Ladies and gentlemen, thank you for standing by. Welcome to the SEI First Quarter 2018 Earnings Call. At this time, all participant lines are in a listen only mode. Later, there will be an opportunity for your questions. Instructions will be given at that time.
As a reminder, today's conference call is being recorded. I would now like to turn the conference over to the Chairman and CEO, Al West. Please go ahead.
Thank you, and welcome, everyone. All of our segment leaders are on the call as well as Dennis McGonigal, SEI's CFO and Kathy Eilig, SEI's Controller. I'll start by recapping the Q1 2018. I'll then turn it over to Dennis to cover LSV and investment in new business segment. After that, each of the business segment leaders will comment on the results of their segments.
And then finally, Kathy will tell you or provide you with some important company wide statistics. And as usual, we will field questions at the end of each report. So let me start with the Q1 2018. 1st quarter earnings increased by 58% from a year ago. Diluted earnings per share for the Q1 of $0.86 represents a 56% increase from the 0.5 $5 reported for the Q1 of 2017.
We also reported a 13% increase in revenue from Q1 2017 to Q1 2018. Also during the Q1 2018, our non cash asset balances under management were essentially flat. The positive flows we had were offset by drops in the market. In addition, during the Q1 2018, we repurchased approximately $1,100,000 of share no, I'm sorry, dollars 1,100,000 shares of SEI stock at an average price of $73 per share. That translates to over $82,000,000 of stock repurchases during the quarter.
Finally, in the Q1, as part of the investments we make to create growth, we capitalized approximately $12,000,000 of the SWP development and amortized approximately $9,700,000 of previously capitalized development. Also in the Q4, we capitalized $900,000 of IMS development and amortized $1,300,000 of previously capitalized IMS development. Q1 2018 sales events, net of client losses, totals approximately $18,800,000 and are expected to generate net annualized recurring revenues of approximately $11,600,000 Now we remain disappointed with our sales results. While activity is very high and our pipelines are significant, larger deals are more complex today and take longer to close. Each of our units will speak to their specific sales results.
Now this concludes my formal remarks, so I'll turn it over to Dennis to give you an update on LSV and the investment in our new business segment. I'll then turn it over to the other business segment heads.
Vince? Thanks, Al. Good afternoon, everyone. I'll cover the Q1 results for the Investments in New Business segment and discuss the results of LSV Asset Management. During the Q1 of 2018, the Investments in New Business segment continued its focus on the operational development and testing of a web based digital advice offering and on the ultra high net worth investor segment through segment through our Private Wealth Management Group.
During the quarter, this segment incurred a loss of $3,200,000 which compared to a loss of $3,800,000 during the Q4 of 2017. Regarding LSV, our earnings from LSV represent our approximate 39 percent ownership during the Q1. LSV contributed $40,600,000 in income to SEI during the quarter. This compares to a $43,300,000 contribution for the Q4 of 2017. Assets grew approximately $500,000,000 for the quarter.
LSV experienced positive cash flow during the quarter, which was offset by market depreciation. Revenue was approximately $131,700,000 of which approximately 1% was performance fee related. Our effective tax rate for the quarter was 11.9%. On December 22, the President signed into law the Tax Cuts and Jobs Act. This had the effect of lowering our overall tax rate.
In addition, our tax rate benefited from the accounting rule change related to stock option expense, which we discussed last year. Finally, during the quarter, we adopted ASU 20,fourteen-nine. This new accounting rule relates to revenue recognition. The adoption of this new rule did not change the accounting treatment for the majority of SEI's revenue arrangements and did not have a material impact to our financial statements. One area of note, however, was on how we record the brokerage fees received and expenses incurred for research services provided in our Private Banking segment.
Both revenue and expense were previously recorded on a gross basis, but now are netted in revenue. This resulted in a reduction of $3,700,000 of both revenue and expense in the banking segment in the Q1. We did not adjust in prior periods. There was no impact to net income in the segment or company. I direct you to our recently filed 10 ks and soon to be filed 10 Q for more information on this accounting change.
I will now take any questions.
Our first question is from the line of Chris Shutler with William Blair. Please go ahead.
Hey, Dennis. Good afternoon. Hi, Chris.
So the $3,700,000 item in private banks, I know that there's offsetting revenue and expenses, but just as we model going forward, should we think about that same kind of magnitude hitting the remaining quarters of the year?
