SOURCE: SEI

SEI

October 24, 2013 08:30 ET

SEI Reports Third-Quarter 2013 Financial Results

OAKS, PA--(Marketwired - Oct 24, 2013) - SEI Investments Company (NASDAQ: SEIC) today announced financial results for third-quarter 2013. Diluted earnings per share were $.38 in third-quarter 2013 compared to $.29 in third-quarter 2012. 

             
Consolidated Overview   For the Three Months     For the Nine Months  
(In thousands, except earnings per share)   Ended September 30,     Ended September 30,  
    2013   2012   %     2013   2012   %  
                                     
Revenues   $ 280,655   $ 251,752   11 %   $ 827,108   $ 730,887   13 %
Net Income attributable to SEI     67,195     50,743   32 %     222,609     150,263   48 %
Diluted Earnings Per Share   $ 0.38   $ 0.29   31 %   $ 1.26   $ 0.85   48 %
                                     
                                     

"During the third quarter of 2013, the Company continued its positive progress across all of our business units. Our growth in revenues and profits reflect the impact of new client activity, growth of existing clients, and positive asset flows," said Alfred P. West, Jr., SEI Chairman and CEO.

"We continue to be encouraged by the market acceptance of our solutions. We are engaged in rapidly-changing markets requiring continued investment in our product and service offering. This enables us to enhance our competitive strength, accelerate our growth, and enhance long-term 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,  
    2013     2012     %     2013     2012     %  
Private Banks:                                            
  Revenues   $ 97,370     $ 92,076     6 %   $ 291,258     $ 268,367     9 %
  Expenses     95,579       91,209     5 %     289,632       263,612     10 %
  Operating Profit     1,791       867     107 %     1,626       4,755     (66 )%
  Gain on sale of subsidiary     --       --     N/M       22,112       --     N/M  
  Total Profit   $ 1,791     $ 867     107 %   $ 23,738     $ 4,755     N/M  
  Operating Margin (A)     2 %     1 %           1 %     2 %      
                                             
Investment Advisors:                                            
  Revenues     61,393       51,384     19 %     175,868       150,227     17 %
  Expenses     33,768       30,114     12 %     98,291       88,440     11 %
  Operating Profit     27,625       21,270     30 %     77,577       61,787     26 %
  Operating Margin     45 %     41 %           44 %     41 %      
                                             
Institutional Investors:                                            
  Revenues     63,539       58,081     9 %     190,385       167,293     14 %
  Expenses     33,058       29,654     11 %     97,595       86,494     13 %
  Operating Profit     30,481       28,427     7 %     92,790       80,799     15 %
  Operating Margin     48 %     49 %           49 %     48 %      
                                             
Investment Managers:                                            
  Revenues     57,266       49,311     16 %     166,542       142,235     17 %
  Expenses     37,763       32,122     18 %     109,432       92,711     18 %
  Operating Profit     19,503       17,189     13 %     57,110       49,524     15 %
  Operating Margin     34 %     35 %           34 %     35 %      
                                             
Investments in New Businesses:                                            
  Revenues     1,087       900     21 %     3,055       2,765     10 %
  Expenses     4,146       3,698     12 %     11,774       11,080     6 %
  Operating Loss     (3,059 )     (2,798 )   N/M       (8,719 )     (8,315 )   N/M  
                                             
Totals:                                            
  Revenues   $ 280,655     $ 251,752     11 %   $ 827,108     $ 730,887     13 %
  Expenses     204,314       186,797     9 %     606,724       542,337     12 %
  Corporate overhead expenses     14,402       11,668     23 %     40,719       33,830     20 %
  NCI reflected in segments     --       (203 )   N/M       (289 )     (657 )   N/M  
  Income from operations   $ 61,939     $ 53,490     16 %   $ 179,954     $ 155,377     16 %
                                             
(A)   Percentage determined exclusive of gain on sale of subsidiary.
     
