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Item 2. Management’s Discussion and Analysis

2025-05-02 compared with 2024-11-01 · 273 added, 375 removed, 400 unchanged (62% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Our revenues and net income are derived primarily from investment advisory services provided to individual and institutional investors in a broad range of investment solutions across equity, fixed income, multi-asset, and alternative capabilities.

We also provide certain investment advisory clients with related administrative services, including distribution, mutual fund transfer agent, accounting, and shareholder services;

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trust services;

and non-discretionary advisory services through model delivery.

Investment advisory revenues depend largely on the total value and composition of assets under our management.

and non-discretionary advisory services.

Investment advisory fees depend largely on the total value and composition of assets under our management.

Accordingly, fluctuations in financial markets and in the composition of assets under management affect our revenues and results of operations.

We incur significant expenditures to develop new products and services and improve and expand our capabilities and distribution channels in order to attract new investment advisory clients and additional investments from our existing clients.

These efforts often involve costs that precede any future revenues that we may recognize from an increase to our assets under management.

The investment management industry has been evolving and industry participants are facing several challenging trends including passive investments taking market share from traditional active strategies;

We incur significant expenditures to develop new products and services and improve and expand our capabilities and distribution channels in order to attract new clients and additional investments from our existing clients.

These efforts often involve costs that precede any future revenues we may recognize from an increase to our assets under management.

The investment management industry has been evolving and industry participants are facing challenging trends including passive investments taking market share from traditional active strategies;

continued downward fee pressure;

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MARKET TRENDS.

stock market indexes rose in the third quarter of 2024.

Shares were supported by generally favorable corporate earnings and expectations that a softening labor market and easing inflation pressures would enable the Federal Reserve to begin reducing short-term interest rates.

Volatility increased considerably at times, but the market finished the quarter on a positive note, as Fed Chair Jerome Powell declared in late August at the central bank’s annual economic symposium that “the time has come” for policymakers to adjust short-term rates.

On September 18, the central bank reduced the fed funds target rate by 50 basis points—which was more than some investors expected—and Fed officials noted the potential for “additional adjustments” as they “carefully assess incoming data, the evolving outlook, and the balance of risks.”

Major stock indexes declined in the first quarter of 2025.

Early optimism about the incoming Trump administration’s likely business-friendly policies faded amid concerns that President Trump’s tariffs on imports from major trading partners would lead to higher prices of goods sold in the U.S.

and contribute to inflation pressures.

Investors were also concerned that some weaker-than-expected economic data and reports from various retailers warning about slowing sales or decreased consumer spending would translate into slower economic growth, if not a recession.

As the quarter ended, investors were bracing for President Trump to impose “reciprocal” tariffs in early April on countries that already have tariffs or other trade barriers on imports from the U.S.

Developed non-U.S.

equity markets generally outperformed large-cap U.S.

stocks in U.S.

dollar terms, as a weaker dollar versus major non-U.S.

currencies lifted overseas returns in dollar terms.

In Europe, equity markets were mostly positive.

Several markets produced double-digit gains, while UK shares climbed about 8%.

Developed Asian markets were broadly positive.

Hong Kong shares surged more than 24%, lifted in part by Chinese stimulus measures intended to bolster the Chinese economy.

Emerging equity markets outperformed stocks in developed non-U.S.

markets in dollar terms.

Emerging Asian markets were mostly positive;

a few rose more than 20%.

Chinese shares surged more than 23%, while the A shares market climbed more than 21%, thanks to brisk gains in September stemming from new Chinese economic stimulus measures.

Markets in Latin America and in the emerging Europe, Middle East, and Africa (EMEA) region were largely positive in dollar terms.

equity markets strongly outperformed U.S.

shares in U.S.

dollar terms.

In Europe, equity markets were mostly positive in dollar terms, helped by expectations for eurozone spending on defense and infrastructure to increase, particularly in Germany.

Developed Asian markets were mixed in dollar terms, with Japanese stocks adding only about 0.5%.

Emerging equity markets rose but trailed stocks in developed non-U.S.

markets in U.S.

dollar terms.

In emerging Asia, markets were mostly negative in dollar terms, but Chinese shares were lifted in part by hopes that fiscal and monetary stimulus would lead to increased consumption and stronger economic growth.

In Latin America and in the emerging Europe, Middle East, and Africa (EMEA) region, markets were mostly positive in dollar terms.

Returns of several major equity market indexes were as follows:

Three months ended Nine months ended

Index 3/31/2025

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(1) Returns exclude dividends

Global bond returns were broadly positive in the third quarter of 2024.

In the U.S., Treasury bill yields and shorter-term bond yields declined as the Fed reduced the fed funds target rate to the 4.75% to 5.00% range and signaled the potential for more rate cuts.

Longer-term U.S.

Treasury yields fell to a lesser degree.

Global bond returns were mostly positive in the first quarter of 2025.

In the U.S., Treasury bill yields were little changed as the Federal Reserve held short-term interest rates steady due to inflation remaining above its 2% long-term goal.

Intermediate- and long-term U.S.

Treasury yields declined, however, amid concerns about slowing economic growth.

The 10-year U.S.

Treasury note yield declined from 4.36% to 3.81% during the quarter.

Treasury note yield decreased from 4.58% to 4.23% in the first quarter.

investment-grade universe, sector performance was broadly positive.

Corporate bonds and mortgage-backed securities fared best.

Treasuries and non-agency commercial mortgage-backed securities also did well.

Asset-backed securities underperformed, but still produced solid gains.

Tax-free municipal bonds lagged the broad taxable bond market, as municipal bond yields generally did not fall as much as comparable Treasury yields.

High yield corporate bonds performed mostly in line with the investment-grade market.

Mortgage-backed and Treasury securities performed best, but corporate bonds and non-agency commercial mortgage-backed securities also did well.

Asset-backed securities lagged with milder gains.

Tax-free municipal bonds trailed the broad taxable bond market, as intermediate-term yields fell less than comparable Treasury yields, and as long-term muni yields increased during the quarter.

High yield corporate bonds produced modest gains but underperformed investment-grade bonds.

Bonds in developed non-U.S.

markets produced positive returns in dollar terms.

Bond prices rose and yields declined in many European countries, as central banks in the UK and the eurozone reduced short-term interest rates, and a weaker dollar versus various currencies lifted overseas returns in dollar terms.

In Japan, the central bank unexpectedly increased its benchmark interest rate in late July, resulting in a significant strengthening of the yen versus the dollar.

In the emerging markets fixed income universe, local currency bonds outperformed dollar-denominated bonds in U.S.

dollar terms, as the dollar weakened versus many developing markets currencies.

markets produced positive returns in U.S.

dollar terms;

returns to U.S.

investors were enhanced by stronger non-U.S.

currencies versus the dollar.

In Europe, longer-term bond yields increased in various countries, particularly in March, in response to the German government’s plans to ramp up infrastructure and defense spending.

The European Central Bank reduced interest rates twice during the quarter, while the Bank of England reduced its benchmark interest rate once.

In Japan, long-term government bond yields rose steadily for most of the quarter, to levels unseen in about 16 years, in anticipation of tighter monetary policy later this year.

However, yields retraced some of their increase in late March amid concerns that economic growth will slow in response to U.S.

tariffs on Japanese automobiles and other exports.

Emerging markets bonds produced positive returns in U.S.

dollar terms.

Bonds denominated in local currencies generally outperformed dollar-denominated bonds in U.S.

dollar terms, as most developing markets currencies appreciated versus the dollar.

Returns of several major bond market indexes were as follows:

Three months ended Nine months ended

Index 3/31/2025

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High Yield Index 0.9%

Credit Suisse Leveraged Loan Index 2.1% 6.6%

S&P UBS Leveraged Loan Index 0.6%

ASSETS UNDER MANAGEMENT.

Assets under management ended the third quarter of 2024 at $1,630.9 billion, an increase of $61.8 billion from June 30, 2024.

The increase in assets under management during the third quarter of 2024 was driven by market appreciation and income, net of distributions not reinvested, of $74.0 billion, offset by net cash outflows of $12.2 billion.

For the nine months ended September 30, 2024, the increase in assets under management was driven by market appreciation, net of distributions not reinvested, of $210.3 billion, offset by net cash outflows of $23.9 billion.

The following tables detail changes in our assets under management, by asset class, during the three- and nine-month periods ended September 30, 2024:

Assets under management ended the first quarter of 2025 at $1,566.3 billion, a decrease of $40.3 billion from December 31, 2024.

The decrease in assets under management during the first quarter of 2025 was driven by market depreciation of $31.7 billion and net cash outflows of $8.6 billion.

The following table details changes in our assets under management, by asset class, during the first quarter of 2025:

Three months ended 3/31/2025

Nine months ended 9/30/2024

(in billions) Equity Fixed income, including money market Multi-asset (1)

Alternatives (2)

Total Equity Fixed income, including money market Multi-asset (1)

Alternatives (2)

Assets under management at beginning of period $ 829.7 $ 188.1 $ 536.0 $ 52.8 $ 1,606.6

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Change during the period (56.3) 7.6 8.4 — (40.3)

Assets under management at September 30, 2024 $ 832.0 $ 186.3 $ 560.9 $ 51.7 $ 1,630.9 $ 832.0 $ 186.3 $ 560.9 $ 51.7 $ 1,630.9

Assets under management at March 31, 2025 $ 773.4 $ 195.7 $ 544.4 $ 52.8 $ 1,566.3

(1) The underlying assets under management of the multi-asset portfolios have been aggregated and presented in this category and not reported in the equity and fixed income columns.

