SEI Investments Co (SEIC) 2003 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the SEI Investments third-quarter earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given at that time. (Operator Instructions) As a reminder, this conference is being recorded. Now, I will turn the conference over to Mr. Al West, Chairman and CEO or SEI Investments Company. Please go ahead.

Good afternoon, everybody, and welcome. All of our segment leaders are here on the call, as well as Dennis McGonigle, SEI CFO. And Kathy Heilig, SEI's Controller. Now, I will start by recapping the third quarter of 2003, then I will turn it over to each of the business segment heads to comment on the results of their segment. And as usual, we will fill (ph) questions at the end of each segment report. Finally, Kathy Heilig will give us some important company-wide statistics. So, let me start with the third quarter.

During the third quarter, two things were notable. First, SEI's revenues are starting to grow modestly. In addition, despite increases in investments in the infrastructure necessary to support our new strategies, we were able to grow our EPS slightly. Second, and most critical to us, during the quarter, we made noble progress in developing and launching our new strategies in each of our businesses.

First, I want to cover the revenue and profit growth. Third quarter revenue grew to 161 million, a growth of 5 percent over last quarter, and also over last year's third quarter. Now, these revenues, however, overstate the strength of our revenue growth because the quarter's revenues were buoyed by about $7 million from onetime revenues, which positively affected the adviser and enterprise segment results. And in a minute I will speak to how these revenues affected third quarter's profits.

Third quarter is a traditionally-slow quarter for sales events, and 2003's third quarter held true to form, following a record-breaking second quarter. Although the dollar value of the events were about 60 percent of second quarter events, many of these events were strategically important for us. And I will report on those after finishing with the EPS.

Now, our EPS for the third quarter grew to 33 cents from 32 cents for both last quarter, as well as third quarter, 2002. And let me go through the math for you. While we had onetime revenues contributing 7 million in revenue, their positive effects on profits and EPS was mostly offset by nonrecurring expenses we incurred during the quarter, coupled with the historically-low onetime event quarter in the private banking segment. What did affect third quarter EPS is a couple of things I have mentioned for the last two quarters. First, that SEI's profits lag as we enter our growth period. Now, this lag effect is caused by front-loaded expenses of sales and installations. And, we are experiencing this lag effect now as we start to grow.

The second EPS-reducing program is our investment in our operating platform necessary for our new strategies. And I will cover the areas of investment in a bit.

First, I want to cover how assets under management grew during the quarter. Our non-cash asset balances grew by $3.6 billion. 1.6 billion of this growth was due to appreciation -- market appreciation. That leaves net new sales at $2 billion for the quarter.

Now, despite these slow improvements in our operating results, we are making some terrific progress in executing our new strategy. Those of you who attended our investor conference in June learned of new strategies for the company. These strategies revolve around delivering financial wellness to our institutional and individual end markets, as well as our bank and non-bank advisory, our intermediaries in our investment managing market (ph).

To execute these strategies, we are building a new platform, which all of our businesses will us to provide services to their clients. Now, this platform will provide us tremendous operational and developmental leverage, and is aimed at improving service, comprehensiveness, and quality.

Now, these investments include what we call the Desktop, which is a system platform to be used by end clients, advisors, and administrators to create the end customers' client experience. Now, these investments also include a global straight-through processing platform, designed to streamline investment processing for our clients, as well as our own operations. Now, we call the platform GIPP, short for Global Investment Processing Platform. Electronic trading is also part of this platform.

Now, noble events showing progress in executing our new strategies during the past quarter are as follows -- First, we delivered a Desktop interim release during the quarter that includes all aspects of its architecture and data management, as well as a number of critical analytical algorithms and client management routines. Secondly, all design has been completed and vendors have been selected for the GIPP platform and the project is ready to enter the bill phase in the fourth quarter. Third, a national bank, our first on this new service, signed up for mutual fund clearing, which is one of the recently-delivered electronic trading capabilities.

SEI has also entered the business of providing separately-managed account services to money managers by acquiring technology from Roar, and reaching licensing agreements with APL and Highland. In addition, we entered worldwide private banking distribution partnerships with HSBC, and Bank Luming (ph) and early results are encouraging.

We are also converting the First Community Bank to our new broadened life-wealth solutions. The life-wealth solution helps community banks succeed in attracting and serving individual high-network clients. And finally, we have 10 adviser clients who are in various stages of a Beta process for the life-wealth solution.

All of these events are early indications of market acceptance of our new strategies. And we deeply believe that the investments we're making for these strategies are crucial to SEI's continued prosperity in both development and launch progress on about all fronts -- is very, very encouraging.

And, as I mentioned before, some of the investment expenses will be capitalized according to our normal capitalization policy. In the third quarter, we capitalized 3.4 million of expenses related to some of these investment projects. This compares to a capitalization of 1.8 million last quarter, and a historical capitalization rate of somewhere between 500 and 600,000 per quarter.

In the longer run, we believe that the work we have done over the past two years, and the work we are currently doing, will pay enormous dividends. In every market we serve, we will be offering new expanded solutions for our clients and our, markets. And these solutions are badly needed by our markets, and will, therefore, help distance us from our competitors. And, naturally, we believe, all of this will help us, again, grow revenues and profit.

We also remain bullish on our long-term outlook because of the fundamentals of our business. The recurring nature of our revenues, our strong cash flow, the strong market acceptance of outsource business solutions, the leverage in our operations, and the portfolio businesses we are creating will continue to serve us well.

That concludes my remarks. And I would like now to move to our segments. And we will report the segments in the following order -- Private banking and trust; investment advisors; enterprises; money managers; and finally, investments in new businesses.

And, I will now move to private banking and trust. And I am going to turn it over to Robert Crudup to discuss the results in this segment. Bob?

Thanks, Al, and good afternoon everyone. As always, we will review the financial results. This quarter, we would also like to give you a sense of our progress and the direction that private banking and trust is going.

As to that progress and the overall positive direction, there are three major things. First, we believe Q3 represents a bottoming in PB&T revenue. Second, we are absolutely on schedule with both product development and new client implementations. But the associated expenses will cost profits to lag. Third, we continue to see market acceptance of our new strategies boding well for our long-term growth.

Now, let's discuss the quarter's financial results in the context of these themes. Revenues for the quarter declined 8 percent over Q3 of 2002, and 5 percent versus Q2 of this year. This can be attributed to previously-anticipated losses in fund processing revenues, and a further decrease in onetime investment processing revenues. Despite the fact that Q3 numbers are down, we are making progress, moving PB&T back toward growth.

