01—Abstract
Summary
Summary of the 10-K filed February 24, 2022. Cited figures are marked; the original filing is the authoritative source.
T.
Rowe Price Group, Inc. is a financial services holding company providing global investment management services through its subsidiaries. At December 31, 2021, it reported $1,687.8 billiona in assets under management, up $217.3 billion from the end of 2020, driven by market appreciation and income of $198.9 billion and $46.9 billion of fee-basis assets acquired with Oak Hill Advisors (OHA), partially offset by net cash outflows of $28.5 billion. Net revenues rose 23.6% to $7,671.9 million and net income attributable to T.
Rowe Price Group increased 29.9% to $3,082.9 millionb, with diluted earnings per share of $13.12 compared with $9.98 in 2020. Operating expenses rose 14.5% to $3,961.9 million, and the operating margin was 48.4% versus 44.2% in 2020. The December 29, 2021 acquisition of OHA, a leading alternative credit manager, was made for upfront consideration of $3.4 billion in cash and common stock, with a further earnout of up to $900.0 million in cash tied to revenue targets from 2025 to 2027.
OHA's results were not included in 2021 operating results; the filing states that beginning in 2022 OHA-related advisory fees, performance fees and carried interest will be included, and that acquisition-related amortization, contingent consideration remeasurement and retention compensation will affect operating results. The company expects 2022 non-GAAP operating expenses to grow 12% to 16% including a full year of OHA. Goodwill totaled $2,693.2 millionc at year-end, of which $2,027.5 million came from OHA.
Capital returns remained significant: the company paid $4.32d per share in regular dividends for 2021, a $3.00 special dividend, and repurchased 5.9 million shares for $1,136.0 million. Cash and discretionary investments fell to $2,077.2 million from $4,247.4 million, and the company reports ample liquidity. Stockholders' equity attributable to T.
Rowe Price Group rose to $9.0 billion from $7.7 billion. The filing also notes continued industry headwinds, including passive investing taking market share from active strategies and downward fee pressure.
02—Key points
Key Highlights
- Assets under management reached $1,687.8 billion at December 31, 2021, up $217.3 billion from $1,470.5 billion at the end of 2020.
- Net revenues increased 23.6% to $7,671.9 million, and net income attributable to T. Rowe Price Group rose 29.9% to $3,082.9 million.
- Diluted earnings per share were $13.12 in 2021 versus $9.98 in 2020; the operating margin improved to 48.4% from 44.2%.
- The OHA acquisition closed December 29, 2021 with upfront consideration of $3.4 billion (cash and stock), plus up to $900.0 million of earnout; OHA added $57 billion of capital under management, of which $46.9 billion of fee-basis AUM is included in year-end AUM.
- OHA results were not included in 2021 income; 2022 operating expenses are expected to grow 12% to 16% (non-GAAP, including OHA) versus 4% to 8% excluding OHA.
- Net cash outflows were $28.5 billion in 2021, including about $2.5 billion redeemed from U.S. mutual funds to fund the OHA cash payment.
- Shareholder returns in 2021 included $4.32 per share in regular dividends, a $3.00 special dividend ($699.8 million), and $1,136.0 million in share repurchases.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 24, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $7.67B$6.21B | +23.6% |
| Operating Expenses | $3.96B$3.46B | +14.5% |
| Operating Income | $3.71B$2.75B | +35.1% |
| Net Income | $3.08B$2.37B | +29.9% |
| EPS (Basic) | $13.25$10.08 | +31.4% |
| EPS (Diluted) | $13.12$9.98 | +31.5% |
| Shares Outstanding (Basic) | 226.60M228.80M | −1.0% |
| Shares Outstanding (Diluted) | 228.80M231.20M | −1.0% |
05—Questions
Frequently Asked Questions
What drove the growth in assets under management in 2021?
AUM increased $217.3 billion, primarily from market appreciation and income of $198.9 billion net of distributions not reinvested, and $46.9 billion of fee-basis assets acquired with OHA. These were partially offset by net cash outflows of $28.5 billion.
What is the OHA acquisition and how will it affect future results?
OHA is an alternative credit manager acquired on December 29, 2021 for upfront consideration of $3.4 billion in cash and common stock, plus up to $900.0 million in earnout tied to revenue targets. Beginning in 2022, OHA-related advisory fees, performance fees and carried interest will be included in results, and the company expects acquisition-related intangible amortization, contingent consideration remeasurement and retention compensation to affect operating results.
Why did operating expenses and operating margin change in 2021?
Operating expenses rose 14.5% to $3,961.9 million, mainly from higher compensation (including bonuses and stock-based compensation), higher distribution and servicing costs, and costs under the expanded FIS recordkeeping relationship, partly offset by the transfer of about 800 associates to FIS. The operating margin rose to 48.4% from 44.2% because revenue growth outpaced expense growth.
How much did the company return to stockholders in 2021?
The company paid $4.32 per share in regular dividends, a $3.00 per share special dividend totaling $699.8 million, and repurchased 5.9 million shares for $1,136.0 million, for total cash returned of $2,839.5 million for 2021.
What are the main risks the filing highlights?
Revenues depend on the value and composition of AUM, so market declines, investor outflows and investment underperformance could reduce fees. The filing also cites competitive pressure from passive products and fee reductions, dependence on contracts with the U.S. mutual funds that can be terminated on 60 days' notice, cybersecurity and operational risks, and an evolving regulatory environment.
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