SEI(US:SEIC)2019-04-25 03:18Financial Data and Key Metrics Changes - First quarter earnings decreased by 18% year-over-year, with diluted earnings per share at $0.73, down 15% from $0.86 in Q1 2018 [6] - Revenue decreased by 1% from Q1 2018 to Q1 2019, primarily due to the downturn in capital markets in Q4 2018 [6] - Non-cash asset balances under management increased by $12.7 billion, while LSV assets under management increased by $7 billion due to market appreciation [7] - The effective tax rate for the quarter was 22%, up from 11% in Q1 2018 [14] Business Line Data and Key Metrics Changes - Private Banking segment revenues totaled $118.3 million, down 3.2% year-over-year, with profits decreasing by $2.7 million to $7.3 million [15][16] - Investment Managers segment revenues increased by 8% to $104.6 million, with profits rising by 6.2% to $35.6 million [25] - Investment Advisors segment revenues were nearly $95 million, down over $4 million year-over-year, with profits declining by over $4 million [35][37] - Institutional Investors segment revenues decreased by 6% to $80.1 million, with operating profits down 7% to $41.4 million [43] Market Data and Key Metrics Changes - Third-party asset balances at the end of Q1 2019 were $586 billion, a 6.4% increase from Q4 2018, driven by net new client fundings of $18.1 billion and market appreciation of $15.6 billion [26] - Negative net fundings of $3 billion in the Institutional Investors segment were primarily due to two large defined benefit clients [44] Company Strategy and Development Direction - The company aims to grow globally, monetize investments in the SEI Wealth Platform (SWP), implement backlog clients, and expand markets and solutions for further growth [23] - The completion of the migration of advisors onto the SEI Wealth Platform is seen as a significant milestone, setting the stage for future growth [40] - The company is focused on managing expenses judiciously while pursuing growth initiatives [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sales pipeline and expects to regain sales events throughout the year despite disappointing results in Q1 [10] - The company is navigating headwinds from previously announced lost business, which will continue to migrate out over the year [24] - Management remains optimistic about growth opportunities despite the challenges faced in the current operating environment [31] Other Important Information - The company repurchased approximately 1.7 million shares at an average price of $51.47 per share, totaling $88.8 million in stock repurchases during the quarter [8] - A severance expense of approximately $4 million was recorded, impacting corporate overheads [14] Q&A Session Summary Question: Clarification on Operating Lease Right-of-Use Assets - Management explained that this new line item represents liabilities on future lease agreements due to a new accounting rule [59] Question: Future Expense Run Rate - Management indicated that the current expense run rate is reasonable, but some severance costs will not benefit until later quarters [64][66] Question: Sales Events and Future Sales Activity - Management clarified that the sales events reported reflect Q1 activity, while the sales pipeline remains strong for future quarters [72][74] Question: Update on Wells Fargo Project - Management confirmed that the scope of work with Wells Fargo remains as initially planned, with clarity on implementation timing [78] Question: Impact of HSBC's Use of Aladdin - Management stated that HSBC's use of Aladdin does not affect their relationship or asset management programs [90] Question: Future of TRUST 3000 Clients - Management noted that while there are no significant losses expected, they are engaged with clients to retain them during the transition to SWP [106] Question: Advisor Recruitment and Sales Cycle - Management indicated that the typical sales cycle for new advisors is about three to nine months, with expectations for acceleration in 2020 [150][153]