SEI Investments Co (SEIC) 2014 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the SEI Third-Quarter 2014 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.

I would now like to turn the conference over to your host, Chairman and CEO, Mr. Al West. Please go ahead.

Thank you. Good afternoon, everybody, and welcome.

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

I want to start by recapping the third quarter of 2014. I'll then turn it over to Dennis to cover LSV in the investment in New Business segment. After that, each of the business segment leaders will comment on the results of their segments. And then finally, Kathy Heilig will provide you with some important company-wide statistics.

As usual, we will field questions at the end of each report. So let me start with the third quarter of 2014. Third Quarter earnings increased by 25% over earnings for the third quarter of 2013. Diluted earnings per share for the third quarter of $0.49 represents a 29% increase from the $0.38 reported for the third quarter of 2013. We also recorded a 15% increase in revenue from third quarter of 2013 to 2014.

Also, during the third quarter of 2014, our non-cash asset balances under Management were unchanged. SEI's assets under Management grew slightly during the quarter and LSV's assets under Management dropped slightly.

Finally, during the third quarter of 2014, we repurchased 2 million shares of SEI stock at an average price of $37.60 per share. That translates to $75.2 million of stock repurchases during the quarter.

Now turning to sales, our net new recurring revenue sales during the quarter were again good. Of the $27.5 million of net new sales events we generated, $25.6 million are recurring revenues. Each of the segment heads will address their sales activities.

Now as you know, the rollout of SWP continues. During the third quarter, we capitalized approximately $7.9 million of the SEI wealth platform development and amortized approximately $9.8 million of previously capitalized development. Our development agenda for SWP remains to deliver functionality important to the large and medium size advisors and banks in the US and UK markets, as well as to further automate our operations.

Now as we discussed in our annual investor conference and reiterated last quarter, we are disappointed at how long it has taken to deliver the full platform, and in turn we are also disappointed at the time it has taken to gain our first large initiative for SWP. While we are diligently working through the sales process with large potential clients, we have increased our attention on Asset Management distribution opportunities and improving profitability in the private banking segment in 2014 and beyond.

Now in the Advisor segment, we have made solid progress in improving our asset gathering as well as in preparing for the roll out of SWP to the US market. Both are important to accelerate our growth in profits of this business.

In the Institutional segment, our strong sales and profits throughout the world are living proof of the strong market adoption of our differentiated Fiduciary Management solutions.

And finally, our Investment Management services segment continues its success in both selling and implementing new business while differentiating our solutions. They are making progress selling to larger prospects and increasing the business we do with existing clients.

Behind all of this of our business units, I am encouraged by the feedback I received from clients and prospects across our companies target markets. Our reputation for delivery remains intact and has strengthened. The sales activities and events in all units confirm the positive feelings in our client bases.

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

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.

During the third quarter of 2014, the investments in New Business segment continued its focus principally on two areas, the ultra high net worth investor segment and development of a web-based investment services and a voice offering coupled with the use of global technologies. Some in the industry would consider this similar to Robo-Advisors.

During the quarter, the investments in New Business segment incurred a loss of $3.4 million, which compares to a $3.1 million loss during the third quarter of 2013. There has been no material change in this segment and we expect losses in this segment to continue in this range the remainder of the year.

Regarding LSV, our earnings from LSV represent our 39.3% ownership interest during the third quarter. LSV contributed approximately $38.2 million in income to SEI during the quarter. This compares to a $31.3 million contribution for the third quarter of 2013. Asset balances declined by approximately $500 million during the quarter due to decreased market valuation which was offset by net positive cash flow.

Cash flow at LSV during the quarter was a positive $1.6 billion and revenue in the quarter was $114.5 million. The earnings from LSV are recorded in the line item on our Income Statement, equity and earnings of unconsolidated affiliate.

In addition to our proportional share of LSV earnings, we also included this line item our share of the income or losses related to our investment in Galfu, the Shanghai-based investment advisory firm. For the quarter, those losses were approximately $300,000. While not a material amount, I wanted to make sure you could reconcile this line item on the Income Statement.

In addition, as regards to Galfu, SEI's total capital investments to date is approximately $15 million, of which $11.9 million remains on the balance sheet. During the fourth quarter we will be evaluating our continued involvement in Galfu, recoverability of the investment to date and any future investment commitments.

