Q3 2013 Earnings Earnings Release Supplement October 16, 2013 Exhibit 99.2 |
1 Important Notes This presentation, and other statements that BlackRock, Inc. (“BlackRock”) may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock’s future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” and similar expressions. BlackRock cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and BlackRock assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance. In addition to risk factors previously disclosed in BlackRock’s Securities and Exchange Commission (“SEC”) reports and those identified elsewhere in this presentation, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: (1) the introduction, withdrawal, success and timing of business initiatives and strategies; (2) changes and volatility in political, economic or industry conditions, the interest rate environment, foreign exchange rates or financial and capital markets, which could result in changes in demand for products or services or in the value of assets under management; (3) the relative and absolute investment performance of BlackRock’s investment products; (4) the impact of increased competition; (5) the impact of future acquisitions or divestitures; (6) the unfavorable resolution of legal proceedings; (7) the extent and timing of any share repurchases; (8) the impact, extent and timing of technological changes and the adequacy of intellectual property, information and cyber security protection; (9) the impact of legislative and regulatory actions and reforms, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, and regulatory, supervisory or enforcement actions of government agencies relating to BlackRock or The PNC Financial Services Group, Inc. (“PNC”); (10) terrorist activities, international hostilities and natural disasters, which may adversely affect the general economy, domestic and local financial and capital markets, specific industries or BlackRock; (11) the ability to attract and retain highly talented professionals; (12) fluctuations in the carrying value of BlackRock’s economic investments; (13) the impact of changes to tax legislation, including income, payroll and transaction taxes, and taxation on products or transactions, which could affect the value proposition to clients and, generally, the tax position of BlackRock; (14) BlackRock’s success in maintaining the distribution of its products; (15) the impact of BlackRock electing to provide support to its products from time to time and any potential liabilities related to securities lending or other indemnification obligations; and (16) the impact of problems at other financial institutions or the failure or negative performance of products at other financial institutions. This presentation also includes non-GAAP financial measures. You can find our presentations on the most directly comparable GAAP financial measures calculated in accordance with GAAP and our reconciliations in the appendix to this earnings release supplement, our current earnings release dated October 16, 2013, and BlackRock’s other periodic reports, which are available on BlackRock’s web site at www.blackrock.com. |
2 Table of Contents Operating and Net Income/Diluted EPS, as adjusted Page 3 Operating Margin, as adjusted Page 4 Q3 2013 Mix by Product, Client Type, Style and Region Page 5 Major Market Indices and Exchange Rates Page 6 Year-over-Year: Q3 2013 vs. Q3 2012 Pages 7-12 Sequential Quarters: Q3 2013 vs. Q2 2013 Pages 13-18 Nonoperating and Capital Management Pages 19-21 Appendix Pages 22-26 |
