SEI Reports Third-Quarter 2010 Financial Results
OAKS, Pa., Oct. 20 /PRNewswire-FirstCall/ -- SEI Investments Company (Nasdaq: SEIC) today announced financial results for third-quarter 2010, reporting an increase in net income attributable to SEI and diluted earnings per share compared to third-quarter 2009. Diluted earnings per share were $0.30. Effective January 1, 2010, company results reflect the deconsolidation of LSV Asset Management (LSV), returning to the equity method of accounting. This change in accounting treatment had no impact on net income attributable to SEI. Without LSV, revenues grew $3.7 million or two percent compared to third-quarter 2009 (see Proforma Consolidated Overview below).
Consolidated Overview For the Three Months For the Nine Months
(In thousands, except earnings
per share) Ended September 30, Ended September 30,
2010 2009 % 2010 2009 %
Revenues $219,513 $275,933 (20%) $669,436 $776,553 (14%)
Net Income attributable to SEI 56,389 52,727 7% 169,287 128,498 32%
Diluted Earnings Per Share $0.30 $0.27 11% $0.89 $0.67 33%
"Compared to a year ago, our third-quarter results reflect improved capital markets, improved markets for our services, and the ongoing management of our costs," said Alfred P. West, Jr., SEI Chairman and CEO.
"While our new sales activities are yielding positive results, lengthy sales and installation cycles remain a challenge for the short term. Longer term, we believe we are well positioned in all business segments to achieve growth. We continue to make key investments that will create growth opportunities for us and for our clients."
Proforma Consolidated Overview For the Three Months For the Nine Months
(In thousands, except earnings
per share) Ended September 30, Ended September 30,
2010 2009 % 2010 2009 %
(Actual) (Proforma) (Actual) (Proforma)
Revenues $219,513 $215,773 2% $669,436 $627,125 7%
Net Income attributable to SEI 56,389 52,727 7% 169,287 128,498 32%
Diluted Earnings Per Share $0.30 $0.27 11% $0.89 $0.67 33%
Summary of Third-Quarter and Year to Date Results by Business Segment
(In thousands) For the Three Month Period For the Nine Month Period
Ended September 30, Ended September 30,
2010 2009 % 2010 2009 %
Private Banks:
Revenues $83,518 $88,561 (6%) $260,730 $272,154 (4%)
Expenses 73,463 79,549 (8%) 229,674 229,108 -
Operating Profit $10,055 $9,012 12% $31,056 $43,046 (28%)
Operating Margin 12% 10% 12% 16%
Investment Advisors:
Revenues 43,422 43,467 - 135,283 120,557 12%
Expenses 26,426 28,001 (6%) 82,129 81,049 1%
Operating Profit 16,996 15,466 10% 53,154 39,508 35%
Operating Margin 39% 36% 39% 33%
Institutional Investors:
Revenues 51,036 47,458 8% 152,821 129,001 18%
Expenses 25,940 27,369 (5%) 78,896 74,803 5%
Operating Profit 25,096 20,089 25% 73,925 54,198 36%
Operating Margin 49% 42% 48% 42%
Investment Managers:
Revenues 40,548 35,208 15% 117,598 101,911 15%
Expenses 25,763 23,047 12% 75,918 68,159 11%
Operating Profit 14,785 12,161 22% 41,680 33,752 23%
Operating Margin 36% 35% 35% 33%
Investments in New
Businesses:
Revenues 989 1,079 (8%) 3,004 3,502 (14%)
Expenses 4,080 3,171 29% 9,480 8,789 8%
Operating Loss (3,091) (2,092) (48%) (6,476) (5,287) (22%)
Operating Margin N/A N/A N/A N/A
LSV:
Revenues - 60,160 N/A - 149,428 N/A
Expenses (1) - 38,928 N/A - 97,083 N/A
Operating Profit - 21,232 N/A - 52,345 N/A
Operating Margin - 35% - 35%
Totals:
Revenues $219,513 $275,933 (20%) $669,436 $776,553 (14%)
Expenses 155,672 200,065 (22%) 476,097 558,991 (15%)
Corporate overhead
expenses 8,981 8,897 1% 28,639 27,235 5%
Noncontrolling interest
reflected in segments (279) (30,168) N/A (956) (73,968) N/A
LSV Employee Group
expenses - 1,836 N/A - 5,476 N/A
Income from operations $ 55,139 $ 95,303 (42%) $ 165,656 $ 258,819 (36%)
(1) Includes $29,829 and $73,120 for the three and nine month periods ended
September 30, 2009, of noncontrolling interest to the other partners of LSV.
