SOURCE: SEI

SEI

January 28, 2015 08:30 ET

SEI Reports Fourth-Quarter 2014 Financial Results

Income From Operations Increases 32 Percent

OAKS, PA--(Marketwired - Jan 28, 2015) - SEI Investments Company (NASDAQ: SEIC) today announced financial results for the fourth-quarter 2014. Diluted earnings per share were $.45 in fourth-quarter 2014 compared to $.37 in fourth-quarter 2013. Earnings were negatively affected by an after-tax charge of approximately $10.7 million related to the write down of an equity investment in a wealth services firm based in China. This charge was partially offset by the tax benefit derived from the reinstatement of the Research and Development Tax Credit during the fourth-quarter 2014 (see Fourth-Quarter Business Highlights for more information).

                             
                             
Consolidated Overview                            
(In thousands, except earnings per share)   For the Three Months Ended December 31,         For the Twelve Months Ended December 31,      
    2014   2013   %     2014   2013   %  
                                     
Revenues   $ 322,757   $ 299,024   8 %   $ 1,266,005   $ 1,126,132   12 %
Net income attributable to SEI     77,097     65,515   18 %     318,713     288,124   11 %
Diluted earnings per share   $ 0.45   $ 0.37   22 %   $ 1.85   $ 1.64   13 %
                                     
                                     

"Our financial results for the fourth quarter finish a year of solid progress across all of our units," said Alfred P. West, Jr., SEI Chairman and CEO. "In addition, the continued market acceptance of our solutions validate the ongoing investments we make to effectively serve our clients in the rapidly changing wealth, investment and asset management markets.

"As always, our focus on creating long-term sustainable growth and increased shareholder value is unwavering."

 
 
Summary of Fourth-Quarter Results by Business Segment
                         
(In thousands)   For the Three Months Ended December 31,           For the Twelve Months Ended December 31,        
    2014     2013     %     2014     2013     %  
Private Banks:                                            
  Revenues   $ 111,959     $ 105,880     6 %   $ 441,467     $ 397,138     11 %
  Expenses     99,975       102,767     (3 )%     399,620       392,399     2 %
  Operating Profit     11,984       3,113     NM       41,847       4,739     NM  
  Gain on sale of subsidiary     --       --     -- %     5,582       22,112     NM  
  Total Profit     11,984       3,113     NM     $ 47,429     $ 26,851     NM  
  Operating Margin (A)     11 %     3 %           9 %     1 %      
                                             
Investment Advisors:                                            
  Revenues     72,872       65,384     11 %     283,811       241,252     18 %
  Expenses     38,448       35,671     8 %     146,500       133,962     9 %
  Operating Profit     34,424       29,713     16 %     137,311       107,290     28 %
  Operating Margin     47 %     45 %           48 %     44 %      
                                             
Institutional Investors:                                            
  Revenues     72,466       67,273     8 %     284,677       257,658     10 %
  Expenses     36,044       35,623     1 %     140,659       133,218     6 %
  Operating Profit     36,422       31,650     15 %     144,018       124,440     16 %
  Operating Margin     50 %     47 %           51 %     48 %      
                                             
Investment Managers:                                            
  Revenues     64,211       59,539     8 %     251,310       226,081     11 %
  Expenses     40,387       39,545     2 %     159,176       148,977     7 %
  Operating Profit     23,824       19,994     19 %     92,134       77,104     19 %
  Operating Margin     37 %     34 %           37 %     34 %      
                                             
Investments in New Businesses:                                            
  Revenues     1,249       948     32 %     4,740       4,003     18 %
  Expenses     5,063       3,949     28 %     18,377       15,723     17 %
  Operating Loss     (3,814 )     (3,001 )   NM       (13,637 )     (11,720 )   NM  
                                             
Totals:                                            
  Revenues   $ 322,757     $ 299,024     8 %   $ 1,266,005     $ 1,126,132     12 %
  Expenses     219,917       217,555     1 %     864,332       824,279     5 %
  Corporate overhead expenses     12,576       13,014     (3 )%     48,889       53,733     (9 )%
  NCI reflected in segments     --       --     -- %     --       (289 )   NM  
  Income from operations   $ 90,264     $ 68,455     32 %   $ 352,784     $ 248,409     42 %
                                               
(A) Percentages determined exclusive of gain on sale of subsidiary.
 
