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spk05: Ladies and gentlemen, thank you for standing by, and welcome to the SEI third quarter 2022 earnings call. At this time, all lines are in a listen-only mode. Later, we will have a question and answer session. You can queue up at any time during today's call by pressing 1 and 0. As a reminder, today's conference is being recorded. I'd now like to turn the conference over to the head of investor relations, Lindsay Upsall. Please go ahead.
spk01: Welcome, everyone. Thank you for joining us on today's third quarter 2022 earnings call. Joining me on today's call are Ryan Higgy, SEI's chief executive officer, Dennis McGonigal, chief financial officer, and the leaders of each of our business segments, Paul Plotter, Bill McCabe, Sanjay Sharma, and Wayne Withrow. Kathy Heilig, SEI's controller, is also with us. As a reminder, we've switched up the format of our calls. Ryan will first provide a business and strategy update, and Dennis will provide an overview of the company's quarterly results, including those for each of our business segments. After our prepared remarks, we'll open up the call to questions. Before we begin, I'd like to point out that our earnings press release can be found under the investor relations section of our website at SEIC.com. This call is being webcast live, and a replay will be available on the events and webcast page of our website. We would like to remind you that during today's presentation and in our responses to your questions, we have and will make certain forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Please refer to our notices regarding forward-looking statements that appear in today's earnings release and in our filings with the Securities and Exchange Commission. We do not undertake to update any of our forward-looking statements. With that, I'll now turn the call over to CEO Ryan Hickey. Ryan?
spk10: Thanks, Lindsay. Hello, everyone, and thank you for joining us today. Over the quarter, I've continued to spend time with our employees, clients, and many of you on the call. The engagement and insight has been invaluable. Clients and prospects clearly enjoy working with SDI, and the interaction has helped me focus our energy on delivering more of what the market values to accelerate growth. After the quarter closed, but before the call, we announced the strategic alignment of our asset management businesses and related units under the leadership of Wayne Withrow. Later in my remarks, I will dive deeper into how the evolution in this organizational structure is a critical step to driving SEI's next chapter of growth. Third quarter revenues declined 3% from a year ago. Our third quarter earnings were down 55% from a year ago. Third quarter of EPS of 45 cents decreased 54% from the 97 cents recorded in the third quarter of 2021. As noted in our second quarter call, we executed on a voluntary separation program from which the majority of the financial impact would be recorded in the third quarter of 2022. The final impact was approximately $57 million or 32 cents per share to the quarter. As I stated before, this program was designed to create an opportunity for tenured SEI employees to have an option to explore their life's ambition and concurrently create space for internal mobility, fresh perspectives, diversity, and external experience. We are committed to an environment where our employees bring their best selves to SEI every day. In the quarter, we repurchased 890,000 shares of SEI stock at a price of $55.55 per share. This translates into $49.4 million of stock repurchases. Stock repurchases were down mainly because we were not in the market while we worked through the recent changes in senior executives. Net sales events totaled approximately $36 million, $30 million of which is net recurring. Dennis will go into further details on our financial results later, but this was a really solid sales quarter for SDI, and I applaud all of our teams. We need to continue to build off that positive momentum moving forward. As inflation, volatility, and other economic factors continue to place pressure on markets, we will remain vigilant, but we're going to act with conviction about how we deploy capital and make the changes necessary to grow our business. Since I stepped into the role of CEO in June, we have been strategically reviewing opportunities across our business and markets. Trends across the entire wealth management market present enormous opportunity for SEI to exploit competitive advantages and accelerate our growth, both organically and inorganically. During the quarter, we announced the alignment of our asset management businesses under Wayne Withrow. SEI's advisor business, institutional business, investment management unit, asset management distribution business, and private wealth management business will all report to Wayne. By implementing an organizational structure that aligns our business strategy across all of our asset management businesses, we bring together the breadth of our capabilities and the depth of our asset management expertise globally. This ultimately provides the complete and personalized experience that's critical to investors' financial success. I'm confident that we can more rapidly expand our footprint across both intermediary and institutional channels. While we have a new structure that creates more streamlined decision-making, the distinct market segments will continue to be run by Wayne, Paul, and Sanjay, and we will report the results of these segments accordingly. Wayne, Paul, and Sanjay are here today and available for questions later in the call. Last quarter, we also took steps to meet market demand for more advanced data integrations. As clients increasingly need real-time access to power analytics, application development, consumption of large amounts of data, and advanced reporting. To meet this growing need, we entered into a strategic partnership with Snowflake and launched the SCI Data Cloud. We currently have two SCI Wealth Platform clients deploying SCI Data Cloud, and we continue to engage with multiple clients across all SCI businesses, including our investment managers business, to adopt this solution. Turning to our lines of business, the investment manager segment had another record sales