WDR - Waddell & Reed Financial Inc. Reports Fourth Quarter Results

February, 05 2019 06:45 AM Waddell & Reed Financial Inc.

Waddell & Reed Financial, Inc. (NYSE: WDR) today reported fourth quarter 2018 net income¹of $46.5 million, or $0.60 per diluted share, compared to net income of $46.3 million, or $0.58 per diluted share, during the prior quarter and net income of $29.8 million, or $0.36 per diluted share, during the fourth quarter of 2017. The fourth quarter of 2018 included a gain of $16.1 million compared to a loss of $6.5 million in the prior year fourth quarter related to the annual revaluation of the pension plan liability. The prior year also included a non-recurring tax charge of $5.4 million related to the Tax Cuts and Jobs Act.

Revenues of $272.2 million during the quarter decreased $22.9 million and $22.3 million compared to the third quarter of 2018 and the fourth quarter of 2017, respectively. Operating expenses of $227.8 million declined $7.8 million compared to the prior quarter and declined $4.9 million compared to the same quarter in 2017. The operating margin was 16.3% during the current quarter, compared to 20.2% and 21.0% during the third quarter of 2018 and the fourth quarter of 2017, respectively. For the twelve-month period ended December 31, 2018, the operating margin was 19.1%, consistent with the prior year’s operating margin of 19.0%.

Assets under management ended the quarter at $65.8 billion, a 17% decrease compared to the prior quarter and a decrease of 19% compared to the fourth quarter of 2017. The lower assets under management were primarily driven by market volatility in the quarter. Sales of $2.7 billion during the current quarter improved 7%, compared to the prior quarter and were comparable with the fourth quarter of 2017. Net outflows of $3.8 billion during the current quarter included $1.0 billion of previously disclosed outflows related to institutional accounts primarily due to certain portfolio manager departures. Excluding the impact of the institutional accounts, net outflows were higher compared to net outflows of $2.0 billion in the third quarter of 2018 and were consistent with the fourth quarter of 2017. Redemptions continued to improve in 2018, with net outflows for the year improving 9% to $10.4 billion compared to $11.4 billion in 2017.

Broker-dealer assets under administration ended the quarter at $51.3 billion, a 12% decrease compared to the third quarter of 2018 primarily due to market depreciation. Compared to the same quarter in 2017, assets under administration decreased 10% due to a reduction in net new assets of $3.1 billion and market depreciation. Average productivity per advisor, as measured by average trailing twelve-month revenue per advisor, was $378 thousand for the twelve-month period ended December 31, 2018, rising 8% compared to the prior quarter and 48% compared to the prior year.

“While the industry landscape remains challenging, we continued to make foundational improvements over the past year that will better position our company for long term success,” said Philip J. Sanders, Chief Executive Officer of Waddell & Reed Financial, Inc. “Within our asset management business, we improved investment performance track records across much of the complex and realigned our sales leadership to provide more focused coverage across all distribution channels. We also made meaningful progress toward improving the competitiveness of our broker-dealer by optimizing our field and support structure, announcing significant technology investments and enhancing our product offerings and advisory programs — all to the benefit of advisors and clients.”

Revenues Analysis

Investment management fees declined $14.8 million, or 11%, and $21.9 million, or 16%, compared to the third quarter of 2018 and the fourth quarter of 2017, respectively, primarily due to lower average assets under management. Previously announced fee reductions in selected mutual funds also contributed, to a lesser extent, to the decrease. During the current quarter, the effective management fee rate was 63.5 basis points compared to 64.6 basis points during the third quarter of 2018 and 66.5 basis points during the fourth quarter of 2017. Average assets under management were $71.6 billion during the current quarter, compared to $79.5 billion during the prior quarter and $81.3 billion during the fourth quarter of 2017.

Underwriting and distribution fees decreased $6.5 million, or 5% sequentially, primarily due to lower assets under administration. Compared to the same quarter in 2017, fees increased $1.6 million, or 1%, due to higher asset-based advisory fees as well as increased support and service revenues from independent financial advisors, which were partially offset by lower distribution fees.

Operating Expenses Analysis

Distribution expenses decreased $5.1 million, or 4%, compared to the prior quarter, primarily due to the decrease in underwriting and distribution revenues. Compared to the fourth quarter of 2017, expenses increased $3.6 million, or 3%, as a result of the increase in underwriting and distribution revenues as well as an increase in the compensation grid for associated independent financial advisors.

