Why did T. Rowe Price report net outflows despite higher assets under management?

Ending AUM rose $61.8 billion, but the increase came mainly from $74.0 billion of net market appreciation and income. Net cash flows were negative $12.2 billion, with equity strategies accounting for $16.1 billion of outflows, according to the AUM table and the earnings supplement, which attributes the outflows largely to U.S. equity strategies.

What drove the year-over-year change in GAAP earnings per share?

GAAP diluted EPS rose to $2.64 from $1.97, and net income attributable to T. Rowe Price increased to $603.0 million from $453.2 million. Non-operating income was $212.5 million, compared with $2.8 million a year earlier, and included $85.9 million in net gains on consolidated sponsored investment products. Capital allocation-based income was $4.6 million, down from $66.1 million.

Why did the effective fee rate decline?

The firm said client flows and transfers shifted assets under management toward lower-fee products and asset classes. The annualized effective fee rate excluding performance-based fees was 40.7 basis points, compared with 41.6 basis points in Q3 2023 and 41.1 basis points in Q2 2024.

How much did the firm return to stockholders, and what is its tax rate outlook?

The firm returned $354 million to stockholders through the recurring quarterly dividend and stock repurchases in Q3 2024. For full-year 2024, it estimates an effective tax rate of 23.5% to 26.5% on a U.S. GAAP basis and 23.5% to 25.5% on a non-GAAP basis. The year-to-date GAAP effective rate was 23.5%.

TROW 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed November 1, 2024. Cited figures are marked; the original filing is the authoritative source.

T.

Rowe Price Group, Inc. (NASDAQ-GS: TROW) reported third-quarter 2024 results on November 1, 2024. Quarter-end assets under management were $1.63 trillion^a, up $61.8 billion from the prior quarter, but the firm recorded net client outflows of $12.2 billion. Net revenues were $1,785.6 million, up 6.9% from the year-ago quarter and 3.0% from the second quarter of 2024.

U.S. GAAP diluted earnings per share were $2.64^b, compared with $1.97 in the third quarter of 2023, and adjusted diluted EPS was $2.57, compared with $2.17. GAAP operating expenses rose 7.6% year over year to $1,172.0 million, while adjusted operating expenses rose 3.6% to $1,099.0 million. Non-operating income was $212.5 million on a GAAP basis, aided by $85.9 million in net gains on consolidated sponsored investment products.

The investment advisory annualized effective fee rate, excluding performance-based fees, declined to 40.7 basis points from 41.6 basis points a year earlier, which the company attributed to a mix shift toward lower-fee products and asset classes. The firm returned $354 million^c to stockholders through its dividend and share repurchases during the quarter. Management stated that it remains on track to reduce net outflows in 2024.

The firm also expects its full-year 2024 effective tax rate to fall between 23.5%^d and 26.5% on a U.S. GAAP basis and between 23.5% and 25.5% on a non-GAAP basis. The filing furnishes an earnings release supplement as Exhibit 99.2 and a press release announcing the results as Exhibit 99.1.

02—Key points

Key Highlights

Assets under management reached $1.63 trillion at September 30, 2024, an increase of $61.8 billion during the quarter, driven by $74.0 billion in net market appreciation and income.
Net client outflows were $12.2 billion in Q3 2024, compared with $3.7 billion in Q2 2024 and $17.4 billion in Q3 2023, per the earnings supplement.
GAAP diluted EPS was $2.64 versus $1.97 in Q3 2023; adjusted diluted EPS was $2.57 versus $2.17.
Net revenues were $1,785.6 million, up 6.9% year over year, with investment advisory fees of $1,632.9 million, up 11.5%.
GAAP operating expenses were $1,172.0 million, up 7.6% year over year; adjusted operating expenses were $1,099.0 million, up 3.6%.
The annualized effective fee rate excluding performance-based fees fell to 40.7 basis points from 41.6 basis points in Q3 2023.
The firm returned $354 million to stockholders through dividends and share repurchases in the quarter, and expects a full-year 2024 GAAP effective tax rate of 23.5% to 26.5%.

03—Questions

Frequently Asked Questions

Why did T. Rowe Price report net outflows despite higher assets under management?
Ending AUM rose $61.8 billion, but the increase came mainly from $74.0 billion of net market appreciation and income. Net cash flows were negative $12.2 billion, with equity strategies accounting for $16.1 billion of outflows, according to the AUM table and the earnings supplement, which attributes the outflows largely to U.S. equity strategies.
What drove the year-over-year change in GAAP earnings per share?
GAAP diluted EPS rose to $2.64 from $1.97, and net income attributable to T. Rowe Price increased to $603.0 million from $453.2 million. Non-operating income was $212.5 million, compared with $2.8 million a year earlier, and included $85.9 million in net gains on consolidated sponsored investment products. Capital allocation-based income was $4.6 million, down from $66.1 million.
Why did the effective fee rate decline?
The firm said client flows and transfers shifted assets under management toward lower-fee products and asset classes. The annualized effective fee rate excluding performance-based fees was 40.7 basis points, compared with 41.6 basis points in Q3 2023 and 41.1 basis points in Q2 2024.
How much did the firm return to stockholders, and what is its tax rate outlook?
The firm returned $354 million to stockholders through the recurring quarterly dividend and stock repurchases in Q3 2024. For full-year 2024, it estimates an effective tax rate of 23.5% to 26.5% on a U.S. GAAP basis and 23.5% to 25.5% on a non-GAAP basis. The year-to-date GAAP effective rate was 23.5%.

04—Continue

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