Business Wire | Jul 28, 2020 06:45AM EDT

Waddell & Reed Financial, Inc. Reports Second Quarter Results

Jul. 28, 2020

OVERLAND PARK, Kan.--(BUSINESS WIRE)--Jul. 28, 2020--Waddell & Reed Financial, Inc. (NYSE: WDR) today reported second quarter 2020 net income1 of $24.8 million, or $0.38 per diluted share, compared to net income of $22.0 million, or $0.32 per diluted share, during the prior quarter and net income of $33.9 million, or $0.45 per diluted share, during the second quarter of 2019.

Philip J. Sanders, Chief Executive Officer of Waddell & Reed Financial, Inc. shared, "Despite the continued challenging circumstances as we navigate the global pandemic, our teams have remained focused on delivering quality service to our clients and affiliated advisors every day while executing on the key components of our long-term vision and growth strategy. We continue to make measurable progress in a number of key areas of our strategy, while maintaining a strong financial profile."

Highlights

* Significant progress in wealth management transformation continued, with enhanced focus on recruiting, improving operating metrics and additional growth opportunities Since January 1, 2020, 21 advisors have affiliated with Waddell & Reed with combined prior firm assets under administration (AUA) totaling $1.4 billion. Advisor count inflected modestly, stabilizing at 1,317 affiliated advisors and advisor associates at June 30, 2020. Advisory AUA net flows were positive for the 6th straight quarter despite a challenging market backdrop, illustrating the wealth manager's ability to capture assets through market cycles. Launched the second phase of our wealth management technology transformation, ONESource, which seamlessly connects data across platforms for advisors, and ONEService, a digital repository of processes, procedures and other information available to all advisors. Introduced a High Net Worth suite of products and services as well as a new Separately Managed Account Strategies product offering. * For Ivy Investments, assets under management (AUM) rebounded along with the broader markets in addition to meaningful improvement in net outflows resulting from lower redemptions Introduced two additional strategies in a model-delivery format, bringing the total offering to nine strategies. As a result of changes stemming from ongoing strategic evaluation of Ivy fund fees, 76% of AUM is now priced at or below its respective peer median. * Balance sheet a continued source of strength - maintained significant liquidity while continuing active capital return program and flexibility for organic and inorganic growth opportunities. * Hired two executives focused on strategic growth - one to support the buildout of enterprise-wide data analytics and related capabilities, and one to support M&A origination, evaluation, and integration.

Financial Summary

The second quarter of 2020 included $12.7 million, or $0.15 per share, of unrealized gains on our investment portfolio within the investment and other (loss) income line compared to $11.0 million, or $0.12 per share, of unrealized losses during the prior quarter and $5.1 million, or $0.05 per share, of unrealized gains during the second quarter of 2019.

Revenues totaled $240.0 million for the quarter, a decrease of $23.7 million and $30.1 million, compared to the prior quarter and the second quarter of 2019, respectively. Operating expenses of $216.4 million decreased $7.9 million and $12.5 million, compared to the first quarter of 2020 and the second quarter of 2019, respectively. The operating margin was 9.8% during the current quarter, compared to 14.9% and 15.3% during the prior quarter and the second quarter of 2019, respectively.

AUM ended the quarter at $65.0 billion, an increase of 16% compared to the prior quarter primarily due to market appreciation and a decrease of 10% compared to the second quarter of 2019. Average AUM were $61.7 billion during the current quarter, compared to $66.1 billion during the prior quarter and $71.4 billion during the second quarter of 2019. Net outflows of $1.4 billion during the current quarter were lower compared to net outflows of $2.3 billion and $2.4 billion in the prior quarter and second quarter of 2019, respectively. Sales of $2.2 billion during the current quarter decreased 13% compared to the prior quarter as second quarter is generally seasonally lower. Sales increased 3% compared to the second quarter of 2019. Redemptions were 24% and 19% lower compared to the prior quarter and second quarter of 2019, respectively.

Wealth management AUA ended the quarter at $59.0 billion, an increase of 14% and 3%, compared to the first quarter of 2020 and the second quarter of 2019, respectively. Average AUA were $56.4 billion during the current quarter, compared to $57.8 billion during the prior quarter and $56.4 billion during the second quarter of 2019. Net new advisory assets were $189.2 million and advisory products continue to drive the majority of new sales. Brokerage asset flows continue to be negative, however, to a lesser extent compared to the prior quarter and the same quarter in 2019. In addition, market appreciation was stronger compared to both the first quarter of 2020 and second quarter of 2019. Starting in the second quarter of 2020, we updated our definition of net new AUA to include dividends and interest for consistency with peers and have reflected this new definition for all periods presented.