Compensation and benefits expenses declined $0.4 million, or 1%, compared to the prior quarter. The fourth quarter of 2018 benefited from lower incentive compensation of $2.0 million and a reduction in share-based compensation of $2.5 million resulting from a change in the stock price. These decreases were partially offset by severance charges of $3.2 million and a net increase in other items of $0.9 million. Compared to the fourth quarter of 2017, expenses declined $5.1 million, or 7%, due to lower share-based compensation costs.

General and administrative expenses improved $0.2 million, or 1%, compared to the third quarter of 2018 and improved $2.7 million, or 13%, compared to the fourth quarter of 2017 due to lower consulting costs as a number of significant projects were completed in late 2017 or early 2018.

Technology expenses increased $0.6 million, or 4%, compared to the prior quarter, and increased $0.7 million, or 5% compared to the fourth quarter of 2017, primarily due to transition costs as we continue to decommission older systems and replace them with more cost-effective solutions.

Occupancy expenses decreased $1.0 million, or 14%, and $1.6 million, or 21%, compared to the prior quarter and the fourth quarter of 2017, respectively, as we realize cost savings from field offices closed during 2018.

Depreciation expense declined primarily due to a charge during the prior quarter to adjust the useful life on certain internally developed software assets.

Investment and other income increased $15.7 million compared to the prior quarter and $19.6 million compared to the same quarter in 2017 primarily due to the annual revaluation of the pension plan liability.

Income tax expense was consistent with the prior quarter and declined compared to the prior year fourth quarter primarily due to the Tax Cuts and Jobs Act, which reduced the federal corporate tax rate and resulted in a non-recurring tax charge to revalue our net deferred tax asset of $5.4 million in the fourth quarter of 2017.

Assets Under Management
(in millions)




Three Months Ended



Dec. 31,

Mar. 31,

Jun. 30,

Sep. 30,

Dec. 31,




2017

2018
Unaffiliated ¹

















Beginning assets


$
31,062


$
31,133


$
31,055


$
30,782


$
31,172


Sales ²



1,577



2,245



1,779



1,589



1,673


Redemptions



(2,912
)


(2,692
)


(2,646
)


(2,425
)


(3,637
)

Net exchanges



316



247



284



360



(131
)

Net Flows



(1,019
)


(200
)


(583
)


(476
)


(2,095
)

Market action



1,090



122



310



866



(4,100
)

Ending assets


$
31,133


$
31,055


$
30,782


$
31,172


$
24,977


Annualized organic growth rate



(13.1
)
%

(2.6
)
%

(7.5
)
%

(6.2
)
%

(26.9
)
%
Annualized redemption rate ³



37.9

%

35.8

%

34.9

%

31.8

%

53.8

%
Institutional

















Beginning assets


$
6,365


$
6,289


$
6,449


$
5,250


$
5,187


Sales ²



66



552



153



83



85


Redemptions



(521
)


(604
)


(1,652
)


(535
)


(1,316
)

Net exchanges



–



–



–



–



511


Net Flows



(455
)


(52
)


(1,499
)


(452
)


(720
)

Market action



379



212



300



389



(812
)

Ending assets


$
6,289


$
6,449


$
5,250


$
5,187


$
3,655


Annualized organic growth rate



(28.6
)
%

(3.3
)
%

(93.0
)
%

(34.4
)
%

(55.5
)
%
Annualized redemption rate ³



32.2

%

37.8

%

115.4

%

40.8

%

117.3

%
Broker-Dealer

















Beginning assets


$
43,472


$
43,660


$
42,707


$
42,619


$
43,183


Sales ²



1,077



1,001



1,002



874



958


Redemptions



(2,026
)


(1,958
)


(1,770
)


(1,612
)


(1,547
)

Net exchanges



(316
)


(247
)


(284
)


(360
)


(380
)

Net Flows



(1,265
)


(1,204
)


(1,052
)


(1,098
)


(969
)

Market action



1,453



251



964



1,662



(5,037
)