Yes, I would say so. Okay.
Okay. Really, if you just take Q1 forward.
Yes, exactly. And then the flows for LSV, Dennis, you said that they were positive. You quantify
it? They're positive about just under 1,900,000,000
Okay. So really good quarter then.
Yes, it was a good quarter.
And it was mostly new clients.
Mostly new clients? Okay. And then lastly, the tax rate, just how should we think about tax rate from here for the remaining quarters?
Yes, Kathy covered that in her comments. But I think the way we're looking at it, the way we plan for it is, you have the statutory rate. We can't really predict option exercising activity, which has this accounting impact. Also, we know if we don't have that, there's going to be some the rate is going to go up a little bit as you kind of level set up for the year. So I would use I'm still using that 21% range as our kind of normalized rate in the way we model.
Yes. Our expectation would be that the Q1 was extremely low for a couple reasons. 1, of course, it was a difference in the statutory rate. We had a lot of stock options vest and we had a lot of exercises. And we would not expect that level to repeat going forward.
The other thing is to the impact of it on the Q1 is significant in terms of percentage because pre tax income is only 1 quarter's worth.
So as you work through the year, it gets adjusted. So I would certainly be modeling a higher rate than what we experienced in the Q1. Okay, guys. Thank you. We operate at the statutory rate in our model.
Thanks, Dennis.
And there are no other questions. You may continue.
Thank you, Dennis. I'm now going to turn it over to Joe Ewijenbe to discuss our private banking segment. Joe?
Thanks, Al. I'll start with the financial update on the Q1 followed by an update on new business activity. 1st quarter revenue of $122,000,000 was down 4%, mainly due to recent accounting changes mentioned by Dennis. For the quarter, operating profit of $10,000,000 was up $1,400,000 from the 4th quarter. Sales activity for SWP and asset management distribution is robust both with current clients and new name prospects.
The decision and contracting process remains challenging and elongated. We're making progress and the solution is gaining market acceptance. During the quarter, we signed and announced an important long term SWP agreement with BMO Wealth Management. In SEI clients since 2005, BMO will migrate their existing book of business currently on Trust 3000 to the SEI Wealth platform in 2019. We also signed another Trust 3000 client, Bremer Trust, to a long term SWP agreement expected to convert by the end of this year.
In the UK, we continue to cross sell and gather solid net cash flow from current SWP clients. Net cash flow for the Q1 was $1,500,000,000 During the quarter, we received notification from True Potential that they will not renew their SWP contract when it expires at the end of the Q1 of 2019. CPS decided to run their business on an in house homegrown system. During the quarter, we had strong professional services or one time revenue related to SWP sales agendas, conversions and other client activity. Regarding recontracted 3 clients for a total of $4,500,000 There were some recontract net downs, mostly due to changes in client business models.
There were no competitive losses during the quarter, but we did lose 2 smaller clients due to merger and acquisition activity. Our asset management distribution business ended the 1st quarter with positive cash flows of $333,000,000 of net new assets. The new flows were representative of key distributors in Asia and in Europe. During our investor conference last year, we discussed the launch of a new asset management platform delivering manager research. And in February, we announced our first client for this platform, Johnny Montgomery Scott.
As an overall tally for SWP, 3,000 and AMD sales events, net of client losses totaled approximately $3,600,000 of which negative 2,300,000 is recurring revenue and 5,900,000 is non recurring or professional services revenue. Our total signed but not installed backlog for SWP is approximately $30,000,000 in net new recurring revenue encompassing 8 uninstalled clients. As a new metric to illustrate our continued momentum with SWP, the total recurring revenue value of our SWP backlog, including the re contracted value of the Trust 3,000 relationships plus the net new recurring revenue is greater than $70,000,000 As a reminder, the average FWP contract is greater than 6 years, so these relationships represent substantial revenue commitments to SEI. Regarding the backlog, I'd like to give you an update on Wells Fargo. We continue to make great progress working in collaboration with Wells Fargo.
To date, we've both met all our key milestones, including SWP development. But at this point, I expect the Wells Fargo conversion will push and we are working closely with them to assess and reset the dates for conversion. In conclusion, we remain focused on the following: capitalizing on our momentum to grow the backlog by contracting events and progressing the rest of the prospects through the sales process, installing the backlog and improving profitability of the banking segment to return the unit to historical profit margins. Any questions?
