SEI Investments Company - 10-Q Summary
Business Context and Reporting Period
This filing is a Quarterly Report on Form 10-Q for SEI Investments Company for the period ended September 30, 2000. The Company operates four primary business lines: Technology Services, Asset Management, Mutual Fund Services, and Investments in New Business. As of September 30, 2000, there were 53,331,949 shares of common stock outstanding.
Key Financial Metrics
Three Months Ended September 30, 2000 (vs. 1999):
- Revenues: $155.6 million (up 33% from $117.2 million)
- Net Income: $27.5 million (up 55% from $17.7 million)
- Diluted EPS: $0.48 (up from $0.31)
- Operating Margin: 26.4% (up from 23.2%)
Nine Months Ended September 30, 2000 (vs. 1999):
- Revenues: $440.8 million (up 32% from $333.1 million)
- Net Income: $70.4 million (up 43% from $49.1 million)
- Diluted EPS: $1.24 (up from $0.86)
- Operating Margin: 24.0% (up from 22.6%)
Liquidity and Balance Sheet:
- Cash and Cash Equivalents: $107.1 million (up from $73.2 million at year-end 1999)
- Total Assets: $327.1 million
- Total Liabilities: $186.6 million
- Long-Term Debt: $27.0 million (excluding $2.0 million current portion)
- Shareholders' Equity: $140.5 million
- Operating Cash Flow (9 months): $83.5 million
Material Changes vs. Prior Period
Revenue and earnings growth were driven by significant increases in assets under management (AUM) and administration across core segments.
- Asset Management: Revenues surged 60% in Q3 and 62% for the nine months, driven by a 57% increase in average AUM to $37.4 billion in Q3. Operating income increased 118% in Q3.
- Technology Services: Revenues grew 23% in Q3 due to increased recurring processing fees from new clients and cross-selling to existing clients. Operating income rose 24%.
- Mutual Fund Services: Revenues increased 14% in Q3, fueled by a 31% rise in client proprietary assets under administration to $195.7 billion.
- Investments in New Business: Revenues grew 37% in Q3 due to international expansion (Europe, Asia, Latin America), though the segment reported an operating loss of $5.2 million due to accelerated investment in new markets.
- Stock Split: A three-for-one stock split was effected in June 2000; all share and per-share data have been restated.
Guidance, Outlook, and Risks
Management Commentary: Management attributes growth to market acceptance of services, economies of scale, and successful cross-selling. They anticipate continued growth through new product delivery and infrastructure utilization.
Outlook: The Company expects to incur losses in the "Investments in New Business" segment for the remainder of 2000 and into 2001 due to significant investments in global expansion, including a new London office and a joint venture in France.
Risks and Contingencies:
- Market Conditions: Continued consolidation in the banking industry or prolonged unfavorable changes in financial securities markets could impede growth.
- Foreign Currency: Approximately 7% of revenues are from foreign operations; the Company does not hedge foreign currency risk.
- Interest Rate Risk: Exposure is limited to the investment portfolio and fixed-rate long-term debt.
Unusual Items: On July 31, 2000, the Company sold its Canadian performance measurement business to Royal Trust Corporation of Canada for a minimal, immaterial gain.
Investor Verification Checklist
- Verify the sustainability of the 57% year-over-year growth in Assets Under Management (AUM) in the Asset Management segment.
- Monitor the timeline for profitability in the "Investments in New Business" segment, given the expectation of continued losses through 2001.
- Review the impact of banking industry consolidation on the Technology Services and Mutual Fund Services segments.
- Confirm the status of the $50 million line of credit and the $20 million planned corporate campus expansion.
- Assess the effect of the stock repurchase program, which utilized $14.9 million in the first nine months of 2000.