SEI Reports Fourth-Quarter 2016 Financial Results


OAKS, Pa., Jan. 25, 2017 (GLOBE NEWSWIRE) -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the fourth-quarter 2016. Diluted earnings per share were $0.55 in fourth-quarter 2016 compared to $0.48 in fourth-quarter 2015. 

Consolidated Overview            
(In thousands, except earnings per share) For the Three Months
Ended December 31,
   For the Twelve Months
Ended December 31,
  
   2016  2015 %  2016  2015 %
             
Revenues $368,810  $335,397  10% $1,401,545  $1,334,208  5%
Net income  88,611   81,379  9%  333,817   331,655  1%
Diluted earnings per share $0.55  $0.48  15% $2.03  $1.96  4%

"Our financial results for both the fourth quarter and the full year show modest gains and reflect the ongoing investments we are making to deliver next generation solutions to our clients," said Alfred P. West, Jr., SEI Chairman and CEO. "We continue to anticipate significant change in the markets we serve and will provide broad-based solutions to address our clients’ complex needs. While net-sales events slowed during the fourth quarter, we are well positioned to capitalize on the significant opportunities within our markets.

“Our focus is unwavering on delivering for clients and positioning our company for long-term sustainable growth and increased shareholder value.”

Summary of Fourth-Quarter Results by Business Segment

(In thousands) For the Three Months
Ended December 31,
   For the Twelve Months
Ended December 31,
  
   2016  2015 %  2016  2015 %
Private Banks:            
Revenues $113,737  $113,690  % $457,886  $456,516  %
Expenses  109,062   102,775  6%  421,188   410,975  2%
Operating Profit  4,675   10,915  (57)%  36,698   45,541  (19)%
Gain on sale of subsidiary       %  2,791   2,791  %
Segment Profit  4,675   10,915  (57)%  39,489   48,332  (18)%
Operating Margin (A)  4%  10%     8%  10%   
                       
Investment Advisors:                      
Revenues  86,857   78,614  10%  330,677   306,620  8%
Expenses  45,565   46,522  (2)%  180,140   171,968  5%
Operating Profit  41,292   32,092  29%  150,537   134,652  12%
Operating Margin  48%  41%     46%  44%   
                       
Institutional Investors:                      
Revenues  88,791   73,525  21%  312,584   297,568  5%
Expenses  44,242   37,189  19%  153,117   145,851  5%
Operating Profit  44,549   36,336  23%  159,467   151,717  5%
Operating Margin  50%  49%     51%  51%   
                       
Investment Managers:                      
Revenues  77,862   68,154  14%  294,390   267,963  10%
Expenses  50,296   45,431  11%  191,127   172,094  11%
Operating Profit  27,566   22,723  21%  103,263   95,869  8%
Operating Margin  35%  33%     35%  36%   
                       
Investments in New Businesses:                      
Revenues  1,563   1,414  11%  6,008   5,541  8%
Expenses  5,027   5,808  (13)%  20,962   20,656  1%
Operating Loss  (3,464)  (4,394) NM   (14,954)  (15,115) NM 
                       
Totals:                      
Revenues $368,810  $335,397  10% $1,401,545  $1,334,208  5%
Expenses  254,192   237,725  7%  966,534   921,544  5%
Corporate overhead expenses  16,477   15,465  7%  59,317   54,451  9%
Income from operations $98,141  $82,207  19% $375,694  $358,213  5%
                       

