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SEI Reports First-Quarter 2019 Financial Results

OAKS, Pa., April 24, 2019 /PRNewswire/ -- SEI Investments Company (SEIC) today announced financial results for the first-quarter 2019. Diluted earnings per share were $0.73 in first-quarter 2019 compared to $0.86 in first-quarter 2018.

Consolidated Overview



(In thousands, except earnings per share)


For the Three Months
Ended March 31,





2019


2018


%








Revenues


$400,820


$405,598


(1)%

Net income


113,981


139,838


(18)%

Diluted earnings per share


$0.73


$0.86


(15)%


"Our first-quarter earnings reflect the recovery from the financial markets' swoon in late 2018, offset by reduced processing fees from non-recurring activities and a higher tax rate. While our net sales results for the quarter were down, our company's new sales activities, which are not reflected in first-quarter close results, are robust, and we expect they will translate into stronger levels in the future," said Alfred P. West, Jr., SEI Chairman and CEO.

"As we continue to advance our industry's modernization, SEI hit a key milestone with the completion of the Investment Advisors segment's migration, as well as additional client conversions, to the SEI Wealth PlatformSM late in the quarter. While keeping our focus on costs and profitability, we continue making key investments in our company to enhance long-term growth and shareholder value."

Summary of First-Quarter Results by Business Segment

(In thousands)


For the Three Months 
Ended March 31,





2019


2018


%

Private Banks:







Revenues


$118,259



$122,164



(3)%

Expenses


110,962



112,202



(1)%

Operating Profit


7,297



9,962



(27)%

Operating Margin


6

%


8

%










Investment Advisors:







Revenues


94,761



99,192



(4)%

Expenses


52,502



52,453



—%

Operating Profit


42,259



46,739



(10)%

Operating Margin


45

%


47

%










Institutional Investors:







Revenues


80,113



85,491



(6)%

Expenses


38,754



41,249



(6)%

Operating Profit


41,359



44,242



(7)%

Operating Margin


52

%


52

%










Investment Managers:







Revenues


104,649



96,855



8%

Expenses


69,066



63,338



9%

Operating Profit


35,583



33,517



6%

Operating Margin


34

%


35

%










Investments in New Businesses:







Revenues


3,038



1,896



60%

Expenses


5,940



5,098



17%

Operating Loss


(2,902)



(3,202)



NM








Totals:







Revenues


$400,820



$405,598



(1)%

Expenses


277,224



274,340



1%

Corporate overhead expenses


20,035



14,942



34%

Income from operations


$103,561



$116,316



(11)%

 

First-Quarter Business Highlights:

  • Revenues from Asset management, administration, and distribution fees decreased due to lower assets under management from the carryover effect of the downturn in the capital markets during the fourth-quarter 2018, negatively impacting our asset-based fee revenues; however, this decrease was partially offset by increased fees from higher assets under administration, resulting from positive cash flows from new and existing clients in our Investment Managers segment.
  • Our average assets under management, excluding LSV, decreased $10.4 billion, or four percent, to $223.2 billion, as compared to $233.6 billion during the first-quarter 2018 (see attached Average Asset Balances schedules for further details).
  • Our average assets under administration increased $63.9 billion, or 12 percent, to $594.2 billion in the first-quarter 2019, as compared to $530.3 billion during the first-quarter 2018 (see attached Average Asset Balances schedules for further details).
  • Our Subadvisory, distribution and other asset management costs decreased in first-quarter 2019, primarily from lower assets under management due to the previously described unfavorable market conditions.
  • Sales events, net of client losses, during first-quarter 2019 totaled approximately $6.2 million and are expected to generate net annualized recurring revenues of approximately $1.2 million when contract values are fully realized. Sales events were lower than normal due to client loss activity in our Institutional Investors segment, flat cash flows across our Investment Advisors and Private Banks segments, limited positive sales activity in our Private Banks segment, and solid sales in our Investment Managers segment.
  • Our earnings from LSV decreased by $3.3 million, or eight percent, to $37.3 million in first-quarter 2019 as compared to $40.6 million in first-quarter 2018. The decrease in earnings was primarily due to a decline in assets under management from the market conditions in fourth-quarter 2018, as well as reduced performance fees earned by LSV.
  • Our operating expenses during the first-quarter 2019 increased. These expenses, primarily personnel costs, generally consist of operational, technology development and maintenance, and marketing costs, and are mainly related to our solutions offerings, as well as servicing existing clients and acquiring new clients. The Company incurred severance expense during the quarter of approximately $4.0 million, all recorded in corporate overhead expenses.
  • We capitalized $9.7 million of software development costs in first-quarter 2019 for continued enhancements to the SEI Wealth Platform.
  • Our effective tax rates were 22.1 percent in first-quarter 2019 and 11.9 percent in first-quarter 2018. The increase in our effective tax rate was primarily due to reduced tax benefits from a lower volume of stock option exercise activity during the quarter as compared to the prior year period.
  • We repurchased 1.7 million shares of our common stock for $88.8 million during the first-quarter 2019.

