SEI Reports Second-Quarter 2023 Financial Results

OAKS, Pa., July 26, 2023 /PRNewswire/ -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the second-quarter 2023. Diluted earnings per share were $0.89 in second-quarter 2023 compared to $0.81 in second-quarter 2022.

Consolidated Overview
(In thousands, except earnings per share)		For the Three Months Ended June 30,						For the Six Months Ended June 30,
		2023		2022		%		2023		2022		%
Revenues		$489,057		$481,670		2 %		$958,176		$1,063,113		(10) %
Net income		118,851		111,276		7 %		225,866		301,584		(25) %
Diluted earnings per share		$0.89		$0.81		10 %		$1.68		$2.17		(23) %

"Our second-quarter financial results reflect solid sales and revenue growth and increasing profitability. In particular, our technology and investment processing businesses delivered strong performance in the quarter, contributing to both top- and bottom-line growth," said CEO Ryan Hicke.

"Over the past year, we have evolved our leadership team, invested in talent, increased our market presence, and aligned our resources to drive an enterprise-wide approach to our markets. We are engaged with our clients, building new relationships across our markets, and expanding our reach globally, and we will continue making prudent, strategic investments to drive long-term, sustainable growth for our stakeholders."

Summary of Second-Quarter Results by Business Segment

(In thousands)		For the Three Months  Ended June 30,						For the Six Months  Ended June 30,
		2023		2022		%		2023		2022		%
Private Banks:
Revenues		$134,099		$124,184		8 %		$256,702		$337,732		(24) %
Expenses		116,061		121,060		(4) %		230,337		243,015		(5) %
Operating Profit		18,038		3,124		NM		26,365		94,717		(72) %
Operating Margin		13 %		3 %				10 %		28 %
Investment Advisors:
Revenues		109,580		113,194		(3) %		216,118		232,424		(7) %
Expenses		64,178		63,375		1 %		127,724		127,895		— %
Operating Profit		45,402		49,819		(9) %		88,394		104,529		(15) %
Operating Margin		41 %		44 %				41 %		45 %
Institutional Investors:
Revenues		75,145		83,483		(10) %		149,435		170,322		(12) %
Expenses		45,516		43,925		4 %		86,384		89,283		(3) %
Operating Profit		29,629		39,558		(25) %		63,051		81,039		(22) %
Operating Margin		39 %		47 %				42 %		48 %
Investment Managers:
Revenues		165,339		155,926		6 %		326,025		312,827		4 %
Expenses		107,761		100,807		7 %		213,627		199,644		7 %
Operating Profit		57,578		55,119		4 %		112,398		113,183		(1) %
Operating Margin		35 %		35 %				34 %		36 %
Investments in New Businesses:
Revenues		4,894		4,883		— %		9,896		9,808		1 %
Expenses		10,571		12,844		(18) %		22,215		24,794		(10) %
Operating Loss		(5,677)		(7,961)		NM		(12,319)		(14,986)		NM
Totals:
Revenues		$489,057		$481,670		2 %		$958,176		$1,063,113		(10) %
Expenses		344,087		342,011		1 %		680,287		684,631		(1) %
Corporate Overhead Expenses		32,369		23,799		36 %		63,521		47,823		33 %
Income from Operations		$112,601		$115,860		(3) %		$214,368		$330,659		(35) %

Second-Quarter Business Highlights:

• Revenues from Information processing and software servicing fees in the second-quarter 2023 include a one-time early contractual buyout fee of $10.5 million relating to an investment processing client of the Private Banks segment that was acquired by an existing client. The Company will continue its relationship and provide investment processing services to both entities.

• Revenues from Assets under management, administration, and distribution fees decreased primarily from lower assets under management in equity and fixed income programs from market depreciation during 2022 and negative cash flows from SEI fund programs due to client losses in the Investment Advisors and Institutional Investors segments. The improvement in market conditions and positive cash flows into separately managed account programs and Strategist programs during 2023 partially offset the decline in revenues.

• Average assets under management in equity and fixed income programs, excluding LSV, decreased $8.1 billion, or 5%, to $169.0 billion in the second-quarter 2023, as compared to $177.1 billion during the second-quarter 2022 (see attached Average Asset Balances schedule for further details).

