Q1 2022 DigitalBridge Group Inc Earnings Call
Greetings and welcome to the digital Bridge group first quarter 'twenty to 'twenty two earnings call.
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Question and answer session will follow the formal presentation.
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I'll have to turn the conference over to your host Severin Watch. Please go ahead.
Good morning, everyone and welcome to digital bridge's first quarter 2022 earnings conference call speaking on the call today from the company as Marc Ganzi, our CEO and Jackie will our CFO .
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, including the effect of the COVID-19 pandemic on those areas may be considered forward looking and.
Such statements involve a number of risks and uncertainties that could cause actual results to differ materially.
All of the information discussed on this call is as of today May five 2022, and digital bridge 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 most recent Form 10-K filed with the SEC and in our Form 10-Q for the quarter ended March 31.
2022.
Great.
So we're going to cover our standard quarterly agenda, Mark we'll start with highlights from the quarter Jacky will cover our financial results and then Mark will wrap up with how we're executing the digital play book in 2022, followed by Q&A.
We've made some great progress to R 22 goals already.
With some very compelling transactions.
So let's get started with.
With that I'll turn the call over to Marc Ganzi, our CEO Mark.
Thanks, Kevin that's exactly right, it's been a busy start to the year.
Already delivering on many of the key 2022 objectives.
In the first four months, we've announced a series of exciting transactions that.
That position us to deliver on and most importantly exceed our financial guidance.
While at the same time advancing important strategic goals, which we'll talk about today.
The deals that we've recently announced are centered around our ability to pair capital.
With our best ideas and the opportunities that we see across the digital infrastructure landscape.
At the same time, we are increasing.
Our shareholders and your exposure to the attractive economics of building and owning these highly sought after assets.
We'll talk about the progress today that we're making on first building a full stack digital infrastructure investor.
Second investing in high quality digital businesses.
And lastly, scaling our high performance operating platform.
Let's get started next slide please.
So the first important deal I want to cover today is the agreement we reached in April with our partners at Wassa to progress their investment to the corporate level.
When warfare first took a stake in our investment management business two years ago, we were managing through both the early stages of the Covid pandemic.
And a massive diversified to digital transformation of the company.
Their investment accelerated that process.
And now that we've gone completely digital it's time to consolidate 100% ownership back under digital bridge and.
And unify our relationship with them.
So that we have one set of investors focused on one business plan.
This is a deal many of our investors have asked us about.
How and when can you buyback the Walker stake.
A question rooted in the understanding that our digital investment platform is such a great business.
And why not it's growing quickly it's capital light and it's got great margins.
It was clear to us as we look to deploy the balance sheet capital. This was our highest and best use.
Okay.
It's a transaction that hits the Mark on three critical fronts for you our investors first it's immediately accretive to earnings.
Over $38 million in incremental run rate FRE in 2022 to you our digirad shareholders.
On its way to $60 million in a few years.
That's up 46% increase relative to our prior 22 guidance is 100% of the earnings not flow to <unk> shareholders.
Second.
100% ownership and digital bridge as I M platform is entirely essential to the future of the business.
We're deploying our balance sheet capital into high growth high return on invested capital high margin businesses that are growing organically at 20 plus percent.
And keep in mind the fees that we generate from our investment management balance sheet.
Our on average 10 year 11 year 12 year funds. These are long duration funds very similar to the leases that we signed on cell towers and data centers.
So the duration and the quality of these cash flows in the investment grade Counterparties that we work with are very much akin to what we do in our digital operating business.
And we're executing at a great price for such a high growth business around 20 times.
This is in line with our capital deployment targets.
It's a multiple that goes down to mid teens in a few years.
As we rapidly scale, our digital investment management platform, which I'll talk about today.
It is important to note. These multiples don't capture the value of the 31, 5% share.
The corporate performance fees that we now retain on future funds.
You would also know this is carey our carried interest.
We believe this will represent significant value to digit rich shareholders over time.
Finally simply.
Simplification.
This is the latest step that we've taken to make our business easier to analyze.
We are now a 100% owner of our digital eye on franchise, that's an easy metric for everyone to understand.
Bottom line we.
We emerge from this deal with higher earnings.
A simpler structure and greater exposure to our fastest growing digital investment management platform.
Before we move on to the next slide I want to take the opportunity to thank the entire team at Wassa, they've been exceptional partners and we will continue to be great partners as we enter the next phase of growth at digital bridge.
Next slide please.
So our next decision was to revert to a conventional C Corp, which we announced in connection with the wall for transaction.
Our REIT status was a question we felt like it needed resolution as we move forward and the compelling nature of the Watford transaction catalyzed our decision.
Highlighting the value of the additional strategic flexibility afforded by operating as a traditional sequel.
Ultimately, what I'm focused on doing what's right not what's readable.
As Jackie as noted we've always been pragmatic about our legacy REIT status.
And does it serve our strategy.
Most importantly does it serve our customers and our ability to execute on our businesses.
After careful analysis, we determined that the additional strategic flexibility of operating outside of a regulatory reconstructs is ultimately the best way for us to deliver long term shareholder value.
And with de Minimis tax implications estimated to range between $10 million to $60 million on an NPV basis over the next five years the decision was quite clear.
The change also highlights the significant Nols and capital loss carryforwards from legacy operations that will provide shelter for taxable income and our digital operating segment and our performance fees carried interest into the future.
As you know digital I am already operates as a taxable REIT subsidiary. So there was no change there.
We think this change at the end of the day. It makes a lot of sense first it removes uncertainty.
And it frees us up to execute transactions like warfare, and the A&P capital deal, which I'll talk about in the coming pages.
Next slide please.
While the Watford deal has always been a strategic transaction that we wanted to execute.
Our acquisition of A&P Capital's global infrastructure equity business was actually quite opportunistic.
The quick background here is.
As a combination of our strong mutual LP relationships that we had and.
In connectivity with the MP team that allowed us to execute what would be a highly accretive transaction that gives us day, one scale and a complementary middle market segment with a terrific management team.
In addition to that we picked up a great portfolio of existing investments with strong long term earnings and future growth potential.
As with Wassa I want to highlight the three key tenants to this transaction.
First we advanced our full stack I am strategy, adding.
Adding a value add franchise in the middle market, where you write checks between $100 million to $500 million, which are candidly too small for our flagship digital infrastructure equity strategies, where.
Where we are typically deploying between 500 and a $1 billion per equity check.
It's a space right for high return potential and with a refined digital plus strategy with lots of room for growth.
