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Sei Investments Company
SEI Reports Third-Quarter 2022 Financial Results
Business
Oct 26 2022
5 min read

SEI Reports Third-Quarter 2022 Financial Results

OAKS, Pa., Oct. 26, 2022 /PRNewswire/ -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the third-quarter 2022. Diluted earnings per share were $0.45 in third-quarter 2022 compared to $0.97 in third-quarter 2021. Diluted earnings per share reflect one-time costs of the voluntary separation program of $57.0 million, or $0.32 per share.

Consolidated Overview

(In thousands, except earnings per share)

For the Three Months Ended September 30,

For the Nine Months   Ended September 30,

2022

2021

%

2022

2021

%

Revenues

$471,334

$485,322

(3) %

$1,534,447

$1,416,659

8 %

Net income

61,659

138,045

(55) %

363,243

401,293

(9) %

Diluted earnings per share

$0.45

$0.97

(54) %

$2.63

$2.79

(6) %

 

"Our third-quarter financial results reflect strong sales activity from market adoption of our solutions. Revenue and profits were impacted by lower capital market performance, one-time costs associated with our voluntary separation program, and continued inflationary pressures on costs. All of our markets are facing a changing landscape, and while this change is challenging, we believe it reinforces growth opportunity for SEI," said CEO Ryan Hicke.

"We will continue to take the important and necessary steps to invest in our talent and capabilities, while aligning our company for organic and inorganic growth. This is an exciting time for SEI, and we will capitalize on our unmatched position at the intersection of asset management and technology. I remain enthusiastic about SEI's future as we set the direction and pace of growth to deliver value for our employees, clients, and shareholders."

Summary of Third-Quarter Results by Business Segment

(In thousands)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2022

2021

%

2022

2021

%

Private Banks:

Revenues

$122,660

$123,018

— %

$460,392

$364,302

26 %

Expenses

116,661

116,679

— %

359,676

345,057

4 %

Operating Profit

5,999

6,339

(5) %

100,716

19,245

NM

Operating Margin

5 %

5 %

22 %

5 %

Investment Advisors:

Revenues

109,565

124,768

(12) %

341,989

357,458

(4) %

Expenses

61,150

62,107

(2) %

189,045

176,267

7 %

Operating Profit

48,415

62,661

(23) %

152,944

181,191

(16) %

Operating Margin

44 %

50 %

45 %

51 %

Institutional Investors:

Revenues

78,260

85,759

(9) %

248,582

255,957

(3) %

Expenses

42,149

41,643

1 %

131,432

122,696

7 %

Operating Profit

36,111

44,116

(18) %

117,150

133,261

(12) %

Operating Margin

46 %

51 %

47 %

52 %

Investment Managers:

Revenues

156,015

147,412

6 %

468,842

426,639

10 %

Expenses

100,876

89,594

13 %

300,520

257,609

17 %

Operating Profit

55,139

57,818

(5) %

168,322

169,030

— %

Operating Margin

35 %

39 %

36 %

40 %

Investments in New Businesses:

Revenues

4,834

4,365

11 %

14,642

12,303

19 %

Expenses

9,915

12,820

(23) %

34,709

39,855

(13) %

Operating Loss

(5,081)

(8,455)

NM

(20,067)

(27,552)

NM

Totals:

Revenues

$471,334

$485,322

(3) %

$1,534,447

$1,416,659

8 %

Expenses

330,751

322,843

2 %

1,015,382

941,484

8 %

Corporate Overhead Expenses

89,537

21,354

319 %

137,360

65,192

111 %

Income from Operations

$51,046

$141,125

(64) %

$381,705

$409,983

(7) %

 

Third-Quarter Business Highlights:

  • Revenues from Information processing and software servicing fees increased from new client conversions. Additional revenues from our acquisition of SEI Novus during the fourth-quarter 2021 also contributed to the increase.
  • Revenues from Assets under management, administration, and distribution fees declined due to the significant decline in capital markets during the third-quarter 2022. This decline was partially offset by increased revenues from assets under administration.
  • Average assets under management in equity and fixed income programs, excluding LSV, decreased $33.4 billion, or 17%, to $166.4 billion in the third-quarter 2022, as compared to $199.8 billion during the third-quarter 2021 (see attached Average Asset Balances schedules for further details).
  • Average assets under administration decreased $69.1 billion, or 8%, to $786.6 billion in the third-quarter 2022, as compared to $855.7 billion during the third-quarter 2021 (see attached Average Asset Balances schedules for further details).
  • Net sales events in the Private Banks and Investment Managers segments during third-quarter 2022 were $33.9 million and are expected to generate net annualized recurring revenues of approximately $26.7 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 third-quarter 2022 were negative $3.1 million due to the previously announced loss of a significant client of the Investment Advisors segment. Without this loss, net sales events were positive $2.5 million. Net cash flows for the Investment Advisors segment were positive $171.9 million into SEI asset management programs and positive $636.5 million into platform-only assets during third-quarter 2022.
  • The increase in operational expenses was primarily due to increased personnel costs due to 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 partially offset by lower direct costs related to asset management revenues and lower amortization expense.
  • We finalized the Voluntary Separation Program (VSP) offered to long-tenured employees in July 2022 and recognized the total cost of the program of $57.0 million during the third-quarter 2022. This one-time cost is included in corporate overhead expenses and reflects a diluted earnings per share impact of $0.32 to third-quarter 2022 results. In addition, we incurred severance costs unrelated to the VSP of $5.2 million included in corporate overhead expenses during the third-quarter 2022.
  • Earnings from LSV decreased to $26.7 million in the third-quarter 2022 as compared to $35.0 million in the third-quarter 2021 due to net negative cash flows from existing clients, market depreciation and client losses.
  • We capitalized $6.8 million of software development costs in third-quarter 2022 for continued enhancements to SWP. Amortization expense related to SWP was $5.8 million in third-quarter 2022 as compared to $12.0 million in third-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. Approximately $4.1 million of this reduction in amortization expense was related to the Private Banks segment and $1.3 million was related to the Investment Advisors segment.
  • We also capitalized $4.2 million of software development costs in third-quarter 2022 for a new platform for the Investment Managers segment.
  • Effective tax rates were 23.0% in third-quarter 2022 and 21.7% in third-quarter 2021. The increase in the effective tax rate was primarily due the timing of one-time state settlements, which reduced the effective rate in third-quarter 2021.
  • We repurchased 890 thousand shares of our common stock for $49.4 million during the third-quarter 2022 at an average price of $55.55 per share.
  • Cash flow from operations was $97.9 million, or $0.72 per share, and free cash flow was $74.4 million during the third-quarter 2022.

 

Earnings Conference CallA conference call to review earnings is scheduled for 4:30 p.m. Eastern time on Oct. 26, 2022. 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: 6671316.

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 Sept. 30, 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,
  • revenue that we believe will be generated by sales events that occurred during the quarter and the timing of the realization of such revenue, if any,
  • our strategies for investing in our talent, the timing of these investments and whether these investments will enable us to capitalize on opportunities for organic and inorganic growth, and
  • whether we positioned for growth, and to deliver value to 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:

  • the drivers of expense growth,
  • our priorities of right sizing our expenses to business growth opportunities and allocating spending to areas of accelerated growth are a priority,
  • whether our previously announced voluntary separation plan will reduce our run-rate expenses going forward,
  • 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,
  • the impact of changes to our client's businesses on our recurring revenue, including the divestiture of lines of business by our clients,
  • whether we will take a one-time reduction in booked revenue in the 4th quarter as a consequence of discussions with Wells Fargo and the amount of any such reduction,
  • whether we will add additional books from the client that went live on our SaaS SWP technology only offering,
  • 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,
  • whether creating opportunities for diverse perspectives in talent from inside and outside of SEI will position us for growth or accelerate our growth,
  • 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,
  • whether we are positioned for sustainable growth and to take advantage of 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,
  • the degree to which our organizational changes will strengthen our offerings and deepen relationships or help our clients succeed,
  • our commitment to driving greater topline revenue growth and the success of such commitment,
  • whether we have laid the groundwork for our future growth plans,
  • whether our voluntary separation program will create space for internal mobility, fresh perspectives, diversity and external experience, and the degree to which this will position us for or accelerate our growth,
  • the success, if any, of the sales and strategic initiatives we pursue,
  • 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,
  • our growth prospects,
  • the timing of and our ability to integrate any acquisition targets that we may pursue, if any,
  • the potential benefits we may derive from any of our acquisitions,
  • 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 COMPANYCONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data)(Unaudited)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2022

2021

2022

2021

Asset management, admin. and distribution fees

$372,133

$393,296

$1,148,824

$1,143,451

Information processing and software servicing fees

99,201

92,026

385,623

273,208

Total revenues

471,334

485,322

1,534,447

1,416,659

Subadvisory, distribution and other asset mgmt. costs

47,334

55,619

150,485

161,610

Software royalties and other information processing costs

6,909

7,348

21,863

20,561

Compensation, benefits and other personnel

227,127

150,188

545,532

429,188

Stock-based compensation

10,766

11,318

31,339

31,173

Consulting, outsourcing and professional fees

58,558

55,868

184,320

165,657

Data processing and computer related

30,950

26,650

93,020

79,746

Facilities, supplies and other costs

19,704

14,124

57,464

49,851

Amortization

10,382

14,674

43,777

43,749

Depreciation

8,558

8,408

24,942

25,141

Total expenses

420,288

344,197

1,152,742

1,006,676

Income from operations

51,046

141,125

381,705

409,983

Net (loss) gain on investments

(1,406)

(575)

(4,515)

134

Interest and dividend income

3,962

892

6,663

2,715

Interest expense

(143)

(101)

(604)

(354)

Equity in earnings of unconsolidated affiliate

26,654

35,005

88,926

103,420

Income before income taxes

80,113

176,346

472,175

515,898

Income taxes

18,454

38,301

108,932

114,605

Net income

$61,659

$138,045

$363,243

$401,293

Basic earnings per common share

$0.46

$0.98

$2.66

$2.83

Shares used to calculate basic earnings per share

135,203

140,507

136,524

141,928

Diluted earnings per common share

$0.45

$0.97

$2.63

$2.79

Shares used to calculate diluted earnings per share

136,345

142,426

137,958

143,981

Dividends declared per common share

$—

$—

$0.40

$0.37

 

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

September 30,

December 31,

2022

2021

Assets

Current Assets:

Cash and cash equivalents

$791,437

$831,407

Restricted cash

351

351

Receivables from investment products

91,223

59,036

Receivables, net of allowance for doubtful accounts of $2,336 and $1,602

482,692

441,609

Securities owned

31,586

28,267

Other current assets

54,931

43,559

Total Current Assets

1,452,220

1,404,229

Property and Equipment, net of accumulated depreciation of $431,473 and $409,248

182,522

178,869

Operating Lease Right-of-Use Assets

24,187

33,614

Capitalized Software, net of accumulated amortization of $579,352 and $545,307

234,228

243,446

Available for Sale and Equity Securities

109,375

129,541

Investments in Affiliated Funds, at fair value

5,620

6,916

Investment in Unconsolidated Affiliate

39,012

107,918

Goodwill

117,509

117,232

Intangible Assets, net of accumulated amortization of $27,133 and $17,716

58,201

68,782

Deferred Contract Costs

37,790

36,236

Deferred Income Taxes

2,253

2,983

Other Assets, net

32,514

24,936

Total Assets

$2,295,431

$2,354,702

Liabilities and Equity

Current Liabilities:

Accounts payable

$8,209

$10,312

Accrued liabilities

294,987

324,382

Current portion of long-term operating lease liabilities

11,202

11,328

Deferred revenue

13,025

9,721

Total Current Liabilities

327,423

355,743

Borrowings Under Revolving Credit Facility

—

40,000

Long-term Income Taxes Payable

803

803

Deferred Income Taxes

3,545

48,876

Long-term Operating Lease Liabilities

18,361

27,639

Other Long-term Liabilities

14,986

20,878

Total Liabilities

365,118

493,939

Shareholders' Equity:

Common stock, $0.01 par value, 750,000 shares authorized; 134,816 and 138,449 shares issued and outstanding

1,348

1,384

Capital in excess of par value

1,285,224

1,246,608

Retained earnings

711,330

632,614

Accumulated other comprehensive loss, net

(67,589)

(19,843)

Total Shareholders' Equity

1,930,313

1,860,763

Total Liabilities and Shareholders' Equity

$2,295,431

$2,354,702

 

ENDING ASSET BALANCES(In millions)  (Unaudited)

Sept. 30,

Dec. 31,

Mar. 31,

Jun. 30,

Sept. 30,

2021

2021

2022

2022

2022

Private Banks:

Equity and fixed-income programs

$25,618

$26,281

$25,335

$22,277

$20,131

Collective trust fund programs

6

6

7

7

7

Liquidity funds

3,988

4,724

4,225

3,666

3,778

Total assets under management

$29,612

$31,011

$29,567

$25,950

$23,916

Client assets under administration

4,675

4,481

4,449

3,923

4,161

Total assets

$34,287

$35,492

$34,016

$29,873

$28,077

Investment Advisors:

Equity and fixed-income programs

$78,560

$81,686

$77,614

$65,783

$62,579

Liquidity funds

3,477

4,317

4,610

8,292

5,200

Total Platform assets under management

$82,037

$86,003

$82,224

$74,075

$67,779

Platform-only assets

13,728

14,564

14,151

12,642

12,609

Total Platform assets

$95,765

$100,567

$96,375

$86,717

$80,388

Institutional Investors:

Equity and fixed-income programs

$89,441

$91,719

$87,358

$75,506

$69,621

Collective trust fund programs

5

5

6

5

6

Liquidity funds

2,599

2,118

2,150

1,654

1,640

Total assets under management

$92,045

$93,842

$89,514

$77,165

$71,267

Client assets under advisement

4,698

4,857

4,778

4,218

4,204

Total assets

$96,743

$98,699

$94,292

$81,383

$75,471

Investment Managers:

Collective trust fund programs (A)

$87,488

$92,549

$85,411

$142,035

$137,538

Liquidity funds

568

423

284

271

248

Total assets under management

$88,056

$92,972

$85,695

$142,306

$137,786

Client assets under administration

861,605

907,377

895,181

885,096

781,246

Total assets

$949,661

$1,000,349

$980,876

$1,027,402

$919,032

Investments in New Businesses:

Equity and fixed-income programs

$1,964

$2,096

$2,057

$1,903

$1,813

Liquidity funds

202

240

305

242

221

Total assets under management

$2,166

$2,336

$2,362

$2,145

$2,034

Client assets under administration

1,378

1,410

1,401

1,076

1,026

Total assets

$3,544

$3,746

$3,763

$3,221

$3,060

LSV Asset Management:

Equity and fixed-income programs (B)

$97,604

$98,984

$95,962

$81,940

$75,380

Total:

Equity and fixed-income programs (C)

$293,187

$300,766

$288,326

$247,409

$229,524

Collective trust fund programs

87,499

92,560

85,424

142,047

137,551

Liquidity funds

10,834

11,822

11,574

14,125

11,087

Total assets under management

$391,520

$405,148

$385,324

$403,581

$378,162

Client assets under advisement

6,076

6,267

6,179

5,294

5,230

Client assets under administration (D)

866,280

911,858

899,630

889,019

785,407

Platform-only assets

13,728

14,564

14,151

12,642

12,609

Total assets

$1,277,604

$1,337,837

$1,305,284

$1,310,536

$1,181,408

(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 $1.7 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 September 30, 2022).

