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SEI Reports First-Quarter 2023 Financial Results

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SEI Investments Company (NASDAQ:SEIC) reported its financial results for the first-quarter 2023, with diluted earnings per share at $0.79, down from $1.36 in the same quarter of 2022. Total revenues decreased by 19% to $469.1 million from $581.4 million in 2022, impacted by a one-time revenue event of $88 million recorded in the previous year.

Net income also fell to $107 million, compared to $190 million last year. The company experienced declines across various business segments, especially the Private Banks segment, which saw revenues drop 43%. Operational expenses increased due to higher personnel costs and inflation, yet cash flow from operations reached $114.4 million.

Despite challenges, the CEO expressed optimism about sales growth and future opportunities, emphasizing a strategic focus on capital alignment for growth.

Positive
  • Cash flow from operations was $114.4 million, or $0.85 per share.
  • The company capitalized $9.0 million on software development costs for enhancements.
  • Net sales events in the Private Banks and Investment Managers segments during Q1 2023 are expected to generate net annualized recurring revenues of approximately $17.1 million.
Negative
  • Diluted earnings per share dropped to $0.79, a decrease of 42% year-over-year.
  • Total revenues decreased by 19% year-over-year.
  • Net income decreased by 44% compared to the same quarter in 2022.
  • Revenues in the Private Banks segment fell by 43%.
  • Average assets under management decreased by $26.7 billion, or 14%, to $167.8 billion.

OAKS, Pa., April 20, 2023 /PRNewswire/ -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the first-quarter 2023. Diluted earnings per share were $0.79 in first-quarter 2023 compared to $1.36 in first-quarter 2022. First-quarter 2022 results included a one-time positive $88.0 million revenue event resulting in $0.47 diluted earnings per share net of associated costs.

Consolidated Overview





(In thousands, except earnings per share)


For the Three Months
Ended March 31,



2023


2022






Revenues


$469,119


$581,443

Net income


107,015


190,308

Diluted earnings per share


$0.79


$1.36

 

"Our first-quarter results reflect strong sales across most of our business lines, especially in technology and investment processing. Revenues and profits were slightly impacted by cash flows in our asset management businesses. We have a clear strategic focus on driving growth and will be very diligent about managing expenses across the company," said CEO Ryan Hicke.

"We are encouraged by overall sales results, as well as the size and makeup of our pipelines, reflecting changes we have made over the last year. We will thoughtfully align our capital to opportunities for growth and deliver the solutions our markets value. I believe SEI's future is ripe with opportunity, and we will be aggressive in executing our long-term growth strategy."

Summary of First-Quarter Results by Business Segment


(In thousands)


For the Three Months
Ended March 31,





2023


2022


%

Private Banks:







Revenues


$122,603


$213,548


(43) %

Expenses


114,276


121,955


(6) %

Operating Profit


8,327


91,593


(91) %

Operating Margin


7 %


43 %










Investment Advisors:







Revenues


106,538


119,230


(11) %

Expenses


63,546


64,520


(2) %

Operating Profit


42,992


54,710


(21) %

Operating Margin


40 %


46 %










Institutional Investors:







Revenues


74,290


86,839


(14) %

Expenses


40,868


45,358


(10) %

Operating Profit


33,422


41,481


(19) %

Operating Margin


45 %


48 %










Investment Managers:







Revenues


160,686


156,901


2 %

Expenses


105,866


98,837


7 %

Operating Profit


54,820


58,064


(6) %

Operating Margin


34 %


37 %










Investments in New Businesses:







Revenues


5,002


4,925


2 %

Expenses


11,644


11,950


(3) %

Operating Loss


(6,642)


(7,025)


NM








Totals:







Revenues


$469,119


$581,443


(19) %

Expenses


336,200


342,620


(2) %

Corporate Overhead Expenses


31,152


24,024


30 %

Income from Operations


$101,767


$214,799


(53) %

 

First-Quarter Business Highlights:

  • Revenues from Information processing and software servicing fees decreased primarily from a one-time early termination fee of $88.0 million from an uninstalled investment processing client recorded during first-quarter 2022 in the Private Banks segment.
  • Revenues from Assets under management, administration, and distribution fees decreased primarily from lower assets under management in equity and fixed income programs from market depreciation during 2022 and negative cash flows from SEI fund programs due to client losses in the Investment Advisors and Institutional Investors segments. The improvement in market conditions and positive cash flows into separately managed account programs and Strategist programs during the first quarter 2023 partially offset the decline in revenues.
  • Average assets under management in equity and fixed income programs, excluding LSV, decreased $26.7 billion, or 14%, to $167.8 billion in the first-quarter 2023, as compared to $194.5 billion during the first-quarter 2022 (see attached Average Asset Balances schedule for further details).
  • Revenue from Asset management, administration and distribution fees increased from existing alternative investment clients of the Investment Managers segment due to new products and additional services. The decrease in average assets under administration reflect a loss of a significant client in 2022 which was not charged asset-based fees.
  • Net sales events in the Private Banks and Investment Managers segments during first-quarter 2023 were $21.2 million and are expected to generate net annualized recurring revenues of approximately $17.1 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 first-quarter 2023 were $1.0 million.
  • Net sales events in newer initiatives during first-quarter 2023 were $1.0 million.
  • Operational expenses increased due to higher personnel costs from business growth, competitive labor markets, and the impact of inflation on wages and services. Operational expenses also increased due to personnel costs and investments in compliance infrastructure to meet new regulatory requirements. The increase was substantially offset by lower direct costs related to asset management revenues and lower amortization expense.
  • Earnings from LSV decreased to $28.9 million in the first-quarter 2023 as compared to $32.5 million in the first-quarter 2022 due to net negative cash flows from existing clients, client losses and market depreciation.
  • We capitalized $9.0 million of software development costs in first-quarter 2023, of which $4.7 million was for continued enhancements to SWP. We also capitalized $4.3 million of software development costs in first-quarter 2023 for a new platform for the Investment Managers segment.
  • Amortization expense related to SWP was $6.2 million in first-quarter 2023 as compared to $12.1 million in first-quarter 2022. The decline in amortization expense was due to the amortization period of the initial development costs related to SWP which ended in second-quarter 2022.
  • Effective tax rates were 23.6% in first-quarter 2023 and 23.1% in first-quarter 2022.
  • We repurchased 1.4 million shares of our common stock for $80.3 million during the first-quarter 2023 at an average price of $59.03 per share.
  • Cash flow from operations was $114.4 million, or $0.85 per share, and free cash flow was $94.7 million during the first-quarter 2023.

Earnings Conference Call
A conference call to review earnings is scheduled for 4:30 p.m. Eastern time on April 20, 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: 8123608.

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 solve problems, manage change, and help protect assets—for growth today and in the future. As of March 31, 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:

  • our strategic focus;
  • the opportunities for us;
  • when and if we will generate net annualized recurring revenues from sales events that occurred during the quarter, and
  • whether we will be able to:
    • manage expenses across the company;
    • align our capital to opportunities for growth and deliver the solutions our markets value; or
    • execute against our long-term growth strategy.

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:

  • our ability to manage through times of uncertainty;
  • the degree to which market conditions and trends create growth opportunities for us;
  • the direction in which we are moving;
  • our sales momentum;
  • the traction we will generate in the areas we have increased our market focus and attention;
  • the degree to which we will assess and revise our alignment of capital to opportunity;
  • 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 growth opportunities in the RIA market of our Investment Advisors segment present for our technology, investment processing, and asset management capabilities;
  • those circumstances that may challenge our revenue rate earned on managed assets;
  • the movement of assets among SMA, ETFs, direct indexing and third-party branded products;
  • whether the nature of our asset management offerings enables us to keep and capture assets supporting our long-term growth and health;
  • the importance of alternative assets to our strategic agenda;
  • the headwinds in the U.K. and U.S. for our Institutional Investors segment;
  • the degree to which our Private Banks segment will be profitable;
  • the need to increase penetration and growth in our asset management markets by capitalizing on the continued growth and demand from intermediaries and institutions;
  • the degree to which the changes we have made in leadership give us a greater opportunity to maintain and drive success in the short and medium term, while also driving talent mobility in the organization to position us for the future;
  • the drivers of sales momentum;
  • our ability to create growth engines;
  • our ability to manage expenses and increase EPS;
  • whether we are laying the foundation from which we will deliver what the market values;
  • our ability to maintain and grow the sales momentum and continue to ensure we are selling, installing, and refreshing our pipelines with the right types of clients;
  • the organic and inorganic opportunities that will drive our growth;
  • the expense levels in our Investments in New Businesses segment;
  • the impact of LSV's pipeline on our revenue; and
  • the 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 March 31,



