SEI Investments Company

Ladies and gentlemen, thank you for standing by. Welcome to the SEI third quarter 2021 earnings call. At this time, all participants are in a listen-only mode. We will conduct a question and answer session, and I'll give instructions at that time. If you should need assistance during the call, please press star, then zero. And as a reminder, this call is being recorded. I would now like to turn the conference over to our host, Chairman and CEO, Al West. Please go ahead, sir.

Thank you. Welcome, everyone. All of our segment leaders are on the call, as well as Dennis McGonigal, SEI CFO, and Kathy Heilig, SEI's controller. I'll start by recapping third quarter 2021. I'll then turn it over to Dennis to cover LSV and the investment in new business segment. After that, each business segment leader will comment on the results of their segments. And as usual, we will field questions at the end of each report. So let's now turn our attention to the financial report, the financial results of the third quarter 2021. Third quarter revenues grew 14% from a year ago. Third quarter earnings increased by 24% from a year ago. And third quarter EPS of 97 cents grew 29% from the 75 cents reported in third quarter 2020. Third quarter asset balances decreased by approximately $3.7 billion, while LSB's balance decreased by $4.8 billion. During the quarter, we repurchased 2.0 million shares of SEI stock at a price of $60.58 per share. That translates into $120 million worth of stock repurchases. Now I'd like to provide you with our situation today. One of our businesses steadily grows its revenues and profits. That's IMS. Another business, the advisor segment, has recently been executing against a new technology-driven strategy. We are experiencing strong indicators that the business has turned a corner, and we're very excited about that. Another business, private banking, is diligently working on an implementation backlog, a strong sales pipeline, and enhancing client satisfaction. Now, the fourth business is the institutional investor segment. While it faces strong headwinds in the legacy defined benefit OCIO client base, It's currently addressing other growing segments. We're also focused on building growth engines beyond our four traditional businesses. Here we are finding opportunity in markets and services adjacent to our four main engines. In the past, we have shared a couple of these innovative young businesses. First, GRC. providing global regulatory compliance services to financial service organizations throughout the world. Second, what has been renamed from SEI IT Services to SEI Sphere, Sphere's leading edge service is network and data security. Third, the private wealth management business is providing an enterprise platform to ultra high net worth families. In addition, we have made two acquisitions in October that will add additional capabilities for both our IMS and institutional business lines. Dennis, Steve, and Paul will provide more information. Next, let's turn to revenue production during the third quarter. Net sales events in private banking and investment managers were $19.4 million, of which $15.1 million are as expected to be recurring. In addition, net sales events of $6.9 million incurred in the asset management related units. These events reflect positive asset flows of advisors and institutions. In a few minutes, unit heads will provide more detail on their specific sales results and their new businesses. opportunities in their new business. To grow and prosper in the future, we know that things will never be the same. So we've been busy adopting new mental models and realities. One such new reality is a remotely distributed workforce. We have been planning how the workforce will work in the future, and today we're beginning to act on our plans. Fortunately, we have sustained the positive momentum created during the first half of 2021. We have a strong backlog of sales and implementations and a number of key prospects late in the sales cycle. In addition, we have been successful in repositioning our asset management related business segments. In conclusion, we look forward to capturing the opportunities to inherit and significant change. And with that, I will turn it over to Dennis to give you an update of LSV and the investment in our new business segment. Dennis.

Thanks, Al. Good afternoon, everyone. I'll cover the third quarter results for the investments in new business segment and discuss the results of LSV asset management. During the third quarter, the investments in new business segment activities consisted of the operation of our private wealth management group, our IT services business opportunity, which Al told you we now call SEI Sphere the modularization of assets and data integration of different platforms to deliver on our one SEI strategy and other investments. During the quarter, the Investments in New Business segment incurred a loss of $8.5 million, which compared to a loss of $9.6 million during the third quarter of 2020. Approximately $6.5 million of expense during the third quarter of 2021 is tied to our one SEI effort. Regarding LSV, our approximate 38.7% ownership contributed $35 million in income to SEI for the third quarter of 2021. This compares to a contribution of $28.3 million in income for the third quarter of 2020. Assets during the quarter contract at approximately $4.8 billion. LSV experienced net negative cash flow during the quarter of approximately $3.1 billion with market depreciation of approximately $1.7 billion. Revenue at LSV was approximately $115.7 million for the quarter with $1.9 million of performance fees. As we discussed on the last quarter call and over time, our people are the key to making SEI go. Our business growth adds to our need to recruit, develop, and retain our talent in all areas, including our operational teams. During the quarter and again recently, we have taken steps to invest in our operational talent with adjustments to their compensation. We recognize their contribution to our success and the role they play in our competitiveness as a company. Regularly, we monitor the labor markets within which we compete and will make appropriate investments to keep SEI as an employer of choice. While this has an impact on overall expenses, we believe it is the right thing to do. As Al mentioned, we have recently closed on two acquisitions. The first is in the United States. We have purchased the technology assets of a company called Phenomial. These assets enhance our investment manager services offering in the areas of investor services and regulatory compliance. In addition, the talent that is now part of SEI enhances our technical team and grows our cloud computing expertise. In the UK, pending regulatory approval, we are expanding our institutional capabilities in the Master Trust solution space with the acquisition of the Atlas Master Trust. This trust will combine with the SEI Master Trust, giving us greater scale and capabilities to compete and grow. Neither of these acquisitions are financially material, although we believe they carry high strategic value. Steve and Paul will provide additional commentary when they speak to their respective segments. For the quarter, our effective tax rate was 22.3%. We have also included in our earnings release additional financial information. Please refer to our soon-to-be-filed 10Q for more information. I will now take any questions.