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Executives

Al. West - Chairman and CEO

Dennis McGonigle - Chief Financial Officer

Kathy Heilig - Controller

Joe Ujobai - Executive Vice President, Private Banks

Wayne Withrow - Executive Vice President

Ed Loughlin - Executive Vice President

Steve Meyer – Executive Vice President

Analysts

Robert Lee - KBW

Chris Donat - Sandler O’Neill

Glenn Greene - Oppenheimer

Jeff Hopson - Stifel

Tom McCrohan - Janney

Sam Hoffman - Nomura

Peter Suss - Bertrand Capital

Eric Connery - Robeco

Peter Heckmann - Avondale Partners

SEI Investments Co. (SEIC) Q3 2012 Results Earnings Call October 24, 2012 2:00 PM ET

Operator

Ladies and gentlemen, thank you for standing by, and welcome to SEI Third Quarter 2012 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded.

I’d now like to turn the conference over to our host, SEI’s Chairman and CEO, Mr. Al West. Please go ahead, sir.

Al West

Good afternoon, everybody. All of our segment leaders are on the call as well as Dennis McGonigle, SEI’s CFO, and Kathy Heilig, SEI’s Controller.

Now, I’m going to start by recapping the third quarter 2012. I’ll then turn it over to Dennis to cover LSV and the investment in new business segments. After that, each business segment leader will comment on the results of their segment. And then, finally, Kathy Heilig will provide you with some important company-wide statistics. Now, as usual, we’ll field questions at the end of each report.

So let me start with the third quarter 2012. Third quarter earnings increased by 3% from a year ago. Diluted earnings per share for the third quarter of $0.29 represents a 7% increase from the $0.27 reported for the third quarter of 2011.

We also reported an 8% increase in revenue during the third quarter versus the third quarter of 2011. And in addition, during the third quarter 2012, our end of quarter non-cash asset balances under management increased by $11 billion. Of that, SEI’s assets under management increased by $7 billion during the quarter, while LSV’s assets under management grew by $4 billion.

Finally, during the third quarter 2012, we repurchased 1.55 million shares of SEI stock at an average price of $21.70 per share. That translates to $33.6 million of stock repurchases during the quarter.

The net new recurring revenue sales remained strong. We generated over $23.7 million of new -- of net new sales events, of which $21.4 million will be recurring revenues. All segments posted good sales quarters, and each one of the segment heads will address their sales activity.

Now, we are continuing our investment in GWP, and its operational infrastructure is so critical to our future. Now, during the third quarter, we capitalized approximately $7.7 million of the Global Wealth Platform development and amortized approximately $10.4 million of previously capitalized development. Now, $2.7 million of the amortized expense was accelerated, as Dennis will explain.

In the Banking segment, while we are increasingly encouraged with our sales activity and intermediate term revenue potential associated with the rollout of GWP, we’re also working hard to manage the cost of building scale and absorbing new business.

Our GWP sales and marketing efforts remain concentrated on capturing U.K. GWP markets as well as launching GWP in the U.S. Now, we’re reaching another important milestone in our launch of GWP in the U.S. We’re in the process of releasing another tranche of U.S. functionality, which will be important to the advisory in banking markets.

Now, recently I made a trip visiting with the CEOs of a number of our U.S. banking clients and prospects. And I continued to be encouraged by the feedback I'm receiving over the launch of GWP.

Now, favorable feedback from clients and prospects is happening across the company. And it's confirmed by our sales events in all of our target markets. Our investments and infrastructure in new service offerings are helping us differentiate ourselves from our competition and these offerings coupled with our financial strength positions us very well for long-term growth.

Now, this concludes my remarks. So I will now ask Dennis McGonigle to give you an update on LSV and the investment in new business segment. After that I will turn it over to the other business segments. Dennis?

Dennis McGonigle

Thanks, Al. Good afternoon, everyone. I will cover the third quarter results for the investments in new business segment and discuss the results of LSV asset management and address a couple of additional items.

During the third quarter, 2012, the investments in new business segment continues to focus on the ultra-high-net-worth investor, the integration of our capabilities acquired in the NorthStar acquisition and the further development of new web-based investment services.

During the quarter, the investments in new business segment incurred a loss of $2.8 million, which compares to $2.7 million loss during the second quarter of 2012. There has been no material change in this segment, and we expect losses in the segment to continue in this range during the remainder of the year.

Regarding LSV, our earnings from LSV represent our approximate 40% ownership interest during the third quarter. LSV contributed approximately $24.9 million in income to SEI during the quarter. This compares to approximately $22.7 million in the second quarter of 2012.

The increase in income is due to an increase in asset balances during the quarter. Asset balances improved by approximately $4 billion during the quarter due to increased market valuation offset by slightly negative cash flows.

In addition to the business update on LSV, I wanted to review a couple of events that have occurred during the quarter. First, we have entered into another loan agreement with certain employees of LSV to enable them to purchase an ownership interest in the firm.

This is similar to other transactions we have done in the past, and I direct you to our 8-K filing and our upcoming 10-Q filings for additional information. As you also saw from a prior 8-K filing on July 31, 2012, we entered into a sale agreement of our Korean business interest SEI Asset Korea.

We expect this transaction to close by the end of first quarter of 2013. The sale of this business of which we owned approximately 56% resulted in us recording a tax liability for prior undistributed earnings, which needed to be recaptured for U.S. tax purposes. This had the effect of increasing our effective tax rate for the quarter by approximately two percentage points or $4.7 million.

At the closing of this sale, which is subject to obtaining the requisite regulatory approvals and the meeting of other specific conditions will result in a future gain to the company. We estimate that net after-tax gain to be in a range of approximately $8.9 million to $20.6 million, the range in gain is due to deal structure and timing.

As we also previously disclosed, we accelerated the depreciation on a component of GWP that we replaced during the quarter. This resulted in a one-time charge to the private bank segment of approximately $2.7 million.

Finally, I would like to make a general comment on expenses. We’ve experienced expense growth mainly in the personnel area around compensation and benefits over the past year.

This increase is driven by increased sales compensation directly related to stronger sales results, an increase in our overall incentive compensation costs as a positive consequence of improved business results, and an increase in expenses related to the digestion and management of the expanded global regulatory and compliance environment. All of our business units as well as our general and administrative areas have shared in this expense growth.

I will now take any questions you may have?

