Press Release: T. Rowe Price Group Reports Third Quarter 2021 Results

NEWS RELEASE

T. ROWE PRICE GROUP REPORTS THIRD QUARTER 2021 RESULTS

BALTIMORE (October 28, 2021) - T. Rowe Price Group, Inc. (NASDAQ-GS: TROW) today reported its results for the third quarter of 2021.

• Assets under management end quarter at $1.61 trillion
• Net client outflows of $6.4 billion for Q3 2021
• Net revenues of $2.0 billion for Q3 2021
• Diluted earnings per common share of $3.31 for Q3 2021
• Adjustednon-GAAP diluted earnings per common share of $3.27 for Q3 2021
• Long-terminvestment performance remains strong

Financial Highlights

				Three months ended						Nine months ended
(in millions, except per-share data)	9/30/2021	9/30/2020	% change		6/30/2021		% change		9/30/2021	9/30/2020		% change
U.S. GAAP basis
Investment advisory fees	$	1,813.4	$	1,469.3	23.4 %		$	1,787.2	1.5 %		$	5,288.4	$	4,090.9	29.3 %
Net revenues	$	1,954.1	$	1,595.8	22.5 %		$	1,929.3	1.3 %		$	5,710.2	$	4,473.8	27.6 %
Operating expenses	$	957.9	$	866.9	10.5 %		$	971.2	(1.4)%		$	2,862.7	$	2,484.0	15.2 %
Net operating income	$	996.2	$	728.9	36.7 %		$	958.1	4.0 %		$	2,847.5	$	1,989.8	43.1 %
Non-operating income (loss)(1)	$	(11.5)	$	191.6	n/m		$	143.9		n/m		$	234.5	$	106.4		n/m
Net income attributable to T. Rowe Price	$	777.2	$	643.2	20.8 %		$	815.7	(4.7)%		$	2,342.3	$	1,589.3	47.4 %
Diluted earnings per common share	$	3.31	$	2.73	21.2 %		$	3.46	(4.3)%		$	9.94	$	6.66	49.2 %
Weighted average common shares		229.1		229.4	(.1)%			229.2		- %				229.4		231.9	(1.1)%
outstanding assuming dilution
Adjustednon-GAAPbasis(2)
Operating expenses	$	957.2	$	830.5	15.3 %		$	931.8	2.7 %		$	2,798.2	$	2,434.2	15.0 %
Net operating income	$	998.7	$	768.0	30.0 %		$	998.6		- %		$	2,916.2	$	2,046.9	42.5 %
Non-operating income (loss)(1)	$	(3.0)	$	25.6	n/m		$	17.8		n/m		$	28.5	$	50.2		n/m
Net income attributable to T. Rowe Price	$	767.6	$	602.7	27.4 %		$	779.0	(1.5)%		$	2,258.6	$	1,596.6	41.5 %
Diluted earnings per common share	$	3.27	$	2.55	28.2 %		$	3.31	(1.2)%		$	9.59	$	6.69	43.3 %
Assets under Management(in billions)
Average assets under management	$	1,648.7	$	1,292.9	27.5 %		$	1,585.3	4.0 %		$	1,581.3	$	1,198.9	31.9 %
Ending assets under management	$	1,612.3	$	1,310.4	23.0 %		$	1,623.1	(.7)%		$	1,612.3	$	1,310.4	23.0 %

1. The percentage change innon-operating income is not meaningful (n/m).
2. Adjusts the GAAP basis for the impact of consolidated T. Rowe Price investment products, the impact of market movements on the supplemental savings plan liability and related economic hedges, investment income related to certain other investments, and certain nonrecurring charges and gains, if any. The firm believes thenon-GAAP financial measures provide relevant and meaningful information to investors about its core operating results.See the reconciliation to the comparable U.S. GAAP measures at the end of this earnings release.

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Management Commentary

William J. Stromberg, chief executive officer, commented: "Uncertainty returned to the markets in September with the S&P 500 giving back the gains made in July and August. Other major U.S. stock market indexes were mixed in the third quarter while stocks in developed markets outside the U.S. fell slightly. U.S. bonds were largely unchanged with headwinds from rising inflationary pressure and growing expectations for the Federal Reserve to begin its long- awaited tapering process.

"Despite the September market retreat, higher average AUM levels driven by previous market gains resulted in investment advisory revenues up 23.4%, diluted GAAP EPS up 21.2%, and adjusted non-GAAP EPS up 28.2%. After modest repurchases in Q2, we bought back 1 million shares during Q3, concentrated in September when markets corrected. Also, in addition to our regular dividend, we paid a $3 per share special dividend in July. Even after these capital returns, our balance sheet remains exceptionally strong.

"AUM-weighted investment performance remains strong over five- and ten-year time periods, while near term performance has been more mixed across our equity strategies. We are particularly pleased with the outstanding results of our target date franchise across all time periods.