Ending assets


$
43,660


$
42,707


$
42,619


$
43,183


$
37,177


Annualized organic growth rate



(11.6
)
%

(11.0
)
%

(9.9
)
%

(10.3
)
%

(9.0
)
%
Annualized redemption rate ³



16.1

%

15.1

%

14.4

%

12.8

%

13.1

%
Consolidated Total

















Beginning assets


$
80,899


$
81,082


$
80,211


$
78,651


$
79,542


Sales²



2,720



3,798



2,934



2,546



2,716


Redemptions



(5,459
)


(5,254
)


(6,068
)


(4,572
)


(6,500
)

Net exchanges



–



–



–



–



–


Net Flows



(2,739
)


(1,456
)


(3,134
)


(2,026
)


(3,784
)

Market action



2,922



585



1,574



2,917



(9,949
)

Ending assets


$
81,082


$
80,211


$
78,651


$
79,542


$
65,809


Annualized organic growth rate



(13.5
)
%

(7.2
)
%

(15.6
)
%

(10.3
)
%

(19.0
)
%
Annualized redemption rate ³



25.7

%

24.8

%

29.8

%

22.1

%

35.4

%

(1)

Unaffiliated includes National channel (home office and wholesale), Defined Contribution Investment Only “DCIO”, Registered Investment Advisor “RIA” and Variable Annuity “VA”.
(2)

Sales is primarily gross sales (net of sales commissions). This amount also includes net reinvested dividends and capital gains, and investment income.
(3)

Excludes Money Market.












Fund Rankings ¹


1 Year


3 Years


5 Years

Lipper










Funds ranked in top half


70
%

37
%

47
%
Assets ranked in top half


69
%

40
%

54
%
MorningStar










Funds ranked in top half


59
%

33
%

38
%
Assets ranked in top half


58
%

41
%

51
%











MorningStar Ratings ¹


Overall


3 Years


5 Years

Funds with 4/5 stars


38
%

30
%

28
%
Assets with 4/5 stars


52
%

38
%

33
%

(1) Based on class I share, which reflects sales and asset concentrations.








































Three Months Ended

Broker-Dealer


Dec. 31,

Mar. 31,

Jun. 30,

Sep. 30,

Dec. 31,

(in millions)


2017

2018

Assets under administration (AUA)

















Advisory assets


$
21,613


$
22,050


$
22,868


$
23,653


$
21,207


Non-advisory assets



35,073



34,216



34,210



34,468



30,059


Total assets under administration



56,686



56,266



57,078



58,121



51,266




















Net new advisory assets ¹


$
129


$
392


$
315


$
(87
)

$
(45
)

Net new non-advisory assets ^{1, 2}



(1,047
)


(983
)


(916
)


(931
)


(840
)

Total net new AUA ¹



(918
)


(591
)


(601
)


(1,018
)


(885
)



















Annualized advisory AUA growth ³



2.5

%

7.3

%

5.7

%

(1.5
)
%

(0.8
)
%
Annualized AUA growth ³



(6.6
)
%

(4.2
)
%

(4.3
)
%

(7.1
)
%

(6.1
)
%


















Advisor count



1,367



1,170



1,130



1,074



1,060


Avg. trailing 12-month revenue per advisor ⁴ (in thousands)


$
256


$
285


$
314


$
350


$
378


Advisor associate count



265



327



339



351



343

(1)

Net new assets is calculated as total client deposits and net transfers less client withdrawals.
(2)

Excludes activity related to products held outside of our platform. These assets represent less than 10% of total AUA.
(3)

Annualized growth is calculated as annualized quarterly net new assets divided by beginning assets under administration.
(4)

Production per advisor is calculated as trailing 12- month total underwriting and distribution fees less “other” underwriting and distribution fees divided by the average number of financial advisors. “Other” underwriting and distribution fees predominantly includes fees paid by independent advisors for programs and services.

Unaudited Consolidated Statements of Income
(in thousands, except per share data and margin)




Three Months Ended

















Dec. 31,


Sep. 30,


Dec. 31,


Sequential Qtr.


Year-over-Year Qtr.