Question -and-Answer Session

Operator

(Operator Instructions) And we’ll go to the line of Robert Lee with KBW.

Robert Lee - KBW

Thanks. Good afternoon, Dennis.

Dennis McGonigle

Hey, Rob.

Robert Lee - KBW

Just a quick question on LSV, could you -- just for, I guess, our records here, could you quantify the modest outflow at LSV?

Dennis McGonigle

It was a negative about $700 million.

Robert Lee - KBW

Okay.

Dennis McGonigle

A chunk of that was really rebalancing, though -- client rebalancing.

Robert Lee - KBW

Okay. And, also, just the expected gain from the South Korean business, I know it’s a pretty wide range. But was that an estimated pre-tax or after-tax impact or?

Dennis McGonigle

After-tax.

Robert Lee - KBW

After-tax. Great. That was it. Thank you.

Dennis McGonigle

You’re welcome.

Operator

And next, we’ll go to the line of Chris Donat with Sandler O’Neill.

Chris Donat - Sandler O’Neill

Hi. Good afternoon. Just another one on the Korea transaction. Did you say that would be before first quarter or after? Sorry for the misunderstanding.

Dennis McGonigle

Yeah. Before the end of first quarter as well as…

Chris Donat - Sandler O’Neill

Before the end. Okay.

Dennis McGonigle

It could happen -- yeah, it could happen by the end of the year, but we’re really thinking more towards the end of first quarter.

Chris Donat - Sandler O’Neill

Okay. And then you wouldn’t book the gain until it actually closes. Correct? Not when it’s…

Dennis McGonigle

Correct, when we close. And then there are kind of a couple of earn-out periods that we would book additional gains as those occur.

Chris Donat - Sandler O’Neill

Okay. And then, I guess, that last part, so with the wide range that $8.9 million to $20.6 million is earn-out structure, one factor that is for the wide range. I’m just trying to understand why -- why it is?

Dennis McGonigle

Yeah. And it’s really, Chris, in deals like this, part of this structure would include things like what the business looks like on the date of close versus the day you entered the transaction.

Chris Donat - Sandler O’Neill

Okay.

Dennis McGonigle

So where revenues are, client retention post the transaction. So there are different metrics that would affect the ultimate price of the deal on closing and then be on it a couple of years after closing.

Chris Donat - Sandler O’Neill

Got it. Okay. Thanks, Dennis.

Dennis McGonigle

Sure. You’re welcome.

Operator

(Operator Instructions) And next, we’ll go to the line of Glenn Greene with Oppenheimer.

Glenn Greene - Oppenheimer

Hey, Dennis. Just on Korea, the revenue and expense impact you’d be thinking about going forward, as we take that out of the business?

Dennis McGonigle

Yeah. It’s pretty minimal. And this business actually was part of Banking, but the impact is a few hundred thousand dollars in profit a quarter. So it’s very minimal.

Glenn Greene - Oppenheimer

Got it.

Dennis McGonigle

And the way to get a direct feel for that, frankly, is, on our income statement, you’d see income attributable to non-controlling interest. That’s essentially the 47 -- I'm sorry -- 44% that we didn't own. So you can kind of back into what the income was year-to-date or for the quarter off of that number.

Glenn Greene - Oppenheimer

And how meaningful of revenue number is it?

Dennis McGonigle

A few million a quarter I think.

Glenn Greene - Oppenheimer

Okay. And then just finally the LSV revenue in the quarter?

Dennis McGonigle

I meant to give that to you on my comments, $74.2 million.

Glenn Greene - Oppenheimer

Okay. Great. Thanks.

Dennis McGonigle

I meant to explicitly say it for Glenn, $74.2 million. But I missed that.

Glenn Greene - Oppenheimer

All right. Well, thanks.

Dennis McGonigle

All right. You’re welcome.

Operator

And there is no one else in queue with the question at this time.

Presentation

Al West

Thank you, Dennis. I'm going to turn it over to Joe Ujobai to discuss private banking segment. Joe?

Joe Ujobai

Yeah. Thank you Al and good afternoon. Today, I will 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 second quarter of 2012.

Revenue for the quarter increased 4% to $92 million. Non-recurring or one-time revenue associated with the implementations and other client projects was a strong contributor to revenue growth.

Expenses for the quarter were up primarily due to the $2.7 million one-time write-off of previously capitalized software, GWP infrastructure costs as we convert larger clients, hone our operation for efficiency, and increased client satisfaction in the U.K. and build our operation in the U.S. Also sales and marketing costs related to our U.S. -- and overall increased sales activity.

Turning to new business, with this strong new business quarter, net sales events were $10.3 million approximately 80% of this is recurring revenue. In the U.S., our investment processing pipeline is accelerating as we get closer to delivering GWP to the bank market and our sales activity is now exclusively GWP.

During the quarter, we extended and enhanced our multiyear partnership with SunTrust into 2020. SunTrust is currently an ASP client. As part of the new arrangement SunTrust will soon be SEI's largest VSP client.

During the quarter, we renewed six clients re-contracting $14 million. In the U.K., in early August we announced the signing of Guardian Wealth Management, our large independent wealth advisor.

We are also working hard to convert the backlog, grow assets under administration and build the new business pipeline. GWP assets under administration at the end of the third quarter grew 13% or $2.3 billion to $19.9 billion. Asset growth includes approximately $1.4 billion due to net new cash flow and $900 million to a market appreciation and currency movement.

We have an unfunded but committed backlog of $4.3 billion of assets under administration from conversion of infrastructure clients that we sold in 2012. We expect this backlog to convert over the next 12 months.

As a reminder, business transition clients convert over time and infrastructure clients typically convert 9 to 18 months after signing. To-date in the U.K., we have 20 signed contracts and 17 clients are now live.

Finally, as a review of our asset management distribution business, earning asset balances were up $1 billion to $18 billion total. In conclusion, the investments we have made over the past several years are beginning to deliver positive sales results. The profitability will continue to be challenged near-term as we build out the GWP business.

We are working to drive the revenue as quickly as possible and controlling costs while building for scale. Any questions?

Question-and-Answer Session

Operator

(Operator Instructions) And we will go to the line of Chris Donat with Sandler O’Neill.

Chris Donat - Sandler O’Neill

Hi. Good afternoon, Joe.

Joe Ujobai

Hey, Chris.

