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Section 1: 8-K (FORM 8-K)

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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):

July 28, 2020

 

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):

 

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

 

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

 

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

 

¨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  ¨

 

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.  ¨

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
Class A Common Stock, $.01 par value WDR New York Stock Exchange

 

 

 

 

 

 

ITEM 2.02RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

 

On July 28, 2020, Waddell & Reed Financial, Inc. (the "Company") issued a press release announcing the Company's financial results for the fiscal quarter ended June 30, 2020 (the “Press Release”). A copy of the Press Release is furnished as Exhibit 99.1 and incorporated herein by reference.

 

ITEM 9.01FINANCIAL STATEMENTS AND EXHIBITS.

 

(d)       Exhibits.

 

Exhibit No.   Description
     
99.1   Press Release dated July 28, 2020
     
104     Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

 

 

 

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: July 28, 2020  By: /s/ Benjamin R. Clouse
     Senior Vice President and
     Chief Financial Officer

 

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 

 

 

News Release

 

Waddell & Reed Financial, Inc. Reports Second Quarter Results

 

Overland Park, KS, July 28, 2020 — Waddell & Reed Financial, Inc. (NYSE: WDR) today reported second quarter 2020 net income1 of $24.8 million, or $0.38 per diluted share, compared to net income of $22.0 million, or $0.32 per diluted share, during the prior quarter and net income of $33.9 million, or $0.45 per diluted share, during the second quarter of 2019.

 

Philip J. Sanders, Chief Executive Officer of Waddell & Reed Financial, Inc. shared, “Despite the continued challenging circumstances as we navigate the global pandemic, our teams have remained focused on delivering quality service to our clients and affiliated advisors every day while executing on the key components of our long-term vision and growth strategy. We continue to make measurable progress in a number of key areas of our strategy, while maintaining a strong financial profile.”

 

Highlights

 

·Significant progress in wealth management transformation continued, with enhanced focus on recruiting, improving operating metrics and additional growth opportunities
oSince January 1, 2020, 21 advisors have affiliated with Waddell & Reed with combined prior firm assets under administration (AUA) totaling $1.4 billion. Advisor count inflected modestly, stabilizing at 1,317 affiliated advisors and advisor associates at June 30, 2020.
oAdvisory AUA net flows were positive for the 6th straight quarter despite a challenging market backdrop, illustrating the wealth manager’s ability to capture assets through market cycles.
oLaunched the second phase of our wealth management technology transformation, ONESource, which seamlessly connects data across platforms for advisors, and ONEService, a digital repository of processes, procedures and other information available to all advisors.
oIntroduced a High Net Worth suite of products and services as well as a new Separately Managed Account Strategies product offering.
·For Ivy Investments, assets under management (AUM) rebounded along with the broader markets in addition to meaningful improvement in net outflows resulting from lower redemptions
oIntroduced two additional strategies in a model-delivery format, bringing the total offering to nine strategies.
oAs a result of changes stemming from ongoing strategic evaluation of Ivy fund fees, 76% of AUM is now priced at or below its respective peer median.
·Balance sheet a continued source of strength – maintained significant liquidity while continuing active capital return program and flexibility for organic and inorganic growth opportunities.
·Hired two executives focused on strategic growth – one to support the buildout of enterprise-wide data analytics and related capabilities, and one to support M&A origination, evaluation, and integration.

 

Financial Summary

 

The second quarter of 2020 included $12.7 million, or $0.15 per share, of unrealized gains on our investment portfolio within the investment and other (loss) income line compared to $11.0 million, or $0.12 per share, of unrealized losses during the prior quarter and $5.1 million, or $0.05 per share, of unrealized gains during the second quarter of 2019.

 

 

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

 

 

 

 

Revenues totaled $240.0 million for the quarter, a decrease of $23.7 million and $30.1 million, compared to the prior quarter and the second quarter of 2019, respectively. Operating expenses of $216.4 million decreased $7.9 million and $12.5 million, compared to the first quarter of 2020 and the second quarter of 2019, respectively. The operating margin was 9.8% during the current quarter, compared to 14.9% and 15.3% during the prior quarter and the second quarter of 2019, respectively.

