Jan 31, 2024 SOURCE: PR NewsWire
SEI Reports Fourth-Quarter 2023 Financial Results
OAKS, Pa., Jan. 31, 2024 /PRNewswire/ -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the fourth-quarter 2023. Diluted earnings per share were $0.91 in fourth-quarter 2023 compared to $0.83 in fourth-quarter 2022.
Consolidated Overview
(In thousands, except earnings per share) For the Three Months For the Twelve Months
Ended
Ended December 31, December 31,
2023 2022 % 2023 2022 %
Revenues $484,858 $456,590 6 % $1,919,793 $1,991,037 (4) %
Net income 120,731 112,224 8 % 462,258 475,467 (3) %
Diluted earnings per share $0.91 $0.83 10 % $3.46 $3.46 - %
"Despite variable market conditions throughout the year, we navigated through uncertainty and delivered solid growth and core profitability. Our 2023 results reflect strong sales activity--particularly in our technology, investment processing, and operations segments--demonstrating traction in growth segments where we believe SEI has significant opportunity," said CEO Ryan Hicke.
"With our unmatched breadth of capabilities, we believe we are firmly positioned to capitalize on the positive trends shaping our markets today and well into the future. Looking ahead to 2024 and beyond, we remain committed to our strategic vision for the future, and our financial strength, robust pipeline, and world-class talent reinforce our foundation and the momentum to deliver long-term, sustainable growth for our stakeholders."
Summary of Fourth-Quarter Results by Business Segment
(In thousands) For the Three Months For the Twelve Months
Ended December 31, Ended December 31,
2023 2022 % 2023 2022 %
Private Banks:
Revenues $125,146 $115,233 9 % $503,317 $575,625 (13) %
Expenses 112,378 113,533 (1) % 455,820 473,209 (4) %
Operating Profit 12,768 1,700 NM 47,497 102,416 (54) %
Operating Margin 10 % 1 % 9 % 18 %
Investment Advisors:
Revenues 109,719 105,777 4 % 436,298 447,766 (3) %
Expenses 67,138 62,605 7 % 259,142 251,650 3 %
Operating Profit 42,581 43,172 (1) % 177,156 196,116 (10) %
Operating Margin 39 % 41 % 41 % 44 %
Institutional Investors:
Revenues 69,794 74,771 (7) % 289,708 323,353 (10) %
Expenses 39,118 40,820 (4) % 165,455 172,252 (4) %
Operating Profit 30,676 33,951 (10) % 124,253 151,101 (18) %
Operating Margin 44 % 45 % 43 % 47 %
Investment Managers:
Revenues 175,168 156,076 12 % 670,486 624,918 7 %
Expenses 115,469 104,330 11 % 437,174 404,850 8 %
Operating Profit 59,699 51,746 15 % 233,312 220,068 6 %
Operating Margin 34 % 33 % 35 % 35 %
Investments in New Businesses:
Revenues 5,031 4,733 6 % 19,984 19,375 3 %
Expenses 11,348 10,450 9 % 45,437 45,159 1 %
Operating Loss (6,317) (5,717) NM (25,453) (25,784) NM
Totals:
Revenues $484,858 $456,590 6 % $1,919,793 $1,991,037 (4) %
Expenses 345,451 331,738 4 % 1,363,028 1,347,120 1 %
Corporate Overhead Expenses 37,723 30,804 22 % 132,241 168,164 (21) %
Income from Operations $101,684 $94,048 8 % $424,524 $475,753 (11) %
Fourth-Quarter Business Highlights:
-- Revenues from Assets under management, administration, and distribution
fees increased primarily from higher assets under management and
administration due to increases from existing alternative investment
clients of the Investment Managers segment due to new products and
additional services. Market appreciation and positive cash flows into
separately managed account programs and Strategist programs during 2023
also contributed to the increase in revenues.
-- The increase in revenues from Assets under management, administration,
and distribution fees was partially offset by negative cash flows from
SEI fund programs in the Investment Advisors segment and client losses
in the Institutional Investors segment.
