×

BlackRock Reports Third Quarter 2017 Diluted EPS of $5.78, or $5.92 as adjusted

  • $96 billion of total net inflows in the third quarter reflects continued strength of diversified business model
  • $76 billion of long-term net inflows, positive across client type, investment style and region
  • 14% increase in revenue year-over-year driven by growth in base fees, performance fees and technology and risk management revenue
  • 15% increase in operating income year-over-year reflects operating margin expansion
  • 10% increase in diluted EPS (15% as adjusted) year-over-year
  • Consistent capital management with $275 million of quarterly share repurchases

NEW YORK--(BUSINESS WIRE)-- BlackRock, Inc. (NYSE: BLK):

FINANCIAL RESULTS

Q3 Q3 Q2 Nine Months Ended September 30,
(in millions, except per share data) 2017 2016

Change

2017

Change

2017 2016

Change

AUM $ 5,976,892 $ 5,117,421 17 % $ 5,689,273 5 % $ 5,976,892 $ 5,117,421 17 %
Total net flows $ 96,112 $ 69,809 $ 103,616 $ 264,326 $ 104,140

GAAP basis:

Revenue $ 3,233 $ 2,837 14 % $ 2,965 9 % $ 9,022 $ 8,265 9 %
Operating income $ 1,394 $ 1,209 15 % $ 1,242 12 % $ 3,783 $ 3,345 13 %
Operating margin 43.1 % 42.6 % 50

bps

41.9 % 120

bps

41.9 % 40.5 % 140

bps

Net income(1) $ 947 $ 875 8 % $ 857 11 % $ 2,666 $ 2,321 15 %
Diluted EPS $ 5.78 $ 5.26 10 % $ 5.22 11 % $ 16.23 $ 13.92 17 %
Weighted average diluted shares 163.8 166.3 (1 )% 164.1 - % 164.3 166.8 (1 )%

As Adjusted:

Operating income(2) $ 1,398 $ 1,216 15 % $ 1,246 12 % $ 3,795 $ 3,442 10 %
Operating margin(2) 45.0 % 44.8 % 20

bps

43.9 % 110

bps

43.9 % 43.5 % 40

bps

Net income(1) (2) $ 969 $ 854 13 % $ 860 13 % $ 2,694 $ 2,362 14 %
Diluted EPS(2) $ 5.92 $ 5.14 15 % $ 5.24 13 % $ 16.40 $ 14.16 16 %

(1)

Net income represents net income attributable to BlackRock, Inc.
(2)

See notes (1) through (3) to the Condensed Consolidated Statements of Income and Supplemental Information for more information on as adjusted items and the reconciliation to GAAP.

BlackRock, Inc. (NYSE: BLK) today reported financial results for the three and nine months ended September 30, 2017.

“BlackRock’s third quarter results reflect the continued growth of our global investment and technology platform and the trusted relationships we have built with our clients,” commented Laurence D. Fink, Chairman and CEO of BlackRock. “Our ability to create investment solutions from a broad range of products – spanning index to illiquid alternatives – combined with industry leading technology and risk management, is resonating with clients and driving more impactful interactions than ever before. As we deepen and expand our relationships with clients and partners, we recognize and embrace the growing responsibility we have on a daily basis to help them achieve their goals.

“Strong organic asset and base fee growth are a direct result of the investments we are making in our platform. We saw $96 billion of total net inflows in the third quarter. This brings year-to-date total organic growth to $264 billion, already surpassing our total flows for the full year of 2016.

“iShares® third quarter net inflows of $52 billion were diversified across both core and non-core strategies. Our continued investment in the iShares franchise, including product innovation, investor education and digital distribution, is driving accelerated growth and increased market share. During the third quarter, we again achieved the #1 market share of ETF flows globally, in both the United States and Europe, and in both equity and fixed income.

“In today’s markets, clients rely on both index and alpha-seeking building blocks to achieve their desired outcomes. Strong investment performance drove third quarter net inflows of $6 billion in our active platform, led by fixed income and multi-asset offerings, which contributed to our strong organic base fee growth during the quarter.

“Technology and risk management revenue, powered by Aladdin®, increased 15% year-over-year as institutions turn to BlackRock for our risk management and analytics capabilities. As technology continues to enhance our alpha-generation and distribution capabilities, and continues to drive efficiencies in our operational infrastructure, it is becoming a larger focus of investment across the entire platform. Our technology investments are contributing significantly to both organic growth and revenue growth and will be critical to driving operating leverage over time.

“With regulation, technology and market forces transforming the ecosystem for asset and wealth managers globally, BlackRock is at the forefront of change in the industry. As our focus remains on the long-term, we continue to purposefully and prudently invest in the future of our business, reinforcing our differentiated ability to serve clients and generate long-term value for shareholders.”

RESULTS BY CLIENT TYPE

September 30, 2017 Q3 2017
Q3 2017 September 30, 2017 Q3 2017 AUM Base fees(1)
(in millions), (unaudited) Net flows AUM Base fees(1) % of Total % of Total
Retail $ 7,367 $ 608,521 $ 843 10 % 30 %
iShares ETFs 52,306 1,640,437 1,067 27 % 38 %
Institutional:
Active 155 1,105,224 489 18 % 18 %
Index 15,976 2,194,701 249 38 % 9 %
Total institutional 16,131 3,299,925 738 56 % 27 %
Long-term 75,804 5,548,883 2,648 93 % 95 %
Cash management 20,381 425,423 144 7 % 5 %
Advisory (73 ) 2,586 - - -
Total $ 96,112 $ 5,976,892 $ 2,792 100 % 100 %

RESULTS BY PRODUCT TYPE

September 30, 2017 Q3 2017
Q3 2017 September 30, 2017 Q3 2017 AUM Base fees(1)
(in millions), (unaudited) Net flows AUM Base fees(1) % of Total % of Total
Equity $ 11,935 $ 3,172,465 $ 1,427 53 % 51 %
Fixed income 59,549 1,788,420 740 30 % 27 %
Multi-asset 4,334 457,027 289 8 % 10 %
Alternatives (14 ) 130,971 192 2 % 7 %
Long-term 75,804 5,548,883 2,648 93 % 95 %
Cash management 20,381 425,423 144 7 % 5 %
Advisory (73 ) 2,586 - - -
Total $ 96,112 $ 5,976,892 $ 2,792 100 % 100 %

RESULTS BY INVESTMENT STYLE

September 30, 2017 Q3 2017
Q3 2017 September 30, 2017 Q3 2017 AUM Base fees(1)
(in millions), (unaudited) Net flows AUM Base fees(1) % of Total % of Total
Active $ 5,796 $ 1,645,352 $ 1,318 28 % 47 %
Index and iShares ETFs 70,008 3,903,531 1,330 65 % 48 %
Long-term 75,804 5,548,883 2,648 93 % 95 %
Cash management 20,381 425,423 144 7 % 5 %
Advisory (73 ) 2,586 - - -
Total $ 96,112 $ 5,976,892 $ 2,792 100 % 100 %

(1) Base fees include investment advisory, administration fees and securities lending revenue.