Their second $3 $4 billion Jif to fund is around 60% digital already and that ratio will grow over time.
When we have some great overlap LP relationships. We also had the privilege of getting to add new Lps to the mix, but we believe we'll be interested in our other offerings over time.
This was a great chance to continue to build new strong LP relationships on a global basis.
Second the transaction will be highly accretive.
We're adding $5 5 billion in VM and increasing our run rate FRE to our I M platform by $23 million on an annualized basis. This year.
Lifting pro forma earnings 20% above the midpoint of our prior guidance.
We've done this at an incredibly compelling valuation.
Up about eight four times FRE before any potential earn outs.
And cost synergies.
This is a great deal as I mentioned before driven by strong LP relationships and connectivity with the MP team, which is actually my third point.
This is a very high caliber plug and play team.
We're adding another 25 plus infrastructure professionals to our 100 plus strong global team that will be based out of the U K with a shared focus on generating long term returns for investors.
As most of you know, we recently announced the addition of Matt Evans, our head of Europe .
As some of you know was formerly at E&P capital.
And knows all of the members of the team and knows the assets.
This really helped us in assessing the opportunity and realizing this was not only a great portfolio.
A great team.
So great team, great economics, and a great portfolio that fits right into our full stack digital <unk> platform.
Next slide please.
Before we move on to cover some of the investment level deals we announced in digital this quarter I want to take a step back and put the warfare in A&P transactions into proper perspective.
When you consolidate these deals will be increased digital bridge shareholder earnings from our digital and platform by 74% since we laid out our guidance back in February which was already a beat and raise going from $82 million.
And at share fee related earnings to $143 million once these deals close.
That's frankly near the midpoint of our 2023 targets, which is about a year away and now all of this 100% flows to you our shareholders.
That's pretty stunning.
And when you factor in the attractive entry valuation of both deals at 16 times.
We believe we transacted at a highly accretive entry price.
For our shareholders.
Next slide please.
While we were busy on the corporate level executing these larger transactions. We've also announced some key investment level deals with a particular focus on advancing what we call our full stack strategy.
We've executed important investments across three of our new verticals core.
Credit and ventures.
Warehousing deals on the balance sheet to seed and highlight the kind of high quality companies and assets, we plan to invest in those strategies as we scale.
First telling it.
Here, we took advantage of the opportunity to create the first independent tower company in Belgium.
With an expansive nationwide footprint of over 3000 sites and lots of room for continued tenancy growth as they build their <unk> network.
It's a business that will have very predictable cash flows with high quality counterparties and long term contracts perfect for that initiative.
Second as ever stream.
We are in partnership with Canadian pension plan.
We invested $220 million and a term loan to support the growth of <unk> business only enterprise grade domestic fiber network.
This is exactly the kind of skill capital many growing digital infrastructure companies need and.
And we were well positioned to provide a value add credit solution.
Finally, Salina, where we let a $60 million series C round with participation from other tier one venture capital firms.
This is <unk> ventures inaugural investment and we're excited to extend our platform into high growth companies across emerging digital infrastructure technologies.
So Luna, which produces gear that specifically serves the <unk> ecosystem is exactly one of these companies.
We couldnt be more excited about partnering with the management team there and other tier one vcs as salone a builds out the next generation of indoor wireless networks.
It is important to note all three of these investments have been warehoused on our balance sheet highlight.
Highlighting another benefit of our new more flexible corporate structure.
We think seeding the next generation of scalable investment offerings is a great way to leverage our permanent capital.
Next slide please.
So to wrap up our Q1 highlights.
We've dropped the new core credit and venture investments into our full stack framework.
And even added A&P deal to our equity sleeve, where bolt on a middle market capability with slightly higher targeted returns in digital plus.
The goal as we've outlined before is to establish <unk> as a full stack digital infrastructure investor.
Owner and operator with the ability to go anywhere to invest operate and capitalize on the $400 billion annual global capex spend across our industry.
I believe this positions us uniquely at the intersection of supply and demand.
With the capability to raise and per capital with the right opportunity to generate strong risk adjusted returns for you our investors.
In fact, our ability to go anywhere globally to show up for customers and corporates is truly unique in our sector.
Something I'll talk more about in section three.
But for now I want to hand, the call over to my partner Jackie womb to take you through the financial results for the quarter. Thank you Jackie.
Thank you Mark and good morning, everyone. As a reminder, in addition to the release of our first quarter earnings we filed a supplemental financial report this morning, which is available within the shareholder section of our website.
Starting with our first quarter results on page 13, the company continues to see strong year over year growth driven by successful I am fundraising.
For the first quarter reported total consolidated revenues were $257 million, which represents a 17% increase from the same period last year.
Year over year growth was driven by our continued expansion in both AUM and fee AUM.
Net income was a loss of $262 million primarily.
<unk> as a result of $219 million of one time, non cash losses, including $133 million from the early extinguishment of the 2025 exchangeable notes and $91 million associated with the sale of the legacy healthcare portfolio.
Total company adjusted EBITDA was $20 million, which grew from $13 million in the same period last year, primarily driven by our successful fund raising in our high margin digital business.
<unk> and distributable earnings of approximately $2 million improved from a loss of $5 million last quarter and a loss of $10 million in the first quarter last year also driven by growth in our <unk> business.
Digital AUM was $47 billion in the first quarter, which grew by 45% from $32 billion in the same period last year.
Beginning next quarter, we plan to only focus on year over year result, as this is a better measure of our long term growth trends, while deemphasizing these quarter over quarter fluctuations associated with I am catch up fees and incentive fees.
Also as Mark discussed earlier, we signed two important transactions app at the end of the quarter. The first was the purchase of Walker share of our Iam business and the second was the acquisition of A&P Capital's global infrastructure equity business, which will significantly increase fee related earnings and.
At four new digital infrastructure portfolio companies to our I am platform.
We are excited to initiate a regular quarterly common dividend in the third quarter.
Recurring cash flows have turned positive in the first quarter and will accelerate following the pending whopper in A&P transactions.
And as we meet or exceed our guidance growth targets, we expect our common dividend per share to materially increase over time, while we continue to invest in high growth digital businesses.
The company is strong and healthy driven by our sector, leading asset light investment management business that generates high quality long term fee earnings and we plan to further optimize our capital structure in the near term using available liquidity.
Moving to page 14, consolidated core digital revenues were $247 million.
12% increase from the same period last year, driven by new <unk> fees.