 

AUM ended the quarter at $65.0 billion, an increase of 16% compared to the prior quarter primarily due to market appreciation and a decrease of 10% compared to the second quarter of 2019. Average AUM were $61.7 billion during the current quarter, compared to $66.1 billion during the prior quarter and $71.4 billion during the second quarter of 2019. Net outflows of $1.4 billion during the current quarter were lower compared to net outflows of $2.3 billion and $2.4 billion in the prior quarter and second quarter of 2019, respectively. Sales of $2.2 billion during the current quarter decreased 13% compared to the prior quarter as second quarter is generally seasonally lower. Sales increased 3% compared to the second quarter of 2019. Redemptions were 24% and 19% lower compared to the prior quarter and second quarter of 2019, respectively.

 

Wealth management AUA ended the quarter at $59.0 billion, an increase of 14% and 3%, compared to the first quarter of 2020 and the second quarter of 2019, respectively. Average AUA were $56.4 billion during the current quarter, compared to $57.8 billion during the prior quarter and $56.4 billion during the second quarter of 2019. Net new advisory assets were $189.2 million and advisory products continue to drive the majority of new sales. Brokerage asset flows continue to be negative, however, to a lesser extent compared to the prior quarter and the same quarter in 2019. In addition, market appreciation was stronger compared to both the first quarter of 2020 and second quarter of 2019. Starting in the second quarter of 2020, we updated our definition of net new AUA to include dividends and interest for consistency with peers and have reflected this new definition for all periods presented.

 

Revenues Analysis

 

Investment management fees decreased $9.4 million, or 9%, compared to the first quarter of 2020 due to a 7% decrease in average AUM and a lower effective management fee rate, partially offset by one more day in the quarter. The effective management fee rate for the current quarter was 64.5 basis points and decreased compared to the prior quarter’s rate due to a shift in product mix as well as targeted fee reductions implemented in the quarter on our large cap growth and core bond products. Compared to the second quarter of 2019, investment management fees declined $17.0 million, or 15%, primarily due to lower average AUM and a lower effective management fee rate due to the previously mentioned fee reductions.

 

Underwriting and distribution fees decreased $13.3 million, or 10%, compared to the prior quarter due to lower advisory fees and lower service and distribution fees due to lower asset levels. In addition, sales commissions were $5.7 million lower compared to the prior quarter as a result of slower sales activity across insurance product lines. Compared to the same quarter in 2019, underwriting and distribution fees decreased $9.9 million, or 7%, due to lower sales commissions and lower service and distribution fees from lower asset levels, partially offset by an increase in advisory fees as a result of the ongoing shift in sales towards advisory products.

 

Shareholder service fees decreased $1.0 million, or 5%, compared to the first quarter of 2020 primarily due to a decrease in average assets. Compared to the second quarter of 2019, shareholder service fees declined $3.2 million, or 14%, due to a decrease in average assets and fewer accounts. There was also a reduction in fund reimbursements related to the outsourcing of our transfer agency transactional processing operations and a corresponding reduction in costs.

 

Operating Expenses Analysis

 

Distribution expenses decreased $12.2 million, or 10%, compared to the prior quarter and decreased $8.6 million, or 7%, compared to the second quarter of 2019. The decrease compared to both periods is a result of the decrease in underwriting and distribution revenue from lower asset levels and insurance product sales.

 

Compensation and benefits expense increased $3.4 million, or 6%, compared to the prior quarter primarily due to mark-to-market adjustments on equity compensation and deferred compensation plans. Compensation and benefits was consistent with the second quarter of 2019, as lower headcount was offset by higher equity compensation due to mark-to-market adjustments.

 

 

 

 

General and administrative expenses increased $1.9 million, or 10%, compared to the first quarter of 2020 due to increased strategic project spending. Compared to the same quarter in 2019, general and administrative expenses increased $4.5 million, or 28%, due to a shift of our transfer agency transactional processing operations costs from technology expenses to general and administrative expenses as a result of outsourcing and increased strategic project spending, partially offset by lower travel and meetings costs.

 

Technology costs increased $0.7 million, or 5%, compared to the prior quarter primarily due to increased software costs for new technologies. Technology costs decreased $2.2 million, or 13%, compared to the second quarter of 2019 as costs related to the transfer agency transactional processing operations outsourcing were shifted to general and administrative expenses. This decrease was partially offset by increased consulting and software costs for new technologies.

