Q1 2021 SEI Investments Co Earnings Call

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Ladies and gentlemen, thank you for standing by and welcome to the S. C. I first quarter 2021 earnings call. At this time all participants are in a listen only mode. It'll have a question answer session and instructions will be given at that time. If you should require assistance during todays call. Please press Star then zero.

As a reminder, today's call is being recorded an expense comes through our host 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 and Kathy Heilig Sei's controller.

I'll start by Recapping first quarter 2021.

I'll, then turn it over to Dennis to cover a L. S B and the investment in new business segment.

After that each business segment leader will comment on the results of their segments.

As usual, we will field questions at the end of day to report.

So, let's turn our attention to the financials.

So the first quarter 2021.

First quarter revenue grew 10% from a year ago.

And first quarter earnings increased by 19% from a year ago.

In addition, the first quarter.

EPS of 89 cents grew 24 per 24% from the <unk>.

72 cents reported in first quarter of 2020.

Finally, the first quarter.

Debt balances grew by $3 $4 billion, while L. S lease balances grew by $7.9 billion.

During the quarter, we repurchased one 2 million shares MSCI stock at a price of $58 11 per share that translates into $66 $9 million of stock repurchases.

Also this quarter we.

Continued our investment income growth generating initiatives the newest effort as one yesterday, which is a large part of our growth strategy.

As you will recall, one F D I leverages existing and new platforms.

On them accessible to all types of clients all adjacent markets and all other platforms.

Turning to revenue production.

Net sales events and private banks and investment managers were $17 5 million of which $13 million are expected to be recurring.

On the other hand, net sales events of negative $12.7 million incurred in the.

Asset management related units of investment advisors institutional investors and a.

Banking's a M D.

In a few minutes unit heads will provide more detail on their specific sales results and their new business opportunities.

To grow and prosper in the future, we know that things will never be the same.

So we have been busy adopting new mental models and realities, one such new reality is it remotely.

Distributed workforce, we have been planning.

How we work in the future interacting on these plans.

Fortunately, we have a lot of positive momentum moving into 2021.

We have a strong backlog of sales and conversions.

Number of key prospects late in the sales process.

We have also made progress.

Strategically repositioning our asset management related business segments.

We are poised and ready to capture the opportunities inherent in significant change.

Now this concludes my formal remarks, so I'll turn it over to Dennis to give you an update on L. S knee and the investment in new business.

After that our segments heads will update results.

Their segments.

Dennis.

Thanks Al Good afternoon, everyone I'll cover the first quarter results for the investments in new business segment and discuss the results of Ellis B asset management.

During the first quarter of 2021 investments in new business segment activities consisted of the operation of our private wealth management group.

It services business opportunity the.

The modular relation of larger technology platforms to deliver on our one Sci strategy.

Other investments.

During the quarter the investments in new business segment incurred a loss of $9 5 million.

Compared to a loss of $11 $4 million during the fourth quarter of 2020.

Approximately $7 5 billion is tied to our one sci effort.

Regarding <unk>, our approximate 39% ownership contributed $33 $4 million on income to Sci for the first quarter.

This compares to a contribution of $36 million net income for the fourth quarter of 2020.

Assets during the quarter grew approximately $7 9 billion.

<unk> experienced net negative cash flow during the quarter of approximately $4 8 billion offsetting market appreciation of approximately $12 7 billion.

Revenue was approximately $110 $8 million for the quarter.

With nominal performance fees.

Yeah.

Finally, our effective tax rate for the quarter was 22, 6%.

We have also included in our earnings release additional financial information.

You have any questions on any statistics, Kathy will be available to answer them.

With that I'll take any questions.

Thank you.

Ladies and gentlemen, if you do have a question. Please press one that then zero on your Touchtone phone, you'll hear acknowledgment that you've been placed in Q you may remove yourself from queue at any time by pressing one two again.

Sure.

Our first question is going to come from the line of Owen Lau from Oppenheimer. Please go ahead.

Thank you.

Thank you for taking my questions. So Dennis with the vaccine could you. Please give us an update on your operating model in 2021, how does the vaccine changed your view about the T. N E span health care costs and other G&A spend for the rest of this year. Thank you.

Sure.

So.

Where we sit today travel is still very very limited in fact that we.

We can count on one hand, not only the number of trips.

Trips people who've made but the number of trips before requesting to make so it's a very limited amount of travel activity, but we certainly anticipate as we move through the year.

I would say, particularly the second half of the year after the summer we might see a slight uptick in net.

On travel activity, because we are starting to get some requests.

For folks to travel.

That being said so.

I would say that if it has any impact on expense. So there's really only modest overall.

In terms of health care spending.

There's really no no.

No.

Trend change over 2020 per se other than now we have a slightly higher or larger workforce, which is in of itself.

Benefit costs up.

But I think if you are asking really based on the.

Kind of anomaly, we had in the third quarter of last year.

I believe it was that was really I'd say case specific with.

With certain.

Health issues with employees.

Okay got it that's very helpful. And then you touch on Al <unk>.

I've got some numbers from the O S. Yes, Wow. So could you please give us a bit more color on this because I think in the first quarter with patient Trey was quite strong day.

The growth to value would trade was quite strong.

Could you. Please talk about your view about how sustainable that it's and also how would that was free capitalized strength. Thank you.

Yes.

There are performance relative performance.

With strong growth exiting the year and in the first quarter. So the good news is.

The value trade.

Certainly help them, but in addition, there are positioned on.

And the value segment on the market.

That has helped them even further now.

Now time will tell whether that value trade is.

100 persist.

And this market this year and beyond.

Yes, they certainly are going to stick to their knitting as a value firm.

And if it does persist in their outperformance were to continue that would only bode well for their ability to.

Compete and weighted assets, but also.

If clients start to rebalance back towards value.

Overall portfolio is that should help them as well.

Thank you that's it for me.

Thanks Alan.

And our next questioner on and go to the line of Brian Kenney from Morgan Stanley. Please go ahead.

Hey, Dennis how are you.

Right Ryan about yourself.

Just a follow up on us on the $4 8 billion of outflows when I get a sense of was that more of a rebalancing issue or a lost client issue and how should we think about organic growth and I'll speak going forward.

Yes. It was about 50 50, so about 50% was rebalancing of 50% was.

Plus clients.

Mainly in the.

Managed volatility product.

In terms of the future they had.

Yes.

Positive gross sales during the quarter.

But again back to the answer I gave to one I think that if the value trade persist in their outperformance.

Add to that.

I think that bodes well for their ability to capture not only assets flowing back to them via rebalancing, but also.

When in searches when when firms who are on clients will look.

Look to find value managers to hire.

Thanks, and then just a question on <unk> I was wondering if you could give an update on the trajectory for that going forward.

Sure. So as we kind of look at the rest of the year second quarter is going to look pretty close to the first quarter.

Yes.

And kind of how we had even planned forecast it out last year and then we'll start to see and we saw a drop down from fourth to first and second quarters, probably will be in the same range and could be a little bit higher than.

And at first but not materially so and.

And then the second half of the year third quarter fourth quarter, we will see additional step downs as we finish the work.

Some of the one Sci work in terms of modernization is targeted at a client implementation later this year and we have to finish that work arguably in the second quarter to get that.

The software releases and production so they are well tested embedded for the for the client so yes.

And we're on track and I think things are trending the way we had expected them to.

Thank you.

Welcome.

Okay.

And next we'll go to the line of Christian <unk> from Piper Sandler. Please go ahead.

Hi, Good afternoon, guys. Thanks for taking my question.

Chris quickly yeah.

Just quickly wanted to combine the two prior questions and thinking about.

Your total expenses on a consolidated basis for the quarter, I mean, given sort of like that.

There should be a positive impact from one one sci decreasing over time, but probably are.

Higher expenses further out from some rebound in travel.

Is it fair to think about the first quarter expenses is a reasonable run rate for the full year.

I think I mean, I think as we've talked in the past, we will see some inflationary growth as the year progresses, so the 1% uptick from fourth to first.

I think there'll be a little more pressure on expenses.

Net.

Over the next few quarters.

We have as Youll hear from the unit from Steve in particular, we have a pretty big backlog of clients to install.

That will have some impact on hiring.

I don't know that travel will really move the needle.

On kind of offset.

Ticked down in one Sci spend I don't think travel will be that significant.

We did get a little bit of benefit in the first quarter on option expense, we had a couple of people.

Leave and allow us to reverse some option expense.

Sure.

But that being said I think expenses will definitely.

Should say definitely.

We expect on the tick up as we progress through the year, but again our job.

Can you try to execute as best we can is to keep it keep our spending.

<unk> targeted at the right things.

Being as productive as possible.

Without giving up some of the investments we think are critical to our future.

That will come that will continue.

Okay. Thanks.

Thanks very much.

And once again, ladies and gentlemen, if you do you have a question at this time. Please press one in July on your Touchtone phone, Mexico on the line of Robert Lee from <unk>.

One moment.

Yes.

Next moving to go to the line of Robert Lee from <unk>. Please go ahead.

Great. Thanks.

Afternoon, gentlemen, how are you doing.

Hey, Rob No yourself.

Pretty good thanks.

Sure.

Just a question just kind of curious at a high level.

<unk>.

As you think about notwithstanding some spending.

We all hope spending comes back on travel or something similar on the second half of the year.

But more broadly as you think about changing the business model more of a distributed workforce.

Maybe it's too early but if you have any kind of initial thoughts on how you think that plays into over long term expense is that gene. There is an opportunity here to diminish our real estate footprint.

Or is.

And the cost of kind of having supported disperse sales force kind of pretty much offset any potential benefit just kind of curious your initial thoughts on it.

Yeah.

Yes.

Okay.

The pandemic hit.

That's kind of the wrong time relative to our own real estate planning because we were.

About 75% on building a brand new building here.

Yes.

And our new campus arguably we call it the north campus.

So.

We finished building and it's.

Ready to be occupied.

We built that building was to eliminate.

Couple leased facilities that we had in the books.

Wilkes area, and we were able to do that so we got rid of those leased facilities.

All of those people went home instead of two or so.

I guess, it's safe to say that.

We have plenty of capacity.

So.

I hope and Dennis Mcgonigle future there is no longer the need to build another parking garage.

Sure.

We do expect the bulk of our workforce, though over time to return.

Now to our offices.

Okay.

Around the globe.

Focus on Oaks at a minimum and roles that are more hybrids. So.

A few days a week type pools.

So we will optimize our capacity.

So we kind of manage our workforce back to offices.