Revenues Analysis

Investment management fees decreased $9.4 million, or 9%, compared to the first quarter of 2020 due to a 7% decrease in average AUM and a lower effective management fee rate, partially offset by one more day in the quarter. The effective management fee rate for the current quarter was 64.5 basis points and decreased compared to the prior quarter's rate due to a shift in product mix as well as targeted fee reductions implemented in the quarter on our large cap growth and core bond products. Compared to the second quarter of 2019, investment management fees declined $17.0 million, or 15%, primarily due to lower average AUM and a lower effective management fee rate due to the previously mentioned fee reductions.

Underwriting and distribution fees decreased $13.3 million, or 10%, compared to the prior quarter due to lower advisory fees and lower service and distribution fees due to lower asset levels. In addition, sales commissions were $5.7 million lower compared to the prior quarter as a result of slower sales activity across insurance product lines. Compared to the same quarter in 2019, underwriting and distribution fees decreased $9.9 million, or 7%, due to lower sales commissions and lower service and distribution fees from lower asset levels, partially offset by an increase in advisory fees as a result of the ongoing shift in sales towards advisory products.

Shareholder service fees decreased $1.0 million, or 5%, compared to the first quarter of 2020 primarily due to a decrease in average assets. Compared to the second quarter of 2019, shareholder service fees declined $3.2 million, or 14%, due to a decrease in average assets and fewer accounts. There was also a reduction in fund reimbursements related to the outsourcing of our transfer agency transactional processing operations and a corresponding reduction in costs.

Operating Expenses Analysis

Distribution expenses decreased $12.2 million, or 10%, compared to the prior quarter and decreased $8.6 million, or 7%, compared to the second quarter of 2019. The decrease compared to both periods is a result of the decrease in underwriting and distribution revenue from lower asset levels and insurance product sales.

Compensation and benefits expense increased $3.4 million, or 6%, compared to the prior quarter primarily due to mark-to-market adjustments on equity compensation and deferred compensation plans. Compensation and benefits was consistent with the second quarter of 2019, as lower headcount was offset by higher equity compensation due to mark-to-market adjustments.

General and administrative expenses increased $1.9 million, or 10%, compared to the first quarter of 2020 due to increased strategic project spending. Compared to the same quarter in 2019, general and administrative expenses increased $4.5 million, or 28%, due to a shift of our transfer agency transactional processing operations costs from technology expenses to general and administrative expenses as a result of outsourcing and increased strategic project spending, partially offset by lower travel and meetings costs.

Technology costs increased $0.7 million, or 5%, compared to the prior quarter primarily due to increased software costs for new technologies. Technology costs decreased $2.2 million, or 13%, compared to the second quarter of 2019 as costs related to the transfer agency transactional processing operations outsourcing were shifted to general and administrative expenses. This decrease was partially offset by increased consulting and software costs for new technologies.

Occupancy expenses decreased $0.4 million, or 9%, compared to the prior quarter and decreased $2.4 million, or 36%, compared to the second quarter of 2019. For both comparative periods, occupancy costs decreased as a result of the planned transition of corporate field offices to independent financial advisors associated with our wealth manager.

Marketing and advertising expenses decreased $0.8 million, or 41%, compared to the prior quarter and decreased $1.3 million, or 53%, compared to the second quarter of 2019. For both comparative periods, marketing and advertising expenses decreased due to lower sponsorship fees in connection with the ongoing shift to virtual industry conferences.

Depreciation expense declined slightly compared to the prior quarter and declined $2.0 million, or 39%, compared to the second quarter of 2019 due to capitalized software development assets becoming fully depreciated.

Investment and Other Income (Loss)

Investment and other income for the second quarter was $15.1 million compared to investment and other losses of $7.7 million in the prior quarter. The $22.9 million increase is primarily due to unrealized gains, net of hedging activity, on the seed and corporate investment portfolios. Compared to the second quarter of 2019, investment and other income increased $6.1 million due to unrealized gains, net of hedging activity, on the seed and corporate investment portfolios, partially offset by a decline in interest income for the corporate investment portfolio due to lower interest rates.

