• Sales Events for Q4 2024: $38 million, with $28 million net recurring.
• Earnings Per Share (EPS) for Q4 2024: $1.19, a 31% increase from the prior year.
• Full Year EPS for 2024: $4.41, growing 27% versus 2023.
• Net Sales Events for 2024: Nearly $130 million, with nearly $100 million recurring.
• Assets Under Management and Administration: $1.6 trillion, nearly flat with the prior quarter.
• Operating Margins: Improved relative to the prior year and prior quarter, despite a 210-basis-point negative impact from incentive and stock compensation.
• Stock Repurchases in Q4 2024: $259 million, the highest amount in SEI's history.
• Total Capital Returns to Shareholders for 2024: $620 million, nearly 6% of year-end market cap.
• Cash Balance at End of Q4 2024: $840 million, with a $325 million undrawn revolver.

• Warning! GuruFocus has detected 6 Warning Signs with SEIC.

Release Date: January 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• SEI Investments Co (NASDAQ:SEIC) reported significant growth in net sales events for the second consecutive quarter, with Q4 2024 sales events totaling $38 million, of which $28 million were net recurring.
• The company achieved an EPS of $1.19 for the quarter, representing a 31% increase from the prior year, with positive contributions from all business units.
• For the full year, SEIC's net sales events reached nearly $130 million, with almost $100 million being recurring, marking a 60% increase from 2023.
• SEIC's strategic investments in global expansion and focus on regional and community banks are yielding positive results, contributing to revenue and operating profit growth across all business units.
• The company has a strong balance sheet with no long-term debt and significant liquidity, ending the quarter with an $840 million cash balance and a $325 million undrawn revolver.

Negative Points

• SEIC's institutional business experienced asset outflows due to expected planned terminations, which is a structural headwind expected to persist through 2025.
• LSV, SEIC's actively managed global value-oriented asset manager, faced net outflows and market depreciation, impacting overall performance.
• The company noted a $0.02 headwind from increased incentive compensation and other items affecting EPS comparability, which slightly pressured margins.
• Despite strong sales events, SEIC anticipates near-term margin pressure due to upfront costs associated with onboarding new clients before revenue realization.
• The integrated cash program's growth is expected to moderate in 2025, with a projected balance of around $2 billion to $2.1 billion, down from $2.4 billion in Q4 2024.

Q & A Highlights

Q: Could you please talk about the sales environment? Net sales were strong, $38 million in the fourth quarter. What drove this growth, and how do you see the sales outlook in 2025? A: Ryan Hicke, CEO: The sales events in Q4 were a mix of new logos and growth from existing clients, both domestically and globally. We have not changed our pricing, and we remain confident in our value proposition. We are focused on meeting client expectations and delivering on time and on budget. We feel positive about our market engagement and sales pipelines for 2025.

Q: Can you elaborate on the near-term margin pressure expected from strong net sales events? How long before the associated expenses are offset by revenue? A: Sean Denham, CFO: We need to invest in costs prior to onboarding clients, which can take 6 to 18 months depending on the business. We are confident in our margins and expect continued margin expansion in 2025. We bring in expenses slightly ahead of when sales events come online, and we are making long-term investments rather than short-term decisions.

Q: How do you view the potential for bank M&A in the US over the next few years, and how is SEI positioned for this trend? A: Sanjay Sharma, EVP and Global Head of Private Banking & Wealth Management: M&A presents two opportunities: helping existing clients acquire others and convincing acquiring parties to come onto our platform. We have experience in technology transfer and onboarding, and we see this as a positive trend for SEI.

Q: Could you discuss the progress of your integrated cash program and its outlook for 2025? A: Paul Klauder, EVP, Head of SEIs Advisor Business: We ended the quarter with about $2.4 billion in the program. We expect a normalized run rate of around $2 to $2.1 billion in 2025. We have diversified options for advisers, and our net yield is about 380 basis points.

Q: Regarding alternative servicing, how significant is it within the IMS segment, and what differentiates your product? A: Phil McCabe, EVP, Head of SEI's Investment Manager Services: Alternatives account for about 70% of our revenue and are growing due to industry tailwinds. We have made investments to expand our global footprint, especially in Europe, and we are one of the largest private asset administrators in Luxembourg.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.