Exhibit 99.1

 

 

News Release

 

Waddell & Reed Financial, Inc. Reports First Quarter Results

 

Overland Park, KS, April 28, 2020

— Waddell & Reed Financial, Inc. (NYSE: WDR) today reported first quarter 2020 net income1 of $22.0 million, or $0.32 per diluted share, compared to net income of $15.9 million, or $0.23 per diluted share, during the prior quarter and net income of $32.1 million, or $0.42 per diluted share, during the first quarter of 2019.

 

Philip J. Sanders, Chief Executive Officer of Waddell & Reed Financial, Inc. said, “The COVID-19 pandemic has required that we, and the world, navigate an extraordinarily complex and rapidly changing environment.  In the midst of this, our Company has proactively implemented a comprehensive business continuity plan that allowed us to effectively respond to the crisis and ensure the safety of our employees, clients, independent advisors, and stakeholders in the communities where we live and work.”

 

Mr. Sanders continued, “Our strong financial profile with significant liquidity will allow us to actively manage through this acute global disruption while continuing to focus on our long-term growth and competitive position.”

 

Highlights

 

·Effectively managed operations through COVID-19 pandemic: achieved 98% of workforce working remotely by end of March, continued to deliver investment insight updates to our clients, and provided over 160 resources to help independent advisors navigate the current market dynamics
·Balance sheet a continued source of strength
oOpportunistic deployment of liquidity via share buybacks at attractive valuations and dividends, with $71 million returned to shareholders and outstanding shares reduced by nearly 6%
oContinued flexibility for organic and inorganic growth opportunities
·For Ivy Investments, assets under management were negatively impacted given broader markets, but meaningful positives across several operating dimensions:
oReduced assets under management outflows versus prior quarter driven by greater sales and lower redemptions
oIncreased percentage of funds ranked in the top half of their respective Morningstar universes2
·Significant progress in wealth management transformation continued, with enhanced focus on recruiting and additional growth opportunities
·Benefited from enterprise model of having both asset and wealth management franchises, with lower net assets under management redemptions in wealth management channel and organic growth in advisory assets under administration

 

Financial Summary

 

The first quarter of 2020 included $11.0 million, or $0.12 per share, of unrealized losses on our investment portfolio within the investment and other (loss) income line compared to $3.0 million, or $0.03 per share, of unrealized gains during the prior quarter and $5.4 million, or $0.05 per share, of unrealized gains during the first quarter of 2019. 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 department, 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 income3 for the fourth quarter of 2019 was $36.0 million and adjusted net income per diluted share3 was $0.51.

 

 

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

2 As measured by number of funds

3 See Non-GAAP Financial Measures section and Reconciliation of GAAP to Non-GAAP Financial Measures table

 

 

 

Revenues totaled $263.7 million for the quarter, a decrease of $6.3 million compared to the prior quarter and an increase of $4.3 million compared to the first quarter of 2019. Operating expenses of $224.3 million decreased $16.9 million compared to the prior quarter, which included a $12.8 million non-cash asset impairment charge. Compared to the same quarter of 2019, operating expenses increased slightly. The operating margin was 14.9% during the current quarter, compared to 10.7% and 13.7% during the prior quarter and the first quarter of 2019, respectively. The adjusted operating margin3 during the prior quarter was 16.3%.

 

Assets under management ended the quarter at $56.0 billion, a decrease of 20% compared to the prior quarter and a decrease of 22% compared to the first quarter of 2019. For both comparative periods, assets under management decreased primarily due to market volatility and continued outflows. Average assets under management were $66.1 billion during the current quarter, compared to $69.1 billion during the prior quarter and $70.1 billion during the first quarter of 2019. Net outflows of $2.3 billion during the current quarter were lower compared to net outflows of $3.4 billion in the fourth quarter of 2019 and were higher compared to net outflows of $1.8 billion in the first quarter of 2019. Sales of $2.5 billion during the current quarter increased 63% and 1% compared to the prior quarter and the first quarter of 2019, respectively. Redemptions were 3% lower compared to the prior quarter and increased 12% compared to the first quarter of 2019.

 

Wealth management assets under administration ended the quarter at $51.8 billion, a decrease of 14% and 8%, compared to the fourth quarter of 2019 and the first quarter of 2019, respectively. For both comparative periods, assets under administration decreased primarily due to market volatility.

 

Revenues Analysis

 

Investment management fees decreased $5.5 million, or 5%, compared to the fourth quarter of 2019 due to a 4% decrease in average assets under management and one less day in the quarter, partially offset by a higher effective management fee rate. The effective management fee rate for the current quarter was 64.0 basis points and increased compared to the prior quarter’s rate due to a reduction in fund fee waivers. Compared to the first quarter of 2019, investment management fees declined $4.5 million, or 4%, primarily due to lower average assets under management, partially offset by one more day and a higher effective management fee rate due to a reduction in fund fee waivers.

 

Underwriting and distribution fees increased slightly compared to the prior quarter and increased $10.7 million, or 8%, compared to the same quarter in 2019. For both comparative periods, the increases were primarily driven by increased fee-based asset allocation product revenues and higher commissionable sales, partially offset by lower service and distribution fees from lower asset levels.

