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PRICE T ROWE GROUP INC (TROW)·Q1 2025 Earnings Summary

Executive Summary

  • Adjusted EPS of $2.23 rose sequentially (+5.2% vs Q4 2024) but declined year-over-year (-6.3% vs Q1 2024); GAAP diluted EPS was $2.15 . Versus Wall Street consensus, adjusted EPS beat by roughly $0.10 per share while revenue was modestly below consensus (see Estimates Context) *.
  • Net revenues of $1.7639B fell 3.3% sequentially and increased 0.8% YoY; investment advisory fees grew 4% YoY on higher average AUM, partially offset by fee-rate mix shift and lower carried interest (CABI) .
  • Firm-wide AUM ended at $1.566T (down $40.3B QoQ) with net client outflows of $8.6B concentrated in U.S. equities; inflows in target date (+$6.3B), fixed income (+$5.4B), and ETFs (+$3.26B) were positives .
  • Management lowered 2025 adjusted operating expense growth guidance to 1%–3% (from 4%–6% in February), a potential margin tailwind; the firm raised its FY2025 effective tax rate ranges vs Q4 disclosures .
  • Potential stock catalysts: expense discipline, accelerating ETF momentum and retirement expansion outside the U.S.; headwinds include fee-rate compression and equity outflows amid market volatility .

What Went Well and What Went Wrong

  • What Went Well

    • “We are making important progress…leveraging our leadership position in retirement…As of March 31, we had $1.57 trillion in AUM” (Rob Sharps) . Target date inflows were $6.3B in Q1 .
    • Strong product momentum: ETFs delivered $3.26B net inflows in Q1; eight ETFs had >$100M inflows, with Capital Appreciation Equity near $1B (Jen Dardis) .
    • Fixed income strength: +$5.4B net inflows, with several strategies each >$1B (Jen Dardis) .

  • What Went Wrong

    • Net client outflows of $8.6B, driven by U.S. equities and late-quarter rebalancing/derisking amid market volatility (Jen Dardis) .
    • Effective fee rate declined to 40.0 bps ex performance fees (from 41.6 bps YoY), reflecting mix shift toward lower-fee vehicles and strategies (management commentary) .
    • Carried interest contribution (CABI) reduced net revenues by $1.2M vs +$47.1M a year ago due to lower market returns .

Financial Results

MetricQ1 2024Q4 2024Q1 2025Consensus Q1 2025*
Net Revenues ($USD Millions)$1,750.2 $1,824.5 $1,763.9 $1,776.3*
Diluted EPS ($USD)$2.49 $1.92 $2.15 —
Adjusted EPS ($USD)$2.38 $2.12 $2.23 $2.1304*
Operating Margin (GAAP, %)33.5% 31.2% 33.8% —
Operating Margin (Adjusted, %)39.3% 33.7% 36.1% —
Ending AUM ($USD Billions)$1,542.2 $1,606.6 $1,566.3 —
Investment Advisory Fees ($USD Millions)Q1 2024Q4 2024Q1 2025
Equity$932.5 $1,006.2 $959.2
Fixed Income (incl. MM)$100.2 $106.2 $103.6
Multi-Asset$429.7 $473.8 $454.7
Alternatives$74.0 $81.0 $80.9
Performance-based Advisory Fees$17.6 $19.3 $10.4
Capital Allocation-Based Income (CABI)$47.1 $(5.2) $(1.2)
Admin/Distribution/Other Fees$149.1 $143.2 $156.3
KPIsQ1 2025
Net Client Flows ($USD Billions)$(8.6)
Net Flows by Asset Class ($USD Billions)Equity $(19.2); Fixed +5.4; Multi-Asset +5.5; Alternatives $(0.3)
Effective Fee Rate (bps, ex perf fees)40.0
Effective Fee Rate (bps, incl perf fees)40.3
Average AUM ($USD Billions)$1,620.3
Target Date Inflows ($USD Billions)$6.3
ETF Net Inflows ($USD Billions)$3.26 (Q1 commentary)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Operating Expenses growth (ex CABI comp)FY 2025+4% to +6% vs 2024 ($4.46B) +1% to +3% vs 2024 ($4.46B) Lowered
Effective Tax Rate (GAAP)FY 202523.0%–27.0% 23.5%–27.5% Raised
Effective Tax Rate (Adjusted)FY 202523.0%–26.0% 24.0%–27.0% Raised
Dividend per shareQ1 2025$1.24 (Q4 2024) $1.27 (declared May 9, 2025) Increased
Share RepurchasesQ1–Apr 2025—$217.5M in Q1; +$65.4M in April Ongoing/active

