SEI Reports Fourth-Quarter 2014 Financial Results

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Income From Operations Increases 32 Percent

OAKS, PA -- (Marketwired) -- 01/28/15 -- SEI Investments Company (NASDAQ: SEIC) today announced financial results for the fourth-quarter 2014. Diluted earnings per share were $.45 in fourth-quarter 2014 compared to $.37 in fourth-quarter 2013. Earnings were negatively affected by an after-tax charge of approximately $10.7 million related to the write down of an equity investment in a wealth services firm based in China. This charge was partially offset by the tax benefit derived from the reinstatement of the Research and Development Tax Credit during the fourth-quarter 2014 (see Fourth-Quarter Business Highlights for more information).

Consolidated Overview
(In thousands, except earnings per share) For the Three Months Ended December 31, For the Twelve Months Ended December 31,
2014 2013 % 2014 2013 %
Revenues $ 322,757 $ 299,024 8 % $ 1,266,005 $ 1,126,132 12 %
Net income attributable to SEI 77,097 65,515 18 % 318,713 288,124 11 %
Diluted earnings per share $ 0.45 $ 0.37 22 % $ 1.85 $ 1.64 13 %

"Our financial results for the fourth quarter finish a year of solid progress across all of our units," said Alfred P. West, Jr., SEI Chairman and CEO. "In addition, the continued market acceptance of our solutions validate the ongoing investments we make to effectively serve our clients in the rapidly changing wealth, investment and asset management markets.

"As always, our focus on creating long-term sustainable growth and increased shareholder value is unwavering."

Summary of Fourth-Quarter Results by Business Segment
(In thousands) For the Three Months Ended December 31, For the Twelve Months Ended December 31,
2014 2013 % 2014 2013 %
Private Banks:
Revenues $ 111,959 $ 105,880 6 % $ 441,467 $ 397,138 11 %
Expenses 99,975 102,767 (3 )% 399,620 392,399 2 %
Operating Profit 11,984 3,113 NM 41,847 4,739 NM
Gain on sale of subsidiary -- -- -- % 5,582 22,112 NM
Total Profit 11,984 3,113 NM $ 47,429 $ 26,851 NM
Operating Margin (A) 11 % 3 % 9 % 1 %
Investment Advisors:
Revenues 72,872 65,384 11 % 283,811 241,252 18 %
Expenses 38,448 35,671 8 % 146,500 133,962 9 %
Operating Profit 34,424 29,713 16 % 137,311 107,290 28 %
Operating Margin 47 % 45 % 48 % 44 %
Institutional Investors:
Revenues 72,466 67,273 8 % 284,677 257,658 10 %
Expenses 36,044 35,623 1 % 140,659 133,218 6 %
Operating Profit 36,422 31,650 15 % 144,018 124,440 16 %
Operating Margin 50 % 47 % 51 % 48 %
Investment Managers:
Revenues 64,211 59,539 8 % 251,310 226,081 11 %
Expenses 40,387 39,545 2 % 159,176 148,977 7 %
Operating Profit 23,824 19,994 19 % 92,134 77,104 19 %
Operating Margin 37 % 34 % 37 % 34 %
Investments in New Businesses:
Revenues 1,249 948 32 % 4,740 4,003 18 %
Expenses 5,063 3,949 28 % 18,377 15,723 17 %
Operating Loss (3,814 ) (3,001 ) NM (13,637 ) (11,720 ) NM
Totals:
Revenues $ 322,757 $ 299,024 8 % $ 1,266,005 $ 1,126,132 12 %
Expenses 219,917 217,555 1 % 864,332 824,279 5 %
Corporate overhead expenses 12,576 13,014 (3 )% 48,889 53,733 (9 )%
NCI reflected in segments -- -- -- % -- (289 ) NM
Income from operations $ 90,264 $ 68,455 32 % $ 352,784 $ 248,409 42 %
(A) Percentages determined exclusive of gain on sale of subsidiary.