As anticipated investment management revenues declined compared to the fourth quarter as the fourth quarter included $8 million of one time catch up fees alongside the final <unk> close and $6 million of incentive fees from our liquid products.
Looking at the right side of the page consolidated adjusted EBITDA was $111 million during the first quarter, which is a 10% increase from the same period last year also driven by new <unk> fees.
Turning to page 15, we have seen continued growth in our digital business, particularly in our high margin investment management business.
First quarter amounts shown on this page are pro forma for the pending acquisition of A&P Capital's global infrastructure equity platform.
We Additionally will own 100% of the Iam revenues and FRE following the acquisition of Walker share in the business.
Both transactions are highly accretive and in line with our promise to be disciplined deploying our capital into high growth digital businesses with a strong recurring yield profile.
Last year, our annualized fee revenues increased from $124 million to $235 million and FRE has increased from $70 million to $124 million.
Turning to page 16, the company has strong current liquidity of approximately $1 billion, we will deploy $718 million combined for our two pending acquisitions.
This capital deployment will be more than offset by over $1 $1 billion of net proceeds expected to be returned from previously warehouse investments to seed new investment management products, new lease pursue strategies and $500 million from the last remaining legacy investments.
As a result, we anticipate accumulating one $4 billion of liquidity to feel acquisitions and to further optimize our capital structure we.
We are very excited for the rest of 2022 as our fund raising an M&A pipeline continues to be robust and this liquidity will help us execute on this pipeline and accelerate our digital growth and with that I'd like to turn it back to mark. Thanks.
Thanks Jackie.
As I said earlier today about the attractive financial implications of the two transactions that we consummated in the last three weeks.
I wanted to really cover for you the strategic rationale and give you some more perspective.
On why the growth in our investment management platform, so seminal to our strategy.
First and foremost it is about accelerating and scaling our businesses that is fundamentally focused on a customer centric approach.
This is our ability to serve global technology and telco customers in ways that other digital infrastructure Reits and managers cannot.
They are operating at scale so.
So we need to operate at scale.
And by having an asset light model that enables us to go anywhere and deliver for customers and raise capital and execute.
As the flywheel on the right highlights investment management capital formation enables us to capitalize on new digital infrastructure opportunities, which creates a virtuous cycle that reinforces our ability first and foremost to serve customers.
They want to work with partners that can deliver.
And here is the magic of what we're doing today digital bridge, we deliver.
That is a hard fact, we talked about it in our last quarterly call over seven 8 billion of new construction happening in five different continents today.
So at.
At a corporate level, we're investing that time that energy, we're forming the capital to make sure that we have what we believe is the most capable global organization.
Built to meet those expectations the expectations of our customers.
We believe our asset like framework is by far the most efficient way to form capital to achieve these objectives.
Next slide please.
So how have we done this.
We've done it by being able to scale.
And to meet the size of the opportunity that sits in front of us in digital infrastructure.
And to get out on the battlefield and compete effectively against our digital peers.
It's really about leveraging our comparative advantages and I think you'll see it here very clearly first on the left hand of the slide we've had 64% CAGR growth over the last three years and our rapidly growing AUM business model.
This is what drives scale when.
When we first did the merger back in 2019, we're roughly at about $13 billion of digital assets under management.
At the end of this year will be north of $60 billion and digitally AUM.
That's the power of an asset light model.
It's leveraging our expertise in investing across this evolving ecosystem and doing it in a nimble way and executing.
These are the key differentiators that allow us to compete.
And wind consistently.
Growing much more quickly than our established digital infrastructure peers, you can see this on the right hand side look at the digital AGM rankings today.
We are vastly climbing the ladder.
And we've done it in a very short period of time.
That's tremendous growth and it's enabled by our ability once again to form capital consistently through this unique investment management platform.
Next slide please.
This growth.
We discussed in AUM has really enabled us to perform as a category leader.
And we've done so in just a short five years competing head to head with what we believe are some of the best established players in the world that have had a two to three decade head start.
Just looking at the slide here on the graph to your left.
74% EBIT growth.
Over the last three years in terms of our CAGR growth.
When you compare that against the leading digital rights in the world, which have averaged 7% and 16% you can see that this business model allows us to scale faster and quicker and grow quicker. This is the key the key and having an asset light digital infrastructure operating model is that we can grow quicker.
And it's enabled us to catch up and it's enabled us to operate at scale and compete on an effective level playing field against our digital infrastructure peers.
The scalability of our platform not only drives strong earnings for.
For digital bridge shareholders.
But our diversified portfolio of category meters is also outperforming down at the portfolio company level.
So when you look across two key business units that I know all institutional investors follow towers and data centers you can see we are delivering results.
Just look at the low right hand of the slide of this page we leased more web megawatts last year across the digital bridge portfolio companies than many of our largest peers. That's astonishing 290 megawatts across vantage scholar in Databank.
Impaired to what we think are three best in class publicly traded data Center REIT.
In the tower sector looking in the upper right hand corner.
30000 towers is where we ended at the end of last year.
That compares to five years ago, we had less than 3000 towers.
So we're scaling and we're able to go out and effectively compete compete in the build to suit market compete in the tower M&A market.
And this is what's really the success factor in the business model that we're delivering today for you our shareholders.
It's rooted in a capability that we have a highly scalable asset light I am platform that gives us the firepower to operate globally and execute locally.
This is the differentiation and where we're going with digital bridge today.
Next slide please.
So look I'm going to finish where I started.
Highlighting our key objectives I think all of you know I would like to clearly communicate with all of you about where we're going this year first number one we're building a full stack digital infrastructure investor.
We've made great progress during the quarter with new investments in credit core and ventures and all of it is on track that's the key.
Second I want to meet and exceed our fundraising and operational targets.
The warfare in A&P transactions put us firmly on a path to exceed our financial guidance.
And we continue to see a robust fundraising environment.
And look this sets us up to deliver on our organic growth objectives as we form capital around these new strategies that we've launched this year.
I'm looking forward to updating you in the next quarter on our progress here as we continue to exceed your expectations.
Third we're going to continue to accelerate and scale our high performance asset light platform as I've. Just highlighted this is central in our ability to continue to grow rapidly compete and win by leveraging our position as the partner of choice to institutional capital.
On the digital infrastructure investment opportunity.
And that really is the key this is a massive opportunity.
So there you have our progress against our key objectives for the year as we remain focused on building a high growth digital infrastructure platform that serves customers.
And generates most importantly strong returns for you our investors and our shareholders.