 

Occupancy expenses decreased $0.4 million, or 9%, compared to the prior quarter and decreased $2.4 million, or 36%, compared to the second quarter of 2019. For both comparative periods, occupancy costs decreased as a result of the planned transition of corporate field offices to independent financial advisors associated with our wealth manager.

 

Marketing and advertising expenses decreased $0.8 million, or 41%, compared to the prior quarter and decreased $1.3 million, or 53%, compared to the second quarter of 2019. For both comparative periods, marketing and advertising expenses decreased due to lower sponsorship fees in connection with the ongoing shift to virtual industry conferences.

 

Depreciation expense declined slightly compared to the prior quarter and declined $2.0 million, or 39%, compared to the second quarter of 2019 due to capitalized software development assets becoming fully depreciated.

 

Investment and Other Income (Loss)

 

Investment and other income for the second quarter was $15.1 million compared to investment and other losses of $7.7 million in the prior quarter. The $22.9 million increase is primarily due to unrealized gains, net of hedging activity, on the seed and corporate investment portfolios. Compared to the second quarter of 2019, investment and other income increased $6.1 million due to unrealized gains, net of hedging activity, on the seed and corporate investment portfolios, partially offset by a decline in interest income for the corporate investment portfolio due to lower interest rates.

 

The effective tax rate was 25.3% for the quarter compared to 32.0% in the prior quarter and 29.1% in the second quarter of 2019. The primary driver of the lower tax rate is the impact of market volatility on our estimated pre-tax income for the remainder of 2020 which resulted in a decrease in our annualized effective tax rate during the second quarter of 2020.

 

 

 

 

AUM

(in millions)

 

   Three Months Ended                 
   Jun. 30,   Mar. 31,   Jun. 30,   Prior Qtr.   Year-over-Year Qtr. 
   2020   2020   2019   Change   %   Change   % 
Unaffiliated 1                                   
Beginning assets  $20,244   $26,264   $27,506   $(6,020)   (23)%  $(7,262)   (26)%
Sales 2   1,490    1,581    1,291    (91)   (6)%   199    15%
Redemptions   (2,179)   (3,019)   (2,441)   840    28%   262    11%
Net exchanges   205    326    303    (121)   (37)%   (98)   (32)%
Net Flows   (484)   (1,112)   (847)   628    56%   363    43%
Market action   3,964    (4,908)   886    8,872    181%   3,078    347%
Ending assets  $23,724   $20,244   $27,545   $3,480    17%  $(3,821)   (14)%
Annualized organic growth rate   (9.6)%   (16.9)%   (12.3)%                    
Annualized redemption rate 3   39.9%   50.9%   36.7%                    
Institutional                                   
Beginning assets  $2,427   $3,096   $4,053   $(669)   (22)%  $(1,626)   (40)%
Sales 2   52    43    54    9    21%   (2)   (4)%
Redemptions   (202)   (179)   (440)   (23)   (13)%   238    54%
Net exchanges   22        25    22    NM    (3)   (12)%
Net Flows   (128)   (136)   (361)   8    6%   233    65%
Market action   698    (533)   195    1,231    231%   503    258%
Ending assets  $2,997   $2,427   $3,887   $570    23%  $(890)   (23)%
Annualized organic growth rate   (21.1)%   (17.6)%   (35.6)%                    
Annualized redemption rate 3   28.6%   24.9%   46.1%                    
Wealth Management                                   
Beginning assets  $33,339   $40,598   $40,095   $(7,259)   (18)%  $(6,756)   (17)%
Sales 2   649    895    789    (246)   (27)%   (140)   (18)%
Redemptions   (1,259)   (1,588)   (1,609)   329    21%   350    22%
Net exchanges   (227)   (326)   (328)   99    30%   101    31%
Net Flows   (837)   (1,019)   (1,148)   182    18%   311    27%
Market action   5,743    (6,240)   1,497    11,983    192%   4,246    284%
Ending assets  $38,245   $33,339   $40,444   $4,906    15%  $(2,199)   (5)%
Annualized organic growth rate   (10.0)%   (10.0)%   (11.5)%                    
Annualized redemption rate 3   11.6%   14.6%   13.8%                    
Consolidated Total                                   
Beginning assets  $56,010   $69,958   $71,654   $(13,948)   (20)%  $(15,644)   (22)%
Sales 2   2,191    2,519    2,134    (328)   (13)%   57    3%
Redemptions   (3,640)   (4,786)   (4,490)   1,146    24%   850    19%
Net exchanges                            
Net Flows   (1,449)   (2,267)   (2,356)   818    36%   907    38%
Market action   10,405    (11,681)   2,578    22,086    189%   7,827    304%
Ending assets  $64,966   $56,010   $71,876   $8,956    16%  $(6,910)   (10)%
Annualized organic growth rate   (10.3)%   (13.0)%   (13.2)%                    
Annualized redemption rate 3   22.6%   28.5%   24.3%                    

