Q3 2020 SEI Investments Co Earnings Call
Yeah.
[music].
<unk>.
Ladies and gentlemen, thank you for standing by welcome to the <unk> third quarter 2020 earnings call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.
Directions will be given at that time.
If you should require assistance during the call. Please press the Star then the ROE as a reminder, this conference is being recorded.
I would now like to turn the conference over to our home.
Chairman and CEO Al West. Please go ahead.
Thank you and welcome everyone.
All of our segment leaders are on the call as well as Dennis Mcgonigle <unk> CFO.
Kathy Heilig S.U.S. so.
I'll start by recapping, our situation and third quarter 2020.
I'll, then turn it over to Dennis to cover LSV and the investment in new business segment.
And after that each business segment leader will comment on the results of their segments then.
Then finally, Kathy Heilig will provide you assume important company watch the six.
As usual, we will field questions at the end of <unk>.
Now before we cover the results of the third quarter I will speak to the set of circumstances will face today.
Around the globe, we are still dealing with it so that and then what.
From the beginning this health crisis, our priority has been on the safety and will help.
Our employees and their families along with the seamless delivery of service to our clients.
I am incredibly grateful to our workforce for transitioning both workplace the home at home the workplace and all the while supporting our clients each other and our communities.
The strength of Sci Shine best when the challenges are screen.
Yeah, we take immense pride and.
Investing for the long term.
We have proven business models that have been shaped over the past 50 years of experience.
They are the bedrock of our ability to weather the uncertainties of today and emerge from the current crisis stronger and better positioned to take advantage of tomorrow's opportunities.
Our secret to success is straightforward remain.
We remain focused on keeping our workforce healthy and productive.
Invest in our best in class technology in.
Innovate continuously and delay.
And deliver world class service to our clients.
We will also be relentless in executing on our strategic strategic vision and launching the growth generating initiatives. We believe will be at the heart of our future successes.
We look forward to sharing our progress with you.
So, let's turn our attention to the financial results of the third quarter 2020.
Third quarter earnings decreased by 16% from a year ago.
Diluted earnings per share for the third quarter of 75 cents is a decrease of 13.
Great sense from the 86 cents reported who.
For the second quarter 2019.
Well 2019, it's fun.
We also reported.
A 2% increase in revenue from third quarter.
2019 to third quarter 2020.
This year's third quarter results.
Benefitted from a rebound in our capital markets.
Our non cash asset balances grew by just under $10 billion from both cash flows and market appreciation.
Kill Us these balances during the third quarter gain just under so.
So a $1 billion.
Also during the third quarter, we repurchased approximately 2.1 million shares of Sci stock at an average price of $51.
54 cents per share.
That translates to approximately 109 million of stock repurchase during the quarter.
Now this quarter. We also contained our investment continued our investment in and do growth generating initiatives. The newest effort is one assay out which is a large part of our growth strategy.
As you will recall, one sci leverages existing and new Sci platforms by making them assessable to all types of clients all adjacent markets and all other platforms.
As a byproduct of the investments we made in the third quarter, we capitalized approximately $6.1 million of development and amortized approximately $12.2 million of previously capitalized development.
To date, we have not capitalize any of the one Sci work.
Now turning into revenue production third quarter sales events net of client losses totaled approximately $28 million and are expected to generate net annualized recurring revenues of approximately $15 million.
Clearly we are encouraged with this year sales results. They reflect the fact that the fact that all though.
Throughout the company, we have successful an entrepreneur or sales team driving revenue.
Our unit heads will speak.
To their specific sales results.
We have three business objectives. The first is to deliver so.
[laughter] smooth safe operations.
The second quarter I'm, Susan the second objective is to grow our business by helping our clients grow.
And our third objective is to continuously innovate so we can keep growing in the future.
Receives objectives, we know that things will never be the same.
So we have been busy adapting to new mental models and realities.
Feel ready to capture the opportunities inherent and significant change.
Now this concludes my formal remarks, and I'll turn it over to Dennis to give you an update there.
Yes on LSV and the investment in new business segment.
And after that all it segment leader heads will update you results in their segments benefits.
Thanks Al Good afternoon, everyone I.
I will cover the third quarter results for the investments in new business segment and discuss the results of LSV asset management.
During the third quarter 2020, the investments in new business segment.
Continued its focus on the ultra high net worth Investor segment.
Through our private wealth management group.
At additional business research initiatives, including those related to our IP services business opportunity and number.
And the Modularization of larger technology platforms into Standalone components, So the wealth management and investment processing space.
To deliver on our one SCR strategy.
During the quarter of the investments in new business segment incurred a loss of $9.8 million, which compared to a loss of $4.5 million during the third quarter of 2019.
This increase loss reflects an increase in investments specifically related to our one SCR strategy.
Which we have discussed in the prior couple of quarters of.
Of our expenses in this segment approximately $8 million is tied to that effort.
The one SCR strategy as a company wide initiative to open business opportunities across our entire company as well as creating new business lines.
Regarding LSV our earnings from LSV represent our approximate 39% ownership interest during the third quarter.
Now lets me contributed $28.3 million in income to Sci during the third quarter 2020. This come.
This compares to a contribution of 37.6 million income during the third quarter of 2019.
Assets during the second during the third quarter grew approximately $1 billion.
LSV experienced net negative cash flow during the quarter approximately 2.2 billion off.
Offsetting market appreciation of approximately $3.2 billion.
Revenue was approximately $94.9 million for the quarter with no performance fees.
Since I know the question is coming on expenses I thought I would address that.
Expenses grew approximately $13 million or 4% from second quarter 2020 to third quarter 2020.
Just under one half of this expense growth approximately $6 million relates to salary and other compensation adjustments. We made at the beginning of the quarter consistent with our annual compensation process for most of our workforce as well as continued hiring in areas of growth.
In addition, approximately 20% or $3 million was due to a spike in health insurance costs during the quarter, which are not predictable and drove by actual experience. Since we are generally self insured.
A final 30% or approximately $4.5 million is essentially onetime in nature.
Related to severance expense.
And professional services fees and costs associated with trade corrections as a result of a couple of Vincent as disclosed in our second quarter 10-Q.
These costs are spread across our segments as well as Jana.
I hope that breakdown helps.
Finally, our effective tax rate for the quarter was 21.4%.
I will now take any questions.
Yes.
Thank you, ladies and gentlemen, if you wish to ask a question. Please press one and then zero on your telephone keypad No way dryer question at any time by repeating the ones that are a command. If you are using a speakerphone. Please pick up the handset for practical number one.
I'm thinking if you have a question. Please press one and then the ROE at this time.
And we'll go to the first line of Brian Kelley with Morgan Stanley. Please go ahead.
Hey, Dennis how are you.
Hey, Ryan welcome aboard.
Thank you just wanted to get a sense of how you're thinking about the trajectory of what a ban on do you still think that it's something that peak this year and in 2021 should more or less resemble 14 18 or is there more to do there next year.