(2) The alternatives asset class includes strategies authorized to invest more than 50% of its holdings in private credit, leveraged loans, mezzanine, real assets/CRE, structured products, stressed / distressed, non-investment grade CLOs, special situations, or have absolute return as its investment objective.

(2) The alternatives asset class includes strategies authorized to invest more than 50% of its holdings in private credit, leveraged loans, mezzanine, real assets/CRE, structured products, stressed/distressed, non-investment grade CLOs, special situations, business development companies, or that have absolute return as its investment objective.

Generally, only those strategies with longer than daily liquidity are included.

Unfunded capital commitments were $14.5 billion at September 30, 2024, $11.3 billion at June 30, 2024, and $11.6 billion at December 31, 2023, and are not reflected in fee basis AUM above.

(3) Includes net distributions not reinvested for the three- and nine-month periods ended September 30, 2024 of $0.2 billion and $1.1 billion, respectively.

Investment advisory clients outside the United States account for 8.6% of our assets under management at September 30, 2024, June 30, 2024, and December 31, 2023.

Assets under management in our target date retirement products, which are included in the multi-asset totals shown above, were $482.1 billion at September 30, 2024, $452.6 billion at June 30, 2024, and $408.4 billion at December 31, 2023.

Net flows into these portfolios were $3.6 billion and $14.1 billion in the three- and nine-month periods ended September 30, 2024.

We also provide strategic investment advice solutions for certain portfolios.

Unfunded capital commitments were $17.1 billion at March 31, 2025 and are not reflected in fee basis AUM above.

(3) Includes net distributions not reinvested for the first quarter of 2025 of $0.5 billion.

Investment advisory clients outside the United States account for 8.7% of our assets under management at March 31, 2025 and 8.8% at December 31, 2024.

Assets under management in our target date retirement portfolios, which are included in the multi-asset totals shown above, were $484.2 billion at March 31, 2025, compared with $475.6 billion at December 31, 2024.

Net flows into these portfolios were $6.3 billion in the first quarter of 2025.

We also provide strategic investment advice solutions to certain portfolios.

These advice solutions, primarily overseen by our multi-asset division, may include strategic asset allocation, and in certain portfolios, asset selection and/or tactical asset allocation overlays.

We also offer advice solutions through retail separately managed accounts and separately managed accounts model delivery.

As of September 30, 2024, total assets in these solutions were $582 billion, of which $567 billion are included in our reported assets under management in the tables above.

As of March 31, 2025, total assets in these solutions were $566 billion, of which $551 billion are included in our reported assets under management in the table above.

We provide participant accounting and plan administration for retirement plans that primarily invest in the firm's U.S.

mutual funds, collective investment trusts and funds outside of the firm's complex.

As of September 30, 2024, our assets under administration were $286 billion, of which nearly $163 billion are assets we manage.

As of March 31, 2025, our assets under administration were $280 billion, of which $158 billion are assets we manage.

INVESTMENT PERFORMANCE.

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Our performance disclosures include specific asset classes, assets under management weighted performance, mutual fund performance against passive peers, and composite performance against benchmarks.

The following tables present investment performance for the one-, three-, five-, and 10-years ended September 30, 2024.

The following tables present investment performance for the one-, three-, five-, and 10-years ended March 31, 2025.

Past performance is not a reliable indicator of future performance.

funds that outperformed Morningstar median (2),(3)

mutual funds that outperformed Morningstar median (2),(3)

1 year 3 years 5 years 10 years

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All Funds 61% 61% 65% 68%

funds that outperformed passive peer median (2),(4)

mutual funds that outperformed passive peer median (2),(4)

1 year 3 years 5 years 10 years

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AUM Weighted Performance

funds AUM that outperformed Morningstar median (2),(3)

mutual funds AUM that outperformed Morningstar median (2),(3)

1 year 3 years 5 years 10 years

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All Funds 61% 73% 68% 87%

funds AUM that outperformed passive peer median (2),(4)

mutual funds AUM that outperformed passive peer median (2),(4)

1 year 3 years 5 years 10 years

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All Composites 33% 40% 41% 49%

As of September 30, 2024, 69 of 142 (48.6%) of the firm's rated U.S.

As of March 31, 2025, 83 of 142 (58.5%) of the firm's rated U.S.

mutual funds (across primary share classes) received an overall rating of 4 or 5 stars.

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In addition, 66% (6) of AUM in the firm's rated U.S.

mutual funds (across primary share classes) ended September 30, 2024 with an overall rating of 4 or 5 stars.

mutual funds (across primary share classes) ended March 31, 2025 with an overall rating of 4 or 5 stars.

(1) The investment performance reflects that of T.

Rowe Price sponsored mutual funds, ETFs and composites AUM and not of OHA’s products.

Rowe Price U.S.

mutual funds and composites AUM.

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Primary share class only.

Excludes money market mutual funds, funds with an operating history of less than one year, T.

Excludes money market mutual funds, U.S.

mutual funds with an operating history of less than one year, T.

Rowe Price passive funds, and T.

Rowe Price funds that are clones of other funds.

Rowe Price U.S.

mutual funds that are clones of other funds.

The top chart reflects the percentage of T.

Rowe Price funds with 1-, 3-, 5-, and 10-year track record that are outperforming the Morningstar category median.

Rowe Price U.S.

mutual funds with 1 year, 3 year, 5 year, and 10 year track record that are outperforming the Morningstar category median.

The bottom chart reflects the percentage of T.

Rowe Price funds AUM that has outperformed for the time periods indicated.

Total AUM included for this analysis includes $332B for 1 year, $329B for 3 years, $328B for 5 years, and $327B for 10 years.

Rowe Price U.S.

mutual funds AUM that has outperformed for the time periods indicated.

Mutual Fund AUM included for this analysis includes $307B for 1 year, $300B for 3 years, $299B for 5 years, and $298B for 10 years.

(4) Passive Peer Median was created by T.

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Primary share class only.

Excludes money market mutual funds, funds with an operating history of less than one year, funds with fewer than three peers, T.

Rowe Price passive funds, and T.

Rowe Price funds that are clones of other funds.

Excludes money market mutual funds, mutual funds with an operating history of less than one year, mutual funds with fewer than three peers, T.

Rowe Price passive mutual funds, and T.

Rowe Price mutual funds that are clones of other funds.

This analysis compares T.

Rowe Price active funds to the applicable universe of passive/index open-end funds and ETFs of peer firms.

Rowe Price active funds with the applicable universe of passive/index open-end funds and ETFs of peer firms.

The top chart reflects the percentage of T.

Rowe Price funds with 1-, 3-, 5-, and 10-year track record that are outperforming the passive peer universe.

Rowe Price mutual funds with 1 year, 3 year, 5 year, and 10 year track record that are outperforming the passive peer universe.

The bottom chart reflects the percentage of T.

Rowe Price funds AUM that has outperformed for the time periods indicated.

Rowe Price mutual funds AUM that has outperformed for the time periods indicated.

Total AUM included for this analysis includes $290B for 1 year, $284B for 3 years, $245B for 5 years, and $237B for 10 years.

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Excludes money market composites.

All composites compared with the official GIPS composite primary benchmark.

All composites compared to official GIPS composite primary benchmark.

The top chart reflects the percentage of T.

Rowe Price composites with 1-, 3-, 5-, and 10-year track record that are outperforming their benchmarks.

Rowe Price composites with 1 year, 3 year, 5 year, and 10 year track record that are outperforming their benchmarks.

The bottom chart reflects the percentage of T.

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RESULTS OF OPERATIONS.

The following table and discussion sets forth information regarding our consolidated financial results for the three- and nine-month periods ended September 30, 2024 and 2023 on a U.S.

The following table and discussion sets forth information regarding our consolidated financial results for the first quarter of 2025 and 2024 on a U.S.

GAAP basis and a non-GAAP basis.

The non-GAAP basis adjusts for the impact of our consolidated sponsored investment products, the impact of market movements on the supplemental savings plan liability and related economic hedge, investment income related to certain other investments, acquisition-related amortization and costs, impairment charges, and certain nonrecurring charges and gains.

Three months ended Nine months ended

The non-GAAP basis adjusts for the impact of our consolidated investment products, the impact of market movements on the deferred compensation liabilities and related economic hedges, investment income related to certain other investments, acquisition-related amortization and costs, impairment charges, and certain nonrecurring charges and gains, if any.

Three months ended Q1 2025 vs.

(in millions, except per-share data) 3/31/2025 3/31/2024 $ change % change (1)

9/30/2024 9/30/2023 $ change % change (1)

Investment advisory fees (2)

$ 1,598.4 $ 1,536.4 $ 62.0 4.0 %

Performance-based advisory fees (2)

$ 10.4 $ 17.6 $ (7.2) (40.9) %

Capital allocation-based income (3)

$ 4.6 $ 66.1 $ (61.5) n/m $ 51.8 $ 121.7 $ (69.9) n/m

$ (1.2) $ 47.1 $ (48.3) n/m

Net revenues $ 1,763.9 $ 1,750.2 $ 13.7 0.8 %

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Net operating income $ 596.3 $ 586.6 $ 9.7 1.7 %

Non-operating income (loss) $ 212.5 $ 2.8 $ 209.7 n/m $ 481.7 $ 244.4 $ 237.3 n/m

Net income attributable to T.

