SEI (SEIC) Q3 2026 earnings review
SEI wins record fund contracts, but a cancelled deal hurts
SEI's fund-administration and bank-technology units are winning record contracts while its traditional money-management arm loses clients. Reported revenue at the financial-technology and asset-management provider rose 14%, or 10% by our math from businesses it owned a year ago, and profit per share excluding one-offs climbed 24%. Chief executive Ryan Hicke noted that nine-month contract bookings have already beaten any full year in company history, but a $33 million charge to cancel a Mexican acquisition held reported profit growth to 2%.
| Sales from businesses owned a year ago | +10.4% reported revenue +14.4% to $662.0M |
|---|---|
| Profit per share, excluding one-offs | $1.64 +24% from a year ago (reported: $1.38, +6%) |
| New contract bookings (net sales events) | $46.8M +53% from a year ago; $157.4M year to date |
| Fourth-quarter buyback plan | Raised similar to Q3's $215.1M pace |
⚖️ Verdict: 🟢 Bullish
The story got better because margin expansion and alternative-fund bookings proved durable even with higher staff bonus accruals. Private Banks kept its operating margin at 20% and management lifted its fourth-quarter stock buyback pace to match the third quarter's $215 million. One caution: the $33 million termination penalty on the Stratos deal and $5 billion of client withdrawals at affiliate LSV show that acquisitions and traditional funds carry real execution costs.
The question now is whether SEI's growth comes from a lasting shift toward outsourcing by private-capital funds or simply rides higher market values and the Stratos acquisition. If outsourcing drives it, underlying revenue growth will stay above 10% as the record contract backlog converts; if markets and acquisitions carry it, growth will step down once SEI laps the December Stratos close. Fourth-quarter revenue excluding Stratos and first-quarter lapped growth will settle it.
🐂 Bull Case
Alternative Managers Drive Record New Contract Bookings
SEI sells back-office administration and technology to investment funds and banks, tracking new contract wins as net sales events. Critics worry that heavy reliance on private-equity and private-credit clients leaves the pipeline vulnerable if alternative asset fundraising slows. Instead, bookings stayed near record highs in the third quarter, led by the Investment Managers division (IMS, which administers funds) and Private Banks.
- Third-quarter net sales events: $46.8 million, up 53% from a year ago
- Year-to-date net sales events: $157.4 million, already beating any full year in company history
- Investment Managers sales events: $32.0 million, with nearly 90% from alternative asset managers
- Private Banks sales events: $12.6 million, up from $0.4 million a year ago
- Client assets under administration: $1.41 trillion, up 16.2% from a year ago
This matters because signed contracts turn into billed revenue over 3 to 18 months as clients move their funds onto the platform. Even after stripping out $23.3 million of revenue from the acquired Stratos wealth business, sales from businesses SEI owned a year ago grew 10.4% by our math.
What to watch: quarterly net sales events and client assets under administration in the fourth quarter. Holding bookings near $40 million would keep underlying revenue growth in the low teens next year.
Operating Leverage Lifts Margins Past Bonus Accruals
SEI has been overhauling its operations to expand profit margins, selling high-margin consulting and data services alongside its software. In the third quarter, the company saw "continued demand across enterprise transformation initiatives, professional services, Data Cloud capabilities, and asset management solutions".
Operating margin excluding one-offs rose 2.6 percentage points from a year ago to 31.5%, while reported operating margin climbed from 28% to 30%. Staff compensation and benefits fell by 2.0 percentage points of revenue to 33.2%, and corporate overhead dropped by 1.9 percentage points to 5.5%. Margins expanded even though management booked an extra $6.4 million in staff bonuses for strong year-to-date results, which shaved about 1 percentage point off the quarterly margin. In Private Banks, operating profit jumped 38% on 11% revenue growth, lifting the unit's margin from 16% to 20%.
What to watch: Private Banks operating margin in the fourth quarter. Staying at or above 20% without a bonus adjustment would show the segment's efficiency gains are permanent.
Buybacks Step Up With a Fresh $800 Million Plan
SEI returns nearly all of its cash flow to shareholders through stock buybacks and dividends, and management previously indicated second-half repurchases would rise from the second quarter's $112.4 million. The company bought back 2.0 million shares for $215.1 million in the third quarter at an average price of $105.24, and the board approved an extra $800 million authorization on October 20.
That brings total buyback capacity to about $926 million alongside $399.8 million in balance-sheet cash. Repurchases cut the diluted share count by 3.4% from a year ago, which turned a 25% rise in operating profit excluding one-offs into 24% growth in profit per share despite lower interest income.
What to watch: fourth-quarter share repurchases against the presentation's plan for a similar ~$215 million level. Executing that pace would retire another 1.5% to 2% of the share count by year-end.