Now providing them with a lot more employees with more flexibility in terms of.

Our work environment versus in office work environment.

So I don't see our cost change that much our lease space in a bigger offices, Ireland UK Indianapolis.

We have some time per run.

And to the extent, we get the Ngos lease terms and we don't need the amount of space. We have certainly we would have the option to shrink.

Right now, we're under <unk> or under lease so.

And theyre not really its not really.

Facilities that lend themselves to Subletting.

Awesome.

Okay great.

Question. Thanks, so much alright, thanks Ralph.

And at this time I have no further questions in queue. Please go ahead.

Great. Thanks, before I turn it over to Steve we would like to remind everyone that during today's presentation and in our responses to your questions. We have and we will make certain forward looking statements that are subject to risks and uncertainties that may cause actual results to differ materially.

Please refer to our notices regarding forward looking statements that appear in today's earnings release and in our.

Our filings with the securities.

The Securities and Exchange Commission.

Cannot undertake to update any of our forward looking statements and with that I'll turn it over to Steve.

Thanks, Dennis good afternoon, everyone.

I wanted to talk about banking first and then as usual I'll turn it over to investment managers. So let's focus on banking during the first quarter. We continued our momentum in the market. While also executing on our <unk> strategy and we are able to continue to prudently manage expenses, which aided in the profit for the quarter.

First quarter 2021 revenues totaled $117 6 million.

Which was up approximately 4% from the first quarter of 2020 due to higher recurring revenues first.

<unk> first quarter 2021 quarterly profit of $6 9 million.

For the segment was up approximately $4 3 million or 168% from the first quarter of 2020 and up 49% from the fourth quarter of 2020. This was primarily due to expense management.

And turning to sales activity for the quarter, we closed $8 7 million of.

Gross recurring sales events, which resulted in $3 6 million of net recurring events for our investment processing business offset by a negative $2 $5 million in asset management of this.

This offset from asset management brought our total net recurring events for the quarter to approximately $1 $1 million from the segments also.

Also in the quarter, we closed $2 $9 million on onetime revenue.

While we are encouraged by the $8 $7 million on gross sales events for the quarter and the momentum with new business that continues.

Had to digest the headwind of an uptick in M&A activity in the industry, which negatively affected our sales total for the quarter. This.

This is a headwind we will have to deal with this year as there are several other clients of ours, who have been acquired however, we remain very bullish on the new sales activity, we continue to experience.

As previously announced on our fourth quarter 2020 call. We closed three SVP agreements in the first quarter two of them new clients to Sci and won an existing client from trust 3000.

Outline the details of these events on the previous call, but to summarize these new sales included Banger savings Bank a trust 3000 clients since 2011, who will convert to <unk> in 2022.

Our west Coast large community banks, we will migrate to SVP from a competitor platform in the first half of 2022 and who is also a candidate for our <unk> strategy. We believe this firm has an opportunity to leverage additional sci platforms and solutions and is currently evaluating <unk> asset management distribution products and finally, our third signing was.

With another new client <unk>, United, Missouri back, who will migrate their private wealth management book of business through the ESI will platform. Later this year, we are proud to welcome <unk> to the Sci family <unk>.

Additionally for new sales in the quarter, keeping our <unk> approach in the forefront we were able to cross sell our archway platform to one of our long term trust clients as well as cross sell additional services to several other clients, including an upsell component to our clients who is migrating to Swm's day.

During the quarter. We also had six refinery contract securing another approximately $9 million on recurring revenue.

As an update on our backlog, our total signed but not installed backlog is approximately $77 3 million in net new recurring revenue at the end of the first quarter.

From an asset management standpoint, total assets under management ended the period at $25 1 billion.

Which was down one 6% from the fourth quarter of 2020.

Our cash flow for the first quarter of 2021 was a negative $885 million.

The majority of this outflow is due to a single asset management client, who had purchased one of our asset management product and decided to sell out of that product completely.

As we continue through 2021, our focus continues to be on maintaining our strong momentum in the market continue to expanding our business with clients and expanding into new markets to increase our opportunities key to this will be our one MSCI strategy and being able to increase our growth opportunities by unlocking all of the assets on platform <unk> has to offer across the company.

We will also focus on driving scale on our business as we push towards providing a sustainable and accelerating margin growth in the future.

We remain excited and optimistic on our growth opportunity.

That concludes my prepared remarks, and I'll now turn it over for any questions.

Thank you once again, ladies and gentlemen, if you have a question. Please press one then zero at this time.

Our first question will come from the line of Ryan <unk> from Morgan Stanley. Please go ahead.

Hey, Steve how are you good.

You're right.

Good.

Couple of questions first one on the.

$22 billion drop in.

For private banks, just wondering if we could get more color on that that al from M&A.

And how does that impact of forward look on revenues.

That was a client who.

Looked like it was a fun family, who look more like an asset manager clients. So we moved that fund complex to IMS. So it was really just an internal move and it's.

Lower fee products. So there wasn't a great deal revenue associated with it but from a servicing and kind of lining up segment opportunity. It was better to go diverse.

Got it thanks.

And then just as a follow up wondering if you could give an update on the competitive environment, you're seeing with some of the other wealth management platforms out there where are you seeing the most pressure and where are you seeing the most success.

Yes, I would say the competition is theres no notable change except the people our competition.

Lakes competing with fee.

Which is nothing new to us.

Sure.

Wealth managers out there, they're looking for a new platform and more.

Much more capability, we certainly.

Hit that on all strides.

Yes, I do see some smaller boutique providers coming in and providing bespoke offerings are going after a piece of the puzzle, but again I think we've designed our platforms and our solution to really address the whole puzzle for wealth management and with our <unk> strategy, where we're being able to lean into that now and do it in a more.

Staggered fashion to make it more digestible.

For us, we feel very well positioned both here and overseas with our capabilities and our platform and technology.

Got it thanks.

Sure.

And next we'll go to the line of Robert Lee from <unk>. Please go ahead.

Great. Thanks, Good afternoon, Steve how are you doing.

I am great Rob how are you doing.

Thank you.

Couple of questions. The first thing is.

Your comments on industry M&A.

There is some headwind.

I guess in the past.

Because it's an industry that's been consolidating two years I guess, but.

I'm always kind of felt as much consolidation opportunities and risks.

I don't want to read too much into your comments on kind of suggest that maybe right now what you're seeing from Levi youre kind of expecting news.

More likely to leave some of the.

Relationships due to M&A or is that just trying to be extra cautious nationally.

On the income.

I'd say, rather to a little bit of both so listen a number of our clients and I think we've talked about these in the past it's been in the press had been acquired one was acquired by a competitor from overseas.

Kind of lining up to come into the U S. I don't feel very.

I don't feel very confident that we're going to keep that business.

The other ones I, just think where we see it trending I think of caution I would say, we're lining up thinking that most likely because of other priorities that the acquiring organization at.

It most likely will not stay with us.

Yeah. When you started off the commentary M&A, we've done we've dealt with this in the past it can be a benefit to us or it can be a headwind.

Over the past couple of years, we've had some M&A that's been very positive for us.

And Unfortunately, I think we're going to have a couple that are going to be negative for us this year.

That's going to be a headwind, but I view it as a temporary headwind that does not take away or distract from the momentum we have and I think quite frankly.

My view of it is even if we do not retain the clients because of acquisitions that gives us another prospect to go after on a larger way.

Okay, Great and then maybe.

Al.

And maybe this goes to the pipeline I mean do you have any sense.

Interest rates go up earning stream no credit.

Credit costs.

So the bank earnings generally seen in better shape.

Versus the year ago potentially so.

Do you see that trend leading at all into your pipeline.

They are engaging more on they seem more willing to start spending some of the.

The money or at least and feel more willing to kind of engage in.

Yes think about change.

Change in <unk> apologies.

Yes, it's a great question, Rob, but either way out but is this we see a number of force is coming to bear that I believe is causing managers not just banks, but wealth managers across the board to re look at their business model and I think it bodes well for US I think you've heard us say time and time again before disruption in this business usually works out for us.

<unk> presents opportunity the pandemic has been a big disruption I think this is causing a lot of people to reconsider outsourcing and strengthen the outsourcing physician.

You certainly have interest rates and the capital position bank of banks being in a better position, but the other piece is many of these with large wealth managers on banks know that they need to make a decision and need to upgrade their technology to drive scale and execute on their strategic plan. Many of them have pushed that decision and I think we are.

Getting to an inflection point now where that's pushing up the decision cannot be pushed anymore.

This is why we leaned in with this one Sci strategy one of the benefits of that as we can make our very powerful transformative solutions more digestible enabled to do this in steps and I think that will play well as these forces coming together.

Yes.

Okay, great and if I can just probably too little numbers I think I just missed on the.

The asset manager contribution in the quarter and then the onetime revenues were both.

Negative and positive $2 nine a day not price.

Income.

Well I think the asset imagine would be as I said, we're down we're down cash flow was $885 million.

And what was your other one Rob on.

The onetime revenues.

One time revenues was $2 9 million.

But also if you are asking for asset management as far as sales who is that what you were asking yes.

Yes.

So the sales force.

We're around if it was negative $2 5 million.

So it was negative two five debt when against our growth of eight 7%.

Okay.

Great. Thank you so much.

Sure.

Next we're going to go to the line of Ryan Bailey from Goldman Sachs. Please go ahead.

Hi, How's it going.

Good how are you on.

Non cigarette.

So I just had a quick question on some of the.

Mentation outlooks on the backlog.

Looks pretty healthy growth in the back on quarter over quarter as we look through the course of the year.

How are you thinking about that getting implemented how that can contribute to revenues.

So I'm thinking about doing it on time.

Right now we have people scheduled and were in line things progress. We didn't have any final implementations scheduled for Q1, but we do have other scheduled throughout the year. If you look at the backlog now and I've been giving this kind of 18 months kind of barometer right now about 61% in the last time, we talked there was around <unk>.

50% up 61% is probably due in the next 18 months.

And the remainder after 18 months, probably more into 'twenty four to 'twenty six months period.

And we're looking to keep that on track could some of the push yes, I don't think materially working with clients that might have.

More.

No.

Troubles or slow down on their side getting implementation downstream implementations on their side, but for the most part I think we are.

In intact it on time.

Got it okay, alright that makes sense.

Maybe just a separate one and to the degree you can talk about specific client.

I'll give it a shot.

Just wondering.

