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Sei Investments Company
SEI Reports First-Quarter 2023 Financial Results
Business
Apr 20 2023
3 min read

SEI Reports First-Quarter 2023 Financial Results

OAKS, Pa., April 20, 2023 /PRNewswire/ -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the first-quarter 2023. Diluted earnings per share were $0.79 in first-quarter 2023 compared to $1.36 in first-quarter 2022. First-quarter 2022 results included a one-time positive $88.0 million revenue event resulting in $0.47 diluted earnings per share net of associated costs.

Consolidated Overview

(In thousands, except earnings per share)

For the Three Months Ended March 31,

2023

2022

Revenues

$469,119

$581,443

Net income

107,015

190,308

Diluted earnings per share

$0.79

$1.36

 

"Our first-quarter results reflect strong sales across most of our business lines, especially in technology and investment processing. Revenues and profits were slightly impacted by cash flows in our asset management businesses. We have a clear strategic focus on driving growth and will be very diligent about managing expenses across the company," said CEO Ryan Hicke.

"We are encouraged by overall sales results, as well as the size and makeup of our pipelines, reflecting changes we have made over the last year. We will thoughtfully align our capital to opportunities for growth and deliver the solutions our markets value. I believe SEI's future is ripe with opportunity, and we will be aggressive in executing our long-term growth strategy."

Summary of First-Quarter Results by Business Segment

(In thousands)

For the Three Months Ended March 31,

2023

2022

%

Private Banks:

Revenues

$122,603

$213,548

(43) %

Expenses

114,276

121,955

(6) %

Operating Profit

8,327

91,593

(91) %

Operating Margin

7 %

43 %

Investment Advisors:

Revenues

106,538

119,230

(11) %

Expenses

63,546

64,520

(2) %

Operating Profit

42,992

54,710

(21) %

Operating Margin

40 %

46 %

Institutional Investors:

Revenues

74,290

86,839

(14) %

Expenses

40,868

45,358

(10) %

Operating Profit

33,422

41,481

(19) %

Operating Margin

45 %

48 %

Investment Managers:

Revenues

160,686

156,901

2 %

Expenses

105,866

98,837

7 %

Operating Profit

54,820

58,064

(6) %

Operating Margin

34 %

37 %

Investments in New Businesses:

Revenues

5,002

4,925

2 %

Expenses

11,644

11,950

(3) %

Operating Loss

(6,642)

(7,025)

NM

Totals:

Revenues

$469,119

$581,443

(19) %

Expenses

336,200

342,620

(2) %

Corporate Overhead Expenses

31,152

24,024

30 %

Income from Operations

$101,767

$214,799

(53) %

 

First-Quarter Business Highlights:

  • Revenues from Information processing and software servicing fees decreased primarily from a one-time early termination fee of $88.0 million from an uninstalled investment processing client recorded during first-quarter 2022 in the Private Banks segment.
  • Revenues from Assets under management, administration, and distribution fees decreased primarily from lower assets under management in equity and fixed income programs from market depreciation during 2022 and negative cash flows from SEI fund programs due to client losses in the Investment Advisors and Institutional Investors segments. The improvement in market conditions and positive cash flows into separately managed account programs and Strategist programs during the first quarter 2023 partially offset the decline in revenues.
  • Average assets under management in equity and fixed income programs, excluding LSV, decreased $26.7 billion, or 14%, to $167.8 billion in the first-quarter 2023, as compared to $194.5 billion during the first-quarter 2022 (see attached Average Asset Balances schedule for further details).
  • Revenue from Asset management, administration and distribution fees increased from existing alternative investment clients of the Investment Managers segment due to new products and additional services. The decrease in average assets under administration reflect a loss of a significant client in 2022 which was not charged asset-based fees.
  • Net sales events in the Private Banks and Investment Managers segments during first-quarter 2023 were $21.2 million and are expected to generate net annualized recurring revenues of approximately $17.1 million when contract values are completely realized.
  • Net sales events in asset management-related businesses of the Investment Advisors and Institutional Investors segments and the Asset Management Distribution (AMD) business in the Private Banks segment during first-quarter 2023 were $1.0 million.
  • Net sales events in newer initiatives during first-quarter 2023 were $1.0 million.
  • Operational expenses increased due to higher personnel costs from business growth, competitive labor markets, and the impact of inflation on wages and services. Operational expenses also increased due to personnel costs and investments in compliance infrastructure to meet new regulatory requirements. The increase was substantially offset by lower direct costs related to asset management revenues and lower amortization expense.
  • Earnings from LSV decreased to $28.9 million in the first-quarter 2023 as compared to $32.5 million in the first-quarter 2022 due to net negative cash flows from existing clients, client losses and market depreciation.
  • We capitalized $9.0 million of software development costs in first-quarter 2023, of which $4.7 million was for continued enhancements to SWP. We also capitalized $4.3 million of software development costs in first-quarter 2023 for a new platform for the Investment Managers segment.
  • Amortization expense related to SWP was $6.2 million in first-quarter 2023 as compared to $12.1 million in first-quarter 2022. The decline in amortization expense was due to the amortization period of the initial development costs related to SWP which ended in second-quarter 2022.
  • Effective tax rates were 23.6% in first-quarter 2023 and 23.1% in first-quarter 2022.
  • We repurchased 1.4 million shares of our common stock for $80.3 million during the first-quarter 2023 at an average price of $59.03 per share.
  • Cash flow from operations was $114.4 million, or $0.85 per share, and free cash flow was $94.7 million during the first-quarter 2023.

