Toggle SGML Header (+)


Section 1: 8-K (8-K)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):

February 5, 2019

 

WADDELL & REED FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

001-13913

 

51-0261715

(State or Other
Jurisdiction of
Incorporation)

 

(Commission
File Number)

 

(IRS Employer
Identification No.)

 

6300 Lamar Avenue

Overland Park, Kansas 66202

(Address of Principal Executive Offices) (Zip Code)

 

(913) 236-2000

(Registrant’s telephone number, including area code)

 

 

(Registrant’s Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company  o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o

 

 

 


 

ITEM 2.02                                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

 

On February 5, 2019, Waddell & Reed Financial, Inc. (the “Company”) issued a press release announcing the Company’s financial results for the fiscal quarter ended December 31, 2018 (the “Press Release”).  A copy of the Press Release is furnished as Exhibit 99.1 and incorporated herein by reference.

 

ITEM 9.01                                  FINANCIAL STATEMENTS AND EXHIBITS.

 

(d)                                 Exhibits.

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release dated February 5, 2019

 

2


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

WADDELL & REED FINANCIAL, INC.

 

 

 

 

Date: February 5, 2019

By:

/s/ Benjamin R. Clouse

 

 

Senior Vice President, Chief Financial Officer and Treasurer

 

3


(Back To Top)

Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

 

 

 

News Release

 

Waddell & Reed Financial, Inc. Reports Fourth Quarter Results

 

Overland Park, KS, Feb. 5, 2019 — Waddell & Reed Financial, Inc. (NYSE: WDR) today reported fourth quarter 2018 net income(1) of $46.5 million, or $0.60 per diluted share, compared to net income of $46.3 million, or $0.58 per diluted share, during the prior quarter and net income of $29.8 million, or $0.36 per diluted share, during the fourth quarter of 2017.  The fourth quarter of 2018 included a gain of $16.1 million compared to a loss of $6.5 million in the prior year fourth quarter related to the annual revaluation of the pension plan liability.  The prior year also included a non-recurring tax charge of $5.4 million related to the Tax Cuts and Jobs Act.

 

Revenues of $272.2 million during the quarter decreased $22.9 million and $22.3 million compared to the third quarter of 2018 and the fourth quarter of 2017, respectively.  Operating expenses of $227.8 million declined $7.8 million compared to the prior quarter and declined $4.9 million compared to the same quarter in 2017.  The operating margin was 16.3% during the current quarter, compared to 20.2% and 21.0% during the third quarter of 2018 and the fourth quarter of 2017, respectively.  For the twelve-month period ended December 31, 2018, the operating margin was 19.1%, consistent with the prior year’s operating margin of 19.0%.

 

Assets under management ended the quarter at $65.8 billion, a 17% decrease compared to the prior quarter and a decrease of 19% compared to the fourth quarter of 2017.  The lower assets under management were primarily driven by market volatility in the quarter.  Sales of $2.7 billion during the current quarter improved 7%, compared to the prior quarter and were comparable with the fourth quarter of 2017.  Net outflows of $3.8 billion during the current quarter included $1.0 billion of previously disclosed outflows related to institutional accounts primarily due to certain portfolio manager departures. Excluding the impact of the institutional accounts, net outflows were higher compared to net outflows of $2.0 billion in the third quarter of 2018 and were consistent with the fourth quarter of 2017.  Redemptions continued to improve in 2018, with net outflows for the year improving 9% to $10.4 billion compared to $11.4 billion in 2017.

 

Broker-dealer assets under administration ended the quarter at $51.3 billion, a 12% decrease compared to the third quarter of 2018 primarily due to market depreciation. Compared to the same quarter in 2017, assets under administration decreased 10% due to a reduction in net new assets of $3.1 billion and market depreciation. Average productivity per advisor, as measured by average trailing twelve-month revenue per advisor, was $378 thousand for the twelve-month period ended December 31, 2018, rising 8% compared to the prior quarter and 48% compared to the prior year.