• Revenue from Asset management, administration, and distribution fees of the Investment Managers segment increased from new business and increases from existing alternative investment clients due to new products and additional services. The decrease in average assets under administration reflect a loss of a significant client in 2022 which was not charged asset-based fees.

• Net sales events in the Private Banks and Investment Managers segments during second-quarter 2023 were $31.1 million and are expected to generate net annualized recurring revenues of approximately $25.4 million when contract values are completely realized.

• Net sales events in asset management-related businesses of the Investment Advisors and Institutional Investors segments and the Asset Management Distribution (AMD) business in the Private Banks segment during second-quarter 2023 were negative $1.9 million.

• Operational expenses increased due to higher personnel costs from business growth, competitive labor markets, and the impact of inflation on wages and services. Operational expenses also increased due to personnel costs and investments in compliance infrastructure to meet new regulatory requirements. The increase was substantially offset by lower direct costs related to asset management revenues and lower amortization expense.

• Expenses in the Institutional Investors segment include the impact of a one-time operational charge of $4.5 million related to a client reimbursement.

• Corporate overhead expenses include a $2.5 million item related to a consulting engagement which ended during the second-quarter 2023.

• Earnings from LSV increased to $32.7 million in the second-quarter 2023 as compared to $29.8 million in the second-quarter 2022 due to increased performance fees and market appreciation. Net negative cash flows from existing clients, and client losses partially offset the increase in earnings from LSV.

• We capitalized $9.0 million of software development costs in second-quarter 2023, of which $4.7 million was for continued enhancements to the SEI Wealth Platform^SM. We also capitalized $4.3 million of software development costs in second-quarter 2023 for a new platform for the Investment Managers segment.

• Amortization expense related to SWP was $6.4 million in second-quarter 2023 as compared to $11.8 million in second-quarter 2022. The decline in amortization expense was due to the amortization period of the initial development costs related to SWP which ended in second-quarter 2022.

• Effective tax rates were 23.4% in second-quarter 2023 and 23.1% in second-quarter 2022.

• We repurchased 1.3 million shares of our common stock for $75.5 million during the second-quarter 2023 at an average price of $58.56 per share.

• Cash flow from operations was $68.2 million and free cash flow was $53.4 million during the second-quarter 2023.

Earnings Conference Call

A conference call to review earnings is scheduled for 4:30 p.m. Eastern time on July 26, 2023. Investors may listen to the call at seic.com/ir-events. Investors may also listen to a replay by telephone at (USA) 866-207-1041; (International) 402-970-0847; Access Code: 1070091.

About SEI^®

SEI (NASDAQ:SEIC) delivers technology and investment solutions that connect the financial services industry. With capabilities across investment processing, operations, and asset management, SEI works with corporations, financial institutions and professionals, and ultra-high-net-worth families to help drive growth, make confident decisions, and protect futures. As of June 30, 2023, SEI manages, advises, or administers approximately $1.3 trillion in assets. For more information, visit seic.com.

This release contains forward-looking statements within the meaning or the rules and regulations of the Securities and Exchange Commission. In some cases you can identify forward-looking statements by terminology, such as "may," "will," "expect," "believe" and "continue" or "appear." Our forward-looking statements include our current expectations as to:

• when and if we will generate net annualized recurring revenues from sales events that occurred during the quarter, as well as the amount of such revenue;

• the duration of our customer relationships; and

• whether we will make prudent, strategic investments to drive long-term, sustainable growth for our stakeholders.

We anticipate that we may deliver forward-looking statements during today's earnings call that include our current expectations as to the matters in this release and set forth above as well as:

• the elements of our strategic focus, including, without limitation, our focus on:

• our sales momentum;

• the markets in which our clients are expanding;

• our success in converting clients from TRUST 3000^® to the SEI Wealth Platform^SM;

• our ability to capitalize on our pipeline, prudently manage expenses, and drive growth to the bottom line;

• the degree to which our market units are positioned to accelerate growth;

• the value of our technology, investment processing and asset management capabilities to our clients;

• the amount, if any, of our current backlog of sold but expected to be installed revenue in the next 18 months that will actually be installed during such period, if ever;

• the amount, if any, of our current backlog that will convert by the end of the year, if ever;

• the appetite of existing clients for our products;

