UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 26, 2024
T. Rowe Price Group, Inc.
(Exact name of registrant as specified in its charter)
| (State of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
| (Address of principal executive offices) | (Zip Code) | ||||
Registrant's telephone number, including area code: (410 ) 345-2000
N/A
(Former Name of Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
The (Nasdaq Global Select Market) | ||||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Section 2 - Financial Information.
Item 2.02. Results of Operations and Financial Condition.
On April 26, 2024 we issued an earnings release reporting our results of operations for the three months ended March 31, 2024. A copy of this earnings release is attached hereto as Exhibit 99.1 and is incorporated by reference.
The information in this Current Report on Form 8-K and the Exhibits attached hereto shall not be deemed to be “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Section 7 Regulation FD
Item 7.01. Regulation FD Disclosure
On April 26, 2024, the Company will hold an investor conference call and webcast to discuss the Company’s earnings results for the three months ended March 31, 2024. A copy of supplemental materials used during the earnings call is furnished as Exhibit 99.2 to this Form 8-K. All information in Exhibits 99.2 is presented as of the particular date or dates referenced therein, and the Company does not undertake any obligation to, and disclaims any duty to, update any of the information provided.
Section 9 - Financial Statements and Exhibits.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
T. Rowe Price Group, Inc.
By: /s/ Jennifer B. Dardis
Jennifer B. Dardis
Vice President, Chief Financial Officer and Treasurer
Date: April 26, 2024
T. Rowe Price Group, Inc. April 26, 2024 Earnings Release Supplement Q1 2024 A copy of this presentation, which includes additional information, is available at investors.troweprice.com. Data as of March 31, 2024, unless otherwise noted. All figures are USD, unless otherwise noted.
2T. R O W E P R I C E This presentation, and other statements that T. Rowe Price may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to T. Rowe Price’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. Forward-looking statements in this presentation may include, without limitation, information concerning future results of our operations, revenues, expenses, earnings, liquidity, cash flows and capital expenditures, industry or market conditions, amount or composition of assets under management, regulatory developments, changes in our effective fee rate, demand for and pricing of our products, new products and services, future transactions, our strategic initiatives, general economic conditions, dividends, stock repurchases, and other aspects of our business. T. Rowe Price cautions that forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results could differ materially from those anticipated in forward-looking statements, and future results could differ materially from historical performance. Forward-looking statements speak only as of the date they are made, and T. Rowe Price assumes no duty to and does not undertake to update forward-looking statements. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our most recent Form 10-K filed with the Securities and Exchange Commission. Forward-Looking Statement
3T. R O W E P R I C E Key Metric Q1 2023 Q4 2023 Q1 2024 AUM and Flows Net Flows ($16.1B) ($28.3B) ($8.0B) Assets Under Management (AUM)1 $1.34T $1.45T $1.54T Average AUM $1.32T $1.37T $1.48T Effective Fee Rate 42.7bps 42.2bps 42.1bps GAAP Basis Net Revenues $1,537.6M $1,642.0M $1,750.2M Operating Expenses $1,053.4M $1,254.8M $1,163.6M Diluted GAAP Earnings per Share (EPS) $1.83 $1.90 $2.49 Non-GAAP Basis Adjusted Operating Expenses2 $1,022.5M $1,150.7M $1,071.4M Adjusted EPS2 $1.69 $1.72 $2.38 Dividends Dividend per share $1.22 $1.22 $1.24 The financial results presented in this earnings release supplement are unaudited. 1 Firmwide AUM includes assets managed by T. Rowe Price Associates, Inc., and its investment advisory affiliates. 2 For the reconciliation between GAAP and adjusted (non-GAAP) expenses and EPS, see the current earnings release. Financial Highlights
4T. R O W E P R I C E % of Funds/ Composites U.S. Mutual Funds Outperforming Morningstar Median1,2 U.S. Mutual Funds Outperforming Morningstar Passive Peer Median1,3 Composites Outperforming Benchmarks4 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years Equity 55% 45% 53% 68% 53% 40% 51% 54% 58% 31% 51% 64% Fixed Income 53% 51% 56% 65% 68% 50% 50% 57% 55% 31% 52% 69% Multi-Asset 84% 50% 72% 78% 92% 37% 74% 58% NA NA NA NA All Funds 65% 48% 60% 70% 72% 42% 58% 56% 57% 31% 51% 66% Past performance is not a reliable indicator of future performance. The investment performance reflects that of the T. Rowe Price-sponsored mutual funds and composites. 1 Source: © 2024 Morningstar, Inc. All rights reserved. Please see page 18 for more information. 2 Primary share class only. Excludes T. Rowe Price passive funds and fund categories not ranked by Morningstar. Net = NAV. 3 Primary share class only. Excludes T. Rowe Price passive funds and institutional funds that are a clone of a retail fund. Mutual funds are measured against the most appropriate style benchmark used for portfolio manager evaluation, which may not always be the prospectus benchmark. Net=NAV. 4 Net returns for composites are calculated using the highest applicable separate account fee schedule and compared to official GIPS composite primary benchmark. Excludes money market composites. % of AUM U.S. Mutual Funds Outperforming Morningstar Median1,2 U.S. Mutual Funds Outperforming Morningstar Passive Peer Median1,3 Composites Outperforming Benchmarks4 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years Equity 69% 40% 53% 82% 66% 32% 37% 53% 61% 34% 41% 62% Fixed Income 49% 63% 66% 80% 85% 71% 68% 69% 50% 24% 43% 48% Multi-Asset 93% 69% 90% 96% 96% 71% 95% 94% NA NA NA NA All Funds 73% 49% 63% 85% 74% 43% 54% 64% 59% 33% 41% 60% Investment Performance Overview
5T. R O W E P R I C E Firmwide AUM includes assets managed by T. Rowe Price Associates, Inc., and its investment advisory affiliates. OHA’s fee-basis AUM of $46.9B acquired on December 29, 2021, is reflected in 2021 ending AUM. All periods after 2021 reflect the related activity. Other acquisition of AUM is detailed in our quarterly releases and 10Qs. Distributions, net of reinvestments, are included in the market change figure. Manager-driven distributions related to our alternative products by year: 2022: $2.6B, 2023: $2.6B, Q1 2024: $1.0B U.S. $ billions Assets Under Management Market Change ($B) +92.3 +60.4 -6.6 +70.1 +127.6 +50.7 +14.7 +50.5 +166.3 -42.0 +231.3 +256.9 +198.9 -351.4 +251.7 +105.7 Net Flows ($B) +22.7 +30.3 +14.1 +17.2 -12.0 +3.7 +1.6 -2.8 +14.0 +13.2 +13.2 +5.6 -28.5 -61.7 -81.8 -8.0 En di ng A U M $391 $482 $489 $577 $692 $747 $763 $811 $991 $962 $1,207 $1,471 $1,688 $1,275 $1,445 $1,542 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Mar-2024
6T. R O W E P R I C E Firmwide fee-basis AUM includes assets managed by T. Rowe Price Associates, Inc., and its investment advisory affiliates. Numbers may not add up due to rounding. Institutional includes defined contribution assets, including those through intermediaries and our full-service recordkeeping business. Retail includes our direct-marketed business and financial intermediaries. Assets Under Management and Net Flows U.S. $ billions ▪ Target date retirement AUM of $443B ▪ U.S. defined contribution AUM of $676B ▪ Alternative AUM includes private markets ($19B), CLOs ($18B), and liquid strategies ($11B) ▪ $12.0B in unfunded capital commitments compared to $11.6B at December 31, 2023 ▪ Outflows largely concentrated in US equity strategies ▪ Alternative flows are net of $1.0B in manager-driven distributions ▪ Target date retirement inflows of $6.8B billion in Q1 2024 Firmwide flows by quarter ($B) Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 (16.1) (20.0) (17.4) (28.3) (8.0) Net Flows Q1 2024 Assets Under Management As of March 31, 2024Asset Class Client Type Geography Assets Under Management Assets Under Management Assets Under Management Net Flows Net Flows Net Flows Fixed Income Multi-Asset Alts Retail Inst. U.S. APAC, EMEA, Canada Equity ($23.5) ($19.5) ($19.7) ($22.7) ($12.8) FI 0.1 (1.9) 1.0 (6.0) 0.2 MA 7.1 1.6 0.4 — 5.5 Alts 0.2 (0.2) 0.9 0.4 (0.9) Inst. ($5.4) ($12.2) ($4.0) ($14.4) ($0.5) Retail (10.7) (7.8) (13.4) (13.9) (7.5) U.S. ($10.7) ($18.9) ($19.6) ($17.8) ($5.9) APAC, EMEA, Canada (5.4) (1.1) 2.2 (10.5) (2.1) Equity Fixed Income Multi-Asset Alts Retail Inst. U.S. APAC, EMEA, Canada Equity
