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Sei Investments Company
SEI Reports Fourth-Quarter 2019 Financial Results
Jan 29 2020
5 min read

SEI Reports Fourth-Quarter 2019 Financial Results

OAKS, Pa., Jan. 29, 2020 /PRNewswire/ -- SEI Investments Company (NASDAQ: SEIC) today announced financial results for the fourth-quarter 2019. Diluted earnings per share were $0.84 in fourth-quarter 2019 compared to $0.73 in fourth-quarter 2018.

Consolidated Overview

(In thousands, except earnings per share)

For the Three Months Ended Dec. 31,

For the Twelve Months Ended Dec. 31,

2019

2018

%

2019

2018

%

Revenues

$423,225

$405,057

4%

$1,649,885

$1,624,167

2%

Net income

128,737

116,034

11%

501,426

505,868

(1)%

Diluted earnings per share

$0.84

$0.73

15%

$3.24

$3.14

3%

"Our financial results for 2019 reflect steady success in growing our profits. While we continue to execute our long-term strategy, turning headwinds into tailwinds, we are leveraging all of our assets through our One SEI approach," said Alfred P. West, Jr., SEI Chairman and CEO.

"The wealth and investment industries are dynamic. We believe our unique position across financial technology, operations and investments provide growth opportunities that will lead to increased shareholder value. The investments we make and our success in 2019 situate us well for the future."

Summary of Fourth-Quarter Results by Business Segment

(In thousands)

For the Three MonthsEnded Dec. 31,

For the Twelve MonthsEnded Dec. 31,

2019

2018

%

2019

2018

%

Private Banks:

Revenues

$118,675

$121,358

(2)%

$470,276

$483,097

(3)%

Expenses

113,596

114,379

(1)%

443,136

457,894

(3)%

Operating Profit

5,079

6,979

(27)%

27,140

25,203

8%

Operating Margin

4

%

6

%

6

%

5

%

Investment Advisors:

Revenues

105,862

97,457

9%

403,778

399,089

1%

Expenses

53,939

53,647

1%

208,508

212,439

(2)%

Operating Profit

51,923

43,810

19%

195,270

186,650

5%

Operating Margin

49

%

45

%

48

%

47

%

Institutional Investors:

Revenues

80,503

80,908

(1)%

322,062

333,299

(3)%

Expenses

38,554

40,919

(6)%

153,937

163,536

(6)%

Operating Profit

41,949

39,989

5%

168,125

169,763

(1)%

Operating Margin

52

%

49

%

52

%

51

%

Investment Managers:

Revenues

114,759

102,380

12%

440,796

398,076

11%

Expenses

72,698

67,738

7%

282,024

259,693

9%

Operating Profit

42,061

34,642

21%

158,772

138,383

15%

Operating Margin

37

%

34

%

36

%

35

%

Investments in New Businesses:

Revenues

3,426

2,954

16%

12,973

10,606

22%

Expenses

8,997

6,164

46%

29,660

22,971

29%

Operating Loss

(5,571)

(3,210)

NM

(16,687)

(12,365)

NM

Totals:

Revenues

$423,225

$405,057

4%

$1,649,885

$1,624,167

2%

Expenses

287,784

282,847

2%

1,117,265

1,116,533

—%

Corporate Overhead Expenses

19,351

19,248

1%

72,196

65,646

10%

Income from Operations

$116,090

$102,962

13%

$460,424

$441,988

4%

Fourth-Quarter Business Highlights:

  • Revenues from Asset management, administration, and distribution fees increased primarily from higher assets under administration in our Investment Managers segment due to sales of new business and market appreciation.
  • Our average assets under administration increased $88.8 billion, or 15%, to $671.5 billion in the fourth-quarter 2019, as compared to $582.7 billion during the fourth-quarter 2018 (see attached Average Asset Balances schedules for further details).
  • Our average assets under management, excluding LSV, increased $20.8 billion, or 10%, to $239.2 billion in the fourth-quarter 2019, as compared to $218.4 billion during the fourth-quarter 2018 (see attached Average Asset Balances schedules for further details).
  • Sales events, net of client losses, during fourth-quarter 2019 totaled approximately $26.1 million and are expected to generate net annualized recurring revenues of approximately $17.5 million when contract values are fully realized. For the year ended 2019, sales events, net of client losses, totaled $87.5 million and are expected to generate net annualized recurring revenues of approximately $62.5 million when contract values are fully realized.
  • Our earnings from LSV increased by $2.7 million, or 8%, to $39.1 million in fourth-quarter 2019 as compared to $36.4 million in fourth-quarter 2018. The increase in earnings was due to higher assets under management from market appreciation. The increase was partially offset by negative cash flows from existing clients, client losses and reduced performance fees earned by LSV.
  • We capitalized $7.1 million of software development costs in fourth-quarter 2019 for continued enhancements to the SEI Wealth PlatformSM (SWP). Amortization expense related to SWP was $10.7 million in fourth-quarter 2019.
  • Stock-based compensation expense in fourth-quarter 2019 increased $1.6 million as compared to fourth-quarter 2018 and $3.6 million as compared to third-quarter 2019 primarily due to a change in our estimate of the timing of when stock option vesting targets would be achieved. The sequential increase in expense from third-quarter 2019 represents a $0.02 diluted earnings per share impact. We expect stock-based compensation expense during 2020 to be approximately $30.1 million as compared to $24.6 million during 2019 as a result of new options granted in fourth-quarter 2019 that carry a higher per share cost valuation.
  • Our operating expenses increased $11.5 million during fourth-quarter 2019 as compared to third-quarter 2019. This increase was primarily due to the increase in stock-based compensation expense, increased direct costs related to increased revenues, and year-end processing costs.
  • Our effective tax rates were 19.5% in fourth-quarter 2019 and 19.2% in fourth-quarter 2018.
  • We repurchased 1.3 million shares of our common stock for $81.2 million during the fourth-quarter 2019. For the year ended 2019, we repurchased 6.2 million shares of our common stock for $348.3 million.

Earnings Conference Call

A conference call to review earnings is scheduled for 4:30 p.m. Eastern Time on Jan. 29, 2020. 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: 7950631.

About SEI

After 50 years in business, SEI (NASDAQ: SEIC) remains 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 Dec. 31, 2019, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages, advises or administers $1 trillion in hedge, private equity, mutual fund and pooled or separately managed assets, including $352 billion in assets under management and $683 billion in client assets under administration. 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:

  • revenue that we believe will be generated by sales events that occurred during the quarter,
  • the growth and momentum of our businesses,
  • the degree to which our unique position across financial technology, operations and investments provide growth opportunities,
  • the degree to which our investments will position us to take advantage of market opportunities,
  • whether our current initiatives will create growth opportunities that will lead to increased shareholder value, and
  • whether we are positioned well for the future.

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 December 31, 2018, filed with the Securities and Exchange Commission.

SEI INVESTMENTS COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

For the Three MonthsEnded Dec. 31,

For the Twelve MonthsEnded Dec. 31,

2019

2018

2019

2018

Asset management, admin. and distribution fees

$337,232

$314,685

$1,307,044

$1,270,180

Information processing and software servicing fees

85,993

90,372

342,841

353,987

Total revenues

423,225

405,057

1,649,885

1,624,167

Subadvisory, distribution and other asset mgmt. costs

46,458

44,798

181,418

180,488

Software royalties and other information processing costs

7,274

7,987

29,993

32,449

Compensation, benefits and other personnel

131,004

132,126

517,917

511,258

Stock-based compensation

9,027

7,409

24,582

23,805

Consulting, outsourcing and professional fees

50,235

49,956

194,560

200,862

Data processing and computer related

22,544

21,312

88,058

84,790

Facilities, supplies and other costs

20,307

18,755

72,078

70,840

Amortization

13,012

12,475

51,419

48,895

Depreciation

7,274

7,277

29,436

28,792

Total expenses

307,135

302,095

1,189,461

1,182,179

Income from operations

116,090

102,962

460,424

441,988

Net gain (loss) on investments

1,053

135

3,174

(325)

Interest and dividend income

3,845

4,251

16,582

13,397

Interest expense

(153)

(134)

(630)

(645)

Equity in earnings of unconsolidated affiliate

39,133

36,385

151,891

159,791

Income before income taxes

159,968

143,599

631,441

614,206

Income taxes

31,231

27,565

130,015

108,338

Net income

$128,737

$116,034

$501,426

$505,868

Basic earnings per common share

$0.86

$0.75

$3.31

$3.23

Shares used to calculate basic earnings per share

150,131

155,057

151,540

156,579

Diluted earnings per common share

$0.84

$0.73

$3.24

$3.14

Shares used to calculate diluted earnings per share

153,672

158,770

154,901

161,232

Dividends declared per common share

$0.35

$0.33

$0.68

$0.63

 

SEI INVESTMENTS COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

Dec. 31,

Dec. 31,

2019

2018

Assets

Current Assets:

Cash and cash equivalents

$841,446

$754,525

Restricted cash

3,101

3,514

Receivables from investment products

54,165

49,869

Receivables, net of allowance for doubtful accounts of $1,201 and $718

340,358

315,336

Securities owned

33,486

30,892

Other current assets

32,289

36,676

Total Current Assets

1,304,845

1,190,812

Property and Equipment, net of accumulated depreciation of $353,453 and $338,206

160,859

145,863

Operating Lease Right-of-Use Assets

42,789

—

Capitalized Software, net of accumulated amortization of $442,677 and $395,171

296,068

309,500

Investments Available for Sale

116,917

111,901

Investments in Affiliated Funds, at fair value

5,988

4,887

Investment in Unconsolidated Affiliate

67,413

52,342

Goodwill

64,489

64,489

Intangible Assets, net of accumulated amortization of $8,773 and $5,090

27,987

31,670

Deferred Contract Costs

30,991

24,007

Deferred Income Taxes

2,822

2,042

Other Assets, net

30,202

34,155

Total Assets

$2,151,370

$1,971,668

Liabilities and Equity

Current Liabilities:

Accounts payable

$4,423

$10,920

Accrued liabilities

272,801

279,634

Current portion of long-term operating lease liabilities

9,156

—

Deferred revenue

7,185

5,154

Total Current Liabilities

293,565

295,708

Long-term Taxes Payable

803

803

Deferred Income Taxes

55,722

57,795

Long-term Operating Lease Liabilities

38,450

—

Other Long-term Liabilities

24,052

24,215

Total Liabilities

412,592

378,521

Shareholders' Equity:

Common stock, $0.01 par value, 750,000 shares authorized; 149,745 and 153,634 shares issued and outstanding

1,497

1,536

Capital in excess of par value

1,158,900

1,106,641

Retained earnings

601,885

517,970

Accumulated other comprehensive loss, net

(23,504)

(33,000)

Total Shareholders' Equity

1,738,778

1,593,147

Total Liabilities and Shareholders' Equity

$2,151,370

$1,971,668

 

ENDING ASSET BALANCES

(In millions)  (Unaudited)

Dec. 31,

Mar. 31,

Jun. 30,

Sept. 30,

Dec. 31,

2018

2019

2019

2019

2019

Private Banks:

Equity and fixed-income programs

$20,453

$22,369

$22,563

$22,580

$23,851

Collective trust fund programs

4

4

4

4

4

Liquidity funds

3,633

3,753

3,322

3,695

3,405

Total assets under management

$24,090

$26,126

$25,889

$26,279

$27,260

Client assets under administration

20,226

22,886

23,387

23,985

25,801

Total assets

$44,316

$49,012

$49,276

$50,264

$53,061

Investment Advisors:

Equity and fixed-income programs

$55,395

$61,277

$64,591

$65,059

$67,895

Collective trust fund programs

7

5

6

4

4

Liquidity funds

5,948

4,362

2,618

2,673

2,887

Total assets under management

$61,350

$65,644

$67,215

$67,736

$70,786

Institutional Investors:

Equity and fixed-income programs

$78,765

$82,578

$82,335

$82,659

$84,291

Collective trust fund programs

79

79

78

81

83

Liquidity funds

2,234

2,529

2,173

2,290

1,746

Total assets under management

$81,078

$85,186

$84,586

$85,030

$86,120

Client assets under advisement

3,359

3,694

3,598

4,467

3,948

Total assets

$84,437

$88,880

$88,184

$89,497

$90,068

Investment Managers:

Equity and fixed-income programs

$89

$—

$—

$—

$—

Collective trust fund programs

42,804

49,232

51,838

53,169

58,070

Liquidity funds

336

704

472

477

479

Total assets under management

$43,229

$49,936

$52,310

$53,646

$58,549

Client assets under administration (A)

552,318

585,997

607,086

637,986

657,541

Total assets

$595,547

$635,933

$659,396

$691,632

$716,090

Investments in New Businesses:

Equity and fixed-income programs

$1,257

$1,466

$1,566

$1,621

$1,688

Liquidity funds

189

218

141

132

158

Total assets under management

$1,446

$1,684

$1,707

$1,753

$1,846

Client assets under advisement

687

729

887

825

1,343

Total assets

$2,133

$2,413

$2,594

$2,578

$3,189

LSV Asset Management:

Equity and fixed-income programs (B)

$96,114

$103,163

$103,575

$100,295

$107,476

Total:

Equity and fixed-income programs (C)

$252,073

$270,853

$274,630

$272,214

$285,201

Collective trust fund programs

42,894

49,320

51,926

53,258

58,161

Liquidity funds

12,340

11,566

8,726

9,267

8,675

Total assets under management

$307,307

$331,739

$335,282

$334,739

$352,037

Client assets under advisement

4,046

4,423

4,485

5,292

5,291

Client assets under administration (D)

572,544

608,883

630,473

661,971

683,342

Total assets

$883,897

$945,045

$970,240

$1,002,002

$1,040,670

(A)

Client assets under administration in the Investment Managers segment include $50.8 billion of assets that are at fee levels below our normal full-service assets (as of Dec. 31, 2019).

