Q2 2019 Earnings Call

July 24, 2019

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Operator: Ladies and gentlemen, thank you for standing by. Welcome to the SEI Q2 2019 Earnings Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session. Instructions will be given at that time. Should you require assistance during the call, please press star, then zero. As a reminder, this conference is being recorded. I'd now like to turn the conference over to Chairman and CEO, Al West. Please go ahead.

Ladies and gentlemen, thank you for standing by welcome to the S.T. <unk> second quarter 2019 earnings call. At this time all participants are in a listen only mode. Later, we'll conduct a question and answer session and instructions will be given at that time should you require assistance during the call. Please press Star then zero.

As a reminder, this conference is being recorded I'd now like to turn the conference over to Chairman and CEO Al West. Please go ahead.

Thank you.

Al West: Thank you, and welcome, everyone. All of our segment leaders are on the call, as well as Dennis McGonigle, SEI's CFO, and Kathy Heilig, SEI's controller. I'll start by recapping the Q2 2019. I'll turn it over to Dennis to cover LSV and the investment in new business segment. After that, each of the business segment leaders will comment on the results of their segments. Finally, Kathy Heilig will provide you with important company-wide statistics. As usual, we will field questions at the end of each report. Let me start with the Q2 2019. Q2 earnings increased by 4% over a year ago. Diluted earnings per share for the Q2 of $0.82 represents a 9% increase from the $0.75 reported for the Q2 2018.

Alfred West: Thank you, and welcome, everyone. All of our segment leaders are on the call, as well as Dennis McGonigle, SEI's CFO, and Kathy Heilig, SEI's controller. I'll start by recapping the Q2 2019. I'll turn it over to Dennis to cover LSV and the investment in new business segment. After that, each of the business segment leaders will comment on the results of their segments. Finally, Kathy Heilig will provide you with important company-wide statistics. As usual, we will field questions at the end of each report. Let me start with the Q2 2019. Q2 earnings increased by 4% over a year ago. Diluted earnings per share for the Q2 of $0.82 represents a 9% increase from the $0.75 reported for the Q2 2018.

And welcome everyone.

All of our segment leaders are on the call as well as Dennis Mcgonigle.

As he said <unk>, CFO and Kathy Heilig Sea ice controller.

I'll start my Kid Recapping, the second quarter 2009.

Then I'll turn it over to Dennis to cover LSV and the investment in new business segment.

After that each of the best business segment leaders will comment on the results of their segments. Then finally, Kathy Heilig will provide you some important company wide statistics.

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

So let me start with the second quarter 2019.

Second quarter earnings to increase by 4% over a year ago diluted earnings per share for the second quarter of 82 cents represents a 9% increase from 75 cents reported for the second quarter of 2018.

Al West: We also reported a 1% increase in revenue from Q2 2018 to Q2 2019. During Q2 2019, our non-cash asset balances under management increased by $3.4 billion. At the same time, LSV assets under management increased by $400 million. These increases in assets under management were primarily due to market appreciation. Now, in addition, during Q2 2019, we repurchased approximately 1.8 million shares of SEI stock at an average price of $53.17 per share. That translates to $97 million of stock repurchases during the quarter.

Alfred West: We also reported a 1% increase in revenue from Q2 2018 to Q2 2019. During Q2 2019, our non-cash asset balances under management increased by $3.4 billion. At the same time, LSV assets under management increased by $400 million. These increases in assets under management were primarily due to market appreciation. Now, in addition, during Q2 2019, we repurchased approximately 1.8 million shares of SEI stock at an average price of $53.17 per share. That translates to $97 million of stock repurchases during the quarter.

We also reported a 1% increase in revenue from second quarter 2018.

The second quarter 2019.

Also during the second quarter 2019, our non cash asset balances under management increased by $3.4 billion.

At the same time LSV assets under management increased by 400.

Marianne.

These increases.

Assets under management were primarily due to market appreciation.

Now in addition, during the second quarter 2019, we repurchased approximately 1.8 million shares of Sci stock at an average price of $53.17 per share.

That translates to 97.

Million dollars stock repurchases during the quarter.

Al West: Finally, in Q2, as part of the investments we make to create growth, we capitalized approximately $9.3 million of the SWP development and amortized approximately $11.8 million of previously capitalized SWP and IMS development. Q2 2019 sales events, net of client losses, totaled approximately $12.7 million and are expected to generate net annualized recurring revenues of approximately $10.8 million. I mean, even though this quarter's sales results are an improvement over last quarter's, we are still not satisfied with our Q2 sales results. We continue to experience slow contract negotiations in this tightly regulated environment, plus we face continued rollover of the institutional business away from US corporate DB plans.

Alfred West: Finally, in Q2, as part of the investments we make to create growth, we capitalized approximately $9.3 million of the SWP development and amortized approximately $11.8 million of previously capitalized SWP and IMS development. Q2 2019 sales events, net of client losses, totaled approximately $12.7 million and are expected to generate net annualized recurring revenues of approximately $10.8 million. I mean, even though this quarter's sales results are an improvement over last quarter's, we are still not satisfied with our Q2 sales results. We continue to experience slow contract negotiations in this tightly regulated environment, plus we face continued rollover of the institutional business away from US corporate DB plans.

Finally in the second quarter as far as the investments we make.

200% to create growth.

We capitalized approximately $9.3 million as WP development and amortized approximately $11.8 million of previously.

Capitalize it as WP and mass development.

Second quarter 2019 sales events net of client losses totaled approximately $12.7 million and are expected to generate net annualized recurring revenues were approximately $10.8 million.

Even though this quarter or early.

Yes, even though this quarter's sales result, or an improvement over last quarters, we're still not satisfied with our second quarter sales results. We continue to experience slow contract negotiations in this tightly regulated environment.

Plus we face continued roll over the institutional business away from us corporate DB plans and finally, all our asset management businesses space.

Al West: Finally, all our asset management businesses face fee compression due to the popularity of passive investing. There are bright spots. One is that across the company, we have fully engaged sales teams and a lot of activity. Two, IMS sales continue to be strong. Three, the migration of advisors to SWP is now behind us. Finally, after the close of the quarter, we signed significant new SWP business. Our market unit heads will speak to the bright spots and their specific sales strategies. Now, this concludes my formal remarks, so I'll turn it over to Dennis to give you an update on LSV and the investment in our new business segment. I'll then turn it over to the other business segments' heads. Dennis?

Alfred West: Finally, all our asset management businesses face fee compression due to the popularity of passive investing. There are bright spots. One is that across the company, we have fully engaged sales teams and a lot of activity. Two, IMS sales continue to be strong. Three, the migration of advisors to SWP is now behind us. Finally, after the close of the quarter, we signed significant new SWP business. Our market unit heads will speak to the bright spots and their specific sales strategies. Now, this concludes my formal remarks, so I'll turn it over to Dennis to give you an update on LSV and the investment in our new business segment. I'll then turn it over to the other business segments' heads. Dennis?

The compression due to the popularity of passive investing.

But there are bright spots.

One is that across the company, we have fully engaged sales teams and a lot of activity.

Two.

IMF sales continued to be strong three.

The migration of advisers to ex WP is now behind us.

And finally after the close of the quarter, we signed significant new S.W.P. business.

Our market unit has will speak to the bright spots and their specific sales strategies.

Now this concludes my formal remarks, so I'll turn it over to Dennis to give you an update on LSV and the investment in our new business segment. I'll, then turn it over to the other business segments as then.

Dennis McGonigle: Thanks, Al. Good afternoon, everyone. I will cover the Q2 results for the investments in new business segment and discuss the results of LSV Asset Management. During Q2 2019, the investments in new business segment continued its focus on the ultra-high net worth investor segment through our private wealth management group and additional research initiatives, including the digital services and hosting opportunity we spoke about in the past, and the modularization of larger technology platforms into standalone components for the wealth management and investment processing space. During the quarter, the investments in new business segment incurred a loss of $3.7 million, which compared to a loss of $3.1 million during Q2 2018. This increase in loss reflects the growth of our private wealth management business, more than offset by other areas of investment.

Thanks Al Good afternoon, everyone I will cover the second quarter results for the investments in new business segment and discuss the results of LSV asset management.

