UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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 27, 2020 (
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
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| (Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code:
(Former name or former address, if changed since last report.)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class |
Trading Symbol(s) |
Name of exchange on which registered | ||
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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:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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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 2020 Results
On April 16, 2020, BlackRock, Inc. (the “Company”) reported results of operations for the three months ended March 31, 2020.
FINANCIAL RESULTS
| Q1 |
Q1 |
|||||||
| (in millions, except per share data) |
2020 |
2019 |
||||||
| AUM |
$ | 6,466,668 |
$ | 6,515,345 |
||||
| % change |
(1 |
)% | ||||||
| Average AUM |
$ | 7,124,711 |
$ | 6,306,903 |
||||
| % change |
13 |
% | ||||||
| Total net flows |
$ | 34,988 |
$ | 64,666 |
||||
| GAAP basis: |
||||||||
| Revenue |
$ | 3,710 |
$ | 3,346 |
||||
| % change |
11 |
% | ||||||
| Operating income |
$ | 684 |
$ | 1,233 |
||||
| % change |
(45 |
)% | ||||||
| Operating margin |
18.4 |
% | 36.8 |
% | ||||
| Net income(1) |
$ | 806 |
$ | 1,053 |
||||
| % change |
(23 |
)% | ||||||
| Diluted EPS |
$ | 5.15 |
$ | 6.61 |
||||
| % change |
(22 |
)% | ||||||
| Weighted average diluted shares |
156.4 |
159.3 |
||||||
| % change |
(2 |
)% | ||||||
| As Adjusted: |
||||||||
| Operating income(2) |
$ | 1,273 |
$ | 1,233 |
||||
| % change |
3 |
% | ||||||
| Operating margin(2) |
41.7 |
% | 41.9 |
% | ||||
| Net income(1) (2) |
$ | 1,032 |
$ | 1,053 |
||||
| % change |
(2 |
)% | ||||||
| Diluted EPS(2) |
$ | 6.60 |
$ | 6.61 |
||||
| % change |
0 |
% | ||||||
| (1) | Net income represents net income attributable to BlackRock, Inc. |
| (2) | See notes (1) through (4) to the condensed consolidated statements of income and supplemental information on pages 14-17 for more information on as adjusted items and the reconciliation to GAAP. |
2
Net flow highlights
| Q1 |
LTM(1) |
|||||||
| (in billions) |
2020 |
2020 |
||||||
| Long-term net flows: |
$ | (18.7 |
) | $ | 258.0 |
|||
| By region: |
||||||||
| Americas |
$ | (13.6 |
) | $ | 164.0 |
|||
| EMEA |
(10.6 |
) | 61.0 |
|||||
| APAC |
5.5 |
33.0 |
||||||
| By client type: |
||||||||
| Retail: |
$ | (1.5 |
) | $ | 15.1 |
|||
| US |
(1.5 |
) | 18.7 |
|||||
| International |
0.0 |
(3.6 |
) | |||||
| iShares® : |
$ | 13.8 |
$ | 166.6 |
||||
| Core |
7.0 |
72.0 |
||||||
| Non-Core |
6.8 |
94.6 |
||||||
| Institutional: |
$ | (31.0 |
) | $ | 76.3 |
|||
| Active |
(1.9 |
) | 82.2 |
|||||
| Index |
(29.1 |
) | (5.9 |
) | ||||
| Cash management net flows: |
$ | 52.5 |
$ | 139.9 |
||||
| Advisory net flows: |
$ | 1.2 |
$ | 1.2 |
||||
| Total net flows |
$ | 35.0 |
$ | 399.1 |
||||
| (1) | Amounts represent rolling last twelve months net flows as of March 31, 2020. |
Business RESULTS
| (in millions), (unaudited) |
Q1 2020 |
March 31, AUM |
Q1 2020 |
March 31, 2020 % of Total |
Q1 2020 % of Total |
|||||||||||||||
| RESULTS BY CLIENT TYPE |
||||||||||||||||||||
| Retail |
$ | (1,524 |
) | $ | 608,824 |
$ | 872 |
9 |
% | 28 |
% | |||||||||
| iShares ETFs |
13,830 |
1,852,190 |
1,170 |
29 |
% | 38 |
% | |||||||||||||
| Institutional: |
||||||||||||||||||||
| Active |
(1,862 |
) | 1,230,092 |
574 |
19 |
% | 19 |
% | ||||||||||||
| Index |
(29,103 |
) | 2,178,499 |
261 |
34 |
% | 9 |
% | ||||||||||||
| Total institutional |
(30,965 |
) | 3,408,591 |
835 |
53 |
% | 28 |
% | ||||||||||||
| Long-term |
(18,659 |
) | 5,869,605 |
2,877 |
91 |
% | 94 |
% | ||||||||||||
| Cash management |
52,441 |
594,089 |
178 |
9 |
% | 6 |
% | |||||||||||||
| Advisory |
1,206 |
2,974 |
— |
— |
— |
|||||||||||||||
| Total |
$ | 34,988 |
$ | 6,466,668 |
$ | 3,055 |
100 |
% | 100 |
% | ||||||||||
| RESULTS BY INVESTMENT STYLE |
||||||||||||||||||||
| Active |
$ | (8,944 |
) | $ | 1,758,548 |
$ | 1,427 |
27 |
% | 47 |
% | |||||||||
| Index and iShares ETFs |
(9,715 |
) | 4,111,057 |
1,450 |
64 |
% | 47 |
% | ||||||||||||
| Long-term |
(18,659 |
) | 5,869,605 |
2,877 |
91 |
% | 94 |
% | ||||||||||||
| Cash management |
52,441 |
594,089 |
178 |
9 |
% | 6 |
% | |||||||||||||
| Advisory |
1,206 |
2,974 |
— |
— |
— |
|||||||||||||||
| Total |
$ | 34,988 |
$ | 6,466,668 |
$ | 3,055 |
100 |
% | 100 |
% | ||||||||||
| RESULTS BY PRODUCT TYPE |
||||||||||||||||||||
| Equity |
$ | 3,162 |
$ | 2,959,662 |
$ | 1,440 |
45 |
% | 46 |
% | ||||||||||
| Fixed income |
(35,372 |
) | 2,235,815 |
852 |
35 |
% | 28 |
% | ||||||||||||
| Multi-asset |
4,391 |
494,177 |
293 |
8 |
% | 10 |
% | |||||||||||||
| Alternatives |
9,160 |
179,951 |
292 |
3 |
% | 10 |
% | |||||||||||||
| Long-term |
(18,659 |
) | 5,869,605 |
2,877 |
91 |
% | 94 |
% | ||||||||||||
| Cash management |
52,441 |
594,089 |
178 |
9 |
% | 6 |
% | |||||||||||||
| Advisory |
1,206 |
2,974 |
— |
— |
— |
|||||||||||||||
| Total |
$ | 34,988 |
$ | 6,466,668 |
$ | 3,055 |
100 |
% | 100 |
% | ||||||||||
| (1) | Base fees include investment advisory, administration fees and securities lending revenue. |
3
INVESTMENT PERFORMANCE AT March 31, 2020(1)
| One- year period |
