Q1 2014 Earnings Call Transcript

Transcript Call Date 04/17/2014

Operator: Good morning. My name is Carmen, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the BlackRock Incorporated First Quarter 2014 Earnings Teleconference. Our host for today's call will be Chairman and Chief Executive Officer, Laurence D. Fink; Chief Financial Officer, Gary Shedlin; President, Robert S. Kapito; and General Counsel, Matthew Mallow. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer period. Thank you.

Mr. Mallow, you may begin your conference.

Matthew J. Mallow - General Counsel: Thanks very much. Good morning, everyone. Before Larry, Gary, and Rob make their remarks, let me remind you that during the course of this call we may make a number of forward-looking statements. We call your attention to the fact that BlackRock's actual results will of course or may of course differ from these statements.

As you know, BlackRock has filed reports with the SEC, which list some of the factors that may cause the results of BlackRock to differ materially from what we say today. As we usually warn you, BlackRock assumes no duty and does not undertake to update any forward-looking statements.

So with that, let the call begin.

Gary S. Shedlin - CFO: Thank you, Matt, and good morning everyone. It's my pleasure to be here to present the results for the first quarter of 2014. Before I turn it over to Larry to offer his comments, I'll review our quarterly financial performance and business results, and as usual I will be focusing primarily on as adjusted results.

BlackRock delivered first quarter earnings per share of $4.43, up 21% compared to 2013. Operating income was $1.1 billion, 15% higher than a year ago, reflecting continued revenue growth and a decline in G&A expense.

First quarter non-operating results reflected $69 million increase in the market value of our seed and co-investments, which were impacted by the monetization of a non-strategic opportunistic private equity investment. The first quarter as adjusted tax rate was 30% and we continue to believe this remains an appropriate planning assumption for 2014.

Underpinning our results was continued organic growth despite volatile market conditions in the first quarter. We saw $27 billion of long-term net new flows, representing an annualized organic growth rate of approximately 3% with organic revenue growth once again outpacing organic asset growth notwithstanding the volatility which impacted our shares during the quarter. Our highly diversified multi-client platform generated more than $5 billion of net flows across each of our Retail, iShares, and Institutional businesses.

First quarter revenues were $2.7 billion, up $221 million or 9% from a year ago, and were driven by continued growth in base fees, performance fees, and revenues from BlackRock Solutions. We once again experienced year-over-year base fee growth across all long-dated asset classes.

Base fees increased to $162 million or 8% from a year ago as average assets under management increased as a function of organic growth, market appreciation, and the acquisitions of the Credit Suisse ETF and MGPA real estate businesses. Base fees were roughly flat compared to the fourth quarter in part due to change in our AUM mix, which was impacted by relatively weaker data in markets with higher fee products and a lower day count in the first quarter.

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