During the second quarter 2019, the investments in new business segment continued its focus on the ultra high net worth Investor segment through our private wealth management group and additional research initiatives, including the digital services and hosting opportunity we spoke about in the past the modularization of larger technology platforms in the Standalone components for the wealth management and investment processing space.

During the quarter the investments in new business segment incurred a loss of $3.7 million, which compared to a loss of $3.1 million during the second quarter of 2018.

This increase in loss reflects the growth of our private wealth management business.

More than offset by other areas of investment.

Dennis McGonigle: Regarding LSV, our earnings from LSV represent our approximate 39% ownership interest during Q2. LSV contributed $37.8 million in income to SEI during Q2 2019. This compares to a contribution of $41.1 million in income during Q2 2018. Assets during the quarter were up approximately $400 million. LSV experienced net negative cash flow during the quarter of approximately $2.1 billion, which was offset by market appreciation. Revenue at LSV was approximately $123 million. Performance fees were minimal. Our effective tax rate for the quarter was 22%. I'm happy to take any questions.

Regarding LSV our earnings from LSV represent our approximate 39% ownership interest during the second quarter.

LSV contributed $37.8 million in income to Sci during the second quarter 2019. This compares to a contribution of $41.1 million of income during the second quarter of 2018.

Assets during the quarter were up approximately $400 million.

LSV experienced net negative cash flow during the quarter of approximately $2.1 billion.

Which was offset by market appreciation.

Revenue at LSV was approximately $123 million and performance fees were minimal.

Our effective tax rate for the quarter was 22%.

Im happy to take any questions.

And if you would like to ask a question. Please press star one at this time, you're Tony indicated in place in Q may remove yourself from the queue. My press the pound key once and I would like to ask a question. Please press star one.

Operator: If you'd like to ask a question, please press star one at this time. You'll hear a tone indicating you've been placed in queue. You may remove yourself from the queue by pressing the pound key. Once again, if you'd like to ask a question, please press star one. We do have a question from the line of Robert Lee with KBW. Please go ahead.

And we do have a question from the line of Robert Lee with KBW. Please go ahead.

Robert Lee: Yeah. Hi, good afternoon. Hi, Dennis.

Yes, hi, good afternoon, Hi, Dennis.

Dennis McGonigle: Hey, Robert.

Hey, Rob Hi, just a quick question on LSV. The you mean, the the outflows there any.

Robert Lee: Hi, just a quick question on LSV, you mean the apples? Is there any, you know, way of kind of characterizing it? Was it kind of maybe one large account, or was it kind of, you know, sensitive? It was just, you know, a lot of rebalancing. Just trying to see if there's any kind of underlying color, if it was a little bit more of a one-off or something else underneath.

Kind of characterizing it was kind of maybe you.

One large account or was it kind of.

Sensitive at this for they know a lot of rebalancing just trying to see if there's any kind of underlying color. If it was a little bit more of a one off or something.

Something else on the underneath.

Dennis McGonigle: Yeah, it's more. The negative flows are really attributed to existing clients, you know, moving some assets out, not really lost clients. They did have about $800 million of new sales in the quarter. You know, while they're, you know, they're net negative, they're still able to, you know, produce or establish new client relationships. Yeah, value is just, you know, value is in a tough spot right now.

As more.

The negative flows are really attributed to existing clients.

Now moving some assets out really lost clients.

And they did have about $800 million of new sales in the quarter. So.

While there.

They are net negative.

They are still able to produce more established new client relationships.

Now the values as values in a tough spot right now.

Robert Lee: Thanks. Great. Thank you.

Great. Thank you.

Dennis McGonigle: You're welcome.

Well.

We also have a question from the line of Chris shelter with William Blair. Please go ahead.

Operator: We also have a question from the line of Chris Shutler with William Blair. Please go ahead.

Hey, Dennis.

Chris Shutler: Hey, Dennis. Quick question on currency, actually. The dollar, I think, strengthened a bit versus the pound recently. Just could you just remind us the sensitivity to revenue and expenses in the segments?

A quick question on currency actually so the dollar thanks strengthen a bit versus the pound recently just could you just remind us the sensitivity to revenue and expenses in the segment.

Dennis McGonigle: Sure. I mean, each of the segments leads that have that impact in their business, you know, we could incorporate that in their comments. Kind of across the company, I'll just make that comment first. You know, it's, the net impact, you know, kind of Q1 to Q2 is pretty neutral. You know, we have a slightly negative impact on revenue and a slightly positive impact on expense. When you compare it to Q2 of last year, it's a little bit more significant impact on revenue, but also similarly, a little more significant impact on expense. Again, the net to the company is pretty modest. Net is slightly negative, you know, less than a half a million dollars. You know, across the total company, it's fairly mute.

Sure. So I mean, so each of those segments leads that have that impact in our business.

We could incorporate that in their comments.

Kind of across the company.

Just make that comment first.

Yes, the net impact.

Kind of Q1 to Q2 is pretty neutral.

We have a slightly negative impact on revenue on a slightly positive impact on expense.

When you compare it to Q2 of last year.

It's a little bit more significant impact on revenue.

But also similarly, a little more significant impact on expense. So again, the net to the company is pretty modest net is slightly negative less than a half million dollars.

So.

Across the total company, it's fairly mute.

Dennis McGonigle: The business lines that it affects a little bit more would be, like in Paul's business, Q2 to Q2 comparatives. His revenue number is probably a little bit under $1 million impacted. His expense numbers, positively impacted by about $400,000. His, I'd say that has a little bit more of a larger impact on a net basis. Steve's business similarly, his revenue was impacted by a negative kind of year-over-year, about $1.5 million, and expenses positive by a little over $1 million. It does have a negative P&L impact to his business year-over-year. Across the company, it's almost like we have this natural hedge against given the different currencies we operate in.

Yes, the business lines that it affects a little bit more would be like a portal business.

Q2 to Q2 comparative.

These revenue numbers, probably little bit under a million dollars impacted as expense numbers.

Positively impacted by about $400000. So I'd say that has a little bit one of the larger impacts on a net basis Steve's business and banking.

Similarly, as revenue was impacted by a negative kind of year over year about $1.5 million at expenses positive by a little over a million.

So it does have a.

Negative PL impact his business year over year.

But across the company, we it's almost like we had this natural hedge against.

Given a different currencies we operate.

All right. Thank you.

Jason Horman: All right. Thank you.

Dennis McGonigle: All right. Thank you.

Dennis McGonigle: You're welcome.

Hello.

Once again, if you have a question please press star one.

Operator: Once again, if you have a question, please press star one. At this time, there's no further questions in the queue.

At this time is no further questions in the queue.

Dennis McGonigle: Thank you. I am now going to turn it over to Steve Meyer to discuss our private banking segment. Steve?

Thank you I am now going to turn it over to Steve Martin to discuss our private banking segment Steve.

Steve Meyer: Thank you, Al. Good afternoon, everyone. For Q2 2019, revenues for the segment totaled $116.1 million, which is down 4.2% as compared to our revenue in Q2 2018. This year-over-year revenue decrease was due primarily to some of the client losses previously announced, along with decreased revenue in our asset management business. Our quarterly profit for the segment of $8.3 million increased $2 million as compared to Q2 2018. This increase was mainly driven by our continued expense management. Our Q2 profit is up $1 million as compared to our profit in Q1.

Thank you al good afternoon, everyone for the second quarter 2019 revenues for the segment totaled $116.1 million, which is down 4.2% as compared to our revenue in the second quarter of 2018. This year over year revenue decrease was due primarily to some of the client losses previously and now along with decreased revenue in our asset management business.

Our quarterly profit for the segment of $8.3 million increased $2 million as compared to the second quarter of 2018.

This increase was mainly driven by our continued expense management.

Our second quarter profit is up $1 million as compared to our profit first quarter.

Steve Meyer: In turning to sales activity, during Q2, we signed $5.4 million in gross processing recurring sales events and approximately -$2.7 million in net sales events. Additionally, we had half a million dollars in one-time events. These events included the following: SWP conversion of an existing TRUST 3000 client. An existing TRUST 3000 client has signed to move to SWP and are scheduled to migrate their existing book of business, plus a new book of business currently on competitor's platform, to the SEI Wealth Platform in the first half of 2020. Schroders Personal Wealth.