quarter, combining both new name sales events and increasing new business with existing clients. In the alternatives market, we took on a large venture capital manager that was previously operating with a major competitor. And in the traditional market, we added a significant client who utilized SEI for middle office services. Globally, we continued the expansion of both our fund administration and regulatory service offerings and added a new private equity client. We are engaging more strategically with our client base as they seek to expand their access to high net worth in the mass affluent market, especially through professional advisors. We feel that SEI is uniquely positioned to capitalize on this growing market dynamic and have begun to assemble more talent focused on this initiative. we are seeing equivalent demand from our intermediary and institutional clients for more access to alternative investment products. Turning to the investment advisors business, we had another solid and active quarter. While we don't believe our results currently reflect our potential, we are encouraged that they reflected our strategies, including the launch of a team solely focused on the RIA market and the unbundling of our platform and investment offerings are showing great signs of early success. In the quarter, we completed the launch of the first version of SEI Connect, our digital client and prospect engagement portal, and we are on track to have it in production for all clients by the end of this year. This is an entirely cloud-native application built on the platform architecture we acquired last year. The institutional investor segment experienced new client wins as well, predominantly with foundations and endowments. During the quarter, we continue to focus on advancing OCIO opportunities and using SEI Novus for more sophisticated OCOIO deals and leading the ECIO proposition. We are also excited about the integration of SEI private wealth management into the institutional business. We believe this will position us to leverage existing relationships on both sides. We are aware that headwinds will persist for the institutional business, given general market conditions and the impact of increased interest rates on the defined benefit market, and we will remain disciplined in how we manage through this. In the private bank business, we had an active quarter with new sales and implementations. Most notably, we converted the initial book of business from U.S. Bank from Trust 3000 to the SEI Wealth Platform. This conversion is significant. It represents the first client to go live using our software-as-a-service solution. We greatly appreciate U.S. Bank's longstanding partnership and its confidence in SEI to deliver a solution that will carry their business into the future. We also signed two new name clients, both of which were using competitor platforms. We will continue to right-size expenses in this segment and look to accelerate sales activity. As I stated last quarter, to do so, we are working to improve our operating efficiency and consolidating teams across our business, operations, and technology platforms, as well as surgically assessing our investment spend in the segment to ensure appropriate return on investment. Additionally, we are actively engaging clients to create more cross-sell opportunities across the enterprise. I'd also like to take a moment to highlight some positive traction and growth areas in our investments and new business segment. We continue to have strong conviction around SEI Sphere, our cybersecurity platform, making strategic investments to accelerate growth and evaluating new market opportunities. We have sold this solution to clients that are new to SEI, as well as successfully sold the service to existing clients. We've also had early success cross-selling additional services within SCI Sphere, especially in the cloud migration space. In our private wealth management business, we added four new clients during the quarter and continue to build upon our pipelines of prospects. Our goals-based approach has resulted in our clients remaining fully invested and weathering the volatile markets with confidence in their portfolio design and performance. And finally, our partnership with LSV remains strong. Dennis will report on their financial results later on the call. As I mentioned in last quarter's call, we are committed to embracing internal mobility and investing in programs and initiatives focused on talent, future skills, rotation of employees, idea sharing, and professional development. To that end, during the quarter, we also announced that Sandy Ewing has transitioned from our Trust 3000 business to lead SEI's family office and regulatory services. where she is working closely with SEI's business segment leaders to advance opportunities and execute growth strategies for these offerings in existing and new markets. As a 27-year veteran of SEI, I am confident in Sandy's leadership and experience to drive these efforts. Lastly, and of equal importance, I'd like to touch on initiatives that are enriching our culture. We believe culture creates the foundation for why we do what we do every day, and we are going to make SEI's culture an even bigger competitive advantage in the future. We know it's critical to foster a workplace where our employees feel welcomed, valued, and respected every day, regardless of their identity. To that end, I'm excited to share that we launched a multi-year initiative to continue our efforts for diversity, equity, and inclusion. I've also joined more than 2,200 CEOs and presidents in signing the CEO Action for Diversity and Inclusion, pledging to act on supporting a more inclusive workplace for employees, communities, and society at large. As we close out the year and look ahead, we continue to execute on making changes that are designed to help us capitalize on our opportunities. We will remain focused on maintaining and accelerating growth in existing businesses, identifying and developing new organic growth engines, looking for acquisitions that align and accelerate our strategy, and enhancing our culture and talent strategies across the entire company. This concludes my prepared remarks. I will now turn it over to Dennis to discuss our financial results for the quarter. Dennis?
