DigitalBridge Group, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; balance-sheet comparisons are to December 31, 2023. DigitalBridge is a global digital-infrastructure investment manager, with strategies spanning data centers, towers, fiber, credit, liquid securities and broader infrastructure. The company reported its continuing business as one segment beginning in 2024.
Financial and operating results
| Metric | Q1 2024 | Q1 2023 or prior date |
|---|---|---|
| Total revenue | $74.4 million | $18.5 million |
| Fee revenue | $73.0 million | $59.1 million |
| Net loss from continuing operations | $16.6 million | $181.7 million |
| Net loss attributable to common stockholders | $44.3 million; $0.28 per share | $212.5 million; $1.34 per share |
| Operating cash flow | $(27.0) million | $19.7 million |
| Cash, cash equivalents and restricted cash at quarter-end | $252.1 million | $824.2 million at March 31, 2023 |
| Debt at quarter-end | $366.5 million | $371.8 million at December 31, 2023 |
| FEEUM | $32.5 billion at March 31 | $32.8 billion at December 31, 2023 |
| AUM | $80.1 billion at March 31 | $80.1 billion at December 31, 2023 |
Revenue growth reflected higher management fees and a smaller carried-interest reversal. Fee revenue rose 23%, primarily from fundraising and a full quarter of InfraBridge fees. Carried interest allocation was a loss of $8.5 million, versus a $54.8 million reversal in Q1 2023. Other gain (loss) improved to a $5.9 million loss from a $144.5 million loss, which in 2023 included a $133.3 million write-down of a promissory note. Total expenses increased to $83.9 million from $54.6 million, partly reflecting higher compensation and amortization; Q1 2023 also included acquisition-related costs.
Discontinued operations generated a $14.1 million loss, versus a $110.6 million loss in Q1 2023. The 2024 loss primarily included a loss related to a guarantee associated with a prior real-estate asset sale. Non-GAAP Fee-Related Earnings (FRE) were $19.6 million, up from $15.3 million; Distributable Earnings (DE) were $2.2 million, compared with a $7.4 million loss. These company-defined measures supplement, and are not substitutes for, GAAP results or cash flow.
Liquidity, debt and capital
At March 31, debt comprised $300 million of securitized notes and $72.4 million principal of 5.75% exchangeable senior notes. The company reported approximately $413 million of liquidity, including unrestricted corporate cash and the full $300 million availability under its variable funding notes facility. The filing states the company was in compliance with the facility’s financial covenants. Consolidated cash flow included sponsored funds and discontinued operations, so it is not equivalent to corporate-only liquidity.
After quarter-end, the remaining senior notes were fully exchanged or redeemed by the end of April: $73.4 million principal exchanged for 8.2 million Class A shares and $5.0 million redeemed for cash. Management expects this to reduce annual interest expense by approximately $4.5 million. The company also settled $35 million of Wafra contingent consideration in March, half in cash and half in shares. Preferred stock had an $821.9 million liquidation preference and a weighted-average dividend rate of 7.135%; quarterly preferred dividends were approximately $14.7 million. The common dividend declared was $0.01 per share.
Changes, outlook and risks
- FEEUM decreased about 1% from year-end, as $1.3 billion of inflows were more than offset by $1.6 billion of outflows. Management reported raising $1.14 billion through April 2024, including $0.5 billion for DBP III and $0.3 billion for the second credit-strategy series; cumulative DBP III capital raised was $3.2 billion.
- Unfunded commitments to sponsored funds were $259.8 million, generally callable on demand; warehoused investments were $51 million at cost. Management said it believed available and anticipated liquidity would meet short- and long-term requirements. No formal earnings or financial guidance was provided.
- Results are exposed to investment valuations, fundraising and fund performance; fee revenue, incentive fees and carried interest may vary. A hypothetical 10% decline in fund investment values would reduce the OP’s share of principal investment income by about $107 million and carried interest by about $71 million, according to the filing.
- Carried interest is subject to reversal and potential clawback. No clawback liability was recorded at quarter-end; the filing states $180.9 million of previously distributed carried interest could be subject to clawback if relevant investments were deemed to have no value, a scenario it describes as remote.
- The company had $11.3 million of estimated InfraBridge contingent consideration, with up to $129 million potentially payable if specified fundraising targets are met. It also reported $46 million of office lease obligations and $32 million of marketable equity securities available for potential monetization; one $18.1 million holding was locked up until August 2024.
- Management cited risks including difficult markets and higher interest rates, the ability to raise capital and grow AUM, investment valuation volatility, foreign-market exposure, cybersecurity, financing availability, conflicts of interest, and the ability to sustain distributions. It reported no material legal proceedings, no material changes to previously disclosed risk factors, and effective disclosure controls.
Important facts for investors to verify
- Reconcile the filing’s rounded $33 billion FEEUM reference with the detailed $32.5 billion figure, and monitor fundraising, fee-paying capital flows and future fee growth.
- Assess corporate-only cash and liquidity separately from consolidated fund cash, and track the post-quarter note exchange, share dilution and interest savings.
- Review the sustainability of FRE and DE alongside GAAP losses and operating cash outflows; assess how much reported revenue depends on unrealized valuations and carried-interest estimates.
- Track fund commitments, contingent consideration and potential carried-interest clawbacks, as well as valuation sensitivity and any changes in covenant compliance.
- Evaluate the quality and concentration of fee revenue: four funds accounted for approximately 26%, 13%, 13% and 12% of Q1 revenue, respectively.