Third-Quarter Business Commentary:
-- In January 2010, LSV was deconsolidated due to the adoption of newly
issued accounting guidance. Our ownership interest in LSV was unchanged
and our proportionate share in the earnings of LSV is reflected in
"Equity in earnings of unconsolidated affiliate" on our Consolidated
Statements of Operations. The deconsolidation of LSV had no impact on
net income attributable to SEI or diluted earnings per share.
-- Revenues in third-quarter 2009 include $60.2 million from LSV. Excluding
these revenues, revenues in third-quarter 2010 increased $3.7 million or
two percent compared to third-quarter 2009. This increase was primarily
due to higher average asset balances under management and administration
from existing clients because of improved capital markets.
-- Stock-based compensation costs in third-quarter 2010 reflect the
reversal of $6.3 million of previously recognized stock-based
compensation costs and the acceleration of $3.1 million of stock-based
compensation costs due to a change in management's estimates of the
attainment of certain performance vesting targets. The net effect of
these two items was a reduction of $3.2 million of stock-based
compensation costs in third-quarter 2010.
-- Third-quarter 2010 includes $2.1 million in costs associated with
operational errors, of which, approximately $1.0 million is recognized
in the Investment Advisors segment and $900K is recognized in the
Investments in New Businesses segment. Also, third-quarter 2009 includes
$2.2 million in costs associated with operational errors which was
recognized in the Institutional Investors segment.
-- The third-quarter 2010 net income attributable to SEI and diluted
earnings per share results include gains of $8.7 million associated with
SIVs, whereas results in third-quarter 2009 included gains of $14.9
million. Additional information pertaining to SIVs is contained in SEI's
2009 Form 10-K filed February 25, 2010.
-- Assets under management increased by $15.1 billion during the
third-quarter 2010 to $164.0 billion at September 30, 2010, as compared
to $148.9 billion at June 30, 2010, primarily due to market driven
appreciation.
-- In the third-quarter 2010, SEI purchased 1,989,000 shares of its common
stock for $38.6 million.
Proforma Consolidated Statement of Operations
The following proforma Consolidated Statements of Operations presents third quarter 2009 and Year to Date September 2009 for comparative purposes only as if LSV and LSV Employee Group was deconsolidated on January 1, 2009. This report is being provided for informational purposes only and is not a restatement or reclassification of previously filed reports. Our interest in LSV is presented as a single line item in the Consolidated Statements of Operations titled "Equity in earnings of unconsolidated affiliate." For additional information, we refer you to Note 2 to the Consolidated Financial Statements included in our 2009 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 25, 2010.
SEI INVESTMENTS COMPANY
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended September 30,
As Reported Proforma
SEI SEI without
Consolidated LSV and LSVEG
2010 2009 %
Total revenues 219,513 215,773 2%
Total expenses 164,374 169,694 (3%)
Income from operations 55,139 46,079 20%
Net gain from investments 9,362 15,616 (40%)
Interest, net 1,285 1,219 5%
Equity in earnings of unconsolidated
affiliate 25,246 21,240 19%
Income before taxes 91,032 84,154 8%
Income taxes 34,311 31,109 10%
Net income 56,721 53,045 7%
Less Net Income attributable to
noncontrolling interest (332) (318) 4%
Net income attributable to SEI $56,389 $52,727 7%
Diluted earnings per share $0.30 $0.27 11%
Diluted shares outstanding 189,521 192,325 (1%)
SEI INVESTMENTS COMPANY
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Nine Months Ended September 30,
As Reported Proforma
SEI SEI without
Consolidated LSV and LSVEG
2010 2009 %
Total revenues 669,436 627,125 7%
Total expenses 503,780 488,294 3%
Income from operations 165,656 138,831 19%
Net gain (loss) from investments 30,435 (1,367) N/A
Interest, net 3,601 3,795 (5%)
Other income 1,070 - N/A
Equity in earnings of unconsolidated
affiliate 72,839 52,370 39%
Income before taxes 273,601 193,629 41%
Income taxes 103,183 64,250 61%
Net income 170,418 129,379 32%
Less Net Income attributable to
noncontrolling interest (1,131) (881) 28%
Net income attributable to SEI $169,287 $128,498 32%
Diluted earnings per share $0.89 $0.67 33%
Diluted shares outstanding 190,694 191,905 (1%)
Earnings Conference Call
A conference call to review earnings is scheduled for 2:00 PM ET on October 20, 2010. 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 174401.
