Oct 25, 2017 SOURCE: PR NewsWire
SEI Reports Third-Quarter 2017 Financial Results
OAKS, Pa., Oct. 25, 2017 /PRNewswire/ -- SEI Investments Company (NASDAQ: SEIC) today announced financial results for the third-quarter 2017. Diluted earnings per share were $0.63 in third-quarter 2017 compared to $0.53 in third-quarter 2016. In addition, on October 24, 2017, SEI's Board of Directors approved an increase in its stock repurchase program by an additional $200.0 million, increasing the available authorization under the program to approximately $230.5 million. Since the beginning of calendar year 2017, the Company repurchased approximately 3.5 million shares at a cost of approximately $188.3 million.
Consolidated Overview
(In thousands, except For the Three Months For the Nine Months
earnings per share) Ended September 30, Ended September 30,
2017 2016 % 2017 2016 %
---- ---- --- ---- ---- ---
Revenues $386,018 $354,641 9% $1,118,333 $1,032,735 8%
Net income 101,739 86,704 17% 282,245 245,206 15%
Diluted earnings per share $0.63 $0.53 19% $1.74 $1.49 17%
"Our third-quarter results reflect continued growth and strategic progress across all of our businesses; even as we continue to invest in and advance our solutions for all our markets," said Alfred P. West, Jr., SEI Chairman and CEO.
"The continued adoption of our broad-based platforms, including the very successful implementation of the SEI Wealth Platform by Regions Bank and a large migration of Investment Advisors segment clients to the Platform, positions us well for the future. As always, we remain committed to long-term sustainable growth and increasing shareholder value."
Summary of Third-Quarter Results by Business Segment
(In thousands) For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2017 2016 % 2017 2016 %
---- ---- --- ---- ---- ---
Private Banks:
Revenues $118,499 $115,952 2% $347,317 $344,149 1%
Expenses 115,806 105,523 10% 336,709 312,126 8%
------- ------- ------- -------
Operating Profit 2,693 10,429 (74)% 10,608 32,023 (67)%
Gain on sale of subsidiary - - - - 2,791 NM
--- -----
Segment Profit 2,693 10,429 (74)% 10,608 34,814 NM
Operating Margin (A) 2% 9% 3% 9%
Investment Advisors:
Revenues 94,318 85,258 11% 275,302 243,820 13%
Expenses 50,585 45,080 12% 147,504 134,575 10%
------ ------ ------- -------
Operating Profit 43,733 40,178 9% 127,798 109,245 17%
Operating Margin 46% 47% 46% 45%
Institutional Investors:
Revenues 80,411 76,222 5% 235,483 223,793 5%
Expenses 40,003 36,943 8% 117,499 108,875 8%
------ ------ ------- -------
Operating Profit 40,408 39,279 3% 117,984 114,918 3%
Operating Margin 50% 52% 50% 51%
Investment Managers:
Revenues 91,020 75,672 20% 255,123 216,528 18%
Expenses 59,831 48,588 23% 165,743 140,831 18%
------ ------ ------- -------
Operating Profit 31,189 27,084 15% 89,380 75,697 18%
Operating Margin 34% 36% 35% 35%
Investments in New Businesses:
Revenues 1,770 1,537 15% 5,108 4,445 15%
Expenses 5,063 5,348 (5)% 15,067 15,935 (5)%
----- ----- ------ ------
Operating Loss (3,293) (3,811) NM (9,959) (11,490) NM
Totals:
Revenues $386,018 $354,641 9% $1,118,333 $1,032,735 8%
Expenses 271,288 241,482 12% 782,522 712,342 10%
Corporate overhead expenses 15,493 15,941 (3)% 45,830 42,840 7%
Income from operations $99,237 $97,218 2% $289,981 $277,553 4%
======= ======= ======== ========
(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 positive cash flows from new and existing clients.
-- Sales events, net of client losses, during third-quarter 2017 totaled
approximately $24.2 million and are expected to generate net annualized
recurring revenues of approximately $17.1 million when contract values
are fully realized.
-- Our average assets under management, excluding LSV, increased $23.7
billion, or 12 percent, to $218.9 billion, as compared to $195.2 billion
during the third-quarter 2016. Our assets under management do not
include advised assets (see attached Average Asset Balances schedules
for further details).
-- Our average assets under administration increased $52.1 billion, or 11
percent, to $507.6 billion in the third-quarter 2017, as compared to
$455.5 billion during the third-quarter 2016 (see attached Average Asset
Balances schedules for further details).
-- Our earnings from LSV increased by $6.8 million, or 21 percent, to $39.3
million in third-quarter 2017 as compared to $32.6 million in
third-quarter 2016. The increase in earnings was due to an increase in
assets under management from market appreciation and increased
performance fees; however, our earnings were negatively impacted by
increased personnel expenses of LSV.
