Ladies and gentlemen, thank you for standing by. Welcome to the SEI First Quarter 2021 Earnings Call. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Alex Whitelam. Please go ahead.

Thank you, Eric. Thank you, everyone. Welcome. We appreciate you joining us today for our first quarter 2024 earnings call. On the call, we have Ryan Hicke, SEI's Chief Executive Officer; Dennis McGonigle Chief Financial Officer; and Sean Denham, incoming Chief Financial Officer with leaders of our business segments, James Cipriano, Sandy Ewing, Paul Klauder, Phil McCabe, Sneha Shah and Sanjay Sharma. 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 press 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 turn the call over to our CEO, Ryan Hicke. Ryan?

Thanks, Alex, and good afternoon, everyone. We are out of the gates this year with high-quality results, top line growth and margin expansion in the first quarter. This deepens our conviction to maintain our focus on excellent execution against our strategic priorities. We are seeing significant traction in our technology and operational businesses as we manage expenses diligently, especially manifesting in profit growth in private banking. Our attention remains on increasing sales and pipeline activity and allocating capital and talent to new growth initiatives and emerging technologies. Accelerating activity and innovation is also a strategic priority in our asset management businesses as market trends and product types, asset allocation and investment choices continue to be headwinds. Our broader value proposition and solution set is resonating and gaining momentum. We need to translate this momentum into increasing new client acquisition and adoption. We will continue to lean into growing segments in the intermediary and institutional markets. Let me dive into our results for the quarter. Revenues in the first quarter were $511.6 million, up 9% from the first quarter of 2023. Net sales events in the quarter totaled $21.3 million, of which $16.6 million were net recurring. This was driven largely by a combination of technology and operational outsourcing sales of $24.5 million, offset by net negative activity in our AUM-oriented businesses. In our advisor business, we generated over $9 million of revenue with the FDIC-insured component of the SEI Integrated Cash program, which we launched in December 2023. Net income for the quarter increased 23% over the same period to $131.4 million. This is an important indication that our focus on sales implementing the backlog and driving more operational leverage across SEI trying to show results. We have more to do on all fronts. In the quarter, we repurchased approximately…

Thanks, Ryan. As Ryan mentioned, EPS for the quarter was $0.99 per share. This compares to $0.79 during the first quarter of 2023 and $0.91 for the fourth quarter of 2023. The revenue for the quarter was $512 million compared to $469 million in the first quarter of '23 million and $485 million in the fourth quarter. Total expenses for the quarter were $386 million, which compares to $367 million last year and $383 million in the fourth quarter. Included in the first quarter, expenses were approximately $6.2 million of severance expense as a result of workforce changes principally in our SEI Novus and Finomial units. The EPS impact is approximately $0.03 to $0.04. On the sales front in our technology and investment processing businesses of private banking and investment managers, net sales events totaled $24.5 million and are expected to generate $20.7 million in recurring revenue. In our asset management-related businesses, net sales were approximately negative $5.7 million, primarily due to asset movement from our mutual fund products into other investment programs as well as net losses in our institutional business. As Ryan mentioned, cash flows in our advisor business were a positive $900-plus million. We also sold $2.5 million of revenue in our new business segment. Total net sales were $21.3 million, of which $16.6 million is recurring. Private banking sales were $2.9 million, most of which is onetime. During the quarter, we had one client win and one loss, both smaller in size that essentially offset each other. The 3 clients recontracted during the quarter represent $4.8 million in annual recurring revenue. Despite first quarter closes, sales activity is strong. The limited client signings, as Ryan referenced, are more an issue of timing versus activity. During the quarter, we stayed on schedule with client implementations and conversions.…

[Operator Instructions] And our first question will go to Owen Lau with Oppenheimer.

So Dennis, as you wish, I'm going to give you a fast ball. Could you please talk about the traction for the cash program going into the second quarter? I know you generated a fee of $9.6 million in the first quarter. You gave us, I think, the quarter end number $897 million. But how much average cash did you get in the first quarter and in April so far? And how we should model out the revenue going forward?

Thanks, Owen. That is pretty much a fast ball right down the middle. I really appreciate doing that. You are too kind. I guess when we travel together this quarter, that helped. Average assets in that program for the quarter were just under $850 million. So the $9.6 million was derived from that average balance, but we ended the quarter with higher levels. And so this is our first quarter of experience with this program full quarter. Paul and the team are continuing to work with our advisor community and getting a better feel for how flows are going to occur into this program. So as the year progresses, I think we'll get a better feel for kind of what's kind of the consistent rate of cash in this program, which can be affected by how much rebalancing occurs when fees are paid, when this cash is used to meet the operational needs of customer accounts. But so far, so good. We're clearly on track for the $25 million we talked about back in January.

