T. Rowe Price 10-Q 2023-06-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended June 30, 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,

July 26, 2023, is 224,295,099.

The exhibit index is at Item 6 on page 43.

PART I – FINANCIAL INFORMATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

The accompanying notes are an integral part of these statements.

Page 2

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per-share amounts)

Showing the first 8K of 104K characters. Open the full section

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 second quarter of 2023, adding to first-quarter gains. Large-cap and growth stocks outperformed. Thanks in part to generally favorable corporate earnings and a resilient economy, equities overcame lingering uncertainty about regional banks’ health; uncertainty about Congress agreeing to raise the federal debt ceiling—the statutory limit on U.S. government borrowing—before the U.S. government ran out of money; and continued monetary policy tightening due to elevated inflation. The Federal Reserve raised short-term interest rates in early May but kept rates unchanged when policymakers met in mid-June. However, Fed officials projected two more rate increases by the end of the year.

Developed non-U.S. equity markets rose but underperformed U.S. equities in the second quarter, even though the U.S. dollar weakened versus major European currencies. In dollar terms, European equity markets were mostly positive, whereas returns in several developed Asian markets were negative. Japanese shares, however, rose more than 6% in dollar terms, as central bank officials kept interest rates very low and as a weakening Yen supported Japan’s export-oriented businesses.

Emerging equity markets in aggregate rose slightly and underperformed equities in developed markets in U.S. dollar terms. In commodity-rich Latin America, many markets rose due in part to hopes that China, a major consumer of commodities, would take measures to help stimulate its economy. Markets in the emerging Europe, Middle East, and Africa (EMEA) region were mostly positive, though Turkish shares dropped more than 10% in dollar terms.

Page 21

Markets in emerging Asia were widely mixed, with Chinese shares falling almost 10% amid concerns that China’s economic growth was weakening. Indian shares climbed 12%.

Returns of several major equity market indexes were as follows:

(1) Returns exclude dividends

Global bond returns were mixed in U.S. dollar terms in the second quarter. In the U.S., Treasury bill yields increased as the Fed lifted the fed funds target rate to the 5.00% to 5.25% range in early May and as investors prepared for possibly two more Fed interest rate increases by the end of the year due to persistent inflation. Intermediate-term Treasury yields climbed amid hawkish rhetoric from Fed officials and continued economic strength. Long-term yields rose to a lesser extent. The 10-year U.S. Treasury note yield increased from 3.48% to 3.81% during the quarter.

In the U.S. investment-grade universe, Treasury securities performed worst. Mortgage-backed and commercial mortgage-backed securities fell to a lesser extent. Corporate bonds and asset-backed securities edged lower. Tax-free municipal bonds edged lower but outperformed the broad taxable investment-grade bond market. High yield corporate bonds, which are less sensitive to interest rate movements, strongly outperformed the high-quality fixed income market.

Bonds in developed non-U.S. markets declined in U.S. dollar terms. In Europe, bond yields pressed higher as several central banks raised short-term interest rates. However, major European currencies strengthened versus the U.S. dollar, which reduced local losses in dollar terms. In Japan, government bond yields remained very low, contained by the continuation of the central bank’s yield curve control policy, but the Yen declined nearly 8% versus the dollar. Emerging markets bonds appreciated in dollar terms. Bonds denominated in local currencies fared marginally better than dollar-denominated issues, as some emerging markets currencies appreciated versus the greenback. The Turkish Lira, however, plunged more than 26%.

Returns for several major bond market indexes were as follows:

Showing the first 8K of 114K characters. Open the full section

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 June 30, 2023. Based on that evaluation, our principal executive and principal financial officers have concluded that our disclosure controls and procedures as of June 30, 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 second quarter of 2023, and has concluded that there was no change during the second 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 second 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 second quarter of 2023, 12,637 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.

Page 42

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.

Page 43

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 July 28, 2023.

T. Rowe Price Group, Inc.

By: /s/ Jennifer B. Dardis

Vice President, Chief Financial Officer and Treasurer

Page 44