spk02: Thanks, Ryan. I will cover information related to the quarter for the company and our units. As Ryan mentioned, EPS for the quarter was 45 cents. This compares to 97 cents during third quarter 2021 and 81 cents for the second quarter of 2022. Third quarter results reflect a one-time charge related to our voluntary separation program, or VSP, of approximately $57 million, which equates to approximately 32 cents per share. In addition, we incurred 5.2 million in severance costs during the quarter, or 3 cents per share, unrelated to the VSP. Excluding these one-time expense items, EPS for the quarter would be 80 cents. Revenue for the quarter was $471 million compared to $485 million in 2021 and $482 million in the second quarter. Total expenses for the quarter were $420 million, which compares to $344 million last year and $366 million in second quarter. Excluding the expenses related to the VSP and severance, expenses for the quarter are approximately $358 million a decrease from second quarter of 2022 of approximately $8 million. Revenues from asset management and administration were impacted by lower capital markets during the quarter. Processing revenues remained relatively flat from second quarter. There were no unusual revenue items during the quarter. The main drivers of expense growth year over year continue to be inflation and the talent to support our growing business lines. Also, costs related to the infrastructure necessary to meet increasing regulatory requirements across the jurisdictions in which we operate. We do not see these inflationary and compliance pressures abating. As Ryan mentioned, rightsizing our expenses to business growth opportunities and allocating spending to areas of accelerated growth are a priority. While we have stated that the VSP is not centered on reducing our run rate expenses going forward, we believe it will have a positive impact in doing so. On the sales front, in our processing businesses, our private banking and IMS net sales events total $33.9 million and are expected to generate $26.7 million in recurring revenue. In our asset management related businesses, net sales, excluding the deconversion of Retirement Planners of America, which we announced in an 8K filing last year and discussed last quarter, were approximately 2.5 million. The impact of RPOA is approximately 5.6 million annualized, or 1.4 million a quarter, based on second quarter 2022 revenue. Private banking net processing sales were $10.2 million, of which 4.7 million is recurring. This reflects one new SWP sale to Sable Trust and a Trust 3000 sale to Computershare. We re-contracted one client during the quarter. The current backlog of sold but expected to be installed revenue in the next 18 months is $44.9 million. As discussed last quarter, this backlog does not reflect any potential revenue from Wells Fargo. Wells continues to assess its own strategy, which has led to some business divestment on their part. The signing of computer share this quarter and the previously announced sale to the principal financial group in 2021 were opportunities created by this divestment from Wells. As a result of their downsizing of their business, we are in discussion with Wells on their Trust 3000 contract and adjusting it to reflect their smaller book of business. The discussions are ongoing, however, they likely will result in a reduction of recurring revenues on the current relationship going forward of approximately 1.3 to 1.7 million a quarter. Also, we may take a one-time reduction in booked revenue in the fourth quarter of approximately five to seven million dollars. None of this is certain as discussions continue. Wells is a great client partner with additional opportunity and we are supportive of their strategic direction and business success. Last quarter, I mentioned we have two clients that are involved in M&A activity, State Street by FNZ and Union Bank of California by U.S. Bank, a client. We have been notified by State Street that they plan to deconvert from SEI in late first quarter of 2023 and that UBAC is expected to deconvert late second quarter of 2023. The total net revenue impact represented by State Street and UBOC is approximately $12.4 million per year. Profits in private banking reflect the impact of capital markets on its AUM-related revenues. While net revenue from sales and asset management was a positive $1.4 million, lower capital markets resulted in reduced revenues from the second quarter. Expenses in the quarter were down from the second quarter of 2022. This is partly due to direct costs associated with asset management and reduced amortization expense. We will continue to focus on spending under Sanjay's leadership. On the IMS front, net sales for the quarter were $23.7 million, $22 million of which is recurring. The quarter sales activity remained robust, reflecting an active market, and reinforces our belief that the trend of outsourcing is continuing to increase. In addition, we re-contracted clients in Q3, totaling $21.8 million in annual recurring revenue with an average length of over three-plus years. Revenue for the quarter was flat to second quarter, reflecting the impact of capital markets and a client deconversion offset by client installs. We continue to