7T. R O W E P R I C E $162.2 $30.3 ($0.1) $20.2 Q1 2023 Investment Advisory Fees CABI CABI (Amortization/Impairment) Admin & Distribution Q1 2024 Quarterly Net Revenues U.S. $ millions ▪ Investment advisory fees represent about 90% of net revenue in the periods presented ▪ Q1 2024 investment advisory revenue was $1,554.0M ▪ CABI was $60M in Q1 2024 compared to $29M in Q1 2023 Q1 2024 compared to Q4 2023 Q1 2024 compared to Q1 2023 $92.8 $8.4 ($1.5) $8.5 Q4 2023 Investment Advisory Fees CABI CABI (Amortization/Impairment) Admin & Distribution Q1 2024 Capital allocation-based income (CABI) $212.6 / 13.8% $108.2 / 6.6% $1,537.6 $1,750.2 $1,750.2 $1,642.0
8T. R O W E P R I C E ($20.1) $3.3 $6.2 ($19.1) $6.9 ($21.7) ($34.8) Q4 2023 Compensation & Related CABI Compensation Distribution & Servicing Ad/Promo Product & Recordkeeping Tech, Occ, & Facility G&A&Other Q1 2024 Quarterly Adjusted Operating Expenses U.S. $ millions Q1 2024 compared to Q1 2023 $36.0 $9.9 $10.4 ($0.5) $2.9 $3.3 ($13.1) Q1 2023 Compensation & Related CABI Compensation Distribution & Servicing Ad/Promo Product & Recordkeeping Tech, Occ, & Facility G&A&Other Q1 2024 Q1 2024 compared to Q4 2023 For the reconciliation between GAAP and adjusted (non-GAAP) expenses, see the current earnings release. Capital allocation-based income (CABI) compensation represents the portion of CABI (carried interest) that is passed through to certain associates as compensation. $48.9 / 4.8% $1,022.5 ($79.3) / (6.9)% $1,150.7 $1,071.4 $1,071.4 Year ended 3/31/2024 3/31/2023 Change (%) Adjusted Operating Expenses $1,071.4 $1,022.5 4.8% Adjusted CABI Compensation (18.5) (8.6) n/m Adjusted Operating Expenses, ex CABI Compensation $1,052.9 $1,013.9 3.8% Basis for Operating Expense Guidance U.S. $ millions
9T. R O W E P R I C E 1 Operating margin is equal to operating income divided by net revenues; adjusted operating margin is equal to adjusted operating income divided by adjusted net revenues. See the GAAP to adjusted (non-GAAP) operating income and operating margin reconciliation on page 13. For the reconciliation between GAAP and adjusted (non-GAAP) net income and EPS, see the current earnings release.. Net Income U.S. $ millions, (except EPS) Quarterly Operating Income and Net Income U.S. GAAP Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Net Income $421.5 $476.4 $453.2 $437.6 $573.8 Diluted EPS $1.83 $2.06 $1.97 $1.90 $2.49 Operating Income U.S. GAAP Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Operating Income $484.2 $533.5 $581.3 $387.2 $586.6 Operating Margin1 31.5% 33.1% 34.8% 23.6% 33.5% Adjusted Operating Income Adjusted Operating Margin1 $528.0 $596.6 $635.9 $502.7 $692.434.1% 36.8% 37.5% 39.3% Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Adjusted Net Income Adjusted EPS $389.4 $466.5 $499.5 $394.7 $548.5 $1.69 $2.02 $2.17 $2.38 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 $1.72 30.4%
10T. R O W E P R I C E Capital Returned to Stockholders Cash and Investments1 1 Cash and investments includes our cash and investments in T. Rowe Price products. This display does not include the non-controllable interest of our seed investments, which we normally consolidate due to our ownership. U.S. $ millions Capital Management Data through 3/31/2024 Q1 2023 Q4 2023 Q1 2024 Cash and Cash Equivalents $2,094.1 $2,066.6 $2,416.5 Discretionary Investments 464.3 463.7 477.5 Cash and Discretionary Investments $2,558.4 $2,530.3 $2,894.0 Redeemable Seed Capital $1,146.8 $1,370.9 $1,418.7 Investments Used to Hedge the Supplemental Savings Plan Liability $786.7 $894.6 $929.0 285 1,126 3,267 80 332 2,058 — — 700 Q1 2024 Last 12 months Last 36 months $6,024 $1,458 $365 Dividends Share Repurchases Special Dividend
11T. R O W E P R I C E $192.0 $18.5 ($5.3) $0.2 $205.4 Q4 2023 Change in accrued carried compensation Acquisition-related amortization Net Realized Contributions Q1 2024 At the end of each reporting period, accrued carried interest reflects what would be due from each investment fund as if the fair value of the underlying investments were realized as of such date, regardless of whether the amounts have been realized. The change in accrued carried interest reflects amounts that are (1) realized and distributed by the fund, (2) market-related adjustments that are recognized as capital allocation-based income in the income statement, and (3) acquisition-related amortization. The change in accrued carried interest will fluctuate quarter to quarter. Approximately $5.3M of the 40%-50% of accrued carried interest recognized in compensation expense was not allocated to non-controlling interest holders and therefore not categorized as CABI-related compensation. Quarterly Capital Allocation-Based Income (carried interest) U.S. $ millions, unless otherwise noted ▪ As of 3/31/2024, about $18B of alternative fee-basis assets under management are eligible to earn carried interest. ▪ In general, 50%-60% of accrued carried interest is expected to be retained in operating income with the remainder recognized as compensation expense. ▪ Absolute performance of the following indices are an indicator of changes in accrued carried interest. Non-controlling interests (NCI) in consolidated entities CABI Comp $13.2 Q1 2024 returns ICE Bank of America U.S. High Yield Index: 1.5 % Credit Suisse Leveraged Loan Index: 2.5 % CABI $47.1 Past performance is not a reliable indicator of future performance. Sources: ICE Data Indices, LLC, and CREDIT SUISSE GROUP AG and/or its affiliates Investments in affiliated private investment funds—carried interest $519.9 $59.5 ($12.4) ($52.7) $514.3 Q4 2023 Change in accrued carried interest Acquisition-related amortization Net Realized Distributions Q1 2024
Non-GAAP Reconciliation
13T. R O W E P R I C E Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Net Revenues, GAAP Basis $1,537.6 $1,610.2 $1,670.7 $1,642.0 $1,750.2 Non-GAAP Adjustments1: Consolidated Investment Products 0.6 0.3 0.7 0.5 1.2 Investment and NCI Amortization and Impairments 12.3 12.3 25.8 10.9 12.4 Net Revenues, Non-GAAP Basis $1,550.5 $1,622.8 $1,697.2 $1,653.4 $1,763.8 Operating Income, GAAP Basis $484.2 $533.5 $581.3 $387.2 $586.6 Non-GAAP Adjustments1: Acquisition-Related Adjustments (2.2) 26.2 67.4 51.3 50.5 Consolidated Investment Products 3.5 3.9 1.4 2.3 2.3 Supplemental Savings Plan Liability 42.5 33.0 (14.2) 61.9 53.0 Operating Income, Non-GAAP Basis $528.0 $596.6 $635.9 $502.7 $692.4 Operating Margin, GAAP Basis2 31.5 % 33.1 % 34.8 % 23.6 % 33.5 % Operating Margin, as Adjusted2 34.1 % 36.8 % 37.5 % 30.4 % 39.3 % 1 For a description of the non-GAAP adjustments, see the related earnings releases and/or prior 10Q or 10Ks filed with the SEC. 2 Operating margin is equal to operating income divided by net revenues. U.S. $ millions Non-GAAP Net Revenues and Operating Income Reconciliation
Appendix
15T. R O W E P R I C E Assets Under Management – by Account Type U.S. $ billions Firmwide AUM includes assets managed by T. Rowe Price Associates, Inc., and its investment advisory affiliates. 1 Full-service recordkeeping manages ~$5B in defined benefit plans 2021 2022 2023 Mar-24 U.S. Defined Contribution – Investment only $533.0 $410.2 $486.2 $524.7 U.S. Retirement Plan Sponsors - Full-service recordkeeping1 162.4 132.4 141.2 151.3 Total U.S. Defined Contribution (DC) 695.4 542.6 627.4 676.0 Other retirement accounts 406.5 304.3 341.4 357.8 Total U.S. DC and Other Retirement 1,101.9 846.9 968.8 1,033.8 Other accounts 585.9 427.8 475.7 508.4 Total AUM at end of period $1,687.8 $1,274.7 $1,444.5 $1,542.2 Full-service recordkeeping and plan administration services provided to: ▪ $266 billion in assets under administration as of March 31, 2024 ▪ Over 8,000 U.S. retirement plans ▪ Over 2.3 million plan participants
