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Executives

Al West – Chairman and CEO

Dennis McGonigle – Chief Financial Officer

Kathy Heilig – Controller

Joe Ujobai – EVP, Private Banks

Wayne Withrow – EVP, SEI Advisor Network

Ed Loughlin – EVP, Institutional Group

Steve Meyer – EVP, Head, Investment Manager Services

Analysts

Jeff Hopson – Stifel Nicolaus

Robert Lee – KBW

Chris Donat – Sandler O’Neill

Glenn Greene – Oppenheimer

Tom McCrohan – Janney

SEI Investments Co. (SEIC) Q1 2012 Results Earnings Call May 2, 2012 2:00 PM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the SEI First Quarter 2012 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session. Instructions will be given at that time. (Operator Instructions)

I’d now like to turn the conference over to Al West, Chairman and CEO. Please go ahead.

Al West

Thank you, and welcome everybody. All of our segment leaders are here on the call with me, as well as Dennis McGonigle, SEI’s CFO; and Kathy Heilig, SEI’s Controller.

Now I’m going to start by recapping the first quarter 2012 and then I will turn it over to Dennis to cover LSV and the Investment in New Business segment. After that each business segment leader will comment on the results of their segment. And then finally Kathy Heilig will give us some important company-wide statistics and as usual, fill questions at the end of each report.

So let me start with the first quarter 2012. First quarter earnings decreased by 13% from a year ago. Diluted earnings per share for the first quarter of $0.28, represents a 10% decrease from the $0.31 reported for the first quarter of 2011.

We also reported a 2% increase in revenue during the first quarter of 2012 versus the first quarter 2011. Now first quarter revenues were up 5% over fourth quarter 2011 revenues. So our earnings for the first quarter of 2012 and 2011 were both affected by gains attributable to SIVs on our balance sheet.

Now during first quarter of 2012 SIVs accounted for gain of $2.9 million, while in first quarter 2011 SIVs netted to an increase to earnings of approximately $6.9 million. Also during the first quarter we had one-time expenses of $1.8 million.

Now in addition, during the first quarter 2012, our non-cash asset balances under management increased by $16.3 billion, of that, SEI’s assets under management grew by $9.4 billion in the quarter, while LSV’s assets under management grew by $6.9 billion.

Finally, during the first quarter 2012 we repurchased 1.8 million shares of SEI stock at an average price of just under, I’m sorry, just over $20 per share, that translates to over $37.7 million of stock repurchases during the quarter.

Net new recurring revenue sales continued to improve. We generated over $26 million of net new sales events of which $23.5 million will be recurring revenues. All segments posted good sales quarters and each of the segment heads will address their sales activity.

We are continuing our investment in GWP and its operational infrastructure so critical to our future. Now during the first quarter we capitalized approximately $9.3 million of the Global Wealth Platform development and amortized approximately $7.6 million of previously capitalized development.

While we are increasingly encouraged with our long-term growth opportunities with the rollout of GWP, we’re also working hard to improve the profitability of our Bank segment.

Our GWP efforts remain concentrated on capturing U.K. GWP markets, as well as launching GWP in the U.S. The next two GWP releases along with the most recent release will complete the baseline functionality for the U.S., significantly enhance the U.K. functionality and then help to improve our operational efficiencies and scale.

Now continue to be encouraged by the feedback I receive from our clients and prospects, and it’s confirmed by our fourth and first quarter sales events across all our markets.

Our investments in infrastructure and new service offerings are helping us differentiate ourselves from our competitors and we certainly expect to capitalize on this even in these challenging markets. Now, our new service offering coupled with our financial strength positions us well for the long-term.

Now this concludes my remarks, so I’ll now ask Dennis McGonigle to give you an update on LSV and the Investment in New Business segment and after that, I’ll turn it over to the other business segments. Dennis?

Dennis McGonigle

Thanks, Al. Good afternoon, everyone. I will cover the first quarter results for the Investments in New Business segment, make a few brief comments on LSV Asset Management.

During the first quarter of 2012, the Investments in New Business segment continued its focus on direct marketing and research activities directed to the ultra-high net worth investor and the further development of services.

During the quarter, the Investments in New Business segment incurred a loss of $2.8 million, which compares to a $2.2 million loss during the fourth quarter of 2011. This increase in loss is due to the costs associated with the acquisition and operating run rate of NorthStar, which approximated $750,000. As you’ll recall, we acquired the assets of NorthStar during the first quarter, we expect losses in this segment to continue in this range during 2012.

Regarding LSV, we continue to own approximately 41% of LSV in the first quarter. LSV contributed approximately $27.3 million in income to SEI during the quarter. This compares a $23.4 million in the fourth quarter 2011.

The increase is due primarily to increased revenues at LSV from higher asset balances. Asset balances grew approximately $6.9 billion during the quarter, primarily from market appreciation. LSV’s cash flow during the quarter were essentially flat.

Also regarding LSV, under an equity compensation plan put in place a couple of years ago, a distribution was made from that plan in the second quarter of 2012 to certain key employees, that distribution will result in a reduction in our ownership percentage at LSV to approximately 40%.

I will now take any questions you may have.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And our first question goes to the line of Jeff Hopson from Stifel Nicolaus. Please go ahead.

Jeff Hopson – Stifel Nicolaus

Okay. Thanks a lot guys. In terms of New Business, can you tell us in terms of what NorthStar brings to you? And then how far away would you say we are from this business line generating higher revenues? When is it commercially viable I guess?

Dennis McGonigle

Yeah. I’d say what’s, yeah, the acquisition of NorthStar as you probably saw in the press release was an asset portion and I’d say not just in the structure of the transaction but what we’re really interested is it was the assets of the company, which is really their technology and we were interested in that for a couple of reasons.