Rowe Price Group, Inc.

$ 603.0 $ 453.2 $ 149.8 33.1 % $ 1,660.2 $ 1,351.1 $ 309.1 22.9 %

Non-operating income (loss) $ 70.7 $ 188.9 $ (118.2) n/m

Net income to T.

Rowe Price Group $ 490.5 $ 573.8 $ (83.3) (14.5) %

Diluted earnings per common share $ 2.15 $ 2.49 $ (0.34) (13.7) %

Weighted average common shares outstanding assuming dilution 222.6 224.2 $ (1.6) (0.7) %

Adjusted non-GAAP basis (3)

Adjusted basis (4)

Operating expenses $ 1,135.1 $ 1,071.4 $ 63.7 5.9 %

Operating expenses, excluding accrued carried interest related compensation $ 1,131.2 $ 1,052.9 $ 78.3 7.4 %

Net operating income $ 640.6 $ 692.4 $ (51.8) (7.5) %

Non-operating income (loss) $ 35.5 $ 28.5 $ 7.0 24.6 %

Net income attributable to T.

Rowe Price Group, Inc.

$ 586.5 $ 499.5 $ 87.0 17.4 % $ 1,654.7 $ 1,355.4 $ 299.3 22.1 %

Net income to T.

Rowe Price Group $ 509.3 $ 548.5 $ (39.2) (7.1) %

Diluted earnings per common share $ 2.23 $ 2.38 $ (0.15) (6.3) %

Assets under management (in billions)

Average assets under management

$ 1,589.5 $ 1,393.6 $ 195.9 14.1 % $ 1,536.2 $ 1,358.2 $ 178.0 13.1 %

Ending assets under management $ 1,630.9 $ 1,346.5 $ 284.4 21.1 % $ 1,630.9 $ 1,346.5 $ 284.4 21.1 %

Assets under management (AUM) (in billions)

Average AUM $ 1,620.3 $ 1,484.4 $ 135.9 9.2 %

Ending AUM $ 1,566.3 $ 1,542.2 $ 24.1 1.6 %

Investment advisory annualized effective fee rate (EFR) (in bps)

EFR without performance-based fees 40.0 41.6 $ (1.6) (3.8) %

EFR with performance-based fees 40.3 42.1 $ (1.8) (4.3) %

(1) n/m - the percentage change is not meaningful.

(2) In the first quarter of 2024, performance-based advisory fees were included in investment advisory fees.

(3) Capital allocation-based income represents the change in accrued carried interest.

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GAAP measures at the end of the Results of Operations section of this Management’s Discussion and Analysis.

Results Overview - Quarter ended September 30, 2024

Results Overview - Quarter ended March 31, 2025

Net revenues consist of investment advisory revenues;

administrative, distribution, and servicing fees;

performance-based advisory fees;

administrative, distribution, services, and other fees;

and capital allocation-based income.

More than 90% of our net revenues are related to investment advisory fees.

Total net revenues were $1,785.6 million in the third quarter of 2024, a 6.9% increase over $1,670.7 million in the third quarter of 2023.

The increase was primarily driven by an 11.5% increase in investment advisory fee revenue as higher overall markets increased average assets under management by 14.1%.

This increase was partially offset by a $61.5 million decrease in capital allocation-based income (change in accrued carried interest) earned from investments in certain affiliated funds.

Total net revenues were $1,763.9 million in the first quarter of 2025, a 0.8% increase compared to $1,750.2 million in the 2024 quarter.

The increase was primarily driven by a 4.0% increase in investment advisory fee revenue as average assets under management increased 9.2%.

This increase was nearly offset by a $48.3 million decline in capital allocation-based income (change in accrued carried interest) earned from certain affiliated funds.

Investment advisory fees are generally earned based on the value and composition of our assets under management, which change based on fluctuations in financial markets and net cash flows.

As our average assets under management increase or decrease in a given period, the level of our investment advisory fee revenue for that

same period generally fluctuates in a similar manner.

As our average assets under management increase or decrease in a given period, the level of our investment advisory fee revenue for that same period generally fluctuates in a similar manner.

Our annualized effective fee rates can be impacted by market or cash flow related shifts among asset classes and products, including those with tiered-fee structures, along with price changes we make in existing products.

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Operating expenses on a U.S.

GAAP basis were $1,172.0 million in the third quarter of 2024, a 7.6% increase over the comparable 2023 period.

GAAP basis were $1,167.6 million in the first quarter of 2025, a 0.3% increase over the comparable 2024 period.

On a non-GAAP basis, operating expenses were $1,135.1 million, a 5.9% increase over the comparable 2024 period.

In comparison to the third quarter of 2023, about 70% of the increase in U.S.

GAAP operating expenses was due to a market-related increase of $43.4 million in the supplemental savings liability in the third quarter of 2024, compared to a decrease of $14.2 million in the supplemental savings liability in the 2023 period.

Also contributing to the increase in U.S.

GAAP operating expenses and the primary drivers of the increase in non-GAAP operating expenses were higher general, administrative and other costs due to a $20 million cost recovery recognized in Q3 2023 that didn't recur in Q3 2024, higher distribution and servicing costs on higher average assets under management distributed through intermediaries, and higher compensation and related benefits.

These increases were partially offset by lower accrued carried interest-related compensation.

Operating margin in the third quarter of 2024 was 34.4% on a U.S.

GAAP basis, compared to 34.8% earned in the third quarter of 2023.

The decrease in our U.S.

GAAP operating margin for the third quarter of 2024 compared to the 2023 period was driven by operating expense growth outpacing net revenue growth primarily due to changes in the supplemental savings plan liability and lower capital allocation-based income.

Diluted earnings per share was $2.64 for the third quarter of 2024 compared to $1.97 for the third quarter of 2023.

The increase was primarily driven by higher operating income, higher net investment gains, and a lower effective tax rate compared to the 2023 period.

On a non-GAAP basis, diluted earnings per share was $2.57 for the third quarter of 2024 as compared to $2.17 for the third quarter of 2023.

The increase was primarily due to higher adjusted operating income, higher adjusted net investment gains, and a lower effective tax rate compared to the 2023 period.

Results Overview - Year-to-Date ended September 30, 2024

Net revenues consist of investment advisory revenues;

administrative, distribution, and servicing fees;

and capital allocation-based income.

More than 90% of our net revenues for the nine months ended September 30, 2024 are related to investment advisory fees.

Total net revenues were $5,269.1 million in the nine months ended September 30, 2024, a 9.4% increase over $4,818.5 million in the 2023 period.

The increase was primarily driven by a 11.3% increase in investment advisory fee revenue as average assets under management increased by 13.1%, partially offset by a $69.9 million decrease in capital allocation-based income (change in accrued carried interest) earned from investments in certain affiliated funds.

Operating expenses were $3,504.2 million in the nine months ended September 30, 2024 compared with $3,219.5 million in the 2023 period.

On a non-GAAP basis, our operating expenses for the nine months ended September 30, 2024 increased 5.3% to $3,276.2 million compared to the 2023 period.

In comparison to the nine months ended September 30, 2023, about 40% of the increase in U.S.

GAAP operating expenses was driven by the change in remeasurement of the contingent consideration liability, as the 2023 period reflected a $72.8 million reduction in the liability compared to a $13.4M reduction in the 2024 period.

Additionally, a market-related increase in the supplemental savings plan liability, and higher amortization and impairments related to acquisition-related intangibles, were also primary contributors to the increase in U.S.

GAAP operating expenses.

Also contributing to the increase in U.S.

GAAP operating expenses and the primary drivers of the increase in non-GAAP operating expenses were higher compensation and related benefits, including the interim bonus accrual, salaries and benefits, distribution and servicing costs, and general, administrative and other costs.

Operating margin in the nine months ended September 30, 2024 was 33.5% on a U.S.

GAAP basis, compared to 33.2% earned in the 2023 period.

In comparison to the first quarter of 2024, higher costs across compensation and related benefits and other expense categories were nearly offset by the change in the market-related impacts on the deferred compensation liabilities.

As noted above, we remove the market-related impacts on the deferred compensation liabilities in our non-GAAP operating expenses measures as the liabilities are economically hedged.

Operating margin in the first quarter of 2025 was 33.8% on a U.S.

GAAP basis, compared to 33.5% earned in the first quarter of 2024.

The increase in our U.S.

GAAP operating margin for the nine months ended September 30, 2024 compared to the 2023 period was primarily driven by net revenue growth outpacing operating expense growth.

Diluted earnings per share was $7.23 for the nine months ended September 30, 2024 compared to $5.86 for the nine months ended September 30, 2023.

The 23.4% increase was driven by higher net investment gains, higher operating income, and a lower effective tax rate in the nine months ended September 30, 2024, as compared to the comparable 2023 period.

On a non-GAAP basis, adjusted diluted earnings per share was $7.21 for the nine months ended September 30, 2024 as compared to $5.88 for the 2023 period.