-- We capitalized $15.3 million and $13.6 million of software development
costs in third-quarter 2017 and 2016, respectively, of which $12.6
million and $11.3 million are related to continued enhancements to the
SEI Wealth Platform(SM). The remaining amounts of the Company's software
development costs capitalized during the third quarter of 2017 and 2016
are related to an application for the Investment Managers segment. Our
expenses related to maintenance and enhancements not eligible for
capitalization have increased. A higher portion of these costs are
recognized in personnel and consulting costs. These increased costs
primarily impacted the Private Banks and Investment Advisors business
segments.
-- Amortization expense related to the SEI Wealth Platform increased to
$12.8 million during the third-quarter 2017 as compared to $11.3 million
during the third-quarter 2016 due to continued enhancements. In
addition, we are currently reassessing the remaining useful life of
certain components and functionality of the Platform. Refer to our
third-quarter 2017 Form 10-Q for additional information.
-- The direct costs associated with our investment management programs
increased in our Private Banks, Investment Advisors and Institutional
Investors segments. These costs primarily relate to fees charged by
investment advisory firms for day-to-day portfolio management of
SEI-sponsored investment products.
-- Our operating expenses, primarily personnel costs, in our Investment
Advisors and Investment Managers segments increased. These expenses
primarily consist of operational and marketing costs and are mainly
related to servicing existing clients and acquiring and implementing new
clients.
-- We acquired Archway Technology Partners, LLC (Archway), a provider of
operating technologies and services to the family office industry,
during the third-quarter 2017. The results of operations of Archway are
included in our Investment Managers business segment. The segment's
third quarter-2017 results were negatively impacted by approximately
$476 thousand from the acquisition. Refer to our third-quarter 2017 Form
10-Q for additional information regarding the financial impact of the
Archway acquisition.
-- We adopted Accounting Standards Update (ASU) 2016-09 in 2017 which will
cause volatility in our quarterly effective tax rate. Our effective tax
rates were 27.7 percent in third-quarter 2017 and 33.8 percent in
third-quarter 2016. Refer to our third-quarter 2017 Form 10-Q for
additional information regarding the impact of ASU 2016-09 on our
effective tax rate.
-- Our tax rate in third-quarter 2017 was also favorably impacted by the
expiration of the statute of limitations pertaining to various federal
tax items.
-- We repurchased 1.2 million shares of our common stock for $68.2 million
during the third-quarter 2017.
Earnings Conference Call
A conference call to review earnings is scheduled for 4:30 p.m. Eastern time on Oct. 25, 2017. Investors may listen to the call at seic.com, Investors section, Events and Webcasts. Investors may also listen to a replay by telephone at (USA) 800-475-6701; (International) 320-365-3844, access code 431994.
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, 2017, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages, advises or administers $845 billion in hedge, private equity, mutual fund and pooled or separately managed assets, including $325 billion in assets under management and $516 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 For the Nine Months
Ended September 30, Ended September 30,
2017 2016 2017 2016
---- ---- ---- ----
Asset management, admin. and distribution fees $299,890 $271,930 $866,945 $785,642
Information processing and software servicing fees 80,922 76,443 233,501 224,834
Transaction-based and trade execution fees 5,206 6,268 17,887 22,259
----- ----- ------ ------
Total revenues 386,018 354,641 1,118,333 1,032,735
Subadvisory, distribution and other asset mgmt costs 45,578 42,586 131,368 122,651
Software royalties and other information processing costs 7,463 7,519 22,837 22,944
Brokerage commissions 3,978 4,864 13,163 17,065
Compensation, benefits and other personnel 118,421 103,137 336,919 307,350
Stock-based compensation 7,088 4,066 19,527 12,044
Consulting, outsourcing and professional fees 46,507 43,631 137,991 121,712
Data processing and computer related 18,449 16,581 53,104 48,081
Facilities, supplies and other costs 18,604 17,075 54,764 50,194
Amortization 13,745 11,388 38,332 33,684
Depreciation 6,948 6,576 20,347 19,457
------ ------
Total expenses 286,781 257,423 828,352 755,182
Income from operations 99,237 97,218 289,981 277,553
Net gain on investments 645 196 1,036 320
Interest and dividend income 1,899 1,026 4,928 3,142
Interest expense (345) (115) (571) (416)
Equity in earnings of unconsolidated affiliate 39,333 32,565 109,213 92,042
Gain on sale of subsidiary - - - 2,791
--- --- --- -----
Income before income taxes 140,769 130,890 404,587 375,432
Income taxes 39,030 44,186 122,342 130,226
------ ------ ------- -------
Net income $101,739 $86,704 $282,245 $245,206
======== ======= ======== ========
