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PRICE T ROWE GROUP INC (TROW)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue and EPS grew year over year, but margins compressed sequentially on higher Q4 compensation and marketing spend; GAAP revenue $1.824B (+11% YoY, +2% QoQ), GAAP EPS $1.92 (+1% YoY, -27% QoQ), Adjusted EPS $2.12 (+23% YoY, -18% QoQ) .
  • Net outflows of $19.3B were concentrated in multi-asset and equities; Target Date delivered +$2.2B in Q4 and +$16.3B for 2024, and fixed income and alternatives posted positive flows for both Q4 and FY .
  • Fee rate mix headwinds persisted (EFR ex performance fees 40.5 bps vs 40.7 bps in Q3 and 41.5 bps in Q4’23) as sales skewed to lower-fee vehicles and redemptions skewed to higher-fee mutual funds; management expects manageable ongoing compression .
  • 2025 outlook: adjusted operating expenses (ex carried interest compensation) guided +4% to +6%; effective tax rate guided to 23%–27% (GAAP) and 23%–26% (non‑GAAP); dividend raised 2.4% to $1.27 per share in Feb-2025 .

What Went Well and What Went Wrong

What Went Well

  • Target Date momentum and ETF growth: Target Date +$2.2B in Q4 and +$16.3B for 2024; ETF net inflows +$1.4B in Q4 and +$4.7B for 2024; management highlighted gross sales strength and a stronger year-end pipeline .
  • Insurance channel and alternatives: Fixed income and alternatives had positive net flows in Q4 and FY; newly announced Aspida partnership expected to add public and private mandates and broaden insurance opportunities .
  • Investment performance and product advances: 61% of AUM beat peer medians over 1-year; management filed for new ETFs (e.g., capital appreciation premium income) and is expanding integrated equity and private allocations capabilities .

Quote: “I am optimistic that we remain on the path to positive flows, and we are on pace to further reduce outflows again this year.” — Rob Sharps .

What Went Wrong

  • Continued net outflows and multi-asset pressure: Q4 net outflows of $19.3B (largely multi-asset and equities), with a previously disclosed sub‑advisory variable annuity redemption impacting November–December .
  • Fee rate pressure: Annualized effective fee rate (ex performance fees) fell to 40.5 bps from 41.5 bps YoY as mix shifted toward lower-fee vehicles (ETFs, CITs, separate accounts) and outflows came from higher-fee mutual funds; 2024 compression ~2% vs historical 1–1.5% .
  • Sequential margin decline: GAAP operating margin fell to 31.2% (Q3: 34.4%) and adjusted to 33.7% (Q3: 39.5%) amid higher Q4 bonus accruals, annual long-term grants, and increased media spend .

Financial Results

Income Statement and Profitability

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Net Revenues ($B)$1.642 $1.733 $1.786 $1.825
GAAP Diluted EPS$1.90 $2.11 $2.64 $1.92
Adjusted Diluted EPS$1.72 $2.26 $2.57 $2.12
GAAP Operating Margin23.6% 32.6% 34.4% 31.2%
Adjusted Operating Margin30.4% 37.2% 39.5% 33.7%

Notes: Q4 revenue +11% YoY/+2% QoQ; GAAP EPS +1% YoY/−27% QoQ; Adjusted EPS +23% YoY/−18% QoQ .

AUM and Flows

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Ending AUM ($T)$1.445 $1.569 $1.631 $1.607
Net Flows ($B)$(28.3) $(3.7) $(12.2) $(19.3)
Avg AUM ($T)$1.374 $1.534 $1.590 $1.639

Fee Rates (annualized EFR)

MetricQ4 2023Q2 2024Q3 2024Q4 2024
EFR excl. performance fees (bps)41.5 41.6 40.7 40.5
EFR incl. performance fees (bps)42.2 —40.9 40.9

Segment (Asset Class) Advisory Fees ($M)

Asset ClassQ4 2023Q3 2024Q4 2024
Equity$864.3 $978.5 $1,006.2
Fixed Income (incl. MM)$98.2 $104.1 $106.2
Multi‑Asset$400.6 $465.8 $473.8
Alternatives$72.8 $84.5 $81.0
Total Investment Advisory Fees$1,435.9 $1,632.9 $1,667.2

KPIs and Other Items

KPIQ4 2023Q2 2024Q3 2024Q4 2024
Target Date net flows ($B)—+3.7 +3.6 +2.2
ETF net flows ($B)———+1.4 (Q4), +4.7 FY
Alternatives fee‑basis AUM ($B)47.9 (Dec-23) ——52.8 (Dec-24)
Unfunded commitments ($B)11.6 (Dec-23) —14.5 (Sep-24) 16.2 (Dec-24)
Capital allocation‑based income (CABI) ($M)+40.2 +0.1 +4.6 (5.2)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted operating expenses excl. carried interest compensationFY 2025—Up 4%–6% vs 2024 level of $4.456B New
Effective tax rate (GAAP)FY 2025—23%–27% New
Effective tax rate (Non‑GAAP)FY 2025—23%–26% New
Dividend per share (quarterly)Mar 2025 payment$1.24 (prior rate) $1.27 (+2.42%) Raised
2024 adjusted opex excl. carried interest compensationFY 20246%–8% YoY increase (framework) Actual: +6.3% to $4.456B In line

