SEI Reports Third-Quarter 2014 Financial Results

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OAKS, PA -- (Marketwired) -- 10/22/14 -- SEI Investments Company (NASDAQ: SEIC) today announced financial results for the third-quarter 2014. Diluted earnings per share were $.49 in third-quarter 2014 compared to $.38 in third-quarter 2013. Our tax rate during third-quarter 2014 was 34.7 percent compared to 28.5 percent in third-quarter 2013. This differential in our tax rate equates to a positive impact of $.03 diluted earnings per share to our third-quarter 2013 earnings.

Consolidated Overview
(In thousands, except earnings per share) For the Three Months Ended September 30, For the Nine Months Ended September 30,
2014 2013 % 2014 2013 %
Revenues $ 322,047 $ 280,655 15 % $ 943,248 $ 827,108 14 %
Net income attributable to SEI 83,983 67,195 25 % 241,616 222,609 9 %
Diluted earnings per share $ 0.49 $ 0.38 29 % $ 1.39 $ 1.26 10 %

"Third-quarter results reflect ongoing progress across all of our business segments," said Alfred P. West, Jr., SEI Chairman and CEO. "SEI's continued success reflects our clients' recognition of the value of our solutions. Our financial results affirm the strength of our diversified portfolio of offerings, and, as always, we remain committed to long-term sustainable growth and increasing shareholder value."

Summary of Third-Quarter Results by Business Segment
(In thousands) For the Three Months Ended September 30, For the Nine Months Ended September 30,
2014 2013 % 2014 2013 %
Private Banks:
Revenues $ 110,147 $ 97,370 13 % $ 329,508 $ 291,258 13 %
Expenses 100,498 95,579 5 % 299,645 289,632 3 %
Operating Profit 9,649 1,791 NM 29,863 1,626 NM
Gain on sale of subsidiary -- -- -- % 5,582 22,112 NM
Total Profit 9,649 1,791 NM $ 35,445 $ 23,738 NM
Operating Margin (A) 9 % 2 % 9 % 1 %
Investment Advisors:
Revenues 74,469 61,393 21 % 210,939 175,868 20 %
Expenses 37,796 33,768 12 % 108,052 98,291 10 %
Operating Profit 36,673 27,625 33 % 102,887 77,577 33 %
Operating Margin 49 % 45 % 49 % 44 %
Institutional Investors:
Revenues 72,560 63,539 14 % 212,211 190,385 11 %
Expenses 35,495 33,058 7 % 104,615 97,595 7 %
Operating Profit 37,065 30,481 22 % 107,596 92,790 16 %
Operating Margin 51 % 48 % 51 % 49 %
Investment Managers:
Revenues 63,640 57,266 11 % 187,099 166,542 12 %
Expenses 40,156 37,763 6 % 118,789 109,432 9 %
Operating Profit 23,484 19,503 20 % 68,310 57,110 20 %
Operating Margin 37 % 34 % 37 % 34 %
Investments in New Businesses:
Revenues 1,231 1,087 13 % 3,491 3,055 14 %
Expenses 4,614 4,146 11 % 13,314 11,774 13 %
Operating Loss (3,383 ) (3,059 ) NM (9,823 ) (8,719 ) NM
Totals:
Revenues $ 322,047 $ 280,655 15 % $ 943,248 $ 827,108 14 %
Expenses 218,559 204,314 7 % 644,415 606,724 6 %
Corporate overhead expenses 12,990 14,402 (10 )% 36,313 40,719 (11 )%
NCI reflected in segments -- -- -- % -- (289 ) NM
Income from operations $ 90,498 $ 61,939 46 % $ 262,520 $ 179,954 46 %
(A) Percentages determined exclusive of gain on sale of subsidiary.

