WDR
$24.95
Waddell & Reed Financial
Earnings Details
4th Quarter December 2020
Tuesday, February 02, 2021 6:45:00 AM
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Summary

Waddell & Reed Financial (WDR) Recent Earnings

Waddell & Reed Financial (WDR) reported 4th Quarter December 2020 earnings of $0.41 per share on revenue of $278.1 million. The consensus earnings estimate was $0.46 per share on revenue of $278.2 million. Revenue grew 3.0% on a year-over-year basis.

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
$0.41
Earnings Whisper
-
Consensus Estimate
$0.46
Reported Revenue
$278.1 Mil
Revenue Estimate
$278.2 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 a fourth quarter 2020 net loss1 of $6.9 million, or $0.11 per diluted share, compared to net income of $30.5 million, or $0.48 per diluted share, during the prior quarter and net income of $15.9 million, or $0.23 per diluted share, during the fourth quarter of 2019. The fourth quarter of 2020 included $39.6 million in costs related to the proposed acquisition of Waddell & Reed Financial, Inc. by Macquarie Asset Management, the asset management division of Macquarie Group (“Macquarie”) pursuant to a merger agreement announced on December 2, 2020. Excluding the merger-related costs, adjusted net income2 for the fourth quarter of 2020 was $25.5 million and adjusted net income per diluted share2 was $0.41. The fourth quarter of 2019 included non-cash asset impairment charges of $12.8 million in connection with certain assets held for sale, including real property related to our corporate headquarters move and the elimination of our internal aviation operations, an $11.2 million non-cash charge related to the annual revaluation of the pension plan liability and $2.3 million in severance expense related to the outsourcing of our transfer agency transactional processing operations. Excluding the non-cash charges and severance expense, adjusted net income2 for the fourth quarter of 2019 was $36.0 million and adjusted net income per diluted share2 was $0.51.

Highlights

  • Announced execution of a merger agreement under which Macquarie would acquire all the outstanding shares of Waddell & Reed Financial, Inc. for $25.00 per share in cash representing total consideration of approximately $1.7 billion. The transaction is expected to close in the second quarter of 2021 subject to regulatory approvals, Waddell & Reed Financial, Inc. stockholder approval and other customary closing conditions.
  • Continued solid financial performance, with a 3.9% increase in revenues compared to the prior quarter led by higher average assets benefiting both Investment Management fees and Wealth Management Advisory fees
  • Average Assets Under Management (AUM) increased 5% compared to the prior quarter
    • Both gross sales and the overall redemption rate improved compared to the prior quarter and the same quarter in 2019, with unaffiliated sales notably improving.
    • Investment performance improved broadly across the complex. As measured by percentage of assets, one- and five- year performance improved while three-year performance remained consistent.
  • Successful quarter for Wealth Management asset growth
    • Net new Assets Under Administration3 (AUA) grew 1.5%, annualized, on the strength of positive net new Advisory AUA for the 8th consecutive quarter.
    • Number of advisors and advisor associates increased to 1,333 on strong recruiting results in the fourth quarter. Since January 1, 2020, 51 advisors have affiliated with Waddell & Reed with combined prior firm AUA totaling over $2.8 billion.
  • Declared a quarterly dividend of $0.25 per share paid on February 1, 2021 to stockholders of record as of January 11, 2021.
  • Balance sheet remains strong with $760.5 million in unrestricted cash and investments at the end of the fourth quarter of 2020; repaid $95.0 million Series B senior unsecured notes in January 2021.

“2020 marked another year of solid progress in transforming our firm into a more diversified and growth-oriented financial services enterprise, with meaningful progress across both of our businesses while successfully navigating a global pandemic,” said Philip J. Sanders, Chief Executive Officer of Waddell & Reed Financial, Inc. Mr. Sanders continued, “We are also well underway in planning a seamless transition for our clients and advisors as we move towards closing our merger agreement with Macquarie Asset Management.”


  1. Net (loss) income represents net (loss) income attributable to Waddell & Reed Financial, Inc.
  2. See Non-GAAP Financial Measures section and Reconciliation of GAAP to Non-GAAP Financial Measures table
  3. Net new advisory AUA are calculated as total client deposits and net transfers less client withdrawals. Client deposits include dividends and interest.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Financial Results

Three Months Ended

Year Ended

 

Dec. 31,

Sep. 30,

Dec. 31,

Dec. 31,

Dec. 31,

 

2020

2020

2019

2020

2019

GAAP basis (in thousands, except per share data):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

278,060

 

 

$

267,670

 

$

270,071

 

$

1,049,497

 

$

1,070,315

 

Operating expenses

$

283,943

 

 

$

230,035

 

$

241,206

 

$

954,727

 

$

924,623

 

Operating (loss) income

$

(5,883

)

 

$

37,635

 

$

28,865

 

$

94,770

 

$

145,692

 

Operating margin

 

(2.1

)

%

 

14.1

%

 

10.7

%

 

9.0

%

 

13.6

%

Controllable expenses1

$

148,886

 

 

$

101,352

 

$

116,437

 

$

449,402

 

$

428,942

 

Net (loss) income

$

(6,877

)

 

$

30,523

 

$

16,146

 

$

72,657

 

$

116,965

 

Net (loss) income per share, basic and diluted

$

(0.11

)

 

$

0.48

 

$

0.23

 

$

1.08

 

$

1.57

 

As adjusted2 (in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

278,060

 

 

$

267,670

 

$

270,071

 

$

1,049,497

 

$

1,070,315

 

Operating expenses

$

244,337

 

 

$

230,035

 

$

226,045

 

$

915,121

 

$

906,381

 

Operating income

$

33,723

 

