SEI Reports Second-Quarter 2008 Results
Revenues down 4%, Net Income down 34%
OAKS, Pa., July 23 /PRNewswire-FirstCall/ -- SEI Investments Company (Nasdaq: SEIC) today announced financial results for second-quarter 2008, reporting decreases in revenues, net income and earnings per share compared to second-quarter 2007. Net income during the second-quarter was negatively affected by a $27.3 million non-cash pre-tax charge (approximately $.09 per share post-tax). This charge is related to previously-disclosed support agreements covering holdings of structured investment products by SEI- sponsored money market funds. This current period charge increases the total accrual for these support agreements to $78.2 million.
Consolidated Overview
(In thousands,
except earnings For the Three Months For the Six Months
per share) Ended June 30, Ended June 30,
2008 2007 % 2008 2007 %
Revenues $329,523 $343,258 (4%) $663,431 $665,983 --
Net Income
Before Taxes 73,385 112,102 (35%) 151,192 213,021 (29%)
Net Income 46,164 69,501 (34%) 95,110 132,878 (28%)
Diluted
Earnings
Per Share $.24 $.34 (29%) $.48 $.65 (26%)
"We continue to make progress, even in the face of difficulties created by the capital and credit markets," said Alfred P. West, Jr., SEI Chairman and CEO.
"We generated good sales across our core businesses, realized further acceptance of our new strategies, continued to operate and expand our Global Wealth Platform, and made good progress on our other key investments. The current market environment will make growth in revenues and profits, in the short-term, challenging. In the long run, we remain firm in our belief that what we are doing will provide our clients with increased opportunities for success and allow us to grow our future revenues and profits."
Summary of Second-Quarter and Year to Date Results by Business Segment
(In thousands) For the Three Month Period For the Six Month Period
Ended June 30, Ended June 30,
2008 2007 % 2008 2007 %
Private Banks:
Revenues $103,602 $100,090 4% $210,656 $197,828 6%
Expenses 85,367 80,829 6% 171,534 158,822 8%
Operating Profit $18,235 $19,261 (5%) $39,122 $39,006 --
Operating Margin 18% 19% 19% 20%
Investment Advisors:
Revenues 61,848 65,446 (5%) 122,367 127,009 (4%)
Expenses 31,551 30,919 2% 62,927 60,293 4%
Operating Profit 30,297 34,527 (12%) 59,440 66,716 (11%)
Operating Margin 49% 53% 49% 53%
Institutional
Investors:
Revenues 51,300 48,911 5% 101,989 95,540 7%
Expenses 29,328 30,181 (3%) 59,468 58,354 2%
Operating Profit 21,972 18,730 17% 42,521 37,186 14%
Operating Margin 43% 38% 42% 39%
Investment Managers:
Revenues 37,307 35,293 6% 73,800 69,287 7%
Expenses 25,012 24,302 3% 50,976 49,204 4%
Operating Profit 12,295 10,991 12% 22,824 20,083 14%
Operating Margin 33% 31% 31% 29%
Investments in New
Businesses:
Revenues 1,864 1,836 2% 3,698 3,466 7%
Expenses 4,147 4,725 (12%) 8,799 9,577 (8%)
Operating Loss (2,283) (2,889) 21% (5,101) (6,111) 17%
Operating Margin n/a n/a n/a n/a
LSV:
Revenues 73,602 91,682 (20%) 150,921 172,853 (13%)
Expenses (1) 45,840 56,262 (19%) 93,196 106,159 (12%)
Operating profit 27,762 35,420 (22%) 57,725 66,694 (13%)
Operating Margin 38% 39% 38% 39%
Consolidated
Segment Totals:
Revenues $329,523 $343,258 (4%) $663,431 $665,983 --
Expenses 221,245 227,218 (3%) 446,900 442,409 1%
Operating Profit $108,278 $116,040 (7%) $216,531 $223,574 (3%)
Operating Margin 33% 34% 33% 34%
(1) Includes $38,072 and $48,861 for the three month period ended June 30,
2008 and 2007, respectively, and $79,310 and $91,533 for the six month
period ended June 30, 2008 and 2007, respectively, of minority
interest to the other partners of LSV.
A reconciliation of the totals reported for the business segments to the applicable line items in the Consolidated Statements of Income for the three and six month periods ended June 30, 2008 and 2007 is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Total operating profit
from business segments $108,278 $116,040 $216,531 $223,574
Corporate overhead expenses (10,347) (10,578) (20,456) (20,705)
Minority interest reflected
in segments 39,082 50,033 81,270 93,625
LSV Employee Group Expenses (1) (1,819) (1,820) (3,640) (3,640)
Income from operations $135,194 $153,675 $273,705 $292,854
(1) Includes $1,806 for the three month period ending June 30, 2008 and
2007, and $3,611 for the six month period ended June 30, 2008 and 2007
of amortization expense related to intangible assets owned by LSV
Employees Group LLC. The amortization is offset through Minority
interest since SEI does not have any ownership in LSV Employee Group
LLC.
Second-Quarter Business Commentary:
-- The Private Banks, Institutional Investors and Investment Managers segments generated gains in second-quarter 2008 revenues versus second-quarter 2007 due to new client activity.
-- The Institutional Investors and Investment Managers segments generated gains in second-quarter 2008 operating profits versus second-quarter 2007.
-- Private Banks second-quarter 2008 operating profit was down versus second-quarter 2007 due to increased costs associated with putting the Global Wealth Platform into production and supporting operations.
-- The LSV and Investment Advisors segments were most directly affected by the weakening capital markets resulting in second-quarter 2008 revenues and operating profits declining from second-quarter 2007 levels.
-- The Global Wealth Platform was placed into service during the third- quarter 2007. Second-quarter 2008 expenses reflect an increase of approximately $3.5 million for amortization versus second-quarter 2007 levels. The amortization is primarily recognized in the Private Banks and Investment Advisors segments.
-- The company's percentage ownership in LSV remained at approximately 43 percent. In the second-quarter 2008, the company recognized $27.8 million as its portion of the earnings from LSV versus $35.4 million in the second- quarter 2007.
-- Assets under management declined by $6.4 billion during second-quarter 2008 to $178.2 billion, primarily due to market depreciation.
-- In the second-quarter 2008, SEI purchased 1.9 million shares of its common stock for $45.5 million.
-- The second-quarter 2008 results include a $27.3 million non-cash charge related to money market funds support agreements. Additional information about the capital support agreements is contained in SEI's 2007 Form 10-K filed February 26, 2008 and SEI's 2008 first-quarter 10-Q filing dated May 2, 2008.
Earnings Conference Call
A conference call to review earnings is scheduled for 2:00 PM ET on July 23, 2008. Investors may listen to the call at www.seic.com (Investor Information section), 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 953975.
About SEI
SEI (Nasdaq: SEIC) is a leading global provider of outsourced asset management, investment processing and investment operations solutions. The company's innovative solutions help corporations, financial institutions, financial advisors, and affluent families create and manage wealth. As of June 30, 2008, through its subsidiaries and partnerships in which the company has a significant interest, SEI administers $420 billion in mutual fund and pooled assets and manages $178 billion in assets. SEI serves clients, conducts or is registered to conduct business and/or operations, from more than 20 offices in over a dozen countries. For more information, visit www.seic.com.
Many of our responses 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 INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended June 30,
2008 2007
Asset management, admin. and distribution fees $260,931 $276,653
Information processing and software servicing fees 57,088 55,414
Transaction-based and trade execution fees 11,504 11,191
Total revenues 329,523 343,258
Commissions and fees 43,045 43,036
Compensation, benefits and other personnel 83,529 88,552
Consulting, outsourcing and professional fees 26,611 22,617
Data processing and computer related 11,229 10,227
Facilities, supplies and other costs 18,417 17,700
Depreciation and amortization 11,498 7,451
Total expenses 194,329 189,583
Income from operations 135,194 153,675
Minority interest (36,930) (47,242)
Net loss on investments (1) (27,294) (997)
Interest and dividend income 3,223 4,882
Interest expense (808) (1,168)
Other -- 2,952
Income before taxes 73,385 112,102
Income taxes 27,221 42,601
Net income $46,164 $69,501
Diluted earnings per common share $.24 $.34
Shares used to calculate diluted
earnings per common share 195,992 203,604
Basic earnings per common share $.24 $.35
Shares used to calculate basic
earnings per common share 192,187 197,314
(1) Includes $27,301 for the three month period ended June 30, 2008 of a
non-cash charge related to money market funds support agreements.
SEI INVESTMENTS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Six Months Ended June 30,
2008 2007
Asset management, admin. and distribution fees $520,990 $533,051
Information processing and software servicing fees 117,227 109,646
Transaction-based and trade execution fees 25,214 23,286
Total revenues 663,431 665,983
Commissions and fees 88,340 85,673
Compensation, benefits and other personnel 167,421 172,830
Consulting, outsourcing and professional fees 53,368 43,496
Data processing and computer related 21,777 20,994
Facilities, supplies and other costs 35,802 35,260
Depreciation and amortization 23,018 14,876
Total expenses 389,726 373,129
Income from operations 273,705 292,854
Minority interest (76,759) (87,976)
Net loss on investments (1) (51,340) (1,313)
Interest and dividend income 7,361 8,933
Interest expense (1,775) (2,429)
Other -- 2,952
Income before taxes 151,192 213,021
Income taxes 56,082 80,143
Net income $95,110 $132,878
Diluted earnings per common share $.48 $.65
Shares used to calculate diluted
earnings per common share 197,102 204,153
Basic earnings per common share $.49 $.67
Shares used to calculate basic
earnings per common share 192,908 197,614
(1) Includes $53,096 for the six month period ended June 30, 2008 of a
non-cash charge related to money market funds support agreements.
SEI INVESTMENTS COMPANY
CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, December 31,
2008 2007
Assets
Cash and short-term investments $320,385 $360,921
Restricted cash 26,822 10,250
Receivables 275,492 275,109
Securities owned 11,987 16,777
Other current assets 54,563 31,877
Total current assets 689,249 694,934
Property and equipment, net 141,775 143,516
Investments available for sale 75,069 77,169
Capitalized software, net 248,939 231,684
Goodwill 22,842 22,842
Intangible assets 56,348 60,177
Other assets, net 18,260 22,043
Total assets $1,252,482 $1,252,365
Liabilities
Current liabilities (1) $230,715 $230,367
Long-term debt 33,819 43,971
Deferred income taxes 77,869 73,600
Long term liabilities 12,623 11,895
Minority interest 133,901 136,149
Shareholders' Equity 763,555 756,383
Total liabilities and shareholders' equity $1,252,482 $1,252,365
(1) Includes $78,218 and $25,122 for the period ended June 30, 2008 and
December 31 2007, respectively, of an accrual related to money market
funds support agreements.
SEI INVESTMENTS COMPANY
ASSET BALANCES
(In millions)
(Unaudited)
Jun. 30, Sep. 30, Dec. 31, Mar. 31, Jun. 30,
2007 2007 2007 2008 2008
Private Banks:
Equity/Fixed
Income prgms. $20,666 $21,816 $21,160 $18,904 $18,163
Collective Trust
Fund prgm. 1,078 1,056 1,007 1,008 955
Liquidity funds 8,224 8,836 8,886 9,198 8,345
Total assets
under mgmt. $29,968 $31,708 $31,053 $29,110 $27,463
Client assets
under admin. 15,019 15,655 14,235 13,897 13,242
Total assets $44,987 $47,363 $45,288 $43,007 $40,705
Investment Advisors:
Equity/Fixed
Income prgms. $36,923 $37,751 $36,378 $32,736 $31,938
Collective Trust
Fund prgm. 2,334 2,325 2,295 2,310 2,259
Liquidity funds 1,400 1,619 2,079 2,461 2,410
Total assets
under mgmt. $40,657 $41,695 $40,752 $37,507 $36,607
Institutional
Investors:
Equity/Fixed
Income prgms. $40,771 $43,504 $44,833 $43,134 $43,608
Collective Trust
Fund prgm. 895 907 897 924 947
Liquidity funds 4,128 4,342 3,629 4,077 3,950
Total assets
under mgmt. $45,794 $48,753 $49,359 $48,135 $48,505
Investment Managers:
Equity/Fixed
Income prgms. $32 $24 $24 $20 $19
Collective Trust
Fund prgm. 7,990 6,814 6,651 6,571 6,572
Liquidity funds 271 360 325 571 438
Total assets
under mgmt. $8,293 $7,198 $7,000 $7,162 $7,029
Client assets
under admin. 192,931 205,251 215,124 225,005 228,722
Total assets $201,224 $212,449 $222,124 $232,167 $235,751
Investments in New
Businesses:
Equity/Fixed
Income prgms. $887 $907 $929 $869 $838
Liquidity funds 43 40 74 77 98
Total assets
under mgmt. $930 $947 $1,003 $946 $936
LSV Asset Management
Equity/Fixed
Income prgms. $73,100 $71,349 $67,599 $61,765 $57,692
Consolidated:
Equity/Fixed
Income prgms (A) $172,379 $175,351 $170,923 $157,428 $152,258
Collective Trust
Fund prgm. 12,297 11,102 10,850 10,813 10,733
Liquidity funds 14,066 15,197 14,993 16,384 15,241
Total assets
under mgmt. $198,742 $201,650 $196,766 $184,625 $178,232
Client assets
under admin. (B) 207,950 220,906 229,359 238,902 241,964
Total assets $406,692 $422,556 $426,125 $423,527 $420,196
(A) Equity/Fixed Income programs include $3,146 of assets invested in
various asset allocation funds at June 30, 2008.
(B) In addition to the numbers presented, SEI also administers an
additional $6,678 in Funds of Funds assets (as of June 30, 2008) on
which SEI does not earn an administration fee.
SOURCE SEI
Released July 23, 2008