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Nature of Operations

SEI Investments Company (the Company), a Pennsylvania corporation, provides comprehensive platforms for investment processing, investment operations and investment management to wealth managers, financial institutions, financial advisors, investment managers, institutional investors and ultra-high-net-worth families in the United States, Canada, the United Kingdom, continental Europe and various other locations throughout the world.

Investment processing platforms consist of application and business process outsourcing services, professional services and transaction-based services. Revenues from investment processing platforms are recognized in Information processing and software servicing fees on the accompanying Consolidated Statements of Operations.

Investment operations platforms consist of outsourcing services including fund and investment accounting, administration, reconciliation, investor servicing and client reporting. Revenues from investment operations platforms are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.

Investment management platforms consists of investment products including mutual funds, collective investment products, alternative investment portfolios and separately managed accounts. The Company serves as the administrator and investment advisor for many of these products. Revenues from investment management platforms are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.

Basis of Presentation

The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Certain financial information and accompanying note disclosure normally included in the Company’s Annual Report on Form 10-K have been condensed or omitted. The interim financial information is unaudited but reflects all adjustments (consisting of only normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of financial position of the Company as of March 31, 2020, the results of operations for the three months ended March 31, 2020 and 2019, and cash flows for the three-months ended March 31, 2020 and 2019. These interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The Company adopted the requirements of Accounting Standards Update (ASU) 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (Accounting Standards Codification (ASC) 326)) (ASU 2016-13) and subsequent amendments ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (ASU 2019-04) and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses (ASU 2019-11) on January 1, 2020. ASU 2016-13 and the related amendments are hereafter referred to as ASC 326. ASC 326 requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. The Company owns mortgage-backed securities issued by the Government National Mortgage Association (GNMA), a federal agency of the U.S. government classified as Available-for-sale debt securities which qualify for the zero credit risk allowance. The Company's U.S. Treasury and other U.S. government agency securities classified as Securities owned are outside the scope of ASC 326. There was no impact to the Company's disclosures related to its marketable securities from the implementation of ASC 326.

In accordance with ASC 326, the Company evaluated its receivable balances for credit risk based upon the source of revenue, its ability to collect fees directly from investment products or directly from assets in the client's account, a review of actual historical credit losses, and the potential for expected credit loss from its current client base. The Company has no meaningful historical credit loss data and a very limited amount of losses pertaining directly to a client's inability to satisfy its receivable balance even during periods of economic distress. The credit loss reserve recognized by the Company through the implementation of ASC 326 during the three months ended March 31, 2020 was immaterial.

The Company also adopted the requirements of ASU 2017-04, Simplifying the Test for Goodwill Impairment (ASU 2017-04) on January 1, 2020. The adoption of ASU 2017-04 did not have a material impact on the Company's consolidated financial statements and related disclosures.

With the exception of the adoption of ASC 326 and ASU 2017-04, there have been no other significant changes in significant accounting policies during the three months ended March 31, 2020 as compared to the significant accounting policies described in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

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Variable Interest Entities

The Company or its affiliates have created numerous investment products for its clients in various types of legal entity structures. The Company serves as the Manager, Administrator and Distributor for these investment products and may also serve as the Trustee for some of the investment products. The Company receives asset management, distribution, administration and custodial fees for these services. Clients are the equity investors and participate in proportion to their ownership percentage in the net income or loss and net capital gains or losses of the products, and, on liquidation, will participate in proportion to their ownership percentage in the remaining net assets of the products after satisfaction of outstanding liabilities.

The Company has concluded that it is not the primary beneficiary of the entities and, therefore, is not required to consolidate any of the pooled investment vehicles for which it receives asset management, distribution, administration and custodial fees under the VIE model. The entities either do not meet the definition of a VIE or the Company does not hold a variable interest in the entities. The entities either qualify for the money market scope exception, or are entities in which the Company’s asset management, distribution, administration and custodial fees are commensurate with the services provided and include fair terms and conditions, or are entities that are limited partnerships which have substantive kick-out rights. The Company acts as a fiduciary and does not hold any other interests other than insignificant seed money investments in the pooled investment vehicles. For this reason, the Company also concluded that it is not required to consolidate the pooled investment vehicles under the voting interest entity model.

The Company is a party to expense limitation agreements with certain SEI-sponsored money market funds subject to Rule 2a-7 of the Investment Company Act of 1940 which establish a maximum level of ordinary operating expenses incurred by the fund in any fiscal year including, but not limited to, fees of the administrator or its affiliates. Under the terms of these agreements, the Company waived $6,641 and $7,905 in fees during the three months ended March 31, 2020 and 2019, respectively.

Revenue Recognition

Revenue is recognized when the transfer of control of promised goods or services under the terms of a contract with customers are satisfied in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those promised goods or services. Certain portions of the Company’s revenues involve a third party in providing goods or services to its customers. In such circumstances, the Company must determine whether the nature of its promise to the customer is to provide the underlying goods or services (the Company is the principal in the transaction and reports the transaction gross) or to arrange for a third party to provide the underlying goods or services (the entity is the agent in the transaction and reports the transaction net). See Note 13 for related disclosures regarding revenue recognition.

Cash and Cash Equivalents

Cash and cash equivalents includes $278,514 and $414,581 at March 31, 2020 and December 31, 2019, respectively, primarily invested in SEI-sponsored open-ended money market mutual funds. The SEI-sponsored mutual funds are Level 1 assets.

Restricted Cash

Restricted cash includes $3,000 at March 31, 2020 and December 31, 2019 segregated for regulatory purposes related to trade-execution services conducted by SEI Investments (Europe) Limited. Restricted cash also includes $101 at March 31, 2020 and December 31, 2019 segregated in special reserve accounts for the benefit of customers of the Company’s broker-dealer subsidiary, SEI Investments Distribution Co. (SIDCO), in accordance with certain rules established by the Securities and Exchange Commission (SEC) for broker-dealers.

Capitalized Software

The Company capitalized $6,458 and $9,937 of software development costs during the three months ended March 31, 2020 and 2019, respectively. The Company's software development costs primarily relate to significant enhancements to the SEI Wealth Platform^SM (SWP). The Company capitalized $6,229 and $9,739 of software development costs for significant enhancements to SWP during the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, the net book value of SWP was $274,885. The net book value includes $58,149 of capitalized software development costs in-progress associated with future releases of SWP. Capitalized software development costs in-progress associated with future releases of SWP were $55,332 as of December 31, 2019. SWP has a weighted average remaining life of 8.4 years. Amortization expense for SWP was $10,797 and $10,399 during the three months ended March 31, 2020 and 2019, respectively.

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Earnings per Share

The calculations of basic and diluted earnings per share for the three months ended March 31, 2020 and 2019 are:

	Three Months Ended March 31,
	2020				2019
Net income	$	109,242			$	113,981
Shares used to compute basic earnings per common share	149,468,000				153,310,000
Dilutive effect of stock options	2,900,000				3,231,000
Shares used to compute diluted earnings per common share	152,368,000				156,541,000
Basic earnings per common share	$	0.73			$	0.74
Diluted earnings per common share	$	0.72			$	0.73

During the three months ended March 31, 2020 and 2019, employee stock options to purchase 7,408,000 and 6,323,000 shares of common stock with an average exercise price of $58.76 and $54.81, respectively, were outstanding but not included in the computation of diluted earnings per common share. These options for the three month periods were not included in the computation of diluted earnings per common share because either the performance conditions have not been satisfied or would not have been satisfied if the reporting date was the end of the contingency period or the options' exercise price was greater than the average market price of the Company’s common stock and the effect on diluted earnings per common share would have been anti-dilutive.

New Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12). The standard removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for the Company beginning in the first quarter of 2021. The Company is currently evaluating the impact of adopting ASU 2019-12 on its consolidated financial statements and related disclosures.

Reclassifications

Certain prior year amounts have been reclassified to conform to current year presentation.

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Statements of Cash Flows

For purposes of the Consolidated Statements of Cash Flows, the Company considers investment instruments purchased with an original maturity of three months or less to be cash equivalents.

The following table provides the details of the adjustments to reconcile net income to net cash provided by operating activities for the three months ended March 31:

	2020				2019
Net income	$	109,242			$	113,981
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	7,473				7,331
Amortization	13,077				12,679
Equity in earnings of unconsolidated affiliate	(29,907		)		(37,317		)
Distributions received from unconsolidated affiliate	52,036				33,237
Stock-based compensation	6,929				5,038
Provision for losses on receivables	80				(85		)
Deferred income tax expense	(1,879		)		(984		)
Net loss (gain) from investments	3,989				(1,279		)
Change in other long-term liabilities	360				277
Change in other assets	(4,658		)		1,334
Contract costs capitalized, net of amortization	(1,769		)		(138		)
Other	(1,612		)		(63		)
Change in current assets and liabilities
(Increase) decrease in
Receivables from investment products	2,553				(2,693		)
Receivables	(17,852		)		(18,304		)
Other current assets	(9,728		)		574
(Decrease) increase in
Accounts payable	8,663				(5,678		)
Accrued liabilities	(36,818		)		(47,836		)
Deferred revenue	(1,207		)		(175		)
Total adjustments	(10,270		)		(54,082		)
Net cash provided by operating activities	$	98,972			$	59,899

LSV Asset Management

The Company has an investment in LSV Asset Management (LSV), a registered investment advisor that provides investment advisory services primarily to institutions, including pension plans and investment companies. LSV is currently an investment sub-advisor for a limited number of SEI-sponsored investment products. The Company's partnership interest in LSV as of March 31, 2020 was 38.9%. The Company accounts for its interest in LSV using the equity method because of its less than 50% ownership. The Company’s interest in the net assets of LSV is reflected in Investment in unconsolidated affiliate on the accompanying Consolidated Balance Sheets and its interest in the earnings of LSV is reflected in Equity in earnings of unconsolidated affiliate on the accompanying Consolidated Statements of Operations.

At March 31, 2020, the Company’s total investment in LSV was $45,285. The Company receives partnership distributions from LSV on a quarterly basis. The Company received partnership distributions from LSV of $52,036 and $33,237 in the three months ended March 31, 2020 and 2019, respectively. As such, the Company considers these distribution payments as returns on investment rather than returns of the Company's original investment in LSV and has therefore classified the associated cash inflows as an operating activity on the Consolidated Statements of Cash Flows.

The Company’s proportionate share in the earnings of LSV was $29,907 and $37,317 during the three months ended March 31, 2020 and 2019, respectively.

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These tables contain condensed financial information of LSV:

Condensed Statement of Operations		Three Months Ended March 31,
		2020				2019
Revenues		$	99,996			$	120,915
Net income		76,897				95,948

Condensed Balance Sheets		March 31, 2020				December 31, 2019
Current assets		$	113,926			$	144,547
Non-current assets		4,769				5,048
Total assets		$	118,695			$	149,595
Current liabilities		$	42,631			$	46,828
Non-current liabilities		5,153				5,326
Partners’ capital		70,911				97,441
Total liabilities and partners’ capital		$	118,695			$	149,595

On April 1, 2020, LSV provided an interest in the partnership to select key employees which reduced the ownership percentage of each existing partner on a pro-rata basis. As a result, the Company's total partnership interest in LSV was reduced slightly from approximately 38.9% to approximately 38.8%.

Receivables

Receivables on the accompanying Consolidated Balance Sheets consist of: 

	March 31, 2020				December 31, 2019
Trade receivables	$	87,126			$	86,043
Fees earned, not billed	256,280				240,239
Other receivables	16,005				15,277
	359,411				341,559
Less: Allowance for doubtful accounts	(1,281		)		(1,201		)
	$	358,130			$	340,358

Fees earned, not billed represents receivables from contracts with customers earned but unbilled and results from timing differences between services provided and contractual billing schedules. These billing schedules generally provide for fees to be billed on a quarterly basis. In addition, certain fees earned from investment operations services are calculated based on assets under administration that have an extended valuation process. Billings to these clients occur once the asset valuation processes are completed.

Receivables from investment products on the accompanying Consolidated Balance Sheets primarily represent fees receivable for distribution, investment advisory, and administration services to various regulated investment companies and other investment products sponsored by SEI.

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Property and Equipment

Property and Equipment on the accompanying Consolidated Balance Sheets consists of:

	March 31, 2020				December 31, 2019
Buildings	$	162,891			$	162,882
Equipment	131,660				123,945
Land	10,830				10,830
Purchased software	144,342				143,705
Furniture and fixtures	19,902				18,835
Leasehold improvements	19,695				20,700
Construction in progress	44,083				33,415
	533,403				514,312
Less: Accumulated depreciation	(360,148		)		(353,453		)
Property and Equipment, net	$	173,255			$	160,859

The Company recognized $7,473 and $7,331 in depreciation expense related to property and equipment for the three months ended March 31, 2020 and 2019, respectively.

Deferred Contract Costs

Deferred contract costs, which primarily consist of deferred sales commissions, were $32,760 and $30,991 as of March 31, 2020 and December 31, 2019, respectively. The Company deferred expenses related to contract costs of $2,997 and $1,126 during the three months ended March 31, 2020 and 2019, respectively. Amortization expense related to deferred contract costs were $1,228 and $988 during the three months ended March 31, 2020 and 2019, respectively, and are included in Compensation, benefits and other personnel on the accompanying Consolidated Statements of Operations. There was no impairment loss in relation to deferred contract costs during the three months ended March 31, 2020.

Accrued Liabilities

Accrued liabilities on the accompanying Consolidated Balance Sheets consist of: 

	March 31, 2020				December 31, 2019
Accrued employee compensation	$	33,519			$	96,991
Accrued consulting, outsourcing and professional fees	32,444				28,610
Accrued sub-advisory, distribution and other asset management fees	48,478				46,245
Accrued dividend payable	—				52,452
Accrued income taxes	23,663				2,010
Other accrued liabilities	41,668				46,493
Total accrued liabilities	$	179,772			$	272,801

The fair value of the Company’s financial assets and liabilities, except for the Company's investment funds sponsored by LSV, is determined in accordance with the fair value hierarchy. The fair value of the Company’s Level 1 financial assets consist mainly of investments in open-ended mutual funds that are quoted daily. Level 2 financial assets consist of GNMA mortgage-backed securities held by the Company's wholly-owned limited purpose federal thrift subsidiary, SEI Private Trust Company (SPTC), Federal Home Loan Bank (FHLB) and other U.S. government agency short-term notes held by SIDCO. The financial assets held by SIDCO were purchased as part of a cash management program requiring only short term, top-tier investment grade government and corporate securities. The financial assets held by SPTC are debt securities issued by GNMA and are backed by the full faith and credit of the U.S. government. These securities were purchased for the sole purpose of satisfying applicable regulatory requirements and have maturity dates which range from 2023 to 2041.

The fair value of the Company's investment funds sponsored by LSV is measured using the net asset value per share (NAV) as a practical expedient. The NAVs of the funds are calculated by the funds' independent custodian and are derived from the fair values of the underlying investments as of the reporting date. The funds allow for investor redemptions at the

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end of each calendar month. This investment has not been classified in the fair value hierarchy but is presented in the tables below to permit reconciliation to the amounts presented on the accompanying Consolidated Balance Sheets.

