SEI Reports Second-Quarter 2013 Financial Results

Download as PDF

Related Documents

OAKS, PA -- (Marketwired) -- 07/18/13 -- SEI Investments Company (NASDAQ: SEIC) today announced financial results for second-quarter 2013. Diluted earnings per share were $.47 in second-quarter 2013 compared to $.28 in second-quarter 2012. Second-quarter 2013 includes income of $.16 diluted earnings per share from a litigation settlement payment related to a structured investment vehicle (SIV) security.

Consolidated Overview
(In thousands, except earnings per share)
For the Three Months
Ended June 30,

For the Six Months
Ended June 30,
2013 2012 % 2013 2012 %
Revenues $ 274,574 $ 241,237 14 % $ 546,453 $ 479,135 14 %
Net Income attributable to SEI 83,494 49,555 68 % 155,414 99,520 56 %
Diluted Earnings Per Share $ 0.47 $ 0.28 68 % $ 0.88 $ 0.56 57 %

"During the second quarter of 2013, the Company continued to make strides in the development and successful implementation of our business strategies across all of our units. Our financial results reflect continued improvement in overall asset flows, implementation of new clients, and a continuation of solid sales activity," said Alfred P. West, Jr., SEI Chairman and CEO.

"Despite our profit challenges in the Private Banks segment, we continue to be encouraged by our progress as we build and enhance our solutions for our markets. Our strong financial condition, the acceptance of our business solutions, and the overall size of our market opportunity bode well for our future. As always, we are committed to enhancing shareholder value over the long term."

Summary of Second-Quarter Results by Business Segment

(In thousands) For the Three Months For the Six Months
Ended June 30, Ended June 30,
2013 2012 % 2013 2012 %
Private Banks:
Revenues $ 95,142 $ 88,303 8 % $ 193,888 $ 176,291 10 %
Expenses 97,755 84,886 15 % 194,053 172,403 13 %
Operating (Loss) Profit (2,613 ) 3,417 (176 )% (165 ) 3,888 (104 )%
Gain on sale of subsidiary - - N/M 22,112 - N/M
Total (Loss) Profit $ (2,613 ) $ 3,417 N/M $ 21,947 $ 3,888 N/M
Operating Margin (A) (3 )% 4 % - % 2 %
Investment Advisors:
Revenues 59,284 49,375 20 % 114,475 98,843 16 %
Expenses 32,898 29,025 13 % 64,523 58,326 11 %
Operating Profit 26,386 20,350 30 % 49,952 40,517 23 %
Operating Margin 45 % 41 % 44 % 41 %
Institutional Investors:
Revenues 63,684 55,895 14 % 126,846 109,212 16 %
Expenses 33,028 28,740 15 % 64,537 56,840 14 %
Operating Profit 30,656 27,155 13 % 62,309 52,372 19 %
Operating Margin 48 % 49 % 49 % 48 %
Investment Managers:
Revenues 55,456 46,713 19 % 109,276 92,924 18 %
Expenses 36,507 30,163 21 % 71,669 60,589 18 %
Operating Profit 18,949 16,550 14 % 37,607 32,335 16 %
Operating Margin 34 % 35 % 34 % 35 %
Investments in New Businesses:
Revenues 1,008 951 6 % 1,968 1,865 6 %
Expenses 3,890 3,684 6 % 7,628 7,382 3 %
Operating Loss (2,882 ) (2,733 ) N/M (5,660 ) (5,517 ) N/M
Totals:
Revenues $ 274,574 $ 241,237 14 % $ 546,453 $ 479,135 14 %
Expenses 204,078 176,498 16 % 402,410 355,540 13 %
Corporate overhead expenses 12,523 11,080 13 % 26,317 22,162 19 %
NCI reflected in segments - (139 ) N/M (289 ) (454 ) N/M
Income from operations $ 57,973 $ 53,798 8 % $ 118,015 $ 101,887 16 %
(A) Percentage determined exclusive of gain on sale of subsidiary.

Second-Quarter Business Commentary:

  • Revenues increased in second-quarter 2013 as compared to both second-quarter 2012 and first-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 $14.2 billion, or 11 percent, to $140.9 billion in the second-quarter 2013, as compared to $126.6 billion during the second-quarter 2012, and decreased $4.1 billion, or three percent, as compared to $145.0 billion during the first-quarter 2013. Average asset balances for the second-quarter 2013 do not include assets related to SEI Asset Korea (see attached Ending and Average Asset Balances schedules for further details).
  • Net income attributable to SEI reflects income of $43.4 million, or approximately $.16 diluted earnings per share, from a settlement payment received pertaining to litigation related to the purchase of securities of Cheyne Finance LLC, a SIV security. SEI holds no SIV securities.
  • Sales events, net of client losses, during second-quarter 2013 totaled approximately $21.7 million and are expected to generate net annualized recurring revenues of approximately $19.8 million when contract values are fully realized.
  • During the second-quarter 2013 the Company recognized an incremental $5.3 million of stock-based compensation expense compared to the first-quarter 2013. This incremental expense reflects a change in the timing of vesting assumptions for previously issued equity options due to the earnings per share impact of the $43.4 million litigation settlement previously mentioned. The Private Banks segment recognized $1.6 million of this incremental expense. The Investment Advisors, Institutional Investors, and Investment Managers segments each recognized approximately $1.0 million.
  • Second-quarter 2013 results for Private Banks as compared to first-quarter 2013 and second-quarter 2012 reflect the sale of SEI Asset Korea at the end of first-quarter 2013. The Private Banks segment's results reflect a reduction in revenue, expense, and profit, as compared to first-quarter 2013 of $2.9 million, $2.5 million, and $0.4 million, respectively. The Private Banks segment's results reflect a reduction in revenue, expense, and profit, as compared to second-quarter 2012 of $2.7 million, $2.5 million, and $0.2 million, respectively.
  • Income from LSV increased in second-quarter 2013 to $27.8 million as compared to $22.7 million in second-quarter 2012 due to an increase in assets under management. Our ownership interest in LSV was approximately 39.3 percent in second-quarter 2013 and 39.8 percent in second-quarter 2012.
  • The effective tax rates were 35.5 percent in second-quarter 2013, 36.6 percent in second-quarter 2012, and 34.9 percent in first-quarter 2013. The second-quarter 2013 tax rate compared to the second-quarter 2012 tax rate was benefited by the reinstatement of the research and development tax credit in 2013 as well as the closure of prior year tax audits.
  • In second-quarter 2013, we repurchased 1.7 million shares of our common stock for $50.5 million.

Earnings Conference Call
A conference call to review earnings is scheduled for 2:00 PM ET on July 18, 2013. Investors may listen to the call at www.seic.com/investors or listen at www.earnings.com, a service of Thomson Streetevents. The call may also be accessed at numerous financial services web sites including AOL and Yahoo. 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 297755.

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 June 30, 2013, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $507 billion in mutual fund and pooled or separately managed assets, including $204 billion in assets under management and $303 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 June 30,
2013 2012
Asset management, admin. and distribution fees $ 203,722 $ 176,613
Information processing and software servicing fees 62,468 57,254
Transaction-based and trade execution fees 8,384 7,370
Total revenues 274,574 241,237
Subadvisory, distribution and other asset mgmt costs 29,652 25,417
Software royalties and other information processing costs 7,884 5,695
Brokerage commissions 6,260 5,634
Compensation, benefits and other personnel 86,715 80,531
Stock-based compensation 10,607 3,865
Consulting, outsourcing and professional fees 33,451 26,329
Data processing and computer related 12,316 11,659
Facilities, supplies and other costs 15,559 15,272
Amortization 8,427 7,407
Depreciation 5,730 5,630
Total expenses 216,601 187,439
Income from operations 57,973 53,798
Net (loss) gain on investments (177 ) 664
Interest and dividend income 688 1,440
Interest expense (114 ) (113 )
Equity in earnings of unconsolidated affiliates 27,588 22,712
Other income 43,429 -
Net income before income taxes 129,387 78,501
Income taxes 45,893 28,762
Net income 83,494 49,739
Less: Net income attributable to the noncontrolling interest - (184 )
Net income attributable to SEI $ 83,494 $ 49,555
Diluted earnings per common share $ 0.47 $ 0.28
Shares used to calculate diluted earnings per share 176,058 175,913
Basic earnings per common share $ 0.48 $ 0.28
Shares used to calculate basic earnings per share 172,223 174,830
SEI INVESTMENTS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
For the Six Months Ended June 30,
2013 2012
Asset management, admin. and distribution fees $ 402,355 $ 349,567
Information processing and software servicing fees 127,000 113,454
Transaction-based and trade execution fees 17,098 16,114
Total revenues 546,453 479,135
Subadvisory, distribution and other asset mgmt costs 57,586 53,420
Software royalties and other information processing costs 15,371 12,636
Brokerage commissions 12,772 11,941
Compensation, benefits and other personnel 175,325 159,074
Stock-based compensation 15,900 7,898
Consulting, outsourcing and professional fees 65,300 53,284
Data processing and computer related 24,374 23,124
Facilities, supplies and other costs 33,707 29,780
Amortization 16,669 15,029
Depreciation 11,434 11,062
Total expenses 428,438 377,248
Income from operations 118,015 101,887
Net gain on investments 103 3,869
Interest and dividend income 1,741 2,927
Interest expense (227 ) (274 )
Equity in earnings of unconsolidated affiliates 55,176 50,042
Gain on sale of subsidiary 22,112 -
Other income 43,429 -
Net income before income taxes 240,349 158,451
Income taxes 84,585 58,477
Net income 155,764 99,974
Less: Net income attributable to the noncontrolling interest (350 ) (454 )
Net income attributable to SEI $ 155,414 $ 99,520
Diluted earnings per common share $ 0.88 $ 0.56
Shares used to calculate diluted earnings per share 176,032 176,791
Basic earnings per common share $ 0.90 $ 0.57
Shares used to calculate basic earnings per share 172,411 175,589
SEI INVESTMENTS COMPANY
CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, December 31,
2013 2012
Assets
Cash and short-term investments $ 487,059 $ 452,247
Restricted cash 5,500 6,000
Receivables, net 220,828 202,818
Securities owned 21,103 20,088
Other current assets 18,886 20,251
Total current assets 753,376 701,404
Property and equipment, net 119,195 127,581
Marketable securities 69,692 81,778
Capitalized software, net 313,121 307,490
Investment in unconsolidated affiliates 81,777 77,398
Other assets, net 10,707 14,173
Total assets $ 1,347,868 $ 1,309,824
Liabilities
Current liabilities $ 131,247 $ 152,005
Deferred income taxes 82,269 93,458
Other Long-term liabilities 7,857 7,032
Total SEI Investments Company shareholders' equity 1,126,495 1,038,180
Noncontrolling interest - 19,149
Total Equity 1,126,495 1,057,329
Total liabilities and equity $ 1,347,868 $ 1,309,824
SEI INVESTMENTS COMPANY
ENDING ASSET BALANCES
(In millions)
(Unaudited)
Jun. 30, Sept. 30, Dec. 31, Mar. 31, Jun. 30,
2012 2012 2012 2013 2013
Private Banks:
Equity/Fixed Income prgms. $ 16,848 $ 17,960 $ 18,862 $ 12,446 $ 12,876
Collective Trust Fund prgms. 335 147 11 9 10
Liquidity funds 5,063 5,342 6,008 5,143 5,048
Total assets under mgmnt. $ 22,246 $ 23,449 $ 24,881 $ 17,598 $ 17,934
Client assets under admin. 10,719 11,611 12,178 12,970 13,122
Total assets $ 32,965 $ 35,060 $ 37,059 $ 30,568 $ 31,056
Investment Advisors:
Equity/Fixed Income prgms. $ 29,153 $ 30,864 $ 31,220 $ 34,166 $ 34,447
