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SEI Reports First-Quarter 2017 Financial Results

OAKS, Pa., April 19, 2017 (GLOBE NEWSWIRE) -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the first-quarter 2017. Diluted earnings per share were $0.55 in first-quarter 2017 compared to $0.47 in first-quarter 2016. Diluted earnings per share in first-quarter 2016 reflect a pre-tax gain of $2.8 million, or $0.01 per share, from the sale of SEI Asset Korea.

Consolidated Overview
(In thousands, except earnings per share) For the Three Months
Ended March 31,
2017 2016 %
Revenues $359,984 $334,263 8%
Net income 88,737 77,497 15%
Diluted earnings per share $0.55 $0.47 17%

“Our financial results for the quarter reflect new and existing client growth, our focus on expenses, and the necessary investments to expand and strengthen the solutions we bring to our target markets,” said Alfred P. West, Jr., SEI Chairman and CEO.

“While we are committed to executing for clients in the short term, we remain focused on the long-term needs of our markets. Our advanced solutions are at the center of what will help our clients sustain their success, while helping us achieve sustainable growth and provide increased shareholder value.”

Summary of First-Quarter Results by Business Segment

(In thousands) For the Three Months
Ended March 31,
2017 2016 %
Private Banks:
Revenues $112,634 $113,361 (1)%
Expenses 108,550 103,741 5%
Operating Profit 4,084 9,620 (58)%
Gain on sale of subsidiary 2,791 NM
Segment Profit 4,084 12,411 NM
Operating Margin (A) 4% 8%
Investment Advisors:
Revenues 88,238 76,679 15%
Expenses 47,539 44,774 6%
Operating Profit 40,699 31,905 28%
Operating Margin 46% 42%
Institutional Investors:
Revenues 77,004 72,897 6%
Expenses 38,828 35,382 10%
Operating Profit 38,176 37,515 2%
Operating Margin 50% 51%
Investment Managers:
Revenues 80,487 69,918 15%
Expenses 52,065 45,275 15%
Operating Profit 28,422 24,643 15%
Operating Margin 35% 35%
Investments in New Businesses:
Revenues 1,621 1,408 15%
Expenses 4,880 5,232 (7)%
Operating Loss (3,259) (3,824) NM
Totals:
Revenues $359,984 $334,263 8%
Expenses 251,862 234,404 7%
Corporate overhead expenses 14,605 13,047 12%
Income from operations $93,517 $86,812 8%

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

First-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 first-quarter 2017 totaled approximately $20.2 million and are expected to generate net annualized recurring revenues of approximately $17.2 million when contract values are fully realized.
  • Our average assets under management, excluding LSV, increased $20.7 billion, or 11 percent, to $201.4 billion, as compared to $180.7 billion during the first-quarter 2016. Our assets under management do not include advised assets (see attached Average Asset Balances schedules for further details).
  • Our average assets under administration increased $69.3 billion, or 17 percent, to $474.0 billion in the first-quarter 2017, as compared to $404.7 billion during the first-quarter 2016 (see attached Average Asset Balances schedules for further details).
  • Our earnings from LSV increased by $4.4 million, or 15 percent, to $33.6 million in first-quarter 2017 as compared to $29.2 million in first-quarter 2016. The increase in earnings was due to an increase in assets under management from market appreciation; however, our earnings were negatively impacted by increased personnel expenses of LSV.
  • We capitalized $16.9 million and $9.5 million of software development costs in first-quarter 2017 and 2016, respectively, of which $15.2 million and $7.6 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 $12.0 million during the first-quarter 2017 as compared to $11.0 million during the first-quarter 2016 due to continued enhancements.
  • 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.
  • During the first-quarter 2017, we adopted ASU 2016-09 which will cause volatility in our quarterly effective tax rate. Our effective tax rates were 31.0 percent in first-quarter 2017 and 35.2 percent in first-quarter 2016. Refer to our Form 10-Q for first-quarter 2017 for information regarding the impact of ASU 2016-09 on our effective tax rate.
  • We repurchased 1.1 million shares of our common stock for $55.4 million during the first-quarter 2017.

Earnings Conference Call
A conference call to review earnings is scheduled for 4:30 p.m. Eastern time on Apr. 19, 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 422405.

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 March 31, 2017, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages, advises or administers $779 billion in hedge, private equity, mutual fund and pooled or separately managed assets, including $297 billion in assets under management and $478 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 March 31,
2017 2016
Asset management, admin. and distribution fees $278,565 $251,437
Information processing and software servicing fees 74,763 73,399
Transaction–based and trade execution fees 6,656 9,427
Total revenues 359,984 334,263
Subadvisory, distribution and other asset mgmt costs 42,502 39,195
Software royalties and other information processing costs 7,662 7,748
Brokerage commissions 4,959 7,108
Compensation, benefits and other personnel 108,943 101,931
Stock-based compensation 6,180 3,789
Consulting, outsourcing and professional fees 43,149 38,506
Data processing and computer related 16,772 15,718
Facilities, supplies and other costs 17,478 15,997
Amortization 12,022 11,012
Depreciation 6,800 6,447
Total expenses 266,467 247,451
Income from operations 93,517 86,812
Net gain (loss) on investments 347 (126)
Interest and dividend income 1,343 1,083
Interest expense (112) (114)
Equity in earnings of unconsolidated affiliate 33,565 29,192
Gain on sale of subsidiary 2,791
Income before income taxes 128,660 119,638
Income taxes 39,923 42,141
Net income 88,737 77,497
Basic earnings per common share $0.56 $0.48
Shares used to calculate basic earnings per share 159,091 163,013
Diluted earnings per common share $0.55 $0.47
Shares used to calculate diluted earnings per share 162,742 166,145


SEI INVESTMENTS COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
March 31, December 31,
2017 2016
Assets
Current Assets:
Cash and cash equivalents $661,372 $695,701
Restricted cash 3,500 3,500
Receivables from investment products 51,453 61,761
Receivables, net of allowance for doubtful accounts of $518 and $523 252,205 227,957
Securities owned 21,372 21,339
Other current assets 29,873 27,575
Total Current Assets 1,019,775 1,037,833
Property and Equipment, net of accumulated depreciation of $291,500 and $285,322 142,726 146,190
Capitalized Software, net of accumulated amortization of $315,512 and $303,540 300,756 295,867
Investments Available for Sale 89,262 84,033
Investments in Affiliated Funds, at fair value 5,156 4,858
Investment in Unconsolidated Affiliate 48,759 50,459
Deferred Income Taxes 1,878 2,127
Other Assets, net 16,240 15,456
Total Assets $1,624,552 $1,636,823
Liabilities and Equity
Current Liabilities:
Accounts payable $7,372 $5,966
Accrued liabilities 167,061 240,525
Deferred revenue 2,337 2,880
Total Current Liabilities 176,770 249,371
Deferred Income Taxes 69,379 69,693
Other Long-term Liabilities 15,610 14,645
Total Liabilities 261,759 333,709
Shareholders' Equity:
Common stock, $.01 par value, 750,000 shares authorized; 158,687 and 159,031 shares issued and outstanding 1,587 1,590
Capital in excess of par value 976,007 955,461
Retained earnings 420,712 384,018
Accumulated other comprehensive loss, net (35,513) (37,955)
Total Shareholders' Equity 1,362,793 1,303,114
Total Liabilities and Shareholders' Equity $1,624,552 $1,636,823


ENDING ASSET BALANCES
(In millions) (Unaudited)
Mar. 31, Jun. 30, Sept. 30, Dec 31, Mar. 31,
2016 2016 2016 2016 2017
Private Banks:
Equity and fixed-income programs $18,370 $18,328 $18,668 $17,926 $19,034
Collective trust fund programs 4 3 3 3 5
Liquidity funds 5,521 4,848 4,034 4,230 3,903
Total assets under management $23,895 $23,179 $22,705 $22,159 $22,942
Client assets under administration 18,324 18,537 19,269 19,255 20,760
Total assets $42,219 $41,716 $41,974 $41,414 $43,702
Investment Advisors:
Equity and fixed-income programs $47,357 $50,016 $52,594 $52,847 $55,311
Collective trust fund programs 7 5 5 5 5
Liquidity funds 5,051 3,661 2,539 2,741 2,645
Total assets under management $52,415 $53,682 $55,138 $55,593 $57,961
Institutional Investors:
Equity and fixed-income programs $73,468 $75,944 $78,701 $76,465 $80,136
Collective trust fund programs 97 88 90 93 89
Liquidity funds 2,390 2,526 2,612 2,903 2,759
Total assets under management $75,955 $78,558 $81,403 $79,461 $82,984
Advised assets 3,228
Total assets $75,955 $78,558 $81,403 $79,461 $86,212
Investment Managers:
Equity and fixed-income programs $72 $73 $79 $81 $84
Collective trust fund programs 32,385 33,841 35,962 36,991 40,646
Liquidity funds 733 750 812 667 911
Total assets under management $33,190 $34,664 $36,853 $37,739 $41,641
Client assets under administration (A) 400,579 419,139 451,204 448,708 457,356
Total assets $433,769 $453,803 $488,057 $486,447 $498,997
Investments in New Businesses:
Equity and fixed-income programs $803 $820 $850 $884 $931
Liquidity funds 41 37 53 61 79
Total assets under management $844 $857 $903 $945 $1,010
Advised assets
85
Total assets $844 $857 $903 $945 $1,095
LSV Asset Management:
Equity and fixed-income programs $78,390 $78,352 $83,863 $87,248 $90,611
Total:
Equity and fixed-income programs (B) $218,460 $223,533 $234,755 $235,451 $246,107
Collective trust fund programs 32,493 33,937 36,060 37,092 40,745
Liquidity funds 13,736 11,822 10,050 10,602 10,297
Total assets under management $264,689 $269,292 $280,865 $283,145 $297,149
Advised assets (C)
3,313
Client assets under administration (D) 418,903 437,676 470,473 467,963 478,116
Total assets $683,592 $706,968 $751,338 $751,108 $778,578

