SEI INVESTMENTS CO

Consolidated Balance Sheets

(Dollars in thousands, except par value)

Consolidated Balance Sheets

(Dollars in thousands, except par value)

Consolidated Statements of Operations

(In thousands, except per share data)

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Equity

Consolidated Statements of Changes in Equity

Consolidated Condensed Statements of Cash Flows

Notes to Consolidated Financial Statements

(all figures are in thousands except share and per share data)

Note 1. Summary of Significant Accounting Policies

Nature of Operations

SEI Investments Company (the Company), a Pennsylvania corporation, provides comprehensive platforms, services and infrastructure–encompassing technology, operational, and investment management services–to help wealth managers, financial advisors, investment managers, family offices, institutional and private investors create and manage wealth.

Investment processing platforms provide technologies and business process outsourcing services for wealth managers. These solutions include investment advisory, client relationship, and other technology-enabled capabilities for the front office; administrative and investment services for the middle office; and accounting and processing services for the back office. Revenues from investment processing platforms are recognized in Information processing and software servicing fees on the accompanying Consolidated Statements of Operations.

Investment operations platforms provide business process outsourcing services for investment managers and asset owners. These platforms support a broad range of traditional and alternative investments and provide technology-enabled information analytics and investor capabilities for the front office; administrative and investment services for the middle office; and fund administration and accounting services for the back office. Revenues from investment operations platforms are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.

Investment management platforms provide comprehensive solutions for managing personal and institutional wealth. These platforms include goals-based investment strategies; SEI-sponsored investment products, including mutual funds, collective investment products, alternative investment portfolios and separately managed accounts (SMA); and other market-specific advice, technology and operational components. These platforms are offered to wealth managers as part of a complete goals-based investment program for their end-investors. For institutional investors, the Company provides Outsourced Chief Investment Officer (OCIO) solutions and Enhanced Chief Investment Officer (ECIO) solutions that include investment management programs, as well as advisory and administrative services. Revenues from investment management platforms are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.

Basis of Presentation

The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Certain financial information and accompanying note disclosure normally included in the Company’s Annual Report on Form 10-K have been condensed or omitted. The interim financial information is unaudited but reflects all adjustments (consisting of only normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of financial position of the Company as of September 30, 2024, the results of operations for the three and nine months ended September 30, 2024 and 2023, and cash flows for the nine months ended September 30, 2024 and 2023. These interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

There have been no significant changes in significant accounting policies during the nine months ended September 30, 2024 as compared to the significant accounting policies described in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Variable Interest Entities

The Company or its affiliates have created numerous investment products for its clients in various types of legal entity structures. The Company serves as the Manager, Administrator and Distributor for these investment products and may also serve as the Trustee for some of the investment products. The Company receives asset management, distribution, administration and custodial fees for these services. Clients are the equity investors and participate in proportion to their ownership percentage in the net income or loss and net capital gains or losses of the products, and, on liquidation, will participate in proportion to their ownership percentage in the remaining net assets of the products after satisfaction of outstanding liabilities. The Company has concluded that it is not the primary beneficiary of the entities and, therefore, is not required to consolidate any of the pooled investment vehicles for which it receives asset management, distribution, administration and custodial fees under the VIE model.

The Company is a party to expense limitation agreements with certain SEI-sponsored money market funds subject to Rule 2a-7 of the Investment Company Act of 1940 which establish a maximum level of ordinary operating expenses incurred by the fund in any fiscal year including, but not limited to, fees of the administrator or its affiliates. Under the terms of these agreements, the Company waived $1,202 and $5,519 in fees during the three months ended September 30, 2024 and 2023, respectively. During the nine months ended September 30, 2024 and 2023, the Company waived $6,764 and $16,400, respectively, in fees.

Revenue Recognition

Revenue is recognized when the transfer of control of promised goods or services under the terms of a contract with customers are satisfied in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those promised goods or services. Certain portions of the Company’s revenues involve a third party in providing goods or services to its customers. In such circumstances, the Company must determine whether the nature of its promise to the customer is to provide the underlying goods or services (the Company is the principal in the transaction and reports the transaction gross) or to arrange for a third party to provide the underlying goods or services (the entity is the agent in the transaction and reports the transaction net). See Note 13 for related disclosures regarding revenue recognition.

Cash and Cash Equivalents

Cash and cash equivalents includes $423,471 and $397,838 at September 30, 2024 and December 31, 2023, respectively, invested in SEI-sponsored open-ended money market mutual funds. See Note 5 for information related to the Company's total investments in SEI-sponsored and non-SEI-sponsored money market mutual funds and commercial paper classified as cash equivalents.

Restricted Cash

Restricted cash includes $250 at September 30, 2024 and December 31, 2023 segregated for regulatory purposes related to trade-execution services conducted by SEI Investments (Europe) Limited. Restricted cash also includes $52 and $51 at September 30, 2024 and December 31, 2023, respectively, segregated in special reserve accounts for the benefit of customers of the Company’s broker-dealer subsidiary, SEI Investments Distribution Co. (SIDCO), in accordance with certain rules established by the Securities and Exchange Commission (SEC) for broker-dealers.