Earnings Conference Call
A conference call to review earnings is scheduled for 4:30 p.m. Eastern Time on April 24, 2019. Investors may listen to the call at seic.com/ir-events. Investors may also listen to a replay by telephone at (USA) 800-475-6701; (International) 320-365-3844, access code 466676.

About SEI
After 50 years in business, SEI (SEIC) remains a leading global provider of investment processing, investment management, and investment operations solutions that help corporations, financial institutions, financial advisors, and ultra-high-net-worth families create and manage wealth. As of March 31, 2019, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages, advises or administers $945 billion in hedge, private equity, mutual fund and pooled or separately managed assets, including $332 billion in assets under management and $609 billion in client assets under administration. For more information, visit seic.com.

This release contains forward-looking statements within the meaning of the rules and regulations of the Securities and Exchange Commission.  In some cases you can identify forward-looking statements by the words ''may'', ''will'', ''expect'', ''believe'' and ''continue'' or ''appear." Our forward-looking statements include discussions about future operations, strategies and financial results, including our expectations as to revenue that we believe will be generated by sales events that occurred during the quarter, the degree to which new sales activity will translate into stronger levels in the future, and the degree to which the manner in which we will seek to invest will create opportunities for growth and value. You should not place undue reliance on our forward-looking statements as they are based on the current beliefs and expectations of our management and subject to significant risks and uncertainties many of which are beyond our control or are subject to change. Although we believe the assumptions upon which we base our forward-looking statements are reasonable, they could be inaccurate. Some of the risks and important factors that could cause actual results to differ from those described in our forward-looking statements can be found in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission and available on our website at https://www.seic.com/investor-relations and on the Securities and Exchange Commission's website (www.sec.gov). There may be additional risks that we do not presently know or that we currently believe are immaterial which could also cause actual results to differ from those contained in our forward-looking statements. We do not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

 

 

SEI INVESTMENTS COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)




For the Three Months 
Ended March 31,



2019


2018






Asset management, admin. and distribution fees


$313,944



$316,209


Information processing and software servicing fees


86,876



89,389







Total revenues


400,820



405,598







Subadvisory, distribution and other asset mgmt. costs


43,805



45,205


Software royalties and other information processing costs


8,128



8,718


Compensation, benefits and other personnel


130,335



124,277


Stock-based compensation


5,038



5,195


Consulting, outsourcing and professional fees


50,206



48,707


Data processing and computer related


20,992



20,591


Facilities, supplies and other costs


18,745



17,613


Amortization


12,679



11,854


Depreciation


7,331



7,122







Total expenses


297,259



289,282







Income from operations


103,561



116,316







Net gain (loss) on investments


1,279



(410)


Interest and dividend income


4,257



2,502


Interest expense


(157)



(257)


Equity in earnings of unconsolidated affiliate


37,317



40,607







Income before income taxes


146,257



158,758







Income taxes


32,276



18,920







Net income


$113,981



$139,838







Basic earnings per common share


$0.74



$0.89







Shares used to calculate basic earnings per share


153,310



157,434







Diluted earnings per common share


$0.73



$0.86







Shares used to calculate diluted earnings per share


156,541



163,424


 

 

SEI INVESTMENTS COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)




March 31,


December 31,



2019


2018

Assets





Current Assets:





  Cash and cash equivalents


$669,323



$754,525


  Restricted cash


3,517



3,514


  Receivables from investment products


52,562



49,869


  Receivables, net of allowance for doubtful accounts of $633 and $718


333,724



315,336


  Securities owned


33,433



30,892


  Other current assets


35,049



36,676


  Total Current Assets


1,127,608



1,190,812







  Property and Equipment, net of accumulated depreciation of $345,129 and $338,206


146,753



145,863


  Operating Lease Right-of-Use Assets


45,297




  Capitalized Software, net of accumulated amortization of $406,871 and $395,171


307,736



309,500


  Investments Available for Sale


109,824



111,901


  Investments in Affiliated Funds, at fair value


5,339



4,887


  Investment in Unconsolidated Affiliate


56,422



52,342


  Goodwill


64,489



64,489


  Intangible Assets, net of accumulated amortization of $6,011 and $5,090


30,749



31,670


  Deferred Contract Costs


24,145



24,007


  Deferred Income Taxes


1,877



2,042


  Other Assets, net


32,882



34,155


  Total Assets


$1,953,121



$1,971,668







Liabilities and Equity





Current Liabilities:





  Accounts payable


$5,242



$10,920


  Accrued liabilities


173,860



279,634


  Short-term operating lease liabilities


8,448




  Deferred revenue


4,979



5,154


  Total Current Liabilities


192,529



295,708







  Long-term Taxes Payable


803



803


  Deferred Income Taxes


56,909



57,795


  Long-term Operating Lease Liabilities


41,838




  Other Long-term Liabilities


24,492



24,215


  Total Liabilities


316,571



378,521







Shareholders' Equity:





  Common stock, $.01 par value, 750,000 shares authorized; 152,276 and 153,634 
  shares issued and outstanding


1,523



1,536


  Capital in excess of par value


1,111,366



1,106,641


  Retained earnings


552,381



517,970


  Accumulated other comprehensive loss, net


(28,720)



(33,000)


  Total Shareholders' Equity


1,636,550



1,593,147


  Total Liabilities and Shareholders' Equity


$1,953,121



$1,971,668


 

 

ENDING ASSET BALANCES

(In millions)  (Unaudited)





Mar. 31,


Jun. 30,


Sept. 30,


Dec. 31,


Mar. 31,




2018


2018


2018


2018


2019

Private Banks:












Equity and fixed-income programs



$22,917



$22,448



$22,739



$20,453



$22,369


Collective trust fund programs



4



4



4



4



4


Liquidity funds



3,537



3,471



3,142



3,633



3,753


Total assets under management



$26,458



$25,923



$25,885



$24,090



$26,126


Client assets under administration



22,411



22,435



23,394



20,226



22,886


Total assets



$48,869



$48,358



$49,279



$44,316



$49,012














Investment Advisors:












Equity and fixed-income programs



$62,176



$62,227



$63,958



$55,395



$61,277


Collective trust fund programs



5



5



5



7



5


Liquidity funds



2,399



3,101



3,182



5,948



4,362


Total assets under management



$64,580



$65,333



$67,145



$61,350



$65,644














Institutional Investors:












Equity and fixed-income programs



$85,607



$83,687



$85,248



$78,765



$82,578


Collective trust fund programs



72



73



74



79



79


Liquidity funds



2,727



2,594



2,544



2,234



2,529


Total assets under management



$88,406



$86,354



$87,866



$81,078



$85,186


Client assets under advisement



4,185



4,544



4,131



3,359



3,694


Total assets



$92,591



$90,898



$91,997



$84,437



$88,880














Investment Managers:












Equity and fixed-income programs



$97



$95



$99



$89



$—


Collective trust fund programs



45,062



45,213



46,934



42,804



49,232


Liquidity funds



732



496



580



336



704


Total assets under management



$45,891



$45,804



$47,613



$43,229



$49,936


Client assets under administration (A)



507,694



522,700



552,411



552,318



585,997


Total assets



$553,585



$568,504



$600,024



$595,547



$635,933














Investments in New Businesses:












Equity and fixed-income programs



$1,114



$1,120



$1,179



$1,257



$1,466


Liquidity funds



72



106



162



189



218


Total assets under management



$1,186



$1,226



$1,341



$1,446



$1,684


Client assets under advisement



49



807



730



687



729


Total assets



$1,235



$2,033



$2,071



$2,133



$2,413














LSV Asset Management:












Equity and fixed-income programs (B)



$108,186



$106,505



$109,363



$96,114



$103,163














Total:












Equity and fixed-income programs (C)



$280,097



$276,082



$282,586



$252,073



$270,853


Collective trust fund programs



45,143



45,295



47,017



42,894



49,320


Liquidity funds



9,467



9,768



9,610



12,340



11,566


Total assets under management



$334,707



$331,145



$339,213



$307,307



$331,739


Client assets under advisement



4,234



5,351



4,861



4,046



4,423


Client assets under administration (D)



530,105



545,135



575,805



572,544



608,883


Total assets



$869,046



$881,631



$919,879



$883,897



$945,045


 

(A)  

Client assets under administration in the Investment Managers segment include $57.2 billion of assets that are at fee levels below our normal full-service assets (as of March 31, 2019).