Third-Quarter Business Highlights:

  • Revenues increased in third-quarter 2014 as compared to both third-quarter 2013 and second-quarter 2014. 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 $24.6 billion, or 17 percent, to $168.5 billion in the third-quarter 2014, as compared to $143.9 billion during the third-quarter 2013, and increased $4.1 billion, or three percent, as compared to $164.3 billion during the second-quarter 2014.
  • Our average assets under administration increased $54.0 billion, or 18 percent, to $360.4 billion in the third-quarter 2014, as compared to $306.4 billion during the third-quarter 2013, and increased $11.9 billion, or three percent, as compared to $348.4 billion during the second-quarter 2014 (see attached Ending and Average Asset Balances schedules for further details).
  • Revenue growth was also driven by increased information processing fees in our Private Banks segment. The increase was primarily attributable to higher fees from the growth in assets processed on the SEI Wealth Platform(SM).
  • Sales events, net of client losses, during third-quarter 2014 totaled approximately $27.5 million and are expected to generate net annualized recurring revenues of approximately $25.6 million when contract values are fully realized.
  • All four core business segments realized revenue and profit margin growth as compared to third-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 $6.9 million, or 22 percent, to $38.2 million in third-quarter 2014 as compared to $31.3 million in third-quarter 2013 due to an increase in assets under management from market appreciation and an increase in performance fees earned by LSV.
  • Stock-based compensation expense during the third-quarter 2014 decreased by $7.3 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 increased to $9.8 million during the third-quarter 2014 as compared to $8.8 million during the third-quarter 2013 due to continued releases of the SEI Wealth Platform(SM).
  • The effective tax rates were 34.7 percent in third-quarter 2014, 28.5 percent in third-quarter 2013, and 35.7 percent in second-quarter 2014. Our third-quarter 2013 tax rate benefited by a one-time adjustment due to a Pennsylvania Tax Law change enacted on July 18, 2013.
  • In third-quarter 2014, we repurchased 2.0 million shares of our common stock for $75.2 million.

Earnings Conference Call
A conference call to review earnings is scheduled for 2 p.m. Eastern time on October 22, 2014. 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 339136.

