Q4 2021 Manning & Napier Inc Earnings Call

February 8, 2022

Hey.

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Please stand by. Your program is about to begin.

Please standby your program is about to begin.

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Good evening, my name is Aaron and I'll be your conference operator today. At this time, I would like to welcome everyone to the Manning and Napier fourth quarter and full year 2021 earnings telecom.

Good evening My name is Aaron and I'll be your conference operator today at this time I would like to welcome everyone to the Manning <unk> Napier fourth quarter and full year 2021 earnings teleconference. Our hosts for today's call are Nicole Kingsley Brunner, Chief marketing and strategy Officer, Marc Mayer, Chief Executive Officer, and Paul The Tag.

Our hosts for today's call are Nicole Kingsley Brunner, Chief Marketing and Strategy Officer, Mark Mayer, Chief Executive Officer, and Paul Battaglia, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 8 p.m. Eastern Time tonight. The dial-in number is 800-934-3033. No passcode is required.

A chief Financial Officer, today's call is being recorded and will be available for replay beginning at eight P. M. Eastern time Tonight. The dial in number is 890 343033, no passcode is required at this time all participants have been placed in a listen only mode. If you should require operator assistance. Please press star zero.

At this time, all participants have been placed in a listen only mode. If you should require operator assistance, please press star zero. It is now my pleasure to turn the floor over to Mrs. Nicole Kingsley-Runner. You may begin.

It is now my pleasure to turn the floor over to Mrs. Nicole Kingsley Brunner you may begin.

Thank you, Erin, and thank you everyone for joining us today to discuss Manning and the Pierce fourth quarter in full year 2021 results.

Thank you Aaron and thank you everyone for joining us today to discuss Manning it appears fourth quarter and full year 2021 without.

Before we begin, I would like to remind everyone that certain statements made during this call, not based on historical facts, including any statements relating to financial guidance, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Before we begin I would like to remind everyone that certain statements made during this call not based on historical facts, including any statements relating to financial guidance may be deemed forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements.

Because these forward looking statements involve known and unknown risks and uncertainties are important factors that could cause actual results to differ materially from those expressed or implied by these forward looking statements.

Manning and appear assumes no obligation or responsibility to update any forward looking statement.

Meaning in Napier assumes no obligation or responsibility to update any forward looking statements.

During this call, some comments may include reference to non-GAAP financial measures. Full GAAP reconciliations can be found in our earnings release and related SEC filings.

During this call. Some comments may include reference to non-GAAP financial measures full GAAP reconciliations can be found in our earnings release and related SEC filings.

With that, I will turn the call over to our Chief Executive Officer, Mark Mayer. Mark.

With that I will turn the call over to our Chief Executive Officer, Marc Mayer Marc.

Thank you, Nicole. Last quarter saw the continuation of the robust return environment that has characterized the pandemic recovery period.

Thank you Nicole.

Last quarter saw the continuation of the robust return environment that has characterized the pandemic recovery period.

Client results were again very strong, even if relative results in some strategies fell a bit short of benchmarks. We will provide details.

<unk> results were again very strong even if relative results and some strategies fell a bit short of benchmarks.

We will provide detail on those shortly.

While today's call will cover our accomplishments during the quarter and full year of 2021, I'd like to take a moment to address the volatile market environment that we have seen so far in 2022.

While today's call will cover our accomplishments during the quarter and full year of 'twenty to 'twenty, one I'd like to take a moment to address the volatile market environment that we have seen so far in 2022.

that markets will be unpredictable and at times turbulent is axiomatic.

That markets will be unpredictable and at times turbulence is axiomatic.

Anticipating precisely when and why volatility might increase and downturns might occur is problematic.

Anticipating precisely when and why volatility might increase and downturns might occur.

He is problematic.

However, it is our responsibility as investors and advisors to help our clients through less stable periods.

However, it is our responsibility as investors and advisors to help our clients through less stable periods, so that through inevitable cycles, we deliver the absolute and relative returns they need to meet their goals.

So that through inevitable cycles, we deliver the absolute and relative returns they need to meet their goals.

In the final analysis, clients are looking for results.

In the final analysis clients are looking for results.

whether they are individuals seeking security and retirement or financial professionals calling on us to deliver results above a required benchmark. It is imperative that investment excellence and superior device remain our cornerstone.

Whether they are individuals seeking security and retirement or financial professionals, calling on us to deliver results above our required benchmark. It is imperative that investment excellence and superior device remain are cornerstones.

clients, not only private clients, but also financial advisors, pensions, endowments, and foundations. Look to us to help them frame their goals and the outcomes they desire and can realistically realistically reel them.

Clients not only private clients, but also financial advisors pensions endowments and foundations look to us to help them frame their goals and the outcomes they desire and can realistically realize.

This is the crucial role of advice and why it is so valuable.

Then they rely on us to design and deliver investment solutions architected to support those goals. And then...

Then they rely on us to design and deliver investment solutions architected to support those goals.

And they expect us to execute to deliver superior returns over time with less risk towards agreed that enables them to realize their financial objectives.

to deliver superior returns over time with less risk to a degree that enables them to realize their financial objectives.