 

$

37,635

 

$

44,026

 

$

134,376

 

$

163,934

 

Operating margin

 

12.1

 

%

 

14.1

%

 

16.3

%

 

12.8

%

 

15.3

%

Controllable expenses

$

109,280

 

 

$

101,352

 

$

101,276

 

$

409,796

 

$

410,700

 

Net income

$

25,503

 

 

$

30,523

 

$

35,983

 

$

102,837

 

$

137,381

 

Net income per share, basic and diluted

$

0.41

 

 

$

0.48

 

$

0.51

 

$

1.58

 

$

1.87

 

AUM (in millions)

$

74,822

 

 

$

67,869

 

$

69,958

 

$

74,822

 

$

69,958

 

Average AUM (in millions)

$

71,093

 

 

$

67,946

 

$

69,102

 

$

66,736

 

$

70,273

 

AUA (in millions)

$

69,705

 

 

$

62,694

 

$

60,095

 

$

69,705

 

$

60,095

 

Average AUA (in millions)

$

63,992

 

 

$

61,400

 

$

57,998

 

$

59,935

 

$

56,327

 

Financial Summary

Revenues totaled $278.1 million for the quarter, an increase of $10.4 million and $8.0 million, compared to the prior quarter and the fourth quarter of 2019, respectively. Operating expenses for the quarter of $283.9 million included $39.6 million in merger-related costs, increasing $53.9 million compared to the third quarter of 2020 and increasing $42.7 million compared to the fourth quarter of 2019. Adjusted operating expenses2 increased $14.3 million and $18.3 million, compared to the third quarter of 2020 and the fourth quarter of 2019, respectively. The operating margin was (2.1)% during the current quarter, compared to 14.1% and 10.7% during the prior quarter and the fourth quarter of 2019, respectively. The adjusted operating margin2 was 12.1% for the current quarter compared to 14.1% and 16.3% during the prior quarter and prior year fourth quarter, respectively.

AUM ended the quarter at $74.8 billion, an increase of 10% and 7%, compared to the prior quarter and the fourth quarter of 2019, respectively. The increase in both comparative periods was due to market appreciation. Average AUM were $71.1 billion during the current quarter, compared to $67.9 billion during the prior quarter and $69.1 billion during the fourth quarter of 2019. Net outflows of $1.8 billion during the current quarter were consistent compared to the prior quarter and were lower compared to net outflows of $3.4 billion in the fourth quarter of 2019. Sales of $2.0 billion during the current quarter increased 9% and 28%, compared to the prior quarter and the fourth quarter of 2019, respectively. The sales improvements were led by our Mid Cap suite with sales of both strategies improving from the prior quarter. Redemptions increased slightly compared to the prior quarter and were 24% better compared to the fourth quarter of 2019. We continue to see elevated redemptions in our International Core Equity product despite improved short-term performance.

Wealth management AUA ended the quarter at $69.7 billion, an increase of 11% and 16%, compared to the third quarter of 2020 and the fourth quarter of 2019, respectively. Average AUA were $64.0 billion during the current quarter, compared to $61.4 billion during the prior quarter and $58.0 billion during the fourth quarter of 2019. Positive market action as well as positive net new AUA of $228 million both contributed to the increase in AUA and average AUA. 


  1. Controllable expenses defined as compensation and benefits, general and administrative, occupancy, technology, and marketing and advertising costs
  2. See Non-GAAP Financial Measures section and Reconciliation of GAAP to Non-GAAP Financial Measures table

Revenues Analysis

Investment management fees increased $5.5 million, or 5%, compared to the third quarter of 2020 due to a 5% increase in average AUM and a slight increase in the effective management fee rate. The effective management fee rate for the current quarter was 62.7 basis points compared to 62.4 basis points for the prior quarter. Compared to the fourth quarter of 2019, investment management fees increased $1.4 million, or 1%, primarily due to higher average AUM, partially offset by a lower effective management fee rate. The effective management fee rate decrease from 63.6 basis points in the prior year was due to targeted pricing reductions on certain products made in previous periods and increased money market fee waivers.

Underwriting and distribution fees increased $5.0 million, or 4%, compared to the prior quarter due to higher advisory fees and higher service and distribution fees from higher asset levels. Compared to the same quarter in 2019, underwriting and distribution fees increased $8.1 million, or 6%, due to increased advisory fees from higher asset levels, partially offset by lower sales commission revenues.

Shareholder service fees remained consistent with the third quarter of 2020. Compared to the fourth quarter of 2019, shareholder service fees declined $1.5 million, or 6%, due to a reduction in fund reimbursement revenues related to the outsourcing of our transfer agency transactional processing operations, which was offset by lower reimbursable costs.

Operating Expenses Analysis

Distribution expenses increased $6.3 million, or 5%, compared to the prior quarter and increased $11.2 million, or 10%, compared to the fourth quarter of 2019 primarily as a result of the increase in underwriting and distribution revenue. The expense increase compared to the fourth quarter of 2019 was larger than the revenue increase primarily due to an increase in the average advisor payout rate from continued increases in production.

Compensation and benefits expense increased $33.6 million, or 54%, compared to the prior quarter and increased $33.2 million, or 53%, compared to the fourth quarter of 2019. For both comparative periods, compensation and benefits expense increased primarily due to merger-related compensation expense of $29.1 million, including mark-to-market adjustments on outstanding restricted share units as a result of the increase in share price of Waddell & Reed Financial, Inc. Class A common stock, retention award accruals, and higher cash incentive payments. In addition, compensation and benefits expense increased due to deferred compensation plan valuation adjustments and higher incentive accruals.

