PRICE T ROWE GROUP INC
For the period ended Sep 30, 2024. Filed Nov 1, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 1, 2024
TROW$108.41-0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-07-26.
0001113169-24-000019
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-01.
0001113169-24-000030
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 133 previous paragraphs and 132 current paragraphs.
60 unchanged; 63 reworded; 9 added; 9 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 20 previous and 20 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
Major U.S. 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.”
Current report
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.
Current report
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.
Current report
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. The 10-year U.S. Treasury note yield declined from 4.36% to 3.81% during the quarter.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Removed paragraphs (9)
Previous report
U.S. stocks were mixed in the second quarter amid strength in large, high-growth companies, especially technology-oriented companies expected to benefit from artificial intelligence (AI) developments. In contrast, stocks of smaller companies, which tend to be more sensitive than large-caps to the economy and interest rate movements, were hurt by diminished expectations for Federal (“Fed”) Reserve rate cuts this year stemming from persistent inflation.
Previous report
Developed non-U.S. equity markets generally underperformed large-cap U.S. stocks in dollar terms. In Europe, equity markets were mixed, with French shares falling about 7%. Developed Asian markets were mostly positive in dollar terms. Shares in Singapore led the region with a 9% gain, but Japanese stocks fell 4%.
Previous report
Emerging equity markets outperformed stocks in developed markets in U.S. dollar terms. Equities in the emerging Europe, Middle East, and Africa (EMEA) region were mostly positive. Turkish shares rose more than 21%, as S&P Global Ratings upgraded its sovereign credit rating. Emerging Asian markets were widely mixed in dollar terms, but Latin American markets were mostly negative, as regional heavyweights Mexico and Brazil tumbled 16% and 12%, respectively.
Previous report
U.S. bond index returns were mostly positive in the second quarter of 2024. U.S. Treasury bill yields were little changed as the Fed kept the fed funds target rate in the 5.25% to 5.50% range, but intermediate- and long-term
Previous report
Treasury yields increased and bond prices eased as Fed rate cut expectations for 2024 continued to wane. The 10-year U.S. Treasury note yield increased from 4.20% to 4.36% during the quarter.
Previous report
Bonds in developed non-U.S. markets produced negative returns in U.S. dollar terms. In Europe, official short-term interest rates in England were unchanged, while the European Central Bank reduced its key policy rate by 25 basis points in early June. However, bond yields in several European countries rose late in the quarter amid political uncertainty in France. In Japan, short-term rates were unchanged, and the yen fell 6% versus the dollar to 38-year lows by the end of June, while the 10-year Japanese government bond yield rose above 1.00% for the first time in more than a decade. In the emerging markets universe, dollar-denominated bonds were flat, but they outperformed local currency bonds in dollar terms, as most developing markets currencies depreciated versus the U.S. dollar.
Previous report
Diluted earnings per share was $2.11 for the second quarter of 2024 compared to $2.06 for the second quarter of 2023. The increase was primarily driven by higher operating income offset slightly by lower non-operating income compared to the 2023 period.
Previous report
Capital allocation-based income in the second quarter of 2024 increased net revenues by $0.1 million compared to an increase in net revenues of $38.7 million in the 2023 period. For the six months ended June 30, 2024, capital allocation-based income increased net revenues by $47.2 million compared to $55.6 million for the 2023 period. The change in accrued carried interest in the second quarter of 2024 declined $24.0 million compared to the 2023 period due to lower overall market returns and relative performance. For the six months ended June 30, 2024, the change in accrued carried interest increased $6.3 million compared to the 2023 period due to higher overall market returns and relative performance.
Previous report
Technology, occupancy, and facility costs were $160.7 million in the second quarter of 2024, an increase of $6.2 million, or 4.0%, compared to the $154.7 million recognized in the 2023 quarter. For the six months ended June
Reworded paragraphs (63)
Previous wording
In the U.S. investment-grade bond universe, sector performance was mostly positive. Asset-backed securities and non-agency commercial mortgage-backed securities performed best. Treasuries and mortgage-backed securities rose marginally, while corporate bonds edged lower. Tax-free municipal bonds performed mostly in line with the broad taxable bond market. High yield corporate bonds outperformed investment-grade issues.
Current wording
In the U.S. 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.
Previous wording
Returns for several major bond market indexes were as follows:
Current wording
Returns of several major bond market indexes were as follows:
Previous wording
Assets under management ended the second quarter of 2024 at $1,569.1 billion, an increase of $26.9 billion from March 31, 2024. The increase in assets under management during the second quarter of 2024 was driven by market appreciation and income, net of distributions not reinvested, of $30.6 billion, offset by net cash outflows of $3.7 billion.
