SEI Reports Second-Quarter 2010 Financial Results
OAKS, Pa., July 21 /PRNewswire-FirstCall/ -- SEI Investments Company (Nasdaq: SEIC) today announced financial results for second-quarter 2010, reporting an increase in net income attributable to SEI and diluted earnings per share compared to second-quarter 2009. Diluted earnings per share were $0.28. 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 $25.5 million or 13 percent compared to second-quarter 2009 (see Proforma Consolidated Overview below).
Consolidated Overview For the Three Months For the Six Months
(In thousands, except earnings
per share) Ended June 30, Ended June 30,
2010 2009 % 2010 2009 %
Revenues $228,388 $252,009 (9%) $449,923 $500,620 (10%)
Net Income attributable to SEI 53,478 41,571 29% 112,898 75,771 49%
Diluted Earnings Per Share $0.28 $0.22 27% $0.59 $0.40 48%
"Compared to year ago, our second-quarter results reflect somewhat improved capital markets and the effects of last year's cost reduction initiatives," said Alfred P. West, Jr., SEI Chairman and CEO.
"While our new sales activities are a positive sign, we believe the ongoing volatility of the capital markets represents a continuing challenge. 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 Six Months
(In thousands, except earnings
per share) Ended June 30, Ended June 30,
2010 2009 % 2010 2009 %
(Actual) (Proforma) (Actual) (Proforma)
Revenues $228,388 $202,931 13% $449,923 $411,352 9%
Net Income attributable to SEI 53,478 41,571 29% 112,898 75,771 49%
Diluted Earnings Per Share $0.28 $0.22 27% $0.59 $0.40 48%
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,
2010 2009 % 2010 2009 %
Private Banks:
Revenues $90,091 $86,645 4% $177,212 $183,593 (3%)
Expenses 78,612 70,761 11% 156,211 149,559 4%
Operating Profit $11,479 $15,884 (28%) $21,001 $34,034 (38%)
Operating Margin 13% 18% 12% 19%
Investment Advisors:
Revenues 46,398 39,582 17% 91,861 77,090 19%
Expenses 28,120 25,939 8% 55,703 53,048 5%
Operating Profit 18,278 13,643 34% 36,158 24,042 50%
Operating Margin 39% 34% 39% 31%
Institutional Investors:
Revenues 51,446 42,164 22% 101,785 81,543 25%
Expenses 26,576 23,264 14% 52,956 47,434 12%
Operating Profit 24,870 18,900 32% 48,829 34,109 43%
Operating Margin 48% 45% 48% 42%
Investment Managers:
Revenues 39,440 33,371 18% 77,050 66,703 16%
Expenses 25,596 22,245 15% 50,155 45,112 11%
Operating Profit 13,844 11,126 24% 26,895 21,591 25%
Operating Margin 35% 33% 35% 32%
Investments in New
Businesses:
Revenues 1,013 1,169 (13%) 2,015 2,423 (17%)
Expenses 2,739 2,325 18% 5,400 5,618 (4%)
Operating Loss (1,726) (1,156) (49%) (3,385) (3,195) (6%)
Operating Margin N/A N/A N/A N/A
LSV:
Revenues - 49,078 N/A - 89,268 N/A
Expenses (1) - 31,709 N/A - 58,155 N/A
Operating Profit - 17,369 N/A - 31,113 N/A
Operating Margin - 35% - 35%
Totals:
Revenues $228,388 $252,009 (9%) $449,923 $500,620 (10%)
Expenses 161,643 176,243 (8%) 320,425 358,926 (11%)
Corporate overhead
expenses 9,941 8,697 14% 19,658 18,338 7%
Noncontrolling interest
reflected in segments (368) (24,737) N/A (677) (43,800) N/A
LSV Employee Group
expenses - 1,820 N/A - 3,640 N/A
Income from operations $ 57,172 $ 89,986 (36%) $110,517 $163,516 (32%)
(1) Includes $24,429 and $43,291 for the three and six month periods ended
June 30, 2009, of noncontrolling interest to the other partners of LSV.
Second-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 second-quarter 2009 include $49.1 million from LSV.
Excluding these revenues, revenues in second-quarter 2010 increased
$25.5 million or 13 percent compared to second-quarter 2009. This
increase was primarily due to higher average asset balances under
management and administration from existing clients because of improved
capital markets.
-- Second-quarter 2010 revenues and profits in the Private Banks segment
include $5.0 million of one-time contract termination fees from a
previously announced bank client lost as a result of an acquisition.
-- Second-quarter revenues and profits were up in all other major business
segments compared to both second-quarter 2009 and first-quarter 2010.
-- The second-quarter 2010 net income attributable to SEI and diluted
earnings per share results include gains of $3.9 million associated with
SIVs primarily due to cash distributions received for note principal
payments, whereas results in second-quarter 2009 included losses of $2.3
million. Additional information pertaining to SIVs is contained in SEI's
2009 Form 10-K filed February 25, 2010.
-- Assets under management decreased by $13.0 billion during the
second-quarter 2010 to $148.9 billion at June 30, 2010, as compared to
$161.9 billion at March 31, 2010, primarily due to the decline in the
market.
-- In the second quarter, SEI purchased 1,401,000 shares of its common
stock for $30.2 million.
Proforma Consolidated Statement of Operations
The following proforma Consolidated Statements of Operations presents second quarter 2009 and Year to Date June 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 June 30,
As Reported Proforma
SEI SEI without
Consolidated LSV and LSVEG
2010 2009 %
Total revenues 228,388 202,931 13%
Total expenses 171,216 152,923 12%
Income from operations 57,172 50,008 14%
Net gain (loss) from investments 3,594 (2,533) n/a
Interest, net 1,087 1,258 (14%)
Other income 1,070 - n/a
Equity in earnings of unconsolidated
affiliate 23,519 17,376 35%
Income before taxes 86,442 66,109 31%
Income taxes 32,603 24,212 35%
Net income 53,839 41,897 29%
Less Net Income attributable to
noncontrolling interest (361) (326) 11%
Net income attributable to SEI $53,478 $41,571 29%
Diluted earnings per share $0.28 $0.22 27%
Diluted shares outstanding 191,500 191,933 --
SEI INVESTMENTS COMPANY
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Six Months Ended June 30,
As Reported Proforma
SEI SEI without
Consolidated LSV and LSVEG
2010 2009 %
Total revenues 449,923 411,352 9%
Total expenses 339,406 318,600 7%
Income from operations 110,517 92,752 19%
Net gain (loss) from investments 21,073 (16,983) n/a
Interest, net 2,316 2,576 (10%)
Other income 1,070 - n/a
Equity in earnings of unconsolidated
affiliate 47,593 31,130 53%
Income before taxes 182,569 109,475 67%
Income taxes 68,872 33,141 108%
Net income 113,697 76,334 49%
Less Net Income attributable to
noncontrolling interest (799) (563) 42%
Net income attributable to SEI $112,898 $75,771 49%
Diluted earnings per share $0.59 $0.40 48%
Diluted shares outstanding 191,281 191,671 --
Earnings Conference Call
A conference call to review earnings is scheduled for 2:00 PM ET on July 21, 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 165205.
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, 2010, through its subsidiaries and partnerships in which the company has a significant interest, SEI administers $380 billion in mutual fund and pooled assets and manages $149 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 June 30,
2010 2009
Asset management, admin. and distribution fees $154,774 $183,209
Information processing and software servicing fees 61,296 54,694
Transaction–based and trade execution fees 12,318 14,106
Total revenues 228,388 252,009
Subadvisory, distribution and other asset mgmt
costs 21,671 20,645
Brokerage commissions and royalties 14,972 15,494
Compensation, benefits and other personnel 67,012 63,670
Stock based compensation 6,278 3,361
Consulting, outsourcing and professional fees 22,702 18,711
Data processing and computer related 10,417 11,177
Facilities, supplies and other costs 16,583 16,203
Amortization 5,997 7,398
Depreciation 5,584 5,364
Total expenses 171,216 162,023
Income from operations 57,172 89,986
Net gain (loss) on investments 3,594 (2,533)
Interest and dividend income 1,502 1,937
Interest expense (415) (1,051)
Other income 1,070 -
Equity in earnings of unconsolidated affiliate 23,519 -
Income before taxes 86,442 88,339
Income taxes 32,603 24,212
Net income 53,839 64,127
Less: Net income attributable to noncontrolling
interest (361) (22,556)
Net income attributable to SEI $53,478 $41,571
Diluted earnings per common share $0.28 $0.22
Shares used to calculate diluted
earnings per common share 191,500 191,933
Basic earnings per common share $0.28 $0.22
Shares used to calculate basic
earnings per common share 189,356 191,023
SEI INVESTMENTS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Six Months Ended June 30,
2010 2009
Asset management, admin. and distribution fees $307,712 $352,573
Information processing and software servicing fees 119,922 116,911
Transaction–based and trade execution fees 22,289 31,136
Total revenues 449,923 500,620
Commissions and fees 44,926 40,468
Brokerage commissions and royalties 28,345 33,224
