Waddell & Reed Financial Inc.
) second-quarter 2013 earnings came in at 67 cents per share,
surpassing the Zacks Consensus Estimate of 64 cents. This also
compares favorably with the prior-year quarter figure of 48
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Notably, results for the reported quarter include a charge of
$8.6 million associated with the launch of Ivy High Income
Opportunities Fund - the company's first closed-end fund.
Considering the aforementioned one-time expenditure, the net
income figure came in at $52.0 million, increasing 24.7%
from $41.7 million in the year-ago quarter.
The year-over-year improvement was aided by top-line growth,
partially offset by higher operating expenses. Further, enhanced
assets under management (AUM) and a solid balance sheet were
among the positives. Additionally, gross sales increased across
all revenue channels, except the Institutional channel.
Performance in Detail
Waddell & Reed's operating revenues climbed 14.5% to $331.7
million from $289.7 million in the year-ago quarter. Moreover,
operating revenues surpassed the Zacks Consensus Estimate of
Overall, gross sales increased 14.9% year over year to $6.8
billion. Redemptions were $5.9 billion, up 5.8% from $5.6 billion
in the prior-year quarter. Net inflows were $935 million, up
significantly from the prior-year quarter.
At the Advisors channel, gross sales rose 17.7% to $1.4 billion
from $1.2 billion in the year-ago quarter. Net inflows grew 41.5%
to $259 million from $183 million in the prior-year quarter.
At the Wholesale channel, gross sales also rose 22.3% year over
year to $5.0 billion. Net inflows grew to $1.1 billion from $626
million in the year-ago period.
Gross sales at the Institutional channel came in at $379 million,
plunging 39.4% from $625 million in the year-ago quarter.
Further, the segment witnessed net outflows of $432 million,
compared with outflows of $433 million in the year-ago quarter.
Waddell & Reed's operating expenses rose 11.0% year over year
to $246.7 million. This was primarily due to increases in
underwriting and distribution expenses, compensation and related
costs as well as general and administrative costs.
Operating margin of 25.6% increased from 23.3% in the prior-year
As of Jun 30, 2013, AUM totaled $104.3 billion, up 17.1% from
$89.1 billion as of Jun 30, 2012.
As of Jun 30, 2013, cash and cash equivalents and investment
securities were $547 million. Moreover, long-term debt totaled
$190 million and stockholders' equity was recorded at $563
During the reported quarter, Waddell & Reed repurchased
Waddell & Reed's sustained growth and its history of boosting
shareholder value through meaningful capital deployment
activities are impressive. Although we are optimistic about the
competitive ranking of Waddell & Reed's funds and its efforts
to control cost in the upcoming quarters, irregular investment
performance, significant intangibles on its balance sheet and
rising competition keep us cautious.
Similar to Waddell & Reed, earnings per share for
The Blackstone Group L.P.
Ameriprise Financial Inc.
) also surpassed the respective Zacks Consensus Estimate. The
outperformance by these companies was attributable to revenue
growth, partially offset by increased operating expenses.
Waddell & Reed currently carries a Zacks Rank #3 (Hold).