Exhibit 99.1
News Release
Waddell & Reed Financial, Inc. Reports Third Quarter Results
Overland Park, KS, October 29, 2019 — Waddell & Reed Financial, Inc. (NYSE: WDR) today reported third quarter 2019 net income1 of $33.1 million, or $0.46 per diluted share, compared to net income of $33.9 million, or $0.45 per diluted share, during the prior quarter and net income of $46.3 million, or $0.58 per diluted share, during the third quarter of 2018.
Revenues of $270.7 million increased slightly compared to the prior quarter and decreased $24.4 million compared to the third quarter of 2018. Operating expenses of $230.7 million increased $1.8 million compared to the prior quarter and declined $5.0 million compared to the same quarter of 2018. The operating margin was 14.8% during the current quarter, compared to 15.3% during the prior quarter and 20.2% during the third quarter of 2018.
Assets under management ended the quarter at $68.8 billion, a decrease of 4% compared to the prior quarter and a decrease of 14% compared to the third quarter of 2018. Average assets under management were $70.5 billion during the current quarter, compared to $71.4 billion during the prior quarter and $79.5 billion during the third quarter of 2018. Net outflows of $2.7 billion during the current quarter were slightly higher compared to net outflows of $2.4 billion in the second quarter of 2019 and were higher compared to net outflows of $2.0 billion in the third quarter of 2018. Sales of $1.8 billion during the current quarter declined 16% and 30% compared to the prior quarter and the third quarter of 2018, respectively. Equity markets during the quarter continued to experience volatility leading to lower sales in key products as investors preferred lower-risk fixed income and money market funds. Redemptions improved slightly compared to the prior quarter and improved 3% compared to the third quarter of 2018.
Wealth management assets under administration ended the quarter at $57.1 billion, a slight decrease compared to the second quarter of 2019, and a 2% decrease compared to the same quarter in 2018. For both comparative periods, assets under administration decreased primarily due to outflows in non-advisory assets.
Philip J. Sanders, Chief Executive Officer of Waddell & Reed Financial, Inc. shared, “the quarter remained challenging from a flow perspective, especially within the unaffiliated channel of our asset management business. However, strong expense control, progress in our wealth management business and the continued strength of our balance sheet provides opportunities to add to and enhance our capabilities as a diversified financial services organization.”
Revenues Analysis
Investment management fees decreased $1.1 million, or 1%, compared to the second quarter of 2019 due to a 1% decrease in average assets under management and a lower effective management fee rate, partially offset by one additional day in the quarter. The effective management fee rate was 62.9 basis points and decreased compared to the prior quarter’s rate entirely due to a true-up in fund fee waiver expenses. Adjusting for the true-up amount, the effective fee rate was consistent with the second quarter’s rate. Compared to the third quarter of 2018, investment management fees declined $17.5 million, or 14%, due to lower average assets under management and a lower effective management fee rate, which was approximately two basis points lower due to fee reductions in selected mutual funds implemented in July 2018.
Underwriting and distribution fees increased $2.3 million, or 2%, compared to the prior quarter, primarily due to an increase in advisory assets under administration. Compared to the same quarter in 2018, fees decreased $4.5 million, or 3%, due to lower service and distribution fees and lower commissionable sales, partially offset by an increase in advisory fees.
1 Net income represents net income attributable to Waddell & Reed Financial, Inc.
Shareholder service fees decreased $0.7 million, or 3%, compared to the second quarter of 2019 due to a decrease in accounts and a nonrecurring decrease in revenue related to the outsourcing of our transfer agent transaction processing. Compared to the third quarter of 2018, shareholder service fees declined $2.4 million, or 9%, primarily due to fewer accounts and a decrease in average assets.
Operating Expenses Analysis
Distribution expenses increased $1.0 million, or 1%, compared to the prior quarter, as a result of the increase in underwriting and distribution revenue. Compared to the third quarter of 2018, expenses increased $0.8 million, or 1%. Rule 12b-1 commissions paid to third parties decreased consistent with the revenue decrease due to lower average mutual fund assets, however, this decrease was more than offset by an increase in the compensation grid for associated independent financial advisors starting in 2019.