see growth with many of our top clients. Expenses were also essentially flat despite continued inflation pressures reflecting overall expense management. Our backlog of sold but expected to install in the next 18 months recurring revenue is $35.3 million. Moving to investment advisors, investment advisors generated net cash flow under the platform of approximately $800 million. This number reflects increased momentum in strategic initiatives we have launched over the past two years, including our dedicated RIA team, producing $269 million in net positive cash flow and cash flows into our portfolios built on our new direct indexing strategies and our tax managed ETFs, growing by $240 million. Revenues for the quarter were down from second quarter as a direct result of capital market pressures and the impact of the RPOA deconversion. Expenses were down as well for the same period, helping margins hold in the mid-40s. We recruited 57 new advisors during the quarter and reengaged 13 existing advisory firms. Advisor activity remains strong, but we continue to see a slowdown in market activity on the part of both advisors and their clients. In the institutional investor segment, OCIO net sales events for the third quarter were a positive $220 million. Growth sales were $660 million, and client losses totaled $440 million. Third quarter new sales were principally in the U.S. endowment and foundation segment. Net sales for the quarter equate to $1.4 million in new recurring revenue when implemented. The current unfunded client backlog of gross sales at quarter end was $2.8 billion. Revenues for the quarter were down from second quarter due to capital market activity offset by net positive client flows. Expenses were also down reflecting reduced direct costs as well as general expense management. In the investment to new business segment, revenues were flat to second quarter. Expense in this segment were down due to the reduction in investment spend related to our one SEI work and a one-time item of $900,000 we had in the second quarter. We expect expenses in this segment, while shifting to new initiatives, to remain relatively flat to current levels. LSV produced $26.7 million in profit during the quarter. This compares to $29.8 million during the second quarter. Revenues for LSB were $91.6 million compared to $99.8 million in the second quarter. LSB recorded performance fees of $1.6 million during the quarter, reflecting positive relative performance. The reduction in revenues is a result of capital markets declining, net client flows, and lower performance fees when compared to second quarter. Net sales were essentially flat while net flows from existing clients due to de-risking and reallocation were negative $1.3 billion. Market depreciation was approximately $7 billion. LSV continues to have active sales activity, and note that the gross sales of $1.4 billion during the quarter was the highest since first quarter of 2019. Many companies are dealing with foreign exchange volatility this quarter. While we do have revenues and expenses in U.S. dollars, the British pound, and the euro, the net impact to company profits when compared to second quarter of 2022 was immaterial. Our tax rate for the quarter was 23%, consistent with second quarter. That concludes my remarks. As a reminder, all of our unit heads are on the call. We will now take any questions. Thank you.
spk05: Ladies and gentlemen, if you would like to ask a question, please press 1 then 0 at this time. Our first question will come from the line of Owen Lau with Oppenheimer. Please go ahead.
spk03: Thank you for taking my question. Let's start off with the new asset management structure. How should investors think about the incremental revenue and expense opportunity here? And also, do you have any expectation about the timing of kind of implementing this new structure and ideas. Thank you.
spk10: Sure. Hey, Owen, how are you doing? Thanks for the call, or thanks for the question. I'll give a quick overview answer of that, and then I'll turn to Wayne to provide some commentary as well. So you should really be thinking about it as a strategy around alignment. When you look at the way that the market is evolving, we really believe that putting these units together under one leader and not necessarily changing the structure of each unit really puts us in a position to more effectively allocate our capital for growth across these segments. We see a real big opportunity in some of the intermediary space and kind of getting away from traditional segmentation and definition as to whether that's a broker-dealer affiliated advisor. We have a lot of enthusiasm and optimism about the RIA space, the advisors and intermediaries that we support in the asset management distribution business. And then most importantly, I think really aligning our investment management unit expertise really with the market units so we have a more cohesive go-to-market strategy that's really aligned with our engineering talent. But, you know, really, for us, it's about positioning ourselves in the best way possible to really accelerate growth, and we thought that this alignment really will accelerate that. Wayne, I don't know if you have any comments or Paul's in the room as well.