General and administrative expenses increased $13.4 million, or 70%, compared to the third quarter of 2020 primarily due to merger-related expenses of $10.5 million, including legal expense, consulting expense, and project-related asset impairments. The remaining increase was due to higher virtual sales incentive meeting accruals and non-cash impairment charges related to field office closures. Compared to the same quarter in 2019, general and administrative expenses increased $2.5 million, or 8%, due to merger-related expenses and 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 offsetting these increases were lower travel and meetings costs and lower non-cash impairment charges.

Technology costs increased $0.8 million, or 6%, compared to the prior quarter primarily due to higher technology consulting costs related to ongoing strategic projects. Technology costs decreased $0.8 million, or 5%, compared to the fourth 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 technology consulting and software costs for new technologies.

Occupancy expenses decreased $0.8 million, or 18%, compared to the prior quarter and decreased $1.7 million, or 34%, compared to the fourth quarter of 2019. For both comparative periods, occupancy costs decreased as a result of the planned transition from advisors leasing space from the Company to advisors utilizing personal branch offices.

Marketing and advertising expenses increased $0.5 million, or 36%, compared to the prior quarter primarily due to higher sponsorship fees. Compared to the fourth quarter of 2019, marketing and advertising expenses decreased $0.6 million, or 24%, primarily due to lower sponsorship fees in connection with the shift to virtual industry conferences.

Depreciation expense increased slightly compared to the prior quarter and declined $0.7 million, or 17%, compared to the fourth quarter of 2019. The decrease compared to 2019 was due to capitalized software development assets becoming fully depreciated.

Investment and Other Income

Investment and other income decreased $4.1 million compared to the prior quarter primarily due to lower unrealized gains, net of hedging activity, on the seed and corporate investment portfolios. Compared to the fourth quarter of 2019, investment and other income increased $6.2 million primarily due to lower pension costs due to the non-cash charge related to the revaluation of the pension plan liability in the fourth quarter of 2019. This increase was partially offset by lower unrealized gains, net of hedging activity, on the seed and corporate investment portfolios and a decline in interest income for the corporate investment portfolio.

The effective tax rate was (12.8)% for the quarter compared to 24.8% in the prior quarter and 28.3% last year. The lower effective tax rate in the current quarter was due to a pre-tax book loss, which was partially offset by higher tax expense from certain non-deductible merger-related costs.

AUM

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dec. 31,

 

Sep. 30,

 

Dec. 31,

 

Prior Qtr.

 

Year-over-Year Qtr.

 

 

2020

 

2020

 

2019

 

Change

 

%

 

Change

 

%

Unaffiliated 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

24,868

 

 

 

$

23,724

 

 

 

$

25,857

 

 

 

$

1,144

 

 

5

 

%

 

$

(989

)

 

(4

)

%

Sales 2

 

 

1,254

 

 

 

 

1,127

 

 

 

 

854

 

 

 

 

127

 

 

11

 

%

 

 

400

 

 

47

 

%

Redemptions

 

 

(1,921

)

 

 

 

(1,977

)

 

 

 

(2,502

)

 

 

 

56

 

 

3

 

%

 

 

581

 

 

23

 

%

Net exchanges

 

 

205

 

 

 

 

239

 

 

 

 

278

 

 

 

 

(34

)

 

(14

)

%

 

 

(73

)

 

(26

)

%

Net Flows

 

 

(462

)

 

 

 

(611

)

 

 

 

(1,370

)

 

 

 

149

 

 

24

 

%

 

 

908

 

 

66

 

%

Market action

 

 

3,571

 

 

 

 

1,755

 

 

 

 

1,777

 

 

 

 

1,816

 

 

103

 

%

 

 

1,794

 

 

101

 

%

Ending assets

 

$

27,977

 

 

 

$

24,868

 

 

 

$

26,264

 

 

 

$

3,109

 

 

13

 

%

 

$

1,713

 

 

7

 

%

Annualized organic growth rate

 

 

(7.4

)

%

 

 

(10.3

)

%

 

 

(21.2

)

%

 

 

 

 

 

 

 

 

 

 

 

 

Annualized redemption rate 3

 

 

29.6

 

%

 

 

32.3

 

%

 

 

39.3

 

%

 

 

 

 

 

 

 

 

 

 

 

 

Institutional

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

3,188

 

 

 

$

2,997

 

 

 

$

3,677

 

 

 

$

191

 

 

6

 

%

 

$

(489

)

 

(13

)

%

Sales 2

 

 

46

 

 

 

 

59

 

 

 

 

32

 

 

 

 

(13

)

 

(22

)

%

 

 

14

 

 

44

 

%

Redemptions

 

 

(189

)

 

 

 

(165

)

 

 

 

(874

)

 

 

 

(24

)

 

(15

)

%

 

 

685

 

 

78

 

%

Net exchanges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NM

 

 

 

 

 

 

NM

 

 

Net Flows

 

 

(143

)

 

 

 

(106

)

 

 

 

(842

)

 

 

 

(37

)

 

(35

)

%

 

 

699

 

 

83

 

%

Market action

 

 

525

 

 

 

 

297

 

 

 

 

261

 

 

 

 

228

 

 

77

 

%

 

 

264

 

 

101

 

%

Ending assets

 

$

3,570

 

 

 

$

3,188

 

 

 

$

3,096

 

 

 

$

382

 

 

12

 

%

 

$

474

 

 

15

 

%

Annualized organic growth rate

 

 

(17.9

)

%

 

 

(14.1

)

%

 

 

(91.6

)

%

 

 

 

 

 

 

 

 

 

 

 

 

Annualized redemption rate 3

 

 

23.0

 

%

 

 

20.5

 

%

 

 

