Q4 2019 Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
[music].
Ladies and gentlemen, thank you free standing by welcome to the S S and see technologies fourth quarter and full year 2019 earnings call.
At this time all participants are in listen only mode. After the speakers presentation. There will be a question answer session.
Ask a question during the session that you'll need to press star one on your telephone. Please be advised that today's conference is being recorded if your quarter any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today Justine Stone. Thank you. Please go ahead.
Hi, everyone welcome and thank you for joining us for Q4 in full year 2019 earnings call I'm Justine Stone Investor relations for assessing seat knowledge is.
With me today is no stone, chairman and Chief Executive Officer, Panwar, President and Chief operating officer, and Patrick that onto our Chief Financial Officer before we get started we need to review the Safe Harbor statement.
Please note that various remarks, we make today about future expectations plans and prospects, including the financial outlook. We provide constitute forward looking statements for purposes of the safe Harbor provisions under the private Security Litigation Reform Act like 95 actual results may differ materially from those indicated by these forward looking statements as a result varied.
Certain factors, including those discussed in the risk factor section of our most recent annual report on form 10-K, which is on file with the FTC and can also be accessed on our website.
These forward looking statements represent our expectations only as of today February 12, 2020, well the company may elect to update these forward looking statement. It specifically disclaims any obligation to do so.
During today's call, we'll be referring to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to comparable GAAP financial measures is included in today's earnings release, which is located in the Investor Relations section of our website at Www Dot assets. These tax dotcom.
I'd also like to request about when we get to the question and answer section of the call. Please limit yourself to one question and one follow up.
Thank you and I'll now turn the call over to Bell [noise].
Thanks, everyone for joining us today, our results for the fourth quarter a billion $212 million into just the revenue and one dollar an eight cents to adjusted diluted earnings per share.
Our adjusted consolidated EBITDA was 490.5 million in our adjusted consolidated EBITDA margin was 40.5% up 180 basis points from Q3.
Q4 organic revenue growth was 4.7%.
The beat was.
Partially driven by revenue growth in our software businesses and strong growth in our fund administration business.
Thousand the 19 net cash from operating activities came in very strong at 573 million for the fourth quarter.
And a billion 328.3 million for the year.
2019, adjusted net income was 1 billion pin point, ninemillion, giving us 131% cash conversion rate.
We paid down 1.123 billion in pet last year.
And over 2 billion.
Since the April 18.
The S.T. acquisition [noise].
Our secured net leverage ratio was 2.7 and our total net leverage ratio was 3.77.
In January this year, we repriced our secured credit facilities from LIBOR, plus 225 to why were plus 175.
We expect to save over 25 million annually and interest costs.
We closed on the algorithm that acquisition, which brings a host of software and services covering market risk credit risk balance sheet risk asset management risk and insurance risk. These solutions cater to the existing FMC customer base.
As well as significantly extend assessment sees reach into financial risk management.
Algorithmic has developed sophisticated wave of calculating a managed <unk> large amounts of data.
At scale.
Additionally, I'd written next offers a variety of micro services, which we can embed into assistance. These reporting induce furthering further enabling our clients now I will turn it over to Rahul.
Thanks Bill.
We had a good quarter in revenue growth cash flow generation and exited the air year with over 40% EBITDA margins advent institutional investment management Intralinks in essence equal Bob all contributed nicely to overall strong results across our business.
We remain focused on innovation to constantly deliver increased functionality to our customers and differentiate our product and services.
Our asset management solutions business developed advanced bank verification, which enhances accounts security and we expect the majority of our asset management client base to adopt this capability throughout 2020.
And help we piloted abroad waste and abuse the old used to identify and prevent the payment of suspicious claims is further diversifies, our health care offering and expands our target market.
Our Intralinks business released new deal marketing why side, due diligence and best provision platforms as well as frictionless deal prep.
A frictionless deal prep allows our customers to easily spin off virtual data rooms, without time consuming contracts or license commitments, we look forward to delivering significant enhancements across our products. We then 20 funny to help us drive revenue growth.
Now all mentioned some key deals for Q4 2019.
