SEI Reports Third-Quarter 2023 Financial Results

Rhea-AI Summary

SEI Investments Company (NASDAQ:SEIC) announced financial results for Q3 2023. Diluted earnings per share were $0.87, a 93% increase from Q3 2022. Net income increased by 88%. Revenues for the quarter were $476.8 million, a 1% increase from the previous year.

Positive

• Diluted earnings per share increased by 93% from Q3 2022 to Q3 2023.
• Net income increased by 88% from Q3 2022 to Q3 2023.
• Revenues for the quarter increased by 1% from the previous year.

Negative

• None.

OAKS, Pa., Oct. 25, 2023 /PRNewswire/ -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the third-quarter 2023. Diluted earnings per share were $0.87 in third-quarter 2023 compared to $0.45 in third-quarter 2022. Third-quarter 2022 results included one-time costs of the voluntary separation program of $57.0 million resulting in $0.32 diluted earnings per share.

Consolidated Overview
(In thousands, except earnings per share)		For the Three Months Ended September 30,						For the Nine Months   Ended September 30,
		2023		2022		%		2023		2022		%
Revenues		$476,759		$471,334		1 %		$1,434,935		$1,534,447		(6) %
Net income		115,661		61,659		88 %		341,527		363,243		(6) %
Diluted earnings per share		$0.87		$0.45		93 %		$2.54		$2.63		(3) %

 

"Our third-quarter financial results reflect continued positive sales activity in our operational and processing businesses and strong profitability due to solid revenue and sound expense management, particularly in our technology and investment processing businesses. We remain focused on executing our strategic growth initiatives and diligently managing expenses across the organization," said CEO Ryan Hicke.

"Despite persisting challenges in the broader market environment, we continue to prudently invest in our talent and solutions to provide our clients an unmatched set of capabilities. Our market activity remains strong, and we are well-positioned to capitalize on the opportunities ahead. We will continue to deliver operational excellence, expand our reach across markets globally, and maintain our strong financial position to deliver long-term growth for our stakeholders."

Summary of Third-Quarter Results by Business Segment

(In thousands)		For the Three Months Ended September 30,						For the Nine Months  Ended September 30,
		2023		2022		%		2023		2022		%
Private Banks:
Revenues		$121,469		$122,660		(1) %		$378,171		$460,392		(18) %
Expenses		113,105		116,661		(3) %		343,442		359,676		(5) %
Operating Profit		8,364		5,999		39 %		34,729		100,716		(66) %
Operating Margin		7 %		5 %				9 %		22 %
Investment Advisors:
Revenues		110,461		109,565		1 %		326,579		341,989		(5) %
Expenses		64,280		61,150		5 %		192,004		189,045		2 %
Operating Profit		46,181		48,415		(5) %		134,575		152,944		(12) %
Operating Margin		42 %		44 %				41 %		45 %
Institutional Investors:
Revenues		70,479		78,260		(10) %		219,914		248,582		(12) %
Expenses		39,953		42,149		(5) %		126,337		131,432		(4) %
Operating Profit		30,526		36,111		(15) %		93,577		117,150		(20) %
Operating Margin		43 %		46 %				43 %		47 %
Investment Managers:
Revenues		169,293		156,015		9 %		495,318		468,842		6 %
Expenses		108,078		100,876		7 %		321,705		300,520		7 %
Operating Profit		61,215		55,139		11 %		173,613		168,322		3 %
Operating Margin		36 %		35 %				35 %		36 %
Investments in New Businesses:
Revenues		5,057		4,834		5 %		14,953		14,642		2 %
Expenses		11,874		9,915		20 %		34,089		34,709		(2) %
Operating Loss		(6,817)		(5,081)		NM		(19,136)		(20,067)		NM
Totals:
Revenues		$476,759		$471,334		1 %		$1,434,935		$1,534,447		(6) %
Expenses		337,290		330,751		2 %		1,017,577		1,015,382		— %
Corporate Overhead Expenses		30,997		89,537		(65) %		94,518		137,360		(31) %
Income from Operations		$108,472		$51,046		112 %		$322,840		$381,705		(15) %

 

Third-Quarter Business Highlights:

• Revenues from Assets under management, administration, and distribution fees increased primarily from higher assets under management and administration due to increases from existing alternative investment clients of the Investment Managers segment due to new products and additional services. Market appreciation and positive cash flows into separately managed account programs and Strategist programs during 2023 also contributed to the increase in revenues.
• The increase in revenues from Assets under management, administration, and distribution fees was partially offset by negative cash flows from SEI fund programs due to client losses in the Investment Advisors and Institutional Investors segments.
• Average assets under management in equity and fixed income programs, excluding LSV, increased $3.9 billion, or 2%, to $170.3 billion during the third-quarter 2023, as compared to $166.4 billion during the third-quarter 2022 (see attached Average Asset Balances schedule for further details).
• Average assets under administration increased $107.1 billion, or 14%, to $893.7 billion during the third-quarter 2023, as compared to $786.6 billion during the third-quarter 2022 (see attached Average Asset Balances schedules for further details).
• Net sales events in the Private Banks and Investment Managers segments during third-quarter 2023 were $22.3 million and are expected to generate net annualized recurring revenues of approximately $19.0 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 third-quarter 2023 were negative $7.6 million.
• Operational expenses declined primarily from the total cost of the voluntary separation program of $57.0 million recognized during third-quarter 2022. This one-time cost is included in corporate overhead expenses and reflects a diluted earnings per share impact of $0.32 to third-quarter 2022 results.
• The decline in operational expenses was also due to decreased non-capitalized consulting costs. This decline was partially offset by higher personnel costs from business growth, competitive labor markets, and the impact of inflation on wages and services. Increased personnel costs and investments in compliance infrastructure to meet new regulatory requirements also partially offset the decline in operational expenses.
• Earnings from LSV increased to $29.9 million in the third-quarter 2023 as compared to $26.7 million in the third-quarter 2022 due to increased performance fees and market appreciation. Net negative cash flows from existing clients and client losses partially offset the increase in earnings from LSV.
• Capitalized software development costs were $8.5 million in third-quarter 2023, of which $4.3 million was for continued enhancements to the SEI Wealth Platform^SM. Amortization expense related to SWP was $6.5 million in third-quarter 2023. Capitalized software development costs also include $4.2 million in third-quarter 2023 for a new platform for the Investment Managers segment.
• Effective tax rates were 22.5% in third-quarter 2023 and 23.0% in third-quarter 2022.
• Repurchased shares of SEI common stock were 1.4 million for $86.0 million during the third-quarter 2023 at an average price of $61.43 per share.
• Cash flow from operations was $163.5 million and free cash flow was $148.3 million during the third-quarter 2023.

Earnings Conference Call
A conference call to review earnings is scheduled for 4:30 p.m. Eastern time on Oct. 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: 9991019.

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 help drive growth, make confident decisions, and protect futures. As of Sept. 30, 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:

• the nature of our sales activity and profitability in our technology, operational and processing businesses;
• the initiatives on which we will focus;
• our ability to manage our expenses;
• where we will invest;
• our ability to capitalize on opportunities;
• when and if we will generate net annualized recurring revenues from sales events that occurred during the quarter, as well as the amount of such revenue;
• the duration of our customer relationships; and
• the degree to which we will deliver long-term growth for our stakeholders.