104.1

 

%

 

 

 

 

 

 

 

 

 

 

 

 

Wealth Management

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

39,813

 

 

 

$

38,245

 

 

 

$

39,248

 

 

 

$

1,568

 

 

4

 

%

 

$

565

 

 

1

 

%

Sales 2

 

 

688

 

 

 

 

634

 

 

 

 

662

 

 

 

 

54

 

 

9

 

%

 

 

26

 

 

4

 

%

Redemptions

 

 

(1,644

)

 

 

 

(1,488

)

 

 

 

(1,535

)

 

 

 

(156

)

 

(10

)

%

 

 

(109

)

 

(7

)

%

Net exchanges

 

 

(205

)

 

 

 

(239

)

 

 

 

(278

)

 

 

 

34

 

 

14

 

%

 

 

73

 

 

26

 

%

Net Flows

 

 

(1,161

)

 

 

 

(1,093

)

 

 

 

(1,151

)

 

 

 

(68

)

 

(6

)

%

 

 

(10

)

 

(1

)

%

Market action

 

 

4,623

 

 

 

 

2,661

 

 

 

 

2,501

 

 

 

 

1,962

 

 

74

 

%

 

 

2,122

 

 

85

 

%

Ending assets

 

$

43,275

 

 

 

$

39,813

 

 

 

$

40,598

 

 

 

$

3,462

 

 

9

 

%

 

$

2,677

 

 

7

 

%

Annualized organic growth rate

 

 

(11.7

)

%

 

 

(11.4

)

%

 

 

(11.7

)

%

 

 

 

 

 

 

 

 

 

 

 

 

Annualized redemption rate 3

 

 

14.1

 

%

 

 

13.1

 

%

 

 

13.6

 

%

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

67,869

 

 

 

$

64,966

 

 

 

$

68,782

 

 

 

$

2,903

 

 

4

 

%

 

$

(913

)

 

(1

)

%

Sales 2

 

 

1,988

 

 

 

 

1,820

 

 

 

 

1,548

 

 

 

 

168

 

 

9

 

%

 

 

440

 

 

28

 

%

Redemptions

 

 

(3,754

)

 

 

 

(3,630

)

 

 

 

(4,911

)

 

 

 

(124

)

 

(3

)

%

 

 

1,157

 

 

24

 

%

Net exchanges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Flows

 

 

(1,766

)

 

 

 

(1,810

)

 

 

 

(3,363

)

 

 

 

44

 

 

2

 

%

 

 

1,597

 

 

47

 

%

Market action

 

 

8,719

 

 

 

 

4,713

 

 

 

 

4,539

 

 

 

 

4,006

 

 

85

 

%

 

 

4,180

 

 

92

 

%

Ending assets

 

$

74,822

 

 

 

$

67,869

 

 

 

$

69,958

 

 

 

$

6,953

 

 

10

 

%

 

$

4,864

 

 

7

 

%

Annualized organic growth rate

 

 

(10.4

)

%

 

 

(11.1

)

%

 

 

(19.6

)

%

 

 

 

 

 

 

 

 

 

 

 

 

Annualized redemption rate 3

 

 

20.2

 

%

 

 

20.5

 

%

 

 

27.7

 

%

 

 

 

 

 

 

 

 

 

 

 

 


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

 

 

 

 

 

 

 

 

 

 

 

 

MorningStar Fund Rankings 1

 

1 Year

 

3 Years

 

5 Years

Funds ranked in top half

 

52

 

%

 

48

%

 

43

%

Assets ranked in top half

 

51

 

%

 

52

%

 

55

%

 

 

 

 

 

 

 

 

 

 

MorningStar Ratings 1

 

Overall

 

3 Years

 

5 Years

Funds with 4/5 stars

 

28

%

 

30

%

 

21

%

Assets with 4/5 stars

 

48

%

 

44

%

 

43

%


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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

Wealth Management

 

Dec. 31,

 

Sep. 30,

 

Dec. 31,

Prior Qtr.

 

Year-over-Year Qtr.

(in millions)

 

2020

 

2020

 

2019

 

Change

 

%

 

Change

 

%

AUA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending advisory AUA

 

$

33,100

 

 

 

$

29,330

 

 

 

$

26,947

 

 

$

3,770

 

 

13

%

 

$

6,153

 

 

23

%

Ending non-advisory AUA

 

 

36,605

 

 

 

 

33,364

 

 

 

 

33,148

 

 

 

3,241

 

 

10

%

 

 

3,457

 

 

10

%

Ending total AUA

 

 

69,705

 

 

 

 

62,694

 

 

 

 

60,095

 

 

 

7,011

 

 

11

%

 

 

9,610

 

 

16

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average advisory AUA 1

 

$

30,036

 

 

 

$

28,502

 

 

 

$

25,672

 

 

$

1,534

 

 

5

%

 

$

4,364

 

 

17

%

Average non-advisory AUA 1

 

 

33,956

 

 

 

 

32,898

 

 

 

 

32,326

 

 

 

1,058

 

 

3

%

 

 

1,630

 

 

5

%

Average AUA 1

 

 

63,992

 

 

 

 

61,400

 

 

 

 

57,998

 

 

 

2,592

 

 

4

%

 

 

5,994

 

 

10

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net new advisory AUA 2

 

$

627

 

 

 

$

437

 

 

 

$

470

 

 

$

190

 

 

43

%

 

$

157

 

 

33

%

Net new non-advisory AUA 2, 3

 

 

(399

)

 

 

 

(475

)

 

 

 

(747

)

 

 

76

 

 

16

%

 

 

348

 

 

47

%

Total net new AUA 2, 3

 

 

228

 

