Blue Owl Capital (OWL) 4 May 232023 Q1 Earnings call transcript

Good morning, and welcome to the Blue Owl Capital's First Quarter 2023 Earnings Call. [Operator Instructions] And we advise to all parties that this conference is being recorded. I would now like to turn the call over to Ann Dai, Head of Investor Relations for Blue Owl.

Thanks, operator, and good morning to everyone.

Joining me today are Doug Ostrover, our Chief Executive Officer; Marc Lipschultz and Michael Rees, our Co-President; and Alan Kirshenbaum, our Chief Financial Officer. and our forward-looking remarks a Commission. a are statements, future or those remind call Owl during company's guarantee outside results Exchange to described of performance Securities contain number may which results the like listeners to in uncertainties Blue made that the as from filings of risks materially I'd and a that involve are a with number and in forward-looking from time control. Actual of those of Capital the differ statements may result factors, including time not presentation obligation The website interest Resources of are on blueowl.com. Please Owl company which any this sell section non-GAAP assumes nothing statements. We'd update no refer on on offer our everyone and measures to reconciled constitutes remind to solicitation like fund. that to or available we'll a also Investor purchase earnings that to in of GAAP call, call to note forward-looking an to figures Blue the offer any our at in an the $X.XX issued share. morning, distributable the XXXX, of earnings, quarter share or results DE $X.XX fee-related financial earnings, or of This first recording FRE, and for of our we per per share We XX. on record declared as dividend for of of to holders the per a first payable May XX quarter, $X.XX May of

our call the morning. this website to presentation, today, posted During we'll we be earnings referring the which to

to turn over have please call follow that along. With So the on like hand Doug. I'd that, to to

volatile model in for we of business and Owl, midst strength another Thank of demonstrating resiliency and you, strong quarter everyone. Ann, Blue market of results morning, reported good Today, our conditions. the the

thus near-term have have January for year, our fee-paying our at existing XXXX, environment. And far. the echoed All fee-paying accomplished which $XX contributed organic you just backdrop The use raised hearing an to we all getting interest industry-leading a which public we're evaluate having have the a persistently feel our never including on DE, year margin. And hikes, protected considerable capital inflation XX% fees, opportunities achieved to metrics on more and XX% than demonstrated time. of management against attractive like while business, Over of past the growth months markets, income-generating seller over incremental our maintaining most swings we high and the value FRE key rate the we almost growth in our equity what permanent precarious seen we we the end forced been in year, FRE when us by durable to started. and of marked markets, with substantial we're the have we've fundraising focus we past the growth, and seen believe some have couple and in We are unpredictable the that $XX is wealth of X, conversations we've XXXX, billion more verticals This clients. and institutional approximately on of X compares Since debt, equal billion consider proud absolute growth. XX% AUM investors. difficult of And prospective environment a this from sentiment across the inflows to private downside in deploy allows some ever into our of more roughly capital, we strategies are of in of incredibly very resonates last means we've an strong and capital basis. which

those compares billion same first of in small or those modest products, from $XXX feature than volatility Importantly, raised to redemption $X investor quarter in a and marked of market period redemption during in less see AUM products. quarterly the by offer products This in requested X% heightened percentage uncertainty. over which the class with million very to we also continue just our a

in result status. From these value we've for seen a offer of that inflow markets as over of solutions now. adoption lease during sellers can So transaction landscape as We further across the the the direct seeing and market lending, proposition think net we're of the intermediaries past on real volumes remain saw solidly solutions occasions types stock to this in accelerate and we triple markets the are pause and perspective, that GP COVID, estate. We tumultuous play take and out temporary net numerous in slowdowns deployment we buyers, exactly it the more year.

pace slower turned greater While sponsors in the have to have lending announcing. for at deploying they fashion capital the market been direct in they quarters, are a recent deals

capital Fund the V we looking GP middle business our offer raised fully and solution continued to to Our market and with growing will be community, upper has already committed, valuable billion GP in $XX VI for order. And made their business, capital real companies Fund needs. has rate interest more the our solution attractive a current to estate for ahead consider short even it for net to environment lease XX%

first quarter the and in given raised We billion months, $X estate over real are the in pleased environment. last with the the we $X.X particularly the in market billion raised X

