SEI Reports Third-Quarter 2020 Financial Results

Rhea-AI Summary

SEI Investments Company (NASDAQ: SEIC) reported third-quarter 2020 financial results, with diluted earnings per share at $0.75, down from $0.86 a year prior, reflecting a 13% decrease. Revenues increased by 2% to $424.9 million, while net income fell 16% to $111.1 million. The Board approved a $250 million stock repurchase program, raising total authorization to approximately $292 million. Selling events in Q3 were approximately $27.9 million, expected to yield annualized recurring revenues of around $14.6 million. Average assets under administration rose 13% to $738.8 billion.

Positive

• Increase in revenues by 2% to $424.9 million.
• Stock repurchase program increased by $250 million.
• Average assets under administration rose 13% to $738.8 billion.

Negative

• Diluted earnings per share decreased by 13% to $0.75.
• Net income fell 16% to $111.1 million.
• Operational income decreased by 8% compared to Q3 2019.

OAKS, Pa., Oct. 21, 2020 /PRNewswire/ -- SEI Investments Company (NASDAQ: SEIC) today announced financial results for the third-quarter 2020. Diluted earnings per share were $0.75 in third-quarter 2020 compared to $0.86 in third-quarter 2019. On Tuesday, Oct. 20, 2020 the Board of Directors of SEI Investments Company approved an increase in its stock repurchase program by an additional $250 million, increasing the available authorization under the program to approximately $292 million.

Consolidated Overview
(In thousands, except earnings per share)		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2020			2019			%		2020			2019			%
Revenues		$424,927			$416,254			2%		$1,240,335			$1,226,660			1%
Net income		111,096			132,168			(16)%		321,404			372,689			(14)%
Diluted earnings per share		$0.75			$0.86			(13)%		$2.14			$2.40			(11)%

"The pandemic continues, as does our focus on clients and our employees' health and safety. We are fortunate to have a strong global workforce that is resilient, engaged and dedicated to providing our clients best-in-class service, and committed to our company's growth. Words can't express our appreciation for their efforts, along with all of the healthcare and service providers who look after our health and well-being," said Alfred P. West, Jr., SEI Chairman and CEO.

"Our business continued to rebound during the quarter, as our markets adjusted to the current environment. Our financial results reflect our strong sales activity, while we invest in our strategic priorities. Our diverse and talented global workforce drives our ability to serve our clients and make an impact on our communities. Looking to the future, we will capitalize on the opportunities in our markets to deliver long-term value to our shareholders, employees and clients."

Summary of Third-Quarter Results by Business Segment

		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
(In thousands)
		2020			2019			%		2020			2019			%
Private Banks:
Revenues		$114,792			$117,250			(2)%		$335,739			$351,601			(5)%
Expenses		113,066			110,788			2%		331,442			329,540			1%
Operating Profit		1,726			6,462			(73)%		4,297			22,061			(81)%
Operating Margin		2	%		6	%				1	%		6	%
Investment Advisors:
Revenues		103,189			103,033			—%		299,218			297,916			—%
Expenses		51,519			51,509			—%		154,100			154,569			—%
Operating Profit		51,670			51,524			—%		145,118			143,347			1%
Operating Margin		50	%		50	%				48	%		48	%
Institutional Investors:
Revenues		79,583			80,337			(1)%		235,309			241,559			(3)%
Expenses		37,812			37,268			1%		113,016			115,383			(2)%
Operating Profit		41,771			43,069			(3)%		122,293			126,176			(3)%
Operating Margin		52	%		54	%				52	%		52	%
Investment Managers:
Revenues		123,846			112,186			10%		359,815			326,037			10%
Expenses		79,838			71,889			11%		228,795			209,326			9%
Operating Profit		44,008			40,297			9%		131,020			116,711			12%
Operating Margin		36	%		36	%				36	%		36	%
Investments in New Businesses:
Revenues		3,517			3,448			2%		10,254			9,547			7%
Expenses		13,315			7,926			68%		37,691			20,663			82%
Operating Loss		(9,798)			(4,478)			NM		(27,437)			(11,116)			NM
Totals:
Revenues		$424,927			$416,254			2%		$1,240,335			$1,226,660			1%
Expenses		295,550			279,380			6%		865,044			829,481			4%
Corporate Overhead Expenses		18,040			16,237			11%		53,414			52,845			1%
Income from Operations		$111,337			$120,637			(8)%		$321,877			$344,334			(7)%

Third-Quarter Business Highlights:

• Revenues from Asset management, administration, and distribution fees increased primarily from higher assets under administration due to positive cash flows from new and existing clients in our Investment Managers segment.
• Our average assets under administration increased $84.8 billion, or 13%, to $738.8 billion in the third-quarter 2020, as compared to $654.0 billion during the third-quarter 2019 (see attached Average Asset Balances schedules for further details).
• Our average assets under management, excluding LSV, increased $13.1 billion, or 6%, to $246.1 billion in the third-quarter 2020, as compared to $233.0 billion during the third-quarter 2019 (see attached Average Asset Balances schedules for further details).
• Sales events, net of client losses, during third-quarter 2020 totaled approximately $27.9 million and are expected to generate net annualized recurring revenues of approximately $14.6 million when contract values are fully realized. For the nine months ended Sept. 30, 2020, sales events, net of client losses, totaled approximately $84.8 million and are expected to generate net annualized recurring revenues of approximately $63.5 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, as well as increased personnel costs to service new clients in our Investment Managers segment. 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 $9.3 million, or 25%, to $28.3 million in third-quarter 2020, as compared to $37.6 million in third-quarter 2019. The decrease in earnings was due to lower assets under management from negative cash flows from existing clients, market depreciation and client losses.
• We capitalized $5.4 million of software development costs in third-quarter 2020 for continued enhancements to the SEI Wealth Platform^SM (SWP). Amortization expense related to SWP was $10.9 million in third-quarter 2020.
• Our effective tax rates were 21.4% in third-quarter 2020 and 18.9% in third-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 2.1 million shares of our common stock for $108.7 million during the third-quarter 2020.

Earnings Conference Call
A conference call to review earnings is scheduled for 4:30 p.m. Eastern time on Oct. 21, 2020. 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: 4259639.

About SEI
After 50 years in business, SEI (NASDAQ:SEIC) remains a leading global provider of investment processing, investment management, and investment operations solutions designed to help corporations, financial institutions, financial advisors, and ultra-high-net-worth families create and manage wealth. As of Sept. 30, 2020, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages, advises or administers approximately $1 trillion in hedge, private equity, mutual fund and pooled or separately managed assets, including approximately $330 billion in assets under management and $755 billion in client assets under administration. 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:

• revenue that we believe will be generated by sales events that occurred during the quarter,
• the rebound of our business,
• whether and the degree to which we will invest in our strategic priorities, and
• whether capitalizing on the opportunities in our markets will deliver long-term value for any of our shareholders, employees or clients.

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.

Investor Contact:	Media Contact:
Lindsey Opsahl	Leslie Wojcik
SEI	SEI
+1 610-676-4052	+1 610-676-4191
lopsahl@seic.com	lwojcik@seic.com

 

SEI INVESTMENTS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
		For the Three Months Ended September 30,						For the Nine Months Ended September 30,
		2020			2019			2020			2019
Asset management, admin. and distribution fees		$339,609			$330,943			$992,039			$969,812
Information processing and software servicing fees		85,318			85,311			248,296			256,848
Total revenues		424,927			416,254			1,240,335			1,226,660
Subadvisory, distribution and other asset mgmt. costs		45,126			44,978			134,645			134,960
Software royalties and other information processing costs		6,992			7,198			21,828			22,719
Compensation, benefits and other personnel		134,795			130,579			391,607			386,913
Stock-based compensation		6,467			5,453			20,458			15,555
Consulting, outsourcing and professional fees		57,949			48,789			168,350			144,325
Data processing and computer related		24,437			22,338			71,647			65,514
Facilities, supplies and other costs		16,679			15,926			47,448			51,771
Amortization		13,200			12,947			39,417			38,407
Depreciation		7,945			7,409			23,058			22,162
Total expenses		313,590			295,617			918,458			882,326
Income from operations		111,337			120,637			321,877			344,334
Net gain (loss) on investments		776			611			(1,310)			2,121
Interest and dividend income		1,009			4,167			5,582			12,737
Interest expense		(153)			(154)			(456)			(477)
Equity in earnings of unconsolidated affiliate		28,305			37,609			86,488			112,758
Income before income taxes		141,274			162,870			412,181			471,473
Income taxes		30,178			30,702			90,777			98,784
Net income		$111,096			$132,168			$321,404			$372,689
Basic earnings per common share		$0.76			$0.88			$2.18			$2.45
Shares used to calculate basic earnings per share		145,812			150,855			147,586			152,009
Diluted earnings per common share		$0.75			$0.86			$2.14			$2.40
Shares used to calculate diluted earnings per share		147,907			154,227			149,958			155,311
Dividends declared per common share		$—			$—			$0.35			$0.33

 