🐻 Bear Case
Stratos Deal Hits a $33 Million Snag in Mexico
SEI bought a majority stake in wealth-management firm Stratos Wealth Holdings in late 2025 to expand its financial-advisor network, leaving a second-stage purchase of a Mexican affiliate pending. This quarter, SEI booked a $32.5 million one-time charge "associated with the termination agreement with Stratos to purchase their Mexican based subsidiary, NSC".
- NSC termination charge: $32.5 million, cutting reported profit per share by about $0.20
- Stratos third-quarter contribution: $23.3 million of revenue and $4.4 million of operating profit
- Acquired intangible amortization in Investment Advisors: $7.3 million, dragging segment margin down 5 percentage points to 41%
- Redeemable minority interest on the balance sheet: $323.1 million, up from $244.0 million at year-end 2025
Canceling the Mexican deal cost shareholders $32.5 million for nothing in return. Meanwhile, SEI excludes $10.5 million of acquisition amortization from its headline profit per share while keeping all of Stratos's revenue, and the balance-sheet obligation to buy out the remaining 42.5% minority owners has grown by $79.1 million in nine months.
What to watch: the final purchase accounting and minority-interest valuation in the annual report. Further upward remeasurements of the redeemable stake will raise the eventual cash buyout cost outside the income statement.
Traditional Asset Management Loses Clients While Rivals Gain
"Our growth is broad-based, our client relationships are becoming deeper and more strategic, and our year-to-date sales results have already surpassed the highest full-year total in SEI’s history," chief executive Ryan Hicke said. Yet the numbers show growth is concentrated in back-office processing while traditional investment management shrinks.
Institutional Investors, which manages money for pension plans, saw revenue fall 2% from a year ago to $70.6 million, operating profit drop 3%, and net sales events print at negative $2.3 million as clients pulled money. At LSV Asset Management, a value-investing affiliate where SEI owns a minority stake, clients withdrew $5.3 billion during the quarter, reversing the second quarter's $2.0 billion inflow and pushing LSV assets down 1% to $116.1 billion. In Investment Advisors, advisors continue shifting into lower-fee ETFs and separately managed accounts, and underlying operating profit excluding Stratos grew 7% on 10% revenue growth.
What to watch: net client flows at LSV and Institutional Investors in the fourth quarter. Continued withdrawals would prove the second quarter's inflow was a one-off mandate rather than a turnaround.
Risks this quarter didn't answer
Several standing risks and prior management commitments received no numerical update in the earnings release or presentation.
- Retail alternatives transfer agency and retirement signings: management previously committed to an August client launch and third-quarter signings, so the conference call or quarterly filing must show whether clients went live.
- Business segment overhaul: promised for 2026 at last year's investor day, but third-quarter results still use the old five segments with no separate figures for international or retail-alternatives revenue.
- UK regulatory review: the Financial Conduct Authority's supervisory requirement on SEI's UK subsidiary went unmentioned; the quarterly filing's legal footnote will show if restrictions remain.
- Market sensitivity: ending assets under management stalled at $606.4 billion (down 0.1% from last quarter), leaving fee revenue exposed if equity markets drop.
💲 Other KPIs
Total assets managed, advised, or administered rose 16.2% from a year ago and 2.4% from last quarter to $2,105.8 billion. Growth came from $49.9 billion of new client assets under administration in the Investment Managers unit, while managed assets stayed flat at $606.4 billion.
Receivables — fees billed to clients but not yet collected — rose 19.9% by our math from $709.7 million at year-end 2025, outpacing the 14.0% nine-month revenue increase. Because SEI bills administration fees after quarterly fund valuations finish, rising receivables lock up working capital even as nine-month operating cash flow grew 17.5% to $565.3 million.
🔮 Guidance
Raised. SEI does not issue revenue or profit forecasts, but its presentation stated that the "Current outlook supports a similar level of repurchases in Q4" after buying back $215.1 million in the third quarter. By our math, that points to about $430 million of buybacks in the second half and $751 million for the full year, above last quarter's $320–420 million second-half trajectory.
❓ Key Questions
Why did SEI pay $32.5 million to cancel NSC?
SEI took a $32.5 million charge to terminate the purchase of Stratos's Mexican subsidiary, NSC. Investors need to know what due-diligence or regulatory issue killed the deal and whether the payment went to Stratos sellers or outside parties.
How many retail-alternatives clients went live in Q3?
Management previously said its first retail-alternatives transfer-agency client would launch on August 3 and promised more retirement-plan signings in Q3. The release gave no numbers on client counts or revenue toward the five-year, $100 million target.
What drove the $79 million jump in minority liabilities?
Redeemable non-controlling interests on the balance sheet rose from $244.0 million at year-end to $323.1 million. Management should explain how much of that increase reflects higher buyout estimates for the remaining 42.5% of Stratos.
Why did LSV outflows jump back to $5.3 billion?
After posting $2.0 billion of net inflows in Q2, affiliate LSV lost $5.3 billion to client withdrawals in Q3. The presentation says flows should improve, but gives no evidence on the pipeline or client redemptions.