-- Average assets under management in equity and fixed income programs,
excluding LSV, increased $5.0 billion, or 3%, to $167.4 billion during
the fourth-quarter 2023, as compared to $162.4 billion during the
fourth-quarter 2022 (see attached Average Asset Balances schedule for
further details).
-- Average assets under administration increased $133.5 billion, or 17%, to
$923.4 billion during the fourth-quarter 2023, as compared to $789.9
billion during the fourth-quarter 2022 (see attached Average Asset
Balances schedules for further details).
-- Revenues from Information processing and software servicing fees
increased from new client conversions and growth from existing SEI
Wealth Platform(SM) (SWP) clients.
-- Net sales events in the Private Banks and Investment Managers segments
during the fourth-quarter 2023 were $22.9 million and are expected to
generate net annualized recurring revenues of approximately $17.6
million when contract values are completely realized. For the year ended
2023, net sales events were $97.5 million and are expected to generate
net annualized recurring revenues of approximately $79.1 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 the fourth-quarter 2023 were negative $10.5 million. For the year
ended 2023, net sales events were negative $18.9 million.
-- Net sales events for newer initiatives, which includes SEI Sphere, were
$1.3 million during the fourth-quarter 2023. For the year ended 2023,
net sales events were $2.2 million.
-- During the fourth-quarter 2023, we completed the acquisition of the
National Pensions Trust and also acquired Altigo, a cloud-based
technology platform that provides inventory, e-subscription, and
reporting capabilities for alternative investments.
-- The increase in operational expenses was due to higher personnel costs
from business growth, competitive labor markets, and the impact of
inflation on wages and services. Increased personnel costs and
investments in compliance infrastructure to meet expanding regulatory
requirements also contributed to the increase in operational expenses.
-- One-time expense items during the fourth-quarter 2023 were approximately
$11.0 million due to an asset write-off of previously capitalized
software development costs of $5.3 million in the Investment Managers
segment, $4.7 million in severance costs, and approximately $1.0 million
in professional fees related to acquisition activity. Of the amount of
severance costs during the fourth-quarter 2023, $4.0 million was
recognized in Corporate overhead expenses.
-- Earnings from LSV increased to $35.4 million in the fourth-quarter 2023
as compared to $31.7 million in the fourth-quarter 2022 due to market
appreciation and increased performance fees. Net negative cash flows
from existing clients and client losses partially offset the increase in
earnings from LSV.
-- Capitalized software development costs were $7.4 million in the
fourth-quarter 2023, of which $4.5 million was for continued
enhancements to SWP. Capitalized software development costs also include
$2.9 million in the fourth-quarter 2023 for a new platform for the
Investment Managers segment.
-- Interest and dividend income increased to $11.6 million in the
fourth-quarter 2023 as compared to $6.6 million in the fourth-quarter
2022, primarily due to higher interest rates.
-- Effective tax rates were 19.6% in the fourth-quarter 2023 and 18.1% in
the fourth-quarter 2022. The tax rate in the fourth-quarter 2023 was
affected by reduced tax benefits related to stock option exercises.
-- Repurchased shares of SEI common stock were 1.2 million for $68.9
million during the fourth-quarter 2023 at an average price of $58.08 per
share.
-- Cash flow from operations was $101.0 million, and free cash flow was
$92.0 million during the fourth-quarter 2023.
Earnings Conference Call
A conference call to review earnings is scheduled for 4:30 p.m. Eastern time on Jan. 31, 2024. 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: 4801296.
