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Manning & Napier, Inc. Reports First Quarter 2016 Earnings Results

FAIRPORT, N.Y., April 27, 2016 /PRNewswire/ -- Manning & Napier, Inc. MN, +1.09% ("Manning & Napier" or "the Company") today reported 2016 first quarter results for the period ended March 31, 2016.

Summary Highlights

  • First quarter income before taxes and economic net income, a non-GAAP measure, were $23.9 million and $15.0 million, or $0.18 per adjusted share
  • Assets under management ("AUM") at March 31, 2016 were $34.7 billion, compared with $35.4 billion at December 31, 2015
  • Revenue for the first quarter decreased 29% year-over-year and decreased 11% sequentially to $64.5 million
  • The Company's Board of Directors declared a quarterly dividend of $0.16 per share of Class A common stock
  • On April 18, 2016, Patrick Cunningham, Chief Executive Officer and Director, announced his retirement from Manning & Napier for personal reasons. William Manning, Co-Founder and Chairman of the Board, assumed the title of Chief Executive Officer, and the Board established an Operating Committee consisting of five senior executives to carry out the day-to-day operations of managing the business.

Patrick Cunningham, Manning & Napier's retiring Chief Executive Officer, commented, "I am pleased with improvements we are seeing in the track records of our key equity strategies through the end of the first quarter. In addition, we are seeing strong relative performance in other products, including Disciplined Value and Global Quality equity strategies, and new business conversations in these products and our fixed income products have increased notably. We are also nearing the close of our acquisition of a majority interest in Rainier Investment Management, LLC, which will add several capitalization-based equity products, including the five-star Rainier International Discovery Fund, to our product set. A high level of client service is a priority as we continue through this transition in our business."

Cunningham continued, "After more than 24 years with Manning & Napier, I will dearly miss our loyal clients and dedicated employees, however; I have the utmost confidence in the new management structure and the team of senior executives that will lead the firm going forward."

First Quarter 2016 Financial Review Manning & Napier reported first quarter 2016 revenue of $64.5 million, a decrease of 29% from revenue of $90.4 million reported in the first quarter of 2015, and a decrease of 11% from revenue of $72.5 million reported in the fourth quarter of 2015. The changes in revenue resulted primarily from changes in average AUM. Average AUM for the quarter was $34.3 billion, a 27% and 8% decrease from average AUM for the first quarter of 2015 and the fourth quarter of 2015, when average AUM was $47.1 billion and $37.3 billion, respectively. Revenue as a percentage of average AUM was 0.76% for the first quarter of 2016, compared to 0.78% for the first quarter of 2015 and 0.77% for the fourth quarter of 2015.

Operating expenses for the first quarter 2016 were $41.8 million, a decrease of $10.8 million, or 21%, compared with the first quarter of 2015, and a decrease of $4.5 million, or 10%, compared with the fourth quarter of 2015.

Compensation and related costs decreased by $4.9 million compared with the first quarter of 2015 and decreased by $2.4 million compared with the fourth quarter of 2015. The expense decrease in the current quarter compared to the first quarter and fourth quarter of 2015 was due to a lower overall workforce coupled with lower variable incentive costs. As a percentage of revenue, compensation and related costs for the first quarter of 2016 were 34%, compared with 30% for the first quarter of 2015 and 34% for the fourth quarter of 2015.

Distribution, servicing and custody expenses for the first quarter of 2016 decreased by $5.5 million, or 33%, compared with the first quarter of 2015, and $1.4 million, or 11%, compared with the fourth quarter of 2015, while average mutual fund and collective trust AUM decreased by 35% and 12% for the respective periods. Other operating costs decreased by $0.5 million, or 5%, compared with the first quarter of 2015, and decreased by $0.8 million, or 8%, compared with the fourth quarter of 2015.

Operating income was $22.8 million for the quarter, a decrease of $15.1 million, or 40%, from the first quarter of 2015 and a decrease of $3.4 million, or 13%, from the fourth quarter of 2015. Operating margin was 35% for the first quarter of 2016, compared with 42% for the first quarter of 2015 and 36% for the fourth quarter of 2015.

Non-operating income was $1.1 million for the quarter, compared to non-operating income of $0.8 million and a loss of $0.2 million reported in the first quarter and fourth quarter of 2015, respectively. For the current quarter, non-operating income included $1.1 million of net income on investments held by the Company to provide initial cash seeding for product development purposes, compared to net gains of $0.6 million and net losses of $0.2 million reported in the first quarter and fourth quarter of 2015, respectively.

Income before taxes was $23.9 million for the first quarter 2016, compared to $38.6 million in the first quarter of 2015, a 38% decrease, and $26.0 million in the fourth quarter of 2015, an 8% decrease. As defined in the Non-GAAP Financial Measures section below, the Company uses economic net income and economic net income per adjusted share to provide greater clarity regarding the cash earnings of the business. On this basis, Manning & Napier reported first quarter 2016 economic net income of $15.0 million, or $0.18 per adjusted share, compared with $24.3 million, or $0.28 per adjusted share, in the first quarter of 2015 and $16.4 million, or $0.20 per adjusted share, in the fourth quarter of 2015.

On a GAAP basis, net income attributable to the controlling and noncontrolling interests for the first quarter of 2016 was $22.2 million, compared with net income of $36.1 million in the first quarter of 2015 and $24.3 million in the fourth quarter of 2015. GAAP net income attributable to the common shareholders for the first quarter of 2016 was $2.4 million, or $0.16 per basic and diluted share, compared to $3.3 million, or $0.24 per basic and diluted share, in the first quarter of 2015 and $2.9 million, or $0.19 per basic and diluted share, in the fourth quarter of 2015 and reflects the public ownership of the Company's subsidiary, Manning & Napier Group, LLC. The remaining ownership interest is attributed to the other members of Manning & Napier Group, LLC.

Assets Under Management As of March 31, 2016, AUM was $34.7 billion, a decrease of 2% from $35.4 billion as of December 31, 2015 and a decrease of 24% from $45.6 billion as of March 31, 2015. As of March 31, 2016, the composition of the...


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