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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 10-Q
___________________________
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2022
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-39653
___________________________
BLUE OWL CAPITAL INC.
(Exact name of registrant as specified in its charter)
___________________________
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Delaware |
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86-3906032 |
(State or other jurisdiction of
incorporation or organization) |
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(I.R.S. Employer
Identification No.) |
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399 Park Avenue, |
New York, |
NY |
10022 |
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(address of principal executive offices) |
(212)
419-3000
(Registrant’s telephone number, including area code)
___________________________
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
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Trading symbol(s) |
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Name of each exchange on which registered |
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Class A common stock |
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OWL |
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New York Stock Exchange |
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Warrants to purchase Class A common stock |
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OWL.WS |
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New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No
o
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ☒
No
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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Large accelerated filer |
☒ |
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Accelerated filer |
o
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Non-accelerated filer |
o
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Smaller reporting company |
o
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Emerging growth company |
o
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable
date.
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Class |
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Outstanding at May 4, 2022
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Class A common stock, par value $0.0001 |
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407,682,203 |
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Class B common stock, par value $0.0001 |
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— |
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Class C common stock, par value $0.0001 |
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670,147,025 |
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Class D common stock, par value $0.0001 |
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319,132,127 |
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TABLE OF CONTENTS
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Page |
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Item 4.
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Mine Safety Disclosures
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DEFINED TERMS
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Assets Under Management or AUM |
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Refers to the assets that we manage, and are generally equal to the
sum of (i) net asset value (“NAV”); (ii) drawn and undrawn debt;
(iii) uncalled capital commitments; and (iv) total managed assets
for certain Real Estate products.
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Annual Report |
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Refers to our annual report for the year ended December 31, 2021,
filed with the SEC on Form 10-K on February 28, 2022. |
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our BDCs |
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Refers to our business development companies, as regulated under
the Investment Company Act of 1940, as amended: Owl Rock Capital
Corporation (NYSE: ORCC) (“ORCC”), Owl Rock Capital Corporation II
(“ORCC II”), Owl Rock Capital Corporation III (“ORCC III”), Owl
Rock Technology Finance Corp. (“ORTF”), Owl Rock Technology Finance
Corp. II (“ORTF II”), Owl Rock Core Income Corp. (“ORCIC”) and Owl
Rock Technology Income Corp. (“ORTIC”). |
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Blue Owl, the Company, the firm, we, us, and our |
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Refers to the Registrant and its consolidated
subsidiaries. |
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Blue Owl Carry |
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Refers to Blue Owl Capital Carry LP. |
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Blue Owl GP |
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Refers collectively to Blue Owl Capital Holdings GP LLC and Blue
Owl Capital GP LLC, which are directly or indirectly wholly owned
subsidiaries of the Registrant that hold the Registrants interests
in the Blue Owl Operating Partnerships. |
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Blue Owl Holdings |
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Refers to Blue Owl Capital Holdings LP. |
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Blue Owl Operating Group |
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Refers collectively to the Blue Owl Operating Partnerships and
their consolidated subsidiaries. |
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Blue Owl Operating Group Units |
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Refers collectively to a unit in each of the Blue Owl Operating
Partnerships. |
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Blue Owl Operating Partnerships |
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Refers to Blue Owl Carry and Blue Owl Holdings,
collectively. |
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Blue Owl Securities |
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Refers to Blue Owl Securities LLC,
a Delaware limited liability company. Blue Owl Securities is a
broker-dealer registered with the SEC, a member of FINRA and
the
SIPC. Blue Owl Securities is wholly owned by Blue Owl and provides
distribution services to all Blue Owl Divisions.
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Business Combination |
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Refers to the transactions contemplated by the Business Combination
Agreement, which were completed on May 19, 2021.
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Business Combination Agreement or BCA |
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Refers to the agreement dated as of December 23, 2020 (as the same
has been or may be amended, modified, supplemented or waived from
time to time), by and among Altimar Acquisition Corporation, Owl
Rock Capital Group LLC, Owl Rock Capital Feeder LLC, Owl Rock
Capital Partners LP and Neuberger Berman Group LLC. |
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Business Combination Date |
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Refers to May 19, 2021. |
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Class A Shares |
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Refers to the Class A common stock, par value $0.0001 per share, of
the Registrant. |
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Class B Shares |
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Refers to the Class B common stock, par value $0.0001 per share, of
the Registrant. |
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Class C Shares |
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Refers to the Class C common stock, par value $0.0001 per share, of
the Registrant. |
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Class D Shares |
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Refers to the Class D common stock, par value $0.0001 per share, of
the Registrant. |
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Class E Shares |
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Refers to the Class E common stock, par value $0.0001 per share, of
the Registrant. |
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Direct Lending |
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Refers to our Direct Lending products, which offer private credit
solutions to middle-market companies through four investment
strategies: diversified lending, technology lending, first lien
lending and opportunistic lending. Direct Lending products are
managed by the Owl Rock division of Blue Owl. |
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Dyal Capital |
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Refers to the Dyal Capital Partners business, which was acquired
from Neuberger Berman Group LLC in connection with the Business
Combination, and is now a division of Blue Owl. |
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Fee-Paying AUM or FPAUM |
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Refers to the AUM on which management fees are earned. For our
BDCs, FPAUM is generally equal to total assets (including assets
acquired with debt but excluding cash). For our other Direct
Lending products, FPAUM is generally equal to NAV or investment
cost. FPAUM also includes uncalled committed capital for products
where we earn management fees on such uncalled committed capital.
For our GP Capital Solutions products, FPAUM for the GP minority
equity investments strategy is generally equal to capital
commitments during the investment period and the cost of unrealized
investments after the investment period. For GP Capital Solutions’
other strategies, FPAUM is generally equal to investment cost. For
Real Estate, FPAUM is generally based on total assets (including
assets acquired with debt). |
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Financial Statements |
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Refers to our consolidated and combined financial statements
included in this report. |
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GP Capital Solutions |
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Refers to our GP Capital Solutions products, which primarily focus
on acquiring equity stakes in, or providing debt financing to,
large, multi-product private equity and private credit platforms
through three existing investment strategies: GP minority equity
investments, GP debt financing and professional sports minority
investments. GP Capital Solutions products are managed by the Dyal
Capital division of Blue Owl. |
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NYSE |
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Refers to the New York Stock Exchange. |
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Oak Street |
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Refers to the investment advisory business of Oak Street Real
Estate Capital, LLC that was acquired on December 29, 2021, and is
now a division of Blue Owl. |
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Oak Street Acquisition |
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Refers to the acquisition of Oak Street completed on December 29,
2021. |
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Owl Rock |
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Refers collectively to the combined businesses of Owl Rock Capital
Group LLC (“Owl Rock Capital Group”) and Blue Owl Securities LLC
(formerly, Owl Rock Capital Securities LLC), which was the
predecessor of Blue Owl for accounting and financial reporting
purposes. References to the Owl Rock division refer to Owl Rock
Capital Group and its subsidiaries that manage our Direct Lending
products. |
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Partner Manager |
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Refers to alternative asset management firms in which the GP
Capital Solution products invest. |
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Part I Fees |
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Refers to quarterly performance income on the net investment income
of our BDCs and similarly structured products, subject to a fixed
hurdle rate. These fees are classified as management fees
throughout this report, as they are predictable and recurring in
nature, not subject to repayment, and cash-settled each
quarter. |
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Part II Fees |
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Generally refers to fees from our BDCs and similarly structured
products that are paid in arrears as of the end of each measurement
period when the cumulative aggregate realized capital gains exceed
the cumulative aggregate realized capital losses and aggregate
unrealized capital depreciation, less the aggregate amount of Part
II Fees paid in all prior years since inception. Part II Fees are
classified as realized performance income throughout this
report. |
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Principals |
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Refers to our founders and senior members of management who hold,
or in the future may hold, Class B Shares and Class D Shares. Class
B Shares and Class D Shares collectively represent 80% of the total
voting power of all shares.
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Real Estate |
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Refers, unless context indicates otherwise, to our Real Estate
products, which primarily focus on providing investors with
predictable current income, and potential for appreciation, while
focusing on limiting downside risk through a unique net lease
strategy. Real Estate products are managed by the Oak Street
division of Blue Owl. |
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Registrant |
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Refers to Blue Owl Capital Inc. |
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SEC |
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Refers to the U.S. Securities and Exchange Commission. |
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Tax Receivable Agreement or TRA |
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Refers to the Amended and Restated Tax Receivable Agreement, dated
as of October 22, 2021, as may be amended from time to time by and
among the Registrant, Blue Owl Capital GP LLC, the Blue Owl
Operating Partnerships and each of the Partners (as defined
therein) party thereto. |
AVAILABLE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information required by the Securities Exchange Act of 1934,
as amended (the “Exchange Act”) with the SEC. We make available
free of charge on our website
(www.blueowl.com)
our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, proxy statements and other filing as
soon as reasonably practicable after such material is
electronically filed with or furnished to the SEC. We also use our
website to distribute company information, including assets under
management and performance information, and such information may be
deemed material. Accordingly, investors should monitor our website,
in addition to our press releases, SEC filings and public
conference calls and webcasts.
Also posted on our website in the “Investor Relations—Governance”
section is the charter for our Audit Committee, as well as our
Corporate Governance Guidelines and Code of Business Conduct
governing our directors, officers and employees. Information on or
accessible through our website is not a part of or incorporated
into this report or any other SEC filing. Copies of our SEC filings
or corporate governance materials are available without charge upon
written request to Blue Owl Capital Inc., 399 Park Avenue, 38th
Floor, New York, New York 10022, Attention: Office of the
Secretary. Any materials we file with the SEC are also publicly
available through the SEC’s website
(www.sec.gov).
No statements herein, available on our website or in any of the
materials we file with the SEC constitute, or should be viewed as
constituting, an offer of any fund.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This report contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), and Section 21E of the Exchange Act, which
reflect our current views with respect to, among other things,
future events, operations and financial performance. You can
identify these forward-looking statements by the use of
forward-looking words such as “outlook,” “believes,” “expects,”
“potential,” “continues,” “may,” “will,” “should,” “seeks,”
“approximately,” “predicts,” “projects,” “intends,” “plans,”
“estimates,” “anticipates” or the negative version of those words,
other comparable words or other statements that do not relate to
historical or factual matters. The forward-looking statements are
based on our beliefs, assumptions and expectations of our future
performance, taking into account all information currently
available to us. Such forward-looking statements are subject to
various risks, uncertainties (some of which are beyond our control)
or other assumptions relating to our operations, financial results,
financial condition, business prospects, growth strategy and
liquidity that may cause actual results or performance to be
materially different from those expressed or implied by these
forward-looking statements. Some of these factors are described
under the headings “Item 1A. Risk Factors” and “Item 2.
Management’s Discussion and Analysis of Financial Condition and
Results of Operations.” These factors should not be construed as
exhaustive and should be read in conjunction with the risk factors
and other cautionary statements that are included in this report
and in our other periodic filings. If one or more of these or other
risks or uncertainties materialize, or if our underlying
assumptions prove to be incorrect, our actual results may vary
materially from those indicated in these forward-looking
statements. New risks and uncertainties arise over time, and it is
not possible for us to predict those events or how they may affect
us. Therefore, you should not place undue reliance on these
forward-looking statements. Any forward-looking statement speaks
only as of the date on which it is made. We do not undertake any
obligation to publicly update or review any forward-looking
statement, whether as a result of new information, future
developments or otherwise, except as required by law.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The information required by this item is included in the Financial
Statements set forth in the
F-pages
of this report.
Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations.
The following Management’s Discussion and Analysis of Financial
Condition and Results of Operations (“MD&A”), should be read in
conjunction with the unaudited consolidated and combined financial
statements and the related notes included in this report. For a
description of our business, please see “Business of Blue Owl” in
the Annual Report.
2022 First Quarter Overview
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Three Months Ended March 31, |
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(dollars in thousands) |
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2022 |
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2021 |
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Net (Loss) Income Attributable to Blue Owl Capital Inc. (After May
19, 2021) / Owl Rock (Prior to May 19, 2021) |
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$ |
(11,815) |
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$ |
39,414 |
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Fee-Related Earnings(1)
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$ |
171,383 |
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$ |
46,350 |
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Distributable Earnings(1)
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$ |
155,726 |
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$ |
40,254 |
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(1) For the specific components and calculations of these Non-GAAP
measures, as well as a reconciliation of these measures to the most
comparable measure in accordance with GAAP, see
“—Non-GAAP Analysis”
and
“—Non-GAAP Reconciliations.”
Our results for first quarter of 2021 do not include the results of
Dyal Capital or Oak Street; therefore, prior period amounts are not
comparable to current period. Please see “—GAAP
Results of Operations Analysis”
and
“—Non-GAAP Analysis”
for a detailed discussion of the underlying drivers of our results,
including the accretive impacts of the Dyal Acquisition and Oak
Street Acquisition.
Assets Under Management
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Blue Owl
AUM: $102.0 billion
FPAUM: $65.6 billion
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Direct Lending Products
AUM: $44.8 billion
FPAUM: $32.7 billion
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GP Capital Solutions Products
AUM: $41.2 billion
FPAUM: $23.7 billion
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Real Estate Products
AUM: $16.1 billion
FPAUM: $9.3 billion
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Diversified Lending
Commenced 2016
AUM: $30.4 billion
FPAUM: $21.1 billion
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GP Minority Equity
Commenced 2010
AUM: $39.6 billion
FPAUM: $22.8 billion
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Net Lease
Commenced 2009
AUM: $16.1 billion
FPAUM: $9.3 billion
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Technology Lending
Commenced 2018
AUM: $8.9 billion
FPAUM: $7.7 billion
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GP Debt Financing
Commenced 2019
AUM: $1.3 billion
FPAUM: $0.7 billion
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First Lien Lending
Commenced 2018
AUM: $3.5 billion
FPAUM: $2.5 billion
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Professional Sports Minority Investments
Commenced 2021
AUM: $0.2 billion
FPAUM: $0.2 billion
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Opportunistic Lending
Commenced 2020
AUM: $2.1 billion
FPAUM: $1.4 billion
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We finished the quarter with $102.0 billion of AUM, which included
$65.6 billion of FPAUM. During the first quarter of 2022,
approximately 95% of our management fees were earned on AUM that we
refer to as permanent capital.
As of March 31, 2022, we have approximately
$7.7 billion
in AUM not yet paying fees, providing approximately
$105.0 million
of annualized management fees once deployed or upon the expiration
of certain fee holidays.
See
“—Assets Under Management”
for additional information, including important information on how
we define these metrics.
Business Environment
Our business is impacted by conditions in the financial markets and
economic conditions in the U.S., and to a lesser extent, elsewhere
in the world.
The public markets have witnessed volatility and dispersion in the
first quarter of 2022 resulting from unexpectedly high and
persistent inflation, a shifting interest rate environment,
geopolitical events, and ongoing impact from COVID-19 globally.
Allocations to alternative strategies have unsurprisingly created
some near-term headwinds to industry-wide M&A and capital
markets activity as investors paused to react to updated
information, market expectations, and a changing investment
landscape. We have benefited from this market volatility as an
increasing number of sponsors and private companies have looked to
Direct Lending for flexible and dependable financing, and capital
that managers need to expand and diversify their platforms through
our GP Capital Solutions products.