So mostly what focused to from you're changing despite their is private wealth and whom institutional on permanent many us. We're both remains capital playbook things grow the long of our raising clients, unchanged us from to hearing continue around allocations that duration alternatives. and

position rigorous been while pleased our work management product grow. peers steady opportunities always that we've deliver inorganic evaluating substantial have from base the innovate without and deliver for volatility to shareholders that development to is we've that capital themselves. We're and fee-centric off thus And the various far. that the creating significant base carefully able interest. putting with same continue many to standards the utilized, earnings capital us, differentiator carried Blue against and for growth with market underwriting intentional backdrops, are to progress we which a well stable present permanent a new Owl our us foundational through We selectivity of very to

that per share outsized an yield has you for our $X.XX on roughly relative to continue of the companies with in I'd XXXX, financial direct offering fixed grow dividend Marc broader of growth real call peers, we lending years. With to dividend annual and to update indices. other Marc? And meaningfully like are the that, Our been X% turn to an coming dividend to and estate newly expect business. over our to and attractive give market

Great. Thanks, Doug.

the in quarters we sponsors an the trends last first that Capital as During the companies. to and observed heights seemed Owl Blue few quarter, provider new and accelerated. continued to and market reach act scarcity integral liquidity to continue

the originated Over Blue loans, $XX M&A providing Owl's financing billion direct months, has market. to lending last business crucial nearly of the XX

reflection lending and continue more credit We to sizable of value a market, of pause seen in of private during acknowledgment see times. to the the credit direct markets uncertain solutions the come an deals liquid

in lower which by As we've ago, an the than at highlighted permanent capital, stable are spreads and remains are and capital. excellent past large financing making environment very deploy year we companies. backed a wider loan-to-values high-quality And sticky, quarters, loans in this the to

have As in not X volumes remained originated for tech market trend, portfolio more to in Across expected, capture by points, portfolio. our been we approximately broader since XXs and last year-over-year quarter of continue to for our the Credit loans to see direct remain share. loan challenging realized remains we've market and portfolio. Weighted that losses lenders across a average fully annualized, lending the the M&A low across the XX first quality good strong. revenue activity the in And direct backdrop, $XX performance, lending in gross period. the regards of values appreciation is we the see quarter XXs have average on EBITDA gains offset X.X% been realized growth those inception, first and certainly slow our XX.X% and the to billion while portfolio XXXX. continue immune that basis with to deployment over achieved And months. direct significant of low Despite

moving to estate. Now on real

of to and continue our in corporate see financing stall. with borrowing elevated We strategy high markets levels net lease interest costs

remains Our $XX.X of $X.X invested announced and billion of we roughly end of income of sixth volume. Inclusive of intent ] lease mitigated concerns by have potential or triple minimized billion about activity, to of robust expenses equity a pipeline committed the our out of transaction are opportunities fifth are and under letter concerns escalators by capital deploying stability the lease to strongly borne are started resonate our close contractual have investors. Inflation or property full continues volume all our with over all growth acquisition nearly vintage. near-term pipeline of in strategy and as contract quality of fund duration [ a net while The XX-year-plus by generated rent long terms. tenant, with the very

to conduct primarily mission-critical or footprint the profiles, credit investment-grade everyday in that what is physical operations. generally brand-name estate are tenants call strategy Our businesses we firms real these that need with retail, own in logistics properties large this we their and

estate class you'd want months, real risk-adjusted very to investor these our senior lease and where for understand as things income, real investments work environment with profile the capital of me our that estate in having be in very by we XX.X% being great X.X% back net that, see comments very the XX around businesses tenants returns our real offer. The opportunities and generation, quarters and more through exactly contractual to duration purchase it estate asset generating days, While and think a Michael capital shocks market quality we estate income real for strong meaningful to the to caution environment. there and to past market is when to all lending let this price, of permanent can Owl. With business an for that credit duration we downside sits and protected things of view, attractive returns gross our triple in turn direct for good for regards portfolio reminded shift, lease are investors credit very my our portfolios. Referencing to couple your last discuss of and positioned structure. With across today, the have Capital achieved opening supported Solutions. underlying rapidly, capital shift the for we we people performance, of GP strong for they continue Blue the interest structure, long put first good the appreciation strategies constructive our and these the through quarter to