Qualitative additions: management flagged $20–$30M of 2025 real estate costs tied to moving into the new Baltimore HQ (partly double rent, partly capacity-driven step-up) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
AI/technology enablement—280 investors using “Investor CoPilot” GenAI tool; productivity potential as use cases mature Expanding internal AI usage
Macro/market breadthQ2: steady progress; pipeline healthy . Q3: revenues +6.9% YoY; active challenges persist Market narrowness (8 stocks drove ~60% of S&P 500 return), factor volatility made alpha generation harder Macro breadth still narrow; alpha headwinds
Product performanceQ2/Q3: Target Date inflows +$3.7B/+3.6B; ETFs scaling Target Date +$2.2B Q4; ETFs +$1.4B Q4 (+$4.7B FY); fixed income and alts positive flows Multi‑product momentum improving
Fee rate/price competitionEFR down to 41.6 bps (Q2) and 40.7 bps excl perf (Q3) on mix to low-fee vehicles 40.5 bps excl perf; 2024 compression ~2% (above 1–1.5% historical); manageable going forward Ongoing manageable compression
Insurance channel—Insurance wins in fixed income; Aspida partnership to manage public and private assets; broader insurer opportunity Strategic push accelerating
DC/Retirement & alts—; Q3 noted retirement leadership Exploring alts in DC; hurdles remain (fee budgets, liquidity, daily pricing); mostly custom for now Early-stage exploration
Regional trendsQ3: APAC/EMEA positive flows EMEA/APAC positive net flows in Q4 and FY International traction

Management Commentary

  • Strategy and flows: “We closed 2024 with $1.6 trillion in AUM and $43.2 billion in 2024 net outflows—which we reduced by nearly half year over year… I am optimistic that we remain on the path to positive flows” — Rob Sharps .
  • Fee dynamics: “We have seen higher fee compression this year… about 2%… elevated redemptions in mutual funds (higher fee) and sales in lower-fee vehicles” — CFO Jen Dardis .
  • Expense framework and capital: “We anticipate 2025 adjusted operating expenses, excluding carried interest expense, will be up 4% to 6%... We bought back $71M in Q4 and $355M in 2024; cash and discretionary investments $3.1B” — CFO Jen Dardis .
  • Insurance/alternatives: “Partnership with Aspida… will allow us to refine our insurance asset management offering… potential to co‑develop offerings with Aspida and Ares” — Rob Sharps ; “We expect to manage certain Aspida public and private assets” — press release .

Q&A Highlights

  • Insurance strategy and Aspida: Non‑exclusive partnership expected to expand life/annuity opportunities; near-term benefits with potential to build over time; collaboration spans TRP fixed income and OHA private credit/structured offerings .
  • Fee rate outlook: 2024 compression ~2% vs historical 1–1.5%; mix shift to lower‑fee vehicles and pricing levers to scale products; management expects a manageable pace and views lower fees as supporting flows/value proposition .
  • Gross sales/pipeline: Best gross sales year since 2021; strong December mandates partly offset large sub‑advisory redemption; 2025 base case is further reduced outflows with path toward organic growth .
  • Expenses and structural savings: Considering structural cost levers to align with fee pressure; aiming for 2–3% annual structural savings to fund growth initiatives; HQ move adds $20–$30M in 2025 .
  • Alts in DC: Exploring but regulatory/liquidity hurdles remain; near-term activity skewed to custom solutions; potential safe-harbor could broaden adoption over time .

Estimates Context

  • S&P Global (Capital IQ) consensus for Q4 2024 EPS, revenue and EBITDA was unavailable at the time of query due to a provider rate limit. As a result, we cannot quantify beats/misses versus Street estimates for this quarter at this time. Values would normally be retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue and adjusted EPS grew solidly YoY on higher average AUM, but sequential margin compression reflected typical Q4 comp and elevated marketing; watch for operating margin recovery as seasonal costs roll off .
  • Mix‑driven fee pressure remains the central headwind; management’s structural cost-savings initiatives and disciplined investment spend are designed to offset compression and fund growth .
  • Flows trajectory improving beneath headline outflows: Target Date leadership, ETF scaling, positive fixed income/alternatives flows, and international (EMEA/APAC) positivity provide multiyear growth vectors .
  • Insurance strategy is a differentiator: Aspida partnership plus OHA capabilities can compound fixed income/alternatives mandates; early benefits expected with larger opportunity over time .
  • 2025 guide sets guardrails: Adjusted opex ex carried interest +4%–6% with incremental real estate headwind; tax rate 23%–27% GAAP; dividend increased for the 39th consecutive year, underscoring capital return commitment .
  • Flow inflection remains the key stock catalyst; management aims to further reduce outflows in 2025 with a stronger pipeline and improved performance, but market breadth and fee dynamics remain swing factors .

Appendix: Additional Data Points

  • Q4 net revenues composition: Investment advisory fees $1,667.2M; performance-based fees $19.3M; CABI $(5.2)M; admin/distribution/servicing $143.2M .
  • Q4 adjusted operating expenses $1,222.6M (+6.2% YoY, +11.2% QoQ); GAAP operating expenses $1,256.1M .
  • Cash and discretionary investments: $3.107B at 12/31/24; buybacks $355M in 2024 .