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SEI Investments Company (NASDAQ:SEIC)
Q4 2019 Earnings Call
Jan 29, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the SEI Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to our host Al West, Chairman and CEO. Please go ahead, sir.

Alfred P. West -- Chairman and Chief Executive Officer

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

I'll start by recapping the fourth quarter and full-year 2019. I'll then turn it over to Dennis to cover LSV and the investment in new business segment. After that, each of the business segment leaders will comment on the results of their segments. Then finally, Kathy Heilig will provide you with some important companywide statistics. As usual, we'll feel questions at the end of each report.

So let me start with the fourth quarter and full-year 2019. Fourth quarter earnings increased by 11% from a year ago. Diluted earnings per share for the fourth quarter of $0.84 represents a 15% increase from the $0.73 reported for the fourth quarter of 2018. For the year 2019, our earnings decreased by 1% over 2018 earnings.

Diluted earnings per share for the full-year of $3.24 is a 3% increase over the $3.14 reported in 2018. We also reported a 4% increase in revenue from fourth quarter of 2018 to fourth quarter 2019, and a 2% increase for the full-year. Also during the fourth quarter 2019, our non-cash asset balances under management increased by $13.2 billion. SEI's assets increased by $5.8 billion and LSV's assets increased by $7.4 billion.

For the year assets under management increased by $33.2 billion. In addition, during the fourth quarter of 2019, we repurchased approximately 1.3 million shares of SEI stock at an average price of $63.66 per share. That translates to over $81.2 million of stock repurchases during the quarter. For the entire year, we repurchased approximately $6.2 million -- no, sorry 6.2 million shares in an average price of this $55.96, representing just over $348.3 million of repurchases. Between our stock-based products and cash dividends during 2019, we returned approximately $450 million in patent capital to shareholders.

During the fourth quarter we capitalized approximately $7.3 million of development and amortized approximately $12 million of previously capitalized growth. During the year, we capitalized $34.1 million and amortized $47.5 million.

Fourth quarter 2019 sales events, net of client losses, totaled approximately $26.1 million and are expected to generate net annualized recurring revenues of approximately $17.5 million. For the full year 2019 sales events, net of client losses totaled approximately $87.5 million and are expected to generate net annualized recurring revenues of approximately $62.5 million. We are pleased with our fourth quarter and annual sales results in our technology and operational businesses that combined with our active pipelines in these businesses, so [Indecipherable] for us to be bullish about future growth.

Still we faced headwinds; first, the full effect of some of our clients we lost over the past two years is hitting our books in 2020. Second, we just like all the members of our industry are subjected to asset management fee compression. And third, our net flows are impaired by the slow decline of the US corporate DB plan market. Finally, as an answer to our headwinds, during the fourth quarter, we introduced One SEIC at our recent Investor Call. One SEI drives our business strategy and define their approach to our markets, and how we will meet the rapidly changing increasingly complex and steadily converging needs of clients and markets.

The goal of One SEI is the leverage existing and new SEI platforms, making them accessible to all types of clients, all adjacent markets and all other platforms. While the road ahead in 2020 and beyond is challenging, it's also full of new opportunities. We believe that we will be better suited to capture the new opportunities with our One SEI strategy.

Now this concludes my remarks. So I'll now ask Dennis to give you an update on LSV and the investment in new business segment. I'll then turn it over to the other business segments. Dennis?

Dennis J. McGonigle -- Executive Vice President and Chief Financial Officer

Thanks, Al. Good afternoon, everyone. I'll cover the fourth quarter and full-year results for the investments in new business segment and discuss the results of LSV Asset Management.

During the fourth quarter of 2019, the investments in new business segment continued its focus on the ultra-high-net-worth investors segment through our private wealth management group and additional business and research initiatives, including those related to our IT services and hosting opportunity, and the modularization of larger technology platforms and the stand-alone components for the wealth management and investment processing space.

During the quarter, the investments in new business segment incurred a loss of $5.6 million, which compared to a loss of $3.2 million during the fourth quarter of 2018. For the full-year, the investments in new business segment incurred a loss of $16.7 million, compared to a loss for 2018 of $12.4 million, this loss reflects the increase in investments mentioned earlier, offset by growth in our private wealth management business.

Regarding LSV, our earnings from LSV represent are approximate 39% ownership interest during the fourth quarter. LSV contributed $39.1 million in income to SEI during the quarter, this compares to a contribution of $36.4 million in income during the fourth quarter of 2018. For the full year of 2019, LSV contributed $151.9 million in income compared to $159.8 million in 2018. Assets during the fourth quarter grew approximately $7.2 billion, LSV experienced net negative cash flow during the quarter of approximately $2 billion, which was offset by market growth.

Revenue was approximately $126.5 million for the quarter and performance fees were minimal. For the company, our effective tax rate for the quarter was 19.6%, one item of note for the company. During the quarter we recorded incremental stock option expense of $3.6 million compared to the third quarter of 2019, due to a change in the estimate of the timing of why investing will occur on a specific tranche of options. This expense is spread across all of our segments, as well as in corporate overhead. This expense approximates $0.02 per share in earnings impact.