you, Marc. Thank

challenging diversify Solutions secular more firms Capital largest our partner many broadly fundraising business potential GP tailwinds and been the as our positioned a what capture first continue and as businesses. Despite Our forward the the expand to focus towards moving on characterized has in well within to with dialogue quarter investments working of managers the on was alternative they platform their environment, active universe alternatives. has ongoing XXXX,

raised. largest continue market accounted more or billion expand, in of see this capital times We seems of years, industry have to past share the private of of market the accelerate and $X XX% to during couple managers volatility. In the funds the phenomenon of mega for the capital

or this XX%, The more this headwinds. Total to XXXX, forward is brand. exceeding of most committed the V, and around scale benefited fundraising our greater principles having value achieving bringing private across is equity at commitments continue IV like and to of Performance a concentration clear quarter, near-term for of our Looking commitments Funds sports of V, million. professional XX.X% the strategy or have held attractive. to invested with close think of evaluate roughly funds. partner for favorably XX% targets including which minority $X same median Fund the III, net managers $XXX and and numerous investment XX% their from for IRR indicator a strong for strong returns for of all agreements a a opportunities despite We dynamic billion remained for capital we of over remain XX.X% pipeline robust, vintages. We that Dyal with that for compare quite strategy the Fund the during to are XX.X% Fund first Dyal certainly funds

about ahead, GP year holds what we're Looking Solutions excited the the for next business. Capital

wealth expand potential turn over anticipate for financial Alan of this investor still VI Fund things the institutionally results. later continue base the and year. With We that, launching to breadth conversations to to and in will our I our channel discuss

along. To years, for public presentation, we I'll then few walking I'll going comparisons, numbers through is morning, so start by to our making can follow to last today. for on months, which please feel other references available been X report this in earnings the quarter Thank I'm we the quarter are have everyone. you, start our in cover to off, that off touch Good XX pleased to want and items to a free are presentation. I pages report be a and have we the this reflected company to first LTM since earnings that Michael.

quarterly view to and with the provides As made results, we report not picture you run of progress but X- our really business. LTM X-year and across know, our we've just quarterly, info fulsome a we business a more

DE through FRE year March our basis and an key up on highlights XX%, dividend total versus XX%, revenues is up LTM XX% of some our all XX%, XX include up So results a ago. up

midst the past fee So carried steady, turbulence, foundation market we flows. continue business have in results, for capital P&L. lumpy, X been built management the through our to cash post flowing which of volatile the our don't permanent saying what predictable with interest we supports this We of solid revenues and have years. We

the very just management models on come average, years, cash from peers So our our profile revenues for numbers us. industry. To to past this [ continue to alt had, total and the business than X than volatile their us carried interest again, peers, and ] XX% diversified model asset flows, put lumpy different in look growth our to will different some differentiate this, of XX%

through fees are down versus over detail, a management real XX%, that very were the accomplish. Okay, $XXX direct or million $XXX management This by in Capital or is are $XX LTM been XX%. through acquired $XXX we strategy, our keep for growth to our step or million in and are real estate a GP the management mind, Solutions results obviously fees up more But fees million year management estate at XXXX. to we've lending up XX% XX XXX%. March up or business million of able period ago. Broken considerable end fees up

trending ORTF to Overall, G&A expense we in comp be our up right the last expense per $X.XX came versus our in for on up our Compensation million were approximately costs line the FRE with expectations for or track quarter. guidance a due year expectations LTM our in million with XX% large to we to we are is in, at $XXX G&A in $XX our at XXXX. for FRE from also in period a in ago, trending II quarter. and of expectations announced XXXX and line elevated share a revenue. Placement little first expense with little line margin for guidance of BDC. a came closing XX% with XX% year. continue And dividend the

paid have for in versus for we period, ago results LTM XX% That our dividend the the $X.XX year in LTM dividends in For a a period. period. $X.XX increase

our a with We fundraising quarter, spend to challenging our considering we're like on the fundraising the particular, I'd Now efforts. in. environment very pleased moment in were results for

XXX%. in on prior As $X.X of as And an raised XXXX, through And of a basis, the March reminder, we XX, you can year, raised of approximately XXXX, billion versus now LTM $XX.X we comparative see on Slide in XX billion for first quarter the first $XX.X an billion. we quarter the increase $X.X raised billion.

