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

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8-K - FORM 8-K - SEI INVESTMENTS CO	seic-123116form8xk12517.htm

Exhibit 99.1

Investor Contact: Media Contact:

Michele Steinmetz Dana Grosser

SEI SEI

+1 610-676-3037 +1 610-676-2459

msteinmetz@seic.com dgrosser@seic.com

Pages: 8

FOR IMMEDIATE RELEASE

SEI Reports Fourth-Quarter 2016 Financial Results

OAKS, Pa., Jan. 25, 2017 -- SEI Investments Company (NASDAQ:SEIC) today announced financial results for the fourth-quarter 2016. Diluted earnings per share were $0.55 in fourth-quarter 2016 compared to $0.48 in fourth-quarter 2015.



Consolidated Overview
(In thousands, except earnings per share)	For the Three Months Ended December 31,					For the Twelve Months Ended December 31,
	2016		2015		%	2016		2015		%

Revenues		$368,810		$335,397	10%		$1,401,545		$1,334,208	5%
Net income	88,611		81,379		9%	333,817		331,655		1%
Diluted earnings per share		$0.55		$0.48	15%		$2.03		$1.96	4%

"Our financial results for both the fourth quarter and the full year show modest gains and reflect the ongoing investments we are making to deliver next generation solutions to our clients," said Alfred P. West, Jr., SEI Chairman and CEO. "We continue to anticipate significant change in the markets we serve and will provide broad-based solutions to address our clients’ complex needs. While net-sales events slowed during the fourth quarter, we are well positioned to capitalize on the significant opportunities within our markets.

“Our focus is unwavering on delivering for clients and positioning our company for long-term sustainable growth and 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,
	2016			2015			%	2016			2015			%
Private Banks:
Revenues		$113,737			$113,690		—%		$457,886			$456,516		—%
Expenses	109,062			102,775			6%	421,188			410,975			2%
Operating Profit	4,675			10,915			(57)%	36,698			45,541			(19)%
Gain on sale of subsidiary	—			—			—%	2,791			2,791			—%
Segment Profit	4,675			10,915			(57)%	39,489			48,332			(18)%
Operating Margin (A)	4		%	10		%		8		%	10		%

Investment Advisors:
Revenues	86,857			78,614			10%	330,677			306,620			8%
Expenses	45,565			46,522			(2)%	180,140			171,968			5%
Operating Profit	41,292			32,092			29%	150,537			134,652			12%
Operating Margin	48		%	41		%		46		%	44		%

Institutional Investors:
Revenues	88,791			73,525			21%	312,584			297,568			5%
Expenses	44,242			37,189			19%	153,117			145,851			5%
Operating Profit	44,549			36,336			23%	159,467			151,717			5%
Operating Margin	50		%	49		%		51		%	51		%

Investment Managers:
Revenues	77,862			68,154			14%	294,390			267,963			10%
Expenses	50,296			45,431			11%	191,127			172,094			11%
Operating Profit	27,566			22,723			21%	103,263			95,869			8%
Operating Margin	35		%	33		%		35		%	36		%

Investments in New Businesses:
Revenues	1,563			1,414			11%	6,008			5,541			8%
Expenses	5,027			5,808			(13)%	20,962			20,656			1%
Operating Loss	(3,464		)	(4,394		)	NM	(14,954		)	(15,115		)	NM

Totals:
Revenues		$368,810			$335,397		10%		$1,401,545			$1,334,208		5%
Expenses	254,192			237,725			7%	966,534			921,544			5%
Corporate overhead expenses	16,477			15,465			7%	59,317			54,451			9%
Income from operations		$98,141			$82,207		19%		$375,694			$358,213		5%

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

Fourth-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.


•	In the fourth-quarter 2016, we recognized a $12.3 million performance fee and a corresponding $6.1 million sub-advisory expense associated with an SEI-sponsored investment product. These items resulted in a positive net impact of approximately $0.03 diluted earnings per share and were reflected in the Institutional Investors segment.