As a final comment on Third Quarter, I want to remind everyone that during the third quarter of 2013, SEI benefited from a lower tax rate due to State tax planning. This lower rate equated to approximately $0.03 in EPS for that quarter. I refer you to our 10-K and soon to be filed 10-Q for additional information.

I'll now take any questions you have.

(Operator Instructions)

Your first question comes from the line of Glenn Greene. Please go ahead.

Hi Dennis, quick question on LSV.

The profitability of the $38.2 million was not only really strong year-over-year, but Q to Q, and I think in the Press Release you alluded to performance fees you got in the quarter. Could you highlight how significant the performance fees, and is that something we should be expecting periodically? Maybe, once a year kind of thing?

They generally have performance fees assuming the performance is good compared to their contracted benchmarks. Just this quarter we call it out because normally, they are, comparatively to last year Third Quarter -- last year it ran about 7% of revenue and this year was more in the 10% range. So it's a little bit higher. They had a much stronger performance quarter. But every quarter there are some -- assuming things are going, while there's some level of performance piece, but it is true that Third Quarters of each year tend to be the higher quarter, if they are doing well. Really because of the anniversary date of their client contracts.

So all else equal, probably be more normalized to be something like 7% around you in the Fourth Quarter?

No, I wouldn't say that, because each quarter is a little bit different. It really depends on the calendaring of their client contracts. Because it's an annual number generally based on when their client relationships were initiated. Does that makes sense?

Yes, I guess.

So my point was really Third Quarter is usually, if they're doing well, it's the higher quarter of all four of the quarters because they have more clients who calendar in that quarter.

Got it. Okay, thanks. That was it.

(Operator Instructions)

At this time there are no further questions.

Thank you, Dennis.

Now I'm going to turn it over to Joe Ujobai to discuss our Private Banking segment. Joe?

Thank you, Al.

For Private Banking from the year ago quarter, revenue of $110 million was up 13% and profit increased to $9.7 million from $1.8 million. Improvement from the year ago quarter was largely driven by, number one, higher recurring investment processing and mutual fund trading revenue.

We continue to grow assets on the asset wealth platform. In the UK, we added over $900 million in net cash flow. In the US we converted our sixth client, Driving Trust Company, as part of our step in strategy. And two, higher Asset Management revenue based on increased assets under Management and our growing distribution business. During the quarter we added $450 million of net cash flow in SEI investment solutions.

Despite strong cash flow in both our Processing and Asset Management businesses, revenue and ending balances were negatively impacted by currency exchange rates and market depreciation. As a reminder, during Q2 2014, we saw a one-time $6 million professional services fee related to SWP discovery at a large bank prospect.

Turning to Business Development, net sales events for the quarter were at $5.4 million, $3.8 million of which is recurring. Recurring sales events were approximately 60% related to investment processing and 40% to Asset Management distribution. Worldwide we now have 30 signed SWP clients with a backlog of approximately $4.3 million recurring revenue that should install over the next 18 months.

As we have discussed throughout the year, our market activities focused on capturing a large early adopter client in the US. We continue to make slow but steady progress towards that goal. Executive engagement at our prospects is strong and is the most important factor in driving towards final decisions and signed contracts.

In the meantime, we will drive modest incremental revenue and profit growth by; number one, growing current trust 3000 and FWP clients; number two, installing the SWP backlog; number three, driving momentum in the Asset Management distribution business; and number four, controlling expenses as we continue to build out the platform. Third Quarter results reflect our focus.

Any questions?

(Operator Instructions)

You have a question from the line of Robert Lee.

Yes. Hi Joe, how are you?

Good.

A couple of questions. First one, if we think of SWP, how do you feel about the business and the trajectory in the sense that if say you don't sign another large client over the next several quarters, do you feel that there's enough between your focus on expenses and the growth in the Asset Management business? And what's the backlog in the SWP that there's still enough revenue growth and expense controls to get you some positive operating leverage without signing an SWP client over the coming year, if that were not to happen?

Yes, it will be incremental and slower than we would like. So I think signing -- we built this to sign big deals. So yes, we'll see positive momentum incremental, but it will be slow without a big deal.

And you mentioned, obviously focused on the large adapter in the US, but can you maybe shift gears a little bit and go back to the UK? I'm assuming that's still the focus there? Or have you looked at the UK mark and saying that maybe there's really not much on the horizon so putting all the effort into the US? Or am I just parsing the words too much?

