BlackRock, Inc.

Please stand by, we're about to begin. Good morning, my name is Jen, and I will be your conference facilitator today. At this time, I'd like to welcome everyone to the BlackRock Incorporated First Quarter 2026 Earnings Teleconference. Our host for today's call will be 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'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, please press star two. Thank you. Mr. Meade, you may begin your conference.

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 FCC, which lists 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 Mark.

Thanks, Chris. Good morning, everyone. It's my pleasure to present results for the first quarter of 2026. 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 results. A reconciliation between GAAP and our as-adjusted results has been included in the tables attached to today's press release. I'll be focusing primarily on our as-adjusted results. It's been a standout start to the year for BlackRock. Our first quarter revenue, operating income, and earnings per share grew double digits. We expanded margins by over 100 basis points, and we delivered 8% organic base fee growth. That's our seventh consecutive quarter at or above 5%, bringing the last 12 months organic base fee growth to 10%. What's driving that performance is deep engagement with clients. We're providing advice, insights, and access across the whole portfolio, allowing clients to efficiently implement both long-term strategic asset allocation moves and tactical exposures to navigate near-term themes and markets. These higher velocity markets bring clients closer to our firm. BlackRock is winning mind share and wallet share reflected in $130 billion of net inflows in the first quarter. Organic growth is durable and broad-based. It's consistently across product, region, and client type. Firms we've brought together deliberately are now compounding even faster in our results and with our clients. You see it across the BlackRock portfolio. Appirio flows accelerating as advisors bring tax-aware direct indexing into the core of accounts. iShares leading the industry across active and index. infrastructure fundraising and deployment ahead of plan. The first quarter of 2026 unfolded in a more volatile market environment. Markets showed heightened sensitivity to incremental economic data, with volatility rising across rates, equities, and currencies. There is real impactful geopolitical uncertainty. There's both excitement and anxiety about how artificial intelligence will impact day-to-day lives and business models. As capital reallocates and assumptions are challenged, markets can feel unsettled, even when underlying fundamentals are sound. That dynamic is evident today. While headlines and sentiment remain uneven, BlackRock's performance tells a very different story. Our fundamentals are strong, organic base fee growth remains well above target, and margin expansion continues to reflect the operating leverage built into our model. Momentum across our business continues to accelerate, That momentum is rooted in clients wanting to partner with scaled, trusted platforms, and they're consolidating more of their portfolios with BlackRock. Turning to our financial results. First quarter revenue of $6.7 billion increased 27% year-over-year, driven by organic growth, the impact of higher markets on average AUM, the acquisitions of HPS and Prequin, and higher technology services and subscription revenues. Operating income of $2.7 billion was up 31%, and earnings per share of $12.53 was 11% higher versus a year ago. EPS also reflected lower non-operating income, a higher effective tax rate, and higher share count in the current quarter linked to the closing of the HPS transaction on July 1, 2025. Non-operating results for the quarter included $66 million of net investment gains, driven primarily by equity method earnings and non-cash valuation gains in our minority investments. Our as-adjusted tax rate for the first quarter was approximately 23%. This reflected $57 million of 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 2026. 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 $5.4 billion was up 24% year over year, driven by the positive impact of market beta on average AUM, organic base fee growth, and approximately $230 million in base fees from HPS. On an equivalent day count basis, our annualized effective fee rate was two-tenths of a basis point higher compared to the fourth quarter. Our fee rate benefited from outperformance of international equity markets relative to the US, along with client demand for international iShares exposures, and our structural growers in systematic equities, private markets, Appirio, and active ETFs. Performance fees of $272 million increased from a year ago. reflecting higher revenue from alternatives, which includes 121 million in performance fees from HPS. Quarterly technology services and subscription revenue was up 22% compared to a year ago. Growth reflects sustained demand for our full range of Aladdin technology offerings and a full quarter impact of the Prequin transaction, which