Q1 2025 SEI Investments Co Earnings Call
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Speaker Change: Hello and welcome to SEI First Quarter 2025 Conference Call. At this time, all participants are on a listen-on mode. After the speech presentation, there will be a question and answer session.
Speaker Change: To ask the question below in the session, you will need to press star 111 on your telephone. You would then hear automated message advising your hand is raised. To withdraw your question, please press star 111 again. I will now like to turn the conference over to Brad Burke. You may begin.
Brad Burke: Thank you and welcome everyone. We appreciate you joining us today for our first quarter of 2025 earnings fall.
Speaker Change: On the call, we have Ryan Hicke, SEI's Chief Executive Officer, Sean Denham, Chief and Ant Law Officer, and Chief Operating Officer, and members of our Executive Management team.
Speaker Change: James Cipriano, Sandy Ewing, Paul Klauder, Michael Lane, Phil McCabe, Mike Peterson, Sneha Shaw, and Sanjay Sharma.
Speaker Change: Before we begin, I would like to point out that our earnings press release and the presentation that we'll accompany today's call can be found under the Investor Relations section of our website at SEIC.com. This call is being webcast live and a replay will be available on the events and webcast page of our website.
Speaker Change: We would like to remind you that during today's presentation and in our responses to your questions, we have and will make certain forward-looking statements that are subject to risk and uncertainties that may cause actual results to differ materially
Speaker Change: Please refer to our notices regarding forward-looking statements that appear in today's presentation slides and in our filings with the Securities and Exchange Commission. We do not undertake to update any of our forward-looking statements. With that, please turn to slide grade as I turn the call to our CEO , Ryan Hicke, Ryan.
Ryan Hicke: Thank you Brad, and good afternoon everyone. Last quarter I shared our expectation that SEI would build upon the strong momentum we achieved in the second half of 2024.
Not only did that momentum continue, but it accelerates
Ryan Hicke: As I've said before, we are running SEI differently. We are showing up in the market differently. We are fundamentally reshaping our operating model, deepening client engagement and relationships, strengthening our talent and sharpening our strategic vision.
Ryan Hicke: The results of these efforts are evident in our performance over the last several quarters.
Ryan Hicke: As part of our enterprise mindset, we held our first ever global client symposium in March, where we brought together clients from across all of our business lines.
It was unbelievable, energizing and humbling [inaudible]
Ryan Hicke: It gave us a forum and a platform to not only connect industry leaders but also help our clients learn about the breadth of SEI's capabilities through each other.
Ryan Hicke: We could see people's perceptions of SEI change in real time as they became increasingly aware of the size of our client network and the intersection of solutions and industries.
Speaker Change: In the first quarter of 2025, SEI delivered earnings per share of $1.17, an 18% increase year over year. All business segments contributed to this growth, each posting higher operating profits and expanded margins.
Speaker Change: Despite the mulchewis capital markets, we saw modest growth in client assets under management and administration demonstrating the breadth of SEI's diversification across product types and geography.
Speaker Change: Most notably, SEI achieved a record-breaking $47 million in net sales events in Q1.
Speaker Change: Thirty-seven million dollars of those are recurring, a new high, surpassing our previous record from Q3 2024.
Speaker Change: This success fanned multiple clients and business lines, both domestically and internationally and reflects the strength of our enterprise mindset and evolving go-to-market strategy.
Speaker Change: By offering a comprehensive suite of solutions, SEI is uniquely positioned to serve the world's most sophisticated institutional, wealth and asset management organizations.
Speaker Change: During the quarter, we also announce the sale of our family off the services business.
Speaker Change: While a strong business, relative to other strategic choices we have, we felt this asset had a greater growth opportunity outside of FBI.
Speaker Change: We believe the Acqueline is positioned to accelerate the growth and adoption of this platform and we're pleased that the sale will deliver a strong return for shareholders exceeding our initial investment in 2017.
Speaker Change: In summary, Q1 was a standout quarter for STI. We are immensely proud of these results, but our focus, as always, remains on the road ahead.
Speaker Change: A path that currently presents an unusually high degree of market uncertainty, but equally presents opportunity as organizations rethink their operating model and capital deployment strategies.
