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BlackRock : Q4 2019 Earnings Supplement

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01/15/2020 | 12:32 pm

January 15, 2020

Q4 2019 Earnings

Earnings Release Supplement

A broadly diversified business

across clients, products and geographies

Assets Under Management of $7.43 trillion at December 31, 2019

Q4 2019 Total Base Fees of $3.089 billion

Client Type

Institutional

33%

Institutional

60%

Retail 28%

Retail 10%

iShares

iShares

ETFs

ETFs

39%

30%

Style

Active

27%

Active

46%

Index

36%

Index

9%

iShares

iShares

ETFs

ETFs

39%

30%

Cash 7%

Cash 6%

Product Type

Equity Equity

52%47%

Fixed

Fixed

Income

Income

31%

28%

Multi-asset

Multi-asset

10%

8%

Alternatives 9%

Alternatives 2%

Cash 7%

Cash 6%

Region

Americas Americas

66%66%

EMEA

EMEA

27%

28%

Asia-Pacific

Asia-Pacific

7%

6%

AUM

Base Fees

AUM

Base Fees

AUM

Base Fees

AUM

Base Fees

Note: Base Fees and AUM by region data is based on client domicile.

1

Long-term net flows

Total long-term

($ in billions)

Retail

7%

6%

4%

3%

2%

2%

4%

5%

6%

6%

7%

7%

6%

3%

0%

0%

0%

3%

7%

7%

4%

3%

2%

1%

2%

3%

5%

$125

$99

$81

$17

$55

$44

$59

$52

$11

$7

$8

$5

$14

$11

$2

$2

$(3)

$(1)

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2017

2018

2018

2018

2018

2019

2019

2019

2019

2017

2018

2018

2018

2018

2019

2019

2019

2019

iShares ETFs

Institutional

19%

15%

10%

9%

10%

9%

10%

10%

11%

2%

2%

1%

0%

(2)%

(1)%

2%

3%

4%

$81

$75

Institutional Active

Institutional Index

$14

$55

$35

$34

$31

$36

$42

$73

$18

$1

$5

$14

$8

$12

$10

$(1)

$(8)

$15

$15

$2

$(7)

$(14)

$(24)

$(27)

$(4)

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2017

2018

2018

2018

2018

2019

2019

2019

2019

2017

2018

2018

2018

2018

2019

2019

2019

2019

LTM organic asset growth rate (%)

LTM organic base fee growth rate (%)

Note: LTM organic asset growth rate measures rolling last twelve months net flows over beginning of period assets.

2

Profitability

($ in millions, except per share data)

Operating Income and Margin, as adjusted

Net Income and EPS, as adjusted

$1,800 $1,700 $1,600 $1,500 $1,400 $1,300 $1,200 $1,100 $1,000

$900 $800 $700 $600 $500 $400

$8.34

44.7% 44.1%

45.2% 44.2%

46.0%

$1,700

43.5% 41.9%

43.1%

43.5% $44.2%1,580

$7.52

$7.15

$6.70

$6.66

$1,488

$1,502

$1,538

$1,460

$6.19

$6.08

$6.61

$6.41

$1,443

$1,400

34.2%

$1,378

$1,309

$1,340

$1,310

$1,233

$1,278

$1,214

$24.1,220%

$1,100

$1,092

$1,080

$1,053

$1,119

$1,013

$1,003

14.2%

$975

$980

4.$2%860

$740

-5.8%

$620

-15.8%

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

$500

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2017

2018

2018

2018

2018

2019

2019

2019

2019

2017

2018

2018

2018

2018

2019

2019

2019

2019

Operating Income, as adjusted

Operating Margin, as adjusted

Net Income, as adjusted

EPS, as adjusted

For further information and reconciliations between GAAP and as adjusted, see page 12 of this earnings release supplement, notes (1) through (3) in the current earnings release as well as previously filed Form 10-Ks,10-Qs and 8-Ks.

3

Capital management

(amounts in millions, except per share data)

Share repurchases and

weighted average diluted shares

Dividends per share

163.8

162.9

162.2

161.4

160.5

159.3

156.4

156.9

$3.30

$3.30

$3.30

$3.30

156.4

$3.13

$3.13

$1,566 (1)

$2.88

$2.88

$2.50

$500

$525

$275

$335

$300

$100

$0

$0

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2017

2018

2018

2018

2018

2019

2019

2019

2019

2017

2018

2018

2018

2018

2019

2019

2019

2019

Share repurchases

Weighted average diluted shares

Dividends

  1. Amount includes the impact of a $1.3 billion private transaction that closed on March 25, 2019. Amounts above exclude repurchases of employee tax withholdings related to employee stock transactions.

4

Major market indices and exchange rates

% Change

% Change

Spot

12/31/19 vs.

