SEI Investments' CEO Discusses Q1 2012 Results - Earnings Call Transcript

SEI Investments Co. (SEIC)

Q1 2012 Results Earnings Call

May 2, 2012 2:00 PM ET

Executives

Al West – Chairman and CEO

Dennis McGonigle – Chief Financial Officer

Kathy Heilig – Controller

Joe Ujobai – EVP, Private Banks

Wayne Withrow – EVP, SEI Advisor Network

Ed Loughlin – EVP, Institutional Group

Steve Meyer – EVP, Head, Investment Manager Services

Analysts

Jeff Hopson – Stifel Nicolaus

Robert Lee – KBW

Chris Donat – Sandler O’Neill

Glenn Greene – Oppenheimer

Tom McCrohan – Janney

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the SEI First Quarter 2012 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session. Instructions will be given at that time. (Operator Instructions)

I’d now like to turn the conference over to Al West, Chairman and CEO. Please go ahead.

Al West

Thank you, and welcome everybody. All of our segment leaders are here on the call with me, as well as Dennis McGonigle, SEI’s CFO; and Kathy Heilig, SEI’s Controller.

Now I’m going to start by recapping the first quarter 2012 and then I will turn it over to Dennis to cover LSV and the Investment in New Business segment. After that each business segment leader will comment on the results of their segment. And then finally Kathy Heilig will give us some important company-wide statistics and as usual, fill questions at the end of each report.

So let me start with the first quarter 2012. First quarter earnings decreased by 13% from a year ago. Diluted earnings per share for the first quarter of $0.28, represents a 10% decrease from the $0.31 reported for the first quarter of 2011.

We also reported a 2% increase in revenue during the first quarter of 2012 versus the first quarter 2011. Now first quarter revenues were up 5% over fourth quarter 2011 revenues. So our earnings for the first quarter of 2012 and 2011 were both affected by gains attributable to SIVs on our balance sheet.

Now during first quarter of 2012 SIVs accounted for gain of $2.9 million, while in first quarter 2011 SIVs netted to an increase to earnings of approximately $6.9 million. Also during the first quarter we had one-time expenses of $1.8 million.

Now in addition, during the first quarter 2012, our non-cash asset balances under management increased by $16.3 billion, of that, SEI’s assets under management grew by $9.4 billion in the quarter, while LSV’s assets under management grew by $6.9 billion.

Finally, during the first quarter 2012 we repurchased 1.8 million shares of SEI stock at an average price of just under, I’m sorry, just over $20 per share, that translates to over $37.7 million of stock repurchases during the quarter.

Net new recurring revenue sales continued to improve. We generated over $26 million of net new sales events of which $23.5 million will be recurring revenues. All segments posted good sales quarters and each of the segment heads will address their sales activity.

We are continuing our investment in GWP and its operational infrastructure so critical to our future. Now during the first quarter we capitalized approximately $9.3 million of the Global Wealth Platform development and amortized approximately $7.6 million of previously capitalized development.

While we are increasingly encouraged with our long-term growth opportunities with the rollout of GWP, we’re also working hard to improve the profitability of our Bank segment.

Our GWP efforts remain concentrated on capturing U.K. GWP markets, as well as launching GWP in the U.S. The next two GWP releases along with the most recent release will complete the baseline functionality for the U.S., significantly enhance the U.K. functionality and then help to improve our operational efficiencies and scale.

Now continue to be encouraged by the feedback I receive from our clients and prospects, and it’s confirmed by our fourth and first quarter sales events across all our markets.

Our investments in infrastructure and new service offerings are helping us differentiate ourselves from our competitors and we certainly expect to capitalize on this even in these challenging markets. Now, our new service offering coupled with our financial strength positions us well for the long-term.

Now this concludes my remarks, so I’ll now ask Dennis McGonigle to give you an update on LSV and the Investment in New Business segment and after that, I’ll turn it over to the other business segments. Dennis?

Dennis McGonigle

Thanks, Al. Good afternoon, everyone. I will cover the first quarter results for the Investments in New Business segment, make a few brief comments on LSV Asset Management.

During the first quarter of 2012, the Investments in New Business segment continued its focus on direct marketing and research activities directed to the ultra-high net worth investor and the further development of services.

During the quarter, the Investments in New Business segment incurred a loss of $2.8 million, which compares to a $2.2 million loss during the fourth quarter of 2011. This increase in loss is due to the costs associated with the acquisition and operating run rate of NorthStar, which approximated $750,000. As you’ll recall, we acquired the assets of NorthStar during the first quarter, we expect losses in this segment to continue in this range during 2012.

Regarding LSV, we continue to own approximately 41% of LSV in the first quarter. LSV contributed approximately $27.3 million in income to SEI during the quarter. This compares a $23.4 million in the fourth quarter 2011.

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