And turning to sales activity during the second quarter, we signed $5.4 million in gross processing recurring sales events, approximately a negative $2.7 million in net sales events.

Additionally, we had half a million dollars in one time events. These events include the following.

SBC conversion of an existing trust 3000 bar and existing trust 3000 clients have signed to moved SVP and are scheduled to migrate their existing book of business plus a new book of business currently on competitors' platform to the Sci wealth platform in the first half 2020.

Shorter's personal well as reported in the UK press in November of 2018, actually I will power the new joint venture Schroeder personal well forwards between Lloyds banking group and schroders through our existing relationship with fusion, well, which was recently extended until 2025 and we reported in our Q4 earnings call. This event highlights a portion of the new ventures assets scheduled to start to migrate to our platform over the next 12 months, we expect to be too we expect there to be additional growth events here.

Steve Meyer: As reported in the UK press in November 2018, SEI will power the new joint venture, Schroders Personal Wealth, forged between Lloyds Banking Group and Schroders through our existing relationship with Fusion Wealth, which was recently extended until 2025, and we reported in our Q4 earnings call. This event highlights a portion of the new venture's assets scheduled to start to migrate to our platform over the next 12 months. We expect there to be additional growth events here. We've mentioned to you before the delays we encounter due to the long and complicated contract processes we have to go through in this market. This quarter was no different.

We have mentioned to you before the delays we encountered due to the long and complicated contract processes. We have to go through in this market. This quarter was no different I am happy to report that after the second quarter was over prior to our call. Today, we signed two new deals represent a total of $16.5 million in net annualized revenue.

Steve Meyer: I'm happy to report that after the Q2 was over, but prior to our call today, we signed two new deals, which represent a total of $16.5 million in net annualized revenue. The first deal was with a long-time client, law firm, Dorsey & Whitney, who is scheduled to migrate their existing book of business to the platform in the middle of 2020. The second deal we were pleased to announce was CIBC U.S. Private Wealth Management. CIBC, or Canadian Imperial Bank of Commerce, is a leading North American financial institution. Its U.S. private wealth management business offers investment management, wealth strategies, and legacy planning solutions. This agreement is significant to SEI for a couple of reasons.

The first deal was with a longtime client law firm Dorsey and Whitney who is scheduled to migrate their existing book of business to the platform in the middle of 2020.

Second deal we were pleased to announce was CBC U.S. private wealth management, CBC or Canadian Imperial Bank of Commerce is a leading north American financial institution.

It's U.S. private wealth management business offers investment management wealth strategies and legacy planning solutions.

This agreement is significant the Sci for a couple reasons under a new relationship with Sci CBC can leverage the Sci wealth platform and benefit from the integration of Sci as unique array of comprehensive operating platforms that will drag its complex business need and supported hybrid coffee model as it grows in the U.S.

Steve Meyer: Under a new relationship with SEI, CIBC can leverage the SEI Wealth Platform and benefit from the integration of SEI's unique array of comprehensive operating platforms that will address its complex business needs and support its hybrid custody model as it grows in the US. SEI solution can support CIBC with a comprehensive set of front-office wealth management capabilities and end-client experiences, coupled with core processing support for both internal and external custody relationships. These events are not included in our sales events reported for this quarter, but will be included with our Q3 sales events. We are pleased with the addition of these new clients and the momentum we are gaining in new business activity within the segment. In turning to an update on our TRUST 3000 business, in the Q2, we successfully converted two TRUST 3000 clients to the SEI Wealth Platform.

Actually I solutions and supports the IVC with a comprehensive set of front office wealth management capabilities and client experiences coupled with the core processing support for both internal and external cost through relationships. These events are not included in our sales events reported for this quarter, but will be included with our Q3 sales events. We are pleased with the addition of these new clients and the momentum we are gaining new business activity within the segment.

And turning to an update on our trust 3000 business in the second quarter, we successfully converted to trust 3000 clients to the FDI wealth platform Legacy Trust declined since 2004, and BBB a comp if a client since 1996 BBB a had previously provided notice Sci that they were going to go to a competitor, but change their mind and never Deconverted, They decided to stay and ultimately migrated to SVP during the quarter.

Steve Meyer: Legacy Trust, a client since 2004, and BBVA Compass, a client since 1996. BBVA had previously provided notice to SEI that they were going to go to a competitor, but changed their mind and never deconverted. They decided to stay and ultimately migrated to SWP during the quarter. Both conversions went very well and demonstrate our ability to increasingly scale our implementation strategy, as well as prove our value proposition against increasingly aggressive competition. We also recontracted 3 Trust clients with contract terms of 3 years or greater. During the quarter, we did receive notice from a Trust client who we had planned to move to SWP, but will be leaving our Trust platform in 2020.

Both conversions went very well and demonstrate our ability to increasingly scale, our implementation strategy as well as prove our value proposition against increasingly aggressive competition.

We also re contract the three trust clients with contract terms of three years or greater.

During the quarter, we did receive notice from a trust client, who we had planned to move SVP, but will be leaving our trust platform in 2020.

Steve Meyer: Also, we received notice from two clients, one in the US on TRUST 3000 and one in the UK on SWP, who have been acquired and their businesses will be moving to their respective acquirers' current platform by early 2020. The impact of these client losses are in the net sales events reported for this quarter. As an update on the wealth platform backlog, our total signed, but not installed backlog for SWP is approximately $35 million in net new recurring revenue, or $51.5 million, if you include the two most recent signings after the quarter. Our Asset Management Distribution business mirrored the global marketplace in which investors remain cautious.

Also we received notice from two clients one of the U.S. on Trust 3001 in the UK on SVP, who have been acquired and their businesses will be moving to the respective acquires current platform by early 2020. The impact of these client losses are in the net sales events reported for this quarter.

As an update on the wealth platform backlog, our total signed but not installed backlog for SBP is approximately $35 million in net new recurring revenue or $51.5 million. If you include the two most recent signings after the quarter.

Our asset management distribution business mirrored the global marketplace in which investors remain cautious while total assets under management ended the period at $22.6 billion, representing increases quarter over quarter and year over year. We did see negative cash flows of $147 million. We continue to build a strong global pipeline in our SMB business.

Steve Meyer: While total assets under management ended the period at $22.6 billion, representing increases quarter-over-quarter and year-over-year, we did see negative cash flows of $147 million. We continue to build a strong global pipeline in our AMD business. As we look to the rest of the year, there are a couple of important focus areas for us to note. First, momentum. We are very encouraged on our sales this quarter and the momentum we are seeing in the market and our pipeline, as well as the success we are having with implementations of clients on the SWP. Sustainable growth is our focus, and I believe we have the foundation for this. While the sales processes are still taking longer than we would like in our market, we are seeing strong and maintained activity. Second, managing headwinds.

As we look to the rest of the year or couple of important focus areas for us note.

First momentum.

We were very encouraged on our sales this quarter and the momentum we are seeing in the market and our pipeline as well as the success, we are having with implementations appliance on the SW paid.

Sustainable growth is our focus and I believe we have the foundation for this well the sales processes are still taking longer than we would like in our market. We are seeing strong and maintained activity.

Second managing headwinds at the risk of sounding like a broken record, we still have several headwinds facing us primarily the impact of lost business that we have previously discussed that will be coming off our platforms in the remainder of the year.

Steve Meyer: At the risk of sounding like a broken record, we still have several headwinds facing us, primarily the impact of lost business that we have previously discussed that will be coming off our platforms in the remainder of the year. While we will continue to manage our expenses judiciously as we continue to forge through our growth initiatives, these headwinds will have an impact to both our top and bottom line growth in the near term. We continue to push forward to building a foundation for sustainable and accelerating growth. Lastly, our continuation of our 2019 strategic themes. As I mentioned to you before, these strategic themes are: 1, growing our business globally. 2, monetizing our investment in SWP. 3, implementing our backlog of sold, yet to be installed clients. 4, expanding our markets and solutions to provide further growth.

While we will continue to manage our expenses judiciously as we continue to forge through our growth initiatives. These headwinds will have an impact to both our top and bottom line growth in the near term we continue to push forward to building a foundation for sustainable and accelerating growth.

And lastly, our continuation of our 2019 strategic themes as I mentioned to you before these strategic themes are one growing our business globally to monetizing our investment in SW paid three implementing our backlog of sold yet to be installed clients and for expanding our markets and solutions to provide further growth.

