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Stock alteration summary: Manning & Napier, Inc. (NYSE: MN)

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Manning & Napier, Inc. (NYSE: MN), (“Manning & Napier” or the “Company”) recently stated 2k19 3rd-quarter results for the duration finished September 30, 2k19.

Summary Highlights

  • Assets under administration (“AUM”) at September 30, 2k19 were $20.50B, contrast to $21.30B at June 30, 2k19
  • Revenue for the 3rd-quarter was $34.20M, down slightly from $34.30M in the 2nd-quarter of 2k19 and a decline of 16.00 percent from the 3rd-quarter of 2k18
  • 3rd-quarter income before taxes was $6.70M; the net income attributable to Manning & Napier, Inc. for the 3rd-quarter was $0.80M, or $0.050 for each diluted share
  • On a non-GAAP basis, as defined in the Non-GAAP Fiscal Measures section below, economic net income for the quarter was $3.70M, or $0.050 for each adjusted share

3rd-Quarter 2k19 Financial Review

Manning & Napier stated 3rd-quarter 2k19 revenue of $34.20M, a decline of 16.00 percent from revenue of $40.50M stated in the 3rd-quarter of 2k18, and a slight decline from revenue of $34.30M stated in the 2nd-quarter of 2k19. Average AUM for the quarter was $20.9B, a 9.0 percent decline from the 3rd-quarter of 2k18 and a 1.0 percent decline from the 2nd-quarter of 2k19, when average AUM was $23.00B and $21.00B, respectively. As a result, revenue as a percentage of average AUM was 0.650 percent for the 3rd-quarter of 2k19, contrast to 0.70 percent and 0.650 percent for the 3rd-quarter of 2k18 and the 2nd-quarter of 2k19, respectively.

The reduction in revenue as a percentage of average AUM in the quarter contrast to the 3rd-quarter of 2k18 was driven by mutual fund and collective investment trust investment administration revenue, which reduced by $3.60M, or 34.00 percent, contrast to the 3rd-quarter of 2k18. The mutual fund and collective trust revenue reduction outpaced the decline in average AUM contrast to the 3rd-quarter of 2k18 mainly as a result of the completion of the Advisor’s mutual fund fee restructure, where investment administration fees were reduced across a majority of the product set at the end of the 1st-quarter 2k19.

Operating costs for the 3rd-quarter 2k19 were $30.70M, a decline of $5.30M, or 15.00 percent, contrast with the 3rd-quarter of 2k18, and a decline of $1.10M, or 3.0 percent, contrast with the 2nd-quarter of 2k19.

Compensation and related costs were $19.50M for the 3rd-quarter of 2k19, a decline of $3.60M, or 16.00 percent, contrast with the 3rd-quarter of 2k18 and a decline of $0.70M, or 3.0 percent, contrast with the 2nd-quarter of 2k19. The change in the current quarter contrast to both the 3rd-quarter of 2k18 and 2nd-quarter of 2k19 was driven by a decline in our workforce, coupled with lower variable incentive costs as a result of the reduction in AUM and revenue. The Company’s average workforce throughout the 3rd-quarter of 2k19 reduced by 16.00 percent and 6.0 percent when contrast to the 3rd-quarter of 2k18 and 2nd-quarter of 2k19, respectively. As a percentage of revenue, compensation and related costs for the 3rd-quarter of 2k19 were 57.00 percent, contrast with 57.00 percent for the 3rd-quarter of 2k18 and 59.00 percent for the 2nd-quarter of 2k19.

Distribution, servicing and custody costs for the 3rd-quarter of 2k19 reduced by $1.60M, or 35.00 percent, contrast with the 3rd-quarter of 2k18 and by $0.10M, or 2.0 percent, contrast with the 2nd-quarter of 2k19. The 35.00 percent decline in distribution, servicing and custody costs when contrast to the 3rd-quarter of 2k18 is the result of a decline in average mutual fund and collective trust AUM of 14.00 percent, in addition to the impacts from the Advisor’s mutual fund fee restructure program accomplished throughout the 1st-quarter of 2k19, where a portion of these costs are now borne by the mutual funds directly.

Other operating costs reduced by $0.10M, or 1.0 percent, contrast with the 3rd-quarter of 2k18, and reduced by $0.40M, or 4.0 percent, contrast with the 2nd-quarter of 2k19. As a percentage of revenue, other operating costs for the 3rd-quarter of 2k19 were 24.00 percent contrast to 21.00 percent for the 3rd-quarter of 2k18 and 25.00 percent for the 2nd-quarter of 2k19.