Collective Trust Fund prgms. 705 370 14 15 14
Liquidity funds 1,880 1,868 2,514 2,094 2,145
Total assets under mgmnt. $ 31,738 $ 33,102 $ 33,748 $ 36,275 $ 36,606
Institutional Investors:
Equity/Fixed Income prgms. $ 55,548 $ 59,852 $ 62,160 $ 64,214 $ 61,927
Collective Trust Fund prgms. 415 153 102 101 106
Liquidity funds 2,958 3,272 2,454 2,810 2,901
Total assets under mgmnt. $ 58,921 $ 63,277 $ 64,716 $ 67,125 $ 64,934
Investment Managers:
Equity/Fixed Income prgms. $ 61 $ 65 $ 67 $ 73 $ 75
Collective Trust Fund prgms. 13,004 15,433 16,197 17,656 18,197
Liquidity funds 226 396 408 522 542
Total assets under mgmnt. $ 13,291 $ 15,894 $ 16,672 $ 18,251 $ 18,814
Client assets under admin. (A) 231,549 240,965 244,671 275,632 289,807
Total assets $ 244,840 $ 256,859 $ 261,343 $ 293,883 $ 308,621
Investments in New Businesses:
Equity/Fixed Income prgms. $ 551 $ 534 $ 513 $ 552 $ 572
Liquidity funds 30 29 43 42 29
Total assets under mgmnt. $ 581 $ 563 $ 556 $ 594 $ 601
LSV Asset Management:
Equity/Fixed Income prgms. (E) $ 54,922 $ 58,886 $ 60,947 $ 64,958 $ 65,417
Total:
Equity/Fixed Income prgms (B) (D) $ 157,083 $ 168,161 $ 173,769 $ 176,409 $ 175,314
Collective Trust Fund prgms. 14,459 16,103 16,324 17,781 18,327
Liquidity funds 10,157 10,907 11,427 10,611 10,665
Total assets under mgmnt. $ 181,699 $ 195,171 $ 201,520 $ 204,801 $ 204,306
Client assets under admin. (C) 242,268 252,576 256,849 288,602 302,929
Total assets $ 423,967 $ 447,747 $ 458,369 $ 493,403 $ 507,235
(A) Client assets under administration in the Investment Managers segment include $55.2 billion of assets balances that require limited services and therefore are at fee levels below our normal full service assets (as of June 30, 2013).
(B) Equity/Fixed Income programs include $3.5 billion of assets invested in various asset allocation funds at June 30, 2013.
(C) In addition to the numbers presented, SEI also administers an additional $5.2 billion in Funds of Funds assets (as of June 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 June 30, Sept. 30, and Dec. 31 2012 were $6.3 billion, $6.6 billion and $7.0 billion respectively.
(E) Ending asset balances for LSV Asset Management as of Mar. 31, 2013 were revised from $66.3 billion to $65 billion.
SEI INVESTMENTS COMPANY
AVERAGE ASSET BALANCES
(In millions)
(Unaudited)
2nd Qtr. 3rd Qtr. 4th Qtr. 1st Qtr. 2nd Qtr.
2012 2012 2012 2013 2013
Private Banks:
Equity/Fixed Income prgms. $ 16,794 $ 17,527 $ 18,301 $ 19,197 $ 12,959
Collective Trust Fund prgms. 396 230 66 11 10
Liquidity funds 5,115 5,401 5,229 5,556 5,093
Total assets under mgmnt. $ 22,305 $ 23,158 $ 23,596 $ 24,764 $ 18,062
Client assets under admin. 10,631 10,867 11,783 12,860 13,183
Total assets $ 32,936 $ 34,025 $ 35,379 $ 37,624 $ 31,245
Investment Advisors:
Equity/Fixed Income prgms. $ 29,103 $ 30,032 $ 30,881 $ 33,189 $ 34,831
Collective Trust Fund prgms. 984 532 158 14 14
Liquidity funds 1,806 1,886 2,176 2,085 2,028
Total assets under mgmnt. $ 31,893 $ 32,450 $ 33,215 $ 35,288 $ 36,873
Institutional Investors:
Equity/Fixed Income prgms. $ 54,998 $ 57,763 $ 61,304 $ 63,642 $ 63,466
Collective Trust Fund prgms. 418 284 120 101 105
Liquidity funds 3,147 3,253 3,493 2,960 2,975
Total assets under mgmnt. $ 58,563 $ 61,300 $ 64,917 $ 66,703 $ 66,546
Investment Managers:
Equity/Fixed Income prgms. $ 63 $ 62 $ 68 $ 68 $ 75
Collective Trust Fund prgms. 12,991 14,797 15,719 17,129 18,205
Liquidity funds 235 287 395 511 500
Total assets under mgmnt. $ 13,289 $ 15,146 $ 16,182 $ 17,708 $ 18,780
Client assets under admin. 229,873 237,155 240,520 263,054 286,018
Total assets $ 243,162 $ 252,301 $ 256,702 $ 280,762 $ 304,798
Investments in New Businesses:
Equity/Fixed Income prgms. $ 550 $ 530 $ 518 $ 542 $ 567
Liquidity funds 33 35 33 38 34
Total assets under mgmnt. $ 583 $ 565 $ 551 $ 580 $ 601
LSV Asset Management:
Equity/Fixed Income prgms. (B) $ 55,994 $ 57,164 $ 59,383 $ 63,997 $ 66,781
Total:
Equity/Fixed Income prgms (A) $ 157,502 $ 163,078 $ 170,455 $ 180,635 $ 178,679
Collective Trust Fund prgms. 14,789 15,843 16,063 17,255 18,334
Liquidity funds 10,336 10,862 11,326 11,150 10,630
Total assets under mgmnt. $ 182,627 $ 189,783 $ 197,844 $ 209,040 $ 207,643
Client assets under admin. 240,504 248,022 252,303 275,914 299,201
Total assets $ 423,131 $ 437,805 $ 450,147 $ 484,954 $ 506,844
(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 second, third and fourth quarters of 2012 were $6.4 billion, $6.5 billion and $6.8 billion respectively and $7.0 billion for the first-quarter 2013.
(B) Average asset balances for LSV Asset Management for first-quarter 2013 were revised from $64.4 billion to $64 billion.

Investor Contact:
Murray Louis
SEI
+1 610-676-1932
mlouis@seic.com

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

Source: SEI

Released July 18, 2013