SEI Investments Company's CEO Discusses Q2 2012 Results - Earnings Call Transcript

SEI Investments Company (SEIC)

Q2 2012 Earnings Conference Call

July 18, 2012 2:00 PM ET


Dennis J. McGonigle – CFO

Edward D. Loughlin – EVP, Institutional Group

Kathy Heilig – Controller

Wayne M. Withrow – EVP, SEI Advisor Network

Stephen G. Meyer – EVP, Head of Investment Manager Services

Alfred P. West, Jr. – Chairman and CEO

Joseph P. Ujobai – EVP, Private Banks


Robert Lee – KBW

Glenn Greene – Oppenheimer

Christopher Donat - Sandler O'Neill

J. Jeffrey Hopson - Stifel Nicolaus

Leonard DeProspo - Janney Capital Markets



Ladies and gentlemen, thank you for standing by. Welcome to the SEI Second Quarter 2012 Earnings Call. At this time, all participants are in a listen-only-mode. Later, we will conduct a question-and-answer session. (Operator instructions). As reminder, this conference is being recorded.

I'd now like to turn the conference over to our host, Chairman and CEO, Mr. Al West. Go ahead sir.

Alfred P. West

Good afternoon, everybody and welcome. With me today on the call are all of our segment leaders as well as Dennis McGonigle, SEI's CFO and Kathy Heilig, SEI's Controller.

Now I'll start by recapping the second quarter 2012. I'll then turn it over to Dennis to cover LSV and the investments and new business segment. And after that each business segment leader will comment on the results of their segment. Then finally Kathy Heilig will provide you with some important Company-wide statistics. Now, as usual, we will field questions at the end of each report.

So, let me start with the second quarter 2012. Second quarter earnings decreased by 8% from a year ago and diluted earnings per share for the second quarter of $0.28 represents a 3% decrease from the $0.29 reported for the second quarter of 2011. We also reported a 1% increase in revenue during the second quarter of 2012 versus the second quarter of 2011.

Now, second quarter revenues were also up 1% over first quarter 2011 revenues. During second quarter of 2012, the SIVs had little effect on earnings. In addition, during second quarter 2012, our end of quarter non-cash asset balances under management decreased by $5.6 billion. Of that, SEI's assets under management increased slightly by $100 million during the quarter, while LSV's assets under management fell by $5.7 billion.

Now finally, during the second quarter 2012, we repurchased 2.3 million shares of SEI stock at an average price of just under $19 per share. Now that translates to over $42.2 million of stock repurchases during the quarter.

Net new recurring revenue sales remained strong. We generated over $20.3 million of net new sales events, of which $15.7 million will be recurring revenues. All segments posted good sales quarters and each of the segment heads will address their sales activity.

Now we are continuing our investment in GWP and its operational infrastructure that are so important to our future. Now during the first quarter we capitalized approximately $8.9 million of the Global Wealth Platform development and amortized approximately $7.4 million of previously capitalized development. While we are increasingly encouraged with our long-term prospects with the rollout of GWP, we're also working hard to improve the profitability of our Bank segment. You'll notice the costs control measures that we had implemented over the past few quarters are showing improvements in the level of many of our costs.

Our GWP efforts remain concentrated on capturing U.K. GWP markets as well as launching GWP in the U.S. We recently passed on an important milestone in our launch of GWP in the U.S. Just a few weeks ago we released a large amount of U.S. functionality which permitted five of our larger advisor clients to convert to GWP.

Now Wayne will provide some more detail on that. In addition I continue to be encouraged by the feedback I receive from our clients and our prospects and it's confirmed by our sales events across all of our markets. Now, our investments in the 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.

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 now ask Dennis McGonigle to give you an update on LSV and the Investments in New Business segment. And after that, I'll turn it over to the other business segments. Dennis?

Dennis J. McGonigle

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 2012, the Investments in New Business segment continued to focus on the ultrahigh net worth investors segment, the integration of our capabilities acquired in the NorthStar acquisition and the further development of new web-based investment services.

During the quarter, the Investments in New Business segment incurred a loss of $2.7 million, which compares to $2.8 million loss during the first quarter of 2012. There have been no material change in this segment and we expect losses in the segment to continue in this range during 2012.

Regarding LSV, our earnings from LSV represent our approximate 40% ownership interest during the second quarter. LSV contributed approximately $22.7 million in income to SEI during the quarter. This compares to $27.3 million in the first quarter of 2012. The decrease in income is due to a few factors.

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