So 2022 is off to a turbulent start. Global equities are down about 5% in their peak in December and have been well reported the most speculative companies around the world. Those with very high valuations and no earnings are down sharply 50% or more.

So 2022 is off to a turbulent start global equities are down about 5% from their peak in December .

And that's been well reported the most speculative companies around the world those with very high valuations and no earnings are down sharply 50% or more.

Fast growing companies, including those with robust earnings, have seen their equities hit when they are perceived to be delivering disappointing news. As rise in rates make longer duration costs increase, isn't there introduction to financial criteria study for industry?

Fast growing companies, including those with robust earnings have seen their equities hit when they are perceived to be delivering disappointing news as rising rates make longer duration equities more vulnerable.

As providers of advice, we are acutely attuned to market turd.

That's providers of advice, we are acutely attuned to market turbulence, we strive to put big declines.

We strive to put big declines or the fear of them in the appropriate long-term context.

The fewer of them in the appropriate long term context at the same time, we must always be empathetic vol.

At the same time, we must always be empathetic. Volatility isn't something...

Volatility isn't some statistical phenomenon.

It can be a real loss of wealth if investors crystallize those losses either because they need the money right now or because they react to downturns by getting out of the market and missing the inevitable rebound.

It can be a real loss of wealth if investors crystallize those losses.

Or because they need the money right now or because they react to downturns by getting out of the market and missing the inevitable rebound.

We can help our clients avoid crystallizing losses unnecessarily by providing sound advice, coupled with five decades of successfully weathering market volatility, a demonstration of our credibility.

We can help our clients avoid crystallizing Boston's unnecessarily by providing sound advice, coupled with five decades of successfully weathering market volatility.

A demonstration of our credibility.

We attempt to both moderate the downside risk of volatile markets through asset allocation.

While also taking advantage of volatility to build positions in stocks and credits, whose fundamentals are sound and whose prices become a track.

While also taking advantage of volatility to build positions in stocks and credits, whose fundamentals are sound and whose prices become attractive.

A comprehensive plan, discipline risk management, trusted advice from an experienced partner are most valuable if we are, in fact, entering a period where a rising tide no longer lifts all boats.

A comprehensive plan disciplined risk management trusted advice from an experienced partner our most valuable if we are in fact entering a period, where a rising tide no longer lifts all boats.

Over time, we have demonstrated the ability to generate alpha, not in spite of our prudent management of risk, but because...

Over time, we've demonstrated the ability to generate alpha not in spite of our prudent management of risk, but because of it.

We have superior upside down side capture ratios across our multi asset fixed income and equity portfolios. Over three, five, 10 and 20 years across the great majority of our strategies, we have captured more than 100% of market upsides while participating in well under 100% of market downturns. This...

We have superior upside downside capture ratios across our multi asset fixed income and equity portfolios over three 510, and 20 years across the great majority of our strategies, we have captured more than a 100% of market upsides, while participating in well under 100% of market down.

Interests. This pattern allows compounding most compellingly shown in our flagship long term growth strategy, which has returned nine 7% per annum after fees since inception in 1973.

most compellingly shown in our flagship long-term growth strategy.

which has returned 9.7% per annum after fees since inception in 1973.

$100,000 invested in long-term growth in January 1973 is now worth $9.3 million.

$100000 invested in long term growth in January 1973 is now worth $9 3 million.

If one were fortunate enough to invest $1 million in 1973, today it is worth $93 million.

If one were fortunate enough to invest $1 million and 1973 today it is worth $93 million.

In the fourth quarter of 2021, all of our risk-based strategies, which represent two-thirds of AUM, delivered positive returns, albeit slightly below blended bench.

In the fourth quarter of 2021 all of our risk based strategies, which represent two thirds of a U N delivered positive returns, albeit slightly below blended benchmarks for the full year 2021 our strategies again generated excellent absolute returns and all outperformed their blended benchmark.

For the full year 2021, our strategies again generated excellent absolute returns and all outperform their blended bench.

All of these risk-based strategies are also delivering material out performance over the trailing three and five-year return windows. Most of the figures we will discuss are available on pages 67 of the Earnings Sun.

All of these risk based strategies are also delivering delivering material outperformance over the trailing three and five year return windows. Most of the figures we will discuss our available on pages six and seven of the earnings supplement.

In Fixed Income, our high-yield bond fund had another excellent quarter and year. In the fourth quarter, the fund delivered over 170 basis points without performance versus its benchmark and 470 basis points for the year. The high-yield bond ranks well into the top death style of its peer group over one, three, five, and 10-year period.

In fixed income or high yield bond fund had another excellent quarter and year in the fourth quarter. The fund delivered over 170 basis points of outperformance versus its benchmark and 470 basis points for the year.

High yield fund ranks well into the top decile of its peer group over 135, and 10 year periods.

Our unconstrained bond series had another positive quarter amid a difficult yield environment. And its flexible approach helped allow it to provide over 400 basis points of outperformance above the Bloomberg Barclays aggregate for the full year.

Our unconstrained bond series had another positive quarter amid a difficult yield environment and it's flexible approach helped allow it to provide over 400 basis points of outperformance above the Bloomberg Barclays aggregate for the full year.

Our aggregate fixing income composite was down for the quarter and results were slightly below benchmark for both the quarter and full year. Results for our tax exempt portfolios were slightly below benchmarks for both periods as well.