 

Fourth-Quarter Business Highlights:

  • Revenue growth was primarily driven by higher Asset management, administration, and distribution fees from market appreciation and improved cash flows from new and existing clients. Our average assets under management, excluding LSV, increased $17.4 billion, or 11 percent, to $169.1 billion in the fourth-quarter 2014, as compared to $151.7 billion during the fourth-quarter 2013.
  • Our average assets under administration increased $54.5 billion, or 17 percent, to $372.4 billion in the fourth-quarter 2014, as compared to $317.8 billion during the fourth-quarter 2013 (see attached Ending and Average Asset Balances schedules for further details).
  • Sales events, net of client losses, during fourth-quarter 2014 totaled approximately $23.1 million and are expected to generate net annualized recurring revenues of approximately $20.0 million when contract values are fully realized.
  • All four core business segments realized revenue and profit margin growth as compared to fourth-quarter 2013 results. Operating margins in all four core business segments improved primarily from increased recurring revenues generated from the higher levels of assets under management and administration.
  • Income from LSV increased $3.2 million, or 10 percent, to $35.3 million in fourth-quarter 2014 as compared to $32.1 million in fourth-quarter 2013 due to an increase in assets under management from market appreciation and an increase in performance fees earned by LSV.
  • We recorded an after-tax charge of approximately $10.7 million, or $0.06 diluted earnings per share, during the fourth-quarter 2014 for the write down of our investment in Gao Fu, a wealth services firm based in China. The after-tax earnings per share impact is a result of the non-deductibility of the charge for U.S. federal tax purposes due to the investment in Gao Fu being held by an Irish subsidiary. This charge against earnings is reflected in Equity in earnings of unconsolidated affiliates on the accompanying Consolidated Statements of Operations.
  • Stock-based compensation expense during the fourth-quarter 2014 decreased by $6.9 million primarily due to the acceleration of expense recognition during the comparable period of 2013 for stock options that achieved performance vesting targets earlier than originally estimated.
  • Amortization expense related to capitalized software was $10.0 million during the fourth-quarter 2014 as compared to $9.0 million during the fourth-quarter 2013 due to continued releases of the SEI Wealth Platform(SM).
  • Our effective tax rates were 33.3 percent in fourth-quarter 2014 and 35.2 percent in fourth-quarter 2013. The decrease in our tax rate was primarily due to reinstatement of the Research and Development Tax Credit, which occurred during the fourth-quarter 2014. This tax benefit was offset by the non-deductibility of a significant portion of the Gao Fu charge noted above.
  • In fourth-quarter 2014, we repurchased 1.6 million shares of our common stock for $62.6 million.

Earnings Conference Call
A conference call to review earnings is scheduled for 2 p.m. Eastern time on January 28, 2015. 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 351742.

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 December 31, 2014, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $625 billion in mutual fund and pooled or separately managed assets, including $253 billion in assets under management and $372 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 December 31,     For the Twelve Months Ended December 31,  
    2014     2013     2014     2013  
                                 
Asset management, admin. and distribution fees   $ 242,966     $ 220,585     $ 948,932     $ 831,720  
Information processing and software servicing fees     70,437       70,085       285,463       261,691  
Transaction-based and trade execution fees     9,354       8,354       31,610       32,721  
                                 
Total revenues     322,757       299,024       1,266,005       1,126,132  
                                 
Subadvisory, distribution and other asset mgmt costs     38,798       33,194       149,791       121,989  
Software royalties and other information processing costs     7,990       8,343       33,522       31,255  
Brokerage commissions     6,785       6,358       23,002       24,649  
Compensation, benefits and other personnel     95,663       92,817       376,873       357,453  
Stock-based compensation     3,982       10,868       13,463       37,865  
Consulting, outsourcing and professional fees     33,535       32,732       136,818       131,399  
Data processing and computer related     12,959       14,373       52,512       51,401  
Facilities, supplies and other costs     16,759       17,333       66,113       64,613  
Amortization     10,068       9,104       38,679       34,602  
Depreciation     5,954       5,447       22,448       22,497  
                                 
Total expenses     232,493       230,569       913,221       877,723  
                                 
Income from operations     90,264       68,455       352,784       248,409  
                                 
Net gain on investments     565       21       614       659  
Interest and dividend income     1,106       828       3,354       3,248  
Interest expense     (116 )     (113 )     (458 )     (535 )
Equity in earnings of unconsolidated affiliates     23,706       31,872       127,786       118,076  
Gain on sale of subsidiary     --       --       5,582       22,112  
Other income     --       --       --       43,429  
                                 
Income before income taxes     115,525       101,063       489,662       435,398  
                                 
Income taxes     38,428       35,548       170,949       146,924  
                                 
Net income     77,097       65,515       318,713       288,474  
                                 
Less: Net income attributable to the noncontrolling interest     --       --       --       (350 )
                                 
