SEI Reports Fourth-Quarter 2022 Financial Results

Rhea-AI Summary

SEI Investments Company (NASDAQ:SEIC) announced Q4 2022 financial results, reporting diluted earnings per share of $0.83, down 19% from $1.03 in Q4 2021. Total revenues for the quarter were $456.59 million, a 9% decline from $501.65 million a year earlier, while net income decreased by 23% to $112.22 million. For the year, revenues rose 4% to $1.99 billion. The company emphasized growth strategies amidst challenging market conditions, including reduction in asset-based fee revenues due to market depreciation. CEO Ryan Hicke noted initiatives to enhance operational efficiency and client relations.

Positive

• Despite a revenue decline in Q4, annual revenues increased by 4% to $1.99 billion.
• Achieved net annualized recurring revenue of approximately $51.1 million from net sales events across segments.
• Increased software development capital expenditures, enhancing future growth potential.

Negative

• Diluted EPS decreased by 19% year-over-year.
• Q4 revenues down 9% due to lower asset management revenues from market depreciation.
• Net income declined 23% to $112.22 million in Q4 compared to last year.

OAKS, Pa., Jan. 25, 2023 /PRNewswire/ -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the fourth-quarter 2022. Diluted earnings per share were $0.83 in fourth-quarter 2022 compared to $1.03 in fourth-quarter 2021.

Consolidated Overview
(In thousands, except earnings per share)		For the Three Months Ended December 31,						For the Twelve Months Ended December 31,
		2022		2021		%		2022		2021		%
Revenues		$456,590		$501,650		(9) %		$1,991,037		$1,918,309		4 %
Net income		112,224		145,300		(23) %		475,467		546,593		(13) %
Diluted earnings per share		$0.83		$1.03		(19) %		$3.46		$3.81		(9) %

"2022 was a year of evolution for SEI. As we reposition our company's future, we've made—and continue to make—the changes we believe are necessary to execute against our strategy to drive growth. As we look at the year ahead, we will work to grow our revenue, improve the overall efficiency and scale of our business, and invest wisely in our future. I'm excited for what lies ahead as we deliver increased value for our employees, clients, and shareholders," said CEO Ryan Hicke.

"Our financial results for 2022 reflect our focus on growth through new client signings, important recontracts, and successful delivery of our solutions to our markets. Numerous economic factors continue to create change in our industry and challenges for our markets. We believe this environment presents growth opportunities, and we remain committed to our vision for SEI's future."

Summary of Fourth-Quarter Results by Business Segment

(In thousands)		For the Three Months Ended December 31,						For the Twelve Months Ended December 31,
		2022		2021		%		2022		2021		%
Private Banks:
Revenues		$115,233		$129,268		(11) %		$575,625		$493,570		17 %
Expenses		113,533		117,739		(4) %		473,209		462,796		2 %
Operating Profit		1,700		11,529		(85) %		102,416		30,774		233 %
Operating Margin		1 %		9 %				18 %		6 %
Investment Advisors:
Revenues		105,777		125,491		(16) %		447,766		482,949		(7) %
Expenses		62,605		64,067		(2) %		251,650		240,334		5 %
Operating Profit		43,172		61,424		(30) %		196,116		242,615		(19) %
Operating Margin		41 %		49 %				44 %		50 %
Institutional Investors:
Revenues		74,771		87,848		(15) %		323,353		343,805		(6) %
Expenses		40,820		45,374		(10) %		172,252		168,070		2 %
Operating Profit		33,951		42,474		(20) %		151,101		175,735		(14) %
Operating Margin		45 %		48 %				47 %		51 %
Investment Managers:
Revenues		156,076		154,518		1 %		624,918		581,157		8 %
Expenses		104,330		91,046		15 %		404,850		348,655		16 %
Operating Profit		51,746		63,472		(18) %		220,068		232,502		(5) %
Operating Margin		33 %		41 %				35 %		40 %
Investments in New Businesses:
Revenues		4,733		4,525		5 %		19,375		16,828		15 %
Expenses		10,450		13,364		(22) %		45,159		53,219		(15) %
Operating Loss		(5,717)		(8,839)		NM		(25,784)		(36,391)		NM
Totals:
Revenues		$456,590		$501,650		(9) %		$1,991,037		$1,918,309		4 %
Expenses		331,738		331,590		— %		1,347,120		1,273,074		6 %
Corporate Overhead Expenses		30,804		26,662		16 %		168,164		91,854		83 %
Income from Operations		$94,048		$143,398		(34) %		$475,753		$553,381		(14) %

