UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 17, 2019 (April 16, 2019)
BLACKROCK, INC.
(Exact name of registrant as specified in its charter)
| DELAWARE | 001-33099 | 32-0174431 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| 55 East 52nd Street, New York, New York | 10055 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (212) 810-5300
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 8.01 Other Events.
First Quarter 2019 Results
On April 16, 2019, BlackRock, Inc. (the “Company”) reported results of operations for the three months ended March 31, 2019.
FINANCIAL RESULTS
| Q1 | Q1 | |||||||
| (in millions, except per share data) |
2019 | 2018 | ||||||
| AUM |
$ | 6,515,345 | $ | 6,316,984 | ||||
| % change |
3 | % | ||||||
| Total net flows |
$ | 64,666 | $ | 56,946 | ||||
| GAAP basis: |
||||||||
| Revenue |
$ | 3,346 | $ | 3,583 | ||||
| % change |
(7 | )% | ||||||
| Operating income |
$ | 1,233 | $ | 1,375 | ||||
| % change |
(10 | )% | ||||||
| Operating margin |
36.8 | % | 38.4 | % | ||||
| Net income(1) |
$ | 1,053 | $ | 1,089 | ||||
| % change |
(3 | )% | ||||||
| Diluted EPS |
$ | 6.61 | $ | 6.68 | ||||
| % change |
(1 | )% | ||||||
| Weighted average diluted shares |
159.3 | 162.9 | ||||||
| % change |
(2 | )% | ||||||
| As Adjusted: |
||||||||
| Operating income(2) |
$ | 1,233 | $ | 1,378 | ||||
| % change |
(11 | )% | ||||||
| Operating margin(2) |
41.9 | % | 44.1 | % | ||||
| Net income(1) (2) |
$ | 1,053 | $ | 1,092 | ||||
| % change |
(4 | )% | ||||||
| Diluted EPS(2) |
$ | 6.61 | $ | 6.70 | ||||
| % change |
(1 | )% | ||||||
| (1) | Net income represents net income attributable to BlackRock, Inc. |
| (2) | See notes (1) through (3) to the condensed consolidated statements of income and supplemental information on pages 10-11 for more information on as adjusted items and the reconciliation to GAAP. |
NET FLOW HIGHLIGHTS
| Q1 | LTM(1) | |||||||
| (in billions) |
2019 | 2019 | ||||||
| Long-term net flows: |
$ | 59.0 | $ | 127.7 | ||||
| By region: |
| |||||||
| Americas |
$ | 40.0 | $ | 140.8 | ||||
| EMEA |
21.9 | 3.3 | ||||||
| APAC |
(2.9 | ) | (16.4 | ) | ||||
| By client type: |
| |||||||
| Retail: |
$ | (0.8 | ) | $ | 1.6 | |||
| US |
3.2 | 18.8 | ||||||
| International |
(4.0 | ) | (17.2 | ) | ||||
|
iShares®: |
$ | 30.7 | $ | 163.6 | ||||
| Core |
19.5 | 93.4 | ||||||
| Non-Core |
11.2 | 70.2 | ||||||
| Institutional: |
$ | 29.1 | $ | (37.5 | ) | |||
| Active |
15.4 | 12.9 | ||||||
| Index |
13.7 | (50.4 | ) | |||||
| Cash management net flows: |
$ | 5.7 | $ | 3.0 | ||||
| (1) | Amounts represent rolling last twelve months long-term net flows as of March 31, 2019. |
2
BUSINESS RESULTS
| March 31, 2019 | Q1 2019 | |||||||||||||||||||
| Q1 2019 | March 31, 2019 | Q1 2019 | AUM | Base fees(1) | ||||||||||||||||
| (in millions), (unaudited) |
Net flows | AUM | Base fees(1) | % of Total | % of Total | |||||||||||||||
| RESULTS BY CLIENT TYPE |
| |||||||||||||||||||
| Retail |
$ | (813 | ) | $ | 646,355 | $ | 826 | 10 | % | 29 | % | |||||||||
| iShares ETFs |
30,688 | 1,924,710 | 1,091 | 30 | % | 39 | % | |||||||||||||
| Institutional: |
||||||||||||||||||||
| Active |
15,367 | 1,160,150 | 500 | 17 | % | 18 | % | |||||||||||||
| Index |
13,757 | 2,327,080 | 247 | 36 | % | 9 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total institutional |
29,124 | 3,487,230 | 747 | 53 | % | 27 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Long-term |
58,999 | 6,058,295 | 2,664 | 93 | % | 95 | % | |||||||||||||
| Cash management |
5,666 | 455,271 | 141 | 7 | % | 5 | % | |||||||||||||
| Advisory |
1 | 1,779 | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$ | 64,666 | $ | 6,515,345 | $ | 2,805 | 100 | % | 100 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| RESULTS BY INVESTMENT STYLE |
| |||||||||||||||||||
| Active |
$ | 13,603 | $ | 1,724,875 | $ | 1,307 | 26 | % | 47 | % | ||||||||||
| Index and iShares ETFs |
45,396 | 4,333,420 | 1,357 | 67 | % | 48 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Long-term |
58,999 | 6,058,295 | 2,664 | 93 | % | 95 | % | |||||||||||||
| Cash management |
5,666 | 455,271 | 141 | 7 | % | 5 | % | |||||||||||||
| Advisory |
1 | 1,779 | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$ | 64,666 | $ | 6,515,345 | $ | 2,805 | 100 | % | 100 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| RESULTS BY PRODUCT TYPE |
| |||||||||||||||||||
| Equity |
$ | (26,077 | ) | $ | 3,375,885 | $ | 1,386 | 52 | % | 49 | % | |||||||||
| Fixed income |
79,923 | 2,029,966 | 774 | 31 | % | 28 | % | |||||||||||||
| Multi-asset |
(1,655 | ) | 499,520 | 276 | 8 | % | 10 | % | ||||||||||||
| Alternatives |
6,808 | 152,924 | 228 | 2 | % | 8 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Long-term |
58,999 | 6,058,295 | 2,664 | 93 | % | 95 | % | |||||||||||||
| Cash management |
5,666 | 455,271 | 141 | 7 | % | 5 | % | |||||||||||||
| Advisory |
1 | 1,779 | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$ | 64,666 | $ | 6,515,345 | $ | 2,805 | 100 | % | 100 | % | ||||||||||
|
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|
|
|
|
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|
|
|||||||||||
| (1) | Base fees include investment advisory, administration fees and securities lending revenue. |
INVESTMENT PERFORMANCE AT MARCH 31, 2019(1)
| One-year period | Three-year period | Five-year period | ||||||||||
| Fixed income: |
||||||||||||
| Actively managed AUM above benchmark or peer median |
||||||||||||
| Taxable |
61 | % | 83 | % | 85 | % | ||||||
| Tax-exempt |
28 | % | 78 | % | 76 | % | ||||||
| Index AUM within or above applicable tolerance |
98 | % | 99 | % | 98 | % | ||||||
| Equity: |