 

 

1Unaffiliated includes National channel (home office and wholesale), Defined Contribution Investment Only, Registered Investment Advisor and Variable Annuity.
2Sales consist of gross sales and includes net reinvested dividends, capital gains and investment income.
3Excludes Money Market.

 

 

 

 

MorningStar Fund Rankings  1  1 Year   3 Years   5 Years 
Funds ranked in top half   48%   49%   37%
Assets ranked in top half   45%   48%   38%

 

MorningStar Ratings  1  Overall   3 Years   5 Years 
Funds with 4/5 stars   28%   28%   26%
Assets with 4/5 stars   41%   39%   41%

 

 

1Based on class I share, which reflects the largest concentration of sales and assets.

 

   Three Months Ended                 
Wealth Management  Jun. 30,   Mar. 31,   Jun. 30,   Prior Qtr.   Year-over-Year Qtr. 
(in millions)  2020   2020   2019   Change   %   Change   % 
AUA                                   
Ending advisory AUA  $27,155   $23,192   $24,789   $3,963    17%  $2,366    10%
Ending non-advisory AUA   31,836    28,644    32,641    3,192    11%   (805)   (2)%
Ending total AUA   58,991    51,836    57,430    7,155    14%   1,561    3%
                                    
Average advisory AUA 1  $25,030   $26,680   $23,917   $(1,650)   (6)%  $1,113    5%
Average non-advisory AUA 1   30,151    32,488    32,272    (2,337)   (7)%   (2,121)   (7)%
Average AUA 1   55,181    59,168    56,189    (3,987)   (7)%   (1,008)   (2)%
                                    
Net new advisory AUA 2  $189   $442   $349   $(253)   (57)%  $(160)   (46)%
Net new non-advisory AUA 2, 3   (346)   (658)   (747)   312    47%   401    54%
Total net new AUA 2, 3   (157)   (216)   (398)   59    27%   241    61%
                                    
Annualized advisory AUA growth 4   3.3%   6.6%   5.9%                    
Annualized AUA growth 4   (1.2)%   (1.4)%   (2.8)%                    
                                    
Advisors and advisor associates   1,317    1,316    1,347    1        (30)   (2)%
Avg. trailing 12-month revenue per advisor 5 (in thousands)  $464   $462   $408   $2       $56    14%

 

 

