Attached files
| file | filename |
|---|---|
| 8-K - 8-K - WADDELL & REED FINANCIAL INC | a14-17910_18k.htm |
Exhibit 99.1
News Release
Waddell & Reed Financial, Inc. Reports Second Quarter Results
Operating income rose 6% sequentially and 45% year-over-year; operating margin of 30.9%
Sales remain strong at $7.5 billion; inflows across all distribution channels
Second quarter’s annualized organic growth rate of 3.7% exceeds last year’s 3.6%
Overland Park, KS, July 29, 2014 — Waddell & Reed Financial, Inc. (NYSE: WDR) today reported second quarter net income of $83.0 million, or $0.98 per diluted share, compared to net income of $74.9 million, or $0.88 per diluted share during the previous quarter and net income of $52.0 million, or $0.61 per diluted share during the second quarter of 2013.
Operating revenues of $400.6 million rose 3% sequentially and 21% compared to the same period last year. Our operating margin was 30.9% during the quarter compared to 29.9% during the previous quarter and 25.6% during the second quarter of 2013.
Assets under management ended the quarter at $135.6 billion, rising 3% sequentially and 30% compared to June 2013. Sales were $7.5 billion during the current quarter, an increase of 10% compared to the second quarter of 2013 and a decrease of 25% compared to the record-setting first quarter of this year. Each of our distribution channels saw inflows during the quarter for a complex-wide total of $1.2 billion, resulting in a 3.7% rate of organic growth.
Business Discussion
“Results in the quarter were strong,” said Hank Herrmann, Chairman and Chief Executive Officer of Waddell & Reed Financial, Inc. “Sales improved 10% compared to last year’s second quarter and our organic growth rate increased slightly, continuing to exceed industry trends.”
Wholesale sales were $4.9 billion, 3% below last year’s second quarter and 31% less than the previous quarter’s record-setting $7.0 billion. Inflows of $104 million were suppressed by a client’s exchange of $485 million from mutual funds to separate accounts, resulting in a reclassification of those assets from our Wholesale channel to our Institutional channel.
Our Advisors channel had sales of $1.5 billion during the quarter, a new record. At $271 million, net flows grew 5% compared to the second quarter of 2013. We continue to focus our efforts on improving productivity, which increased 18% compared to the same period last year while headcount has remained flat.
The Institutional channel had sales of $1.2 billion, more than three times the volume of the second quarter of 2013. Net flows were $827 million, benefiting from the $485 million exchange from the Wholesale channel previously mentioned and $342 million of net new sales.
Management Fee Revenue Analysis
Management fees, benefiting from one additional day during the current quarter, rose 3% sequentially, a rate that was slightly higher than the rate of growth in average assets under management. Compared to the second quarter of 2013, revenues rose 24% due to an increase in average assets under management.
The effective fee rate during the current quarter was 58.9 basis points compared to 59.2 basis points and 59.5 basis points in the first quarter of 2014 and second quarter of 2013, respectively.
Underwriting and Distribution Analysis
Wholesale channel
Revenues rose slightly compared to the previous quarter on a modest increase in asset-based Rule 12b-1 fees. Direct costs declined as an increase in Rule 12b-1 fees was more than offset by lower commission costs. Indirect costs rose with higher IT costs.
Compared to the same period in 2013, revenues rose with higher asset-based Rule 12b-1 fees. Direct costs rose with higher Rule 12b-1 fees, partly offset by a small decline of commissions paid to third party distributors. Indirect costs rose due to higher IT costs.
Advisors channel
Sequentially, revenues increased due to asset-based advisory fees, and to a lesser degree, Rule 12b-1 fees. Direct costs increased in correlation with revenues while indirect costs remained unchanged.
Compared to the second quarter of 2013, the increase in revenues was largely due to higher advisory fees, and to a lesser degree, higher asset-based Rule 12b-1 fees. Direct costs rose with revenues while indirect costs increased with field management salaries.
Compensation and Related Expense Analysis
Costs declined sequentially due to lower incentive compensation and to a lesser degree, lower pension and saving plan costs.
Compared to the same period last year, costs increased due to higher equity compensation. An increase in base salaries was offset by lower incentive compensation and lower pension costs.