||||||||||||
| Actively managed AUM above benchmark or peer median |
||||||||||||
| Fundamental |
63 | % | 73 | % | 83 | % | ||||||
| Systematic |
27 | % | 87 | % | 87 | % | ||||||
| Index AUM within or above applicable tolerance |
97 | % | 99 | % | 98 | % | ||||||
| (1) | Past performance is not indicative of future results. The performance information shown is based on preliminary available data. Please refer to page 12 for performance disclosure detail. |
3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION
(in millions, except shares and per share data), (unaudited)
| Three Months | ||||||||||||||||||||
| Three Months Ended | Ended | |||||||||||||||||||
| March 31, | December 31, | |||||||||||||||||||
| 2019 | 2018 | Change | 2018 | Change | ||||||||||||||||
| Revenue |
||||||||||||||||||||
| Investment advisory, administration fees and securities lending revenue |
$ | 2,805 | $ | 2,947 | $ | (142 | ) | $ | 2,779 | $ | 26 | |||||||||
| Investment advisory performance fees |
26 | 70 | (44 | ) | 100 | (74 | ) | |||||||||||||
| Technology services revenue |
204 | 184 | 20 | 203 | 1 | |||||||||||||||
| Distribution fees |
262 | 311 | (49 | ) | 271 | (9 | ) | |||||||||||||
| Advisory and other revenue |
49 | 71 | (22 | ) | 81 | (32 | ) | |||||||||||||
|
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|
|
|
|
|
|
|
|
|||||||||||
| Total revenue |
3,346 | 3,583 | (237 | ) | 3,434 | (88 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Expense |
||||||||||||||||||||
| Employee compensation and benefits |
1,064 | 1,121 | (57 | ) | 1,020 | 44 | ||||||||||||||
| Distribution and servicing costs |
404 | 432 | (28 | ) | 420 | (16 | ) | |||||||||||||
| Direct fund expense |
242 | 261 | (19 | ) | 224 | 18 | ||||||||||||||
| General and administration |
388 | 383 | 5 | 449 | (61 | ) | ||||||||||||||
| Restructuring charge |
— | — | — | 60 | (60 | ) | ||||||||||||||
| Amortization of intangible assets |
15 | 11 | 4 | 15 | — | |||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|||||||||||
| Total expense |
2,113 | 2,208 | (95 | ) | 2,188 | (75 | ) | |||||||||||||
|
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|
|
|
|
|
|
|
|
|
|||||||||||
| Operating income |
1,233 | 1,375 | (142 | ) | 1,246 | (13 | ) | |||||||||||||
| Nonoperating income (expense) |
||||||||||||||||||||
| Net gain (loss) on investments |
142 | 15 | 127 | (67 | ) | 209 | ||||||||||||||
| Interest and dividend income |
29 | 15 | 14 | 41 | (12 | ) | ||||||||||||||
| Interest expense |
(46 | ) | (46 | ) | — | (46 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total nonoperating income (expense) |
125 | (16 | ) | 141 | (72 | ) | 197 | |||||||||||||
|
|
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|
|
|
|
|
|
|
|
|||||||||||
| Income before income taxes |
1,358 | 1,359 | (1 | ) | 1,174 | 184 | ||||||||||||||
| Income tax expense |
298 | 265 | 33 | 247 | 51 | |||||||||||||||
|
|
|
|
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|
|
|
|
|
|
|||||||||||
| Net income |
1,060 | 1,094 | (34 | ) | 927 | 133 | ||||||||||||||
|
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|
|
|
|
|
|||||||||||
| Less: |
||||||||||||||||||||
| Net income (loss) attributable to noncontrolling interests |
7 | 5 | 2 | — | 7 | |||||||||||||||
|
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|
|
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|
|
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|
|||||||||||
| Net income attributable to BlackRock, Inc. |
$ | 1,053 | $ | 1,089 | $ | (36 | ) | $ | 927 | $ | 126 | |||||||||
|
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|
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|
|
|
|||||||||||
| Weighted-average common shares outstanding |
||||||||||||||||||||
| Basic |
158,268,034 | 161,250,018 | (2,981,984 | ) | 158,859,998 | (591,964 | ) | |||||||||||||
| Diluted |
159,348,431 | 162,918,961 | (3,570,530 | ) | 160,450,266 | (1,101,835 | ) | |||||||||||||
| Earnings per share attributable to BlackRock, Inc. common stockholders (3) |
||||||||||||||||||||
| Basic |
$ | 6.65 | $ | 6.75 | $ | (0.10 | ) | $ | 5.84 | $ | 0.81 | |||||||||
| Diluted |
$ | 6.61 | $ | 6.68 | $ | (0.07 | ) | $ | 5.78 | $ | 0.83 | |||||||||
| Cash dividends declared and paid per share |
$ | 3.30 | $ | 2.88 | $ | 0.42 | $ | 3.13 | $ | 0.17 | ||||||||||
| Supplemental information: |
||||||||||||||||||||
| AUM (end of period) |
$ | 6,515,345 | $ | 6,316,984 | $ | 198,361 | $ | 5,975,818 | $ | 539,527 | ||||||||||
| Shares outstanding (end of period) |
155,323,503 | 161,275,008 | (5,951,505 | ) | 158,520,147 | (3,196,644 | ) | |||||||||||||
| GAAP: |
||||||||||||||||||||
| Operating margin |
36.8 | % | 38.4 | % | (160 | ) bps | 36.3 | % | 50 | bps | ||||||||||
| Effective tax rate |
22.1 | % | 19.6 | % | 250 | bps | 21.0 | % | 110 | bps | ||||||||||
| As adjusted: |
||||||||||||||||||||
| Operating income (1) |
$ | 1,233 | $ | 1,378 | $ | (145 | ) | $ | 1,310 | $ | (77 | ) | ||||||||
| Operating margin (1) |
41.9 | % | 44.1 | % | (220 | ) bps | 43.5 | % | (160 | ) bps | ||||||||||
| Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests |
$ | 118 | $ | (21 | ) | $ | 139 | $ | (72 | ) | $ | 190 | ||||||||
| Net income attributable to BlackRock, Inc. (2) |
$ | 1,053 | $ | 1,092 | $ | (39 | ) | $ | 975 | $ | 78 | |||||||||
| Diluted earnings attributable to BlackRock, Inc. common stockholders per share (2) (3) |
$ | 6.61 | $ | 6.70 | $ | (0.09 | ) | $ | 6.08 | $ | 0.53 | |||||||||
| Effective tax rate |
22.1 | % | 19.6 | % | 250 | bps | 21.2 | % | 90 | bps | ||||||||||
See pages 10-11 for the reconciliation to GAAP and notes (1) through (3) for more information on as adjusted items.