We go to the line of Chris Donat with Sandler O'Neill. Please go ahead.
Hey, Chris.
Thanks for taking my call, Joe. Just on the Wells Fargo getting pushed back, does that have any should we expect some revenue impact in 2019 from that or because they are already an existing account, nothing material or can you help us decide?
Yes, really nothing material. I mean, we still have a reasonable amount of one time revenue. So we continue to work very actively on the conversion and the build out of custom. There really isn't much impact to the revenue though in 2018 or 2019 though.
Okay. And I'll try asking it and see how you answer it. Is the getting pushed back you or them or can you say?
We're working really closely together and these are very complex conversions. As I said earlier, we've both sides met all of our key deliverables. And I think as we get to a firmer date, we can explain more about the delays.
Okay. Thanks, Joe.
Next, we go to the line of Glenn Greene with Oppenheimer. Please go ahead.
Hey, good afternoon, Joe. Just following up on the last question. Do you have a reasonable sense of the timing when Wells is likely to convert at this point or just too much up in the air?
Look, I think we both sides want to get this thing converted as soon as possible. They bought the SI Wealth platform because they believe it adds a lot of value to their business. So we're working really closely to figure out the best timing. And again, as soon as we get firm dates, I think you all probably know those before anybody. It seems you guys know everything before things go official.
So, we'll tell you as soon as possible. But we're working really closely with them to figure out the best dates.
And the 2 SWP clients that are not going to renew, just to be clear, were those U. K. Clients? And just a little bit more color why they're not renewing in the order of magnitude of the dollar impact?
I mentioned there were 2 Trust 3000 clients that we did not recontract because of competitive sorry, not competitive, M and A situations. And I also mentioned there was a client in the UK called True Potential that has decided to they were an early client of ours and they decided to take the platform in house. They have a little bit of technology bend. They built some front end software and their business is a fairly simple mutual fund managed account business and they decided to try to build that on their own.
And what's the assets for True Potential? So it's just one SWP client that's not renewing, I misheard that.
Yes, that's what we talked about. That's what I announced today. We don't announce individual assets for the clients. Okay.
And then just a little bit more color. It sounds like you're enthused by the pipeline, but still frustrated with getting deals over the goal line. But just maybe a little bit more color in terms of activity you're seeing.
So we think BMO Harris, our BMO Wealth Management, as it's called now, is a terrific win for us. They are a very substantial BSP client of ours. They are a terrific book of business for us. There's a lot more opportunity as a global organization. That's a big, big win for us.
And again, these large wins are very complex sales situations. So that's another great one for us to get. That helps a lot as firms like that decide to move to SWP, that's helpful. But as I've said and as Alice mentioned, these are complex contracting processes and so we have a lot of activity, but it's getting the contracts inked is the hard part. But sales activity is very, very strong and we are at it every day.
Okay, thanks. Good luck.
Thanks.
Next we go to the line of Robert Lee with KBW. Please go ahead.
Yes. Hi. Good afternoon, Joe.
Hi, Rob.
Hi. I'm just curious,
could you maybe update us, I mean, in the U. K, Elyse, obviously, you talked about strong net cash flows and unfortunately had the one client who's leaving the SWP. But I'm just kind of curious about kind of sales and pipeline well, pipeline activity there for SWP with new UK or clients?
Yes. We've been disappointed that we haven't closed that many deals in the UK in the last couple of years, but we are actively engaged in some very robust sales agendas on the larger side of the market. We've got to move those agendas through the sales process. I think a lot of the market was really bogged down with some of the regulatory chains with MiFID II and some of the other changes that were going into the industry. Some vendors delivered MiFID II.
We did a good job of that. Others didn't deliver so well. We've got to open up some opportunities for us. And I expect we'll continue to progress some agendas there this year. But we're actively engaged.
We have some of the UK team here this week and spent some time with the pipeline on there next week. And there's some interesting agendas there, but we are working hard to get some new business there because we are happy with the organic growth of the clients that we have on the platform there today. So if we can get some new names to add to that organic growth, we think that continues to be an interesting opportunity for us.
Okay. And then maybe just a follow-up on the, I mean the one I guess it was about $5,000,000 call it $6,000,000 of onetime revenues and I'm just kind of curious are those are most of those one time revenues related to kind of clients who've already kind of signed on like Wells or others and you're just going through the process? Or are you still seeing a reasonable amount of one time fees from people who haven't signed yet kind of in the pipeline, but you're kind of going through the exploratory process?
