SOURCE: SEI

SEI

October 21, 2015 08:30 ET

SEI Reports Third-Quarter 2015 Financial Results

Results Include $.02 Diluted Earnings per Share Charge for Asset Write Off

OAKS, PA--(Marketwired - Oct 21, 2015) -  SEI Investments Company (NASDAQ: SEIC) today announced financial results for the third-quarter 2015. Diluted earnings per share were $.47 in third-quarter 2015 compared to $.49 in third-quarter 2014. Third-quarter 2015 includes a charge against earnings of approximately $6.0 million, or $.02 diluted earnings per share, from the write off of certain assets related to the SEI Wealth Platform(SM).

                             
Consolidated Overview                            
(In thousands, except earnings per share)   For the Three Months Ended September 30,         For the Nine Months Ended September 30,      
    2015   2014   %     2015   2014   %  
                                     
Revenues   $ 335,622   $ 322,047   4 %   $ 998,811   $ 943,248   6 %
Net income     79,425     83,983   (5 )%     250,276     241,616   4 %
Diluted earnings per share   $ 0.47   $ 0.49   (4 )%   $ 1.47   $ 1.39   6 %
                                     

"Our third-quarter results reflect short-term challenges resulting from weakened capital markets, balanced by continued market acceptance of our broad solutions," said Alfred P. West, Jr., SEI Chairman and CEO. "We are encouraged by the level of engagement of our target markets and feel the investments we are making in enhancing our technology platforms, operational capacity and investment products serve us well both for today and into the future.

"Despite the market headwinds we face, we are confident in our market positioning and in our ability to help our clients succeed by delivering outsourced enterprise platforms."

Summary of Third-Quarter Results by Business Segment

                         
(In thousands)   For the Three Months Ended September 30,           For the Nine Months Ended September 30,        
    2015     2014     %     2015     2014     %  
Private Banks:                                            
  Revenues   $ 116,280     $ 110,147     6 %   $ 342,826     $ 329,508     4 %
  Expenses     104,217       100,498     4 %     308,200       299,645     3 %
  Operating Profit     12,063       9,649     25 %     34,626       29,863     16 %
  Gain on sale of subsidiary     --       --     -- %     2,791       5,582     NM  
  Segment Profit     12,063       9,649     NM       37,417       35,445     NM  
  Operating Margin (A)     10 %     9 %           10 %     9 %      
                                             
Investment Advisors:                                            
  Revenues     76,238       74,469     2 %     228,006       210,939     8 %
  Expenses     45,530       37,796     20 %     125,446       108,052     16 %
  Operating Profit     30,708       36,673     (16 )%     102,560       102,887     -- %
  Operating Margin     40 %     49 %           45 %     49 %      
                                             
Institutional Investors:                                            
  Revenues     74,515       72,560     3 %     224,043       212,211     6 %
  Expenses     36,923       35,495     4 %     108,662       104,615     4 %
  Operating Profit     37,592       37,065     1 %     115,381       107,596     7 %
  Operating Margin     50 %     51 %           51 %     51 %      
                                             
Investment Managers:                                            
  Revenues     67,162       63,640     6 %     199,809       187,099     7 %
  Expenses     43,899       40,156     9 %     126,663       118,789     7 %
  Operating Profit     23,263       23,484     (1 )%     73,146       68,310     7 %
  Operating Margin     35 %     37 %           37 %     37 %      
                                             
Investments in New Businesses:                                            
  Revenues     1,427       1,231     16 %     4,127       3,491     18 %
  Expenses     5,179       4,614     12 %     14,848       13,314     12 %
  Operating Loss     (3,752 )     (3,383 )   NM       (10,721 )     (9,823 )   NM  
                                             
Totals:                                            
  Revenues   $ 335,622     $ 322,047     4 %   $ 998,811     $ 943,248     6 %
  Expenses     235,748       218,559     8 %     683,819       644,415     6 %
  Corporate overhead expenses     12,856       12,990     (1 )%     38,986       36,313     7 %
  Income from operations   $ 87,018     $ 90,498     (4 )%   $ 276,006     $ 262,520     5 %
                                               

(A) Percentages determined exclusive of gain on sale of subsidiary.

