Q2 2020 SS&C Technologies Holdings Inc Earnings Call
Dead dead dead dead.
Dead dead dead.
Ladies and gentlemen, thank you for standing by and welcome to the ss&c Technologies second quarter earnings conference call at this time. All participants are in a listen-only mode after the speaker's presentation. There will be a question-and-answer session to ask a question during the session. You will need to press star one on your telephone. We do ask participants to limit themselves to one question and one follow-up. Please be advised that today's conference is being recorded. If you require any further assistance, please press * 0. I would now like to hand the conference over to your speaker. Today is Justine Stone. Thank you, please go ahead.
Hi, everyone. Welcome and thank you for joining us for our queue to 20 20 Rings call. I'm just seeing Stone investor relations for SMC with me. Today is Bill stones and chief executive officer. We will cancel our president and Chief Operating Officer and Patrick for our Chief Financial Officer before we get started. We need to review the Safe Harbor statement. Please note that various mom to 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 on their private Securities litigation Reform Act of 1995 actual results, May differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the risk factors section of our most recent annual report on form 10-K, which is on file with the SEC and can also be accessed on our website.
These forward-looking statements represent our expectations only as it's today, July 28th, 2020 while the company may elect to update these forward-looking statements it specifically disclaims any obligation to do so long during today's call will be referring to certain non-gaap Financial measures a Reconciliation affiliation of these non-gaap Financial measures to comparable gaap. Financial measures is included in today's earnings release, which is located in our investor relations section of our website at ww.w. I will now turn the call over to Bill
Thanks Justine and thanks everyone for joining us today. I hope you and yours are home safe and healthy, I'll discuss our results for the quarter and then talk through our assumptions for the remainder of the year as we continue to navigate in a covid-19 world are results of the second quarter were a billion 140 point eight million dollars and adjusted Revenue down 1.3% and $2.04 off just an adjusted diluted earnings per share up 14.3% or adjusted Consolidated. Ebitda was 448.4 million and it just took a bit margin remain constant at 39.3% our Q2 adjusted organic. Revenue was down 1.4% many Perpetual license software a complex Outsourcing deals have been pushed as well as delayed fund launches, but firms are now adjusting to the new environment.
We continue to see strengthened.
An alternative fund Administration and as businesses with 4.6 and 3.6 organic growth respectively. We were encouraged by entering solid solid performance of 3% Organic Grown DST in our Perpetual license businesses or bit more cute to weakness, but we are encouraged by our large deal Pipeline and initial Q3 acceptances off of our bids.
Operating cash flow was 555.7 million or 6 months of June 2020 a 33.4% increase from the four hundred sixteen point six million for the prior six months or secured net leverage ratio is 2.53 times and our total net leverage ratio is 3.6 times with our secured leverage levels. Well below 3x, we will consider other uses of free cash flow including stock BuyBacks, which you have seen. We have renewed and increased our authorized buy back program 750 million in Q2. We bought back half a million shares of common stock at an average price plus 58.62 per share or twenty seven point five million despite the challenges of covid-19 and the global economic shot shut down as presented us ss&c as maintain a high level of service to our customers and has continued to win.
And eight one of our largest strategic Partners is transitioned all technology operations in Canada and Europe to snc's International Financial Services business.
This equates to tens of millions of dollars in Revenue annually and we started recognize a portion of that in Q2. We also have set a high alternative a 600 minutes Administration the high-level Mark of 1.81 trillion dollars. This was driven by lower-than-average Fun closures in Q2 new mandates one and a big chunk out in organic assets under Administration group. We believe alternative asset managers are well positioned in these volatile markets Black Diamond continues to grow nicely and had its best-ever sales quarter in addition to including a contract with a wealth management division of a top 10 u.s. Bank.
We have updated our twenty-twenty scenario analysis, which can be found on page four and five of our earnings results slides. We are now using the 2021 scenario as our base line with an incremental increase or decrease in revenue of about 40 million depending upon the state of the economy for the rest of 2018. We anticipate earnings-per-share to come in at $4.10 as our Base Line This is up $0.27 from our original 20/20 wage scenario. We were all so excited about changes to our senior management team. Then delmastro is assuming the reins of ss&c health and as previously announced in Q2 age and Geiger and Steve event are leading our had been business. I'm out turn it over to Rahul to discuss the quarter in more detail.