Our aggregate fixed income composite was down for the quarter and results were slightly below benchmark for both the quarter and full year results for our tax exempt portfolios were slightly below benchmarks for both periods as well.

Our fundamental bottom-up equity portfolios all underperformed in the fourth quarter. For the full year, our US equity composite provided results in line with its benchmark while our non-US equity composite generated over 400 basis points without performance.

Our fundamental bottom up equity portfolios, all underperformed in the fourth quarter.

For the full year, our U S equity composite provided results in line with its benchmark, while our non U S equity composite generated over 400 basis points of outperformance for the full year, our global equity composite outperformed by over 100 basis points, while our core equity unrestricted composites underperformed by Russell.

For the full year, our global equity composite outperform by over 100 basis points, will have core equity unrestricted composite underperform by roughly 100 basis points. With the deviations between the two, primarily explained by their respective over and underweightings to the US equity market versus their benchmarks.

100 basis points with the deviations between the two primarily explained by their respective over and under weightings to the U S equity market versus their benchmarks.

All four of these core, all equity strategies are beating their benchmarks for the three and five year trail and time periods. And in some cases, exceptionally so. For example, our non-US equity composite is out in front of its three and five year benchmarks by over 800 and 300 annualized basis points respectively and impressive the truth.

All four of these core all equity strategies are beating their benchmarks for the three and five year trailing trying periods and in some cases exceptionally so for example, our non U S equity composite is out in front of its three and five year benchmarks by over 803 hundred annualized basis points, respectively and impressive.

Yeah.

A rainier international small cap objective had an outstanding fourth quarter, substantially outperforming its benchmark by over 400 basis points and pushing full year relative results ahead of benchmark as well.

Our Rainier International small cap objective had an outstanding fourth quarter substantially outperforming its benchmark by over 400 basis points and pushing full year relative results ahead of benchmark as well.

The strategies longer run results remain exceptional with the sister international discovery fund generating three and five year annualized out performance of over 950 and 700 basis points respect.

Strategies longer run results remain exceptional with the sister International Discovery Fund generating three and five year annualized outperformance of over 950, and 700 basis points respectively.

Moreover, our real estate series continued its remarkable second half run delivering over 17 percentage points of absolute return and again outperforming its MSCI U.S. read bench.

Moreover, our real estate series continued its remarkable second half run delivering over 17 percentage points of absolute return and again outperforming its MSCI U S. REIT benchmark the strategy generated full year returns of over 43% and it is ahead of its benchmark for 135.

The strategy generated full year returns of over 43% and it is ahead of its benchmark for 1, 3, 5, and 10 year travel.

And 10 year trailing time periods, our disciplined value series returned to outperformance last quarter and narrowed its underperformance gap for the full year.

Our discipline value series returned to out performance last quarter and narrowed its underperformance gap for the full year.

We're proud to have delivered another terrific year of investment results for clients. Absolute returns were excellent for equity and multi-asset strategies, and relative results were generally strong again as well. As highlighted previously, we believe the investment environment has entered a period of higher risk as the global macroeconomy rapidly moves through its business sites.

We are proud to have delivered another terrific year of investment results for clients absolute returns were excellent for equity and multi asset strategies and relative results will generally strong again as well as.

As highlighted previously we believe the investment environment has entered a period of higher risk as the global macro economy macro economy rapidly moves towards business cycle consistent with our risk disciplines, we would expect our portfolios to gradually pull back on risk all else equal.

Consistent with our risk disciplines, we would expect our portfolios to gradually pull back on risk, all LC.

However, should markets present an attractive buying opportunity, our award-winning investment research team stands ready to capitalize on behalf of clients.

However should markets present, an attractive buying opportunity our award winning investment research team stands ready to capitalize on behalf of clients.

Turning now to strategic initiatives as we look back on both the quarter and the phone.

Turning now to strategic initiatives as we look back on both the quarter and the full year.

Our flows trajectory has significantly improved over the past several years, although net flows were again negative for the fourth quarter. In 2018 and 2019, we experienced approximately 3.7 billion and 4.5 billion of net outflows each year. Respect.

Our flow trajectory has significantly improved over the past several years, although net flows were again negative for the fourth quarter and.

2018 in 2019, we experienced approximately $3 7 billion at four 5 billion of net outflows each year, respectively. Since then driven by investment excellence and progress on our strategic initiatives.

Since then, through my investment excellence and progress on our strategic initiatives, we were able to slash net outflows in half in 2020 and by yet another 75% this...

We were able to slash net outflows in half in 2020 and by yet another 75% this year, bringing our total rate of net outflows from four 5 billion down to just over $6 billion in 2021.

bringing our total rate of net outflows from 4.5 billion down to just over 0.6 billion in 2021. We are continuing to moderate our rate of outflows while seeing signs of increased sales productivity leading to improvements in our rate of inflow.

We are continuing to moderate our rate of outflows, while seeing signs of increased sales productivity leading to improvements in our rate of inflows we have confidence in our plan to return to net positive flows at an aggregate firm level for the calendar year 2022.

