BlackRock Inc (NYSE:BLK) Q4 2014 Earnings Conference Call - Preliminary Transcript

Jan 15, 2015 • 08:00 am ET


BlackRock Inc (NYSE:BLK) Q4 2014 Earnings Conference Call - Preliminary Transcript


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Gary Shedlin

our 2014 results highlight the stability and diversification of our business model and evidence the significant investments we've made in recent years to enhance the depth and breadth of our global platform. For the fourth quarter BlackRock delivered earnings per share of $4.82 and operating income of $1.2 billion. Full year earnings per share of $19.34 was up 17% compared to 2013, and operating income of $4.6 billion was 13% higher.

Non-operating results for the quarter reflected a $2 million decrease in the market value of our seed and co-investments, down $63 million year-over-year driven primarily by a reduced economic investment portfolio and lower gains from investments in our hedge funds and fund to funds vehicles.

Our 25.4% as adjusted tax rate for the fourth quarter benefited from $39 million of non recurring items. While we continue to estimate that 30% remains a reasonable projected tax rate for 2015, the actual effective tax rate may differ as a consequence of additional non-recurring items that arise during the year.BlackRock's fourth quarter results were driven by $88 billion of long term net new business, our highest ever quarterly net flows representing an annualized organic growth rate of 8.3%.

For the full year 2014, BlackRock generated total long term net new business of $181 billion, representing an organic growth rate of 4.5% together with net flows from our cash management business, BlackRock generated over $200 billion of net inflows for the year.

During 2014, we achieved organic asset growth of 11% in iShares, 11% in retail, and 1% in institutional in line with the growth targets we outlined at our June Investor Day.

This resulted in organic based fee growth in excess of organic AUM growth, as we benefited from positive mix change associated with our faster growing, higher fee retail and iShares businesses.

Equally important, net long term flows were diversified by asset class and region with positive flows across all categories for both the quarter and the full year. Fourth quarter revenue was flat with a year ago, as growth in base fees and revenue from BlackRock Solutions was offset by a decrease in performance fees. Full year revenue grew 9% from 2013, driven by growth in base fees and revenue from BlackRock Solutions, both of which reached record levels in 2014.

Fourth quarter base fees was 5% year-over-year as average AUM increased due to organic growth and market appreciation. However, base fees were down 3% compared to the third quarter due to a lower fourth quarter AUM entry rate, the continued impact of divergent beta and ongoing dollar appreciation against foreign currencies.

While the S&P 500 was up 2% on average during the fourth quarter, the MSCI World was down 2% with emerging markets and natural resources indices lagging even further, down 8% and 12% respectively. Such divergent beta impacts our financial results as only 34% of our equity base fees are generated in U.S. markets.In addition, ongoing dollar appreciation led to a $59 billion decline in long term AUM