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BlackRock Reports Full Year 2017 Diluted EPS of $30.23, or $22.60 as adjusted

NEW YORK--(BUSINESS WIRE)--

BlackRock, Inc. (BLK):

FINANCIAL RESULTS

  Q4   Q4         Q3       Full Year    
(in millions, except per share data)   2017     2016  

 

Change

    2017  

 

Change

    2017     2016  

 

Change

AUM $ 6,288,195 $ 5,147,852 22 % $ 5,976,892 5 %   $ 6,288,195   $ 5,147,852 22 %
Total net flows $ 102,929 $ 98,050 $ 96,112 $ 367,254 $ 202,191

GAAP basis:

Revenue $ 3,469 $ 2,890 20 % $ 3,233 7 % $ 12,491 $ 11,155 12 %
Operating income $ 1,489 $ 1,225 22 % $ 1,394 7 % $ 5,272 $ 4,570 15 %
Operating margin 42.9

%

 

42.4

%

 

50 bps 43.1

%

(20 ) bps 42.2 % 41.0

%

 

120 bps
Net income(1) (2) $ 2,304 $ 851 171 % $ 947 143 % $ 4,970 $ 3,172 57 %
Diluted EPS $ 14.07 $ 5.13 174 % $ 5.78 143 % $ 30.23 $ 19.04 59 %
Weighted average diluted shares 163.8 165.9 (1 )% 163.8 - % 164.4 166.6 (1 )%

As Adjusted:

Operating income(3) $ 1,492 $ 1,232 21 % $ 1,398 7 % $ 5,287 $ 4,674 13 %

Operating margin(3)

44.8

%

 

44.4

%

 

40 bps 45.0

%

(20 ) bps 44.1 % 43.7

%

 

40 bps
Net income(1) (3) $ 1,022 $ 852 20 % $ 969 5 % $ 3,716 $ 3,214 16 %
Diluted EPS(3)   $ 6.24     $ 5.14       21 %     $ 5.92     5 %     $ 22.60     $ 19.29       17 %
(1)   Net income represents net income attributable to BlackRock, Inc.
(2)

GAAP net income for fourth quarter and full year 2017 reflects $1.2 billion of net tax benefit related to the Tax Cuts and Jobs Act. See the Income Tax Expense (Benefit) for more information.

(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. (BLK) today reported financial results for the three months and year ended December 31, 2017.

“BlackRock’s record 2017 results reflect the long-term investments we’ve consistently made in our business to better serve clients,” commented Laurence D. Fink, Chairman and CEO of BlackRock. “$367 billion of total net inflows for the year were the strongest flows in BlackRock’s history, and included $103 billion in the fourth quarter.

“Full year net inflows represented 7% organic asset growth and were positive across client types, asset classes, major regions and investment styles. Investors are increasingly seeking comprehensive solutions, and BlackRock’s differentiated ability to offer scaled investment strategies, industry leading risk management and portfolio construction technology and thought leadership is driving deeper client partnerships than ever before. And we continue to expand the global reach of our integrated platform to investors in high growth geographies like China, where earlier this month we obtained our private fund management registration to manufacture and distribute onshore investment products.

iShares ETFs generated $245 billion of full year net inflows, as an increasingly diverse set of institutional and retail clients are using ETFs for asset allocation and alpha generation. Investors are using both equity and fixed income ETFs in their portfolios for Core and precision exposures and as financial instruments. Investments made in iShares ETFs drove expanded market share in 2017 and enabled us to once again capture the #1 share of industry ETF flows globally, in the United States and Europe, and in both equity and fixed income products.

“In alpha-seeking strategies, we are leveraging the powerful combination of human investment expertise and sophisticated data analytics. Performance across our alpha-seeking strategies remains strong and drove $24 billion of net inflows in 2017.

“Technology and risk management revenue, powered by Aladdin®, increased 14% for the full year, and demand remains strong across our full range of capabilities. In 2017, we expanded our technology reach, scaling our distribution capabilities through Aladdin Risk for Wealth Management, Cachematrix, iCapital and Scalable Capital. We continue to invest in technology and data to generate improved alpha, better serve our clients and more efficiently run our business.

“Throughout BlackRock’s 30-year history, we have been driven by a fiduciary commitment to our clients, a culture of innovation, a passion for performance and a workplace that embraces diversity and inclusion. We are fortunate to have dedicated employees who share our vision of creating better financial futures for clients. We enter 2018 well positioned to continue investing for future growth, developing our talent and delivering differentiated value for clients and shareholders alike.”

CAPITAL MANAGEMENT

BlackRock’s Board of Directors approved a 15% increase in the quarterly cash dividend to $2.88 per share, payable March 22, 2018, to shareholders of record at the close of business on March 7, 2018.