The 22.6% increase was primarily due to higher adjusted operating income and a lower effective tax rate.

Three months ended Nine months ended

GAAP operating margin for the first quarter of 2025 compared to the 2024 period was driven by net revenue growth outpacing operating expense growth primarily due to higher investment advisory fee revenue and market-related reductions in deferred compensation liabilities.

Diluted earnings per share was $2.15 for the first quarter of 2025 compared to $2.49 for the first quarter of 2024.

The decrease was primarily driven by lower investment gains compared to the 2024 period.

On a non-GAAP basis, diluted earnings per share was $2.23 for the first quarter of 2025 as compared to $2.38 for the first quarter of 2024.

The decrease was primarily due to lower adjusted operating income and a higher adjusted effective tax rate compared to the 2024 period.

Three months ended Q1 2025 vs.

(in millions) 3/31/2025 3/31/2024 $ change % change (1)

9/30/2024 9/30/2023 $ change % change (1)

Investment advisory fees (2)

Equity $ 959.2 $ 932.5 $ 26.7 2.9 %

Fixed income 104.1 100.9 3.2 3.2 % 304.9 303.3 1.6 0.5 %

Fixed income, including money market 103.6 100.2 3.4 3.4 %

Multi-asset 454.7 429.7 25.0 5.8 %

1 unchanged sentence

1,598.4 1,536.4 62.0 4.0 %

Performance-based advisory fees (2)

10.4 17.6 (7.2) (40.9) %

Capital allocation-based income

Change in accrued carried interest 35.1 91.9 (56.8) n/m 121.6 172.1 (50.5) n/m

Acquisition-related amortization and impairments (30.5) (25.8) (4.7) n/m (69.8) (50.4) (19.4) n/m

4.6 66.1 (61.5) n/m 51.8 121.7 (69.9) n/m

Administrative, distribution, and servicing fees

Change in accrued carried interest 9.2 59.5 (50.3) n/m

Acquisition-related amortization and impairments (10.4) (12.4) 2.0 (16.1) %

(1.2) 47.1 (48.3) n/m

Administrative, distribution, services, and other fees

Administrative fees 134.7 127.4 7.3 5.7 %

2 unchanged sentences

Net revenues $ 1,763.9 $ 1,750.2 $ 13.7 0.8 %

Average assets under management

(in billions)

Average AUM (in billions):

Equity $ 826.3 $ 770.4 $ 55.9 7.3 %

Fixed income 183.3 169.0 14.3 8.5 % 175.9 169.6 6.3 3.7 %

Fixed income, including money market 191.6 169.5 22.1 13.0 %

Multi-asset 549.7 497.0 52.7 10.6 %

Alternatives 52.7 47.5 5.2 10.9 %

Average assets under management $ 1,589.5 $ 1,393.6 $ 195.9 14.1 % $ 1,536.2 $ 1,358.2 $ 178.0 13.1 %

Average AUM $ 1,620.3 $ 1,484.4 $ 135.9 9.2 %

Investment advisory annualized effective fee rate (bps) 40.3 42.1 (1.8) (4.3) %

1 unchanged sentence

(1) n/m - the percentage change is not meaningful.

Investment advisory fees in the third quarter of 2024 increased 11.5% over the comparable 2023 quarter as average assets under management increased $195.9 billion or 14.1%, to $1,589.5 billion.

For the nine months ended September 30, 2024, investment advisory revenues increased 11.3% over the comparable 2023 period as average assets under management increased $178.0 billion, or 13.1%, to $1,536.2 billion.

Investment advisory fees includes performance fees of $5.6 million and $40.0 million for the three- and nine-month periods ended September 30, 2024, respectively, compared to $2.1 million and $13.0 million in the same respective 2023 periods.

Performance fees earned in 2024 and 2023 were primarily from equity and alternative products.

The average annualized effective fee rate earned for the three- and nine-month periods ended September 30, 2024 declined from the comparable 2023 periods due to client flows and transfers creating a mix shift in assets under management toward lower fee products and asset classes.

The 2024 year-to-date annualized effective fee rate was favorably impacted by higher performance based fees of about 0.2 basis points.

Capital allocation-based income includes the change in accrued carried interest along with acquisition-related amortization and impairments.

In the third quarter of 2024, the change in accrued carried interest increased net revenues by $35.1 million compared to $91.9 million in the 2023 period.

For the nine months ended September 30, 2024, the change in accrued carried interest increased net revenues by $51.8 million compared to $121.7 million for the 2023 period.

The decrease in the change in accrued carried interest for both periods was due to lower relative performance.

We also recognized higher acquisition-related amortization and impairment changes in the 2024 periods.

A portion of the capital allocation-based income was passed through to certain associates as compensation and the related expense was recognized in compensation and related costs with the unpaid amount reported as non-controlling interest on the unaudited condensed consolidated balance sheet.

Administrative, distribution, and servicing fees in the third quarter of 2024 were $148.1 million, an increase of $7.4 million, or 5.3%, from the comparable 2023 quarter.

For the nine months ended September 30, 2024, these fees were $444.8 million, an increase of $34.5 million, or 8.4%, from the 2023 period.

The increases for both periods were primarily due to higher average assets on which we earn administrative revenue for non-discretionary advisory services.

For the nine months ended September 30, 2024, higher retail transfer agent servicing activities provided to the T.

Rowe Price mutual funds also contributed to the increase.

(2) In the first quarter of 2024, performance-based advisory fees were included in investment advisory fees.

Investment advisory fees in the first quarter of 2025 increased 4.0% over the comparable 2024 quarter as average assets under management increased $135.9 billion, or 9.2%, to $1,620.3 billion.

The average annualized effective fee rate earned for the first quarter of 2025 declined from the comparable 2024 period as client flows and transfers led to a mix shift in assets under management toward lower fee asset classes and products.

Performance-based advisory fees in the first quarter of 2025 were in equity and alternative strategies, while they were primarily equity in the 2024 period.

Capital allocation-based income decreased net revenues by $1.2 million in the first quarter of 2025 compared with an increase in net revenue of $47.1 million in the 2024 quarter.

The decrease over prior year was largely driven by a decline in the accrued carried interest allocation from investments in affiliated investment funds compared with the 2024 period.

The decline was due to lower overall market returns.

The firm realized carried interest of $43.1 million in the first quarter of 2025 compared to $52.7 million in the 2024 period.

A portion of the capital allocation-based income is passed through to certain associates as compensation and the related expense recognized in compensation and related costs with the unpaid amount reported as non-controlling interest on the unaudited consolidated balance sheets.

Administrative, distribution, services, and other fees in the first quarter of 2025 were $156.3 million, an increase of $7.2 million, or 4.8%, from the comparable 2024 quarter.

The increase in the first quarter was primarily due to higher reimbursable costs associated with the firm's U.S.

mutual funds, and non-discretionary advisory services.

The reimbursable costs from the firm’s U.S.

mutual funds are offset by expenses recognized in product and recordkeeping costs.

Our net revenues reflect the elimination of advisory and administrative fee revenue earned from our consolidated

sponsored investment products.

investment products.

The corresponding expenses recognized by these products, and consolidated in our financial statements, were also eliminated from operating expenses.

For the third quarter, we eliminated net revenue of $1.3 million in 2024 and $0.7 million in 2023.

For the nine months ended September 30, we eliminated net revenue of $3.0 million in 2024 and $1.6 million in 2023.

For the first quarter, we eliminated net revenue of $1.4 million in 2025 and $1.2 million in 2024.

Operating expenses

Three months ended Nine months ended

Three months ended Q1 2025 vs.

(in millions) 3/31/2025 3/31/2024 $ change % change (1)

9/30/2024 9/30/2023 $ change % change (1)

Compensation, benefits and related costs $ 657.9 $ 629.3 $ 28.6 4.5 %

Acquisition-related retention agreements 14.2 13.5 0.7 5.2 %

Capital allocation-based income compensation (2.0) 19.9 (21.9) n/m 8.8 34.0 (25.2) n/m

Supplemental savings plan (2)

43.4 (14.2) 57.6 n/m 111.0 61.3 49.7 n/m

Capital allocation-based income compensation (0.4) 13.2 (13.6) n/m

Deferred compensation liabilities (7.2) 53.0 (60.2) n/m

Total compensation and related costs 664.5 709.0 (44.5) (6.3) %

4 unchanged sentences

General, administrative, and other 103.3 92.6 10.7 11.6 %

Change in fair value of contingent consideration (13.4) — (13.4) n/m (13.4) (72.8) 59.4 (81.6) %

Acquisition-related amortization and impairment costs 28.7 29.9 (1.2) (4.0) %

Total operating expenses $ 1,167.6 $ 1,163.6 $ 4.0 0.3 %

Total adjusted operating expenses (2)

$ 1,135.1 $ 1,071.4 63.7 5.9 %

(1) n/m - The percentage change is not meaningful.

(2) The impact of the market on the supplemental savings plan liability drives the expense recognized each period.

Compensation, benefits, and related costs were $632.9 million in the third quarter of 2024, an increase of $15.9 million, or 2.6%, compared to the 2023 quarter.

For the nine months ended September 30, 2024, these costs were $1,898.0 million, an increase of $96.7 million, or 5.4%, compared to the 2023 period.