2023


2022






Asset management, admin. and distribution fees


$371,829


$394,097

Information processing and software servicing fees


97,290


187,346






Total revenues


469,119


581,443






Subadvisory, distribution and other asset mgmt. costs


47,379


53,128

Software royalties and other information processing costs


7,293


7,547

Compensation, benefits and other personnel


173,415


160,484

Stock-based compensation


8,074


10,566

Consulting, outsourcing and professional fees


61,104


62,491

Data processing and computer related


33,340


29,816

Facilities, supplies and other costs


18,792


17,627

Amortization


9,424


16,887

Depreciation


8,531


8,098






Total expenses


367,352


366,644






Income from operations


101,767


214,799






Net gain (loss) on investments


744


(489)

Interest and dividend income


8,778


848

Interest expense


(141)


(250)

Equity in earnings of unconsolidated affiliate


28,879


32,459






Income before income taxes


140,027


247,367






Income taxes


33,012


57,059






Net income


$107,015


$190,308






Basic earnings per common share


$0.80


$1.38






Shares used to calculate basic earnings per share


134,020


137,935






Diluted earnings per common share


$0.79


$1.36






Shares used to calculate diluted earnings per share


135,311


139,712

 

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




March 31,


December 31,



2023


2022

Assets





Current Assets:





Cash and cash equivalents


$834,355


$853,008

Restricted cash


352


351

Receivables from investment products


55,744


62,014

Receivables, net of allowance for doubtful accounts of $721 and $901


458,226


457,084

Securities owned


31,779


32,148

Other current assets


50,964


48,703

Total Current Assets


1,431,420


1,453,308






Property and Equipment, net of accumulated depreciation of $449,628 and $440,861


183,207


181,029

Operating Lease Right-of-Use Assets


23,992


24,992

Capitalized Software, net of accumulated amortization of $593,049 and $586,744


240,038


237,302

Available for Sale and Equity Securities


124,269


128,201

Investments in Affiliated Funds, at fair value


6,537


6,366

Investment in Unconsolidated Affiliate


55,041


104,673

Goodwill


115,602


115,599

Intangible Assets, net of accumulated amortization of $33,226 and $30,261


52,567


55,532

Deferred Contract Costs


37,505


37,928

Deferred Income Taxes


9,993


4,936

Other Assets, net


38,323


33,687

Total Assets


$2,318,494


$2,383,553






Liabilities and Equity





Current Liabilities:





Accounts payable


$14,160


$13,283

Accrued liabilities


233,684


359,363

Current portion of long-term operating lease liabilities


10,331


10,344

Deferred revenue


14,330


14,893

Total Current Liabilities


272,505


397,883






Long-term Income Taxes Payable


803


803

Long-term Operating Lease Liabilities


17,657


18,786

Other Long-term Liabilities


13,195


12,257

Total Liabilities


304,160


429,729






Shareholders' Equity:





Common stock, $0.01 par value, 750,000 shares authorized; 133,268 and 134,162
shares issued and outstanding


1,333


1,342

Capital in excess of par value


1,327,591


1,307,162

Retained earnings


729,988


694,287

Accumulated other comprehensive loss, net


(44,578)


(48,967)

Total Shareholders' Equity


2,014,334


1,953,824

Total Liabilities and Shareholders' Equity


$2,318,494


$2,383,553

 