 

Fourth-Quarter Business Highlights:

• Revenues from Assets under management, administration, and distribution fees declined primarily from lower assets under management from the significant market depreciation during 2022 which negatively impacted our asset-based fee revenues.
• Revenues from Information processing and software servicing fees decreased primarily from an adjustment during the quarter to revenue for a client that reduced their business processed with the Company through divestment.
• Average assets under management in equity and fixed income programs, excluding LSV, decreased $36.9 billion, or 19%, to $162.4 billion in the fourth-quarter 2022, as compared to $199.3 billion during the fourth-quarter 2021 (see attached Average Asset Balances schedules for further details).
• Average assets under administration decreased $94.4 billion, or 11%, to $789.9 billion in the fourth-quarter 2022, as compared to $884.3 billion during the fourth-quarter 2021 (see attached Average Asset Balances schedules for further details).
• Net sales events in the Private Banks and Investment Managers segments during fourth-quarter 2022 were $25.0 million and are expected to generate net annualized recurring revenues of approximately $15.1 million when contract values are completely realized. For the year ended 2022, net sales events in the Private Banks and Investment Managers segments were $72.5 million and are expected to generate net annualized recurring revenues of approximately $51.1 million when contract values are completely realized.
• During the fourth-quarter 2022, the Private Banks and Investment Managers segments recontracted a combined $108.1 million in recurring revenue. One of the recontracts in the Private Banks segment, while successful in extending the relationship, resulted in a reduction in contracted annual recurring revenue of approximately $8.3 million. This reduction is not included in the net sales events in the Private banks segment for the fourth-quarter or the year ended 2022.
• 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 fourth-quarter 2022 were negative $4.7 million. For the year ended 2022, net sales events were negative $4.9 million primarily due to the previously announced loss of a significant client of the Investment Advisors segment. Without this loss, net sales events were essentially flat.
• 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 $31.7 million in the fourth-quarter 2022 as compared to $34.2 million in the fourth-quarter 2021 due to net negative cash flows from existing clients, market depreciation and client losses. The decline in earnings was partially offset by higher performance fees earned by LSV.
• We capitalized $6.2 million of software development costs in fourth-quarter 2022 for continued enhancements to SWP. Amortization expense related to SWP was $5.9 million in fourth-quarter 2022 as compared to $11.9 million in fourth-quarter 2021. 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.
• We also capitalized $4.3 million of software development costs in fourth-quarter 2022 for enhancements to an existing platform for the Investment Managers segment.
• We recognized other income of $3.4 million in fourth-quarter 2022 related to insurance recoveries for weather-related damage to our corporate headquarters.
• Effective tax rates were 18.1% in fourth-quarter 2022 and 18.3% in fourth-quarter 2021.
• We repurchased 1.3 million shares of our common stock for $79.6 million during the fourth-quarter 2022 at an average price of $59.36 per share.
• Cash flow from operations was $137.6 million, or $1.01 per share, and free cash flow was $120.3 million during the fourth-quarter 2022.

Earnings Conference Call
A conference call to review earnings is scheduled for 4:30 p.m. Eastern time on Jan. 25, 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: 9166923.

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 Dec. 31, 2022, SEI manages, advises, or administers approximately $1.2 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:

• the degree to which market conditions and trends create growth opportunities for us,
• our strategic focus, and
• whether we will:
• make the necessary changes to execute against our strategy to drive growth,
• invest wisely in our future, or
• deliver increased value for our employees, clients, and shareholders.

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:

• whether we will increase our revenue over time from those clients to which we have granted price concessions,
• whether we will expand any of our relationships with any of our clients,
• the negative consequences for us, if any, with respect to those of our clients that are involved in M&A activity,
• the degree to which outsourcing activity will grow and our ability to take advantage of this trend, if any,
• the strength of activity in our Investment Advisors segment,
• the expense trends in any of our market segments,
• whether we will generate positive sales momentum,
• the extent, scope and strategies of our expense management,
• our strategies for managing,
• the success, if any, that we may have in our Investment Managers market segment,
• our strategy for the unbundling of our investment options and the value our clients may see in this strategy,
• the growth opportunities for our Institutional Investors market segment,
• the degree to which our Private Banks market segment is positioned for growth,
• the drivers of expense growth,
• our priorities of right sizing our expenses to business growth opportunities and allocating spending to areas of accelerated growth,
• the timing of client deconversions and the effect of these deconversions on our revenue,
• the value of our backlog and the strength of our pipelines,
• whether we will see revenue growth within many of our top clients,
• the timing and success of client migrations, implementations and conversions,
• our ability to expand our relationships and revenue opportunities with new and existing clients,
• our ability to align our talent and solutions capabilities with our go-to-market strategy and the degree to which such alignment will enable us to capitalize on opportunities,
• whether our investments will create growth opportunities,
• the margins that our businesses may generate and the degree to which our reported margins will decline, increase or normalize,
• the degree to which one-time and transaction-based revenues during the quarter will be repeated,
• how we will manage our expenses,
• the strategic initiatives and business segments that we will pursue and those in which we will invest,
• our commitment to driving greater topline revenue growth and the success of such commitment,
• the timing of when new clients will be on-boarded directly to new technology platforms and when our entire existing client base will be live on such platforms,
• whether we will be able to drive cross-selling opportunities,
• whether we will focus on maintaining and accelerating growth in existing businesses, expanding our focus on new growth engines, or reinvigorating our culture and talent strategies across the company,
• the organic and inorganic opportunities that will drive our growth, 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, 2021, 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 December 31,				For the Twelve Months Ended December 31,
		2022		2021		2022		2021
Asset management, admin. and distribution fees		$365,239		$403,565		$1,514,063		$1,547,016
Information processing and software servicing fees		91,351		98,085		476,974		371,293
Total revenues		456,590		501,650		1,991,037		1,918,309
Subadvisory, distribution and other asset mgmt. costs		46,247		56,458		196,732		218,068
Software royalties and other information processing costs		7,143		7,198		29,006		27,759
Compensation, benefits and other personnel		174,497		155,309		720,029		584,497
Stock-based compensation		8,064		10,278		39,403		41,451
Consulting, outsourcing and professional fees		57,693		57,543		242,013		223,200
Data processing and computer related		32,151		27,814		125,171		107,560
Facilities, supplies and other costs		17,529		19,909		74,993		69,760
Amortization		10,503		15,403		54,280		59,152
Depreciation		8,715		8,340		33,657		33,481
Total expenses		362,542		358,252		1,515,284		1,364,928
Income from operations		94,048		143,398		475,753		553,381
Net gain (loss) on investments		1,437		(500)		(3,078)		(366)
Interest and dividend income		6,645		934		13,308		3,649
Interest expense		(145)		(209)		(749)		(563)
Other income		3,379		—		3,379		—
Equity in earnings of unconsolidated affiliate		31,741		34,152		120,667		137,572
Income before income taxes		137,105		177,775		609,280		693,673
Income taxes		24,881		32,475		133,813		147,080
Net income		$112,224		$145,300		$475,467		$546,593
Basic earnings per common share		$0.83		$1.04		$3.49		$3.87
Shares used to calculate basic earnings per share		134,714		139,080		136,071		141,216
Diluted earnings per common share		$0.83		$1.03		$3.46		$3.81
Shares used to calculate diluted earnings per share		135,818		141,305		137,423		143,312
Dividends declared per common share		$0.43		$0.40		$0.83		$0.77

 

SEI INVESTMENTS COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
		December 31,		December 31,
		2022		2021
Assets
Current Assets:
Cash and cash equivalents		$853,008		$831,407
Restricted cash		351		351
Receivables from investment products		62,014		59,036
Receivables, net of allowance for doubtful accounts of $901 and $1,602		457,084		441,609
Securities owned		32,148		28,267
Other current assets		48,703		43,559
Total Current Assets		1,453,308		1,404,229
Property and Equipment, net of accumulated depreciation of $440,861 and $409,248		181,029		178,869
Operating Lease Right-of-Use Assets		24,992		33,614
Capitalized Software, net of accumulated amortization of $586,744 and $545,307		237,302		243,446
Available for Sale and Equity Securities		128,201		129,541
Investments in Affiliated Funds, at fair value		6,366		6,916
Investment in Unconsolidated Affiliate		104,673		107,918
Goodwill		115,599		117,232
Intangible Assets, net of accumulated amortization of $30,261 and $17,716		55,532		68,782
Deferred Contract Costs		37,928		36,236
Deferred Income Taxes		4,936		2,983
Other Assets, net		33,687		24,936
Total Assets		$2,383,553		$2,354,702
Liabilities and Equity
Current Liabilities:
Accounts payable		$13,283		$10,312
Accrued liabilities		359,363		324,382
Current portion of long-term operating lease liabilities		10,344		11,328
Deferred revenue		14,893		9,721
Total Current Liabilities		397,883		355,743
Borrowings Under Revolving Credit Facility		—		40,000
Long-term Income Taxes Payable		803		803
Deferred Income Taxes		—		48,876
Long-term Operating Lease Liabilities		18,786		27,639
Other Long-term Liabilities		12,257		20,878
Total Liabilities		429,729		493,939
Shareholders' Equity:
Common stock, $0.01 par value, 750,000 shares authorized; 134,162 and 138,449 shares issued and outstanding		1,342		1,384
Capital in excess of par value		1,307,162		1,246,608
Retained earnings		694,287		632,614
Accumulated other comprehensive loss, net		(48,967)		(19,843)
Total Shareholders' Equity		1,953,824		1,860,763
Total Liabilities and Shareholders' Equity		$2,383,553		$2,354,702