Capitalized Software

The Company capitalized $18,414 and $26,584 of software development costs during the nine months ended September 30, 2024 and 2023, respectively, to further develop the SEI Wealth Platform SM(SWP) and for the development of a new platform for the Investment Managers segment. The Company capitalized $10,542 and $13,706 of software development costs for significant enhancements to SWP during the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, the net book value of SWP was $208,457. The net book value includes $1,145 of capitalized software development costs in-progress associated with future releases of SWP. SWP has a weighted average remaining life of 8.4 years. Amortization expense for SWP was $20,517 and $19,027 during the nine months ended September 30, 2024 and 2023, respectively.

The Company also capitalized $7,872 and $12,878 of software development costs during the nine months ended September 30, 2024 and 2023, respectively, related to the development of a new platform for the Investment Managers segment. Capitalized software development costs in-progress associated with this platform were $28,040 as of September 30, 2024. The platform is not yet ready for use.

Earnings per Share

The calculations of basic and diluted earnings per share for the three and nine months ended September 30, 2024 and 2023 are:

During the three months ended Sept 30, 2024 and 2023, employee stock options to purchase 10,606,000 and 10,869,000 shares of common stock with an average exercise price of $61.06 and $61.31, respectively, were outstanding but not included in the computation of diluted earnings per common share. During the nine months ended September 30, 2024 and 2023, employee stock options to purchase 10,747,000 and 11,049,000 shares of common stock with an average exercise price of $61.05 and $61.29, respectively, were outstanding but not included in the computation of diluted earnings per common share. These options for the three and nine month periods were not included in the computation of diluted earnings per common share because either the performance conditions have not been satisfied or would not have been satisfied if the reporting date was the end of the contingency period or the options' exercise price was greater than the average market price of the Company’s common stock and the effect on diluted earnings per common share would have been anti-dilutive.

New Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07) which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments in ASU 2023-07 apply retrospectively to all prior periods presented in the financial statements. The Company continues to assess the impact of ASU 2023-07. The Company has identified the chief operating decision maker (CODM) and is in the process of finalizing the significant segment expenses and other information regularly provided to the CODM and included with the reported measure of segment profit/loss. The Company is on schedule to complete its assessment of ASU 2023-07 and the impact on its consolidated financial statements and related disclosures as of January 1, 2025.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures (ASU 2023-09) to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2023-09 on its consolidated financial statements and related disclosures.

Reclassifications

Certain prior year amounts have been reclassified to conform to current year presentation.

Statements of Cash Flows

For purposes of the Consolidated Statements of Cash Flows, the Company considers investment instruments purchased with an original maturity of three months or less to be cash equivalents.

The following table provides the details of the adjustments to reconcile net income to net cash provided by operating activities for the nine months ended September 30, 2024 and 2023:

Note 2. Investment in Unconsolidated Affiliate

LSV Asset Management

The Company has an investment in LSV Asset Management (LSV), a registered investment advisor that provides investment advisory services primarily to institutions, including pension plans and investment companies. LSV is currently an investment sub-advisor for a limited number of SEI-sponsored investment products. The Company's partnership interest in LSV as of September 30, 2024 was 38.6%. The Company accounts for its interest in LSV using the equity method because of its less than 50% ownership. The Company’s interest in the net assets of LSV is reflected in Investment in unconsolidated affiliate on the accompanying Consolidated Balance Sheets and its interest in the earnings of LSV is reflected in Equity in earnings of unconsolidated affiliate on the accompanying Consolidated Statements of Operations.

At September 30, 2024, the Company’s total investment in LSV was $49,675. The Company's investment includes advances provided to LSV related to their working capital accounts. The Company receives partnership distributions from LSV on a quarterly basis. The Company received partnership distributions from LSV of $112,476 and $100,252 in the nine months ended September 30, 2024 and 2023, respectively. As such, the Company considers these distribution payments as returns on investment rather than returns of the Company's original investment in LSV and has therefore classified the associated cash inflows as an operating activity on the Consolidated Statements of Cash Flows.

The Company’s proportionate share in the earnings of LSV was $36,513 and $29,927 during the three months ended September 30, 2024 and 2023, respectively. During the nine months ended September 30, 2024 and 2023, the Company’s proportionate share in the earnings of LSV was $102,375 and $91,517, respectively.

These tables contain condensed financial information of LSV:

Note 3. Composition of Certain Financial Statement Captions

Receivables

Receivables on the accompanying Consolidated Balance Sheets consist of:

Fees earned, not billed represents receivables from contracts with customers earned but unbilled and results from timing differences between services provided and contractual billing schedules. These billing schedules generally provide for fees to be billed on a quarterly basis. In addition, certain fees earned from investment operations services are calculated based on assets under administration that have an extended valuation process. Billings to these clients occur once the asset valuation processes are completed.

Receivables from investment products on the accompanying Consolidated Balance Sheets primarily represent fees receivable for distribution, investment advisory, and administration services to various regulated investment companies and other investment products sponsored by SEI.

Property and Equipment

Property and Equipment on the accompanying Consolidated Balance Sheets consists of:

The Company recognized $25,097 and $26,509 in depreciation expense related to property and equipment for the nine months ended September 30, 2024 and 2023, respectively.