Operating income was $3.40M for the quarter, a decline of $1.10M, or 24.00 percent, from the 3rd-quarter of 2k18 and a boost of $1.00M, or 39.00 percent, from the 2nd-quarter of 2k19. Operating margin was 10.00 percent for the 3rd-quarter of 2k19, contrast with 11.00 percent for the 3rd-quarter of 2k18 and 7.0 percent for the 2nd-quarter of 2k19.

Non-operating income was $3.30M for the quarter, a contrast to $0.70M and $1.10M for the 3rd-quarter of 2k18 and 2nd-quarter of 2k19, respectively. Included in the 3rd-quarter of 2k19 is the $2.90M gain recognized from the Company’s sale of its partner, Perspective Partners, LLC, as talked about in the “Other Business Updates” section below. The 3rd-quarter of 2k19 includes less than $0.10M of net gains on investments held by the Company, contrast to net gains of $0.10M in the 3rd-quarter of 2k18 and $0.20M in the 2nd-quarter of 2k19. The 3rd-quarter of 2k19 also includes $0.80M of interest and dividend income, a contrast to $0.50M and $0.80M for the 3rd-quarter of 2k18 and 2nd-quarter of 2k19, respectively. Also included in non-operating income in 3rd-quarter of 2k19 was a cost of $0.40M related to changes in the Company’s expected tax benefits under the tax receivable agreement with the other holders of units of Manning & Napier Group, LLC and the corresponding changes in the payment of such benefits.

Income before provision for income taxes was $6.70M for the 3rd-quarter of 2k19, a boost as a contrast to $5.30M in the 3rd-quarter of 2k18 and $3.60M in the 2nd-quarter of 2k19. Provision for income taxes was $0.20M for 3rd-quarter 2k19, a decline of $0.1M and $0.20M in contrast to the 3rd-quarter of 2k18 and 2nd-quarter of 2k19, respectively.

Net income attributable to the controlling and the non-controlling interests for the 3rd-quarter of 2k19 was $6.60M, a contrast to $5.00M in the 3rd-quarter of 2k18 and $3.20M in the 2nd-quarter of 2k19. Net income attributable to Manning & Napier, Inc. for the 3rd-quarter of 2k19 was $0.80M, or $0.050 for each basic and diluted share, contrast to $0.80M, or $0.050 for each basic and diluted share, in the 3rd-quarter of 2k18 and $0.40M, or $0.030 for each basic and diluted share, in the 2nd-quarter of 2k19 and reflects the public ownership of the Company’s partner, Manning & Napier Group, LLC. The remaining ownership interest is attributable to the other members of Manning & Napier Group, LLC.

As defined in the Non-GAAP Financial Measures section below, the Company uses economic income, economic net income and economic net income for each adjusted share to provide greater clarity regarding the cash earnings of the business. On this basis, Manning & Napier stated 3rd-quarter 2k19 economic income of $5.20M, contrast to $4.20M in the 2nd-quarter of 2k19. In addition, the Company stated economic net income of $3.70M, or $0.050 for each adjusted share, in the 3rd-quarter of 2k19 contrast to $3.70M, or $0.050 for each adjusted share, in the 3rd-quarter of 2k18 and $3.00M, or $0.040 for each adjusted share, in the 2nd-quarter of 2k19.

Nine-months finished September 30, 2k19 Financial Review

Manning & Napier stated a 2k19 year-to-date revenue of $103.30M, a decline of 17.00 percent from revenue of $123.90M stated for a similar duration in 2k18. This decline was driven by changes in average AUM, which reduced by 11.00 percent from the previous year to $20.8 0billion in 2k19, coupled with the effects of the mutual fund fee restructure accomplished in the 1st-quarter of 2k19. 2k19 year-to-date revenue as a percentage of average AUM was 0.660 percent, a contrast to 0.710 percent for the previous year-to-date.

Operating costs for 2k19 year-to-date were $96.10M, a decline of $9.70M, or 9.0 percent, from a similar duration in 2k18.

Compensation and related costs for 2k19 year-to-date reduced by $7.50M, or 11.00 percent, when contrast to a similar duration in 2k18. This change was driven by a 15.00 percent reduction in our average workforce in addition to lower variable incentive costs as a result of the reduction in AUM and revenue. This decline was partially offset by a boost to share-based compensation attributable to the timing and amount of equity awards granted. As a percentage of revenue, compensation and related costs for 2k19 year-to-date were 59.00 percent, contrast to 55.00 percent for the previous year.

