BlackRock (BLK) 13 Jan 232022 Q4 Earnings call transcript

Good morning. My name is Keren, and I will be your conference facilitator today. Today's call is being recorded. At this time, I would like to welcome everyone to the BlackRock Incorporated Fourth Quarter 2022 Earnings Teleconference.

Our host for today's call will be Chairman and Chief Executive Officer, Laurence D. Gary Officer, Financial Chief S. Fink; S. Shedlin; President, Robert Kapito; and Counsel, Christopher General J. Meade. been have to placed prevent lines any mute on All background noise. After a question-and-answer there will remarks, the period. speaker's be [Operator Instructions]

begin Thank conference. you Mr. may you, Meade, your

Chris Meade, Good morning, everyone. the Counsel of General BlackRock. I'm

statements. remind your like of we fact results BlackRock's attention a to Before make during forward-looking of may, call, that differ actual to the begin, the you of from we statements. may number I'd course this We these course, call that

know, filed factors which may BlackRock has you assumes was and not some what cause of no SEC, As with the BlackRock does from undertake BlackRock reports results say materially of that to statements. to today. duty forward-looking we update the differ the any

I'll turn Gary. to that, over it with So

to morning my quarter and Thanks, and It's present for Year XXXX. New Happy the everyone. results Good full fourth to pleasure Chris. year

performance I it our over to Larry, review I'll results. and financial Before business turn

I as-adjusted release earnings our While adjusted results. our results, discloses focusing GAAP and primarily on as financial will both be

will to reminder, as As of XXXX, current updated referenced of we the financial and this quarter results financials. income. first definitions comparisons on call in operating quarter Year-over-year operating our net these income, adjusted recast beginning margin relate a

in we history, serving have business BlackRock's to Throughout long-term consistently our and environments. a commitment invested focus with clients market across

into integrated to differentiated capabilities as markets, culture outsourced private distinct industry-leading and areas One solutions model ETFs, established And for have value such in technology. we positions clients. a We have high-growth leadership BlackRock create and proposition and our business

to most market turned world more around in resilient XXXX. years, XX at organically we environments assistance one ever in of portfolios. construct advice to the And of rate result over was a As investments, for and again fastest grew these while BlackRock once challenging XXXX the clients our

risk for long-term times their our solve are solutions clients industry-leading BlackRock good more portfolios needs challenging growth preferences increasingly unique investment of consolidating and whether risk, adding reducing and their continued priorities. most bad or demonstrate with and times, their In organic that that address

During XXXX, growth. generated $XXX over billion organic net total of industry-leading BlackRock and base positive delivered fee inflows

ended representing the organic momentum, growth momentum approximately annualized total generating base with quarter and in significant fourth net of in the we inflows X% reflecting outsourcing Importantly, fee $XXX and year iShares mandates. strong continued billion

billion Full $XX.X of year both down revenue compared of per was XX% Operating and share $X.X of X%. income declined earnings XXXX. billion to $XX.XX

$X.X lower on the lower billion For driven the performance lower and by of was year-over-year of average impact AUM fees. fourth appreciation dollar and quarter, primarily revenue XX% markets

income reflecting XX%, XX% share Quarterly non-operating billion $X.X rate down in year operating of was while higher ago, a was versus lower a also effective by tax and per private income strategic of the income minority in earnings lower primarily current net quarter. $XXX the mark-to-market million of equity quarter Non-operating investment seed included investment and portfolios Envestnet. gains investment driven in co-investment our for results and our $X.XX

XXXX for or rates, as because XX% changes rate items. adjusted was due actual tax items in reasonable fourth estimate in for that approximately discrete effective discrete an of though driven in tax or non-recurring U.K. by differ part to may increase a tax primarily projected quarter XX%, We potential the tax tax is Our the rate rate legislation. currently run

last over corresponding Fourth revenue the year-over-year, decline XX% revenue and market of quarter reflecting approximately exchange foreign line AUM trillion of negative average was lending months. in base on the fee down primarily and beta billion movements $X.X impact AUM of XX securities $X.X in the with

the fourth fees fee Sequentially, lending was base revenue securities positive in quarter. base down and quarter despite organic X% growth

and mix basis rate on third continued lending discussed fee change our previously fourth revenue. entry by approximately impact fee Our mandates points fourth quarter the X.X quarter rate, securities the from quarter lower favoring decreased effective lower annualized reflecting

