SEI Investments Earnings: Mixed Quarter and Mixed Margin Progress

SEI Investments reported a mixed first quarter. Excluding one-time items, revenue declined 5% to $469 million, in line with FactSet consensus, while EPS of $0.79 came in $0.03 below consensus. The private banks segment showed modest progress on the operating margin front, but lower asset-based fees weighed on margins for SEI’s higher-margin segments such as investment advisors and institutional investors. Firmwide, SEI’s operating margin of 21.7% improved from 20.6% in the prior quarter but was below the 26.1% (excluding a one-time large termination fee) in the year-ago period. SEI is unique among peers with no net debt and over $6 of cash per share, and it appears to be looking at potential acquisitions more aggressively. We are maintaining our $67 fair value estimate and narrow moat rating.