RESULTS BY CLIENT TYPE
                                         
            December 31, 2017   Q4 2017
Q4 2017 December 31, 2017 Q4 2017 AUM Base fees(1)
(in millions), (unaudited)   Net flows     AUM     Base fees(1)     % of Total   % of Total
Retail $ 11,391 $ 628,377 $ 858   10 %   29 %
iShares ETFs 54,800 1,752,239 1,123 28 % 39 %
Institutional:
Active 2,187 1,139,308 508 18 % 18 %
Index   12,202       2,316,807       257       37 %     9 %
Total institutional   14,389       3,456,115       765       55 %     27 %
Long-term 80,580 5,836,731 2,746 93 % 95 %
Cash management 23,406 449,949 150 7 % 5 %
Advisory   (1,057 )     1,515       -       -       -  
Total   $ 102,929     $ 6,288,195     $ 2,896       100 %     100 %
 
RESULTS BY PRODUCT TYPE
                                         
December 31, 2017 Q4 2017
Q4 2017 December 31, 2017 Q4 2017 AUM Base fees(1)
(in millions), (unaudited)   Net flows     AUM     Base fees(1)     % of Total   % of Total
Equity $ 35,782 $ 3,371,641 $ 1,493 53 % 51 %
Fixed income 42,951 1,855,465 754 30 % 26 %
Multi-asset 4,923 480,278 305 8 % 11 %
Alternatives   (3,076 )     129,347       194       2 %     7 %
Long-term 80,580 5,836,731 2,746 93 % 95 %
Cash management 23,406 449,949 150 7 % 5 %
Advisory   (1,057 )     1,515       -       -       -  
Total   $ 102,929     $ 6,288,195     $ 2,896       100 %     100 %
 
RESULTS BY INVESTMENT STYLE
                                         
December 31, 2017 Q4 2017
Q4 2017 December 31, 2017 Q4 2017 AUM Base fees(1)
(in millions), (unaudited)   Net flows     AUM     Base fees(1)     % of Total   % of Total
Active $ 12,962 $ 1,696,005 $ 1,353 27 % 47 %
Index and iShares ETFs   67,618       4,140,726       1,393       66 %     48 %
Long-term 80,580 5,836,731 2,746 93 % 95 %
Cash management 23,406 449,949 150 7 % 5 %
Advisory   (1,057 )     1,515       -       -       -  
Total   $ 102,929     $ 6,288,195     $ 2,896       100 %     100 %
(1)   Base fees include investment advisory, administration fees and securities lending revenue.

BUSINESS HIGHLIGHTS

Long-term net inflows were positive across all major regions, with net inflows of $55.3 billion, $17.9 billion and $7.4 billion from clients in the Americas, EMEA and Asia-Pacific, respectively. At December 31, 2017, 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 fourth quarter of 2017 are presented below.

  • Retail long-term net inflows of $11.4 billion reflected net inflows of $7.4 billion in the United States and $4.0 billion internationally. Fixed income net inflows of $8.0 billion were diversified across our top-performing active platform, led by net inflows into unconstrained, short duration and municipals categories. Multi-asset net inflows of $2.0 billion were largely due to inflows into the Multi-asset Income fund family. Equity net inflows of $1.1 billion were paced by flows into international equities.
  • iShares ETFs long-term net inflows of $54.8 billion reflected strength in iShares Core, precision exposure and financial instrument ETFs. Equity net inflows of $44.9 billion were driven by both U.S. and international equity market exposures. Fixed income net inflows of $8.7 billion reflected inflows into broad fixed income and investment grade corporate funds. Commodities iShares generated $1.0 billion of net inflows.
  • Institutional active long-term net inflows of $2.2 billion were led by multi-asset net inflows of $2.9 billion, reflecting ongoing demand for our LifePath® target-date series and factors strategies, and fixed income net inflows of $2.3 billion. Equity net outflows of $1.2 billion were primarily due to outflows in fundamental active equities. Alternatives net inflows were $2.1 billion, excluding $3.9 billion of capital return associated with real estate and private equity fund-of-funds, or $1.8 billion of total net outflows. Momentum in illiquid alternatives fundraising continued, with $17 billion of committed capital available to invest on behalf of clients.
  • Institutional index long-term net inflows of $12.2 billion included fixed income net inflows of $24.0 billion, led by demand for liability-driven solutions, partially offset by equity net outflows of $9.0 billion. Alternatives net outflows of $2.5 billion were primarily due to outflows from passive currency overlays.

Cash management AUM increased 6% from the prior quarter to $449.9 billion.

INVESTMENT PERFORMANCE AT DECEMBER 31, 2017 (1)

    One-year period   Three-year period   Five-year period
Fixed income:      
Actively managed AUM above benchmark or peer median
Taxable

81%

73%

90%

Tax-exempt

52%

68%

72%

Index AUM within or above applicable tolerance  

96%

 

93%

 

99%

Equity:
Actively managed AUM above benchmark or peer median
Fundamental

70%

72%

73%

Systematic

83%

87%

90%

Index AUM within or above applicable tolerance  

96%

 

99%

 

98%

(1)  

Past performance is not indicative of future results. The performance information shown is based on preliminary available data. Please refer to the Performance Notes for performance disclosure detail.