Earnings Conference CallA conference call to review earnings is scheduled for 4:30 p.m. Eastern time on April 20, 2023. Investors may listen to the call at seic.com/ir-events. Investors may also listen to a replay by telephone at (USA) 866-207-1041; (International) 402-970-0847; Access Code: 8123608.

About SEI®SEI (NASDAQ:SEIC) delivers technology and investment solutions that connect the financial services industry. With capabilities across investment processing, operations, and asset management, SEI works with corporations, financial institutions and professionals, and ultra-high-net-worth families to solve problems, manage change, and help protect assets—for growth today and in the future. As of March 31, 2023, SEI manages, advises, or administers approximately $1.3 trillion in assets. For more information, visit seic.com.

This release contains forward-looking statements within the meaning or the rules and regulations of the Securities and Exchange Commission. In some cases you can identify forward-looking statements by terminology, such as "may," "will," "expect," "believe" and "continue" or "appear." Our forward-looking statements include our current expectations as to:

  • our strategic focus;
  • the opportunities for us;
  • when and if we will generate net annualized recurring revenues from sales events that occurred during the quarter, and
  • whether we will be able to:
    • manage expenses across the company;
    • align our capital to opportunities for growth and deliver the solutions our markets value; or
    • execute against our long-term growth strategy.

We anticipate that we may deliver forward-looking statements during today's earnings call that include our current expectations as to the matters in this release and set forth above as well as:

  • our ability to manage through times of uncertainty;
  • the degree to which market conditions and trends create growth opportunities for us;
  • the direction in which we are moving;
  • our sales momentum;
  • the traction we will generate in the areas we have increased our market focus and attention;
  • the degree to which we will assess and revise our alignment of capital to opportunity;
  • our ability to improve profitability without cannibalizing our medium to long-term growth agendas;
  • the growth of our U.K., European, and Irish businesses;
  • the growth opportunities in the RIA market of our Investment Advisors segment present for our technology, investment processing, and asset management capabilities;
  • those circumstances that may challenge our revenue rate earned on managed assets;
  • the movement of assets among SMA, ETFs, direct indexing and third-party branded products;
  • whether the nature of our asset management offerings enables us to keep and capture assets supporting our long-term growth and health;
  • the importance of alternative assets to our strategic agenda;
  • the headwinds in the U.K. and U.S. for our Institutional Investors segment;
  • the degree to which our Private Banks segment will be profitable;
  • the need to increase penetration and growth in our asset management markets by capitalizing on the continued growth and demand from intermediaries and institutions;
  • the degree to which the changes we have made in leadership give us a greater opportunity to maintain and drive success in the short and medium term, while also driving talent mobility in the organization to position us for the future;
  • the drivers of sales momentum;
  • our ability to create growth engines;
  • our ability to manage expenses and increase EPS;
  • whether we are laying the foundation from which we will deliver what the market values;
  • our ability to maintain and grow the sales momentum and continue to ensure we are selling, installing, and refreshing our pipelines with the right types of clients;
  • the organic and inorganic opportunities that will drive our growth;
  • the expense levels in our Investments in New Businesses segment;
  • the impact of LSV's pipeline on our revenue; and
  • the success and benefits of our strategic investments.

