DigitalBridge Group, Inc. (NYSE:DBRG) is a leading global alternative asset manager dedicated to investing in the rapidly expanding digital infrastructure sector. With a focus on data centers, cell towers, fiber networks, small cells, and edge infrastructure, the company has established itself as a key player in the digital transformation of the global economy.
Business Overview and History
DigitalBridge has a rich history that traces back to its origins as Colony Capital, founded in 2009 as a real estate investment trust focused on commercial real estate properties. The company’s transformation into a digital infrastructure powerhouse began in 2015 with the acquisition of the investment management business and operations of Digital Bridge Holdings. This strategic move marked a significant shift towards the digital infrastructure sector, allowing DigitalBridge to leverage Digital Bridge’s extensive experience and expertise in critical digital assets.
In 2019, DigitalBridge underwent a transformative merger with NorthStar Realty Finance Corp. and NorthStar Asset Management Group, significantly expanding its asset base and investment management capabilities. This transaction solidified DigitalBridge’s position as a leading global alternative asset manager dedicated to the digital infrastructure sector.
Throughout its evolution, DigitalBridge has demonstrated resilience in the face of various challenges, including volatile market conditions and rapidly changing technological trends. The company successfully navigated the economic uncertainty during the COVID-19 pandemic, which underscored the essential nature of the digital infrastructure assets within its portfolio.
Today, DigitalBridge operates as a taxable C-Corporation, conducting its activities through its operating subsidiary, DigitalBridge Operating Company, LLC. With a global footprint spanning key offices in the United States, Europe, and Asia, and a team of over 300 employees, DigitalBridge has established itself as a major player in the digital infrastructure investment landscape.
Under the leadership of CEO Marc Ganzi, DigitalBridge has built an impressive portfolio of digital infrastructure assets, leveraging its deep industry expertise and strong relationships with leading service providers and developers. The company’s investment strategies span across various verticals, including value-add equity funds, core equity, credit, and liquid securities.
DigitalBridge’s flagship DigitalBridge Partners (DBP) series of funds focuses on value-add digital infrastructure investments, while its Core Equity strategy (SAF) targets more stabilized assets with long-duration cash flows. The company’s DigitalBridge Credit strategy delivers credit solutions to the digital infrastructure sector, and its Liquid Strategies provide fundamental long-only and long-short public equity exposure to the industry.
In 2023, DigitalBridge further expanded its capabilities with the acquisition of InfraBridge, a global infrastructure equity investment management business, solidifying its position as a multi-strategy platform catering to the diverse needs of its institutional investor base.
Financials and Operational Highlights
DigitalBridge’s financial performance has been marked by consistent growth and strong operational execution. As of September 30, 2024, the company reported fee-earning equity under management (FEEUM) of $34.1 billion, representing a 14% increase from the same period in the prior year.
The company’s fee revenue for the nine months ended September 30, 2024, totaled $228.1 million, a 20% increase compared to the same period in 2023. This growth was driven by strong performance across DigitalBridge’s product offerings, including its flagship DigitalBridge Partners funds, co-investment vehicles, and the InfraBridge platform.
DigitalBridge’s fee-related earnings (FRE) reached $98 million on a last-twelve-month (LTM) basis as of September 30, 2024, up from $72 million in the prior-year period. The company’s FRE margin expanded to 32% during the quarter, reflecting its ability to effectively scale its investment management platform.
For the most recent fiscal year (2023), DigitalBridge reported revenue of $821.38 million, net income of $185.28 million, operating cash flow of $233.64 million, and free cash flow of $262.58 million. In the most recent quarter (Q3 2024), the company achieved revenue of $76.12 million, representing a 16.3% year-over-year growth. This increase was driven by higher management fees from recent fund raises, partially offset by lower carried interest allocation compared to the prior year period. Net income for Q3 2024 stood at $48.33 million, with operating cash flow and free cash flow both at $35.90 million.
Liquidity
Despite the challenges posed by the broader macroeconomic environment, DigitalBridge has maintained a strong balance sheet, with $427 million in total liquidity as of September 30, 2024. The company’s net debt position remains low, providing it with the financial flexibility to pursue strategic growth initiatives.
As of the most recent reporting period, DigitalBridge had a debt-to-equity ratio of 0.149, cash holdings of $294.42 million, and an available credit line of $300 million under the Variable Funding Notes (VFN) facility. The company’s current ratio and quick ratio both stood at 7.13, indicating a strong liquidity position.
Recent Developments and Outlook
In 2024, DigitalBridge has continued to execute on its growth strategy, delivering several noteworthy achievements. The company raised over $6.1 billion in new capital year-to-date, putting it on track to exceed its $7 billion annual fundraising target. This capital has been deployed across the company’s various investment strategies, including co-investments in key platforms like DataBank and Vertical Bridge.
DigitalBridge has also been active in pursuing strategic acquisitions to further expand its capabilities. In October 2024, the company announced an agreement to acquire Yondr Group, a global developer and operator of hyperscale data centers. This acquisition is expected to strengthen DigitalBridge’s position in the high-growth hyperscale data center segment, which is driven by the rising demand for cloud computing and artificial intelligence infrastructure.