Deferred Contract Costs

Deferred contract costs, which primarily consist of deferred sales commissions, were $42,527 and $40,221 as of September 30, 2024 and December 31, 2023, respectively. The Company deferred expenses related to contract costs of $5,326 and $2,243 during the three months ended September 30, 2024 and 2023, respectively. During the nine months ended September 30, 2024 and 2023, the Company deferred expenses related to contract costs of $10,237 and $7,212, respectively. Amortization expense related to deferred contract costs were $7,931 and $6,622 during the nine months ended September 30, 2024 and 2023, respectively. Amortization expense related to deferred contract costs is included in Compensation, benefits and other personnel on the accompanying Consolidated Statements of Operations. There wereno material impairment losses in relation to deferred contract costs during the nine months ended September 30, 2024.

Accrued Liabilities

Accrued liabilities on the accompanying Consolidated Balance Sheets consist of:

Note 4. Fair Value Measurements

The fair value of the Company’s financial assets and liabilities, except for the Company's investment funds sponsored by LSV, is determined in accordance with the fair value hierarchy. The fair value of the Company’s Level 1 financial assets consist mainly of investments in open-ended mutual funds that are quoted daily. Level 2 financial assets consist of GNMA mortgage-backed securities held by the Company's wholly-owned limited purpose federal thrift subsidiary, SEI Private Trust Company (SPTC), and Federal Home Loan Bank (FHLB) and other U.S. government agency short-term notes held by SIDCO. The financial assets held by SIDCO were purchased as part of a cash management program requiring only short term, top-tier investment grade government and corporate securities. The financial assets held by SPTC are debt securities issued by GNMA and are backed by the full faith and credit of the U.S. government. These securities were purchased for the sole purpose of satisfying applicable regulatory requirements and have maturity dates which range from 2027 to 2041.

The fair value of the Company's investment funds sponsored by LSV is measured using the net asset value per share (NAV) as a practical expedient. The NAVs of the funds are calculated by the funds' independent custodian and are derived from the fair values of the underlying investments as of the reporting date. The funds allow for investor redemptions at the end of each calendar month. This investment has not been classified in the fair value hierarchy but is presented in the tables below to permit reconciliation to the amounts presented on the accompanying Consolidated Balance Sheets.

The valuation of the Company's Level 2 financial assets held by SIDCO and SPTC are based upon securities pricing policies and procedures utilized by third-party pricing vendors.

The pricing policies and procedures applied for our Level 1 and Level 2 financial assets during the nine months ended September 30, 2024 were consistent with those as described in the Company's Annual Report on Form 10-K at December 31, 2023. The Company had no Level 3 financial assets at September 30, 2024 or December 31, 2023 that were required to be measured at fair value on a recurring basis. The Company's Level 3 financial liabilities at September 30, 2024 and December 31, 2023 consist entirely of the estimated fair value of the contingent consideration resulting from an acquisition (See Note 12). There were no transfers of financial assets between levels within the fair value hierarchy during the nine months ended September 30, 2024.

The fair value of certain financial assets of the Company was determined using the following inputs:

(1) The fair value amounts presented in the tables above are intended to permit reconciliation of the fair value hierarchy to the amounts presented on the accompanying Consolidated Balance Sheets (See Note 5).

Note 5. Marketable Securities

Marketable securities include investments in money market funds and commercial paper classified as cash equivalents, available-for-sale debt securities, investments in SEI-sponsored and non-SEI-sponsored mutual funds, equities, investments in funds sponsored by LSV and securities owned by SIDCO.

Cash Equivalents

Investments in SEI-sponsored and non-SEI-sponsored money market funds and commercial paper classified as cash equivalents had a fair value of $633,780 and $565,588 at September 30, 2024 and December 31, 2023, respectively. There were no material unrealized or realized gains or losses from these investments during the nine months ended September 30, 2024 and 2023. Investments in money market funds and commercial paper are Level 1 assets.

Available for Sale and Equity Securities

Available For Sale and Equity Securities on the accompanying Consolidated Balance Sheets consist of:

Net unrealized losses at September 30, 2024 of available-for-sale debt securities were $5,580 (net of income tax benefit of $1,667). Net unrealized losses at December 31, 2023 of available-for-sale debt securities were $6,875 (net of income tax benefit of $2,054). These unrealized losses are associated with the Company’s investments in mortgage-backed securities issued by GNMA and were caused by interest rate increases (See Note 4). The contractual cash flows of these securities are guaranteed by an agency of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of the Company's investments. The Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost bases. These net unrealized losses are reported as a separate component of Accumulated other comprehensive loss on the accompanying Consolidated Balance Sheets.

The following tables provide the scheduled maturities of the Company's available-for-sale debt securities:

There were no material realized gains or losses from available-for-sale debt securities during the nine months ended September 30, 2024 and 2023, respectively.

There were gross realized gains of $1,651 and gross realized losses of $1,416 from mutual funds and equities during the nine months ended September 30, 2024. There were no material realized gains or losses from mutual funds and equities during the nine months ended September 30, 2023. Gains and losses from mutual funds and equities are reflected in Net gain (loss) from investments on the accompanying Consolidated Statements of Operations.

Investments in Affiliated Funds

The Company has an investment in funds sponsored by LSV. The Company records this investment on the accompanying Consolidated Balance Sheets at fair value. Unrealized gains and losses from the change in fair value of these funds are recognized in Net gain (loss) from investments on the accompanying Consolidated Statements of Operations.

