BlackRock Inc. - FORM 8-K - EX-99.1 - EARNINGS RELEASE DATED APRIL 14, 2016

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8-K - FORM 8-K - BlackRock Inc.	d171154d8k.htm
EX-99.2 - FIRST QUARTER 2016 EARNINGS - EARNINGS RELEASE SUPPLEMENT - BlackRock Inc.	d171154dex992.htm

Exhibit 99.1

LOGO


Tom Wojcik, Investor Relations				Brian Beades, Media Relations
212.810.8127				212.810.5596

BlackRock Reports First Quarter 2016 Diluted EPS of $3.92, or $4.25 as adjusted

$36.1 billion of long-term net inflows reflect continued resilience of differentiated business model

Restructuring charge of $76 million from initiative to streamline and simplify organization excluded from as adjusted results

Expansion in as adjusted operating margin from prior year reflects organic growth and expense discipline, despite negative market performance

Diluted EPS decrease of 19% (13% as adjusted) year-over-year, reflects impact of decline in average AUM and lower performance fees in current quarter, and lower effective tax rate and one-time nonoperating gain in prior year quarter

5% increase in quarterly cash dividend to $2.29 per share and $300 million of share repurchases

FINANCIAL RESULTS


(in millions, except per share data)	Q1 2016			Q1 2015			Change			Q4 2015			Change
AUM	$	4,737,165		$	4,774,192			(1	)%	$	4,645,412			2	%
GAAP basis:
Revenue	$	2,624		$	2,723			(4	)%	$	2,863			(8	)%
Operating income	$	963		$	1,067			(10	)%	$	1,137			(15	)%
Operating margin		36.7	%		39.2	%		(250	) bps		39.7	%		(300	) bps
Net income⁽¹⁾	$	657		$	822			(20	)%	$	861			(24	)%
Diluted EPS	$	3.92		$	4.84			(19	)%	$	5.11			(23	)%
Weighted average diluted shares		167.4			169.7			(1	)%		168.6			(1	)%
As Adjusted:
Operating income⁽²⁾	$	1,047		$	1,077			(3	)%	$	1,143			(8	)%
Operating margin⁽²⁾		41.6	%		41.2	%		40	bps		41.6	%		—	bps
Net income^{(1) (2)}	$	711		$	830			(14	)%	$	801			(11	)%
Diluted EPS⁽²⁾	$	4.25		$	4.89			(13	)%	$	4.75			(11	)%

⁽¹⁾	Net income represents net income attributable to BlackRock, Inc.

⁽²⁾	See notes (1) through (4) to the Condensed Consolidated Statements of Income and Supplemental Information on pages 11 through 13 for more information on as adjusted items and the reconciliation to GAAP.

New York, April 14, 2016 — BlackRock, Inc. (NYSE:BLK) today reported financial results for the three months ended March 31, 2016.

“BlackRock performed well in a challenging market environment and our first quarter 2016 results demonstrate our ongoing ability to help clients achieve their investment goals,” commented Laurence D. Fink, Chairman and CEO of BlackRock. “BlackRock generated long-term net inflows of $36 billion in the quarter, driven by positive global flows across both active and index products. Over the last twelve months, we saw $118 billion of long-term net inflows, muting the impact of $148 billion of market and FX headwinds over the same period.

“Strong organic asset growth and positive mix shift largely offset equity market headwinds, as a 1% year-over-year decline in base fees outpaced a 9% average fall in the MSCI World Index over the same period. While we of course were not immune to the effects of market movements, which impacted both base fees and performance fees this quarter, the magnitude and diversification of our inflows speak to the differentiation of BlackRock’s platform and our ability to serve our clients.

“iShares were once again a critical tool for investors to manage their portfolios in a period of heightened volatility. During the quarter, iShares saw more than $24 billion of total net inflows, capturing the #1 market share of net inflows globally, in the US and in Europe. iShares flows were led by fixed income, with record quarterly net inflows of more than $27 billion, as investors utilized bond ETFs to efficiently access liquidity and diversify exposure.

“Across our Institutional business, first quarter net inflows of $12 billion were driven by strong active fixed income and multi-asset flows. The investments we’ve made to deepen relationships with our clients are generating results, and over 50% of our largest institutional clients have five or more products managed by BlackRock.

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“BlackRock’s US Retail business generated long-term net inflows of $1 billion, primarily driven by strong long-term investment performance across our active fixed income platform. As the US active mutual fund industry experienced first quarter outflows for the first time since the financial crisis, BlackRock’s client-centric, solutions-oriented approach continued to deliver inflows.

“BlackRock Solutions revenue grew 16% year-over-year, led by Aladdin, our unifying technology platform. In the evolving regulatory environment, we are seeing growing demand from clients, as asset owners and managers focus on risk management and adapt to change. We are also seeing increasing opportunities in the retail marketplace to provide our distribution partners with institutional-quality asset allocation, risk management and digital advice capabilities.