Three- |
Five- |
||||||||||
| Fixed income: |
||||||||||||
| Actively managed AUM above benchmark or peer median |
||||||||||||
| Taxable |
46% |
59% |
71% |
|||||||||
| Tax-exempt |
31% |
30% |
59% |
|||||||||
| Index AUM within or above applicable tolerance |
77% |
96% |
92% |
|||||||||
| Equity: |
||||||||||||
| Actively managed AUM above benchmark or peer median |
||||||||||||
| Fundamental |
76% |
79% |
83% |
|||||||||
| Systematic |
23% |
71% |
66% |
|||||||||
| Index AUM within or above applicable tolerance |
92% |
97% |
96% |
|||||||||
| (1) | Past performance is not indicative of future results. The performance information shown is based on preliminary available data. Please refer to page 18 for performance disclosure detail. |
4
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, |
|||||||||||||||||||||||||||
| 2020 |
2019 |
Change |
2019 |
Change |
||||||||||||||||||||||||
| Revenue |
||||||||||||||||||||||||||||
| Investment advisory, administration fees and securities lending revenue |
$ | 3,055 |
$ | 2,805 |
$ | 250 |
$ | 3,089 |
$ | (34 |
) | |||||||||||||||||
| Investment advisory performance fees |
41 |
26 |
15 |
239 |
(198 |
) | ||||||||||||||||||||||
| Technology services revenue |
274 |
204 |
70 |
274 |
— |
|||||||||||||||||||||||
| Distribution fees |
276 |
262 |
14 |
270 |
6 |
|||||||||||||||||||||||
| Advisory and other revenue |
64 |
49 |
15 |
105 |
(41 |
) | ||||||||||||||||||||||
| Total revenue |
3,710 |
3,346 |
364 |
3,977 |
(267 |
) | ||||||||||||||||||||||
| Expense |
||||||||||||||||||||||||||||
| Employee compensation and benefits |
1,137 |
1,064 |
73 |
1,212 |
(75 |
) | ||||||||||||||||||||||
| Distribution and servicing costs |
445 |
404 |
41 |
438 |
7 |
|||||||||||||||||||||||
| Direct fund expense |
277 |
242 |
35 |
245 |
32 |
|||||||||||||||||||||||
| General and administration |
1,142 |
388 |
754 |
515 |
627 |
|||||||||||||||||||||||
| Amortization of intangible assets |
25 |
15 |
10 |
29 |
(4 |
) | ||||||||||||||||||||||
| Total expense |
3,026 |
2,113 |
913 |
2,439 |
587 |
|||||||||||||||||||||||
| Operating income |
684 |
1,233 |
(549 |
) | 1,538 |
(854 |
) | |||||||||||||||||||||
| Nonoperating income (expense) |
||||||||||||||||||||||||||||
| Net gain (loss) on investments |
(40 |
) | 142 |
(182 |
) | 118 |
(158 |
) | ||||||||||||||||||||
| Interest and dividend income |
15 |
29 |
(14 |
) | 29 |
(14 |
) | |||||||||||||||||||||
| Interest expense |
(46 |
) | (46 |
) | — |
(51 |
) | 5 |
||||||||||||||||||||
| Total nonoperating income (expense) |
(71 |
) | 125 |
(196 |
) | 96 |
(167 |
) | ||||||||||||||||||||
| Income before income taxes |
613 |
1,358 |
(745 |
) | 1,634 |
(1,021 |
) | |||||||||||||||||||||
| Income tax expense (benefit) |
(14 |
) | 298 |
(312 |
) | 300 |
(314 |
) | ||||||||||||||||||||
| Net income |
627 |
1,060 |
(433 |
) | 1,334 |
(707 |
) | |||||||||||||||||||||
| Less: |
||||||||||||||||||||||||||||
| Net income (loss) attributable to noncontrolling interests |
(179 |
) | 7 |
(186 |
) | 33 |
(212 |
) | ||||||||||||||||||||
| Net income attributable to BlackRock, Inc. |
$ | 806 |
$ | 1,053 |
$ | (247 |
) | $ | 1,301 |
$ | (495 |
) | ||||||||||||||||
| Weighted-average common shares outstanding |
||||||||||||||||||||||||||||
| Basic |
155,243,279 |
158,268,034 |
(3,024,755 |
) | 155,195,733 |
47,546 |
||||||||||||||||||||||
| Diluted |
156,416,726 |
159,348,431 |
(2,931,705 |
) | 156,894,201 |
(477,475 |
) | |||||||||||||||||||||
| Earnings per share attributable to BlackRock, Inc. common stockholders (4) |
||||||||||||||||||||||||||||
| Basic |
$ | 5.19 |
$ | 6.65 |
$ | (1.46 |
) | $ | 8.38 |
$ | (3.19 |
) | ||||||||||||||||
| Diluted |
$ | 5.15 |
$ | 6.61 |
$ | (1.46 |
) | $ | 8.29 |
$ | (3.14 |
) | ||||||||||||||||
| Cash dividends declared and paid per share |
$ | 3.63 |
$ | 3.30 |
$ | 0.33 |
$ | 3.30 |
$ | 0.33 |
||||||||||||||||||
| Supplemental information: |
||||||||||||||||||||||||||||
| AUM (end of period) |
$ | 6,466,668 |
$ | 6,515,345 |
$ | (48,677 |
) | $ | 7,429,633 |
$ | (962,965 |
) | ||||||||||||||||
| Shares outstanding (end of period) |
155,085,806 |
155,323,503 |
(237,697 |
) | 155,198,968 |
(113,162 |
) | |||||||||||||||||||||
| GAAP: |
||||||||||||||||||||||||||||
| Operating margin |
18.4 |
% | 36.8 |
% | (1,840 |
) | bps |
38.7 |
% | (2,030 |
) | bps |
||||||||||||||||
| Effective tax rate |
(1.7 |
)% | 22.1 |
% | (2,380 |
) | bps |
18.8 |
% | (2,050 |
) | bps |
||||||||||||||||
| As adjusted: |
||||||||||||||||||||||||||||
| Operating income (1) |
$ | 1,273 |
$ | 1,233 |
$ | 40 |
$ | 1,538 |
$ | (265 |
) | |||||||||||||||||
| Operating margin (1) |
41.7 |
% | 41.9 |
% | (20 |
) | bps |
43.5 |
% | (180 |
) | bps |
||||||||||||||||
| Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests (2) |
$ | (14 |
) | $ | 118 |
$ | (132 |
) | $ | 63 |
$ | (77 |
) | |||||||||||||||
| Net income attributable to BlackRock, Inc. (3) |
$ | 1,032 |
$ | 1,053 |
$ | (21 |
) | $ | 1,309 |
$ | (277 |
) | ||||||||||||||||
| Diluted earnings attributable to BlackRock, Inc. common stockholders per share (3) (4) |
$ | 6.60 |
$ | 6.61 |
$ | (0.01 |
) | $ | 8.34 |
$ | (1.74 |
) | ||||||||||||||||
| Effective tax rate |
18.0 |
% | 22.1 |
% | (410 |
) | bps |
18.3 |
% | (30 |
) | bps |
||||||||||||||||
See pages 14-17 for the reconciliation to GAAP and notes (1) through (4) for more information on as adjusted items.