General and Administrative Expense Analysis
Costs increased compared to the previous quarter due in part to higher legal and technology consulting costs, and to a lesser degree higher advertising and dealer services costs.
Last year’s second quarter included $6.6 million of costs associated with the launch of a closed-end fund. This year’s second quarter included higher costs for legal, technology consulting and dealer services.
Unaudited Balance Sheet Information
Schedule of Selected Items
|
|
|
Quarter ended |
| |
|
(Amounts in millions) |
|
June 30, 2014 |
| |
|
Cash & cash equivalents (unrestricted) |
|
$ |
507.7 |
|
|
Investment securities |
|
217.4 |
| |
|
Total assets |
|
1,437.0 |
| |
|
Long-term debt |
|
190.0 |
| |
|
Total liabilities |
|
664.7 |
| |
|
Stockholders’ equity |
|
772.3 |
| |
|
($ in thousands) |
|
Quarter-to-Date |
|
Year-to-Date |
| ||
|
Shares repurchased |
|
|
|
|
| ||
|
Number of shares |
|
628,022 |
|
908,208 |
| ||
|
Total cost |
|
$ |
44,047 |
|
$ |
61,722 |
|
|
|
|
|
|
|
| ||
|
Dividend paid |
|
|
|
|
| ||
|
Rate per share |
|
$ |
0.34 |
|
$ |
0.68 |
|
|
Total paid |
|
$ |
28,977 |
|
$ |
57,963 |
|
|
|
|
|
|
|
| ||
|
Capital returned to stockholders |
|
$ |
73,024 |
|
$ |
119,685 |
|
Unaudited Consolidated Statement of Income
|
|
|
2013 |
|
2014 |
| ||||||||||||||||||
|
(Amounts in thousands, except for per share data) |
|
1st Qtr. |
|
2nd Qtr. |
|
3rd Qtr. |
|
4th Qtr. |
|
1st Qtr. |
|
2nd Qtr. |
|
3rd Qtr. |
|
4th Qtr. |
| ||||||
|
Operating Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Investment management fees |
|
$ |
148,445 |
|
$ |
156,219 |
|
$ |
165,559 |
|
$ |
180,219 |
|
$ |
188,037 |
|
$ |
193,624 |
|
|
|
|
|
|
Underwriting and distribution fees |
|
135,419 |
|
141,597 |
|
146,863 |
|
158,940 |
|
165,267 |
|
169,001 |
|
|
|
|
| ||||||
|
Shareholder service fees |
|
32,691 |
|
33,890 |
|
34,667 |
|
35,845 |
|
37,112 |
|
38,009 |
|
|
|
|
| ||||||
|
Total operating revenues |
|
316,555 |
|
331,706 |
|
347,089 |
|
375,004 |
|
390,416 |
|
400,634 |
|
|
|
|
| ||||||
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Underwriting and distribution |
|
161,571 |
|
164,844 |
|
169,046 |
|
181,252 |
|
194,951 |
|
195,608 |
|
|
|
|
| ||||||
|
Compensation and related costs |
|
48,155 |
|
47,376 |
|
49,472 |
|
52,594 |
|
50,009 |
|
48,589 |
|
|
|
|
| ||||||
|
General and administrative |
|
16,208 |
|
26,938 |
|
20,462 |
|
22,811 |
|
23,756 |
|
27,183 |
|
|
|
|
| ||||||
|
Subadvisory fees |
|
4,484 |
|
4,291 |
|
1,667 |
|
1,778 |
|
1,877 |
|
2,069 |
|
|
|
|
| ||||||
|
Depreciation |
|
3,227 |
|
3,222 |
|
3,172 |
|
3,213 |
|
3,249 |
|
3,541 |
|
|
|
|
| ||||||
|
Total operating expenses |
|
233,645 |
|
246,671 |
|
243,819 |
|
261,648 |
|
273,842 |
|
276,990 |
|
|
|
|
| ||||||
|
Operating Income |
|
82,910 |
|
85,035 |
|
103,270 |
|
113,356 |
|
116,574 |
|
123,644 |
|
|
|
|
| ||||||
|
Investment and other income |