With that I want to thank you for listening to earnings presentation. This morning, I'd like to turn the call back over to the operator to initiate the Q&A session.
Yes.
Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question Youre welcome to play Star and then one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue you.
You May press Star and then two if you would like to move your question from the queue.
All participants using speaker equipment, it may be necessary to pick up your handset before pressing this don't Keith.
One moment, please while we poll.
Two questions.
Our first question is from Michael <unk> of Cowen. Please go ahead.
Alright, thanks for taking the questions.
Two if I may 1st.
First question is.
You did some great transactions in terms of <unk> and <unk>.
And really on the call we emphasized the capital light approach going forward. So my question for you is as we look forward and you think about the balance further M&A between the investment management platform and the operating business. How should we think about that balance and also as part of that how should we think of.
Your outstanding operating guidance, and then I have a follow up.
Yes, Thanks, Mike Good morning.
And I appreciate your attention and.
All four questions. So first on the allocation of capital.
I think thats kind of where we need to go with this question is how do we prioritize where we put the money to work and we did a lot of hard work last year getting ourselves into a strong liquidity position by.
By the work that Jackie and the team did and so the reward for that is we get to be opportunistic when we get to put that capital to work. We think we can generate the best earnings and generate the fastest amount of.
So.
On that basis in this quarter.
We found that there were two opportunistic trades in <unk> and in A&P that really can help us accelerate our objectives on one half of the side of the ledger, which is digital.
Secondly, as we think about where we're putting capital to work in our digital operating business in this quarter, we didn't find anything in the Hyperscale front that fit vantage yield cos objectives, and our return things are still priced to perfection in Hyperscale, we did deploy capital at Databank.
The bank had a really strong quarter.
Beating its budget by a little over one 4% in terms of EBITDA growth very strong bookings and further to that the biggest pipeline we've ever had in the company's history with over $28 million of leasing in the backlog and roughly about a dozen new construction projects, where we're expanding capacity.
Across our core markets so.
Both.
Vantage and data bank have continued to perform at our expectations I would say.
Exactly where we've told you would be.
And we see a lot of green shoots in data bank, and we see more hyperscale opportunities that advantage yieldco.
The rest of the year and just in this quarter. There was nothing that manifested itself that made any sense from our perspective.
But remember at the end of the day, we are the stewards of the balance sheet and my objective is to achieve the highest returns on invested capital for you and for every shareholder.
And on that basis, A&P, and Watford delivered that outcome.
So look I think that.
In addition to that Youre going to see us be incredibly hawkish with how we use the balance sheet.
We have the envy of having a strong balance sheet.
Our strong liquidity position as you saw in todays presentation.
We're going to get a lot of capital coming back to the balance sheet throughout the course of the year.
And so we want to maintain that high liquidity maintain that flexibility.
Obviously, we've got some preferreds that we want to keep our eye on and think about redeeming.
Never rule out share buybacks and measuring that against the total return on capital and of course, we're putting the dividend back on in the third quarter. So these are all priorities on how we're going to use the cash we're going to be incredibly thoughtful and intelligent about it as we've always been I think you've always heard Jackie and I'll be incredibly responsible with the <unk>.
And I think this quarter demonstrates that and we've executed exactly how we've told you we would.
Perfect. Thank you for that and your second your second question, Mike I don't think I answered your second question run it back again sorry.
Go ahead, yes, well on the what I was asking is.
Have outstanding.
Operating digital operating revenue EBITDA guidance, which assumes some M&A just wondering how to think about that that was the second part of the question.
But then I do have a separate question and maybe I can sneak it in here.
Look we've seen interest rates move higher over the last years over the last year and we've seen shifts in the macro environment. What I'm wondering is from your perspective, when we think about data center deals.
How has your view of.
What you can do on a LTV basis, or a net debt to EBITDA basis change over the last year and then how have the rates that you could get for deals on both Colo and Hyperscale changed I know theres a lot in there, but I would really appreciate that color.
Yes, let me, let me try to unpack the corporate story and then we can go down to the asset level story.
On a corporate basis.
We were very clear last year, why we wanted to securitize.
Our cash flows from our investment management business.
First and foremost we saw a window where interest rates were low.
Second we found a structure, where we could fixed.
Our cost of debt, which I've always been very clear with you and our investors that that is a key tenet in how I built great companies over last 27 years using the securitization marketplace to have 30 year backed notes and securities.
Really quantify the capital corporate structure, which we've done very thoughtfully.
And we will continue to do that right now we're in a window where interest rates and risk.
Moving up and in turn you are finding that credit is tightening as it should.
And stories that are good and stories that are understood by the rating agencies are going to get financed where they have strong cash flows and investment grade counterparties and marginal stories are not going to get financed and we're already seeing that play out in this quarter.
I think as you move down into the portfolio company realm, and you talk about the finance ability of co.
Colo and edge in Hyperscale.
What we've seen at least from our side and our portfolio of companies is we've been able to get financing done in the quarter.
So if you look across all of our businesses once again using that long term 30 year see MBS and ABS structures, we've been locked down our debt and we did that last year. We were busy last year at the portfolio company level locking down our capital structure.
Once again, I said that last year, if you listen carefully to my calls I was very focused on locking down long term capital at historically low rates on 30 year tenured see MBS and ABS, we did that a data bank and we did that advantage and.
And I'm not going to tell you we were prophetic in that but we do have a sense of capital markets and we have a sense of ebb and flow. This is a team that's been doing this for 28 years, so that was not accidental.
I want to be clear we plan for these situations. We felt like interest rates were going to move last year, we felt like that the world was a challenging place just given the amount of free money that was pumped into the system.
Saw inflation a year ago, we told you that on calls four quarters ago, we were seeing inflation and now it's all manifesting itself and some people are surprised I'm not surprised.
Once again, the battle scars of the Dot com crash, and the mortgage crisis, where where Jackie and our C suite leaders and we let our companies through those crises.
This is a management team that candidly has more depth and operating experience and our digital REIT peers, we've been doing this longer so being through those cycles and having great management that understands how to prepare for it and prepare our portfolio companies in our investment management business, making sure that those businesses are solid in a good place.
What we do it's part of our investment framework here so.
I feel like we're in a great position at.
At the corporate level, we've got cash we've got flexibility, we can be patient, we're going to continue to be patient and then down at the portfolio company level. Once again all of our businesses are well capitalized most of our debt maturities are on these 30 year stacks that we talked about most of those loans were originated in 2000 22021 and a few.
We did a little bit of financings in the beginning of 2022.
