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Technological Innovations Aid SEI Investments (SEIC), Costs Ail
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SEI Investments Company’s (SEIC - Free Report) robust assets under management (AUM) balance and technological innovations position it well for top-line growth. With its global presence, a diverse range of product offerings and strategic acquisitions, the company is expected to benefit in the long run.
However, elevated expenses are expected to hurt the company’s bottom line to some extent in the near term. SEIC’s increased exposure to fee-based revenues is concerning.
Thus, analysts are not that optimistic regarding the company’s earnings growth prospects. Over the last seven days, the Zacks Consensus Estimate for SEIC’s 2023 earnings has been revised marginally lower.
Looking at its fundamentals, SEI Investments’ revenues witnessed a compound annual growth rate (CAGR) of 5.5% over the last six years (2017-2022). AUM saw a CAGR of 3.2% over the same period.
Technology is the backbone of SEI Investments’ businesses. The company’s primary business platform, Investment Processing, delivers its outsourced software and processing services through TRUST 3000 and the SEI Wealth Platform (SWP). Revenues generated by these two are recognized under information processing and software servicing fees. While the same recorded a decline in 2019 and 2020, it witnessed a CAGR of 6.9% over the six years between 2017 and 2022.
The company’s 2021 strategic acquisitions, including Oranj's cloud-native technology platform, Finomial and Novus, support its technological advancement efforts. SEIC has launched two key technology enhancements through the SWP — Digital Account Open and Digital Model Management. Also, it launched SEI Data Cloud through a strategic partnership with Snowflake to address the financial services industry’s demand for more advanced data integration. These initiatives and constant innovations in software will likely help SEI Investments win clients and, thus, continue to support top-line growth.
SEIC continues to impress with its enhanced capital deployment activities. In December 2022, the company hiked its semi-annual dividend by 7.5%. It also has a share repurchase plan in place. In June 2022, it increased its buyback authorization by $200 million.
However, the company’s expenses witnessed a CAGR of 6.1% over the last six years (2017-2022). The rise was mainly due to an increase in compensation costs, and data processing and computer-related expenses. As the company’s operations are mainly technology-driven, costs related to the same are expected to continue rising, given the up-gradation of proprietary software and the development of new ones.
Asset management, administration and distribution fees are the major revenue generators for SEI Investments. These comprised 76% of total revenues in 2022, 80.6% in 2021, 79.9% in 2020, 79.2% in 2019, 78.2% in 2018, 77.4% in 2017, 76.5% in 2016, 75.7% in 2015 and 75% in 2014. Such high dependence on fee-based revenues could adversely affect the company’s financials in the near term, as fluctuations in markets and foreign exchange translations and/or regulatory changes may hamper AUM growth.
A couple of finance stocks worth a look at are The Bank of New York Mellon Corporation (BK - Free Report) and Interactive Brokers Group, Inc. (IBKR - Free Report) . The Zacks Consensus Estimate for BK and IBKR’s current-year earnings has increased over the last 30 days.
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Technological Innovations Aid SEI Investments (SEIC), Costs Ail
SEI Investments Company’s (SEIC - Free Report) robust assets under management (AUM) balance and technological innovations position it well for top-line growth. With its global presence, a diverse range of product offerings and strategic acquisitions, the company is expected to benefit in the long run.
However, elevated expenses are expected to hurt the company’s bottom line to some extent in the near term. SEIC’s increased exposure to fee-based revenues is concerning.
Thus, analysts are not that optimistic regarding the company’s earnings growth prospects. Over the last seven days, the Zacks Consensus Estimate for SEIC’s 2023 earnings has been revised marginally lower.
Looking at its fundamentals, SEI Investments’ revenues witnessed a compound annual growth rate (CAGR) of 5.5% over the last six years (2017-2022). AUM saw a CAGR of 3.2% over the same period.
Technology is the backbone of SEI Investments’ businesses. The company’s primary business platform, Investment Processing, delivers its outsourced software and processing services through TRUST 3000 and the SEI Wealth Platform (SWP). Revenues generated by these two are recognized under information processing and software servicing fees. While the same recorded a decline in 2019 and 2020, it witnessed a CAGR of 6.9% over the six years between 2017 and 2022.
The company’s 2021 strategic acquisitions, including Oranj's cloud-native technology platform, Finomial and Novus, support its technological advancement efforts. SEIC has launched two key technology enhancements through the SWP — Digital Account Open and Digital Model Management. Also, it launched SEI Data Cloud through a strategic partnership with Snowflake to address the financial services industry’s demand for more advanced data integration. These initiatives and constant innovations in software will likely help SEI Investments win clients and, thus, continue to support top-line growth.
SEIC continues to impress with its enhanced capital deployment activities. In December 2022, the company hiked its semi-annual dividend by 7.5%. It also has a share repurchase plan in place. In June 2022, it increased its buyback authorization by $200 million.
However, the company’s expenses witnessed a CAGR of 6.1% over the last six years (2017-2022). The rise was mainly due to an increase in compensation costs, and data processing and computer-related expenses. As the company’s operations are mainly technology-driven, costs related to the same are expected to continue rising, given the up-gradation of proprietary software and the development of new ones.
Asset management, administration and distribution fees are the major revenue generators for SEI Investments. These comprised 76% of total revenues in 2022, 80.6% in 2021, 79.9% in 2020, 79.2% in 2019, 78.2% in 2018, 77.4% in 2017, 76.5% in 2016, 75.7% in 2015 and 75% in 2014. Such high dependence on fee-based revenues could adversely affect the company’s financials in the near term, as fluctuations in markets and foreign exchange translations and/or regulatory changes may hamper AUM growth.
A couple of finance stocks worth a look at are The Bank of New York Mellon Corporation (BK - Free Report) and Interactive Brokers Group, Inc. (IBKR - Free Report) . The Zacks Consensus Estimate for BK and IBKR’s current-year earnings has increased over the last 30 days.