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Manning & Napier hits Street expectations

Rochester Business Journal
August 2, 2013

Manning & Napier Inc. reported economic net income of nearly $27.2 million for the second quarter, matching Wall Street estimates of 30 cents per adjusted share.
The income measure for the Perinton-based money manager rose 20 percent from $22.6 million, or 25 cents an adjusted share, in the second quarter of 2012.
"I thought the economic performance for the company was solid," CEO Patrick Cunningham said Wednesday after the market's close. "Year over year, we've seen our economic income rise. This was, all in all, a good quarter."
Cunningham called the 20 percent spike in economic net income a good jump.
"Obviously, increase in revenue is part of it, and also there's variability relative to our expenses," he said. "The combination of a moderation in expenses with good revenue growth resulted in a good, solid economic income increase."
Revenue for the most recent quarter was $93 million, up 14 percent from $81.5 million in the second quarter last year and up 3 percent from $90.3 million in the first quarter this year.
Operating expenses totaled $71.6 million, including non-cash, share-based reorganization-related compensation of $22.8 million. Excluding that, expenses totaled $48.8 million.
Operating expenses excluding the compensation were $50.5 million in the first quarter this year and $44.3 million in the second quarter of 2012, the firm reported.
Net income attributable to Manning & Napier shareholders was $260,000, or 2 cents a basic and diluted share, compared with a loss of $1.8 million, or 14 cents a share, in the second quarter a year ago.
Using generally accepted accounting principles, net income attributable to controlling and non-controlling interests was $18.6 million, up 97 percent from $9.5 million in the same quarter a year ago.
The firm reported a net quarterly decline in assets under management, with outflows of $3.3 billion and inflows of $1.9 billion. Assets fell to $46.3 billion on June 30 from $48.1 billion on March 31.
"In our business, you go through periods where you have significant net inflows and you have periods where you have some outflows," Cunningham said. "We have had, over the first half of the year and certainly in the second quarter, some outflows, particularly in the U.S. equities strategy, which has a three-year number that is trailing its benchmarks.
"Although we continually tell people that the three-year number is the most unreliable and is no indicator of what's going to happen, and that market cycles are important, there are still people who make decisions based upon that number."
Investors have shown a preference in recent quarters for safe stocks paying relatively high dividends and for bonds, Cunningham said.
"We have been positioning our portfolios over the last several years to have a strong preference for higher-growth companies," he said.
"If you believe the economy is going to be slow in general, which we do, the only way people are going to get the kind of returns they're going to need is to make sure they have companies that can grow faster than the economy, that have organic growth and are gaining market share and have businesses that can grow even when there's not a rising tide that's raising all ships.
"The market has not shown a preference for these types of companies."
Manning & Napier Group LLC distributed $31.3 million in cash to its shareholders in the second quarter, a dividend of 16 cents a share, the company reported.
The company's stock price (NYSE: MN) was $17.95 at the close of trading Wednesday, ranging from $17.83 to $18.13 during the day. The company reported its results after the market closed.
The stock climbed above $20 in late May, with a high of $20.45. It opened at $12 when Manning & Napier became a public company in November 2011.

8/2/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email


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