The effective tax rate was 25.3% for the quarter compared to 32.0% in the prior quarter and 29.1% in the second quarter of 2019. The primary driver of the lower tax rate is the impact of market volatility on our estimated pre-tax income for the remainder of 2020 which resulted in a decrease in our annualized effective tax rate during the second quarter of 2020.

__________________

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

AUM

(in millions)



Three Months Ended

Jun. 30, Mar. 31, Jun. 30, Prior Qtr. Year-over-Year Qtr.

2020 2020 2019 Change % Change %

Unaffiliated ^1

Beginning assets $ 20,244 $ 26,264 $ 27,506 $ (6,020 ) (23 ) % $ (7,262 ) (26 ) %

Sales ^2 1,490 1,581 1,291 (91 ) (6 ) % 199 15 %

Redemptions (2,179 ) (3,019 ) (2,441 ) 840 28 % 262 11 %

Net exchanges 205 326 303 (121 ) (37 ) % (98 ) (32 ) %

Net Flows (484 ) (1,112 ) (847 ) 628 56 % 363 43 %

Market action 3,964 (4,908 ) 886 8,872 181 % 3,078 347 %

Ending assets $ 23,724 $ 20,244 $ 27,545 $ 3,480 17 % $ (3,821 ) (14 ) %

Annualized organic (9.6 ) % (16.9 ) % (12.3 ) % growth rate

Annualized redemption 39.9 % 50.9 % 36.7 % rate ^3

Institutional

Beginning assets $ 2,427 $ 3,096 $ 4,053 $ (669 ) (22 ) % $ (1,626 ) (40 ) %

Sales ^2 52 43 54 9 21 % (2 ) (4 ) %

Redemptions (202 ) (179 ) (440 ) (23 ) (13 ) % 238 54 %

Net exchanges 22 - 25 22 NM (3 ) (12 ) %

Net Flows (128 ) (136 ) (361 ) 8 6 % 233 65 %

Market action 698 (533 ) 195 1,231 231 % 503 258 %

Ending assets $ 2,997 $ 2,427 $ 3,887 $ 570 23 % $ (890 ) (23 ) %

Annualized organic (21.1 ) % (17.6 ) % (35.6 ) % growth rate

Annualized redemption 28.6 % 24.9 % 46.1 % rate ^3

Wealth Management

Beginning assets $ 33,339 $ 40,598 $ 40,095 $ (7,259 ) (18 ) % $ (6,756 ) (17 ) %

Sales ^2 649 895 789 (246 ) (27 ) % (140 ) (18 ) %

Redemptions (1,259 ) (1,588 ) (1,609 ) 329 21 % 350 22 %

Net exchanges (227 ) (326 ) (328 ) 99 30 % 101 31 %

Net Flows (837 ) (1,019 ) (1,148 ) 182 18 % 311 27 %

Market action 5,743 (6,240 ) 1,497 11,983 192 % 4,246 284 %

Ending assets $ 38,245 $ 33,339 $ 40,444 $ 4,906 15 % $ (2,199 ) (5 ) %

Annualized organic (10.0 ) % (10.0 ) % (11.5 ) % growth rate

Annualized redemption 11.6 % 14.6 % 13.8 % rate ^3

Consolidated Total

Beginning assets $ 56,010 $ 69,958 $ 71,654 $ (13,948 ) (20 ) % $ (15,644 ) (22 ) %

Sales^ 2 2,191 2,519 2,134 (328 ) (13 ) % 57 3 %

Redemptions (3,640 ) (4,786 ) (4,490 ) 1,146 24 % 850 19 %

Net exchanges - - - - - - -

Net Flows (1,449 ) (2,267 ) (2,356 ) 818 36 % 907 38 %

Market action 10,405 (11,681 ) 2,578 22,086 189 % 7,827 304 %

Ending assets $ 64,966 $ 56,010 $ 71,876 $ 8,956 16 % $ (6,910 ) (10 ) %

Annualized organic (10.3 ) % (13.0 ) % (13.2 ) % growth rate

Annualized redemption 22.6 % 28.5 % 24.3 % rate ^3

__________________________

Unaffiliated includes National channel (home office and wholesale), Defined^ Contribution Investment Only, Registered Investment Advisor and Variable1 Annuity.

