EX-99.1 2 blk-ex991_6.htm EARNINGS RELEASE DATED JANUARY 16, 2019 blk-ex991_6.htm

Exhibit 99.1

 

 

 

 

 

INVESTOR RELATIONS:

Samantha Tortora      212.810.5397

 

MEDIA RELATIONS:

Brian Beades    212.810.5596

 

New York, January 16, 2019 – BlackRock, Inc. (NYSE: BLK) today reported financial results for the three months and year ended December 31, 2018.

 

BlackRock Reports Full Year 2018 Diluted EPS of $26.58, or $26.93 as adjusted

Fourth Quarter 2018 Diluted EPS of $5.78, or $6.08 as adjusted

 

 

 

 

 

 

$124 billion of full year total net inflows, led by iShares®, active multi-asset and illiquid alternatives

Record $81 billion of quarterly iShares inflows reflects market leadership in high-growth ETF sector

4% increase in full year revenue driven by growth in base fees and technology services revenue, partially offset by lower performance fees

Restructuring charge of $60 million from initiative to modify the size and shape of the workforce excluded from as adjusted results

4% growth in full year operating income (5% as adjusted)

$3.6 billion returned to shareholders in 2018, including

$1.7 billion of full year share repurchases

5% increase in quarterly cash dividend to $3.30 per share approved by Board of Directors

Laurence D. Fink, Chairman and CEO:

 

“BlackRock’s scale and strategic positioning allowed us to deliver organic growth, revenue growth, and operating leverage in 2018, while simultaneously investing in our highest growth opportunities and returning $3.6 billion in capital to shareholders. The benefits of the investments we have made to build the most diversified global asset management and technology services firm in the world are clearer today than at any point in our history.

 

“BlackRock generated total net inflows of $124 billion in 2018. This included $50 billion of fourth quarter net inflows and record quarters for iShares and illiquid alternative strategies. Technology services revenue grew 19% in 2018, driven by strong demand for Aladdin and our digital wealth technologies. Our results reflect continued growth in these key initiatives and the resilience of our platform.

 

“BlackRock is well positioned to deliver the holistic portfolio solutions, technology services and strategic counsel that clients increasingly are seeking, especially in the face of meaningful headwinds for the asset management industry. We will continue to invest in our platform to ensure BlackRock is even better positioned to serve clients and consistently deliver long-term value to shareholders in the years ahead.”

 

 

 

 

 

FINANCIAL RESULTS  

(in millions,

Q4

 

Q4

 

 

Full Year

 

except per share data)

2018

 

2017*

 

 

2018

 

2017*

 

AUM

$

5,975,818

 

$

6,288,195

 

 

$

5,975,818

 

$

6,288,195

 

% change

 

(5

)%

 

 

 

 

 

(5

)%

 

 

 

Total net flows

$

49,773

 

$

102,929

 

 

$

123,629

 

$

367,254

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

3,434

 

$

3,764

 

 

$

14,198

 

$

13,600

 

% change

 

(9

)%

 

 

 

 

 

4

%

 

 

 

Operating income

$

1,246

 

$

1,485

 

 

$

5,457

 

$

5,254

 

% change

 

(16

)%

 

 

 

 

 

4

%

 

 

 

Operating margin

 

36.3

%

 

39.5

%

 

 

38.4

%

 

38.6

%

Net income(1) (2)

$

927

 

$

2,295

 

 

$

4,305

 

$

4,952

 

% change

 

(60

)%

 

 

 

 

 

(13

)%

 

 

 

Diluted EPS

$

5.78

 

$

14.01

 

 

$

26.58

 

$

30.12

 

% change

 

(59

)%

 

 

 

 

 

(12

)%

 

 

 

Weighted average

   diluted shares

 

160.5

 

 

163.8

 

 

 

161.9

 

 

164.4

 

% change

 

(2

)%

 

 

 

 

 

(2

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As Adjusted:

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income(3)

$

1,310

 

$

1,488

 

 

$

5,531

 

$

5,269

 

% change

 

(12

)%

 

 

 

 

 

5

%

 

 

 

Operating margin(3)

 

43.5

%

 

44.7

%

 

 

44.3

%

 

44.1

%

Net income(2) (3)

$

975

 

$

1,013

 

 

$

4,361

 

$

3,698

 

% change

 

(4

)%

 

 

 

 

 

18

%

 

 

 

Diluted EPS(3)

$

6.08

 

$

6.19

 

 

$

26.93

 

$

22.49

 

% change

 

(2

)%

 

 

 

 

 

20

%

 

 

 

 

 

*

Results for 2017 were recast to reflect the adoption of the new revenue recognition standard. For further information, refer to the Current Report on Form 8-K furnished on March 22, 2018.

(1)

GAAP net income for fourth quarter 2017 reflected $1.2 billion of net tax benefit related to the Tax Cuts and Jobs Act.

(2)

Net income represents net income attributable to BlackRock, Inc.

(3)

See notes (1) through (3) to the condensed consolidated statements of income and supplemental information on pages 10 and 11 for more information on as adjusted items and the reconciliation to GAAP.

NET FLOW HIGHLIGHTS

 

 

 

Q4

 

 

Full Year

 

(in billions)

2018

 

 

2018

 

Long-term net flows:

$

43.6

 

 

$

123.3

 

 

 

 

 

 

 

 

 

 

 

By region:

 

 

 

 

 

 

 

 

 

 

 

 

Americas:

 

60.5

 

 

 

156.9

 

 

EMEA:

 

(0.4

)

 

 

(23.3

)

 

APAC:

 

(16.5

)

 

 

(10.3

)

 

 

 

 

 

 

 

 

 

 

By client type:

 

 

 

 

 

 

 

 

 

 

 

 

Retail:

$

(3.2

)

 

$

20.7

 

 

 

U.S.:

 

6.5

 

 

 

25.9

 

 

 

International:

 

(9.7

)

 

 

(5.2

)

 

 

 

 

 

 

 

 

 

 

 

iShares:

$

81.4

 

 

$

167.5

 

 

 

Core:

 

33.2

 

 

 

106.2

 

 

 

Non-Core:

 

48.2

 

 

 

61.3

 

 

 

 

 

 

 

 

 

 

 

 

Institutional:

$

(34.6

)

 

$

(64.9

)

 

 

Index:

 

(27.0

)

 

 

(53.7

)

 

 

Active:

 

(7.6

)

 

 

(11.2

)

 

 

 

 

 

 

 

 

 

 

Cash management net flows:

$

6.1

 

 

$

0.0

 

 

 

 

 

 

 

1

 

BUSINESS RESULTS

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

Q4 2018

 

 

 

Q4 2018

 

December 31, 2018

 

Q4 2018

 

AUM

 

Base fees(1)

 

 

(in millions), (unaudited)

Net flows

 

AUM

 

Base fees(1)

 

% of Total

 

% of Total

 

 

RESULTS BY CLIENT TYPE

Retail

$

(3,178

)

$

610,850

 

$

840

 

 

10

%

 

30

%

 

iShares ETFs

 

81,402

 

 

1,731,425

 

 

1,054

 

 

29

%

 

38

%

 

Institutional:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

(7,568

)

 

1,079,979

 

 

502

 

 

18

%

 

18

%

 

Index

 

(27,064

)

 

2,103,230

 

 

238

 

 

35

%

 

9

%

 

Total institutional

 

(34,632

)

 

3,183,209

 

 

740

 

 

53

%

 

27

%

 

Long-term

 

43,592

 

 

5,525,484

 

 

2,634

 

 

92

%

 

95

%

 

Cash management

 

6,146

 

 

448,565

 

 

145

 

 

8

%

 

5

%

 

Advisory

 

35

 

 

1,769

 

 

-

 

 

-

 

 

-

 

 

Total

$

49,773

 

$

5,975,818

 

$

2,779

 

 

100

%

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RESULTS BY INVESTMENT STYLE

Active

$

(12,283

)

$

1,617,780

 

$

1,328

 

 

27

%

 

48

%

 

Index and iShares ETFs

 

