10-QPeriod: Q2 FY2010

Blackstone Inc. Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 6, 2010For Securities:BX

Summary

Blackstone Inc. (BX) reported its second-quarter 2010 financial results, indicating a significant shift in performance compared to the same period in the prior year. Total revenues increased by 35% year-over-year to $550.1 million, driven by a strong rebound in investment income and growth in management and advisory fees. However, total expenses also rose by 7% to $1.13 billion, primarily due to higher compensation and benefits. Despite the revenue growth, the company reported a net loss attributable to The Blackstone Group L.P. of $193.3 million, or $0.55 per common unit, a widening of the net loss from the prior year's $164.3 million. This was largely impacted by a substantial increase in performance fee-related compensation and equity-based compensation expenses. Assets under management grew by 19% to $111.1 billion, reflecting positive market appreciation and capital inflows, particularly in the Credit and Marketable Alternatives segment. The company's liquidity remains solid with $506.7 million in cash and significant access to credit facilities.

Financial Highlights

29 data points
Beta

Revenue

$550.09M

Net Income

-$656.32M

-119.3% Net Margin

EPS (Diluted)

$-0.55

Total Assets

$16.47B

Cash & Equivalents

$506.74M

Free Cash Flow

-$5.49M

Financial Statements
Beta
Revenue$550.09M
Operating Expenses$1.13B
Interest Expense$7.68M
Net Income-$656.32M
EPS (Basic)$-0.55
EPS (Diluted)$-0.55
Shares Outstanding (Basic)354.40M
Shares Outstanding (Diluted)354.40M

Key Highlights

  • 1Total revenues increased to $550.1 million, up 35% from the prior year, driven by strong investment income and management fees.
  • 2Net loss attributable to The Blackstone Group L.P. widened to $193.3 million, or $0.55 per unit, compared to $164.3 million in the prior year.
  • 3Assets under management increased by 19% year-over-year to $111.1 billion, indicating growth in capital deployment.
  • 4Fee-earning assets under management rose by 8% to $101.4 billion, supported by inflows and acquisitions in the Credit and Marketable Alternatives segment.
  • 5Compensation and benefits expenses increased significantly, particularly performance fee-related and equity-based compensation, contributing to the wider net loss.
  • 6The company acquired management agreements for CDOs and CLOs, consolidating approximately $2.7 billion in assets and liabilities into its financial statements.
  • 7Private Equity segment revenues declined significantly due to reversals of performance fees, though investment income showed improvement.

Frequently Asked Questions

Blackstone's revenue growth was primarily driven by a substantial increase in Investment Income (Loss), up $116.2 million year-over-year, reflecting improved performance of underlying portfolio investments, particularly in the Real Estate segment. Management and Advisory Fees also contributed positively, increasing by $65.2 million due to higher advisory fees from fund placement and restructuring businesses, and increased base management fees in the Credit and Marketable Alternatives segment.

The widening net loss, from $164.3 million in Q2 2009 to $193.3 million in Q2 2010, was largely due to a significant increase in expenses. Total Compensation and Benefits rose by $51.9 million, driven by higher Performance Fee Related Compensation and Base Compensation. Notably, equity-based compensation also contributed significantly to the expense increase.

On April 1, 2010, Blackstone acquired management agreements for CDO and CLO vehicles, leading to the consolidation of approximately $2.7 billion in assets and liabilities. While this acquisition contributed to the growth in Assets Under Management and Fee-Earning Assets Under Management in the Credit and Marketable Alternatives segment, it had no material impact on the Condensed Consolidated Statement of Operations or the Condensed Consolidated Statement of Cash Flows for the reported period.

The Private Equity segment experienced a significant decrease in Performance Fees and Allocations, primarily due to reversals of previously accrued fees. This was influenced by negative performance in certain funds like BCP IV and BCOM during the quarter, partly due to unfavorable fluctuations in public investment share prices and foreign exchange rates. However, investment income showed improvement, with BCP V demonstrating stronger performance.