Skip to main content
News and events

Press releases

BlackRock Reports Second Quarter 2016 Diluted EPS of $4.73, or $4.78 as Adjusted

Company Release - 7/14/2016 6:30 AM ET
  • AUM of $4.9 trillion, up 4% year-over-year and 3% sequentially
  • $2 billion of long-term net inflows in the second quarter of 2016, and $126 billion over the last twelve months, demonstrate strength of diversified business model
  • 2% decline in base fees year-over-year, driven by mix shift from equities to fixed income and cash
  • 13% growth in Aladdin® revenue from the second quarter of 2015 reflects continued demand for risk management
  • 2% decline in diluted EPS (4% as adjusted) year-over-year reflects mix shift and lower performance fees
  • Consistent capital management with $275 million of quarterly share repurchases

NEW YORK--(BUSINESS WIRE)-- BlackRock, Inc. (NYSE:BLK):

 

FINANCIAL RESULTS

(in millions, except per share data)   Q2

2016

  Q2

2015

  Change   Q1

2016

  Change   Six Months Ended June 30,  
            2016   2015   Change
AUM $ 4,890,121 $ 4,721,294 4% $ 4,737,165 3% $ 4,890,121   $ 4,721,294 4%

GAAP basis:

Revenue $ 2,804 $ 2,905 (3)% $ 2,624 7% $ 5,428 $ 5,628 (4)%
Operating income $ 1,173 $ 1,238 (5)% $ 963 22% $ 2,136 $ 2,305 (7)%
Operating margin 41.8% 42.6% (80) bps 36.7% 510 bps 39.4% 41.0% (160) bps
Net income(1) $ 789 $ 819 (4)% $ 657 20% $ 1,446 $ 1,641 (12)%
Diluted EPS $ 4.73 $ 4.84 (2)% $ 3.92 21% $ 8.66 $ 9.69 (11)%
Weighted average diluted shares 166.6 169.1 (1)% 167.4 -% 167.0 169.4 (1)%

As Adjusted:

Operating income(2) $ 1,179 $ 1,248 (6)% $ 1,047 13% $ 2,226 $ 2,325 (4)%
Operating margin(2) 43.9% 44.9% (100) bps 41.6% 230 bps 42.8% 43.2% (40) bps
Net income(1) (2) $ 797 $ 838 (5)% $ 711 12% $ 1,508 $ 1,668 (10)%
Diluted EPS(2) $ 4.78 $ 4.96 (4)% $ 4.25 12% $ 9.03 $ 9.85 (8)%
        (1) Net income represents net income attributable to BlackRock, Inc.

(2) See notes (1) through (4) 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 and six months ended June 30, 2016.

“Our clients are facing unprecedented challenges as they attempt to navigate the current investment environment,” said Chairman and Chief Executive Officer Laurence D. Fink. “Political and macroeconomic uncertainty, historically low yields and elevated market volatility are leading clients to pause, as evidenced by more than $55 trillion in bank deposits in the US, China and Japan alone.

“BlackRock generated $2 billion of long-term net flows in the quarter and $126 billion of inflows over the last twelve months, despite the impact of market headwinds and a slowdown in client activity. Beta and mix shift favored fixed income and cash relative to equities, and impacted second quarter base fees year-over-year.

“This market environment is creating greater opportunities for BlackRock to engage with clients – leading to more frequent and substantive conversations than ever before. Clients are seeking advice, goal-oriented investment solutions and risk management and technological expertise. The differentiated platform we have purposely built at BlackRock is resonating with clients. Our combination of active, index and alternative investment capabilities, powered by Aladdin’s industry-leading technology and risk management, positions us well to capture flows when client activity accelerates.

“We are seeing increasing evidence that our recent strategic investments are driving growth. iShares generated $16 billion of net new business during the quarter, with significant strength in fixed income and ‘smart-beta’ ETFs, as clients utilize these tools to manage risk and minimize volatility. We saw another strong quarter of capital raising in infrastructure, bringing total invested and committed capital to $8 billion, providing clients access to attractive long-term returns and stimulating needed economic growth. Finally, Aladdin revenue grew 13% year-over-year. The increasing impact of technology on our industry continues to drive demand, as we signed one of our largest ever institutional clients during the quarter, and we remain focused on meeting the growing need for technology solutions in the retail sector.

“Now more than ever, BlackRock is uniquely positioned to provide innovative solutions to our clients' complex investment and technology needs. Our focus remains on investing for the future so BlackRock can help clients meet their financial goals and deliver long-term value for shareholders.”