The increases in both periods were primarily due to a higher interim bonus accrual, and higher salaries and related benefits, as base salary modestly increased in January 2024 and we increased our headcount.

These increases were partially offset by higher labor capitalization and lower stock-based compensation compared to the 2023 periods.

The 2023 periods included severance costs related to the July 2023 workforce action.

The firm employed 8,104 associates at September 30, 2024, an increase of 2.5% from the end of 2023 and an increase of 3.3% from September 30, 2023.

Distribution and servicing costs were $91.6 million for the third quarter of 2024, an increase of $16.7 million, or 22.3%, from $74.9 million recognized in the 2023 quarter.

For the nine months ended September 30, 2024, these costs were $261.2 million, an increase of 21.9%, from $214.2 million recognized in the comparable 2023 period.

The increases in both periods were primarily driven by higher average assets under management distributed through intermediaries.

The costs in this expense category primarily include amounts paid to third-party intermediaries that source the assets of certain share classes of our U.S.

(2) See the reconciliation to the comparable U.S.

GAAP measures at the end of the Results of Operations section of this Management’s Discussion and Analysis.

Compensation, benefits, and related costs were $657.9 million in the first quarter of 2025, an increase of $28.6 million, or 4.5%, compared to the 2024 quarter.

The increase was primarily due to higher salaries, employee benefits, and a higher interim bonus accrual.

We award base salary increases in January of each year.

The firm employed 8,084 associates at March 31, 2025, a decrease of 0.9% from the end of 2024, and an increase of 2.6% from March 31, 2024.

Distribution and servicing costs were $93.6 million in the first quarter of 2025, an increase of $11.7 million, or 14.3%, compared to $81.9 million recognized in the 2024 quarter.

The increase was primarily driven by higher average assets under management distributed through intermediaries.

The costs in this expense category include amounts paid to third-party intermediaries that source the assets of certain share classes of our U.S.

mutual funds, ETFs, and our international products, such as our Japanese ITMs and SICAVs.

These costs were offset entirely by the distribution revenue we earn and report in net revenues:

12b-1 revenue is recognized in administrative, distribution, and servicing fees for the Advisor and R share classes of the U.S.

These costs are offset entirely by the distribution revenue we earn and report in net revenues:

12b-1 revenue is recognized in administrative, distribution, services, and other fees for the Advisor and R share classes of the U.S.

mutual funds and investment advisory fee revenue for our international products and ETFs.

Advertising and promotion costs were $20.8 million in the third quarter of 2024, a decrease of $0.3 million, or 1.4%, compared to the $21.1 million recognized in the 2023 quarter.

For the nine months ended September 30, 2024, these costs were $79.4 million, an increase of $9.6 million, or 13.8%, compared to the 2023 period.

For the nine months ended September 30, 2024, the increase was primarily driven by higher media spend and increased investment in our brand.

Technology, occupancy, and facility costs were $164.0 million in the third quarter of 2024, an increase of $4.3 million, or 2.7%, compared to the $159.7 million recognized in the 2023 quarter.

For the nine months ended September 30, 2024, these costs were $474.8 million, an increase of $13.8 million, or 3.0%, compared with the 2023 period.

The increases in both periods were primarily related to higher costs from the firm's ongoing investment in its technology capabilities, primarily hosted solution licenses.

Specific to the nine months ended comparison, these increases were offset by lower office facility costs, as the 2023 period included the rent cost of two UK facilities until we occupied our new building in the second half of 2023, and the first quarter of 2024 included a non-recurring cost benefit related to the UK facility.

General, administrative, and other expenses were $104.2 million in the third quarter of 2024, an increase of $18.5 million, or 21.6%, compared to the $85.7 million recognized in the 2023 quarter.

For the nine months ended September 30, 2024, these costs were $305.5 million, an increase of $12.3 million, or 4.2%, compared with the 2023 period.

The increases in both periods were primarily due to a cost recovery recognized in 2023 that didn't recur in 2024, higher professional fees, and higher travel and entertainment.

These increases were partially offset by lower research fee expense as the firm changed its approach to paying for research, consistent with regulations and general industry practice.

Change in fair value of contingent consideration.

The contingent consideration represents the earnout arrangement related to our acquisition of OHA in which additional purchase price may be due upon satisfying or exceeding certain defined revenue targets.

Every reporting period, we record the potential amount due under this arrangement at fair value.

For the three months ended September 30, 2024, we recognized a $13.4 million reduction in the liability in 2024 compared to no change in the 2023 period.

During the nine months ended September 30, 2024 and 2023, we recognized reductions of the contingent consideration liability of $13.4 million and $72.8 million, respectively.

Challenging market conditions have reduced revenue expectations below the defined revenue targets resulting in a reduction of the contingent consideration liability to zero as of September 30, 2024.

Acquisition-related amortization and impairment costs.

As part of the purchase accounting for our acquisitions, we identified and separately recognized, at fair value, certain intangible assets.

During the three- and nine-month periods ended September 30, 2024, we recognized $51.5 million and $125.3 million, respectively, in amortization and impairments related to the definite and indefinite-lived intangible assets.

These amounts include impairment charges of $25.6 million and $59.7 million, respectively, recognized on certain definite and indefinite-lived intangibles as reduced growth expectations reduced their fair value.

For the comparable 2023 periods, amortization and impairment costs were of $38.5 million and $93.1 million, respectively.

Product and recordkeeping related costs were $83.8 million in the first quarter of 2025, an increase of $8.8 million, or 11.7%, compared to $75.0 million in the 2024 quarter.

The increase was primarily due to higher reimbursable costs associated with the firm's U.S.

mutual funds which is offset by the expected reimbursement recognized in administrative, distribution, services and other fee revenue.

Technology, occupancy, and facility costs were $167.6 million in the first quarter of 2025, an increase of $17.7 million, or 11.8%, compared to $149.9 million recognized in the 2024 quarter.

The increase was primarily due to higher costs from the firm's ongoing investment in its technology capabilities, primarily hosted solutions and depreciation.

Additionally, the 2024 quarter included a non-recurring cost benefit related to the firm's UK facility.

We began occupying our new corporate headquarters in March.

General, administrative, and other expenses were $103.3 million in the first quarter of 2025, an increase of $10.7 million, or 11.6%, compared to $92.6 million recognized in the 2024 quarter.

The increase was primarily due to higher professional fees and information services.

Acquisition-related amortization and impairment costs primarily relate to the indefinite- and definite-lived intangible assets identified and separately recognized, at fair value, on acquisition date.

In the first quarter of 2025, we recognized acquisition-related amortization and impairment costs of $28.7 million, a decrease of $1.2 million, or 4.0%, compared to $29.9 million recognized in the 2024 period.

The decrease was primarily driven by lower

impairment charges related to certain definite-lived intangible assets.

Should conditions that led us to recognize the impairment charges deteriorate further, additional impairments may be recognized in future periods.

Non-operating income (loss)

Non-operating income for the third quarter of 2024 was $212.5 million compared to $2.8 million in the 2023 quarter.

The following table details the components of non-operating income for both the three- and nine-month periods ended September 30, 2024 and 2023.

Three months ended Nine months ended

Non-operating income for the first quarter of 2025 was $70.7 million compared to $188.9 million in the 2024 quarter.

The following table details the components of non-operating income for both the first quarter of 2025 and 2024.

Three months ended

(in millions) 3/31/2025 3/31/2024

Net gains (losses) from non-consolidated T.

Rowe Price investment products

Net gains (losses) from non-consolidated investment products

Cash and discretionary investments

5 unchanged sentences

Market-related gains (losses) and equity in earnings (losses) (11.3) 23.5

Net gains (losses) recognized upon deconsolidation (0.6) 0.7 (0.6) 0.7

Investments used to hedge the supplemental savings plan liability 41.1 (19.7) 105.6 58.6

Total net gains (losses) from non-consolidated T.

Rowe Price investment products 105.6 9.3 270.9 180.6

Total seed capital investments (11.1) 23.5

Total cash, discretionary, and seed investments 23.5 51.5

Investments used to hedge the deferred compensation liabilities (10.7) 49.7

Total net gains (losses) from non-consolidated investment products 12.8 101.2

Other investment income 19.1 20.3

Net gains (losses) on investments 31.9 121.5

Net gains (losses) on consolidated sponsored investment products 85.9 (24.4) 166.7 45.4

Net gains (losses) on consolidated investment products 31.9 72.3

Other gains (losses), including foreign currency gains (losses) 6.9 (4.9)

Non-operating income (loss) $ 70.7 $ 188.9

Higher investment gains earned by our investment portfolio during the three- and nine-month periods ended September 30, 2024 compared to the 2023 periods were primarily due to overall stronger market returns and higher dividend income over both periods.

The table above includes the net investment income of the underlying portfolios included in the consolidated

sponsored investment products and not just the net investment income related to our ownership interest in the products.

The table below shows the impact that the consolidated sponsored investment products had on the individual lines of our unaudited condensed consolidated statements of income and the portion attributable to our interest:

Three months ended Nine months ended

Adjusted non-operating income (loss) (1)

$ 35.5 $ 28.5

(1) See the reconciliation to the comparable U.S.

GAAP measures at the end of the Results of Operations section of this Management's Discussion and Analysis.