The valuation of the Company's Level 2 financial assets held by SIDCO and SPTC are based upon securities pricing policies and procedures utilized by third-party pricing vendors.

The pricing policies and procedures applied for our Level 1 and Level 2 financial assets during the three months ended March 31, 2020 were consistent with those as described in our Annual Report on Form 10-K at December 31, 2019. The Company had no Level 3 financial assets at March 31, 2020 or December 31, 2019 that were required to be measured at fair value on a recurring basis. The Company's Level 3 financial liabilities at March 31, 2020 and December 31, 2019 consist entirely of the estimated contingent consideration resulting from an acquisition (See Note 12). The fair value of the contingent consideration was determined using a Monte-Carlo simulation model. Key assumptions for the Monte-Carlo simulation model include expected revenues, expected volatility, risk-free rate and other factors. There were no transfers of financial assets between levels within the fair value hierarchy during the three months ended March 31, 2020.

The fair value of certain financial assets of the Company was determined using the following inputs:

						Fair Value Measurements at the End of the Reporting Period Using
Assets		March 31, 2020				Quoted Prices in Active  Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)
Equity securities		$	10,033			$	10,033			$	—
Available-for-sale debt securities		100,525				—				100,525
Fixed-income securities owned		31,420				—				31,420
Investment funds sponsored by LSV (1)		3,753
		$	145,731			$	10,033			$	131,945

						Fair Value Measurements at the End of the Reporting Period Using
Assets		December 31, 2019				Quoted Prices in Active  Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)
Equity securities		$	12,119			$	12,119			$	—
Available-for-sale debt securities		104,798				—				104,798
Fixed-income securities owned		33,486				—				33,486
Investment funds sponsored by LSV (1)		5,988
		$	156,391			$	12,119			$	138,284

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The Company's marketable securities include investments in money market funds and commercial paper classified as cash equivalents, available-for-sale debt securities, investments in SEI-sponsored and non-SEI-sponsored mutual funds, equities, investments in funds sponsored by LSV and securities owned by SIDCO.

Cash Equivalents

The Company's investments in money market funds and commercial paper classified as cash equivalents had a fair value of $425,697 and $543,765 at March 31, 2020 and December 31, 2019, respectively. There were no material unrealized or realized gains or losses from these investments during the three months ended March 31, 2020 and 2019.

Available for Sale and Equity Securities

Available For Sale and Equity Securities on the accompanying Consolidated Balance Sheets consist of: 

	At March 31, 2020
	Cost Amount				Gross Unrealized Gains				Gross Unrealized (Losses)				Fair Value
Available-for-sale debt securities	$	98,322			$	2,203			$	—			$	100,525
SEI-sponsored mutual funds	7,508				—				(1,126		)		6,382
Equities and other mutual funds	3,595				56				—				3,651
	$	109,425			$	2,259			$	(1,126	)		$	110,558

	At December 31, 2019
	Cost Amount				Gross Unrealized Gains				Gross Unrealized (Losses)				Fair Value
Available-for-sale debt securities	$	104,193			$	605			$	—			$	104,798
SEI-sponsored mutual funds	7,564				125				(39		)		7,650
Equities and other mutual funds	3,637				832				—				4,469
	$	115,394			$	1,562			$	(39	)		$	116,917

Net unrealized gains at March 31, 2020 of the Company's available-for-sale debt securities were $1,696 (net of income tax expense of $507). Net unrealized gains at December 31, 2019 of the Company's available-for-sale debt securities were $465 (net of income tax benefit of $140). These net unrealized gains are reported as a separate component of Accumulated other comprehensive loss on the accompanying Consolidated Balance Sheets.

There were gross realized losses of $128 and $109 from available-for-sale debt securities during the three months ended March 31, 2020 and 2019, respectively. There were no gross realized gains from available-for-sale debt securities during the three months ended March 31, 2020 and 2019. Realized losses from available-for-sale debt securities, including amounts reclassified from accumulated comprehensive loss, are reflected in Net (loss) gain from investments on the accompanying Consolidated Statements of Operations.

There were gross realized gains of $189 and gross realized losses of $235 from mutual funds and equities during the three months ended March 31, 2020. During the three months ended March 31, 2019, there were gross realized gains of $43 and gross realized losses of $3 from mutual funds and equities. Gains and losses from mutual funds and equities are reflected in Net (loss) gain from investments on the accompanying Consolidated Statements of Operations.

Investments in Affiliated Funds

The Company has an investment in funds sponsored by LSV. The Company records this investment on the accompanying Consolidated Balance Sheets at fair value. Unrealized gains and losses from the change in fair value of these funds are recognized in Net gain (loss) from investments on the accompanying Consolidated Statements of Operations.

The investment primarily consists of U.S. dollar denominated funds that invest primarily in securities of Canadian, Australian and Japanese companies as well as various other global securities. The underlying securities held by the funds are translated into U.S. dollars within the funds. The funds had a fair value of $3,753 and $5,988 at March 31, 2020 and December 31, 2019, respectively. The Company recognized unrealized losses of $2,235 and $452 during the three months ended March 31, 2020 and 2019, respectively, from the change in fair value of the funds.

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Securities Owned

The Company’s broker-dealer subsidiary, SIDCO, has investments in U.S. government agency securities with maturity dates less than one year. These investments are reflected as Securities owned on the accompanying Consolidated Balance Sheets. Due to specialized accounting practices applicable to investments by broker-dealers, the securities are reported at fair value and changes in fair value are recorded in current period earnings. The securities had a fair value of $31,420 and $33,486 at March 31, 2020 and December 31, 2019, respectively. There were no material net gains or losses related to the securities during the three months ended March 31, 2020 and 2019.

The Company has a five-year $300,000 Credit Agreement (the Credit Facility) with Wells Fargo Bank, National Association, and a syndicate of other lenders. The Credit Facility is scheduled to expire in June 2021, at which time any aggregate principal amount of loans outstanding becomes payable in full. Any borrowings made under the Credit Facility will accrue interest at rates that, at the Company's option, are based on a base rate (the Base Rate) plus a premium that can range from 0.25% to 1.00% or the London InterBank Offered Rate (LIBOR) plus a premium that can range from 1.25% to 2.00% depending on the Company’s Leverage Ratio (a ratio of consolidated indebtedness to consolidated EBITDA for the four preceding fiscal quarters, all as defined in the related agreement). The Base Rate is defined as the highest of a) the Federal Funds Rate, as published by the Federal Reserve Bank of New York, plus 0.50%, b) the prime commercial lending rate of Wells Fargo, c) the applicable LIBOR plus 1.00%, or d) 0%. The Company also pays quarterly commitment fees based on the unused portion of the Credit Facility. The quarterly fees for the Credit Facility can range from 0.15% of the amount of the unused portion to 0.30%, depending on the Company’s Leverage Ratio. Certain wholly-owned subsidiaries of the Company have guaranteed the obligations of the Company under the agreement. The aggregate amount of the Credit Facility may be increased by an additional $100,000 under certain conditions set forth in the agreement. The Company may issue up to $15,000 in letters of credit under the terms of the Credit Facility. The Company pays a periodic commission fee of 1.25% plus a fronting fee of 0.175% of the aggregate face amount of the outstanding letters of credit issued under the Credit Facility.