5
ASSETS UNDER MANAGEMENT
(in millions), (unaudited)
Current Quarter Component Changes by Client Type and Product Type
| December 31, |
Net |
Market |
FX |
March 31, |
Average |
|||||||||||||||||||
| Retail: |
||||||||||||||||||||||||
| Equity |
$ | 252,413 |
$ | 9,103 |
$ | (52,981 |
) | $ | (3,793 |
) | $ | 204,742 |
$ | 237,927 |
||||||||||
| Fixed income |
305,265 |
(8,412 |
) | (14,699 |
) | (4,097 |
) | 278,057 |
301,616 |
|||||||||||||||
| Multi-asset |
120,439 |
(3,557 |
) | (15,177 |
) | (673 |
) | 101,032 |
114,423 |
|||||||||||||||
| Alternatives |
25,180 |
1,342 |
(1,364 |
) | (165 |
) | 24,993 |
25,917 |
||||||||||||||||
| Retail subtotal |
703,297 |
(1,524 |
) | (84,221 |
) | (8,728 |
) | 608,824 |
679,883 |
|||||||||||||||
| iShares ETFs: |
||||||||||||||||||||||||
| Equity |
1,632,972 |
10,448 |
(380,268 |
) | (9,462 |
) | 1,253,690 |
1,496,807 |
||||||||||||||||
| Fixed income |
565,790 |
(1,637 |
) | (6,410 |
) | (3,734 |
) | 554,009 |
572,594 |
|||||||||||||||
| Multi-asset |
5,210 |
24 |
(693 |
) | (42 |
) | 4,499 |
5,007 |
||||||||||||||||
| Alternatives |
36,093 |
4,995 |
(1,030 |
) | (66 |
) | 39,992 |
38,630 |
||||||||||||||||
| iShares ETFs subtotal |
2,240,065 |
13,830 |
(388,401 |
) | (13,304 |
) | 1,852,190 |
2,113,038 |
||||||||||||||||
| Institutional: |
||||||||||||||||||||||||
| Active: |
||||||||||||||||||||||||
| Equity |
141,118 |
1,023 |
(27,278 |
) | (2,423 |
) | 112,440 |
130,260 |
||||||||||||||||
| Fixed income |
651,368 |
(13,908 |
) | (6,073 |
) | (6,042 |
) | 625,345 |
651,318 |
|||||||||||||||
| Multi-asset |
434,233 |
8,194 |
(53,293 |
) | (7,718 |
) | 381,416 |
420,907 |
||||||||||||||||
| Alternatives |
111,951 |
2,829 |
(2,280 |
) | (1,609 |
) | 110,891 |
111,840 |
||||||||||||||||
| Active subtotal |
1,338,670 |
(1,862 |
) | (88,924 |
) | (17,792 |
) | 1,230,092 |
1,314,325 |
|||||||||||||||
| Index: |
||||||||||||||||||||||||
| Equity |
1,793,826 |
(17,412 |
) | (366,413 |
) | (21,211 |
) | 1,388,790 |
1,643,893 |
|||||||||||||||
| Fixed income |
792,969 |
(11,415 |
) | 23,048 |
(26,198 |
) | 778,404 |
803,570 |
||||||||||||||||
| Multi-asset |
8,239 |
(270 |
) | (730 |
) | (9 |
) | 7,230 |
8,146 |
|||||||||||||||
| Alternatives |
4,848 |
(6 |
) | (695 |
) | (72 |
) | 4,075 |
4,499 |
|||||||||||||||
| Index subtotal |
2,599,882 |
(29,103 |
) | (344,790 |
) | (47,490 |
) | 2,178,499 |
2,460,108 |
|||||||||||||||
| Institutional subtotal |
3,938,552 |
(30,965 |
) | (433,714 |
) | (65,282 |
) | 3,408,591 |
3,774,433 |
|||||||||||||||
| Long-term |
6,881,914 |
(18,659 |
) | (906,336 |
) | (87,314 |
) | 5,869,605 |
6,567,354 |
|||||||||||||||
| Cash management |
545,949 |
52,441 |
(260 |
) | (4,041 |
) | 594,089 |
555,263 |
||||||||||||||||
| Advisory(3) |
1,770 |
1,206 |
49 |
(51 |
) | 2,974 |
2,094 |
|||||||||||||||||
| Total |
$ | 7,429,633 |
$ | 34,988 |
$ | (906,547 |
) | $ | (91,406 |
) | $ | 6,466,668 |
$ | 7,124,711 |
||||||||||
6
Current Quarter Component Changes by Investment Style and Product Type (Long-Term)
| December 31, |
Net |
Market |
FX |
March 31, |
Average |
|||||||||||||||||||
| Active: |
||||||||||||||||||||||||
| Equity |
$ | 316,145 |
$ | 3,907 |
$ | (63,277 |
) | $ | (4,017 |
) | $ | 252,758 |
$ | 294,863 |
||||||||||
| Fixed income |
939,275 |
(21,660 |
) | (20,835 |
) | (9,322 |
) | 887,458 |
935,636 |
|||||||||||||||
| Multi-asset |
554,672 |
4,638 |
(68,469 |
) | (8,391 |
) | 482,450 |
535,329 |
||||||||||||||||
| Alternatives |
137,130 |
4,171 |
(3,645 |
) | (1,774 |
) | 135,882 |
137,756 |
||||||||||||||||
| Active subtotal |
1,947,222 |
(8,944 |
) | (156,226 |
) | (23,504 |
) | 1,758,548 |
1,903,584 |
|||||||||||||||
| Index and iShares ETFs: |
||||||||||||||||||||||||
| iShares ETFs: |
||||||||||||||||||||||||
| Equity |
1,632,972 |
10,448 |
(380,268 |
) | (9,462 |
) | 1,253,690 |
1,496,807 |
||||||||||||||||
| Fixed income |
565,790 |
(1,637 |
) | (6,410 |
) | (3,734 |
) | 554,009 |
572,594 |
|||||||||||||||
| Multi-asset |
5,210 |
24 |
(693 |
) | (42 |
) | 4,499 |
5,007 |
||||||||||||||||
| Alternatives |
36,093 |
4,995 |
(1,030 |
) | (66 |
) | 39,992 |
38,630 |
||||||||||||||||
| iShares ETFs subtotal |
2,240,065 |
13,830 |
(388,401 |
) | (13,304 |
) | 1,852,190 |
2,113,038 |
||||||||||||||||
| Non-ETF Index: |
||||||||||||||||||||||||
| Equity |
1,871,212 |
(11,193 |
) | (383,395 |
) | (23,410 |
) | 1,453,214 |
1,717,217 |
|||||||||||||||
| Fixed income |
810,327 |
(12,075 |
) | 23,111 |
(27,015 |
) | 794,348 |
820,868 |
||||||||||||||||
| Multi-asset |
8,239 |
(271 |
) | (731 |
) | (9 |
) | 7,228 |
8,147 |
|||||||||||||||
| Alternatives |
4,849 |
(6 |
) | (694 |
) | (72 |
) | 4,077 |
4,500 |
|||||||||||||||
| Non-ETF Index subtotal |
2,694,627 |
(23,545 |
) | (361,709 |
) | (50,506 |
) | 2,258,867 |
2,550,732 |
|||||||||||||||
| Index and iShares ETFs subtotal |
4,934,692 |
(9,715 |
) | (750,110 |
) | (63,810 |
) | 4,111,057 |
4,663,770 |
|||||||||||||||
| Long-Term |
$ | 6,881,914 |
$ | (18,659 |
) | $ | (906,336 |
) | $ | (87,314 |
) | $ | 5,869,605 |
$ | 6,567,354 |
|||||||||