 

“While the industry landscape remains challenging, we continued to make foundational improvements over the past year that will better position our company for long term success,” said Philip J. Sanders, Chief Executive Officer of Waddell & Reed Financial, Inc.  “Within our asset management business, we improved investment performance track records across much of the complex and realigned our sales leadership to provide more focused coverage across all distribution channels.  We also made meaningful progress toward improving the competitiveness of our broker-dealer by optimizing our field and support structure, announcing significant technology investments and enhancing our product offerings and advisory programs — all to the benefit of advisors and clients.”

 


(1)  Net income represents net income attributable to Waddell & Reed Financial, Inc.

 


 

Revenues Analysis

 

Investment management fees declined $14.8 million, or 11%, and $21.9 million, or 16%, compared to the third quarter of 2018 and the fourth quarter of 2017, respectively, primarily due to lower average assets under management. Previously announced fee reductions in selected mutual funds also contributed, to a lesser extent, to the decrease.  During the current quarter, the effective management fee rate was 63.5 basis points compared to 64.6 basis points during the third quarter of 2018 and 66.5 basis points during the fourth quarter of 2017.  Average assets under management were $71.6 billion during the current quarter, compared to $79.5 billion during the prior quarter and $81.3 billion during the fourth quarter of 2017.

 

Underwriting and distribution fees decreased $6.5 million, or 5% sequentially, primarily due to lower assets under administration.  Compared to the same quarter in 2017, fees increased $1.6 million, or 1%, due to higher asset-based advisory fees as well as increased support and service revenues from independent financial advisors, which were partially offset by lower distribution fees.

 

Operating Expenses Analysis

 

Distribution expenses decreased $5.1 million, or 4%, compared to the prior quarter, primarily due to the decrease in underwriting and distribution revenues.  Compared to the fourth quarter of 2017, expenses increased $3.6 million, or 3%, as a result of the increase in underwriting and distribution revenues as well as an increase in the compensation grid for associated independent financial advisors.

 

Compensation and benefits expenses declined $0.4 million, or 1%, compared to the prior quarter.  The fourth quarter of 2018 benefited from lower incentive compensation of $2.0 million and a reduction in share-based compensation of $2.5 million resulting from a change in the stock price.  These decreases were partially offset by severance charges of $3.2 million and a net increase in other items of $0.9 million.  Compared to the fourth quarter of 2017, expenses declined $5.1 million, or 7%, due to lower share-based compensation costs.

 

General and administrative expenses improved $0.2 million, or 1%, compared to the third quarter of 2018 and improved $2.7 million, or 13%, compared to the fourth quarter of 2017 due to lower consulting costs as a number of significant projects were completed in late 2017 or early 2018.

 

Technology expenses increased $0.6 million, or 4%, compared to the prior quarter, and increased $0.7 million, or 5% compared to the fourth quarter of 2017, primarily due to transition costs as we continue to decommission older systems and replace them with more cost-effective solutions.

 

Occupancy expenses decreased $1.0 million, or 14%, and $1.6 million, or 21%, compared to the prior quarter and the fourth quarter of 2017, respectively, as we realize cost savings from field offices closed during 2018.

 

Depreciation expense declined primarily due to a charge during the prior quarter to adjust the useful life on certain internally developed software assets.

 

Investment and other income increased $15.7 million compared to the prior quarter and $19.6 million compared to the same quarter in 2017 primarily due to the annual revaluation of the pension plan liability.

 

Income tax expense was consistent with the prior quarter and declined compared to the prior year fourth quarter primarily due to the Tax Cuts and Jobs Act, which reduced the federal corporate tax rate and resulted in a non-recurring tax charge to revalue our net deferred tax asset of $5.4 million in the fourth quarter of 2017.

