SEI(SEIC) - 2021 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements This section presents SEI Investments Company's unaudited consolidated financial statements for the quarter ended March 31, 2021, encompassing balance sheets, statements of operations, and cash flows Consolidated Balance Sheets As of March 31, 2021, total assets were $2.15 billion, total liabilities decreased to $321.8 million, and shareholders' equity increased to $1.83 billion Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $2,150,901 | $2,167,256 | | Cash and cash equivalents | $782,582 | $784,626 | | Total Liabilities | $321,793 | $427,349 | | Accrued liabilities | $199,235 | $299,845 | | Total Shareholders' Equity | $1,829,108 | $1,739,907 | Consolidated Statements of Operations For Q1 2021, total revenues increased 10% to $455.7 million, with net income rising 19% to $129.5 million, resulting in diluted EPS of $0.89 Q1 2021 vs. Q1 2020 Performance (in thousands, except per share data) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Total Revenues | $455,686 | $414,762 | | Income from Operations | $132,837 | $110,228 | | Net Income | $129,470 | $109,242 | | Diluted EPS | $0.89 | $0.72 | Consolidated Statements of Cash Flows Net cash from operations increased to $136.6 million in Q1 2021, while investing activities used $30.7 million and financing activities used $109.5 million, leading to a $2.0 million net cash decrease Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $136,573 | $98,972 | | Net cash used in investing activities | ($30,656) | ($17,352) | | Net cash used in financing activities | ($109,512) | ($165,050) | | Net decrease in cash | ($2,044) | ($94,576) | - The company used $71.2 million for the purchase and retirement of common stock in Q1 2021, compared to $130.6 million in Q1 2020[26][167] Notes to Consolidated Financial Statements The notes detail accounting policies, revenue disaggregation, segment performance, the LSV Asset Management equity investment, litigation updates, and the new credit facility - The company's revenue is primarily derived from asset management, administration, and distribution fees, as well as information processing and software servicing fees[113] - The company holds a 38.8% partnership interest in LSV Asset Management, accounted for using the equity method, with SEI's share of LSV's earnings at $33.4 million in Q1 2021[44][46] - The company provides updates on two key legal matters: the Stanford Trust Company Litigation and the SS&C Advent Litigation, with management not expecting a material adverse effect[91][100] - On April 23, 2021, the company entered into a new five-year, $325 million credit facility, replacing the previous agreement[69] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 financial performance, highlighting revenue and net income growth driven by market appreciation, segment performance, and LSV affiliate earnings, alongside liquidity and capital resources Q1 2021 Consolidated Performance Summary | Metric | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $455.7M | $414.8M | 10% | | Income from operations | $132.8M | $110.2M | 21% | | Net income | $129.5M | $109.2M | 19% | | Diluted EPS | $0.89 | $0.72 | 24% | - Revenue growth was primarily driven by higher average assets under administration (up 21% to $821.6 billion) and management (up $43.2 billion to $280.4 billion, excluding LSV), benefiting from market appreciation and positive cash flows[128] - The company continued its stock repurchase program, buying back 1.2 million shares for $66.9 million in Q1 2021[133] - The 'One SEI' strategy, a company-wide initiative to integrate and modularize technology platforms, incurred significant costs in 2020, with investments expected to continue through 2021[136] Business Segments Analysis All business segments reported year-over-year revenue growth, with Investment Managers leading at 17% revenue increase and Private Banks showing a 168% operating profit increase Segment Operating Profit (Loss) (in thousands) | Segment | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | Private Banks | $6,884 | $2,568 | 168% | | Investment Advisors | $58,267 | $49,889 | 17% | | Institutional Investors | $45,341 | $40,936 | 11% | | Investment Managers | $53,399 | $42,340 | 26% | | Investments in New Businesses | ($9,538) | ($7,522) | (27)% | - Investment Managers segment revenue grew 17% due to higher asset valuations and positive cash flows into alternative and traditional offerings[148] - Private Banks segment operating profit grew 168% due to higher revenue and decreased promotion, travel, and non-capitalized SWP-related costs[143][145] Liquidity and Capital Resources The company maintains strong liquidity, with $785.7 million in cash, secured a new $325 million credit facility, and used cash for stock repurchases and dividends in Q1 2021 - On April 23, 2021, the company replaced its credit facility with a new five-year, $325 million agreement with a syndicate of lenders led by Wells Fargo[161] - Cash flow from operations increased to $136.6 million in Q1 2021 from $99.0 million in Q1 2020, primarily due to higher net income[160][166] - Key uses of cash in Q1 2021 were stock repurchases ($71.2 million), dividend payments ($53.1 million), and capital expenditures ($4.2 million)[167][170] Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the company's market risk disclosures since the 2020 Annual Report on Form 10-K - There have been no material changes to the company's market risk disclosures since the 2020 Annual Report on Form 10-K[181] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[182] - No material changes to the internal control over financial reporting were identified during the quarter ended March 31, 2021[183] PART II - OTHER INFORMATION Legal Proceedings The company is party to various legal proceedings, including Stanford Trust and SS&C Advent litigations, with management believing no material adverse effect is probable - The company states that it does not believe the various legal proceedings it is party to are material and that the probability of a material adverse effect from their outcome is remote[184] Risk Factors There have been no material changes in risk factors from those disclosed in the 2020 Annual Report on Form 10-K - There have been no material changes in risk factors from those disclosed in the 2020 Annual Report on Form 10-K[185] Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2021, the company repurchased 1.15 million common shares for $66.9 million, with $125.9 million remaining for future repurchases Common Stock Repurchases in Q1 2021 | Period | Total Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining Under Program | | :--- | :--- | :--- | :--- | | January 2021 | — | — | $192,827,000 | | February 2021 | 554,000 | $57.44 | $161,010,000 | | March 2021 | 598,000 | $58.72 | $125,888,000 | | Total Q1 | 1,152,000 | $58.11 | $125,888,000 | Exhibits This section lists exhibits filed with the Form 10-Q, including the new Credit Agreement, CEO and CFO certifications, and XBRL interactive data files - Key exhibits filed include a new Credit Agreement, CEO and CFO certifications (Rule 13a-15(e)/15d-15(e) and Section 1350), and XBRL data files[188]