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SEI Reports Second-Quarter 2018 Financial Results

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SEI Reports Second-Quarter 2018 Financial Results

PR Newswire

OAKS, Pa., July 19, 2018 /PRNewswire/ -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the second-quarter 2018. Diluted earnings per share were $0.75 in second-quarter 2018 compared to $0.57 in second-quarter 2017.

Consolidated Overview













(In thousands, except
earnings per share)


For the Three Months
Ended June 30,




For the Six Months 
Ended June 30,





2018


2017


%


2018


2017


%














Revenues


$404,830



$372,331



9%


$810,428



$732,315



11%

Net income


121,677



91,769



33%


261,515



180,506



45%

Diluted earnings per share


$0.75



$0.57



32%


$1.61



$1.11



45%

"Second-quarter financial results reflect increased adoption of our solutions across our markets, as well as continued migration to SEI's platforms, most notably the SEI Wealth PlatformSM," said Alfred P. West, Jr., SEI Chairman and CEO.

"We continue to acquire new clients, enhance our platforms, and create scale while executing our long-term strategy. We feel that this puts us on track to generate sustainable growth for our shareholders."

Summary of Second-Quarter Results by Business Segment

(In thousands)


For the Three Months 
Ended June 30,




For the Six Months 
Ended June 30,





2018


2017


%


2018


2017


%

Private Banks:













Revenues


$121,126



$116,184



4%


$243,290



$228,818



6%

Expenses


114,842



112,353



2%


227,044



220,903



3%

Operating Profit


6,284



3,831



64%


16,246



7,915



105%

Operating Margin


5

%


3

%




7

%


3

%
















Investment Advisors:













Revenues


99,890



92,746



8%


199,082



180,984



10%

Expenses


53,052



49,380



7%


105,505



96,919



9%

Operating Profit


46,838



43,366



8%


93,577



84,065



11%

Operating Margin


47

%


47

%




47

%


46

%
















Institutional Investors:













Revenues


83,434



78,068



7%


168,925



155,072



9%

Expenses


40,871



38,668



6%


82,120



77,496



6%

Operating Profit


42,563



39,400



8%


86,805



77,576



12%

Operating Margin


51

%


50

%




51

%


50

%
















Investment Managers:













Revenues


97,566



83,616



17%


194,421



164,103



18%

Expenses


63,321



53,847



18%


126,659



105,912



20%

Operating Profit


34,245



29,769



15%


67,762



58,191



16%

Operating Margin


35

%


36

%




35

%


35

%
















Investments in New Businesses:













Revenues


2,814



1,717



64%


4,710



3,338



41%

Expenses


5,940



5,124



16%


11,038



10,004



10%

Operating Loss


(3,126)



(3,407)



NM


(6,328)



(6,666)



NM














Totals:













Revenues


$404,830



$372,331



9%


$810,428



$732,315



11%

Expenses


278,026



259,372



7%


552,366



511,234



8%

Corporate overhead expenses


16,514



15,732



5%


31,456



30,337



4%

Income from operations


$110,290



$97,227



13%


$226,606



$190,744



19%

Second-Quarter Business Highlights:

  • Revenue growth in the quarter was primarily driven by higher Asset management, administration, and distribution fees from market appreciation and positive cash flows from new and existing clients.
  • Information processing and software servicing fees in our Private Banks segment increased $3.3 million in second-quarter 2018 compared to second-quarter 2017 primarily due to increased assets from new and existing clients processed on the SEI Wealth Platform (the Platform).
  • Revenues from the SEI Archway acquisition were $5.6 million during the second-quarter 2018. SEI Archway was acquired during the third-quarter 2017 and is reported in our Investment Managers segment.
  • Our average assets under management, excluding LSV, increased $17.8 billion, or nine percent, to $227.0 billion, as compared to $209.2 billion during the second-quarter 2017 (see attached Average Asset Balances schedules for further details).
  • Our average assets under administration increased $53.4 billion, or 11 percent, to $545.3 billion in the second-quarter 2018, as compared to $491.9 billion during the second-quarter 2017 (see attached Average Asset Balances schedules for further details).
  • Sales events, net of client losses, during second-quarter 2018 totaled approximately $24.5 million and are expected to generate net annualized recurring revenues of approximately $19.1 million when contract values are fully realized.
  • Our earnings from LSV increased by $4.8 million, or 13 percent, to $41.1 million in second-quarter 2018 as compared to $36.3 million in second-quarter 2017. The increase in earnings was primarily due to an increase in assets under management from market appreciation and cash inflows from new clients.
  • Our operating expenses, primarily personnel costs, increased across all of our business segments. These expenses primarily consist of operational, technology development and maintenance and marketing costs and are mainly related to our solutions offerings and to servicing existing and acquiring new clients. In addition, our Investment Managers segment includes personnel costs related to SEI Archway acquired during the third-quarter 2017.
  • We capitalized $11.7 million of software development costs in second-quarter 2018 for continued enhancements to the Platform.
  • Our effective tax rate was 21.1 percent in second-quarter 2018 as compared to 32.1 percent in second-quarter 2017. The decline in our tax rate was primarily due to the tax changes enacted in the Tax Cuts and Jobs Act in December 2017.
  • We acquired Huntington Steele, LLC (Huntington Steele), a registered investment advisor servicing the ultra-high-net-worth market, during the second-quarter 2018. As a result, our ending advised assets as of June 30, 2018 increased by approximately $800 million, and our revenues and expenses increased by approximately $900 thousand and $700 thousand, respectively, during the second-quarter 2018. The results of operations of Huntington Steele are included in our Investments in New Businesses segment. Refer to our second-quarter 2018 Form 10-Q for additional information regarding the financial impact of the acquisition.
  • We adopted ASU Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09) on January 1, 2018. With our adoption of ASU 2014-09, fees received for research services provided by our brokerage subsidiary, SIDCO, are now recorded net of amounts paid for the soft dollar arrangement. As a result, our revenues and expenses in second-quarter 2018 were each reduced by $3.3 million with no impact to net income. Refer to our second-quarter 2018 Form 10-Q for information regarding the impact of ASU 2014-09 on our financial statements.
  • We repurchased 1.6 million shares of our common stock for $104.6 million during the second-quarter 2018.

Earnings Conference Call
A conference call to review earnings is scheduled for 4:30 p.m. Eastern time on July 19, 2018. Investors may listen to the call at seic.com/ir-events. Investors may also listen to a replay by telephone at (USA) 800-475-6701; (International) 320-365-3844, access code 451477.

About SEI
Now in its 50th year of business, 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 June 30, 2018, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages, advises or administers $882 billion in hedge, private equity, mutual fund and pooled or separately managed assets, including $331 billion in assets under management and $545 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, including our expectations as to the revenue that we believe will be generated by sales events that occurred during the quarter. 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.

Investor Contact:

Media Contact:

Lindsey Opsahl

Leslie Wojcik

SEI

SEI

+1 610-676-4052

+1 610-676-4191

lopsahl@seic.com

lwojcik@seic.com

 

SEI INVESTMENTS COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)




For the Three Months
Ended June 30,


For the Six Months 
Ended June 30,



2018


2017


2018


2017










Asset management, admin. and distribution fees


$316,508



$289,682



$632,717



$569,143


Information processing and software servicing fees


88,322



82,649



177,711



163,172











Total revenues


404,830



372,331



810,428



732,315











Subadvisory, distribution and other asset mgmt. costs


45,209



43,907



90,414



87,059


Software royalties and other information processing costs


7,977



11,319



16,695



23,290


Compensation, benefits and other personnel


127,375



109,555



251,652



218,498


Stock-based compensation


5,323



6,259



10,518



12,439


Consulting, outsourcing and professional fees


50,441



48,335



99,148



91,484


Data processing and computer related


21,133



18,990



41,724



37,315


Facilities, supplies and other costs


17,783



17,575



35,396



33,500


Amortization


12,161



12,565



24,015



24,587


Depreciation


7,138



6,599



14,260



13,399











Total expenses


294,540



275,104



583,822



541,571











Income from operations


110,290



97,227



226,606



190,744











Net (loss) gain on investments


(139)



44



(549)



391


Interest and dividend income


3,162



1,686



5,664



3,029


Interest expense


(132)



(114)



(389)



(226)


Equity in earnings of unconsolidated affiliate


41,073



36,315



81,680



69,880











Income before income taxes


154,254



135,158



313,012



263,818











Income taxes


32,577



43,389



51,497



83,312











Net income


$121,677



$91,769



$261,515



$180,506











Basic earnings per common share


$0.77



$0.58



$1.66



$1.14











Shares used to calculate basic earnings per share


157,542



158,325



157,488



158,708











Diluted earnings per common share


$0.75



$0.57



$1.61



$1.11











Shares used to calculate diluted earnings per share


162,225



161,709



162,825



162,226











Dividends declared per common share


$0.30



$0.28



$0.30



$0.28


 

SEI INVESTMENTS COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)




June 30,


December 31,



2018


2017

Assets





Current Assets:





  Cash and cash equivalents


$693,442



$744,247


  Restricted cash


3,509



3,505


  Receivables from investment products


53,386



56,666


  Receivables, net of allowance for doubtful accounts of $605 and $695


314,631



282,706


  Securities owned


28,981



21,526


  Other current assets


36,248



31,158


  Total Current Assets


1,130,197



1,139,808







Property and Equipment, net of accumulated depreciation of $323,992 and $309,955


144,330



146,428


Capitalized Software, net of accumulated amortization of $372,249 and $350,045


312,814



310,405


Investments Available for Sale


89,019



87,983


Investments in Affiliated Funds, at fair value


5,739



6,034


Investment in Unconsolidated Affiliate


51,810



59,492


Goodwill


65,249



52,990


Intangible Assets, net of accumulated amortization of $3,248 and $1,552


33,852



28,578


Deferred Contract Costs


21,521




Deferred Income Taxes


2,360



2,767


Other Assets, net


33,815



18,884


Total Assets


$1,890,706



$1,853,369







Liabilities and Equity





Current Liabilities:





  Accounts payable


$7,519



$5,268


  Accrued liabilities


193,832



265,058


  Deferred revenue


5,587



4,723


  Total Current Liabilities


206,938



275,049







Borrowings Under Revolving Credit Facility




30,000


Long-term Taxes Payable


9,629



10,629


Deferred Income Taxes


56,871



48,472


Other Long-term Liabilities


26,386



12,380


Total Liabilities


299,824



376,530







Shareholders' Equity:





  Common stock, $.01 par value, 750,000 shares authorized; 156,800 and 157,069
  shares issued and outstanding


1,568



1,571


  Capital in excess of par value


1,094,771



1,027,709


  Retained earnings


522,764



467,467


  Accumulated other comprehensive loss, net


(28,221)



(19,908)


  Total Shareholders' Equity


1,590,882



1,476,839


  Total Liabilities and Shareholders' Equity


$1,890,706



$1,853,369


 

ENDING ASSET BALANCES

(In millions)  (Unaudited)





Jun. 30,


Sept. 30,


Dec 31,


Mar. 31,


Jun. 30,




2017


2017


2017


2018


2018

Private Banks:












Equity and fixed-income programs



$20,185



$21,196



$22,764



$22,917



$22,448


Collective trust fund programs



4



4



4



4



4


Liquidity funds



3,589



3,345



3,864



3,537



3,471


Total assets under management



$23,778



$24,545



$26,632



$26,458



$25,923


Client assets under administration



20,951



22,107



22,980



22,411



22,435


Total assets



$44,729



$46,652



$49,612



$48,869



$48,358














Investment Advisors:












Equity and fixed-income programs



$57,358



$59,455



$61,908



$62,176



$62,227


Collective trust fund programs



5



5



5



5



5


Liquidity funds



2,451



2,327



2,414



2,399



3,101


Total assets under management



$59,814



$61,787



$64,327



$64,580



$65,333














Institutional Investors:












Equity and fixed-income programs



$81,723



$85,763



$87,587



$85,607



$83,687


Collective trust fund programs



80



82



78



72



73


Liquidity funds



2,468



3,699



2,937



2,727



2,594


Total assets under management



$84,271



$89,544



$90,602



$88,406



$86,354


Advised assets



4,255



3,626



3,942



4,185



4,544


Total assets



$88,526



$93,170



$94,544



$92,591



$90,898














Investment Managers:












Equity and fixed-income programs



$92



$93



$96



$97



$95


Collective trust fund programs



42,662



46,087



49,340



45,062



45,213


Liquidity funds



999



799



743



732



496


Total assets under management



$43,753



$46,979



$50,179



$45,891



$45,804


Client assets under administration (A)



476,543



493,538



495,447



507,694



522,700


Total assets



$520,296



$540,517



$545,626



$553,585



$568,504














Investments in New Businesses:












Equity and fixed-income programs



$997



$1,052



$1,104



$1,114



$1,120


Liquidity funds



46



71



53



72



106


Total assets under management



$1,043



$1,123



$1,157



$1,186



$1,226


Advised assets



69



54



49



49



807


Total assets



$1,112



$1,177



$1,206



$1,235



$2,033














LSV Asset Management:












Equity and fixed-income programs (B)



$95,700



$102,901



$107,690



$108,186



$106,505














Total:












Equity and fixed-income programs (C)



$256,055



$270,460



$281,149



$280,097



$276,082


Collective trust fund programs



42,751



46,178



49,427



45,143



45,295


Liquidity funds



9,553



10,241



10,011



9,467



9,768


Total assets under management



$308,359



$326,879



$340,587



$334,707



$331,145


Advised assets



4,324



3,680



3,991



4,234



5,351


Client assets under administration (D)



497,494



515,645



518,427



530,105



545,135


Total assets



$810,177



$846,204



$863,005



$869,046



$881,631



(A)     Client assets under administration in the Investment Managers segment include $42.7 billion of assets that require limited 
          services and therefore are at fee levels below our normal full service assets (as of June 30, 2018). In addition, these assets 
          as of June 30, 2018 also include approximately $14.2 billion administered by SEI Archway that were not included in prior 
          periods.