Current Quarter Component Changes by Product Type (Long-Term)
| December 31, |
Net |
Market |
FX |
March 31, |
Average |
|||||||||||||||||||
| Equity |
$ | 3,820,329 |
$ | 3,162 |
$ | (826,940 |
) | $ | (36,889 |
) | $ | 2,959,662 |
$ | 3,508,887 |
||||||||||
| Fixed income |
2,315,392 |
(35,372 |
) | (4,134 |
) | (40,071 |
) | 2,235,815 |
2,329,098 |
|||||||||||||||
| Multi-asset |
568,121 |
4,391 |
(69,893 |
) | (8,442 |
) | 494,177 |
548,483 |
||||||||||||||||
| Alternatives: |
||||||||||||||||||||||||
| Illiquid alternatives |
75,349 |
2,568 |
(1,765 |
) | (1,051 |
) | 75,101 |
75,305 |
||||||||||||||||
| Liquid alternatives |
59,048 |
1,560 |
(1,743 |
) | (738 |
) | 58,127 |
59,763 |
||||||||||||||||
| Currency and commodities(4) |
43,675 |
5,032 |
(1,861 |
) | (123 |
) | 46,723 |
45,818 |
||||||||||||||||
| Alternatives subtotal |
178,072 |
9,160 |
(5,369 |
) | (1,912 |
) | 179,951 |
180,886 |
||||||||||||||||
| Long-Term |
$ | 6,881,914 |
$ | (18,659 |
) | $ | (906,336 |
) | $ | (87,314 |
) | $ | 5,869,605 |
$ | 6,567,354 |
|||||||||
| (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 mandates linked to purchases and disposition of assets and portfolios on behalf of official institutions and long-term portfolio liquidation assignments. |
| (4) | Amounts include commodity iShares ETFs. |
7
ASSETS UNDER MANAGEMENT
(in millions), (unaudited)
Year-over-Year Component Changes by Client Type and Product Type
| March 31, |
Net |
Market |
FX impact (1) |
March 31, |
Average AUM(2) |
|||||||||||||||||||
| Retail: |
||||||||||||||||||||||||
| Equity |
$ | 225,992 |
$ | 12,064 |
$ | (30,530 |
) | $ | (2,784 |
) | $ | 204,742 |
$ | 233,405 |
||||||||||
| Fixed income |
281,566 |
6,881 |
(6,917 |
) | (3,473 |
) | 278,057 |
295,202 |
||||||||||||||||
| Multi-asset |
117,898 |
(9,158 |
) | (7,121 |
) | (587 |
) | 101,032 |
116,401 |
|||||||||||||||
| Alternatives |
20,899 |
5,309 |
(1,081 |
) | (134 |
) | 24,993 |
23,723 |
||||||||||||||||
| Retail subtotal |
646,355 |
15,096 |
(45,649 |
) | (6,978 |
) | 608,824 |
668,731 |
||||||||||||||||
| iShares ETFs: |
||||||||||||||||||||||||
| Equity |
1,423,204 |
76,775 |
(238,529 |
) | (7,760 |
) | 1,253,690 |
1,476,391 |
||||||||||||||||
| Fixed income |
471,161 |
78,505 |
7,457 |
(3,114 |
) | 554,009 |
533,364 |
|||||||||||||||||
| Multi-asset |
4,171 |
773 |
(413 |
) | (32 |
) | 4,499 |
4,656 |
||||||||||||||||
| Alternatives |
26,174 |
10,582 |
3,278 |
(42 |
) | 39,992 |
32,853 |
|||||||||||||||||
| iShares ETFs subtotal |
1,924,710 |
166,635 |
(228,207 |
) | (10,948 |
) | 1,852,190 |
2,047,264 |
||||||||||||||||
| Institutional: |
||||||||||||||||||||||||
| Active: |
||||||||||||||||||||||||
| Equity |
118,653 |
8,412 |
(12,675 |
) | (1,950 |
) | 112,440 |
127,068 |
||||||||||||||||
| Fixed income |
571,313 |
28,106 |
30,343 |
(4,417 |
) | 625,345 |
635,912 |
|||||||||||||||||
| Multi-asset |
369,046 |
34,389 |
(15,562 |
) | (6,457 |
) | 381,416 |
400,741 |
||||||||||||||||
| Alternatives |
101,138 |
11,322 |
(335 |
) | (1,234 |
) | 110,891 |
106,783 |
||||||||||||||||
| Active subtotal |
1,160,150 |
82,229 |
1,771 |
(14,058 |
) | 1,230,092 |
1,270,504 |
|||||||||||||||||
| Index: |
||||||||||||||||||||||||
| Equity |
1,608,036 |
(39,657 |
) | (164,233 |
) | (15,356 |
) | 1,388,790 |
1,652,582 |
|||||||||||||||
| Fixed income |
705,926 |
34,793 |
53,196 |
(15,511 |
) | 778,404 |
765,808 |
|||||||||||||||||
| Multi-asset |
8,405 |
(1,070 |
) | (128 |
) | 23 |
7,230 |
8,097 |
||||||||||||||||
| Alternatives |
4,713 |
(23 |
) | (580 |
) | (35 |
) | 4,075 |
4,566 |
|||||||||||||||
| Index subtotal |
2,327,080 |
(5,957 |
) | (111,745 |
) | (30,879 |
) | 2,178,499 |
2,431,053 |
|||||||||||||||
| Institutional subtotal |
3,487,230 |
76,272 |
(109,974 |
) | (44,937 |
) | 3,408,591 |
3,701,557 |
||||||||||||||||
| Long-term |
6,058,295 |
258,003 |
(383,830 |
) | (62,863 |
) | 5,869,605 |
6,417,552 |
||||||||||||||||
| Cash management |
455,271 |
139,849 |
2,119 |
(3,150 |
) | 594,089 |
512,006 |
|||||||||||||||||
| Advisory(3) |
1,779 |
1,207 |
28 |
(40 |
) | 2,974 |
1,864 |
|||||||||||||||||
| Total |
$ | 6,515,345 |
$ | 399,059 |
$ | (381,683 |
) | $ | (66,053 |
) | $ | 6,466,668 |
$ | 6,931,422 |
||||||||||
8
Year-over-Year Component Changes by Investment Style and Product Type (Long-Term)
| March 31, |
Net |
Market |
FX impact (1) |
March 31, |
Average AUM(2) |
|||||||||||||||||||
| Active: |
||||||||||||||||||||||||
| Equity |
$ | 278,944 |
$ | 10,454 |
$ | (33,471 |
) | $ | (3,169 |
) | $ | 252,758 |
$ | 290,224 |
||||||||||
| Fixed income |
836,950 |
35,027 |
22,789 |
(7,308 |
) | 887,458 |
914,780 |
|||||||||||||||||
| Multi-asset |
486,944 |
25,232 |
(22,682 |
) | (7,044 |
) | 482,450 |
517,141 |
||||||||||||||||
| Alternatives |
122,037 |
16,630 |
(1,417 |
) | (1,368 |
) | 135,882 |
130,506 |
||||||||||||||||
| Active subtotal |
1,724,875 |
87,343 |
(34,781 |
) | (18,889 |
) | 1,758,548 |
1,852,651 |
||||||||||||||||
| Index and iShares ETFs: |
||||||||||||||||||||||||
| iShares ETFs |
||||||||||||||||||||||||
| Equity |