Fourth-Quarter Business Highlights:

  • Revenue growth was primarily driven by higher Asset management, administration, and distribution fees from market appreciation and improved cash flows from new and existing clients. Our average assets under management, excluding LSV, increased $17.4 billion, or 11 percent, to $169.1 billion in the fourth-quarter 2014, as compared to $151.7 billion during the fourth-quarter 2013.
  • Our average assets under administration increased $54.5 billion, or 17 percent, to $372.4 billion in the fourth-quarter 2014, as compared to $317.8 billion during the fourth-quarter 2013 (see attached Ending and Average Asset Balances schedules for further details).
  • Sales events, net of client losses, during fourth-quarter 2014 totaled approximately $23.1 million and are expected to generate net annualized recurring revenues of approximately $20.0 million when contract values are fully realized.
  • All four core business segments realized revenue and profit margin growth as compared to fourth-quarter 2013 results. Operating margins in all four core business segments improved primarily from increased recurring revenues generated from the higher levels of assets under management and administration.
  • Income from LSV increased $3.2 million, or 10 percent, to $35.3 million in fourth-quarter 2014 as compared to $32.1 million in fourth-quarter 2013 due to an increase in assets under management from market appreciation and an increase in performance fees earned by LSV.
  • We recorded an after-tax charge of approximately $10.7 million, or $0.06 diluted earnings per share, during the fourth-quarter 2014 for the write down of our investment in Gao Fu, a wealth services firm based in China. The after-tax earnings per share impact is a result of the non-deductibility of the charge for U.S. federal tax purposes due to the investment in Gao Fu being held by an Irish subsidiary. This charge against earnings is reflected in Equity in earnings of unconsolidated affiliates on the accompanying Consolidated Statements of Operations.
  • Stock-based compensation expense during the fourth-quarter 2014 decreased by $6.9 million primarily due to the acceleration of expense recognition during the comparable period of 2013 for stock options that achieved performance vesting targets earlier than originally estimated.
  • Amortization expense related to capitalized software was $10.0 million during the fourth-quarter 2014 as compared to $9.0 million during the fourth-quarter 2013 due to continued releases of the SEI Wealth Platform(SM).
  • Our effective tax rates were 33.3 percent in fourth-quarter 2014 and 35.2 percent in fourth-quarter 2013. The decrease in our tax rate was primarily due to reinstatement of the Research and Development Tax Credit, which occurred during the fourth-quarter 2014. This tax benefit was offset by the non-deductibility of a significant portion of the Gao Fu charge noted above.
  • In fourth-quarter 2014, we repurchased 1.6 million shares of our common stock for $62.6 million.

Earnings Conference Call
A conference call to review earnings is scheduled for 2 p.m. Eastern time on January 28, 2015. Investors may listen to the call at seic.com/investors. The call may also be accessed at many financial services websites, including Google Finance and Yahoo Finance. Investors may also listen to replays at these websites, or by telephone at (USA) 800-475-6701; (International) 320-365-3844, access code 351742.

About SEI
SEI (NASDAQ: SEIC) is a leading global provider of investment processing, investment management, and investment operations solutions that help corporations, financial institutions, financial advisors, and ultra-high-net-worth families create and manage wealth. As of December 31, 2014, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $625 billion in mutual fund and pooled or separately managed assets, including $253 billion in assets under management and $372 billion in client assets under administration. For more information, visit seic.com.

Many of the statements in this release may be considered "forward looking statements" and include discussions about future operations, strategies and financial results. Forward-looking statements are based upon estimates and assumptions that involve risks and uncertainties, many of which are beyond our control or are subject to change. Although we believe our assumptions are reasonable, they could be inaccurate. Our actual future revenues and income could differ materially from our expected results. We have no obligation to publicly update or revise any forward-looking statements.