Lower investment gains earned by our investment portfolio during the first quarter of 2025 compared to the 2024 periods were primarily due to lower overall market returns.

The table above shows the net investment income of the underlying portfolios of the consolidated investment products, not just the income from our ownership share.

The table below displays how consolidated investment products affected the individual lines of our unaudited consolidated income statements and the portion attributable to our interest.

Three months ended

(in millions) 3/31/2025 3/31/2024

2 unchanged sentences

Impact on income before taxes $ 29.4 $ 70.0

Net income (loss) attributable to our interest in the consolidated T.

Rowe Price investment products $ 46.1 $ (11.8) $ 100.5 $ 25.6

Net income (loss) attributable to our interest in the consolidated investment products $ 14.8 $ 50.4

Net income (loss) attributable to redeemable non-controlling interests (unrelated third-party investors) 14.6 19.6

$ 83.5 $ (25.8) $ 159.4 $ 36.6

Impact on income before taxes $ 29.4 $ 70.0

Provision for income taxes

The GAAP effective tax rate for the third quarter of 2024 was 22.5% compared with 24.8% in the third quarter of 2023.

These quarterly rates were the result of an overall year-to-date rate of 23.5% for 2024 and 26.1% for 2023.

The GAAP effective tax rate for the first quarter of 2025 was 24.3% compared with 23.5% in the first quarter of 2024.

The following table reconciles the statutory federal income tax rate to our effective tax rate on a U.S.

GAAP basis for the nine months ended September 30, 2024 and 2023:

Nine months ended

GAAP basis for the three months ended March 31, 2025 and 2024:

Three months ended

3/31/2025 3/31/2024

7 unchanged sentences

Effective income tax rate 24.3 % 23.5 %

Adjusted effective tax rate 24.7 % 23.9 %

(1) State income tax benefits are reflected in the total benefits for net income attributable to redeemable non-controlling interests and stock-based compensation plans activity.

(2) Net income attributable to redeemable non-controlling interests represents the portion of earnings held in the firm's consolidated investment products, which are not taxable to the firm despite being included in pre-tax income.

The non-GAAP effective tax rate primarily adjusts for the impact of the consolidated investment products, including the net income attributable to the redeemable non-controlling interests.

Our non-GAAP effective tax rate was 23.8% in the third quarter of 2024 compared with 24.8% in the third quarter of 2023.

Our non-GAAP effective tax rate was 24.1% for the nine months ended September 30, 2024 compared to 26.8% for the 2023 period.

The year-to-date 2024 U.S.

GAAP and non-GAAP effective tax rates decreased compared to 2023 rates primarily due to lower valuation allowances recognized.

In the first nine months of 2023, we recognized a full valuation allowance against all UK-based deferred tax assets recorded at the time.

The adjusted effective tax rate primarily adjusts for the impact of the consolidated investment products, including the net income attributable to the redeemable non-controlling interests.

Our adjusted effective tax rate for the first quarter was 24.7% in 2025 compared with 23.9% in 2024.

The increase in both the U.S.

GAAP and adjusted effective tax rates was primarily due to higher state taxes in the 2025 quarter.

We currently estimate that our effective tax rate for the full year 2025, on a U.S.

GAAP basis, will be in the range of 23.5% to 27.5%.

On a non-GAAP basis, the range is 23.5% to 25.5% .

On an adjusted basis, the range is 24.0% to 27.0% .

Our effective tax rate will continue to experience volatility in future periods as the tax benefits recognized from stock-based compensation are impacted by market fluctuations in our stock price and the timing of option exercises.

The rate also experiences volatility from the remeasurement of the contingent consideration liability, as well as changes in deferred tax asset valuation allowances, primarily in foreign jurisdictions, based on the sufficiency of taxable income in future periods.

The rate also experiences volatility from the changes in deferred tax asset valuation allowances, primarily in foreign jurisdictions, based on the sufficiency of taxable income in future periods.

GAAP rate will also be impacted by changes in the proportion of net income that is attributable to our redeemable non-controlling interests and non-controlling interests reflected in permanent equity.

6 unchanged sentences

GAAP financial measures for the three months ended

September 30, 2024 and 2023.

March 31, 2025 and 2024.

Three months ended 3/31/2025

10 unchanged sentences

(14.2) 14.2 — 3.0 11.2 0.05

Contingent consideration (1)

13.4 (13.4) — (1.8) (11.6) (0.05)

Intangible assets amortization and impairments (1)

1 unchanged sentence

Total acquisition-related (38.6) 49.0 — 10.1 38.9 0.17

Supplemental savings plan liability (2) (Compensation and related costs)

Deferred compensation liabilities (2) (Compensation and related costs)

7.2 (7.2) 10.7 0.7 2.8 0.01

Consolidated T.

Rowe Price investment products (3)

Consolidated investment products (3)

(1.1) 2.5 (31.9) (3.1) (11.7) (0.05)

17 unchanged sentences

Total acquisition-related (38.1) 50.5 — 14.1 36.4 0.16

Supplemental savings plan liability (2) (Compensation and related costs)

14.2 (14.2) 19.7 1.7 3.8 0.02

Consolidated T.

Rowe Price investment products (3)

(0.7) 1.4 24.4 3.6 8.2 0.03

Other non-operating income (4)

— — (18.2) (5.6) (12.6) (0.05)

Adjusted Non-GAAP Basis $ 1,061.3 $ 635.9 $ 28.7 $ 165.1 $ 499.5 $ 2.17

The following schedules reconcile certain U.S.

GAAP financial measures for the nine months ended September 30, 2024 and 2023.

Nine months ended 9/30/2024

Operating expenses Net operating income Non-operating income (loss) Provision (benefit) for income taxes (5)

Net income attributable to T.

Rowe Price Group, Inc.

Diluted earnings per share (6)

GAAP Basis (FS line item) $ 3,504.2 $ 1,764.9 $ 481.7 $ 527.5 $ 1,660.2 $ 7.23

Non-GAAP adjustments:

Acquisition-related:

Investment and NCI amortization and impairments (1) (Capital allocation-based income and Compensation and related costs)

29.8 40.0 — 7.8 32.2 0.14

Acquisition-related retention arrangements (1) (Compensation and related costs)

(30.6) 30.6 — 7.2 23.4 0.10

Contingent consideration (1)

13.4 (13.4) — (1.8) (11.6) (0.05)

Intangible assets amortization and impairments (1)

(125.3) 125.3 — 24.9 100.4 0.44

Total acquisition-related (112.7) 182.5 — 38.1 144.4 0.63

Supplemental savings plan liability (2) (Compensation and related costs)

(111.0) 111.0 (105.6) 1.2 4.2 0.02

Consolidated T.

Rowe Price investment products (3)

(4.3) 7.3 (166.7) (21.2) (79.3) (0.35)

Other non-operating income (4)

— — (95.0) (20.2) (74.8) (0.32)

Adjusted Non-GAAP Basis $ 3,276.2 $ 2,065.7 $ 114.4 $ 525.4 $ 1,654.7 $ 7.21

Nine months ended 9/30/2023

Operating expenses Net operating income Non-operating income (loss) Provision (benefit) for income taxes (5)

Net income attributable to T.

Rowe Price Group, Inc.

Diluted earnings per share (6)

GAAP Basis (FS line item) $ 3,219.5 $ 1,599.0 $ 244.4 $ 481.3 $ 1,351.1 $ 5.86

Non-GAAP adjustments:

Acquisition-related:

Investment and NCI amortization and impairments (1) (Capital allocation-based income and Compensation and related costs)

20.8 29.6 — 6.2 23.4 0.10

Acquisition-related retention arrangements (1) (Compensation and related costs)

(41.5) 41.5 — 7.2 34.3 0.15

Contingent consideration (1)

72.8 (72.8) — (8.0) (64.8) (0.28)

Intangible assets amortization and impairments (1)

(93.1) 93.1 — 17.7 75.4 0.33

Total acquisition-related (41.0) 91.4 — 23.1 68.3 0.30

Supplemental savings plan liability (2) (Compensation and related costs)

Deferred compensation liabilities (2) (Compensation and related costs)

(53.0) 53.0 (49.7) 0.9 2.4 0.01

Consolidated T.

Rowe Price investment products (3)

Consolidated investment products (3)

(1.1) 2.3 (72.3) (14.0) (36.4) (0.16)

2 unchanged sentences

Adjusted Non-GAAP Basis $ 1,071.4 $ 692.4 $ 28.5 $ 172.4 $ 548.5 $ 2.38

(1) These non-GAAP adjustments remove the impact of acquisition-related amortization and costs including intangible assets and acquired assets amortization and impairments, contingent consideration liability fair value remeasurements, amortization and impairments of acquired investments and non-controlling interest basis differences, and amortization of compensation-related arrangements.

Management believes adjusting for these charges helps the reader's ability to understand our core operating results and to increase comparability period to period.

(2) This non-GAAP adjustment removes the compensation expense impact from market valuation changes in the supplemental savings plan liability and the related net gains (losses) on investments designated as an economic hedge against the related liability.

Amounts deferred under the supplemental savings plan are adjusted for appreciation (depreciation) of hypothetical investments chosen by participants.

Rowe Price investment products to economically hedge the exposure to

these market movements.

