SEI Reports Third-Quarter 2016 Financial Results

OAKS, Pa., Oct. 20, 2016 (GLOBE NEWSWIRE) — SEI Investments Company (NASDAQ:SEIC) today announced financial results for the third-quarter 2016. Diluted earnings per share were $0.53 in third-quarter 2016 compared to $0.47 in third-quarter 2015. Third-quarter 2015 includes a charge against earnings of approximately $6.0 million, or $0.02 diluted earnings per share, from the write-off of certain assets related to the SEI Wealth PlatformSM.

Consolidated Overview                        
(In thousands, except earnings per share)     For the Three Months
Ended September 30,
      For the Nine Months 
Ended September 30,
   
    2016   2015   %   2016   2015   %
                         
Revenues   $ 354,641       $ 335,622         6 %   $ 1,032,735       $ 998,811         3 %
Net income     86,704         79,425         9 %     245,206         250,276         (2 )%
Diluted earnings per share   $ 0.53       $ 0.47         13 %   $ 1.49       $ 1.47         1 %
                                                         

“Our third-quarter results reflect growth in revenue from existing clients, new business and stronger capital markets,” said Alfred P. West, Jr., SEI Chairman and CEO.

“Our current investments are aimed at preparing for large client implementations and creating a sustainable competitive advantage for all of our services. They also position us well for long-term success and increased shareholder value.”

Summary of Third-Quarter Results by Business Segment

(In thousands)   For the Three Months 
Ended September 30,
      For the Nine Months 
Ended September 30,
   
    2016   2015   %   2016   2015   %
Private Banks:                        
Revenues   $ 115,952     $ 116,280       %   $ 344,149     $ 342,826       %
Expenses     105,523       104,217       1 %     312,126       308,200       1 %
Operating Profit     10,429       12,063       (14 )%     32,023       34,626       (8 )%
Gain on sale of subsidiary                 %     2,791       2,791       %
Segment Profit     10,429       12,063       (14 )%     34,814       37,417       (7 )%
Operating Margin (A)     9 %     10 %         9 %     10 %    
                         
Investment Advisors:                        
Revenues     85,258       76,238       12 %     243,820       228,006       7 %
Expenses     45,080       45,530       (1 )%     134,575       125,446       7 %
Operating Profit     40,178       30,708       31 %     109,245       102,560       7 %
Operating Margin     47 %     40 %         45 %     45 %    
                         
Institutional Investors:                        
Revenues     76,222       74,515       2 %     223,793       224,043       %
Expenses     36,943       36,923       %     108,875       108,662       %
Operating Profit     39,279       37,592       4 %     114,918       115,381       %
Operating Margin     52 %     50 %         51 %     51 %    
                         
Investment Managers:                        
Revenues     75,672       67,162       13 %     216,528       199,809       8 %
Expenses     48,588       43,899       11 %     140,831       126,663       11 %
Operating Profit     27,084       23,263       16 %     75,697       73,146       3 %
Operating Margin     36 %     35 %         35 %     37 %    
                         
Investments in New Businesses:                          
Revenues     1,537       1,427       8 %     4,445       4,127       8 %
Expenses     5,348       5,179       3 %     15,935       14,848       7 %
Operating Loss     (3,811 )     (3,752 )   NM     (11,490 )     (10,721 )   NM
                         
Totals:                        
Revenues   $ 354,641     $ 335,622       6 %   $ 1,032,735     $ 998,811       3 %
Expenses     241,482       235,748       2 %     712,342       683,819       4 %
Corporate overhead expenses     15,941       12,856       24 %     42,840       38,986       10 %
Income from operations   $ 97,218     $ 87,018       12 %   $ 277,553     $ 276,006       1 %

(A) Percentages determined exclusive of gain on sale of subsidiary.

Third-Quarter Business Highlights:

  • Revenue growth in the quarter was primarily driven by higher Asset management, administration, and distribution fees from market appreciation and improved cash flows from new and existing clients.
  • Sales events, net of client losses, during third-quarter 2016 totaled approximately $14.6 million and are expected to generate net annualized recurring revenues of approximately $11.6 million when contract values are fully realized.
  • Our average assets under management, excluding LSV, increased $22.4 billion, or 13 percent, to $195.2 billion, as compared to $172.8 billion during the third-quarter 2015 (see attached Average Asset Balances schedules for further details).
  • Our average assets under administration increased $57.7 billion, or 15 percent, to $455.5 billion in the third-quarter 2016, as compared to $397.8 billion during the third-quarter 2015 (see attached Average Asset Balances schedules for further details).
  • We recorded $1.6 million in non-recurring revenues in our Private Banks segment due to a contract buyout from an investment processing bank client. 
  • Our earnings from LSV decreased by $1.0 million, or three percent, to $32.6 million in third-quarter 2016 as compared to $33.6 million in third-quarter 2015. The decline in earnings was due to increased personnel expenses of LSV.
  • We capitalized $13.6 million and $6.4 million of software development costs in third-quarter 2016 and 2015, respectively, of which $11.3 million and $5.7 million are related to continued enhancements to the SEI Wealth Platform.
  • Amortization expense related to the SEI Wealth Platform increased to $11.3 million during the third-quarter 2016 as compared to $10.8 million during the third-quarter 2015 due to continued enhancements.
  • In the third-quarter 2015, we wrote off approximately $6.0 million, or $0.02 diluted earnings per share, in previously capitalized software development costs and purchased software related to the SEI Wealth Platform.
  • Our operating expenses, primarily personnel costs, in our Investment Managers segment increased. These expenses primarily consist of operational and marketing costs and are mainly related to servicing existing clients and acquiring and implementing new clients.
  • The stronger U.S. dollar against the British pound during the third-quarter 2016 compared to the third-quarter 2015 negatively impacted the revenues of our Private Banks and Institutional Investors segments by $2.5 million and $1.5 million, respectively, and operating income by $1.0 million for each of the two segments.
  • Our effective tax rates were 33.8 percent in third-quarter 2016 and 34.1 percent in third-quarter 2015.
  • We repurchased 1.6 million shares of our common stock for $73.4 million during the third-quarter 2016.

Earnings Conference Call
A conference call to review earnings is scheduled for 4:30 p.m. Eastern time on October 20, 2016. Investors may listen to the call at seic.com/investors. The call may also be accessed at many financial services websites, including Google Finance and Yahoo Finance. Investors may also listen to replays at these websites, or by telephone at (USA) 800-475-6701; (International) 320-365-3844, access code 404239.

About SEI
SEI (NASDAQ:SEIC) is 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 September 30, 2016, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $751 billion in mutual fund and pooled or separately managed assets, including $281 billion in assets under management and $470 billion in client assets under administration. For more information, visit seic.com.

Many of the statements in this release may be considered “forward looking statements” and include discussions about future operations, strategies and financial results.  Forward-looking statements are based upon estimates and assumptions that involve risks and uncertainties, many of which are beyond our control or are subject to change.  Although we believe our assumptions are reasonable, they could be inaccurate.  Our actual future revenues and income could differ materially from our expected results.  We have no obligation to publicly update or revise any forward-looking statements.

 
SEI INVESTMENTS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
    For the Three Months 
Ended September 30,
  For the Nine Months 
Ended September 30,
    2016   2015   2016   2015
                 
Asset management, admin. and distribution fees   $ 271,930     $ 252,585     $ 785,642     $ 756,101  
Information processing and software servicing fees     76,443       74,413       224,834       218,765  
Transaction–based and trade execution fees     6,268       8,624       22,259       23,945  
                 
Total revenues     354,641       335,622       1,032,735       998,811  
                 
Subadvisory, distribution and other asset mgmt costs     42,586       40,230       122,651       119,619  
Software royalties and other information processing costs       7,519       8,028       22,944       23,594  
Brokerage commissions     4,864       6,460       17,065       17,863  
Compensation, benefits and other personnel     103,137       99,461       307,350       292,646  
Stock-based compensation     4,066       3,867       12,044       11,476  
Consulting, outsourcing and professional fees     43,631       35,963       121,712       108,560  
Data processing and computer related     16,581       15,173       48,081       43,100  
Facilities, supplies and other costs     17,075       22,477       50,194       56,195  
Amortization     11,388       10,837       33,684       31,806  
Depreciation     6,576       6,108       19,457       17,946  
                 
Total expenses     257,423       248,604       755,182       722,805  
                 
Income from operations     97,218       87,018       277,553       276,006  
                 
Net gain (loss) on investments     196       (756 )     320       (544 )
Interest and dividend income     1,026       846       3,142       2,570  
Interest expense     (115 )     (115 )     (416 )     (342 )
Equity in earnings of unconsolidated affiliates     32,565       33,595       92,042       104,917  
Gain on sale of subsidiary             2,791       2,791  
                 
Income before income taxes     130,890       120,588       375,432       385,398  
                 
Income taxes     44,186       41,163       130,226       135,122  
                 
Net income     86,704       79,425       245,206       250,276  
                 
Basic earnings per common share   $ 0.54     $ 0.48     $ 1.51     $ 1.51  
                 
Shares used to calculate basic earnings per share     160,916       165,579       161,908       166,142  
                 
Diluted earnings per common share   $ 0.53     $ 0.47     $ 1.49     $ 1.47  
                 
Shares used to calculate diluted earnings per share     163,925       169,255       165,053       169,977  
                 