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 September 30, 2010, through its subsidiaries and partnerships in which the company has a significant interest, SEI administers $402 billion in mutual fund and pooled assets and manages $164 billion in assets. SEI serves clients, conducts or is registered to conduct business and/or operations, from numerous offices worldwide. 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)
Three Months Ended September 30,
2010 2009
Asset management, admin. and distribution fees $155,799 $206,235
Information processing and software servicing
fees 55,226 56,241
Transaction–based and trade execution fees 8,488 13,457
Total revenues 219,513 275,933
Subadvisory, distribution and other asset mgmt
costs 21,900 21,998
Brokerage commissions and royalties 12,402 14,421
Compensation, benefits and other personnel 64,694 70,204
Stock based compensation 3,468 3,418
Consulting, outsourcing and professional fees 21,841 20,173
Data processing and computer related 10,167 11,235
Facilities, supplies and other costs 18,302 18,817
Amortization 5,998 15,042
Depreciation 5,602 5,322
Total expenses 164,374 180,630
Income from operations 55,139 95,303
Net gain on investments 9,362 15,616
Interest and dividend income 1,621 1,897
Interest expense (336) (1,034)
Equity in earnings of unconsolidated affiliate 25,246 -
Income before taxes 91,032 111,782
Income taxes 34,311 31,109
Net income 56,721 80,673
Less: Net income attributable to
noncontrolling interest (332) (27,946)
Net income attributable to SEI $56,389 $52,727
Diluted earnings per common share $0.30 $0.27
Shares used to calculate diluted
earnings per common share 189,521 192,325
Basic earnings per common share $0.30 $0.28
Shares used to calculate basic
earnings per common share 187,964 190,850
SEI INVESTMENTS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Nine Months Ended September 30,
2010 2009
Asset management, admin. and distribution fees $463,511 $558,808
Information processing and software servicing
fees 175,148 173,152
Transaction–based and trade execution fees 30,777 44,593
Total revenues 669,436 776,553
Subadvisory, distribution and other asset mgmt
costs 66,826 62,466
Brokerage commissions and royalties 40,747 47,645
Compensation, benefits and other personnel 198,922 207,312
Stock based compensation 16,403 10,209
Consulting, outsourcing and professional fees 65,250 60,034
Data processing and computer related 30,512 33,927
Facilities, supplies and other costs 50,833 50,453
Amortization 17,895 29,493
Depreciation 16,392 16,195
Total expenses 503,780 517,734
Income from operations 165,656 258,819
Net gain (loss) on investments 30,435 (1,367)
Interest and dividend income 4,823 5,545
Interest expense (1,222) (2,884)
Other income 1,070 -
Equity in earnings of unconsolidated affiliate 72,839 -
Income before taxes 273,601 260,113
Income taxes 103,183 64,250
Net income 170,418 195,863
Less: Net income attributable to the
noncontrolling interest (1,131) (67,365)
Net income attributable to SEI $169,287 $128,498
Diluted earnings per common share $0.89 $0.67
Shares used to calculate diluted
earnings per common share 190,694 191,905
Basic earnings per common share $0.90 $0.67
Shares used to calculate basic
earnings per common share 189,090 190,986
SEI INVESTMENTS COMPANY
CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
September 30, December, 31
2010 2009
Assets
Cash and short-term investments $451,778 $590,877 (a)
Restricted cash 19,000 20,000
Receivables 171,709 212,451 (a)
Other current assets 19,930 18,075
Total current assets 662,417 841,403
Property and equipment, net 144,026 146,053
Marketable securities 177,889 181,897
Capitalized software, net 289,604 278,656
Investment in unconsolidated affiliate 63,096 -
Goodwill - 22,842
Intangible assets, net - 44,859
Other assets, net 16,993 18,098
Total assets $1,354,025 $1,533,808
Liabilities
Current liabilities $116,340 $163,055 (b)
Long-term debt 120,000 247,152 (b)
Deferred income taxes 91,108 86,257
Long-term liabilities 5,836 5,726
Total SEI Investments Company shareholders’
equity 1,006,391 909,723
Noncontrolling interest 14,350 121,895
Total Equity 1,020,741 1,031,618
Total liabilities and equity $1,354,025 $1,533,808
(a) Includes $57,061 of cash and cash equivalents and $66,392 of receivables
of LSV Asset Management.
