SEI(SEIC) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - SEI reported an EPS of $1.30, marking an all-time high when excluding one-time items, with earnings growth of 8% sequentially and 17% year over year [3][12] - Net sales events totaled $31 million for the quarter, with a record sales quarter in Investment Manager Services, reflecting strong demand for outsourcing and client expansions [4][9] - Year-to-date net sales events surpassed $100 million, a record for SEI through the third quarter [9] Business Line Data and Key Metrics Changes - Private banking revenue increased by 4% year over year, driven by growth in the SWP platform [13] - Investment Manager Services experienced double-digit revenue and operating profit growth, with alternatives showing robust growth in both the U.S. and EMEA [13] - Advisors' business posted the highest year-over-year revenue growth among all segments, supported by market appreciation and an integrated cash program [14] Market Data and Key Metrics Changes - Assets under administration grew broadly across CITs, alternatives, and traditional funds, with alternatives driving the majority of growth [17] - Assets under management increased, with modestly positive net flows in advisors, particularly in ETFs and SMAs, while institutional flows remained flat [18] Company Strategy and Development Direction - The company is focused on disciplined execution, transparent communication, and creating long-term value for clients and shareholders [3] - SEI is investing in technology, automation, and talent to drive margin expansion and capitalize on high-return opportunities [10] - The company is strategically positioned to support large alternative asset managers exploring outsourcing fund administration [5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sales pipeline compared to the previous year, highlighting a diversified pipeline of opportunities [9] - The company anticipates that recent and future wins will offset a notable contract loss in private banking, which is viewed as a one-off event [27][28] - Management emphasized the importance of client engagement and the potential for future opportunities despite current challenges [29] Other Important Information - SEI ended the quarter with $793 million in cash and no net debt, with share repurchases totaling $142 million in Q3 [19] - The company made a $50 million investment in LSV's market-neutral hedge fund, contributing positively to Q3 results [19] Q&A Session Summary Question: Sales events from alternatives - Management noted that two-thirds of sales events were from alternatives, with a mix of large and small clients contributing to this growth [23][25] Question: Details on the contract loss in private banking - The contract loss was a one-off event due to a major operating model change by the client, not indicative of a trend [26][27] Question: Integrated cash program yields - The integrated cash program is currently earning about 370 basis points, with competitive yields for investors [32] Question: Expense growth in private banking - Expense growth is attributed to investments in talent and onboarding new clients, with no unusual trends noted [34][35] Question: Investment Manager Services margins - Future margins are expected to remain strong, but investments may lead to some fluctuations in the short term [38][40] Question: International sales mix - The company is in the early phases of defining its international strategy, focusing on maximizing presence in existing jurisdictions [44][46] Question: Buyback pace - The company plans to return 90% to 100% of free cash flow to shareholders through dividends and buybacks, with ongoing buybacks expected [49] Question: Impact of credit fears on private credit servicing - Management indicated no significant impact on the private credit servicing pipeline, with strong performance expected from top-tier managers [50][52] Question: High-risk relationships in private banking - Currently, there are no known high-risk relationships in the private banking portfolio, with strong client engagement noted [55]