SEI Reports Second-Quarter 2020 Financial Results

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SEI Investments Company (NASDAQ:SEIC) reported its second-quarter 2020 results with diluted earnings per share of $0.68, down 17% from $0.82 in Q2 2019. Total revenues decreased by 2% to $400.6 million, while net income fell 20% to $101.1 million. The firm noted notable declines in revenues from Private Banks and Investment Advisors by 7% and 6%, respectively. However, the Investment Managers segment experienced a 9% revenue increase, helping offset some losses. The company repurchased 1.6 million shares for $89.5 million during the quarter.

Positive

• Investment Managers segment revenue increased by 9%, totaling $119.3 million.
• Average assets under administration increased by $49.2 billion, or 8%, to $672.8 billion.
• Sales events during Q2 totaled approximately $22.1 million, expecting net annualized recurring revenues of about $16.6 million.

Negative

• Diluted EPS decreased by 17% to $0.68 from $0.82 in Q2 2019.
• Total revenues fell by 2% compared to the same quarter last year.
• Net income decreased by 20% year-over-year, from $126.5 million to $101.1 million.
• Operating profit from Private Banks dropped to $3, down from $8.3 million, a 100% decline.

OAKS, Pa., July 22, 2020 /PRNewswire/ -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the second-quarter 2020. Diluted earnings per share were $0.68 in second-quarter 2020 compared to $0.82 in second-quarter 2019.

Consolidated Overview
(In thousands, except earnings per share)		For the Three Months Ended June 30,				For the Six Months   Ended June 30,
		2020		2019		%		2020		2019		%
Revenues		$400,646			$409,586			(2)%		$815,408			$810,406			1%
Net income		101,066			126,540			(20)%		210,308			240,521			(13)%
Diluted earnings per share		$0.68			$0.82			(17)%		$1.39			$1.54			(10)%

"While we and the rest of the world continue to cope with the pandemic, our employees' health and safety remain our top priority as we move through our return-to-office plans. We are proud of our global workforce's resilience as they manage the extended period of a remote workplace—all the while remaining totally committed to supporting and servicing our clients. We greatly appreciate the healthcare workers and others who help us deal with COVID-19's impact on our lives," said Alfred P. West, Jr., SEI Chairman and CEO.

"While financial markets somewhat rebounded during the quarter, we experienced headwinds that impacted our results. Our client engagement was high last quarter, resulting in positive sales activity. We continue to invest in our One SEI strategy, using this period to accelerate the necessary development work that will bring this initiative to its full potential.

"Our view of the future is not dampened by the challenges we all face in society today. Our diverse global workforce is the foundation of what will enable us to fulfill our promise of serving our clients and communities in which we work and live. Capitalizing on the opportunities in the markets we serve and the solutions we offer will lead to increased shareholder value."

Summary of Second-Quarter Results by Business Segment

(In thousands)		For the Three Months Ended June 30,				For the Six Months Ended June 30,
		2020		2019		%		2020		2019		%
Private Banks:
Revenues		$107,726			$116,092			(7)%		$220,947			$234,351			(6)%
Expenses		107,723			107,790			—%		218,376			218,752			—%
Operating Profit		3			8,302			(100)%		2,571			15,599			(84)%
Operating Margin		—%			7%					1%			7%
Investment Advisors:
Revenues		93,708			100,122			(6)%		196,029			194,883			1%
Expenses		50,149			50,558			(1)%		102,581			103,060			—%
Operating Profit		43,559			49,564			(12)%		93,448			91,823			2%
Operating Margin		46%			50%					48%			47%
Institutional Investors:
Revenues		76,523			81,109			(6)%		155,726			161,222			(3)%
Expenses		36,937			39,361			(6)%		75,204			78,115			(4)%
Operating Profit		39,586			41,748			(5)%		80,522			83,107			(3)%
Operating Margin		52			51%					52%			52%
Investment Managers:
Revenues		119,340			109,202			9%		235,969			213,851			10%
Expenses		74,668			68,371			9%		148,957			137,437			8%
Operating Profit		44,672			40,831			9%		87,012			76,414			14%
Operating Margin		37%			37%					37%			36%
Investments in New Businesses:
Revenues		3,349			3,061			9%		6,737			6,099			10%
Expenses		13,466			6,797			98%		24,376			12,737			91%
Operating Loss		(10,117)			(3,736)			NM		(17,639)			(6,638)			NM
Totals:
Revenues		$400,646			$409,586			(2)%		$815,408			$810,406			1%
Expenses		282,943			272,877			4%		569,494			550,101			4%
Corporate Overhead Expenses		17,391			16,573			5%		35,374			36,608			(3)%
Income from Operations		$100,312			$120,136			(17)%		$210,540			$223,697			(6)%

