SEI Reports Second-Quarter 2022 Financial Results

Rhea-AI Summary

SEI Investments Company (NASDAQ:SEIC) reported Q2 2022 earnings with diluted EPS at $0.81, down 13% from $0.93 in Q2 2021. Revenues rose 1% to $481.67 million, while net income decreased 17% to $111.28 million. Despite facing market challenges and increased operational expenses, revenue grew by 14% to $1.06 billion for the first half of 2022, driven by strong performance in the Private Banks segment.

Investments in new businesses showed positive growth, but overall, the company expects pressures due to capital market conditions and inflation.

Positive

• Revenue growth of 14% to $1.06 billion for H1 2022.
• Private Banks segment experienced a 40% revenue increase for H1 2022.
• Cash flow from operations was $70.2 million.

Negative

• Diluted EPS fell 13% year-over-year.
• Net income decreased 17% compared to Q2 2021.
• Significant decline in average assets under management by 11% year-over-year.

OAKS, Pa., July 20, 2022 /PRNewswire/ -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the second-quarter 2022. Diluted earnings per share were $0.81 in second-quarter 2022 compared to $0.93 in second-quarter 2021.

Consolidated Overview
(In thousands, except earnings per share)		For the Three Months Ended June 30,						For the Six Months Ended June 30,
		2022		2021		%		2022		2021		%
Revenues		$481,670		$475,651		1 %		$1,063,113		$931,337		14 %
Net income		111,276		133,778		(17) %		301,584		263,248		15 %
Diluted earnings per share		$0.81		$0.93		(13) %		$2.17		$1.82		19 %

 

"Our second-quarter financial results reflect our business' resilience as we navigate the state of the capital markets, inflation's continued impact, and change. While we expect these challenges to continue, we remain steadfast in our conviction that our company is moving in the right direction," said CEO Ryan Hicke.

"We've made progress as a business in three strategic areas of focus: growth, talent, and culture. Our expertise in asset management, technology, and operations is the foundation for driving short- and long-term revenue growth. We are seizing opportunities globally to provide existing and new solutions to our markets, enhance our talent, and reignite our culture. We will continue to diligently assess and allocate our investments in order to push our company forward in these areas, further position us for growth, and deliver value to our employees, clients, and 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,
		2022		2021		%		2022		2021		%
Private Banks:
Revenues		$124,184		$123,676		— %		$337,732		$241,284		40 %
Expenses		121,060		117,654		3 %		243,015		228,378		6 %
Operating Profit		3,124		6,022		(48) %		94,717		12,906		NM
Operating Margin		3 %		5 %				28 %		5 %
Investment Advisors:
Revenues		113,194		119,396		(5) %		232,424		232,690		— %
Expenses		63,375		59,133		7 %		127,895		114,160		12 %
Operating Profit		49,819		60,263		(17) %		104,529		118,530		(12) %
Operating Margin		44 %		50 %				45 %		51 %
Institutional Investors:
Revenues		83,483		85,699		(3) %		170,322		170,198		— %
Expenses		43,925		41,895		5 %		89,283		81,053		10 %
Operating Profit		39,558		43,804		(10) %		81,039		89,145		(9) %
Operating Margin		47 %		51 %				48 %		52 %
Investment Managers:
Revenues		155,926		142,808		9 %		312,827		279,227		12 %
Expenses		100,807		84,995		19 %		199,644		168,015		19 %
Operating Profit		55,119		57,813		(5) %		113,183		111,212		2 %
Operating Margin		35 %		40 %				36 %		40 %
Investments in New Businesses:
Revenues		4,883		4,072		20 %		9,808		7,938		24 %
Expenses		12,844		13,631		(6) %		24,794		27,035		(8) %
Operating Loss		(7,961)		(9,559)		NM		(14,986)		(19,097)		NM
Totals:
Revenues		$481,670		$475,651		1 %		$1,063,113		$931,337		14 %
Expenses		342,011		317,308		8 %		684,631		618,641		11 %
Corporate Overhead Expenses		23,799		22,322		7 %		47,823		43,838		9 %
Income from Operations		$115,860		$136,021		(15) %		$330,659		$268,858		23 %

 

Second-Quarter Business Highlights:

• Revenues from Information processing and software servicing fees increased from new client conversions and growth from existing SEI Wealth Platform^SM (SWP) clients. Additional revenues from our acquisition of SEI Novus during the fourth-quarter 2021 also contributed to the increase.
• Revenues from Assets under management, administration, and distribution fees were flat. Revenues from Assets under management decreased due to the significant decline in market conditions during the second quarter and client shifts into lower fee investment products. This decline was offset by increased revenues from assets under administration.
• Our average assets under management in equity and fixed income programs, excluding LSV, decreased $21.1 billion, or 11%, to $177.1 billion in the second-quarter 2022, as compared to $198.2 billion during the second-quarter 2021 (see attached Average Asset Balances schedules for further details).
• Our average assets under administration increased $39.3 billion, or 5%, to $897.5 billion in the second-quarter 2022, as compared to $858.2 billion during the second-quarter 2021 (see attached Average Asset Balances schedules for further details).
• Net sales events in the Private Banks and Investment Managers segments during second-quarter 2022 were $7.9 million and are expected to generate net annualized recurring revenues of approximately $5.6 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 second-quarter 2022 were $934.0 thousand.
• The increase in operational expenses was primarily due to increased personnel costs due to business growth, competitive labor markets, and the impact of inflation on wages and services. The increase was partially offset by lower direct costs related to asset management revenues.
• In June, we initiated an enhanced voluntary separation program to long-tenured employees as part of our commitment to professional development and expanded responsibilities for current and new talent by increasing advancement opportunities. We expect this program to be finalized in July 2022. The program's total cost is currently estimated to be between $54.0 million and $58.0 million, which will be recorded as part of third-quarter 2022 results.
• Earnings from LSV decreased to $29.8 million in the second-quarter 2022 as compared to $35.1 million in the second-quarter 2021 due to negative cash flows from existing clients, market depreciation and client losses.
• We capitalized $6.1 million of software development costs in second-quarter 2022 for continued enhancements to SWP. Amortization expense related to SWP was $11.8 million in second-quarter 2022.
• Our effective tax rates were 23.1% in second-quarter 2022 and 22.3% in second-quarter 2021. The increase in the effective tax rate was primarily due to decreased tax benefits associated with a lower volume of stock option exercises.
• We repurchased 2.0 million shares of our common stock for $109.3 million during the second-quarter 2022 at an average price of $55.48 per share.
• Cash flow from operations was $70.2 million, or $0.51 per share, and free cash flow was $52.4 million during the second-quarter 2022.

Earnings Conference Call
A conference call to review earnings is scheduled for 4:30 p.m. Eastern time on July 20, 2022. 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: 4384485.

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 June 30, 2022, 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:

• the extent to which current market conditions will persist,
• revenue that we believe will be generated by sales events that occurred during the quarter and the timing of the realization of such revenue, if any,
• whether we will diligently assess and allocate our investments,
• whether we positioned for growth, and to deliver value to our employees, clients, and shareholders, and
• when our enhanced voluntary separation program will close and the amount of the cost of such program.

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:

• the timing and success of client migrations, implementations and conversions,
• our ability to expand our relationships and revenue opportunities with new and existing clients,
• whether our investments will create growth opportunities,
• whether we are positioned for sustainable growth and to take advantage of opportunities,
• the margins that out businesses may generate,
• the degree to which one-time and transaction-based revenues during the quarter will be repeated,
• the competition for and cost of talent and the effect of these factors on our business,
• the headwinds we will face and our strategies for how we may respond to these headwinds,
• how we will manage our expenses,
• the degree to which our reported margins will decline, increase or normalize,
• the strategic initiatives and business segments that we will pursue and those in which we will invest,
• whether we have laid the groundwork for our future growth plans,
• the degree to which we will align our talent and spending to capitalize on market opportunities for both the short and medium term,
• whether our voluntary separation program will create space for internal mobility, fresh perspectives, diversity and external experience, and the degree to which this will position us for or accelerate our growth,
• the degree to which we will reset our capital investments to sustain the growth we create,
• the success, if any, of the sales and strategic initiatives we pursue,
• whether our culture will enable us to be more nimble, while maintaining focus and attention on our clients and opportunities,
• 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,
• the value of our backlog and the strength of our pipelines,
• 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,
• our growth prospects,
• the timing of and our ability to integrate any acquisition targets that we may pursue, if any,
• the potential benefits we may derive from any of our acquisitions,
• the organic and inorganic opportunities that will drive our growth,
• the investments we may make in our technologies and personnel, 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 June 30,				For the Six Months Ended June 30,
		2022		2021		2022		2021
Asset management, admin. and distribution fees		$382,594		$382,509		$776,691		$750,155
Information processing and software servicing fees		99,076		93,142		286,422		181,182
Total revenues		481,670		475,651		1,063,113		931,337
Subadvisory, distribution and other asset mgmt. costs		50,023		55,827		103,151		105,991
Software royalties and other information processing costs		7,407		7,471		14,954		13,213
Compensation, benefits and other personnel		157,921		141,779		318,405		279,000
Stock-based compensation		10,007		10,103		20,573		19,855
Consulting, outsourcing and professional fees		63,271		55,449		125,762		109,789
Data processing and computer related		32,254		27,375		62,070		53,096
Facilities, supplies and other costs		20,133		18,479		37,760		35,727
Amortization		16,508		14,723		33,395		29,075
Depreciation		8,286		8,424		16,384		16,733
Total expenses		365,810		339,630		732,454		662,479
Income from operations		115,860		136,021		330,659		268,858
Net (loss) gain on investments		(2,620)		377		(3,109)		709
Interest and dividend income		1,853		878		2,701		1,823
Interest expense		(211)		(130)		(461)		(253)
Equity in earnings of unconsolidated affiliate		29,813		35,065		62,272		68,415
Income before income taxes		144,695		172,211		392,062		339,552
Income taxes		33,419		38,433		90,478		76,304
Net income		$111,276		$133,778		$301,584		$263,248
Basic earnings per common share		$0.82		$0.94		$2.20		$1.85
Shares used to calculate basic earnings per share		136,435		142,074		137,185		142,638
Diluted earnings per common share		$0.81		$0.93		$2.17		$1.82
Shares used to calculate diluted earnings per share		137,817		144,212		138,764		144,759
Dividends declared per common share		$0.40		$0.37		$0.40		$0.37

 

 

SEI INVESTMENTS COMPANY CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
		June 30,		December 31,
		2022		2021
Assets
Current Assets:
Cash and cash equivalents		$771,673		$831,407
Restricted cash		351		351
Receivables from investment products		54,911		59,036
Receivables, net of allowance for doubtful accounts of $1,952 and $1,602		466,902		441,609
Securities owned		31,171		28,267
Other current assets		50,523		43,559
Total Current Assets		1,375,531		1,404,229
Property and Equipment, net of accumulated depreciation of $424,048 and $409,248		178,946		178,869
Operating Lease Right-of-Use Assets		27,629		33,614
Capitalized Software, net of accumulated amortization of $572,065 and $545,307		230,497		243,446
Available for Sale and Equity Securities		121,682		129,541
Investments in Affiliated Funds, at fair value		6,000		6,916
Investment in Unconsolidated Affiliate		46,865		107,918
Goodwill		117,405		117,232
Intangible Assets, net of accumulated amortization of $24,163 and $17,716		61,669		68,782
Deferred Contract Costs		35,353		36,236
Deferred Income Taxes		2,459		2,983
Other Assets, net		30,893		24,936
Total Assets		$2,234,929		$2,354,702
Liabilities and Equity
Current Liabilities:
Accounts payable		$10,305		$10,312
Accrued liabilities		218,752		324,382
Current portion of long-term operating lease liabilities		10,993		11,328
Deferred revenue		13,510		9,721
Total Current Liabilities		253,560		355,743
Borrowings Under Revolving Credit Facility		—		40,000
Long-term Income Taxes Payable		803		803
Deferred Income Taxes		22,833		48,876
Long-term Operating Lease Liabilities		21,675		27,639
Other Long-term Liabilities		13,970		20,878
Total Liabilities		312,841		493,939
Shareholders' Equity:
Common stock, $0.01 par value, 750,000 shares authorized; 135,480 and 138,449 shares issued and outstanding		1,355		1,384
Capital in excess of par value		1,272,971		1,246,608
Retained earnings		693,525		632,614
Accumulated other comprehensive loss, net		(45,763)		(19,843)
Total Shareholders' Equity		1,922,088		1,860,763
Total Liabilities and Shareholders' Equity		$2,234,929		$2,354,702