Net income attributable to SEI   $ 77,097     $ 65,515     $ 318,713     $ 288,124  
                                 
Basic earnings per common share   $ 0.46     $ 0.39     $ 1.89     $ 1.68  
                                 
Shares used to calculate basic earnings per share     167,146       170,113       168,246       171,561  
                                 
Diluted earnings per common share   $ 0.45     $ 0.37     $ 1.85     $ 1.64  
                                 
Shares used to calculate diluted earnings per share     171,326       174,766       172,565       175,718  
                                 
                                 
 
SEI INVESTMENTS COMPANY
BALANCE SHEETS
(In thousands)
(Unaudited)
 
           
    December 31,     December 31,
    2014     2013
Assets              
  Current Assets:              
    Cash and cash equivalents   $ 667,446     $ 578,273
    Restricted cash     5,801       5,500
    Receivables from regulated investment companies     48,393       39,364
    Receivables, net     194,419       186,664
    Securities owned     21,175       21,133
    Other current assets     18,193       16,166
      Total Current Assets     955,427       847,100
               
  Property and Equipment, net     125,535       118,995
  Capitalized software, net     309,040       312,615
  Investments available for sale     77,609       83,323
  Investments in affiliated funds, at fair value     4,523       4,849
  Investment in unconsolidated affiliates     54,290       61,370
  Other assets, net     16,451       10,917
      Total Assets   $ 1,542,875     $ 1,439,169
               
Liabilities and Equity              
  Current Liabilities:              
    Accounts payable   $ 10,588     $ 16,235
    Accrued liabilities     207,429       188,123
    Deferred income taxes, net     1,414       1,653
    Deferred revenue     1,749       1,977
      Total Current Liabilities     221,180       207,988
               
  Deferred income taxes     63,755       66,572
  Other long-term liabilities     10,327       8,607
      Total Liabilities     295,262       283,167
               
  Shareholders' Equity:              
    Common stock     1,667       1,692
    Capital in excess of par value     834,615       721,219
    Retained earnings     420,226       431,604
    Accumulated other comprehensive (loss) income, net     (8,895 )     1,487
      Total Shareholders' Equity     1,247,613       1,156,002
      Total Liabilities and Shareholders' Equity   $ 1,542,875     $ 1,439,169
                     
                     
 
SEI INVESTMENTS COMPANY
ENDING ASSET BALANCES
(In millions)
(Unaudited)
 
    Dec 31,   Mar. 31,   Jun. 30,   Sept. 30,   Dec 31,
    2013   2014   2014   2014   2014
Private Banks:                              
  Equity/Fixed Income programs   $ 15,472   $ 16,918   $ 18,679   $ 18,634   $ 18,666
  Collective Trust Fund programs     14     14     12     11     8
  Liquidity funds     5,685     5,670     5,274     5,331     5,889
  Total assets under management   $ 21,171   $ 22,602   $ 23,965   $ 23,976   $ 24,563
  Client assets under administration     15,272     15,641     15,347     16,288     16,741
  Total assets   $ 36,443   $ 38,243   $ 39,312   $ 40,264   $ 41,304
                               
Investment Advisors:                              
  Equity/Fixed Income programs   $ 38,574   $ 39,981   $ 42,125   $ 42,260   $ 43,845
  Collective Trust Fund programs     11     13     13     9     9
  Liquidity funds     2,846     2,802     2,696     3,086     3,173
  Total assets under management   $ 41,431   $ 42,796   $ 44,834   $ 45,355   $ 47,027
                               
Institutional Investors:                              
  Equity/Fixed Income programs   $ 66,548   $ 69,194   $ 71,598   $ 72,006   $ 72,828
  Collective Trust Fund programs     109     102     100     98     95
  Liquidity funds     2,644     2,505     2,414     2,891     2,929
  Total assets under management   $ 69,301   $ 71,801   $ 74,112   $ 74,995   $ 75,852
                               
Investment Managers:                              
  Equity/Fixed Income programs   $ 69   $ 68   $ 64   $ 64   $ 27
  Collective Trust Fund programs     22,377     22,633     22,598     21,297     20,833
  Liquidity funds     718     782     802     1,018     946
  Total assets under management   $ 23,164   $ 23,483   $ 23,464   $ 22,379   $ 21,806
  Client assets under administration (A)     311,992     326,735     337,492     346,841     355,890
  Total assets   $ 335,156   $ 350,218   $ 360,956   $ 369,220   $ 377,696
                               
Investments in New Businesses:                              
  Equity/Fixed Income programs   $ 619   $ 632   $ 659   $ 703   $ 736
  Liquidity funds     46     49     38     118     98
  Total assets under management   $ 665   $ 681   $ 697   $ 821   $ 834
                               