spk04: Yeah, thanks, Ryan. I guess what I would say is this is all about growth. I think FEI has – we've always done a great job in leveraging all of our operations. I mean, it's a company – our company is built upon the concept of leverage. By combining these units, we think this gives us a better opportunity to leverage our investment solutions across institutional, intermediary, U.S., non-U.S., to really create some level of innovation that maybe we haven't even fully appreciated before. that in addition to how can we further leverage basically our client-facing technology in those markets. So we see this as untapped opportunity for us on the client growth side.
spk06: Yeah, I would just add, this is Paul, the integration of private wealth management and institutional is a wonderful integration in the sense of leveraging two direct channels, one to wealthy individuals and single-family offices, and one to institutions. It is without doubt that the institutional investor committee members are of wealth many times, and being able to mine those opportunities as natural lead flows will really be a creative on the diverse side. Many of those of wealth are also sitting on those committee members, so being able to get that cross leverage. We've already in flight doing that. We've had a number of meetings over the last two weeks, so I'm very excited about that integration and where it stands and what the opportunity holds.
spk03: Got it. That is super helpful. And then, Dennis, you talked about the Wells Fargo relationship. If I write it down correctly, it may have a $1.3 to $1.7 million revenue impact per quarter. And then is there any one-time reduction in the fourth quarter, about $5 to $7 million? So from a modeling perspective, should we include that, like $5 to $7 million in the fourth quarter, and then $1.3 to $1.7 million from the first quarter of 2023 going forward. I think you mentioned that the negotiation of discussion is ongoing, but I just want to see how we should model that out. And also, is there any offset from the expense side? Thank you.
spk02: Yeah, so the reason I mentioned that is because I really suggest that you do include it in your thinking about SCI going forward. And the reason why we thought it was important to get on the table now is because if we do get an agreement signed and it's in this kind of range of financial impact, we wouldn't have to follow up with any independent disclosure. So, yeah, when I would, you know, it's in our model. Let's put it that way. Even though we're not really done the conversations with Welles.
spk03: Don, that's very helpful.
spk02: Your question about cost takeout, I'd say that's more to the extent we've got cost benefit from processing less business on the part of Wells. We're already capturing that through by the fact that Principal Group went live already with us on Trust 3000, and now we're actively working on the computer share implementation. So we might get some benefit when they go live as well.
spk11: I agree, Dennis. So principal financial group, they are already live as part of the quarter one implementation early this year. And computer shares, we are actively working with them.
spk03: Okay, that's fantastic. Just one final question on expense. I think many companies are talking about very tight expense control. I know the asset management restructuring You may have some ideas in that, but other than that, given the market condition, is there any other potential area that you can manage to expand space further if, you know, we never know, but if the market conditions further deteriorate? Thank you.
spk10: So I think... I think, Owen, simply put, we're always going to be judicious about managing the expenses of the company, and we'll have discipline around that. I think we've got a pretty long-term track record of that. That being said, I think the message that we sent in July and hopefully reiterate today is we're also going to be aggressive around allocating capital and investments in areas where we believe that we can accelerate our position. We want to try to take advantage of some of these difficult times as well to maybe extend our or really try to accelerate areas where we believe that we have a market advantage. But I think overall, nothing will change in terms of our discipline, in terms of how SEI manages expenses corporately.
spk03: Got it. Thank you very much. You're welcome.
spk05: Thank you. As a reminder, if you do wish to ask a question, please press 1, then 0 at this time. Our next question comes from the line of Ryan Kenney with Morgan Stanley. Please go ahead.
spk07: Hi, good afternoon. Thanks for taking my question. Hey, Ryan. Just a follow-up from the last question. Can you give us some more color on how much of the expense base is fixed versus variable? And if you're reallocating across the segment, what's the takeaway for the overall company margin?
