01—Abstract
Summary
Summary of the 10-K filed February 16, 2024. Cited figures are marked; the original filing is the authoritative source.
T.
Rowe Price Group, Inc. reported net revenues of $6,460.5 milliona for 2023, essentially flat versus $6,488.4 million in 2022, as investment advisory fees fell to $5,747.7 million from $5,969.1 million. Average assets under management decreased $36.1 billion, or 2.6%, to $1,362.3 billion, and the annualized effective fee rate declined to 42.2 basis points from 42.7. Operating expenses rose 8.7% to $4,474.3 million on a U.S. GAAP basis, largely due to market movements on the supplemental savings plan liability, so operating margin fell to 30.7% from 36.6%.
U.S. GAAP net income attributable to T. Rowe Price Group increased to $1,788.7 millionb, or $7.76 per diluted share, from $1,557.9 million, or $6.70, driven by non-operating investment income of $504.1 million versus a loss of $425.5 million in 2022. On a non-GAAP basis, diluted earnings per share were $7.59 versus $8.02 a year earlier.
Ending AUM rose $169.8 billion to $1,444.5 billionc, driven by $251.6 billion of market appreciation, partially offset by $81.8 billion of net cash outflows, concentrated in growth-oriented equity strategies. The firm returned $1,376.2 million to stockholders in 2023 through dividends ($4.88 per share) and $254.3 million of repurchases, and reported cash and cash equivalents of $2,066.6 million at year-end. Management estimates 2024 non-GAAP operating expenses excluding accrued carried interest compensation will grow 3% to 5%, and projects a 2024 GAAP effective tax rate of 23.0% to 27.0%.
02—Key points
Key Highlights
- Ending AUM of $1,444.5 billion, up $169.8 billion from 2022, driven by $251.6 billion in market appreciation and offset by $81.8 billion in net cash outflows.
- Net revenues of $6,460.5 million, down 0.4% from $6,488.4 million, as investment advisory fees declined 3.7% to $5,747.7 million.
- Operating margin of 30.7%, down from 36.6% in 2022, with U.S. GAAP operating expenses up 8.7% to $4,474.3 million.
- U.S. GAAP diluted EPS of $7.76, up from $6.70, while non-GAAP diluted EPS fell to $7.59 from $8.02.
- Non-operating income of $504.1 million, compared with a loss of $425.5 million in 2022, reflecting investment market gains.
- Target date retirement product AUM of $408.4 billion, 28.3% of managed assets, with net inflows of $13.1 billion in 2023.
- Estimated 2024 non-GAAP operating expense growth of 3%-5% excluding accrued carried interest compensation; cash and cash equivalents of $2,066.6 million at year-end.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 16, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $6.46B$6.49B | −0.4% |
| Operating Expenses | $4.47B$4.11B | +8.7% |
| Operating Income | $1.99B$2.37B | −16.3% |
| Net Income | $1.79B$1.56B | +14.8% |
| EPS (Basic) | $7.78$6.73 | +15.6% |
| EPS (Diluted) | $7.76$6.70 | +15.8% |
| Shares Outstanding (Basic) | 224.10M226.00M | −0.8% |
| Shares Outstanding (Diluted) | 224.80M227.10M | −1.0% |
05—Questions
Frequently Asked Questions
Why did T. Rowe Price's operating margin decline in 2023?
The filing attributes the decline from 36.6% to 30.7% primarily to lower investment advisory revenue from lower average assets under management and higher operating expenses. U.S. GAAP operating expenses rose 8.7% to $4,474.3 million, with the impact of market movements on the supplemental savings plan liability accounting for about 70% of the increase.
Why did GAAP diluted EPS rise while non-GAAP diluted EPS fell?
GAAP diluted EPS increased to $7.76 from $6.70, primarily because of net investment income in 2023 versus net investment losses in 2022. Non-GAAP diluted EPS declined to $7.59 from $8.02 due to lower operating income and a higher effective tax rate, partly offset by investment income on the cash and discretionary portfolio.
What drove the change in assets under management in 2023?
Ending AUM rose $169.8 billion to $1,444.5 billion. Market appreciation, net of distributions not reinvested, contributed $251.6 billion, while net cash outflows of $81.8 billion partly offset it. Net outflows were driven primarily by growth-oriented equity strategies sourced from Americas financial intermediaries and institutional clients, while multi-asset and alternative strategies had net inflows.
What is the outlook for expenses and taxes in 2024?
The company estimates 2024 non-GAAP operating expenses, excluding non-GAAP accrued carried interest compensation, will grow 3% to 5% from $4,190.7 million in 2023. It estimates the full-year 2024 effective tax rate at 23.0% to 27.0% on a GAAP basis and 23% to 26% on a non-GAAP basis. Capital expenditures for 2024 are expected to be about $487 million.
06—Continue