SEI Reports First-Quarter 2014 Financial Results

Download as PDF

Related Documents

SEI Approves Increase in Stock Repurchase Program

OAKS, PA -- (Marketwired) -- 04/23/14 -- SEI Investments Company (NASDAQ: SEIC) today announced financial results for the first-quarter 2014. Diluted earnings per share were $.43 in first-quarter 2014 compared to $.41 in first-quarter 2013. Diluted earnings per share reflect pre-tax gains of $5.6 million, or $.02 per share, and $22.1 million, or $.08 per share, from the sale of SEI Asset Korea, in the first-quarter 2014 and 2013, respectively.

In addition, on Tuesday, April 22, 2014, SEI's Board of Directors approved an increase in its stock repurchase program by an additional $200 million, increasing the available authorization under the program to approximately $212 million.

Consolidated Overview For the Three Months
(In thousands, except earnings per share) Ended March 31,
2014 2013 %
Revenues $ 302,386 $ 271,879 11 %
Net income attributable to SEI 74,820 71,920 4 %
Diluted earnings per share $ 0.43 $ 0.41 5 %

"First quarter results reflect continued progress across our company both in terms of financial results and the expanding market acceptance of our solutions," said Alfred P. West, Jr., SEI Chairman and CEO. "The continued implementation of our integrated business solutions contributed to increased assets under administration and assets under management during the quarter.

"These results reinforce our commitment to the implementation of SEI's long-term market strategies. We continue to invest in solutions we feel position us well for long-term success, sustainable growth, and increased shareholder value."

Summary of First-Quarter Results by Business Segment

(In thousands) For the Three Months Ended March 31,
2014 2013 %
Private Banks:
Revenues $ 105,179 $ 98,746 7 %
Expenses 100,190 96,298 4 %
Operating Profit 4,989 2,448 104 %
Gain on sale of subsidiary 5,582 22,112 NM
Total Profit 10,571 24,560 NM
Operating Margin (A) 5 % 2 %
Investment Advisors:
Revenues 66,424 55,191 20 %
Expenses 34,577 31,625 9 %
Operating Profit 31,847 23,566 35 %
Operating Margin 48 % 43 %
Institutional Investors:
Revenues 68,657 63,162 9 %
Expenses 34,095 31,509 8 %
Operating Profit 34,562 31,653 9 %
Operating Margin 50 % 50 %
Investment Managers:
Revenues 61,008 53,820 13 %
Expenses 39,184 35,162 11 %
Operating Profit 21,824 18,658 17 %
Operating Margin 36 % 35 %
Investments in New Businesses:
Revenues 1,118 960 16 %
Expenses 4,249 3,738 14 %
Operating Loss (3,131 ) (2,778 ) NM
Totals:
Revenues $ 302,386 $ 271,879 11 %
Expenses 212,295 198,332 7 %
Corporate overhead expenses 11,699 13,794 (15 )%
Noncontrolling interest reflected in segments - (289 ) NM
Income from operations $ 78,392 $ 60,042 31 %
(A) Percentages determined exclusive of gain on sale of subsidiary.

First-Quarter Business Highlights:

  • Revenues increased in first-quarter 2014 as compared to both first-quarter 2013 and fourth-quarter 2013. 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.
  • Sales events, net of client losses, during first-quarter 2014 totaled approximately $23.1 million and are expected to generate net annualized recurring revenues of approximately $21.9 million when contract values are fully realized.
  • Our average assets under management, excluding LSV, increased $12.6 billion, or nine percent, to $157.6 billion in the first-quarter 2014, as compared to $145.0 billion during the first-quarter 2013, and increased $5.9 billion, or four percent, as compared to $151.7 billion during the fourth-quarter 2013. Average asset balances for the first-quarter 2013 include $7.0 billion in assets related to SEI Asset Korea (SEI AK), which was sold in first-quarter 2013 (see attached Ending and Average Asset Balances schedules for further details).
  • Our average assets under administration increased $60.1 billion, or 22 percent, to $336.0 billion in the first-quarter 2014, as compared to $275.9 billion during the first-quarter 2013, and increased $18.2 billion, or six percent, as compared to $317.8 billion during the fourth-quarter 2013 (see attached Ending and Average Asset Balances schedules for further details).
  • We recorded pre-tax gains of $5.6 million, or $.02 diluted earnings per share, and $22.1 million, or $.08 diluted earnings per share, from the sale of SEI AK in first-quarter 2014 and 2013, respectively. The operating results of SEI AK were included in the Private Banks business segment.
  • Income from LSV increased in first-quarter 2014 to $32.2 million as compared to $27.8 million in first-quarter 2013 due to an increase in assets under management from market appreciation and an increase in performance fees earned by LSV. Our ownership interest in LSV was approximately 39.3 percent in first-quarter 2014 and 39.8 percent in first-quarter 2013.
  • Amortization expense related to capitalized software increased to $9.2 million during the first-quarter 2014 as compared to $8.2 million during the first-quarter 2013 due to continued releases of the SEI Wealth Platform(SM).
  • The effective tax rates were 35.9 percent in first-quarter 2014, 34.9 percent in first-quarter 2013, and 35.2 percent in fourth-quarter 2013. Due to the expiration of the research and development tax credit on December 31, 2013, the first-quarter 2014 tax rate reflects no benefit for the tax credit, whereas the first-quarter 2013 tax rate reflects the benefit for 2012 and 2013. The increase in our tax rate was partially offset by an increase in the portion of pre-tax income in certain foreign jurisdictions which is taxed at a lower rate during the first-quarter 2014.
  • In first-quarter 2014, we repurchased 2.0 million shares of our common stock for $69.0 million.

Earnings Conference Call
A conference call to review earnings is scheduled for 1:00 p.m. ET on April 23, 2014. Investors may listen to the call at www.seic.com/investors. The call may also be accessed at the financial services sections of numerous web sites, including Google Finance and Yahoo Finance. Investors may also listen to replays at these web sites, or by telephone at (USA) 1-800-475-6701; (International) 320-365-3844, access code 324787.