One, it was solid technology that further -- we felt could further extend our capabilities and offering into the front office of our clients in the advisory business, the wealth management business and the Bank GWP Global Wealth Services offering.

And NorthStar gave us some components that we had not build out in Global Wealth Platform and we’ll enhance that platform more richly in the front office, which as we’ve worked in the market over the past few years, there is keen interest on the part of the market in improving front office execution capabilities, efficiency, compliance and sales quality. So the technical functionality is what we are after versus the business of NorthStar itself.

Secondly, the NorthStar capabilities, although some of the capabilities we have actually already built in GWP. There were some overlaps. It further extends also the straight through processing nature of our offerings direct from that client sales interaction all the way through to client implementation and transaction processing.

Joe and Wayne who -- we expect those businesses for sure will benefit from that increased, functional capability once we sort through the integration issues with Global Wealth Platform, can speak to it more directly. I wouldn’t say that we are in the business. We are not in -- we didn’t take NorthStar as a business and are now trying to grow the NorthStar business as it existed prior to acquisition.

There are some other applications in NorthStar we are looking at independent of the Global Wealth Platform. For example, its potential integration with TRUST 3000 as that exists, its potential integration with other third-party custody platforms that we may come across in our Global Wealth Services or trust retails and client relationships. But that’s I would say put that in kind of the R&D category of things we are investigating further.

Jeff Hopson – Stifel Nicolaus

Okay. Thank you.

Dennis McGonigle

NorthStar really didn’t have much of a P&L if you will, when we bought them.

Jeff Hopson – Stifel Nicolaus

Got it. Okay. Thanks.

Dennis McGonigle

You’re welcome.

Operator

Thank you. (Operator Instructions) We will now go to line of Robert Lee from KBW. Please go ahead.

Robert Lee – KBW

Thank you. Good afternoon, everyone.

Dennis McGonigle

Hi, Rob.

Robert Lee – KBW

Hey. Just the two questions. Well, first one is just on LSV. Are other strategies or your main strategies still open at this point to new investors?

Dennis McGonigle

Yeah. The simplest way to say is the larger cap strategies are open. The smaller cap are more niche global market type products, I’d say for the most are closures. There are some of those who are still open as well, but their core products are still open.

Robert Lee – KBW

Right. Great. And the second question I have was just kind of and I don’t know if this is something Dennis to ask you or ask to all of the segment heads. But I guess I’ll start with by asking you. I believe heading in towards the end of last year, heading into this year, as a firm, I think you had taken some initiatives to kind of look at the expense base, see how you are doing some things, see how you can maybe try some efficiencies and I’m sure that’s ongoing?

But can you may be update us kind of more broadly, I mean, are you at a point where you can look and say Geni -- we think we could take $5 million, $10 million or something out of the expense base kind of some of the initiatives we have or anyway kind of providing some roadmap or guidelines, and how you’re thinking about some of the initiatives you are taking?

Dennis McGonigle

Well, I’m not sure if my peers want me to answer this question, because my answer might be different than theirs.

Al West

You are breaking up.

Dennis McGonigle

But, Rob, I really think its best at the unit -- in each unit because each unit is at a different spot. So, Joe, certainly will talk about expenses and kind of the transition of expenses, and some of the things we’ve done working on operationally, but also in the sales and marketing client implementation side.

The good news there is that we certainly expect to have more sales, grow our clients that will need some costs to support. It takes the Investment Manager Services business, Steve Meyers’s business, a growing business. It’s not in a profit pressure, cost pressure mode. It’s in a growth absorption mode, if anything.

Institutional, well, the leverage and scale in that business with revenue growth and similarly in Advisor business, asset growth can be very productive for us profit-wise even.

So, Wayne also will have some, certainly some expense management to work through as he rolls out the Global Wealth Services and Global Wealth Platforms to his advisory clients and begins the transition in his business off of the existing infrastructure to the new infrastructure. So I really think it’s unit by unit.

Robert Lee – KBW

I appreciate that.

Dennis McGonigle

Sure.

Robert Lee – KBW

And I guess now all the guys know what questions are coming, so.

Dennis McGonigle

Yeah. That’s why I spoke so long. They get a thought.

Robert Lee – KBW

Thanks a lot.

Dennis McGonigle

Sure.

Operator

Thank you. At this time, we have no further questions. Please, continue.

Presentation

Al West

Thank you. I’m now going to turn it over to Joe Ujobai to discuss our Private Banking segment.

Joe Ujobai

Great. Thank you, Al. Today, I’d like to give you an update on our activity and a review of the current financials for the Private Banking segment. I will focus primarily on a comparison to the fourth quarter of 2011.

Revenue for the quarter was up compared to the previous quarter at $88 million, expenses for the quarter increased by approximately $2.7 million. Expenses for the quarter include an additional one-time charge of approximately $1 million related to accrued asset management distribution fees in our Canadian business. I mentioned this during the last investor call.

Expenses also included one-time expense of approximately $700,000 associated with restructuring of our GWP operations. Restructuring of operations is part of an overall program to control GWP infrastructure costs as an improved quality and build for scale.

We expect to have additional expense-related restructuring in the second quarter. While we focus on GWP Infrastructure cost control, we do expect to see higher sales, marketing and implementation expenses based on our growing new business activity. Our goal is to control our overall GWP expenses as we move from the build to the growth phase of this business.

Turning to new business, sales events for the quarter were $9 million, approximately 70% of this is recurring revenue. In the U.K., we continue to see three key positive dynamics converging at the same time. Number one, consistent acceleration of new name sales.

In the first quarter, we signed three new GWS contracts. The first is an additional contract to process an offshore book of business to one of our larger PCIM client signed last year.