Third-Quarter Business Highlights:

  • Revenue growth was primarily driven by higher Asset management, administration, and distribution fees from improved cash flows from new and existing clients and the favorable market conditions which prevailed during the first six months of 2015. The recent market volatility during third-quarter 2015 negatively impacted our asset-based fee revenues and partially offset our revenue growth.
  • Sales events, net of client losses, during third-quarter 2015 totaled approximately $20.8 million and are expected to generate net annualized recurring revenues of approximately $19.5 million when contract values are fully realized.
  • Despite the unfavorable market conditions during third-quarter 2015, our average assets under management, excluding LSV, increased $4.4 billion, or three percent, to $172.8 billion, as compared to $168.5 billion during the third-quarter 2014 (see attached Average Asset Balances schedules for further details).
  • Our average assets under administration increased $37.4 billion, or ten percent, to $397.8 billion in the third-quarter 2015, as compared to $360.4 billion during the third-quarter 2014 (see attached Average Asset Balances schedules for further details).
  • Our earnings from LSV decreased by $4.6 million, or 12 percent, to $33.6 million in third-quarter 2015 as compared to $38.2 million in third-quarter 2014. The reduction in earnings was due to lower assets under management from market volatility in third-quarter 2015 as well as reduced performance fees earned by LSV.
  • We wrote off approximately $6.0 million, or $0.02 diluted earnings per share, in previously capitalized software development costs and purchased software related to the SEI Wealth Platform in the third-quarter 2015. The expense associated with this write off impacted the Private Banks segment by $3.6 million and the Investment Advisors segment by $2.4 million, and is reflected in Facilities, supplies and other costs on the Consolidated Statement of Operations.
  • Amortization expense related to the SEI Wealth Platform was $10.8 million during the third-quarter 2015 as compared to $9.8 million during the third-quarter 2014 due to continued enhancements.
  • Our operating expenses related to personnel costs in our Investment Advisors and Investment Managers segments increased. These increased operational costs are mainly related to servicing new and existing clients.
  • Our effective tax rates were 34.1 percent in third-quarter 2015 and 34.7 percent in third-quarter 2014.
  • We repurchased 1.7 million shares of our common stock for $85.8 million during the third-quarter 2015.

Earnings Conference Call
A conference call to review earnings is scheduled for 2 p.m. Eastern time on October 21, 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 371051.

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, 2015, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $638 billion in mutual fund and pooled or separately managed assets, including $245 billion in assets under management and $393 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,
    2015   2014   2015   2014
                         
Asset management, admin. and distribution fees   $ 252,585   $ 244,704   $ 756,101   $ 705,966
Information processing and software servicing fees     74,413     70,020     218,765     215,026
Transaction-based and trade execution fees     8,624     7,323     23,945     22,256
                         
Total revenues     335,622     322,047     998,811     943,248
                         
Subadvisory, distribution and other asset mgmt costs     40,230     39,737     119,619     110,993
Software royalties and other information processing costs     8,028     8,562     23,594     25,532
Brokerage commissions     6,460     5,119     17,863     16,217
Compensation, benefits and other personnel     99,461     94,316     292,646     281,210
Stock-based compensation     3,867     3,786     11,476     9,481
Consulting, outsourcing and professional fees     35,963     34,946     108,560     103,283
Data processing and computer related     15,173     13,555     43,100     39,553
Facilities, supplies and other costs     22,477     16,136     56,195     49,354
Amortization     10,837     9,813     31,806     28,611
Depreciation     6,108     5,579     17,946     16,494
                         
Total expenses     248,604     231,549     722,805     680,728
                         
Income from operations     87,018     90,498     276,006     262,520
                         
Net (loss) gain on investments     (756)     (478)     (544)     49
Interest and dividend income     846     750     2,570     2,248
Interest expense     (115)     (115)     (342)     (342)
Equity in earnings of unconsolidated affiliates     33,595     37,963     104,917     104,080
Gain on sale of subsidiary     --     --     2,791     5,582
                         
Income before income taxes     120,588     128,618     385,398     374,137
                         
Income taxes     41,163     44,635     135,122     132,521
                         
Net income     79,425     83,983     250,276     241,616
                         
Basic earnings per common share   $ 0.48   $ 0.50   $ 1.51   $ 1.43
                         
Shares used to calculate basic earnings per share     165,579     167,925     166,142     168,612
                         
