SEI Investments Company (NASDAQ:SEIC) Q2 2023 Earnings Conference Call July 26, 2023 4:30 PM ET Company Participants Alex Whitelam – Director-Investor Relations Ryan Hicke – Chief Executive Officer Dennis McGonigle – Chief Financial Officer Sanjay Sharma – Executive Vice President and Global Head-Private Banking Conference Call Participants Ryan Kenny – Morgan Stanley Jeff Schmitt – William Blair Owen Lau – Oppenheimer Mike Brown – KBW Operator Ladies and gentlemen, thank you for standing by. Welcome to the ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________________________________ FORM 10-Q ________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_________to ________ Commission File Number: 0-10200 ___________________________________ ...

SEI Investments Company (NASDAQ:SEIC) Q1 2023 Earnings Conference Call April 20, 2023 4:30 PM ET Company Participants Lindsey Opsahl - Head of Investor Relations Ryan Hicke - Chief Executive Officer Dennis McGonigle - Executive Vice President, Chief Financial Officer Sanjay Sharma - Executive Vice President and Global Head of Private Banking & Wealth Management Phil McCabe - Executive Vice President, Head of Investment Manager Services Paul Klauder - Executive Vice President, Head of the Institutional Group ...

OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_________to ________ Commission File Number: 0-10200 ________________________________________ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 ________________________________________ SEI INVESTMENTS COMPANY (Exact name of R ...

Financial Data and Key Metrics Changes - EPS for Q4 2022 was $0.83, down from $1.03 in Q4 2021 and $0.45 in Q3 2022 [18] - Revenue for the quarter was $457 million, compared to $502 million in 2021 and $471 million in Q3 2022 [18] - Fourth quarter revenues declined 9% year-over-year, and earnings were down 23% from the previous year [22][23] Business Line Data and Key Metrics Changes - In the Investment Managers segment, the alternative business saw large clients launching new products, while the traditional business added new clients across all product lines [9][10] - The Institutional Investors segment faced revenue and profit impacts due to capital market declines, but OCIO sales produced strong results in 2022 [12] - Private Banking had a busy quarter with eight clients recontracted, representing $53 million in annual recurring revenue [20] Market Data and Key Metrics Changes - The market environment was influenced by inflation, geopolitical tensions, and fiscal policy, affecting capital market performance [22] - The unfunded client backlog of gross sales at quarter end was $2.5 billion, with negative net flows from existing clients due to de-risking [38] Company Strategy and Development Direction - The company aims to leverage its business model to turn challenges into opportunities and focus on growth areas such as outsourcing, cybersecurity, and RIA [8][15] - SEI is focusing on unbundling investment options and enhancing client engagement to drive growth [11][16] - The company is building a corporate development team to execute strategic transactions for growth [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current volatile market and emphasized the importance of maintaining investments for future growth [25][26] - The leadership highlighted a renewed focus on expense management and strategic client engagement to drive profitability [24][32] Other Important Information - The company repurchased 1.3 million shares at an average price of $59.36, totaling $79.6 million [24] - A dividend of $0.43 per share was declared for the year [24] Q&A Session Summary Question: What is the trajectory for pretax margin and expense flexibility? - Management indicated that margin compression is a function of market conditions and that they have the ability to adjust variable costs based on performance [54][55] Question: Can you elaborate on the investments in compliance infrastructure? - The CFO explained that these investments are necessary to meet regulatory requirements and are part of a long-term strategy [46][47] Question: What are the growth areas for 2023? - Management identified cybersecurity and outsourcing as key focus areas, with increased sales force and capabilities in SEI Sphere [72][73] Question: How should we think about operating margins going forward? - Management expects margins to trend back to historical levels, with improvements in private banking and institutional business margins over time [81][84] Question: What opportunities exist for cross-selling with recontracted clients? - Management noted that recontracting is part of their growth strategy, allowing for deeper relationships and cross-selling opportunities [85][88]

Financial Data and Key Metrics Changes - Third quarter revenues declined 3% year-over-year to $471 million from $485 million in Q3 2021 [9][38] - Earnings per share (EPS) for the third quarter was $0.45, down 54% from $0.97 in the same quarter last year [9][37] - The financial impact of a voluntary separation program was approximately $57 million, equating to $0.32 per share for the quarter [10][37] - Total expenses for the quarter increased to $420 million from $344 million in the previous year [38][40] Business Line Data and Key Metrics Changes - The Investment Managers segment had a record sales quarter, with significant new business from both new and existing clients [18] - The Investment Advisors business saw net cash flow onto the platform of approximately $800 million, reflecting increased momentum in strategic initiatives [52] - The Institutional Investors segment experienced new client wins, particularly with foundations and endowments, with OCIO net sales events totaling $220 million [54] - The Private Bank business had an active quarter with new sales and implementations, including a significant conversion from U.S. Bank [25] Market Data and Key Metrics Changes - The company noted that lower capital markets impacted revenues from asset management and administration [39] - The backlog of sold but expected-to-install revenue in the next 18 months was reported at $44.9 million [43] - The current unfunded client backlog of gross sales at quarter end was $2.8 billion in the Institutional Investors segment [54] Company Strategy and Development Direction - The company announced a strategic alignment of its asset management businesses under one leadership to drive growth [8][14] - There is a focus on leveraging technology and data integration to meet market demand for advanced analytics [17] - The company aims to capitalize on growth opportunities in the wealth management market through both organic and inorganic means [13][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate inflation and market volatility while pursuing growth [12][35] - The company is committed to maintaining a disciplined approach to expense management while also being aggressive in capital allocation [77][78] - Management highlighted the importance of fostering a diverse and inclusive workplace culture as a competitive advantage [34] Other Important Information - The company repurchased 890,000 shares of stock at a price of $55.55 per share, totaling $49.4 million [11] - A strategic partnership with Snowflake was established to enhance data capabilities [17] - The company is actively engaging clients to create cross-sell opportunities across its business segments [27] Q&A Session Summary Question: How should investors think about the incremental revenue and expense opportunity with the new asset management structure? - Management emphasized that the alignment of units under one leader will enhance capital allocation for growth across segments [63][64] Question: Can you clarify the revenue impact from the Wells Fargo relationship? - Management confirmed a potential revenue impact of $1.3 million to $1.7 million per quarter and a one-time reduction of $5 million to $7 million in Q4 [71][72] Question: How much of the expense base is fixed versus variable? - The majority of expenses are fixed due to the employee base, but there are variable costs tied to assets and trading activity [84][85] Question: What changes are being made to the private bank segment to support better sales? - Management highlighted a significant backlog of signed contracts and ongoing engagement with clients to ensure timely implementations [100][102] Question: Can you expand on the deconversion within investment managers? - The decrease in assets was attributed to market impacts and parting ways with a low-fee strategy client, offset by new client fundings [110]

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements.](index=4&type=section&id=Item%201.%20Financial%20Statements.) This section presents the unaudited consolidated financial statements of SEI Investments Company, including the Balance Sheets, Statements of Operations, Comprehensive Income, Changes in Equity, and Condensed Statements of Cash Flows for the periods ended June 30, 2022, and December 31, 2021, or June 30, 2022 and 2021, respectively. These statements provide a snapshot of the company's financial position, performance, and cash movements [Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=Consolidated%20Balance%20Sheets%20(Unaudited)%20--%20June%2030%2C%202022%20and%20December%2031%2C%202021) | Metric | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (2022 vs 2021) | | :----------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | | **Assets:** | | | | | Cash and cash equivalents | $771,673 | $831,407 | $(59,734) | | Total Current Assets | $1,375,531 | $1,404,229 | $(28,698) | | Total Assets | $2,234,929 | $2,354,702 | $(119,773) | | **Liabilities & Equity:** | | | | | Total Current Liabilities | $253,560 | $355,743 | $(102,183) | | Borrowings Under Revolving Credit Facility | $— | $40,000 | $(40,000) | | Total Liabilities | $312,841 | $493,939 | $(181,098) | | Total Shareholders' Equity | $1,922,088 | $1,860,763 | $61,325 | | Total Liabilities and Shareholders' Equity | $2,234,929 | $2,354,702 | $(119,773) | - Total assets decreased by **$119.8 million**, or **5.1%**, from December 31, 2021, to June 30, 2022, primarily driven by a decrease in cash and cash equivalents and investments[12](index=12&type=chunk)[15](index=15&type=chunk) - Total liabilities decreased by **$181.1 million**, or **36.7%**, largely due to the repayment of **$40.0 million** under the revolving credit facility and a significant reduction in accrued liabilities[15](index=15&type=chunk) - Shareholders' equity increased by **$61.3 million**, or **3.3%**, primarily due to retained earnings growth, partially offset by accumulated other comprehensive loss[15](index=15&type=chunk) [Consolidated Statements of Operations (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20(Unaudited)%20--%20For%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202022%20and%202021) | Metric | 3 Months Ended June 30, 2022 (in thousands) | 3 Months Ended June 30, 2021 (in thousands) | YoY Change (%) | 6 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2021 (in thousands) | YoY Change (%) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :------------- | :---------------------------------------- | :---------------------------------------- | :------------- | | Total revenues | $481,670 | $475,651 | 1% | $1,063,113 | $931,337 | 14% | | Total expenses | $365,810 | $339,630 | 8% | $732,454 | $662,479 | 11% | | Income from operations | $115,860 | $136,021 | (15)% | $330,659 | $268,858 | 23% | | Net income | $111,276 | $133,778 | (17)% | $301,584 | $263,248 | 15% | | Basic earnings per common share | $0.82 | $0.94 | (13)% | $2.20 | $1.85 | 19% | | Diluted earnings per common share | $0.81 | $0.93 | (13)% | $2.17 | $1.82 | 19% | | Dividends declared per common share | $0.40 | $0.37 | 8% | $0.40 | $0.37 | 8% | - For the three months ended June 30, 2022, total revenues saw a slight increase of **1%**, while net income decreased by **17%** due to higher expenses and a net loss from investments[18](index=18&type=chunk) - For the six months ended June 30, 2022, total revenues increased by **14%**, and net income increased by **15%**, driven by higher information processing and software servicing fees, including one-time early termination fees[18](index=18&type=chunk)[137](index=137&type=chunk) [Consolidated Statements of Comprehensive Income (Unaudited)](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)%20--%20For%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202022%20and%202021) | Metric | 3 Months Ended June 30, 2022 (in thousands) | 3 Months Ended June 30, 2021 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2021 (in thousands) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net income | $111,276 | $133,778 | $301,584 | $263,248 | | Foreign currency translation adjustments | $(14,623) | $994 | $(19,181) | $2,679 | | Unrealized loss on investments, net of tax | $(3,088) | $(292) | $(7,057) | $(835) | | Reclassification adjustment for losses realized in net income, net of tax | $129 | $179 | $318 | $432 | | Total other comprehensive (loss) income, net of tax | $(17,582) | $881 | $(25,920) | $2,276 | | Comprehensive income | $93,694 | $134,659 | $275,664 | $265,524 | - Comprehensive income decreased significantly for the three months ended June 30, 2022, to **$93.7 million** from **$134.7 million** in the prior year, primarily due to foreign currency translation adjustments and unrealized losses on investments[21](index=21&type=chunk) - For the six months ended June 30, 2022, comprehensive income increased to **$275.7 million** from **$265.5 million**, despite substantial foreign currency translation adjustments and unrealized losses on investments[21](index=21&type=chunk) [Consolidated Statements of Changes in Equity (Unaudited)](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity%20(Unaudited)%20--%20For%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202022%20and%202021) | Metric | 3 Months Ended June 30, 2022 (in thousands) | 3 Months Ended June 30, 2021 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2021 (in thousands) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Total Equity (Beginning Balance) | $1,973,083 | $1,829,108 | $1,860,763 | $1,739,907 | | Net income | $111,276 | $133,778 | $301,584 | $263,248 | | Other comprehensive (loss) income | $(17,582) | $881 | $(25,920) | $2,276 | | Purchase and retirement of common stock | $(109,293) | $(129,219) | $(209,383) | $(196,158) | | Dividends declared | $(54,378) | $(52,389) | $(54,378) | $(52,389) | | Total Equity (Ending Balance) | $1,922,088 | $1,805,606 | $1,922,088 | $1,805,606 | - For the three months ended June 30, 2022, total equity decreased from **$1,973.1 million** to **$1,922.1 million**, primarily due to common stock repurchases and dividends, partially offset by net income[24](index=24&type=chunk) - For the six months ended June 30, 2022, total equity increased from **$1,860.8 million** to **$1,922.1 million**, driven by net income, but significantly impacted by common stock repurchases totaling **$209.4 million**[27](index=27&type=chunk)[78](index=78&type=chunk) [Consolidated Condensed Statements of Cash Flows (Unaudited)](index=10&type=section&id=Consolidated%20Condensed%20Statements%20of%20Cash%20Flows%20(Unaudited)%20--%20For%20the%20Six%20Months%20Ended%20June%2030%2C%202022%20and%202021) | Metric | 6 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2021 (in thousands) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net cash provided by operating activities | $330,615 | $324,997 | | Net cash used in investing activities | $(42,516) | $(56,087) | | Net cash used in financing activities | $(332,173) | $(277,936) | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | $(15,660) | $2,578 | | Net decrease in cash, cash equivalents and restricted cash | $(59,734) | $(6,448) | | Cash, cash equivalents and restricted cash, end of period | $772,024 | $781,279 | - Net cash provided by operating activities increased slightly to **$330.6 million** in the first six months of 2022, up from **$325.0 million** in the prior year, primarily due to increased net income[30](index=30&type=chunk)[178](index=178&type=chunk) - Net cash used in investing activities decreased to **$42.5 million** in the first six months of 2022, from **$56.1 million** in the prior year, mainly due to lower net purchases of marketable securities[30](index=30&type=chunk)[179](index=179&type=chunk) - Net cash used in financing activities increased significantly to **$332.2 million**, from **$277.9 million**, driven by higher common stock repurchases and dividend payments, alongside the repayment of the revolving credit facility[30](index=30&type=chunk)[180](index=180&type=chunk) [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed disclosures and explanations for the figures presented in the consolidated financial statements, covering significant accounting policies, investments, financial caption compositions, fair value measurements, marketable securities, credit facilities, shareholders' equity, comprehensive loss, business segments, income taxes, commitments, goodwill, revenue recognition, and a voluntary separation program [Note 1. Summary of Significant Accounting Policies](index=11&type=section&id=Note%201.