Distribution, servicing and custody costs for 2k19 reduced by $4.10M, or 29.00 percent, from 2k18. The decline in distribution, servicing and custody cost resulted from declines in average mutual fund and collective trust AUM, which reduced by 16.00 percent from 2k18 in addition to the completion of the Advisor’s mutual fund fee restructure program throughout the 1st-quarter of 2k19, where a portion of these costs are now borne by the mutual funds directly.

Other operating costs for 2k19 year-to-date turned up by $1.80M, or 8.0 percent, when contrast to a similar duration in 2k18. This incline is driven mainly by the $2.10M gain reflected in the 1st-quarter of 2k18 related to the Company’s sale of Rainier U.S. mutual funds, which offset other costs in the 1st-quarter of 2k18. Other operating costs as a percentage of revenue were 24.00 percent for 2k19 year-to-date and 19.00 percent for a similar duration in 2k18.

Operating income was $7.20M for 2k19 year-to-date, a decline of $10.90M, or 60.00 percent, from 2k18 year-to-date. Operating margin for 2k19 year-to-date was 7.0 percent contrast to the previous year duration of 15.00 percent.

Non-operating income for 2k19 year-to-date was $6.20M, a boost of $4.70M from the non-operating income of $1.60M stated in a similar duration in 2k18. Included in 2k19 is the $2.90M gain from the Company’s sale of Perspective Partners, LLC throughout the 3rd-quarter of 2k19 as talked about in the “Other Business Updates” section below. The 2k19 year-to-date duration reflects a $1.20M net gain on investments held by the Company, contrast to a net loss of $0.20M in a similar duration of 2k18. Interest and dividend income for 2k19 year-to-date was $2.40M, contrast to $1.40M in 2k18.

Income before provision for income taxes was $13.40M for 2k19 year-to-date, contrast to $19.70M in 2k18, a 32.00 percent decline. Provision for income taxes reduced by $0.50M when contrast to the similar duration in 2k18, driven by a decline in taxable earnings contrast to the previous year.

Net income attributable to the controlling and the non-controlling interests was $12.70M and $18.40M in year-to-date 2k19 and 2k18, respectively. Net income attributable to Manning & Napier, Inc. for 2k19 year-to-date was $1.80M, or $0.120 for each basic and diluted share, contrast to $2.80M, or $0.180 for each basic and diluted share in 2k18.

On a Non-GAAP basis, as defined in the Non-GAAP Financial Measures section of this release, Manning & Napier stated an economic income of $13.20M for the nine-months finished September 30, 2k19. In addition, economic net income was $9.40M, or $0.120 for each adjusted share for 2k19 year-to-date, in contrast to $14.00M, or $0.180 for each adjusted share in 2k18.

Assets Under Administration

As of September 30, 2k19, AUM was $20.50B, a decline of 4.0 percent from $21.30B as of June 30, 2k19 and 11.00 percent from $23.10B as of September 30, 2k18. The composition of the Company’s AUM across portfolios as of September 30, 2k19 was 65.00 percent in blended assets, 30.00 percent in equity, and 5.0 percent in fixed income, consistent with AUM composition on June 30, 2k19 and September 30, 2k18.

Since June 30, 2k19, AUM reduced by nearly $0.80B. This decline in AUM was attributable to net client outflows of about $1.00B, partially offset by about $0.30B in market appreciation. The net client outflows of $1.00B consisted of separately managed account net outflows of about $0.60B in addition to mutual fund and collective investment trust net outflows of about $0.50B. The annualized separate account retention rate for the three months finished September 30, 2k19 was 88.00 percent, a contrast to 90.00 percent for the rolling 12 months finished September 30, 2k19.

When contrast to September 30, 2k18, AUM reduced by about $2.60B from $23.10B, counting declines of about $1.30B, or 8.0 percent, in separate account AUM and about $1.30B, or 18.00 percent, in mutual fund and collective investment trust AUM. The $2.60B decline in AUM from September 30, 2k18 to September 30, 2k19 was attributable to net client outflows of about $3.50B, partially offset by market appreciation of about $0.90B. The net client outflows of $3.50B consisted of about $1.90B of net outflows for separate accounts and $1.50B of net outflows for mutual funds and collective investment trusts.

Subsequent to September 30, 2k19, the Company received notice of a client termination with AUM of about $1.00B and annualized revenue of about $3.30M. The assets were redeemed throughout October 2k19.

Balance Sheet

Cash and cash equivalents, and investments totaled $153.00M as of September 30, 2k19, in contrast to $146.80M as of June 30, 2k19.

Throughout the quarter finished September 30, 2k19, Manning & Napier Group, LLC distributed about $3.20M in cash to its members, and the Company declared a 3rd-quarter dividend of $0.020 for each share of Class A common stock. As of September 30, 2k19, the Company had no debt.

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