 

RESULTS BY CLIENT TYPE

(in millions), (unaudited)

 

Q2 2016
Net flows

 

June 30, 2016
AUM

 

Q2 2016
Base Fees(1)

 

June 30, 2016
AUM
% of Total

 

Q2 2016
Base Fees(1)
% of Total

Retail   $ (6,292 )  

$

544,427

  $ 806   12 %   34 %
iShares 15,675 1,154,122 845 26 % 36 %
Institutional:
Active (6,717 ) 1,009,721 479 22 % 20 %
Index   (1,129 )     1,796,654     240   40 %   10 %
Total institutional   (7,846 )     2,806,375     719   62 %   30 %
Total long-term   $ 1,537     $ 4,504,924   $ 2,370   100 %   100 %
 

RESULTS BY PRODUCT TYPE

(in millions), (unaudited)

 

Q2 2016
Net flows

 

June 30, 2016
AUM

 

Q2 2016
Base Fees(1)

 

June 30, 2016
AUM
% of Total

 

Q2 2016
Base Fees(1)
% of Total

Equity   $ (2,215 )  

$

2,432,558

  $ 1,236   54 %   52 %
Fixed income 5,494 1,566,656 655 34 % 28 %
Multi-asset (3,099 ) 386,520 291 9 % 12 %
Alternatives   1,357       119,190     188   3 %   8 %
Total long-term   $ 1,537     $ 4,504,924   $ 2,370   100 %   100 %
 

RESULTS BY INVESTMENT STYLE

(in millions), (unaudited)

 

Q2 2016
Net flows

 

June 30, 2016
AUM

 

Q2 2016
Base Fees(1)

 

June 30, 2016
AUM
% of Total

 

Q2 2016
Base Fees(1)
% of Total

Active  

$

(12,812

)

 

$

1,510,424

  $ 1,277   34 %   54 %
Index and iShares   14,349       2,994,500     1,093   66 %   46 %
Total long-term   $ 1,537     $ 4,504,924   $ 2,370   100 %   100 %

(1) Base fees include investment advisory, administration fees and securities lending revenue.

 

Long-Term Business Highlights

Long-term net inflows of $4.1 billion and $9.3 billion from clients in the Americas and EMEA regions, respectively, were partially offset by net outflows of $11.9 billion from clients in Asia-Pacific. At June 30, 2016, BlackRock managed 63% of its long-term AUM for investors in the Americas and 37% for clients in EMEA and Asia-Pacific.

A discussion of the Company’s net flows by client type for the second quarter of 2016 is presented below.

  • Retail long-term net outflows of $6.3 billion reflected net outflows of $2.7 billion and $3.6 billion from the United States and internationally, respectively. Fixed income saw net inflows of $2.3 billion, paced by flows into municipals and core bond funds. Equity net outflows of $4.9 billion were primarily related to outflows from international equities driven by market uncertainty and de-risking. Multi-asset net outflows of $2.6 billion were largely due to outflows from world allocation strategies.
  • iShares long-term net inflows of $15.7 billion were driven by fixed income net inflows of $10.0 billion, diversified across corporate, emerging market and municipal bond funds. Equity net inflows of $3.4 billion reflected strong flows into the Core Series and Minimum Volatility funds. Commodities iShares generated $2.1 billion of net inflows.
  • Institutional active long-term net outflows of $6.7 billion were primarily due to fixed income net outflows of $7.0 billion, driven by client re-allocation activity.
  • Institutional index long-term net outflows of $1.1 billion reflected equity net outflows of $1.2 billion.

Cash management AUM increased 28% to $374.7 billion, primarily reflecting $80.6 billion in AUM acquired in the BofA® Global Capital Management transaction.

Advisory AUM ended the second quarter at $10.5 billion.

INVESTMENT PERFORMANCE AT JUNE 30, 2016 (1)

 

 

One-year period

 

Three-year period

 

Five-year period

Fixed Income:
Actively managed AUM above benchmark or peer
median

Taxable

53

%

80 % 91 %
Tax-exempt

46

%

48

%

70

%

Index AUM within or above applicable tolerance  

93

%

 

99

%

 

99

%

Equity:
Actively managed AUM above benchmark or peer
median
Fundamental

63

%

67

%

51

%

Scientific

40

%

82

%

92

%

Index AUM within or above applicable tolerance  

96

%

 

98

%

 

98

%

(1) Past performance is not indicative of future results. The performance information shown is based on preliminary available data. Please refer to 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 Thursday, July 14, 2016 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 38298849). 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 Thursday, July 14, 2016 and ending at midnight on Thursday, July 28, 2016. 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 38298849. To access the webcast, please visit the investor relations section of www.blackrock.com.

About BlackRock

BlackRock is a global leader in investment management, risk management and advisory services for institutional and retail clients. At June 30, 2016, BlackRock’s AUM was $4.890 trillion. BlackRock helps clients around the world meet their goals and overcome challenges with a range of products that include separate accounts, mutual funds, iShares® (exchange-traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®. As of June 30, 2016, the firm had approximately 12,700 employees in more than 30 countries and a major presence in global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company’s website at www.blackrock.com | Twitter: @blackrock_news | 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
June 30, March 31,
2016 2015 Change 2016 Change
Revenue

Investment advisory, administration fees and
securities lending revenue

$2,489 $2,534 $(45 ) $2,359 $130
Investment advisory performance fees 74 136 (62 ) 34 40
BlackRock Solutions and advisory 172 161 11 171 1
Distribution fees 11 13 (2 ) 11 -
Other revenue 58   61   (3 ) 49   9  
Total revenue 2,804   2,905   (101 ) 2,624   180  
Expense
Employee compensation and benefits 977 1,012 (35 ) 947 30
Distribution and servicing costs 109 105 4 97 12
Amortization of deferred sales commissions 9 12 (3 ) 10 (1 )
Direct fund expense 195 191 4 188 7
General and administration 316 312 4 318 (2 )
Restructuring charge - - - 76 (76 )
Amortization of intangible assets 25   35   (10 ) 25   -  
Total expense 1,631   1,667   (36 ) 1,661   (30 )
Operating income 1,173 1,238 (65 ) 963 210
 