Five points that lead to encouragement and help me feel this way are -- First, investment processing recurring revenues grew 4 percent in Q3 of this year versus the same quarter last year. This was the third consecutive quarter that recurring revenues have grown modestly. Second, the implementation of three new clients announced in Q2 is on schedule for a late fourth-quarter implementation, further boosting recurring revenues. Third, investment processing onetime revenues in Q3 were at their lowest level in several years. At this point, there is little room for further decline. Fourth, fund processing revenues lost this quarter, represents the full recognition of the National City lost. Last, one of our largest fund services clients, Union Bank of California, has been successfully re-contracted this quarter. These are all indicators that the tide is beginning to turn when it comes to revenue.

Now, let's turn to profits. In the context of our second theme, which is profits will lag revenues, and as Al has mentioned on several occasions, as we begin to grow again, profit growth will lag revenue growth. This is especially true in PB&T. Three items will help make this point -- First, sales commissions are substantial, and they are front-loaded. Second, new deals will require ramping up installations and servicing staff prior to receiving recurring revenues. And third, we are increasing critical investment expenditures in both core processing and Desktop systems. These will support our new strategies.

We should note that there is a new accounting rule that affects the timing of recognizing onetime implementation revenues. This new rule will have a dampening affect on our future revenue growth. In effect, certain implementation revenues will now be recognized over several years, instead of in the year that services are completed. Though this did not affect the current quarter, it will have effect on future quarters' onetime revenue.

Now, let's turn our attention to my third theme, which is market acceptance of our new solutions. As I stated last quarter, the second quarter represented the best new business quarter for PB&T in some time, and included transactions which indicated strong acceptance of our new solutions. Q3 sales were more modest, with 2.2 million in recurring revenue. But, our sales success continues to reflect our clients' acceptance of the new business solutions. You will remember we have three focus strategies. First, a new business model for investment distributor banks. Second, a new business model for investment manufacturing banks. And lastly, building and an STP platform for large-scale banks. This quarter's transactions are once again an important indicator of market acceptance of our new solutions.

Two sales transactions will help make this point. First, Met Life, a current BST client, bought our trust administration offering, taking a big step toward our investment distributor model. And, as Al mentioned, our first large-scale national bank contracted for SEI's mutual fund clearing network, thereby taking a giant step towards STP. In summary, let's recap my three themes. First, we believe Q3 represents a bottoming of PB&T's revenue, with a return to modest growth in the near future. This does not preclude quarterly fluctuations, but the trend should be upward. Recurring revenue growth in investment processing will lead the way. Second, our product development and the implementation of new clients are on schedule, but the associated expenses in the form of sales and implementation costs will cost profits to lag, as well an uptick in our investment. Third, we continue to see market acceptance of our new solutions in the form of new business. And our pipeline is a boding well for long-term growth.

In closing, while sales activity is strong, we do have competition in each transaction. But, we are encouraged. Our new business model (technical difficulty) and clients are engaging these models. The strength of our solutions will be obvious to our prospects. This will result in business growth for the private banking and trust segment.

If you have questions, I will be happy to answer them.

(OPERATOR INSTRUCTIONS). Jeff Hopson with A.G. Edwards.

A couple of questions -- In general, how would you characterize the pipeline (indiscernible) potential versus last quarter? And in particular, last quarter, I guess you picked up one former client -- Fidelity. Can you talk about those other potential clients of Fidelity, and how those discussions are coming?

Okay. I said last quarter that our new business pipeline was as strong as it had been in several years. That continues to be the case. Since the last quarter, I think we have seen some transactions move closer to consummation. So, I would say that is the encouraging thing about the pipeline. The size of the pipeline pretty much remains the same as it was last quarter. If you look at the pipeline, there are more large banks in the pipeline today than there has been since the late 1990s. And, I think that is an indication of what is going on with that competitor -- Fidelity.

Okay. And then, the liquidity assets in our management were down more than the long-term assets were up. Any significance there?

No, I think that is just an indication of some folks moving cash back into the market. There was no lost business. And, it seemed to come across from our -- sort of -- complete book of clients.

Okay. Thank you.

You're welcome.

Glenn Green with ThinkEquity Partners.

I just want to go back to the Fidelity situation. I just want to some color on what is really happening there. I mean, there's been some scuttlebutt in the market about what is happening with that business. And, just want to understand the implications for your clients.

Glenn, I have not seen a public announcement from Fidelity that they are withdrawing from that business. I would tell you that their current clients are very active in the marketplace, looking at their alternatives, and would draw me to conclude that they have shared that with their clients.

Okay. You recently -- I think this was with your segment -- the Highmark contract signing -- I just want to get some clarity on the nature of that contract signing. Whether it is an expanded relationship and what it entails?

Yes, that was the mutual fund -- the fund processing contract that I mentioned in my presentation. We have had a long-standing relationship with Highmark Funds. And the new relationship is substantially what we have had in the past. And the associated revenues are substantially similar as to what they were in the past.

Okay. And are there any notable contracts that are coming up for bid that you may or may not be concerned about?

Yes, you know, most of our contracts are around the five-year timeframe, which means 20 to 25 percent of our clients re-contract every year. So, we've got in ongoing, aggressive strategy around re-contracting clients. This year, with that one notable exception, we have been very successful. And I hope and expect that to be the case.

Great. Thanks, Bob.

Brad Moore with Putnam Global Securities.

A couple of things -- first off, can you repeat for me the amount of recurring revenue that you sold -- did you say 2.2 million?

Yes.

Okay. How does that compare to the prior quarter?

Last quarter, I believe, was seven.

Okay. And is the 2.2 million -- is that from -- did you say that is from the two sales of the new strategy? Or --?

There are some other small things in there. But, I would say that it was substantially from that.

Okay. And in terms of the -- (multiple speakers)

And make note that it has contracted recurring revenues -- what we announced.

Right. Okay. And, in terms of the pipeline, does it include -- does the majority of the pipeline essentially include clients that are interested in the new strategy? Or is this clients that are also in the pipeline because of the old strategy?

Yes, that is an interesting question. In the market today, we're presenting our new strategies. And we are getting a lot of tractions with clients around these strategies. And we hope that most of our clients that come in will move into the new strategies. That does not preclude us moving a client into our ASP service, for example.

Okay. Have you had to, at all, re-size the market opportunity of the new strategy, given what you know so far? Either -- have you had to re-size it up or down compared to your original expectations?

No, I would stick with the way we talked about it at the meeting here in June.

Okay.

It would be consistent with that.

