SEI Investments Company (NASDAQ:SEIC) Q3 2023 Earnings Call Transcript

SEI Investments Company (NASDAQ:SEIC) Q3 2023 Earnings Call Transcript October 25, 2023

SEI Investments Company reports earnings inline with expectations. Reported EPS is $0.87 EPS, expectations were $0.87.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the SEI Third Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, instructions will be given at that time. As a reminder, today’s call is being recorded. I will now turn the call over to your host, Director, Investor Relations, Alex Whitelam. Please go ahead, sir.

Alex Whitelam: Thank you, and welcome, everyone. We appreciate you for joining us today for our third quarter 2023 earnings call. On the call, we have Ryan Hicke, SEI’s Chief Executive Officer; Dennis McGonigle, Chief Financial Officer; and leaders of our business segments: Wayne Withrow, Paul Klauder, Jay Cipriano, Phil McCabe, Sanjay Sharma and Sneha Shah. Before we begin, I’d like to point out that our earnings press release can be found under the Investor Relations section of our website at seic.com. This call is being webcast live, and a replay will be available on the Events and Webcast page of our website. We would like to remind you that during today’s presentation and in our responses to your questions, we have and will make certain forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially.

Please refer to our notices regarding forward-looking statements that appear in today’s earnings press release and in our filings with the Securities and Exchange Commission. We do not undertake to update any of our forward-looking statements. With that, I’ll turn the call over to CEO, Ryan Hicke. Ryan?

Ryan Hicke: Thanks, Alex. Hello, everyone, and thank you for joining us. Despite a challenging market environment, we delivered solid results for the third quarter with quality top line and earnings growth. As I laid out at last year’s Investor Day, we are surgically focused on the following areas: growing our sales results in segments and markets where we believe we can repeatably win. We are seeing that play out with investment managers, regional and community banks, UK private client investment managers and larger RIAs, adding talent and capital to enhance internal insight with outside perspective and launching more organic and acquired new businesses for future revenue generation and growth. We’re focused on investing in automation, AI and alternatives to drive scale and service excellence and continuing to deliver long-term earnings growth, driven by revenue and enhanced with smart expense management.

We are proud of our momentum as we’re executing our long-term growth strategy while managing our company for profitability. I’m excited about what we see ahead, knowing we are not satisfied or complacent, we will keep executing and innovating. Turning to Q3 results. Revenues in the third quarter were $477 million, up 1% from a year ago. Net income for the quarter was $116 million, EPS was $0.87. Keep in mind that our third quarter results for 2022 were impacted by a onetime expense related to our voluntary separation program. Absent this expense, this year’s third quarter EPS increased by $0.10 or 13% year-over-year on a comparable basis. Dennis will provide more details on our results. In the quarter, we repurchased 1.4 million shares of SEI stock at an average price of $61.43 per share.

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Q&A Session

That translates into $86 million of stock purchases. The sales success we’ve had throughout the year in our technology and operational outsourcing businesses continued in the third quarter. We remain focused on generating more higher-quality touch points with clients, building out our pipeline and broadening our client relationships through cross sales. We also launched our enterprise sales group this quarter to increase activity across larger wealth management firms. We believe these efforts are positioning us well to capitalize on future growth opportunities and increase sales. Net sales events in the quarter totaled $14.5 million, $11.1 million of which were net recurring. This was a combination of technology and operational outsourcing sales of $22.3 million, offset by negative activity in our asset management businesses.

With that, let me turn to our business lines. Our Investment Managers business had another good quarter, delivering strong revenue and earnings growth. The team implemented and converted new clients and funds while managing expenses well and growth continues for this segment. Our constant focus on our strategic clients resulted in a number of cross-sell events and client re-contracts in the quarter. We are really excited to see that we are winning across alternatives, traditional and global segments. In alternatives, our largest clients continue to expand in the private credit, private equity, real estate and infrastructure markets. During the quarter, we onboarded two firms through competitive takeaways and won a highly competitive new bid.

Globally, we also continue to see strong flows from existing relationships, and we have expanded our sales leadership and client service functions on the ground to enhance our pipeline development. In the traditional business, we are seeing a trend with our larger clients who are beginning to launch alternative funds. This provides significant opportunity for SEI. We are also seeing continued increased interest in our CIT platform. Next, Private Banking drove another solid quarter, signing three deals and re-contracting five clients. The team also successfully delivered on their backlog, implementing five clients on the SEI Wealth Platform, representing more than $15 million in recurring revenue from the backlog. During the quarter, we migrated more than 115,000 accounts and approximately $360 billion in assets, including a substantial book from U.S. Bank moving from TRUST 3000 to SWP and CIBC’s conversion to SWP from competitive platforms.

We also went live with our multicustody solution, which is generating broad interest with both our existing and prospective client base. The Private Banking business continues to move forward by capitalizing on our expanding pipeline and prudently managing expenses. While we still have some previously announced events to absorb in coming quarters, we are confident in our margin growth strategy for the business that we have discussed on previous calls. Moving to our Global Asset Management business. Investment advisors had net positive cash flows of approximately $612 million, primarily driven by our separately managed accounts, strategist partner solutions and open architecture technology and custody that support advisor-driven investment flexibility.

The team is executing on our growth plans for the business, and we are focused on driving more revenue growth to capitalize on the robust opportunity set that we see within the intermediary space. We’ve also continued to enhance our solutions for this business, including SEI Connect to provide a front office digital collaborative wealth management experience for advisors and their end clients. All new advisors benefit from the enhanced investor portal and we’re seeing solid adoption across the entire client base. We’re also advancing our efforts to build out custody capabilities for alternative assets. Finally, we launched our liquid alternative strategy in our U.S. fund complex. We expect to see this fund — we expect to sell this fund standalone for the time being and will include it in models offered to advisors early next year.