SOURCE: SEI

SEI

July 27, 2016 08:30 ET

SEI Reports Second-Quarter 2016 Financial Results

OAKS, PA--(Marketwired - Jul 27, 2016) - SEI Investments Company (NASDAQ: SEIC) today announced financial results for the second-quarter 2016. Diluted earnings per share were $.49 in second-quarter 2016 compared to $.51 in second-quarter 2015.

                             
Consolidated Overview                            
(In thousands, except earnings per share)   For the Three Months
Ended June 30,
        For the Six Months
Ended June 30,
     
    2016   2015   %     2016   2015   %  
                             
Revenues   $ 343,831   $ 337,745   2 %   $ 678,094   $ 663,189   2 %
Net income     81,005     86,240   (6 )%     158,502     170,851   (7 )%
Diluted earnings per share   $ 0.49   $ 0.51   (4 )%   $ 0.96   $ 1.00   (4 )%
                                     

"Our second-quarter results reflect the broad market adoption of our solutions across our business segments," said Alfred P. West, Jr., SEI Chairman and CEO. "The new client signings and growth of existing client relationships demonstrate the success we are having in our markets.

"Our larger and more complex client signings are proof of our ability to compete successfully in highly regulated, dynamic markets. Implementing these clients and sustaining this success requires an increase in our technology and operational investments. These investments position us to deliver long-term sustainable growth and increased shareholder value."

 
Summary of Second-Quarter Results by Business Segment
 
(In thousands)   For the Three Months
Ended June 30,
          For the Six Months
Ended June 30,
       
    2016     2015     %     2016     2015     %  
Private Banks:                                    
  Revenues   $ 114,836     $ 115,333     -- %   $ 228,197     $ 226,546     1 %
  Expenses     102,862       104,727     (2 )%     206,603       203,983     1 %
  Operating Profit     11,974       10,606     13 %     21,594       22,563     (4 )%
  Gain on sale of subsidiary     --       --     -- %     2,791       2,791     -- %
  Segment Profit     11,974       10,606     13 %     24,385       25,354     (4 )%
  Operating Margin (A)     10 %     9 %           9 %     10 %      
                                             
Investment Advisors:                                            
  Revenues     81,883       77,753     5 %     158,562       151,768     4 %
  Expenses     44,721       40,857     9 %     89,495       79,916     12 %
  Operating Profit     37,162       36,896     1 %     69,067       71,852     (4 )%
  Operating Margin     45 %     47 %           44 %     47 %      
                                             
Institutional Investors:                                            
  Revenues     74,674       75,980     (2 )%     147,571       149,528     (1 )%
  Expenses     36,550       36,528     -- %     71,932       71,739     -- %
  Operating Profit     38,124       39,452     (3 )%     75,639       77,789     (3 )%
  Operating Margin     51 %     52 %           51 %     52 %      
                                             
Investment Managers:                                            
  Revenues     70,938       67,280     5 %     140,856       132,647     6 %
  Expenses     46,968       42,141     11 %     92,243       82,764     11 %
  Operating Profit     23,970       25,139     (5 )%     48,613       49,883     (3 )%
  Operating Margin     34 %     37 %           35 %     38 %      
                                             
Investments in New Businesses:                                            
  Revenues     1,500       1,399     7 %     2,908       2,700     8 %
  Expenses     5,355       4,803     11 %     10,587       9,669     9 %
  Operating Loss     (3,855 )     (3,404 )   NM       (7,679 )     (6,969 )   NM  
                                             
Totals:                                            
  Revenues   $ 343,831     $ 337,745     2 %   $ 678,094     $ 663,189     2 %
  Expenses     236,456       229,056     3 %     470,860       448,071     5 %
  Corporate overhead expenses     13,852       12,771     8 %     26,899       26,130     3 %
  Income from operations   $ 93,523     $ 95,918     (2 )%   $ 180,335     $ 188,988     (5 )%
(A) Percentages determined exclusive of gain on sale of subsidiary.
   