 


 

Assets Under Management

(in millions)

 

 

 

Three Months Ended

 

 

 

Dec. 31,

 

Mar. 31,

 

Jun. 30,

 

Sep. 30,

 

Dec. 31,

 

 

 

2017

 

2018

 

Unaffiliated (1)

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

31,062

 

$

31,133

 

$

31,055

 

$

30,782

 

$

31,172

 

Sales (2)

 

1,577

 

2,245

 

1,779

 

1,589

 

1,673

 

Redemptions

 

(2,912

)

(2,692

)

(2,646

)

(2,425

)

(3,637

)

Net exchanges

 

316

 

247

 

284

 

360

 

(131

)

Net Flows

 

(1,019

)

(200

)

(583

)

(476

)

(2,095

)

Market action

 

1,090

 

122

 

310

 

866

 

(4,100

)

Ending assets

 

$

31,133

 

$

31,055

 

$

30,782

 

$

31,172

 

$

24,977

 

Annualized organic growth rate

 

(13.1

)%

(2.6

)%

(7.5

)%

(6.2

)%

(26.9

)%

Annualized redemption rate (3)

 

37.9

%

35.8

%

34.9

%

31.8

%

53.8

%

Institutional

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

6,365

 

$

6,289

 

$

6,449

 

$

5,250

 

$

5,187

 

Sales (2)

 

66

 

552

 

153

 

83

 

85

 

Redemptions

 

(521

)

(604

)

(1,652

)

(535

)

(1,316

)

Net exchanges

 

 

 

 

 

511

 

Net Flows

 

(455

)

(52

)

(1,499

)

(452

)

(720

)

Market action

 

379

 

212

 

300

 

389

 

(812

)

Ending assets

 

$

6,289

 

$

6,449

 

$

5,250

 

$

5,187

 

$

3,655

 

Annualized organic growth rate

 

(28.6

)%

(3.3

)%

(93.0

)%

(34.4

)%

(55.5

)%

Annualized redemption rate (3)

 

32.2

%

37.8

%

115.4

%

40.8

%

117.3

%

Broker-Dealer

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

43,472

 

$

43,660

 

$

42,707

 

$

42,619

 

$

43,183

 

Sales (2)

 

1,077

 

1,001

 

1,002

 

874

 

958

 

Redemptions

 

(2,026

)

(1,958

)

(1,770

)

(1,612

)

(1,547

)

Net exchanges

 

(316

)

(247

)

(284

)

(360

)

(380

)

Net Flows

 

(1,265

)

(1,204

)

(1,052

)

(1,098

)

(969

)

Market action

 

1,453

 

251

 

964

 

1,662

 

(5,037

)

Ending assets

 

$

43,660

 

$

42,707

 

$

42,619

 

$

43,183

 

$

37,177

 

Annualized organic growth rate

 

(11.6

)%

(11.0

)%

(9.9

)%

(10.3

)%

(9.0

)%

Annualized redemption rate (3)

 

16.1

%

15.1

%

14.4

%

12.8

%

13.1

%

Consolidated Total

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

80,899

 

$

81,082

 

$

80,211

 

$

78,651

 

$

79,542

 

Sales (2)

 

2,720

 

3,798

 

2,934

 

2,546

 

2,716

 

Redemptions

 

(5,459

)

(5,254

)

(6,068

)

(4,572

)

(6,500

)

Net exchanges

 

 

 

 

 

 

Net Flows

 

(2,739

)

(1,456

)

(3,134

)

(2,026

)

(3,784

)

Market action

 

2,922

 

585

 

1,574

 

2,917

 

(9,949

)

Ending assets

 

$

81,082

 

$

80,211

 

$

78,651

 

$

79,542

 

$

65,809

 

Annualized organic growth rate

 

(13.5

)%

(7.2

)%

(15.6

)%

(10.3

)%

(19.0

)%

Annualized redemption rate (3)

 

25.7

%

24.8

%

29.8

%

22.1

%

35.4

%

 


(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.

