Ladies and gentlemen, thank you for standing by, and welcome to the SEI 4th Quarter 2019 Earnings Conference Call. And as a reminder, today's call is being recorded. I would now like to turn the call over to our host, Al West, Chairman and CEO. Please go ahead, sir.
Thank you. 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 Q4 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 company wide statistics. As usual, we'll field questions at the end of each report. So let me start with the Q4 and full year 2019. 4th quarter earnings increased by 11% from a year ago.
Diluted earnings per share for the Q4 of $0.84 represents a 15% increase from the $0.73 reported for the Q4 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 Q4 2018 to Q4 2019 and a 2% increase for the full year. Also during the Q4 2019, our non cash asset balances under management increased by $13,200,000,000 SEI's assets increased by $5,800,000,000 and LSV assets increased by $7,400,000,000 For the year, assets under management increased by $33,200,000,000 In addition, during the Q4 2019, we repurchased approximately 1,300,000 shares of SEI stock at an average price of $63.66
per share.
That translates to over $81,200,000 of stock repurchases during the quarter. For the entire year, we repurchased approximately $6,200,000 no, sorry, 6,200,000 shares at an average price of $55.96 representing just over $348,300,000 of repurchases. Between our stock buybacks and cash dividends during 2019, we returned approximately $450,000,000 in patent capital to shareholders. During the Q4, we capitalized approximately $7,300,000 of development and amortized approximately $12,000,000 of previously capitalized development. During the year, we capitalized $34,100,000 and amortized $47,500,000 4th quarter 2019 sales events net of client losses totaled approximately 26.1 $1,000,000 and are expected to generate net annualized recurring revenues of approximately $17,500,000 For the full year 2019, sales events net of client losses totaled approximately $87,500,000 and are expected to generate net annualized recurring revenues of approximately $62,500,000 We are pleased with our 4th quarter 4th quarter and annual sales results in our technology and operational businesses.
That combined with our active pipelines in these businesses caused us to be bullish about future growth. Still, we faced headwinds. First, the full effect of some of the clients we lost over the past 2 years is hitting our books in 2020. 2nd, 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 U. S.
Corporate DB plan market. Finally, as an answer to our headwinds, during the Q4, we introduced the One SEI theme at our recent investor conference. One SEI drives our business strategy and defines our 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 1 SEI is to 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 SAI 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? Thanks, Al. Good afternoon, everyone. I'll cover the Q4 and full year results for the investments in new business segment and discuss the results of LSV Asset Management. During the Q4 of 2019, the Investments in New Business segment continued its focus on the ultrahighnetworthinvestor 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 into standalone components for the wealth management and investment processing space.
During the quarter, the investments in new business segment occurred a loss of $5,600,000 which compared to a loss of $3,200,000 during the Q4 of 2018. For the full year, the investments in new business segment incurred a loss of $16,700,000 compared to a loss for 2018 of 12,400,000 dollars 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 our approximate 39% ownership interest during the Q4. LSV contributed $39,100,000 in income to SEI during the quarter. This compares to a contribution of $36,400,000 in income during the Q4 of 2018.
For the full year of 2019, LSV contributed $151,900,000 in income compared to $159,800,000 in 2018. Assets during the Q4 grew approximately $7,200,000,000 LSV experienced net negative cash flow during the quarter of approximately $2,000,000,000 which was offset by market growth. Revenue was approximately $126,500,000 for the quarter and performance fees were minimal. For the company, our effective tax rate for the quarter was 19.5%. One item of note for the company, during the quarter, we recorded incremental stock option expense of $3,600,000 compared to the Q3 of 2019 due to a change in the estimate of the timing of when 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.
Thank you. And our first question comes from Robert Lee from KBW. Please go ahead.
Good afternoon, Dennis.
Hey, Rob.
Hey, a quick question on the investments in new business. I mean, I know you went through some of the expense initiatives there that are flowing through there. So should we be thinking because it 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 expect it to be in for a while? Yes.
I would say this is because we really started to put more into the IT services space and then in this modularization space, which we have been talking about for the past couple of quarters. So yes.
Okay, great.
Now we have to get more growth out of Private Wealth Management, so that will help should help a little bit.
Okay. And then maybe just a quick follow-up, this will become maybe kind of a modeling thing, but on the tax rate, I know it gets affected by options exercise and a variety of other things. But how should we be thinking of kind of a, 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 expensing has any kind of impact on that?