You probably were. We're very active in the UK. We have 20 clients up and installed and I think that we're doing two things there. One is, we're focusing on helping those clients grow. So we are seeing revenue growth from current clients. And the platform is a great infrastructure to help them grow their business. We're seeing that play out in some of our clients as we expected and we are actively in the market trying to bring on new names there too.

And just to make sure I understand correctly the $5.4 million of net sales in the quarter, that which I guess was 40% Asset Management and 60% Processing. So that's a combination -- should I think of that as a combination of what was infrastructure backlog that comes on the platform, as well as the organic growth of the 20 or so existing clients in the UK, primarily? Is that the right way to think of that?

Well, the processing side is generally new contracts. So it's where we either sold a new processing deal. We sold a community bank in the US. So that would be on the platform, that would be included there and we would sell some additional services to some current clients. And on the Asset Management side it would be the net new assets cash flow that we've sold.

Actually, I misspoke. I really was meaning that the $900 million of net cash in the UK. I apologize.

Yes, so that would be with the current clients we would consider that net sales for current clients.

So, I guess, the main point being that the existing clients themselves are growing organically, so you're capturing financial growth.

That's correct. Yes, that's correct.

I think, as you know, we changed the business model where it's largely a UA-based, so as our clients grow our revenue grows. And I think that's the big difference between the Legacy business and the SWP business, is that as our clients grow, our revenue should grow.

Great. Thanks for taking my questions.

Your next question comes from the line of Chris Donat.

Hi, Chris.

Hi, good afternoon. Good afternoon, Joe.

Two questions on the Private Banks business. As I think about the $40 billion in total assets. Can you give us a ballpark on what's overseas? And then the related question is, thinking about currency exposure, is it mostly British pound or are there other currencies involved?

Yes, that $30 billion is based on our UK clients on the platform and $10 billion US, and yes, the exposure is largely British pounds.

Okay, got it. So looking at the move in the third quarter it looks like if the fourth quarter plays out that way, it's going to be another headwind. But anyway, that's an assumption, thanks.

Okay.

Next we'll go back to the line of Glenn Greene.

Hi Joe, just thinking out loud and just a clarification on last question, the $40 billion assets under Management administration that shows up in your reported numbers, does that include the SWP assets or do you keep that segregated? I'm a little confused right now.

That is the SWP assets.

It is? So that is reported in those numbers. So the Asset Management business, which--

I'm sorry, maybe I misanswered the question.

Let me make sure you're talking on the Earnings Release?

Yes.

We have the Asset Balances Schedule?

Yes.

The assets under Administration that show up in our banking there are at the mutual fund administration assets.

Right, that's what I thought.

(technical difficulty) The $40 billion that Joe talks about in his commentary asset SWP, assets on the platform. They're two different numbers.

Okay, that's helpful. Thanks, Dennis. Appreciate it.

And that was split 30/10 between UK and US?

Yes, for SWP, yes.

Got it.

And maybe it would be helpful, could you give us a sense what kind of revenue rate we're on for SWP and what proportion of potential client assets have converted at this point of the signed clients?

So, what do you mean by revenue rates? What are you asking for there?

Are you at a $25 million to $30 million annual revenue run rate and do you have 60% to 70% of potential assets of clients that you've signed now converted on to the system?

So as I mentioned we have a backlog of about $4.3 million of clients to convert, so there are a handful of clients that are still left to convert. And we don't break out the SWP revenue from the rest of the processing revenue at this point.

Okay, I was just trying to get an update because I think the last time you may have disclosed a timeline might have been 2012. You gave a timeline out to 2014 to 2015.

Yes, when we did that for the UK business and we're on track for that number.

Okay.

And the Asset Management distribution business, which seems to have a lot of momentum, can you give us a frame of reference how big that is in proportion to total private banking and trust revenue? The relative growth rate for it?

Yes, hold on. Let me get that.

It's about 25% of our revenue. And that revenue has been growing at about 20%.

And is it over time? Not today, but what's the profitability potential of that business? Is it like Wayne's business when it scales?

Yes, it is. It's less profitable now because it isn't as big. But yes, I think it has some pretty significant profitability margin potential.

Okay, great. Thank you.

Glenn, the break out of revenue of Asset Management versus Processing is in the Q.

Okay, got it.