“BlackRock remains committed to constantly evolving our organization to meet the long-term needs of our clients. We continue to invest in our business to capture the opportunities ahead of us and drive growth despite current market volatility. Doing so requires making smart and difficult decisions about allocating resources, and led to our decision to initiate a restructuring during the quarter that will streamline and simplify our organization, driving efficiencies across our platform to better serve our clients and deliver returns for our shareholders.

“I want to thank our employees for their unwavering focus on creating better financial futures for our clients. We are confident that our unique and differentiated business model remains well positioned for growth in the current environment.”

RESULTS BY CLIENT TYPE


(in millions), (unaudited)	Q1 2016 Net flows			March 31, 2016 AUM		Q1 2016 Base Fees⁽¹⁾		March 31, 2016 AUM % of Total			Q1 2016 Base Fees⁽¹⁾ % of Total
Retail	$	(359	)	$	542,666	$	789		12	%		35	%
iShares		24,247			1,127,554		791		25	%		35	%
Institutional:
Active		10,798			1,000,191		449		23	%		20	%
Index		1,395			1,764,149		227		40	%		10	%

Total institutional		12,193			2,764,340		676		63	%		30	%

Total long-term	$	36,081		$	4,434,560	$	2,256		100	%		100	%

RESULTS BY PRODUCT TYPE


(in millions), (unaudited)	Q1 2016 Net flows			March 31, 2016 AUM		Q1 2016 Base Fees⁽¹⁾		March 31, 2016 AUM % of Total			Q1 2016 Base Fees⁽¹⁾ % of Total
Equity	$	(17,677	)	$	2,408,175	$	1,173		54	%		52	%
Fixed income		52,173			1,525,153		618		34	%		27	%
Multi-asset		(566	)		385,243		284		9	%		13	%
Alternatives		2,151			115,989		181		3	%		8	%

Total long-term	$	36,081		$	4,434,560	$	2,256		100	%		100	%

RESULTS BY INVESTMENT STYLE


(in millions), (unaudited)	Q1 2016 Net flows		March 31, 2016 AUM		Q1 2016 Base Fees⁽¹⁾		March 31, 2016 AUM % of Total			Q1 2016 Base Fees⁽¹⁾ % of Total
Active	$	8,545	$	1,499,128	$	1,227		34	%		54	%
Index & iShares		27,536		2,935,432		1,029		66	%		46	%

Total long-term	$	36,081	$	4,434,560	$	2,256		100	%		100	%

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

Long-Term Business Highlights

Long-term net inflows were positive across all regions, with net inflows of $21.1 billion, $11.5 billion and $3.5 billion from clients in the Americas, EMEA and Asia-Pacific, respectively. At March 31, 2016, BlackRock managed 62% of its long-term AUM for investors in the Americas and 38% for clients in EMEA and Asia-Pacific.

A discussion of the Company’s net flows by client type for the first quarter of 2016 is presented below.

Retail long-term net outflows of $0.4 billion included net inflows of $0.9 billion in the United States, offset by international outflows of $1.3 billion. Fixed income saw net inflows of $2.1 billion, paced by flows into municipals, core bond and high yield funds. Multi-asset net outflows of $1.6 billion were primarily due to outflows from world allocation strategies.

iShares long-term net inflows of $24.2 billion were driven by record fixed income net inflows of $27.5 billion, diversified across treasuries, corporate bond and high yield funds.

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Institutional active long-term net inflows of $10.8 billion were led by fixed income net inflows of $10.9 billion, reflecting strong insurance wins in the quarter. Multi-asset net inflows of $1.3 billion were driven by ongoing demand for solutions offerings and the LifePath^® target-date suite. BlackRock raised an additional $2 billion in alternatives commitments, ending the quarter with total unfunded commitments of $12 billion. Equity net outflows of $1.8 billion were due to fundamental outflows, partially offset by scientific inflows.

Institutional index long-term net inflows of $1.4 billion reflected fixed income net inflows of $11.7 billion, partially offset by equity outflows of $10.8 billion.

Cash management AUM decreased 3% to $292.0 billion.

Advisory AUM ended the first quarter at $10.6 billion.

INVESTMENT PERFORMANCE AT MARCH 31, 2016⁽¹⁾


	One-year period			Three-year period			Five-year period
Fixed Income:
Actively managed AUM above benchmark or peer median
Taxable		50	%		85	%		89	%
Tax-exempt		37	%		50	%		68	%
Index AUM within or above applicable tolerance		91	%		98	%		98	%
Equity:
Actively managed AUM above benchmark or peer median
Fundamental		64	%		58	%		52	%
Scientific		41	%		84	%		97	%
Index AUM within or above applicable tolerance		97	%		97	%		96	%

⁽¹⁾ Past performance is not indicative of future results. The performance information shown is based on preliminary available data. Please refer to page 14 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 Thursday, April 14, 2016 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 82193349). 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 Thursday, April 14, 2016 and ending at midnight on Thursday, April 28, 2016. 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 82193349. To access the webcast, please visit the investor relations section of www.blackrock.com.