3 EPS and operating income up 12% year-over-year Operating and Net Income, as adjusted ($ in millions) Diluted Earnings Per Share, as adjusted (1) Q3 2012 includes $25 million of pre-tax closed-end fund launch costs. (2) Q2 2013 EPS and net income reflect a $39 million noncash, nonoperating pre-tax gain related to the PennyMac IPO. For further information and reconciliation between GAAP and as adjusted, see the appendix, notes (a) through (f) in the current earnings release as well as previously filed Form 10-Ks, 10-Qs and 8-Ks. Operating Income Net Income +12% +12% • Base fees and BRS revenue drove year-over-year results • Sequential results reflect seasonally lower securities lending fees $575 $558 $610 $695 $637 $722 $672 Q1 2012 Q2 2012 Q3 2012 (1) Q4 2012 Q1 Q2 2013 2013 (2) Q3 2013 $3.16 $3.10 $3.47 $3.96 Q1 2012 Q2 2012 Q3 2012 (1) Q4 2012 Q1 2013 Q2 2013 (2) Q3 2013 $3.65 $4.15 $3.88 $825 $832 $876 $1,041 $921 $982 $978 |
4 Continued year-over-year margin improvement 40.0% 41.3% 39.2% 38.6% 39.7% 39.3% 36.8% 38.2% 40.7% 42.6% 41.2% 2009 2009 2010 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Full Year 2012 = 40.4% Operating Margin, as adjusted For further information and reconciliation between GAAP and as adjusted, see the appendix, notes (a) through (f) in the current earnings release as well as previously filed Form 10-Ks, 10-Qs and 8-Ks. BGI/BLK Pro Forma |
5 A broadly diversified business across clients, products and geographies Q3 2013 Long-term Base Fees of $2.078 billion Long-term Assets Under Management of $3.798 trillion at September 30, 2013 Product Type Client Type Style Region Alternatives 3% Alternatives 8% Multi-asset 8% Multi-asset 13% Fixed Income 33% Fixed Income 23% Equity 56% Equity 56% iShares 23% iShares 35% Retail 12% Retail 34% Institutional 65% Institutional 31% AUM Base Fees AUM Base Fees Index 42% Index 10% iShares 23% iShares 35% Asia-Pacific 8% Asia-Pacific 8% EMEA 31% EMEA 28% Americas 61% Americas 64% Active 35% Active 55% AUM Base Fees AUM Base Fees |
6 Major market indices and exchange rates Spot Average Level % Change Q3 2013 vs. September 30, 2013 June 30, 2013 % Change Q3 2013 Q3 2012 Q2 2013 Q3 2012 Q2 2013 Equity Indices: Domestic S&P 500 1,682 1,606 5% 1,673 1,401 1,610 19% 4% Global MSCI Barra World Index 1,544 1,434 8% 1,511 1,274 1,463 19% 3% MSCI Europe Index 106 98 8% 104 92 101 13% 3% MSCI AC Asia Pacific Index 139 131 6% 135 119 136 13% (1%) MSCI Emerging Markets Index 987 940 5% 956 961 1,004 (1%) (5%) S&P Global Natural Resources 3,354 3,083 9% 3,262 3,291 3,295 (1%) (1%) Fixed Income Index: Barclays U.S. Aggregate Bond Index 1,810 1,799 1% 1,795 1,830 1,839 (2%) (2%) Foreign Exchange Rates: GBP to USD 1.62 1.52 7% 1.55 1.58 1.54 (2%) 1% EUR to USD 1.35 1.30 4% 1.32 1.25 1.31 6% 1% Source: Bloomberg |
Year-over-year Q3 2013 vs. Q3 2012 |
8 EPS, as adjusted - Q3 2013 Compared to Q3 2012 EPS up 12% year-over-year driven by operating income Total EPS: $3.88 Total EPS: $3.47 Operating EPS: Operating EPS: (1) Q3 2012 includes $25 million of pre-tax closed-end fund launch costs. For further information and reconciliation between GAAP and as adjusted, see the appendix and notes (a) through (f) in the current earnings release. $0.41 Increasing EPS Decreasing EPS $3.42 ($0.13) $0.54 $3.96 ($0.50) $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 Q3 2012 (1) Operating EPS Nonoperating EPS Q3 2013 Nonoperating: $0.05 Nonoperating: ($0.08) |