One of the drivers we've been talking about for the business has been on your asset management and wealth management sort of coming closer together on Spi being at a competitive advantage with that I was just wondering with wells on a sale of majority sales day or asset management business, how that impacts your relationship with them.

What's sort of going forward.

Yes, so I don't think it changes our relationship with them obviously wells.

Going through their own rationalization and working on their business.

We have a very close relationship in close contact with wells we knew about.

Going to be divesting of that business, we service some of that business, but it's not a majority of the business and we don't think it will have a material impact on our revenue.

But we're still focused on.

Ironically, we think this is good for us because wells is normalizing and right sizing your business for the future and I think once they do that and get to there.

They are getting to a good spot we will be able to engage them on how sci could continue to support them and increased our support and business with them.

Awesome.

Can I sneak one more on.

Sure.

Was just wondering about the I think you said that you're up sold a client who is converting from trust 3000 to SWT.

Wondering if you could give us a little bit more detail there.

What components that was how much of an increase in the <unk>.

On your.

So are you talking about the cross sales Ryan.

Yes, I think so yes, yes, yes.

Obviously, I'm not going to get into the client, but what I'd say is.

And I think this is an important factors before you heard us talk a lot about new business, but we didn't spend much time on cross sell.

As I've told you part of our strategy.

Overused adhere with land and expand but one of the key points of our one MSCI strategy was to unbundle parts of our platform. So people could digest and move quicker and during that process as we got decline in if there was opportunity to upsell them or add other functionality for example in this case to.

AD front office capabilities.

They were just focused either on the back of our middle office that will be an opportunity and thats what happened in this space and we do think as we lean in more there'll be more opportunity for us on this on clients that are converting as well as new sales that we have so we view that as a very positive move forward for us It gives us another lever to pull with.

As we expand and grow the business.

Great. Thank you.

Sure.

And at this time, we have no further questions in queue.

Okay. So al.

No questions I will turn it over to investment managers segment, so turning to the investment managers segment. During the first quarter. We continued our momentum in this segment and saw strong growth from both new clients and expansion with existing clients.

For the first quarter of 2021 revenues for this segment totaled $136 4 million.

Which was 17% higher as compared to our revenue in the first quarter of 2020 profit for the first quarter profit for the first quarter for this segment of $53 4 million.

Was 26, 1% higher as compared to the first quarter of 2020.

Third party asset balances at the end of the first quarter of 2021 were $831 8 billion.

Approximately $71 4 billion higher than the asset balances at the end of the fourth quarter of 2020. This increase was due to net client fundings of $38 6 billion as.

As well as market appreciation of $32 8 billion.

And turning to market activity during the first quarter of 2021, we had a strong sales quarter with net new business events totaling $9 3 million and recurring.

As well as re contracts of $8 $7 million on recurring revenues. These events. This quarter were diverse and spanned our entire business. They were reflective of the current market dynamic which is highlighted by a larger amount of what we would call singles and doubles versus larger scale mandates highlight that these events included in our alternatives market.

And if we closed a number of strategic new names, while sales to existing clients continued to be robust.

I was selected to provide fund administration for several new hedge fund.

<unk> was also selected after an extensive RFP process by a $25 billion fund of fund to utilize the FBI trade platform.

Momentum also continued in the private equity and private debt space and we continue to launch funds with both new and existing clients.

In our traditional market unit, we continue to add new business in all product lines with both new and existing clients consistent with our land and expand strategy to new client selected us to take advantage of our Middle Office services platform on multi fund complex joined our pioneering advisors inner circle 40 AD platform and we also added a new ETF clients, who are turnkey and <unk>.

<unk> on our Circle Trust platform.

In Europe, we continue to have solid cross sell and finally in our family Office services unit, we signed multiple new named single family office clients. The archway platform and continue to see strong demand from this industry vertical.

Our backlog of sold on unfunded new business stands at $35 6 million at the end of the first quarter.

As we progress into 2021, we will continue to focus on our growth strategy and look to continue our strong momentum in the market. We have a strong pipeline across all segments, great momentum in our leading platform combined with exceptionally talented and experienced people.

This combined with our continued execution of our strategy bodes well for the future.

That concludes my prepared remarks on I'll now turn it over for any questions you may have.

Thank you and once again, ladies and gentlemen, as a reminder, if you wish to ask a question. Please press one zero at this time.

When you go the line of Ryan <unk> from Morgan Stanley. Please go ahead.

Hey, Steve just wanted get an update on how you're thinking about margins from here and how sustainable the 39%.

Okay.

Thanks, Ryan So margins my view has not changed from before and I know I sound like a broken record I feel comfortable with the margins in the mid Thirty's as I said last I think it was last quarter I can see that uptick into that 36 range. This quarter, we had a number of things, which I think impacted.

The margin positively one we implemented a lot of new business and the labor market is a little tighter here.

So we implemented a lot of the revenue ahead of us bringing on some of the resources for it. So our personnel expense was a little low compared to the revenue and we're obviously that will that will switch as we go through and switch certainly by Q2, Secondly, we had some.

Kind of one time expense adjustment that helped us somewhere around <unk>.

Compensation.

As Dennis mentioned that won't repeat so I think if I took those out and looked at the margin we are probably more and be more in the 36 per cent range, which is again, where I feel comfortable that this business is that especially as we continue to invest and continue to build out our platform solutions for sustainable revenue.

Got it.

And then just a question on digital assets, we've seen some announcements from a few investment servicers over the last few months outlining plans to offer.

Servicing accounting and custody of digital assets, just wanted to get a sense of how that.

Potentially fit into your space and if youre seeing any demand from your customers to offer something similar.

Yes, so we've actually Ryan we are already providing services for a handful of crypto funds and it is something strategically we believe and we've already had discussion with numerous of our clients that they have planned.

Set of funds around this so it is something that strategically we are on obviously, we don't provide custody, but we're obviously lincoln integrate into custodian, but it is something we do think that we're going to have a larger servicing footprint on in the future.

Great. Thanks.

Sure.

And next go to the line.

Robert Lee from <unk>. Please please go ahead.

Great. Thanks, Hi, Steve.

Since you already gave us.

The backlog of public on this one other quick question.

I'm just kind of curious I mean, you.

Hum.

There's obviously been plenty of M&A in the asset management industry too.

More so on the traditional versus on terms based on assumed some there.

Is there anything we should be thinking about net kind of plays out that there is any kind of impact on the momentum in this business.

Seem like any of them just kind of curious your thoughts on that.

No. So I think Rob and I missed a little bit there kind of cut out but yes.

Yeah listen the alternative side has been a driver for us as well as the industry for a number of years. However, what I would say on I think we saw this towards the end of last year. Our traditional business is resurging again, and I think it's resurging for a number of reasons.

Noninterest in that space are under pressure as active management comes under pressure and they are rethinking their business model on how to drive scale outsourcing and the capabilities. We have on the platform resonate very well when theyre looking at that if.

If you look in this quarter sales a good bit of it was our traditional business. So we were very happy with the progress we see a huge need for a middle office services platform. We also see a need across our cities on our ETF platforms. So that's an area that I expect good growth from.

This year and I think adds managers kind of rethink their business model, we stand on a good position to service them and give them an offering that will help them with that.

Okay, great. Thanks for taking my questions.

Sure.

And at this time, we have no further questions in queue. Please go ahead.

Great. Thank you I'll now turn it over to Wayne Withrow to cover the advisors segment Wayne.

Thanks, Steve.

Yes.

During the first quarter of 2021, we continued execution of our strategy, including improvements in our sales and marketing process to fit a virtual environment.

Offering a bundled fee and our new unbundled fee investment products.

And continued enhancement and delivery of a completely integrated front to back office technology platform <unk>.

<unk> coffee.

First quarter revenues totaled $113 million.

This 11% increase from the first quarter of last year.

It reflects the impact of AUM growth.

As well as lower fee rates on some of our products.

Expenses were up compared to the first quarter of last year, primarily due to an increase in direct costs.

And to a lesser expense.

Expenses associated with our purchase of the Orange technology platform.

Same factors influence the expense increase from the fourth quarter of last year at.

As well as inclusion in the fourth quarter expenses on some non recurring savings.

Overall, the profit picture for the unit remained relatively intact.

Slight pressure on our asset management revenue rate.

Assets under management growth of 77 4 billion at the end of the first quarter.

Total platform assets.

And at $90 billion.

Market appreciation drove this increase.

We did achieve strong cash flow growth in our newer on bundled fee product.

Partially offset by net redemptions.

Older embedded fee products.

Primarily in our actively managed mutual fund wrap program.

Total net cash flow for the quarter was $306 million.

Of this total $125 million was in assets under management and $181 million asset under administration.

We recruited 52, new advisors during the quarter.

During the quarter, we purchased the assets of <unk> technology.

This acquisition was it further.

On the back office technology strategy.

While the financial sides of the transaction was modest.

We feel the end investor collaboration platform, we acquired is compelling.

And will unlock new opportunities for tech forward client engagement.

We intend to fully integrate this platform at WP and begin to rollout to our advisors and the second half of this year.

In addition to this platform asset.

Acquisition included a team of skilled cloud technology professionals.

During the balance of this year, we expect to incur a $5 million expense increase as we integrate and rollout this platform.

While there still remains much to be accomplished.

We are making progress in that three focus areas.

Ah bobbing, our sales and marketing process.

The day digital World.

Designing and offering investment product responsive to todays investor.

And delivering a compelling front to back office technology platform incorporating custody.

It is my opinion that achieving success in areas famous companies with our skill sets and assets.

I'll now welcome any questions you have.

Thank you once again, ladies and gentlemen, do you have a question. Please press one zero at this time.

Your line of Ryan <unk> from Morgan Stanley. Please go ahead.

Hey way on how are you.

Oh, Great line, how about you.

Just a question on the Orange acquisition.

Wanted to get a sense of how it fits into your tax strategy in terms of what specifically it enables you to do that you weren't able to do before and then from here are there any other gaps on tack or capabilities that you're looking for fill line.

Well at the highest level Orange was.

And investor collaboration pool. So we did not have a strong presence in the end investor collaboration tool.

So.

If you looked at it in terms of specific functionality.

Like account aggregation.

Digital document vault.

On secure messaging and collaboration between investment advisors and advisers and clients it's functions such as that.

It is also a completely cloud native technology platform and will be in the forefront of us moving all of our end investor technology into the cloud.

And then are there any other gaps or capabilities that you're looking to fill line from here.

Yes, I mean, I think when you look at it we're always going on will always.

Enhance our end customer reporting and we expect it to be able to do that.