 

 

 

(38

)

 

 

 

(277

)

 

 

266

 

 

700

%

 

 

505

 

 

182

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annualized advisory AUA growth 4

 

 

8.5

 

%

 

 

6.4

 

%

 

 

7.5

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Annualized AUA growth 4

 

 

1.5

 

%

 

 

(0.3

)

%

 

 

(1.9

)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisors and advisor associates

 

 

1,333

 

 

 

 

1,313

 

 

 

 

1,327

 

 

 

20

 

 

2

%

 

 

6

 

 

0

%

Avg. trailing 12-month revenue per advisor 5 (in thousands)

 

$

487

 

 

 

$

474

 

 

 

$

438

 

 

$

13

 

 

3

%

 

$

49

 

 

11

%


  1. Average AUA are calculated as the average of the beginning of month AUA during each reporting period.
  2. Net new AUA are calculated as total client deposits and net transfers less client withdrawals. Client deposits include dividends and interest.
  3. Excludes activity related to products held outside of our wealth management platform. These assets represent less than 10% of total AUA.
  4. Annualized growth is calculated as annualized quarterly net new AUA divided by beginning AUA.
  5. Production per Advisor is calculated as trailing 12- month Total underwriting and distribution fees less “other” underwriting and distribution fees divided by the average number of advisors. “Other” underwriting and distribution fees predominantly includes fees paid by advisors for programs and services.

     

Unaudited Consolidated Statements of (Loss) Income

(in thousands, except per share data and margin)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dec. 31,

 

Sep. 30,

 

Dec. 31,

 

Prior Qtr.

 

Year-over-Year Qtr.

 

 

2020

 

2020

 

2019

 

Change

 

%

 

Change

 

%

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment management fees

 

$

112,068

 

 

 

$

106,617

 

 

 

$

110,706

 

 

 

$

5,451

 

 

 

5

 

%

 

$

1,362

 

 

 

1

 

%

Underwriting and distribution fees

 

 

144,408

 

 

 

 

139,456

 

 

 

 

136,309

 

 

 

 

4,952

 

 

 

4

 

%

 

 

8,099

 

 

 

6

 

%

Shareholder service fees

 

 

21,584

 

 

 

 

21,597

 

 

 

 

23,056

 

 

 

 

(13

)

 

 

(0

)

%

 

 

(1,472

)

 

 

(6

)

%

Total

 

 

278,060

 

 

 

 

267,670

 

 

 

 

270,071

 

 

 

 

10,390

 

 

 

4

 

%

 

 

7,989

 

 

 

3

 

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution1

 

 

128,474

 

 

 

 

122,195

 

 

 

 

117,225

 

 

 

 

6,279

 

 

 

5

 

%

 

 

11,249

 

 

 

10

 

%

Compensation and benefits (including share-based compensation of $23,177, $11,080 and $11,142, respectively)

 

 

96,007

 

 

 

 

62,416

 

 

 

 

62,816

 

 

 

 

33,591

 

 

 

54

 

%

 

 

33,191

 

 

 

53

 

%

General and administrative

 

 

32,535

 

 

 

 

19,156

 

 

 

 

30,061

 

 

 

 

13,379

 

 

 

70

 

%

 

 

2,474

 

 

 

8

 

%

Technology

 

 

15,077

 

 

 

 

14,250

 

 

 

 

15,950

 

 

 

 

827

 

 

 

6

 

%

 

 

(873

)

 

 

(5

)

%

Occupancy

 

 

3,399

 

 

 

 

4,160

 

 

 

 

5,143

 

 

 

 

(761

)

 

 

(18

)

%

 

 

(1,744

)

 

 

(34

)

%

Marketing and advertising

 

 

1,868

 

 

 

 

1,370

 

 

 

 

2,467

 

 

 

 

498

 

 

 

36

 

%

 

 

(599

)

 

 

(24

)

%

Depreciation

 

 

3,113

 

 

 

 

2,998

 

 

 

 

3,767

 

 

 

 

115

 

 

 

4

 

%

 

 

(654

)

 

 

(17

)

%

Subadvisory fees

 

 

3,470

 

 

 

 

3,490

 

 

 

 

3,777

 

 

 

 

(20

)

 

 

(1

)

%

 

 

(307

)

 

 

(8

)

%

Total

 

 

283,943

 

 

 

 

230,035

 

 

 

 

241,206

 

 

 

 

53,908

 

 

 

23

 

%

 

 

42,737

 

 

 

18

 

%

Operating (loss) income

 

 

(5,883

)

 

 

 

37,635

 

 

 

 

28,865

 

 

 

 

(43,518

)

 

 

(116

)

%

 

 

(34,748

)

 

 

(120

)

%

Investment and other income (loss)

 

 

1,391

 

 

 

 

5,449

 

 

 

 

(4,804

)

 

 

 

(4,058

)

 

 

(74

)

%

 

 

6,195

 

 

 

129

 

%

Interest expense

 

 

(1,603

)

 

 

 

(1,542

)

 

 

 

(1,533

)

 

 

 

(61

)

 

 

(4

)

%

 

 

(70

)

 

 

(5

)

%

(Loss) income before provision for income taxes

 

 

(6,095

)

 

 

 

41,542

 

 

 

 

22,528

 

 

 

 

(47,637

)

 

 

(115

)

%

 

 

(28,623

)

 

 

(127

)

%

Provision for income taxes

 

 

782

 

 

 

 

10,296

 

 

 

 

6,382

 

 

 

 

(9,514

)

 

 

(92

)

%

 

 

(5,600

)

 

 

(88

)

%

Net (loss) income

 

 

(6,877

)

 

 

 

31,246

 

 

 

 

16,146

 

 

 

 

(38,123

)

 

 

(122

)

%

 

 

(23,023

)

 

 

(143

)

%

Net income attributable to redeemable noncontrolling interests

 

 

 

 

 

 

723

 

 

 

 

210

 

 

 

 

(723

)

 

 

(100

)

%

 

 

(210

)

 

 

(100

)

%

Net (loss) income attributable to Waddell & Reed Financial, Inc.

