Second Quarter 2012 Financial Review
Manning & Napier reported second quarter 2012 revenue of $81.5 million, a decrease of 5% from revenue of $85.8 million reported in the second quarter of 2011, and a decrease of 4% from revenue of $85.0 million reported in the first quarter of 2012. The changes in revenue were generally consistent with changes in average assets under management, which decreased by 3% from the second quarter of 2011 and 1% since the first quarter of 2012. Revenue as a percentage of average assets under management (“AUM”) was 0.76% for the second quarter of 2012, compared with 0.78% for the second quarter of 2011 and 0.79% for the previous quarter.
Operating expenses were $68.3 million, or $44.3 million excluding non-cash reorganization-related share-based compensation of $24.0 million. The $44.3 million represents a $5.2 million decrease in expenses, compared with the second quarter of 2011, and a $1.0 million decrease in expenses compared with the first quarter of 2012, excluding reorganization-related share-based compensation. The decreases in expenses in the current quarter compared with the second quarter of 2011 and the first quarter of 2012, was due primarily to lower incentive compensation costs. The lower incentive compensation as compared to the second quarter of 2011 was partially offset by an increase in headcount.
Generally Accepted Accounting Principles (“GAAP”) based operating income was $13.2 million. Operating income, excluding non-cash reorganization-related share-based compensation, was $37.3 million for the quarter, a $0.9 million increase over the second quarter of 2011 and a $2.5 million decrease from the first quarter of 2012. Operating margin, excluding non-cash reorganization-related share-based compensation expense, was 45.7% for the second quarter of 2012, compared with 42.4% for the second quarter of 2011 and 46.7% for the first quarter of 2012.The Company uses economic income and economic net income to provide greater clarity regarding the cash earnings of the business by removing non-cash reorganization-related share-based compensation charges and non-cash interest expense on shares subject to mandatory redemption, as defined in the Non-GAAP Financial Measures section below. On this basis, Manning & Napier reported second quarter 2012 economic income of $36.7 million, compared with $36.2 million in the second quarter of 2011, and $40.1 million in the first quarter of 2012. Also for the second quarter of 2012, economic net income was $22.7 million, or $0.25 per adjusted share, compared with $22.4 million in the second quarter of 2011, and $24.8 million, or $0.28 per adjusted share in the first quarter of 2012.
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