|
4,377 |
|
1,002 |
|
5,212 |
|
9,313 |
|
3,900 |
|
6,100 |
|
|
|
|
| ||||||
|
Interest expense |
|
(2,854 |
) |
(2,858 |
) |
(2,832 |
) |
(2,700 |
) |
(2,755 |
) |
(2,755 |
) |
|
|
|
| ||||||
|
Income before taxes |
|
84,433 |
|
83,179 |
|
105,650 |
|
119,969 |
|
117,719 |
|
126,989 |
|
|
|
|
| ||||||
|
Provision for taxes |
|
30,570 |
|
31,222 |
|
37,231 |
|
41,210 |
|
42,855 |
|
44,001 |
|
|
|
|
| ||||||
|
Net Income |
|
$ |
53,863 |
|
$ |
51,957 |
|
$ |
68,419 |
|
$ |
78,759 |
|
$ |
74,864 |
|
$ |
82,988 |
|
|
|
|
|
|
Net income per share, basic and diluted: |
|
0.63 |
|
0.61 |
|
0.80 |
|
0.92 |
|
0.88 |
|
0.98 |
|
|
|
|
| ||||||
|
Weighted average shares outstanding - basic and diluted |
|
85,593 |
|
85,869 |
|
85,603 |
|
85,294 |
|
85,019 |
|
85,073 |
|
|
|
|
| ||||||
|
Operating margin |
|
26.2 |
% |
25.6 |
% |
29.8 |
% |
30.2 |
% |
29.9 |
% |
30.9 |
% |
|
|
|
| ||||||
Net Distribution Cost Analysis
|
(Amounts in thousands) |
|
1st Qtr. |
|
2nd Qtr. |
|
3rd Qtr. |
|
4th Qtr. |
|
1st Qtr. |
|
2nd Qtr. |
|
3rd Qtr. |
|
4th Qtr. |
| ||||||
|
Wholesale Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
U&D Revenues |
|
$ |
48,175 |
|
$ |
49,846 |
|
$ |
52,472 |
|
$ |
56,926 |
|
$ |
59,564 |
|
$ |
60,237 |
|
|
|
|
|
|
U&D Expenses - Direct |
|
(63,548 |
) |
(64,694 |
) |
(67,107 |
) |
(72,698 |
) |
(79,700 |
) |
(76,834 |
) |
|
|
|
| ||||||
|
U&D Expenses - Indirect |
|
(11,000 |
) |
(11,229 |
) |
(10,409 |
) |
(11,285 |
) |
(11,535 |
) |
(12,791 |
) |
|
|
|
| ||||||
|
Net Distribution (Costs) |
|
$ |
(26,373 |
) |
$ |
(26,077 |
) |
$ |
(25,044 |
) |
$ |
(27,057 |
) |
$ |
(31,671 |
) |
$ |
(29,388 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Advisors Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
U&D Revenues |
|
$ |
87,244 |
|
$ |
91,751 |
|
$ |
94,391 |
|
$ |
102,014 |
|
$ |
105,703 |
|
$ |
108,764 |
|
|
|
|
|
|
U&D Expenses - Direct |
|
(59,657 |
) |
(62,794 |
) |
(64,550 |
) |
(69,023 |
) |
(74,697 |
) |
(76,867 |
) |
|
|
|
| ||||||
|
U&D Expenses - Indirect |
|
(27,366 |
) |
(26,127 |
) |
(26,980 |
) |
(28,246 |
) |
(29,019 |
) |
(29,116 |
) |
|
|
|
| ||||||
|
Net Distribution (Costs)/Excess |
|
$ |
221 |
|
$ |
2,830 |
|
$ |
2,861 |
|
$ |
4,745 |
|
$ |
1,987 |
|
$ |
2,781 |
|
|
|
|
|
Changes in Assets Under Management
|
|
|
2013 |
|
2014 |
| ||||||||||||||||||
|
(Amounts in millions) |
|
1st Qtr. |
|
2nd Qtr. |
|
3rd Qtr. |
|
4th Qtr. |
|
1st Qtr. |
|
2nd Qtr. |
|
3rd Qtr. |
|
4th Qtr. |
| ||||||
|
Wholesale Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Beginning assets |
|
$ |
48,930 |
|
$ |
53,254 |
|
$ |
53,860 |
|
$ |
59,661 |
|
$ |
67,055 |
|
$ |
70,467 |
|
|
|
|
|
|
Sales* |
|
5,042 |
|
5,030 |
|
5,191 |
|
6,148 |
|
7,017 |
|
4,864 |
|
|
|
|
| ||||||
|
Redemptions |
|
(3,157 |
) |
(3,983 |
) |
(3,723 |
) |
(3,449 |
) |
(3,562 |
) |
(4,363 |
) |
|
|
|
| ||||||
|
Net Exchanges |
|
66 |
|
61 |
|
83 |
|