     

Third-Quarter Business Commentary:

  • Revenues increased in third-quarter 2013 as compared to both third-quarter 2012 and second-quarter 2013. Revenue growth was primarily driven by higher Asset management, administration, and distribution fees from improved cash flows from new and existing clients and market appreciation. 

  • Our average assets under management, excluding LSV, increased $11.3 billion, or nine percent, to $143.9 billion in the third-quarter 2013, as compared to $132.6 billion during the third-quarter 2012, and increased $3.0 billion, or two percent, as compared to $140.9 billion during the second-quarter 2013. Average asset balances for the third-quarter 2012 include $6.5 billion in assets related to SEI Asset Korea, which was sold in first-quarter 2013 (see attached Ending and Average Asset Balances schedules for further details).

  • Sales events, net of client losses, during third-quarter 2013 totaled approximately $20.7 million and are expected to generate net annualized recurring revenues of approximately $18.3 million when contract values are fully realized.

  • Income from LSV increased in third-quarter 2013 to $31.3 million as compared to $24.9 million in third-quarter 2012 due to an increase in assets under management. Our ownership interest in LSV was approximately 39.3 percent in third-quarter 2013 and 39.8 percent in third-quarter 2012.

  • Stock-based compensation expense in third-quarter 2013 increased by $7.2 million as compared to third-quarter 2012. This incremental expense reflects a change in our estimate of the timing of when stock option vesting targets will be achieved. The Private Banks segment recognized $2.1 million of this incremental expense. The Investment Advisors, Institutional Investors, and Investment Managers segments each recognized approximately $1.3 million in expense.

  • Corporate overhead costs increased in third-quarter 2013 as compared to third-quarter 2012 due to $1.2 million in increased stock-based compensation, increased personnel costs, and higher costs related to regulatory and compliance matters. 

  • The effective tax rates were 28.5 percent in third-quarter 2013, 39.0 percent in third-quarter 2012, and 35.5 percent in second-quarter 2013. The third-quarter 2013 tax rate was benefited by Pennsylvania Tax Law changes enacted during the third-quarter 2013. These changes resulted in a reduction of the deferred tax liability that has been built up over numerous years. The third-quarter 2012 tax rate reflected the accrual of taxes on the cumulative undistributed earnings of SEI Asset Korea.

  • In third-quarter 2013, we repurchased 1.9 million shares of our common stock for $58.6 million.

Earnings Conference Call
A conference call to review earnings is scheduled for 2:00 p.m. ET on October 24, 2013. Investors may listen to the call at www.seic.com/investors. The call may also be accessed at the financial services sections of numerous web sites, including Google Finance and Yahoo Finance. Investors may also listen to replays at these web sites, or by telephone at (USA) 1-800-475-6701; (International) 320-365-3844, access code 306035.

About SEI
SEI (NASDAQ: SEIC) is a leading global provider of investment processing, fund processing, and investment management business outsourcing solutions that help corporations, financial institutions, financial advisors, and ultra-high-net-worth families create and manage wealth. As of September 30, 2013, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $529 billion in mutual fund and pooled or separately managed assets, including $219 billion in assets under management and $310 billion in client assets under administration. For more information, visit www.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,  
    2013     2012  
                 
Asset management, admin. and distribution fees   $ 208,780     $ 183,083  
Information processing and software servicing fees     64,606       60,901  
Transaction-based and trade execution fees     7,269       7,768  
                 
Total revenues     280,655       251,752  
                 
Subadvisory, distribution and other asset mgmt costs     31,209       26,022  
Software royalties and other information processing costs     7,541       6,701  
Brokerage commissions     5,519       5,542  
Compensation, benefits and other personnel     89,311       85,781  
Stock-based compensation     11,097       3,879  
Consulting, outsourcing and professional fees     33,367       27,314  
Data processing and computer related     12,654       11,749  
Facilities, supplies and other costs     13,573       15,129  
Amortization     8,829       10,384  
Depreciation     5,616       5,761  
                 