4
ASSETS UNDER MANAGEMENT
(in millions), (unaudited)
| Current Quarter Component Changes by Client Type and Product Type |
| |||||||||||||||||||||||
| Net | ||||||||||||||||||||||||
| December 31, | inflows | Market | March 31, | |||||||||||||||||||||
| 2018 | (outflows) | change | FX impact (1) | 2019 | Average AUM (2) | |||||||||||||||||||
| Retail: |
||||||||||||||||||||||||
| Equity |
$ | 205,714 | $ | (3,613 | ) | $ | 23,370 | $ | 521 | $ | 225,992 | $ | 219,245 | |||||||||||
| Fixed income |
271,588 | 5,929 | 4,099 | (50 | ) | 281,566 | 277,587 | |||||||||||||||||
| Multi-asset |
113,417 | (3,692 | ) | 8,086 | 87 | 117,898 | 116,924 | |||||||||||||||||
| Alternatives |
20,131 | 563 | 226 | (21 | ) | 20,899 | 20,495 | |||||||||||||||||
|
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|
|
|||||||||||||
| Retail subtotal |
610,850 | (813 | ) | 35,781 | 537 | 646,355 | 634,251 | |||||||||||||||||
| iShares ETFs: |
||||||||||||||||||||||||
| Equity |
1,274,262 | (1,622 | ) | 151,100 | (536 | ) | 1,423,204 | 1,369,626 | ||||||||||||||||
| Fixed income |
427,596 | 32,203 | 12,010 | (648 | ) | 471,161 | 451,119 | |||||||||||||||||
| Multi-asset |
4,485 | (636 | ) | 320 | 2 | 4,171 | 4,204 | |||||||||||||||||
| Alternatives |
25,082 | 743 | 354 | (5 | ) | 26,174 | 26,119 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| iShares ETFs subtotal |
1,731,425 | 30,688 | 163,784 | (1,187 | ) | 1,924,710 | 1,851,068 | |||||||||||||||||
| Institutional: |
||||||||||||||||||||||||
| Active: |
||||||||||||||||||||||||
| Equity |
110,976 | (5,536 | ) | 12,941 | 272 | 118,653 | 117,018 | |||||||||||||||||
| Fixed income |
538,961 | 12,992 | 18,942 | 418 | 571,313 | 551,584 | ||||||||||||||||||
| Multi-asset |
336,237 | 2,591 | 30,680 | (462 | ) | 369,046 | 355,060 | |||||||||||||||||
| Alternatives |
93,805 | 5,320 | 1,905 | 108 | 101,138 | 98,044 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Active subtotal |
1,079,979 | 15,367 | 64,468 | 336 | 1,160,150 | 1,121,706 | ||||||||||||||||||
| Index: |
||||||||||||||||||||||||
| Equity |
1,444,873 | (15,306 | ) | 177,919 | 550 | 1,608,036 | 1,558,876 | |||||||||||||||||
| Fixed income |
646,272 | 28,799 | 25,821 | 5,034 | 705,926 | 676,391 | ||||||||||||||||||
| Multi-asset |
7,745 | 82 | 600 | (22 | ) | 8,405 | 8,182 | |||||||||||||||||
| Alternatives |
4,340 | 182 | 157 | 34 | 4,713 | 4,511 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Index subtotal |
2,103,230 | 13,757 | 204,497 | 5,596 | 2,327,080 | 2,247,960 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Institutional subtotal |
3,183,209 | 29,124 | 268,965 | 5,932 | 3,487,230 | 3,369,666 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Long-term |
5,525,484 | 58,999 | 468,530 | 5,282 | 6,058,295 | 5,854,985 | ||||||||||||||||||
| Cash management |
448,565 | 5,666 | 676 | 364 | 455,271 | 450,140 | ||||||||||||||||||
| Advisory (3) |
1,769 | 1 | 3 | 6 | 1,779 | 1,778 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | 5,975,818 | $ | 64,666 | $ | 469,209 | $ | 5,652 | $ | 6,515,345 | $ | 6,306,903 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Current Quarter Component Changes by Investment Style and Product Type (Long-term) |
| |||||||||||||||||||||||
| Net | ||||||||||||||||||||||||
| December 31, | inflows | Market | March 31, | |||||||||||||||||||||
| 2018 | (outflows) | change | FX impact (1) | 2019 | Average AUM (2) | |||||||||||||||||||
| Active: |
||||||||||||||||||||||||
| Equity |
$ | 258,205 | $ | (9,464 | ) | $ | 29,893 | $ | 310 | $ | 278,944 | $ | 273,333 | |||||||||||
| Fixed income |
795,985 | 18,285 | 22,525 | 155 | 836,950 | 813,821 | ||||||||||||||||||
| Multi-asset |
449,654 | (1,101 | ) | 38,766 | (375 | ) | 486,944 | 471,984 | ||||||||||||||||
| Alternatives |
113,936 | 5,883 | 2,131 | 87 | 122,037 | 118,539 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Active subtotal |
1,617,780 | 13,603 | 93,315 | 177 | 1,724,875 | 1,677,677 | ||||||||||||||||||
| Index and iShares ETFs: |
||||||||||||||||||||||||
| iShares ETFs: |
||||||||||||||||||||||||
| Equity |
1,274,262 | (1,622 | ) | 151,100 | (536 | ) | 1,423,204 | 1,369,626 | ||||||||||||||||
| Fixed income |
427,596 | 32,203 | 12,010 | (648 | ) | 471,161 | 451,119 | |||||||||||||||||
| Multi-asset |
4,485 | (636 | ) | 320 | 2 | 4,171 | 4,204 | |||||||||||||||||
| Alternatives |
25,082 | 743 | 354 | (5 | ) | 26,174 | 26,119 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| iShares ETFs subtotal |
1,731,425 | 30,688 | 163,784 | (1,187 | ) | 1,924,710 | 1,851,068 | |||||||||||||||||
| Non-ETF Index: |
||||||||||||||||||||||||
| Equity |
1,503,358 | (14,991 | ) | 184,337 | 1,033 | 1,673,737 | 1,621,806 | |||||||||||||||||
| Fixed income |
660,836 | 29,435 | 26,337 | 5,247 | 721,855 | 691,741 | ||||||||||||||||||
| Multi-asset |
7,745 | 82 | 600 | (22 | ) | 8,405 | 8,182 | |||||||||||||||||
| Alternatives |
4,340 | 182 | 157 | 34 | 4,713 | 4,511 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Non-ETF Index subtotal |
2,176,279 | 14,708 | 211,431 | 6,292 | 2,408,710 | 2,326,240 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Index & iShares ETFs subtotal |
3,907,704 | 45,396 | 375,215 | 5,105 | 4,333,420 | 4,177,308 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Long-term |
$ | 5,525,484 | $ | 58,999 | $ | 468,530 | $ | 5,282 | $ | 6,058,295 | $ | 5,854,985 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Current Quarter Component Changes by Product Type (Long-term) |
| |||||||||||||||||||||||
| Net | ||||||||||||||||||||||||
| December 31, | inflows | Market | March 31, | |||||||||||||||||||||
| 2018 | (outflows) | change | FX impact (1) | 2019 | Average AUM (2) | |||||||||||||||||||
| Equity |
$ | 3,035,825 | $ | (26,077 | ) | $ | 365,330 | $ | 807 | $ | 3,375,885 | $ | 3,264,765 | |||||||||||
| Fixed income |
1,884,417 | 79,923 | 60,872 | 4,754 | 2,029,966 | 1,956,681 | ||||||||||||||||||
| Multi-asset |
461,884 | (1,655 | ) | 39,686 | (395 | ) | 499,520 | 484,370 | ||||||||||||||||
| Alternatives: |
||||||||||||||||||||||||
| Illiquid alternatives |
59,827 | 5,938 | 600 | 97 | 66,462 | 63,757 | ||||||||||||||||||
| Liquid alternatives |
51,718 | (99 | ) | 1,494 | 5 | 53,118 | 52,362 | |||||||||||||||||
| Currency and commodities(4) |
31,813 | 969 | 548 | 14 | 33,344 | 33,050 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Alternatives subtotal |
143,358 | 6,808 | 2,642 | 116 | 152,924 | 149,169 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Long-term |