Yes. I mean, the stock based comp expense doesn't have any impact on that. It's more the exercise of options has an impact on that. And in the Q4, 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.
Right. Great. Thanks for taking my questions.
But this quarter's tax rate is pretty comparable to last year's 4th quarter tax rate. It was around 19.3%, I think, or 18%, yes. So it's not that far off. Yes.
Hey, Dennis. Good afternoon.
Hey, Chris.
For the options that were granted in the Q4, is there an EPS target that you have to hit for those divest?
There is and we'll publish that in our proxy when we file that in April. Okay.
And then if I guess the other one is just on the buyback, the 1.3 in the quarter, obviously markets were strong. But just given you're noting improved momentum in the business and given all the cash on the balance sheet, I guess the question is just why not be more aggressive with the stock buyback? I know you've gotten that before, but would love to get a refresher.
Yes. I
mean, I wouldn't say we have any necessarily change in mindset around buyback. There are just certain periods where it's a little bit easier to get the stock in the market just because of trading and trading patterns. There are some Q4 is no different that there were some days where there just wasn't enough volume to accommodate us being engaged. Had less even though we still did acquire a 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 we'll just be pretty steady with it. If the opportunity presents itself, we'll get more aggressive.
Yes. Okay. Fair enough. Thank you.
Thank you. And we have no one queuing up. Please continue.
Thank you. I will turn it over to Steve Meyer to discuss both Private Banking and IMS segments. Steve? Thank you, Al.
For the Q4 of 2019, revenue of $118,700,000 was up slightly from the Q3 of 2019, primarily due to an increase in asset management revenues. 4th quarter revenue as compared to a year ago is down $2,700,000 mainly driven by previous announced client losses. For the Q4 2019, operating profit of $5,100,000 decreased from the 3rd quarter due to increased expenses related to compensation and stock option expense. For the year, our profit grew by $1,900,000 mainly driven by expense management. And turning to sales activity for the quarter, we closed $8,100,000 in net processing recurring sales events, bringing our total 2019 net recurring events to $24,500,000 Also during the quarter, we closed $7,200,000 in one time events, bringing the total to $18,300,000 in one time events for 2019.
During the Q4, we signed 2 new SWP agreements. 1st, a long time Trust 3000 client, Edward Jones Trust Company, signed on to adopt SWP. Edward Jones Trust Company has been a client since 2002 and will convert their existing book of business to SWP. Our second signing was Connor Broadley, a U. K.
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 acquired 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 Q4, we successfully converted a new client to SEI, Bankers Trust in Des Moines, 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 and affiliate of the bank to the SEI family. In addition to this SWP implementation, we re contracted 3 Trust 3,000 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 U. K. Office with a large global bank to provide our SWP platform to support their private bank's 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 event numbers announced for the Q4 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. 1st, 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. 2nd, 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.
3rd, this firm is a large global organization that many opportunities for us to expand our relationship with. We are excited about this opportunity and look forward to sharing more details in the future. As an update on our backlog, our total signed but not installed backlog is approximately $53,600,000 in net new recurring revenue. This number does include principal, but does not include the global bank discussed previously. From an asset management standpoint, total assets under management ended the period at $23,900,000,000 representing a $1,300,000,000 increase quarter over quarter and $3,400,000,000 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 AMD business. And looking back at 2019, we are pleased with our efforts and 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 to our margins. Simply said, we want to keep the accelerator down on moving the business forward. This serves as a good segue to the year ahead. And turning to 2020, our focus is on the following. 1st, maintaining 3rd, continuing our strategy of 1 SEI, which enable us 3rd, continuing our strategy of 1 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.
4th, managing through the financial 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 loss business. In summary, we have an active pipeline across the U. S.
And UK. 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.
Thank you. And we have a question from Robert Lee of KBW. Please go ahead.
Great. Good afternoon, Steve.
Good afternoon, Rob.
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, that's come out of there? And 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.
So a couple of things, I guess, Rob. The net recurring that we closed during the quarter, and again, it's net. So there's a gross number and then any losses or go backs and clients would come off of this was $8,100,000 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 40 plus years a current client and will continue to be a client. As mentioned on previous call, 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?
Well, I guess, wells are still in that backlog. And then maybe if you 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 onboard?