I will now take any questions.

Questions and Answers:

Operator

[Operator Instructions] And our first question comes from Robert Lee from KBW. Please go ahead.

Robert Lee -- Keefe, Bruyette & Woods, Inc. -- Analyst

Good afternoon, Dennis.

Dennis J. McGonigle -- Executive Vice President and Chief Financial Officer

Hi, Rob.

Robert Lee -- Keefe, Bruyette & Woods, Inc. -- Analyst

A quick question on the investments in new business. I mean, I know you went through some of the expense initiatives there, they're flowing through there, so should we be thinking because obviously stepped up last quarter and then versus where it had been running. Should we be thinking this is kind of a reasonable kind of area, you expected to be in for a while or...

Dennis J. McGonigle -- Executive Vice President and Chief Financial Officer

Yes, yes, I would say this is because we really started to put more into the IT services space, and then in this modernization space, which we have been talking about for the best couple of quarters. So yes.

Robert Lee -- Keefe, Bruyette & Woods, Inc. -- Analyst

Okay, great.

Dennis J. McGonigle -- Executive Vice President and Chief Financial Officer

Now we to get more, we have to get more growth on a private wealth management so that will help, it should help a little bit.

Robert Lee -- Keefe, Bruyette & Woods, Inc. -- Analyst

Okay. And then maybe just a quick follow-up, this really can maybe kind of a modeling thing, but on the tax rate, I know it gets affected by options, exercise in a variety of other things, but how should we be thinking of, kind of, let's call it a normal tax rate as we look forward, and I don't know if the change in some of the stock-based comp expense has any kind of impact on that?

Dennis J. McGonigle -- Executive Vice President and Chief Financial Officer

Yeah, I mean, the stock-based comp expenses have any impact on that, it's more of the exercise of options has an impact on us. And in the fourth quarter that probably helped us to around 2 percentage points on the tax rate. As we look forward, we still use around 21.5% as our kind of more normalized rate, because we really can't predict some of these other things.

Robert Lee -- Keefe, Bruyette & Woods, Inc. -- Analyst

Right. Okay, great, thanks for taking my questions.

Dennis J. McGonigle -- Executive Vice President and Chief Financial Officer

But this quarter's tax rate is pretty comparable to last year's fourth quarter tax rate, it was around 19.3%, I think or 19%. Yes, so it's not that far off.

Robert Lee -- Keefe, Bruyette & Woods, Inc. -- Analyst

Yes. Great, thank you.

Dennis J. McGonigle -- Executive Vice President and Chief Financial Officer

Yes.

Operator

Thank you. And now to the line of Chris Shutler from William Blair. Please go ahead.

Chris Shutler -- William Blair -- Analyst

Hey, Dennis. Good afternoon.

Dennis J. McGonigle -- Executive Vice President and Chief Financial Officer

Hey, Chris.

Chris Shutler -- William Blair -- Analyst

For the options that were granted in the fourth quarter, is there an EPS target that you have to hit for those to vest?

Dennis J. McGonigle -- Executive Vice President and Chief Financial Officer

There is a more published that in our proxy, when we file that in April.

Chris Shutler -- William Blair -- Analyst

Okay. And then if I guess the other one is just on the buyback, the $1.3 [Phonetic] in the quarter, obviously markets are strong. But just given your noting improved momentum in the business and given all the cash on the balance sheet. I guess the question just why not be more aggressive with the stock buyback, I know you've gotten that before, but would love to get a refresher.

Dennis J. McGonigle -- Executive Vice President and Chief Financial Officer

Yes. Hi, Matt. I mean, I wouldn't say we have any necessarily change in mindset around buyback. Just certain periods where it's a little bit easier to get the stock in the market, just because of trading and how trading patterns. There are some -- fourth quarter is no different that, there were some days were just wasn't enough volume to accommodate us being engaged of -- had less even though we still did acquire decent amount of stock. So I wouldn't say we're any more aggressive, we'll be any more aggressive or less aggressive, it's just really will this be pretty steady with it. If the opportunity presents itself we'll get more aggressive.

Chris Shutler -- William Blair -- Analyst

Yes. Okay, fair enough. Thank you.

Operator

[Operator Instructions] And we have no one queuing up. Please continue.

Alfred P. West -- Chairman and Chief Executive Officer

Thank you. I will turn it over to Steve Meyer to discuss both private banking and IMS segments. Steve?

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

Thank you, Al. For the fourth quarter of 2019 revenue of $118.7 million was up slightly from the third quarter of 2019, primarily due to an increase in asset management revenues. Fourth quarter revenue, as compared to a year ago is down $2.7 million, mainly driven by previously announced client losses. For the fourth quarter of 2019 operating profit of $5.1 million decreased from the third quarter due to increased expenses related to compensation and stock option expense. For the year, our profit grew by $1.9 million, mainly driven by expense management.