There's a little bit of that. So there are some prospects that again are paying us as part of the process and haven't yet signed contracts, but the bulk of that revenue is related to conversions of clients that have already signed.
Great. Thanks for taking my questions.
Thanks.
Next, we go to the line of Chris Shutler with William Blair. Please go ahead.
Hey, Joe.
Hi, Chris.
So regarding the true potential in the UK, I just want to confirm that is in the net sales events for Q1, correct?
Absolutely. Otherwise, we would not have had negative net sales events. Yes, correct.
Okay. And are you is it the all revenue from True Potential that you will lose including the asset management component?
No, it's just the investment it's sort of an average of what we had from that as an investment processing revenue last year, but it's not the asset management revenue. We expect the asset management revenue to continue there. But like I said, they fashion themselves as a technology firm in addition to a financial services firm and they've decided to try to build something and take it in house.
Okay. And is the asset management revenue or the kind of the platform revenue a bigger component?
It's about fifty-fifty in the past. It's been about fifty-fifty in the past.
Okay.
That helps. And then on wells, I just want to make absolutely sure I'm clear on this. So you're basically saying no change to the revenue outlook around wells, just kind of a push out in the go live date, right?
Yes, certainly in 2018 2019 there's no change and a push out in the go live date. Yes, absolutely, that's correct.
Okay. And I mean, do you think that you need Wells to go live to be able to sign other large ASP clients?
No, I think we're talking very actively with some of our other large clients as well as some other large global banks that would prefer an ASP over our software as a service model. And so our expectation has been for that wells would be the first, but there are certainly other opportunities for us.
Okay. Thanks a lot. Thanks.
Next is the line of Tom McCrohan with Mizuho. Please go ahead.
Hey, Joe. Just two follow ups on wells. So has the wells conversion come to a halt or until a new date is framed up or
is work being done? Not at all. We have the same team. We're very actively involved in the conversion. We continue to develop the technology that again is specific to ASP or software as a service.
They continue to have a substantial number of people in the project and the conversion continues.
Great. And just in terms of magnitude of the delay, are we talking about quarters, years? I mean, if
there's any way to It's really hard to tell that. It will be delayed. Otherwise, we probably wouldn't be talking about it. But it's really hard for me to predict that at this point. And frankly, as soon as we have a better sense of it, I'm sure that, as I said earlier, you all will find out about it in the market.
And I think Wells is committed to with us to talk more openly about it. But I don't want to give you information that isn't correct until we feel that we have a good understanding of it.
Okay, thanks. That's all I had.
We have a good relationship with Wells. Wells is very excited about SWP and the platform. We are very excited about Wells being a client of ours and we're working very closely with them to make this a reality.
There are no further questions. You may continue.
Thank you, Joe. Our next segment is advisors and Wayne Winthrop will cover this segment. Wayne?
Thanks, Al. In the Q1 of 2018, we continued to grow our revenues and profits, while simultaneously making big strides in the migration of our business to the SEI Wealth Platform. 1st quarter revenues totaled over $99,000,000 These revenues were $11,000,000 better than the Q1 of last year. This increase was driven by positive net cash flow and market appreciation, offset in part by fee reductions in some of our investment products. Expenses were up in the Q1 versus last year's Q1 due to increased direct costs and personnel expense tied to our growth.
SEI Wealth Platform migration expenses, together with increased development expense, net of capitalization, also contributed to the increase. Our profits grew 14.8% from last year's Q1 and our margins grew slightly as many expense categories increased roughly in line with our revenue growth. Assets under management were 64.6 $1,000,000,000 at March 31, an increase of $6,600,000,000 from March 31, 2017. The increase was driven by positive net cash flow and market appreciation. During the Q1, our net cash flow was $935,000,000 This positive cash flow, partially offset by declining markets, was the cause of our AUM increase from the end of last year.
During the quarter, we recruited 130 new advisors. Our pipeline of new advisors remains strong. On March 31, we completed another migration of advisors onto the SEI Wealth Platform. This migration included roughly 86,000 accounts and over $11,000,000,000 in assets. We now have close to 80% of our assets migrated onto the SEI Wealth Platform.