BUSINESS HIGHLIGHTS

Long-term net inflows were positive across all major regions, with net inflows of $42.3 billion, $23.6 billion and $9.9 billion from clients in the Americas, EMEA and Asia-Pacific, respectively. At September 30, 2017, BlackRock managed 64% of its long-term AUM for clients in the Americas, 28% for clients in EMEA and 8% for clients in Asia-Pacific.

The Company’s net flows by client type for the third quarter of 2017 are presented below.

  • Retail long-term net inflows of $7.4 billion reflected net inflows of $3.7 billion in the United States and $3.7 billion internationally. Fixed income net inflows of $4.6 billion were diversified across our top-performing active platform, led by net inflows into unconstrained, municipal and emerging market debt categories. Equity net inflows of $1.7 billion reflected inflows into index mutual funds. Multi-asset net inflows of $1.0 billion were largely due to inflows into the Multi-asset Income fund family, partially offset by outflows from world allocation strategies.
  • iShares ETFs long-term net inflows of $52.3 billion reflected strength in iShares Core, precision exposure and financial instrument ETFs. Equity net inflows of $33.1 billion were driven by both U.S. and international equity market exposures. Fixed income net inflows of $17.5 billion reflected inflows into treasury, investment grade corporate and broad fixed income funds. Commodities iShares generated $1.5 billion of net inflows.
  • Institutional active long-term net inflows of $0.2 billion were led by multi-asset net inflows of $3.5 billion, reflecting ongoing demand for the LifePath® target-date series and factors strategies, and fixed income net inflows of $0.5 billion. Equity net outflows of $3.3 billion were driven by fundamental and scientific active equities. Alternatives had net outflows of $0.5 billion (including $0.6 billion return of capital).
  • Institutional index long-term net inflows of $16.0 billion included fixed income net inflows of $36.9 billion, driven by demand for liability-driven solutions, partially offset by equity net outflows of $19.6 billion.

Cash management AUM increased 6% to $425.4 billion, driven by $20.4 billion of net inflows.

INVESTMENT PERFORMANCE AT SEPTEMBER 30, 2017 (1)

One-year period Three-year period Five-year period
Fixed income:
Actively managed AUM above benchmark or peer median
Taxable 78% 78% 89%
Tax-exempt 55% 51% 53%
Index AUM within or above applicable tolerance 97% 94% 98%
Equity:
Actively managed AUM above benchmark or peer median
Fundamental 59% 80% 69%
Scientific 86% 89% 91%
Index AUM within or above applicable tolerance 97% 98% 99%

(1) Past performance is not indicative of future results. The performance information shown is based on preliminary available data. Please refer to the Performance Notes for performance disclosure detail.

TELECONFERENCE, WEBCAST AND PRESENTATION INFORMATION

Chairman and Chief Executive Officer, Laurence D. Fink, and Chief Financial Officer, Gary S. Shedlin, will host a teleconference call for investors and analysts on Wednesday, October 11, 2017 at 8:30 a.m. (Eastern Time). Members of the public who are interested in participating in the teleconference should dial, from the United States, (800) 374-0176, or from outside the United States, (706) 679-8281, shortly before 8:30 a.m. and reference the BlackRock Conference Call (ID Number 92702706). A live, listen-only webcast will also be available via the investor relations section of www.blackrock.com.

Both the teleconference and webcast will be available for replay by 12:30 p.m. (Eastern Time) on Wednesday, October 11, 2017 and ending at midnight on Wednesday, October 25, 2017. To access the replay of the teleconference, callers from the United States should dial (855) 859-2056 and callers from outside the United States should dial (404) 537-3406 and enter the Conference ID Number 92702706. To access the webcast, please visit the investor relations section of www.blackrock.com.

About BlackRock

BlackRock helps investors build better financial futures. As a fiduciary to our clients, we provide the investment and technology solutions they need when planning for their most important goals. As of September 30, 2017, the firm manages approximately $5.977 trillion in assets on behalf of investors worldwide. For additional information on BlackRock, please visit www.blackrock.com | Twitter: @blackrock | Blog: www.blackrockblog.com | LinkedIn: www.linkedin.com/company/blackrock

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

(in millions, except shares and per share data), (unaudited)

Three Months
Three Months Ended Ended
September 30, June 30,
2017 2016 Change 2017 Change
Revenue
Investment advisory, administration fees and

securities lending revenue

$ 2,792 $ 2,546 $ 246 $ 2,675 $ 117
Investment advisory performance fees 191 58 133 48 143
Technology and risk management revenue(a) 175 152 23 164 11
Distribution fees 5 10 (5 ) 5 -
Advisory and other revenue(a) 70 71 (1 ) 73 (3 )
Total revenue 3,233 2,837 396 2,965 268
Expense
Employee compensation and benefits 1,088 969 119 999 89
Distribution and servicing costs 123 114 9 121 2
Amortization of deferred sales commissions 4 8 (4 ) 4 -
Direct fund expense 234 200 34 224 10
General and administration 363 312 51 350 13
Amortization of intangible assets 27 25 2 25 2
Total expense 1,839 1,628 211 1,723 116
Operating income 1,394 1,209 185 1,242 152
Nonoperating income (expense)
Net gain (loss) on investments 41 31 10 36 5
Interest and dividend income 15 22 (7 ) 13 2
Interest expense (46 ) (52 ) 6 (48 ) 2
Total nonoperating income (expense) 10 1 9 1 9
Income before income taxes 1,404 1,210 194 1,243 161
Income tax expense 445 333 112 376 69
Net income 959 877 82 867 92
Less:
Net income (loss) attributable to noncontrolling interests 12 2 10 10 2
Net income attributable to BlackRock, Inc. $ 947 $ 875 $ 72 $ 857 $ 90
Weighted-average common shares outstanding
Basic 161,872,716 164,129,214 (2,256,498 ) 162,502,465 (629,749 )
Diluted 163,773,546 166,256,598 (2,483,052 ) 164,149,861 (376,315 )
Earnings per share attributable to BlackRock, Inc.

common stockholders (3)

Basic $ 5.85 $ 5.33 $ 0.52 $ 5.27 $ 0.58
Diluted $ 5.78 $ 5.26 $ 0.52 $ 5.22 $ 0.56
Cash dividends declared and paid per share $ 2.50 $ 2.29 $ 0.21 $ 2.50 $ -

Supplemental information:

AUM (end of period) $ 5,976,892 $ 5,117,421 $ 859,471 $ 5,689,273 $ 287,619
Shares outstanding (end of period) 161,597,770 163,858,070 (2,260,300 ) 162,207,216 (609,446 )
GAAP:
Operating margin 43.1 % 42.6 % 50 bps 41.9 % 120 bps
Effective tax rate 32.0 % 27.6 % 440 bps 30.5 % 150 bps
As adjusted:
Operating income (1) $ 1,398 $ 1,216 $ 182 $ 1,246 $ 152
Operating margin (1) 45.0 % 44.8 % 20 bps 43.9 % 110 bps
Nonoperating income (expense), less net income

(loss) attributable to noncontrolling interests

$ (2 ) $ (1 ) $ (1 ) $ (9 ) $ 7
Net income attributable to BlackRock, Inc. (2) $ 969 $ 854 $ 115 $ 860 $ 109

Diluted earnings attributable to BlackRock, Inc.

common stockholders per share (2) (3)

$ 5.92 $ 5.14 $ 0.78 $ 5.24 $ 0.68
Effective tax rate 30.6 % 29.7 % 90 bps 30.5 % 10 bps

See the reconciliation to GAAP and notes (1) through (3) for more information on as adjusted items.

