DigitalBridge Group, Inc. (NYSE:DBRG) Q4 2022 Earnings Call Transcript

DigitalBridge Group, Inc. (NYSE:DBRG) Q4 2022 Earnings Call Transcript February 24, 2023

Operator: Greetings, and welcome to the DigitalBridge Group Inc. Fourth Quarter 2022 Earnings Conference Call.  It is now my pleasure to introduce your host, Severin White, Managing Director, Head of Public Investor Relations. Thank you. You may begin.

Severin White: Good morning, everyone, and welcome to DigitalBridge’s Fourth Quarter 2022 Earnings Conference Call. Speaking on the call today from the company is Marc Ganzi, our CEO; and Jacky Wu, our CFO. I’ll quickly cover the safe harbor, and then we can get started. Some of the statements that we make today regarding our business operations and financial performance may be considered forward-looking and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. All information discussed on this call is as of today, February 24, 2023, and DigitalBridge does not intend and undertakes no duty to update it for future events or circumstances. For more information, please refer to the risk factors discussed in our recent 10-K to be filed with the SEC for the year ending December 31, 2022.

So we’re going to start with Marc summarizing the progress we’ve made in 2022, Jacky will outline our financial results and updated guidance and turn it back over to Marc to outline what we are focused on in 2023. With that, I’ll turn the call over to Marc Ganzi, our CEO. Marc?

Marc Ganzi: Thanks, Sev, and thank you, our investors, for your continued interest in DigitalBridge. Particularly as we enter 2023 and navigate the final stage of our transformation. I’d like to start today by putting 2022 and the progress we made this year in context. Most importantly, through a dynamic macro environment, we delivered growth this year, maintaining our position as the partner of choice to top operating management teams and institutional investors that are allocating capital to digital infrastructure, which has proven itself to be one of the most durable asset classes. First, on corporate strategy. We established our asset management platform as the strategic growth driver for our business going forward, successfully building out a full stack profile with new complementary strategies.

Next, capital formation. It’s our most relevant near-term KPI. When you look forward to revenue and earnings growth, this is where you’ll find our best opportunity. Here, we exceeded our fundraising targets for the year, building up significant embedded earnings, growth going forward into 2023 and beyond. Finally, and most importantly, our portfolio continued to perform with strong leasing, driving solid outcomes for our investors. The best way to deliver growth in today’s environment is to create free cash flow from organic leasing and escalators. Again, this is what matters, portfolio performance. And here is where we really excelled. We’ll talk a little bit about that today. Next slide, please. In 2022, DigitalBridge really established our asset management platform as the strategic growth driver for our business going forward.

The fundamental shift was about orienting our company around a scalable, asset-light, high-return business model. As we’ve detailed before in our corporate overview, the returns on capital associated with Investment Management are superior and allow us to establish a leading market position of a smaller capital without having to tap capital markets regularly to grow our business. This is an alternative. We believe a superior alternative way to own digital infrastructure. We achieved a number of key strategic objectives last year that allowed us to advance this road map. First, we scaled our full stack profile, both organically with the launch of our core and credit strategies and also through M&A as we telegraph to you, our investors, with the acquisition of AMP’s infrastructure equity business.

Now rebranded as InfraBridge. This gives us a compelling middle-market capability with a digital plus investment focus. Second, we consolidated the ownership of our Investment Management platform, buying back Wafra’s minority stake so that 100% of our Investment Management earnings flow back to you, DigitalBridge shareholders. Finally, we continue to simplify our business profile. Starting with the DataBank recap. This was the first step in deconsolidating our operating segment, which represents the last phase in our corporate transformation. Some very important strategic progress this year that sets us up to win in 2023 and beyond. Next slide, please. In addition to advancing our Investment Management road map, we allocated capital strategically across 4 accretive transactions while continuing to maintain strong liquidity at the corporate level.

As I’ve mentioned before, maintaining strong liquidity in this environment is a strategic imperative to DigitalBridge. In 2022, we allocated over $800 million in cash to accretive M&A in our investment in our Investment Management profile as well as continuing to optimize our capital structure. Let me elaborate a little bit on that. First, let’s start with the Wafra stake, for a little bit under $500 million in cash, including the earnout as well as the issuance of stock. We purchased AMP’s infrastructure equity franchise next, and bought back over $110 million of common and preferred stock taking advantage of market dislocation in the fourth quarter of last year. Those investments are set to generate over $85 million in incremental pro forma earnings, which translates to EPS of over $0.49 per share.