Fourth private alternatives. performance continues quarter respectively, from year-over-year illiquid carrier year alternative fees decline fees represents to our higher fees from reflected a alternatives our full deferred potential million ago. offset The and from of increased portion balance, XX% business liquid markets by liquid as from unrecognized lower carry $X.X exceeds $XXX million, primarily a year full of $XXX scale, and and decreased year Notably, revenue revenue fee long-only which future performance our and billion. mandates, partially

technology been income on business increased X% Aladdin's net Quarterly delivered revenue and platform reflected new headwinds technology on fixed with periods non-dollar revenue, stronger. demand services $X.X assets. and solutions market and billion record our in increased year-over-year full the never Our sales Aladdin's Aladdin Both XXXX, X%. declines revenue significant associated of for revenue has impact year FX

X% Annual estimate constant On ACV, expense lower we in a XX% increased year or G&A currency XXXX, contract value, have would increased expense expense. fund ago. from X% and direct ACV reflecting year-over-year. decreased basis, a compensation, Total

and compensation partially by due X% down primarily and compensation programs impact expense reflecting lower offset income benefit incentive lower For lower operating fees performance base compensation. and certain to the year, compensation deferred was employee higher mark-to-market full of

are higher quarterly Recall average also in finalize expense seasonally the sequential includes year we X% reflecting primarily direct comparisons in decline full expense AUM. rebates relevant fourth that year-over-year, in of of occur direct compensation year-over-year impact the index fourth decreased quarter. that fourth fund XXXX lower fund quarter less compensation expense the quarter. because The

expense, G&A investments higher fourth and of Excluding product strategic launch expense lower in expense. costs, X% the re-measurement ongoing occupancy exchange and reflecting impact sub-advisory offset increased by technology foreign year-over-year, partially quarter

primarily compared our expense and a spend cloud associated migration was of T&E full with expense. core XX% to the normalized return technology levels to more For year, Aladdin we that higher estimate XXXX, driven by G&A up

of investments people. we the been operating movements result of a cycles. made growth markets have direct strategic XX.X% have organic we investments margin longer-term disciplined and primarily a of down in XXX our Our consistently making impact industry-leading ongoing full as-adjusted technology through market the reflecting from BlackRock's foreign points is revenue year ago, basis the and exchange on and negative was year

to As we've playing continue times throughout history, of emerged often and stronger. enables shown we where model offense in our uncertainty us BlackRock's greatest it's even differentiated

our have Since aggressively opportunity. free of XXXX, focus restructured will for the managing initiatives. year In increasingly to priorities resources prepared discretionary areas would year, of shape people which important order we of investment need recently strategic to July, size investing our capacity in a and better to our on be pace we our we and growth critical continue so been during in workforce the our spend, greatest for most up we the

only these initiatives but teams, capacity of $XX to create a fourth for previously charge severance quarter disciplined of targeted approximately or talent. increase granted investment taking restructuring primarily deferred for opportunities impacted and and shape awards By compensation X.X% a of workforce. not employees in accelerated comprised amortization XXX of approach our our our resulted million also incredible how for we global we This

single has charge as from to been expense appears to enhance results prior our as excluded This on periods. item income our a comparison statement adjusted line and XXXX GAAP

efficiently us, Our incredibly committed business organic is optimizing of we take the before in advantage to growth well the possible. most and positioned deeply remain to opportunities

support our the count continue At We strategy, flat innovation would shape our talent growing centers footprint be XXXX. continue at to pyramid in head present, growth and be allowing expect broadly us of to iHub central will optimizing to to scale. we our talent our to in

and expect Hudson which single-digit is growth, scale to expense a and in by future cloud, move would new operations support in to impact migrating we clients mid- addition, In high the substantially to XXXX also headquarters, continued increase the of driven our the Aladdin investment G&A to complete. upcoming core now our Yards technology annualized