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 September 30, 2014, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $612 billion in mutual fund and pooled or separately managed assets, including $249 billion in assets under management and $363 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 September 30, For the Nine Months Ended September 30,
2014 2013 2014 2013
Asset management, admin. and distribution fees $ 244,704 $ 208,780 $ 705,966 $ 611,135
Information processing and software servicing fees 70,020 64,606 215,026 191,606
Transaction-based and trade execution fees 7,323 7,269 22,256 24,367
Total revenues 322,047 280,655 943,248 827,108
Subadvisory, distribution and other asset mgmt costs 39,737 31,209 110,993 88,795
Software royalties and other information processing costs 8,562 7,541 25,532 22,912
Brokerage commissions 5,119 5,519 16,217 18,291
Compensation, benefits and other personnel 94,316 89,311 281,210 264,636
Stock-based compensation 3,786 11,097 9,481 26,997
Consulting, outsourcing and professional fees 34,946 33,367 103,283 98,667
Data processing and computer related 13,555 12,654 39,553 37,028
Facilities, supplies and other costs 16,136 13,573 49,354 47,280
Amortization 9,813 8,829 28,611 25,498
Depreciation 5,579 5,616 16,494 17,050
Total expenses 231,549 218,716 680,728 647,154
Income from operations 90,498 61,939 262,520 179,954
Net (loss) gain on investments (478 ) 535 49 638
Interest and dividend income 750 679 2,248 2,420
Interest expense (115 ) (195 ) (342 ) (422 )
Equity in earnings of unconsolidated affiliates 37,963 31,028 104,080 86,204
Gain on sale of subsidiary -- -- 5,582 22,112
Other income -- -- -- 43,429
Income before income taxes 128,618 93,986 374,137 334,335
Income taxes 44,635 26,791 132,521 111,376
Net income 83,983 67,195 241,616 222,959
Less: Net income attributable to the noncontrolling interest -- -- -- (350 )
Net income attributable to SEI $ 83,983 $ 67,195 $ 241,616 $ 222,609
Basic earnings per common share $ 0.50 $ 0.39 $ 1.43 $ 1.29
Shares used to calculate basic earnings per share 167,925 171,308 168,612 172,043
Diluted earnings per common share $ 0.49 $ 0.38 $ 1.39 $ 1.26
Shares used to calculate diluted earnings per share 172,905 176,043 173,700 176,036
SEI INVESTMENTS COMPANY
BALANCE SHEETS
(In thousands)
(Unaudited)
September 30, December 31,
2014 2013
Assets
Current Assets:
Cash and cash equivalents $ 577,914 $ 578,273
Restricted cash 5,500 5,500
Receivables from regulated investment companies 46,533 39,364
Receivables, net 211,228 186,664
Securities owned 21,173 21,133
Other current assets 21,028 16,166
Total Current Assets 883,376 847,100
Property and Equipment, net 128,775 118,995
Capitalized software, net 310,368 312,615
Investments available for sale 81,084 83,323
Trading securities 4,908 4,849
Investment in unconsolidated affiliates 63,858 61,370
Other assets, net 13,410 10,917
Total Assets $ 1,485,779 $ 1,439,169
Liabilities and Equity
Current Liabilities:
Accounts payable $ 6,512 $ 16,235
Accrued liabilities 148,839 188,123
Deferred income taxes, net 1,868 1,653
Deferred revenue 1,098 1,977
Total Current Liabilities 158,317 207,988
Deferred income taxes 71,552 66,572
Other long-term liabilities 11,270 8,607
Total Liabilities 241,139 283,167
Shareholders' Equity:
Common stock 1,671 1,692
Capital in excess of par value 805,197 721,219
Retained earnings 440,767 431,604
Accumulated other comprehensive (loss) income, net (2,995 ) 1,487
Total Shareholders' Equity 1,244,640 1,156,002
Total Liabilities and Shareholders' Equity $ 1,485,779 $ 1,439,169
SEI INVESTMENTS COMPANY
ENDING ASSET BALANCES
(In millions)
(Unaudited)
Sept. 30, Dec. 31, Mar. 31, Jun. 30, Sept. 30,
2013 2013 2014 2014 2014
Private Banks:
Equity/Fixed Income programs $ 14,305 $ 15,472 $ 16,918 $ 18,679 $ 18,634
Collective Trust Fund programs 11 14 14 12 11
Liquidity funds 5,167 5,685 5,670 5,274 5,331
Total assets under management $ 19,483 $ 21,171 $ 22,602 $ 23,965 $ 23,976
Client assets under administration 14,101 15,272 15,641 15,347 16,288
Total assets $ 33,584 $ 36,443 $ 38,243 $ 39,312 $ 40,264
Investment Advisors:
Equity/Fixed Income programs $ 36,203 $ 38,574 $ 39,981 $ 42,125 $ 42,260
Collective Trust Fund programs 14 11 13 13 9