You look at the collaboration on a financial planning side, how you can.

We view and modify financial plans on milk and it's something we have on our roadmap.

Its items such as that without.

Telling the world what our tech strategy is.

Got it okay. Thanks.

And next we're going to go to the line.

Brian <unk> from Goldman Sachs. Please go ahead.

Hi, wind how's it going.

Hi, Ryan.

I'm, sorry, I missed the number.

Did you say net.

On slide you had inflows.

Right.

Total new assets on the platform with $306 million and net cash flow.

Of that total $125 million with assets under management and $181 million with assets under administration.

Got it okay.

Yes.

Just sort of a question as you think about the.

Bundled to unbundled approach it seems like Youre, having we've had several quarters now of really good momentum on the unbundled or <unk> approach I was just wondering if you can help us think about why it might be that advisors are choosing to AIA approach moving from.

And your guidance.

Just sort of an investment selection decision is there a pricing component to it at all.

It may be something else on I'm not thinking about.

Yes.

I think you hit on the high point.

You get down into the weeds, a little more complex with that I mean, some of the products.

It's more expensive and existing product I would say.

Yeah.

Okay.

If you had to generalize I would say.

The unbundled product a little bit more expensive.

Excuse me a little bit cheaper when you add all the components together with some people prefer.

Having the bundled price even if it is a little more expensive.

It just seems cheaper because it is not a whole set of line items.

But the major difference I think of the unbundled and bundled is that allows you to sort of deconstruct the whole investment management profit.

But if you want to charge separately for example for tax management pick that as an example, you can do that in an unbundled structure, where everything bundled you have to offer all of the components of asset management together.

And invested value did or not to take tax management Beta Easy example, if you have.

Qualified money in tax Magnus in the pricing on the bundled product you pay for it even though you really don't need it.

This allows us to customize.

The pricing and the and the delivery of the product for what the Investor really needs and I think that's what's resonating.

Got it that makes sense and then I know I asked this question last quarter, but if I can answer again, if you can do sort of a rough rough justice on the split.

Debt.

Floors between sort of like new advisors.

Existing advisers that are converting existing books of business from AUM to AA.

Yes, I think right now the <unk>.

Major growth.

The majority of that growth into new advisors.

At this point okay.

Alright, Thanks, Mike.

And at this time I have no further questions in queue.

Alright, great.

With that I will turn it over to Paul to talk about institutional investors.

Thanks, Brian and good afternoon, everyone.

Im going to discuss the financial results for the first quarter of 2021.

First quarter 2021 revenue.

The $4 5 million increased 7% compared to the first quarter of 2020 on.

Operating profit for the first quarter 2021 for $45 3 million and increased 11% compared to the first quarter of 2020.

Both revenue and operating profit increases were due to market appreciation positive currency translation.

<unk> slightly by negative client fundings.

Operating margin for the quarter was 54%.

Quarter end asset balances of $99 4 billion reflect a $19 8 billion increase versus first quarter 2020.

This was due to market appreciation.

Net sales events for the first quarter were a negative $2 7 billion.

Gross sales were $1 2 billion in client losses totaled $3 9 billion.

First quarter, new sales were diversified across U S and dominant foundations governmental and health care.

The client losses for the quarter were predominantly due to unsuccessful client rebids and DB curtailments.

CIO market is highly intermediate it and numerous CIO search consultants are active in getting asset owners to evaluate their incumbent OCI al firm.

We were impacted by this in the first quarter and it is likely this trend continues given our tenured tenured client base, particularly in the corporate defined benefit market.

The unfunded client back line of growth sales at quarter end was $865 million.

We continue to focus on stabilizing our client base distinguishing our OCI on solution selling new OCI on relationships and advancing our <unk> proposition.

Thank you very much and I'm happy to answer any questions that you may have.

Yeah.

Thank you we're going on.

Our first question from Robert Lee from <unk>. Please go ahead.

Hi, good afternoon Paul.

Hi, Robert.

Yeah.

I'm curious I mean, so I mean, given the commentary around kind of the.

Heavily intermediary channel.

I mean, I guess to some degree that's always been the case, but what's kind of changed.

More maybe more recently.

Feels like maybe there's some celebration and the pace of activity is it just coming out of the first.

Half of last year that was.

Maybe pent up demand I mean, how should we think of that.

Yes, good question.

The OCI on the search consultants.

Kind of exploded over the last three years or four years and certainly the velocity has increased even more in the last 12 months.

What we witnessed last year in the first couple of quarters in the second and third quarter of last year as most of our clients.

Or just kind of entrenched and focusing on their own business and focusing on the risk management with respect to their asset pool rightly. So.

What also with zoom and video and efficiencies unveiled was more time, they had to maybe think about their incumbent provider and perhaps test the market at the same time.

Many of the search consultants, where prodding into clients our clients on other tenure clients, suggesting that proper due diligence on proper governance. After some intervals sei. It's five years seven years, whatever that they should go out and test the market. So it's been a little bit of a confluence of events in the sense that the.

Ents have more time on their hands and maybe more efficiencies in their quarterly meetings.

Search consultants have gotten more aggressive in their target now we're not anti search consultants, we have a whole team focused in both the U S and the U K around the search consultants, but we also believe that you have to given our CIO firm, an ample amount of time to prove value improved wires and just go.

Through due diligence for the sake of due diligence.

May save a couple of hours from both from a cost perspective, but might not bring the right value proposition. So we are in flight reminding all of our clients on that.

On the zoom impact, we've lost a little bit of the human element.

So while we haven't traveled as much we do see that some of our clients are requesting travel and we're excited to be back in person because some of the human part of the client relationship.

We think is important in addition to just the substance and the quantitative components that we deliver.

That makes sense and then maybe a follow.

Follow up to that.

So.

I mean, if there's a way to characterize.

When you even with the search.

On the search ex intermediaries, having their own agenda more or less.

Is there a way of characterizing when you do lose mandated.

Price performance on mix of the two.

Any way to kind of.

For us to kind of get a sense of if you do something with the kind of $15.

Yes, when we see Rebids price is always a factor so.

Whatever we made in the past, we kind of know intuitively, we probably won't make the same in the future.

So we address that in our rebid.

So the client phase so we adjust price when we're actively trying to retain the client.

That said and I think I've mentioned this in the past there are some <unk> that are very predatory with respect to price where they are even bidding very low single digit basis points.

We spent a lot of time, making sure the search consultant and the asset on our understood.

All cost not just the OCI LP, but with all the cost of debt.

The implementation, which is the bigger component is what the cost of the managers are and just having a simple our model our.

Model low cost model doesn't mean, it's a better model.

So cost is a factor back to your original question.

Sometimes it might be the.

The shiny new car.

Go through a re bid in.

They have.

Eight or nine firms that are presenting in maybe click with the new team or theres, a different relationship or there is other dynamics.

One on one of the beauties of the business is being able to get assets over quickly.

One of the negatives of the business as the business does not have long on contracts. So our contracts are 30% 30 days in most <unk> are 30 days notice.

Clients could move easily if they want to not that it's not.

Penalize the move but its not like Youre migrating technology or doing a hole.

Large scale migration and moving from 100 CIO firm to another old styled firm. So all those factors are a day now with all that said.

Which is clearly a headwind from a new from a existing client perspective, that's also a tailwind from a new business standpoint, and our new business trends have increased.

Our pipelines are increasing and our ability of attracting larger investors are increasing so.

While we don't want to lose any client, we do think theres going to be trends continue on non prime but we also feel the velocity of selling new clients is still going to be there as well.

Okay, great and if I could just ask one more question and I apologize for taking up so much.

At this time, but.

One is I guess you're alone on competitors I guess is Russell.

Yes.

Working with our neighbour viewers Hamilton lane to be there kind of I guess, one of their sole providers or.

Kind of private investing private assets.

I guess they needed the deciding to outsource debt I mean do you.

Phil.

All of these things.

It's something that if you look at the University of your own capabilities debt.

It's something you guys on it.

Net or thinking about that may be that part of your offering.

<unk>.

Yeah.

So we don't see you could see them up with additional comfort on the east.

What you need in house.

Yes, we have a very robust alternative offering and.

We've been a pioneer for number of years and now that we havent davidsons foundations that are larger clip, they're consuming alternatives. So we're very comfortable with our alternative capabilities, we would always like to add more resources and more people that have expertise and we are looking at that and Kevin Barr is taking that responsibility within the investment management unit.

Quite quite simply what Russell did is there an outsourcer that just outsource day major asset classes on another firm so that book.

I'll also be a little bit debt. If you are picking a firm that can't do a core component of the asset classes that are maybe the most important component and why are you picking that for them to be the outsourcer. So.

Looking through the realities of some other things that are occurring with their business and I won't comment on that.

It may be because they don't want to invest in the people on they'd rather just have a relationship or partnership.

Okay, great appreciate it thanks Paul.

Thank you Rob I appreciate it.

Next we will go.

Next time, you go to line of.

Chris Donat from Piper Sandler. Please go ahead.

Hey, Paul how are you doing.

Good Chris how are you.

Doing fine.

One quick question on the.

The revenue yield as we calculated on on average.

Assets it looked like it ticked.

Ticked down about two basis points over the last year I don't know if on.

Looking at interest now, it's definitely not a dramatic move but I'm. Just wondering if you got any commentary on either you or your mix shifting our pricing pressure or a lower mix of all soft or the volatility.

Any dynamic going on that's affecting.

On your revenue yield per average asset.

Yes, Chris not net.

Necessarily on lower reduction of alternatives I mean like anything there's rebalancing that we occur.

<unk>.

Kind of quarter to take it back in line with the investment policy statements. So there might be a little bit of that but.

On the participation in alts continues to be.

Consistent and in fact, it's probably actually increasing as we bring on more endowments and foundations I would say the biggest thing on the revenue yield.

Is the reality of either large clients or rebate clients. So clients that we rebid that we keep that we don't keep at the same rate that we had before.

Got it okay. Thanks, Paul.

Thanks, Chris.

Yeah.

Okay and on our next question is going to come from the line on the ground daily from Goldman Sachs. Please go ahead.

Hi, Paul I wanted to come back to <unk>.

Some of the lost clients so the.

La stream beds dynamic.

On a product that Mike shiny new car analogy.

You find that call. It 12 months 24 months. After client leaves are you able to sort of like re engage with them and sort of.

When the back is that sort of like a blueprint and you could think about.

Yes.

I wouldn't say 12 or 24 months net debt would be awesome. If it was that quick.

