Release Date: July 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- BlackRock Inc (BLK, Financial) reported double-digit operating income growth and expanded its margin by 160 basis points year over year.
- The company saw net new assets of over $80 billion, with total net inflows of $82 billion in the second quarter.
- BlackRock Inc (BLK) ended the second quarter with a record AUM of over $10.6 trillion.
- The company is executing on strong opportunities in core business areas and building for future growth, particularly in private markets and technology.
- BlackRock Inc (BLK) announced planned acquisitions of Global Infrastructure Partners and Preqin, expected to accelerate growth in private markets and technology services.
Negative Points
- Flows were impacted by an approximately $20 billion active fixed income redemption from a large insurance client linked to M&A activity.
- Institutional index net outflows of $35 billion were concentrated in low-fee index equities.
- Total expense increased 5% year over year, driven by higher incentive compensation, G&A, and sales asset and account expense.
- Employee compensation and benefit expense was up 4% year over year, reflecting higher incentive compensation.
- G&A expense was up 7% year over year, primarily due to the timing of technology spend in the prior year and higher professional services expense.
Q & A Highlights
Q: Lots of optimism on the firm's trajectory for organic growth. Can you help contextualize this more? What does the pipeline look like today, and what does it mean for the firm's organic base fee growth for the back half of '24?
A: Martin Small, CFO: Q2 organic base fee growth was 3%, and we see excellent momentum. Measures for fee growth velocity keep increasing. We expect rate cuts to normalize bond markets and drive flows. Our structural growers like ETFs, models, Aladdin, and private markets are capturing additional growth. We have achieved our 5% organic base fee growth target on average over the last five years and have a great deal of conviction about the path to 5% in the back half of '24.
Q: What are your expectations for flows in the infrastructure space with the GIP deal expected to close in the third quarter?
A: Laurence Fink, CEO: We are having incredible conversations and business integration meetings with GIP. The enthusiasm between our organizations is fantastic, and we expect to have some amazing opportunities and announcements post-closing.
Q: Can you talk about the outlook for technology services revenue growth and the impact of Preqin on your 10% to 15% target for 2025?
A: Martin Small, CFO: Technology services revenue was up 10% year-on-year. We expect Preqin to accelerate our planned technology services ACV growth within our target range. Preqin will increase current ACV dollars by about 15%, and we expect to continue targeting low- to mid-teens growth in tech services ACV.
Q: How do you see the product evolution in private markets with Preqin, and is there a pathway for ETFs given the underlying illiquid nature of the investments?
A: Martin Small, CFO: We see the opportunity to grow Preqin by integrating it with Aladdin and eFront. We aim to drive more sales, innovate new data products, and scale efficiently. We believe we can apply indexing principles to private markets, creating benchmarks and investable indices.
Q: What are you seeing in terms of re-risking? Is it coming out of cash or within other asset classes?
A: Laurence Fink, CEO: It's a mixed bag. Some clients are derisking from equities to fixed-income instruments, while others are reallocating from cash to more diversified strategies like private credit and infrastructure. We believe the macro trends towards more bond allocation and the use of ETFs as core components of portfolios will continue.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
