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    BLK
    Earnings call· Dec 2024(Q4 FY24)

    BlackRock, Inc. BLK

    Jan 15, 2025 Source

    Executive summary

    BlackRock Q4 FY24 — Record Inflows and Strategic Acquisitions Drive Strong Growth

    BlackRock achieved a milestone year in Q4 FY24, marked by record net inflows and double-digit growth in revenue, operating income, and EPS, driven by strong organic momentum and strategic acquisitions. The firm is positioning itself as a unique asset management and fintech platform, integrating public and private markets to meet evolving client needs and drive future growth, with a focus on higher secular growth areas.

    Highlights

    7

    • Record net inflows of $641 billion in FY24, including $281 billion in Q4.

    • Annual revenue of $20.4 billion, up 14% year-over-year.

    • Operating income of $8.1 billion, up 23% year-over-year.

    • Adjusted EPS of $43.61, up 15% year-over-year.

    • Annualized organic base fee growth of 7% in Q4, highest in 3 years.

    • Technology services ACV increased 12% year-over-year.

    • Operating margin expanded by 280 basis points to 44.5% for the full year.

    Concerns

    4

    • EPS reflected lower nonoperating income and a higher share count due to GIP transaction.

    • Lower interest income in Q4 due to delivery of cash for GIP acquisition.

    • $31 billion of net redemptions from low-fee index equity strategies, primarily from clients outside the U.S. rebalancing portfolios.

    • $13 billion of successful realizations, primarily from private equity, private credit, and infrastructure strategies, which are outflows from AUM perspective.

    Guidance & targets

    8
    CategoryTargetConfidence
    Effective tax rate
    25%
    medium materiality
    High
    Headcount increase
    Higher, approximately 2,300 new colleagues
    low materiality
    High
    Core G&A expense growth
    Mid- to high single-digit percentage increase
    medium materiality
    High
    Share repurchases
    $1.5 billion
    high materiality
    High
    Q1 FY25 dividend increase
    Increase
    medium materiality
    High
    Realizations from GIP funds
    Approximately $5 billion
    medium materiality
    High
    Technology services ACV growth
    Low to mid-teens
    medium materiality
    High
    Organic base fee growth
    5%
    high materiality
    High

    Operational metrics

    68
    Total Net Inflows
    $641 billionRecord
    FY24

    Diversified across active, index, and cash, led by $385 billion from US clients.

    Total Net Inflows
    $281 billionRecord
    Q4 FY24

    Second consecutive record flow quarter.

    Organic Base Fee Growth
    4%
    FY24
    Annualized Organic Base Fee Growth
    7%Highest in 3 years
    Q4 FY24

    GIP's organic growth contributed about 0.5 percentage point.

    Revenue Growth
    14%YoY
    FY24

    Total revenue $20.4 billion.

    Operating Income Growth
    23%YoY
    FY24

    Total operating income $8.1 billion.

    Adjusted EPS Growth
    15%YoY
    FY24

    Adjusted EPS $43.61.

    Revenue Growth
    23%YoY
    Q4 FY24

    Total revenue $5.7 billion, driven by higher markets on average AUM and higher performance fees.

    Operating Income Growth
    36%YoY
    Q4 FY24

    Total operating income $2.3 billion.

    Adjusted EPS Growth
    23%YoY
    Q4 FY24

    Adjusted EPS $11.93, reflected lower tax rate partially offset by lower nonoperating income and higher share count.

    Adjusted Tax Rate
    21%
    Q4 FY24

    Benefited from discrete items.

    Base Fees and Securities Lending Revenue
    $4.4 billionUp 23% YoY, Up 10% sequentially
    Q4 FY24

    Driven by positive market beta on average AUM, organic base fee growth, and approximately $230 million from GIP.

    Annualized Effective Fee Rate
    0.7 basis point highervs Q3 FY24
    Q4 FY24

    Primarily reflecting onboarding of higher fee rate private market assets following GIP closing.