1,423,204 |
76,775 |
(238,529 |
) | (7,760 |
) | 1,253,690 |
1,476,391 |
||||||||||||||||
| Fixed income |
471,161 |
78,505 |
7,457 |
(3,114 |
) | 554,009 |
533,364 |
|||||||||||||||||
| Multi-asset |
4,171 |
773 |
(413 |
) | (32 |
) | 4,499 |
4,656 |
||||||||||||||||
| Alternatives |
26,174 |
10,582 |
3,278 |
(42 |
) | 39,992 |
32,853 |
|||||||||||||||||
| iShares ETFs subtotal |
1,924,710 |
166,635 |
(228,207 |
) | (10,948 |
) | 1,852,190 |
2,047,264 |
||||||||||||||||
| Non-ETF Index |
||||||||||||||||||||||||
| Equity |
1,673,737 |
(29,635 |
) | (173,967 |
) | (16,921 |
) | 1,453,214 |
1,722,831 |
|||||||||||||||
| Fixed income |
721,855 |
34,753 |
53,833 |
(16,093 |
) | 794,348 |
782,142 |
|||||||||||||||||
| Multi-asset |
8,405 |
(1,071 |
) | (129 |
) | 23 |
7,228 |
8,098 |
||||||||||||||||
| Alternatives |
4,713 |
(22 |
) | (579 |
) | (35 |
) | 4,077 |
4,566 |
|||||||||||||||
| Non-ETF Index subtotal |
2,408,710 |
4,025 |
(120,842 |
) | (33,026 |
) | 2,258,867 |
2,517,637 |
||||||||||||||||
| Index and iShares ETFs subtotal |
4,333,420 |
170,660 |
(349,049 |
) | (43,974 |
) | 4,111,057 |
4,564,901 |
||||||||||||||||
| Long-Term |
$ | 6,058,295 |
$ | 258,003 |
$ | (383,830 |
) | $ | (62,863 |
) | $ | 5,869,605 |
$ | 6,417,552 |
||||||||||
Year-over-Year Component Changes by Product Type (Long-Term)
| March 31, |
Net |
Market |
FX impact (1) |
March 31, |
Average AUM(2) |
|||||||||||||||||||
| Equity |
$ | 3,375,885 |
$ | 57,594 |
$ | (445,967 |
) | $ | (27,850 |
) | $ | 2,959,662 |
$ | 3,489,446 |
||||||||||
| Fixed income |
2,029,966 |
148,285 |
84,079 |
(26,515 |
) | 2,235,815 |
2,230,286 |
|||||||||||||||||
| Multi-asset |
499,520 |
24,934 |
(23,224 |
) | (7,053 |
) | 494,177 |
529,895 |
||||||||||||||||
| Alternatives: |
||||||||||||||||||||||||
| Illiquid alternatives |
66,462 |
10,733 |
(1,265 |
) | (829 |
) | 75,101 |
70,899 |
||||||||||||||||
| Liquid alternatives |
53,118 |
5,615 |
(13 |
) | (593 |
) | 58,127 |
56,910 |
||||||||||||||||
| Currency and commodities(4) |
33,344 |
10,842 |
2,560 |
(23 |
) | 46,723 |
40,116 |
|||||||||||||||||
| Alternatives subtotal |
152,924 |
27,190 |
1,282 |
(1,445 |
) | 179,951 |
167,925 |
|||||||||||||||||
| Long-Term |
$ | 6,058,295 |
$ | 258,003 |
$ | (383,830 |
) | $ | (62,863 |
) | $ | 5,869,605 |
$ | 6,417,552 |
||||||||||
| (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 thirteen months. |
| (3) | Advisory AUM represents mandates linked to purchases and disposition of assets and portfolios on behalf of official institutions and long-term portfolio liquidation assignments. |
| (4) | Amounts include commodity iShares ETFs. |
9
SUMMARY OF REVENUE
| Three Months |
Three |
|||||||||||||||||||
| Ended |
Ended |
|||||||||||||||||||
| March 31, |
December 31, |
|||||||||||||||||||
| (in millions), (unaudited) |
2020 |
2019 |
Change |
2019 |
Change |
|||||||||||||||
| Investment advisory, administration fees and securities lending revenue: |
||||||||||||||||||||
| Equity: |
||||||||||||||||||||
| Active |
$ | 398 |
$ | 375 |
$ | 23 |
$ | 403 |
$ | (5 |
) | |||||||||
| iShares ETFs |
879 |
847 |
32 |
906 |
(27 |
) | ||||||||||||||
| Non-ETF Index |
163 |
164 |
(1 |
) | 172 |
(9 |
) | |||||||||||||
| Equity subtotal |
1,440 |
1,386 |
54 |
1,481 |
(41 |
) | ||||||||||||||
| Fixed income: |
||||||||||||||||||||
| Active |
481 |
457 |
24 |
491 |
(10 |
) | ||||||||||||||
| iShares ETFs |
259 |
220 |
39 |
258 |
1 |
|||||||||||||||
| Non-ETF Index |
112 |
97 |
15 |
112 |
— |
|||||||||||||||
| Fixed income subtotal |
852 |
774 |
78 |
861 |
(9 |
) | ||||||||||||||
| Multi-asset |
293 |
276 |
17 |
296 |
(3 |
) | ||||||||||||||
| Alternatives: |
||||||||||||||||||||
| Illiquid alternatives |
148 |
110 |
38 |
138 |
10 |
|||||||||||||||
| Liquid alternatives |
112 |
94 |
18 |
112 |
— |
|||||||||||||||
| Currency and commodities |
32 |
24 |
8 |
30 |
2 |
|||||||||||||||
| Alternatives subtotal |
292 |
228 |
64 |
280 |
12 |
|||||||||||||||
| Long-term |
2,877 |
2,664 |
213 |
2,918 |
(41 |
) | ||||||||||||||
| Cash management |
178 |
141 |
37 |
171 |
7 |
|||||||||||||||
| Total base fees |
3,055 |
2,805 |
250 |
3,089 |
(34 |
) | ||||||||||||||
| Investment advisory performance fees: |
||||||||||||||||||||
| Equity |
2 |
— |
2 |
31 |
(29 |
) | ||||||||||||||
| Fixed income |
2 |
2 |
— |
8 |
(6 |
) | ||||||||||||||
| Multi-asset |
1 |
— |
1 |
12 |
(11 |
) | ||||||||||||||
| Alternatives: |
||||||||||||||||||||
| Illiquid alternatives |
17 |
20 |
(3 |
) | 96 |
(79 |
) | |||||||||||||
| Liquid alternatives |
19 |
4 |
15 |
92 |
(73 |
) | ||||||||||||||
| Alternatives subtotal |
36 |
24 |
12 |
188 |
(152 |
) | ||||||||||||||
| Total performance fees |
41 |
26 |
15 |
239 |
(198 |
) | ||||||||||||||
| Technology services revenue |
274 |
204 |
70 |
274 |
— |
|||||||||||||||
| Distribution fees: |
||||||||||||||||||||
| Retrocessions |
169 |
161 |
8 |
167 |
2 |
|||||||||||||||
| 12b-1 fees (US mutual fund distribution fees) |
91 |
89 |
2 |
91 |
— |
|||||||||||||||
| Other |
16 |
12 |
4 |
12 |
4 |
|||||||||||||||
| Total distribution fees |