91 |
|
112 |
|
(397 |
) |
|
|
|
| ||||||
|
Net flows |
|
1,951 |
|
1,108 |
|
1,551 |
|
2,790 |
|
3,567 |
|
104 |
|
|
|
|
| ||||||
|
Market action |
|
2,373 |
|
(502 |
) |
4,250 |
|
4,604 |
|
(155 |
) |
1,100 |
|
|
|
|
| ||||||
|
Ending assets |
|
$ |
53,254 |
|
$ |
53,860 |
|
$ |
59,661 |
|
$ |
67,055 |
|
$ |
70,467 |
|
$ |
71,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Advisors Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Beginning assets |
|
$ |
35,660 |
|
$ |
37,915 |
|
$ |
38,172 |
|
$ |
40,767 |
|
$ |
43,667 |
|
$ |
44,224 |
|
|
|
|
|
|
Sales* |
|
1,303 |
|
1,404 |
|
1,242 |
|
1,283 |
|
1,435 |
|
1,457 |
|
|
|
|
| ||||||
|
Redemptions |
|
(1,047 |
) |
(1,083 |
) |
(1,071 |
) |
(1,104 |
) |
(1,106 |
) |
(1,098 |
) |
|
|
|
| ||||||
|
Net Exchanges |
|
(66 |
) |
(62 |
) |
(83 |
) |
(92 |
) |
(112 |
) |
(88 |
) |
|
|
|
| ||||||
|
Net flows |
|
190 |
|
259 |
|
88 |
|
87 |
|
217 |
|
271 |
|
|
|
|
| ||||||
|
Market action |
|
2,065 |
|
(2 |
) |
2,507 |
|
2,813 |
|
340 |
|
1,302 |
|
|
|
|
| ||||||
|
Ending assets |
|
$ |
37,915 |
|
$ |
38,172 |
|
$ |
40,767 |
|
$ |
43,667 |
|
$ |
44,224 |
|
$ |
45,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Institutional Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Beginning assets |
|
$ |
11,775 |
|
$ |
12,626 |
|
$ |
12,312 |
|
$ |
13,316 |
|
$ |
15,821 |
|
$ |
16,692 |
|
|
|
|
|
|
Sales* |
|
430 |
|
379 |
|
386 |
|
1,913 |
|
1,554 |
|
1,193 |
|
|
|
|
| ||||||
|
Redemptions |
|
(469 |
) |
(811 |
) |
(550 |
) |
(792 |
) |
(679 |
) |
(851 |
) |
|
|
|
| ||||||
|
Net Exchanges |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
485 |
|
|
|
|
| ||||||
|
Net flows |
|
(39 |
) |
(432 |
) |
(164 |
) |
1,121 |
|
875 |
|
827 |
|
|
|
|
| ||||||
|
Market action |
|
890 |
|
118 |
|
1,168 |
|
1,384 |
|
(4 |
) |
646 |
|
|
|
|
| ||||||
|
Ending assets |
|
$ |
12,626 |
|
$ |
12,312 |
|
$ |
13,316 |
|
$ |
15,821 |
|
$ |
16,692 |
|
$ |
18,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Consolidated Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Beginning assets |
|
$ |
96,365 |
|
$ |
103,795 |
|
$ |
104,344 |
|
$ |
113,744 |
|
$ |
126,543 |
|
$ |
131,383 |
|
|
|
|
|
|
Sales* |
|
6,775 |
|
6,813 |
|
6,819 |
|
9,344 |
|
10,006 |
|
7,514 |
|
|
|
|
| ||||||
|
Redemptions |
|
(4,673 |
) |
(5,877 |
) |
(5,344 |
) |
(5,345 |
) |
(5,347 |
) |
(6,312 |
) |
|
|
|
| ||||||
|
Net Exchanges |
|
0 |
|
(1 |
) |
0 |
|
(1 |
) |
0 |
|
0 |
|
|
|
|
| ||||||
|
Net flows |
|
2,102 |
|
935 |
|
1,475 |
|
3,998 |
|
4,659 |
|
1,202 |
|
|
|
|
| ||||||
|
Market action |
|
5,328 |
|
(386 |
) |
7,925 |
|
8,801 |
|
181 |
|
3,048 |
|
|
|
|
| ||||||
|
Ending assets |
|
$ |
103,795 |
|
$ |
104,344 |
|
$ |
113,744 |
|
$ |
126,543 |
|
$ |
131,383 |
|
$ |
135,633 |
|
|
|
|
|
* Sales is primarily gross sales (net of sales commissions). This amount also includes net reinvested dividends & capital gains and investment income.