9 Operating Income, as adjusted - Q3 2013 Compared to Q3 2012 Base fees drove operating results (1) Q3 2012 includes $25 million of pre-tax closed-end fund launch costs. For further information and reconciliation between GAAP and as adjusted, see the appendix and notes (a) through (f) in the current earnings release. Increasing Revenue Increasing Expenses $102 million $876 ($50) $152 $978 $0 $600 $700 $800 $900 $1,000 $1,100 Q3 2012 (1) Revenue Expenses Q3 2013 |
10 Revenue reflects positive markets and flows Q3 2013 Compared to Q3 2012 $152 million Total Revenue Q3 2012 $2.32 billion Q3 2013 $2.47 billion • BlackRock Solutions reflects strength in Aladdin business revenue • Securities lending fees reflect lower spreads consistent with industry trends 81% 6% 4% 6% 1% 2% Base Fees ex Sec Lending Securities Lending Performance Fees BRS and Advisory Distribution Fees Other Revenue 83% 4% 4% 6% 1% 2% $2,320 ($7) $159 $28 ($30) $2,472 $0 $2,200 $2,400 $2,600 Q3 2012 Base Fees ex Sec Lending BRS & Advisory Other Revenue Performance Fees Securities Lending Q3 2013 Decreasing Revenue Increasing Revenue |
11 Growth in base fees reflects higher average AUM driven by markets and organic growth Q3 2013 $2.15 billion Q3 2013 Compared to Q3 2012 Base fees (including securities lending) Q3 2012 $2.02 billion $0 $129 million Decreasing Base Fees Increasing Base Fees $2,024 $13 $23 $103 $6 $8 ($3) ($6) ($15) $2,153 $1,800 $1,900 $2,000 $2,100 $2,200 $2,300 Q3 2012 iShares Equity Multi-Asset Active Fixed Income Alternatives Non-ETF Index Equity iShares Fixed Income Active Equity Cash Q3 2013 |
12 Expenses driven by higher revenue-related costs Q3 2013 $1.49 billion Increasing Expenses Decreasing Expenses Expenses, as adjusted, by Category Q3 2013 Compared to Q3 2012, as adjusted (1) Amounts exclude pre-tax closed-end fund launch costs, which are presented separately above. For further information and reconciliation between GAAP and as adjusted, see the appendix and notes (a) through (f) in the current earnings release. Q3 2012 $1.44 billion $50 million • Q3 2012 includes $25 million of pre-tax closed-end fund launch costs 56% 7% 1% 10% 23% 3% Employee Comp. & Benefits Distribution & Servicing Costs Amort. of Deferred Sales Commissions Direct Fund Expenses General & Administration Amortization of Intangibles 57% 6% 1% 11% 22% 3% $1,444 $38 $23 $21 $1 $1 ($25) $1,494 $0 $1,450 $1,550 Q3 2012 Fund Launch Costs Distribution & Servicing Amort.- Intangibles Amort. - Def Sales Commissions G&A (1) Direct Fund Expenses Compensation & Benefits (1) Q3 2013 ($9) |
Sequential Quarters Q3 2013 vs. Q2 2013 |
14 Sequential EPS decline driven by PennyMac gain and discrete tax benefit (1) Q2 2013 EPS included a $39 million noncash, nonoperating pre-tax gain related to the PennyMac IPO. (2) Q2 2013 EPS included a discrete tax benefit of approximately $29 million, primarily due to the realization of loss carryforwards. For further information and reconciliation between GAAP and as adjusted, see the appendix and notes (a) through (f) in the current earnings release. EPS, as adjusted - Q3 2013 Compared to Q2 2013 Operating EPS: Total EPS: $4.15 Total EPS: $3.88 Operating EPS: Decreasing EPS Increasing EPS $3.84 Operating EPS: • Q2 2013 EPS included seasonally higher securities lending fees $4.10 ($0.17) ($0.14) $3.95 $0.01 $0.03 $3.96 ($0.50) $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 Q2 2013 PennyMac Gain (1) Discrete Tax Benefit (2) Q2 EPS ex. PennyMac Gain & Tax Benefit Operating EPS Nonoperating EPS Q3 2013 Nonoperating: $0.05 Nonoperating: ($0.08) Nonoperating: ($0.11) |