Yeah, there's as we I think with our last call there's still more to do in the early part of the year, but it will start to come down.
Oh.
Over the course of the first half of the year that certainly into the second half of the year.
So were you know.
As we said in the past were.
It's a project and it will.
And it will take the trajectory more of a project that out.
On a sustainable plan.
Platform Bill.
Thanks.
You're welcome.
Thank you next door to the line of Robert Lee with KBW. Please go ahead.
Great Hi, Thanks, Dennis over all is well with you.
Yes, thanks, Rob.
Thank you on the here.
Quick question I guess this would allow us to see I mean, obviously, you know they've been struggling with flows and.
Then lunch you know year to date like 24% I mean, I don't know if there's any color and say you may have into kind of VIX.
Known they've anything in terms of knowing the redemption that we should be thinking about it and look ahead or any reason.
I think that the snow, making some changes.
Near term trends over the.
Coming quarters.
Yeah, I mean, it's obvious that trends aren't good, but then or yeah, they're not good for value investing generally.
And since LSV is very.
Specific to that segment of the market there.
Yes, clearly caught up caught up in that.
I can't say, there's real predictability kind of quarter to quarter.
Uh huh.
And that the flows this past quarter about half of the negative flows.
Where from lost clients about half of that negative flows were from existing clients. So.
So they were really more just a rebalancing away with some existing clients.
Arguably the outlook for value improves.
That potentially would reverse itself.
Yes, that's capital gets committed.
To this segment up the equity markets.
And I would say, it's really not as not predictable.
If you remember back a couple of quarters, they've actually had positive flows so its.
Less predictable.
So we're just you know that sure.
Victor.
About.
On the last call I conviction about what they're doing I conviction about value.
They know what they are really good at.
Sales of economy shock of urban through.
This type of thing before even though this one's more prolonged than other periods.
And.
You know, there's starkel perspective for what it's worth.
Which suggests that when it turns it will turn very much as a base.
Great.
And then maybe as a follow up and I'm just curious I don't know if this is embedded in some of the spend numbers you mentioned more than half million, but you know I know.
No over the Siemens back in July or so in other words, one of your vendors had their ransomware attack, but I got to dispose. Some of your point that it seems kinda cures, you've seen any spencer or will allow the lead for them or maybe.
Maybe some question from Stephen one of the other segments kind of made me think.
Impacting or changed in any way your approach.
Working with some of your your outside vendors.
No one on the expense front.
Yeah. There is a portion of expense associated with that event in that four and a half million dollar number.
The wheel. So we certainly don't expect that to repeat itself.
And.
And some of that's just a.
Yeah, what we did to make sure we were on on top of this particular vendor.
Uh huh.
I'd say, we're affirming its always in constant improvement.
When it comes to vendor management.
No it's an area that.
Whether we had this event or not we would have been.
Consistent with our approach to risk management and vendor management.
Now this points points is it something that in terms of it.
Issues associate with this particular event.
What art that are been your vendor program would it have caught this even if it.
Had elements in it so we're.
Looking at all that I'll leave it maybe.
Any follow up question to Steve since it's more kind of it in the end market elements to it as well, but we feel like were.
From a market perspective is kind of behind us.
Behind us it's more.
Just a.
Valuating, our condition and improving from here.
I mean, it's I mean should we expect that there may be used for a couple of quarters, a little bit more on kind of trailing expenses from me this image.
Hi, I'm glad you're yeah.
Yeah, I would say I would say there.
Incrementally.
Hello, given what we expenses third quarter I don't see any anything on top of that.
To be down a little bit and the only area. We would have some expenditures out of pocket will be.
Professional services related.
Consultants and others, but it's not.
I wouldn't say, it's any greater than what we've heard and third.
Third quarter.
Hey, great. Thanks for taking my question and no problem. Thank you.
Thank you next door to the line of Chris Shutler with William Blair. Please go ahead.
Hey, Dan its good afternoon, Hi, Chris.
Hi, Chris.
Slip.
Let's see I guess first I wanted to ask about the the the one SCR just to reiterate to you said about $8 million of expenses and a new business segment was one sci.
Yes, and that's consistent with second quarter as well.
Yeah and in terms of how we should think about that going forward. So basically maintain that $8 million so level into per quarter into early next year and then it will start to come down and.
I guess, how much do expenses come down as you progress through 2021.
Yeah, I think it's my expectation is it will be.
A gradual in the first quarter, a little bit more in the second quarter and then more significantly.
Our three to where it's hopefully is pretty much off the books and by the end of the year.
[noise] [noise], Okay, great and then the health care cost item that you mentioned would you just explain that quickly and is or just to confirm that that $3 million is a ongoing expenses.
No. It's there's a couple of elements in there one first of all you may not whether were not were self insured.
On health care, we have catastrophic coverage and.
Policies over the top but for the most part where pay.
I, usually go for health care.
And what we saw in the third quarter, which I think other companies are probably going to have similar experience. There was a lot of catch up in the third quarter.
In the healthcare arena as people stayed away from there.
Medical appointments and medical treatments in the second quarter because of coated.
And it popped back up in the third.
Third quarter said it was some catch up.
In terms of.
Health care usage, if you will.
We Unfortunately, we had one.
Fairly significant individual health sales.
Situation that also added to the expense sales.
That well you know I don't expect that to repeat.
Repeat itself in the fourth quarter.
There may still be some level of catch up for people.
But it should normalize.
Okay.
Got it thanks for the detail problem.
And then lets see maybe one more oh, just don't the onetime expenses that you mentioned, the four and a half thing it was four and a half million dollars and you.
And you said it was across segments were were there any segment to where it was more pronounced than others.
Uh huh.
It's probably a combination of.
G and H.
Hi, Selman.
Yes, probably more.
That's a managers.
And then the severance was an institution.
[noise], maybe a little bit in banking.
Okay.
Alright, Thanks, a lot.
Thanks, a lot that's set so it's pretty well spread around.
Yes.
Okay makes sense. Thank you.
Thank you and I do have a question from Owen Lau with Oppenheimer. Please go ahead.
Thank you and I. Thank you for taking my question, Dennis Upsell and if I don't know how are you.
I'm good I'm good thank you.
Some companies starting to talk about upside and downside off working from home or could you. Please give us an update on you all at sea ice operating model going into 2021, and how should we think of maybe the Ti you save any potential we're gonna stay safe.
Oh and the order after synergy on a spend going into 2021. Thank you.
Sure maybe the way, we're thinking about the return to office.
Work is right now we have about 250 or so employees in our offices, mostly here in.
Pennsylvania.
We've recently announced our workforce that we wouldn't be bringing back any.
Significant numbers again till the earliest March onest.
So yeah, we were.
A few months ago were more hopeful.
The pandemic would have progressed further than it has.
We would be able to bring more people back by now but.
So we made that announcement at the same time, we also.
You are reminded our workforce that there may be instances, where we might need to pull some people into the office.
Or offices.
Or a specific periods of time.
For their job functions, particularly when we get closer to year end sit here at processing.