    Performance Fees
    $451 millionIncreased from a year ago
    Q4 FY24

    Led by higher revenue from alternatives, strong broad-based performance across hedge funds.

    Performance Fees
    $1.2 billionIncreased from a year ago
    FY24

    Led by higher revenue from alternatives.

    Technology Services Revenue Growth
    13%YoY
    Q4 FY24
    Technology Services Revenue
    $1.6 billionIncreased 8%
    FY24

    Reflects successful onboarding of new clients and expanding relationships.

    Annual Contract Value (ACV) Growth
    12%YoY
    FY24

    On a constant currency basis, ACV would have increased 13%.

    Total Expense Growth
    9%
    FY24

    Primarily due to higher incentive compensation, G&A, and sales, asset and account expense.

    Employee Compensation and Benefit Expense Growth
    11%YoY
    FY24

    Reflecting higher incentive compensation due to higher performance fees and operating income.

    G&A Expense Growth
    5%
    FY24

    Primarily from planned technology investment, higher professional fees, and GIP's G&A expense.

    Adjusted Operating Margin
    45.5%Increased 390 bps YoY
    Q4 FY24
    Adjusted Operating Margin
    44.5%Up 280 bps
    FY24
    Capital Returned to Shareholders
    $4.7 billion
    FY24

    Through dividends and share repurchases.

    Open Market Share Repurchases
    $375 million
    Q4 FY24
    Open Market Share Repurchases
    $1.6 billion
    FY24
    Shares Repurchased
    28 million
    Last 10 years

    Represents over 15% annualized return for shareholders.

    ETF Net Inflows
    $390 billionIndustry-leading
    FY24

    Representing 11% organic asset and 7% organic base fee growth.

    Digital Assets ETP Net Inflows
    $41 billionIncluded in record annual net inflows
    FY24

    Just launched in 2024.

    ETF Net Inflows
    $143 billion
    Q4 FY24

    Reflected significant momentum into year-end.

    Institutional Platform Net Inflows
    $74 billion
    FY24

    Led by $64 billion active net inflows.

    Institutional Active Net Inflows
    $64 billion
    FY24

    Including funding of several large outsourcing mandates.

    Institutional Index Net Inflows
    $9 billion
    FY24

    Driven by $43 billion into fixed income, partially offset by $31 billion net redemptions from low-fee index equity strategies.

    Retail Net Inflows
    $24 billion
    FY24

    Led by Aperio ($14 billion) and active fixed income mutual funds ($12 billion).

    Private Markets Net Inflows
    $9 billion
    FY24

    Driven by infrastructure and private credit.

    Realizations
    $13 billion
    FY24

    Primarily from private equity, private credit, and infrastructure strategies.

    Cash Management Net Inflows
    $81 billion
    Q4 FY24

    Driven by US government and international prime funds.

    Cash Management Net Inflows
    $153 billion
    FY24
    Cash Management AUM Growth
    20%YoY
    FY24
    Client Net Inflows
    Over $2 trillion
    Last 5 years
    Assets Under Management (AUM)
    Nearly $11.6 trillionNew high
    End of FY24
    Assets Under Management (AUM) Increase
    $1.5 trillion
    FY24
    Aladdin Users
    More than 130,000
    End of FY24
    Private Markets and Alternatives Platform AUM
    $600 billion
    Pro forma for HPS

    Expected to be a top 5 provider.

    Private Markets and Alternatives Platform Revenue
    Over $3 billionAbout 15% of 2024 revenues
    Pro forma for HPS
    Private Markets and Technology Revenue % of Total
    Over 20%
    Pro forma for HPS and Preqin

    Revenue base in long-dated, less market-sensitive products and services.

    Fixed Income Platform AUM
    $3 trillion
    End of FY24

    Across active and index.

    Insurance AUM
    $700 billion
    End of FY24

    Managed for insurance companies.

    Models, Direct Indexing, SMAs AUM
    Over $350 billion
    End of FY24

    For wealth managers.