Mobile asset manager based in Boston show, that's a sense. These full suite a hedge fund services, they were particularly impressed with our investor and Investor vision products and existing private equity clients, which from a big for accounting for him to asses since the for tax services.
An 8 billion dollar UK based family office chose a suite of advent products to satisfy their portfolio management and trading needs.
The European fund administrator and existing client greatly expanded their commitment to advent Geneva.
And asset manager with four and a half billion in assets chose to partner with assets. Since he has to build out asset management functionality and as eclipse a health plan out a new Mexico Ceausescus since the health BPL services.
50 billion, plus an asset asset manager and advent client since 1992 expanded their moxy license for additional seats and existing UK based client expanded their use of our work full product AWB.
We'll now turn it over to Patrick the run through the financials.
Oh.
Results for the fourth quarter 2019 were GAAP revenues of 1 billion 203.5 million GAAP net income of 141.6 million in diluted EPS of 54 cents.
Adjusted revenue was 1 billion 212.2 million excluding the impact.
Adoption of the revenue.
Six.
Acquired revenue adjustment for DST Intralinks.
Thanks acquisitions.
We had a strong quarter adjusted revenue was up 7%.
Adjusted operating income increased 11.5% and adjusted diluted EPS was a dollar.
Team for 70% increase over the fourth quarter 2018.
Adjusted revenue increased 79.4 million or 7% over Q4 2018.
The acquisitions of Intralinks.
That's track and algorithmic contributed 48.1 million in the quarter.
Foreign exchange had an unfavorable impact a 1.4.
0.1% in the quarter.
Organic growth on a constant currency basis was four point.
<unk> per se.
Driven by strength in institutional investment management.
It is and the advent business.
Adjusted operating income for the fourth quarter was 470 million, an increase or 48.5 million or 11.5%.
Fourth quarter of 2018.
Foreign exchange had a negative impact of point 4 million on expenses in the quarter.
Adjusted operating margins improved from 37.2% of the fourth quarter of 2018.
38.8% fourth quarter 2000.
Adjusted consolidated EBITDA as defined and.
Three into earnings release was 490.5 million.
40.5% of adjusted revenue an increase of 10.3%.
Q4 2018.
Net interest expense for the quarter was 145 million in.
It includes 15.1 million of non cash amortize financing costs.
Oh I D.
<unk> expense deferred financing costs associated with the pay off of our B one term loan.
The average for interest rate in the quarter for the credit facilities, including the senior notes was 4.53% compared to 4.77% in the fourth quarter 2018.
Reported a GAAP tax provision of 19.3 million or 12% or pre tax income.
Full year, the GAAP tax provision was 93.2 million or 17.5%.
Adjusted net income was 284.6 million adjusted EPS.
It was a dollar rate.
Adjusted net income excludes 162.2 million of amortization of intangible assets.
16.7 billion of stock based compensation.
15.1 million of amortization of non cash amortize financing costs.
<unk>.
11.2 billion of purchase accounting adjustment, mostly deferred revenue adjustment and depreciation related to the revaluation.
Yes.
For acquisitions.
6.7 million for revenue adjustments related to adoption of.
Standard six so six and 13.3 million non operating costs.
Putting 7 million of foreign exchange impact.
3.8 million and legal settlements and 4.5 million severance costs related to staff reductions.
This was offset by 4.5 million gain a mark to market.
I just thoughts on investments.
The effective tax rate, we use for adjusted net income was 26%.
Diluted shares increased 3.4% on the fourth quarter, mostly due to the shares issued for the Intralinks acquisition in 2018 and option issuance.
And this was offset by the third quarter 2019 share repurchases.
On the balance sheet and cash flow as of December 31st were approximately 153.
Cash cash equivalents.
And approximately 7.2 million of gross debt.
Net debt position of 7.1 billion.
Operating cash flow for the 12 month.
Just 1 billion 328.3 million.
It's 688.2 million or 107% increase compared to the same period in 2018.
Highlights for the 12 months are we paid that debt.
Of 1 billion 143.8 million.
And that brings the total to 2 billion 46.6 million of debt paid since we Didnt DST acquisition.