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

Fourth-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.
  • In the fourth-quarter 2016, we recognized a $12.3 million performance fee and a corresponding $6.1 million sub-advisory expense associated with an SEI-sponsored investment product. These items resulted in a positive net impact of approximately $0.03 diluted earnings per share and were reflected in the Institutional Investors segment. 
  • Sales events, net of client losses, during fourth-quarter 2016 totaled approximately $10.6 million and are expected to generate net annualized recurring revenues of approximately $5.5 million when contract values are fully realized. For the year ended 2016, sales events, net of client losses, totaled approximately $93.1 million and are expected to generate net annualized recurring revenues of approximately $74.0 million when contract values are fully realized.
  • Our average assets under management, excluding LSV, increased $11.4 billion, or six percent, to $194.8 billion, as compared to $183.4 billion during the fourth-quarter 2015 (see attached Average Asset Balances schedules for further details).
  • Our average assets under administration increased $57.8 billion, or 14 percent, to $465.7 billion in the fourth-quarter 2016, as compared to $407.9 billion during the fourth-quarter 2015 (see attached Average Asset Balances schedules for further details).
  • Our earnings from LSV increased by $2.0 million, or six percent, to $34.1 million in fourth-quarter 2016 as compared to $32.1 million in fourth-quarter 2015. The increase in earnings was due to an increase in assets under management from market appreciation; however, our earnings were negatively impacted by lower performance fees and increased personnel expenses of LSV.
  • We capitalized $17.2 million and $6.9 million of software development costs in fourth-quarter 2016 and 2015, respectively, of which $12.4 million and $5.2 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 $11.7 million during the fourth-quarter 2016 as compared to $10.8 million during the fourth-quarter 2015 due to continued enhancements.
  • Our operating expenses increased $13.2 million, or five percent, during the fourth-quarter 2016 compared to the third-quarter 2016 due in part to the previously mentioned sub-advisory expense. Without this item, the sequential increase in our operating expenses during the fourth-quarter would have been $7.1 million, or just under three percent.
  • 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 fourth-quarter 2016 compared to the fourth-quarter 2015 negatively impacted the revenues of our Private Banks and Institutional Investors segments by $2.9 million and $1.8 million, respectively, and operating income by $1.2 million for each of the two segments.
  • Our effective tax rates were 33.4 percent in fourth-quarter 2016 and 29.3 percent in fourth-quarter 2015. The increase in the tax rate is due to a one time state tax settlement we received in the fourth quarter of 2015 as well as the reinstatement of the Research and Development credit in the fourth quarter of 2015. In 2015, all of the Research and Development Tax credit was recorded in the fourth quarter as compared to each quarter in 2016.
  • We repurchased 1.4 million shares of our common stock for $66.8 million during the fourth-quarter 2016.

Earnings Conference Call
A conference call to review earnings is scheduled for 4:30 p.m. Eastern time on Jan. 25, 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 415844.

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 December 31, 2016, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $751 billion in hedge, private equity, mutual fund and pooled or separately managed assets, including $283 billion in assets under management and $468 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 December 31,
 For the Twelve Months
Ended December 31,
   2016  2015  2016  2015
         
Asset management, admin. and distribution fees $286,534  $254,410  $1,072,176  $1,010,511 
Information processing and software servicing fees  75,512   72,128   300,346   290,893 
Transaction–based and trade execution fees  6,764   8,859   29,023   32,804 
         
Total revenues  368,810   335,397   1,401,545   1,334,208 
         
Subadvisory, distribution and other asset mgmt costs  48,310   40,443   170,961   160,062 
Software royalties and other information processing costs  7,379   7,903   30,323   31,497 
Brokerage commissions  5,087   6,525   22,152   24,388 
Compensation, benefits and other personnel  107,272   103,128   414,622   395,774 
Stock-based compensation  3,973   5,836   16,017   17,312 
Consulting, outsourcing and professional fees  45,057   37,876   166,769   146,436 
Data processing and computer related  16,849   15,784   64,930   58,884 
Facilities, supplies and other costs  18,051   18,773   68,245   74,968 
Amortization  11,708   10,824   45,392   42,630 
Depreciation  6,983   6,098   26,440   24,044 
         
Total expenses  270,669   253,190   1,025,851   975,995 
         
Income from operations  98,141   82,207   375,694   358,213 
         
Net (loss) gain on investments  (208)  88   112   (456)
Interest and dividend income  1,174   788   4,316   3,358 
Interest expense  (115)  (141)  (531)  (483)
Equity in earnings of unconsolidated affiliates  34,061   32,140   126,103   137,057 
Gain on sale of subsidiary        2,791   2,791 
         