Current wording
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.
Previous wording
For the six months ended June 30, 2024, the increase in assets under management was driven by market appreciation, net of distributions not reinvested, of $136.3 billion, offset by net cash outflows of $11.7 billion.
Current wording
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.
Previous wording
The following tables detail changes in our assets under management, by asset class, during the three- and six-month periods ended June 30, 2024:
Current wording
The following tables detail changes in our assets under management, by asset class, during the three- and nine-month periods ended September 30, 2024:
Previous wording
(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. Generally, only those strategies with longer than daily liquidity are included. Unfunded capital commitments were $11.3 billion at June 30, 2024, $12.0 billion at March 31, 2024, and $11.6 billion at December 31, 2023, and are not reflected in fee basis AUM above.
Current wording
(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. 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.
Previous wording
(3)Includes net distributions not reinvested for the three- and six-month periods ended June 30, 2024 of $0.7 billion and $0.9 billion, respectively.
Current wording
(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.
Previous wording
Investment advisory clients outside the United States account for 8.6% of our assets under management at June 30, 2024, 8.5% at March 31, 2024, and 8.6% at December 31, 2023.
Current wording
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.
Previous wording
Assets under management in our target date retirement products, which are included in the multi-asset totals shown above, were $452.6 billion at June 30, 2024, $443.0 billion at March 31, 2024, and $408.4 billion at December 31, 2023. Net flows into these portfolios were $3.7 billion and $10.5 billion in the three- and six-month periods ended June 30, 2024.
Current wording
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.
Previous wording
We also provide strategic investment advice solutions for 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 June 30, 2024, total assets in these solutions were $549 billion, of which $534 billion are included in our reported assets under management in the tables above.
Current wording
We also provide strategic investment advice solutions for 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.
Previous wording
We provide participant accounting and plan administration for retirement plans that invest in the firm's U.S. mutual funds, collective investment trusts and funds outside of the firm's complex. As of June 30, 2024, our assets under administration were $273 billion, of which nearly $157 billion are assets we manage.
Current wording
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.
Previous wording
Strong investment performance and brand awareness is a key driver to attracting and retaining assets—and to our long-term success. 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 June 30, 2024. Past performance is no guarantee of future results.
Current wording
Strong investment performance and brand awareness is a key driver to attracting and retaining assets—and to our long-term success. 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. Past performance is not a reliable indicator of future performance.
Previous wording
As of June 30, 2024, 65 of 130 (50.0%) of the firm's rated U.S. mutual funds (across primary share classes) received an overall rating of 4 or 5 stars. By comparison, 32.5% of Morningstar's fund population is given a rating of 4 or 5 stars(5). In addition, 65%(6) of AUM in the firm's rated U.S. mutual funds (across primary share classes) ended June 30, 2024 with an overall rating of 4 or 5 stars.
Current wording
As of September 30, 2024, 69 of 142 (48.6%) of the firm's rated U.S. mutual funds (across primary share classes) received an overall rating of 4 or 5 stars. By comparison, 32.5% of Morningstar's fund population is given a rating of 4 or 5 stars(5). In addition, 67%(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.
Previous wording
(3) Source: Morningstar. Primary share class only. Excludes money market mutual funds, 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. 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. 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 $326B for 1 year, $323B for 3 years, $323B for 5 years, and $322B for 10 years.
Current wording
(3) Source: Morningstar. Primary share class only. Excludes money market mutual funds, 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. 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. 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.
Previous wording
(4) Passive Peer Median was created by T. Rowe Price using data from Morningstar. 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. This analysis compares T. Rowe Price active funds to 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. 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 $309B for 1 year, $306B for 3 years, $269B for 5 years, and $261B for 10 years.
Current wording
(4) Passive Peer Median was created by T. Rowe Price using data from Morningstar. 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. This analysis compares T. Rowe Price active funds to 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. 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 $315B for 1 year, $312B for 3 years, $272B for 5 years, and $267B for 10 years.
Previous wording
(5)Composite net returns are calculated using the highest applicable separate account fee schedule. Excludes money market composites. All composites compared with the 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. The bottom chart reflects the percentage of T. Rowe Price composite AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $1,401B for 1 year, $1,396B for 3 years, $1,389B for 5 years, and $1,340B for 10 years.
Current wording
(5)Composite net returns are calculated using the highest applicable separate account fee schedule. Excludes money market composites. All composites compared with the 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. The bottom chart reflects the percentage of T. Rowe Price composite AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $1,457B for 1 year, $1,452B for 3 years, $1,444B for 5 years, and $1,392B for 10 years.
