Detailed Narrative
Strategic Execution and Financial Performance
SEI reported an outstanding second quarter with record revenue, adjusted operating profit, and adjusted earnings per share, increasing 15%, 36%, and 38% year-over-year, respectively. This performance is attributed to disciplined capital allocation, an evolved value proposition, and the successful execution of strategic goals announced at Investor Day. The company is achieving these results while simultaneously investing in future growth initiatives.
Private Markets Expansion into Retail and Retirement
SEI is actively expanding its presence in private markets for retail and retirement channels, leveraging its capabilities in administration, transfer agency, investor servicing, compliance, and operational infrastructure. The recent expansion of its SEC registered transfer agency and its position as a scaled independent trust platform for collective investment trusts are key milestones. Management believes these initiatives could generate over $100 million in annual run rate revenue within five years.
Advancing Asset Management Strategy
The company is executing on its asset management strategy, showing momentum in ETFs, which have grown from $3 billion to over $8 billion in the last 12 months. Progress includes expanding private market capabilities through strategic partnerships, such as the recently announced collaboration with Carlyle. This involves a growing product pipeline with new ETF launches and enhanced model capabilities, reflecting a focus on product development tied to market opportunities.
Technology, Data, and AI Application
SEI is applying technology, data, automation, and AI to enhance client experience and business scalability. Recent improvements to SEI Data Cloud and the IMS platform provide clients with faster information access, simplified integrations, and reduced operational complexity. The company is digitizing core operating processes, including NAV delivery and automated data flows, and embedding AI into workflows to improve service, automate routines, accelerate onboarding, and enhance data access.
Strong Sales Events and Pipeline
Sales events totaled $43 million in Q2, contributing to a year-to-date total of $110 million, a figure that would have been a full-year record just a few years ago. IMS led with $32 million in sales events, driven by new client wins and expanded existing relationships, with approximately three-quarters from alternative investments. Private Banking contributed $13 million. The company emphasizes the quality of these sales, which leverage existing capabilities, require less incremental investment, and quickly contribute to financial results.
Stratos Performance and Growth
Stratos, a strategic acquisition, is performing well, generating over $10 million in EBITDA for the quarter (including integration costs). It is attracting SEI advisors seeking succession, liquidity, and growth solutions, and has a healthy pipeline of non-SEI acquisition opportunities. The business is focused on integrating infrastructure, launching a new CTO, and developing an OCIO initiative to serve as a lead generation source for its OCIO business.
LSV Inflows and Performance
LSV experienced a notable reversal in trends, generating approximately $2 billion in net inflows during the quarter, driven by a new large mandate and strong long-term investment performance. Combined with market appreciation, total LSV assets increased by nearly $17 billion. LSV's investment performance remained strong, with several non-U.S. strategies outperforming benchmarks, contributing $6.5 million in performance fees to SEI.