16T. R O W E P R I C E U.S. Defined Contribution and Target Date AUM As of March 31, 2024. U.S. $ billions. Not to scale. Not all products are available to all investors. U.S. Defined Contribution AUM - $676B ▪ Almost 60% ($395B) of our U.S. DC AUM is held in T. Rowe Price target date products. ▪ The other $281B is held in single strategy products with large cap growth equity and stable value being the largest proportion. Target Date AUM - $443B ▪ Almost 90% ($395B) of our target date assets are held by DC plans. ▪ The other $48B are predominately held by Individual Investors. U.S. DC AUM $676 Target Date AUM $443 Target Date in DC AUM $395
17T. R O W E P R I C E Target Date Franchise Not all products are available in all jurisdictions nor to all investors. ▪ $443B of target date retirement AUM as of March 31, 2024 ▪ $6.8B of target date retirement net new flows in Q1 2024 ▪ $13.1B of target date retirement net new flows in full year 2023 ▪ 3rd largest total market share of 11.3%* ▪ #1 in active market share* *Morningstar Direct as of 12/31/2023. Includes target date assets held in a mutual fund or CIT. Data excludes assets held in custom products. Retirement Higher Equity Active Management Funds | Trusts Target Lower Equity Active Management Funds | Trusts Blend Higher Equity Higher Passive vs. Active Allocation Funds | Trusts Hybrid Higher Equity Higher Active vs. Passive Allocation Trusts Custom Target Date Custom Allocations Varied Management Separate Accounts Retirement Income Higher Equity Active Management 2020 and 2025 Funds $264 $297 $353 $299 $358 $384 $29 $35 $38 $36 $50 $59 Retirement (Higher Equity Active) All Other Target Date 2019 2020 2021 2022 2023 Mar-2024 $0 $100 $200 $300 $400 $500
18T. R O W E P R I C E Investment performance overview (slide 4) 1 Source: © 2024 Morningstar, Inc. All rights reserved. The information contained herein: 1) is proprietary to Morningstar and/or its content providers; 2) may not be copied or distributed; and 3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. 2 Source: Morningstar. Primary share class only. Excludes money market mutual funds, funds with an operating history of less than one year, T. Rowe Price passive funds, and T. Rowe Price funds that are clones of other funds. The top chart reflects the percentage of T. Rowe Price funds with 1 year, 3 year, 5 year, and 10 year track record that outperformed the Morningstar category median. The bottom chart reflects the percentage of T. Rowe Price funds AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $327B for 1 year, $326B for 3 years, $326B for 5 years, and $323B for 10 years. 3 Passive Peer Median was created by T. Rowe Price using data from Morningstar. Primary share class only. Excludes money market mutual funds, funds with an operating history of less than one year, funds with fewer than three peers, T. Rowe Price passive funds, and T. Rowe Price funds that are clones of other funds. This analysis compares T. Rowe Price active funds with the applicable universe of passive/index open-end funds and ETFs of peer firms. The top chart reflects the percentage of T. Rowe Price funds with 1 year, 3 year, 5 year, and 10 year track record that outperformed the passive peer universe. The bottom chart reflects the percentage of T. Rowe Price funds AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $310B for 1 year, $310B for 3 years, $273B for 5 years, and $265B for 10 years. 4 Composite net returns are calculated using the highest applicable separate account fee schedule. Excludes money market composites. All composites compared to official GIPS composite primary benchmark. The top chart reflects the percentage of T. Rowe Price composites with 1 year, 3 year, 5 year, and 10 year track record that outperformed their benchmarks. The bottom chart reflects the percentage of T. Rowe Price composite AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $1,377B for 1 year, $1,372B for 3 years, $1,365B for 5 years, and $1,317B for 10 years. Capital Allocation Based Income (slide 11) © 2024 CREDIT SUISSE GROUP AG and/or its affiliates. All rights reserved. ICE Data Indices, LLC (“ICE DATA”), is used with permission. ICE DATA, ITS AFFILIATES AND THEIR RESPECTIVE THIRD-PARTY SUPPLIERS DISCLAIM ANY AND ALL WARRANTIES AND REPRESENTATIONS, EXPRESS AND/OR IMPLIED, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, INCLUDING THE INDICES, INDEX DATA AND ANY DATA INCLUDED IN, RELATED TO, OR DERIVED THEREFROM. NEITHER ICE DATA, ITS AFFILIATES NOR THEIR RESPECTIVE THIRD-PARTY SUPPLIERS SHALL BE SUBJECT TO ANY DAMAGES OR LIABILITY WITH RESPECT TO THE ADEQUACY, ACCURACY, TIMELINESS OR COMPLETENESS OF THE INDICES OR THE INDEX DATA OR ANY COMPONENT THEREOF, AND THE INDICES AND INDEX DATA AND ALL COMPONENTS THEREOF ARE PROVIDED ON AN “AS IS” BASIS AND YOUR USE IS AT YOUR OWN RISK. ICE DATA, ITS AFFILIATES AND THEIR RESPECTIVE THIRD-PARTY SUPPLIERS DO NOT SPONSOR, ENDORSE, OR RECOMMEND T. ROWE PRICE OR ANY OF ITS PRODUCTS OR SERVICES. Additional Information
19T. R O W E P R I C E Important Information Sources for references in Retirement Spotlight comments: ▪ DCIO largest providers: Pensions and Investments as of December 2022 ▪ Proprietary assets in record keeping plans: BrightScope/ICI Defined Contribution Plan Profile, issued September 2023 The following entities may be referenced in the earnings supplement or the earnings call: ▪ TRPA – T. Rowe Price Associates, Inc. ▪ TRPIM – T. Rowe Price Investment Management, Inc. This material, including any statements, information, data and content contained within it and any materials, information, images, links, graphics or recordings provided in conjunction with this material are being furnished by T. Rowe Price for general informational purposes only. Under no circumstances should the material, in whole or part, be copied or distributed without consent from T. Rowe Price. The views contained herein are as of the date of the presentation. The information and data obtained from third-party sources which is contained in the report were obtained from the sources deemed reliable; however, its accuracy and completeness is not guaranteed. The products and services discussed in this presentation are available via subsidiaries of T. Rowe Price Group as authorized in countries throughout the world. The products and services are not available to all investors or in all countries. Visit troweprice.com to learn more about the products and services available in your country and the T. Rowe Price Group subsidiary which is authorized to provide them. The material is not intended for use by persons in jurisdictions that prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request. © 2024 T. Rowe Price. All Rights Reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, and the Bighorn Sheep design are, collectively and/or apart, trademarks of T. Rowe Price Group, Inc.
NEWS RELEASE
T. ROWE PRICE GROUP REPORTS FIRST QUARTER 2024 RESULTS
BALTIMORE (April 26, 2024) - T. Rowe Price Group, Inc. (NASDAQ-GS: TROW) today reported its results for the first quarter of 2024.
▪Quarter-end assets under management of $1.54 trillion
▪Net client outflows of $8.0 billion
▪Diluted earnings per common share (EPS) of $2.49; Adjusted diluted EPS of $2.38
▪Returned $365 million to stockholders from the recurring quarterly dividend and stock repurchases
▪Increased the quarterly dividend for the 38th consecutive year
Rob Sharps, chief executive officer and president, commented, “Tailwinds from stronger-than-anticipated markets drove assets under management to $1.54 trillion as of March 31. Net outflows of $8 billion played out as we expected and were about half the level of net outflows we had in the first quarter of 2023. While outflows will persist in 2024, we continue to believe that there will be substantial improvement this year driven by higher sales and lower redemptions.”