Supplemental Information
|
|
|
2013 |
|
2014 |
| ||||||||||||
|
|
|
1st Qtr. |
|
2nd Qtr. |
|
3rd Qtr. |
|
4th Qtr. |
|
1st Qtr. |
|
2nd Qtr. |
|
3rd Qtr. |
|
4th Qtr. |
|
|
Channel highlights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Wholesalers |
|
50 |
|
50 |
|
49 |
|
50 |
|
60 |
|
60 |
|
|
|
|
|
|
Number of Advisors |
|
1,717 |
|
1,734 |
|
1,784 |
|
1,746 |
|
1,737 |
|
1,740 |
|
|
|
|
|
|
Advisors’ Productivity * |
|
50.5 |
|
53.1 |
|
53.7 |
|
57.4 |
|
60.9 |
|
62.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption rates - long term assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale |
|
24.6 |
% |
29.4 |
% |
25.7 |
% |
21.7 |
% |
21.1 |
% |
25.1 |
% |
|
|
|
|
|
Advisors |
|
9.4 |
% |
9.1 |
% |
8.7 |
% |
8.5 |
% |
8.2 |
% |
7.9 |
% |
|
|
|
|
|
Institutional |
|
15.5 |
% |
25.5 |
% |
17.0 |
% |
21.6 |
% |
17.0 |
% |
19.9 |
% |
|
|
|
|
|
Total |
|
18.0 |
% |
21.7 |
% |
18.6 |
% |
17.1 |
% |
16.2 |
% |
18.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating highlights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic growth/(decay) annualized |
|
8.7 |
% |
3.6 |
% |
5.7 |
% |
14.1 |
% |
14.7 |
% |
3.7 |
% |
|
|
|
|
|
Total assets under management (in millions) |
|
103,795 |
|
104,344 |
|
113,744 |
|
126,543 |
|
131,383 |
|
135,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diversification (Company Total) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As % of Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Strategy |
|
33.6 |
% |
28.5 |
% |
25.9 |
% |
27.6 |
% |
33.4 |
% |
26.3 |
% |
|
|
|
|
|
Fixed Income |
|
30.7 |
% |
30.4 |
% |
31.8 |
% |
24.4 |
% |
23.3 |
% |
25.4 |
% |
|
|
|
|
|
Other |
|
35.7 |
% |
41.1 |
% |
42.3 |
% |
48.0 |
% |
43.3 |
% |
48.3 |
% |
|
|
|
|
|
As % of Assets Under Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Strategy |
|
33.7 |
% |
33.4 |
% |
33.8 |
% |
34.3 |
% |
33.9 |
% |
32.9 |
% |
|
|
|
|
|
Fixed Income |
|
20.7 |
% |
19.9 |
% |
19.0 |
% |
18.1 |
% |
18.6 |
% |
18.7 |
% |
|
|
|
|
|
Other |
|
45.6 |
% |
46.7 |
% |
47.2 |
% |
47.6 |
% |
47.5 |
% |
48.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating margin |
|
26.2 |
% |
25.6 |
% |
29.8 |
% |
30.2 |
% |
29.9 |
% |
30.9 |
% |
|
|
|
|
|
|
|
1 Year |
|
3 Years |
|
5 Years |
|
|
|
|
|
|
|
|
|
|
|
|
Lipper Fund Rankings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds ranked in top quartile |
|
44 |
% |
33 |
% |
31 |
% |
|
|
|
|
|
|
|
|
|
|
|
Funds ranked in top half |
|
64 |
% |
55 |
% |
57 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets ranked in top quartile |
|
62 |
% |
64 |
% |
36 |
% |
|
|
|
|
|
|
|
|
|
|
|
Assets ranked in top half |
|
82 |
% |
78 |
% |
83 |
% |
|
|
|
|
|
|
|
|
|
|
* Advisors’ productivity is calculated by dividing U&D revenues for the Advisors channel by the average number of advisors during the period.
