SEI’s assets, revenue and expenses climb in Q1

April 22, 2022 1:32 PM

A Wall Street street sign outside the New York Stock Exchange as snow falls in New York, on Monday, Feb. 1, 2021.

Bucking the trend of first quarter slumps seen elsewhere, SEI Investments managed to beat expectations and deliver a Q1 of annual increases amid a difficult market.

The Oaks, Pennsylvania-based investment management firm posted revenue of $581.4 million for the quarter, up 28% year over year and surpassing Zacks Equity Research consensus estimates of $558.1 million.

Assets under management were $385.3 billion, up slightly from $383.7 one year ago. Client assets under administration climbed to $899.6 billion, up 8% year over year but down 1.4% for the quarter.

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SEI also reported first quarter net income of $190.3 million, a 47% improvement from the year-ago quarter. Profit of $1.36 per share was up from $0.89 in the first quarter 2021 and matched consensus estimates.

Operating income increased by 62% to $214.8 million. Total expenses for the quarter came in at $366.6 million, up 14%.

"Our first quarter financial profits were challenged by negative capital markets, but we achieved solid sales results and successfully implemented new business,” SEI Chairman and CEO Alfred West said in a statement. “We continue investing in our future through new technology and business initiatives to deliver best-in-class platforms and service to our markets and create new growth opportunities."

Assets on the rise

According to SEI’s quarterly earnings statement, the company’s revenues from asset management, administration and distribution fees increased due to market appreciation during 2021 and positive cash flows from new and existing clients.

But the decline in market conditions during the start of 2022 negatively impacted revenues from assets under management and administration, partially offsetting potential revenue growth, according to officials.

SEI’s average assets under administration increased by $71.8 billion, or 9%, to reach $893.4 billion in the first three months of 2021.

Average assets under management, excluding LSV Asset Management, saw a $13.2 billion increase in Q1. That’s up 5% from one year ago and was good enough to push average assets under management to $293.6 billion.

A down quarter for LSV

SEI owns roughly 39% of LSV Asset Management, a registered investment advisory firm in Chicago that operates mutual funds with value stocks.

LSV contributed $32.5 million in income to SEI in the first quarter of 2022, representing a decrease of 2.7% compared to a year ago and a 5% drop compared to last quarter. SEI said the slide was driven by negative cash flows from existing clients and client losses, which offset

the positive impact from market appreciation in 2021.

Chief Financial Officer Dennis McGonigle said during an earnings call with analysts that LSV’s assets during the quarter decreased by approximately $3 billion.

“LSV experienced net negative cash flow during the quarter of approximately $1.7 billion with market depreciation of approximately $1.3 billion,” McGonigle said during the call, according to a transcript by Seeking Alpha. “Revenue for LSV was approximately $108.5 million for the quarter with $1.3 million of performance fees.”

LSV managed approximately $109 billion in value equity portfolios for around 350 institutional clients as of December 30, 2021, its most recent public disclosure.

Remarks from the outgoing CEO

Just weeks ago SEI announced that its months-long search for a new CEO ended with a promotion from within.

West, who founded SEI in 1968, is transitioning to an executive chairman role and will be replaced by 24-year SEI veteran Ryan Hicke on June 1.

Hicke currently serves as an executive vice president and chief information officer, putting him at the helm of SEI’s technology strategy. He led SEI Sphere, a new cybersecurity and data protection business, and previously served as SEI’s U.K. asset management and private banking businesses.

West believes Hicke’s experience and understanding of SEI’s business makes him the perfect person to take the reins.

"I'm thrilled that Ryan Hicke will become SEI's next CEO, and I'm excited to see him lead the company into the future. His diverse, global experience at SEI informs his commitment to our company's strengths across our three pillars of expertise: investments, operations and technology. With this change in leadership, I'm confident SEI has great days ahead,” West said in a statement. "The strength of our leadership and talented workforce globally is key to driving SEI's enduring success and helping our clients manage change with confidence. Looking toward the future, we will make sound decisions to improve our results and continue to capitalize on market opportunities to deliver long-term value to our shareholders and build brave futures for our employees, clients, and communities."