T. Rowe Price Group (TROW) Q3 2024 earnings summary

Executive summary

• Q3 2024 assets under management (AUM) reached $1.63 trillion, up from $1.57 trillion in Q2 and $1.35 trillion in Q3 2023, despite $12.2 billion in net outflows, mainly from US equity strategies, offset by $3.6 billion in target date inflows and $74.0 billion in market appreciation.

• Net income attributable to the company was $603.0 million (GAAP), with diluted EPS of $2.64 (GAAP) and $2.57 (adjusted), both up sharply year-over-year.

• Active ETF franchise and retirement solutions expanded, including new sector-focused and retirement income products.

• Long-term investment performance remains solid, with 68% of U.S. funds outperforming the Morningstar median over 10 years on an AUM-weighted basis.

• Returned $354 million to shareholders in Q3 via dividends and stock repurchases, with over $1.1 billion returned year-to-date.

Financial highlights

• Net revenues for Q3 2024 were $1.79 billion, up 6.9% year-over-year and 3% sequentially, driven by higher average AUM and investment advisory fees.

• Adjusted operating income was $718 million, up 13% year-over-year and almost 10% sequentially.

• Operating expenses (GAAP) were $1.17 billion, up 7.6% year-over-year; adjusted operating expenses were $1.1 billion, up 3.6% year-over-year.

• Q3 annualized effective fee rate declined to 40.9 bps as assets shifted to lower-fee vehicles.

• Operating margin was 34.4% (GAAP) and 39.5% (adjusted) in Q3 2024.

Outlook and guidance

• Management expects to reduce net outflows for the full year, with 2024 net outflows projected to be less than half of 2023 levels, excluding the VA termination.

• Further increases in net outflows are expected in Q4 due to seasonal trends and a large VA termination.

• 2024 adjusted operating expenses (excluding carried interest) expected to be 6%-8% above 2023's $4.19 billion.

• 2024 effective tax rate is projected at 23.5%–26.5% (GAAP) and 23.5%–25.5% (non-GAAP).

• For 2025, further improvement in flows is anticipated, with strong growth expected in retirement date funds, alternatives, ETFs, and SMAs.