Management believes it is useful to offset the non-operating investment income (loss) realized on the economic hedges against the related compensation expense and remove the net impact to help the reader's ability to understand our core operating results and to increase comparability period to period.

(3) These non-GAAP adjustments remove the impact that the consolidated T.

Rowe Price investment products have on our U.S.

GAAP consolidated statements of income.

Specifically, we add back the operating expenses and subtract the investment income of the consolidated T.

Rowe Price investment products.

The adjustment to operating expenses represents the operating expenses of the consolidated products, net of the elimination of related management and administrative fees.

(1) These non-GAAP adjustments remove the impact of acquisition-related amortization and costs, including amortization of intangible assets, the recurring fair value remeasurements of the contingent consideration liability, if any, amortization of acquired investment and non-controlling interest basis differences and amortization of compensation-related arrangements.

We believe adjusting for these charges helps the reader's ability to understand our core operating results and increases comparability period to period.

(2) This non-GAAP adjustment eliminates the compensation expense impact from market valuation changes in deferred compensation liabilities, including the supplemental savings plan and, starting in the fourth quarter of 2024, restricted fund units, and the related net gains (losses) on investments used as economic hedges against the related liabilities.

The liabilities are adjusted based on the performance of hypothetical investments selected by participants.

We use investment products to economically hedge the market risk associated with the supplemental savings plan liability and the expected settlement value of unvested restricted fund units.

We believe it is useful to offset the non-operating investment income (loss) of the hedges against the related compensation expense and remove the net impact to help the reader's ability to understand the firm's core operating results and to increase comparability period to period.

(3) This non-GAAP adjustment removes the impact of the consolidated investment products by adding back their operating expenses and subtracting their investment income.

The operating expense adjustment represents their operating expenses net of related investment advisory and administrative fees.

The adjustment to net income attributable to T.

Rowe Price Group, Inc.

represents the net income of the consolidated products, net of redeemable non-controlling interests.

Management believes the consolidated T.

Rowe Price investment products may impact the reader’s ability to understand our core operating results.

(4) This non-GAAP adjustment represents the other non-operating income (loss) and the net gains (losses) earned on our investment portfolio that are not designated as economic hedges of the supplemental savings plan liability, and that are not part of the cash and discretionary investment portfolio.

We retain in our non-GAAP measures the investment gains recognized on the cash and discretionary investments as these assets and related income (loss) are considered part of our core operations.

Management believes adjusting for these non-operating income (loss) items helps the reader’s ability to understand our core operating results and increases comparability to prior years.

Additionally, management does not emphasize the impact of the portion of non-operating income (loss) removed when managing and evaluating our performance.

(5) The income tax impacts were calculated in order to achieve an overall year-to-date non-GAAP effective tax rate of 24.1% in 2024 and 26.8% in 2023.

As such, the non-GAAP effective tax rate for the three months ended September 30, 2024 and 2023 was 23.8% and 24.8%, respectively.

represents the consolidated investment products' net income, net of redeemable non-controlling interests.

We believe this adjustment helps the reader’s ability to understand our core operating results and increases comparability period to period.

(4) This non-GAAP adjustment removes non-operating income (loss) earned on those investments that are not economic hedges for the deferred compensation liabilities and are not part of the cash and discretionary investment portfolio.

We retain gains from cash and discretionary investments in our non-GAAP measures, as they are are considered part of our core operations.

We believe adjusting for the remaining non-operating income (loss) helps the reader’s ability to understand the firm's core operating results and increases comparability period to period.

Additionally, we do not emphasize this portion of non-operating income (loss) when assessing the firm's performance.

(5) The income tax impacts were calculated in order to achieve an overall non-GAAP effective tax rate.

As such, the non-GAAP effective tax rate for the three months ended March 31, 2025 and 2024 was 24.7% and 23.9%, respectively.

(6) This non-GAAP measure was calculated by applying the two-class method to adjusted net income attributable to T.

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The calculation of adjusted net income allocated to common stockholders is as follows:

Three months ended Nine months ended

9/30/2024 9/30/2023 9/30/2024 9/30/2023

Three months ended

(in millions) 3/31/2025 3/31/2024

Adjusted net income attributable to T.

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Redeemable seed capital investments 1,331.9 1,262.3

Investments used to hedge the supplemental savings plan liability 969.1 894.6

Investments used to hedge the deferred compensation liabilities 1,054.4 1,110.9

Total cash and investments in T.

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Our discretionary investment portfolio is comprised of short duration bond funds, which typically yield higher than money market rates.

Our subsidiaries outside the United States held cash and discretionary investments of $771.5 million at September 30, 2024 and $699.0 million at December 31, 2023.

Our subsidiaries outside the United States held cash and discretionary investments of $644.0 million at March 31, 2025 and $653.9 million at December 31, 2024.

Given the availability of our financial resources and cash expected to be generated through future operations, we do not maintain an available external source of additional liquidity.

Our seed capital investments are redeemable, although we generally expect to be invested for several years for the products to build an investment performance history and until unrelated third-party investors substantially reduce our relative ownership percentage.

The cash and investment presentation on the unaudited condensed consolidated balance sheet is based on the accounting treatment for the cash equivalent or investment item.

The cash and investment presentation on the unaudited consolidated balance sheet is based on the accounting treatment for the cash equivalent or investment item.

The following table details how T.

Rowe Price Group, Inc.’s interests in cash and investments relate to where they are presented on the unaudited condensed consolidated balance sheet as of September 30, 2024.

(in millions) Cash and cash equivalents Investments Net assets of consolidated T.

Rowe Price investment products (1)

Rowe Price Group, Inc.’s interests in cash and investments relate to where they are presented on the unaudited consolidated balance sheet as of March 31, 2025.

(in millions) Cash and cash equivalents Investments Net assets of consolidated investment products (1)

Cash and discretionary investments $ 2,836.7 $ 460.4 $ — $ 3,297.1

Seed capital investments — 556.7 775.2 1,331.9

Investments used to hedge the supplemental savings plan liability — 969.1 — 969.1

Investments used to hedge the deferred compensation liabilities — 1,054.4 — 1,054.4

Total cash and investments in T.

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Redeemable non-controlling interests — — 977.2 977.2

As reported on unaudited condensed consolidated balance sheet at September 30, 2024

As reported on unaudited consolidated balance sheet at March 31, 2025

$ 2,836.7 $ 3,240.3 $ 1,752.4 $ 7,829.4

(1) The consolidated T.

Rowe Price investment products are generally those products we provided seed capital at the time of their formation and we have a controlling interest.

(1) The consolidated investment products are generally those products we provided seed capital at the time of their formation and we have a controlling interest.

These products generally represent U.S.

mutual funds, ETFs, and funds regulated outside the U.S.

The $1,036.0 million represents the total value at September 30, 2024 of our interest in the consolidated T.

Rowe Price investment products.

The $775.2 million represents the total value at March 31, 2025 of our interest in the consolidated investment products.

The total net assets of the T.

Rowe Price investment products at September 30, 2024 of $1,799.4 million includes assets of $1,857.2 million, less liabilities of $57.8 million as reflected in our unaudited condensed consolidated balance sheets.

(2) Includes $203.4 million of non-controlling interests in consolidated entities and represents the portion of these investments, held by related parties, that we cannot sell in order to obtain cash for general operations.

Our unaudited condensed consolidated balance sheet reflects the cash and cash equivalents, investments, other assets and liabilities of those sponsored investment products we consolidate, as well as redeemable non-controlling interests for the portion of these sponsored investment products that are held by unrelated third-party investors.

Although we can redeem our net interest in these sponsored investment products at any time, we cannot directly access or sell the assets held by the products to obtain cash for general operations.

Additionally, the assets of these sponsored investment products are not available to our general creditors.

Our interest in these sponsored investment products was generally used as initial seed capital and is recategorized as discretionary when it is determined by management that the seed capital is no longer needed.

We assess the discretionary investment products and, when we decide to liquidate our interest, we seek to do so in a way as to not impact the product and, ultimately, the unrelated third-party investors.

Rowe Price investment products at March 31, 2025 of $1,752.4 million includes assets of $1,794.4 million, less liabilities of $42.0 million as reflected in our unaudited consolidated balance sheets.

(2) Includes $160.4 million of non-controlling interests in consolidated entities held by related parties and cannot sell in order to obtain cash for general operations.

Our unaudited consolidated balance sheet includes the cash, investments, and other assets and liabilities of our consolidated investment products, which includes any redeemable non-controlling interests held by third-party investors.

While we can redeem our net interest in these investment products at any time, we cannot directly access or sell their assets for general operations, and their assets are not available to our general creditors.

Our interest typically serves as initial seed capital and is reclassified as discretionary when management decides the seed capital no longer needed.

We evaluate these discretionary investment products and aim to liquidate our interest without affecting the product or unrelated third-party investors.

Uses of Liquidity

We increased our quarterly recurring dividend per common share in February 2025 by 2.4% to $1.27 per common share from $1.24 per common share.

Further, we expended $263.7 million in the first nine months of 2024 to repurchase 2.3 million shares of our outstanding common stock, at an average price of $112.30 per share.

Further, we expended $217.5 million in the first quarter of 2025 to repurchase 2.1 million shares of our outstanding common stock, at an average price of $101.57 per share.

These dividends and repurchases were expended using existing cash balances and cash generated from operations.