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 elements of our strategic focus, including, without limitation, our focus on:
  • strategic clients;
  • managing expenses;
  • enhancing our development pipeline;
  • proactively engaging with current clients;
  • expanding our sales pipeline;
  • connecting resources across the enterprise to identify and execute against cross-selling opportunities;
  • growing our profits;
  • prudently deploying capital;
  • investing in talent and market experience;
  • alternative investments;
  • inorganic growth; and
  • delivering at a high level for clients;
• advancing our efforts to build out custody capabilities for alternatives;
• the trends in our clients' businesses;
• our ability to sell our newly-launched US Fund Complex on a standalone basis and the timing for including it in our models offered to advisors;
• offering models which include alternative asset classes;
• whether our enhanced asset management solutions will attract more advisors;
• the headwinds our businesses face and our ability to respond to these headwinds;
• the success of our efforts to assess the market offerings and the best path forward to enhance our growth;
• our sales momentum;
• our ability to capitalize on our pipeline, prudently manage expenses, and drive profit to the bottom line;
• the degree to which our market units are positioned to accelerate growth;
• the value of our technology, investment processing and asset management capabilities to our clients;
• the timing of the closing, if any, of our acquisitions;
• the amount, if any, of our current backlog of sold but expected to be installed revenue in the next 18 months that will actually be installed during such period, if ever;
• the amount, if any, of our current backlog that will convert by the end of the year, if ever;
• the degree to which our newer investment offerings will benefit our business;
• the market dynamics affecting our market units;
• the degree to which our tax rate may vary;
• 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 organic and inorganic opportunities that will drive our growth; and
• the expected 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 September 30,				For the Nine Months Ended September 30,
		2023		2022		2023		2022
Asset management, admin. and distribution fees		$380,594		$372,133		$1,131,244		$1,148,824
Information processing and software servicing fees		96,165		99,201		303,691		385,623
Total revenues		476,759		471,334		1,434,935		1,534,447
Subadvisory, distribution and other asset mgmt. costs		47,531		47,334		142,157		150,485
Software royalties and other information processing costs		8,095		6,909		23,784		21,863
Compensation, benefits and other personnel		180,470		227,127		529,591		545,532
Stock-based compensation		7,979		10,766		23,458		31,339
Consulting, outsourcing and professional fees		54,203		58,558		176,619		184,320
Data processing and computer related		34,016		30,950		102,301		93,020
Facilities, supplies and other costs		16,999		19,704		58,825		57,464
Amortization		9,797		10,382		28,851		43,777
Depreciation		9,197		8,558		26,509		24,942
Total expenses		368,287		420,288		1,112,095		1,152,742
Income from operations		108,472		51,046		322,840		381,705
Net (loss) gain from investments		(206)		(1,406)		1,053		(4,515)
Interest and dividend income		11,125		3,962		29,453		6,663
Interest expense		(116)		(143)		(396)		(604)
Equity in earnings of unconsolidated affiliate		29,927		26,654		91,517		88,926
Income before income taxes		149,202		80,113		444,467		472,175
Income taxes		33,541		18,454		102,940		108,932
Net income		$115,661		$61,659		$341,527		$363,243
Basic earnings per common share		$0.87		$0.46		$2.57		$2.66
Shares used to calculate basic earnings per share		132,231		135,203		133,035		136,524
Diluted earnings per common share		$0.87		$0.45		$2.54		$2.63
Shares used to calculate diluted earnings per share		133,504		136,345		134,250		137,958
Dividends declared per common share		$—		$—		$0.43		$0.40

 

SEI INVESTMENTS COMPANY CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
		September 30,		December 31,
		2023		2022
Assets
Current Assets:
Cash and cash equivalents		$854,443		$853,008
Restricted cash		301		351
Receivables from investment products		55,687		62,014
Receivables, net of allowance for doubtful accounts of $1,184 and $901		518,854		457,084
Securities owned		32,748		32,148
Other current assets		57,357		48,703
Total Current Assets		1,519,390		1,453,308
Property and Equipment, net of accumulated depreciation of $465,297 and $440,861		177,521		181,029
Operating Lease Right-of-Use Assets		20,686		24,992
Capitalized Software, net of accumulated amortization of $606,214 and $586,744		244,416		237,302
Available for Sale and Equity Securities		119,562		128,201
Investments in Affiliated Funds, at fair value		6,838		6,366
Investment in Unconsolidated Affiliate		44,645		104,673
Goodwill		115,597		115,599
Intangible Assets, net of accumulated amortization of $39,432 and $30,261		46,413		55,532
Deferred Contract Costs		38,518		37,928
Deferred Income Taxes		26,449		4,936
Other Assets, net		37,201		33,687
Total Assets		$2,397,236		$2,383,553
Liabilities and Equity
Current Liabilities:
Accounts payable		$10,198		$13,283
Accrued liabilities		249,872		359,363
Current portion of long-term operating lease liabilities		9,882		10,344
Deferred revenue		12,100		14,893
Total Current Liabilities		282,052		397,883
Long-term Income Taxes Payable		803		803
Long-term Operating Lease Liabilities		15,138		18,786
Other Long-term Liabilities		15,362		12,257
Total Liabilities		313,355		429,729
Shareholders' Equity:
Common stock, $0.01 par value, 750,000 shares authorized; 131,571 and 134,162 shares issued and outstanding		1,316		1,342
Capital in excess of par value		1,369,465		1,307,162
Retained earnings		763,635		694,287
Accumulated other comprehensive loss, net		(50,535)		(48,967)
Total Shareholders' Equity		2,083,881		1,953,824
Total Liabilities and Shareholders' Equity		$2,397,236		$2,383,553