2018


2018


2017


Change

%


Change


%

Revenues:


























Investment management fees


$
114,521



$
129,302



$
136,387



$
(14,781
)

(11.4
)
%

$
(21,866
)


(16.0
)
%
Underwriting and distribution fees



133,788




140,308




132,200




(6,520
)

(4.6
)
%


1,588



1.2

%
Shareholder service fees



23,921




25,508




25,889




(1,587
)

(6.2
)
%


(1,968
)


(7.6
)
%
Total



272,230




295,118




294,476




(22,888
)

(7.8
)
%


(22,246
)


(7.6
)
%
Operating expenses:


























Distribution ¹



111,456




116,591




107,889




(5,135
)

(4.4
)
%


3,567



3.3

%
Compensation and benefits (including share-based compensation of $9,039, $12,856 and $15,297, respectively)



64,155




64,561




69,273




(406
)

(0.6
)
%


(5,118
)


(7.4
)
%
General and administrative



17,403




17,559




20,069




(156
)

(0.9
)
%


(2,666
)


(13.3
)
%
Technology



15,982




15,414




15,282




568


3.7

%


700



4.6

%
Occupancy



6,116




7,148




7,743




(1,032
)

(14.4
)
%


(1,627
)


(21.0
)
%
Marketing and advertising



2,685




2,461




3,353




224


9.1

%


(668
)


(19.9
)
%
Depreciation



6,387




8,141




5,357




(1,754
)

(21.5
)
%


1,030



19.2

%
Subadvisory fees



3,647




3,767




3,717




(120
)

(3.2
)
%


(70
)


(1.9
)
%
Total



227,831




235,642




232,683




(7,811
)

(3.3
)
%


(4,852
)


(2.1
)
%
Operating income



44,399




59,476




61,793




(15,077
)

(25.3
)
%


(17,394
)


(28.1
)
%
Investment and other income



17,351




1,697




(2,218
)



15,654


922.5

%


19,569



(882.3
)
%
Interest expense



(1,553
)



(1,555
)



(2,909
)



2


0.1

%


1,356



46.6

%
Income before provision for income taxes



60,197




59,618




56,666




579


1.0

%


3,531



6.2

%
Provision for income taxes



14,125




13,105




26,380




1,020


7.8

%


(12,255
)


(46.5
)
%
Net income



46,072




46,513




30,286




(441
)

(0.9
)
%


15,786



52.1

%
Net (loss) income attributable to redeemable noncontrolling interests



(396
)



208




522




(604
)

290.4

%


(918
)


(175.9
)
%
Net income attributable to Waddell & Reed Financial, Inc.


$
46,468



$
46,305



$
29,764



$
163


0.4

%

$
16,704



56.1

%
Net income per share, basic and diluted:


$
0.60



$
0.58



$
0.36















Weighted average shares outstanding - basic and diluted



77,786




79,595




83,137















Operating margin



16.3

%


20.2

%


21.0

%








































(1) Distribution expense


























Unaffiliated



25,406




28,116




31,395















Broker-dealer



86,050




88,475




76,494


















$
111,456



$
116,591



$
107,889

Unaudited Consolidated Statements of Income
(in thousands, except per share data and margin)




Year Ended











Dec. 31,


Dec. 31,







2018


2017


Change


%

Revenues:
















Investment management fees


$
507,906



$
531,850



$
(23,944
)


(4.5
)
%
Underwriting and distribution fees



550,010




518,699




31,311



6.0

%
Shareholder service fees



102,385




106,595




(4,210
)


(3.9
)
%
Total



1,160,301




1,157,144




3,157



0.3

%
Operating expenses:
















Distribution ¹



456,832




432,264




24,568



5.7

%
Compensation and benefits (including share-based compensation of $51,565 and $57,716, respectively)



263,329




271,276




(7,947
)


(2.9
)
%
General and administrative



73,643




88,951




(15,308
)


(17.2
)
%
Technology



65,275




66,078




(803
)


(1.2
)
%
Occupancy



27,197




30,721




(3,524
)


(11.5
)
%
Marketing and advertising



10,323




12,425




(2,102
)


(16.9
)
%
Depreciation



25,649




20,983




4,666



22.2

%
Subadvisory fees



14,805




13,174




1,631



12.4

%
Intangible asset impairment



1,200




1,500




(300
)


(20.0
)
%
Total



938,253




937,372




881



0.1

%
Operating income



222,048




219,772




2,276



1.0

%
Investment and other income



22,705




37,084




(14,379
)


(38.8
)
%
Interest expense



(6,461
)



(11,279
)



4,818



42.7

%
Income before provision for income taxes



238,292




245,577




(7,285
)


(3.0
)
%
Provision for income taxes



55,480




101,368




(45,888
)


(45.3
)
%
Net income



182,812




144,209




38,603



26.8

%
Net (loss) income attributable to redeemable noncontrolling interests



(776
)



2,930




(3,706
)


(126.5
)
%
Net income attributable to Waddell & Reed Financial, Inc.


