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Sei Investments Company
SEI Reports Third-Quarter 2023 Financial Results
Business
Oct 25 2023
5 min read

SEI Reports Third-Quarter 2023 Financial Results

OAKS, Pa., Oct. 25, 2023 /PRNewswire/ -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the third-quarter 2023. Diluted earnings per share were $0.87 in third-quarter 2023 compared to $0.45 in third-quarter 2022. Third-quarter 2022 results included one-time costs of the voluntary separation program of $57.0 million resulting in $0.32 diluted earnings per share.

Consolidated Overview

(In thousands, except earnings per share)

For the Three Months Ended September 30,

For the Nine Months   Ended September 30,

2023

2022

%

2023

2022

%

Revenues

$476,759

$471,334

1 %

$1,434,935

$1,534,447

(6) %

Net income

115,661

61,659

88 %

341,527

363,243

(6) %

Diluted earnings per share

$0.87

$0.45

93 %

$2.54

$2.63

(3) %

 

"Our third-quarter financial results reflect continued positive sales activity in our operational and processing businesses and strong profitability due to solid revenue and sound expense management, particularly in our technology and investment processing businesses. We remain focused on executing our strategic growth initiatives and diligently managing expenses across the organization," said CEO Ryan Hicke.

"Despite persisting challenges in the broader market environment, we continue to prudently invest in our talent and solutions to provide our clients an unmatched set of capabilities. Our market activity remains strong, and we are well-positioned to capitalize on the opportunities ahead. We will continue to deliver operational excellence, expand our reach across markets globally, and maintain our strong financial position to deliver long-term growth for our stakeholders."

Summary of Third-Quarter Results by Business Segment

(In thousands)

For the Three MonthsEnded September 30,

For the Nine Months Ended September 30,

2023

2022

%

2023

2022

%

Private Banks:

Revenues

$121,469

$122,660

(1) %

$378,171

$460,392

(18) %

Expenses

113,105

116,661

(3) %

343,442

359,676

(5) %

Operating Profit

8,364

5,999

39 %

34,729

100,716

(66) %

Operating Margin

7 %

5 %

9 %

22 %

Investment Advisors:

Revenues

110,461

109,565

1 %

326,579

341,989

(5) %

Expenses

64,280

61,150

5 %

192,004

189,045

2 %

Operating Profit

46,181

48,415

(5) %

134,575

152,944

(12) %

Operating Margin

42 %

44 %

41 %

45 %

Institutional Investors:

Revenues

70,479

78,260

(10) %

219,914

248,582

(12) %

Expenses

39,953

42,149

(5) %

126,337

131,432

(4) %

Operating Profit

30,526

36,111

(15) %

93,577

117,150

(20) %

Operating Margin

43 %

46 %

43 %

47 %

Investment Managers:

Revenues

169,293

156,015

9 %

495,318

468,842

6 %

Expenses

108,078

100,876

7 %

321,705

300,520

7 %

Operating Profit

61,215

55,139

11 %

173,613

168,322

3 %

Operating Margin

36 %

35 %

35 %

36 %

Investments in New Businesses:

Revenues

5,057

4,834

5 %

14,953

14,642

2 %

Expenses

11,874

9,915

20 %

34,089

34,709

(2) %

Operating Loss

(6,817)

(5,081)

NM

(19,136)

(20,067)

NM

Totals:

Revenues

$476,759

$471,334

1 %

$1,434,935

$1,534,447

(6) %

Expenses

337,290

330,751

2 %

1,017,577

1,015,382

— %

Corporate Overhead Expenses

30,997

89,537

(65) %

94,518

137,360

(31) %

Income from Operations

$108,472

$51,046

112 %

$322,840

$381,705

(15) %

 

Third-Quarter Business Highlights:

  • Revenues from Assets under management, administration, and distribution fees increased primarily from higher assets under management and administration due to increases from existing alternative investment clients of the Investment Managers segment due to new products and additional services. Market appreciation and positive cash flows into separately managed account programs and Strategist programs during 2023 also contributed to the increase in revenues.
  • The increase in revenues from Assets under management, administration, and distribution fees was partially offset by negative cash flows from SEI fund programs due to client losses in the Investment Advisors and Institutional Investors segments.
  • Average assets under management in equity and fixed income programs, excluding LSV, increased $3.9 billion, or 2%, to $170.3 billion during the third-quarter 2023, as compared to $166.4 billion during the third-quarter 2022 (see attached Average Asset Balances schedule for further details).
  • Average assets under administration increased $107.1 billion, or 14%, to $893.7 billion during the third-quarter 2023, as compared to $786.6 billion during the third-quarter 2022 (see attached Average Asset Balances schedules for further details).
  • Net sales events in the Private Banks and Investment Managers segments during third-quarter 2023 were $22.3 million and are expected to generate net annualized recurring revenues of approximately $19.0 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 2023 were negative $7.6 million.
  • Operational expenses declined primarily from the total cost of the voluntary separation program of $57.0 million recognized during 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.
  • The decline in operational expenses was also due to decreased non-capitalized consulting costs. This decline was partially offset by higher personnel costs from business growth, competitive labor markets, and the impact of inflation on wages and services. Increased personnel costs and investments in compliance infrastructure to meet new regulatory requirements also partially offset the decline in operational expenses.
  • Earnings from LSV increased to $29.9 million in the third-quarter 2023 as compared to $26.7 million in the third-quarter 2022 due to increased performance fees and market appreciation. Net negative cash flows from existing clients and client losses partially offset the increase in earnings from LSV.
  • Capitalized software development costs were $8.5 million in third-quarter 2023, of which $4.3 million was for continued enhancements to the SEI Wealth PlatformSM. Amortization expense related to SWP was $6.5 million in third-quarter 2023. Capitalized software development costs also include $4.2 million in third-quarter 2023 for a new platform for the Investment Managers segment.
  • Effective tax rates were 22.5% in third-quarter 2023 and 23.0% in third-quarter 2022.
  • Repurchased shares of SEI common stock were 1.4 million for $86.0 million during the third-quarter 2023 at an average price of $61.43 per share.
  • Cash flow from operations was $163.5 million and free cash flow was $148.3 million during the third-quarter 2023.

Earnings Conference CallA conference call to review earnings is scheduled for 4:30 p.m. Eastern time on Oct. 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: 9991019.

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 help drive growth, make confident decisions, and protect futures. As of Sept. 30, 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:

  • the nature of our sales activity and profitability in our technology, operational and processing businesses;
  • the initiatives on which we will focus;
  • our ability to manage our expenses;
  • where we will invest;
  • our ability to capitalize on opportunities;
  • when and if we will generate net annualized recurring revenues from sales events that occurred during the quarter, as well as the amount of such revenue;
  • the duration of our customer relationships; and
  • the degree to which we will deliver long-term growth for our stakeholders.

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 elements of our strategic focus, including, without limitation, our focus on:
    • strategic clients;
    • managing expenses;
    • enhancing our development pipeline;
    • proactively engaging with current clients;
    • expanding our sales pipeline;
    • connecting resources across the enterprise to identify and execute against cross-selling opportunities;
    • growing our profits;
    • prudently deploying capital;
    • investing in talent and market experience;
    • alternative investments;
    • inorganic growth; and
    • delivering at a high level for clients;
  • advancing our efforts to build out custody capabilities for alternatives;
  • the trends in our clients' businesses;
  • our ability to sell our newly-launched US Fund Complex on a standalone basis and the timing for including it in our models offered to advisors;
  • offering models which include alternative asset classes;
  • whether our enhanced asset management solutions will attract more advisors;
  • the headwinds our businesses face and our ability to respond to these headwinds;
  • the success of our efforts to assess the market offerings and the best path forward to enhance our growth;
  • our sales momentum;
  • our ability to capitalize on our pipeline, prudently manage expenses, and drive profit to the bottom line;
  • the degree to which our market units are positioned to accelerate growth;
  • the value of our technology, investment processing and asset management capabilities to our clients;
  • the timing of the closing, if any, of our acquisitions;
  • the amount, if any, of our current backlog of sold but expected to be installed revenue in the next 18 months that will actually be installed during such period, if ever;
  • the amount, if any, of our current backlog that will convert by the end of the year, if ever;
  • the degree to which our newer investment offerings will benefit our business;
  • the market dynamics affecting our market units;
  • the degree to which our tax rate may vary;
  • 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 organic and inorganic opportunities that will drive our growth; and
  • the expected 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 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,