276 |
262 |
14 |
270 |
6 |
|||||||||||||||
| Advisory and other revenue: |
||||||||||||||||||||
| Advisory |
17 |
19 |
(2 |
) | 37 |
(20 |
) | |||||||||||||
| Other |
47 |
30 |
17 |
68 |
(21 |
) | ||||||||||||||
| Total advisory and other revenue |
64 |
49 |
15 |
105 |
(41 |
) | ||||||||||||||
| Total revenue |
$ | 3,710 |
$ | 3,346 |
$ | 364 |
$ | 3,977 |
$ | (267 |
) | |||||||||
Highlights
| • | Investment advisory, administration fees and securities lending revenue increased $250 million from the first quarter of 2019, primarily driven by organic growth, the net positive impact of market beta and foreign exchange on average AUM, despite the impact of recent market volatility, and the effect of one more day in the quarter, partially offset by strategic pricing changes to certain products. Securities lending revenue of $158 million increased from $148 million in the first quarter of 2019. |
Investment advisory, administration fees and securities lending revenue decreased $34 million from the fourth quarter of 2019, driven by the impact of lower average AUM related to recent market declines and the effect of one less day in the quarter, partially offset by the impact of organic growth. Securities lending revenue of $158 million decreased from $169 million in the fourth quarter of 2019.
10
| • | Performance fees increased $15 million from the first quarter of 2019, primarily reflecting higher revenue from liquid alternative products. |
Performance fees decreased $198 million from the fourth quarter of 2019, primarily due to a seasonally higher number of funds with a performance measurement period that ended in the fourth quarter of 2019.
| • | Technology services revenue increased $70 million from the first quarter of 2019, primarily reflecting the impact of the eFront acquisition and higher revenue from Aladdin®. |
| • | Advisory and other revenue decreased $41 million from the fourth quarter of 2019, primarily reflecting lower advisory and transition management assignments. |
SUMMARY OF OPERATING EXPENSE
| Three Months |
Three Months |
|||||||||||||||||||
| Ended |
Ended |
|||||||||||||||||||
| March 31, |
December 31, |
|||||||||||||||||||
| (in millions), (unaudited) |
2020 |
2019 |
Change |
2019 |
Change |
|||||||||||||||
| Operating expense |
||||||||||||||||||||
| Employee compensation and benefits |
$ | 1,137 |
$ | 1,064 |
$ | 73 |
$ | 1,212 |
$ | (75 |
) | |||||||||
| Distribution and servicing costs: |
||||||||||||||||||||
| Retrocessions |
169 |
161 |
8 |
167 |
2 |
|||||||||||||||
| 12b-1 costs |
89 |
88 |
1 |
89 |
— |
|||||||||||||||
| Other |
187 |
155 |
32 |
182 |
5 |
|||||||||||||||
| Total distribution and servicing costs |
445 |
404 |
41 |
438 |
7 |
|||||||||||||||
| Direct fund expense |
277 |
242 |
35 |
245 |
32 |
|||||||||||||||
| General and administration: |
||||||||||||||||||||
| Marketing and promotional |
69 |
81 |
(12 |
) | 109 |
(40 |
) | |||||||||||||
| Occupancy and office related |
78 |
74 |
4 |
83 |
(5 |
) | ||||||||||||||
| Portfolio services |
65 |
62 |
3 |
70 |
(5 |
) | ||||||||||||||
| Technology |
88 |
69 |
19 |
83 |
5 |
|||||||||||||||
| Professional services |
44 |
33 |
11 |
46 |
(2 |
) | ||||||||||||||
| Communications |
12 |
9 |
3 |
10 |
2 |
|||||||||||||||
| Foreign exchange remeasurement |
5 |
8 |
(3 |
) | 13 |
(8 |
) | |||||||||||||
| Contingent consideration fair value adjustments |
25 |
6 |
19 |
35 |
(10 |
) | ||||||||||||||
| Product launch costs |
84 |
— |
84 |
— |
84 |
|||||||||||||||
| Charitable contribution |
589 |
— |
589 |
— |
589 |
|||||||||||||||
| Other general and administration |
83 |
46 |
37 |
66 |
17 |
|||||||||||||||
| Total general and administration expense |
1,142 |
388 |
754 |
515 |
627 |
|||||||||||||||
| Amortization of intangible assets |
25 |
15 |
10 |
29 |
(4 |
) | ||||||||||||||
| Total operating expense |
$ | 3,026 |
$ | 2,113 |
$ | 913 |
$ | 2,439 |
$ | 587 |
||||||||||
Highlights
| • | On February 13, 2020, BlackRock announced the establishment of The BlackRock Foundation (the “Foundation”) and the contribution of its remaining 20% stake in PennyMac Financial Services, Inc. to the Foundation and the BlackRock Charitable Fund, which BlackRock established in 2013 (the “Charitable Contribution”). The Charitable Contribution resulted in an operating expense of $589 million, which was offset by a $122 million noncash, nonoperating pre-tax gain on the contributed shares and a tax benefit of $241 million. The Charitable Contribution will provide long-term funding for BlackRock’s philanthropic investments and partnerships. |
11
| • | Employee compensation and benefits expense increased $73 million from the first quarter of 2019, primarily reflecting higher base compensation partially linked to a higher headcount. |
Employee compensation and benefits expense decreased $75 million from the fourth quarter of 2019, primarily reflecting lower incentive compensation, driven by lower operating income and lower performance fees, partially offset by higher seasonal payroll taxes and higher base compensation.
| • | Direct fund expense increased $35 million from the first quarter of 2019 and $32 million from the fourth quarter of 2019, reflecting higher average AUM. |
| • | General and administration expense increased $754 million from the first quarter of 2019, primarily driven by the Charitable Contribution and $84 million of product launch costs associated with the January 2020 close of the $2.3 billion BlackRock Health Sciences Trust II. The increase also reflected higher technology expense, including certain costs related to COVID-19, higher professional services expense, contingent consideration fair value adjustments related to prior acquisitions, and costs related to certain legal matters, including Aviron Capital, LLC., partially offset by lower marketing and promotional expense. |
General and administration expense increased $627 million from the fourth quarter of 2019, largely driven by the Charitable Contribution, $84 million of product launch costs and costs related to certain legal matters, including Aviron Capital, LLC., partially offset by seasonally lower marketing and promotional expense, lower contingent consideration fair value adjustments and lower foreign exchange remeasurement expense.
INCOME TAX EXPENSE (BENEFIT)
| Three Months |
Three Months |
|||||||||||||||||||||||
| Ended |
Ended |
|||||||||||||||||||||||
| March 31, |
December 31, |
|||||||||||||||||||||||
| (in millions), (unaudited) |
2020 |
2019 |
Change |
2019 |
Change |
|||||||||||||||||||
| Income tax expense (benefit) |
$ | (14 |
) | $ | 298 |
$ | (312 |
) | $ | 300 |
$ | (314 |
) | |||||||||||
| Effective tax rate |
(1.7 |
)% | 22.1 |
% | (2,380 |
) | bps |
18.8 |
% | (2,050 |
) | bps | ||||||||||||
Highlights
| • | First quarter 2020 income tax benefit included a discrete tax benefit of $241 million recognized in connection with the Charitable Contribution. |
| • | First quarter 2020 and 2019 income tax expense (benefit) included $64 million and $23 million, respectively, of discrete tax benefits, including benefits related to stock-based compensation awards that vest in the first quarter of each year. |
| • | Fourth quarter 2019 income tax expense included $21 million of discrete tax benefits. |
12
SUMMARY OF NONOPERATING INCOME (EXPENSE), LESS NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS
| Three Months |
Three Months |
|||||||||||||||||||
| Ended |
Ended |
|||||||||||||||||||
| March 31, |
December 31, |
|||||||||||||||||||
| (in millions), (unaudited) |
2020 |
2019 |
Change |
2019 |
Change |
|||||||||||||||
| Nonoperating income (expense), GAAP basis |
$ | (71 |
) | $ | 125 |
$ | (196 |
) | $ | 96 |
$ | (167 |
) | |||||||
| Less: Net income (loss) attributable to noncontrolling interests (“NCI”) |
(179 |
) | 7 |
(186 |
) | 33 |
(212 |
) | ||||||||||||
| Nonoperating income (expense)(1) |
$ | 108 |
$ | 118 |
$ | (10 |
) | $ | 63 |
$ | 45 |
|||||||||
| Three Months |
Three Months |
|||||||||||||||||||
| Ended |
Ended |
|||||||||||||||||||
| March 31, |
December 31, |
|||||||||||||||||||
| (in millions), (unaudited) |
2020 |
2019 |
Change |
2019 |
Change |
|||||||||||||||
| Net gain (loss) on investments(1) |
||||||||||||||||||||
| Private equity |
$ | (18 |
) | $ | — |
$ | (18 |
) | $ | 9 |
$ | (27 |
) | |||||||
| Real assets |
5 |
6 |
(1 |
) | (1 |
) | 6 |
|||||||||||||
| Other alternatives(2) |
(25 |
) | 8 |
(33 |
) | 1 |
(26 |
) | ||||||||||||
| Other investments(3) |
(150 |
) | 73 |
(223 |
) | 40 |
(190 |
) | ||||||||||||
| Subtotal |
(188 |
) | 87 |
(275 |
) | 49 |
(237 |
) | ||||||||||||
| Gain related to the Charitable Contribution |
122 |
— |
122 |
— |
122 |
|||||||||||||||
| Other gains (losses)(4) |
205 |
48 |
157 |
36 |
169 |
|||||||||||||||
| Total net gain (loss) on investments(1) |
139 |
135 |
4 |
85 |
54 |
|||||||||||||||
| Interest and dividend income |
15 |
29 |
(14 |
) | 29 |
(14 |
) | |||||||||||||
| Interest expense |
(46 |
) | (46 |
) | — |
(51 |
) | 5 |
||||||||||||
| Net interest expense |
(31 |
) | (17 |
) | (14 |
) | (22 |
) | (9 |
) | ||||||||||
| Nonoperating income (expense)(1) |
$ | 108 |
$ | 118 |
$ | (10 |
) | $ | 63 |
$ | 45 |
|||||||||
| (1) | Net of net income (loss) attributable to NCI. Management believes nonoperating income (expense), as adjusted, is an effective measure for reviewing BlackRock’s nonoperating results, which ultimately impact BlackRock’s book value. For more information on as adjusted items and the reconciliation to GAAP see note (2) to the condensed consolidated statements of income and supplemental information on pages 14-17. |
| (2) | Amounts primarily include net gains (losses) related to direct hedge fund strategies and hedge fund solutions. |
| (3) | Amounts primarily include net gains (losses) related to equity and fixed income investments. |
| (4) | The amount for the three months ended March 31, 2020 includes a nonoperating pre-tax gain of approximately $240 million in connection with a recapitalization of iCapital Network, Inc. Additional amounts primarily include noncash pre-tax gains (losses) related to the revaluation of a corporate minority investment. |
13
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) |
2020 |
2019 |
2019 |
|||||||||
| Operating income, GAAP basis |
$ | 684 |
$ | 1,233 |
$ | 1,538 |
||||||
| Non-GAAP expense adjustment: |
||||||||||||
| Charitable Contribution |
589 |
— |
— |
|||||||||
| Operating income, as adjusted (1) |
1,273 |
1,233 |
1,538 |
|||||||||
| Product launch costs and commissions |
87 |
— |
— |
|||||||||
| Operating income used for operating margin measurement |
$ | 1,360 |
$ | 1,233 |
$ | 1,538 |
||||||
| Revenue, GAAP basis |
$ | 3,710 |
$ | 3,346 |
$ | 3,977 |
||||||
| Non-GAAP adjustments: |
||||||||||||
| Distribution fees |
(276 |
) | (262 |
) | (270 |
) | ||||||
| Investment advisory fees |
(169 |
) | (142 |
) | (168 |
) | ||||||
| Revenue used for operating margin measurement |
$ | 3,265 |
$ | 2,942 |
$ | 3,539 |
||||||
| Operating margin, GAAP basis |
18.4 |
% | 36.8 |
% | 38.7 |
% | ||||||
| Operating margin, as adjusted (1) |
41.7 |
% | 41.9 |
% | 43.5 |
% | ||||||
See note (1) to the condensed consolidated statements of income and supplemental information on pages 16 and 17 for more information on as adjusted items and the reconciliation to GAAP.
RECONCILIATION OF US GAAP NONOPERATING INCOME (EXPENSE) TO NONOPERATING INCOME (EXPENSE), LESS NET INCOME (LOSS) ATTRIBUTABLE TO NCI, AS ADJUSTED
| Three Months Ended |
||||||||||||
| March 31, |
December 31, |
|||||||||||
| (in millions), (unaudited) |
2020 |
2019 |
2019 |
|||||||||
| Nonoperating income (expense), GAAP basis |
$ | (71 |
) | $ | 125 |
$ | 96 |
|||||
| Less: Net income (loss) attributable to NCI |
(179 |
) | 7 |
33 |
||||||||
| Nonoperating income (expense), net of NCI |
108 |
118 |
63 |
|||||||||
| Less: Gain related to the Charitable Contribution |
122 |
— |
— |
|||||||||
| Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted (2) |
$ | (14 |
) | $ | 118 |
$ | 63 |
|||||
See note (2) to the condensed consolidated statements of income and supplemental information on page 17 for more information on as adjusted items and the reconciliation to GAAP.
14
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, except per share data), (unaudited) |
2020 |
2019 |
2019 |
|||||||||
| Net income attributable to BlackRock, Inc., GAAP basis |
$ | 806 |
$ | 1,053 |
$ | 1,301 |
||||||
| Non-GAAP adjustments: |
||||||||||||
| Charitable Contribution, net of tax |
226 |
— |
— |
|||||||||
| Income tax matters |
— |
— |
8 |
|||||||||
| Net income attributable to BlackRock, Inc., as adjusted (3) |
$ | 1,032 |
$ | 1,053 |
$ | 1,309 |
||||||
| Diluted weighted-average common shares outstanding (4) |
156.4 |
159.3 |
156.9 |
|||||||||
| Diluted earnings per common share, GAAP basis (4) |
$ | 5.15 |
$ | 6.61 |
$ | 8.29 |
||||||
| Diluted earnings per common share, as adjusted (3) (4) |
$ | 6.60 |
$ | 6.61 |
$ | 8.34 |
||||||
See notes (3) and (4) to the condensed consolidated statements of income and supplemental information on page 17 for more information on as adjusted items and the reconciliation to GAAP.
15
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.
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. Management believes that operating margin, as adjusted, reflects the Company’s long-term ability to manage ongoing costs in relation to its revenues. The Company uses operating margin, as adjusted, to assess the Company’s financial performance and to determine the long-term and annual compensation of the Company’s senior-level employees. Furthermore, this metric is used to evaluate the Company’s relative performance against industry peers, as it eliminates margin variability arising from the accounting of revenues and expenses related to distributing different product structures in multiple distribution channels utilized by asset managers.
| • | Operating income, as adjusted, includes a non-GAAP expense adjustment. The Charitable Contribution expense of $589 million has been excluded from operating income, as adjusted, due to its nonrecurring nature. |
| • | 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 calculating operating margin, as adjusted, is reduced to exclude all of the Company’s distribution fees, which are recorded as a separate line item on the condensed consolidated statements of income, as well as a portion of investment advisory fees received that is used to pay distribution and servicing costs. For certain products, based on distinct arrangements, |
16
| distribution fees are collected by the Company and then passed-through to third-party client intermediaries. For other products, investment advisory fees are collected by the Company and a portion is passed-through to third-party client intermediaries. However, in both structures, the third-party client intermediary similarly owns the relationship with the retail client and is responsible for distributing the product and servicing the client. The amount of distribution and investment advisory fees fluctuates each period primarily based on a predetermined percentage of the value of AUM during the period. These fees also vary based on the type of investment product sold and the geographic location where it is sold. In addition, the Company may waive fees on certain products that could result in the reduction of payments to the third-party intermediaries. |
(2) Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted: Management believes nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, is an effective measure for reviewing BlackRock’s nonoperating contribution to its results and provides comparability of this information among reporting periods. Management believes nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, provides a useful measure, for both management and investors, of BlackRock’s nonoperating results, which ultimately impact BlackRock’s book value. The noncash, nonoperating pre-tax gain of $122 million related to the Charitable Contribution has been excluded from nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted due to its nonrecurring nature.
(3) 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.
The first quarter of 2020 included a discrete tax benefit of $241 million recognized in connection with the Charitable Contribution. The discrete tax benefit has been excluded from as adjusted results due to the non-recurring nature of the Charitable Contribution. 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 as a result of tax rate changes. These 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.
(4) Nonvoting participating preferred stock is considered to be a common stock equivalent for purposes of determining basic and diluted earnings per share calculations.
forward-looking statements
This filing, and other statements that BlackRock may make, may contain forward-looking statement 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.
17
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) a pandemic or health crisis, including the COVID-19 pandemic, and its impact on financial institutions, the global economy or capital markets, as well as BlackRock’s products, clients, vendors and employees, and BlackRock’s results of operations, the full extent of which may be unknown; (2) the introduction, withdrawal, success and timing of business initiatives and strategies; (3) 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 (“AUM”); (4) the relative and absolute investment performance of BlackRock’s investment products; (5) BlackRock’s ability to develop new products and services that address client preferences; (6) the impact of increased competition; (7) the impact of future acquisitions or divestitures; (8) BlackRock’s ability to integrate acquired businesses successfully; (9) the unfavorable resolution of legal proceedings; (10) the extent and timing of any share repurchases; (11) the impact, extent and timing of technological changes and the adequacy of intellectual property, information and cyber security protection; (12) attempts to circumvent BlackRock’s operational control environment or the potential for human error in connection with BlackRock’s operational systems; (13) the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to BlackRock or The PNC Financial Services Group, Inc. (“PNC”); (14) changes in law and policy and uncertainty pending any such changes; (15) 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; (16) the ability to attract and retain highly talented professionals; (17) fluctuations in the carrying value of BlackRock’s economic investments; (18) 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; (19) BlackRock’s success in negotiating distribution arrangements and maintaining distribution channels for its products; (20) the failure by a key vendor of BlackRock to fulfill its obligations to the Company; (21) any disruption to the operations of third parties whose functions are integral to BlackRock’s exchange-traded funds (“ETF”) platform; (22) 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 (23) 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, 2020 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 29, 2020. The performance data does not include accounts terminated prior to March 31, 2020 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, 2020 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.
18
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 27, 2020 |
Chief Financial Officer and | |||
| Senior Managing Director | ||||
| Gary S. Shedlin |
19