You should not place undue reliance on our forward-looking statements, as they are based on the current beliefs and expectations of our management and subject to significant risks and uncertainties, many of which are beyond our control or are subject to change. Although we believe the assumptions upon which we base our forward-looking statements are reasonable, they could be inaccurate. Some of the risks and important factors that could cause actual results to differ from those described in our forward-looking statements can be found in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended Dec. 31, 2022, filed with the Securities and Exchange Commission.

 

SEI INVESTMENTS COMPANYCONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data)(Unaudited)

For the Three Months Ended March 31,

2023

2022

Asset management, admin. and distribution fees

$371,829

$394,097

Information processing and software servicing fees

97,290

187,346

Total revenues

469,119

581,443

Subadvisory, distribution and other asset mgmt. costs

47,379

53,128

Software royalties and other information processing costs

7,293

7,547

Compensation, benefits and other personnel

173,415

160,484

Stock-based compensation

8,074

10,566

Consulting, outsourcing and professional fees

61,104

62,491

Data processing and computer related

33,340

29,816

Facilities, supplies and other costs

18,792

17,627

Amortization

9,424

16,887

Depreciation

8,531

8,098

Total expenses

367,352

366,644

Income from operations

101,767

214,799

Net gain (loss) on investments

744

(489)

Interest and dividend income

8,778

848

Interest expense

(141)

(250)

Equity in earnings of unconsolidated affiliate

28,879

32,459

Income before income taxes

140,027

247,367

Income taxes

33,012

57,059

Net income

$107,015

$190,308

Basic earnings per common share

$0.80

$1.38

Shares used to calculate basic earnings per share

134,020

137,935

Diluted earnings per common share

$0.79

$1.36

Shares used to calculate diluted earnings per share

135,311

139,712

 

SEI INVESTMENTS COMPANYCONSOLIDATED BALANCE SHEETS(In thousands)(Unaudited)

March 31,

December 31,

2023

2022

Assets

Current Assets:

Cash and cash equivalents

$834,355

$853,008

Restricted cash

352

351

Receivables from investment products

55,744

62,014

Receivables, net of allowance for doubtful accounts of $721 and $901

458,226

457,084

Securities owned

31,779

32,148

Other current assets

50,964

48,703

Total Current Assets

1,431,420

1,453,308

Property and Equipment, net of accumulated depreciation of $449,628 and $440,861

183,207

181,029

Operating Lease Right-of-Use Assets

23,992

24,992

Capitalized Software, net of accumulated amortization of $593,049 and $586,744

240,038

237,302

Available for Sale and Equity Securities

124,269

128,201

Investments in Affiliated Funds, at fair value

6,537

6,366

Investment in Unconsolidated Affiliate

55,041

104,673

Goodwill

115,602

115,599

Intangible Assets, net of accumulated amortization of $33,226 and $30,261

52,567

55,532

Deferred Contract Costs

37,505

37,928

Deferred Income Taxes

9,993

4,936

Other Assets, net

38,323

33,687

Total Assets

$2,318,494

$2,383,553

Liabilities and Equity

Current Liabilities:

Accounts payable

$14,160

$13,283

Accrued liabilities

233,684

359,363

Current portion of long-term operating lease liabilities

10,331

10,344

Deferred revenue

14,330

14,893

Total Current Liabilities

272,505

397,883

Long-term Income Taxes Payable

803

803

Long-term Operating Lease Liabilities

17,657

18,786

Other Long-term Liabilities

13,195

12,257

Total Liabilities

304,160

429,729

Shareholders' Equity:

Common stock, $0.01 par value, 750,000 shares authorized; 133,268 and 134,162 shares issued and outstanding