SEI INVESTMENTS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
For the Three Months Ended December 31, For the Twelve Months Ended December 31,
2014 2013 2014 2013
Asset management, admin. and distribution fees $ 242,966 $ 220,585 $ 948,932 $ 831,720
Information processing and software servicing fees 70,437 70,085 285,463 261,691
Transaction-based and trade execution fees 9,354 8,354 31,610 32,721
Total revenues 322,757 299,024 1,266,005 1,126,132
Subadvisory, distribution and other asset mgmt costs 38,798 33,194 149,791 121,989
Software royalties and other information processing costs 7,990 8,343 33,522 31,255
Brokerage commissions 6,785 6,358 23,002 24,649
Compensation, benefits and other personnel 95,663 92,817 376,873 357,453
Stock-based compensation 3,982 10,868 13,463 37,865
Consulting, outsourcing and professional fees 33,535 32,732 136,818 131,399
Data processing and computer related 12,959 14,373 52,512 51,401
Facilities, supplies and other costs 16,759 17,333 66,113 64,613
Amortization 10,068 9,104 38,679 34,602
Depreciation 5,954 5,447 22,448 22,497
Total expenses 232,493 230,569 913,221 877,723
Income from operations 90,264 68,455 352,784 248,409
Net gain on investments 565 21 614 659
Interest and dividend income 1,106 828 3,354 3,248
Interest expense (116 ) (113 ) (458 ) (535 )
Equity in earnings of unconsolidated affiliates 23,706 31,872 127,786 118,076
Gain on sale of subsidiary -- -- 5,582 22,112
Other income -- -- -- 43,429
Income before income taxes 115,525 101,063 489,662 435,398
Income taxes 38,428 35,548 170,949 146,924
Net income 77,097 65,515 318,713 288,474
Less: Net income attributable to the noncontrolling interest -- -- -- (350 )
Net income attributable to SEI $ 77,097 $ 65,515 $ 318,713 $ 288,124
Basic earnings per common share $ 0.46 $ 0.39 $ 1.89 $ 1.68
Shares used to calculate basic earnings per share 167,146 170,113 168,246 171,561
Diluted earnings per common share $ 0.45 $ 0.37 $ 1.85 $ 1.64
Shares used to calculate diluted earnings per share 171,326 174,766 172,565 175,718
SEI INVESTMENTS COMPANY
BALANCE SHEETS
(In thousands)
(Unaudited)
December 31, December 31,
2014 2013
Assets
Current Assets:
Cash and cash equivalents $ 667,446 $ 578,273
Restricted cash 5,801 5,500
Receivables from regulated investment companies 48,393 39,364
Receivables, net 194,419 186,664
Securities owned 21,175 21,133
Other current assets 18,193 16,166
Total Current Assets 955,427 847,100
Property and Equipment, net 125,535 118,995
Capitalized software, net 309,040 312,615
Investments available for sale 77,609 83,323
Investments in affiliated funds, at fair value 4,523 4,849
Investment in unconsolidated affiliates 54,290 61,370
Other assets, net 16,451 10,917
Total Assets $ 1,542,875 $ 1,439,169
Liabilities and Equity
Current Liabilities:
Accounts payable $ 10,588 $ 16,235
Accrued liabilities 207,429 188,123
Deferred income taxes, net 1,414 1,653
Deferred revenue 1,749 1,977
Total Current Liabilities 221,180 207,988
Deferred income taxes 63,755 66,572
Other long-term liabilities 10,327 8,607
Total Liabilities 295,262 283,167
Shareholders' Equity:
Common stock 1,667 1,692
Capital in excess of par value 834,615 721,219
Retained earnings 420,226 431,604
Accumulated other comprehensive (loss) income, net (8,895 ) 1,487
Total Shareholders' Equity 1,247,613 1,156,002
Total Liabilities and Shareholders' Equity $ 1,542,875 $ 1,439,169
SEI INVESTMENTS COMPANY
ENDING ASSET BALANCES
(In millions)
(Unaudited)
Dec 31, Mar. 31, Jun. 30, Sept. 30, Dec 31,
2013 2014 2014 2014 2014
Private Banks:
Equity/Fixed Income programs $ 15,472 $ 16,918 $ 18,679 $ 18,634 $ 18,666
Collective Trust Fund programs 14 14 12 11 8
Liquidity funds 5,685 5,670 5,274 5,331 5,889
Total assets under management $ 21,171 $ 22,602 $ 23,965 $ 23,976 $ 24,563
Client assets under administration 15,272 15,641 15,347 16,288 16,741
Total assets $ 36,443 $ 38,243 $ 39,312 $ 40,264 $ 41,304
Investment Advisors:
Equity/Fixed Income programs $ 38,574 $ 39,981 $ 42,125 $ 42,260 $ 43,845
Collective Trust Fund programs 11 13 13 9 9
Liquidity funds 2,846 2,802 2,696 3,086 3,173
Total assets under management $ 41,431 $ 42,796 $ 44,834 $ 45,355 $ 47,027
Institutional Investors:
Equity/Fixed Income programs $ 66,548 $ 69,194 $ 71,598 $ 72,006 $ 72,828
Collective Trust Fund programs 109 102 100 98 95
Liquidity funds 2,644 2,505 2,414 2,891 2,929
Total assets under management $ 69,301 $ 71,801 $ 74,112 $ 74,995 $ 75,852
Investment Managers:
Equity/Fixed Income programs $ 69 $ 68 $ 64 $ 64 $ 27
Collective Trust Fund programs 22,377 22,633 22,598 21,297 20,833
Liquidity funds 718 782 802 1,018 946
Total assets under management $ 23,164 $ 23,483 $ 23,464 $ 22,379 $ 21,806
Client assets under administration (A) 311,992 326,735 337,492 346,841 355,890
Total assets $ 335,156 $ 350,218 $ 360,956 $ 369,220 $ 377,696
Investments in New Businesses:
Equity/Fixed Income programs $ 619 $ 632 $ 659 $ 703 $ 736
Liquidity funds 46 49 38 118 98
Total assets under management $ 665 $ 681 $ 697 $ 821 $ 834
LSV Asset Management:
Equity/Fixed Income programs $ 76,189 $ 77,973 $ 82,026 $ 81,536 $ 82,665
Total:
Equity/Fixed Income programs (B) $ 197,471 $ 204,766 $ 215,151 $ 215,203 $ 218,767
Collective Trust Fund programs 22,511 22,762 22,723 21,415 20,945
Liquidity funds 11,939 11,808 11,224 12,444 13,035
Total assets under management $ 231,921 $ 239,336 $ 249,098 $ 249,062 $ 252,747
Client assets under administration (C) 327,264 342,376 352,839 363,129 372,631
Total assets $ 559,185 $ 581,712 $ 601,937 $ 612,191 $ 625,378
(A) Client assets under administration in the Investment Managers segment include $53.0 billion of assets balances that require limited services and therefore are at fee levels below our normal full service assets (as of December 31, 2014).
(B) Equity/Fixed Income programs include $5.2 billion of assets invested in various asset allocation funds at December 31, 2014.
(C) In addition to the numbers presented, SEI also administers an additional $6.5 billion in Funds of Funds assets (as of December 31, 2014) on which SEI does not earn an administration fee.
SEI INVESTMENTS COMPANY
AVERAGE ASSET BALANCES
(In millions)
(Unaudited)
4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
2013 2014 2014 2014 2014
Private Banks:
Equity/Fixed Income programs $ 14,901 $ 16,114 $ 17,829 $ 18,804 $ 18,606
Collective Trust Fund programs 11 14 12 12 10
Liquidity funds 5,218 5,757 5,429 5,466 5,537
Total assets under management $ 20,130 $ 21,885 $ 23,270 $ 24,282 $ 24,153
Client assets under administration 14,702 15,366 15,069 15,707 16,451
Total assets $ 34,832 $ 37,251 $ 38,339 $ 39,989 $ 40,604
Investment Advisors:
Equity/Fixed Income programs $ 37,520 $ 39,005 $ 40,887 $ 42,389 $ 43,104
Collective Trust Fund programs 13 13 13 11 9
Liquidity funds 2,785 2,806 2,637 2,830 3,087
Total assets under management $ 40,318 $ 41,824 $ 43,537 $ 45,230 $ 46,200
Institutional Investors:
Equity/Fixed Income programs $ 65,750 $ 67,697 $ 70,706 $ 72,010 $ 72,771
Collective Trust Fund programs 110 103 134 98 96
Liquidity funds 2,720 2,571 2,664 2,883 2,973
Total assets under management $ 68,580 $ 70,371 $ 73,504 $ 74,991 $ 75,840
Investment Managers:
Equity/Fixed Income programs $ 75 $ 68 $ 68 $ 64 $ 64
Collective Trust Fund programs 21,345 22,004 22,447 22,123 21,140
Liquidity funds 592 738 824 962 904
Total assets under management $ 22,012 $ 22,810 $ 23,339 $ 23,149 $ 22,108
Client assets under administration 303,131 320,644 333,373 344,661 355,903
Total assets $ 325,143 $ 343,454 $ 356,712 $ 367,810 $ 378,011
Investments in New Businesses:
Equity/Fixed Income programs $ 613 $ 623 $ 640 $ 688 $ 731
Liquidity funds 33 46 43 139 97
Total assets under management $ 646 $ 669 $ 683 $ 827 $ 828
LSV Asset Management:
Equity/Fixed Income programs $ 75,240 $ 76,306 $ 79,866 $ 82,402 $ 83,187
Total:
Equity/Fixed Income programs $ 194,099 $ 199,813 $ 209,996 $ 216,357 $ 218,463
Collective Trust Fund programs 21,479 22,134 22,606 22,244 21,255
Liquidity funds 11,348 11,918 11,597 12,280 12,598
Total assets under management $ 226,926 $ 233,865 $ 244,199 $ 250,881 $ 252,316
Client assets under administration 317,833 336,010 348,442 360,368 372,354
Total assets $ 544,759 $ 569,875 $ 592,641 $ 611,249 $ 624,670

Investor Contact:
Nicole Vattimo
SEI
+1 610-676-4385
nvattimo@seic.com

Media Contact:
Dana Grosser
SEI
+1 610-676-2459
dgrosser@seic.com

Source: SEI

Released January 28, 2015