And then on price of banking, margin continues to go up. Is there any explorational goal on when you can get back to historical 30% margin level? I mean it may or may not be a straight line up, but is there any potential investments that we should be aware of before it reaches your goal.

It's probably best that Ryan answered this question because I would be -- I'm not going to be here. I know what my aspirations are now. They've changed quite a bit [indiscernible].

It treated differently as the [indiscernible]

But I think we've always said that this business, we expect the type of business it is, how we operate the business to scale and opportunities within the business that this should be a 30% margin business that we'll get to both through top line growth and efficiency and delivery that gets that top line growth or a big chunk of it to the bottom line. And Sanjay has really done a great job over the past 18, 20 months in reorienting the business both in terms of its market-facing activities and client engagement and the level of client engagement and prospect engagement, but also in working with not just with his own unit but across other units within SEI that contribute to the offering of private banking to bring costs down or to bring them to a level that we feel really good about the scale we'll get going forward. So we're still looking at that I'd say, a 3-plus year time frame, 3 to 5 years as a good target. But a lot of it depends on continuing to execute the way the team has been executing.

I would echo that. I think what's been consistent [indiscernible] I mean, I think this is the fifth or sixth quarter that you kind of see consistent improvement and I think we sent hopefully a very clear message externally and internally when Sanjay took over responsibility that we were going to get this business back to historical margins. We were going to be extremely disciplined and focused on how we do that. But I think the thing that is encouraging for us as a leadership team is really seeing how the activity and focus on the revenue side and the sales side is starting to pay off with leading indicators that we track, such as activity and pipeline engagement. So I mean, I think Dennis' answer is spot on. But I think most importantly, Sanjay and the team just have this as a really strong blueprint and plan that they're executing against moving forward.

Thanks a lot for your insight, Dennis. It's my pleasure working with you.

Thank you, Owen. Mine as well.

And next, we'll hear from Jeff Schmitt with William Blair.

Dennis, I wish you the best in your retirement.

Thanks, Jeff.

So question on the Investment Advisors business, the margin jumped up 45%. Expenses were pretty flat from last quarter. Is that improvement in the margin mainly from the addition of spread income? Or are there some expense initiatives underway. Just trying to think how should we think about that 45% margin going forward?

I'll let Paul jump in here. But clearly, the revenue up and the high-margin on that revenue stream helped in the first quarter, certainly compared to fourth quarter and last year. But there also is a very concerted effort on cost containment. And I would -- I use terms more like a greater efficiency and delivery, higher quality and delivery, higher scale, better -- we always invest in our technology in operational areas to help drive scale. So that's also been a help. I don't know, Paul, do you want to?

Yes. I would concur. Net interest income and the profitability of the FDIC program, obviously, is a big contributor. The markets are a contributor. Expense management, we continue to be disciplined about that. And just from a sales and marketing perspective, we are looking for more larger advisors that convert, I would say, we call them chunk plays, bigger advisors over $250 million. We did see 3 of those this quarter and we continue to have a sales emphasis on those larger advisors while we still work our bread and butter, which is our advisors affiliated with broker-dealers. So overall, a very positive quarter for the segment.

And then a number of your biggest competitors in that segment are starting to implement price increases in their businesses. Does that sort of open the door for you to do the same? Or do you see it more as an opportunity if you don't?

Yes. On the price increase side, I mean, we always look at the competitiveness of all of our offerings. I mean the mutual funds, we know have had some price decreases over time or just more investors kind of opting out for other implementation, whether it's ETFs, separate accounts, UMA programs. So we're always looking at the competitiveness. We don't see right now much increase that we can just build in, in absolute price relative to our competitive set, but we'll continue to evaluate that. But more importantly is just driving growth through getting more and more assets under management. That's where we really think there's going to be escalation in the profitability of the segment.