In terms of additional costs, we would incur or.
Adjustments.
I really see.
See much change on that front over the next quarter.
You know, we're very cognizant of.
Making sure that our police have a that's comfortable.
Work from home experience says they can have so.
We've done a lot on that front already.
We're also cognizant of.
And really all of our up there.
Locations the challenges that working parents are having the school school age children or.
Were younger than school age children.
So we've made some adjust.
The adjustments there.
What we think will.
Can help at least a little bit without issue.
When it comes to T.N.A. I don't expect much change there.
Over the next quarter, we're certainly.
We're certainly not planning any big client.
Client events or celebrations.
And I'd say and when it comes to travel and.
The movement of our workforce.
Out into the field and converse the.
The movement of clients visiting campus that will occur and it is occurring on a very limited basis.
I expect that will expand a little bit over time, but I don't expect that really to get anywhere close to.
To I'll call it normal for a while and that's it.
And that's really twofold, one yeah, we're very protective of our workforce and our willingness to let them.
Travel and Conversely.
Prospects and clients really don't want a lot of visitors so.
Yeah, we can accommodate visitors here to campus safely be prepared to campus for that.
Protocols for our employees, who do travel or require.
Well, who are required to travel by client demand and voluntarily travel I might add.
But I'm, sorry, but I don't see travel and entertainment change much.
That's very helpful. Thank you. Thank you that's helpful.
Thank you.
Thank you next door to the lineup Robert Lee with KBW. Please go ahead.
Oh, great. Thanks.
Uh huh.
Tax follow maybe to Ah I know, it's always hard to predict given you know moves around with no option, but and whatnot, but.
In the adventure, where you sit now what you're kind of thinking about it.
Tax rate going forward.
Yeah, I think it'll it'll be in us.
Arranged.
[noise] third quarter, we get a little bit.
Tax benefit from some expiring.
[noise] elements.
For the most part.
You know it should be.
I don't have a similar range to a third quarter in the <unk>.
Good.
Great and then maybe one last thing on heat treat patients and I know the last thing you want to be working.
Talking about hypotheticals, but hypothetically no its no down the road. So we had you know are facing higher corporate tax rates no.
Maybe.
Who knows.
As you know is there any reason they yeah no.
Where you sit today would you expect kind of the 100 basis point increase.
Oh Oh.
Well affecting you guys are you anyway, where you're seeing are you thinking maybe because of foreign sourced income or something would be less just trying to get your.
Your own kind of different than that.
Hypothetically.
[laughter] thick.
Yeah, I think if we would have to prepare for any.
I would say flat.
Direct increasing the statutory rate without any other.
Elements of adjustment.
Hmm.
It will probably hit us pretty directly.
Okay. Thank you for taking my hypothetical right Yeah, I don't know if you recall when the tax cut for.
Mhm, we got yeah, we yeah pretty much full.
Pretty much full benefit from.
Matt as well.
And right.
And there's also this.
Little thing whatever most companies balance sheet called deferred tax assets.
Mhm liabilities those have to adjust as well so you get these.
On one quarter anomalies one.
And we all have that we don't have it probably as much as most companies do.
Something to watch out for.
Hypothetically.
Hi, Ben.
Thank you [laughter].
Thank you and I have no further questions in queue at this time.
So how will that with that I'll now pass it on to Steve talk about the private banking sector.
<unk>.
Thanks, Darren good afternoon.
Good afternoon, everyone for the third quarter 2020 revenues for the segment totaled $114.8 million, which was down 2.1% from the third quarter of 2019, which was due primarily to previously announced client losses and a decrease in our asset management revenues in comparison to the second quarter of 2020 revenues from.
The segment were up 6.6% for the third quarter, which was due primarily to one time revenues tied to implementation activities.
For the third quarter 2020 quarterly profit for the segment was down $4.7 million from the third quarter of 2019. This year over year decrease was primarily driven by previously announced client losses, and a d. clean decline in our asset management business.
Quarterly profit was up about $1.7 million from the second quarter of 2020, mainly driven by our increase in one time revenues.
Turning to sales activity for the quarter, we closed $29.8 million of gross recurring sales events and re contracted eight client for another $22.6 million in revenue, which in total solidified $52.4 million of recurring revenue and resulted in approximately.
$600000 of net recurring event for the investment processing business or.
Offset by a negative $1.3 million in asset management of that this.
This offset brought our total net recurring events for the quarter to a negative $700000 for the segment.
The difference between our gross events in the net events was primarily due to a small net down in one of our deal signed for the quarter.
The average term for our rig contracts. This quarter were was 3.9 years and also in the quarter, we closed $11 million in one time sales.
I'm pleased to announce that during the quarter, we signed an agreement with one of our largest and longest running client partner U.S. banks to adopt the FBI wealth platform.
<unk> Bank the fifth largest bank in the nation has been acquiring about 1977 and will join over 50 other sign clients committed to utilizing s. WP as the core technology and infrastructure to grow and modernize their wealth management business and.
In July U.S. Bank signed this long term SVP contract implementation agreement U.S. Bank selected the F.B.I. wealth platform to fuel their global growth strategic initiative and to take advantage of an upgrade in technology and infrastructure solution set that will power the future of their wealth management and investment services business.
U.S. Bank will consume S.W.P. in a software as a service model as this is a large scale implementation, we expect to be multi phase multi year conversion in the interim U.S. Bank will remain on our trust 3000 platform we.
We have started implementation activities with U.S. back.
This event is significant for us for several reasons first it validates our one s. Guy strategy as we were able to modernize our platform and approach to offer only core to core back office for FW pay and move this agenda factor finalizing it during the pandemic sector.
Second it allows us to land EF W.P. with U.S. Bang and then provides us the opportunity to expand our additional SVP front office capabilities to U.S. Bank.
Third this is a large scale soft adoption of that WP further validating the broad capabilities of actually I was wealth platform and finally this will allow us to support US banks continued global growth in a more meaningful way we've.
We've enjoyed many milestones as long time partners with us back in this industry and we are thrilled to be able to continue our long term partnership as well as to expand our relationship.
Also during the quarter, we signed an agreement with a new client Fcr Pacific Premier Trust, a division of Pacific Premier Bancorp.
We won this business in a competitive process and we expect Pacific Premier truck to migrate to SVP from a competitor platform in the first half of 2021, and we look forward to welcoming them to they actually I family and supporting their future growth initiatives.
From a UK perspective, we continue to see is continued expansion in growth from the fusion Schroders migration I continue progressing with the U.S. HSBC implementation.
As an update on our backlog, our total signed but not installed backlog was approximately $73.8 million $73.1 million in net new recurring revenue.
Turning to implementation activity in the third quarter, we successfully converted to clients to the Sci wealth platform choke Hall, and Stuart LLP in Boston, Massachusetts, and Legacy Trust Company in Houston, Texas, Both existing trust 3000 clients.
Both clients were successfully brought live on SVP, and a 100 per cent remote environment well.
