Q4 2020 SEI Investments Co Earnings Call
Sure.
Okay.
Ladies and gentlemen, thank you for your patience in holding and welcome to the STI fourth quarter of two in 2020 earnings call. At this time all participant phone lines are in a listen only mode and later there'll be opportunities for your questions if you'd like to queue up at any point during the presentation feel free depressed one followed by zero just a brief reminder, today's conference is.
Being recorded.
And now happy to turn the conference over to Chairman and CEO Al West.
Thank you very much and welcome everyone.
All of our segment leaders are here with me on the call as well as Dennis Mcgonigle, Sei's, CFO and Kathy I like I guess you guys control.
I'll start by recapping, the fourth quarter and full year, 'twenty and 'twenty I'll, then turn it over there and that's to cover L. S V and the investment in new business segment.
And after that in each business segment leader will comment on the results of their segments.
And finally cash.
And I will provide you with some important company wide statistics.
And as usual, we'll field questions at the end of each reported.
So now, let's turn our attention to the financial reports.
Good.
Fourth quarter, 'twenty and 'twenty.
Fourth quarter earnings excuse me revenue grew 5% from a year ago.
Well in earnings decreased by 2% from a year ago.
In fourth quarter EPS up 86 cents grew by 2% from the 84 cents reported in 2019.
Fourth quarter asset balances grew by $27 million, while L. S vs balances grew by $11.6 billion.
During the quarter, we repurchased one 8 million shares of MSCI stock in a price at $4.36 per share.
That translates in the $99 million of stock repurchases.
And in the entire year in the form of repurchases and dividends, we passed $529 million of capital to shareholders.
This quarter we.
We also continued our investment in and the growth generating initiatives.
And then this effort is one Sci, which is a large part of our growth strategy.
And you will recall, one F C I leverages existing and new Sci platform by making them accessible to all types of clients all adjacent markets and all other platforms.
Now turning to revenue production.
For core sales events net of client losses totaled $8 $8 million and in.
And I expect to generate.
Net annualized return.
Revenues of $4 9 million.
And we are not discouraged with this quarter's sales results and do not reflect the sales activities occurring throughout the company and all of our target markets.
We think results is a timing issue.
At school correct itself.
Are you in and Ed will speak to there.
Specific sales results and their opportunities.
And to grow and prosper in the future, we know that things will never be the same.
So we have been very busy adapting to new mental models and realities such as remotely.
Distributed workforce.
We have a lot of positive momentum moving into 'twenty and 'twenty, one we have strong backlog and sales and conversions and a number of key prospect slate and in the sales cycle.
We also have made progress in strategically repositioning our asset management business segments.
We appear poised and ready to.
Capture the opportunities inherent in significant change.
And that concludes my formal remarks, so I'll turn it over to Dennis to give you an update on L. S free and the investment and in new business segment.
After that all segment heads will.
Date their results and their segments finished.
Thanks Al.
And everyone I will cover the fourth quarter results for the investments in new business segment and discuss the results of Ellis B asset.
Management.
In the fourth quarter, 'twenty and 'twenty the investments in new business segment activities consisted of the operation of our private wealth management business, our it services business opportunity.
Amortization of larger technology platforms to deliver on our one Sci strategy and other investments.
During the quarter the investments in new business segment, and incurred a loss of $11.4 billion, which compared to a loss of $9 8 million during the third quarter of 2020.
This increase loss reflects an increase in investments specifically related to our one Sci strategy approximately.
$8 $7 million is tied to that effort.
We also recorded an adjustment to the valuation of our contingent obligation for the Huntington Steele acquisition and.
Increasing expenses by approximately $900000.
Regarding LSE or 39% ownership contributed $30 6 million and income to Sci for the fourth quarter of 2020.
This compares to a contribution of $39 1 million and.
And income for the fourth quarter of 2019.
Asset store in the period grew approximately $11.6 billion.
L. S b experienced net negative cash flow during the quarter of approximately $4 $6 billion offsetting market appreciation of approximately $16 $2 billion.
Revenue, what LSP was approximately 100 point $102.1 million per the quarter with no performance fees.
Finally for the company, our effective tax rate for the quarter was $19 six per cent.
I'll now be happy to take questions.
Just a reminder, it is pressing one followed by zero, if you'd like to place yourself in Q.
It looks like we do have a question here from Atlanta, Brian Kenney and Morgan Stanley. Your line is open.
Hi, Denis and good afternoon, Hey, Ryan.
And so on the last earnings call, you mentioned, a $3 million uptick from health insurance costs in the third quarter and so just wondering where that number stands in the fourth quarter and how we should think about the trajectory of health insurance spend going forward.
Yeah It was essentially.
Flattish to down a little bit in in the fourth quarter.
So I mean, it's really case since we're self and you know we self insure it's kind of case by case.
And within the work force, but I'd say, it's pretty.
But I would kind of guesstimate and it would be in this range. The same range of you know for the course of the year, if not there and maybe down a little bit other than.
And we are adding we have added more employees to the company. So.
And that in and of itself will drive up Hmm will increase our health care costs, but we.
We have in special health situations with.
Certain certain individuals that really drove up what kind of anomalies if you will.
Unfortunate and anomalies or not.
Got it and then on the $8 7 million dollar increase.
From when I see I'm, just wondering if you could give and upset and update on how youre thinking about the trajectory for the one and I see I spend through 'twenty and 'twenty, one and I think you said before that it should start to come down gradually through the year. So just wondering if that's still the case.
Yeah. So that was yeah that was just wasn't in an increase that was just how much we spent in the quarter, which was up slightly over third quarter, but I wouldn't say materially.
But as we.
Progress through this year.
Yeah, that's kind of the peak peak quarter was fourth quarter.
And it'll start to.
And I'll come down as we deliver.
And.
You know finished and finished.
Activities from that work.
And and.
And we won't go to zero by the end of the year, but it'll be significantly lower.
Okay.
Got it thanks.
Yep.
Just a reminder, one followed by zero to place yourself in Q. It looks like next we have a line of Cristina Piper Sandler Your line is open.
Hey, good afternoon, and kind of one for you and all about the the $8 8 million in sales events and al comment that it was a timing issue and not reflecting the.
The sales effort.
And I should I read into that that are so far in January and.
Sales events have been pretty good or is that the wrong conclusion to draw.
So rather than your read into anything why don't we wait for Mr. Meyer to go.
Okay.
And I can wait Oh, Okay and then.
I can.
If I can try on another question.
Just following up on what Ryan was asking in a bigger picture for expenses.
And thinking about you know your.
'twenty 'twenty expenses at $1.2 billion.
And we expect something in that neighborhood for for 'twenty, and 'twenty, one or maybe a little less with less investment in one S T I and and I recognize you know.
The sub advisory is always going to be market dependent but.
Anyway.