And turning to sales activity for the quarter, we closed $8.1 million in net processing recurring sales events, bringing our total 2019 net recurring events to $24.5 million. Also during the quarter, we closed $7.2 million in one-time events, bringing the total to $18.3 million in one-time events for 2019. During the fourth quarter, we signed two new SWP agreements. First, a long time Trust 3000 client Edward Jones Trust Company signed on to adopt SWP. Ever Jones Trust Company has been a client since 2002, and we'll convert their existing book of business to SWP.Our second signing was Connor Broadley, our UK wealth manager, who has chosen to take advantage of all the components of SEI's full end-to-end wealth management platform incorporating technology, core processing and operational outsourcing for the front, middle and back office. Also during the quarter, we finalized our contract with the Principal Financial Group to provide our Trust Platform to service their required Wells Fargo institutional retirement and trust business. This deal is significant for us not only from a financial standpoint, but also principal as a market leader and we are encouraged about the opportunity to expand our relationship from here.

In the fourth quarter, we successfully converted a new client to SEI, Bankers Trust and demoing, Iowa. Bankers Trust is Iowa's largest privately owned bank and had previously been running on a competitor platform, the conversion went very well and we are excited to welcome Bankers Trust including BTC Capital Management, a registered investment advisor, an affiliate of the bank to the SEI family. In addition to this SWP implementation, we recontracted three Trust 3000 clients during the quarter.

I'm also pleased to announce that after the quarter end, but before today's call we signed a long-term agreement out of our UK office with a large global bank to provide our SWP platform to support their private banks global discretionary and alternatives books of business across our various global locations. We are not naming the bank currently as we are working on a joint communication that will be announced later in the quarter. This deal is not included in our -- numbers announced for the fourth quarter and we will include it in our Q1 events.

In addition to the size of the deal and financial impact, this is significant for us for several reasons. First, this business requires a true global solution that will cover multi jurisdictions for a large global bank, a true global watermark for our SWP platform. Second, this deal incorporates our One SEI strategy specifically leveraging the IMS platform along with SWP to offer services across the entirety of this business and asset types. Third, this firm is a large global organization that offers many opportunities for us to expand our relationship with. We are excited about this opportunity. I look forward to sharing more details in the future. As an update on our backlog, our total signed, but not installed backlog is approximately $53.6 million in net new recurring revenue. This number does include principle but does not include the global bank discussed previously.

From an asset management standpoint, total assets under management ended the period at $23.9 billion representing a $1.3 billion increase quarter-over-quarter and $3.4 billion increase in year-over-year assets. Our AUM increase is mainly due to market appreciation. We continue to build a strong global pipeline in our ANB business. And looking back at 2019, we are pleased with our efforts on our progress, and most importantly our regained momentum as evidenced by our sales events for the year. As I mentioned to you in the beginning of 2019, our focus for the year was steadfastly on growing our business, monetizing our investment in SWP, installing our backlog and expanding our opportunities through the leveraging of other SEI platforms and solutions. While we are pleased with our progress, we are still not satisfied with our results. We still have much work to do and continue to grow our business absorbing previously lost business and providing sustainable and accelerating growth for our margins. Simply said, we want to keep the accelerator down moving the business forward. This serves as a good segue to the year ahead.

And turning to 2020, our focus is on the following: first, maintaining our momentum and continue to execute on our growth agenda with new sales. Second, expanding our markets and solutions to expand our growth opportunity. Third, continuing our strategy One SEI, which enables us to offer the full power of all of SEI's platforms and assets and enables us to address our clients emerging needs and problems in ways no one else can, Fourth, managing through the financials headwinds of the lost business we had previously announced, which will be in full effect for 2020. This will be a challenge to manage as the lost revenue typically outpaces the rate of bringing new revenue on as we implement our backlog of business. Our focus is on managing through this financial challenge with an eye on establishing a sustainable and accelerating margin rate as we exit out of the year and manage through the downward pressure of this aforementioned lost business. In summary, we have an active pipeline across the US and U.K, we feel well positioned to grow our private banking business globally and feel we have a great opportunity offering the power and capability of all of SEI's technology and processing platforms across the wealth management market, we are excited for the future. That concludes my prepared remarks and I will now turn it over to any questions you may have.

Operator

[Operator Instructions] And we have a question from Robert Lee of KBW. Please go ahead.

Robert Lee -- Keefe, Bruyette & Woods, Inc. -- Analyst

Great. Good afternoon. Steve.

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

Good afternoon, Rob.

Robert Lee -- Keefe, Bruyette & Woods, Inc. -- Analyst

Just a couple of questions, but real quickly with the principal business, I mean that -- just trying to get a sense of the puts and takes of the net recurring, so you had principal come in, not the global bank, I guess how does the Wells Fargo kind of fit into that given some of the commentary, I guess it's come out of there and then, well, if you can maybe go through the puts and takes of the net recurring that may be helpful because there's so many moving pieces this quarter.