 

Shareholder service fees decreased $1.5 million, or 6%, compared to the fourth quarter of 2019 primarily due to a reduction in reimbursements related to the outsourcing of our transfer agency transactional processing operations and lower average assets. Compared to the first quarter of 2019, shareholder service fees declined $1.8 million, or 8%, primarily due to the outsourcing of our transfer agency transactional processing operations, fewer accounts and a decrease in average assets.

 

Operating Expenses Analysis

 

Distribution expenses increased $2.8 million, or 2%, compared to the prior quarter and increased $10.2 million, or 9%, compared to the first quarter of 2019 as a result of the increase in underwriting and distribution revenue. For both comparative periods, the expense increase is larger than the revenue increase primarily due to an increase in the average advisor payout rate.

 

Compensation and benefits expense decreased $4.4 million, or 7%, compared to the prior quarter due to lower incentive compensation, lower headcount and lower share-based compensation due to mark-to-market adjustments of cash-settled restricted stock unit awards, partially offset by the reset of payroll tax limits at the beginning of the year. Compared to the first quarter of 2019, compensation and benefits expense decreased $6.4 million, or 10%, due to lower share-based compensation from a shift in grant dates and mark-to-market adjustments of cash-settled restricted stock unit awards, lower incentive compensation costs and lower headcount.

 

 

 

General and administrative expenses decreased $11.5 million, or 38%, compared to the fourth quarter of 2019, due to a $12.8 million non-cash asset impairment charge incurred during the prior quarter and lower travel and meetings costs in the current quarter due to a transition to virtual meetings. These decreases were partially offset by increased strategic project spending, as well as the shift of our transfer agency transactional processing operations costs from technology expenses to general and administrative expenses as a result of the outsourcing. Compared to the same quarter in 2019, general and administrative expenses increased $3.9 million, or 26%, due to the transfer agency transactional processing operations outsourcing costs shift, partially offset by lower travel and meetings costs.

 

Technology costs decreased $2.4 million, or 15%, compared to the prior quarter and decreased $2.8 million, or 17%, compared to the first quarter of 2019. For both comparative periods, technology costs decreased as costs related to the transfer agency transactional processing operations outsourcing were shifted to general and administrative expenses, partially offset by increased consulting and software costs for new technologies.

 

Occupancy expenses decreased $0.4 million, or 8%, compared to the prior quarter and decreased $2.0 million, or 30%, compared to the first 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 $0.6 million, or 23%, compared to the prior quarter due to the timing of sponsorship fees and fewer promotional items and remained flat compared to the first quarter of 2019.

 

Depreciation expense declined slightly compared to the prior quarter and declined $2.5 million, or 41%, compared to the first quarter of 2019, primarily due to fully depreciated capitalized development assets.

 

Investment and Other (Loss) Income

 

Investment and other (loss) income declined $2.9 million compared to the prior quarter primarily due to unrealized losses on the investment portfolio, partially offset by the non-cash charge related to the annual revaluation of the pension plan liability in the prior quarter. Compared to the first quarter of 2019, investment and other (loss) income declined $17.2 million due to a change in unrealized losses on the corporate investment portfolio.

 

The effective tax rate was 32.0% for the quarter compared to 28.3% in the prior quarter and 24.6% last year. The effective tax rate for the quarter included additional items totaling $1.9 million primarily related to non-deductible share-based compensation.

 

 

 

Assets Under Management

(in millions)

 