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 March 31, 2014, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $582 billion in mutual fund and pooled or separately managed assets, including $239 billion in assets under management and $343 billion in client assets under administration. For more information, visit www.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 March 31,
2014 2013
Asset management, admin. and distribution fees $ 225,071 $ 198,633
Information processing and software servicing fees 69,178 64,532
Transaction-based and trade execution fees 8,137 8,714
Total revenues 302,386 271,879
Subadvisory, distribution and other asset mgmt costs 34,012 27,934
Software royalties and other information processing costs 8,553 7,487
Brokerage commissions 5,979 6,512
Compensation, benefits and other personnel 94,424 88,610
Stock-based compensation 2,823 5,293
Consulting, outsourcing and professional fees 34,933 31,849
Data processing and computer related 12,620 12,058
Facilities, supplies and other costs 15,852 18,148
Amortization 9,214 8,242
Depreciation 5,584 5,704
Total expenses 223,994 211,837
Income from operations 78,392 60,042
Net gain on investments 136 280
Interest and dividend income 777 1,053
Interest expense (113 ) (113 )
Equity in earnings of unconsolidated affiliates 31,891 27,588
Gain on sale of subsidiary 5,582 22,112
Income before income taxes 116,665 110,962
Income taxes 41,845 38,692
Net income 74,820 72,270
Less: Net income attributable to the noncontrolling interest - (350 )
Net income attributable to SEI $ 74,820 $ 71,920
Basic earnings per common share $ 0.44 $ 0.42
Shares used to calculate basic earnings per share 169,306 172,598
Diluted earnings per common share $ 0.43 $ 0.41
Shares used to calculate diluted earnings per share 173,828 176,005
SEI INVESTMENTS COMPANY
BALANCE SHEETS
(In thousands)
(Unaudited)
March 31, December 31,
2014 2013
Assets
Current Assets:
Cash and cash equivalents $ 545,552 $ 578,273
Restricted cash 5,500 5,500
Receivables from regulated investment companies 43,272 39,364
Receivables, net 207,724 186,664
Securities owned 21,153 21,133
Other current assets 19,432 16,166
Total Current Assets 842,633 847,100
Property and equipment, net 121,039 118,995
Capitalized software, net 312,866 312,615
Investments available for sale 81,660 83,323
Trading securities 4,914 4,849
Investment in unconsolidated affiliates 61,756 61,370
Other assets, net 14,113 10,917
Total Assets $ 1,438,981 $ 1,439,169
Liabilities and Equity
Current Liabilities:
Accounts payable $ 8,373 $ 16,235
Accrued liabilities 141,664 188,123
Deferred income taxes, net 1,604 1,653
Deferred revenue 2,078 1,977
Total Current Liabilities 153,719 207,988
Deferred income taxes 71,578 66,572
Other long-term liabilities 9,312 8,607
Total Liabilities 234,609 283,167
Shareholders' Equity:
Common stock 1,691 1,692
Capital in excess of par value 758,645 721,219
Retained earnings 444,022 431,604
Accumulated other comprehensive income, net 14 1,487
Total Shareholders' Equity 1,204,372 1,156,002
Total Liabilities and Shareholders' Equity $ 1,438,981 $ 1,439,169
SEI INVESTMENTS COMPANY
ENDING ASSET BALANCES
(In millions)
(Unaudited)
Mar. 31, Jun. 30, Sept. 30, Dec 31, Mar. 31,
2013 2013 2013 2013 2014
Private Banks:
Equity/Fixed Income programs $ 12,446 $ 12,876 $ 14,305 $ 15,472 $ 16,918
Collective Trust Fund programs 9 10 11 14 14
Liquidity funds 5,143 5,048 5,167 5,685 5,670
Total assets under management $ 17,598 $ 17,934 $ 19,483 $ 21,171 $ 22,602
Client assets under administration 12,970 13,122 14,101 15,272 15,641
Total assets $ 30,568 $ 31,056 $ 33,584 $ 36,443 $ 38,243
Investment Advisors:
Equity/Fixed Income programs $ 34,166 $ 34,447 $ 36,203 $ 38,574 $ 39,981
Collective Trust Fund programs 15 14 14 11 13
Liquidity funds 2,094 2,145 2,779 2,846 2,802
Total assets under management $ 36,275 $ 36,606 $ 38,996 $ 41,431 $ 42,796
Institutional Investors:
Equity/Fixed Income programs $ 64,214 $ 61,927 $ 64,429 $ 66,548 $ 69,194
Collective Trust Fund programs 101 106 107 109 102
Liquidity funds 2,810 2,901 3,125 2,644 2,505