That would probably be unlikely that they would pick somebody else and then move again until our 24 months unless they made a really bad decision that said. Your question is a great question, we keep incubation program alive with our loss clients.

Factors too.

We're three prospects right now that were clients that were lost more than five or seven years ago that their program, maybe is not working out as great. As they had hoped that we're re engaging with I would say.

Most asset owners that would take on OCI on hold firm unless something really went dead. It would be a very odd less than three years. It would be more normal somewhere between five and seven years and yes, we did reengage and tried it.

Keep connected with a lot of clients of course as you know some of our loss clients are things that are actually theyre just loss entities in the sense that the DB plan is going away. So they're not the assets go plan or the organization still exists, but theres not a DB plan any longer.

So those can't be re engaged of course.

Got it that makes sense.

On the <unk> opportunity do you have a rough timeline for when you think youll be out in the market and starting to generate some revenues.

Yes, we're in the market we're active.

We have a number of prospects.

We're we're optimistic that we can get some closes this year hopefully sooner in the quarters in the later quarters.

But we're also realistic to understand that any new initiatives, while we have passion and energy about getting things over the goal line the institutional asset owners don't move as swiftly as we would like and that's just common.

I started in the what was called the manager of manager group back in 1995.

And I remember the early years.

It took a while it took US 18 months to get our first one over the goal line. When we were selling manager managers now clearly the environment is different now than it was then.

But that said, even new initiatives take some time there are some things that we're trying to.

Offer as sweeteners with respect to pricing.

Trying to get a longer term contract that I can talk about when we do get one over the goal line.

And Theres also some things that we're going to continue to invest in which we've had already budgeted for in our P&L around front end technology to make the user experience customizable.

And as efficient for these asset owners as possible.

No that makes sense. Thank you.

Thank you.

The next one to go to their line Robert Lee with <unk>. Please go ahead.

Hi, again, thanks, taking my follow up.

So the problem I guess, probably this is kind of the.

Yes.

The quarterly margin question, so margin continue to maintain a pretty.

Healthy level.

And kind of maybe not at historic highs.

It was last quarter, but kind of.

Certainly up there so be given some of the weather.

The pricing challenges and business challenges and clearly there's been some tailwind ctrip helps but.

How should we be thinking of kind of margin progression from here.

Given that some of the headwinds you face and B, just simplistically assume markets.

I know I use the word normalize but over that.

You wanted to find that.

Should we think of.

Yes progression from here.

53, plus sustainable, which we think is kind of interest back 51 on a handle.

Yes, so Rob I think ive messaged in the past.

Without question, we've been aided by tremendous capital markets.

Don't think $53 $54, 55% for the business and the headwinds is sustainable.

It's probably more realistic that it's closer to 50% and maybe toggles between say $49 $50 51 someone that area we.

We don't necessarily and we don't.

Business practice, we don't manage to a specific margin.

The realities of the client Rebids.

Al its clients and what goes out the door.

Is far larger than what comes in the door that said more and more of the new clients are consuming alternatives, which is at a better clip. So I think a.

More longer term.

Run rate profit margin.

Profit margin percentage thats closer to 50% I might spike down a little bit from there is more realistic the other component.

Dennis commented on that I think Youll see our group return quicker is travel.

We want to be in front of these clients, we want the human element and there are some of our clients because they have these formal quarterly meetings that require outs or defer asking us to come travel soon rather than later now that doesn't mean that we have to send multiple people in but we want to be in front of them, because we want to remind them of the value of the relationship.

So you might see my group pick up the travel a bit quicker than perhaps some of the other groups.

Okay, great. Thanks for the refresher I appreciate it thanks. Thank you.

Okay.

And at this time I have no further questions.

Great I'd like to turn the call back over to Al West.

Well, ladies and gentlemen.

We are making progress on two fronts on the first front, we are very fortunate.

Kept our workforce healthy and productive.

Delivering a high level of client service throughout the pandemic.

On the second front, despite short term headwinds momentum is building throughout our business.

Please be safe and remain healthy.

Good day thank.

Thank you for attending our call.

Thank you and ladies and gentlemen that will conclude our conference for today. Thank your participation for using AT&T event services you may now disconnect.

We're sorry your conferences ending now please hang up.

[music].

[music].

[music].

Ladies and gentlemen, thank you for standing by and welcome to the C. I first quarter 2021 earnings call. At this time all participants are in listen only mode. It'll have a question and answer session and instructions will be given at that time.

You should require assistance during todays call. Please press Star then zero as a reminder, today's call is being recorded an expense comes through our host 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.

Hi, I guess you guys control.

I'll start by Recapping first quarter 2021.

I will then turn it over to Dennis to cover the OSP and the investment in new business segment.

After that each business segment leader will comment on the results of their segments.

As usual, we will feel questions at the end of each report.

So, let's turn our attention to the financials.

So the first quarter 2021.

First quarter revenue grew 10% from a year ago.

And first quarter earnings increased by 19% from a year ago.

In addition first quarter.

EPS of <unk> 89 cents grew 24 per.

24% from the.

72, <unk> reported in first quarter of 2020.

Finally, the first quarter.

Asset balances grew by $3 4 billion.

Well L. S lease balances grew by seven 9 billion.

During the quarter, we repurchased one 2 million shares.

Stock at a price of $58 on 11 per share that translates into $66 9 million of stock repurchases.

Also this quarter we.

Continued our investment in growth generating initiatives the newest effort as one Sci which is a large part of our growth strategy.

As you'll recall, one sci leverages existing and new Sci platforms.

Making them accessible to all types of clients all adjacent markets and all other platforms.

Turning to revenue production.

Net sales events and private banks and investment managers were $17 5 million of which $13 million are expected to be recurring.

On the other hand, net sales events of negative $12 7 million incurred in the.

Asset management related units.

West many advisors institutional investors and a bank.

Banking's a M D.

In a few minutes unit heads will provide more detail on their specific sales results and their new business opportunities.

To grow and prosper in the future, we know that things will never be the same.

So we have been busy adopting new mineral models and realities, one such new reality is a remotely.

Distributed workforce.

We have been planning.

How we work in the future interacting on these plans.

Yeah.

Fortunately, we have a lot of positive momentum moving into 2021.

We have a strong backlog of sales and conversions and a number of key prospects late in the sales process.

We have also made progress.

Theyre typically repositioning our asset management related business segments.

We are poised and ready to capture the opportunities inherent in significant change.

Now this concludes my formal remarks, so I'll turn it over to Dennis to give you an update on L. S me and the investment in new business.

After that our segments heads will update results.

Their segments.

Dennis.

Thanks Al good afternoon, everyone.

I'll cover the first quarter results for the investments in new business segment and discuss the results of Ellis B asset management.

During the first quarter of 2021 investments in new business segment activities consisted of the operation of our private wealth management group.

It services business opportunity the.

The modular relation of larger technology platforms to deliver on our one Sci strategy.

Other investments.

During the quarter the investments in new business segment incurred a loss of $9 5 million.

Which compared to a loss of $11 $4 million during the fourth quarter of 2020.

Approximately $7 5 billion is tied to our one sci effort.

Regarding <unk>, our approximate 39% ownership contributed $33 $4 million on income to Sci for the first quarter.

This compares to a contribution of $36 million net income for the fourth quarter of 2020.

Assets during the quarter grew approximately $7 9 billion.

<unk> experienced net negative cash flow during the quarter of approximately $4 8 billion offsetting market appreciation of approximately $12 7 billion.

Revenue was approximately $110 $8 million per the quarter.

With nominal performance fees.

Finally, our effective tax rate for the quarter was 22, 6%.

We have also included in our earnings release additional financial information.

You have any questions on any statistics, Kathy will be available to answer them.

With that I'll take any questions.

Thank you.

Ladies and gentlemen, if you do have a question. Please press one that then zero on your Touchtone phone, you'll hear acknowledgment that you've been placed in Q you may remove yourself from queue at any time by pressing one zero again.

Sure.

Our first question is going to come from the line of Owen Lau from Oppenheimer. Please go ahead.

Thank you.

Thank you for taking my questions, So Dennis with the vaccine.

Please give us an update on your operating model in 2021.

How does the vaccine change your view about the T N E span health care costs and other G&A spend for the rest of this year. Thank you.

Sure so.

Where we sit today travel is still very very limited in fact that we.

We can count on one hand, not only the number of trips people have made but the number of trips before requesting to make so it's a very limited amount of travel activity, but we certainly anticipate as we move through the year and I would say, particularly the second half of the year. After the summer we might see a slight uptick in <unk>.

<unk> activity, because we are starting to get some requests.

For folks to travel.

That being said it so I would say that if it has any impact on expenses just really to be modest overall.

In terms of health care spending.

There's really no.

No no.

Trend change over 2020 per se other than now we have a slightly higher or larger workforce, which is in of itself.

Benefit costs up.

But I think if you're asking really based on the.

Kind of anomaly, we had in the third quarter of last year.

I believe it was that was really I'd say case specific with.

Certainly.

Issues with employees.

Okay got it that's very helpful. And then you touched on <unk>.

I've got some numbers from the west yes, well so could you please give us a bit more color on this because I think in the first quarter.

Patient Trey was quite strong day.

The growth to value with trade was quite strong could.

Could you. Please talk about your view about how sustainable that it's and also how we capitalize the strength. Thank you.

Yes.

There are performance relative performance.

With strong book exiting the year and in the first quarter. So the good news is the.

The value trade.

Certainly help them, but in addition, there are positioned on the in the value segment of the market.

That's helped them even further.

Now time will tell whether that value trade is.

Wanted to persist.

And this market this year and beyond.

Yes, they certainly are going to stick to their knitting as a value firm.

And if it does persist in their outperformance were to continue that would only bode well for their ability to.

No compete and weighted assets, but also.

As clients start to rebalance back towards value within the overall portfolio is that should help them as well.

Thank you that's it for me.

Thanks Alan.

And our next questioner on and go to the line of Brian Kenney from Morgan Stanley. Please go ahead.

Hey, Dennis how are you.

Great Ryan about yourself.

Just a follow up on us on the $4 8 billion of outflows when I get a sense of was that more of a rebalancing issue or a lost client issue and how should we think about organic growth and I'll speak going forward.

Yes. It was about 50 50, so about 50% was rebalancing of 50% was.

Most clients.

Mainly in the.

Managed volatility product.

In terms of the future I mean they.

They had.

Yes.

Positive gross sales during the quarter.

But again back to the answer I gave the one I think that if the value trade persists and their outperformance.

Add to that.

