BlackRock, Inc.

Good morning. My name is Jerome, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the BlockRock Incorporated First Quarter 2021 Earnings Daily Conference. Our host for today's call will be Chairman and Chief Executive Officer Lauren D. Fink, Chief Financial Officer Gary S. Shedlin, President Robert F. Capito, and General Counsel Christopher J. Meade. All lines have been placed on me to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the count key. Thank you. Mr. Meade, you may begin your conference.

Thank you. Good morning, everyone. I'm Chris Meade, 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 see today. BlackRock assumes no duty and does not undertake to update any forward-looking statements. So with that, I'll turn it over to Gary.

Thanks, Chris, and good morning, everyone. I hope everyone and their families are remaining safe and healthy. It's my pleasure to present results for the first quarter of 2021. Before I turn it over to Larry to offer his comments, I'll review our financial performance and business results. While our earnings release discloses both GAAP and as-adjusted financial results, I'll be focusing primarily on our as-adjusted results. BlackRock's platform has been built over time to help clients meet their objectives regardless of market environment or risk appetite. We've invested for years to develop industry-leading franchises in high-growth areas such as ETFs, private markets, technology, and more recently, sustainable investing, so we can help clients construct resilient, whole portfolios that leverage both active and index capabilities. While few of us could have predicted that we would still be confronting the human and economic challenges of the COVID-19 pandemic a year later, The events of the past year have only strengthened our resolve to continue to invest for future growth in order to evolve our business, live our purpose and meet the needs of all of our stakeholders, including clients, employees, shareholders and the communities in which we operate. The investments BlackRock has consistently made to build a best-in-class investment and technology platform centered around a fiduciary mindset where clients always come first in a collaborative and unifying one BlackRock culture that encourages emotional ownership, are driving incredible momentum across our entire business. BlackRock generated record net inflows of $172 billion in the first quarter, our fourth consecutive quarter with over $100 billion in quarterly inflows, representing 8% annualized organic asset growth and 14% annualized organic base fee growth. strong performance from our entire active franchise, once again contributed to this quarter's robust organic fee growth. Over the last 12 months, our broad-based platform, pairing diverse investment capabilities with best-in-class technology and rigorous risk management, has now generated over $525 billion of total net inflows, representing 14% organic-based fee growth, well in excess of our 5% long-term target. First quarter revenue of $4.4 billion increased 19% year over year, while operating income of $1.5 billion rose 21% and reflected the impact of approximately $180 million of costs associated with the launch of the nearly $5 billion BlackRock Innovation and Growth Trust, our largest closed-end fund ever, in late March. Earnings per share of $7.77 was up 18% compared to a year ago, also reflecting lower non-operating income and a higher effective tax rate, partially offset by a lower diluted share count in the current quarter. Non-operating results for the quarter included $8 million of net investment income, as gains in our co-investment portfolio were largely offset by the mark-to-market impact of our minority stake in InvestNet. Our adjusted tax rate for the first quarter was approximately 21% and included $39 million of discrete tax benefits related to stock-based compensation awards that best in the first quarter of each year. We continue to estimate that 23% is a reasonable projected tax run rate for the remainder of 2021, though the actual effective tax rate may differ as a consequence of non-recurring or discrete items or potential changes in tax legislation during the year. First quarter base fee and securities lending revenue of $3.6 billion was up 18% year over year, primarily driven by strong organic base fee growth and the positive impact of market beta and foreign exchange movements on average AUM, partially offset by higher discretionary money market fee waivers, lower securities lending revenue, and the effect of one less day in the current quarter, and strategic pricing investments over the last year. Sequentially, base fee and securities lending revenue was up 6%. On an equivalent day count basis, our effective fee rate was essentially flat compared to the fourth quarter, a strong organic-based fee growth driven by our higher fee active businesses more than offset higher discretionary money market fee waivers and lower securities lending revenue in the current quarter. Performance fees of $129 million were up significantly from a year ago, reflecting strong performance in our liquid alternative and long-only investment platforms and the impact of COVID-related market volatility a year ago. Quarterly technology services revenue increased 12% from a year ago. Annual contract value, or ACV, increased 16% year over year, reflecting particularly strong growth from the first quarter of 2020, which was impacted by slower sales and contracting disruption in the early days of the pandemic. We remain committed to low to mid-teens growth in ACV over the long term. Aladdin's resilience has been a key differentiator throughout the COVID crisis, and client demand remains strong. As Larry will discuss in more detail, we see tremendous opportunity to continue building out Aladdin's climate and sustainability risk analytics and data capabilities, making it central to constructing sustainable portfolios of the future. Advisory and other revenue was down $33 million year-over-year, primarily reflecting the absence of PennyMac equity method earnings following the charitable contribution of our remaining equity stake in the first quarter of 2020, as well as lower transition management revenue in the current quarter. Total expense increased 17% versus the year-ago quarter, driven primarily by higher compensation, direct fund, and non-core G&A expense. Employee compensation and benefit expense was up 24%, primarily reflecting higher incentive compensation, driven by higher operating income and performance fees, and higher deferred compensation, reflecting additional grants and the mark-to-market impact of certain deferred compensation programs relative to depressed levels a year ago. Approximately 80% of the increase in our compensation-to-revenue ratio year-over-year was attributable to this mark-to-market impact on certain deferred compensation programs. Direct fund expense increased 16% year-over-year, primarily reflecting higher average index AUM. G&A expense was up $32 million year-over-year and $111 million sequentially, reflecting approximately $180 million of previously disclosed closed-end fund launch costs. Recall that we exclude the impact of these product launch costs when reporting our as-adjusted operating margin. Year-over-year G&A comparisons were also impacted by approximately $155 million of non-core G&A expense in the first quarter of 2020, which