Chris Donat - Sandler O’Neill

In terms of what Al was talking about as far as the amortization -- sorry the capitalization for GWP at $7.7 million and I guess we're getting into the last major U.S. tranche of the software. Are we getting to the point where we are going to see much or significantly less capitalization, maybe more like 2013? And then the second part of that is in terms of the expenses, is there something soon you will be sharing with other segments within SEI?

Joe Ujobai

So, I will actually answer the second question first. So, we do share some of the expense. So the Banking segment takes the majority of the expense, but the Advisor segment also takes a chunk of the expense.

Overtime, I think the spending becomes more discretionary as the core is built out and we will decide based on which markets are going to be impacted by that spending and divide some of the expense that way.

And to your first question, we're going to continue to invest in GWP. The core is largely built but the stuff we are building now, post say the U.S. entry point will be around creating more efficiency of the platform as well as driving more revenue and overtime probably entering new markets.

So, I think we will continue to see investment, some of that will continue to be capitalized and some of that will be expensed.

Chris Donat - Sandler O’Neill

Okay. Thanks, Joe.

Dennis McGonigle

Hey, Chris. This is Dennis. I would just comment on the $2.7 million accelerated depreciation, why all that went to banking if that's what you maybe asking about as well because that had to do with 100% with functionality on the platform in the U.K. market.

Chris Donat - Sandler O’Neill

Okay.

Dennis McGonigle

Advisor segment and other business segments don't operate there, they just -- banking does.

Joe Ujobai

That was specific to our U.K. tax functionality and we decided to change vendors and there was some cost associated with that change as well as some enhancement of the write-down.

Chris Donat - Sandler O’Neill

Got it. Thank you.

Operator

Next, we will go to the line of Jeff Hopson with Stifel.

Jeff Hopson - Stifel

Thanks. Could you give us the amount of the one-time revenues in the quarter and then the sales number, so did that include the SunTrust or can you give us a little more detail as to how many new business contracts, I guess, you signed in the quarter?

Joe Ujobai

So we -- as far as one-time revenue, we always had some element of one-time revenue in our quarter…

Jeff Hopson - Stifel

Okay.

Joe Ujobai

…in the quarters. It's usually tied to one or two things, it's either project for current clients or implementation projects.

Jeff Hopson - Stifel

Okay.

Joe Ujobai

And we had -- actually we've been citing a fair amount of additional business over the last several quarters. We did have some higher than usual one-time. So for the quarter it was about $7.5 million -- sorry it was closer to $8 million of one-time which where last quarter it was closer to $5 million. So about $3 million of additional one-time quarter-over-quarter.

Jeff Hopson - Stifel

Okay.

Joe Ujobai

And from a sales standpoint, the two big deals for the quarter would be the SunTrust deal, which is included in that number, because the flip from ASP to BSP is increasing in our relationship with them. The Guardian deal in the U.K. and then some other smaller deals those in the U.S. and some additional business and current clients in the U.K.

Jeff Hopson - Stifel

Okay. And I'm sorry, of the 1.9 or 1.4 of flows, how much of that was new business converted, I guess, what, infrastructure versus cash flows from the transition clients?

Joe Ujobai

It was largely due to cash flows from the business transition clients.

Jeff Hopson - Stifel

Got it. And…

Joe Ujobai

We still have a pretty strong backlog of $4.2 billion from its structure clients that we will convert over the next year or so.

Jeff Hopson - Stifel

Got it. Okay. Sorry one last question, some of the other financial services process providers, I guess, have been talking about a slowdown in decision-making in the last quarter or two, any sense for you guys. It sounds like you are -- your discussions have accelerated but any thoughts on that?

Joe Ujobai

We are still pretty active. I mean I think if anything we are -- Al mentioned he was on the road for a week talking to CEOs, some of our clients and prospects. I spent a fair amount of the time -- my time doing similar things and I think we’re -- we loved -- as we always love to see decisions made more quickly, but I think they are the pressures that some of these larger institutions are under overtime is going to help us get these decisions done and it will be open to new models going forward. So, we haven't seen that -- I haven't experienced that in the banking business.

Jeff Hopson - Stifel

Okay. Great. Thank you.

Operator

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

Tom McCrohan - Janney

Hi, Joe. The U.K. pipeline, is there any update on the $54 million amount that you assigned to that U.K. GWP pipe line back in May?

Joe Ujobai

I think that the pipeline remains strong. We --I mean, the good news is, one is, we're starting to see some of our current clients and the business transition assets starting to flow while we continue to work the pipeline.

And I've said in previous calls the pipeline is skewing more towards infrastructure clients than business transition clients. And it’s skewing towards -- and we are focusing more on larger clients. Those larger prospects may have longer sales cycles, but as we have built momentum and have created some scale and stability in the market, we're looking at larger firms.

Tom McCrohan - Janney

And again, that pipeline, that $55 million or so, is just U.K., not U.S., correct?

Joe Ujobai

That’s correct, yeah. We’re -- it's been still pretty early stages in the U.S. So we haven't really quantified that pipeline, but I'd say, as I said before, it’s strong and accelerating.

Tom McCrohan - Janney

Great. And then just hoping you could just speak to how I'm viewing the recurring revenues that -- the projections you provided back in May, it seems like basing your projections you get to that $45 million of recurring revenues by just the U.K. book by 2015.

I think you call that a base case, but it seems like if you add to that some sort of conversion from the pipeline, and I think you said back in May, you’re now expected about a-third of the pipeline in the next 12 months. There’re some assumptions around business transition clients getting more client assets, one-time revenues and none of us is assuming anything up in the U.S. Its seems like that $45 million number if you add in pipeline conversion growth in that kind of business transition it would be more than 50% of assets and assume some sort of one time revenue, you get to close like $80 million revenue contribution from GWP just in the U.K. book. Is there anything you can speak to that's wrong with that thinking?

Joe Ujobai

Well, I think that's really positive thinking. I think that we've got to continue with strong -- with strong business transition flows. And I think we are generally beginning to see that, as some of these business transition clients have been client of ours for a year or two, where we’re starting to see more predictable flows from them.

And we’re also being able to do -- as we get more experience to be able to be more supportive of moving those assets more quickly. And that number will also be largely dependent on our ability to sign some of these larger firms that are in the pipeline and we continue to execute against the strategy.