The Credit Facility contains covenants that restrict the ability of the Company to engage in mergers, consolidations, asset sales, investments, transactions with affiliates other than wholly-owned subsidiaries, or to incur liens or other indebtedness including contingent obligations or guarantees, as defined in the agreement. In the event of a default under the Credit Facility, the Company would also be restricted from paying dividends on, or repurchasing its common stock without the approval of the lenders. Upon the occurrence of certain financial or economic events, significant corporate events, or certain other events of default constituting an event of default under the Credit Facility, all loans outstanding may be declared immediately due and payable and all commitments under the agreement may be terminated.

As of March 31, 2020, the Company had outstanding letters of credit of $11,553 under the Credit Facility. These letters of credit were issued primarily for the expansion of the Company's headquarters and are scheduled to expire during the remainder of 2020. The amount of the Credit Facility that is available for general corporate purposes as of March 31, 2020 was $288,447.

Stock-Based Compensation

The Company has only non-qualified stock options outstanding under its equity compensation plans. All outstanding stock options have performance-based vesting provisions specific to each option grant that tie the vesting of the applicable stock options to the Company’s financial performance. The Company’s stock options vest at a rate of 50% when a specified financial vesting target is achieved, and the remaining 50% when a second, higher specified financial vesting target is achieved. Options do not vest due to the passage of time but solely as a result of achievement of the financial vesting targets. Options granted in December 2017 and thereafter include a service condition which requires a minimum two or four year waiting period from the grant date along with the attainment of the applicable financial vesting target. The targets are measured annually on December 31. The amount of stock-based compensation expense recognized in the period is based upon management’s estimate of when the financial vesting targets may be achieved. Any change in management’s estimate could result in the remaining amount of stock-based compensation expense to be accelerated, spread out over a longer period, or reversed. This may cause volatility in the recognition of stock-based compensation expense in future periods and could materially affect the Company’s earnings.

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The Company recognized stock-based compensation expense in its Consolidated Financial Statements in the three months ended March 31, 2020 and 2019, respectively, as follows: 

	Three Months Ended March 31,
	2020				2019
Stock-based compensation expense	$	6,929			$	5,038
Less: Deferred tax benefit	(1,381		)		(946		)
Stock-based compensation expense, net of tax	$	5,548			$	4,092

As of March 31, 2020, there was approximately $66,934 of unrecognized compensation cost remaining related to unvested employee stock options that management expects will vest and is being amortized.

The Company issues new common shares associated with the exercise of stock options. The total intrinsic value of options exercised during the three months ended March 31, 2020 was $18,687. The total options exercisable as of March 31, 2020 had an intrinsic value of $81,585. The total intrinsic value for options exercisable is calculated as the difference between the market value of the Company’s common stock as of March 31, 2020 and the weighted average exercise price of the options. The market value of the Company’s common stock as of March 31, 2020 was $46.34 as reported by the Nasdaq Stock Market, LLC. The weighted average exercise price of the options exercisable as of March 31, 2020 was $37.85. Total options that were outstanding as of March 31, 2020 were 15,055,000. Total options that were exercisable as of March 31, 2020 were 7,647,000.

Common Stock Buyback

The Company’s Board of Directors, under multiple authorizations, has authorized the repurchase of the Company’s common stock on the open market or through private transactions. The Company purchased 2,433,000 shares at a total cost of $127,432 during the three months ended March 31, 2020, which reduced the total shares outstanding of common stock. The cost of stock purchases during the period includes the cost of certain transactions that settled in the following quarter. On March 18, 2020, the Company's Board of Directors approved an increase in the stock repurchase program by an additional $250,000. As of March 31, 2020, the Company had approximately $240,097 of authorization remaining for the purchase of common stock under the program.

The Company immediately retires its common stock when purchased. Upon retirement, the Company reduces Capital in excess of par value for the average capital per share outstanding and the remainder is charged against Retained earnings. If the Company reduces its Retained earnings to zero, any subsequent purchases of common stock will be charged entirely to Capital in excess of par value.

The components of Accumulated other comprehensive loss, net of tax, are as follows: 

	Foreign Currency Translation Adjustments				Unrealized Gains (Losses) on Investments				Accumulated Other Comprehensive Loss
Balance, January 1, 2020	$	(23,969	)		$	465			$	(23,504	)
Other comprehensive loss before reclassifications	(13,075		)		1,131				(11,944		)
Amounts reclassified from accumulated other comprehensive loss	—				100				100
Net current-period other comprehensive loss	(13,075		)		1,231				(11,844		)
Balance, March 31, 2020	$	(37,044	)		$	1,696			$	(35,348	)

The Company’s reportable business segments are:

Private Banks – provides outsourced investment processing and investment management platforms to banks and trust institutions, independent wealth advisers and financial advisors worldwide;

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Investment Advisors – provides investment management and investment processing platforms to affluent investors through a network of independent registered investment advisors, financial planners and other investment professionals in the United States;

Institutional Investors – provides investment management and administrative outsourcing platforms to retirement plan sponsors, healthcare systems, higher education and other not-for-profit organizations worldwide;

Investment Managers – provides investment operations outsourcing platforms to fund companies, banking institutions, traditional and non-traditional investment managers worldwide and family offices in the United States; and

Investments in New Businesses – focuses on providing investment management solutions to ultra-high-net-worth families residing in the United States; developing internet-based investment services; developing network and data protection services; modularizing larger technology platforms into stand-alone components; entering new markets; and conducting other research and development activities.

The information in the following tables is derived from the Company’s internal financial reporting used for corporate management purposes. There are no inter-segment revenues for the three months ended March 31, 2020 and 2019. Management evaluates Company assets on a consolidated basis during interim periods. The accounting policies of the reportable business segments are the same as those described in Note 1 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The following tables highlight certain financial information about each of the Company’s business segments for the three months ended March 31, 2020 and 2019:

	Private Banks				Investment Advisors				Institutional Investors				Investment Managers				Investments In New Businesses				Total
	For the Three Months Ended March 31, 2020
Revenues	$	113,221			$	102,321			$	79,203			$	116,629			$	3,388			$	414,762
Expenses	110,653				52,432				38,267				74,289				10,910				286,551
Operating profit (loss)	$	2,568			$	49,889			$	40,936			$	42,340			$	(7,522	)		$	128,211

	Private Banks				Investment Advisors				Institutional Investors				Investment Managers				Investments In New Businesses				Total
	For the Three Months Ended March 31, 2019
Revenues	$	118,259			$	94,761			$	80,113			$	104,649			$	3,038			$	400,820
Expenses	110,962				52,502				38,754				69,066				5,940				277,224
Operating profit (loss)	$	7,297			$	42,259			$	41,359			$	35,583			$	(2,902	)		$	123,596

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A reconciliation of the total operating profit reported for the business segments to income from operations in the Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019 is as follows:

	2020				2019
Total operating profit from segments	$	128,211			$	123,596
Corporate overhead expenses	(17,983		)		(20,035		)
Income from operations	$	110,228			$	103,561

The following tables provide additional information for the three months ended March 31, 2020 and 2019 pertaining to our business segments:

	Capital Expenditures (1)								Depreciation
	2020				2019				2020				2019
Private Banks	$	9,925			$	8,461			$	3,882			$	3,549
Investment Advisors	5,390				3,947				1,151				1,179
Institutional Investors	1,358				871				302				405
Investment Managers	9,032				3,349				1,812				1,771
Investments in New Businesses	418				241				70				91
Total from business segments	$	26,123			$	16,869			$	7,217			$	6,995
Corporate overhead	997				385				256				336
	$	27,120			$	17,254			$	7,473			$	7,331

(1) Capital expenditures include additions to property and equipment and capitalized software.