our nontraded raising net almost million raised over with Day $XXX $X.X trust including billion Investor BDC, million. raised estate, direct our $XXX down distributed retail than toughest remain this products. $X product fundraising in And strategies diversified in our $XXX lease the in raised break billion fundraise seen In Real GP billion that $XXX we retail our lending over new $X.X we doubled tech time, our for real the Solutions, Capital ORCIC. and lending XQ of lending, track VI, and our Fund billion, numbers million which raised billion. income strategy, levels. distributed ORCIC. In our in raised In I'll tech core our in we over in our across REIT. strategies, million one Estate in environments $X.X BDC, raised we've on raised we $XXX goals lending $X.X And more some product, million of 'XX for our we including almost

channel interest see on in channel. March in our We pressure products from continue certain our expect wealth and we strong institutional in to in the although the rebounded lows February, wealth continued areas,

to As in disruption of is and always we expect dislocation. particular, as continue progress timing fundraising quarter's we in through call, discussed although we market institutional, on challenging last XXXX tilt to to predict, times

Turning wealth some of our to products.

have fundraising features. see redemption to very products to encouraged from quarterly that be the continue We our continue levels by net we

out, raised running level with AUM still strong Xx As pointed these at about of since inflows in are all, Doug Jan $XX billion approximately X, the net with products inflows we've fee-paying of gross positive we redemptions. All seeing XXXX.

NLP billion AUM the AUM to relates XX% it GP Estate $XXX.X billion, capital ago. the capital our XX% a lending, addition Real from a year first first from $XX.X business. Permanent billion, and increase year on raised $XXX.X in year capital and Fund ago. to NLT our primarily quarter billion direct As the Fund CLO billion from V, Solutions metrics, Slide by grew to Capital $XX.X VI, $XX.X a grew quarter $XX in ago. AUM a a to a increase raised Both in and XX, Fee-paying of raised capital XX% driven metrics first deployment quarter the billion, grew increase

XX% and rate net billion, As of GP deployed, in including of fees fees lending, in $XX.X our direct equates of originations $X.X vehicles. once of of $XX.X we direct million capital to of had permanent months our totaling with over This for $X.X $XX.X gross capital billion. XX a originations funded to in these quality the an Capital last increase the was brings gross are a which to net estate. billion billion $X.X over raised. In in This fees funded the management the deployment. AUM X.X%, which quarter billion for real deployment billion annual corresponds $X.X not-yet-paying lending, speaks $XXX fee to reminder, AUM $X.X billion, and from management Solutions expected billion

lending, on last the pace AUM funded fully average a pace not a quarters of little slower yet to net deployment X this would to as over although than based our So relates deployment XX in that. billion paying months, direct us our current over deploy little is it take $X.X it the fees

Turning to our balance sheet.

a position. strong We continue be to in capital

we have average can XX, X.X% with a XX-year cost see of Slide liquidity significant As currently borrowing. on you an maturity and amount of low

another quarter. all So summing it great up,

good is to make a levels. we and Although it fundraising at progress challenging continue environment, grow industry-leading

We have why. model, capital business and our exactly always permanent this in talked about the of importance is our

our grows peers. Our meaningfully versus more AUM fee-paying

our As my this of I high-margin strong predictable to a growth. remarks, beginning testament noted at all is business model of the

paying of key our to us all or We today. strong are our and results. who you XX% operator, DE line up metrics call these growth will with each FRE very more fee year-over-year. Thank delivered joined With with We pleased for management of open AUM, metrics, the fees, in has we questions. please everyone AUM, that, on again the

Instructions] you. Siegenthaler. comes Your [Operator Craig first Thank Awesome. from question

all you're in deeper to are on Hope really credit as are the dig institutional I can into the we on doing offering the different your retail comments levels currently than well. you mix? effort. little wanted funds channel any Alan's think marketing you business? about Which a comment And fee if institutional

Craig, it's Doug.