So the uptick of wells going
to SWP, that uptick is in that backlog. What I'd say to 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 underway with implementation, but that will come on majority in 2021, end of 2021 in there.
Great. I'll get back in the queue while the questions come. Thanks.
Okay.
Thank you. And now to the line of Chris Donat from Piper Sandler. Please go ahead.
Good afternoon, Steve. How are you doing?
Good. How are you doing, Chris?
Doing fine. Just one clarification on the loss business with Department of Interior. Was that in or no longer in the Q4? And can you remind us the dates of when that revenue would have ceased?
Yes. That came out it actually left us in the Q4 towards the beginning of Q4. So the majority of it in the quarter was out. But keep in mind now we'll have the full year impact of that.
Okay. And whatever. It's pointless to ask you a question on the global bank that's out of 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.
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.
We're excited to talk more about it when we can.
Okay. And the adjective you used with it was significant, but that's about it, right?
Yes. But my tone was neutral.
Understood.
All right. Thank you. And now to the line of Chris Shutler from William Blair. Please go ahead.
Hey, Steve. How are you? Good. How are you, Chris? Good.
I just wanted a couple of quick clarifications. You already covered these. But principal, you said that's going to come on when?
Primarily, we're already in implementation moving over, but I would look towards 2021.
Okay. And the flows from the AMD business in the quarter?
Flows from AMD were about $63,000,000 And year to date net cash flows were $296,000,000
Okay. And then I guess lastly, just the you noted the sales number, the 8.1 is net. So is there anything to call out that was lost in the quarter?
No. I mean typical business, we don't losses 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 cost of business, nothing needed to fall out.
Okay. And lastly on the UK Bank, presumably that they whoever that is, they are on a system from one of your chief competitors. Is that accurate?
For part of the business, yes.
Okay. Thanks a lot.
Sure.
Thank you. And now to the line of Robert Lee from KBW. Please go ahead.
Great. Thanks again. Just maybe Steve, two quick clarifications. So the $7,000,000 of one time event, dollars 7,200,000 that pretty much all flowed through in the quarter or?
No, about 10% of that flowed through. So the $7,200,000 announced about $700,000,000 flowed through. But however, remember, we had other one time revenue that we announced and about $6,600,000 of that flowed through the quarter.
Okay, great. And then 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
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 it's you guys at nauseam. And that's going to put some downward pressure on our margin.
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 an accelerating path from there. So we're hoping that these downward the downward 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.
Great. Thank you.
Thank you. And now to the line of Glenn Greene from Oppenheimer. Please go ahead.
Good afternoon. How are you?
Good. How are you, Glenn?
And congrats on the large bank win, anxious to hear it. So I was trying to go back to Wells Fargo. And the reason I ask it, there's been a lot of cat or concern out in the market. Wells has indicated they're taking some significant write downs in their wealth management business from your technology investments, whatnot. Is it just can we just sort of definitively say there's been no change in the status of your relationship with Wells Fargo at this point?
There's been no change in the status of our relationship with Wells Fargo. And if you would ask for 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 as a strong partner as we always have.
All right, great. That's all I needed. Thank you. Great.
Thank you. And now to the line of Chris Shutler from William Blair. Please go ahead.
Hey, Steve. Thanks for taking the follow-up. Just to put a finer point on that, have you confirmed with Wells that the impairments do not relate to SEI?
We've not talked to Wells about that. That's their disclosure and I'd have no reason to talk them about that to be honest with you, Chris.
Okay. Thank you.
Thank you. We have no one else in queue.
Okay. Our next segment is Investment Advisors. Wayne Withrow will cover this segment.
No. I'm good. That's in the Investment Managers. So turning to the Investment Manager segment. That's all right.
So turning to the Investment Manager segment. For the Q4 of 2019, revenues for the segment totaled $114,800,000 which was $12,400,000 or 12.1 percent higher as compared to our revenue in the Q4 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 $440,800,000 which was $42,700,000 or 10.7 percent higher than the full year of 2018. Our quarterly profit for the segment of $42,100,000 was $7,400,000 or 21.4 percent higher as compared to the Q4 of 2018.