Well others in the industry are expiring implementation delays, we continue to install clients on time and on budget throughout the quarter Sci and our client partner teams continue to successfully operate in a virtual environment and met all milestones unlikely to avoid any disruption to our clients business.
The teams have enhanced our remote training implementation capabilities and the continued success of these conversions will ensure our ongoing ability to bring clients live under unforeseen circumstances. This case.
This capability to finalize these implementations during these disruptive times is a testament to our clients, our workforce and bodes well for the future.
From an asset management standpoint, total assets under management ended the period at $23.5 billion, representing a 2% increase from the second quarter of 2020.
Are you I'm increase was due to market appreciation.
Cash flow for the third quarter 2020, with a negative $314 million.
Turning to the business environment, despite the ongoing pandemic and the challenges that has brought we continue to operate as business as usual and our workforce continues to rise to the occasion and across our company, we have executed extremely well finding new ways to engage clients and prospects I'm.
I'm encouraged by the continued strong market activity, we're seeing and the growth opportunities in front of us I'm from.
I am further encouraged by the execution of our one SCR strategy and the investments, we're making are platforms and business to drive sustainable growth.
Our people, our culture, and our technology or differentiator and I feel well positioned due to them.
That concludes my prepared remarks, and I'll now turn it over for any questions you may have.
Thank you as a reminder, if you wish to ask a question if Kraft one and then zero at this time.
And we'll go to the line of <unk> with Oppenheimer. Please go ahead.
Yes. Thank you for taking my questions again, Oh, sorry, Steve for the onetime revenue I didn't get a month, how much what's the onetime revenue and what was that and overall, we see margins started to expand you should take it as a sign that it's the beginning of a more sustainable margin.
Pension from here or it's too early to say bonds along over the next couple of quarters. Thank you.
So the the one time Oh in that we closed in the quarter was $11 million in one time sale as far as the margin I would say yeah. We're still dealing with you know the client losses that we've announced a north Korean before a and we're still going to kind of digest them through this quarter and the rest of this year I think.
I've mentioned this before on a number of calls my hope is that sometime in 2021 as we get through this and start to implement a in a more meaningful way our backlog I'm, hoping to get to a point, where we can have a more sustainable and accelerate accelerating margin Uh huh.
Got it thanks, Steve.
Sure.
Thank you I'd like to go to the line of Robert Lee with KBW. Please go ahead.
Great. Thanks, So thanks, Steve Hope, you're well sure I am hope Youre.
Oh good thing.
One of the numbers you went through I think pretty quickly so maybe a <unk> go back up.
No that was just my first question is really on the private bank.
Private bank you know as the GP when you know.
And then I'm, assuming that's incorporated into your kind of meant numbers. It's in the order and how should we think about that.
That's kind of some of the new food revenue impact for a while I'm just trying to get a sense.
[music].
You know Im sure Youre right. Its a great question and I understand there's a lot of moving parts here. So what I'll say is that so remember obviously, a jos bank because they're a great moved to F.W.P. for us and like in the past anytime an existing five whose best WP, even when it's in a competitive process.
Well I'd love to announce the entire event as you know new revenue we can't we obviously have revenue on the books. So we only announced I think that in this case again, because the one F.B.I. strategy. We are 40, the ability to just sell the core back office processing order or an S.W.P. to try to U.S. bag.
And obviously, we did that because it wasn't a full stack at a reduced rate. So so actually it was a little net down from trough from the from the trust a number but we have the ability now as I said, the kind of land and expand and up sell U.S. back and potentially in the gay for improved.
That that ER net down so the gross it reflects a obviously that and the net reflect net down from that as well as the new sales in any net up we had from that the importance I think that you should take from this and I know we've talked about this a little.
Last quarter between last quarter and this quarter.
We have solidified for new business every contract close to $100 million of revenue in the segments.
For the next three to seven years.
Quite frankly, I think that is a significant point that you should take a.
And I think it's important for you to take going forward.
Yeah, there when we look at growing this business, there's really four legs to growing this one and retaining our existing clients to growing our existing client three bringing new clients on and for expanding our opportunities our solutions and our markets and our asset backed if you will.
We're doing all four.
Great and then maybe.
Oh, but with the backlog of 71 billion a month to me a backlog because of mindless know, how you're thinking about that in turn no.
Turning on to me I guess, if I remember correctly, maybe the first half over like kind of an 18 month period, maybe starting next year.
Other have kind of no over the next several years and that's the right way to think of it.
Yeah, I think so I think last time it was I think the rough numbers here. It was about 50% in the next 18 months, we expect to come on and then the next 50, you know after that yeah going up to you.
Yeah, well most you know 2030 month, you know if I looked at it now you know, we've obviously added to that backlog now but I'd.
But I say that still Directionally correct, how I would look at it obviously some of the deals that are in conversion that would be down to about 15 months, but some of the new we added well add to that so if I had to look at roughly I'd say around 50, 253% in the next 18 months in the RAF after that you know spread out.
Okay, great. Thank you Steve appreciate it.
Thank you like to go to Atlanta, Chris Shutler with William Blair. Please go ahead.
Hey, Steve Good afternoon.
Afternoon, Chris how are you doing good.
Good how are you good.
So first one U.S. bank. So if that's oh, it sounds like a modest net down recognizing it's like for like just.
Oh I'm sure I'm trying to reconcile how that all that makes sense. If S.W.P. is massively better technology then.
What you S Bank has had in the past and it's that certainly isn't kind of the same as you're experiencing in wells Fargo.
Five years ago, when you announced that there was like for like also but was still a pretty nice step up in recurring revenue.
Well, Chris sales you know they did not buy the full stack of S.W. pay.
So wow, what they're getting certainly as a step up from what they have they're not bought the full stack. So again going back or one F.B.I. strategy and some of the talks we've had you know the full staff, while extremely powerful and extremely valuable is sometimes hard because it's such a big.
It's such a big transformational change. So this case they literally bought the core to core back office, you know kind of S.W.P. to trust 3000, and that's what they're installing so all the value add front office applications.
Unlike wells are not included in this.
Okay got it okay, and if something makes sense or two obviously U.S. banks it quite a large and long standing partner and are obviously getting this done and this time frame in the pandemic and securing this revenue and the move to F.W.P. and giving us the opportunity to grow I think is a significant step.
Yep, Okay makes sense.
And then secondly on or maybe expenses.
Just help us think through the trajectory of expenses in your business not only Q2 to Q3, but just how we should think about them going forward. So is Q3, Oh, a good jumping off point I guess.
Yeah. So certainly expenses were off the dentist whenever I'm a little bit you know if you look at our net up I think our expenses were now quarter over quarter or a little over $5 million. You know some of that I'd say a million dollars of it was directly tied to our asset management revenue increase if you think about it as the revenue increases there are underlying sub advisory manager fees go up.
Yeah, I'd say half of it was tied to some of the processing and trade corrections that that Denis had mentioned and the remainder was personnel expenses kinda, partly due to our normal mid year rate cycle and some of that very positively tied.