The funds had a fair value of $8,410 and $7,316 at September 30, 2024 and December 31, 2023, respectively. The Company recognized unrealized gains of $673 and $66 during the three months ended September 30, 2024 and 2023, respectively, from the change in fair value of the funds. The Company recognized unrealized gains of $1,094 and $472 during the nine months ended September 30, 2024 and 2023, respectively, from the change in fair value of the funds.

Securities Owned

The Company’s broker-dealer subsidiary, SIDCO, has investments in U.S. government agency securities with maturity dates less than one year. These investments are reflected as Securities owned on the accompanying Consolidated Balance Sheets. Due to specialized accounting practices applicable to investments by broker-dealers, the securities are reported at fair value and changes in fair value are recorded in current period earnings. The securities had a fair value of $30,289 and $31,334 at September 30, 2024 and December 31, 2023, respectively. There were no material net gains or losses related to the securities during the three and nine months ended September 30, 2024 and 2023.

Note 6. Line of Credit

The Company has afive-year $325,000 Credit Agreement (the Credit Facility) with Wells Fargo Bank, N.A., and a syndicate of other lenders. The Credit Facility is scheduled to expire in April 2026, at which time any aggregate principal amount of loans outstanding becomes payable in full. Any borrowings made under the Credit Facility will accrue interest at rates that, at the Company's option, are based on a base rate (the Base Rate) plus a premium that can range from 0.25% to 1.00% or the Adjusted Term Secured Overnight Financing Rate (SOFR) plus a premium that can range from 1.25% to 2.00% depending on the Company’s Leverage Ratio (a ratio of consolidated indebtedness to consolidated EBITDA for thefour preceding fiscal quarters, all as defined in the related agreement). The Base Rate is defined as the highest of a) the Prime Rate, b) the Federal Funds Rate plus 0.50% and c) the Adjusted Term SOFR for a one-month tenor in effect on such day plus 1.00%.

The Company also pays quarterly commitment fees based on the unused portion of the Credit Facility. The quarterly fees for the Credit Facility can range from 0.15% of the amount of the unused portion to 0.30%, depending on the Company’s Leverage Ratio. Certain wholly-owned subsidiaries of the Company have guaranteed the obligations of the Company under the agreement. The aggregate amount of the Credit Facility may be increased by an additional $100,000 under certain conditions set forth in the agreement. The Company may issue up to $15,000 in letters of credit under the terms of the Credit Facility. The Company pays a periodic commission fee of 1.25% plus an issuance fee of 0.20% of the aggregate face amount of the outstanding letters of credit issued under the Credit Facility.

The Credit Facility contains covenants with restrictions on the ability of the Company to do transactions with affiliates other than wholly-owned subsidiaries or to incur liens or certain types of indebtedness as defined in the agreement. In the event of a default under the Credit Facility, the Company would also be restricted from paying dividends on, or repurchasing, its common stock without the approval of the lenders. Upon the occurrence of certain financial or economic events, significant corporate events, or certain other events of default constituting an event of default under the Credit Facility, all loans outstanding may be declared immediately due and payable and all commitments under the agreement may be terminated.

The Company was in compliance with all covenants of the Credit Facility during the nine months ended September 30, 2024. As of October 22, 2024, the Company had outstanding letters of credit of $4,866 under the Credit Facility. The amount of the Credit Facility that is available for general corporate purposes as of October 22, 2024 was $320,134.

Note 7. Shareholders’ Equity

Stock-Based Compensation

On April 2, 2024, the Company’s Board of Directors approved the 2024 Omnibus Equity Compensation Plan (the 2024 Plan), which was later approved by the shareholders of the Company on May 29, 2024. The 2024 Plan became effective upon receipt of the shareholders' approval on May 29, 2024 and is the successor equity compensation plan to the 2014 Equity Compensation Plan (the 2014 Plan) which was merged with and into the 2024 Plan. The 2024 Plan provides for the grant of stock options, stock units, stock awards, stock appreciation rights and other stock-based awards. No further grants will be made under the 2014 Plan, and shares with respect to all grants outstanding under the 2014 Plan will be issued or transferred under the 2024 Plan. Permitted grantees under the 2024 Plan include employees, non-employee directors and consultants who perform services for the Company. The plan is administered by the Compensation Committee of the Board of Directors of the Company. There were no grants of stock options, stock units, stock awards, stock appreciation rights or other stock-based awards made under the 2024 Plan as of June 30, 2024.

The Company has non-qualified stock options and restricted stock units (RSUs) outstanding under its equity compensation plans. The Company recognized stock-based compensation expense in its Consolidated Financial Statements in the three and nine months ended September 30, 2024 and 2023, respectively, as follows:

The vesting of the Company's RSUs are time-based and are not based on the achievement of performance targets. The majority of the Company's RSUs will vest on the third anniversary of the issuance date. All outstanding stock options have performance-based vesting provisions specific to each option grant that tie the vesting of the applicable stock options to the Company’s financial performance. The Company’s stock options vest at a rate of 50% when a specified financial vesting target is achieved, and the remaining 50% when a second, higher specified financial vesting target is achieved. Options vest as a result of achievement of the financial vesting targets. Options granted in December 2017 and thereafter include a service condition which requires a minimumtwo orfour year waiting period from the grant date along with the attainment of the applicable financial vesting target. The targets are measured annually on December 31. The amount of stock-based compensation expense recognized in the period is based upon management’s estimate of when the financial vesting targets may be achieved. Any change in management’s estimate could result in the remaining amount of stock-based compensation expense to be accelerated, spread out over a longer period, or reversed. This may cause volatility in the recognition of stock-based compensation expense in future periods and could materially affect the Company’s earnings.