Okay. And then, finally, just curious to know -- what are you seeing in terms of the organic growth of trust accounts at your client firms?

I have not looked at that in a while. But, through this economic downturn that we have been through for the last three years, that growth has not been great -- the organic growth within our current client base.

Okay (multiple speakers)

For trust. But the other thing I would remind you there -- as we re-focus on our new strategy, we're not really focused on trust; we are focused on private clients. Trust is an important component of that, but, as we transition the business, the private business is definitely a growth business at the bank.

Okay. Is it fair to say, though, that the trust business is decreasing from an organic standpoint? That the number of trust accounts is actually declining at this point?

No, I would not say that.

Okay. All right, great. Thanks.

Pete Heckmann with Stifel Nicolaus.

In terms of -- a couple of questions here -- The last portion -- you said in the third quarter there was a final deconversion of some revenue related in National City. Is there a way that you can quantify that last portion? And then, can you talk about the implementation milestones you are looking at for the fourth quarter and the first quarter, related to some of the larger new wins, including First Tennessee, Citizens, etc., etc. -- so we can kind of get a feel for when we should start seeing some incremental revenue?

Right. I think I said last quarter that the recurring revenue lost on National City would be about $1 million -- a little less than $1 million a month. And that we recognized one month of that in Q2. So we have gotten two full months this quarter of that.

Regarding the implementations, as I said, they are on schedule, and we expect all three of those clients to go before the end of the fourth quarter -- toward the end of the fourth quarter.

Okay. That is great. And then, as a follow-up to that, on the Citizens -- the relationship that also have the asset management component -- is that the same type of timetable we are talking for conversion of that piece of the business?

The trust processing conversion will be complete in December. The implementation of the investment distributing model will carry through next year.

Okay. You think that is a first-half issue?

Yes.

Great. I appreciate it.

Carla Cooper with Robert W. Baird.

I wonder if you could talk a little bit, Bob, about the typical contribution that you see from clients in excess of contracted revenue.

That is a great question. And I -- (multiple speakers)

Is there a typical percentage?

I think I can give you a directional answer without it being terribly concise. When we bring a new client on -- you know, if the contracted revenue is worth $10,000, you would expect another opportunity to cross-sell services, anywhere from a 20 percent increment of that to 100 percent increment of that. And if you go back and look at the models that I shared with you in June, I think you can get a sense of the effect of that in an investment manufacturing bank, or in an investment distributing bank.

And, I had one other question, which was -- the rate of technology investments right now is obviously up. And, I wonder if there's any way to think about that in terms of the size or the impact on the current level of expenses right now in the private banking trust division. Thanks.

I don't think I can give you an answer to that at this moment that I would be comfortable with.

Okay. Thank you.

Lionel Michael with (indiscernible) Advisory Services.

This may be a question without any relevance. Do you have a new revenue opportunity in the mutual fund processing area coming out of the late trade type of activity?

If you can think of one, I would be interested in it. (laughter). I don't think of one off the top (indiscernible) An important part of our service there as sponsor distributor for mutual funds, is compliance. So, I think that is sort of already built into our business model.

Well, I mean, clearly, a number of fund groups have what they thought was a competent system. But, there were holes in it. And, does that represent a revenue opportunity?

No, as I said, I think our compliance model is built into our current offering. What I would say about that offering is that, as we move toward this strategy for investment manufacturers, that the mutual fund component is a very important part of that offering. And, we expect to differentiate our product from the other offerings in the market as we build out this investment manufacturing strategy.

Thank you.

You're welcome.

Robert Lee with KBW.

Most of my questions (indiscernible) 2 quick ones -- Understanding that with the a pickup in the revenues, you know, our operating income is going to lag -- this fronted costs and some other things. Over time -- assuming you are successful in trying to migrate your business model. Where do you see, sort of, the long-term margins settling out in this business? Do you think it goes back towards the high 30s? Do you think 40 percent and north, where it has been more-recently a reasonable long-term kind of run rate? How do you think of that? And then, just one other follow-up.

Okay. Looking at the private banking business and the private client business and the wealth businesses. This is a growth business for us in investment processing and investment products offered into that market. We think it will continue to be a very large opportunity for us. So, we're going to continue to invest in solutions to help support the market. And, with that said, I think we would expect our margins to be in the high 30s, because we're going to consistently investment.

Okay. Thanks. The follow-up question is -- I was just looking at the assets under management in this segment -- just the equity in fixed income programs. You know, assets were pretty much flat, sequentially. And, assuming a normal 60/40 kind of mix, you would have expected it to be up a little bit, you know. Were there outflows there? Was there any lost business there or anything we should be aware of?

There is no substantial lost business. The things that move around that affect these numbers is the kind of product that you have someone hand in (ph) the associated fees. And we have been moving for over a year out of some high-fee products into some lower-fee products. So that may be one of the things you are seeing going on there.

Okay. Thanks a lot, Bob.

You're welcome.

Kevin Sonnit (ph) with Founders.

Mr. Sonnit, your line is open. Do you have a question?

Sorry about that. Bob, going back to your breakout of the three things that would, kind of, drag out profits here a little bit even as you close deals and see revenue pickup a little bit. The third component -- the investment spending -- a couple of people have already taken a shot at this -- but, can you give us kind of a -- some sense of the magnitude of that within that, I think, 46 million or so of expenses this quarter. Is it closer to 3, 4, 5 million or closer to 10 million?

The uptick is down on the lower end of that scale.

Okay. And if you just look back over it -- you guys have been talking about the incremental investment spending for a few quarters now. Is that sort of peaking this quarter or next quarter? Has it come from a lower-level? Or should we kind of continue to expect that sort of magnitude of dollars for the next few quarters?

I think you can expect that for the next few quarters.

Okay. Thank you.

You bet.

Eugene Chrishman (ph) with Lazard.

I just had a quick question on -- you mentioned that -- sort of the onetime revenues that you get will be spread out more; they won't be lump-sum recognized. And you said there wasn't an of that sort of revenue this quarter. But, in a more-typical quarter -- is it just stuff that comes up once a year? Or is it's something that is 20 or 30 percent of your incremental revenues? And how much of an impact do you expect that to have on future revenue growth over the next year or two?

Yes, that is around a new revenue recognition rule, and I'm going to let Dennis McGonigle answer that one for us.

The new rule, as many of you may already know, does not eliminate the recognition of onetime revenues; it just defers the recognition over the life of that client under contract. So, just to clarify -- Now, we will still have onetime revenue, except it will be spread over time. On a comparative basis, you really will not see much impact because we comparatively have not had high levels of onetime revenue over the past 18 months or so.