	Amortization
	2020				2019
Private Banks	$	7,421			$	7,141
Investment Advisors	2,652				2,523
Institutional Investors	427				433
Investment Managers	2,335				2,339
Investments in New Businesses	185				185
Total from business segments	$	13,020			$	12,621
Corporate overhead	57				58
	$	13,077			$	12,679

The gross liability for unrecognized tax benefits at March 31, 2020 and December 31, 2019 was $16,207 and $15,356, respectively, exclusive of interest and penalties, of which $16,133 and $15,194 would affect the effective tax rate if the Company were to recognize the tax benefit.

The Company classifies interest and penalties on unrecognized tax benefits as income tax expense. As of March 31, 2020 and December 31, 2019, the combined amount of accrued interest and penalties related to tax positions taken on tax returns was $2,200 and $1,962, respectively.

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	March 31, 2020				December 31, 2019
Gross liability for unrecognized tax benefits, exclusive of interest and penalties	$	16,207			$	15,356
Interest and penalties on unrecognized benefits	2,200				1,962
Total gross uncertain tax positions	$	18,407			$	17,318
Amount included in Current liabilities	$	4,950			$	4,896
Amount included in Other long-term liabilities	13,457				12,422
	$	18,407			$	17,318

The Company's effective income tax rate for the three months ended March 31, 2020 and 2019 differs from the federal income tax statutory rate due to the following:

		Three Months Ended March 31,
		2020			2019
Statutory rate		21.0	%		21.0	%
State taxes, net of federal tax benefit		3.1			2.6
Foreign tax expense and tax rate differential		(0.1	)		(0.1	)
Tax benefit from stock option exercises		(2.2	)		(1.1	)
Other, net		(0.3	)		(0.3	)
		21.5	%		22.1	%

The decrease in the Company's effective tax rate for the three months ended March 31, 2020 was primarily due to increased tax benefits related to the higher volume of stock option exercises as compared to the three months ended March 31, 2019.

The Company files income tax returns in the United States on a consolidated basis and in many U.S. state and foreign jurisdictions. The Company is subject to examination of income tax returns by the Internal Revenue Service (IRS) and other domestic and foreign tax authorities. The Company is no longer subject to U.S. federal income tax examination for years before 2016 and is no longer subject to state, local or foreign income tax examinations by authorities for years before 2015.

The Company estimates it will recognize $4,950 of gross unrecognized tax benefits. This amount is expected to be paid within one year or to be removed at the expiration of the statute of limitations and resolution of income tax audits and is netted against the current payable account. These unrecognized tax benefits are related to tax positions taken on certain federal, state, and foreign tax returns. However, the timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. While it is reasonably possible that some issues under examination could be resolved in the next twelve months, based upon the current facts and circumstances, the Company cannot reasonably estimate the timing of such resolution or the total range of potential changes as it relates to the current unrecognized tax benefits that are recorded as part of the Company’s financial statements.

In the ordinary course of business, the Company from time to time enters into contracts containing indemnification obligations of the Company. These obligations may require the Company to make payments to another party upon the occurrence of certain events including the failure by the Company to meet its performance obligations under the contract. These contractual indemnification provisions are often standard contractual terms of the nature customarily found in the type of contracts entered into by the Company. In many cases, there are no stated or notional amounts included in the indemnification provisions. There are no amounts reflected on the Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019 related to these indemnifications.

Stanford Trust Company Litigation

SEI has been named in seven lawsuits filed in Louisiana courts; four of the cases also name SPTC as a defendant. The underlying allegations in all actions relate to the purported role of SPTC in providing back-office services to Stanford Trust Company. The complaints allege that SEI and SPTC participated in some manner in the sale of “certificates of deposit” issued by Stanford International Bank so as to be a “seller” of the certificates of deposit for purposes of primary liability under the Louisiana Securities Law or so as to be secondarily liable under that statute for sales of certificates of deposit made by Stanford Trust Company. Two of the actions also include claims for violations of the Louisiana Racketeering Act

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and possibly conspiracy, and a third also asserts claims of negligence, breach of contract, breach of fiduciary duty, violations of the uniform fiduciaries law, negligent misrepresentation, detrimental reliance, violations of the Louisiana Racketeering Act, and conspiracy.

The procedural status of the seven cases varies. The Lillie case, filed originally in the 19th Judicial District Court for the Parish of East Baton Rouge, was brought as a class action and is procedurally the most advanced of the cases. SEI and SPTC filed exceptions, which the Court granted in part, dismissing claims under the Louisiana Unfair Trade Practices Act and permitting the claims under the Louisiana Securities Law to go forward. On March 11, 2013, newly-added insurance carrier defendants removed the case to the United States District Court for the Middle District of Louisiana. On August 7, 2013, the Judicial Panel on Multidistrict Litigation transferred the matter to the Northern District of Texas where MDL 2099, In re: Stanford Entities Securities Litigation (“the Stanford MDL”), is pending. On September 22, 2015, the District Court on the motion of SEI and SPTC dismissed plaintiffs’ claims for primary liability under Section 714(A) of the Louisiana Securities Law, but declined to dismiss plaintiffs’ claims for secondary liability under Section 714(B) of the Louisiana Securities Law based on the allegations pled by plaintiffs. On November 4, 2015, the District Court granted SEI and SPTC's motion to dismiss plaintiffs' claims under Section 712(D) of the Louisiana Securities Law. Consequently, the only claims of plaintiffs remaining in Lillie are plaintiffs' claims for secondary liability against SEI and SPTC under Section 714(B) of the Louisiana Securities Law. On May 2, 2016, the District Court certified the class as being "all persons for whom Stanford Trust Company purchased or renewed Stanford Investment Bank Limited certificates of deposit in Louisiana between January 1, 2007 and February 13, 2009". Notice of the pendency of the class action was mailed to potential class members on October 4, 2016.

On December 1, 2016, a group of plaintiffs who opted out of the Lillie class filed a complaint against SEI and SPTC in the United States District Court in the Middle District of Louisiana (“Ahders Complaint”), alleging claims essentially the same as those in Lillie. In January 2017, the Judicial Panel on Multidistrict Litigation transferred the Ahders proceeding to the Northern District of Texas and the Stanford MDL. During February 2017, SEI and SPTC filed their response to the Ahders Complaint, and in March 2017 the District Court for the Northern District of Texas approved the stipulated dismissal of all claims in this Complaint predicated on Section 712(D) or Section 714(A) of the Louisiana Securities Law. In both cases, as a result of the proceedings in the Northern District of Texas, only the plaintiffs’ secondary liability claims under Section 714(B) of the Louisiana Securities Law remain. Limited discovery and motions practice have occurred, including SEI and SPTC’s filing of a dispositive summary judgment motion in the Lillie proceeding. On January 31, 2019, the Judicial Panel on Multidistrict Litigation remanded the Lillie and Ahders proceedings to the Middle District of Louisiana.

With respect to the Lillie proceeding, on July 9, 2019, the District Court issued an order granting SEI’s Summary Judgment Motion to dismiss the remaining Section 714(B) claim and denying Plaintiffs’ Motion for Continuance of SEI and SPTC’s Motion for Summary Judgment pursuant to Rule 56(d). On July 17, 2019, Plaintiffs filed a Motion for Reconsideration and/or New Trial. The Court denied Plaintiffs’ Motion for Reconsideration and/or New Trial and entered a Final Judgment in favor of SEI and SPTC on August 15, 2019. On August 27, 2019, Plaintiffs-Appellants filed a Notice of Appeal to the United States Court of Appeals for the Fifth Circuit of the District Court's dismissal of the Lillie matter. On November 20, 2019, Plaintiffs-Appellants filed a Motion in Support of the Notice of Appeal. On January 17, 2020, SEI and SPTC timely filed their brief in opposition to the Plaintiffs-Appellants' motion for appeal. On February 7, 2020, Plaintiffs-Appellants filed their reply brief.