Second-Quarter Business Highlights:

• Revenues from Asset management, administration, and distribution fees decreased primarily from lower assets under management from the carryover effect of the sharp market depreciation during March 2020, which negatively impacted our asset-based fee revenues. This decline was partially offset by increased fees from higher assets under administration from positive cash flows and sales of new business in our Investment Managers segment.
• Our average assets under administration increased $49.2 billion, or 8%, to $672.8 billion in the second-quarter 2020, as compared to $623.6 billion during the second-quarter 2019 (see attached Average Asset Balances schedules for further details).
• Our average assets under management, excluding LSV, declined $1.8 billion, or 1%, to $226.8 billion in the second-quarter 2020, as compared to $228.6 billion during the second-quarter 2019 (see attached Average Asset Balances schedules for further details).
• Information processing and software servicing fees in our Private Banks segment decreased by $5.4 million during the second-quarter 2020 due primarily to previously announced client losses.
• Sales events, net of client losses, during second-quarter 2020 totaled approximately $22.1 million and are expected to generate net annualized recurring revenues of approximately $16.6 million when contract values are fully realized.
• The increase in our operational expenses was primarily due to increased consulting costs related to our continued investments in new business opportunities, such as our One SEI strategy and IT Services offering. This increase was partially offset by a decline in travel and promotional-related expenses, as our sales and client relationship personnel adapted to COVID-19 restrictions.
• Our earnings from LSV decreased by $9.5 million, or 25%, to $28.3 million in second-quarter 2020 as compared to $37.8 million in second-quarter 2019. The decrease in earnings was due to lower assets under management from negative cash flows from existing clients, the carryover effect of negative markets in March 2020, and client losses.
• We capitalized $5.6 million of software development costs in second-quarter 2020 for continued enhancements to the SEI Wealth Platform^SM (SWP). Amortization expense related to SWP was $10.9 million in second-quarter 2020.
• Our effective tax rates were 23.3% in second-quarter 2020 and 22.1% in second-quarter 2019. The increase in our effective tax rate was due to decreased tax benefits associated with a lower volume of stock option exercises and a higher effective state tax rate.
• We repurchased 1.6 million shares of our common stock for $89.5 million during the second-quarter 2020.

Earnings Conference Call
A conference call to review earnings is scheduled for 4:30 p.m. Eastern time on July 22, 2020. Investors may listen to the call at 25202020%2520Earnings%2520Release&a=seic.com%2Fir-events" rel="nofollow">seic.com/ir-events. Investors may also listen to a replay by telephone at (USA) 866-207-1041; (International) 402-970-0847; Access Code: 8812985.

About SEI
After 50 years in business, SEI (NASDAQ:SEIC) remains 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, 2020, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages, advises or administers $1 trillion in hedge, private equity, mutual fund and pooled or separately managed assets, including $318 billion in assets under management and $693 billion in client assets under administration. For more information, visit 25202020%2520Earnings%2520Release&a=seic.com" rel="nofollow">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:

• revenue that we believe will be generated by sales events that occurred during the quarter,
• whether our development initiatives will enable the full potential of our One SEI initiative,
• whether we will fulfill our promise of serving our clients and communities, and
• whether capitalizing on the opportunities in the markets in which we serve and the solutions we offer will lead to shareholder value.

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, 2019, 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 June 30,		For the Six Months     Ended June 30,
		2020		2019		2020		2019
Asset management, admin. and distribution fees		$320,577			$324,925			$652,430			$638,869
Information processing and software servicing fees		80,069			84,661			162,978			171,537
Total revenues		400,646			409,586			815,408			810,406
Subadvisory, distribution and other asset mgmt. costs		44,182			46,177			89,519			89,982
Software royalties and other information processing costs		7,389			7,393			14,836			15,521
Compensation, benefits and other personnel		125,331			125,999			256,812			256,334
Stock-based compensation		7,062			5,064			13,991			10,102
Consulting, outsourcing and professional fees		57,111			45,330			110,401			95,536
Data processing and computer related		24,506			22,184			47,210