%20Summary%20of%20Significant%20Accounting%20Policies) - SEI Investments Company provides comprehensive technology, operational, and investment management services to wealth managers, financial advisors, investment managers, family offices, institutional and private investors[32](index=32&type=chunk) - The company's revenue streams are categorized into Investment processing platforms (Information processing and software servicing fees), Investment operations platforms (Asset management, administration and distribution fees), and Investment management platforms (Asset management, administration and distribution fees)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) - The company waived **$20.2 million** and **$21.5 million** in fees during the six months ended June 30, 2022 and 2021, respectively, under expense limitation agreements with certain SEI-sponsored money market funds[40](index=40&type=chunk) - Capitalized software development costs, primarily for the SEI Wealth Platform (SWP), amounted to **$13.8 million** and **$12.3 million** for the six months ended June 30, 2022 and 2021, respectively, with the net book value of SWP at **$224.7 million** as of June 30, 2022[44](index=44&type=chunk) [Note 2. Investment in Unconsolidated Affiliate](index=14&type=section&id=Note%202.%20Investment%20in%20Unconsolidated%20Affiliate) - SEI holds a **38.6%** partnership interest in LSV Asset Management (LSV), an investment advisor, accounted for using the equity method[47](index=47&type=chunk)[49](index=49&type=chunk) | Metric | 3 Months Ended June 30, 2022 (in thousands) | 3 Months Ended June 30, 2021 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2021 (in thousands) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | SEI's proportionate share in LSV earnings | $29,813 | $35,065 | $62,272 | $68,415 | - The company received partnership distributions from LSV of **$69.8 million** and **$68.1 million** in the six months ended June 30, 2022 and 2021, respectively, classified as operating activities[48](index=48&type=chunk) [Note 3. Composition of Certain Financial Statement Captions](index=15&type=section&id=Note%203.%20Composition%20of%20Certain%20Financial%20Statement%20Captions) | Metric | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | **Receivables:** | | | | Trade receivables | $107,853 | $111,209 | | Fees earned, not billed | $337,445 | $315,255 | | Other receivables | $23,556 | $16,747 | | Less: Allowance for doubtful accounts | $(1,952) | $(1,602) | | Total Receivables, net | $466,902 | $441,609 | | **Property and Equipment, net:** | | | | Buildings | $209,907 | $209,766 | | Equipment | $167,591 | $153,158 | | Land | $26,411 | $24,651 | | Purchased software | $156,569 | $156,387 | | Total Property and Equipment, net | $178,946 | $178,869 | | **Accrued Liabilities:** | | | | Accrued employee compensation | $52,418 | $107,933 | | Accrued employee benefits and other personnel | $9,749 | $13,951 | | Accrued consulting, outsourcing and professional fees | $47,067 | $36,411 | | Accrued sub-advisory, distribution and other asset management fees | $58,400 | $58,661 | | Accrued dividend payable | $— | $55,452 | | Other accrued liabilities | $51,118 | $51,974 | | Total accrued liabilities | $218,752 | $324,382 | - Deferred contract costs, primarily deferred sales commissions, were **$35.4 million** as of June 30, 2022, down from **$36.2 million** at December 31, 2021, with amortization expense of **$5.9 million** for the six months ended June 30, 2022, including **$1.8 million** accelerated due to a client agreement termination[53](index=53&type=chunk) [Note 4. Fair Value Measurements](index=16&type=section&id=Note%204.%20Fair%20Value%20Measurements) - The fair value of financial assets is determined using a hierarchy: Level 1 (quoted prices in active markets), Level 2 (significant observable inputs), and Level 3 (significant unobservable inputs)[55](index=55&type=chunk)[59](index=59&type=chunk) - The company's Level 1 assets primarily consist of investments in open-ended mutual funds, while Level 2 assets include GNMA mortgage-backed securities and U.S. government agency short-term notes[55](index=55&type=chunk) - The fair value of investment funds sponsored by LSV is measured using the net asset value per share (NAV) as a practical expedient[56](index=56&type=chunk) - Level 3 financial liabilities consist entirely of estimated contingent consideration from an acquisition, valued using a Monte-Carlo simulation model[58](index=58&type=chunk) [Note 5. Marketable Securities](index=17&type=section&id=Note%205.%20Marketable%20Securities) - Marketable securities include cash equivalents (money market funds, commercial paper), available-for-sale debt securities, SEI-sponsored and non-SEI-sponsored mutual funds, equities, LSV-sponsored funds, and securities owned by SIDCO[60](index=60&type=chunk) | Metric | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Cash Equivalents (Fair Value) | $458,521 | $422,838 | | Available-for-sale debt securities (Fair Value) | $110,870 | $117,135 | | SEI-sponsored mutual funds (Fair Value) | $6,022 | $7,211 | | Equities and other mutual funds (Fair Value) | $4,790 | $5,195 | | Investment funds sponsored by LSV (Fair Value) | $6,000 | $6,916 | | Securities owned (Fair Value) | $31,171 | $28,267 | - Net unrealized losses on available-for-sale debt securities were **$6.8 million** at June 30, 2022, primarily due to interest rate increases affecting GNMA mortgage-backed securities[62](index=62&type=chunk) - The company recognized unrealized losses of **$916 thousand** from LSV-sponsored funds during the six months ended June 30, 2022, compared to unrealized gains of **$766 thousand** in the prior year[66](index=66&type=chunk) [Note 6. Line of Credit](index=19&type=section&id=Note%206.%20Line%20of%20Credit) - The company has a **$325.0 million** Credit Agreement expiring in April 2026, with interest rates based on a base rate or LIBOR plus a premium, and includes SOFR as a fallback rate[68](index=68&type=chunk) - During the six months ended June 30, 2022, the company fully repaid **$40.0 million** borrowed under the Credit Facility for an acquisition[71](index=71&type=chunk) - As of July 15, 2022, **$319.0 million** of the Credit Facility was available for general corporate purposes, after accounting for **$6.0 million** in outstanding letters of credit[72](index=72&type=chunk) [Note 7. Shareholders' Equity](index=19&type=section&id=Note%207.%20Shareholders%27%20Equity) | Metric | 3 Months Ended June 30, 2022 (in thousands) | 3 Months Ended June 30, 2021 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2021 (in thousands) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Stock-based compensation expense | $10,007 | $10,103 | $20,573 | $19,855 | | Less: Deferred tax benefit | $(1,839) | $(1,904) | $(3,934) | $(3,758) | | Stock-based compensation expense, net of tax | $8,168 | $8,199 | $16,639 | $16,097 | - The company repurchased **3.7 million shares** of common stock for **$209.4 million** during the six months ended June 30, 2022, with **$221.9 million** remaining authorization[78](index=78&type=chunk) - A cash dividend of **$0.40 per share** was declared on June 1, 2022, totaling **$54.4 million** for the six months ended June 30, 2022, an increase from **$52.4 million** in the prior year[80](index=80&type=chunk) [Note 8. Accumulated Other Comprehensive Loss](index=21&type=section&id=Note%208.%20Accumulated%20Other%20Comprehensive%20Loss) | Component | January 1, 2022 (in thousands) | Other comprehensive loss before reclassifications (in thousands) | Amounts reclassified from accumulated other comprehensive loss (in thousands) | Net current-period other comprehensive loss (in thousands) | June 30, 2022 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------------------------------- | :---------------------------------------------------------- | :------------------------------------------------------- | :----------------------------- | | Foreign Currency Translation Adjustments | $(19,781) | $(19,181) | $— | $(19,181) | $(38,962) | | Unrealized Gains (Losses) on Investments | $(62) | $(7,057) | $318 | $(6,739) | $(6,801) | | Total Accumulated Other Comprehensive Loss | $(19,843) | $(26,238) | $318 | $(25,920) | $(45,763) | - Accumulated other comprehensive loss increased from **$(19.8) million** at January 1, 2022, to **$(45.8) million** at June 30, 2022, primarily due to foreign currency translation adjustments and unrealized losses on investments[81](index=81&type=chunk) [Note 9. Business Segment Information](index=21&type=section&id=Note%209.%20Business%20Segment%20Information) - SEI operates through five reportable business segments: Private Banks, Investment Advisors, Institutional Investors, Investment Managers, and Investments in New Businesses[82](index=82&type=chunk) | Segment | 3 Months Ended June 30, 2022 Revenues (in thousands) | 3 Months Ended June 30, 2021 Revenues (in thousands) | YoY Change (%) | 6 Months Ended June 30, 2022 Revenues (in thousands) | 6 Months Ended June 30, 2021 Revenues (in thousands) | YoY Change (%) | | :-------------------------- | :------------------------------------- | :------------------------------------- | :------------- | :------------------------------------- | :------------------------------------- | :------------- | | Private Banks | $124,184 | $123,676 | 0% | $337,732 | $241,284 | 40% | | Investment Advisors | $113,194 | $119,396 | (5)% | $232,424 | $232,690 | 0% | | Institutional Investors | $83,483 | $85,699 | (3)% | $170,322 | $170,198 | 0% | | Investment Managers | $155,926 | $142,808 | 9% | $312,827 | $279,227 | 12% | | Investments in New Businesses | $4,883 | $4,072 | 20% | $9,808 | $7,938 | 24% | | **Total Revenues** | **$481,670** | **$475,651** | **1%** | **$1,063,113** | **$931,337** | **14%** | | Segment | 3 Months Ended June 30, 2022 Operating Profit (Loss) (in thousands) | 3 Months Ended June 30, 2021 Operating Profit (Loss) (in thousands) | YoY Change (%) | 6 Months Ended June 30, 2022 Operating Profit (Loss) (in thousands) | 6 Months Ended June 30, 2021 Operating Profit (Loss) (in thousands) | YoY Change (%) | | :-------------------------- | :------------------------------------------------ | :------------------------------------------------ | :------------- | :------------------------------------------------ | :------------------------------------------------ | :------------- | | Private Banks | $3,124 | $6,022 | (48)% | $94,717 | $12,906 | NM | | Investment Advisors | $49,819 | $60,263 | (17)% | $104,529 | $118,530 | (12)% | | Institutional Investors | $39,558 | $43,804 | (10)% | $81,039 | $89,145 | (9)% | | Investment Managers | $55,119 | $57,813 | (5)% | $113,183 | $111,212 | 2% | | Investments in New Businesses | $(7,961) | $(9,559) | NM | $(14,986) | $(19,097) | NM | | **Total Operating Profit (Loss)** | **$139,659** | **$158,343** | **(12)%** | **$378,482** | **$312,696** | **21%** | [Note 10. Income Taxes](index=24&type=section&id=Note%2010.%20Income%20Taxes) | Metric | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Gross liability for unrecognized tax benefits | $16,861 | $14,887 | | Interest and penalties | $1,642 | $1,338 | | Total gross uncertain tax positions | $18,503 | $16,225 | | Component | 3 Months Ended June 30, 2022 (%) | 3 Months Ended June 30, 2021 (%) | 6 Months Ended June 30, 2022 (%) | 6 Months Ended June 30, 2021 (%) | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Statutory rate | 21.0 | 21.0 | 21.0 | 21.0 | | State taxes, net of federal tax benefit | 2.8 | 3.2 | 2.8 | 3.2 | | Foreign tax expense and tax rate differential | (0.1) | (0.1) | (0.1) | (0.1) | | Tax benefit from stock option exercises | (0.3) | (1.2) | (0.3) | (1.2) | | Other, net | (0.3) | (0.6) | (0.3) | (0.4) | | **Effective tax rate** | **23.1** | **22.3** | **23.1** | **22.5** | - The increase in the effective tax rate for the three and six months ended June 30, 2022, was primarily due to decreased tax benefits from lower stock option exercises, partially offset by a decrease in state tax expense[91](index=91&type=chunk) - Pennsylvania House Bill 1342, signed July 8, 2022, reduces the corporate income tax rate from **9.99%** to **4.99%** in phases, with management evaluating the impact, not expecting it to be material[94](index=94&type=chunk) [Note 11. Commitments and Contingencies](index=25&type=section&id=Note%2011.%20Commitments%20and%20Contingencies) - The company is involved in various legal proceedings, including the SS&C Advent Litigation, where a New York State Court granted SEI's motion for injunctive relief and affirmed that SS&C Advent's purported contract termination was 'pretextual' and breached the agreement[97](index=97&type=chunk)[100](index=100&type=chunk)[106](index=106&type=chunk)[110](index=110&type=chunk) - SEI continues to believe it will not need to change providers under its contract with SS&C Advent and expects the financial impact of litigating the Advent Matter to be immaterial[106](index=106&type=chunk)[107](index=107&type=chunk) - Other legal matters arising in the normal course of business are not believed to have a material adverse effect on the company's financial position[108](index=108&type=chunk) [Note 12. Goodwill and Intangible Assets](index=29&type=section&id=Note%2012.%20Goodwill%20and%20Intangible%20Assets) | Segment | December 31, 2021 (in thousands) | Measurement period adjustments (in thousands) | Foreign currency translation adjustments (in thousands) | June 30, 2022 (in thousands) | | :------------------- | :----------------------------- | :------------------------------------ | :---------------------------------------------- | :----------------------------- | | Institutional Investors | $48,911 | $(11) | $— | $48,900 | | Investment Managers | $56,822 | $211 | $(27) | $57,006 | | Investments in New Businesses | $11,499 | $— | $— | $11,499 | | **Total Goodwill** | **$117,232** | **$200** | **$(27)** | **$117,405** | - Goodwill increased slightly to **$117.4 million** at June 30, 2022, primarily due to measurement period adjustments from the Finomial and Novus acquisitions in Q4 2021[111](index=111&type=chunk)[112](index=112&type=chunk) - Amortization expense related to intangible assets acquired through acquisitions was **$6.5 million** for the six months ended June 30, 2022, a significant increase from **$2.1 million** in the prior year, due to recent acquisitions[115](index=115&type=chunk) [Note 13. Revenues from Contracts with Customers](index=29&type=section&id=Note%2013.%20Revenues%20from%20Contracts%20with%20Customers) - The company's principal revenue sources are asset management, administration, and distribution fees (percentage of net assets) and information processing and software servicing fees (monthly fees, percentage of assets processed, or project-oriented)[116](index=116&type=chunk) | Major Product Line | 6 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2021 (in thousands) | YoY Change (%) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :------------- | | Investment management fees from pooled investment products | $235,136 | $242,419 | (3)% | | Investment management fees from investment management agreements | $223,148 | $222,367 | 0% | | Investment operations fees | $290,825 | $258,194 | 13% | | Investment processing fees - PaaS | $112,833 | $106,622 | 6% | | Investment processing fees - SaaS | $73,104 | $63,813 | 15% | | Professional services fees | $97,849 | $10,349 | 845% | | Account fees and other | $30,218 | $27,573 | 10% | | **Total Revenues** | **$1,063,113** | **$931,337** | **14%** | - Professional services fees for the Private Banks segment include **$88.0 million** in one-time early termination fees recorded in Q1 2022 from a significant client, significantly boosting this category's revenue[119](index=119&type=chunk) [Note 14. Voluntary Separation Program](index=33&type=section&id=Note%2014.