PRICE T ROWE GROUP INC Q2 FY2025 earnings call

• Building momentum: Growing ETF business, leveraging partnerships, expanding retirement leadership. - Investment performance: Equity markets had volatility; long-term performance solid; Target Date funds strong, especially near-dated vintages; fixed income strong, alternatives had mixed results. - Flows and AUM: Net outflows of $14.9 billion in Q2 2025, driven by U.S. equities; positive flows in fixed income, multi-asset, alternatives; ETFs had $2.5 billion net flows; model delivery assets to be included in AUM. - Financial results: Adjusted diluted EPS $2.24, flat to prior quarter; adjusted net revenue flat to Q2 2024; operating expenses up, but expense management plan in place. - Growth initiatives: Growing ETF business, expanding private market alternatives, retirement solutions growth, international client interest in U.S. equity research strategy.

Equity: Mixed performance in the quarter with some strategies underperforming, but long-term performance solid; U.S. equity research, diversified mid-cap growth, etc., had strong 3-, 5-, 10-year track records. Fixed Income: Strong performance vs peers, majority of funds beating peer group medians, led by high yield and low duration. Emerging Markets: Weaker quarter vs peers but long-term better vs benchmark. Alternatives: Credit markets posted solid returns; private credit and structured credit portfolios had strong gains, liquid strategies in line with benchmarks; new deal flow muted but pipeline showing positive developments. ETF: $6 billion in inflows in first half, AUM at $16.2 billion as of June 30; 11 ETFs over $500 million AUM; launched new ETFs. Retirement: Target Date suite surpassed $520 billion in AUM; added 20-70 vintages.

• Expense outlook: Expect 2025 adjusted operating expenses, excluding carried interest, up 2%-4% over 2024; plan to reduce expense growth to align with revenue growth, keeping non-market-driven expense growth in low single digits in 2026-2027. - Flow expectations: Anticipate outflows to continue in second half but lower than first half; leading indicators show improvement. - ETF growth: Continued growth in ETF pipeline with new launches, expecting incremental new business.

• Market volatility: Impact on flows and AUM. - Fiduciary risks: Concerns around fees and fiduciary risks in relation to private assets in DC plans. - Expense management challenges: Balancing expense growth with revenue growth, managing inflationary pressures.

Q: Brian Bedell from Deutsche Bank asks about 401(k) business, private markets in DC plans, and weaving private products into retirement solutions.

A: Robert W. Sharps responds about client-first approach, investment and commercial case for private assets in DC plans, and considering partnerships like OHA.

Q: Michael Cyprys from Morgan Stanley asks about expense initiatives, AI, blockchain, and stablecoins.

A: Robert W. Sharps, Eric Veiel, and Jen Dardis discuss expense management, AI's impact on productivity and alpha generation, and tokenization in digital assets.

Q: Glenn Schorr from Evercore ISI asks about retirement channel, equity outflows, and fee rate.

A: Robert W. Sharps, Eric Veiel, and Jen Dardis talk about retirement channel growth, equity outflows impact, and fee rate trends.

Q: Daniel Fannon from Jefferies asks about fee rate impact of business growth, ETFs, and models.

A: Robert W. Sharps and Jen Dardis discuss fee rate trends, impact of business growth on fees, and ETF vs mutual fund dynamics.

Q: Ivory Gao on behalf of Craig Siegenthaler asks about ETF growth cannibalization.

A: Jennifer Benson Dardis and Eric Veiel discuss ETF growth as a mix of new and existing clients.

Q: Benjamin Budish from Barclays asks about acquisitions and product suite extension.

A: Robert W. Sharps and Jen Dardis talk about M&A strategy, cultural alignment, and new capabilities.

Q: Kenneth Brooks Worthington from JPM asks about organic growth necessity.

A: Robert W. Sharps states that organic growth is necessary for long-term success and delivering value to stakeholders.