(a)

Beginning with the first quarter of 2017, Aladdin revenue previously reported within “BlackRock Solutions® and advisory” has been presented within “Technology and risk management revenue” on the condensed consolidated statements of income. The remaining previously reported “BlackRock Solutions and advisory” revenue is currently reported as part of “Advisory and other revenue.” Under the historical presentation, BlackRock Solutions and advisory revenue would have totaled $200 million for the three months ended September 30, 2017. The prior period amount reported for BlackRock Solutions and advisory of $174 million for the three months ended September 30, 2016 has been reclassified to conform to the current presentation. See the Summary of Revenue for further information.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

(in millions, except shares and per share data), (unaudited)

Nine Months Ended
September 30,
2017 2016 Change
Revenue

Investment advisory, administration fees and securities lending revenue

$ 7,997 $ 7,394 $ 603
Investment advisory performance fees 309 166 143
Technology and risk management revenue(a) 497 439 58
Distribution fees 17 32 (15 )
Advisory and other revenue(a) 202 234 (32 )
Total revenue 9,022 8,265 757
Expense
Employee compensation and benefits 3,108 2,893 215
Distribution and servicing costs 361 320 41
Amortization of deferred sales commissions 13 27 (14 )
Direct fund expense 666 583 83
General and administration 1,014 946 68
Restructuring charge - 76 (76 )
Amortization of intangible assets 77 75 2
Total expense 5,239 4,920 319
Operating income 3,783 3,345 438
Nonoperating income (expense)
Net gain (loss) on investments 128 49 79
Interest and dividend income 35 33 2
Interest expense (159 ) (154 ) (5 )
Total nonoperating income (expense) 4 (72 ) 76
Income before income taxes 3,787 3,273 514
Income tax expense 1,090 954 136
Net income 2,697 2,319 378
Less:
Net income (loss) attributable to noncontrolling interests 31 (2 ) 33
Net income attributable to BlackRock, Inc. $ 2,666 $ 2,321 $ 345
Weighted-average common shares outstanding
Basic 162,459,737 164,756,355 (2,296,618 )
Diluted 164,289,042 166,760,912 (2,471,870 )
Earnings per share attributable to BlackRock, Inc.

common stockholders (3)

Basic $ 16.41 $ 14.09 $ 2.32

Diluted $ 16.23 $ 13.92 $ 2.31
Cash dividends declared and paid per share $ 7.50 $ 6.87 $ 0.63

Supplemental information:

AUM (end of period) $ 5,976,892 $ 5,117,421 $ 859,471
Shares outstanding (end of period) 161,597,770 163,858,070 (2,260,300 )
GAAP:
Operating margin 41.9 % 40.5 % 140

bps

Effective tax rate 29.0 % 29.1 % (10

)

bps

As adjusted:
Operating income (1) $ 3,795 $ 3,442 $ 353
Operating margin (1) 43.9 % 43.5 % 40

bps

Nonoperating income (expense), less net income (loss)

attributable to noncontrolling interests

$ (27 ) $ (70 ) $ 43
Net income attributable to BlackRock, Inc. (2) $ 2,694 $ 2,362 $ 332
Diluted earnings attributable to BlackRock, Inc.

common stockholders per share (2) (3)

$ 16.40 $ 14.16 $ 2.24
Effective tax rate 28.5 % 30.0 % (150

)

bps

See the reconciliation to GAAP and notes (1) through (3) for more information on as adjusted items.

(a)

Beginning with the first quarter of 2017, Aladdin revenue previously reported within “BlackRock Solutions and advisory” has been presented within “Technology and risk management revenue” on the condensed consolidated statements of income. The remaining previously reported “BlackRock Solutions and advisory” revenue is currently reported as part of “Advisory and other revenue.” Under the historical presentation, BlackRock Solutions and advisory revenue would have totaled $571 million for the nine months ended September 30, 2017. The prior period amount reported for BlackRock Solutions and advisory of $517 million for the nine months ended September 30, 2016 has been reclassified to conform to the current presentation. See the Summary of Revenue for further information.

ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Current Quarter Component Changes by Client Type and Product Type

Net

June 30,

2017

inflows

(outflows)

Market

change

FX impact (1)

September 30,

2017

Average AUM (2)
Retail:
Equity $ 215,808 $ 1,734 $

6,110

$ 2,016 $ 225,668 $ 220,944
Fixed income 240,932 4,613 1,569 1,234 248,348 245,193
Multi-asset 113,903 1,046 2,796 317 118,062 116,183
Alternatives 16,113 (26 ) 224 132 16,443 17,198
Retail subtotal 586,756 7,367 10,699 3,699 608,521 599,518
iShares ETFs:
Equity 1,139,850 33,102 50,806 4,637 1,228,395 1,184,488
Fixed income 364,991 17,526 1,055 2,695 386,267 376,880
Multi-asset 3,240 169 77 5 3,491 3,359
Alternatives 20,155 1,509 576 44 22,284 21,283
iShares ETFs subtotal 1,528,236 52,306 52,514 7,381 1,640,437 1,586,010
Institutional:
Active:
Equity 126,446 (3,296 ) 5,866 1,350 130,366 128,842
Fixed income 553,652 496 4,513 3,366 562,027 559,121
Multi-asset 311,921 3,477 7,827 4,508 327,733 320,619
Alternatives 83,836 (522 ) 1,161 623 85,098 83,851
Active subtotal 1,075,855 155 19,367 9,847 1,105,224 1,092,433
Index:
Equity 1,532,592 (19,605 ) 65,291 9,758 1,588,036 1,562,897
Fixed income 545,049 36,914 (1,451 ) 11,266 591,778 572,049
Multi-asset 7,672 (358 ) 389 38 7,741 7,824
Alternatives 7,880 (975 ) 156 85 7,146 7,544
Index subtotal 2,093,193 15,976 64,385 21,147 2,194,701 2,150,314
Institutional subtotal 3,169,048 16,131 83,752 30,994 3,299,925 3,242,747
Long-term 5,284,040 75,804 146,965 42,074 5,548,883 5,428,275
Cash management 402,575 20,381 224 2,243 425,423 415,082
Advisory (3) 2,658 (73 ) (98 ) 99 2,586 2,621
Total $ 5,689,273 $ 96,112 $ 147,091 $ 44,416 $ 5,976,892 $ 5,845,978
Current Quarter Component Changes by Investment Style and Product Type (Long-term)