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

So a couple of things I guess Rob, the net recurring that we closed during the quarter and again, it's net, so there is a gross number and then any losses or go back on clients would come off of it with $8.1 million. Principal is included in that number. The global bank I just mentioned is not in that number. We look at that as a Q1 event. Wells Fargo has no impact on that number as Wells Fargo continues to be as it has for the past three plus years a current client and will continue to be a client. As mentioned on previous calls, they've just delayed the SWP implementation and there's no new news on that. So from a high level, that's kind of, is there anything specific other than that, Rob?

Robert Lee -- Keefe, Bruyette & Woods, Inc. -- Analyst

Well, I guess Wells is still in that backlog and then maybe talk a little bit about principal kind of how you think about that kind of coming on. Is that going to be kind of roll in over the course of 2021. I mean how should we kind of think about that coming on board?

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

So the uptick of Wells going to SWP, that uptick is in that backlog, but what I'll tell you is not the majority of that backlog, there is a majority of other new business in that backlog and then principal will come on to our platform. We're already under way with implementation, but that will come on majority in 2021, end of 2021 in there.

Robert Lee -- Keefe, Bruyette & Woods, Inc. -- Analyst

Great. I'll get back in the queue. I'll let other questions come. Thanks.

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

Okay.

Operator

Thank you. And now to the line of Chris Donat from Piper Sandler. Please go ahead.

Chris Donat -- Piper Sandler -- Analyst

Good afternoon, Steve, how are you doing?

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

Good, how are you doing, Chris?

Chris Donat -- Piper Sandler -- Analyst

Doing fine. Just one clarification on the lost business with Department of Interior. Was that in or no longer in the fourth quarter and can you remind us the dates of when that revenue would have ceased?

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

Yeah, that's now it actually left us in the fourth quarter -- through the beginning of fourth quarter. So the majority of it in the quarter was out, but keep in mind now we'll have the full year impact of that.

Chris Donat -- Piper Sandler -- Analyst

Okay and whatever it's pointless to ask you a question on the global bank that's in the UK. But you did say we can expect just, I didn't catch everything we can expect an announcement during the quarter, clarification. Okay.

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

Yes and I appreciate Chris as you can imagine we're telling you what we can, we want to be a good partner and we want to have a joint communication. So when that is done, hopefully in the quarter, we will certainly put that out and we're excited to talk more about it when we can.

Chris Donat -- Piper Sandler -- Analyst

Okay and the adjective used with it was significant, but that's about it, right?

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

Yes, but my tone was neutral.

Chris Donat -- Piper Sandler -- Analyst

Understood.

Operator

All right, thank you. And now to the line of Chris Shutler from William Blair. Please go ahead.

Chris Shutler -- William Blair -- Analyst

Hey, Steve. How are you?

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

Good, how are you, Chris?

Chris Shutler -- William Blair -- Analyst

Good, I just wanted a couple of quick clarifications, you already covered these, but principal you said that's going to come on when?

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

Primarily we're already in implementation moving over, but I would looks toward 2021.

Chris Shutler -- William Blair -- Analyst

Okay, the flows from the A&D business in the quarter?

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

Flows from A&D were about $63 million and year-to-date net cash flows were $296 million.

Chris Shutler -- William Blair -- Analyst

Okay and then I guess lastly, just that the -- you noted the sales number, the $8.1 [Phonetic] is net. So is there anything to call out that was, that was lost in the quarter?

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

Now, I mean typical business, we don't loss is -- unfortunately, as much as I hate losing any business sometimes are part of the business, but we had I would say not significant, but normal course of business. Nothing needed to call out.

Chris Shutler -- William Blair -- Analyst

Okay and lastly on the U.K. bank presumably that they whoever that is they are on a system from one of your chief competitors. Is that accurate?

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

For part of the business, yes.

Chris Shutler -- William Blair -- Analyst

Okay, thanks a lot.

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

Sure.

Operator

Thank you. And now to the line of Robert Lee from KBW. Please go ahead.

Robert Lee -- Keefe, Bruyette & Woods, Inc. -- Analyst

Great. Thanks again. And just maybe, Steve, two quick clarifications. So the $7 million of one-time events $7.2 million that pretty much all flowed through in the quarter or?

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

No. About 10% of that flow through. So of the $7.2 announced about 700 flow through. But however, remember we had other one-time revenue that we announced and about $6.6 of that flow through the quarter.

Robert Lee -- Keefe, Bruyette & Woods, Inc. -- Analyst

Okay, great. And then you had -- you, kind of, gave some commentary around, kind of, margin kind of progression. Can you maybe just repeat that or maybe clarify? I just want to make sure I understand how we should be thinking in the segment, kind of?

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

Sure. So we're very happy with the momentum, but we're not satisfied with where we are results, as I said. What I'd say is this year is going to be a tough year as we manage that lost business that we've talked about. I know to you guys at nauseam. And that's going to put some downward pressure on our margins. But our goal is to move the margins to get through that challenge and come out of the year hopefully, into 2021, where I can start to establish a sustainable level of margin whatever that is, and then accelerating path from there.