With this new client, we are expanding our solutions to include offshore custody services. This is a traditional infrastructure client and the assets will convert later this year. The second new client, Broadstone Wealth Management represents another important new signing for GWS.

Broadstone has both discretionary and advisory business and will convert to GWS this year. The discretionary book is currently serviced by a key competitor in the U.K. and gives us greater credibility in the market with GWS positioning as a single infrastructure.

Our third signing is a large private client investment manager. This new client has selected GWS to drive a conversion of a subset of their individual managed accounts into a new scalable investment offering. This is a key value proposition of a Global Wealth platform. So this new client is further proof of our solution design.

Secondly, GWS assets under administration at the end of the first quarter were up $1.8 billion to just over $17 billion. Approximately $800 million was due to net cash flow of business transitioning clients and $1 billion due to market appreciation.

We also have an unfunded but committed backlog of $2 billion from conversion of our infrastructure clients sold over the past two quarters. We expect to convert this backlog in 2012.

As a reminder, business tradition clients convert over period of time and infrastructure clients typically convert 9 to 18 months after signing. The third dimension is a continuous increase in the depth and quality of our U.K. pipeline. Regulation continues to be a positive catalyst for change in this market.

Turning to the U.S., our U.S. investment processing pipeline is the largest, it has been in recent years and is moving away from TRUST 3000 to GWS. On GWS agendas in the U.S., we have significantly increased activity with both existing SEI clients and new names.

We believe that the value proposition that resonates well in the U.K. has direct relevance in the U.S. to both bank and other wealth managers for SEI.

During the quarter, we re-contracted a client for $4.7 million. They worked hard to secure our current business and about 72% of our TRUST 3000 revenue is re-contracted until 2015 or longer.

Finally, as a review of our asset management distribution business, ending asset balances grew to $17.2 billion largely due to market depreciation.

In conclusion, investments we have made over the past several years are beginning to deliver positive sales results. We remain focused on growing our distinct clients, adding the right new clients and successfully launching GWS in the U.S.

Investments in new senior hires in 2010 and ‘11 are bearing dividends for SEI in the U.K. We’re working to drive the revenue as quickly as possible and controlling costs or building for scale. Any questions?

Question-and-Answer Session

Operator

(Operator Instruction) And our first question is from the line of Chris Donat from Sandler O’Neill. Please go ahead.

Chris Donat – Sandler O’Neill

Hi. Good afternoon, Joe.

Joe Ujobai

Hi.

Chris Donat – Sandler O’Neill

Just one quick one on the Canadian asset management expenses. Does that -- we had it last quarter, you had $1 million this quarter. Is it done or is it something that might come back in the second quarter?

Joe Ujobai

No. It’s done.

Chris Donat – Sandler O’Neill

Okay. And then just trying to see if we can quantify any of the additional expenses in the second quarter that you alluded to, we’re talking low single-digit millions incrementally, I would assume?

Joe Ujobai

In additional expenses or -- I’m not sure I just got the question.

Chris Donat – Sandler O’Neill

Sorry. Like tied to restructuring?

Joe Ujobai

Yeah. I would say it would be similar to what we’ve experienced in the first quarter.

Chris Donat – Sandler O’Neill

Okay. So it won’t necessarily be an increase. It would be like the first quarter.

Joe Ujobai

Yeah. I think, we’ve -- as part of the overall cost control as we move from what I called earlier a build phase to a growth face. You look at, there is only four big areas of expense. One, we’ve certainly spent a lot of money on in that development. Al and others have talked about that we’re largely -- we’re getting very close to having baseline done.

I think going forward, development expenses will be more maintenance and then on discretionary based on either efficiency and/or entering new markets. So development is an area, we can focus on over time expense reduction.

We talked about an operational restructure to raise the quality of our service as well as to create scale. We focused heavily on that over the last quarter or so. That’s where most of these one-time expenses occurred.

We’re trying to drive the operations closer to the clients. So we’re moving some of the operations that were based here in Oaks to London. I think we’re in a pretty good shape in what I’d call sort of the baseline infrastructure of operations in London as we execute against this restructuring. We still need to build out some of the U.S. operations unless we enter the market.

So, there is room in those two places for us to make expense improvements. Those other areas where we’re going to spend more money are sales, marketing and relationship management. I think that’s a good thing, because it means, we’re selling more. We have more clients and then implementations.

I think we’re finding, we can we can scale implementation. So the cost of an implementation -- per implementation is beginning to go down, but we expect to do a lot more of them. So, there is sort of a balance here as we progress this business from build to grow. And -- our goal here is to oversee that and manage to that, so that ultimately we can control these expenses and drive more of our revenue to the bottom line.

Chris Donat – Sandler O’Neill

Okay. Thanks very much.

Operator

Thank you. And next we’ll go to line of Glenn Greene from Oppenheimer. Please go ahead.

Glenn Greene – Oppenheimer

Thanks. Hi, Joe. How are you?

Joe Ujobai

Good.

Glenn Greene – Oppenheimer

Sounds like good progress. Just a couple of questions, first on the three GWS signings in the U.K., anyway to sort of frame the asset levels and if you’re more comfortable doing it in aggregate, that’s fine?

Joe Ujobai

Yeah. These three are all conversion or infrastructure clients. So, we’ll start to see these assets -- we’ll see these assets this year. All three of them have fairly substantial growth plans. So over time I think we’ll see some growth from them. And the $9 million of sales events I think which I mentioned 70% or so was recurring. That’s heavily tied to these three clients.

So, they are generally a little bit bigger than most of the clients we’ve signed in the past. And again, we expect the asset to convert more quickly because they are business transition clients.

Glenn Greene – Oppenheimer

The large PCIM that you alluded to, is than an entirely new client for you?

