SOURCE: SEI

SEI

October 22, 2014 08:30 ET

SEI Reports Third-Quarter 2014 Financial Results

EPS Increases 29 Percent on Revenue Increase of 15 Percent

OAKS, PA--(Marketwired - Oct 22, 2014) - SEI Investments Company (NASDAQ: SEIC) today announced financial results for the third-quarter 2014. Diluted earnings per share were $.49 in third-quarter 2014 compared to $.38 in third-quarter 2013. Our tax rate during third-quarter 2014 was 34.7 percent compared to 28.5 percent in third-quarter 2013. This differential in our tax rate equates to a positive impact of $.03 diluted earnings per share to our third-quarter 2013 earnings.

                             
Consolidated Overview                            
(In thousands, except earnings per share)   For the Three Months Ended September 30,         For the Nine Months Ended September 30,      
    2014   2013   %     2014   2013   %  
                                     
Revenues   $ 322,047   $ 280,655   15 %   $ 943,248   $ 827,108   14 %
Net income attributable to SEI     83,983     67,195   25 %     241,616     222,609   9 %
Diluted earnings per share   $ 0.49   $ 0.38   29 %   $ 1.39   $ 1.26   10 %
                                     

"Third-quarter results reflect ongoing progress across all of our business segments," said Alfred P. West, Jr., SEI Chairman and CEO. "SEI's continued success reflects our clients' recognition of the value of our solutions. Our financial results affirm the strength of our diversified portfolio of offerings, and, 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 Ended September 30,           For the Nine Months Ended September 30,        
    2014     2013     %     2014     2013     %  
Private Banks:                                            
  Revenues   $ 110,147     $ 97,370     13 %   $ 329,508     $ 291,258     13 %
  Expenses     100,498       95,579     5 %     299,645       289,632     3 %
  Operating Profit     9,649       1,791     NM       29,863       1,626     NM  
  Gain on sale of subsidiary     --       --     -- %     5,582       22,112     NM  
  Total Profit     9,649       1,791     NM     $ 35,445     $ 23,738     NM  
  Operating Margin (A)     9 %     2 %           9 %     1 %      
                                             
Investment Advisors:                                            
  Revenues     74,469       61,393     21 %     210,939       175,868     20 %
  Expenses     37,796       33,768     12 %     108,052       98,291     10 %
  Operating Profit     36,673       27,625     33 %     102,887       77,577     33 %
  Operating Margin     49 %     45 %           49 %     44 %      
                                             
Institutional Investors:                                            
  Revenues     72,560       63,539     14 %     212,211       190,385     11 %
  Expenses     35,495       33,058     7 %     104,615       97,595     7 %
  Operating Profit     37,065       30,481     22 %     107,596       92,790     16 %
  Operating Margin     51 %     48 %           51 %     49 %      
                                             
Investment Managers:                                            
  Revenues     63,640       57,266     11 %     187,099       166,542     12 %
  Expenses     40,156       37,763     6 %     118,789       109,432     9 %
  Operating Profit     23,484       19,503     20 %     68,310       57,110     20 %
  Operating Margin     37 %     34 %           37 %     34 %      
                                             
Investments in New Businesses:                                            
  Revenues     1,231       1,087     13 %     3,491       3,055     14 %
  Expenses     4,614       4,146     11 %     13,314       11,774     13 %
  Operating Loss     (3,383 )     (3,059 )   NM       (9,823 )     (8,719 )   NM  
                                             
Totals:                                            
  Revenues   $ 322,047     $ 280,655     15 %   $ 943,248     $ 827,108     14 %
  Expenses     218,559       204,314     7 %     644,415       606,724     6 %
  Corporate overhead expenses     12,990       14,402     (10 )%     36,313       40,719     (11 )%
  NCI reflected in segments     --       --     -- %     --       (289 )   NM  
  Income from operations   $ 90,498     $ 61,939     46 %   $ 262,520     $ 179,954     46 %
                                               
(A)   Percentages determined exclusive of gain on sale of subsidiary.
     

