BlackRock, Inc.

And ladies and gentlemen, please stand by. Good morning. My name is Jake, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the BlackRock Incorporated Second Quarter 2022 Earnings Teleconference. Our host for today's call will be Chairman and Chief Executive Officer Lawrence D. Fink, Chief Financial Officer Gary S. Shedlin, President Robert S. Capito, and General Counsel Christopher J. Mead. 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 and then the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. Thank you, Mr. Mead. You may begin your conference.

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 Gary.

Thanks, Chris, and good morning, everyone. It's my pleasure to present results for the second quarter of 2022. 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 today primarily on our As Adjusted numbers. As a reminder, beginning in the first quarter of 2022, we updated our definitions of as adjusted operating income operating margin and net income, year over year financial comparisons referenced on this call will relate current quarter results to these recast financials. Global equity and debt markets delivered their first worst first half returns in decades as investors reacted to uncertainty associated with rising recession fears, surging inflation, interest rate hikes and geopolitical tensions. In total, These market declines, along with significant dollar appreciation against major currencies, reduced the value of BlackRock's assets under management by $1.7 trillion since December 31st. Despite this challenging backdrop, BlackRock's comprehensive platform still generated industry-leading organic growth of over $175 billion in net inflows in the first half of 2022. BlackRock's second quarter results once again demonstrate the resilience of our platform and validate the investments we have consistently made to build the most comprehensive range of investment management and technology solutions in the industry. I cannot think of a time when the value of our diversified platform and our commitment to continuously investing for the long-term ahead of client needs has been more evident. Over the last 12 months, BlackRock's broad-based platform has generated over $460 billion of total net inflows, representing 5% organic base fee growth. providing a strong foundation to help immunize our base fees from the impact of double-digit market declines on our assets under management. During a tumultuous second quarter, BlackRock delivered total net inflows of $90 billion, representing 4% annualized organic asset growth. Flows were positive across all product types and regions, demonstrating diversification of our differentiated platform, even in the face of macro and industry headwinds, and an ability to quickly adapt to changing client needs. Importantly, second quarter flows did not reflect the funding of any significant AIG-related assets, which will now occur in the second half of this year. Second quarter annualized organic base fee decay of 1% reflected client portfolio repositioning favoring lower fee index and cash products and higher redemptions in active fixed income and equity mutual funds. Second quarter revenue of $4.5 billion was 6% lower year over year, primarily driven by the impact of significantly lower markets and dollar appreciation on average AUM and lower performance fees. Operating income of $1.7 billion was down 14% year over year, while earnings per share of $7.36 was down 30%, also reflecting meaningfully lower non-operating income compared to a year ago. Non-operating results for the quarter included $200 million of net investment losses, driven primarily by unrealized mark-to-market declines in the value of our unhedged seed capital investments and minority stake in investment. Our as-adjusted tax rate for the second quarter was approximately 25%. We continue to estimate the 24% as a reasonable projected tax run rate for the remainder of 2022, though the actual effective tax rate may differ because of non-recurring or discrete items or potential changes in tax legislation. Despite double digit declines in equity and fixed income indexes year over year, second quarter base fee and securities lending revenue of $3.7 billion was down just 2% year over year. The negative impact of approximately $1.5 trillion of market beta and foreign exchange movements on AUM over the last 12 months was partially offset by 5% organic base fee growth over the last year, and the elimination of discretionary yield support money market fund waivers and higher securities lending revenue versus a year ago. On a constant currency basis, we estimate second quarter base fee and securities lending revenue would have been flat year over year. Sequentially, base fee and securities lending revenue was down 4%, reflecting the impact of continued market declines on average AUM. On an equivalent day count basis, our effective fee rate was up, approximately 0.3 basis points, benefiting from the elimination of discretionary money market fund fee waivers and higher securities lending revenue. As a result of significant global equity and bond market declines during the quarter, including the impact of excess related dollar appreciation, we entered the third quarter with an estimated base fee run rate approximately 5% lower than our total base fees for the second quarter. Performance fees of $106 million decreased from a year ago, primarily reflecting lower revenues from alternative and long-only products. Our Aladdin business delivered record sales in the first six months of 2022, and demand for our technology solutions has never been stronger. Quarterly technology services revenue increased 5 percent from a year ago, reflecting this increased demand, but also reflected the currency impact of significant dollar appreciation on Aladdin's non-dollar revenue. Annual contract value, or HCV, increased 10 percent year-over-year, On a constant currency basis, we estimate ACV would have increased 13% from a year ago. We remain committed to low to mid-teens growth in ACV over the long term, especially as periods of market volatility have historically underscored the importance of Aladdin and generated increased demand from clients. Total expense was flat year over year, reflecting lower compensation and direct fund expense, partially offset by higher G&A expense. Employee compensation and benefit expense was down 6% year-over-year, primarily reflecting lower incentive compensation due to lower operating income and performance fees and lower deferred compensation expense driven in part by the mark-to-market impact of certain deferred cash compensation programs, partially offset by higher-based compensation. Direct fund expense decreased 5% year-over-year, primarily reflecting lower average index AUM. G&A expense was up 12% year-over-year, primarily driven by higher T&E expense and other costs associated with return to office and ongoing strategic investments in technology, including the migration of Aladdin to the cloud. Sequentially, G&A