spk02: Ryan's looking at me to answer this one, Ryan. So it's funny how that works. When we look at our expense make-up, we do have some variable costs tied to assets on the sub-advisor fee, so that adjusts pretty quickly. We have some variable costs tied to trading activity, so that would adjust if trading activity is down, trading buy-ins are down. We're predominantly, I wouldn't say predominantly, but a higher majority of fixed costs because of employee base, and one of the things that allows us to drive the margins we drive as a company is because of that fixed cost base, how we manage that fixed cost base, and the scalability of that fixed cost base, or the leverage we get off of it as we grow. That being said, we do have variable costs tied to predominantly the technology space, where we do work with outside firms and help in supplementing or complementing our own technology staff and resources. for sure is variable, but I would also say that there's probably different categories of variability there. Some of that cost is tied to commitments we've made on behalf of clients. So unless something changes on the client side, that variability is not necessarily going to be available to us to adjust, although we certainly would work with our third-party partners to adjust where we can. Then there are things that are committed projects of ours that we think are critical to our future and there's variable spend tied to those, I would suggest that if you go back to the last tough period we had, 08-09, we actually increased the spending in those areas to put us in a position to take advantage of market opportunity coming out of those tough times. Then there's a third category of nice to do, we are doing, but do we really need to do it in the moment And that's an area where we would have some decision optionality, if you will, to decide whether to slow things down or take things out. We always try to keep an eye on expenses, trim around the edges. The best way to avoid significant cuts, frankly, is to run pretty lean in good times, not to overspend when times are good. because that really sets you up for a problem when times aren't so good. And again, I point back to 08-09, and we didn't do a lot of cost cutting in 08-09 in the tough markets. But one of the reasons we didn't is because we didn't have a lot of fat to cut out, because we try not to run the company with in that way. The other thing in tough markets, this is something maybe Phil can comment on, Sanjay, and even Wayne, is our clients are in the same business. And sometimes their business model doesn't respond as well to tougher markets as ours does. And it opens up opportunity for us. And maybe, you know, Phil, you want to talk about your experience before and how things improve.
spk10: And before you do that, Phil, I think the other thing, Ryan, to your question around, you know, how we're kind of looking at investments, We don't look at it, as we said before, as a fixed pool of money, but we're going to be acting, I think, a little bit more decisively where we see good momentum and we see opportunity. We're going to be reallocating, and I think that is a good segue, Phil, because we've had two great quarters, but we also see a lot of opportunity to accelerate some investments and maybe deliver better services for our existing and future clients.
spk09: Sure. Thanks, Ryan. any time that our clients are having challenges, whether it's with turnover or expense challenges, it's actually an opportunity for IMS on the outsourcing side. You know, we can come in there and help them do things better, faster, and cheaper. So I think it's actually our ability to help our clients scale as they're launching new products, but at the same time as their management fees are getting squeezed more and more over time has really been you know, a big driver of our success over the last few quarters or so. So I think it's a, you know, IMS is in a great spot. And any of these challenges that, you know, we're seeing across any company are actually opportunities for us in the future.
spk00: Thank you.
spk02: I'm going to wrap up, Brian. We do have variable comp. So I should mention that. So, you know, a chunk of our compensation costs are variable in nature. So certainly that's a lever that, you know, we have, to work with, and our board certainly would pay attention to that, as would we. But even in the toughest markets, we were very attentive to our workforce, even on that element of their compensation package, because we felt talent, just like today, talent's at a premium, and we will want to take care of our talent because that's what's going to help us take advantage of the opportunities coming out of it. The one thing about this cycle that I think is different than the last cycle, though, is that there's more visibility, at least it seems in the market, to tough times coming, whereas the last cycle was pretty abrupt. It hit everybody overnight. Not that some people didn't see it coming, but most people didn't. This one, most people see it coming, and I think it's an opportunity for us now to be talking to clients and prospects about how we can help them be in a better position when the tough times do come. And that moving to us now is a better answer.
spk07: Thank you.
spk05: And our final question in queue comes in the line of Ryan Bailey with Goldman Sachs. Please go ahead. Hi, everyone.
spk08: Thank you for taking the question. So I just wanted to walk through some of the stuff. within private banks. I think some of the commentary was the M&A dynamics would lead to a $12.4 million annual reduction in revenues. Wells at the midpoint, I think, would be a $6 million reduction in revenue. That's $18.4 million in total for a headwind to revenues for the segment. It's about $4.5 million per quarter in terms of revenue headwinds relative to the $6 million of operating profit that the segment put up this quarter. long-winded way of sort of leading into, can you help us think through what are the changes you're making to the private bank segment to support both better sales and faster implementation of the $44.9 million backlog?