closed on March 3rd, 2025. Prequin added approximately 65 million to first quarter revenue. Annual contract value, or ACV, increased 14% year over year. We remain committed to low to mid-teens ACV growth over the long term. Total expense increased 24% year over year, reflecting higher compensation, sales asset and account expense, and G&A. Employee compensation and benefit expense was up 27%, reflecting higher incentive compensation linked to higher operating income and performance fees, and higher headcount associated with the onboarding of HPS and PreQIN employees. Sales asset and account expense increased 25% compared to a year ago, primarily driven by higher distribution and servicing costs and direct fund expense. G&A expense increased 14%, primarily driven by the impact of the HPS and PreQIN acquisitions. Excluding the impact of the HPS and PreQIN acquisitions, G&A would have increased a mid-single-digit percentage from a year ago. Our first quarter as adjusted operating margin of 44.5% was up 130 basis points from a year ago, reflecting the positive impact of markets on revenue and strong organic base fee growth. We continue to deliver higher margin expansion on recurring fee-related earnings. Excluding the impact of all performance fees and related compensation, our adjusted operating margin for the first quarter would have been 45.6%, up 180 basis points year over year. We repurchased $450 million worth of shares in the first quarter. At present, based on our capital spending plans for the year and subject to market and other conditions, we still anticipate repurchasing at least $450 million of shares per quarter for the balance of the year, consistent with our January guidance. In the first quarter, BlackRock generated total net inflows of $130 billion, led by strength across ETFs, active and private markets. Record first quarter ETF net inflows of $132 billion were led by index bond ETFs with $41 billion of net inflows. Precision exposures, core equity, and active ETFs added $39 billion, $32 billion, and $19 billion, respectively. Client demand for international diversification presents meaningful upside for BlackRock, particularly in areas like emerging markets and precision single country allocations. This demand for premium exposures that are specific to iShares resulted in double-digit organic base fee growth for ETFs in the quarter. Retail net inflows of $15 billion reflected continued strength in our systematic liquid alternatives, active fixed income, and evergreen private markets offerings. Subscriptions for HPS's flagship non-traded BDC continue, with approximately 150 million of subscriptions for the April window. Demand for Appirio and SpiderRock is also accelerating, as financial advisors turn to these platforms for customized and tax-aware strategies. Appirio generated a record $13 billion of net inflows, and SpiderRock added over $1 billion in the quarter. Appirio's AUM has more than tripled, and SpiderRock's AUM has more than doubled in the five and two years since their respective closings. Institutional active net inflows were $24 billion. driven by our life path target date franchise, private markets, and systematic strategies. These inflows were partially offset by a few client-specific active fixed income redemptions. Institutional index net outflows of $35 billion were concentrated in low-fee index equities. In private markets, we continue to see strong momentum supported by investment performance, differentiated deal flow, and the breadth of our client relationships. We saw an aggregate $9 billion of net inflows led by private credit and infrastructure and primarily driven by deployment activity. Finally, BlackRock's cash management platform saw $6 billion of net outflows in the first quarter. Cash management results reflected seasonal redemptions from US government funds, partially offset by growth in customized cash mandates. BlackRock's at its best helping clients navigate intense periods of transformation across industries markets, and geopolitics. Capital's moving. Wealth management platforms, institutions, consultants, they're evaluating their providers of asset management services. Our whole portfolio model has a proven track record of capturing momentum and gaining share in these environments. BlackRock is simultaneously a leading public markets manager, a scaled private markets platform, and a global technology company. That's not something that can be replicated overnight. Our clients know it. Our results prove it. We generated 8% organic base fee growth in the quarter and 10% over the last 12 months. At the same time, we grew revenue and operating income double digits and expanded margins by over 100 basis points. When clients are making big decisions about their portfolios, they're choosing BlackRock because we can meet them across public markets, private markets, and technology all on one platform. We have the investment expertise, the technology, the global reach, and the track record. And we have nearly 25,000 colleagues, one BlackRock, working together to deliver excellence for our clients and growth for our shareholders.