55,875

 

 

3,907,704

 

 

1,306

 

 

65

%

 

47

%

 

Long-term

 

43,592

 

 

5,525,484

 

 

2,634

 

 

92

%

 

95

%

 

Cash management

 

6,146

 

 

448,565

 

 

145

 

 

8

%

 

5

%

 

Advisory

 

35

 

 

1,769

 

 

-

 

 

-

 

 

-

 

 

Total

$

49,773

 

$

5,975,818

 

$

2,779

 

 

100

%

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RESULTS BY PRODUCT TYPE

Equity

$

28,292

 

$

3,035,825

 

$

1,365

 

 

50

%

 

49

%

 

Fixed income

 

3,100

 

 

1,884,417

 

 

766

 

 

32

%

 

28

%

 

Multi-asset

 

7,297

 

 

461,884

 

 

287

 

 

8

%

 

10

%

 

Alternatives

 

4,903

 

 

143,358

 

 

216

 

 

2

%

 

8

%

 

Long-term

 

43,592

 

 

5,525,484

 

 

2,634

 

 

92

%

 

95

%

 

Cash management

 

6,146

 

 

448,565

 

 

145

 

 

8

%

 

5

%

 

Advisory

 

35

 

 

1,769

 

 

-

 

 

-

 

 

-

 

 

Total

$

49,773

 

$

5,975,818

 

$

2,779

 

 

100

%

 

100

%

 

(1)

Base fees include investment advisory, administration fees and securities lending revenue.

 

INVESTMENT PERFORMANCE AT DECEMBER 31, 2018(1)

One-year period

 

Three-year period

 

Five-year period

 

  Fixed income:

 

 

 

 

 

 

 

 

 

  Actively managed AUM above benchmark or peer median

 

 

 

 

 

 

 

 

 

Taxable

48%

 

69%

 

82%

 

Tax-exempt

47%

 

71%

 

76%

 

  Index AUM within or above applicable tolerance

98%

 

99%

 

98%

 

  Equity:

 

 

 

 

 

 

 

 

 

  Actively managed AUM above benchmark or peer median

 

 

 

 

 

 

 

 

 

Fundamental

50%

 

67%

 

78%

 

Systematic

32%

 

83%

 

93%

 

  Index AUM within or above applicable tolerance

97%

 

98%

 

99%

 

(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.

CAPITAL MANAGEMENT

BlackRock’s Board of Directors approved a 5% increase in the quarterly cash dividend to $3.30 per share, payable March 21, 2019, to shareholders of record at the close of business on March 6, 2019.

TELECONFERENCE, WEBCAST AND PRESENTATION INFORMATION

Chairman and Chief Executive Officer, Laurence D. Fink, President, Robert S. Kapito, and Chief Financial Officer, Gary S. Shedlin, will host a teleconference call for investors and analysts on Wednesday, January 16, 2019 at 8:30 a.m. (Eastern Time). Members of the public who are interested in participating in the teleconference should dial, from the United States, (800) 374-0176, or from outside the United States, (706) 679-8281, shortly before 8:30 a.m. and reference the BlackRock Conference Call (ID Number 7965387). A live, listen-only webcast will also be available via the investor relations section of www.blackrock.com.

Both the teleconference and webcast will be available for replay by 3:30 p.m. (Eastern Time) on Wednesday, January 16, 2019 and ending at midnight on Wednesday, January 30, 2019. To access the replay of the teleconference, callers from the United States should dial (855) 859-2056 and callers from outside the United States should dial (404) 537-3406 and enter the Conference ID Number 7965387. To access the webcast, please visit the investor relations section of www.blackrock.com.

ABOUT BLACKROCK

BlackRock helps investors build better financial futures. As a fiduciary to our clients, we provide the investment and technology solutions they need when planning for their most important goals. As of December 31, 2018, the firm managed approximately $5.98 trillion in assets on behalf of investors worldwide. For additional information on BlackRock, please visit www.blackrock.com | Twitter: @blackrock | Blog: www.blackrockblog.com | LinkedIn: www.linkedin.com/company/blackrock.

 

2

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

(in millions, except shares and per share data), (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

Ended

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

2018

 

 

2017*

 

 

Change

 

 

2018

 

 

Change

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment advisory, administration fees and

  securities lending revenue

$

2,779

 

 

$

2,897

 

 

$

(118

)

 

$

2,883

 

 

$

(104

)

Investment advisory performance fees

 

100

 

 

 

285

 

 

 

(185

)

 

 

151

 

 

 

(51

)

Technology services revenue

 

203

 

 

 

176

 

 

 

27

 

 

 

200

 

 

 

3

 

Distribution fees

 

271

 

 

 

306

 

 

 

(35

)

 

 

279

 

 

 

(8

)

Advisory and other revenue

 

81

 

 

 

100

 

 

 

(19

)

 

 

63

 

 

 

18

 

Total revenue

 

3,434

 

 

 

3,764

 

 

 

(330

)

 

 

3,576

 

 

 

(142

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

1,020

 

 

 

1,147

 

 

 

(127

)

 

 

1,097

 

 

 

(77

)

Distribution and servicing costs

 

420

 

 

 

433

 

 

 

(13

)

 

 

408

 

 

 

12

 

Direct fund expense

 

224

 

 

 

237

 

 

 

(13

)

 

 

249

 

 

 

(25

)

General and administration

 

449

 

 

 

450

 

 

 

(1

)

 

 

413

 

 

 

36

 

Restructuring charge

 

60

 

 

 

-

 

 

 

60

 

 

 

-

 

 

 

60

 

Amortization of intangible assets

 

15

 

 

 

12

 

 

 

3

 

 

 

13

 

 

 

2

 

Total expense

 

2,188

 

 

 

2,279

 

 

 

(91

)

 

 

2,180

 

 

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

1,246

 

 

 

1,485

 

 

 

(239

)

 

 

1,396

 

 

 

(150

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonoperating income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss) on investments

 

(67

)

 

 

33

 

 

 

(100

)

 

 

50

 

 

 

(117

)

Interest and dividend income

 

41

 

 

 

14

 

 

 

27

 

 

 

29

 

 

 

12

 

Interest expense

 

(46

)

 

 

(46

)

 

 

-

 

 

 

(46

)

 

 

-

 

Total nonoperating income (expense)

 

(72

)

 

 

1

 

 

 

(73

)

 

 

33

 

 

 

(105

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

1,174

 

 

 

1,486

 

 

 

(312

)

 

 

1,429

 

 

 

(255

)

Income tax expense (benefit)

 

247

 

 

 

(815

)

 

 

1,062

 

 

 

226

 

 

 

21

 

Net income

 

927

 

 

 

2,301

 

 

 

(1,374

)

 

 

1,203

 

 

 

(276

)

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to noncontrolling

  interests

 

-

 

 

 

6

 

 

 

(6

)

 

 

(13

)

 

 

13

 

Net income attributable to BlackRock, Inc.