<unk> being battle tested being prepared having what we think is best in class leadership when.
When we go into these choppy markets and you move into the unknown you want to be with Great management teams.
To be with the team that understands how to operate in this space.
<unk> capital.
And once you protected your capital how do you grow how do you go out and play offense.
I'm actually I don't want to sound too jubilant about it but Jackie and seven were very excited about what's in front of US we are built for moments like this.
And hopefully shareholders that invest with us.
And our track record and understand how we've been able to build great companies through difficult moments.
From joining that journey with us.
So we're seeing opportunity, we see a lot of opportunity and the fact that we were able to form a lot of capital in the last two to three quarters is advantage digital bridge.
Because when you look at the capital structure some of these public companies.
And their ability to generate liquidity in their ability to go out and raise capital to go do Greenfield and brownfield in a market like this that becomes constrained.
We are unconstrained. This was the whole purpose of our presentation today as having the ability to go anywhere having the capital to go compete and most importantly, having the local teams to execute while others may be conservative and need to pull back that's not something we need to do here at digital but it starts with a long winded answer but I'm.
I'm really this is a key focus of this quarter in our presentation today, Mike and just to answer your guidance question I'll break it up into two areas.
Obviously, both <unk> and the Whopper transaction, we guided and said to the street.
In our releases that those are additive to our guidance. So we expect 2022.
On the digital side, we will meet or exceed our guidance. In addition to the overlay for both E&P and Laura.
Digital operating we did not guide to M&A.
'twenty two just because as we discussed never put into diesel.
Signed up and qualified.
In terms of our longer term guidance.
Of M&A.
What we have said and what <unk> guided is that we still have $1 $4 billion of liquidity in the near term as we form new new.
New products and strategies and the return of capital back to the balance sheet, but warehouse opportunities as well as remaining.
Legacy assets that will continue to monetize so there'll be plenty of firepower for us to continue to deploy.
Still lump digital infrastructure businesses in general.
And we will go and acquire businesses to the degree the pricing the return makes sense for our shareholders.
Awesome guys really appreciate that thanks.
Our pleasure.
Our next question is from Jade Rahmani of <unk>. Please go ahead.
Thank you very much considering the evolving macroeconomic environment. Firstly, how do you manage to that in terms of business priorities. Secondly, did any cyclical factors play into the REIT decision.
Let's take the second question first good morning, Jade how are you.
I think on the on the re question I don't see it as a cyclical situation. What we saw with the reach aid was that we had one business unit that was growing a lot faster than the other business units and we've been very clear with everyone about that digital operating digitally and ultimately.
It's a tax declaration at the end of the day.
And for Us.
Business builders.
And the ability to be constrained by a tax declaration versus not it was a pretty easy decision actually.
We're seeing more opportunity to foreign capital in the private market side versus the digital operating business, which takes capital from the public balance sheet and.
And further to that when you look at the returns again returns on invested capital. If you look at what we did with <unk>. We look at what we do to the A&P those were vastly superior to the returns that we're seeing and opportunities that we could have put on the balance sheet. When you look around the world and you see assets trading at 29 30, we've seen some tower deals trade at 40 times here in the U.
That makes no sense to me at all.
When I can buy long term earnings that are by nature.
Cash flows that have a duration of five to 10 years and I can buy that on a blended multiple at 16 times and grow it and bring that multiple although were down 11 to 12 times within a three year time period, that's exactly what I believe investors pay me to do which is go out and create the best long term sustainable earnings with the best returns so.
When we deployed that capital.
For the water transaction, we deployed the capital for E&P, we're getting returns north of 20%.
That's easier rhythmic for Jackie and I explained to you guys.
So thats the decision we made in this quarter that was the capital allocation decision that was in front of us and we took it there were other capital allocation decisions James that came to the investment Committee.
We chose to not do them.
In terms of what we put on balance sheet and so that's really really key here I think the other thing is at the end of the day.
The REIT versus non REIT situation as we as we mentioned in the earnings release Youll see Theres about 50.
$50 million tax leakage over the next five years Thats Minimis right when you compare that to how fast.
We're growing in an unconstrained business model when you look at that 74% EBIT growth.
It's where investors want to be we believe that's where investors want me I mean, theyre going to vote with their wallets today and over the next couple of quarters, where they want to invest in digital infrastructure.
Our appeal to them is in this environment.
As you pointed out Jade.
The cyclicals are tough right you've got rising interest rates, you got rising inflation, you've got stock market selling off of our public competitors being somewhat liquidity constrained, we like our model where were a little bit more asset light, we're more nimble and we're not constrained.
And the key to this is really simple James I've been doing this once again for 28 years the ability to serve customers.
Is the core tenant of this company.
We are built to serve our customers and the ability to have capital and the ability to go anywhere for them.
That is a concept of going to keep driving home to you into every one of our shareholders.
That is our advantage that's our competitive advantage and if we can keep showing up for our customers on a global basis.
Lynn.
We get more at bats, we get more bookings, we get more Lisa and we grow faster.
And it's the fact the numbers are just startlingly clear that we grow faster right now than our public peers and its the model and its the decisions. This management team has made.
Certainly in this quarter by moving to a C Corp does give us more flexibility to go do that and show up for customers and we think over time.
And remember investing in digital infrastructure is not a quarter to quarter investment we believe over the next two three and five years.
By investing with US. This is the way you invest in digital infrastructure. Today. This is the future of where investors shouldn't want to be.
Okay, and with respect to cyclicality and how you manage the business or how the business would be impacted in the downturn.
Clearly the investment management baseline fees.
Be positive also the sector has lots of countercyclical attributes as demand for digital infrastructure is a secular trend, but what would be the various.
Things that you're focused on.
Yes, so thats a great question, so getting into the micro.
We've got 26 companies around the world, we are communicating with those companies two or three times a week.
Very good sense of our dashboards and our Kpis and here are the things that matter today, Jamie one construction costs.
Are we on budget are we above budget and.
And I will tell you that by and large given inflation and given the cost of goods sold.
We're actually finding that construction costs have not deviating that materially from our business plans.
So a material deviation would be something for me greater than 3% to 4% and we're just not seeing that across all of our business is now Jade Theres certainly outliers.
Manager of $50 billion portfolio, youre going to find that certain regions and certain management teams are better at controlling costs than others, but by and large we feel like on the seven plus billion of Greenfield Capex, we're going to put out. This year, we think within a 300 to 400 basis points standard deviation, we will stay within those parameters. So I am not that can see.