It's in the K and the Q.

Got it. Okay, thanks.

Your next question comes from the line of Thomas McCrohan.

Hi, Joe.

Just follow-up on SWP, can you update us on the size of the US SWP pipeline in terms of total potential revenue and the mix between large versus smaller prospects?

It remains about the same as we've talked about over the last couple of meetings. And nothing's really fallen out. So what we're really doing is focusing on the larger firms and really focusing on trying to get some of these big guys closed.

And I think in the past, maybe it was the last Analyst day, you talked about working with some third party accounting firms, consultancies to help build out the ecosystem. Is there any update on that you can provide us?

We are actively working with a number of third parties, as we're making progress in the large bank space. Sometimes those firms are hiring third parties to help them in the decision process. As that happens it creates some momentum in the market. Third parties are more interested and so I'd say we're making good progress in that area too.

Okay, thank you.

At this time there are no further questions.

Thanks.

Thanks, Joe.

Our next segment is Investment Advisors. Wayne Withrow will cover this segment. Wayne?

Thanks, Al.

During the third quarter, we continued good cash flow momentum and had another solid quarter of new advisor recruiting. Assets under Management were $45.4 billion at September 30th, a 16% improvement from a year ago. During the quarter, we had almost $1.1 billion of positive net cash flow. Revenues for the quarter were $74.5 million. This compares to $61.4 million for the third quarter of last year, an increase of 21%.

Expenses for the quarter increased from the third quarter of last year, primarily due to an increase in direct costs and personnel costs associated with our asset growth and increased expenses associated with the SEI wealth platform. These same items were the primary driver of increased expenses from the second quarter of this year.

On the new business front, we signed 154 new advisors during the quarter. Our pipeline of prospects remains strong.

Moving on to the status of the SEI Wealth platform, we continue to implement the learning from our May 31st conversion and remain on track for an additional conversion of similar size before the end of this year. We have a goal of getting to larger conversions and the start of new revenue opportunities before the end of 2015.

Before I wrap up, I would like to mention that we are beginning to see a shift from some of our riskier, higher revenue investment strategies to more conservative investment strategies. While I don't see any slowdown in our overall business momentum, this will create a headwind going into the Fourth Quarter.

In summary, net cash flow and new advisor recruiting were very positive for the quarter, momentum remains strong, and the Wealth platform remains on the horizon.

I now welcome any questions you have.

(Operator Instructions)

At this time there are no questions.

Thank you, Wayne.

Our next segment is the Institutional Investor segment and I'll turn it over to Ed Loughlin to discuss this segment. Thanks.

Thanks, Al. Good afternoon, everyone.

I'm going to start with the financials for the quarter and then discuss sales activity. Revenues approaching $73 million for the third quarter increased 14% compared to the year ago period. New client funding and market appreciation during the period fueled the increases. Quarterly profits of $37 million increased 22% compared to the third quarter of 2013. Margins for the quarter increased to 51%. Asset balances grew to $75 billion on September 30th, an increase of $800 million for the quarter.

Net new client assets funded during the quarter were $1.3 billion and the backlog of committed but unfunded assets at quarter end was $570 million. New client sales closed during the quarter were $1.6 billion. New client adoption continues to be well diversified by both market segment and geography.

Several years ago we targeted municipalities as a growth opportunity and I'm happy to report we have successfully since then added $2.2 billion in assets from local governments.

Fiduciary Management is now moving into the defined contribution space and our Sales and Marketing groups are busy establishing SEI as an experienced player. We continue to be well positioned to successfully compete in the Institutional Fiduciary Management space. We enjoy a strong pipeline and we remain optimistic about the growth opportunities for this segment.

Thank you, very much and I'm happy to entertain any questions you have.

(Operator Instructions)

You have a question from the line of Chris Donat.

Good afternoon, Ed.

Chris, I knew you wouldn't disappoint me.

I will. We let Wayne get off, so I figured I'd ask one of you.

Only one per call, huh? Okay.

Just following up on an announcement you made during the quarter about hiring a hedge fund specialist in the Institutional segment. As fate would have it, this sort of coincided with CalPERS' announcement that they were getting out of hedge funds. And I'm just wondering what's the strategic rationale there? Are your clients demanding or asking, or are you just trying to keep a as broad an investment opportunity base as you can for your clients?