2023

2022

2023

2022

Asset management, admin. and distribution fees

$380,594

$372,133

$1,131,244

$1,148,824

Information processing and software servicing fees

96,165

99,201

303,691

385,623

Total revenues

476,759

471,334

1,434,935

1,534,447

Subadvisory, distribution and other asset mgmt. costs

47,531

47,334

142,157

150,485

Software royalties and other information processing costs

8,095

6,909

23,784

21,863

Compensation, benefits and other personnel

180,470

227,127

529,591

545,532

Stock-based compensation

7,979

10,766

23,458

31,339

Consulting, outsourcing and professional fees

54,203

58,558

176,619

184,320

Data processing and computer related

34,016

30,950

102,301

93,020

Facilities, supplies and other costs

16,999

19,704

58,825

57,464

Amortization

9,797

10,382

28,851

43,777

Depreciation

9,197

8,558

26,509

24,942

Total expenses

368,287

420,288

1,112,095

1,152,742

Income from operations

108,472

51,046

322,840

381,705

Net (loss) gain from investments

(206)

(1,406)

1,053

(4,515)

Interest and dividend income

11,125

3,962

29,453

6,663

Interest expense

(116)

(143)

(396)

(604)

Equity in earnings of unconsolidated affiliate

29,927

26,654

91,517

88,926

Income before income taxes

149,202

80,113

444,467

472,175

Income taxes

33,541

18,454

102,940

108,932

Net income

$115,661

$61,659

$341,527

$363,243

Basic earnings per common share

$0.87

$0.46

$2.57

$2.66

Shares used to calculate basic earnings per share

132,231

135,203

133,035

136,524

Diluted earnings per common share

$0.87

$0.45

$2.54

$2.63

Shares used to calculate diluted earnings per share

133,504

136,345

134,250

137,958

Dividends declared per common share

$—

$—

$0.43

$0.40

 

SEI INVESTMENTS COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

September 30,

December 31,

2023

2022

Assets

Current Assets:

Cash and cash equivalents

$854,443

$853,008

Restricted cash

301

351

Receivables from investment products

55,687

62,014

Receivables, net of allowance for doubtful accounts of $1,184 and $901

518,854

457,084

Securities owned

32,748

32,148

Other current assets

57,357

48,703

Total Current Assets

1,519,390

1,453,308

Property and Equipment, net of accumulated depreciation of $465,297 and $440,861

177,521

181,029

Operating Lease Right-of-Use Assets

20,686

24,992

Capitalized Software, net of accumulated amortization of $606,214 and $586,744

244,416

237,302

Available for Sale and Equity Securities

119,562

128,201

Investments in Affiliated Funds, at fair value

6,838

6,366

Investment in Unconsolidated Affiliate

44,645

104,673

Goodwill

115,597

115,599

Intangible Assets, net of accumulated amortization of $39,432 and $30,261

46,413

55,532

Deferred Contract Costs

38,518

37,928

Deferred Income Taxes

26,449

4,936

Other Assets, net

37,201

33,687

Total Assets

$2,397,236

$2,383,553

Liabilities and Equity

Current Liabilities:

Accounts payable

$10,198

$13,283

Accrued liabilities

249,872

359,363

Current portion of long-term operating lease liabilities

9,882

10,344

Deferred revenue

12,100

14,893

Total Current Liabilities

282,052

397,883

Long-term Income Taxes Payable

803

803

Long-term Operating Lease Liabilities

15,138

18,786

Other Long-term Liabilities

15,362

12,257

Total Liabilities

313,355

429,729

Shareholders' Equity:

Common stock, $0.01 par value, 750,000 shares authorized; 131,571 and 134,162 shares issued and outstanding

1,316

1,342

Capital in excess of par value

1,369,465

1,307,162

Retained earnings

763,635

694,287

Accumulated other comprehensive loss, net

(50,535)

(48,967)

Total Shareholders' Equity

2,083,881

1,953,824

Total Liabilities and Shareholders' Equity

$2,397,236

$2,383,553

 

ENDING ASSET BALANCES

(In millions)  (Unaudited)

 

Sept. 30,

Dec. 31,

Mar. 31,

Jun. 30,

Sept. 30,

2022

2022

2023

2023

2023

Private Banks:

Equity and fixed-income programs

$20,131

$22,377

$23,653

$24,091

$23,039

Collective trust fund programs

7

7

6

7

6

Liquidity funds

3,778

3,201

3,427

3,433

3,636

Total assets under management

$23,916

$25,585

$27,086

$27,531

$26,681

Client assets under administration

4,161

4,151

4,299

4,154

4,399

Total assets

$28,077

$29,736

$31,385

$31,685

$31,080

Investment Advisors:

Equity and fixed-income programs

$62,579

$66,240

$68,065

$69,439

$66,911

Liquidity funds

5,200

5,436

4,965

4,968

5,175

Total Platform assets under management

$67,779

$71,676

$73,030

$74,407

$72,086

Platform-only assets

12,609

13,931

14,980

16,103

16,232

Total Platform assets

$80,388

$85,607

$88,010

$90,510

$88,318

Institutional Investors:

Equity and fixed-income programs

$69,621

$73,178

$74,939

$75,854

$72,387

Collective trust fund programs

6

5

4

4

4

Liquidity funds

1,640

1,557

1,576

1,353

2,119

Total assets under management

$71,267

$74,740

$76,519

$77,211

$74,510

Client assets under advisement

4,204

4,314

4,559

4,368

4,085

Total assets

$75,471

$79,054

$81,078

$81,579

$78,595

Investment Managers:

Collective trust fund programs (A)

$137,538

$141,285

$146,176

$149,779

$146,991

Liquidity funds

248

199

203

249

180

Total assets under management

$137,786

$141,484

$146,379

$150,028

$147,171

Client assets under administration

781,246

810,491

845,828

873,570

886,382

Total assets

$919,032

$951,975

$992,207

$1,023,598

$1,033,553

Investments in New Businesses:

Equity and fixed-income programs

$1,813

$1,912

$2,031

$2,104

$2,017

Liquidity funds

221

215

217

217

202

Total assets under management

$2,034

$2,127

$2,248

$2,321

$2,219

Client assets under administration

1,026

1,077

1,081

1,098

1,070

Total assets

$3,060

$3,204

$3,329

$3,419

$3,289

LSV Asset Management:

Equity and fixed-income programs (B)

$75,380

$83,753

$84,964

$86,469

$83,684

Total:

Equity and fixed-income programs (C)

$229,524

$247,460

$253,652

$257,957

$248,038

Collective trust fund programs

137,551

141,297

146,186

149,790

147,001

Liquidity funds

11,087

10,608

10,388

10,220

11,312

Total assets under management

$378,162

$399,365

$410,226

$417,967

$406,351

Client assets under advisement

5,230

5,391

5,640

5,466

5,155

Client assets under administration (D)

785,407

814,642

850,127

877,724

890,781

Platform-only assets

12,609

13,931

14,980

16,103

16,232

Total assets

$1,181,408

$1,233,329

$1,280,973

$1,317,260

$1,318,519

(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 $1.8 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, 2023).

(C)  

Equity and fixed-income programs include $5.9 billion of assets invested in various asset allocation funds (as of September 30, 2023).