 

ENDING ASSET BALANCES (In millions)  (Unaudited)
		Sept. 30,		Dec. 31,		Mar. 31,		Jun. 30,		Sept. 30,
		2022		2022		2023		2023		2023
Private Banks:
Equity and fixed-income programs		$20,131		$22,377		$23,653		$24,091		$23,039
Collective trust fund programs		7		7		6		7		6
Liquidity funds		3,778		3,201		3,427		3,433		3,636
Total assets under management		$23,916		$25,585		$27,086		$27,531		$26,681
Client assets under administration		4,161		4,151		4,299		4,154		4,399
Total assets		$28,077		$29,736		$31,385		$31,685		$31,080
Investment Advisors:
Equity and fixed-income programs		$62,579		$66,240		$68,065		$69,439		$66,911
Liquidity funds		5,200		5,436		4,965		4,968		5,175
Total Platform assets under management		$67,779		$71,676		$73,030		$74,407		$72,086
Platform-only assets		12,609		13,931		14,980		16,103		16,232
Total Platform assets		$80,388		$85,607		$88,010		$90,510		$88,318
Institutional Investors:
Equity and fixed-income programs		$69,621		$73,178		$74,939		$75,854		$72,387
Collective trust fund programs		6		5		4		4		4
Liquidity funds		1,640		1,557		1,576		1,353		2,119
Total assets under management		$71,267		$74,740		$76,519		$77,211		$74,510
Client assets under advisement		4,204		4,314		4,559		4,368		4,085
Total assets		$75,471		$79,054		$81,078		$81,579		$78,595
Investment Managers:
Collective trust fund programs (A)		$137,538		$141,285		$146,176		$149,779		$146,991
Liquidity funds		248		199		203		249		180
Total assets under management		$137,786		$141,484		$146,379		$150,028		$147,171
Client assets under administration		781,246		810,491		845,828		873,570		886,382
Total assets		$919,032		$951,975		$992,207		$1,023,598		$1,033,553
Investments in New Businesses:
Equity and fixed-income programs		$1,813		$1,912		$2,031		$2,104		$2,017
Liquidity funds		221		215		217		217		202
Total assets under management		$2,034		$2,127		$2,248		$2,321		$2,219
Client assets under administration		1,026		1,077		1,081		1,098		1,070
Total assets		$3,060		$3,204		$3,329		$3,419		$3,289
LSV Asset Management:
Equity and fixed-income programs (B)		$75,380		$83,753		$84,964		$86,469		$83,684
Total:
Equity and fixed-income programs (C)		$229,524		$247,460		$253,652		$257,957		$248,038
Collective trust fund programs		137,551		141,297		146,186		149,790		147,001
Liquidity funds		11,087		10,608		10,388		10,220		11,312
Total assets under management		$378,162		$399,365		$410,226		$417,967		$406,351
Client assets under advisement		5,230		5,391		5,640		5,466		5,155
Client assets under administration (D)		785,407		814,642		850,127		877,724		890,781
Platform-only assets		12,609		13,931		14,980		16,103		16,232
Total assets		$1,181,408		$1,233,329		$1,280,973		$1,317,260		$1,318,519

(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 $1.8 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 September 30, 2023).
(C)	Equity and fixed-income programs include $5.9 billion of assets invested in various asset allocation funds (as of September 30, 2023).
(D)	In addition to the assets presented, SEI also administers an additional $11.4 billion in Funds of Funds assets on which SEI does not earn an administration fee (as of September 30, 2023).