SEI INVESTMENTS COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
		September 30,			December 31,
		2020			2019
Assets
Current Assets:
Cash and cash equivalents		$767,698			$841,446
Restricted cash		3,101			3,101
Receivables from investment products		51,644			54,165
Receivables, net of allowance for doubtful accounts of $1,310 and $1,201		378,170			340,358
Securities owned		35,820			33,486
Other current assets		38,475			32,289
Total Current Assets		1,274,908			1,304,845
Property and Equipment, net of accumulated depreciation of $370,072 and $353,453		180,531			160,859
Operating Lease Right-of-Use Assets		38,945			42,789
Capitalized Software, net of accumulated amortization of $479,159 and $442,677		278,226			296,068
Available for Sale and Equity Securities		116,564			116,917
Investments in Affiliated Funds, at fair value		5,207			5,988
Investment in Unconsolidated Affiliate		33,117			67,413
Goodwill		64,489			64,489
Intangible Assets, net of accumulated amortization of $11,536 and $8,773		25,225			27,987
Deferred Contract Costs		33,833			30,991
Deferred Income Taxes		2,065			2,822
Other Assets, net		32,507			30,202
Total Assets		$2,085,617			$2,151,370
Liabilities and Equity
Current Liabilities:
Accounts payable		$13,038			$4,423
Accrued liabilities		223,217			272,801
Current portion of long-term operating lease liabilities		8,445			9,156
Deferred revenue		5,815			7,185
Total Current Liabilities		250,515			293,565
Long-term Income Taxes Payable		803			803
Deferred Income Taxes		47,578			55,722
Long-term Operating Lease Liabilities		34,768			38,450
Other Long-term Liabilities		22,520			24,052
Total Liabilities		356,184			412,592
Shareholders' Equity:
Common stock, $0.01 par value, 750,000 shares authorized; 144,491 and 149,745 shares issued and outstanding		1,445			1,497
Capital in excess of par value		1,174,142			1,158,900
Retained earnings		581,244			601,885
Accumulated other comprehensive loss, net		(27,398)			(23,504)
Total Shareholders' Equity		1,729,433			1,738,778
Total Liabilities and Shareholders' Equity		$2,085,617			$2,151,370

 

ENDING ASSET BALANCES
(In millions)  (Unaudited)
		Sept. 30,			Dec. 31,			Mar. 31,			Jun. 30,			Sept. 30,
		2019			2019			2020			2020			2020
Private Banks:
Equity and fixed-income programs		$22,580			$23,851			$21,160			$22,974			$23,499
Collective trust fund programs		4			4			5			5			6
Liquidity funds		3,695			3,405			4,143			4,291			3,718
Total assets under management		$26,279			$27,260			$25,308			$27,270			$27,223
Client assets under administration		23,985			25,801			21,497			23,903			24,174
Total assets		$50,264			$53,061			$46,805			$51,173			$51,397
Investment Advisors:
Equity and fixed-income programs		$65,059			$67,895			$54,856			$59,958			$65,581
Collective trust fund programs		4			4			2			3			3
Liquidity funds		2,673			2,887			5,969			6,648			3,866
Total assets under management		$67,736			$70,786			$60,827			$66,609			$69,450
Institutional Investors:
Equity and fixed-income programs		$82,659			$84,291			$72,399			$80,257			$83,846
Collective trust fund programs		81			83			94			103			101
Liquidity funds		2,290			1,746			3,672			1,924			2,096
Total assets under management		$85,030			$86,120			$76,165			$82,284			$86,043
Client assets under advisement		4,467			3,948			3,406			3,326			3,618
Total assets		$89,497			$90,068			$79,571			$85,610			$89,661
Investment Managers:
Collective trust fund programs		53,169			58,070			48,226			58,178			63,277
Liquidity funds		477			479			392			664			389
Total assets under management		$53,646			$58,549			$48,618			$58,842			$63,666
Client assets under administration (A)		637,986			657,541			610,794			668,611			730,369
Total assets		$691,632			$716,090			$659,412			$727,453			$794,035
Investments in New Businesses:
Equity and fixed-income programs		$1,621			$1,688			$1,484			$1,498			$1,572
Liquidity funds		132			158			152			194			169
Total assets under management		$1,753			$1,846			$1,636			$1,692			$1,741
Client assets under advisement		825			1,343			1,056			1,193			1,179
Total assets		$2,578			$3,189			$2,692			$2,885			$2,920
LSV Asset Management:
Equity and fixed-income programs (B)		$100,295			$107,476			$70,851			$81,134			$82,051
Total:
Equity and fixed-income programs (C)		$272,214			$285,201			$220,750			$245,821			$256,549
Collective trust fund programs		53,258			58,161			48,327			58,289			63,387
Liquidity funds		9,267			8,675			14,328			13,721			10,238
Total assets under management		$334,739			$352,037			$283,405			$317,831			$330,174
Client assets under advisement		5,292			5,291			4,462			4,519			4,797
Client assets under administration (D)		661,971			683,342			632,291			692,514			754,543
Total assets		$1,002,002			$1,040,670			$920,158			$1,014,864			$1,089,514

(A)	Client assets under administration in the Investment Managers segment include $51.1 billion of assets that are at fee levels below our normal full-service assets (as of September 30, 2020).
(B)	Equity and fixed-income programs include $1.6 billion of assets managed by LSV in which fees are based on performance only (as of September 30, 2020).
(C)	Equity and fixed-income programs include $7.5 billion of assets invested in various asset allocation funds at September 30, 2020.
(D)	In addition to the numbers presented, SEI also administers an additional $11.5 billion in Funds of Funds assets (as of September 30, 2020) on which SEI does not earn an administration fee.