Total assets under management $ 67,125 $ 64,934 $ 67,661 $ 69,301 $ 71,801
Investment Managers:
Equity/Fixed Income programs $ 73 $ 75 $ 75 $ 69 $ 68
Collective Trust Fund programs 17,656 18,197 19,868 22,377 22,633
Liquidity funds 522 542 678 718 782
Total assets under management $ 18,251 $ 18,814 $ 20,621 $ 23,164 $ 23,483
Client assets under administration (A) 275,632 289,807 295,959 311,992 326,735
Total assets $ 293,883 $ 308,621 $ 316,580 $ 335,156 $ 350,218
Investments in New Businesses:
Equity/Fixed Income programs $ 552 $ 572 $ 594 $ 619 $ 632
Liquidity funds 42 29 26 46 49
Total assets under management $ 594 $ 601 $ 620 $ 665 $ 681
LSV Asset Management:
Equity/Fixed Income programs $ 64,958 $ 65,417 $ 71,149 $ 76,189 $ 77,973
Total:
Equity/Fixed Income programs (B) $ 176,409 $ 175,314 $ 186,755 $ 197,471 $ 204,766
Collective Trust Fund programs 17,781 18,327 20,000 22,511 22,762
Liquidity funds 10,611 10,665 11,775 11,939 11,808
Total assets under management $ 204,801 $ 204,306 $ 218,530 $ 231,921 $ 239,336
Client assets under administration (C) 288,602 302,929 310,060 327,264 342,376
Total assets $ 493,403 $ 507,235 $ 528,590 $ 559,185 $ 581,712
(A) Client assets under administration in the Investment Managers segment include $51.3 billion of assets balances that require limited services and therefore are at fee levels below our normal full service assets (as of March 31, 2014).
(B) Equity/Fixed Income programs include $4.7 billion of assets invested in various asset allocation funds at March 31, 2014.
(C) In addition to the numbers presented, SEI also administers an additional $6.2 billion in Funds of Funds assets (as of March 31, 2014) on which SEI does not earn an administration fee.
SEI INVESTMENTS COMPANY
AVERAGE ASSET BALANCES
(In millions)
(Unaudited)
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 1st Qtr.
2013 2013 2013 2013 2014
Private Banks:
Equity/Fixed Income programs $ 19,197 $ 12,959 $ 13,696 $ 14,901 $ 16,114
Collective Trust Fund programs 11 10 11 11 14
Liquidity funds 5,556 5,093 5,142 5,218 5,757
Total assets under management $ 24,764 $ 18,062 $ 18,849 $ 20,130 $ 21,885
Client assets under administration 12,860 13,183 13,760 14,702 15,366
Total assets $ 37,624 $ 31,245 $ 32,609 $ 34,832 $ 37,251
Investment Advisors:
Equity/Fixed Income programs $ 33,189 $ 34,831 $ 35,618 $ 37,520 $ 39,005
Collective Trust Fund programs 14 14 14 13 13
Liquidity funds 2,085 2,028 2,520 2,785 2,806
Total assets under management $ 35,288 $ 36,873 $ 38,152 $ 40,318 $ 41,824
Institutional Investors:
Equity/Fixed Income programs $ 63,642 $ 63,466 $ 63,153 $ 65,750 $ 67,697
Collective Trust Fund programs 101 105 107 110 103
Liquidity funds 2,960 2,975 3,091 2,720 2,571
Total assets under management $ 66,703 $ 66,546 $ 66,351 $ 68,580 $ 70,371
Investment Managers:
Equity/Fixed Income programs $ 68 $ 75 $ 76 $ 75 $ 68
Collective Trust Fund programs 17,129 18,205 19,259 21,345 22,004
Liquidity funds 511 500 613 592 738
Total assets under management $ 17,708 $ 18,780 $ 19,948 $ 22,012 $ 22,810
Client assets under administration 263,054 286,018 292,627 303,131 320,644
Total assets $ 280,762 $ 304,798 $ 312,575 $ 325,143 $ 343,454
Investments in New Businesses:
Equity/Fixed Income programs $ 542 $ 567 $ 584 $ 613 $ 623
Liquidity funds 38 34 27 33 46
Total assets under management $ 580 $ 601 $ 611 $ 646 $ 669
LSV Asset Management:
Equity/Fixed Income programs $ 63,997 $ 66,781 $ 69,463 $ 75,240 $ 76,306
Total:
Equity/Fixed Income programs (A) $ 180,635 $ 178,679 $ 182,590 $ 194,099 $ 199,813
Collective Trust Fund programs 17,255 18,334 19,391 21,479 22,134
Liquidity funds 11,150 10,630 11,393 11,348 11,918
Total assets under management $ 209,040 $ 207,643 $ 213,374 $ 226,926 $ 233,865
Client assets under administration 275,914 299,201 306,387 317,833 336,010
Total assets $ 484,954 $ 506,844 $ 519,761 $ 544,759 $ 569,875
(A) Equity/Fixed Income programs in the Private Banks segment for first-quarter 2013 includes $7.0 billion in assets related to SEI Asset Korea, which was sold in first-quarter 2013.

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 April 23, 2014