SEI Investments Company (SEIC) is a leading provider of comprehensive platforms, services, and infrastructure encompassing technology, operational, and investment management solutions for wealth managers, financial advisors, investment managers, family offices, institutional and private investors. The company's diverse offerings enable its clients to create and manage wealth effectively, leveraging SEI's expertise and innovative capabilities.

In the latest fiscal year, SEI reported annual revenue of $1,921,600,000 and net income of $462,258,000, reflecting the company's ability to consistently deliver strong financial performance. Additionally, SEI generated annual operating cash flow of $447,030,000 and free cash flow of $388,237,000, underscoring its robust liquidity position and efficient capital allocation.

For the second quarter of 2024, SEI reported revenue of $518,986,000, a 6% increase compared to the prior-year period. Net income for the quarter was $139,120,000, up 17% year-over-year. The company's diluted earnings per share for the quarter stood at $1.05, an 18% increase from the $0.89 reported in the same period of 2023.

Business Overview

SEI's comprehensive platforms and solutions are organized into five reportable business segments: Private Banks, Investment Advisors, Institutional Investors, Investment Managers, and Investments in New Businesses.

Private Banks

The Private Banks segment provides outsourced investment processing and investment management platforms to banks, trust institutions, independent wealth advisors, and financial advisors worldwide. This segment generated revenue of $262,538,000 in the first half of 2024, a 4% increase compared to the same period in 2023. Operating profit for the segment was $37,674,000, up 41% year-over-year, driven by increased investment processing fees from new client conversions and growth from existing clients, as well as higher investment management fees from international clients.

Investment Advisors

The Investment Advisors segment provides investment management and investment processing platforms to affluent investors through a network of independent registered investment advisors, financial planners, and other investment professionals in the United States. Revenue for this segment was $243,305,000 in the first half of 2024, a 13% increase from the prior-year period. Operating profit grew 21% to $107,394,000, primarily due to increased fees from separately managed account programs and the launch of the SEI Integrated Cash Program, which generated $19.7 million in revenue during the first six months of 2024.

Institutional Investors

The Institutional Investors segment provides Outsourced Chief Investment Officer (OCIO) solutions, including investment management and administrative outsourcing platforms, to retirement plan sponsors, healthcare systems, higher education institutions, and other not-for-profit organizations worldwide. Revenue for this segment was $143,285,000 in the first half of 2024, a 4% decrease from the same period in 2023, due to client losses. However, operating profit increased 3% to $64,750,000, driven by decreased direct expenses and a one-time operational charge in the prior-year period.

Investment Managers

The Investment Managers segment provides investment operations outsourcing platforms to fund companies, banking institutions, traditional and non-traditional investment managers worldwide. Revenue for this segment grew 12% to $352,521,000 in the first half of 2024, while operating profit increased 21% to $131,684,000. The segment benefited from increased revenues from additional services provided to alternative fund clients and positive cash flows into new and existing funds.

Investments in New Businesses

The Investments in New Businesses segment focuses on providing investment management solutions to ultra-high-net-worth families, hosted technology services to family offices and financial institutions, and developing network and data protection services. Revenue for this segment increased 13% to $28,916,000 in the first half of 2024, with a modest improvement in profitability.

Geographic Breakdown

SEI's operations span across multiple regions, with a significant presence in the United States, the United Kingdom, Canada, Ireland, and Luxembourg. In the first half of 2024, the United States accounted for 85.5% of the company's total revenue, the United Kingdom contributed 7.8%, Canada generated 2.2%, Ireland represented 3.2%, and Luxembourg made up 1.3% of total revenue.

Liquidity

As of June 30, 2024, SEI had cash and cash equivalents of $768,291,000 and no outstanding debt, providing the company with ample liquidity to fund its operations and strategic initiatives. The company's credit facility, which expires in April 2026, provides an additional $320,134,000 in available borrowing capacity as of July 17, 2024.

During the first half of 2024, SEI generated $227,030,000 in net cash from operating activities. The company utilized $163,774,000 to repurchase 2,456,000 shares of its common stock, underscoring its commitment to returning capital to shareholders.

Risks and Challenges

While SEI has demonstrated consistent growth and operational excellence, the company faces several risks and challenges that investors should consider. These include changes in capital markets and the value of financial instruments, product development risks, the potential failure of third-party service providers, pricing pressure from competition and disruptive technologies, the impact of the performance of its unconsolidated affiliate LSV Asset Management, industry consolidation, and regulatory changes affecting the financial services industry.

Outlook

SEI's management remains steadfast in its conviction about the company's performance for 2024 and beyond. The foundation of the business is strong, with the core segments delivering solid results. The company is also leaning into future growth initiatives, such as expanding its presence in the RIA market, capitalizing on the convergence of public and private markets, and leveraging its expertise in alternative investments.

With a formidable balance sheet, unmatched capabilities, and a laser-focused strategy, SEI is well-positioned to drive growth and continue delivering value to its shareholders. The company's upcoming Investor Day on November 7, 2024, will provide further insights into its strategic priorities and long-term outlook.

Conclusion

Overall, SEI Investments Company's consistent financial performance, diversified business model, and strategic initiatives position the company for continued success in the evolving wealth management and investment services landscape.