Thanks, Phil. Our operations are well settled into remote working conditions as a result of in our clients have complimented us on the quality of our delivery. We have maintained Revenue retention rates and continue to grow in some of our key markets. We sell growth in alternative funds Services as an intro link sent you two drivers included competitive takeaways and alternative. I didn't trading volumes and ads and a large payment protection plan win for intralinks offsetting of reduction in m&a volumes as expected. We saw a Slowdown In Perpetual license same institutional investment management and other software license businesses. Do you see Revenue was impacted by reduced volumes and activity in both financial services and Healthcare as well as the time and interest revenues due to the interest rate declined our pipeline remains strong and we're optimistic about being able to win large mandates that DST and elsewhere in our business over the next few quarters dead.
The products and services we provide our mission critical to our client base. We've seen a significant increase in login and usage activity on our web and mobile client portals and applications. He has increased in downtown for cloud hosting an outsourced Services as firms in this remote working environment look to us to provide access to production systems and augment their staff and processing capability were making investments in our business to innovate and support our clients black diamonds new timeline feature that allows for personalized digital communication at scale was adopted by over sixty clients in Q2 an ssce elsewhere developing dashboards that are updated in real-time so lady to covid-19 product utilization and Trends. We're using the vedado technology to help stay in the local governments can handwritten medical doctor informs algorithmics continues to perform well, and we have several ongoing projects to incorporate the technology into our existing solution.
Now I will mention some key deals for Q2 large fund Administration client using Geneva upgraded to our Cloud delivery solution giving them our application and it infrastructure in one solution the US Bank bought our Black Diamond solution to help them attract registered investment advisors and independent money manager with over a hundred billion in assets bought a Samsung SSD products, including Global wealth platform. They needed a comprehensive end-to-end solution with scalability to handle High volumes and existing Healthcare client added our drug discount rep to their Suite of services a large Brazilian asset manager shows ss&c Global Services sweet citing. Our team's expertise and Technology a commercial real estate company chose Precision for the loan origination and servicing the $20 uk-based investment manager looking to consolidate vendors moved in additional funds from a competitor to ss&c Globe.
A $28 billion dollar alternative manager upgraded to as the clips they were impressed with the interface. And anywhere anytime functionality will not turn it over to Patrick to run through the financials.
Thank you.
Results for the second quarter were Gap revenues of 1138000000 gaap. Net income of 169.5 million and diluted EPS of $0.64.
Adjusted Revenue was a billion 140 million point eight million, excluding the impact of the adoption of the revenue * 606 and four acquired deferred revenue adjustments for the acquisition adjusted Revenue was down 1.3% adjusted operating income increased 9% and it just did EPS was a dollar for Thursday if 14.3 increase over Q2 2019.
Adjusted Revenue decreased $15 million or 1.3% over Q2 2019 the Acquisitions contributed 25.1 million for an exchange an unfavorable impact of 7.2 million or 6% of the quarter inorganic decline on a constant currency basis was 1.4% off I-75 weakness in the healthcare transfer agency Advent software products due to the current environment. These were offset by step inside Administration has business intralinks institutional products adjusted operating income for the second quarter of 2020 was 450.1 Million an increase of 3.9 million or 9% for the second quarter of 2019.
For an exchange had a positive impact of 8.3 million expenses in the quarter. They're just adjusted operating margins improved from 36.9% in 2019. The 37.7% in the second quarter of 2020 driven by lower Personnel costs lower third-party service expenses off or out-of-pocket expenses and lower travel expenses adjusted Consolidated, but to find a Note 3 of the earnings was lease released was 448.4 million or 39.3% of adjusted Revenue.
a slight increase of 2 million / 219
interest expense for the second quarter was 220 220 was 60.5 million and includes 3.5 million of non-cash off ties financing costs and no ID the average rate in the quarter for our credit facility, and the senior notes was 3.19% compared to 4.96% in the second quarter of 2019 and resulted in an interest expense decrease of 43.8 million dollars to record a gap provision of 29.5 million or 14.8% of pretax income.
adjusted
That income as defined a note 4 in the organs versus lease was 276.1 million and adjusted EPS was a dollar for the effective tax rate used for adjusted income was 26%
diluted shares increase slightly 265.8 million in the quarter the impact of option exercises and share issuance was offset by a decrease in the average sure price on our balance sheet and cash flow as of June 30th. We had approximately $262 million dollars of cash cash equivalents wage in approximately seven billion of gross debt for a net debt position of approximately 6.7 billion.