So, I think we believe there's a significant business opportunity for us in the U.K. over time. We believe that we've got some strong momentum there and continue to invest in efforts to grow that business.

Tom McCrohan - Janney

But you still believe that you can convert about a third of the existing pipeline, Joe, in the next 12 months?

Joe Ujobai

Yeah. But I think the -- as I’ve mentioned, we’re talking with bigger firms, the sales cycle is a bit longer. But I believe that is still a pretty solid number for us.

Tom McCrohan - Janney

Great. My last question and I’ll jump off. You discussed GWP with SunTrust and if so, is there any feedback you got from there or anything you can talk about?

Joe Ujobai

Yeah. We’re talking to all of our big important U.S. partners and clients about GWP. I think that as you know the plan is to deliver GWP in the U.S. in a BSP or an outsourced mode, not in an ASP orientation.

I've warned sort of -- talked to everybody that it's a little bit different that some of the words are a little bit different, because GWP is such a straight through system, that the concept of an operation starts to change over time because of the straight through nature of GWP.

So, I mean, I would view that large client of ours at ASP that either flip to BSP or ask us to take on certain functions or certain services in a BSP mode is a positive move towards the GWP solution.

But I think people are giving us more business in the U.S., because they like the vision, they like the investment we've made. So, I view that as these kinds of things as a positives step towards GWP.

Operator

Was that it from Mr. McCrohan?

Tom McCrohan - Janney

That's it. Thank you.

Operator

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

Robert Lee - KBW

Thanks, good afternoon. First question is there -- how should we think about a point where maybe you could start seeing the business scale up? I mean, understanding your spending on, building up the platform the U.S. rollout for GWP.

But as we look at business starts, new business wins pickup, revenue pickup, if we’re thinking say its assets under administration, when that gets to like $25 billion is where you kind of really start hitting a scale point?

I'm just trying to get a feel for it, if there is any kind of metric that we can track externally that would be kind of a place for you, where literally the margin would start to accelerate from there or is it just not that black and white?

Joe Ujobai

I wish it was black and white. It’s not just black and white. I watch asset under administration really closely, because probably 80% to 80% plus of our revenue is tied to assets under administration. So that is what is really going to drive our revenue.

We have 20 clients and some of them are smaller. They look more like our community bank clients from a revenue standpoint, so I think when you start to see us win some larger business, I think that will be key to us.

I think we continue to build out the platform and make it more efficient. We continue to hone the infrastructure. So we, for example, we largely leveraged infrastructure here in the U.S., when we had a handful of clients in the U.K.

We have I think, made a significant step this year to move more of that U.K. operation to the U.K., because we think that’s important to continue to improve client satisfaction and to drive more business on the ground there. There is some cost of making those changes.

So there's a lot of moving parts, but I follow asset under administration and I’m looking closely at, as we are able to close larger clients and again, I think getting into the U.S. market, which is substantially larger than the U.K. market.

We are getting some of our current clients converted and winning some new business. And I think we are still into this over the next year or so until we start to see it impact ultimately, which is most important to us which is its profitability.

Robert Lee - KBW

Okay. And this is just probably just kind of a presentation or modeling type question. But when you have 19, call it $20 billion of GWP assets under administration, when you report your segment asset balances, you report 11.6. I mean, how should I be thinking of, what’s the difference?

Dennis McGonigle

This is Dennis, Rob. Rob, the 11.6 is actually like proprietary mutual fund, fund administration type revenues.

Robert Lee - KBW

Okay.

Dennis McGonigle

It’s kind of about the legacy business and banking, a lot that has moved over the years over to the IMS Group. So we don't report on that schedule in the earnings release, the assets processed on the platform. That’s something we could add in the future, but those two are not the same, same bucket of assets.

Robert Lee - KBW

Okay. And I don't know if maybe along those lines, I don't know if you've broken it out. Call that, at least on a quarter basis broken out separately, but if we look at the $92 million of revenues in the quarter, what would you attribute directly to kind of it, if you can directly to the GWP platform?

Joe Ujobai

We don't break that out yet in the reports. So, we do breakout our overall investment processing, and then some of the transaction based like brokerage and then asset management where we actually have discretion of where we manage the portfolios, but we haven't broken out yet trust versus GWP at this point.

Robert Lee - KBW

Okay. Those were my questions. Thanks.

Joe Ujobai

Thanks.

Operator

Next, we’ll go to line of Glenn Greene with Oppenheimer.

Glenn Greene - Oppenheimer

Hey, thanks. You're getting a lot of air time today, Joe.

Joe Ujobai

I'm used to it.

Glenn Greene - Oppenheimer

Just back on SunTrust, just I'm a little curious how this works. So they obviously extended out to 2020, does that mean for the time being they are on Trust 3000, do they have like a natural pathway to GWP or, and is that incremental over time? How does that whole transition work, especially you were only selling GWP going forward?

Joe Ujobai

So, as you know we've talked a lot about our U.S. clients about GWP and I think there, if you look at banks around the U.S., there's a lot of pressure in banks around financials. Certainly, the interest rate environment, the regulatory environment has taken away a fair amount of revenue. You've got Frank business necessarily impact the trust department or the private wealth area, but it does impact revenue overall at banks.

And so, we've talked for a long time to our clients about the BSP model being a more efficient model for them to run their wealth processing infrastructure. And so, Sun, like some of our other clients, BMO Harris have agreed that it does make sense to do that.

And so as part of that relationship and arrangement, we're moving them from ASP to BSP and as part of that, we extend our overall relationship to them from a timing standpoint to 2020.

My expectations are that we would move these clients to GWP prior to the ending of that contract. But it is locking our current relationships for a longer period of time and then it certainly opens but nothing precludes us. In fact, it opens the door to talking about the benefits and moving to GWP. But it's a good step towards that given that we would move GWP in the BSP model.

Glenn Greene - Oppenheimer

Okay. And then on a mean interest of time, I'll just ask one more. But the expense run rate to think about, absent the $2.7 million right-off, is this a good run rate going forward in the context that you talked about profitability remaining under pressure over the near-term?

Joe Ujobai

There is a number of - unfortunately, there is a number of factors. So, I hope we sell a heck of a lot more and my sales comp numbers go up, because we've made obviously a huge investment in GWP and we want to have sales quarters that are -- we had a good sales quarter. We want to have sales quarters that grow substantially larger than that in the coming years. So, I would expect some of those expenses to go up.