Joe Ujobai

It’s a brand new client for us. The third one I mentioned and they are looking to move some of their managed accounts to a much more scalable infrastructure and it’s not all of their business, but it’s an interesting portion of their growing business. And it’s a big important win for us.

Glenn Greene – Oppenheimer

Will you -- are you able to name the name or will you at some point or not allowed to?

Joe Ujobai

In the beginning with our first handful of clients we always forced -- we encourage them to help us with our disclosures and so we only pronounced their names, generally close to the signings. As we have got more of these clients, some of them have -- would rather have the names announced more on their schedule than our schedule. So, we expect we would that name but as they start to roll out this service to their advisors and clients, then their name would come out.

Glenn Greene – Oppenheimer

Okay. And then moving to the U.S., you sound continually excited about the pipeline. Where are we in terms of new signings for GWS in the U.S. and did you have any signings first of all in the quarter, you sounded like you did, but it sounds like you are encouraged by the pipeline?

Joe Ujobai

Yeah. I’m encouraged by the pipeline. I mean there is a long sell cycle in these things, and we have been talking to our clients about this for a long time. But really towards the end of last year and early this year, we have ratcheted up our sales events and really moved all of our focus in the U.S. sales force towards GWP.

I wouldn’t expect a name in the next quarter or two, but I think they were lining up for -- we are excited about the engagement we are having and moving quickly from sales to what we would call discovery should really try to determine the viability of each prospects.

Glenn Greene – Oppenheimer

Okay. Thanks, Joe.

Operator

Thank you. And next we’ll go to line of Jeff Hopson from Stifel Nicolaus. Please go ahead.

Jeff Hopson – Stifel Nicolaus

Okay. Thank you. Joe, so from a practical standpoint, when do you see some of these starting to hit revenues more significantly I guess. And then in terms of the timing, so as we look forward to say next year, you are talking about development cost probably that will start moderating and then you have marketing costs probably will accelerate a little bit. And then I guess servicing costs that may be will be flat or down. So anything additionally that you can give us in terms of timing of expenses relative to revenues?

Joe Ujobai

Okay. So timing of revenue, I’ll answer that in two ways. I think we have got some good indications with our business transition client. So as I mentioned earlier, we booked about $800 million net cash flow from business transition clients in the first quarter. That’s a substantial improvement over our run rate in previous quarters.

And what we are finding is some of the clients that came on in late 2010 or early 2011 are starting to drive some fairly significant assets. And so, what we are learning is that, it may take 6, 9, 12 plus months for our business transition client to really rev up and get moment around asset gathering.

So, we have 13 or so clients. We have 16 clients signed. We have 13 clients installed. A lot of those first 13 are business transition and so we would expect to see continued growth from business transition clients. Given that many of them are up and running and we have experience with them and they have experience with us and we are seeing some positive momentum in that space.

And so, that’s good ongoing recurring increased revenue for us. We are able to continue to drive what I really call pipes we’ve got. 13 pipes now up and running and other three to convert, based on the sales we have had, and more pipes we have, the more that’s going to grow. And again, those pipes get bigger as we get -- or get more efficient as we get some experience.

So, I think we will start to see again continued growth from these business transition clients. But as I mentioned earlier, a lot of the new clients are more traditional conversions. So we will see some of these clients that we announced today or the ones we announced in the fourth quarter, most of those assets will convert this year.

So, we will start to see quarter-by-quarter positive trend on the revenue. I don’t see a breakout on the revenues this year or probably early next year. But we are definitely seeing positive trend on the revenue based on assets under administration growth.

And expenses as I said, it’s a balance between moderating what -- using you word, moderating what we have been investing heavily in and scaling what we’ve built combined balanced with additional sales and implementation expenses. Some of the restructuring we did in the first quarter and during the second quarter. They’re obviously one-time costs associated with that. I know we’ll start to see some of those savings in those areas start to impact expenses in the third and fourth quarter.

But -- so, we look at it sort of the four areas I mentioned earlier, development, operations, sales and implementations. We’re trying to balance that and ultimately drive an impact. So, the more of this revenue starts to hit the bottom line a bit.

Jeff Hopson – Stifel Nicolaus

Okay. And in terms of the pipeline, any comments either quantitatively or qualitatively?

Joe Ujobai

In the U.K., we’re pretty much as we sell them, we are filling the pipeline. The pipeline still looks around 50 plus million dollars. I would say that the firms are larger and the firms are more, sorry, more conversion than we’ve had in the past. They are still sort of in the small to mid size. I don’t anticipate as closing a jumbo in the next couple of quarters.

Jeff Hopson – Stifel Nicolaus

Okay. And I know that in the past you talked about a couple potential jumbos. You’d started to have some conversations with some jumbos, anything to say as far as how those are coming along?

Joe Ujobai

I think those are long conversations, I hope over time, they become shorter. I think they were positive conversations, the more clients we close, the more assets we gather, the more experience we get. There certainly is a level of – an increased level of confidence amongst larger firms with our solution. I think the more case studies and the more referenceable we become, that certainly helps.

And I can tell you that most of these large firms aren’t really making decisions – alternative decisions to us. They are not just making decisions, but again as we continue – this thing continues to stabilize and grow. I also think as we bring this to the U.S. market, there are a lot of very large opportunities in the U.S. market, not only with current clients but with new prospects, and just by sheer numbers, lots of opportunity that were beginning to focus on.

Jeff Hopson – Stifel Nicolaus

Great. Thank you.

Operator

And we’ll go to the line of Robert Lee with KBW. Please go ahead.