It's a new head count tied to new revenue coming in so I think going forward, obviously as I've said before my job is to grow the topline and bottom line. We've got a great group of people that are focused on this and we're going to manage expenses, but you know as we bring new business on you will see an uptick in some of our personnel in some of our tech.
Now I'd like you know that's been the vein of bringing new revenue in but yeah, we're very focused on managing that and Ah hopefully keeping it flat or bring it down and hopefully getting into next year, where I can provide a more sustainable and accelerating profit trajectory.
Okay got it and lastly, Steve on the asset management distribution business did you say that the flows were negative 314 tax cash flows were negative 300.
Cash flow was a negative 314 million for the year for the quarter for the quarter and is there any [laughter] excuse me.
Is there any sign of that business.
Turning a corner it feels like you're sort of in this flattish to slightly negative in most quarters. These days, yeah, I think what's going to happen and I think what we're really and you can imagine the environment I think private banks are taking a pretty conservative view on their asset management side, we see and yeah and not negative for our side was really made up of two two client.
Who really we're deciding to put a pass position a more defensive acquisition together and we see a lot of unrest you know with the election coming the pandemic going on so I think to turn the corner fully we're going to see a little bit more sales. We had gives you a little bit more stabilization after the election.
Some of the other things for the for the banks to feel a little bit more comfortable to lean in.
Okay. Thanks, a lot.
Thanks, a lot.
Thank you and next door to the line of Ryan can live with Morgan Stanley. Please go ahead.
Hey, Steve Good afternoon.
And Ryan welcome.
Thanks.
On the trust 3000 platform and I don't have some clients on that platform and it's profitable and you've talked about wanting to keep that platform running for a while I'm just trying to get a sense of where we're at in that transition and has the pandemic in the current economic environment impacted the appetite from migrating to trust 3000.
W.P. at all.
No I think you know certainly some people or some of our clients yet aren't entertaining any moves right now because of the pandemic I'd put them on the lower side I think we're still engaged with many of them on the increasing capabilities. They can get but thats WP and I think that will happen in the normal course, and I think as I've said before trust 3000 still a.
Very powerful platform that competes well in the market and I view it the one word I always use its an asset and as Dave. It's a growing asset. So you know my view of it right. Now is we're going to continue with that and it's a growing asset we're going to continue to support it and as we continue to move clients to ask WP.
Yeah, we'll continue to look at it but I think with the one that's the mindset there's opportunity for us to take components of our other platforms combined with trust 3000, and providing even powerful tool because I do think you know when we look at the Grand scheme of the clients left from Trust 3000, there's some that's W.P. might not be a fit for for a number of reasons, including.
Maybe the limited size of their wealth management business, maybe to mourn trust side and maybe the capabilities that provide them are ones that they just don't want to invest in right now, but I think there's opportunities for us to continue to grow the trust relationship and expand our services through some of the other assets be it the one Sci mindset.
Thank you sure.
Thank you our next door to the line of Chris Donat with paper Kramer. Please go ahead.
Hey, Steve how are you doing good how are you Chris.
You can find one guys quick question on the land and expand strategy in it.
My question is directed at U.S. Bank, but I wouldn't expect it to answer directly so just thinking in general about landing and expanding what the one Sci strategy.
What are you competing against as you think not so much on the core to core.
Transaction that you're doing now with U.S. bank, but as you work. If you were to sell more of the Sci wealth platform what what's your competition that's in house in in back.
In banks like U.S. bank well.
Well. Thank you if that's the way I was going to answer it I I don't want to speak specifically about any one client, but what I would say the norm across all banks were seeing anywhere from.
Home grown legacy technology to play.
To plug and play front office anywhere from CRM to yeah portfolio management to modeling software. So it kind of runs the gamut, but the key is.
<unk> in many cases very disparate technologies cobbled together to solve the situation, but in the long term. It's made the situation worse. So they're really looking for a straight through powerful platform and technology stack and I think part of the benefit of doing it. This way is it gives them the ability to digest a major part.
Of the improved platform and then start to transition other pieces and a more kind of expanded cadence, which I think is a very Africa appetizing, especially when you look at many of these firms have a number of systems anywhere from five to 10. So I think it provides.
It's definitely a better trajectory in a more acceptable.
Well, you know less risky way of transforming their internal operations and I'm, replacing internal systems.
Okay got it thanks, I'm not sure.
Thank you and I have no further questions in queue at this time.
Right with no other questions I'll turn to in the investment manager segment.
So for the third quarter of 2020 revenues for the segment totaled $123.8 million, which was $11.6 million or 10.4% higher as compared to our revenue in the third quarter of 2019. This year over year revenue increase was due primarily to net new client funding and existing client expansion.
Our quarterly profit for the segment of $44 million was $3.7 million or 9.2% higher as compared to the third quarter of 2019 higher profits year over year were primarily driven by an increase in revenue offset by a smaller increase in personnel expenses investments.
Third party asset balances at the end of the third quarter of 2024 $730.4 billion approximately $61.8 billion higher than the asset balances at the end of the second quarter of 2020. This increase was due to net new client fundings of $29.3 billion and market appreciation of 32.
$25 billion.
And turning to market activity during the third quarter 2020, we had strong sales quarter with net new business events totaling $12.2 million from recurring revenue as well as re contract of $9.5 million and recurring revenues. These events include the following highlights and our alternative marketing unit, we closed a number of strategic.
Names why sales to existing clients continue to be rude, but robot as these clients continue to launch new products.
Actually I was selected to provide our front office platform, providing investor Onboarding data management and reporting to support 135 billion dollar alternative manager in a highly competitive transaction.
A significant deal demonstrates our capability to deliver Standalone comprehensive platform solution. In addition to our standard role as funding Ministry or.
In addition, we were selected by a startup credit shop with a significant track record capitalizing on the on our market leadership in the private credit space and we were also selected by growing private equity real estate manager to convert from a competitor due to our operational expertise and technology platform and.
In our traditional market unit. In addition to continue our momentum with collective investment trust and expanding our relationships with our clients. We also are pleased to announce the addition of our first turnkey easy apply to our advisors are circle Trust platform.
In Europe, private credit private equity and real assets continued to be the main drivers of new fund launches with strong cross sales with existing clients and.
And our family Office services unit, we continue to see steady demand in the single family Office segment with new name sales events for the Arts way platform.
In summary, we continue to see strong momentum in the business and across our client base as we all know this year has had its fair share of challenges.
And I'm immensely proud of our workforce, who are the real key to our continued success. There are persistent from resilience in the face of these challenges have been nothing less than remarkable and is being noticed and appreciated by our clients as we.
As we enter the final stretch of 2020, we will continue on executing on our growth opportunities as well as investing in our overall platform, including the front end platform, which we feel has significant growth opportunity for us.
That concludes my prepared remarks, I'll now turn it over for any questions you may have.
Thank you as a reminder, if you wish to ask a question. Please press one and then the ROE at this time and well first go to line up right.