Income before income taxes  133,053   115,082   508,485   500,480 
         
Income taxes  44,442   33,703   174,668   168,825 
         
Net income  88,611   81,379   333,817   331,655 
         
Basic earnings per common share $0.55  $0.49  $2.07  $2.00 
         
Shares used to calculate basic earnings per share  159,674   164,473   161,350   165,725 
         
Diluted earnings per common share $0.55  $0.48  $2.03  $1.96 
         
Shares used to calculate diluted earnings per share  162,567   168,461   164,431   169,598 
         
Dividends declared per common share $0.28  $0.26  $0.54  $0.50 
                 


SEI INVESTMENTS COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
  December 31, December 31,
   2016  2015
Assets    
Current Assets:    
Cash and cash equivalents $695,701  $679,661 
Restricted cash  3,500   5,500 
Receivables from investment products  61,761   48,098 
Receivables, net of allowance for doubtful accounts of $523 and $649  227,957   223,023 
Securities owned  21,339   21,235 
Other current assets  27,575   26,207 
Total Current Assets  1,037,833   1,003,724 
     
Property and Equipment, net of accumulated depreciation of $285,322 and $259,501  146,190   143,977 
Capitalized Software, net of accumulated amortization of $303,540 and $259,358  295,867   290,522 
Investments Available for Sale  84,033   81,294 
Investments in Affiliated Funds, at fair value  4,858   4,039 
Investment in Unconsolidated Affiliates  50,459   49,580 
Deferred Income Taxes  2,127    
Other Assets, net  15,456   15,492 
Total Assets $1,636,823  $1,588,628 
     
Liabilities and Equity    
Current Liabilities:    
Accounts payable $5,966  $4,511 
Accrued liabilities  240,525   217,587 
Deferred revenue  2,880   2,385 
Total Current Liabilities  249,371   224,483 
     
Deferred Income Taxes  69,693   63,028 
Other Long-term Liabilities  14,645   11,397 
Total Liabilities  333,709   298,908 
     
Shareholders' Equity:    
Common stock, $.01 par value, 750,000 shares authorized; 159,031 and 163,733 shares issued and outstanding  1,590   1,637 
Capital in excess of par value  955,461   910,513 
Retained earnings  384,018   402,860 
Accumulated other comprehensive loss, net  (37,955)  (25,290)
Total Shareholders' Equity  1,303,114   1,289,720 
Total Liabilities and Shareholders' Equity $1,636,823  $1,588,628 
         


SEI INVESTMENTS COMPANY
ENDING ASSET BALANCES
(In millions)
(Unaudited)
 
   Dec 31, Mar. 31, Jun. 30, Sept. 30, Dec 31,
   2015 2016 2016 2016 2016
Private Banks:           
Equity and fixed-income programs  $18,150  $18,370  $18,328  $18,668  $17,926 
Collective trust fund programs   4   4   3   3   3 
Liquidity funds   5,835   5,521   4,848   4,034   4,230 
Total assets under management  $23,989  $23,895  $23,179  $22,705  $22,159 
Client assets under administration   17,532   18,324   18,537   19,269   19,255 
Total assets  $41,521  $42,219  $41,716  $41,974  $41,414 
            
Investment Advisors:           
Equity and fixed-income programs  $46,123  $47,357  $50,016  $52,594  $52,847 
Collective trust fund programs   7   7   5   5   5 
Liquidity funds   4,924   5,051   3,661   2,539   2,741 
Total assets under management  $51,054  $52,415  $53,682  $55,138  $55,593 
            
Institutional Investors:           
Equity and fixed-income programs  $72,263  $73,468  $75,944  $78,701  $76,465 
Collective trust fund programs   96   97   88   90   93 
Liquidity funds   2,883   2,390   2,526   2,612   2,903 
Total assets under management  $75,242  $75,955  $78,558  $81,403  $79,461 
            
Investment Managers:           
Equity and fixed-income programs  $66  $72  $73  $79  $81 
Collective trust fund programs   32,117   32,385   33,841   35,962   36,991 
Liquidity funds   832   733   750   812   667 
Total assets under management  $33,015  $33,190  $34,664  $36,853  $37,739 
Client assets under administration (A)   390,282   400,579   419,139   451,204   448,708 
Total assets  $423,297  $433,769  $453,803  $488,057  $486,447 
            