Yeah. So there are some help on the right 21, yeah. So there are some costs variable costs associated with revenue so.
And you mentioned one of the key ones, which is a sub advisory expenses, which was one of the.
And there is a cost increase in the fourth quarter and.
That's all good news, though we we want to see that.
So you know as I look out for the rest of the year on expenses.
And I still kind of peg around you.
And kind of inflationary.
Type race, because we will have.
And the compensation inflation as the year progresses with our work force, particularly as we had last year in that middle part of the year and to go into the third quarter.
And we are growing and I'm sure you know.
Particularly in certain business lines that do that lead to some additional head count.
So I would say, it's a yeah, we will get some offsets with.
The one and see I spend coming down.
And we also are capitalizing less of our development spend.
Which as you know so the net effect of that is.
And it gets to get to the expense line.
And we're doing they are doing a lot to it too.
To try to work that down as well.
And we'd like to sit here and say that you know will be we would be flat, but I think we'll still see some some level of increased spending, but I wouldn't say and so there's nothing unusual in that.
Okay.
Over a year year over year expenses.
Sure.
Yeah totally here.
And for the company.
And we're pretty pretty flat up a couple of maybe one two per cent or so.
So yeah I think that's what we can accomplish that again, we'll be in pretty good shape.
Okay.
Number one and focus on it as you get them and get the revenue in and get it as much of it to the bottom line as possible and that's the goal.
So.
And that's still the goal.
Yeah.
Yeah.
And next we have the line of Robert Lee of Keyw and your line is open.
Great, Thanks, and happy belated, new year everyone's in the [laughter].
And my question.
Thanks Ravi.
Thank you just a quick one.
Probably incorporated into your broader comments on them and spas and delayed.
And quickly re including legal notices pretty.
Pretty vs and the increase in equity based comp.
And changes next year.
Maybe just quickly.
And how we should be thinking about that kind of maybe what drove that and.
You know, where how and where will that be flown.
Hello, smoothed the segments from kind of and in corporate just try and.
I think in the geography of it.
Yeah. So the option based expense follows the people.
So it would hit the segments as well as our G&A because it follows.
Oh yeah.
And the employee in themselves who are.
And you'll have been awarded option grants and the and.
And the increase in and option expenses.
Yes, a function of a couple of things one is certainly.
And we do grant options.
As a general rule ever in December and we.
And I went through that grant process. This past December.
And so those new options that have been granted are now in the <unk>.
Expense number.
And we do expect those to.
The best you know kind of on schedule.
And as our option plan outlines.
We also.
As we've talked about after the third quarter.
Uh huh.
We pushed out a year and best thing estimates all in one particular tranche. So it just hasn't the effect of extending the expenses into the future.
So that that adds to that number but.
And a big Big part of it is the option grants will be made it in.
And our usual annual cycle.
But it does follow the people so it'll show up in.
In all the segments as well as G&A.
Great and then maybe just a quick follow up I know in in the past a lot of your option grants and partially kind of Etfs true in minutes and best thing in.
I've seen how fast.
And I guess two weeks in the proxy but were.
Were there any changes kind of in the recent grants and the color around kind of baked in kind of you know earnings growth and kind of.
Ed.
And and <unk>.
And <unk>.
Got it.
And I, usually like to wait until the proxy kits out there, but yeah.
And that being said I'd say that.
You know our board when they look at the option grant process, that's really who that's the governing body of it.
That drives that.
Yeah they.
And as management believes we.
We are entering our overhead.
And we're already doing pretty pretty well I think as a company but.
Over the next three to five years, we feel.
Pretty bullish about our growth prospects and they.
Set the vesting targets kind of in line with our expectations.
Expectations on.
Kind of near term growth.
Coupled with longer term growth expectations in it.
And thank our shareholders and.
As a general rule, if we hit those targets.
And there'll be.
Satisfied in.
Should be well rewarded.
And the stock price.
And that is on top of our earnings goals. How are however, just emphasizes.
Our option grants vest and 50% chunks.
But they can vest no sooner than two years for the first 50 per cent and four years for the second 50 per cent.
So we still have that kind of two year for your minimum.
And investing cycle.
In addition to that but then they don't vest at all if we don't hit the EPS targets.
Alright.
Yeah.
Great. Thanks, guys.
And no problem.
And at this time, we actually have no further questions queued.
Alright, well that with that I'll turn it over to Steve and he can answer Chris Donuts question.
Steve.
Okay.
Yeah.
Yeah.
Yeah.
Steve are you still on.
It looks like <unk> line has dropped and he'll be reconnecting just shortly for us.
Okay.
Sorry about that everyone. If we could just hold on.
Third I'd like in for Steve.
Steve I am sorry about that I I got dropped off and how.
A problem well you're on and you can restore that's a wait and for your answered. His question I I heard that set up I appreciate it.
[laughter], thanks, everybody sorry for the delay good afternoon, everyone 2020 was a challenging year across our industry and the world due to the pandemic, but despite this challenge we were able to continue to drive momentum and new business events client expansion implementations and our growth strategy for private banks.
The fourth quarter and annual 'twenty and 'twenty numbers and comparisons are listed in our earnings release for your review so I'll only highlight a couple of key areas and the financial results, specifically fourth quarter, 'twenty and 'twenty revenues totaled $119 $7 million, which was up approximately one per cent compared to the fourth quarter of 2019 and up 4.2.
2% versus the third quarter of 2020.
This was primarily due to one time revenues along with an increase in recurring revenues from increased assets. We do not expect the majority of the one time revenues to repeat next quarter.
Fourth quarter, 'twenty, and 'twenty profit of $4 $6 million for this segment was down slightly from the fourth quarter of 2019. This represents the absorption of previously announced losses, new revenue generation and a modest increase in expenses.
Fourth quarter, 'twenty, and 'twenty profit compared to the third quarter 'twenty and 'twenty profit was up about $2 $9 million, mainly driven by our increase in both recurring and nonrecurring revenues.
And turning to sales activity for the quarter, we closed $3 $8 million of gross recurring sales events, which resulted in $2 $1 million of net recurring events for our investment processing business offset by a negative $1.1 million in the asset management of that this offset from asset management and brought our total net recurring events for the quarter to $1 million.
For the segment also in the quarter, we closed $1.2 million in one time sales one time in sales for the year totaled $16.5 million and help dampen the impact of lost business and.
I'm pleased to announce that during the quarter, we signed an agreement with a new client a large trust company headquartered in New England. We expect this client to migrate to S. W. P from a competitor platform in the second half of 'twenty and 'twenty, one and in addition to converting their wealth management businesses. The client will also be outsourcing or back office staff C. I, they previously and manage their operations in house.