So we're hoping that these downward -- the pressure from these losses will get through this year and then be able to start to manage through a more sustainable and accelerating path back to our normal margins in this business.

Robert Lee -- Keefe, Bruyette & Woods, Inc. -- Analyst

Okay. Great, thank you.

Operator

Thank you. And now to line of Glenn Greene from Oppenheimer. Please go ahead.

Glenn Greene -- Oppenheimer -- Analyst

Good afternoon. How are you?

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

Good. How are you, Glenn?

Glenn Greene -- Oppenheimer -- Analyst

And congrats on the large bank [Indecipherable] anxious to hear it. So I just want to go back to Wells Fargo. And the reason I ask it, there's been a lot of chatter concern out in the market. Wells was indicated, they're taking some significant writedowns in the wealth management business from your technology investments whatnot. Is it just -- can you just sort of definitively say there's been no change in the status of your relationship with Wells Fargo at this point?

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

There's been no change in the status of your relationship with Wells Fargo. And if you would ask from my comment on it. I think our relationship has strengthened, because we've treated them like a true partner as we had for over the past 40-years and we'll continue to do so. I understand the chatter going on in the industry, but we are -- as you can imagine, we are not the only technology or system provider they use and quite frankly we're not the largest we use. They have their other challenges to go through and we are focused on supporting them, it's a strong partner as we always have.

Glenn Greene -- Oppenheimer -- Analyst

All right, great. That's all I needed. Thank you.

Operator

Great. Thank you. And now to the line of Chris Shutler from William Blair. Please go ahead.

Chris Shutler -- William Blair -- Analyst

Hi, Steve. Thanks for taking the follow-up. Just to put a finer point on that, have you confirm with Wells the impairments do not relate to SEI?

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

We've not talked to Wells about that. That's their disclosure and I'd have no reason to talk to them about that to be honest with you, Chris.

Chris Shutler -- William Blair -- Analyst

Okay, thank you.

Operator

Thank you, we have no one else in queue.

Alfred P. West -- Chairman and Chief Executive Officer

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

Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions

Now, I'm going to bet on the Investment Managers. So turning to the Investment Manager. That's right. So turning to the Investment Manager segment again. For the fourth quarter of 2019, revenues for this segment totaled $114.8 million, which was $12.4 million or 12.1% higher as compared to our revenue in the fourth quarter of 2018. This year-over-year revenue increase was due primarily to net new client fundings and existing client expansion. For the full year 2019, our revenue was $440.8 million, which was $42.7 million or 10.7% higher than the full year of 2018. Our quarterly profit for the segment of $42.1 million was $7.4 million or 21.4% higher as compared to the fourth quarter of 2018. Our full year profit for the segment of $158.8 million was approximately $20.4 million or 14.7% higher than the annual profit of 2018. Higher profits were primarily driven by an increase in revenue offset by a smaller increase in personnel expense and investments. Third-party asset balances at the end of the fourth quarter of 2019 were $657.5 billion, approximately $19.6 billion higher than the asset balances at the end of the third quarter of 2019. This increase was due to net new client fundings of $9.1 billion as well as market appreciation of $10.4 billion.

And turning to market activity, during the fourth quarter of 2019, we had a strong sales quarter with net new business events totaling $11.9 million in recurring revenues as well as recontracts of $7.5 million in recurring revenues. Most importantly, these sales were diverse and spanned our entire business and included both new name business and expansion of existing wallet share with current clients. These events include the following highlights: in our alternative market unit, we added a $20 billion private equity insourcing shop who selected SEI as their first third-party administrator as well as two existing private equity managers that left their current administrators to become SEI clients. Additionally, we added another client to our growing private equity real estate practice. In our traditional market unit, in addition to continue our momentum with collective investment trusts for new and existing clients, we also had success expanding middle office servicing relationships with four existing clients. In Europe, we continue to win new private equity and private credit mandates from both existing and new clients, particularly related to funds domiciled in Ireland and Luxembourg. And then the family office services business, we had continued success with new sales events within the single-family office and multi-family office market.

Our total net business sales events for 2019 were just over $49 million, which was comparable to our 2018 net sales events of $50 million. 2019 marks the second highest annual total for net sales in the Investment Managers segment. Our backlog of signed, but not yet implemented sales stand at $42.1 million at the end of the fourth quarter of 2019. In the beginning of 2019, I covered what our focus areas for the year would be. These included expansion of our sales and growth opportunities; expansion of our platform into the front office; continued expansion of our emerging solutions such as global regulatory and compliance, and leveraging our platforms and solutions to support growth opportunities in other market segments, thus our One SEI initiative.

I'm pleased to say that we made substantial progress on all of these focus areas and we believe our strong sales year serves as a validation of our progress and market acceptance. As we enter 2020, our focus and investment would be centered on the following areas: First continued execution of our strong pipeline and growth opportunities. Second sustained push of our platform into the front office supporting our clients and investors. Third, continued expansion to our market adjacencies and growth in key markets such as private equity and private equity real estate, as well as expansion of our solutions in these areas.