Second-Quarter Business Highlights:

  • Revenue growth in the quarter was primarily driven by higher Asset management, administration, and distribution fees from improved cash flows from new and existing clients. The market volatility occurring during the course of the preceding 12 months negatively impacted our asset-based fee revenues and partially offset our revenue growth.
  • Sales events, net of client losses, during second-quarter 2016 totaled approximately $29.1 million and are expected to generate net annualized recurring revenues of approximately $23.4 million when contract values are fully realized.
  • Our average assets under management, excluding LSV, increased $11.9 billion, or seven percent, to $189.1 billion, as compared to $177.1 billion during the second-quarter 2015 (see attached Average Asset Balances schedules for further details).
  • Our average assets under administration increased $37.5 billion, or nine percent, to $433.7 billion in the second-quarter 2016, as compared to $396.2 billion during the second-quarter 2015 (see attached Average Asset Balances schedules for further details).
  • Our earnings from LSV decreased by $8.0 million, or 21 percent, to $30.3 million in second-quarter 2016 as compared to $38.3 million in second-quarter 2015. The decline in earnings was due to lower assets under management from market volatility and reduced performance fees.
  • We capitalized $10.1 million and $8.1 million of software development costs in second-quarter 2016 and 2015, respectively, of which $8.5 million and $6.3 million are related to continued enhancements to the SEI Wealth Platform.
  • Amortization expense related to the SEI Wealth Platform increased to $11.1 million during the second-quarter 2016 as compared to $10.6 million during the second-quarter 2015 due to continued enhancements.
  • 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 new clients. Additionally, sales compensation expense in our Investment Managers segment increased due to new business activity.
  • The strengthening of the U.S. dollar against the British pound and Canadian dollar during 2016 negatively impacted our revenues and operating income of our Private Banks and Institutional Investors segments. A prolonged period of a strengthening U.S. dollar against these currencies could have a further negative impact to our revenues and operating profits of these segments.
  • Our effective tax rates were 35.2 percent in second-quarter 2016 and 35.6 percent in second-quarter 2015.
  • We repurchased 1.5 million shares of our common stock for $73.5 million during the second-quarter 2016.

Earnings Conference Call
A conference call to review earnings is scheduled for 2 p.m. Eastern time on July 27, 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 398089.

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 June 30, 2016, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $707 billion in mutual fund and pooled or separately managed assets, including $269 billion in assets under management and $438 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 June 30,
    For the Six Months
Ended June 30,
 
    2016     2015     2016     2015  
                         
Asset management, admin. and distribution fees   $ 262,275     $ 256,748     $ 513,712     $ 503,516  
Information processing and software servicing fees     74,992       73,699       148,391       144,352  
Transaction-based and trade execution fees     6,564       7,298       15,991       15,321  
                                 
Total revenues     343,831       337,745       678,094       663,189  
                                 
Subadvisory, distribution and other asset mgmt costs     40,870       40,872       80,065       79,389  
Software royalties and other information processing costs     7,677       8,057       15,425       15,566  
Brokerage commissions     5,093       5,431       12,201       11,403  
Compensation, benefits and other personnel     102,282       98,999       204,213       193,185  
Stock-based compensation     4,189       3,859       7,978       7,609  
Consulting, outsourcing and professional fees     39,575       36,969       78,081       72,597  
Data processing and computer related     15,782       14,527       31,500       27,927  
Facilities, supplies and other costs     17,122       16,659       33,119       33,718  
Amortization     11,284       10,611       22,296       20,969  
Depreciation     6,434       5,843       12,881       11,838  
                                 
Total expenses     250,308       241,827       497,759       474,201  
                                 
Income from operations     93,523       95,918       180,335       188,988  
                                 
Net gain (loss) on investments     250       (38 )     124       212  
Interest and dividend income     1,033       755       2,116       1,724  
Interest expense     (187 )     (114 )     (301 )     (227 )
Equity in earnings of unconsolidated affiliates     30,285       37,289       59,477       71,322  
Gain on sale of subsidiary     --       --       2,791       2,791  
                                 
Income before income taxes     124,904       133,810       244,542       264,810  
                                 
Income taxes     43,899       47,570       86,040       93,959  
                                 
Net income     81,005       86,240       158,502       170,851  
                                 
Basic earnings per common share   $ 0.50     $ 0.52     $ 0.98     $ 1.03  
                                 
Shares used to calculate basic earnings per share     161,795       166,152       162,404       166,423  
                                 
Diluted earnings per common share   $ 0.49     $ 0.51     $ 0.96     $ 1.00  
                                 
Shares used to calculate diluted earnings per share     165,088       169,973       165,616       170,338  
                                 