Operating cash flow for the six months ended June 2020 was 557.7 Million $139 million increase or 34 down 33.4% compared to the same period in 2019.
For the 6th for the first six months of this this year. We paid off growth step of 503.3 million and we borrowed $246 million on our revolver the first quarter.
The $246 revolver was paid off for the second quarter.
We paid 133.1 million of cash interests compared to 169.9 million in the same period last year.
Who paid thirty four point seven million in cash taxes compared to 124.8 million in the same period last year as we deferred some tax payments in June 2020.
Kelsey-Seybold ESO was 53.3 days compared to 52.5 as of March and 49.7 as December 2019 Thursday, we use possibly $52 billion of cash or 2.2% of adjusted revenue for Capital expenditures and capitalized software mostly for it as well as the sold improvements month.
the first six months would declared and paid 64 million of common stock dividends compared to Fifty Point six million in the same period last year
And what year was twenty-seven point eight million cash to buy back a half million shares of Treasury stock an average price of $58.62.
R l t m Consolidated that we use for Covenant compliance was 1 billion 864 million as of June 2020 and includes 16.5 million of equality, but cost savings related to our acquisitions.
Based on that data 6.7 billion total leverage ratio was 3.6 times and are secured leverage ratio was 2.53 times as of June 30th.
On the remainder of the Year through the current unpredictably predictability of the market and economic conditions. We are providing three scenarios for the year depending on the time of the recovery. These are the assumptions on these scenarios markets will continue to be volatile large-scale Outsourcing deals and license deals are impacted month.
AUA levels remain flat and fund launches are delayed off.
We're focusing on client service retention rates will continue to be in the range of our most recent results month.
With a some foreign currency exchange to be at where they are at current limits.
Adjusted organic growth for the year will be in the range of -1 per cent to -2.7 per cent.
Interest rates on our Term Loan facility will be approximately the 1-month Libor plus the spread which is a currently hundred seventy-five cents.
We will manage our expenses during this period by controlling variable expenses and staff hiring will continue investing our business for the long-term with capital expenditures or approximately 2.55% of residents.
And will continue to use a tax rate of approximately 26% or adjusted basis.
The first scenario assumes that the economic condition start improving in the fourth quarter of 2020.
And is this assumption we expect approximately the following results adjusted revenue of 4640000000. Just the net income of 1107000000 diluted shares of 267.5 million and operating cash flow 1.1 billion.
The second scenario seems economic conditions are improving the first quarter of 2021. And in this assumption we expect approximately the following results.
Adjusted Revenue 4.6 billion adjusted net income of 1 billion. Ninety three point five million diluted shares a $267 million operating cash flow of 1090000000 the third scenario seems that the economic conditions on start improving until the second half of 2021. You know, this is something we expect approximately the following results.
Adjusted revenue of 4560000000 adjusted net income of 1080000000 diluted shares of 266.5 million month and operating cash flow of 1075000000 and I'll turn it back over to bill for closing comments. Thanks Patrick in closing. I'd like to thank the 28300 people for staying focused 23300 people that work for ss&c for staying focused and delivering. We're blessed to have such a talented Workforce. I also like to reiterate the confidence we have in our business model. It's cash flow characteristics and resiliency. Well, we cannot control the macroeconomic headwinds have covid-19. We can't control the quality of our deliverables and are high touch customer service.
We have solid.
Visibility into our earnings and cash flow generation for the remainder of the year and we will continue to manage cost track receivables in support our sales force in winning new business.
Our pipeline continues to grow with specific large opportunities within sstl and Retirement Solutions. We believe we will come out of this current crisis as a stronger company.
With that, I'll turn it over question.
As a reminder to ask a question. I need to press star one on your telephone to withdraw your question. Press the pound key. Again. We asked participants to limit themselves to one question a follow-up. Please stand by while we compiled the Q&A roster.
Your first question comes from the line of surrender fee with Jeffrey your line is open.
Thank you for taking my questions. Can you help me when I look at the second half for guidance? Can you break that down in terms of your expectations for what you're seeing in terms of maybe DS group with the S T versus the rest of the business if you can write that down versus as an influence as well.