15 Operating income impacted by seasonal trends Operating Income, as adjusted - Q3 2013 Compared to Q2 2013 ($4) million $0 For further information and reconciliation between GAAP and as adjusted, see the appendix and notes (a) through (f) in the current earnings release. Decreasing Revenue Decreasing Expenses $982 ($10) $6 $978 $950 $1,000 Q2 2013 Revenue Expenses Q3 2013 |
16 Higher BRS revenue and base fees (ex securities lending) offset by seasonally lower securities lending ($10) million Q3 2013 Compared to Q2 2013 Increasing Revenue Total Revenue Q2 2013 $2.48 billion Decreasing Revenue Q3 2013 $2.47 billion 82% 5% 4% 6% 1% 2% Base Fees ex Sec Lending Securities Lending Performance Fees BRS and Advisory Distribution Fees Other Revenue 83% 4% 4% 6% 1% 2% $2,482 $1 ($37) ($12) $7 $13 $18 $2,472 $0 $2,200 $2,400 $2,600 Q2 2013 BRS & Advisory Base Fees ex Sec Lending Performance Fees Distribution Fees Other Revenue Securities lending Q3 2013 |
17 Base fees impacted by beta, product mix shift and seasonality of securities lending Q3 2013 $2.15 billion ($24) million Base Fees (including securities lending) $0 Q3 2013 Compared to Q2 2013 Q2 2013 $2.18 billion $2,177 ($16) ($8) ($8) ($7) ($7) $5 $8 $9 $2,153 $2,000 $2,100 $2,200 $2,300 Q2 2013 Multi-Asset Alternatives iShares Equity Active Equity iShares Fixed Income Active Fixed Income Cash Non-ETF Index Equity Q3 2013 Increasing Base Fees Decreasing Base Fees |
18 Sequential total expenses remain stable Q3 2013 $1.49 billion $0 Expenses, as adjusted, by Category Q3 2013 Compared to Q2 2013, as adjusted ($6) million Q2 2013 $1.50 billion For further information and reconciliation between GAAP and as adjusted, see the appendix and notes (a) through (f) in the current earnings release. $1,500 ($7) ($5) ($1) $5 $2 $1,494 $1,400 $1,500 $1,600 Q2 2013 G&A Distribution & Servicing Compensation & Benefits Direct Fund Expenses Amort. - Def Sales Commissions Q3 2013 Increasing Expenses Decreasing Expenses |
Nonoperating and Capital Management |
20 Q3 2013 $21 million Nonoperating Expense by Category, as adjusted Q3 2013 nonoperating expense $12 $5 $7 ($3) $2 ($44) ($60) ($50) ($40) ($30) ($20) ($10) $0 $10 $20 $30 $40 Private Equity Real Estate Distressed Credit/ Mortgage Funds Hedge Funds/ Funds of Hedge Funds Other Investments Net Interest Expense For further information and reconciliation between GAAP and as adjusted, see the appendix and notes (a) through (f) in the current earnings release. Investment Losses / Net Interest Expense Investment Gains $23 million Net Investment Gain |
21 Continued commitment to sound capital management As Adjusted GAAP 2010 YTD Q3 2012 Est. YTD Q3 2013 Amounts above exclude repurchases of employee tax withholdings related to employee stock transactions. Payout ratio = (Dividends declared + shares repurchases) / GAAP Net income. For further information and reconciliation between GAAP and as adjusted, see previously filed Form 10-Ks, Form 10-Qs and 8-Ks and the appendix to this earnings release supplement. Dividend payout ratio = Dividends declared / GAAP net income. $2.5 $2.8 $2.2 $1.9 $2.4 $2.6 $2.6 $2.7 $1.8 $2.2 $5.04 $6.00 $5.50 $4.00 $3.12 $3.12 $2.68 $1.68 42% 43% 43% 38% 48% 53% 36% 42% YTD Q3 2013 2012 2011 2010 2009 2008 2007 2006 Annualized $6.72 72% 55% 66% 61% 88% 74% 74% Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Operating cash flow Dividends and Dividend Payout Ratio Share repurchases Total payout ratio Include $1.0 billion May 2012 buyback of 6.4 million shares from Barclays Include $1.0 billion May 2012 buyback of 6.4 million shares from Barclays Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 22% CAGR 235% $166 $250 $250 $250 $167 $43 $125 $1,043 2011 2012 |