(C)

Equity and fixed-income programs include $6.2 billion of assets invested in various asset allocation funds (as of September 30, 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 September 30, 2022).

 

AVERAGE ASSET BALANCES(In millions) (Unaudited)

3rd Qtr.

4th Qtr.

1st Qtr.

2nd Qtr.

3rd Qtr.

2021

2021

2022

2022

2022

Private Banks:

Equity and fixed-income programs

$26,232

$25,999

$25,637

$23,713

$22,115

Collective trust fund programs

6

6

6

7

7

Liquidity funds

3,916

4,452

4,403

3,795

3,742

Total assets under management

$30,154

$30,457

$30,046

$27,515

$25,864

Client assets under administration

4,476

4,607

4,500

4,163

4,026

Total assets

$34,630

$35,064

$34,546

$31,678

$29,890

Investment Advisors:

Equity and fixed-income programs

$79,602

$80,703

$77,576

$70,436

$67,464

Liquidity funds

3,403

3,644

5,151

7,070

5,380

Total Platform assets under management

$83,005

$84,347

$82,727

$77,506

$72,844

Platform-only assets

13,863

14,341

13,978

13,142

13,271

Total Platform assets

$96,868

$98,688

$96,705

$90,648

$86,115

Institutional Investors:

Equity and fixed-income programs

$91,965

$90,557

$89,250

$80,971

$74,859

Collective trust fund programs

5

5

5

5

6

Liquidity funds

2,742

2,391

2,223

2,097

1,717

Total assets under management

$94,712

$92,953

$91,478

$83,073

$76,582

Client assets under advisement

4,658

4,812

4,889

3,987

4,194

Total assets

$99,370

$97,765

$96,367

$87,060

$80,776

Investment Managers:

Collective trust fund programs (A)

$89,441

$90,457

$86,633

$131,435

$143,817

Liquidity funds

532

491

432

285

250

Total assets under management

$89,973

$90,948

$87,065

$131,720

$144,067

Client assets under administration

851,183

879,718

888,854

893,361

782,559

Total assets

$941,156

$970,666

$975,919

$1,025,081

$926,626

Investments in New Businesses:

Equity and fixed-income programs

$1,958

$2,053

$2,025

$2,016

$1,939

Liquidity funds

205

197

286

262

231

Total assets under management

$2,163

$2,250

$2,311

$2,278

$2,170

Client assets under advisement

1,423

1,423

1,397

1,165

1,126

Total assets

$3,586

$3,673

$3,708

$3,443

$3,296

LSV Asset Management:

Equity and fixed-income programs (B)

$99,924

$97,381

$96,449

$87,818

$81,241

Total:

Equity and fixed-income programs (C)

$299,681

$296,693

$290,937

$264,954

$247,618

Collective trust fund programs

89,452

90,468

86,644

131,447

143,830

Liquidity funds

10,798

11,175

12,495

13,509

11,320

Total assets under management

$399,931

$398,336

$390,076

$409,910

$402,768

Client assets under advisement

6,081

6,235

6,286

5,152

5,320

Client assets under administration (D)

855,659

884,325

893,354

897,524

786,585

Platform-only assets

13,863

14,341

13,978

13,142

13,271

Total assets

$1,275,534

$1,303,237

$1,303,694

$1,325,728

$1,207,944

(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 third-quarter 2022 include $1.8 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 $6.3 billion of average assets invested in various asset allocation funds during third-quarter 2022.

(D)

In addition to the assets presented, SEI also administers an additional $12.7 billion of average assets in Funds of Funds assets during third-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-third-quarter-2022-financial-results-301660244.html

SOURCE SEI Investments Company