$ | 5,525,484 | $ | 58,999 | $ | 468,530 | $ | 5,282 | $ | 6,058,295 | $ | 5,854,985 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) | Foreign exchange reflects the impact of translating non-US dollar denominated AUM into US dollars for reporting purposes. |
| (2) | Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing four months. |
| (3) | Advisory AUM represents long-term portfolio liquidation assignments. |
| (4) | Amounts include commodity iShares ETFs. |
5
ASSETS UNDER MANAGEMENT
(in millions), (unaudited)
| Year-over-Year Component Changes by Client Type and Product Type |
| |||||||||||||||||||||||||||
| Net | Acquisitions | |||||||||||||||||||||||||||
| March 31, | inflows | and | Market | March 31, | ||||||||||||||||||||||||
| 2018 | (outflows) | dispositions(1) | change | FX impact (2) | 2019 | Average AUM (3) | ||||||||||||||||||||||
| Retail: |
||||||||||||||||||||||||||||
| Equity |
$ | 232,955 | $ | (5,771 | ) | $ | 2,137 | $ | 2,077 | $ | (5,406 | ) | $ | 225,992 | $ | 228,018 | ||||||||||||
| Fixed income |
266,571 | 7,411 | 14,070 | (2,343 | ) | (4,143 | ) | 281,566 | 273,072 | |||||||||||||||||||
| Multi-asset |
121,601 | (2,813 | ) | 2,519 | (2,465 | ) | (944 | ) | 117,898 | 119,768 | ||||||||||||||||||
| Alternatives |
17,236 | 2,753 | 1,628 | (427 | ) | (291 | ) | 20,899 | 19,305 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Retail subtotal |
638,363 | 1,580 | 20,354 | (3,158 | ) | (10,784 | ) | 646,355 | 640,163 | |||||||||||||||||||
| iShares ETFs: |
||||||||||||||||||||||||||||
| Equity |
1,344,564 | 81,482 | — | 9,013 | (11,855 | ) | 1,423,204 | 1,367,394 | ||||||||||||||||||||
| Fixed income |
394,191 | 79,923 | — | 3,410 | (6,363 | ) | 471,161 | 418,978 | ||||||||||||||||||||
| Multi-asset |
3,766 | 366 | — | 43 | (4 | ) | 4,171 | 3,908 | ||||||||||||||||||||
| Alternatives |
25,404 | 1,804 | — | (933 | ) | (101 | ) | 26,174 | 25,078 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| iShares ETFs subtotal |
1,767,925 | 163,575 | — | 11,533 | (18,323 | ) | 1,924,710 | 1,815,358 | ||||||||||||||||||||
| Institutional: |
||||||||||||||||||||||||||||
| Active: |
||||||||||||||||||||||||||||
| Equity |
136,470 | (13,136 | ) | (4,296 | ) | 3,196 | (3,581 | ) | 118,653 | 126,525 | ||||||||||||||||||
| Fixed income |
563,572 | (3,640 | ) | 2,417 | 18,775 | (9,811 | ) | 571,313 | 551,214 | |||||||||||||||||||
| Multi-asset |
343,344 | 18,645 | (1,593 | ) | 19,190 | (10,540 | ) | 369,046 | 351,477 | |||||||||||||||||||
| Alternatives |
87,060 | 11,004 | 3,374 | 1,674 | (1,974 | ) | 101,138 | 91,929 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Active subtotal |
1,130,446 | 12,873 | (98 | ) | 42,835 | (25,906 | ) | 1,160,150 | 1,121,145 | |||||||||||||||||||
| Index: |
||||||||||||||||||||||||||||
| Equity |
1,649,248 | (100,000 | ) | 4,749 | 84,973 | (30,934 | ) | 1,608,036 | 1,624,596 | |||||||||||||||||||
| Fixed income |
662,189 | 48,657 | 2,051 | 23,973 | (30,944 | ) | 705,926 | 651,967 | ||||||||||||||||||||
| Multi-asset |
7,986 | 1,047 | (243 | ) | (167 | ) | (218 | ) | 8,405 | 7,965 | ||||||||||||||||||
| Alternatives |
4,904 | (30 | ) | 1 | (27 | ) | (135 | ) | 4,713 | 4,610 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Index subtotal |
2,324,327 | (50,326 | ) | 6,558 | 108,752 | (62,231 | ) | 2,327,080 | 2,289,138 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Institutional subtotal |
3,454,773 | (37,453 | ) | 6,460 | 151,587 | (88,137 | ) | 3,487,230 | 3,410,283 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Long-term |
5,861,061 | 127,702 | 26,814 | 159,962 | (117,244 | ) | 6,058,295 | 5,865,804 | ||||||||||||||||||||
| Cash management |
454,784 | 2,971 | 686 | 2,184 | (5,354 | ) | 455,271 | 453,287 | ||||||||||||||||||||
| Advisory (4) |
1,139 | 676 | — | 22 | (58 | ) | 1,779 | 1,473 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total |
$ | 6,316,984 | $ | 131,349 | $ | 27,500 | $ | 162,168 | $ | (122,656 | ) | $ | 6,515,345 | $ | 6,320,564 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Year-over-Year Component Changes by Investment Style and Product Type (Long-term) |
| |||||||||||||||||||||||||||
| Net | Acquisitions | |||||||||||||||||||||||||||
| March 31, | inflows | and | Market | March 31, | ||||||||||||||||||||||||
| 2018 | (outflows) | dispositions(1) | change | FX impact (2) | 2019 | Average AUM (3) | ||||||||||||||||||||||
| Active: |
||||||||||||||||||||||||||||
| Equity |
$ | 308,367 | $ | (22,909 | ) | $ | (2,160 | ) | $ | 2,532 | $ | (6,886 | ) | $ | 278,944 | $ | 291,305 | |||||||||||
| Fixed income |
816,274 | 1,419 | 16,487 | 15,878 | (13,108 | ) | 836,950 | 809,653 | ||||||||||||||||||||
| Multi-asset |
464,945 | 15,832 | 926 | 16,725 | (11,484 | ) | 486,944 | 471,245 | ||||||||||||||||||||
| Alternatives |
104,297 | 13,756 | 5,002 | 1,247 | (2,265 | ) | 122,037 | 111,234 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Active subtotal |
1,693,883 | 8,098 | 20,255 | 36,382 | (33,743 | ) | 1,724,875 | 1,683,437 | ||||||||||||||||||||
| Index and iShares ETFs: |
||||||||||||||||||||||||||||
| iShares ETFs |
||||||||||||||||||||||||||||
| Equity |
1,344,564 | 81,482 | — | 9,013 | (11,855 | ) | 1,423,204 | 1,367,394 | ||||||||||||||||||||
| Fixed income |
394,191 | 79,923 | — | 3,410 | (6,363 | ) | 471,161 | 418,978 | ||||||||||||||||||||
| Multi-asset |
3,766 | 366 | — | 43 | (4 | ) | 4,171 | 3,908 | ||||||||||||||||||||
| Alternatives |
25,404 | 1,804 | — | (933 | ) | (101 | ) | 26,174 | 25,078 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| iShares ETFs subtotal |
1,767,925 | 163,575 | — | 11,533 | (18,323 | ) | 1,924,710 | 1,815,358 | ||||||||||||||||||||
| Non-ETF Index |
||||||||||||||||||||||||||||
| Equity |
1,710,306 | (95,998 | ) | 4,750 | 87,714 | (33,035 | ) | 1,673,737 | 1,687,834 | |||||||||||||||||||
| Fixed income |
676,058 | 51,009 | 2,051 | 24,527 | (31,790 | ) | 721,855 | 666,600 | ||||||||||||||||||||
| Multi-asset |
7,986 | 1,047 | (243 | ) | (167 | ) | (218 | ) | 8,405 | 7,965 | ||||||||||||||||||
| Alternatives |
4,903 | (29 | ) | 1 | (27 | ) | (135 | ) | 4,713 | 4,610 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Non-ETF Index subtotal |
2,399,253 | (43,971 | ) | 6,559 | 112,047 | (65,178 | ) | 2,408,710 | 2,367,009 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Index & iShares ETFs subtotal |
4,167,178 | 119,604 | 6,559 | 123,580 | (83,501 | ) | 4,333,420 | 4,182,367 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Long-term |