Financial Highlights
| Three months ended | |||||||||||||||||||||||||||||
| (in millions, except per-share data) | 3/31/2024 | 3/31/2023 | Change(1) | 12/31/2023 | Change(1) | ||||||||||||||||||||||||
| U.S. GAAP basis | |||||||||||||||||||||||||||||
| Investment advisory fees | $ | 1,554.0 | $ | 1,391.8 | 11.7 | % | $ | 1,461.2 | 6.4 | % | |||||||||||||||||||
Capital allocation-based income(2) | $ | 47.1 | $ | 16.9 | n/m | $ | 40.2 | n/m | |||||||||||||||||||||
| Net revenues | $ | 1,750.2 | $ | 1,537.6 | 13.8 | % | $ | 1,642.0 | 6.6 | % | |||||||||||||||||||
| Operating expenses | $ | 1,163.6 | $ | 1,053.4 | 10.5 | % | $ | 1,254.8 | (7.3) | % | |||||||||||||||||||
| Net operating income | $ | 586.6 | $ | 484.2 | 21.1 | % | $ | 387.2 | 51.5 | % | |||||||||||||||||||
| Non-operating income (loss) | $ | 188.9 | $ | 135.4 | n/m | $ | 259.7 | n/m | |||||||||||||||||||||
| Net income attributable to T. Rowe Price | $ | 573.8 | $ | 421.5 | 36.1 | % | $ | 437.6 | 31.1 | % | |||||||||||||||||||
| Diluted earnings per common share | $ | 2.49 | $ | 1.83 | 36.1 | % | $ | 1.90 | 31.1 | % | |||||||||||||||||||
| Weighted average common shares outstanding assuming dilution | 224.2 | 225.2 | (0.4) | % | 224.0 | 0.1 | % | ||||||||||||||||||||||
Adjusted basis(3) | |||||||||||||||||||||||||||||
| Operating expenses | $ | 1,071.4 | $ | 1,022.5 | 4.8 | % | $ | 1,150.7 | (6.9) | % | |||||||||||||||||||
| Operating expenses, excluding accrued carried interest related compensation | $ | 1,052.9 | $ | 1,013.9 | 3.8 | % | $ | 1,135.5 | (7.3) | % | |||||||||||||||||||
| Net operating income | $ | 692.4 | $ | 528.0 | 31.1 | % | $ | 502.7 | 37.7 | % | |||||||||||||||||||
| Non-operating income (loss) | $ | 28.5 | $ | 30.8 | (7.5) | % | $ | 49.5 | n/m | ||||||||||||||||||||
| Net income attributable to T. Rowe Price | $ | 548.5 | $ | 389.4 | 40.9 | % | $ | 394.7 | 39.0 | % | |||||||||||||||||||
| Diluted earnings per common share | $ | 2.38 | $ | 1.69 | 40.8 | % | $ | 1.72 | 38.4 | % | |||||||||||||||||||
Assets under management (in billions) | |||||||||||||||||||||||||||||
| Average assets under management | $ | 1,484.4 | $ | 1,322.9 | 12.2 | % | $ | 1,374.3 | 8.0 | % | |||||||||||||||||||
| Ending assets under management | $ | 1,542.2 | $ | 1,341.7 | 14.9 | % | $ | 1,444.5 | 6.8 | % | |||||||||||||||||||
| Investment advisory effective fee rate in basis points (bps) | 42.1 | 42.7 | (0.6) | 42.2 | (0.1) | ||||||||||||||||||||||||
(1) n/m - the percentage change is not meaningful.
(2) Capital allocation-based income represents the change in accrued carried interest.
(3) See the reconciliation to the comparable U.S. GAAP measures at the end of this earnings release.
1
Assets Under Management
During Q1 2024, assets under management (AUM) increased $97.7 billion to $1.54 trillion. The components of the change in AUM, by asset class, are shown in the table below.
Three months ended 3/31/2024 | |||||||||||||||||||||||||||||
| (in billions) | Equity | Fixed income, including money market | Multi-asset(1) | Alternatives(2) | Total | ||||||||||||||||||||||||
| Assets under management at beginning of period | $ | 743.6 | $ | 170.0 | $ | 483.0 | $ | 47.9 | $ | 1,444.5 | |||||||||||||||||||
| Net cash flows prior to manager-driven distributions | (12.8) | 0.2 | 5.5 | 0.1 | (7.0) | ||||||||||||||||||||||||
| Manager-driven distributions | — | — | — | (1.0) | (1.0) | ||||||||||||||||||||||||
| Net cash flows | (12.8) | 0.2 | 5.5 | (0.9) | (8.0) | ||||||||||||||||||||||||
Net market appreciation (depreciation) and income(3) | 72.1 | 0.7 | 32.1 | 0.8 | 105.7 | ||||||||||||||||||||||||
| Change during the period | 59.3 | 0.9 | 37.6 | (0.1) | 97.7 | ||||||||||||||||||||||||
Assets under management at March 31, 2024 | $ | 802.9 | $ | 170.9 | $ | 520.6 | $ | 47.8 | $ | 1,542.2 | |||||||||||||||||||
(1) The underlying AUM of the multi-asset portfolios have been aggregated and presented in this category and not reported in the equity and fixed income columns.
(2) The alternatives asset class includes strategies authorized to invest more than 50% of its holdings in private credit, leveraged loans, mezzanine, real assets/CRE, structured products, stressed/distressed, non-investment grade CLOs, special situations, business development companies, or that have absolute return as its investment objective. Generally, only those strategies with longer than daily liquidity are included. Unfunded capital commitments as of March 31, 2024 were $12.0 billion and $11.6 billion as of December 31, 2023, and are not reflected in fee basis AUM above.
(3) Includes net distributions not reinvested of $0.2 billion.
Investors domiciled outside the United States accounted for 8.5% of the firm's AUM at March 31, 2024 and 8.6% at December 31, 2023.
The firm provides participant accounting and plan administration for retirement plans that invest in the firm's U.S. mutual funds and collective investment trusts, as well as funds managed outside of the firm's complex. As of March 31, 2024, the firm's assets under administration were $266 billion, of which $156 billion were assets we manage.
The firm offers non-discretionary advisory services through model delivery and multi-asset solutions for providers to implement. The firm records the revenue earned on these services in administrative fees. The assets under advisement in these portfolios, predominantly in the United States, were $13.1 billion at March 31, 2024.
2
Financial Results Highlights
Net Revenues
| Three months ended | |||||||||||||||||||||||||||||
| (in millions) | 3/31/2024 | 3/31/2023 | Change | 12/31/2023 | Change | ||||||||||||||||||||||||
| Investment advisory fees | |||||||||||||||||||||||||||||
| Equity | $ | 949.6 | $ | 833.9 | 13.9 | % | $ | 864.3 | 9.9 | % | |||||||||||||||||||
| Fixed income, including money market | 100.6 | 102.4 | (1.8) | % | 98.2 | 2.4 | % | ||||||||||||||||||||||
| Multi-asset | 429.7 | 386.0 | 11.3 | % | 400.6 | 7.3 | % | ||||||||||||||||||||||
| Alternatives | 74.1 | 69.5 | 6.6 | % | 98.1 | (24.5) | % | ||||||||||||||||||||||
| Total investment advisory fees | 1,554.0 | 1,391.8 | 11.7 | % | 1,461.2 | 6.4 | % | ||||||||||||||||||||||
Capital allocation-based income(1) | 47.1 | 16.9 | n/m | 40.2 | n/m | ||||||||||||||||||||||||
| Administrative, distribution, and servicing fees | 149.1 | 128.9 | 15.7 | % | 140.6 | 6.0 | % | ||||||||||||||||||||||
| Net revenues | $ | 1,750.2 | $ | 1,537.6 | 13.8 | % | $ | 1,642.0 | 6.6 | % | |||||||||||||||||||
| Average AUM (in billions): | |||||||||||||||||||||||||||||
| Equity | $ | 770.4 | $ | 687.0 | 12.1 | % | $ | 704.9 | 9.3 | % | |||||||||||||||||||
| Fixed income, including money market | 169.5 | 169.6 | (0.1) | % | 168.4 | 0.7 | % | ||||||||||||||||||||||
| Multi-asset | 497.0 | 422.2 | 17.7 | % | 453.6 | 9.6 | % | ||||||||||||||||||||||
| Alternatives | 47.5 | 44.1 | 7.7 | % | 47.4 | 0.2 | % | ||||||||||||||||||||||
| Average AUM | $ | 1,484.4 | $ | 1,322.9 | 12.2 | % | $ | 1,374.3 | 8.0 | % | |||||||||||||||||||
| Investment advisory effective fee rate (bps) | 42.1 | 42.7 | (0.6) | 42.2 | (0.1) | ||||||||||||||||||||||||
(1)The Capital allocation-based income represents the change in accrued carried interest. The percentage change is not meaningful (n/m).