Diluted earnings per common share   $ 0.47   $ 0.49   $ 1.47   $ 1.39
                         
Shares used to calculate diluted earnings per share     169,255     172,905     169,977     173,700
   
   
   
SEI INVESTMENTS COMPANY  
CONSOLIDATED BALANCE SHEETS  
(In thousands)  
(Unaudited)  
   
    September 30,     December 31,  
    2015     2014  
Assets                
  Current Assets:                
    Cash and cash equivalents   $ 647,589     $ 667,446  
    Restricted cash     6,319       5,801  
    Receivables from regulated investment companies     45,792       48,393  
    Receivables, net     217,696       194,419  
    Securities owned     21,225       21,175  
    Other current assets     29,206       18,193  
      Total Current Assets     967,827       955,427  
                 
  Property and Equipment, net     142,352       125,535  
  Capitalized software, net     294,380       309,040  
  Investments available for sale     75,650       77,609  
  Investments in affiliated funds, at fair value     3,944       4,523  
  Investment in unconsolidated affiliates     42,294       54,290  
  Other assets, net     17,082       16,451  
      Total Assets   $ 1,543,529     $ 1,542,875  
                 
Liabilities and Equity                
  Current Liabilities:                
    Accounts payable   $ 4,002     $ 10,588  
    Accrued liabilities     153,280       207,429  
    Deferred income taxes, net     176       1,414  
    Deferred revenue     4,457       1,749  
      Total Current Liabilities     161,915       221,180  
                 
  Deferred income taxes     59,597       63,755  
  Other long-term liabilities     12,253       10,327  
      Total Liabilities     233,765       295,262  
                 
  Shareholders' Equity:                
    Common stock     1,646       1,667  
    Capital in excess of par value     892,549       834,615  
    Retained earnings     435,915       420,226  
    Accumulated other comprehensive loss, net     (20,346 )     (8,895 )
      Total Shareholders' Equity     1,309,764       1,247,613  
      Total Liabilities and Shareholders' Equity   $ 1,543,529     $ 1,542,875  
 
 
 
SEI INVESTMENTS COMPANY
ENDING ASSET BALANCES
(In millions)
(Unaudited)
 
    Sept. 30,   Dec 31,   Mar. 31,   Jun. 30,   Sept. 30,
    2014   2014   2015   2015   2015
Private Banks:                              
  Equity/Fixed Income programs   $ 18,634   $ 18,666   $ 19,296   $ 19,686   $ 18,243
  Collective Trust Fund programs     11     8     9     13     3
  Liquidity funds     5,331     5,889     5,551     5,280     5,469
  Total assets under management   $ 23,976   $ 24,563   $ 24,856   $ 24,979   $ 23,715
  Client assets under administration     16,288     16,741     17,643     17,485     16,896
  Total assets   $ 40,264   $ 41,304   $ 42,499   $ 42,464   $ 40,611
                               
Investment Advisors:                              
  Equity/Fixed Income programs   $ 42,260   $ 43,845   $ 45,800   $ 46,951   $ 43,988
  Collective Trust Fund programs     9     9     8     8     9
  Liquidity funds     3,086     3,173     3,047     2,817     4,677
  Total assets under management   $ 45,355   $ 47,027   $ 48,855   $ 49,776   $ 48,674
                               
Institutional Investors:                              
  Equity/Fixed Income programs   $ 72,006   $ 72,828   $ 74,178   $ 75,341   $ 70,818
  Collective Trust Fund programs     98     95     94     93     96
  Liquidity funds     2,891     2,929     3,246     2,960     2,655
  Total assets under management   $ 74,995   $ 75,852   $ 77,518   $ 78,394   $ 73,569
                               
Investment Managers:                              
  Equity/Fixed Income programs   $ 64   $ 27   $ 25   $ 24   $ 59
  Collective Trust Fund programs     21,297     20,833     20,965     20,632     19,863
  Liquidity funds     1,018     946     1,091     1,007     848
  Total assets under management   $ 22,379   $ 21,806   $ 22,081   $ 21,663   $ 20,770
  Client assets under administration (A)     346,841     355,890     372,116     381,963     376,133
  Total assets   $ 369,220   $ 377,696   $ 394,197   $ 403,626   $ 396,903
                               
Investments in New Businesses:                              
  Equity/Fixed Income programs   $ 703   $ 736   $ 756   $ 779   $ 752
  Liquidity funds     118     98     106     57     51
  Total assets under management   $ 821   $ 834   $ 862   $ 836   $ 803
                               