$ | 5,861,061 | $ | 127,702 | $ | 26,814 | $ | 159,962 | $ | (117,244 | ) | $ | 6,058,295 | $ | 5,865,804 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Year-over-Year Component Changes by Product Type (Long-term) |
| |||||||||||||||||||||||||||
| Net | Acquisitions | |||||||||||||||||||||||||||
| March 31, | inflows | and | Market | March 31, | ||||||||||||||||||||||||
| 2018 | (outflows) | dispositions(1) | change | FX impact (2) | 2019 | Average AUM (3) | ||||||||||||||||||||||
| Equity |
$ | 3,363,237 | $ | (37,425 | ) | $ | 2,590 | $ | 99,259 | $ | (51,776 | ) | $ | 3,375,885 | $ | 3,346,533 | ||||||||||||
| Fixed income |
1,886,523 | 132,351 | 18,538 | 43,815 | (51,261 | ) | 2,029,966 | 1,895,231 | ||||||||||||||||||||
| Multi-asset |
476,697 | 17,245 | 683 | 16,601 | (11,706 | ) | 499,520 | 483,118 | ||||||||||||||||||||
| Alternatives: |
||||||||||||||||||||||||||||
| Illiquid alternatives |
49,472 | 11,965 | 4,968 | 1,238 | (1,181 | ) | 66,462 | 56,670 | ||||||||||||||||||||
| Liquid alternatives |
52,091 | 1,932 | 28 | 77 | (1,010 | ) | 53,118 | 52,039 | ||||||||||||||||||||
| Currency and commodities(5) |
33,041 | 1,634 | 7 | (1,028 | ) | (310 | ) | 33,344 | 32,213 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Alternatives subtotal |
134,604 | 15,531 | 5,003 | 287 | (2,501 | ) | 152,924 | 140,922 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Long-term |
$ | 5,861,061 | $ | 127,702 | $ | 26,814 | $ | 159,962 | $ | (117,244 | ) | $ | 6,058,295 | $ | 5,865,804 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (1) | Amounts include net AUM from the acquisitions of Tennenbaum Capital Partners in August 2018 and the asset management business of Citibanamex in September 2018, AUM reclassifications and net dispositions related to the transfer of BlackRock’s UK Defined Contribution Administration and Platform business to Aegon N.V. in July 2018, and net AUM dispositions related to the sale of BlackRock’s minority interest in DSP BlackRock Investment Managers Pvt. Ltd. to The DSP Group in August 2018. |
| (2) | Foreign exchange reflects the impact of translating non-US dollar denominated AUM into US dollars for reporting purposes. |
| (3) | Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months. |
| (4) | Advisory AUM represents long-term portfolio liquidation assignments. |
| (5) | Amounts include commodity iShares ETFs. |
6
SUMMARY OF REVENUE
| Three Months | Three Months | |||||||||||||||||||
| Ended | Ended | |||||||||||||||||||
| March 31, | December 31, | |||||||||||||||||||
| (in millions), (unaudited) |
2019 | 2018 | Change | 2018 | Change | |||||||||||||||
| Investment advisory, administration fees and securities lending revenue: |
||||||||||||||||||||
| Equity: |
||||||||||||||||||||
| Active |
$ | 375 | $ | 438 | $ | (63 | ) | $ | 385 | $ | (10 | ) | ||||||||
| iShares ETFs |
847 | 926 | (79 | ) | 827 | 20 | ||||||||||||||
| Non-ETF Index |
164 | 176 | (12 | ) | 153 | 11 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Equity subtotal |
1,386 | 1,540 | (154 | ) | 1,365 | 21 | ||||||||||||||
| Fixed income: |
||||||||||||||||||||
| Active |
457 | 456 | 1 | 466 | (9 | ) | ||||||||||||||
| iShares ETFs |
220 | 208 | 12 | 205 | 15 | |||||||||||||||
| Non-ETF Index |
97 | 93 | 4 | 95 | 2 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Fixed income subtotal |
774 | 757 | 17 | 766 | 8 | |||||||||||||||
| Multi-asset |
276 | 296 | (20 | ) | 287 | (11 | ) | |||||||||||||
| Alternatives: |
||||||||||||||||||||
| Illiquid alternatives |
110 | 77 | 33 | 99 | 11 | |||||||||||||||
| Liquid alternatives |
94 | 101 | (7 | ) | 94 | — | ||||||||||||||
| Currency and commodities |
24 | 25 | (1 | ) | 23 | 1 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Alternatives subtotal |
228 | 203 | 25 | 216 | 12 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Long-term |
2,664 | 2,796 | (132 | ) | 2,634 | 30 | ||||||||||||||
| Cash management |
141 | 151 | (10 | ) | 145 | (4 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total base fees |
2,805 | 2,947 | (142 | ) | 2,779 | 26 | ||||||||||||||
| Investment advisory performance fees: |
||||||||||||||||||||
| Equity |
— | 18 | (18 | ) | 23 | (23 | ) | |||||||||||||
| Fixed income |
2 | 3 | (1 | ) | 6 | (4 | ) | |||||||||||||
| Multi-asset |
— | 5 | (5 | ) | 4 | (4 | ) | |||||||||||||
| Alternatives: |
||||||||||||||||||||
| Illiquid alternatives |
20 | — | 20 | 48 | (28 | ) | ||||||||||||||
| Liquid alternatives |
4 | 44 | (40 | ) | 19 | (15 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Alternatives subtotal |
24 | 44 | (20 | ) | 67 | (43 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total performance fees |
26 | 70 | (44 | ) | 100 | (74 | ) | |||||||||||||
| Technology services revenue |
204 | 184 | 20 | 203 | 1 | |||||||||||||||
| Distribution fees: |
||||||||||||||||||||
| Retrocessions |
161 | 192 | (31 | ) | 168 | (7 | ) | |||||||||||||
| 12b-1 fees (US mutual funds distribution fees) |
89 | 108 | (19 | ) | 93 | (4 | ) | |||||||||||||
| Other |
12 | 11 | 1 | 10 | 2 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distribution fees |
262 | 311 | (49 | ) | 271 | (9 | ) | |||||||||||||
| Advisory and other revenue: |
||||||||||||||||||||
| Advisory |
19 | 21 | (2 | ) | 33 | (14 | ) | |||||||||||||
| Other |
30 | 50 | (20 | ) | 48 | (18 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total advisory and other revenue |
49 | 71 | (22 | ) | 81 | (32 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total revenue |
$ | 3,346 | $ | 3,583 | $ | (237 | ) | $ | 3,434 | $ | (88 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Highlights
| • | Investment advisory, administration fees and securities lending revenue decreased $142 million from the first quarter of 2018, primarily driven by the negative impact of markets and foreign exchange on average AUM and the impact of strategic pricing investments, partially offset by the positive impact of acquisitions and organic growth. Securities lending revenue of $148 million in the current quarter compared with $155 million in first quarter of 2018. |
Investment advisory, administration fees and securities lending revenue increased $26 million from the fourth quarter of 2018, driven by the impact of higher average AUM and higher securities lending revenue, partially offset by the effect of two less days in the quarter. Securities lending revenue of $148 million in the current quarter compared with $129 million in the fourth quarter of 2018.
