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SEI Reports Third-Quarter 2016 Financial Results

OAKS, Pa., Oct. 20, 2016 (GLOBE NEWSWIRE) -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the third-quarter 2016. Diluted earnings per share were $0.53 in third-quarter 2016 compared to $0.47 in third-quarter 2015. Third-quarter 2015 includes a charge against earnings of approximately $6.0 million, or $0.02 diluted earnings per share, from the write-off of certain assets related to the SEI Wealth PlatformSM.

Consolidated Overview
(In thousands, except earnings per share) For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2016 2015 % 2016 2015 %
Revenues $354,641 $335,622 6% $1,032,735 $998,811 3%
Net income 86,704 79,425 9% 245,206 250,276 (2)%
Diluted earnings per share $0.53 $0.47 13% $1.49 $1.47 1%

"Our third-quarter results reflect growth in revenue from existing clients, new business and stronger capital markets," said Alfred P. West, Jr., SEI Chairman and CEO.

"Our current investments are aimed at preparing for large client implementations and creating a sustainable competitive advantage for all of our services. They also position us well for long-term success and increased shareholder value."

Summary of Third-Quarter Results by Business Segment

(In thousands) For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2016 2015 % 2016 2015 %
Private Banks:
Revenues $115,952 $116,280 % $344,149 $342,826 %
Expenses 105,523 104,217 1% 312,126 308,200 1%
Operating Profit 10,429 12,063 (14)% 32,023 34,626 (8)%
Gain on sale of subsidiary % 2,791 2,791 %
Segment Profit 10,429 12,063 (14)% 34,814 37,417 (7)%
Operating Margin (A) 9% 10% 9% 10%
Investment Advisors:
Revenues 85,258 76,238 12% 243,820 228,006 7%
Expenses 45,080 45,530 (1)% 134,575 125,446 7%
Operating Profit 40,178 30,708 31% 109,245 102,560 7%
Operating Margin 47% 40% 45% 45%
Institutional Investors:
Revenues 76,222 74,515 2% 223,793 224,043 %
Expenses 36,943 36,923 % 108,875 108,662 %
Operating Profit 39,279 37,592 4% 114,918 115,381 %
Operating Margin 52% 50% 51% 51%
Investment Managers:
Revenues 75,672 67,162 13% 216,528 199,809 8%
Expenses 48,588 43,899 11% 140,831 126,663 11%
Operating Profit 27,084 23,263 16% 75,697 73,146 3%
Operating Margin 36% 35% 35% 37%
Investments in New Businesses:
Revenues 1,537 1,427 8% 4,445 4,127 8%
Expenses 5,348 5,179 3% 15,935 14,848 7%
Operating Loss (3,811) (3,752) NM (11,490) (10,721) NM
Totals:
Revenues $354,641 $335,622 6% $1,032,735 $998,811 3%
Expenses 241,482 235,748 2% 712,342 683,819 4%
Corporate overhead expenses 15,941 12,856 24% 42,840 38,986 10%
Income from operations $97,218 $87,018 12% $277,553 $276,006 1%

(A) Percentages determined exclusive of gain on sale of subsidiary.

Third-Quarter Business Highlights:

  • Revenue growth in the quarter was primarily driven by higher Asset management, administration, and distribution fees from market appreciation and improved cash flows from new and existing clients.
  • Sales events, net of client losses, during third-quarter 2016 totaled approximately $14.6 million and are expected to generate net annualized recurring revenues of approximately $11.6 million when contract values are fully realized.
  • Our average assets under management, excluding LSV, increased $22.4 billion, or 13 percent, to $195.2 billion, as compared to $172.8 billion during the third-quarter 2015 (see attached Average Asset Balances schedules for further details).
  • Our average assets under administration increased $57.7 billion, or 15 percent, to $455.5 billion in the third-quarter 2016, as compared to $397.8 billion during the third-quarter 2015 (see attached Average Asset Balances schedules for further details).
  • We recorded $1.6 million in non-recurring revenues in our Private Banks segment due to a contract buyout from an investment processing bank client.
  • Our earnings from LSV decreased by $1.0 million, or three percent, to $32.6 million in third-quarter 2016 as compared to $33.6 million in third-quarter 2015. The decline in earnings was due to increased personnel expenses of LSV.
  • We capitalized $13.6 million and $6.4 million of software development costs in third-quarter 2016 and 2015, respectively, of which $11.3 million and $5.7 million are related to continued enhancements to the SEI Wealth Platform.
  • Amortization expense related to the SEI Wealth Platform increased to $11.3 million during the third-quarter 2016 as compared to $10.8 million during the third-quarter 2015 due to continued enhancements.
  • In the third-quarter 2015, we wrote off approximately $6.0 million, or $0.02 diluted earnings per share, in previously capitalized software development costs and purchased software related to the SEI Wealth Platform.
  • Our operating expenses, primarily personnel costs, in our Investment Managers segment increased. These expenses primarily consist of operational and marketing costs and are mainly related to servicing existing clients and acquiring and implementing new clients.
  • The stronger U.S. dollar against the British pound during the third-quarter 2016 compared to the third-quarter 2015 negatively impacted the revenues of our Private Banks and Institutional Investors segments by $2.5 million and $1.5 million, respectively, and operating income by $1.0 million for each of the two segments.
  • Our effective tax rates were 33.8 percent in third-quarter 2016 and 34.1 percent in third-quarter 2015.
  • We repurchased 1.6 million shares of our common stock for $73.4 million during the third-quarter 2016.

Earnings Conference Call
A conference call to review earnings is scheduled for 4:30 p.m. Eastern time on October 20, 2016. Investors may listen to the call at seic.com/investors. The call may also be accessed at many financial services websites, including Google Finance and Yahoo Finance. Investors may also listen to replays at these websites, or by telephone at (USA) 800-475-6701; (International) 320-365-3844, access code 404239.

About SEI
SEI (NASDAQ:SEIC) is a leading global provider of investment processing, investment management, and investment operations solutions that help corporations, financial institutions, financial advisors, and ultra-high-net-worth families create and manage wealth. As of September 30, 2016, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $751 billion in mutual fund and pooled or separately managed assets, including $281 billion in assets under management and $470 billion in client assets under administration. For more information, visit 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,
For the Nine Months
Ended September 30,
2016 2015 2016 2015
Asset management, admin. and distribution fees $271,930 $252,585 $785,642 $756,101
Information processing and software servicing fees 76,443 74,413 224,834 218,765
Transaction–based and trade execution fees 6,268 8,624 22,259 23,945
Total revenues 354,641 335,622 1,032,735 998,811
Subadvisory, distribution and other asset mgmt costs 42,586 40,230 122,651 119,619
Software royalties and other information processing costs 7,519 8,028 22,944 23,594
Brokerage commissions 4,864 6,460 17,065 17,863
Compensation, benefits and other personnel 103,137 99,461 307,350 292,646
Stock-based compensation 4,066 3,867 12,044 11,476
Consulting, outsourcing and professional fees 43,631 35,963 121,712 108,560
Data processing and computer related 16,581 15,173 48,081 43,100
Facilities, supplies and other costs 17,075 22,477 50,194 56,195
Amortization 11,388 10,837 33,684 31,806
Depreciation 6,576 6,108 19,457 17,946
Total expenses 257,423 248,604 755,182 722,805
Income from operations 97,218 87,018 277,553 276,006
Net gain (loss) on investments 196 (756) 320 (544)
Interest and dividend income 1,026 846 3,142 2,570
Interest expense (115) (115) (416) (342)
Equity in earnings of unconsolidated affiliates 32,565 33,595 92,042 104,917
Gain on sale of subsidiary 2,791 2,791
Income before income taxes 130,890 120,588 375,432 385,398
Income taxes 44,186 41,163 130,226 135,122
Net income 86,704 79,425 245,206 250,276
Basic earnings per common share $0.54 $0.48 $1.51 $1.51
Shares used to calculate basic earnings per share 160,916 165,579 161,908 166,142
Diluted earnings per common share $0.53 $0.47 $1.49 $1.47
Shares used to calculate diluted earnings per share 163,925 169,255 165,053 169,977
Dividends declared per common share $ $ $0.26 $0.24


SEI INVESTMENTS COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September 30, December 31,
2016 2015
Assets
Current Assets:
Cash and cash equivalents $623,162 $679,661
Restricted cash 5,500 5,500
Receivables from investment products 48,783 48,098
Receivables, net of allowance for doubtful accounts of $987 and $649 247,724 223,023
Securities owned 21,320 21,235
Other current assets 30,279 26,207
Total Current Assets 976,768 1,003,724
Property and Equipment, net of accumulated depreciation of $278,675 and $259,501 149,262 143,977
Capitalized Software, net of accumulated amortization of $292,745 and $259,358 290,329 290,522
Investments Available for Sale 93,157 81,294
Investments in Affiliated Funds, at fair value 4,888 4,039
Investment in Unconsolidated Affiliates 39,376 49,580
Deferred Income Taxes 3,722
Other Assets, net 16,064 15,492
Total Assets $1,573,566 $1,588,628
Liabilities and Equity
Current Liabilities:
Accounts payable $7,008 $4,511
Accrued liabilities 170,753 217,587
Deferred revenue 2,974 2,385
Total Current Liabilities 180,735 224,483
Deferred Income Taxes 65,518 63,028
Other Long-term Liabilities 14,103 11,397
Total Liabilities 260,356 298,908
Shareholders' Equity:
Common stock, $.01 par value, 750,000 shares authorized; 159,954 and 163,733 shares issued and outstanding 1,600 1,637
Capital in excess of par value 941,370 910,513
Retained earnings 400,778 402,860
Accumulated other comprehensive loss, net (30,538) (25,290)
Total Shareholders' Equity 1,313,210 1,289,720
Total Liabilities and Shareholders' Equity $1,573,566 $1,588,628


SEI INVESTMENTS COMPANY
ENDING ASSET BALANCES
(In millions)
(Unaudited)
Sept. 30, Dec 31, Mar. 31, Jun. 30, Sept. 30,
2015 2015 2016 2016 2016
Private Banks:
Equity and fixed-income programs $18,243 $18,150 $18,370 $18,328 $18,668
Collective trust fund programs 3 4 4 3 3
Liquidity funds 5,469 5,835 5,521 4,848 4,034
Total assets under management $23,715 $23,989 $23,895 $23,179 $22,705
Client assets under administration 16,896 17,532 18,324 18,537 19,269
Total assets $40,611 $41,521 $42,219 $41,716 $41,974
Investment Advisors:
Equity and fixed-income programs $43,988 $46,123 $47,357 $50,016 $52,594
Collective trust fund programs 9 7 7 5 5
Liquidity funds 4,677 4,924 5,051 3,661 2,539
Total assets under management $48,674 $51,054 $52,415 $53,682 $55,138
Institutional Investors:
Equity and fixed-income programs $70,818 $72,263 $73,468 $75,944 $78,701
Collective trust fund programs 96 96 97 88 90
Liquidity funds 2,655 2,883 2,390 2,526 2,612
Total assets under management $73,569 $75,242 $75,955 $78,558 $81,403
Investment Managers:
Equity and fixed-income programs $59 $66 $72 $73 $79
Collective trust fund programs 19,863 32,117 32,385 33,841 35,962
Liquidity funds 848 832 733 750 812
Total assets under management $20,770 $33,015 $33,190 $34,664 $36,853
Client assets under administration (A) 376,133 390,282 400,579 419,139 451,204
Total assets $396,903 $423,297 $433,769 $453,803 $488,057
Investments in New Businesses:
Equity and fixed-income programs $752 $764 $803 $820 $850
Liquidity funds 51 47 41 37 53
Total assets under management $803 $811 $844 $857 $903
LSV Asset Management:
Equity and fixed-income programs $76,958 $78,335 $78,390 $78,352 $83,863
Total:
Equity and fixed-income programs (B) $210,818 $215,701 $218,460 $223,533 $234,755
Collective trust fund programs 19,971 32,224 32,493 33,937 36,060
Liquidity funds 13,700 14,521 13,736 11,822 10,050
Total assets under management $244,489 $262,446 $264,689 $269,292 $280,865
Client assets under administration (C) 393,029 407,814 418,903 437,676 470,473
Total assets $637,518 $670,260 $683,592 $706,968 $751,338

(A) Client assets under administration in the Investment Managers segment include $48.3 billion of assets that require limited services and therefore are at fee levels below our normal full service assets (as of September 30, 2016).
(B) Equity and fixed-income programs include $4.7 billion of assets invested in various asset allocation funds at September 30, 2016.
(C) In addition to the numbers presented, SEI also administers an additional $11.1 billion in Funds of Funds assets (as of September 30, 2016) on which SEI does not earn an administration fee. Client assets under administration as of September 30, 2016 do not reflect $1.3 billion in Funds of Funds assets that were reported at December 31, 2015.

SEI INVESTMENTS COMPANY
AVERAGE ASSET BALANCES
(In millions)
(Unaudited)
3rd Qtr. 4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr.
2015 2015 2016 2016 2016
Private Banks:
Equity and fixed-income programs $19,080 $18,603 $17,644 $18,504 $18,650
Collective trust fund programs 6 3 3 3 3
Liquidity funds 5,443 5,511 5,661 5,118 4,386
Total assets under management $24,529 $24,117 $23,308 $23,625 $23,039
Client assets under administration 17,504 17,775 17,248 18,436 19,039
Total assets $42,033 $41,892 $40,556 $42,061 $42,078
Investment Advisors:
Equity and fixed-income programs $45,992 $46,044 $45,175 $48,783 $51,924
Collective trust fund programs 9 8 7 6 5
Liquidity funds 3,523 4,784 5,009 4,061 2,694
Total assets under management $49,524 $50,836 $50,191 $52,850 $54,623
Institutional Investors:
Equity and fixed-income programs $73,568 $72,463 $71,779 $74,984 $77,583
Collective trust fund programs 93 96 98 96 90
Liquidity funds 2,843 3,109 2,834 2,868 2,751
Total assets under management $76,504 $75,668 $74,711 $77,948 $80,424
Investment Managers:
Equity and fixed-income programs $24 $59 $66 $72 $73
Collective trust fund programs 20,449 30,960 30,784 33,021 35,257
Liquidity funds 978 960 832 701 874
Total assets under management $21,451 $31,979 $31,682 $33,794 $36,204
Client assets under administration 380,247 390,080 387,421 415,237 436,459
Total assets $401,698 $422,059 $419,103 $449,031 $472,663
Investments in New Businesses:
Equity and fixed-income programs $776 $788 $757 $811 $845
Liquidity funds 49 47 48 39 44
Total assets under management $825 $835 $805 $850 $889
LSV Asset Management:
Equity and fixed-income programs $80,656 $79,634 $74,699 $79,733 $83,373
Total:
Equity and fixed-income programs $220,096 $217,591 $210,120 $222,887 $232,448
Collective trust fund programs 20,557 31,067 30,892 33,126 35,355
Liquidity funds 12,836 14,411 14,384 12,787 10,749
Total assets under management $253,489 $263,069 $255,396 $268,800 $278,552
Client assets under administration (A) 397,751 407,855 404,669 433,673 455,498
Total assets $651,240 $670,924 $660,065 $702,473 $734,050

(A) Client assets under administration during third-quarter 2016 do not reflect $1.3 billion in Funds of Funds assets that were reported during fourth-quarter 2015.

Investor Contact: Michele Steinmetz SEI +1 610-676-3037 msteinmetz@seic.com Media Contact: Dana Grosser SEI +1 610-676-2459 dgrosser@seic.com

Source:SEI Investments Company