SEI Investments Company Q4 FY2025 earnings call

• Ryan Hicke noted SEI had an exceptional Q4, with highest ever quarterly earnings, broad-based growth across segments, record sales events ($44 million total, $28 million in private banking), and progress with Stratos partnership. He highlighted future investment in ETFs, SMAs, models, and alternative products, and evolving IMS operating model.
• Sean Denham discussed EPS, segment performances, margins, noting consolidated margins were impacted by severance and M&A costs but improved excluding these. He also covered sales events, asset performance, and capital allocation, including share repurchases and Stratos acquisition financing.

Private banking had $28 million in net sales events. IMS had net sales events of $20 million, with over two-thirds from U.S.-based alternative managers. Asset management segments saw sequential growth driven by market appreciation and adviser flows offsetting institutional client losses and mutual fund outflows. The integrated cash program contributed $21 billion to revenue in Q4, matching prior periods. Private banking revenue benefited from recent professional services wins with quicker revenue conversion and margin accretion. IMS benefited from a $3 million revenue accrual true-up, with revenue and margins increasing meaningfully excluding this benefit. Asset management segments had sequential growth due to market appreciation and adviser flows.

SEI does not provide earnings guidance. However, factors to consider include seasonality in performance fees (LSV fees highest in Q4, lowest in Q1), annual compensation increases effective January 1, accelerated investments leading to higher depreciation/amortization in Q1, and a targeted workforce reduction in December to support efficient operating model.

• Variable quarterly sales results due to large professional services engagements.
• Impact of one-time items (severance, M&A fees) on earnings.
• Integration challenges with the Stratos partnership.

Q: More than two-thirds of sales events came from Alts in Q4. Color on new wins vs expanding relationships; Ryan on April earnings visibility.

A: Phil McCabe said it was a combination of new business and cross-sales globally, with pipeline strong and larger wins to be covered in Q1 results. Ryan mentioned positive visibility on IMS opportunities with large organizations leading to potential updates in April.

Q: Fairly wide gap between net recurring and nonrecurring sales events. Discuss drivers.

A: Sanjay Sharma explained professional services are in two buckets: early advisory engagement with prospects/clients and influencing strategy, reflecting in Q4 results.

Q: On Private Bank segment, margin step up and near-term outlook.

A: Phil McCabe said margins in private banking have been steadily increasing over recent quarters and expect to stay in a high teens range with upside potential if professional services sales are strong.

Q: How much were underlying expenses down from workforce reductions, run rate impact by segment.

A: Sean Denham said the reduction in compensation related to RIF roughly matches annual compensation increases, so run rate impact is flattish.

Q: IMS margin, run rate.

A: Phil McCabe said IMS margin was impacted by a $5 million true-up, but excluding that, had 5% QoQ growth. Sean Denham mentioned Q1 opportunities and continued hiring in anticipation of growth.

Q: On Stratos, run rate impact and resegmentation timeline.

A: Sean Denham said Q4 Stratos had ~$5 million revenue and under $1 million operating income, with more info in Q1 on full quarter consolidation.

Q: Stratos go-forward strategy, acquisitions during integration.

A: Sean Denham said acquisitions planned as part of Stratos strategy continued, with early January acquisitions of additional entities.

Q: Revenue recognition impact of big sales events.

A: Ryan Hicke clarified the two big private bank wins are recurring, with professional services extensions from existing clients and others having spread revenue recognition over time.

Q: Professional services backlog timeline.

A: Sanjay Sharma said professional services projects run over 12-18 months, spreading revenue recognition accordingly.

Q: UK institutional client losses, strategic importance.

A: Michael Lane said UK institutional business is a fraction but important, with changes in leadership and operating model underway to grow the business