(A) Client assets under administration in the Investment Managers segment include $47.4 billion of assets that require limited services and therefore are at fee levels below our normal full service assets (as of March 31, 2017).
(B) Equity and fixed-income programs include $5.0 billion of assets invested in various asset allocation funds at March 31, 2017.
(C) Assets for which SEI acts as an advisor to the accounts. These assets were excluded in previous periods.
(D) In addition to the numbers presented, SEI also administers an additional $10.1 billion in Funds of Funds assets (as of March 31, 2017) on which SEI does not earn an administration fee.

AVERAGE ASSET BALANCES
(In millions) (Unaudited)
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 1st Qtr.
2016 2016 2016 2016 2017
Private Banks:
Equity and fixed-income programs $17,644 $18,504 $18,650 $17,945 $18,498
Collective trust fund programs 3 3 3 3 4
Liquidity funds 5,661 5,118 4,386 4,030 4,051
Total assets under management $23,308 $23,625 $23,039 $21,978 $22,553
Client assets under administration 17,248 18,436 19,039 19,010 20,223
Total assets $40,556 $42,061 $42,078 $40,988 $42,776
Investment Advisors:
Equity and fixed-income programs $45,175 $48,783 $51,924 $52,267 $54,446
Collective trust fund programs 7 6 5 5 5
Liquidity funds 5,009 4,061 2,694 2,638 2,559
Total assets under management $50,191 $52,850 $54,623 $54,910 $57,010
Institutional Investors:
Equity and fixed-income programs $71,779 $74,984 $77,583 $77,040 $77,852
Collective trust fund programs 98 96 90 92 90
Liquidity funds 2,834 2,868 2,751 2,766 2,891
Total assets under management $74,711 $77,948 $80,424 $79,898 $80,833
Advised assets
3,125
Total assets $74,711 $77,948 $80,424 $79,898 $83,958
Investment Managers:
Equity and fixed-income programs $66 $72 $73 $79 $75
Collective trust fund programs 30,784 33,021 35,257 36,170 39,081
Liquidity funds 832 701 874 813 860
Total assets under management $31,682 $33,794 $36,204 $37,062 $40,016
Client assets under administration 387,421 415,237 436,459 446,666 453,766
Total assets $419,103 $449,031 $472,663 $483,728 $493,782
Investments in New Businesses:
Equity and fixed-income programs $757 $811 $845 $851 $909
Liquidity funds 48 39 44 60 63
Total assets under management $805 $850 $889 $911 $972
Advised assets
82
Total assets $805 $850 $889 $911 $1,054
LSV Asset Management:
Equity and fixed-income programs $74,699 $79,733 $83,373 $84,676 $90,274
Total:
Equity and fixed-income programs $210,120 $222,887 $232,448 $232,858 $242,054
Collective trust fund programs 30,892 33,126 35,355 36,270 39,180
Liquidity funds 14,384 12,787 10,749 10,307 10,424
Total assets under management $255,396 $268,800 $278,552 $279,435 $291,658
Advised assets
3,207
Client assets under administration 404,669 433,673 455,498 465,676 473,989
Total assets $660,065 $702,473 $734,050 $745,111 $768,854


Investor / Media Contact: Dana Grosser SEI +1 610-676-2459 dgrosser@seic.com

Source:SEI Investments Company