BlackRock (NYSE:BLK) reported first-quarter financial results on Tuesday. The transcript from the company’s earnings call has been provided below.
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Chris Meade (General Counsel)
Good morning everyone. I’m Chris Mead, the General Counsel of BlackRock. Before we begin, I’d like to 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 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. BlackRock assumes no duty and does not undertake to update any forward looking statements. So with that, I’ll turn it over to Martin. Thanks, Chris. Good morning everyone. It’s my pleasure to present results for the first quarter of 2026. Before I turn it over to Larry, I’ll review our financial performance and business results. Our earnings release discloses both GAAP and as-adjusted results. A reconciliation between GAAP and our as-adjusted results has been included in the tables attached to today’s press release. I’ll be focusing primarily on our as-adjusted results. It’s been a standout start to the year for BlackRock. Our first quarter revenue, operating income and earnings per share grew double digits. We expanded margins by over 100 basis points and we delivered 8% organic base fee growth. That’s our seventh consecutive quarter at or above 5%, bringing the last 12 months organic base fee growth to 10%. What’s driving that performance is deep engagement with clients. We’re providing advice, insights and access across the whole portfolio, allowing clients to efficiently implement both long term strategic asset allocation moves and tactical exposures to navigate near term themes and markets. These higher velocity markets bring clients closer to our firm. BlackRock is winning mindshare and wallet share reflected in 130 billion of net inflows. In the first quarter. Organic growth is durable and broad based. It’s consistently across product, region and client type. Firms we brought together deliberately are now compounding even faster in our results and with our clients. You see it across the BlackRock portfolio Aperio flows accelerating as advisors bring tax aware direct indexing into the core of accounts. IShares leading the industry across active and index infrastructure, Fundraising and deployment ahead of plan the first quarter of 2026 unfolded in a more volatile market environment. Markets showed heightened sensitivity to incremental economic data with volatility rising across rates, equities and currencies. There is real impactful geopolitical uncertainty. There’s both excitement and anxiety about how artificial intelligence will impact day to day lives and business models. As capital reallocates and assumptions are challenged, markets can feel unsettled even when underlying fundamentals are sound. That dynamic is evident today. While headlines and sentiment remain uneven. Blackrock’s performance tells a very different story. Our fundamentals are strong. Organic base fee growth remains well above target and margin expansion continues to reflect the operating leverage built into our model. Momentum across our business continues to accelerate. That momentum is rooted in clients wanting to partner with scaled trusted platforms and they’re consolidating more of their portfolios with BlackRock. Turning to our financial results, first quarter revenue of 6.7 billion increased 27% year over year driven by organic growth, the impact of higher markets. On average, aum, the acquisitions of HPS (High Performance Systems) and Preqin and higher technology services and subscription revenue. Operating income of 2.7 billion was up 31% and earnings per share of $12.53 was 11% higher versus a year ago. EPS also reflected lower non operating income, a higher effective tax rate and higher share count in the current quarter linked to the closing of the HHPS (High Performance Systems) transaction on July 1, 2025. Non operating results for the quarter included 66 million of net investment gains driven primarily by equity method earnings and non cash valuation gains including in our minority investments. Our as adjusted tax rate for the first quarter was approximately 23%. This reflected 57 million of discrete tax benefits related to stock based compensation awards that vest in the first quarter of each year. We continue to estimate that 25% is a reasonable projected tax run rate for the remainder of 2026. The actual effective tax rate may differ because of non recurring or discrete items or potential changes in tax legislation. First quarter base fee and securities lending revenue of 5.4 billion was up 24% year over year driven by the positive impact of market beta. On average AUM organic base fee growth and approximately 230 million in base fees from HPS (High Performance Systems) on an equivalent day count basis. Our annualized effective fee rate was 2.10of a basis point higher compared to the fourth quarter. Our fee rate benefited from outperformance of international equity markets relative to the US along with client dem and for international iShares exposures and our structural growers in systematic equities, private markets, appirio and active ETFs. Performance fees of 272 million increased from a year ago reflecting higher revenue from alternatives which includes 121 million performance fees from HPS (High Performance Systems). Quarterly technology services and subscription revenue was up 22% compared to a year ago. Growth reflects sustained demand for our full range of Aladdin technology offerings and a full quarter impact of the Prequin transaction which closed on March 3, 2025. Prequin added approximately 65 million to first quarter revenue. Annual contract value or ACV increased 14% year over year. We remain committed to low to mid teens ACV growth over the long term. Total expense increased 24% year over year reflecting higher compensation, Sales, asset and account expense and GNA. Employee compensation and benefit expense was up 27% reflecting higher incentive compensation linked to higher operating income and performance fees and higher headcount associated with the onboarding of HPS (High Performance Systems) and frequent employees. Sales, asset and account expense increased 25% compared to a year ago primarily driven by higher distribution and servicing costs and direct fund expense. G and an expense increased 14% primarily driven by the impact of the HPS (High Performance Systems) and Preqin acquisitions. Excluding the impact of the HPS (High Performance Systems) and Preqin acquisitions, G and A would have increased a mid single digit