 

 

ENDING ASSET BALANCES (In millions)  (Unaudited)
		Jun. 30,		Sept. 30,		Dec. 31,		Mar. 31,		Jun. 30,
		2021		2021		2021		2022		2022
Private Banks:
Equity and fixed-income programs		$26,264		$25,618		$26,281		$25,335		$22,277
Collective trust fund programs		7		6		6		7		7
Liquidity funds		3,654		3,988		4,724		4,225		3,666
Total assets under management		$29,925		$29,612		$31,011		$29,567		$25,950
Client assets under administration		4,412		4,675		4,481		4,449		3,923
Total assets		$34,337		$34,287		$35,492		$34,016		$29,873
Investment Advisors:
Equity and fixed-income programs		$78,053		$78,560		$81,686		$77,614		$65,783
Liquidity funds		3,550		3,477		4,317		4,610		8,292
Total Platform assets under management		$81,603		$82,037		$86,003		$82,224		$74,075
Platform-only assets (E)		13,566		13,728		14,564		14,151		12,642
Total Platform assets (E)		$95,169		$95,765		$100,567		$96,375		$86,717
Institutional Investors:
Equity and fixed-income programs		$93,010		$89,441		$91,719		$87,358		$75,506
Collective trust fund programs		5		5		5		6		5
Liquidity funds		2,516		2,599		2,118		2,150		1,654
Total assets under management		$95,531		$92,045		$93,842		$89,514		$77,165
Client assets under advisement		4,566		4,698		4,857		4,778		4,218
Total assets		$100,097		$96,743		$98,699		$94,292		$81,383
Investment Managers:
Collective trust fund programs		$87,012		$87,488		$92,549		$85,411		$142,035
Liquidity funds		473		568		423		284		271
Total assets under management		$87,485		$88,056		$92,972		$85,695		$142,306
Client assets under administration (A)		875,942		861,605		907,377		895,181		885,096
Total assets		$963,427		$949,661		$1,000,349		$980,876		$1,027,402
Investments in New Businesses:
Equity and fixed-income programs		$1,924		$1,964		$2,096		$2,057		$1,903
Liquidity funds		191		202		240		305		242
Total assets under management		$2,115		$2,166		$2,336		$2,362		$2,145
Client assets under administration		1,422		1,378		1,410		1,401		1,076
Total assets		$3,537		$3,544		$3,746		$3,763		$3,221
LSV Asset Management:
Equity and fixed-income programs (B)		$102,404		$97,604		$98,984		$95,962		$81,940
Total:
Equity and fixed-income programs (C)		$301,655		$293,187		$300,766		$288,326		$247,409
Collective trust fund programs		87,024		87,499		92,560		85,424		142,047
Liquidity funds		10,384		10,834		11,822		11,574		14,125
Total assets under management		$399,063		$391,520		$405,148		$385,324		$403,581
Client assets under advisement		5,988		6,076		6,267		6,179		5,294
Client assets under administration (D)		880,354		866,280		911,858		899,630		889,019
Platform-only assets		13,566		13,728		14,564		14,151		12,642
Total assets		$1,298,971		$1,277,604		$1,337,837		$1,305,284		$1,310,536

(A)	Client assets under administration in the Investment Managers segment include $80.7 billion of assets that are at fee levels below our normal full-service assets (as of June 30, 2022).
(B)	Equity and fixed-income programs include $1.9 billion of assets managed by LSV in which fees are based on performance only (as of June 30, 2022).
(C)	Equity and fixed-income programs include $6.4 billion of assets invested in various asset allocation funds at June 30, 2022.
(D)	In addition to the numbers presented, SEI also administers an additional $12.9 billion in Funds of Funds assets (as of June 30, 2022) on which SEI does not earn an administration fee.
(E)	Platform assets under management and Platform-only assets combined are total Platform assets in the Investment Advisors segment.