Net

June 30,

2017

inflows

(outflows)

Market

change

FX impact (1)

September 30,

2017

Average AUM (2)
Active:
Equity $ 290,196 $ (3,015 ) $ 10,433 $ 2,562 $ 300,176 $ 295,895
Fixed income 782,622 4,836 6,079 4,303 797,840 792,042
Multi-asset 425,824 4,523 10,623 4,825 445,795 436,802
Alternatives 99,949 (548 ) 1,385 755 101,541 101,049
Active subtotal 1,598,591 5,796 28,520 12,445 1,645,352 1,625,788
Index and iShares ETFs:
iShares ETFs:
Equity 1,139,850 33,102 50,806 4,637 1,228,395 1,184,488
Fixed income 364,991 17,526 1,055 2,695 386,267 376,880
Multi-asset 3,240 169 77 5 3,491 3,359
Alternatives 20,155 1,509 576 44 22,284 21,283
iShares ETFs subtotal 1,528,236 52,306 52,514 7,381 1,640,437 1,586,010
Non-ETF Index:
Equity 1,584,650 (18,152 ) 66,834 10,562 1,643,894 1,616,788
Fixed income 557,011 37,187 (1,448 ) 11,563 604,313 584,321
Multi-asset 7,672 (358 ) 389 38 7,741 7,824
Alternatives 7,880 (975 ) 156 85 7,146 7,544
Non-ETF Index subtotal 2,157,213 17,702 65,931 22,248 2,263,094 2,216,477
Index & iShares ETFs subtotal 3,685,449 70,008 118,445 29,629 3,903,531 3,802,487
Long-term $ 5,284,040 $ 75,804 $ 146,965 $ 42,074 $ 5,548,883 $ 5,428,275
Current Quarter Component Changes by Product Type (Long-term)

Net

June 30,

2017

inflows

(outflows)

Market

change

FX impact (1)

September 30,

2017

Average AUM (2)
Equity $ 3,014,696 $ 11,935 $ 128,073 $ 17,761 $ 3,172,465 $ 3,097,171
Fixed income 1,704,624 59,549 5,686 18,561 1,788,420 1,753,243
Multi-asset 436,736 4,334 11,089 4,868 457,027 447,985
Alternatives:
Core 97,551 (504 ) 1,355 766 99,168 98,746
Currency and commodities(4) 30,433 490 762 118 31,803 31,130
Alternatives subtotal 127,984 (14 ) 2,117 884 130,971 129,876
Long-term $ 5,284,040 $ 75,804 $ 146,965 $ 42,074 $ 5,548,883 $ 5,428,275

(1)

Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
(2) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing four months.
(3) Advisory AUM represents long-term portfolio liquidation assignments.
(4)

Amounts include commodity iShares ETFs.

ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Year-to-Date Component Changes by Client Type and Product Type

Net

December 31,

2016

inflows

(outflows)

Acquisition(1)

Market

change

FX impact (2)

September 30,

2017

Average AUM (3)
Retail:
Equity $ 196,221 $ 3,009 $ - $ 20,892 $ 5,546 $ 225,668 $ 212,224
Fixed income 222,256 16,497 - 6,003 3,592 248,348 236,065
Multi-asset 107,997 (847 ) - 10,005 907 118,062 112,831
Alternatives 15,478 (158 ) - 725 398 16,443

16,522

Retail subtotal 541,952 18,501 - 37,625 10,443 608,521

577,642

iShares ETFs:
Equity 951,252 129,488 - 134,562 13,093 1,228,395 1,095,500
Fixed income 314,707 58,779 - 5,105 7,676 386,267 351,985
Multi-asset 3,149 61 - 272 9 3,491 3,122
Alternatives 18,771 2,213 - 1,138 162 22,284 20,470
iShares ETFs subtotal 1,287,879 190,541 - 141,077 20,940 1,640,437 1,471,077
Institutional:
Active:
Equity 120,699 (12,357 ) - 18,023 4,001 130,366 126,223
Fixed income 536,727 (2,967 ) - 17,705 10,562 562,027 551,117
Multi-asset 276,933 16,692 - 21,531 12,577 327,733 301,793
Alternatives 75,615 2,367 3,264 2,021 1,831 85,098

79,818

Active subtotal 1,009,974 3,735 3,264 59,280 28,971 1,105,224

1,058,951

Index:
Equity 1,389,004 (25,778 ) - 193,874 30,936 1,588,036 1,504,119
Fixed income 498,675 63,528 - 97 29,478 591,778 540,163
Multi-asset 6,928 (500 ) - 1,098 215 7,741 7,518
Alternatives 7,074 (367 ) - 194 245 7,146 7,538
Index subtotal 1,901,681 36,883 - 195,263 60,874 2,194,701 2,059,338
Institutional subtotal 2,911,655 40,618 3,264 254,543 89,845 3,299,925

3,118,289

Long-term 4,741,486 249,660 3,264 433,245 121,228 5,548,883 5,167,008
Cash management 403,584 14,854 - 850 6,135 425,423 406,729
Advisory (4) 2,782 (188 ) - (189 ) 181 2,586 2,691
Total $ 5,147,852 $ 264,326 $ 3,264 $ 433,906 $ 127,544 $ 5,976,892 $ 5,576,428
Year-to-Date Component Changes by Investment Style and Product Type (Long-term)

Net

December 31,

2016

inflows

(outflows)

Acquisition(1)

Market

change

FX impact (2)

September 30,

2017

Average AUM (3)
Active:
Equity $ 275,033 $ (17,475 ) $ - $ 34,966 $ 7,652 $ 300,176 $ 289,036
Fixed income 749,996 10,910 - 23,502 13,432 797,840 775,996
Multi-asset 384,930 15,845 - 31,536 13,484 445,795 414,624
Alternatives 91,093 2,209 3,264 2,746 2,229 101,541 96,339
Active subtotal 1,501,052 11,489 3,264 92,750 36,797 1,645,352 1,575,995
Index and iShares ETFs:
iShares ETFs:
Equity 951,252 129,488 - 134,562 13,093 1,228,395 1,095,500
Fixed income 314,707 58,779 - 5,105 7,676 386,267 351,985
Multi-asset 3,149 61 - 272 9 3,491 3,122
Alternatives 18,771 2,213 - 1,138 162 22,284 20,470
iShares ETFs subtotal 1,287,879 190,541 - 141,077 20,940 1,640,437 1,471,077
Non-ETF Index:
Equity 1,430,891 (17,651 ) - 197,823 32,831 1,643,894 1,553,530
Fixed income 507,662 66,148 - 303 30,200 604,313 551,349
Multi-asset 6,928 (500 ) - 1,098 215 7,741 7,518
Alternatives 7,074 (367 ) - 194 245 7,146 7,539
Non-ETF Index subtotal 1,952,555 47,630 - 199,418 63,491 2,263,094 2,119,936
Index & iShares ETFs subtotal 3,240,434 238,171 - 340,495 84,431 3,903,531 3,591,013
Long-term $ 4,741,486 $ 249,660 $ 3,264 $ 433,245 $ 121,228 $ 5,548,883 $ 5,167,008
Year-to-Date Component Changes by Product Type (Long-term)