As Al mentioned, our sales results were a function of timing after the quarter closed but prior to this call. We signed three additional S. W. P agreements. The first is with a longtime trust 3000 client banger savings Bang Bang or savings headquartered in Bangor, Maine has been in Sci clients since 2011, and we expect to migrate their trust 3000 and business that has to be paid.
In the first half of 'twenty and 'twenty two net.
Next we signed an agreement with a west coast large community Bank, who will migrate to has to be paid from a competitor platform in the first half of 'twenty and 'twenty two as we continue our one Sci strategy. We believe this firm has an opportunity to leverage additional sci platforms and solutions and is currently evaluating S. He is asset management distribution product for the benefit of their.
<unk> and their clients.
Finally, we were pleased to announce that we signed an agreement with another new client U M B, United Missouri Bank to migrate their private wealth management book of business for the FBI wealth platform headquartered in Kansas City U M. B is the second and to end assessment and decision making process to be fully completed in a remote environment as our engagement began after.
And our offices had gone to a work from home model as a result of COVID-19.
We are proud of the way both organizations, we're able to virtually come together to conduct and execute them meaningful business agenda. Despite the challenges brought forth by the global pandemic.
Al referenced this is an example of us changing our mental models in this case around sales, which bodes well for the future.
We are excited to work with all of these firms as they migrate towards the Spi wealth platform and look forward to supporting our future growth initiatives. These three clients are not included in our Q4 sales events and will be included in our first quarter events.
From a global perspective, we continue to see expansion and growth in the U K from the fusion Schroders migration and continued progression with the H S. P C implementation.
As an update on our backlog, our total signed but not in felt backlog is approximately $75 million in net new recurring revenue at the end of the first and fourth quarter.
Turning to implementation activity in the fourth quarter, we successfully converted Edward Jones Trust Company from Trust 3000 to S. W. P and work.
Jones has been and actually I clients since 2001 I'm happy to report that this is another client who has successfully brought live in a 100% remote environment.
From an asset management standpoint, total assets under management ended the period at $25 $5 billion, representing a 9% increase from the third quarter of 2020, our AUM increase was due to market appreciation our cash flow for the fourth quarter of 2020 was a negative $456 million.
As we move into 'twenty 'twenty, one our focus is on maintaining our strong momentum and to continue growing our business, bringing on new clients expanding with existing clients and entering new markets. We will also focus on driving scale in our business as we push towards providing a sustainable and accelerating margin growth, we will continue to manage through headwinds as well.
We entered the year, but we will do so with a focus on the future. We are excited and optimistic on our growth opportunity.
That concludes my prepared remarks, and I'll now turn it over for any questions you may have.
And again, just a reminder press one followed by zero now at a place yourself in queue for question.
Looks like we do have the line of Brian Kenney and Morgan Stanley. Your line is open.
Hey, Steve how are you good how're you wrong.
Good I'm just on the backlog I think I heard $75 million is where it currently stands and just wanted to get an update in terms of the timing how much you expect to come through and this year versus next year.
Yeah. So I think right now looking at it and you know again this is a number somewhat moving but right now as we look at the backlog about 58 per cent 60 per cent of its going to fund within the next 18 months and the remainder will fund after that 18 months, probably the following 18 two.
The past 18 to about 24 26 months.
Got it thanks sure.
Next we have the line of Chris user William Blair. Your line is open.
Good afternoon.
And in craft.
Al.
And the three wins that you announced that were not in Q4 and that'll be in Q1 and can you give us a sense of how how large those are in a recurring revenue basis.
Yeah. So if you take all three together, we're talking probably are just under $7 million in recurring that recurring revenue, but you know we have a lot going on and in Q1 positives wise as well as some potential headwinds. So theres a lot of activity emotion that can impact the number but a go so.
We have more work to do but what I'd say is we're off to a good start.
Alright, great.
And I know you gave the AR at the one time revenue in the quarter was at 1.2 or was it too I didnt catch that number.
Sure. It was 1.2 in one time for the quarter $16 five for the year.
Got it.
Okay. Thanks, a lot and I'll hop back in queue.
Sure.
Next we have Robert Lee K B W.
Great.
Thanks for taking my question, So Paul's I'm sure sure Rob Hope all is well do.
All good thanks.
Just curious so a me too.
And to the three that you signed subsequent to the store in Europe, our existing clients and me.
And that's kind of talk a little bit about new it would be.
Taking on the SME platform, where those generally kind of revenue enhancing was dependent revenue flat I mean, just in terms of how you and it was.
Revenue flat, how do you kind of expected in those relationships to a evolves. Thank you.
First question.
Yeah. So you were a little unclear there Rob and I think what you said is so of the three signings post the quarter and are actually one of them was in existing trust 3005, two were new tests.
And what I'd say is yeah. My you know obviously with the one that's the move from Trust 3000, and that's W. P was a net up and moving to S. W. P. A.
And the other ones, we're obviously at our our market rates. So I'd say from a revenue standpoint, and where they are to start was kind of where I thought there'd be and you know as I mentioned I think we have aspirations that we can grow with these clients.
Okay, great and in just eight months in the asset management business programs within the segment and just wanted to try and horizon cash flows were minus 460.
For 456 million negative.
And just kind of curious to me and I think.
And maybe you touched on it but you just update us in a couple of the initiatives underway in that part of the business you know away from us and you'd be and.
And I know there were some.
Some.
So in some new things in past years, and just trying to get kind of net and yeah. So.
So listen I think obviously you know that business. We've we provided program for you know, mainly our bank and clients and you know we're part of an overall price program of these banks and we're a piece of it.
Yeah, I think that that has been under a little pressure. This year as banks have decided to move money either in cash or to other places or other parts of the program. So that is obviously reflected in the net negatives we've had and I think ongoing you know I do think during the year, though we did have we didn't lose one client during the year. We did have new clients that helped mitigate some of the al.
Flows, but I think obviously the concern with that a little bit is we're part of a program. We don't control the whole program, so as banks changing their strategies or their programs. That's obviously something strategically we looked at because it would be positive for us or negative.
So I think there's been a number of initiatives as well as another and new programs that we've launched this year, but obviously the outflows have weighed them down, but it's something you know, we're hoping that as the market continues and we will continue to be a bigger part of the overall bank's programs with these but obviously you know if they decided strategically to do something else that could have a negative.
Packed on us.
Great and if I can just throw one more and you I'm sure.
You've also and it talks about kind of in reinvigorating kind in the U K businesses I think its about in the state and in maybe you did some changes in personnel there.
Sure.
And so did you.
Maybe up there and kind of what you're seeing there how you feel about that part of the business, which I guess at this point, maybe about 10 years ago I got you off the ground, but yes, it sounds like more dormant and the reason that it yeah. So what I'd say is I think that you know when I look across all the businesses are the U K was probably impacted the most from the pandemic.