Steve Meyer: We believe that the results of this quarter reflect all of these themes, and we look to continue this progress. That concludes my prepared remarks, and I'll now turn it over for any questions you may have.

We believe that the results of this quarter reflect all of these things and we look to continue this progress.

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

And once again, if youd like to ask a question. Please press star one.

Operator: Once again, if you'd like to ask a question, please press star one. First, we go to the line of Robert Lee with KBW. Please go ahead.

First through the line of Robert Lee with KBW.

Go ahead.

Robert Lee: Hey, Steve, how are you? Good morning.

Hey, Steve how are you good morning, good morning, good afternoon.

Steve Meyer: Good.

Robert Lee: Good morning. Good afternoon.

Steve Meyer: Good afternoon, Rob.

Good afternoon, Rob good thanks.

Robert Lee: Good. Thanks. There's a lot of stuff kind of went through quickly. First one's just kind of really a numbers thing. Was it $5.4 million of gross sales, but $7.2 million of kind of, losses? Kind of the, is the gross losses. I just want to make sure I have those numbers.

There's a lot of stuff kind of went through quickly. So first one is kind of really numbers thing is was it.

5.4 million of gross sales of $7.2 million of kind of losses, so kind of the.

The gross losses I, just want make sure I have those numbers, yes, that's about right I think it's actually if you look at it that would be.

Steve Meyer: Yeah, that's about right. I think it's actually, if you look at it, that would be, I think it's 8.2, isn't it?

The eight point.

Two isn't it.

Yes.

Robert Lee: Yeah, I'll take another look. Yeah.

I'll take it yes.

Jason Horman: That's 8.1.

Robert Lee: That's 8.1.

That's helpful.

Steve Meyer: 8.1.

Hey, 0.1.

Robert Lee: 8.1. I'm sorry, 8.1 total loss?

Hey, Hey, 0.1, Im sorry upon one total loss yes.

Steve Meyer: Yes.

Robert Lee: Okay. All right. All right, great. You know, just kind of curious, you know, obviously, you know, the expense control is in place. You know, should we expect with the pickup in post-quarter pickup in sales activity? I mean, if you could refresh my memory, when did you pay sales commissions? Is it on installation or kind of the signing of the contract?

Okay all right.

Alright, great and then.

Just kind of curious obviously, you know the expense controls in place, but with the.

Should we expect that the pickup and.

Post quarter pickup in sales activity I mean, if you could refresh memory when when it is you pay.

Hey sales commissions is it on installation or kind of the signing of the contract.

Steve Meyer: Well, it's broken up, and there's a portion of it paid upon signing of contract and then some held. I think generally what you're looking for is kind of an outlook on expense. What I'd say is that we're going to continue to manage expenses. I feel that, you know, we're doing a very good job maybe reallocating the expense we have right now to the priorities. As we start to grow this, and as I start to push on that sustainable and accelerating growth, we're not afraid to invest or up the expense in light of driving that growth.

Well, it's going to grow its broken up and there is a portion of the paid upon signing of.

Contract and then some help but I think generally what you're looking for is kind of an outlook on expense and what I'd say is that we're going to continue to manage expenses.

I feel that we are doing a very good job maybe reallocating the expense.

We have right now to the priorities, but as we start to grow this and as I start to push on that sustainable on accelerating growth, we're not afraid to invest or up expense in light of driving that growth.

Robert Lee: Okay. You know, maybe one last question.

Okay and.

Maybe one last question. Thanks for Rob just one thing on the sales to remind you with the new rules sales comp remember from us.

Steve Meyer: Rob, just one thing on the sales, to remind you, with the new rule, sales comp, remember, from an accounting standpoint, is deferred. Remember that with those new rules, it's deferred now, according, I think, to the life of the.

Accounting standpoint is deferred.

So remember that with those new rules, it's deferred now.

Acquiring I think the life of the type of acquired loans by estimated.

Jason Horman: Life of the client, generally estimated.

Steve Meyer: Life of the client, generally estimated.

Steve Meyer: Life of the client.

Jason Horman: You estimate that.

Steve Meyer: You estimate that.

As to meet that.

Robert Lee: Okay. Great. Thanks for the reminder. I'm just kind of curious, I mean, I'm sure with CIBC and, you know, the other transaction with the law firm, you know, I'm guessing that's probably been in the works for a while, but is it possible any way that you kind of look at that and say, gee, you know, we were able to kind of maybe... Would you attribute the signing of those or the timing of it to anything, any of the maybe the changes you feel like you implemented kind of early on that kind of helped push them through the pipeline faster than, you know, maybe they had been moving, like, kind of accelerated things or?

Okay, great. Thanks for the reminder.

I'm just kind of curious so I mean, I'm sure with CA BC and the.

The other transaction with the law firm.

Im guessing its probably been works for a while but.

Is it possible anyway. So you kind of look at and say Gee you know.

We were able to kind of maybe would you attribute the signing of those or the timing of it to anything.

Any that maybe the changes you feel like you implemented kind of early on the kind of help push them through the pipeline faster than maybe they had been moving like kind of accelerated things are.

Steve Meyer: Yeah, Rob, I think we have a very dedicated and strong group of individuals that have been working for a very long time, and the way I would classify this is, while certainly we've changed some things that I think have helped overall the business, I think this is finally them getting really the credit they're due on the hard work they've put in over the past couple of years. This CIBC was a long process. All these tend to be longer processes. I think we're finding ways to look at things a little differently and change and make some slight changes. I think, you know, momentum begets momentum, and I think the one thing we're looking is, we see strong momentum in our pipeline.

Yes, Rob I think we have a very dedicated and strong group of individuals with them working for a very long time and the way I would classify this is while certainly we've changed some things I think have helped overall the business I think this is finally them getting.

Really the credit there are due on the hard work they put in.

Over the past couple of years. So is this the IVC was a long process.

All these tend to be longer process, but I think we're finding ways to look at things a little differently and change and make some slight changes, but I think you have momentum begets momentum and I think the one thing we are looking is.

We see strong momentum in our pipeline, we're working very aggressively on those deals that we see that can move quickly or quicker now quickly and we're pushing on them.

Steve Meyer: We're working very aggressively on those deals that we see that can move quickly, or quicker, not quickly, and we're pushing on them.

Robert Lee: Great. Thank you for taking my question.

Great. Thank you for taking my question sure my pleasure.

Steve Meyer: Sure. My pleasure, Rob.

We also have a question from the line of Chris done that with Sandler O'neill. Please go ahead.

Operator: We also have a question from the line of Chris Donat with Sandler O'Neill. Please go ahead.

Chris Donat: Hey, good afternoon, Steve.

Hey, good afternoon, Steve Good afternoon, Chris how are you.

Steve Meyer: Good afternoon, Chris. How are you?

Chris Donat: Doing fine. How about you?

Doing fine how about you.

Steve Meyer: Very good.

Good so just on the two signings after the quarter closed.

Chris Donat: Just on the two signings after the quarter closed, two related questions. One is kind of following up on Rob. How long were these negotiations going, sort of from start to closing? Pick whatever metric you want for start or whatever point you want to use. You know, how far out will implementation be for CIBC? Sounds like it's big. I'm thinking it's complicated. Is it, you know, quarters away, years away, decades away?

Two related questions. One is kind of following up on Rob.

How long were these negotiations going forward from start to closing and pick whatever metric you want forestar.

Whatever point, you want to use and then implementation how far.

Yes, how far out we'll implementation be for CNBC sounds like its big I'm thinking it's complicated is it.

Yes quarters away years away decades away just add a little color.

Steve Meyer: Yeah.

Chris Donat: a little color.

Steve Meyer: Chris, two things. I really don't want to pinpoint, only it's fair to pinpoint to the client how long, you know, the exact process goes. What I'd say is, it was kind of the normal we see in this. The contract process, in particular, I think, took the elongated cycle that we have been seeing and talking about for a while. As far as implementation, I believe, Dorsey, I announced that I said in the script, and I know we went through a lot. We're looking for them to convert in to SWP in 2020. CIBC, as you can appreciate, it's a new client, it is a large client, and we're working through project plans now, so I wouldn't want to really put a date on it.