"Net outflows for the quarter of $6.4 billion were concentrated in our growth oriented strategies, as some investors continue to reposition away from growth after many years of attractive returns. We experienced modest inflows elsewhere, including $0.7 billion into our target date products in Q3. While near-term redemptions continue, we remain confident in the long-term health of the business as seen in positive sales activity and client engagements.

"Strong AUM and revenue growth in 2021 has allowed us to invest in multiple initiatives to bolster long-term investment performance and develop new areas of growth. Highlights from Q3 included:

• We announced an effective date of March 7, 2022 for six existing strategies to transition to T. Rowe Price Investment Management (TRPIM), a separateU.S.-basedSEC-registered investment adviser. We have completed our targeted research analyst hiring and continue to build and test new systems, processes, and operations to ensure that TRPIM and T. Rowe Price Associates can fully operate as independent investment platforms.
• We implemented our expanded partnership with FIS in our retirement recordkeeping business with the shift of associates and responsibilities occurring on August 1.
• We launched the Retirement Blend Funds in late July, broadening our range of retirement solutions for clients of all sizes. The previously announced fee reductions across our target date franchise went into effect on July 1.
• We launched three new active fixed incomeexchange-traded funds (ETFs), expanding the firm's active ETF roster to eight. The new ETFs are core fixed income strategies that can serve as building blocks for client portfolios.

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"Our associates returned to our offices in many of our global locations during Q3 and this will continue gradually in the U.S. during Q4. Our associates worked successfully from home over the last 19 months. We feel we are at our best, though, when we are together, and we look forward to reconvening in the coming weeks and continuing our work on behalf of our clients.

"Today we announcedthe next phase of our growth strategy to broaden our investment capabilities and advance our business. We have agreed to purchase Oak Hill Advisors, L.P. (OHA), a leading alternative credit manager, which we believe will accelerate our expansion into alternative investment markets.

"T. Rowe Price and OHA bring together similar cultures with shared values, including a focus on investment performance and integrity. We look forward to welcoming our new colleagues from OHA and working with them as we continue to help clients meet their investment goals."

CONFERENCE CALL INFORMATION

T. Rowe Price will host a live audio webcast today at 9:00 am eastern time to discuss the acquisition. Access to the webcast will be available via the firm's Investor Relations website at troweprice.gcs-web.com/events. A replay will be available shortly after the conclusion of the meeting and archived online for a period of one year.

Assets Under Management

During Q3 2021, assets under management decreased $10.8 billion to $1.61 trillion. Net cash outflows were $6.4 billion, and clients transferred $3.6 billion in net assets from the U.S. mutual funds primarily to collective investment trusts and other investment products, of which $1.9 billion transferred into the retirement date trusts. The components of the change in assets under management, by vehicle and asset class, are shown in the tables below.

		Three months e	nded 9/30/2021							Nine months ended 9/30/2021
							Collective										Collective
			Subadvised	investment						Subadvised	investment
	U.S.			trusts and				U.S.			trusts and
			funds and		other						funds and		other
(in billions)	mutual			separate	investment	Total			mutual			separate	investment	Total
funds			accounts			products					funds			accounts			products
Assets under management at	$ 865.8	$	426.9		$	330.4			$1,623.1		$ 794.6	$	400.1		$	275.8		$1,470.5
beginning of period
Net cash flows before client	.1			(5.8)			(.7)			(6.4)		3.2			(21.9)			12.9		(5.8)
transfers
Client transfers	(3.6)			.5			3.1			-			(18.4)			2.0			16.4		-
Net cash flows after client	(3.5)			(5.3)			2.4			(6.4)		(15.2)			(19.9)			29.3		(5.8)
transfers
Net market (depreciation)/	(1.1)			(.8)			(2.3)			(4.2)		82.1			40.6			25.4		148.1
appreciation and (losses)/gains
Net distributions not reinvested	(.2)			-		-	(.2)		(.5)			-		-	(.5)
Change during the period	(4.8)			(6.1)			.1			(10.8)			66.4			20.7			54.7		141.8
Assets under management at	$ 861.0		$	420.8		$	330.5			$1,612.3			$ 861.0		$	420.8		$	330.5		$1,612.3
September 30, 2021

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		Three months ended 9/30/2021						Nine months ended 9/30/2021
				Fixed												Fixed
				income,												income,
				including												including
(in billions)	Equity			money		Multi-asset(1)			Total			Equity			money		Multi-asset(1)		Total
		market						market
Assets under management at	$ 985.1	$	178.7	$	459.3			$1,623.1		$ 895.8	$	168.7	$	406.0		$1,470.5
beginning of period
Net cash flows	(8.4)			2.1			(.1)			(6.4)		(28.8)			11.2			11.8		(5.8)
Net market (depreciation)/
appreciation and (losses)/	(2.0)			(.1)			(2.3)			(4.4)		107.7			.8			39.1		147.6
gains(2)
Change during the period	(10.4)			2.0			(2.4)			(10.8)			78.9			12.0			50.9		141.8
Assets under management at	$ 974.7		$	180.7		$	456.9			$1,612.3			$ 974.7		$	180.7		$	456.9		$1,612.3
September 30, 2021

1. The underlying assets under management of themulti-asset portfolios have been aggregated and presented in this category and not reported in the equity and fixed income columns.
2. Includes distributions reinvested and not reinvested.