Compensation and benefits expense increased $3.1 million, or 5%, compared to the prior quarter due to $3.0 million of severance expense, primarily related to the outsourcing of our transfer agency transactional processing operations. Compared to the third quarter of 2018, compensation and benefits expense increased $0.4 million, or 1%, as severance in the current quarter was partially offset by lower costs from reduced headcount as well as a $1.3 million decrease in share-based compensation due to previously-issued awards vesting fully, as well as forfeitures.
General and administrative expenses increased $0.6 million, or 4%, in the current quarter primarily due to increases in recruiting costs, state business tax and insurance costs compared to the second quarter. Compared to the third quarter of 2018, expenses improved $0.9 million, or 5%, due to lower legal and consulting costs.
Technology costs decreased $1.4 million and $0.4 million compared to the prior quarter and third quarter of 2018, respectively. The decrease in both periods was primarily related to a non-recurring benefit from the outsourcing of our transfer agent transactional processing operations. Compared to the third quarter of 2018, the benefit was partially offset by costs from the centralized advisor desktop platform which was rolled out during the second quarter of 2019.
Occupancy and Marketing and advertising expenses decreased a combined $1.3 million, or 14%, compared to the prior quarter. Compared to the third quarter of 2018, these expenses declined $1.8 million, or 19%. For both comparative periods, occupancy costs decreased as we realized cost savings from the closure of field offices, and marketing expenses decreased as prior period fund mergers have reduced fund-related marketing expenses.
Depreciation expense declined $0.4 million, or 8%, compared to the prior quarter and declined $3.3 million, or 41%, compared to the third quarter of 2018 primarily due to certain fixed assets reaching the end of their useful lives.
Investment and Other Income
Investment and other income declined $3.8 million compared to the prior quarter primarily due to lower unrealized gains on seed and corporate investment portfolios. Compared to the third quarter of 2018, investment and other income increased $3.5 million primarily due to unrealized gains on the seed and corporate investment portfolios and increased interest income from our corporate investment portfolio.
Assets Under Management
(in millions)
| Three Months Ended | ||||||||||||||||||||||||||||
| Sep. 30, | Jun. 30, | Sep. 30, | Prior Qtr. | Year-over-Year Qtr. | ||||||||||||||||||||||||
| 2019 | 2019 | 2018 | Change | % | Change | % | ||||||||||||||||||||||
| Unaffiliated1 | ||||||||||||||||||||||||||||
| Beginning assets | $ | 27,545 | $ | 27,506 | $ | 30,782 | $ | 39 | 0 | % | $ | (3,237 | ) | (11 | )% | |||||||||||||
| Sales2 | 999 | 1,291 | 1,589 | (292 | ) | (23 | )% | (590 | ) | (37 | )% | |||||||||||||||||
| Redemptions | (2,684 | ) | (2,441 | ) | (2,425 | ) | (243 | ) | (10 | )% | (259 | ) | (11 | )% | ||||||||||||||
| Net exchanges | 334 | 303 | 360 | 31 | 10 | % | (26 | ) | (7 | )% | ||||||||||||||||||
| Net Flows | (1,351 | ) | (847 | ) | (476 | ) | (504 | ) | (60 | )% | (875 | ) | (184 | )% | ||||||||||||||
| Market action | (337 | ) | 886 | 866 | (1,223 | ) | (138 | )% | (1,203 | ) | (139 | )% | ||||||||||||||||
| Ending assets | $ | 25,857 | $ | 27,545 | $ | 31,172 | $ | (1,688 | ) | (6 | )% | $ | (5,315 | ) | (17 | )% | ||||||||||||