I think that bodes well for their ability to capture not only.

Assets flowing back to them via rebalancing, but also.

When in searches when when firms who are on our clients look to look to find value managers to hire.

Thanks, and then just a question on one C. I was wondering if you could give an update on the trajectory for that going forward.

Sure. So as we kind of look out the rest of the year second quarter is going to look pretty close to the first quarter.

Okay.

That's kind of how we had even planned forecast it out last year and then we'll start to see and we saw a drop down from fourth to first and second quarters, probably will be in the same range it could be a little bit higher than that.

And then first book.

Materially so and then the second half of the year third quarter fourth quarter, we will see additional step downs as we finish the work.

Some of the <unk> work in terms of modernization is targeted at a client implementation later this year and we have to finish that work arguably in the second quarter to get that.

The software releases and production so they are well tested embedded for the for the client so.

We are on track and I think things are trending the way we had expected them to.

Thank you.

Welcome.

Yes.

And next we'll go to the line of Christian <unk> from Piper Sandler. Please go ahead.

Good afternoon guidance, thanks for taking my question.

Chris quickly yeah. Thanks, just.

Just quickly wanted to combine the two prior questions and thinking about that.

Your total expenses on a consolidated basis for the quarter, I mean, given sort of like that.

There should be a positive impact from one one sci decreasing over time, but probably are.

Higher expenses further out from some rebound in travel is it is it fair to think about the first quarter expenses is a reasonable run rate for the full year.

I think I mean, I think as we talked in the past, we will see some inflationary growth as the year progresses, so the 1% uptick from fourth to first.

I think there'll be a little more pressure on expenses than that.

The next few quarters.

Yes.

Have as Youll hear from the unit from Steve in particular, we have a pretty big backlog of clients install.

That will have some impact on hiring.

I don't know that travel will really move the needle.

Offset.

It ticked down in one Sci spend I don't think travel will be that significant.

We did get a little bit of benefit in the first quarter on option expense, we had a couple of people.

Leave and allow us to reverse some option expense.

Sure.

But that being said I think expenses they'll definitely.

Should say definitely.

We expect them to tick up as we progress through the year, but again our job is to continue to try to execute as best we can is to keep it keep our spending.

<unk> targeted at the right things.

Being as productive as possible.

Without giving up some of the investments we think are critical to our future.

That will come that will continue.

Great Rob.

So.

Pretty good thanks.

Just a question just kind of curious on at a high level.

<unk>.

As you think about notwithstanding some spending I think we all hoped spending comes back on travel or something similar on the second half of the year, but in a way, but more broadly as you think about changing the business model more of a distributed workforce.

Maybe it's too early but if you have any kind of initial thoughts on how you think that plays out into over long term expenses that Gee theres, an opportunity here to diminish our real estate footprint.

Sure.

The cost of kind of having supported dispersed sales force kind of pretty much offset any potential benefit just kind of curious your initial thoughts on it.

Yes.

Okay.

The pandemic hit.

That's kind of the wrong time relative to our own real estate planning because we were.

75% on building a brand new building here.

And.

And our new campus arguably we call it the north campus.

So yes.

We finished that building and it's where it's ready to be occupied.

When we built that building was to eliminate.

Couple leased facilities that we had in the.

Oaks area, and we were able to do that so we got rid of those leased facilities.

But all of those people went home instead of two or so.

I guess, it's safe to say that.

We have plenty of capacity.

So.

I hope and Dennis Mcgonigle future there is no longer the need to build another parking garage.

We do expect the bulk of our work force, though over time to return to.

To our offices.

Okay.

Around the globe.

Focus on Oaks at a minimum and roles that are more hybrid so.

A few days a week type roles.

So on.

Optimize our capacity.

And as we kind of manage our workforce back to offices provide.

Providing them with a lot more employees with more flexibility in terms of.

On work environment versus some office work environment.

So on I'll say, our cost change it much our lease space in a bigger offices, Ireland UK Indianapolis those leases out for some time per run.

And to the extent, we get at the end of those lease terms and we.

Don't need the amount of space, we have certainly we would have the option to to shrink.

But right now we're under we're under lease so.

And are not really its not really.

Facilities that lend themselves to Subletting.

That's even possible.

Okay great.

Thanks, so much alright, thanks Ralph.

And at this time I have no further questions in queue. Please go ahead.

Before I turn it over to Steve we would like to remind everyone that during today's presentation and in our responses to your questions. We have and we will make certain forward looking statements that are subject to risks and uncertainties that may cause actual results to differ materially.

Please refer to our notices regarding forward looking statements that appear in today's earnings release and in our filings with the securities.

The Securities and Exchange Commission.

Cannot undertake to update any of our forward looking statements and with that I'll turn it over to Steve.

Thanks, Dennis good afternoon, everyone.

I wanted to talk about banking first and then as usual I'll turn it over to investment managers. So let's focus on banking during the first quarter. We continued our momentum in the market. While also executing on our <unk> strategy and we are able to continue to prudently manage expenses, which aided in the profit per quarter.

First quarter 2021 revenues totaled $117 6 million.

Which was up approximately 4% from the first quarter of 2020 due to higher recurring revenues.

First quarter 2021 quarterly profit of $6 9 million.

For the segment was up approximately $4 3 million or 168% from the first quarter of 2020 and up 49% from the fourth quarter of 2020. This was primarily due to expense management.

And turning to sales activity for the quarter, we closed $8 7 million of.

Gross recurring sales events, which resulted in $3 6 million of net recurring events for our investment processing business offset by a negative $2 $5 million in asset management.

This offset from asset management brought our total net recurring events for the quarter to approximately $1 1 million for the segments.

Also in the quarter, we closed $2 $9 million on one time revenue.

While we are encouraged by the $8 $7 million on gross sales events for the quarter and the momentum with new business that continues we had to digest the headwind of an uptick in M&A activity in the industry, which negatively affected our sales total for the quarter.

This is a headwind we will have to deal with this year as there are several other clients of ours, who have been acquired however, we remain very bullish on the new sales activity, we continue to experience.

As previously announced on our fourth quarter, 2024th we closed three SVP agreements in the first quarter two of them new clients to Sci and one on existing client from trust 3000.

Outline the details of these events on the previous call, but to summarize these new sales included Banger savings Bank a trust 3000 clients since 2011, we will convert to <unk> in 2022.

West Coast large community Bank, we will migrate to SVP from a competitor platform in the first half of 2022 and who is also a candidate for our <unk> strategy. We believe this firm has an opportunity to leverage additional SaaS platforms and solutions and is currently evaluating <unk> asset management distribution products and finally, our third signing was with another.

New client <unk>, United, Missouri back, who will migrate their private wealth management book of business to the <unk> platform. Later this year, we are proud to welcome <unk> to the Sci family.

Additionally for new sales in the quarter, keeping our one sci approach in the forefront we were able to cross sell our archway platform to one of our long term trust clients as well as cross sell additional services to several other clients, including an upsell of components to our clients who is migrating to Swm's day.

During the quarter. We also had six five free contract securing another approximately $9 million on recurring revenue.

As an update on our backlog, our total signed but not installed backlog is approximately $77 3 million in net new recurring revenue at the end of the first quarter.

From an asset management standpoint, total assets under management ended the period of $25 1 billion.

Which was down one 6% from the fourth quarter of 2020.

Our cash flow for the first quarter of 2021 was a negative $885 million.

The majority of this outflow was due to a single asset management client, who had purchased one of our asset management product and decided to sell out of that product completely.

As we continue through 2021, our focus continues to be on maintaining our strong momentum in the market continue to expanding our business with clients and expanding into new markets to increase our opportunities key to this will be our one MSCI strategy and being able to increase our growth opportunities by unlocking all of the assets on platform <unk> has to offer across the company.

We will also focus on driving scale on our business as we push towards providing a sustainable and accelerating margin growth in the future.

We remain excited and optimistic on our growth opportunity.

That concludes my prepared remarks, and I'll now turn it over for any questions you have.

Thank you once again, ladies and gentlemen, if you have a question. Please press one zero at this time.

Our first question will come from the line of Ryan <unk> from Morgan Stanley. Please go ahead.

Hey, Steve how are you good.

You're right.

Good.

Couple of questions first one on the.

On $22 billion drop in.

For private banks, just wondering if we could get more color on that that al from M&A.

And how does that impact the forward look on revenues yes.

Yes that was on a client who.

Looked like it was a fun family, who look more like an asset manager clients. So we move that fund complex to IMS. So it was really just an internal move and it's.

A lower fee products. So there wasn't a great deal revenue associated with it but from a servicing and kind of lining up segment opportunity. It was better to go diverse.

Got it thanks.

And then just as a follow up wondering if you could give an update on the competitive environment, you're seeing with some of the other wealth management platforms out there.

Are you seeing the most pressure on where are you seeing the most success.

Yes, I would say the competition is there is no notable change except the people our competition.

Lakes competing with fee.

Which is nothing new to us.

Sure.

Wealth managers out there, they're looking for a new platform and.

Much more capability, we certainly.

Hit that on all strides.

Yes, I do see some smaller boutique providers coming in and providing bespoke offerings are going after a piece of the puzzle, but again I think we've designed our platforms and our solution to really address the whole puzzle for wealth management and with our <unk> strategy, where we're being able to lean into that now and do it in a more.

Staggered fashion to make it more digestible, but.

For us, we feel very well positioned both here and overseas with our capabilities and our platform and technology.

Got it thanks.

Sure.

And next well go to go to the line of Robert Lee from <unk>. Please go ahead.

Great. Thanks, Good afternoon, Steve how are you doing.

Great Rob how are you doing.

Thank you.

Couple of questions. The first thing is on.

Your comments on industry M&A.

There is some headwind there.

In the past.

Because it's an industry that's been consolidating for years I guess.

I'm always kind of thought of as much and consolidation opportunities to raise rents.

No.

I don't want to read too much into your comments on kind of suggests that maybe right now what you've seen from EBITDA youre kind of expecting there.

More likely to use some of the.

Relationships due to M&A or is that just trying to be extra cautious nationally.

And I would say rather to a little bit of both so let's say a number of our clients and I think we've talked about these in the past it's been in the press had been acquired and one was acquired by a competitor from overseas.

Kind of lining up to come into the U S.

I don't feel very.

Don't feel very confidence that we're going to keep that business.

The other ones I, just think where we see it trending I.

I think I have a caution I would say, we're lining up thinking that most likely because of other priorities that the acquiring organization.

It most likely will not stay with us.