$

927

 

 

$

2,295

 

 

$

(1,368

)

 

$

1,216

 

 

$

(289

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

158,859,998

 

 

 

161,272,950

 

 

 

(2,412,952

)

 

 

160,141,506

 

 

 

(1,281,508

)

Diluted

 

160,450,266

 

 

 

163,777,534

 

 

 

(3,327,268

)

 

 

161,378,217

 

 

 

(927,951

)

Earnings per share attributable to BlackRock, Inc.

   common stockholders (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

5.84

 

 

$

14.23

 

 

$

(8.39

)

 

$

7.59

 

 

$

(1.75

)

Diluted

$

5.78

 

 

$

14.01

 

 

$

(8.23

)

 

$

7.54

 

 

$

(1.76

)

Cash dividends declared and paid per share

$

3.13

 

 

$

2.50

 

 

$

0.63

 

 

$

3.13

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AUM (end of period)

$

5,975,818

 

 

$

6,288,195

 

 

$

(312,377

)

 

$

6,444,100

 

 

$

(468,282

)

Shares outstanding (end of period)

 

158,520,147

 

 

 

161,046,825

 

 

 

(2,526,678

)

 

 

159,804,364

 

 

 

(1,284,217

)

GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

36.3

%

 

 

39.5

%

 

 

(320

) bps

 

 

39.0

%

 

 

(270

) bps

Effective tax rate

 

21.0

%

 

 

(55.1

)%

 

 

7,610

  bps

 

 

15.7

%

 

 

530

  bps

As adjusted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (1)

$

1,310

 

 

$

1,488

 

 

$

(178

)

 

$

1,400

 

 

$

(90

)

Operating margin (1)

 

43.5

%

 

 

44.7

%

 

 

(120

) bps

 

 

44.2

%

 

 

(70

) bps

Nonoperating income (expense), less net income

     (loss) attributable to noncontrolling interests

$

(72

)

 

$

(5

)

 

$

(67

)

 

$

46

 

 

$

(118

)

Net income attributable to BlackRock, Inc. (2)

$

975

 

 

$

1,013

 

 

$

(38

)

 

$

1,214

 

 

$

(239

)

Diluted earnings attributable to BlackRock, Inc.

     common stockholders per share (2) (3)

$

6.08

 

 

$

6.19

 

 

$

(0.11

)

 

$

7.52

 

 

$

(1.44

)

Effective tax rate

 

21.2

%

 

 

31.7

%

 

 

(1,050

) bps

 

 

16.0

%

 

 

520

  bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See pages 10-11 for the reconciliation to GAAP and notes (1) through (3) for more information on as adjusted items.

 

*

Results for 2017 were recast to reflect the adoption of the new revenue recognition standard. For further information, refer to the Current Report on Form 8-K furnished on March 22, 2018.  

 

 

 


3

 

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

(in millions, except shares and per share data), (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

2018

 

 

2017*

 

 

Change

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

Investment advisory, administration fees and securities

      lending revenue

$

11,553

 

 

$

10,868

 

 

$

685

 

Investment advisory performance fees

 

412

 

 

 

594

 

 

 

(182

)

Technology services revenue

 

785

 

 

 

657

 

 

 

128

 

Distribution fees

 

1,155

 

 

 

1,183

 

 

 

(28

)

Advisory and other revenue

 

293

 

 

 

298

 

 

 

(5

)

Total revenue

 

14,198

 

 

 

13,600

 

 

 

598

 

 

 

 

 

 

 

 

 

 

 

 

 

Expense

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

4,320

 

 

 

4,253

 

 

 

67

 

Distribution and servicing costs

 

1,675

 

 

 

1,663

 

 

 

12

 

Direct fund expense

 

998

 

 

 

895

 

 

 

103

 

General and administration

 

1,638

 

 

 

1,446

 

 

 

192

 

Restructuring charge

 

60

 

 

 

-

 

 

 

60

 

Amortization of intangible assets

 

50

 

 

 

89

 

 

 

(39

)

Total expense

 

8,741

 

 

 

8,346

 

 

 

395

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

5,457

 

 

 

5,254

 

 

 

203

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonoperating income (expense)

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss) on investments

 

1

 

 

 

161

 

 

 

(160

)

Interest and dividend income

 

104

 

 

 

49

 

 

 

55

 

Interest expense

 

(184

)

 

 

(205

)

 

 

21

 

Total nonoperating income (expense)

 

(79

)

 

 

5

 

 

 

(84

)

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

5,378

 

 

 

5,259

 

 

 

119

 

Income tax expense

 

1,076

 

 

 

270

 

 

 

806

 

Net income

 

4,302

 

 

 

4,989

 

 

 

(687

)

Less:

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to noncontrolling interests

 

(3

)

 

 

37

 

 

 

(40

)

Net income attributable to BlackRock, Inc.

$

4,305

 

 

$

4,952

 

 

$

(647

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

Basic

 

160,301,116

 

 

 

162,160,601

 

 

 

(1,859,485

)

Diluted

 

161,948,732

 

 

 

164,415,035

 

 

 

(2,466,303

)

Earnings per share attributable to BlackRock, Inc.

   common stockholders (3)

 

 

 

 

 

 

 

 

 

 

 

Basic

$

26.86

 

 

$

30.54

 

 

$

(3.68

)

Diluted

$

26.58

 

 

$

30.12

 

 

$

(3.54

)

Cash dividends declared and paid per share

$

12.02

 

 

$

10.00

 

 

$

2.02

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AUM (end of period)

$

5,975,818

 

 

$

6,288,195

 

 

$

(312,377

)

Shares outstanding (end of period)

 

158,520,147

 

 

 

161,046,825

 

 

 

(2,526,678

)

GAAP:

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

38.4

%

 

 

38.6

%

 

 

(20

) bps

Effective tax rate

 

20.0

%

 

 

5.2

%

 

 

1,480

  bps

As adjusted:

 

 

 

 

 

 

 

 

 

 

 

Operating income (1)

$

5,531

 

 

$

5,269

 

 

$

262

 

Operating margin (1)

 

44.3

%

 

 

44.1

%

 

 

20

  bps

Nonoperating income (expense), less net income (loss)

     attributable to noncontrolling interests

$

(76

)

 

$

(32

)

 

$

(44

)

Net income attributable to BlackRock, Inc. (2)

$

4,361

 

 

$

3,698

 

 

$

663

 

Diluted earnings attributable to BlackRock, Inc.

     common stockholders per share (2) (3)

$

26.93

 

 

$

22.49

 

 

$

4.44

 

Effective tax rate

 

20.0

%

 

 

29.4

%

 

 

(940

) bps

 

 

 

 

 

 

 

 

 

 

 

 

See pages 10-11 for the reconciliation to GAAP and notes (1) through (3) for more information on as adjusted items.

 

*

Results for 2017 were recast to reflect the adoption of the new revenue recognition standard. For further information, refer to the Current Report on Form 8-K furnished on March 22, 2018.  

 

4

 

 

ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Current Quarter Component Changes by Client Type and Product Type

 

 

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

inflows

 

 

Market

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

2018

 

 

(outflows)

 

 

change

 

 

FX impact (1)

 

 

2018

 

 

Average AUM (2)

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

237,544

 

 

$

2,295

 

 

$

(32,766

)

 

$

(1,359

)

 

$

205,714

 

 

$

220,909

 

Fixed income

 

282,879

 

 

 

(7,877

)

 

 

(1,947

)

 

 

(1,467

)

 

 

271,588

 

 

 

276,755

 

Multi-asset

 

124,304

 

 

 

170

 

 

 

(10,701

)

 

 

(356

)

 

 

113,417

 

 

 

119,109

 

Alternatives

 

18,534

 

 

 

2,234

 

 

 

(575

)

 

 

(62

)

 

 

20,131

 

 

 

19,045

 

Retail subtotal

 

663,261

 

 

 

(3,178

)

 

 

(45,989

)

 

 

(3,244

)

 

 

610,850

 

 

 

635,818

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,413,925

 

 

 

60,509

 

 

 

(196,608

)

 

 

(3,564

)

 

 

1,274,262

 

 

 

1,339,103

 

Fixed income

 

412,343

 

 

 

18,858

 

 

 

(1,939

)

 

 

(1,666

)

 

 

427,596

 

 

 

413,580

 

Multi-asset

 

3,814

 

 

 

988

 

 

 

(312

)

 

 

(5

)

 

 

4,485

 

 

 

3,950

 

Alternatives

 

23,106

 

 

 

1,047

 

 

 

960

 

 

 

(31

)

 

 

25,082

 

 

 

23,717

 

iShares ETFs subtotal

 

1,853,188

 

 

 

81,402

 

 

 

(197,899

)

 

 

(5,266

)

 

 

1,731,425

 

 

 

1,780,350

 

Institutional:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

128,975

 

 

 

(1,641

)

 

 

(15,655

)

 

 

(703

)

 

 

110,976

 

 

 

119,411

 

Fixed income

 

551,591

 

 

 

(13,315

)

 

 

2,189

 

 

 

(1,504

)

 

 

538,961

 

 

 

543,033

 