Net revenues in Q1 2024 were $1.8 billion, an increase of 13.8% from Q1 2023 and an increase of 6.6% from Q4 2023. The Q1 2024 increase over Q1 2023 was primarily driven by increases in investment advisory fees on higher average AUM, higher performance-based fees earned predominantly on certain U.S. equity strategies, and higher capital allocation-based income. Performance-based fees earned in Q1 2024 were $17.6 million. In comparison to Q4 2023, the increase was primarily driven by an increase in investment advisory fees on higher average AUM.
▪The investment advisory fee annualized effective fee rate of 42.1 basis points in Q1 2024 decreased from 42.7 basis points earned in Q1 2023 and 42.2 basis points earned in Q4 2023. In comparison to Q1 2023, outflows and client transfers over the past year drove a mix shift in assets under management toward lower fee vehicles leading to an unfavorable impact on the annualized effective fee rate. These unfavorable impacts were slightly offset by strong market returns over the last year and $17.6 million in performance-based fees earned predominantly on certain U.S. equity strategies.
▪Capital allocation-based income in Q1 2024 of $47.1 million includes $59.5 million in additional accrued carried interest, partially offset by $12.4 million in acquisition-related, non-cash amortization and impairments. Comparatively, the Q1 2023 amount of $16.9 million includes $29.2 million in additional accrued carried interest, offset by $12.3 million in non-cash amortization and impairments.
3
A portion of the capital allocation-based income is passed through as compensation and recognized in compensation and related costs with the unpaid amount reported as non-controlling interest on the consolidated balance sheet. For detail of the quarterly change in accrued carried interest, which is reported as part of investments on the consolidated balance sheet, and related non-controlling interest, see the applicable tables at the end of this release.
▪Administrative, distribution and servicing fees in Q1 2024 were $149.1 million, an increase of $20.2 million from Q1 2023 and $8.5 million from Q4 2023. The increase from Q1 2023 and Q4 2023 is primarily driven by higher fees related to transfer agent services provided to the T. Rowe Price mutual funds.
Operating Expenses
| Three months ended | |||||||||||||||||||||||||||||
| (in millions) | 3/31/2024 | 3/31/2023 | Change (1) | 12/31/2023 | Change (1) | ||||||||||||||||||||||||
| Compensation, benefits, and related costs | $ | 629.3 | $ | 593.3 | 6.1 | % | $ | 649.4 | (3.1) | % | |||||||||||||||||||
| Acquisition-related retention agreements | 13.5 | 14.2 | (4.9) | % | 13.5 | — | % | ||||||||||||||||||||||
Capital allocation-based income compensation(2) | 13.2 | 3.5 | n/m | 10.6 | n/m | ||||||||||||||||||||||||
| Supplemental savings plan | 53.0 | 42.5 | n/m | 61.9 | n/m | ||||||||||||||||||||||||
| Total compensation and related costs | 709.0 | 653.5 | 8.5 | % | 735.4 | (3.6) | % | ||||||||||||||||||||||
| Distribution and servicing | 81.9 | 71.5 | 14.5 | % | 75.7 | 8.2 | % | ||||||||||||||||||||||
| Advertising and promotion | 25.3 | 25.8 | (1.9) | % | 44.4 | (43.0) | % | ||||||||||||||||||||||
| Product and recordkeeping related costs | 75.0 | 72.1 | 4.0 | % | 68.1 | 10.1 | % | ||||||||||||||||||||||
| Technology, occupancy, and facility costs | 149.9 | 146.6 | 2.3 | % | 171.6 | (12.6) | % | ||||||||||||||||||||||
| General, administrative, and other | 92.6 | 107.5 | (13.9) | % | 128.1 | (27.7) | % | ||||||||||||||||||||||
| Change in fair value of contingent consideration | — | (49.6) | n/m | (9.6) | n/m | ||||||||||||||||||||||||
| Acquisition-related amortization and impairment costs | 29.9 | 26.0 | 15.0 | % | 41.1 | (27.3) | % | ||||||||||||||||||||||
| Total operating expenses | $ | 1,163.6 | $ | 1,053.4 | 10.5 | % | $ | 1,254.8 | (7.3) | % | |||||||||||||||||||
Total adjusted operating expenses(3) | $ | 1,071.4 | $ | 1,022.5 | 4.8 | % | $ | 1,150.7 | (6.9) | % | |||||||||||||||||||
(1) n/m - the percentage change is not meaningful.
(2) Capital allocation-based income compensation represents the change in accrued carried interest compensation.
(3) See the reconciliation to the comparable U.S. GAAP measures at the end of this earnings release.
Operating expenses were $1,163.6 million, an increase of 10.5% from Q1 2023 and a decrease of 7.3% from Q4 2023. On a non-GAAP basis, adjusted operating expenses in Q1 2024 were $1,071.4 million, a 4.8% increase from Q1 2023 and a 6.9% decrease from Q4 2023. The increase in adjusted operating expenses from Q1 2023 was primarily driven by higher compensation and benefit costs along with higher accrued carried interest related compensation. The decrease in adjusted operating expenses from Q4 2023 was primarily driven by lower stock-based compensation, advertising and promotion costs, and general and administrative-related costs.
▪Compensation, benefits, and related costs in Q1 2024 of $629.3 million increased $36.0 million from Q1 2023 and decreased $20.1 million from Q4 2023. The increase from Q1 2023 was primarily due to a higher interim bonus accrual and higher salaries and related benefits, which were partially offset by higher capitalized labor. In comparison to Q4 2023, the decrease was primarily due to lower stock-based compensation related to the firm's annual equity grant awarded in December, partially offset by a higher
4
interim bonus accrual. The firm employed 7,878 associates at March 31, 2024, a decrease of 0.4% from the end of 2023, and an increase of 0.5% from March 31, 2023.
▪Distribution and servicing costs in Q1 2024 of $81.9 million increased $10.4 million from Q1 2023 and $6.2 million from Q4 2023. The increases from prior periods were primarily driven by higher costs incurred to distribute products through U.S. intermediaries and higher average assets under management.
▪Advertising and promotion expenses in Q1 2024 of $25.3 million were relatively flat to Q1 2023, and decreased $19.1 million from Q4 2023. The seasonal media and agency costs in Q4 2023, along with increased investment in the firm's brand in Q4 2023, contributed to the decline in advertising and promotion costs in Q1 2024.
▪Technology, occupancy, and facility costs in Q1 2024 of $149.9 million increased $3.3 million from Q1 2023 and decreased $21.7 million from Q4 2023. The decrease from Q4 2023 is primarily due to accelerated amortization of certain technology assets not recurring in Q1 2024, as well as a non-recurring cost benefit realized in Q1 2024 related to the firm's new UK facility.
▪General, administrative, and other costs in Q1 2024 of $92.6 million decreased $14.9 million from Q1 2023 and $35.5 million from Q4 2023. The decrease from Q1 2023 was primarily due to lower research fee expense as the firm changed its approach to paying for research, consistent with regulations and general industry practice. In comparison to Q4 2023, the seasonal timing of certain general and administrative related costs, including professional fees and charitable contributions, was the primary driver of the decrease.