Liquidity funds 2,779 2,846 2,802 2,696 3,086
Total assets under management $ 38,996 $ 41,431 $ 42,796 $ 44,834 $ 45,355
Institutional Investors:
Equity/Fixed Income programs $ 64,429 $ 66,548 $ 69,194 $ 71,598 $ 72,006
Collective Trust Fund programs 107 109 102 100 98
Liquidity funds 3,125 2,644 2,505 2,414 2,891
Total assets under management $ 67,661 $ 69,301 $ 71,801 $ 74,112 $ 74,995
Investment Managers:
Equity/Fixed Income programs $ 75 $ 69 $ 68 $ 64 $ 64
Collective Trust Fund programs 19,868 22,377 22,633 22,598 21,297
Liquidity funds 678 718 782 802 1,018
Total assets under management $ 20,621 $ 23,164 $ 23,483 $ 23,464 $ 22,379
Client assets under administration (A) 295,959 311,992 326,735 337,492 346,841
Total assets $ 316,580 $ 335,156 $ 350,218 $ 360,956 $ 369,220
Investments in New Businesses:
Equity/Fixed Income programs $ 594 $ 619 $ 632 $ 659 $ 703
Liquidity funds 26 46 49 38 118
Total assets under management $ 620 $ 665 $ 681 $ 697 $ 821
LSV Asset Management:
Equity/Fixed Income programs $ 71,149 $ 76,189 $ 77,973 $ 82,026 $ 81,536
Total:
Equity/Fixed Income programs (B) $ 186,755 $ 197,471 $ 204,766 $ 215,151 $ 215,203
Collective Trust Fund programs 20,000 22,511 22,762 22,723 21,415
Liquidity funds 11,775 11,939 11,808 11,224 12,444
Total assets under management $ 218,530 $ 231,921 $ 239,336 $ 249,098 $ 249,062
Client assets under administration (C) 310,060 327,264 342,376 352,839 363,129
Total assets $ 528,590 $ 559,185 $ 581,712 $ 601,937 $ 612,191
(A) Client assets under administration in the Investment Managers segment include $52.5 billion of assets balances that require limited services and therefore are at fee levels below our normal full service assets (as of September 30, 2014).
(B) Equity/Fixed Income programs include $5.1 billion of assets invested in various asset allocation funds at September 30, 2014.
(C) In addition to the numbers presented, SEI also administers an additional $6.7 billion in Funds of Funds assets (as of September 30, 2014) on which SEI does not earn an administration fee.
SEI INVESTMENTS COMPANY
AVERAGE ASSET BALANCES
(In millions)
(Unaudited)
3rd Qtr. 4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr.
2013 2013 2014 2014 2014
Private Banks:
Equity/Fixed Income programs $ 13,696 $ 14,901 $ 16,114 $ 17,829 $ 18,804
Collective Trust Fund programs 11 11 14 12 12
Liquidity funds 5,142 5,218 5,757 5,429 5,466
Total assets under management $ 18,849 $ 20,130 $ 21,885 $ 23,270 $ 24,282
Client assets under administration 13,760 14,702 15,366 15,069 15,707
Total assets $ 32,609 $ 34,832 $ 37,251 $ 38,339 $ 39,989
Investment Advisors:
Equity/Fixed Income programs $ 35,618 $ 37,520 $ 39,005 $ 40,887 $ 42,389
Collective Trust Fund programs 14 13 13 13 11
Liquidity funds 2,520 2,785 2,806 2,637 2,830
Total assets under management $ 38,152 $ 40,318 $ 41,824 $ 43,537 $ 45,230
Institutional Investors:
Equity/Fixed Income programs $ 63,153 $ 65,750 $ 67,697 $ 70,706 $ 72,010
Collective Trust Fund programs 107 110 103 134 98
Liquidity funds 3,091 2,720 2,571 2,664 2,883
Total assets under management $ 66,351 $ 68,580 $ 70,371 $ 73,504 $ 74,991
Investment Managers:
Equity/Fixed Income programs $ 76 $ 75 $ 68 $ 68 $ 64
Collective Trust Fund programs 19,259 21,345 22,004 22,447 22,123
Liquidity funds 613 592 738 824 962
Total assets under management $ 19,948 $ 22,012 $ 22,810 $ 23,339 $ 23,149
Client assets under administration 292,627 303,131 320,644 333,373 344,661
Total assets $ 312,575 $ 325,143 $ 343,454 $ 356,712 $ 367,810
Investments in New Businesses:
Equity/Fixed Income programs $ 584 $ 613 $ 623 $ 640 $ 688
Liquidity funds 27 33 46 43 139
Total assets under management $ 611 $ 646 $ 669 $ 683 $ 827
LSV Asset Management:
Equity/Fixed Income programs $ 69,463 $ 75,240 $ 76,306 $ 79,866 $ 82,402
Total:
Equity/Fixed Income programs $ 182,590 $ 194,099 $ 199,813 $ 209,996 $ 216,357
Collective Trust Fund programs 19,391 21,479 22,134 22,606 22,244
Liquidity funds 11,393 11,348 11,918 11,597 12,280
Total assets under management $ 213,374 $ 226,926 $ 233,865 $ 244,199 $ 250,881
Client assets under administration 306,387 317,833 336,010 348,442 360,368
Total assets $ 519,761 $ 544,759 $ 569,875 $ 592,641 $ 611,249

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 October 22, 2014