SEI Reports Third-Quarter 2013 Financial Results

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OAKS, PA -- (Marketwired) -- 10/24/13 -- SEI Investments Company (NASDAQ: SEIC) today announced financial results for third-quarter 2013. Diluted earnings per share were $.38 in third-quarter 2013 compared to $.29 in third-quarter 2012.

Consolidated Overview For the Three Months For the Nine Months
(In thousands, except earnings per share) Ended September 30, Ended September 30,
2013 2012 % 2013 2012 %
Revenues $ 280,655 $ 251,752 11 % $ 827,108 $ 730,887 13 %
Net Income attributable to SEI 67,195 50,743 32 % 222,609 150,263 48 %
Diluted Earnings Per Share $ 0.38 $ 0.29 31 % $ 1.26 $ 0.85 48 %

"During the third quarter of 2013, the Company continued its positive progress across all of our business units. Our growth in revenues and profits reflect the impact of new client activity, growth of existing clients, and positive asset flows," said Alfred P. West, Jr., SEI Chairman and CEO.

"We continue to be encouraged by the market acceptance of our solutions. We are engaged in rapidly-changing markets requiring continued investment in our product and service offering. This enables us to enhance our competitive strength, accelerate our growth, and enhance long-term shareholder value."

Summary of Third-Quarter Results by Business Segment

(In thousands) For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2013 2012 % 2013 2012 %
Private Banks:
Revenues $ 97,370 $ 92,076 6 % $ 291,258 $ 268,367 9 %
Expenses 95,579 91,209 5 % 289,632 263,612 10 %
Operating Profit 1,791 867 107 % 1,626 4,755 (66 )%
Gain on sale of subsidiary -- -- N/M 22,112 -- N/M
Total Profit $ 1,791 $ 867 107 % $ 23,738 $ 4,755 N/M
Operating Margin (A) 2 % 1 % 1 % 2 %
Investment Advisors:
Revenues 61,393 51,384 19 % 175,868 150,227 17 %
Expenses 33,768 30,114 12 % 98,291 88,440 11 %
Operating Profit 27,625 21,270 30 % 77,577 61,787 26 %
Operating Margin 45 % 41 % 44 % 41 %
Institutional Investors:
Revenues 63,539 58,081 9 % 190,385 167,293 14 %
Expenses 33,058 29,654 11 % 97,595 86,494 13 %
Operating Profit 30,481 28,427 7 % 92,790 80,799 15 %
Operating Margin 48 % 49 % 49 % 48 %
Investment Managers:
Revenues 57,266 49,311 16 % 166,542 142,235 17 %
Expenses 37,763 32,122 18 % 109,432 92,711 18 %
Operating Profit 19,503 17,189 13 % 57,110 49,524 15 %
Operating Margin 34 % 35 % 34 % 35 %
Investments in New Businesses:
Revenues 1,087 900 21 % 3,055 2,765 10 %
Expenses 4,146 3,698 12 % 11,774 11,080 6 %
Operating Loss (3,059 ) (2,798 ) N/M (8,719 ) (8,315 ) N/M
Totals:
Revenues $ 280,655 $ 251,752 11 % $ 827,108 $ 730,887 13 %
Expenses 204,314 186,797 9 % 606,724 542,337 12 %
Corporate overhead expenses 14,402 11,668 23 % 40,719 33,830 20 %
NCI reflected in segments -- (203 ) N/M (289 ) (657 ) N/M
Income from operations $ 61,939 $ 53,490 16 % $ 179,954 $ 155,377 16 %
(A) Percentage determined exclusive of gain on sale of subsidiary.

Third-Quarter Business Commentary:

  • Revenues increased in third-quarter 2013 as compared to both third-quarter 2012 and second-quarter 2013. Revenue growth was primarily driven by higher Asset management, administration, and distribution fees from improved cash flows from new and existing clients and market appreciation.

  • Our average assets under management, excluding LSV, increased $11.3 billion, or nine percent, to $143.9 billion in the third-quarter 2013, as compared to $132.6 billion during the third-quarter 2012, and increased $3.0 billion, or two percent, as compared to $140.9 billion during the second-quarter 2013. Average asset balances for the third-quarter 2012 include $6.5 billion in assets related to SEI Asset Korea, which was sold in first-quarter 2013 (see attached Ending and Average Asset Balances schedules for further details).