Multi-asset

 

356,887

 

 

 

5,675

 

 

 

(23,444

)

 

 

(2,881

)

 

 

336,237

 

 

 

347,598

 

Alternatives

 

93,468

 

 

 

1,713

 

 

 

(953

)

 

 

(423

)

 

 

93,805

 

 

 

93,594

 

Active subtotal

 

1,130,921

 

 

 

(7,568

)

 

 

(37,863

)

 

 

(5,511

)

 

 

1,079,979

 

 

 

1,103,636

 

Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,702,243

 

 

 

(32,871

)

 

 

(220,536

)

 

 

(3,963

)

 

 

1,444,873

 

 

 

1,572,931

 

Fixed income

 

636,993

 

 

 

5,434

 

 

 

10,142

 

 

 

(6,297

)

 

 

646,272

 

 

 

635,009

 

Multi-asset

 

7,805

 

 

 

464

 

 

 

(619

)

 

 

95

 

 

 

7,745

 

 

 

7,787

 

Alternatives

 

4,744

 

 

 

(91

)

 

 

(296

)

 

 

(17

)

 

 

4,340

 

 

 

4,548

 

Index subtotal

 

2,351,785

 

 

 

(27,064

)

 

 

(211,309

)

 

 

(10,182

)

 

 

2,103,230

 

 

 

2,220,275

 

Institutional subtotal

 

3,482,706

 

 

 

(34,632

)

 

 

(249,172

)

 

 

(15,693

)

 

 

3,183,209

 

 

 

3,323,911

 

Long-term

 

5,999,155

 

 

 

43,592

 

 

 

(493,060

)

 

 

(24,203

)

 

 

5,525,484

 

 

 

5,740,079

 

Cash management

 

443,185

 

 

 

6,146

 

 

 

550

 

 

 

(1,316

)

 

 

448,565

 

 

 

445,872

 

Advisory (3)

 

1,760

 

 

 

35

 

 

 

7

 

 

 

(33

)

 

 

1,769

 

 

 

1,762

 

Total

$

6,444,100

 

 

$

49,773

 

 

$

(492,503

)

 

$

(25,552

)

 

$

5,975,818

 

 

$

6,187,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Quarter Component Changes by Investment Style and Product Type (Long-term)

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

inflows

 

 

Market

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

2018

 

 

(outflows)

 

 

change

 

 

FX impact (1)

 

 

2018

 

 

Average AUM (2)

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

301,049

 

 

$

(1,312

)

 

$

(40,089

)

 

$

(1,443

)

 

$

258,205

 

 

$

278,269

 

Fixed income

 

819,332

 

 

 

(20,763

)

 

 

116

 

 

 

(2,700

)

 

 

795,985

 

 

 

804,945

 

Multi-asset

 

481,192

 

 

 

5,845

 

 

 

(34,146

)

 

 

(3,237

)

 

 

449,654

 

 

 

466,707

 

Alternatives

 

112,003

 

 

 

3,947

 

 

 

(1,529

)

 

 

(485

)

 

 

113,936

 

 

 

112,639

 

Active subtotal

 

1,713,576

 

 

 

(12,283

)

 

 

(75,648

)

 

 

(7,865

)

 

 

1,617,780

 

 

 

1,662,560

 

Index and iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,413,925

 

 

 

60,509

 

 

 

(196,608

)

 

 

(3,564

)

 

 

1,274,262

 

 

 

1,339,103

 

Fixed income

 

412,343

 

 

 

18,858

 

 

 

(1,939

)

 

 

(1,666

)

 

 

427,596

 

 

 

413,580

 

Multi-asset

 

3,814

 

 

 

988

 

 

 

(312

)

 

 

(5

)

 

 

4,485

 

 

 

3,950

 

Alternatives

 

23,106

 

 

 

1,047

 

 

 

960

 

 

 

(31

)

 

 

25,082

 

 

 

23,717

 

iShares ETFs subtotal

 

1,853,188

 

 

 

81,402

 

 

 

(197,899

)

 

 

(5,266

)

 

 

1,731,425

 

 

 

1,780,350

 

Non-ETF Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,767,713

 

 

 

(30,905

)

 

 

(228,868

)

 

 

(4,582

)

 

 

1,503,358

 

 

 

1,634,982

 

Fixed income

 

652,131

 

 

 

5,005

 

 

 

10,268

 

 

 

(6,568

)

 

 

660,836

 

 

 

649,852

 

Multi-asset

 

7,804

 

 

 

464

 

 

 

(618

)

 

 

95

 

 

 

7,745

 

 

 

7,787

 

Alternatives

 

4,743

 

 

 

(91

)

 

 

(295

)

 

 

(17

)

 

 

4,340

 

 

 

4,548

 

Non-ETF Index subtotal

 

2,432,391

 

 

 

(25,527

)

 

 

(219,513

)

 

 

(11,072

)

 

 

2,176,279

 

 

 

2,297,169

 

Index & iShares ETFs subtotal

 

4,285,579

 

 

 

55,875

 

 

 

(417,412

)

 

 

(16,338

)

 

 

3,907,704

 

 

 

4,077,519

 

Long-term

$

5,999,155

 

 

$

43,592

 

 

$

(493,060

)

 

$

(24,203

)

 

$

5,525,484

 

 

$

5,740,079

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Quarter Component Changes by Product Type (Long-term)

 

 

 

 

 

 

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

inflows

 

 

Market

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

2018

 

 

(outflows)

 

 

change

 

 

FX impact (1)

 

 

2018

 

 

Average AUM (2)

 

Equity

$

3,482,687

 

 

$

28,292

 

 

$

(465,565

)

 

$

(9,589

)

 

$

3,035,825

 

 

$

3,252,354

 

Fixed income

 

1,883,806

 

 

 

3,100

 

 

 

8,445

 

 

 

(10,934

)

 

 

1,884,417

 

 

 

1,868,377

 

Multi-asset

 

492,810

 

 

 

7,297

 

 

 

(35,076

)

 

 

(3,147

)

 

 

461,884

 

 

 

478,444

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core

 

109,465

 

 

 

4,061

 

 

 

(1,435

)

 

 

(546

)

 

 

111,545

 

 

 

110,167

 

Currency and commodities(4)

 

30,387

 

 

 

842

 

 

 

571

 

 

 

13

 

 

 

31,813

 

 

 

30,737

 

Alternatives subtotal

 

139,852

 

 

 

4,903

 

 

 

(864

)

 

 

(533

)

 

 

143,358

 

 

 

140,904

 

Long-term

$

5,999,155

 

 

$

43,592

 

 

$

(493,060

)

 

$

(24,203

)

 

$

5,525,484

 

 

$

5,740,079

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

inflows

 

 

and

 

 

Market

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

2017

 

 

(outflows)

 

 

dispositions(1)

 

 

change

 

 

FX impact (2)

 

 

2018

 

 

Average AUM (3)

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

233,218

 

 

$

2,090

 

 

$

2,137

 

 

$

(28,005

)

 

$

(3,726

)

 

$

205,714

 

 

$

231,556

 

Fixed income

 

257,571

 

 

 

11,546

 

 

 

14,070

 

 

 

(8,630

)

 

 

(2,969

)

 

 

271,588

 

 

 

268,818

 

Multi-asset

 

120,855

 

 

 

2,914

 

 

 

2,519

 

 

 

(12,107

)

 

 

(764

)

 

 

113,417

 

 

 

120,907

 

Alternatives

 

16,733

 

 

 

4,150

 

 

 

7

 

 

 

(590

)

 

 

(169

)

 

 

20,131

 

 

 

17,990

 

Retail subtotal

 

628,377

 

 

 

20,700

 

 

 

18,733

 

 

 

(49,332

)

 

 

(7,628

)

 

 

610,850

 

 

 

639,271

 

iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,329,610

 

 

 

112,817

 

 

 

-

 

 

 

(159,433

)

 

 

(8,732

)

 

 

1,274,262

 

 

 

1,360,991

 

Fixed income

 

395,252

 

 

 

50,930

 