•

Sales events, net of client losses, during fourth-quarter 2016 totaled approximately $10.6 million and are expected to generate net annualized recurring revenues of approximately $5.5 million when contract values are fully realized. For the year ended 2016, sales events, net of client losses, totaled approximately $93.1 million and are expected to generate net annualized recurring revenues of approximately $74.0 million when contract values are fully realized.


•	Our average assets under management, excluding LSV, increased $11.4 billion, or six percent, to $194.8 billion, as compared to $183.4 billion during the fourth-quarter 2015 (see attached Average Asset Balances schedules for further details).


•	Our average assets under administration increased $57.8 billion, or 14 percent, to $465.7 billion in the fourth-quarter 2016, as compared to $407.9 billion during the fourth-quarter 2015 (see attached Average Asset Balances schedules for further details).


•	Our earnings from LSV increased by $2.0 million, or six percent, to $34.1 million in fourth-quarter 2016 as compared to $32.1 million in fourth-quarter 2015. The increase in earnings was due to an increase in assets under management from market appreciation; however, our earnings were negatively impacted by lower performance fees and increased personnel expenses of LSV.

•

We capitalized $17.2 million and $6.9 million of software development costs in fourth-quarter 2016 and 2015, respectively, of which $12.4 million and $5.2 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 $11.7 million during the fourth-quarter 2016 as compared to $10.8 million during the fourth-quarter 2015 due to continued enhancements.


•	Our operating expenses increased $13.2 million, or five percent, during the fourth-quarter 2016 compared to the third-quarter 2016 due in part to the previously mentioned sub-advisory expense. Without this item, the sequential increase in our operating expenses during the fourth-quarter would have been $7.1 million, or just under three percent.


•	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 fourth-quarter 2016 compared to the fourth-quarter 2015 negatively impacted the revenues of our Private Banks and Institutional Investors segments by $2.9 million and $1.8 million, respectively, and operating income by $1.2 million for each of the two segments.

•

Our effective tax rates were 33.4 percent in fourth-quarter 2016 and 29.3 percent in fourth-quarter 2015. The increase in the tax rate is due to a one time state tax settlement we received in the fourth quarter of 2015 as well as the reinstatement of the Research and Development credit in the fourth quarter of 2015. In 2015, all of the Research and Development Tax credit was recorded in the fourth quarter as compared to each quarter in 2016.


•	We repurchased 1.4 million shares of our common stock for $66.8 million during the fourth-quarter 2016.

Earnings Conference Call

A conference call to review earnings is scheduled for 4:30 p.m. Eastern time on Jan. 25, 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 415844.

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 December 31, 2016, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $751 billion in hedge, private equity, mutual fund and pooled or separately managed assets, including $283 billion in assets under management and $468 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 December 31,						For the Twelve Months Ended December 31,
	2016			2015			2016			2015

Asset management, admin. and distribution fees		$286,534			$254,410			$1,072,176			$1,010,511
Information processing and software servicing fees	75,512			72,128			300,346			290,893
Transaction–based and trade execution fees	6,764			8,859			29,023			32,804

Total revenues	368,810			335,397			1,401,545			1,334,208

Subadvisory, distribution and other asset mgmt costs	48,310			40,443			170,961			160,062
Software royalties and other information processing costs	7,379			7,903			30,323			31,497
Brokerage commissions	5,087			6,525			22,152			24,388
Compensation, benefits and other personnel	107,272			103,128			414,622			395,774
Stock-based compensation	3,973			5,836			16,017			17,312
Consulting, outsourcing and professional fees	45,057			37,876			166,769			146,436
Data processing and computer related	16,849			15,784			64,930			58,884
Facilities, supplies and other costs	18,051			18,773			68,245			74,968
Amortization	11,708			10,824			45,392			42,630
Depreciation	6,983			6,098			26,440			24,044

Total expenses	270,669			253,190			1,025,851			975,995

Income from operations	98,141			82,207			375,694			358,213

Net (loss) gain on investments	(208		)	88			112			(456		)
Interest and dividend income	1,174			788			4,316			3,358
Interest expense	(115		)	(141		)	(531		)	(483		)
Equity in earnings of unconsolidated affiliates	34,061			32,140			126,103			137,057
Gain on sale of subsidiary	—			—			2,791			2,791