When you started off the commentary M&A, we've done we've dealt with this in the past it can be a benefit to us or it can be a headwind.

Over the past couple of years, we've had some M&A that's been very positive for us.

Unfortunately, I think we're going to have a couple that are going to be negative for us this year.

That's going to be a headwind, but I view it as a temporary headwind that does not take away or distract from the momentum we have and I think quite frankly.

My view of it is even if we do not retain the clients because of acquisitions that gives us another prospect to go after on a larger way.

Okay, Great and then maybe.

Al.

And maybe this goes to the pipeline I mean do you have any sense.

Interest rates go up earnings should go up.

Credit costs pretty well controlled.

Bank earnings generally seen in better shape.

Versus the year ago potentially so.

Do you see that trend leading at all into your pipeline.

They are engaging more on the seem more willing to start spending some of the.

The money or are these things you're more willing to kind of engage in.

Yes think about change.

Change in <unk> balance sheet.

Yes, it's a great question, Rob, but either way out but is this we see a number of force is coming to bear that.

That I believe is causing managers not just banks, but wealth managers across the board to re look at their business model and I think it bodes well for US I think you've heard us say time and time again before disruption in this business usually works out for us and presents opportunity. The pandemic has been a big disruption I think this is causing a lot of.

People to reconsider outsourcing and strengthened the outsourcing position.

You certainly have interest rates and the capital position bank of banks being in a better position, but the other piece is many of these large wealth managers and banks know that they need to make a decision and need to upgrade their technology to drive scale.

Execute on their strategic plan many of them have pushed that decision and I think we're getting to an inflection point now where that pushing up the decision cannot be pushed anymore and I think this is why we leaned in with this one Sci strategy one of the benefits of that as we can make our very powerful transformative solutions more died.

<unk> enabled to do this in steps and I think that will play well as these forces coming together.

Yes.

Okay, great and if I can just volume two little numbers I think I just missed on the.

Asset managers contribution in the quarter and then the onetime revenues with them both.

The negative and positive $2 9 billion not price.

Income.

Well I think the asset management of the assets that were down were down cash flow was $885 million.

And what was your other one Rob on.

On the one time revenues.

Some one time revenues was $2 9 million.

But also if you are asking for asset management as far as sales who is that what you were asking yes, yes. So.

So the sales force.

We're around negative $2.5 million.

So it was negative two five debt went against our growth of eight 7%.

Okay.

Great. Thank you so much.

Sure.

Next moving to go to the line of Ryan Bailey from Goldman Sachs. Please go ahead.

Hi, How's it going.

Good how are you on.

Non cigarette.

So I just had a quick question on some of the implementation outlooks on the backlog.

Looks pretty healthy with growth in the back on quarter over quarter as we look through the course of the year.

How are you thinking about that getting implemented how that can contribute to revenues.

So I'm thinking about doing it on time.

Right now we have people schedule then we're in line things progress we didn't have any final implementation scheduled for Q1, but we do have other scheduled throughout the year. If you look at the backlog now and I've been giving this kind of 18 months kind of barometer right now about 61% from the last time, we talked there was around <unk>.

50% about 61% is probably due in the next 18 months.

And the remainder after 18 months, probably more into 'twenty four to 'twenty six month period.

And we're looking to keep that on track could some of the push yes, I don't think materially working with clients that might have.

More.

No.

Troubles or slow down on their side getting implementation downstream implementations on their side, but for the most part I think we're in.

In intact of on time.

Got it okay, alright that makes on.

Maybe just a separate one and to the degree you can talk about specific client.

Ill give it a shot.

I was just wondering.

One of the drivers we've been talking about for the business has been on your asset management on wealth management sort of coming close together and STI.

Being at a competitive advantage with that I was just wondering with wells on a sale of majority sales their asset management business, how that impacts your relationship with them.

What sort of index going forward.

Yes, so I don't think it changes our relationship with them obviously wells.

Going through their own rationalization and working on their business.

Have a very close relationship in close contact with well we knew about that they were going to be divesting of that business. We service some of that business, but it's not a majority of the business and we don't think it will have a material impact on our revenue.

But we're still focused on.

Ironically, we think this is good for us because wells is normalizing and right sizing their business for the future and I think once they do that and get to.

Getting into a good spot, we will be able to engage them on how sci could continue to support them and increased our support and business with them.

Awesome.

Sneak one more in.

Sure.

I was just wondering about the I think you said that Youre up sold a client who is converting from trust 3000 sure SWT I was just wondering if you could give us a little bit more detail there on maybe what components that was how much of an increase in the net revenue.

So are you talking about the cross sales Ryan.

Yes, I think so yes, yes, yes.

Obviously, I'm not going to get into the client, but what I'd say is.

And I think this is an important factors before you heard us talk a lot about new business, but we didn't spend much time on cross sell.

I've told you part of our strategy.

We overuse of here with land and expand but one of the key points of our one MSCI strategy was to unbundle parts of our platform. So people could digest and move quicker and during that process as we got the fine and if there was opportunity to up sell them or add other functionality for example in this case.

Just to add front office capabilities.

Because they were just focused either on the back and middle office that will be an opportunity and thats what happened in this case and we do think as we lean in more there'll be more opportunity for us on this on clients that are converting as well as new sales that we have so we view that as a very positive move forward for us It gives us another lever to pull with.

As we expand and grow the business.

Great. Thanks, Dave.

Sure.

And at this time, we have no further questions on queue.

Okay. So al.

With no questions I'll turn it over to investment managers segment.

So turning to the investment managers segments. During the first quarter. We continued our momentum in this segment and saw strong growth from both new clients and expansion with existing clients.

For the first quarter of 2021 revenues for the segment totaled $136 4 million.

Which was 17% higher as compared to our revenue in the first quarter of 2020.

Profit for the first quarter profit for the first quarter for the segment of $53 4 million.

With 26, 1% higher as compared to the first quarter of 2020.

Third party asset balances at the end of the first quarter of 2021 were $831 8 billion.

Approximately $71 4 billion higher than the asset balances at the end of the fourth quarter of 2020. This increase was due to net client fundings of $38 6 billion as.

As well as market appreciation of $32 8 billion.

And turning to market activity during the first quarter of 2021, we had a strong sales quarter with net new business events totaling $9 3 million and.

On recurring revenue as well as re contracts of $8 $7 million on recurring revenues. These events. This quarter were diverse and spanned our entire business. They were reflective of the current market dynamic which is highlighted by a larger amount of what we would call singles and doubles versus larger scale mandates highlights of these events included in our al.

Turning to this market and if we closed a number of strategic new names while sales to existing clients continues to be robust ICI was selected to provide fund administration for several new hedge fund actually I was also selected after an extensive RFP process by a $25 billion fund to funds to utilize the FBI trade platform.

Momentum also continued in the private equity and private debt space and we continue to launch funds with both new and existing clients.

On our traditional market unit, we continue to add new business on all product lines with both new and existing clients consistent with our land and expand strategy to new client selected us to take advantage of our Middle Office services platform on multi fund complex joined our pioneering advisors inner circle 40 AD platform and we also added a new ETF clients, who are turnkey at <unk>.

Users on our circle trusted platform.

In Europe, we continue to have solid cross sales and finally in our family Office services unit, we signed multiple new named single family office clients to the archway platform and continue to see strong demand from this industry vertical.

Our backlog of sold but unfunded new business stands at $35 6 million at the end of the first quarter.

As we progress into 2021, we will continue to focus on our growth strategy and look to continue our strong momentum in the market.

We have a strong pipeline across all segments, great momentum in our leading platform combined with exceptionally talented and experienced people.

This combined with our continued execution of our strategy bodes well for the future.

That concludes my prepared remarks on I'll now turn it over for any questions you may have.

Thank you and once again, ladies and gentlemen, as a reminder, if you wish to ask a question. Please press one zero at this time.

Do you have line of Ryan <unk> from Morgan Stanley. Please go ahead.

Hey, Steve just want to get an update on how you're thinking about margins from here and how sustainable the 39%.

Okay.

Thanks, Ryan So margin my view has not changed from before and I know it sounds like a broken record I feel comfortable with the margins in the mid Thirty's as I said last I think it was last quarter I can see that up 15 to 36 range. This quarter, we had a number of things, which I think impacted.

The margin positively one we implemented a lot of new business and the labor market is a little tighter here.

So we implemented a lot of the revenue ahead of us bringing on some of the resources for it. So our personnel expense was a little low compared to the revenue and.

Obviously that will that will switch as we go through and switch certainly by Q2, Secondly, we had some.

Kind of one time expense adjustment that helped us somewhere around <unk>.

Compensation.

As Dennis mentioned that won't repeat so I think if I took those out and look at the margin, we have probably more and be more in the 36 per cent range, which is again, where I feel comfortable that this business is that especially as we continue to invest and continue to build out our platform and solutions for sustainable revenue.

Got it.

And then just a question on digital assets, we've seen some announcements from a few investment services over the last few months outlining plans to offer.

Servicing accounting and custody of digital assets, just want to get a sense of how that could potentially fit into your space and if youre seeing any demand from your customers to offer something similar.

Yes, so we've actually Ryan we are already providing services for a handful of crypto funds and it is something strategically we believe and we've already had discussion with numerous of our clients that they have plans.

Set of funds around this so it is something that strategically we are on obviously, we don't provide custody, but we're obviously lincoln integrate into custodian, but it is something we do think that we're going to have a larger servicing footprint on in the future.

Great. Thanks.

Sure.

And next well go to the line.

Robert Lee from <unk>. Please go ahead.

Great. Thanks, Steve.

Since you already gave us.

The backlog they just funded next one another quick question.

I'm just kind of curious I mean, you have.

Hum.

I mean, there's obviously been plenty of M&A on the asset management industry.

So on the traditional versus on terms space certainly some there.

Is there anything we should be thinking about that kind of plays out.

<unk> kind of impact on the momentum in this business.

Seemed like in any been just kind of curious your thoughts.

On that.

No I think Rob and I missed a little bit there kind of cut out but yes.

The other thing the alternative side has been a driver for us as well as the industry for a number of years. However, what I would say and I think we saw this towards the end of last year. Our traditional business is resurging again, and I think it's resurging for a number of reasons the.

The managers in that space are under pressure as active management comes under pressure and they are rethinking their business model on how to drive scale outsourcing and the capabilities. We have on the platform resonate very well when theyre looking at that.

If you look in this quarter sales a good bit of it was our traditional business. So we were very happy with the progress we see a huge need for our middle office services platform we.

