01—Abstract
Summary
Summary of the 10-K filed February 15, 2023. Cited figures are marked; the original filing is the authoritative source.
T.
Rowe Price Group, Inc. (NASDAQ: TROW) reported a difficult 2022 in its 10-K filed February 15, 2023. Assets under management ended the year at $1,274.7 billiona, down $413.1 billion from $1,687.8 billion at the end of 2021, driven by market depreciation and losses of $351.4 billion and net cash outflows of $61.7 billion. Average AUM fell 12.6% to $1,398.4 billion, and investment advisory fees declined 15.9% to $5,969.1 million.
Net revenues fell 15.4% to $6,488.4 millionb, and the annualized effective fee rate eased to 42.7 basis points from 44.4. Net income attributable to T. Rowe Price Group fell 49.5% to $1,557.9 million, and diluted EPS dropped to $6.70 from $13.12.
The decline reflected lower revenue, net non-operating investment losses of $425.5 millionc, and a $175.1 million impairment on acquired investment management contract intangibles, along with $108.5 million of amortization on the Oak Hill Advisors (OHA) intangibles. The OHA acquisition, completed December 29, 2021, added $57 billion of alternative credit capital under management. Operating expenses rose 3.9% to $4,114.7 million, and the company estimated 2023 non-GAAP operating expense growth of 2% to 6%.
The balance sheet remained strong, with cash and cash equivalents of $1,755.6 milliond and stockholders' equity attributable to T. Rowe Price Group of $8,839.5 million at year-end.
The company returned $1,964.1 million to stockholders in 2022 through $1,108.8 million of recurring dividends and $855.3 million of repurchases, and it paid $4.80 per share in regular dividends. Investors should weigh the strong capital position against continued net outflows from U.S. mutual funds and the sensitivity of earnings to market levels and fee rates.
02—Key points
Key Highlights
- Ending AUM of $1,274.7 billion, down $413.1 billion from $1,687.8 billion, primarily from $351.4 billion in market depreciation and losses and $61.7 billion in net cash outflows.
- Net revenues decreased 15.4% to $6,488.4 million, with investment advisory fees down 15.9% to $5,969.1 million.
- Net income attributable to T. Rowe Price Group decreased 49.5% to $1,557.9 million; diluted EPS was $6.70 versus $13.12 in 2021.
- Non-operating loss of $425.5 million versus a $284.6 million gain in 2021, and a $175.1 million impairment on acquired intangible assets.
- Target date retirement products had net cash inflows of $11.3 billion and represented 26.2% of managed assets at year-end, up from 23.2%.
- Cash and cash equivalents of $1,755.6 million; $1,964.1 million returned to stockholders through dividends and repurchases in 2022.
- Company estimates 2023 non-GAAP operating expense growth of 2% to 6% and a full-year 2023 GAAP effective tax rate of 24.5% to 28.5%.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 15, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $6.49B$7.67B | −15.4% |
| Operating Expenses | $4.11B$3.96B | +3.9% |
| Operating Income | $2.37B$3.71B | −36.0% |
| Net Income | $1.56B$3.08B | −49.5% |
| EPS (Basic) | $6.73$13.25 | −49.2% |
| EPS (Diluted) | $6.70$13.12 | −48.9% |
| Shares Outstanding (Basic) | 226.00M226.60M | −0.3% |
| Shares Outstanding (Diluted) | 227.10M228.80M | −0.7% |
05—Questions
Frequently Asked Questions
How did assets under management change in 2022?
Ending AUM was $1,274.7 billion at December 31, 2022, a decrease of $413.1 billion from the end of 2021. The filing attributes $351.4 billion of the decline to market depreciation and losses, including distributions not reinvested, and $61.7 billion to net cash outflows. U.S. mutual funds fell to $627.8 billion from $871.4 billion.
Why did net income fall so sharply?
Net income attributable to T. Rowe Price Group fell 49.5% to $1,557.9 million. The filing cites lower investment advisory fees on lower average AUM, a non-operating loss of $425.5 million compared with a gain of $284.6 million in 2021, and fourth-quarter impairment charges of $175.1 million on investment management contract intangibles. A higher effective tax rate of 25.6% also contributed.
What is the impact of the Oak Hill Advisors acquisition?
T. Rowe Price completed the OHA acquisition on December 29, 2021, adding $57 billion of capital under management in alternative credit strategies as of December 31, 2022. The 2022 results include OHA's operating expenses, $108.5 million of definite-lived intangible amortization, and a $161.2 million reduction in the fair value of the contingent consideration liability. Up to $900.0 million of cash earnout may be due starting in 2025.
How much did the company return to shareholders?
In 2022 the company paid $1,108.8 million in recurring dividends and repurchased stock for $855.3 million, for total cash returned of $1,964.1 million. It paid $4.80 per share in regular dividends, an increase of 11.1% over 2021. The Board's remaining repurchase authorization was 8,775,217 shares at year-end.
What are the main risks highlighted in the filing?
The filing emphasizes that revenues depend on the value and composition of AUM, which is exposed to market declines, investor flows, and the continuing shift from active to passive investing. It also cites intense competition, reliance on third-party intermediaries, regulatory change, cybersecurity, and the risks of integrating OHA, including performance-fee dependence at OHA.
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