T. Rowe Price(TROW) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total assets under management increased to $1.54 trillion as of March 31, 2024, representing a 15% increase compared to Q1 2023 [8] - Adjusted earnings per share for Q1 2024 was$ 2.38, up 40% from Q1 2023, driven by higher average AUM and investment advisory revenue [13] - Q1 adjusted net revenues were $1.8 billion, a nearly 14% increase from Q1 of last year [22] - Adjusted operating income increased 31% from Q1 2023 to$ 692 million, resulting in a rolling 12-month adjusted operating margin of 36% [23] Business Line Data and Key Metrics Changes - The retirement business is critical, with over $1 trillion in identifiable retirement assets, of which$ 676 billion (65%) are in U.S. defined contribution plans [28] - The target date franchise saw inflows of $6.8 billion, offset by outflows from other multi-asset products [21] - U.S. equity experienced net outflows, particularly in large and mid-cap growth strategies, but these outflows were less than half the level of the previous year [20] Market Data and Key Metrics Changes - Investment performance was solid, with 65% of funds beating their peer group one-year medians [9] - The firm retained its number one position among over 330 asset managers in the Institutional Investors 2024 ranking of America's top asset management firms [12] Company Strategy and Development Direction - The company is focused on evolving its retirement income solutions, including launching a managed lifetime income solution and a personalized retirement manager [39][38] - There is an emphasis on maintaining a strong cash position to support dividends, buybacks, and potential M&A opportunities [25] - The firm is adapting its expertise in the U.S. retirement market to pursue opportunities in international markets [35] Management's Comments on Operating Environment and Future Outlook - Management expects net outflows in 2024 but anticipates substantial improvement compared to last year, although monthly flows may be impacted by client activity [9] - The outlook for flows remains positive, with improved performance leading to less AUM marked as at risk and more notified unfunded wins [56] - Management is optimistic about the capital raising pipeline and expects mid-teens growth in capital under management for OHA [78] Other Important Information - The firm returned$ 365 million to shareholders in Q1 2024 through share buybacks and dividends [24] - The company has seen significant year-over-year gross sales improvement with wealth and individual investor clients [18] Q&A Session Summary Question: Retirement channel alternatives - The company is actively researching alternatives for retirement plans, but there are complexities around adding them to 401(k) plans due to daily NAV requirements and fee sensitivity [45][48] Question: Decumulation opportunities - The company believes there will not be a one-size-fits-all solution for retirement income and is focusing on offering a variety of solutions to meet diverse participant needs [52][54] Question: Trends in gross sales and redemptions - Management noted that the outlook for flows has not changed, with higher conviction that outflows will be substantially lower than last year [55][59] Question: Economics of DCIO vs. full-service record-keeping - The company sees strong potential in both segments, with proprietary products making up a significant portion of the retirement services business [68][70] Question: Growth drivers for OHA - Management is optimistic about the growth potential for OHA, particularly in dedicated senior private lending products, despite recent slower growth in fee-based AUM [78][79]