%20Voluntary%20Separation%20Program) - In June 2022, SEI initiated a Voluntary Separation Program (VSP) for long-tenured U.S. employees to enhance talent attraction and development[130](index=130&type=chunk) - The VSP includes a severance package, continuation of benefits, and allowances related to stock option vesting, which will be considered modifications to equity compensation plans[131](index=131&type=chunk) - The company expects a one-time increase of **$54.0 million** to **$58.0 million** in personnel costs associated with the VSP during the third quarter of 2022[132](index=132&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section provides management's perspective on the company's financial performance and condition, highlighting key drivers, segment results, and significant events, covering revenue and expense trends, asset balances, and the impact of strategic initiatives and market conditions [Overview](index=34&type=section&id=Overview) - SEI is a global provider of technology-driven wealth and investment management solutions, managing, advising, or administering **$1.3 trillion** in assets as of June 30, 2022[135](index=135&type=chunk) | Metric | 3 Months Ended June 30, 2022 (in thousands) | 3 Months Ended June 30, 2021 (in thousands) | YoY Change (%) | 6 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2021 (in thousands) | YoY Change (%) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :------------- | :---------------------------------------- | :---------------------------------------- | :------------- | | Revenues | $481,670 | $475,651 | 1% | $1,063,113 | $931,337 | 14% | | Expenses | $365,810 | $339,630 | 8% | $732,454 | $662,479 | 11% | | Income from operations | $115,860 | $136,021 | (15)% | $330,659 | $268,858 | 23% | | Net income | $111,276 | $133,778 | (17)% | $301,584 | $263,248 | 15% | | Diluted earnings per common share | $0.81 | $0.93 | (13)% | $2.17 | $1.82 | 19% | - Revenue from Asset management, administration and distribution fees increased due to higher average assets under administration from 2021 market appreciation and positive cash flows, despite 2022 market declines, with average assets under administration increasing **7%** to **$895.4 billion** in the first six months of 2022[137](index=137&type=chunk)[139](index=139&type=chunk) - Revenue from Asset management, administration and distribution fees were negatively impacted by a shift into lower fee products[137](index=137&type=chunk)[139](index=139&type=chunk) - One-time early termination fees of **$88.0 million** were recorded in Q1 2022 from a significant investment processing client[137](index=137&type=chunk)[139](index=139&type=chunk) - Acquisitions of SEI Novus and Atlas Master Trust contributed **$6.1 million** and **$2.5 million** in revenue, respectively, during the first six months of 2022[137](index=137&type=chunk)[139](index=139&type=chunk) - Earnings from LSV decreased by **9%** to **$62.3 million** in the first six months of 2022 due to negative cash flows, market depreciation, and client losses[137](index=137&type=chunk)[139](index=139&type=chunk) - Operating expenses increased due to higher personnel and consulting costs, partially offset by lower direct costs related to asset management revenues[137](index=137&type=chunk)[139](index=139&type=chunk) [Introduction of Voluntary Separation Program](index=36&type=section&id=Introduction%20of%20Voluntary%20Separation%20Program) - In June 2022, SEI launched an enhanced voluntary separation program for long-tenured U.S. employees to foster professional development and advancement opportunities[138](index=138&type=chunk) - The program is expected to result in a one-time increase of **$54.0 million** to **$58.0 million** in personnel costs during the third quarter of 2022[138](index=138&type=chunk) [Ending Asset Balances](index=37&type=section&id=Ending%20Asset%20Balances) | Segment | June 30, 2022 (in millions) | June 30, 2021 (in millions) | YoY Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :------------- | | Private Banks Total assets | $29,873 | $34,337 | (13)% | | Investment Advisors Total Platform assets (E) | $86,717 | $95,169 | (9)% | | Institutional Investors Total assets | $81,383 | $100,097 | (19)% | | Investment Managers Total assets | $1,027,402 | $963,427 | 7% | | Investments in New Businesses Total assets | $3,221 | $3,537 | (9)% | | LSV Equity and fixed-income programs (B) | $81,940 | $102,404 | (20)% | | **Total Assets** | **$1,310,536** | **$1,298,971** | **1%** | - Total assets across all segments increased by **1%** to **$1.31 trillion** as of June 30, 2022, compared to June 30, 2021[141](index=141&type=chunk) - Investment Managers segment showed significant growth in total assets, increasing by **7%** to **$1.03 trillion**, primarily driven by collective trust fund programs[140](index=140&type=chunk) [Average Asset Balances](index=39&type=section&id=Average%20Asset%20Balances) | Segment | 3 Months Ended June 30, 2022 (in millions) | 3 Months Ended June 30, 2021 (in millions) | YoY Change (%) | 6 Months Ended June 30, 2022 (in millions) | 6 Months Ended June 30, 2021 (in millions) | YoY Change (%) | | :-------------------------- | :------------------------------------- | :------------------------------------- | :------------- | :------------------------------------- | :------------------------------------- | :------------- | | Private Banks Total assets | $31,678 | $34,301 | (8)% | $33,113 | $33,821 | (2)% | | Investment Advisors Total Platform assets (E) | $90,648 | $93,502 | (3)% | $93,677 | $91,284 | 3% | | Institutional Investors Total assets | $87,060 | $100,723 | (14)% | $91,714 | $99,468 | (8)% | | Investment Managers Total assets | $1,025,081 | $938,832 | 9% | $1,000,501 | $917,344 | 9% | | Investments in New Businesses Total assets | $3,443 | $3,512 | (2)% | $3,576 | $3,377 | 6% | | LSV Equity and fixed-income programs (B) | $87,818 | $103,583 | (15)% | $92,134 | $100,530 | (8)% | | **Total Assets** | **$1,325,728** | **$1,274,453** | **4%** | **$1,314,715** | **$1,245,824** | **6%** | - Average total assets increased by **4%** for the three months and **6%** for the six months ended June 30, 2022, compared to the prior year periods[144](index=144&type=chunk) - The Investment Managers segment showed a consistent **9%** increase in average total assets for both the three and six-month periods, driven by collective trust fund programs[143](index=143&type=chunk) [Business Segments](index=41&type=section&id=Business%20Segments) | Segment | 3 Months Ended June 30, 2022 Operating Margin (%) | 3 Months Ended June 30, 2021 Operating Margin (%) | 6 Months Ended June 30, 2022 Operating Margin (%) | 6 Months Ended June 30, 2021 Operating Margin (%) | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Private Banks | 3% | 5% | 28% | 5% | | Investment Advisors | 44% | 50% | 45% | 51% | | Institutional Investors | 47% | 51% | 48% | 52% | | Investment Managers | 35% | 40% | 36% | 40% | | Investments in New Businesses | NM | NM | NM | NM | - **Private Banks:** Revenues increased **40%** for the six-month period due to **$88.0 million** in early termination fees and increased investment processing fees, partially offset by foreign currency fluctuations and decreased investment management fees, with operating margin for the six-month period increasing significantly to **28%** from **5%**[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - **Investment Advisors:** Revenues decreased **5%** for the three-month period and were flat for the six-month period, impacted by decreased investment management fees from SEI fund programs due to market conditions, partially offset by increased separately managed account fees, with operating margin declining to **44%** (3 months) and **45%** (6 months)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - **Institutional Investors:** Revenues decreased **3%** for the three-month period and were flat for the six-month period, benefiting from SEI Novus and Atlas Master Trust acquisitions, but offset by client losses and foreign currency impacts, with operating margin decreasing to **47%** (3 months) and **48%** (6 months)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - **Investment Managers:** Revenues increased **9%** for the three-month period and **12%** for the six-month period, driven by higher valuations of existing client assets and positive cash flows into alternative and traditional offerings, with operating margin decreasing to **35%** (3 months) and **36%** (6 months)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) [Other](index=43&type=section&id=Other) - Corporate overhead expenses increased to **$47.8 million** for the six months ended June 30, 2022, from **$43.8 million** in the prior year, primarily due to higher personnel, consulting, and professional fees[156](index=156&type=chunk) | Metric | 3 Months Ended June 30, 2022 (in thousands) | 3 Months Ended June 30, 2021 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2021 (in thousands) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net (loss) gain from investments | $(2,620) | $377 | $(3,109) | $709 | | Interest and dividend income | $1,853 | $878 | $2,701 | $1,823 | | Interest expense | $(211) | $(130) | $(461) | $(253) | | Equity in earnings of unconsolidated affiliate | $29,813 | $35,065 | $62,272 | $68,415 | | **Total other income and expense items, net** | **$28,835** | **$36,190** | **$61,403** | **$70,694** | - Net losses from investments for the three and six months ended June 30, 2022, were primarily due to unrealized mark-to-market losses on LSV-sponsored and company-sponsored mutual funds amid market declines[158](index=158&type=chunk) - Amortization expense increased by **15%** for both the three and six-month periods ended June 30, 2022, driven by intangible assets acquired through the Finomial, SEI Novus, and Atlas Master Trust acquisitions[162](index=162&type=chunk)[164](index=164&type=chunk) - The effective income tax rate increased to **23.1%** for both the three and six months ended June 30, 2022, mainly due to decreased tax benefits from lower stock option exercises[165](index=165&type=chunk) - The company faces a complex and changing regulatory environment, with increased scrutiny and potential for enforcement actions, which could materially impact operating results or financial position[169](index=169&type=chunk)[171](index=171&type=chunk) [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) | Metric | 6 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2021 (in thousands) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net cash provided by operating activities | $330,615 | $324,997 | | Net cash used in investing activities | $(42,516) | $(56,087) | | Net cash used in financing activities | $(332,173) | $(277,936) | | Net decrease in cash, cash equivalents and restricted cash | $(59,734) | $(6,448) | | Cash, cash equivalents and restricted cash, end of period | $772,024 | $781,279 | - As of July 15, 2022, the company had **$386.2 million** in free and immediately accessible cash and cash equivalents for general corporate purposes[176](index=176&type=chunk) - Cash flows from operations increased by **$5.6 million** in the first six months of 2022, primarily due to higher net income, partially offset by changes in working capital[178](index=178&type=chunk) - Net cash used in financing activities increased due to **$210.3 million** in common stock repurchases and **$109.8 million** in dividend payments during the first six months of 2022[180](index=180&type=chunk) [Forward-Looking Information and Risk Factors](index=47&type=section&id=Forward-Looking%20Information%20and%20Risk%20Factors) - The company's future operations, strategies, and financial results are subject to various risks and uncertainties, including changes in capital markets, product development, third-party service provider failures, and increased competition[182](index=182&type=chunk)[183](index=183&type=chunk) - Significant risks include the impact of LSV Asset Management's performance, software defects, data and cybersecurity risks, extensive governmental regulation, and litigation[183](index=183&type=chunk) - The company operates through many regulated subsidiaries and is subject to extensive and changing legislation, regulation, and supervision, which could have a material adverse effect on its business and clients[184](index=184&type=chunk)[186](index=186&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk.](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) This section refers to previous disclosures regarding market risk, specifically how changes in capital markets and interest rates can affect revenues, earnings, and the value of fixed-income investment securities, with no material changes to this information reported - Information on market risk, including the impact of capital market changes and interest rate fluctuations on revenues, earnings, and fixed-income investment securities, remains consistent with the disclosures in the Annual Report on Form 10-K for the year ended December 31, 2021[196](index=196&type=chunk) [Item 4. Controls and Procedures.](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2022, concluding they are effective, with no material changes in internal control over financial reporting occurring during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[197](index=197&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2022[199](index=199&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings.](index=54&type=section&id=Item%201.%20Legal%20Proceedings.) The company is involved in various legal proceedings and investigations in the ordinary course of business, which are not believed to be material, and while outcomes are uncertain, the probability of a material adverse effect on SEI as a whole is considered remote - The company is party to various legal proceedings and investigations arising in the ordinary course of business, which are not considered material[201](index=201&type=chunk) - The probability of any of these matters having a material adverse effect on SEI as a whole is believed to be remote, although an unfavorable resolution could materially affect net earnings in a particular interim period[201](index=201&type=chunk) [Item 1A. Risk Factors.](index=54&type=section&id=Item%201A.%20Risk%20Factors.) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes have occurred in the risk factors from those disclosed in the Annual Report on Form 10-K for 2021[202](index=202&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](index=54&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) The Board of Directors authorized an additional **$200.0 million** for the common stock repurchase program on June 1, 2022, and during the three months ended June 30, 2022, the company repurchased **1.97 million shares** for **$109.3 million**, with **$221.9 million** remaining authorization | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program | | :------- | :------------------------------- | :--------------------------- | :---------------------------------------------------------------- | | April 2022 | 450,000 | $56.95 | $105,578,000 | | May 2022 | 750,000 | $55.30 | $64,105,000 | | June 2022 | 770,000 | $54.81 | $221,910,000 | | **Total** | **1,970,000** | **$55.48** | | - The Board of Directors approved an additional **$200.0 million** for the common stock repurchase program on June 1, 2022, bringing the total authorization to **$5.328 billion** with no expiration date[203](index=203&type=chunk) [Item 6. Exhibits.](index=54&type=section&id=Item%206.%20Exhibits.) This section lists the exhibits filed as part of the Form 10-Q, including various certifications, the XBRL instance document, and taxonomy extension documents - The exhibits include certifications from the Chief Executive Officer and Chief Financial Officer (Rule 13a-15(e)/15d-15(e) and Section 1350), along with XBRL instance and taxonomy extension documents[205](index=205&type=chunk) [SIGNATURES](index=55&type=section&id=SIGNATURES) The report was duly signed on behalf of SEI Investments Company by Dennis J. McGonigle, Chief Financial Officer, on July 25, 2022 - The report was signed by Dennis J. McGonigle, Chief Financial Officer of SEI Investments Company, on July 25, 2022[207](index=207&type=chunk)

