BlackRock, Inc. Q2 FY2025 earnings call

• Financial Performance: Second quarter revenue was $5.4 billion, up 13% year-over-year; operating income was $2.1 billion, up 12%; earnings per share was $12.05, 16% higher. AUM reached a record $12.5 trillion, with net inflows of $68 billion, excluding $48 billion of low-fee institutional index outflows, net inflows were $116 billion.
• Strategic Initiatives: Executed on organic growth in structural growth categories like digital assets, active ETFs, etc., and completed three major acquisitions. Integration of GIP, HPS, and Preqin is progressing well with positive client feedback.
• Business Growth: iShares AUM approached $5 trillion, technology services and subscription revenue was up 26% year-over-year, annual contract value (ACV) increased 32% year-over-year. Cash AUM was nearly $1 trillion, with $22 billion of net inflows in the second quarter.

BlackRock's second quarter of 2025 saw 6% organic base fee growth for the fourth consecutive quarter of 5% or higher. Revenue was $5.4 billion, up 13% year-over-year. Operating income was $2.1 billion, up 12%, and earnings per share was $12.05, 16% higher year-over-year. AUM reached a record $12.5 trillion. ETF net inflows were $85 billion, with fixed income ETFs leading at $44 billion. Cash AUM was up 25% over the last year, with $22 billion of net inflows in the second quarter. The closing of HPS Investment Partners added $165 billion of client AUM and $118 billion of fee-paying AUM on July 1, expected to add approximately $450 million of revenue in the third quarter of 2025.

• Expected HPS to add approximately $450 million of revenue in the third quarter of 2025, including $225 million in management fees.
• Anticipate HPS to positively impact BlackRock's overall effective fee rate by approximately 0.6 of a basis point.
• Target $400 billion of gross private markets fundraising from 2025 to 2030, led by infrastructure and private financing solutions platforms.

• Market fluctuations may impact AUM and revenue.
• Regulatory changes could adversely affect business operations.
• Integration challenges during acquisitions may lead to temporary client engagement pauses.

Q: With the number of acquisitions closed over the last year, how is the progress of integrating HPS and GIP, and the impact on insurance clients?

A: Client feedback has been extremely strong. Opportunities with insurance companies across regions are stronger than ever. GIP V closed above the target, and there are huge growth opportunities in public-private financing and infrastructure financing.

Q: Regarding the potential migration of privates into target funds in the U.S. 40(k) channel, what is the strategy timeline and regulatory expectations?

A: Expect to launch a proprietary LifePath with privates target date fund in 2026. Need litigation or advice reform in the U.S. to add private markets exposure into DC plans. Positive momentum is building with recent dialogue with policymakers.

Q: Thoughts on profitability and margin outlook going forward?

A: Second quarter adjusted operating margin was 43.3%, down 80 basis points year-over-year. Aim to target a 45% or greater margin profile. Core G&A is expected to have a low teens percentage increase in 2025 due to acquisitions, but expect controllable expenses to align with organic base fee growth going forward.

Q: What are the recent flow trends in HPS and the business outlook for the second half?

A: There are fundraising activities across various strategies. Expect a ramp-up to higher fundraising levels in later years. Consistent investment performance is key to fundraising goals, and teams are focused on delivering for clients.

Q: Thoughts on inorganic growth opportunities and the ElmTree acquisition?

A: Main focus is on integrating current acquisitions. ElmTree acquisition brings triple net lease and intersects real estate and credit. Will continue to be prudent, selective, and tactical with M&A, looking for complementary capabilities in private markets and technology. Also see opportunities in global capital markets expansion.

Q: How do you think about capital returns?

A: Capital management strategy is to invest in the business first, then return cash to shareholders through dividends and share repurchases. Repurchased $375 million of common shares in the second quarter and expect to repurchase at least $1.5 billion for full year 2025. Dividend payout ratio target is 40%-50%.

Q: Talk about iShares in Europe and fixed income growth?

A: iShares in Europe is performing strongly with $29 billion of net inflows in the second quarter. Fixed income ETFs led inflows. Europe is seeing growth potential as it democratizes its retail investor base, and iShares is well-positioned to capture this growth.

Q: Speak to the opportunity of managing stablecoin reserves?

A: Stablecoin development is vibrant, with BlackRock well-positioned to be part of the conversations. Stablecoins may have a role in currency digitization, and they should be invested in short-term government bonds to ensure legitimacy and safety. There are active dialogues with central banks and regulators regarding stablecoins.