| Annualized organic growth rate | (19.6 | )% | (12.3 | )% | (6.2 | )% | ||||||||||||||||||||||
| Annualized redemption rate3 | 40.9 | % | 36.7 | % | 31.8 | % | ||||||||||||||||||||||
| Institutional | ||||||||||||||||||||||||||||
| Beginning assets | $ | 3,887 | $ | 4,053 | $ | 5,250 | $ | (166 | ) | (4 | )% | $ | (1,363 | ) | (26 | )% | ||||||||||||
| Sales2 | 49 | 54 | 83 | (5 | ) | (9 | )% | (34 | ) | (41 | )% | |||||||||||||||||
| Redemptions | (230 | ) | (440 | ) | (535 | ) | 210 | 48 | % | 305 | 57 | % | ||||||||||||||||
| Net exchanges | — | 25 | — | (25 | ) | NM | — | NM% | ||||||||||||||||||||
| Net Flows | (181 | ) | (361 | ) | (452 | ) | 180 | 50 | % | 271 | 60 | % | ||||||||||||||||
| Market action | (29 | ) | 195 | 389 | (224 | ) | (115 | )% | (418 | ) | (107 | )% | ||||||||||||||||
| Ending assets | $ | 3,677 | $ | 3,887 | $ | 5,187 | $ | (210 | ) | (5 | )% | $ | (1,510 | ) | (29 | )% | ||||||||||||
| Annualized organic growth rate | (18.6 | )% | (35.6 | )% | (34.4 | )% | ||||||||||||||||||||||
| Annualized redemption rate3 | 23.9 | % | 46.1 | % | 40.8 | % | ||||||||||||||||||||||
| Wealth Management | ||||||||||||||||||||||||||||
| Beginning assets | $ | 40,444 | $ | 40,095 | $ | 42,619 | $ | 349 | 1 | % | $ | (2,175 | ) | (5 | )% | |||||||||||||
| Sales2 | 744 | 789 | 874 | (45 | ) | (6 | )% | (130 | ) | (15 | )% | |||||||||||||||||
| Redemptions | (1,542 | ) | (1,609 | ) | (1,612 | ) | 67 | 4 | % | 70 | 4 | % | ||||||||||||||||
| Net exchanges | (334 | ) | (328 | ) | (360 | ) | (6 | ) | (2 | )% | 26 | 7 | % | |||||||||||||||
| Net Flows | (1,132 | ) | (1,148 | ) | (1,098 | ) | 16 | 1 | % | (34 | ) | (3 | )% | |||||||||||||||
| Market action | (64 | ) | 1,497 | 1,662 | (1,561 | ) | (104 | )% | (1,726 | ) | (104 | )% | ||||||||||||||||
| Ending assets | $ | 39,248 | $ | 40,444 | $ | 43,183 | $ | (1,196 | ) | (3 | )% | $ | (3,935 | ) | (9 | )% | ||||||||||||
| Annualized organic growth rate | (11.2 | )% | (11.5 | )% | (10.3 | )% | ||||||||||||||||||||||
| Annualized redemption rate3 | 13.4 | % | 13.8 | % | 12.8 | % | ||||||||||||||||||||||
| Consolidated Total | ||||||||||||||||||||||||||||
| Beginning assets | $ | 71,876 | $ | 71,654 | $ | 78,651 | $ | 222 | 0 | % | $ | (6,775 | ) | (9 | )% | |||||||||||||
| Sales2 | 1,792 | 2,134 | 2,546 | (342 | ) | (16 | )% | (754 | ) | (30 | )% | |||||||||||||||||
| Redemptions | (4,456 | ) | (4,490 | ) | (4,572 | ) | 34 | 1 | % | 116 | 3 | % | ||||||||||||||||
| Net exchanges | — | — | — | — | — | — | — | |||||||||||||||||||||
| Net Flows | (2,664 | ) | (2,356 | ) | (2,026 | ) | (308 | ) | (13 | )% | (638 | ) | (31 | )% | ||||||||||||||
| Market action | (430 | ) | 2,578 | 2,917 | (3,008 | ) | (117 | )% | (3,347 | ) | (115 | )% | ||||||||||||||||
| Ending assets | $ | 68,782 | $ | 71,876 | $ | 79,542 | $ | (3,094 | ) | (4 | )% | $ | (10,760 | ) | (14 | )% | ||||||||||||
| Annualized organic growth rate | (14.8 | )% | (13.2 | )% | (10.3 | )% | ||||||||||||||||||||||
| Annualized redemption rate3 | 24.3 | % | 24.3 | % | 22.1 | % | ||||||||||||||||||||||
| (1) | Unaffiliated includes National channel (home office and wholesale), Defined Contribution Investment Only “DCIO”, Registered Investment Advisor “RIA” and Variable Annuity “VA”. |
| (2) | Sales is primarily gross sales (net of sales commissions). This amount also includes net reinvested dividends and capital gains, and investment income. |
| (3) | Excludes Money Market. |