From a slowdown in sales so while the pipeline still remains active and it's obviously slowed very significantly there are several deals that were working through the pipeline and on and I'm encouraged by them and I'm encouraged by the size of the pipeline, we have and the additions we're making I.
I guess the the the one caveat is it's just taking a lot longer a lot of the initiatives have slowed and or you know they haven't stopped but they've delayed and with the pandemic going on in a little bit more severely over in the U K I don't think that's going to fall out really in this quarter, it'll probably take another quarter or two I think before we start to see.
And this is industry wide starting to see more activity.
Okay, great. Thanks for taking all my questions appreciate it sure up the problem.
And so we do have the line of Owen Lau with Oppenheimer. Your line is open.
Thank you good afternoon, and Steve Sorry, I lost my connection and a little bit.
And a little bit if you have if you have that dress that I apologize for that.
It looks like Youll, you control the expands quite well given your revenue growth in the fourth quarter and I. We caught you mentioned that you will continue to make investments, but they will tell off in the second half of 'twenty 'twenty. One is there any change in that timeline. Thank you.
Yes, no no and there there's no change lives and we're gonna still make investments and yeah. We feel good about how we've managed expenses and I think as Dennis said as we continue to grow you know there might be more expenses, we add but as I've started to say in past quarters, we're really starting to focus on the scale of this business and we're looking to drive a more sustainable and excel.
<unk> margin level. So we will look to manage our expenses as well as reduce our expenses are you know, where we can and that'll be one of our priorities for this year, but you know the one thing we won't do is manage expenses to the extent, where it would hurt revenue coming in and obviously, if we have a number of large deals were worse.
And on and if they were to happen, we would certainly support them with any new business new people new expenses, we needed to but you know I feel that where we are in track record of expense you know kind of from Q3 and in Q4.
And that's what we can expect going forward.
Got it and then another quick one could you please comment a bit on your strategic partnership with can new intelligence, how big do you see the opportunity in design and office space and then the next step of this strategic partnership. Thank you.
Sure. So just one clarification, so new as part of a strategic partnership we formed with our family Office services, formerly known as Art's way and that rolls up in our investment management unit, but I'll answer. The question here just wanted to make that clear to everybody. So it is a partnership that we feel helps expand our certainly our.
Reporting and aggregation capabilities, that's a widely used system and capability in the industry and it feels it just gives us more power to our platform. So it's something that we felt that we needed to do will help us continue to support the growth we've seen in future growth down the road.
Okay. Thank you that's it for me.
Great. Thanks Al.
And next we have flying and Ryan Bailey Goldman Sachs line is open.
Good afternoon and C F.
And then Ron how are you.
Good day.
Just wondering if you could talk about the addressable market for <unk>.
And.
And your thoughts around expanding and sorry, I was just wondering how you're thinking about timing of when that could start contributing to the sales pipeline.
Yeah. So yeah, I think the market list and it's still a I think the market. We have both in the U S and U K is still active I think it's smaller than I would like especially when I look at it compared to some of our other markets like in IMS and one thing. We've started to do obviously is start to branch that out to you know more of a wealth manager based approach the large our initiatives.
Have you could give us upwards of 1800 and new prospects are.
That we could go after we've actually started to already prospect in that space and we're hopeful that this year. It will help drive some of ourselves.
Got it thank you.
Sure.
And at this point, we actually have no further questions queued.
Great. So with no other questions I'll turn to the investment managers segment.
So 'twenty and 'twenty marked another strong year of growth and momentum for investment managers across the business, including in our results sales expansion with clients and execution of our growth strategy.
Revenue for the fourth quarter of 'twenty, and 'twenty of $129 $6 million was 13% higher as compared to our revenue in the fourth quarter of 2019 profit for the fourth quarter of the segment of $49 $4 million was 17, 6% higher as compared to the fourth quarter of 2019.
And third party asset balances at the end of the fourth quarter of 'twenty and 'twenty were $764 billion approximately $30 billion higher in the asset balances at the end of the third quarter of 'twenty and 'twenty.
This increase was due to market appreciation of $36 $3 billion offset by net client fundings of a negative $6 $3 billion and negative fundings. This quarter were due to new client fundings being offset by one client shutting down and product line and liquidating their fund complex.
And turning to market activity during the fourth quarter of 'twenty and 'twenty, we had a strong sales quarter with net new business events totaling $9 million in recurring revenue as well as a record quarter re contracts of $43 million in recurring revenues. These events included the following highlights in our alternative market in it we closed a number of strategic new names, while sales to existing clients.
And it's continued to be robust as these clients continue to launch new products actually I was selected to provide fund administration for several new credit fund launches for a 200 plus billion dollar global alternatives manager demonstrating our industry, leading platform and continued commitment to the growing private credit space actually I was also selected after an extensive RFP.
Process by $20 billion private equity for first time Outsourcer for full fund administration.
In our traditional market in it we had another strong quarter and our collective investment Trust business. We also had continued success executing on our growth strategies, adding new and existing clients onto our data aggregation and middle office services platform, all of which is consistent with our land and expand strategy.
In Europe, we added several new names, including a top 10 global financial institution in the fourth quarter and our.
Family Office services unit, we released a comprehensive technology upgrade to the industry, leading archway platform. The upgraded platform provides the foundation for rapid innovation with it in the family Office Technologies segment. In addition family Office services continued to see steady demand in the single family Office segment with the signing of multiple new sales events.
Our backlog of sold but unfunded new business stands at $38 $6 million at the end of the fourth quarter.
As we progress into 'twenty and 'twenty, one we will continue to focus on our growth strategy and look to continue our strong momentum in new sales and expansion with existing clients. We will also look to continue the expansion of our platform primarily in to the front office with our Investor platform, which we believe will provide an additional source of growth we remain optimistic and excited about our growth.
Opportunities.
That concludes my prepared remarks, and I'll now turn it over for any questions you may have.
Just a reminder, it is one followed by zero, if you'd like to queue up here for a question. It looks like first we'll go to the line Robert Lee U K B W. Atlanta same thing.
Hi, great. Thanks, again, Steve or op margin a and.
The margin question that mean.
Margin, 38%.
Probably.
By My records and and maybe even in an all time high I'm not sure and I do know it bounces around but.
You know kind of it feels like it's been running towards the high end and where he has historically and how should we be thinking.
And it's kind of in the margins going forward.
And in your you've always kind of run in this 35 36 range and still we should be thinking or are you kind of reaching a new level and scale.
Should be somewhat higher.
And I'm going to sound like a broken record here Rob.
So I feel comfortable with the business in that 35 36 now in the mid and I've always said it'll bounce around a little bit more comfortable when you look at it year over year and if you look at it year over year, it's still in that 36 per cent range. I think Q4, you know we did a good job managing expenses I think there was a number of factors in that including some expense.