Compensation, benefits and other personnel 134,228 137,108
Stock based compensation 12,935 6,791
Consulting, outsourcing and professional fees 43,409 39,861
Data processing and computer related 20,345 22,692
Facilities, supplies and other costs 32,531 31,636
Amortization 11,897 14,451
Depreciation 10,790 10,873
Total expenses 339,406 337,104
Income from operations 110,517 163,516
Net loss on investments 21,073 (16,983)
Interest and dividend income 3,202 3,648
Interest expense (886) (1,850)
Other income 1,070 -
Equity in earnings of unconsolidated affiliate 47,593 -
Income before taxes 182,569 148,331
Income taxes 68,872 33,141
Net income 113,697 115,190
Less: Net income attributable to the noncontrolling
interest (799) (39,419)
Net income attributable to SEI $112,898 $75,771
Diluted earnings per common share $0.59 $0.40
Shares used to calculate diluted
earnings per common share 191,281 191,671
Basic earnings per common share $0.60 $0.40
Shares used to calculate basic
earnings per common share 189,652 191,053
SEI INVESTMENTS COMPANY
CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, December, 31
2010 2009
Assets
Cash and short-term investments $461,929 $590,877 (a)
Restricted cash 19,000 20,000
Receivables 164,870 212,451 (a)
Other current assets 16,001 18,075
Total current assets 661,800 841,403
Property and equipment, net 147,159 146,053
Marketable securities 177,379 181,897
Capitalized software, net 284,834 278,656
Investment in unconsolidated affiliate 61,370 -
Goodwill - 22,842
Intangible assets, net - 44,859
Other assets, net 17,579 18,098
Total assets $1,350,121 $1,533,808
Liabilities
Current liabilities $116,144 $163,055 (b)
Long-term debt 150,000 247,152 (b)
Deferred income taxes 86,417 86,257
Long-term liabilities 5,752 5,726
Total SEI Investments Company shareholders’
equity 978,966 909,723
Noncontrolling interest 12,842 121,895
Total Equity 991,808 1,031,618
Total liabilities and equity $1,350,121 $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)
Jun. 30, Sep. 30, Dec. 31, Mar. 31, Jun. 30,
2009 2009 2009 2010 2010
Private Banks:
Equity/Fixed Income prgms. $10,892 $12,479 $12,690 $12,635 $11,769
Collective Trust Fund prgm. 1,176 1,098 1,067 1,023 640
Liquidity funds 7,581 6,524 6,035 5,329 5,175
Total assets under mgmt. $19,649 $20,101 $19,792 $18,987 $17,584
Client assets under admin. 10,143 10,941 11,213 11,429 10,335
Total assets $29,792 $31,042 $31,005 $30,416 $27,919
Investment Advisors:
Equity/Fixed Income prgms. $21,705 $24,739 $25,392 $26,222 $23,699
Collective Trust Fund prgm. 2,621 2,521 2,423 2,284 2,066
Liquidity funds 2,469 2,243 1,929 1,731 2,635
Total assets under mgmt. $26,795 $29,503 $29,744 $30,237 $28,400
Institutional Investors:
Equity/Fixed Income prgms. $36,955 $43,672 $44,322 $45,891 $43,506
Collective Trust Fund prgm. 755 707 684 657 643
Liquidity funds 3,462 4,624 3,370 3,198 2,558
Total assets under mgmt. $41,172 $49,003 $48,376 $49,746 $46,707
Investment Managers:
Equity/Fixed Income prgms. $3 $4 $4 $2 $1
Collective Trust Fund prgm. 6,794 7,075 7,428 7,639 7,366
Liquidity funds 505 528 412 447 428
Total assets under mgmt. $7,302 $7,607 $7,844 $8,088 $7,795
Client assets under admin. (A) 213,930 216,222 221,680 220,807 220,459
Total assets $221,232 $223,829 $229,524 $228,895 $228,254
Investments in New Businesses:
Equity/Fixed Income prgms. $473 $473 $520 $534 $496
Liquidity funds 133 93 75 72 74
Total assets under mgmt. $606 $566 $595 $606 $570
LSV Asset Management
Equity/Fixed Income prgms. $40,210 $49,349 $52,488 $54,189 $47,822
Consolidated:
Equity/Fixed Income prgms (B) $110,238 $130,716 $135,416 $139,473 $127,293
Collective Trust Fund prgm. 11,346 11,401 11,602 11,603 10,715
Liquidity funds 14,150 14,012 11,821 10,777 10,870
Total assets under mgmt. $135,734 $156,129 $158,839 $161,853 $148,878
Client assets under admin. (C) 224,073 227,163 232,893 232,236 230,794
Total assets $359,807 $383,292 $391,732 $394,089 $379,672
(A) Client assets under administration in the Investment Managers segment
include $58,534 of assets balances that require limited services and
therefore are at fee levels below our normal full service assets (as of
June 30, 2010).
(B) Equity/Fixed Income programs include $2,215 of assets invested in
various asset allocation funds at June 30, 2010.
(C) In addition to the numbers presented, SEI also administers an
additional $8,478 in Funds of Funds assets (as of June 30, 2010) on which
SEI does not earn an administration fee.
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SOURCE SEI Investments Company
Released July 21, 2010