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Sei Investments Company
SEI Reports Fourth-Quarter 2022 Financial Results
Business
Jan 25 2023
3 min read

SEI Reports Fourth-Quarter 2022 Financial Results

OAKS, Pa., Jan. 25, 2023 /PRNewswire/ -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the fourth-quarter 2022. Diluted earnings per share were $0.83 in fourth-quarter 2022 compared to $1.03 in fourth-quarter 2021.

Consolidated Overview

(In thousands, exceptearnings per share)

For the Three Months Ended December 31,

For the Twelve MonthsEnded December 31,

2022

2021

%

2022

2021

%

Revenues

$456,590

$501,650

(9) %

$1,991,037

$1,918,309

4 %

Net income

112,224

145,300

(23) %

475,467

546,593

(13) %

Diluted earnings per share

$0.83

$1.03

(19) %

$3.46

$3.81

(9) %

"2022 was a year of evolution for SEI. As we reposition our company's future, we've made—and continue to make—the changes we believe are necessary to execute against our strategy to drive growth. As we look at the year ahead, we will work to grow our revenue, improve the overall efficiency and scale of our business, and invest wisely in our future. I'm excited for what lies ahead as we deliver increased value for our employees, clients, and shareholders," said CEO Ryan Hicke.

"Our financial results for 2022 reflect our focus on growth through new client signings, important recontracts, and successful delivery of our solutions to our markets. Numerous economic factors continue to create change in our industry and challenges for our markets. We believe this environment presents growth opportunities, and we remain committed to our vision for SEI's future."

Summary of Fourth-Quarter Results by Business Segment

(In thousands)

For the Three MonthsEnded December 31,

For the Twelve MonthsEnded December 31,

2022

2021

%

2022

2021

%

Private Banks:

Revenues

$115,233

$129,268

(11) %

$575,625

$493,570

17 %

Expenses

113,533

117,739

(4) %

473,209

462,796

2 %

Operating Profit

1,700

11,529

(85) %

102,416

30,774

233 %

Operating Margin

1 %

9 %

18 %

6 %

Investment Advisors:

Revenues

105,777

125,491

(16) %

447,766

482,949

(7) %

Expenses

62,605

64,067

(2) %

251,650

240,334

5 %

Operating Profit

43,172

61,424

(30) %

196,116

242,615

(19) %

Operating Margin

41 %

49 %

44 %

50 %

Institutional Investors:

Revenues

74,771

87,848

(15) %

323,353

343,805

(6) %

Expenses

40,820

45,374

(10) %

172,252

168,070

2 %

Operating Profit

33,951

42,474

(20) %

151,101

175,735

(14) %

Operating Margin

45 %

48 %

47 %

51 %

Investment Managers:

Revenues

156,076

154,518

1 %

624,918

581,157

8 %

Expenses

104,330

91,046

15 %

404,850

348,655

16 %

Operating Profit

51,746

63,472

(18) %

220,068

232,502

(5) %

Operating Margin

33 %

41 %

35 %

40 %

Investments in New Businesses:

Revenues

4,733

4,525

5 %

19,375

16,828

15 %

Expenses

10,450

13,364

(22) %

45,159

53,219

(15) %

Operating Loss

(5,717)

(8,839)

NM

(25,784)

(36,391)

NM

Totals:

Revenues

$456,590

$501,650

(9) %

$1,991,037

$1,918,309

4 %

Expenses

331,738

331,590

— %

1,347,120

1,273,074

6 %

Corporate Overhead Expenses

30,804

26,662

16 %

168,164

91,854

83 %

Income from Operations

$94,048

$143,398

(34) %

$475,753

$553,381

(14) %

 

Fourth-Quarter Business Highlights:

  • Revenues from Assets under management, administration, and distribution fees declined primarily from lower assets under management from the significant market depreciation during 2022 which negatively impacted our asset-based fee revenues.
  • Revenues from Information processing and software servicing fees decreased primarily from an adjustment during the quarter to revenue for a client that reduced their business processed with the Company through divestment.
  • Average assets under management in equity and fixed income programs, excluding LSV, decreased $36.9 billion, or 19%, to $162.4 billion in the fourth-quarter 2022, as compared to $199.3 billion during the fourth-quarter 2021 (see attached Average Asset Balances schedules for further details).
  • Average assets under administration decreased $94.4 billion, or 11%, to $789.9 billion in the fourth-quarter 2022, as compared to $884.3 billion during the fourth-quarter 2021 (see attached Average Asset Balances schedules for further details).
  • Net sales events in the Private Banks and Investment Managers segments during fourth-quarter 2022 were $25.0 million and are expected to generate net annualized recurring revenues of approximately $15.1 million when contract values are completely realized. For the year ended 2022, net sales events in the Private Banks and Investment Managers segments were $72.5 million and are expected to generate net annualized recurring revenues of approximately $51.1 million when contract values are completely realized.
  • During the fourth-quarter 2022, the Private Banks and Investment Managers segments recontracted a combined $108.1 million in recurring revenue. One of the recontracts in the Private Banks segment, while successful in extending the relationship, resulted in a reduction in contracted annual recurring revenue of approximately $8.3 million. This reduction is not included in the net sales events in the Private banks segment for the fourth-quarter or the year ended 2022.
  • 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 fourth-quarter 2022 were negative $4.7 million. For the year ended 2022, net sales events were negative $4.9 million primarily due to the previously announced loss of a significant client of the Investment Advisors segment. Without this loss, net sales events were essentially flat.
  • 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 $31.7 million in the fourth-quarter 2022 as compared to $34.2 million in the fourth-quarter 2021 due to net negative cash flows from existing clients, market depreciation and client losses. The decline in earnings was partially offset by higher performance fees earned by LSV.
  • We capitalized $6.2 million of software development costs in fourth-quarter 2022 for continued enhancements to SWP. Amortization expense related to SWP was $5.9 million in fourth-quarter 2022 as compared to $11.9 million in fourth-quarter 2021. 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.
  • We also capitalized $4.3 million of software development costs in fourth-quarter 2022 for enhancements to an existing platform for the Investment Managers segment.
  • We recognized other income of $3.4 million in fourth-quarter 2022 related to insurance recoveries for weather-related damage to our corporate headquarters.
  • Effective tax rates were 18.1% in fourth-quarter 2022 and 18.3% in fourth-quarter 2021.
  • We repurchased 1.3 million shares of our common stock for $79.6 million during the fourth-quarter 2022 at an average price of $59.36 per share.
  • Cash flow from operations was $137.6 million, or $1.01 per share, and free cash flow was $120.3 million during the fourth-quarter 2022.

Earnings Conference CallA conference call to review earnings is scheduled for 4:30 p.m. Eastern time on Jan. 25, 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: 9166923.

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 Dec. 31, 2022, SEI manages, advises, or administers approximately $1.2 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:

  • the degree to which market conditions and trends create growth opportunities for us,
  • our strategic focus, and
  • whether we will:
    • make the necessary changes to execute against our strategy to drive growth,
    • invest wisely in our future, or
    • deliver increased value for our employees, clients, and shareholders.

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:

  • whether we will increase our revenue over time from those clients to which we have granted price concessions,
  • whether we will expand any of our relationships with any of our clients,
  • the negative consequences for us, if any, with respect to those of our clients that are involved in M&A activity,
  • the degree to which outsourcing activity will grow and our ability to take advantage of this trend, if any,
  • the strength of activity in our Investment Advisors segment,
  • the expense trends in any of our market segments,
  • whether we will generate positive sales momentum,
  • the extent, scope and strategies of our expense management,
  • our strategies for managing,
  • the success, if any, that we may have in our Investment Managers market segment,
  • our strategy for the unbundling of our investment options and the value our clients may see in this strategy,
  • the growth opportunities for our Institutional Investors market segment,
  • the degree to which our Private Banks market segment is positioned for growth,
  • the drivers of expense growth,
  • our priorities of right sizing our expenses to business growth opportunities and allocating spending to areas of accelerated growth,
  • the timing of client deconversions and the effect of these deconversions on our revenue,
  • the value of our backlog and the strength of our pipelines,
  • whether we will see revenue growth within many of our top clients,
  • the timing and success of client migrations, implementations and conversions,
  • our ability to expand our relationships and revenue opportunities with new and existing clients,
  • our ability to align our talent and solutions capabilities with our go-to-market strategy and the degree to which such alignment will enable us to capitalize on opportunities,
  • whether our investments will create growth opportunities,
  • the margins that our businesses may generate and the degree to which our reported margins will decline, increase or normalize,
  • the degree to which one-time and transaction-based revenues during the quarter will be repeated,
  • how we will manage our expenses,
  • the strategic initiatives and business segments that we will pursue and those in which we will invest,
  • our commitment to driving greater topline revenue growth and the success of such commitment,
  • the timing of when new clients will be on-boarded directly to new technology platforms and when our entire existing client base will be live on such platforms,
  • whether we will be able to drive cross-selling opportunities,
  • whether we will focus on maintaining and accelerating growth in existing businesses, expanding our focus on new growth engines, or reinvigorating our culture and talent strategies across the company,
  • the organic and inorganic opportunities that will drive our growth, 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, 2021, 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 December 31,