So Chris two things I really don't want to pinpoint.

Okay, It's fair to pinpoint the declines how long the process that process took what I'd say it was kind of a normal we see in this the contracts that process in particular, I think took the elongated cycle that we have been seeing and talking about for a while as far as implementation I believe Dorsey I announced that I said in the script and I know we went through a lot. We're looking for them to convert in SVC in 2020 CBC as you can appreciate it's a new client. It is a large client and we're working through project plans now so I wouldn't want to really put a date on it.

Chris Donat: Okay, understood. Thank you.

Okay understood. Thank you.

Steve Meyer: Sure.

Sure.

Next question will come from Glenn Greene with Oppenheimer. Please go ahead, thanks, Steve Good afternoon.

Operator: Next question will come from Glenn Greene with Oppenheimer. Please go ahead.

Glenn Greene: Thanks. Hey, Steve. Good afternoon.

Steve Meyer: Hi, Glenn.

Glenn Greene: A couple quick questions. The first, can you just remind us where we are on realizing the previously announced client losses?

Hi, Glenn.

Glenn Greene: A couple quick questions. The first, can you just remind us where we are on realizing the previously announced client losses?

So a couple of quick questions. The first can you just remind us where we are on realizing the previously announced client losses.

Blame that Glenn how much has been absorbed in the piano how much revenue has already hit how much revenues come out already from the previously announced losses.

Steve Meyer: Explain that, Glenn.

Glenn Greene: How much has been absorbed in the P&L? How much revenue has already hit? How much revenue has come out already from the previously announced losses?

Steve Meyer: Oh, I'd say, the losses we had, that we've announced, and I don't have an exact figure in front of me, Glenn, but I'm going to say anywhere between a quarter of that loss and, you know, 40% of what we, kind of estimated or announced from a client standpoint. We still have more to go.

No.

So I'd say the losses, we had.

That we've announced and I don't have an exact figure in front of me, Glenn, but I'm going to say anywhere between a quarter of that loss and 40% of what we kind of estimated or now from a client standpoint, we still have more to go okay. And then the three client losses in the quarter for her great and two were due to mergers yes, what about the one the one that did lever is going to leave in 2020, The trust 3000 client any.

Glenn Greene: Okay. You had 3 client losses in the quarter, if I heard right, and 2 were due to mergers.

Steve Meyer: Yes.

Glenn Greene: What about the one that did leave or is going to leave in 2020, the TRUST 3000 client? Did they give you any reason why they're leaving?

Did they give you any reason why they're leaving.

Steve Meyer: Yeah, we don't really want to talk individually about clients. What I'd say, Glenn, you know, this is, as you know, and have gotten to know us, this is a complex business, and development and technology cycles can take a little bit of a time, a timeframe or a longer timeframe, and sometimes that timeframe doesn't match up with the client's needs or what they're looking at. I'd say this one fell in that bucket.

Yes, we don't really want to talk individually about five lets say Glenn. This is as you know and have gotten analysis of the complex business and development and technology cycles can take a little bit of a time.

Timeframe or longer timeframe, and sometimes that timeframe doesn't match up with the clients needs are what they are looking at and I'd say this one fell in that bucket.

Glenn Greene: Okay. Finally, CIBC, congratulations.

Okay, and then finally see obviously congratulations. Thank you, let's just the U.S. part is yes does that mean potentially you know, obviously potentially but Canada down the road.

Steve Meyer: Thank you.

Glenn Greene: That's just the US part?

Steve Meyer: Yeah.

Glenn Greene: Does that mean potentially, you know, obviously, potentially, but, you know, Canada down the road?

Steve Meyer: What I'd say is it means the US part now, we're very happy with that. As you know, we're always looking for ways to grow with our clients.

What I'd say is it means to US Park now, we're very happy with that.

But as you know, we're always looking for ways to grow with our clients.

Glenn Greene: Okay, thanks. Congrats again.

Okay. Thanks, Congrats again, thank you.

Steve Meyer: Thank you.

Once again, if you have a question please press star one.

Operator: Once again, if you have a question, please press star one. At this time, there's no further questions in the queue.

Okay.

At this time there is no further questions in the queue.

Hey, Thank you.

Al West: Thank you, Steve. Our next segment today is investment managers, and Steve Meyer will also address this segment. Steve?

Alfred West: Thank you, Steve. Our next segment today is investment managers, and Steve Meyer will also address this segment. Steve?

See our next segment today is investment managers and Steve Merrill will also addresses segment.

Steve Meyer: Thanks, Al. In turning to investment managers, for Q2 2019, revenues for the segment totaled $109.2 million, which was $11.6 million, or 11.9% higher, as compared to our revenue in Q2 2018. This year-over-year revenue increase was due primarily to net new client fundings and existing client expansion. Quarterly profit for the segment of $40.8 million, was $6.6 million, or 19.2% higher, as compared to Q2 2018. Higher profits were primarily driven by an increase in revenue, offset by a smaller increase in personnel and systems expense. We continue to manage expenses judiciously.

Thanks, Al and turning to investment managers for the second quarter of 2019 revenues for the segment totaled $109.2 million, which was $11.6 million or 11.9% higher as compared to our revenue in the second quarter of 2018. This year over year revenue increase was due primarily to net new client funding and existing client expansion.

Our quarterly profit for the segment of $40.8 million was $6.6 million or 19.2% higher as compared to the second quarter of 2018.

Higher profits were primarily driven by an increase in revenue offset by a smaller increase in personnel and systems expense, we continue to manage expenses judiciously.

Steve Meyer: Third-party asset balances at the end of Q2 2019 were $607.1 billion, or 3.6% higher, as compared to the asset balances at the end of Q1 2019. This was due to an increase in assets due to net new client fundings of $10 billion, as well as market appreciation of $11.1 billion. Turning to market activity, during Q2 2019, we had a very strong sales quarter with net new business events totaling $12 million in recurring revenues, as well as recontracts of $23.8 million in recurring revenues. Most importantly, these sales were diverse and spanned our entire business, including both new name business and expansion of wallet share with current clients.

Third party asset balances at the end of the second quarter of 2019 were $607.1 billion or 3.6% higher as compared to the asset balances at the end of the first quarter 2019. This was due to an increase in assets due to net new client fundings of $10 billion as well as market appreciation of $11.1 billion.

Turning to market activity during the second quarter of 2019, we had a very strong sales quarter with net new business events totaling $12 million and recurring revenues as well as re contracts of $23.8 million in recurring revenues. Most importantly, these sales were diverse and spanned our entire business include both new name business and expansion of wallet share with current clients. These events include the following highlights in our alternative market unit in the second quarter, we signed a significant billion dollar credit start off in a highly competitive process. Additionally, we added another client to our growing private equity real estate book of business.

Steve Meyer: These events include the following highlights: In our alternative market unit, in the Q2, we signed a significant billion-dollar credit startup in a highly competitive process. Additionally, we added another client to our growing private equity real estate book of business. In our traditional market unit, we won a large middle office services mandate with an existing client, further expanding our wallet share with that client. In Europe, we continue to win new private equity and private credit mandates from both existing and new clients, particularly related to funds domiciled in Ireland and Luxembourg. Finally, SEI Archway had new sales events in both the single-family office and multifamily office market segments.

In our traditional markets and if we want to large middle office services mandate within existing clients further expanding our wallet share with that client.

In Europe , we continue to win new private equity and private credit mandates from both existing and new clients, particularly related to fund domiciled in Ireland and Luxembourg.

Finally, I Arts way had new sales events in both the single family office and multifamily office market segments.

Steve Meyer: We continue to invest in our platforms and see significant growth opportunities in numerous areas, including the private equity and real estate segments, the single and multifamily office arena, collective investment trusts, and ETF servicing, as well as considerable demand for our front office investor platform, which is a real differentiator for us, and our middle office solutions. Our pipeline remains very strong, and I'm optimistic of our continued momentum. That concludes my prepared remarks, and I'll now turn it over for any questions you may have.

We continue to invest in our platforms and see significant growth opportunities in numerous areas, including the private equity and real estate segments. The single and multifamily office Arena collective investment Trust and ETF servicing as well as considerable demand for our front office investor platform, which is a real differentiator for us and our Middle office solutions. Our pipeline remains very strong and I'm optimistic of our continued momentum that concludes my prepared remarks, and I'll now turn it over for any questions you may have.

