SEI Reports Third-Quarter 2016 Financial Results


OAKS, Pa., Oct. 20, 2016 (GLOBE NEWSWIRE) -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the third-quarter 2016. Diluted earnings per share were $0.53 in third-quarter 2016 compared to $0.47 in third-quarter 2015. Third-quarter 2015 includes a charge against earnings of approximately $6.0 million, or $0.02 diluted earnings per share, from the write-off of certain assets related to the SEI Wealth PlatformSM.

Consolidated Overview            
(In thousands, except earnings per share)   For the Three Months
Ended September 30,
   For the Nine Months 
Ended September 30,
  
  2016 2015 % 2016 2015 %
             
Revenues $354,641   $335,622    6% $1,032,735   $998,811    3%
Net income  86,704    79,425    9%  245,206    250,276    (2)%
Diluted earnings per share $0.53   $0.47    13% $1.49   $1.47    1%
                             

"Our third-quarter results reflect growth in revenue from existing clients, new business and stronger capital markets," said Alfred P. West, Jr., SEI Chairman and CEO.

"Our current investments are aimed at preparing for large client implementations and creating a sustainable competitive advantage for all of our services. They also position us well for long-term success and increased shareholder value."

Summary of Third-Quarter Results by Business Segment

(In thousands) For the Three Months 
Ended September 30,
   For the Nine Months 
Ended September 30,
  
  2016 2015 % 2016 2015 %
Private Banks:            
Revenues $115,952  $116,280   % $344,149  $342,826   %
Expenses  105,523   104,217   1%  312,126   308,200   1%
Operating Profit  10,429   12,063   (14)%  32,023   34,626   (8)%
Gain on sale of subsidiary        %  2,791   2,791   %
Segment Profit  10,429   12,063   (14)%  34,814   37,417   (7)%
Operating Margin (A)  9%  10%    9%  10%  
             
Investment Advisors:            
Revenues  85,258   76,238   12%  243,820   228,006   7%
Expenses  45,080   45,530   (1)%  134,575   125,446   7%
Operating Profit  40,178   30,708   31%  109,245   102,560   7%
Operating Margin  47%  40%    45%  45%  
             
Institutional Investors:            
Revenues  76,222   74,515   2%  223,793   224,043   %
Expenses  36,943   36,923   %  108,875   108,662   %
Operating Profit  39,279   37,592   4%  114,918   115,381   %
Operating Margin  52%  50%    51%  51%  
             
Investment Managers:            
Revenues  75,672   67,162   13%  216,528   199,809   8%
Expenses  48,588   43,899   11%  140,831   126,663   11%
Operating Profit  27,084   23,263   16%  75,697   73,146   3%
Operating Margin  36%  35%    35%  37%  
             
Investments in New Businesses:              
Revenues  1,537   1,427   8%  4,445   4,127   8%
Expenses  5,348   5,179   3%  15,935   14,848   7%
Operating Loss  (3,811)  (3,752) NM  (11,490)  (10,721) NM
             
Totals:            
Revenues $354,641  $335,622   6% $1,032,735  $998,811   3%
Expenses  241,482   235,748   2%  712,342   683,819   4%
Corporate overhead expenses  15,941   12,856   24%  42,840   38,986   10%
Income from operations $97,218  $87,018   12% $277,553  $276,006   1%

(A) Percentages determined exclusive of gain on sale of subsidiary.

Third-Quarter Business Highlights:

  • Revenue growth in the quarter was primarily driven by higher Asset management, administration, and distribution fees from market appreciation and improved cash flows from new and existing clients.
  • Sales events, net of client losses, during third-quarter 2016 totaled approximately $14.6 million and are expected to generate net annualized recurring revenues of approximately $11.6 million when contract values are fully realized.
  • Our average assets under management, excluding LSV, increased $22.4 billion, or 13 percent, to $195.2 billion, as compared to $172.8 billion during the third-quarter 2015 (see attached Average Asset Balances schedules for further details).
  • Our average assets under administration increased $57.7 billion, or 15 percent, to $455.5 billion in the third-quarter 2016, as compared to $397.8 billion during the third-quarter 2015 (see attached Average Asset Balances schedules for further details).
  • We recorded $1.6 million in non-recurring revenues in our Private Banks segment due to a contract buyout from an investment processing bank client. 
  • Our earnings from LSV decreased by $1.0 million, or three percent, to $32.6 million in third-quarter 2016 as compared to $33.6 million in third-quarter 2015. The decline in earnings was due to increased personnel expenses of LSV.
  • We capitalized $13.6 million and $6.4 million of software development costs in third-quarter 2016 and 2015, respectively, of which $11.3 million and $5.7 million are related to continued enhancements to the SEI Wealth Platform.
  • Amortization expense related to the SEI Wealth Platform increased to $11.3 million during the third-quarter 2016 as compared to $10.8 million during the third-quarter 2015 due to continued enhancements.
  • In the third-quarter 2015, we wrote off approximately $6.0 million, or $0.02 diluted earnings per share, in previously capitalized software development costs and purchased software related to the SEI Wealth Platform.
  • Our operating expenses, primarily personnel costs, in our Investment Managers segment increased. These expenses primarily consist of operational and marketing costs and are mainly related to servicing existing clients and acquiring and implementing new clients.
  • The stronger U.S. dollar against the British pound during the third-quarter 2016 compared to the third-quarter 2015 negatively impacted the revenues of our Private Banks and Institutional Investors segments by $2.5 million and $1.5 million, respectively, and operating income by $1.0 million for each of the two segments.
  • Our effective tax rates were 33.8 percent in third-quarter 2016 and 34.1 percent in third-quarter 2015.
  • We repurchased 1.6 million shares of our common stock for $73.4 million during the third-quarter 2016.

Earnings Conference Call
A conference call to review earnings is scheduled for 4:30 p.m. Eastern time on October 20, 2016. Investors may listen to the call at seic.com/investors. The call may also be accessed at many financial services websites, including Google Finance and Yahoo Finance. Investors may also listen to replays at these websites, or by telephone at (USA) 800-475-6701; (International) 320-365-3844, access code 404239.

About SEI
SEI (NASDAQ:SEIC) is 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 September 30, 2016, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $751 billion in mutual fund and pooled or separately managed assets, including $281 billion in assets under management and $470 billion in client assets under administration. For more information, visit seic.com.

Many of the statements in this release may be considered “forward looking statements” and include discussions about future operations, strategies and financial results.  Forward-looking statements are based upon estimates and assumptions that involve risks and uncertainties, many of which are beyond our control or are subject to change.  Although we believe our assumptions are reasonable, they could be inaccurate.  Our actual future revenues and income could differ materially from our expected results.  We have no obligation to publicly update or revise any forward-looking statements.

 
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,
  2016 2015 2016 2015
         
Asset management, admin. and distribution fees $271,930  $252,585  $785,642  $756,101 
Information processing and software servicing fees  76,443   74,413   224,834   218,765 
Transaction–based and trade execution fees  6,268   8,624   22,259   23,945 
         
Total revenues  354,641   335,622   1,032,735   998,811 
         
Subadvisory, distribution and other asset mgmt costs  42,586   40,230   122,651   119,619 
Software royalties and other information processing costs    7,519   8,028   22,944   23,594 
Brokerage commissions  4,864   6,460   17,065   17,863 
Compensation, benefits and other personnel  103,137   99,461   307,350   292,646 
Stock-based compensation  4,066   3,867   12,044   11,476 
Consulting, outsourcing and professional fees  43,631   35,963   121,712   108,560 
Data processing and computer related  16,581   15,173   48,081   43,100 
Facilities, supplies and other costs  17,075   22,477   50,194   56,195 
Amortization  11,388   10,837   33,684   31,806 
Depreciation  6,576   6,108   19,457   17,946 
         
Total expenses  257,423   248,604   755,182   722,805 
         
Income from operations  97,218   87,018   277,553   276,006 
         
Net gain (loss) on investments  196   (756)  320   (544)
Interest and dividend income  1,026   846   3,142   2,570 
Interest expense  (115)  (115)  (416)  (342)
Equity in earnings of unconsolidated affiliates  32,565   33,595   92,042   104,917 
Gain on sale of subsidiary      2,791   2,791 
         
