SEI Reports First-Quarter 2023 Financial Results

Rhea-AI Summary

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

 

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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.