^ Sales consist of gross sales and includes net reinvested dividends, capital2 gains and investment income.

^ Excludes Money Market.3



MorningStar Fund Rankings ^1 1 Year 3 Years 5 Years

Funds ranked in top half 48 % 49 % 37 %

Assets ranked in top half 45 % 48 % 38 %



MorningStar Ratings ^1 Overall 3 Years 5 Years

Funds with 4/5 stars 28 % 28 % 26 %

Assets with 4/5 stars 41 % 39 % 41 %

____________________________

Based on class I share, which reflects the largest concentration of sales^1 and assets.



Three Months Ended

Wealth Jun. 30, Mar. 31, Jun. 30, Prior Qtr. Year-over-Year Management Qtr.

(in 2020 2020 2019 Change % Change % millions)

AUA

Ending $ 27,155 $ 23,192 $ 24,789 $ 3,963 17 % $ 2,366 10 %advisory AUA

Endingnon-advisory 31,836 28,644 32,641 3,192 11 % (805 ) (2 ) %AUA

Ending total 58,991 51,836 57,430 7,155 14 % 1,561 3 %AUA



Averageadvisory AUA $ 25,030 $ 26,680 $ 23,917 $ (1,650 ) (6 ) % $ 1,113 5 %^1

Averagenon-advisory 30,151 32,488 32,272 (2,337 ) (7 ) % (2,121 ) (7 ) %AUA ^1

Average AUA 55,181 59,168 56,189 (3,987 ) (7 ) % (1,008 ) (2 ) %^1



Net newadvisory AUA $ 189 $ 442 $ 349 $ (253 ) (57 ) % $ (160 ) (46 ) %^2

Net newnon-advisory (346 ) (658 ) (747 ) 312 47 % 401 54 %AUA ^2, 3

Total netnew AUA ^2, (157 ) (216 ) (398 ) 59 27 % 241 61 %3



Annualizedadvisory AUA 3.3 % 6.6 % 5.9 % growth ^4

AnnualizedAUA growth ^ (1.2 ) % (1.4 ) % (2.8 ) % 4



Advisors andadvisor 1,317 1,316 1,347 1 - (30 ) (2 ) %associates

Avg.trailing12-monthrevenue per $ 464 $ 462 $ 408 $ 2 - $ 56 14 %advisor ^5(inthousands)

_________________________

^ Average AUA are calculated as the average of the beginning of month AUA1 during each reporting period.

Net new AUA are calculated as total client deposits and net transfers less^ client withdrawals. Client deposits2 include dividends and interest.

Excludes activity related to products held outside of our wealth management^ platform. These assets represent3 less than 10% of total AUA.

^ Annualized growth is calculated as annualized quarterly net new AUA divided4 by beginning AUA.

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 of5 advisors. "Other" underwriting and

distribution fees predominantly includes fees paid by advisors for programs and services.

UnauditedConsolidatedStatements ofIncome

(in thousands,except pershare data andmargin)

Three Months Ended

Jun. 30, Mar. 31, Jun. 30, Prior Qtr. Year-over-Year Qtr.

2020 2020 2019 Change % Change %

Revenues:

Investmentmanagement $ 95,824 $ 105,219 $ 112,870 $ (9,395 ) (9 ) % $ (17,046 ) (15 ) %fees

Underwritingand 123,633 136,943 133,495 (13,310 ) (10 ) % (9,862 ) (7 ) %distributionfees

Shareholder 20,577 21,571 23,789 (994 ) (5 ) % (3,212 ) (14 ) %service fees

Total 240,034 263,733 270,154 (23,699 ) (9 ) % (30,120 ) (11 ) %

Operating expenses:

Distribution^1 107,876 120,033 116,477 (12,157 ) (10 ) % (8,601 ) (7 ) %

Compensationand benefits(includingshare-basedcompensation 61,863 58,425 61,876 3,438 6 % (13 ) - of $12,532,$9,983 and$11,119,respectively)