 

ENDING ASSET BALANCES
(In millions)  (Unaudited)
		Dec. 31,		Mar. 31,		Jun. 30,		Sept. 30,		Dec. 31,
		2021		2022		2022		2022		2022
Private Banks:
Equity and fixed-income programs		$26,281		$25,335		$22,277		$20,131		$22,377
Collective trust fund programs		6		7		7		7		7
Liquidity funds		4,724		4,225		3,666		3,778		3,201
Total assets under management		$31,011		$29,567		$25,950		$23,916		$25,585
Client assets under administration		4,481		4,449		3,923		4,161		4,151
Total assets		$35,492		$34,016		$29,873		$28,077		$29,736
Investment Advisors:
Equity and fixed-income programs		$81,686		$77,614		$65,783		$62,579		$66,240
Liquidity funds		4,317		4,610		8,292		5,200		5,436
Total Platform assets under management		$86,003		$82,224		$74,075		$67,779		$71,676
Platform-only assets		14,564		14,151		12,642		12,609		13,931
Total Platform assets		$100,567		$96,375		$86,717		$80,388		$85,607
Institutional Investors:
Equity and fixed-income programs		$91,719		$87,358		$75,506		$69,621		$73,178
Collective trust fund programs		5		6		5		6		5
Liquidity funds		2,118		2,150		1,654		1,640		1,557
Total assets under management		$93,842		$89,514		$77,165		$71,267		$74,740
Client assets under advisement		4,857		4,778		4,218		4,204		4,314
Total assets		$98,699		$94,292		$81,383		$75,471		$79,054
Investment Managers:
Collective trust fund programs (A)		$92,549		$85,411		$142,035		$137,538		$141,285
Liquidity funds		423		284		271		248		199
Total assets under management		$92,972		$85,695		$142,306		$137,786		$141,484
Client assets under administration		907,377		895,181		885,096		781,246		810,491
Total assets		$1,000,349		$980,876		$1,027,402		$919,032		$951,975
Investments in New Businesses:
Equity and fixed-income programs		$2,096		$2,057		$1,903		$1,813		$1,912
Liquidity funds		240		305		242		221		215
Total assets under management		$2,336		$2,362		$2,145		$2,034		$2,127
Client assets under administration		1,410		1,401		1,076		1,026		1,077
Total assets		$3,746		$3,763		$3,221		$3,060		$3,204
LSV Asset Management:
Equity and fixed-income programs (B)		$98,984		$95,962		$81,940		$75,380		$83,753
Total:
Equity and fixed-income programs (C)		$300,766		$288,326		$247,409		$229,524		$247,460
Collective trust fund programs		92,560		85,424		142,047		137,551		141,297
Liquidity funds		11,822		11,574		14,125		11,087		10,608
Total assets under management		$405,148		$385,324		$403,581		$378,162		$399,365
Client assets under advisement		6,267		6,179		5,294		5,230		5,391
Client assets under administration (D)		911,858		899,630		889,019		785,407		814,642
Platform-only assets		14,564		14,151		12,642		12,609		13,931
Total assets		$1,337,837		$1,305,284		$1,310,536		$1,181,408		$1,233,329

(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 $2.1 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 December 31, 2022).
(C)	Equity and fixed-income programs include $6.4 billion of assets invested in various asset allocation funds (as of December 31, 2022).
(D)	In addition to the assets presented, SEI also administers an additional $12.5 billion in Funds of Funds assets on which SEI does not earn an administration fee (as of December 31, 2022).