• the degree to which our newer investment offerings will benefit our business;

• the market dynamics affecting our market units;

• our ability to mitigate the headwinds of various markets;

• the strength of our partnership with our affiliates;

• our ability to identify and incubate businesses that we believe will build upon our foundation for future growth and contribute to our corporate revenue goals;

• the degree to which the expenses in our Investments in New Businesses segment will remain consistent going forward;

• the degree to which our tax rate may vary;

• our sales momentum;

• our ability to improve profitability without cannibalizing our medium to long-term growth agendas;

• the growth of our U.K., European, and Irish businesses;

• the organic and inorganic opportunities that will drive our growth; and

• the expected success and benefits of our strategic investments.

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 Dec. 31, 2022, filed with the Securities and Exchange Commission.

# # #

 

SEI INVESTMENTS COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
		For the Three Months  Ended June 30,				For the Six Months  Ended June 30,
		2023		2022		2023		2022
Asset management, admin. and distribution fees		$378,821		$382,594		$750,650		$776,691
Information processing and software servicing fees		110,236		99,076		207,526		286,422
Total revenues		489,057		481,670		958,176		1,063,113
Subadvisory, distribution and other asset mgmt. costs		47,247		50,023		94,626		103,151
Software royalties and other information processing costs		8,396		7,407		15,689		14,954
Compensation, benefits and other personnel		175,706		157,921		349,121		318,405
Stock-based compensation		7,405		10,007		15,479		20,573
Consulting, outsourcing and professional fees		61,312		63,271		122,416		125,762
Data processing and computer related		34,945		32,254		68,285		62,070
Facilities, supplies and other costs		23,034		20,133		41,826		37,760
Amortization		9,630		16,508		19,054		33,395
Depreciation		8,781		8,286		17,312		16,384
Total expenses		376,456		365,810		743,808		732,454
Income from operations		112,601		115,860		214,368		330,659
Net gain (loss) on investments		515		(2,620)		1,259		(3,109)
Interest and dividend income		9,550		1,853		18,328		2,701
Interest expense		(139)		(211)		(280)		(461)
Equity in earnings of unconsolidated affiliate		32,711		29,813		61,590		62,272
Income before income taxes		155,238		144,695		295,265		392,062
Income taxes		36,387		33,419		69,399		90,478
Net income		$118,851		$111,276		$225,866		$301,584
Basic earnings per common share		$0.89		$0.82		$1.69		$2.20
Shares used to calculate basic earnings per share		132,854		136,435		133,437		137,185
Diluted earnings per common share		$0.89		$0.81		$1.68		$2.17
Shares used to calculate diluted earnings per share		133,936		137,817		134,623		138,764
Dividends declared per common share		$0.43		$0.40		$0.43		$0.40

 

SEI INVESTMENTS COMPANY CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
		June 30,		December 31,
		2023		2022
Assets
Current Assets:
Cash and cash equivalents		$777,051		$853,008
Restricted cash		300		351
Receivables from investment products		56,304		62,014
Receivables, net of allowance for doubtful accounts of $936 and $901		521,600		457,084
Securities owned		31,040		32,148
Other current assets		55,610		48,703
Total Current Assets		1,441,905		1,453,308
Property and Equipment, net of accumulated depreciation of $458,119 and $440,861		180,503		181,029
Operating Lease Right-of-Use Assets		22,293		24,992
Capitalized Software, net of accumulated amortization of $599,557 and $586,744		242,525		237,302
Available for Sale and Equity Securities		116,791		128,201
Investments in Affiliated Funds, at fair value		6,772		6,366
Investment in Unconsolidated Affiliate		54,318		104,673
Goodwill		115,602		115,599
Intangible Assets, net of accumulated amortization of $36,450 and $30,261		49,621		55,532
Deferred Contract Costs		38,561		37,928
Deferred Income Taxes		17,464		4,936
Other Assets, net		38,609		33,687
Total Assets		$2,324,964		$2,383,553
Liabilities and Equity
Current Liabilities:
Accounts payable		$7,220		$13,283
Accrued liabilities		237,164		359,363
Current portion of long-term operating lease liabilities		11,076		10,344
Deferred revenue		14,913		14,893
Total Current Liabilities		270,373		397,883
Long-term Income Taxes Payable		803		803
Long-term Operating Lease Liabilities		16,032		18,786
Other Long-term Liabilities		14,203		12,257
Total Liabilities		301,411		429,729
Shareholders' Equity:
Common stock, $0.01 par value, 750,000 shares authorized; 132,230 and 134,162   shares issued and outstanding		1,322		1,342
Capital in excess of par value		1,337,538		1,307,162
Retained earnings		724,672		694,287
Accumulated other comprehensive loss, net		(39,979)		(48,967)
Total Shareholders' Equity		2,023,553		1,953,824
Total Liabilities and Shareholders' Equity		$2,324,964		$2,383,553