 


 

Fund Rankings (1)

 

1 Year

 

3 Years

 

5 Years

 

Lipper

 

 

 

 

 

 

 

Funds ranked in top half

 

70

%

37

%

47

%

Assets ranked in top half

 

69

%

40

%

54

%

MorningStar

 

 

 

 

 

 

 

Funds ranked in top half

 

59

%

33

%

38

%

Assets ranked in top half

 

58

%

41

%

51

%

 

MorningStar Ratings (1)

 

Overall

 

3 Years

 

5 Years

 

Funds with 4/5 stars

 

38

%

30

%

28

%

Assets with 4/5 stars

 

52

%

38

%

33

%

 


(1)         Based on class I share, which reflects sales and asset concentrations.

 

 

 

Three Months Ended

 

Broker-Dealer

 

Dec. 31,

 

Mar. 31,

 

Jun. 30,

 

Sep. 30,

 

Dec. 31,

 

(in millions)

 

2017

 

2018

 

Assets under administration (AUA)

 

 

 

 

 

 

 

 

 

 

 

Advisory assets

 

$

21,613

 

$

22,050

 

$

22,868

 

$

23,653

 

$

21,207

 

Non-advisory assets

 

35,073

 

34,216

 

34,210

 

34,468

 

30,059

 

Total assets under administration

 

56,686

 

56,266

 

57,078

 

58,121

 

51,266

 

 

 

 

 

 

 

 

 

 

 

 

 

Net new advisory assets (1)

 

$

129

 

$

392

 

$

315

 

$

(87

)

$

(45

)

Net new non-advisory assets (1), (2)

 

(1,047

)

(983

)

(916

)

(931

)

(840

)

Total net new AUA (1)

 

(918

)

(591

)

(601

)

(1,018

)

(885

)

 

 

 

 

 

 

 

 

 

 

 

 

Annualized advisory AUA growth (3)

 

2.5

%

7.3

%

5.7

%

(1.5

)%

(0.8

)%

Annualized AUA growth (3)

 

(6.6

)%

(4.2

)%

(4.3

)%

(7.1

)%

(6.1

)%

 

 

 

 

 

 

 

 

 

 

 

 

Advisor count

 

1,367

 

1,170

 

1,130

 

1,074

 

1,060

 

Avg. trailing 12-month revenue per advisor (4) (in thousands)

 

$

256

 

$

285

 

$

314

 

$

350

 

$

378

 

Advisor associate count

 

265

 

327

 

339

 

351

 

343

 

 


(1)         Net new assets is calculated as total client deposits and net transfers less client withdrawals.

(2)         Excludes activity related to products held outside of our platform.  These assets represent less than 10% of total AUA.

(3)         Annualized growth is calculated as annualized quarterly net new assets divided by beginning assets under administration.

(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 financial advisors.  “Other” underwriting and distribution fees predominantly includes fees paid by independent advisors for programs and services.

 


 

Unaudited Consolidated Statements of Income

(in thousands, except per share data and margin)

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

Dec. 31,

 

Sep. 30,

 

Dec. 31,

 

Sequential Qtr.

 

Year-over-Year Qtr.

 

 

 

2018

 

2018

 

2017

 

Change

 

%

 

Change

 

%

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment management fees

 

$

114,521

 

$

129,302

 

$

136,387

 

$

(14,781

)

(11.4

)%

$

(21,866

)

(16.0

)%

Underwriting and distribution fees

 

133,788

 

140,308

 

132,200

 

(6,520

)

(4.6

)%

1,588

 

1.2

%

Shareholder service fees

 

23,921

 

25,508

 

25,889

 

(1,587

)

(6.2

)%

(1,968

)

(7.6

)%

Total

 

272,230

 

295,118

 

294,476

 

(22,888

)

(7.8

)%

(22,246

)

(7.6

)%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution (1)

 

111,456

 

116,591

 

107,889

 

(5,135

)

(4.4

)%

3,567

 

3.3

%

Compensation and benefits (including share-based compensation of $9,039, $12,856 and $15,297, respectively)

 

64,155

 

64,561

 

69,273

 

(406

)

(0.6

)%

(5,118

)

(7.4

)%

General and administrative

 

17,403

 

17,559

 

20,069

 

(156

)

(0.9

)%

(2,666

)

(13.3

)%

Technology

 

15,982

 

15,414

 

15,282

 