We have confidence in our plan to return to net positive flows at an aggregate firm level for the calendar year 2022. Our intermediary channel has already experienced positive net flows for the past few quarters, and we project that our wealth management channel will be in positive net flows for 2022.

Our intermediary channel has already experienced positive net flows for the past few quarters and we project that our wealth management channel will be in positive net flows for 2022.

We are continuing to invest in sales and client service personnel across our channels. A number of our most recent hires in both wealth management and the intermediary channel are experienced and we anticipate that their productivity ramps will be fast.

We are continuing to invest in sales and client service personnel across our channels a number of our most recent hires in both wealth management and the intermediary channel our experienced and we anticipate that their productivity ramps will be faster.

On the intermediary side, we are focusing on leverage and efficiency.

On the intermediary side, we are focusing on leverage and efficiency, we have a unique and compelling offering that resonates with our current base of advisor partners and we are focused on improving brand awareness and communicating our story to find new opportunities.

We have a unique and compelling offering that resonates with our current base of advise your partners. And we are focused on improving brand awareness and communicating our story to find new opportunities.

We are continuing to take steps to evolve our investment strategies, our investment strategies to meet client needs. Delivering results for clients is our number one priority, and we will not waver in executing on our time test the processes.

We are continuing to take steps to evolve our investment strategies, our investment strategies to meet client needs and delivering results for clients is our number one priority and we will not waver in executing on our time tested processes.

Additionally, in 2022, we will deepen our ESG integration. It is clear that sustainable investing will only grow in importance, and we will remain competitive.

Additionally, in 2022, we will deepen our ESG integration. It is clear that sustainable investing will only grow in importance and we will remain competitive.

Also in 2022, we will continue to make progress in evolving our tax managed offerings, bolstering our existing competencies. Final implementation of advanced tax management tools will require systems development that will take most of the year to implement.

So in 2022, we will continue to make progress in evolving our tax managed offerings bolstering our existing competencies final implementation of advanced tax management tools will require systems development that will take most of the year to implement.

In 2021, we made significant progress in advancing our technology. Workday is now fully implemented, and this system is already helping us streamline both human resource and finance work.

In 2021, we've made significant progress in advancing our technology Workday is now fully implemented and this system is already helping our streamline both human resource and finance workflows.

Significant elements of Charles River are in place and are now aiding our trading and portfolio implementation.

Significant elements of Charles River are in place and are now eating our trading and portfolio implementation.

These initiatives are essential steps forward as we work to operate with the efficiency, agility and flexibility needed to compete in today's fast-paced environment. We look forward to further building out our technology capabilities in the year ahead.

These initiatives are essential steps forward as we work to operate with the efficiency agility and flexibility needed to compete in today's fast paced environment. We look forward to further building out our technology capabilities in the year ahead.

Finally, I'd like to take a moment to provide an update on people and culture. We are committed to having a talent-rich, diverse workforce, fully aligned with our clients and shareholders.

Finally, I'd like to take a moment to provide an update on people and culture. We are committed to having a talent rich diverse workforce fully aligned with our clients and shareholders. Both our deferred compensation plan and the long term incentive plan grants that were made last week had been invested in our mutual funds.

Both our deferred compensation plan and the long term incentive plan grants that were made last week have been invested in our mutual funds. As we continue to invest a

As we continue to invest alongside our clients, we strive to have a great culture that helps to attract and retain the best people.

We strive to have a great culture that helps to attract and retain the best people.

We continue to strengthen our culture and build a highly meritocratic and diverse workforce. In 2021, 44% of our new hires were female and 25% were ethnically diverse. Consistent with the goals we set for ourselves.

We continue to strengthen our culture and build a highly merit meritocratic and diverse workforce in 2021, 44% of our new hires were female and 25% were ethnically diverse consistent with the goals we set for ourselves.

As I look back on the year that was, I believe we made significant strides as we executed on our key strategic initiative.

As I look back on the year that was I believe we made significant strides as we executed on our key strategic initiatives.

We are simultaneously delivering investment excellence, high-touch client service, and compelling advice, all the while upgrading our major aspect of our infrastructure.

We are simultaneously delivering investment excellence high touch client service and compelling advice all the while upgrading our major aspects of our infrastructure. The combined effect has been delivering improved economics for shareholders with that I'll turn the call over to Paul for more detail on our financials.

The combined effect has been delivering improved economics for shareholders.

With that, I'll turn the call over to Paul for more detail on our financial.

Paul.

Thank you, Mark, for all everyone, and thanks for joining us today.

Thank you Mark Hello, everyone and thanks for joining us today.

Starting with that client flows and assets under management, AUM at the end of December was $22.5 billion, up from $22 billion as of September 30th.

Starting with net client flows and assets under management.

At the end of December was $22 $5 billion up from 22 billion as of September 30th.

We've benefited from strong market returns at the end of the year, with approximately 840 million of market appreciation that was offset by 270 million of net client outflows during the quarter.

We benefited from strong market returns at the end of the year with approximately 840 million of market appreciation was offset by 270 million of net client outflows during the quarter.

For the year ended, December 31, 2021, AUM increased by $2.4 billion or 12%.

For the year ended December 31, 2021 AUM.

<unk> increased by $2 $4 billion or 12%.

