T. Rowe Price's (TROW) Q4 2024 earnings report highlights a strong financial performance, with net revenues reaching $7,093.6 million, a 9.8% increase compared to $6,460.5 million in 2023. This growth was driven by a 12.1% rise in investment advisory fees, which totaled $6,399.7 million in 2024, up from $5,709.5 million in 2023. The increase in advisory fees was supported by higher average assets under management (AUM), which grew by 14.7% to $1,561.9 billion in 2024.

Operating expenses for 2024 were $4,760.3 million, reflecting a 6.4% increase from $4,474.3 million in 2023. This rise was primarily attributed to higher compensation costs, distribution and servicing costs, and advertising expenses. Despite the increase in expenses, net operating income improved significantly, rising by 17.5% to $2,333.3 million in 2024, compared to $1,986.2 million in 2023.

Non-operating income for 2024 was $486.3 million, slightly lower than the $504.1 million reported in 2023. However, this figure represents a substantial recovery from the non-operating loss of $425.5 million in 2022. The decline in 2024 compared to 2023 was primarily due to lower gains on consolidated investment portfolios. Net income attributable to T. Rowe Price Group, Inc. rose to $2,100.1 million in 2024, a 17.4% increase from $1,788.7 million in 2023. This improvement was driven by higher operating income and a lower effective tax rate. Diluted earnings per share also increased to $9.15 in 2024, up from $7.76 in 2023, reflecting a 17.9% growth.

The company's operating margin improved to 32.9% in 2024, compared to 30.7% in 2023. This increase was primarily due to net revenue growth outpacing the rise in operating expenses, supported by higher average AUM and effective cost management. Average AUM for 2024 reached $1,561.9 billion, a 14.7% increase from $1,362.3 billion in 2023. This growth was driven by strong market returns and net inflows, particularly in equity and multi-asset classes. Ending AUM for 2024 stood at $1,606.6 billion, up 11.2% from $1,444.5 billion at the end of 2023.

Investment advisory fees, which form the bulk of T. Rowe Price's revenues, increased by 12.1% in 2024. The average annualized effective fee rate, excluding performance-based fees, declined slightly to 41.0 basis points in 2024 from 41.9 basis points in 2023, reflecting a mix shift toward lower-fee products and asset classes.Performance-based advisory fees saw a significant increase, rising to $59.3 million in 2024 from $38.2 million in 2023, reflecting improved investment performance. However, capital allocation-based income declined sharply to $46.6 million in 2024 from $161.9 million in 2023, due to lower accrued carried interest.

On a non-GAAP basis, operating expenses for 2024 were $4,498.8 million, a 5.6% increase from $4,260.7 million in 2023. The rise was driven by higher costs across compensation, distribution, and advertising, partially offset by lower external research fees and higher capitalized labor. Non-GAAP diluted earnings per share increased to $9.33 in 2024, up from $7.59 in 2023, reflecting a 22.9% growth.

T. Rowe Price's strong financial performance in 2024 underscores its ability to capitalize on favorable market conditions and effectively manage costs, resulting in robust revenue growth, improved margins, and higher earnings per share.