Assets under management in the firm's target date retirement products, which are reported as part of the multi-asset column in the table above, were $377.7 billion at September 30, 2021, compared with $379.2 billion at

June 30, 2021 and $332.2 billion at December 31, 2020. Net cash flows into these portfolios were $.7 billion for Q3 2021 and $12.7 billion for YTD 2021.

Investors domiciled outside the United States accounted for 8.8% of the firm's assets under management at September 30, 2021, 9.0% at June 30, 2021, and 9.3% at December 31, 2020.

The firm provides participant accounting and plan administration for defined contribution retirement plans that invest in the firm's U.S. mutual funds and collective investment trusts, as well as funds outside of the firm's complex. As of September 30, 2021, the firm's assets under administration were $260 billion, of which nearly $173 billion are assets we manage.

In recent years, the firm began offering non-discretionary advisory services through model delivery and multi-asset solutions for providers to implement. The firm records the revenue earned on these services in administrative fees. The assets under advisement in these portfolios, predominantly in the United States, were $8 billion at September 30, 2021.

Financial Results

Net revenues earned in Q3 2021 were $2.0 billion, an increase of 22.5% from Q3 2020. Average assets under management in Q3 2021 were $1.65 trillion, an increase of 27.5% from Q3 2020. The firm voluntarily waived money market advisory fees in Q3 2021 of $13.7 million to continue to maintain positive yields for investors. The firm anticipates that the waivers in Q4 2021 will be at a similar level to Q3 2021 and expects to continue to waive fees into 2022.

• Investment advisory revenues earned in Q3 2021 from the firm's U.S. mutual funds were $1.1 billion, an increase of 19.8% from Q3 2020. Average assets under management in these funds increased 24.3% to $881.0 billion in Q3 2021 from Q3 2020.

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• Investment advisory revenues earned in Q3 2021 from subadvised funds, separate accounts, collective investment trusts and other investment products were $687.9 million, an increase of 29.8% from Q3 2020. Average assets under management for these products increased 31.4% to $767.7 billion in Q3 2021 from Q3 2020.
• The annualized effective fee rate of 43.6 basis points in Q3 2021 was down from 45.2 basis points earned in both Q2 2021 and Q3 2020. In comparison to Q2 2021, the decrease is primarily due to the July 2021 fee reductions in the firm'starget-date products. In comparison to Q3 2020, the annualized effective fee rate was also impacted by client transfers to lower fee vehicles or share classes within the complex over the last twelve months and money market fee waivers. These fee pressures were partially offset as higher market valuations led to an asset class shift towards equity strategies. Over time, the firm's effective fee rate can be impacted by market or cash flow related shifts among asset and share classes, price changes in existing products, and asset level changes in products with tiered-fee structures.
• Administrative, distribution, and servicing fees in Q3 2021 were $140.7 million, an increase of 11.2% from Q3 2020. The increase was primarily attributable to higher transfer agent servicing activities provided to the T. Rowe Price mutual funds, higher model delivery revenue, as well as higher12b-1 revenue earned on the Advisor and R share classes of the U.S. mutual funds as a result of increased assets under management in these share classes.

Operating expenses in Q3 2021 were $957.9 million, an increase of 10.5% compared to Q3 2020. The increase in the firm's operating expenses from Q3 2020 was primarily due to higher compensation costs and higher distribution and servicing costs as average assets under management increased over the prior year. Also contributing to the increase in operating expenses during the quarter were costs incurred as FIS began providing technology development and core operations for our full-service recordkeeping offering on August 1, 2021. During the quarter, the firm incurred recordkeeping costs, which were partially offset by a reduction in the compensation expenses related to the approximately 800 associates who transitioned to FIS, as well as transition costs associated with the expanded relationship.

These increases were partially offset by lower compensation expenses related to the supplemental savings plan. The lower supplemental savings plan-related expenses in the Q3 2021 were entirely offset by the non-operating gains earned on the investments used to economically hedge the related liability.

On a non-GAAP basis, the firm's operating expenses in Q3 2021 were $957.2 million, a 15.3% increase over Q3 2020. The firm's non-GAAP operating expenses exclude the impact of the supplemental savings plan and consolidated sponsored products.

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