  • Sales events, net of client losses, during third-quarter 2013 totaled approximately $20.7 million and are expected to generate net annualized recurring revenues of approximately $18.3 million when contract values are fully realized.

  • Income from LSV increased in third-quarter 2013 to $31.3 million as compared to $24.9 million in third-quarter 2012 due to an increase in assets under management. Our ownership interest in LSV was approximately 39.3 percent in third-quarter 2013 and 39.8 percent in third-quarter 2012.

  • Stock-based compensation expense in third-quarter 2013 increased by $7.2 million as compared to third-quarter 2012. This incremental expense reflects a change in our estimate of the timing of when stock option vesting targets will be achieved. The Private Banks segment recognized $2.1 million of this incremental expense. The Investment Advisors, Institutional Investors, and Investment Managers segments each recognized approximately $1.3 million in expense.

  • Corporate overhead costs increased in third-quarter 2013 as compared to third-quarter 2012 due to $1.2 million in increased stock-based compensation, increased personnel costs, and higher costs related to regulatory and compliance matters.

  • The effective tax rates were 28.5 percent in third-quarter 2013, 39.0 percent in third-quarter 2012, and 35.5 percent in second-quarter 2013. The third-quarter 2013 tax rate was benefited by Pennsylvania Tax Law changes enacted during the third-quarter 2013. These changes resulted in a reduction of the deferred tax liability that has been built up over numerous years. The third-quarter 2012 tax rate reflected the accrual of taxes on the cumulative undistributed earnings of SEI Asset Korea.

  • In third-quarter 2013, we repurchased 1.9 million shares of our common stock for $58.6 million.

Earnings Conference Call
A conference call to review earnings is scheduled for 2:00 p.m. ET on October 24, 2013. 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 306035.

