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01/10 17:14
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary and Q&A indicate strong financial performance, with growth in AUA and AUM, robust performance fees, and significant share repurchases. The company is investing in future growth, with a focus on alternatives and international markets. Despite some margin pressure from investments, the overall sentiment is positive, supported by optimistic guidance and a strategic focus on long-term growth. The Q&A revealed no major risks or concerns, and the management's responses were generally reassuring.
EPS (Earnings Per Share) EPS reached $1.30, an all-time high for SEI, excluding onetime items. This represents an 8% sequential growth and a 17% year-over-year increase. The growth was driven by strong revenue growth and margin expansion.
Net Sales Events Net sales events totaled $31 million, with the Investment Managers business leading the way. This was offset by a contract loss in private banking. Excluding the loss, net sales would have approached $47 million. Year-to-date net sales events surpassed $100 million, a record for SEI through the third quarter.
Private Banking Revenue Private Banking saw a 4% increase in revenue year-over-year, driven by healthy growth on the SWP platform. However, margins declined year-over-year due to onetime items that benefited last year's results. Excluding those items, margins would have increased by approximately 60 basis points.
Investment Managers Revenue and Margins The Investment Managers segment posted double-digit revenue and operating profit growth. Margins improved significantly, supported by revenue growth that exceeded 25% annualized from Q2 to Q3. Growth was fueled by market appreciation in the traditional business and capital deployment in the alternatives business.
Advisors Revenue and Margins Advisors posted the highest year-over-year revenue growth among all segments. Margins improved due to strong revenue growth, a $2 million earnout true-up, and contributions from the integrated cash program, which added $10 million to operating profit versus the prior year.
Institutional Revenue and Margins Institutional revenue and operating profit were essentially flat year-over-year, reflecting lower equity exposure and less benefit from market appreciation compared to other segments. Margins declined sequentially due to choppier items in both the current and prior periods.
Assets Under Administration (AUA) AUA saw strong growth both sequentially and year-over-year, driven by broad-based growth across CITs, alternatives, and traditional funds. The majority of the growth was driven by alternatives, with some benefit from market appreciation.
Assets Under Management (AUM) AUM increased with modestly positive net flows in Advisors, driven by growth in ETFs and SMEs, which offset pressure on traditional mutual funds. Institutional flows were flat, and LSV AUM increased over 4% from Q2, driven by strong market performance and relative benchmark performance.
Performance Fees LSV performance fees totaled $8 million, or $3 million at SEI's share, in Q3, supported by strong performance against relative benchmarks.
Capital Allocation SEI ended the quarter with $793 million of cash and no net debt. Share repurchases totaled $142 million in Q3 and $775 million for the trailing 12 months, representing more than 7% of shares repurchased over the last year. Additionally, SEI made a $50 million anchor investment in LSV's market-neutral hedge fund, contributing $1.5 million to Q3 results before taxes.
IMS Sales Activity: IMS posted a record sales quarter with $31 million in net sales events, driven by surging demand for outsourcing and client expansions. Approximately 2/3 of sales events were tied to client expansions, and 2/3 came from alternative managers.
Institutional Mandate Win: Secured a multibillion-dollar fixed income assignment for a state government client, reflecting SEI's ability to deliver targeted solutions and compete for specialized mandates.
Private Banking Win: Secured a $13 million win with a leading super-regional U.S. bank for a comprehensive transformation initiative across all business lines, including technology, outsourced operations, and professional services.
Stratos Partnership: The partnership is increasing awareness of SEI across broker-dealer and RIA channels, with renewed inbound interest in SEI's capabilities. Initial closing expected in late 2025 or early 2026.
AI and Tokenization: SEI is advancing tokenization pilots and applying AI to workflows to support efficiency and scalability. Near-term focus is on use case validation and disciplined rollout.
Cost Optimization: Incurred $4 million in severance costs as part of cost optimization initiatives, reflecting commitment to evolving the business.
Sales Pipeline and Record EPS: Year-to-date sales events surpassed $100 million, a record for SEI through Q3. EPS reached $1.30, an all-time high excluding one-time items.
Capital Allocation: Deployed $142 million for share repurchases in Q3 and $775 million over the trailing 12 months. Made a $50 million anchor investment in LSV's market-neutral hedge fund to support future fundraising.