That sort of concerned about construction costs I'll tell you, where I am concerned I am concerned about labor.
And two things are happening in the labor market that.
I just came back from a conference in Los Angeles with.
Sat on a panel with about another 30, Ceos and a common theme in not just digital infrastructure Z as Jade, but global Ceos, everyone is saying the same thing right. The cost of labor has skyrocketed the competition for labor is intense.
How you retain and Incent employees to stay is harder than ever but here's the real challenge is getting people to come to work.
It's an absolute phenomenon that's happening across all sectors. Good news for US is our employees are showing up to work and theyre doing the work.
But where do you feel that pinch jade as you feel it on the front lines of construction so.
People to climb towers folks that do micro trenching for fiber.
Datacenter engineers I mean these are the most coveted jobs in digital infrastructure today.
Our wages have gone up as you would expect depending on the portfolio company anywhere from 3% to 10%. It's a competitive market. We are retaining our employees. We're losing very few people generally speaking morale is strong and our portfolio companies, but they are working hard and they're overworked theres a lot of infrastructure to be built in.
Our number one mission is to keep our employees happy keep them mentally satisfying and make sure that they are paid and make sure. They're not overworked. These are sort of key things that I think our Ceos are focused on today. So labor is definitely one of the consequences of what's happening in terms of the cyclicality that you mentioned we talked to.
Interest rates earlier interest rates are rising.
Liquidity is disappearing out of the system, great SaaS, our portfolio companies have access to capital. So we are not capital constrained.
All the financings that we wanted to get done in this quarter got done we had a couple of really material financings that got done down at the portfolio company level. So access to capital for digital rich companies does not constrained. So that's good news our cost of borrowing is going up as you would imagine so new financings certainly jr impacted previous financings, where we've securitized.
Long term bonds or indentures have not been impacted because I made a conscious decision over the last two to three years to fix our cost of debt down at our portfolio company <unk> that was a conscious decision that we made based on the facts now here's the good news the silver lining is bookings are up we.
We had a very strong quarter in terms of new bookings.
Highlighted that in our presentation today that we feel like we're winning in terms of new bookings are winning new Bts orders I will tell you rents antidote only around the globe were going up.
We've heard that across all of our portfolio companies, so whether it's a colo whether its a build to suit.
We are being able to reprice.
The rental space for our properties on a global basis, and we're seeing rental rates increase anywhere from the low side of 3% to 4% to the high side of 10% to 15% depending on the asset class.
As inflation has creeped up we've been able to reset new rental rates for customers that are entering our facilities and for customers that were building for them. In addition to that as you know our leases have fixed escalators and a big majority of our revenues on an international basis are all CPI index, mostly all CPI index. So.
As a global business that operates in Asia, Europe , Latin America, and obviously here in North America, we are inflation protected.
Most of our leases have expense reimbursement pass throughs, so we're not bearing the burden.
Of high utility costs at the property level or other types of costs that are pass throughs from a cam basis. So we feel like this business.
The <unk> business in the <unk> portfolio companies are really well situated to take advantage of the market conditions that are coming we're once again I'm not sort of giving you a jubilant picture, but I think Jackie and I feel really good about how we're situated and I think as long as we continue to see bookings growth, which we're seeing across.
All of our portfolio companies.
Remain generally constructive and very positive setting into this turbulent environment.
Thanks, very much for taking the questions I appreciate it.
Thanks, Jason talk to you soon.
Our next question is from Dan <unk> of B Riley. Please go ahead.
Yes. Good morning, guys. Thanks for taking my questions and congrats on a very very busy quarter.
First one from me wanted to dig in a little on potential synergies with the A&P acquisition.
If I just do the math.
The management fee.
<unk> margin it seems like the margin there is pretty low.
So I guess any any ability to sort of get that more in line with where you guys were at 60% margin.
Upside to FRE in the multiple that you acquired.
What's that.
Yeah. Thanks, Dan appreciate it so first and foremost.
We the numbers that we published to you the street today, where pre synergies.
So we didn't want to serve up a synergy number and say.
We're going to deliver a deal at seven times or six times, we just don't do that that's not Jackie and I's DNA. We tend to give you kind of what is the base case and then we like to go out and exceed your expectations. That's generally our prevailing attitude about these thing I'll, let Jackie talk about the deal level economics as he drove the deal with Ben Jenkins, but generally speaking.
We feel there is improvement and you want to talk about the improvement there Jacky yes.
Boston New revenue, yes sure.
We're obviously very excited about the transaction, Ben and I and Mark.
<unk> equity platform was a little under scale, obviously with just a couple of funds.
Underneath our belt, albeit good funds.
Now, we can plug and play into our back office, and our scalable and extensible platform on the <unk> side.
To be able to service both back office as well as other support functions like investment management et cetera to be able to scale that platform. So youll see the guidance in terms of the overlay of our A&P is showing FRE margin sub 40% you should expect that over time.
And relatively short time for us to.
Accreted up towards our margin levels of closer to 60%.
Great. Thanks, and then another one for me you guys have sort of been.
Willing to be patient with the bright spire shares.
I guess, there's a lot of moving parts on the cash with the capital tied up in the warehouse vehicles and capital needed to support these acquisitions.
Is there anything to think that.
It's sort of kind of force your hand, a little bit.
So those shares just to meet the acquisitions or do you feel like Youre still comfortable even if you were to put those to the side for the next cut.
Quarters that there is no worries there about sort of meeting the acquisition.
Cash needed.
No I think our liquidity is in great shape actually.
Yes.
We've warehoused a couple of transactions, which we actually haven't we haven't even closed on those and put the cash out.
So our actual cash position as of today may five is actually quite strong.
We've got a closing coming up with Walker and a couple of weeks the.
The A&P transaction has some regulatory review that will take.
On the magnitude of short side of three months, maybe as long as six months because of Aussie regulators. So that will take a little bit of time with warehouse, the telenet transaction, which doesn't close for a couple more months. So our liquidity position. Once again is from a position of strength.
Commentary on bright spar, which I'll, let Jackie give his views.
We continue to have strong conviction and confidence around what Mike Massey and the team are doing the shares have traded a little bit below of where we think ultimately the value inherent in the businesses.
But I think we continue to be very constructive on that business I don't know your thoughts Jack.
Mike and his team are just doing fantastic.
The turnaround the heat and implemented a.
Dividend yield of 9% and rising.
In our opinion.
He is doing great work and we're not going to be forced our hand, nothing is going to force our hand to be able to say we have to sell these things.
