SEI Investments Company (



Q42011 Earnings Call

January 25, 2012 - 2:00 p.m. ET


Alfred P. West, Jr. – Chairman and Chief Executive Officer

Dennis J. McGonigle – Chief Financial Officer

Kathy C. Heilig – Chief Accounting Officer and Controller

Joseph P. Ujobai – Executive Vice President, Private Banks

Wayne M. Withrow – Executive Vice President, SEI Advisor Network

Edward D. Loughlin – Executive Vice President, Institutional Group

Stephen G. Meyer – Executive Vice President, Head of Investment Manager Services


J. Jeffrey Hopson – Stifel, Nicolaus & Co., Inc.

Christopher R. Donat – Sandler O’Neill & Partners, L.P.

Glenn Greene – Oppenheimer Securities

Robert Lee – Keefe, Bruyette & Woods, Inc.

Jeffrey Bronchick – Cove Street Capital, LLC

Leonard DeProspo – Janney Montgomery Scott, LLC



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Ladies and gentlemen, thank you for standing by. Welcome to the SEI Investment's Fourth Quarter 2011 Earnings Conference Call. (Operator Instructions)

I would now like to turn the conference over to our host, Mr. Al West, Chairman and CEO. Sir, please go ahead.

Alfred P. West, Jr.

Thank you and good afternoon, everybody and welcome. 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 fourth quarter and full-year 2011. I'll then turn it over to Dennis to cover LSV and the investment in new businesses. And after that, each of the business segment leaders will comment on the results of their segments. And then finally, Kathy Heilig will provide you with some important company-wide statistics. As usual, we will field questions at the end of each report. So let me start with the fourth quarter and full-year 2011.

Fourth quarter earnings decreased by 29% from a year ago. Diluted earnings per share for the fourth quarter of $0.25 represents a 24% decrease from the $0.33 reported for the fourth quarter of 2010. Now, for the year 2011, our earnings decreased by 12% and diluted earnings per share for the full year of $1.11 is a 9% decrease over the $1.22 reported in 2010. We also reported a 2% decrease in revenues from fourth quarter 2010 to fourth quarter 2011. And for the year 2011, revenues increased 3% over 2010 revenues.

Our earnings for the fourth quarter of 2010 and 2011 were affected by gains and losses attributable to the SIVs on our balance sheet, as well as the sale of other assets. Now, during fourth quarter 2011, SIVs accounted for a loss of 700 million -- $700,000, while fourth quarter 2010 -- while in the fourth quarter 2010, SIVs and the sale of other assets netted to an increase to earnings of approximately $18 million.

Now also during the fourth quarter 2011, our non-cash asset balances under management increased by $10 billion. Of that, SEI's assets under management grew by $5.7 billion during the quarter, while LSV's assets under management grew by $4.3 billion. Now, please note that the capital markets' performance, particularly at the end of third quarter 2011, had a negative impact on fourth quarter revenues in our asset management businesses.

Our Institutional Investors segment was most negatively affected due to the way that business segment calculates and takes fees. Ed Loughlin will address this issue in his comments. Now, thanks to a stronger market exiting 2011, our asset management fee should respond positively. Now, during the fourth quarter 2011, we repurchased [$3.2 million] [ph] of SEI stock at an average price of just over $16 per share. Now that translates to over $52 million of stock repurchases during the quarter.

For the entire year, the numbers are $11.1 million -- 11.1 million shares purchased at an average price of $19 a share, representing $211 million of repurchases. Now, net new recurring revenue sales, while better, are still slower than we would like. Nonetheless, the Investment Managers and Private Banking segments had good sales quarters, signing a number of accounts.

In addition, the Advisors segment added a number of new advisors to its roll. Plus, the Advisor and Institutional Investor segments showed modest growth in net new business, and each of the segment heads will address their sales events when they talk about their segments. All in all, we generated over $20 million of net new sales events, of which $16 million were recurring revenues.

Now, turning our attention to GWP. We are continuing our investment, and its functionality and its operational infrastructure is so critical to our future. Now, during the first quarter we capitalized approximately $10.4 million of the Global Wealth Platform development and amortized approximately $7.3 million of previously capitalized development.

Now, while we're increasingly encouraged with our long-term growth opportunities with the roll-out of GWP, we are working hard to improve the profitability of our Bank segment. We recently initiated a cost reduction and control program with particular emphasis on banking, and we began to see the results of some of these efforts in the fourth quarter.

We are concentrating our GWP efforts on capturing U.K. GWP markets, as well as launching GWP in the U.S. And for this reason, we are building the functionality and infrastructure necessary to process U.S. banks and advisors, as well as enhance our service quality and efficiency. Now, the next three GWP releases will complete the baseline functionality for the U.S., significantly enhance the U.K. functionality, and help to improve our operational efficiencies and scale.

I just returned from London where I met with a number of clients and prospects, and I continue to be encouraged by the feedback I'm receiving from our markets. Our investments in infrastructure and new service offerings are helping us to outdistance our competitors across all of our business lines, and we certainly expect to capitalize on this even in these challenging markets.

For our new service offerings coupled -- our new service offerings, coupled with our financial strength, positions us well for the long-term growth. Now, this concludes my remarks. So I will ask Dennis McGonigle to give you an update on [LSV] [ph] and the Investments in New Business segment. And after that, I'll turn it over to the other business segments. Dennis?

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