(B)     Equity and fixed-income programs include assets managed by LSV in which fees are based on performance only. A portion 
          of these assets were not included in prior period reported assets. The ending value of these assets for each period are as 
          follows: $2.0 billion in June 2017, $2.3 billion in September 2017, $2.4 billion in December 2017, $2.4 billion in March 2018 
          and $2.3 billion in June 2018.

(C)     Equity and fixed-income programs include $5.7 billion of assets invested in various asset allocation funds at June 30, 2018.

(D)     In addition to the numbers presented, SEI also administers an additional $11.6 billion in Funds of Funds assets (as of 
          June 30, 2018) on which SEI does not earn an administration fee.

 

AVERAGE ASSET BALANCES

(In millions) (Unaudited)





2nd Qtr.


3rd Qtr.


4th Qtr.


1st Qtr.


2nd Qtr.




2017


2017


2017


2018


2018

Private Banks:












Equity and fixed-income programs



$19,610



$20,699



$21,748



$23,412



$22,870


Collective trust fund programs



5



4



4



4



4


Liquidity funds



3,677



3,555



3,584



3,720



3,516


Total assets under management



$23,292



$24,258



$25,336



$27,136



$26,390


Client assets under administration



21,166



21,441



22,759



23,398



22,605


Total assets



$44,458



$45,699



$48,095



$50,534



$48,995














Investment Advisors:












Equity and fixed-income programs



$56,319



$58,406



$60,730



$62,650



$62,890


Collective trust fund programs



5



5



5



5



5


Liquidity funds



2,390



2,335



2,235



2,290



2,429


Total assets under management



$58,714



$60,746



$62,970



$64,945



$65,324














Institutional Investors:












Equity and fixed-income programs



$80,561



$84,520



$86,573



$87,207



$85,045


Collective trust fund programs



85



80



80



77



72


Liquidity funds



2,861



3,177



3,052



2,905



2,621


Total assets under management



$83,507



$87,777



$89,705



$90,189



$87,738


Advised assets



3,687



3,552



3,796



4,383



4,301


Total assets



$87,194



$91,329



$93,501



$94,572



$92,039














Investment Managers:












Equity and fixed-income programs



$84



$92



$99



$96



$109


Collective trust fund programs



41,615



44,824



47,772



49,243



45,646


Liquidity funds



937



952



843



834



649


Total assets under management



$42,636



$45,868



$48,714



$50,173



$46,404


Client assets under administration (A)



470,701



486,158



494,201



506,951



522,679


Total assets



$513,337



$532,026



$542,915



$557,124



$569,083














Investments in New Businesses:












Equity and fixed-income programs



$954



$1,016



$1,079



$1,105



$1,090


Liquidity funds



64



55



54



70



95


Total assets under management



$1,018



$1,071



$1,133



$1,175



$1,185


Advised assets



73



73



50



50



813


Total assets



$1,091



$1,144



$1,183



$1,225



$1,998














LSV Asset Management:












Equity and fixed-income programs (B)



$94,010



$100,244



$106,112



$109,904



$108,380














Total:












Equity and fixed-income programs



$251,538



$264,977



$276,341



$284,374



$280,384


Collective trust fund programs



41,710



44,913



47,861



49,329



45,727


Liquidity funds



9,929



10,074



9,768



9,819



9,310


Total assets under management



$303,177



$319,964



$333,970



$343,522



$335,421


Advised assets



3,760



3,625



3,846



4,433



5,114


Client assets under administration



491,867



507,599



516,960



530,349



545,284


Total assets



$798,804



$831,188



$854,776



$878,304



$885,819



(A)  Client assets under administration in the Investment Managers segment in Q2 2018 include approximately $13.9 billion of 
       average asset balances administered by SEI Archway that were not included in prior periods.

(B)  Equity and fixed-income programs include assets managed by LSV in which fees are based on performance only. A portion 
       of these assets were not included in prior period reported assets. The average of these assets for each period are as 
       follows: $2.0 billion in Q2 2017, $2.2 billion in Q3 2017, $2.4 billion in Q4 2017, $2.3 billion in Q1 2018 and $2.3 billion in Q2 
       2018.

 

Cision View original content:http://www.prnewswire.com/news-releases/sei-reports-second-quarter-2018-financial-results-300683962.html

SOURCE SEI Investments Company

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