Legg Mason Inc. bounced back from its first loss since 2009 with a profit of $80.8 million in the quarter that ended Sept. 30, the Baltimore-based investment company announced Friday.
In the previous quarter, Legg lost $9.5 million, blaming the shortfall on the costs of refinancing debt and launching two new funds.
In the July-to-September quarter last year, Legg earned $56.7 million. On a per-share basis, Legg made 60 cents per share in the latest period, up from 39 cents in the same quarter last year. Those results beat analysts' estimates by 6 cents per share.
Revenue in the second quarter reached $640.3 million, up 4 percent from a year ago.
This is Legg's first earnings report since Mark Fetting stepped down as chairman and CEO after less than five years leading the company.
Despite some improvements in the company's performance, Joseph A. Sullivan, interim CEO, told analysts Friday morning, "I recognize the status quo is not an option."
Legg has been trying to stem the outflow of investor dollars from its funds. The company saw a net inflow of $200 million in the latest quarter. Assets under management in the quarter reached $650.7 billion, up from $631.8 billion at the end of June. Market appreciation accounted for most of that growth.
The company is looking at expanding its sales force and might undertake acquisitions to fill gaps in international and global funds, Sullivan said.
"The quarter signifies more progress toward an eventual turnaround," said Macrae Sykes, an analyst with Gabelli & Co. in Rye, N.Y.
Though Legg continues to attract money to its fixed-income funds, it faces challenges on the equity side, Sykes said. The company expects $2 billion in redemptions from equity funds this month.
Legg has hired executive recruiter Korn/Ferry International to assist in the search for a permanent CEO.
"There is no stated time frame for completion of the search, but realistically, it could take several months," Sullivan said.
Industry experts have speculated that Fetting's departure was advocated internally by Nelson Peltz, an activist shareholder whose company owns 9.5 percent of Legg, making it the second-largest shareholder. Peltz negotiated a seat on the board three years ago, and in exchange, agreed not to grouse publicly about Legg or agitate for the sale of its subsidiaries. That pact expires Nov. 15.
Initially, the company knew little of Peltz's intentions, said Sullivan, adding that Peltz turned out to be a "constructive member of the board."
An analyst asked executives whether the expiration of the standstill agreement with Peltz could affect Legg's ability to attract a new CEO.
Peter Nachtwey, Legg's chief financial officer, played down any impact, noting that he joined Legg last year partly because of its board, which included Peltz.
Sykes said investors will be watching the CEO selection and for changes once the Peltz agreement expires. He said he doesn't expect a major acquisition by Legg.
Analysts have speculated that Legg, which owns several subsidiaries that run largely independent of the parent, might sell or spin off some of them.
However, Sullivan said, "We are committed to the affiliate model."
During the quarter, Legg completed the repurchase of 3.6 million shares for $90 million.
In New York Stock Exchange trading, Legg's stock closed up 23 cents at $24.93 a share.
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