I also see a need across our cities on our ETF platforms. So that's an area that I expect good growth from this year and I think adds managers kind of rethink their business model, we stand on a good position to service them and give them an offering that will help them with that.

Okay, great. Thanks for taking my questions.

Sure.

And at this time, we have no further questions in queue. Please go ahead.

Great. Thank you I'll now turn it over to Wayne Withrow to cover the advisor segment Wayne.

Thanks, Steve.

Yes.

During the first quarter of 2021, we continued execution of our strategy, including improvements in our sales and marketing process.

Virtual environment.

Offering a bundled fee in our new unbundled fee investment products.

And continued enhancement and delivery of a completely integrated front to back office technology platform <unk>.

<unk> coffee.

First quarter revenues totaled $113 million.

This 11% increase from the first quarter of last year.

It reflects the impact of AUM growth.

As well as lower fee rates on some of our products.

Expenses were up compared to the first quarter of last year, primarily due to an increase in direct costs.

And to a lesser expense.

Expenses associated with our purchase of the Orange technology platform.

Same factors influence the expense increase from the fourth quarter of last year at.

As well as inclusion in the fourth quarter expenses on.

On some non recurring savings.

Overall, the profit picture for the unit remained relatively intact.

Slight pressure on our asset management revenue rate.

Assets under management growth of 77 4 billion at the end of the first quarter.

Total platform assets.

And at $90 billion.

Market appreciation drove this increase.

We did achieve strong cash flow growth in our newer on bundled fee products.

Partially offset by net redemptions in our older embedded fee products.

Primarily in our actively managed mutual fund wrap program.

Total net cash flow for the quarter was $306 million.

Of this total $125 million was in assets under management and $181 million asset under administration.

We recruited 52, new advisors during the quarter.

During the quarter, we purchased the assets of <unk> technology.

On the back office technology strategy.

While the financial sides of the transaction was modest.

We feel the end investment collaboration platform, we acquired is compelling.

And will unlock new opportunities for tech forward client engagement.

We intend to fully integrate this platform at WP and begin to rollout to our advisors and the second half of this year.

In addition to this platform asset the acquisition included a team of skilled cloud technology professionals.

During the balance of this year, we expect to incur a $5 million expense increase as we integrate and rollout this platform.

While there still remains much to be accomplished.

I feel we are making progress in that three focus areas.

Evolving our sales and marketing process.

Today's digital world.

Designing and offering investment product.

Spot to todays investor.

And delivering a compelling front to back office technology platform incorporating custody.

It is my opinion.

On that achieving success in areas famous companies with our skill sets and assets.

I'll now welcome any questions you have.

Thank you once again, ladies and gentlemen, do you have a question. Please press one zero at this time.

Your line of Ryan <unk> from Morgan Stanley. Please go ahead.

Hey way on how are you.

Oh, Great line, how about you.

Good just a question on the Orange acquisition.

I wanted to get a sense of how it fits into your tech strategy in terms of what specifically it enables you to do that you weren't able to debt before and then from here are there any other gaps on tack or capabilities that you're looking to fill in.

Well at the highest level Orange was.

And end Investor collaboration pool.

We did not have a strong presence in the end investment collaboration tool.

So.

If you looked at it in terms of specific functionality.

Things like account aggregation.

Digital document ball.

Secure messaging and collaboration with the advisors and advisor and client it functions such as that.

It is also a completely cloud native technology platform and will be in the forefront of us moving all of our end investor technology into the cloud.

And then are there any other gaps or capabilities that you're looking to fill line from here.

Yeah, I mean, I think when you look at it we're always going on will always.

Enhanced and customer reporting and we expect it.

To be able to do that.

If you look at the collaboration on a financial planning side, how you can sort of we view and modified financial plans in real time on something we have on our roadmap.

Its items such as that.

Telling the world what our tech strategy is.

Got it okay. Thanks.

And next we're going to go to the line.

Ryan Bailey from Goldman Sachs. Please go ahead.

Hi, Wayne.

Hi, Ryan.

I'm, sorry, I missed the number.

Did you say.

On slide you had inflows.

Right.

Total new assets on the platform with $306 million and net cash flow.

Of that total $125 million with assets under management and $181 million with assets under administration.

Got it okay.

I guess on.

Just sort of a question as you think about the.

Bundled both unbundled approach it seems like Youre, having you've had several quarters now of really good momentum on the unbundled or <unk> approach I was just wondering if you can help us think about why it might be that advisors are choosing to approach with <unk>.

Are you guys.

Just sort of an investment selection decision is there a pricing component to it at all.

It may be something else that I'm not thinking about.

Yes.

I think you hit all the high points.

You get down into the weeds, a little more complex with that I mean, some of the products. We have one that's more expensive and existing product I would say.

Oh.

If you had to generalize I would say.

The unbundled product a little bit more expensive.

A little bit cheaper when you add all the components together with some people prefer.

Having the bundled price even if it is a little more expensive.

It just seems cheaper because it is not a whole set of line items.

But the major difference I think would be on bundling and bundled is that allows you to sort of deconstruct the whole investment management profit.

So that if you want to charge separately for example for tax management pick that as an example, you can do that on an unbundled structure, where everything bundled you have to offer all of the components of asset management together, whether an investment value did or not to take tax management would be the easy example, if you have.

Qualified money intact Magnus in the pricing on the bundled product you pay for it even though you really don't need it.

So this allows us to customize.

Pricing and and the delivery of the product to what the investor really needs and I think that's what's resonating.

Got it.

And then I know I asked this question last quarter, but if I can ask it again, if you can do sort of a rough rough justice on the split of debt EUA floors between sort of like new advisors.

On the existing advisers sort of converting existing books of business from <unk> to <unk>.

Yes, I think right now the major growth as the majority of that growth into new advisors.

At this point okay.

Alright, Thanks, Mike.

And at this time I have no further questions in queue.

Alright, great.

With that I will turn it over to Paul to talk about institutional investors.

Thanks, Lynn good afternoon, everyone.

To discuss the financial results for the first quarter of 2021.

First quarter 2021 revenue of $84 $5 million increased 7% compared to the first quarter of 2020.

Operating profit for the first quarter 2021 for $45 3 million and increased 11% compared to the first quarter of 2020.

Both revenue and operating profit increases were due to market appreciation.

Positive currency translation offset slightly by negative client fundings.

Operating margin for the quarter was 54%.

Quarter end asset balances of $99 4 billion reflects a $19 8 billion increase versus first quarter 2020.

This was due to market appreciation.

Net sales event for the first quarter were a negative $2 7 billion.

Gross sales were $1 2 billion in client losses totaled $3 9 billion.

First quarter, new sales were diversified across U S and dominant foundations governmental and health care.

The client losses for the quarter were predominantly due to unsuccessful client rebids and DB curtailments.

CIO market is highly intermediate it and numerous CIO search consultants are active in getting asset owners to evaluate their incumbent OCI al firm.

We were impacted by this in the first quarter and it is likely this trend continues given our tenured tenured client base, particularly in the corporate defined benefit market.

The unfunded client backlog of gross sales at quarter end was $865 million.

We continue to focus on stabilizing our client base distinguishing our OCI on solution selling new <unk> relationships and advancing our <unk> proposition.

Thank you very much and I'm happy to answer any questions that you may have.

Thank you.

On a go to our first question from Robert Lee from <unk>. Please go ahead.

Hi, good afternoon Paul.

Hi, Robert.

I'm curious I mean, so I mean, given the commentary around kind of.

Heavily intermediary channel I mean.

I mean, I guess to some degree that's always been the case, but what's kind of changed.

More maybe more recently.

Sounds like maybe there's some celebration and the pace of activity is it just coming out of the first.

Half of last year there was.

Maybe pent up demand I mean, how should we think of that.

Yes, good question.

The OCI on the search consultants.

Kind of exploded over the last three or four years and certainly the velocity has increased even more in the last 12 months.

What we witnessed last year in the first couple of quarters in the second and third quarter of last year as most of our clients.

Just kind of entrenched and focusing on their own business and focusing on the risk management with respect to their asset pool rightly. So.

Yeah.

What also with zoom and video and efficiencies unveiled was more time they had to maybe think about the incumbent provider and perhaps test the market at the same time.

Many of the search consultants where product into clients our clients on other tenured clients, suggesting that proper due diligence on proper governance. After some intervals sei. It's five years seven years, whatever that they should go out and test the market. So it's been a little bit of a comparable confluence of events in the sense that the.

More time on their hands and maybe more efficiencies in their quarterly meetings.

Search consultants have gotten more aggressive in their target now we're not anti search consultants, we have a whole team focused in both the U S and the U K around the search consultants, but we also believe that you have to given our CIO firm, an ample amount of time to prove value improved wires and just go.

Through due diligence for the sake of due diligence.

On may save a couple of hours from both from a cost perspective, but might not bring the right value proposition. So we are in flight reminding all of our clients on that.

On the zoom impact, we've lost a little bit of the human element.

So while we haven't traveled as much we do see that some of our clients are requesting travel and we're excited to be back in person because some of the human part of the client relationship.

We think is important in addition to just the substance and the quantitative components that we deliver.

Yes.

That makes sense, then maybe on the follow up to that.

So.

I mean, if there's a way to characterize.

When you even with the search.

So intermediaries, having their own agenda more or less.

Is there a way of characterizing when you do lose mandated.

On price performance on mix of the two I mean, because it's.

Any way to kind of.

For us to kind of get a sense of if you do something with.

The kind of $15.

Yes, when we see Rebids price is always a factor so.

However, we made in the past, we kind of know intuitively, we probably won't make the same in the future.

So we address that in our rebid.

<unk> sales, so we adjust price when we're actively trying to retain the client.

That said and I think I've mentioned this in the past there are some OCI OS that are very predatory with respect to price.

They're even bidding very low single digit basis points.

We spent a lot of time, making sure the search consultant on the asset owner.

And it's all cost not just the <unk>, but it's all the cost of debt.

The implementation, which the bigger component is what the cost of the managers are and just having a simple our model our.

Model low cost model doesn't mean, it's a better model.

So cost is a factor back to your original question.

Sometimes it might be the.

The shiny new car.

Go through a re bid in.

They have.

Eight or nine firms that are presenting in maybe click with the new team or theres, a different relationship or there is other dynamics.

One of the one of the beauties of the business is being able to get assets over quickly.

One of the negatives of the business as the business does not have long.

Tracks. So our contracts are 30% 30 days in most <unk> are 30 days notice.

Clients could move easily.