Total expenses     218,716       198,262  
                 
Income from operations     61,939       53,490  
                 
Net gain on investments     535       3,708  
Interest and dividend income     679       1,490  
Interest expense     (195 )     (115 )
Equity in earnings of unconsolidated affiliates     31,028       24,928  
                 
Net income before income taxes     93,986       83,501  
                 
Income taxes     26,791       32,415  
                 
Net income     67,195       51,086  
                 
Less: Net income attributable to the noncontrolling interest     --       (343 )
                 
Net income attributable to SEI   $ 67,195     $ 50,743  
                 
Diluted earnings per common share   $ 0.38     $ 0.29  
                 
Shares used to calculate diluted earnings per share     176,043       175,369  
                 
Basic earnings per common share   $ 0.39     $ 0.29  
                 
Shares used to calculate basic earnings per share     171,308       173,429  
                 
                 
   
SEI INVESTMENTS COMPANY  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(In thousands, except per share data)  
(Unaudited)  
   
    For the Nine Months Ended September 30,  
    2013     2012  
                 
Asset management, admin. and distribution fees   $ 611,135     $ 532,650  
Information processing and software servicing fees     191,606       174,355  
Transaction-based and trade execution fees     24,367       23,882  
                 
Total revenues     827,108       730,887  
                 
Subadvisory, distribution and other asset mgmt costs     88,795       79,442  
Software royalties and other information processing costs     22,912       19,337  
Brokerage commissions     18,291       17,483  
Compensation, benefits and other personnel     264,636       244,855  
Stock-based compensation     26,997       11,777  
Consulting, outsourcing and professional fees     98,667       80,598  
Data processing and computer related     37,028       34,873  
Facilities, supplies and other costs     47,280       44,909  
Amortization     25,498       25,413  
Depreciation     17,050       16,823  
                 
Total expenses     647,154       575,510  
                 
Income from operations     179,954       155,377  
                 
Net gain on investments     638       7,577  
Interest and dividend income     2,420       4,417  
Interest expense     (422 )     (389 )
Equity in earnings of unconsolidated affiliates     86,204       74,970  
Gain on sale of subsidiary     22,112       --  
Other income     43,429       --  
                 
Net income before income taxes     334,335       241,952  
                 
Income taxes     111,376       90,892  
                 
Net income     222,959       151,060  
                 
Less: Net income attributable to the noncontrolling interest     (350 )     (797 )
                 
Net income attributable to SEI   $ 222,609     $ 150,263  
                 
Diluted earnings per common share   $ 1.26     $ 0.85  
                 
Shares used to calculate diluted earnings per share     176,036       176,317  
                 
Basic earnings per common share   $ 1.29     $ 0.86  
                 
Shares used to calculate basic earnings per share     172,043       174,869  
                 
                 
 
SEI INVESTMENTS COMPANY
CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
 
    September 30,   December 31,
    2013   2012
Assets            
             
Cash and cash equivalents   $ 527,214   $ 452,247
Restricted cash     5,500     6,000
Receivables, net     225,961     202,818
Securities owned     20,728     20,088
Other current assets     20,629     20,251
             
  Total current assets     800,032     701,404
             
Property and equipment, net     118,494     127,581
Investments available for sale     86,186     75,869
Trading securities     4,841     5,909
Capitalized software, net     313,206     307,490
Investment in unconsolidated affiliates     57,429     77,398
Other assets, net     11,511     14,173
             
  Total assets   $ 1,391,699   $ 1,309,824
             
             
             
Liabilities            
             
Current liabilities   $ 145,278   $ 152,005
Deferred income taxes     71,151     93,458
Other Long-term liabilities     8,703     7,032
             
Total SEI Investments Company shareholders' equity     1,166,567     1,038,180
Noncontrolling interest     --     19,149
Total Equity     1,166,567     1,057,329
             