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section provides the unaudited consolidated financial statements and management's discussion and analysis for the three months ended March 31, 2022 [Item 1. Financial Statements.](index=4&type=section&id=Item%201.%20Financial%20Statements.) This section presents the unaudited consolidated financial statements of SEI Investments Company for the three months ended March 31, 2022 and 2021, including balance sheets, statements of operations, comprehensive income, changes in equity, and cash flows, along with detailed notes explaining significant accounting policies, investments, and other financial captions [Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=Consolidated%20Balance%20Sheets) Presents the company's financial position, including assets, liabilities, and equity, as of March 31, 2022, and December 31, 2021 | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total Assets | $2,372,606 | $2,354,702 | | Total Liabilities | $399,523 | $493,939 | | Total Shareholders' Equity | $1,973,083 | $1,860,763 | - Total assets increased by **$17.9 million**, and total shareholders' equity increased by **$112.3 million** from December 31, 2021, to March 31, 2022, while total liabilities decreased by **$94.4 million**[13](index=13&type=chunk)[16](index=16&type=chunk) [Consolidated Statements of Operations (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) Details the company's revenues, expenses, and net income for the three months ended March 31, 2022, and 2021 | Metric (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Total Revenues | $581,443 | $455,686 | | Total Expenses | $366,644 | $322,849 | | Income from Operations| $214,799 | $132,837 | | Net Income | $190,308 | $129,470 | | Basic EPS | $1.38 | $0.90 | | Diluted EPS | $1.36 | $0.89 | - Total revenues increased by **27.6%** year-over-year, driven by higher asset management, administration, and distribution fees, and a significant increase in information processing and software servicing fees. Net income grew by **46.9%** and diluted EPS by **52.8%** compared to the prior year period[19](index=19&type=chunk) [Consolidated Statements of Comprehensive Income (Unaudited)](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Reports net income and other comprehensive income/loss components for the three months ended March 31, 2022, and 2021 | Metric (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net Income | $190,308 | $129,470 | | Foreign currency translation adjustments | $(4,558) | $1,685 | | Unrealized loss on investments, net of tax | $(3,780) | $(290) | | Total other comprehensive (loss) income, net of tax | $(8,338) | $1,395 | | Comprehensive income | $181,970 | $130,865 | - Comprehensive income increased by **39.1%** year-over-year, despite a total other comprehensive loss in 2022 primarily due to negative foreign currency translation adjustments and increased unrealized losses on investments[22](index=22&type=chunk) [Consolidated Statements of Changes in Equity (Unaudited)](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity) Outlines changes in shareholders' equity, including net income, stock repurchases, and stock-based compensation, for the period | Metric (in thousands) | Balance, January 1, 2022 | Balance, March 31, 2022 | | :-------------------- | :----------------------- | :---------------------- | | Total Equity | $1,860,763 | $1,973,083 | | Net income | — | $190,308 | | Other comprehensive loss | — | $(8,338) | | Purchase and retirement of common stock | — | $(100,090) | | Issuance of common stock (employee plans/options) | — | $19,874 | | Stock-based compensation | — | $10,566 | - Total shareholders' equity increased by **$112.3 million** during the three months ended March 31, 2022, primarily driven by net income and stock-based compensation, partially offset by common stock repurchases and other comprehensive loss[25](index=25&type=chunk) [Consolidated Condensed Statements of Cash Flows (Unaudited)](index=9&type=section&id=Consolidated%20Condensed%20Statements%20of%20Cash%20Flows) Summarizes cash flows from operating, investing, and financing activities for the three months ended March 31, 2022, and 2021 | Metric (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $260,427 | $136,573 | | Net cash used in investing activities | $(31,760) | $(30,656) | | Net cash used in financing activities | $(146,652) | $(109,512) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $76,424 | $(2,044) | | Cash, cash equivalents and restricted cash, end of period | $908,182 | $785,683 | - Net cash provided by operating activities significantly increased to **$260.4 million** in Q1 2022 from **$136.6 million** in Q1 2021. The company experienced a net increase in cash, cash equivalents, and restricted cash of **$76.4 million** in Q1 2022, a reversal from a net decrease in the prior year[27](index=27&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations of significant accounting policies, financial captions, and other disclosures supporting the financial statements [Note 1. Summary of Significant Accounting Policies](index=10&type=section&id=Note%201.%20Summary%20of%20Significant%20Accounting%20Policies) Describes the company's business operations, revenue recognition, and key accounting principles, including software development costs and EPS calculation - SEI Investments Company provides comprehensive technology, operational, and investment management services to wealth managers, financial advisors, investment managers, family offices, and institutional/private investors. Revenues are primarily from asset management, administration, distribution fees, and information processing/software servicing fees[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - The company capitalized **$6.6 million** in software development costs in Q1 2022, primarily for the SEI Wealth Platform (SWP), which has a net book value of **$230.4 million** and a weighted average remaining life of **10.2 years**[41](index=41&type=chunk) Earnings Per Share Calculation | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $190,308 | $129,470 | | Shares used for basic EPS | 137,935,000 | 143,201,000 | | Dilutive effect of stock options | 1,777,000 | 2,105,000 | | Shares used for diluted EPS | 139,712,000 | 145,306,000 | | Basic EPS | $1.38 | $0.90 | | Diluted EPS | $1.36 | $0.89 | [Note 2. Investment in Unconsolidated Affiliate](index=14&type=section&id=Note%202.%20Investment%20in%20Unconsolidated%20Affiliate) Details the company's equity method investment in LSV Asset Management, including its financial contribution and distributions - The Company holds a **38.7%** partnership interest in LSV Asset Management, an investment advisor, accounted for using the equity method. The investment value was **$52.8 million** as of March 31, 2022[45](index=45&type=chunk)[46](index=46&type=chunk) LSV Financials and SEI's Share | Metric (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------- | :-------------------------------- | :-------------------------------- | | LSV Revenues | $108,450 | $110,837 | | LSV Net Income | $83,791 | $85,920 | | SEI's Equity in Earnings of LSV | $32,459 | $33,350 | - SEI received **$33.0 million** in partnership distributions from LSV in Q1 2022, classified as operating cash flow. LSV's revenues and net income slightly decreased year-over-year[46](index=46&type=chunk)[47](index=47&type=chunk) [Note 3. Composition of Certain Financial Statement Captions](index=15&type=section&id=Note%203.%20Composition%20of%20Certain%20Financial%20Statement%20Captions) Breaks down key balance sheet items such as receivables, property and equipment, deferred contract costs, and accrued liabilities Receivables Composition | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Trade receivables | $101,117 | $111,209 | | Fees earned, not billed | $330,678 | $315,255 | | Other receivables | $7,437 | $16,747 | | Less: Allowance for doubtful accounts | $(1,388) | $(1,602) | | Total Receivables, net | $437,844 | $441,609 | Property and Equipment, Net | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Total Property and Equipment, gross | $597,499 | $588,117 | | Less: Accumulated depreciation | $(417,041) | $(409,248) |\ | Property and Equipment, net | $180,458 | $178,869 | - Deferred contract costs, primarily sales commissions, were **$35.8 million** as of March 31, 2022. Amortization expense for these costs was **$3.9 million** in Q1 2022, including **$1.8 million** accelerated due to a client contract termination[52](index=52&type=chunk) Accrued Liabilities Composition | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Accrued employee compensation | $42,053 | $107,933 | | Accrued income taxes | $55,278 | — | | Total accrued liabilities | $250,468 | $324,382 | [Note 4. Fair Value Measurements](index=16&type=section&id=Note%204.%20Fair%20Value%20Measurements) Explains the valuation hierarchy for financial assets and liabilities, including Level 1, Level 2, and Level 3 instruments - The Company's financial assets are valued using a fair value hierarchy, with Level 1 assets (e.g., open-ended mutual funds) and Level 2 assets (e.g., GNMA mortgage-backed securities, U.S. government agency notes) comprising the majority. Investment funds sponsored by LSV are measured using NAV as a practical expedient[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - Level 3 financial liabilities consist of estimated contingent consideration from an acquisition, valued using a Monte-Carlo simulation model. There were no Level 3 financial assets or transfers between levels during Q1 2022[57](index=57&type=chunk) Fair Value of Financial Assets | Asset Category (in thousands) | March 31, 2022 | December 31, 2021 | | :---------------------------- | :------------- | :---------------- | | Equity securities (Level 1) | $11,903 | $12,406 | | Available-for-sale debt securities (Level 2) | $122,814 | $117,135 | | Fixed-income securities owned (Level 2) | $31,258 | $28,267 | | Investment funds sponsored by LSV | $7,270 | $6,916 | | Total | $173,245 | $164,724 | [Note 5. Marketable Securities](index=18&type=section&id=Note%205.%20Marketable%20Securities) Details the composition and fair value of cash equivalents, available-for-sale debt securities, and equity investments - Cash equivalents, primarily money market funds and commercial paper, had a fair value of **$422.6 million** at March 31, 2022, with no material unrealized or realized gains/losses[61](index=61&type=chunk) Available For Sale and Equity Securities | Metric (in thousands) | March 31, 2022 Fair Value | December 31, 2021 Fair Value | | :-------------------- | :------------------------ | :--------------------------- | | Available-for-sale debt securities | $122,814 | $117,135 | | SEI-sponsored mutual funds | $6,837 | $7,211 | | Equities and other mutual funds | $5,066 | $5,195 | | Total | $134,717 | $129,541 | - Net unrealized losses on available-for-sale debt securities increased to **$3.8 million** (net of tax) at March 31, 2022, primarily due to interest rate increases affecting GNMA mortgage-backed securities. The Company does not intend to sell these before recovery of cost[62](index=62&type=chunk) - The Company recognized unrealized gains of **$354 thousand** from investments in LSV-sponsored funds during Q1 2022[66](index=66&type=chunk) [Note 6. Line of Credit](index=19&type=section&id=Note%206.%20Line%20of%20Credit) Describes the company's credit facility, outstanding balance, and compliance with covenants as of March 31, 2022 - The Company has a **$325 million** five-year Credit Agreement expiring in April 2026. Borrowings accrue interest based on a base rate or LIBOR plus a premium, with a fallback to SOFR upon LIBOR cessation[68](index=68&type=chunk) - As of March 31, 2022, the outstanding balance on the credit facility was **$30 million**, following a **$10 million** principal payment in February 2022. The Company was in compliance with all covenants[71](index=71&type=chunk)[73](index=73&type=chunk) - As of April 21, 2022, **$288.7 million** of the credit facility was available for general corporate purposes, after accounting for outstanding letters of credit[72](index=72&type=chunk) [Note 7. Shareholders' Equity](index=19&type=section&id=Note%207.%20Shareholders%27%20Equity) Covers stock-based compensation, stock option activity, and common stock repurchase programs impacting equity - Stock options have performance-based vesting tied to financial targets, with a minimum service condition. The Company recognized **$10.6 million** in stock-based compensation expense in Q1 2022, net of a **$2.1 million** deferred tax benefit[74](index=74&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) - As of March 31, 2022, **$92.1 million** of unrecognized compensation cost remained for unvested employee stock options. The total intrinsic value of exercisable options was **$103.5 million**[76](index=76&type=chunk)[77](index=77&type=chunk) - The Company repurchased **1.7 million shares** of common stock for **$100.1 million** in Q1 2022, reducing total shares outstanding. Approximately **$131.2 million** remained authorized for repurchases[78](index=78&type=chunk) [Note 8. Accumulated Other Comprehensive Loss](index=21&type=section&id=Note%208.%20Accumulated%20Other%20Comprehensive%20Loss) Details the components of accumulated other comprehensive loss, including foreign currency adjustments and unrealized investment losses Components of Accumulated Other Comprehensive Loss (net of tax) | Metric (in thousands) | Balance, January 1, 2022 | Net current-period other comprehensive loss | Balance, March 31, 2022 | | :-------------------- | :----------------------- | :---------------------------------------- | :---------------------- | | Foreign Currency Translation Adjustments | $(19,781) | $(4,558) | $(24,339) | | Unrealized Gains (Losses) on Investments | $(62) | $(3,780) | $(3,842) | | Total Accumulated Other Comprehensive Loss | $(19,843) | $(8,338) | $(28,181) | - Accumulated other comprehensive loss increased from **$(19.8) million** at January 1, 2022, to **$(28.2) million** at March 31, 2022, primarily due to foreign currency translation adjustments and unrealized losses on investments[80](index=80&type=chunk) [Note 9. Business Segment Information](index=22&type=section&id=Note%209.%20Business%20Segment%20Information) Provides financial performance data for the company's five reportable business segments, including revenues and operating profit - SEI operates through five reportable business segments: Private Banks, Investment Advisors, Institutional Investors, Investment Managers, and Investments in New Businesses. Each segment provides distinct platforms and services to specific client types[81](index=81&type=chunk) Segment Revenues and Operating Profit (Three Months Ended March 31, 2022) | Segment | Revenues (in thousands) | Operating Profit (in thousands) | | :------------------------ | :---------------------- | :------------------------------ | | Private Banks | $213,548 | $91,593 | | Investment Advisors | $119,230 | $54,710 | | Institutional Investors | $86,839 | $41,481 | | Investment Managers | $156,901 | $58,064 | | Investments in New Businesses | $4,925 | $(7,025) | | Total Operating Profit from Segments | $581,443 | $238,823 | - Total operating profit from segments increased to **$238.8 million** in Q1 2022 from **$154.4 million** in Q1 2021. Corporate overhead expenses were **$24.0 million** in Q1 2022[83](index=83&type=chunk)[84](index=84&type=chunk) [Note 10. Income Taxes](index=23&type=section&id=Note%2010.%20Income%20Taxes) Discusses unrecognized tax benefits and reconciles the statutory income tax rate to the effective tax rate - The gross liability for unrecognized tax benefits was **$15.8 million** at March 31, 2022, with **$1.4 million** in accrued interest and penalties[86](index=86&type=chunk)[87](index=87&type=chunk) Effective Income Tax Rate Reconciliation | Factor | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Statutory rate | 21.0 % | 21.0 % | | State taxes, net of federal tax benefit | 2.9 % | 3.1 % | | Foreign tax expense and tax rate differential | (0.1) % | (0.1) % | | Tax benefit from stock option exercises | (0.4) % | (1.1) % | | Other, net | (0.3) % | (0.3) % | | **Effective tax rate** | **23.1 %** | **22.6 %** | - The effective tax rate increased to **23.1%** in Q1 2022 from **22.6%** in Q1 2021, primarily due to decreased tax benefits from lower stock option exercises[88](index=88&type=chunk) [Note 11. Commitments and Contingencies](index=24&type=section&id=Note%2011.