Income before income taxes  130,890   120,588   375,432   385,398 
         
Income taxes  44,186   41,163   130,226   135,122 
         
Net income  86,704   79,425   245,206   250,276 
         
Basic earnings per common share $0.54  $0.48  $1.51  $1.51 
         
Shares used to calculate basic earnings per share  160,916   165,579   161,908   166,142 
         
Diluted earnings per common share $0.53  $0.47  $1.49  $1.47 
         
Shares used to calculate diluted earnings per share  163,925   169,255   165,053   169,977 
         
Dividends declared per common share $  $  $0.26  $0.24 
               


 
SEI INVESTMENTS COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
  September 30, December 31,
  2016 2015
Assets    
Current Assets:    
Cash and cash equivalents $623,162  $679,661 
Restricted cash  5,500   5,500 
Receivables from investment products  48,783   48,098 
Receivables, net of allowance for doubtful accounts of $987 and $649  247,724   223,023 
Securities owned  21,320   21,235 
Other current assets  30,279   26,207 
  Total Current Assets  976,768   1,003,724 
     
Property and Equipment, net of accumulated depreciation of $278,675 and $259,501  149,262   143,977 
Capitalized Software, net of accumulated amortization of $292,745 and $259,358  290,329   290,522 
Investments Available for Sale  93,157   81,294 
Investments in Affiliated Funds, at fair value  4,888   4,039 
Investment in Unconsolidated Affiliates  39,376   49,580 
Deferred Income Taxes  3,722    
Other Assets, net  16,064   15,492 
  Total Assets $1,573,566  $1,588,628 
     
Liabilities and Equity    
Current Liabilities:    
Accounts payable $7,008  $4,511 
Accrued liabilities  170,753   217,587 
Deferred revenue  2,974   2,385 
  Total Current Liabilities  180,735   224,483 
     
Deferred Income Taxes  65,518   63,028 
Other Long-term Liabilities  14,103   11,397 
  Total Liabilities  260,356   298,908 
     
Shareholders' Equity:    
Common stock, $.01 par value, 750,000 shares authorized; 159,954 and 163,733 shares issued and outstanding    1,600   1,637 
Capital in excess of par value  941,370   910,513 
Retained earnings  400,778   402,860 
Accumulated other comprehensive loss, net  (30,538)  (25,290)
  Total Shareholders' Equity  1,313,210   1,289,720 
  Total Liabilities and Shareholders' Equity $1,573,566  $1,588,628 
         


 
SEI INVESTMENTS COMPANY
ENDING ASSET BALANCES
(In millions)
(Unaudited)
 
   Sept. 30, Dec 31, Mar. 31, Jun. 30, Sept. 30,
   2015 2015 2016 2016 2016
Private Banks:           
Equity and fixed-income programs  $18,243  $18,150  $18,370  $18,328  $18,668 
Collective trust fund programs   3   4   4   3   3 
Liquidity funds   5,469   5,835   5,521   4,848   4,034 
Total assets under management  $23,715  $23,989  $23,895  $23,179  $22,705 
Client assets under administration   16,896   17,532   18,324   18,537   19,269 
Total assets  $40,611  $41,521  $42,219  $41,716  $41,974 
            
Investment Advisors:           
Equity and fixed-income programs  $43,988  $46,123  $47,357  $50,016  $52,594 
Collective trust fund programs   9   7   7   5   5 
Liquidity funds   4,677   4,924   5,051   3,661   2,539 
Total assets under management  $48,674  $51,054  $52,415  $53,682  $55,138 
            
Institutional Investors:           
Equity and fixed-income programs  $70,818  $72,263  $73,468  $75,944  $78,701 
Collective trust fund programs   96   96   97   88   90 
Liquidity funds   2,655   2,883   2,390   2,526   2,612 
Total assets under management  $73,569  $75,242  $75,955  $78,558  $81,403 
            
Investment Managers:           
Equity and fixed-income programs  $59  $66  $72  $73  $79 
Collective trust fund programs   19,863   32,117   32,385   33,841   35,962 
Liquidity funds   848   832   733   750   812 
Total assets under management  $20,770  $33,015  $33,190  $34,664  $36,853 
Client assets under administration (A)     376,133   390,282   400,579   419,139   451,204 
Total assets  $396,903  $423,297  $433,769  $453,803  $488,057 
            