About BlackRock

BlackRock is a global leader in investment management, risk management and advisory services for institutional and retail clients. At March 31, 2016, BlackRock’s AUM was $4.737 trillion. BlackRock helps clients around the world meet their goals and overcome challenges with a range of products that include separate accounts, mutual funds, iShares^® (exchange-traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions^®. As of March 31, 2016, the firm had approximately 13,000 employees in more than 30 countries and a major presence in global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company’s website at www.blackrock.com | Twitter: @blackrock_news | Blog: www.blackrockblog.com | LinkedIn: www.linkedin.com/company/blackrock

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

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


	Three Months Ended March 31,									Three Months Ended December 31,
	2016			2015			Change			2015			Change
Revenue
Investment advisory, administration fees and securities lending revenue	$	2,359		$	2,390		$	(31	)	$	2,460		$	(101	)
Investment advisory performance fees		34			108			(74	)		169			(135	)
BlackRock Solutions and advisory		171			147			24			171			—
Distribution fees		11			17			(6	)		11			—
Other revenue		49			61			(12	)		52			(3	)

Total revenue		2,624			2,723			(99	)		2,863			(239	)

Expense
Employee compensation and benefits		947			981			(34	)		989			(42	)
Distribution and servicing costs		97			99			(2	)		103			(6	)
Amortization of deferred sales commissions		10			13			(3	)		11			(1	)
Direct fund expense		188			189			(1	)		189			(1	)
General and administration		318			339			(21	)		410			(92	)
Restructuring charge		76			—			76			—			76
Amortization of intangible assets		25			35			(10	)		24			1

Total expense		1,661			1,656			5			1,726			(65	)

Operating income		963			1,067			(104	)		1,137			(174	)

Nonoperating income (expense)
Net gain (loss) on investments		(2	)		63			(65	)		57			(59	)
Interest and dividend income		5			4			1			5			—
Interest expense		(51	)		(51	)		—			(51	)		—

Total nonoperating income (expense)		(48	)		16			(64	)		11			(59	)

Income before income taxes		915			1,083			(168	)		1,148			(233	)
Income tax expense		268			258			10			279			(11	)

Net income		647			825			(178	)		869			(222	)
Less:
Net income (loss) attributable to noncontrolling interests		(10	)		3			(13	)		8			(18	)

Net income attributable to BlackRock, Inc.	$	657		$	822		$	(165	)	$	861		$	(204	)

Weighted-average common shares outstanding
Basic		165,388,130			167,089,037			(1,700,907	)		165,826,808			(438,678	)
Diluted		167,398,938			169,723,167			(2,324,229	)		168,632,558			(1,233,620	)
Earnings per share attributable to BlackRock, Inc. common stockholders (4)
Basic	$	3.97		$	4.92		$	(0.95	)	$	5.19		$	(1.22	)
Diluted	$	3.92		$	4.84		$	(0.92	)	$	5.11		$	(1.19	)
Cash dividends declared and paid per share	$	2.29		$	2.18		$	0.11		$	2.18		$	0.11

Supplemental information:

AUM (end of period)	$	4,737,165		$	4,774,192		$	(37,027	)	$	4,645,412		$	91,753
Shares outstanding (end of period)		165,174,069			167,084,582			(1,910,513	)		165,596,139			(422,070	)
GAAP:
Operating margin		36.7	%		39.2	%		(250) bps			39.7	%		(300) bps
Effective tax rate		29.0	%		23.9	%		510 bps			24.5	%		450 bps
As adjusted:
Operating income (1)	$	1,047		$	1,077		$	(30	)	$	1,143		$	(96	)
Operating margin (1)		41.6	%		41.2	%		40 bps			41.6	%		— bps
Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests (2)	$	(38	)	$	11		$	(49	)	$	1		$	(39	)
Net income attributable to BlackRock, Inc. (3)	$	711		$	830		$	(119	)	$	801		$	(90	)
Diluted earnings attributable to BlackRock, Inc. common stockholders per share (3) (4)	$	4.25		$	4.89		$	(0.64	)	$	4.75		$	(0.50	)
Effective tax rate		29.6	%		23.7	%		590 bps			30.0	%		(40	) bps

See pages 11-13 for the reconciliation to GAAP and notes (1) through (4) for more information on as adjusted items.

