SEI Investments Co. SEIC reported third-quarter 2015 earnings per share of 47 cents, which lagged the Zacks Consensus Estimate of 51 cents. Moreover, the reported figure was down 4% from the year-ago quarter.
Results suffered due to an elevated expense level. Also, the asset position reflected weakness during the quarter. However, sturdy growth in top line continued to be an upside.
SEI Investments’ sales events (net of client losses) during the quarter summed around $20.8 million and are expected to generate net annualized recurring revenues of about $19.5 million after contract values are fully realized. However, short-term challenges resulting from weakened capital markets dampened investors’ confidence, which was reflected in over 3% fall in share price at Wednesday’s close.
Net income came in at $79.4 million, down 5% year over year. The quarter included a charge against earnings of around $6.0 million or 2 cents per share due to the write off of certain assets related to the SEI Wealth Platform.
Behind the Headlines
Revenues at SEI Investments improved 4% year over year to $335.6 million. The growth was mainly attributable to an increase in asset management, administration and distribution fees as well as elevated cash flows and favorable market conditions. Moreover, the figure came slightly above the Zacks Consensus Estimate of $335.2 million.
Total expenses amounted to $248.6 million, up 7% year over year. The rise in costs primarily resulted from an increase in all the expense components except software royalties and other information processing costs.
Operating income fell 4% year over year to $87.0 million.
As of Sep 30, 2015, assets under management (“AUM”) declined 2% year over year to $244.5 billion. Total client AUM was recorded at $393.0 billion, up 8% year over year.
Share Repurchase
In the reported quarter, SEI Investments bought back 1.7 million shares of its common stock for $85.8 million.
Our Take
SEI Investments, backed by its global investment products and services, has been successfully generating revenues over the past several quarters. Moreover, robust asset inflows are expected to be accretive to the company’s overall growth.
Though the company’s capital deployment activities remain impressive, its high dependence on fee-based revenues and weak expense management, along with a stringent regulatory landscape, will likely weigh on its profitability in the quarters ahead.
Currently, SEI Investments has a Zacks Rank #5 (Strong Sell).
Among other investment managers, Waddell & Reed Financial, Inc. WDR is scheduled to announce third-quarter 2015 results on Oct 27; while Apollo Global Management, LLC APO and The Carlyle Group LP CG are expected to release September-end quarter results on Oct 28.
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