568

 

3.7

%

700

 

4.6

%

Occupancy

 

6,116

 

7,148

 

7,743

 

(1,032

)

(14.4

)%

(1,627

)

(21.0

)%

Marketing and advertising

 

2,685

 

2,461

 

3,353

 

224

 

9.1

%

(668

)

(19.9

)%

Depreciation

 

6,387

 

8,141

 

5,357

 

(1,754

)

(21.5

)%

1,030

 

19.2

%

Subadvisory fees

 

3,647

 

3,767

 

3,717

 

(120

)

(3.2

)%

(70

)

(1.9

)%

Total

 

227,831

 

235,642

 

232,683

 

(7,811

)

(3.3

)%

(4,852

)

(2.1

)%

Operating income

 

44,399

 

59,476

 

61,793

 

(15,077

)

(25.3

)%

(17,394

)

(28.1

)%

Investment and other income

 

17,351

 

1,697

 

(2,218

)

15,654

 

922.5

%

19,569

 

(882.3

)%

Interest expense

 

(1,553

)

(1,555

)

(2,909

)

2

 

0.1

%

1,356

 

46.6

%

Income before provision for income taxes

 

60,197

 

59,618

 

56,666

 

579

 

1.0

%

3,531

 

6.2

%

Provision for income taxes

 

14,125

 

13,105

 

26,380

 

1,020

 

7.8

%

(12,255

)

(46.5

)%

Net income

 

46,072

 

46,513

 

30,286

 

(441

)

(0.9

)%

15,786

 

52.1

%

Net (loss) income attributable to redeemable noncontrolling interests

 

(396

)

208

 

522

 

(604

)

290.4

%

(918

)

(175.9

)%

Net income attributable to Waddell & Reed Financial, Inc.

 

$

46,468

 

$

46,305

 

$

29,764

 

$

163

 

0.4

%

$

16,704

 

56.1

%

Net income per share, basic and diluted:

 

$

0.60

 

$

0.58

 

$

0.36

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic and diluted

 

77,786

 

79,595

 

83,137

 

 

 

 

 

 

 

 

 

Operating margin

 

16.3

%

20.2

%

21.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


(1) Distribution expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaffiliated

 

25,406

 

28,116

 

31,395

 

 

 

 

 

 

 

 

 

Broker-dealer

 

86,050

 

88,475

 

76,494

 

 

 

 

 

 

 

 

 

 

 

$

111,456

 

$

116,591

 

$

107,889

 

 

 

 

 

 

 

 

 

 


 

Unaudited Consolidated Statements of Income

(in thousands, except per share data and margin)

 

 

 

Year Ended

 

 

 

 

 

 

 

Dec. 31,

 

Dec. 31,

 

 

 

 

 

2018

 

2017

 

Change

 

%

 

Revenues:

 

 

 

 

 

 

 

 

 

Investment management fees

 

$

507,906

 

$

531,850

 

$

(23,944

)

(4.5

)%

Underwriting and distribution fees

 

550,010

 

518,699

 

31,311

 

6.0

%

Shareholder service fees

 

102,385

 

106,595

 

(4,210

)

(3.9

)%

Total

 

1,160,301

 

1,157,144

 

3,157

 

0.3

%

Operating expenses:

 

 

 

 

 

 

 

 

 

Distribution (1)

 

456,832

 

432,264

 

24,568

 

5.7

%

Compensation and benefits (including share-based compensation of $51,565 and $57,716, respectively)

 

263,329

 

271,276

 

(7,947

)

(2.9

)%

General and administrative

 

73,643

 

88,951

 

(15,308

)

(17.2

)%

Technology

 

65,275

 

66,078

 

(803

)

(1.2

)%

Occupancy

 

27,197

 

30,721

 

(3,524

)

(11.5

)%

Marketing and advertising

 

10,323

 

12,425

 

(2,102

)

(16.9

)%

Depreciation

 

25,649

 

20,983

 

4,666

 

22.2

%

Subadvisory fees

 

14,805

 

13,174

 