Dividends declared per common share   $ 0.26     $ 0.24     $ 0.26     $ 0.24  
 
 
SEI INVESTMENTS COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
    June 30,     December 31,  
    2016     2015  
Assets            
  Current Assets:            
    Cash and cash equivalents   $ 594,767     $ 679,661  
    Restricted cash     5,500       5,500  
    Receivables from investment products     47,066       48,098  
    Receivables, net of allowance for doubtful accounts of $946 and $649     242,084       223,023  
    Securities owned     21,290       21,235  
    Other current assets     30,213       26,207  
      Total Current Assets     940,920       1,003,724  
                 
  Property and Equipment, net of accumulated depreciation of $272,292 and $259,501     138,696       143,977  
  Capitalized Software, net of accumulated amortization of $281,407 and $259,358     288,070       290,522  
  Investments Available for Sale     88,372       81,294  
  Investments in Affiliated Funds, at fair value     4,420       4,039  
  Investment in Unconsolidated Affiliates     41,996       49,580  
  Deferred Income Taxes     4,041       --  
  Other Assets, net     13,856       15,492  
      Total Assets   $ 1,520,371     $ 1,588,628  
                 
Liabilities and Equity                
  Current Liabilities:                
    Accounts payable   $ 3,541     $ 4,511  
    Accrued liabilities     145,717       217,587  
    Deferred revenue     3,479       2,385  
      Total Current Liabilities     152,737       224,483  
                 
  Deferred Income Taxes     67,089       63,028  
  Other Long-term Liabilities     12,262       11,397  
      Total Liabilities     232,088       298,908  
                 
  Shareholders' Equity:                
    Common stock, $.01 par value, 750,000 shares authorized; 161,191 and 163,733 shares issued and outstanding     1,612       1,637  
    Capital in excess of par value     933,434       910,513  
    Retained earnings     380,664       402,860  
    Accumulated other comprehensive loss, net     (27,427 )     (25,290 )
      Total Shareholders' Equity     1,288,283       1,289,720  
      Total Liabilities and Shareholders' Equity   $ 1,520,371     $ 1,588,628  
 
 
SEI INVESTMENTS COMPANY
ENDING ASSET BALANCES
(In millions)
(Unaudited)
 
    Jun. 30,   Sept. 30,   Dec. 31,   Mar. 31,   Jun. 30,
    2015   2015   2015   2016   2016
Private Banks:                    
  Equity and fixed-income programs   $ 19,686   $ 18,243   $ 18,150   $ 18,370   $ 18,328
  Collective trust fund programs     13     3     4     4     3
  Liquidity funds     5,280     5,469     5,835     5,521     4,848
  Total assets under management   $ 24,979   $ 23,715   $ 23,989   $ 23,895   $ 23,179
  Client assets under administration     17,485     16,896     17,532     18,324     18,537
  Total assets   $ 42,464   $ 40,611   $ 41,521   $ 42,219   $ 41,716
                               
Investment Advisors:                              
  Equity and fixed-income programs   $ 46,951   $ 43,988   $ 46,123   $ 47,357   $ 50,016
  Collective trust fund programs     8     9     7     7     5
  Liquidity funds     2,817     4,677     4,924     5,051     3,661
  Total assets under management   $ 49,776   $ 48,674   $ 51,054   $ 52,415   $ 53,682
                               
Institutional Investors:                              
  Equity and fixed-income programs   $ 75,341   $ 70,818   $ 72,263   $ 73,468   $ 75,944
  Collective trust fund programs     93     96     96     97     88
  Liquidity funds     2,960     2,655     2,883     2,390     2,526
  Total assets under management   $ 78,394   $ 73,569   $ 75,242   $ 75,955   $ 78,558
                               
Investment Managers:                              
  Equity and fixed-income programs   $ 24   $ 59   $ 66   $ 72   $ 73
  Collective trust fund programs     20,632     19,863     32,117     32,385     33,841
  Liquidity funds     1,007     848     832     733     750
  Total assets under management   $ 21,663   $ 20,770   $ 33,015   $ 33,190   $ 34,664
  Client assets under administration (A)     381,963     376,133     390,282     400,579     419,139
  Total assets   $ 403,626   $ 396,903   $ 423,297   $ 433,769   $ 453,803
                               
Investments in New Businesses:                              
  Equity and fixed-income programs   $ 779   $ 752   $ 764   $ 803   $ 820
  Liquidity funds     57     51     47     41     37
  Total assets under management   $ 836   $ 803   $ 811   $ 844   $ 857
                               