 

AVERAGE ASSET BALANCES
(In millions) (Unaudited)
		4th Qtr.		1st Qtr.		2nd Qtr.		3rd Qtr.		4th Qtr.
		2021		2022		2022		2022		2022
Private Banks:
Equity and fixed-income programs		$25,999		$25,637		$23,713		$22,115		$21,839
Collective trust fund programs		6		6		7		7		7
Liquidity funds		4,452		4,403		3,795		3,742		3,395
Total assets under management		$30,457		$30,046		$27,515		$25,864		$25,241
Client assets under administration		4,607		4,500		4,163		4,026		4,126
Total assets		$35,064		$34,546		$31,678		$29,890		$29,367
Investment Advisors:
Equity and fixed-income programs		$80,703		$77,576		$70,436		$67,464		$66,100
Liquidity funds		3,644		5,151		7,070		5,380		5,127
Total Platform assets under management		$84,347		$82,727		$77,506		$72,844		$71,227
Platform-only assets		14,341		13,978		13,142		13,271		13,905
Total Platform assets		$98,688		$96,705		$90,648		$86,115		$85,132
Institutional Investors:
Equity and fixed-income programs		$90,557		$89,250		$80,971		$74,859		$72,581
Collective trust fund programs		5		5		5		6		5
Liquidity funds		2,391		2,223		2,097		1,717		1,719
Total assets under management		$92,953		$91,478		$83,073		$76,582		$74,305
Client assets under advisement		4,812		4,889		3,987		4,194		4,251
Total assets		$97,765		$96,367		$87,060		$80,776		$78,556
Investment Managers:
Collective trust fund programs (A)		$90,457		$86,633		$131,435		$143,817		$140,494
Liquidity funds		491		432		285		250		275
Total assets under management		$90,948		$87,065		$131,720		$144,067		$140,769
Client assets under administration		879,718		888,854		893,361		782,559		785,813
Total assets		$970,666		$975,919		$1,025,081		$926,626		$926,582
Investments in New Businesses:
Equity and fixed-income programs		$2,053		$2,025		$2,016		$1,939		$1,890
Liquidity funds		197		286		262		231		208
Total assets under management		$2,250		$2,311		$2,278		$2,170		$2,098
Client assets under advisement		1,423		1,397		1,165		1,126		1,075
Total assets		$3,673		$3,708		$3,443		$3,296		$3,173
LSV Asset Management:
Equity and fixed-income programs (B)		$97,381		$96,449		$87,818		$81,241		$83,370
Total:
Equity and fixed-income programs (C)		$296,693		$290,937		$264,954		$247,618		$245,780
Collective trust fund programs		90,468		86,644		131,447		143,830		140,506
Liquidity funds		11,175		12,495		13,509		11,320		10,724
Total assets under management		$398,336		$390,076		$409,910		$402,768		$397,010
Client assets under advisement		6,235		6,286		5,152		5,320		5,326
Client assets under administration (D)		884,325		893,354		897,524		786,585		789,939
Platform-only assets		14,341		13,978		13,142		13,271		13,905
Total assets		$1,303,237		$1,303,694		$1,325,728		$1,207,944		$1,206,180

(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 fourth-quarter 2022 include $1.9 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 $6.3 billion of average assets invested in various asset allocation funds during fourth-quarter 2022.
(D)	In addition to the assets presented, SEI also administers an additional $12.5 billion of average assets in Funds of Funds assets during fourth-quarter 2022 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

View original content:https://www.prnewswire.com/news-releases/sei-reports-fourth-quarter-2022-financial-results-301730704.html

SOURCE SEI Investments Company

FAQ

What were the Q4 2022 earnings results for SEIC?

SEI reported Q4 2022 diluted earnings per share of $0.83, down 19% from $1.03 in Q4 2021.

How did SEI's revenues perform in 2022?

In 2022, SEI's total revenues were $1.99 billion, an increase of 4% compared to $1.92 billion in 2021.

What challenges did SEI face in Q4 2022?

SEI faced challenges including a 9% revenue decline in Q4 2022 due to lower asset management fees stemming from market depreciation.

What is the outlook for SEI moving forward?

SEI aims to improve operational efficiency and grow revenues through new client signings and recontracts in 2023.