spk02: Right. So I'm glad you, I'll pass on to Sanjay quickly here, but I'm glad you brought that. One big answer is that $44 million backlog, that that's the replacement, if you will, plus of the revenue that you know, for the most part, is out of our control. So that's the good news. And I'll let Sanjay maybe talk about the implementation cycles and how things are going on that front.
spk11: Sure. Thank you, Dennis. So if you look at the signed backlog, Dennis talked about 44 million plus signed backlog. Those are the implementations in flight, and we are actively working with those clients. And we are tracking those milestones very closely. We have fortnightly steering committee meetings with their senior executives, and it's a mutually beneficial for both organizations so that we can stay on track with respect to those implementations. With 60-plus implementations so far on SWP itself, I think we have significant experience how to manage and monitor those changes on weekly basis. So we feel fairly confident that we will be able to deliver this backlog. At the same time, our clients, they are super engaged with us. Dennis and I, we are actively engaging with all of our clients to stay on track. At the same time, the one aspect I would call out where we are making significant change in terms of how we are improving ongoing basis for implementations. If you look at any implementation, change management, organization change management is a key function. And that's why we are actively working with our clients, ensuring that we are hand-holding them through this change providing them necessary training so that they can adopt the new platform.
spk10: And I would say we talked about this in the previous quarter with Sanjay and his team. And a lot of other SEI people have been out really effectively engaging the executives of our clients and prospects. And I think that activity in the market gives us a lot of confidence about the receptivity of our value proposition. To Dennis's point, I think we're seeing an increasing demand for firms that are looking at their operating model and where outsourcing is. could play a role, but I think the just increased level of urgency and activity engaging with our clients is important, and that's something we're very focused on while we manage the expenses in the unit.
spk08: Okay, thank you. That call was really helpful.
spk02: Brian, I think maybe you want to talk about sales, too, because Brian, I think your other question was about sales organizations.
spk11: What are we doing on the sales front? Yeah, on the sales front as well, in the UK market, we are actively re-establishing ourselves. We have created the sales team there on the ground. We have established the sales support function there as well. So the team on the ground is in the process of forming the overall sales pipeline there. Similarly, here on the US market, we are consolidating the overall sales structure and providing and creating more of a uniform process there as well. We are focusing on two things. One is around the cross-sell with our existing client base. We have a pretty solid client base, so we are spending time and effort there. Again, I'm repeating what Ryan said. Engaging with our existing client is extremely important for us so that we can avoid any leakage in our revenue stream. And the second part in terms of how we improve on our sales cycle, creating a uniform process, that's extremely important for us. So those are the key focus areas through which we are going to expedite our sales cycle both for U.S. and U.K. market.
spk08: Understood. Okay, thank you. And then maybe shifting gears a little bit, I was wondering if you could expand on the deconversion within investment managers. It looked like there was a big decrease in assets there on the AUA side. So if you could help us think through that. what type of assets, whether that was more traditional or alternatives, and the reason behind the deconversion as well, please.
spk09: Yeah, sure, Brian. This is Phil McCabe. Yes, the asset alternative balances were down quarter over quarter. That was due a little bit to market impact, but also to us parting ways with a very low fee off strategy client that we just didn't really fit into our wheelhouse. So that was also offset by millions of dollars in new client funding. So that's what happened, but you can rest assured that it was a one-time event. Got it.
spk08: All right. Thank you very much.
spk05: And speakers, we have no further questions in queue, so I'll turn it over to CEO Ryan Hickey for any final comments. Thank you.
spk10: This is a pivotal period for SDI. We benefit from our unmatched position at the intersection of asset management and technology. We are increasing our investments and focus on sales and marketing. We're setting the direction of pace and growth, and I remain extremely enthusiastic about SDI's future. I look forward to future meetings and calls with this community to discuss our strategic approach, the opportunities it represents, and the progress we're making. As a reminder, we will be hosting an investor day on November 14th and 15th. We look forward to welcoming you all back on campus in Oaks. For those who cannot attend in person, additional details will be provided closer to the conference about how you can listen in virtually. Thank you for attending our call.
spk05: Ladies and gentlemen, that does conclude today's conference. I'd like to thank you for your participation. You may now disconnect.
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