Fourth quarter gross client inflows were $685 million, a 12% improvement over last quarter, and included 220 million of wealth management inflows and $460 million into our intermediary and institutional channel.

Fourth quarter gross client inflows were 685 million, a 12% improvement over last quarter and included $220 million of wealth management inflows and $460 million into our intermediary and institutional channel.

Gross client outflows for the quarter were 960 million, an increase from 770 million reported last quarter.

Gross client outflows for the quarter were $960 million, an increase from 770 million reported last quarter.

Growth client outflows increased across channels. On the wealth management side, we reported $295 million of fourth quarter gross outflows with another $660 million of outflows from the Intermediary and Institutional Channel.

Gross client outflows increased across channels on the wealth management side, we reported $295 million of fourth quarter gross outflows with another $660 million of outflows from the intermediary and institutional channels.

Our overall AUM turnover rate for both the fourth quarter and full year 2021 was 17%. With the full year rate representing a 7% point improvement from 24% in 2020.

Our overall AUM turnover rate for both the fourth quarter and full year 2021 was 17% with the full year rate, representing a seven percentage point improvement from 24% in 2020.

Nevertheless, the rate of client outflows increased from what we observed for the first time months of 2021.

Nevertheless, the rate of client outflows increased from what we observed for the first nine months of 2021.

Looking closer at the outflows, we can see that the increase is primarily attributable to the rate of withdrawals from our separate account clients coupled with an increase in the turnover rate among our mutual fund clients during the quarter. Importantly, our separate account retention rate remains high at 98%, which tells us that the majority of the outflows can be explained by existing accounts, existing clients that are using their returns that we have delivered on their portfolios.

Importantly, our separate account retention rate remained high at 98%, which tells us that the majority of the outflows can be explained by existing account existing clients that are using their returns that we have delivered on their portfolios.

Despite the net client outflows for the quarter, we reported year-over-year improvement with regard to client flows.

Despite the net client outflows for the quarter, we reported year over year improvement with regard to client flows.

Gross inflows increased by 12% for the year from 2.4 billion in 2020 to 2.7 billion in 2021.

Gross inflows increased by 12% for the year from $2 4 billion in 2020 to $2 7 billion in 2021 Approx.

Approximately two-thirds of our gross inflows came through the intermediary institutional channel, which increased by 24% over 2020, driven by our intermediary distribution team.

Approximately two thirds of our gross inflows came through the intermediary institutional channel, which increased by 24% over 2020, driven by our intermediary distribution team.

On the Welcoming Management side, overall gross inflows decreased from 936 million in 2020 to 876 million in 2021.

On the wealth management side overall gross inflows decreased from $936 million in 2000 $20 million to $876 million in 2021.

However, upon closer inspection, we see that sales productivity among our financial consultants, meaning new dollars into the firm actually increased by 12% in 2021.

However, upon closer inspection, we see that sales productivity, among our financial consultants, meaning new dollars into the firm actually increased by 12% in 2021.

The difference between the decrease in reported wealth management inflows in the improvement in sales productivity stems from transfers between investment strategies, which were about $100 million higher in 2020 than in 2021. These transfers are included in both gross inflows and growth is gross outflows in our publicly reported numbers.

These transfers are included in both gross inflows and growth gross outflows and are publicly reported numbers.

Gross client outflows improved by 30%, decreasing from 4.7 billion in 2020 to 3.3 billion in 2021.

Gross client outflows improved by 30% decreasing from $4 7 billion in 2020 to $3 3 billion in 2021.

As Mark mentioned earlier, overall net client outflows of $623 million or a meaningful improvement from 2.3 billion net outflows in 2020 in 4.5 billion in 2019.

As Mark mentioned earlier overall net client outflows of $623 million were a meaningful improvement from $2 3 billion of net outflows in 2020 and $4 5 billion in 2019.

further, we observed that we observed neck client inflows for 2021 into our intermediary channel and into our mutual funds as our strengthened absolute and relative investment track records, helped in gathering assets through our third party intermediary partners.

Further we observed that we.

Observe net client inflows for 2021 into our intermediary channel and into our mutual funds as our strengthened absolute and relative investment track records helped in gathering assets through our third party intermediary partners.

Lastly, looking at specific investment strategies, we reported net inflows for the year into our high yield fund and Rainier International Small Cap Strategy.

Lastly, looking at a specific investment strategies, we reported net inflows for the year into our high yield fund and Rainier International small cap strategies.

Looking ahead, the anticipated institutional redemption that we addressed on our last call was completed during January and outflow of approximately $300 million.

Looking ahead, the anticipated institutional redemption that we addressed on our last call was completed during January and outflow of approximately $300 million. Despite this we remain committed to our target of positive net inflows for 2022 based on the investments we've made in our sales teams over the last two years the improved.

Despite this, we remain committed to our target of positive net inflows for 2022. Based on the investments we've made in our sales teams over the last two years, the improvement in our sales pipeline and our strong investment track record.

And our sales pipeline and our strong investment track records.

Turning to our fourth quarter P&L, we reported revenue of $37.8 million for the quarter compared to revenue of $37.5 million reported last quarter with overall revenue margins remaining consistent at 67 basis points.