With respect to the Ahders proceeding, on July 16, 2019, SEI and SPTC filed a Motion for Summary Judgment pursuant to Rule 56(d) to have the remaining Section 714(B) claim dismissed. On January 24, 2020, the District Court issued an order granting SEI’s Summary Judgment Motion to dismiss the remaining Section 714(B) claim. On March 17, 2020, Plaintiffs-Appellants filed a Notice of Appeal to the United States Court of Appeals for the Fifth Circuit of the District Court's dismissal of the Ahders matter.

Another case, filed in the 23rd Judicial District Court for the Parish of Ascension, also was removed to federal court and transferred by the Judicial Panel on Multidistrict Litigation to the Northern District of Texas and the Stanford MDL. The schedule for responding to that Complaint has not yet been established.

Two additional cases remain in the Parish of East Baton Rouge. Plaintiffs filed petitions in 2010 and have granted SEI and SPTC indefinite extensions to respond. No material activity has taken place since.

In two additional cases, filed in East Baton Rouge and brought by the same counsel who filed the Lillie action, virtually all of the litigation to date has involved motions practice and appellate litigation regarding the existence of federal subject matter jurisdiction under the federal Securities Litigation Uniform Standards Act (SLUSA). The matters were removed to the United States District Court for the Northern District of Texas and consolidated. The court then dismissed the action under SLUSA. The Court of Appeals for the Fifth Circuit reversed that order, and the Supreme Court of the United States affirmed the Court of Appeals judgment on February 26, 2014. The matters were remanded to state court and no material activity has taken place since that date.

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While the outcome of this litigation remains uncertain, SEI and SPTC believe that they have valid defenses to plaintiffs' claims and intend to defend the lawsuits vigorously. Because of uncertainty in the make-up of the Lillie class, the specific theories of liability that may survive a motion for summary judgment or other dispositive motion, the relative lack of discovery regarding damages, causation, mitigation and other aspects that may ultimately bear upon loss, the Company is not reasonably able to provide an estimate of loss, if any, with respect to the foregoing lawsuits.

SEI Capital Accumulation Plan Litigation

On September 28, 2018, a class action complaint was filed in the United States District Court for the Eastern District of Pennsylvania by Gordon Stevens, individually and as the representative of similarly situated persons, and on behalf of the SEI Capital Accumulation Plan (the “Plan”) naming the Company and its affiliated and/or related entities SEI Investments Management Corporation, SEI Capital Accumulation Plan Design Committee, SEI Capital Accumulation Plan Investment Committee, SEI Capital Accumulation Plan Administration Committee, and John Does 1-30 as defendants (the “Stevens Complaint”). The Stevens Compliant seeks unspecified damages for defendants’ breach of fiduciary duties under ERISA with respect to selecting and monitoring the Plan’s investment options and by retaining affiliated investment products in the Plan.

Although SEI believes its defenses against the plaintiff’s allegations were valid, the Company agreed to settle this matter in the very early stages of the litigation in order to avoid the high cost of protracted class-action litigation and internal distractions such cases bring. On March 3, 2020, the Court issued its Approval Order approving the settlement agreement. The financial impact of the settlement agreement is not material to the Company.

SS&C Advent Matter

On February 28, 2020, SEI Global Services, Inc. ("SGSI"), a wholly-owned subsidiary of the Company, filed a complaint under seal in the United States District Court for the Eastern District of Pennsylvania against SS&C Advent ("Advent") and SS&C Technologies Holdings, Inc. ("SS&C") alleging that SS&C and Advent breached the terms of the contract between the parties and asking the Court to hold SS&C and Advent to their bargained-for obligations (the "Advent Matter"). In addition to Breach of Contract, the complaint also includes counts for Declaratory Judgment, Tortious Interference with Existing and Prospective Contractual Relations, Violation of the New York General Business Law Section 349, Violations of Section 2 of the Sherman Antitrust Act, Promissory Estoppel and Breach of the Covenant of Good Faith and Fair Dealing. SGSI seeks various forms of relief, including declaratory judgment, specific performance under the contract, and monetary damages, including treble damages and attorney’s fees. Additionally, on February 28, 2020, SGSI filed a related Motion to File Complaint Under Seal (the "Under Seal Motion") requesting that the Advent Matter complaint be maintained under seal and not a matter of public record.

On March 3, 2020, prior to any motions being filed by any of the parties, the Court denied SGSI’s Under Seal Motion. The complaint became a matter of public record on April 15, 2020.

SEI does not believe that it will have to change providers under the current terms of its contract with SS&C or Advent and that the process of litigating its rights under this contract may be a multi-year process. Consequently, SEI does not believe that the Advent Matter will create any consequence to the services it provides to its clients in the near term. SEI believes that it has alternatives available to it that will enable it to continue to provide currently provided services to its clients in all material respects in the unlikely event that there ultimately is a negative outcome in the Advent Matter.

SEI believes it has a strong basis for proving the actions it alleges in the Advent Matter and looks forward to the opportunity to assert its rights under contract. SEI expects the financial impact of litigating the Advent Matter to be immaterial.

Other Matters

The Company is also a party to various other actions and claims arising in the normal course of business that the Company does not believe are material. The Company believes that the ultimate resolution of these matters will not have a material adverse effect on the Company's financial position or the manner in which the Company conducts its business. Currently, the Company does not believe the amount of losses associated with these matters can be estimated. While the Company does not believe that the amount of such losses will, when liquidated or estimable, be material to its financial position, the assumptions may be incorrect and any such loss could have a material adverse effect on the Company's results of operations or the manner in which the Company conducts its business in the period(s) during which the underlying matters are resolved.

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On April 2, 2018, the Company acquired all ownership interests of Huntington Steele, LLC (Huntington Steele). The total purchase price was allocated to Huntington Steele’s net tangible and intangible assets based upon their estimated fair values at the date of purchase. The excess purchase price over the value of the identifiable intangible assets was recorded as goodwill. The total amount of goodwill from this transaction amounted to $11,499 and is included on the accompanying Consolidated Balance Sheets. The total purchase price for Huntington Steele included a contingent purchase price payable to the sellers upon the attainment of specified financial measures determined at various intervals occurring between 2019 and 2023. The Company made payments of $433 and $633 during 2019 and the three months ended March 31, 2020, respectively, to the sellers and recorded a fair value adjustment related to the contingent consideration. As of March 31, 2020, the fair value of the contingent consideration of $10,955 is included in Other long-term liabilities on the accompanying Balance Sheet.

In July 2017, the Company acquired all ownership interests of Archway Technology Partners, LLC, Archway Finance & Operations, Inc. and Keystone Capital Holdings, LLC (collectively, Archway), a provider of operating technologies and services to the family office industry. The total purchase price was allocated to Archway’s net tangible and intangible assets based upon their estimated fair values at the date of purchase. The excess purchase price over the value of the net tangible and identifiable intangible assets was recorded as goodwill. The total amount of goodwill from this transaction amounted to $52,990 and is included on the accompanying Consolidated Balance Sheets.

There were no changes to the Company's goodwill during the three months ended March 31, 2020.

The Company recognized $921 of amortization expense related to the intangible assets acquired through the acquisitions of Huntington Steele and Archway during the three months ended March 31, 2020 and 2019.

The Company’s principal sources of revenues are: (1) asset management, administration and distribution fees primarily earned based upon a contractual percentage of net assets under management or administration; and (2) information processing and software servicing fees that are either recurring and primarily earned based upon the number of trust accounts being serviced or a percentage of the total average daily market value of the clients' assets processed on the Company's platforms, or non-recurring and based upon project-oriented contractual agreements related to client implementations.