    Cash Management AUM
    Over $900 billion
    End of FY24
    Aladdin Revenue
    $1.6 billion
    FY24
    Headcount Growth
    7%
    Since end of 2022

    AUM up $3 trillion in same period.

    ETF Net Inflows
    Approximately 1/4 of $390 billion
    FY24
    Active ETFs Net Inflows
    $22 billion
    FY24
    Bitcoin ETP AUM
    Over $50 billionLargest ETF launch in history
    Less than a year since launch

    Third highest asset gathering ETF in the industry.

    European ETF Platform Organic Growth
    Double-digit
    Each of last 2 years

    Including over $90 billion in net inflows in 2024.

    European ETF Platform AUM
    Nearing $1 trillionLarger than the next 5 issuers combined
    End of FY24
    Managed Models and SMA Franchise AUM
    Over $300 billion
    End of FY24
    Outsourcing Mandates
    More than $120 billion
    FY24

    From pension plans and retirement schemes.

    LifePath Target Date Franchise AUM
    More than $0.5 trillion
    End of FY24
    LifePath Paycheck AUM
    $16 billionFastest-growing lifetime income target date strategy
    Year-end

    In the defined contribution market.

    Private Credit AUM
    About $20 billion
    Current

    From HLEND, a high performing BDC.

    Non-traded BDC AUM
    About $600 millionGrowing
    Current
    Assets Under Management (AUM)
    $165 billion
    At IPO
    Employees
    650
    At IPO
    Shareholder Total Return
    About 21%vs 8% for S&P 500
    Annualized since IPO
    Effective Fee Rate Increase
    5%
    FY24
    Operating Income Growth
    Over 20%
    Since 2022

    Product announcements

    3
    ProductTypeDetails
    LifePath Paychecklaunch
    Jio BlackRocklaunch
    Investment Management Platform (Saudi Arabia)launch

    Deals & partnerships

    9
    GIP (Global Infrastructure Partners)Acquisition of a leading infrastructure investor.

    Closed in October, bringing an influx of talent and strengthening private market platform.

    HPS Investment PartnersPlanned acquisition of a leading private credit firm.

    Expected to bring real scale and expertise in the wealth channel, including over $20 billion of wealth-focused assets in HLEND.

    PreqinPlanned acquisition of a private markets data and insights provider.

    Will enhance Aladdin's capabilities with private market data.

    Jio Financial ServicesJoint venture to launch digital-first assets with wealth management businesses in India.

    Combines BlackRock's investment expertise with Jio's local market knowledge.

    Public Investment Fund (Saudi Arabia)Partnership to launch an investment management platform to drive investments and future growth in the local economy.

    Part of BlackRock's strategy to deepen local capital markets globally.

    TemasekJoint venture decarbonization partners.

    Successful collaboration with large asset owners.

    MicrosoftAI partnership.

    Successful collaboration.

    MGXPartnership to mobilize data centers and infrastructure investments.

    Successful collaboration.

    Partners GroupManaged model solution for private markets access.

    First-of-its-kind single subscription model product with varied allocations based on risk tolerance.

    Risks & headwinds

    6
    Higher share countQ4 FY24

    Included 6.9 million shares issued and delivered at the closing of the GIP transaction.

    Mitigation: Part of strategic acquisition.

    Lower nonoperating incomeQ4 FY24

    $7 million of net investment losses in Q4, primarily due to changes in co-investment valuations.

    Lower interest incomeQ4 FY24

    Reflected delivery of cash at the closing of the GIP transaction.

    Mitigation: Cash raised through debt offering in March 2024 for GIP acquisition.

    Net redemptions from low-fee index equity strategiesFY24

    $31 billion

    Mitigation: Clients (mostly outside US) rebalanced portfolios amid record equity market levels. Offset by $43 billion into fixed income index.

    Operational burden and tax of managing multiple subscription documents and cash flows for private markets productsOngoing

    Discussed, not quantified.