Our full year profit for the segment of $158,800,000 was approximately $20,400,000 or 14.7 percent 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. 3rd party asset balances at the end of the Q4 of 2019 were $657,500,000,000 approximately $19,600,000,000 higher than the asset balances at the end of the Q3 of 2019. This increase was due to net new client fundings of 9 $100,000,000 as well as market appreciation of $10,400,000,000 And turning to market activity, during the Q4 of 2019, we had a strong sales quarter with net new business events totaling $11,900,000 in recurring revenues as well as recontracts of $7,500,000 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 $20,000,000,000 private equity insourcing shop who selected SEI as their 1st third party administrator as well as 2 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 trust for new and existing clients, we also had success expanding middle office servicing relationships with 4 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.
In the family office services business, we had continued success with new sales events within the single family office and multifamily office market. Our total net business sales events for 2019 were just over $49,000,000 which was comparable to our 2018 net sales events of $50,000,000 2019 marks the 2nd highest annual total for net sales in the Investment Manager segment. Our backlog of signed but not yet implemented sales stand at $42,100,000 at the end of the Q4 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 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 will be centered on the following areas. 1st, 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 SCI 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.
Thank you. And we have no one queuing up.
Okay. Now are you ready Wayne? The next segment is investment advisors. Wayne Winthrop will cover this segment.
Finally, Al. In 2019, after 5 years of diligent 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. 4th quarter revenues totaled $106,000,000 up from $97,000,000 in the Q4 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 4th quarter. As compared to the Q3, 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 mask the savings recognized in both development and operations due to completion of the migration. Our profits were up significantly compared to last year's 4th quarter.
Completion of the migration and the expenses associated with it allowed us to drop much of our revenue growth to the bottom line. During the quarter, we attracted $125,000,000 in new assets onto our platform, putting our total assets under administration over $80,000,000,000 Of this total, almost $71,000,000,000 were assets under management, an increase of over $9,000,000,000 from December 31, 2018. During the quarter, our net cash flow in managed assets, including fees, was a negative $193,000,000 While recent cash flows and 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. For 2020, we will concentrate on 2 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 1 SEI strategy and targets functions that help strengthen the overall advisor experience.
The first example is our digital account open process, which will be using technology originally built for the IMS unit. We expect to introduce this new capability in the first half of this year.
2nd,
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 3rd 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 multiyear 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.
Thank you. And we have a question from Chris Shutler. Please go ahead.
Hey, Wayne. Could you give us the cash flows again? You ran through those numbers pretty quickly. I think I missed some of them.
Right. So this is sort of a new statistic. We have $125,000,000 in new assets onto our platform and that's an AUA number. The assets under management were negative $193,000,000 for the quarter, bring the total to $71,000,000,000 assets under management.
Okay. And the just to be clear, the negative $193,000,000 that's what you have that's the number you've always reported as net new assets?
That's always the number we've always reported and that's net of fees.
Yes, exactly.
It includes fees in it.
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 Q3. So what are you seeing kind of behind the scenes that gives you more comfort? Is there anything you can say beyond like anecdotally?
Are there any numbers you can give us to give us some comfort about the trajectory?
Yes. I think if you look
at the past 6 months, what I would say is I think that a lot of the numbers were influenced by a bad December,
I guess is the way I'd answer that question.
I guess I would have thought this Q4 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?
It wasn't for us.
Okay. That's all I had. Thank you.
Thank you. And now to the line of Chris Donat. Please go ahead.
Hey, Wayne. Just wanted to stand sort of the same topic of the flows. With it improving year to date, can you compare it to what flows you 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.
I was talking about December, not January.
Okay. But I thought you said the you've seen an improvement in momentum since the Q4 in your prepared remarks or did I miss here that?
I think throughout last year, to date, like as of right now, we're seeing improved momentum.
Okay.
We haven't talked about January yet.
Wait, sorry. When you say year to date improvement, you're talking 2020 or?
From January 1, 2019 until now, momentum is improving. So that's 13 months.
Okay. And that improvement, it's more of a secular trend, it's not a typical seasonal pattern?
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 December, right, December is going to be influenced by which way the market is going, people put money in or tackle harvesting out or what people are doing.
Okay. I think I'm chasing the wrong thing here. Move on.
All right. Thank you. We have no one else in queue. Please continue.
Our next segment is the Institutional Investors segment. Paul Kalru will report on this segment. Paul?
Thanks Al. Good afternoon everyone. I'm going to discuss the financial results for the Q4 of 2019 as well as the entire year. Q4 2019 revenues of $80,500,000 were similar to the Q4 2018 revenues. Full year revenues of 322,000,000 dollars decreased 3% compared to 2018.