For the year, we paid 353.2 million of cash interest compared to 268.1 million.
It's an 18.
Cash taxes for 2019, we paid 222.7 million compared to 143.4 million of the same period last year.
Our accounts receivable DSL was 49.7 days.
As of December compared to 51.2 days as of September 2019.
We used 130.4 million a cash or 2.8%.
Robert Hill adjusted revenue.
Mostly for capitalized software tea and leasehold improvements.
For the year, we declared a paid 107.7 million in common stock dividends compared to 70.9 billion last year.
And we received option exercise proceeds of 125.7 million compared to 84.9 million in 2018.
Treasury stock buybacks, we may treasury stock buybacks of 60.3 million or 1.3 million shares.
Average price of $45 third quarter 2019.
Tacked on to lose share and according to 1.3 million for the full quarter.
Fourth quarter.
Our LTM consolidated EBITDA, which is used for the covenant compliance was 1 billion 877.5 million.
As of December and includes 49.6 million of acquired EBITDA in cost savings.
Related to the acquisition.
Based on that at approximately 7.1 million, our total leverage ratio.
3.7, sometimes in the secured was 2.7 times as of December.
For outlook for the year for the first.
As for the fourth first quarter of 2020.
Current expectation for the first quarter is adjusted revenue in the range of 1 billion 150 billion.
1.109 billion.
Adjusted net income of 248.5 million.
264.5 million diluted shares from the range.
267.5 to 268.5 million.
We expect adjusted tax rate to continue at 26%.
For the full year 2020 or current expectation this adjusted revenue in the range of.
4.692 billion.
The 4.852 billion adjusted net income.
1 billion.
84.5 million to 1 billion 139.5 million.
Diluted shares in the range of 270 273 million.
Organic.
Growth for the year as expected to be in the range of 0.5% to 3.9% for the full year.
And we fully for the full year, we continue to expected adjusted tax rate to be 26% and cash from operating activities to be in the range of 1.220 billion.
The 1 billion 260.
Yeah and capital expenditures to be in a range of 2.93, 0.1% of adjusted revenues.
I'll turn it over to Bill for final call.
Thanks, Patrick 2020 is off to a good start just yesterday, we announced the dairies management and alternatives clients with 144 billion an asset has extended its outsourcing relationship with that doesn't see.
Originally slated to provide fund administration, the Middle office services for a portion of Aries business.
Just to see now supports areas across credit private equity and real estate.
There is an important client.
Correct, that's a C and we remain focused on delivering innovation and expertise to help areas fulfill its strategic objectives.
We have also entered into a multi year renewal agreement was humana one of assessment see health flagship clients.
This agreement extends our relationship with the health care provider to engage us to see how does the technology partner beyond pharmacy claims processing, we will deliver a range of digital technologies to support Humana strategy of providing them integrated health care approach simplifying the health care experience and reducing healthcare expenses.
[laughter] see health is March is marching to a different drummer and we appreciate humana's recognition.
Now I'll open it up for questions.
As a reminder to ask a question you need to press star one on your telephone to withdraw your question press the pound or husky.
Please limit your questions to one question and one follow up to allow other participants time for questions. Please standby will be compiled documented roster.
Your first question comes from Brad Zelnick with Credit Suisse. Your line is open.
Fantastic. Thank you so much in congrats on a strong finish the year guidance. My question first is just on pricing last quarter, you talked about being more methodical about price increases can you give us an update on your initiatives across the businesses and and the timeline for when these changes like might actually be.
Pete you take up and taking effect in and what are the opportunities.
Across the portfolio, which businesses which seem.
More and more ready to take price increases.
So so Brad this is a whole just.
Give you an update we've been working pretty methodically through that price process, I'd say, probably for two months or so now and we expect to continue working on it through the end the quarter and maybe into April.
In our software businesses advent and institutional investment management et cetera, we already had a reasonably good process for.
Contractual price increases.
So while we're taking a look at those businesses I think the biggest opportunity for US is in some of our outsourcing businesses, where we haven't in the past been as diligence. So that includes fund services and others.