Robert Lee – KBW

Great. Thanks Joe. Just had two questions for you. First one is, and talking about the kind of what the pipeline of transition – oriented clients, you mentioned that you’re seeing some improvement acceleration, you’d mentioned the $800 million of cash inflows, but is there any way to kind of size that in aggregate the book of business that’s kind of you’re weighting on and any sense of your expectations over the time frame you expect to get that. Is it $5 billion of potential transition assets that could transition over the next two years? I mean how do you – what’s your thought on that?

Joe Ujobai

Yeah and I would say as we have got $17 billion of assets now on the platform with the business transitioning clients, we still have a relatively small percentage of their assets. Now, obviously that’s improving as we see cash flows improve, but it’s still a relatively more opportunity to their assets 20% to 30% of their assets. I think that’s probably at the higher end.

So, I think again the more success we have in converting assets, this is really a momentum business. So, the more success we have at converting assets, the faster this is going to grow.

As I said earlier, we have now 16 – we’ll have 16 pipes into the platform with most if not all of our clients have fairly aggressive growth plans, but they’d be organic or through acquisitions. And so we should see – we should start to I think see, some, again increased momentum over the coming quarters on those current clients and then you’re adding these new clients.

As I mentioned earlier, there is a $2 billion of backlog that’s committed to us contractually from our infrastructure clients, but we’d also expect those firms to grow too. So I think the answer is the momentum is heading in the right direction, we are seeing some very positive flows from some of our 13 or 16 clients and we would expect to continue to focus on [everything] is gathering more assets from current clients, selling more clients and entering the U.S., so we have even more pipes into the banks.

Robert Lee – KBW

Maybe a follow-up, one perception or at least my perception. Thinking back over the last couple of years is that, one of the revenue challenges I think maybe has been even as you’ve been rolling out in the U.K. and signing clients, the incremental revenues there has been some offset just with price concessions and whatnot on re-contracting in the U.S. on TRUST 3000 and other things. Can you comment and maybe update us on where pricing is in the U.S.? When you do re-contract and assuming that I’m reasonably on track that you are getting over that hump now where the business is growing fast enough, big enough that come up or overcome some incremental pricing pressure on re-contracting here?

Joe Ujobai

As I mentioned earlier, we have about 72% of our TRUST 3000 revenue contracted through 2015 or longer. I feel we are in pretty good shape where we are out re-contracting, that’s I think – certainly our competition, one thing they have or really probably the only thing they have is cut price to compete.

So, we are certainly see that would that be re-contract that we experience, but further along we get with GWP and making that a reality to the U.S., I think the more we can work to protect our current pricing with our current clients.

What’s hurt us more than re-contracting in the past has been losing some clients mostly due to M&A activity. So, I would ask the question if it’s general business as usual re-contracting, the re-contracting rates despite some fairly significant price pressure because of the market conditions have generally improved and again, I think that’s largely due to the investment we have made in the future of this industry.

What kills us the most is, when we have an M&A transaction and we don’t win that largely due to who has made the acquisition. Typically, over the last seven or eight years it has been about 50-50, we won 50% of time and lose 50% of the time.

But short of a large acquisition, I think generally we feel pretty good about our ability to re-contract clients. In fact, now we are going back to these clients that will be re-contracting going forward and talking about an ultimate move to GWP, which certainly strengthens our position in the market.

Robert Lee – KBW

Great. Thanks for taking my question.

Operator

And we’ll go to the line of Tom McCrohan with Janney. Please go ahead

Tom McCrohan - Janney

Hi, Joe. How are you?

Joe Ujobai

Good.

Tom McCrohan - Janney

Question just on the sales events. So, this quarter you mentioned $9 million, I think last quarter it was $11 million. So, you had about $20 million of sales events over the past couple of quarter. So, can you remind us of how these revenues are going to be reflected in reported results, that was going to phase in to the model?

Joe Ujobai

So, again, some of those are one-time, so some of those come in over the next quarter or two, but if I look at what’s recurring revenue, as I have mentioned, a business transition client that comes in over time, so we think that’s sort of three to five years and the way we calculate that sales event is we give sort of an average annual revenue associated with the contract.

So, if it’s a five-year contract, we’ll give you the average annual revenue over the course of the five years, and we think that it generally picks up in year two and momentum in years three, four and five.

On a business or on an infrastructure client, it takes anywhere from nine to 18 months to see that revenue articulate. So, we’ll start to see some of the revenue we’ve sold in the fourth and the first quarter, they will start to come in towards the end of this year and into next year.

Tom McCrohan – Janney

So given that and assuming the market cooperates, market valuations aren’t – let’s say, let’s just assume, I mean at current levels and given you recontracted about 75% of your existing base business, shouldn’t revenues trend higher from here on a sequential basis given that you are layering in these new businesses – new business wins?

Joe Ujobai

Yes. That’s our goal as ad revenues trend higher. We have other businesses within side of banking, of this banking segment, asset management, that’s heavily dependent on. That business is 100% dependent on market valuation. We have a cash management business that is taking a fair looking given the rates of money market funds and our ability to take the same fee levels.

So we have brokerage, which bounces around a little bit. So we have some more transactional businesses, but in our core recurring revenue business with wealth processing or investment processing, we expect to see that continue to trend in the right direction.

Tom McCrohan – Janney

And just to clarify the number of clients in the U.K., I think last quarter you said it was 15, obviously with these three, you’re at 18. How many are currently live? Well, just confirm that is 18. And how many are live right now on the platform?

Joe Ujobai

It’s actually 17, because we’re sort of counting one as two, because as I mentioned this quarter, we signed a significant new book of business with the private client investment manger that would be their offshore book, which wasn’t in original contract.

So it is 17 contracts with 16 signed and we have two signed contracts in the U.S. So there is a total of 19 signed GWP deals. And of that, I think 12 books of business are converted or open for business, 13. I don’t know the exact number anymore because we’re getting more of them.