Net

December 31,

2016

inflows

(outflows)

Acquisition(1)

September 30,

change

FX impact (2)

September 30,

2017

Average AUM (3)
Equity $ 2,657,176 $ 94,362 $ - $ 367,351 $ 53,576 $ 3,172,465 $ 2,938,066
Fixed income 1,572,365 135,837 - 28,910 51,308 1,788,420 1,679,330
Multi-asset 395,007 15,406 - 32,906 13,708 457,027 425,264
Alternatives:
Core 88,630 2,353 3,264 2,753 2,168 99,168 93,963
Currency and commodities(5) 28,308 1,702 - 1,325 468 31,803 30,385
Alternatives subtotal 116,938 4,055 3,264 4,078 2,636 130,971 124,348
Long-term $ 4,741,486 $ 249,660 $ 3,264 $ 433,245 $ 121,228 $ 5,548,883 $ 5,167,008
(1) Amount represents AUM acquired in the First Reserve Infrastructure business transaction in June 2017 (“First Reserve Transaction”).
(2) Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
(3) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing ten months.
(4) Advisory AUM represents long-term portfolio liquidation assignments.
(5)

Amounts include commodity iShares ETFs.

ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Year-over-Year Component Changes by Client Type and Product Type

Net

September 30,

2016

inflows

(outflows)

Acquisition(1)

Market

change

FX impact (2)

September 30,

2017

Average AUM (3)
Retail:
Equity $ 196,131 $ 4,751 $ - $ 22,417 $ 2,369 $ 225,668 $ 207,806
Fixed income 230,842 14,666 - 1,204 1,636 248,348 234,080
Multi-asset 111,369 (2,548 ) - 8,891 350 118,062 111,957
Alternatives 16,436 (814 ) - 693 128 16,443

16,435

Retail subtotal 554,778 16,055 - 33,205 4,483 608,521

570,278

iShares ETFs:
Equity 891,010 180,138 - 150,283 6,964 1,228,395 1,049,435
Fixed income 329,462 58,453 - (5,239 ) 3,591 386,267 345,114
Multi-asset 2,506 755 - 223 7 3,491 2,999
Alternatives 23,188 495 - (1,448 ) 49 22,284 20,724
iShares ETFs subtotal 1,246,166 239,841 - 143,819 10,611 1,640,437 1,418,272
Institutional:
Active:
Equity 123,770 (15,161 ) - 20,675 1,082 130,366 124,915
Fixed income 560,799 (1,700 ) - 3,168 (240 ) 562,027 550,908
Multi-asset 280,406 22,351 - 19,126 5,850 327,733 295,524
Alternatives 74,678 4,553 3,264 2,092 511 85,098

78,678

Active subtotal 1,039,653 10,043 3,264 45,061 7,203 1,105,224

1,050,025

Index:
Equity 1,355,128 (17,400 ) - 246,625 3,683 1,588,036 1,468,656
Fixed income 507,165 89,725 - (15,805 ) 10,693 591,778 528,790
Multi-asset 7,980 (296 ) - 371 (314 ) 7,741 7,603
Alternatives 7,228 (543 ) - 408 53 7,146 7,440
Index subtotal 1,877,501 71,486 - 231,599 14,115 2,194,701 2,012,489
Institutional subtotal 2,917,154 81,529 3,264 276,660 21,318 3,299,925

3,062,514

Long-term 4,718,098 337,425 3,264 453,684 36,412 5,548,883 5,051,064
Cash management 388,982 32,526 - 1,074 2,841 425,423 404,180
Advisory (4) 10,341 (7,573 ) - (137 ) (45 ) 2,586 4,323
Total $ 5,117,421 $ 362,378 $ 3,264 $ 454,621 $ 39,208 $ 5,976,892 $ 5,459,567
Year-over-Year Component Changes by Investment Style and Product Type (Long-term)

Net

September 30,

2016

inflows

(outflows)

Acquisition(1)

Market

change

FX impact (2)

September 30,

2017

Average AUM (3)
Active:
Equity $ 281,726 $ (22,023 ) $ - $ 38,028 $ 2,445 $ 300,176 $ 285,819
Fixed income 782,858 9,427 - 4,516 1,039 797,840 774,433
Multi-asset 391,775 19,803 - 28,017 6,200 445,795 407,481
Alternatives 91,114 3,739 3,264 2,785 639 101,541 95,113
Active subtotal 1,547,473 10,946 3,264 73,346 10,323 1,645,352 1,562,846
Index and iShares ETFs:
iShares ETFs
Equity 891,010 180,138 - 150,283 6,964 1,228,395 1,049,435
Fixed income 329,462 58,453 - (5,239 ) 3,591 386,267 345,114
Multi-asset 2,506 755 - 223 7 3,491 2,999
Alternatives 23,188 495 - (1,448 ) 49 22,284 20,724
iShares ETFs subtotal 1,246,166 239,841 - 143,819 10,611 1,640,437 1,418,272
Non-ETF Index
Equity 1,393,303 (5,787 ) - 251,689 4,689 1,643,894 1,515,558
Fixed income 515,948 93,264 - (15,949 ) 11,050 604,313 539,345
Multi-asset 7,980 (296 ) - 371 (314 ) 7,741 7,603
Alternatives 7,228 (543 ) - 408 53 7,146 7,440
Non-ETF Index subtotal 1,924,459 86,638 - 236,519 15,478 2,263,094 2,069,946
Index & iShares ETFs subtotal 3,170,625 326,479 - 380,338 26,089 3,903,531 3,488,218
Long-term $ 4,718,098 $ 337,425 $ 3,264 $ 453,684 $ 36,412 $ 5,548,883 $ 5,051,064

Year-over-Year Component Changes by Product Type (Long-term)

Net

September 30,

2016

inflows

(outflows)

Acquisition(1)

Market

change

FX impact (2)

September 30,

2017

Average AUM (3)

Equity $ 2,566,039 $ 152,328 $ - $ 440,000 $ 14,098 $ 3,172,465 $ 2,850,812
Fixed income 1,628,268 161,144 - (16,672 ) 15,680 1,788,420 1,658,892
Multi-asset 402,261 20,262 - 28,611 5,893 457,027 418,083
Alternatives:
Core 88,731 3,569 3,264 2,773 831 99,168 92,758
Currency and commodities(5) 32,799 122 - (1,028 ) (90 ) 31,803 30,519
Alternatives subtotal 121,530 3,691 3,264 1,745 741 130,971 123,277
Long-term $ 4,718,098 $ 337,425 3,264 $ 453,684 $ 36,412 $ 5,548,883 $ 5,051,064
(1) Amount represents AUM acquired in the First Reserve Transaction.
(2) Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
(3) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months.
(4) Advisory AUM represents long-term portfolio liquidation assignments.
(5)

Amounts include commodity iShares ETFs.