Higher than expected inflation has impacted expectations for the
pace of rate hikes, driving market volatility and adjusting
investors’ views on earnings growth for many public companies. We
anticipate a net positive effect on our business from a rising rate
environment. We expect our Direct Lending products to be a
beneficiary of rising rates, as investor demand increases for
senior secured floating rate assets focused on downside protection,
and over time, the effect of rising rates would be positive for the
net interest income of our Direct Lending products’ loan
portfolios. For GP Capital Solutions, market volatility should
drive demand for products managed by large, diversified managers,
benefiting the types of firms our GP Capital Solutions products
have typically taken stakes in. With respect to our Real Estate
products, we believe there will continue to be strong demand for
real estate strategies with long-term, contractual income that are
positively correlated to inflation and backed by investment grade
tenants, and that rising corporate borrowing costs will drive
incremental demand for our Real Estate net lease
solutions.
We believe that our disciplined investment philosophy across our
distinct but complementary products contributes to the stability of
our performance throughout market cycles. Our products have a
stable base of permanent or long-term capital enabling us to invest
in assets with a long-term focus over different points in a market
cycle.
Assets Under Management
We present information regarding our AUM, FPAUM and various other
related metrics throughout this MD&A to provide context around
our fee generating revenues results, as well as indicators of the
potential for future earnings from existing and new products. Our
calculations of AUM and FPAUM may differ from the calculation
methodologies of other asset managers, and as a result these
measures may not be comparable to similar measures presented by
other asset managers. In addition, our calculation of AUM includes
amounts that are fee exempt (i.e., not subject to
fees).
As of March 31, 2022, our assets under management include
approximately $2.2 billion related to us, our executives and other
employees. A portion of these assets under management relate to
accrued carried interests, as well as investments that are not
charged fees.
Composition of Assets Under Management
Our AUM consists of FPAUM, AUM not yet paying fees, fee-exempt AUM
and net appreciation and leverage in products on which fees are
based on commitments or investment cost. AUM not yet paying fees
generally relates to unfunded capital commitments (to the extent
such commitments are not already subject to fees), undeployed debt
(to the extent we earn fees based on total asset values or
investment cost, inclusive of assets purchased using debt) and AUM
that is subject to a temporary fee holiday. Fee-exempt AUM
represents certain investments by us, our employees, other related
parties and third parties, as well as certain co-investment
vehicles on which we do not earn fees.
Management uses AUM not yet paying fees as an indicator of
management fees that will be coming online as we deploy existing
assets in products that charge fees based on deployed and not
uncalled capital, as well as AUM that is currently subject to a fee
holiday that will expire at a predetermined time in the future. AUM
not yet paying fees could provide
approximately
$105.0 million
of additional annualized management fees once deployed or upon the
expiration of the relevant fee holidays. Approximately
$2.2 billion of AUM not yet paying fees moved to FPAUM on
January 1, 2022, driven primarily by the expiration of certain fee
holidays in Dyal Fund V, which was offset by a decrease in FPAUM
for a step down in fee basis in Dyal Fund III of $0.9
billion.
Permanency and Duration of Assets Under Management
Our capital base is heavily weighted toward permanent capital. We
use the term “permanent capital” to refer to AUM in our products
that do not have ordinary redemption provisions or a requirement to
exit investments and return the proceeds to investors after a
prescribed period of time. Some of these products, however, may be
required, or elect, to return all or a portion of capital gains and
investment income. Permanent capital includes certain products that
are subject to management fee step downs and/or roll-offs over
time. Substantially all of our remaining AUM is in what we refer to
as “long-dated funds.” These are funds in which the contractual
remaining life is five years or more.
We view the permanency and duration of the products that we manage
as a differentiator in our industry and as a means of measuring the
stability of our future revenues stream. The chart below presents
the composition of our management fees by remaining product
duration. Changes in these relative percentages will occur over
time as the mix of products we offer changes. For example, our Real
Estate products have a higher concentration in long-dated funds,
which in isolation may cause our percentage of management fees from
permanent capital to decline.
Changes in AUM
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Three Months Ended March 31, 2022 |
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Three Months Ended March 31, 2021 |
|
(dollars in millions) |
Direct Lending |
|
GP Capital Solutions |
|
Real Estate |
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Total |
|
Direct Lending |
|
GP Capital Solutions |
|
Real Estate |
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Total |
|
Beginning Balance |
$ |
39,227 |
|
|
$ |
39,906 |
|
|
$ |
15,362 |
|
|
$ |
94,495 |
|
|
$ |
27,101 |
|
|
$ |
26,220 |
|
|
$ |
— |
|
|
$ |
53,321 |
|
|
Acquisition |
— |
|
|
— |
|
|
— |
|
|
— |
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|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
New capital raised |
1,938 |
|
|
1,566 |
|
|
360 |
|
|
3,864 |
|
|
235 |
|
|
911 |
|
|
— |
|
|
1,146 |
|
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Change in debt |
3,618 |
|
|
— |
|
|
— |
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|
3,618 |
|
|
329 |
|
|
— |
|
|
— |
|
|
329 |
|
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Distributions |
(284) |
|
|
(758) |
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|
(165) |
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|
(1,207) |
|
|
(181) |
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|
(74) |
|
|
— |
|
|
(255) |
|
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Change in value / other |
276 |
|
|
439 |
|
|
533 |
|
|
1,248 |
|
|
293 |
|
|
3,139 |
|
|
— |
|
|
3,432 |
|
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Ending Balance |
$ |
44,775 |
|
|
$ |
41,153 |
|
|
$ |
16,090 |
|
|
$ |
102,018 |
|
|
$ |
27,777 |
|
|
$ |
30,196 |
|
|
$ |
— |
|
|
$ |
57,973 |
|
Direct Lending.
Increase in AUM was driven by a combination of continued
fundraising and debt deployment across the strategy.
•$1.2
billion new capital raised in Diversified Lending, primarily driven
by retail fundraising in ORCIC.
•$0.7
billion new capital raised in Technology Lending, driven by
continued fundraising in ORTF II, our second technology-focused
BDC.
•$3.6
billion of debt deployment across all of Direct Lending, as we
continue to opportunistically deploy leverage in our
BDCs.
GP Capital Solutions.
Increase in AUM was driven by new capital raised, primarily in Dyal
Fund V, and overall appreciation across all of our major
products.
Real Estate.
There was no material increase or decrease in AUM.
Changes in FPAUM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2022 |
|
Three Months Ended March 31, 2021 |
|
(dollars in millions) |
Direct Lending |
|
GP Capital Solutions |
|
Real Estate |
|
Total |
|
Direct Lending |
|
GP Capital Solutions |
|
Real Estate |
|
Total |
|
Beginning Balance |
$ |
32,029 |
|
|
$ |
21,212 |
|
|
$ |
8,203 |
|
|
$ |
61,444 |
|
|
$ |
20,862 |
|
|
$ |
17,608 |
|
|
$ |
— |
|
|
$ |
38,470 |
|
|
Acquisition |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
New capital raised / deployed |
2,200 |
|
|
1,171 |
|
|
1,077 |
|
|
4,448 |
|
|
482 |
|
|
1,011 |
|
|
— |
|
|
1,493 |
|
|
Fee basis change |
— |
|
|
1,268 |
|
|
— |
|
|
1,268 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Distributions |
(278) |
|
|
— |
|
|
(161) |
|
|
(439) |
|
|
(149) |
|
|
11 |
|
|
— |
|
|
(138) |
|
|
Change in value / other |
(1,293) |
|
|
— |
|
|
156 |
|
|
(1,137) |
|
|
276 |
|
|
— |
|
|
— |
|
|
276 |
|
|
Ending Balance |
$ |
32,658 |
|
|
$ |
23,651 |
|
|
$ |
9,275 |
|
|
$ |
65,584 |
|
|
$ |
21,471 |
|
|
$ |
18,630 |
|
|
$ |
— |
|
|
$ |
40,101 |
|
Direct Lending.
Increase in FPAUM was driven by a combination of continued
fundraising and debt deployment as discussed in the AUM section
above, partially offset by a change in methodology that reduced
FPAUM by approximately $1.5 billion.
GP Capital Solutions.
Increase in FPAUM was driven by new capital raised, primarily in
Dyal Fund V, and the expiration of certain fee holidays on January
1, 2022. The expiration of the fee holiday drove an increase in
FPAUM of
$2.2 billion, which was
partially offset by
a decrease in FPAUM for a step down in fee basis in Dyal Fund III
of $0.9 billion.
Real Estate.
There was no material increase or decrease in FPAUM.
Product Performance
Product performance for certain of our products is included
throughout this discussion with analysis to facilitate an
understanding of our results of operations for the periods
presented. The performance information of our products reflected is
not indicative of our performance. An investment in Blue Owl is not
an investment in any of our products. Past performance is not
indicative of future results. As with any investment, there is
always the potential for gains as well as the possibility of
losses. There can be no assurance that any of these products or our
other existing and future products will achieve similar returns.
MoIC and IRR data has not been presented for products that have
launched within the last two years as such information is generally
not meaningful (“NM”).
Direct Lending
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MoIC |
|
IRR |
|
(dollars in millions) |
Year of
Inception |
|
AUM |
|
Capital
Raised
(1) |
|
Invested
Capital
(2) |
|
Realized
Proceeds
(3) |
|
Unrealized
Value
(4) |
|
Total
Value |
|
Gross (5) |
|
Net (6) |
|
Gross (7) |
|
Net (8) |
|
Diversified Lending |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORCC |
2016 |
|
$ |
14,616 |
|
|
$ |
6,018 |
|
|
$ |
6,030 |
|
|
$ |
2,024 |
|
|
$ |
5,871 |
|
|
$ |
7,895 |
|
|
1.41x |
|
1.31x |
|
11.8 |
% |
|
8.9 |
% |
|
ORCC II (9) |
2017 |
|
$ |
2,614 |
|
|
$ |
1,383 |
|
|
$ |
1,355 |
|
|
$ |
269 |
|
|
$ |
1,342 |
|
|
$ |
1,611 |
|
|
NM |
|
1.19x |
|
NM |
|
7.0 |
% |
|
ORCC III |
2020 |
|
$ |
3,651 |
|
|
$ |
1,709 |
|
|
$ |
1,659 |
|
|
$ |
101 |
|
|
$ |
1,664 |
|
|
$ |
1,765 |
|
|
NM |
|
NM |
|
NM |
|
NM |
|
ORCIC |
2020 |
|
$ |
8,376 |
|
|
$ |
2,810 |
|
|
$ |
2,780 |
|
|
$ |
71 |
|
|
$ |
2,763 |
|
|
$ |
2,834 |
|
|
NM |
|
NM |
|
NM |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology Lending |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORTF |
2018 |
|
$ |
7,185 |
|
|
$ |
3,195 |
|
|
$ |
3,196 |
|
|
$ |
278 |
|
|
$ |
3,457 |
|
|
$ |
3,735 |
|
|
1.22x |
|
1.17x |
|
15.2 |
% |
|
11.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Lien Lending (10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owl Rock First Lien Fund Levered |
2018 |
|
$ |
2,948 |
|
|
$ |
1,161 |
|
|
$ |
813 |
|
|
$ |
116 |
|
|
$ |
836 |
|
|
$ |
952 |
|
|
1.22x |
|
1.18x |
|
10.2 |
% |
|
8.1 |
% |
|
Owl Rock First Lien Fund Unlevered |
2019 |
|
|
$ |
150 |
|
|
$ |
144 |
|
|
$ |
7 |
|
|
$ |
147 |
|
|
$ |
154 |
|
|
1.11x |
|
1.08x |
|
5.3 |
% |
|
3.5 |
% |
(1)Includes
reinvested dividends and share repurchases, if
applicable.
(2)Invested
capital includes capital calls, reinvested dividends and periodic
investor closes, as applicable.
(3)Realized
proceeds represent the sum of all cash distributions to
investors.
(4)Unrealized
value represents the product’s NAV. There can be no assurance that
unrealized values will be realized at the valuations
indicated.
(5)Gross
multiple of invested capital (“MoIC”) is calculated by adding total
realized proceeds and unrealized values of a product’s investments
and dividing by the total amount of invested capital. Gross MoIC is
before giving effect to management fees (including Part I Fees) and
Part II Fees, as applicable.
(6)Net
MoIC measures the aggregate value generated by a product’s
investments in absolute terms. Net MoIC is calculated by adding
total realized proceeds and unrealized values of a product’s
investments and dividing by the total amount of invested capital.
Net MoIC is calculated after giving effect to management fees
(including Part I Fees) and Part II Fees, as applicable, and all
other expenses.
(7)Gross
IRR is an annualized since inception gross internal rate of return
of cash flows to and from the product and the product’s residual
value at the end of the measurement period. Gross IRRs are
calculated before giving effect to management fees (including Part
I Fees) and Part II Fees, as applicable.
(8)Net
IRRs are calculated consistent with gross IRRs, but after giving
effect to management fees (including Part I Fees) and Part II Fees,
as applicable, and all other expenses. An individual investor’s IRR
may be different to the reported IRR based on the timing of capital
transactions.
(9)For
the purposes of calculating Gross IRR, the expense support provided
to the fund would be impacted when assuming a performance excluding
management fees (including Part I Fees) and Part II Fees, and
therefore is not meaningful for ORCC II.
(10)Owl
Rock First Lien Fund is comprised of three feeder funds: Onshore
Levered, Offshore Levered and Insurance Unlevered. The gross and
net MoIC and IRR presented in the chart are for Onshore Levered and
Insurance Unlevered as those are the largest of the levered and
unlevered feeder funds. The gross and net MoIC for the Offshore
Levered feeder fund is 1.21x and 1.14x, respectively. The gross and
net IRR for the Offshore Levered feeder is 9.6% and 6.4%,
respectively. All other values for Owl Rock First Lien Fund Levered
are for Onshore Levered and Offshore Levered combined. AUM is
presented as the aggregate of the three Owl Rock First Lien Fund
feeders. Owl Rock First Lien Fund Unlevered Investor equity and
note commitments are both treated as capital for all
values.
GP Capital Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MoIC |
|
IRR |
|
|
|
(dollars in millions) |
Year of
Inception |
|
AUM |
|
Capital
Raised |
|
Invested
Capital
(2) |
|
Realized
Proceeds
(3) |
|
Unrealized
Value
(4) |
|
Total
Value |
|
Gross (5) |
|
Net (6) |
|
Gross (7) |
|
Net (8) |
|
|
|
GP Minority Equity (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dyal Fund I |
2011 |
|
$ |
954 |
|
|
$ |
1,284 |
|
|
$ |
1,248 |
|
|
$ |
583 |
|
|
$ |
721 |
|
|
$ |
1,304 |
|
|
1.19x |
|
1.04x |
|
3.8 |
% |
|
0.5 |
% |
|
|
|
Dyal Fund II |
2014 |
|
$ |
2,590 |
|
|
$ |
2,153 |
|
|
$ |
1,846 |
|
|
$ |
421 |
|
|
$ |
2,028 |
|
|
$ |
2,449 |
|
|
1.48x |
|
1.33x |
|
11.9 |
% |
|
7.8 |
% |
|
|
|
Dyal Fund III |
2015 |
|
$ |
8,174 |
|
|
$ |
5,318 |
|
|
$ |
3,241 |
|
|
$ |
2,591 |
|
|
$ |
4,272 |
|
|
$ |
6,863 |
|
|
2.54x |
|
2.12x |
|
31.8 |
% |
|
23.9 |
% |
|
|
|
Dyal Fund IV |
2018 |
|
$ |
14,330 |
|
|
$ |
9,041 |
|
|
$ |
4,807 |
|
|
$ |
2,352 |
|
|
$ |
6,667 |
|
|
$ |
9,019 |
|
|
2.25x |
|
1.88x |
|
127.3 |
% |
|
81.2 |
% |
|
|
|
Dyal Fund V |
2020 |
|
$ |
7,798 |
|
|
$ |
6,787 |
|
|
$ |
926 |
|
|
$ |
— |
|
|
$ |
1,758 |
|
|
$ |
1,758 |
|
|
NM |
|
NM |
|
NM |
|
NM |
|
|
(1)Valuation-related
amounts and performance metrics are presented on a quarter lag and
are exclusive of investments made by us and the related carried
interest vehicles of the respective products.