Nonoperating income (expense)
Net gain (loss) on investments 20 6 14 (2 ) 22
Interest and dividend income 6 5 1 5 1
Interest expense (51 ) (52 ) 1   (51 ) -  
Total nonoperating income (expense) (25 ) (41 ) 16   (48 ) 23  
Income before income taxes 1,148 1,197 (49 ) 915 233
Income tax expense 353   371   (18 ) 268   85  
Net income 795 826 (31 ) 647 148
Less:

Net income (loss) attributable to noncontrolling
interests

6   7   (1 ) (10 ) 16  
Net income attributable to BlackRock, Inc. $789   $819   $(30 ) $657   $132  
Weighted-average common shares outstanding
Basic 164,758,612 166,616,558 (1,857,946 ) 165,388,130 (629,518 )
Diluted 166,639,290 169,114,759 (2,475,469 ) 167,398,938 (759,648 )

Earnings per share attributable to BlackRock, Inc.
common stockholders (4)

Basic $4.79 $4.92 $(0.13 ) $3.97 $0.82
Diluted $4.73 $4.84 $(0.11 ) $3.92 $0.81
Cash dividends declared and paid per share $2.29 $2.18 $0.11 $2.29 $ -
 

Supplemental information:

 
AUM (end of period) $4,890,121 $4,721,294 $168,827 $4,737,165 $152,956
Shares outstanding (end of period) 164,463,297 166,379,267 (1,915,970 ) 165,174,069 (710,772 )
GAAP:
Operating margin 41.8 % 42.6 % (80) bps 36.7 % 510 bps
Effective tax rate 30.9 % 31.2 % (30) bps 29.0 % 190 bps
As adjusted:
Operating income (1) $1,179 $1,248 $(69 ) $1,047 $132
Operating margin (1) 43.9 % 44.9 % (100) bps 41.6 % 230 bps

Nonoperating income (expense), less net income
(loss) attributable to noncontrolling interests (2)

$(31 ) $(50 ) $19 $(38 ) $7
Net income attributable to BlackRock, Inc. (3) $797 $838 $(41 ) $711 $86

Diluted earnings attributable to BlackRock, Inc.
common stockholders per share (3) (4)

$4.78 $4.96 $(0.18 ) $4.25 $0.53
Effective tax rate 30.6 % 30.1 % 50 bps 29.6 % 100 bps
 

See the reconciliation to GAAP and notes (1) through (4) for more information on as adjusted items.

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

(in millions, except shares and per share data), (unaudited)

             
  Six Months Ended  
June 30,
2016   2015 Change
Revenue
Investment advisory, administration fees and securities lending revenue $4,848 $4,924 $(76 )
Investment advisory performance fees 108 244 (136 )
BlackRock Solutions and advisory 343 308 35
Distribution fees 22 30 (8 )
Other revenue 107   122   (15 )
Total revenue 5,428   5,628   (200 )
Expense
Employee compensation and benefits 1,924 1,993 (69 )
Distribution and servicing costs 206 204 2
Amortization of deferred sales commissions 19 25 (6 )
Direct fund expense 383 380 3
General and administration 634 651 (17 )
Restructuring charge 76 - 76
Amortization of intangible assets 50   70   (20 )
Total expense 3,292   3,323   (31 )
 
Operating income 2,136 2,305 (169 )
 
Nonoperating income (expense)
Net gain (loss) on investments 18 69 (51 )
Interest and dividend income 11 9 2
Interest expense (102 ) (103 ) 1  
Total nonoperating income (expense) (73 ) (25 ) (48 )
Income before income taxes 2,063 2,280 (217 )
Income tax expense 621   629   (8 )
Net income 1,442 1,651 (209 )
Less:
Net income (loss) attributable to noncontrolling interests (4 ) 10   (14 )
Net income attributable to BlackRock, Inc. $1,446   $1,641   $(195 )
 
Weighted-average common shares outstanding
Basic 165,073,371 166,851,492 (1,778,121 )
Diluted 167,023,559 169,418,964 (2,395,405 )
Earnings per share attributable to BlackRock, Inc. common stockholders (4)
Basic $8.76 $9.84 $(1.08 )
Diluted $8.66 $9.69 $(1.03 )
Cash dividends declared and paid per share $4.58 $4.36 $0.22
 

Supplemental information:

 
AUM (end of period) $4,890,121 $4,721,294 $168,827
Shares outstanding (end of period) 164,463,297 166,379,267 (1,915,970 )
GAAP:
Operating margin 39.4 % 41.0 % (160) bps
Effective tax rate 30.1 % 27.7 % 240 bps
As adjusted:
Operating income (1) $2,226 $2,325 $(99 )
Operating margin (1) 42.8 % 43.2 % (40) bps

Nonoperating income (expense), less net income (loss) attributable to
noncontrolling interests (2)

$(69 ) $(39 ) $(30 )
Net income attributable to BlackRock, Inc. (3) $1,508 $1,668 $(160 )

Diluted earnings attributable to BlackRock, Inc. common stockholders per
share (3) (4)

$9.03 $9.85 $(0.82 )
Effective tax rate 30.1 % 27.0 % 310 bps
 

See the reconciliation to GAAP and notes (1) through (4) for more information on as adjusted items.