Well, I don't care to comment on CalPERS' decision. So I don't think that probably is appropriate. But basically, what we're seeing is that the hedge space, the private equity space, the real estate space, all of these in the alternative area are good diversifiers for our clients. Especially those corporate pension plans that as they start down the path of matching the interest rates to their liabilities they do need to have some other diversifying assets in the growth portion of the portfolio. And as you know, historically down the foundation space has always been a big consumer of these asset classes, and I don't think that CalPERS making that decision is going to change their mind. So that's the reason for the hire.

Okay. Got it, thank you.

(Operator Instructions)

Next we'll go to the line of Robert Lee.

Hi Ed, how you doing?

Good Rob, how about yourself?

Good.

Just a margin question, of 51% and been running at 50% or greater the last three quarter. And I know it ebbs and flows over time, but is there anything in this quarter from an expense perspective that tamped down the expense levels at all? Or should we feel like this is, given the scale of the business, a reasonable run rate to think about somewhere in this 50% to 51% range going forward?

Well, there's nothing -- to the first part of your question, there's nothing unusual from an expense perspective in the quarter that is the reason for the one-time type of revenue for the increase. I would say that this segment, I think, will continue to enjoy respectable margins. They will fluctuate, but I think they will always be in a range that are very appropriate.

Okay, and just curious about -- maybe update us a little bit on the pricing environment. As you have gone and targeted some larger relationships and losses there's been this movement or maybe at least talk about unbundling, what are you paying for your services versus Asset Management? Instead of doing a bundled fee? Are you seeing those conversations or demands heat up, or is it really just all talk at this point? Any color on that would be helpful.

Sure.

Well, I would say that there is some movement toward the unbundling of the fees. It tends to be with larger pools of money and it also tends to be probably more along the lines when we are competing against some of the investment consultants or actuarial consultants that have moved into this particular space. I think it's early for us to really give you some quantitative information as to what the impact might be.

We haven't had that many deals to be able to quantify that. And as you may recall, typically what happens is we move a client over. We convert them to their old asset allocation and then it's in subsequent quarters where we put on the alternatives. So we don't really know the exact fee that the client would pay for probably six to nine months. But we'll keep you informed of that.

Okay, thanks a lot.

Sure.

Your next question comes from the line of Glenn Greene.

Hi, Ed how are you?

Just real quick question. Is there any update or any new color you could share with us related to the defined contribution opportunity that you've alluded to recently?

You know, did you hear the 51% margins with all these questions? (laughter)

We applaud you for that.

Yes. In the DC space, I think that we're out there doing the basic ground work that you need to do and so far as participating in that particular area. So there's a lot of marketing things that are going on. We're attending conferences. We have our outbound telemarketing and calling efforts going on. So we're pretty active insofar as putting the foundation in place for us to be able to start to close business, but it takes awhile.

Okay, thanks.

At this time there are no further questions.

Very good.

Finally. (laughter) 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?

Thanks, Al. Good afternoon, everyone.

For the third quarter of 2014, revenues for the segment totaled $63.6 million, which was $6.4 million or 11.1% higher than our revenue as compared to third quarter of last year. This year-over-year increase in revenue is primarily due to an increase in our asset balances along with new client funding across all our products. Our quarterly profit for this segment of $23.5 million was approximately $4 million or 20.4% higher than the third quarter of 2013.

Third party asset balances at the end of the Third Quarter of 2014 were $346.8 billion approximately $9.3 billion or 2.8% higher, as compared to our asset balances at the end of the second quarter of 2014. This increase in assets is primarily due to net positive cash flows of $5.3 billion enhanced by market appreciation of $4 billion.

From a market standpoint we believe the Investment Manager industry is evolving rapidly. In order to stay ahead of our clients and prospects emerging needs we continue to invest in our solutions and platform. We are focused on several key areas of investments. Specifically, middle and front office services and increased capabilities, global risk and regulatory compliance solutions, increased Dow recording and investor insights for our clients.

Turning to sales activity, during the third quarter of 2014, we have our largest sales quarter in over a year. Net new business sales events totaled $10.3 million in annualized revenue. These events were allocated across all our market segments and approximately 55% of this revenue came from new named business this quarter.

We continue to see strong business activity specifically in middle office opportunities and also with larger manager outsourcing agendas. Additionally, we continue to see strong progress in the traditional side of our market with more focus on collective investment trusts and exchange trader funds. Overall, these opportunities are still in longer sales and implementation cycles, especially in the larger deals. However, we are optimistic about our pipeline and growth prospects.