Third-Quarter Business Highlights:

  • Revenues increased in third-quarter 2014 as compared to both third-quarter 2013 and second-quarter 2014. 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 $24.6 billion, or 17 percent, to $168.5 billion in the third-quarter 2014, as compared to $143.9 billion during the third-quarter 2013, and increased $4.1 billion, or three percent, as compared to $164.3 billion during the second-quarter 2014.
  • Our average assets under administration increased $54.0 billion, or 18 percent, to $360.4 billion in the third-quarter 2014, as compared to $306.4 billion during the third-quarter 2013, and increased $11.9 billion, or three percent, as compared to $348.4 billion during the second-quarter 2014 (see attached Ending and Average Asset Balances schedules for further details).
  • Revenue growth was also driven by increased information processing fees in our Private Banks segment. The increase was primarily attributable to higher fees from the growth in assets processed on the SEI Wealth Platform(SM).
  • Sales events, net of client losses, during third-quarter 2014 totaled approximately $27.5 million and are expected to generate net annualized recurring revenues of approximately $25.6 million when contract values are fully realized.
  • All four core business segments realized revenue and profit margin growth as compared to third-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 $6.9 million, or 22 percent, to $38.2 million in third-quarter 2014 as compared to $31.3 million in third-quarter 2013 due to an increase in assets under management from market appreciation and an increase in performance fees earned by LSV.
  • Stock-based compensation expense during the third-quarter 2014 decreased by $7.3 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 increased to $9.8 million during the third-quarter 2014 as compared to $8.8 million during the third-quarter 2013 due to continued releases of the SEI Wealth Platform(SM).
  • The effective tax rates were 34.7 percent in third-quarter 2014, 28.5 percent in third-quarter 2013, and 35.7 percent in second-quarter 2014. Our third-quarter 2013 tax rate benefited by a one-time adjustment due to a Pennsylvania Tax Law change enacted on July 18, 2013.
  • In third-quarter 2014, we repurchased 2.0 million shares of our common stock for $75.2 million.

Earnings Conference Call
A conference call to review earnings is scheduled for 2 p.m. Eastern time on October 22, 2014. 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 339136.

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, 2014, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $612 billion in mutual fund and pooled or separately managed assets, including $249 billion in assets under management and $363 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 September 30,     For the Nine Months Ended September 30,  
    2014     2013     2014     2013  
                                 
Asset management, admin. and distribution fees   $ 244,704     $ 208,780     $ 705,966     $ 611,135  
Information processing and software servicing fees     70,020       64,606       215,026       191,606  
Transaction-based and trade execution fees     7,323       7,269       22,256       24,367  
                                 
Total revenues     322,047       280,655       943,248       827,108  
                                 
Subadvisory, distribution and other asset mgmt costs     39,737       31,209       110,993       88,795  
Software royalties and other information processing costs     8,562       7,541       25,532       22,912  
Brokerage commissions     5,119       5,519       16,217       18,291  
Compensation, benefits and other personnel     94,316       89,311       281,210       264,636  
Stock-based compensation     3,786       11,097       9,481       26,997  
Consulting, outsourcing and professional fees     34,946       33,367       103,283       98,667  
Data processing and computer related     13,555       12,654       39,553       37,028  
Facilities, supplies and other costs     16,136       13,573       49,354       47,280  
Amortization     9,813       8,829       28,611       25,498  
Depreciation     5,579       5,616       16,494       17,050  
                                 
Total expenses     231,549       218,716       680,728       647,154  
                                 
Income from operations     90,498       61,939       262,520       179,954  
                                 
Net (loss) gain on investments     (478 )     535       49       638  
Interest and dividend income     750       679       2,248       2,420  
Interest expense     (115 )     (195 )     (342 )     (422 )
Equity in earnings of unconsolidated affiliates     37,963       31,028       104,080       86,204  
Gain on sale of subsidiary     --       --       5,582       22,112  
Other income     --       --       --       43,429  
                                 
Income before income taxes     128,618       93,986       374,137       334,335  
                                 
Income taxes     44,635       26,791       132,521       111,376  
                                 
Net income     83,983       67,195       241,616       222,959  
                                 
Less: Net income attributable to the noncontrolling interest     --       --       --       (350 )
                                 
Net income attributable to SEI   $ 83,983     $ 67,195     $ 241,616     $ 222,609  
                                 
Basic earnings per common share   $ 0.50     $ 0.39     $ 1.43     $ 1.29  
                                 
Shares used to calculate basic earnings per share     167,925       171,308       168,612       172,043  
                                 
Diluted earnings per common share   $ 0.49     $ 0.38     $ 1.39     $ 1.26  
                                 
Shares used to calculate diluted earnings per share     172,905       176,043       173,700       176,036  
                                 