Disaggregation of Revenue

The following tables provide additional information pertaining to our revenues disaggregated by major product line and primary geographic market based on the location of the use of the products or services for each of the Company’s business segments for the three months ended March 31, 2020 and 2019:

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	Private Banks				Investment Advisors				Institutional Investors				Investment Managers				Investments In New Businesses				Total
Major Product Lines:	For the Three Months Ended March 31, 2020
Investment management fees from pooled investment products	$	32,844			$	70,180			$	13,317			$	193			$	359			$	116,893
Investment management fees from investment management agreements	347				27,420				65,710				—				2,963				96,440
Investment operations fees	475				—				—				106,201				—				106,676
Investment processing fees - PaaS	46,153				—				—				—				—				46,153
Investment processing fees - SaaS	29,169				—				—				3,251				—				32,420
Professional services fees	2,715				—				—				1,274				—				3,989
Account fees and other	1,518				4,721				176				5,710				66				12,191
Total revenues	$	113,221			$	102,321			$	79,203			$	116,629			$	3,388			$	414,762
Primary Geographic Markets:
United States	$	74,014			$	102,321			$	62,089			$	108,443			$	3,388			$	350,255
United Kingdom	24,359				—				12,824				—				—				37,183
Canada	10,401				—				1,598				—				—				11,999
Ireland	4,447				—				2,530				8,186				—				15,163
Other	—				—				162				—				—				162
Total revenues	$	113,221			$	102,321			$	79,203			$	116,629			$	3,388			$	414,762

	Private Banks				Investment Advisors				Institutional Investors				Investment Managers				Investments In New Businesses				Total
Major Product Lines:	For the Three Months Ended March 31, 2019
Investment management fees from pooled investment products	$	32,973			$	66,623			$	13,661			$	205			$	309			$	113,771
Investment management fees from investment management agreements	702				23,838				66,171				—				2,698				93,409
Investment operations fees	376				—				—				94,867				—				95,243
Investment processing fees - PaaS	43,911				—				—				—				—				43,911
Investment processing fees - SaaS	34,708				—				—				2,549				—				37,257
Professional services fees	3,777				—				—				1,417				—				5,194
Account fees and other	1,812				4,300				281				5,611				31				12,035
Total revenues	$	118,259			$	94,761			$	80,113			$	104,649			$	3,038			$	400,820
Primary Geographic Markets:
United States	$	77,454			$	94,761			$	62,325			$	98,058			$	3,038			$	335,636
United Kingdom	25,350				—				13,466				—				—				38,816
Canada	10,660				—				1,727				—				—				12,387
Ireland	4,795				—				2,311				6,591				—				13,697
Other	—				—				284				—				—				284
Total revenues	$	118,259			$	94,761			$	80,113			$	104,649			$	3,038			$	400,820

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Investment management fees from pooled investment products - Revenues associated with clients' assets invested in Company-sponsored pooled investment products. Contractual fees are stated as a percentage of the average market value of assets under management and collected on a monthly basis. Revenues are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.

Investment management fees from investment management agreements - Revenues based on assets of clients of the Institutional Investors segment primarily invested in Company-sponsored products. Each client is charged an investment management fee that is stated as a percentage of the average market value of all assets under management. The client is billed directly on a quarterly basis. Revenues are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.

Revenues associated with the separately managed account program offered through registered investment advisors located throughout the United States. The contractual fee is stated as a percentage of the average market value of all assets invested in the separately managed account and collected on a quarterly basis. Revenues are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.

Investment operations fees - Revenues earned from accounting and administrative services, distribution support services and regulatory and compliance services to investment management firms and family offices. The Company contracts directly with the investment management firm or family office. The contractual fees are stated as a percentage of net assets under administration and billed when asset valuations are finalized. Revenues are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.

Investment processing fees - Platform as a Service - Revenues associated with clients that outsource their entire investment operation and back-office processing functions. Through the use of the Company's proprietary platforms, the Company assumes all back-office investment processing services including investment processing, custody and safekeeping of assets, income collections, securities settlement and other related trust activities. The contractual fee is based on a monthly fee plus additional fees determined on a per-account or per-transaction basis. Contractual fees can also be stated as a percentage of the value of assets processed on the Company's platforms each month as long as the fee is in excess of a monthly contractual minimum. The client is billed directly on a monthly basis. Revenues are recognized in Information processing and software servicing fees on the accompanying Consolidated Statements of Operations.

Investment processing fees - Software as a Service - Revenues associated with clients that outsource investment processing technology software and computer processing by accessing our proprietary software and data center remotely but retain responsibility for all investment operations, client administration and other back-office trust operations. The contractual fee is based on a monthly fee plus additional fees determined on a per-account or per-transaction basis. The client is billed directly on a monthly basis. Revenues are recognized in Information processing and software servicing fees on the accompanying Consolidated Statements of Operations.

Professional services fees - Revenues associated with the business services migration for investment processing clients of the Private Banks segment and investment operations clients of the Investment Managers segment. In addition, Professional services include other services such as business transformation consulting. Typically, fees are stated as a contractual fixed fee. The client is billed directly and fees are collected according to the terms of the agreement.

Account fees and other - Revenues associated with custody account servicing, account terminations, reimbursements received for out-of-pocket expenses, and other fees for the provision of ancillary services.

Revenue is recognized by the Company when the performance obligations are satisfied and transfer of control to the client is completed. The majority of the Company’s performance obligations are satisfied and control is transferred to the client continuously. Therefore, revenue is recognized on a monthly basis. The amount of revenue recognized reflects the amount of consideration expected to be received by the Company in exchange for satisfied performance obligations.

The Company does not disclose the value of unsatisfied performance obligations as the majority of its contracts relate to: 1) contracts with an original term of one year or less; 2) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed; and 3) contracts that are based on the value of assets under management or administration.

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Revenue from Asset management, administration and distribution fees increased primarily from higher average assets under administration from market appreciation and positive cash flows from new and existing clients during 2019 and early 2020. The sharp market volatility occurring during March 2020 negatively impacted our revenues from assets under management and partially offset our revenue growth. Our average assets under administration increased $85.0 billion, or 14%, to $679.2 billion in the first three months of 2020 as compared to $594.2 billion during the first three months of 2019. Our average assets under management, excluding LSV, increased $14.0 billion to $237.2 billion in the first three months of 2020 as compared to $223.2 billion during the first three months of 2019.

•	Information processing and software servicing fees in our Private Banks segment decreased by $4.7 million during the first three months of 2020 due to decreased non-recurring fees and previously announced client losses.

•	Our proportionate share in the earnings of LSV decreased to $29.9 million in the first three months of 2020 as compared to $37.3 million in the first three months of 2019 due to lower assets under management from negative cash flows from existing clients, negative markets during March 2020 and client losses.

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•	We capitalized $6.2 million in the first three months of 2020 for the SEI Wealth Platform as compared to $9.7 million in the first three months of 2019. Amortization expense related to SWP increased to $10.8 million during the first three months of 2020 as compared to $10.4 million during the first three months of 2019.

•	Our effective tax rate during the first quarter of 2020 was 21.5% as compared to 22.1% during the first quarter of 2019. The decline in our tax rate was primarily due to increased tax benefits associated with stock option exercises.

•	We continued our stock repurchase program during 2020 and purchased 2.4 million shares for $127.4 million in the three month period.

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(A)	Client assets under administration in the Investment Managers segment include $50.4 billion of assets that are at fee levels below our normal full service assets (as of March 31, 2020).

(B)	Equity and fixed-income programs include assets managed by LSV in which fees are based on performance only. The ending value of these assets as of March 31, 2020 was $1.3 billion.