The Company revised its estimate of when some vesting targets are expected to be achieved. This change in management's estimate resulted in an increase of $3,098 in stock-based compensation expense during the nine months ended September 30, 2024.

As of September 30, 2024, there was approximately $85,239 of unrecognized compensation cost remaining related to unvested employee stock options and restricted stock units that management expects will vest and is being amortized.

The Company issues new common shares associated with the exercise of stock options. The total intrinsic value of options exercised during the nine months ended September 30, 2024 was $24,053. The total options exercisable as of September 30, 2024 had an intrinsic value of $71,076. The total intrinsic value for options exercisable is calculated as the difference between the market value of the Company’s common stock as of September 30, 2024 and the weighted average exercise price of the options. The market value of the Company’s common stock as of September 30, 2024 was $69.19 as reported by the Nasdaq Stock Market, LLC. The weighted average exercise price of the options exercisable as of September 30, 2024 was $55.98. Total options that were outstanding as of September 30, 2024 were 15,343,000. Total options that were exercisable as of September 30, 2024 were 5,298,000.

Common Stock Buyback

The Company’s Board of Directors, under multiple authorizations, has authorized the repurchase of common stock on the open market or through private transactions. The Company purchased 3,730,000 shares at a total cost of $252,978 during the nine months ended September 30, 2024, which reduced the total shares outstanding of common stock. The cost of stock purchases during the period includes the cost of excise taxes applicable to stock repurchases and certain transactions that settled in the following quarter. As of September 30, 2024, the Company had approximately $29,100 of authorization remaining for the purchase of common stock under the program. On October 22, 2024, the Company's Board of Directors approved an increase in the stock repurchase program by an additional $400,000, increasing the available authorization to approximately $429,100.

The Company immediately retires its common stock when purchased. Upon retirement, the Company reduces Capital in excess of par value for the average capital per share outstanding and the remainder is charged against Retained earnings. If the Company reduces its Retained earnings to zero, any subsequent purchases of common stock will be charged entirely to Capital in excess of par value.

Cash Dividend

On May 29, 2024, the Board of Directors declared a cash dividend of $0.46 per share on the Company's common stock, which was paid on June 18, 2024, to shareholders of record on June 10, 2024. Cash dividends declared during the nine months ended September 30, 2024 and 2023 were $60,285 and $57,177, respectively.

Note 8. Accumulated Other Comprehensive Loss

The components of Accumulated other comprehensive loss, net of tax, are as follows:

Note 9. Business Segment Information

The Company’s reportable business segments are:

Private Banks – Provides outsourced investment processing and investment management platforms to banks and trust institutions, independent wealth advisers, and financial advisors worldwide;

Investment Advisors – Provides investment management and investment processing platforms to affluent investors through a network of independent registered investment advisors, financial planners and other investment professionals in the United States;

Institutional Investors – Provides Outsourced Chief Investment Officer solutions, including investment management and administrative outsourcing platforms to retirement plan sponsors, healthcare systems, higher education and other not-for-profit organizations worldwide;

Investment Managers – Provides investment operations outsourcing platforms to fund companies, banking institutions, traditional and non-traditional investment managers worldwide; and

Investments in New Businesses – Focuses on providing investment management solutions to ultra-high-net-worth families residing in the United States, hosted technology services to family offices and financial institutions; developing network and data protection services; entering new markets; and conducting other research and development activities.

The information in the following tables is derived from internal financial reporting used for corporate management purposes. There areno inter-segment revenues for the three and nine months ended September 30, 2024 and 2023. Assets are not allocated to segments for internal reporting purposes. The accounting policies of the reportable business segments are the same as those described in Note 1 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

During the first quarter 2024 and made effective January 1, 2024, the Company made a determination to reorganize some of its business segments based on how its current Chief Operating Decision Maker (CODM) manages its businesses, including with respect to resource allocation and performance assessment. As a result, one of the Company's client relationships formerly reported in the Private Banks segment will be reported in the Investment Managers segment and the Company’s family office services business, formerly reported in the Investment Managers segment, will be reported in the Investments in New Businesses segment. The business segment financial presentation was reclassified in 2024 to conform to this reorganization. Prior year amounts have been reclassified to conform to current year presentation.

The following tables highlight certain financial information about each of the business segments for the three months ended September 30, 2024 and 2023:

A reconciliation of the total operating profit reported for the business segments to income from operations in the Consolidated Statements of Operations for the three months ended September 30, 2024 and 2023 is as follows:

The following tables provide additional information for the three months ended September 30, 2024 and 2023 pertaining to the business segments:

(1) Capital expenditures include additions to property and equipment and capitalized software.

The following tables highlight certain financial information about each of business segment for the nine months ended September 30, 2024 and 2023:

A reconciliation of the total operating profit reported for the business segments to income from operations in the Consolidated Statements of Operations for the nine months ended September 30, 2024 and 2023:

The following tables provide additional information for the nine months ended September 30, 2024 and 2023:

(2) Capital expenditures include additions to property and equipment and capitalized software.

