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Waddell & Reed Financial, Inc. Reports Third Quarter Results and Announces New Capital Return Policy
Overland Park, KS, Oct. 24, 2017 Waddell & Reed Financial, Inc. (NYSE: WDR) today reported third quarter 2017 net income(1) of $38.0 million, or $0.45 per diluted share, compared to net income of $23.3 million, or $0.28 per diluted share, during the prior quarter and net income of $53.8 million, or $0.65 per diluted share, during the third quarter of 2016.
Operating revenues of $289.4 million during the third quarter of 2017 increased 1% sequentially due primarily to one additional day during the current quarter. Compared to the third quarter of 2016, operating revenues declined 5% due primarily to lower average assets under management, which was partly offset by a 2.5 basis point increase in our effective fee rate. The operating margin during the current quarter was 19.0% compared to 17.8% during the previous quarter and 24.3% during the same period last year.
Redemptions during the current quarter were at their lowest level since March 2014, owing mostly to the continued decline in redemptions in our retail unaffiliated distribution channel. Complex-wide, gross sales were $2.9 billion during the quarter, declining 13% compared to the prior quarter, but improving 14% compared to the third quarter of 2016. Assets under management were $80.9 billion at the end of September, largely unchanged compared to the prior quarter and 5% lower than the third quarter of 2016. Net outflows of $2.8 billion during the current quarter increased slightly compared to net outflows of $2.5 billion in the prior quarter, but improved compared to net outflows of $4.9 billion during the same period last year.
While we have made progress toward stabilizing our assets under management, we must now increase our focus on reenergizing organic growth. said Philip J. Sanders, Chief Executive Officer of Waddell & Reed Financial, Inc. Success in this effort will depend on competitive investment performance, appropriate product offerings, and effective sales and distribution strategies. The corporate initiatives we outlined last quarter are already underway and, we believe, will provide a foundation for success.
As part of our regular assessment of the return of capital to stockholders, we are implementing a revised capital return policy intended to provide greater financial flexibility to invest in our business, maintain a strong balance sheet and continue to provide a competitive return to stockholders. Accordingly, the Board reduced the quarterly dividend on our Class A common stock to $0.25 per share, payable on February 1, 2018 to stockholders of record as of January 11, 2018. This capital return policy also encompasses a plan to repurchase $250 million of our common stock, which is inclusive of buybacks to offset dilution of our equity grants. Based on our current financial forecast, we intend to engage in an opportunistic share repurchase plan to fulfill the targeted buybacks over the next two years.
We believe this policy allows us to create long-term value for our stockholders by providing us with additional flexibility to reposition our company amidst an ever-changing industry. This new capital return policy will not only provide for sustainability of the dividend, but also support our strategic initiatives going forward, added Sanders.
The following information was filed by Waddell Reed Financial Inc (WDR) on Tuesday, October 24, 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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