are position for investing balance use We to continued sheet prudent BlackRock of success. also through our best

support growth, approximates $X.X co-investment $X.X and our capital billion seed to During we billion. our now year-end new XXXX, allocated and of portfolio

strategic attractive our various investments reinforcing Our very generating our simultaneously elements returns and minority shareholders. for are strategy of

manager end-to-end provider, save invested employed DC we in tech-enabled, the U.S. a plan the and is retirement solutions made in recently became which businesses their investment year, for helping the Circle human smaller access primary we interest, easier to and ways by reserves, a retirement. minority cash During Americans of

We billion share over XXXX, including an from committed repurchases, shareholders of cash XX% combination shareholders systematically and and share a to repurchases returning also to of to dividends XXXX. returned billion $X.X in $X.X of record increase remain excess through a

capital reducing our strategy stock, inception of in our annual shares total we return for management XXXX, current Since have $XX XX% outstanding BlackRock's billion of and of XX% total our by unlevered now over compound repurchased shareholders. approximately an generating

subject for At repurchase price, on to market relative spending our capital least present, the targeting shares and during the including conditions, XXXX. valuation stock of $X.X billion are of year we the at of based plans

our by strategy As always you more Larry, guided will BlackRock's has hear clients' needs. from been

our our executing focused relentlessly to and with investment and delivering build more excellence. are fiduciary enables with relationships choice, platform. and on us This deeper differentiated drive providing duties performance growth across broader strong clients We

billion, in net billion X% of long-term inflows year billion and net led asset led $XXX inflows regions, from generated growth, were organic X% demand alternatives. a base clients XXXX $XXX of by growth, were net ETFs, organic quarter and Full by inflows into billion across long-term outsourced including growth strategic Fourth solutions areas, flows positive $XXX all of annualized illiquid in in billion industry-leading of United $XXX the net organic ETFs. fee growth representing $XXX asset inflows including ETF X% and States. record BlackRock representing

our reflected some and quarter history. seasonality of of also inflows inflows, segments. product for the in bond our Surging net ETF of client net our saw second quarter ETFs, billion but Fourth the demand diversity represented $XX billion $XX which best reflected

as in equity quarter. tactical also allocation changes clients We strength ETFs saw reassessed as exposures continued core precision well during asset as the

fixed world partially systematic outflows year billion Fourth retail of billion $XX and in Full in alternative funds. and income SMAs allocation multi-strategy $XX and reflected pressures our similar index ongoing trends. strength quarter net active by retail offset strategies of outflows equity industry reflected net income

billion types all $XXX record XXXX reflecting of asset generated BlackRock's business base growth of net inflows and organic fee representing by paced and $XXX across organic net positive inflows, institutional X% of broad-based X% in Fourth types product approximately strength active the mandates. fixed mandate. the funding and were active quarter income of net Institutional inflows included the all several AIG product remainder outsourcing funding Corebridge billion of substantial significant $XX of the also across billion

unconstrained, five-year demand positioned of especially for high credit stabilize part return, risk-adjusted and to meet year. and diversified with in well records income rates our across yield platform is well remain growth interest fixed investor positioned and and the the yield as alpha active total strong three- performance latter for We

of markets also billion private net continued by driven and private for during inflows infrastructure. $XX Demand illiquid strategies into with year credit the

base annual our now institutional for potential deploy raised continues clients and significant approximately of business $XX representing to new as fees We of In commitments approximately capital a client private in markets we $XXX have strategies, million to in future committed billion addition, fees. grow, significant XXXX. performance also of variety

industry, BlackRock's institutional challenging Despite fourth cash international grow for billion platform And net breadth, million management $XX product BlackRock in became of a the number of leveraging technology, by net money outflows we risk capabilities. as rates outflows liquidity are year scale, provider. the the experienced stabilize, broader market well particularly and Finally, the management share $XX positioned our and to one quarter year. for market

to years. of this my my hand like BlackRock a this garnered me had It's amazing from privilege of alongside. the opportunity our shareholders, the grateful I'd for I be to work CFO over advice for Before the feedback, to the wisdom last giving and I him to have Board, most highlight it XX team been analysts, career, sell-side of I'm our deeply to amazing colleagues finance and, moment I've Larry, thank the for our last time, all, truly one and take organization