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ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Current Quarter Component Changes by Client Type and Product Type


	December 31, 2015		Net inflows (outflows)			Market change			FX impact ⁽¹⁾			March 31, 2016		Average AUM ⁽²⁾
Retail:
Equity	$	193,755	$	(395	)	$	(711	)	$	787		$	193,436	$	187,071
Fixed income		212,653		2,121			1,451			984			217,209		213,460
Multi-asset		115,307		(1,635	)		(490	)		109			113,291		112,182
Alternatives		19,410		(450	)		(451	)		221			18,730		19,038

Retail subtotal		541,125		(359	)		(201	)		2,101			542,666		531,751
iShares:
Equity		823,156		(4,686	)		(5,541	)		5,175			818,104		788,674
Fixed income		254,190		27,482			6,799			2,661			291,132		271,355
Multi-asset		2,730		(586	)		13			9			2,166		2,290
Alternatives		12,485		2,037			1,565			65			16,152		14,253

iShares subtotal		1,092,561		24,247			2,836			7,910			1,127,554		1,076,572
Institutional:
Active:
Equity		121,442		(1,770	)		(1,524	)		685			118,833		115,703
Fixed income		514,428		10,883			15,177			3,756			544,244		526,554
Multi-asset		252,041		1,263			4,987			3,719			262,010		252,218
Alternatives		74,941		422			(543	)		284			75,104		74,462

Active subtotal		962,852		10,798			18,097			8,444			1,000,191		968,937
Index:
Equity		1,285,419		(10,826	)		(5,383	)		8,592			1,277,802		1,243,866
Fixed income		441,097		11,687			19,802			(18	)		472,568		452,235
Multi-asset		6,258		392			916			210			7,776		6,949
Alternatives		6,003		142			(79	)		(63	)		6,003		6,009

Index subtotal		1,738,777		1,395			15,256			8,721			1,764,149		1,709,059

Institutional subtotal		2,701,629		12,193			33,353			17,165			2,764,340		2,677,996

Long-term		4,335,315		36,081			35,988			27,176			4,434,560	$	4,286,319

Cash management		299,884		(8,155	)		(21	)		278			291,986
Advisory ⁽³⁾		10,213		(97	)		(122	)		625			10,619

Total	$	4,645,412	$	27,829		$	35,845		$	28,079		$	4,737,165

Current Quarter Component Changes by Product Type (Long-term)


	December 31, 2015		Net inflows (outflows)			Market change			FX impact ⁽¹⁾			March 31, 2016		Average AUM ⁽²⁾
Equity:
Active	$	281,319	$	(3,970	)	$	(2,836	)	$	1,768		$	276,281	$	269,706
iShares		823,156		(4,686	)		(5,541	)		5,175			818,104		788,674
Non-ETF index		1,319,297		(9,021	)		(4,782	)		8,296			1,313,790		1,276,934

Equity subtotal		2,423,772		(17,677	)		(13,159	)		15,239			2,408,175		2,335,314
Fixed income:
Active		719,653		12,915			16,310			4,833			753,711		732,595
iShares		254,190		27,482			6,799			2,661			291,132		271,355
Non-ETF index		448,525		11,776			20,120			(111	)		480,310		459,654

Fixed income subtotal		1,422,368		52,173			43,229			7,383			1,525,153		1,463,604
Multi-asset		376,336		(566	)		5,426			4,047			385,243		373,639
Alternatives:
Core		92,085		180			(997	)		371			91,639		91,225
Currency and commodities ⁽⁴⁾		20,754		1,971			1,489			136			24,350		22,537

Alternatives subtotal		112,839		2,151			492			507			115,989		113,762

Long-term	$	4,335,315	$	36,081		$	35,988		$	27,176		$	4,434,560	$	4,286,319

Current Quarter Component Changes by Investment Style (Long-term)


	December 31, 2015		Net inflows (outflows)		Market change		FX impact ⁽¹⁾		March 31, 2016		Average AUM ⁽²⁾
Active	$	1,462,672	$	8,545	$	16,976	$	10,935	$	1,499,128	$	1,460,200
Index & iShares		2,872,643		27,536		19,012		16,241		2,935,432		2,826,119

Long-term	$	4,335,315	$	36,081	$	35,988	$	27,176	$	4,434,560	$	4,286,319

⁽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.

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ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

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


	March 31, 2015		Net inflows (outflows)			Acquisitions⁽¹⁾		Market change			FX impact ⁽²⁾			March 31, 2016		Average AUM ⁽³⁾
Retail:
Equity	$	201,706	$	7,816		$	—	$	(15,854	)	$	(232	)	$	193,436	$	195,784
Fixed income		201,405		20,448			—		(5,202	)		558			217,209		210,481
Multi-asset		128,402		(4,344	)		366		(11,024	)		(109	)		113,291		121,519
Alternatives		19,467		61			—		(924	)		126			18,730		19,468

