Executive Summary / Key Takeaways

• Accelerated Growth Momentum: SEI Investments Company is demonstrating robust growth, marked by record net sales events exceeding $100 million year-to-date through Q3 2025, and an all-time high EPS of $1.30 in Q3 2025 (excluding one-time items), driven by an "enterprise-first mindset" and strong demand for outsourcing solutions across its segments.
• Technological Differentiators and Strategic Investments: The company's proprietary platforms like the SEI Wealth Platform (SWP), SEI Scope, and SEI Sphere, coupled with strategic acquisitions like LifeYield and early adoption of AI and tokenization, provide a competitive edge in efficiency, scalability, and client experience, underpinning its long-term growth strategy.
• Expanding Global Footprint and Niche Leadership: SEI is solidifying its leadership in alternative asset management, particularly private credit, and expanding its international presence, evidenced by record performance from its international team and significant client wins in Luxembourg and the UK.
• Fortress Balance Sheet and Disciplined Capital Allocation: With $793 million in cash and no net debt as of Q3 2025, SEI maintains significant liquidity. The company is committed to returning 90-100% of free cash flow to shareholders primarily through share repurchases, while strategically funding acquisitions like Stratos Wealth Holdings.
• Outlook and Key Considerations: Management anticipates continued strong margins, though near-term investments may cause slight pressure. The Stratos acquisition, expected to close in late 2025 or early 2026, is poised to significantly expand SEI's reach in the financial advisory sector, while the company actively addresses regulatory scrutiny and market-related headwinds in certain segments.

A New Era of Growth: SEI's Strategic Evolution in Financial Services

SEI Investments Company, founded in 1968, has evolved into a leading global provider of financial technology, operations, and asset management services. The company offers a comprehensive suite of solutions, including investment processing, operations, and management platforms for wealth managers, investment managers, asset owners, and institutional and personal wealth clients. This extensive offering positions SEI as a critical partner in a financial services industry increasingly driven by the demand for outsourced solutions and advanced technology.

SEI's overarching strategy is centered on a fundamental reshaping of its operating model, deepening client engagement, strengthening its talent base, and sharpening its strategic vision. This "enterprise-first mindset" aims to break down internal silos, enabling the company to scale across segments and capture greater wallet share from its diverse client base. The company is strategically allocating capital to high-growth opportunities, expanding its global footprint, and making targeted investments in technology, automation, and talent. This approach is designed to position SEI as a strategic partner rather than merely a vendor, a shift that management believes is crucial for long-term success.

The broader financial services landscape is undergoing significant transformation, characterized by surging demand for outsourcing, particularly from alternative investment managers, banks, and large Registered Investment Advisors (RIAs) who are rethinking their operational models. The industry is also witnessing a convergence between private and public markets, and a growing emphasis on technology-integrated services, partly fueled by the broader AI and data center boom. These trends create a fertile ground for SEI's specialized offerings.

Technological Leadership: The Engine of SEI's Competitive Moat

At the core of SEI's value proposition and competitive advantage lies its robust and continuously evolving technology infrastructure. The company's proprietary platforms are designed to deliver efficiency, scalability, and an enhanced client experience.

The SEI Wealth Platform (SWP) is a foundational investment processing platform for wealth managers, offering a comprehensive suite of services from investment advisory and client relationship management to administrative and accounting functions. As of September 30, 2025, the net book value of SWP stood at $197.528 million, with a weighted average remaining life of 7.70 years, reflecting ongoing significant enhancements. For the nine months ended September 30, 2025, amortization expense for SWP was $21.602 million. These continuous investments ensure the platform remains at the forefront of industry capabilities, providing tangible benefits such as streamlined operations and reduced manual data entry for clients.

In the Investment Managers segment, the new SEI Scope platform was placed into service during Q3 2025, with a net book value of $38.031 million and an estimated useful life of 7 years. Amortization expense for SEI Scope was $1.100 million for the nine months ended September 30, 2025. This platform is designed to further enhance SEI's service offerings and operational capabilities, particularly for alternative and traditional asset managers. Additionally, the Archway Platform provides hosted technology services for family offices and financial institutions, integrating investment, operations, accounting, and client reporting. The SEI Novus portfolio intelligence tool offers institutional investors advanced data management, performance measurement, reporting, and risk analytics.