1Average AUA are calculated as the average of the beginning of month AUA during each reporting period.
2Net new AUA are calculated as total client deposits and net transfers less client withdrawals. Client deposits include dividends and interest.
3Excludes activity related to products held outside of our wealth management platform.  These assets represent less than 10% of total AUA.
4Annualized growth is calculated as annualized quarterly net new AUA divided by beginning AUA.
5Production 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                 
   Jun. 30,   Mar. 31,   Jun. 30,   Prior Qtr.   Year-over-Year Qtr. 
   2020   2020   2019   Change   %   Change   % 
Revenues:                                   
Investment management fees  $95,824   $105,219   $112,870   $(9,395)   (9)%  $(17,046)   (15)%
Underwriting and distribution fees   123,633    136,943    133,495    (13,310)   (10)%   (9,862)   (7)%
Shareholder service fees   20,577    21,571    23,789    (994)   (5)%   (3,212)   (14)%
Total   240,034    263,733    270,154    (23,699)   (9)%   (30,120)   (11)%
Operating expenses:                                   
Distribution1   107,876    120,033    116,477    (12,157)   (10)%   (8,601)   (7)%
Compensation and benefits (including share-based compensation of $12,532, $9,983 and $11,119, respectively)   61,863    58,425    61,876    3,438    6%   (13)    
General and administrative   20,524    18,598    16,037    1,926    10%   4,487    28%
Technology   14,237    13,502    16,442    735    5%   (2,205)   (13)%
Occupancy   4,291    4,709    6,701    (418)   (9)%   (2,410)   (36)%
Marketing and advertising   1,119    1,896    2,399    (777)   (41)%   (1,280)   (53)%
Depreciation   3,209    3,513    5,228    (304)   (9)%   (2,019)   (39)%
Subadvisory fees   3,288    3,666    3,715    (378)   (10)%   (427)   (11)%
Total   216,407    224,342    228,875    (7,935)   (4)%   (12,468)   (5)%
Operating income   23,627    39,391    41,279    (15,764)   (40)%   (17,652)   (43)%
Investment and other income (loss)   15,148    (7,745)   9,025    22,893    296%   6,123    68%
Interest expense   (1,539)   (1,549)   (1,552)   10    1%   13    1%
Income before provision for income taxes   37,236    30,097    48,752    7,139    24%   (11,516)   (24)%
Provision for income taxes   9,412    9,633    14,190    (221)   (2)%   (4,778)   (34)%
Net income   27,824    20,464    34,562    7,360    36%   (6,738)   (19)%
Net income (loss) attributable to redeemable noncontrolling interests   3,000    (1,522)   614    4,522    297%   2,386    389%
Net income attributable to Waddell & Reed Financial, Inc.  $24,824   $21,986   $33,948   $2,838    13%  $(9,124)   (27)%
Net income per share, basic and diluted:  $0.38   $0.32   $0.45                     
Weighted average shares outstanding - basic and diluted   65,488    67,675    74,694                     
Operating margin   9.8%   14.9%   15.3%                    
                                    
1Distribution expense                                   
Unaffiliated   20,587    23,624    25,242                     
Wealth Management   87,289    96,409    91,235                     
   $107,876   $120,033   $116,477                     

 

   

 

 

Unaudited Consolidated Statements of Income

(in thousands, except per share data and margin)

 

   Six Months Ended         
   Jun. 30,   Jun. 30,     
   2020   2019   Change   % 
Revenues:                    
Investment management fees  $201,043   $222,632   $(21,589)   (10)%
Underwriting and distribution fees   260,576    259,740    836     
Shareholder service fees   42,148    47,192    (5,044)   (11)%
Total   503,767    529,564    (25,797)   (5)%
Operating expenses:                    
Distribution1    227,909    226,271    1,638    1%
Compensation and benefits (including share-based compensation of $22,515 and $23,892, respectively)   120,288    126,719    (6,431)   (5)%
General and administrative   39,122    30,741    8,381    27%
Technology   27,739    32,750    (5,011)   (15)%
Occupancy   9,000    13,416    (4,416)   (33)%
Marketing and advertising   3,015    4,363    (1,348)   (31)%
Depreciation   6,722    11,229    (4,507)   (40)%
Subadvisory fees   6,954    7,272    (318)   (4)%
Total   440,749    452,761    (12,012)   (3)%
Operating income   63,018    76,803    (13,785)   (18)%
Investment and other income   7,403    18,478    (11,075)   (60)%
Interest expense   (3,088)   (3,100)   12     
Income before provision for income taxes   67,333    92,181    (24,848)   (27)%
Provision for income taxes   19,045    24,861    (5,816)   (23)%
Net income   48,288    67,320    (19,032)   (28)%
Net income attributable to redeemable noncontrolling interests   1,478    1,318    160    12%
Net income attributable to Waddell & Reed Financial, Inc.  $46,810   $66,002   $(19,192)   (29)%
Net income per share, basic and diluted:  $0.70   $0.87           
Weighted average shares outstanding - basic and diluted   66,581    75,492           
Operating margin   12.5%   14.5%          
                     
1Distribution expense                    
Unaffiliated   44,211    49,258           
Wealth Management   183,698    177,013           
   $227,909   $226,271           

 

   

 

 

Underwriting and distribution fees

(in thousands)

 

   For the three months ended Jun. 30, 2020 
   Unaffiliated   Wealth
Management
   Total 
Advisory fees  $   $72,534   $72,534 
Service and distribution fees   13,670    13,600    27,270 
Sales commissions   373    15,034    15,407 
Other revenues   91    8,331    8,422 
Total underwriting and distribution fees  $14,134   $109,499   $123,633 