While we deployed significant capital in 2022, we also prioritized and have maintained strong liquidity. Today, that stands at almost $700 million. Further, we continue to delever our business, reducing both investment level and corporate debt on a pro-rata basis during the course of 2022. Again, in this environment, this is essential to my battle plan. The ability to allocate capital in line with our priorities while maintaining strong liquidity and deleveraging were significant achievements this year. Next slide, please. Next is capital formation. This is really the KPI that drives future revenue and earnings growth. Here we finished off the year with a solid fourth quarter. We raised $1.4 billion across four of our strategies. That took our cumulative fundraising to $8.5 billion for the year and fee-earning equity to $4.8 billion, exceeding our 2022 midpoint target of $3.8 billion by 26%.

As that capital kicks into high gear in the first quarter of this year and beyond, you’ll see the revenue growth follow in our financials. Next page, please. So where does that put us across the platform? As of today, we’re at approximately $28 billion in FEEUM. That’s 52% higher than last year with half the growth coming from organic fundraising and the other half via our acquisition of AMP, which we just closed at the beginning of February. We’re excited about that acquisition, and we’ve already commenced the full integration of the teams and back-office operations. We’re looking forward to the growth in InfraBridge, and we’re excited about the prospects that, that business has for DigitalBridge shareholders. The other really important thing here to note is the proliferation of colors you see on the slide.

We’ve talked about building the full stack and what you’re starting to see is the manifestation of those efforts. On top of our flagship DigitalBridge Partners Series funds, we’ve gotten significant growth in co-investment, permanent capital vehicles and liquid strategies. And now we’re laying in capital for our credit and core strategies. That significant embedded revenue and earnings growth that will manifest itself in 2023. This enables us to scale and execute our go-forward business plan. Next slide, please. So the third piece that’s relevant here as we look back in 2022 is the success we’ve had across our global portfolio. On the front end, that means actively investing in new platforms on a global basis. In particular, I want to highlight 2 signature transactions that we did in the back half of last year.

Number one, the $11 billion take-private of Switch. And secondly, the $18 billion GD Towers partnership with Deutsche Telekom. I also want to call out the growth we’re seeing in Asia, both with new platforms and tuck-in acquisitions, we’ve been able to execute across existing portfolio companies in that geography. We remain excited about that theater, and we’re looking forward to investing there in 2023 and beyond. And look, all of this is enabled by continued growth in AUM and FEEUM that we’ve experienced over the last 2 years. We’re now with investments in 5 continents. So again, let me put that in a proper perspective for you. In summary, one, we beat FEEUM by 26% in 2022 against our budget. 52% FEEUM growth since 2021 and 56% AUM growth over the last 3 years.

We continue to post some of the fastest growth metrics in all of the key areas that matter in the asset management sector. I couldn’t be more pleased with our execution. Next page. So why can we post this type of growth? Simple, our investments are outperforming in the most important metric of all, organic revenue growth at the asset level. Our performance continued to be strong this quarter. With growth on a year-over-year basis and monthly recurring revenue across all of our food groups. This is the foundation for the performance of our franchise over time, deliver organic growth. On the right side, you can see the conservative portfolio debt metrics that we put in place over a year ago and have been able to manage effectively through a dynamic macro environment.

42% loan-to-value, 74% of hedged debt fixed with an average full extended maturity of over 7 years. This is conservative management of the capital structures at our portfolio companies. This was not accidental. This is a plan we put in place at the beginning of COVID. We led multiple securitizations at the end of 2020, 2021 and 2022, setting up our portfolio companies to maximize their liquidity by having fixed debt with only 1 covenant, which is a DSCR ratio and no cash traps. This is a playbook that worked incredibly well for us in 2001 and 2002 and worked very well for us in 2008 and 2009, and it’s working again. When you deliver great performance on a portfolio company level that manifests itself in good outcomes for our investors, this is really the heart of the business.

Let’s talk about a few of those outcomes on the next slide, please. The reason we’re so focused on portfolio performance is because ultimately, strong performance drives great outcomes for our investors. When we say our investors, we mean our LPs and of course, you, our public shareholders at DigitalBridge. In 2022, despite a rising rate environment and inflation, we delivered, generating realizations at attractive valuations well in excess of our carrying values and generating carried interest for you, our shareholders. These are deals we closed in the third and fourth quarter of 2022 not 2 years ago at the peak when multiples were greater than mid-20s and low 30s First Vantage Towers. We cornerstone their IPO 1.5 years ago and generated a strong return for our investors that was otherwise a challenging market, reinforcing the durability of digital infrastructure and Towers in particular.

Second, Wildstone, which is our leading digital media platform that we sold to Antin. Again, strong returns on a net basis at a substantial premium to where we maintained it on our books. And then lastly — and we continue to bring in new investors as that fundraising period stays open to the end of Q2 this year. That’s a deal where we generated 2x MOIC for our balance sheet in just 3 years, and even better return for the original investors. Again, a significant premium to where we carried the asset on our balance sheet. This is what it’s all about, investing in great platforms, best-in-class management teams, driving growth and performance and then ultimately delivering great returns for our investors and shareholders. That’s been my track record over the last 25 years.

And now as we exit future investments, you, our public investors get to share in the profits with me and our team, create alignment with you, our public shareholders. So that’s the story in 2022. Significant progress on our corporate strategy, beating our capital formation targets and continued performance at the portfolio level, all of which sets the table for a very successful 2023 and beyond. So with that, I’ll turn it over to Jacky to walk through the financials. Jacky?

Jacky Wu: Thank you, Marc, and good morning, everyone. As a reminder, in addition to the release of our fourth quarter earnings, we filed a supplemental financial report this morning, which is available within the Shareholders section of our website. . Starting with our fourth quarter results on Page 14, the company saw strong year-over-year growth, driven by fundraising in our Investment Management business and realized performance fees. For the fourth quarter reported total consolidated revenues were $301 million, which represents an 18% increase from the same period last year. GAAP net loss attributable to common stockholders was $19 million or $0.12 per share. Total company adjusted EBITDA was $28 million, which grew by 32% from $21 million in the same period last year.

Total company distributable earnings was a loss of $11 million or $0.07 per share. It is important to note that our results this quarter were negatively impacted by a $53 million noncash valuation allowance. Although we expect to have the ability to use the value of our NOLs under GAAP standards we have conservatively applied this reserve now. And as the company continues to generate growth in its earnings, it will be reversed in future periods. Digital AUM was $53 million in the fourth quarter, which grew by 17% from $45 million in the same period last year, including the recently closed transaction of AMP Capital, Switch and GD Towers. We have reached over $65 billion AUM on a pro forma basis. Turning to Page 15. Our fourth quarter highlights have trended positively with fee revenues, fee-related earnings and distributable earnings all up year-over-year when excluding the previously mentioned noncash valuation allowance.

Photo by sean pollock on Unsplash

The company raised $22 billion in fee-earning equity under management, up 22% year-over-year, and we raised $4.8 billion of fee-paying capital during the year despite a very difficult fundraising environment. Furthermore, the company continues to prioritize the optimization of its capital structure. Our current corporate liquidity sits at approximately $680 million after closing the AMP Capital acquisition. During 2022, we executed a share repurchase program and initiated a regular quarterly dividend, which we believe we have the capacity to increase in the future. We will touch on this in more detail later in the presentation. Moving to Page 16. The company grew recurring Investment Management revenue and earnings, driven by fee-earning equity under management.

The company’s share of revenues and fee-related earnings increased by 49% and 33% year-over-year, respectively, led by our increased ownership of the business following the acquisition of Wafra’s minority stake. Moving to Page 17. Consolidated digital operating adjusted EBITDA was $99 million, which is a 17% increase from the same period last year, driven by continued data center acquisitions and organic leasing growth. The company’s share of digital operating revenues was down 14% year-over-year, while adjusted EBITDA was down 15%. These reductions are attributed to the previously announced DataBank recapitalization which reduced the company’s ownership from 22% at the beginning of the year to 11% in the fourth quarter. Turning to Page 18.

We have seen continued growth in our high-margin Investment Management business. Since the fourth quarter of 2021, our annualized fee revenues increased from $120 million to $233 million and fee-related earnings increased from $73 million to $120 million on a pro forma basis. This includes the recently closed acquisition of AMP Capital’s equity infrastructure platform, which was subsequently rebranded as InfraBridge. Looking at the right side of the page, our run rate fee revenues were $250 million. This provides an indication of expected revenues and is calculated simply by multiplying committed BUM at the end of the year by the average annual fee rates. Moving to Slide 19. I will now outline our earnings guidance for 2023 and 2025. We are updating our 2023 and 2025 targets for the Investment Management business, and are providing indicative guidance on run rate earnings.

We’ve laid out 2 scenarios for 2023 based on our intent to opportunistically recapitalize and deconsolidate the operating segments, which once accomplished, frees up additional capital to allocate towards new earnings. This will shift the earnings profile of the business towards asset-light, higher margin, lower capital intensity and a higher DE as a result. We are expecting an exceptionally strong fundraising year in 2023, driven by our successor flagship fund product. Note that this is intended to represent FRE at the end of 2023, excluding catch-up fees and onetime items. Nominal earnings for 2023 will be impacted by timing of fundraising. We have additionally introduced guidance on distributable earnings now that we have begun generating positive recurring earnings, and we’ll begin to focus heavily on the bottom line going forward.

Our strong liquidity position and near-term firepower allows for opportunistic deployment, which we expect to contribute significantly to run rate earnings in addition to the potential to generate realized gains and carried interest earned from further successful exits. Turning to Page 20. We wanted to look back at where we’ve been to highlight what has been accomplished to date and how that continues to drive into the future. Back in 2018 and 2019, the company’s legacy assets generated earnings on paper, but were overlevered and unsustainable. Over the next couple of years, we’ve shed over 99% of the legacy assets and moved the company from this low margin and unsustainable business model into a high-growth, high-margin, asset-light business with promising growth prospects led by our fundraising engine.

We continue to see meaningful upside to our core model as presented, led by further M&A and capital structure optimization, with compounding uplift from continued investment alongside our LPs in our funds, which target attractive IRRs and resulting carried interest as we begin harvesting exits like we successfully completed in the third and fourth quarter of 2022. No major transformation is easy, and we’d like to thank our shareholders for the continued support and patience. And I’m pleased to say that as we continue to execute this plan, DigitalBridge will be prime for long-term shareholder success. Turning to Page 21. The company has built significant balance sheet liquidity, driven by proceeds from both the DataBank recapitalization and return of warehouse investments due to successful fundraising.

Following our recent acquisition of the InfraBridge platform for $316 million, we are strongly positioned with approximately $700 million of balance sheet liquidity. Additionally, we have further potential sources of capital, including BrightSpire shares and remaining legacy asset sales, which can be utilized to offset medium-term obligations such as the upcoming 2023 convertible note repayment, which we expect to retire with readily available cash on hand. Throughout 2023, we expect to remain well positioned to deploy capital for accretive uses. Moving to Page 22. We have continued to make significant progress improving our debt profile with our debt-to-adjusted EBITDA ratio improving from 11x down to 10x. This reduction is driven by lower investment level debt in our operating segment as a result of the DataBank recapitalization and transfer warehouse investments into our newly raised core and credit funds, resulting in a $206 million total reduction in debt.

We will pay down the convertible notes due in April and target the reconsolidation of the operating segment, leaving only the $300 million of securitization as the company’s remaining debt. As we continue to execute upon our plan, we expect to achieve leverage ratios in the low single digits. In summary, and as I’ve continued to reiterate, our company is strong and healthy, driven by our sector-leading asset-light Investment Management business that generates high-quality, predictable and long-dated fee earnings. We expect to have a strong start to 2023 as our near-term fundraising and our growth prospects remain robust. And with that, I will turn it back to Marc. Thank you.

Marc Ganzi: Thanks, Jacky. I want to finish out by laying my top priorities for 2023. This is a section we’ve done in previous Q4 earnings calls where I’d like to lay out the 3 things that matter. This year, it’s pretty simple. Number one, we’ve got a fund raise. We will continue to form capital around new and existing platforms. Two, as our promise to all of you, simplification. Getting the operating segment deconsolidated while we maintain strong liquidity. Lastly, we need to continue to perform at our portfolio companies with strong asset management through the cycle and driving free cash flow growth by industry-leading organic revenue growth at the asset level. This is a seminal to our success going forward. It’s a tried and tested formula for me as a CEO and who has presided over the good and the bad times.

The key in a market fraught with crosswinds is you have to have a simple and focused battle plan. We have that here at DigitalBridge in 2023 and beyond. Next page, please. So let’s start with fund raising. This is really going to be our #1 KPI in 2023. This is the metric that I know all of you will have your eyes on quarter-to-quarter. Our plan is to raise more than $8-plus billion of net new capital across our platforms. That will break down essentially into 3 buckets of opportunity. First, we’re going to launch our next DigitalBridge Partner Series; two, we’re going to finish raising around our core and credit strategies that we started last year, where we have excellent momentum heading into the first part of this year; Three, we’re going to continue to grow our co-invest program, supporting the acquisition of new platforms as well as providing additional capital to existing portfolio companies to fuel their growth.

Our co-invest program over the last 4 years has been really one of the standout attributes of why institutional investors want to partner with us. That incremental FEEUM is going to drive a substantial amount of high-margin reoccurring fee revenues, as you can see on the right, with little to no incremental G&A. Now this is largely the fact that we invested heavily in 2022 in systems and in people. We invested in those people to seed and grow new products, and the fruits of that labor will pay off in 2023 with high-margin FRE. We’re confident that we can achieve these targets because we continue to see very strong interest in the digital infrastructure asset class by the world’s leading institutional investors, that naturally are attracted to its combination of persistent growth, durability and the recognition that DigitalBridge is the leading investor in the sector.

Next page, please. So next up, my priority continues to be advancing the simplification of our corporate profile, which will ultimately result in the deconsolidation of our operating segment into IM. There are 3 drivers here that I want you all to pay attention to. Number one, significantly reduced complexity. This is the number one thing we talk to public investors about today. The financial consolidation of businesses that we own, a combined 12% of, in my view, distorts true DigitalBridge shareholder revenues, cash flows and capital structure, which leads to unnecessary complexity that is a tangible cost burden and makes it challenging for investors to understand what is DigitalBridge own? We’re kind of getting sick hearing that question.

So we’re going to make things simple. The second key here is the acceleration of a pure-play corporate profile. What will ultimately emerge as a lean, profitable asset manager serving secular growth markets, devoid of the complexity of assembling and then pulling apart two business models, which makes it tough on you, our investors. Lastly, we expect this initiative to unlock incremental capital that we can redeploy in order to fuel the growth in the form of incremental digital M&A and our optimization of our capital structure. We’re essentially monetizing assets at attractive multiples and then redeploying them at lower levels into businesses that compound over time. We’ve demonstrated this already with the acquisition of AMP, taking over the full stick of our IM business from Wafra, and we will do that again in 2023.

Next slide, please. So what does this look like when we finalize our asset manager profile? Well, here’s just a quick illustration of what we look like today on the left, with 2 segments. 2/3 of our earnings coming from Investment Management and 1/3 coming from the operating segment, which is predominantly Vantage SDC and DataBank. So migrating to the right side of the page, going forward, our earnings will be driven by reoccurring revenues and earnings from our Investment Management platform, supplemented by income from retained principal investments, which is the residual amount that we’ll keep in Vantage SDC and DataBank in essence as the GP of those continuation vehicles. Strategically, one of the most attractive aspects of this transition is, we are more closely aligning our capital with that of our limited partners.

The ability to align the balance sheet in private LPs with our public investors is where we’re going, and we think that symmetry bodes well for all parties, and it creates the right outcomes for all investors. Next slide, please. So at the end, this is what that simpler profile looks like on a financial basis. As you can see, the transition will reveal a fast-growing asset manager, levered to the secular growth markets in digital infrastructure. The incredible 42% 3-year CAGR on FRE is growth that we’re anticipating over the next few years. This manifests itself in very strong financial performance. We have a simple algorithm with new FEEUM generating revenue at an average rate of 90 bps and very attractive incremental margins. As I stated before, my focus go forward is to grow our profitability.

This is an attractive high-growth profile that’s simple to understand and appreciate. Next page, please. So finally, I want to address where we’re going to put the money to work and what our priorities are going forward, so there’s no confusion. As you can see, over the past few years, we’ve allocated capital to a combination of uses. I think we as a management team have demonstrated we tend to be very pragmatic about these choices. One of our biggest allocations has been almost $400 million in GP commitments alongside of our LPs. Today, we structurally allocate about 2% to 3% of the equity in each of our fund vehicles. And in the long run, especially as we finalize our capital structure optimization, we expect to allocate more capital to this high-return use case.

We’re eating our own cooking, and we like to see our capital compound at attractive rates, and we think you’ll agree with that. The second primary use is accretive digital M&A, as I stated a few pages ago. Between the Wafra transaction AMP, last year, we deployed over $500 million in cash to continue to build our IM platform and increase our exposure in this high-quality earnings stream. We’ll continue to be active here with a focus on strategic and complementary platforms where we can accelerate growth. As I highlighted in my last quarterly earnings call, we’ve also been looking at the notion of entering the private equity space in digital infrastructure, which is a space that we do not occupy today. We think there are good opportunities here and a fertile ground, and we’ll continue to build that organically and also go out and look at accretive M&A.

The third piece is capital structure optimization. Look, here, we’ve been opportunistic. We bought back preferreds last year, which we expect to continue to be a use of free cash flow going forward. In the near term, as I promised, we’ll pay down our $200 million of 2023 converts when they come due on time in April with cash on hand. Finally, repurchases and dividends. We took advantage of what we see as an attractive price for our stock last quarter, buying back $55 million, and we also retained a $0.01 dividend last year in terms of making sure that we stayed committed to our promises. We intend to continue to maintain what we call a low but grow dividend policy, and we’re going to continue to execute share repurchases opportunistically over time, measuring it against the other 3 categories of where we can put capital to work.

The key here is, as we look at our capital allocation framework is a focus in the near term on successfully executing creative digital M&A the way we have last year, and continue to rationalize and optimize our capital structure as we did last year. Over time, we’ll have more free cash flow to invest alongside our LPs and compound shareholder capital. Next page, please. So in conclusion today, let’s bring it back to where we’re going and where we want to take you, our investors in 2023. What’s my scorecard for the year ahead? Pretty simple. Here’s my checklist. One, we’re going to fund raise. As most of you know, I’m laser-focused right now on forming $8 billion in new net capital around our DigitalBridge Partner core and credit strategy as well as co-invest.

Two, simplification. We’re going to finish our transformation with the deconsolidation of the operating segment and continue to delever our business. And lastly, portfolio performance. Continuing to invest in high-quality digital businesses, driving free cash flow through organic growth and investing in the best management teams in the digital infrastructure ecosystem. Taking a step back, I believe that these are really our control variables for 2023. These are the things that we can go out and execute. And my belief is, as we execute on these 3 initiatives, good things will happen at the company. And most importantly, good things will happen for you, our shareholders. With that, I want to thank you for listening to our earnings presentation this morning.

Now I’d like to turn the call back over to our operator to initiate our Q&A session. Operator?

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Q&A Session

Operator: . Our first question is from the line of Ric Prentiss with Raymond James.

Brent Penter: This is Brent on for Ric this morning. First question, you talked about M&A in the IM segment. With AMP deal done, what new swim lanes might a target fit into to expand your offering? You mentioned private equity. What else should we be thinking about there?

Marc Ganzi: It’s Marc, and thanks for tuning in. So I think we’ve been pretty prescriptive about that. I’ve made it very clear that digital private equity is a high priority of us. There are many firms that are in middle market, digital private equity that you’re investing in digital infrastructure and TMT and also software and SaaS models. We think there’s a couple of really good teams out there that we have a lot of respect for. We’re out talking to all of them just like we would be in our traditional investment management space. We talked to all the management teams. And so we’ve been spending the last year getting to know a couple of those management teams. And we think there’s a good opportunity to add that part of our IM business through an acquisition.

And that’s why we’ve been harvesting the cash so that we can be opportunistic. What we’ve also said is, I think I’ve also been pretty prescriptive about the importance of renewable energy and the ability to power digital infrastructure with renewable energy. We’ve seen that case study, full force at Switch, where we’re outperforming our leasing projections, our full year of leasing in ’22 exceeded our 3-year guidance, and customers want to be in data centers and they want to be around digital infrastructure that has renewable energy. So we’re spending a lot of time around thinking about how we can grow the InfraBridge platform and continue to add strength in the renewable space. So those are really my 2 areas of focus today is really private equity — digital private equity middle market and renewable energy.

We’re very focused, got a number of targets, and obviously, we have a guide in terms of what we think we’re going to do in M&A. We did well last year with the Wafra and AMP deals. And I think this management team, those that follow me know that we’ve got a pretty rich history in doing M&A. So our confidence and conviction level around that is pretty strong.

Brent Penter: Got it. And then on the DE guidance, what kind of carried interest is assumed in that guide? And is that sort of the difference between the upper end and lower end of the guide?

Marc Ganzi: Yes, I’ll defer it to Jacky on that.

Jacky Wu: Great. The biggest difference in the guide really in the range is driven by the fundraising range, but we have not assumed carried interest in our guidance. So that would be incremental upside to our numbers.

Brent Penter: Okay. And then Marc, you’ll have a lot of funds to deploy if you hit this guide. And then you also have some portfolio codes that might be nearing time to exit. So could you just give us an update on how you’re viewing M&A multiples right now globally, what looks attractive? What looks less attractive?