Business Overview and History

SEI Investments Company (NASDAQ: SEIC) is a leading global provider of financial technology, operations, and asset management services within the financial services industry. With a history spanning over five decades, SEI has established itself as a trusted partner to a diverse array of clients, including wealth managers, banks, investment advisors, asset managers, and institutional investors.

SEI was founded in 1968 in Oaks, Pennsylvania, and has since evolved from a pioneering provider of investment processing services to a comprehensive financial technology and solutions company. The company's core competencies are centered around three pillars: technology, operations, and asset management.

In its early years, SEI focused on developing its proprietary TRUST 3000 investment processing platform to serve banks and trust institutions. This early focus on investment processing laid the foundation for SEI's future expansion into broader wealth management solutions. The company established itself as a pioneer in investment processing technologies, providing custody, accounting, and other back-office services to its clients.

Over the following decades, SEI continued to innovate and expand its service offerings, responding to the evolving needs of its clients. The company diversified its service offerings and client base, launching the SEI Wealth Platform in the early 2000s, which provided a fully-integrated, single infrastructure solution for wealth managers. SEI also began providing investment management and operations outsourcing services to investment managers and institutional investors, allowing it to become a more comprehensive solutions provider to the financial services industry.

One of the key challenges SEI faced during its growth was the transition from a technology-focused company to a multi-faceted solutions provider. As client demands evolved, SEI had to invest heavily in developing new capabilities, integrating acquisitions, and adapting its operating model. This required significant capital investment and organizational change, which SEI was able to navigate successfully over time. The company's ability to anticipate industry trends and proactively enhance its service offerings has been a hallmark of its growth strategy.

In the 1990s, SEI launched its investment management platforms, providing comprehensive solutions for managing personal and institutional wealth. This move solidified the company's position as a leading provider of investment management services, complementing its investment processing capabilities.

The early 2000s saw SEI's entrance into the institutional investor market, with the introduction of its Outsourced Chief Investment Officer (OCIO) and Unbundled OCIO solutions. These offerings allowed SEI to leverage its investment management expertise to serve the needs of retirement plan sponsors, healthcare systems, and other institutional asset owners.

More recently, SEI has made strategic investments to enhance its global footprint and expand its capabilities in alternative investments and technology-enabled services. The acquisition of LifeYield in 2024, for example, has enabled SEI to deliver a fully bundled unified managed household (UMH) solution, further strengthening its position in the wealth management space.

Financial Performance and Key Metrics

SEI's financial performance has been consistently strong, with the company reporting steady revenue and earnings growth over the past several years. In 2024, the company reported total revenues of $2.13 billion, an 11% increase from the previous year. Net income for the year reached $581.2 million, a 26% year-over-year increase, and the company generated $622.3 million in operating cash flow.

The company's balance sheet remains healthy, with a strong cash position of $840.2 million and no long-term debt as of the end of 2024. SEI's return on equity (ROE) and return on assets (ROA) for the year were 25.5% and 21.6%, respectively, reflecting the company's efficient deployment of capital and effective asset management.

Segment Performance

SEI operates across five core business segments: Investment Managers, Private Banks, Investment Advisors, Institutional Investors, and Investments in New Businesses. Each segment has contributed to the company's overall growth, showcasing the diversification of SEI's revenue streams.

The Investment Managers segment, which provides an outsourced investment management operating platform to alternative and traditional asset managers, reported a 13% increase in revenues to $728.4 million in 2024, driven by growth in alternative and traditional fund assets. This segment represented 34% of SEI's total revenues. Operating margins for this segment improved to 38% in 2024, up from 35% in 2023.

The Private Banks segment, which offers outsourced investment processing and investment management platforms to banks and trust institutions, saw a 9% revenue increase to $541.4 million during the same period, benefiting from new client wins and growth within the existing client base. This segment accounted for 26% of SEI's total revenues. Operating margins for the Private Banks segment improved to 15% in 2024, up from 10% in 2023.

The Investment Advisors segment, which provides wealth management technology, operations, and asset management solutions to independent financial advisors, experienced a 17% revenue increase to $509.4 million in 2024, partially attributed to the successful launch of the SEI Integrated Cash program. This segment represented 24% of SEI's total revenues. Operating margins for this segment improved to 44% in 2024, up from 41% in 2023.

The Institutional Investors segment, which offers outsourced chief investment officer (OCIO) solutions to retirement plan sponsors and other institutional asset owners, reported a 1% revenue decrease to $285.7 million, as headwinds from defined benefit plan terminations were largely offset by new OCIO platform clients and market appreciation. This segment accounted for 13% of SEI's total revenues. Despite the revenue decrease, operating margins for this segment improved to 46% in 2024, up from 43% in 2023.

The Investments in New Businesses segment, which focuses on providing investment management solutions to ultra-high-net-worth families and developing new technologies, saw a 15% revenue increase to $60.2 million in 2024, representing 3% of SEI's total revenues. This segment reported an operating loss of $14.5 million in 2024, an improvement from the $18.5 million loss in 2023.