Fund something else so.
Our perspective is we will do it constructively with Mike and the team and and what makes sense for him and other shareholders of bright spire, and we will be responsible sellers period.
But we have all the funding and liquidity, we need to do the plan that we want to do with digital infrastructure.
Awesome and then last one for me just.
You've acquired a bunch of FRE here over the last couple of weeks.
I mean can you maybe quantify how much increase capacity you have to raise capital in the securitized markets and then obviously that would add to the firepower you laid out on slide 16.
So I guess.
How top of mind, taking those cross sell because a good chunk of them are callable now and then.
The rest of them should be callable over the course of this year.
Yes sure.
First of all first and foremost, we've always had digital infrastructure acquisitions, and seeding new funds and products.
The accelerated growth both in IMS operating is is the best and highest use of cash. So we have done that we will continue to do that when that capital comes back in.
The new strategies are realized and that capital comes back to the balance sheet.
Certainly that's fair game for us to go and redeem the preferred.
So long as we don't see another higher and better use of capital or digital infrastructure for our shareholders. The way we kind of look at is the preferreds hop back coupon in that 7% range bright spire. We just talked about has a yield of 9%.
We've got excess cash on hand.
<unk>.
And there is no digital infrastructure businesses immediately for us to go and seeding new products go and acquire until our balance sheet. We will go in quickly redeem those things where appropriate.
Awesome guys well I appreciate you taking my questions I'll turn it over and best of luck.
Thank you.
Our next question is from Jonathan Atkin of RBC. Please go ahead.
Thanks, So I think you talked to portions of this but maybe just to put a finer point.
Given our higher debt financing costs.
How does that kind of affect your.
When it thinks about putting putting leverage on acquisitions or in the securitization market, how does that affect unlevered return expectations and then on the.
A&P infra can you talk a little bit about the.
The horizon for I guess JF, one that you referenced.
Are there any kind of potential tie ins with companies like data bank and given given what you've just bought thanks.
Sure Good morning, Jonathan and thank you for participating.
Let's start with the latter and then maybe go to the first question.
I think as it relates to A&P Jif, <unk> and jiff to two two sizable portfolios Jif, one was already in the process of being wound down. So the orderly disposition of that portfolio will continue we don't see any change in the personnel and we don't see any change in the strategy.
And so those assets for an orderly wind down would be over the next two years to four years.
On <unk>, two which is a relatively new fund, where we have incremental firepower and we've got businesses that are growing.
There may be some monetization over the next two to three years, but candidly our focus is to grow that portfolio.
Overlay, our investment framework sort of the digital rich way of how we create alpha through back office, it opportunistic financings Greenfield brownfield leveraging our customer logos.
And bringing our human capital to bear I think this is a model Jonathan you've gotten to know pretty well over the last two decades.
Injecting some of our DNA.
And our strategy into that portfolio is really important.
And Theres a lot of synergies.
You hit the nail right on the head I mean weather for example in the airports, just bringing <unk> technology to those airports and creating an opportunity to create new lines of income by using our digital expertise.
Focusing on the renewables team at A&P, where they've got a great advantage there and there is an opportunity to continue to invest in de carbonization, which is so important to me I have highlighted that for the last two years. That's a big part of why we did this A&P transaction and then the digital logos that they have are incredibly strong digital logos that or exceed.
Their expectations in terms of growth there on their business plan, there's opportunity to grow further and remember in A&P, Jonathan the average check size and just wanted to give to us between $220 million and $280 million. The average check size at Digirad partners. One in distribution partners too is between 800 $900 million. So these are different.
Business models. They are playing in different categories that are in the middle market infrastructure, and we're doing big Bulge infrastructure. So this is really great for us because we werent penetrating that middle market digital infrastructure part of the asset class a lot of opportunities would come through our funnel and we'd have to say no because the check size is too small that was the constraint now we're unconstrained where play.
And that middle market space, and we're finding there's a lot of opportunity a lot of synergies there so really.
Cited about the opportunity to unlock value.
As Jackie said earlier in the E&P platform creates the synergies unlock the value.
Inject or DNA and then most importantly, bring all of our customer relationships in banking relationships and balance sheet relationships to bear on the jif, one in <unk> portfolio, and then stabilize that platform and grow it.
There's a lot of opportunity for growth there and what we call our digital plus strategy. So.
Now your first question, which is really important.
Which is how do we think about capital markets. How do we think about debt financing in new deals were doing not prospective deals. So in terms of new deals that are coming through investment committee today I would say there are three things that we talk about and have been talking about now for the better part of nine months, one we're taking lower.
Levels of leverage on assets. So we're underwriting to lower Levered returns why we think this is an environment, where you don't stress. This is not an environment, where you've taken incremental risk. It's a risk off environment. So what youre seeing is a lot of prudence in a lot of care around the capital structure and new investments in new platforms.
Second we've recalibrated our models.
Similar to the discussions Jonathan you and I used to have in early 2000, and the same conversations you and I had in 2008 and 2009, which is we have spreads moving up we have base rates moving.
You'd have to take a five and 10 year view on that curve and so thats. What we have done once again, we did that two quarters ago. We were already moving spreads up we're already moving base rates up and on that basis, you get to different outcomes, which is you get to lower returns.
That's really important being prepared being ready to accept a lower return.
Underwriting higher spreads underwriting higher base rates lower leverage and in turn lowering exit multiples and models I've never been a big.
Put a 25 exit multiple in the model to make the returns work Thats. We think other people do that we don't do that we've generally haven't changed our exit multiples around here for 20 plus years.
Once again for you Jonathan Ashland as a broken record because you have been around for a long time.
We haven't moved exit multiples precipitously and we won't because they were already pretty conservative. So this is about having a framework.
And about having an investment framework that's been in place for multiple decades.
Literally have not changed the way that we underwrite deals in 20 years, we have an asset test we are a business linzess those of you that nobody really well have heard the speech for a long time.
Underwrite the assets and then you layer in the business plan, which is around growth, which is around churn, which is around interest rates total leverage levels.
Leasing growth Pts growth M&A growth and then ultimately the exit multiples. This is a team that is incredibly surgical about how we look at digital infrastructure.
We've been doing it so long this was not a surprise to us this environment does not surprise us.
This is an environment, where we thrive we don't survive make no mistake, we're going to go out and we are going to thrive in this environment much the way we did in the dot com crash much in the way we didn't know eight nine once again, we feel very good about where we are and we know exactly where to go and what to do there is no mystery about the.