(D)  

In addition to the assets presented, SEI also administers an additional $11.4 billion in Funds of Funds assets on which SEI does not earn an administration fee (as of September 30, 2023).

 

AVERAGE ASSET BALANCES

(In millions) (Unaudited)

 

3rd Qtr.

4th Qtr.

1st Qtr.

2nd Qtr.

3rd Qtr.

2022

2022

2023

2023

2023

Private Banks:

Equity and fixed-income programs

$22,115

$21,839

$23,576

$23,748

$23,920

Collective trust fund programs

7

7

7

7

6

Liquidity funds

3,742

3,395

3,253

3,500

3,585

Total assets under management

$25,864

$25,241

$26,836

$27,255

$27,511

Client assets under administration

4,026

4,126

4,316

4,282

4,221

Total assets

$29,890

$29,367

$31,152

$31,537

$31,732

Investment Advisors:

Equity and fixed-income programs

$67,464

$66,100

$67,578

$68,371

$69,309

Liquidity funds

5,380

5,127

4,995

4,808

4,990

Total Platform assets under management

$72,844

$71,227

$72,573

$73,179

$74,299

Platform-only assets

13,271

13,905

14,812

15,548

16,544

Total Platform assets

$86,115

$85,132

$87,385

$88,727

$90,843

Institutional Investors:

Equity and fixed-income programs

$74,859

$72,581

$74,653

$74,865

$75,023

Collective trust fund programs

6

5

5

4

4

Liquidity funds

1,717

1,719

1,715

1,537

1,611

Total assets under management

$76,582

$74,305

$76,373

$76,406

$76,638

Client assets under advisement

4,194

4,251

4,431

4,583

4,294

Total assets

$80,776

$78,556

$80,804

$80,989

$80,932

Investment Managers:

Collective trust fund programs (A)

$143,817

$140,494

$144,914

$147,543

$150,379

Liquidity funds

250

275

317

286

237

Total assets under management

$144,067

$140,769

$145,231

$147,829

$150,616

Client assets under administration

782,559

785,813

836,410

859,296

889,503

Total assets

$926,626

$926,582

$981,641

$1,007,125

$1,040,119

Investments in New Businesses:

Equity and fixed-income programs

$1,939

$1,890

$1,991

$2,057

$2,096

Liquidity funds

231

208

212

199

211

Total assets under management

$2,170

$2,098

$2,203

$2,256

$2,307

Client assets under advisement

1,126

1,075

1,098

1,075

1,101

Total assets

$3,296

$3,173

$3,301

$3,331

$3,408

LSV Asset Management:

Equity and fixed-income programs (B)

$81,241

$83,370

$86,987

$84,492

$86,671

Total:

Equity and fixed-income programs (C)

$247,618

$245,780

$254,785

$253,533

$257,019

Collective trust fund programs

143,830

140,506

144,926

147,554

150,389

Liquidity funds

11,320

10,724

10,492

10,330

10,634

Total assets under management

$402,768

$397,010

$410,203

$411,417

$418,042

Client assets under advisement

5,320

5,326

5,529

5,658

5,395

Client assets under administration (D)

786,585

789,939

840,726

863,578

893,724

Platform-only assets

13,271

13,905

14,812

15,548

16,544

Total assets

$1,207,944

$1,206,180

$1,271,270

$1,296,201

$1,333,705

(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 2023 include $1.9 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 $6.1 billion of average assets invested in various asset allocation funds during third-quarter 2023.

(D)  

In addition to the assets presented, SEI also administers an additional $11.6 billion of average assets in Funds of Funds assets during third-quarter 2023 on which SEI does not earn an administration fee.

 

Investor Contact:  

Media Contact:

Alex Whitelam                                                                  

Leslie Wojcik

SEI                                                                        

SEI

+1 610-676-4924                                                      

+1 610-676-4191

awhitelam@seic.com                                                

lwojcik@seic.com

Cision View original content:https://www.prnewswire.com/news-releases/sei-reports-third-quarter-2023-financial-results-301967819.html

SOURCE SEI Investments Company