Going forward, what would drive this deferred revenue would be client signings. And, as Bob talk about, it is pipeline and the events to date, and that, hopefully over time, will be a nice deferred revenue number that we'll be booking over the life of the client contracts.

Okay (multiple speakers)

We have always stated that our recurring revenue base is -- across the company as well as in our part of banking and trust -- is very healthy.

But the life of the client -- (multiple speakers)

Life of the client -- correct.

Okay. So you are talking about -- so are the 20 percent, sort of, cost (indiscernible) you were talking about on top of an initial sale -- is that usually onetime stuff and I should think about that being added on increments of, you know, over the five years now or --?

No. The add-on stuff continues to add to our recurring revenue base for that client.

Okay. Thank you.

Carla Cooper with Robert W. Baird.

If it was in the press release, I missed it. Could you talk about the level of revenue of investment processing versus mutual fund versus investment management in the division?

Yes. Investment process (indiscernible) -- Front processing was 14; and investment management was 13.

Thank you.

At this point, there are no further questions in queue.

Thank you. Our second segment is investment advisors and Carl Guarino will cover this segment. Carl?

Thank you, Al, and good afternoon everyone. I want to focus my remarks this quarter on two areas. First, providing you some insight into the numbers, because they are clouded somewhat by onetime factors. And second, updating your on the substantial progress we are making in our strategic direction.

As for the numbers, the increase in revenues and profits for the third quarter was aided by non-recurring brokerage revenue, as well as an increase in assets under management. Onetime items added approximately 3.5 million to topline revenue, and 1.7 million to profits for the segment.

As expected, margins declined somewhat to 51.8 percent, as we continue to make targeted investments in key areas, such as the Desktop platform, to support our strategic growth. Although average assets under management for the third quarter increased to 26.4 billion, due to market appreciation, cash flow for the third quarter was a negative 400 million.

Now, quarterly revenues and profits were aided by onetime factors. The reverse was true for cash flow. Redemptions were impacted in the quarter by the closing of our variable annuity funds, as well as the loss of a large offshore client -- a loss unrelated to investment performance or our strategy. These onetime losses amounted to approximately 500 million. So, without these onetime items, cash flow for the quarter would have been a positive 100 million, reflecting a modest reduction in the redemption rate from prior periods.

We ended the quarter with about 26.3 million in assets under management. We continue to make progress in our strategic direction. The reshaping of our adviser distribution course, and the establishment of an SEI network of elite wealth advisors. To reshape our distribution, we began a process, during the third quarter, of encouraging over 2,000 advisors with under 2.5 million in assets each with SEI to make a more-substantial commitment to our business proposition. Advisors who fail to do so will be frozen from further offering of our investment solutions, but not required to redeem existing assets.

Progress continues on the buildout of the more-comprehensive business platform for our planned wealth adviser network. We continue to add advisors to our Beta process and business assessment programs and are pleased with the positive market reception to our offer. As we enter the fourth quarter, we are preparing to launch new investment strategies that are more tailored to the individual goals and risk profiles of affluent investors. These strategies will incorporate new asset classes, such as hedge, zero coupons, and real estate, permitting better alignment of portfolio performance with high-network client expectations. The investment strategies are expected to formally launch early next year, and will be made available, broadly, to our adviser distribution.

Thanks, and I will now take any questions that you may have.

(OPERATOR INSTRUCTIONS). Mayank Tandon with Janney Montgomery Scott.

Carl, can you give us a little more color on the 3.5 million onetime revenue impact and the costs associated with that?

I think in terms of the revenue side -- because this impacts us and also the enterprise division -- I will turn that over to my colleague, Ed Loughlin, for a little more comment.

What we're talking but here is that we had a very large portfolio restructuring. (technical difficulty) SEI served as the transition manager. And we were able to provide a much-lower cost level for shareholders. Serving that capacity, we were paid for that particular service.

Okay. So it was 3.5 million split evenly between both segments?

No. What you're going to hear -- in my segment, it was an additional $3 million.

Okay. And were there non-recurring costs related to this is well?

Yes, there were.

What was the amount for that?

I don't (multiple speakers)

We don't have a detail of that. What I've indicated with respect to the adviser segment is that if we take all of the onetime items that we have on the expense side -- that amounts to about 1 million 8. So the net effect in profits of all the onetime was 1.7 million. But, we are not breaking out what those items were.

Okay. I think I am clear. And then, also Carl, could you touch on -- maybe gives us a little more color on the client loss that you had mentioned?

Well, I don't want to get into more detail on that because it is -- it does deal with a specific client and their situation. So I don't want to -- in any way, step on client confidentiality. I will just comment to the fact that there is no relationship here with respect to performance or our strategy or anything like that going on.

Okay. Thanks.

Robert Lee with KBW.

I just wanted to actually make sure I understood what the comment was about -- 1 million or so onetime expenses in the segment related to this -- the transition manager role and some other stuff -- do I have that right?

The total numbers are 3.5 million of revenue; 1.8 million of onetime expense. That includes all items of onetime expense, so that gives you a 1.7 million net to profit, again, for the adviser segment.

Okay. Now, I'm going to ask you the same question I asked Bob. Assuming that margins in this business have ramped up pretty dramatically in the past year and a half despite the tough revenue environment. Even if we enter -- assuming going through a transition period here too -- who knows what the market does? -- I mean, where do you see, long-term, margins settling down here? I mean, I've got to assume that the 50-percent-plus operating margins may not be long-term sustainable.

I do not want to get into the business of trying to predict the margins in the future. As you know -- I mean, go back a year or so and the margins in this segment were running in the mid-50s and even a little bit higher. And we began this year saying that that was not a sustainable margin with the investments that we had planned in connection with our new strategy. Where we go from 51.8 that we have now is both a reflection of the speed of those investments, but also market circumstances. So, obviously movements in the market are going to affect revenues and indirectly affect margin. And I don't want to be in the business of trying to predict that.

You mentioned, I guess, in the quarter just ended that you went to about 2,000 advisors and, I guess, probably suggested that they ought to do more business or that is it? I mean, have you built into your own forecast some level of this over time? Do you have any sense of what the reaction is?

To put this in perspective -- as we have indicated before, if you look at our business, the top 2,000 advisors we deal with are responsible for about 85 percent of the assets (multiple speakers) We have made clear that it is -- these advisors, if you will, that have sort of small relationships with SEI, that we want to re-shape some.

