SEI Investments Company (SEIC) Analyst/Investor Day Prepared Remarks Transcript

SEI Investments is executing a comprehensive strategic transformation, evolving from a siloed model to an integrated, horizontal enterprise aimed at repeatable, sustainable growth and double-digit annualized total shareholder returns through 2030. This involves driving double-digit growth in its Investment Manager Services (IMS) through alternatives and outsourcing, reimagining Asset Management for high single-digit AUM growth by targeting larger RIAs and converting mutual funds to ETFs, and boosting underperforming International returns via market expansion and cost control. The company is also enhancing operational efficiency through a new Global Capability Center and technology rationalization, while adopting a more balanced capital allocation strategy, including M&A like the Stratos acquisition, to leverage capital for strategic investments and reduce cash balances. These efforts are underpinned by a cultural shift towards collaboration, expanded professional services, and strategic investments in emerging technologies like AI and tokenization.

Analysis

SEI Investments (SEIC) is executing a significant strategic pivot from a decentralized, siloed structure to an integrated, horizontal enterprise focused on driving repeatable growth and achieving double-digit annualized total shareholder returns through 2030. The cornerstone of its growth is the Investment Manager Services (IMS) segment, which is projected to deliver double-digit growth by capitalizing on the outsourcing trend among large alternative asset managers, particularly in the high-growth private credit space where it holds a #1 global ranking. Concurrently, the firm is 'reimagining' its asset management business to counteract secular drags from mutual fund outflows, targeting high single-digit AUM growth by moving upmarket to enterprise RIAs, leveraging its full ecosystem of custody and technology, and expanding its product suite with ETF conversions. A key focus is boosting profitability in its international business, which contributes 15% of revenue but has margins 4x lower than North America; the strategy here is to replicate the successful turnaround of its private banking unit under the same leadership. This growth strategy is underpinned by a new emphasis on 'Enterprise Excellence,' which aims to improve operating margins by 25-50 basis points annually through initiatives like a new Global Capability Center in India (projected $40M savings over 5 years) and centralized procurement. Furthermore, SEI is adopting a more aggressive capital allocation policy, targeting a 1x net debt-to-EBITDA ratio—a stark shift from its current zero-debt, negative 1x position—to fund strategic M&A, such as the recent Stratos acquisition, and other investments beyond its traditional share buyback and dividend program.

Key Decisions for Investors

• Investors should closely monitor the performance of the Investment Manager Services (IMS) segment, as its ability to maintain double-digit growth by winning large outsourcing mandates in alternatives is critical to the company's overall total shareholder return target.
• The turnaround in the Asset Management division is a key catalyst; track net new asset flows, particularly from larger RIA clients and into new ETF products, to validate the success of the new 'ecosystem' sales strategy and the integration of the Stratos acquisition.
• SEI's pivot to using leverage (targeting 1x net debt-to-EBITDA) for M&A introduces both opportunity and execution risk, so it is prudent to scrutinize the discipline and accretive nature of future capital deployment.
• The targeted 25-50 basis point annual operating margin expansion is a crucial metric for gauging management's new operational discipline, with the successful scaling of the Global Capability Center and the international segment's margin improvement being key indicators to watch.