Blue Owl Capital Inc. — FY2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the supplied text does not provide standalone fourth-quarter results. Blue Owl is an alternative asset manager operating in Direct Lending, GP Capital Solutions and Real Estate.
Business and assets under management
- Year-end AUM was $138.2 billion, including $88.8 billion of fee-paying AUM (FPAUM).
- Product-line AUM/FPAUM: Direct Lending $68.6 billion/$49.0 billion; GP Capital Solutions $48.5 billion/$28.8 billion; Real Estate $21.1 billion/$11.0 billion.
- Approximately 93% of 2022 management fees came from Permanent Capital vehicles. The company cited $10.8 billion of AUM not yet paying fees, estimated to generate about $141 million of annualized management fees once deployed or fee holidays expire.
Financial results and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue, net | $1.370 billion | $823.9 million |
| Management fees, net | $1.212 billion | $667.9 million |
| Consolidated and combined net loss | $40.2 million | $1.802 billion |
| Net loss attributable to Blue Owl | $9.3 million | $376.2 million |
| Fee-Related Earnings (non-GAAP) | $800.1 million | $451.7 million |
| Distributable Earnings (non-GAAP) | $742.8 million | $427.3 million |
| Operating cash flow | $728.4 million | $281.7 million |
Fee-Related Earnings were about 60.5% of FRE revenues of $1.322 billion; this is a non-GAAP measure, not a GAAP operating margin. GAAP expenses totaled $1.372 billion, slightly exceeding revenue. The filing’s non-GAAP measures exclude various items, including equity compensation, acquisition-related costs, intangible amortization and financing costs, and should not be viewed as measures of liquidity.
- Investing cash outflow was $485.2 million; financing cash outflow was $217.7 million. Cash increased by $25.5 million to $68.1 million.
- Year-end debt obligations had $1.660 billion of principal outstanding: $700 million of 2031 Notes, $400 million of 2032 Notes, $350 million of 2051 Notes and $210 million under the revolving facility. The revolver had approximately $899.9 million available.
- Total assets were $8.893 billion and total liabilities were $3.344 billion. The company reported approximately $936.2 million of estimated potential TRA payments, subject to assumptions about future taxable income and tax benefits.
Changes versus the prior period
- Revenue rose by $545.8 million; Fee-Related Earnings increased by $348.4 million and Distributable Earnings by $315.5 million. Growth reflected continued fundraising and deployment, as well as the inclusion of Dyal, Oak Street and Wellfleet acquisition results for more of the year.
- Comparability is limited: 2021 included only partial-period results for Dyal, Oak Street and Wellfleet, and 2021 GAAP loss included substantial acquisition- and transaction-related items, including a large non-cash equity compensation charge.
- Management fees increased across all three business lines. Administrative, transaction and other fees declined by $4.1 million, primarily because lower portfolio-company transaction activity reduced fee income.
- Interest expense increased by $28.4 million to $55.7 million, primarily due to higher average debt outstanding. Higher base rates also increased BDC Part I Fees, benefiting management-fee revenue.
- AUM increased from $94.5 billion to $138.2 billion, including $6.5 billion added through the Wellfleet acquisition. Dyal Fund V closed at $12.9 billion, above its initial $9 billion target.
Outlook, risks and unusual items
- Management said it expects current liquidity and cash generated from management fees to meet anticipated working-capital needs for at least 12 months. It cautioned that slower fundraising or deployment could delay or reduce future fees.
- For 2023, the company said it intended to set an annual dividend target of $0.56 per Class A share ($0.14 quarterly), subject to quarterly Board approval and the company’s discretion. The fourth-quarter 2022 dividend was $0.13 per share, payable in March 2023.
- Management described 2022 as a volatile market environment, citing inflation, rising interest rates, geopolitical instability and COVID-19-related uncertainty. Direct Lending originations declined year over year, though management reported wider spreads and lower loan-to-value ratios on average. Higher rates benefited Part I Fees, while pressuring real estate transaction activity and portfolio-company finances.
- Key disclosed risks include credit deterioration and defaults, valuation uncertainty for illiquid assets, leverage, fundraising and redemption pressure, competition, conflicts of interest, reliance on key personnel, regulation and cybersecurity. Blue Owl also noted risks from rising rates and inflation, real estate market conditions, and the LIBOR-to-SOFR transition.
- Unusual items included acquisition-related earnouts and fair-value liabilities, redemption of all Public Warrants in August 2022, and $420.8 million of equity-based compensation expense, including $246.0 million for Oak Street earnout units. The filing reported no pending legal proceedings expected to have a material financial-statement impact. KPMG gave an unqualified opinion on the financial statements and internal controls; management also concluded internal controls were effective.
Important facts for investors to verify
- Review the full GAAP-to-non-GAAP reconciliations and assess recurring earnings separately from acquisition, equity-compensation and fair-value effects.
- Check the composition, fee basis and deployment pace of the $10.8 billion of AUM not yet paying fees, and whether estimated fee conversion is realized.
- Confirm current revolver borrowings and availability: the filing reports $210 million outstanding at year-end, while its MD&A also says there were no borrowings outstanding as of the report date.
- Assess the assumptions, timing and potential acceleration of TRA payments, including the estimated $936.2 million total, and their effect on cash available for dividends.
- Monitor portfolio credit quality, valuation marks, fundraising, redemptions, acquisition earnout obligations and the Board’s quarterly dividend decisions.
- Consider that the Principals held 80% of voting power at year-end, limiting the influence of public Class A shareholders.