Well, I think that you know overall we think the businesses I think looking at one point to 2.7% and and I would say that that you know, as we said on call that we think that the fundamental situation be as business and info links will probably you know grow at the low end of of our expectations that's beginning of the year, but still probably grow somewhere between between three and 4.5% You know, we would expect EST to probably be flat to down to two down 2% We have several very large deals in Vietnam, but they have to they have to sign and they have to start generating Revenue. So we're optimistic about VST and twenty Twenty-One, but for twenty twenty they will continue to be rep Revenue challenge, but but we still will will generate tremendous cash flow in and earnings.
Thank you. And this is a follow up when I look at your margin guidance obviously versus the guidance. I was provided the last quarter with the expectation of sort of margins to be better. But it's also expected that Martinez will be relatively steady regardless of the revenue outcome. And so are you guys targeting marja this point or how should we think about that aspect?
You know, I think that in general we target we target margins that at about 40% ebitda margins and you know, we haven't really changed, you know, and it's going to bounce, you know, between 38 and 42 and a lot of that's going to you know, at the beginning of this Kobe thing, you know, we bought a lot of equipment shipped it out expensed at all right in and so there's going to be times when when when our expenses are a little bit higher in there be other times when our revenue is a little bit higher but I would say that in general that's that's about where we where we target our Consolidated ebitda percentages.
Thank you.
Your next question comes from the line of Ken Hill with rosenblatt your line is open.
Hey, good afternoon. Everyone. Just wanted to ask one on kind of the capital allocation front. You guys have leveraged seems like where you need it. You have the share repurchase authorization there but is hoping to talk a bit about m&a and how that fits into the picture. Maybe what you're seeing as it relates to the ability to approach companies right now in the environment evaluate transactions and actually start implementing on them will be helpful. Thanks God.
Well, we you know, we constantly go after opposition candidates and and you know, we're sort of cool about it. And then we're also disciplined about you know, what I am going to pay even in today's world family members are a company that just sold today for somewhere around 30 times, even though you know, it's it's very difficult for us to to do that and see how we ever.
Make money with that but we have you know, plenty of Firepower. We have plenty of management bandwidths. So we're you know, we're we're active but but right now with you even in today's world, it's a pretty
hi price for for good assets.
Okay fair enough. I just had one question then on the guidance difference is between the Baseline scenario that kind of 20 21 recovery like revenues went up by about fifty million. Is it Thursday in that Universe coming in there? I think that was you guys to Target that around forty million in Revenue growing at a high single-digit great and then kind of any thoughts on the impact on debt income is that actually coming in a higher-margin just given the net income uptake was greater in your most recent guidance.
You think they this is the the change in the scenario in events is definitely a part of it. I'll probably about half I think the rest of it is we did a little better in Q2 and we expect to be a little better if you click on that Baseline 20-21 scenario margin on in a vest at least right now. We expect to be about you know, 20% or so and then we've got Improvement plans to get up from them.
Got it. All right. Thanks for the detail there.
Your next question comes from the line of Alex crammed with UBS. Your line is open. Yeah. Hey good evening, you know in terms of your scenarios, you obviously same, you know, economic recovery, but can you cannot lay out what really needs to happen for the business to re accelerate in terms of the the pandemic. I mean, you know, it seems like your business. I'm very Reliant upon going into seeing clients doing installs or you know, using Consultants on-premise, so, you know any flavor you can give us like how long that will you know progressed from here considering that, you know, we're on the financial services industry and I think we all very conservative in terms of going back to offices and letting people in our premises so long and then maybe how have you changed your business to kind of get around that and and how much of your business can can can can do off-premise I guess or cloud.
Does that make sense?
Ninety-nine percent of our people work from home.
Right, so we are either either.
You know working on an individual client account where the data resides in our data Farms.
And and the system's reside in our data forms are are we're working where the systems and data reside in their data forms, you know often which might be a third-party wage paid upon so you you know, the the work, you know, even the implementation work is pretty similar, you know how long the difference is that? You're doing it from your home rather than from your desk and you're not surrounded by you know other people doing the same thing, you know, you're you're working you're working from home. So, you know in some ways you get better productivity because you get the focus and there's not there's not, you know, the corruption of the office and another way there's challenges because you don't have access as readily to expertise right around here.