Tom McCrohan – Janney

All right. Just want to make sure. So 17, you have 17 GWP customers in the U.K., plus a couple of extra here in the U.S., is that what you said?

Joe Ujobai

Yes.

Tom McCrohan – Janney

Yes. Got it. Okay. So I got, thanks Joe.

Joe Ujobai

Okay.

Operator

And we have no further questions at this time.

Presentation

Al West

Thanks, Joe. Our next segment is Investment Advisors and Wayne Withrow will begin. Wayne?

Wayne Withrow

Thanks, Al. During the first quarter we saw a significant improvement in our net cash flow, which together with positive markets resulted in a marked improvement in our financial results. Assets under management were $32.6 billion at March 31, a 7% improvement from December 31. This increase was driven by $374 million in net positive cash flow and an overall increase in market evaluations.

Gross cash receipts for the quarter were $1.6 billion. Our quarterly net cash flow was the best we’ve seen since 2007. Revenues for the quarter were $49.5 million, a $4.4 million increase from the fourth quarter. We also saw our margins improve quarter-over-quarter by 200 basis points from 38.8% to 40.8%.

On the new business front, we signed 120 new advisors during the quarter. As discussed last year, we are being more selective in the advisors we recruit. Our pipeline into advisors remains very strong.

Our improvement in revenues, profits, and net cash flow are all exciting news, but even more exciting is that we remain on track for the U.S. rollout of GWP. We have 85 small beta clients on the system and are scheduled to begin implementation of early adopter clients at the end of the second quarter.

If you recall, the beta clients are all small advisors, while the early adopters are among our largest and most complex clients. After the early adopter implementations, we expect to slowly ramp up the U.S. rollout of GWP in the last half of 2012 with a more aggressive rollout beginning in 2013.

In summary, net cash flow, profits and new advisor recruiting was strong during the first quarter and the imminent U.S. rollout of GWP bodes well for the segment. I welcome any questions you may have.

Question-and-Answer Session

Operator

(Operator Instructions) We will go to Jeff Hopson with Stifel Nicolaus. Please go ahead.

Jeff Hopson – Stifel Nicolaus

Okay. Thanks a lot. Wayne, so the revenue rate, the fee rate I guess looked like it blipped up a little bit and I did notice that liquidity assets were down, so is that part of the equation, I guess from here in terms of the revenue?

Wayne Withrow

That is part of the equation. We had positive markets and we have got $74 million of net positive cash flow and then that’s amplified in the revenue recognition because we did see a shift from the liquidity balance in the more long-term products.

Jeff Hopson – Stifel Nicolaus

And then the cash flow number, can you give the – I didn’t know if that was gross or net, was that $1.6 billion of gross or net?

Wayne Withrow

$1.6 billion was gross, $3.74 million is net.

Jeff Hopson – Stifel Nicolaus

Great. Okay. Thank you.

Operator

We will go to Tom McCrohan with Janney.

Tom McCrohan – Janney

Wayne, how are you?

Wayne Withrow

Great.

Tom McCrohan – Janney

Any learnings or takeaways from the 85 small beta clients are running on GWP, what have you learned from that whole experience and what tweaks if any are you making to the platform?

Wayne Withrow

I won’t say we are making any tweaks to the platform. It’s not how I would characterize it. What I would say is, we’ve discovered areas where we had to improve the workflow perhaps, so we could become more efficient. And we found other areas that maybe didn’t work exactly how we wanted them to.

I mean, it’s exactly what you would expect in a beta. So we wanted to make sure that we had small clients on, so we could make the fixes before we bring on the more larger, more complex clients.

Tom McCrohan – Janney

All right. And are you making – are there any major event coming up or events coming up this year where you are going to really showcase us new platform that we should be paying attention to or is it case-by-case you are going out selectively and waiting for kind of more aggressive rollout till next year?

Wayne Withrow

We’re at the early stages of beginning the marketing rollout of the platform.

Tom McCrohan – Janney

Okay. Thanks.

Operator

We’ve got Robert Lee with KBW. Please go ahead.

Robert Lee – KBW

Thanks. Good afternoon, Wayne. I just had a quick question, and this is if you can refresh our memory. As you roll out GWP in your channel, I mean how should we think of that from a revenue perspective? I guess I’m kind of thinking that it’s not really so much an initial revenue benefit so much as getting them on the platform. And I guess hopefully capturing more business from those advisors and hoping them grow their business faster, but there isn’t necessarily distinct revenue capture at least upfront. I mean, am I thinking that correctly or...?

Wayne Withrow

Yes. The way I look at it is, it makes our current offering sort of this turnkey platform much more attractive because it’s a better platform. And that will help us recruit advisors into that model, but it also will enable us to move upstream work to someone who wants more flexibility and what the platform can do. So, it will enable us to recruit larger advisors.

Now in connection with that, right now our revenues are primarily driven through the asset management fees. As we move towards these larger advisors, we may get a combination of platform-based fees and asset management fees. We see the big revenue opportunity in new advisors, not – while there’s incremental revenue from our existing client base, the focus is on recruiting new.

Robert Lee – KBW

All right. Great. Thank you.

Operator

We have no further questions at this time.

Presentation

Al West

Thank you, Wayne. Our next segment is the Institutional Investor segment and I’m going to turn it over to Ed Loughlin to discuss this segment. Ed?

Ed Loughlin

Thanks, Al. Good afternoon, everyone. I’m going to start with the financials for the quarter and then discuss sales activity. Revenues of $53 million for the first quarter increased 7% compared to the fourth quarter primarily due to new client fundings and market appreciation during the quarter. Profits of $25 million increased 9% versus the fourth quarter with margins of 47% increasing slightly compared to the prior quarter.