 

ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Current Quarter Component Changes by Client Type and Product
    Net        
March 31, inflows June 30,
2016 (outflows) Acquisition (1) Market Change FX impact (2) 2016 Average AUM (3)
 
Retail:
Equity $193,436 $(4,887 ) $ - $6,091 $(2,660 ) $191,980 $194,197
Fixed Income 217,209 2,317 - 5,250 (1,066 ) 223,710 221,062
Multi-Asset 113,291 (2,581 ) - 1,271 (525 ) 111,456 112,902
Alternatives 18,730 (1,141 ) - (162 ) (146 ) 17,281 17,971
Retail subtotal 542,666 (6,292 ) - 12,450 (4,397 ) 544,427 546,132
iShares:
Equity 818,104 3,431 - 7,661 (2,428 ) 826,768 826,127
Fixed Income 291,132 10,026 - 5,720 (1,982 ) 304,896 297,883
Multi-Asset 2,166 122 - 41 (1 ) 2,328 2,255
Alternatives 16,152 2,096   - 1,915   (33 ) 20,130 17,905
iShares subtotal 1,127,554 15,675 - 15,337 (4,444 ) 1,154,122 1,144,170
Institutional:
Active:
Equity 118,833 482 - 2,529 (1,717 ) 120,127 120,312
Fixed Income 544,244 (6,977 ) - 13,064 (645 ) 549,686 545,509
Multi-Asset 262,010 (131 ) - 7,024 (3,966 ) 264,937 263,270
Alternatives 75,104 (91 ) - 526   (568 ) 74,971 75,404
Active subtotal 1,000,191 (6,717 ) - 23,143 (6,896 ) 1,009,721 1,004,495
Index:
Equity 1,277,802 (1,241 ) - 20,404 (3,282 ) 1,293,683 1,292,312
Fixed Income 472,568 128 - 30,198 (14,530 ) 488,364 477,717
Multi-Asset 7,776 (509 ) - 330 202 7,799 7,570
Alternatives 6,003 493   - 487   (175 ) 6,808 6,406
Index subtotal 1,764,149 (1,129 ) - 51,419   (17,785 ) 1,796,654 1,784,005
Institutional subtotal 2,764,340 (7,846 ) - 74,562   (24,681 ) 2,806,375 2,788,500
Long-term 4,434,560 1,537   - 102,349   (33,522 ) 4,504,924 4,478,802
Cash Management 291,986 5,015 80,635 8 (2,960 ) 374,684 353,432
Advisory (4) 10,619 (48 ) - 15   (73 ) 10,513 10,624
Total $4,737,165 $6,504   $80,635 $102,372   $(36,555 ) $4,890,121 $4,842,858
                             
Current Quarter Component Changes by Product (Long-term)            
Net
March 31, inflows June 30,
2016 (outflows) Acquisition Market Change FX impact (2) 2016 Average AUM (3)
 
Equity:
Active $276,281 $(3,880 ) $ - $7,093 $(3,146 ) $276,348 $278,552
iShares 818,104 3,431 - 7,661 (2,428 ) 826,768 826,127
Non-ETF index 1,313,790 (1,766 ) - 21,931   (4,513 ) 1,329,442 1,328,269
Equity subtotal 2,408,175 (2,215 ) - 36,685 (10,087 ) 2,432,558 2,432,948
Fixed income:
Active 753,711 (4,987 ) - 17,962 (1,255 ) 765,431 758,738
iShares 291,132 10,026 - 5,720 (1,982 ) 304,896 297,883
Non-ETF index 480,310 455   - 30,550   (14,986 ) 496,329 485,550
Fixed income subtotal 1,525,153 5,494 - 54,232 (18,223 ) 1,566,656 1,542,171
Multi-asset 385,243 (3,099 ) - 8,666 (4,290 ) 386,520 385,997
Alternatives:
Core 91,639 (1,153 ) - 313 (887 ) 89,912 91,072

Currency and
commodities (5)

24,350 2,510   - 2,453   (35 ) 29,278 26,614
Alternatives subtotal 115,989 1,357   - 2,766   (922 ) 119,190 117,686
Long-term $4,434,560 $1,537   $ - $102,349   $(33,522 ) $4,504,924 $4,478,802
                             
Current Quarter Component Changes by Investment Style (Long-term)          
Net
March 31, inflows June 30,
2016 (outflows) Acquisition Market Change FX impact (2) 2016 Average AUM (3)
Active $1,499,128 $(12,812 ) $ - $33,714 $(9,606 ) $1,510,424 $1,506,836
Index and iShares 2,935,432 14,349   - 68,635   (23,916 ) 2,994,500 2,971,966
Long-term $4,434,560 $1,537   $ - $102,349   $(33,522 ) $4,504,924 $4,478,802
 
(1)  

Amount represents $80.6 billion of AUM acquired in the BofA Global Capital Management transaction in April 2016.

(2) Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
(3) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing four months.
(4) Advisory AUM represents long-term portfolio liquidation assignments.
(5)

Amounts include commodity iShares.