Retail subtotal		550,980		23,981			366		(33,004	)		343			542,666		547,252
iShares:
Equity		824,336		56,996			—		(66,090	)		2,862			818,104		806,121
Fixed income		233,183		59,195			—		(3,298	)		2,052			291,132		250,887
Multi-asset		1,772		506			—		(107	)		(5	)		2,166		1,992
Alternatives		14,839		1,922			—		(643	)		34			16,152		14,233

iShares subtotal		1,074,130		118,619			—		(70,138	)		4,943			1,127,554		1,073,233
Institutional:
Active:
Equity		128,036		(2,401	)		—		(6,769	)		(33	)		118,833		122,545
Fixed income		526,117		10,851			—		4,410			2,866			544,244		524,694
Multi-asset		257,084		7,955			—		(6,488	)		3,459			262,010		255,729
Alternatives		73,045		3,155			560		(1,812	)		156			75,104		74,069

Active subtotal		984,282		19,560			560		(10,659	)		6,448			1,000,191		977,037
Index:
Equity		1,373,052		(48,253	)		—		(52,586	)		5,589			1,277,802		1,305,734
Fixed income		467,775		2,334			—		5,935			(3,476	)		472,568		463,102
Multi-asset		8,054		(309	)		—		(191	)		222			7,776		7,142
Alternatives		5,324		1,720			—		(976	)		(65	)		6,003		6,055

Index subtotal		1,854,205		(44,508	)		—		(47,818	)		2,270			1,764,149		1,782,033

Institutional subtotal		2,838,487		(24,948	)		560		(58,477	)		8,718			2,764,340		2,759,070

Long-term		4,463,597		117,652			926		(161,619	)		14,004			4,434,560	$	4,379,555

Cash management		292,495		(1,207	)		—		289			409			291,986
Advisory ⁽⁴⁾		18,100		(7,429	)		—		(187	)		135			10,619

Total	$	4,774,192	$	109,016		$	926	$	(161,517	)	$	14,548		$	4,737,165

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


	March 31, 2015		Net inflows (outflows)			Acquisitions⁽¹⁾		Market change			FX impact ⁽²⁾			March 31, 2016		Average AUM ⁽³⁾
Equity:
Active	$	298,118	$	(306	)	$	—	$	(22,020	)	$	489		$	276,281	$	285,623
iShares		824,336		56,996			—		(66,090	)		2,862			818,104		806,121
Non-ETF index		1,404,676		(42,532	)		—		(53,189	)		4,835			1,313,790		1,338,440

Equity subtotal		2,527,130		14,158			—		(141,299	)		8,186			2,408,175		2,430,184
Fixed income:
Active		720,094		30,988			—		(1,045	)		3,674			753,711		727,680
iShares		233,183		59,195			—		(3,298	)		2,052			291,132		250,887
Non-ETF index		475,203		2,645			—		6,188			(3,726	)		480,310		470,597

Fixed income subtotal		1,428,480		92,828			—		1,845			2,000			1,525,153		1,449,164
Multi-asset		395,312		3,808			366		(17,810	)		3,567			385,243		386,382
Alternatives:
Core		89,086		4,461			560		(2,635	)		167			91,639		90,819
Currency and commodities ⁽⁵⁾		23,589		2,397			—		(1,720	)		84			24,350		23,006

Alternatives subtotal		112,675		6,858			560		(4,355	)		251			115,989		113,825

Long-term	$	4,463,597	$	117,652		$	926	$	(161,619	)	$	14,004		$	4,434,560	$	4,379,555

Year-over-Year Component Changes by Investment Style (Long-term)


	March 31, 2015		Net inflows (outflows)		Acquisitions⁽¹⁾		Market change			FX impact ⁽²⁾		March 31, 2016		Average AUM ⁽³⁾
Active	$	1,496,210	$	37,509	$	926	$	(43,312	)	$	7,795	$	1,499,128	$	1,484,089
Index & iShares		2,967,387		80,143		—		(118,307	)		6,209		2,935,432		2,895,466

Long-term	$	4,463,597	$	117,652	$	926	$	(161,619	)	$	14,004	$	4,434,560	$	4,379,555

⁽¹⁾	Amounts represent $560 million of AUM acquired in the Infraestructura Institucional acquisition in October 2015 and $366 million of AUM acquired in the FutureAdvisor acquisition in October 2015. The FutureAdvisor acquisition amount does not include AUM that was held in iShares holdings.

⁽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.

