SEI Investments Company (SEIC) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A indicate strong financial performance, with growth in AUA and AUM, robust performance fees, and significant share repurchases. The company is investing in future growth, with a focus on alternatives and international markets. Despite some margin pressure from investments, the overall sentiment is positive, supported by optimistic guidance and a strategic focus on long-term growth. The Q&A revealed no major risks or concerns, and the management's responses were generally reassuring.
Key Financial Performance
EPS (Earnings Per Share) EPS reached $1.30, an all-time high for SEI, excluding onetime items. This represents an 8% sequential growth and a 17% year-over-year increase. The growth was driven by strong revenue growth and margin expansion.
Net Sales Events Net sales events totaled $31 million, with the Investment Managers business leading the way. This was offset by a contract loss in private banking. Excluding the loss, net sales would have approached $47 million. Year-to-date net sales events surpassed $100 million, a record for SEI through the third quarter.
Private Banking Revenue Private Banking saw a 4% increase in revenue year-over-year, driven by healthy growth on the SWP platform. However, margins declined year-over-year due to onetime items that benefited last year's results. Excluding those items, margins would have increased by approximately 60 basis points.
Investment Managers Revenue and Margins The Investment Managers segment posted double-digit revenue and operating profit growth. Margins improved significantly, supported by revenue growth that exceeded 25% annualized from Q2 to Q3. Growth was fueled by market appreciation in the traditional business and capital deployment in the alternatives business.
Advisors Revenue and Margins Advisors posted the highest year-over-year revenue growth among all segments. Margins improved due to strong revenue growth, a $2 million earnout true-up, and contributions from the integrated cash program, which added $10 million to operating profit versus the prior year.
Institutional Revenue and Margins Institutional revenue and operating profit were essentially flat year-over-year, reflecting lower equity exposure and less benefit from market appreciation compared to other segments. Margins declined sequentially due to choppier items in both the current and prior periods.
Assets Under Administration (AUA) AUA saw strong growth both sequentially and year-over-year, driven by broad-based growth across CITs, alternatives, and traditional funds. The majority of the growth was driven by alternatives, with some benefit from market appreciation.
Assets Under Management (AUM) AUM increased with modestly positive net flows in Advisors, driven by growth in ETFs and SMEs, which offset pressure on traditional mutual funds. Institutional flows were flat, and LSV AUM increased over 4% from Q2, driven by strong market performance and relative benchmark performance.
Performance Fees LSV performance fees totaled $8 million, or $3 million at SEI's share, in Q3, supported by strong performance against relative benchmarks.
Capital Allocation SEI ended the quarter with $793 million of cash and no net debt. Share repurchases totaled $142 million in Q3 and $775 million for the trailing 12 months, representing more than 7% of shares repurchased over the last year. Additionally, SEI made a $50 million anchor investment in LSV's market-neutral hedge fund, contributing $1.5 million to Q3 results before taxes.
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Operating Highlights
IMS Sales Activity: IMS posted a record sales quarter with $31 million in net sales events, driven by surging demand for outsourcing and client expansions. Approximately 2/3 of sales events were tied to client expansions, and 2/3 came from alternative managers.
Institutional Mandate Win: Secured a multibillion-dollar fixed income assignment for a state government client, reflecting SEI's ability to deliver targeted solutions and compete for specialized mandates.
Private Banking Win: Secured a $13 million win with a leading super-regional U.S. bank for a comprehensive transformation initiative across all business lines, including technology, outsourced operations, and professional services.
Stratos Partnership: The partnership is increasing awareness of SEI across broker-dealer and RIA channels, with renewed inbound interest in SEI's capabilities. Initial closing expected in late 2025 or early 2026.
AI and Tokenization: SEI is advancing tokenization pilots and applying AI to workflows to support efficiency and scalability. Near-term focus is on use case validation and disciplined rollout.
Cost Optimization: Incurred $4 million in severance costs as part of cost optimization initiatives, reflecting commitment to evolving the business.
Sales Pipeline and Record EPS: Year-to-date sales events surpassed $100 million, a record for SEI through Q3. EPS reached $1.30, an all-time high excluding one-time items.
Capital Allocation: Deployed $142 million for share repurchases in Q3 and $775 million over the trailing 12 months. Made a $50 million anchor investment in LSV's market-neutral hedge fund to support future fundraising.
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Risk or Challenges
Contract Loss in Private Banking: A contract loss in private banking due to a client's strategic shift away from their bank trust model. This loss, while modest in financial impact, has driven lower net sales for the segment.
Long Contracting Process for Large Opportunities: Engagements with large alternative asset managers involve lengthy contracting processes due to the size and complexity of these opportunities, potentially delaying revenue realization.
Severance Costs: Nearly $4 million in severance costs were incurred this quarter, reflecting ongoing cost optimization initiatives and employee transitions.
M&A Costs Related to Stratos Acquisition: Approximately $3 million in M&A costs were incurred related to the planned acquisition of Stratos, impacting corporate overhead.
Institutional Business Challenges: Institutional revenue and operating profit were essentially flat, reflecting lower equity exposure and less benefit from market appreciation compared to other segments.