And that did not repeat from Q3, and some investment downtick, but you know part of the key for our continued and sustained growth in this business, which I think is the key that we're looking for banking as well as we've always looked to expand out in the future markets expand out our solution and invest in our solutions and platform and we'll continue to do that.
And with that continued investments and spend which you know again, we don't capitalize we expense them you know that will go mute down the margins a little bit but will we get a couple of quarters in and can we start to tick up a little bit here and there yeah and you know I think when we asked this and if you were asked this and look back five years ago.
And a caveat it in the 34 35 range. So I do think there's a progression and I just don't think it's as big as a progression as we saw this quarter.
Okay Fair enough and you say, yes, and just to repeat you mentioned and what are your problems around client liquidation and I missed it.
And I missed the comment in the first part of it.
So if you look you know for the first time that I can remember we had kind of a negative net events on the asset growth side and yeah. We did have positive client fundings this quarter, but they were wiped away by one client who had a specific target date fund a fund family are really targeted to one client and they are for <unk>.
T degrees and shut that down and so those assets going out was what caused the negative client fundings.
Okay got it thank you.
[laughter].
At this time he has no further questions queued.
Great with that I'll turn it over to Wayne to discuss the advisor segment Wayne.
Thanks, Steve.
The world headlines for 'twenty and 'twenty was the Corona virus.
And the 'twenty and 'twenty headlines for the NCI and advisor segment, where the incorporation of digital advisor recruiting in response to the pandemic.
A further opening of our platform and third party investment brands and.
And added flexibility in our pricing model and the way we engage advisors.
Yeah.
The financial results in this segment.
With numerical comparisons to last year are included in the press release.
Color explaining some of those numbers include.
Fourth quarter revenues rose due to positive capital markets, partially offset by negative cash flow.
Yeah.
Expenses were down and margins will.
Due to onetime savings mostly related to the pandemic.
Ongoing operational expenses were pretty much a wash with both increases and decreases.
Notably and increase in direct costs due to asset valuations and a decrease in our technology spend.
During the quarter, we had $245 million in negative net cash flow out of Sci and manage the asset and.
And a positive $160 million in asset under administration.
Total platform assets stand at $87 billion.
Of this total 75 billion asset under management.
While cash flow into a bundled pricing assets under management was negative cash flow into our newer unbundled pricing products was strong.
During the quarter, we recruited 78 new advisors.
Best quarterly performance of the year.
Our pipeline and new advisers remains active.
For 'twenty and 'twenty, one we will concentrate on four main areas.
First we will continue to enhance our technology platform to provide a compelling front to back business platform.
We view our single source completely integrated front to back platform as a differentiator.
Second we will continue to broaden our investor and platform to include non Commoditized components.
With examples being direct indexing and tax management overlays.
Third we will educate advisors on the applicability and benefits both our historical investment management products with bundled fees and our newer unbundled fee products.
Finally in response to advisor needs, we have realigned our sales force to ensure adequate focus accessibility and contact with advisors, taking our capabilities to assist with their growth agendas.
And now welcome any questions you may have.
And again, just a reminder, it is one and followed by zero to place yourself in Q.
First we have the line of Brian Kenney Morgan Stanley. Your line is open.
Hello, and good afternoon.
Good afternoon.
And so just hoping you could give some more color on the advisor recruitment strategy I know before Covid a lot of it was done face to face and then it turned virtual so just wondering what the appetite is to stay digital and virtual post vaccination and and if there is and appetite would there be any material expense benefit you could see a prolonged and.
And next year. Thanks.
I guess the way I'd answer is there may be some expense benefit, but that's not really our focus.
I think we will continue with the methods, we're using now and.
And what they primarily are is when you look at the early parts of the sales process, we can make them national in scope as opposed to geographic and scope and.
And as we conduct recruiting events, we can more finely segment the clients as to what Theyre looking for it as opposed to just what geography, they happen to be located in.
And I believe makes us much more effective in recruiting advisors and I expect that will continue.
And more because I feel it's more effective than because of the pandemic Boyd existence in the pandemic.
Okay.
Thanks, that's helpful.
Next we have the line of Owen Lau with Oppenheimer. Your line is open.
Thank you our highway and I just have one quick question on your comment about the revenue was up year over year, but expands was down and you mentioned, a one time saving due to the pandemic.
Can you. Please quantify for US is it just fair to say that the delta between fall Q and 19 and talk in 'twenty, It's kind of the saving we we should think about thank you.
Yeah, Yeah, I think that's I think that's a fair comment I think you need to look.
At the the fourth quarter of 2019 as much more indicative.
Hum.
Of the operating expenses of the unit.
With the one modification and being you know as our assets under management increase you know our direct cost line increases.
But you know we're seeking savings in other areas, but that made that delta I would say between those.
<unk>.
Two what has gone up and our operating expenses compared to two years, we saved it and the one time savings.
Got it and then with the vaccine with that kind of change your view with that the <unk>.
Expense may go up in 'twenty and 'twenty, one how should you think about the impact of the vaccine distribution on our advisors. Thank you.
Yeah, I I would not say I did not expect the expenses to go up because the.
We're back live in person and obviously things like travel and perhaps conducting events.
No live events, the cost of that associated but we're structuring and conducting virtual events and expense associated with them and we liked it.
We don't want to save money by not doing events, we just want to spend the money on virtual events as opposed to live events. So I would not there'll be some increase.
But I think the increases in expenses will be largely due to the increase in net assets we manage.
Got it it's helpful. Thank you very much.
Next we have Robert Lee Kyw Your line is open.
Thanks, Hey, we in Hawaii.
Great.
And.
Couple of questions. The first one and I apologize if you had mentioned in.
Kind of in advisor in head count and no new signings in the quarter.
And.
And then new.
And second question is you know as you kind of new.
I think it'd be helpful to kind of.
And just for me to tend to get a sense and you know how do we think in the revenue dynamics between kind of bundled versus unbundled and and so do you mean, you're talking about having.
Good cash flows.
Close in on it and you're unbundled services versus no new bundled services being that you know you know how do we think in that revenue dynamics between the two I mean is it.
Yeah.
Negative easing wash and just trying to get a sense and had and thank him and the moving pieces and underneath this business shifts.
Okay. I think your first question, Rob was new advisers in a number was 78 and.
And then the more in depth question is how do you think about the pricing of the unbundled plugged in and I would say generally.
And I'm generalizing and bundled products all in.
Or less expensive and lowest sources of revenue than in the bundled products.
And I think that and and and I think that's a reflection of you know investor and adviser needs and I think as we go out.
Do you know to educate advisers as to what fits best for them and.
Bundled parking product is a little bit harder to explain and it adds more moving parts one that is much simpler and straightforward.
But you are correct, we are seeing more growth in the unbundled pricing model and.
And in the revenue recognition rate is a little bit lower to be direct with your question.