| MorningStar Fund Rankings 1 | 1 Year | 3 Years | 5 Years | |||||||||
| Funds ranked in top half | 54 | % | 42 | % | 29 | % | ||||||
| Assets ranked in top half | 63 | % | 63 | % | 40 | % | ||||||
| MorningStar Ratings 1 | Overall | 3 Years | 5 Years | |||||||||
| Funds with 4/5 stars | 29 | % | 29 | % | 23 | % | ||||||
| Assets with 4/5 stars | 45 | % | 42 | % | 36 | % | ||||||
| (1) | Based on class I share, which reflects the largest concentration of sales and assets. |
| Three Months Ended | ||||||||||||||||||||||||||||
| Wealth Management | Sep. 30, | Jun. 30, | Sep. 30, | Prior Qtr. | Year-over-Year Qtr. | |||||||||||||||||||||||
| (in millions) | 2019 | 2019 | 2018 | Change | % | Change | % | |||||||||||||||||||||
| Assets under administration (AUA) | ||||||||||||||||||||||||||||
| Advisory assets | $ | 25,107 | $ | 24,789 | $ | 23,653 | $ | 318 | 1 | % | $ | 1,454 | 6 | % | ||||||||||||||
| Non-advisory assets | 32,006 | 32,641 | 34,468 | (635 | ) | (2 | )% | (2,462 | ) | (7 | )% | |||||||||||||||||
| Total assets under administration | 57,113 | 57,430 | 58,121 | (317 | ) | (1 | )% | (1,008 | ) | (2 | )% | |||||||||||||||||
| Net new advisory assets1 | $ | 236 | $ | 253 | $ | (87 | ) | $ | (17 | ) | (7 | )% | $ | 323 | 371 | % | ||||||||||||
| Net new non-advisory assets1, 2 | (769 | ) | (885 | ) | (931 | ) | 116 | 13 | % | 162 | 17 | % | ||||||||||||||||
| Total net new AUA1, 2 | (533 | ) | (632 | ) | (1,018 | ) | 99 | 16 | % | 485 | 48 | % | ||||||||||||||||
| Annualized advisory AUA growth3 | 3.8 | % | 4.3 | % | (1.5 | )% | ||||||||||||||||||||||
| Annualized AUA growth3 | (3.7 | )% | (4.5 | )% | (7.1 | )% | ||||||||||||||||||||||
| Advisors and advisor associates | 1,344 | 1,347 | 1,425 | (3 | ) | NM | (81 | ) | (6 | )% | ||||||||||||||||||
| Avg. trailing 12-month revenue per advisor4 (in thousands) | $ | 422 | $ | 408 | $ | 351 | $ | 14 | 3 | % | $ | 71 | 20 | % | ||||||||||||||
| (1) | Net new assets are calculated as total client deposits and net transfers less client withdrawals. |
| (2) | Excludes activity related to products held outside of our wealth management platform. These assets represent less than 10% of total AUA. |
| (3) | Annualized growth is calculated as annualized quarterly net new assets divided by beginning AUA. |
| (4) | Production per Advisor is calculated as trailing 12- month Total underwriting and distribution fees less “other” underwriting and distribution fees divided by the average number of Advisors. “Other” underwriting and distribution fees predominantly includes fees paid by Advisors for programs and services. |
Unaudited Consolidated Statements of Income
(in thousands, except per share data and margin)
| Three Months Ended | ||||||||||||||||||||||||||||
| Sep. 30, | Jun. 30, | Sep. 30, | Prior Qtr. | Year-over-Year Qtr. | ||||||||||||||||||||||||
| 2019 | 2019 | 2018 | Change | % | Change | % | ||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||
| Investment management fees | $ | 111,806 | $ | 112,870 | $ | 129,302 | $ | (1,064 | ) | (1 | )% | $ | (17,496 | ) | (14 | )% | ||||||||||||
| Underwriting and distribution fees | 135,787 | 133,495 | 140,308 | 2,292 | 2 | % | (4,521 | ) | (3 | )% | ||||||||||||||||||
| Shareholder service fees | 23,087 | 23,789 | 25,508 | (702 | ) | (3 | )% | (2,421 | ) | (9 | )% | |||||||||||||||||
| Total | 270,680 | 270,154 | 295,118 | 526 | 0 | % | (24,438 | ) | (8 | )% | ||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||
| Distribution | 117,425 | 116,477 | 116,591 | 948 | 1 | % | 834 | 1 | % | |||||||||||||||||||