I would expect things like client service and relationship management expenses to go up. And then we try to balance those as best as possible with creating efficiency around the operation, and overtime not investing in technology at the same rate we’ve invested today.

But that’s the balance that isn’t achievable in short periods of time like the next three months or so. So we work closely to control expenses. But it will stay a little bumpy as we bring on some new clients and don't realize the revenue right away. So we are certainly mindful of trying to manage those expenses as tightly as possible.

Glenn Greene - Oppenheimer

Okay. Thanks.

Operator

Next, we’ll go to the line of Sam Hoffman with Nomura.

Sam Hoffman - Nomura

Thanks for taking my questions. I just had two questions on the development of the platform and the margins. Can you talk a bit about, what is happening operationally on the ground that prevents the margin from increasing? Is it mainly that the investments in the platform are taking longer and more expensive than expected, or is it that clients are requiring more customization than you expected for each client?

Joe Ujobai

No. I would say if you look at the maturity of the platform, it is still pretty young technology and so. And we have invested a fair amount in additional functionality, in new features as well as entering the U.S. market.

We are turning some of our investment, now from a technology standpoint towards making operations more efficient. So, our goal is always to -- our goal is always to invest in technology to try to make the operation more efficient and more scalable.

We are just getting to some of those investments now and so there are probably more manual processes in the operations then we would like. And we will really start to kick off a number of situations where we will create more technology to make the operation more scalable. So probably the operation isn’t that scalable as we would like it to be and I used the word hone earlier.

So we've learned a lot also in the U.K. market. For example, mutual fund trading is not nearly as automated in the U.K. as it is in the U.S. So that's an area where we had to spend some -- put some more people on more resources and overtime we would hope to try to automate that as much as possible.

I mentioned earlier that we largely moved the U.K. operation from a leverage organization that was primarily based here in the U.S. to and on the ground organization to be closer to the clients, to I think enhance our client satisfaction, to be able to convert assets more quickly, to add people in the market that understand the nuances of the market, so that adds some costs to the structure.

But I think we are working everyday to determine how to make this the most efficient organization possible and we’ll continuing invest from a technology standpoint and overtime I think that will scale the operations. So we are more efficient in profitability improves.

Sam Hoffman - Nomura

Okay. And then second question is can you give an update upon the progress in terms of converting Cullen/Frost and [Frontier] in the U.S.?

Joe Ujobai

Yeah. We are on target to convert Frontier at the end of this year. And then we would convert Frost/Cullen, sometime probably on the middle of next year.

Sam Hoffman - Nomura

Okay. And then just one clarification on SunTrust, just the amount that you booked as sales, is that the amount which is like the increase in revenue that's going to come from SunTrust, or does part of that kind of come out of one area and into sales?

And so we shouldn't really counter the increase in revenue just from an accounting standpoint or modeling standpoint. How should we think about I guess the number that you gave us for SunTrust?

Joe Ujobai

Yeah. So we would book, we call it net sales event growth. So we would book the additional revenue that we expect, based on this newly negotiated SunTrust enhanced relationship. So, only the additional net new revenue from them would be considered part of the $10.3 million net sales of that number that I announced today.

Sam Hoffman - Nomura

Terrific. Thanks for taking my questions.

Joe Ujobai

Thanks.

Operator

Next we’ll go to line of Eric Bertrand with Surveyor Capital.

Peter Suss - Bertrand Capital

Yeah. Hi. It's actually Peter Suss. How are you, Joe?

Joe Ujobai

Hi, Peter.

Peter Suss - Bertrand Capital

Just a couple of quick questions. One, ex GWP, is this segment still generating about a 35% pretax margin, I think you've given that number in the past?

Joe Ujobai

Yeah. Absolutely. In fact, it's actually increased a little bit, so we had some focus on that and yeah, the Trust 3000 business and the rest of the business has margin between 35% and 40%.

Peter Suss - Bertrand Capital

Yeah. And as your client servicing and relationship management expenses go up, should we think about one-time revenues going up with them?

Joe Ujobai

Well, we -- I think as we work with larger organizations that are often more inclined to who want customization or the improvement -- the conversions are more complicated, that is generally where we start to see one-time revenue opportunities.

Peter Suss - Bertrand Capital

And is there anyway that you can kind of give, it just sounds like there's a lot of moving pieces. This year, you’ve had a little bit of incremental investment spend and I guess you have some sales commissions. Can you just give color on what kind of the core run rate expenses are for GWP excluding any sales commissions, or kind of one-time investment spend that you have had?

And what I'm trying to get at, is just when I think about the $80 million number that Tom gave earlier, I know you guys gave $50 million as a minimum for 2015, but I think it's probably pretty easy to get to the $80 million number. I'm just trying to think about on an ongoing basis, what kind of a pretax profit or I guess a little bit of a loss that would imply in 2015?

Joe Ujobai

Yeah. We -- I talked a little bit about expense run rates at the summer annual investor conferences, and so I would sort of refer you back to those last couple of your presentations to take a look at some high-level numbers around the expense run rate.

Our ultimate goal here is that we believe we can get the GWP business to be as profitable if not more profitable than our current book of business, the trust business, and that’s why we are investing significantly in it.

So, I would say that we are -- there are a lot of moving parts, and we are in multiple markets, and we do continue to invest and the operation isn’t fully scalable yet. And we have 20 clients but they are smaller. And as we get larger clients, we think we will gain scale but I sort of refer back to those meetings for some direction around overall expenses.

Peter Suss - Bertrand Capital

Yeah. I think if I recall, you've kind of talked about around $100 million number for core expenses. Is that kind of -- and so then if you did $80 million in revenue in 2015, it would imply a little bit of a loss for GWP. But if you look at the 35% to 40% pretax margin ex GWP, you actually get to kind of more of a 20% plus pretax margin for this overall segment. Does that sound reasonable?

Joe Ujobai

I think you are directionally correct, but the goal is to get this to fairly substantial margin like our Trust 3000 business that my colleagues run. The timing is the hardest thing to predict here. But as both Al and I said, we are having terrific conversations in the market with our clients and prospects and we see -- we made this investment because we think it's a very significant opportunity for us that will ultimately drive strong profitability. Timing is the hard part to predict.