expense was up 7%, primarily reflecting higher T&E expense. Our second quarter as adjusted operating margin of 43.7% was down 320 basis points from a year ago, reflecting the immediate negative impact of markets and foreign exchange movements on quarterly revenue and the ongoing longer-term strategic investments we've been making in technology and our people. While we can't control near-term market volatility, we are always prepared for it. We have strong conviction in our strategy, our clients' increasing needs for whole portfolio and technology solutions, the growth of global capital markets, and the strength of our proven operating model. The diversification and breadth of our business positions us to serve clients in a variety of environments, and we continue to believe that our growth engines, including ETFs, alternatives, technology, and whole portfolio solutions, are well positioned to increase market share. Whether it was during the financial crisis of 2008 or in the early days of the pandemic in 2020, BlackRock has always capitalized on market disruption and emerged stronger. because the stability of our business model enables us to responsibly invest for the long term and continue playing offense when many others are forced to pull back. We have navigated these choppy waters before and are well prepared for what may lay ahead. As always, we remain committed to optimizing organic growth in the most efficient way possible. We are continually focused on managing our entire discretionary expense base and will be prudent in reevaluating our overall level of spend in the current environment. 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 repurchased approximately $1 billion worth of shares in the first half of this year, including $500 million in the second quarter. Our repurchases exceeded our planned run rate as we took advantage of what we viewed as attractive relative valuation opportunities in our stock. At present, based on our capital spending plans for the year, And subject to market conditions, including the relative valuation of our stock price, we still anticipate repurchasing at least $375 million of shares per quarter for the balance of the year, consistent with previous guidance. BlackRock's second quarter net inflows of $90 billion once again demonstrate the stability of our diversified platform to adapt to changing markets and client needs. ETF market share has increased as investors use them as vehicles of choice for strategic and tactical portfolio reallocations. Illiquid alternatives continue to provide clients with higher income and uncorrelated returns as the traditional hedge between stocks and bonds has weakened, and demand for cash management offerings is increasing amid rising rates. BlackRock was the beneficiary of each of these industry trends during the second quarter, enabling us to capture money in motion as investors recalibrated their portfolios. BlackRock's second quarter ETF net inflows of $52 billion were positive across each of our product categories, core, strategic, and precision, representing 7% annualized asset growth. Our strategic category drove nearly 70% of net inflows in the quarter, led by continued demand for our diversified fixed income offering as clients utilized bond ETFs to reposition portfolios given the major shifts in the fixed income market. Core equity and higher fee precision ETFs also saw net inflows of $15 billion and $1 billion, respectively. We've invested for years to support the growth of fixed income ETFs, both to create a diversified bond ETF platform and to deliver the liquidity and price transparency our clients expect, especially during times of market stress. In another challenging quarter for fixed income markets, our bond ETFs once again delivered for clients and generated $31 billion in net inflows. Retail net outflows of $10 billion reflected industry pressures in active fixed income and world allocation strategies, partially offset by strength in index SMAs, municipal bonds, and our systematic multi-strategy alternatives fund. Gross sales in U.S. active mutual funds have remained strong, but were offset by elevated redemptions from long-duration fixed income, high yield, and growth equities. BlackRock's institutional franchise generated $26 billion of net inflows as we continue to partner with institutional clients to deliver investment expertise, greater customization, industry-leading risk management, and the benefits of our global scale. BlackRock's institutional active net inflows of $5 billion were led by growth in systematic active equity, illiquid alternatives, life path target date funds, and outsourced CIO solutions. We see continued demand for our outsourcing capabilities and are increasingly engaging with the world's most sophisticated institutions to partner with them on whole portfolio solutions. In March, we announced an assignment with AIG where BlackRock will manage up to $150 billion of AIG's investment portfolio and execute an Aladdin mandate. Roughly $400 million from this assignment funded during the second quarter. At present, We expect the Aladdin contract to be executed and the majority of the remaining AIG assets to be funded during the second half of 2022. BlackRock's institutional index business generated net inflows of $21 billion, led by continued strength in LDI solutions. Across institutional and retail clients, demand for alternatives continued, with nearly $5 billion in net inflows across liquid and illiquid alternative strategies during the quarter, driven by private credit, infrastructure, and private equity. Fundraising momentum remains strong, and we have approximately $36 billion of committed capital to deploy for institutional clients and a variety of alternative strategies representing a significant source of future base and performance fees. Finally, with cash becoming a more attractive asset class as rates rise, BlackRock's cash management platform generated $21 billion of net inflows in the second quarter, benefiting from the investments we've made to build this business in recent years. Net inflows were driven by U.S. government mandates and included inflows from Circle as we became the primary manager of their USDC cash reserves. In a rising rate environment, BlackRock is well-positioned to grow market share by leveraging our scale, product breadth, technology, and risk management on behalf of liquidity clients. As BlackRock has demonstrated throughout our history, challenging environments create unique opportunities for future growth. and we've always emerged stronger and more deeply connected with our clients. While we are not immune to market headwinds, the last few months have only given us more conviction in our strategy and ability to deliver differentiated growth over the long term. The diversification and breadth of our platform enables us to serve clients across market environments, and we believe BlackRock is as well-positioned as ever to meet the needs of all stakeholders. With that, I'll turn it over to Larry.