TELECONFERENCE, WEBCAST AND PRESENTATION INFORMATION

Chairman and Chief Executive Officer, Laurence D. Fink, and Chief Financial Officer, Gary S. Shedlin, will host a teleconference call for investors and analysts on Friday, January 12, 2018 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 6567048). 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 12:30 p.m. (Eastern Time) on Friday, January 12, 2018 and ending at midnight on Friday, January 26, 2018. 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 6567048. 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, 2017, the firm managed approximately $6.288 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.

 

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,
      2017     2016     Change     2017     Change
Revenue
Investment advisory, administration fees and

securities lending revenue

$ 2,896 $ 2,486 $ 410 $ 2,792 $ 104
Investment advisory performance fees 285 129 156 191 94
Technology and risk management revenue(a) 180 156 24 175 5
Distribution fees 7 9 (2 ) 5 2
Advisory and other revenue(a)   101     110     (9 )   70     31  
Total revenue   3,469     2,890     579     3,233     236  
 
Expense
Employee compensation and benefits 1,147 987 160 1,088 59
Distribution and servicing costs 131 109 22 123 8
Amortization of deferred sales commissions 4 7 (3 ) 4 -
Direct fund expense 238 183 55 234 4
General and administration 448 355 93 363 85
Amortization of intangible assets   12     24     (12 )   27     (15 )
Total expense   1,980     1,665     315     1,839     141  
 
Operating income 1,489 1,225 264 1,394 95
 
Nonoperating income (expense)
Net gain (loss) on investments 33 6 27 41 (8 )
Interest and dividend income 14 7 7 15 (1 )
Interest expense   (46 )   (51 )   5     (46 )   -  
Total nonoperating income (expense)   1     (38 )   39     10     (9 )
 
Income before income taxes 1,490 1,187 303 1,404 86
Income tax expense (benefit)   (820 )   336     (1,156 )   445     (1,265 )
Net income   2,310     851     1,459     959     1,351  
Less:
Net income (loss) attributable to noncontrolling interests   6     -     6     12     (6 )
Net income attributable to BlackRock, Inc. $ 2,304   $ 851   $ 1,453   $ 947   $ 1,357  
 
Weighted-average common shares outstanding
Basic 161,272,950 163,441,552 (2,168,602 ) 161,872,716 (599,766 )
Diluted 163,777,534 165,854,167 (2,076,633 ) 163,773,546 3,988
Earnings per share attributable to BlackRock, Inc.

common stockholders (3)

Basic $ 14.29 $ 5.21 $ 9.08 $ 5.85 $ 8.44
Diluted $ 14.07 $ 5.13 $ 8.94 $ 5.78 $ 8.29
Cash dividends declared and paid per share $ 2.50 $ 2.29 $ 0.21 $ 2.50 $ -
 

Supplemental information:

 
AUM (end of period) $ 6,288,195 $ 5,147,852 $ 1,140,343 $ 5,976,892 $ 311,303
Shares outstanding (end of period) 161,046,825 163,121,291 (2,074,466 ) 161,597,770 (550,945 )
GAAP:
Operating margin 42.9 % 42.4 % 50

 bps

43.1 % (20 ) bps
Effective tax rate (55.2 )% 28.3 % (8,350 ) bps 32.0 % (8,720 ) bps
As adjusted:
Operating income (1) $ 1,492 $ 1,232 $ 260 $ 1,398 $ 94
Operating margin (1) 44.8 % 44.4 % 40

 bps

45.0 % (20 ) bps
Nonoperating income (expense), less net income

(loss) attributable to noncontrolling interests

$ (5 ) $ (38 ) $ 33 $ (2 ) $ (3 )
Net income attributable to BlackRock, Inc. (2) $ 1,022 $ 852 $ 170 $ 969 $ 53
Diluted earnings attributable to BlackRock, Inc.

common stockholders per share (2) (3)

$ 6.24 $ 5.14 $ 1.10 $ 5.92 $ 0.32
Effective tax rate       31.3 %     28.6 %     270

 bps

    30.6 %     70

 bps

 

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

 
(a)  

Beginning with the first quarter of 2017, Aladdin revenue previously reported within “BlackRock Solutions® and advisory” has been presented within “Technology and risk management revenue” on the condensed consolidated statements of income. The remaining previously reported “BlackRock Solutions and advisory” revenue is currently reported as part of “Advisory and other revenue.” Under the historical presentation, BlackRock Solutions and advisory revenue would have totaled $234 million for the three months ended December 31, 2017. The prior period amount reported for BlackRock Solutions and advisory of $197 million for the three months ended December 31, 2016 has been reclassified to conform to the current presentation. See the Summary of Revenue for further information.

 
 

CONDENSED CO...