Income before income taxes	133,053			115,082			508,485			500,480

Income taxes	44,442			33,703			174,668			168,825

Net income	88,611			81,379			333,817			331,655

Basic earnings per common share		$0.55			$0.49			$2.07			$2.00

Shares used to calculate basic earnings per share	159,674			164,473			161,350			165,725

Diluted earnings per common share		$0.55			$0.48			$2.03			$1.96

Shares used to calculate diluted earnings per share	162,567			168,461			164,431			169,598

Dividends declared per common share		$0.28			$0.26			$0.54			$0.50

SEI INVESTMENTS COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)



	December 31,			December 31,
	2016			2015
Assets
Current Assets:
Cash and cash equivalents		$695,701			$679,661
Restricted cash	3,500			5,500
Receivables from investment products	61,761			48,098
Receivables, net of allowance for doubtful accounts of $523 and $649	227,957			223,023
Securities owned	21,339			21,235
Other current assets	27,575			26,207
Total Current Assets	1,037,833			1,003,724

Property and Equipment, net of accumulated depreciation of $285,322 and $259,501	146,190			143,977
Capitalized Software, net of accumulated amortization of $303,540 and $259,358	295,867			290,522
Investments Available for Sale	84,033			81,294
Investments in Affiliated Funds, at fair value	4,858			4,039
Investment in Unconsolidated Affiliates	50,459			49,580
Deferred Income Taxes	2,127			—
Other Assets, net	15,456			15,492
Total Assets		$1,636,823			$1,588,628

Liabilities and Equity
Current Liabilities:
Accounts payable		$5,966			$4,511
Accrued liabilities	240,525			217,587
Deferred revenue	2,880			2,385
Total Current Liabilities	249,371			224,483

Deferred Income Taxes	69,693			63,028
Other Long-term Liabilities	14,645			11,397
Total Liabilities	333,709			298,908

Shareholders' Equity:
Common stock, $.01 par value, 750,000 shares authorized; 159,031 and 163,733 shares issued and outstanding	1,590			1,637
Capital in excess of par value	955,461			910,513
Retained earnings	384,018			402,860
Accumulated other comprehensive loss, net	(37,955		)	(25,290		)
Total Shareholders' Equity	1,303,114			1,289,720
Total Liabilities and Shareholders' Equity		$1,636,823			$1,588,628

SEI INVESTMENTS COMPANY

ENDING ASSET BALANCES

(In millions)

(Unaudited)



	Dec 31,		Mar. 31,		Jun. 30,		Sept. 30,		Dec 31,
	2015		2016		2016		2016		2016
Private Banks:
Equity and fixed-income programs		$18,150		$18,370		$18,328		$18,668		$17,926
Collective trust fund programs	4		4		3		3		3
Liquidity funds	5,835		5,521		4,848		4,034		4,230
Total assets under management		$23,989		$23,895		$23,179		$22,705		$22,159
Client assets under administration	17,532		18,324		18,537		19,269		19,255
Total assets		$41,521		$42,219		$41,716		$41,974		$41,414

Investment Advisors:
Equity and fixed-income programs		$46,123		$47,357		$50,016		$52,594		$52,847
Collective trust fund programs	7		7		5		5		5
Liquidity funds	4,924		5,051		3,661		2,539		2,741
Total assets under management		$51,054		$52,415		$53,682		$55,138		$55,593

Institutional Investors:
Equity and fixed-income programs		$72,263		$73,468		$75,944		$78,701		$76,465
Collective trust fund programs	96		97		88		90		93
Liquidity funds	2,883		2,390		2,526		2,612		2,903
Total assets under management		$75,242		$75,955		$78,558		$81,403		$79,461

Investment Managers:
Equity and fixed-income programs		$66		$72		$73		$79		$81
Collective trust fund programs	32,117		32,385		33,841		35,962		36,991
Liquidity funds	832		733		750		812		667
Total assets under management		$33,015		$33,190		$34,664		$36,853		$37,739
Client assets under administration (A)	390,282		400,579		419,139		451,204		448,708
Total assets		$423,297		$433,769		$453,803		$488,057		$486,447