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to over that, you, Larry. With

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leading base industry We organic for annualized over momentum representing organic We BlackRock the of based of long-term growth fourth fees strong delivering XXXX, with quarter captured year. X/X year very inflows flows X% ended the with positive that billion and the the $XXX in fees. industry estimate net

five BlackRock or an average growth compared has past delivered asset net $X.X inflows alone, industry X% flows. Over to flat aggregate the or in organic years trillion negative

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it open for let's questions. and you, up Thank everyone,

[Operator Instructions] from Daniel with We'll Please Jefferies. first go our ahead. take question Fannon

thinking you kind wanted rates to fixed income allocation. you're what Can your it really now, on to you follow around year? this with to of seeing about then comments demand? before we demand about Are having see also, XXXX, up that need about see talked fixed start other products that peak as area assets asset And that I is or about. you into an income you've clearly, incremental conversations here clients outside of see you think you and talk

Rob.

Kapito to them as one, managed. in are challenged. to nimble they that partner top have, to going to they're not equities going has much how actually know, that structure be now, market change insights have is difficult both the in market were are to declines to And experienced a take find more solutions. they been bonds. right asset rates you joint to XXXX. to need their and for both more or Rob turning Clients have know to I class because more traditional a BlackRock help call of be rethink allocations, We that specifically which think XX-XX and portfolio don't each and where very here. the global across wait going Dan. we I'll and double-digit There

to of the income And they're are have size. because in from more to navigate and both grow the areas protection to which at the for inflation products go. they and are private of where the going how from rates markets, looking looking three cash, common that continue They're are uncertainty

able participate think these the Larry in that significantly years, have we needs demonstrate is that described built, We clients. bad XXXX the to address a been both how have allowing markets platform in And client good for ones. to our I in over and results us

answer I think directly, see growth lot a of But question going we that support trajectory now your even our tailwinds XXXX. to more into are to

The their The excellent, is income are performance strong. our as clients to back we first environment one attractive funds is And or risk. for actually certainly can insurers fixed credit much income fixed are without to trillion help $X.X first in time the because, positioned and duration earn very franchises stabilizes. and years, taking our pension yields across add well allocations the rate platform flagship

fixed growth come expect next is and have income of years most you the teams, both or we we the lot the did through the fixed to And the ETFs. diversified few ETFs U.S. in ready. it ETFs. only our that core in trillion leading whether lineup XXXX, passive, of in iShares as $XX So in that going income, of A will reach market. with And precision, know, industry through active the bond X.X% in are as it's represent

lot have we of So, here. a runway

renewable infrastructure, JV that that AT&T I infrastructure. opportunities gave credit. the example will infrastructure side, benefit more emphasize market there Reduction will And has Infrastructure be And momentum, private with one Gigapower, largest and in available called his of of been which the us On be the and in was many Larry think we in which recently would this other renewable announced infrastructure to Act an the from with an in other remarks is example companies even the will private passed U.S. JVs

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Aladdin periods has is in XXXX. importance increased we the you market volatility, historically our our in sales that, course, Aladdin, lastly, as of of it know because of in then, to net And record saw clients

So, all in years us continued growth of for ahead. the these position

Alex Blostein next ahead. Goldman question Our with comes Please go Sachs. from

we'll expense get Gary, move. being there. an your question in congrats again next this spirit maybe last on earnings call, And your of in CFO the

us G&A like I base, heard things that frame high for mid- Maybe about how I for compensation, you So, the help thinking compensation the to on market rate, XXXX. conditions guide the you more sort single year? this contemplates. that broadly, including of core are guess the guide digits expense And

Thanks, Alex.