For the Twelve MonthsEnded December 31,

2022

2021

2022

2021

Asset management, admin. and distribution fees

$365,239

$403,565

$1,514,063

$1,547,016

Information processing and software servicing fees

91,351

98,085

476,974

371,293

Total revenues

456,590

501,650

1,991,037

1,918,309

Subadvisory, distribution and other asset mgmt. costs

46,247

56,458

196,732

218,068

Software royalties and other information processing costs

7,143

7,198

29,006

27,759

Compensation, benefits and other personnel

174,497

155,309

720,029

584,497

Stock-based compensation

8,064

10,278

39,403

41,451

Consulting, outsourcing and professional fees

57,693

57,543

242,013

223,200

Data processing and computer related

32,151

27,814

125,171

107,560

Facilities, supplies and other costs

17,529

19,909

74,993

69,760

Amortization

10,503

15,403

54,280

59,152

Depreciation

8,715

8,340

33,657

33,481

Total expenses

362,542

358,252

1,515,284

1,364,928

Income from operations

94,048

143,398

475,753

553,381

Net gain (loss) on investments

1,437

(500)

(3,078)

(366)

Interest and dividend income

6,645

934

13,308

3,649

Interest expense

(145)

(209)

(749)

(563)

Other income

3,379

—

3,379

—

Equity in earnings of unconsolidated affiliate

31,741

34,152

120,667

137,572

Income before income taxes

137,105

177,775

609,280

693,673

Income taxes

24,881

32,475

133,813

147,080

Net income

$112,224

$145,300

$475,467

$546,593

Basic earnings per common share

$0.83

$1.04

$3.49

$3.87

Shares used to calculate basic earnings per share

134,714

139,080

136,071

141,216

Diluted earnings per common share

$0.83

$1.03

$3.46

$3.81

Shares used to calculate diluted earnings per share

135,818

141,305

137,423

143,312

Dividends declared per common share

$0.43

$0.40

$0.83

$0.77

 

SEI INVESTMENTS COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

December 31,

December 31,

2022

2021

Assets

Current Assets:

Cash and cash equivalents

$853,008

$831,407

Restricted cash

351

351

Receivables from investment products

62,014

59,036

Receivables, net of allowance for doubtful accounts of $901 and $1,602

457,084

441,609

Securities owned

32,148

28,267

Other current assets

48,703

43,559

Total Current Assets

1,453,308

1,404,229

Property and Equipment, net of accumulated depreciation of $440,861 and $409,248

181,029

178,869

Operating Lease Right-of-Use Assets

24,992

33,614

Capitalized Software, net of accumulated amortization of $586,744 and $545,307

237,302

243,446

Available for Sale and Equity Securities

128,201

129,541

Investments in Affiliated Funds, at fair value

6,366

6,916

Investment in Unconsolidated Affiliate

104,673

107,918

Goodwill

115,599

117,232

Intangible Assets, net of accumulated amortization of $30,261 and $17,716

55,532

68,782

Deferred Contract Costs

37,928

36,236

Deferred Income Taxes

4,936

2,983

Other Assets, net

33,687

24,936

Total Assets

$2,383,553

$2,354,702

Liabilities and Equity

Current Liabilities:

Accounts payable

$13,283

$10,312

Accrued liabilities

359,363

324,382

Current portion of long-term operating lease liabilities

10,344

11,328

Deferred revenue

14,893

9,721

Total Current Liabilities

397,883

355,743

Borrowings Under Revolving Credit Facility

—

40,000

Long-term Income Taxes Payable

803

803

Deferred Income Taxes

—

48,876

Long-term Operating Lease Liabilities

18,786

27,639

Other Long-term Liabilities

12,257

20,878

Total Liabilities

429,729

493,939

Shareholders' Equity:

Common stock, $0.01 par value, 750,000 shares authorized; 134,162 and 138,449 shares issued and outstanding

1,342

1,384

Capital in excess of par value

1,307,162

1,246,608

Retained earnings

694,287

632,614

Accumulated other comprehensive loss, net

(48,967)

(19,843)

Total Shareholders' Equity

1,953,824

1,860,763

Total Liabilities and Shareholders' Equity

$2,383,553

$2,354,702

 

ENDING ASSET BALANCES

(In millions)  (Unaudited)

Dec. 31,

Mar. 31,

Jun. 30,

Sept. 30,

Dec. 31,

2021

2022

2022

2022

2022

Private Banks:

Equity and fixed-income programs

$26,281

$25,335

$22,277

$20,131

$22,377

Collective trust fund programs

6

7

7

7

7

Liquidity funds

4,724

4,225

3,666

3,778

3,201

Total assets under management

$31,011

$29,567

$25,950

$23,916

$25,585

Client assets under administration

4,481

4,449

3,923

4,161

4,151

Total assets

$35,492

$34,016

$29,873

$28,077

$29,736

Investment Advisors:

Equity and fixed-income programs

$81,686

$77,614

$65,783

$62,579

$66,240

Liquidity funds

4,317

4,610

8,292

5,200

5,436

Total Platform assets under management

$86,003

$82,224

$74,075

$67,779

$71,676

Platform-only assets

14,564

14,151

12,642

12,609

13,931

Total Platform assets

$100,567

$96,375

$86,717

$80,388

$85,607

Institutional Investors:

Equity and fixed-income programs

$91,719

$87,358

$75,506

$69,621

$73,178

Collective trust fund programs

5

6

5

6

5

Liquidity funds

2,118

2,150

1,654

1,640

1,557

Total assets under management

$93,842

$89,514

$77,165

$71,267

$74,740

Client assets under advisement

4,857

4,778

4,218

4,204

4,314

Total assets

$98,699

$94,292

$81,383

$75,471

$79,054

Investment Managers:

Collective trust fund programs (A)

$92,549

$85,411

$142,035

$137,538

$141,285

Liquidity funds

423

284

271

248

199

Total assets under management

$92,972

$85,695

$142,306

$137,786

$141,484

Client assets under administration

907,377

895,181

885,096

781,246

810,491

Total assets

$1,000,349

$980,876

$1,027,402

$919,032

$951,975

Investments in New Businesses:

Equity and fixed-income programs

$2,096

$2,057

$1,903

$1,813

$1,912

Liquidity funds

240

305

242

221

215

Total assets under management

$2,336

$2,362

$2,145

$2,034

$2,127

Client assets under administration

1,410

1,401

1,076

1,026

1,077

Total assets

$3,746

$3,763

$3,221

$3,060

$3,204

LSV Asset Management:

Equity and fixed-income programs (B)

$98,984

$95,962

$81,940

$75,380

$83,753

Total:

Equity and fixed-income programs (C)

$300,766

$288,326

$247,409

$229,524

$247,460

Collective trust fund programs

92,560

85,424

142,047

137,551

141,297

Liquidity funds

11,822

11,574

14,125

11,087

10,608

Total assets under management

$405,148

$385,324

$403,581

$378,162

$399,365

Client assets under advisement

6,267

6,179

5,294

5,230

5,391

Client assets under administration (D)

911,858

899,630

889,019

785,407

814,642

Platform-only assets

14,564

14,151

12,642

12,609

13,931

Total assets

$1,337,837

$1,305,284

$1,310,536

$1,181,408

$1,233,329

(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 $2.1 billion of assets managed by LSV in which fees are based solely onperformance and are not calculated as an asset-based fee (as of December 31, 2022).