| Compensation and benefits (including share-based compensation of $11,580, $11,199 and $12,856, respectively) | 64,999 | 61,876 | 64,561 | 3,123 | 5 | % | 438 | 1 | % | |||||||||||||||||||
| General and administrative | 16,680 | 16,037 | 17,559 | 643 | 4 | % | (879 | ) | (5 | )% | ||||||||||||||||||
| Technology | 15,019 | 16,442 | 15,414 | (1,423 | ) | (9 | )% | (395 | ) | (3 | )% | |||||||||||||||||
| Occupancy | 5,684 | 6,701 | 7,148 | (1,017 | ) | (15 | )% | (1,464 | ) | (20 | )% | |||||||||||||||||
| Marketing and advertising | 2,134 | 2,399 | 2,461 | (265 | ) | (11 | )% | (327 | ) | (13 | )% | |||||||||||||||||
| Depreciation | 4,833 | 5,228 | 8,141 | (395 | ) | (8 | )% | (3,308 | ) | (41 | )% | |||||||||||||||||
| Subadvisory fees | 3,882 | 3,715 | 3,767 | 167 | 4 | % | 115 | 3 | % | |||||||||||||||||||
| Total | 230,656 | 228,875 | 235,642 | 1,781 | 1 | % | (4,986 | ) | (2 | )% | ||||||||||||||||||
| Operating income | 40,024 | 41,279 | 59,476 | (1,255 | ) | (3 | )% | (19,452 | ) | (33 | )% | |||||||||||||||||
| Investment and other income | 5,212 | 9,025 | 1,697 | (3,813 | ) | (42 | )% | 3,515 | 207 | % | ||||||||||||||||||
| Interest expense | (1,562 | ) | (1,552 | ) | (1,555 | ) | (10 | ) | (1 | )% | (7 | ) | (0 | )% | ||||||||||||||
| Income before provision for income taxes | 43,674 | 48,752 | 59,618 | (5,078 | ) | (10 | )% | (15,944 | ) | (27 | )% | |||||||||||||||||
| Provision for income taxes | 10,175 | 14,190 | 13,105 | (4,015 | ) | (28 | )% | (2,930 | ) | (22 | )% | |||||||||||||||||
| Net income | 33,499 | 34,562 | 46,513 | (1,063 | ) | (3 | )% | (13,014 | ) | (28 | )% | |||||||||||||||||
| Net income (loss) attributable to redeemable noncontrolling interests | 445 | 614 | 208 | (169 | ) | (28 | )% | 237 | 114 | % | ||||||||||||||||||
| Net income attributable to Waddell & Reed Financial, Inc. | $ | 33,054 | $ | 33,948 | $ | 46,305 | $ | (894 | ) | (3 | )% | $ | (13,251 | ) | (29 | )% | ||||||||||||
| Net income per share, basic and diluted: | $ | 0.46 | $ | 0.45 | $ | 0.58 | ||||||||||||||||||||||
| Weighted average shares outstanding - basic and diluted | 72,387 | 74,694 | 79,595 | |||||||||||||||||||||||||
| Operating margin | 14.8 | % | 15.3 | % | 20.2 | % | ||||||||||||||||||||||
| (1) Distribution expense | ||||||||||||||||||||||||||||
| Unaffiliated | 23,323 | 24,501 | 28,116 | |||||||||||||||||||||||||
| Wealth Management | 94,102 | 91,976 | 88,475 | |||||||||||||||||||||||||
| $ | 117,425 | $ | 116,477 | $ | 116,591 | |||||||||||||||||||||||
Unaudited Consolidated Statements of Income
(in thousands, except per share data and margin)
| Nine Months Ended | ||||||||||||||||
| Sep. 30, | Sep. 30, | |||||||||||||||
| 2019 | 2018 | Change | % | |||||||||||||
| Revenues: | ||||||||||||||||
| Investment management fees | $ | 334,438 | $ | 393,385 | $ | (58,947 | ) | (15 | )% | |||||||
| Underwriting and distribution fees | 395,527 | 416,222 | (20,695 | ) | (5 | )% | ||||||||||
| Shareholder service fees | 70,279 | 78,464 | (8,185 | ) | (10 | )% | ||||||||||
| Total | 800,244 | 888,071 | (87,827 | ) | (10 | )% | ||||||||||
| Operating expenses: | ||||||||||||||||
| Distribution | 343,696 | 345,376 | (1,680 | ) | (0 | )% | ||||||||||
| Compensation and benefits (including share-based compensation of $35,471 and $42,526, respectively) | 191,718 | 199,174 | (7,456 | ) | (4 | )% | ||||||||||
| General and administrative | 47,421 | 56,240 | (8,819 | ) | (16 | )% | ||||||||||