   Three Months Ended                 
   Mar. 31,   Dec. 31,   Mar. 31,   Prior Qtr.   Year-over-Year Qtr. 
   2020   2019   2019   Change   %   Change   % 
Unaffiliated 1                            
Beginning assets  $26,264   $25,857   $24,977   $407    2%  $1,287    5%
Sales 2   1,581    854    1,593    727    85%   (12)   (1)%
Redemptions   (3,019)   (2,502)   (2,306)   (517)   (21)%   (713)   (31)%
Net exchanges   326    278    276    48    17%   50    18%
Net Flows   (1,112)   (1,370)   (437)   258    19%   (675)   (154)%
Market action   (4,908)   1,777    2,966    (6,685)   (376)%   (7,874)   (265)%
Ending assets  $20,244   $26,264   $27,506   $(6,020)   (23)%  $(7,262)   (26)%
Annualized organic growth rate   (16.9)%   (21.2)%   (7.0)%                    
Annualized redemption rate 3   50.9%   39.3%   35.7%                    
Institutional                                   
Beginning assets  $3,096   $3,677   $3,655   $(581)   (16)%  $(559)   (15)%
Sales 2   43    32    141    11    34%   (98)   (70)%
Redemptions   (179)   (874)   (357)   695    80%   178    50%
Net exchanges                   NM        NM%
Net Flows   (136)   (842)   (216)   706    84%   80    37%
Market action   (533)   261    614    (794)   (304)%   (1,147)   (187)%
Ending assets  $2,427   $3,096   $4,053   $(669)   (22)%  $(1,626)   (40)%
Annualized organic growth rate   (17.6)%   (91.6)%   (23.6)%                    
Annualized redemption rate 3   24.9%   104.1%   36.6%                    
Wealth Management                                   
Beginning assets  $40,598   $39,248   $37,177   $1,350    3%  $3,421    9%
Sales 2   895    662    754    233    35%   141    19%
Redemptions   (1,588)   (1,535)   (1,626)   (53)   (3)%   38    2%
Net exchanges   (326)   (278)   (276)   (48)   (17)%   (50)   (18)%
Net Flows   (1,019)   (1,151)   (1,148)   132    11%   129    11%
Market action   (6,240)   2,501    4,066    (8,741)   (350)%   (10,306)   (253)%
Ending assets  $33,339   $40,598   $40,095   $(7,259)   (18)%  $(6,756)   (17)%
Annualized organic growth rate   (10.0)%   (11.7)%   (12.4)%                    
Annualized redemption rate 3   14.6%   13.6%   14.5%                    
Consolidated Total                                   
Beginning assets  $69,958   $68,782   $65,809   $1,176    2%  $4,149    6%
Sales 2   2,519    1,548    2,488    971    63%   31    1%
Redemptions   (4,786)   (4,911)   (4,289)   125    3%   (497)   (12)%
Net exchanges                            
Net Flows   (2,267)   (3,363)   (1,801)   1,096    33%   (466)   (26)%
Market action   (11,681)   4,539    7,646    (16,220)   (357)%   (19,327)   (253)%
Ending assets  $56,010   $69,958   $71,654   $(13,948)   (20)%  $(15,644)   (22)%
Annualized organic growth rate   (13.0)%   (19.6)%   (10.9)%                    
Annualized redemption rate 3   28.5%   27.7%   23.9%                    

The following information was filed by Waddell Reed Financial Inc (WDR) on Tuesday, April 28, 2020 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.

View differences made from one quarter to another to evaluate Waddell Reed Financial Inc's financial trajectory

Compare SEC Filings Year-over-Year (YoY) and Quarter-over-Quarter (QoQ)
Sample 10-K Year-over-Year (YoY) Comparison

Compare this 10-Q Quarterly Report to its predecessor by reading our highlights to see what text and tables were  removed  ,   added    and   changed   by Waddell Reed Financial Inc.

Continue

Never Miss A New SEC Filing Again


Real-Time SEC Filing Notifications
Screenshot taken from Gmail for a new 10-K Annual Report
Last10K.com Member Feature

Receive an e-mail as soon as a company files an Annual Report, Quarterly Report or has new 8-K corporate news.

Continue

We Highlighted This SEC Filing For You


SEC Filing Sentiment Analysis - Bullish, Bearish, Neutral
Screenshot taken from Wynn's 2018 10-K Annual Report
Last10K.com Member Feature

Read positive and negative remarks made by management in their entirety without having to find them in a 10-K/Q.

Continue

Widen Your SEC Filing Reading Experience


Increased Reading Area for SEC Filings
Screenshot taken from Adobe Inc.'s 10-Q Quarterly Report
Last10K.com Member Feature

Remove data columns and navigations in order to see much more filing content and tables in one view

Continue

Uncover Actionable Information Inside SEC Filings


SEC Filing Disclosures
Screenshot taken from Lumber Liquidators 10-K Annual Report
Last10K.com Member Feature

Read both hidden opportunities and early signs of potential problems without having to find them in a 10-K/Q

Continue

Adobe PDF, Microsoft Word and Excel Downloads


Download Annual and Quarterly Reports as PDF, Word and Excel Documents
Screenshots of actual 10-K and 10-Q SEC Filings in PDF, Word and Excel formats
Last10K.com Member Feature

Export Annual and Quarterly Reports to Adobe PDF, Microsoft Word and Excel for offline viewing, annotations and analysis

Continue

FREE Financial Statements


Download Annual and Quarterly Reports as PDF, Word and Excel Documents
Screenshot of actual balance sheet from company 10-K Annual Report
Last10K.com Member Feature

Get one-click access to balance sheets, income, operations and cash flow statements without having to find them in Annual and Quarterly Reports

Continue for FREE

Intrinsic Value Calculator


Intrinsic Value Calculator
Screenshot of intrinsic value for AT&T (2019)
Last10K.com Member Feature

Our Intrinsic Value calculator estimates what an entire company is worth using up to 10 years of financial ratios to determine if a stock is overvalued or not

Continue

Financial Stability Report


Financial Stability Report
Screenshot of financial stability report for Coco-Cola (2019)
Last10K.com Member Feature

Our Financial Stability reports uses up to 10 years of financial ratios to determine the health of a company's EPS, Dividends, Book Value, Return on Equity, Current Ratio and Debt-to-Equity

Continue

Get a Better Picture of a Company's Performance


Financial Ratios
Available Financial Ratios
Last10K.com Member Feature

See how over 70 Growth, Profitability and Financial Ratios perform over 10 Years

Continue

Log in with your credentials

or    

Forgot your details?

Create Account