Previous wording
The following table and discussion sets forth information regarding our consolidated financial results for the three- and six-month periods ended June 30, 2024 and 2023 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.
Current wording
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. 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.
Previous wording
Net revenues consist of investment advisory revenues; administrative, distribution, and servicing fees; and capital allocation-based income. Approximately 90% of our net revenues are related to investment advisory fees. Total net revenues were $1,733.3 million in the second quarter of 2024, a 7.6% increase compared with $1,610.2 million in the second quarter of 2023. The increase was primarily driven by an 10.8% increase in investment advisory fee revenue as higher overall markets increased average assets under management by 13.0%, partially offset by a $38.6 million decrease in capital allocation-based income (change in accrued carried interest) earned from investments in certain affiliated funds.
Current wording
Net revenues consist of investment advisory revenues; administrative, distribution, and servicing 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.
Previous wording
Capital allocation-based income will fluctuate quarter-to-quarter to reflect the adjustment to accrued carried interest for the change in value of certain affiliated funds, assuming the funds’ underlying investments were realized as of the end of the period, regardless of whether the funds’ underlying investments have been realized.
Current wording
Capital allocation-based income will fluctuate quarter-to-quarter to reflect the adjustment to accrued carried interest for the change in value of certain affiliated funds assuming the funds’ underlying investments were realized as of the end of the period.
Previous wording
Operating expenses on a U.S. GAAP basis were $1,168.6 million in the second quarter of 2024, a 8.5% increase over the comparable 2023 period. On a non-GAAP basis, operating expenses were $1,105.8 million, a 7.8% increase over the comparable 2023 period.
Current wording
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. On a non-GAAP basis, operating expenses were $1,099.0 million, a 3.6% increase over the comparable 2023 period.
Previous wording
Operating margin in the second quarter of 2024 was 32.6% on a U.S. GAAP basis, compared to 33.1% earned in the second quarter of 2023. The decrease in our U.S. GAAP operating margin for the second quarter of 2024 compared to the 2023 period was driven by operating expense growth outpacing net revenue growth primarily due to acquisition-related amortization and impairments along with changes in the supplemental savings plan liability.
Current wording
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.
Previous wording
On a non-GAAP basis, diluted earnings per share was $2.26 for the second quarter of 2024 as compared to $2.02 for the second quarter of 2023. The increase was primarily due to higher adjusted operating income compared to the 2023 period.
Current wording
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.
Previous wording
Net revenues consist of investment advisory revenues; administrative, distribution, and servicing fees; and capital allocation-based income. Approximately 90% of our net revenues for the six months ended June 30, 2024 are related to investment advisory fees. Total net revenues were $3,483.5 million in the six months ended June 30, 2024, a 10.7% increase compared with $3,147.8 million in the 2023 period. The increase was primarily driven by a 11.2% increase in investment advisory fee revenue as average assets under management increased by 12.6%.
Current wording
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.
Previous wording
Operating expenses were $2,332.2 million in the six months ended June 30, 2024 compared with $2,130.1 million in the 2023 period. On a non-GAAP basis, our operating expenses for the six months ended June 30, 2024 increased 6.3% to $2,177.2 million compared to the 2023 period.
Current wording
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.
Previous wording
In comparison to the six months ended June 30, 2023, more than a third of the increase in U.S. GAAP operating expenses was driven by the remeasurement of the contingent consideration liability, as the 2023 period reflected a $72.8 million reduction in the liability compared to no change in the 2024 period. Also contributing to the increase in U.S. GAAP operating expenses and the primary drivers of non-GAAP operating expenses were higher compensation and related benefits, including the interim bonus accrual; salaries and benefits along with distribution and servicing costs, and advertising and promotion costs.
Current wording
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.
Previous wording
In comparison to the second quarter of 2023, the increases in U.S. GAAP and non-GAAP operating expenses were primarily driven by higher compensation and related benefits, including the interim bonus accrual, along with higher distribution and servicing costs and advertising and promotion costs. The U.S. GAAP operating expense increase was also impacted by intangible amortization and impairments and the remeasurement of contingent consideration liability.
Current wording
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.
Previous wording
Operating margin in the six months ended June 30, 2024 was 33.1%, compared to 32.3% earned in the 2023 period. The increase in our operating margin for the six months ended June 30, 2024 compared to the 2023 period was primarily driven by net revenue growth outpacing operating expense growth.
Current wording
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. 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.