Peter Suss - Bertrand Capital

Yeah. I know for sure, I mean, what's so good about what Tom said is that it seems like in 2015, those numbers are kind of just with your existing contracts and existing pipeline, which is just U.K. So it's not -- it's a pretty conservative number when you think about what you're doing in the U.S. So anyway just thanks for the thoughts and best of luck. Thank you.

Joe Ujobai

Thanks.

Operator

Next, we’ll go to line of Eric Connery with Robeco.

Eric Connery - Robeco

Hi, Joe. Could you rough out for us, what an additional $1 billion either dollar or sterling from existing clients for GWP, would contribute to the operating profit line?

Joe Ujobai

Yeah. I’m not prepared to do that. I think we've talked about that we charge somewhere between 10 and 25 basis points depending on the complexity of the clients, and their overall commitment to us and the timeframe of that commitment.

And so, I think we've given -- tried to give some indication around revenue. And we are doing our best to scale this operation, and not spend every new dollar of revenue on costs. But we are not really disclosing or sharing those kinds of models at this point.

Joe Ujobai

Frankly, we just did not have enough experience I think to do that yet. We're still in early days of this.

Eric Connery - Robeco

Okay. Would the contribution margin be similar to what it is for Trust 3000?

Joe Ujobai

Not in the next billion, no. But again, the long-term goal is to get there.

Eric Connery - Robeco

Okay. Thank you.

Operator

And next, we'll go to the line of Peter Heckmann with Avondale Partners.

Joe Ujobai

Hi, Pete.

Peter Heckmann - Avondale Partners

I had a follow-up question. You’ve mentioned the BMO Harris relationship renewing on Trust 3000 and I was curious if that's inclusive of the M&I merger?

Joe Ujobai

We've extended our relationship with BMO Harris. We talked about that several calls ago. And so that's not included in the 10.3 that I announced this afternoon. But we have extended our relationship with BMO Harris, and have taken on additional business based on their growth strategy.

Operator

Was that it Mr. Heckmann?

Peter Heckmann - Avondale Partners

That is it.

Operator

Okay.

Joe Ujobai

Thank you.

Operator

No one else in queue with the question at this time.

Al West

Thank you, Joe. Our next segment is Investment Advisors and Wayne Withrow will cover this segment. Wayne?

Wayne Withrow

Thanks, Al. During the third quarter, we had good net cash flow, increasing momentum and a full quarter of GWP operations with our early adopter clients. Assets under management was $33.1 billion at September 30th, a 4.3% improvement from June 30th.

During the quarter, we had $511 million of positive net cash flow. This is the highest quarterly cash flow we have received since the first quarter of 2002. Cash flow momentum remained strong.

Revenues for the quarter were $51.4 million, a 4.1% improvement from the second quarter. Margins improved only slightly as we increased staff to support our volumes, enlarged our sales force and saw increases in variable compensation related to our overall business and sales success. On the new business front, we signed 124 new advisors during the quarter. Our pipeline of new advisors remains very strong.

Moving to the status of our GWP rollout, our early adopter advisors have now completed a full quarter of operations on GWP. This continuation of the GWP beta rollout is going well.

We are on track to convert our second set of early adopter clients at the end of November, and still expect to be getting more generalized rollout of GWP beginning in 2013. We continue to receive positive feedback from advisors with respect to our GWP strategy.

In summary, net cash flow and new advisor recruiting were positive for the quarter and momentum continues to build. The impending rollout of GWP has helped build this momentum and I am excited about the platform’s rollout to the entire market, beginning in 2013.

I welcome any questions you have.

Question-and-Answer Session

Operator

(Operator Instructions) And first we will to line of Jeff Hopson with Stifel.

Jeff Hopson - Stifel

Okay. Thanks, Wayne. So when you're talking about the fact that this conversion is helping the momentum, are you talking about the pipeline of advisors that are more interested in joining you guys or how do you think about that?

Wayne Withrow

Yeah. I think what it does, it helps our brand and helps people get interested in doing business with us, because they see us as a forward thinker. So, they are willing to convert over to our existing platform in hopes of moving to the more robust platform in the future. So, we're not seeing what I would really called GWP related revenue right now. But it's helping our traditional book of business.

Jeff Hopson - Stifel

Okay. And as far as the early adopters, anything that you are learning there as far as, I guess coming out of it as far as behavior et cetera, that you can share that is helping or hurting them, I guess on GWP?

Wayne Withrow

I guess, what I'd say is that the early adopters are very engaged in the platform. They are very engaged in our success. And we are getting a lot of true on the ground type of experience of how to make the platform better. And we weren't a 100% right in every area. But we're making modification and responses and feedback quickly and it's going very well.

Jeff Hopson - Stifel

Okay. Thanks.

Operator

And next we will go to the line of Peter Heckmann with Avondale Partners.

Peter Heckmann - Avondale Partners

Good afternoon, Wayne. I wanted to follow-up on some of the comments you had made at the Analyst Day as regards to the flexible stamp functionality. Can you talk about what type of market interest you're seeing there and if a portion of those strong flows we saw on the quarter, may have been existing advisors that were in managed products that we bringing some traditional assets over to allocate towards more of an AUA or third-party products?

Wayne Withrow

Yeah. Pete, that’s actually kind of a good way to look at, when I say GWP is contributing to the momentum. When I talked about the $511 million of positive net cash flow that’s cash flow into existing SEI investment programs, that is not cash flow into non-SEI programs. And as you recall one of the bedrock for accessible camp strategy is we will accept afore fee both SEI assets and non-SEI assets.

So while, the $511 million is solely SEI assets, they’re doing that in anticipation of perhaps being able to consolidate their non-SEI assets onto the SEI platforms, so they have a single operation.

Peter Heckmann - Avondale Partners

Got it. That makes sense. And so in terms of the tranche, are we talking about between the early adopters of the next tranche is that 1%, 2%, 3% of advisors more than that and how do you anticipate the milestones through 2013?

Wayne Withrow

Well, I think when I look at the second early adopter clients that we’re proving out the technology now. I would say the second early adopter clients. I look at proving out our conversion strategy, because part of our objectives is to move to this new platform without any accurate disruption of our advisors business.

So, we want them and have a very good experience. And we’re working hard on that right now and early adopters be, will help prove that out. I think as I go into the 2013, we expect to be able to convert 10, 20, 30, a lot of accounts at once as opposed to converting 2,000 or 3,000 accounts at a time.