%20Commitments%20and%20Contingencies) Outlines ongoing legal proceedings, including the Stanford Trust Company and SS&C Advent litigations, and their potential impact - The Company is involved in various legal proceedings, including the Stanford Trust Company litigation and the SS&C Advent litigation. In the Stanford Trust cases, federal class actions have been dismissed, and the Company expects remaining ancillary litigations to be resolved in its favor[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - In the SS&C Advent litigation, SEI Global Services, Inc. (SGSI) filed a complaint alleging breach of contract and other claims. A New York State Court judge granted SGSI's motion for injunctive relief, affirming SGSI's likely success on breach of contract claims and rejecting SS&C Advent's arguments regarding license termination[96](index=96&type=chunk)[99](index=99&type=chunk)[104](index=104&type=chunk)[107](index=107&type=chunk) - SGSI's motion for partial summary judgment was granted on April 15, 2022, confirming the perpetual nature of the licenses and that SS&C Advent's termination attempt was a breach of contract. SEI expects the financial impact of this litigation to be immaterial[104](index=104&type=chunk)[107](index=107&type=chunk)[109](index=109&type=chunk) [Note 12. Goodwill and Intangible Assets](index=27&type=section&id=Note%2012.%20Goodwill%20and%20Intangible%20Assets) Reports goodwill by segment and details amortization expense for intangible assets, reflecting recent acquisitions Goodwill by Segment (in thousands) | Segment | Balance, December 31, 2021 | Balance, March 31, 2022 | | :------------------------ | :----------------------- | :---------------------- | | Institutional Investors | $48,911 | $48,911 | | Investment Managers | $56,822 | $57,024 | | Investments in New Businesses | $11,499 | $11,499 | | Total Goodwill | $117,232 | $117,434 | - Goodwill increased slightly due to measurement period adjustments and foreign currency translation. Recent acquisitions in Q4 2021, Finomial and Novus Partners, contributed **$4.036 million** and **$48.911 million** to goodwill, respectively[111](index=111&type=chunk)[112](index=112&type=chunk) - Amortization expense for intangible assets acquired through acquisitions increased to **$3.3 million** in Q1 2022 from **$0.9 million** in Q1 2021, reflecting the impact of recent acquisitions[115](index=115&type=chunk) [Note 13. Revenues from Contracts with Customers](index=28&type=section&id=Note%2013.%20Revenues%20from%20Contracts%20with%20Customers) Disaggregates revenues by major product lines and primary geographic markets, including details on one-time termination fees - The Company's principal revenue sources are asset management, administration, and distribution fees (based on assets) and information processing and software servicing fees (recurring or project-oriented)[116](index=116&type=chunk) Disaggregated Revenues by Major Product Lines (Three Months Ended March 31, 2022) | Major Product Lines (in thousands) | Private Banks | Investment Advisors | Institutional Investors | Investment Managers | Investments in New Businesses | Total | | :--------------------------------- | :------------ | :------------------ | :---------------------- | :------------------ | :---------------------------- | :---- | | Investment management fees from pooled investment products | $33,118 | $71,993 | $13,866 | $84 | $367 | $119,428 | | Investment management fees from investment management agreements | $255 | $42,008 | $68,460 | — | $4,126 | $114,849 | | Investment operations fees | $360 | — | — | $145,379 | — | $145,739 | | Investment processing fees - PaaS | $56,455 | — | — | — | — | $56,455 | | Investment processing fees - SaaS | $29,559 | — | $3,110 | $3,658 | — | $36,327 | | Professional services fees | $92,729 | — | — | $389 | — | $93,118 | | Account fees and other | $1,072 | $5,229 | $1,403 | $7,391 | $432 | $15,527 | | **Total Revenues** | **$213,548** | **$119,230** | **$86,839** | **$156,901** | **$4,925** | **$581,443** | - Professional services fees in the Private Banks segment include **$88.0 million** in one-time early termination fees from a significant client, recognized entirely in Q1 2022 due to no future performance obligations[117](index=117&type=chunk) Disaggregated Revenues by Primary Geographic Markets (Three Months Ended March 31, 2022) | Primary Geographic Markets (in thousands) | Private Banks | Investment Advisors | Institutional Investors | Investment Managers | Investments in New Businesses | Total | | :---------------------------------------- | :------------ | :------------------ | :---------------------- | :------------------ | :---------------------------- | :---- | | United States | $80,886 | $119,230 | $70,563 | $144,025 | $4,925 | $419,629 | | United Kingdom | $116,663 | — | $12,749 | — | — | $129,412 | | Canada | $11,800 | — | $1,242 | — | — | $13,042 | | Ireland | $4,199 | — | $2,167 | $9,822 | — | $16,188 | | Luxembourg | — | — | — | $3,054 | — | $3,054 | | Other | — | — | $118 | — | — | $118 | | **Total Revenues** | **$213,548** | **$119,230** | **$86,839** | **$156,901** | **$4,925** | **$581,443** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section provides management's perspective on the Company's financial condition and results of operations for the three months ended March 31, 2022, compared to the prior year. It highlights key drivers of revenue and expense changes, segment performance, asset balances, and liquidity, along with an overview of regulatory matters and forward-looking statements [Overview](index=31&type=section&id=Overview) Provides a high-level summary of the company's business, asset balances, and key financial performance metrics for the quarter - SEI is a global provider of technology-driven wealth and investment management solutions, managing, advising, or administering **$1.3 trillion** in assets as of March 31, 2022, including **$385.3 billion** in assets under management and **$899.6 billion** in client assets under administration[131](index=131&type=chunk) Consolidated Summary of Operations (Three Months Ended March 31) | Metric (in thousands) | 2022 | 2021 | Percent Change | | :-------------------- | :-------- | :-------- | :------------- | | Revenues | $581,443 | $455,686 | 28% | | Expenses | $366,644 | $322,849 | 14% | | Income from operations| $214,799 | $132,837 | 62% | | Net income | $190,308 | $129,470 | 47% | | Diluted EPS | $1.36 | $0.89 | 53% | - Key impacts include a **28% increase in revenues**, driven by higher asset management/administration fees and a one-time **$88.0 million** early termination fee from a Private Banks segment client. Operating expenses increased by **14%** due to direct costs, higher personnel costs, and acquisition-related expenses[133](index=133&type=chunk)[134](index=134&type=chunk) [Ending Asset Balances](index=33&type=section&id=Ending%20Asset%20Balances) Presents the company's total assets under management and administration by segment as of March 31, 2022 Ending Asset Balances by Segment (as of March 31, 2022, in millions) | Segment | Total Assets Under Management | Client Assets Under Administration/Advisement | Total Assets | | :------------------------ | :---------------------------- | :-------------------------------------------- | :----------- | | Private Banks | $29,567 | $4,449 | $34,016 | | Investment Advisors | $82,224 | $14,151 (Platform-only) | $96,375 | | Institutional Investors | $89,514 | $4,778 (Advisement) | $94,292 | | Investment Managers | $85,695 | $895,181 | $980,876 | | Investments in New Businesses | $2,362 | $1,401 (Advisement) | $3,763 | | LSV | $95,962 | — | $95,962 | | **Total** | **$385,324** | **$919,960** | **$1,305,284** | - Total assets increased by **5%** to **$1.3 trillion** as of March 31, 2022, compared to March 31, 2021. Client assets under administration in the Investment Managers segment grew by **8%** to **$895.2 billion**[136](index=136&type=chunk) [Average Asset Balances](index=35&type=section&id=Average%20Asset%20Balances) Details the average assets under management and administration by segment for the three months ended March 31, 2022 Average Asset Balances by Segment (Three Months Ended March 31, 2022, in millions) | Segment | Total Average Assets Under Management | Average Client Assets Under Administration/Advisement | Total Average Assets | | :------------------------ | :------------------------------------ | :---------------------------------------------------- | :------------------- | | Private Banks | $30,046 | $4,500 | $34,546 |\ | Investment Advisors | $82,727 | $13,978 (Platform-only) | $96,705 |\ | Institutional Investors | $91,478 | $4,889 (Advisement) | $96,367 |\ | Investment Managers | $87,065 | $888,854 | $975,919 |\ | Investments in New Businesses | $2,311 | $1,397 (Advisement) | $3,708 |\ | LSV | $96,449 | — | $96,449 |\ | **Total** | **$390,076** | **$910,220** | **$1,303,694** | - Total average assets increased by **7%** to **$1.3 trillion** for the three months ended March 31, 2022, compared to the prior year. Average client assets under administration grew by **9%** to **$893.4 billion**[139](index=139&type=chunk) [Business Segments](index=37&type=section&id=Business%20Segments) Analyzes the revenue and operating profit performance of each business segment, highlighting key drivers of change Segment Performance (Three Months Ended March 31, 2022 vs. 2021) | Segment | 2022 Revenues (in thousands) | 2021 Revenues (in thousands) | Revenue Change | 2022 Operating Profit (in thousands) | 2021 Operating Profit (in thousands) | Operating Profit Change | | :------------------------ | :--------------------------- | :--------------------------- | :------------- | :----------------------------------- | :----------------------------------- | :---------------------- | | Private Banks | $213,548 | $117,608 | 82% | $91,593 | $6,884 | NM | | Investment Advisors | $119,230 | $113,294 | 5% | $54,710 | $58,267 | (6)% | | Institutional Investors | $86,839 | $84,499 | 3% | $41,481 | $45,341 | (9)% | | Investment Managers | $156,901 | $136,419 | 15% | $58,064 | $53,399 | 9% | | Investments in New Businesses | $4,925 | $3,866 | 27% | $(7,025) | $(9,538) | NM | - Private Banks revenues surged **82%** due to an **$88.0 million** early termination fee and increased investment processing fees. Investment Advisors saw a **5%** revenue increase from separately managed account fees, despite decreased investment management fees[144](index=144&type=chunk)[145](index=145&type=chunk) - Institutional Investors' revenues grew **3%** from acquisitions (SEI Novus, Atlas Master Trust) and market appreciation, but operating profit declined **9%** due to increased personnel and professional fees related to these acquisitions. Investment Managers' revenues increased **15%** from higher client asset valuations and positive cash flows[148](index=148&type=chunk) [Other Financial Information](index=39&type=section&id=Other) Covers corporate overhead, other income/expense, amortization, tax rates, and cash flow activities for the period - Corporate overhead expenses increased to **$24.0 million** in Q1 2022, up from **$21.5 million** in Q1 2021, primarily due to higher personnel, consulting, and professional fees[149](index=149&type=chunk) Other Income and Expense Items (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Net (loss) gain from investments | $(489) | $332 | | Interest and dividend income | $848 | $945 | | Interest expense | $(250) | $(123) | | Equity in earnings of unconsolidated affiliate | $32,459 | $33,350 | | Total other income and expense items, net | $32,568 | $34,504 | - Equity in earnings from LSV decreased by **3%** to **$32.5 million** in Q1 2022, mainly due to negative cash flows and client losses offsetting market appreciation. Total amortization expense increased to **$16.9 million**, driven by acquisitions and SWP enhancements[152](index=152&type=chunk)[153](index=153&type=chunk)[155](index=155&type=chunk) - The effective income tax rate increased to **23.1%** in Q1 2022, primarily due to decreased tax benefits from lower stock option exercises. Stock-based compensation expense was **$10.6 million**[156](index=156&type=chunk)[157](index=157&type=chunk) - Net cash provided by operating activities increased by **$123.9 million** in Q1 2022. Net cash used in financing activities included **$100.2 million** for common stock repurchases and **$55.5 million** for dividend payments[161](index=161&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[172](index=172&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk.](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) This section refers to the Company's Annual Report on Form 10-K for the year ended December 31, 2021, for detailed information on quantitative and qualitative disclosures about market risk. No material changes to this information were reported for the current period - No material changes to market risk disclosures were reported from the Annual Report on Form 10-K for the year ended December 31, 2021[185](index=185&type=chunk) [Item 4. Controls and Procedures.](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management, including the CEO and CFO, evaluated the effectiveness of the Company's disclosure controls and procedures as of March 31, 2022, concluding they were effective. No material changes in internal control over financial reporting occurred during the quarter - Disclosure controls and procedures were evaluated as effective as of March 31, 2022[186](index=186&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2022[187](index=187&type=chunk) [PART II - OTHER INFORMATION](index=49&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides additional information on legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings.](index=49&type=section&id=Item%201.%20Legal%20Proceedings.) The Company and its subsidiaries are involved in various legal proceedings in the ordinary course of business, which are not believed to be material. Details of these proceedings are summarized in Note 11 to the Consolidated Financial Statements - The Company is party to various legal proceedings, examinations, and investigations arising in the ordinary course of business, none of which are believed to have a material adverse effect on SEI as a whole[189](index=189&type=chunk) - Specific proceedings are detailed in Note 11, including the Stanford Trust Company litigation and SS&C Advent litigation[189](index=189&type=chunk) [Item 1A. Risk Factors.](index=49&type=section&id=Item%201A.%20Risk%20Factors.) This section refers to the Company's Annual Report on Form 10-K for the year ended December 31, 2021, for a comprehensive discussion of risk factors. No material changes to these risk factors were reported for the current period - No material changes in risk factors were reported from those disclosed in the Annual Report on Form 10-K for 2021[190](index=190&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) The Company's Board of Directors has authorized a common stock repurchase program. During the three months ended March 31, 2022, the Company repurchased 1.713 million shares for a total cost of $100.09 million - The Board of Directors has authorized the repurchase of up to **$5.128 billion** worth of common stock, with no expiration date[191](index=191&type=chunk) Common Stock Repurchases (Three Months Ended March 31, 2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program | | :---------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | | January 2022| 163,000 | $56.12 | $222,163,000 | | February 2022| 764,000 | $58.87 | $177,187,000 | | March 2022 | 786,000 | $58.46 | $131,204,000 | | **Total** | **1,713,000** | **$58.43** | — | [Item 6. Exhibits.](index=49&type=section&id=Item%206.%20Exhibits.) This section lists the exhibits filed as part of the Form 10-Q, including certifications (Rule 13a-15(e)/15d-15(e) and Section 1350) and XBRL-related documents - Exhibits include CEO and CFO certifications (Rule 13a-15(e)/15d-15(e) and Section 1350) and various XBRL taxonomy documents[193](index=193&type=chunk) [Signatures](index=50&type=section&id=Signatures) The report is duly signed on behalf of SEI Investments Company by Dennis J. McGonigle, Chief Financial Officer, on April 25, 2022 - The report was signed by Dennis J. McGonigle, Chief Financial Officer, on April 25, 2022[195](index=195&type=chunk)

SEI Investments Company (NASDAQ:SEIC) Q1 2022 Earnings Conference Call April 20, 2022 4:30 PM ET Company Participants Al West - Chairman and Chief Executive Officer Ryan Hicke - Executive Vice President Dennis McGonigle - Chief Financial Officer Al Chiaradonna – Senior Vice President, SEI Wealth Platform Phil McCabe - Head of Investment Manager Services Wayne Withrow - Executive Vice President, Independent Advisor Solutions Paul Klauder - Executive Vice President, Head of the Institutional Group Conference ...

