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Murray Louis
SEI, VP
+1 610 676-1932
mlouis@seic.com

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Dana Grosser
SEI
+1 610 676-2459
dgrosser@seic.com

Press

Oct
24
2012

SEI Reports Third-Quarter 2012 Financial Results

Strong Sales Results Continue

OAKS, Pa., October 24, 2012 -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for third-quarter 2012. Diluted earnings per share were $.29 in third-quarter 2012 compared to $.27 in third-quarter 2011.

Consolidated Overview (In thousands, except earnings per share)
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2012 2011 % 2012 2011 %
Revenues $251,752 $233,227 8% $730,887 $703,480 4%
Net Income attributable to SEI 50,743 49,232 3% 150,263 160,563 (6%)
Diluted Earnings Per Share $0.29 $0.27 7% $0.85 $0.86 (1%)

“Continued strong new business sales and growing revenue are the highlights of the third-quarter 2012,” said Alfred P. West, Jr., SEI Chairman and CEO.

“We continue to see growing acceptance of our solutions and services in all markets. We remain confident that the investments we have made and continue to make will significantly enhance long-term 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,
2012 2011 % 2012 2011 %
Private Banks:
Revenues $92,076 $87,697 5% $268,367 $262,279 2%
Expenses 91,209 85,893 6% 263,612 254,570 4%
Operating Profit $867 $1,804 (52%) $4,755 $7,709 (38%)
Operating Margin 1% 2% 2% 3%
Investment Advisors:
Revenues 51,384 46,798 10% 150,227 144,674 4%
Expenses 30,114 28,051 7% 88,440 82,825 7%
Operating Profit 21,270 18,747 13% 61,787 61,849 -
Operating Margin 41% 40% 41% 43%
Institutional Investors:
Revenues 58,081 52,216 11% 167,293 160,132 4%
Expenses 29,654 25,524 16% 86,494 79,883 8%
Operating Profit 28,427 26,692 7% 80,799 80,249 1%
Operating Margin 49% 51% 48% 50%
Investment Managers:
Revenues 49,311 45,585 8% 142,235 133,478 7%
Expenses 32,122 29,412 9% 92,711 86,693 7%
Operating Profit 17,189 16,173 6% 49,524 46,785 6%
Operating Margin 35% 35% 35% 35%
Investments in New Businesses:
Revenues 900 931 (3%) 2,765 2,917 (5%)
Expenses 3,698 2,429 52% 11,080 8,474 31%
Operating Loss (2,798) (1,498) N/A (8,315) (5,557) N/A
Operating Margin N/A N/A N/A N/A
Totals:
Revenues $251,752 $233,227 8% $730,887 $703,480 4%
Expenses 186,797 171,309 9% 542,337 512,445 6%
Corporate overhead expenses 11,668 11,155 5% 33,830 32,523 4%
Noncontrolling interest reflected in segments (203) (373) N/A (657) (1,178) N/A
Income from operations $53,490 $51,136 5% $155,377 $159,690 (3%)

Third-Quarter Business Commentary:

  • Revenues increased in third-quarter 2012 as compared to both third-quarter 2011 and second-quarter 2012. This was driven by an increase in Asset management, administration, and distribution fee revenues resulting from increased cash flows from new and existing clients and market appreciation in 2012. 
  •  Our average assets under management, excluding LSV, increased $14.8 billion, or 13 percent, to $132.6 billion in the third-quarter 2012, as compared to $117.8 billion during the third-quarter 2011, and increased $6.0 billion, or five percent, as compared to $126.6 billion during the second-quarter 2012 (See attached Ending and Average Asset Balances schedules for further details).
  • Sales events, net of client losses, during third-quarter 2012 totaled approximately $23.7 million and are expected to generate net annualized recurring revenues of approximately $21.4 million when contract values are fully realized.
  • Income from LSV increased in third-quarter 2012 to $24.9 million as compared to third-quarter 2011 and second-quarter 2012 due to an increase in assets under management. Our ownership interest was 40 percent in second- and third-quarter 2012 and 41 percent in third-quarter 2011.
  • In the third-quarter 2012, SEI decided to discontinue the use of specific functionality within the Global Wealth Platform and incurred $2.7 million of amortization expense related to the remaining net book value of this component. This expense was recognized in the Private Banks segment. Without this expense Private Banks profits for the quarter would have been $3.5 million, which is comparable to second-quarter 2012.
  • Net income attributable to SEI includes gains from SIV securities of $3.4 million in third-quarter 2012 compared to losses of $0.8 million in third-quarter 2011 and a gain of $1.1 million in second-quarter 2012.
  • The effective tax rates were 39.0 percent in the third-quarter 2012 and 33.8 percent in the third-quarter 2011. The increase in the tax rate was due to the accrual of taxes on the cumulative undistributed earnings of SEI Asset Korea, offset by certain tax planning strategies which benefited the tax rate in third-quarter 2011. As a result of the sale of SEI Asset Korea, the Company no longer considers the undistributed earnings to be indefinitely reinvested and therefore accrued U.S. deferred taxes on the cumulative undistributed earnings of SEI Asset Korea.
  • In the third-quarter 2012, SEI purchased 1.55 million shares of its common stock for $33.6 million.

Earnings Conference Call

A conference call to review earnings is scheduled for 2:00 PM ET on October 24, 2012. Investors may listen to the call at www.seic.com/investors or listen at www.earnings.com , a service of Thomson Streetevents. The call may also be accessed at numerous financial services web sites including AOL and Yahoo. Investors may also listen to replays at these web sites, or by telephone at (USA) 1-800-475-6701; (International) 320-365-3844, access code 268471.

About SEI

SEI (NASDAQ:SEIC) is a leading global provider of investment processing, fund processing, and investment management business outsourcing solutions that help corporations, financial institutions, financial advisors, and ultra-high-net-worth families create and manage wealth. As of September 30, 2012, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $448 billion in mutual fund and pooled or separately managed assets, including $195 billion in assets under management and $253 billion in client assets under administration. For more information, visit www.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)
Three Months Ended September 30,
2012 2011
Asset management, admin. and distribution fees $183,083 $167,827
Information processing and software servicing fees 60,901 55,676
Transaction–based and trade execution fees 7,768 9,724
Total revenues 251,752 233,227
Subadvisory, distribution and other asset mgmt costs 26,538 24,613
Software royalties and other information processing costs 6,185 6,703
Brokerage commissions 5,542 7,026
Compensation, benefits and other personnel 85,781 71,198
Stock-based compensation 3,879 3,424
Consulting, outsourcing and professional fees 27,314 30,183
Data processing and computer related 11,749 12,316
Facilities, supplies and other costs 15,129 14,274
Amortization 10,384 7,008
Depreciation 5,761 5,346
Total expenses 198,262 182,091
Income from operations 53,490 51,136
Net gain (loss) on investments 3,708 (1,418)
Interest and dividend income 1,490 1,400
Interest expense (115) (126)
Equity in earnings of unconsolidated affiliate 24,928 23,908
Net income before income taxes 83,501 74,900
Income taxes 32,415 25,256
Net income 51,086 49,644
Less: Net income attributable to the noncontrolling interest (343) (412)
Net income attributable to SEI $50,743 $49,232
Diluted earnings per common share $0.29 $0.27
Shares used to calculate diluted earnings per common share 175,369 182,580
Basic earnings per common share $0.29 $0.27
Shares used to calculate basic earnings per common share 173,429 181,718