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SUMMARY OF REVENUE


	Three Months Ended March 31,				Change			Three Months Ended December 31,		Change
(in millions), (unaudited)	2016		2015		Change			2015		Change
Investment advisory, administration fees and securities lending revenue:
Equity:
Active	$	386	$	422	$	(36	)	$	413	$	(27	)
iShares		623		684		(61	)		666		(43	)
Non-ETF Index		164		163		1			169		(5	)

Equity subtotal		1,173		1,269		(96	)		1,248		(75	)
Fixed income:
Active		396		373		23			404		(8	)
iShares		152		130		22			147		5
Non-ETF Index		70		68		2			72		(2	)

Fixed income subtotal		618		571		47			623		(5	)
Multi-asset		284		304		(20	)		311		(27	)
Alternatives:
Core		164		154		10			172		(8	)
Currency and commodities		17		19		(2	)		17		—

Alternatives subtotal		181		173		8			189		(8	)

Long-term		2,256		2,317		(61	)		2,371		(115	)
Cash management		103		73		30			89		14

Total base fees		2,359		2,390		(31	)		2,460		(101	)
Investment advisory performance fees:
Equity		11		37		(26	)		84		(73	)
Fixed income		5		4		1			16		(11	)
Multi-asset		3		8		(5	)		15		(12	)
Alternatives		15		59		(44	)		54		(39	)

Total performance fees		34		108		(74	)		169		(135	)

*BlackRock Solutions* and advisory		171		147		24			171		—
Distribution fees		11		17		(6	)		11		—
Other revenue		49		61		(12	)		52		(3	)

Total revenue	$	2,624	$	2,723	$	(99	)	$	2,863	$	(239	)

Highlights

•

Investment advisory, administration fees and securities lending revenue decreased $31 million from the first quarter of 2015 as the effect of lower markets on average equity AUM more than offset organic growth, the effect of one additional day in the current quarter and lower yield-related fee waivers on certain money market funds. Securities lending revenue of $148 million in the current quarter increased $34 million from the first quarter of 2015, primarily reflecting an increase in average balances of securities on loan and higher spreads.

Investment advisory, administration fees and securities lending revenue decreased $101 million from the fourth quarter of 2015, reflecting the effect of lower markets on average equity AUM and the effect of one less day in the current quarter, partially offset by higher securities lending revenue.

•

Performance fees decreased $74 million from the first quarter of 2015 and $135 million from the fourth quarter of 2015, primarily reflecting lower fees from alternative and equity products. The decrease from the fourth quarter of 2015 also reflected seasonally higher fees from funds with a performance measurement period that ended in the fourth quarter.

•

BlackRock Solutions^® and advisory revenue increased $24 million from the first quarter of 2015. BlackRock Solutions and advisory revenue included $141 million of Aladdin^® revenue in the current quarter compared with $126 million in the first quarter of 2015 and $138 million in the fourth quarter of 2015.

-7-

SUMMARY OF OPERATING EXPENSE


	Three Months Ended March 31,				Change			Three Months Ended December 31,		Change
(in millions), (unaudited)	2016		2015		Change			2015		Change
Operating Expense

Employee compensation and benefits	$	947	$	981	$	(34	)	$	989	$	(42	)
Distribution and servicing costs		97		99		(2	)		103		(6	)
Amortization of deferred sales commissions		10		13		(3	)		11		(1	)
Direct fund expense		188		189		(1	)		189		(1	)
General and administration		318		339		(21	)		410		(92	)
Restructuring charge		76		—		76			—		76
Amortization of intangible assets		25		35		(10	)		24		1

Total Operating Expense	$	1,661	$	1,656	$	5		$	1,726	$	(65	)

Highlights

•

Employee compensation and benefits decreased $34 million from the first quarter of 2015, reflecting lower incentive compensation, driven primarily by lower performance fees, partially offset by higher headcount.

Employee compensation and benefits decreased $42 million from the fourth quarter of 2015, reflecting lower incentive compensation, driven by lower operating income and lower performance fees, partially offset by higher seasonal employer payroll taxes and an increase in stock-based compensation expense related to the effect of additional grants at the end of January 2016.

•

General and administration expense decreased $21 million from the first quarter of 2015, primarily reflecting lower discretionary marketing and promotional spend and an increased benefit from the impact of foreign exchange remeasurement.

General and administration expense decreased $92 million from the fourth quarter of 2015, primarily reflecting the seasonal and discretionary impact of lower marketing and promotional expense, reduced foreign exchange remeasurement expense and $23 million of transaction-related expense incurred in the fourth quarter of 2015.

•

A restructuring charge of $76 million, primarily comprised of severance and accelerated amortization expense of previously granted deferred compensation awards, was recorded in the first quarter of 2016 in connection with a project to streamline and simplify the organization.

INCOME TAX EXPENSE


	Three Months Ended March 31,				Change		Three Months Ended December 31,		Change
(in millions), (unaudited)	2016		2015		Change		2015		Change
Income tax expense	$	268	$	258	$	10	$	279	$	(11	)

Highlights

•

The first quarter 2016 income tax expense included a $4 million net noncash benefit, primarily related to the revaluation of certain deferred income tax liabilities, including the effect of tax legislation enacted in Japan and domestic state and local tax changes.

•

The first quarter 2015 income tax expense benefited from $69 million of nonrecurring items, primarily due to the realization of losses from changes in the Company’s organizational tax structure and the resolution of certain outstanding tax matters.