Speaker Change: SEI has historically been successful in how we have navigated challenging environments. Our diversified business model, coupled with a fortress balance sheet, and an amazing workforce, has been at the core of this success and something that we believe positions us exceptionally well to address the current conditions.
Speaker Change: Growth-focused firms are actively advancing their shift to outsourcing, particularly for technology and operational platforms.
Speaker Change: Our sales pipelines are strong, with discussions remaining proactive and optimistic. Our investment manager clients report stable redemption activity and capital deployment trends that align with expectations.
Speaker Change: That said, the recent wave of market uncertainty in the evolving macroeconomic dynamics in a disbarrable that could influence the broader economy and potentially our pipeline activity. As Yogi Barra famously said, it's tough to make predictions, especially about the future.
Speaker Change: While the full impact of these developments is yet to unfold, we are closely monitoring the situation but we remain focused on controlling what can be controlled. Notably our talent, our client focus and our strategic investments.
Speaker Change: Looking forward, I am confident in the SEI Strong Foundation and our ability to deliver sustained long-term growth.
Speaker Change: We are actively pursuing both organic and inorganic opportunities to accelerate our strategic progress, ensuring we continue to create value for our clients and shareholders.
Speaker Change: Before I hand the call over to Sean, I want to highlight his expanded role in SEI's Chief Financial Officer and Chief Operating Officer [inaudible]
Speaker Change: In a short time, Sean was driven significant value, relentlessly pursuing higher returns on invested capital and unlocking SEI's growth potential. He has also been a terrific cultural addition to the team. With that, I'll turn it over to Sean.
Thank you, Ryan. Please turn this vibe 4.
Sean Denham: Our EPS of $1.17 represents an 18% increase from Q1 2024. Additionally, share repurchases over the last 12 months were a notable contributor to earnings growth, driving three cents of EPS improvement against Q1 2024.
Sean Denham: Last quarter we had a handful of items called out that affected the comparability of our EPS. This quarter, the impact of those types of items was negligible.
Earnings for Share Declined Modestly on a Sequential Basit
which was our expectation.
Sean Denham: Turning to business units financial performance on slide five. Each of our business units realize operating profit growth against Q1 of 2024. Growth in our investment managers business reflects strong sales momentum, particularly among alternative and global managers.
Sean Denham: Investments Advisors Revenue Growth of 11% was largely attributed to the year-to-year contribution from the Integrated Cash Program.
Sean Denham: which generated $21 million of revenue, first $10 million in the prior year. Sequentially, investment advisors and institutional investors saw modest declines, mostly attributable to the full quarter impact of lower asset balances, which occurred towards the end of the fourth quarter.
Sean Denham: Turning to slide six, we achieved healthy improvement in the operating profit margins in all business units on both a sequential and year-over-year basis.
Sean Denham: As a result, SEI's consolidated operating profit margin increased to 28.5% for Q1, marking the highest level achieved in the last three years.
Sean Denham: Marching improvements stem from positive operating leverage, the lack of unusual one-time items, the contribution from our Integrated Cash Program and our continued focus on cost control.
Sean Denham: Last quarter I indicated that the timing of certain investments to support business growth may pressure margins.
Sean Denham: Due to the time needed for hiring and initiating new technology investments, these expenses in the first quarter were modest. We expect these costs to gradually increase throughout the year, but their overall impact on margins should remain relatively limited.
Sean Denham: Turning to slide seven, SEI achieved a record level of sales events in the quarter, surpassing Q3 of 2024. Sales events were led by our investment managers and private banking businesses, with more modest contributions from investment advisors and institutional investors.
Sean Denham: Investment Managers wins were driven by existing and new clients, both in the US and globally.
Sean Denham: We also realize a positive contribution from the new product offerings, notably our Luxembourg depository services, reflecting the continued investments we're making to enhance our global service offering and operational footprint.
Sean Denham: The strength of our investment managers business is underpin by our leading market position with alternative managers, which accounted for nearly 70% of segment revenue in 2024.
Sean Denham: Private banking winds were broad-based in the quarter, coming from new and existing clients. M&A activity contributed to sales events, with clients completing a handful of acquisitions and transitioning those multiple businesses to SWP.
Sean Denham: Q1 saw strong client renewals with six contracts extended, certainly run rate revenue nearly $20 million with an average extension period of three years.