But in general the the business operates the same, you know, once once we you know, we secure a client and begin the implementation, what's more challenging a little bit is this on large-scale sales opportunity? It's a lot of Zoom meetings and a lot of
Yeah, so Alex if you if you take a look at it, right?
of relationship building from from a touchpoint. Hey, we know what Alex Granite UBS or we no surrender Jeffries or we know with somebody else right and trying to connect all those dots to get whoever is in the buying position to be comfortable to buy from us and and that becomes a little bit more challenging done from over remote places, you know, they can't look in the eye and you know ask is a really hard questions and see how you handle them and and those kinds of things so I would say that stuff off the biggest difference in or you can comment on that. I would just add, you know, obviously I agree with that and and I would just add in particular. It's the same Capital expenditures, right? So so people that are buying Perpetual licenses or they're going to kick off some project that has a lengthy conversion. And they really need to get comfortable with our team environment.
That's where we've seen some slowdown so far this year, but as Bill said in his remarks, we're starting to see people get more comfortable even in this remote working environment and make some of those decisions. So coming back to be scenarios. I think the assumption is under the recovery scenario or the Improvement scenario that we have we continue to have that and we have people go back to making decisions on some of those larger deals.
Okay fair enough and then you know you said DST is still going to be fairly challenge this year, but but maybe more positive next year. So do you think it can actually grow next year and any any any sort of ranges way you think next you can already be for for the business?
Well, you know, we we've gotten some solid acceptances of our of our bids and Country. I mean, we haven't signed the contracts yet. But but we're in the midst of contract negotiations on those and found we've been selected in in in that totals, you know upwards fifty fifty sixty million dollars and we have a full pipeline of other deals. And so we're getting some traction, you know, and and you know, so we we think that there's an opportunity that that DSP in in 2021 could be, you know, I'm not positive in the one to 2% rings.
Very good. I'll hop back in the queue. Thank you.
Your next question comes from the line of Brad zelnick with Credit Suisse your line is open.
Great. Thank you so much and congrats to everybody on the the great quarter and especially with the performance on intralinks. Can you talk about the puts and takes between m&a activity and a corporate use cases? And how should we calibrate our expectations going forward for intralinks coming off of this large PPP related win and and just the overall strength in the quarter wage?
Well first I think you know can disconnect the in Papa. Try to see who who we put in charge of that business. I guess about eight or nine months ago have really done a great job right there on top of that. They know their customers they know their markets and and they're aggressive and Thursday.
Intralinks also has a very good development organization and they've been bringing out new products and services. And and I think that that even though m&a has been down. I think seven percent so far in the first six months, you know, they've been able to use their data room capability for other things such as tracking this p p program for one of the largest banks in the country and and and also for other things and so I would just say that it's pretty flexible business. It's a really bright Workforce and Ken and Bob are are good leaders and the homemade something say something else.
Well, I would have that, you know secure document exchange right is obviously a lot broader than just m&a so we found some good use cases for it with the payment Protection Program. But but there's a month there's plenty of other use cases that I think Bob in Canada their sales teams and development teams are working on.
Thanks guys. Can I just follow up one for Patrick, you know appreciate the very thorough disclosure and I might have missed it. But can can you just help to reconcile the really strong first-half cash flow generation and the you know, the scenario guidance that actually ticks down on cash flow. Is that just the Acquisitions or are missing something else?
well, the the main difference is that we were able to
two for about $56 million dollars of cash tax payments from Q2 to Q3 as per you know, the legislation that Congress passed. So so we have to make a tax payment about sixty million dollars in July 15th. So essentially we move, you know, tax payments from Q2 to Q3 rep that helped Q2 cash flow a little bit. But we also had you know strong collections.
And and and and good revenues for the quarter that helped cash flow.
Okay. Thanks very much. Be well everybody.
Your next question comes from the line of Andrew Schmidt with City your line is open.
Hey guys. Thank you for taking my questions and hope everyone is doing well question on organic growth was wondering if you talk a little bit about just thoughts and how organic eggs sequentially into the third quarter. It seems like the Outlook suggests that there's a sequential decline in organic Revenue. So I'm just trying to reconcile what's going on from quarter-to-quarter would be helpful.
Well, we still have some some runoff in the in the DST business. So so that that's a bit of a headwind. We've also had
As you know some some.