5
Non-operating income (loss)
| (in millions) | Three months ended | ||||||||||||||||
| 3/31/2024 | 3/31/2023 | 12/31/2023 | |||||||||||||||
| Net gains (losses) from non-consolidated T. Rowe Price investment products | |||||||||||||||||
| Cash and discretionary investments | |||||||||||||||||
| Dividend income | $ | 27.8 | $ | 20.2 | $ | 33.1 | |||||||||||
| Market-related gains (losses) and equity in earnings (losses) | 0.2 | 10.6 | 5.4 | ||||||||||||||
| Total net gains (losses) from cash and discretionary investments | 28.0 | 30.8 | 38.5 | ||||||||||||||
| Seed capital investments | |||||||||||||||||
| Dividend income | — | 0.5 | 0.6 | ||||||||||||||
| Market-related gains (losses) and equity in earnings (losses) | 23.5 | 15.1 | 25.3 | ||||||||||||||
| Net gains (losses) recognized upon deconsolidation | — | — | (0.7) | ||||||||||||||
| Investments used to hedge the supplemental savings plan liability | 49.7 | 44.7 | 65.0 | ||||||||||||||
| Total net gains (losses) from non-consolidated T. Rowe Price investment products | 101.2 | 91.1 | 128.7 | ||||||||||||||
| Other investment income | 20.3 | 2.8 | 12.8 | ||||||||||||||
| Net gains (losses) on investments | 121.5 | 93.9 | 141.5 | ||||||||||||||
| Net gains (losses) on consolidated sponsored investment products | 72.3 | 45.4 | 119.2 | ||||||||||||||
| Other gains (losses), including foreign currency gains (losses) | (4.9) | (3.9) | (1.0) | ||||||||||||||
| Non-operating income (loss) | $ | 188.9 | $ | 135.4 | $ | 259.7 | |||||||||||
On a non-GAAP basis, non-operating income (loss) consists of investment gains/losses generated from the firm's cash and discretionary investment portfolio.
Income taxes
The following reconciles the statutory federal income tax rate to the firm's effective tax rate for the first quarter of 2024 and 2023:
| Three months ended | |||||||||||
| 3/31/2024 | 3/31/2023 | ||||||||||
| Statutory U.S. federal income tax rate | 21.0 | % | 21.0 | % | |||||||
State income taxes for current year, net of federal income tax benefits(1) | 2.5 | 3.0 | |||||||||
Net (income) losses attributable to redeemable non-controlling interests(2) | (0.5) | (0.4) | |||||||||
| Net excess tax losses (benefits) from stock-based compensation plans activity | (0.3) | (0.4) | |||||||||
| Valuation allowances | 0.5 | 4.3 | |||||||||
| Other items | 0.3 | 1.2 | |||||||||
| Effective income tax rate | 23.5 | % | 28.7 | % | |||||||
(1) State income tax benefits are reflected in the total benefits for net income attributable to redeemable non-controlling interests and stock-based compensation plans activity.
(2) Net income attributable to redeemable non-controlling interest represents the portion of earnings held in the firm's consolidated investment products, which are not taxable to the firm despite being included in pre-tax income.
The firm's non-GAAP effective tax rate for Q1 2024 was 23.9%, compared with 30.3% for Q1 2023. The decrease in the firm's effective tax rate in Q1 2024 compared to Q1 2023 is primarily due to lower valuation allowances recognized. In Q1 2023, valuation allowances were recognized against cumulative UK-based deferred tax assets. The 2024 rate was also favorably impacted by changes in state income apportionment rules in certain jurisdictions.
The firm estimates that its effective tax rate for the full year 2024 will be in the range of 23% to 27% on a U.S. GAAP basis, and 23% to 26% on a non-GAAP basis.
6
Other Matters
The financial results presented in this release are unaudited. The firm expects that it will file its Form 10-Q Quarterly Report for the first quarter of 2024 with the U.S. Securities and Exchange Commission later today. The Form 10-Q will include additional information on the firm's unaudited financial results at March 31, 2024.
Certain statements in this earnings release may represent “forward-looking information,” including information relating to anticipated changes in revenues, our operations, expenses, earnings, liquidity, cash flows and capital expenditures, industry or market conditions, amount or composition of assets under management, regulatory developments, changes in our effective fee rate, demand for and pricing of our products, new products and services, effective tax rates, net income and earnings per common share, future transactions, our strategic initiatives, general economic conditions, dividends, stock repurchases, and other market conditions. For a discussion concerning risks and other factors that could affect future results, see the firm's 2023 Annual Report on Form 10-K.
Founded in 1937, T. Rowe Price (NASDAQ - GS: TROW) helps individuals and institutions around the world achieve their long-term investment goals. As a large global asset management company known for investment excellence, retirement leadership, and independent proprietary research, the firm is built on a culture of integrity that puts client interests first. Clients rely on the award-winning firm for its retirement expertise and active management of equity, fixed income, alternatives, and multi-asset investment capabilities. T. Rowe Price has $1.54 trillion in assets under management as of March 31, 2024, and serves millions of clients globally. News and other updates can be found on Facebook, Instagram, LinkedIn, X, YouTube, and troweprice.com/newsroom.
Webcast Information
Chief Executive Officer and President, Rob Sharps, Chief Financial Officer, Jen Dardis, and Head of Global Distribution, Dee Sawyer, will provide an update on business performance, review financial results, and answer questions on a webcast to be held on Friday, April 26, 2024 from 8:00 - 8:45 AM (Eastern Time). Head of Global Investments, Eric Veiel, will join for the Q&A. To access the webcast or to obtain dial in instructions to ask a question, please visit investors.troweprice.com.
Supplemental materials will be available on the company's investor relations website shortly before the start of the call. A replay of the webcast will be available on the company's investor relations website shortly after the event.
CONTACTS:
| Public Relations | Investor Relations | ||||||||||
| Jamaal Mobley | Linsley Carruth | ||||||||||
| 410-345-3403 | 410-345-3717 | ||||||||||
| jamaal.mobley@troweprice.com | linsley.carruth@troweprice.com | ||||||||||
7
| Unaudited Consolidated Statements of Income | ||||||||||||||||||||
| (in millions, except per-share amounts) | ||||||||||||||||||||
| Three months ended | ||||||||||||||||||||
| Revenues | 3/31/2024 | 3/31/2023 | 12/31/2023 | |||||||||||||||||
| Investment advisory fees | $ | 1,554.0 | $ | 1,391.8 | $ | 1,461.2 | ||||||||||||||
| Capital allocation-based income | 47.1 | 16.9 | 40.2 | |||||||||||||||||
| Administrative, distribution, and servicing fees | 149.1 | 128.9 | 140.6 | |||||||||||||||||
| Net revenues | 1,750.2 | 1,537.6 | 1,642.0 | |||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Compensation, benefits, and related costs | 629.3 | 593.3 | 649.4 | |||||||||||||||||
| Acquisition-related retention agreements | 13.5 | 14.2 | 13.5 | |||||||||||||||||
| Capital allocation-based income compensation | 13.2 | 3.5 | 10.6 | |||||||||||||||||
| Supplemental savings plan | 53.0 | 42.5 | 61.9 | |||||||||||||||||
| Total compensation and related costs | 709.0 | 653.5 | 735.4 | |||||||||||||||||
| Distribution and servicing | 81.9 | 71.5 | 75.7 | |||||||||||||||||
| Advertising and promotion | 25.3 | 25.8 | 44.4 | |||||||||||||||||
| Product and recordkeeping related costs | 75.0 | 72.1 | 68.1 | |||||||||||||||||
| Technology, occupancy, and facility costs | 149.9 | 146.6 | 171.6 | |||||||||||||||||
| General, administrative, and other | 92.6 | 107.5 | 128.1 | |||||||||||||||||
| Change in fair value of contingent consideration | — | (49.6) | (9.6) | |||||||||||||||||
| Acquisition-related amortization and impairment costs | 29.9 | 26.0 | 41.1 | |||||||||||||||||
| Total operating expenses | 1,163.6 | 1,053.4 | 1,254.8 | |||||||||||||||||
| Net operating income | 586.6 | 484.2 | 387.2 | |||||||||||||||||
| Non-operating income (loss) | ||||||||||||||||||||
| Net gains (losses) on investments | 121.5 | 93.9 | 141.5 | |||||||||||||||||
| Net gains (losses) on consolidated sponsored investment products | 72.3 | 45.4 | 119.2 | |||||||||||||||||
| Other gains (losses), including foreign currency gains (losses) | (4.9) | (3.9) | (1.0) | |||||||||||||||||
| Total non-operating income (loss) | 188.9 | 135.4 | 259.7 | |||||||||||||||||
| Income before income taxes | 775.5 | 619.6 | 646.9 | |||||||||||||||||
| Provision for income taxes | 182.1 | 177.9 | 173.3 | |||||||||||||||||
| Net income | 593.4 | 441.7 | 473.6 | |||||||||||||||||
| Less: net income (loss) attributable to redeemable non-controlling interests | 19.6 | 20.2 | 36.0 | |||||||||||||||||
| Net income attributable to T. Rowe Price | 573.8 | 421.5 | 437.6 | |||||||||||||||||
| Less: net income allocated to outstanding restricted stock and stock unit holders | 15.8 | 10.5 | 11.7 | |||||||||||||||||
| Net income allocated to T. Rowe Price common stockholders | $ | 558.0 | $ | 411.0 | $ | 425.9 | ||||||||||||||
| Earnings per share | ||||||||||||||||||||
| Basic | $ | 2.50 | $ | 1.83 | $ | 1.91 | ||||||||||||||
| Diluted | $ | 2.49 | $ | 1.83 | $ | 1.90 | ||||||||||||||
| Weighted-average common shares | ||||||||||||||||||||
| Outstanding | 223.6 | 224.4 | 223.5 | |||||||||||||||||
| Outstanding assuming dilution | 224.2 | 225.2 | 224.0 | |||||||||||||||||
8
The following table summarizes the cash flows for the three months ended 2024 that are attributable to T. Rowe Price Group, our consolidated sponsored investment products, and the related eliminations required.