Note 10. Income Taxes

The gross liability for unrecognized tax benefits at September 30, 2024 and December 31, 2023 was $17,766 and $15,532, respectively, exclusive of interest and penalties, of which $17,604 and $14,878 would affect the effective tax rate if the Company were to recognize the tax benefit.

The Company classifies interest and penalties on unrecognized tax benefits as income tax expense. As of September 30, 2024 and December 31, 2023, the combined amount of accrued interest and penalties related to tax positions taken on tax returns was $2,232 and $1,385, respectively.

The effective income tax rate for the three and nine months ended September 30, 2024 and 2023 differs from the federal income tax statutory rate due to the following:

The Company files income tax returns in the United States on a consolidated basis and in many U.S. state and foreign jurisdictions. The Company is subject to examination of income tax returns by the Internal Revenue Service (IRS) and other domestic and foreign tax authorities. The Company is no longer subject to U.S. federal income tax examination for years before 2020 and is no longer subject to state, local or foreign income tax examinations by authorities for years before 2018.

The Company estimates it will recognize $3,713 of gross unrecognized tax benefits. This amount is expected to be paid within one year or to be removed at the expiration of the statute of limitations and resolution of income tax audits and is netted against the current payable account. These unrecognized tax benefits are related to tax positions taken on certain federal, state, and foreign tax returns. However, the timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. While it is reasonably possible that some issues under examination could be resolved in the next twelve months, based upon the current facts and circumstances, the Company cannot reasonably estimate the timing of such resolution or the total range of potential changes as it relates to the current unrecognized tax benefits that are recorded as part of the Company’s financial statements.

The Organization for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar Two). Certain aspects of Pillar Two are effective January 1, 2024 and other aspects are effective January 1, 2025. While it is uncertain whether the U.S. will enact legislation to adopt Pillar Two, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar Two. The Company has determined Pillar Two will not have a material impact on the Company's effective tax rate, consolidated results of operation, financial position, or cash flows.

Note 11. Commitments and Contingencies

In the ordinary course of business, the Company from time to time enters into contracts containing indemnification obligations of the Company. These obligations may require the Company to make payments to another party upon the occurrence of certain events including the failure by the Company to meet its performance obligations under the contract. These contractual indemnification provisions are often standard contractual terms of the nature customarily found in the type of contracts entered into by the Company. In many cases, there are no stated or notional amounts included in the indemnification provisions. There are no amounts recognized on the Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 related to these indemnifications.

Rubicon Wealth Management

Prior to the relationship termination described in the following sentence, SEI Private Trust Company (SPTC), a wholly-owned operating subsidiary of SEI, held custody accounts for the end-clients of Rubicon Wealth Management LLC, an SPTC investment advisor client (Rubicon). On May 1, 2024, SPTC terminated its client relationship with Rubicon in light of the events associated with the Allegation (as defined below), and notified Rubicon clients with accounts at SPTC that they were required to transfer their accounts to other custodians.

Beginning on July 10, 2024, nine of Rubicon’s clients that had custodial accounts at SPTC filed state civil actions for fraud in the Court of Common Pleas of Montgomery County, Pennsylvania against Rubicon, its founder, Scott Mason, Mr. Mason’s wife, Lynne Mason, and Orchard Park Real Estate Holdings LLC (Orchard Park), a business owned by the Masons. The fraud allegation (the Allegation) is based on the claim that Mr. Mason used Rubicon client funds to invest in Orchard Park, an entity allegedly formed and controlled by Mr. Mason, and that all such invested funds were subsequently withdrawn from Orchard Park by the Masons and were used for their own, extensive personal expenses. It has been reported that the Securities and Exchange Commission and the Federal Bureau of Investigation are currently investigating Mr. Mason and his wife. The Company is also aware of at leasttwo other cases filed in other jurisdictions against Rubicon and/or the Masons and Orchard Park, and there may be additional cases filed against Rubicon and/or the Masons of which the Company is unaware.

As of October 17, 2024, eight separate, but related, suits have been filed against SPTC in its capacity as custodian for the Rubicon accounts of the plaintiffs. These actions were also filed in the Court of Common Pleas of Montgomery County, Pennsylvania and are: Star Sitron vs. SEI Private Trust Company, Case No. 2024-17132 (Sitron); Charles Murray vs. SEI Private Trust Company, Case No. 2024-18391 (Murray); James A. Byrne & Sharon Byrne vs. SEI Private Trust Company, Case No. 2024-20612; Melody Pettinelli & Melody Pettinelli as Trustee of the Donald Pettinelli Trust dated 11/7/1996 vs. SEI Private Trust Company, Case. 2024-21377; Norman Love vs. SEI Private Trust Company, Case No. 2024-21361; Stephen Red & Carla Red vs. SEI Private Trust Company, Case No. 2024-21902; Edward A. Tettemer & Lyn K. Tettemer vs. SEI Private Trust Company, Case No. 2024-21827; and Jonathan Klein & Sara Klein vs. SEI Private Trust Company, Case No. 2024- 23294 (collectively, the Rubicon Actions). Based on the complaints that have thus far been filed in the Rubicon Actions, these actions appear to be based generally on similar theories that include alleged breach of contract, breach of fiduciary duty, negligence, and breach of state consumer protection laws by SPTC in connection with certain transfers of Plaintiffs’ assets from SPTC custodial accounts to Orchard Park bank accounts. SPTC has been served with complaints intwo of the Rubicon Actions, Sitron and Murray. In the remainingsix Rubicon Actions, the plaintiffs have commenced suit but have not filed their formal complaints. The Sitron and Murray cases are both in the early stages, with initial motion practice and discovery now occurring.