SEI INVESTMENTS COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
Nine Months Ended September 30,
2012 2011
Asset management, admin. and distribution fees $532,650 $507,662
Information processing and software servicing fees 174,355 167,535
Transaction–based and trade execution fees 23,882 28,283
Total revenues 730,887 703,480
Subadvisory, distribution and other asset mgmt costs 80,889 77,213
Software royalties and other information processing costs 17,890 20,908
Brokerage commissions 17,483 20,206
Compensation, benefits and other personnel 244,855 214,836
Stock-based compensation 11,777 10,966
Consulting, outsourcing and professional fees 80,598 85,579
Data processing and computer related 34,873 35,229
Facilities, supplies and other costs 44,909 42,474
Amortization 25,413 20,031
Depreciation 16,823 16,348
Total expenses 575,510 543,790
Income from operations 155,377 159,690
Net gain on investments 7,577 3,912
Interest and dividend income 4,417 4,380
Interest expense (389) (485)
Other expense, net - -
Equity in earnings of unconsolidated affiliate 74,970 82,387
Net income before income taxes 241,952 249,884
Income taxes 90,892 88,087
Net income 151,060 161,797
Less: Net income attributable to the noncontrolling interest (797) (1,234)
Net income attributable to SEI $150,263 $160,563
Diluted earnings per common share $0.85 $0.86
Shares used to calculate diluted earnings per common share 176,317 186,032
Basic earnings per common share $0.86 $0.87
Shares used to calculate basic earnings per common share 174,869 184,030

SEI INVESTMENTS COMPANY CONDENSED BALANCE SHEETS (In thousands) (Unaudited)
September 30, 2012 December 31, 2011
Assets
Cash and short-term investments $397,677 $420,986
Restricted cash 6,000 6,000
Receivables, net 226,194 167,909
Securities owned 21,081 20,949
Other current assets 19,527 19,107
Total current assets 670,479 634,951
Property and equipment, net 131,889 129,548
Marketable securities 132,722 139,333
Capitalized software, net 310,168 309,133
Investment in unconsolidated affiliate 63,618 60,954
Other assets, net 23,528 20,640
Total assets $1,332,404 $1,294,559
Liabilities
Current liabilities $126,535 $151,073
Deferred income taxes 95,713 93,751
Other Long-term liabilities 11,079 8,276
Total SEI Investments Company shareholders’ equity 1,081,304 1,025,316
Noncontrolling interest 17,773 16,143
Total Equity 1,099,077 1,041,459
Total liabilities and equity $1,332,404 $1,294,559

SEI INVESTMENTS COMPANY ENDING ASSET BALANCES (In millions) (Unaudited)
Sept. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sept. 30, 2012
Private Banks:
Equity/Fixed Income prgms. $15,442 $16,435 $17,180 $16,848 $17,960
Collective Trust Fund prgms. 476 450 435 335 147
Liquidity funds 5,529 5,553 5,549 5,063 5,342
Total assets under mgmt. $21,447 $22,438 $23,164 $22,246 $23,449
Client assets under admin. 9,845 10,355 10,916 10,719 11,611
Total assets $31,292 $32,793 $34,080 $32,965 $35,060
Investment Advisors:
Equity/Fixed Income prgms. $24,757 $26,639 $29,722 $29,153 $30,864
Collective Trust Fund prgms. 1,392 1,298 1,199 705 370
Liquidity funds 2,653 2,505 1,643 1,880 1,868
Total assets under mgmt. $28,802 $30,442 $32,564 $31,738 $33,102
Institutional Investors:
Equity/Fixed Income prgms. $46,259 $49,051 $54,537 $55,548 $59,852
Collective Trust Fund prgms. 510 492 424 415 153
Liquidity funds 3,356 3,888 3,725 2,958 3,272
Total assets under mgmt. $50,125 $53,431 $58,686 $58,921 $63,277
Investment Managers:
Equity/Fixed Income prgms. $64 $57 $62 $61 $65
Collective Trust Fund prgms. 10,896 11,255 12,781 13,004 15,433
Liquidity funds 195 152 147 226 396
Total assets under mgmt. $11,155 $11,464 $12,990 $13,291 $15,894
Client assets under admin. (A) 223,620 221,198 228,327 231,549 240,965
Total assets $234,775 $232,662 $241,317 $244,840 $256,859
Investments in New Businesses:
Equity/Fixed Income prgms. $490 $515 $568 $551 $534
Liquidity funds 41 37 34 30 29
Total assets under mgmt. $531 $552 $602 $581 $563
LSV Asset Management:
Equity/Fixed Income prgms. $49,444 $53,712 $60,607 $54,922 $58,886
Total:
Equity/Fixed Income prgms (B) $136,456 $146,409 $162,676 $157,083 $168,161
Collective Trust Fund prgms. 13,274 13,495 14,839 14,459 16,103
Liquidity funds 11,774 12,135 11,098 10,157 10,907
Total assets under mgmt. $161,504 $172,039 $188,613 $181,699 $195,171
Client assets under admin. (C) 233,465 231,553 239,243 242,268 252,576
Total assets $394,969 $403,592 $427,856 $423,967 $447,747