 
 

ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Year-to-Date Changes by Client Type and Product
    Net          
December 31, inflows June 30,
2015 (outflows) Acquisition (1) Market Change FX impact (2) 2016 Average AUM (3)
 
Retail:
Equity $193,755 $(5,282 ) $ - $5,380 $(1,873 ) $191,980 $190,233
Fixed Income 212,653 4,438 - 6,701 (82 ) 223,710 217,268
Multi-Asset 115,307 (4,217 ) - 782 (416 ) 111,456 112,436
Alternatives 19,410 (1,591 ) - (613 ) 75   17,281 18,472
Retail subtotal 541,125 (6,652 ) - 12,250 (2,296 ) 544,427 538,409
iShares:
Equity 823,156 (1,255 ) - 2,120 2,747 826,768 805,871
Fixed Income 254,190 37,508 - 12,519 679 304,896 283,690
Multi-Asset 2,730 (464 ) - 54 8 2,328 2,289
Alternatives 12,485 4,133   - 3,480   32   20,130 16,068
iShares subtotal 1,092,561 39,922 - 18,173 3,466 1,154,122 1,107,918
Institutional:
Active:
Equity 121,442 (1,288 ) - 1,005 (1,032 ) 120,127 117,890
Fixed Income 514,428 3,907 - 28,240 3,111 549,686 534,858
Multi-Asset 252,041 1,131 - 12,011 (246 ) 264,937 257,134
Alternatives 74,941 331   - (17 ) (284 ) 74,971 74,909
Active subtotal 962,852 4,081 - 41,239 1,549 1,009,721 984,791
Index:
Equity 1,285,419 (12,067 ) - 15,021 5,310 1,293,683 1,266,701
Fixed Income 441,097 11,814 - 50,001 (14,548 ) 488,364 463,891
Multi-Asset 6,258 (117 ) - 1,246 412 7,799 7,186
Alternatives 6,003 635   - 408   (238 ) 6,808 6,237
Index subtotal 1,738,777 265   - 66,676   (9,064 ) 1,796,654 1,744,015
Institutional subtotal 2,701,629 4,346   - 107,915   (7,515 ) 2,806,375 2,728,806
Long-term 4,335,315 37,616   - 138,338   (6,345 ) 4,504,924 4,375,133
Cash Management 299,884 (3,140 ) 80,635 (13 ) (2,682 ) 374,684 328,543
Advisory (4) 10,213 (145 ) - (107 ) 552   10,513 10,433
Total $4,645,412 $34,331   $80,635 $138,218   $(8,475 ) $4,890,121 $4,714,109
                             
Year-to-Date Component Changes by Product (Long-term)            
Net
December 31, inflows June 30,
2015 (outflows) Acquisition Market Change FX impact (2) 2016 Average AUM (3)
 
Equity:
Active $281,319 $(7,850 ) $ - $4,257 $(1,378 ) $276,348 $273,821
iShares 823,156 (1,255 ) - 2,120 2,747 826,768 805,871
Non-ETF index 1,319,297 (10,787 ) - 17,149   3,783   1,329,442 1,301,003
Equity subtotal 2,423,772 (19,892 ) - 23,526 5,152 2,432,558 2,380,695
Fixed income:
Active 719,653 7,928 - 34,272 3,578 765,431 744,516
iShares 254,190 37,508 - 12,519 679 304,896 283,690
Non-ETF index 448,525 12,231   - 50,670   (15,097 ) 496,329 471,501
Fixed income subtotal 1,422,368 57,667 - 97,461 (10,840 ) 1,566,656 1,499,707
Multi-asset 376,336 (3,667 ) - 14,093 (242 ) 386,520 379,045
Alternatives:
Core 92,085 (973 ) - (683 ) (517 ) 89,912 91,079

Currency and
commodities (5)

20,754 4,481   - 3,941   102   29,278 24,607
Alternatives subtotal 112,839 3,508   - 3,258   (415 ) 119,190 115,686
Long-term $4,335,315 $37,616   $ - $138,338   $(6,345 ) $4,504,924 $4,375,133
                             
Year-to-Date Component Changes by Investment Style (Long-term)            
Net
December 31, inflows June 30,
2015 (outflows) Acquisition Market Change FX impact (2) 2016 Average AUM (3)
Active $1,462,672 $(4,266 ) $ - $50,688 $1,330 $1,510,424 $1,481,289
Index and iShares 2,872,643 41,882   - 87,650   (7,675 ) 2,994,500 2,893,844
Long-term $4,335,315 $37,616   $ - $138,338   $(6,345 ) $4,504,924 $4,375,133
 
(1)  

Amount represents $80.6 billion of AUM acquired in the BofA Global Capital Management transaction in April 2016.

(2) Foreign exchange reflects the impact of converting non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
(3) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing seven months.
(4) Advisory AUM represents long-term portfolio liquidation assignments.
(5)

Amounts include commodity iShares.