Average

Q4 2019 vs.

12/31/2018

9/30/2019

12/31/2019

9/30/2019

12/31/2018

Q4 2018

Q3 2019

Q4 2019

Q3 2019

Q4 2018

Equity Indices

Domestic

S&P 500

2,507

2,977

3,231

9%

29%

2,693

2,958

3,086

4%

15%

Global

MSCI Barra World Index

1,884

2,180

2,358

8%

25%

2,010

2,169

2,260

4%

12%

MSCI Europe Index

114

133

140

5%

23%

120

129

135

5%

13%

MSCI AC Asia Pacific Index

147

156

171

10%

16%

152

157

164

4%

8%

MSCI Emerging Markets Index

966

1,001

1,115

11%

15%

978

1,014

1,051

4%

7%

S&P Global Natural Resources

3,311

3,524

3,855

9%

16%

3,580

3,558

3,645

2%

2%

BLK Equity Index(1)

10%

22%

4%

10%

Fixed Income Index

Barclays U.S. Aggregate Bond Index

2,047

2,221

2,225

-%

9%

2,011

2,201

2,221

1%

10%

Foreign Exchange Rates

GBP to USD

1.28

1.23

1.33

8%

4%

1.29

1.23

1.29

5%

-%

EUR to USD

1.15

1.09

1.12

3%

(3)%

1.14

1.11

1.11

-%

(3)%

Source: Bloomberg

  1. Revenue weighted composite index calculated by BlackRock to approximate the impact of market fluctuations on BlackRock's equity base fees. The index is derived from publicly available market indices that represent applicable AUM benchmarks for each equity portfolio, as selected by BlackRock. The market impact information for each equity portfolio used to calculate the index may be substantially different from that shown. Index does not include portfolios that do not have an applicable market index. Index does not reflect BlackRock's investment performance, and is not indicative of past or future results.

5

Quarterly revenue

($ in millions)

73%

Base fees ex. securities lending

Percentage Change

Year-over-Year

Sequential

Base fees ex. securities lending

10%

3%

Securities lending

Securities lending

31%

13%

Performance fees

Performance fees

139%

98%

3%

Technology services revenue

Technology services revenue

35%

6%

Distribution fees

Distribution fees

0%

0%

7%

Advisory and other revenue

30%

69%

7%

6%

4%

Advisory and other revenue

Total

16%

8%

Q4 2019 compared to Q4 2018

$543

Q4 2019 compared to Q3 2019

$285

$139

$71

$40

$24

$(1)

$3,977

$118

$90

$43

$19

$15

$3,977

$3,692

$270

$3,434

Q4 2018

Base fees

Performance

Technology

Securities

Advisory and

Distribution

Q4 2019

Q3 2019

Performance

Base fees

Advisory and

Securities

Technology

Q4 2019

ex. sec

fees

services

lending

other revenue

fees

fees

ex. sec

other revenue

lending

services

lending

revenue

lending

revenue

6

Quarterly investment advisory, administration fees

and securities lending revenue

($ in millions)

Q4 2019 compared to Q4 2018

Q4 2019 compared to Q3 2019

$310

$109

$18

$17

$9

$3,089

$14

$12

$12

$8

$7

$4

$(5)

$3,089

$26

$25

$19

$34

$23

$2,980

$53

$64

$79

$2,779

Q4 2018 iShares Alts

iShares

Cash

Active Non-ETF Active

Non-ETF

Multi- Q4 2019

Q3 2019 iShares

Alts Non-ETF

Active

Cash Multi-

iShares

Non-ETF

Active Q4 2019

ETFs EQ

ETFs FI

FI

EQ

EQ

FI

Asset

ETFs EQ

FI

EQ

Asset

ETFs FI

EQ

FI

7

Quarterly expense, as adjusted

($ in millions)

18%

Employee comp. & benefits

10%

Distribution & servicing costs

50%

Direct fund expense

General & administration

21%

Percentage Change

Year-over-Year

Sequential

Employee comp. & benefits

19%

9%

Distribution & servicing costs

4%

3%

Direct fund expense

9%

3%

General & administration

15%

34%

Amortization of intangible assets

93%

4%

1%

Amortization of intangible assets

Total

15%

11%

Q4 2019 compared to Q4 2018

$315

Q4 2019 compared to Q3 2019

$249

$196

$2,439

$130

$2,439

$101

$66

$2,190

$1

$6

$11

$2,124

$14

$18

$21

Q4 2018

Amortization

Distribution

Direct fund

G&A

Employee

Q4 2019

Q3 2019

Amortization

Direct fund

Distribution

Employee

G&A

Q4 2019

of intangible

& servicing

expense

comp.

of intangible

expense

& servicing

comp.

assets

costs

& benefits

assets

costs

& benefits

Fourth quarter of 2018 expense, as adjusted, includes non-GAAP adjustments related to a restructuring charge of $60 million and PNC LTIP funding obligation of $4 million. For further information, see the item included under Non-GAAP expense adjustments on page 12 of this earnings release supplement and note (1) in the current earnings release.