And maybe since you know and speak a little little slow I mean, obviously bundled is pretty easy to centralized so if I'm thinking of and unbundled and best in product.
For me and maybe helpful.
And just kind of what's been kind of a popular product where you're seeing traction with in may.
Maybe a little bit and how that pricing and more just to understand it better.
Yeah. So I mean, the easiest example in and one of the very successful price I would say.
And ETF wrap program.
Where the pricing on the underlying in best in implementation. If you will kind of debated generation units and in embedded and in T. F. In the ETF, which is not in Sci product and we use a multitude of third party, we pick which went and whether it be ishares or vanguard's wherever it is in and we assemble that and then we tried we unbundled the price in Wiltshire.
A portfolio level fee.
And as you know the asset allocation and the tax management and the cost of the technology the operation to custody that sits on top of that.
As opposed to you know if you go and do a mutual fund wrap program all of its bundled into the mutual funds.
Net clarified.
Yeah. It does thank you.
Thanks.
Yeah.
Next we have the line of Chris user William Blair. Your line is open.
Hey, Wayne and I, just wanted to follow up on that last one.
And can you give us a sense like a rough rough averages how different the pricing is.
On bundled versus bundled like 510 per cent or is it materially more than that.
Yeah, I think it's probably more like 20 per cent.
Okay got it.
And I thought I would say that what I would just sort of put that in kind of I mean, the unbundled ETF products been around for five years, I mean, and what you see as kind of reflect you know as.
As we migrate to that it kind of smooths into the numbers you see.
Yes.
Okay.
And.
And I think this is.
This sort of and in line with the pricing question, but I think in this business as well as maybe in the AR.
Institutional investor business, there's been some benefit over time from increased adoption of alternatives and maybe just refresh my memory has actually has that been a benefit in your business. That's helped the fee rate or is that just in the institutional businesses.
What what I would say that is primarily in new institutional business.
Well, it's not in my business, let's put it that way opinions and new business.
And you know one of the major factors there you need to understand in my business and he spent 90 per cent or do you feel key advisers are affiliated with broker dealers.
Broker dealers one EBITDA.
Compliance oversight and alternatives.
Complicate that job for them.
Yes, Okay, and all of that all makes sense, they're just lastly on the.
You talked about tax management overlays direct indexing, just remind me what kind of the timing of that net rollout is.
Well.
The direct indexing product is rolling out in two weeks okay.
So the D and the initial direct indexing product will have.
You know tax loss harvesting and a negative ESG option built into the core product.
And what comes out and I think its february 5th or something I don't know exactly but it's around there.
And then.
You know tax loss.
Active pass tax loss management is something we will incorporate into the direct index and fired up and later in the year now we already have that incorporate into our active management that's in bags.
But if you think about it if you can take tax active tax loss management and put that into a passive portfolio that makes it much more valuable. So you don't have to pay for the active component.
And the tax over there you can just say I just want to beta and then tax.
Taxloss manage it for me.
Sure.
Yeah makes sense.
I mean, you can't do that when you own in ETF, where you own the basket of Securities you don't don't need individuals' names like you do in direct index understood understood I'm, sorry, just one more quick one just on expenses when is Q4, a good jumping off point.
No.
So maybe just elaborate on that.
And <unk>.
I think that you know there was a lot of.
What I would consider nonrecurring savings.
In in Q4 this year.
So I would probably say and I don't want to limit expenses, but I'd, probably look at Q4 last year as being more in ticket.
Of work.
What's the jumping off point should be okay got it yes, yes.
Thank you Wayne.
And next to Ryan Bailey with Goldman Sachs. Your line is open.
Good afternoon.
Hi, Ryan.
And I was just wondering if you could help me think about.
The flows that are coming in to the the unbundled option of that.
Is that from existing.
Existing advisors, who are in the bundled option and kind of shifting I hope the crossroads is completely new advisors do you have any sense of and I guess the mix of what's driving that growth.
Yeah.
I would say.
That is about 50 50.
But you know our objective here as well.
In the asset management World has changed and we're trying to put at both of our bars and declines in the products that makes sense for them.
And if that means shifting from the bundled to unbundled, that's fine by us, we'd rather get them in a better solution. So and then it's also very appealing to new advisers and so currently it's about 50 50 between existing and new.
Got it okay, and I guess fit in the existing base.
Not sure how much insight do you have and so this is it they are bringing across new accounts or there's sort of new money, that's coming in or is it more of a conversion.
It's a little bit of both I mean, I think that.
They're not bringing new accounts onto the platform and.
Still they convert the existing book and did a new philosophy.
One way to think about it because this is setting us up for more growth with them.
Got it okay, alright and exams.
And then on the AUM side.
And we've kind of moved through.
Some of the initial quarterly volatility and it sounds like you know in the digital marketing strategies is sort.
Sort of taking out and I was wondering like do you feel that the flow is it going to turn more positively on the AUM side into 'twenty, one or is it kind of closer to flattish over the near term.
Yeah, no I feel more positive about going into 'twenty 'twenty one.
Okay, Alright and Thats.
And the largely cause carbons behind us.
And it's sort of in our operating other things or is there a driver.
Yeah, I mean, I don't want to.
Don't take this in one way I don't want to say, it's because COVID-19 is behind US I think that we've adapted to the new digital world and we've learned by it and I think that now we have a model that makes a lot of sense and now it may get modified going forward, but we have some things now you just kind of work better that COVID-19 forced us to adopt.
Got it okay. That's done in Nissan's alright. Thank you.
Okay.
Next we have rubber and Lifeco VW gyn.
And your line is open.
Great. Thanks for taking my follow ups.
And I just want to make sure I and.
And I'm understanding that.
The minus $245 million.
And good cash flows in and that just bundles or they've kind of if I'm looking at and bundled and unbundled combine that with a total cash and cash flows in the.
Between the AUM and AUC in the segment.
Right way to think of that.
Yeah, both the AUM and a weighted numbers.
The numbers I gave you are.
The entire totals for the unit.
Okay Alright.
Alright got it and then and just kind of curious thinking with the unbundled theme I guess in the call.
And so how do you think that kind of you know.
And when you talking to existing and new advisors and that your capabilities in and obviously you can do in the Etfs.
Program for a while now.
And how does that how do you position and competitive is it.
<unk> versus other kind of.
You know Oh.
Other services out there, whether they're kind of robo services, if you will or model portfolios I mean, how do you position that.
Yes.
And the differentiated from <unk>.
What other programs you are used to new elsewhere.
Is it just performance and really driven.
Well, it's actually the opposite I think that and you unbundle it and it allows you to sell the individual components individual value proposition of each component as opposed to one and see whether you know.
You know do you want everything you know.
On the on the left side of the menu do you want to pick what you want I mean, so you need tax overlay, okay, well, that's all in bundled do D. D. S. Yoga day, that's kind of on bundled if you want the various components of it.