 

 

-

 

 

 

(14,355

)

 

 

(4,231

)

 

 

427,596

 

 

 

404,236

 

Multi-asset

 

3,761

 

 

 

1,050

 

 

 

-

 

 

 

(317

)

 

 

(9

)

 

 

4,485

 

 

 

3,837

 

Alternatives

 

23,616

 

 

 

2,738

 

 

 

-

 

 

 

(1,196

)

 

 

(76

)

 

 

25,082

 

 

 

24,663

 

iShares ETFs subtotal

 

1,752,239

 

 

 

167,535

 

 

 

-

 

 

 

(175,301

)

 

 

(13,048

)

 

 

1,731,425

 

 

 

1,793,727

 

Institutional:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

137,185

 

 

 

(7,895

)

 

 

(4,296

)

 

 

(11,485

)

 

 

(2,533

)

 

 

110,976

 

 

 

131,474

 

Fixed income

 

570,050

 

 

 

(20,701

)

 

 

2,417

 

 

 

(7,301

)

 

 

(5,504

)

 

 

538,961

 

 

 

554,107

 

Multi-asset

 

347,825

 

 

 

11,944

 

 

 

(1,593

)

 

 

(14,650

)

 

 

(7,289

)

 

 

336,237

 

 

 

348,342

 

Alternatives

 

84,248

 

 

 

5,448

 

 

 

4,995

 

 

 

444

 

 

 

(1,330

)

 

 

93,805

 

 

 

89,217

 

Active subtotal

 

1,139,308

 

 

 

(11,204

)

 

 

1,523

 

 

 

(32,992

)

 

 

(16,656

)

 

 

1,079,979

 

 

 

1,123,140

 

Index:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,671,628

 

 

 

(91,845

)

 

 

4,749

 

 

 

(122,252

)

 

 

(17,407

)

 

 

1,444,873

 

 

 

1,648,418

 

Fixed income

 

632,592

 

 

 

37,335

 

 

 

2,051

 

 

 

(4,835

)

 

 

(20,871

)

 

 

646,272

 

 

 

640,733

 

Multi-asset

 

7,837

 

 

 

1,005

 

 

 

(243

)

 

 

(880

)

 

 

26

 

 

 

7,745

 

 

 

8,031

 

Alternatives

 

4,750

 

 

 

(199

)

 

 

1

 

 

 

(142

)

 

 

(70

)

 

 

4,340

 

 

 

4,689

 

Index subtotal

 

2,316,807

 

 

 

(53,704

)

 

 

6,558

 

 

 

(128,109

)

 

 

(38,322

)

 

 

2,103,230

 

 

 

2,301,871

 

Institutional subtotal

 

3,456,115

 

 

 

(64,908

)

 

 

8,081

 

 

 

(161,101

)

 

 

(54,978

)

 

 

3,183,209

 

 

 

3,425,011

 

Long-term

 

5,836,731

 

 

 

123,327

 

 

 

26,814

 

 

 

(385,734

)

 

 

(75,654

)

 

 

5,525,484

 

 

 

5,858,009

 

Cash management

 

449,949

 

 

 

(21

)

 

 

686

 

 

 

1,593

 

 

 

(3,642

)

 

 

448,565

 

 

 

453,883

 

Advisory (4)

 

1,515

 

 

 

323

 

 

 

-

 

 

 

5

 

 

 

(74

)

 

 

1,769

 

 

 

1,381

 

Total

$

6,288,195

 

 

$

123,629

 

 

$

27,500

 

 

$

(384,136

)

 

$

(79,370

)

 

$

5,975,818

 

 

$

6,313,273

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-over-Year Component Changes by Investment Style and Product Type (Long-term)

 

 

 

 

 

 

Net

 

 

Acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

inflows

 

 

and

 

 

Market

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

2017

 

 

(outflows)

 

 

dispositions(1)

 

 

change

 

 

FX impact (2)

 

 

2018

 

 

Average AUM (3)

 

Active:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

$

311,209

 

 

$

(12,439

)

 

$

(2,160

)

 

$

(33,819

)

 

$

(4,586

)

 

$

258,205

 

 

$

300,671

 

Fixed income

 

815,135

 

 

 

(12,009

)

 

 

16,487

 

 

 

(15,869

)

 

 

(7,759

)

 

 

795,985

 

 

 

808,997

 

Multi-asset

 

468,679

 

 

 

14,858

 

 

 

926

 

 

 

(26,757

)

 

 

(8,052

)

 

 

449,654

 

 

 

469,249

 

Alternatives

 

100,982

 

 

 

9,598

 

 

 

5,002

 

 

 

(146

)

 

 

(1,500

)

 

 

113,936

 

 

 

107,206

 

Active subtotal

 

1,696,005

 

 

 

8

 

 

 

20,255

 

 

 

(76,591

)

 

 

(21,897

)

 

 

1,617,780

 

 

 

1,686,123

 

Index and iShares ETFs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

iShares ETFs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,329,610

 

 

 

112,817

 

 

 

-

 

 

 

(159,433

)

 

 

(8,732

)

 

 

1,274,262

 

 

 

1,360,991

 

Fixed income

 

395,252

 

 

 

50,930

 

 

 

-

 

 

 

(14,355

)

 

 

(4,231

)

 

 

427,596

 

 

 

404,236

 

Multi-asset

 

3,761

 

 

 

1,050

 

 

 

-

 

 

 

(317

)

 

 

(9

)

 

 

4,485

 

 

 

3,837

 

Alternatives

 

23,616

 

 

 

2,738

 

 

 

-

 

 

 

(1,196

)

 

 

(76

)

 

 

25,082

 

 

 

24,663

 

iShares ETFs subtotal

 

1,752,239

 

 

 

167,535

 

 

 

-

 

 

 

(175,301

)

 

 

(13,048

)

 

 

1,731,425

 

 

 

1,793,727

 

Non-ETF Index

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

1,730,822

 

 

 

(85,211

)

 

 

4,750

 

 

 

(127,923

)

 

 

(19,080

)

 

 

1,503,358

 

 

 

1,710,777

 

Fixed income

 

645,078

 

 

 

40,189

 

 

 

2,051

 

 

 

(4,897

)

 

 

(21,585

)

 

 

660,836

 

 

 

654,661

 

Multi-asset

 

7,838

 

 

 

1,005

 

 

 

(243

)

 

 

(880

)

 

 

25

 

 

 

7,745

 

 

 

8,031

 

Alternatives

 

4,749

 

 

 

(199

)

 

 

1

 

 

 

(142

)

 

 

(69

)

 

 

4,340

 

 

 

4,690

 

Non-ETF Index subtotal

 

2,388,487

 

 

 

(44,216

)

 

 

6,559

 

 

 

(133,842

)

 

 

(40,709

)

 

 

2,176,279

 

 

 

2,378,159

 

Index & iShares ETFs subtotal

 

4,140,726

 

 

 

123,319

 

 

 

6,559

 

 

 

(309,143

)

 

 

(53,757

)

 

 

3,907,704

 

 

 

4,171,886

 

Long-term

$

5,836,731

 

 

$

123,327

 

 

$

26,814

 

 

$

(385,734

)

 

$

(75,654

)

 

$

5,525,484

 

 

$

5,858,009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-over-Year Component Changes by Product Type (Long-term)

 

 

 

 

 

 

Net

 

 

Acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

inflows

 

 

and

 

 

Market

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

2017

 

 

(outflows)

 

 

dispositions(1)

 

 

change

 

 

FX impact (2)

 

 

2018

 

 

Average AUM (3)

 

Equity

$

3,371,641

 

 

$

15,167

 

 

$

2,590

 

 

$

(321,175

)

 

$

(32,398

)

 

$

3,035,825

 

 

$

3,372,439

 

Fixed income

 

1,855,465

 

 

 

79,110

 

 

 

18,538

 

 

 

(35,121

)

 

 

(33,575

)

 

 

1,884,417

 

 

 

1,867,894

 

Multi-asset

 

480,278

 

 

 

16,913

 

 

 

683

 

 

 

(27,954

)

 

 

(8,036

)

 

 

461,884

 

 

 

481,117

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core

 

98,533

 

 

 

9,590

 

 

 

4,995

 

 

 

(29

)

 

 

(1,544

)

 

 

111,545

 

 

 

104,652

 

Currency and commodities(5)

 

30,814

 

 

 

2,547

 

 

 

8

 

 

 

(1,455

)

 

 

(101

)

 

 

31,813

 

 

 

31,907

 

Alternatives subtotal

 

129,347

 

 

 

12,137

 

 

 

5,003

 

 

 

(1,484

)

 

 

(1,645

)

 

 

143,358

 

 

 

136,559

 

Long-term

$

5,836,731

 

 

$

123,327

 

 

$

26,814

 

 

$

(385,734

)

 

$

(75,654

)

 

$

5,525,484

 

 

$

5,858,009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Amounts include net AUM from the acquisitions of Tennenbaum Capital Partners in August 2018 (“TCP Transaction”) and the asset management business of Citibanamex in September 2018 (“Citibanamex Transaction”), 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 (“DSP Transaction”).