$
183,588



$
141,279



$
42,309



29.9

%
Net income per share, basic and diluted:


$
2.28



$
1.69









Weighted average shares outstanding - basic and diluted



80,468




83,573









Operating margin



19.1

%


19.0

%
























(1) Distribution expense
















Unaffiliated



112,562




130,079









Broker-dealer



344,270




302,185












$
456,832



$
432,264

Underwriting and distribution fees
(in thousands)




For the three months ended Dec. 31, 2018



Unaffiliated


Broker-Dealer


Total
Fee-based asset allocation product revenues


$
–


$
67,504


$
67,504
Rule 12b-1 service and distribution fees



17,307



16,347



33,654
Sales commissions on front-end load mutual funds and variable annuity products



468



12,994



13,462
Sales commissions on other products



–



9,533



9,533
Other revenues



109



9,526



9,635
Total underwriting and distribution fees


$
17,884


$
115,904


$
133,788

















For the three months ended Sep. 30, 2018



Unaffiliated


Broker-Dealer


Total
Fee-based asset allocation product revenues


$
–


$
69,468


$
69,468
Rule 12b-1 service and distribution fees



19,707



18,106



37,813
Sales commissions on front-end load mutual funds and variable annuity products



441



13,651



14,092
Sales commissions on other products



–



9,111



9,111
Other revenues



126



9,698



9,824
Total underwriting and distribution fees


$
20,274


$
120,034


$
140,308

















For the three months ended Dec. 31, 2017



Unaffiliated


Broker-Dealer


Total
Fee-based asset allocation product revenues


$
–


$
63,905


$
63,905
Rule 12b-1 service and distribution fees



22,122



19,306



41,428
Sales commissions on front-end load mutual funds and variable annuity products



380



13,497



13,877
Sales commissions on other products



–



7,615



7,615
Other revenues



186



5,189



5,375
Total underwriting and distribution fees


$
22,688


$
109,512


$
132,200

















For the year ended Dec. 31, 2018



Unaffiliated


Broker-Dealer


Total
Fee-based asset allocation product revenues


$
–


$
269,069


$
269,069
Rule 12b-1 service and distribution fees



78,041



70,938



148,979
Sales commissions on front-end load mutual funds and variable annuity products



1,886



54,895



56,781
Sales commissions on other products



–



36,131



36,131
Other revenues



568



38,482



39,050
Total underwriting and distribution fees


$
80,495


$
469,515


$
550,010

















For the year ended Dec. 31, 2017



Unaffiliated


Broker-Dealer


Total
Fee-based asset allocation product revenues


$
–


$
240,089


$
240,089
Rule 12b-1 service and distribution fees



91,313



75,850



167,163
Sales commissions on front-end load mutual funds and variable annuity products



1,498



55,293



56,791
Sales commissions on other products



–



31,286



31,286
Other revenues



1,182



22,188



23,370
Total underwriting and distribution fees


$
93,993


$
424,706


$
518,699

Unaudited Condensed Balance Sheet
(in thousands)




Dec. 31,


Dec. 31,



2018


2017
Assets








Cash & cash equivalents (unrestricted)


$
231,997


$
207,829
Investment securities



617,135



700,492
Other assets



285,649



241,305
Property and equipment, net



63,429



87,667
Goodwill and intangible assets



145,869



147,069
Total assets


$
1,344,079


$
1,384,362
Liabilities, redeemable noncontrolling interests and equity








Short-term notes payable


$
–


$
94,996
Long-term debt



94,854



94,783
Other liabilities



354,312



307,190
Redeemable noncontrolling interests



11,463



14,509
Total stockholders’ equity



883,450



872,884
Liabilities, redeemable noncontrolling interests and equity


$
1,344,079


$
1,384,362
Shares outstanding



76,790



82,687

Unaudited Condensed Cash Flow
(in thousands)




Three Months Ended


Year Ended



Dec. 31,


Sep. 30,


Dec. 31,


Dec. 31,


Dec. 31,



2018


2018


2017


2018


2017
Cash provided by (used in):




















Operating activities


$
93,278



$
90,652



$
70,519



$
357,011



$
53,832

Investing activities



(32,224
)