Turning to our fourth quarter P&L, we reported revenue of $37 $8 million for the quarter compared to revenue of $37 $5 million reported last quarter with overall revenue margins remaining consistent at 67 basis points.

Operating expenses were $28.6 million in the quarter, an increase of approximately 300,000 compared to the previous quarter, and a decrease of 370,000 compared to the fourth quarter of 2020.

Operating expenses were $28 $6 million in the quarter, an increase of approximately 300000 compared to the previous quarter and a decrease of 370000 compared to the fourth quarter of 2020.

When comparing operating expenses against the last quarter, we see that other operating costs increased by 18%, and that was partially offset by decreases in compensation related costs and distribution expenses.

When comparing operating expenses against the last quarter, we see that other operating costs increased by 18% and that was partially offset by decreases in compensation and related costs and distribution expenses.

Confensation-related costs decreased by $830,000 when compared to last quarter.

Compensation related costs decreased by $830000 when compared to last quarter.

The decreases mainly the results of actual incentive compensation for the year being less than prior estimates based on fourth quarter results.

The decrease was mainly the result of actual incentive compensation for the year being less than prior estimates based on fourth quarter results.

Our compensation-related costs as a percentage of revenue was 47% down from 50% last quarter. As we move into year two of our deferred compensation program, we will no longer achieve the one-time savings that came during the initial year of implementation. And as a result, we anticipate the compensation expense and our compensation ratio will likely increase beginning in the first quarter of 2022.

Our compensation related cost as a percentage of revenue was 47% down from 50% last quarter.

As we move into year two of our deferred compensation program, we will no longer achieve the one time savings that came during the initial year of implementation and as a result, we anticipate the compensation expense and our compensation ratio will likely increase beginning in the first quarter of 2022.

Distribution, servicing and custody expenses decreased by $60,000 or 2% during the quarter generally in line with distribution revenue.

Distribution servicing and custody expenses decreased by $60000 or 2% during the quarter generally in line with distribution revenue.

Q4 other operating expenses of $8.2 million were a $1.2 million increase from last quarter. This increase was mainly the result of the increases in both consulting fees and technology license costs during the quarter.

Q4, other operating expenses of $8 $2 million were $1 $2 million increase from last quarter. This increase was mainly result of the increases in both consulting fees and technology license costs during the quarter.

With revenue of $37.8 million in operating expenses of $28.6 million, we finished the quarter with $9.2 million of operating income. 1% off from the $9.3 million reported last quarter, with operating income margins of 24.4%.

With revenue of $37.8 million in operating expenses of $28 6 million. We finished the quarter with $9 2 million of operating income 1% off from the $9 3 million reported last quarter with operating income margins of 24, 4%.

We reported a small, non-operating loss in the quarter, again generally in line with two-three. And as a result, we reported pretext income of $9.2 million.

We reported a small non operating loss in the quarter again generally in line with Q3 and as a result, we reported pretax income of $9 $2 million.

Looking at our non-gab financial metrics, we reported $560,000 of strategic restructuring costs, resulting in economic income of $9.7 million, again in line with the third quarter.

Looking at our non-GAAP financial metrics, we reported $560000 of strategic restructuring costs, resulting in economic income of $9 7 million again in line with the third quarter.

Okay.

Despite the fact that economic income was generally unchanged against the third quarter, economic net income per adjusted share increased by five cents per share to 35 cents in Q4.

Despite the fact that economic income was generally unchanged against the third quarter economic net income per adjusted share increased by five cents per share to <unk> 35 in Q4 the.

The improvement is the result of a decrease in our effective tax rates in the last quarter, with the fourth quarter rate coming in at 19.5%.

The improvement is the result of a decrease in our effective tax rate since last quarter with the fourth quarter rate coming in at 19, 5% the.

The improvement is the result of incremental tax benefits realized during the quarter, stemming from the vesting of equity awards in December , and the recognition of full-year impacts from permanent book tax income differences.

The improvement is the result of incremental tax benefits realized during the quarter stemming from the vesting of equity awards in December and the recognition of full year impacts from permanent book tax income differences.

With that, I'll summarize our four-year results. We reported revenue of $145.6 million. About 15% from 127 million in 2020, with overall revenue margins of 67 basis points for both years.

With that I'll summarize our full year results, we reported revenue of $145 $6 million up 15% from $127 million in 2020 with overall revenue margins of 67 basis points for both years.

Operating expenses were 113.1 million, a decrease of 170,000 from last-

Operating expenses were $113 1 million a decrease of 170000 from last year.

Compensation and related costs were $73.9 million, down by approximately 500,000 in 2021, and representing 51% of revenue.

Compensation and related costs were $73 $9 million down by approximately 500000 in 2021 and representing 51% of revenue.

Increased incentive compensation driven by revenue growth and investment performance was more than offset by savings resulting from the deferred compensation plan.

Increased incentive compensation driven by revenue growth and investment performance was more than offset by savings, resulting from the deferred compensation plan.

We finished the year with 279 employees up slightly from 276 at the start of the year as reductions in our back office staff were offset by additions to our sales team.

Distribution, servicing, and custody expenses decreased by approximately $420,000, which is primarily a result of business mix changes, trending toward asset classes that do not have distribution.