    Mitigation: Developing managed model solutions (e.g., with Partners Group) to simplify access and reduce operational burden.

    Regulatory hurdles for private markets in retirement channelsOngoing

    Discussed, not quantified.

    Mitigation: Advocating for reforms (safe harbors, litigation/advice reform) and leveraging better analytics/data (Preqin) to support expansion.

    What to watch in Q1 FY25

    5

    Preqin acquisition closing

    Q1 2025
    CurrentPending regulatory approvals
    TargetClosed

    Why it matters

    Integration of Preqin's data is key to enhancing Aladdin's private market capabilities and supporting the expansion of private markets offerings.

    At present, subject to regulatory approvals and other customary closing conditions, we expect our planned acquisitions of Preqin and HPS to close in the first quarter of 2025 and in mid-2025, respectively.

    Q&A highlights

    6

    How do recent rate moves change the market backdrop for "money in motion" and which asset classes will benefit most in 2025?

    Martin Small highlighted strong organic base fee growth (7% in Q4) and continued momentum in structural growers like ETFs, models, Aladdin, fixed income, and target date funds. Larry Fink emphasized the steepening yield curve will drive money from cash ($10 trillion in money market funds) into intermediate and longer-duration fixed income, including private credit and infrastructure.

    “We've been living in a world of an inverted yield curve. And you had the ability to earn the highest return on keeping your money in cash... as you noticed, the yield curve is steepening. And so you're going to -- over the time, you're going to be benefiting by going out the curve.”

    asked by Alex Blostein · answered by Laurence Fink

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Acquisitions and Platform Evolution

    BlackRock's 2024 was a milestone year marked by significant acquisitions, including GIP, and planned acquisitions of HPS and Preqin. These moves are transforming BlackRock into a unique asset management and fintech platform, integrating public and private markets. The firm anticipates these acquisitions will contribute to higher and more durable organic growth, greater resilience, and multiple expansion, with private markets and technology expected to comprise over 20% of overall revenue on a pro forma basis.

    02

    Record Inflows and Organic Growth Momentum

    The company achieved record net inflows of $641 billion in 2024, including $281 billion in Q4, driven by broad-based strength across institutional, wealth, and technology. This momentum resulted in 7% annualized organic base fee growth in Q4, the highest in three years, exceeding the firm's 5% through-the-cycle target even before the full integration of recent acquisitions.

    03

    Aladdin and Technology Services Expansion

    Aladdin continues to be a core operating system, with technology services revenue growing 8% for the full year and ACV increasing 12% year-over-year. The platform is expanding its capabilities, including integrating eFront and the planned acquisition of Preqin for private market data, to provide sophisticated risk management and portfolio analytics across public and private assets, driving strong demand and significant client mandates.

    04

    ETF Leadership and Innovation

    BlackRock's iShares franchise maintained its leadership, generating $390 billion in ETF net inflows in 2024, representing 11% organic asset growth. This included $41 billion into digital assets ETPs and significant growth in active ETFs. The firm is innovating at the product and portfolio level, expanding its European ETF platform to nearly $1 trillion, and connecting investors to capital markets growth globally.

    05

    Retirement Solutions and Private Markets Access

    BlackRock, as a leading DCIO manager, is innovating in retirement solutions, including the LifePath Paycheck offering for annuity-based income streams. The firm is actively exploring ways to bring private markets into retirement channels and wealth management through managed models and evergreen funds, leveraging its acquisitions and data analytics capabilities to overcome regulatory and operational hurdles.

    06

    Global Partnerships and Market Development

    BlackRock is engaging in global partnerships with governments and sovereign wealth funds to deepen local capital markets, citing initiatives like the Jio BlackRock joint venture in India and an investment management platform in Saudi Arabia. These collaborations aim to lay foundations for significant AUM growth over the next 5-10 years by connecting investors to long-term capital market growth.

    AI-generated summary of the company’s earnings call. Not investment advice.