(2)

Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. 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

 

 

 

 

 

 

Year Ended

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

(in millions), (unaudited)

2018

 

 

2017*

 

 

Change

 

 

2018

 

 

Change

 

 

2018

 

 

2017*

 

 

Change

 

 

Investment advisory, administration fees

   and securities lending revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

$

385

 

 

$

425

 

 

$

(40

)

 

$

405

 

 

$

(20

)

 

$

1,654

 

 

$

1,654

 

 

$

-

 

 

iShares ETFs

 

827

 

 

 

888

 

 

 

(61

)

 

 

885

 

 

 

(58

)

 

 

3,549

 

 

 

3,220

 

 

 

329

 

 

Non-ETF Index

 

153

 

 

 

177

 

 

 

(24

)

 

 

169

 

 

 

(16

)

 

 

685

 

 

 

680

 

 

 

5

 

 

Equity subtotal

 

1,365

 

 

 

1,490

 

 

 

(125

)

 

 

1,459

 

 

 

(94

)

 

 

5,888

 

 

 

5,554

 

 

 

334

 

 

Fixed income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active

 

466

 

 

 

449

 

 

 

17

 

 

 

460

 

 

 

6

 

 

 

1,840

 

 

 

1,717

 

 

 

123

 

 

iShares ETFs

 

205

 

 

 

213

 

 

 

(8

)

 

 

205

 

 

 

-

 

 

 

825

 

 

 

808

 

 

 

17

 

 

Non-ETF Index

 

95

 

 

 

87

 

 

 

8

 

 

 

98

 

 

 

(3

)

 

 

387

 

 

 

344

 

 

 

43

 

 

Fixed income subtotal

 

766

 

 

 

749

 

 

 

17

 

 

 

763

 

 

 

3

 

 

 

3,052

 

 

 

2,869

 

 

 

183

 

 

Multi-asset

 

287

 

 

 

314

 

 

 

(27

)

 

 

298

 

 

 

(11

)

 

 

1,176

 

 

 

1,157

 

 

 

19

 

 

Alternatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core

 

193

 

 

 

170

 

 

 

23

 

 

 

185

 

 

 

8

 

 

 

732

 

 

 

639

 

 

 

93

 

 

Currency and commodities

 

23

 

 

 

24

 

 

 

(1

)

 

 

24

 

 

 

(1

)

 

 

98

 

 

 

91

 

 

 

7

 

 

Alternatives subtotal

 

216

 

 

 

194

 

 

 

22

 

 

 

209

 

 

 

7

 

 

 

830

 

 

 

730

 

 

 

100

 

 

Long-term

 

2,634

 

 

 

2,747

 

 

 

(113

)

 

 

2,729

 

 

 

(95

)

 

 

10,946

 

 

 

10,310

 

 

 

636

 

 

Cash management

 

145

 

 

 

150

 

 

 

(5

)

 

 

154

 

 

 

(9

)

 

 

607

 

 

 

558

 

 

 

49

 

 

Total base fees

 

2,779

 

 

 

2,897

 

 

 

(118

)

 

 

2,883

 

 

 

(104

)

 

 

11,553

 

 

 

10,868

 

 

 

685

 

 

Investment advisory performance fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

23

 

 

 

95

 

 

 

(72

)

 

 

7

 

 

 

16

 

 

 

91

 

 

 

152

 

 

 

(61

)

 

Fixed income

 

6

 

 

 

14

 

 

 

(8

)

 

 

-

 

 

 

6

 

 

 

8

 

 

 

34

 

 

 

(26

)

 

Multi-asset

 

4

 

 

 

19

 

 

 

(15

)

 

 

1

 

 

 

3

 

 

 

19

 

 

 

33

 

 

 

(14

)

 

Alternatives

 

67

 

 

 

157

 

 

 

(90

)

 

 

143

 

 

 

(76

)

 

 

294

 

 

 

375

 

 

 

(81

)

 

Total performance fees

 

100

 

 

 

285

 

 

 

(185

)

 

 

151

 

 

 

(51

)

 

 

412

 

 

 

594

 

 

 

(182

)

 

Technology services revenue

 

203

 

 

 

176

 

 

 

27

 

 

 

200

 

 

 

3

 

 

 

785

 

 

 

657

 

 

 

128

 

 

Distribution fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retrocessions

 

168

 

 

 

185

 

 

 

(17

)

 

 

168

 

 

 

-

 

 

 

709

 

 

 

675

 

 

 

34

 

 

12b-1 fees (U.S. mutual funds distribution fees)

 

93

 

 

 

110

 

 

 

(17

)

 

 

102

 

 

 

(9

)

 

 

406

 

 

 

466

 

 

 

(60

)

 

Other

 

10

 

 

 

11

 

 

 

(1

)

 

 

9

 

 

 

1

 

 

 

40

 

 

 

42

 

 

 

(2

)

 

Total distribution fees

 

271

 

 

 

306

 

 

 

(35

)

 

 

279

 

 

 

(8

)

 

 

1,155

 

 

 

1,183

 

 

 

(28

)

 

Advisory and other revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory

 

33

 

 

 

54

 

 

 

(21

)

 

 

26

 

 

 

7

 

 

 

113

 

 

 

128

 

 

 

(15

)

 

Other

 

48

 

 

 

46

 

 

 

2

 

 

 

37

 

 

 

11

 

 

 

180

 

 

 

170

 

 

 

10

 

 

Total advisory and other revenue

 

81

 

 

 

100

 

 

 

(19

)

 

 

63

 

 

 

18

 

 

 

293

 

 

 

298

 

 

 

(5

)

 

Total revenue

$

3,434

 

 

$

3,764

 

 

$

(330

)

 

$

3,576

 

 

$

(142

)

 

$

14,198

 

 

$

13,600

 

 

$

598

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*

Results for 2017 were recast to reflect the adoption of the new revenue recognition standard. For further information, refer to the Current Report on Form 8-K furnished on March 22, 2018.  

Highlights

▪

Investment advisory, administration fees and securities lending revenue decreased $118 million from the fourth quarter of 2017 and $104 million from the third quarter of 2018, despite the positive impact of organic growth and AUM acquired in the TCP and Citibanamex transactions. The decrease was driven by the impact of lower markets, previously announced pricing changes to select investment products and lower borrowing demand for securities lending in the current environment. Securities lending revenue of $129 million in the current quarter compared with $150 million in the fourth quarter of 2017 and $160 million in the third quarter of 2018.

▪

Performance fees decreased $185 million from the fourth quarter of 2017, reflecting lower revenue from liquid alternative and long-only products and decreased $51 million from the third quarter of 2018, primarily due to strong performance from a single hedge fund with an annual performance measurement period that ends in the third quarter.

▪

Technology services revenue increased $27 million from the fourth quarter of 2017 and $3 million from the third quarter of 2018, primarily reflecting higher revenue from institutional Aladdin®.