Investments in New Businesses:           
Equity and fixed-income programs  $752  $764  $803  $820  $850 
Liquidity funds   51   47   41   37   53 
Total assets under management  $803  $811  $844  $857  $903 
            
LSV Asset Management:           
Equity and fixed-income programs  $76,958  $78,335  $78,390  $78,352  $83,863 
            
Total:           
Equity and fixed-income programs (B)  $210,818  $215,701  $218,460  $223,533  $234,755 
Collective trust fund programs   19,971   32,224   32,493   33,937   36,060 
Liquidity funds   13,700   14,521   13,736   11,822   10,050 
Total assets under management  $244,489  $262,446  $264,689  $269,292  $280,865 
Client assets under administration (C)   393,029   407,814   418,903   437,676   470,473 
Total assets  $637,518  $670,260  $683,592  $706,968  $751,338 

(A) Client assets under administration in the Investment Managers segment include $48.3 billion of assets that require limited services and therefore are at fee levels below our normal full service assets (as of September 30, 2016).
(B) Equity and fixed-income programs include $4.7 billion of assets invested in various asset allocation funds at September 30, 2016.
(C) In addition to the numbers presented, SEI also administers an additional $11.1 billion in Funds of Funds assets (as of September 30, 2016) on which SEI does not earn an administration fee. Client assets under administration as of September 30, 2016 do not reflect $1.3 billion in Funds of Funds assets that were reported at December 31, 2015.

 
SEI INVESTMENTS COMPANY
AVERAGE ASSET BALANCES
(In millions)
(Unaudited)
 
   3rd Qtr. 4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr.
   2015 2015 2016 2016 2016
Private Banks:           
Equity and fixed-income programs  $19,080  $18,603  $17,644  $18,504  $18,650 
Collective trust fund programs   6   3   3   3   3 
Liquidity funds   5,443   5,511   5,661   5,118   4,386 
Total assets under management  $24,529  $24,117  $23,308  $23,625  $23,039 
Client assets under administration   17,504   17,775   17,248   18,436   19,039 
Total assets  $42,033  $41,892  $40,556  $42,061  $42,078 
            
Investment Advisors:           
Equity and fixed-income programs  $45,992  $46,044  $45,175  $48,783  $51,924 
Collective trust fund programs   9   8   7   6   5 
Liquidity funds   3,523   4,784   5,009   4,061   2,694 
Total assets under management  $49,524  $50,836  $50,191  $52,850  $54,623 
            
Institutional Investors:           
Equity and fixed-income programs  $73,568  $72,463  $71,779  $74,984  $77,583 
Collective trust fund programs   93   96   98   96   90 
Liquidity funds   2,843   3,109   2,834   2,868   2,751 
Total assets under management  $76,504  $75,668  $74,711  $77,948  $80,424 
            
Investment Managers:           
Equity and fixed-income programs  $24  $59  $66  $72  $73 
Collective trust fund programs   20,449   30,960   30,784   33,021   35,257 
Liquidity funds   978   960   832   701   874 
Total assets under management  $21,451  $31,979  $31,682  $33,794  $36,204 
Client assets under administration   380,247   390,080   387,421   415,237   436,459 
Total assets  $401,698  $422,059  $419,103  $449,031  $472,663 
            
Investments in New Businesses:           
Equity and fixed-income programs  $776  $788  $757  $811  $845 
Liquidity funds   49   47   48   39   44 
Total assets under management  $825  $835  $805  $850  $889 
            
LSV Asset Management:           
Equity and fixed-income programs  $80,656  $79,634  $74,699  $79,733  $83,373 
            
Total:           
Equity and fixed-income programs  $220,096  $217,591  $210,120  $222,887  $232,448 
Collective trust fund programs   20,557   31,067   30,892   33,126   35,355 
Liquidity funds   12,836   14,411   14,384   12,787   10,749 
Total assets under management  $253,489  $263,069  $255,396  $268,800  $278,552 
Client assets under administration (A)     397,751   407,855   404,669   433,673   455,498 
Total assets  $651,240  $670,924  $660,065  $702,473  $734,050 

(A) Client assets under administration during third-quarter 2016 do not reflect $1.3 billion in Funds of Funds assets that were reported during fourth-quarter 2015.


            

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