1,333

1,342

Capital in excess of par value

1,327,591

1,307,162

Retained earnings

729,988

694,287

Accumulated other comprehensive loss, net

(44,578)

(48,967)

Total Shareholders' Equity

2,014,334

1,953,824

Total Liabilities and Shareholders' Equity

$2,318,494

$2,383,553

 

ENDING ASSET BALANCES(In millions)  (Unaudited)

Mar. 31,

Jun. 30,

Sept. 30,

Dec. 31,

Mar. 31,

2022

2022

2022

2022

2023

Private Banks:

Equity and fixed-income programs

$25,335

$22,277

$20,131

$22,377

$23,653

Collective trust fund programs

7

7

7

7

6

Liquidity funds

4,225

3,666

3,778

3,201

3,427

Total assets under management

$29,567

$25,950

$23,916

$25,585

$27,086

Client assets under administration

4,449

3,923

4,161

4,151

4,299

Total assets

$34,016

$29,873

$28,077

$29,736

$31,385

Investment Advisors:

Equity and fixed-income programs

$77,614

$65,783

$62,579

$66,240

$68,065

Liquidity funds

4,610

8,292

5,200

5,436

4,965

Total Platform assets under management

$82,224

$74,075

$67,779

$71,676

$73,030

Platform-only assets

14,151

12,642

12,609

13,931

14,980

Total Platform assets

$96,375

$86,717

$80,388

$85,607

$88,010

Institutional Investors:

Equity and fixed-income programs

$87,358

$75,506

$69,621

$73,178

$74,939

Collective trust fund programs

6

5

6

5

4

Liquidity funds

2,150

1,654

1,640

1,557

1,576

Total assets under management

$89,514

$77,165

$71,267

$74,740

$76,519

Client assets under advisement

4,778

4,218

4,204

4,314

4,559

Total assets

$94,292

$81,383

$75,471

$79,054

$81,078

Investment Managers:

Collective trust fund programs (A)

$85,411

$142,035

$137,538

$141,285

$146,176

Liquidity funds

284

271

248

199

203

Total assets under management

$85,695

$142,306

$137,786

$141,484

$146,379

Client assets under administration

895,181

885,096

781,246

810,491

845,828

Total assets

$980,876

$1,027,402

$919,032

$951,975

$992,207

Investments in New Businesses:

Equity and fixed-income programs

$2,057

$1,903

$1,813

$1,912

$2,031

Liquidity funds

305

242

221

215

217

Total assets under management

$2,362

$2,145

$2,034

$2,127

$2,248

Client assets under administration

1,401

1,076

1,026

1,077

1,081

Total assets

$3,763

$3,221

$3,060

$3,204

$3,329

LSV Asset Management:

Equity and fixed-income programs (B)

$95,962

$81,940

$75,380

$83,753

$84,964

Total:

Equity and fixed-income programs (C)

$288,326

$247,409

$229,524

$247,460

$253,652

Collective trust fund programs

85,424

142,047

137,551

141,297

146,186

Liquidity funds

11,574

14,125

11,087

10,608

10,388

Total assets under management

$385,324

$403,581

$378,162

$399,365

$410,226

Client assets under advisement

6,179

5,294

5,230

5,391

5,640

Client assets under administration (D)

899,630

889,019

785,407

814,642

850,127

Platform-only assets

14,151

12,642

12,609

13,931

14,980

Total assets

$1,305,284

$1,310,536

$1,181,408

$1,233,329

$1,280,973

(A)

Collective trust fund program assets in the Investment Managers segment are included in assets under management since SEI is the trustee. Fees earned on this product are less than fees earned on customized asset management programs.

(B)

Equity and fixed-income programs include $2.0 billion of assets managed by LSV in which fees are based solely on performance and are not calculated as an asset-based fee (as of March 31, 2023).

(C)

Equity and fixed-income programs include $6.3 billion of assets invested in various asset allocation funds (as of March 31, 2023).

(D)

In addition to the assets presented, SEI also administers an additional $12.1 billion in Funds of Funds assets on which SEI does not earn an administration fee (as of March 31, 2023).