SEI is also strategically expanding its technological capabilities through acquisitions and new initiatives. The December 2024 acquisition of LifeYield, LLC aims to integrate tax-smart technology to deliver the industry's first fully bundled Unified Managed Household (UMH) solution, enhancing SEI's offering for sophisticated advisors. Furthermore, SEI is in the "early innings" of adopting AI and tokenization, applying AI to internal workflows and advancing tokenization pilots with partners. While near-term focus is on use case validation and disciplined rollout, these initiatives are expected to significantly support efficiency and scalability over time.

The company's commitment to technological innovation is evident in its R&D spending, with $22.828 million capitalized in software development costs for the nine months ended September 30, 2025, including $14.510 million for SWP enhancements and $8.318 million for SEI Scope. This continuous investment in proprietary technology provides SEI with a strong competitive moat, enabling it to offer superior operational execution, tailored solutions, and a differentiated client experience. This technological edge translates into improved pricing power, stronger client retention, and the ability to capture market share in segments demanding advanced, integrated solutions.

Strategic Momentum and Robust Performance Across Segments

SEI's strategic transformation is yielding tangible results, reflected in its strong financial performance and significant operational achievements across its business segments. For the nine months ended September 30, 2025, total revenues reached $1.69 billion, an 8% increase year-over-year, while net income attributable to SEI surged 28% to $542.804 million. Diluted earnings per share for the same period increased 32% to $4.25. In Q3 2025 alone, SEI delivered an EPS of $1.30, an all-time high excluding one-time items, on total revenues of $578.511 million, up 8% year-over-year.

The Investment Managers segment is a significant growth engine, posting a record sales quarter in Q3 2025. This performance was driven by surging demand for outsourcing and client expansions, with approximately two-thirds of sales events tied to existing client growth and two-thirds originating from alternative managers. Revenue for this segment increased 12% in Q3 2025 and 11% for the nine months ended September 30, 2025, reaching $207.050 million and $594.165 million, respectively. Operating profit also saw double-digit growth, with margins expanding to 39%. This robust growth is fueled by increased administration fees, collective investment trusts, and positive cash flows into alternative and traditional funds. SEI is a global leader in private credit, experiencing strong traction across private equity, real estate, and infrastructure. The international team within this segment achieved its best quarter and year, attracting larger clients and expanding SEI's global operational footprint in regions like Luxembourg, where SEI is ranked sixth out of 164 fund administrators based on alternative assets under administration.

The Private Banks segment also demonstrated solid momentum, with revenues increasing 4% in Q3 2025 to $143.994 million and 5% for the nine months ended September 30, 2025, to $423.157 million. This growth was primarily driven by new SEI Wealth Platform (SWP) client conversions, increased transaction volumes, and market appreciation. A notable win in Q3 2025 involved a $13 million partnership with a leading super-regional U.S. bank for a comprehensive transformation initiative, encompassing technology, outsourced operations, and professional services. While the segment experienced a notable contract loss at the end of September 2025 due to a client's strategic shift, management views this as a "one-off event" with modest financial impact, confident that new wins will more than compensate. SEI's strategy in this segment focuses on deep client engagement, expanding services like SEI Data Cloud and SEI Professional Services, and maintaining a high client retention rate of approximately 1%.

The Investment Advisors segment posted the highest year-over-year revenue growth among all segments in Q3 2025, driven by market appreciation, the integrated cash program, and improving underlying business momentum. Revenues increased 16% in Q3 2025 to $147.465 million and 14% for the nine months ended September 30, 2025, to $421.234 million. Operating profit grew 21% and 18% for the respective periods, with margins reaching 46%. The SEI Integrated Cash Program, expanded in late 2024, contributed significantly, adding $10 million to operating profit in Q3 2025 compared to the prior year. Efforts to enhance the SEI ecosystem for RIAs, including the acquisition of LifeYield and the launch of the SEI Access ALT platform, are yielding results faster than anticipated.