 

ENDING ASSET BALANCES (In millions)  (Unaudited)
		Jun. 30,		Sept. 30,		Dec. 31,		Mar. 31,		Jun. 30,
		2022		2022		2022		2023		2023
Private Banks:
Equity and fixed-income programs		$22,277		$20,131		$22,377		$23,653		$24,091
Collective trust fund programs		7		7		7		6		7
Liquidity funds		3,666		3,778		3,201		3,427		3,433
Total assets under management		$25,950		$23,916		$25,585		$27,086		$27,531
Client assets under administration		3,923		4,161		4,151		4,299		4,154
Total assets		$29,873		$28,077		$29,736		$31,385		$31,685
Investment Advisors:
Equity and fixed-income programs		$65,783		$62,579		$66,240		$68,065		$69,439
Liquidity funds		8,292		5,200		5,436		4,965		4,968
Total Platform assets under management		$74,075		$67,779		$71,676		$73,030		$74,407
Platform-only assets		12,642		12,609		13,931		14,980		16,103
Total Platform assets		$86,717		$80,388		$85,607		$88,010		$90,510
Institutional Investors:
Equity and fixed-income programs		$75,506		$69,621		$73,178		$74,939		$75,854
Collective trust fund programs		5		6		5		4		4
Liquidity funds		1,654		1,640		1,557		1,576		1,353
Total assets under management		$77,165		$71,267		$74,740		$76,519		$77,211
Client assets under advisement		4,218		4,204		4,314		4,559		4,368
Total assets		$81,383		$75,471		$79,054		$81,078		$81,579
Investment Managers:
Collective trust fund programs (A)		$142,035		$137,538		$141,285		$146,176		$149,779
Liquidity funds		271		248		199		203		249
Total assets under management		$142,306		$137,786		$141,484		$146,379		$150,028
Client assets under administration		885,096		781,246		810,491		845,828		873,570
Total assets		$1,027,402		$919,032		$951,975		$992,207		$1,023,598
Investments in New Businesses:
Equity and fixed-income programs		$1,903		$1,813		$1,912		$2,031		$2,104
Liquidity funds		242		221		215		217		217
Total assets under management		$2,145		$2,034		$2,127		$2,248		$2,321
Client assets under administration		1,076		1,026		1,077		1,081		1,098
Total assets		$3,221		$3,060		$3,204		$3,329		$3,419
LSV Asset Management:
Equity and fixed-income programs (B)		$81,940		$75,380		$83,753		$84,964		$86,469
Total:
Equity and fixed-income programs (C)		$247,409		$229,524		$247,460		$253,652		$257,957
Collective trust fund programs		142,047		137,551		141,297		146,186		149,790
Liquidity funds		14,125		11,087		10,608		10,388		10,220
Total assets under management		$403,581		$378,162		$399,365		$410,226		$417,967
Client assets under advisement		5,294		5,230		5,391		5,640		5,466
Client assets under administration (D)		889,019		785,407		814,642		850,127		877,724
Platform-only assets		12,642		12,609		13,931		14,980		16,103
Total assets		$1,310,536		$1,181,408		$1,233,329		$1,280,973		$1,317,260

(A)	Collective trust fund program assets in the Investment Managers segment are included in assets under management since SEI is the trustee. Fees earned on this product are less than fees earned on customized asset management programs.
(B)	Equity and fixed-income programs include $2.0 billion of assets managed by LSV in which fees are based solely on performance and are not calculated as an asset-based fee (as of June 30, 2023).
(C)	Equity and fixed-income programs include $6.2 billion of assets invested in various asset allocation funds (as of June 30, 2023).
(D)	In addition to the assets presented, SEI also administers an additional $11.7 billion in Funds of Funds assets on which SEI does not earn an administration fee (as of June 30, 2023).