Market appreciation positively impacted revenue for the quarter the year while net client losses was the primary detractor. Operating profits for the Q4 2019 were $42,000,000 5% higher than Q4 2018 due to the previously mentioned items and lower operating expenses. 2019 full year profits were $168,100,000 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 $90,100,000,000 reflect a $6,700,000,000 increase versus the Q4 of 2018. This was due to much higher capital markets at twelvethirty onetwenty 19 versus twelvethirty onetwenty 18. Net asset events for the 4th quarter were a negative 615,000,000 Gross sales were $260,000,000 and client losses totaled $885,000,000 Total new client signings for 2019 was $3,500,000,000 that represents $10,900,000 of revenue. The client loss numbers for the quarter the year were primarily driven by acquisitions, DB terminations or curtailments and unsuccessful rebids of competitive tenders. The unfunded client backlog at year end was $560,000,000 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 U. S. Defined benefit market, bring 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.
Thank you. And we have no one queuing up on this topic.
Thank you, Paul. I would now like Kathy Heiglitz to give you a few company wide statistics. Kathy?
Thanks, Dan. Good afternoon, everyone. I have some additional corporate information about this quarter. 4th quarter 2019 cash flow from operations was $163,600,000 or 1 point $6 per share. Year to date cash flow from operations is $545,100,000 or 3.5 $2 per share.
The 4th quarter free cash flow was 143,800,000 dollars and year to date free cash flow $468,000,000 In the 4th quarter, our capital expenditures, excluding our software, was $12,600,000 that does include $6,000,000 for our new facilities And year to date capital expenditures excluding capitalized software were $43,100,000 which includes around 25 point $5,000,000 for the facility expansion. We project our capital expenditures for 2020, excluding capitalized software to be $45,000,000 and this also includes about $25,000,000 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 terminology 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 establish 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.
You 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 are subject to change. Although we believe the assumptions upon which we 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 ks for the year ended December 31, 2018. And now please feel free to ask any other questions that you may have.
Thank you. And now to the line of Chris Donat from Piper Sandler. Please go ahead, sir.
Thanks for taking my question. Dennis, I wanted to ask a couple on expenses. Looking at the sub advisory fees, you just saw a tick up there if you look at it relative to certain assets. I was just wondering if there's anything there. And then secondly, in the little bit bigger number, the facilities, supplies and other costs picked up like $3,000,000 quarter on quarter.
Any call outs there?
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 facility supplies and other costs line item, it's really around, I would say, the supplies and other costs area. So there's a couple of things going on here that I would consider kind of one time in nature for Q4.
1, in terms of the delta, we had a sales tax revenue our sales tax benefit in the Q3 of about $1,000,000 that did not repeat in the 4th quarter. So Q3 was under by about $1,000,000 and so that didn't repeat. We had 4th quarter and this happens generally every year statement, we call statement production costs. So the cost of produce statements, we generally have a 1 4th quarter hit, and that's about a little over $1,000,000 as well. So that won't repeat in Q1.
That's really a 4th quarter phenomenon. We had a it's kind of the
good news, bad news.
The bad news is we had about a $600,000 expense related to our Huntington Steel acquisition a little while ago. But the good news is the reason for that is because the business has performed better than we had expected when we made that acquisition. And I'd say that's generally it.
Okay. The Huntington Steel though, is that was that in compensation? Or was that in some other expense lines?
That would be more related to acquisition costs and goodwill.
Okay.
That's just part of the earn out.
Yes. Understood. Okay. Thank you.
You're welcome.
Thank you. And now to Chris Shutler. Please go ahead.
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 the kind of the your early thoughts on 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?
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.
Okay. Thank you.
Thank you. And now to the line of Patrick O'Shaughnessy from Raymond James. Please go ahead.
Hey, thanks. So non recurring sales have been elevated the last couple of quarters and I think particularly in private banks. Is there anything specific you would be pointing to that's driving those types of sales?
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 and a little bit faster than we saw before.
So we're hoping to continue that momentum into 2020.
Great. Thank you.
Sure.
Thank you. We have no one else in queue. Please continue.
Thank you, Kathy. So ladies and gentlemen, I'm encouraged by the direction each of our businesses are taking and the progress they are making. I believe that the investments we are making combined with 1 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.
Thank you. And ladies and gentlemen, that does conclude our conference for today.