SUMMARY OF REVENUE

Three Months
Three Months Ended Ended Nine Months Ended
September 30, June 30, September 30,
(in millions), (unaudited) 2017 2016 Change 2017 Change 2017 2016 Change
Investment advisory, administration fees

and securities lending revenue:

Equity:
Active $ 421 $ 409 $ 12 $ 412 $ 9 $ 1,235 $ 1,201 $ 34
iShares ETFs 836 691 145 776 60 2,333 1,970 363
Non-ETF Index 170 170 - 178 (8 ) 509 508 1
Equity subtotal 1,427 1,270 157 1,366 61 4,077 3,679 398
Fixed income:
Active 442 427 15 428 14 1,281 1,237 44
iShares ETFs 210 188 22 200 10 595 512 83
Non-ETF Index 88 78 10 84 4 257 217 40
Fixed income subtotal 740 693 47 712 28 2,133 1,966 167
Multi-asset 289 285 4 282 7 843 860 (17 )
Alternatives:
Core 169 156 13 156 13 469 488 (19 )
Currency and commodities 23 24 (1 ) 22 1 67 61 6
Alternatives subtotal 192 180 12 178 14 536 549 (13 )
Long-term 2,648 2,428 220 2,538 110 7,589 7,054 535
Cash management 144 118 26 137 7 408 340 68
Total base fees 2,792 2,546 246 2,675 117 7,997 7,394 603
Investment advisory performance fees:
Equity 30 14 16 12 18 57 67 (10 )
Fixed income 9 2 7 1 8 20 9 11
Multi-asset 2 1 1 7 (5 ) 14 6 8
Alternatives 150 41 109 28 122 218 84 134
Total performance fees 191 58 133 48 143 309 166 143
Technology and risk management revenue(1) 175 152 23 164 11 497 439 58
Distribution fees 5 10 (5 ) 5 - 17 32 (15 )
Advisory and other revenue:
Advisory(1) 25 22 3 25 - 74 78 (4 )
Other 45 49 (4 ) 48 (3 ) 128 156 (28 )
Advisory and other revenue 70 71 (1 ) 73 (3 ) 202 234 (32 )
Total revenue $ 3,233 $ 2,837 $ 396 $ 2,965 $ 268 $ 9,022 $ 8,265 $ 757
(1)

Beginning with the first quarter of 2017, Aladdin revenue previously reported within “BlackRock Solutions and advisory” has been presented within “Technology and risk management revenue” on the condensed consolidated statements of income. The remaining previously reported “BlackRock Solutions and advisory” revenue is currently reported as part of “Advisory and other revenue.” Under the historical presentation, BlackRock Solutions and advisory revenue would have totaled $200 million and $571 million for the three and nine months ended September 30, 2017, respectively. The prior period amounts reported for BlackRock Solutions and advisory of $174 million and $517 million for the three and nine months ended September 30, 2016, respectively, have been reclassified to conform to the current presentation.

Highlights

  • Investment advisory, administration fees and securities lending revenue increased $246 million from the third quarter of 2016, reflecting the impact of higher markets and organic growth on average AUM, partially offset by previously announced pricing changes to select investment products. Securities lending revenue of $150 million in the current quarter compared with $142 million in the third quarter of 2016.

    Investment advisory, administration fees and securities lending revenue increased $117 million from the second quarter of 2017, driven by higher average AUM and the effect of one additional day in the current quarter. Securities lending revenue of $150 million in the current quarter compared with $156 million in the second quarter of 2017.
  • Performance fees increased $133 million from the third quarter of 2016 and $143 million from the second quarter of 2017, reflecting improved performance in a broad range of hedge and long-only funds, including strong performance from a single hedge fund with an annual performance measurement period that ends in the third quarter.
  • Technology and risk management revenue increased $23 million from the third quarter of 2016 and $11 million from the second quarter of 2017, reflecting ongoing demand for Aladdin and other technology offerings.

SUMMARY OF OPERATING EXPENSE

Three Three
Months Ended Months Ended Nine Months Ended
September 30, June 30, September 30,
(in millions), (unaudited) 2017 2016 Change 2017 Change 2017 2016 Change
Operating expense
Employee compensation and benefits $ 1,088 $ 969 $ 119 $ 999 $ 89 $ 3,108 $ 2,893 $ 215
Distribution and servicing costs 123 114 9 121 2 361 320 41
Amortization of deferred sales commissions 4 8 (4 ) 4 - 13 27 (14 )
Direct fund expense 234 200 34 224 10 666 583 83
General and administration 363 312 51 350 13 1,014 946 68
Restructuring charge - - - - - - 76 (76 )
Amortization of intangible assets 27 25 2 25 2 77 75 2
Total operating expense $ 1,839 $ 1,628 $ 211 $ 1,723 $ 116 $ 5,239 $ 4,920 $ 319

Highlights

  • Employee compensation and benefits expense increased $119 million from the third quarter of 2016, primarily reflecting higher incentive compensation, driven primarily by higher performance fees and operating income, and higher headcount.

    Employee compensation and benefits expense increased $89 million from the second quarter of 2017, primarily reflecting higher incentive compensation, driven primarily by performance fees and operating income.
  • Direct fund expense increased $34 million from the third quarter of 2016 and $10 million from the second quarter of 2017, reflecting higher average AUM.
  • General and administration expense increased $51 million from the third quarter of 2016, reflecting higher portfolio services, technology, and professional services, as well as increased foreign exchange remeasurement expense and contingent consideration fair value adjustments.

    General and administration expense increased $13 million from the second quarter of 2017, reflecting increased professional service fees and contingent consideration fair value adjustments, partially offset by lower marketing and promotional expense.

INCOME TAX EXPENSE

Three Three
Months Ended Months Ended Nine Months Ended
September 30, June 30, September 30,
(in millions), (unaudited) 2017 2016 Change 2017 Change 2017 2016 Change
Income tax expense $ 445 $ 333 $ 112

$

376

$ 69 $ 1,090 $ 954 $ 136
Effective tax rate 32.0 % 27.6 % 440 bps 30.5% 150 bps 29.0 % 29.1 % (10

)

bps

Highlights

  • Third quarter 2017 income tax expense included a $19 million net noncash tax expense related to the revaluation of certain deferred income tax liabilities as a result of domestic state and local tax changes.
  • Third quarter 2016 income tax expense included a $26 million net noncash tax benefit, primarily related to the revaluation of certain deferred income tax liabilities as a result of legislation enacted in the United Kingdom, and domestic state and local tax changes.