ENDING ASSET BALANCES
(In millions)  (Unaudited)




Mar. 31,


Jun. 30,


Sept. 30,


Dec. 31,


Mar. 31,



2022


2022


2022


2022


2023

Private Banks:











Equity and fixed-income programs


$25,335


$22,277


$20,131


$22,377


$23,653

Collective trust fund programs


7


7


7


7


6

Liquidity funds


4,225


3,666


3,778


3,201


3,427

Total assets under management


$29,567


$25,950


$23,916


$25,585


$27,086

Client assets under administration


4,449


3,923


4,161


4,151


4,299

Total assets


$34,016


$29,873


$28,077


$29,736


$31,385












Investment Advisors:











Equity and fixed-income programs


$77,614


$65,783


$62,579


$66,240


$68,065

Liquidity funds


4,610


8,292


5,200


5,436


4,965

Total Platform assets under management


$82,224


$74,075


$67,779


$71,676


$73,030

Platform-only assets


14,151


12,642


12,609


13,931


14,980

Total Platform assets


$96,375


$86,717


$80,388


$85,607


$88,010












Institutional Investors:











Equity and fixed-income programs


$87,358


$75,506


$69,621


$73,178


$74,939

Collective trust fund programs


6


5


6


5


4

Liquidity funds


2,150


1,654


1,640


1,557


1,576

Total assets under management


$89,514


$77,165


$71,267


$74,740


$76,519

Client assets under advisement


4,778


4,218


4,204


4,314


4,559

Total assets


$94,292


$81,383


$75,471


$79,054


$81,078












Investment Managers:











Collective trust fund programs (A)


$85,411


$142,035


$137,538


$141,285


$146,176

Liquidity funds


284


271


248


199


203

Total assets under management


$85,695


$142,306


$137,786


$141,484


$146,379

Client assets under administration


895,181


885,096


781,246


810,491


845,828

Total assets


$980,876


$1,027,402


$919,032


$951,975


$992,207












Investments in New Businesses:











Equity and fixed-income programs


$2,057


$1,903


$1,813


$1,912


$2,031

Liquidity funds


305


242


221


215


217

Total assets under management


$2,362


$2,145


$2,034


$2,127


$2,248

Client assets under administration


1,401


1,076


1,026


1,077


1,081

Total assets


$3,763


$3,221


$3,060


$3,204


$3,329












LSV Asset Management:











Equity and fixed-income programs (B)


$95,962


$81,940


$75,380


$83,753


$84,964












Total:











Equity and fixed-income programs (C)


$288,326


$247,409


$229,524


$247,460


$253,652

Collective trust fund programs


85,424


142,047


137,551


141,297


146,186

Liquidity funds


11,574


14,125


11,087


10,608


10,388

Total assets under management


$385,324


$403,581


$378,162


$399,365


$410,226

Client assets under advisement


6,179


5,294


5,230


5,391


5,640

Client assets under administration (D)


899,630


889,019


785,407


814,642


850,127

Platform-only assets


14,151


12,642


12,609


13,931


14,980

Total assets


$1,305,284


$1,310,536


$1,181,408


$1,233,329


$1,280,973



(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 $2.0 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 March 31, 2023).

(C)

Equity and fixed-income programs include $6.3 billion of assets invested in various asset allocation funds (as of March 31, 2023).

(D)

In addition to the assets presented, SEI also administers an additional $12.1 billion in Funds of Funds assets on which SEI does not earn an administration fee (as of March 31, 2023).

 

AVERAGE ASSET BALANCES
(In millions) (Unaudited)




1st Qtr.


2nd Qtr.


3rd Qtr.


4th Qtr.


1st Qtr.