Another large migration is planned for the end of September and a final smaller migration is planned for March 31, 2019. So in roughly 11 months, all advisor accounts will be on the FTI Wealth platform. As we complete these conversions, we will be simultaneously helping all of our advisors adopt the new features of the platform, especially its straight through processing capabilities. In summary, the Q1 reflected our continued financial growth and solid progress towards completion of our migration to the SEI Wealth Platform. These items give us confidence in the long term opportunity in front of us.
I welcome any questions you have.
We go to the line of Robert Lee with KBW. Please go ahead. Mr. Lee, you have your phone muted, sir.
Sorry about that. Thanks. Hi, Wayne. How are you?
I'm great.
Just on the fee reductions, were those because I know you've talked about this several times over the past year or so. Were these was this kind of the flow through impact of prior reductions or were there some new reductions implemented, say, at the start of the year that saw the impact? And maybe if you could kind of give us a sense of kind of where that's happening? Is it more of a mix thing with the products or just seeing that you have to lower management fees on some products?
Well, early last year, we reduced the expense ratio of some of our mutual funds. And I would say that was early last year. And then in the middle of last year, we reduced the expenses of our ETF portfolio strategies and our SMA strategies for our larger clients. And then at the very beginning of this year, we reduced the expense ratio of 1 of our larger mutual funds, U. S.
Based mutual funds. And so basically, all those numbers are reflected in the Q1 results.
Okay, great. And I'm just curious, I mean, your new advisor headcount has been pretty good quarter over quarter. And can you maybe update us on a little bit on the competitive environment you see out there? I mean, we do see and hear about different competitors coming up with different types of technology platforms. I think there's firms like Advisor Engines and others who seem like they're trying to target the same kind of the same advisor segments.
Could you maybe talk a little bit about what you're seeing in the competitive environment, any new entrants or anything?
Yes. I would at the highest level, I would take some of the technology platforms like Advisor Engines, and I would look at them as the same way I would look at asset management firms. And what I mean by that is they're appealing to the do it yourself advisor who wants to assemble a platform for their business that they can run themselves. So they can construct portfolios, pick the components of the portfolios, they can pick the custody platform, they can pick the surround technology, whether it be feed collection platform, aggregation platform, performance measurement. We're a complete bundled solution.
So we appeal to the advisor that wants to outsource a complete platform, be it investment or technology or operations and wants to concentrate primarily on servicing their existing clients and selling new clients. So the value propositions are very different, and I think we go after advisors with different mindsets.
Great. That's helpful. That's all I had. Thank you.
And there are no further questions. You may continue.
Thank you, Wayne. Our next segment is Institutional Investors segment and Paul Carter will report on this segment.
Paul? Thanks, Al. Good afternoon, everyone. I'm going to discuss the financial results for the Q1 of 2018. 1st quarter revenues of 85 point 5,000,000 increased 11% compared to the Q1 of 2017.
1st quarter operating profits of 44,400,000 dollars increased 16% compared to the Q1 of 2017. Both revenues and operating profits were positively impacted by market appreciation, client fundings, positive currency translation and changes in asset class diversification by our client base. Approximately $2,000,000 of the revenue and operating profit in the Q1 was one time in nature due to retro private equity firms and specific client performance based fees. Quarter end asset balances of $92,600,000,000 reflect a $7,600,000,000 increase compared to the Q1 of 2017. This increase is driven by higher capital markets and positive client fundings.
Net fundings were flat for the quarter. This included approximately $850,000,000 in losses, which was, as previously discussed, the continuation of partial curtailments of BB clients and a client merger. The unfunded new client backlog at quarter end was $700,000,000 but will be impacted by 2nd quarter client losses. New client signings for the quarter were $1,100,000,000 This is primarily diversified across new clients in endowments and foundations, U. S.
Healthcare and U. K. Fiduciary management. Continued sales penetration in the non for profit segments will continue to yield a higher consumption rate of higher fee alternative investment asset classes. Our sales pipeline is strong and we will continue to focus on key growth markets in 2018 and I welcome any questions that you might have.
We go
to the line of Robert Lee with KBW. Please go ahead.
Hi, good afternoon.
Hi, Robert.
Hey, how are you? Just I guess a quick follow-up. You mentioned that, I guess, pipeline be impacted by client losses in subsequent quarters. Are there some sizable client redemptions you're anticipating as we look ahead to the current quarter?
There is a similar curtailment that we now know of in the second quarter that's probably somewhere in the magnitude of the gross backlog.