PART I [Item 1. Business.](index=4&type=section&id=Item%201.%20Business.) SEI provides global technology and investment solutions, managing approximately $1.3 trillion in assets across five core business segments - SEI manages, advises, or administers approximately **$1.3 trillion** in assets globally, serving a broad range of client types including top U.S. banks and investment managers worldwide[18](index=18&type=chunk) - Key strategies include focusing on converging market needs, enhancing existing capabilities with a 'One SEI' approach, investing in talent, and expanding global presence[19](index=19&type=chunk)[20](index=20&type=chunk)[22](index=22&type=chunk) - The business model emphasizes turning challenges into opportunities, driving mutual growth, engaging clients and employees, and leveraging financial strength, characterized by scalable businesses, recurring revenues, and strong cash flow[21](index=21&type=chunk)[22](index=22&type=chunk) [Corporate Overview](index=4&type=section&id=Corporate%20Overview) SEI delivers technology and investment solutions, managing $1.3 trillion in assets globally through five business segments - SEI provides technology and investment solutions, encompassing investment processing, operations, and asset management, to a diverse client base[17](index=17&type=chunk) - The company has **five business segments**, with Investments in New Businesses focusing on R&D for new initiatives[18](index=18&type=chunk) - SEI manages, advises, or administers approximately **$1.3 trillion** in assets, with global service centers[18](index=18&type=chunk) [Mission and Strategy](index=4&type=section&id=Mission%20and%20Strategy) SEI's strategy focuses on meeting converging client needs, enhancing capabilities, investing in talent, and expanding its global footprint - SEI's mission is to build brave futures through the power of connection, aiming to meet emerging and converging client needs and increase shareholder value[19](index=19&type=chunk) - Key strategies include addressing converging markets and client needs, enhancing existing capabilities through a 'One SEI' approach for aggregated data and modular solutions, investing in talent, and expanding its global footprint[19](index=19&type=chunk)[20](index=20&type=chunk)[22](index=22&type=chunk) [Business Model](index=5&type=section&id=Business%20Model) SEI's business model is built on four critical elements to drive long-term, sustainable growth with recurring revenues - SEI's growth strategies are anchored in a proven business model with four critical elements: turning challenges into opportunities, driving mutual growth, meaningfully engaging clients and employees, and leveraging financial strength[21](index=21&type=chunk)[22](index=22&type=chunk) - The company focuses on long-term, sustainable revenue and earnings growth, maintaining a strong balance sheet, investing in R&D, and favoring scalable businesses that generate recurring revenues and predictable cash flows[22](index=22&type=chunk) [Other Competitive Advantages](index=5&type=section&id=Other%20Competitive%20Advantages) Competitive advantages stem from integrated solutions, a 'One SEI' approach, a dynamic workforce, and new solution development - SEI is uniquely positioned in the wealth and investment management industry, providing critical capabilities across technology, operations, and asset management, delivered standalone or as comprehensive solutions[22](index=22&type=chunk) - The 'One SEI' approach leverages company assets, especially technology, as modular components across multiple market segments, enhancing operating leverage and driving service quality and product innovation[22](index=22&type=chunk) - Commitment to new solutions includes SEI Sphere for cybersecurity and SEI Ventures for corporate venture capital, aiming for longer-term growth opportunities[23](index=23&type=chunk) [Core Capabilities](index=7&type=section&id=Core%20Capabilities) Core capabilities include technology services, investment operations, and asset management, combined into outsourced solutions - SEI combines technology services, investment operations, and asset management into tailored outsourced solutions[24](index=24&type=chunk) - Technology and operations services include advanced platforms for asset management, wealth advisory, administration, processing, infrastructure, and cybersecurity[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - Asset management solutions provide comprehensive programs for personal and institutional wealth, including investment strategies, customized programs, and SEI-sponsored products[28](index=28&type=chunk)[29](index=29&type=chunk) [Principal Business Platforms and Revenue Recognition](index=7&type=section&id=Principal%20Business%20Platforms%20and%20Revenue%20Recognition) SEI's principal platforms enable modular service delivery, with revenues recognized from SaaS fees and asset-based percentages - SEI's principal business platforms (Investment Processing, Investment Operations, Investment Management) are foundational for its 'One SEI' modularization strategy[30](index=30&type=chunk) - Investment processing revenues are from application software, BPO, professional, and transaction-based services, recognized as information processing and software servicing fees[30](index=30&type=chunk) - Investment operations and management revenues are primarily earned as a percentage of net assets under administration or management, recognized as asset management, administration, and distribution fees[31](index=31&type=chunk)[32](index=32&type=chunk) Assets Under Management (as of December 31, 2021) | Asset Type | Amount (Billions USD) | | :--- | :--- | | Fixed-income and equity funds & SMAs | $201.8 | | Collective trust fund programs | $92.6 | | Liquidity or money market funds | $11.8 | | **Total SEI-managed assets** | **$306.2** | | LSV Asset Management (unconsolidated)| $99.0 | [Human Capital](index=9&type=section&id=Human%20Capital) SEI employed 4,406 people as of January 2022, emphasizing a diverse workforce and professional development - As of January 31, 2022, SEI had **4,371 full-time and 35 part-time employees**, none of whom are unionized[33](index=33&type=chunk) - SEI is committed to creating an inclusive workforce and culture, valuing diversity of thought and talent[34](index=34&type=chunk) - The company provides multiple tools for employee growth and professional development, including new programs, learning content, and a comprehensive learning platform[35](index=35&type=chunk) [Diversity and Inclusion](index=9&type=section&id=Diversity%20and%20Inclusion) SEI is dedicated to fostering an inclusive culture, recognizing diversity as crucial for meeting client needs - SEI is committed to creating and maintaining an inclusive workforce and culture, believing diversity of thought and talent is imperative for addressing market and client needs[34](index=34&type=chunk) - The company values contributions from diverse backgrounds, experiences, and ideas, and is an equal opportunity employer[34](index=34&type=chunk) [Training and Development](index=9&type=section&id=Training%20and%20Development) SEI supports employee growth through various training tools, including a comprehensive online learning platform and specialized programs - SEI provides multiple tools for employee growth and professional development, including new programs and a comprehensive learning platform[35](index=35&type=chunk) - The Design Thinking program fosters creativity and innovation, while the Gallup CliftonStrengths assessment helps employees understand and build upon their unique strengths[36](index=36&type=chunk) [Leadership Development](index=9&type=section&id=Leadership%20Development) Leadership development includes programs for emerging leaders, initiatives for advancing women, and support for recent graduates - The '5-15 Leadership Program' brings together emerging and experienced leaders to learn, grow, and develop a leadership mindset while working on key business topics[37](index=37&type=chunk)[38](index=38&type=chunk) - The 'Get, Grow, Keep' global initiative aims to develop clear paths for women's advancement, improving attraction, development, and retention of female employees[38](index=38&type=chunk) - Associates and Internship programs equip recent graduates with tools and development opportunities for successful careers at SEI[39](index=39&type=chunk) [Employee Affinity Groups](index=10&type=section&id=Employee%20Affinity%20Groups) SEI supports employee-led affinity groups that foster positive change and advocacy within communities - SEI supports employee-led affinity groups that make a meaningful, positive impact on communities and advocate for diversity initiatives[40](index=40&type=chunk) - These groups are self-created, self-run, and self-sustained with a global reach, each following a specified mission[40](index=40&type=chunk) - Examples include the SEI Black Professionals Network, SEI Cares, SEI Diversity, SEI Green Team, SEI Salutes, SEI Women's Network, and Wellness Team[45](index=45&type=chunk) [Workplace Health and Safety](index=10&type=section&id=Workplace%20Health%20and%20Safety) SEI prioritizes workforce health and safety, implementing a multi-phased return-to-office plan in response to COVID-19 - Workplace health and safety is a top priority, with a multi-phased return-to-office plan implemented in response to the COVID-19 pandemic[41](index=41&type=chunk) - Measures include following local and national governmental guidance, restructuring floor plans for physical distancing, and implementing various health and safety protocols[41](index=41&type=chunk)[43](index=43&type=chunk) - Expanded health and wellness benefits were introduced to help employees cope with COVID-19 impacts, including a microsite for information, child care reimbursement, expanded paid time off, and mental health resources[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) [Sustainability](index=11&type=section&id=Sustainability) SEI is formalizing its sustainability efforts by integrating ESG considerations into its investment approach and operations - SEI is formalizing and building upon its sustainability efforts, considering ESG impacts on business risk and future growth[48](index=48&type=chunk) - Sustainable investing capabilities are underpinned by manager research, providing in-depth ESG analysis of managers and developing sustainable investing solutions for clients[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - Environmental sustainability efforts include managing greenhouse gas emissions, waste, and benefiting local watersheds, as well as joining Climate Action 100+[52](index=52&type=chunk)[53](index=53&type=chunk) [Business Segments Overview](index=11&type=section&id=Business%20Segments%20Overview) SEI's five business segments are organized by target market, with Investment Managers being the largest revenue contributor in 2021 - SEI's business segments are organized around target markets: Private Banks, Investment Advisors, Institutional Investors, Investment Managers, and Investments in New Businesses[54](index=54&type=chunk) - Each segment offers specialized outsourced investment processing, investment management, and administrative platforms[54](index=54&type=chunk) Percentage of Consolidated Revenues by Business Segment | Segment | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Private Banks | 26 % | 27 % | 28 % | | Investment Advisors | 25 % | 24 % | 24 % | | Institutional Investors | 18 % | 19 % | 20 % | | Investment Managers | 30 % | 29 % | 27 % | | Investments in New Businesses | 1 % | 1 % | 1 % | | **Total** | **100 %**| **100 %**| **100 %**| [Private Banks](index=12&type=section&id=Private%20Banks) This segment offers outsourced investment processing and management solutions to wealth managers globally - The Private Banks segment provides outsourced investment processing and management solutions to institutional and private-client wealth managers globally[56](index=56&type=chunk) - Solutions are enabled by the SEI Wealth Platform (SWP) and TRUST 3000, offering integrated technology, operational outsourcing, and asset management[58](index=58&type=chunk) - Contracts for services generally range from **five to seven years**, with **108 significant client relationships** as of December 31, 2021[59](index=59&type=chunk) [Investment Advisors](index=12&type=section&id=Investment%20Advisors) This segment delivers wealth management technology and investment solutions to independent financial advisors in the U.S - The Investment Advisors segment provides wealth management technology and investment solutions to independent financial advisors in the U.S[63](index=63&type=chunk) - The flexible operating platform offers end-to-end business, technology, and operational solutions, including front, middle, and back-office capabilities[64](index=64&type=chunk) - Revenues are primarily earned as a percentage of average daily assets under management, with approximately **7,500 financial advisor relationships** as of December 31, 2021[64](index=64&type=chunk)[65](index=65&type=chunk) [Institutional Investors](index=13&type=section&id=Institutional%20Investors) This segment offers Outsourced CIO (OCIO) and Enhanced CIO (ECIO) solutions to institutional clients globally - The Institutional Investors segment provides OCIO solutions and ECIO platforms to institutional investors globally[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) - Solutions leverage SEI's comprehensive capabilities to help clients make confident decisions, achieve greater control, reduce risk, and improve efficiencies[67](index=67&type=chunk) - In 2021, SEI acquired Atlas Master Trust and Novus Partners to expand its presence and integrate global portfolio intelligence capabilities[70](index=70&type=chunk) [Investment Managers](index=14&type=section&id=Investment%20Managers) This segment provides investment operations outsourcing solutions to fund companies and investment managers worldwide - The Investment Managers segment offers investment operations outsourcing solutions to a global market, including fund companies, banking institutions, and investment managers[73](index=73&type=chunk) - Capabilities include data and information management, investment operations, regulatory and compliance support, fund administration, and multi-asset class accounting via SEI's Archway Platform[75](index=75&type=chunk)[77](index=77&type=chunk) - Contracts for fund administration outsourcing generally range from **three to five years**, with fees primarily earned as a percentage of assets under management and administration[78](index=78&type=chunk) [Investments in New Businesses](index=14&type=section&id=Investments%20in%20New%20Businesses) This segment focuses on developing new ventures and R&D activities to expand SEI's solutions into new markets - This segment focuses on new business ventures and R&D to expand solutions to new or existing markets, including ultra-high-net-worth families[80](index=80&type=chunk) - Initiatives include cybersecurity and IT solutions via SEI Sphere and modularization of larger technology platforms for wealth management and investment processing[81](index=81&type=chunk) - The family wealth management solution offers flexible, personalized family-office type services with a goals-based investment process[82](index=82&type=chunk) [Research and Development](index=15&type=section&id=Research%20and%20Development) SEI dedicates significant resources to R&D, primarily for technology platforms and new investment products - SEI devotes significant resources to R&D for new technology platforms, enhancements to existing ones, and new investment products and services[83](index=83&type=chunk) - The majority of R&D spending is related to adding capabilities to the SEI Wealth Platform (SWP), which serves as the technology infrastructure for Private Banks and Investment Advisors segments[83](index=83&type=chunk) Research and Development Expenditures | Metric | 2021 (in thousands) | 2020 (in thousands) | 2019 (in thousands) | | :--- | :--- | :--- | :--- | | Research and development expenditures | $168,519 | $175,456 | $163,008 | | Capitalization of costs incurred in developing computer software | $26,037 | $24,119 | $34,074 | | R&D expenditures as a percentage of revenues| 8.8 % | 10.4 % | 9.9 % | [Marketing and Sales](index=15&type=section&id=Marketing%20and%20Sales) SEI directly markets its business platforms globally through a dedicated sales force - SEI directly markets its business platforms to potential clients in target markets[85](index=85&type=chunk) - As of January 31, 2022, the company employed approximately **100 sales representatives** globally[85](index=85&type=chunk) [Customers](index=15&type=section&id=Customers) The company maintains a diversified customer base with no single customer accounting for more than 10% of revenues - In 2021, **no single customer accounted for more than 10% of revenues** in any business segment, indicating a diversified customer base[86](index=86&type=chunk) [Regulatory Considerations](index=15&type=section&id=Regulatory%20Considerations) SEI operates through regulated subsidiaries, facing risks from extensive and evolving U.S. and foreign regulations - SEI conducts operations through several regulated wholly-owned subsidiaries, subject to extensive and changing legislation, regulation, and supervision by U.S. and foreign authorities[87](index=87&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk) - Non-compliance can lead to sanctions, fines, business limitations, and reputational harm, with increased governmental scrutiny in recent years[90](index=90&type=chunk)[91](index=91&type=chunk) - The company must comply with anti-money laundering, economic sanctions, and privacy/data protection laws (e.g., GDPR, CCPA), incurring substantial compliance costs and risks[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) [Item 1A. Risk Factors.](index=18&type=section&id=Item%201A.