Sean Denham: Our SEI sphere offering part of the investment to new business segments, security significant win this quarter by expanding our partnership with an existing private banking client.
Sean Denham: This client will utilize all of SEI sphere's offerings, including cybersecurity, network architecture, and file migration.
Sean Denham: Turning to sliding, both AUM and AUA increased on a sequential and year-over-year basis in the first quarter.
Sean Denham: Despite the S&P 500 declining by 4.6% in Q1, our AUM experience the negligible market impact due to our broad diversification across geographies and asset classes.
Sean Denham: We also benefit from modestly positive net inflows and institutional advisors driven by inflows into our Strategist and Traditional Estimate Programs, and all set by outflows and mutual funds.
Sean Denham: Our institutional business boasts a handful of client wins in the course. And the advisor business, our efforts to enhance the SEI ecosystem for the entire advisor community, especially in RIAs, is yielding results more quickly than we had anticipated. Thank you, Aidan.
Sean Denham: During the quarter, we also launched a handful of initiatives to drive increased client interest in SEI products to the lens of tax and income optimization, notably our direct indexing SMA program.
Sean Denham: Our LSD investment, which experienced significant outflows in the fourth quarter, saw an improvement in Q1 as market performance shifted in favor of both global and value mandates, driving a modest increase in LSD's asset.
Sean Denham: In the context of ongoing market volatility, we recognize that investors are keenly focused on the implications for assets under management across our advisors institutional and private banking businesses.
Sean Denham: Our portfolios in those businesses are on balance slightly less market sensitive than a typical 60-40 portfolio, due to our allocations for fixed income alternatives and liquidity mandates.
Sean Denham: In summary, SEI's resiliency is enhanced by our substantial diversification, which that benefited us in the first quarter and we anticipate will continue to dampen the impact of market uncertainty going forward.
Sean Denham: Slide 9 summarizes our capital allocation and balance sheet. We continue to invest aggressively in our own shares in the first quarter, buying back $193 million of stock at an average price of $77, bringing total share of repurchases over the last two quarters to more than $450 million.
Sean Denham: Additionally, we announced a $500 million increase in our share, repurchase authorization.
Sean Denham: Turning to our balance sheet, we ended the first quarter with more than $700 million of cash in no long-term debt.
Sean Denham: We view SEI's incredibly low leverage and ample capacity for investment as strategic advantages, especially in the current uncertain market environment. Client value our stability, knowing our fortress balance sheet and commitment to constantly investing in our business ensures what thrive for years to come.
Sean Denham: Before opening for questions, I'd like to invite all of you to attend our Investor Day on September 18th in New York. We have a lot of initiatives in process and look forward to sharing our plans to accelerate growth.
Sean Denham: It's more information than we can cover in an earnings call, so we hope you'll all be able to join us in New York this September . With that, operator, please open a line for questions.
Speaker Change: Thank you. Ladies and gentlemen, as a reminder to ask the question, please first start one one on your telephone, then wait for your name to be announced. To withdraw your question, please first start one one again. Please stand by while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Owen Lau with Oppenheimer. Your line is open.
Hello, good afternoon and thank you for taking my question.
Owen Lau: Could you please talk about the sales environment over the last few weeks? I saw that your first quarter net sales were pretty strong, but I'm wondering how does the recent macro uncertainty and terror situation impact your conversation with clients and the sales cycle? Thanks.
Speaker Change: Hey Owen, how are you? You're doing well. Thank you for the question. Yeah, very, very strong Q1 in sales. As I mentioned in the script, we are not seeing a slowdown in activity, but I thought I might be more helpful. Michael's in the room, Phil's in the room, Sanjay's in the room, all the unit leads in the room. Maybe if they provide a little bit of color commentary in terms of what they're seeing, especially around the late stage pipeline and early stage pipeline. Brian , Brian Dave, want to kick off first? Sure. Hi, Owen.
Sanjay: And for product banking, I can look at this as an opportunity in two segments. One opportunity, it is presenting for our existing clients.
Sanjay: As existing clients are going through this kind of uncertain environment, we can see more tracks in terms of outsourcing.
Sanjay: and they are engaging with us. So I see that as an opportunity for SEI.