General and 20,524 18,598 16,037 1,926 10 % 4,487 28 %administrative

Technology 14,237 13,502 16,442 735 5 % (2,205 ) (13 ) %

Occupancy 4,291 4,709 6,701 (418 ) (9 ) % (2,410 ) (36 ) %

Marketing and 1,119 1,896 2,399 (777 ) (41 ) % (1,280 ) (53 ) %advertising

Depreciation 3,209 3,513 5,228 (304 ) (9 ) % (2,019 ) (39 ) %

Subadvisory 3,288 3,666 3,715 (378 ) (10 ) % (427 ) (11 ) %fees

Total 216,407 224,342 228,875 (7,935 ) (4 ) % (12,468 ) (5 ) %

Operating 23,627 39,391 41,279 (15,764 ) (40 ) % (17,652 ) (43 ) %income

Investment andother income 15,148 (7,745 ) 9,025 22,893 296 % 6,123 68 %(loss)

Interest (1,539 ) (1,549 ) (1,552 ) 10 1 % 13 1 %expense

Income beforeprovision for 37,236 30,097 48,752 7,139 24 % (11,516 ) (24 ) %income taxes

Provision for 9,412 9,633 14,190 (221 ) (2 ) % (4,778 ) (34 ) %income taxes

Net income 27,824 20,464 34,562 7,360 36 % (6,738 ) (19 ) %

Net income(loss)attributable 3,000 (1,522 ) 614 4,522 297 % 2,386 389 %to redeemablenoncontrollinginterests

Net incomeattributableto Waddell & $ 24,824 $ 21,986 $ 33,948 $ 2,838 13 % $ (9,124 ) (27 ) %ReedFinancial,Inc.

Net income pershare, basic $ 0.38 $ 0.32 $ 0.45 and diluted:

Weightedaverage sharesoutstanding - 65,488 67,675 74,694 basic anddiluted

Operating 9.8 % 14.9 % 15.3 % margin



^1Distribution expense

Unaffiliated 20,587 23,624 25,242

Wealth 87,289 96,409 91,235 Management

$ 107,876 $ 120,033 $ 116,477



Unaudited ConsolidatedStatements of Income

(in thousands, except pershare data and margin)

Six Months Ended

Jun. 30, Jun. 30,

2020 2019 Change %

Revenues:

Investment management fees $ 201,043 $ 222,632 $ (21,589 ) (10 ) %

Underwriting and 260,576 259,740 836 - distribution fees

Shareholder service fees 42,148 47,192 (5,044 ) (11 ) %

Total 503,767 529,564 (25,797 ) (5 ) %

Operating expenses:

Distribution^1 227,909 226,271 1,638 1 %

Compensation and benefits(including share-based 120,288 126,719 (6,431 ) (5 ) %compensation of $22,515 and$23,892, respectively)

General and administrative 39,122 30,741 8,381 27 %

Technology 27,739 32,750 (5,011 ) (15 ) %

Occupancy 9,000 13,416 (4,416 ) (33 ) %

Marketing and advertising 3,015 4,363 (1,348 ) (31 ) %

Depreciation 6,722 11,229 (4,507 ) (40 ) %

Subadvisory fees 6,954 7,272 (318 ) (4 ) %

Total 440,749 452,761 (12,012 ) (3 ) %

Operating income 63,018 76,803 (13,785 ) (18 ) %

Investment and other income 7,403 18,478 (11,075 ) (60 ) %

Interest expense (3,088 ) (3,100 ) 12 -

Income before provision for 67,333 92,181 (24,848 ) (27 ) %income taxes

Provision for income taxes 19,045 24,861 (5,816 ) (23 ) %

Net income 48,288 67,320 (19,032 ) (28 ) %

Net income attributable toredeemable noncontrolling 1,478 1,318 160 12 %interests

Net income attributable toWaddell & Reed Financial, $ 46,810 $ 66,002 $ (19,192 ) (29 ) %Inc.

Net income per share, basic $ 0.70 $ 0.87 and diluted:

Weighted average sharesoutstanding - basic and 66,581 75,492 diluted

Operating margin 12.5 % 14.5 %



^1Distribution expense

Unaffiliated 44,211 49,258

Wealth Management 183,698 177,013

$ 227,909 $ 226,271

Underwriting and distribution fees

(in thousands)