And we're working through that with customers and thus far you know they've been pretty receptive to that process and it's going well.
Thanks to the Colorado, and just maybe a follow up on.
Ah software enabled services versus revenue that appears in the license maintenance and other line.
I think just the mix of what we were modeling and perhaps others came in a little bit differently than expected you just remind us Patrick maybe the rhythm of the business and as we model. These lines going forward, how we should think about where where does value in the revenue lines of showing up.
Well, Brian I think you know when you look at and our business you know I would say that the software enabled services businesses.
Is by far our largest business and and that that is primarily.
Hey.
Once we pay business.
And I think it's it's a almost all recurring revenue.
And then obviously in the and the software businesses more and more of that is becoming term licenses.
And then perpetual licenses, so that has a much higher recurring basis and that aside from maintenance.
And I'm not that business still has some ended the quarter.
Types of types of accelerations.
Okay.
Thanks, so much nice job guys.
Your next question comes from Rayna Kumar with Evercore ISI. Your line is open.
Good evening. Thanks for taking my question you you called out pretty large rain for the organic growth for 20, 20% to 0.5% of 3.9% what factors have to be in place to get due to the high end versus the low end and then secondly, if you can just call lot your expectations for the first quarter.
Organic growth.
Yes, I think ramp as far as the spread its you know we're getting into larger deals and and I think that you know as we close these deals I think you know the organic revenue growth goes up.
But we you know we're not we're not trying to a two oh.
Go ahead of ourselves.
And we're trying to make sure that that are or Rob our guidance to you is is.
As both Directionally the right way and then also from a magnitude standpoint, we're giving you you know how we look at.
And then I think the.
The first quarter, Patrick do you have that right in front of you maybe.
No.
The first quarter is very similar to the full year on the low end its 0.4% increase.
And on the high end, it's 3.8% increase.
Great Thats very helpful and just as a follow up what are your expectations for topline growth for alternatives business and D. S. T and software. So we can have a you know good breakdown of the drivers for the organic growth.
Well I think rain or what we what we have traditionally thought is that a.
One of Ministration business is gonna be mid single digits. The the DSD business is gonna be flat too.
Plus one to minus one and then spin or car.
Our funds are software business.
It will probably range somewhere in the three to five range.
Thank you.
Your next question comes from Andrew Smith with Citi. Your line is open.
Hi, guys. Thanks for taking my questions first question on D.S.T. you guys meet some sales change there last year, well DST and then across the business as a whole, but wondering if you talk about just any change in the pipeline you've seen or just generally how the pipeline shaping up across.
Cross Health care financial Yeah financial institution segment or things like that any color on you know that the impact as the sales changes have have had would be helpful.
Yeah, I you know I would say again you know.
I think our biggest acquisition prior to.
Prior to be as to DST was globeop and full BOP had about 2500 people.
And DST had 16500, so no we're not finished.
So there's still a lot of work to do but we're making progress and I think that.
I'd tell you know we worked hard on on Humana, we spent.
Hundreds if not thousands of hours on working with Humana, and that's pretty reward and this rewarding to see that they signed up with us and we think we're going to have a larger and larger.
So relationship with them and they're very demanding which which helps our business.
So we have some pretty high hopes in that in the health care space I guess I think there's still some no some fundamental things going on in financial services and mutual fund industry as far as you know past active to passive and and a sub accounting versus coal.
For mutual fund accounting, but you know again, where we're innovating, we're we're bringing new people into it we're adding.
Apps and other things that we think are going to help us over the long term.
And over the short to medium term.
No, we're making a whole lot of money.
Got it that makes sense and then just as my follow up and you guys did good job delevering in the fourth quarter and quickly reaching targeted debt levels with your cash flow. This year in reaching targeted debt levels can you talk a little bit without just priorities for use of cash and then just any.
Comments about around the eminent M&A pipeline weather.
You know there was any sizable deals out there you think or can be realized or just just the anything of that nature would be helpful.
No I mean, we have on we'd have a strong pipeline on acquisition prospects I wouldn't say, we have anything of of you know a billion dollar size or or or such but we have you know several.