Dividends declared per common share   $     $     $ 0.26     $ 0.24  
                             

 
SEI INVESTMENTS COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
    September 30,   December 31,
    2016   2015
Assets        
Current Assets:        
Cash and cash equivalents   $ 623,162     $ 679,661  
Restricted cash     5,500       5,500  
Receivables from investment products     48,783       48,098  
Receivables, net of allowance for doubtful accounts of $987 and $649     247,724       223,023  
Securities owned     21,320       21,235  
Other current assets     30,279       26,207  
  Total Current Assets     976,768       1,003,724  
         
Property and Equipment, net of accumulated depreciation of $278,675 and $259,501     149,262       143,977  
Capitalized Software, net of accumulated amortization of $292,745 and $259,358     290,329       290,522  
Investments Available for Sale     93,157       81,294  
Investments in Affiliated Funds, at fair value     4,888       4,039  
Investment in Unconsolidated Affiliates     39,376       49,580  
Deferred Income Taxes     3,722        
Other Assets, net     16,064       15,492  
  Total Assets   $ 1,573,566     $ 1,588,628  
         
Liabilities and Equity        
Current Liabilities:        
Accounts payable   $ 7,008     $ 4,511  
Accrued liabilities     170,753       217,587  
Deferred revenue     2,974       2,385  
  Total Current Liabilities     180,735       224,483  
         
Deferred Income Taxes     65,518       63,028  
Other Long-term Liabilities     14,103       11,397  
  Total Liabilities     260,356       298,908  
         
Shareholders’ Equity:        
Common stock, $.01 par value, 750,000 shares authorized; 159,954 and 163,733 shares issued and outstanding       1,600       1,637  
Capital in excess of par value     941,370       910,513  
Retained earnings     400,778       402,860  
Accumulated other comprehensive loss, net     (30,538 )     (25,290 )
  Total Shareholders’ Equity     1,313,210       1,289,720  
  Total Liabilities and Shareholders’ Equity   $ 1,573,566     $ 1,588,628  
                 

 
SEI INVESTMENTS COMPANY
ENDING ASSET BALANCES
(In millions)
(Unaudited)
 
      Sept. 30,   Dec 31,   Mar. 31,   Jun. 30,   Sept. 30,
      2015   2015   2016   2016   2016
Private Banks:                      
Equity and fixed-income programs     $ 18,243     $ 18,150     $ 18,370     $ 18,328     $ 18,668  
Collective trust fund programs       3       4       4       3       3  
Liquidity funds       5,469       5,835       5,521       4,848       4,034  
Total assets under management     $ 23,715     $ 23,989     $ 23,895     $ 23,179     $ 22,705  
Client assets under administration       16,896       17,532       18,324       18,537       19,269  
Total assets     $ 40,611     $ 41,521     $ 42,219     $ 41,716     $ 41,974  
                       
Investment Advisors:                      
Equity and fixed-income programs     $ 43,988     $ 46,123     $ 47,357     $ 50,016     $ 52,594  
Collective trust fund programs       9       7       7       5       5  
Liquidity funds       4,677       4,924       5,051       3,661       2,539  
Total assets under management     $ 48,674     $ 51,054     $ 52,415     $ 53,682     $ 55,138  
                       
Institutional Investors:                      
Equity and fixed-income programs     $ 70,818     $ 72,263     $ 73,468     $ 75,944     $ 78,701  
Collective trust fund programs       96       96       97       88       90  
Liquidity funds       2,655       2,883       2,390       2,526       2,612  
Total assets under management     $ 73,569     $ 75,242     $ 75,955     $ 78,558     $ 81,403  
                       
Investment Managers:                      
Equity and fixed-income programs     $ 59     $ 66     $ 72     $ 73     $ 79  
Collective trust fund programs       19,863       32,117       32,385       33,841       35,962  
Liquidity funds       848       832       733       750       812  
Total assets under management     $ 20,770     $ 33,015     $ 33,190     $ 34,664     $ 36,853  
Client assets under administration (A)         376,133       390,282       400,579       419,139       451,204  
Total assets     $ 396,903     $ 423,297     $ 433,769     $ 453,803     $ 488,057  
                       
Investments in New Businesses:                      
Equity and fixed-income programs     $ 752     $ 764     $ 803     $ 820     $ 850  
Liquidity funds       51       47       41       37       53  
Total assets under management     $ 803     $ 811     $ 844     $ 857     $ 903  
                       
LSV Asset Management:                      
Equity and fixed-income programs     $ 76,958     $ 78,335     $ 78,390     $ 78,352     $ 83,863  
                       