| Technology | 47,769 | 49,293 | (1,524 | ) | (3 | )% | ||||||||||
| Occupancy | 19,100 | 21,081 | (1,981 | ) | (9 | )% | ||||||||||
| Marketing and advertising | 6,497 | 7,638 | (1,141 | ) | (15 | )% | ||||||||||
| Depreciation | 16,062 | 19,262 | (3,200 | ) | (17 | )% | ||||||||||
| Subadvisory fees | 11,154 | 11,158 | (4 | ) | (0 | )% | ||||||||||
| Intangible asset impairment | — | 1,200 | (1,200 | ) | (100 | )% | ||||||||||
| Total | 683,417 | 710,422 | (27,005 | ) | (4 | )% | ||||||||||
| Operating income | 116,827 | 177,649 | (60,822 | ) | (34 | )% | ||||||||||
| Investment and other income | 23,690 | 5,354 | 18,336 | 342 | % | |||||||||||
| Interest expense | (4,662 | ) | (4,908 | ) | 246 | 5 | % | |||||||||
| Income before provision for income taxes | 135,855 | 178,095 | (42,240 | ) | (24 | )% | ||||||||||
| Provision for income taxes | 35,036 | 41,355 | (6,319 | ) | (15 | )% | ||||||||||
| Net income | 100,819 | 136,740 | (35,921 | ) | (26 | )% | ||||||||||
| Net income (loss) attributable to redeemable noncontrolling interests | 1,763 | (380 | ) | 2,143 | 564 | % | ||||||||||
| Net income attributable to Waddell & Reed Financial, Inc. | $ | 99,056 | $ | 137,120 | $ | (38,064 | ) | (28 | )% | |||||||
| Net income per share, basic and diluted: | $ | 1.33 | $ | 1.69 | ||||||||||||
| Weighted average shares outstanding - basic and diluted | 74,446 | 81,372 | ||||||||||||||
| Operating margin | 14.6 | % | 20.0 | % | ||||||||||||
| (1) Distribution expense | ||||||||||||||||
| Unaffiliated | 71,124 | 87,155 | ||||||||||||||
| Wealth Management | 272,572 | 258,221 | ||||||||||||||
| $ | 343,696 | $ | 345,376 | |||||||||||||
Underwriting and distribution fees
(in thousands)
| For the three months ended Sep. 30, 2019 | ||||||||||||
| Unaffiliated | Wealth Management | Total | ||||||||||
| Fee-based asset allocation product revenues | $ | — | $ | 73,356 | $ | 73,356 | ||||||
| Rule 12b-1 service and distribution fees | 16,003 | 16,426 | 32,429 | |||||||||
| Sales commissions on front-end load mutual funds and variable annuity products | 361 | 12,523 | 12,884 | |||||||||
| Sales commissions on other products | — | 8,024 | 8,024 | |||||||||
| Other revenues | 67 | 9,027 | 9,094 | |||||||||
| Total underwriting and distribution fees | $ | 16,431 | $ | 119,356 | $ | 135,787 | ||||||
| For the three months ended Jun. 30, 2019 | ||||||||||||
| Unaffiliated | Wealth Management | Total | ||||||||||
| Fee-based asset allocation product revenues | $ | — | $ | 70,220 | $ | 70,220 | ||||||
| Rule 12b-1 service and distribution fees | 16,329 | 16,327 | 32,656 | |||||||||
| Sales commissions on front-end load mutual funds and variable annuity products | 488 | 12,302 | 12,790 | |||||||||
| Sales commissions on other products | — | 8,497 | 8,497 | |||||||||
| Other revenues | 83 | 9,249 | 9,332 | |||||||||
| Total underwriting and distribution fees | $ | 16,900 | $ | 116,595 | $ | 133,495 | ||||||
| For the three months ended Sep. 30, 2018 | ||||||||||||
| Unaffiliated | Wealth Management | Total | ||||||||||
| Fee-based asset allocation product revenues | $ | — | $ | 69,468 | $ | 69,468 | ||||||
| Rule 12b-1 service and distribution fees | 19,707 | 18,106 | 37,813 | |||||||||
| Sales commissions on front-end load mutual funds and variable annuity products | 441 | 13,651 | 14,092 | |||||||||
| Sales commissions on other products | — | 9,111 | 9,111 | |||||||||
| Other revenues | 126 | 9,698 | 9,824 | |||||||||
| Total underwriting and distribution fees | $ | 20,274 | $ | 120,034 | $ | 140,308 | ||||||
