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SEI Reports Fourth-Quarter 2016 Financial Results

OAKS, Pa., Jan. 25, 2017 (GLOBE NEWSWIRE) -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the fourth-quarter 2016. Diluted earnings per share were $0.55 in fourth-quarter 2016 compared to $0.48 in fourth-quarter 2015.

Consolidated Overview
(In thousands, except earnings per share) For the Three Months
Ended December 31,
For the Twelve Months
Ended December 31,
2016 2015 % 2016 2015 %
Revenues $368,810 $335,397 10% $1,401,545 $1,334,208 5%
Net income 88,611 81,379 9% 333,817 331,655 1%
Diluted earnings per share $0.55 $0.48 15% $2.03 $1.96 4%

"Our financial results for both the fourth quarter and the full year show modest gains and reflect the ongoing investments we are making to deliver next generation solutions to our clients," said Alfred P. West, Jr., SEI Chairman and CEO. "We continue to anticipate significant change in the markets we serve and will provide broad-based solutions to address our clients’ complex needs. While net-sales events slowed during the fourth quarter, we are well positioned to capitalize on the significant opportunities within our markets.

“Our focus is unwavering on delivering for clients and positioning our company for long-term sustainable growth and increased shareholder value.”

Summary of Fourth-Quarter Results by Business Segment

(In thousands) For the Three Months
Ended December 31,
For the Twelve Months
Ended December 31,
2016 2015 % 2016 2015 %
Private Banks:
Revenues $113,737 $113,690 % $457,886 $456,516 %
Expenses 109,062 102,775 6% 421,188 410,975 2%
Operating Profit 4,675 10,915 (57)% 36,698 45,541 (19)%
Gain on sale of subsidiary % 2,791 2,791 %
Segment Profit 4,675 10,915 (57)% 39,489 48,332 (18)%
Operating Margin (A) 4% 10% 8% 10%
Investment Advisors:
Revenues 86,857 78,614 10% 330,677 306,620 8%
Expenses 45,565 46,522 (2)% 180,140 171,968 5%
Operating Profit 41,292 32,092 29% 150,537 134,652 12%
Operating Margin 48% 41% 46% 44%
Institutional Investors:
Revenues 88,791 73,525 21% 312,584 297,568 5%
Expenses 44,242 37,189 19% 153,117 145,851 5%
Operating Profit 44,549 36,336 23% 159,467 151,717 5%
Operating Margin 50% 49% 51% 51%
Investment Managers:
Revenues 77,862 68,154 14% 294,390 267,963 10%
Expenses 50,296 45,431 11% 191,127 172,094 11%
Operating Profit 27,566 22,723 21% 103,263 95,869 8%
Operating Margin 35% 33% 35% 36%
Investments in New Businesses:
Revenues 1,563 1,414 11% 6,008 5,541 8%
Expenses 5,027 5,808 (13)% 20,962 20,656 1%
Operating Loss (3,464) (4,394) NM (14,954) (15,115) NM
Totals:
Revenues $368,810 $335,397 10% $1,401,545 $1,334,208 5%
Expenses 254,192 237,725 7% 966,534 921,544 5%
Corporate overhead expenses 16,477 15,465 7% 59,317 54,451 9%
Income from operations $98,141 $82,207 19% $375,694 $358,213 5%

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

Fourth-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.
  • In the fourth-quarter 2016, we recognized a $12.3 million performance fee and a corresponding $6.1 million sub-advisory expense associated with an SEI-sponsored investment product. These items resulted in a positive net impact of approximately $0.03 diluted earnings per share and were reflected in the Institutional Investors segment.
  • Sales events, net of client losses, during fourth-quarter 2016 totaled approximately $10.6 million and are expected to generate net annualized recurring revenues of approximately $5.5 million when contract values are fully realized. For the year ended 2016, sales events, net of client losses, totaled approximately $93.1 million and are expected to generate net annualized recurring revenues of approximately $74.0 million when contract values are fully realized.
  • Our average assets under management, excluding LSV, increased $11.4 billion, or six percent, to $194.8 billion, as compared to $183.4 billion during the fourth-quarter 2015 (see attached Average Asset Balances schedules for further details).
  • Our average assets under administration increased $57.8 billion, or 14 percent, to $465.7 billion in the fourth-quarter 2016, as compared to $407.9 billion during the fourth-quarter 2015 (see attached Average Asset Balances schedules for further details).
  • Our earnings from LSV increased by $2.0 million, or six percent, to $34.1 million in fourth-quarter 2016 as compared to $32.1 million in fourth-quarter 2015. The increase in earnings was due to an increase in assets under management from market appreciation; however, our earnings were negatively impacted by lower performance fees and increased personnel expenses of LSV.
  • We capitalized $17.2 million and $6.9 million of software development costs in fourth-quarter 2016 and 2015, respectively, of which $12.4 million and $5.2 million are related to continued enhancements to the SEI Wealth Platform. Our expenses related to maintenance and enhancements not eligible for capitalization have increased. A higher portion of these costs are recognized in personnel and consulting costs. These increased costs primarily impacted the Private Banks and Investment Advisors business segments.
  • Amortization expense related to the SEI Wealth Platform increased to $11.7 million during the fourth-quarter 2016 as compared to $10.8 million during the fourth-quarter 2015 due to continued enhancements.
  • Our operating expenses increased $13.2 million, or five percent, during the fourth-quarter 2016 compared to the third-quarter 2016 due in part to the previously mentioned sub-advisory expense. Without this item, the sequential increase in our operating expenses during the fourth-quarter would have been $7.1 million, or just under three percent.
  • 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 fourth-quarter 2016 compared to the fourth-quarter 2015 negatively impacted the revenues of our Private Banks and Institutional Investors segments by $2.9 million and $1.8 million, respectively, and operating income by $1.2 million for each of the two segments.
  • Our effective tax rates were 33.4 percent in fourth-quarter 2016 and 29.3 percent in fourth-quarter 2015. The increase in the tax rate is due to a one time state tax settlement we received in the fourth quarter of 2015 as well as the reinstatement of the Research and Development credit in the fourth quarter of 2015. In 2015, all of the Research and Development Tax credit was recorded in the fourth quarter as compared to each quarter in 2016.
  • We repurchased 1.4 million shares of our common stock for $66.8 million during the fourth-quarter 2016.

Earnings Conference Call
A conference call to review earnings is scheduled for 4:30 p.m. Eastern time on Jan. 25, 2017. 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 415844.

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 December 31, 2016, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $751 billion in hedge, private equity, mutual fund and pooled or separately managed assets, including $283 billion in assets under management and $468 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 December 31,
For the Twelve Months
Ended December 31,
2016 2015 2016 2015
Asset management, admin. and distribution fees $286,534 $254,410 $1,072,176 $1,010,511
Information processing and software servicing fees 75,512 72,128 300,346 290,893
Transaction–based and trade execution fees 6,764 8,859 29,023 32,804
Total revenues 368,810 335,397 1,401,545 1,334,208
Subadvisory, distribution and other asset mgmt costs 48,310 40,443 170,961 160,062
Software royalties and other information processing costs 7,379 7,903 30,323 31,497
Brokerage commissions 5,087 6,525 22,152 24,388
Compensation, benefits and other personnel 107,272 103,128 414,622 395,774
Stock-based compensation 3,973 5,836 16,017 17,312
Consulting, outsourcing and professional fees 45,057 37,876 166,769 146,436
Data processing and computer related 16,849 15,784 64,930 58,884
Facilities, supplies and other costs 18,051 18,773 68,245 74,968
Amortization 11,708 10,824 45,392 42,630
Depreciation 6,983 6,098 26,440 24,044
Total expenses 270,669 253,190 1,025,851 975,995
Income from operations 98,141 82,207 375,694 358,213
Net (loss) gain on investments (208) 88 112 (456)
Interest and dividend income 1,174 788 4,316 3,358
Interest expense (115) (141) (531) (483)
Equity in earnings of unconsolidated affiliates 34,061 32,140 126,103 137,057
Gain on sale of subsidiary 2,791 2,791
Income before income taxes 133,053 115,082 508,485 500,480
Income taxes 44,442 33,703 174,668 168,825
Net income 88,611 81,379 333,817 331,655
Basic earnings per common share $0.55 $0.49 $2.07 $2.00
Shares used to calculate basic earnings per share 159,674 164,473 161,350 165,725
Diluted earnings per common share $0.55 $0.48 $2.03 $1.96
Shares used to calculate diluted earnings per share 162,567 168,461 164,431 169,598
Dividends declared per common share $0.28 $0.26 $0.54 $0.50


SEI INVESTMENTS COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31, December 31,
2016 2015
Assets
Current Assets:
Cash and cash equivalents $695,701 $679,661
Restricted cash 3,500 5,500
Receivables from investment products 61,761 48,098
Receivables, net of allowance for doubtful accounts of $523 and $649 227,957 223,023
Securities owned 21,339 21,235
Other current assets 27,575 26,207
Total Current Assets 1,037,833 1,003,724
Property and Equipment, net of accumulated depreciation of $285,322 and $259,501 146,190 143,977
Capitalized Software, net of accumulated amortization of $303,540 and $259,358 295,867 290,522
Investments Available for Sale 84,033 81,294
Investments in Affiliated Funds, at fair value 4,858 4,039
Investment in Unconsolidated Affiliates 50,459 49,580
Deferred Income Taxes 2,127
Other Assets, net 15,456 15,492
Total Assets $1,636,823 $1,588,628
Liabilities and Equity
Current Liabilities:
Accounts payable $5,966 $4,511
Accrued liabilities 240,525 217,587
Deferred revenue 2,880 2,385
Total Current Liabilities 249,371 224,483
Deferred Income Taxes 69,693 63,028
Other Long-term Liabilities 14,645 11,397
Total Liabilities 333,709 298,908
Shareholders' Equity:
Common stock, $.01 par value, 750,000 shares authorized; 159,031 and 163,733 shares issued and outstanding 1,590 1,637
Capital in excess of par value 955,461 910,513
Retained earnings 384,018 402,860
Accumulated other comprehensive loss, net (37,955) (25,290)
Total Shareholders' Equity 1,303,114 1,289,720
Total Liabilities and Shareholders' Equity $1,636,823 $1,588,628


SEI INVESTMENTS COMPANY
ENDING ASSET BALANCES
(In millions)
(Unaudited)
Dec 31, Mar. 31, Jun. 30, Sept. 30, Dec 31,
2015 2016 2016 2016 2016
Private Banks:
Equity and fixed-income programs $18,150 $18,370 $18,328 $18,668 $17,926
Collective trust fund programs 4 4 3 3 3
Liquidity funds 5,835 5,521 4,848 4,034 4,230
Total assets under management $23,989 $23,895 $23,179 $22,705 $22,159
Client assets under administration 17,532 18,324 18,537 19,269 19,255
Total assets $41,521 $42,219 $41,716 $41,974 $41,414
Investment Advisors:
Equity and fixed-income programs $46,123 $47,357 $50,016 $52,594 $52,847
Collective trust fund programs 7 7 5 5 5
Liquidity funds 4,924 5,051 3,661 2,539 2,741
Total assets under management $51,054 $52,415 $53,682 $55,138 $55,593
Institutional Investors:
Equity and fixed-income programs $72,263 $73,468 $75,944 $78,701 $76,465
Collective trust fund programs 96 97 88 90 93
Liquidity funds 2,883 2,390 2,526 2,612 2,903
Total assets under management $75,242 $75,955 $78,558 $81,403 $79,461
Investment Managers:
Equity and fixed-income programs $66 $72 $73 $79 $81
Collective trust fund programs 32,117 32,385 33,841 35,962 36,991
Liquidity funds 832 733 750 812 667
Total assets under management $33,015 $33,190 $34,664 $36,853 $37,739
Client assets under administration (A) 390,282 400,579 419,139 451,204 448,708
Total assets $423,297 $433,769 $453,803 $488,057 $486,447
Investments in New Businesses:
Equity and fixed-income programs $764 $803 $820 $850 $884
Liquidity funds 47 41 37 53 61
Total assets under management $811 $844 $857 $903 $945
LSV Asset Management:
Equity and fixed-income programs $78,335 $78,390 $78,352 $83,863 $87,248
Total:
Equity and fixed-income programs (B) $215,701 $218,460 $223,533 $234,755 $235,451
Collective trust fund programs 32,224 32,493 33,937 36,060 37,092
Liquidity funds 14,521 13,736 11,822 10,050 10,602
Total assets under management $262,446 $264,689 $269,292 $280,865 $283,145
Client assets under administration (C) 407,814 418,903 437,676 470,473 467,963
Total assets $670,260 $683,592 $706,968 $751,338 $751,108

(A) Client assets under administration in the Investment Managers segment include $48.8 billion of assets that require limited services and therefore are at fee levels below our normal full service assets (as of December 31, 2016).
(B) Equity and fixed-income programs include $4.7 billion of assets invested in various asset allocation funds at December 31, 2016.
(C) In addition to the numbers presented, SEI also administers an additional $9.5 billion in Funds of Funds assets (as of December 31, 2016) on which SEI does not earn an administration fee. Client assets under administration as of December 31, 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)
4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
2015 2016 2016 2016 2016
Private Banks:
Equity and fixed-income programs $18,603 $17,644 $18,504 $18,650 $17,945
Collective trust fund programs 3 3 3 3 3
Liquidity funds 5,511 5,661 5,118 4,386 4,030
Total assets under management $24,117 $23,308 $23,625 $23,039 $21,978
Client assets under administration 17,775 17,248 18,436 19,039 19,010
Total assets $41,892 $40,556 $42,061 $42,078 $40,988
Investment Advisors:
Equity and fixed-income programs $46,044 $45,175 $48,783 $51,924 $52,267
Collective trust fund programs 8 7 6 5 5
Liquidity funds 4,784 5,009 4,061 2,694 2,638
Total assets under management $50,836 $50,191 $52,850 $54,623 $54,910
Institutional Investors:
Equity and fixed-income programs $72,463 $71,779 $74,984 $77,583 $77,040
Collective trust fund programs 96 98 96 90 92
Liquidity funds 3,109 2,834 2,868 2,751 2,766
Total assets under management $75,668 $74,711 $77,948 $80,424 $79,898
Investment Managers:
Equity and fixed-income programs $59 $66 $72 $73 $79
Collective trust fund programs 30,960 30,784 33,021 35,257 36,170
Liquidity funds 960 832 701 874 813
Total assets under management $31,979 $31,682 $33,794 $36,204 $37,062
Client assets under administration 390,080 387,421 415,237 436,459 446,666
Total assets $422,059 $419,103 $449,031 $472,663 $483,728
Investments in New Businesses:
Equity and fixed-income programs $788 $757 $811 $845 $851
Liquidity funds 47 48 39 44 60
Total assets under management $835 $805 $850 $889 $911
LSV Asset Management:
Equity and fixed-income programs $79,634 $74,699 $79,733 $83,373 $84,676
Total:
Equity and fixed-income programs $217,591 $210,120 $222,887 $232,448 $232,858
Collective trust fund programs 31,067 30,892 33,126 35,355 36,270
Liquidity funds 14,411 14,384 12,787 10,749 10,307
Total assets under management $263,069 $255,396 $268,800 $278,552 $279,435
Client assets under administration (A) 407,855 404,669 433,673 455,498 465,676
Total assets $670,924 $660,065 $702,473 $734,050 $745,111

(A) Client assets under administration during fourth-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