10-QPeriod: Q3 FY2010

Blackstone Inc. Quarterly Report for Q3 Ended Sep 30, 2010

Filed November 5, 2010For Securities:BX

Summary

Blackstone Inc. (BX) reported its third-quarter 2010 financial results, showing a significant increase in total revenues to $784.0 million, up 31% year-over-year, driven primarily by a strong rebound in performance fees and allocations and a notable increase in investment income. The company experienced a substantial growth in its Credit and Marketable Alternatives segment, bolstered by acquisitions and strong performance in its credit-oriented funds and funds of hedge funds. Despite an overall increase in revenues, Blackstone reported a net loss attributable to the Group of $44.4 million for the quarter, compared to a net loss of $176.2 million in the prior year's comparable period. This was influenced by significant compensation expenses, including equity-based compensation, and the consolidation of certain CDO and CLO vehicles which added to both assets and liabilities. The company's fee-earning assets under management (AUM) and total AUM saw healthy growth, indicating continued investor confidence and successful capital deployment across its various business segments.

Financial Highlights

27 data points
Beta

Revenue

$784.00M

Net Income

$147.53M

18.8% Net Margin

EPS (Diluted)

$-0.12

Total Assets

$17.74B

Cash & Equivalents

$1.02B

Free Cash Flow

$277.50M

Financial Statements
Beta
Revenue$784.00M
Operating Expenses$925.77M
Interest Expense$11.77M
Net Income$147.53M
EPS (Basic)$-0.12
EPS (Diluted)$-0.12

Key Highlights

  • 1Total revenues increased by 31% year-over-year to $784.0 million, driven by strong performance in Performance Fees and Allocations (+73%) and Investment Income (+118%).
  • 2Blackstone reported a net loss attributable to the Group of $44.4 million for the quarter, an improvement from the $176.2 million net loss in Q3 2009.
  • 3Fee-earning assets under management (AUM) grew by 8% to $104.3 billion, while total AUM increased by 22% to $119.1 billion, indicating successful capital deployment and market appreciation.
  • 4The Credit and Marketable Alternatives segment showed robust growth, with revenues up 29% year-over-year, boosted by acquisitions and strong performance in funds of hedge funds and credit-oriented strategies.
  • 5Total expenses decreased by 16% year-over-year to $925.8 million, primarily due to lower base compensation and equity-based compensation expenses.
  • 6The company issued $400 million in senior notes due 2021 on September 15, 2010, strengthening its capital structure.

Frequently Asked Questions

The primary drivers for the 31% year-over-year increase in total revenues to $784.0 million were strong performance fees and allocations, which grew by 73%, and a substantial 118% increase in investment income. This performance was fueled by improved market conditions and the company's strategic focus on its Real Estate and Credit and Marketable Alternatives segments.

Total expenses decreased by 16% year-over-year to $925.8 million. This reduction was mainly due to lower compensation and benefits expenses, particularly a decrease in base compensation and equity-based compensation. This was partially offset by increases in other operating expenses related to business growth and fundraising efforts.

The consolidation of certain Collateralized Debt Obligation (CDO) and Collateralized Loan Obligation (CLO) vehicles, effective January 1, 2010, under revised accounting rules for variable interest entities (VIEs), resulted in an increase in both total assets (by $6.2 billion) and total liabilities (by $7.2 billion) on the balance sheet. While this impacts the balance sheet presentation, the company stated there was no material impact on net income or cash flows from these specific acquisitions.

Blackstone experienced healthy growth in its AUM. Fee-earning AUM increased by 8% to $104.3 billion, while total AUM grew by 22% to $119.1 billion compared to the prior year. This growth reflects successful capital deployment, net inflows, and positive market appreciation across its various investment strategies.