                                 
                                 
SEI INVESTMENTS COMPANY
BALANCE SHEETS
(In thousands)
(Unaudited)
 
    September 30,     December 31,
    2014     2013
Assets              
  Current Assets:              
    Cash and cash equivalents   $ 577,914     $ 578,273
    Restricted cash     5,500       5,500
    Receivables from regulated investment companies     46,533       39,364
    Receivables, net     211,228       186,664
    Securities owned     21,173       21,133
    Other current assets     21,028       16,166
      Total Current Assets     883,376       847,100
                 
  Property and Equipment, net     128,775       118,995
  Capitalized software, net     310,368       312,615
  Investments available for sale     81,084       83,323
  Trading securities     4,908       4,849
  Investment in unconsolidated affiliates     63,858       61,370
  Other assets, net     13,410       10,917
      Total Assets   $ 1,485,779     $ 1,439,169
               
Liabilities and Equity              
  Current Liabilities:              
    Accounts payable   $ 6,512     $ 16,235
    Accrued liabilities     148,839       188,123
    Deferred income taxes, net     1,868       1,653
    Deferred revenue     1,098       1,977
      Total Current Liabilities     158,317       207,988
                 
  Deferred income taxes     71,552       66,572
  Other long-term liabilities     11,270       8,607
      Total Liabilities     241,139       283,167
                 
  Shareholders' Equity:              
    Common stock     1,671       1,692
    Capital in excess of par value     805,197       721,219
    Retained earnings     440,767       431,604
    Accumulated other comprehensive (loss) income, net     (2,995 )     1,487
      Total Shareholders' Equity     1,244,640       1,156,002
      Total Liabilities and Shareholders' Equity   $ 1,485,779     $ 1,439,169
                     
                     
                     
SEI INVESTMENTS COMPANY
ENDING ASSET BALANCES
(In millions)
(Unaudited)
 
    Sept. 30,   Dec. 31,   Mar. 31,   Jun. 30,   Sept. 30,
    2013   2013   2014   2014   2014
Private Banks:                              
  Equity/Fixed Income programs   $ 14,305   $ 15,472   $ 16,918   $ 18,679   $ 18,634
  Collective Trust Fund programs     11     14     14     12     11
  Liquidity funds     5,167     5,685     5,670     5,274     5,331
  Total assets under management   $ 19,483   $ 21,171   $ 22,602   $ 23,965   $ 23,976
  Client assets under administration     14,101     15,272     15,641     15,347     16,288
  Total assets   $ 33,584   $ 36,443   $ 38,243   $ 39,312   $ 40,264
                               
Investment Advisors:                              
  Equity/Fixed Income programs   $ 36,203   $ 38,574   $ 39,981   $ 42,125   $ 42,260
  Collective Trust Fund programs     14     11     13     13     9
  Liquidity funds     2,779     2,846     2,802     2,696     3,086
  Total assets under management   $ 38,996   $ 41,431   $ 42,796   $ 44,834   $ 45,355
                               
Institutional Investors:                              
  Equity/Fixed Income programs   $ 64,429   $ 66,548   $ 69,194   $ 71,598   $ 72,006
  Collective Trust Fund programs     107     109     102     100     98
  Liquidity funds     3,125     2,644     2,505     2,414     2,891
  Total assets under management   $ 67,661   $ 69,301   $ 71,801   $ 74,112   $ 74,995
                               
Investment Managers:                              
  Equity/Fixed Income programs   $ 75   $ 69   $ 68   $ 64   $ 64
  Collective Trust Fund programs     19,868     22,377     22,633     22,598     21,297
  Liquidity funds     678     718     782     802     1,018
  Total assets under management   $ 20,621   $ 23,164   $ 23,483   $ 23,464   $ 22,379
  Client assets under administration (A)     295,959     311,992     326,735     337,492     346,841
  Total assets   $ 316,580   $ 335,156   $ 350,218   $ 360,956   $ 369,220
                               
Investments in New Businesses:                              
  Equity/Fixed Income programs   $ 594   $ 619   $ 632   $ 659   $ 703
  Liquidity funds     26     46     49     38     118
  Total assets under management   $ 620   $ 665   $ 681   $ 697   $ 821
                               
LSV Asset Management:                              
  Equity/Fixed Income programs   $ 71,149   $ 76,189   $ 77,973   $ 82,026   $ 81,536
                               