100 million range in and out you know similar to two algorithm mix.
And I would say that that you know we're active when we try to be disciplined in that process and and that's going pretty well for us.
And I think that.
But.
We will probably execute on on a couple you know you know in the first couple of quarters.
Yes.
Yeah, I'm sorry, the other stuff about using our cash is that.
I think in the first quarter, we maybe have already paid down another 100 million or so.
And and you know we haven't so much cash flow that share buybacks look.
Creasing, we are attractive when we make this much money and and and we have the this much value we think in our share price. So.
I think that that's something that we might use some more of that 500 million dollar authorization, we got a few quarters ago, but again, we're very disciplined about it we want to make sure that.
The financially we remain very very strong.
Understood. Thank you guys.
Your next question comes from Alex Kramm with <unk>. Your line is open.
Hey, good evening, just coming back to the organic growth outlook for a second here I'm not to put you too much on the spot Bill, but I think last quarter, you made a comment that you're hoping to get back to 3% to 5% 2020 already it was probably more of it off the cuff comment but.
So now that we have like more exact guidance, maybe bigger picture. What do you think the biggest difference are now versus what you're thinking I mean, obviously doesn't better into fourth quarter is it a little bit of a base effect door by some business is still doing a little bit worse than you. Originally I thought maybe 90 days ago.
Yeah, you don't think Alex is is that you know some of the stuff came in in Q4 that that we might have thought what's going to come in in Q1.
In this you know the accounting in the stuff is is the bodies and dean admit.
Right. So when you look at six so six and some of these other thing you know to be able to truly predict for you when somebody goes from a three year deal to a five year deal and all the sudden you're you're recognizing two or three times as much money is what you were expecting to to recognize it becomes you know a little more.
A little more of a you know I guess.
And so I think we have plenty of stuff in the pipeline I think there's all kinds of stuff and that's a little bit. Unlike last year. You know if you start one of the thing that they're not closing.
Oh, you start wanted to give you got you guys and gals more information and then they start closing and then it looks like whipsaw you know so I think that that that more of the nature of the businesses that were in the size of the.
Of the deals that we have opportunities olefins and then you know that the the.
The impact of a winning.
On on on our financial statements is.
Yes.
Pretty unique in pretty impressive.
Okay fair enough and very quick one fall for Patrick I guess can you just how much interest expense I you are building into your budget and does that contemplate what does your guidance actually contemplates further debt pay down from here or is it as off today.
[noise], though when.
Well, we provide our guide this week, we just assume that all free cash flow.
It's going to go to pay down debt.
Okay, that's what's assumed in our guys.
And then on on interest expense.
We think it's a.
Plus or minus a range of 290 million.
Oh for the here.
Okay. That's all I want to thank you.
Asset base.
Your next question comes from surrender thing with Jefferies. Your line is open.
Good afternoon.
Congratulations on on a strong for Q here gentlemen.
I'd like to start off on a question about.
The margin profile or your expenses can you provide a little bit of color in terms of how we should be thinking about the trajectory forward or what the current baseline is.
As I look back over the couple of quarters it seems like you're.
Ability to generate additional cost savings continues to surpass expectations and so how should we think about margins and maybe margin improvement in the your head.
Well we.
We prefer to.
To outperform than to underperform. So you know that that is consistent with our objectives.
The big place now right and so there's there's lots of ways to manage costs and and and keep people aware of things that we can do ana and a bit more efficient basis, we're still a very high margin place than we don't you know, we don't cost Nichols around like their manhole covers but but we do pay attention to expire.
Susan and we have a solid management team and Patrick has got a solid.
Finance and accounting team that pays attention and so I think that we will continue to.
To get more efficient continue to get more productive and I think that will translate into.
Additional cost savings.
That's helpful. And then I can think about the the year ahead any color you can provide I'm just kind of how as an intralinks ended 2019 versus 2018 in kind of how you're thinking about them in the your head at this point.
Well I think in general.
We have new management and each one of those businesses and and I would say that right now the intralinks business is quite strongly brought out a number of new products and and Bob Traci and can discount to you're doing a great job and my caught neuro <unk> and this is also doing a great job. He's got some some headwind still about.