 

$

(6,877

)

 

 

$

30,523

 

 

 

$

15,936

 

 

 

$

(37,400

)

 

 

(123

)

%

 

$

(22,813

)

 

 

(143

)

%

Net (loss) income per share, basic and diluted:

 

$

(0.11

)

 

 

$

0.48

 

 

 

$

0.23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic and diluted

 

 

62,527

 

 

 

 

64,240

 

 

 

 

69,896

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

 

(2.1

)

%

 

 

14.1

 

%

 

 

10.7

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Distribution expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaffiliated

 

 

24,213

 

 

 

 

22,733

 

 

 

 

23,392

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wealth Management

 

 

104,262

 

 

 

 

99,462

 

 

 

 

93,833

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

128,475

 

 

 

$

122,195

 

 

 

$

117,225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited Consolidated Statements of Income
(in thousands, except per share data and margin)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

 

 

 

 

 

 

 

 

Dec. 31,

 

Dec. 31,

 

 

 

 

2020

 

2019

 

Change

 

%

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment management fees

 

$

419,728

 

 

 

$

445,144

 

 

 

$

(25,416

)

 

 

(6

)

%

Underwriting and distribution fees

 

 

544,440

 

 

 

 

531,836

 

 

 

 

12,604

 

 

 

2

 

%

Shareholder service fees

 

 

85,329

 

 

 

 

93,335

 

 

 

 

(8,006

)

 

 

(9

)

%

Total

 

 

1,049,497

 

 

 

 

1,070,315

 

 

 

 

(20,818

)

 

 

(2

)

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution1

 

 

478,578

 

 

 

 

460,921

 

 

 

 

17,657

 

 

 

4

 

%

Compensation and benefits (including share-based compensation of $56,772 and $46,613, respectively)

 

 

278,711

 

 

 

 

254,534

 

 

 

 

24,177

 

 

 

9

 

%

General and administrative

 

 

90,813

 

 

 

 

77,482

 

 

 

 

13,331

 

 

 

17

 

%

Technology

 

 

57,066

 

 

 

 

63,719

 

 

 

 

(6,653

)

 

 

(10

)

%

Occupancy

 

 

16,559

 

 

 

 

24,243

 

 

 

 

(7,684

)

 

 

(32

)

%

Marketing and advertising

 

 

6,253

 

 

 

 

8,964

 

 

 

 

(2,711

)

 

 

(30

)

%

Depreciation

 

 

12,833

 

 

 

 

19,829

 

 

 

 

(6,996

)

 

 

(35

)

%

Subadvisory fees

 

 

13,914

 

 

 

 

14,931

 

 

 

 

(1,017

)

 

 

(7

)

%

Total

 

 

954,727

 

 

 

 

924,623

 

 

 

 

30,104

 

 

 

3

 

%

Operating income

 

 

94,770

 

 

 

 

145,692

 

 

 

 

(50,922

)

 

 

(35

)

%

Investment and other income

 

 

14,243

 

 

 

 

18,886

 

 

 

 

(4,643

)

 

 

(25

)

%

Interest expense

 

 

(6,233

)

 

 

 

(6,195

)

 

 

 

(38

)

 

 

(1

)

%

Income before provision for income taxes

 

 

102,780

 

 

 

 

158,383

 

 

 

 

(55,603

)

 

 

(35

)

%

Provision for income taxes

 

 

30,123

 

 

 

 

41,418

 

 

 

 

(11,295

)

 

 

(27

)

%

Net income

 

 

72,657

 

 

 

 

116,965

 

 

 

 

(44,308

)

 

 

(38

)

%

Net income attributable to redeemable noncontrolling interests

 

 

2,200

 

 

 

 

1,973

 

 

 

 

227

 

 

 

12

 

%

Net income attributable to Waddell & Reed Financial, Inc.

 

$

70,457

 

 

 

$

114,992

 

 

 

$

(44,535

)

 

 

(39

)

%

Net income per share, basic and diluted:

 

$

1.08

 

 

 

$

1.57

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic and diluted

 

 

64,974

 

 

 

 

73,299

 

 

 

 

 

 

 

 

 

Operating margin

 

 

9.0

 

%

 

 

13.6

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Distribution expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaffiliated

 

 

91,157

 

 

 

 

96,718

 

 

 

 

 

 

 

 

 

Wealth Management

 

 

387,421

 

 

 

 

364,203

 

 

 

 

 

 

 

 

 

 

 

$

478,578

 

 

 

$

460,921

 

 

 

 

 

 

 

 

 

Underwriting and distribution fees
(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended Dec. 31, 2020

 

 

Unaffiliated

 

Wealth Management

 

Total

Advisory fees

 

$

 

$

86,721

 

$

86,721

Service and distribution fees

 

 

14,938

 

 

16,053

 

 

30,991

Sales commissions

 

 

17

 

 

17,795

 

 

17,812

Other revenues

 

 

55

 

 

8,829

 

 

8,884

Total underwriting and distribution fees

 

$

15,010

 

$

129,398

 

$

144,408

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended Sep. 30, 2020

 

 

Unaffiliated

 

Wealth Management

 

Total

Advisory fees

 

$

 

$

82,591

 