Distribution servicing and custody expenses decreased by approximately $420000, which is primarily a result of business mix changes trending toward asset classes that do not have distribution fees attached.

Other operating expenses of $29 million were up by about $760,000 when compared to 2020.

Other operating expenses of $29 million were up by about 760000, when compared to 2020.

The increase has due to increased implementation costs in software subscriptions, stemming from our technology overhaul, as well as a $1.2 million gain that offset other operating expenses last year, all of which were partially offset by savings in various other operating costs. Other operating costs as a percentage of revenue for the year were approximately 20%.

The increase is due to increased implementation costs and software subscriptions stemming from our technology overhaul as well as a $1.2 million gain that offset other operating expenses last year, all of which were partially offset by savings in various other operating costs.

Other operating costs as a percentage of revenue for the year were approximately 20%.

Overall, we reported operating income of $33 million in 2021 compared to $14 million for the year ended December 31st, 2020.

Overall, we reported operating income of $33 million in 2021 compared to $14 million for the year ended December 31 2020.

Our full year non-gap earnings per adjusted share was $1.24, which represents a 275% increase over the 33 cents per adjusted share reported for 2020.

Our full year non-GAAP earnings per adjusted share was $1.24, which represents a 275% increase over the 33 cents per adjusted share reported for 2020.

Turning to the balance sheet, we reported approximately $98 million in cash and investments as of December 31st. An increase of nearly $8.5 million compared to what we reported on September 30th.

Turning to the balance sheet, we reported approximately $98 million in cash and investments as of December 31, an increase of nearly $8 5 million compared to what we reported on September 30th.

Regarding ownership, the adjusted share count decreased slightly from 23.2 million adjusted shares outstanding as of September 30th to 22.9 million as of December 31st.

Regarding ownership the adjusted share count decreased slightly from $23 2 million adjusted shares outstanding as of September 30th to $22 9 million as of December 31st.

The components of our adjusted chairs outstanding are provided within the investor's supplement.

The components of our adjusted shares outstanding are provided within the Investor supplement.

As of December 31, our employees and directors own approximately 36% of the adjusted share count, including unvested awards, but only 24% of the voteable class A common stock.

As of December 31st our employees and directors own approximately 36% of the adjusted share count, including Unvested Awards, but only 24% of the Votable class a common stock.

As we discussed on prior calls, we accomplished a great deal related to our overall balance sheet and capital structure during 2021.

As we've discussed on prior calls we accomplished a great deal related to our overall balance sheet and capital structure during 2021.

We returned approximately $7.5 million of cash to shareholders throughout the year by way of share repurchases and by reinstituting our 5 cent per share quarterly dividend beginning in the third quarter of 2021. Additionally, we made strides to further simplify our complex corporate structure through the 2021 annual exchange process, after which the class A shareholders of many in a pair ink owned more than 97% of the company's operating subsidiary, many in a pair group.

We returned approximately $7 $5 million of cash to shareholders throughout the year by way of share repurchases and by reinstituting, our five cent per share quarterly dividend beginning in the third quarter of 2021.

Additionally, we made strides to further simplify our complex corporate structure through the 2021 annual exchange process after which the class a shareholders of Manning <unk> Napier, Inc. Owned more than 97% of the company's operating subsidiary many in our peer group.

And while we're on the topic of the balance sheet and ownership, there are a few first quarter 2022 updates that I'll speak to at this time.

And while we're on the topic of the balance sheet in ownership. There are a few first quarter 2022 updates that I'll speak to at this time.

First, earlier this month, we had a tron other tron of restricted stock units vest under our long-term incentive plan.

First earlier this month, we had a try another tranche of restricted stock units vest under our long term incentive plan.

Approximately 580,000 previously granted restricted stock units vested and after withholding a portion of the newly vested shares to settle employee income taxes due Approximately 370,000 class A shares were issued

Approximately 580000 previously granted restricted stock units divested and after withholding a portion of the newly vested shares to settle employee income taxes do approximately 370000 class a shares were issued.

So while Class A common stock increased are fully diluted share count decreased by approximately 210,000 shares as a result of this vest.

So while class a common stock increased our fully diluted share count decreased by approximately 210000 shares as a result of this vesting.

With the exception of another 80,000 RSU scheduled to vest on December 31st, there are no other RSU scheduled to vest during 2022.

With the exception of another 80000 Rs use scheduled to vest on December 31st there are no. Other RF you schedule to vast during 2022.

And in the meantime, we are beginning the process of preparing a new equity compensation proposal for shareholders to vote later this year to replace the plan that expired in 2021.

And in the meantime, we are beginning the process of preparing a new equity compensation proposal for shareholders to vote. Later this year to replace the plan that expired in 2021.

Okay.

Second, given the absence of the equity-based compensation plan, as part of our year-end compensation reviews, we awarded long-term incentives in the form of investment into our mutual funds that will again best over five years.

Second given the absence of the equity based compensation plan as part of our year end compensation reviews, we awarded long term incentives in the form of investment into our mutual funds that will again vest over five years.

We continue to believe that long-term incentives are an important tool and our overall competition philosophy is a way to ensure employee, client and shareholder outcomes are properly aligned.

We continue to believe that long term incentives are an important tool in our overall compensation philosophy is a way to ensure employee client and shareholder outcomes are properly aligned.