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
ETFs and platform placementAccelerating AUM; filings for CAP Premium Income & Hedged Equity $3.26B net inflows; specialist sales; roadmap expansion (Rob/Er ic) Improving
Fee rate dynamicsEFR down on mix shift EFR 40.0 bps; 60% structural shift to lower-fee vehicles; equity mix down (Jen) Downward pressure persists
Retirement expansion (intl.)Canada target date launch; insurance partnership Aspida New partnerships in Japan/Korea/Asia; first Canada client commitment Expanding
Alternatives/private credit (OHA)CABI higher in Q3; OHA momentum O-Credit flows slower but platform placements expanding; large dry powder; DC adoption gradual Mixed near-term; constructive LT
Macro/volatility & flowsQ4 net outflows tied to VA subadvisory; pipeline strong Late-March/early-April derisking; retail outflows normalized later; base case for 2025 flow improvement Gradual improvement
Expense disciplineSeasonal Q4 expenses elevated 2025 adjusted OpEx growth cut to 1%–3% Positive for margins
Insurance channelAspida partnership details (public/private credit) Continued focus; buybacks opportunistic (capital allocation) Building
Technology/AIInvestor CoPilot adoption (280 investors) Ongoing tech investment; HQ move; higher hosted solutions and depreciation Continued investment

Management Commentary

  • “We are making important progress and are extending our reach—leveraging our world class investment platform, our leadership position in retirement, and the strength of our brand” (Rob Sharps) .
  • “Our target date franchise had $6.3 billion of net inflows…In fixed income, we had strong net inflows of $5.4 billion…our ETF business had another successful quarter with net inflows of $3.26 billion” (Jen Dardis) .
  • “We now expect 2025 adjusted operating expenses…to be up 1% to 3% over 2024 $4.46 billion, down from the 4% to 6% range given in February” (Jen Dardis) .

Q&A Highlights

  • ETFs: Building differentiated offerings; focus on platform placement, specialist sales, and potential ETF share classes with IP/capacity considerations (Rob/Eric) .
  • Alternatives in DC: Management believes DC/wealth access to private markets will come over time; open to partnerships where needed; hurdles include liquidity, pricing, and fees (Rob/Eric) .
  • Fee-rate outlook: ~60% of Q1 decline structural (lower-fee vehicles/strategies); ~40% cyclical (mix shift away from equity); persistent trend expected (Jen) .
  • Flows/backlog: Base case for 2025 improvement vs 2024; early-April volatility drove retail outflows that normalized later; institutional flows solid; pipeline healthy (management) .
  • Capital allocation: ~$3.3B cash and discretionary investments; opportunistic buybacks and selective M&A, with focus on differentiated capabilities (Jen/Rob) .

Estimates Context

MetricActual Q1 2025Consensus Q1 2025*Surprise
Adjusted EPS ($USD)$2.23 $2.1304*Bold beat
Net Revenues ($USD Millions)$1,763.9 $1,776.3*Slight miss
EBITDA ($USD Millions)$708.9*$676.7*Beat
  • EPS beat driven by expense control and higher average AUM offsetting fee-rate declines and weaker carried interest; revenue miss modest, reflecting lower CABI and mix shift .
  • Note: Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

  • Expense guidance cut to +1%–3% for FY2025 is a meaningful positive for operating leverage amid fee-rate pressure .
  • Product momentum continues: target date (+$6.3B), fixed income (+$5.4B), and ETFs (+$3.26B) offer diversified flow drivers despite equity outflows .
  • Fee-rate compression from mix shifts (ETFs/CITs/SMAs; blend target date) likely persists; watch EFR trajectory and product mix for revenue yield implications .
  • Carried interest (CABI) contribution normalized lower vs last year; less upside variability in non-advisory revenue in current backdrop .
  • International retirement expansion (Japan/Korea/Asia/Canada) and insurance channel partnerships provide medium-term growth vectors beyond U.S. mutual funds .
  • Capital allocation remains shareholder-friendly (dividend to $1.27; stepped-up buybacks); liquidity supports opportunistic M&A/partnerships in private markets .
  • Near-term trading: EPS beat and expense discipline are positives; monitor equity market volatility’s impact on flows and fee-rate mix, and April AUM/outflows cadence .