T. Rowe Price Group (TROW) Q3 2024 earnings summary

Executive summary

• Assets under management (AUM) reached $1.63 trillion at quarter-end, up 3.9% from June 30 and 21.1% year-over-year, despite $12.2 billion in net outflows primarily from U.S. equity strategies.

• Net outflows were offset by $74.0 billion in market appreciation and income, with strong inflows in target date, multi-asset, and alternatives.

• The firm expanded its ETF business and launched new retirement solutions, including Personalized Retirement Manager and Managed Lifetime Income.

• Retirement assets represent about two-thirds of AUM, with $722 billion in U.S. defined contribution and $482 billion in target date AUM.

• A large sub-advised variable annuity termination will drive higher outflows in Q4, but excluding this, 2024 net outflows are expected to be less than half of 2023 levels.

Financial highlights

• Adjusted EPS for Q3 2024 was $2.57, up 18.4% year-over-year; diluted GAAP EPS was $2.64, with net income at $603.0 million.

• Net revenues for Q3 2024 were $1.79 billion, up 6.9% year-over-year and 3% sequentially, with investment advisory revenue at $1.63 billion.

• Adjusted operating income was $718 million, up 13% year-over-year; GAAP operating income was $613.6 million.

• Adjusted operating expenses rose 3.6% year-over-year to $1,099.0 million; GAAP operating expenses were $1,172.0 million, up 7.6%.

• Effective tax rate for Q3 2024 was 22.5% (GAAP) and 23.8% (non-GAAP), both lower than the prior year.

Outlook and guidance

• 2024 adjusted operating expenses (excluding carried interest) are expected to be 6%-8% above 2023, with Q4 expenses rising due to seasonality and project completions.

• Management expects to reduce net outflows for the full year and projects a 2024 effective tax rate of 23.5%–26.5% (GAAP) and 23.5%–25.5% (non-GAAP).

• For 2025, further improvement in net flows is expected, with a larger contribution from alternatives, ETFs, and SMAs, though a return to positive organic growth may not occur for the full year.

• Expense growth for 2025 will likely align with revenue growth, with continued investment in ETFs, alternatives, and technology.

• Capital expenditures for 2024 are projected at $460 million, with 60% allocated to technology initiatives.