This summary is based on the first quarter fiscal 2007 earnings call conducted by BlackRock Inc. (BLK) on April 19, 2007.
Chairman and Chief Executive Officer: Laurence D. Fink
Chief Financial Officer: Paul L. Audet
General Counsel: Robert P. Connolly
Key Investors Issues
- Earnings per share increased from $1.06 in prior year to $1.48.
- Quarterly revenue was $1.005 billion versus $1.019 billion in previous year.
- Assets under management totaled $1.154 trillion at March 31, 2007, up 2.6% since the end of Q4.
First Quarter Fiscal 2007 Financial Highlights
BlackRock reported net income of $195.4 million or $1.48 per diluted share.
This compares with diluted earnings per share of $1.06 and $1.28 in the first and fourth quarters of 2006, respectively. First quarter 2007 diluted earnings per share include 3 cents of Merrill Lynch Investment Managers (MLIM) integration charges, 6 cents in launch costs for a new closed-end fund and a 2 cents charge associated with syndication costs for a large real estate venture.
Performance fee related earnings contributed approximately 7 cents to diluted earnings per share in the first quarter of 2007, as compared to 37 cents and 14 cents per share in the first and fourth quarters of 2006, respectively. Before the effect of these charges and the contribution from performance fees, first quarter 2007 diluted earnings per share increased approximately 104% and 8% compared to the first and fourth quarters of 2006, respectively.
Adjusted earnings per share increased by approximately 29% to $1.59 for the first quarter 2007, compared to $1.23 for the first quarter 2006.
This was despite a 30 cents per share decrease in the per share contribution from performance fees. First quarter 2007 adjusted earnings per share would have been $1.64, excluding the 2 cents real estate syndication charges and the 3 cents impact of higher fund launch costs over the amount incurred in fourth quarter 2006. Performance fees in the first quarter 2006 primarily were related to fees earned from a multi-year institutional real estate equity account acquired in the SSRM Holdings, Inc. transaction.
The adjusted operating margin of 34.0% decreased approximately 1.6% from fourth quarter 2006 due to increased launch costs on a new closed-end fund and the operating income effect of two fewer days in the first quarter.
Revenue totaled $1.005 billion for the first quarter 2007 compared to $1.019 billion for fourth quarter 2006.
The decrease in revenue reflects lower performance fees, the impact of two fewer days and a lower fee mix for equities. Performance fees, including amounts earned by BlackRock Solutions, for first quarter 2007 and fourth quarter 2006 were $22.4 million and $43.8 million, respectively.
MLIM integration charges for first quarter 2007 were $7.1 million.
Total integration costs to be incurred, including the $142 million expensed in 2006, are estimated at $170 to $180 million.
Assets under management (AUM) totaled $1.154 trillion at March 31, 2007, up $29.5 billion, or 2.6%, since fourth quarter-end and $79.1 billion, or 7.4%, since closing the MLIM merger.
Net new business totaled $14.4 billion and $31.6 billion during the first quarter and since closing, respectively.
For the quarter, new business efforts resulted in positive net flows in all asset classes and in all client channels. Net new business from U.S. investors for the quarter totaled $12.7 billion, including $3.7 billion in long-dated mandates and $9 billion in cash management products. Net inflows from international clients were $7.2 billion, before giving effect to $5.4 billion of outflows resulting from one client’s strategic restructuring and outflows in a single securities lending account. BlackRock Solutions also maintained solid momentum, adding two new Aladdin assignments during the quarter. BlackRock’s new business pipeline continues to be robust, with $28.4 billion of wins funded or to be funded, and the Company is participating in a substantial number of searches across regions and products.
Flows in long-dated products included $2.6 billion from retail investors, $2.1 billion from institutional clients and $1.3 billion from high net worth investors. BlackRock is beginning to capitalize on its enhanced platform, winning mandates and introducing products, including target date and target risk funds for U.S. defined contribution plans, that neither predecessor organization would have been able to execute effectively in the past. The Company is also seeing early results from broader cross-selling efforts across regions, channels and products, and continues to have robust new business momentum, as evidenced by its pipeline.
Fixed income AUM closed the quarter up $22.5 billion to $470.5 billion, including an asset reclassification.
