BlackRock (BLK) 14 Apr 232023 Q1 Earnings call transcript

Good morning. My name is Jess, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the BlackRock Incorporated First Quarter 2023 Earnings Teleconference.

Our host for today's call will be Chairman and Chief Executive Officer, Laurence D. Fink; Chief Financial Officer, Martin S. S. Robert President, Small; Counsel, General Christopher and J. Kapito; Meade. Instructions] [Operator

Meade, may your begin conference. Mr. you

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

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

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

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

Thanks, everyone. present my Chris, for to good pleasure It's morning, of the and XXXX. results first quarter

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

release discloses as-adjusted our results. and primarily as GAAP results. focusing be both adjusted I'll Our financial on earnings

first the and the volatility income, certain in definitions operating updated we adjusted cash associated income. Beginning now as net non-operating of of plans of compensation mark-to-market quarter and deferred expense impact They margin, our operating with XXXX, income compensation exclude the believe non-operating our investors over change management companies. and an impact management the understanding and this useful a increases with more provides with core in XXXX. financial hedge, other asset company of which began of performance comparability We time economic

time we quarter. information our as BlackRock first I'm end, goal our investors simplified be our to presenting helpful in streamlining of with the and expense regularly for appropriate. distribution providing excited beginning first disclosures this also reviews of revenue CFO. disclosure where To the the to and

client-facing first And BlackRock of was my for hand, I clients. were know, can you spent XX first of you most years many built BlackRock tell at roles. in As

The the our in economic damage clients us. XX built and few weeks, has is and is for over help time dislocations of last from hiking adjusting Financial present significant clients. view Market higher definitely opportunities over BlackRock's cracks easy this behind to money world to all burst years rate conditions. tightening importantly, into cycle market rapid platform credit BlackRock for been environments. rates most and

investors capital these recent more growth see Asset to dislocations markets, to and markets. firms and activity management connect economic driving we

years clients and XX investors, bond center strategy. on with desktops put strategies, real unlocked connections new economy. more more unconstrained our insights, of investors through we among advisers, personalized pioneered spent long-term access, We're capital We've industry, growth the SMAs. creating Aladdin the world-class creating capabilities, markets and iShares advice thousands and of markets partner. We and on BlackRock's leading a journey the that's of technology, the investment market this leading We've and

long-term have perspective. We

ability stress. end-to-end We providing quickly We're technology in whole portfolio servicing. to move have and a adviser, times portfolio investment the of

a and BlackRock our business. use streamline service. to the as use scale nimbleness it use growth They platform support as enabler. their and own commercial Clients a They of

Our of ETFs, private alongside markets advisory, that's with active driving combination unique what's differentiated BlackRock's capabilities, technology organic growth. platform outsourcing and

in clients demonstrates X% our the representing consolidating $XXX with growth. inflows base of of organic first more Whether portfolios reducing continued organic And industry-leading fee or BlackRock and risk, growth net their that BlackRock. annualized growth adding total asset quarter, generated organic X% are billion,

average driven over performance the revenue XX% appreciation by billion lower XX as fees. as quarter year-on-year, significantly dollar last and was lower AUM lower First $X.X primarily on impact of markets well the of months

higher XX%, offset $X.X rate also effective share reflecting was down while of higher non-operating a year partially billion of XX% was income Operating income. $X.XX a tax versus lower per by ago, earnings

by equity mark-to-market value investments. gains and Non-operating gains of of results for investment million private the our capital unhedged the quarter net included portfolio primarily co-investment $XX seed and driven

awards compensation in discrete lower quarter adjusted quarter XX%. for to first rate year tax XXXX. the as was approximately reflects stock-based quarter This of the of vest tax benefits that to compared first each the Our related

tax is of rate to nonrecurring in items reasonable or continue legislation. tax or XX% discrete a for because actual of that estimate potential projected rate run the remainder changes differ The may tax We XXXX. effective

of over base $XXX was fees fee securities of higher elimination the quarter down discretionary impact revenue securities and offset money the by was beta XX revenue. movements This waivers market fund market First and and last months on lending exchange reflected lending year-over-year. of $X.X our revenue billion negative approximately partially and X% billion of foreign AUM the

our Sequentially, count of X%, partially impact offset securities base the higher spreads, lower due count to to compared lower Performance changing from and lending of quarter, the quarter. lending a annualized ago, mainly an lower revenue alternatives. fee primarily $XX preferences. effective risk equivalent increased reflecting and first revenue million basis, fee day day fourth in a securities rate the by reflecting average year client decreased On from was fees modestly AUM

sales associated exchange our strong net Aladdin's also for to reflecting platform we interest assets to Aladdin was income fixed see solutions. and impact significant revenue our services flat XXXX, demand declines Aladdin's the over market non-dollar Quarterly technology In strong this XX continuing with foreign year the approximately continue client delivered ago, and on record last on headwinds months. technology but compared platform revenue a