Basic earnings per common share $0.64 $0.54 $1.78 $1.51
===== ===== ===== =====
Shares used to calculate basic earnings per share 157,902 160,916 158,439 161,908
======= ======= ======= =======
Diluted earnings per common share $0.63 $0.53 $1.74 $1.49
===== ===== ===== =====
Shares used to calculate diluted earnings per share 161,148 163,925 161,866 165,053
======= ======= ======= =======
Dividends declared per common share $- $- $0.28 $0.26
=== === ===== =====
SEI INVESTMENTS COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September 30, December 31,
2017 2016
---- ----
Assets
Current Assets:
Cash and cash equivalents $684,971 $695,701
Restricted cash 3,503 3,500
Receivables from investment products 50,961 61,761
Receivables, net of allowance for doubtful accounts of $699 and $523 273,535 227,957
Securities owned 21,469 21,339
Other current assets 30,537 27,575
------ ------
Total Current Assets 1,064,976 1,037,833
Property and Equipment, net of accumulated depreciation of $302,901 and $285,322 148,106 146,190
Capitalized Software, net of accumulated amortization of $340,864 and $303,540 307,116 295,867
Investments Available for Sale 82,252 84,033
Investments in Affiliated Funds, at fair value 5,738 4,858
Investment in Unconsolidated Affiliate 42,225 50,459
Intangible Assets, net 82,263 -
Deferred Income Taxes 1,676 2,127
Other Assets, net 17,045 15,456
------ ------
Total Assets $1,751,397 $1,636,823
========== ==========
Liabilities and Equity
Current Liabilities:
Accounts payable $4,429 $5,966
Accrued liabilities 185,368 240,525
Deferred revenue 3,134 2,880
----- -----
Total Current Liabilities 192,931 249,371
Borrowings Under Revolving Credit Facility 40,000 -
Deferred Income Taxes 69,704 69,693
Other Long-term Liabilities 16,221 14,645
------ ------
Total Liabilities 318,856 333,709
Shareholders' Equity:
Common stock, $.01 par value, 750,000 shares authorized; 157,405 and 159,031 1,574 1,590
shares issued and outstanding
Capital in excess of par value 1,002,909 955,461
Retained earnings 448,356 384,018
Accumulated other comprehensive loss, net (20,298) (37,955)
------- -------
Total Shareholders' Equity 1,432,541 1,303,114
Total Liabilities and Shareholders' Equity $1,751,397 $1,636,823
========== ==========
ENDING ASSET BALANCES
(In millions) (Unaudited)
Sept. 30, Dec 31, Mar. 31, Jun. 30, Sept. 30,
2016 2016 2017 2017 2017
---- ---- ---- ---- ----
Private Banks:
Equity and fixed-income programs $18,668 $17,926 $19,034 $20,185 $21,196
Collective trust fund programs 3 3 5 4 4
Liquidity funds 4,034 4,230 3,903 3,589 3,345
----- ----- ----- ----- -----
Total assets under management $22,705 $22,159 $22,942 $23,778 $24,545
Client assets under administration 19,269 19,255 20,760 20,951 22,107
------ ------ ------ ------ ------
Total assets $41,974 $41,414 $43,702 $44,729 $46,652
Investment Advisors:
Equity and fixed-income programs $52,594 $52,847 $55,311 $57,358 $59,455
Collective trust fund programs 5 5 5 5 5
Liquidity funds 2,539 2,741 2,645 2,451 2,327
----- ----- ----- ----- -----
Total assets under management $55,138 $55,593 $57,961 $59,814 $61,787
Institutional Investors:
Equity and fixed-income programs (E) $78,701 $76,465 $78,954 $81,723 $84,939
Collective trust fund programs 90 93 89 80 82
Liquidity funds 2,612 2,903 2,759 2,468 3,699
----- ----- ----- ----- -----
Total assets under management $81,403 $79,461 $81,802 $84,271 $88,720
Advised assets - - 3,228 4,255 4,450
--- --- ----- ----- -----
Total assets $81,403 $79,461 $85,030 $88,526 $93,170
Investment Managers:
Equity and fixed-income programs $79 $81 $84 $92 $93
Collective trust fund programs 35,962 36,991 40,646 42,662 46,087
Liquidity funds 812 667 911 999 799
--- --- --- --- ---
Total assets under management $36,853 $37,739 $41,641 $43,753 $46,979
Client assets under administration (A) 451,204 448,708 457,356 476,543 493,538
------- ------- ------- ------- -------
Total assets $488,057 $486,447 $498,997 $520,296 $540,517
Investments in New Businesses:
Equity and fixed-income programs $850 $884 $931 $997 $1,052
Liquidity funds 53 61 79 46 71
--- --- --- --- ---
Total assets under management $903 $945 $1,010 $1,043 $1,123
Advised assets - - 85 69 54
--- --- --- --- ---
Total assets $903 $945 $1,095 $1,112 $1,177
LSV Asset Management:
Equity and fixed-income programs $83,863 $87,248 $90,611 $94,774 $101,893
Total:
Equity and fixed-income programs (B) $234,755 $235,451 $244,925 $255,129 $268,628
Collective trust fund programs 36,060 37,092 40,745 42,751 46,178
Liquidity funds 10,050 10,602 10,297 9,553 10,241
------ ------ ------ ----- ------
Total assets under management $280,865 $283,145 $295,967 $307,433 $325,047
Advised assets (C) - - 3,313 4,324 4,504
Client assets under administration (D) 470,473 467,963 478,116 497,494 515,645
Total assets $751,338 $751,108 $777,396 $809,251 $845,196
======== ======== ======== ======== ========
(A) Client assets under administration in
the Investment Managers segment include
$48.1 billion of assets that require
limited services and therefore are at
fee levels below our normal full
service assets (as of September 30,
2017).