Sanjay: In terms of the next stage, five lines of which we are expecting to close this year, we are very confident about that.
Sanjay: and we are seeing good traction, so I don't see any slowdown in our near stage by fire activities. In the long term, that's something we have to watch, we have nothing we have to wait for a couple of orders before we can make any comment about that.
Sure.
Speaker Change: Hi-Oh and Till McCabe. A couple things real quick. We don't see any slowdown at all in activity, especially on the alternative side of the business.
Speaker Change: If there was a little bit of flow down on the institutional side, it's more than being made up for on the retail side of the business
Speaker Change: We're seeing a lot of demand for semi-liquid products out there on the retail side and this is a really great environment for alternative managers to deploy capital and they're very opportunistic right now. So we're seeing a lot of great activity out there. It hasn't slowed at all.
and Owen, this is Michael Lane, Ed.
Speaker Change: Interestingly, you heard from Sean that we are seeing results improving in the R.A. side of our business quicker than we expected.
Speaker Change: That's not only a result of our outbound activity, continue to improve and increase in that space, but our inbound activity as advisors are spreading word of mouth of what we do and as they're learning more about the capabilities of the entire ecosystem of SDI .
Speaker Change: So, the last few weeks of volatility have not impacted any way the amount of activity that we're participating in with respect to clients.
Speaker Change: So yeah, Owen, I'll just summarize, I think it's good to get their color, so we're confident about what we see. If there's anything we're watching we're closely, it's just the timing of when we would expect things to sign and then we saw some of that last year, but we aren't seeing anything coming out of the pipeline, we aren't seeing a slowdown of activity, but some of the market impact could maybe have some effect on the timing, but that would just be a quarter here or quarter there. [inaudible]
Cardi, that's super helpful.
Speaker Change: And then going back to Slide A, I think you make the comment that ending AUM and AUA were up sequentially, but the broader US market was down. The growth was broad base and it did not just come from one pocket. So could you please unpack the driver of that inflow?
Speaker Change: And then how much of your AUM is actually tied to US versus non-US? Thanks!
Speaker Change: So, on the US versus non-US when you think about the asset management allocation, the equity allocation is somewhere in the ballpark of about 48% of which 80% of that is US versus 20% is non-US.
Speaker Change: On the IMS side, we're seeing fewer losses these days, and we're seeing a lot of funding from new launches and new clients converting. And most of the, about 85% of that revenue where there's that asset growth is coming from North America.
Speaker Change: Can you please add some more color about the choice of the inflows? Because it kind of overcome the market decline in the first quarter.
Reporter.
Speaker Change: I think, oh, and that's just kind of a matriculation of the backlog of some previous signing. I think that's in eight.
Speaker Change: Manifestation as well of what Michael was talking about with ongoing activity from last year with advisors. So there was no one thing I'd say it was a variety of strategies that we have had in place for acquiring new advisors, engaging on boarding advisors, intermediaries. We also saw some flows outside the US from some new distribution partners. So it was definitely not materially driven by one firm, one event, one client.
Speaker Change: No, and in fact we had positive net flow both on the advisor side and the institutional side so that would offset some of the market losses as well.
Gallic Central Act
Thank you.
Please stand by for our next questions.
Speaker Change: Our next question comes from the line of Ryan Kenny with Morgan Stanley . Your line is open.
Speaker Change: Hey, good afternoon. This is Colonel Schmitt, some behalf of Ryan Kenny.
Speaker Change: Can you guys speak to your ability to maintain the 28% margin? That was a record this quarter in, you know, the uncertain batch route from here, given the volatility in the market and, you know, how do you see sales coming in? Yeah.
Speaker Change: Sure, this is Sean. I mean, I think now for a few quarters in a row, we've been seeing modest but increasing margin and operating profit increase.
Speaker Change: I think a lot of that contribution just is coming from net sales. I think the onboarding as those net sales are coming online and translating its revenue. So we're seeing some improvement in margins there. In saying that, I think we've done a really nice job of cost control. And so...
I don't want to say doing more with less, but...
Speaker Change: Thinking about where our return on invested capital specifically around investments, how those investments are coming on board, and I think we're just in a lot more thoughtful about managing those investments. So I think the contribution, you know, combining the revenue growth.