The message that we sent pretty openly in the marketplace was that -- for these advisors, each of whom has less than 2.5 million, we're looking for a larger commitment or they will be frozen from new sales. We are very mindful of advisors' existing business. We're very mindful of the tax situation of existing accounts and not wanting to force a sort of change on individuals.

Now, so, what is the reaction of that? It may well be that there are advisors who do not want to increase their commitment. And that could lead to an acceleration of their efforts to redeem accounts. There are advisors who may take this invitation as an opportunity to increase their commitment, which will increase assets under management.

And finally, I would say there are -- what we call our select and best advisors -- who clearly are very pleased with the fact that we are making our offering more limited and exclusive. And therefore, may also respond in sort of a positive way.

So far, it is early. We just made this announcement at, sort of, the end of the third quarter. We are working through a process now with the advisors. We have roadshows scheduled literally all over the country with the advisors. So, I don't want to predict how that will come out. I'll just say that early reaction, I think, in general -- in terms of the strategic direction we are taking, is generally pretty positive. Advisors seem to understand the reason for our direction. Certainly, our best advisors are pleased that we're taking the step.

Okay. And one last question. If you were to look at current sales within this segment -- I'm just curious -- what products you are seeing driving sales? Is its the separate account platform? The mutual fund platform? Can you just give us a little color there?

Sure. Again, the efforts on our part are always around a sort of portfolio sale approach, rather than specific asset class product. It has been the case probably for the last year or more that separate accounts, in particular, are attracting good attention from the market because of the tax optimization capabilities. So, what growth we have seen has been more in that separate account arena.

Thank you.

Jeff Hopson with A.G. Edwards.

Yes, just to follow up on the -- kind of the timeframe for your discussions with the 2,000 advisors that you mentioned. When would you expect too, I guess, understand what their decision is going to be? And then how will you decide whether or not you are successful or not in terms of advisors doubling their contribution or leaving the program altogether?

In terms of timeframe, we have a (indiscernible) with roadshows and meetings with advisors that will take us through the end of this year. So by the end of this year I expect to have either more formal commitments from advisors or not.

In terms of how you measure the impact, some aspects of this are, you know, pretty measurable -- how many of those advisors do indicate a commitment to increase their assets. Some are a little less. You know, hard to measure the increase we might get from our best advisors by nature of the fact that the program is more exclusive. I don't know how to, sort of, carve out the incremental benefit of this.

Similarly, it might be hard to carve out what is the incremental acceleration of redemption rate from advisors who do not make the commitment. How much they might have redeemed anyway versus what they, in fact, redeemed. That might be more a matter of opinion. But we will certainly have some sort of qualitative assessment as to how things are going by year end.

Okay. And then in terms of your flows in the quarter, any sense that as the quarter progressed that people became more aggressive with their money, as the market improved?

A little bit of uptick probably if you take out the onetime items -- a little bit of positive uptick as the quarter went on. It was not pronounced.

Okay. Thank you.

Pete Heckmann with Stifel Nicolaus.

With regards to this Lockwood acquisition -- the acquisition of Lockwood by Bank of New York, it seems -- now, it just may be because they have a better PR -- but, it seems like I am seeing their name pop up a lot more. Does Bank of New York really contribute or dedicate a lot of new resources to Lockwood? Are you seeing them as a more competitive player in this space?

It's hard to comment specifically on what Bank of New York has added. I think Lockwood clearly is one of the players in the separate accounts space. I think, as that space has garnered more attention, it is natural that you will see their name more. And, they will be sort of recognized in that arena.

As you know, our new strategy is to provide a complete end-to-end business solution for advisors in the broader life-wealth space. And I think that gives us just enormous separation, frankly, from not only Lockwood, but other separate accounts or turnkey mutual fund providers. Just anecdotally, the adviser in the West Coast that we are speaking with -- we have not had a relationship with before -- indicated to us they have made a decision to go with a turnkey program. They looked at SEI, they looked at Russell, they looked at Lockwood. When they discovered what we were doing in terms of our wealth network -- I mean, his comment was "you have no competition in this arena." The issue of Lockwood or Russell in terms of competition simply goes away. So, that's where we are headed in terms of -- I will say distinguishing ourselves, giving ourselves some real space and room from competition.

Okay. Thank you.

Brad Moore with Putnam Global.

I just wondered if you could quantify your pipeline of clients -- new clients -- outside the existing base of either select clients or otherwise?

Yes, I cannot formally, Brad. But we have lots of conversations going on. We have -- we are beginning -- particular as we get into this fall period -- of really stepping up the pace in terms of seminars or forums that we have. I think with the progress that we have made in terms of the network strategy, and all that coming together, we think -- for official open or launch at the end of the first quarter of next year. We think we're now positioned to, frankly, open up pretty significantly in terms of prospecting for new advisors. To this point, it has not been a heavy emphasis; we have been focusing on re-shaping and doing some of the things, sort of, within our existing force and doing a lot of building. But, this is something that we expect to ramp up and we have already started to, sort of, ramp up the prospecting efforts this fall.

We don't tend to track that formally in a, sort of, prospect sense the way you might -- an institutional client or a bank. So, I don't have, sort of, specific numbers like that that I could share with you. But, it will be a significant emphasis. Again, I think the network offering we have is going to attract attention and make us appealing to a wider base of advisors, frankly, that we have accessed before.

Okay, so you said, in earnest, the beginning of the new year? In terms of targeting -- (multiple speakers)

(inaudible) is starting in earnest this fall. I think the official opening of the network with the -- and business solution -- we've said would be the end of the first quarter of next year.

Okay. And then can you give us some color on investment performance during the third quarter, relative to the benchmarks?

Do you want to (indiscernible) respond?

This is Ed Loughlin. The performance -- again, if you were to take a look at our typical investor and so forth -- that 60/40 type of a portfolio. We were pretty much flat to the benchmark, you know, from that perspective. I guess, to put that -- to give you some framework around that, what we have seen -- and I think we have discussed before -- is that the performance area we may have had a little bit of a struggle with over the last 12 to 15 months -- has been the Large Cap U.S. market. And that is probably off of its benchmark by about 75 basis points -- the strategy -- the U.S. Small Cap is over its benchmark by about 140 basis points. The corps fixed income, which we had talked about previously -- that really has recovered from some of those Enron issues. And, that is outperforming very, very handsomely. It's probably by about 90 basis points.

So I think, just generally, some of the soft spots have really improved. It continues to be a fairly-volatile market. And a market that, to a larger degree, in all asset classes, lower quality is what is been rewarded. And, our portfolio has a point of view that is expressed by ourselves and also our managers -- that, to a large degree, we think that that the -- that is not going to be sustainable as far as those kinds of companies. Those kinds of -- you know, if you look at the high-yield lower-quality credit, are not going to continue to be rewarded. So -- does not help you?

