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 Platform^SM.

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.

SEI Reports Third-Quarter 2016 Financial Results

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