The Institutional Investors segment saw a significant multibillion-dollar fixed income mandate win for a state government client in Q3 2025, reflecting an evolved approach to delivering targeted solutions. While revenue for the nine months ended September 30, 2025, decreased 2% to $209.675 million, operating profit increased 1% to $99.880 million, with margins at 48%. The team has made substantial efforts to offset structural headwinds from corporate defined benefit (DB) plan terminations, which have historically impacted the segment.

SEI's Investments in New Businesses segment experienced a revenue decrease due to the divestiture of the Family Office Services business in Q2 2025, which generated a $94.412 million gain. This was partially offset by increased revenues from SEI Sphere network and data protection services and SEI Private Wealth Management.

Financial Strength and Strategic Capital Deployment

SEI maintains a robust financial position, characterized by a "fortress balance sheet" and significant liquidity. As of September 30, 2025, the company held $792.822 million in cash and cash equivalents and no net debt. This strong liquidity provides ample capacity for strategic investments and capital returns to shareholders.

The company's capital allocation strategy prioritizes returning 90% to 100% of free cash flow to shareholders, primarily through share repurchases. In Q3 2025, SEI repurchased $142 million of common stock, and for the trailing twelve months, total repurchases amounted to $775 million, representing over 7% of shares outstanding. On October 24, 2025, the Board of Directors approved an additional $650 million increase to the stock repurchase program, bringing the total available authorization to approximately $773.2 million. This aggressive buyback program underscores management's belief that the stock is undervalued and is a key driver of EPS growth.

Strategic acquisitions are also a component of capital deployment. The pending acquisition of 57.50% of Stratos Wealth Holdings for approximately $527 million in cash is expected to close in late 2025 or early 2026. SEI plans to fund the majority of this acquisition with balance sheet cash, with an anticipation of drawing down cash levels to a run rate of around $300 million. This investment is expected to significantly expand SEI's reach and capabilities within the financial advisory sector. Additionally, SEI made a $50 million anchor investment in the LSV Global Equity Market Neutral Fund, LP in Q3 2025, which contributed $1.5 million to Q3 results before tax.

Competitive Landscape and Differentiated Positioning

SEI operates in a highly competitive financial services industry, facing direct competition from large, diversified players like BlackRock (BLK), State Street Corporation , Invesco Ltd. , and Franklin Resources , as well as indirect competition from fintech platforms and AI-driven investment apps.

Compared to BlackRock (BLK), a global leader in asset management known for its Aladdin platform, SEI differentiates itself through customized wealth and retirement solutions for niche clients, such as private banks and not-for-profit organizations. While BlackRock leads in technological scale and innovation speed, SEI's strength lies in operational execution for mid-sized clients and its ability to provide tailored, integrated solutions. SEI's proprietary technology, like SWP, offers efficient, client-specific implementations, potentially leading to stronger customer loyalty and recurring revenue, which can counter BlackRock's broader market positioning.

Against State Street Corporation (STT), a major provider of investment servicing and custody, SEI's offerings emphasize integrated wealth management solutions through its subsidiaries, while State Street focuses on custody and servicing for large institutions. SEI's adaptability for niche markets and its end-to-end solutions for specific client types contrast with State Street's established infrastructure for high-volume transactions. SEI's ability to invest in differentiating front-office capabilities, client experience, and portfolio management tools on platforms like SWP provides a "bigger arsenal of capabilities" that resonates with clients.

SEI also competes with Invesco Ltd. (IVZ) and Franklin Resources (BEN) in fund management and advisory. While Invesco emphasizes retail-oriented products and Franklin focuses on fund-specific strategies, SEI offers more diversified outsourcing solutions and an integrated approach for wealth management organizations. SEI's focus on delivery certainty and excellence in client onboarding, as highlighted by management, is a key differentiator that builds credibility and fosters long-term partnerships.