For the three months ended Jun. 30, 2020

Unaffiliated Wealth Total Management

Advisory fees $ - $ 72,534 $ 72,534

Service and distribution fees 13,670 13,600 27,270

Sales commissions 373 15,034 15,407

Other revenues 91 8,331 8,422

Total underwriting and distribution $ 14,134 $ 109,499 $ 123,633fees



For the three months ended Mar. 31, 2020

Unaffiliated Wealth Total Management

Advisory fees $ - $ 77,118 $ 77,118

Service and distribution fees 15,276 14,589 29,865

Sales commissions 451 20,657 21,108

Other revenues 135 8,717 8,852

Total underwriting and distribution $ 15,862 $ 121,081 $ 136,943fees



For the three months ended Jun. 30, 2019

Unaffiliated Wealth Total Management

Advisory fees $ - $ 70,220 $ 70,220

Service and distribution fees 16,615 16,041 32,656

Sales commissions 493 20,794 21,287

Other revenues 83 9,249 9,332

Total underwriting and distribution $ 17,191 $ 116,304 $ 133,495fees



For the six months ended Jun. 30, 2020

Unaffiliated Wealth Total Management

Advisory fees $ - $ 149,652 $ 149,652

Service and distribution fees 28,946 28,189 57,135

Sales commissions 824 35,691 36,515

Other revenues 226 17,048 17,274

Total underwriting and distribution $ 29,996 $ 230,580 $ 260,576fees



For the six months ended Jun. 30, 2019

Unaffiliated Wealth Total Management

Advisory fees $ - $ 135,450 $ 135,450

Service and distribution fees 33,081 31,445 64,526

Sales commissions 935 40,416 41,351

Other revenues 175 18,238 18,413

Total underwriting and distribution $ 34,191 $ 225,549 $ 259,740fees

Unaudited Condensed Balance Sheet

(in thousands)



Jun. 30, Dec. 31,

2020 2019

Assets

Cash & cash equivalents (unrestricted) $ 156,710 $ 151,815

Investment securities 619,052 688,346

Other assets 212,443 245,572

Property and equipment, net 31,928 34,726

Goodwill and intangible assets 145,869 145,869

Total assets $ 1,166,002 $ 1,266,328

Liabilities, redeemable noncontrolling interests and equity

Short-term notes payable $ 94,962 $ -

Long-term debt - 94,926

Other liabilities 278,480 343,300

Redeemable noncontrolling interests 25,857 19,205

Total stockholders' equity 766,703 808,897

Liabilities, redeemable noncontrolling interests $ 1,166,002 $ 1,266,328and equity

Shares outstanding 65,174 68,847

UnauditedCondensedCash Flow

(inthousands)



Three Months Ended Six Months Ended

Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30,

2020 2020 2019 2020 2019

Cashprovided by (usedin):

Operating $ (526 ) $ 29,276 $ 40,644 $ 28,750 $ 23,147 activities

Investing 20,430 27,694 9,946 48,124 (3,987 )activities

Financing (32,123 ) (69,371 ) (53,605 ) (101,494 ) (113,118 )activities

Net changeduring $ (12,219 ) $ (12,401 ) $ (3,015 ) $ (24,620 ) $ (93,958 )period



Three Months Ended Six Months Ended

Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30,

(inthousands,except 2020 2020 2019 2020 2019number ofshares)

Shares repurchased

Number of 1,468,367 3,807,438 2,142,894 5,275,805 4,369,219shares

Total cost $ 18,061 $ 53,939 $ 36,824 $ 72,000 $ 75,963

Dividend paid

Rate per $ 0.25 $ 0.25 $ 0.25 $ 0.50 $ 0.50share

Total paid $ 16,528 $ 17,119 $ 18,840 $ 33,647 $ 38,188

Capitalreturned to $ 34,589 $ 71,058 $ 55,664 $ 105,647 $ 114,151stockholders

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, 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 wealth management services to clients throughout the United States since 1937. Today, we distribute our investment products through the unaffiliated channel under the IVY INVESTMENTS(r) brand (encompassing broker/dealer, retirement, and registered investment advisors), our wealth management channel (through independent financial advisors associated with WADDELL & REED, INC.), 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 and assets under administration, 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 the impact of the COVID-19 pandemic and related economic conditions, as well as the factors 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, 2019, 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 wealth management and investment management 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, 2019 and as updated in our quarterly reports on Form 10-Q for the year ending December 31, 2020. 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.

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CONTACT: Investor Contact: Mike Daley, Vice President, Chief Accounting Officer & Investor Relations, (913) 236-1795, mdaley1@waddell.com

CONTACT: Mutual Fund Investor Contact: Call (888) WADDELL, or visit www.waddell.com or www.ivyinvestments.com.