That concludes my prepared remarks and I will now turn it over for any questions you may have.

(Operator Instructions)

We'll go back to the line of Chris Donat.

Yes, thanks for taking my question, Steve.

Just on the $10.3 million of sales, over what sort of time horizon should we think about that coming into revenue? Is that more on the 18 month or 12 month?

I'd say next over the next 12 to 14 months.

Okay, thank you.

Some of it -- I would say there's a portion of it probably 30% or so that will probably happen a little sooner than that.

Okay, by sooner?

Within the next six to nine months.

Okay, got it.

(Operator Instructions)

Next we'll go to the line of Robert Lee.

Hi, Steve, how are you?

Good, how are you, Robert?

Good, thanks.

So I have to ask you the margin question too, I guess.

Hold on. Margins will sustain at a level that is appropriate. (laughter) That is the answer we're using today.

What is the appropriate level?

Hold on, let me turn it over to Ed. (laughter)

No, Rob, we've discussed this before. I feel very comfortable and I hate sounding like a broken record, I feel very comfortable for this business. Even though I think we are setting pace within the industry. I feel very comfortable where our business is running in the mid 30s level and I would expect it to continue there.

There will be spikes up and down as investments continue. I'd say this quarter, our investments just due to timing were a little less. But we also, as I said last time I think in the last quarterly call, we continue to look for ways to improve our processes and become more efficient and productive. So I feel comfortable as we grow the business. While there might be spikes, this will still be within the mid 30s margin business.

Okay, thanks. I didn't even have to ask the question, so thank you.

At this time there are no further questions.

Thank you, Steve.

I'd like Kathy Heilig to give you a few company-wide statistics. Kathy?

Thanks, Al. Good afternoon, everyone.

I have some additional corporate information regarding this quarter. The third quarter cash flow from Operations was $97.9 million or $0.57 per share. Year-to-date cash flow from Operations is $241 million. Free cash flow for the third quarter was $82.1 million or $0.47 per share and year-to-date free cash flow is $188 million.

Capital expenditures this quarter excluding the building were $7.8 million. The expenses for the fourth quarter is expected to be around $4 million. As noted in the Press Release, the tax rate was 34.7% but we would expect at the fourth quarter the tax rate would range between 35% and 36%.

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 development. You should refer to our periodic SEC filings for a description of various risks and uncertainties that could affect our future financial results.

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

(Operator Instructions)

You have a question from the line of Glenn Greene.

Thanks. Can't let Wayne get off so easy. So have to follow-up with a couple questions here. (laughter)

Before you start, Glenn, I would like to point out unlike your prior comment there is no other business like my business.

Oh, okay. Well there's a lot of comments that relate to that but I won't go there. (laughter)

So the revenue, Wayne, the revenue the 21% growth or 6% Q to Q clearly out paced the asset growth. So the question, was there anything unusual in terms of the revenue recognition in the quarter? Or why did the yield increase as much as it did? Is the first question and then there's a second.

Yes, we did have a little spike in one-time fees in the quarter.

Order of magnitude? Or it's not appropriate to tell me?

Well, maybe like a half a million.

Okay, and then you called out the de-risking of assets and some magnitude of a headwind going into the fourth quarter. Any way to frame that so we can think about that right as we go forward?

It's sort of impossible to frame it right now, because we're three weeks into the quarter and it's the beginning of a trend and I think if markets bounce back I think it will reverse itself. It's hard to say. If it continues like this it could accelerate. So I don't know what's going to happen in this going forward.

Is it just something you'd see in October or were you seeing it toward the tail end of the third quarter?

I think both.

Okay. That's it, thanks.

At this time there are no further questions.

Thank you.

So, ladies and gentlemen in conclusion, we continue to concentrate on maintaining highly satisfied clients, growing new business events, controlling cost, and investing in projects critical to our future. And our focus on long term growth and revenues and profits is unwavering and I'm bullish about our intermediate and longer term business opportunities and feel good about our progress in the short-term.

So before we leave you, we'll give you one more chance to ask Wayne a question and anybody else.

(Operator Instructions)

At this time there are no questions.

Very good. Have a great afternoon, everybody, and thank you very much for your attendance.

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