Peter Heckmann - Avondale Partners

Okay. Okay. And then last question there. I think Al mentioned at the Analyst Day, maybe a little bit increased appetite towards acquisitions and there has been a lot of M&A activity in this space around advisor technology and flexible tamps. And would you say that there are -- that SEI has an appetite within this area and if there are any holes that you're looking to fill in terms of functionality?

Wayne Withrow

Well, I think that NorthStar acquisition filled some holes for us. I can't think of any other holes that an acquisition would fill at this point. But the other way to look at that is we're building this end-to-end unified platform straight through processing includes front, middle, back office functionality.

And there are lot of acquisitions going on in the marketplace and advisors have cobbled together end-to-end solutions that incorporate or integrate different providers. The acquisitions are some of those different providers create some disruption in the marketplace and that's an opportunity for us.

Peter Heckmann - Avondale Partners

Okay. I appreciate it.

Operator

And next we'll go to the line of Robert Lee with KBW.

Robert Lee - KBW

Hi. Good afternoon, Wayne.

Wayne Withrow

Hi, Rob.

Robert Lee - KBW

Hey, just real simple question. I'm just curious in the quarter, if I look at kind of a simplistic fee realization rate to average assets, it’s kind of jumped up a little bit or maybe it's been trending up a little bit, is that simply just the mixed shift towards more equities as markets have rebounded or is there anything within revenue or types of products that's kind of putting some upward pressure on the fee rate?

Wayne Withrow

I think a lot of that is the leverage that just inherited in the business. As the values go up, there's a lot of leverage embedded in the realization rate in funds.

Robert Lee - KBW

Okay. That was it. Thanks.

Operator

And no one else is in queue at this moment.

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 Loughlin

Thanks, Al. Good afternoon, everyone. I'm going to focus my remarks on the financial results and also the continued progress we've made during the third quarter compared to the second quarter of 2012.

Third quarter revenues of $58 million increased 4%, compared to the second quarter, primarily due to new client fundings and market appreciation.

Operating profits of $28 million increased 5% compared to the second quarter. Quarterly margins of 49% were similar to the second quarter. Quarter end asset balances of $63 billion reflect the $4 billion increase compared to the second quarter of 2012. And net new client funding during the third quarter was $953 million.

The backlog of committed, but unfunded sales was $1.5 billion at the end of the quarter. Client signings for the third quarter were $2.7 billion and total $8.2 billion year-to-date through September.

New sales have return to pre-crisis financial -- pre-financial crisis production levels, as Institutional Investors continue to seek a fiduciary partner, who can actively manage managers, near-term asset allocation and also plan liabilities.

SEI's fiduciary management program has a proven track record of adding value for clients in these areas and competes favorably in the outsourcing space. Our pipeline remained strong and we continue to be optimistic about the growth opportunities in the institutional space.

I'm happy to entertain any questions you might have.

Question-and-Answer Session

Operator

(Operator Instructions) And we'll go to the line of Jeff Hopson with Stifel.

Jeff Hopson - Stifel

Hi, Ed. So, when you look at RFP activity, some of the closings and some of the things that are out there. I see a lot of CIO outsourcing indications I guess. And obviously, that’s helping you guys. Is that -- does that represent the type of business that you are bringing over today for the most part?

Ed Loughlin

Yeah. Yeah. And I think the space has really kind of expanded to your point. At one point, there were primarily managers in this particular space. Our solution has always been broader than that, because of the fact that we took on fiduciary responsibility 16 years ago.

So whether you call it outsource investment office, fiduciary management, you can call it variety of different types of things. But having more competitors like that in the marketplace is generating more activity. And I think we are benefiting from that.

Jeff Hopson - Stifel

Okay. So, you would say that clients making a decision as time moves on actually more competitors in the market, it would be helping this whole issue of -- I don’t know who came up with this term, but fiduciary fatigue, I've heard anything else out there regulatory is that you think is helping kind of that the -- helping accelerate momentum, I guess?

Ed Loughlin

And I think that the complexity around pension certainly is helping because of the fact that it is a more complex environment. I think the other aspect of this is in a low return environment, I think clients are really forced to look at different types of investment strategies and as it relates to pension plans in particular, I think anything new, creates an opportunity because many times there is not in-house expertise on that like alternatives or really like liability management. And I think those are positive catalysts for us.

Jeff Hopson - Stifel

Okay. Great. Thank you.

Operator

And there is no one else in queue with the question at this time.

Presentation

Al West

Thank you, Ed. Our final segment today is Investment Managers. And I'm going to turn it over to Steve Meyer to discuss this segment.

Steve Meyer

Thanks, Al. Good afternoon, everyone. For the third quarter of 2012, revenues for the segment totaled $49.3 million, which was $2.6 million or 5.6% higher than the second quarter of 2012. This quarter-over-quarter increase in revenue was primarily due to an increase in our asset balances and new client fundings.

Revenue on a year-over-year basis increased $3.7 million or 8.2%. Our quarterly profit for this segment of $17.2 million was approximately 3.9% higher than our profit for the second quarter of 2012. This profit was also a 6.3% higher than our profit for the third quarter of 2011.

The quarter-over-quarter increase in profit was largely due to our increased revenues, partially offset by an increase in our investment, operational and compensation expenses. Third-party asset balances at the end of the third quarter of 2012 were $241 billion, approximately $9.4 billion or 4.1% higher as compared to our asset balances at the end of the second quarter of 2012. The increase in assets is primarily due to market appreciation of $7.9 billion combined with net positive cash flows of $1.5 billion.

During the third quarter of 2012, we had net new business sales events totaling $7.1 million in annualized revenue. This represents another solid sales quarter of equal importance, a majority of these sales came from expanding our wallet share with existing clients. As you will recall, this continues to be a key strategic initiative for us.

Turning to the market, despite the traditional seasonal slowdown in the third quarter, we continue to see encouraging activity in the market and managers continue to make decisions. We remain optimistic that this continued activity in the market and feel well-positioned for growth.

I will now turn it over for any questions you may have.

Question-and-Answer Session

Operator

(Operator Instructions) And next we’ll go to the line of Robert Lee with KBW.

Robert Lee - KBW

Hi Steve. How are you?

Steve Meyer

Good. How are you, Rob?