On August 8, 2024, SPTC filed preliminary objections to the plaintiff’s complaint in Sitron, which remain pending. On September 12, 2024 the Sitron court issued an initial case management order requiring, among other things, fact discovery to be completed within approximately 18 months and dispositive motions to be filed within 21 months from the commencement of the action. On October 16, 2024, SPTC filed preliminary objections to the plaintiff’s claims in Murray, which also remain pending. On October 7, 2024, the Murray court issued an initial case management order requiring, among other things, fact discovery to be completed within nine months and dispositive motions to be filed within 12 months of commencement of the action.

While the Rubicon Actions are in their infancy and the ultimate outcomes of these litigations remain uncertain, SEI and SPTC intend to defend each of the Rubicon Actions. Currently, SPTC estimates that the aggregate amount of Rubicon client assets transferred at the direction of Mr. Mason from SPTC custodial accounts to Orchard Park bank accounts is approximately $15,000. In the event that SPTC is unsuccessful in its defense of the Rubicon Actions, SEI does not currently believe that the losses associated with such unsuccessful defense would exceed the approximately $15,000 of Rubicon client assets that Mr. Mason directed to be transferred to Orchard Park.

United Kingdom Financial Conduct Authority Supervisory Review of SEI Investments (Europe) Limited

On July 31, 2024, SEI Investments (Europe) Limited (SIEL), an indirectly, wholly-owned operating subsidiary of SEI, received a final requirement notice from the Financial Conduct Authority of the United Kingdom (the FCA) under section 166(3)(a) of the Financial Services and Markets Act 2000 (FSMA), requiring SIEL to engage a “Skilled Person” to undertake a two-stage review of SIEL’s governance arrangements and control environment. In the first stage, the Skilled Person will provide SIEL and the FCA with a report setting out the Skilled Person’s view of the effectiveness of the control environment and governance arrangements with respect to key risks, as well as the Skilled Person’s recommendations where necessary to address any identified weaknesses (the Section 166 Report). In the second stage, the Skilled Person will provide an independent view of the quality and completeness of the remediation carried out by SIEL to address any findings from the initial stage and any self-identified weaknesses, including a view on SIEL’s compliance with relevant regulations.

The appointment of a Skilled Person is one of the regulatory tools used by the FCA to supervise and monitor firms it regulates. A Skilled Person is an independent third party expert with the relevant knowledge and experience to undertake a review as described above. The FCA may use the Section 166 Report and any associated information or documents provided by the Skilled Person in connection with the exercise of any of its statutory functions including its supervisory and enforcement powers.

In August 2024, SIEL, with the approval of FCA, appointed the firm of Grant Thornton to act as the Skilled Person. The first stage of the Section 166 Report is expected to be completed in early December 2024. Grant Thornton has begun its fact-finding process. SIEL looks forward to receiving the views of the Skilled Person in the Section 166 Report and is committed to working with the FCA and Grant Thornton to implement any recommendations for its control environment or governance arrangements, as appropriate. Until SIEL receives the Section 166 Report, neither SIEL nor SEI is reasonably able to provide an estimate of the costs or consequences that may be associated with the Section 166 requirement notice.

Other Matters

The Company and certain of its subsidiaries are party to various other examinations, investigations, actions and claims arising in the normal course of business that the Company does not believe are material. The Company believes that the ultimate resolution of these matters will not have a material adverse effect on the Company's financial position or the manner in which the Company conducts its business. Currently, the Company does not believe the amount of losses associated with these matters can be estimated. While the Company does not believe that the amount of such losses will, when liquidated or estimable, be material to its financial position, the assumptions may be incorrect and any such loss could have a material adverse effect on the Company's results of operations or the manner in which the Company conducts its business in the period(s) during which the underlying matters are resolved.

Note 12. Goodwill and Intangible Assets

The changes in the carrying amount of the Company's goodwill by segment are as follows:

The reclassification of the Company's goodwill by segment during the nine months ended September 30, 2024 reflects the relative fair value allocation of the goodwill related to the businesses that were reclassified into the new segment (See Note 9).

In November 2023, the Company's wholly-owned operating subsidiary in the United Kingdom, SIEL, acquired all of the outstanding equity of XPS Pensions (Nexus) Limited, principal employer and scheme funder of the National Pensions Trust (NPT), from its parent company, XPS Pensions Group PLC (XPS). The total purchase price for XPS Pensions (Nexus) Limited included a contingent consideration payable to the sellers subject to the achievement of certain post-closing performance measurements determined during intervals occurring withintwo years immediately following the closing date. During the nine months ended September 30, 2024, the Company made an adjustment of $1,547 which reduced the fair value of the contingent consideration. The fair value adjustment to the contingent consideration is reflected in Facilities, supplies and other costs on the Consolidated Statement of Operations. As of September 30, 2024, the fair value of the contingent consideration of $2,611 is included in Other long-term liabilities on the accompanying Balance Sheet.