Okay. Thanks.

And Brad, I will just add to that from the advisory segment stance issue, if you will, of our performance -- or relative to performances -- is really not an issue for us in the marketplace. I think what is, and continues to be an issue in the high-net-worth marketplace, is the fact that the end investors tend to be driven more by absolute returns. And I think the new investment strategies that we are in process of launching, provide us with a great differentiated offering that really speaks to that issue. And again, it is -- right now, we are introducing that to our adviser network, and we are getting some very positive feedback and reaction, at least from them.

Great. Thanks.

Brad, probably one other perspective -- that portfolio that I talked about and so far as our U.S. Large Cap -- if you will look at that on a twelve-month type of a basis -- just to give you some sense of where the benchmark is. Even though we have underperformed the benchmark, we are still in about 70th percentile. 70th being on the high side. So we are beating the media manager in that particular area. So the benchmark has performed very, very well.

Okay.

There are some favorable (ph) comparisons against peers.

Yes. Okay.

Glenn Green with ThinkEquity Partners.

A similar question I was asking Bob -- just the level of investment spending in the quarter -- some kind of range to help us -- just sort of in the couple of million dollars per quarter range?

I guess I have to say this -- aside for the onetime items that you see reflected in the segment numbers, I think you can expect, over the next couple of quarters, to see continued investment at substantially the same levels that are reflected in this quarter. Now, the other wild card for us in expenses going is around sales compensation and the like, which will just be driven by events.

Okay. And just to clarify -- the discussion you just had with Brad. Your typical balance portfolio was up (indiscernible) 2 to 3 percent in the quarter?

Three.

Okay. Thanks.

At this time, there are no further questions in queue.

Okay. Thank you. Our third segment is the enterprise segment. Now, I'm going to turn it over to Ed Loughlin to discuss this segment. Ed?

Thanks, Al. Good afternoon, everyone. As you can see in the earnings release, revenue, profit and also margin comparisons to last year -- for both the three-month and also the nine-month periods, are all favorable. So my remarks today are going to be really focused on progress since last quarter. I'm also going to comment on what we believe to be the improving willingness of institutions to make change decisions to their retirement and also their endowment asset programs.

So looking at the quarterly numbers, revenues and profits for the quarter did benefit from both onetime, non-recurring brokerage revenue, and also a $400 million increase in assets under management. Onetime items for the quarter increased revenue by approximately $3 million, and profits by approximately 2.4 million. Margins for the quarter increased to an unsustainable level of 48 percent.

The summer season is normally a slow time for new client commitments. However, during the quarter, SEI successfully closed eight new clients, totaling $275 million in retirement sales, and $70 million in treasury sales. We continue to experience an increased level of interest in our solutions, and also client-committed to making change decisions. To date, we have sold over $2 billion of retirement assets and $900 million of treasury assets.

Our solutions-oriented business philosophy does enable us to enjoy stable, long-term client relationships with the majority of our clients. Clients that selected SEI for a single product are more vulnerable. During the quarter, we lost several product-oriented relationships, due to some rotations in board compositions, and also some corporate merger activity.

I would also note that product-oriented buyers continue to question active versus passive implementation. So, the net funding, after accounting for client losses, was $247 million at the close of the quarter. And our unfunded backlog was $800 million.

The pace of sales activity continues to be strong and the pipeline continues to grow. We are receiving enthusiastic support from both clients and prospects for our expanded solutions that are helping planned sponsors more effectively manage the impact of rising corporate contributions on their corporate finances.

Thank you, and I am happy to entertain any questions.

(OPERATOR INSTRUCTIONS). Mayank Tandon, Janney Montgomery Scott

Ed, you did mention the onetime impact. Could you repeat the operating profit impact?

The operating profit was 2.4 (ph) million.

2.4 million. Okay.

Positive.

Okay. And this may be more of a corporate (indiscernible) question -- I just want to the clear. Al talked about the upfront or the non-recurring expenses. Were they all related to this onetime revenue impact?

No, they were not.

Okay. I will come back later with another question. And then, Ed, could you talk about -- once again, I'm sorry, the number that you gave. The (indiscernible) backlog was 800 million?

Yes. (multiple speakers)

And then what was the funding in the quarter?

The funding was a net $247 million.

Okay. And did you also give the number of new clients you want, both on the retirement side and the liquidity side?

Yes, it was 275 million in retirement, and 70 million in treasury sales.

And, do you have the number of new clients that you added in each area?

It I eight new clients in retirement and two in treasury. A total of 10.

Okay. Great. Thanks very much.

(OPERATOR INSTRUCTIONS). Christ Arndt with Select Equity Group.

This has obviously been a good year for new fundings -- new net fundings. Can you just talk about what has changed this year? You mentioned the willingness to consider options. But, any perspective you have on how long that might continue to last? Do you anticipate a favorable new sales environment for the next couple of years? Or, this a quarterly type (indiscernible)? Any additional thoughts in that respect?

Sure, Chris. I guess it would be hard to forecast insofar as the buyer's behavior, going forward. But I can probably more-accurately reflect what I think we have seen happening. To a large degree, for a couple of years there -- I mean planned sponsors did not make a lot of changes -- just generally. Whether it was for our program or any other program, because I think, they were focused on the business and the implications of the market downturn and the coming downturns of their business.

I think they're a couple of trends, though, that we do see that are positive for our particular business. One is, I think that there is a continued interest in outsourcing the responsibility for these programs to some type of a solution provider like ourselves. And, I think the second trend would be the fact that just -- if we look at just the retirement area in particular, these pension plans -- as I think I have talk about in the past -- these are not self-financing anymore. The fact there are about 70 percent of the pension plans out there are now underfunded -- I think it does force some of the focus to -- are there some other ways to be able to handle this responsibility of making these fairly-significant cash contributions, going forward? And try and better understand the impact that it has for the corporation.

So, I think those two dynamics are things that are probably not going to change very quickly. This underfunded status is something -- interest rates and poor markets contributed to that. The markets can improve, but if interest rates do not dramatically increase very quickly, their liabilities are still going to be fairly-significant, and the plans will be -- continue to be underfunded. So, I think that those are favorable trends, and we want to be able to be well-positioned to capitalize on them.

Great. Thanks a lot.

At this time, there are no further questions in queue.

Thank you. Our fourth segment today is money managers and I'm going to turn it over to Wayne Withrow to discuss this segment. Wayne?