Finally, execution of our One SEI strategy, leveraging our platforms and solutions to support growth opportunities and other market segments and providing the power of all of SEI to our clients. We are encouraged with the progress we have made and with the continual evolution of our solutions and platforms that we are investing in, and we believe that this investment will drive sustainable growth. Our pipeline remains strong and we are encouraged about our future.

That includes my prepared remarks, and I'll now turn it over for any questions you may have.

Operator

Thank you. [Operator Instructions] And we have no one queuing up.

Alfred P. West -- Chairman and Chief Executive Officer

Okay. Are you ready Wayne? The next segment is Investment Advisors. Wayne Withrow will cover this segment.

Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions

[Indecipherable] in 2019, after five-year to built an effort. We celebrated the completion of our migration onto the SEI Wealth Platform. It is now time to monetize the value of this platform and grow our business. Fourth quarter revenues totaled $106 million, up from $97 million in the fourth quarter of last year. The impact of positive markets was partially offset by negative net cash flows in our assets under management. We managed to hold our revenue recognition rate relatively steady. Expenses were relatively flat compared to last year's fourth quarter, as compared to the third quarter expenses were up due primarily to increased stock option expense and non-recurring expenses in our operation.

From a big picture perspective expense increases from this non-recurring item and direct costs tied to our AUM growth match the savings recognized in both development and operations, due to completion of the migration. Our profits were up significantly, compared to last year's fourth quarter. Completion of the migration and the expenses associated with it allowed us to drive much of our revenue growth to the bottom line.

During the quarter, we attracted $125 million in new assets onto our platform putting our total assets under administration over $80 billion, of this total almost $71 billion of assets under management, an increase of over -- above $9 billion from December 31st 2018. During the quarter, our net cash flow in managed asset including fees was a negative $193 million, while we've been cash flows in assets under management was negative, our flows are trending in the right direction and newer products are being well received. I would expect these directional trends to continue.

During the quarter, we recruited 76 new advisors bringing our total for the year to 327. Our pipeline of new advisors remains active. 2020 we will concentrate on two main areas; first, we are focusing on monetizing the value of the SEI Wealth Platform now that the migration is complete. The challenges presented by the migration from both our existing clients and our internal operations are now essentially behind us and we are focused on growth unencumbered by these challenges. As part of this process our technology development leverages the One SEI strategy and targets functions that help strengthen the overall advisor experience. The first example is our digital account open process, which we'll be using technology originally built for the IMS unit. We expect to introduce this new capability in the first half of this year.

Second, with the migration no longer our primary focus, we turn to the investment product area, where opportunities exist to help today's advisors. As an example, our third-party ETF strategies, incorporating tax loss harvesting and liquidity management were our top selling investment strategy in 2019.

In summary, we spent 2019 getting over the hangover from our multi-year migration onto the SEI Wealth Platform. We are now beginning to see the positive of having that behind us and are excited about our future prospects. I now welcome any questions you may have.

Operator

[Operator Instructions] And we have a question from Chris Shutler. Please go ahead.

Chris Shutler -- William Blair -- Analyst

Hey, Wayne. Could you give us the cash flows, again you ran through those numbers pretty quickly. I think, I missed some of them.

Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions

Right. So this is sort of a new statistic. We have $125 million in new assets onto our platform that's an AUA number. The assets under management were negative $193 for the quarter, bringing the total to $71 billion assets under management.

Chris Shutler -- William Blair -- Analyst

Okay. And the -- just to be clear, the negative $193, that's what you have -- that's the number you've always always reported as net new assets.

Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions

That's always the number we've always reported and that's net of fees, includes these in it.

Chris Shutler -- William Blair -- Analyst

Right. Yes, yes. So I guess, I'm just trying to figure out, you're talking about improved momentum yet like that number is slightly negative in the quarter, and it's actually I think worse than it was in the third quarter. So what are you seeing, kind of, behind the scenes that gives you more comfort, is anything you can say beyond like anecdotally, are there any numbers you can give us -- to give us some comfort about the trajectory?

Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions

Yes, I think if I look at -- I think if you look at the past six months what I would say is I think there's a lot of numbers influenced by a bad December. I guess the way I'd answer that question.

Chris Shutler -- William Blair -- Analyst

I guess, I would have thought this fourth quarter being super strong would have been kind of counter that to that point that advisor to be very engaged, but it's not the case.

Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions

Wasn't for us.

Chris Shutler -- William Blair -- Analyst

Okay. Okay, that's all I had. Thank you.

Operator

Thank you. And now to the line of Chris Donat. Please go ahead.

Chris Donat -- Piper Sandler -- Analyst

Hey, Wayne, just wanted to stand, sort of the same topic of the flows with an improving year-to-date. Can you compare it to what flows should typically have seen in other January, because I'm looking at other data and maybe I'm comparing apples and oranges here, but it seems like January is typically a pretty strong month for fund flows for asset managers?

Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions

I was talking about December not January.