(A) Client assets under administration in the Investment Managers segment include $38.0 billion of assets balances that require limited services and therefore are at fee levels below our normal full service assets (as of September 30, 2012).
(B) Equity/Fixed Income programs include $2.8 billion of assets invested in various asset allocation funds at September 30, 2012.
(C) In addition to the numbers presented, SEI also administers an additional $4.6 billion in Funds of Funds assets (as of September 30, 2012) on which SEI does not earn an administration fee.

SEI INVESTMENTS COMPANY AVERAGE ASSET BALANCES (In millions) (Unaudited)
3rd Qtr. 2011 4th Qtr. 2011 1st Qtr. 2012 2nd Qtr. 2012 3rd Qtr. 2012
Private Banks:
Equity/Fixed Income prgms. $16,592 $16,624 $17,116 $16,794 $17,527
Collective Trust Fund prgms. 505 464 436 396 230
Liquidity funds 5,210 5,401 5,581 5,115 5,401
Total assets under mgmt. $22,307 $22,489 $23,133 $22,305 $23,158
Client assets under admin. 10,364 10,290 10,211 10,631 10,867
Total assets $32,671 $32,779 $33,344 $32,936 $34,025
Investment Advisors:
Equity/Fixed Income prgms. $26,658 $26,094 $28,426 $29,103 $30,032
Collective Trust Fund prgms. 1,442 1,314 1,238 984 532
Liquidity funds 2,224 2,499 2,015 1,806 1,886
Total assets under mgmt. $30,324 $29,907 $31,679 $31,893 $32,450
Institutional Investors:
Equity/Fixed Income prgms. $49,115 $48,504 $52,270 $54,998 $57,763
Collective Trust Fund prgms. 505 500 427 418 284
Liquidity funds 3,416 3,461 3,765 3,147 3,253
Total assets under mgmt. $53,036 $52,465 $56,462 $58,563 $61,300
Investment Managers:
Equity/Fixed Income prgms. $52 $65 $58 $63 $62
Collective Trust Fund prgms. 11,292 10,773 11,983 12,991 14,797
Liquidity funds 200 219 190 235 287
Total assets under mgmt. $11,544 $11,057 $12,231 $13,289 $15,146
Client assets under admin. 236,953 224,633 224,547 229,873 237,155
Total assets $248,497 $235,690 $236,778 $243,162 $252,301
Investments in New Businesses:
Equity/Fixed Income prgms. $525 $515 $549 $550 $530
Liquidity funds 42 42 39 33 35
Total assets under mgmt. $567 $557 $588 $583 $565
LSV Asset Management:
Equity/Fixed Income prgms. $54,679 $54,021 $59,200 $55,994 $57,164
Total:
Equity/Fixed Income prgms $147,621 $145,823 $157,619 $157,502 $163,078
Collective Trust Fund prgms. 13,744 13,051 14,084 14,789 15,843
Liquidity funds 11,092 11,622 11,590 10,336 10,862
Total assets under mgmt. $172,457 $170,496 $183,293 $182,627 $189,783
Client assets under admin. 247,317 234,923 234,758 240,504 248,022
Total assets $419,774 $405,419 $418,051 $423,131 $437,805