About how much volatility, we're having in the equity markets and.
The more of the merrier for is as far as that is concerned and so no. But we have eclipse is gaining momentum we've got a talented team and and I think overall those will prove to have been a wise decision.
Thank you I'll get back into queue for follow.
Your next question comes from Chris been Love with Piper Sandler Your line is open.
Hi, guys. Thanks for taking my question. So there's definitely a strong quarter for for revenues relative to your Fourq uniting guidance can you talk about some of the drivers you saw there I heard your comments earlier bill about strains in the software business isn't funny midstream and finding ministration, but is there any other detail that you can provide.
Well I I again, I think I think you know that though we signed a couple of multiple your deals with a six so six you know your recommending record recognizing $10 million than you know other things of that nature that are coming into the business and and.
You know you're gonna have some.
Strengths in certain quarters, and you're going to have a little less strength than other quarters than reality is the business was the same in both quarters. You know it's just a question of visit to the contracts signed on June 20, Eightth or July 3rd.
So I think that do you know before it wasn't quite as much of a swing.
But but it's pretty pretty dramatic now.
Your next question comes from Dan Perlin with RBC capital markets. Your line is open.
Thanks, and congrats on ending the year. So strong that question I had is around this license and maintenance line I mean, it was it was a big quarter I'm, just trying to make sure I understand kind of whats in it. So you did 48 million of acquired revenue how much is there a big chunk of that the falls into that Phil.
Naturally is the first I'm trying to understand kind of what's what's embedded in that a significant step up and I understand that the whole cadence idea about one quarter, starting the other but it's a and it's pretty dramatic.
Well again, we won some pretty big deals that that we've got to recognize a pretty significant money in the fourth quarter.
The third and fourth quarters and that's that's been something that has has driven that line and.
And I think that we have increasing numbers of products that we're selling that it's giving us opportunities to have.
Pretty.
Dramatic changes.
Full either dramatic to the upside, but they won't always be it's just that's not the nature of how this all operates but you know were bigger and bigger and were more extended with better people all over the world and I think we're going to have.
We're going to have a really good 2020.
Yes.
How but acquisitions.
Yes in that line I think it was about $3.8 million of algorithm X and that.
Maintenance and term license line and the rest of it is all.
Large multiyear contracts we side.
That's all.
So to that same extent, thus extending on that theme for a second you know you have talked about.
When you're looking at opportunities they are more sizable than maybe they have been in the past this quarter, obviously, which would you just described clearly indicates that you're winning those.
So how do we have we think about it to see going forward when you're talking about winning these deals I mean in the past they were smaller now there clearly much much larger.
Does that mean, it's going to be the duration between these are gonna be bigger or longer it is going to be that much more lumpy is going to skew more towards these license now do you think I'm just trying to get a handle hobby and we frame what 2020 it looks like.
Thank you.
Yeah, I mean, I think that there's you know you have to you have to stay close to the market you have to be willing to present to to that market. You know the the way in which you once to consume your products and services.
No. Some it used to be that big debate between perpetual in term now it's a big debate between.
Between.
Uh huh.
Full outsourcing.
Some outsourcing some hosting.
Your contracts you know some are two years some four years summer one year's summer three years, so over 10 years.
So Dan depending on on what that mix is in any particular quarter is what's going to really determine.
How big of amplitude you're going to have in the change from quarter to quarter. So you know I don't think it's that much different. Although you know we're you know we're bidding on.
400 million dollar a year stuff right in and again, it's not we're not.
Right at the precipice, signing one of those but we're not going on the door it enough of them and we're getting better each time and and I think that you know, we manage our business pretty well when I would guess that the next five years will look like the last five years.
Thank you.
Your next question comes from Tandon with Needham Your line is open.
Well. Thank you a good evening, a bill Rahul mentioned several deals and then maybe Robert can answer this but just wanted to get a sense of those deal wins, what what determining factors on those wins is that product capabilities as a price. Other factors that may have played a role in in tilting the balance in your favor versus your competition.