(C)

Equity and fixed-income programs include $6.4 billion of assets invested in various asset allocation funds (as of December 31, 2022).

(D)

In addition to the assets presented, SEI also administers an additional $12.5 billion in Funds of Funds assets on which SEI does not earn an administration fee (as of December 31, 2022).

 

AVERAGE ASSET BALANCES

(In millions) (Unaudited)

4th Qtr.

1st Qtr.

2nd Qtr.

3rd Qtr.

4th Qtr.

2021

2022

2022

2022

2022

Private Banks:

Equity and fixed-income programs

$25,999

$25,637

$23,713

$22,115

$21,839

Collective trust fund programs

6

6

7

7

7

Liquidity funds

4,452

4,403

3,795

3,742

3,395

Total assets under management

$30,457

$30,046

$27,515

$25,864

$25,241

Client assets under administration

4,607

4,500

4,163

4,026

4,126

Total assets

$35,064

$34,546

$31,678

$29,890

$29,367

Investment Advisors:

Equity and fixed-income programs

$80,703

$77,576

$70,436

$67,464

$66,100

Liquidity funds

3,644

5,151

7,070

5,380

5,127

Total Platform assets under management

$84,347

$82,727

$77,506

$72,844

$71,227

Platform-only assets

14,341

13,978

13,142

13,271

13,905

Total Platform assets

$98,688

$96,705

$90,648

$86,115

$85,132

Institutional Investors:

Equity and fixed-income programs

$90,557

$89,250

$80,971

$74,859

$72,581

Collective trust fund programs

5

5

5

6

5

Liquidity funds

2,391

2,223

2,097

1,717

1,719

Total assets under management

$92,953

$91,478

$83,073

$76,582

$74,305

Client assets under advisement

4,812

4,889

3,987

4,194

4,251

Total assets

$97,765

$96,367

$87,060

$80,776

$78,556

Investment Managers:

Collective trust fund programs (A)

$90,457

$86,633

$131,435

$143,817

$140,494

Liquidity funds

491

432

285

250

275

Total assets under management

$90,948

$87,065

$131,720

$144,067

$140,769

Client assets under administration

879,718

888,854

893,361

782,559

785,813

Total assets

$970,666

$975,919

$1,025,081

$926,626

$926,582

Investments in New Businesses:

Equity and fixed-income programs

$2,053

$2,025

$2,016

$1,939

$1,890

Liquidity funds

197

286

262

231

208

Total assets under management

$2,250

$2,311

$2,278

$2,170

$2,098

Client assets under advisement

1,423

1,397

1,165

1,126

1,075

Total assets

$3,673

$3,708

$3,443

$3,296

$3,173

LSV Asset Management:

Equity and fixed-income programs (B)

$97,381

$96,449

$87,818

$81,241

$83,370

Total:

Equity and fixed-income programs (C)

$296,693

$290,937

$264,954

$247,618

$245,780

Collective trust fund programs

90,468

86,644

131,447

143,830

140,506

Liquidity funds

11,175

12,495

13,509

11,320

10,724

Total assets under management

$398,336

$390,076

$409,910

$402,768

$397,010

Client assets under advisement

6,235

6,286

5,152

5,320

5,326

Client assets under administration (D)

884,325

893,354

897,524

786,585

789,939

Platform-only assets

14,341

13,978

13,142

13,271

13,905

Total assets

$1,303,237

$1,303,694

$1,325,728

$1,207,944

$1,206,180

(A)

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

(B)

Equity and fixed-income programs during fourth-quarter 2022 include $1.9 billion of average assets managed by LSV inwhich fees are based solely on performance and are not calculated as an asset-based fee.

(C)

Equity and fixed-income programs include $6.3 billion of average assets invested in various asset allocation funds during fourth-quarter 2022.

(D)

In addition to the assets presented, SEI also administers an additional $12.5 billion of average assets in Funds of Fundsassets during fourth-quarter 2022 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-fourth-quarter-2022-financial-results-301730704.html

SOURCE SEI Investments Company