Unaudited Consolidated Statement of Income
|
|
|
Six Months Ended |
| ||||||
|
(Amounts in thousands, except for per share data) |
|
Jun-14 |
|
Jun-13 |
|
% Change |
| ||
|
Operating Revenues: |
|
|
|
|
|
|
| ||
|
Investment management fees |
|
$ |
381,661 |
|
$ |
304,664 |
|
25.3 |
% |
|
Underwriting and distribution fees |
|
334,268 |
|
277,016 |
|
20.7 |
% | ||
|
Shareholder service fees |
|
75,121 |
|
66,581 |
|
12.8 |
% | ||
|
Total operating revenues |
|
791,050 |
|
648,261 |
|
22.0 |
% | ||
|
Operating Expenses: |
|
|
|
|
|
|
| ||
|
Underwriting and distribution |
|
390,559 |
|
326,415 |
|
19.7 |
% | ||
|
Compensation and related costs |
|
98,598 |
|
95,531 |
|
3.2 |
% | ||
|
General and administrative |
|
50,939 |
|
43,146 |
|
18.1 |
% | ||
|
Subadvisory fees |
|
3,946 |
|
8,775 |
|
-55.0 |
% | ||
|
Depreciation |
|
6,790 |
|
6,449 |
|
5.3 |
% | ||
|
Total operating expenses |
|
550,832 |
|
480,316 |
|
14.7 |
% | ||
|
Operating Income |
|
240,218 |
|
167,945 |
|
43.0 |
% | ||
|
Investment and other income |
|
10,000 |
|
5,379 |
|
85.9 |
% | ||
|
Interest expense |
|
(5,510 |
) |
(5,712 |
) |
-3.5 |
% | ||
|
Income before taxes |
|
244,708 |
|
167,612 |
|
46.0 |
% | ||
|
Provision for taxes |
|
86,856 |
|
61,792 |
|
40.6 |
% | ||
|
Net Income |
|
$ |
157,852 |
|
$ |
105,820 |
|
49.2 |
% |
|
Net income per share, basic and diluted |
|
1.86 |
|
1.23 |
|
50.4 |
% | ||
|
Weighted average shares outstanding - basic and diluted |
|
85,046 |
|
85,732 |
|
-0.8 |
% | ||
|
Operating margin |
|
30.4 |
% |
25.9 |
% |
17.2 |
% | ||
Net Distribution Cost Analysis
|
|
|
Six Months Ended |
| ||||||
|
(Amounts in thousands) |
|
Jun-14 |
|
Jun-13 |
|
% Change |
| ||
|
Wholesale Channel |
|
|
|
|
|
|
| ||
|
U&D Revenues |
|
$ |
119,801 |
|
$ |
98,021 |
|
22.2 |
% |
|
U&D Expenses - Direct |
|
(156,534 |
) |
(128,242 |
) |
22.1 |
% | ||
|
U&D Expenses - Indirect |
|
(24,326 |
) |
(22,229 |
) |
9.4 |
% | ||
|
Net Distribution (Costs) |
|
$ |
(61,059 |
) |
$ |
(52,450 |
) |
16.4 |
% |
|
|
|
|
|
|
|
|
| ||
|
Advisors Channel |
|
|
|
|
|
|
| ||
|
U&D Revenues |
|
$ |
214,467 |
|
$ |
178,995 |
|
19.8 |
% |
|
U&D Expenses - Direct |
|
(151,564 |
) |
(122,451 |
) |
23.8 |
% | ||
|
U&D Expenses - Indirect |
|
(58,135 |
) |
(53,493 |
) |
8.7 |
% | ||
|
Net Distribution (Costs)/Excess |
|
$ |
4,768 |
|
$ |
3,051 |
|
56.3 |
% |
Changes in Assets Under Management
|
|
|
Six Months Ended |
| ||||||
|
(Amounts in millions) |
|
Jun-14 |
|
Jun-13 |
|
% Change |
| ||
|
Wholesale Channel |
|
|
|
|
|
|
| ||
|
Beginning assets |
|
$ |
67,055 |
