WDR
$17.82
Waddell & Reed Financial
$.07
.39%
Earnings Details
4th Quarter December 2018
Tuesday, February 5, 2019 6:45:00 AM
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Summary

Waddell & Reed Financial (WDR) Recent Earnings

Waddell & Reed Financial (WDR) reported 4th Quarter December 2018 earnings of $0.60 per share on revenue of $272.2 million. The consensus earnings estimate was $0.52 per share on revenue of $276.3 million. Revenue fell 7.6% compared to the same quarter a year ago.

Waddell & Reed Financial, Inc., is engaged in providing investment management, investment product underwriting and distribution, and shareholder services administration to mutual funds and institutional and separately managed accounts.

Results
Reported Earnings
$0.60
Earnings Whisper
-
Consensus Estimate
$0.52
Reported Revenue
$272.2 Mil
Revenue Estimate
$276.3 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Waddell & Reed Financial, Inc. Reports Fourth Quarter Results

OVERLAND PARK, Kan.--(BUSINESS WIRE)-- Waddell & Reed Financial, Inc. (NYSE: WDR) today reported fourth quarter 2018 net income1 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.”

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.

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.

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

Waddell & Reed Financial, Inc.
Investor Contact:
Mike Daley, Vice President – Corporate Controller & Investor Relations, (913) 236-1795, mdaley1@waddell.com
or
Mutual Fund Investor Contact:
Call (888) WADDELL, or visit www.waddell.com or www.ivyfunds.com.

Source: Waddell & Reed Financial, Inc.