Once again, if you have a question please press star one.

Operator: Once again, if you have a question, please press star one. At this time... We do have a question from the line of Robert Lee with KBW. Please go ahead.

At this time, we do have a question from line of Robert Lee with KBW.

Robert Lee: Hey, see, you thought you got away.

Good Hey, so you got away Hey, Rob 38.4, Okay. Thank you [laughter] 38.4 million backlog ended the quarter.

Wayne Withrow: Hey, Rob, 38.4.

Robert Lee: Okay, thank you.

Wayne Withrow: $38.4 million backlog end of the quarter.

[laughter].

Sure.

Robert Lee: Sure.

And you're like old reliable.

Wayne Withrow: You're like, old, reliable.

[laughter].

Operator: At this time, there's no further questions in the queue.

At this time is no further questions in the queue.

Al West: Thank you, Steve. Our next segment today is investment advisors, and Wayne Withrow will cover this segment. Wayne?

Alfred West: Thank you, Steve. Our next segment today is investment advisors, and Wayne Withrow will cover this segment. Wayne?

Thank you Steve.

And the next segment today is investment advisors and Wayne Withrow will cover this segment Wayne.

Wayne Withrow: Thanks, Al. In Q2 2019, we focused on rebuilding the momentum we lost throughout our migration onto the SEI Wealth Platform. With the migration complete, we also redirected resources toward value-added technology development, client technology adoption, and sales activities. Q2 revenues totaled almost $100 million, which is essentially flat from Q2 of last year. These results were positively impacted by market appreciation and a shift of liquidity products into equities. Factors which detracted from these results were net negative cash flow and a slight decrease in our average basis points earned on assets. Expenses were down $2.5 million from Q2 of last year and $2 million from Q1. Q2 results include about $1 million in one-time savings.

Thanks Al.

In the second quarter of 2019, we focused on rebuilding the momentum we lost throughout our migration onto the Sci wealth platform.

With the migration complete we also redirected resources toward value added technology development.

Client technology adoption and sales activities.

Second quarter revenues totaled almost $100 million, which is essentially flat in the second quarter last year.

These results were positively impacted by market appreciation and a shift of liquidity products into equities.

Factors, which detracts from these results were net negative cash flow and a slight decrease in our average basis points earned on assets.

Expenses were down $2.5 million in the second quarter of last year and $2 million from the first quarter.

Second quarter results include about $1 million in one time savings.

Wayne Withrow: Also included in these results are increased direct costs tied to our asset growth and savings in the technology area, tied to the completion of the migration and implementation of the cost savings measures we began in Q1. Our profits increased $2.7 million from last year's Q2 due to cost savings. Assets under management were $67.2 billion at 30 June, an increase of $1.9 billion from 30 June 2018. During Q1, our net cash flow was a negative $201 million. While our flows during Q2 were still negative, they are trending in a positive direction. We recruited 81 new advisors during Q2, and our pipeline of new advisors remains active.

Also included in these results are increased direct cost tied to our asset growth and savings in the technology area tied to the completion of the migration and implementation of the cost savings measures. We began in the first quarter.

Our profit increased $2.7 million from last year's second quarter due to cost savings.

Assets under management were $67.2 billion at June Thirtyth, an increase of $1.9 billion from June Thirtyth 2018.

During the first quarter, our net cash flow was a negative $201 million.

While our flows during the quarter were still negative they are trending in a positive direction.

We recruited 81, new advisors during the quarter and our pipeline of new advisors remains active.

Wayne Withrow: In summary, during the Q2, we posted good profit results. While cash flow is not where I would like it to be, the quarter saw a pickup in our momentum. We are focused on reaping the benefits of the SEI Wealth Platform now that we are fully migrated. I now welcome any questions you have.

In summary.

During the second quarter, we posted good profit results, while cash flow, it's not where I would like it to be the quarter Soi pick up in our momentum.

We are focused on reaping the benefit of the Sci wealth platform now that we are fully migrated.

I now welcome any questions you have.

And once again, please press star one if you have a question.

Operator: Once again, please press star one if you have a question. First, we go to line of Robert Lee with KBW. Please go ahead.

First to the line of Robert Lee with KBW. Please go ahead.

Robert Lee: Yeah. Hi, Wayne. How are you?

Yes, Hi, Wayne how are you good Rob.

Wayne Withrow: Good, Rob.

Robert Lee: Quick question. We just talking about the competitive environment a little bit. I mean, as Al mentioned up front, you know, as we all know, kind of about the, you know, pressure on fees and competition from low-cost alternatives and understanding that you know, you made some adjustments, I forget exactly when it was, maybe a year or so ago, but, you know, when you look at your kind of product pricing and, you know, maybe what kind of feedback you get from advisors, existing, prospective, I mean, any sense that, you know, you've, you know, changing some of your programs, whether it's, you know, incremental fee changes or maybe even, you know, changing up some of the products to include more passive products?

Quick question, just talking about the competitive environment, a little bit I mean as al mentioned upfront.

As we all know kind of about the.

Pressure on fees and competition from low cost alternatives and.

Understanding that you made some adjustments.

I forget exactly when it was maybe a year or so ago, but.

Are you.

When you look at your kind of product pricing and maybe what kind of feedback you get from advisers existing perspective, I mean any sense that.

Yes.

Change in some of your programs, whether it's incremental fee changes or maybe even.

Changing up some of the plan some of the products to include more passive products. I know you have DTF no product, but just kind of curious kind of how you're reacting steps, you're taking to react to the pricing environment.

Robert Lee: You know, I know you have the ETF, you know, product, but just kind of curious, kind of how you're reacting, you know, steps you're taking to react to the pricing environment.

Wayne Withrow: Right. I guess what I'd say is, if you look at it, we're experiencing, you know, strong growth in our ETF product line, which is a purely passive product.

All right. So I guess, what I'd say is if you look at it we're experiencing strong growth in our EFT product line with the purely passive caught up.

Robert Lee: Mm-hmm.

Wayne Withrow: And we earn, you know, a little bit less on that, and that's reflected in the results. I guess near the end of the Q1, we made a change in our models, and we introduced a passive large cap US equity fund in the models as an option for advisors that don't want sort of that space to be active. Again, that is a little more, a little lower fee, and it's passive US large cap. We're now actively marketing that, too. I think that's the two big changes I'd point out.

And we are a little bit less on that and thats reflected in the results.

A little bit.

So I guess near the end of the.

First quarter, we entered we've made a change in our models that we introduce a passive large cap us equity.

Fund in the models as an option for advice that don't want sort of that space to be accurate.

So again that is.

A little more a little lower fee and its passive us large cap. So we are now.

Actively marketing that too.

So I think that to be changes I'd point out.

Robert Lee: Okay, great. Maybe the follow-up, just, you know, now that you've completed the full migration, got everyone on it, as you've talked about, kind of going, can refocus attention on the marketplace. I'm assuming that includes kind of then selling the broader platform to capture a broader array of advisor assets. Maybe it's early stages, but are you seeing any early signs that your conversations with the types of advisors you're talking to or are filling in, starting to fill in your pipeline are maybe larger or more diverse than, you know, some of your historic advisors?

Okay.

Great and then maybe as a follow up just now that Youve completed the full migration got everyone on it as you've talked about kind of going.

Can refocus attention in the marketplace.

I'm, assuming that includes kind of been selling the broader platform to capture a broader array of advisor assets. So you.

Maybe it's early stages, but are you seeing any.

Any early signs that your conversations with the types of advisors, you're talking to or filling in starting to fill in your pipeline or maybe larger more diverse than some of your historic advisors.

Wayne Withrow: Yeah, I would say that the advisors are looking at us for a broader solution than perhaps they looked at before. I don't know that we've necessarily moved very much upstream yet, although I would expect that. We are seeing, you know, some flows of non-SEI assets onto the platform as a result of advisors looking for a broader solution.

Yes, I would say that.

Advisors looking.

At us for a broader solutions or perhaps they looked that before I don't know that weve necessarily move very much upstream yet, although I would expect that.

And we are seeing some flows of whatever of non sci assets onto the platform as a result of advisors looking for a broader solution.