Previous wording
Diluted earnings per share was $4.60 for the six months ended June 30, 2024 compared to $3.89 for the six months ended June 30, 2023. The 18.3% increase was driven by higher operating income, a lower effective tax rate, and higher net investment gains in the six months ended June 30, 2024, as compared to the comparable 2023 period
Current wording
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.
Previous wording
On a non-GAAP basis, adjusted diluted earnings per share was $4.64 for the six months ended June 30, 2024 as compared to $3.71 for the 2023 period. The 25.1% increase was driven by higher operating income and a lower effective tax rate.
Current wording
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.
Previous wording
Investment advisory fees in the second quarter of 2024 increased 10.8% over the comparable 2023 quarter as average assets under management increased $176.6 billion or 13.0%, to $1,534.0 billion. For the six months ended June 30, 2024, investment advisory revenues increased 11.2% over the comparable 2023 period as average assets under management increased $169.0 billion, or 12.6%, to $1,509.2 billion.
Current wording
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.
Previous wording
The average annualized effective fee rate earned for the three- and six-month periods ended June 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 also favorably impacted by about 0.3 basis points in higher performance based fees within equity and alternative products compared to the 2023 year-to-date period.
Current wording
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.
Previous wording
A portion of the capital allocation-based income is passed through to certain associates as compensation and the related expense is recognized in compensation and related costs with the unpaid amount reported as non-controlling interest on the consolidated balance sheet.
Current wording
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.
Previous wording
Administrative, distribution, and servicing fees in the second quarter of 2024 were $147.6 million, an increase of $6.9 million, or 4.9%, from the comparable 2023 quarter. For the six months ended June 30, 2024, these fees were $296.7 million, an increase of $27.1 million, or 10.1%, from the 2023 period. The increases for both periods were primarily due to higher retail transfer agent servicing activities provided to the T. Rowe Price mutual funds and higher average assets on which we earn administrative revenue for non-discretionary advisory services.
Current wording
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.
Previous wording
sponsored investment products. The corresponding expenses recognized by these products, and consolidated in our financial statements, were also eliminated from operating expenses. For the second quarter, we eliminated net revenue of $0.5 million in 2024 and $0.3 million in 2023. For the six months ended June 30, we eliminated net revenue of $1.7 million in 2024 and $0.9 million in 2023.
Current wording
sponsored 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.
Previous wording
Compensation, benefits, and related costs were $635.8 million in the second quarter of 2024, an increase of $44.8 million, or 7.6%, compared to the 2023 quarter. For the six months ended June 30, 2024, these costs were $1,265.1 million, an increase of $80.8 million, or 6.8%, compared to the 2023 period. The increase 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. These increases were partially offset by higher labor capitalization compared to the 2023 periods.
Current wording
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.
Previous wording
The firm employed 7,929 associates at June 30, 2024, an increase of 0.3% from the end of 2023 and June 30, 2023.
Current wording
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.
Previous wording
Distribution and servicing costs were $87.7 million for the second quarter of 2024, an increase of $19.9 million, or 29.5%, from $67.8 million recognized in the 2023 quarter. For the six months ended June 30, 2024, these costs were $169.7 million, an increase of 21.8% over $139.3 million recognized in the comparable 2023 period. The increases in both periods were primarily driven by higher average assets under management distributed through intermediaries.
Current wording
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.
Previous wording
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. 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. mutual funds and investment advisory fee revenue for our international products.
Current wording
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. 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. mutual funds and investment advisory fee revenue for our international products and ETFs.
Previous wording
Advertising and promotion costs were $33.3 million in the second quarter of 2024, an increase of $10.4 million, or 45.4%, compared to the $22.9 million recognized in the 2023 quarter. For the six months ended June 30, 2024, these costs were $58.6 million, an increase of $9.9 million, or 20.3%, compared to the 2023 period. The increases for both periods were primarily driven by higher media spend and increased investment in our brand.
Current wording
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.
Previous wording
30, 2024, these costs were $310.8 million, an increase of $9.5 million, or 3.2%, 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, including hosted solution licenses and depreciation. These increases were partially offset by lower office facility costs related to double rent incurred in the 2023 period until we occupied our new UK facility in the second half of 2023, and a non-recurring cost benefit related to the UK facility in the first quarter of 2024.
Current wording
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.
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Previous report — wording carried elsewhere
For the six months ended June 30, 2024, these costs were $201.3 million, a decrease of $6.2 million, or 3.0%, compared with the 2023 period. The decrease was primarily due to lower research fee expense as the firm changed its approach to paying for research, consistent with regulations and general industry practice. This decrease was partially offset by higher professional fees and information services.