7

 

 

SUMMARY OF OPERATING EXPENSE

Three

 

 

 

 

 

 

Three

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Months Ended

 

 

 

 

 

 

Months Ended

 

 

 

 

 

 

Year Ended

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

(in millions), (unaudited)

2018

 

 

2017*

 

 

Change

 

 

2018

 

 

Change

 

 

2018

 

 

2017*

 

 

Change

 

 

Operating expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

$

1,020

 

 

$

1,147

 

 

$

(127

)

 

$

1,097

 

 

$

(77

)

 

$

4,320

 

 

$

4,253

 

 

$

67

 

 

Distribution and servicing costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retrocessions

 

168

 

 

 

185

 

 

 

(17

)

 

 

168

 

 

 

-

 

 

 

709

 

 

 

675

 

 

 

34

 

 

12b-1 costs

 

92

 

 

 

106

 

 

 

(14

)

 

 

100

 

 

 

(8

)

 

 

399

 

 

 

455

 

 

 

(56

)

 

Other

 

160

 

 

 

142

 

 

 

18

 

 

 

140

 

 

 

20

 

 

 

567

 

 

 

533

 

 

 

34

 

 

Total distribution and servicing costs

 

420

 

 

 

433

 

 

 

(13

)

 

 

408

 

 

 

12

 

 

 

1,675

 

 

 

1,663

 

 

 

12

 

 

Direct fund expense

 

224

 

 

 

237

 

 

 

(13

)

 

 

249

 

 

 

(25

)

 

 

998

 

 

 

895

 

 

 

103

 

 

General and administration:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketing and promotional

 

108

 

 

 

102

 

 

 

6

 

 

 

77

 

 

 

31

 

 

 

361

 

 

 

333

 

 

 

28

 

 

Occupancy and office related

 

73

 

 

 

73

 

 

 

-

 

 

 

73

 

 

 

-

 

 

 

293

 

 

 

275

 

 

 

18

 

 

Portfolio services

 

68

 

 

 

76

 

 

 

(8

)

 

 

60

 

 

 

8

 

 

 

271

 

 

 

251

 

 

 

20

 

 

Technology

 

62

 

 

 

58

 

 

 

4

 

 

 

61

 

 

 

1

 

 

 

234

 

 

 

203

 

 

 

31

 

 

Professional services

 

47

 

 

 

50

 

 

 

(3

)

 

 

42

 

 

 

5

 

 

 

158

 

 

 

142

 

 

 

16

 

 

Communications

 

9

 

 

 

10

 

 

 

(1

)

 

 

9

 

 

 

-

 

 

 

37

 

 

 

34

 

 

 

3

 

 

Foreign exchange remeasurement

 

4

 

 

 

8

 

 

 

(4

)

 

 

7

 

 

 

(3

)

 

 

16

 

 

 

5

 

 

 

11

 

 

Contingent consideration fair value adjustments

 

31

 

 

 

9

 

 

 

22

 

 

 

29

 

 

 

2

 

 

 

65

 

 

 

8

 

 

 

57

 

 

Product launch costs

 

-

 

 

 

-

 

 

 

-

 

 

 

1

 

 

 

(1

)

 

 

12

 

 

 

4

 

 

 

8

 

 

Other general and administration

 

47

 

 

 

64

 

 

 

(17

)

 

 

54

 

 

 

(7

)

 

 

191

 

 

 

191

 

 

 

-

 

 

Total general and administration expense

 

449

 

 

 

450

 

 

 

(1

)

 

 

413

 

 

 

36

 

 

 

1,638

 

 

 

1,446

 

 

 

192

 

 

Restructuring charge

 

60

 

 

 

-

 

 

 

60

 

 

 

-

 

 

 

60

 

 

 

60

 

 

 

-

 

 

 

60

 

 

Amortization of intangible assets

 

15

 

 

 

12

 

 

 

3

 

 

 

13

 

 

 

2

 

 

 

50

 

 

 

89

 

 

 

(39

)

 

Total operating expense

$

2,188

 

 

$

2,279

 

 

$

(91

)

 

$

2,180

 

 

$

8

 

 

$

8,741

 

 

$

8,346

 

 

$

395

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*

Results for 2017 were recast to reflect the adoption of the new revenue recognition standard. For further information, refer to the Current Report on Form 8-K furnished on March 22, 2018.  

Highlights

▪

Employee compensation and benefits expense decreased $127 million from the fourth quarter of 2017, reflecting lower incentive compensation, primarily driven by lower performance fees and lower operating income.

Employee compensation and benefits expense decreased $77 million from the third quarter of 2018, reflecting lower incentive compensation, including the mark-to-market impact of lower deferred compensation expense.

▪

Direct fund expense decreased $13 million from the fourth quarter of 2017 and $25 million from the third quarter of 2018, reflecting lower average AUM.

▪

General and administration expense decreased $1 million from the fourth quarter of 2017, despite $31 million of contingent consideration fair value adjustments related to prior acquisitions in the current quarter.

General and administration expense increased $36 million from the third quarter of 2018, primarily due to seasonally higher marketing and promotional expense.

▪

A restructuring charge of $60 million, primarily comprised of severance and accelerated amortization expense of previously granted deferred compensation awards, was recorded in the fourth quarter of 2018 in connection with an initiative to modify the size and shape of the workforce.

INCOME TAX EXPENSE (BENEFIT)

 

Three

 

 

 

 

 

Three

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Months Ended

 

 

 

 

 

Months Ended

 

 

 

 

 

 

Year Ended

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

September 30,

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

(in millions), (unaudited)

2018

 

 

2017*

 

 

Change

 

2018

 

 

Change

 

 

2018

 

 

2017*

 

 

Change

 

 

Income tax expense (benefit)

$

247

 

 

$

(815

)

 

$

1,062

 

 

$

226

 

 

$

21

 

 

$

1,076

 

 

$

270

 

 

$

806

 

 

Effective tax rate

 

21.0

%

 

 

(55.1

)%

 

 

7,610

bps

 

 

15.7

%

 

 

530

bps

 

 

20.0

%

 

 

5.2

%

 

 

1,480

bps

 

 

*

Results for 2017 were recast to reflect the adoption of the new revenue recognition standard. For further information, refer to the Current Report on Form 8-K furnished on March 22, 2018.  

Highlights

 

▪

Both fourth and third quarter 2018 income tax expense reflected a reduced tax rate associated with the Tax Cuts and Jobs Act (the “2017 Act”) enacted in the United States.

 

▪

Fourth quarter 2017 income tax benefit included $1.2 billion of net tax benefit related to the 2017 Act and included an $84 million discrete tax benefit, primarily related to stock-based compensation awards.

 

▪

Third quarter 2018 income tax expense benefited from $90 million of discrete items and a $5 million net noncash tax benefit related to the revaluation of certain deferred income tax liabilities as a result of domestic state and local tax changes.

 

8

 

 

SUMMARY AND RECONCILIATION OF U.S. GAAP NONOPERATING INCOME (EXPENSE) TO NONOPERATING INCOME (EXPENSE), AS ADJUSTED

 

 

Three Months

 

 

 

 

 

 

Three Months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

Ended

 

 

 

 

 

 

Year Ended

 

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

(in millions), (unaudited)

 

2018

 

 

2017

 

 

Change

 

 

2018

 

 

Change

 

 

2018

 

 

2017

 

 

Change

 

 

Nonoperating income (expense), GAAP basis

 

$

(72

)

 

$

1

 

 

$

(73

)

 

$

33

 

 

$

(105

)

 

$

(79

)

 

$

5

 

 

$

(84

)

 

Less: Net income (loss) attributable to

     noncontrolling interests ("NCI")

 

 

-

 

 

 

6

 

 

 

(6

)

 

 

(13

)

 

 

13

 

 

 

(3

)

 

 

37

 

 

 

(40

)

 

Nonoperating income (expense), as adjusted(1)(2)

 

$

(72

)

 

$

(5

)

 

$

(67

)

 

$

46

 

 

$

(118

)

 

$

(76

)

 

$

(32

)

 