2022


2022


2022


2022


2023

Private Banks:











Equity and fixed-income programs


$25,637


$23,713


$22,115


$21,839


$23,576

Collective trust fund programs


6


7


7


7


7

Liquidity funds


4,403


3,795


3,742


3,395


3,253

Total assets under management


$30,046


$27,515


$25,864


$25,241


$26,836

Client assets under administration


4,500


4,163


4,026


4,126


4,316

Total assets


$34,546


$31,678


$29,890


$29,367


$31,152












Investment Advisors:











Equity and fixed-income programs


$77,576


$70,436


$67,464


$66,100


$67,578

Liquidity funds


5,151


7,070


5,380


5,127


4,995

Total Platform assets under management


$82,727


$77,506


$72,844


$71,227


$72,573

Platform-only assets


13,978


13,142


13,271


13,905


14,812

Total Platform assets


$96,705


$90,648


$86,115


$85,132


$87,385












Institutional Investors:











Equity and fixed-income programs


$89,250


$80,971


$74,859


$72,581


$74,653

Collective trust fund programs


5


5


6


5


5

Liquidity funds


2,223


2,097


1,717


1,719


1,715

Total assets under management


$91,478


$83,073


$76,582


$74,305


$76,373

Client assets under advisement


4,889


3,987


4,194


4,251


4,431

Total assets


$96,367


$87,060


$80,776


$78,556


$80,804












Investment Managers:











Collective trust fund programs (A)


$86,633


$131,435


$143,817


$140,494


$144,914

Liquidity funds


432


285


250


275


317

Total assets under management


$87,065


$131,720


$144,067


$140,769


$145,231

Client assets under administration


888,854


893,361


782,559


785,813


836,410

Total assets


$975,919


$1,025,081


$926,626


$926,582


$981,641












Investments in New Businesses:











Equity and fixed-income programs


$2,025


$2,016


$1,939


$1,890


$1,991

Liquidity funds


286


262


231


208


212

Total assets under management


$2,311


$2,278


$2,170


$2,098


$2,203

Client assets under advisement


1,397


1,165


1,126


1,075


1,098

Total assets


$3,708


$3,443


$3,296


$3,173


$3,301












LSV Asset Management:











Equity and fixed-income programs (B)


$96,449


$87,818


$81,241


$83,370


$86,987












Total:











Equity and fixed-income programs (C)


$290,937


$264,954


$247,618


$245,780


$254,785

Collective trust fund programs


86,644


131,447


143,830


140,506


144,926

Liquidity funds


12,495


13,509


11,320


10,724


10,492

Total assets under management


$390,076


$409,910


$402,768


$397,010


$410,203

Client assets under advisement


6,286


5,152


5,320


5,326


5,529

Client assets under administration (D)


893,354


897,524


786,585


789,939


840,726

Platform-only assets


13,978


13,142


13,271


13,905


14,812

Total assets


$1,303,694


$1,325,728


$1,207,944


$1,206,180


$1,271,270



(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 first-quarter 2023 include $2.1 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 $6.4 billion of average assets invested in various asset allocation funds during first-quarter 2023.

(D)

In addition to the assets presented, SEI also administers an additional $12.3 billion of average assets in Funds of Funds assets during first-quarter 2023 on which SEI does not earn an administration fee.

 

Investor Contact:

Media Contact:

Lindsey Opsahl

Leslie Wojcik

SEI

SEI

+1 610-676-4052

+1 610-676-4191

lopsahl@seic.com

lwojcik@seic.com

 

Cision View original content:https://www.prnewswire.com/news-releases/sei-reports-first-quarter-2023-financial-results-301803513.html

SOURCE SEI Investments Company

FAQ

What were SEIC's earnings for the first quarter of 2023?

SEI Investments Company reported diluted earnings per share of $0.79 for Q1 2023.

How did SEIC's revenues change in Q1 2023 compared to Q1 2022?

Revenues decreased by 19% year-over-year, from $581.4 million in Q1 2022 to $469.1 million in Q1 2023.

What factors contributed to the decrease in SEIC's net income in Q1 2023?

The net income fell by 44% due to lower revenues across multiple segments and the absence of a one-time revenue event from the previous year.

What is SEIC's outlook following the Q1 2023 financial results?

The CEO expressed optimism about growth opportunities and strategic capital alignment despite the revenue declines.

How did operational expenses impact SEIC's financial results in Q1 2023?

Operational expenses increased due to higher personnel costs and inflation, which affected overall profitability.

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