Robert Lee - KBW

Okay. Thanks. So, just one quick question or maybe two, but in terms of the rate at which new business is coming on and we’re seeing a little bit of an upper trend again in the kind of about the fee realization rate, is there -- is the new business that you are taking on is that coming on in a kind of incrementally higher fee, because of mix or for whatever reason compared to kind of the legacy book or how should we be thinking about that going forward?

Steve Meyer

No. I think if you're asking for as pricing terms. Now, I think pricing there is price pressure out there, but we continue to bring on business at historically what we have -- the pricing terms we have. I think maybe a little bit of the uptick this quarter was again, if you looked at this business was the majority taken from existing clients that typically within the client to came from might have a little bit higher rate depending on the product if their alternative versus traditional. So the mix of the assets this quarter might have been a little bit in higher products. But I wouldn't say I'm ready to say that's a ongoing trend.

Robert Lee - KBW

Okay. And maybe just I guess over the last several quarters, you’ve had a couple of large competitors sell. And I guess GlobeOp and Goldman getting rid of selling its business to State Street, are you seeing any kind of increased RFP activity or dislocation or opportunity related to some of the M&A activity out there?

Steve Meyer

We are seeing a little bit of a spike in RFPs. And what I would say is, I think we definitely -- whenever there is a change like that, you typically go through phases. People take a wait and see attitude, but typically in the mid to long term, you do see opportunity flow from transactions like that and I think we are seeing that.

Robert Lee - KBW

Okay. That was it. Thanks for taking my question.

Steve Meyer

Sure. Thank you.

Operator

And no one else is in queue at this time.

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. Third quarter 2012 cash flow from operations was $70.8 million or $0.40 per share. Year-to-date September cash flow from operations $145.9 million.

Third quarter free cash flow $57.7 million or $0.33 per share and year-to-date free cash flow 98.2 million. In the third quarter, the capital expenditures excluding the capitalized software were $3.5 million. The year-to-date capital expenditures excluding capital software about $20 million and we would expect about another $3 million in the next quarter.

The accounts payable balance at September was $3.6 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 or correct any statements herein as a result of future developments. You should refer to our periodic SEC filings for 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

(Operator Instructions) And we'll go to the line of Chris Donat with Sandler O’Neill.

Chris Donat - Sandler O’Neill

Hi. I don't know if Ed is still on the line, but just looking back at some of the numbers and most of the comments -- commentary about competition with the operating margins just under 50% for a while here, I'm just wondering if with more competition you're seeing anything on pricing in your business there, Ed?

Ed Loughlin

Chris, at this particular point in time, I think if you were to look at the pricing realization. I think it’s going to reflect the fact that we have had a pretty good successful year as far as bringing in larger clients. So, larger clients their affect of fee rate continues to go down with more assets that they bring in.

I think the thing that we have to really kind of keep an eye on is just this whole issue of pricing transparency. As the market moves more towards that, some of the newer competitors especially kind of in the consulting space, I mean they’re moving from what used to be a fixed fee and potentially, they have -- I think the ability to really kind of confuse and cloud the pricing issue. Because they may not really price their services for the value that really needs to be delivered.

Chris Donat - Sandler O’Neill

Okay. That helps. I was just wondering if there’s anything -- what some of the dynamics are out there, since you are about right now about 40% of the operating profit for the company, so. I thought at least one question should be out there, another question out there. Thanks.

Ed Loughlin

Sure.

Operator

Next we’ll go to line of Tom McCrohan with Janney.

Tom McCrohan - Janney

Hi, thanks. Quick question on amortization then a follow-up on consulting and professional fees. This tend -- with the pending release of, I guess, 13.1%, the U.S. functionality for GWP, does that mean there will be some accelerated amortization going into the P&L when that goes into production?

Ed Loughlin

It won't be accelerated amortization. But when we put that asset -- when we turn that asset live, it will be an amortized over -- the remaining life is about 9.7 years. So, we’d amortize over that timeframe, Tom.

Tom McCrohan - Janney

So, like a case if you…

Ed Loughlin

Also there will be a slight pickup in quarterly amortization expense as you know.

Tom McCrohan - Janney

So, the recent case in Q say that the GWP platform is amortized over 15 years is that dropping to nine or are you talking about…

Ed Loughlin

No. The original life is 15 years and we brought into service and as you'll remember in the summer of 2007.

Tom McCrohan - Janney

Yeah.

Ed Loughlin

So, we’re five -- over five years into that original life. We have 9.7 years left.

Tom McCrohan - Janney

Got it.

Ed Loughlin

So, anything new we bring it -- bring live we amortize over the remaining life, which is at 9.7 as of today.

Tom McCrohan - Janney

Okay. And Dennis, in terms of consulting, outsourcing, professional fees that line item on your P&L, how much of that do you believe is related to GWP activities, implementation, conversion that type of stuff?

Dennis McGonigle

How much of the total or how much to the negative delta?

Tom McCrohan - Janney

How much in total or how much of your run rate of consulting out outsourcing professional service fees?

Dennis McGonigle

Tom, I go answer generally, I would say that a significant portion of it is related to banking. So it's GWP as well as some of the things we do on the TRUST 3000 side, but also a piece of that is in technology development work as well as operational outsourcing services work we do in the IMS side.

Tom McCrohan - Janney

Okay.

Dennis McGonigle

But as there are the two markets and advisor picks it up and picks up the piece as it relates to GWP.

Tom McCrohan - Janney

Okay. Thank you.

Operator

And at this time, there is no one else in queue to ask a question.

Al West

Thank you, Kathy. So in conclusion, we are concentrating our efforts on maintaining highly satisfied clients, growing new business events, controlling costs and investing in projects critical to our future. Now, our focus on long-term growth in revenues and profits is unwavering and as a momentum grows in the near-term, I really remain bullish about our intermediate and longer-term business opportunities and the positive impact we will make on the markets we serve.

That’s all, that we have this afternoon. If you have any lingering questions, please ask them now.

Operator

(Operator Instructions) And no one else is queuing up at this time.

Al West

Good afternoon everybody and thank you very much for your attendance.

Operator

And ladies and gentlemen, this conference will be made available for replay after 4:00 p.m. today through January 24th. You may access the executive replay system at any time by dialing 1-800-475-6701 and entering the access code of 268471. International participants may dial 320-365-3844 with the access code of 268471. That does conclude your conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.

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