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Market Update : 
BlackRock Earnings Call, Second Quarter 2008
Author: Godwin Gwetu
123jump.com
Last Update: 5:51 AM ET July 21 2008


The investment management firm reported second quarter total revenues of $1.387 million compared with $1.097 million in the year ago quarter. The quarterly net income was $274 million, an increase of 23% versus the second quarter last year net income of $222 million. The management advised that Assets Under Management (UAM) rose 16% to $1.428 trillion as at June 30, 2008 versus the same period last year.

 
This summary is based on the second quarter fiscal 2008 earnings call conducted by BlackRock Inc. (BLK) on July 17, 2008.

Management:

Chairman and CEO: Laurence D. Fink
CFO: Anne Marie Petach
MD and General Counsel: Robert P. Connolly

Key Investor Issues:

- Q2 total revenues rose 26.4% from $1.097 million last year to $1.387 million.
- Half year EPS were $3.87 versus $3.17 same period last year.
- Q2 operating income increased 2% to $405 million from $396 million in Q1 of 2008.

Second-Quarter Financial Highlights:

The quarterly EPS increased from $1.69 to $2.05 for the current year quarter.

- The growth in earnings included a 44% increase in operating income compared with 2007.
- The improvements in operating results were offset partially by lower non-operating income reflecting the effect of declining markets on seed and co-investments and higher net interest expense.

The Q2 operating income increased 44% to $405 million from $282 million in Q2 of 2007.

- The Q2 results included activities related to UAM acquired in the Quellos transaction which closed on October 1, 2007.

The 26% increase in quarterly revenues was a result of several factors.

- The investment advisory and administration base fees of $1.161 million in Q2 rose $210 million or 22% versus $951 million in the year ago quarter.
- The increase was a result of organic growth in AUM across all asset classes and the AUM acquired in the Quellos transaction.
- The current quarter results included $45 million of fees related to AUM acquired in the Quellos transaction

- The performance fees were $57 million compared with $26 million in the quarter last year.
- The increase related to higher performance fees earned on international equity separate accounts and alternative investment products in Q2 of 2008.

- The management advised that Other revenue, which includes BlackRock Solutions and property management fees, was $135 million during the quarter versus $88 million in Q2 of 2007.
- The Q2 BlackRock Solutions revenue increased to $100 million compared with $46 million in Q2 of 2007.
- The increase of 115% reflects additional Aladdin mandates and advisory assignments.

The second quarter operating expenses of $982 million increased $167 million or 21% compared with $815 million in the year ago quarter.

- The employee compensation and benefits increased $143 million.
- The increase was mainly due to higher incentive compensation related to increases in operating income and performance fees, a $38 million increase in salaries and benefits primarily due to increased staff and a $23 million increase in deferred compensation relating to appreciation on assets associated with certain deferred compensation plans, partially offset by gains on investments included in non-operating income.

- The portfolio administration and servicing costs paid to Merrill Lynch and other third parties increased $23 million as a result of higher levels of average AUM across all asset classes.

- The amortization of deferred sales costs increased $5 million due to higher sales of certain share classes of open-ended funds.

- The general and administration expenses decreased $9 million primarily related to a $14 million reduction in closed-end fund launch costs, a $6 million decline in foreign currency re-measurement costs and a $3 million dip in professional services related to MLIM integration costs in 2007.
- These were partly offset by increases in portfolio services and occupancy expenses of $8 million and $6 million respectively.

- The amortization of intangible assets increased $5 million due to an increase in finite-lived management contracts acquired in the Quellos transaction.


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