Operating revenues rose 23% year-over-year; operating margin 29.9%
Operating revenues of
Last year’s fourth quarter benefited from a record-high level of investment income due to strong investment gains and dividends and the related tax benefit from a capital loss carryforward. While non-operating in nature, these items added approximately
Assets under management rose 4% during the quarter and ended March at a record
“Our results once again showcase the strength and resiliency of our distribution model,” said
The Wholesale channel had
Our Advisors channel had record sales of
The Institutional channel experienced solid results. Sales of
Management Fee Revenue Analysis
Revenues rose 4% compared to the previous quarter and 27% compared to the same period in 2013, but in both instances at a rate that was slightly below the rate of increase in average assets under management. This difference was due to fewer days in the current period compared to the fourth quarter and a slightly lower effective fee rate. The effective fee rate during both the first and fourth quarters of 2013 was 59.5 basis points and during the first quarter of 2014 it was 59.2 basis points.
Underwriting and Distribution Analysis
The sequential increase in revenues was due to higher asset-based Rule 12b-1 fees. Direct costs rose on a combination of higher sales commissions and asset-based Rule 12b-1 fees paid to third party distributors. Higher sales volume also resulted in an increase in commissions paid to our wholesalers. Indirect costs were largely unchanged as an increase in compensation costs was offset by lower advertising costs.
Compared to the same period in 2013, revenues rose with higher levels of assets under management. Higher asset-based Rule 12b-1 fees paid to third party distributors accounted for approximately half of the increase in direct costs, while sales commissions paid to third party distributors and wholesalers accounted for the remainder. Indirect costs rose due to higher advertising and compensation costs.
Sequentially, revenues increased with asset-based advisory fees, and to a lesser degree, Rule 12b-1 fees. This increase in revenues was partly offset by lower front-end load sales commissions. Direct costs increased as a percentage of revenues due to bonus adjustments in the fourth quarter and to a lesser degree, higher advisor payouts in the first quarter. Indirect costs increased slightly as higher IT costs and payroll taxes were largely offset by lower pension, group medical, and business meeting and travel costs.
Compared to the first quarter of 2013, the increase in revenues was largely due to higher advisory fees. Asset-based Rule 12b-1 fees and front-end load and other point-of-sale commissions also contributed to the increase in revenues. Direct costs rose slightly more than related revenues due to increased advisor payouts while IT costs contributed to the increased indirect costs.
Compensation and Related Expense Analysis
Costs declined sequentially due to lower incentive compensation, and to a lesser degree, lower equity compensation and pension costs. This decline was partly offset by annual merit increases and higher payroll taxes. Compared to the same period last year, costs rose due to higher base salaries and equity compensation and were partly offset by lower pension costs.
General and Administrative Expense Analysis
Sequentially, costs were largely unchanged as a decline in advertising costs was offset by small increases in costs across a number of different items, including IT, dealer services, fund expenses and consulting.
Year-over-year, costs increased with higher legal and consulting, dealer services, temporary office staff and IT costs.
|Unaudited Balance Sheet Information|
|Schedule of Selected Items||Quarter ended|
|(Amounts in millions)|
|Cash & cash equivalents (unrestricted)|
|Shares granted - equity compensation||38,365||780,506|
|($ in thousands)|
|Number of shares||280,186||666,351|
|Rate per share|
|Capital returned to stockholders|
|* Includes activity through |
|Unaudited Consolidated Statement of Income|
|(Amounts in thousands, except for per share data)||2013||2014|
|1st Qtr.||2nd Qtr.||3rd Qtr.||4th Qtr.||1st Qtr.||2nd Qtr.||3rd Qtr.||4th Qtr.|
|Investment management fees||$||148,445||$||156,219||$||165,559||$||180,219||$||188,037|
|Underwriting and distribution fees||135,419||141,597||146,863||158,940||165,267|
|Shareholder service fees||32,691||33,890||34,667||35,845||37,112|
|Total operating revenues||316,555||331,706||347,089||375,004||390,416|
|Underwriting and distribution||161,571||164,844||169,046||181,252||194,951|
|Compensation and related costs||48,155||47,376||49,472||52,594||50,009|
|General and administrative||16,208||26,938||20,462||22,811||23,756|
|Total operating expenses||233,645||246,671||243,819||261,648||273,842|
|Investment and other income||4,377||1,002||5,212||9,313||3,900|
|Income before taxes||84,433||83,179||105,650||119,969||117,719|
|Provision for taxes||30,570||31,222||37,231||41,210||42,855|
|Net income per diluted share||0.63||0.61||0.80||0.92||0.88|
|Weighted average shares outstanding - diluted||85,593||85,869||85,603||85,294||85,019|
|Net Distribution Cost Analysis|
|(Amounts in thousands)|
|Wholesale Channel||1st Qtr.||2nd Qtr.||3rd Qtr.||4th Qtr.||1st Qtr.||2nd Qtr.||3rd Qtr.||4th Qtr.|
|U&D Expenses - Direct||(63,548||)||(64,694||)||(67,107||)||(72,698||)||(79,700||)|
|U&D Expenses - Indirect||(11,000||)||(11,229||)||(10,409||)||(11,285||)||(11,535||)|
|Net Distribution (Costs)||$||(26,373||)||$||(26,077||)||$||(25,044||)||$||(27,057||)||$||(31,671||)|
|U&D Expenses - Direct||(59,657||)||(62,794||)||(64,550||)||(69,023||)||(74,697||)|
|U&D Expenses - Indirect||(27,366||)||(26,127||)||(26,980||)||(28,246||)||(29,019||)|
Net Distribution (Costs)/Excess
|Changes in Assets Under Management||2013||2014|
|(Amounts in millions)||1st Qtr.||2nd Qtr.||3rd Qtr.||4th Qtr.||1st Qtr.||2nd Qtr.||3rd Qtr.||4th Qtr.|
|* Sales is primarily gross sales (net of sales commissions). This amount also includes|
|net reinvested dividends & capital gains and investment income.|
|1st Qtr.||2nd Qtr.||3rd Qtr.||4th Qtr.||1st Qtr.||2nd Qtr.||3rd Qtr.||4th Qtr.|
|Number of Wholesalers||50||50||49||50||60|
|Number of Advisors||1,717||1,734||1,784||1,746||1,737|
|Advisors' Productivity *||50.5||53.1||53.7||57.4||60.9|
|Redemption rates - long term assets|
|Organic growth/(decay) annualized||8.7%||3.6%||5.7%||14.1%||14.7%|
|Total assets under management (in Millions)||103,795||104,344||113,744||126,543||131,383|
|Diversification (Company Total)|
|As % of Sales|
|As % of Assets Under Management|
|Lipper Fund Rankings||1 Year||3 Years||5 Years|
|Funds ranked in top quartile||47%||30%||28%|
|Funds ranked in top half||67%||48%||46%|
|Assets ranked in top quartile||73%||64%||21%|
|Assets ranked in top half||83%||74%||43%|
|* Advisors' productivity is calculated by dividing U&D revenues for the Advisors channel|
|by the average number of advisors during the period.|
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
Web Site Resources
We invite you to visit the “Investor Relations” section of our Web site at www.waddell.com under the caption “Data Tables” to review supplemental information schedules.
Past performance is no guarantee of future results. Please invest carefully.
About the Company
Through its subsidiaries,
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 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 or on behalf of the Company 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
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
VP, Investor Relations
Mutual Fund Investor Contact:
888-WADDELL, or visit www.waddell.comor www.ivyfunds.com.