SEI's competitive advantages stem from its strong brand in niche markets, proprietary technology for investment processing, and unique distribution channels. The company's "enterprise mindset" allows it to offer a comprehensive suite of solutions, appealing to firms seeking to consolidate partners. This positioning has enabled SEI to maintain a premium price point and service level while winning in targeted segments. The company's 1% client attrition rate in private banking is a testament to its strong client engagement and strategic partner approach.

Outlook and Growth Trajectory

SEI's management expresses confidence in the company's ability to deliver sustained long-term growth, driven by its strategic transformation and strong sales pipelines. The initial closing of the Stratos Wealth Holdings acquisition, expected in late 2025 or early 2026, is a significant strategic move that will expand SEI's footprint in the independent advisory space. This partnership is expected to integrate Stratos' client-centric model with SEI's technology, custody, and investment management capabilities, creating a powerful platform for advisors.

Management anticipates that free cash flow on a forward-looking twelve-month run rate will be returned 90% to 100% to shareholders through dividends or buybacks. While the benefit from the integrated cash program is expected to moderate in 2025 to a normalized run rate of $2 billion to $2.1 billion due to anticipated decreases in short-term interest rates, the company's diversified revenue streams are expected to dampen this impact.

For the Investment Managers segment, while margins were strong in Q3 2025, management expects them to remain "relatively flat, if not a downtick" into 2026 due to continued investments in the platform and hiring ahead of future growth. This reflects a strategic decision to prioritize long-term growth and client execution over short-term margin maximization within individual units. William Blair has increased its FY2025 EPS estimate for SEI Investments to $5.58 per share, up from $5.51, reflecting a positive outlook.

Risks and Challenges

Despite the positive momentum, SEI faces several risks and challenges. The company operates in a complex and evolving global regulatory environment, with increased scrutiny and potential for significant compliance costs and reputational impact. Its UK subsidiary, SEI Investments Europe Limited (SIEL), is currently undergoing a supervisory review by the Financial Conduct Authority (FCA) and has voluntarily applied for a Voluntary Requirement (VREQ), restricting new client agreements or product launches without prior consent. While SIEL management believes remediation actions will address these concerns, the direct and indirect costs of compliance and potential enforcement actions remain a risk.

Market volatility and fluctuations in interest rates continue to pose risks, impacting asset valuations and the profitability of certain programs like the integrated cash program. The Institutional Investors segment also faces persistent headwinds in the defined benefit space through 2025, as elevated interest rates make annuitization advantageous for plans, leading to client losses. While SEI's diversified portfolio is designed to dampen the impact of market uncertainty, it is not immune.

Integration risks associated with strategic acquisitions, such as Stratos Wealth Holdings and LifeYield, also exist. Ensuring seamless integration and realizing expected synergies are critical for these investments to contribute to long-term growth. Furthermore, the company faces ongoing operational risks related to software defects, data and cybersecurity threats, and disruptions of services, which are inherent in the financial technology sector.

Conclusion

SEI Investments Company is in a period of dynamic transformation, successfully leveraging its "enterprise-first mindset" and technological prowess to drive significant growth and expand its market presence. The company's record sales events, robust financial performance, and strategic investments in platforms like SWP and SEI Scope, coupled with its early adoption of AI and tokenization, underscore a compelling investment thesis centered on technological leadership and operational excellence. SEI's ability to secure major client wins in the Investment Managers and Private Banks segments, alongside its strategic partnership with Stratos, positions it favorably to capitalize on the increasing demand for outsourcing and integrated wealth management solutions.

While regulatory scrutiny and market headwinds in certain areas present ongoing challenges, SEI's strong balance sheet, disciplined capital allocation strategy, and commitment to client satisfaction provide a solid foundation. The company's focus on continuous innovation and its strategic positioning as a comprehensive solutions provider, rather than merely a vendor, are critical factors that should enable it to sustain its growth trajectory and deliver long-term value for shareholders. Investors should monitor the successful integration of its recent acquisitions, the continued expansion of its global footprint, and the effective management of its technological roadmap as key indicators of its enduring success.