BlackRock, Inc.

Good morning. My name is Katie, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the BlackRock Incorporated First Quarter 2024 Earnings Teleconference. Our host for today's call will be the Chairman and Chief Executive Officer Lawrence D. Fink, Chief Financial Officer Martin S. Small, President Robert S. Capito, and General Counsel Christopher J. Meade. All lines have been placed on mute 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, please press star two. 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, you 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, and good morning, everyone. It's my pleasure to present results for the first quarter of 2024. 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 financial results. I'll be focusing primarily on our As Adjusted results. BlackRock's first quarter results reflect sustained momentum across our entire platform. We ended the quarter with record AUM of nearly $10.5 trillion and one of the strongest opportunity sets ahead across multiple growth engines, including technology, outsource solutions, and private markets. Momentum's accelerating, and we have line of sight into a breadth of significant mandates in investment management and technology, spanning client channels and geographies. Teams across BlackRock are energized and organized to execute on these opportunities and deliver BlackRock's platform to clients through world-class client service. We've built BlackRock to be a structural grower with industry leadership in secular growth areas like ETFs, private markets, model portfolios, and technology. With supportive markets and more optimistic sentiment from clients, we're confident in our ability to both grow assets on behalf of clients and drive profitable growth for our shareholders. First quarter long-term net inflows of $76 billion continue to lead the industry, driving positive organic base fee growth alongside double-digit growth year-over-year in revenue and earnings, as well as 180 basis points of margin expansion. Excluding low-fee institutional index equity flows, we saw $100 billion of long-term net inflows in the quarter. As equity markets powered to record highs in the first quarter, investors who were waiting in cash missed out on significant returns across broader markets. With long-term investing, time in the markets is often more important than market timing. Although cash remains an attractive safe haven with the prospect of fewer rate cuts for 2024, the nearly 30% increase in equities over the last year continues to propel clients towards re-risking into stocks and bonds. Clients choose BlackRock for performance. They continue to consolidate more of their portfolios with us, which is driving our growth premium. With more clarity on interest rates and a supportive market backdrop, the assets we manage on behalf of our clients are units of trust, ended the quarter up $1.4 trillion from a year ago, an increase of 15%. Organic asset and base fee growth again accelerated into the end of the quarter, and we see broad-based momentum growing across client channels and regions. In the first quarter, BlackRock generated long-term net inflows of $76 billion, partially offset by seasonal outflows from institutional money market funds. Total annualized organic base fee growth of 1%, reflected seasonally softer flows earlier in the quarter before coming back to target in March. First quarter revenue of $4.7 billion increased 11% year over year, driven by the impact of market appreciation over the last 12 months on average AUM, and higher performance fees and technology services revenue. Operating income of $1.8 billion was up 17%, and earnings per share of $9.81 was 24% higher versus a year ago, also reflecting higher non-operating income. Non-operating results for the quarter included $90 million of net investment gains, driven primarily by mark-to-market non-cash gains on our unhedged seed capital investments and minority investment in InvestNet. Our as-adjusted tax rate for the first quarter was approximately 23% and included 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 2024, though 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 $3.8 billion was up 8% year over year and up 5% sequentially, driven by the positive impact of market beta on average AUM and positive organic base fee growth. On an equivalent day count basis, our annualized effective fee rate was three-tenths of a basis point lower compared to the fourth quarter. This was mainly due to the relative outperformance of lower fee U.S. equity markets, client preferences for lower fee U.S. exposures, and lower securities lending revenue. Performance fees of $204 million increased from a year ago, primarily reflecting higher revenue from alternatives. Quarterly technology services revenue was up 11% compared to a year ago. reflecting sustained demand for our Latin technology offerings. Annual contract value, or ACV, increased 9% year over year. Beginning in the first quarter of 2024, earnings recognized from minority investments accounted for under equity method will be presented as part of our non-operating results. Advisory and other revenue increased from a year ago, primarily reflecting this change. In addition, as many of you know, we updated the presentation of expense line items by including a new sales, asset, and account income statement caption. This category includes distribution and servicing costs, direct fund expense, and sub-advisory and other sales, asset, and account-based expense. Sub-advisory and other expense, which are variable non-compensation expenses associated with asset and revenue growth, was previously reported within general and administration expense. We believe this change provides investors a clearer view of both BlackRock's variable non-compensation expense and G&A, which represents more fixed costs. It represents how we'll execute on our financial rubric of aligning investment spend with our highest conviction growth areas, variabilizing more of our expense base, and generating fixed cost scale. Total expense increase 8% year over year, reflecting higher compensation, G&A, and sales asset and account expense. Employee compensation and benefit expense was up 11%, primarily reflecting higher incentive compensation as a result of higher operating income and performance fees. G&A expense increased 6% due to the timing of technology investment spend in the prior year. Sequentially, G&A expense decreased 12%, reflecting timing of technology investment spend and seasonally higher marketing and promotional expense in the fourth quarter. While one quarter's results can be impacted by timing of spend, We expect technology to be one of our primary areas of investment within G&A. Sales asset and account expense increased 5% compared to a year ago, primarily driven by higher direct fund expense. Direct fund expense was up 7% year over year, mainly due to higher average index AUM. Sequentially, direct fund expense