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 Dec. 31, 2023, SEI manages, advises, or administers approximately $1.4 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:
-- the degree to which are positioned to capitalize on trends shaping our
markets;
-- when and if we will generate net annualized recurring revenues from
sales events that occurred during the quarter, as well as the amount of
any such revenue; and
-- the degree to which we will deliver 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 degree to which our Private Banking and Investment Manager Services
business units are well positioned to continue to expand and contribute
to our top and bottom lines;
-- the size of the intermediary market;
-- the opportunities for our Advisor business;
-- whether our strategic initiatives in our Advisor business will help us
with new client adoption and exploit the opportunity we see in the
intermediary market;
-- the elements of our strategic focus, including, without limitation, our
focus on:
-- sales and revenue growth;
-- transforming our asset management businesses;
-- targeting new segments for sales;
-- driving margin expansion and profit growth through increased
operational leverage and discipline;
-- innovating our solution for the future;
-- delivering for our clients;
-- engaging with our markets; and
-- investing in our talent and our capabilities;
-- whether we are well-positioned for 2024 and beyond;
-- the degree to which our capabilities benefit our clients;
-- our ability to accelerate growth and market share;
-- the benefits of our focus on key clients in the alternatives space and
the cross sale opportunities that this focus may generate;
-- the strength of the expansion opportunities for our turn-key Collective
Investment Trust solution;
-- the benefits we will derive from the businesses and/or assets we acquire
and our ability to successful integrate these assets in order to drive
the expected benefits, strategic and otherwise;
-- the headwinds our businesses face and our ability to respond to these
headwinds;
-- our ability to capitalize on our pipeline and opportunities, manage
expenses, and drive profit to the bottom line;
-- the amount, if any, of our current backlog of sold but expected to be
installed revenue and recurring revenue in the next 18 months that will
actually be installed during such period, if ever;
-- the market dynamics affecting our market units;
-- our ability to improve profitability without cannibalizing our medium to
long-term growth agendas;
-- the areas in which we will invest;
-- the degree to which the Private Banks segment's focus is paying off in
both new business generation and building a quality and growing
pipeline;
-- our ability to expand the margins of our Private Banking business and
the degree to which this business is positioned for growth;
-- the amount of revenue and profit that our new FDIC cash sweep program
will generate during 2024;
-- our tax rate for the first quarter of 2024;
-- the degree to which there is positive sales momentum in our
Institutional Investors business segment; 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 For the Twelve Months
Ended December 31, Ended December 31,
2023 2022 2023 2022
Asset management, admin. and distribution fees $383,571 $365,239 $1,514,815 $1,514,063
Information processing and software servicing fees 101,287 91,351 404,978 476,974
Total revenues 484,858 456,590 1,919,793 1,991,037
Subadvisory, distribution and other asset mgmt. costs 47,106 46,247 189,263 196,732
Software royalties and other information processing costs 8,505 7,143 32,289 29,006
Compensation, benefits and other personnel 184,508 174,497 714,099 720,029
Stock-based compensation 7,850 8,064 31,308 39,403
Consulting, outsourcing and professional fees 54,850 57,693 231,469 242,013
Data processing and computer related 34,735 32,151 137,036 125,171
Facilities, supplies and other costs 27,011 17,529 85,836 74,993
Amortization 9,818 10,503 38,669 54,280
Depreciation 8,791 8,715 35,300 33,657
Total expenses 383,174 362,542 1,495,269 1,515,284
Income from operations 101,684 94,048 424,524 475,753
Net gain (loss) from investments 1,704 1,437 2,757 (3,078)
Interest and dividend income 11,574 6,645 41,027 13,308
Interest expense (187) (145) (583) (749)
Other income 3,379 3,379
Equity in earnings of unconsolidated affiliate 35,413 31,741 126,930 120,667
Income before income taxes 150,188 137,105 594,655 609,280
Income taxes 29,457 24,881 132,397 133,813
Net income $120,731 $112,224 $462,258 $475,467
Basic earnings per common share $0.92 $0.83 $3.49 $3.49
Shares used to calculate basic earnings per share 131,269 134,714 132,593 136,071
Diluted earnings per common share $0.91 $0.83 $3.46 $3.46
