SEI Reports First-Quarter 2017 Financial Results

OAKS, Pa., April 19, 2017 (GLOBE NEWSWIRE) -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the first-quarter 2017. Diluted earnings per share were $0.55 in first-quarter 2017 compared to $0.47 in first-quarter 2016. Diluted earnings per share in first-quarter 2016 reflect a pre-tax gain of $2.8 million, or $0.01 per share, from the sale of SEI Asset Korea.

Consolidated Overview
(In thousands, except earnings per share)	For the Three Months Ended March 31,
		2017		2016	%

Revenues	$359,984		$334,263		8%
Net income		88,737		77,497	15%
Diluted earnings per share	$0.55		$0.47		17%

“Our financial results for the quarter reflect new and existing client growth, our focus on expenses, and the necessary investments to expand and strengthen the solutions we bring to our target markets,” said Alfred P. West, Jr., SEI Chairman and CEO.

“While we are committed to executing for clients in the short term, we remain focused on the long-term needs of our markets. Our advanced solutions are at the center of what will help our clients sustain their success, while helping us achieve sustainable growth and provide increased shareholder value.”

Summary of First-Quarter Results by Business Segment

(In thousands)	For the Three Months Ended March 31,
		2017			2016		%
Private Banks:
Revenues	$112,634			$113,361			(1)%
Expenses		108,550			103,741		5%
Operating Profit		4,084			9,620		(58)%
Gain on sale of subsidiary		—			2,791		NM
Segment Profit		4,084			12,411		NM
Operating Margin (A)		4	%		8	%

Investment Advisors:
Revenues		88,238			76,679		15%
Expenses		47,539			44,774		6%
Operating Profit		40,699			31,905		28%
Operating Margin		46	%		42	%

Institutional Investors:
Revenues		77,004			72,897		6%
Expenses		38,828			35,382		10%
Operating Profit		38,176			37,515		2%
Operating Margin		50	%		51	%

Investment Managers:
Revenues		80,487			69,918		15%
Expenses		52,065			45,275		15%
Operating Profit		28,422			24,643		15%
Operating Margin		35	%		35	%

Investments in New Businesses:
Revenues		1,621			1,408		15%
Expenses		4,880			5,232		(7)%
Operating Loss		(3,259	)		(3,824	)	NM

Totals:
Revenues	$359,984			$334,263			8%
Expenses		251,862			234,404		7%
Corporate overhead expenses		14,605			13,047		12%
Income from operations	$93,517			$86,812			8%

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

First-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 first-quarter 2017 totaled approximately $20.2 million and are expected to generate net annualized recurring revenues of approximately $17.2 million when contract values are fully realized.
Our average assets under management, excluding LSV, increased $20.7 billion, or 11 percent, to $201.4 billion, as compared to $180.7 billion during the first-quarter 2016. Our assets under management do not include advised assets (see attached Average Asset Balances schedules for further details).
Our average assets under administration increased $69.3 billion, or 17 percent, to $474.0 billion in the first-quarter 2017, as compared to $404.7 billion during the first-quarter 2016 (see attached Average Asset Balances schedules for further details).
Our earnings from LSV increased by $4.4 million, or 15 percent, to $33.6 million in first-quarter 2017 as compared to $29.2 million in first-quarter 2016. The increase in earnings was due to an increase in assets under management from market appreciation; however, our earnings were negatively impacted by increased personnel expenses of LSV.
We capitalized $16.9 million and $9.5 million of software development costs in first-quarter 2017 and 2016, respectively, of which $15.2 million and $7.6 million are related to continued enhancements to the SEI Wealth Platform. Our expenses related to maintenance and enhancements not eligible for capitalization have increased. A higher portion of these costs are recognized in personnel and consulting costs. These increased costs primarily impacted the Private Banks and Investment Advisors business segments.
Amortization expense related to the SEI Wealth Platform increased to $12.0 million during the first-quarter 2017 as compared to $11.0 million during the first-quarter 2016 due to continued enhancements.
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.
During the first-quarter 2017, we adopted ASU 2016-09 which will cause volatility in our quarterly effective tax rate. Our effective tax rates were 31.0 percent in first-quarter 2017 and 35.2 percent in first-quarter 2016. Refer to our Form 10-Q for first-quarter 2017 for information regarding the impact of ASU 2016-09 on our effective tax rate.
We repurchased 1.1 million shares of our common stock for $55.4 million during the first-quarter 2017.

Earnings Conference Call
A conference call to review earnings is scheduled for 4:30 p.m. Eastern time on Apr. 19, 2017. 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 422405.