Okay, that's helpful. And then maybe again also talk a little bit about the competitive environment. I know it's talked in the past about new entrants in the OCIO marketplace, consultants and others, and that has also put some pricing pressure, I guess, on the industry. And could you maybe just update us and if you're are you to the extent you see that you're losing some business here or there, is it mainly to lower priced competitors? Or how do you are you seeing them kind of impact your pipelines?
Just kind of get a feel for that.
Yes. I think the beauty of our segueing into endowments and foundations is they are not low price buyers. They are high quality buyers and they want to find organizations that have scale, scope, resources that can manage their endowment and foundation for the next 30 odd years. So unlike someone, say, DB plant was in the market right now that was only going to be around for 4 or 5 years, they might be a low cost buyer because they're not really going to
be a going concern, so to speak.
But the endowments and foundations, foundations, they're going to do a competitive process. They're going to make sure that your rates are competitive, these are the others, but they're not going to just buy the cheapest provider. The other benefit that I mentioned in my remarks is that these types of investors consume alternative investments at a much higher clip and our revenue model for alternatives is higher just like it is with other competitors and that will certainly be a direct benefit and we saw some of that benefit in the Q1.
Great. That was it. Thank you for taking my question.
No problem, Robert.
And next we go to the line of Chris Shutler with William Blair. Please go ahead.
Hey, Paul. Hey, Chris. I just wanted
to follow-up on that last comment around alternatives. So just putting it all together with increasing mix of alternatives, kind of fee pressure elsewhere, how should we think about kind of the blended revenue yield in your part of the business?
I mean, it's really stayed fairly flat, maybe gone down a little bit, Chris. We do have so we have two dimensions. We have historical DB accounts that we won 10 years ago that are curtailing or we're losing, where when we won them 10 years ago, we had a much higher OCIO fee or fiduciary management fee. We're now replacing that with endowments and foundations where the OCIO fee might be lower, but the net up we get from alternative investments is much higher because the DB plans did not have as much alternative investments. Consequently, it kind of levels out.
As the DB runs off and we replace it with more of these endowments and foundations, we feel confident that the yield rate will actually increase over time. But I don't see that in the foreseeable future. My goal in the foreseeable future is to keep it levelized. One of the real benefits that we did over the last 6 months is we had our largest raise in private equity with our clients we've ever had. That's a tremendous asset class for the investors.
It's very helpful for us and investors that would put assets in private equity, they're making a commitment for 8 to 10 years, as you know. So that's a real good benefit we brought to them and also a commitment that they have for us as a OCIO
All right. That helps. Thank you.
Thank you.
There are no other questions. You may continue.
Thank you, Paul. Our final segment today is Investment Managers. Now I'm going to turn it over to Steve Meyer to discuss this segment. Steve?
Thanks, Al. Good afternoon, everyone. For the Q1 of 2018, revenues for the segment totaled $96,900,000 which was $16,400,000 or 20.3 percent higher as compared to our revenue in the Q1 of 2017. This year over year revenue increase was due to net new client fundings, market appreciation and the acquisition of Archway. Our quarterly profit for this segment of $33,500,000 was $5,100,000 or 17.9% higher as compared to the Q1 of 2017.
Higher profits were primarily driven by an increase in revenue, offset by an increase in personnel and investment Our increase in investment expense included amortization of our investments in the front office portion of our platform and the amortization of Archway acquisition. We expect our increase in investment expense and related amortization to continue for the next several quarters.
3rd party asset balances at the
end of the Q1 of 2018 were $507,700,000,000 approximately $50,300,000,000 or 11% higher as compared to
the asset balances at the
end of the Q1 of 2017. This increase in assets was primarily due to net new client fundings of $42,800,000,000 and market appreciation of $7,500,000,000 And turning to market activity, during the Q1 of 2018, we had a strong sales quarter with net new business events totaling $8,100,000 These sales were comprised of new name business as well as an expansion of existing business with current clients across all of our segments. These wins included a new metal office outsourcing mandate and a collective fund mandate with 2 prominent traditional managers, an ETF servicing mandate and several private equity outsourcing deals, 1 in a competitive process. Additionally, we signed several new family office clients. The market continues to stay active and we continue to see strong demand for platforms as well as a market need for our new solutions, including our front office platform, global regulatory and compliance and our hosting platform.