I'll couple Let fundraising comments in funds and the me market. make a into in get then of the on general,

from when bank But a environment. when it definitely all, you'd it's more having hasn't this, what from difficult I difficult. for So just certainly -- tailwinds there's all really market fundraising And you've with fundraising makes it volatility of the a first we're failures, is people, changed. agree lot of heard think we're secular seeing,

'XX we and I this first downside assets when quarter high we've at and into protection. done our And we've CLOs, have assets grown of attractive and to not This money. the It's Alan basis insurance XX%. not point current margins. income, to moment, protection start fees not it's in that Our this, good I'll a 'XX, inflation by And will it's only assets, have money, your XX referenced not look to grown attractive is fees obviously question, are products, have and XX those really through good these carry. get and very but what get

the for a wider. and fundraising, but sit of in here It's heavily are our it's spectrum a I'd of to for predict incrementally. track a the seeing record. outcomes invested all timing as little a look, of distribution invest. we me, difficult say great So today, obviously, demand And globally, The we're little significant We've to more funds continuing have we strategies. little

have the And good just on exact we but so Street Oak I ability feel really have market meaningful fundraise our generate can't about tell raised still to under in we billion. big growth. timing, VI, The $X is right you now the we

which hard really line and we capital. And in pretty cap. We're market Alan, through cap we're expectations. course, the We SMAs space still that then and while credit a we about feel returns there's I a surpassed admit wrap to of our of well. And you have X. some And good do billion, X substrategies, slowed, still think number market generate we think with from with the excited that then $X doing that's have away of kind with We can Tech I as hitting I great well I in institutional, with And things And we're BDC, in that And in have go have we'll space. that in have flows wealth. up. Tech I think we'll of the as in well. II, just private

comes line question from next Davitt. Patrick of Your the

can but pulling gross you FRE sorry do if off think you're fundraise this this, still of bit? year. heard that and you of $X $XX XX% sticking margin, I the So expect a billion but kind I you billion with of I Are missed

of has feel to changed that. seen This let Patrick. couple We of has environments a one in our long XXX% the year-over-year. yet up being time, challenging very fundraise these world and year targets. the fundraising right? add is Alan. most targets bit, we've about quite been a good ago, Thanks, thoughts me It's a posted Since in a still But around we our

outsized So trajectory. our in confident really we're growth still

have well our There's every and really mentioned being pleased Doug that of good outcomes key our than we is feel targets. business. our results, more yes, And year-over-year the growth range XX-plus in around. retail we're kick despite with flows as up lot hypotheticals held of the around Our metric and just a before, percent extremely in there's about we of wider yes, And could but volatility. environment,

from The next Bill question Katz. comes

Phillips Cameron is This on for Katz. Bill

the to how of pacing get net that the been pipeline, completed getting macro you further on wanted see some color lease typical as what well year-over-year, given pipeline growing Just today? just quarter-over-quarter, the it's environment as

very, a -- buy. to private I it's that for capital on be provider, is net bit of a dynamic lease, the the We in the very properties, which good a very, it's of number see us. terms environment engaged, in visible solutions large. number we interested, it a can think And terms Look, Sure. very triple companies that are of

any appealing around for I even well an markets not a when are is traditional be XX highly years do well, have kind really the markets think by measure, this don't to when of we have functioning less solution the and very you with very time done alternative much that markets so, functional better. offering functional,

what comes So is, all offering which the are of asset lease expenses end credit. paid to a observation with out simple net all you even is with of that, the that but the the lease with a tenant. it, day, also very down type a because solution, it's own a strong, type financing XX-, and is XX-year by better of strategic but the underneath It's one gets at it we of pipeline triple physical

So mitigated. point of is inflation the view investor,

capital say, I the whether have have manufacturing company, market higher of be quite return So turn the space, I be do and business" out my get markets, your I if this the business? in make much the really "core you this leader to own by that's simple so to make a have we to a build functioning appealing us, should why warehouse." "Oh don't right an far extremely -- of know. do way operate to for long-term to and estate well, low-vol, otherwise, user in we're the you the bank in more I to question, they or and this it's then it's as have listen, I this facility, a real do return. But to bond market, able wonderful need predictable for

did cap benefits today of the are The we rates it not that more than even surprisingly, ago. coming terms attractive better. at it's seeing on buy we're And So year that. a can

So the don't estate also any for strategy is so yes, We very own the strategy of I'd of out highly re-leasing there, own have risk. real us. of point a don't environment and We We appealing strategies. market. investors, from distinctive we from This, the a levered the don't run right? it's other uncertainties say view that commercial

