T. Rowe Price(TROW) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for T. Rowe Price Group, Inc. for the quarter ended June 30, 2025 Consolidated Financial Statements Consolidated financial statements show total assets grew to $14.34 billion by June 2025, with Q2 net income at $505.2 million Financial Metric (in millions) | Financial Metric | 6/30/2025 | 12/31/2024 | | :--- | :--- | :--- | | Total Assets | $14,342.2 M | $13,472.0 M | | Total Liabilities | $2,529.3 M | $2,021.9 M | | Total Stockholders' Equity | $10,560.5 M | $10,345.4 M | Income Statement (in millions) | Income Statement (in millions) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $1,723.3 | $1,733.3 | $3,487.2 | $3,483.5 | | Net Operating Income | $478.3 | $564.7 | $1,074.6 | $1,151.3 | | Net Income Attributable to T. Rowe | $505.2 | $483.4 | $995.7 | $1,057.2 | | Diluted EPS | $2.24 | $2.11 | $4.38 | $4.60 | Cash Flows (YTD, in millions) | Cash Flows (YTD, in millions) | 6/30/2025 | 6/30/2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $1,162.8 | $1,315.0 | | Net Cash used in Investing Activities | $(56.8) | $(93.4) | | Net Cash used in Financing Activities | $(687.3) | $(575.5) | Notes to Unaudited Consolidated Financial Statements The notes detail accounting policies, revenue breakdowns, investment holdings, and significant commitments for future product launches Revenue & AUM (Six months ended 6/30/2025) | Revenue & AUM (Six months ended 6/30/2025) | Amount | | :--- | :--- | | Total Investment Advisory Fees | $3,166.0 M | | Equity Fees | $1,882.8 M | | Fixed Income Fees | $209.1 M | | Multi-Asset Fees | $910.6 M | | Alternatives Fees | $163.5 M | | Average AUM | $1,604.5 B | - The company's investment portfolio, excluding consolidated products, totaled $3.36 billion at June 30, 2025, up from $3.00 billion at year-end 2024, with key components including investments for deferred compensation hedges ($1.05 billion) and discretionary investments ($719.0 million)[33] - As of June 30, 2025, the company has $261.0 million of unrecognized compensation expense related to stock-based awards, expected to be recognized over remaining vesting periods through 2030[57][58] - The company has committed $330 million for investment in future OHA product launches through 2026, with a contingent consideration of up to $900 million related to the OHA acquisition potentially payable in 2026-2027, though its fair value was zero as of June 30, 2025[72][73] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's performance amid a challenging industry environment, highlighting AUM growth, revenue changes, and operating margin compression Market Trends and Assets Under Management (AUM) Major U.S. and international stock markets rose in Q2 2025, driving AUM growth to $1.677 trillion despite net cash outflows - Major U.S. stock market indexes rose in Q2 2025, with the S&P 500 Index up 10.9% and the NASDAQ Composite Index up 17.8% for the quarter[84][88] AUM Change Q2 2025 (in billions) | AUM Change Q2 2025 (in billions) | Equity | Fixed Income | Multi-asset | Alternatives | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Beginning AUM | $773.4 | $195.7 | $544.4 | $52.8 | $1,566.3 | | Net Cash Flows | $(18.1) | $1.2 | $0.9 | $1.1 | $(14.9) | | Market Appreciation & Income | $83.2 | $3.4 | $38.0 | $0.8 | $125.4 | | Ending AUM | $838.5 | $200.3 | $583.3 | $54.7 | $1,676.8 | Investment Performance The company's long-term investment performance remains solid with 62% of U.S. funds outperforming over 10 years, though short-term results are mixed % of U.S. Funds Outperforming Morningstar Median | % of U.S. Funds Outperforming Morningstar Median | 1 year | 3 years | 5 years | 10 years | | :--- | :--- | :--- | :--- | :--- | | All Funds | 35% | 54% | 50% | 62% | % of Composites Outperforming Benchmarks | % of Composites Outperforming Benchmarks | 1 year | 3 years | 5 years | 10 years | | :--- | :--- | :--- | :--- | :--- | | All Composites | 33% | 42% | 41% | 60% | - As of June 30, 2025, 47.2% of the firm's rated U.S. mutual funds received an overall Morningstar rating of 4 or 5 stars, compared to 32.5% for the broader Morningstar fund population[102] Results of Operations Q2 2025 net revenues decreased 0.6% to $1.72 billion, while operating expenses rose 6.5%, compressing the GAAP operating margin to 27.8% Financial Results (in millions, except EPS) | Financial Results (in millions, except EPS) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Revenues | $1,723.3 | $1,733.3 | (0.6)% | | Operating Expenses (GAAP) | $1,245.0 | $1,168.6 | 6.5% | | Net Operating Income (GAAP) | $478.3 | $564.7 | (15.3)% | | Diluted EPS (GAAP) | $2.24 | $2.11 | 6.2% | - The average annualized effective fee rate (excluding performance fees) declined to 39.6 basis points in Q2 2025 from 41.1 basis points in Q2 2024, attributed to market movements and client flows shifting AUM toward lower-fee products[104][118] - Technology, occupancy, and facility costs rose 11.5% YoY to $179.4 million in Q2 2025, driven by higher technology costs and expenses related to the new corporate headquarters occupied in March 2025[124][129] Capital Resources and Liquidity The company maintains a strong liquidity position with $3.8 billion in cash and discretionary investments, returning $901.0 million to stockholders in H1 2025 Liquidity (in millions) | Liquidity (in millions) | 6/30/2025 | 12/31/2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $3,058.9 | $2,649.8 | | Discretionary investments | $749.6 | $457.1 | | Total cash and discretionary investments | $3,808.5 | $3,106.9 | - In the first half of 2025, the company repurchased 3.4 million shares for $326.1 million and paid $574.9 million in dividends, totaling $901.0 million returned to stockholders[153][154] - Anticipated capital expenditures for the full year 2025 are approximately $282 million, with over 80% designated for technology initiatives[155] Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in the company's market risks from those previously disclosed in its 2024 Form 10-K Annual Report - There has been no material change in the company's market risks from those provided in the Form 10-K Annual Report for 2024[170] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of June 30, 2025[171] - There were no changes in internal control over financial reporting during Q2 2025 that have materially affected or are likely to materially affect such controls[172] PART II – OTHER INFORMATION Legal Proceedings Information on legal proceedings is referenced in the Commitments and Contingencies footnote, with management assessing a remote likelihood of material adverse outcomes - Information on legal proceedings is located in the Commitments and Contingencies footnote (Note 11) of the financial statements[174][74] - Management believes the likelihood of a material adverse effect from pending ordinary course of business claims is remote[74] Risk Factors There have been no material changes to the company's risk factors from those previously disclosed in its 2024 Form 10-K Annual Report - There have been no material changes in the risk factors from those provided in the Form 10-K Annual Report for 2024[175] Share Repurchases The company repurchased 1,230,409 shares at an average price of $89.76 in Q2 2025, with 15.0 million shares remaining under authorization Share Repurchase Activity (Q2 2025) | Month (2025) | Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | April | 754,746 | $87.22 | | May | 261,218 | $93.63 | | June | 214,445 | $94.00 | | Total Q2 | 1,230,409 | $89.76 | - As of June 30, 2025, the maximum number of shares that may yet be purchased under the company's authorized programs is 15,025,865[176][178] Exhibits This section lists the exhibits filed as part of the Form 10-Q report, including required certifications by executive officers and XBRL financial statements - The filing includes required certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31(i).1 and 31(i).2) and Section 1350 Certifications (Exhibit 32)[182]