BlackRock Reports First Quarter 2018 Diluted EPS of $6.68, or $6.70 as adjusted

 

CIAL RESULTS REFLECT NEW REVENUE RECOGNITION STANDARD (PRIOR PERIODS HAVE BEEN RECAST)
Q1 Q1 Q4
(in millions, except per share data) 2018 2017(a) Change 2017(a) Change
AUM $ 6,316,984 $ 5,420,477 17 % $ 6,288,195 %
Total net flows $ 56,946 $ 64,599 $ 102,929
GAAP basis:
Revenue $ 3,583 $ 3,092 16 % $ 3,764 (5 )%
Operating income $ 1,375 $ 1,143 20 % $ 1,485 (7 )%
Operating margin 38.4 % 37.0 % 140 bps 39.5 % (110 ) bps
Net income(1) (2) $ 1,089 $ 859 27 % $ 2,295 (53 )%
Diluted EPS $ 6.68 $ 5.21 28 % $ 14.01 (52 )%
Weighted average diluted shares 162.9 164.9 (1 )% 163.8 (1 )%
As Adjusted:
Operating income(3) $ 1,378 $ 1,147 20 % $ 1,488 (7 )%
Operating margin(3) 44.1 % 42.6 % 150 bps 44.7 % (60 ) bps
Net income(1) (3) $ 1,092 $ 862 27 % $ 1,013 8 %
Diluted EPS(3) $ 6.70 $ 5.23 28 % $ 6.19 8 %
(a) Financial 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) Net income represents net income attributable to BlackRock, Inc.
(2) GAAP net income for fourth quarter 2017 reflects $1.2 billion of net tax benefit related to the Tax Cuts and Jobs Act.
(3) See notes (1) through (3) to the condensed consolidated statements of income and supplemental information for more information on as adjusted items and the reconciliation to GAAP.

BlackRock, Inc. (NYSE: BLK) today reported financial results for the three months ended March 31, 2018.

“Paced by a strong January, long-term net inflows of $55 billion, representing 5% annualized organic base fee growth, were positive across active and index strategies,” commented Laurence D. Fink, Chairman and CEO of BlackRock. “Momentum continued in technology and risk management, with 19% year-over-year revenue growth, further highlighting the strength and diversity of our global platform.

“Investors experienced a spike in market volatility during the quarter, driven by concerns over global trade policies, a heightened focus on rates and inflation, and headlines in the technology sector. Institutional investors, in particular, reacted to these factors, by de-risking and re-balancing. At the same time, we also saw many corporate clients adapting to U.S. tax reform by seeking liquidity to fund future capital investment or more aggressive share repurchases. As a result of these various crosscurrents, BlackRock experienced a significant number of both large inflows and large outflows from institutional clients in the first quarter. Total institutional net inflows were $3 billion, but reflected active net outflows from multi-asset strategies, primarily related to the loss of a single client from M&A activity, and from active fixed income strategies, linked to profit-taking and cash repatriation planning.

“Driven by strong flows in our retail channels, BlackRock saw continued demand for a diverse range of fixed income strategies, including unconstrained, total return, short duration and emerging market debt, as well as alpha-seeking equity strategies. Our top performing fixed income platform saw $27 billion of net inflows across active and index. Active equities generated $1 billion of net inflows as performance improved, with 78% of fundamental equities and 90% of systematic active equity assets above benchmark or peer median for the five-year period.

iShares® saw quarterly net inflows of $35 billion, as clients continued to use iShares at the core of their portfolios to drive active returns and as simple, efficient tools to manage risk exposure amid market volatility.

“Growth in technology and risk management revenue was powered by demand for institutional Aladdin® and expansion of our digital wealth and distribution technologies, including Aladdin Risk for Wealth Management and Cachematrix. We continue to invest in technology to enhance our distribution capabilities and help partners efficiently scale their businesses and construct better portfolios.

“In a challenging environment, BlackRock continued to perform well. Building on a strong start to 2018, we remain committed to investing for growth and delivering the benefits of our scale to both clients and shareholders.”