(B)

Equity and fixed-income programs include $2.5 billion of assets managed by LSV in which fees are based on performance only (as of Dec. 31, 2019).

(C)

Equity and fixed-income programs include $6.0 billion of assets invested in various asset allocation funds at Dec. 31, 2019.

(D)

In addition to the numbers presented, SEI also administers an additional $13.1 billion in Funds of Funds assets (as of Dec. 31, 2019) on which SEI does not earn an administration fee.

 

AVERAGE ASSET BALANCES

(In millions) (Unaudited)

4th Qtr.

1st Qtr.

2nd Qtr.

3rd Qtr.

4th Qtr.

2018

2019

2019

2019

2019

Private Banks:

Equity and fixed-income programs

$21,383

$21,831

$22,088

$22,432

$23,106

Collective trust fund programs

4

4

4

4

4

Liquidity funds

3,265

3,706

3,388

3,625

3,581

Total assets under management

$24,652

$25,541

$25,480

$26,061

$26,691

Client assets under administration

21,608

22,098

23,124

23,717

24,930

Total assets

$46,260

$47,639

$48,604

$49,778

$51,621

Investment Advisors:

Equity and fixed-income programs

$59,954

$58,732

$62,419

$64,761

$66,371

Collective trust fund programs

4

5

6

5

4

Liquidity funds

3,452

5,298

3,465

2,580

2,673

Total assets under management

$63,410

$64,035

$65,890

$67,346

$69,048

Institutional Investors:

Equity and fixed-income programs

$81,833

$81,725

$82,597

$82,398

$83,304

Collective trust fund programs

75

79

78

80

82

Liquidity funds

2,449

2,375

2,342

2,287

2,106

Total assets under management

$84,357

$84,179

$85,017

$84,765

$85,492

Client assets under advisement

3,566

3,494

3,641

3,797

4,106

Total assets

$87,923

$87,673

$88,658

$88,562

$89,598

Investment Managers:

Equity and fixed-income programs

$96

$—

$—

$—

$—

Collective trust fund programs

44,009

47,322

50,108

52,587

55,499

Liquidity funds

480

559

497

460

642

Total assets under management

$44,585

$47,881

$50,605

$53,047

$56,141

Client assets under administration (A)

561,043

572,065

600,509

630,328

646,592

Total assets

$605,628

$619,946

$651,114

$683,375

$702,733

Investments in New Businesses:

Equity and fixed-income programs

$1,198

$1,394

$1,436

$1,609

$1,649

Liquidity funds

179

202

178

142

145

Total assets under management

$1,377

$1,596

$1,614

$1,751

$1,794

Client assets under advisement

958

708

917

842

1,044

Total assets

$2,335

$2,304

$2,531

$2,593

$2,838

LSV Asset Management:

Equity and fixed-income programs (B)

$99,791

$104,517

$102,919

$100,094

$104,814

Total:

Equity and fixed-income programs (C)

$264,255

$268,199

$271,459

$271,294

$279,244

Collective trust fund programs

44,092

47,410

50,196

52,676

55,589

Liquidity funds

9,825

12,140

9,870

9,094

9,147

Total assets under management

$318,172

$327,749

$331,525

$333,064

$343,980

Client assets under advisement

4,524

4,202

4,558

4,639

5,150

Client assets under administration (D)

582,651

594,163

623,633

654,045

671,522

Total assets

$905,347

$926,114

$959,716

$991,748

$1,020,652

(A)

Average client assets under administration in the Investment Managers segment during fourth-quarter 2019 include $50.8 billion that are at fee levels below our normal full-service assets.

(B)

Equity and fixed-income programs include $2.4 billion of average assets managed by LSV in which fees are based on performance only during fourth-quarter 2019.

(C)

Equity and fixed-income programs include $6.0 billion of average assets invested in various asset allocation funds during fourth-quarter 2019.

(D)

In addition to the numbers presented, SEI also administers an additional $13.1 billion of average assets in Funds of Funds assets during fourth-quarter 2019 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

 

 

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SOURCE SEI Investments Company