|
$ |
48,930 |
|
37.0 |
% |
|
Sales* |
|
11,881 |
|
10,072 |
|
18.0 |
% | ||
|
Redemptions |
|
(7,925 |
) |
(7,140 |
) |
11.0 |
% | ||
|
Net Exchanges |
|
(285 |
) |
127 |
|
N/M |
| ||
|
Net flows |
|
3,671 |
|
3,059 |
|
20.0 |
% | ||
|
Market action |
|
945 |
|
1,871 |
|
-49.5 |
% | ||
|
Ending assets |
|
$ |
71,671 |
|
$ |
53,860 |
|
33.1 |
% |
|
|
|
|
|
|
|
|
| ||
|
Advisors Channel |
|
|
|
|
|
|
| ||
|
Beginning assets |
|
$ |
43,667 |
|
$ |
35,660 |
|
22.5 |
% |
|
Sales* |
|
2,892 |
|
2,707 |
|
6.8 |
% | ||
|
Redemptions |
|
(2,204 |
) |
(2,130 |
) |
3.5 |
% | ||
|
Net Exchanges |
|
(200 |
) |
(128 |
) |
N/M |
| ||
|
Net flows |
|
488 |
|
449 |
|
8.7 |
% | ||
|
Market action |
|
1,642 |
|
2,063 |
|
-20.4 |
% | ||
|
Ending assets |
|
$ |
45,797 |
|
$ |
38,172 |
|
20.0 |
% |
|
|
|
|
|
|
|
|
| ||
|
Institutional Channel |
|
|
|
|
|
|
| ||
|
Beginning assets |
|
$ |
15,821 |
|
$ |
11,775 |
|
34.4 |
% |
|
Sales* |
|
2,747 |
|
809 |
|
239.6 |
% | ||
|
Redemptions |
|
(1,530 |
) |
(1,280 |
) |
19.5 |
% | ||
|
Net Exchanges |
|
485 |
|
0 |
|
N/M |
| ||
|
Net flows |
|
1,702 |
|
(471 |
) |
461.4 |
% | ||
|
Market action |
|
642 |
|
1,008 |
|
-36.3 |
% | ||
|
Ending assets |
|
$ |
18,165 |
|
$ |
12,312 |
|
47.5 |
% |
|
|
|
|
|
|
|
|
| ||
|
Consolidated Total |
|
|
|
|
|
|
| ||
|
Beginning assets |
|
$ |
126,543 |
|
$ |
96,365 |
|
31.3 |
% |
|
Sales* |
|
17,520 |
|
13,588 |
|
28.9 |
% | ||
|
Redemptions |
|
(11,659 |
) |
(10,550 |
) |
10.5 |
% | ||
|
Net Exchanges |
|
0 |
|
(1 |
) |
N/M |
| ||
|
Net flows |
|
5,861 |
|
3,037 |
|
93.0 |
% | ||
|
Market action |
|
3,229 |
|
4,942 |
|
-34.7 |
% | ||
|
Ending assets |
|
$ |
135,633 |
|
$ |
104,344 |
|
30.0 |
% |
* Sales is primarily gross sales (net of sales commissions). This amount also includes net reinvested dividends & capital gains and investment income.
Earnings Conference Call
Stockholders, members of the investment community and the general public are invited to listen to a live Web cast of our earnings release conference call today at 10:00 a.m. Eastern. During this call, Henry J. Herrmann, Chairman and CEO, will review our quarterly results. Live access to the teleconference will be available on the “Investor Relations” section of our Web site at www.waddell.com. A Web cast replay will be made available shortly after the conclusion of the call and accessible for seven days.
Web Site Resources
We invite you to visit the “Investor Relations” section of our Web site at www.waddell.com under the caption “Data Tables” to review supplemental information schedules.