  Total liabilities and equity   $ 1,391,699   $ 1,309,824
             
             
 
SEI INVESTMENTS COMPANY
ENDING ASSET BALANCES
(In millions)
(Unaudited)
 
    Sept. 30,   Dec. 31,   Mar. 31,   Jun. 30,   Sept. 30,
    2012   2012   2013   2013   2013
Private Banks:                              
  Equity/Fixed Income programs   $ 17,960   $ 18,862   $ 12,446   $ 12,876   $ 14,305
  Collective Trust Fund programs     147     11     9     10     11
  Liquidity funds     5,342     6,008     5,143     5,048     5,167
  Total assets under management   $ 23,449   $ 24,881   $ 17,598   $ 17,934   $ 19,483
  Client assets under administration     11,611     12,178     12,970     13,122     14,101
  Total assets   $ 35,060   $ 37,059   $ 30,568   $ 31,056   $ 33,584
                               
Investment Advisors:                              
  Equity/Fixed Income programs   $ 30,864   $ 31,220   $ 34,166   $ 34,447   $ 36,203
  Collective Trust Fund programs     370     14     15     14     14
  Liquidity funds     1,868     2,514     2,094     2,145     2,779
  Total assets under management   $ 33,102   $ 33,748   $ 36,275   $ 36,606   $ 38,996
                               
Institutional Investors:                              
  Equity/Fixed Income programs   $ 59,852   $ 62,160   $ 64,214   $ 61,927   $ 64,429
  Collective Trust Fund programs     153     102     101     106     107
  Liquidity funds     3,272     2,454     2,810     2,901     3,125
  Total assets under management   $ 63,277   $ 64,716   $ 67,125   $ 64,934   $ 67,661
                               
Investment Managers:                              
  Equity/Fixed Income programs   $ 65   $ 67   $ 73   $ 75   $ 75
  Collective Trust Fund programs     15,433     16,197     17,656     18,197     19,868
  Liquidity funds     396     408     522     542     678
  Total assets under management   $ 15,894   $ 16,672   $ 18,251   $ 18,814   $ 20,621
  Client assets under administration (A)     240,965     244,671     275,632     289,807     295,959
  Total assets   $ 256,859   $ 261,343   $ 293,883   $ 308,621   $ 316,580
                               
Investments in New Businesses:                              
  Equity/Fixed Income programs   $ 534   $ 513   $ 552   $ 572   $ 594
  Liquidity funds     29     43     42     29     26
  Total assets under management   $ 563   $ 556   $ 594   $ 601   $ 620
                               
LSV Asset Management:                              
  Equity/Fixed Income programs   $ 58,886   $ 60,947   $ 64,958   $ 65,417   $ 71,149
                               
Total:                              
  Equity/Fixed Income programs (B) (D)   $ 168,161   $ 173,769   $ 176,409   $ 175,314   $ 186,755
  Collective Trust Fund programs     16,103     16,324     17,781     18,327     20,000
  Liquidity funds     10,907     11,427     10,611     10,665     11,775
  Total assets under management   $ 195,171   $ 201,520   $ 204,801   $ 204,306   $ 218,530
                               
  Client assets under administration (C)     252,576     256,849     288,602     302,929     310,060
  Total assets   $ 447,747   $ 458,369   $ 493,403   $ 507,235   $ 528,590
                               
(A)   Client assets under administration in the Investment Managers segment include $56.2 billion of assets balances that require limited services and therefore are at fee levels below our normal full service assets (as of Sept. 30, 2013).
(B)   Equity/Fixed Income programs include $3.9 billion of assets invested in various asset allocation funds at Sept. 30, 2013.
(C)   In addition to the numbers presented, SEI also administers an additional $5.6 billion in Funds of Funds assets (as of Sept. 30, 2013) on which SEI does not earn an administration fee.
(D)   Equity/Fixed Income programs in the Private Banks segment for 2012 included assets related to SEI Asset Korea, which was sold in first-quarter 2013. Assets for SEI Asset Korea at Sept. 30, 2012 and Dec. 31, 2012 were $6.6 billion and $7.0 billion, respectively.
     
