Blackstone Inc. (BX) Earnings

Management highlights

- Blackstone reported outstanding results in Q1 with distributable earnings up 25% YOY, underpinned by fee-related earnings growth and net realizations. Inflows reached $69 billion in Q1 and nearly $250 billion over last 12 months. Total assets under management grew 12% YOY to over $1.3 trillion. - AI is a key driver with Blackstone being largest investor in AI-related infrastructure, including data centers, energy grid modernization, and investments in AI innovators. AI is expected to catalyze new opportunities across business lines. - Private credit: External assertions about systemic risk are unfounded. Institutional and insurance clients represent 75% of credit platform AUM and continue to commit capital. Blackstone's private credit strategies have generated 9.4% net returns annually since inception. - Institutional business: AUM in institutional channel ~$715B, up 50% in 5 years. Infrastructure platform up 41% YOY to $84B. BXMA crossed $100B milestone, up 15% YOY. Life sciences BXLS6 raised $6.3B. Corporate private equity, secondaries, and credit fundraising successful. - Credit platform: Manages $536B total assets, up 15% YOY. Investment-grade private credit platform up 23% YOY to ~$130B. - Private wealth platform: AUM up 14% YOY to $310B, up nearly threefold in 5 years. BXP, BX Infra, BREIT fundraising strong. Innovation accelerating with new products in pipeline. - Performance: Fee-related earnings grew 23% YOY to $1.5B. Fee revenues up 20% YOY to $2.6B. Distributable earnings up 25% YOY to $1.8B. Net realizations up 26% YOY to $448M. Investment performance resilient with infrastructure leading, corporate private equity, credit, BXMA, and real estate showing varied results.

Guidance

- IPO outlook: Believes record year of IPO activity due to firm's mix of businesses including AI beneficiary, AI unaffected companies. Once war resolves and markets stabilize, expect acceleration in IPO activity. - AI impact: Broad-based impact across business with infrastructure, real estate, credit benefiting. Long-term, being leading large-scale private capital provider to AI ecosystem areas is key driver of growth. - Private wealth: Continue to move in wealth at rapid pace, seeing global opportunity with underpenetrated market. Confidence in channel remains strong with unique product range. - Credit platform: Direction of travel for medium and long term is very good despite near-term deceleration. Dry powder in credit area will earn fees upon investment. - Management fees: Sequentially expect more moderate growth in near term, but acceleration in latter part of year due to drawdown funds coming online and continued momentum elsewhere. Stock-based comp seasonality with rate of growth expected to be lower than first quarter in full year.

Segment performance

GAAP net income for the quarter was $1.3 billion. Distributable earnings were $1.8 billion, or $1.36 per common share. Fee-related earnings grew 23% year over year to $1.5 billion, or $1.26 per share. Fee revenues increased 20% year over year to $2.6 billion. Distributable earnings increased 25% year over year to $1.8 billion in the first quarter, or $1.36 per share. Net realizations totaled $448 million in the quarter, up 26% year over year. Infrastructure led the way in Q1 with 7.8% appreciation in the quarter and 25% appreciation for the last 12 months. Corporate private equity funds appreciated 3.2% in the first quarter and 16% for the LTM period. Credit non-investment grade private credit strategies reported a gross return of 0.6% in the first quarter and 9% for the last 12 months. BXMA reported a gross return for the absolute return composite of 1.7% in the first quarter and over 12% for the last 12 months. Overall values were stable in real estate in the first quarter with strength in data centers offset by declines in other areas. AUM in institutional business is now approximately $715 billion, up more than 50% in the last five years. Infrastructure platform grew 41% year-over-year to $84 billion. BXMA crossed the $100 billion milestone in the first quarter, up 15% year over year. Life sciences new flagship BXLS6 hit its hard cap in the first quarter, raising $6.3 billion. Corporate private equity raised nearly $12 billion to date for new Asia flagship. Secondaries raised an additional $6 billion in the first quarter for latest private equity flagship. Credit held final close for latest opportunistic fund POS5, which hit its cap and was oversubscribed. Credit platform manages $536 billion of total assets, up 15% year over year. Investment-grade private credit platform grew 23% year-over-year to approximately $130 billion. Private wealth platform AUM increased 14% year over year to $310 billion, up nearly threefold in the past five years.