Chris Donat -- Piper Sandler -- Analyst

Okay. But I thought you said the -- you've seen an improvement in momentum since the fourth quarter did, in your prepared remarks? Or did I miss hear that?

Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions

I think throughout last year to date, like as of right now, we're seeing improved moment.

Chris Donat -- Piper Sandler -- Analyst

Okay.

Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions

We have -- but we haven't talked about January yet.

Chris Donat -- Piper Sandler -- Analyst

Okay, sorry. It's when you say year-to-date improvement you are talking 2020 or?

Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions

From January 1st 2019 until now momentum is improving.

Chris Shutler -- William Blair -- Analyst

Okay.

Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions

So that's 30-months.

Chris Shutler -- William Blair -- Analyst

Okay. Okay. And that improvement it's more of a secular trend, it's not a typical seasonal pattern?

Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions

It's not the one, it's the trend with us, I don't think it's seasonal. I think it's kind of hard to look at this business as seasonal. I mean, if you look at the December, December is going to be influenced by which way the markets gone or people put money in or taxes harvesting out or what people are doing.

Chris Donat -- Piper Sandler -- Analyst

Okay. I think I'm chasing the wrong thing there. Move on.

Operator

All right, thank you. We have no one else in queue, please continue.

Alfred P. West -- Chairman and Chief Executive Officer

Our next segment is the Institutional Investors segment. Paul Klauder will report on this segment.

Paul F. Klauder -- Executive Vice President, Head of the Institutional Group

Well thanks, Al. Good afternoon, everyone. I'm going to discuss the financial results for the fourth quarter of 2019, as well as the entire year. Fourth quarter 2019 revenues of $80.5 million were similar to the fourth quarter 2018 revenues. Full-year revenues of $322 million, decreased 3%, compared to 2018. Market appreciation positively impacted revenue for the quarter and the year, while net client losses was the primary detractor.

Operating profit for the fourth quarter 2019 were $42 million, 5% higher than fourth quarter 2018, due to the previously mentioned items and lower operating expenses. 2019 full-year profit or $168.1 million and decreased 1%, compared to 2018. Higher capital markets and lower operating expenses were positives offset by net client fundings. Operating margins for full-year 2019 were 52% quarter-end asset balances of $90.1 billion reflect a $6.7 billion increase versus the fourth quarter of 2018. This was due to much higher capital markets at 12/30/2019 versus 12/31/2018.

Net asset event for the fourth quarter were a negative $615 million. Gross sales were $250 million and client losses totaled $885 million. Total new client signings for 2019 was $3.5 billion that represents $10.9 million of revenue. The client loss numbers for the quarter and the year were primarily driven by acquisitions, DB terminations or curtailments and unsuccessful rebids of competitive centers.

The unfunded client backlog at year end was $560 million, while I am disappointed with the new business sales for Q4 2019, I have confidence in the pipeline and our sales force is very active. Our focus in 2020 will be to continue to diversify new business growth out of the US defined benefit market, bringing new strategic initiatives to the market, including our One SEI strategy of integrating multiple SEI platforms and we will continue to differentiate our OCIO offering around the globe.

Thank you very much. And I'm happy to entertain any questions you may have.

Operator

Thank you. [Operator Instructions] And we have no one queuing up on this topic.

Alfred P. West -- Chairman and Chief Executive Officer

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

Kathy C. Heilig -- SEI Investments Company -- Vice President, Chief Accounting Officer and Controller

Thanks and good afternoon, everyone. I have some additional corporate information about this quarter. Our fourth quarter 2019 cash flow from operations was $163.6 million or $1.06 per share. Year-to-date cash flow from operations $545.1 million or $3.52 per share. The fourth quarter free cash flow was $143.8 million, and year-to-date free cash flow $468 million.

In the fourth quarter, our capital expenditures excluding our software was $12.6 million that does include $6 million for our new facilities and year-to-date capital expenditures excluding capitalized software were $43.1 million, which includes around $25.5 million for the facility expansion. We project our capital expenditures for 2020 leading capitalized software to be $45 million and this also includes about $25 million related to the facility.

We would also 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. In some cases, you can identify forward-looking statements by terminologies such as may, will, expect, believe, continue or appear. Our forward-looking statements include our expectations as to the revenue that we believe will be generated by sales events that occurred during the quarter or when our unfunded backlog may fund.

The benefits we will derive from our investments and our ability to monetize these investments. Our ability to manage our expenses scale our offerings and established sustainable and accelerating margins; our ability to take advantage of opportunities to expand client relationships; the strength of our pipelines and growth opportunities; and our ability to execute on and the success of our strategic objectives. Should not place undue reliance on our forward-looking statements as they are based on current beliefs and expectations of our management and subject to significant risks and uncertainties, many of which are beyond our control or subject to change.

Although we believe the assumptions upon which to base our forward-looking statements are reasonable they could be inaccurate. Some of the risks and important factors that could cause actual results to differ from those described in our forward-looking statements can be found in our risk factors section of our annual report Form 10-K for the year ended December 31st 2018.