Shares used to calculate diluted earnings per share 132,160 135,818 133,728 137,423
Dividends declared per common share $0.46 $0.43 $0.89 $0.83
SEI INVESTMENTS COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31, December 31,
2023 2022
Assets
Current Assets:
Cash and cash equivalents $834,697 $853,008
Restricted cash 301 351
Receivables from investment products 55,886 62,014
Receivables, net of allowance for doubtful accounts of $663 and $901 501,434 457,084
Securities owned 31,334 32,148
Other current assets 54,464 48,703
Total Current Assets 1,478,116 1,453,308
Property and Equipment, net of accumulated depreciation of $474,034 and $440,861 171,364 181,029
Operating Lease Right-of-Use Assets 22,477 24,992
Capitalized Software, net of accumulated amortization of $612,971 and $586,744 239,783 237,302
Available for Sale and Equity Securities 155,413 128,201
Investments in Affiliated Funds, at fair value 7,316 6,366
Investment in Unconsolidated Affiliate 110,781 104,673
Goodwill 137,333 115,599
Intangible Assets, net of accumulated amortization of $42,520 and $30,261 82,443 55,532
Deferred Contract Costs 40,221 37,928
Deferred Income Taxes 37,709 4,936
Other Assets, net 37,047 33,687
Total Assets $2,520,003 $2,383,553
Liabilities and Equity
Current Liabilities:
Accounts payable $10,618 $13,283
Accrued liabilities 318,945 359,363
Current portion of long-term operating lease liabilities 8,118 10,344
Deferred revenue 15,366 14,893
Total Current Liabilities 353,047 397,883
Long-term Income Taxes Payable 803 803
Long-term Operating Lease Liabilities 17,235 18,786
Other Long-term Liabilities 17,090 12,257
Total Liabilities 388,175 429,729
Shareholders' Equity:
Common stock, $0.01 par value, 750,000 shares authorized; 131,178 and 134,162 1,312 1,342
shares issued and outstanding
Capital in excess of par value 1,404,962 1,307,162
Retained earnings 762,586 694,287
Accumulated other comprehensive loss, net (37,032) (48,967)
Total Shareholders' Equity 2,131,828 1,953,824
Total Liabilities and Shareholders' Equity $2,520,003 $2,383,553
ENDING ASSET BALANCES
(In millions) (Unaudited)
Dec. 31, Mar. 31, Jun. 30, Sept. 30, Dec. 31,
2022 2023 2023 2023 2023
Private Banks:
Equity and fixed-income programs $22,377 $23,653 $24,091 $23,039 $24,496
Collective trust fund programs 7 6 7 6 4
Liquidity funds 3,201 3,427 3,433 3,636 3,916
Total assets under management $25,585 $27,086 $27,531 $26,681 $28,416
Client assets under administration 4,151 4,299 4,154 4,399 7,267
Total assets $29,736 $31,385 $31,685 $31,080 $35,683
Investment Advisors:
Equity and fixed-income programs $66,240 $68,065 $69,439 $66,911 $71,634
Liquidity funds 5,436 4,965 4,968 5,175 4,812
Total Platform assets under management $71,676 $73,030 $74,407 $72,086 $76,446
Platform-only assets 13,931 14,980 16,103 16,232 18,324
Platform-only assets-deposit program 843
Total Platform assets $85,607 $88,010 $90,510 $88,318 $95,613
Institutional Investors:
Equity and fixed-income programs $73,178 $74,939 $75,854 $72,387 $77,208
Collective trust fund programs 5 4 4 4 1
Liquidity funds 1,557 1,576 1,353 2,119 1,734
Total assets under management $74,740 $76,519 $77,211 $74,510 $78,943
Client assets under advisement 4,314 4,559 4,368 4,085 6,120
Total assets $79,054 $81,078 $81,579 $78,595 $85,063
Investment Managers:
Collective trust fund programs (A) $141,285 $146,176 $149,779 $146,991 $156,376
Liquidity funds 199 203 249 180 114
Total assets under management $141,484 $146,379 $150,028 $147,171 $156,490
Client assets under administration 810,491 845,828 873,570 886,382 935,564
Total assets $951,975 $992,207 $1,023,598 $1,033,553 $1,092,054
Investments in New Businesses:
Equity and fixed-income programs $1,912 $2,031 $2,104 $2,017 $2,174
Liquidity funds 215 217 217 202 209
Total assets under management $2,127 $2,248 $2,321 $2,219 $2,383
Client assets under administration 1,077 1,081 1,098 1,070 1,150
Total assets $3,204 $3,329 $3,419 $3,289 $3,533
LSV Asset Management:
Equity and fixed-income programs (B) $83,753 $84,964 $86,469 $83,684 $89,312
Total:
Equity and fixed-income programs (C) $247,460 $253,652 $257,957 $248,038 $264,824
Collective trust fund programs 141,297 146,186 149,790 147,001 156,381
Liquidity funds 10,608 10,388 10,220 11,312 10,785
Total assets under management $399,365 $410,226 $417,967 $406,351 $431,990
Client assets under advisement 5,391 5,640 5,466 5,155 7,270
Client assets under administration (D) 814,642 850,127 877,724 890,781 942,831
Platform-only assets 13,931 14,980 16,103 16,232 19,167
Total assets $1,233,329 $1,280,973 $1,317,260 $1,318,519 $1,401,258
(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 $1.9 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 December 31,
2023).