(2)Invested
capital includes capital calls.
(3)Realized
proceeds represent the sum of all cash distributions to
investors.
(4)Unrealized
value represents the product's NAV. There can be no assurance that
unrealized values will be realized at the valuations
indicated.
(5)Gross
MoIC is calculated by adding total realized proceeds and unrealized
values of a product’s investments and dividing by the total amount
of invested capital. Gross MoIC is before giving effect to
management fees and carried interest, as applicable.
(6)Net
MoIC measures the aggregate value generated by a product's
investments in absolute terms. Net MoIC is calculated by adding
total realized proceeds and unrealized values of a product's
investments and dividing by the total amount of invested capital.
Net MoIC is calculated after giving effect to management fees and
carried interest, as applicable, and all other
expenses.
(7)Gross
IRR is an annualized since inception gross internal rate of return
of cash flows to and from the product and the product’s residual
value at the end of the measurement period. Gross IRRs are
calculated before giving effect to management fees and carried
interest, as applicable.
(8)Net
IRR is an annualized since inception net internal rate of return of
cash flows to and from the product and the product's residual value
at the end of the measurement period. Net IRRs reflect returns to
all investors. Net IRRs are calculated after giving effect to
management fees and carried interest, as applicable, and all other
expenses. An individual investor's IRR may be different to the
reported IRR based on the timing of capital
transactions.
Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MoIC |
|
IRR |
|
|
|
(dollars in millions) |
Year of Inception |
|
AUM |
|
Capital Raised |
|
Invested Capital
(2) |
|
Realized
Proceeds
(3) |
|
Unrealized
Value
(4) |
|
Total
Value |
|
Gross (5) |
|
Net (6) |
|
Gross (7) |
|
Net (8) |
|
|
|
Net Lease (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oak Street Real Estate Capital Fund IV |
2017 |
|
$ |
1,322 |
|
|
$ |
1,250 |
|
|
$ |
1,239 |
|
|
$ |
923 |
|
|
$ |
883 |
|
|
$ |
1,806 |
|
|
1.60x |
|
1.46x |
|
27.2 |
% |
|
21.4 |
% |
|
|
|
Oak Street Real Estate Capital Net Lease Property Fund |
2019 |
|
$ |
5,671 |
|
|
$ |
3,161 |
|
|
$ |
2,600 |
|
|
$ |
164 |
|
|
$ |
2,951 |
|
|
$ |
3,115 |
|
|
1.21x |
|
1.20x |
|
22.5 |
% |
|
21.4 |
% |
|
|
|
Oak Street Real Estate Capital Fund V |
2020 |
|
$ |
3,621 |
|
|
$ |
2,500 |
|
|
$ |
1,147 |
|
|
$ |
304 |
|
|
$ |
1,089 |
|
|
$ |
1,393 |
|
|
NM |
|
NM |
|
NM |
|
NM |
|
|
|
Oak Street Asset-Backed Securitization (9) |
2020 |
|
$ |
3,001 |
|
|
$ |
2,713 |
|
|
$ |
342 |
|
|
$ |
48 |
|
|
$ |
352 |
|
|
$ |
400 |
|
|
NM |
|
NM |
|
NM |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Valuation-related
amounts and performance metrics, as well as invested capital and
realized proceeds, are presented on a quarter lag where
applicable.
(2)Invested
capital includes investments by the general partner, capital calls,
dividends reinvested and periodic investors closes, as
applicable.
(3)Realized
proceeds represent the sum of all cash distributions to all
investors.
(4)Unrealized
value represents the fund’s NAV. There can be no assurance that
unrealized values will be realized at the valuations
indicated.
(5)Gross
MoIC is calculated by adding total realized proceeds and unrealized
values of a product’s investments and dividing by the total amount
of invested capital. Gross MoIC is before giving effect to
management fees and carried interest, as applicable.
(6)Net
MoIC measures the aggregate value generated by a product's
investments in absolute terms. Net MoIC is calculated by adding
total realized proceeds and unrealized values of a product's
investments and dividing by the total amount of invested capital.
Net MoIC is calculated after giving effect to management fees and
carried interest, as applicable, and all other
expenses.
(7)Gross
IRR is an annualized since inception gross internal rate of return
of cash flows to and from the product and the product’s residual
value at the end of the measurement period. Gross IRRs are
calculated before giving effect to management fees and carried
interest, as applicable.
(8)Net
IRR is an annualized since inception net internal rate of return of
cash flows to and from the product and the product's residual value
at the end of the measurement period. Net IRRs reflect returns to
all investors. Net IRRs are calculated after giving effect to
management fees and carried interest, as applicable, and all other
expenses. An individual investor's IRR may be different to the
reported IRR based on the timing of capital
transactions.
(9)Capital
raised for this product includes the par value of notes issued in
the securitization. Invested capital, realized proceeds, unrealized
and total values relate to the subordinated notes/equity of the
securitization.
GAAP Results of Operations Analysis
As a result of the Dyal Acquisition and Oak Street Acquisition,
prior year amounts are not comparable to current year amounts or
expected future trends. Dyal Capital’s and Oak Street’s results of
operations are included from the Business Combination Date and
December 29, 2021, respectively.
Three Months Ended March 31, 2022, Compared to the Three Months
Ended March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
(dollars in thousands) |
2022 |
|
2021 |
|
$ Change |
|
Revenues |
|
|
|
|
|
|
Management fees, net (includes Part I Fees of $46,739 and
28,914)
|
$ |
247,632 |
|
|
$ |
94,713 |
|
|
$ |
152,919 |
|
|
Administrative, transaction and other fees |
28,345 |
|
|
13,511 |
|
|
14,834 |
|
|
|
|
|
|
|
|
Total Revenues, Net |
275,977 |
|
|
108,224 |
|
|
167,753 |
|
|
Expenses |
|
|
|
|
|
|
Compensation and benefits |
193,892 |
|
|
47,984 |
|
|
145,908 |
|
|
Amortization of intangible assets |
61,526 |
|
|
— |
|
|
61,526 |
|
|
General, administrative and other expenses |
43,294 |
|
|
14,860 |
|
|
28,434 |
|
|
Total Expenses |
298,712 |
|
|
62,844 |
|
|
235,868 |
|
|
Other (Loss) Income |
|
|
|
|
|
|
Net gains on investments |
5 |
|
|
— |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
(12,834) |
|
|
(5,858) |
|
|
(6,976) |
|
|
Change in TRA liability |
(9,652) |
|
|
— |
|
|
(9,652) |
|
|
Change in warrant liability |
17,758 |
|
|
— |
|
|
17,758 |
|
|
Change in earnout liability |
(496) |
|
|
— |
|
|
(496) |
|
|
Total Other (Loss) Income |
(5,219) |
|
|
(5,858) |
|
|
639 |
|
|
(Loss) Income Before Income Taxes |
(27,954) |
|
|
39,522 |
|
|
(67,476) |
|
|
Income tax (benefit) expense |
(5,038) |
|
|
188 |
|
|
(5,226) |
|
|
Consolidated and Combined Net (Loss) Income |
(22,916) |
|
|
39,334 |
|
|
(62,250) |
|
|
Net loss attributable to noncontrolling interests |
11,101 |
|
|
80 |
|
|
11,021 |
|
|
Net (Loss) Income Attributable to Blue Owl Capital Inc. |
$ |
(11,815) |
|
|
$ |
39,414 |
|
|
$ |
(51,229) |
|
Revenues, Net
Management Fees.
Management fees increased primarily due to the $96.8 million
accretive impact of GP Capital Solution’s management fees and $17.2
million of Real Estate’s management fees as well as overall growth
in FPAUM across all of our Diversified Lending product strategies.
See Note 5 to our consolidated and combined financial statements
for additional details on our GAAP management fees by product and
strategy.
Administrative, Transaction and Other Fees.
The increase in administrative, transaction and other fees was
driven primarily by a $4.8 million increase of dealer manager
revenue, a $2.6 million increase of administrative fees related to
our Direct Lending products and $3.1 million increase of
administrative fees related to our GP Capital Solutions products
due to higher compensation and benefits being recovered from our
products, which are included from the Business Combination Date.
Also contributing to the year-over-year increase was a $4.3 million
increase in fee income earned for services provided to portfolio
companies.
Expenses
Compensation and Benefits.
Compensation and benefits expenses increased by $96.2 million
related to amortization of equity grants, $16.1 million related to
acquisition related cash earnouts for Oak Street and an additional
$33.6 million related to growth in our employee headcount as a
result of the Dyal and Oak Street acquisitions as well as organic
growth.
Amortization of Intangible Assets.
These expenses relate to the amortization of intangible assets
acquired in connection with the Dyal Acquisition and the Oak Street
Acquisition.
General, Administrative and Other Expenses.
The increase in general, administrative and other expenses was due
to Transaction Expenses of $9.6 million, a $7.6 million
increase in distribution costs due to placement fees associated
with Dyal Fund V and certain private fund closes in Direct Lending
as well as ongoing trail fees for historical fundraise Dyal
products which are included from the Business Combination Date. The
remaining net increase was driven primarily by our continued growth
as a public company and transitioning back to the office from a
remote workforce.
Other Loss
Interest expense.
The increase in interest expense was driven by higher average debt
outstanding, as in 2021 our long-term debt outstanding related to
the $250.0 million term loan agreement (the “Term Loan”) that was
repaid in the second quarter of 2021 using proceeds from the $700.0
million of 2031 Notes, a larger size facility. Further, we issued
the $350.0 million of 2051 Notes during the fourth quarter of 2021
and $400.0 million of 2032 Notes during the first quarter of 2022.
The impact of higher average borrowing outstanding in fiscal
quarter 2022 was partially offset by lower average borrowing rates
on the Notes in 2022 compared to the Term Loan in
2021.
Change in TRA liability.
The change in TRA liability in 2022 was due to the impact of the
time value of money on the portion of the TRA that is carried at
fair value (i.e., Dyal Acquisition contingent consideration). The
TRA was entered into in connection with the Business Combination in
May 2021.
Change in warrant liability.
The change in warrant liability in 2022 was driven by the decrease
in the price of our Public Warrants, as such price directly impacts
the valuation of our Private Placement Warrants. The warrants were
issued in connection with the Business Combination in May
2021.
Change in earnout liability.
There was no material change to the earnout liability.
Income Tax Benefit
Prior to the Business Combination, our income was generally subject
to New York City Unincorporated Business Tax (“UBT”), as the
operating entities are partnerships for U.S. federal income tax
purposes. As a result of the Business Combination, the portion of
income allocable to the Registrant is now also generally subject to
corporate tax rates at the U.S. federal and state and local levels.
This resulted in an increase in income tax benefit in the current
year period. Please see Note 9 to our Financial Statements for a
discussion of the significant tax differences that impacted our
effective tax rate.
Net Loss Attributable to Noncontrolling Interest
Net loss attributable to noncontrolling interests in the current
year primarily represents the allocation to Common Units of their
pro rata share of the Blue Owl Operating Group’s post-Business
Combination net loss due to the drivers discussed above. The Common
Units represented an approximately 71% weighted average economic
interest in the Blue Owl Operating Group during the first quarter
of 2022. Prior to the Business Combination, amounts attributable to
noncontrolling interests were not significant, and related
primarily to third-party interests held in certain of our
consolidated investment advisor holding companies.
Non-GAAP Analysis
In addition to presenting our consolidated and combined results in
accordance with GAAP, we present certain other financial measures
that are not presented in accordance with GAAP. Management uses
these measures to assess the performance of our business, and we
believe that this information enhances the ability of shareholders
to analyze our performance from period to period. These non-GAAP
financial measures supplement and should be considered in addition
to and not in lieu of our GAAP results, and such measures should
not be considered as indicative of our liquidity. Our non-GAAP
measures may not be comparable to other similarly titled measured
used by other companies. Please see
“—Non-GAAP Reconciliations”
for reconciliations of these measures to the most comparable
measures prepared in accordance with GAAP.
Fee-Related Earnings and Related Components
Fee-Related Earnings is a supplemental non-GAAP measure of
operating performance used to make operating decisions and assess
our operating performance. Fee-Related Earnings excludes certain
items that are required for the presentation of our results on a
GAAP basis. Management also reviews the components that comprise
Fee-Related Earnings (i.e., FRE Revenues and FRE Expenses) on the
same basis used to calculate Fee-Related Earnings, and such
components are also non-GAAP measures and have been identified with
the prefix “FRE” in the tables and discussion below. Management
believes that by excluding these items, which are described below,
Fee-Related Earnings and its components can be useful as
supplemental measures to our GAAP results in assessing our
operating performance and focusing on whether our recurring
revenues, primarily consisting of management fees, are sufficient
to cover our recurring operating expenses.
Fee-Related Earnings exclude various items that are required for
the presentation of our results under GAAP, including the
following: noncontrolling interests in the Blue Owl Operating
Partnerships; equity-based compensation expense; compensation
expenses related to capital contributions in certain subsidiary
holding companies that are in-turn paid as compensation to certain
employees, as such contributions are not included in Fee-Related
Earnings or Distributable Earnings; amortization of
acquisition-related earnouts; amortization of intangible assets;
“Transaction Expenses” as defined below; net gains (losses) on
investments, changes in TRA, earnout and warrant liabilities; net
losses on retirement of debt; interest and taxes. In addition,
management reviews revenues by reducing GAAP administrative,
transaction and other fees for certain expenses related to
reimbursements from our products, which are presented gross for
GAAP but net for non-GAAP measures. Transaction Expenses are
expenses incurred in connection with the Business Combination and
other acquisitions and strategic transactions, including subsequent
adjustments related to such transactions, that were not eligible to
be netted against consideration or recognized as acquired assets
and assumed liabilities in the relevant transaction. Starting in
the first quarter of 2022, Transaction Expenses also include
expenses paid on behalf of certain products that are expected to be
reimbursed in subsequent periods; such amounts were not material to
the prior periods presented, and therefore such periods have not be
restated for this change.
Distributable Earnings
Distributable Earnings is a supplemental non-GAAP measure of
operating performance that equals Fee-Related Earnings plus or
minus, as relevant, realized performance income and related
compensation, interest expense, as well as amounts payable for
taxes and payments made pursuant to the TRA. Amounts payable for
taxes presents the current income taxes payable related to the
respective period’s earnings, assuming that all Distributable
Earnings were allocated to the Registrant, which would occur
following the exchange of all Blue Owl Operating Group Units for
Class A Shares. Current income taxes payable and payments made
pursuant to the TRA reflect the benefit of tax deductions that are
excluded when calculating Distributable Earnings (e.g.,
equity-based compensation expenses, net losses on retirement of
debt, Transaction Expenses, tax goodwill, etc.). If these tax
deductions were to be excluded from amounts payable for taxes,
Distributable Earnings would be lower and our effective tax rate
would appear to be higher, even though a lower amount of income
taxes would have been paid or payable for a period’s earnings. We
make these adjustments when calculating Distributable Earnings to
more accurately reflect the net realized earnings that are expected
to be or become available for distribution or reinvestment into our
business. Management believes that Distributable Earnings can be
useful as a supplemental performance measure to our GAAP results
assessing the amount of earnings available for
distribution.