Thanks, Al. I will begin my comments with a discussion of our continued sales momentum in the existing global funds services business. I will then spend a few moments discussing the rollout of our new outsourcing solutions for separately-managed accounts.

With respect to global fund services, we sold new business projected to generate 2.1 million in annualize revenue. In addition, access under administration for the quarter increased 6.1 billion, 4.1 billion of which came from new client funding and the balance of which was attributable to market appreciation.

Our results continue to reflect sales for both alternative fund managers and traditional managers, as we added seven new alternative managers, and three new traditional managers during the quarter.

The quarter's second major accomplishment is that we completed the groundwork for our back office processing solutions for the separately-managed accounts space. According to (indiscernible) the separately-managed accounts industry contained $433 billion in assets as of June 30, 2003. Recently, the Money Management Institute estimated that this total will top 1.2 trillion by 2006.

At the same time that the addressable market is booming, the complexity of the operating environment is expected to make its participants receptive to new outsourcing solutions. During the third quarter, we acquired ownership of a proprietary automation platform developed by World Asset Management.

In addition, we acquired licenses to software from Highland software in the APL division of CheckFree Corporation. As we integrate these components into our existing back office processing center, we feel we will be able to offer a unique, best-of-class outsourcing solution for separately-managed accounts. The initial implementation of this integrated solution should be completed before the end of the fourth quarter.

I must remind you that while the opportunity looks bright, we're in the early stages of the solutions rollout, and it is too early to say when you may see its impact on our financial results or what the impact may be. Looking forward, our pipeline remains strong, the launch of our separately-managed account offering looks promising, and my outlook for this segment is positive.

We will now entertain questions.

(OPERATOR INSTRUCTIONS). Robert Lee with KBW.

I just have two quick questions. First, I just want to clarify -- when you mentioned -- I guess, that you acquired the technology. Or is it licensed? I mean, do you actually own it outright at this point?

The more software we acquire, we own it outright.

And second, I'm just curious if you could talk a little bit about any changes in competitive landscape as it relates to the hedge fund administration business? You've got some nice client wins there. Are you seeing any change in the landscape -- any particular competitors that are not as competitive as they were? Were any new basis, or---?

(technical difficulty) the answer is no.

Okay. How about in terms of seeing any additional pricing pressure their? Or, not at all?

As I said in the past, this tends to be a quality-driven by her; not a price-driven by. First of all, (indiscernible).

Okay. Thanks.

Jeff Hopson with A.G. Edwards.

Yes, in regards to the * platform, can you give us a sense of when you were going to be selling to the asset managers? Is a lower-cost? Just easier? Processing? Or exactly, what will be the cells message that you take out of the market?

I think the cells messaging is -- the cells message is primarily twofold. Reduced cost and increase quality. And the separately managed account space is important to understand that a manager needs to get access from the separate account sponsor. From the sponsor's perspective, the incline quality operation are now that reflects upon customers very important. So, quality operation can actually helped a manager tried their revenue. Sensibly to get participate in more programs.

Okay. On the call side, is their exact number you can give to clients as far as a basis point improvement? Or, as a more qualitative at this point?

I guess I'm not come here prepared to quantify right now. What I would say the industry statistics, is estimated that anywhere because of the operation is anywhere from 12 to 50 basis points and existing environments.

Okay. Thank you.

At this time there are no further questions in queue.

Thank you. Our fifth and file segment is investment in new business. And I'm going to turn it over to Joe Ujobai to discuss this segment. Joe?

Thank you, out. This afternoon I will report on investments in new business segment that is always a focus on our global businesses. In this segment, most of the revenue report is related to global, but expenses include other strategic longer-term investments. The loss of the fourth quarter is $4.4 million, reflecting an improvement from the 5. $1 million loss in the second quarter of 2003. The message I want to lead with you today is that we are beginning to see sustainable momentum across all of our major market initiatives about their enterprise and private client businesses. In our global enterprise business we at new sales events totaling $300 million. Newly announced pension clients include Canadian tire, and in the UK, the University of Bristol. As of quarter end, we at an unfunded backlog of $700 million, of which happens already funded this month.

In the UK, we have now entered into three distribution relationships with traditional investment consultants, such as Deloitte & Touche, and Barnett Wattingham. We are beginning to see significant asset (indiscernible) opportunity through this indirect sales channel.

In our private client business, we began to roll out of our high-net-worth solutions with HSBC Republic in Asia and Europe. Those results are encouraging.

We also announced the expansion of our relationship with Old Mutual, having been selected to manage their offshore elite funds. We've expected additional assets of over $130 million.

And finally, we are working towards the first quarter 2004 worldwide private client launch with Bank (indiscernible) . Going forward, we expect to see improvement in bottom line performance as sales momentum builds. But, as we always remind, we will continue to invest in the people and the infrastructure necessary to support new business initiatives, market expansion, and sustainable global growth.

If there are any questions, I am prepared to entertain them now.

(OPERATOR INSTRUCTIONS). Carla Cooper with Robert W. Baird.

I wondered if you could just talk about the decline in the assets under admin from -- it looks to me 7 billion to 5.3 in the quarter?

Yes, we did lose a global funds services client and this had impact on our assets (ph) in administration, as well as our revenue. But, frankly, not much impact on profitability.

And then, the Bank Luming -- could you talk about that in a little more detail? Does that resemble the HSBC win?

It's similar to HSBC, although Luming is a smaller organization. And we're working with Bank Luming to create a high-net-worth solution, using our multi-manager capability. And, they will market that to their more-affluent client segment.

Thank you.

(OPERATOR INSTRUCTIONS). At this time, there are no further questions in queue.

Thank you. That concludes our quarterly reports from our segments. I would now like to ask Kathy Heilig to give you a few company-wide statistics.

Thanks, Al. Good afternoon, everyone. I have some additional corporate information about this quarter. Third quarter cash flow from operations was 59.4 million, or 55 cents per share. Third quarter free cash flow was 46.6 million, or 43 cents per share. Year-to-date cash flow from operations, 123.9 million.

In the third quarter, we spent 4.2 million towards our new facilities, and 2 million for equipment. We expect the rest of the year's facilities to be about another million, and equipment to be between 2 and 2.5 million in the fourth quarter.

Third quarter depreciation was 3.6 million, and third quarter amortization, 469,000. And, the Accounts Payable balance at September 30 was 3.7 million.

We also would like to remind you that many of our responses are based upon assumptions that involve risks. Future revenues and income could differ from expected results. We have no obligation to publicly update any forward-looking statements.