Asset balances increased by $5 billion during the quarter approaching $59 billion on March 31. Net new client assets funded during the quarter were $1.8 billion and the backlog of committed but unfunded assets at quarter end was $1.2 billion. First quarter sales from seven new clients in our global markets totaled $2.8 billion representing a strong sales quarter for the segment.

Continuous sales growth supports the increasing institutional market demand for outsourced investment providers who take on significant accountability and also investment discretion on behalf of the clients. SEI 20-year track record and resource model rooted in fiduciary management positions us well to continue to grow the global institutional business, and we are optimistic about the growth opportunities for this segment.

Thank you very much. I’m happy to entertain any questions you might have.

Question-and-Answer Session

Operator

(Operator Instructions) And now we will go to line of Jeff Hopson from Stifel Nicolaus. Please go ahead.

Jeff Hopson – Stifel Nicolaus

Okay. Thanks. Ed, in terms of the sales in the quarter, anything I guess typically from the seasonality standpoint the first quarter is a big quarter to make changes. Is that true? Did that affect the number of signings? And anything else that is helping kind of release the logjam?

Ed Loughlin

Typically, we don’t necessarily see that the sales come in 25% each quarter. So I’d have to go and look as if the first quarter as typically the largest from the sales production, but let’s assume that there are – there’s a certain amount of demand that is pushed early in the year.

That did exist this year, I think that we have focused on trying to get larger investors that’s been a big part of our strategy. The difference between the good year and a great year is getting a couple of larger ones and so I think that’s probably a major contributing factor.

Jeff Hopson – Stifel Nicolaus

Okay. And then the expense, I assume there were some sales expense that hid in the quarter on the high side is that true?

Ed Loughlin

Yeah. If we were to look at the fourth quarter versus the first quarter the biggest increase, okay. Of the $1.4 million increase in expenses $900,000 of that was direct cost associated with those assets. In that direct cost would be the money mangers cost, if there’s any kind of advisor that we’re paying as a referral, so that’s the biggest part of that.

Jeff Hopson – Stifel Nicolaus

Okay. Great. Thanks.

Operator

Thank you. And next we’ll go to line of Christopher Donat from Sandler O’Neill. Please go ahead.

Chris Donat – Sandler O’Neill

Hi, just for another on the $2.8 billion of new assets. Can you give us a sense on the sales cycles for those when where the first discussions and that sort of go backwards and how that got us to $2.8 billion in the first quarter?

Al West

Yeah. And I would say that they’re kind of all over the lot, but just generally, I would say to you that the sales process has changed somewhat because of the fact but I think clients or prospects are kind of engaging us the way they want to engage us, but what I mean there is probably 55% of our deals now come through an RFP process. So historically that really hasn’t been the case. So there’s a lot more work that the client is doing research wise or the prospect before they kind of get us involved.

The process is still pretty long because there was one situation that we announced there’s a not for profit, they sent the RFP to 55 prospective bidders, they now right down to 12, then to 8 then to 4, and then we got it.

So it’s not really a longer time period on our side, but the fact that they’re going through this type of a discovery process. You know it was lot of work on their sides. And so that prolongs the overall process.

Generally I would say – I can’t comment that the process is shorter, I just think that – client seem to be more committed to ending the prospects – ending the process. So we don’t see as many delays at the end. This is more important for them to finalize the due diligence, make a decision and then convert the assets. So that’s the most encouraging thing.

Chris Donat – Sandler O’Neill

Okay. Thanks.

Operator

Thanks you. And next we’ll go to line of Tom McCrohan from Janney. Please go ahead.

Tom McCrohan – Janney

Yeah. Just a quick question, do you say new client’s sales, this quarter it was $2.8 billion?

Al West

Yes. $2.8 billion.

Tom McCrohan – Janney

So that sounds like one of the highest levels in a while, right I mean looking at the trends?

Al West

It’s good, it’s a strong quarter.

Tom McCrohan – Janney

Okay. I’m looking at the trends like Q4 is $1.8 billion -- $754 million, and Q3, $1.1 billion, 2Q $1.4 billion in the 1Q. So it looks like it’s – pretty solid relative to last four quarters.

Al West

Yeah. I mean we want to get it back to the production level that we had prior to the finance request.

Tom McCrohan – Janney

And can you remind me what that was?

Al West

That was $7 billion.

Tom McCrohan – Janney

$7 billion, okay.

Tom McCrohan – Janney

All right. Fair enough. Thanks.

Al West

Sure.

Operator

And this time we have no further questions please continue.

Presentation

Al West

Thank you, Ed. Our final segment today is Investment Management. And I’m going to turn it over to Steve Meyer to discuss the segment.

Steve Meyer

Thanks, Al. Good afternoon, everyone. As usual, I’ll give a brief recap of the financial results for the quarter and then give an update on the market. For the first quarter of 2012, revenues for this segment totaled $46.2 million which was $1.7 million or 3.9% higher than the fourth quarter of 2011. This quarter-over-quarter increase in revenue was primarily due to an increase in asset balances as well as one-time revenues events received in the first quarter.

Our quarterly profit for this segment, $15.8 million was approximately $600,000 or 3.7% higher than our profit for the fourth quarter of 2011. This quarter-over-quarter increase in profit was largely due to an increase in our revenue for the quarter offset by an increase in certain expenses such as sales compensation and workforce expenses.

Third-party asset balances at the end of the first quarter of 2012 were $228.3 billion, approximately $7.1 billion or 3.2% higher as compared to our asset balances at the end of the fourth quarter of 2011. The increase in assets was primarily due to net positive cash flows of $1.7 billion and market appreciation of $5.4 billion.