Annual have was prior year-over-year. of We X% implementations. increased impacted of Services contract especially ACV periods quarter generated committed or volatility market Aladdin revenue low fees the underscored by the importance the over ACV, onetime and term, growth in mid-teens as to long the value, demand. historically and remain timing of Sequential Technology to increased

and offset compensation direct benefit and primarily Employee down was due X% fund lower expense. income expense reflecting and compensation reflecting Total lower incentive to performance lower by operating expense decreased X% expense partially and year-over-year, G&A higher fees. compensation

expense lower and promotional G&A decreased Sequentially, moving a G&A new expense reflecting and to higher our increased in X% and of T&E occupancy expense primarily expense. right the our XX%, here higher seasonally New expense as impact including marketing higher due result promotional Yards, to headquarters expense, Hudson of York. marketing

X% current rebates quarter. higher quarterly lower AUM. higher reflecting expense that index Sequentially, to seasonally primarily average fund occur fund and was AUM year-over-year, direct the increased in fourth quarter expense Direct in due index average down the

first quarter margin ago. XXX movements markets as was primarily the quarterly exchange year This impact points down and Our reflects foreign revenue. XX.X% operating of on of a from negative adjusted basis

markets with improved differentiated growth since XXXX, a Although delivering continue our to organic be have the aim end and prioritizing of investments in of margin. and we operating disciplined overall will hiring the

is platform market cycles. our and the us the in while made of focus investments margin. disciplined growth to investments diversification direct result on through our The resilience maintaining of organic consistently critical pursue a we've industry-leading BlackRock's expenses allow

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

present, in our G&A we'd XXXX, headcount with our to XXXX percentage and flat also expense. a expect single-digit in line January, broadly guidance be core In high at increase mid- we'd expect in to

to strategy management share in and capital then to a to first, remains, of cash dividends Our invest repurchases. business and excess return through our combination shareholders

through growth. We sheet success. This position prudent a to our organic balance and best through to use continue BlackRock support is seed co-investments of to invest primarily for continued

opportunity our where strategic We inorganic support to see and growth an initiatives. we will investments accelerate make

invest to stable enables BlackRock's us model business remain and and differentiated opportunistic.

whole Prior infrastructure of our product and distribution direct at acquisition portfolio and strategy clients. of Aperio First and energy Our our reach. Reserve BlackRock are focuses indexing this scale on philosophy capabilities coverage, examples extending extend enrich for to acquisitions eFront the our to investing Aladdin's to

As in previously common to X.X% we increased quarterly of our announced per by stock. January, share dividend $X

still our in previous the on quarter. spending capital shares quarter We shares the our January. common At repurchasing anticipate guidance for XXX present, also per based subject conditions, consistent in balance least repurchased of year, we $XXX million first for million year the at and worth the market of plans with of to

billion $XXX connectivity ongoing market unfolded only inflows strong in liquidity events net which the of total BlackRock's and clients, stress with grew our as evidence quarter.

our billion $XX was of ETFs. precision exposures and led This inflows seasonal were equity by bond U.S. for net in from ETF ETFs. box quarter sentiment-driven trading by offset tax outflows partially style demand First

use seen volatility, asset their in periods of allocation we've in portfolios. market to implement repeatedly As preferences tactical investors iShares

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into inflows reflected net Retail fixed income. Aperio inflows and active in strength net broad-based index SMAs through

outsourcing risk BlackRock's from generated a continue were income enabler, inflows, of as franchise inflows we platform for and inflows active industry-leading which turnkey net of servicing. technology access fundings institutional billion billion investment seeking multi-asset management, a several $XX net as and significant fixed expertise, included by net $XX customization, led to greater mandates. scale clients to investment Institutional institutional partner

XX% representing private markets annualized and led base also credit with continued for infrastructure. of private billion fee $X inflows, net growth by organic Demand

our relationships. analytics for network continue form with through We They're deals to Examples Gigapower, diversified agreement our and technology. clients infrastructure our to include one our unique funds venture global a underpinned joint AT&T. and of data, source by of

represents billion in future have We in approximately clients and generated source of net quarters generated $XX flows during positive and for of base committed we've alternative capital inflows of a aggregate, to active the significant variety now In since quarter, of deploy BlackRock two a strategies, XXXX. but all approximately beginning performance billion $XX this of the and fees. active

in demand the for first cash net offset away quarter. net platform inflows cash our management client-specific diversify quarter yields. months saw March the as management redemptions clients solutions BlackRock's and two to unwinds. primarily surging Flows inflows the were as due from SPAC net of cash such deposits Finally, look of March by $X to in that driven in activity enhance were billion first

range strategies, investment delivering capabilities. and to and on highlight platform. of management build with working a quarter of the actively clients a we've full made market results diversified We're first the resilient management investments operational benefits technology, insights of and, providing cash BlackRock's liquidity course, technology their