RESULTS BY CLIENT TYPE
March 31, 2018 Q1 2018
Q1 2018 March 31, 2018 Q1 2018 AUM Base fees(1)
(in millions), (unaudited) Net flows AUM Base fees(1) % of Total % of Total
Retail $ 16,686 $ 638,363 $ 855 10 % 29 %
iShares ETFs 34,649 1,767,925 1,158 28 % 39 %
Institutional:
Active (7,088 ) 1,130,446 527 18 % 18 %
Index 10,378 2,324,327 256 37 % 9 %
Total institutional 3,290 3,454,773 783 55 % 27 %
Long-term 54,625 5,861,061 2,796 93 % 95 %
Cash management 2,674 454,784 151 7 % 5 %
Advisory (353 ) 1,139
Total $ 56,946 $ 6,316,984 $ 2,947 100 % 100 %
RESULTS BY INVESTMENT STYLE
March 31, 2018 Q1 2018
Q1 2018 March 31, 2018 Q1 2018 AUM Base fees(1)
(in millions), (unaudited) Net flows AUM Base fees(1) % of Total % of Total
Active $ 5,513 $ 1,693,883 $ 1,365 27 % 46 %
Index and iShares ETFs 49,112 4,167,178 1,431 66 % 49 %
Long-term 54,625 5,861,061 2,796 93 % 95 %
Cash management 2,674 454,784 151 7 % 5 %
Advisory (353 ) 1,139
Total $ 56,946 $ 6,316,984 $ 2,947 100 % 100 %
RESULTS BY PRODUCT TYPE
March 31, 2018 Q1 2018
Q1 2018 March 31, 2018 Q1 2018 AUM Base fees(1)
(in millions), (unaudited) Net flows AUM Base fees(1) % of Total % of Total
Equity $ 26,514 $ 3,363,237 $ 1,540 53 % 52 %
Fixed income 26,683 1,886,523 757 30 % 26 %
Multi-asset (1,987 ) 476,697 296 8 % 10 %
Alternatives 3,415 134,604 203 2 % 7 %
Long-term 54,625 5,861,061 2,796 93 % 95 %
Cash management 2,674 454,784 151 7 % 5 %
Advisory (353 ) 1,139
Total $ 56,946 $ 6,316,984 $ 2,947 100 % 100 %

BUSINESS HIGHLIGHTS

Long-term net inflows of $57.3 billion and $3.2 billion from clients in the Americas and Asia-Pacific regions, respectively, were partially offset by net outflows of $5.9 billion from clients in EMEA. At March 31, 2018, BlackRock managed 63% of its long-term AUM for clients in the Americas, 29% for clients in EMEA and 8% for clients in Asia-Pacific.

The Company’s net flows by client type for the first quarter of 2018 are presented below.

  • Retail long-term net inflows of $16.7 billion reflected net inflows of $8.7 billion in the United States and $8.0 billion internationally. Fixed income net inflows of $10.0 billion were diversified across the Company’s top-performing active platform, led by net inflows into unconstrained, emerging market and municipals categories. Equity net inflows of $4.2 billion reflected inflows into index mutual funds and international active equities. Multi-asset net inflows of $2.0 billion were largely due to inflows into the Multi-asset Income fund family.
  • iShares ETFs long-term net inflows of $34.6 billion reflected strength in iShares Core ETFs. Equity net inflows of $29.7 billion were driven by both U.S. and international equity market exposures. Fixed income and commodity iShares generated $3.2 billion and $1.7 billion of net inflows, respectively.
  • Institutional active long-term net outflows of $7.1 billion were driven by fixed income outflows of $4.1 billion linked to profit-taking and cash repatriation planning, and multi-asset net outflows of $4.1 billion resulting from a single redemption associated with client M&A activity. Alternatives net inflows of $1.4 billion were led by inflows into hedge funds, private equity solutions and infrastructure offerings.
  • Institutional index long-term net inflows of $10.4 billion included fixed income net inflows of $17.5 billion, led by demand for liability-driven solutions, partially offset by equity net outflows of $7.2 billion.

Cash management AUM increased 1% from the prior quarter to $454.8 billion.

INVESTMENT PERFORMANCE AT MARCH 31, 2018(1)
One-year period Three-year period Five-year period
Fixed income:
Actively managed AUM above benchmark or peer median
Taxable 83% 72% 90%
Tax-exempt 63% 58% 74%
Index AUM within or above applicable tolerance 96% 99% 100%
Equity:
Actively managed AUM above benchmark or peer median
Fundamental 66% 77% 78%
Systematic 84% 89% 90%
Index AUM within or above applicable tolerance 96% 98% 98%

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