We can bundle and they can pick and choose what they consider valuable and what they're willing to pay so it just makes it much more customized for them. It's in it's in keeping with kind of the new.
The overall theme and see everything in this mass customization at both invested level any advisory level.
And.
Okay. That's helpful. I appreciate it.
Thanks.
At this point, we have no further questions queued.
Okay.
With that I will turn it over to Paul.
Thanks, Wayne and good afternoon, everyone I'm.
And I'm going to discuss the financial results in the fourth quarter of 2020 as well as the entire year.
Fourth quarter 2020 revenue of $82 $3 million increased 2% compared to the fourth quarter 2019.
Full year revenue was $317 $6 million decreased 1% compared to 2019.
Market appreciation positively impacted revenue, while net client losses was the primary detractor.
Operating profit for the fourth quarter, 2020 were $45 5 million, 8% higher than the fourth quarter of 2019.
2020 full year profits were $167 7 million and were flat compared to 2019.
Higher capital markets, and lower operating and travel expenses were positive the profit offset by net client fundings.
Operating margin for the quarter was 55% and for the year was 53 per cent.
Quarter end asset balances of $97 2 billion reflect a $7 1 billion increase versus the fourth quarter of 2019.
Net asset event for the fourth quarter were a negative $300 million.
Gross sales were $1 4 billion in client losses totaled $1 7 billion.
Total new client signings for 'twenty and 'twenty were $5 4 billion $5 4 billion, which represents a $12 8 million in revenue. This.
This was accomplished predominantly in a virtual environment.
Fourth quarter, new sales, we're diversified diversified across U S and dominant foundations and health care and you're right management.
The client loss numbers for the quarter and the year were primarily driven by acquisition.
DB terminations or curtailments and unsuccessful rebids of competitive tenders.
And you always Seattle marketplace is extremely competitive and client rebids are common and so we anticipate client decisions to continue.
This should also be a tailwind for new signings.
The unfunded client backlog at year end was $500 million.
Finally, our focus in 2021 will be to continue to diversify and new business growth out of the U S defined benefit market for OTI al.
Actively demonstrate our value proposition proposition in the current CIO clients and.
And market extensively in order to close larger investors for our new E C. I O enhanced chief investment officer offering.
We will also look at both organic and nonorganic opportunities to fuel future growth.
Thank you very much and I'm happy to answer any questions you may have.
And again, just a reminder, just pressing one followed by zero to queue up here for a question.
First we go to the line of Ryan Kenny and Morgan Stanley. Your line is open.
Hey, Paul Good afternoon, Hi, Brian.
And so just wanted to forget and update them on the strategy and so maybe starting on the geographic side I know you're mostly in the U S. But also have a sizeable book in the U K, Ireland and Canada. So just wanted to in a sense of where you see the growth going forward.
And from that lands in and how big the appetite is to expand more broadly in two other regions.
Sure.
And so as you indicated the big segments are U S, Canada U K.
South Africa, and then a little bit nominal and in the far east.
So we have different growth strategies for each one of the sub component markets and then in some components some of the niches like in down in some foundations in the U S.
Certainly big plays we see growth in the U K with regard to continued.
Evaluation and fiduciary management, and we see growth with the consolidation of Master Trust in the D C marketplace.
And the U K, we also see opportunities across the globe with our New initiative E. C. I O, which is really spearheaded and targeted to very large sophisticated investors that we introduced on our last call. Our that is probably about 1400 suspects globally and that represents about 25 trillion.
And potential assets and again, that's a technology and non fiduciary service integration and helping their staffing and more efficiently and so that's the good news and those types of investors are diversified around the globe and we wouldn't see that as a key strategy.
We are evaluating again.
More <unk>.
Larger commitment and in the in the far East and that's something I think as a company we need to evaluate as opposed to adjusted and individuals' segment.
So hopefully that answers your question Ryan about you know some of the focus globally.
Got it that's helpful. And then just from a product lines are there any capabilities that you feel like you would benefit maybe from more scale or as an add on.
Yeah, we think from in OCI O perspective.
From a product line up in front of the capability.
They are one of the largest in that marketplace and viewed as a kind of best practice in that marketplace. So you know other than a couple of small components of different types of alternative launches that we normally would do and we don't think we have a product efficiency one of the one of the issues, we have which others have in such a crowded space.
<unk>.
We have a issue of differentiation when you have 80 different players who are in this space. It's hard for the consumer to distinguish from that vast number of competitors. So.
As holiday and would help certainly we spend and exhaustive amount of time with our clients and getting client referrals and client references because those are key to getting new business opportunities on.
On the E C. I O. We think we have a full suite of capabilities from a technological perspective, but there are things that we're looking at externally that might help augment the suite.
And that's something that we'll continue to do as we rollout that in new initiative to those do.
And do it yourself investors.
Thanks.
Thank you.
And next we have Robert and Lifeco VW. Your line is open.
Hi, Paul how are you doing and.
And Robert how are you.
And.
And same question I asked Steve on the Mrs and managers and on the margin.
And a 55% maybe running around the.
And in all time high so in my numbers are correct I mean.
It's early and very healthy margins here for a while but.
And it was there anything new.
As you think that low.
It was suppressed.
Maybe expenses in the quarter and you know how should we think in that going forward kind of you've been in this kind of 50.
<unk> 51 to <unk> two ish type of range is that the right way to think Covid for awhile.
Yeah, I would say outside of just great with great leadership Robert.
Some of the realities of that.
Profit margin are the markets you know the markets clearly exploded in the fourth quarter, obviously it exploded in the third quarter sales.
Way, we recognize revenue in our group, our four periods and so for the fourth quarter. It would be September 30th October 31st November 30th December 31.
All four of those periods, where high watermarks in those respective months. So that was a real positive thing and consequently the.
And the revenue increase fairly dramatically and I you know in fairness most of that was market related and not you know kind of new initiative related and now we're starting the year with a nice space.
It looks like January and it'll be a nice month as well. So we're we're off to a good start at least from that component.
The expenses are down and.
And yeah like my other colleagues expenses are down because of travel not that we're not trying to travel, but the vast majority of our clients and prospects want to experienced virtually.
So historically, we've spent about $600000 a quarter in travel we've really not much of that over the last three quarters.
We would anticipate and not really spending much of that in the first two quarters, but at some point, we will head back to the clients because they will want us to head back, but the way we will do it as measured and we'll do it differently. We may not have to send in as many resources and in various geographic geography, we do think virtual will always be.
And in aspect of a delivery for institutional investors that might not be the only aspect, but it'll probably be a critical aspect. So visiting clients five or six times, a year may not be as necessary in the future of the way it was in the past.
So you know I think the margins.
To get back to your original question and a low 50% area is probably a more normalized margin range.