SUMMARY AND RECONCILIATION OF U.S. GAAP NONOPERATING INCOME (EXPENSE) TO NONOPERATING INCOME (EXPENSE), AS ADJUSTED

Three Months Three Months
Ended Ended Nine Months Ended
September 30, June 30, September 30,
(in millions), (unaudited) 2017 2016 Change 2017 Change 2017 2016 Change
Nonoperating income (expense), GAAP basis $ 10 $ 1 $ 9 $ 1 $ 9 $ 4 $ (72 ) $ 76

Less: Net income (loss) attributable to noncontrolling interests ("NCI")

12 2 10 10 2 31 (2 ) 33
Nonoperating income (expense), as adjusted(1)(2) $ (2 ) $ (1 ) $ (1 ) $ (9 ) $ 7 $ (27 ) $ (70 ) $ 43
Three Months Three Months
Ended Ended Nine Months Ended
September 30, June 30, September 30,
(in millions), (unaudited) 2017 2016 Change 2017 Change 2017 2016 Change
Net gain (loss) on investments(1)(2)
Private equity $ 7 $ 2 $ 5 $ 8 $ (1 ) $ 21 $ 11 $ 10
Real assets 1 2 (1 ) - 1 2 5 (3 )
Other alternatives(3) 11 9 2 9 2 34 13 21
Other investments(4) 10 16 (6 ) 4 6 35 22 13
Subtotal 29 29 - 21 8 92 51 41
Other gains - - - 5 (5 ) 5 - 5
Total net gain (loss) on investments(1)(2) 29 29 - 26 3 97 51 46
Interest and dividend income 15 22 (7 ) 13 2 35 33 2
Interest expense (46 ) (52 ) 6 (48 ) 2 (159 ) (154 ) (5 )
Net interest expense (31 ) (30 ) (1 ) (35 ) 4 (124 ) (121 ) (3 )
Nonoperating income (expense), as adjusted(1)(2) $ (2 ) $ (1 ) $ (1 ) $ (9 ) $ 7 $ (27 ) $ (70 ) $ 43
(1) Net of net income (loss) attributable to NCI.
(2)

Management believes nonoperating income (expense), as adjusted, is an effective measure for reviewing BlackRock’s nonoperating contribution to results. For more information on other as adjusted items and the reconciliation to GAAP see notes (1) through (3) to the Condensed Consolidated Statements of Income and Supplemental Information.

(3) Amounts primarily include net gains (losses) related to direct hedge fund strategies and hedge fund solutions.
(4)

Amounts primarily include net gains (losses) related to equity and fixed income investments.

ECONOMIC TANGIBLE ASSETS

The Company presents economic tangible assets as additional information to enable investors to exclude certain assets that have equal and offsetting liabilities or noncontrolling interests that ultimately do not have an impact on stockholders’ equity or cash flows. In addition, goodwill and intangible assets are excluded from economic tangible assets.

Economic tangible assets include cash, receivables, seed and co-investments, regulatory investments and other assets.

September 30, December 31,
(in billions), (unaudited) 2017 (Est.) 2016
Total balance sheet assets $ 221 $ 220
Separate account assets and separate account collateral held under

securities lending agreements

(176 ) (177 )
Consolidated sponsored investment funds - (1 )
Goodwill and intangible assets, net (31 ) (30 )
Economic tangible assets $ 14 $ 12
RECONCILIATION OF U.S. GAAP OPERATING INCOME AND OPERATING MARGIN TO OPERATING INCOME AND OPERATING MARGIN, AS ADJUSTED
Three Months Ended Nine Months Ended
September 30, June 30, September 30,
(in millions), (unaudited) 2017 2016 2017 2017 2016
Operating income, GAAP basis $ 1,394 $ 1,209 $ 1,242 $ 3,783 $ 3,345
Non-GAAP expense adjustments:
Restructuring charge - - - - 76
PNC LTIP funding obligation 4 7 4 12 21
Operating income, as adjusted $ 1,398 $ 1,216 $ 1,246 $ 3,795 $ 3,442
Revenue, GAAP basis $ 3,233 $ 2,837 $ 2,965 $ 9,022 $ 8,265
Non-GAAP adjustments:
Distribution and servicing costs (123 ) (114 ) (121 ) (361 ) (320 )
Amortization of deferred sales commissions (4 ) (8 ) (4 ) (13 ) (27 )
Revenue used for operating margin measurement $ 3,106 $ 2,715 $ 2,840 $ 8,648 $ 7,918
Operating margin, GAAP basis 43.1 % 42.6 % 41.9 % 41.9 % 40.5 %
Operating margin, as adjusted 45.0 % 44.8 % 43.9 % 43.9 % 43.5 %

See note (1) to the Condensed Consolidated Statements of Income and Supplemental Information for more information on as adjusted items and the reconciliation to GAAP.

RECONCILIATION OF U.S. GAAP NET INCOME ATTRIBUTABLE TO BLACKROCK TO NET INCOME ATTRIBUTABLE TO BLACKROCK, AS ADJUSTED
Three Months Ended Nine Months Ended
September 30, June 30, September 30,
(in millions, except per share data), (unaudited) 2017 2016 2017 2017 2016
Net income attributable to BlackRock, Inc., GAAP basis $ 947 $ 875 $ 857 $ 2,666 $ 2,321
Non-GAAP adjustments:
Restructuring charge (including $23 tax benefit) - - - - 53
PNC LTIP funding obligation, net of tax 3 5 3 9 14
Income tax matters 19 (26 ) - 19 (26 )
Net income attributable to BlackRock, Inc., as adjusted $ 969 $ 854 $ 860 $ 2,694 $ 2,362
Diluted weighted-average common shares outstanding(3) 163.8 166.3 164.1 164.3 166.8
Diluted earnings per common share, GAAP basis(3) $ 5.78 $ 5.26 $ 5.22 $ 16.23 $ 13.92
Diluted earnings per common share, as adjusted(3) $ 5.92 $ 5.14 $ 5.24 $ 16.40 $ 14.16

See notes (2) and (3) to the Condensed Consolidated Statements of Income and Supplemental Information for more information on as adjusted items and the reconciliation to GAAP.

NOTES TO CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION (unaudited)

BlackRock reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”); however, management believes evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and considers them to be helpful, for both management and investors, in evaluating BlackRock’s financial performance over time. Management also uses non-GAAP financial measures as a benchmark to compare its performance with other companies and to enhance the comparability of this information for the reporting periods presented. Non-GAAP measures may pose limitations because they do not include all of BlackRock’s revenue and expense. BlackRock’s management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Non-GAAP measures may not be comparable to other similarly titled measures of other companies.