About SEI
SEI (NASDAQ: SEIC) is a leading global provider of investment processing, fund processing, and investment management business outsourcing solutions that help corporations, financial institutions, financial advisors, and ultra-high-net-worth families create and manage wealth. As of September 30, 2013, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $529 billion in mutual fund and pooled or separately managed assets, including $219 billion in assets under management and $310 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 September 30,
2013 2012
Asset management, admin. and distribution fees $ 208,780 $ 183,083
Information processing and software servicing fees 64,606 60,901
Transaction-based and trade execution fees 7,269 7,768
Total revenues 280,655 251,752
Subadvisory, distribution and other asset mgmt costs 31,209 26,022
Software royalties and other information processing costs 7,541 6,701
Brokerage commissions 5,519 5,542
Compensation, benefits and other personnel 89,311 85,781
Stock-based compensation 11,097 3,879
Consulting, outsourcing and professional fees 33,367 27,314
Data processing and computer related 12,654 11,749
Facilities, supplies and other costs 13,573 15,129
Amortization 8,829 10,384
Depreciation 5,616 5,761
Total expenses 218,716 198,262
Income from operations 61,939 53,490
Net gain on investments 535 3,708
Interest and dividend income 679 1,490
Interest expense (195 ) (115 )
Equity in earnings of unconsolidated affiliates 31,028 24,928
Net income before income taxes 93,986 83,501
Income taxes 26,791 32,415
Net income 67,195 51,086
Less: Net income attributable to the noncontrolling interest -- (343 )
Net income attributable to SEI $ 67,195 $ 50,743
Diluted earnings per common share $ 0.38 $ 0.29
Shares used to calculate diluted earnings per share 176,043 175,369
Basic earnings per common share $ 0.39 $ 0.29
Shares used to calculate basic earnings per share 171,308 173,429
SEI INVESTMENTS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
For the Nine Months Ended September 30,
2013 2012
Asset management, admin. and distribution fees $ 611,135 $ 532,650
Information processing and software servicing fees 191,606 174,355
Transaction-based and trade execution fees 24,367 23,882
Total revenues 827,108 730,887
Subadvisory, distribution and other asset mgmt costs 88,795 79,442
Software royalties and other information processing costs 22,912 19,337
Brokerage commissions 18,291 17,483
Compensation, benefits and other personnel 264,636 244,855
Stock-based compensation 26,997 11,777
Consulting, outsourcing and professional fees 98,667 80,598
Data processing and computer related 37,028 34,873
Facilities, supplies and other costs 47,280 44,909
Amortization 25,498 25,413
Depreciation 17,050 16,823
Total expenses 647,154 575,510
Income from operations 179,954 155,377
Net gain on investments 638 7,577
Interest and dividend income 2,420 4,417
Interest expense (422 ) (389 )
Equity in earnings of unconsolidated affiliates 86,204 74,970
Gain on sale of subsidiary 22,112 --
Other income 43,429 --
Net income before income taxes 334,335 241,952
Income taxes 111,376 90,892
Net income 222,959 151,060
Less: Net income attributable to the noncontrolling interest (350 ) (797 )
Net income attributable to SEI $ 222,609 $ 150,263
Diluted earnings per common share $ 1.26 $ 0.85
Shares used to calculate diluted earnings per share 176,036 176,317
Basic earnings per common share $ 1.29 $ 0.86
Shares used to calculate basic earnings per share 172,043 174,869
SEI INVESTMENTS COMPANY
CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
September 30, December 31,
2013 2012
Assets
Cash and cash equivalents $ 527,214 $ 452,247
Restricted cash 5,500 6,000
Receivables, net 225,961 202,818
Securities owned 20,728 20,088
Other current assets 20,629 20,251
Total current assets 800,032 701,404
Property and equipment, net 118,494 127,581
Investments available for sale 86,186 75,869
Trading securities 4,841 5,909
Capitalized software, net 313,206 307,490
Investment in unconsolidated affiliates 57,429 77,398
Other assets, net 11,511 14,173
Total assets $ 1,391,699 $ 1,309,824
Liabilities
Current liabilities $ 145,278 $ 152,005
Deferred income taxes 71,151 93,458
Other Long-term liabilities 8,703 7,032
Total SEI Investments Company shareholders' equity 1,166,567 1,038,180
Noncontrolling interest -- 19,149
Total Equity 1,166,567 1,057,329
Total liabilities and equity $ 1,391,699 $ 1,309,824
SEI INVESTMENTS COMPANY
ENDING ASSET BALANCES
(In millions)
(Unaudited)
Sept. 30, Dec. 31, Mar. 31, Jun. 30, Sept. 30,
2012 2012 2013 2013 2013
Private Banks:
Equity/Fixed Income programs $ 17,960 $ 18,862 $ 12,446 $ 12,876 $ 14,305
Collective Trust Fund programs 147 11 9 10 11
Liquidity funds 5,342 6,008 5,143 5,048 5,167
Total assets under management $ 23,449 $ 24,881 $ 17,598 $ 17,934 $ 19,483
Client assets under administration 11,611 12,178 12,970 13,122 14,101
Total assets $ 35,060 $ 37,059 $ 30,568 $ 31,056 $ 33,584
Investment Advisors:
Equity/Fixed Income programs $ 30,864 $ 31,220 $ 34,166 $ 34,447 $ 36,203
Collective Trust Fund programs 370 14 15 14 14
Liquidity funds 1,868 2,514 2,094 2,145 2,779
Total assets under management $ 33,102 $ 33,748 $ 36,275 $ 36,606 $ 38,996
Institutional Investors:
Equity/Fixed Income programs $ 59,852 $ 62,160 $ 64,214 $ 61,927 $ 64,429
Collective Trust Fund programs 153 102 101 106 107
Liquidity funds 3,272 2,454 2,810 2,901 3,125
Total assets under management $ 63,277 $ 64,716 $ 67,125 $ 64,934 $ 67,661
Investment Managers:
Equity/Fixed Income programs $ 65 $ 67 $ 73 $ 75 $ 75
Collective Trust Fund programs 15,433 16,197 17,656 18,197 19,868
Liquidity funds 396 408 522 542 678
Total assets under management $ 15,894 $ 16,672 $ 18,251 $ 18,814 $ 20,621
Client assets under administration (A) 240,965 244,671 275,632 289,807 295,959
Total assets $ 256,859 $ 261,343 $ 293,883 $ 308,621 $ 316,580
Investments in New Businesses:
Equity/Fixed Income programs $ 534 $ 513 $ 552 $ 572 $ 594
Liquidity funds 29 43 42 29 26
Total assets under management $ 563 $ 556 $ 594 $ 601 $ 620
LSV Asset Management:
Equity/Fixed Income programs $ 58,886 $ 60,947 $ 64,958 $ 65,417 $ 71,149
Total:
Equity/Fixed Income programs (B) (D) $ 168,161 $ 173,769 $ 176,409 $ 175,314 $ 186,755
Collective Trust Fund programs 16,103 16,324 17,781 18,327 20,000
Liquidity funds 10,907 11,427 10,611 10,665 11,775
Total assets under management $ 195,171 $ 201,520 $ 204,801 $ 204,306 $ 218,530
Client assets under administration (C) 252,576 256,849 288,602 302,929 310,060
Total assets $ 447,747 $ 458,369 $ 493,403 $ 507,235 $ 528,590
(A) Client assets under administration in the Investment Managers segment include $56.2 billion of assets balances that require limited services and therefore are at fee levels below our normal full service assets (as of Sept. 30, 2013).
(B) Equity/Fixed Income programs include $3.9 billion of assets invested in various asset allocation funds at Sept. 30, 2013.
(C) In addition to the numbers presented, SEI also administers an additional $5.6 billion in Funds of Funds assets (as of Sept. 30, 2013) on which SEI does not earn an administration fee.
(D) Equity/Fixed Income programs in the Private Banks segment for 2012 included assets related to SEI Asset Korea, which was sold in first-quarter 2013. Assets for SEI Asset Korea at Sept. 30, 2012 and Dec. 31, 2012 were $6.6 billion and $7.0 billion, respectively.
SEI INVESTMENTS COMPANY
AVERAGE ASSET BALANCES
(In millions)
(Unaudited)
3rd Qtr. 4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr.
2012 2012 2013 2013 2013
Private Banks:
Equity/Fixed Income programs $ 17,527 $ 18,301 $ 19,197 $ 12,959 $ 13,696
Collective Trust Fund programs 230 66 11 10 11
Liquidity funds 5,401 5,229 5,556 5,093 5,142
Total assets under management $ 23,158 $ 23,596 $ 24,764 $ 18,062 $ 18,849
Client assets under administration 10,867 11,783 12,860 13,183 13,760
Total assets $ 34,025 $ 35,379 $ 37,624 $ 31,245 $ 32,609
Investment Advisors:
Equity/Fixed Income programs $ 30,032 $ 30,881 $ 33,189 $ 34,831 $ 35,618
Collective Trust Fund programs 532 158 14 14 14
Liquidity funds 1,886 2,176 2,085 2,028 2,520
Total assets under management $ 32,450 $ 33,215 $ 35,288 $ 36,873 $ 38,152
Institutional Investors:
Equity/Fixed Income programs $ 57,763 $ 61,304 $ 63,642 $ 63,466 $ 63,153
Collective Trust Fund programs 284 120 101 105 107
Liquidity funds 3,253 3,493 2,960 2,975 3,091
Total assets under management $ 61,300 $ 64,917 $ 66,703 $ 66,546 $ 66,351
Investment Managers:
Equity/Fixed Income programs $ 62 $ 68 $ 68 $ 75 $ 76
Collective Trust Fund programs 14,797 15,719 17,129 18,205 19,259
Liquidity funds 287 395 511 500 613
Total assets under management $ 15,146 $ 16,182 $ 17,708 $ 18,780 $ 19,948
Client assets under administration 237,155 240,520 263,054 286,018 292,627
Total assets $ 252,301 $ 256,702 $ 280,762 $ 304,798 $ 312,575
Investments in New Businesses:
Equity/Fixed Income programs $ 530 $ 518 $ 542 $ 567 $ 584
Liquidity funds 35 33 38 34 27
Total assets under management $ 565 $ 551 $ 580 $ 601 $ 611
LSV Asset Management:
Equity/Fixed Income programs $ 57,164 $ 59,383 $ 63,997 $ 66,781 $ 69,463
Total:
Equity/Fixed Income programs (A) $ 163,078 $ 170,455 $ 180,635 $ 178,679 $ 182,590
Collective Trust Fund programs 15,843 16,063 17,255 18,334 19,391
Liquidity funds 10,862 11,326 11,150 10,630 11,393
Total assets under management $ 189,783 $ 197,844 $ 209,040 $ 207,643 $ 213,374
Client assets under administration 248,022 252,303 275,914 299,201 306,387
Total assets $ 437,805 $ 450,147 $ 484,954 $ 506,844 $ 519,761
(A) Equity/Fixed Income programs in the Private Banks segment for 2012 and first-quarter 2013 included average assets related to SEI Asset Korea, which was sold in first-quarter 2013. Average assets for SEI Asset Korea for the third and fourth quarters of 2012 were $6.5 billion and $6.8 billion, respectively, and $7.0 billion for the 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 October 24, 2013