8

Full year revenue

($ in millions)

77%

Base fees ex. securities lending

Percentage Change

Year-over-Year

Base fees ex. securities lending

2%

Securities lending

Securities lending

(2)%

Performance fees

Performance fees

9%

2%

Technology services revenue

Technology services revenue

24%

Distribution fees

Distribution fees

(7)%

7%

Advisory and other revenue

(8)%

7%

3%4%

Advisory and other revenue

Total

2%

2019 compared to 2018

$341

$14,198

$234

$189

$38

$(10)

$(24)

$(86)

$14,539

2018

Base fees ex.

Technology

Performance fees Securities lending Advisory and other Distribution fees

2019

sec lending

services revenue

revenue

99

Full year investment advisory, administration fees

and securities lending revenue

($ in millions)

2019 compared to 2018

$224

$138

$78

$18

$11

$(18)

$(28)

$(54)

$(100)

$11,777

$179

$11,553

2018

Alts

iShares ETFs

Active

Non-ETF

Cash

Non-ETF

Multi-Asset iShares ETFs

Active

2019

FI

FI

FI

EQ

EQ

EQ

1010

Full year expense, as adjusted

($ in millions)

19%

Employee comp. & benefits

11%

Distribution & servicing costs

Direct fund expense

49%

20%

General & administration

Percentage Change

Employee comp. & benefits Distribution & servicing costs Direct fund expense General & administration Amortization of intangible assets

Year-over-Year

4%

1%

(2)%

7%

94%

1%

Amortization of intangible assets

Total

4%

2019 compared to 2018

$321

$163$8,988

$8,667

$(20)

$10

$47

$48

$73

2018

Direct fund

Distribution &

Amortization of

Product launch

G&A (1)

Employee comp

2019

expense

servicing costs

intangible assets

costs and

& benefits (1)

comissions

(1) Amounts exclude product launch costs and commissions incurred in 2019 and 2018, which are presented separately above.

2018 expense, as adjusted, includes non-GAAP adjustments related to a restructuring charge of $60 million and PNC LTIP funding obligation of $14 million. For further information, see the item included under Non-GAAP expense adjustments on page 12 of this earnings release supplement and note (1) in the current earnings release.

1111

Reconciliation between GAAP and as adjusted

($ in millions)

2017

2018

2019

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Operating Income

GAAP

$

1,485

$

1,375

$

1,440

$

1,396

$

1,246

$

1,233

$

1,278

$

1,502

$

1,538

Non-GAAP expense adjustments

3

3

3

4

64

-

-

-

-

As Adjusted

$

1,488

$

1,378

$

1,443

$

1,400

$

1,310

$

1,233

$

1,278

$

1,502

$

1,538

Nonoperating Income (Expense)

GAAP

$

1

$

(16)

$

(24)

$

33

$

(72)

$

125

$

57

$

(42)

$

96

Non-GAAP adjustments

(6)

(5)

(5)

13

-

(7)

(10)

-

(33)

As Adjusted

$

(5)

$

(21)

$

(29)

$

46

$

(72)

$

118

$

47

$

(42)

$

63

Net Income

GAAP

$

2,295

$

1,089

$

1,073

$

1,216

$

927

$

1,053

$

1,003

$

1,119

$

1,301

Non-GAAP adjustments

(1,282)

3

7

(2)

48

-

-

-

8

As Adjusted

$

1,013

$

1,092

$

1,080

$

1,214

$

975

$

1,053

$

1,003

$

1,119

$

1,309

Non-GAAP adjustments include amounts related to a restructuring charge, PNC LTIP funding obligations and noncash income tax matters, as applicable. The fourth quarter of 2017 includes a non-GAAP adjustment of $1.3 billion related to the Tax Cuts and Jobs Act. For further information and reconciliation between GAAP and as adjusted, see notes (1) through (3) in the current earnings release as well as previously filed Form 10-Ks,10-Qs and 8-Ks.

12

Important Notes

This presentation, 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.

This presentation also includes non-GAAP financial measures. You can find our presentations on the most directly comparable GAAP financial measures calculated in accordance with GAAP and our reconciliations on page 12 of this earnings release supplement, our current earnings release dated January 15, 2020, and BlackRock's other periodic reports, which are available on BlackRock's website at www.blackrock.com.

13

Disclaimer

BlackRock Inc. published this content on 15 January 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 January 2020 11:32:09 UTC

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