Morgan Stanley. Please go ahead.
Hey, just a question on the theory, but I look at investment managers revenues over your average assets under administration and management. It looks like the fee rate came down a bit this quarter. That's when I talk is that because of pricing pressure at where that asset appreciation and onboarding coming in at the end so the fee rates and enroll forward. Thanks, Yeah I think.
It's more of the latter and if you think of you know this this quarter, our new event and even looking at the new events a fund that a lot of it is with existing clients. Many of those clients might be rate, reaching higher to your sales were lower tiers of their break points et cetera. So I would say, it's more a function of that.
As well as you know is where we look for some of our products and solutions. There are less tied to assets and more tied to a platform fee in some other volume increases, but I'd say the primary for the quarter is more of a the type of business that came in from clients.
Thanks, that's helpful.
Sure.
Thank you and look forward to lineup Robert Lee with KBW. Please go ahead.
Hi, again, Steve you can probably stick my first question backlog Oh, yeah.
[laughter] I leave it out so you get and you can ask me for [laughter], It's a fair point.
9 million at the end of the quarter.
Right right and so on.
On the.
On the re contracting I guess is 9 million can you maybe give some color around what you saw this quarter may be last or are expecting in terms of.
No kind of you know.
You kind of re contracting it kinda.
Similar revenue levels, adding some additional services just trying to get some color around kind of the yeah. So you know every <unk> every clients a little different you know some clients have depending on the segment. Some clients has had a rough year and maybe their assets of drops and certainly were good partner and we'll lean into help them address.
We remain on track and look for the future and potentially to sell them other business, but I think mostly for this quarter. We saw re contracting at the same fee level and you know just the continuation and expansion of your and in some case, an expansion of services and a an uptick because of an expansion of the services.
Okay, great that was it thank you.
Thank you next what point Oh in law with Oppenheimer. Please go ahead.
Thank you Steve just a quick modeling question I bought a slice median daughters are taking expense line item, what's gonna any kind of one time consulting expenses related investigation, a compliance or these incremental expands would stay there because of that.
<unk> expenses you mentioned, thank you yeah, and this quarter and this this segment I'd say half the uptick was really tied to personnel a and I would say that was a combination of the again, our midyear salary and promotion or you know kind of a routine we go through.
As well as new people hiring new people for new business, which I think is a great sign our investments were up and that was probably closer to about 20% and there was some others around you know consulting and professional services and as Dennis mentioned, a little bit due to professional fees and costs do.
Though some of the other situations we had at the you know earlier this year I think for the most part you know we're looking to manage the expenses you know we could see some uptick due to personnel and continuing to bring new revenue and new business and but you know, we're hoping to keep that yeah at a at.
A modest pace.
Got it thank you Steve sure.
Thank you I have no further questions in queue at this time [laughter]. Okay. Thank you there's no other questions I will turn it over to Wayne Withrow to go over the advisors segment Wayne.
Okay.
Thanks, Steve.
During the third quarter of 2020, we continued execution of our business strategy in a virtual environment.
While making progress we continue to evolve our virtual model and feel we are uniquely positioned to take advantage of this new reality.
Third quarter revenues totaled $103 million.
These revenues were flat compared to the third quarter of last year.
Now while revenues were flat our asset balances increased year over year, but our asset mix, resulting in this growth not being reflected in revenue growth.
The good news is these assets are on our platform and we hope to receive increased fees as they move into equity and fixed income products.
Like revenues expenses were flat compared to the third quarter of last year.
The corporate wide increases Dennis discussed and it.
And increases in sub advisory expenses, driven by our estimate program.
I'm, mostly.
Were mostly offset by savings in an assortment of other areas, including travel and sales compensation.
Our profits remained flat from last years third quarter.
Assets under management at the end of the third quarter was $69.4 billion.
This is up roughly 2.5%.
On September Thirtyth 2019.
Our average assets under management during the quarter were up a similar percentage from last year's quarter.
Positive markets and positive cash flow from sales activity contributed to overall asset growth.
But portfolio repositioning into money market products prevented this growth from yielding revenue growth.
Net cash flow for the quarter was $114 million.
It's total it's not a $158 million in advisory fees taken by our advisors.
Going forward I intend to report cash flow growth of these advisory fees since they are not the result of sales activity.
Exclusive of these fees cash flow for the quarter was $272 million.
In addition to this cash flow into our assets under management, we had $250 million.
Cash flow into non managed assets on our platform.
We recruited 56, new advisors during the quarter.
As I discussed during Sci second quarter call. Our investment management unit is now cure rating some products managed by third party asset managers.
We are seeing growth of these curated products.
In summary, we are settling into the new normal driven by COVID-19.
We are focused on driving growth operating in this new environment.
A scale strong financial position and technology, driven culture will allow us to capitalize on this new business environment.
I now welcome any questions you may have.
Thank you as a reminder, if you wish to ask a question. Please press one and then zero at this time.
I'll first go to line of Ryan Hello, with Morgan Stanley. Please go ahead.
Can you hear me.
I can Ryan Hi.
Hi, I'm just wanted to see if you could give us an update on the competitive environment, specifically in the turnkey asset management program, what you're seeing there and how we should think about any pricing pressure going forward. Thanks.
Yeah, I mean, I think the competition in the turn in it in the turnkey space is fierce and.
You know, it's it's other turnkey providers and it's also competition from the internally managed broker dealer platforms.
Oh, Yeah, and I think you'll continue to see a pricing pressure in those markets.
However, I mean, I would say that if you look at the.
Leverage inherent in our business model.
I think we are really well positioned in a fee compression world right now.
Thanks and has their remote working environment impacted demand for your platforms at all.
Oh I don't know if it's increase.
Increased the demand for our platform I think the plastic the remote environment.
The functionality in the platform and just you know the ease of a remote processing as well as allowed us to thrive in the remote environment and I think.
And I think people are more inclined to outsource perhaps than they were in the past, but it's really the platform is really an enabler and I think you'd be quite frankly, it operates as well in a virtual world as a dog in Allied world.
Thanks.
Thank you and export from the line of Robert Lee with KBW. Please go ahead.
Thank you Hi, Wayne how are you.
I'm, great Robyn I don't have a backlog talking about.
[laughter], Okay Uh huh.
I want to make sure I understand your comments around kind of the net cash flows and yeah.
The change starting its core that you and I apologize but.
<unk> days, if you maybe just walk through that again.
[noise] <unk> whites changing.
Yeah I mean.
Every quarter.
Our advisors.
Collector advisory fees out of the Oh, the investment accounts and traditionally we have always included that.
If you will negative cash flows redemptions, which go to pay the advisory fees in our in our cash flow numbers, but really if you look at cash flow as a move.
As a measure of sales activity that really has nothing to do with sales activity.
And it's you know as we've gotten bigger and bigger it's become a more significant number you know as I said during the last quarter it was $160 million.
That went out just to pay for the advisory fees for advice we're.