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 March 31, 2017, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages, advises or administers $779 billion in hedge, private equity, mutual fund and pooled or separately managed assets, including $297 billion in assets under management and $478 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 March 31,
		2017			2016

Asset management, admin. and distribution fees	$278,565			$251,437
Information processing and software servicing fees		74,763			73,399
Transaction–based and trade execution fees		6,656			9,427

Total revenues		359,984			334,263

Subadvisory, distribution and other asset mgmt costs		42,502			39,195
Software royalties and other information processing costs		7,662			7,748
Brokerage commissions		4,959			7,108
Compensation, benefits and other personnel		108,943			101,931
Stock-based compensation		6,180			3,789
Consulting, outsourcing and professional fees		43,149			38,506
Data processing and computer related		16,772			15,718
Facilities, supplies and other costs		17,478			15,997
Amortization		12,022			11,012
Depreciation		6,800			6,447

Total expenses		266,467			247,451

Income from operations		93,517			86,812

Net gain (loss) on investments		347			(126	)
Interest and dividend income		1,343			1,083
Interest expense		(112	)		(114	)
Equity in earnings of unconsolidated affiliate		33,565			29,192
Gain on sale of subsidiary		—			2,791

Income before income taxes		128,660			119,638

Income taxes		39,923			42,141

Net income		88,737			77,497

Basic earnings per common share	$0.56			$0.48

Shares used to calculate basic earnings per share		159,091			163,013

Diluted earnings per common share	$0.55			$0.47

Shares used to calculate diluted earnings per share		162,742			166,145

SEI INVESTMENTS COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

	March 31,			December 31,
		2017			2016
Assets
Current Assets:
Cash and cash equivalents	$661,372			$695,701
Restricted cash		3,500			3,500
Receivables from investment products		51,453			61,761
Receivables, net of allowance for doubtful accounts of $518 and $523		252,205			227,957
Securities owned		21,372			21,339
Other current assets		29,873			27,575
Total Current Assets		1,019,775			1,037,833

Property and Equipment, net of accumulated depreciation of $291,500 and $285,322		142,726			146,190
Capitalized Software, net of accumulated amortization of $315,512 and $303,540		300,756			295,867
Investments Available for Sale		89,262			84,033
Investments in Affiliated Funds, at fair value		5,156			4,858
Investment in Unconsolidated Affiliate		48,759			50,459
Deferred Income Taxes		1,878			2,127
Other Assets, net		16,240			15,456
Total Assets	$1,624,552			$1,636,823

Liabilities and Equity
Current Liabilities:
Accounts payable	$7,372			$5,966
Accrued liabilities		167,061			240,525
Deferred revenue		2,337			2,880
Total Current Liabilities		176,770			249,371

Deferred Income Taxes		69,379			69,693
Other Long-term Liabilities		15,610			14,645
Total Liabilities		261,759			333,709

Shareholders' Equity:
Common stock, $.01 par value, 750,000 shares authorized; 158,687 and 159,031 shares issued and outstanding		1,587			1,590
Capital in excess of par value		976,007			955,461
Retained earnings		420,712			384,018
Accumulated other comprehensive loss, net		(35,513	)		(37,955	)
Total Shareholders' Equity		1,362,793			1,303,114
Total Liabilities and Shareholders' Equity	$1,624,552			$1,636,823

ENDING ASSET BALANCES
(In millions) (Unaudited)

	Mar. 31,		Jun. 30,		Sept. 30,		Dec 31,		Mar. 31,
		2016		2016		2016		2016		2017
Private Banks:
Equity and fixed-income programs	$18,370		$18,328		$18,668		$17,926		$19,034
Collective trust fund programs		4		3		3		3		5
Liquidity funds		5,521		4,848		4,034		4,230		3,903
Total assets under management	$23,895		$23,179		$22,705		$22,159		$22,942
Client assets under administration		18,324		18,537		19,269		19,255		20,760
Total assets	$42,219		$41,716		$41,974		$41,414		$43,702

Investment Advisors:
Equity and fixed-income programs	$47,357		$50,016		$52,594		$52,847		$55,311
Collective trust fund programs		7		5		5		5		5
Liquidity funds		5,051		3,661		2,539		2,741		2,645
Total assets under management	$52,415		$53,682		$55,138		$55,593		$57,961

Institutional Investors:
Equity and fixed-income programs	$73,468		$75,944		$78,701		$76,465		$80,136
Collective trust fund programs		97		88		90		93		89
Liquidity funds		2,390		2,526		2,612		2,903		2,759
Total assets under management	$75,955		$78,558		$81,403		$79,461		$82,984
Advised assets		—		—		—		—		3,228
Total assets	$75,955		$78,558		$81,403		$79,461		$86,212