1,631

 

12.4

%

Intangible asset impairment

 

1,200

 

1,500

 

(300

)

(20.0

)%

Total

 

938,253

 

937,372

 

881

 

0.1

%

Operating income

 

222,048

 

219,772

 

2,276

 

1.0

%

Investment and other income

 

22,705

 

37,084

 

(14,379

)

(38.8

)%

Interest expense

 

(6,461

)

(11,279

)

4,818

 

42.7

%

Income before provision for income taxes

 

238,292

 

245,577

 

(7,285

)

(3.0

)%

Provision for income taxes

 

55,480

 

101,368

 

(45,888

)

(45.3

)%

Net income

 

182,812

 

144,209

 

38,603

 

26.8

%

Net (loss) income attributable to redeemable noncontrolling interests

 

(776

)

2,930

 

(3,706

)

(126.5

)%

Net income attributable to Waddell & Reed Financial, Inc.

 

$

183,588

 

$

141,279

 

$

42,309

 

29.9

%

Net income per share, basic and diluted:

 

$

2.28

 

$

1.69

 

 

 

 

 

Weighted average shares outstanding - basic and diluted

 

80,468

 

83,573

 

 

 

 

 

Operating margin

 

19.1

%

19.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 


(1) Distribution expense

 

 

 

 

 

 

 

 

 

Unaffiliated

 

112,562

 

130,079

 

 

 

 

 

Broker-dealer

 

344,270

 

302,185

 

 

 

 

 

 

 

$

456,832

 

$

432,264

 

 

 

 

 

 


 

Underwriting and distribution fees

(in thousands)

 

 

 

For the three months ended Dec. 31, 2018

 

 

 

Unaffiliated

 

Broker-Dealer

 

Total

 

Fee-based asset allocation product revenues

 

$

 

$

67,504

 

$

67,504

 

Rule 12b-1 service and distribution fees

 

17,307

 

16,347

 

33,654

 

Sales commissions on front-end load mutual funds and variable annuity products

 

468

 

12,994

 

13,462

 

Sales commissions on other products

 

 

9,533

 

9,533

 

Other revenues

 

109

 

9,526

 

9,635

 

Total underwriting and distribution fees

 

$

17,884

 

$

115,904

 

$

133,788

 

 

 

 

For the three months ended Sep. 30, 2018

 

 

 

Unaffiliated

 

Broker-Dealer

 

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 three months ended Dec. 31, 2017

 

 

 

Unaffiliated

 

Broker-Dealer

 

Total

 

Fee-based asset allocation product revenues

 

$

 

$

63,905

 

$

63,905

 

Rule 12b-1 service and distribution fees

 

22,122

 

19,306

 

41,428

 

Sales commissions on front-end load mutual funds and variable annuity products

 

380

 

13,497

 

13,877

 

Sales commissions on other products

 

 

7,615

 

7,615

 

Other revenues

 

186

 

5,189

 

5,375

 

Total underwriting and distribution fees

 

$

22,688

 

$

109,512

 

$

132,200

 

 

 

 

For the year ended Dec. 31, 2018

 

 

 

Unaffiliated

 

Broker-Dealer

 

Total

 

Fee-based asset allocation product revenues

 

$

 

$

269,069

 

$

269,069

 

Rule 12b-1 service and distribution fees

 

78,041

 

70,938

 

148,979

 

Sales commissions on front-end load mutual funds and variable annuity products

 

1,886

 

54,895

 

56,781

 

Sales commissions on other products

 

 

36,131

 

36,131

 

Other revenues

 

568

 

38,482

 

39,050

 

Total underwriting and distribution fees

 

$

80,495

 

$

469,515

 

$

550,010

 

 

 

 

For the year ended Dec. 31, 2017

 

 

 

Unaffiliated

 

Broker-Dealer

 

Total

 

Fee-based asset allocation product revenues

 

$

 

$

240,089

 

$

240,089

 

Rule 12b-1 service and distribution fees

 

91,313

 

75,850

 

167,163

 