Financials

SEI's financial performance has been consistently strong, with the company reporting steady revenue and earnings growth over the past several years. In 2024, the company reported total revenues of $2.13 billion, an 11% increase from the previous year. Net income for the year reached $581.2 million, a 26% year-over-year increase, and the company generated $622.3 million in operating cash flow. Annual free cash flow for 2024 was $565.8 million.

For the most recent quarter (Q4 2024), SEI reported revenue of $557.2 million, a 14.9% increase year-over-year, driven by growth across all business segments. Net income for the quarter was $155.8 million, a 29% increase year-over-year, primarily due to higher revenues and operating leverage. The company reported earnings per share (EPS) of $1.19 for Q4 2024, representing a 31% increase from the prior year. For the full year 2024, SEI reported EPS of $4.41, growing 27% versus 2023.

SEI's net sales events in Q4 2024 were $38 million, with $28 million in net recurring revenue. For the full year 2024, net sales events reached nearly $130 million, with nearly $100 million recurring, representing nearly 60% growth from 2023 and almost double 2022.

The financial services industry has seen steady growth, with the company reporting a compound annual growth rate (CAGR) of 5.2% in revenues over the last five years. Additionally, the company's total assets under management, advisement and administration have reported a CAGR of 8.2% over the same period.

While SEI has a global presence, with operations and clients in the United States, United Kingdom, Ireland, Canada, continental Europe, India, and South Africa, the company does not provide a detailed breakdown of revenue by geographic region.

Liquidity

The company's balance sheet remains healthy, with a strong cash position of $839.9 million as of December 31, 2024, and no long-term debt. SEI's return on equity (ROE) and return on assets (ROA) for the year were 25.5% and 21.6%, respectively, reflecting the company's efficient deployment of capital and effective asset management.

SEI's debt-to-equity ratio stands at 0.01, indicating a very low level of leverage. The company has a $325 million five-year revolving credit facility, of which $320.1 million was available as of January 31, 2025. SEI's current ratio and quick ratio are both 4.08, demonstrating strong short-term liquidity.

Human Capital

SEI has a talented workforce of approximately 5,070 full-time and 32 part-time employees, who are critical to the company's ability to serve its clients globally. The company's success relies heavily on its ability to attract, retain, and develop skilled professionals across various disciplines within the financial services and technology sectors.

Regulatory Considerations

SEI and its regulated subsidiaries are subject to extensive legislation, regulation, and supervision in the jurisdictions in which they operate. The company's operations are continuously monitored by various regulatory authorities, and it must comply with an evolving regulatory landscape, which can have a significant impact on its operations and financial performance. Navigating these complex regulatory requirements remains an ongoing challenge for SEI and requires significant resources to ensure compliance across its global operations.

Risks and Challenges

While SEI has demonstrated its resilience and adaptability, the company faces several risks and challenges inherent to the financial services industry. These include:

1. Sensitivity to Capital Market Fluctuations: As a significant portion of SEI's revenues are derived from assets under management and administration, the company's performance is susceptible to changes in capital market conditions, which can impact the value of client assets.

2. Regulatory Compliance: SEI operates in a highly regulated industry, with its subsidiaries subject to oversight by various governmental and self-regulatory authorities. Navigating the evolving regulatory landscape and ensuring compliance can present ongoing challenges.

3. Competitive Landscape: The financial technology and investment management industries are highly competitive, with SEI facing competition from a diverse array of players, including traditional financial institutions, fintech firms, and global asset management companies.

4. Cybersecurity and Data Privacy: As a technology-driven company, SEI is exposed to the risks of cybersecurity threats and data breaches, which can have significant reputational and financial implications.

5. Reliance on Key Partnerships and Third-Party Providers: SEI's operations rely on the performance and availability of various third-party service providers, such as technology vendors and investment managers. Disruptions or failures within these partnerships can impact SEI's ability to deliver services to its clients.

Outlook and Conclusion

Looking ahead, SEI is well-positioned to navigate the evolving market dynamics and continue its growth trajectory. The company's focus on technology, operations, and investment management solutions has proven to be a compelling value proposition for its diverse client base. SEI's strategic investments in areas like alternative investments, global expansion, and technological innovation are expected to drive future growth and solidify the company's position as a leading provider of financial services solutions.

While SEI did not provide explicit forward guidance for 2025, the company expressed confidence in its current momentum and sales pipeline. Management stated that growth drivers are broad-based, with every business unit realizing revenue growth, operating profit growth, and margin growth relative to the fourth quarter of the previous year. SEI remains focused on allocating capital to the strongest growth opportunities and plans to continue investing in infrastructure, scale, client experience, people, and global regulatory/compliance capabilities.

The company anticipates that the benefit from its integrated cash program will moderate during 2025 as clients explore alternative cash options and as short-term interest rates decrease. Additionally, SEI expects some near-term margin pressure as they make investments to onboard new business. However, management remains confident in their ability to continue margin expansion over the long term.

Despite the challenges posed by market volatility, regulatory changes, and competitive pressures, SEI's strong financial position, diversified business model, and experienced management team suggest that the company is equipped to adapt and thrive in the years to come. As the financial services industry continues to evolve, SEI Investments Company remains a resilient and innovative player, well-equipped to support the needs of its clients and create long-term value for its shareholders.