The Mutual Fund Long-term Award is fully funded at the time of grant, meaning that we have taken approximately $7 million of cash and invested in many and appear funds on behalf of our employees that will begin to vest over the next five years.

The mutual fund long term award is fully funded at the time of grant, meaning that we have taken approximately $7 million of cash and invested it in Manning <unk> Napier funds on behalf of our employees that will begin to vest over the next five years.

So while there's no dilutive impact to class A shareholders, this will appear as a use of cash during the first quarter and will begin to record compensation expense over the vesting period beginning in Q1 2022.

So while there is no dilutive impact to class a shareholders. This will appear as a use of cash during the first quarter and will begin to report compensation expense over the vesting period, beginning in Q1 2022.

This balance will appear as a marketable security on our balance sheet, and we will potentially have increased, unrealized holding gains and losses on our non-operating P&L as a result of this long-term incentive plan.

This balance will appear as a marketable security on our balance sheet, and we will potentially have increased unrealized holding gains and losses on our nonoperating P&L as a result of this long term incentive plan.

And lastly, our Board of Directors recently authorized a new $10 million share repurchase program that will expire at the end of 2022.

And lastly, our board of directors recently authorized a new $10 million share repurchase program that will expire at the end of 2022.

Returning capital shareholders and optimizing our balance sheet resources remains a priority for us as we begin the year.

Returning capital to shareholders and optimizing our balance sheet resources remains a priority for us as we begin the year.

And wrapping up today's call, I'll reiterate the goals that we have discussed for the year.

And wrapping up todays call I will reiterate the goals that we have discussed for the year.

We remain committed to achieving positive net client cash flows in 2022. And our entire organization is focused on supporting our sales teams to help accomplish this important milestone.

We remain committed to achieving positive net client cash flows in 2022 and our entire organization is focused on supporting our sales teams to help accomplish this important milestone.

We are looking forward to completing the work on our digital transformation and to start aggressively pursuing important work on the re-engineering of business processes and resulting synergies.

We are looking forward to completing the work on our digital transformation and to start aggressively pursuing important work and the reengineering, our business processes and resulting synergies.

We will continue to evaluate our product and service offerings, as well as gaps in our lineup, including pursuing opportunities to further enhance our comprehensive wealth management offering.

We will continue to evaluate our product and service offerings as well as gaps in our lineup, including pursuing opportunities to further enhance our comprehensive wealth management offering.

From a financial perspective, we expect that gap earnings will be impacted by the loss of the one-time savings realized in 2021 from our deferred compensation plan, as well as the anticipated increase in non-cash depreciation charges that are forthcoming upon completion of the digital transformation.

From a financial perspective, we expect the GAAP earnings will be impacted by the loss of the onetime savings realized in 2021 from our deferred compensation plan as well as the anticipated increase in noncash depreciation charges that are forthcoming upon completion of the digital transformation.

Further, we believe that the strategic restructuring efforts that initially began when Mark reset our strategy in 2019 are now completed.

Further we believe that the strategic restructuring efforts that initially began when mark reset our strategy in 2019 are now completed give.

Given these factors, as we look ahead to 2022, we intend to move away from economic income as our non- GAAP financial measure, and instead intend to measure ourselves based on adjusted EBITDA. To find as earnings before interest, taxes, depreciation and amortization, including any net gains and losses related to changes and liabilities under our tax receivable agreement, which we believe will be a more representative measure of our results going forward.

Given these factors as we look ahead to 2022, we intend to move away from economic income as our non-GAAP financial measure and instead intend to measure ourselves based on adjusted EBITDA defined as earnings before interest taxes, depreciation and amortization, including any net gains and losses.

The changes in liabilities under our tax receivable agreement, which we believe will be a more represented representative measure of our results going forward.

Similarly, we believe that cash from operations will be another important metric to measure our success. And we anticipate delivering strong cash from operations given our simplified ownership structure and the presence of non-cash expenses on our P&L.

Similarly, we believe that cash from operations will be another important metric to measure our success and we anticipate delivering strong cash from operations given our simplified ownership structure and the presence of noncash expenses on our P&L.

In closing, we're excited about the progress that we've made in improving sales productivity and operating results while adding value and returning capital to shareholders. However, as we begin 2022, important work continues on each of these fronts as we strive to achieve results for clients and shareholders in the coming year.

In closing we're excited about the progress that we've made in improving sales productivity and operating results, while adding value in returning capital to shareholders. However, as we begin 2022 important work continues on each of these fronts as we strive to achieve results for clients and shareholders.

In the coming year.

That concludes today's call. If you have any questions on the topics addressed today, please contact us using the Inquiries Portal on the Investor Relations website and we'll promptly address your inquiry. Thank you for listening and for your interest in Manning and Appear and I'll now turn the call back over to the operator. Aaron?

That concludes today's call. If you have any questions on the topics address today, please contact us using the inquiries portal on the Investor Relations website, and we'll promptly address your inquiry.

You for listening and for your interest in Manning <unk> Napier and I'll now turn the call back over to the operator Erin.

Thank you. This does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.

And our go.

Okay.

Hi.

Yeah.

Q4 2021 Manning & Napier Inc Earnings Call

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