Appendix |
23 Long-term AUM mix by product type Q2 2013 $3.564 trillion Q3 2013 $3.798 trillion Q3 2012 $3.378 trillion Active Equity iShares Equity Active Fixed Income iShares Fixed Income Multi-Asset Alternatives Non-ETF Index Equity Non-ETF Index Fixed Income 8% 15% 19% 6% 8% 3% 29% 12% 8% 16% 18% 5% 8% 3% 31% 11% 8% 17% 17% 5% 8% 3% 31% 11% |
24 Quarterly operating income and net income – GAAP and as adjusted GAAP as adjusted Non-GAAP adjustments include amounts related to the PennyMac Charitable Contribution, U.K. lease exit costs, a contribution to short-term investment funds (“STIFs”), PNC LTIP funding obligation, compensation related to appreciation (depreciation) on certain deferred compensation plans and noncash income tax changes, as applicable. For further information and reconciliation between GAAP and as adjusted, see notes (a) through (f) in the current earnings release as well as previously filed Form 10-Ks, 10-Qs and 8-Ks. GAAP Non-GAAP Adjustments ($ in millions) Operating Income ($ in millions) Net Income ($ in millions) Non-GAAP Adjustments ($ in millions) $825 $832 $876 $1,041 $921 $982 $978 $815 $829 $875 $1,005 , $909 $849 $966 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 $10 $3 $1 $36 $12 $133 $12 Q1 2012 Q2 2012 Q3 Q4 2012 2012 Q1 2013 Q2 2013 Q3 2013 $3 $4 ($32) $5 $5 ($7) ($58) Q1 2012 Q2 Q3 Q4 Q1 2012 2012 2012 2013 Q2 2013 Q3 2013 $575 $558 $610 $695 $637 $722 $672 $572 $554 $642 $690 $632 $729 Q1 Q2 2012 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 $730 as adjusted |
25 Quarterly nonoperating income (expense) – GAAP and as adjusted GAAP as adjusted Nonoperating Income (Expense) ($ in millions) Non-GAAP Adjustments ($ in millions) Non-GAAP adjustments include net income (loss) attributable to noncontrolling interests, a gain associated with the PennyMac Charitable Contribution and compensation expense related to (appreciation) depreciation on certain deferred compensation plans. For further information and reconciliation between GAAP and as adjusted, see notes (a) through (f) in the current earnings release as well as previously filed Form 10-Ks, 10-Qs and 8-Ks. ($8) ($3) ($17) $40 ($38) ($57) ($3) Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 $23 $(40) $30 $(67) $41 $69 $(18) $15 $(43 ) $13 $(27) $3 $12 $( 21 ) Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 |
Cash Flow GAAP and As Adjusted (in millions) 2010 2011 2012 YTD Q3 2012 EST YTD Q3 2013 Operating Cash Flows Operating Cash flows, GAAP basis $2,488 $2,826 $2,240 $1,886 $2,400 Less: Non-GAAP adjustments (1) (77) 178 (483) 40 200 Operating Cash flows, as Adjusted $2,565 $2,648 $2,723 $1,846 $2,200 Investing Cash Flows Investing Cash flows, GAAP basis ($627) ($204) ($266) ($551) ($300) Less: Non-GAAP adjustments (1) (52) 24 (211) (180) (100) Investing Cash flows, as Adjusted ($575) ($228) ($55) ($371) ($200) Financing Cash Flows Financing Cash flows, GAAP basis ($3,170) ($2,485) ($944) ($661) ($2,800) Less: Non-GAAP adjustments (1) 110 (71) 631 (10) (100) Financing Cash flows, as Adjusted ($3,280) ($2,414) ($1,575) ($651) ($2,700) (1) Non-GAAP adjustments include the impact on cash flows of consolidated sponsored investment funds and consolidated VIEs. 26 |