I'll just add to that. We're operating under a longer-term view that there's going to continue to be price compression and that the pricing environment in the asset management in particular is -- that pressure is not -- isn't changing. It's only going to continue, which is why we're so focused on technology build, operational efficiency and scale, client delivery, broadening out our market segments for growth. So it's -- I don't know that we've seen price increases in the competitive set, it would possibly be a good thing in certain areas if that occurred. But we're operating under that this is going to be a more price-competitive environment and making sure that from a delivery standpoint, we're as effective and efficient and scalable as possible. And that's something our clients really appreciate both within the advisor channel and the banking channel. I mean many of Sanjay's clients, every one of them is dealing with the same market issue.

[Operator Instructions] Next, we'll hear from Ryan Kenny with Morgan Stanley.

Dennis, congratulations on 90-plus quarters.

I survived, right? I am a survivor.

You have been very helpful. So thank you so much for everything throughout the years. I have a question on net new sales. So when I look at the 3 bullets, you have $24.5 million from private banks and IMS, it's pretty strong. You have $2.5 million from the newer initiatives and then there's the drag of negative $5.7 million from the Asset Management-related businesses. And when you look over the last few quarters, that drag has persisted for a while. So how should investors think about how much of a drag there is going forward. If you could give an update on where your current [indiscernible] defined benefit plans stands? And how much headwinds should we expect going forward on there?

Yes, Ryan. It's Ryan. Hope you're doing well. I'll start and then Jay is in the room, and Paul can add. So let's start with the first of the 3. So if you look at IMS bills in the room as well. That's another exceptional quarter of sales, as I mentioned. When you think about the breadth of our capabilities set there, the overall market trends around the appetite and the embracing of outsourcing and our ability to continue to invest and deliver differentiation through technology and operational solutions and our people, we feel good on the traditional side of the alternative side and the emerging in the global side to continue to drive net new sales numbers. We already touched on what Sanjay and the team are doing. So first of all, we feel good. We look at the total addressable markets. We'll continue to be nimble. We'll allocate resource where needed, and we'll continue to expand our footprint in areas there. We made a concerted effort, as you know, last summer to bring in an executive from the outside and look at our new business initiatives and investments in new business in different ways. I talked about a little bit of that earlier with what we're doing with TIFIN and SEIsmic, but when you see family office services and sphere and private wealth management, we know when we think about the company 5 to 7 years out, we want additional growth engines beyond what we have today, and we're starting to really lay some railroad tracks to make some investments there. We feel good about that. And then when you get to the AUM-based businesses, I honestly think it's a tale of 2 cities right now. You just have an overall market and macro shift in terms of…

Sure. Thanks, Ryan. Certainly, planned corporate defined benefit plans, making the decision to annuitize. We've touched on this in the past. It continues to be a reality in the corporate DB space. Certainly in the rate environment that we've experienced over the last couple of years. It's encouraging to see a few reports out there that the pace of annuitization has slowed over the last 6 months and also talking to some of our clients who may experience a funding status over 100%. Some are utilizing that cash to fund other opportunities instead of moving towards annuitization. What I'm most encouraged about those as I look across the new business activity that we did close in the first quarter of this year, the new names we brought in span U.S. corporate defined benefit U.S. endowments, U.K. master trust business, know this business. So we continue to see activity across all of those sectors and the new names as we work through some of those planned annuitizations that we've talked about now for a bit.

And Ryan, if I could that [indiscernible]. Ryan, this is Paul. Just to add one other thing. With regard to the FDIC program, I know you know this, but I just wanted to call it out. We did not recognize that as a sales event. So that's very strong revenue and profitability that the unit and the firm is getting, but that is not a sales event. So recognize that lift that's not in there, but the lift -- the decrease associated with moving out of mutual funds to ETFs and other passive implements are in there.

And that was our final question. I would now like to turn the call over to CEO, Ryan Hicke.

Thank you. As I mentioned, we started the quarter with strong financial results and are poised to drive future success. We also announced in Q1 the hire of Sean Denham as Dennis' successor as CFO for SEI. Sean is a terrific addition to the SEI executive team and brings a wealth of experience and talent to drive our future growth. But I would like to close by thanking and acknowledging my friend, Dennis McGonigle. For almost 40 years, Dennis has set the standard for leadership, culture, stewardship and care and that care extended to shareholders, clients, employees and our families. I have the deepest amount of personal and professional respect and admiration for Dennis, and I'm extremely proud to have worked with him for 26 years, learned from him for 26 years and laughed with him for 26 years. Many more times ahead for us in the future, but on behalf of all of us at SEI, I want to say thank you to Dennis, and thank you to everybody for joining today's call.

That does conclude our conference for today. Thank you for your participation. You may now disconnect.