Total:                              
  Equity/Fixed Income programs (B)   $ 186,755   $ 197,471   $ 204,766   $ 215,151   $ 215,203
  Collective Trust Fund programs     20,000     22,511     22,762     22,723     21,415
  Liquidity funds     11,775     11,939     11,808     11,224     12,444
  Total assets under management   $ 218,530   $ 231,921   $ 239,336   $ 249,098   $ 249,062
                                 
  Client assets under administration (C)     310,060     327,264     342,376     352,839     363,129
  Total assets   $ 528,590   $ 559,185   $ 581,712   $ 601,937   $ 612,191
                                 
(A)   Client assets under administration in the Investment Managers segment include $52.5 billion of assets balances that require limited services and therefore are at fee levels below our normal full service assets (as of September 30, 2014).
(B)   Equity/Fixed Income programs include $5.1 billion of assets invested in various asset allocation funds at September 30, 2014.
(C)   In addition to the numbers presented, SEI also administers an additional $6.7 billion in Funds of Funds assets (as of September 30, 2014) on which SEI does not earn an administration fee.
     
     
     
SEI INVESTMENTS COMPANY
AVERAGE ASSET BALANCES
(In millions)
(Unaudited)
 
    3rd Qtr.   4th Qtr.   1st Qtr.   2nd Qtr.   3rd Qtr.
    2013   2013   2014   2014   2014
Private Banks:                              
  Equity/Fixed Income programs   $ 13,696   $ 14,901   $ 16,114   $ 17,829   $ 18,804
  Collective Trust Fund programs     11     11     14     12     12
  Liquidity funds     5,142     5,218     5,757     5,429     5,466
  Total assets under management   $ 18,849   $ 20,130   $ 21,885   $ 23,270   $ 24,282
  Client assets under administration     13,760     14,702     15,366     15,069     15,707
  Total assets   $ 32,609   $ 34,832   $ 37,251   $ 38,339   $ 39,989
                               
Investment Advisors:                              
  Equity/Fixed Income programs   $ 35,618   $ 37,520   $ 39,005   $ 40,887   $ 42,389
  Collective Trust Fund programs     14     13     13     13     11
  Liquidity funds     2,520     2,785     2,806     2,637     2,830
  Total assets under management   $ 38,152   $ 40,318   $ 41,824   $ 43,537   $ 45,230
                               
Institutional Investors:                              
  Equity/Fixed Income programs   $ 63,153   $ 65,750   $ 67,697   $ 70,706   $ 72,010
  Collective Trust Fund programs     107     110     103     134     98
  Liquidity funds     3,091     2,720     2,571     2,664     2,883
  Total assets under management   $ 66,351   $ 68,580   $ 70,371   $ 73,504   $ 74,991
                               
Investment Managers:                              
  Equity/Fixed Income programs   $ 76   $ 75   $ 68   $ 68   $ 64
  Collective Trust Fund programs     19,259     21,345     22,004     22,447     22,123
  Liquidity funds     613     592     738     824     962
  Total assets under management   $ 19,948   $ 22,012   $ 22,810   $ 23,339   $ 23,149
  Client assets under administration     292,627     303,131     320,644     333,373     344,661
  Total assets   $ 312,575   $ 325,143   $ 343,454   $ 356,712   $ 367,810
                               
Investments in New Businesses:                              
  Equity/Fixed Income programs   $ 584   $ 613   $ 623   $ 640   $ 688
  Liquidity funds     27     33     46     43     139
  Total assets under management   $ 611   $ 646   $ 669   $ 683   $ 827
                               
LSV Asset Management:                              
  Equity/Fixed Income programs   $ 69,463   $ 75,240   $ 76,306   $ 79,866   $ 82,402
                               
Total:                              
  Equity/Fixed Income programs   $ 182,590   $ 194,099   $ 199,813   $ 209,996   $ 216,357
  Collective Trust Fund programs     19,391     21,479     22,134     22,606     22,244
  Liquidity funds     11,393     11,348     11,918     11,597     12,280
  Total assets under management   $ 213,374   $ 226,926   $ 233,865   $ 244,199   $ 250,881
                                 
  Client assets under administration     306,387     317,833     336,010     348,442     360,368
  Total assets   $ 519,761   $ 544,759   $ 569,875   $ 592,641   $ 611,249
                                 

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