Robert Lee: Okay. I'm just curious, you know, going from, I mean, I'm sure the hope is that those non-SEI assets, you know, accelerate, but just from a reporting perspective, would those be excluded from your net cash flows, you know, as you disclose them, quarter-to-quarter?

Okay and.

Im just curious going if I mean.

Sure. The hope is that those those those non sci assets.

Accelerate just kind of just from a reporting perspective.

Those be excluded from your net cash flows so as you disclose them quarter to quarter.

Kathy Heilig: All the assets we disclose are flows into SEI managed product. We have not yet disclosed SEI administered product.

All the assets, we disclose our flows into Sci managed Florida.

We have not yet disclosed sci administered product.

Robert Lee: Great. Okay, thank you.

Great.

Okay. Thank you.

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

Operator: At this time, we have no further questions in the queue.

Thank you Wayne.

Al West: Thank you, Wayne. Our final segment today is the institutional investor segment. Paul Klauder will report on this segment. Paul?

Alfred West: Thank you, Wayne. Our final segment today is the institutional investor segment. Paul Klauder will report on this segment. Paul?

Our final segment today is the institutional investors segment, Paul Klauder will report on the same well. Thanks, Alan Good afternoon, everyone I'm going to discuss the financial results for the second quarter of 2019.

Paul Klauder: Thanks, Al. Good afternoon, everyone. I'm going to discuss the financial results for Q2 2019. Q2 revenues of $81.1 million decreased 3% compared to Q2 2018. Q2 operating profits of $41.7 million decreased 2% compared to Q2 2018. Operating margins for the quarter was 51.5%. Both revenues and operating profits for the quarter were impacted by negative client fundings and currency impact versus Q2 2018. Quarter and asset balances of $88.2 billion reflect a $2.7 billion dollar decrease compared to Q2 2018. This decrease is driven primarily by negative client fundings. Net sales were a positive $1.2 billion for the quarter.

Second quarter revenues of 81.1 million decreased 3% compared to the second quarter of 2018.

Second quarter operating profits of $41.7 million decreased 2% compared to the second quarter of 2018.

Operating margins for the quarter was 51.5%.

Both revenues and operating profits for the quarter were impacted by negative client fundings and currency impact versus the second quarter of 2018.

Quarter end asset balances of 88.2 billion reflects a $2.7 billion decrease compared to the second quarter of 2018.

This decrease was driven primarily by negative client fundings.

Net sales were a positive 1.2 billion for the quarter.

Paul Klauder: Gross sales were $1.5 billion, and client losses were about $300 million. The unfunded new client backlog at quarter end was $1.2 billion, and we would expect the majority of this to fund in Q3. The new client signings were diversified across new clients, endowments and foundations, and UK fiduciary management, including a large new name. We believe our new business focus on longer term asset pools across all global markets is beginning to pay dividends for the business, and our sales pipeline is strong. We do continue to stay focused on all client situations, especially those in a rebid process or in M&A activity. Thank you very much, and I'm happy to entertain any questions that you may have.

Gross sales were 1.5 billion and client losses were about $300 million.

The unfunded new client backlog at quarter end was $1.2 billion and we would expect the majority of this to fund in the third quarter.

The new client signings were diversified across new clients, and endowments and foundations and UK fiduciary management, including a large new name.

We believe our new business focus on longer term asset pools across all global markets is beginning to pay dividends for the business and our sales pipeline is strong.

We do continue to stay focused on all client situations, especially those in a rebid process or in M&A activity.

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

Once again, if you have a question. Please press star one at this time.

Operator: Once again, if you have a question, please press star one at this time. Again, star one, if you have a question. Once again, star one, if you have a question. First question comes to the line of Robert Lee. Please go ahead.

Star One if you have a question.

HM.

Once again star one if you have a question.

Oh.

Our first question comes line and Robert Lee. Please go ahead.

Robert Lee: Great. Hi, good afternoon, Paul.

Great Hi, good afternoon Paul.

Paul Klauder: Hi, Robert.

Robert Lee: Could, first things is simply, could you repeat what the unfunded pipeline was? Was it one and a half billion?

Hi, Robert.

Robert Lee: Could, first things is simply, could you repeat what the unfunded pipeline was? Was it one and a half billion?

Okay.

First things is simply can you repeat what the unfunded pipeline was was it.

One and a half billion.

Paul Klauder: Gross sales were $1.5 billion. Losses were $300 for the quarter.

So gross sales were 1.5 billion losses were 300 for the quarter right. The unfunded you apply a backlog that is going to be funded is 1.2 billion and we expect that auto occurred in the third quarter.

Robert Lee: Right.

Paul Klauder: The unfunded new client backlog that is going to be funded is $1.2 billion, and we expect that all to occur in Q3. Does that answer your question, Robert?

Does that answer your question Robert.

He removed himself from queue.

Operator: He removed himself from queue.

Paul Klauder: Okay, no problem.

Okay no problem.

Operator: There are no other participants queued up.

And there are no other participants queuing up.

Thank you Paul.

Al West: Thank you, Paul. I would now like Kathy Heilig to give you a few company-wide statistics. Kathy?

Alfred West: Thank you, Paul. I would now like Kathy Heilig to give you a few company-wide statistics. Kathy?

I would now like Kathy Heilig to give you a few company wide statistics.

Yes.

Kathy Heilig: Thanks, Al. Good afternoon, everyone. I have some additional corporate information regarding this quarter. Q2 2019 cash flow from operations was $167.7 million, or $1.02 per share. Year to date, cash flow from operations is $217.6 million, or $1.40 per share. Q2 2019 free cash flow is $137.6 million, and year to date, free cash flow is $180.2 million. Q2 capital expenditures excluding capitalized software, was $10.9 million, which does include expansion of our campus. The year to date, capital expenditures excluding capitalized software, were $18.2 million, and that includes about $10 million for facility expansion.

That sounds good afternoon, everyone I have some additional corporate information regarding this quarter.

Second quarter 2019 cash flow from operations was 157.7 million or a dollar or two cents per share year to date cash flow from operations is $217.6 million or $1.40 per share.

Second quarter 2019, free cash flow was $137.6 million and year to date free cash flow is $180.2 million.

Second quarter capital expenditures, including excluding capitalized software was $10.9 million, which does include expansion of our campus.

And the year to date capital expenditures were excluding capitalized software were $18.2 million.

And that includes about $10 million or facility expansion.

Kathy Heilig: We project, because we are expanding our facility, that capital expenditures will be approximately another $22 million. As noted, in this release, the Q2 tax rate was 22%, and our effective tax rate could fluctuate as a result of the timing of tax benefit relating to stock option exercises. We also would like to remind you that many of our comments are forward-looking statements and are based upon assumptions that involve risk, and that the financial information presented in our release and on this call is unaudited. In some cases, you can identify forward-looking statements by terminology such as may, will, expect, believe, and continue or appear.

We project because we are expanding our facility that capital expenditures will be approximately another.

$22 million.

As noted in this release the second quarter tax rate was 22%.

And our effective tax rate could fluctuate as a result of the timing of tax benefit relating to stock option exercises.

We also would like to remind you that many of our comments are forward looking statements and are based upon assumptions that involve risks and that the financial information presented in our release on this call is unaudited in some cases you can identify forward looking statements by Terminologies such as May will expect believe and continue or here are forward. Looking statements include our expectations as to revenue that we believe will be generated by sales events that occurred during the quarter. The benefits, we will derive from our investments our ability to manage our expenses and scale, our operating strength of our pipelines and growth opportunities and our ability to execute on and the success of our strategic objective.

Kathy Heilig: Our forward-looking statements include our expectations as to revenue that we believe will be generated by sales events that occurred during the quarter, the benefits we will derive from our investments, our ability to manage our expenses and scale our offerings, the strength of our pipelines and growth opportunities, and our ability to execute on, and the success of our strategic objectives. You should not place undue reliance on our forward-looking statements as they are based on the current beliefs and expectations of our management and subject to significant risks and uncertainties, many of which are beyond our control or subject to change.

You should not place undue reliance on forward looking statements as they are based on the current beliefs and expectations of our management and subject to significant risks and uncertainties many of which are beyond our control or subject to change.