 

AVERAGE ASSET BALANCES (In millions) (Unaudited)
		2nd Qtr.		3rd Qtr.		4th Qtr.		1st Qtr.		2nd Qtr.
		2022		2022		2022		2023		2023
Private Banks:
Equity and fixed-income programs		$23,713		$22,115		$21,839		$23,576		$23,748
Collective trust fund programs		7		7		7		7		7
Liquidity funds		3,795		3,742		3,395		3,253		3,500
Total assets under management		$27,515		$25,864		$25,241		$26,836		$27,255
Client assets under administration		4,163		4,026		4,126		4,316		4,282
Total assets		$31,678		$29,890		$29,367		$31,152		$31,537
Investment Advisors:
Equity and fixed-income programs		$70,436		$67,464		$66,100		$67,578		$68,371
Liquidity funds		7,070		5,380		5,127		4,995		4,808
Total Platform assets under management		$77,506		$72,844		$71,227		$72,573		$73,179
Platform-only assets		13,142		13,271		13,905		14,812		15,548
Total Platform assets		$90,648		$86,115		$85,132		$87,385		$88,727
Institutional Investors:
Equity and fixed-income programs		$80,971		$74,859		$72,581		$74,653		$74,865
Collective trust fund programs		5		6		5		5		4
Liquidity funds		2,097		1,717		1,719		1,715		1,537
Total assets under management		$83,073		$76,582		$74,305		$76,373		$76,406
Client assets under advisement		3,987		4,194		4,251		4,431		4,583
Total assets		$87,060		$80,776		$78,556		$80,804		$80,989
Investment Managers:
Collective trust fund programs (A)		$131,435		$143,817		$140,494		$144,914		$147,543
Liquidity funds		285		250		275		317		286
Total assets under management		$131,720		$144,067		$140,769		$145,231		$147,829
Client assets under administration		893,361		782,559		785,813		836,410		859,296
Total assets		$1,025,081		$926,626		$926,582		$981,641		$1,007,125
Investments in New Businesses:
Equity and fixed-income programs		$2,016		$1,939		$1,890		$1,991		$2,057
Liquidity funds		262		231		208		212		199
Total assets under management		$2,278		$2,170		$2,098		$2,203		$2,256
Client assets under advisement		1,165		1,126		1,075		1,098		1,075
Total assets		$3,443		$3,296		$3,173		$3,301		$3,331
LSV Asset Management:
Equity and fixed-income programs (B)		$87,818		$81,241		$83,370		$86,987		$84,492
Total:
Equity and fixed-income programs (C)		$264,954		$247,618		$245,780		$254,785		$253,533
Collective trust fund programs		131,447		143,830		140,506		144,926		147,554
Liquidity funds		13,509		11,320		10,724		10,492		10,330
Total assets under management		$409,910		$402,768		$397,010		$410,203		$411,417
Client assets under advisement		5,152		5,320		5,326		5,529		5,658
Client assets under administration (D)		897,524		786,585		789,939		840,726		863,578
Platform-only assets		13,142		13,271		13,905		14,812		15,548
Total assets		$1,325,728		$1,207,944		$1,206,180		$1,271,270		$1,296,201

(A)	Collective trust fund program average assets in the Investment Managers segment are included in assets under management since SEI is the trustee. Fees earned on this product are less than fees earned on customized asset management programs.
(B)	Equity and fixed-income programs during second-quarter 2023 include $2.0 billion of average assets managed by LSV in which fees are based solely on performance and are not calculated as an asset-based fee.
(C)	Equity and fixed-income programs include $6.3 billion of average assets invested in various asset allocation funds during second-quarter 2023.
(D)	In addition to the assets presented, SEI also administers an additional $11.9 billion of average assets in Funds of Funds assets during second-quarter 2023 on which SEI does not earn an administration fee.

 

Investor Contact:	Media Contact:
Alex Whitelam	Leslie Wojcik
SEI	SEI
+1 610-676-4924	+1 610-676-4191
awhitelam@seic.com	lwojcik@seic.com

 

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SOURCE SEI Investments Company