(b) Includes $20,552 of debt of LSV Employee Group of which $6,400 is
included in Current liabilities and the remaining $14,152 is included in
Long-term debt.
SEI INVESTMENTS COMPANY
ASSET BALANCES
(In millions)
(Unaudited)
Sep. 30, Dec. 31, Mar. 31, Jun. 30, Sep. 30,
2009 2009 2010 2010 2010
Private Banks:
Equity/Fixed Income prgms. $12,479 $12,690 $12,635 $11,769 $12,842
Collective Trust Fund prgm. 1,098 1,067 1,023 640 615
Liquidity funds 6,524 6,035 5,329 5,175 5,034
Total assets under mgmt. $20,101 $19,792 $18,987 $17,584 $18,491
Client assets under admin. 10,941 11,213 11,429 10,335 10,557
Total assets $31,042 $31,005 $30,416 $27,919 $29,048
Investment Advisors:
Equity/Fixed Income prgms. $24,739 $25,392 $26,222 $23,699 $26,091
Collective Trust Fund prgm. 2,521 2,423 2,284 2,066 2,028
Liquidity funds 2,243 1,929 1,731 2,635 2,253
Total assets under mgmt. $29,503 $29,744 $30,237 $28,400 $30,372
Institutional Investors:
Equity/Fixed Income prgms. $43,672 $44,322 $45,891 $43,506 $47,667
Collective Trust Fund prgm. 707 684 657 643 641
Liquidity funds 4,624 3,370 3,198 2,558 3,475
Total assets under mgmt. $49,003 $48,376 $49,746 $46,707 $51,783
Investment Managers:
Equity/Fixed Income prgms. $4 $4 $2 $1 $1
Collective Trust Fund prgm. 7,075 7,428 7,639 7,366 7,781
Liquidity funds 528 412 447 428 423
Total assets under mgmt. $7,607 $7,844 $8,088 $7,795 $8,205
Client assets under admin. (A) 216,222 221,680 220,807 220,459 227,777
Total assets $223,829 $229,524 $228,895 $228,254 $235,982
Investments in New Businesses:
Equity/Fixed Income prgms. $473 $520 $534 $496 $533
Liquidity funds 93 75 72 74 82
Total assets under mgmt. $566 $595 $606 $570 $615
LSV Asset Management
Equity/Fixed Income prgms. $49,349 $52,488 $54,189 $47,822 $54,492
Consolidated:
Equity/Fixed Income prgms (B) $130,716 $135,416 $139,473 $127,293 $141,626
Collective Trust Fund prgm. 11,401 11,602 11,603 10,715 11,065
Liquidity funds 14,012 11,821 10,777 10,870 11,267
Total assets under mgmt. $156,129 $158,839 $161,853 $148,878 $163,958
Client assets under admin. (C) 227,163 232,893 232,236 230,794 238,334
Total assets $383,292 $391,732 $394,089 $379,672 $402,292
(A) Client assets under administration in the Investment Managers segment
include $59.6 billion of assets balances that require limited services and
therefore are at fee levels below our normal full service assets (as of
September 30, 2010).
(B) Equity/Fixed Income programs include $2,386 million of assets invested
in various asset allocation funds at September 30, 2010.
(C) In addition to the numbers presented, SEI also administers an
additional $4,534 million in Funds of Funds assets (as of September 30,
2010) on which SEI does not earn an administration fee.
SOURCE SEI Investments Company
Released October 20, 2010