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2024 1,135.2 334.5 1,469.7

Nine months ended 9/30/2024

Three months ended 3/31/2025

288.8 217.5 506.3

Total $ 2,545.9 $ 806.3 $ 3,352.2

We anticipate property, equipment, software and other capital expenditures, including internal labor capitalization, for the full-year 2024 to be about $460 million of which approximately 60% is planned for technology initiatives with the remaining primarily related to the build out of our new Baltimore headquarters.

We anticipate property, equipment, software and other capital expenditures, including internal labor capitalization, for the full-year 2025 to be about $282 million of which 85% is planned for technology initiatives.

We expect to fund our anticipated capital expenditures with operating cash flows and other available resources.

The following table summarizes the cash flows for the nine months ended September 30, 2024 and 2023, that are attributable to T.

Rowe Price Group, Inc., our consolidated sponsored investment products, and the related eliminations required in preparing the statement.

Nine months ended

The following table summarizes the cash flows for the three months ended March 31, 2025 and 2024, that are attributable to T.

Rowe Price Group, Inc., our consolidated investment products, and the related eliminations required in preparing the statement.

Three months ended

3/31/2025 3/31/2024

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Rowe Price Group, Inc.

Cash flow attributable to consolidated sponsored investment products Elims

Cash flow attributable to consolidated investment products Elims

Cash flow attributable to T.

Rowe Price Group, Inc.

Cash flow attributable to consolidated sponsored investment products Elims

Cash flow attributable to consolidated investment products Elims

Cash flows from operating activities

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Amortization and impairment of acquisition-related assets and retention agreements 49.0 — — 49.0 50.8 — — 50.8

Fair value remeasurement of contingent liability (13.4) — — (13.4) (72.8) — — (72.8)

Stock-based compensation expense 50.3 — — 50.3 58.4 — — 58.4

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Total non-cash adjustments 139.8 — 14.8 154.6 (25.6) — 50.4 24.8

Net redemptions in sponsored investment products used to economically hedge supplemental savings plan liability 29.8 — — 29.8 101.3 — — 101.3

Net change in trading securities held by consolidated sponsored investment products — (517.9) — (517.9) — (779.9) — (779.9)

Net redemptions in T.

Rowe Price investment products used to economically hedge deferred compensation liabilities 45.9 — — 45.9 15.1 — — 15.1

Net change in trading securities held by consolidated investment products — (163.0) — (163.0) — (158.3) — (158.3)

Other changes 95.7 (3.5) (1.9) 90.3 176.2 (7.4) (6.5) 162.3

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Net cash provided by (used in) financing activities (489.4) 120.2 (42.2) (411.4) (355.2) 106.8 (19.4) (267.8)

Effect of exchange rate changes on cash and cash equivalents of consolidated sponsored investment products — 0.5 — 0.5 — (1.8) — (1.8)

Effect of exchange rate changes on cash and cash equivalents of consolidated investment products — 0.9 — 0.9 — (0.8) — (0.8)

Net change in cash and cash equivalents during period 186.9 (12.3) — 174.6 349.9 10.2 — 360.1

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Rowe Price Group, Inc.

during the first nine months of 2024 provided cash flows of $2,339.4 million, an increase of $222.1 million from $2,117.3 million provided during the 2023 period.

The increase was primarily driven by a $309.1 million increase in net income and a $1.5 million increase in cash flows related to timing differences associated with the cash settlement of our assets and liabilities.

These increases to operating cash flows were offset in part by a $17.0 million decrease in the add-back for non-cash items as detailed in the table above.

Additionally, in 2024, proceeds received from net redemptions of investments that economically hedge our supplemental savings plan liability decreased $71.5 million as compared to the 2023 period.

during the first quarter of 2025 provided cash flows of $771.9 million, an increase of $32.4 million from $739.5 million provided during the 2024 period.

The increase was primarily driven by a $165.4 million increase in the add-back for non-cash items as detailed in the table above.

This increase to operating cash flows was offset in part by a $83.3 million decrease in net income and by a $80.5 million decrease in cash flows related to timing differences in the cash settlement of our assets and liabilities.

Additionally, in 2025, we made $30.8 million more in net redemptions from certain investment products that economically hedge our deferred compensation liabilities as compared to the 2024 period.

The remaining change in reported cash flows from operating activities was attributable to the net change in trading securities held in our consolidated investment products’ underlying portfolios.

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totaled $95.6 million in 2025 compared with $34.4 million in 2024.

During 2024, we had net proceeds from the sale of investments of $209.9 million compared to net purchases of investments totaling $72.1 million during the 2023 period.

In 2024, we increased our property and equipment expenditures by $84.4 million and other investing activity by $7.4 million compared to the 2023 period.

We eliminate our capital in those sponsored investment products we consolidate in preparing our consolidated statements of cash flows.

The remaining change in reported cash flows from investing activities of $19.9 million is primarily related to the net cash removed from our unaudited condensed consolidated balance sheet from consolidating and deconsolidating investment products.

During 2025, we had net proceeds from the sale of investments of $2.1 million compared to $65.3 million during the 2024 period.

In 2025, we decreased our property and equipment expenditures by $20.5 million and increased other investing activity by $18.5 million compared to the 2024 period.

We eliminate our capital in our consolidated investment products in preparing our consolidated statements of cash flows.

The remaining change in reported cash flows from investing activities of $3.8 million is primarily related to the net cash removed from our unaudited consolidated balance sheet from consolidating and deconsolidating investment products.

Financing Activities

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The $3.0 million increase in dividends paid in 2025 was a result of the 2.4% increase in our quarterly dividend per share over prior year.

In addition, cash flows generated from common stock issued under stock compensation plans increased by $2.6 million during 2024 compared to 2023.

The remaining change in reported cash flows from financing activities was primarily attributable to a $17.5 million increase in net subscriptions from redeemable non-controlling interest holders of our consolidated investment products during 2024.

The remaining change in reported cash flows from financing activities was primarily attributable to a $9.4 million decrease in net subscriptions from redeemable non-controlling interest holders of our consolidated investment products during 2025.

CRITICAL ACCOUNTING POLICIES.

The preparation of financial statements often requires the selection of specific accounting methods and policies from among several acceptable alternatives.

Further, significant estimates and judgments may be required in selecting and applying those methods and policies in the recognition of the assets and liabilities in our unaudited condensed consolidated balance sheets, the revenues and expenses in our unaudited condensed consolidated statements of income, and the information that is contained in our significant accounting policies and notes to unaudited condensed consolidated financial statements.

Further, significant estimates and judgments may be required in selecting and applying those methods and policies in the recognition of the assets and liabilities in our unaudited consolidated balance sheets, the revenues and expenses in our unaudited consolidated statements of income, and the information that is contained in our significant accounting policies and notes to unaudited consolidated financial statements.

Making these estimates and judgments requires the analysis of information concerning events that may not yet be complete and of facts and circumstances that may change over time.

Accordingly, actual amounts or future results can differ materially from those estimates that we include currently in our unaudited condensed consolidated financial statements, significant accounting policies, and notes.

Accordingly, actual amounts or future results can differ materially from those estimates that we include currently in our unaudited consolidated financial statements, significant accounting policies, and notes.

There have been no material changes in the critical accounting policies previously identified in our 2024 Annual Report on Form 10-K.

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changes in the amount and composition of our assets under management;

our expense levels;

our tax rate;

our expense levels, tax rate, dividends, stock repurchases, investments, new products and services, capital expenditures, changes in our effective fee rate, and potential transactions;

legal or regulatory developments;

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interest rates and currency fluctuations;

and our expectations regarding financial markets, future transactions, dividends, stock repurchases, investments, new products and services, capital expenditures, changes in our effective fee rate, and other industry or market conditions.

our expectations regarding financial markets and other industry or market conditions.

Readers are cautioned that any forward-looking information provided by or on behalf of T.

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client-related cash inflows and outflows in our products, performance fees, capital allocation-based income, fluctuations in global financial markets that result in appreciation or depreciation of the assets under our management, our introduction of new investment products, and changes in retirement savings trends relative to participant-directed investments and defined contribution plans.

The ability to attract and retain investors’ assets under our management is dependent on investor sentiment and confidence;

The ability to attract and retain investors’ assets under our management is dependent on investor sentiment and confidence, including changes in sentiment and confidence that may result from U.S.

trade policies, market volatility and economic outlook;;

the relative investment performance of the T.

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and disruptions of services, including those provided by third parties, such as fund and product recordkeeping, facilities, communications, power, and the mutual fund transfer agent and accounting systems, as a result of extreme events, cyberattacks or otherwise.

Our business is also subject to substantial governmental regulation, and changes in legal, regulatory, accounting, tax, and compliance requirements may have a substantial effect on our operations and results, including, but not limited to, effects on costs that we incur and effects on investor interest in sponsored investment products and investing in general or in particular classes of mutual funds or other investments.

Our business is also subject to substantial governmental regulation, and changes in legal, regulatory, accounting, tax (including the proposed Maryland sales tax on certain information technology services), and compliance requirements may have a substantial effect on our operations and results, including, but not limited to, effects on costs that we incur and effects on investor interest in investment products and investing in general or in particular classes of mutual funds or other investments.

Quantitative and Qualitative Disclosures About Market Risk.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis