SEI INVESTMENTS CO - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - FORM 8-K - SEI INVESTMENTS CO	seicform8-k13019.htm

Exhibit 99.1

Investor Contact: Media Contact:

Lindsey Opsahl Leslie Wojcik

SEI SEI

+1 610-676-4052 +1 610-676-4191

lopsahl@seic.com lwojcik@seic.com

Pages: 8

FOR IMMEDIATE RELEASE

SEI Reports Fourth-Quarter 2018 Financial Results

OAKS, Pa., Jan. 30, 2019 – SEI Investments Company (NASDAQ:SEIC) today announced financial results for the fourth-quarter 2018. Diluted earnings per share were $0.73 in fourth-quarter 2018 compared to $0.75 in fourth-quarter 2017.



Consolidated Overview
(In thousands, except earnings per share)	For the Three Months Ended December 31,					For the Twelve Months Ended December 31,
	2018		2017		%	2018		2017		%

Revenues		$405,057		$408,219	(1)%		$1,624,167		$1,526,552	6%
Net income	116,034		122,144		(5)%	505,868		404,389		25%
Diluted earnings per share		$0.73		$0.75	(3)%		$3.14		$2.49	26%

"Our financial results reflect the positive growth of platform adoption across our business segments, as well as the capital markets' negative impact during the fourth quarter," said Alfred P. West, Jr., SEI Chairman and CEO.

"As we have said in the past, the wealth and investment management industries have headwinds to address and tailwinds to capitalize on. We believe our platforms position us well to enable our clients' success, while providing us growth opportunities that will lead to 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,
	2018			2017			%	2018			2017			%
Private Banks:
Revenues		$121,358			$126,955		(4)%		$483,097			$474,272		2%
Expenses	114,379			118,410			(3)%	457,894			455,119			1%
Operating Profit	6,979			8,545			(18)%	25,203			19,153			32%
Operating Margin	6		%	7		%		5		%	4		%

Investment Advisors:
Revenues	97,457			98,171			(1)%	399,089			373,473			7%
Expenses	53,647			54,329			(1)%	212,439			201,833			5%
Operating Profit	43,810			43,842			—%	186,650			171,640			9%
Operating Margin	45		%	45		%		47		%	46		%

Institutional Investors:
Revenues	80,908			86,974			(7)%	333,299			322,457			3%
Expenses	40,919			44,141			(7)%	163,536			161,640			1%
Operating Profit	39,989			42,833			(7)%	169,763			160,817			6%
Operating Margin	49		%	49		%		51		%	50		%

Investment Managers:
Revenues	102,380			94,321			9%	398,076			349,444			14%
Expenses	67,738			60,761			11%	259,693			226,504			15%
Operating Profit	34,642			33,560			3%	138,383			122,940			13%
Operating Margin	34		%	36		%		35		%	35		%

Investments in New Businesses:
Revenues	2,954			1,798			64%	10,606			6,906			54%
Expenses	6,164			5,611			10%	22,971			20,678			11%
Operating Loss	(3,210		)	(3,813		)	NM	(12,365		)	(13,772		)	NM

Totals:
Revenues		$405,057			$408,219		(1)%		$1,624,167			$1,526,552		6%
Expenses	282,847			283,252			—%	1,116,533			1,065,774			5%
Corporate overhead expenses	19,248			18,004			7%	65,646			63,834			3%
Income from operations		$102,962			$106,963		(4)%		$441,988			$396,944		11%

Fourth-Quarter Business Highlights:

•

Revenues from Asset management, administration, and distribution fees increased due to higher assets under administration, resulting from positive cash flows from new and existing clients in our Investment Managers segment; however, this increase was partially offset by a decline in fees from assets under management due to the unfavorable market conditions during the fourth-quarter 2018, which negatively impacted our asset-based fee revenues.


•	Performance fees of $3.4 million were recognized in fourth-quarter 2017 associated with an SEI-sponsored investment product in our Institutional Investors segment. We did not earn any performance fees from this product in fourth-quarter 2018.


•	Our average assets under management, excluding LSV, decreased $9.5 billion, or four percent, to $218.4 billion, as compared to $227.9 billion during the fourth-quarter 2017 (see attached Average Asset Balances schedules for further details).


•	Our average assets under administration increased $65.7 billion, or 13 percent, to $582.7 billion in the fourth-quarter 2018, as compared to $517.0 billion during the fourth-quarter 2017 (see attached Average Asset Balances schedules for further details).

•

Information processing and software servicing fees declined primarily from our adoption of ASU Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09) in 2018 in which fees received for research services provided by our brokerage subsidiary, SIDCO, are recorded net of amounts paid for the related soft dollar arrangements. The corresponding decrease in expenses due to the adoption of ASU 2014-09 is reflected in Software royalties and other information processing costs.


•	Our Subadvisory, distribution and other asset management costs decreased in fourth-quarter 2018, primarily from lower assets under management due to unfavorable market conditions, as well as the recognition of subadvisory expense of $1.7 million in fourth-quarter 2017 related to the previously mentioned performance fees.

•

Sales events, net of client losses, during fourth-quarter 2018 totaled approximately $10.7 million and are expected to generate net annualized recurring revenues of approximately $3.7 million when contract values are fully realized. For the year ended 2018, sales events, net of client losses, totaled approximately $81.9 million and are expected to generate net annualized recurring revenues of approximately $56.9 million when contract values are fully realized.


•	Our earnings from LSV decreased by $7.0 million, or 16 percent, to $36.4 million in fourth-quarter 2018 as compared to $43.3 million in fourth-quarter 2017. The decrease in earnings was primarily due to a decline in assets under management from market volatility in fourth-quarter 2018, as well as reduced performance fees earned by LSV.


•	Our operating expenses for the year ended 2018 increased across all of our business segments. These expenses, primarily personnel costs, generally consist of operational, technology development and maintenance, and marketing costs, and are mainly related to our solutions offerings, as well as servicing existing clients and acquiring new clients.


•	We capitalized $10.9 million of software development costs in fourth-quarter 2018 for continued enhancements to the SEI Wealth Platform^SM.


•	Stock-based compensation expense in fourth-quarter 2018 decreased by $9.4 million as compared to fourth-quarter 2017 due to the fourth-quarter 2017 change in our estimate of the timing of when stock option vesting targets would be achieved. We expect stock-based compensation expense during 2019 to be approximately $22.6 million as compared to $23.8 million during 2018.

•

Our effective tax rate was 19.2 percent in fourth-quarter 2018 and included the new 21.0 percent corporate tax rate and deductions through the Tax Cuts and Jobs Act (the Tax Act). Our fourth-quarter 2017 rate was 19.9 percent and reflected the estimated impact of the Tax Act and included a net tax benefit of $12.4 million from the re-measurement of our deferred tax liability and the deemed repatriation of our previously undistributed foreign earnings.


•	We repurchased 2.3 million shares of our common stock for $115.2 million during the fourth-quarter 2018.

Earnings Conference Call

A conference call to review earnings is scheduled for 4:30 p.m. Eastern Time on Jan. 30, 2019. Investors may listen to the call at seic.com/ir-events. Investors may also listen to a replay by telephone at (USA) 800-475-6701; (International) 320-365-3844, access code 463177.

About SEI

After 50 years in business, SEI (NASDAQ:SEIC) remains 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 Dec. 31, 2018, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages, advises or administers $884 billion in hedge, private equity, mutual fund and pooled or separately managed assets, including $307 billion in assets under management and $573 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, including our expectations as to the amount of our stock-based compensation expense during 2019, the revenue that we believe will be generated by sales events that occurred during the quarter and the degree to which our current operations will create value prospectively. 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, expenses 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,
	2018			2017			2018			2017

Asset management, admin. and distribution fees		$314,685			$314,597			$1,270,180			$1,184,157
Information processing and software servicing fees	90,372			93,622			353,987			342,395

Total revenues	405,057			408,219			1,624,167			1,526,552

Subadvisory, distribution and other asset mgmt. costs	44,798			48,436			180,488			181,509
Software royalties and other information processing costs	7,987			12,497			32,449			46,792
Compensation, benefits and other personnel	132,126			121,818			511,258			458,737
Stock-based compensation	7,409			16,839			23,805			36,366
Consulting, outsourcing and professional fees	49,956			48,366			200,862			186,357
Data processing and computer related	21,312			20,508			84,790			77,615
Facilities, supplies and other costs	18,755			15,885			70,840			66,646
Amortization	12,475			9,943			48,895			48,275
Depreciation	7,277			6,964			28,792			27,311

Total expenses	302,095			301,256			1,182,179			1,129,608

Income from operations	102,962			106,963			441,988			396,944

Net gain (loss) on investments	135			233			(325		)	1,269
Interest and dividend income	4,251			2,129			13,397			7,057
Interest expense	(134		)	(210		)	(645		)	(781		)
Equity in earnings of unconsolidated affiliate	36,385			43,337			159,791			152,550

Income before income taxes	143,599			152,452			614,206			557,039

Income taxes	27,565			30,308			108,338			152,650

Net income		$116,034			$122,144			$505,868			$404,389

Basic earnings per common share		$0.75			$0.78			$3.23			$2.56

Shares used to calculate basic earnings per share	155,057			157,390			156,579			158,177

Diluted earnings per common share		$0.73			$0.75			$3.14			$2.49

Shares used to calculate diluted earnings per share	158,770			163,478			161,232			162,269

Dividends declared per common share		$0.33			$0.30			$0.63			$0.58

SEI INVESTMENTS COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)



	December 31,			December 31,
	2018			2017
Assets
Current Assets:
Cash and cash equivalents		$754,525			$744,247
Restricted cash	3,514			3,505
Receivables from investment products	49,869			56,666
Receivables, net of allowance for doubtful accounts of $718 and $695	315,336			282,706
Securities owned	30,892			21,526
Other current assets	36,676			31,158
Total Current Assets	1,190,812			1,139,808

Property and Equipment, net of accumulated depreciation of $338,206 and $309,955	145,863			146,428
Capitalized Software, net of accumulated amortization of $395,171 and $350,045	309,500			310,405
Investments Available for Sale	111,901			87,983
Investments in Affiliated Funds, at fair value	4,887			6,034
Investment in Unconsolidated Affiliate	52,342			59,492
Goodwill	64,489			52,990
Intangible Assets, net of accumulated amortization of $5,090 and $1,552	31,670			28,578
Deferred Contract Costs	24,007			—
Deferred Income Taxes	2,042			2,767
Other Assets, net	34,155			18,884
Total Assets		$1,971,668			$1,853,369

Liabilities and Equity
Current Liabilities:
Accounts payable		$10,920			$5,268
Accrued liabilities	279,634			265,058
Deferred revenue	5,154			4,723
Total Current Liabilities	295,708			275,049

Borrowings Under Revolving Credit Facility	—			30,000
Long-term Taxes Payable	803			10,629
Deferred Income Taxes	57,795			48,472
Other Long-term Liabilities	24,215			12,380
Total Liabilities	378,521			376,530

Shareholders' Equity:
Common stock, $.01 par value, 750,000 shares authorized; 153,634 and 157,069 shares issued and outstanding	1,536			1,571
Capital in excess of par value	1,106,641			1,027,709
Retained earnings	517,970			467,467
Accumulated other comprehensive loss, net	(33,000		)	(19,908		)
Total Shareholders' Equity	1,593,147			1,476,839
Total Liabilities and Shareholders' Equity		$1,971,668			$1,853,369

ENDING ASSET BALANCES

(In millions) (Unaudited)



	Dec 31,		Mar. 31,		Jun. 30,		Sept. 30,		Dec 31,
	2017		2018		2018		2018		2018
Private Banks:
Equity and fixed-income programs		$22,764		$22,917		$22,448		$22,739		$20,453
Collective trust fund programs	4		4		4		4		4
Liquidity funds	3,864		3,537		3,471		3,142		3,633
Total assets under management		$26,632		$26,458		$25,923		$25,885		$24,090
Client assets under administration	22,980		22,411		22,435		23,394		20,226
Total assets		$49,612		$48,869		$48,358		$49,279		$44,316

Investment Advisors:
Equity and fixed-income programs		$61,908		$62,176		$62,227		$63,958		$55,395
Collective trust fund programs	5		5		5		5		7
Liquidity funds	2,414		2,399		3,101		3,182		5,948
Total assets under management		$64,327		$64,580		$65,333		$67,145		$61,350

Institutional Investors:
Equity and fixed-income programs		$87,587		$85,607		$83,687		$85,248		$78,765
Collective trust fund programs	78		72		73		74		79
Liquidity funds	2,937		2,727		2,594		2,544		2,234
Total assets under management		$90,602		$88,406		$86,354		$87,866		$81,078
Advised assets	3,942		4,185		4,544		4,131		3,359
Total assets		$94,544		$92,591		$90,898		$91,997		$84,437

Investment Managers:
Equity and fixed-income programs		$96		$97		$95		$99		$89
Collective trust fund programs	49,340		45,062		45,213		46,934		42,804
Liquidity funds	743		732		496		580		336
Total assets under management		$50,179		$45,891		$45,804		$47,613		$43,229
Client assets under administration (A)	495,447		507,694		522,700		552,411		552,318
Total assets		$545,626		$553,585		$568,504		$600,024		$595,547

Investments in New Businesses:
Equity and fixed-income programs		$1,104		$1,114		$1,120		$1,179		$1,257
Liquidity funds	53		72		106		162		189
Total assets under management		$1,157		$1,186		$1,226		$1,341		$1,446
Advised assets	49		49		807		730		687
Total assets		$1,206		$1,235		$2,033		$2,071		$2,133

LSV Asset Management:
Equity and fixed-income programs (B)		$107,690		$108,186		$106,505		$109,363		$96,114