$

82,591

Service and distribution fees

 

 

14,623

 

 

15,305

 

 

29,928

Sales commissions

 

 

223

 

 

17,847

 

 

18,070

Other revenues

 

 

82

 

 

8,785

 

 

8,867

Total underwriting and distribution fees

 

$

14,928

 

$

124,528

 

$

139,456

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended Dec. 31, 2019

 

 

Unaffiliated

 

Wealth Management

 

Total

Advisory fees

 

$

 

$

75,382

 

$

75,382

Service and distribution fees

 

 

15,860

 

 

15,609

 

 

31,469

Sales commissions

 

 

431

 

 

19,826

 

 

20,257

Other revenues

 

 

48

 

 

9,153

 

 

9,201

Total underwriting and distribution fees

 

$

16,339

 

$

119,970

 

$

136,309

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended Dec. 31, 2020

 

 

Unaffiliated

 

Wealth Management

 

Total

Advisory fees

 

$

 

$

318,964

 

$

318,964

Service and distribution fees

 

 

58,507

 

 

59,547

 

 

118,054

Sales commissions

 

 

1,065

 

 

71,333

 

 

72,399

Other revenues

 

 

362

 

 

34,662

 

 

35,023

Total underwriting and distribution fees

 

$

59,934

 

$

484,506

 

$

544,440

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended Dec. 31, 2019

 

 

Unaffiliated

 

Wealth Management

 

Total

Advisory fees

 

$

 

$

284,188

 

$

284,188

Service and distribution fees

 

 

65,227

 

 

63,197

 

 

128,424

Sales commissions

 

 

1,730

 

 

80,785

 

 

82,515

Other revenues

 

 

290

 

 

36,419

 

 

36,709

Total underwriting and distribution fees

 

$

67,247

 

$

464,589

 

$

531,836

Unaudited Condensed Balance Sheet
(in thousands)

 

 

 

 

 

 

 

 

 

Dec. 31,

 

Dec. 31,

 

 

2020

 

2019

Assets

 

 

 

 

 

 

Cash & cash equivalents (unrestricted)

 

$

273,756

 

$

151,815

Investment securities

 

 

486,765

 

 

688,346

Other assets

 

 

225,538

 

 

245,572

Property and equipment, net

 

 

21,903

 

 

34,726

Goodwill and intangible assets

 

 

145,869

 

 

145,869

Total assets

 

$

1,153,831

 

$

1,266,328

Liabilities, redeemable noncontrolling interests and equity

 

 

 

 

 

 

Short-term notes payable

 

$

94,997

 

$

Long-term debt

 

 

 

 

94,926

Other liabilities

 

 

331,077

 

 

343,300

Redeemable noncontrolling interests

 

 

 

 

19,205

Total stockholders’ equity

 

 

727,757

 

 

808,897

Liabilities, redeemable noncontrolling interests and equity

 

$

1,153,831

 

$

1,266,328

Shares outstanding

 

 

62,398

 

 

68,847

Unaudited Condensed Cash Flow
(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

Dec. 31,

 

Sep. 30,

 

Dec. 31,

 

Dec. 31,

 

Dec. 31,

 

 

2020

 

2020

 

2019

 

2020

 

2019

Cash provided by (used in):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

$

96,072

 

 

$

63,222

 

 

$

89,382

 

 

$

188,044

 

 

$

165,983

 

Investing activities

 

 

32,452

 

 

 

18,084

 

 

 

11,309

 

 

 

98,660

 

 

 

(6,851

)

Financing activities

 

 

(18,366

)

 

 

(55,634

)

 

 

(52,838

)

 

 

(175,494

)

 

 

(224,547

)

Net change during period

 

$

110,158

 

 

$

25,672

 

 

$

47,853

 

 

$

111,210

 

 

$

(65,415

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

Dec. 31,

 

Sep. 30,

 

Dec. 31,

 

Dec. 31,

 

Dec. 31,

(in thousands, except number of shares)

 

2020

 

2020

 

2019

 

2020

 

2019

Shares repurchased

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of shares

 

 

102,817

 

 

2,617,108

 

 

2,315,326

 

 

7,995,730

 

 

9,164,564

Total cost

 

$

2,618

 

$

40,052

 

$

37,542

 

$

114,670

 

$

154,219

Dividend paid

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rate per share

 

$

0.25

 

$

0.25

 

$

0.25

 

$

1.00

 

$

1.00

Total paid

 

$

15,637

 

$

16,292

 

$

17,731

 

$

65,576

 

$

74,291

Capital returned to stockholders

 

$

18,255

 

$

56,344

 

$

55,273

 

$

180,246

 

$

228,510

Non-GAAP Financial Measures

“Adjusted net income attributable to Waddell & Reed Financial, Inc.,” “adjusted net income per share, basic and diluted,” “adjusted controllable expenses,” “adjusted operating expenses,” “adjusted operating income,” and “adjusted operating margin” are non-GAAP financial measures that are not presented in accordance with U.S. generally accepted accounting principles (GAAP). We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding charges and gains that are not indicative of our core operating results, and allow management and investors to better evaluate our performance between periods and compared to other companies in our industry.

These non-GAAP financial measures should not be considered a substitute for financial measures presented in accordance with GAAP and you should not rely on non-GAAP financial measures alone as measures of our performance.