 

AVERAGE ASSET BALANCES (In millions) (Unaudited)
		3rd Qtr.		4th Qtr.		1st Qtr.		2nd Qtr.		3rd Qtr.
		2022		2022		2023		2023		2023
Private Banks:
Equity and fixed-income programs		$22,115		$21,839		$23,576		$23,748		$23,920
Collective trust fund programs		7		7		7		7		6
Liquidity funds		3,742		3,395		3,253		3,500		3,585
Total assets under management		$25,864		$25,241		$26,836		$27,255		$27,511
Client assets under administration		4,026		4,126		4,316		4,282		4,221
Total assets		$29,890		$29,367		$31,152		$31,537		$31,732
Investment Advisors:
Equity and fixed-income programs		$67,464		$66,100		$67,578		$68,371		$69,309
Liquidity funds		5,380		5,127		4,995		4,808		4,990
Total Platform assets under management		$72,844		$71,227		$72,573		$73,179		$74,299
Platform-only assets		13,271		13,905		14,812		15,548		16,544
Total Platform assets		$86,115		$85,132		$87,385		$88,727		$90,843
Institutional Investors:
Equity and fixed-income programs		$74,859		$72,581		$74,653		$74,865		$75,023
Collective trust fund programs		6		5		5		4		4
Liquidity funds		1,717		1,719		1,715		1,537		1,611
Total assets under management		$76,582		$74,305		$76,373		$76,406		$76,638
Client assets under advisement		4,194		4,251		4,431		4,583		4,294
Total assets		$80,776		$78,556		$80,804		$80,989		$80,932
Investment Managers:
Collective trust fund programs (A)		$143,817		$140,494		$144,914		$147,543		$150,379
Liquidity funds		250		275		317		286		237
Total assets under management		$144,067		$140,769		$145,231		$147,829		$150,616
Client assets under administration		782,559		785,813		836,410		859,296		889,503
Total assets		$926,626		$926,582		$981,641		$1,007,125		$1,040,119
Investments in New Businesses:
Equity and fixed-income programs		$1,939		$1,890		$1,991		$2,057		$2,096
Liquidity funds		231		208		212		199		211
Total assets under management		$2,170		$2,098		$2,203		$2,256		$2,307
Client assets under advisement		1,126		1,075		1,098		1,075		1,101
Total assets		$3,296		$3,173		$3,301		$3,331		$3,408
LSV Asset Management:
Equity and fixed-income programs (B)		$81,241		$83,370		$86,987		$84,492		$86,671
Total:
Equity and fixed-income programs (C)		$247,618		$245,780		$254,785		$253,533		$257,019
Collective trust fund programs		143,830		140,506		144,926		147,554		150,389
Liquidity funds		11,320		10,724		10,492		10,330		10,634
Total assets under management		$402,768		$397,010		$410,203		$411,417		$418,042
Client assets under advisement		5,320		5,326		5,529		5,658		5,395
Client assets under administration (D)		786,585		789,939		840,726		863,578		893,724
Platform-only assets		13,271		13,905		14,812		15,548		16,544
Total assets		$1,207,944		$1,206,180		$1,271,270		$1,296,201		$1,333,705

(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 third-quarter 2023 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 $6.1 billion of average assets invested in various asset allocation funds during third-quarter 2023.
(D)	In addition to the assets presented, SEI also administers an additional $11.6 billion of average assets in Funds of Funds assets during third-quarter 2023 on which SEI does not earn an administration fee.

 

Investor Contact:	Media Contact:
Alex Whitelam	Leslie Wojcik
SEI	SEI
+1 610-676-4924	+1 610-676-4191
awhitelam@seic.com	lwojcik@seic.com

View original content:https://www.prnewswire.com/news-releases/sei-reports-third-quarter-2023-financial-results-301967819.html

SOURCE SEI Investments Company

FAQ

What were the diluted earnings per share for Q3 2022 and Q3 2023?

Diluted earnings per share were $0.45 for Q3 2022 and $0.87 for Q3 2023.

How much did net income increase from Q3 2022 to Q3 2023?

Net income increased by 88% from Q3 2022 to Q3 2023.

What was the percentage increase in revenues for the quarter?

Revenues for the quarter increased by 1% from the previous year.