Total:                      
Equity and fixed-income programs (B)     $ 210,818     $ 215,701     $ 218,460     $ 223,533     $ 234,755  
Collective trust fund programs       19,971       32,224       32,493       33,937       36,060  
Liquidity funds       13,700       14,521       13,736       11,822       10,050  
Total assets under management     $ 244,489     $ 262,446     $ 264,689     $ 269,292     $ 280,865  
Client assets under administration (C)       393,029       407,814       418,903       437,676       470,473  
Total assets     $ 637,518     $ 670,260     $ 683,592     $ 706,968     $ 751,338  

(A) Client assets under administration in the Investment Managers segment include $48.3 billion of assets that require limited services and therefore are at fee levels below our normal full service assets (as of September 30, 2016).
(B) Equity and fixed-income programs include $4.7 billion of assets invested in various asset allocation funds at September 30, 2016.
(C) In addition to the numbers presented, SEI also administers an additional $11.1 billion in Funds of Funds assets (as of September 30, 2016) on which SEI does not earn an administration fee. Client assets under administration as of September 30, 2016 do not reflect $1.3 billion in Funds of Funds assets that were reported at December 31, 2015.

 
SEI INVESTMENTS COMPANY
AVERAGE ASSET BALANCES
(In millions)
(Unaudited)
 
      3rd Qtr.   4th Qtr.   1st Qtr.   2nd Qtr.   3rd Qtr.
      2015   2015   2016   2016   2016
Private Banks:                      
Equity and fixed-income programs     $ 19,080     $ 18,603     $ 17,644     $ 18,504     $ 18,650  
Collective trust fund programs       6       3       3       3       3  
Liquidity funds       5,443       5,511       5,661       5,118       4,386  
Total assets under management     $ 24,529     $ 24,117     $ 23,308     $ 23,625     $ 23,039  
Client assets under administration       17,504       17,775       17,248       18,436       19,039  
Total assets     $ 42,033     $ 41,892     $ 40,556     $ 42,061     $ 42,078  
                       
Investment Advisors:                      
Equity and fixed-income programs     $ 45,992     $ 46,044     $ 45,175     $ 48,783     $ 51,924  
Collective trust fund programs       9       8       7       6       5  
Liquidity funds       3,523       4,784       5,009       4,061       2,694  
Total assets under management     $ 49,524     $ 50,836     $ 50,191     $ 52,850     $ 54,623  
                       
Institutional Investors:                      
Equity and fixed-income programs     $ 73,568     $ 72,463     $ 71,779     $ 74,984     $ 77,583  
Collective trust fund programs       93       96       98       96       90  
Liquidity funds       2,843       3,109       2,834       2,868       2,751  
Total assets under management     $ 76,504     $ 75,668     $ 74,711     $ 77,948     $ 80,424  
                       
Investment Managers:                      
Equity and fixed-income programs     $ 24     $ 59     $ 66     $ 72     $ 73  
Collective trust fund programs       20,449       30,960       30,784       33,021       35,257  
Liquidity funds       978       960       832       701       874  
Total assets under management     $ 21,451     $ 31,979     $ 31,682     $ 33,794     $ 36,204  
Client assets under administration       380,247       390,080       387,421       415,237       436,459  
Total assets     $ 401,698     $ 422,059     $ 419,103     $ 449,031     $ 472,663  
                       
Investments in New Businesses:                      
Equity and fixed-income programs     $ 776     $ 788     $ 757     $ 811     $ 845  
Liquidity funds       49       47       48       39       44  
Total assets under management     $ 825     $ 835     $ 805     $ 850     $ 889  
                       
LSV Asset Management:                      
Equity and fixed-income programs     $ 80,656     $ 79,634     $ 74,699     $ 79,733     $ 83,373  
                       
Total:                      
Equity and fixed-income programs     $ 220,096     $ 217,591     $ 210,120     $ 222,887     $ 232,448  
Collective trust fund programs       20,557       31,067       30,892       33,126       35,355  
Liquidity funds       12,836       14,411       14,384       12,787       10,749  
Total assets under management     $ 253,489     $ 263,069     $ 255,396     $ 268,800     $ 278,552  
Client assets under administration (A)         397,751       407,855       404,669       433,673       455,498  
Total assets     $ 651,240     $ 670,924     $ 660,065     $ 702,473     $ 734,050  

(A) Client assets under administration during third-quarter 2016 do not reflect $1.3 billion in Funds of Funds assets that were reported during fourth-quarter 2015.

CONTACT: Investor Contact: 	
Michele Steinmetz	
SEI
+1 610-676-3037	
msteinmetz@seic.com

Media Contact:
Dana Grosser
SEI
+1 610-676-2459
dgrosser@seic.com