Speaker Change: along with the cost control has really been the main drivers. [inaudible]
Speaker Change: Got it. That's very clear. I had to follow up on expenses, but that took care of it. So just one more on the Repurchase Authorization. Is there any sort of cadence that you expect to deploy or use that authorization from here? Yeah.
Speaker Change: Well, we were coming up against it, so we had done an authorization in Q2 or Q3 of 24. We used that up pretty quickly. We saw an opportunity in the market as well as our large cash position. Thank you very much.
Speaker Change: We also believe that the stock is at a really good price and as a result of that we wanted to buy back and accelerated portion of stock then we historically had.
Speaker Change: on a go-forward basis, much of that question was in there but I'm sure that question will come. We are we're looking at forward
Speaker Change: Really a quarter out of time. We do a really nice job, I think, of forecasting what the capital needs of the organization will be or the next quarter to a year.
Speaker Change: And based off of that, we really make a determination in any one given quarter on what we think to buy that should be. So it's going to be a combination of where we think the stock prices, we think the stock is low as I'm sure a lot of companies think they're stock is low with market pullback over the last.
Speaker Change: You know, a couple of months here and so that's really, there's really not much more to it than just understanding what our cash needs will be on a go-forward basis or the next quarter or two and how we're thinking about the stock price.
Garda, thank you.
Thank you. Please stand by for our next question.
Speaker Change: Our next question comes from the line of Crispin Love with type of Sandler. Yalan is open.
Thank you. Good afternoon. Appreciate take my question.
Speaker Change: Just when I look back over the last three quarters, it's definitely been a noticeable shift in sales events levels compared to prior years and the 5-7 shows that well. But what do you think the secret sauce is that that has driven the signal to get up to and what's resonating most with these new clients?
Hey, Kristen.
Salas Foundation
Speaker Change: And what I mean by that is I look at our client base and you look at the engagement we have with our client base, the growth we're getting from existing clients.
Speaker Change: from New launches, or fraud cells, or organic growth, is extremely strong. And that's a testament to the FTI teams that are out on the street every day in front of clients engaging with clients. And I don't think you can underscore that. And I'll own the fact, Crispin, that maybe we weren't doing that at the level we should have been doing that a few years ago, but that is definitely not the case.
Speaker Change: I think the second thing is a different positioning of the company, less as a vertical and more as a horizontal. The market is starting to truly appreciate the breadth of what we can offer, firms want to do more with fewer partners, not add to their stable strategic vendors. [inaudible]
Speaker Change: and they see SEI as a really, really strong choice in many situations, not just to continue to drive existing capabilities, but to look for us to innovate and partner with them for new opportunities. And that positioning is really, really resonating. [inaudible]
Speaker Change: and I think third, and this may sound tactical. Our activity levels are just higher. They just are. We are out there, we are engaged, and I think when you look at the collaboration from the leadership team all the way down, everybody is invested in making sure that we all win as the collective, and we're less concerned on who's winning in each unit. It doesn't really matter to us. We care about the sum of the parts.
Speaker Change: And we are really just getting started when you think about what Michael Lane and the team are going to be able to do with asset management if we continue that mindset and that approach [inaudible]
Speaker Change: I think I reset this on the last couple calls, Crispin and I do think it bears repeating. We are immensely proud of the sales results, but we are more proud of when you unpack those sales results. Those are firms and segments and clients that we want.
Speaker Change: We are not playing a revenue in any cost game, we are maintaining a premium price point, we are maintaining a premium service level but we are winning in the segments where we transition the company a few years ago to target our R&D dollars, target our capital, target our talent [inaudible]
Speaker Change: Great adventure and all very helpful there. And then in a prepared remark, you also called out growth in the investment managers segment among all to global managers. Can you share and just give a little bit more detail on parts of the alternative space we have been having the most success recently?
Speaker Change: Beyond bolstering, our operational footprint in Dublin and Luxembourg, but adding more go-to-market talent. We'll fill you with a little bit of view when I'm just over there on what we're just kind of seeing in the US or what's winning in the US. Sure, thanks Ryan. The only thing I would add.