(7,160
)



(13,415
)



10,347




(212,395
)
Financing activities



(69,152
)



(50,131
)



(75,197
)



(311,788
)



(188,710
)
Net change during period


$
(8,098
)


$
33,361



$
(18,093
)


$
55,570



$
(347,273
)

























Three Months Ended


Year Ended



Dec. 31,


Sep. 30,


Dec. 31,


Dec. 31,


Dec. 31,
(in thousands, except number of shares)


2018


2018


2017


2018


2017
Shares repurchased




















Number of shares



2,443,723



1,424,612



937,927



6,963,269



1,842,337
Total cost


$
46,873


$
28,369


$
20,133


$
135,891


$
35,768
Dividend paid




















Rate per share


$
0.25


$
0.25


$
0.46


$
1.00


$
1.84
Total paid


$
19,684


$
20,050


$
38,351


$
81,215


$
154,042
Capital returned to stockholders


$
66,557


$
48,419


$
58,484


$
217,106


$
189,810

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 10:00 a.m. Eastern. During this call, Philip J. Sanders, CEO and CIO, will review our quarterly results. Live access to the teleconference will be available on the “Investor Relations” section of our Web site at ir.waddell.com. A Web cast replay will be made available shortly after the conclusion of the call and accessible for seven days.

Web Site Resources

We invite you to visit the Investor Relations section of our Web site at ir.waddell.com. Under the “Investor Information” tab you will find a link to presentations as well as to data tables, which include supplemental information schedules.

Past performance is no guarantee of future results. Please invest carefully.

About the Company

Through its subsidiaries, Waddell & Reed Financial, Inc. has provided investment management and financial planning services to clients throughout the United States since 1937. Today, we distribute our investment products through the unaffiliated channel (encompassing broker/dealer, retirement, and registered investment advisors), our broker-dealer channel (through independent financial advisors), and our Institutional channel (including defined benefit plans, pension plans, endowments and subadvisory relationships). For more information, visit ir.waddell.com.

Forward-Looking Statements

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, stock repurchases 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 us or on our behalf 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 December 31, 2017, which include, without limitation:

The loss of existing distribution relationships or inability to access new distribution relationships;
A reduction in assets under our management on short notice, through increased redemptions in our distribution channels or our Funds, particularly those Funds with a high concentration of assets, or investors terminating their relationship with us or shifting their funds to other types of accounts with different rate structures;
The adverse ruling or resolution of any litigation, regulatory investigations and proceedings, or securities arbitrations by a federal or state court or regulatory body;
Changes in our business model, operations and procedures, including our methods of distributing our proprietary products, as a result of evolving fiduciary standards;
The introduction of legislative or regulatory proposals or judicial rulings that change the independent contractor classification of our financial advisors at the federal or state level for employment tax or other employee benefit purposes;
A decline in the securities markets or in the relative investment performance of our Funds and other investment portfolios and products as compared to competing funds;
Our inability to reduce expenses rapidly enough to align with declines in our revenues due to various factors, including fee pressure, the level of our assets under management or our business environment;
Non-compliance with applicable laws or regulations and changes in current legal, regulatory, accounting, tax or compliance requirements or governmental policies;
Our inability to attract and retain senior executive management and other key personnel to conduct our broker-dealer, fund management and investment advisory business;
A failure in, or breach of, our operational or security systems or our technology infrastructure, or those of third parties on which we rely; and
Our inability to implement new information technology and systems, or our inability to complete such implementation in a timely or cost effective manner.

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 Securities and Exchange Commission, including the information in Item 1 “Business” and Item 1A “Risk Factors” of Part I and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part II to our Annual Report on Form 10- K for the year ended December 31, 2017 and as updated in our quarterly reports on Form 10-Q for the year ending December 31, 2018. All forward-looking statements speak only as of the date on which they are made and we undertake no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20190205005183/en/

Waddell & Reed Financial, Inc.
Investor Contact:
Mike Daley, Vice President — Corporate Controller & Investor Relations, (913) 236-1795, mdaley1@waddell.com
or
Mutual Fund Investor Contact:
Call (888) WADDELL, or visit www.waddell.com or www.ivyfunds.com.

Company Name:	Waddell & Reed Financial Inc.
Stock Symbol:	WDR
Market:	NYSE
Website:	waddell.com

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