SEI Investments Company

Ladies and gentlemen, thank you for your patience and holding, and welcome to the SEI fourth quarter of 2020 earnings call. At this time, all participant phone lines are in a listen-only mode, and later there will be opportunities for your questions. If you'd like to queue up at any point during the presentation, feel free to press 1 followed by 0. Just a brief reminder, today's conference is being recorded. I'm now happy to turn the conference over to Chairman and CEO Al West.

Thank you very much, and welcome, everyone. All of our segment leaders are here with me on the call, as well as Dennis McGonigal, SEI CFO, and Kathy Heilig, SEI's controller. I'll start by recapping fourth quarter and full year 2020. I'll then turn it over to Dennis to cover LSV and the investment in a new business segment. After that, each business segment leader will comment on the results of their segments. Then finally, Kathy Hiley will provide you with some important company-wide statistics. As usual, we'll field questions at the end of each report. So now let's turn our attention to the financial reports of the fourth quarter of 2020. Fourth quarter earnings, excuse me, revenue grew 5% from a year ago. Fourth quarter earnings decreased by 2% from a year ago. In fourth quarter, EPS of 86 cents grew by 2% from the 84 cents reported in 2019. Fourth quarter asset balances grew by $27 billion, while LSV's balances grew by $11.6 billion. During the quarter, we repurchased 1.8 million shares of SEI stock at a price of $54.36 per share. That translates into $99 million of stock repurchases. During the entire year, in the form of repurchases and dividends, we passed $529 million of capital to shareholders. This quarter, we also continued our investment into growth-generating initiatives. The newest effort is One SEI, which is a large part of our growth strategy. As you will recall, One SEI leverages existing and new SEI platforms by making them accessible to all types of clients, all adjacent markets, and all other platforms. Turning to revenue production, fourth quarter sales events net of client losses total $8.8 million and are expected to generate net annualized recurring revenues of $4.9 million. And we are not discouraged with this quarter sales results. They do not reflect the sales activities occurring throughout the company in all of our target markets. We treat results as a timing issue which will correct itself. A unit head will speak to their specific sales results and their opportunities. And to grow and prosper in the future, we know that things will never be the same. So we have been very busy adopting to new mental models and realities, such as remotely distributed workforce. We have a lot of positive momentum moving into 2021. We have strong backlog of sales and conversions and a number of key prospects late in the sales cycle. We also have made progress in strategically repositioning our asset management business segments. We are poised and ready to capture the opportunities inherent in significant change. And that concludes my formal remarks, so I will turn it over to Dennis to give you an update on LSV and the investment in our new business segment. After that, all segment heads will update their results in their segments.

Dennis? Thanks, Al. Good afternoon, everyone. I will cover the fourth quarter results for the Investments in New Business segment and discuss the results of LSB asset management. During the fourth quarter of 2020, the Investments in New Business segment activities consisted of the operation of our private wealth management business, our IT services business opportunity, the modularization of larger technology platforms, to deliver on our one SEI strategy and other investments. During the quarter, the investments in the business segment incurred a loss of $11.4 million, which compared to a loss of $9.8 million during the third quarter of 2020. This increased loss reflects an increase in investments specifically related to our one SEI strategy, approximately $8.7 million is tied to that effort. We also recorded an adjustment to the valuation of our contingent obligation for the Huntington Steel acquisition, increasing expenses by approximately $900,000. Regarding LSV, our 39% ownership contributed $30.6 million in income to SEI for the fourth quarter of 2020. This compares to a contribution of $39.1 million in income for the fourth quarter of 2019. Assets during the period grew approximately $11.6 billion. LSB experienced net negative cash flow during the quarter of approximately $4.6 billion, offsetting market appreciation of approximately $16.2 billion. Revenue at LSB was approximately $102.1 million for the quarter with no performance fees. Finally, for the company, our effective tax rate for the quarter was 19.6%. I'll now be happy to take questions.