Investments in New Businesses:
Equity and fixed-income programs		$764		$803		$820		$850		$884
Liquidity funds	47		41		37		53		61
Total assets under management		$811		$844		$857		$903		$945

LSV Asset Management:
Equity and fixed-income programs		$78,335		$78,390		$78,352		$83,863		$87,248

Total:
Equity and fixed-income programs (B)		$215,701		$218,460		$223,533		$234,755		$235,451
Collective trust fund programs	32,224		32,493		33,937		36,060		37,092
Liquidity funds	14,521		13,736		11,822		10,050		10,602
Total assets under management		$262,446		$264,689		$269,292		$280,865		$283,145

Client assets under administration (C)	407,814		418,903		437,676		470,473		467,963
Total assets		$670,260		$683,592		$706,968		$751,338		$751,108


(A)	Client assets under administration in the Investment Managers segment include $48.8 billion of assets that require limited services and therefore are at fee levels below our normal full service assets (as of December 31, 2016).


(B)	Equity and fixed-income programs include $4.7 billion of assets invested in various asset allocation funds at December 31, 2016.


(C)	In addition to the numbers presented, SEI also administers an additional $9.5 billion in Funds of Funds assets (as of

December 31, 2016) on which SEI does not earn an administration fee. Client assets under administration as of December 31, 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)



	4th Qtr.		1st Qtr.		2nd Qtr.		3rd Qtr.		4th Qtr.
	2015		2016		2016		2016		2016
Private Banks:
Equity and fixed-income programs		$18,603		$17,644		$18,504		$18,650		$17,945
Collective trust fund programs	3		3		3		3		3
Liquidity funds	5,511		5,661		5,118		4,386		4,030
Total assets under management		$24,117		$23,308		$23,625		$23,039		$21,978
Client assets under administration	17,775		17,248		18,436		19,039		19,010
Total assets		$41,892		$40,556		$42,061		$42,078		$40,988

Investment Advisors:
Equity and fixed-income programs		$46,044		$45,175		$48,783		$51,924		$52,267
Collective trust fund programs	8		7		6		5		5
Liquidity funds	4,784		5,009		4,061		2,694		2,638
Total assets under management		$50,836		$50,191		$52,850		$54,623		$54,910

Institutional Investors:
Equity and fixed-income programs		$72,463		$71,779		$74,984		$77,583		$77,040
Collective trust fund programs	96		98		96		90		92
Liquidity funds	3,109		2,834		2,868		2,751		2,766
Total assets under management		$75,668		$74,711		$77,948		$80,424		$79,898

Investment Managers:
Equity and fixed-income programs		$59		$66		$72		$73		$79
Collective trust fund programs	30,960		30,784		33,021		35,257		36,170
Liquidity funds	960		832		701		874		813
Total assets under management		$31,979		$31,682		$33,794		$36,204		$37,062
Client assets under administration	390,080		387,421		415,237		436,459		446,666
Total assets		$422,059		$419,103		$449,031		$472,663		$483,728

Investments in New Businesses:
Equity and fixed-income programs		$788		$757		$811		$845		$851
Liquidity funds	47		48		39		44		60
Total assets under management		$835		$805		$850		$889		$911

LSV Asset Management:
Equity and fixed-income programs		$79,634		$74,699		$79,733		$83,373		$84,676

Total:
Equity and fixed-income programs		$217,591		$210,120		$222,887		$232,448		$232,858
Collective trust fund programs	31,067		30,892		33,126		35,355		36,270
Liquidity funds	14,411		14,384		12,787		10,749		10,307
Total assets under management		$263,069		$255,396		$268,800		$278,552		$279,435

Client assets under administration (A)	407,855		404,669		433,673		455,498		465,676
Total assets		$670,924		$660,065		$702,473		$734,050		$745,111

(A) Client assets under administration during fourth-quarter 2016 do not reflect $1.3 billion in Funds of Funds assets that were reported during fourth-quarter 2015.

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