And you know this this quarter was certainly in the car for those.
And those reasons I noted.
Great, Thanks, and I'm, taking my questions and I apologize for the dogs barking in the deck no problem.
Yes.
Next we have the line of Chris user William Blair. Your line is open.
Okay.
Hey, Paul I, just wanted to put a finer point on that question around margins or expenses. A similar question when I asked Wayne but is the if we look at the Q4 expense number and <unk>.
Is that a good jumping off point for 'twenty and 'twenty, one and I ask because if you look back.
I think over the last five years typically other than last year, where expenses were down just slightly into Q1 sequentially.
And in the other four years and I think they were down to three $4 million sequentially. So just how to think of I guess Q4 into Q1, excluding any kind of change that might have to do with the markets.
Yeah, and so as far as expenses I would say.
Yeah, like like Hawaii and had answered.
A year ago expenses are probably closer, it's probably not that high and probably a little bit lower than that as far as the jumping off point.
Fourth quarter again, Theres, a lot of savings there with respect to client events and client and travel that we wouldn't estimate it may continue in the first and second quarter, but we would not estimate that that would be kind of in normalized.
And kind of run rate what we're in.
And in in the fourth quarter.
And so we had a little bit of a cough a reduction in the fourth quarter as well that we would expect and we hope will not normalize or will not be the same in <unk> and.
And 2021 with being able to close more business and pay more sales comp. So I would say, it's probably not as high as a year ago, but it's probably closer to a year ago fourth quarter than it is to with the parent and fourth quarter.
So the sales comp reduction in Q4, how much was that.
It was probably small 250000, plus it wasn't a big number okay got it.
Okay. Thank you Paul Yep.
And next we have Owen Lau with Oppenheimer. Your line is open.
Thank you Al Hi, Paul I don't want to go.
So I just wanted to go back to the enhanced C. I O I hear you that the opportunity is huge in this space, but could you. Please give us a bit more color in terms of the marketing transaction you saw the January thing any revenue yet or any other feedback from your.
Clients or prospects. Thank you.
Yeah, So and we have not generated any revenue yet we're actively in the market. We have talked to many suspects we have converted many suspects the prospects and.
And in some of those prospects are getting into a finer evaluation of our overall capabilities.
And as I indicated it is different than investment management. It is and then administrative platform that is coupling technology and non fiduciary services.
And it is a method to help those chief investment officers.
Become more efficient and more effective at a fluctuating there kind of internal investment process. So Oh C. I O takes the place of the CIO and E. C. I L helps to see I O be more and more efficient.
We would expect it to be basis points, we have every belief.
Belief and our marketing efforts of charging basis points.
Yield with respect to basis points will probably be different in D. C. I O where it might be in all in the twenty's the low thirties for OCI Oh, it's probably in a in all.
High single digits to low teens for E C. I O, but that will make up itself force and scale, because we're going to be dealing with multibillion dollar organizations. So to date, we're really excited about a lot of the work that we've done we've had hired some dedicated people focus exclusively on the marketing efforts we've done a lot.
Of enhanced digital marketing, we found that Ceos and want to talk in which is great.
And they were very comfortable in having virtual meetings and now it's just a question of cod and converting those prospects and clients and moving in more suspects and prospects.
Got it just final one based on your.
Progress so far do you have any expectation when you can start generating revenue from that or youre, not ready to kind of talk about that and now thank you.
I would love to give more specifics as Steve did with them you know post post quarter deals I don't have that yet so I think I'd be remiss to give a specific timeframe, but where we're working as hard as we possibly can to get those deals over the goal line.
Got it thank you very much Paul Thank you.
At this time, we have no further questions by phone.
Okay, I would like to turn the call over to Kathy Heilig Sei's controller.
Thanks, Paul and good evening, everyone I have sun and GE.
And all our corporate information regarding this quarter.
In our fourth quarter, our cash flow from operations was $93 4 million or 64 cents a share bringing year to date cash flow from operations to $488 7 million or $3.28 per share book.
First quarter free cash flow was $76 6 million and year to date free cash flow was $410 million.
For the fourth quarter capital expenditures, excluding capitalized software were $11.3 million, which did include $2 3 million for facility expansion here.
Year to date capital expenditures, excluding capitalized software were 54.4 million with about half of it relating to the facility expansion, we project, our 'twenty 'twenty, one and capital expenditures cash.
And excluding capitalized software to be about $21 million, which does include about 6 million relating to the facility.
We also would like to remind you that during today's presentation and in our responses to your questions and we've made certain forward looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Please refer to our notice regarding forward looking statements that appears in todays earned.
And three lease.
And in our filings with the Securities and Exchange Commission, we do not undertake to update any of our forward looking statements and now please feel free to ask any other questions that you may have.
Yeah.
And just a reminder, it is one and followed by zero, if you'd like to see.
And so yourself in queue for question.
And it looks like we do have a question from the line of Chris user William Blair. Your line is open.
Just a couple of final ones on unexpected if you don't mind.
First just just to to confirm Dennis in your initial comments I think you said.
Basically we expect low single digit base expense growth in 'twenty and 'twenty, one and excluding any changes in.
Sub advisory is that is that correct.
Yeah, and I'm trying to be cautious on it because as we know things change.
And pretty can change pretty quickly so.
Yeah, I think that's I think what we.
And the markets.
Fair per Guestroom, okay.
And then just to confirm that.
Call. It you know two to three per cent whatever the number is.
Is that and does that include the increase in stock comp that you're projecting or does it exclude that.
It would exclude debt due in.
And exclude that okay, yes.
And then just lastly, I just wanted to confirm in the S. One S. T. I spend I know you said it won't be zero by the end of the year, but.
Should we.
Specced, it basically would be pretty close to zero.
And Nobody's really new.
It'll be.
And again I hate to go go out on a limb because you know in technology folks have.
And and solution development and folks have a great way of.
Finding additional thing to do.
But I would say it's.
Yeah.
Uh huh.
Comfortable I'm Hussein and they'll clearly be below half of what it is now.
Okay.
Between half and.
More than half.
Okay.
Thanks, a lot I appreciate it and.
And our problems.
Yes.
And at this time, we have no further questions queued by phone.
Very good.
Lasalle.
And ladies and gentlemen, we're fighting on two fronts first in the Covid pandemic and second growing.
Revenue and profit is doing in disruptive times.
And the first front, we were very fortunate to have planned well in and able to keep our work force healthy and productive.
And all in the second front, despite short term headwinds momentum is building throughout our business segments.
So.
And in Saar call, please be safe and remain healthy.
And have a great day, thanks for attending and alcohol.
And ladies and gentlemen, still connected that does conclude the presentation for this afternoon. We thank you very much for all of your participation and using our teleconferencing service you may now disconnect.
Yeah.
Yeah.
Yeah.
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