increased due to higher average index AUM in the current quarter and higher rebates that seasonally occur in the fourth quarter. Our first quarter as adjusted operating margin of 42.2% was up 180 basis points from a year ago. As markets improve, we remain committed to driving operating leverage and profitable growth. BlackRock's industry-leading organic growth is a direct result of the disciplined investments we've made consistently through market cycles. Looking forward, we'll continue to prioritize investments with differentiated organic growth potential or that will expand operating leverage through enhanced scale. In line with our guidance in January and excluding the impact of global infrastructure partners and related transaction costs, at present, we would expect our headcount to be broadly flat in 2024. And we would also expect a low to mid single digit percentage increase in 2024 core G&A expense. Our capital management strategy remains consistent. We invest first. Either the scale strategic growth initiatives or drive operational efficiency. and then return excess cash to our shareholders through a combination of dividends and share repurchases. At times, we may make inorganic investments where we see an opportunity to accelerate organic growth and support our strategic initiatives. Last month, we announced our agreement to acquire the remaining equity interest in SpiderRock Advisors, a leading provider of customized option overlay strategies in the U.S. wealth market. This transaction expands on BlackRock's minority investment in SpiderRock Advisors made in 2021 and builds on BlackRock's strong growth in personalized, separately managed accounts via Appirio and ETF model portfolios. At present, we expect the transaction to close in the second quarter of this year, subject to customary closing conditions. In March, we issued $3 billion of debt to fund a portion of the cash consideration for our planned acquisition of GIP. Our offering consisted of three tranches of senior unsecured notes across 5-, 10-, and 30-year maturities. The offering was well received by fixed income investors, especially our inaugural 30-year bond. We currently have invested the proceeds of the offering at substantially the same rate as the cost of borrowing, effectively eliminating incremental cost of carrying additional debt prior to the close of the GIP transaction. We continue to target the third quarter of 2024 for the closing of the GIP transaction, which remains subject to regulatory approvals and other customary closing conditions. We repurchased 375 million worth of common shares in the first quarter. At present, based on our capital spending plans for the year and subject to market conditions, we still anticipate repurchasing at least 375 million of shares per quarter for the balance of the year, consistent with our January guidance. More positive sentiment from clients and in markets persisted into the first quarter. Clients increasingly turned to BlackRock to reposition and redeploy across their portfolios. First quarter long-term net inflows of $76 billion were positive across active and index strategies, as well as each of our client and product types. ETF net inflows of $67 billion were led by core equity and fixed income ETFs, with net inflows of $37 billion and $18 billion, respectively. These inflows were partially offset by seasonal tax trading-related outflows from our U.S. style box exposure and precision ETFs. As you'll hear from Larry, our Bitcoin ETC saw surging demand after launching in January, gathering $14 billion of net inflows in the quarter. This is just the latest example of BlackRock innovating to provide better access and transparency to a wider range of investment exposures. Retail net inflows of $7 billion were led by continued growth in Appirio, as well as renewed demand for active fixed income. Financial advisors are increasingly looking to customize whole portfolios at scale, driving growth across our SMA and managed model platforms. Our partnership with InvestNet is one channel powering flows through model portfolios. We saw our best gross sales month ever on the platform, and year-to-date organic asset and revenue growth has more than doubled compared to this time last year. Sales on the platform aren't just accelerating, they're diversifying. We similarly saw record gross flows in custom models and record AUM in our global allocation models, both of which have larger active components. Within SMAs, our previously mentioned acquisition of SpiderRock Advisors will further enhance our product offerings and provide even greater personalization across our wealth segments. Institutional active net inflows of $15 billion were driven by our Life Path target date franchise and outsourcing mandates. We see significant momentum across our whole portfolio capabilities. Our pipeline remains strong as more and more clients turn to BlackRock for outsourcing solutions. Institutional index net outflows of $13 billion were concentrated in low-fee index equities as several large clients rebalanced their portfolios amid significant equity market appreciation in the last six months. Our private markets franchise saw a billion of net inflows. Continued demand for our liquid offerings was offset by alpha generation for our clients, reflected in over $3 billion of fund monetization and LP distributions or change in fee basis, primarily for more seasoned private equity solutions programs. Finally, BlackRock's cash management platform saw $19 billion of net outflows in the first quarter, in line with institutional money market industry trends. Our cash business can experience seasonal rotations in the first quarter, as many institutional clients withdraw these liquid assets for operational purposes, including tax and bonus payments. Cash management flows were impacted by approximately $14 billion of net redemptions during the last week of March ahead of the Good Friday holiday. Outflows were driven by clients redeeming balances to have cash on hand during a time when many businesses are open, but the financial markets are closed. This phenomenon is not uncommon or unique to BlackRock. Balance has largely returned with approximately $20 billion of money market net inflows in the first week of April. BlackRock's differentiated business model has enabled us to continue to grow with our clients, driving industry-leading organic growth and margins. Looking ahead, as markets trend to be more supportive and clients re-risk, we see significant opportunity to expand our market share and consolidate our position with clients. We've set ourselves up to be a structural grower with the diversified platform that we've built. Enthusiasm's growing, momentum's building across the platform. All of us at BlackRock are excited about our future and the growing opportunities for BlackRock, for our clients, for our employees, and of course, for our shareholders. With that, I'll turn it over to Larry. Thank you, Martin.