SEI Reports First-Quarter 2023 Financial Results

SEI Investments Company

OAKS, PA — SEI Investments Company (NASDAQ: SEIC) recently announced financial results for the first-quarter 2023. Diluted earnings per share were $0.79 in first-quarter 2023 compared to $1.36 in first-quarter 2022. First-quarter 2022 results included a one-time positive $88.0 million revenue event resulting in $0.47 diluted earnings per share net of associated costs.

Consolidated Overview
(In thousands, except earnings per share) For the Three Months
Ended March 31,
2023 2022
Revenues $469,119 $581,443
Net income 107,015 190,308
Diluted earnings per share $0.79 $1.36
“Our first-quarter results reflect strong sales across most of our business lines, especially in technology and investment processing. Revenues and profits were slightly impacted by cash flows in our asset management businesses. We have a clear strategic focus on driving growth and will be very diligent about managing expenses across the company,” said CEO Ryan Hicke.

“We are encouraged by overall sales results, as well as the size and makeup of our pipelines, reflecting changes we have made over the last year. We will thoughtfully align our capital to opportunities for growth and deliver the solutions our markets value. I believe SEI’s future is ripe with opportunity, and we will be aggressive in executing our long-term growth strategy.”

Summary of First-Quarter Results by Business Segment
(In thousands) For the Three Months
Ended March 31,
2023 2022 %
Private Banks:
Revenues $122,603 $213,548 (43) %
Expenses 114,276 121,955 (6) %
Operating Profit 8,327 91,593 (91) %
Operating Margin 7 % 43 %
Investment Advisors:
Revenues 106,538 119,230 (11) %
Expenses 63,546 64,520 (2) %
Operating Profit 42,992 54,710 (21) %
Operating Margin 40 % 46 %
Institutional Investors:
Revenues 74,290 86,839 (14) %
Expenses 40,868 45,358 (10) %
Operating Profit 33,422 41,481 (19) %
Operating Margin 45 % 48 %
Investment Managers:
Revenues 160,686 156,901 2 %
Expenses 105,866 98,837 7 %
Operating Profit 54,820 58,064 (6) %
Operating Margin 34 % 37 %
Investments in New Businesses:
Revenues 5,002 4,925 2 %
Expenses 11,644 11,950 (3) %
Operating Loss (6,642) (7,025) NM
Revenues $469,119 $581,443 (19) %
Expenses 336,200 342,620 (2) %
Corporate Overhead Expenses 31,152 24,024 30 %
Income from Operations $101,767 $214,799 (53) %
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First-Quarter Business Highlights:

  • Revenues from Information processing and software servicing fees decreased primarily from a one-time early termination fee of $88.0 million from an uninstalled investment processing client recorded during first-quarter 2022 in the Private Banks segment.
  • Revenues from Assets under management, administration, and distribution fees decreased primarily from lower assets under management in equity and fixed income programs from market depreciation during 2022 and negative cash flows from SEI fund programs due to client losses in the Investment Advisors and Institutional Investors segments. The improvement in market conditions and positive cash flows into separately managed account programs and Strategist programs during the first quarter 2023 partially offset the decline in revenues.
  • Average assets under management in equity and fixed income programs, excluding LSV, decreased $26.7 billion, or 14%, to $167.8 billion in the first-quarter 2023, as compared to $194.5 billion during the first-quarter 2022 (see attached Average Asset Balances schedule for further details).
  • Revenue from Asset management, administration and distribution fees increased from existing alternative investment clients of the Investment Managers segment due to new products and additional services. The decrease in average assets under administration reflect a loss of a significant client in 2022 which was not charged asset-based fees.
  • Net sales events in the Private Banks and Investment Managers segments during first-quarter 2023 were $21.2 million and are expected to generate net annualized recurring revenues of approximately $17.1 million when contract values are completely realized.
  • Net sales events in asset management-related businesses of the Investment Advisors and Institutional Investors segments and the Asset Management Distribution (AMD) business in the Private Banks segment during first-quarter 2023 were $1.0 million.
  • Net sales events in newer initiatives during first-quarter 2023 were $1.0 million.
  • Operational expenses increased due to higher personnel costs from business growth, competitive labor markets, and the impact of inflation on wages and services. Operational expenses also increased due to personnel costs and investments in compliance infrastructure to meet new regulatory requirements. The increase was substantially offset by lower direct costs related to asset management revenues and lower amortization expense.
  • Earnings from LSV decreased to $28.9 million in the first-quarter 2023 as compared to $32.5 million in the first-quarter 2022 due to net negative cash flows from existing clients, client losses and market depreciation.
  • The Company capitalized $9.0 million of software development costs in first-quarter 2023, of which $4.7 million was for continued enhancements to SWP. It also capitalized $4.3 million of software development costs in first-quarter 2023 for a new platform for the Investment Managers segment.
  • Amortization expense related to SWP was $6.2 million in first-quarter 2023 as compared to $12.1 million in first-quarter 2022. The decline in amortization expense was due to the amortization period of the initial development costs related to SWP which ended in second-quarter 2022.
  • Effective tax rates were 23.6% in first-quarter 2023 and 23.1% in first-quarter 2022.
  • The Company repurchased 1.4 million shares of its common stock for $80.3 million during the first-quarter 2023 at an average price of $59.03 per share.
  • Cash flow from operations was $114.4 million, or $0.85 per share, and free cash flow was $94.7 million during the first-quarter 2023.
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Additional details can be found on the Company’s website.

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