BALTIMORE (April 28, 2020) - T. Rowe Price Group, Inc.
- Assets under management end quarter at $1.01 trillion
- Net client outflows of $6.0 billion for Q1 2020
- Net revenues of $1.5 billion for Q1 2020
- Diluted earnings per common share of $1.41 for Q1 2020
- Adjusted
non-GAAP diluted earnings per common share of $1.87 for Q1 2020 - Repurchased 8.3 million shares at an average price of $106.43
Long-term investment performance remains strong
Financial Highlights
Management Commentary
William J. Stromberg, president and chief executive officer, commented: “These are extraordinary times. Q1 2020 saw the rise of the coronavirus pandemic, forcing us to live and work in new ways, disrupting global economies and markets, and ultimately ending a historic
"The very best of T. Rowe Price teamwork and culture have been on display as our teams quickly and efficiently established
"In our annual report, published in March, I referred to 2019's market as an 'everything rally' in which investors were treated to gains in nearly every asset class. Q1 2020 was the opposite as most global equities and
"Throughout the disruption and volatility, we stayed close to our clients and engagement levels have been robust. We experienced net outflows of $6.0 billion in Q1 as some clients
"The firm was in very strong financial shape as we entered 2020 with no debt and plenty of cash. This strength gives us the confidence to continue investing in our capabilities for the long term, despite volatile markets. And we continue to make progress against our strategic objectives. In Q1, we expanded our ESG efforts with the launch of a new sustainable range of SICAV funds, bringing socially responsible investing versions of several of our funds to European investors. In addition, as part of our ongoing focus on the global retirement market, we launched our new
"With the steep decline in market values, we are updating our 2020
"Finally, we responded to the drop in our share price and to higher trading volumes in Q1 by repurchasing
8.3million shares. Total shares outstanding finished Q1 at 228.0 million, the lowest level since 1986. Still, our balance sheet remains
"The coronavirus pandemic has brought considerable change and uncertainty to our world. Our associates have responded well, and I am extremely proud of the agility and resilience they have demonstrated. All of us remain focused on delivering
Assets Under Management
During Q1 2020, assets under management decreased $198.0 billion to $1.01 trillion. Net cash outflows were $6.0 billion, and clients transferred $4.4 billion in net assets from the U.S. mutual funds to other investment products, primarily retirement date trusts. The components of the change in assets under management, by vehicle and asset class, are shown in the tables below.
Assets under management in the firm's target date retirement products, which are reported as part of the multi- asset column in the table above, were $241.9 billion at March 31, 2020, compared with $292.4 billion at December 31, 2019. Net cash inflows into these portfolios were $.3 billion in Q1 2020. A redemption in a risk- managed strategy from a large institutional client was the primary driver of the
Investors domiciled outside the United States accounted for 7.4% of the firm's assets under management at March 31, 2020 and 6.9% at December 31, 2019.
Financial Results
Net revenues earned in Q1 2020 were $1.5 billion, up 10.2% from Q1 2019. Average assets under management in Q1 2020 increased 11.4% from Q1 2019 to $1.16 trillion, and were higher than
Investment advisory revenues earned in Q1 2020 from the firm's U.S. mutual funds were $876.2 million, an increase of 7.4% from Q1 2019. Average assets under management in these funds increased 7.2% to $654.3 billion in Q1 2020.
Investment advisory revenues earned in Q1 2020 from subadvised, separate accounts, and other investment products were $451.6 million, an increase of 19.4% from Q1 2019. Average assets under management for these products increased 17.3% to $508.4 billion in Q1 2020.
The effective fee rate of 45.9 basis points in Q1 2020, while flat compared to Q4 2019, decreased compared to the 46.4 basis points earned in Q1 2019, primarily due to client transfers within the complex to lower fee vehicles or share classes over the last twelve months. Over time, the firm's effective fee rate can be impacted by market or cash flow related shifts among asset and share classes, price changes in existing products, and asset level changes in products with
Administrative, distribution, and servicing fees in Q1 2020 were $134.8 million, an increase of 1.3% from Q1 2019. The increase was primarily attributable to increased retail transfer agent servicing activities and higher recordkeeping fees, partially offset by lower
Operating expenses in Q1 2020 were $755.4 million, a decrease of 5.0% compared to Q1 2019. The decrease in the firm's operating expenses was primarily due to a change in
On a
Compensation and related costs were $440.7 million in Q1 2020, a decrease of 10.3% compared to
Q1 2019. This decrease was primarily related to $100.3 million in lower compensation expense related to the supplemental savings plan as falling markets in Q1 2020 reduced the liability compared with an increase from market returns in Q1 2019. Partially offsetting this decrease in compensation expense related to the supplemental savings plan were increases in base salaries and benefits, as our average staff size was 5.3% higher in Q1 2020 compared to Q1 2019 and we modestly increased base salaries at the beginning of the year, as well as a higher interim bonus accrual and
Advertising and promotion expenses were $24.9 million in Q1 2020, an increase of 15.3% over Q1 2019. The increase was primarily driven by more television media activity in Q1 2020 compared to Q1 2019.
Technology, occupancy, and facility costs were $105.4 million in Q1 2020, an increase of 7.4% from the $98.1 million recognized in Q1 2019. The increase was due to the ongoing investment in the firm's technology capabilities, including related depreciation and hosted solution licenses.
General, administrative, and other costs were $77.1 million in Q1 2020, an increase of 5.6% compared with the $73.0 million recognized in Q1 2019. The increase was primarily due to higher
For Q1 2020, operating expenses on a GAAP basis decreased 5.0% compared to Q1 2019; however, on a non- GAAP basis, they increased 8.1%. Given the market environment, the firm updated its 2020
Income taxes. The firm's effective tax rate was 19.5% in Q1 2020 compared with 24.7% in Q1 2019. The firm's lower effective tax rate for Q1 2020 as compared to the 2019 quarter was driven primarily by higher discrete tax benefits associated with option exercises. These benefits were partially offset by net losses attributable to redeemable
The firm estimates its GAAP effective tax rate for the full year 2020 will be in the range of 24% to 27%.
Capital Management
In Q1 2020, the firm expended $887.0 million to repurchase 8.3 million shares, or 3.5%, of its outstanding common shares at an average price of $106.43.
In February 2020, the firm increased its quarterly dividend by 18.4% to $.90 per common share.
The firm invested $46.0 million during Q1 2020 in capitalized facilities and technology and expects capital expenditures, including internal labor capitalization, for 2020 to be up to $230 million, of which about three- quarters is planned for technology initiatives. These expenditures are expected to continue to be funded from the firm's operating resources.
Investment Performance
The percentage of the firm's U.S. mutual funds(1) (across primary share classes) that outperformed their comparable Morningstar median on a total return basis and that are in the top Morningstar quartile for the
In addition, 76% of assets under management in the the firm's rated U.S. mutual funds (across primary share classes) ended the quarter with an overall rating of four or five stars from Morningstar. The performance of the firm's institutional strategies against their benchmarks remains competitive, especially over longer time periods.
Other Matters
The financial results presented in this release are unaudited. The firm expects that it will file its Form
Founded in 1937,