Investment Managers:
Equity and fixed-income programs	$72		$73		$79		$81		$84
Collective trust fund programs		32,385		33,841		35,962		36,991		40,646
Liquidity funds		733		750		812		667		911
Total assets under management	$33,190		$34,664		$36,853		$37,739		$41,641
Client assets under administration (A)		400,579		419,139		451,204		448,708		457,356
Total assets	$433,769		$453,803		$488,057		$486,447		$498,997

Investments in New Businesses:
Equity and fixed-income programs	$803		$820		$850		$884		$931
Liquidity funds		41		37		53		61		79
Total assets under management	$844		$857		$903		$945		$1,010
Advised assets		—		—		—		—		85
Total assets	$844		$857		$903		$945		$1,095

LSV Asset Management:
Equity and fixed-income programs	$78,390		$78,352		$83,863		$87,248		$90,611

Total:
Equity and fixed-income programs (B)	$218,460		$223,533		$234,755		$235,451		$246,107
Collective trust fund programs		32,493		33,937		36,060		37,092		40,745
Liquidity funds		13,736		11,822		10,050		10,602		10,297
Total assets under management	$264,689		$269,292		$280,865		$283,145		$297,149
Advised assets (C)		—		—		—		—		3,313
Client assets under administration (D)		418,903		437,676		470,473		467,963		478,116
Total assets	$683,592		$706,968		$751,338		$751,108		$778,578

(A) Client assets under administration in the Investment Managers segment include $47.4 billion of assets that require limited services and therefore are at fee levels below our normal full service assets (as of March 31, 2017).
(B) Equity and fixed-income programs include $5.0 billion of assets invested in various asset allocation funds at March 31, 2017.
(C) Assets for which SEI acts as an advisor to the accounts. These assets were excluded in previous periods.
(D) In addition to the numbers presented, SEI also administers an additional $10.1 billion in Funds of Funds assets (as of March 31, 2017) on which SEI does not earn an administration fee.



AVERAGE ASSET BALANCES
(In millions) (Unaudited)

	1st Qtr.		2nd Qtr.		3rd Qtr.		4th Qtr.		1st Qtr.
		2016		2016		2016		2016		2017
Private Banks:
Equity and fixed-income programs	$17,644		$18,504		$18,650		$17,945		$18,498
Collective trust fund programs		3		3		3		3		4
Liquidity funds		5,661		5,118		4,386		4,030		4,051
Total assets under management	$23,308		$23,625		$23,039		$21,978		$22,553
Client assets under administration		17,248		18,436		19,039		19,010		20,223
Total assets	$40,556		$42,061		$42,078		$40,988		$42,776

Investment Advisors:
Equity and fixed-income programs	$45,175		$48,783		$51,924		$52,267		$54,446
Collective trust fund programs		7		6		5		5		5
Liquidity funds		5,009		4,061		2,694		2,638		2,559
Total assets under management	$50,191		$52,850		$54,623		$54,910		$57,010

Institutional Investors:
Equity and fixed-income programs	$71,779		$74,984		$77,583		$77,040		$77,852
Collective trust fund programs		98		96		90		92		90
Liquidity funds		2,834		2,868		2,751		2,766		2,891
Total assets under management	$74,711		$77,948		$80,424		$79,898		$80,833
Advised assets		—		—		—		—		3,125
Total assets	$74,711		$77,948		$80,424		$79,898		$83,958

Investment Managers:
Equity and fixed-income programs	$66		$72		$73		$79		$75
Collective trust fund programs		30,784		33,021		35,257		36,170		39,081
Liquidity funds		832		701		874		813		860
Total assets under management	$31,682		$33,794		$36,204		$37,062		$40,016
Client assets under administration		387,421		415,237		436,459		446,666		453,766
Total assets	$419,103		$449,031		$472,663		$483,728		$493,782

Investments in New Businesses:
Equity and fixed-income programs	$757		$811		$845		$851		$909
Liquidity funds		48		39		44		60		63
Total assets under management	$805		$850		$889		$911		$972
Advised assets		—		—		—		—		82
Total assets	$805		$850		$889		$911		$1,054

LSV Asset Management:
Equity and fixed-income programs	$74,699		$79,733		$83,373		$84,676		$90,274

Total:
Equity and fixed-income programs	$210,120		$222,887		$232,448		$232,858		$242,054
Collective trust fund programs		30,892		33,126		35,355		36,270		39,180
Liquidity funds		14,384		12,787		10,749		10,307		10,424
Total assets under management	$255,396		$268,800		$278,552		$279,435		$291,658
Advised assets		—		—		—		—		3,207
Client assets under administration		404,669		433,673		455,498		465,676		473,989
Total assets	$660,065		$702,473		$734,050		$745,111		$768,854

SEI Reports First-Quarter 2017 Financial Results

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