Environment, we're selling into.
Great. Thank you very much.
Thanks, Jonathan.
Soon.
Our next question is from Richard <unk> of Jpmorgan. Please go ahead.
Great.
The follow up with the deals in digital I am.
Does it make sense to keep the digital operating.
As part of the overall company or does it make more sense to maybe spin it off.
Or is that just right now a part of the opportunities in the operating side.
That could change over the next 12 18 months or longer.
Well look I don't I don't think the operating environment changes the opportunity set.
We haven't changed our business plan, we haven't changed our strategy.
Good businesses are built to respond to any cyclical nature of what happens in an economy.
As I said earlier to Jonathan we're built for investing in an environment like this.
We really don't have a problem investing in a in a market like this because we've been through it and when you've been through it and you understand the consequences of interest rates and inflation higher construction costs higher wages.
Higher growth, maybe higher lease rates, maybe more churn.
We understand how to.
Navigate these waters.
I think what you saw in the first quarter was us being opportunistic.
By buying out the wall for stake in by buying A&P. It means that we believe we can continue to form a lot of capital and we believe if we form that capital there'll be enormous opportunity and so on that basis.
We are built to scale.
Everything that we've talked about today is building to scale in this asset light model, where we've invested and I am and we're scaling that part of the business. It enables us to grow and grow faster.
The key.
That wasn't clear in the presentation today I'm going to be banging on that trend for the next two to three quarters and youre going to see it in the numbers youre going to see it in our asset scaling youre going to see it in our total capital raised youre going to see it in our <unk> growth and we're going to continue to build and grow.
At the highest levels of this company Theres, one tenant and there is one tenant only which is we're built to serve customers.
And so the best way in an environment like this to go out and respond to opportunities and customer needs is to continue to foreign capital and the ability to go anywhere where a customer wants you to take them provided you get the right risk adjusted returns we talked about that with with the previous analyst, Jonathan which is there's just a bit of a recalibration.
We recalibrate your models right you accept new realities, you accept higher interest rates you accept higher construction cost you accept higher wages, you accept lower exit multiples, but nothing changes we wake up every day go to work. We know we're doing we've got a big pipeline and execute on and we have the capital to do it so.
It's just a slight nuance right, it's not a pivot it's not a change in our operations, it's not a change in our strategy, it's just accepting new realities.
And then underwriting to those new realities and Thats. What you hear this team is prepared to do and we are.
We're very well prepared to do that I hope that comes through today in our in our commentary in our presentation.
And then on the digital I emphasize I guess there are startup costs for new strategies that you pointed out are broken out in the supplemental.
Are you kind of at scale now and these costs will fall off or should we expect these costs to kind of continue and if so at what level for how long.
Sure, we would expect them to already be at scale. So we've been we're excited about them and once theyre finalized in quantity strategy when it comes to fruition.
Capital of that we've gone and invested in warehousing the balance of it will come back to the balance sheet and these investment professionals will now run in and we'll be able to grow on top of that we're excited.
Great. Thank you.
Our next question is from Rick Prentiss of Raymond James. Please go ahead.
Thanks, Good morning, everybody.
Correct Okay.
Okay.
Busy quarter for you guys in post quarter, a busy day for us I wanted to ask two questions.
First obviously.
Obviously simplify the store even further with the Walter transaction I appreciate that and the flexibility. It gives you.
A question, we get a lot of times from investors is now that you're simplifying the story more and more.
Bottom line for US what do you think the most important numbers or metrics for investors to look at to monitor your progress and how to value of the company. What you do to manage the company's first question.
Yeah, Jack and I are looking at the Rosemont I think the simplest metric is always EBITDA in FRE rate and then ultimately we'll be distributable earnings and so I think when we think about that.
The top of the pyramid will be EBITDA. The next level will be FRE FRE drives EBITDA and then ultimately Rick it's back to the basics right earnings per share.
What are we delivering for you returning the dividend back on in the third quarter. We think we're building a very high growth.
High performing organization that is going to deliver the fastest revenue growth EBIT growth, that's fueled by FRE and that ultimately will be strong distributable earnings for our shareholders and Jackie has been awesome. At this he has done a great job getting us to back to cash flow positive.
You saw the <unk> number for this quarter.
And we're going to continue to drive that and continue to be more free cash flow positive on a Jack if you want to comment on that but you and I share that passion for profitability and returning earnings back to our shareholders.
And as we fund raise more and realize the rest of the year guidance and beyond for our certainly E laminate fundraising.
Add that to the $23 million that we're acquiring from A&P in the $38 million that we get back from Wausau.
The earnings per share and you can see is goldman accelerated pretty substantially in the very near term.
Obviously per share is an important comment there you guys have touched on a couple of times, including slide 16 potential not just with dividends with share repurchase help us understand how you think about leverage share repurchases do you need an authorized program would you have to do a <unk> type plan because let's face. It you guys are always active and busy not sure what kind of.
Blackout dates you would have if you if you didn't put something like that in place, but talk to us a little bit about what the share buyback where it might be as we see opportunity in the stock price I assume you guys do too.
Yes, sure. So we highlighted to you guys that the dividend will be turned on in the third quarter, you should expect that as we get closer to that date that we will form a program with our board and more to come there don't want to highlight exactly which one but there will be one that would be just.
Broad based and recurring one that works for our business.
And adequately.
Optimizing the allocation of capital between value back to shareholders by investing back into digital infrastructure business itself first and foremost as we love our sector will continue to invest in digital infrastructure.
But to the degree it makes sense and we will balance that with the value back to shareholders and optimizing our capital structure.
Great. Thanks, guys.
Right.
Thanks, Rick.
Ladies and gentlemen that concludes the question and answer session I would like to turn the call back to Marc Ganzi for any closing remarks remarks.
Well. Thank you everyone. We appreciate your interest your time your attention and to our shareholders. We appreciate your support.
These are.
In some respects challenging times.
But as I said earlier. This is a team that has built for those these types of moments.
Jackie and myself and the entire team here.
Main incredibly focused and excited about the opportunities that sit in front of US. We encourage you to spend more time with us over the coming weeks by all means reach out to your sales team to get access to us sovereign and myself and Jackie always remain open to engaging with our shareholders.
Robust dialogue about where we're going and the exciting growth that the company. So with that I'll conclude the quarterly call today. Thank you again for your time and your interest in digital bridge take care.
Ladies and gentlemen, this concludes today's call. Thank you for joining US you may now disconnect your lines.