During the first quarter of 2012, we had net new business sales events totaling $8.3 million in annualized revenue. This represents a strong quarter in new revenue events. Equally of importance, these new events were diversified among all of our solutions and represented the U.S. and non-U.S. growth opportunities.

Turning to the market, I’m pleased to report that activity has increased in the first quarter, but with an undertone of engaged activity, specifically firms seemed to executing and making decisions. While the economy and broader stock markets still has an effect on clients’ decision making, we are cautiously optimistic that we are seeing the beginning of a thawing cycle regarding investment decisions.

In summary, we continue to execute on our strategy focus on our key growth opportunities and invest in our solutions. This combined with the positive sentiment in the investment managers market should bode well for us.

Thanks of your time and I’ll now turn it over for any questions you have.

Question-and-Answer Session

Operator

(Operator Instructions) And our question comes from the line of Chris Donat from Sandler O’Neill. Please go ahead.

Chris Donat – Sandler O’Neill

Hey, Steve. Just want to make sure I heard that right. You had $8.3 million of annualized revenue, that’s what you said?

Steve Meyer

$8.3 million.

Chris Donat – Sandler O’Neill

And then, just in terms of what’s going on, maybe away from even maybe impacting some customer decisions. Any comments on the activity related to GlobeOp and if that’s impacting customer activity?

Steve Meyer

Well, I typically don’t like to mention and give airtime to any of my competitors, but what I’d say is certainly when you have consolidation in the industry, I think it takes everyone to take a step back and kind of reconsider where they are and certainly we look at that as a potential opportunity for us.

Chris Donat – Sandler O’Neill

Okay. Thanks.

Steve Meyer

Sure.

Operator

Thank you. At this time we have no further questions. Please continue. Oh, we do have a question from the line of Glenn Greene from Oppenheimer. Please go ahead.

Glenn Greene – Oppenheimer

Hey, Steve, maybe just the mix of the new business between traditional managers and alternatives?

Steve Meyer

Traditional, actually was a little bit higher this quarter which was good to see. Traditional was about 60% of it. 60% versus 40% and the global was about – just under about 15% or so of the new business.

Glenn Greene – Oppenheimer

And how big was the one-time revenue item you called out?

Steve Meyer

One-time – of the $1.7 million was about $700,000 or little bit more and that related to a change in service with two of our clients.

Glenn Greene – Oppenheimer

Okay. Thank you.

Steve Meyer

Sure.

Operator

Thank you. (Operator Instructions) And now we’ll go to the line of Jeff Hopson from Stifel Nicolaus. Please go ahead.

Jeff Hopson – Oppenheimer

Okay. Thanks a lot. So, of the $8.3 million, did any of that hit in this quarter?

Steve Meyer

Of the $8.3 million, a very little of that hit this quarter, but we do expect it to hit this year.

Jeff Hopson – Oppenheimer

Okay. Great. Thank you.

Steve Meyer

Sure.

Operator

Thank you. At this time, we have no further questions. Please, continue.

Presentation

Al West

Thank you, Steve. I would now like Kathy Heilig to give you a few companywide statistics. Kathy?

Kathy Heilig

Thanks, Al. Good afternoon everyone. I have some additional corporate information about this quarter. The first quarter 2012 cash flow from operations was $39.2 million or $0.22 per share. In the first quarter, free cash flow was $17.8 million or $0.10 per share.

First quarter capital expenditures excluding capitalized software were $12.1 million, but that included the $10 million for the NorthStar acquisition. The remaining capital expenditures for this year are projected to be about an additional $10 million. The tax rate was 37.2% which compares with the tax rate of 34.7% last quarter, but that did reflect some tax planning strategies. We would expect assuming everything stayed status quo with our business as well as with the R&D tax credit not being extended that our rate will be around 37%.

The accounts payable balance at the end of March was $2.2 million. We also would like to remind you that many of our comments are forward-looking statements and are based upon assumptions that involve risks and that the financial information presented in our release and on this call is unaudited. Future revenues and income could differ from expected results. We have no obligation to publicly update our correct any statements herein as a result of future developments. You should refer to our periodic SEC filings for a description of various risks and uncertainties that could affect our future financial results.

And now, please feel free to ask any other questions that you might have.

Question-and-Answer Session

Operator

And I will go to the line of Glenn Greene from Oppenheimer. Please go ahead.

Glenn Greene – Oppenheimer

Thanks, maybe for Dennis, two questions. First is, help me reconcile the $26 million or the $23 million in sales. I heard the $9 million from Joe, and the $8 million from Steve, is the difference [obviously] Ed’s business?

Dennis McGonigle

That difference is institutional because of the fact that revenue is off of the asset sales event, which is about $8 million and also the revenue is off of the net positive cash flow from Wayne in the quarter.

Glenn Greene – Oppenheimer

And then I ask this every quarter, so I’ll ask it again, the LSV revenue in the quarter?

Dennis McGonigle

$77.4 million.

Glenn Greene – Oppenheimer

Got it. Thanks.

Dennis McGonigle

Operator

(Operator Instructions) And we have no current questions. Please continue.

Al West

Thank you. So ladies and gentlemen, as we look ahead to 2012, that although new net sales events have been promising, we expect short term revenue and profit growth to remain difficult to achieve.

And I will continue to concentrate on our efforts on maintaining high satisfied clients, growing new business events and controlling cost. I remain bullish about our longer term business opportunity and the positive impact we are making on the markets we serve. And our focuses on long term growth and revenues and profits is unwavering.

Now, before you go, our Annual Investor Day will be held on 30th of May this year, with a dinner at the night before on the May 29. Please save the date.

And I’ll give you one more chance to ask anybody questions. If you have no questions, thank you very much for joining us and have a great afternoon.

Operator

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.

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