We feel well positioned with the investments we have made and feel optimistic regarding our future growth opportunity. That concludes my prepared remarks, and I'll now turn it over for any questions you may have.
Thank you. We go to the line of Chris Donat with Sandler O'Neill. Please go ahead.
Hey, Steve.
Hi, Chris. How are you?
Doing fine. How about you?
Good.
Just wanted to ask on the competitive environment. I mean, you guys did an acquisition last year for your business, but we've seen a lot of activity away from you with particularly SS and C and DST merger and then some noise this past quarter around FIDESA, which I realize is kind of away from you. But I'm just wondering, when you have this sort of consolidation in the industry, does that create more competition for you? Does it create opportunities to call on new clients? Just wondering how it affects your sales or business or if it doesn't really?
Well, I think anytime you have
a transaction like this, anytime there's what I would call noise like that in the industry, there's always opportunities. I think it's something we've seen, we'll continue to see. We don't see huge inflection points from it, especially as these deals get larger as people as consolidation happens. It's tough for people. It's a big event for someone to move their business, especially the larger they become.
However, what we do see is clients are still pushing as managers look to change their business model, as they're under increased complexity from regulation, from them looking at how to scale their business, expand their business, they are looking for capability. And whether acquisitions and consolidations provide that among certain providers or not, I think that's the driving force we see and we see the most opportunity with.
Got it. Okay. Thank you.
Sure.
And there are no other questions. You may continue.
Thanks, Steve. I would now like Kathy Heilig to give you a few company wide statistics. Kathy?
Thanks, Al, and good afternoon, everyone. I have some additional corporate information about this quarter. Our 1st quarter cash flow from operations was 104,200,000 dollars or $0.64 per share. 1st quarter free cash flow was 85,700,000 dollars And 1st quarter capital expenditures excluding the capitalized software was $5,600,000 We're projecting capital expenditures excluding capitalized software, to be about $37,000,000 for the year because that does include money set aside for expansion of our facility. As we talked about earlier, the tax rate was 11.9% and it is due to the combination of the new tax act and the tax benefit of the 1st quarter stock option exercises.
And as you're aware, our rates will fluctuate as a result of the timing of stock option exercises. We also would like to remind you that many of our comments are forward looking statements and are based upon assumptions that involve risks and that the financial information presented in our release and on this call is unaudited. Future revenues and income could differ from expected results. We have no obligation to publicly update or correct any statements herein as a result of future developments. You should refer to our periodic SEC filings for a description of various risks and uncertainties that could affect our future financial results.
Now, please feel free to ask any other questions that you may have.
We go to the line of Chris Shutler with William Blair. Please go ahead.
Thank you. Steve, I had a couple of follow ups. I didn't get in the queue quick enough. No problem, Ed. So one was just the fundings in the quarter.
I know you gave a number. Can you just give us the number for the quarter?
Fundings for the quarter? This is again, this is the assets, it's year over year quarters, Chris. So it was $50,300,000,000 of assets going up. And out of that, net new client fundings were $42,800,000,000 Again, Q1 2018 versus Q1, 2017. If you're trying to look at where we are sequentially, which I think is where you typically go quarter over quarter, Q4, we were about 2.5% up, asset wise quarter over quarter Q4 to Q1.
And that was all from client fundings or how much of that was market versus
fundings? Actually, it was about net new client funding was about $27,300,000,000 offset by depreciation of 15.1
Okay. So that's Q4 to Q1. Got it. Okay. And then the backlog and retention, did you give those numbers or the backlog number at least?
Backlog is at the end of the quarter about 38.6%.
38.6%, okay. And then lastly, just general question, the amortization on the P and L, the 11.8 in Q1, is that a good run rate to use going forward?
I think for the next several quarters, that's probably in line directionally correct. If you could imagine, there's 2 points here, remember, there's the amortization of Archway, the acquisition and amortization of our capitalized investment expenses that we mentioned. And as I mentioned on the right, I think that's going to be pretty consistent over the next several quarters.
Okay. Thank you. Sure.
And there
are no other questions. You may continue.
Thank you, Jeff. So ladies and gentlemen, I am encouraged by the direction our businesses are taking and the progress they're making. While we face short term headwinds, we believe that the investments we're making will help us benefit from all the changes taking place in our industry. And this concludes our call and have a great day and thank you for attending our call. Appreciate it.
Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.