Contract Loss in Private Banking: A contract loss in private banking due to a client's strategic shift away from their bank trust model. This loss, while modest in financial impact, has driven lower net sales for the segment.
Long Contracting Process for Large Opportunities: Engagements with large alternative asset managers involve lengthy contracting processes due to the size and complexity of these opportunities, potentially delaying revenue realization.
Severance Costs: Nearly $4 million in severance costs were incurred this quarter, reflecting ongoing cost optimization initiatives and employee transitions.
M&A Costs Related to Stratos Acquisition: Approximately $3 million in M&A costs were incurred related to the planned acquisition of Stratos, impacting corporate overhead.
Institutional Business Challenges: Institutional revenue and operating profit were essentially flat, reflecting lower equity exposure and less benefit from market appreciation compared to other segments.
Client Departures in Asset Management: Client departures in the institutional business offset growth elsewhere, indicating ongoing challenges in retaining clients in this segment.
Pressure on Traditional Mutual Funds: Continued pressure on traditional mutual funds, although offset by growth in ETFs and SMEs.
Net Outflows in LSV Assets: Nearly $3 billion of net outflows in LSV assets under management, partially offsetting strong market performance.
Future Sales Pipeline: SEI expects to provide more clarity on the nature of large and complex opportunities in their sales pipeline by early 2026. They have confidence in their sales pipelines compared to Q3 last year.
Stratos Partnership: The initial closing of the Stratos partnership is expected in late 2025 or early 2026. This partnership is anticipated to increase awareness of SEI's capabilities and generate renewed interest in their offerings.
AI and Tokenization Initiatives: SEI is in the early stages of adopting AI and tokenization. They are focusing on use case validation and disciplined rollout, with expectations that these initiatives will enhance efficiency and scalability over time.
Capital Allocation: SEI is maintaining an excess cash balance in preparation for funding the first Stratos close. They are also deploying capital to strategic investments, such as a $50 million anchor investment in LSV's market-neutral hedge fund, which is expected to support future fundraising from institutional investors.
Private Banking Transformation Initiative: SEI is engaged in a comprehensive transformation initiative with a leading super regional U.S. bank. This project involves retiring legacy systems, executing complex data conversions, and integrating new platforms, representing a significant opportunity for SEI.
Dividends: No specific mention of dividends or a dividend program was made in the transcript.
Share Repurchase: SEI repurchased $142 million worth of shares in Q3 2025 and $775 million over the trailing 12 months, representing more than 7% of shares outstanding repurchased in the last year.
The earnings call summary and Q&A indicate strong financial performance, with growth in AUA and AUM, robust performance fees, and significant share repurchases. The company is investing in future growth, with a focus on alternatives and international markets. Despite some margin pressure from investments, the overall sentiment is positive, supported by optimistic guidance and a strategic focus on long-term growth. The Q&A revealed no major risks or concerns, and the management's responses were generally reassuring.
The earnings call reveals strong financial performance with increased EPS, private banking, and investment manager revenue. Despite margin declines due to investments, year-over-year improvements are noted. Shareholder returns through buybacks and dividends are emphasized, and optimistic growth in AUM and AUA is reported. The Q&A session provides additional insights into strategic investments and strong sales pipelines, although some timelines remain uncertain. Overall, the combination of positive financial results, strategic investments, and shareholder return plans suggests a positive stock price movement over the next two weeks.
The earnings call reveals strong financial performance, with a 31% YoY EPS growth and record share buybacks, signaling confidence in the company's prospects. Despite a slight decrease in Q4 sales events, net recurring sales increased significantly. The Q&A section highlights positive market engagement, strong client retention, and potential for M&A. The company's strategic investments and high cash reserves further support a positive outlook. However, some uncertainty remains regarding future terminations and alternative servicing revenue, slightly tempering the overall positive sentiment.
The earnings call summary reflects strong financial performance, with significant EPS and revenue growth, robust AUM and AUA increases, and strategic investments in AI and automation. Shareholder returns through buybacks and dividends further bolster sentiment. The Q&A section supports sustainable growth and highlights strategic wins without over-reliance on singular deals. Despite competitive and regulatory risks, the company's proactive measures and strong market demand outlook contribute to a positive sentiment, likely resulting in a 2% to 8% stock price increase.
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