A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is included in the table below.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

Dec. 31,

 

Sep. 30,

 

Dec. 31,

 

Dec. 31,

 

Dec. 31,

 

 

2020

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to Waddell & Reed Financial, Inc. (GAAP)

 

$

(6,877

)

 

 

$

30,523

 

 

$

15,936

 

 

 

$

70,457

 

 

 

$

114,992

 

 

Adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger-related costs1

 

 

39,606

 

 

 

 

 

 

 

 

 

 

 

39,606

 

 

 

 

 

 

Severance

 

 

 

 

 

 

 

 

 

2,320

 

 

 

 

 

 

 

 

5,401

 

 

Non-cash asset impairments

 

 

 

 

 

 

 

 

 

12,841

 

 

 

 

 

 

 

 

12,841

 

 

Pension revaluation

 

 

 

 

 

 

 

 

 

11,217

 

 

 

 

 

 

 

 

11,217

 

 

Tax effect of adjustments

 

 

(7,226

)

 

 

 

 

 

 

(6,331

)

 

 

 

(7,226

)

 

 

 

(7,070

)

 

Adjusted net income attributable to Waddell & Reed Financial, Inc. (non-GAAP)

 

$

25,503

 

 

 

$

30,523

 

 

$

35,983

 

 

 

$

102,837

 

 

 

$

137,381

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average share outstanding-basic and diluted

 

 

62,527

 

 

 

 

64,240

 

 

 

69,896

 

 

 

 

64,974

 

 

 

 

73,299

 

 

Adjusted net income per share, basic and diluted (non-GAAP)

 

$

0.41

 

 

 

$

0.48

 

 

$

0.51

 

 

 

$

1.58

 

 

 

$

1.87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Controllable expenses (GAAP)

 

$

148,886

 

 

 

$

101,352

 

 

$

116,437

 

 

 

$

449,402

 

 

 

$

428,942

 

 

Adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger-related costs

 

 

39,606

 

 

 

 

 

 

 

 

 

 

 

39,606

 

 

 

 

 

 

Severance

 

 

 

 

 

 

 

 

 

2,320

 

 

 

 

 

 

 

 

5,401

 

 

Non-cash asset impairments

 

 

 

 

 

 

 

 

 

12,841

 

 

 

 

 

 

 

 

12,841

 

 

Adjusted controllable expenses (non-GAAP)

 

$

109,280

 

 

 

$

101,352

 

 

$

101,276

 

 

 

$

409,796

 

 

 

$

410,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses (GAAP)

 

$

283,943

 

 

 

$

230,035

 

 

$

241,206

 

 

 

$

954,727

 

 

 

$

924,623

 

 

Adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger-related costs

 

 

39,606

 

 

 

 

 

 

 

 

 

 

 

39,606

 

 

 

 

 

 

Severance

 

 

 

 

 

 

 

 

 

2,320

 

 

 

 

 

 

 

 

5,401

 

 

Non-cash asset impairments

 

 

 

 

 

 

 

 

 

12,841

 

 

 

 

 

 

 

 

12,841

 

 

Adjusted operating expenses (non-GAAP)

 

$

244,337

 

 

 

$

230,035

 

 

$

226,045

 

 

 

$

915,121

 

 

 

$

906,381

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (loss) income (GAAP)

 

$

(5,883

)

 

 

$

37,635

 

 

$

28,865

 

 

 

$

94,770

 

 

 

$

145,692

 

 

Adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger-related costs

 

 

39,606

 

 

 

 

 

 

 

 

 

 

 

39,606

 

 

 

 

 

 

Severance

 

 

 

 

 

 

 

 

 

2,320

 

 

 

 

 

 

 

 

5,401

 

 

Non-cash asset impairments

 

 

 

 

 

 

 

 

 

12,841

 

 

 

 

 

 

 

 

12,841

 

 

Adjusted operating income (non-GAAP)

 

$

33,723

 

 

 

$

37,635

 

 

$

44,026

 

 

 

$

134,376

 

 

 

$

163,934

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

278,060

 

 

 

$

267,670

 

 

$

270,071

 

 

 

$

1,049,497

 

 

 

$

1,070,315

 

 

Operating margin (GAAP)

 

 

(2.1

)

%

 

 

14.1

%

 

 

10.7

 

%

 

 

9.0

 

%

 

 

13.6

 

%

Adjusted operating margin (non-GAAP)

 

 

12.1

 

%

 

 

14.1

%

 

 

16.3

 

%

 

 

12.8

 

%

 

 

15.3

 

%


  1. Primarily represents increased compensation from mark-to-market adjustments on outstanding restricted share units as a result of the increase in share price of Waddell & Reed Financial, Inc. Class A common stock, retention award accruals, higher cash incentive payments, legal and consulting costs and project-related asset impairments all related to the proposed acquisition of Waddell & Reed Financial, Inc. by Macquarie.

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 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 our plans, assumptions, expectations, beliefs and objectives with respect to the merger, 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. Important transaction-related and other risk factors that may cause such differences include, without limitation: (i) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; (ii) the transaction closing conditions may not be satisfied in a timely manner or at all, including due to the failure to obtain Waddell & Reed Financial, Inc. stockholder approval and regulatory and client approvals or as a result of a decrease in assets under administration or assets under management; (iii) the announcement and pendency of the merger may disrupt our business operations (including the threatened or actual loss of employees, clients, independent financial advisors associated with Waddell & Reed or vendors); (iv) the amount of the costs, fees, expenses and other charges related to the merger, including in the event of any unexpected delays; and (v) we could experience financial or other setbacks if the transaction encounters unanticipated problems. Other 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 administration or assets under our management on short notice;
  • 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.

Investor Contact:
Mike Daley, Vice President, Chief Accounting Officer & Investor Relations, (913) 236-1795, mdaley1@waddell.com

Mutual Fund Investor Contact:
Call (888) WADDELL, or visit www.waddell.com or www.ivyinvestments.com.

Source: Waddell & Reed Financial, Inc.