You know challenges and being able to close large large perpetual-license deals. And then on the the large Outsourcing deals, we have sometimes the revenue doesn't ramp up for recorder. So those are a free, you know reasons for for you know, kind of a flat organic Revenue picture off between the second quarter and and the fourth quarter the whole comment on that. Now you think that I think in the Baseline scenario, we we are assuming that you know sales and sales activity remains at current levels and doesn't get a lot better and doesn't get a lot worse from here and it's kind of a flash flash Outlook if that starts to come back then we expect to be closer to our economic Improvement scenario.
Got it. That's helpful. Thank you for that. And then retention that's a pretty bright spot sticking with the the 96% rate. That's an ltn measure of just talk a little bit about how it trended and the most recent quarter and then if there were any Variations by product or service, that would be helpful.
I think they all trended down from 96.4% to 96% So it was a little a little bit of a decline on the LTM basis.
And and pretty much all the businesses have you know High retention rates in that range. There's there's no really outliers pretty much hanging in that range most of the businesses.
Got it. Thank you very much guys.
Your next question comes from the line of Asia Shabbat with Deutsche Bank. Your line is open congrats congrats on this question about that are in the office right now. I was just wondering if you could provide any flavor or color around whether it was a transfer agency deals any color on those front and then also on the health-care side, I understand some of the head beens new age because of the elective surgeries are getting surgeries are getting pushed out, but can just talk about the momentum in that business ability to sign new deals on the health-care front as well. Thanks God. Yes one on the on the on the picture. We have several large deals and Tom Services business wage. I don't Healthcare System. So those those look pretty good to us. And we have a couple very nice deals in financial services. So, you know, it's across the board in d f t and
it's been a lot of hard work and a lot of people have done not you know Yeomans working in filling out rfps and and and meeting with with the various prospects that that's been the kind of and I would say, you know, we probably have a pipeline of you know, maybe 10 deals and EST business that has you know, something between ten and thirty million dollars in Revenue attached and then the second part of your question was
What's about I'm sorry, but I don't I don't ya know. It was just about health care and the deal flow on that front as well and just the the name Edwin that we are seeing on the health-care side just as you think about when do we start to see that normalized going forward?
Well, that's right. I mean in particular right at the beginning of the pandemic, you know, everybody rushed out and got their prescriptions refilled and there was a lot of value in to us, but you know, obviously once you've done that you don't need to continuously resell it. So so with that part of the business slowed down a little bit and then we get a lot of business to pay claims on the on elective surgery in our health plan business and stuff like that. So, you know without any elective surgeries, there's you know, again less less prescriptions for pain less than 15 GB for 4500 biotics and other things like that. So so, you know, we're waiting for you know, the elective surgery process to come back, you know, now obviously if if the hospital bed are are all taken up by kovic patience then and that's not going to happen. So those are the types of things that we went into our thought process on our
On our scenario, so I think they're well thought-out I think we have opportunity.
In healthcare and and I would tell you that we're we're pretty optimistic that we're going to to have a really good twenty one and and we're going to have a very solid in to 12 a.m.
That's very helpful. And maybe just a quick question on Alternatives Alternatives delivered a pretty strong growth in this quarter as well. And now you mentioned share games. They're complete events and on that front. I was just wondering if you could talk about both private Equity as well as hedge funds. What are you seeing on both those friends? Thanks.
Yeah, so so it's been pretty much across the board there as well, you know in our heads business we've seen its new funds client start new funds we've had some competitive wins. We've had organic rebound from home, you know, the the decline earlier in the year and in our private equity and real assets businesses are you know, remain very strong both in terms of wins as well as the prospects that we have several large deals that were working. So across-the-board Alternatives has been, you know, pretty good.
That's great. Thanks.
Your next question comes from the line of Peter Hickman with Davidson. The line is open. Good afternoon. Thanks for taking my question Patrick. Just you know, but was there a long time gain from sale of an asset and a quarter?
There was you can you can see the adjustment in the cash flow statement does mark-to-market and the game got it got it 16.5 is the gain and and and $34 right off your scenario guidance. Have you assumed any level of of vivax?
We have an assumed any level of Buybacks in the scenarios in diluted shares count.
Okay, great. And then just you know, can you give me an approximate number for for just the professional software license keys in the quarter?
Professional Services Revenue in the quarter. I'm sorry Perpetual software license fees.