The Company recognized $10,066 and $9,178 of amortization expense related to acquired intangible assets during the nine months ended September 30, 2024 and 2023, respectively.

Note 13. Revenues from Contracts with Customers

The Company’s principal sources of revenues are: (1) asset management, administration and distribution fees primarily earned based upon a contractual percentage of net assets under management or administration; and (2) information processing and software servicing fees that are either recurring and primarily earned based upon the number of trust accounts being serviced or a percentage of the market value of the clients' assets processed on the Company's platforms, or non-recurring and based upon project-oriented contractual agreements related to client implementations.

Disaggregation of Revenue

The following tables provide additional information pertaining to our revenues disaggregated by major product line and primary geographic market based on the location of the use of the products or services for each of the business segments for the three months ended September 30, 2024 and 2023:

The following tables provide additional information pertaining to our revenues disaggregated by major product line and primary geographic market based on the location of the use of the products or services for each of the Company’s business segments for the nine months ended September 30, 2024 and 2023:

(1) Professional services fees of the Private Banks segment includes a one-time early contractual buyout fee of $10,457 recorded during the nine months ended September 30, 2023 from an investment processing client acquired by an existing client.

Investment management fees from pooled investment products - Revenues associated with clients' assets invested in Company-sponsored pooled investment products. Contractual fees are stated as a percentage of the market value of assets under management and collected on a monthly basis. Revenues are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.

Investment management fees from investment management agreements - Revenues based on assets of clients of the Institutional Investors segment primarily invested in Company-sponsored products. Each client is charged an investment management fee that is stated as a percentage of the market value of all assets under management. The client is billed directly on a quarterly basis. Revenues are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.

Revenues associated with the separately managed account program offered through registered investment advisors located throughout the United States. The contractual fee is stated as a percentage of the market value of all assets invested in the separately managed account and collected on a quarterly basis. Revenues are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.

Investment operations fees - Revenues earned from accounting and administrative services, distribution support services and regulatory and compliance services to investment management firms and family offices. The Company contracts directly with the investment management firm or family office. The contractual fees are stated as a percentage of net assets under administration and billed when asset valuations are finalized. Also includes income from client cash balances held in the FDIC-insured accounts through the SEI Integrated Cash program. Revenues are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.

Investment processing fees - Platform as a Service - Revenues associated with clients that outsource their entire investment operation and back-office processing functions. Through the use of the Company's proprietary platforms, the Company assumes all back-office investment processing services including investment processing, custody and safekeeping of assets, income collections, securities settlement and other related trust activities. The contractual fee is based on a monthly fee plus additional fees determined on a per-account or per-transaction basis. Contractual fees can also be stated as a percentage of the value of assets processed on the Company's platforms each month as long as the fee is in excess of a monthly contractual minimum. The client is billed directly on a monthly basis. Revenues are recognized in Information processing and software servicing fees on the accompanying Consolidated Statements of Operations.

Revenues associated with clients of the mutual fund trading solution are fees recognized for shareholder services and related services through the use of the Company's proprietary platform or through third-party vendor agreements. Contractual fees are stated as a percentage of the value of total assets or positions processed on the Company's platform or subject to third-party vendor agreements each month. Fees are billed and collected on a monthly and quarterly basis. These revenues were previously classified under Account fees and other in 2023 and have been reclassified to conform to the current year presentation.

Investment processing fees - Software as a Service - Revenues associated with clients of the Private Banks segment for application software services. Clients retain responsibility for all investment operations, client administration and other back-office trust operations. The contractual fee is based on a monthly fee plus additional fees determined on a per-account or per-transaction basis. The client is billed directly on a monthly basis.

Revenues associated with clients of the Investments in New Businesses segment processed on the Archway Platform SM are fees for hosted technology services to family offices and financial institutions. The Archway Platform is an integrated technology platform used for investment, operations, accounting and client reporting by these institutions. The contractual fee is based on a monthly subscription fee to access the Archway Platform along with additional fees on a per transaction basis.

Revenues associated with clients of the Institutional Investors segment processed on the SEI Novus SM portfolio intelligence tool are fees for data management, performance measurement, reporting, and risk analytics. The contractual fee is based on a fixed fee to access SEI Novus and includes fees for integration of historical fund data and custom reporting.

All revenues from investment processing fees are recognized in Information processing and software servicing fees on the accompanying Consolidated Statements of Operations.

Professional services fees - Revenues associated with the business services migration for investment processing clients of the Private Banks segment and investment operations clients of the Investment Managers segment. In addition, Professional services include other services such as business transformation consulting. Typically fees are stated as a contractual fixed fee. The client is billed directly and fees are collected according to the terms of the agreement.

Account fees and other - Revenues associated with custody account servicing, account terminations, reimbursements received for out-of-pocket expenses, and other fees for the provision of ancillary services.

Note 14. Sale of Property

On July 8, 2024, the Company sold a condominium located in New York, New York. The Company recognized a net pre-tax gain of $8,151 after associated costs and expenses during the third quarter 2024 as a result of the sale. The gain from the sale is reflected in Other income on the accompanying Consolidated Statement of Operations.