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Waddell & Reed Financial, Inc. Reports Third Quarter Results

Stocks in this article: WDR

Waddell & Reed Financial, Inc. (NYSE: WDR) today reported third quarter net income of $68.4 million, or $0.80 per diluted share, compared to net income of $52.0 million, or $0.61 per diluted share during the previous quarter (excluding costs associated with the launch of our closed-end fund, net income was $57.3 million, or $0.67 per diluted share for the previous quarter), and net income from continuing operations of $52.1 million, or $0.61 per diluted share during the third quarter of 2012.

Operating revenues were $347.1 million, an improvement of 5% compared to the previous quarter and 18% compared to the same period last year. The operating margin was 29.8%, compared to 25.6% during the previous quarter (or 28.2% excluding costs associated with the launch of our closed-end fund during the quarter), and 27.2% during the same period last year. Solid top-line growth and continued expense control have led to the margin’s expansion.

Assets under management were $114 billion at quarter-end, rising 9% during the quarter on a combination of strong market action and solid, sustained inflows across equity and fixed income assets. Compared to the end of September 2012, assets under management rose $19 billion, or 20%, including $4.3 billion from net new inflows – representing a 5% rate of organic growth – and $14.6 billion from positive market appreciation.

Business Discussion

Management commentary

“The key drivers of success for asset managers are solid investment performance and the ability to offer the right products to clients at the right time,” said Hank Herrmann, Chairman and Chief Executive Officer of Waddell & Reed Financial, Inc. “We are fortunate to possess both investment and distribution teams that have allowed us to progress toward our goals.”

Channel discussion

The Wholesale channel continues to lead the growth of assets under management complex-wide. Reaching nearly $60 billion, asset levels in this channel rose 11% during the quarter on a combination of equity and fixed income product inflows and strong market appreciation. Inflows of $1.6 billion represent an organic growth rate of 11.5%, significantly outpacing industry trends.

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