 
 

ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Year-over-Year Component Changes by Client Type and Product
    Net        
June 30, inflows June 30,
2015 (outflows)

Acquisition (1)

Market Change FX impact (2) 2016 Average AUM (3)
 
Retail:
Equity $203,373 $2,630 $ - $(9,364 ) $(4,659 ) $191,980 $193,092
Fixed Income 209,056 12,963 - 2,736 (1,045 ) 223,710 214,434
Multi-Asset 129,188 (7,639 ) 366 (9,441 ) (1,018 ) 111,456 117,523
Alternatives 19,445 (1,029 ) - (1,039 ) (96 ) 17,281 19,089
Retail subtotal 561,062 6,925 366 (17,108 ) (6,818 ) 544,427 544,138
iShares:
Equity 828,057 51,620 - (49,596 ) (3,313 ) 826,768 804,479
Fixed Income 230,735 67,678 - 8,511 (2,028 ) 304,896 265,625
Multi-Asset 1,844 527 - (35 ) (8 ) 2,328 2,098
Alternatives 14,953 3,620   - 1,601   (44 ) 20,130 15,033
iShares subtotal 1,075,589 123,445 - (39,519 ) (5,393 ) 1,154,122 1,087,235
Institutional:
Active:
Equity 128,032 (158 ) - (3,722 ) (4,025 ) 120,127 120,420
Fixed Income 517,251 4,634 - 29,597 (1,796 ) 549,686 529,160
Multi-Asset 256,964 3,406 - 9,684 (5,117 ) 264,937 256,501
Alternatives 73,236 2,445   560 (332 ) (938 ) 74,971 74,607
Active subtotal 975,483 10,327 560 35,227 (11,876 ) 1,009,721 980,688
Index:
Equity 1,345,855 (14,886 ) - (29,110 ) (8,176 ) 1,293,683 1,284,269
Fixed Income 465,392 201 - 54,776 (32,005 ) 488,364 465,324
Multi-Asset 7,013 (635 ) - 1,066 355 7,799 7,068
Alternatives 6,495 1,117   - (384 ) (420 ) 6,808 6,277
Index subtotal 1,824,755 (14,203 ) - 26,348   (40,246 ) 1,796,654 1,762,938
Institutional subtotal 2,800,238 (3,876 ) 560 61,575   (52,122 ) 2,806,375 2,743,626
Long-term 4,436,889 126,494   926 4,948   (64,333 ) 4,504,924 4,374,999
Cash Management 271,506 27,698 80,635 270 (5,425 ) 374,684 306,240
Advisory (4) 12,899 (2,025 ) - (36 ) (325 ) 10,513 11,097
Total $4,721,294 $152,167   $81,561 $5,182   $(70,083 ) $4,890,121 $4,692,336
                             
Year-over-Year Component Changes by Product (Long-term)            
Net
June 30, inflows June 30,
2015 (outflows)

Acquisition(1)

Market Change FX impact (2) 2016 Average AUM (3)
 
Equity:
Active $298,884 $(2,106 ) $ - $(14,478 ) $(5,952 ) $276,348 $280,032
iShares 828,057 51,620 - (49,596 ) (3,313 ) 826,768 804,479
Non-ETF index 1,378,376 (10,308 ) - (27,718 ) (10,908 ) 1,329,442 1,317,749
Equity subtotal 2,505,317 39,206 - (91,792 ) (20,173 ) 2,432,558 2,402,260
Fixed income:
Active 718,853 16,912 - 31,538 (1,872 ) 765,431 736,047
iShares 230,735 67,678 - 8,511 (2,028 ) 304,896 265,625
Non-ETF index 472,846 886   - 55,571   (32,974 ) 496,329 472,871
Fixed income subtotal 1,422,434 85,476 - 95,620 (36,874 ) 1,566,656 1,474,543
Multi-asset 395,009 (4,341 ) 366 1,274 (5,788 ) 386,520 383,190
Alternatives:
Core 89,954 2,079 560 (1,305 ) (1,376 ) 89,912 91,148

Currency and
commodities (5)

24,175 4,074   - 1,151   (122 ) 29,278 23,858
Alternatives subtotal 114,129 6,153   560 (154 ) (1,498 ) 119,190 115,006
Long-term $4,436,889 $126,494   $926 $4,948   $(64,333 ) $4,504,924 $4,374,999
                             
Year-over-Year Component Changes by Investment Style (Long-term)          
Net
June 30, inflows June 30,
2015 (outflows)

Acquisition(1)

Market Change FX impact (2) 2016 Average AUM (3)
Active $1,496,571 $11,987 $926 $15,933 $(14,993 ) $1,510,424 $1,483,802
Index and iShares 2,940,318 114,507   - (10,985 ) (49,340 ) 2,994,500 2,891,197
Long-term $4,436,889 $126,494   $926 $4,948   $(64,333 ) $4,504,924 $4,374,999
 
(1)  

Amounts represent $560 million of AUM acquired in the Infraestructura Institucional acquisition in October 2015, $366 million of AUM acquired in the FutureAdvisor acquisition in October 2015 and $80.6 billion of AUM acquired in the BofA Global Capital Management transaction in April 2016. The FutureAdvisor acquisition amount does not include AUM that was held in iShares holdings.

(2) Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
(3) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months.
(4) Advisory AUM represents long-term portfolio liquidation assignments.
(5)

Amounts include commodity iShares.