•

The fourth quarter 2015 income tax expense included a $64 million noncash benefit, primarily related to the revaluation of certain deferred income tax liabilities, including the effect of tax legislation enacted in the United Kingdom.

-8-

SUMMARY OF NONOPERATING INCOME (EXPENSE)


	Three Months Ended March 31,								Three Months Ended December 31, 2015
(in millions), (unaudited)	2016			2015		Change			Three Months Ended December 31, 2015		Change
Nonoperating income (expense), GAAP basis	$	(48	)	$	16	$	(64	)	$	11	$	(59	)
Less: Net income (loss) attributable to NCI		(10	)		3		(13	)		8		(18	)

Nonoperating income (expense)⁽¹⁾	$	(38	)	$	13	$	(51	)	$	3	$	(41	)


	Estimated economic investments at	Three Months Ended March 31,									Three Months Ended December 31,
(in millions), (unaudited)	March 31, 2016⁽³⁾	2016			2015			Change			2015			Change
Net gain (loss) on investments^(1) (2)
Private equity	20-25%	$	2		$	1		$	1		$	36		$	(34	)
Real assets	5-10%		2			2			—			3			(1	)
Other alternatives⁽⁴⁾	10-15%		—			4			(4	)		4			(4	)
Other investments⁽⁵⁾	55-60%		4			8			(4	)		5			(1	)

Subtotal			8			15			(7	)		48			(40	)
Other gains⁽⁶⁾			—			45			(45	)		1			(1	)

Total net gain (loss) on investments⁽¹⁾			8			60			(52	)		49			(41	)
Interest and dividend income			5			4			1			5			—
Interest expense			(51	)		(51	)		—			(51	)		—

Net interest expense			(46	)		(47	)		1			(46	)		—

Total nonoperating income (expense)⁽¹⁾			(38	)		13			(51	)		3			(41	)
Compensation expense related to (appreciation) depreciation on deferred compensation plans			—			(2	)		2			(2	)		2

Nonoperating income (expense), as adjusted⁽¹⁾		$	(38	)	$	11		$	(49	)	$	1		$	(39	)

⁽¹⁾	Net of net income (loss) attributable to noncontrolling interests (“NCI”).

⁽²⁾	Amounts include net gain (loss) on consolidated variable interest entities.

⁽³⁾

Percentages represent estimated percentages of BlackRock’s corporate economic investment portfolio at March 31, 2016. Economic investment amounts at December 31, 2015 for private equity, real assets, other alternatives and other investments were $375 million, $104 million, $227 million and $842 million, respectively.

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

⁽⁵⁾	Amounts include net gains (losses) related to equity and fixed income investments, and BlackRock’s seed capital hedging program.

⁽⁶⁾	Amount for the three months ended March 31, 2015 primarily includes a gain related to the acquisition of certain assets of BlackRock Kelso Capital Advisors LLC.

Highlights

•

Net gain (loss) on investments decreased from the first quarter of 2015 due to lower marks in the first quarter of 2016 and a $40 million noncash gain related to BlackRock Kelso Capital Advisors LLC recorded in the first quarter of 2015.

Net gain (loss) on investments decreased from the fourth quarter of 2015, primarily driven by a $35 million unrealized gain on a strategic private equity investment in the fourth quarter of 2015 and lower marks in the first quarter of 2016.

-9-

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.


	March 31,			December 31,
(in billions), (unaudited)	2016 (Est.)			2015

Total balance sheet assets	$	223		$	225
Separate account assets and separate account collateral held under securities lending agreements		(181	)		(182	)
Consolidated sponsored investment funds		(1	)		(1	)
Goodwill and intangible assets, net		(30	)		(30	)

Economic tangible assets	$	11		$	12

-10-

RECONCILIATION OF U.S. GAAP OPERATING INCOME AND OPERATING MARGIN TO OPERATING INCOME AND OPERATING MARGIN, AS ADJUSTED


	Three Months Ended
	March 31,						December 31,
(in millions), (unaudited)	2016			2015			2015
Operating income, GAAP basis	$	963		$	1,067		$	1,137
Non-GAAP expense adjustments:
Restructuring charge		76			—			—
PNC LTIP funding obligation		8			8			4
Compensation expense related to appreciation (depreciation) on deferred compensation plans		—			2			2

Operating income, as adjusted		1,047			1,077			1,143
Product launch costs and commissions		—			—			—

Operating income used for operating margin measurement	$	1,047		$	1,077		$	1,143

Revenue, GAAP basis	$	2,624		$	2,723		$	2,863
Non-GAAP adjustments:
Distribution and servicing costs		(97	)		(99	)		(103	)
Amortization of deferred sales commissions		(10	)		(13	)		(11	)

Revenue used for operating margin measurement	$	2,517		$	2,611		$	2,749

Operating margin, GAAP basis		36.7	%		39.2	%		39.7	%

Operating margin, as adjusted		41.6	%		41.2	%		41.6	%

See note (1) to the Condensed Consolidated Statements of Income and Supplemental Information on page 12 for more information on as adjusted items and the reconciliation to GAAP.