 

AVERAGE ASSET BALANCES(In millions) (Unaudited)

1st Qtr.

2nd Qtr.

3rd Qtr.

4th Qtr.

1st Qtr.

2022

2022

2022

2022

2023

Private Banks:

Equity and fixed-income programs

$25,637

$23,713

$22,115

$21,839

$23,576

Collective trust fund programs

6

7

7

7

7

Liquidity funds

4,403

3,795

3,742

3,395

3,253

Total assets under management

$30,046

$27,515

$25,864

$25,241

$26,836

Client assets under administration

4,500

4,163

4,026

4,126

4,316

Total assets

$34,546

$31,678

$29,890

$29,367

$31,152

Investment Advisors:

Equity and fixed-income programs

$77,576

$70,436

$67,464

$66,100

$67,578

Liquidity funds

5,151

7,070

5,380

5,127

4,995

Total Platform assets under management

$82,727

$77,506

$72,844

$71,227

$72,573

Platform-only assets

13,978

13,142

13,271

13,905

14,812

Total Platform assets

$96,705

$90,648

$86,115

$85,132

$87,385

Institutional Investors:

Equity and fixed-income programs

$89,250

$80,971

$74,859

$72,581

$74,653

Collective trust fund programs

5

5

6

5

5

Liquidity funds

2,223

2,097

1,717

1,719

1,715

Total assets under management

$91,478

$83,073

$76,582

$74,305

$76,373

Client assets under advisement

4,889

3,987

4,194

4,251

4,431

Total assets

$96,367

$87,060

$80,776

$78,556

$80,804

Investment Managers:

Collective trust fund programs (A)

$86,633

$131,435

$143,817

$140,494

$144,914

Liquidity funds

432

285

250

275

317

Total assets under management

$87,065

$131,720

$144,067

$140,769

$145,231

Client assets under administration

888,854

893,361

782,559

785,813

836,410

Total assets

$975,919

$1,025,081

$926,626

$926,582

$981,641

Investments in New Businesses:

Equity and fixed-income programs

$2,025

$2,016

$1,939

$1,890

$1,991

Liquidity funds

286

262

231

208

212

Total assets under management

$2,311

$2,278

$2,170

$2,098

$2,203

Client assets under advisement

1,397

1,165

1,126

1,075

1,098

Total assets

$3,708

$3,443

$3,296

$3,173

$3,301

LSV Asset Management:

Equity and fixed-income programs (B)

$96,449

$87,818

$81,241

$83,370

$86,987

Total:

Equity and fixed-income programs (C)

$290,937

$264,954

$247,618

$245,780

$254,785

Collective trust fund programs

86,644

131,447

143,830

140,506

144,926

Liquidity funds

12,495

13,509

11,320

10,724

10,492

Total assets under management

$390,076

$409,910

$402,768

$397,010

$410,203

Client assets under advisement

6,286

5,152

5,320

5,326

5,529

Client assets under administration (D)

893,354

897,524

786,585

789,939

840,726

Platform-only assets

13,978

13,142

13,271

13,905

14,812

Total assets

$1,303,694

$1,325,728

$1,207,944

$1,206,180

$1,271,270

(A)

Collective trust fund program average assets in the Investment Managers segment are included in assets under management since SEI is the trustee. Fees earned on this product are less than fees earned on customized asset management programs.

(B)

Equity and fixed-income programs during first-quarter 2023 include $2.1 billion of average assets managed by LSV in which fees are based solely on performance and are not calculated as an asset-based fee.

(C)

Equity and fixed-income programs include $6.4 billion of average assets invested in various asset allocation funds during first-quarter 2023.

(D)

In addition to the assets presented, SEI also administers an additional $12.3 billion of average assets in Funds of Funds assets during first-quarter 2023 on which SEI does not earn an administration fee.

 

Investor Contact:

Media Contact:

Lindsey Opsahl

Leslie Wojcik

SEI

SEI

+1 610-676-4052

+1 610-676-4191

lopsahl@seic.com

lwojcik@seic.com

 

Cision View original content:https://www.prnewswire.com/news-releases/sei-reports-first-quarter-2023-financial-results-301803513.html

SOURCE SEI Investments Company