led listening I'm shareholders. and Throughout most the and our recent clients. its to employees opportunities clients, for our and future excited BlackRock, in our our for for growing crisis, our BlackRock's about by history

turn to And with it that, Larry. over I'll

to BlackRock And you on stability Thank a is And optimism Martin. our source and the you, as good earnings call of for everybody. joining Thank for call. congratulations your both first CFO. clients. morning

them also the investment long-term be opportunities in their on embed providing today's markets. while We portfolios are to insights in had helping volatility navigate and resiliency

of The X/X markets confidence $XXX first led of again continued the over bad into and with long-term and net inflows XXXX, our standards. net XXXX, consistency assets we performance, billion BlackRock's in industry billion across guidance fiduciary BlackRock generated both good captured once $XXX results clients' and momentum of quarter. and across our In industry BlackRock's Strong flows. new from our the in in

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or see periods are BlackRock first ETFs this transparency in past bond inflows our These of providing investors ETF precision markets. quarter. from for allocation tactical tools critically were to in management as important stressed $XX tax express ETFs. generated ETF platform, and once during BlackRock risk-off were as we billion and our markets, by into to loss again Industry-leading use, prove and asset ETFs used declines tools leverage value equity they outflows unique weaker their the are in active actively for price discovery particularly segment Across risk-on this In offset net harvesting liquidity, reduce of BlackRock and trades. quarter. to their exposures flows

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in of when in third out inflows and We XXXX. have these periods, following sell-off XXXX, recently in In first sentiments seen follows the risk-on play the quarter each quarter in of the pattern equity and most of return. this prior December XXXX

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to across ETF Especially billion ranges shift their bond as curve. BlackRock's interest assets Treasury their manage use rate access risk manage U.S. market Treasury large to over and markets exposures quickly haven to ETF cash. treasury historic risk. U.S. the leading BlackRock's moves, providing yield investors of safe platform and the and Investors to assets, manage experienced to turn $XXX entire

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see fixed leading active clients and owners, of of the asset wealth we income BlackRock world's Today, most as ETFs. managers managers asset

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

Stanley. question Cyprys Michael from with Instructions]Your comes [Operator Morgan first

added $X a question worth offering So COVID, management. cash deposits, yet system about the aren't influx terms deposits, banks seen the today those yield of in much massive on think, deposits. a trillion of on of has banking I Since

about remain be if And of think shift longer. there flows greater you and capturing money for higher do structural a fund might how deposits? rates is, question are accelerating a the going share to So

you're curious just about thinking that? So how

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comes with Siegenthaler Craig from America. Our next of Bank question

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you wealth also So mix And any on the have updated see perspective winner given institutions large on your between of and topic, could BlackRock a if on the this with platforms. because big be I'm active passive and curious management your mix conversations flow reallocation thoughts I this. real wanted updated to

So take that I'll Craig, one. it's Kapito. Rob

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comes with Schorr Glenn Evercore. from Our question next

I So the index you times think last if XX the but flat the a talked but outlook at X% function that's underlying in I is past, of if and growth. on of could organic and talk you where the I are going, ETF pricing? wonder active you months, more out growth know asset your fee base in mean core what I about we've flows have look equity and versus many

Hi, Glenn. It's growth delivered Martin. question. environment we challenging seen. Thanks our has for the In the despite market XXXX, organic fee industry ever positive most base

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You had X% $XXX net flows base organic a total and market, billion a BlackRock delivered fee stressed and of growth. you of lot volatility had still

be mission, our grower is strategy in quarter. aim, our not fastest the any Our to

come exceptional growth. XXXX, going rates still a at bases element precision is base come by like rate about income some we We through preferences. deliver ETF of organic XX important is then flows tax exposures to a from 'XX fee asset quarter don't risk And tend But that. has some the winning when 'XX years, important I and growth precision that see over that term. trading, the to fee reversals had we and mutual the don't long fee that's I precision were to the years what's think more just 'XX, It's particular the in really volatility, share market base always higher ETF saw inflows to been positive rates. over and forward, years. had first to those we that these X% impact market to We've manage and products five that sort first able growth on we at fixed clients. average about it 'XX. the have related fee And cycles quarter are of at fund and that marked We on time. quarter with a think the really manage of in Glenn, seven tend in portfolios. look outsourcing the come you fee lower flows fourth And look which that's lot growth have into the obviously Those in to from at dynamics base mind growing organic we to exposures. think slightly seasonal differentiated, set in Our the we've organic of the this really see consistent last of over aim exposures X% last over deliver to quarter, fee I flows to done changing is you where of more to has tend

time, think solid see And continue there. you'll so over to I good growth

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

today. today and operator. know for going us to I'm with is thank joining of all reported day, you especially other morning. I really you, all Thank a the busy financial this institutions Yes. banks

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thank call. will that conclude today's your participation. We gentlemen, for you and Ladies

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