No longer going to include that if you will in market appreciation depreciation, which is really it's much more akin to that it's not something that.
Directories old or even an indirect result of sales activity.
Okay.
So.
Kinda like you'll report you win that.
Ed posting Roes Bose.
Those would be kind of gross.
Same dollar.
Right.
We we report a U M and a new way net I'm, just saying that in the net calculation. We're not going to include the fees paid to advisors.
Okay.
Okay, Great I think I get it and then also I think you know you touched on it it's <unk> million of cash flows on managed assets.
Thank you and I think your last quarter are you going to sound and maybe talk.
Talking more about kind of the Hello.
Although it was not it was a new wave you will see us move yourself.
Maybe just update us on kind of the word where that is.
Today.
I'm sorry could you repeat the last part of the question, we could Rob I didn't get it you know the assets under administration I mean, I think you know that you had 250 million of cash flows denominated that right. So I mean, that's becoming recently important so I mean this is.
I was just trying to get in.
A handle on what does your AG way your kind of your non managed assets on the platform today.
Yeah, I I would say, it's north of $10 billion.
But it's but it's you know eight B.A. away.
When you look at you know anyway, which is primarily.
Primarily as a pure custody.
It's not so much a revenue driver as it enables us to gather the assets onto the platform.
And its you know a variation of a land and expand strategy. Steve. It's got the skews that you know it gives us existing clients, which are better able to address going forward as you know they have.
Increasing needs are differing needs that we can meet with other products.
Right.
Thanks Wayne.
Thank you and I have no further questions in queue at this time.
Okay.
With that I will turn it over to Paul who will discuss the institutional segment.
Thanks Wayne.
Good afternoon, everyone I'm going to discuss the financial results for the third quarter of 2020.
Third quarter revenues of 79.6 million decreased 1% compared to the third quarter of 2019 third.
Third quarter operating profit of 41.8 million decreased 3% compared to the third quarter of 2019 API.
Operating margin for the quarter was 52.5%.
Revenue decreases were impacted by negative quite fundings were offset by higher capital markets.
Operating profits were negatively impacted by one time severance expenses and one time trading error, a positively impacted by lower travel costs.
Quarter end asset balances of 89.7 billion reflect a $200 million increase compared to the third quarter of 2019.
This slight increase is driven by positive capital markets offset by negative claim fundings.
Net sales were a positive 1.65 billion for the quarter, which was comprised of gross sales of 2.35 billion and client losses of 700 million.
New CIO signings were strong and including U.S. health care U.S. non for profit governmental and fiduciary management defined benefit.
The unfunded new client backlog at quarter end was 925 million.
Sales momentum so a positive turn with increased activity in a return to in person execution in select accounts.
We're also enhancing our virtual interactions with prospects.
Oh CIO, our peas in inbound inquiries continues to be strong in the quarter and in the early stage of the fourth quarter.
We are very focused on existing clients as our current clients are apt to also go through a formal re bid process due to time anniversary with <unk>.
On the new strategic initiatives tied we formally launched our enhanced CIO <unk> CIO solution.
The large ended the institutional marketplace third quarter.
We are actively marketing it solution and building a pipeline and looking to add more sales resources.
This solution is consistent with the one Sci mindset.
We continue to research on other strategic initiatives and evaluating new markets globally.
Thank you very much and I'm happy to answer any questions that you may have.
Thank you once again, if you have a question you May press, one and then the ROE at this time it we're watching the liner right Kelly with Morgan Stanley. Please go ahead.
Hi, Paul how are you.
And there's no.
Good.
I mean, the I O.
I don't understand how material of a driver that is for revenue at that point.
Well, it's not a driver at all there's no there's no revenue in our group for either so.
So we're just like watching this into the large institutional marketplace.
We didn't globally, there's about 800 suspects that fit the qualitative and quantitative destination and those that want to in source and had a team and this solution as you know.
You know is to make the team more efficient and more.
So anything that we do with respect.
No.
We have not had a transaction yet would be incremental to the revenue and incremental to the profits of the units.
Got it thanks, and then one more question I understand that there's some benefit from lower rates on the TV business is from delays in the funding status. How should we think about quantifying the revenue impact yeah long end rates were to rise from here.
If the long end rates were to rise it'd be hard for me to just give you a quick clarification on on you know from a revenue perspective, but you know.
You know our book is about 32 or $33 billion of corporate defined benefit at that yeah.
The average funded status of the defined benefit plans presently, it's about 84, b or 84% on a PBM basis.
100 basis points would certainly give them a better an inflection point and would probably move the funded status three or 4% all things being equal with.
Yes.
Certainly not an issue.
To begin with.
Guys are immunized the portfolio, but.
Maybe for certain clients that are more funded where certain claims to have more cash that type of move might give them the opportunity to do a curtailment. So.
Certainly, it's a tailwind for our business when long rates are low and it would be a headwind as long rates raise over time, because legacy defined benefit plans may decide to take action.
Got it thanks.
Thank you.
Thank you your next door to the line of Robert Lee with KBW. Please go ahead.
Hi, Paul how are you Robert.
Robert Good to talk to you.
To [laughter] I, just want to clarify he comes about and that flows.
I mean, I guess as you know that confused.
Oh, yeah yeah.
I guess im just trying to reconcile that if I heard you correctly or are you maybe you.
Increase in anyway, Im assuming my markets offset by some.
I guess you know outflows.
Outflows would be funding yet you had like are the right about the active net inflows. There just one I missed there was something wrong or maybe I'm just misunderstanding it.
I mean, it's yeah, that's right I'm comparing this to the quarter end out the balance Robert I'm comparing it against the previous year.
So collectively for the four quarters.
We've had more outflows than we've had in flows with respect to the third quarter in and of itself.
We sold 2.35 billion, we lost 700 million and we have a backlog of 925 million. So not everything that we sold in the third quarter funded in the third quarter.
Some of that we usually when we have a sales of than we usually have a 30 or 45 day lag before it actually comes in two.
To the.
Through the portfolio and therefore, we start accruing revenue so.
Well my comments about the negative client fundings are more year over year not quarter versus quarter.
Oh, great got it that's helpful and then.
I guess Im just kind of curious me your margins pretty healthy in this business, it's been running at a pretty high rate you know.
So I mean, you as you look ahead, you kinda Oh launch the CIO initiate isn't no understanding some of the one of the I call Sir.
<unk> segment.
You know is there any reason you know how should we be thinking about margin adult day.
<unk>.
Maybe peak margin that.
Settling back down towards it makes more sense, you know just trying to get a handle on that.
Yeah, I would say you know clearly the biggest impact with respect.
Robert is.
If we lose a client and they moved out of our own platform.
Versus a similar dollar that comes in we're probably going to lose lose profitability, we probably are making more on what we're losing them what we're bringing in so.
So we have that reality, we have the rebid reality when we go out.
Retain a client we probably are not going to be getting them at the same rate.
Matt.
Now that said that by clients that are more diversified that might consume more alternative that's done.