| For the nine months ended Sep. 30, 2019 | ||||||||||||
| Unaffiliated | Wealth Management | Total | ||||||||||
| Fee-based asset allocation product revenues | $ | — | $ | 208,806 | $ | 208,806 | ||||||
| Rule 12b-1 service and distribution fees | 48,514 | 48,441 | 96,955 | |||||||||
| Sales commissions on front-end load mutual funds and variable annuity products | 1,287 | 36,845 | 38,132 | |||||||||
| Sales commissions on other products | — | 24,127 | 24,127 | |||||||||
| Other revenues | 242 | 27,265 | 27,507 | |||||||||
| Total underwriting and distribution fees | $ | 50,043 | $ | 345,484 | $ | 395,527 | ||||||
| For the nine months ended Sep. 30, 2018 | ||||||||||||
| Unaffiliated | Wealth Management | Total | ||||||||||
| Fee-based asset allocation product revenues | $ | — | $ | 201,565 | $ | 201,565 | ||||||
| Rule 12b-1 service and distribution fees | 60,734 | 54,591 | 115,325 | |||||||||
| Sales commissions on front-end load mutual funds and variable annuity products | 1,418 | 41,900 | 43,318 | |||||||||
| Sales commissions on other products | — | 26,632 | 26,632 | |||||||||
| Other revenues | 459 | 28,923 | 29,382 | |||||||||
| Total underwriting and distribution fees | $ | 62,611 | $ | 353,611 | $ | 416,222 | ||||||
Unaudited Condensed Balance Sheet
(in thousands)
| Sep. 30, | Dec. 31, | |||||||
| 2019 | 2018 | |||||||
| Assets | ||||||||
| Cash & cash equivalents (unrestricted) | $ | 162,567 | $ | 231,997 | ||||
| Investment securities | 691,616 | 617,135 | ||||||
| Other assets | 205,269 | 285,649 | ||||||
| Property and equipment, net | 49,785 | 63,429 | ||||||
| Goodwill and intangible assets | 145,869 | 145,869 | ||||||
| Total assets | $ | 1,255,106 | $ | 1,344,079 | ||||
| Liabilities, redeemable noncontrolling interests and equity | ||||||||
| Long-term debt | 94,908 | 94,854 | ||||||
| Other liabilities | 303,755 | 354,312 | ||||||
| Redeemable noncontrolling interests | 16,913 | 11,463 | ||||||
| Total stockholders’ equity | 839,530 | 883,450 | ||||||
| Liabilities, redeemable noncontrolling interests and equity | $ | 1,255,106 | $ | 1,344,079 | ||||
| Shares outstanding | 71,211 | 76,790 | ||||||
Unaudited Condensed Cash Flow
(in thousands)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| Sep. 30, | Jun. 30, | Sep. 30, | Sep. 30, | Sep. 30, | ||||||||||||||||
| 2019 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||
| Cash provided by (used in): | ||||||||||||||||||||
| Operating activities | $ | 61,084 | $ | 40,644 | $ | 90,652 | $ | 84,231 | $ | 263,733 | ||||||||||
| Investing activities | (14,173 | ) | 9,946 | (7,160 | ) | (18,160 | ) | 42,571 | ||||||||||||
| Financing activities | (58,591 | ) | (53,605 | ) | (50,131 | ) | (171,709 | ) | (242,636 | ) | ||||||||||
| Net change during period | $ | (11,680 | ) | $ | (3,015 | ) | $ | 33,361 | $ | (105,638 | ) | $ | 63,668 | |||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| Sep. 30, | Jun. 30, | Sep. 30, | Sep. 30, | Sep. 30, | ||||||||||||||||
| (in thousands, except number of shares) | 2019 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||
| Shares repurchased | ||||||||||||||||||||
| Number of shares | 2,480,019 | 2,142,894 | 1,424,612 | 6,849,238 | 4,519,546 | |||||||||||||||
| Total cost | $ | 40,715 | $ | 36,824 | $ | 28,369 | $ | 116,677 | $ | 89,018 | ||||||||||
| Dividend paid | ||||||||||||||||||||
| Rate per share | $ | 0.25 | $ | 0.25 | $ | 0.25 | $ | 0.25 | $ | 0.25 | ||||||||||