| • | Performance fees decreased $44 million from the first quarter of 2018, primarily reflecting lower revenue from liquid alternatives and long-only products, partially offset by higher revenue from illiquid alternatives. |
Performance fees decreased $74 million from the fourth quarter of 2018, primarily due to a seasonally higher number of funds with a performance measurement period that ended in the fourth quarter of 2018.
| • | Technology services revenue increased $20 million from the first quarter of 2018, primarily reflecting higher revenue from Aladdin. |
| • | Advisory and other revenue decreased $22 million from the first quarter of 2018, primarily reflecting lower earnings from an equity method investment. |
Advisory and other revenue decreased $32 million from the fourth quarter of 2018, primarily reflecting lower fees from advisory and transition management assignments.
7
SUMMARY OF OPERATING EXPENSE
| Three | Three | |||||||||||||||||||
| Months Ended | Months Ended | |||||||||||||||||||
| March 31, | December 31, | |||||||||||||||||||
| (in millions), (unaudited) |
2019 | 2018 | Change | 2018 | Change | |||||||||||||||
| Operating expense |
||||||||||||||||||||
| Employee compensation and benefits |
$ | 1,064 | $ | 1,121 | $ | (57 | ) | $ | 1,020 | $ | 44 | |||||||||
| Distribution and servicing costs: |
||||||||||||||||||||
| Retrocessions |
161 | 192 | (31 | ) | 168 | (7 | ) | |||||||||||||
| 12b-1 costs |
88 | 106 | (18 | ) | 92 | (4 | ) | |||||||||||||
| Other |
155 | 134 | 21 | 160 | (5 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distribution and servicing costs |
404 | 432 | (28 | ) | 420 | (16 | ) | |||||||||||||
| Direct fund expense |
242 | 261 | (19 | ) | 224 | 18 | ||||||||||||||
| General and administration: |
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| Marketing and promotional |
81 | 85 | (4 | ) | 108 | (27 | ) | |||||||||||||
| Occupancy and office related |
74 | 74 | — | 73 | 1 | |||||||||||||||
| Portfolio services |
62 | 70 | (8 | ) | 68 | (6 | ) | |||||||||||||
| Technology |
69 | 53 | 16 | 62 | 7 | |||||||||||||||
| Professional services |
33 | 32 | 1 | 47 | (14 | ) | ||||||||||||||
| Communications |
9 | 10 | (1 | ) | 9 | — | ||||||||||||||
| Foreign exchange remeasurement |
8 | 1 | 7 | 4 | 4 | |||||||||||||||
| Contingent consideration fair value adjustments |
6 | 6 | — | 31 | (25 | ) | ||||||||||||||
| Product launch costs |
— | 11 | (11 | ) | — | — | ||||||||||||||
| Other general and administration |
46 | 41 | 5 | 47 | (1 | ) | ||||||||||||||
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|
|
|
|
|
|
|
|
|
|||||||||||
| Total general and administration expense |
388 | 383 | 5 | 449 | (61 | ) | ||||||||||||||
| Restructuring charge |
— | — | — | 60 | (60 | ) | ||||||||||||||
| Amortization of intangible assets |
15 | 11 | 4 | 15 | — | |||||||||||||||
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|
|
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|
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|
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| Total operating expense |
$ | 2,113 | $ | 2,208 | $ | (95 | ) | $ | 2,188 | $ | (75 | ) | ||||||||
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|
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Highlights
| • | Employee compensation and benefits expense decreased $57 million from the first quarter of 2018, primarily reflecting lower incentive compensation, driven in part by lower operating income. |
Employee compensation and benefits expense increased $44 million from the fourth quarter of 2018, primarily reflecting higher seasonal payroll taxes and an increase in stock-based compensation expense related to the effect of additional grants at the end of January 2019, partially offset by lower incentive compensation, driven in part by lower performance fees and operating income.
| • | General and administration expense increased $5 million from the first quarter of 2018, primarily due to higher technology expense, partially offset by the impact of product launch costs recorded in the first quarter of 2018. |
General and administration expense decreased $61 million from the fourth quarter of 2018, primarily due to seasonally lower marketing and promotional expense, lower professional services expense, and the impact of contingent consideration fair value adjustments related to prior acquisitions recorded in the fourth quarter of 2018.