| Three months ended | |||||||||||||||||||||||
| 3/31/2024 | |||||||||||||||||||||||
(in millions) | Cash flow attributable to T. Rowe Price | Cash flow attributable to consolidated T. Rowe Price investment products | Elims | As reported | |||||||||||||||||||
| Cash flows from operating activities | |||||||||||||||||||||||
| Net income (loss) | $ | 573.8 | $ | 70.0 | $ | (50.4) | $ | 593.4 | |||||||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities | |||||||||||||||||||||||
| Depreciation, amortization and impairments of property, equipment and software | 62.6 | — | — | 62.6 | |||||||||||||||||||
| Amortization and impairment of acquisition-related assets and retention agreements | 50.8 | — | — | 50.8 | |||||||||||||||||||
| Stock-based compensation expense | 58.4 | — | — | 58.4 | |||||||||||||||||||
| Net (gains) losses recognized on investments | (197.4) | — | 50.4 | (147.0) | |||||||||||||||||||
| Net redemptions in sponsored investment products used to economically hedge supplemental savings plan liability | 15.1 | — | — | 15.1 | |||||||||||||||||||
| Net change in trading securities held by consolidated sponsored investment products | — | (158.3) | — | (158.3) | |||||||||||||||||||
| Other changes | 176.2 | (7.4) | (6.5) | 162.3 | |||||||||||||||||||
| Net cash provided by (used in) operating activities | 739.5 | (95.7) | (6.5) | 637.3 | |||||||||||||||||||
| Net cash provided by (used in) investing activities | (34.4) | (0.1) | 25.9 | (8.6) | |||||||||||||||||||
| Net cash provided by (used in) financing activities | (355.2) | 106.8 | (19.4) | (267.8) | |||||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents of consolidated sponsored investment products | — | (0.8) | — | (0.8) | |||||||||||||||||||
| Net change in cash and cash equivalents during period | 349.9 | 10.2 | — | 360.1 | |||||||||||||||||||
| Cash and cash equivalents at beginning of year | 2,066.6 | 77.2 | — | 2,143.8 | |||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 2,416.5 | $ | 87.4 | $ | — | $ | 2,503.9 | |||||||||||||||
| Unaudited Condensed Consolidated Balance Sheet Information (in millions) | As of | ||||||||||
| 3/31/2024 | 12/31/2023 | ||||||||||
| Cash and cash equivalents | $ | 2,416.5 | $ | 2,066.6 | |||||||
| Accounts receivable and accrued revenue | 883.0 | 807.9 | |||||||||
| Investments | 2,588.7 | 2,554.7 | |||||||||
| Assets of consolidated sponsored investment products | 2,117.2 | 1,959.3 | |||||||||
| Operating lease assets | 234.9 | 241.1 | |||||||||
| Property, equipment and software, net | 846.4 | 806.6 | |||||||||
| Goodwill and intangible assets | 3,124.6 | 3,150.1 | |||||||||
| Other assets | 642.7 | 692.5 | |||||||||
| Total assets | 12,854.0 | 12,278.8 | |||||||||
| Supplemental savings plan liability | 927.4 | 895.0 | |||||||||
Total other liabilities, includes $71.1 at March 31, 2024, and $54.2 at December 31, 2023, from consolidated sponsored investment products | 1,260.4 | 1,092.6 | |||||||||
| Non-controlling interests* | 882.1 | 786.1 | |||||||||
Stockholders' equity attributable to T. Rowe Price Group, Inc., 223.5 common shares outstanding at March 31, 2024 and 223.9 common shares outstanding at December 31, 2023 | $ | 9,784.1 | $ | 9,505.1 | |||||||
* This includes both redeemable and non-redeemable non-controlling interest in consolidated entities.
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The following tables detail changes in our investments in affiliated private investment funds - carried interest and non-controlling interest in consolidated entities.
| Three months ended | |||||||||||||||||
| Investments in affiliated private investment funds - carried interest | 3/31/2024 | 3/31/2023 | 12/31/2023 | ||||||||||||||
| Balance at beginning of period | $ | 519.9 | $ | 467.8 | $ | 578.2 | |||||||||||
| Capital allocation-based income: | |||||||||||||||||
| Change in accrued carried interest | 59.5 | 29.2 | 51.1 | ||||||||||||||
| Acquisition-related amortization and impairments | (12.4) | (12.3) | (10.9) | ||||||||||||||
| Net distributions | (52.7) | (0.9) | (98.5) | ||||||||||||||
Balance at end of period | $ | 514.3 | $ | 483.8 | $ | 519.9 | |||||||||||
| Three months ended | |||||||||||||||||
| Non-controlling interests (NCI) in consolidated entities | 3/31/2024 | 3/31/2023 | 12/31/2023 | ||||||||||||||
| Balance at beginning of period | $ | 192.0 | $ | 190.7 | $ | 221.5 | |||||||||||
| Capital allocation-based income compensation: | |||||||||||||||||
| Change in accrued carried interest compensation | 18.5 | 8.6 | 15.2 | ||||||||||||||
| Acquisition-related amortization and impairments | (5.3) | (5.1) | (4.6) | ||||||||||||||
| Net contributions (distributions) | 0.2 | 0.2 | (40.1) | ||||||||||||||
Balance at end of period | $ | 205.4 | $ | 194.4 | $ | 192.0 | |||||||||||
Non-GAAP Information and Reconciliation
The firm believes the non-GAAP financial measures below provide relevant and meaningful information to investors about its core operating results. These measures have been established in order to increase transparency for the purpose of evaluating the firm's core business, for comparing current results with prior period results, and to enable more appropriate comparison with industry peers. However, non-GAAP financial measures should not be considered as a substitute for financial measures calculated in accordance with U.S. GAAP and may be calculated differently by other companies.
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The following schedules reconcile U.S. GAAP financial measures to non-GAAP financial measures for the three months ended March 31, 2024 and 2023 and December 31, 2023.