percentage from a year ago. Our first quarter as adjusted operating margin of 44.5% was up 130 basis points from a year ago reflecting the positive impact of markets on revenue and strong organic base fee growth. We continue to deliver higher margin expansion on recurring fee related earnings excluding the impact of all performance fees and related compensation. Our adjusted operating margin for the first quarter would have been 45.6%, up 180 basis points year over year. We repurchased 450 million worth of shares in the first quarter. At present, based on our capital spending plans for the year and subject to market and other conditions, we still anticipate repurchasing at least 450 million of shares per quarter for the balance of the year. Consistent with our January guidance. In the first quarter BlackRock generated total net inflows of 130 billion led by strength across ETF’S active and private markets. Record first quarter ETF net inflows of $132 billion were led by index bond ETFs with $41 billion of net inflows. Precision exposures, core equity and active ETFs added $39 billion, $32 billion and $19 billion respectively. Client demand for international diversification presents meaningful upside for BlackRock, particularly in areas like emerging markets and precision single country allocations. This demand for premium exposures that are specific to iShares resulted in double digit organic base fee growth for ETFs in the quarter. Retail net inflows of 15 billion reflected continued strength in our systematic liquid alternatives, Active Fixed income and Evergreen private markets offerings. Subscriptions for HPS (High Performance Systems)’s flagship non traded BDC continue with approximately 150 million of subscriptions for the April window. Demand for Aperio and spiderrock is also accelerating as financial advisors turn to these platforms for customized and tax aware strategies. Aperio generated a record $13 billion of net inflows and SpiderRock added over 1 billion in the quarter. Aperio’s AUM has more than tripled and SpiderRock’s AUM has more than doubled in the five and two years since their respective closings. Institutional active net inflows were 24 billion driven by our life path, target date franchise private markets and systematic strategies. These inflows were partially offset by a few client specific active fixed income redemptions. Institutional index net outflows of 35 billion were concentrated in low fee index equities. In private markets we continue to see strong momentum supported by investment performance, differentiated deal flow and the breadth of our client relationships. We saw an aggregate 9 billion of net inflows led by private credit and infrastructure and primarily driven by deployment activity. Finally, BlackRock’s cash management platform saw 6 billion of net outflows in the first quarter. Cash management results reflected seasonal redemptions from US government funds partially offset by growth in customized cash mandates. BlackRock said its best helping clients navigate intense periods of transformation across industries, markets and geopolitics Capital’s moving wealth management platforms. Institutions, consultants they’re evaluating their providers of asset management services. Our whole portfolio model has a proven track record of capturing momentum and gaining share in these environments. BlackRock is simultaneously a leading public markets manager, a scaled private markets platform and a global technology company. That’s not something that can be replicated overnight. Our clients know it. Our results prove it. We generated 8% organic base fee growth in the quarter and 10% over the last 12 months at the same time, we grew revenue and operating income double digits and expanded margins by over 100 basis points. When clients are making big decisions about their portfolios, they’re choosing BlackRock because we can meet them across public markets, private markets and technology all on one platform. We have the investment expertise, the technology, the global reach and the track record. And we have nearly 25,000 colleagues 1 BlackRock working together to deliver excellence for our clients and growth for our shareholders. With that, I’ll turn it over to Larry.
Larry Fink (Chairman and Chief Executive Officer)
Thank you, Martin. Good morning everyone and thank you for joining the call. This was one of the strongest starts to a year in BlackRock’s history. Clients awarded us with $130 billion of net inflows in the first quarter. That drove 8% organic base fee growth, representing our highest first quarter in the last five years. Technology Services ACV grew 14%, our margins expanded by over 100 basis points to 44.5 and our firm’s effective fee rate moved upward. And over the last 12 months, clients entrusted BlackRock with $744 billion in net new assets powering 10% organic base fee growth. Our result reflects a global business with accelerating momentum, deep client engagement worldwide and a platform built to compound through cycles. But our position reflects something larger than 1/4 or even 1 year results. The conversations I’m having with clients around the world confirm what our results already show. Our business is becoming more global and more connected. Our brand is strengthening in every region in which we operate. I’ve seen it deepen even in the last few weeks in my trips to Mexico, Europe and my conversations with colleagues and clients in the Middle East. I want to recognize the resilience and partnership from our employees, our clients and our board members in the Middle East. We’ll continue to do everything we can to support them. In a world where capital is moving and provider relationships are being reevaluated, BlackRock is a trusted destination. A major part of my role has always been spending time with clients. By 2026, schedule has already been filled with rich dialogue with CEOs, sovereign wealth funds, pension funds, insurance, CIOs, wealth managers and governments. In these conversations, I hear a consistent theme. The world feels different. Not just uncertain, but different. The world is reorganizing around self reliance, AI is reshaping how we live and how we work. Private markets are a large and growing part of the capital markets and clients are turning to BlackRock to help them understand what this means for their portfolios and for their beneficiaries. We’re engaged with clients across Every channel, geography and asset class. Many of these conversations would not have been possible five years ago because the platform …