%20Risk%20Factors.) SEI faces risks from capital markets, product development, competition, technology, investment performance, and regulations - Revenues and earnings are highly sensitive to capital market changes and financial instrument values, with decreases in assets under administration/management directly impacting financial results[101](index=101&type=chunk) - Significant risks include product development challenges, reliance on third-party providers, intense pricing pressure from competition and disruptive technology, and the performance of unconsolidated affiliates like LSV[102](index=102&type=chunk)[107](index=107&type=chunk)[109](index=109&type=chunk)[112](index=112&type=chunk) - Cybersecurity threats, data breaches, system outages, and intellectual property risks pose significant challenges to technology infrastructure and client data security[116](index=116&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) - The financial services industry's extensive and evolving regulatory environment, including anti-money laundering, sanctions, and data privacy laws, presents substantial compliance costs and litigation risks[135](index=135&type=chunk)[137](index=137&type=chunk)[139](index=139&type=chunk)[141](index=141&type=chunk)[147](index=147&type=chunk) - General business risks include the effectiveness of management strategies, challenges in integrating acquisitions, operational failures, and the ability to attract and retain skilled employees, exacerbated by global events like COVID-19 and geopolitical unrest[148](index=148&type=chunk)[151](index=151&type=chunk)[159](index=159&type=chunk)[163](index=163&type=chunk)[181](index=181&type=chunk)[187](index=187&type=chunk) [Risks Related to Our Business Model](index=18&type=section&id=Risks%20Related%20to%20Our%20Business%20Model) Business model risks include capital market fluctuations, product development challenges, pricing pressure, and affiliate performance - A majority of SEI's revenues are based on assets under management or administration, making them **vulnerable to changes in capital markets** and financial instrument values[101](index=101&type=chunk) - Product development risk exists due to the need for continuous innovation, timely delivery, and client acceptance of new products and services, with potential for significant financial losses if unsuccessful[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk) - Reliance on third parties for products and services (e.g., software development, cloud services) introduces risks of inadequate or untimely service, potentially causing errors or failures[107](index=107&type=chunk)[108](index=108&type=chunk) - The investment management industry is **highly competitive**, leading to pricing pressures from lower-priced products, passive investing, and technological innovations[109](index=109&type=chunk) - SEI's earnings and cash flows are significantly affected by the performance of its minority-owned affiliate, **LSV Asset Management**[112](index=112&type=chunk) [Risks Related to Our Technology](index=21&type=section&id=Risks%20Related%20to%20Our%20Technology) Technology risks include data and cybersecurity threats, system outages, data losses, and intellectual property protection - SEI experiences **millions of daily cyber-attacks** and faces significant data and cybersecurity risks from various sources, including organized crime, hackers, and internal errors[116](index=116&type=chunk) - Successful cyber-attacks or information breaches could lead to operational disruptions, data misappropriation, financial losses, reputational damage, and regulatory scrutiny[117](index=117&type=chunk)[118](index=118&type=chunk) - The company is exposed to risks of outages, data losses, and disruptions of services, which could diminish product quality and lead to contractual liability or reputational harm[124](index=124&type=chunk) - Protecting proprietary technology and defending against infringement claims are crucial, as the industry is characterized by frequent intellectual property litigation[125](index=125&type=chunk) - Dependence on third-party service providers for operations increases the risk of operational failures and potential financial losses or regulatory sanctions[126](index=126&type=chunk)[127](index=127&type=chunk)[129](index=129&type=chunk) [Risks Related to Our Investment Products and Solutions](index=24&type=section&id=Risks%20Related%20to%20Our%20Investment%20Products%20and%20Solutions) Investment product risks include poor performance, contract terminations, and reliance on third-party sub-advisers and services - **Poor investment performance** of SEI's products or client preference for lower-fee products can lead to asset outflows and reduced management fees[130](index=130&type=chunk) - Investment advisory contracts can be terminated or not renewed on favorable terms, potentially reducing fees and assets under management[131](index=131&type=chunk) - Reliance on third-party sub-advisers introduces risks of financial loss, regulatory sanctions, or reputational damage due to their performance, errors, or non-compliance[132](index=132&type=chunk) - Dependence on third-party approvals for distributing investment offerings and third-party pricing services for security valuation can adversely affect marketing and financial accuracy[133](index=133&type=chunk)[134](index=134&type=chunk) [Risks Related to Our Legal, Regulatory and Compliance Environment](index=24&type=section&id=Risks%20Related%20to%20Our%20Legal%2C%20Regulatory%20and%20Compliance%20Environment) SEI operates in a highly regulated industry, exposing it to significant legal, regulatory, and compliance risks - The financial services industry is subject to extensive and evolving regulations, exposing SEI to legal or regulatory sanctions, financial loss, and reputational damage from non-compliance[135](index=135&type=chunk)[137](index=137&type=chunk) - Compliance with anti-money laundering, economic sanctions (OFAC), and anti-corruption laws globally incurs higher costs and compliance risks[139](index=139&type=chunk)[140](index=140&type=chunk) - Privacy and data protection laws (e.g., Gramm-Leach-Bliley Act, GDPR, CCPA) impose mandatory obligations, leading to significant fines, litigation risk, and increased compliance costs[141](index=141&type=chunk)[142](index=142&type=chunk) - Investment management operations are complex and subject to legal liability for client losses due to operational failures, misrepresentation of services, or errors in investment models[145](index=145&type=chunk)[146](index=146&type=chunk) - SEI faces substantial regulatory risks and litigation, with increased oversight and enforcement actions leading to significant direct and indirect costs[147](index=147&type=chunk) [Risks Related to Our Business Generally](index=26&type=section&id=Risks%20Related%20to%20Our%20Business%20Generally) General business risks include strategy execution, acquisition integration, operational failures, and talent retention - Failure of management to develop and execute effective business strategies, or to anticipate changes, could adversely affect growth prospects and earnings[148](index=148&type=chunk)[149](index=149&type=chunk) - Acquisitions, divestitures, joint ventures, and strategic alliances carry risks related to integration, potential conflicts with partners, and exposure to new regulatory requirements or liabilities[151](index=151&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - Operational risks, including inadequate processes, system failures, human error, or misconduct, can lead to significant financial loss, regulatory sanctions, or reputational damage[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[166](index=166&type=chunk) - The ability to hire and retain qualified employees is critical, with intense competition and regulatory limitations on compensation impacting talent acquisition and retention[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) - External factors such as currency fluctuations, changes in interest rates, and increased geopolitical unrest (including the long-term effects of climate change) could negatively affect revenues and earnings[171](index=171&type=chunk)[172](index=172&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk) - The **COVID-19 pandemic** has impacted and may continue to impact business operations, employees, customers, and partners, creating substantial uncertainty in global economic conditions[182](index=182&type=chunk)[183](index=183&type=chunk) [Item 1B. Unresolved Staff Comments.](index=32&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments.) The company has no unresolved staff comments from the SEC - There are no unresolved staff comments[187](index=187&type=chunk) [Item 2. Properties.](index=32&type=section&id=Item%202.%20Properties.) SEI's corporate headquarters in Oaks, Pennsylvania, comprises ten buildings on 124 acres - SEI's corporate headquarters in Oaks, PA, includes **628,000 sq ft** of office space and **34,000 sq ft** of data center space across ten buildings on 124 acres[188](index=188&type=chunk) - The company leases an additional **195,000 sq ft** of office space and owns a **3,400 sq ft** condominium in New York[188](index=188&type=chunk) [Item 3. Legal Proceedings.](index=32&type=section&id=Item%203.%20Legal%20Proceedings.) Information on legal proceedings is detailed in Note 10 to the Consolidated Financial Statements - Information on legal proceedings is provided in Note 10 to the Consolidated Financial Statements[189](index=189&type=chunk) - The company is party to other actions and claims in the normal course of business, which are not believed to be material[190](index=190&type=chunk) [Item 4. Mine Safety Disclosures.](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) SEI has no mine safety disclosures to report - There are no mine safety disclosures[192](index=192&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.](index=33&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities.) SEI's common stock trades on NASDAQ under 'SEIC', with an active stock repurchase program and semi-annual dividend policy - SEI's common stock is traded on The Nasdaq Global Select Market® under the symbol 'SEIC'[193](index=193&type=chunk) - The Board of Directors intends to declare future dividends on a semiannual basis[193](index=193&type=chunk) - The Board of Directors authorized an additional **$200.0 million** for the stock repurchase program on December 10, 2021, with no expiration date[199](index=199&type=chunk) Common Stock Price Range and Dividends Declared (2020-2021) | Year | Quarter | High ($) | Low ($) | Dividends ($) | | :--- | :--- | :--- | :--- | :--- | | 2021 | First | 62.45 | 52.12 | — | | 2021 | Second | 64.78 | 55.05 | 0.37 | | 2021 | Third | 63.50 | 57.06 | — | | 2021 | Fourth | 65.22 | 57.72 | 0.40 | | 2020 | First | 69.61 | 35.41 | — | | 2020 | Second | 61.58 | 43.40 | 0.35 | | 2020 | Third | 58.67 | 48.81 | — | | 2020 | Fourth | 57.62 | 48.70 | 0.37 | Issuer Purchases of Equity Securities (Q4 2021) | Period | Total Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | October 1 – 31, 2021 | 50,000 | 62.96 | | November 1 – 30, 2021| 802,000 | 63.22 | | December 1 – 31, 2021| 677,000 | 61.49 | | **Total** | **1,529,000** | **62.44** | [Price Range of Common Stock and Dividends](index=33&type=section&id=Price%20Range%20of%20Common%20Stock%20and%20Dividends) SEI's common stock is traded on NASDAQ under 'SEIC', with plans to declare semi-annual dividends - SEI's common stock is traded on The Nasdaq Global Select Market® (NASDAQ) under the symbol 'SEIC'[193](index=193&type=chunk) - The Board of Directors intends to declare future dividends on a semiannual basis[193](index=193&type=chunk) Common Stock Price Range and Dividends Declared (2020-2021) | Year | Quarter | High ($) | Low ($) | Dividends ($) | | :--- | :--- | :--- | :--- | :--- | | 2021 | First | 62.45 | 52.12 | — | | 2021 | Second | 64.78 | 55.05 | 0.37 | | 2021 | Third | 63.50 | 57.06 | — | | 2021 | Fourth | 65.22 | 57.72 | 0.40 | | 2020 | First | 69.61 | 35.41 | — | | 2020 | Second | 61.58 | 43.40 | 0.35 | | 2020 | Third | 58.67 | 48.81 | — | | 2020 | Fourth | 57.62 | 48.70 | 0.37 | [Stock Performance Graph](index=34&type=section&id=Stock%20Performance%20Graph) The report includes a graph comparing SEI's stock performance against the NASDAQ Market Index and a blended Industry Index - The report provides a stock performance graph comparing SEI's common stock cumulative total return against the NASDAQ Market Index and Industry Index 2[197](index=197&type=chunk) - The Industry Index 2 is a blend of **81% NASDAQ US Asset Managers and Custodians** and **19% NASDAQ US Software**[197](index=197&type=chunk) - Returns are based on historical performance and are not indicative of future results[197](index=197&type=chunk) [Issuer Purchases of Equity Securities](index=34&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) SEI has an active stock repurchase program, with an additional $200.0 million approved in December 2021 - The Board of Directors has authorized the repurchase of up to **$5.128 billion** worth of common stock, with no expiration date[199](index=199&type=chunk) - On December 10, 2021, the stock repurchase program was increased by an additional **$200.0 million**[199](index=199&type=chunk) Issuer Purchases of Equity Securities (Q4 2021) | Period | Total Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | October 1 – 31, 2021 | 50,000 | 62.96 | | November 1 – 30, 2021| 802,000 | 63.22 | | December 1 – 31, 2021| 677,000 | 61.49 | | **Total** | **1,529,000** | **62.44** | [Item 6. [Reserved]](index=34&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.](index=35&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) SEI's 2021 revenues increased 14% to $1.9 billion, with net income rising 22% to $546.6 million, driven by market appreciation and LSV earnings Consolidated Statements of Operations Summary (2019-2021) | Metric (in thousands) | 2021 | 2020 | Change (2021 vs 2020) | 2019 | Change (2020 vs 2019) | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,918,309 | $1,684,058 | 14 % | $1,649,885 | 2 % | | Expenses | $1,364,928 | $1,238,171 | 10 % | $1,189,461 | 4 % | | Income from operations| $553,381 | $445,887 | 24 % | $460,424 | (3)% | | Net income | $546,593 | $447,286 | 22 % | $501,426 | (11)% | | Diluted EPS | $3.81 | $3.00 | 27 % | $3.24 | (7)% | - **2021 revenue growth** was driven by higher asset management, administration, and distribution fees from market appreciation and positive cash flows, as well as increased information processing fees[206](index=206&type=chunk) - **2020 revenue growth** was primarily from higher assets under administration in the Investment Managers segment and market appreciation after the COVID-19 shutdown[207](index=207&type=chunk) - Operating expenses increased in 2021 due to direct costs related to revenue growth and higher personnel costs, while in 2020, they increased due to new business investments and personnel costs in the Investment Managers segment[206](index=206&type=chunk)[207](index=207&type=chunk) - Earnings from LSV **increased 17% in 2021** due to higher assets under management and performance fees, but **decreased 23% in 2020** due to lower assets and underperformance of value equity[206](index=206&type=chunk)[207](index=207&type=chunk) [Overview](index=35&type=section&id=Overview) SEI provides global wealth and investment solutions, managing $1.3 trillion in assets, with strong revenue and net income growth in 2021 - SEI is a leading global provider of technology-driven wealth and investment management solutions, managing, advising, or administering approximately **$1.3 trillion** in assets as of December 31, 2021[204](index=204&type=chunk) - Significant items impacting 2021 results include **increased asset management and processing fees**, higher LSV earnings, and increased operating expenses due to business growth[206](index=206&type=chunk) - Significant items impacting 2020 results include increased assets under administration, market appreciation post-COVID-19, **decreased LSV earnings**, and increased investments in new business opportunities like the One SEI strategy[207](index=207&type=chunk) Consolidated Financial Performance (2019-2021) | Metric (in thousands) | 2021 | 2020 | Change (2021 vs 2020) | 2019 | Change (2020 vs 2019) | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,918,309 | $1,684,058 | 14 % | $1,649,885 | 2 % | | Expenses | $1,364,928 | $1,238,171 | 10 % | $1,189,461 | 4 % | | Income from operations| $553,381 | $445,887 | 24 % | $460,424 | (3)% | | Net income | $546,593 | $447,286 | 22 % | $501,426 | (11)% | | Diluted EPS | $3.81 | $3.00 | 27 % | $3.24 | (7)% | [Ending Asset Balances](index=40&type=section&id=Ending%20Asset%20Balances) Total assets reached $1.338 trillion at year-end 2021, a 14% increase driven by growth in the Investment Managers and Investment Advisors segments - Investment Managers segment saw a **19% increase** in client assets under administration to **$907.4 billion** in 2021[221](index=221&type=chunk) - Investment Advisors segment's total Platform assets **increased 16%** to **$100.6 billion** in 2021[221](index=221&type=chunk) Ending Asset Balances (in millions) as of December 31 | Segment / Asset Type | 2021 | 2020 | Percent Change (2021 vs 2020) | | :--- | :--- | :--- | :--- | | **Total assets under management** | **$405,148** | **$368,660** | **10 %** | | Advised assets | $6,267 | $5,362 | 17 % | | Client assets under administration | $911,858 | $786,743 | 16 % | | Platform-only assets | $14,564 | $11,862 | 23 % | | **Total assets** | **$1,337,837**| **$1,172,627**| **14 %** | | LSV: Equity and fixed-income programs | $98,984 | $93,692 | 6 % | [Average Asset Balances](index=42&type=section&id=Average%20Asset%20Balances) Total average assets increased 20% to $1.268 trillion in 2021, driven by strong growth in the Investment Managers and Investment Advisors segments - Investment Managers segment's total average assets **increased 24%** to **$936.6 million** in 2021[225](index=225&type=chunk) - Investment Advisors segment's total Platform average assets **increased 21%** to **$94.5 million** in 2021[225](index=225&type=chunk) Average Asset Balances (in millions) for the Year Ended December 31 | Segment / Asset Type | 2021 | 2020 | Percent Change (2021 vs 2020) | | :--- | :--- | :--- | :--- | | **Total assets under management** | **$393,289** | **$327,672** | **20 %** | | Advised assets | $5,928 | $4,807 | 23 % | | Client assets under administration | $854,961 | $717,650 | 19 % | | Platform-only assets | $13,426 | $9,914 | 35 % | | **Total assets** | **$1,267,604**| **$1,060,043**| **20 %** | | LSV: Equity and fixed-income programs | $99,591 | $85,043 | 17 % | [Business Segments](index=44&type=section&id=Business%20Segments) All business segments saw revenue growth in 2021, with Investment Managers leading at 19% and Private Banks operating profit growing 245% - Private Banks revenue increased due to new SWP client conversions, growth from existing SWP clients, market appreciation, and non-recurring fees[230](index=230&type=chunk) - Investment Advisors revenue increased from positive cash flows into separately managed account programs and market appreciation[233](index=233&type=chunk) - Institutional Investors revenue increased from market appreciation, new OCIO sales, and performance fees, despite defined benefit client losses[234](index=234&type=chunk) - Investment Managers revenue increased due to higher valuations of existing client assets and positive cash flows into various offerings[235](index=235&type=chunk) - Corporate overhead expenses increased in 2021 due to higher personnel costs, stock-based compensation, consulting, and professional fees[236](index=236&type=chunk) Business Segment Performance (in thousands) for the Year Ended December 31 | Segment | 2021 Revenues | 2020 Revenues | % Change (2021 vs 2020) | 2021 Operating Profit (Loss) | 2020 Operating Profit (Loss) | % Change (2021 vs 2020) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Private Banks | $493,570 | $455,393 | 8 % | $30,774 | $8,912 | 245 % | | Investment Advisors | $482,949 | $407,564 | 18 % | $242,615 | $201,651 | 20 % | | Institutional Investors | $343,805 | $317,627 | 8 % | $175,735 | $167,718 | 5 % | | Investment Managers | $581,157 | $489,462 | 19 % | $232,502 | $180,463 | 29 % | | Investments in New Businesses | $16,828 | $14,012 | 20 % | $(36,391) | $(38,859) | NM | [Liquidity and Capital Resources](index=50&type=section&id=Liquidity%20and%20Capital%20Resources) Operating cash flow increased to $633.1 million in 2021, driven by higher net income and LSV repayments - Operating cash flows increased in 2021 due to **higher net income** and increased repayments from LSV[257](index=257&type=chunk) - Investing activities in 2021 included **$80.2 million for acquisitions** (Novus