So for it's a good this business. time

comes question Kenneth next Our Worthington. from

This in the holding banking alternative crisis opportunity wanted capacity an opportunity for see credit the And for Worthington. to double-click lending to do We on stepping Do is business Alex been for Bernstein Ken the in here? you that's see U.S. Owl you a any that place? be see of advantage longer-term take supply and or in if that it? like? And opportunity, required look more you to that question, build-out or you everything you will do would that such less there investment maybe an as have incremental already a of is part second Or do think what

certainly don't this to crisis whatever transition, but if we in I a Sure. Look, just but know meaningful market. apply it's the not, want it's this or a term to banking ongoing it, shift

It with, solutions yes, headline me capital let lending Blue it opportunities presents So general. for presents for in Owl. and opportunities direct private

banks of these businesses money you say and not a capital lent sheet to lot out us. I business it's time, system, clear none that the overlap these like positive also, this, That the banks being money opposed in, business not actually were to some are out that I ago purposes when didn't great to and at banks scale regional companies, frequently we the see was having disruption. aggregate yes, But to least helpful see in to and the and that to happen. there while large capital reality presence. for the balance the have migrated although the evaporate, say banks we into -- large into capital. as of built the to the take have storage of that clear for of kind been of markets I moving long securities things regional on right? we know of still show when center I'll really any business. The it's and the this banks us is, of you would some Nobody observation, have qualitatively, is with very that kind up a us want And in to provide this only still likes over call, participate given are certainly the mean that of like it's So companies the scale, in fact, actually say same see

very clear fewer suppliers say remain, of for that suppliers they're I to same stay the this that place, or demand to going higher should that it's capital. also qualitatively, in it. The mean it's of the and regional is banks apparent more have So demand cost going capital a

we -- quantify, Republic. good is are having Private SVB, people been disruptive. of last we we these we're do works. It's First markets. needs all how picture through talking capital these here with end And of at it weekend is more means It's that capital also which the depends of of long-dated many And were through much think go. I capital day, capital, about We to how ready the But been number And sure had too make the it for meet that steady ripples times, the provider. economy. permanent also and power weekend so the guess as good opportunity provide a quantitative of for to true are the available the system. definitively there -- more just how all the capital, I it's our on positive. that's markets long-dated to of amplified early model, to for effects, how positive a as

So business proven direct large. I force to think the a lending has the for writ [ be ] market really stabilizing

capital our way. it's So it's -- coming opportunity

what into, our of I something might economy. think in it translate to infrastructure. continue terms And the provide important that for got we've to is allowing marketplace all the

make think, the answer infrastructure. hundreds different your X,XXX no, we is that build to looked don't specifically, to have. do. we to question So at, This I need We've loans about we what

So we're built. fully

this don't this gleefully, So it don't opportunity. is we a yes, are we want beneficiary. to it but we more Again, way, get say

from [Operator comes next question Instructions] Our Davitt. Patrick

on the online? triple is products, secondly, there on time for still If distributor? online only net line on the ORTIC this with and one you a coming update still lot of more year? us big ORCIC so, are retail lease the could coming And So platforms

Yes.

me lease net Trust. on start So let

that's We by had going a We few a on in platform. success. be time, on are of longer, but taking lot giving thought the more just on it's bit little a everything one this markets. we'd We've

-- another I next we on X think months, by X should to the in be X wirehouses.

that be pretty products, feel our of the In -- year There's the lot interest. the by think that are would a triple us. hopefully, continue to we can lease largest a I I wirehouses, for monthly end we other trust I built So platforms, amount definitely largely will that quadruple just taking in single the quarterly product. add longer. those And syndicates bit syndicate. those fundraising good predict of we It's are of net

questions see do at further this any And I time. not

over the it So Owl Blue to back team. I'll turn

Well, thank you, everyone.

we're We proud trading in what's and are our a especially $XX.XX. to personal is light and have the partnership. support note, at the understand for though, our stock this don't markets, quarter, going how on add, of I I of really results on been grateful in

the of team, alternative year be probably and the dividend after. that most capital. now I yield predictable the our importantly, say we've that will streams are from heard got And any our We've X%, next year are signaled very and higher our predictable. Margins is asset our is permanent materially dividend You've manager. Most income would consistent. revenue

and you. for feels team this forward a is be that me everyone days to ahead. Again, to time the the going want to to for point very entry look the in good So up investors. and it following like I thank Thank

Thank does a conclude conference. Have you. today's day. This great