Fee-Related Earnings and Distributable Earnings
Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(dollars in thousands) |
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FRE revenues |
|
|
|
|
$ |
272,598 |
|
|
$ |
103,771 |
|
|
|
|
FRE expenses |
|
|
|
|
(101,735) |
|
|
(57,501) |
|
|
|
|
Net loss allocated to noncontrolling interests included in
Fee-Related Earnings |
|
|
|
|
520 |
|
|
80 |
|
|
|
|
Fee-Related Earnings |
|
|
|
|
$ |
171,383 |
|
|
$ |
46,350 |
|
|
|
|
Distributable Earnings |
|
|
|
|
$ |
155,726 |
|
|
$ |
40,254 |
|
|
|
Fee-Related Earnings and Distributable Earnings increased
year-over-year as a result of the accretive impact of the Dyal
Acquisition and Oak Street Acquisition, as well as higher FRE
revenues from our Direct Lending products. These increases were
offset by higher FRE expenses, primarily due to compensation and
benefits as discussed further below.
FRE Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
(dollars in thousands) |
2022 |
|
2021 |
|
|
|
|
|
|
|
Direct Lending Products |
|
|
|
|
|
|
|
|
|
|
Diversified lending |
$ |
105,452 |
|
|
$ |
76,478 |
|
|
|
|
|
|
|
|
Technology lending |
23,030 |
|
|
13,857 |
|
|
|
|
|
|
|
|
First lien lending |
3,681 |
|
|
3,815 |
|
|
|
|
|
|
|
|
Opportunistic lending |
1,541 |
|
|
563 |
|
|
|
|
|
|
|
|
Management Fees, Net |
133,704 |
|
|
94,713 |
|
|
|
|
|
|
|
|
Administrative, transaction and other fees |
14,473 |
|
|
9,058 |
|
|
|
|
|
|
|
|
FRE Revenues - Direct Lending Products |
148,177 |
|
|
103,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GP Capital Solutions Products |
|
|
|
|
|
|
|
|
|
|
GP minority equity investments |
102,100 |
|
|
— |
|
|
|
|
|
|
|
|
GP debt financing |
3,092 |
|
|
— |
|
|
|
|
|
|
|
|
Professional sports minority investments |
500 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management Fees, Net |
105,692 |
|
|
— |
|
|
|
|
|
|
|
|
Administrative, transaction and other fees |
1,571 |
|
|
— |
|
|
|
|
|
|
|
|
FRE Revenues - GP Capital Solutions Products |
107,263 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate Products |
|
|
|
|
|
|
|
|
|
|
Net lease |
17,158 |
|
|
— |
|
|
|
|
|
|
|
|
Management Fees, Net |
17,158 |
|
|
— |
|
|
|
|
|
|
|
|
FRE Revenues - Real Estate Products |
17,158 |
|
|
— |
|
|
|
|
|
|
|
|
Total FRE Revenues |
$ |
272,598 |
|
|
$ |
103,771 |
|
|
|
|
|
|
|
FRE revenues increased due to the accretive impact of the Dyal
Capital and Oak Street acquisitions. FRE revenues also increased as
a result of overall growth in FPAUM across all of our Diversified
Lending product strategies. Also contributing to the increase were
higher administrative, transaction and other fees due to higher fee
income earned for services provided to portfolio
companies.
FRE Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(dollars in thousands) |
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FRE compensation and benefits |
|
|
|
|
$ |
(74,969) |
|
|
$ |
(44,530) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FRE general, administrative and other expenses |
|
|
|
|
(26,766) |
|
|
(12,971) |
|
|
|
|
Total FRE Expenses |
|
|
|
|
$ |
(101,735) |
|
|
$ |
(57,501) |
|
|
|
FRE expenses increased primarily due to higher FRE compensation and
benefits as a result of increased headcount, both in the legacy Owl
Rock business, as well as due to an increase related to the Dyal
Acquisition and Oak Street Acquisition. FRE general, administrative
and other expenses increased primarily due to increased
distribution costs, increased costs related to being a public
company and increased travel and office-related expenses as we
transition from working remotely back to the office. See
“—GAAP Results of Operations Analysis”
for additional information on these drivers.
Non-GAAP Reconciliations
The table below presents the reconciliation of the non-GAAP
measures presented throughout this MD&A. Please see
“—Non-GAAP Analysis”
for important information regarding these measures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(dollars in thousands) |
|
|
|
|
2022 |
|
2021 |
|
|
|
GAAP (Loss) Income Before Income Taxes |
|
|
|
|
$ |
(27,954) |
|
|
$ |
39,522 |
|
|
|
|
Net loss allocated to noncontrolling interests included in
Fee-Related Earnings |
|
|
|
|
520 |
|
|
80 |
|
|
|
|
Strategic Revenue-Share Purchase consideration
amortization |
|
|
|
|
8,922 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity-based compensation |
|
|
|
|
96,601 |
|
|
— |
|
|
|
|
Capital-related compensation |
|
|
|
|
830 |
|
|
— |
|
|
|
|
Acquisition-related cash earnout amortization |
|
|
|
|
16,082 |
|
|
— |
|
|
|
|
Amortization of intangible assets |
|
|
|
|
61,526 |
|
|
— |
|
|
|
|
Transaction Expenses |
|
|
|
|
9,637 |
|
|
890 |
|
|
|
|
Interest expense |
|
|
|
|
12,834 |
|
|
5,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains on investments |
|
|
|
|
(5) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in TRA liability |
|
|
|
|
9,652 |
|
|
— |
|
|
|
|
Change in warrant liability |
|
|
|
|
(17,758) |
|
|
— |
|
|
|
|
Change in earnout liability |
|
|
|
|
496 |
|
|
— |
|
|
|
|
Fee-Related Earnings |
|
|
|
|
171,383 |
|
|
46,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
(12,834) |
|
|
(5,858) |
|
|
|
|
Taxes and TRA payments |
|
|
|
|
(2,823) |
|
|
(238) |
|
|
|
|
Distributable Earnings |
|
|
|
|
155,726 |
|
|
40,254 |
|
|
|
|
Interest expense |
|
|
|
|
12,834 |
|
|
5,858 |
|
|
|
|
Taxes and TRA payments |
|
|
|
|
2,823 |
|
|
238 |
|
|
|
|
Fixed assets depreciation and amortization |
|
|
|
|
218 |
|
|
131 |
|
|
|
|
Adjusted EBITDA |
|
|
|
|
$ |
171,601 |
|
|
$ |
46,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(dollars in thousands) |
|
|
|
|
2022 |
|
2021 |
|
|
|
GAAP Revenues |
|
|
|
|
$ |
275,977 |
|
|
$ |
108,224 |
|
|
|
|
Strategic Revenue-Share Purchase consideration
amortization |
|
|
|
|
8,922 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative and other fees |
|
|
|
|
(12,301) |
|
|
(4,453) |
|
|
|
|
FRE Revenues |
|
|
|
|
$ |
272,598 |
|
|
$ |
103,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(dollars in thousands) |
|
|
|
|
2022 |
|
2021 |
|
|
|
GAAP Compensation and Benefits |
|
|
|
|
$ |
193,892 |
|
|
$ |
47,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity-based compensation |
|
|
|
|
(96,188) |
|
|
— |
|
|
|
|
Capital-related compensation |
|
|
|
|
(830) |
|
|
— |
|
|
|
|
Acquisition-related cash earnout amortization |
|
|
|
|
(16,082) |
|
|
— |
|
|
|
|
Administrative and other expenses |
|
|
|
|
(5,823) |
|
|
(3,454) |
|
|
|
|
FRE Compensation and Benefits |
|
|
|
|
$ |
74,969 |
|
|
$ |
44,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(dollars in thousands) |
|
|
|
|
2022 |
|
2021 |
|
|
|
GAAP General, Administrative and Other Expenses |
|
|
|
|
$ |
43,294 |
|
|
$ |
14,860 |
|
|
|
|
Transaction Expenses |
|
|
|
|
(9,637) |
|
|
(890) |
|
|
|
|
Equity-based compensation |
|
|
|
|
(413) |
|
|
— |
|
|
|
|
Administrative and other expenses |
|
|
|
|
(6,478) |
|
|
(999) |
|
|
|
|
FRE General, Administrative and Other Expenses |
|
|
|
|
$ |
26,766 |
|
|
$ |
12,971 |
|
|
|
Liquidity and Capital Resources
Overview
We rely on management fees as the primary source of our operating
liquidity. From time to time we may rely on the use of revolving
credit facilities between management fee collection dates, which
generally occur on a quarterly basis. We may also rely on our
Revolving Credit Facility for liquidity needed to fund
acquisitions, which we may replace with longer-term financing,
subject to market conditions. To the extent that we have excess
liquidity, we may invest such excess liquidity in corporate bonds,
agency securities and other investments.
We ended the first quarter of 2022 with $186.0 million of cash and
cash equivalents and $714.8 million available under our
Revolving Credit Facility. Based on management’s experience and our
current level of liquidity and assets under management, we believe
that our current liquidity position and cash generated from
management fees will continue to be sufficient to meet our
anticipated working capital needs for at least the next 12
months.
Over the short and long term, we may use cash and cash equivalents,
issue additional debt or equity securities, or may seek other
sources of liquidity to:
•Grow
our existing investment management business.
•Expand,
or acquire, into businesses that are complementary to our existing
investment management businesses or other strategic growth
initiatives.
•Pay
operating expenses, including cash compensation to our
employees.
•Repay
debt obligations and interest thereon.
•Opportunistically
repurchase Class A Shares pursuant to the Share Repurchase Program
(as defined below).
•Pay
income taxes and amounts due under the TRA.
•Pay
dividends to holders of our Class A Shares, as well as make
corresponding distributions to holders of Common Units at the Blue
Owl Operating Group level.
•Fund
investment commitments to existing or future products.
Debt Obligations
As of March 31, 2022, our long-term debt obligations consisted
of $700.0 million of 2031 Notes, $400.0 million of 2032 Notes and
$350.0 million of 2051 Notes. We expect to use cash on hand to pay
interest and principal due on our financing arrangements over time,
which would reduce amounts available for dividends and
distributions to our shareholders. We may choose to refinance all
or a portion of any amounts outstanding on or prior to their
respective maturity dates by issuing new debt, which could result
in higher borrowing costs. We may also choose to repay borrowing by
using proceeds from the issuance of equity or other securities,
which would dilute shareholders. See Note 3 to our consolidated and
combined financial statements in this report for additional
information regarding our debt obligations.
Management regularly reviews Adjusted EBITDA to assess our ability
to service our debt obligations. Adjusted EBITDA is equal to
Distributable Earnings plus interest expense, taxes payable and TRA
payments, and fixed assets depreciation and amortization. Adjusted
EBITDA is a non-GAAP financial measure that supplements and should
be considered in addition to and not in lieu of our GAAP results,
and such measure should not be considered as indicative of our
liquidity. Adjusted EBITDA may not be comparable to other similarly
titled measured used by other companies. Adjusted EBITDA was
$171.6 million for the quarter ended March 31, 2022.
Please see
“—Non-GAAP Reconciliations”
for reconciliations of Adjusted EBITDA to the most comparable
measures prepared in accordance with GAAP.
Tax Receivable Agreement
As discussed in Note 10 to our consolidated and combined financial
statements in this report, we may in the future be required to make
payments under the TRA. As of March 31, 2022, assuming no
material changes in the relevant tax law and that we generate
sufficient taxable income to realize the full tax benefit of the
increased amortization resulting from the increase in tax basis of
certain Blue Owl Operating Group assets, we expect to pay
approximately $806.5 million under the TRA. Future cash
savings and related payments under the TRA in respect of subsequent
exchanges of Blue Owl Operating Group Units for Class A or B Shares
would be in addition to these amounts.
Payments under the tax receivable agreement are anticipated to
increase the tax basis adjustment and, consequently, result in
increasing annual amortization deductions in the taxable years of
and after such increases to the original basis adjustments, and
potentially will give rise to increasing tax savings with respect
to such years and correspondingly increasing payments under the
TRA.
The obligation to make payments under the tax receivable agreement
is an obligation of Blue Owl GP, and any other corporate taxpaying
entities that in the future may hold GP Units, and not of the Blue
Owl Operating Group. We may need to incur debt to finance payments
under the TRA to the extent the Blue Owl Operating Group does not
distribute cash to Registrant or Blue Owl GP in an amount
sufficient to meet our obligations under the TRA.
The actual increase in tax basis of the Blue Owl Operating Group
assets resulting from an exchange or from payments under the TRA,
as well as the amortization thereof and the timing and amount of
payments under the TRA, will vary based upon a number of factors,
including the following:
•The
amount and timing of our taxable income will impact the payments to
be made under the TRA. To the extent that we do not have sufficient
taxable income to utilize the amortization deductions available as
a result of the increased tax basis in the Blue Owl Operating
Partnerships’ assets, payments required under the TRA would be
reduced.
•The
price of our Class A Shares at the time of any exchange will
determine the actual increase in tax basis of the Blue Owl
Operating Partnerships’ assets resulting from such exchange;
payments under the TRA resulting from future exchanges, if any,
will be dependent in part upon such actual increase in tax
basis.
•The
composition of the Blue Owl Operating Group assets at the time of
any exchange will determine the extent to which we may benefit from
amortizing the increased tax basis in such assets and thus will
impact the amount of future payments under the TRA resulting from
any future exchanges.
•The
extent to which future exchanges are taxable will impact the extent
to which we will receive an increase in tax basis of the Blue Owl
Operating Group assets as a result of such exchanges, and thus will
impact the benefit derived by us and the resulting payments, if
any, to be made under the TRA.
•The
tax rates in effect at the time any potential tax savings are
realized, which would affect the amount of any future payments
under the TRA.
Depending upon the outcome of these and other factors, payments
that we may be obligated to make under the TRA in respect of
exchanges could be substantial. In light of the numerous factors
affecting our obligation to make payments under the TRA, the timing
and amounts of any such actual payments are not reasonably
ascertainable.
Warrants
We classify the warrants issued in connection with the Business
Combination as liabilities in our consolidated and combined
statements of financial condition, as in the event of a change in
control, warrant holders have the ability to demand cash settlement
from us. In addition, we have the option to cash settle outstanding
warrants when certain criteria is met, as described in Note 2 to
our Financial Statements. To the extent we have insufficient cash
on hand or that we opt to, we may rely on debt or equity financing
to facilitate these transactions in the future if
needed.
Oak Street Cash Earnout
A portion of the Oak Street Cash Earnout is classified as a
liability and represents the fair value of the obligation to make
future cash payments that would need to be made if all the
respective Oak Street Triggering Events occur. Further, the portion
classified as compensation expense will be expensed and a
corresponding accrued compensation liability will be recorded over
the service period. To the extent we have insufficient cash on hand
or that we opt to, we may rely on debt or equity financing to
facilitate these transactions in the future. See Note 2 to our
Financial Statements for additional information.
Dividends and Distributions
We intend to continue to pay to Class A Shareholders (and Class B
Shareholders in the future to the extent any Class B Shares are
outstanding) a quarterly dividend representing approximately 85% of
Distributable Earnings following the end of each quarter. Blue Owl
Capital Inc.’s share of Distributable Earnings, subject to
adjustment as determined by our Board to be necessary or
appropriate to provide for the conduct of our business, to make
appropriate investments in our business and products, to comply
with applicable law, any of our debt instruments or other
agreements, or to provide for future cash requirements such as
tax-related payments, operating reserves, clawback obligations and
dividends to shareholders for any ensuing quarter. All of the
foregoing is subject to the qualification that the declaration and
payment of any dividends are at the sole discretion of our Board,
and our Board may change our dividend policy at any time,
including, without limitation, to reduce or eliminate dividends
entirely.
The Blue Owl Operating Partnerships will make cash distributions
(“Tax Distributions”) to the partners of such partnerships,
including to Blue Owl GP, if we determine that the taxable income
of the relevant partnership will give rise to taxable income for
its partners. Generally, Tax Distributions will be computed based
on our estimate of the taxable income of the relevant partnership
allocable to a partner multiplied by an assumed tax rate equal to
the highest effective marginal combined U.S. federal, New York
State and New York City income tax rates prescribed for an
individual or corporate resident in New York City (taking into
account certain assumptions set forth in the relevant partnership
agreements). Tax Distributions will be made only to the extent
distributions from the Blue Owl Operating Partnerships for the
relevant year were otherwise insufficient to cover the estimated
assumed tax liabilities.
Holders of our Class A and B Shares may not always receive
distributions or may receive lower distributions on a per share
basis at a time when we, indirectly through Blue Owl GP, and
holders of our Common Units are receiving distributions on their
interests, as distributions to the Registrant and Blue Owl GP may
be used to settle tax and TRA liabilities, if any, and other
obligations.
Dividends are expected to be treated as qualified dividends under
current law to the extent of the Company’s current and accumulated
earnings and profits, with any excess dividends treated as a return
of capital to the extent of a shareholder’s basis, and any
remaining excess generally treated as gain realized on the sale or
other disposition of stock.
Risks to our Liquidity
Our ability to obtain financing provides us with additional sources
of liquidity. Any new financing arrangement that we may enter into
may have covenants that impose additional limitations on us,
including with respect to making distributions, entering into
business transactions or other matters, and may result in increased
interest expense. If we are unable to secure financing on terms
that are favorable to us, our business may be adversely impacted.
No assurance can be given that we will be able to issue new debt,
enter into new credit facilities or issue equity or other
securities in the future on attractive terms or at
all.
Adverse market conditions, including from unexpectedly high and
persistent inflation, a shifting interest rate environment,
geopolitical events, and ongoing impact from COVID-19 globally, may
negatively impact our liquidity. Cash flows from management fees
may be impacted by a slowdown or a decline in fundraising and
deployment, as well as declines in the value of investments held in
certain of our products.
LIBOR Transition
On March 5, 2021, the UK Financial Conduct Authority announced that
it would phase out LIBOR as a benchmark immediately after December
31, 2021, for sterling, euro, Japanese yen, Swiss franc and 1-week
and 2-month U.S. Dollar settings and immediately after June 30,
2023, the remaining U.S. Dollar settings. Our Notes are fixed rate
borrowings, and therefore the LIBOR phase out will not have an
impact on this borrowing. The Revolving Credit Facility is subject
to SOFR rates at our option, or alternative rates that are not tied
to LIBOR. Certain of our products hold investments and have
borrowings that are tied to LIBOR, and we continue to focus on
managing any risk related to those exposures. Our senior management
has oversight of these transition efforts. See “Risk Factors—Risks
Related to Legal and Regulatory Environment—Changes to the method
of determining the London Interbank Offered Rate (“LIBOR”) or the
selection of a replacement for LIBOR may affect the value of
investments held by our products and could affect our results of
operations and financial results.”
Cash Flows Analysis
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Three Months Ended March 31, |
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(dollars in thousands) |
2022 |
|
2021 |
|
$ Change |
|
Net cash provided by (used in): |
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|
|
|
|
|
Operating activities |
$ |
93,204 |
|
|
$ |
587 |
|
|
$ |
92,617 |
|
|
Investing activities |
(22,607) |
|
|
(295) |
|
|
(22,312) |
|
|
Financing activities |
72,788 |
|
|
(3,358) |
|
|
76,146 |
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Net Change in Cash and Cash Equivalents |
$ |
143,385 |
|
|
$ |
(3,066) |
|
|
$ |
146,451 |
|
Operating Activities.
Our net cash flows from operating activities are generally
comprised of management fees, less cash used for operating
expenses, including interest paid on our debt obligations. One of
our largest operating cash outflows generally relates to bonus
expense, which are generally paid out during the first quarter of
the year following the expense.
Net cash flows from operating activities increased from the prior
year period due to the inclusion of the GP Capital Solutions and
Real Estate related cash flows, as well as higher management fees
from our Direct Lending products. These increases were partially
offset by higher 2021 discretionary bonuses, which were paid in the
first quarter of 2022, as compared to discretionary bonuses in
2020, which were paid in the first quarter of 2021.
Investing Activities.
Cash flows from investing activities for 2022 were primarily
related to leasehold improvements associated with certain office
spaces. In 2021, cash flows related to investing activities were
not material.
Financing Activities.
Cash flows from financing activities for 2022 were primarily driven
by dividends on our Class A Shares and related distributions on our
Common Units (noncontrolling interests). Our cash flows from
financing activities also benefited from a net increase to our debt
as a result of the proceeds from our 2032 Notes, which were used to
finance working capital needs and general capital purposes,
partially offset by repayments under our Revolving Credit
Facility.
Our 2021 cash flows related to financing activities included
borrowings and repayments under our previously outstanding
revolving credit facilities. In addition, distributions related to
pre-Business Combination-related earnings was another significant
financing cash flow in the prior-year period.
Critical Accounting Estimates
We prepare our Financial Statements in accordance with U.S. GAAP.
In applying many of these accounting principles, we make estimates
that affect the reported amounts of assets, liabilities, revenues
and expenses in our consolidated and combined financial statements.
We base our estimates on historical experience and other factors
that we believe are reasonable under the circumstances. These
estimates, however, are subjective and subject to change, and
actual results may differ materially from our current estimates due
to the inherent nature of these estimates, including uncertainty in
the current economic environment due to unexpectedly high and
persistent inflation, a shifting interest rate environment,
geopolitical events, and ongoing impact from COVID-19 globally. For
a summary of our significant accounting policies, see Note 2 to our
Financial Statements.
Estimation of Fair Values
Investments Held by our Products
The fair value of the investments held by our Direct Lending
products is the primary input to the calculation for the majority
of our management fees. Management fees from our GP Capital
Solutions and Real Estate products are generally based on
commitments or investment cost, so our management fees are
generally not impacted by changes in the estimated fair values of
investments held by these products. However, to the extent that
management fees are calculated based on investment cost of the
product’s investments, the amount of fees that we may charge will
increase or decrease from the effect of changes in the cost basis
of the product’s investments, including potential impairment
losses. In the absence of observable market prices, we use
valuation methodologies applied on a consistent basis and
assumptions that we believe market participants would use to
determine the fair value of the investments. For investments where
little market activity exists, the determination of fair value is
based on the best information available, we incorporate our own
assumptions and involves a significant degree of judgment, and the
consideration of a combination of internal and external
factors.
Our products generally value their investments at fair value, as
determined in good faith by each product’s respective board of
directors or valuation committee, as applicable, based on, among
other things, the input of third party valuation firms and taking
into account the nature and realizable value of any collateral, an
investee’s ability to make payments and its earnings, the markets
in which the investee operates, comparison to publicly traded
companies, discounted cash flows, current market interest rates and
other relevant factors. Because such valuations are inherently
uncertain, the valuations may fluctuate significantly over time due
to changes in market conditions. These valuations would, in turn,
have corresponding proportionate impacts on the amount of
management fees that we may earn from certain products on which
revenues are based on the fair value of investments.
TRA Liability
We carry a portion of our TRA liability at fair value, as it is
contingent consideration related to the Dyal Acquisition. The
valuation of this portion of the TRA liability is mostly sensitive
to our expectation of future cash savings that we may ultimately
realize related to our tax goodwill and other intangible assets
deductions. We then apply a discount rate that we believe is
appropriate given the nature of and expected timing of payments of
the liability. A decrease in the discount rate assumption would
result in an increase in the fair value estimate of the liability,
which would have a correspondingly negative impact on our GAAP
results of operations. However, payments under the TRA are
ultimately only made to the extent we realize the offsetting cash
savings on our income taxes due to the tax goodwill and other
intangibles deduction. See Note 8 to our Financial Statements for
additional details.
Earnout Liability and Private Placement Warrants
Liability
The fair values of our Earnout Securities liability and Private
Placement Warrants liability were determined using various
significant unobservable inputs. The assumptions used could have a
material impact on the valuation of these liabilities, and include
our best estimate of expected volatility, expected holding periods
and appropriate discounts for lack of marketability. Changes in the
estimated fair values of these liabilities may have material
impacts on our results of operations in any given period, as any
increases in these liabilities have a corresponding negative impact
on our GAAP results of operations in the period in which the
changes occur. See Note 8 to our Financial Statements for
additional details.
Equity-based Compensation
The fair values of our equity-based compensation RSU and Incentive
Unit grants are generally determined using our Class A Share price
on the grant date, adjusted for the lack of dividend participation
during the vesting period, and the application of a discount for
lack of marketability on RSUs and Incentive Units that are subject
to a one-year post-vesting transfer restriction. The higher these
discounts, the lower the compensation expense taken over time for
these grants.
For the Oak Street Earnout Units that were classified as
equity-based compensation for GAAP, we used Monte Carlo simulations
that had various significant unobservable inputs. The assumptions
used have a material impact on the valuation of these grants, and
include our best estimate of expected volatility, expected holding
periods and appropriate discounts for lack of marketability. The
higher the expected volatility, the higher the compensation expense
taken each period for these grants. The higher the expected holding
periods and discount for lack of marketability, the lower the
compensation expense taken each period for these grants. See Note 7
to our Financial Statements for additional details.
Deferred Tax Assets
Substantially all of our deferred tax assets relate to the goodwill
and other intangible assets deductible for tax purposes, as well as
subsequent payments expected to be made under the TRA. In
accordance with relevant tax rules, we expect to take substantially
all of these goodwill and other intangible deductions over a
15-year period following the applicable transaction. To the extent
we generate insufficient taxable income to take the full deduction
in any given year, we will generate a net operating loss (“NOL”)
that is available for us to use over an indefinite carryforward
period in order to fully realize the deferred tax
assets.
When evaluating the realizability of deferred tax assets, all
evidence—both positive and negative—is considered. This evidence
includes, but is not limited to, expectations regarding future
earnings, future reversals of existing temporary tax differences
and tax planning strategies. We did not take into account any tax
planning strategies when arriving at this conclusion; however, the
other assumptions underlying the taxable income estimates, are
based on our near-term operating model. If we experience a
significant decline in AUM for any extended time during the period
for which these estimates relate and we do not otherwise experience
offsetting growth rates in other periods, we may not generate
taxable income sufficient to realize the deferred tax assets and
may need to record a valuation allowance. However, given the
indefinite carryforward period available for NOLs and the
conservative estimates used to prepare the taxable income
projections, the sensitivity of our estimates and assumptions are
not likely to have a material impact on our conclusion that a
valuation allowance is not needed.
Impairment of Goodwill and Other Intangible Assets
Our ongoing accounting for goodwill and other intangible assets
acquired as part of the Business Combination requires us to make
significant estimates and assumptions as we exercise judgement to
evaluate these assets for impairment. We generally undertake a
qualitative review of factors that may indicate whether an
impairment exists. We take into account factors such as the growth
in AUM and FPAUM, general economic conditions, and various other
factors that require judgement in deciding whether a quantitative
analysis should be undertaken. Our evaluation for indicators of
impairment may not capture a potential impairment, which could
result in an overstatement of the carrying values of goodwill and
other intangible assets.
Impact of Changes in Accounting on Recent and Future
Trends
We believe that none of the changes to GAAP that went into effect
during the three months ended March 31, 2022, or that have been
issued but that we have not yet adopted, are expected to
substantively impact our future trends.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.
Our primary exposure to market risk is the indirect impact that
movements in the fair value of investments in products has on our
management fees. In our Direct Lending products, our management
fees are generally based on the fair value of the gross assets held
by such products, and therefore changes in the fair value of those
assets impacts the management fees we earn in any given period.
These management fees will be increased (or reduced) in direct
proportion to the effect of changes in the market value of our
investments in the related funds. The proportion of our management
fees that are based on fair value is dependent on the number and
types of investment funds in existence and the current stage of
each fund’s life cycle. Management fees from our GP Capital
Solutions and Real Estate products, however, are generally based on
capital commitments or investment cost, and therefore management
fees are not materially impacted by changes in fair values of the
underlying investments held by those products. To the extent that
management fees are calculated based on investment cost of the
product’s investments, the amount of fees that we may charge will
increase or decrease from the effect of changes in the cost basis
of the product’s investments, including potential impairment
losses.
Interest Rate Risk
Our Notes bear interest at fixed rates. Our Revolving Credit
Facility bears interest at a variable rate based on SOFR (or an
alternative base rate at our option). As of the date of this
report, we have no borrowings outstanding under our Revolving
Credit Facility, and therefore changes in interest rates would not
have a material impact on interest expense.
Credit Risk
We generally endeavor to minimize our risk of exposure by limiting
to reputable financial institutions the counterparties with which
we enter into financial transactions. As of March 31, 2022 and
December 31, 2021, we had cash balances with financial
institutions in excess of Federal Deposit Insurance Corporation
insured limits. We seek to mitigate this exposure by monitoring the
credit standing of these financial institutions.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as such term is
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act,
that are designed to ensure that information required to be
disclosed by us in reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within
the time periods specified in SEC rules and forms, and that such
information is accumulated and communicated to our management,
including our principal executive officer and principal financial
officer, as appropriate, to allow timely decisions regarding
required disclosure. Any controls and procedures, no matter how
well designed and operated, can provide only reasonable assurance
of achieving the desired objectives.
Our management, with the participation of our principal executive
officer and principal financial officer, has evaluated the
effectiveness of the design and operation of our disclosure
controls and procedures as of March 31, 2022. Based upon that
evaluation and subject to the foregoing, our principal executive
officer and principal financial officer concluded that, as of
March 31, 2022, the design and operation of our disclosure
controls and procedures were effective to accomplish their
objectives at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the quarter ended March 31,
2022, that has materially affected, or is reasonably likely to
materially affect, our internal control over financial
reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We may from time to time be involved in litigation and claims
incidental to the conduct of our business. Our businesses are also
subject to extensive regulation, which may result in regulatory
proceedings against us. See
“— Item 1A. Risk Factors.”
We are not currently subject to any pending legal (including
judicial, regulatory, administrative or arbitration) proceedings
that we expect to have a material impact on our consolidated and
combined financial statements. However, given the inherent
unpredictability of these types of proceedings and the potentially
large and/or indeterminate amounts that could be sought, an adverse
outcome in certain matters could have a material effect on Blue
Owl’s financial results in any particular period. See Note 10 to
our Financial Statements for additional information.
Item 1A. Risk Factors.
Some factors that could cause our actual results to differ
materially from those results in this report are described as risks
in our Annual Report. Any of these factors could materially and
adversely affect our business, financial condition, results of
operations and cash flows. As of the date of this report, there
have been no material changes to the risk factors previously
disclosed in the Annual Report. We may, however, disclose changes
to such factors or disclose additional factors from time to time in
our future filings with the SEC.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.
Share Repurchases
The table below presents purchases made by or on behalf of Blue Owl
Capital Inc. or any “affiliated purchaser” (as defined in Rule
10b-18(a)(3) under the Exchange Act) of shares of our Class A
Shares during each of the indicated periods:
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(dollars in thousands, except per share data) |
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Period |
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Total Number of Shares Purchased |
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Average Price Paid Per Share |
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Total Number of Shares Purchased as Part of Publicly Announced
Plans or Programs |
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Approximate Dollar Value of Shares That May Yet be Purchased Under
the Plans or Programs(1) |
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January 1, 2022 - January 31, 2022 |
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— |
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$ |
— |
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— |
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|
$ |
100,000 |
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February 1, 2022 - February 28, 2022 |
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— |
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— |
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— |
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100,000 |
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March 1, 2022 - March 31, 2022 |
|
2,000 |
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12.09 |
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2,000 |
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75,825 |
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Total |
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2,000 |
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2,000 |
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(1)On
May 19, 2021, Blue Owl’s Board authorized the repurchase of up
to $100.0 million of Class A Shares. Under the repurchase program,
repurchases may be made from time to time in open market
transactions, in privately negotiated transactions or otherwise.
The timing and the actual numbers repurchased will depend on a
variety of factors, including legal requirements, price and
economic and market conditions. The repurchase program was set to
expire on May 19, 2022. On May 4, 2022, Blue Owl’s Board authorized
renewing the repurchase program, and increased the amount to up to
$150.0 million of Class A Shares. The repurchase program may be
changed, suspended or discontinued at any time and will terminate
upon the earlier of (i) the purchase of all shares available under
the repurchase program or (ii) December 31, 2024.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
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Description |
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101* |
|
Interactive data files pursuant to Rule 405 of Regulation S-T,
formatted in Inline XBRL (eXtensible Business Reporting Language):
(i) the Consolidated and Combined Statements of Financial Condition
as of March 31, 2022 and December 31, 2021, (ii) the
Consolidated and Combined Statements of Operations for the three
months ended March 31, 2022 and 2021, (iii) the Consolidated
and Combined Statements of Changes in Shareholders’ Equity
(Deficit) for the three months ended March 31, 2022 and 2021,
(iv) the Consolidated and Combined Statements of Cash Flows for the
three months ended March 31, 2022 and 2021, and (v) the Notes
to the Consolidated and Combined Financial Statements
|
|
104* |
|
Cover Page Interactive Data File (formatted as Inline XBRL and
contained in Exhibit 101) |
|
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* |
|
Filed herewith |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly
authorized.
|
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Date: May 5, 2022
|
|
Blue Owl Capital Inc. |
|
|
|
|
|
|
By: |
/s/ Alan Kirshenbaum |
|
|
|
Alan Kirshenbaum |
|
|
|
Chief Financial Officer |
INDEX TO FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
|
|
|
|
Page |
|
|
|
Consolidated and Combined Statements of Financial Condition as of
March 31, 2022 and December 31, 2021
|
|
|
Consolidated and Combined Statements of Operations for the three
months ended March 31, 2022 and 2021
|
|
|
Consolidated and Combined Statements of Changes in Shareholder’s
Equity (Deficit) for the three months ended March 31, 2022 and
2021
|
|
|
Consolidated and Combined Statements of Cash Flows for the three
months ended March 31, 2022 and 2021
|
|
|
Notes to Consolidated and Combined Financial Statements |
|
Blue Owl Capital Inc.
(Prior to May 19, 2021, Owl Rock)
Consolidated and Combined Statements of Financial Condition
(Unaudited)
(Dollars in Thousands, Except Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2022 |
|
December 31, 2021 |
|
Assets |
|
|
|
|
Cash and cash equivalents |
$ |
185,952 |
|
|
$ |
42,567 |
|
|
Due from related parties |
211,582 |
|
|
224,576 |
|
|
Operating lease assets |
86,241 |
|
|
86,033 |
|
|
Strategic Revenue-Share Purchase consideration, net |
486,400 |
|
|
495,322 |
|
|
Deferred tax assets |
648,536 |
|
|
635,624 |
|
|
Intangible assets, net |
2,549,885 |
|
|
2,611,411 |
|
|
Goodwill |
4,132,245 |
|
|
4,132,245 |
|
|
Other assets, net (includes investments of $— and $1,311 at fair
value, respectively)
|
60,090 |
|
|
38,620 |
|
|
Total Assets |
$ |
8,360,931 |
|
|
$ |
8,266,398 |
|
|
Liabilities |
|
|
|
|
Debt obligations, net |
$ |
1,412,539 |
|
|
$ |
1,174,167 |
|
|
Accrued compensation |
92,565 |
|
|
155,606 |
|
|
Operating lease liabilities |
90,133 |
|
|
88,480 |
|
|
Deferred tax liabilities |
44,376 |
|
|
48,962 |
|
|
TRA liability (includes $120,978 and $111,325 at fair value,
respectively)
|
695,195 |
|
|
670,676 |
|
|
Warrant liability, at fair value |
51,040 |
|
|
68,798 |
|
|
Earnout liability, at fair value |
144,296 |
|
|
143,800 |
|
|
Accounts payable, accrued expenses and other
liabilities |
85,943 |
|
|
68,339 |
|
|
Total Liabilities |
2,616,087 |
|
|
2,418,828 |
|
|
Commitments and Contingencies (Note 10)
|
|
|
|
|
Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Class A Shares, par value $0.0001 per share, 2,500,000,000
authorized, 407,639,908 and 404,919,411 issued and outstanding,
respectively
|
41 |
|
|
40 |
|
|
|
|
|
|
Class C Shares, par value $0.0001 per share, 1,500,000,000
authorized, 670,147,025 and 674,766,200 issued and outstanding,
respectively
|
67 |
|
|
67 |
|
|
Class D Shares, par value $0.0001 per share, 350,000,000
authorized, 319,132,127 and 319,132,127 issued and outstanding,
respectively
|
32 |
|
|
32 |
|
|
|
|
|
|
Additional paid-in capital |
2,166,232 |
|
|
2,160,934 |
|
|
Accumulated deficit |
(549,826) |
|
|
(497,506) |
|
|
Total Shareholders’ Equity Attributable to Blue Owl Capital
Inc. |
1,616,546 |
|
|
1,663,567 |
|
|
Shareholders’ equity attributable to noncontrolling
interests |
4,128,298 |
|
|
4,184,003 |
|
|
Total Shareholders’ Equity |
5,744,844 |
|
|
5,847,570 |
|
|
Total Liabilities and Shareholders’ Equity |
$ |
8,360,931 |
|
|
$ |
8,266,398 |
|
The accompanying notes are an integral part of these consolidated
and combined financial statements.
Blue Owl Capital Inc.
Consolidated and Combined Statements of Operations
(Unaudited)
(Prior to May 19, 2021, Owl Rock)
(Dollars in Thousands, Except Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
2022 |
|
2021 |
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
Management fees, net (includes Part I Fees of $46,739 and 28,914,
respectively)
|
|
|
|
|
$ |
247,632 |
|
|
$ |
94,713 |
|
|
|
|
Administrative, transaction and other fees |
|
|
|
|
28,345 |
|
|
13,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues, Net |
|
|
|
|
275,977 |
|
|
108,224 |
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
Compensation and benefits |
|
|
|
|
193,892 |
|
|
47,984 |
|
|
|
|
Amortization of intangible assets |
|
|
|
|
61,526 |
|
|
— |
|
|
|
|
General, administrative and other expenses |
|
|
|
|
43,294 |
|
|
14,860 |
|
|
|
|
Total Expenses |
|
|
|
|
298,712 |
|
|
62,844 |
|
|
|
|
Other (Loss) Income |
|
|
|
|
|
|
|
|
|
|
Net gains on investments |
|
|
|
|
5 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
(12,834) |
|
|
(5,858) |
|
|
|
|
Change in TRA liability |
|
|
|
|
(9,652) |
|
|
— |
|
|
|
|
Change in warrant liability |
|
|
|
|
17,758 |
|
|
— |
|
|
|
|
Change in earnout liability |
|
|
|
|
(496) |
|
|
— |
|
|
|
|
Total Other (Loss) Income |
|
|
|
|
(5,219) |
|
|
(5,858) |
|
|
|
|
(Loss) Income Before Income Taxes |
|
|
|
|
(27,954) |
|
|
39,522 |
|
|
|
|
Income tax (benefit) expense |
|
|
|
|
(5,038) |
|
|
188 |
|
|
|
|
Consolidated and Combined Net (Loss) Income |
|
|
|
|
(22,916) |
|
|
39,334 |
|
|
|
|
Net loss attributable to noncontrolling interests |
|
|
|
|
11,101 |
|
|
80 |
|
|
|
|
Net (Loss) Income Attributable to Blue Owl Capital Inc. (After May
19, 2021) / Owl Rock (Prior to May 19, 2021) |
|
|
|
|
$ |
(11,815) |
|
|
$ |
39,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Attributable to Class A Shares |
|
|
|
|
$ |
(11,815) |
|
|
|
|
|
|
Net Loss per Class A Share |
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
$ |
(0.03) |
|
|
|
|
|
|
Diluted |
|
|
|
|
$ |
(0.03) |
|
|
|
|
|
|
Weighted-Average Class A Shares |
|
|
|
|
|
|
|
|
|
|
Basic(1)
|
|
|
|
|
417,108,929 |
|
|
|
|
|
Diluted |
|
|
|
|
417,108,929 |
|
|
|
|
(1)Included
in the weighted-average Class A Shares outstanding were 10,928,095
RSUs that have vested but have not been settled in Class A Shares.
These RSUs do not participate in dividends until settled in Class A
Shares. See Note 12.
The accompanying notes are an integral part of these consolidated
and combined financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Blue Owl Capital Inc. |
|
Consolidated and Combined Statements of Changes in Shareholders’
Equity (Deficit) (Unaudited) |
|
(Prior to May 19, 2021, Owl Rock) |
|
(Dollars in Thousands, Except Per Share Data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
2022 |
|
2021 |
|
|
|
Members’ Deficit Prior to the Business Combination |
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
|
|
|
$ |
— |
|
|
$ |
(507,687) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions |
|
|
|
|
— |
|
|
(9,125) |
|
|
|
|
Comprehensive income prior to the Business Combination
Date |
|
|
|
|
— |
|
|
39,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance |
|
|
|
|
$ |
— |
|
|
$ |
(477,398) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Shares Par Value |
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
|
|
|
$ |
40 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class C Shares and Common Units exchanged for Class A
Shares |
|
|
|
|
1 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance |
|
|
|
|
$ |
41 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class C Shares Par Value |
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
|
|
|
$ |
67 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance |
|
|
|
|
$ |
67 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class D Shares Par Value |
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
|
|
|
$ |
32 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance |
|
|
|
|
$ |
32 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Blue Owl Capital Inc. |
|
Consolidated and Combined Statements of Changes in Shareholders’
Equity (Deficit) (Unaudited) |
|
(Prior to May 19, 2021, Owl Rock) |
|
(Dollars in Thousands, Except Per Share Data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Paid-in Capital |
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
|
|
|
$ |
2,160,934 |
|
|
$ |
— |
|
|
|
|
Deferred taxes on capital transactions |
|
|
|
|
9,639 |
|
|
— |
|
|
|
|
TRA liability on capital transactions |
|
|
|
|
(14,868) |
|
|
— |
|
|
|
|
Exercise of warrants |
|
|
|
|
2 |
|
|
— |
|
|
|
|
Equity-based compensation |
|
|
|
|
2,781 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Withholding taxes on vested RSUs |
|
|
|
|
(214) |
|
|
— |
|
|
|
|
Class A Share repurchases |
|
|
|
|
(24,238) |
|
|
— |
|
|
|
|
Reallocation between additional paid-in capital and noncontrolling
interests due to changes in Blue Owl Operating Group
ownership |
|
|
|
|
32,196 |
|
|
— |
|
|
|
|
Ending Balance |
|
|
|
|
$ |
2,166,232 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Deficit |
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
|
|
|
$ |
(497,506) |
|
|
$ |
— |
|
|
|
|
Cash dividends declared on Class A Shares |
|
|
|
|
(40,505) |
|
|
— |
|
|
|
|
Comprehensive loss |
|
|
|
|
(11,815) |
|
|
— |
|
|
|
|
Ending Balance |
|
|
|
|
$ |
(549,826) |
|
|
$ |
— |
|
|
|
|
Total Shareholders' Equity Attributable to Blue Owl Capital
Inc. |
|
|
|
|
$ |
1,616,546 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Equity Attributable to Noncontrolling
Interests |
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
|
|
|
$ |
4,184,003 |
|
|
$ |
6,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity-based compensation |
|
|
|
|
84,018 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions |
|
|
|
|
5,131 |
|
|
2,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions |
|
|
|
|
(101,038) |
|
|
— |
|
|
|
|
Withholding taxes on vested RSUs |
|
|
|
|
(519) |
|
|
— |
|
|
|
|
Reallocation between additional paid-in capital and noncontrolling
interests due to changes in Blue Owl Operating Group
ownership |
|
|
|
|
(32,196) |
|
|
— |
|
|
|
|
Comprehensive loss |
|
|
|
|
(11,101) |
|
|
(80) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance |
|
|
|
|
$ |
4,128,298 |
|
|
$ |
9,100 |
|
|
|
|
Total Shareholders' Equity |
|
|
|
|
$ |
5,744,844 |
|
|
$ |
(468,298) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Dividends Paid per Class A Share |
|
|
|
|
$ |
0.10 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Class A Shares |
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
|
|
|
404,919,411 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Share repurchases |
|
|
|
|
(2,000,000) |
|
|
— |
|
|
|
|
Shares delivered on vested RSUs |
|
|
|
|
101,122 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class C Shares and Common Units exchanged for Class A
Shares |
|
|
|
|
4,619,175 |
|
|
— |
|
|
|
|
Exercise of warrants |
|
|
|
|
200 |
|
|
— |
|
|
|
|
Ending Balance |
|
|
|
|
407,639,908 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Class C Shares |
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
|
|
|
674,766,200 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class C Shares and Common Units exchanged for Class A
Shares |
|
|
|
|
(4,619,175) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance |
|
|
|
|
670,147,025 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Class D Shares |
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
|
|
|
319,132,127 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance |
|
|
|
|
319,132,127 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated
and combined financial statements.
Blue Owl Capital Inc.
Consolidated and Combined Statements of Cash Flows
(Unaudited)
(Prior to May 19, 2021, Owl Rock)
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2022 |
|
2021 |
|
|
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
Consolidated and combined net (loss) income |
$ |
(22,916) |
|
|
$ |
39,334 |
|
|
|
|
Adjustments to reconcile consolidated and combined net (loss)
income to net cash from operating activities: |
|
|
|
|
|
|
Amortization of intangible assets |
61,526 |
|
|
— |
|
|
|
|
Equity-based compensation |
96,601 |
|
|
— |
|
|
|
|
Depreciation and amortization of fixed assets |
218 |
|
|
131 |
|
|
|
|
Amortization of debt discounts and deferred financing
costs |
1,022 |
|
|
218 |
|
|
|
|
Amortization of investment discounts and premiums |
6 |
|
|
— |
|
|
|
|
Non-cash lease expense |
1,444 |
|
|
1,148 |
|
|
|
|
|
|
|
|
|
|
Net gains on investments, net of dividends |
(5) |
|
|
— |
|
|
|
|
Change in TRA liability |
9,652 |
|
|
— |
|
|
|
|
Change in warrant liability |
(17,758) |
|
|
— |
|
|
|
|
Change in earnout liability |
496 |
|
|
— |
|
|
|
|
Deferred income taxes |
(7,860) |
|
|
— |
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Due from related parties |
12,994 |
|
|
(7,555) |
|
|
|
|
Strategic Revenue-Share Purchase consideration |
8,922 |
|
|
— |
|
|
|
|
Other assets, net |
4,099 |
|
|
(11,252) |
|
|
|
|
Accrued compensation |
(72,843) |
|
|
(26,045) |
|
|
|
|
Accounts payable, accrued expenses and other
liabilities |
17,606 |
|
|
4,608 |
|
|
|
|
Net Cash Provided by Operating Activities |
93,204 |
|
|
587 |
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
Purchase of fixed assets |
(18,379) |
|
|
(295) |
|
|
|
|
Purchase of investments |
(5,750) |
|
|
— |
|
|
|
|
Proceeds from investment sales and maturities |
1,522 |
|
|
— |
|
|
|
|
Net Cash Used in Investing Activities |
(22,607) |
|
|
(295) |
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from debt obligations |
395,060 |
|
|
97,898 |
|
|
|
|
Debt issuance costs |
(4,854) |
|
|
— |
|
|
|
|
Repayments of debt obligations, including retirement
costs |
(153,000) |
|
|
(94,745) |
|
|
|
|
Withholding taxes on vested RSUs |
(733) |
|
|
— |
|
|
|
|
Dividends paid on Class A Shares |
(40,505) |
|
|
— |
|
|
|
|
Proceeds from exercise of warrants |
2 |
|
|
— |
|
|
|
|
Class A Share repurchases |
(24,238) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Contributions from noncontrolling interests |
2,094 |
|
|
2,614 |
|
|
|
|
Distributions to noncontrolling interests |
(101,038) |
|
|
(9,125) |
|
|
|
|
Net Cash Provided by (Used in) Financing Activities |
72,788 |
|
|
(3,358) |
|
|
|
|
Net Increase (Decrease) in Cash and Cash Equivalents |
143,385 |
|
|
(3,066) |
|
|
|
|
Cash and cash equivalents, beginning of period |
42,567 |
|
|
11,630 |
|
|
|
|
Cash and Cash Equivalents, End of Period |
$ |
185,952 |
|
|
$ |
8,564 |
|
|
|
|
Supplemental Information |
|
|
|
|
|
|
Cash paid for interest |
$ |
215 |
|
|
$ |
5,675 |
|
|
|
|
Cash paid for income taxes |
$ |
113 |
|
|
$ |
230 |
|
|
|
The accompanying notes are an integral part of these consolidated
and combined financial statements.
Blue Owl Capital Inc.
(Prior to May 19, 2021, Owl Rock)
Notes to Consolidated and Combined Financial Statements
(Unaudited)
1. ORGANIZATION
Blue Owl Capital Inc. (the “Registrant”), a Delaware corporation,
together with its consolidated subsidiaries (collectively, the
“Company” or “Blue Owl”), is a global alternative asset manager.
Anchored by a strong permanent capital base, the Company deploys
private capital across Direct Lending, GP Capital Solutions and
Real Estate strategies on behalf of institutional and private
wealth clients.
The Company’s primary sources of revenues are management fees,
which are generally based on the amount of the Company’s fee-paying
assets under management. The Company generates substantially all of
its revenues in the United States. The Company operates through one
operating and reportable segment. This single reportable segment
reflects how the chief operating decision makers allocate resources
and assess performance under the Company’s “one-firm approach,”
which includes operating collaboratively across product lines, with
predominantly a single expense pool.
The Company conducts its operations through Blue Owl Capital
Holdings LP (“Blue Owl Holdings”) and Blue Owl Capital Carry LP
(“Blue Owl Carry”). Blue Owl Holdings and Blue Owl Carry are
referred to, collectively, as the “Blue Owl Operating
Partnerships,” and collectively with their consolidated
subsidiaries, as the “Blue Owl Operating Group.” The Registrant
holds its controlling financial interests in the Blue Owl Operating
Group indirectly through Blue Owl Capital Holdings GP LLC and Blue
Owl Capital GP LLC (collectively, “Blue Owl GP”), which are
directly or indirectly wholly owned subsidiaries of the
Registrant.
Business Combination, Including Dyal Acquisition
The Registrant was initially incorporated in the Cayman Islands as
Altimar Acquisition Corporation (“Altimar”), a special purpose
acquisition company. Pursuant to the Business Combination Agreement
dated December 23, 2020, as amended, modified, supplemented or
waived from time to time (the “Business Combination Agreement”), on
May 19, 2021 (“Business Combination Date”), (i) Altimar was
redomiciled as a Delaware corporation and changed its name to Blue
Owl Capital Inc., (ii) Altimar merged with Owl Rock (as defined
below) (the “Altimar Merger”) and (iii) the Company acquired Dyal
Capital Partners (“Dyal Capital”), a former division of Neuberger
Berman Group LLC (the “Dyal Acquisition”) (collectively with the
Altimar Merger, the “Business Combination”). As further discussed
in Note 2, for both the Altimar Merger and the Dyal Acquisition,
Owl Rock was deemed to be the acquirer for accounting purposes.
Therefore, the predecessor to Blue Owl is “Owl Rock,” a combined
carve-out of Owl Rock Capital Group LLC and Blue Owl Securities LLC
(formerly, Owl Rock Capital Securities LLC)
(“Securities”).
Oak Street Acquisition
On December 29, 2021, the Company completed its acquisition of Oak
Street Real Estate Capital, LLC (“Oak Street”) and its advisory
business (the “Oak Street Acquisition,” and together with the Dyal
Acquisition, the “Acquisitions”).
Registrant’s Capital Structure
As of March 31, 2022, the Registrant had the following
instruments outstanding:
•Class
A Shares—Shares
of Class A common stock that are publicly traded. Class A
Shareholders are entitled to dividends declared on the Class A
Shares by the Registrant’s board of directors (the “Board”). As of
March 31, 2022, the Class A Shares and Class C Shares
(collectively, the “Low-Vote Shares”) represented a combined 10% of
the total voting power of all shares. Subsequent to March 31, 2022,
the Company’s organization documents were amended to increase from
10% to 20% the total voting power of the Low-Vote
Shares.
Blue Owl Capital Inc.
(Prior to May 19, 2021, Owl Rock)
Notes to Consolidated and Combined Financial Statements
(Unaudited)
•Class
B Shares—Shares
of Class B common stock that are not publicly traded. Class B
Shareholders are entitled to dividends in the same amount per share
as declared on Class A Shares. As of March 31, 2022, the Class B
Shares and Class D Shares (collectively, the “High-Vote Shares”)
represented a combined 90% of the total voting power of all shares.
Subsequent to March 31, 2022, the Company’s organization documents
were amended to lower from 90% to 80% the total voting power of the
High-Vote Shares. No Class B Shares have been issued from inception
through March 31, 2022. Common Units (as defined below) held
by certain senior members of management (“Principals”) are
exchangeable on a one-for-one basis for Class B
Shares.
•Class
C Shares—Shares
of Class C common stock that are not publicly traded. Class C
Shareholders do not participate in the earnings of the Registrant,
as the holders of such shares participate in the economics of the
Blue Owl Operating Group through their direct and indirect holdings
of Common Units and Incentive Units (as defined below and subject
to limitations on unvested units). For every Common Unit held
directly or indirectly by non-Principals, one Class C Share is
issued to grant a corresponding voting interest in the Registrant.
The Class C Shares are Low-Vote Shares as described
above.
•Class
D Shares—Shares
of Class D common stock that are not publicly traded. Class D
Shareholders do not participate in the earnings of the Registrant,
as the holders of such shares participate in the economics of the
Blue Owl Operating Group through their direct or indirect holdings
of Common Units and Incentive Units (subject to limitations on
unvested units). For every Common Unit held directly and indirectly
by Principals, one Class D Share is issued to grant a corresponding
voting interest in the Registrant. The Class D Shares are High-Vote
Shares as described above.
•RSUs—The
Company grants Class A restricted share units (“RSUs”) to its
employees and independent Board members. An RSU entitles the holder
to receive a Class A Share, or cash equal to the fair value of a
Class A Share at the election of the Board, upon completion of a
requisite service period. RSUs granted to-date do not accrue
dividend equivalents. No RSUs were issued prior to the Business
Combination. RSU grants are accounted for as equity-based
compensation. See Note 7 for additional information.
•Warrants—In
connection with the Business Combination, the Company issued
warrants to purchase Class A Shares at a price of $11.50 per share.
The warrants expire five years from the Business Combination Date.
A portion of the outstanding warrants are held by the sponsor of
Altimar (“Private Placement Warrants”) and the remaining warrants
are held by other third-party investors (“Public Warrants”). The
Company generally may redeem all Public Warrants for $0.01 per
warrant if the Company’s Class A Share price equals or exceeds
$18.00 per share. If the Company’s Class A Share price is greater
than $10.00 per share but less than $18.00 per share, the Company
generally may redeem all Public Warrants for $0.10 per warrant. In
each case, any redemptions require a 30-day notice to the warrant
holders, during which time the holders may elect to exercise their
warrants, and such redemptions must be done for not less than all
of the outstanding Public Warrants. Holders may elect to exercise
their warrants on a cashless basis.
The following table presents the number of shares of the
Registrant, RSUs and warrants that were outstanding as of
March 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
Class
A Shares |
|
407,639,908 |
|
|
|
|
|
Class C Shares |
|
670,147,025 |
|
|
Class D Shares |
|
319,132,127 |
|
|
RSUs |
|
21,645,224 |
|
|
Warrants |
|
14,159,048 |
|
Blue Owl Capital Inc.
(Prior to May 19, 2021, Owl Rock)
Notes to Consolidated and Combined Financial Statements
(Unaudited)
Blue Owl Operating Partnerships’ Capital Structure
As of March 31, 2022, the Blue Owl Operating Partnerships had
outstanding the following instruments, which are collectively
referred to as “Blue Owl Operating Group Units”:
•GP
Units—The
Registrant indirectly holds a general partner interest and all of
the GP Units in each of the Blue Owl Operating Partnerships. The GP
Units are general partner interests in the Blue Owl Operating
Partnerships that represent the Registrant’s economic ownership in
the Blue Owl Operating Group. For each Class A Share and Class B
Share outstanding, the Registrant indirectly holds an equal number
of GP Units. References to GP Units refer collectively to a GP Unit
in each of the Blue Owl Operating Partnerships. References to GP
Units also include Common Units (as defined below) acquired and
held directly or indirectly by the Registrant as a result of Common
Units exchanged for Class A Shares.
•Common
Units—Common
Units are limited partner interests held by certain members of
management, employees and other third parties in the Blue Owl
Operating Partnerships. Subject to certain restrictions, Common
Units are exchangeable on a one-for-one basis for either Class A
Shares (if held by a non-Principal) or Class B Shares (if held by a
Principal). Common Unit exchanges may be settled in cash, only at
the election of the Company’s Exchange Committee (currently
composed of independent members of the Board), and only if funded
from proceeds of a new permanent equity offering. Common Units held
by Principals are exchangeable after the two-year anniversary of
the Business Combination Date. References to Common Units refer
collectively to a Common Unit in each of the Blue Owl Operating
Partnerships, but excludes any Common Units held directly or
indirectly by the Registrant. Upon an exchange of Common Units for
an equal number of Class A Shares or Class B Shares, a
corresponding number of Class C Shares or Class D Shares,
respectively, will be cancelled. Common Unitholders are entitled to
distributions in the same amount per unit as declared on GP
Units.
•Incentive
Units—Incentive
Units are Class P limited partner interests in the Blue Owl
Operating Partnerships granted to certain members of management,
employees and consultants (collectively, “Incentive Unit Grantees”)
and are generally subject to vesting conditions, as further
discussed in Note 7. Incentive Units are held indirectly through
Blue Owl Management Vehicle LP on behalf of Incentive Unit
Grantees. A vested Incentive Unit may convert into a Common Unit
upon becoming economically equivalent on a tax basis to a Common
Unit. Once vested, Incentive Unitholders are entitled to
distributions in the same amount per unit as declared on GP Units
and Common Units. Unvested Incentive Unitholders generally are not
entitled to distributions; however, consistent with other Blue Owl
Operating Group Units (other than Oak Street Earnout Units),
unvested Incentive Units receive taxable income allocations that
may subject holders to tax liabilities. As a result, Incentive
Unitholders (consistent with other Blue Owl Operating Group Units
other than Oak Street Earnout Units) may receive tax distributions
on unvested units to cover a portion or all of such tax
liabilities.
•Oak
Street Earnout Units—In
connection with the Oak Street Acquisition, the Company agreed to
make additional payments of cash (“Oak Street Cash Earnout”) and
Common Units (“Oak Street Earnout Units” and collectively with the
Oak Street Cash Earnout, the “Oak Street Earnouts”) in two tranches
upon the occurrence of certain “Oak Street Triggering Events.” The
Oak Street Triggering Events are based on achieving a certain level
of quarterly management fee revenues from existing and future Oak
Street products. See Note 3 to the consolidated and combined
audited financial statements included in the Company’s Annual
Report for the year ended December 31, 2021 (the “2021 Audited
Financial Statements”), for additional information.
Blue Owl Capital Inc.
(Prior to May 19, 2021, Owl Rock)
Notes to Consolidated and Combined Financial Statements
(Unaudited)
The following table presents the number of Blue Owl Operating Group
Units that were outstanding as of March 31, 2022:
|
|
|
|
|
|
|
|
|
|
Units |
|
March 31, 2022 |
|
GP Units |
|
407,639,908 |
|
|
Common Units |
|
989,279,152 |
|
|
Incentive Units |
|
24,999,499 |
|
|
Oak Street Earnout Units |
|
26,074,330 |
|
Share Repurchase Program
On May 19, 2021, Blue Owl’s Board authorized the repurchase of
up to $100.0 million of Class A Shares. Under the repurchase
program, repurchases may be made from time to time in open market
transactions, in privately negotiated transactions or otherwise.
The timing and the actual numbers repurchased will depend on a
variety of factors, including legal requirements, price and
economic and market conditions. The repurchase program was set to
expire on May 19, 2022. On May 4, 2022, Blue Owl’s Board authorized
renewing the repurchase program, and increased the amount to up to
$150.0 million of Class A Shares. The repurchase program may
be changed, suspended or discontinued at any time and will
terminate upon the earlier of (i) the purchase of all shares
available under the repurchase program or (ii) December 31,
2024.
Common Unit Exchanges
During the first quarter of 2022, the Company exchanged 4,619,175
Common Units and Class C Shares for an equal number of Class A
Shares. As a result of the exchange, the Company reallocated equity
from noncontrolling interests to the Company’s additional paid-in
capital and recorded additional deferred tax assets and TRA
liability in connection with the exchanges. See the consolidated
and combined statement of shareholders’ equity for these
amounts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These unaudited, interim, consolidated and combined financial
statements are prepared in accordance with U.S. generally accepted
accounting principles (“GAAP”) as set forth in the Financial
Accounting Standards Board’s (“FASB”) Accounting Standards
Codification (“ASC”). All intercompany transactions and balances
have been eliminated in consolidation and combination. The notes
are an integral part of the Company’s consolidated and combined
financial statements. In the opinion of management, all adjustments
necessary for a fair presentation of the Company’s consolidated and
combined financial statements have been included and are of a
normal and recurring nature. The Company’s comprehensive income
(loss) is comprised solely of consolidated and combined net income
(i.e., the Company has no other comprehensive income). These
interim consolidated and combined financial statements should be
read in conjunction with the 2021 Audited Financial
Statements.
Prior to the Business Combination, Blue Owl’s financial statements
were prepared on a consolidated and combined basis. As part of the
Business Combination, Securities was contributed to the Blue Owl
Operating Group. Following the Business Combination, the financial
statements are prepared on a consolidated basis.
The merger between Owl Rock and Altimar was accounted for as a
reverse asset acquisition, with no step-up to fair value on any
assets or liabilities, and therefore no goodwill or other
intangible assets were recorded. The Acquisitions were accounted
for using the acquisition method of accounting. As a result, the
Company recorded the fair value of the net assets acquired as of
the closing date of each respective acquisition, and operating
results for each acquired business are included starting as of such
each respective date.
Blue Owl Capital Inc.
(Prior to May 19, 2021, Owl Rock)
Notes to Consolidated and Combined Financial Statements
(Unaudited)
Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make assumptions and estimates that affect
the amounts reported in the consolidated and combined financial
statements. The most critical of these estimates are related to (i)
the fair value of the investments held by the products the Company
manages, as for many products, this impacts the amount of revenues
the Company recognizes each period; (ii) the fair value of
equity-based compensation grants; (iii) the fair values of
liabilities with respect to the TRA (the portion considered
contingent consideration), warrants and earnout liability; (iv) the
estimate of future taxable income, which impacts the realizability
and carrying amount of the Company’s deferred income tax assets;
and (v) the qualitative and quantitative assessments of whether
impairments of acquired intangible assets and goodwill exist.
Inherent in such estimates and judgements relating to future cash
flows, which include the Company’s interpretation of current
economic indicators and market valuations, and assumptions about
the Company’s strategic plans with regard to its operations. While
management believes that the estimates utilized in preparing the
consolidated and combined financial statements are reasonable and
prudent, actual results could differ materially from those
estimates.
Principles of Consolidation
The Company consolidates entities in which it has a controlling
financial interest based on the application of either the variable
interest model or the voting interest model.
An entity is considered to be a variable interest entity (“VIE”) if
any of the following conditions exist: (a) the total equity
investment at risk is not sufficient to permit the entity to
finance its activities without additional subordinated financial
support, (b) the holders of equity investment at risk, as a
group, lack either the direct or indirect ability through voting
rights or similar rights to make decisions that have a significant
effect on the success of the entity or the obligation to absorb the
expected losses or right to receive the expected residual returns,
or (c) the voting rights of some equity investors are
disproportionate to their obligation to absorb losses of the
entity, their rights to receive returns from an entity, or both and
substantially all of the entity’s activities either involve or are
conducted on behalf of an investor with disproportionately few
voting rights.
The Company is required to consolidate any VIEs for which it is the
primary beneficiary. The Company is the primary beneficiary if it
holds a controlling financial interest, which is defined as having
(a) the power to direct the activities of the VIE that most
significantly impact the entity’s economic performance and
(b) the obligation to absorb losses of the entity or the right
to receive benefits from the entity that could potentially be
significant to the VIE. The Company does not consolidate any of the
products it manages, as it does not hold any direct or indirect
interests in such entities that could expose the Company to an
obligation to absorb losses or right to receive benefits that are
more than insignificant to such entities.
Fees that are customary and commensurate with the level of services
provided by the Company, and where the Company does not hold other
economic interests in the entity that would absorb more than an
insignificant amount of the expected losses or returns of the
entity, are not be considered to be variable interests. The Company
factors in all economic interests, including proportionate
interests held through related parties, to determine if fees are
variable interests. The Company’s interests in the products it
manages are primarily in the form of management fees, realized
performance income, and insignificant direct or indirect equity
interests, and therefore does not have variable interests in such
entities.
Blue Owl Capital Inc.
(Prior to May 19, 2021, Owl Rock)
Notes to Consolidated and Combined Financial Statements
(Unaudited)
The Company determines whether it is the primary beneficiary of a
VIE at the time it becomes involved with a VIE and continuously
reconsiders that conclusion. In evaluating whether the Company is
the primary beneficiary, the Company evaluates its direct and
indirect economic interests in the entity. The consolidation
analysis is generally performed qualitatively; however, if the
primary beneficiary is not readily determinable, a quantitative
analysis may also be performed. This analysis requires judgment,
including: (1) determining whether the equity investment at
risk is sufficient to permit the entity to finance its activities
without additional subordinated financial support,
(2) evaluating whether the equity holders, as a group, can
make decisions that have a significant effect on the success of the
entity, (3) determining whether two or more parties’ equity
interests should be aggregated, (4) determining whether the
equity investors have proportionate voting rights to their
obligations to absorb losses or rights to receive returns from an
entity and (5) evaluating the nature of relationships and
activities of the parties involved in determining which party
within a related-party group is most closely associated with a VIE
and therefore would be deemed the primary beneficiary.
For entities that are not VIEs, the Company evaluates such entities
(“VOEs”) under the voting interest model. The Company consolidates
VOEs where the Company controls a majority voting interest. The
Company will generally not consolidate VOEs where a single investor
or simple majority of third-party investors with equity have the
ability to exercise substantive kick-out or participation
rights.
Acquisitions
For business combinations accounted for under the acquisition
method, management recognizes the fair value of assets acquired and
liabilities assumed on the acquisition date. The excess of purchase
price consideration over the fair value of net assets acquired is
recorded as goodwill. Management’s determination of fair value of
assets acquired and liabilities assumed at the acquisition date is
based on the best information available in the circumstances and
incorporates management’s own assumptions and involve a significant
degree of judgment.
Cash and Cash Equivalents
The Company considers highly-rated liquid investments that have an
original maturity of three months or less from the date of purchase
to be cash equivalents. As of March 31, 2022 and
December 31, 2021, the Company holds the majority of its cash
balances with a single financial institution and such balances are
in excess of Federal Deposit Insurance Corporation insured limits,
which exposes the Company to a certain degree of credit risk
concentration.
Investments
Investments are primarily comprised of investments for which the
Company has elected the fair value option in order to simplify the
accounting for these instruments, and therefore changes in
unrealized gains or losses are included in current-period earnings.
Such elections are irrevocable and are applied on an
investment-by-investment basis at initial recognition. Investments
are included within other assets in the consolidated and combined
statements of financial condition. Realized and changes in
unrealized gains (losses) on these investments are included within
net gains (losses) on investments in the consolidated and combined
statements of operations. Investments for which the Company has not
elected the fair value option are primarily comprised of
equity-method investments in its products. See Note 8 for
additional information.
Leases
Right-of-use assets and liabilities related to operating leases are
included within operating lease assets and operating lease
liabilities, respectively, in the Company’s consolidated and
combined statements of financial condition.
The Company determines if an arrangement is a lease at inception.
Right-of-use lease assets and lease liabilities are recognized at
commencement date based on the present value of lease payments over
the lease term. Right-of-use lease assets represent the Company’s
right to use a leased asset for the lease term and lease
liabilities represent the Company’s obligation to make lease
payments arising from the lease. The Company does not recognize
right-of-use lease assets and lease liabilities for leases with an
initial term of one year or less.
Blue Owl Capital Inc.
(Prior to May 19, 2021, Owl Rock)
Notes to Consolidated and Combined Financial Statements
(Unaudited)
As the Company’s leases do not provide an implicit rate, the
Company uses its estimated incremental borrowing rate based on
information available at the lease commencement date in determining
the present value of lease payments. The determination of an
appropriate incremental borrowing rate requires judgment. The
Company determines its incremental borrowing rate based on data for
instruments with similar characteristics, including recently issued
debt, as well as other factors.
The operating lease assets include any lease payments made and
lease incentives. Lease terms include options to extend or
terminate when it is reasonably certain that the Company will
exercise that option. In addition, the Company separates lease and
non-lease components embedded within lease agreements. Lease
expense for operating lease payments is recognized on a
straight-line basis, which consists of amortization of right-of-use
assets and interest accretion on lease liabilities, over the lease
term and included within general, administrative and other expenses
in the consolidated and combined statements of operations. The
Company does not have any material finance leases.
Strategic Revenue-Share Purchase Consideration
On September 20, 2021, the Company entered into certain Agreements
of Purchase and Sale (the “Strategic Revenue-Share Purchase”),
whereby certain fund investors relinquished their rights to receive
management fee shares with respect to certain existing and future
GP Capital Solutions products. In exchange for the foregoing, the
Company issued 29,701,013 Class A Shares with a fair value of
$455.0 million and paid cash of $50.2 million (net of
previously accrued management fee shares payable and other
receivable) to such fund investors.
The Company determined that it was not receiving a distinct good or
service from the customers as a result of the Strategic
Revenue-Share Purchase, and therefore determined that the
consideration paid to the customers represents a reduction of the
transaction price (i.e., a reduction to revenue). Accordingly, the
total consideration paid was recorded within Strategic
Revenue-Share Purchase consideration in the Company’s consolidated
statements of financial condition and is being amortized as a
reduction of management fees, net in the Company’s consolidated
statements of operations. See Note 5 for additional
information.
Intangible Assets, Net and Goodwill
The Company recognized certain finite-lived intangible assets and
goodwill as a result of the Acquisitions. The Company’s
finite-lived intangible assets consist of contractual rights to
earn future management fees from the acquired investment management
agreements and value associated with the acquired client
relationships and trademarks. Finite-lived intangible assets are
amortized on a straight-line basis over their estimated useful
lives.
The Company uses its best estimates and assumptions to accurately
assign fair value to identifiable intangible assets acquired at the
acquisition date as well as the useful lives of those acquired
intangible assets. Examples of critical estimates in valuing
certain of the intangible assets acquired include, but are not
limited to, future expected cash inflows and outflows, expected
useful life and discount rates. The Company’s estimates for future
cash flows are based on historical data, various internal estimates
and certain external sources, and are based on assumptions that are
consistent with the plans and estimates the Company uses to manage
the underlying assets acquired. The Company estimates the useful
lives of the intangible assets based on the expected period over
which the Company anticipates generating economic benefit from the
asset. The Company bases its estimates on assumptions it believes
to be reasonable but that are unpredictable and inherently
uncertain. Unanticipated events and circumstances may occur that
could affect the accuracy or validity of such assumptions,
estimates or actual results.
The Company tests finite-lived intangible assets for impairment if
certain events occur or circumstances change indicating that the
carrying amount of the intangible asset may not be recoverable. The
Company evaluates impairment by comparing the estimated fair value
attributable to the intangible asset with its carrying amount. If
an impairment exists, the Company adjusts the carrying value to
equal the fair value by taking a charge through earnings. No
impairments have been recognized to-date on the Company’s acquired
intangible assets.
Blue Owl Capital Inc.
(Prior to May 19, 2021, Owl Rock)
Notes to Consolidated and Combined Financial Statements
(Unaudited)
Goodwill represents the excess of consideration over identifiable
net assets of an acquired business. The Company tests goodwill
annually for impairment. If, after assessing qualitative factors,
the Company believes that it is more-likely-than-not that the fair
value of the reporting unit inclusive of goodwill is less than its
carrying amount, the Company will perform a quantitative assessment
to determine whether an impairment exists. If an impairment exists,
the Company adjusts the carrying value of goodwill so that the
carrying value of the reporting unit is equal to its fair value by
taking a charge through earnings. The Company also tests goodwill
for impairment in other periods if an event occurs or circumstances
change such that it is more-likely-than-not to reduce the fair
value of the reporting unit below its carrying amount. No
impairments have been recognized to-date on the Company’s
goodwill.
Fixed Assets
Fixed assets are recorded at cost, less accumulated depreciation
and amortization, and are included within other assets, net in the
Company’s consolidated and combined statements of financial
condition. Fixed assets are depreciated or amortized on a
straight-line basis, with the corresponding depreciation and
amortization expense included within general, administrative and
other expenses in the Company’s consolidated and combined
statements of operations. The estimated useful life for leasehold
improvements is the lesser of the remaining lease term and the life
of the asset, while other fixed assets are generally depreciated
over a period of
three to seven years. Fixed assets are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be
recoverable.
Debt Obligations, Net
The Company’s debt obligations, other than revolving credit
facilities, are recorded at amortized cost, net of any debt
issuance costs, discounts and premiums. Debt issuance costs are
deferred and along with discounts and premiums are amortized to
interest expense in the consolidated and combined statements of
operations over the life of the related debt instrument using the
effective interest method. Unamortized debt issuance costs,
discounts and premiums are written off to net losses on retirement
of debt in the consolidated and combined statements of operations
when the Company prepays borrowings prior to maturity. The Company
defers debt issuance costs associated with revolving credit
facilities and presents them within other assets, net in the
consolidated and combined statements of financial condition, and
such amounts are amortized to interest expense in the consolidated
and combined statements of operations on a straight-line basis over
the life of the related facility.
TRA Liability
The tax receivable agreement (“TRA”) liability represents amounts
payable to certain pre-Business Combination equity holders of Owl
Rock and Dyal Capital. The portion of the TRA liability related to
the Dyal Acquisition is deemed contingent consideration payable to
the previous owners of Dyal Capital, and therefore is carried at
fair value, with changes in fair value reported within other loss
in the consolidated and combined statements of operations. The
remaining portion of the TRA is carried at a value equal to the
expected future payments due under the TRA. The Company recorded
its initial estimate of future payments under the TRA portion that
is not related to the Dyal Acquisition, including as a result of
exchanges of Common Units for Class A or B Shares, as a decrease to
additional paid-in capital in the consolidated and combined
statements of financial condition. Subsequent adjustments to the
liability for future payments under the tax receivable agreement
related to changes in estimated future tax rates or state income
tax apportionment are recognized through current period earnings in
the consolidated and combined statements of operations. See Note 10
for additional information.
Warrant Liability, at Fair Value
The Company’s warrants are recorded as liabilities carried at fair
value, with changes in fair value included within other loss in the
Company’s consolidated and combined statements of
operations.
The Private Placement Warrants contain exercise and settlement
features that may change with a change in the holder, which
precludes the Private Placement Warrants from being considered
indexed to the Company’s own stock, and therefore the Private
Placement Warrants are precluded from being classified within
equity and are accounted for as derivative
liabilities.
Blue Owl Capital Inc.
(Prior to May 19, 2021, Owl Rock)
Notes to Consolidated and Combined Financial Statements
(Unaudited)
The Public Warrants include a provision that, in the event of a
tender offer or exchange offer made to and accepted by holders of
more than 50% of the outstanding Class A Shares, all holders of the
warrants would be entitled to receive cash for their warrants. Such
an event would not constitute a change in control because the Class
A Shares do not represent a majority of the Registrant’s voting
shares. Accordingly, the Public Warrants are also precluded from
being classified within equity and are accounted for as derivative
liabilities. This provision also applies to the Private Placement
Warrants.
Earnout Liability, at Fair Value
Earnout liability is comprised of the Oak Street Cash Earnout. The
Oak Street Cash Earnout represents contingent consideration on the
Oak Street Acquisition and is recorded at fair value until the
contingency has been resolved, with changes in fair value included
within change in earnout liability in the Company’s consolidated
and combined statements of operations. Once recognized, earnout
liabilities are not derecognized until the contingencies are
resolved and the consideration is paid or becomes payable. Earnout
liabilities may expire and upon expiration, the consideration would
not be paid or payable.
Noncontrolling Interests
Noncontrolling interests are primarily comprised of Common Units,
which are interests in the Blue Owl Operating Group not held by the
Company.
Allocations to noncontrolling interests in the consolidated and
combined statements of operations are based on the substantive
profit-sharing arrangements in the operating agreements of the Blue
Owl Operating Partnerships. The Company does not record income or
loss allocations to noncontrolling interests to the extent that
such allocations would be provisional in nature, such as for
unvested Incentive Units (other than certain minimum tax
distributions). Provisional allocations to these interests would be
subject to reversal in the event the unvested Incentive Units are
forfeited or if the Seller Earnout Units would not have achieved
their Class E Triggering Events.
Certain consolidated holding companies for investment advisor
subsidiaries of the Blue Owl Operating Group are partially owned by
third-party investors. Such interests are also presented as
noncontrolling interests.
Revenue Recognition
Revenues consist of management fees; administrative, transaction
and other fees; and realized performance income. The Company
recognizes revenues when such amounts are probable that a
significant reversal would not occur. The Company recognizes
revenue at the time of transfer of promised goods or services to
customers in an amount that reflects the consideration to which the
Company expects to be entitled in exchange for those goods or
services (i.e., the transaction price). Under this method, revenue
is based on a contract with a determinable transaction price and
distinct performance obligations with probable collectability.
Revenues cannot be recognized until the performance obligations are
satisfied and control is transferred to the customer.
Management Fees, Net
Management fees are recognized over the period in which the
investment management services are performed because customers
simultaneously consume and receive benefits continuously over time.
Payment terms and fee rates of management fees vary by product but
are generall