LSV Asset Management:                              
  Equity/Fixed Income programs   $ 81,536   $ 82,665   $ 84,123   $ 86,334   $ 76,958
                               
Total:                              
  Equity/Fixed Income programs (B)   $ 215,203   $ 218,767   $ 224,178   $ 229,115   $ 210,818
  Collective Trust Fund programs     21,415     20,945     21,076     20,746     19,971
  Liquidity funds     12,444     13,035     13,041     12,121     13,700
  Total assets under management   $ 249,062   $ 252,747   $ 258,295   $ 261,982   $ 244,489
                               
  Client assets under administration (C)     363,129     372,631     389,759     399,448     393,029
  Total assets   $ 612,191   $ 625,378   $ 648,054   $ 661,430   $ 637,518
                                 

(A) Client assets under administration in the Investment Managers segment include $49.3 billion of assets balances that require limited services and therefore are at fee levels below our normal full service assets (as of September 30, 2015).

(B) Equity/Fixed Income programs include $4.7 billion of assets invested in various asset allocation funds at September 30, 2015.

(C) In addition to the numbers presented, SEI also administers an additional $6.4 billion in Funds of Funds assets (as of September 30, 2015) 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.
    2014   2014   2015   2015   2015
Private Banks:                              
  Equity/Fixed Income programs   $ 18,804   $ 18,606   $ 18,869   $ 19,872   $ 19,080
  Collective Trust Fund programs     12     10     8     12     6
  Liquidity funds     5,466     5,537     5,755     5,256     5,443
  Total assets under management   $ 24,282   $ 24,153   $ 24,632   $ 25,140   $ 24,529
  Client assets under administration     15,707     16,451     17,504     17,823     17,504
  Total assets   $ 39,989   $ 40,604   $ 42,136   $ 42,963   $ 42,033
                               
Investment Advisors:                              
  Equity/Fixed Income programs   $ 42,389   $ 43,104   $ 44,809   $ 47,027   $ 45,992
  Collective Trust Fund programs     11     9     9     8     9
  Liquidity funds     2,830     3,087     3,072     2,819     3,523
  Total assets under management   $ 45,230   $ 46,200   $ 47,890   $ 49,854   $ 49,524
                               
Institutional Investors:                              
  Equity/Fixed Income programs   $ 72,010   $ 72,771   $ 73,760   $ 75,426   $ 73,568
  Collective Trust Fund programs     98     96     95     94     93
  Liquidity funds     2,883     2,973     3,021     3,354     2,843
  Total assets under management   $ 74,991   $ 75,840   $ 76,876   $ 78,874   $ 76,504
                               
Investment Managers:                              
  Equity/Fixed Income programs   $ 64   $ 64   $ 27   $ 25   $ 24
  Collective Trust Fund programs     22,123     21,140     21,108     21,387     20,449
  Liquidity funds     962     904     1,066     1,010     978
  Total assets under management   $ 23,149   $ 22,108   $ 22,201   $ 22,422   $ 21,451
  Client assets under administration     344,661     355,903     367,206     378,347     380,247
  Total assets   $ 367,810   $ 378,011   $ 389,407   $ 400,769   $ 401,698
                               
Investments in New Businesses:                              
  Equity/Fixed Income programs   $ 688   $ 731   $ 755   $ 784   $ 776
  Liquidity funds     139     97     101     75     49
  Total assets under management   $ 827   $ 828   $ 856   $ 859   $ 825
                               
LSV Asset Management:                              
  Equity/Fixed Income programs   $ 82,402   $ 83,187   $ 83,439   $ 87,409   $ 80,656
                               
Total:                              
  Equity/Fixed Income programs   $ 216,357   $ 218,463   $ 221,659   $ 230,543   $ 220,096
  Collective Trust Fund programs     22,244     21,255     21,220     21,501     20,557
  Liquidity funds     12,280     12,598     13,015     12,514     12,836
  Total assets under management   $ 250,881   $ 252,316   $ 255,894   $ 264,558   $ 253,489
                               
  Client assets under administration     360,368     372,354     384,710     396,170     397,751
  Total assets   $ 611,249   $ 624,670   $ 640,604   $ 660,728   $ 651,240

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