Management uses both GAAP and non-GAAP financial measures in evaluating BlackRock’s financial performance. Adjustments to GAAP financial measures (“non-GAAP adjustments”) include certain items management deems nonrecurring or that occur infrequently, transactions that ultimately will not impact BlackRock’s book value or certain tax items that do not impact cash flow.

Computations for all periods are derived from the condensed consolidated statements of income as follows:

(1) Operating income, as adjusted, and operating margin, as adjusted: Management believes operating income, as adjusted, and operating margin, as adjusted, are effective indicators of BlackRock’s financial performance over time and, therefore, provide useful disclosure to investors.

  • Operating income, as adjusted, includes non-GAAP expense adjustments. The portion of compensation expense associated with certain long-term incentive plans (“LTIP”) funded, or to be funded, through share distributions to participants of BlackRock stock held by The PNC Financial Services Group, Inc. (“PNC”) has been excluded because it ultimately does not impact BlackRock’s book value. For the nine months ended September 30, 2016, a restructuring charge comprised of severance and accelerated amortization expense of previously granted deferred compensation awards has been excluded to provide an analysis of BlackRock’s ongoing operations and to ensure comparability among periods presented.
  • Revenue used for operating margin, as adjusted, excludes distribution and servicing costs paid to related parties and other third parties. Management believes such costs represent a benchmark for the amount of revenue passed through to external parties who distribute the Company’s products. In addition, management believes the exclusion of such costs is useful because it creates consistency in the treatment for certain contracts for similar services, which due to the terms of the contracts, are accounted for under GAAP on a net basis within investment advisory, administration fees and securities lending revenue. Amortization of deferred sales commissions is excluded from revenue used for operating margin measurement, as adjusted, because such costs, over time, substantially offset distribution fee revenue the Company earns. For each of these items, BlackRock excludes from revenue used for operating margin, as adjusted, the costs related to each of these items as a proxy for such offsetting revenue.

(2) Net income attributable to BlackRock, Inc., as adjusted: Management believes net income attributable to BlackRock, Inc., as adjusted, and diluted earnings per common share, as adjusted, are useful measures of BlackRock’s profitability and financial performance. Net income attributable to BlackRock, Inc., as adjusted, equals net income attributable to BlackRock, Inc., GAAP basis, adjusted for significant nonrecurring items, charges that ultimately will not impact BlackRock’s book value or certain tax items that do not impact cash flow.

See aforementioned discussion regarding operating income, as adjusted, and operating margin, as adjusted, for information on the PNC LTIP funding obligation and the restructuring charge.

For each period presented, the non-GAAP adjustment related to the restructuring charge and PNC LTIP funding obligation was tax effected at the respective blended rates applicable to the adjustments. Amounts for income tax matters represent net noncash (benefits) expense primarily associated with the revaluation of certain deferred tax liabilities related to intangible assets and goodwill. Amounts have been excluded from the as adjusted results as these items will not have a cash flow impact and to ensure comparability among periods presented.

Per share amounts reflect net income attributable to BlackRock, Inc., as adjusted divided by diluted weighted average common shares outstanding.

(3) Nonvoting participating preferred stock is considered to be a common stock equivalent for purposes of determining basic and diluted earnings per share calculations.

FORWARD-LOOKING STATEMENTS

This earnings release, and other statements that BlackRock may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock’s future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” and similar expressions.

BlackRock cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and BlackRock assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

BlackRock has previously disclosed risk factors in its Securities and Exchange Commission (“SEC”) reports. These risk factors and those identified elsewhere in this earnings release, among others, could cause actual results to differ materially from forward-looking statements or historical performance and include: (1) the introduction, withdrawal, success and timing of business initiatives and strategies; (2) changes and volatility in political, economic or industry conditions, the interest rate environment, foreign exchange rates or financial and capital markets, which could result in changes in demand for products or services or in the value of assets under management; (3) the relative and absolute investment performance of BlackRock’s investment products; (4) the impact of increased competition; (5) the impact of future acquisitions or divestitures; (6) the unfavorable resolution of legal proceedings; (7) the extent and timing of any share repurchases; (8) the impact, extent and timing of technological changes and the adequacy of intellectual property, information and cyber security protection; (9) the potential for human error in connection with BlackRock’s operational systems; (10) the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to BlackRock or PNC; (11) changes in law and policy and uncertainty pending any such changes; (12) terrorist activities, international hostilities and natural disasters, which may adversely affect the general economy, domestic and local financial and capital markets, specific industries or BlackRock; (13) the ability to attract and retain highly talented professionals; (14) fluctuations in the carrying value of BlackRock’s economic investments; (15) the impact of changes to tax legislation, including income, payroll and transaction taxes, and taxation on products or transactions, which could affect the value proposition to clients and, generally, the tax position of the Company; (16) BlackRock’s success in negotiating distribution arrangements and maintaining distribution channels for its products; (17) the failure by a key vendor of BlackRock to fulfill its obligations to the Company; (18) any disruption to the operations of third parties whose functions are integral to BlackRock’s ETF platform; (19) the impact of BlackRock electing to provide support to its products from time to time and any potential liabilities related to securities lending or other indemnification obligations; and (20) the impact of problems at other financial institutions or the failure or negative performance of products at other financial institutions.

BlackRock’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and BlackRock’s subsequent filings with the SEC, accessible on the SEC’s website at www.sec.gov and on BlackRock’s website at www.blackrock.com, discuss these factors in more detail and identify additional factors that can affect forward-looking statements. The information contained on the Company’s website is not a part of this earnings release.

PERFORMANCE NOTES

Past performance is not indicative of future results. Except as specified, the performance information shown is as of September 30, 2017 and is based on preliminary data available at that time. The performance data shown reflects information for all actively and passively managed equity and fixed income accounts, including U.S. registered investment companies, European-domiciled retail funds and separate accounts for which performance data is available, including performance data for high net worth accounts available as of August 31, 2017. The performance data does not include accounts terminated prior to September 30, 2017 and accounts for which data has not yet been verified. If such accounts had been included, the performance data provided may have substantially differed from that shown.

Performance comparisons shown are gross-of-fees for institutional and high net worth separate accounts, and net-of-fees for retail funds. The performance tracking shown for index accounts is based on gross-of-fees performance and includes all institutional accounts and all iShares funds globally using an index strategy. AUM information is based on AUM available as of September 30, 2017 for each account or fund in the asset class shown without adjustment for overlapping management of the same account or fund. Fund performance reflects the reinvestment of dividends and distributions.

Performance shown is derived from applicable benchmarks or peer median information, as selected by BlackRock, Inc. Peer medians are based in part on data either from Lipper, Inc. or Morningstar, Inc. for each included product.

View source version on businesswire.com: http://www.businesswire.com/news/home/20171011005301/en/

BlackRock, Inc.
Investor Relations:
Tom Wojcik, 212.810.8127
or
Media Relations:
Brian Beades, 212.810.5596

Source: BlackRock, Inc.