Investments in New Businesses:           
Equity and fixed-income programs  $764  $803  $820  $850  $884 
Liquidity funds   47   41   37   53   61 
Total assets under management  $811  $844  $857  $903  $945 
            
LSV Asset Management:           
Equity and fixed-income programs  $78,335  $78,390  $78,352  $83,863  $87,248 
            
Total:           
Equity and fixed-income programs (B)  $215,701  $218,460  $223,533  $234,755  $235,451 
Collective trust fund programs   32,224   32,493   33,937   36,060   37,092 
Liquidity funds   14,521   13,736   11,822   10,050   10,602 
Total assets under management  $262,446  $264,689  $269,292  $280,865  $283,145 
            
Client assets under administration (C)   407,814   418,903   437,676   470,473   467,963 
Total assets  $670,260  $683,592  $706,968  $751,338  $751,108 
                      

(A) Client assets under administration in the Investment Managers segment include $48.8 billion of assets that require limited services and therefore are at fee levels below our normal full service assets (as of December 31, 2016).
(B) Equity and fixed-income programs include $4.7 billion of assets invested in various asset allocation funds at December 31, 2016.
(C) In addition to the numbers presented, SEI also administers an additional $9.5 billion in Funds of Funds assets (as of December 31, 2016) on which SEI does not earn an administration fee. Client assets under administration as of December 31, 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)
 
   4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
   2015 2016 2016 2016 2016
Private Banks:           
Equity and fixed-income programs  $18,603  $17,644  $18,504  $18,650  $17,945 
Collective trust fund programs   3   3   3   3   3 
Liquidity funds   5,511   5,661   5,118   4,386   4,030 
Total assets under management  $24,117  $23,308  $23,625  $23,039  $21,978 
Client assets under administration   17,775   17,248   18,436   19,039   19,010 
Total assets  $41,892  $40,556  $42,061  $42,078  $40,988 
            
Investment Advisors:           
Equity and fixed-income programs  $46,044  $45,175  $48,783  $51,924  $52,267 
Collective trust fund programs   8   7   6   5   5 
Liquidity funds   4,784   5,009   4,061   2,694   2,638 
Total assets under management  $50,836  $50,191  $52,850  $54,623  $54,910 
            
Institutional Investors:           
Equity and fixed-income programs  $72,463  $71,779  $74,984  $77,583  $77,040 
Collective trust fund programs   96   98   96   90   92 
Liquidity funds   3,109   2,834   2,868   2,751   2,766 
Total assets under management  $75,668  $74,711  $77,948  $80,424  $79,898 
            
Investment Managers:           
Equity and fixed-income programs  $59  $66  $72  $73  $79 
Collective trust fund programs   30,960   30,784   33,021   35,257   36,170 
Liquidity funds   960   832   701   874   813 
Total assets under management  $31,979  $31,682  $33,794  $36,204  $37,062 
Client assets under administration   390,080   387,421   415,237   436,459   446,666 
Total assets  $422,059  $419,103  $449,031  $472,663  $483,728 
            
Investments in New Businesses:           
Equity and fixed-income programs  $788  $757  $811  $845  $851 
Liquidity funds   47   48   39   44   60 
Total assets under management  $835  $805  $850  $889  $911 
            
LSV Asset Management:           
Equity and fixed-income programs  $79,634  $74,699  $79,733  $83,373  $84,676 
            
Total:           
Equity and fixed-income programs  $217,591  $210,120  $222,887  $232,448  $232,858 
Collective trust fund programs   31,067   30,892   33,126   35,355   36,270 
Liquidity funds   14,411   14,384   12,787   10,749   10,307 
Total assets under management  $263,069  $255,396  $268,800  $278,552  $279,435 
            
Client assets under administration (A)   407,855   404,669   433,673   455,498   465,676 
Total assets  $670,924  $660,065  $702,473  $734,050  $745,111 
                      

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

 


            

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