Al West: Although we believe the assumptions upon which we base our forward-looking statements are reasonable, they could be inaccurate. Some of the risks and important factors that could cause actual results to differ from those described in our forward-looking statements can be found in the Risk Factors section of our annual report on Form 10-K for the year ending 31 December 2018, that we filed with the Securities and Exchange Commission. Now, please feel free to ask any other questions you may have.

Kathy Heilig: Although we believe the assumptions upon which we base our forward-looking statements are reasonable, they could be inaccurate. Some of the risks and important factors that could cause actual results to differ from those described in our forward-looking statements can be found in the Risk Factors section of our annual report on Form 10-K for the year ending 31 December 2018, that we filed with the Securities and Exchange Commission. Now, please feel free to ask any other questions you may have.

Although we believe the assumptions upon which we base our forward looking statements are reasonable they could be inaccurate.

Some of the risks important factors that could cause actual results to differ from those described in our forward looking statements can be found in the risk factor section of our annual report on Form 10-K for the year ended December 31, 2018 that we filed with the Securities and Exchange Commission.

And now please feel free to ask any other questions you may have.

Hi.

[noise].

Jason Horman: Once again, please press star one if you have a question. Our first question comes from the line of Chris Donnett with Sandler O'Neill. Please go ahead.

Operator: Once again, please press star one if you have a question. Our first question comes from the line of Chris Donnett with Sandler O'Neill. Please go ahead.

Once again, please press star one if you have a question.

And our first question comes from the line of Chris Donat with Sandler Oneill. Please go ahead.

[Analyst]: Hi, I had one clarifying question for Dennis. Just want to double-check with the compensation line on a consolidated basis. Just that there was no severance this quarter, unlike the prior two quarters. A kind of related question, Dennis, if you wouldn't mind, re-saying what the expense recognition is on sales compensation. I'm not sure I caught that as it was part of Steve's discussion earlier.

Chris Donat: Hi, I had one clarifying question for Dennis. Just want to double-check with the compensation line on a consolidated basis. Just that there was no severance this quarter, unlike the prior two quarters. A kind of related question, Dennis, if you wouldn't mind, re-saying what the expense recognition is on sales compensation. I'm not sure I caught that as it was part of Steve's discussion earlier.

Hi, I had one.

Clarifying question for Dennis.

Just wanted to double check with the compensation line on a consolidated basis.

Just sit there was no severance this quarter. Unlike the prior two quarters and kind of related question then few in mind.

Re saying what the.

The expense recognition is on sales compensation I'm not sure I caught that it is it was part of Steve's discussion earlier.

Dennis McGonigle: Sure. There was minimal severance in the Q2, you know, compared to Q1, particularly. Then on sales compensation, under the new accounting rules that came into play last year, as it relates to some of our business lines, and it's principally in banking and a little bit in Investment Manager Services as well. When you have these longer tailed contracts where delivery of service is over time, you know, rather than more immediate, You're required to defer the recognition of that sales compensation expense, you know, and then recognize it over the life of the client, the estimated life of the client. That's, that was the answer to Rob Lee's question about sales comp relative to Q3 expenses.

Sure. So there there was minimal severance in the second quarter.

Yes compare to first quarter, particularly.

And then on sales compensation there under the new accounting rules that came in came into play last year.

As it relates to.

Some of our business lines as per principally in banking and a little bit of an investment manager services as well when you have these longer tailed contracts.

Where delivery of services over time.

Rather than more immediate.

You test your you are required to.

To further recognition of that sales compensation expense.

Yes, and then recognized over the life of the client the estimated life of the client.

So thats what that was the answer to Rob's question about sales comp.

Relative to third quarter expenses.

Okay got it thanks very much Dennis go up next we'll go to line of Robert Lee representing KBW. Your line is open.

[Analyst]: Okay, got it. Thanks very much, Dennis.

Chris Donat: Okay, got it. Thanks very much, Dennis.

Dennis McGonigle: You're welcome.

Jason Horman: Next, we'll go to the line of Robert Lee, representing KBW. Your line is open.

Operator: Next, we'll go to the line of Robert Lee, representing KBW. Your line is open.

Robert Lee: Great, thanks for taking my follow-up. Actually, this is one for Steve in on SWP and really in the UK. Could you just update us on kind of what new business flows are like there? I guess particularly interested in, you know, any kind of color, as it relates to impacts you're seeing, you know, around, you know, Brexit concerns. I mean, certainly when you look, you know, at least in the asset management business there, it's kind of suffering through outflows. What are your kind of clients experiencing with their client portfolios? Or maybe just rebalancing to more conservative investments.

Great. Thanks for taking my follow up and actually this is one for Steven on this WPP and really in the UK.

Could you just update us on kind of win new business flows like there and I guess, particularly interested in.

Any kind of color.

As it relates to impacts you're seeing around Brexit concerns I mean, certainly when you look at least in the asset management business, there, it's kind of suffering through.

Outflows, but what are your kind of clients experiencing with their client portfolios or maybe just rebalancing to more conservative investments.

Steve Meyer: Yeah, well, I think as I said in my write-up, I think from an investor standpoint, that we're seeing at least on the asset management side, investors remain cautious, and I think that's something we're seeing across the board. Specifically to the UK, if you're asking me about kind of our processing clients and processing prospects, you know, investment prospecting, we continue to see momentum there and activity in our pipeline. You know, I think the announcement of the, which we talked about, the Schroders Personal Wealth, is a great piece of business that is certainly, that's something that we're looking that's going to drive growth. I see a good bit of momentum in our activity there in our pipeline.

Yes, well I think as I said in my right up I think.

An investor standpoint that we're seeing at least on the asset management side investors remain cautious and I think thats something were seeing across the board specifically to UK. If you ask me about kind of our processing.

Clients and processing prospects feel investment processing, we can see can seem to see momentum there and activity in our pipeline.

I think the announcement of the which we talked about the schroders personal well, it's a great piece of business that is certainly.

That's something that we're looking at is going to drive growth and I see a good bit of momentum in our activity. There in our pipeline. We have added to the sales force there and we're hopeful that that will start to drive more results after you've got.

Steve Meyer: We have added to the sales force there, and we're hopeful that that will start to drive more results out of the UK.

Great. Thank you very much sure there are no other participants queuing up at this time.

Robert Lee: Great. Thank you very much.

Steve Meyer: Sure.

Jason Horman: There are no other participants queued up at this time.

Steve Meyer: There are no other participants queued up at this time.

Al West: Thank you. Ladies and gentlemen, while sales results were below expectations in Q2, Q3 is off to a good start. We remain encouraged by our pipelines and the progress we're making. We believe that the investments we're making in our products and organization will help us benefit from all the changes taking place in our industry. Now, before you go, please note that we're holding an investment, an investor conference on 12 November and 13 November at SEI's Oaks headquarters. Dinner will be served on the 12th, followed by the conference on the 13th. Please save the date. Thanks for attending this afternoon, and have a great day.

Alfred West: Thank you. Ladies and gentlemen, while sales results were below expectations in Q2, Q3 is off to a good start. We remain encouraged by our pipelines and the progress we're making. We believe that the investments we're making in our products and organization will help us benefit from all the changes taking place in our industry. Now, before you go, please note that we're holding an investment, an investor conference on 12 November and 13 November at SEI's Oaks headquarters. Dinner will be served on the 12th, followed by the conference on the 13th. Please save the date. Thanks for attending this afternoon, and have a great day.

Thank you.

So ladies and gentleman, while sales results were below expectations second quarter.

Third quarter is off to a good start.

We remain encouraged by our pipelines and the progress we're making.

We believe that the investments we are making in our products and organization will help us benefit from all the changes taking place in our industry.

Now before you go. Please note that we are holding and then investment and then Investor Conference on November Twelveth and 13th at Sci Zos headquarters.

There will be served on the 12, followed by the conference in the 13.

Please save the date.

Thanks for attending this afternoon and have a great day.

Ladies and gentlemen, I will conclude our conference for today. Thank for your participation infusion ATP teleconference. You may now disconnect.

Jason Horman: Ladies and gentlemen, that will conclude our conference for today. Thank you for your participation. If you're in the AT&T conference, you may now disconnect.

Operator: Ladies and gentlemen, that will conclude our conference for today. Thank you for your participation. If you're in the AT&T conference, you may now disconnect.

Yes.

Q2 2019 Earnings Call

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