LSV Asset Management:                              
  Equity/Fixed Income programs   $ 76,189   $ 77,973   $ 82,026   $ 81,536   $ 82,665
                               
Total:                              
  Equity/Fixed Income programs (B)   $ 197,471   $ 204,766   $ 215,151   $ 215,203   $ 218,767
  Collective Trust Fund programs     22,511     22,762     22,723     21,415     20,945
  Liquidity funds     11,939     11,808     11,224     12,444     13,035
  Total assets under management   $ 231,921   $ 239,336   $ 249,098   $ 249,062   $ 252,747
                               
  Client assets under administration (C)     327,264     342,376     352,839     363,129     372,631
  Total assets   $ 559,185   $ 581,712   $ 601,937   $ 612,191   $ 625,378
   
(A) Client assets under administration in the Investment Managers segment include $53.0 billion of assets balances that require limited services and therefore are at fee levels below our normal full service assets (as of December 31, 2014).
(B) Equity/Fixed Income programs include $5.2 billion of assets invested in various asset allocation funds at December 31, 2014.
(C) In addition to the numbers presented, SEI also administers an additional $6.5 billion in Funds of Funds assets (as of December 31, 2014) on which SEI does not earn an administration fee.
   
   
 
SEI INVESTMENTS COMPANY
AVERAGE ASSET BALANCES
(In millions)
(Unaudited)
 
    4th Qtr.   1st Qtr.   2nd Qtr.   3rd Qtr.   4th Qtr.
    2013   2014   2014   2014   2014
Private Banks:                              
  Equity/Fixed Income programs   $ 14,901   $ 16,114   $ 17,829   $ 18,804   $ 18,606
  Collective Trust Fund programs     11     14     12     12     10
  Liquidity funds     5,218     5,757     5,429     5,466     5,537
  Total assets under management   $ 20,130   $ 21,885   $ 23,270   $ 24,282   $ 24,153
  Client assets under administration     14,702     15,366     15,069     15,707     16,451
  Total assets   $ 34,832   $ 37,251   $ 38,339   $ 39,989   $ 40,604
                               
Investment Advisors:                              
  Equity/Fixed Income programs   $ 37,520   $ 39,005   $ 40,887   $ 42,389   $ 43,104
  Collective Trust Fund programs     13     13     13     11     9
  Liquidity funds     2,785     2,806     2,637     2,830     3,087
  Total assets under management   $ 40,318   $ 41,824   $ 43,537   $ 45,230   $ 46,200
                               
Institutional Investors:                              
  Equity/Fixed Income programs   $ 65,750   $ 67,697   $ 70,706   $ 72,010   $ 72,771
  Collective Trust Fund programs     110     103     134     98     96
  Liquidity funds     2,720     2,571     2,664     2,883     2,973
  Total assets under management   $ 68,580   $ 70,371   $ 73,504   $ 74,991   $ 75,840
                               
Investment Managers:                              
  Equity/Fixed Income programs   $ 75   $ 68   $ 68   $ 64   $ 64
  Collective Trust Fund programs     21,345     22,004     22,447     22,123     21,140
  Liquidity funds     592     738     824     962     904
  Total assets under management   $ 22,012   $ 22,810   $ 23,339   $ 23,149   $ 22,108
  Client assets under administration     303,131     320,644     333,373     344,661     355,903
  Total assets   $ 325,143   $ 343,454   $ 356,712   $ 367,810   $ 378,011
                               
Investments in New Businesses:                              
  Equity/Fixed Income programs   $ 613   $ 623   $ 640   $ 688   $ 731
  Liquidity funds     33     46     43     139     97
  Total assets under management   $ 646   $ 669   $ 683   $ 827   $ 828
                               
LSV Asset Management:                              
  Equity/Fixed Income programs   $ 75,240   $ 76,306   $ 79,866   $ 82,402   $ 83,187
                               
Total:                              
  Equity/Fixed Income programs   $ 194,099   $ 199,813   $ 209,996   $ 216,357   $ 218,463
  Collective Trust Fund programs     21,479     22,134     22,606     22,244     21,255
  Liquidity funds     11,348     11,918     11,597     12,280     12,598
  Total assets under management   $ 226,926   $ 233,865   $ 244,199   $ 250,881   $ 252,316
                               
  Client assets under administration     317,833     336,010     348,442     360,368     372,354
  Total assets   $ 544,759   $ 569,875   $ 592,641   $ 611,249   $ 624,670
                                 
                                 

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