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

(OPERATOR INSTRUCTIONS). Robert Lee with KBW.

A couple of questions -- First, just trying to figure out why interest income would have declined when cash balances and investments, I believe, rose in the quarter. And also, what was the $500,000 net gain on investments?

Okay. The interest (indiscernible) -- there was actually a mis-computation in a prior quarter. So you are seeing that correction. So, it is actually a little lower in this quarter than it would be next quarter. Everything else staying the same.

The 500,000 is a combination of gain on investments, and the loss on some hedges that we have -- that, we discussed in previous quarters.

Okay. Also, this may be more for Al -- I noticed that share repurchases trailed off in the quarter. Is there -- what should we expected going forward? I mean, is it a pretty dramatic drop? And also, I guess we are half hoping to see some kind of change -- maybe increasing the dividend with the changes in the tax laws. Could you talk about that as well?

Yes. First of all, the repurchase -- the stock moved fairly well during the quarter.

(technical difficulty)

maybe increase in the dividend with the changes in the tax laws. Could you talk about that as well?

Yes. First of all, the repurchase. The stock moved fairly well during the quarter. And we didn't move into it very much. And so it is an atypical quarter, we believe, and we will be buying more, going forward.

We have been studying, at the same time, which also slowed us down a bit. We have been studying the dividends versus stock repurchase. And pretty much kind of -- with the assumptions you have to make to determine one is better than the other, I think, are really guesses at this point. So we will be discussing it at the December board meeting, and we'll make a conclusion at that time. But I really can't even guess at this point how we will come out in it. Although, we will come out with a position.

Okay. Thanks.

Mayank Tandon, Janney Montgomery Scott.

Kathy, could you first give the depreciation number again for the quarter?

3.6 million.

And you said amortization was 469,000?

Right.

I'm sorry -- depreciation was 3.6 million, right?

Right.

Okay, sorry. And I also wanted to go back to the previous question that I asked before in terms of the one-time events. I understand the onetime events that impacted enterprises and investment advisors -- what were the non-recurring expenses that Al talk about earlier on the call?

The non-recurring expenses that I was referring to were -- first of all, included the brokerage expenses for doing those -- that transition management. And then there was also a couple very large consulting projects that are non-recurring. Now, some that will hang over into next quarter just a little bit. But most of it hits the third quarter.

And then we also had some investments that netted considerably higher this quarter than last quarter. And then there is a handful of other things. But all of those things are kind of outside of our business. We didn't consider them non-recurring expenses that were related to us -- our normal business. So that is why I mentioned them.

Al, what was the amount, though?

Well, depending on how you count, it's between 6 and 9 million. If you throw in also -- if you throw in the fact that -- which I did mention -- which was the non-recurring and -- the PB&T -- the private banking -- their non-recurring revenue was off -- I think below the historical norm. So that was another factor that kind of --

Okay. So 6 to 9 million would be sort of a rough range. (multiple speakers) that would include the impact on the advisors and enterprises segment? That would be total -- this number?

That's total. That's company-wide.

Jim Raley (ph) with Harley Caprifish (ph).

Kathy, hi. Just curious what the free cash flow was for the year. I don't know if you gave that year-to-date?

No, I didn't. It's -- was 91.3 million.

Great. Thank you.

Carla Cooper, Robert W. Baird.

Yes, I just wondered if you could comment on the general and administrative expenses. They look to be up to me quite a bit, year-over-year. And just wondered, again -- anything pointed there?

That included some of these expenses that I was (ph) just talking about. They weren't in the segments, but they ended up hitting G&A. That's why we didn't put them in the segments -- because it wasn't related to our normal business.

Okay. Thank you.

Brad Moore, Putnam Global.

Did you guys pay sales commissions on the 7 million of onetime revenue?

No.

Okay. Can you help me understand --? (multiple speakers)

(multiple speakers) Absolutely not.

Okay. Can you help me, then, understand what the nature of the linked quarter increase in sales and marketing expenses is all about?

Do you mean for the entire company?

Yes, company-wide.

Yes, a number of them -- a number of the units had stronger sales. And so the sales expenses were up. And, I will let Bob talk to his. He has got a little different story. Just a second --

If you look at the sales and marketing expenses for PB&T, we hit a low (ph) in the fourth quarter of 2002. And you will see a continuous ramp-up through the first three quarters of this year. And that is around the marketing and promotion expenses, with rolling our new positioning and story out with clients, and some incremental sales commissions associated with the new transactions that we have been closing.

Okay. Great. Thanks.

Pete Heckmann, Stifel Nicolaus.

Sorry about this. I thought I understood the nature -- or the flow-through of the one-times. But then, a recent question led me to believe that maybe perhaps I do not understand it.

If you can just go through and summarize real quickly the onetime revenue impact to the three segments, and then any related or additional onetime related expense? I guess -- listening to the call earlier, it sounded to me like you were talk about something like a $4 million benefit, which would have been about 2 cents in the quarter. And then, the answer to a more recent question sounded like perhaps maybe onetime expenses all-in were greater than the $7 million.

Okay -- do the accounting again. It's 7 million, and the direct brokerage behind that created about a $4 million increase in the two segments of adviser and enterprise. Then there were other expenses that were mostly in G&A that increased that considerably. And then there were the difference between the -- a couple of investments that we were making between the third quarter and fourth quarter. And then there was -- as I've, you know -- the full number, it would be some of the PB&T onetime -- revenues were down historically -- which was pretty much timing.

Okay, so kind of all-in here, when we look at that net income number, is there -- again --?

Problem with that thing (ph), if you leave out the revenue -- onetime revenue shortfall of (ph) PB&T, you've got probably a positive effect of 7 million, somewhere around a million.

Of about one million?

Yes.

Okay. Thank you.

(OPERATOR INSTRUCTIONS) Mr. West, at this time, there are no further questions in queue.

Thank you all. Just in conclusion, we are very excited about what we are building, and do look forward to delivering the potential that we do see. And I cannot stress enough that we are optimistic and confident. Our return revenues, strong cash flow, the market acceptance of our business solutions, and our operational leverage added to the investments and new solutions we are making for our markets, and -- as well as the portfolio businesses -- all serve to support our goal of creating long-term, sustainable growth in revenues and profits.

And so -- I also want to remind you we are in the business-solutions business. And that fact is more evident with our new directions. And our clients do business with us because we are solving essential business problems for them and making their businesses and their lives better. That is very high value-added proposition, and it differentiates us from our competition. And we do believe it will continue to serve us in the future.

Thank you all, and have a good day.

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