Mike if I kind of just look down the list Hey, I would say that the fund services wins and there's a number of them right. There's a family office as an asset manager. This private equity client in general we have you know we think much more capability in that marketplace than the folks we compete against what.
The only software company what are the biggest fund administrator, we have over any number of years bills, Dave pretty impressive a rail additional modules and services. So that when a big organization looks at us not only can we address their core requirements, but also.
Sure do lots of other little things that are sources of operating leverage to have us doing.
On the software side, and we had a number of large software deals as we as we've talked about you know I think once again is a combination all that software is benefiting from the user base that we have collected both in our license customers and the fact that many of these systems were using ourselves and continuously improving so when we go out in the marketplace and we're you know.
Constantly looking at our Salesforce and making sure we've got the right people showing up for the right meetings and you know going through their presentation and the best way possible and and as Bill said, we're getting better right and I think that's really what's reflected in these deals.
Right. Okay, great. That's helpful and then a bill or what is the health care drilled in margin profile look like versus your core financial focused business.
And just given the success you've had the two men.
Should be then looks for the next big deal to come on the health care side, where there seem to be a lot of opportunities versus on the core financial services side.
Well.
No.
From your lips to God's ears, my hearing we think theres.
A number of big deals and.
In health care, we we run that business too.
You know I think about 30% margins, we have opportunities to improve that and we're working on those you know Sean Hogan, who runs that business has done a really nice job forest and he's got a good team and we have a bunch of people that are out there you know knocking down doors and we have some new applications that are coming out that.
I think are being well received in and you know it it to those tend to be pretty big revenue opportunities and and the more.
The more innovation the more technology, we can bring to bear I think the more our margins go up and our revenue profile improves.
Okay fair enough. Thanks Bill.
Your next question comes from Chris Shutler with William Blair. Your line is open.
Hi, guys. Good afternoon, how much do you expect pricing to contribute to revenue growth in 2020, and how much did it contribute in 2019.
You know I think that.
I don't know that we have completely quantified yet because we're still working through the process of discussing with customers things like that but but I would say that a lot of the the avenue range that or the organic growth range that Patrick laid out you know maybe 15, 20% of that on the high end might be might come from pricing.
Okay.
How fast the alternatives business growing in the fourth quarter.
About 5% I think right right I think it's a little so tired.
Okay.
[laughter] lastly, can I just ask about the share count I think it was 264 million in the corner fully diluted why the jump in Q1, and a and further for the full year just wondering how concerned that is.
Well the.
The diluted share count is.
Very sensitive to stock price.
Yes, and I think I think the average stock price.
In Q4 was $56.
Right.
Got it.
Yeah, So that has a big impact so it's really not.
It would be some option exercises but.
Typical.
Most likely but the big differences how diluted shares is calculated based on the stock price.
Okay that makes sense Patrick thank you.
Your next question comes from Peter Heckmann with <unk> Davidson Your line is open.
Hey, good afternoon, congratulations on that Humana extension that was longer looking at has there been any developments as regards the signet piece, which I think is scheduled for new here within the next 20 months or so.
You know I think I think we have.
Contract with Cigna through through 2022, so I.
It's not quite 20 months, but but you know I mean, they bought express scripts were not you know we're not hanging our hat on on on a on Cigna.
Continued have us handle their pharmacy claims.
But we have other great relationship with Cigna, and we have other ways to replace that revenue and.
And we're big customer segments. So we'll replace some of it or we will be such a big customers.
So really that's how I'd be works you know when we can play too.
That's right that's right then and Patrick just.
I was keeping standpoint.
The the the revenue at the S T.
Stemmed from a customer contracts that said it traded out prior to the close of the deal.
Can you quantify.
Any trailing drag here into 2020.
I think it's 2020 its a.
42 million.
And more front half loaded I would assume.
It's pretty evenly.
Okay.
I mean, it's a little bit front loaded.
Yeah, there's this probably like.
It's 46 million for the whole year.
And the current estimate is is it runs you know 15 11 10 in time.
Yeah.
Great. Thank you very much.
Your next question comes from Ashish Sabadra with Deutsche Bank. Your line is open.