| Total paid | $ | 18,372 | $ | 18,840 | $ | 20,050 | $ | 56,560 | $ | 61,531 | ||||||||||
| Capital returned to stockholders | $ | 59,087 | $ | 55,664 | $ | 48,419 | $ | 173,237 | $ | 150,549 | ||||||||||
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, Philip J. Sanders, CEO, will review our quarterly results. Live access to the teleconference will be available on the “Investor Relations” section of our Web site atir.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 atir.waddell.com. Under the “Investor Information” tab you will find a link to presentations as well as to data tables, which include supplemental information schedules.
Contacts
Investor Contact:
Mike Daley, Vice President, Chief Accounting Officer & Investor Relations, (913) 236-1795, mdaley1@waddell.com
Mutual Fund Investor Contact:
Call (888) WADDELL, or visitwww.waddell.comorwww.ivyinvestments.com.
Past performance is no guarantee of future results. Please invest carefully.
About the Company
Through its subsidiaries, Waddell & Reed Financial, Inc. has provided investment management and wealth management services to clients throughout the United States since 1937. Today, we distribute our investment products through the unaffiliated channel under the IVY INVESTMENTS® brand (encompassing broker/dealer, retirement, and registered investment advisors), our wealth management channel (through independent financial advisors associated with WADDELL & REED, INC.), and our institutional channel (including defined benefit plans, pension plans, endowments and subadvisory relationships). For more information, visit ir.waddell.com.
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, stock repurchases 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 us or on our behalf 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, 2018, which include, without limitation:
| · | The loss of existing distribution relationships or inability to access new distribution relationships; |
| · | 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; |
| · | Changes in our business model, operations and procedures, including our methods of distributing our proprietary products, as a result of evolving fiduciary standards; |
| · | 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; |
| · | 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; |
| · | Our inability to reduce expenses rapidly enough to align with declines in our revenues due to various factors, including fee pressure, the level of our assets under management or our business environment; |
| · | Non-compliance with applicable laws or regulations and changes in current legal, regulatory, accounting, tax or compliance requirements or governmental policies; |
| · | Our inability to attract and retain senior executive management and other key personnel to conduct our broker-dealer, fund management and investment advisory business; |
| · | A failure in, or breach of, our operational or security systems or our technology infrastructure, or those of third parties on which we rely; and |
| · | Our inability to implement new information technology and systems, or our inability to complete such implementation in a timely or cost effective manner. |
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, 2018 and as updated in our quarterly reports on Form 10-Q for the year ending December 31, 2019. All forward-looking statements speak only as of 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, except to the extent required by law.