(B)  

Equity and fixed-income programs include $2.7 billion of assets managed by LSV in which fees are based on performance only (as of March 31, 2019).

(C)  

Equity and fixed-income programs include $5.5 billion of assets invested in various asset allocation funds at March 31, 2019.

(D)  

In addition to the numbers presented, SEI also administers an additional $11.4 billion in Funds of Funds assets (as of March 31, 2019) on which SEI does not earn an administration fee.


 

 

AVERAGE ASSET BALANCES

(In millions) (Unaudited)





1st Qtr.


2nd Qtr.


3rd Qtr.


4th Qtr.


1st Qtr.




2018


2018


2018


2018


2019

Private Banks:












Equity and fixed-income programs



$23,412



$22,870



$22,516



$21,383



$21,831


Collective trust fund programs



4



4



4



4



4


Liquidity funds



3,720



3,516



3,376



3,265



3,706


Total assets under management



$27,136



$26,390



$25,896



$24,652



$25,541


Client assets under administration



23,398



22,605



23,175



21,608



22,098


Total assets



$50,534



$48,995



$49,071



$46,260



$47,639














Investment Advisors:












Equity and fixed-income programs



$62,650



$62,890



$63,399



$59,954



$58,732


Collective trust fund programs



5



5



5



4



5


Liquidity funds



2,290



2,429



2,958



3,452



5,298


Total assets under management



$64,945



$65,324



$66,362



$63,410



$64,035














Institutional Investors:












Equity and fixed-income programs



$87,207



$85,045



$84,885



$81,833



$81,725


Collective trust fund programs



77



72



74



75



79


Liquidity funds



2,905



2,621



2,469



2,449



2,375


Total assets under management



$90,189



$87,738



$87,428



$84,357



$84,179


Client assets under advisement



4,383



4,301



4,263



3,566



3,494


Total assets



$94,572



$92,039



$91,691



$87,923



$87,673














Investment Managers:












Equity and fixed-income programs



$96



$109



$95



$96



$—


Collective trust fund programs



49,243



45,646



45,856



44,009



47,322


Liquidity funds



834



649



555



480



559


Total assets under management



$50,173



$46,404



$46,506



$44,585



$47,881


Client assets under administration (A)



506,951



522,679



541,063



561,043



572,065


Total assets



$557,124



$569,083



$587,569



$605,628



$619,946














Investments in New Businesses:












Equity and fixed-income programs



$1,105



$1,090



$1,148



$1,198



$1,394


Liquidity funds



70



95



146



179



202


Total assets under management



$1,175



$1,185



$1,294



$1,377



$1,596


Client assets under advisement



50



813



777



958



708


Total assets



$1,225



$1,998



$2,071



$2,335



$2,304














LSV Asset Management:












Equity and fixed-income programs (B)



$109,904



$108,380



$109,527



$99,791



$104,517














Total:












Equity and fixed-income programs (C)



$284,374



$280,384



$281,570



$264,255



$268,199


Collective trust fund programs



49,329



45,727



45,939



44,092



47,410


Liquidity funds



9,819



9,310



9,504



9,825



12,140


Total assets under management



$343,522



$335,421



$337,013



$318,172



$327,749


Client assets under advisement



4,433



5,114



5,040



4,524



4,202


Client assets under administration (D)



530,349



545,284



564,238



582,651



594,163


Total assets



$878,304



$885,819



$906,291



$905,347



$926,114


 

(A)  

Average client assets under administration in the Investment Managers segment during first-quarter 2019 include $57.0 billion that are at fee levels below our normal full-service assets.

(B)  

Equity and fixed-income programs include $2.7 billion of average assets managed by LSV in which fees are based on performance only during first-quarter 2019.

(C) 

Equity and fixed-income programs include $5.3 billion of average assets invested in various asset allocation funds during first-quarter 2019.

(D) 

In addition to the numbers presented, SEI also administers an additional $11.3 billion of average assets in Funds of Funds assets during first-quarter 2019 on which SEI does not earn an administration fee.

 

Investor Contact:   

Media Contact:

Lindsey Opsahl      

Leslie Wojcik

SEI          

SEI

+1 610-676-4052     

+1 610-676-4191

lopsahl@seic.com      

lwojcik@seic.com

 

Cision

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