T. Rowe Price 10-Q 2023-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2023

OR

For the transition period from to

Commission File Number: 000-32191

T. ROWE PRICE GROUP, INC.

(Exact name of registrant as specified in its charter)

100 East Pratt Street, Baltimore, Maryland 21202

(Address, including Zip Code, of principal executive offices)

(410) 345-2000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares outstanding of the issuer’s common stock ($.20 par value), as of the latest practicable date,

April 28, 2023, is 224,571,987.

The exhibit index is at Item 6 on page 38.

PART I – FINANCIAL INFORMATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

The accompanying notes are an integral part of these statements.

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per-share amounts)

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OVERVIEW.

Our revenues and net income are derived primarily from investment advisory services provided to individual and institutional investors in U.S. mutual funds, subadvised funds, separately managed accounts, collective investment trusts, and other sponsored products. The other sponsored products include: open-ended investment products offered to investors outside the U.S., products offered through variable annuity life insurance plans in the U.S., affiliated private investment funds, and collateralized loan obligations. We also provide certain investment advisory clients with related administrative services, including distribution, mutual fund transfer agent, accounting, and shareholder services; participant recordkeeping and transfer agent services for defined contribution retirement plans; brokerage; trust services; and non-discretionary advisory services through model delivery. Additionally, we derive revenue from our interests in general partners of certain affiliated private investment funds that are entitled to a disproportionate allocation of income through capital allocation-based arrangements also known as carried interest.

We manage a broad mix of equity, fixed income, multi-asset, alternative and money market asset classes and solutions that meet the varied needs and objectives of individual and institutional investors. Investment advisory revenues 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 general trend to passive investing has been persistent and accelerated in recent years, which has negatively impacted our new client inflows. However, over the long term we expect well-executed active management to play an important role for investors. In this regard, we have ample liquidity and resources that allow us to take advantage of attractive growth opportunities. We are investing in key capabilities, including investment professionals, distribution professionals, technologies, and new product offerings in order to provide our clients with strong investment management expertise and service.

On April 20, 2023, we completed our acquisition of Retiree, Inc., a fintech firm that offers innovative retirement income planning software. The terms of the transaction are not material.

MARKET TRENDS.

Major U.S. stock indexes rose in the first quarter of 2023. Large-cap shares surpassed their smaller-cap peers, and growth stocks outperformed value stocks across all market classes. After a strong January, the market surrendered some of its gains in February due to concerns that the Federal Reserve—which raised short-term interest rates on February 1—would continue ramping up rates to combat elevated inflation. Equities fell sharply in the first half of March, as two of the largest bank failures in U.S. history raised concerns about the stability of the U.S. banking industry. Although financial regulators acted quickly to protect all Silicon Valley Bank and Signature Bank depositors from losses and to restore confidence in other banks, investors had lingering concerns—following a year of aggressive interest rate increases—that other regional banks could be toppled by losses from their bond holdings or a flight of depositors’ capital. As investors’ concerns diminished in the second half of March, however, equities rebounded strongly.

Developed non-U.S. equity markets outperformed U.S. equities, as a weaker dollar versus some currencies enhanced returns to U.S. investors. In Europe, equity markets were mostly positive in dollar terms, though financials sector concerns centered on Switzerland’s Credit Suisse, which was acquired by UBS Group in a government-brokered deal, rocked the markets in March. Developed Asian market returns were mostly positive but lagged European markets.

Stocks in emerging markets underperformed equities in developed non-U.S. markets in dollar terms. Markets in the major emerging regions were widely mixed. In Latin America, for example, Mexican shares surged more than 20%,

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while Colombian shares slumped 13%. In Asia, stocks in Taiwan and South Korea outperformed with gains of about 15% and 10%, respectively, while Indian shares fell more than 6%. In emerging Europe, Turkish shares slipped 9%, as the country recovered from a massive early-February earthquake and continued to struggle with elevated inflation, while Greek shares jumped about 16%.

Returns of several major equity market indexes were as follows:

(1) Returns exclude dividends

Global bonds produced mostly positive returns in dollar terms in the first quarter. In the U.S., three- and six-month U.S. Treasury bill yields rose as the Federal Reserve raised the fed funds target rate by 25 basis points in February and in March. The fed funds target rate range at the end of the quarter was 4.75% to 5.00%. However, U.S. Treasury note and bond yields declined roughly 30 to 40 basis points for the quarter, as regional bank distress resulted in a flight to safety in mid-March and raised expectations that the Fed would temper future interest rate increases. The 10-year U.S. Treasury note yield fell from 3.88% to 3.48% during the quarter.

In the U.S. investment-grade universe, corporate bonds and Treasuries performed best. Mortgage-backed securities also did well, but asset-backed and commercial mortgage-backed securities trailed with milder gains. Tax-free municipal bonds rose but slightly lagged the taxable investment-grade bond market. High yield issues outperformed higher-quality fixed income securities.

Bonds in developed non-U.S. markets appreciated in dollar terms, thanks to strength in March amid falling yields in various countries. Returns to U.S. investors were lifted by stronger European currencies versus the dollar. The Japanese yen, however, fell close to 1% versus the dollar, as Japanese monetary authorities kept monetary policy very stimulative. Emerging markets bonds produced positive returns in dollar terms, as various central banks continued raising short-term rates to fight inflation. Bonds denominated in local currencies fared better than dollar-denominated issues, as the U.S. dollar retreated versus many emerging markets currencies.

Returns for several major bond market indexes were as follows:

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There has been no material change in our market risks from those provided in Item 7A of the Form 10-K Annual Report for 2022.

Our management, including our principal executive and principal financial officers, has evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2023. Based on that evaluation, our principal executive and principal financial officers have concluded that our disclosure controls and procedures as of March 31, 2023, are effective at the reasonable assurance level to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, including this Form 10-Q quarterly report, is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management, including our principal executive and principal financial officers, has evaluated any change in our internal control over financial reporting that occurred during the first quarter of 2023, and has concluded that there was no change during the first quarter of 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

For information about our legal proceedings, please see our Commitments and Contingencies footnote to our unaudited condensed consolidated financial statements in Part 1. of this Form 10-Q.

There have been no material changes in the information provided in Item 1A of our Form 10-K Annual Report for 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(c) Repurchase activity during the first quarter of 2023 is as follows:

Shares repurchased by us in a quarter may include repurchases conducted pursuant to publicly announced board authorization, outstanding shares surrendered to us to pay the exercise price in connection with swap exercises of employee stock options, and shares withheld to cover the minimum tax withholding obligation associated with the vesting of restricted stock awards. Of the total number of shares purchased during the first quarter of 2023, 80,078 were related to shares surrendered in connection with employee stock option exercises and no shares were withheld to cover tax withholdings associated with the vesting of restricted stock awards.

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The following table details the changes in and status of the Board of Directors’ outstanding publicly announced board authorizations.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Not applicable.

The following exhibits required by Item 601 of Regulation S-K are furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on May 2, 2023.

T. Rowe Price Group, Inc.

By: /s/ Jennifer B. Dardis

Vice President, Chief Financial Officer and Treasurer

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