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Waddell & Reed Financial, Inc. Reports First Quarter Results
Overland Park, KS, May 2, 2017 Waddell & Reed Financial, Inc. (NYSE: WDR) today reported first quarter 2017 net income1 of $33.1 million, or $0.39 per diluted share, compared to net income of $22.4 million, or $0.27 per diluted share, during the prior quarter and net income of $37.0 million, or $0.45 per diluted share, during the first quarter of 2016. The fourth quarter of 2016 included a pension charge of $20.7 million ($13.0 million, net of taxes) and a charge for the impairment of an intangible asset of $4.0 million ($2.5 million, net of taxes).
Operating revenues of $287 million during the first quarter of 2017 declined 2% sequentially. Two fewer days during the quarter was the primary reason for the decline in revenues, with slightly lower average assets under management being offset by a higher effective fee rate. Compared to the same period last year, operating revenues declined 12% due to a combination of lower average assets under management and reduced Rule 12b-1 fee revenues in our broker-dealer advisory programs related to a share conversion of load-waived Class A shares to Class I shares in July 2016. The operating margin during the current quarter was 18.4% compared to 12.8% during the previous quarter and 22.1% during the same period last year.
March 31, 2017 assets under management were $81 billion, increasing 1% during the quarter, but declined 15% compared to March 31, 2016. Outflows during the current quarter were $3.4 billion, compared to outflows of $4.4 billion and outflows of $6.3 billion during the fourth and first quarters of 2016, respectively.
Flow pressure continues to ease as redemptions from some of the largest sources of outflows steadily abates. Redemptions from Asset Strategy, which was once our most substantial source of outflows, fell to $1.0 billion during the current quarter, compared to redemptions of $4.5 billion during the first quarter last year. Complex-wide, sales rose 7% sequentially; however, sales volume remains soft compared to historical levels. We have begun to gain traction in a number of investment strategies, particularly in retail unaffiliated distribution, where sequential sales rose 31%.
We are seeing early signs of progress, although much work remains, said Philip J. Sanders, Chief Executive Officer of Waddell & Reed Financial, Inc. Asset levels were stable sequentially, reflecting a slowing of net outflows, an uptick in gross sales and positive market action.
Management Fee Revenue Analysis
Management fees declined 2% sequentially, while average assets under management declined 1%. The current quarter had two fewer days, which caused fees to decline at a greater rate than assets under management. Compared to the first quarter of 2016, fees declined 10%, while average assets under management declined 15%. A mix-shift in the retail asset base led revenues to decline at a lesser rate than average assets under management.
Average assets under management were $81 billion during the current quarter, compared to $82 billion during the prior quarter and $96 billion during the same period in 2016. The effective fee rate for the current quarter was 65.0 basis points compared to 64.4 basis points and 60.8 basis points during the fourth and first quarter of 2016, respectively.
The following information was filed by Waddell Reed Financial Inc (WDR) on Tuesday, May 2, 2017 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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