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

Operator

Thank you. [Operator Instructions] And now to the line of Chris Donat from Piper Sandler. Please go ahead, sir.

Chris Donat -- Piper Sandler -- Analyst

Thanks for taking my question. Dennis I wanted to ask a couple on expenses. Looking at the sub-advisory fees just saw it tick up there. If you look at it relative to certain assets. I was just wondering if there's anything there? And then secondly, and a little bit bigger number, the facilities, supplies and other costs picked up like $3 million quarter-on-quarter any call out there?

Dennis J. McGonigle -- Executive Vice President and Chief Financial Officer

Sure. So on the sub-advisor fees, that's really just a direct expense associated with revenue growth. So whenever we get asset management growth regardless of the source it's going to -- you're generally going to see a tick up in sub-advisory fees as well. On the facilities, supplies and other costs line item, it's really around I would say the supply is in other cost areas. So there's a couple of things going on here that I would consider, kind of, one-time in nature for fourth quarter. One, in terms of the delta we had a sales tax revenue, our sales tax benefit in the third quarter of about $1 million that did not repeat in the fourth quarter. So third quarter was under by $1 million, and so that didn't repeat. Though we had fourth quarter and this happens generally every year statement we call statement production costs. So the cost of produce statements we generally have a one, fourth quarter hit, and that's about a little over $1 million as well. So that won't repeat in the first quarter and that's really a fourth quarter phenomenon. We had a, kind of, a good news, bad news. The bad news is, we had about $600,000 expense related to our Huntington Steel acquisition acquisition a little while ago, but the good news is the reason for that is because of the business has performed better than we had expected when we made that acquisition. And I'd say that's generally it.

Chris Donat -- Piper Sandler -- Analyst

Okay, the Huntington Steel, though, is that was that in compensation or was that in some other expense side?

Dennis J. McGonigle -- Executive Vice President and Chief Financial Officer

It would be more related to acquisition costs and goodwill.

Chris Donat -- Piper Sandler -- Analyst

Okay.

Dennis J. McGonigle -- Executive Vice President and Chief Financial Officer

So, just part of the earn-out.

Chris Donat -- Piper Sandler -- Analyst

Yes. Understood. Okay, thank you.

Dennis J. McGonigle -- Executive Vice President and Chief Financial Officer

You're welcome.

Operator

Thank you. And now to Chris Shutler. Please go ahead.

Chris Shutler -- William Blair -- Analyst

Thanks, one more for Steve as if I didn't ask enough questions already. I know on the UK bank win anything you can say about that kind of that your early thoughts on what the timing of when that could go live? And is it likely to be phased or kind of all at once for the initial books of business that you won?

Dennis J. McGonigle -- Executive Vice President and Chief Financial Officer

Well, there's not much I can say, I'm pretty sure it will be phased that's about all I can say at this point, Chris.

Chris Shutler -- William Blair -- Analyst

Okay, thank you.

Operator

Thank you. And now to the line of Patrick O'Shaughnessy from Raymond James. Please go ahead.

Patrick O'Shaughnessy -- Raymond James -- Analyst

Hey, thanks. So, non-recurring sales have been elevated in the last couple of quarters and I think particularly in private banks. Is there anything specific you'd be pointing to that's driving those types of sales?

Dennis J. McGonigle -- Executive Vice President and Chief Financial Officer

So I think it's -- we certainly have some momentum. I think our strategy that we announced about making it easier to do business with SEI, modulizing the platform. And I also think it's the kind of cycle in the market where a lot of these larger firms including banks are looking to make decisions. So I think all of those have come together, our pipeline is strong and we're seeing the deals move through in the proper cycle a little bit faster than we saw before. So we're hoping to continue that momentum into 2020.

Patrick O'Shaughnessy -- Raymond James -- Analyst

Great, thank you.

Dennis J. McGonigle -- Executive Vice President and Chief Financial Officer

Sure.

Operator

Thank you. We have no one else in queue, please continue.

Alfred P. West -- Chairman and Chief Executive Officer

Thank you, Kathy. So, ladies and gentlemen, I'm encouraged by the direction each of our businesses are taking and the progress they're making. I believe this investments we are making combined with One SEI, will help us benefit from all the changes taking place in our industry. Have a good day, and thank you for attending our call.

Operator

[Operator Closing Remarks]

Duration: 53 minutes

Call participants:

Alfred P. West -- Chairman and Chief Executive Officer

Dennis J. McGonigle -- Executive Vice President and Chief Financial Officer

Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services

Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions

Paul F. Klauder -- Executive Vice President, Head of the Institutional Group

Robert Lee -- Keefe, Bruyette & Woods, Inc. -- Analyst

Chris Shutler -- William Blair -- Analyst

Chris Donat -- Piper Sandler -- Analyst

Glenn Greene -- Oppenheimer -- Analyst

Kathy C. Heilig -- SEI Investments Company -- Vice President, Chief Accounting Officer and Controller

Patrick O'Shaughnessy -- Raymond James -- Analyst

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