Three months ended 3/31/2024 | |||||||||||||||||||||||||||||||||||
| Operating expenses | Net operating income | Non-operating income (loss) | Provision (benefit) for income taxes(5) | Net income attributable to T. Rowe Price | Diluted earnings per share(6) | ||||||||||||||||||||||||||||||
| U.S. GAAP Basis (FS line item) | $ | 1,163.6 | $ | 586.6 | $ | 188.9 | $ | 182.1 | $ | 573.8 | $ | 2.49 | |||||||||||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||||||||||||
| Acquisition-related: | |||||||||||||||||||||||||||||||||||
Investment and NCI amortization and impairments(1) (Capital allocation-based income and Compensation and related costs) | 5.3 | 7.1 | — | 2.0 | 5.1 | 0.02 | |||||||||||||||||||||||||||||
Acquisition-related retention arrangements(1) (Compensation and related costs) | (13.5) | 13.5 | — | 3.8 | 9.7 | 0.04 | |||||||||||||||||||||||||||||
Intangible assets amortization and impairments(1) | (29.9) | 29.9 | — | 8.3 | 21.6 | 0.10 | |||||||||||||||||||||||||||||
| Total acquisition-related | (38.1) | 50.5 | — | 14.1 | 36.4 | 0.16 | |||||||||||||||||||||||||||||
Supplemental savings plan liability(2) (Compensation and related costs) | (53.0) | 53.0 | (49.7) | 0.9 | 2.4 | 0.01 | |||||||||||||||||||||||||||||
Consolidated T. Rowe Price investment products(3) | (1.1) | 2.3 | (72.3) | (14.0) | (36.4) | (0.16) | |||||||||||||||||||||||||||||
Other non-operating income(4) | — | — | (38.4) | (10.7) | (27.7) | (0.12) | |||||||||||||||||||||||||||||
| Adjusted Non-GAAP Basis | $ | 1,071.4 | $ | 692.4 | $ | 28.5 | $ | 172.4 | $ | 548.5 | $ | 2.38 | |||||||||||||||||||||||
Three months ended 3/31/2023 | |||||||||||||||||||||||||||||||||||
| Operating expenses | Net operating income | Non-operating income (loss) | Provision (benefit) for income taxes(5) | Net income attributable to T. Rowe Price | Diluted earnings per share(6) | ||||||||||||||||||||||||||||||
| U.S. GAAP Basis (FS line item) | $ | 1,053.4 | $ | 484.2 | $ | 135.4 | $ | 177.9 | $ | 421.5 | $ | 1.83 | |||||||||||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||||||||||||
| Acquisition-related: | |||||||||||||||||||||||||||||||||||
Investment and NCI amortization and impairments(1) (Capital allocation-based income and Compensation and related costs) | 5.1 | 7.2 | — | 1.5 | 5.7 | 0.02 | |||||||||||||||||||||||||||||
Acquisition-related retention arrangements(1) (Compensation and related costs) | (14.2) | 14.2 | — | 3.1 | 11.1 | 0.05 | |||||||||||||||||||||||||||||
Contingent consideration(1) | 49.6 | (49.6) | — | (10.5) | (39.1) | (0.17) | |||||||||||||||||||||||||||||
Intangible assets amortization and impairments(1) | (26.0) | 26.0 | — | 5.6 | 20.4 | 0.09 | |||||||||||||||||||||||||||||
| Total acquisition-related | 14.5 | (2.2) | — | (0.3) | (1.9) | (0.01) | |||||||||||||||||||||||||||||
Supplemental savings plan liability(2) (Compensation and related costs) | (42.5) | 42.5 | (44.7) | (0.5) | (1.7) | (0.01) | |||||||||||||||||||||||||||||
Consolidated T. Rowe Price investment products(3) | (2.9) | 3.5 | (45.4) | (4.6) | (17.1) | (0.07) | |||||||||||||||||||||||||||||
Other non-operating income(4) | — | — | (14.5) | (3.1) | (11.4) | (0.05) | |||||||||||||||||||||||||||||
| Adjusted Non-GAAP Basis | $ | 1,022.5 | $ | 528.0 | $ | 30.8 | $ | 169.4 | $ | 389.4 | $ | 1.69 | |||||||||||||||||||||||
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Three months ended 12/31/2023 | |||||||||||||||||||||||||||||||||||
| Operating expenses | Net operating income | Non-operating income (loss) | Provision (benefit) for income taxes(5) | Net income attributable to T. Rowe Price | Diluted earnings per share(6) | ||||||||||||||||||||||||||||||
| U.S. GAAP Basis (FS line item) | $ | 1,254.8 | $ | 387.2 | $ | 259.7 | $ | 173.3 | $ | 437.6 | $ | 1.90 | |||||||||||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||||||||||||
| Acquisition-related: | |||||||||||||||||||||||||||||||||||
Investment and NCI amortization and impairments(1) (Capital allocation-based income and Compensation and related costs) | 4.6 | 6.3 | — | 1.7 | 4.6 | 0.02 | |||||||||||||||||||||||||||||
Acquisition-related retention arrangements(1) (Compensation and related costs) | (13.5) | 13.5 | — | 3.6 | 9.9 | 0.04 | |||||||||||||||||||||||||||||
Contingent consideration(1) | 9.6 | (9.6) | — | (2.6) | (7.0) | (0.03) | |||||||||||||||||||||||||||||
Intangible assets amortization and impairments(1) | (41.1) | 41.1 | — | 11.1 | 30.0 | 0.14 | |||||||||||||||||||||||||||||
| Total acquisition-related | (40.4) | 51.3 | — | 13.8 | 37.5 | 0.17 | |||||||||||||||||||||||||||||
Supplemental savings plan liability(2) (Compensation and related costs) | (61.9) | 61.9 | (65.0) | (0.8) | (2.3) | (0.01) | |||||||||||||||||||||||||||||
Consolidated T. Rowe Price investment products(3) | (1.8) | 2.3 | (119.2) | (21.8) | (59.1) | (0.26) | |||||||||||||||||||||||||||||
Other non-operating income(4) | — | — | (26.0) | (7.0) | (19.0) | (0.08) | |||||||||||||||||||||||||||||
| Adjusted Non-GAAP Basis | $ | 1,150.7 | $ | 502.7 | $ | 49.5 | $ | 157.5 | $ | 394.7 | $ | 1.72 | |||||||||||||||||||||||
(1) These non-GAAP adjustments remove the impact of acquisition-related amortization and costs including intangible assets and acquired assets amortization and impairments, contingent consideration liability fair value remeasurements, amortization and impairments of acquired investments and non-controlling interest basis differences, and amortization of compensation-related arrangements. Management believes adjusting for these charges helps the reader's ability to understand the firm's core operating results and to increase comparability period to period.
(2) This non-GAAP adjustment removes the compensation expense impact from market valuation changes in the supplemental savings plan liability and the related net gains (losses) on investments designated as economic hedges against the related liability. Amounts deferred under the supplemental savings plan are adjusted for appreciation (depreciation) of hypothetical investments chosen by participants. The firm uses T. Rowe Price investment products to economically hedge the exposure to these market movements. Management believes it is useful to offset the non-operating investment income (loss) recognized on the economic hedges against the related compensation expense and remove the net impact to help the reader's ability to understand the firm's core operating results and to increase comparability period to period.
(3) These non-GAAP adjustments remove the impact the consolidated sponsored investment products have on the firm's U.S. GAAP consolidated statements of income. Specifically, the firm adds back the operating expenses and subtracts the investment income of the consolidated sponsored investment products. The adjustment to operating expenses represents the operating expenses of the consolidated products, net of the elimination of related management and administrative fees. The adjustment to net income attributable to T. Rowe Price represents the net income of the consolidated products, net of redeemable non-controlling interests. Management believes the consolidated sponsored investment products may impact the reader’s ability to understand the firm's core operating results.
(4) This non-GAAP adjustment represents the other non-operating income (loss) and the net gains (losses) earned on the firm's investment portfolio that are not designated as economic hedges of the supplemental savings plan liability and that are not part of the cash and discretionary investment portfolio. Management retains in its non-GAAP measures the investment gains recognized on the cash and discretionary investments as these assets and related income (loss) are considered part of the firm's core operations. Management believes adjusting for the remaining non-operating income (loss) helps the reader’s ability to understand the firm's core operating results and increases comparability to prior years. Additionally, management does not emphasize the impact of this portion of non-operating income (loss) when managing and evaluating the firm's performance.
(5) The income tax impacts were calculated in order to achieve an overall non-GAAP effective tax rate for the three months ended March 31, 2024 and 2023 was 23.9% and 30.3%, respectively.
(6) This non-GAAP measure was calculated by applying the two-class method to adjusted net income attributable to T. Rowe Price Group and dividing by the weighted-average common shares outstanding assuming dilution. The calculation of adjusted net income allocated to common stockholders is as follows:
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| Three months ended | |||||||||||||||||
| 3/31/2024 | 3/31/2023 | 12/31/2023 | |||||||||||||||
| Adjusted net income attributable to T. Rowe Price | $ | 548.5 | $ | 389.4 | $ | 394.7 | |||||||||||
| Less: adjusted net income allocated to outstanding restricted stock and stock unit holders | 15.2 | 9.6 | 10.6 | ||||||||||||||
| Adjusted net income allocated to common stockholders | $ | 533.3 | $ | 379.8 | $ | 384.1 | |||||||||||
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