(C)	Equity and fixed-income programs include $8.4 billion of assets invested in various asset allocation funds at March 31, 2020.

(D)	In addition to the numbers presented, SEI also administers an additional $11.5 billion in Funds of Funds assets (as of March 31, 2020) on which SEI does not earn an administration fee.

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(A)	Average client assets under administration in the Investment Managers segment for the three months ended March 31, 2020 include $49.8 billion that are at fee levels below our normal full service assets.

(B)	Equity and fixed-income programs include assets managed by LSV in which fees are based on performance only. The average value of these assets for the three months ended March 31, 2020 was $1.9 billion.

(C)	Equity and fixed-income programs include $7.0 billion of average assets invested in various asset allocation funds for the three months ended March 31, 2020.

(D)	In addition to the numbers presented, SEI also administers an additional $11.5 billion of average assets in Funds of Funds assets for the three months ended March 31, 2020 on which SEI does not earn an administration fee.

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•	Decreased investment processing fees from the loss of clients offset by new client conversions and growth from existing clients; and

•	Decreased investment management fees from existing international clients due to negative cash flows and market volatility during March 2020.

•	A decrease in revenues; and

•	Increased costs, mainly personnel and consulting costs, related to maintenance, support and client migrations to SWP.

•	Increased investment management fees from market appreciation during 2019 and early 2020; and

•	Increased separately managed account program fees from positive cash flows into SEI’s strategist programs; partially offset by

•	The impact to investment management fees from the market volatility during March 2020, negative cash flows and a decrease in average basis points earned on assets due to client-directed shifts into liquidity products and SEI's ETF program.

•	An increase in revenues;

•	Decreased costs, mainly personnel and consulting costs, related to maintenance, support and client migrations to SWP; and

•	Decreased costs associated with accounts formerly processed on TRUST 3000® due to client migrations to SWP; partially offset by

•	Increased direct expenses associated with increased assets into our investment products.

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•	Defined benefit client losses, mainly resulting from acquisitions and plan curtailments; and

•	The impact to investment management fees from negative markets during March 2020; partially offset by

•	Asset funding from new sales of our investment management platforms; and

•	Increased investment management fees from market appreciation during 2019 and early 2020.

•	A decrease in revenues; partially offset by

•	Decreased direct expenses associated with investment management fees.

•	Positive cash flows into alternative, traditional and separately managed account offerings from new and existing clients; partially offset by

•	The impact of negative markets during March 2020 to assets under administration; and

•	Client losses and fund closures.

•	An increase in revenues; partially offset by

•	Increased costs associated with new business, primarily personnel expenses and third-party vendor costs; and

•	Increased non-capitalized investment spending, mainly consulting costs.

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•	The capitalization of costs incurred in developing computer software. We capitalized $6.5 million of software development costs in the first three months of 2020 as compared to $9.9 million in the first three months of 2019. The majority of our software development costs are related to significant enhancements for the expanded functionality of the SEI Wealth Platform.

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Capital expenditures. Our capital expenditures in the first three months of 2020 were $20.7 million as compared to $7.3 million in the first three months of 2019. Our expenditures in 2020 and 2019 primarily include purchased software, equipment for our data center operations and the expansion of our corporate headquarters which is scheduled to be completed during the fourth quarter 2020. Total expenditures related to the expansion for the remainder of 2020 are expected to be approximately $15.1 million. Prolonged work restrictions due to the COVID-19 virus outbreak may delay the planned completion date.

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The repurchase of our common stock. Our Board of Directors has authorized the repurchase of our common stock through multiple authorizations. Currently, there is no expiration date for our common stock repurchase program. We had total capital outlays of $130.6 million during the first three months of 2020 and $90.8 million during the first three months of 2019 for the repurchase of our common stock.

•	Proceeds from the issuance of our common stock. We received $18.6 million in proceeds from the issuance of our common stock during the first three months of 2020 as compared to $8.9 million during the first three months of 2019. The increase in proceeds is primarily attributable to a higher level of stock option exercise activity.

•	Dividend payments. Cash dividends paid were $52.5 million in the first three months of 2020 as compared to $50.8 million in the first three months of 2019.

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•	changes in capital markets that may affect our revenues and earnings;

•	product development risk;

•	risk of failure by a third-party service provider;

•	data and cyber security risks;

•	operational risks associated with the processing of investment transactions;

•	systems and technology risks;

•	pricing pressure from increased competition, disruptive technology and poor investment performance;

•	the affect on our earnings and cashflows from the performance of LSV Asset Management;

•	third party pricing services for the valuation of securities invested in our investment products;

•	external factors affecting the fiduciary management market;

•	the affect of extensive governmental regulation;

•	litigation and regulatory examinations and investigations;

•	our ability to capture the expected value from acquisitions, divestitures, joint ventures, minority stakes or strategic alliances;

•	increased costs and regulatory risks from the growth of our business;

•	fiduciary or other legal liability for client losses from our investment management operations;

•	consolidation within our target markets;

•	our ability to receive dividends or other payments in needed amounts from our subsidiaries;

•	the exit by the United Kingdom from the European Union;

•	third party approval of our investment products with advisors affiliated with independent broker-dealers or other networks;

•	the effectiveness of our business, risk management and business continuity strategies, models and processes;

•	financial and non-financial covenants which may restrict our ability to manage liquidity needs;

•	changes in, or interpretation of, accounting principles or tax rules and regulations;

•	fluctuations in foreign currency exchange rates;

•	fluctuations in interest rates affecting the value of our fixed-income investment securities;

•	our ability to hire and retain qualified employees;

•	the competence and integrity of our employees and third-parties;

•	stockholder activism efforts;

•	retention of executive officers and senior management personnel; and

•	unforeseen or catastrophic events, including the emergence of pandemic, terrorist attacks, extreme weather events or other natural disasters.

•	SEI Investments Distribution Co., or SIDCO, a broker-dealer registered with the SEC under the Securities Exchange Act of 1934 and a member of the Financial Industry Regulatory Authority, Inc., or FINRA;

•	SEI Investments Management Corporation, or SIMC, an investment advisor registered with the SEC under the Investment Advisers Act of 1940 and with the Commodity Futures Trading Commission, or CFTC, under the Commodity Exchange Act;

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•	SEI Private Trust Company, or SPTC, a limited purpose federal thrift chartered and regulated by the Office of the Comptroller of the Currency;

•	SEI Trust Company, or STC, a Pennsylvania trust company, regulated by the Pennsylvania Department of Banking and Securities;

•	SEI Investments (Europe) Limited, or SIEL, an investment manager and financial institution subject to regulation by the Financial Conduct Authority of the United Kingdom;

•	SEI Investments Canada Company, or SEI Canada, an investment fund manager that has various other capacities that is regulated by the Ontario Securities Commission and various provincial authorities;

•	SEI Investments Global, Limited, or SIGL, a management company for Undertakings for Collective Investment in Transferable Securities, or UCITS, and for Alternative Investment Funds, or AIFs, that is regulated primarily by the Central Bank of Ireland, or CBI;

•	SEI Investments - Global Fund Services, Ltd., or GFSL, an authorized provider of administration services for Irish and non-Irish collective investment schemes that is regulated by the CBI; and

•	SEI Investments - Depositary and Custodial Services (Ireland) Limited, or D&C, an authorized provider of depositary and custodial services that is regulated by the CBI.

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(e)	Our Board of Directors has authorized the repurchase of up to $0.004 billion worth of our common stock through multiple authorizations. Currently, there is no expiration date for our common stock repurchase program. On March 18, 2020, our Board of Directors approved an increase in the stock repurchase program by an additional $250 million.

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