(C)
Equity and fixed-income programs include $6.3 billion of assets invested in various asset allocation funds (as of December 31, 2023).
(D) In addition to the assets presented, SEI also administers an additional $11.2 billion in Funds of Funds assets on which SEI does not earn an administration fee (as of December 31, 2023).
AVERAGE ASSET BALANCES
(In millions) (Unaudited)
4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
2022 2023 2023 2023 2023
Private Banks:
Equity and fixed-income programs $21,839 $23,576 $23,748 $23,920 $23,309
Collective trust fund programs 7 7 7 6 5
Liquidity funds 3,395 3,253 3,500 3,585 3,808
Total assets under management $25,241 $26,836 $27,255 $27,511 $27,122
Client assets under administration 4,126 4,316 4,282 4,221 7,083
Total assets $29,367 $31,152 $31,537 $31,732 $34,205
Investment Advisors:
Equity and fixed-income programs $66,100 $67,578 $68,371 $69,309 $68,369
Liquidity funds 5,127 4,995 4,808 4,990 5,046
Total Platform assets under management $71,227 $72,573 $73,179 $74,299 $73,415
Platform-only assets 13,905 14,812 15,548 16,544 17,201
Platform-only assets-deposit program 281
Total Platform assets $85,132 $87,385 $88,727 $90,843 $90,897
Institutional Investors:
Equity and fixed-income programs $72,581 $74,653 $74,865 $75,023 $73,644
Collective trust fund programs 5 5 4 4 3
Liquidity funds 1,719 1,715 1,537 1,611 1,682
Total assets under management $74,305 $76,373 $76,406 $76,638 $75,329
Client assets under advisement 4,251 4,431 4,583 4,294 4,607
Total assets $78,556 $80,804 $80,989 $80,932 $79,936
Investment Managers:
Collective trust fund programs (A) $140,494 $144,914 $147,543 $150,379 $149,551
Liquidity funds 275 317 286 237 205
Total assets under management $140,769 $145,231 $147,829 $150,616 $149,756
Client assets under administration 785,813 836,410 859,296 889,503 916,268
Total assets $926,582 $981,641 $1,007,125 $1,040,119 $1,066,024
Investments in New Businesses:
Equity and fixed-income programs $1,890 $1,991 $2,057 $2,096 $2,069
Liquidity funds 208 212 199 211 197
Total assets under management $2,098 $2,203 $2,256 $2,307 $2,266
Client assets under advisement 1,075 1,098 1,075 1,101 1,080
Total assets $3,173 $3,301 $3,331 $3,408 $3,346
LSV Asset Management:
Equity and fixed-income programs (B) $83,370 $86,987 $84,492 $86,671 $84,492
Total:
Equity and fixed-income programs (C) $245,780 $254,785 $253,533 $257,019 $251,883
Collective trust fund programs 140,506 144,926 147,554 150,389 149,559
Liquidity funds 10,724 10,492 10,330 10,634 10,938
Total assets under management $397,010 $410,203 $411,417 $418,042 $412,380
Client assets under advisement 5,326 5,529 5,658 5,395 5,687
Client assets under administration (D) 789,939 840,726 863,578 893,724 923,351
Platform-only assets 13,905 14,812 15,548 16,544 17,482
Total assets $1,206,180 $1,271,270 $1,296,201 $1,333,705 $1,358,900
(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 fourth-quarter 2023 include $1.8 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 $6.1 billion of average assets invested in various asset allocation funds during fourth-quarter 2023.
(D) In addition to the assets presented, SEI also administers an additional $11.3 billion of average assets in Funds of Funds assets during fourth-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