and Finomial) and **$26.0 million** for capitalized software development[259](index=259&type=chunk) - Financing activities included **$411.5 million for common stock repurchases** and **$105.5 million in dividend payments** in 2021[260](index=260&type=chunk) - SEI has a **$325.0 million** five-year senior unsecured revolving credit facility, with **$40.0 million** borrowed in November 2021 for an acquisition[251](index=251&type=chunk)[254](index=254&type=chunk) Consolidated Cash Flows Summary (in thousands) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $633,101 | $488,682 | $545,122 | | Net cash used in investing activities | $(164,883) | $(67,496) | $(78,180) | | Net cash used in financing activities | $(422,319) | $(482,135) | $(386,620) | | Net increase (decrease) in cash and cash equivalents | $44,031 | $(56,820) | $86,508 | | Cash, cash equivalents and restricted cash, end of year | $831,758 | $787,727 | $844,547 | [Cash Requirements](index=52&type=section&id=Cash%20Requirements) Cash requirements are primarily funded by operating cash flow, available borrowing capacity, and existing cash reserves - Cash requirements and liquidity needs are primarily funded through cash flow from operations and available borrowing capacity[261](index=261&type=chunk) - SEI anticipates sufficient funds from operating cash flow, available borrowing capacity, and existing cash to meet operational needs and fund the stock repurchase program for the foreseeable future[262](index=262&type=chunk) [Critical Accounting Policies and Estimates](index=52&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies involve significant judgment for software costs, income taxes, stock compensation, and acquisition valuations - Critical accounting policies and estimates include computer software development costs, income taxes, stock-based compensation, and the valuation of long-lived assets (goodwill and intangible assets) acquired in acquisitions[263](index=263&type=chunk) - Capitalization of internal software development costs requires considerable judgment regarding technological and economic feasibility and estimated economic life[264](index=264&type=chunk)[265](index=265&type=chunk) - Income tax accounting involves assumptions, judgments, and estimates for current and deferred taxes, including valuation allowances and potential outcomes of tax audits[267](index=267&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk) - Stock-based compensation expense depends on management's estimate of when financial vesting targets will be achieved, with changes potentially causing volatility in recognition[270](index=270&type=chunk)[271](index=271&type=chunk) - Valuation of acquired assets, goodwill, and intangible assets in business combinations requires significant estimates and assumptions, impacting amortization expense and potential impairment[272](index=272&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk)[276](index=276&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk.](index=56&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) Market risk disclosures are incorporated by reference from Item 1A and Item 7 of this report - Market risk disclosures are referenced from 'Our revenues and earnings are affected by changes in capital markets and significant changes in the value of financial instruments' and 'Changes in interest rates may affect the value of our fixed-income investment securities' in Item 1A, Risk Factors[278](index=278&type=chunk) - Additional market risk information is found under 'Impact of COVID-19' in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations[278](index=278&type=chunk) [Item 8. Financial Statements and Supplementary Data.](index=57&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data.) This section presents SEI's audited consolidated financial statements and the independent auditor's reports - This item includes the Reports of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in Equity, Consolidated Statements of Cash Flows, and Notes to Consolidated Financial Statements[280](index=280&type=chunk) - KPMG LLP provided an **unqualified opinion** on the consolidated financial statements for the three-year period ended December 31, 2021, and on the effectiveness of internal control over financial reporting as of December 31, 2021[283](index=283&type=chunk)[284](index=284&type=chunk) [Reports of Independent Registered Public Accounting Firm](index=58&type=section&id=Reports%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued unqualified opinions on the financial statements and internal controls, noting software capitalization as a critical audit matter - KPMG LLP issued an **unqualified opinion** on SEI's consolidated financial statements for the three-year period ended December 31, 2021[283](index=283&type=chunk) - KPMG LLP also expressed an **unqualified opinion** on the effectiveness of the Company's internal control over financial reporting as of December 31, 2021[284](index=284&type=chunk)[293](index=293&type=chunk) - A critical audit matter was the evaluation of costs eligible for capitalization in connection with enhancements to internal use software, specifically the SEI Wealth Platform, due to the high degree of auditor judgment required[288](index=288&type=chunk) [Consolidated Balance Sheets](index=62&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to $2.355 billion in 2021, driven by growth in cash, receivables, and goodwill from acquisitions - Total assets **increased by $187.4 million** from 2020 to 2021, driven by increases in cash, receivables, and goodwill[301](index=301&type=chunk) - Goodwill significantly **increased to $117.2 million** in 2021 from $64.5 million in 2020, reflecting recent acquisitions[301](index=301&type=chunk) Consolidated Balance Sheet Summary (in thousands) | Account (in thousands) | December 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets:** | | | | Cash and cash equivalents | $831,407 | $784,626 | | Receivables, net | $441,609 | $385,219 | | Capitalized Software, net | $243,446 | $270,977 | | Goodwill | $117,232 | $64,489 | | Total Assets | **$2,354,702** | **$2,167,256** | | **Liabilities:** | | | | Total Current Liabilities | $355,743 | $317,275 | | Borrowings Under Revolving Credit Facility | $40,000 | — | | Total Liabilities | **$493,939** | **$427,349** | | **Equity:** | | | | Total Shareholders' Equity | **$1,860,763** | **$1,739,907** | [Consolidated Statements of Operations](index=64&type=section&id=Consolidated%20Statements%20of%20Operations) Total revenues increased 14% to $1.918 billion in 2021, with net income growing 22% to $546.6 million - Total revenues **increased by $234.3 million (14%)** in 2021 compared to 2020[306](index=306&type=chunk) - Net income **increased by $99.3 million (22%)** in 2021 compared to 2020[306](index=306&type=chunk) Consolidated Statements of Operations (in thousands, except per-share data) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total revenues | $1,918,309 | $1,684,058 | $1,649,885 | | Total expenses | $1,364,928 | $1,238,171 | $1,189,461 | | Income from operations | $553,381 | $445,887 | $460,424 | | Equity in earnings of unconsolidated affiliates | $137,572 | $117,134 | $151,891 | | Net income | $546,593 | $447,286 | $501,426 | | Diluted earnings per common share | $3.81 | $3.00 | $3.24 | | Dividends declared per common share | $0.77 | $0.72 | $0.68 | [Consolidated Statements of Comprehensive Income](index=65&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income was $543.5 million in 2021, slightly below net income due to foreign currency and investment losses - Total other comprehensive loss, net of taxes, was **$3.045 million** in 2021, compared to income of $6.706 million in 2020[308](index=308&type=chunk) - Foreign currency translation adjustments resulted in a loss of **$1.432 million** in 2021, a reversal from gains in prior years[308](index=308&type=chunk) Consolidated Statements of Comprehensive Income (in thousands) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net income | $546,593 | $447,286 | $501,426 | | Foreign currency translation adjustments| $(1,432) | $5,620 | $7,618 | | Unrealized holding (losses) gains on investments, net of tax | $(2,527) | $374 | $1,486 | | Less: reclassification adjustment for losses realized in net income, net of tax | $914 | $712 | $392 | | Total other comprehensive (loss) income, net of taxes | $(3,045) | $6,706 | $9,496 | | Comprehensive income | $543,548 | $453,992 | $510,922 | [Consolidated Statements of Changes in Equity](index=66&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity) Total shareholders' equity increased to $1.861 billion in 2021, driven by net income and offset by stock repurchases - Total Shareholders' Equity **increased by $120.8 million** in 2021[310](index=310&type=chunk) - Net income of **$546.6 million** contributed positively, while common stock repurchases (totaling **$411.5 million**) and dividends declared (**$107.8 million**) reduced equity[310](index=310&type=chunk) Consolidated Statements of Changes in Equity (in thousands) | Metric (in thousands) | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Common Stock (shares) | 138,449 | 143,396 | 149,745 | | Common Stock ($) | $1,384 | $1,434 | $1,497 | | Capital In Excess of Par Value | $1,246,608 | $1,190,001 | $1,158,900 | | Retained Earnings | $632,614 | $565,270 | $601,885 | | Accumulated Other Comprehensive Loss | $(19,843) | $(16,798) | $(23,504) | | **Total Equity** | **$1,860,763**| **$1,739,907**| **$1,738,778**| [Consolidated Statements of Cash Flows](index=67&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased to $633.1 million in 2021, while investing cash use rose due to acquisitions - Operating cash flows **increased by $144.4 million** in 2021, primarily from increased net income and repayments of advances from LSV[257](index=257&type=chunk)[311](index=311&type=chunk) - Investing activities in 2021 included **$80.2 million for acquisitions** and **$26.0 million for capitalized software**[259](index=259&type=chunk)[313](index=313&type=chunk) - Financing activities in 2021 included **$408.1 million for common stock repurchases** and **$105.5 million for dividend payments**[260](index=260&type=chunk)[313](index=313&type=chunk) Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $633,101 | $488,682 | $545,122 | | Net cash used in investing activities | $(164,883) | $(67,496) | $(78,180) | | Net cash used in financing activities | $(422,319) | $(482,135) | $(386,620) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $44,031 | $(56,820) | $86,508 | | Cash, cash equivalents and restricted cash, end of year | $831,758 | $787,727 | $844,547 | [Notes to Consolidated Financial Statements](index=69&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of accounting policies, financial captions, and significant transactions - Note 1 details significant accounting policies, including revenue recognition, cash equivalents, property and equipment, marketable securities, fair value measurements, capitalized software, and business combinations[314](index=314&type=chunk)[325](index=325&type=chunk)[330](index=330&type=chunk)[332](index=332&type=chunk)[337](index=337&type=chunk)[341](index=341&type=chunk)[344](index=344&type=chunk) - Note 2 provides information on the investment in unconsolidated affiliate LSV Asset Management, including SEI's ownership interest and proportionate share in earnings[361](index=361&type=chunk)[363](index=363&type=chunk) - Note 6 details the **$325.0 million revolving credit facility**, including terms, covenants, and borrowings for acquisitions[388](index=388&type=chunk)[391](index=391&type=chunk) - Note 7 covers shareholders' equity, including stock-based compensation plans, common stock buybacks, and cash dividends[396](index=396&type=chunk)[404](index=404&type=chunk)[406](index=406&type=chunk) - Note 10 outlines commitments and contingencies, including the Stanford Trust Company and SS&C Advent litigations[410](index=410&type=chunk)[412](index=412&type=chunk)[415](index=415&type=chunk) - Note 14 provides details on business acquisitions in 2021, including Finomial and Novus, and the contingent consideration for Huntington Steele[448](index=448&type=chunk)[451](index=451&type=chunk)[454](index=454&type=chunk) [Schedule II - Valuation and Qualifying Accounts and Reserves](index=101&type=section&id=Schedule%20II%20-%20Valuation%20and%20Qualifying%20Accounts%20and%20Reserves) This schedule details changes in the allowance for doubtful accounts and the deferred income tax valuation allowance Allowance for Doubtful Accounts (in thousands) | Year | Balance at Beginning of Year | Additions Charged to Costs and Expenses | Deductions | Balance at End of Year | | :--- | :--- | :--- | :--- | :--- | | 2021 | $1,100 | $502 | — | $1,602 | | 2020 | $1,201 | — | $(101) | $1,100 | | 2019 | $718 | $483 | — | $1,201 | Deferred Income Tax Valuation Allowance (in thousands) | Year | Balance at Beginning of Year | Additions Charged to Costs and Expenses | Deductions | Balance at End of Year | | :--- | :--- | :--- | :--- | :--- | | 2021 | $68,776 | — | $(4,977) | $63,799 | | 2020 | $70,731 | — | $(1,955) | $68,776 | | 2019 | $72,316 | — | $(1,585) | $70,731 | [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.](index=102&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure.) SEI reports no changes in or disagreements with its accountants - There are no changes in or disagreements with accountants on accounting and financial disclosure[473](index=473&type=chunk) [Item 9A. Controls and Procedures.](index=102&type=section&id=Item%209A.%20Controls%20and%20Procedures.) Management concluded that disclosure controls and internal control over financial reporting were effective as of year-end 2021 - Management concluded that disclosure controls and procedures were **effective** as of December 31, 2021, ensuring timely and accurate reporting[474](index=474&type=chunk) - Management also concluded that internal control over financial reporting was **effective** as of December 31, 2021, based on the COSO framework[475](index=475&type=chunk) - KPMG LLP audited and expressed an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting[476](index=476&type=chunk) - No changes in internal control over financial reporting occurred during Q4 2021 that materially affected or are reasonably likely to materially affect it[477](index=477&type=chunk) [Item 9B. Other Information.](index=102&type=section&id=Item%209B.%20Other%20Information.) This item reports that there is no other information required to be disclosed - There is no other information to report[478](index=478&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.](index=102&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections.) SEI has no disclosures regarding foreign jurisdictions that prevent inspections - There are no disclosures regarding foreign jurisdictions that prevent inspections[479](index=479&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance.](index=103&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance.) Information on directors, officers, and corporate governance is incorporated by reference from the company's proxy statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the definitive proxy statement[481](index=481&type=chunk)[488](index=488&type=chunk) - Key executive officers include Alfred P. West, Jr. (Chairman & CEO), Kevin P. Barr (Executive Vice President), Kathy C. Heilig (Chief Accounting Officer & Controller), Ryan P. Hicke (Executive Vice President & CIO), Paul F. Klauder (Executive Vice President), Dennis J. McGonigle (CFO & Executive Vice President), Michael N. Peterson (Executive Vice President & General Counsel), and Wayne M. Withrow (Executive Vice President)[482](index=482&type=chunk)[483](index=483&type=chunk)[484](index=484&type=chunk)[485](index=485&type=chunk)[486](index=486&type=chunk)[487](index=487&type=chunk) - SEI has adopted a Code of Conduct for all employees and a Code of Ethics for Senior Financial Officers, available on its website[489](index=489&type=chunk) [Item 11. Executive Compensation.](index=103&type=section&id=Item%2011.%20Executive%20Compensation.) Information regarding executive compensation is incorporated by reference from SEI's definitive proxy statement - Information on executive compensation is incorporated by reference from the definitive proxy statement[490](index=490&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.](index=103&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters.) This section incorporates security ownership information by reference and details the company's equity compensation plans - Information on security ownership of certain beneficial owners and management is incorporated by reference from the definitive proxy statement[491](index=491&type=chunk) - The 2014 Omnibus Equity Compensation Plan, which replaced the 2007 Plan, provides for grants of stock options, stock units, stock awards, stock appreciation rights, and dividend equivalents[494](index=494&type=chunk)[495](index=495&type=chunk) - The plan is administered by the Compensation Committee, which determines grant terms, vesting criteria, and exercisability[496](index=496&type=chunk)[497](index=497&type=chunk) Equity Compensation Plan Information as of December 31, 2021 | Metric | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted –average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 19,084,064 | $54.35 | 12,977,981 | | Equity compensation plans not approved by security holders | — | — | — | | **Total** | **19,084,064** | **$54.35** | **12,977,981** | [Item 13. Certain Relationships and Related Transactions, and Director Independence.](index=107&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence.) Information on related transactions and director independence is incorporated by reference from the proxy statement - Information on certain relationships and related transactions, and director independence, is incorporated by reference from the definitive proxy statement[511](index=511&type=chunk) [Item 14. Principal Accounting Fees and Services.](index=107&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services.) Information concerning principal accounting fees and services is incorporated by reference from the proxy statement - Information on principal accounting fees and services is incorporated by reference from the definitive proxy statement[512](index=512&type=chunk) PART IV [Item 15. Exhibits, Financial Statement Schedules.](index=108&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules.) This item lists the financial statements and exhibits filed with the Annual Report on Form 10-K - This item lists the Consolidated Financial Statements and supplementary data filed as part of Item 8[514](index=514&type=chunk) - It includes reports of independent registered public accounting firm, consolidated financial statements (Balance Sheets, Statements of Operations, Comprehensive Income, Changes in Equity, Cash Flows), and Notes to Consolidated Financial Statements[514](index=514&type=chunk) - An index of exhibits incorporated by reference or filed with the Annual Report on Form 10-K is also provided[514](index=514&type=chunk) [Item 16. Form 10-K Summary.](index=108&type=section&id=Item%2016.%20Form%2010-K%20Summary.) This item indicates that no Form 10-K Summary is provided - No Form 10-K Summary is provided[515](index=515&type=chunk)