 

AVERAGE ASSET BALANCES
(In millions) (Unaudited)
		3rd Qtr.			4th Qtr.			1st Qtr.			2nd Qtr.			3rd Qtr.
		2019			2019			2020			2020			2020
Private Banks:
Equity and fixed-income programs		$22,432			$23,106			$24,657			$22,229			$23,740
Collective trust fund programs		4			4			4			5			7
Liquidity funds		3,625			3,581			3,581			4,366			3,948
Total assets under management		$26,061			$26,691			$28,242			$26,600			$27,695
Client assets under administration		23,717			24,930			24,840			23,819			25,295
Total assets		$49,778			$51,621			$53,082			$50,419			$52,990
Investment Advisors:
Equity and fixed-income programs		$64,761			$66,371			$64,933			$57,429			$64,479
Collective trust fund programs		5			4			3			3			3
Liquidity funds		2,580			2,673			3,284			6,923			4,569
Total assets under management		$67,346			$69,048			$68,220			$64,355			$69,051
Institutional Investors:
Equity and fixed-income programs		$82,398			$83,304			$79,926			$77,037			$82,830
Collective trust fund programs		80			82			86			100			102
Liquidity funds		2,287			2,106			2,342			2,476			2,120
Total assets under management		$84,765			$85,492			$82,354			$79,613			$85,052
Client assets under advisement		3,797			4,106			3,760			3,362			3,565
Total assets		$88,562			$89,598			$86,114			$82,975			$88,617
Investment Managers:
Collective trust fund programs		52,587			55,499			55,952			54,061			62,028
Liquidity funds		460			642			617			482			565
Total assets under management		$53,047			$56,141			$56,569			$54,543			$62,593
Client assets under administration (A)		630,328			646,592			654,386			649,012			713,528
Total assets		$683,375			$702,733			$710,955			$703,555			$776,121
Investments in New Businesses:
Equity and fixed-income programs		$1,609			$1,649			$1,663			$1,468			$1,560
Liquidity funds		142			145			168			182			180
Total assets under management		$1,751			$1,794			$1,831			$1,650			$1,740
Client assets under advisement		842			1,044			1,222			1,148			1,206
Total assets		$2,593			$2,838			$3,053			$2,798			$2,946
LSV Asset Management:
Equity and fixed-income programs (B)		$100,094			$104,814			$88,059			$80,395			$83,536
Total:
Equity and fixed-income programs (C)		$271,294			$279,244			$259,238			$238,558			$256,145
Collective trust fund programs		52,676			55,589			56,045			54,169			62,140
Liquidity funds		9,094			9,147			9,992			14,429			11,382
Total assets under management		$333,064			$343,980			$325,275			$307,156			$329,667
Client assets under advisement		4,639			5,150			4,982			4,510			4,771
Client assets under administration (D)		654,045			671,522			679,226			672,831			738,823
Total assets		$991,748			$1,020,652			$1,009,483			$984,497			$1,073,261

(A)	Average client assets under administration in the Investment Managers segment during third-quarter 2020 include $50.4 billion that are at fee levels below our normal full-service assets.
(B)	Equity and fixed-income programs include $1.6 billion of average assets managed by LSV in which fees are based on performance only during third-quarter 2020.
(C)	Equity and fixed-income programs include $7.5 billion of average assets invested in various asset allocation funds during third-quarter 2020.
(D)	In addition to the numbers presented, SEI also administers an additional $11.4 billion of average assets in Funds of Funds assets during third-quarter 2020 on which SEI does not earn an administration fee.

 

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SOURCE SEI Investments Company

FAQ

What were SEIC's earnings for Q3 2020?

SEIC's diluted earnings per share for Q3 2020 were $0.75, down from $0.86 in Q3 2019.

How did SEIC's revenues perform in Q3 2020?

SEIC reported revenues of $424.9 million for Q3 2020, a 2% increase compared to $416.3 million in Q3 2019.

What changes were made to SEIC's stock repurchase program?

The Board approved an increase of $250 million to SEIC's stock repurchase program, totaling approximately $292 million.

What was the average assets under administration for SEIC in Q3 2020?

SEI's average assets under administration increased by 13% to $738.8 billion in Q3 2020.