Speaker Change: We are the leader in private credit around the world, so globally. So we're seeing good traction in private credit, private equity, real estate infrastructure, pretty much any asset class out there. We're seeing a lot of activity. And as Ryan said, we sent a couple of people over there to live in the UK a couple of few years ago, and it's really starting to pay dividends. So we are attracting some very, very large private credit managers and multi-strap managers over in that part of the world. So. So.
It's just great activity is driving results.
Speaker Change: Great, appreciate the color and congrats on a great quarter. Thank you, Christopher.
Speaker Change: Thank you. As a reminder, ladies and gentlemen, let's start one one to ask the question.
Please stand by for our next question.
Speaker Change: Our next question comes from a line of Jeff Schmitt with Wim Blair. Your line is open.
Speaker Change: Hi everyone. In private banks, how much of the revenue growth is coming from your shift into regional and community banks? And is the competitive landscape much different there or is it kind of the same players you typically compete against? [inaudible]
Speaker Change: Hey, Jeff, how much size I think I was. Jeff, this subject here. So Jeff, a river we talked about a few photos ago, the way the segment and our good market strategy, very having focus on these of committee backs segment, that is paying the symptoms.
Speaker Change: If I look at last the four quarters of soon, almost 16-70% of that growth is coming through that segment.
Speaker Change: And that segment is also presenting to a recent opportunities for us.
Speaker Change: One we are very actively working on and now the one Michael Lane.
Michael Lane: is going to talk about it and maybe keep supporting us, but the professional services are fortunate to be launched in a few research committee segments, MSC Data Cloud, those services are resonating very well.
Michael Lane: and we can see a possible rule that this segment we have, we are very strong with respect to our combination.
Michael Lane: and our solutions, our services, our existing client-based relationships, they're pretty strong. So, existing clients, they are working as our reference points, and with that, that is also helping us to be a new business.
Speaker Change: It is pretty consistent and similar, so I don't think we see any massive kind of new entrance, you know, definitely formidable competitors, we have a tremendous amount of respect for in that space. One area where I think we continue to potentially separate ourselves is a little bit of what Sean mentioned earlier about our ability to continue to invest capital and continue to innovate. When you look at the SEI wealth platform, if you think about how we built that really from the back to the front,
Speaker Change: The majority of the investment now is going into front office, differentiate capabilities, client experience, advisor experience, portfolio, management tools. So I have faith times that you and the team feels like you just have a bigger arsenal of capabilities to talk about. And we're getting more credit, I think, for the value of the platform. And we're getting more credit. And we're getting more credit. And we're getting more credit.
Speaker Change: at the regional committee segment, they are also engaging us with the implementation services.
Speaker Change: which they were not earlier, so now we are the ones providing those services.
Speaker Change: And I talked about professional services data cloud. In the other part, that regional community segment, they wish to result in
Speaker Change: So that's something we, they will be able to utilize the enterprise cap release of SEI, not just a technology platform, outsource operations, but professional services, data cloud, asset management, that will say much bigger role.
Speaker Change: Okay, thank you. And then if this administration were to pivot and loosen up banking regulations, would you expect that to have much of an impact on the private bank segment? I guess if banks like change capital deployment strategies.
Speaker Change: I think the only thing that really gets moved lower and the other is the speed at which some of these firms want to get to their future operating model. Jeff, I think what's really resonated across all segments of banks and Sanjay's living this every day, we just have two different firms in this week. It's really a shift to wealth.
Speaker Change: So I think depending on what happens with the administration environment, I'm not sure that has a massive impact, but these organizations have really realized that they need to have a much more robust and scalable competitive offering in the wealth space, and we are primed to really accelerate the delivery of that through our capability set and that resonates.
Great. Thank you.
Thank you.
Speaker Change: Ladies and gentlemen, I'm showing no further questions on the queue. I will now like to turn the call back over to Ryan Hicke for closing remarks.
Speaker Change: Thank you. As we, I think echo the last couple quarters, this was a terrific quarter, but it was one quarter. It doesn't change how we run the company. It doesn't change how we think about what we need to do moving forward. We remain very diligent, very focused and very thoughtful about how we can continue to deliver these types of results for our shareholders and stakeholders globally. And I always like to close the call by thanking the clients and especially the FBI workforce for all they do every day. Thank you.
Speaker Change: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.