$

(44

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months

 

 

 

 

 

 

Three Months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

Ended

 

 

 

 

 

 

Year Ended

 

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

(in millions), (unaudited)

 

2018

 

 

2017

 

 

Change

 

 

2018

 

 

Change

 

 

2018

 

 

2017

 

 

Change

 

 

Net gain (loss) on investments(1)(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private equity

 

$

(15

)

 

$

-

 

 

$

(15

)

 

$

4

 

 

$

(19

)

 

$

(5

)

 

$

21

 

 

$

(26

)

 

Real assets

 

 

2

 

 

 

15

 

 

 

(13

)

 

 

10

 

 

 

(8

)

 

 

26

 

 

 

17

 

 

 

9

 

 

Other alternatives(3)

 

 

(3

)

 

 

4

 

 

 

(7

)

 

 

1

 

 

 

(4

)

 

 

2

 

 

 

38

 

 

 

(36

)

 

Other investments(4)

 

 

(50

)

 

 

8

 

 

 

(58

)

 

 

(3

)

 

 

(47

)

 

 

(70

)

 

 

43

 

 

 

(113

)

 

Subtotal

 

 

(66

)

 

 

27

 

 

 

(93

)

 

 

12

 

 

 

(78

)

 

 

(47

)

 

 

119

 

 

 

(166

)

 

Other gains(5)

 

 

(1

)

 

 

-

 

 

 

(1

)

 

 

51

 

 

 

(52

)

 

 

51

 

 

 

5

 

 

 

46

 

 

Total net gain (loss) on investments(1)(2)

 

 

(67

)

 

 

27

 

 

 

(94

)

 

 

63

 

 

 

(130

)

 

 

4

 

 

 

124

 

 

 

(120

)

 

Interest and dividend income

 

 

41

 

 

 

14

 

 

 

27

 

 

 

29

 

 

 

12

 

 

 

104

 

 

 

49

 

 

 

55

 

 

Interest expense

 

 

(46

)

 

 

(46

)

 

 

-

 

 

 

(46

)

 

 

-

 

 

 

(184

)

 

 

(205

)

 

 

21

 

 

Net interest expense

 

 

(5

)

 

 

(32

)

 

 

27

 

 

 

(17

)

 

 

12

 

 

 

(80

)

 

 

(156

)

 

 

76

 

 

Nonoperating income (expense), as adjusted(1)(2)

 

$

(72

)

 

$

(5

)

 

$

(67

)

 

$

46

 

 

$

(118

)

 

$

(76

)

 

$

(32

)

 

$

(44

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 and 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 for the third quarter and full year of 2018 primarily include a $40 million pre-tax gain related to the DSP Transaction and a $10 million noncash pre-tax gain related to the revaluation of another strategic investment.


9

 

 

RECONCILIATION OF U.S. GAAP OPERATING INCOME AND OPERATING MARGIN TO OPERATING INCOME AND OPERATING MARGIN, AS ADJUSTED

 

 

Three Months Ended

 

 

Year Ended

 

 

 

 

December 31,

 

 

September 30,

 

 

December 31,

 

 

(in millions), (unaudited)

 

2018

 

 

2017*

 

 

2018

 

 

2018

 

 

2017*

 

 

Operating income, GAAP basis

 

$

1,246

 

 

$

1,485

 

 

$

1,396

 

 

$

5,457

 

 

$

5,254

 

 

Non-GAAP expense adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring charge

 

 

60

 

 

 

-

 

 

 

-

 

 

 

60

 

 

 

-

 

 

PNC LTIP funding obligation

 

 

4

 

 

 

3

 

 

 

4

 

 

 

14

 

 

 

15

 

 

Operating income, as adjusted (1)

 

 

1,310

 

 

 

1,488

 

 

 

1,400

 

 

 

5,531

 

 

 

5,269

 

 

Product launch costs and commissions

 

 

-

 

 

 

-

 

 

 

1

 

 

 

13

 

 

 

-

 

 

Operating income used for operating margin measurement

 

$

1,310

 

 

$

1,488

 

 

$

1,401

 

 

$

5,544

 

 

$

5,269

 

 

Revenue, GAAP basis

 

$

3,434

 

 

$

3,764

 

 

$

3,576

 

 

$

14,198

 

 

$

13,600

 

 

Non-GAAP adjustment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution and servicing costs

 

 

(420

)

 

 

(433

)

 

 

(408

)

 

 

(1,675

)

 

 

(1,663

)

 

Revenue used for operating margin measurement

 

$

3,014

 

 

$

3,331

 

 

$

3,168

 

 

$

12,523

 

 

$

11,937

 

 

Operating margin, GAAP basis

 

 

36.3

%

 

 

39.5

%

 

 

39.0

%

 

 

38.4

%

 

 

38.6

%

 

Operating margin, as adjusted (1)

 

 

43.5

%

 

 

44.7

%

 

 

44.2

%

 

 

44.3

%

 

 

44.1

%

 

 

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.

 

* Results for 2017 were recast to reflect the adoption of the new revenue recognition standard. For further information, refer to the Current Report on Form 8-K furnished on March 22, 2018.

 

RECONCILIATION OF U.S. GAAP NET INCOME ATTRIBUTABLE TO BLACKROCK TO NET INCOME ATTRIBUTABLE TO BLACKROCK, AS ADJUSTED

 

 

Three Months Ended

 

 

Year Ended

 

 

 

 

December 31,

 

 

September 30,

 

 

December 31,

 

 

(in millions), (unaudited)

 

2018

 

 

2017*

 

 

2018

 

 

2018

 

 

2017*

 

 

Net income attributable to BlackRock, Inc., GAAP basis

 

$

927

 

 

$

2,295

 

 

$

1,216

 

 

$

4,305

 

 

$

4,952

 

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring charge, net of tax

 

 

47

 

 

 

-

 

 

 

-

 

 

 

47

 

 

 

-

 

 

PNC LTIP funding obligation, net of tax

 

 

3

 

 

 

2

 

 

 

3

 

 

 

12

 

 

 

11

 

 

The 2017 Act:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax revaluation (noncash)

 

 

-

 

 

 

(1,758

)

 

 

-

 

 

 

-

 

 

 

(1,758

)

 

Deemed repatriation tax

 

 

-

 

 

 

477

 

 

 

-

 

 

 

-

 

 

 

477

 

 

Other income tax matters

 

 

(2

)

 

 

(3

)

 

 

(5

)

 

 

(3

)

 

 

16

 

 

Net income attributable to BlackRock, Inc., as adjusted (2)

 

$

975

 

 

$

1,013

 

 

$

1,214

 

 

$

4,361

 

 

$

3,698

 

 

Diluted weighted-average common shares outstanding (3)

 

 

160.5

 

 

 

163.8

 

 

 

161.4

 

 

 

161.9

 

 

 

164.4

 

 

Diluted earnings per common share, GAAP basis (3)

 

$

5.78

 

 

$

14.01

 

 

$

7.54

 

 

$

26.58

 

 

$

30.12

 

 

Diluted earnings per common share, as adjusted (2) (3)

 

$

6.08

 

 

$

6.19

 

 

$

7.52

 

 

$

26.93

 

 

$

22.49

 

 

 

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.

 

* Results for 2017 were recast to reflect the adoption of the new revenue recognition standard. For further information, refer to the Current Report on Form 8-K furnished on March 22, 2018.

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.

 

 

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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. The fourth quarter and full year of 2017 noncash deferred tax revaluation benefit of $1,758 million and the other income tax matters were 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. A deemed repatriation tax expense of $477 million has been excluded from the fourth quarter and full year of 2017 as adjusted results due to the one-time nature 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.


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FORWARD-LOOKING STATEMENTS

This earnings release, 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 earnings release, 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 earnings release.

PERFORMANCE NOTES

Past performance is not indicative of future results. Except as specified, the performance information shown is as of December 31, 2018 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 U.S. 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 November 30, 2018. The performance data does not include accounts terminated prior to December 31, 2018 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 December 31, 2018 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.

 

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