Contacts
Investor Contact:
Nicole Russell, VP, Investor Relations, (913) 236-1880, nrussell@waddell.com
Mutual Fund Investor Contact:
Call (888) WADDELL, or visit www.waddell.com or www.ivyfunds.com.
Past performance is no guarantee of future results. Please invest carefully.
About the Company
Waddell & Reed, Inc., founded in 1937, is one of the oldest mutual fund complexes in the United States, having introduced the Waddell & Reed Advisors Group of Mutual Funds in 1940. Today, we distribute our investment products through the Waddell & Reed Wholesale channel (encompassing broker/dealer, retirement, and registered investment advisors), our Advisors channel (our network of financial advisors), and our Institutional channel (including defined benefit plans, pension plans and endowments, and our subadvisory partnership with Mackenzie in Canada).
Through its subsidiaries, Waddell & Reed Financial, Inc. provides investment management and financial planning services to clients throughout the United States. Waddell & Reed Investment Management Company serves as investment advisor to the Waddell & Reed Advisors Group of Mutual Funds, Ivy Funds Variable Insurance Portfolios and Waddell & Reed InvestEd Portfolios, while Ivy Investment Management Company serves as investment advisor to Ivy Funds. Waddell & Reed, Inc. serves as principal underwriter and distributor to the Waddell & Reed Advisors Group of Mutual Funds, Ivy Funds Variable Insurance Portfolios and Waddell & Reed InvestEd Portfolios, while Ivy Funds Distributor, Inc. serves as principal underwriter and distributor to Ivy Funds.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the current views and assumptions of management with respect to future events regarding our business and industry in general. These forward-looking statements include all statements, other than statements of historical fact, regarding our financial position, business strategy and other plans and objectives for future operations, including statements with respect to revenues and earnings, the amount and composition of assets under management, distribution sources, expense levels, redemption rates and the financial markets and other conditions. These statements are generally identified by the use of such words as “may,” “could,” “should,” “would,” “believe,” “anticipate,” “forecast,” “estimate,” “expect,” “intend,” “plan,” “project,” “outlook,” “will,” “potential” and similar statements of a future or forward-looking nature. Readers are cautioned that any forward-looking information provided by or on behalf of the Company is not a guarantee of future performance. Actual results may differ materially from those contained in these forward-looking statements as a result of various factors, including but not limited to those discussed below. If one or more events related to these or other risks, contingencies or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from those forecasted or expected. Certain important factors that could cause actual results to differ materially from our expectations are disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2013, which include, without limitation:
· The loss of existing distribution channels or inability to access new distribution channels;
· A reduction in assets under our management on short notice, through increased redemptions in our distribution channels or our Funds, particularly those Funds with a high concentration of assets, or investors terminating their relationship with us or shifting their funds to other types of accounts with different rate structures;
· The adverse ruling or resolution of any litigation, regulatory investigations and proceedings, or securities arbitrations by a federal or state court or regulatory body;
· The introduction of legislative or regulatory proposals or judicial rulings that change the independent contractor classification of our financial advisors at the federal or state level for employment tax or other employee benefit purposes;
· Our inability to provide sufficient capital to support new investment products;
· The ability of mutual fund and other investors to redeem their investments without prior notice or on short notice;
· Our inability to implement new information technology and systems, or inability to complete such implementation in a timely or cost effective manner;
· Non-compliance with applicable laws or regulations and changes in current legal, regulatory, accounting, tax or compliance requirements or governmental policies;
· A decline in the securities markets or in the relative investment performance of our Funds and other investment portfolios and products as compared to competing funds; and
· Our inability to attract and retain senior executive management and other key personnel to conduct our broker/dealer, fund management and investment advisory business.
· Our inability to hire or retain senior executive management or other key employees.
The foregoing factors should not be construed as exhaustive and should be read together with other cautionary statements included in this and other reports and filings we make with the Securities and Exchange Commission, including the information in Item 1 “Business” and Item 1A “Risk Factors” of Part I and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part II to our Annual Report on Form 10-K for the year ended December 31, 2013 and as updated in our quarterly reports on Form 10-Q for the year ending December 31, 2014. All forward-looking statements speak only as the date on which they are made and we undertake no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.