(B) Equity and fixed-income programs
include $5.5 billion of assets invested
in various asset allocation funds at
September 30, 2017.
(C) Assets for which SEI acts as an advisor
to the accounts. These assets were
excluded in previous periods.
(D) In addition to the numbers presented,
SEI also administers an additional
$11.1 billion in Funds of Funds assets
(as of September 30, 2017) on which SEI
does not earn an administration fee.
(E) Ending asset balance for Institutional
Investors as of Mar. 31, 2017 were
revised from $80.1 billion to $79.0
billion.
AVERAGE ASSET BALANCES
(In millions) (Unaudited)
3rd Qtr. 4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr.
2016 2016 2017 2017 2017
---- ---- ---- ---- ----
Private Banks:
Equity and fixed-income programs $18,650 $17,945 $18,498 $19,610 $20,699
Collective trust fund programs 3 3 4 5 4
Liquidity funds 4,386 4,030 4,051 3,677 3,555
----- ----- ----- ----- -----
Total assets under management $23,039 $21,978 $22,553 $23,292 $24,258
Client assets under administration 19,039 19,010 20,223 21,166 21,441
------ ------ ------ ------ ------
Total assets $42,078 $40,988 $42,776 $44,458 $45,699
Investment Advisors:
Equity and fixed-income programs $51,924 $52,267 $54,446 $56,319 $58,406
Collective trust fund programs 5 5 5 5 5
Liquidity funds 2,694 2,638 2,559 2,390 2,335
----- ----- ----- ----- -----
Total assets under management $54,623 $54,910 $57,010 $58,714 $60,746
Institutional Investors:
Equity and fixed-income programs $77,583 $77,040 $77,852 $80,561 $83,696
Collective trust fund programs 90 92 90 85 80
Liquidity funds 2,751 2,766 2,891 2,861 3,177
----- ----- ----- ----- -----
Total assets under management $80,424 $79,898 $80,833 $83,507 $86,953
Advised assets - - 3,125 3,687 4,376
--- --- ----- ----- -----
Total assets $80,424 $79,898 $83,958 $87,194 $91,329
Investment Managers:
Equity and fixed-income programs $73 $79 $75 $84 $92
Collective trust fund programs 35,257 36,170 39,081 41,615 44,824
Liquidity funds 874 813 860 937 952
--- --- --- --- ---
Total assets under management $36,204 $37,062 $40,016 $42,636 $45,868
Client assets under administration 436,459 446,666 453,766 470,701 486,158
------- ------- ------- ------- -------
Total assets $472,663 $483,728 $493,782 $513,337 $532,026
Investments in New Businesses:
Equity and fixed-income programs $845 $851 $909 $954 $1,016
Liquidity funds 44 60 63 64 55
--- --- --- --- ---
Total assets under management $889 $911 $972 $1,018 $1,071
Advised assets - - 82 73 73
--- --- --- --- ---
Total assets $889 $911 $1,054 $1,091 $1,144
LSV Asset Management:
Equity and fixed-income programs $83,373 $84,676 $90,274 $93,094 $99,279
Total:
Equity and fixed-income programs $232,448 $232,858 $242,054 $250,622 $263,188
Collective trust fund programs 35,355 36,270 39,180 41,710 44,913
Liquidity funds 10,749 10,307 10,424 9,929 10,074
------ ------ ------ ----- ------
Total assets under management $278,552 $279,435 $291,658 $302,261 $318,175
Advised assets - - 3,207 3,760 4,449
Client assets under administration 455,498 465,676 473,989 491,867 507,599
Total assets $734,050 $745,111 $768,854 $797,888 $830,223
======== ======== ======== ======== ========
Investor Contact: Media Contact:
----------------- --------------
Lindsey Opsahl Dana Grosser
SEI SEI
+1 610-676-4052 +1 610-676-2459
lopsahl@seic.com dgrosser@seic.com
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SOURCE SEI Investments Company