Total:
Equity and fixed-income programs (C)		$281,149		$280,097		$276,082		$282,586		$252,073
Collective trust fund programs	49,427		45,143		45,295		47,017		42,894
Liquidity funds	10,011		9,467		9,768		9,610		12,340
Total assets under management		$340,587		$334,707		$331,145		$339,213		$307,307
Advised assets	3,991		4,234		5,351		4,861		4,046
Client assets under administration (D)	518,427		530,105		545,135		575,805		572,544
Total assets		$863,005		$869,046		$881,631		$919,879		$883,897


(A)	Client assets under administration in the Investment Managers segment include $56.7 billion of assets that are at fee levels below our normal full service assets (as of December 31, 2018).


(B)	Equity and fixed-income programs include $2.1 billion of assets managed by LSV in which fees are based on performance only (as of December 31, 2018).


(C)	Equity and fixed-income programs include $5.1 billion of assets invested in various asset allocation funds at December 31, 2018.


(D)	In addition to the numbers presented, SEI also administers an additional $11.0 billion in Funds of Funds assets (as of

December 31, 2018) on which SEI does not earn an administration fee.

AVERAGE ASSET BALANCES

(In millions) (Unaudited)



	4th Qtr.		1st Qtr.		2nd Qtr.		3rd Qtr.		4th Qtr.
	2017		2018		2018		2018		2018
Private Banks:
Equity and fixed-income programs		$21,748		$23,412		$22,870		$22,516		$21,383
Collective trust fund programs	4		4		4		4		4
Liquidity funds	3,584		3,720		3,516		3,376		3,265
Total assets under management		$25,336		$27,136		$26,390		$25,896		$24,652
Client assets under administration	22,759		23,398		22,605		23,175		21,608
Total assets		$48,095		$50,534		$48,995		$49,071		$46,260

Investment Advisors:
Equity and fixed-income programs		$60,730		$62,650		$62,890		$63,399		$59,954
Collective trust fund programs	5		5		5		5		4
Liquidity funds	2,235		2,290		2,429		2,958		3,452
Total assets under management		$62,970		$64,945		$65,324		$66,362		$63,410

Institutional Investors:
Equity and fixed-income programs		$86,573		$87,207		$85,045		$84,885		$81,833
Collective trust fund programs	80		77		72		74		75
Liquidity funds	3,052		2,905		2,621		2,469		2,449
Total assets under management		$89,705		$90,189		$87,738		$87,428		$84,357
Advised assets	3,796		4,383		4,301		4,263		3,566
Total assets		$93,501		$94,572		$92,039		$91,691		$87,923

Investment Managers:
Equity and fixed-income programs		$99		$96		$109		$95		$96
Collective trust fund programs	47,772		49,243		45,646		45,856		44,009
Liquidity funds	843		834		649		555		480
Total assets under management		$48,714		$50,173		$46,404		$46,506		$44,585
Client assets under administration (A)	494,201		506,951		522,679		541,063		561,043
Total assets		$542,915		$557,124		$569,083		$587,569		$605,628

Investments in New Businesses:
Equity and fixed-income programs		$1,079		$1,105		$1,090		$1,148		$1,198
Liquidity funds	54		70		95		146		179
Total assets under management		$1,133		$1,175		$1,185		$1,294		$1,377
Advised assets	50		50		813		777		958
Total assets		$1,183		$1,225		$1,998		$2,071		$2,335

LSV Asset Management:
Equity and fixed-income programs (B)		$106,112		$109,904		$108,380		$109,527		$99,791

Total:
Equity and fixed-income programs (C)		$276,341		$284,374		$280,384		$281,570		$264,255
Collective trust fund programs	47,861		49,329		45,727		45,939		44,092
Liquidity funds	9,768		9,819		9,310		9,504		9,825
Total assets under management		$333,970		$343,522		$335,421		$337,013		$318,172
Advised assets	3,846		4,433		5,114		5,040		4,524
Client assets under administration (D)	516,960		530,349		545,284		564,238		582,651
Total assets		$854,776		$878,304		$885,819		$906,291		$905,347


(A)	Average client assets under administration in the Investment Managers segment during fourth-quarter 2018 include $59.1 billion that are at fee levels below our normal full service assets.


(B)	Equity and fixed-income programs include $2.1 billion of average assets managed by LSV in which fees are based on performance only during fourth-quarter 2018.


(C)	Equity and fixed-income programs include $5.2 billion of average assets invested in various asset allocation funds during fourth-quarter 2018.


(D)	In addition to the numbers presented, SEI also administers an additional $11.0 billion of average assets in Funds of Funds assets during fourth-quarter 2018 on which SEI does not earn an administration fee.

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