Risks & headwinds

- Market volatility: Geopolitical turbulence like Middle East conflict and AI disruption fears impact market. Prior market moving events show need for patience as world normalizes. - Private credit perception: External negative campaign against private credit impacts capital flows in wealth channel despite strong long-term returns and resilient fund structures. - Software sector disruption: Software sector at risk from AI, with range of outcomes and need for adaptation. Some sectors and companies will see disruption, with mission-critical platforms likely more resilient. - Redemptions in private wealth: Social media and press reporting can differ from facts. Some noise around redemptions in private wealth products, but long-term performance and premium to liquid markets matter. - Regulatory and litigation risks: In defined contribution channel, long history of litigation has held back private assets in 401ks, but regulatory rulemaking process is underway which may impact future opportunities.

Analyst Q&A

• Q: On IPO pipeline, what's driving record IPO outlook and timing of realized performance fees?

  A: Driven by firm's diversity and presence in physical world and AI infrastructure. IPOs break into AI beneficiary, AI unaffected companies. Timing of realized fees depends on market stabilization post-war. -

• Q: How does AI impact growth and fundraising?

  A: Broad-based impact with infrastructure, real estate, credit benefiting. Long-term, being leading private capital provider to AI ecosystem areas is growth driver. -

• Q: On private wealth expansion, is business plan accelerating?

  A: Moving at rapid pace with global opportunity, underpenetrated market, and unique product range. Confidence in channel remains strong. -

• Q: Lessons learned from wealth channel redemptions?

  A: Products sold through sophisticated financial advisors with disclosure. Caps on redemptions are features, and long-term performance matters. -

• Q: On BXMA and institutional allocations, and wealth segment demand shift?

  A: BXMA has strong performance, attracting investor attention. Receptivity in institutional meetings has picked up, and multi-managers and new products attractive to individual investors. -

• Q: On credit fees, headwinds and tailwinds?

  A: Fee AUM up 14% YOY, inflows of $37B. Near-term deceleration in BDC area, but breadth of platform and dry powder in credit area are key. -

• Q: On Middle East conflict and fundraising?

  A: Middle Eastern clients have shown resilience, no country represents more than low single digits. Conflict may cause some reinvestment at home, but long-term看好 Middle East. -

• Q: On retail credit and FA redemptions profile?

  A: Redeemers are smaller number of large investors, great mass of smaller investors stick with product. Brand strength and performance expected to gain market share. -

• Q: Why operate capital light model?

  A: Gives flexibility, no net debt or insurance liabilities, no redemption or credit risk at firm level, all-weather business model. -

• Q: On base fee growth and stock-based comp?

  A: Base fee growth slowed recently, but expect acceleration in latter part of year. Stock-based comp has seasonality with rate of growth expected to be lower in full year. -

• Q: On AI risk re-underwriting and 401k guidance?

  A: Focus on working with portfolio companies to adapt to AI. DOL guidance on 401ks starts to establish safe harbor, giving individual investors exposure to alternatives. -

• Q: On Corbridge and equitable merger?

  A: View as opportunity for CoreBridge, existing IMA contractual relationship to continue, potential to expand services to combined company. -

• Q: On software loan portfolio refinancing risk?

  A: Well-performing software companies have incentives to make investments work, performance has been good. Wall of maturities can be managed through refinancing, extensions, etc. -

• Q: On 401k impact of retail channel noise?

  A: Near-term redemption not focus in retirement savings, rational argument for long-term compounding from alternatives.