included closed-end fund launch costs, contingent consideration fair value adjustments, and costs related to certain legal matters. On a core basis, quarterly G&A expense was essentially flat year-over-year. as higher portfolio services and technology expense was offset by lower T&E, marketing spend, and professional fees. Quarterly G&A expense also benefited from a delay in planned spending in a number of areas, which we expect to incur over the remainder of the year. And tangible amortization expense increased $9 million year-over-year as a result of the acquisition of Appirio, which closed on February 1st. Our first quarter as adjusted operating margin of 44.4% was up 270 basis points from a year ago, benefiting in part from significantly lower level of non-core G&A expense versus a year ago, and the delayed timing of certain investment spend in the current quarter. As we stated in January, our business has never been better positioned to take advantage of the opportunities before us, and we remain committed to optimizing organic growth in the most efficient way possible. We continue to see numerous opportunities to invest for growth, including sustainable investing, private markets, technology, and China, and intend to pursue these opportunities responsibly. Our capital management strategy remains first to invest in our business and then to return excess cash to shareholders through a combination of dividends and share repurchases. We continue to invest through prudent use of our balance sheet to best position BlackRock for continued success. through seed and co-investments to support organic growth and through tactical M&A and strategic minority investments to accelerate our growth ambitions. During the first quarter, we closed our acquisition of the Perio and, as Larry will discuss in more detail, announced a partnership with Tomasic to co-invest in innovative decarbonization technology. We previously announced a 14% increase in our quarterly dividend to $4.13 per share of common stock and also repurchased $300 million worth of common shares in the first quarter. While we will remain opportunistic with respect to additional share repurchases during the year, there is no change to the minimum repurchase guidance we provided to you earlier this year. As you will also hear from Larry, BlackRock has never been better positioned to deliver for clients as we leverage our unique insights, guidance, and solutions to help them meet their long-term investment needs. Record net inflows of $172 billion in the first quarter, including $133 billion of long-term flows, reflect the strength of our broad-based franchise with positive flows across every asset class, investment style, client channel, and region. Our iShares and BlackRock ETFs generated net inflows of $68 billion, representing 10% annualized organic asset and base fee growth. Results highlight the diversity of the product segments within our ETF franchise, with growth led by continued strength in core equity and sustainable ETFs. We also saw strong flows into our higher-fee, liquid, markets-driven precision exposures, as clients continued to re-risk, particularly in international equities, and tactically position their portfolios for the reopening of economies worldwide. First quarter fixed income ETF flows of $1.6 billion reflected demand for shorter term and floating rate bond exposures, which was largely offset by outflows from longer duration ETFs, especially LQB, as investors reacted to the most significant steepening in the yield curve since 2013. These inflows, even with the drag from longer duration products, speak to the diversity of our fixed income ETF franchise, which will continue to benefit from strong long-term secular growth. Record retail net inflows of $37 billion, representing 17% annualized organic asset growth and 25% annualized organic-based fee growth, were positive in both the U.S. and internationally and across all major asset classes, including fixed income. Inflows reflected broad-based strength across the entirety of our top-performing active platform, which is well-positioned to capture resurging demand for active equities, and investor appetite for yield, where a diversified fixed income range including unconstrained, high yield, international, and broad market strategies are positioned to meet client demand in any rate environment. BlackRock's institutional active franchise generated $17 billion in net inflows led by continued growth into our LifePath target date and alternatives platforms. Institutional index net inflows of $11 billion once again reflected equity net outflows, which were more than offset by fixed income net inflows as clients rebalanced portfolios after significant equity market gains or sought to immunize portfolios through LDI strategies. As previously discussed in January, we expect a large U.S. public pension client to transition approximately $55 billion of low-fee index assets to another investment manager. This transition is likely to occur during the second quarter of 2021 and will have a de minimis impact on our organic-based fee growth for the year. Across our retail and institutional client businesses, we generated a record $21 billion of active equity net inflows, representing our eighth consecutive quarter of positive flows in this category. Flows were led by top-performing franchises in technology and mid-cap growth, which benefited from the previously mentioned launch of the BlackRock Innovation and Growth Closed-End Fund. We remain well positioned for future growth in our active businesses with over 80% of fundamental active equity, scientific active equity, and taxable fixed income assets performing above their respective benchmarks for pure medians for the trailing five-year period. Demand for alternatives also continued with nearly $9 billion of net inflows into liquid and illiquid alternative strategies during the quarter driven by infrastructure, private equity solutions, and liquid alternatives funds. Fundraising momentum remains strong, and we have approximately $27 billion of committed capital to deploy for institutional clients in a variety of alternative strategies, representing a significant source of future base and performance fees. Finally, BlackRock's cash management platform continued to grow and outperform peers, generating almost $40 billion of net inflows in the first quarter and topping $700 billion in assets under management for the first time. During the first quarter, we incurred approximately $78 million of gross discretionary yield support waivers and expect such discretionary fee waivers to persist for the near term, especially in light of the recent growth in our U.S. government fund franchise and the supply-demand dynamics in the short-dated U.S. Treasury and repo markets. Future levels of discretionary fee waivers will be impacted by several factors, including the level of AUM and funds with existing waivers, gross yields, and competitive positioning. Our strong performance over the last 12 months is a testament to our purpose, the strong execution of our strategy, the competence our clients place in us, and the hard work, commitment, and resilience of our employees. Our relationships with clients have never been deeper, and we will continue to invest responsibly from a position of strength to meet the needs of all of our stakeholders over the coming years. With that, I'll turn it over to Larry.