01—Abstract
Summary
Summary of the 10-Q filed April 26, 2024. Cited figures are marked; the original filing is the authoritative source.
T.
Rowe Price Group, Inc. reported first-quarter 2024 net revenues of $1,750.2 milliona, up 13.8% from $1,537.6 million in the first quarter of 2023, driven by an 11.7% increase in investment advisory fees as average assets under management rose 12.2% to $1,484.4 billion. U.S. GAAP operating expenses rose 10.5% to $1,163.6 million, and net income attributable to T. Rowe Price increased 36.1% to $573.8 million, or $2.49 diluted earnings per share, versus $1.83 a year earlier.
The filing notes that the first-quarter 2023 results included a $49.6 millionb reduction in the OHA contingent consideration liability, which made the comparison with 2024 less favorable on an expense basis. On a non-GAAP basis, which excludes consolidated sponsored investment products, supplemental savings plan market effects, and acquisition-related items, diluted earnings per share were $2.38, up from $1.69. Ending assets under management were $1,542.2 billion at March 31, 2024, up $97.7 billion from year-end 2023, with market appreciation of $105.7 billion partly offset by net outflows of $8.0 billion.
The investment advisory effective fee rate declined to 42.1 basis points from 42.7 basis points a year earlier, reflecting a mix shift toward lower-fee vehicles. Balance sheet liquidity strengthened, with cash and cash equivalents rising to $2,416.5 millionc from $2,066.6 million at December 31, 2023.
The company returned $365.1 milliond to stockholders in the quarter, including $285.0 million in dividends and $80.1 million in share repurchases, and raised its quarterly dividend to $1.24 per share from $1.22. KPMG LLP issued a review report with no material modifications identified.
02—Key points
Key Highlights
- Net revenues of $1,750.2 million, up 13.8% from $1,537.6 million in Q1 2023.
- Net income attributable to T. Rowe Price Group of $573.8 million, up 36.1% from $421.5 million; diluted EPS of $2.49 versus $1.83.
- Non-GAAP diluted EPS of $2.38 versus $1.69 in the prior-year quarter.
- Ending assets under management of $1,542.2 billion, up $97.7 billion in the quarter, with net cash outflows of $8.0 billion and market appreciation and income of $105.7 billion.
- Investment advisory effective fee rate of 42.1 bps, down from 42.7 bps, as mix shifted toward lower-fee vehicles.
- Cash and cash equivalents of $2,416.5 million at March 31, 2024; $365.1 million returned to stockholders in the quarter, including $80.1 million of share repurchases.
- Quarterly dividend raised to $1.24 per share from $1.22; full-year 2024 U.S. GAAP effective tax rate guided to 23% to 27%.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed April 26, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $1.75B$1.54B | +13.8% |
| Operating Expenses | $1.16B$1.05B | +10.5% |
| Operating Income | $586.60M$484.20M | +21.1% |
| Net Income | $573.80M$421.50M | +36.1% |
| EPS (Basic) | $2.50$1.83 | +36.6% |
| EPS (Diluted) | $2.49$1.83 | +36.1% |
| Shares Outstanding (Basic) | 223.60M224.40M | −0.4% |
| Shares Outstanding (Diluted) | 224.20M225.20M | −0.4% |
05—Questions
Frequently Asked Questions
What drove the increase in revenue and earnings this quarter?
Investment advisory fees rose 11.7% to $1,554.0 million as average assets under management increased 12.2% to $1,484.4 billion. Capital allocation-based income rose to $47.1 million from $16.9 million, reflecting a $30.2 million increase in accrued carried interest. Operating margin on a U.S. GAAP basis improved to 33.5% from 31.5%.
Why did U.S. GAAP operating expenses increase, and how much of that was one-time?
U.S. GAAP operating expenses rose 10.5% to $1,163.6 million. About 45% of the increase came from the prior-year contingent consideration remeasurement, since the first quarter of 2023 included a $49.6 million reduction in the liability and the first quarter of 2024 had no change. The remaining drivers were higher compensation, including higher accrued carried interest compensation, and higher distribution and servicing costs.
Are investors seeing net inflows or outflows?
The firm experienced net cash outflows of $8.0 billion in the first quarter of 2024 before market appreciation. Multi-asset strategies had net inflows of $5.5 billion, while equity strategies had net outflows of $12.8 billion. Target date retirement products had net inflows of $6.8 billion.
How is the company returning capital to shareholders?
In the first quarter of 2024, the company paid $285.0 million in dividends and repurchased 717 thousand shares for $80.1 million, at an average price of $111.11 per share. The quarterly dividend was increased 1.6% to $1.24 per share.
What is the status of the OHA earnout and related commitments?
The contingent consideration liability for the OHA acquisition was $13.4 million at March 31, 2024, unchanged in the quarter, and the earnout may be payable in cash from 2025 to 2027 if defined revenue targets are met, with a possible extension of two years. The company has committed $397 million to fund OHA products over the next three years.
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