| • | In the fourth quarter of 2018, a restructuring charge of $60 million, primarily comprised of severance and accelerated amortization expense of previously granted deferred compensation awards, was recorded in connection with an initiative to modify the size and shape of the workforce. |
8
INCOME TAX EXPENSE
| Three | Three | |||||||||||||||||||
| Months Ended | Months Ended | |||||||||||||||||||
| March 31, | December 31, | |||||||||||||||||||
| (in millions), (unaudited) |
2019 | 2018 | Change | 2018 | Change | |||||||||||||||
| Income tax expense |
$ | 298 | $ | 265 | $ | 33 | $ | 247 | $ | 51 | ||||||||||
| Effective tax rate |
22.1 | % | 19.6 | % | 250 | bps | 21.0 | % | 110 | bps | ||||||||||
Highlights
| • | First quarter 2019 and 2018 income tax expense included $22 million and $56 million, respectively, of discrete tax benefits related to stock-based compensation awards that vested in the first quarter of each respective year. |
SUMMARY AND RECONCILIATION OF US GAAP NONOPERATING INCOME (EXPENSE) TO NONOPERATING INCOME (EXPENSE), AS ADJUSTED
| Three Months | Three Months | |||||||||||||||||||
| Ended | Ended | |||||||||||||||||||
| March 31, | December 31, | |||||||||||||||||||
| (in millions), (unaudited) |
2019 | 2018 | Change | 2018 | Change | |||||||||||||||
| Nonoperating income (expense), GAAP basis |
$ | 125 | $ | (16 | ) | $ | 141 | $ | (72 | ) | $ | 197 | ||||||||
| Less: Net income (loss) attributable to noncontrolling interests (“NCI”) |
7 | 5 | 2 | — | 7 | |||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|||||||||||
| Nonoperating income (expense), as adjusted(1)(2) |
$ | 118 | $ | (21 | ) | $ | 139 | $ | (72 | ) | $ | 190 | ||||||||
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| Three Months | Three Months | |||||||||||||||||||
| Ended | Ended | |||||||||||||||||||
| March 31, | December 31, | |||||||||||||||||||
| (in millions), (unaudited) |
2019 | 2018 | Change | 2018 | Change | |||||||||||||||
| Net gain (loss) on investments(1)(2) |
||||||||||||||||||||
| Private equity |
$ | — | $ | 1 | $ | (1 | ) | $ | (15 | ) | $ | 15 | ||||||||
| Real assets |
6 | 5 | 1 | 2 | 4 | |||||||||||||||
| Other alternatives(3) |
8 | 3 | 5 | (3 | ) | 11 | ||||||||||||||
| Other investments(4) |
73 | 1 | 72 | (50 | ) | 123 | ||||||||||||||
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|||||||||||
| Subtotal |
87 | 10 | 77 | (66 | ) | 153 | ||||||||||||||
| Other gains(5) |
48 | — | 48 | (1 | ) | 49 | ||||||||||||||
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|
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|
|
|
|
|
|
|||||||||||
| Total net gain (loss) on investments(1)(2) |
135 | 10 | 125 | (67 | ) | 202 | ||||||||||||||
| Interest and dividend income |
29 | 15 | 14 | 41 | (12 | ) | ||||||||||||||
| Interest expense |
(46 | ) | (46 | ) | — | (46 | ) | — | ||||||||||||
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|
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|
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|
|
|||||||||||
| Net interest expense |
(17 | ) | (31 | ) | 14 | (5 | ) | (12 | ) | |||||||||||
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|
|
|
|
|
|
|
|
|
|||||||||||
| Nonoperating income (expense), as adjusted(1)(2) |
$ | 118 | $ | (21 | ) | $ | 139 | $ | (72 | ) | $ | 190 | ||||||||
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| (1) | Net of net income (loss) attributable to NCI. |
| (2) | Management believes nonoperating income (expense), as adjusted, is an effective measure for reviewing BlackRock’s nonoperating contribution to results. For more information on other as adjusted items and the reconciliation to GAAP see notes (1) through (3) to the condensed consolidated statements of income and supplemental information on pages 10-11. |
| (3) | Amounts primarily include net gains (losses) related to direct hedge fund strategies and hedge fund solutions. |
| (4) | Amounts primarily include net gains (losses) related to equity and fixed income investments. |
| (5) | Amounts primarily include noncash pre-tax gains related to the revaluation of certain minority strategic investments. |
9
RECONCILIATION OF US GAAP OPERATING INCOME AND OPERATING MARGIN TO OPERATING INCOME AND OPERATING MARGIN, AS ADJUSTED
| Three Months Ended | ||||||||||||
| March 31, | December 31, | |||||||||||
| (in millions), (unaudited) |
2019 | 2018 | 2018 | |||||||||
| Operating income, GAAP basis |
$ | 1,233 | $ | 1,375 | $ | 1,246 | ||||||
| Non-GAAP expense adjustments: |
||||||||||||
| Restructuring charge |
— | — | 60 | |||||||||
| PNC LTIP funding obligation |
— | 3 | 4 | |||||||||
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|
|
|
|
|
|
|||||||
| Operating income, as adjusted (1) |
1,233 | 1,378 | 1,310 | |||||||||
| Product launch costs and commissions |
— | 12 | — | |||||||||
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| Operating income used for operating margin measurement |
$ | 1,233 | $ | 1,390 | $ | 1,310 | ||||||
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|||||||
| Revenue, GAAP basis |
$ | 3,346 | $ | 3,583 | $ | 3,434 | ||||||
| Non-GAAP adjustment: |
||||||||||||
| Distribution and servicing costs |
(404 | ) | (432 | ) | (420 | ) | ||||||
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|
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| Revenue used for operating margin measurement |
$ | 2,942 | $ | 3,151 | $ | 3,014 | ||||||
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| Operating margin, GAAP basis |
36.8 | % | 38.4 | % | 36.3 | % | ||||||
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|
|
|
|
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| Operating margin, as adjusted (1) |
41.9 | % | 44.1 | % | 43.5 | % | ||||||
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|
|
|
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See note (1) to the condensed consolidated statements of income and supplemental information on page 11 for more information on as adjusted items and the reconciliation to GAAP.
RECONCILIATION OF US GAAP NET INCOME ATTRIBUTABLE TO BLACKROCK TO NET INCOME ATTRIBUTABLE TO BLACKROCK, AS ADJUSTED
| Three Months Ended | ||||||||||||
| March 31, | December 31, | |||||||||||
| (in millions), (unaudited) |
2019 | 2018 | 2018 | |||||||||
| Net income attributable to BlackRock, Inc., GAAP basis |
$ | 1,053 | $ | 1,089 | $ | 927 | ||||||
| Non-GAAP adjustments: |
||||||||||||
| Restructuring charge, net of tax |
— | — | 47 | |||||||||
| PNC LTIP funding obligation, net of tax |
— | 3 | 3 | |||||||||
| Income tax matters |
— | — | (2 | ) | ||||||||
|
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|
|
|||||||
| Net income attributable to BlackRock, Inc., as adjusted (2) |
$ | 1,053 | $ | 1,092 | $ | 975 | ||||||
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| Diluted weighted-average common shares outstanding (3) |
159.3 | 162.9 | 160.5 | |||||||||
| Diluted earnings per common share, GAAP basis (3) |
$ | 6.61 | $ | 6.68 | $ | 5.78 | ||||||
| Diluted earnings per common share, as adjusted (2) (3) |
$ | 6.61 | $ | 6.70 | $ | 6.08 | ||||||
See notes (2) and (3) to the condensed consolidated statements of income and supplemental information on page 11 for more information on as adjusted items and the reconciliation to GAAP.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION (unaudited)
BlackRock reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”); however, management believes evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and considers them to be helpful, for both management and investors, in evaluating BlackRock’s financial performance over time. Management also uses non-GAAP financial measures as a benchmark to compare its performance with other companies and to enhance the comparability of this information for the reporting periods presented. Non-GAAP measures may pose limitations because they do not include all of BlackRock’s revenue and expense. BlackRock’s management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Non-GAAP measures may not be comparable to other similarly titled measures of other companies.