Client Departures in Asset Management: Client departures in the institutional business offset growth elsewhere, indicating ongoing challenges in retaining clients in this segment.
Pressure on Traditional Mutual Funds: Continued pressure on traditional mutual funds, although offset by growth in ETFs and SMEs.
Net Outflows in LSV Assets: Nearly $3 billion of net outflows in LSV assets under management, partially offsetting strong market performance.
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Guidance & Outlook
Future Sales Pipeline: SEI expects to provide more clarity on the nature of large and complex opportunities in their sales pipeline by early 2026. They have confidence in their sales pipelines compared to Q3 last year.
Stratos Partnership: The initial closing of the Stratos partnership is expected in late 2025 or early 2026. This partnership is anticipated to increase awareness of SEI's capabilities and generate renewed interest in their offerings.
AI and Tokenization Initiatives: SEI is in the early stages of adopting AI and tokenization. They are focusing on use case validation and disciplined rollout, with expectations that these initiatives will enhance efficiency and scalability over time.
Capital Allocation: SEI is maintaining an excess cash balance in preparation for funding the first Stratos close. They are also deploying capital to strategic investments, such as a $50 million anchor investment in LSV's market-neutral hedge fund, which is expected to support future fundraising from institutional investors.
Private Banking Transformation Initiative: SEI is engaged in a comprehensive transformation initiative with a leading super regional U.S. bank. This project involves retiring legacy systems, executing complex data conversions, and integrating new platforms, representing a significant opportunity for SEI.
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Shareholder Return Plan
Dividends: No specific mention of dividends or a dividend program was made in the transcript.
Share Repurchase: SEI repurchased $142 million worth of shares in Q3 2025 and $775 million over the trailing 12 months, representing more than 7% of shares outstanding repurchased in the last year.
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Key Q&A
Q:Are 2/3 of sales events from alternatives similar to recent quarters, and are they from large alternative players or smaller nonpublic alternatives?
A:The sales events are a mix of large and small clients, with no single event exceeding 10% of the total. They include private credit, insourcers moving to outsourcing, retail alternatives, and CITs. Announcements about larger managers moving from insourcing to outsourcing are expected early next year.
Q:Can you provide details on the known contract loss in private banking?
A:The loss is a one-off event, not a trend, and was due to a major operating model change for the client. The notice was received at the end of September, and the entire loss was taken at once. The client was a long-time partner, and SEI will continue to support them during their transition.
Q:For the integrated cash program, are you earning a fixed rate or considering allocating to fixed rates as the Fed eases?
A:SEI is earning about 370 basis points and providing investors with 55 basis points yield. As rates decrease, investor yields are adjusted proportionally. SEI has 20x the amount in integrated cash in fixed income portfolios, which helps mitigate the impact of rate declines.
Q:Why has expense growth in private banks been higher recently, and will the new service center impact growth?
A:The expense growth is due to investments in talent and onboarding backlog to ensure successful client experiences. The new service center may help manage growth over time, but the focus remains on backlog delivery and client onboarding.
Q:Is the Q3 margin level for the IMS business sustainable, and how will ongoing investments impact margins?
A:Q3 margins were higher due to market appreciation, which is not tied to costs. Margins are expected to remain strong but may see slight declines due to investments in talent and technology. SEI focuses on overall company margins rather than individual unit margins.
Q:What is the sales mix between U.S. and international markets, and how is the international strategy progressing?
A:The international strategy is in early stages, focusing on jurisdictions like the U.K., Dublin, and Luxembourg, and leveraging existing U.S. client relationships. Revenue mix details will be provided as segments are realigned.
Q:What is the expected pace of share buybacks, and will it change with the Stratos acquisition?
A:SEI plans to return 90%-100% of free cash flow to shareholders through dividends and buybacks. The pace of buybacks may adjust based on cash needs for the Stratos acquisition.
Q:Are there any concerns about private credit servicing due to market credit fears?
A:SEI's private credit managers are highly skilled and not concerned about credit risks. The business is diversified, and SEI gets paid based on invested capital, not mark-to-market or NAV, minimizing risk.
Q:Are there other high-risk relationships in the private bank's client portfolio?
A:SEI is not aware of any other high-risk relationships. Client engagement has been strong, and the company feels confident about its client relationships.
Q:What remains in the investment in new businesses segment after the Archway divestiture?
A:The segment includes the Sphere business and Private Wealth Management business. This segment will eventually be integrated into other segments as SEI realigns its organization.
Q:Can you quantify the margin suppression from accelerated investments?
A:SEI does not quantify margin suppression from investments, as it is not how the business is managed.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about quantifying margin suppression from accelerated investments, stating that it is not how the business is managed.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI tokenization
AI workflow
Advisor Summit
Awareness SEI
Banking win
Burke Head
CEO SEI
Congratulations IMS
Day energy
Day runway
Day week
Hicke SEI
Instructions today
Investor Day
Island record
Managers way
Marco Island
adviser
affirmation
announcement
approach
case
clarity
client expansion
confidence
date
enthusiasm
loss
mandate
margin expansion
nature
outsourcing
process
record SEI
record client
return opportunity
sector
track
wallet
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Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