 
 

SUMMARY OF REVENUE

                               
  Three Months Ended
June 30,
  Change  

Three Months
Ended
March 31, 2016

  Change Six Months Ended
June 30,
 
(in millions), (unaudited) 2016   2015 2016   2015 Change

Investment advisory, administration fees
and securities lending revenue:

 
Equity:
Active $406 $447 $(41 ) $386 $20 $792 $869 $(77 )
iShares 656 728 (72 ) 623 33 1,279 1,412 (133 )
Non-ETF Index 174 190 (16 ) 164 10   338 353 (15 )
Equity subtotal 1,236 1,365 (129 ) 1,173 63 2,409 2,634 (225 )
Fixed income:
Active 414 387 27 396 18 810 760 50
iShares 172 138 34 152 20 324 268 56
Non-ETF Index 69 72 (3 ) 70 (1 ) 139 140 (1 )
Fixed income subtotal 655 597 58 618 37 1,273 1,168 105
Multi-asset 291 316 (25 ) 284 7 575 620 (45 )
Alternatives:
Core 168 161 7 164 4 332 315 17
Currency and commodities 20 19 1   17 3   37 38 (1 )
Alternatives subtotal 188 180 8   181 7   369 353 16  
Long-term 2,370 2,458 (88 ) 2,256 114 4,626 4,775 (149 )
Cash management 119 76 43   103 16   222 149 73  
Total base fees 2,489 2,534 (45 ) 2,359 130 4,848 4,924 (76 )
Investment advisory performance fees:
Equity 42 61 (19 ) 11 31 53 98 (45 )
Fixed income 2 3 (1 ) 5 (3 ) 7 7 -
Multi-asset 2 8 (6 ) 3 (1 ) 5 16 (11 )
Alternatives 28 64 (36 ) 15 13   43 123 (80 )
Total performance fees 74 136 (62 ) 34 40 108 244 (136 )
 
BlackRock Solutions and advisory 172 161 11 171 1 343 308 35
Distribution fees 11 13 (2 ) 11 - 22 30 (8 )
Other revenue 58 61 (3 ) 49 9   107 122 (15 )
Total revenue $2,804 $2,905 $(101 ) $2,624 $180   $5,428 $5,628 $(200 )
 

Highlights

  • Investment advisory, administration fees and securities lending revenue decreased $45 million from the second quarter of 2015 reflecting mix shift from equities to fixed income and cash products, partially offset by lower yield-related waivers on certain money market funds and the effect of AUM acquired in the BofA Global Capital Management transaction. Securities lending revenue of $151 million in the current quarter increased $4 million from the second quarter of 2015.

    Investment advisory, administration fees and securities lending revenue increased $130 million from the first quarter of 2016, driven by higher average AUM.
  • Performance fees decreased $62 million from the second quarter of 2015, primarily reflecting lower fees from alternative and equity products, and increased $40 million from the first quarter of 2016.
  • BlackRock Solutions® and advisory revenue increased $11 million from the second quarter of 2015. BlackRock Solutions and advisory revenue included $146 million of Aladdin® revenue in the current quarter compared with $129 million in the second quarter of 2015 and $141 million in the first quarter of 2016.
 

SUMMARY OF OPERATING EXPENSE

                                   
  Three

Months Ended
June 30,

Three
Months
Ended

 

Six Months Ended
June 30,

 
(in millions), (unaudited) 2016   2015   Change

March 31,
2016

Change

2016

 

2015

 

Change

Operating Expense    

Employee compensation and
benefits

$977 $1,012 $(35 ) $947 $30 $1,924 $1,993 $(69 )
Distribution and servicing costs 109 105 4 97 12 206 204 2

Amortization of deferred sales
commissions

9 12 (3 ) 10 (1 ) 19 25 (6 )
Direct fund expense 195 191 4 188 7 383 380 3
General and administration 316 312 4 318 (2 ) 634 651 (17 )
Restructuring charge - - - 76 (76 ) 76 - 76
Amortization of intangible assets 25 35 (10 ) 25 -   50 70 (20 )
Total Operating Expense $1,631 $1,667 $(36 ) $1,661 $(30 ) $3,292 $3,323 $(31 )
 

Highlights

  • Employee compensation and benefits decreased $35 million from the second quarter of 2015, reflecting lower incentive compensation, driven primarily by lower operating income and performance fees.

    Employee compensation and benefits increased $30 million from the first quarter of 2016, reflecting higher incentive compensation, driven by higher operating income and performance fees, partially offset by lower seasonal employer payroll taxes.
  • A restructuring charge of $76 million, primarily comprised of severance and accelerated amortization expense of previously granted deferred compensation awards, was recorded in the first quarter of 2016 in connection with a project to streamline and simplify the organization.
 

INCOME TAX EXPENSE

 

Three
Months Ended
June 30,

 

Three
Months
Ended

   

Six Months Ended
June 30,

(in millions), (unaudited) 2016   2015 Change

March 31,
2016

Change

2016   2015   Change
Income tax expense $353 $371 $(18) $268 $85 $621 $629 $(8)
 

Highlights

  • The second quarter 2016 and 2015 income tax expense included a $4 million and $13 million net noncash expense, respectively, primarily related to the revaluation of certain deferred income tax liabilities as a result of domestic state and local tax changes.
  • The first quarter 2016 income tax expense included a $4 million net noncash benefit, primarily related to the revaluation of certain deferred income tax liabilities, including the effect of tax legislation enacted in Japan and domestic state and local tax changes.
 