LSV Asset Management:                              
  Equity and fixed-income programs   $ 86,334   $ 76,958   $ 78,335   $ 78,390   $ 78,352
                               
Total:                              
  Equity and fixed-income programs (B)   $ 229,115   $ 210,818   $ 215,701   $ 218,460   $ 223,533
  Collective trust fund programs     20,746     19,971     32,224     32,493     33,937
  Liquidity funds     12,121     13,700     14,521     13,736     11,822
  Total assets under management   $ 261,982   $ 244,489   $ 262,446   $ 264,689   $ 269,292
                               
  Client assets under administration (C)     399,448     393,029     407,814     418,903     437,676
  Total assets   $ 661,430   $ 637,518   $ 670,260   $ 683,592   $ 706,968
(A) Client assets under administration in the Investment Managers segment include $50.0 billion of assets that require limited services and therefore are at fee levels below our normal full service assets (as of June 30, 2016).
(B) Equity and fixed-income programs include $4.6 billion of assets invested in various asset allocation funds at June 30, 2016.
(C) In addition to the numbers presented, SEI also administers an additional $12.0 billion in Funds of Funds assets (as of June 30, 2016) on which SEI does not earn an administration fee. Client assets under administration as of June 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)
 
    2nd Qtr.   3rd Qtr.   4th Qtr.   1st Qtr.   2nd Qtr.
    2015   2015   2015   2016   2016
Private Banks:                    
  Equity and fixed-income programs   $ 19,872   $ 19,080   $ 18,603   $ 17,644   $ 18,504
  Collective trust fund programs     12     6     3     3     3
  Liquidity funds     5,256     5,443     5,511     5,661     5,118
  Total assets under management   $ 25,140   $ 24,529   $ 24,117   $ 23,308   $ 23,625
  Client assets under administration     17,823     17,504     17,775     17,248     18,436
  Total assets   $ 42,963   $ 42,033   $ 41,892   $ 40,556   $ 42,061
                               
Investment Advisors:                              
  Equity and fixed-income programs   $ 47,027   $ 45,992   $ 46,044   $ 45,175   $ 48,783
  Collective trust fund programs     8     9     8     7     6
  Liquidity funds     2,819     3,523     4,784     5,009     4,061
  Total assets under management   $ 49,854   $ 49,524   $ 50,836   $ 50,191   $ 52,850
                               
Institutional Investors:                              
  Equity and fixed-income programs   $ 75,426   $ 73,568   $ 72,463   $ 71,779   $ 74,984
  Collective trust fund programs     94     93     96     98     96
  Liquidity funds     3,354     2,843     3,109     2,834     2,868
  Total assets under management   $ 78,874   $ 76,504   $ 75,668   $ 74,711   $ 77,948
                               
Investment Managers:                              
  Equity and fixed-income programs   $ 25   $ 24   $ 59   $ 66   $ 72
  Collective trust fund programs     21,387     20,449     30,960     30,784     33,021
  Liquidity funds     1,010     978     960     832     701
  Total assets under management   $ 22,422   $ 21,451   $ 31,979   $ 31,682   $ 33,794
  Client assets under administration     378,347     380,247     390,080     387,421     415,237
  Total assets   $ 400,769   $ 401,698   $ 422,059   $ 419,103   $ 449,031
                               
Investments in New Businesses:                              
  Equity and fixed-income programs   $ 784   $ 776   $ 788   $ 757   $ 811
  Liquidity funds     75     49     47     48     39
  Total assets under management   $ 859   $ 825   $ 835   $ 805   $ 850
                               
LSV Asset Management:                              
  Equity and fixed-income programs   $ 87,409   $ 80,656   $ 79,634   $ 74,699   $ 79,733
                               
Total:                              
  Equity and fixed-income programs   $ 230,543   $ 220,096   $ 217,591   $ 210,120   $ 222,887
  Collective trust fund programs     21,501     20,557     31,067     30,892     33,126
  Liquidity funds     12,514     12,836     14,411     14,384     12,787
  Total assets under management   $ 264,558   $ 253,489   $ 263,069   $ 255,396   $ 268,800
                               
  Client assets under administration (A)     396,170     397,751     407,855     404,669     433,673
  Total assets   $ 660,728   $ 651,240   $ 670,924   $ 660,065   $ 702,473
(A) Client assets under administration during second-quarter 2016 do not reflect $1.3 billion in Funds of Funds assets that were reported during fourth-quarter 2015.
   

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