Oh, Thanks, let me add my congratulations as well just such a strong quarter.
Question on innovation to Robert You mentioned, a number of new product innovation that even produced in the market and.
Maybe you can just talk about except when do you have that product and as you think about the innovation building up and helping drive more event, how should we think about contribution from innovation into mcadams over the next three years, how should we think about the contribution from these new product innovation. Thanks.
So.
I think on the on the first part of it right. The way I see should we go by building. These things is we try to get some anchor clients than we try to get market buying right and thats, how we embark on some of our largest projects. So we certainly when we complete them.
Already have validated that there will be good market reception and that's been the case that's been the case, where some of the development we talked about in the Intralinks business. It's certainly the case, but what we do with our portfolio systems and things like that we expect that to continue.
One of the biggest ways in which we differentiate ourselves from the others in the marketplace and really bring a lot of value is continuing to add products continue to add features and functions and just try to understand what customers are dealing with whether its demands of big institutions or demand the regulators and how we help them solve that so thats a big.
Part of our sales and revenue growth process, and we expect that to continue over the next several years.
That's great and then maybe just a question on pricing should we think about these pricing increases as a onetime or is that opportunity for you to continue to have pricing increases on them, what our new pieces going forward I, just wanted to better understand to pricing falling into business. It seems like it's pretty good.
And just pulling some more color.
Thanks, I think the way we're doing this with our customers, particularly in businesses, where we haven't done it on a consistent <unk> in a consistent way is we are setting the expectation that this is an annual conversation.
Right. So so we're just kind of why were being thoughtful about it right warrant we're really not trying to annoyed people are going into long discussions. We're we're just trying to have cost of living type increases and take a look at an account review and do that in a pretty formal way once a year and we think the customers that.
Our receptive and we'll we'll make that apart up our normal practice is going forward.
That's great Congrats once again on such a sort of quarter. Thanks.
Your next question comes from James <unk> with Morgan Stanley. Your line is open.
Hi, guys. This is johnson on for James Congrats on a quarter and thanks for taking my questions wanted to dig in a little more on pricing actions you mentioned, you're working through the pricing process for about two months have you seen any customer attrition because of that.
We have not.
In fact, I would say that the conversations we've had you know the targets we set by customer.
We were pleasantly surprised by how close and in some cases, how much better we can get so it is going pretty well, but we're being thoughtful about it we really value those relationships, we want to make sure that you know, we're bringing a lot of value, but no. We really haven't had any negative I'll fall on as a result.
Got it that's helpful and you mentioned some of the deals that came in during the quarter or expected to be in Q1 can you give us the impact of that benefited the quarter.
Yeah, I wouldn't say that we have that.
As of.
Number for you.
And it you know even that is.
As to how much revenue.
You'd almost have to go back deal by deal and we haven't done that.
Got it thank you.
Again, if he would like to ask a question press Star one on your telephone. Your next question comes from Jackson.
He Morgan your line is open.
Hey, good evening guys. Thanks, taking my question and I apologize for you you addressed this on the call. We just said bounce around a little bit but was there any impact from.
Some of the market volumes coming the year over year comparison in the fourth quarter relative to the fourth quarter 2018 on the as business.
In terms of trading volumes.
Oh very level I, probably some but.
Really not material either to as they're certainly not to the company.
Okay Fair enough and then an update on the Orion business. We know that this has done certainly a tailwind over most of 2019, what should we be expecting the earned 2020 from that business.
I mean, that's been growing it at.
You know 2020, 5% of year for for a number of years and I I would guess it will continue to do that in.
In 2020, obviously, the the the investment.
Situation is something too.
Two you know, we monitor closely and so I think that.
But that's a good business, it's going to continue to be a good business, there's a lot of activity there and.
And black Diamond and our team is is a strong Pete.
Alright, thank you.
There are no further questions at this time, Oh, no tend to call back over to Bill Stone.
[noise]. So again, thank thank all of you for for listening in we we feel we feel very good about our Q4, we feel very good about 2020, and and we look forward to talking to you at the end of the first quarter. Thanks.
This concludes today's conference call you may now disconnect.
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