 

 

AVERAGE ASSET BALANCES (In millions) (Unaudited)
		2nd Qtr.		3rd Qtr.		4th Qtr.		1st Qtr.		2nd Qtr.
		2021		2021		2021		2022		2022
Private Banks:
Equity and fixed-income programs		$26,056		$26,232		$25,999		$25,637		$23,713
Collective trust fund programs		7		6		6		6		7
Liquidity funds		3,833		3,916		4,452		4,403		3,795
Total assets under management		$29,896		$30,154		$30,457		$30,046		$27,515
Client assets under administration		4,405		4,476		4,607		4,500		4,163
Total assets		$34,301		$34,630		$35,064		$34,546		$31,678
Investment Advisors:
Equity and fixed-income programs		$76,840		$79,602		$80,703		$77,576		$70,436
Liquidity funds		3,370		3,403		3,644		5,151		7,070
Total Platform assets under management		$80,210		$83,005		$84,347		$82,727		$77,506
Platform-only assets (E)		13,292		13,863		14,341		13,978		13,142
Total Platform assets (E)		$93,502		$96,868		$98,688		$96,705		$90,648
Institutional Investors:
Equity and fixed-income programs		$93,458		$91,965		$90,557		$89,250		$80,971
Collective trust fund programs		68		5		5		5		5
Liquidity funds		2,681		2,742		2,391		2,223		2,097
Total assets under management		$96,207		$94,712		$92,953		$91,478		$83,073
Client assets under advisement		4,516		4,658		4,812		4,889		3,987
Total assets		$100,723		$99,370		$97,765		$96,367		$87,060
Investment Managers:
Collective trust fund programs		$84,553		$89,441		$90,457		$86,633		$131,435
Liquidity funds		469		532		491		432		285
Total assets under management		$85,022		$89,973		$90,948		$87,065		$131,720
Client assets under administration (A)		853,810		851,183		879,718		888,854		893,361
Total assets		$938,832		$941,156		$970,666		$975,919		$1,025,081
Investments in New Businesses:
Equity and fixed-income programs		$1,870		$1,958		$2,053		$2,025		$2,016
Liquidity funds		236		205		197		286		262
Total assets under management		$2,106		$2,163		$2,250		$2,311		$2,278
Client assets under advisement		1,406		1,423		1,423		1,397		1,165
Total assets		$3,512		$3,586		$3,673		$3,708		$3,443
LSV Asset Management:
Equity and fixed-income programs (B)		$103,583		$99,924		$97,381		$96,449		$87,818
Total:
Equity and fixed-income programs (C)		$301,807		$299,681		$296,693		$290,937		$264,954
Collective trust fund programs		84,628		89,452		90,468		86,644		131,447
Liquidity funds		10,589		10,798		11,175		12,495		13,509
Total assets under management		$397,024		$399,931		$398,336		$390,076		$409,910
Client assets under advisement		5,922		6,081		6,235		6,286		5,152
Client assets under administration (D)		858,215		855,659		884,325		893,354		897,524
Platform-only assets		13,292		13,863		14,341		13,978		13,142
Total assets		$1,274,453		$1,275,534		$1,303,237		$1,303,694		$1,325,728

(A)	Average client assets under administration in the Investment Managers segment during second-quarter 2022 include $80.7 billion that are at fee levels below our normal full-service assets.
(B)	Equity and fixed-income programs include $2.1 billion of average assets managed by LSV in which fees are based on performance only during second-quarter 2022.
(C)	Equity and fixed-income programs include $6.9 billion of average assets invested in various asset allocation funds during second-quarter 2022.
(D)	In addition to the numbers presented, SEI also administers an additional $13.1 billion of average assets in Funds of Funds assets during second-quarter 2022 on which SEI does not earn an administration fee.
(E)	Platform assets under management and Platform-only assets combined are total Platform assets in the Investment Advisors segment.

 

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-second-quarter-2022-financial-results-301590407.html

SOURCE SEI Investments Company

FAQ

What were SEIC's earnings results for Q2 2022?

SEI Investments reported diluted EPS of $0.81, down 13% from $0.93 in Q2 2021.

How did SEIC perform in terms of revenue growth in Q2 2022?

The company achieved revenue growth of 1% to $481.67 million in Q2 2022.

What challenges did SEIC face in Q2 2022?

SEIC faced challenges from capital market conditions, inflation impacts, and increased operational expenses.

What changes occurred in SEIC's average assets under management?

Average assets under management decreased by 11% to $177.1 billion compared to Q2 2021.

What is SEIC's outlook after the Q2 2022 financial results?

The company expects ongoing challenges but believes it is moving in the right direction strategically.