Additionally, DigitalBridge made a significant move in the Japanese tower market by taking a controlling stake in JTOWER, the largest independent tower company in the country. This transaction highlights the company’s ability to identify and capitalize on emerging opportunities in the global digital infrastructure landscape.
Looking ahead, DigitalBridge remains optimistic about the long-term growth prospects of the digital infrastructure sector. The company is well-positioned to continue executing on its multi-strategy approach, leveraging its deep industry expertise and strong relationships to deliver compelling investment opportunities for its institutional investor base.
In terms of guidance, DigitalBridge has revised its targets for 2024. The company now expects to end 2024 with between $305 million and $320 million in fee revenue, which is below their previous guidance range of $335 million to $360 million. However, this revised range still represents a 14% to 20% increase over the $267 million reported in 2023. For fee-earning equity under management (FEEUM), DigitalBridge has slightly lowered its target to $35 billion to $37 billion by the end of 2024, down from the previous range of $36 billion to $38 billion. The company maintains its guidance for fee-related earnings (FRE) between $100 million and $110 million for 2024, which would represent over 20% growth versus 2023.
The company attributes the shortfall versus their original 2024 guidance primarily to the composition and timing of capital raised this year, with a larger contribution from co-invest capital and funds that charge fees on invested capital rather than committed capital that generate catch-up fees. Management believes this is largely a timing issue and not an indicator of their long-term growth prospects.
Investment Management Segment
The Investment Management segment is DigitalBridge’s core business, representing the Company’s global digital infrastructure investment management platform. This segment encompasses the full range of the Company’s investment offerings, including its flagship value-add digital infrastructure equity funds, core equity strategies, credit solutions, and liquid securities strategies.
The DigitalBridge Partners (DBP) series of funds form the backbone of the Investment Management platform, focusing on value-add digital infrastructure investments. At September 30, 2024, the DBP funds had total commitments of $12.35 billion, with $10.25 billion of invested capital. The DBP funds have demonstrated strong investment performance, with the flagship DBP I and DBP II funds achieving gross and net multiples of invested capital of 1.06x and 1.03x, respectively, and gross and net internal rates of return of 14.4% and 12.6%, respectively.
The Company’s Core Equity strategy, launched in 2022, invests in digital infrastructure businesses and assets with stable, long-duration cash flow profiles, primarily in developed markets. This strategy had $1.04 billion in total commitments and $1.01 billion in invested capital as of September 30, 2024, with a gross multiple of invested capital of 1.01x and a gross internal rate of return of 7.0%.
DigitalBridge’s Credit strategy provides financing solutions to corporate borrowers in the digital infrastructure sector globally, offering products such as first and second lien term loans, mezzanine debt, preferred equity, and construction/delay-draw loans. The Credit I fund, launched in 2022, had $486 million in total value with a gross multiple of invested capital of 1.01x and a gross internal rate of return of 13.8%.
The Liquid Strategies segment includes fundamental long-only and long-short public equities strategies that leverage the Company’s digital infrastructure expertise and network to build portfolios of high-quality, undervalued businesses across the digital infrastructure, real estate, and technology, media, and telecom sectors.
The InfraBridge strategy, acquired by DigitalBridge in 2023, focuses on mid-market investments in digital infrastructure and related sectors such as transportation, logistics, and energy transition. The InfraBridge funds had $2.43 billion in total value as of September 30, 2024, with a gross multiple of invested capital of 1.06x and a gross internal rate of return of 9.8%.
Overall, the Investment Management segment has continued to drive growth for DigitalBridge, with total fee-earning equity under management increasing 14% year-over-year to $34.1 billion as of September 30, 2024. The diverse range of investment strategies and strong investment performance across the platform have positioned DigitalBridge as a leading global digital infrastructure investment manager.
Risks and Challenges
While DigitalBridge’s growth story is compelling, the company is not without its risks and challenges. The digital infrastructure sector is highly competitive, and the company faces ongoing competition from other investment firms and industry players vying for the same assets and investment opportunities.
Additionally, DigitalBridge’s performance is heavily dependent on the strength of its investment strategies and its ability to effectively deploy and manage capital. Any underperformance or missteps in its investment decisions could have a material impact on the company’s financial results and investor confidence.
The broader macroeconomic environment, including factors such as interest rate fluctuations, geopolitical tensions, and potential economic downturns, could also pose risks to DigitalBridge’s operations and financial performance. The company’s ability to navigate these challenges will be crucial in maintaining its competitive edge and delivering consistent returns to its investors.
Conclusion
DigitalBridge Group, Inc. has established itself as a leading global alternative asset manager in the rapidly evolving digital infrastructure sector. With a diversified investment platform, a strong track record of execution, and a clear vision for the future, the company is well-positioned to capitalize on the growing demand for mission-critical digital assets. As DigitalBridge continues to expand its reach and capabilities, investors will be closely watching the company’s ability to navigate the complex and dynamic digital infrastructure landscape.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.