     
 
SEI INVESTMENTS COMPANY
AVERAGE ASSET BALANCES
(In millions)
(Unaudited)
 
    3rd Qtr.   4th Qtr.   1st Qtr.   2nd Qtr.   3rd Qtr.
    2012   2012   2013   2013   2013
Private Banks:                              
  Equity/Fixed Income programs   $ 17,527   $ 18,301   $ 19,197   $ 12,959   $ 13,696
  Collective Trust Fund programs     230     66     11     10     11
  Liquidity funds     5,401     5,229     5,556     5,093     5,142
  Total assets under management   $ 23,158   $ 23,596   $ 24,764   $ 18,062   $ 18,849
  Client assets under administration     10,867     11,783     12,860     13,183     13,760
  Total assets   $ 34,025   $ 35,379   $ 37,624   $ 31,245   $ 32,609
                               
Investment Advisors:                              
  Equity/Fixed Income programs   $ 30,032   $ 30,881   $ 33,189   $ 34,831   $ 35,618
  Collective Trust Fund programs     532     158     14     14     14
  Liquidity funds     1,886     2,176     2,085     2,028     2,520
  Total assets under management   $ 32,450   $ 33,215   $ 35,288   $ 36,873   $ 38,152
                               
Institutional Investors:                              
  Equity/Fixed Income programs   $ 57,763   $ 61,304   $ 63,642   $ 63,466   $ 63,153
  Collective Trust Fund programs     284     120     101     105     107
  Liquidity funds     3,253     3,493     2,960     2,975     3,091
  Total assets under management   $ 61,300   $ 64,917   $ 66,703   $ 66,546   $ 66,351
                               
Investment Managers:                              
  Equity/Fixed Income programs   $ 62   $ 68   $ 68   $ 75   $ 76
  Collective Trust Fund programs     14,797     15,719     17,129     18,205     19,259
  Liquidity funds     287     395     511     500     613
  Total assets under management   $ 15,146   $ 16,182   $ 17,708   $ 18,780   $ 19,948
  Client assets under administration     237,155     240,520     263,054     286,018     292,627
  Total assets   $ 252,301   $ 256,702   $ 280,762   $ 304,798   $ 312,575
                               
Investments in New Businesses:                              
  Equity/Fixed Income programs   $ 530   $ 518   $ 542   $ 567   $ 584
  Liquidity funds     35     33     38     34     27
  Total assets under management   $ 565   $ 551   $ 580   $ 601   $ 611
                               
LSV Asset Management:                              
  Equity/Fixed Income programs   $ 57,164   $ 59,383   $ 63,997   $ 66,781   $ 69,463
                               
Total:                              
  Equity/Fixed Income programs (A)   $ 163,078   $ 170,455   $ 180,635   $ 178,679   $ 182,590
  Collective Trust Fund programs     15,843     16,063     17,255     18,334     19,391
  Liquidity funds     10,862     11,326     11,150     10,630     11,393
  Total assets under management   $ 189,783   $ 197,844   $ 209,040   $ 207,643   $ 213,374
                               
  Client assets under administration     248,022     252,303     275,914     299,201     306,387
  Total assets   $ 437,805   $ 450,147   $ 484,954   $ 506,844   $ 519,761
                                 
(A)   Equity/Fixed Income programs in the Private Banks segment for 2012 and first-quarter 2013 included average assets related to SEI Asset Korea, which was sold in first-quarter 2013. Average assets for SEI Asset Korea for the third and fourth quarters of 2012 were $6.5 billion and $6.8 billion, respectively, and $7.0 billion for the first-quarter 2013.
     
     

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