really spent think when ability because the are we critical organic a think continue And I also do we've others talking competitors PE gives of model our So to maybe calls volatility and forward to mindful come we our that I of that because know diversified driver it. drive last our going some of growth context, that periods through just positioned trying our can't these to invest simply right, philosophy we us multiple. generally better of the is couple that, than about obviously of

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ahead. Morgan question take from Cyprys go Please with Michael our We'll next Stanley.

on congratulations best Gary new in run an XX-year CFO, role. you all the amazing your And wish I as

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ahead. with go our Craig with We'll question Please Bank move next of America. Siegenthaler to

you're quarterly really going your Gary these over thanks miss nine help years. to for the sure earnings And calls. last I'm

you tell he's be to I sulking. going could

Craig. I'll miss you,

comments first grab equities in really a of majority the do win we've will until the of in question last follow-up will last fixed split for year? So share for seen you think Rob's a seen passive active rebalancing, healthy think decade? just the you we've this just income Or fixed like potential up the to on for as inflows do income

Great question.

believe you're we operational XXXX So navigating where or ETFs actually talking this the active. for, you're in in simplicity, been the income them. that ETFs fixed income this -- began fixed talking abilities of through about looking factor We've the the majority duration, managing in the you the exposures, your not investors but to not could convexity, do about investing index use instruments, to the liquidity, They're certainly are exposures passive. passively these get credit

that through markets, and going and ETF fund to And going most I become And saw entire I it we truly important mutual bond to what capital in one more manage is into out purchases, utilized believe this through of XXXX, of ETFs. transformations is are to your more greater movements provides passive. precision not exposures in be fixed the the much expertise believe income ETFs exposures

to about that's where as both been It bonds active, ETFs people that and that a now, in to instrument. most to in over you far saw And seeking, a have allow they trying think is because get exposures. It and and navigate passive exposures certainly, is identify you're you're those investment XXXX that is confused from able stock. liquid we instrument, get the an your highly passive what we bonds to index and years

it use active going side-by-side going with true believe their investors bond They're to investing. Look, are in how it. use I to

individual not active it's trying have Buying bonds not. going all for away, most investing. suggest bulk I'm But So fixed income bonds. of not is to do portfolios, individual the to bond you need

bonds, the You a you have can then component really find And in ETFs. you're great going mortgage true that of do that. could credit individual value expertise if you through express large to where expertise,

can't But in let's fixed in organizations their income be that do clear, totality entire most universe.

market. easier It's believe it's about bonds going a major to of is fixed is And income. believe so, beginning investing. ETFs in talked going we to to this Rob grow, continue ETFs bond going believe the I to especially expansion as and more investing of liquidity, this we to going are in entire bond the with how make cheaper. of component simplify be a And

as component of this every, invest index-like that believe in bond I'm using ETFs is actively selections. -- bond beginning, ETF going like side-by-side that exposures the I actively you're exposures. seeing every now to we but alongside And to individual if say with investor bond expression of your active all a using are is to only seeking, And not instruments active express their

to selection one And would are bond as fixed curve. thing going can is you I time where can you alpha individual believe to passive, will into are period add, I add income or a the ability Craig, alpha. you in your we it through of saying, just both where Larry in and on is but all it the do active down come add

end short is a you short to an very find give opportunities can we duration. now X.X% earn the the going Today, year of can to I very was That be which in example curve, ago to a X% low-yielding. in a active.

on it both, combination but as of is and active both ETFs, where find to most So active. split it depend a call index you determine the our will between can clients the output

you any the Ladies Mr. and reached gentlemen, questions. have Fink, do remarks? time for closing allotted we have

for I do, to operator. your continued joining this and in want morning BlackRock. everybody interest for I thank

build them needs performance and our the fourth their term. clients that year guidance helping of and serving our them a result for evolve choice and quarter with and is everyone help our each direct them commitment long fiduciary standards full individually, Our through in providing

a I great I'm the any I incredibly our a and opportunities us. want to of ahead excited in thank year. in history, to everyone, and about XXXX unlike have our position And you is new other believe time of BlackRock please all start

This concludes today's teleconference.

day. You a now have great disconnect, may and