Sales commissions on front-end load mutual funds and variable annuity products

 

1,498

 

55,293

 

56,791

 

Sales commissions on other products

 

 

31,286

 

31,286

 

Other revenues

 

1,182

 

22,188

 

23,370

 

Total underwriting and distribution fees

 

$

93,993

 

$

424,706

 

$

518,699

 

 


 

Unaudited Condensed Balance Sheet

(in thousands)

 

 

 

Dec. 31,

 

Dec. 31,

 

 

 

2018

 

2017

 

Assets

 

 

 

 

 

Cash & cash equivalents (unrestricted)

 

$

231,997

 

$

207,829

 

Investment securities

 

617,135

 

700,492

 

Other assets

 

285,649

 

241,305

 

Property and equipment, net

 

63,429

 

87,667

 

Goodwill and intangible assets

 

145,869

 

147,069

 

Total assets

 

$

1,344,079

 

$

1,384,362

 

Liabilities, redeemable noncontrolling interests and equity

 

 

 

 

 

Short-term notes payable

 

$

 

$

94,996

 

Long-term debt

 

94,854

 

94,783

 

Other liabilities

 

354,312

 

307,190

 

Redeemable noncontrolling interests

 

11,463

 

14,509

 

Total stockholders’ equity

 

883,450

 

872,884

 

Liabilities, redeemable noncontrolling interests and equity

 

$

1,344,079

 

$

1,384,362

 

Shares outstanding

 

76,790

 

82,687

 

 

Unaudited Condensed Cash Flow

(in thousands)

 

 

 

Three Months Ended

 

Year Ended

 

 

 

Dec. 31,

 

Sep. 30,

 

Dec. 31,

 

Dec. 31,

 

Dec. 31,

 

 

 

2018

 

2018

 

2017

 

2018

 

2017

 

Cash provided by (used in):

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

$

93,278

 

$

90,652

 

$

70,519

 

$

357,011

 

$

53,832

 

Investing activities

 

(32,224

)

(7,160

)

(13,415

)

10,347

 

(212,395

)

Financing activities

 

(69,152

)

(50,131

)

(75,197

)

(311,788

)

(188,710

)

Net change during period

 

$

(8,098

)

$

33,361

 

$

(18,093

)

$

55,570

 

$

(347,273

)

 

 

 

Three Months Ended

 

Year Ended

 

 

 

Dec. 31,

 

Sep. 30,

 

Dec. 31,

 

Dec. 31,

 

Dec. 31,

 

(in thousands, except number of shares)

 

2018

 

2018

 

2017

 

2018

 

2017

 

Shares repurchased

 

 

 

 

 

 

 

 

 

 

 

Number of shares

 

2,443,723

 

1,424,612

 

937,927

 

6,963,269

 

1,842,337

 

Total cost

 

$

46,873

 

$

28,369

 

$

20,133

 

$

135,891

 

$

35,768

 

Dividend paid

 

 

 

 

 

 

 

 

 

 

 

Rate per share

 

$

0.25

 

$

0.25

 

$

0.46

 

$

1.00

 

$

1.84

 

Total paid

 

$

19,684

 

$

20,050

 

$

38,351

 

$

81,215

 

$

154,042

 

Capital returned to stockholders

 

$

66,557

 

$

48,419

 

$

58,484

 

$

217,106

 

$

189,810

 

 


 

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 and CIO, will review our quarterly results. Live access to the teleconference will be available on the “Investor Relations” section of our Web site at ir.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 ir.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 — Corporate Controller & Investor Relations, (913) 236-1795, mdaley1@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

 

Through its subsidiaries, Waddell & Reed Financial, Inc. has provided investment management and financial planning services to clients throughout the United States since 1937.  Today, we distribute our investment products through the unaffiliated channel (encompassing broker/dealer, retirement, and registered investment advisors), our broker-dealer channel (through independent financial advisors), 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, 2017, 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, 2017 and as updated in our quarterly reports on Form 10-Q for the year ending December 31, 2018. 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.

 


(Back To Top)