Management uses both GAAP and non-GAAP financial measures in evaluating BlackRock’s financial performance. Adjustments to GAAP financial measures (“non-GAAP adjustments”) include certain items management deems nonrecurring or that occur infrequently, transactions that ultimately will not impact BlackRock’s book value or certain tax items that do not impact cash flow.
10
Computations for all periods are derived from the condensed consolidated statements of income as follows:
(1) Operating income, as adjusted, and operating margin, as adjusted: Management believes operating income, as adjusted, and operating margin, as adjusted, are effective indicators of BlackRock’s financial performance over time and, therefore, provide useful disclosure to investors.
| • | Operating income, as adjusted, includes non-GAAP expense adjustments. A restructuring charge, primarily comprised of severance and accelerated amortization expense of previously granted deferred compensation awards, has been excluded to provide more meaningful analysis of BlackRock’s ongoing operations and to ensure comparability among periods presented. The portion of compensation expense associated with certain long-term incentive plans (“LTIP”) funded, or to be funded, through share distributions to participants of BlackRock stock held by The PNC Financial Services Group, Inc. (“PNC”) has been excluded because it ultimately does not impact BlackRock’s book value. |
| • | Operating income used for measuring operating margin, as adjusted, is equal to operating income, as adjusted, excluding the impact of product launch costs (e.g. closed-end fund launch costs) and related commissions. Management believes the exclusion of such costs and related commissions is useful because these costs can fluctuate considerably and revenue associated with the expenditure of these costs will not fully impact BlackRock’s results until future periods. |
Revenue used for operating margin, as adjusted, excludes distribution and servicing costs paid to third parties. Management believes such costs represent a benchmark for the amount of revenue passed through to external parties who distribute the Company’s products. BlackRock excludes from revenue used for operating margin, as adjusted, the costs related to distribution and servicing costs as a proxy for such offsetting revenue.
(2) Net income attributable to BlackRock, Inc., as adjusted: Management believes net income attributable to BlackRock, Inc., as adjusted, and diluted earnings per common share, as adjusted, are useful measures of BlackRock’s profitability and financial performance. Net income attributable to BlackRock, Inc., as adjusted, equals net income attributable to BlackRock, Inc., GAAP basis, adjusted for significant nonrecurring items, charges that ultimately will not impact BlackRock’s book value or certain tax items that do not impact cash flow.
See aforementioned discussion regarding operating income, as adjusted, and operating margin, as adjusted, for information on the PNC LTIP funding obligation and restructuring charge.
For each period presented, the non-GAAP adjustment related to the restructuring charge and PNC LTIP funding obligation was tax effected at the respective blended rates applicable to the adjustments. Amounts for income tax matters represent net noncash (benefits) expense primarily associated with the revaluation of certain deferred tax liabilities related to intangible assets and goodwill. Amounts have been excluded from the as adjusted results as these items will not have a cash flow impact and to ensure comparability among periods presented.
Per share amounts reflect net income attributable to BlackRock, Inc., as adjusted divided by diluted weighted average common shares outstanding.
(3) Nonvoting participating preferred stock is considered to be a common stock equivalent for purposes of determining basic and diluted earnings per share calculations.
11
FORWARD-LOOKING STATEMENTS
This filing, and other statements that BlackRock may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock’s future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” and similar expressions.
BlackRock cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and BlackRock assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.
BlackRock has previously disclosed risk factors in its Securities and Exchange Commission (“SEC”) reports. These risk factors and those identified elsewhere in this filing, among others, could cause actual results to differ materially from forward-looking statements or historical performance and include: (1) the introduction, withdrawal, success and timing of business initiatives and strategies; (2) changes and volatility in political, economic or industry conditions, the interest rate environment, foreign exchange rates or financial and capital markets, which could result in changes in demand for products or services or in the value of assets under management; (3) the relative and absolute investment performance of BlackRock’s investment products; (4) the impact of increased competition; (5) the impact of future acquisitions or divestitures; (6) the unfavorable resolution of legal proceedings; (7) the extent and timing of any share repurchases; (8) the impact, extent and timing of technological changes and the adequacy of intellectual property, information and cyber security protection; (9) the potential for human error in connection with BlackRock’s operational systems; (10) the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to BlackRock or PNC; (11) changes in law and policy and uncertainty pending any such changes; (12) terrorist activities, international hostilities and natural disasters, which may adversely affect the general economy, domestic and local financial and capital markets, specific industries or BlackRock; (13) the ability to attract and retain highly talented professionals; (14) fluctuations in the carrying value of BlackRock’s economic investments; (15) the impact of changes to tax legislation, including income, payroll and transaction taxes, and taxation on products or transactions, which could affect the value proposition to clients and, generally, the tax position of the Company; (16) BlackRock’s success in negotiating distribution arrangements and maintaining distribution channels for its products; (17) the failure by a key vendor of BlackRock to fulfill its obligations to the Company; (18) any disruption to the operations of third parties whose functions are integral to BlackRock’s exchange-traded funds platform; (19) the impact of BlackRock electing to provide support to its products from time to time and any potential liabilities related to securities lending or other indemnification obligations; and (20) the impact of problems at other financial institutions or the failure or negative performance of products at other financial institutions.
BlackRock’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and BlackRock’s subsequent filings with the SEC, accessible on the SEC’s website at www.sec.gov and on BlackRock’s website at www.blackrock.com, discuss these factors in more detail and identify additional factors that can affect forward-looking statements. The information contained on the Company’s website is not a part of this filing.
PERFORMANCE NOTES
Past performance is not indicative of future results. Except as specified, the performance information shown is as of March 31, 2019 and is based on preliminary data available at that time. The performance data shown reflects information for all actively and passively managed equity and fixed income accounts, including US registered investment companies, European-domiciled retail funds and separate accounts for which performance data is available, including performance data for high net worth accounts available as of February 28, 2019. The performance data does not include accounts terminated prior to March 31, 2019 and accounts for which data has not yet been verified. If such accounts had been included, the performance data provided may have substantially differed from that shown.
Performance comparisons shown are gross-of-fees for institutional and high net worth separate accounts, and net-of-fees for retail funds. The performance tracking shown for index accounts is based on gross-of-fees performance and includes all institutional accounts and all iShares funds globally using an index strategy. AUM information is based on AUM available as of March 31, 2019 for each account or fund in the asset class shown without adjustment for overlapping management of the same account or fund. Fund performance reflects the reinvestment of dividends and distributions.
Performance shown is derived from applicable benchmarks or peer median information, as selected by BlackRock, Inc. Peer medians are based in part on data either from Lipper, Inc. or Morningstar, Inc. for each included product.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BlackRock, Inc. | ||||||
| (Registrant) | ||||||
| By: | /s/ Gary S. Shedlin | |||||
| Date: April 17, 2019 | Gary S. Shedlin | |||||
| Chief Financial Officer and | ||||||
| Senior Managing Director | ||||||
13