Easy I O. The great thing about a CIO is much of the technology, if not all the technologies Bill.
Similar to the technology infrastructure and back.
Stephen Kilmer fill mccain sell to the investment management services unit. So there's not a lot of build out there. There's a service model their sales people there are some reporting and things like that.
It it's not we don't think that's a huge investment in capital and again, its a real great leverage and I see I have on leasing those capabilities to to an adjacent market.
Yeah.
Great. Thank you.
Thank you.
Thank you next with White of Chris Shutler with William Blair. Please go ahead.
Hey, Paul good afternoon.
Hi, Chris.
So first could you break out the net new assets in the quarter versus the market appreciation.
So again, the net new assets.
Meaning that sales are or just sales there is no market appreciation in the sales.
Are you, saying that the second quarter versus the third quarter.
Correct to get from the second quarter ending assets to the third quarter ending assets how much of it was markets versus how much of it was no.
<unk> net new.
Or new business wins one.
Yeah, It looks like it's about.
You know roughly two and a half billion with the market.
[noise] billion half roughly is probably based on a new event.
[noise] okay.
And then.
I think going back a year or two ago, you were talking about you know at least thinking about doing tuck.
Tuck in acquisitions in your space or maybe making.
Select higher or two maybe mainly to address the endowment foundation area is that still something that's.
A strategic priority or maybe maybe just an update on that would be great sure sure.
It is something formally we looked at last year fourth quarter, we did have an outside firm presented some opportunities.
So we have decided to pause on the properties that we saw we did not think they would bring anything incremental to us or differential to WTI.
To us so we have set our sights more on a personnel strategy of select individuals that enhance the capabilities for any enough solution, which we've already done.
Livered on two fronts.
Two fronts and there was another one that we're looking at but also part of that process. When we were looking at properties and specifically the larger end of the market.
Affirmed our believes that many of the larger end of the market's actually don't want to outsource they want to in source.
And that really kind of been leased with the capability is one that really.
Really go to.
Go to Mark with this enhanced CIO solution rather than fight the fight of trying to Heli 2 billion dollar endowment they should outsource.
We are going to deploy our capabilities and saying we can make you more efficient from a technological standpoint. So I think that was a break through a series of work that we were able to do both internally and externally.
Got it okay. Thanks for the update.
Thanks, Chris.
Thank you I have no further questions in queue at this time.
Great I will now turn the call over to Kathy Heilig <unk> controller.
Thanks, Paul and good afternoon, everyone I have some additional corporate information about this quarter is there.
Third quarter cash flow from operations was 131.1 billion or 89 cents per share bringing.
Bringing year to date cash flow from operations to 395.2 million or $2.64 per share.
Third quarter free cash flow was 116.3 million, bringing year to date free cash flow to 333.5 million.
In the third quarter, our capital expenditures, excluding capitalized software were 8.7 million. This number includes the expansion of our facility.
A year to date capital expenditures, excluding capitalized software are 43.1 million.
We project.
For the fourth quarter, the capital expenditures will be approximately 15 million.
We also would like to remind you that many of our comments I thought we'd let the statements that are based upon assumptions that involve risks and that the financial information presented in our release and on this call is on audit it inside.
In some cases you can identify forward looking statements by terminology such as should May well expect believe continue or Pierre I forward looking statements include our expectations as kill it.
Your time horizons of our investments and the ability to take advantage of opportunities are.
Our ability to expand our relationships and revenue opportunities with existing clients do.
The degree to which we benefit from our scale resources technology and infrastructure.
Our ability to bring clients live in unforeseen circumstances dictate.
Demand for our products and services and the components of our business that will drive Chris.
Revenue that we believe will be generated by sales events that occurred during the quarter or when our unfunded backlog may find.
I resource allocations in technology, and platforms, which we choose to invest including our one I see I see that.
The strategic initiatives and business segments that we will pursue the strength of our pipeline and great opportunities and our ability to execute on and the success of our strategic objective.
You should not place and give reliance on forward looking statements as they are based on the current beliefs and expectations of management and subject to significant risks and uncertainties many of which are beyond our control or subject to change.
Although we believe the assumptions upon which we base our forward looking statements are reasonable they could be inaccurate seven.
Some of the risks and important factors that could cause actual results to differ from those described in our forward looking statements can be found in the risk factor section of our annual report form 10-K Freaky.
For December 31st 2019.
Oh that report is available on our website.
There may be additional risks that we cannot presently now that we currently believe are immaterial, which could also cause actually results to differ from those contained in our forward looking statements. We do not update the forward looking statements to reflect the impact of circumstances or events that may arise. After the date of the forward looking.
Hey, Matt.
And now please feel free to ask any other questions that you may have.
Thank you as a reminder, if you wish to ask a question. Please press one and then hero at this time and.
And we'll go to the line of Chris Shutler with William Blair. Please go ahead.
Thanks, just one last one for Steve, let's see if I can.
See if I wanted to come back to the did the U.S. bank discussion and just the.
Just trying to figure out like it is there a compelling reason for a bank to to only by the kind of the backend the custody platform and not use Sci for the front office tools.
I would think.
I would think that.
You know using Sci for everything would be it'd be a lot more integrated a better experience et cetera, but.
Just help us think through kind of the thought.
The thought process of a bank as they go through that back end up limitation and what.
You know what the risk is that they.
That they said they wouldn't use actually I for other solutions.
Yeah, Chris I understand but I think you were thinking a little so look at it. This way I think it's very compelling to use the whole platform. However, as we've discussed numerous times a lot of times when adopting the whole platform should be like open heart surgery quite a large transformative.
<unk>.
And as part of our plan to increase growth.
Who adopt the one that's got mindset modularize our platform gives the ability to adopt pieces of the platform now obviously in this case are adopting the quarter for back office, which is a large part of it. However, there was a lot of rate front end technology in other services that are package with the platform I think the real.
Hey here is it gives the ability for any institution to lean in and adopt Sci and move in a less.
Yeah, less impactful way and not as many hurdles and then certainly add more components as they go. So I think quite frankly is optionality, which in this day and age and especially dealing with large financial institutions. I think is much needed and more positive so I quite frankly look.
This is a huge positive move and positive outcome with a great opportunity for the future.
Okay. Thanks for that I appreciate the clarification sure.
[laughter].
Thank you and I have no further questions in queue at this time.
<unk>.
Ladies and gentlemen.
We are fighting on two fronts.
Firstly, a code at 19 disruption and second growing revenues and profits during this call.
On the first front, we were very fortunate to have planned well and been able to keep our workforce healthy and productive.
Well the second front, we face short term headwinds, but we believe that will prevail, thanks to our motivated and innovative workforce and.
And the strategic investments, we are making in that future.
Please be safe and remain healthy.
Great day.
Thank you ladies.
We're sorry your conference is ending now please hang up.
<unk>.
Thank you, ladies and gentlemen that does conclude your conference for today. Thank you for your participation and for using ATM T. executive teleconference. For today you may now disconnect.
Sure.
Yes.
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