BlackRock, Inc. (BLK) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Strong Performance and Growth: BlackRock reported strong performance in the first half and second quarter of 2024, with double-digit operating income growth, margin expansion, and record AUM of over $10.6 trillion.
• Significant Net New Assets: Clients entrusted BlackRock with over $80 billion of net new assets, indicating strong client trust and market leadership.
• Expansion into High-Growth Areas: The firm is expanding into higher secular growth areas like private markets and technology, aiming for greater diversification and resilience in revenue and earnings.
• Strategic Acquisitions: Planned acquisitions of Global Infrastructure Partners and Preqin are set to enhance BlackRock's private markets and technology platforms, driving future growth.
• ETF and Active Management Success: BlackRock led the ETF industry in flows for the first half of 2024, with significant net inflows across various product types and active management strategies.

Pessimistic Highlights

• Active Fixed-Income Redemption: A significant redemption of approximately $20 billion from a large insurance client due to M&A activity impacted flows.
• Market Volatility: Despite overall growth, the firm noted the impact of market volatility on investment gains and the necessity of navigating changing market conditions.

Company Outlook

• Positive Growth Trajectory: BlackRock is optimistic about continuing its strong performance, with a focus on achieving or exceeding its 5% organic base fee growth target over the long term. The firm anticipates further profitable growth and operating leverage as markets improve.
• Strategic Investments and Acquisitions: Investments in strategic growth initiatives and planned acquisitions are expected to accelerate growth and support strategic initiatives, contributing to a positive outlook for the remainder of 2024 and beyond.

Q & A Highlights

• Q: What does the pipeline look like for organic base fee growth in the back half of '24? (Alex Blostein, Goldman Sachs)

  A: Q2 organic base fee growth was 3%, with momentum building. BlackRock expects growth from structural areas like ETFs, models, Aladdin, and expanding private markets. The firm is optimistic about reaching its 5% organic base fee growth target in the back half of '24, driven by supportive markets and differentiated durable earnings. (Martin S. Small)

• Q: How will the Preqin acquisition impact the 10% to 15% target for technology services revenue growth in 2025? (Craig Siegenthaler, Bank of America)

  A: Preqin is expected to accelerate technology services ACV growth within the target range, increasing current ACV dollars by about 15%. BlackRock remains committed to low- to mid-teens ACV growth over the long term, with Preqin enhancing capabilities and client offerings. (Martin S. Small)

• Q: What are the expectations for flows in the infrastructure space post-GIP deal closure? (Michael Cyprys, Morgan Stanley)

  A: BlackRock is excited about the opportunities in infrastructure following the GIP acquisition, with enthusiastic conversations and integration planning underway. The firm anticipates significant opportunities and announcements post-closing. (Laurence D. Fink)

• Q: How do you see the product evolution with the Preqin acquisition, and is there a pathway for ETFs in private markets? (Bill Katz, TD Cowen)

  A: Preqin unlocks a new segment of growth, with opportunities to drive more sales, innovate new data products, and scale efficiently. BlackRock sees the potential to apply indexing principles to private markets, enhancing client services and creating new growth avenues. (Martin S. Small)

• Q: What's driving cash management growth, and how do you see re-risking trends? (Ken Worthington, JPMorgan)

  A: Cash management growth is driven by government and international prime funds, with new large client mandates. Bond ETFs are also used as cash proxies. Re-risking trends vary, with some clients derisking due to reaching liability levels, while others re-risk from cash into fixed income or equities. (Martin S. Small, Laurence D. Fink)