RECONCILIATION OF U.S. GAAP NONOPERATING INCOME NET OF NCI TO NONOPERATING INCOME NET OF NCI, AS ADJUSTED


	Three Months Ended
	March 31,						December 31,
(in millions), (unaudited)	2016			2015			2015
Nonoperating income (expense), GAAP basis	$	(48	)	$	16		$	11
Less: Net income (loss) attributable to NCI		(10	)		3			8

Nonoperating income (expense), net of NCI		(38	)		13			3
Compensation expense related to (appreciation) depreciation on deferred compensation plans		—			(2	)		(2	)

Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted	$	(38	)	$	11		$	1

See note (2) to the Condensed Consolidated Statements of Income and Supplemental Information on page 12 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
	March 31,					December 31,
(in millions, except per share data), (unaudited)	2016			2015		2015
Net income attributable to BlackRock, Inc., GAAP basis	$	657		$	822	$	861
Non-GAAP adjustments:
Restructuring charge, net of tax		53			—		—
PNC LTIP funding obligation, net of tax		5			5		4
Income tax matters		(4	)		3		(64	)

Net income attributable to BlackRock, Inc., as adjusted	$	711		$	830	$	801

Diluted weighted-average common shares outstanding⁽⁴⁾		167.4			169.7		168.6
Diluted earnings per common share, GAAP basis⁽⁴⁾	$	3.92		$	4.84	$	5.11
Diluted earnings per common share, as adjusted⁽⁴⁾	$	4.25		$	4.89	$	4.75

See notes (3) and (4) to the Condensed Consolidated Statements of Income and Supplemental Information on pages 12 and 13 for more information on as adjusted items and the reconciliation to GAAP.

-11-

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, for the reasons described below, considers them to be effective indicators, for both management and investors, of 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.

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. A restructuring charge comprised of severance and accelerated amortization expense of previously granted deferred compensation awards has been excluded to provide more meaningful analysis of BlackRock’s ongoing operations and to ensure comparability among periods presented. 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. Compensation expense associated with appreciation (depreciation) on investments related to certain BlackRock deferred compensation plans has been excluded, as returns on investments set aside for these plans, which substantially offset this expense, are reported in nonoperating income (expense).

•

Operating income used for measuring operating margin, as adjusted, is equal to operating income, as adjusted, excluding the impact of product launch costs (e.g. closed-end fund launch costs) and related commissions. Management believes the exclusion of such costs and related commissions is useful because these costs can fluctuate considerably and revenue associated with the expenditure of these costs will not fully impact BlackRock’s results until future periods.

Revenue used for operating margin, as adjusted, excludes distribution and servicing costs paid to related parties and other third parties. 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) Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted: Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, equals nonoperating income (expense), GAAP basis, less net income (loss) attributable to NCI, adjusted for compensation expense associated with (appreciation) depreciation on investments related to certain BlackRock deferred compensation plans. The compensation expense offset is recorded in operating income. This compensation expense has been included in nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, to offset returns on investments set aside for these plans, which are reported in nonoperating income (expense), GAAP basis.

(3) Net income attributable to BlackRock, Inc., as adjusted: See aforementioned discussion regarding operating income, as adjusted, and operating margin, as adjusted, for information on the PNC LTIP funding obligation and 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. The three months ended March 31, 2016 and December 31, 2015 reflected a $4 million and $64 million noncash tax benefit, respectively, primarily

-12-

associated with the revaluation of certain deferred tax liabilities related to intangible assets and goodwill. Such amount has been excluded from the as adjusted results as this item will not have a cash flow impact and to ensure comparability among periods presented.

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

-13-

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.

In addition to risk factors previously disclosed in BlackRock’s Securities and Exchange Commission (“SEC”) reports and those identified elsewhere in this earnings release, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: (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 impact of legislative and regulatory actions and reforms, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, and regulatory, supervisory or enforcement actions of government agencies relating to BlackRock or PNC; (10) 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; (11) the ability to attract and retain highly talented professionals; (12) fluctuations in the carrying value of BlackRock’s economic investments; (13) 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; (14) BlackRock’s success in maintaining the distribution of its products; (15) 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 (16) 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 March 31, 2016 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 February 29, 2016. The performance data does not include accounts terminated prior to March 31, 2016 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 March 31, 2016 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.

Source of performance information and peer medians is BlackRock, Inc. and is based in part on data from Lipper Inc. for U.S. funds and Morningstar, Inc. for non-U.S. funds.

-14-

BlackRock Inc. - FORM 8-K - EX-99.1 - EARNINGS RELEASE DATED APRIL 14, 2016 - April 14, 2016

Attached files

BlackRock Inc. Reports