 

   For the three months ended Mar. 31, 2020 
   Unaffiliated   Wealth
Management
   Total 
Advisory fees  $   $77,118   $77,118 
Service and distribution fees   15,276    14,589    29,865 
Sales commissions   451    20,657    21,108 
Other revenues   135    8,717    8,852 
Total underwriting and distribution fees  $15,862   $121,081   $136,943 

 

   For the three months ended Jun. 30, 2019 
   Unaffiliated   Wealth
Management
   Total 
Advisory fees  $   $70,220   $70,220 
Service and distribution fees   16,615    16,041    32,656 
Sales commissions   493    20,794    21,287 
Other revenues   83    9,249    9,332 
Total underwriting and distribution fees  $17,191   $116,304   $133,495 

 

   For the six months ended Jun. 30, 2020 
   Unaffiliated   Wealth
Management
   Total 
Advisory fees  $   $149,652   $149,652 
Service and distribution fees   28,946    28,189    57,135 
Sales commissions   824    35,691    36,515 
Other revenues   226    17,048    17,274 
Total underwriting and distribution fees  $29,996   $230,580   $260,576 

 

   For the six months ended Jun. 30, 2019 
   Unaffiliated   Wealth
Management
   Total 
Advisory fees  $   $135,450   $135,450 
Service and distribution fees   33,081    31,445    64,526 
Sales commissions   935    40,416    41,351 
Other revenues   175    18,238    18,413 
Total underwriting and distribution fees  $34,191   $225,549   $259,740 

 

 

 

Unaudited Condensed Balance Sheet

(in thousands)

 

   Jun. 30,   Dec. 31, 
   2020   2019 
Assets          
Cash & cash equivalents (unrestricted)  $156,710   $151,815 
Investment securities   619,052    688,346 
Other assets   212,443    245,572 
Property and equipment, net   31,928    34,726 
Goodwill and intangible assets   145,869    145,869 
Total assets  $1,166,002   $1,266,328 
Liabilities, redeemable noncontrolling interests and equity          
Short-term notes payable  $94,962   $ 
Long-term debt       94,926 
Other liabilities   278,480    343,300 
Redeemable noncontrolling interests   25,857    19,205 
Total stockholders’ equity   766,703    808,897 
Liabilities, redeemable noncontrolling interests and equity  $1,166,002   $1,266,328 
Shares outstanding   65,174    68,847 

 

Unaudited Condensed Cash Flow

(in thousands)

 

   Three Months Ended   Six Months Ended 
   Jun. 30,   Mar. 31,   Jun. 30,   Jun. 30,   Jun. 30, 
   2020   2020   2019   2020   2019 
Cash provided by (used in):                         
Operating activities  $(526)  $29,276   $40,644   $28,750   $23,147 
Investing activities   20,430    27,694    9,946    48,124    (3,987)
Financing activities   (32,123)   (69,371)   (53,605)   (101,494)   (113,118)
Net change during period  $(12,219)  $(12,401)  $(3,015)  $(24,620)  $(93,958)

 

   Three Months Ended   Six Months Ended 
   Jun. 30,   Mar. 31,   Jun. 30,   Jun. 30,   Jun. 30, 
(in thousands, except number of shares)  2020   2020   2019   2020   2019 
Shares repurchased                         
Number of shares   1,468,367    3,807,438    2,142,894    5,275,805    4,369,219 
Total cost  $18,061   $53,939   $36,824   $72,000   $75,963 
Dividend paid                         
Rate per share  $0.25   $0.25   $0.25   $0.50   $0.50 
Total paid  $16,528   $17,119   $18,840   $33,647   $38,188 
Capital returned to stockholders  $34,589   $71,058   $55,664   $105,647   $114,151 

 

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 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, Chief Accounting Officer & Investor Relations, (913) 236-1795, [email protected]

 

Mutual Fund Investor Contact:

Call (888) WADDELL, or visit www.waddell.com or www.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 and assets under administration, 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 the impact of the COVID-19 pandemic and related economic conditions, as well as the factors 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, 2019, 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 wealth management and investment management 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, 2019 and as updated in our quarterly reports on Form 10-Q for the year ending December 31, 2020. 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.

 

 

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