SUMMARY OF NONOPERATING INCOME (EXPENSE)

 
   

Three Months
Ended
June 30,

   

Three Months
Ended
March 31,
2016

    Six Months Ended
June 30,
 

(in millions), (unaudited)

2016   2015 Change Change 2016   2015

Change

Nonoperating income (expense), GAAP basis

$(25 ) $(41 ) $16 $(48 ) $23 $(73 ) $(25 ) $(48 )

Less: Net income (loss) attributable to NCI

6   7   (1 ) (10 ) 16   (4 ) 10   (14 )
 
Nonoperating income (expense)(1) $(31 ) $(48 ) $17   $(38 ) $7   $(69 ) $(35 ) $(34 )
 

 

 

Estimated
economic
investments at
June 30, 2016(3)

 

Three Months
Ended
June 30,

Three Months
Ended
March 31,
2016

Six Months Ended
June 30,

(in millions), (unaudited) 2016 2015 Change Change 2016 2015 Change
Net gain (loss) on investments(1) (2)
Private equity 20-25 % $7 $9 $(2 ) $2 $5 $9 $10 $(1 )
Real assets 5-10 % 1 2 (1 ) 2 (1 ) 3 4 (1 )
Other alternatives(4)

15-20

% 4 - 4 - 4 4 4 -
Other investments(5) 50-55 % 2   (12 ) 14   4   (2 ) 6   (4 ) 10  
 
Subtotal 14 (1 ) 15 8 6 22 14 8
Other gains(6) -   -   -   -   -   -   45   (45 )
 
Total net gain (loss) on investments(1) 14 (1 ) 15 8 6 22 59 (37 )
Interest and dividend income 6 5 1 5 1 11 9 2
Interest expense (51 ) (52 ) 1   (51 ) -   (102 ) (103 ) 1  
 
Net interest expense (45 ) (47 ) 2   (46 ) 1   (91 ) (94 ) 3  
 
Total nonoperating income (expense)(1) (31 ) (48 ) 17 (38 ) 7 (69 ) (35 ) (34 )

Compensation expense related to
(appreciation) depreciation on deferred
compensation plans

-   (2 ) 2   -   -   -   (4 ) 4  
 

Nonoperating income (expense), as
adjusted(1)

$(31 ) $(50 ) $19   $(38 ) $7   $(69 ) $(39 ) $(30 )
 
(1)   Net of net income (loss) attributable to noncontrolling interests (“NCI”).
(2) Amounts include net gain (loss) on consolidated variable interest entities.
(3) Percentages represent estimated percentages of BlackRock’s corporate economic investment portfolio at June 30, 2016. Economic investment amounts at March 31, 2016 for private equity, real assets, other alternatives and other investments were $360 million, $104 million, $227 million and $871 million, respectively.
(4) Amounts primarily include net gains (losses) related to direct hedge fund strategies and hedge fund solutions.
(5) Amounts include net gains (losses) related to equity and fixed income investments, and BlackRock’s seed capital hedging program.
(6) Amount for the six months ended June 30, 2015 primarily includes a gain related to the acquisition of certain assets of BlackRock Kelso Capital Advisors LLC.
 

Highlights

  • Net gain (loss) on investments increased from the second quarter of 2015 and first quarter of 2016 due to higher marks in the second quarter of 2016.

ECONOMIC TANGIBLE ASSETS

The Company presents economic tangible assets as additional information to enable investors to exclude certain assets that have equal and offsetting liabilities or noncontrolling interests that ultimately do not have an impact on stockholders’ equity or cash flows. In addition, goodwill and intangible assets are excluded from economic tangible assets.

Economic tangible assets include cash, receivables, seed and co-investments, regulatory investments and other assets.

   
June 30, December 31,
(in billions), (unaudited) 2016 (Est.) 2015
Total balance sheet assets

$222

$225
Separate account assets and separate account collateral held under

securities lending agreements

(179

) (182 )
Consolidated sponsored investment funds

(1

)

(1 )
Goodwill and intangible assets, net (31 ) (30 )
Economic tangible assets $11   $12  
 
 

RECONCILIATION OF U.S. GAAP OPERATING INCOME AND OPERATING MARGIN TO OPERATING INCOME
AND OPERATING MARGIN, AS ADJUSTED

 
  Three Months Ended   Six Months Ended
June 30,   March 31, June 30,
(in millions), (unaudited) 2016   2015 2016 2016   2015
Operating income, GAAP basis $1,173 $1,238 $963 $2,136 $2,305
Non-GAAP expense adjustments:
Restructuring charge - - 76 76 -
PNC LTIP funding obligation 6 8 8 14 16

Compensation expense related to
appreciation (depreciation) on
deferred compensation plans

-   2   -   -   4  
 
Operating income, as adjusted 1,179 1,248 1,047 2,226 2,325

Product launch costs and
commissions

-   5   -   -   5  
 

Operating income used for operating
margin measurement

$1,179   $1,253   $1,047   $2,226   $2,330  
 
Revenue, GAAP basis $2,804 $2,905 $2,624 $5,428 $5,628
Non-GAAP adjustments:
Distribution and servicing costs (109 ) (105 ) (97 ) (206 ) (204 )

Amortization of deferred sales
commissions

(9 ) (12 ) (10 ) (19 ) (25 )
 

Revenue used for operating margin
measurement

$2,686   $2,788   $2,517   $5,203   $5,399  
 
Operating margin, GAAP basis 41.8 % 42.6 % 36.7 % 39.4