For total total license fee. Revenue would be fine. Just trying to get a field truck.
Perpetual licenses yes with 5.9 million get back in the queue.
Your next question comes from the line of Jackson with JPMorgan your line is open great. Thanks for taking my questions guys. First one actually is is on as they may call it 3 and 1/2 organic grocer. So how much of that was driven by, you know, drank or maybe the volumes that that you saw in the market versus is new logo twin.
Go ahead roll.
Yeah, so, you know, I would say probably 60% of it was Market volumes and volatility and 40% of it was new sales folks on as as well as if the newer clubs that form. So so Mike Hunter and his team have been doing a pretty good job of both accelerating the development and Innovation we have on that as well as getting the prospects to buy even in this environment. So I'm pretty pleased about that and I Had A $64
And so just a quick follow-up on that is that about you know, what you guys are kind of expecting in the long-term or is that is that being impacted by by the economic Outlook as well just in terms of logo additions and you know, call it non volume related growth with the business.
I think we're expecting non volume related growth to get to continue to get better from here, you know, obviously when you sell a deal in the beginning you don't get all the revenue you get, you know, some kind of bound Revenue during the implementation. I think that's kind of where we are right now on the new clients that we have sold recently. And so we expect those clients to get up to full strength and we expect to continue to sell more run rate Revenue. So we do expect it to grow over time.
That's great. And then if I could just sneak in one quick one the DST headwinds, we've hashed it out certainly pretty thoroughly tonight, but I just asked the different ways is the is the the DST exposure or maybe the Perpetual mix? What is anything surprising you off as as far as maybe how relatively less resilient that business has been relative to the other businesses that you have.
I don't think so. I I think that it's a it's a big complex business that that is getting a you know, a pretty a pretty hefty overhaul. And you know as you go off this pretty hefty overhaul, there's all kinds of things are fine, right? This is a business the one we bought it had $16,400 account and you know and and you know, four hundred four hundred and $20 a month.
You know, and now it has less accountant no closer to eight hundred million dollars. So, you know, we're trying to do things in a wise way. We you know, we we think there's some great opportunities and we have some great climb and you know, we we have to to suggest to them and percent of them things. They want to buy
We can't be in the business of building things. We want to build we have to build things that people want to buy and I think we're making progress in that regard. And and I think that's the, you know will end up being Holy Grail. There's no nothing magic here. It's just hard work with very large clients and generally very big systems that need some money. You need some Innovation and and some you know new product delivery.
okay
Understood. Thank you.
Your next question comes from the line of Chris schuttler with William Blair your line is open.
Everyone good afternoon. Could you talk about the reasons for the management changes at both Advent and DST Health recently?
That you know, Rob Roy who was running that business for the last couple of years for us and they've been with Advent for nineteen years had, you know got an offer to go be an operating partner at a month charge private Equity Firm and and he decided to do it. He's also from California and he was living in New York with us and and and there's a good chance. He'll moved back to the West Coast so I know he's a great guy. We wish him well and and Karen and people event, you know, Steve had been running the Black Diamond business for a long time and and Karen had been you know, the number two persons of syringe for for a number of years and so in a way, we're both excited about Karen and Steve's opportunity. And and also we wish we wish Robert well, so not much else there and and then you know, we've been you know, staying around the health care business little bit now for over, you know, two years and three months and months.
And you know Danny delmastro started a company called aeromed in in Connecticut and grew that to a pretty large company and sold it to to Cardinal Health Choice there.
Senior executive at Cardinal Health for you know for years I think and then left there and and we were fortunate enough to pick him up and we've been impressed with his presence and off and and sales capability and and executive capabilities. So so we decided put him in charge and and you know, we we think he's done a great job for us and break in relationships and you know, we're excited about our opportunity.
Okay. Thanks Bill. And then just looking at the the scenarios the Baseline scenarios revenue is a little bit lower if we North Sorento vast but the prophet is is up nicely versus your original guidance or the original scenarios rather. So I guess the question is where where are you taking out costs considerably more aggressively than the original scenarios. Well, I think a couple of things I mean obviously, you know, we appreciate that the Federal Reserve has waged have interest rates that you know, nineteen basis points or something. So so interest costs are a lot less helped. Yeah, Basically we're also moving from you know, Nineteen Hundred contractors or so. We will have I believe none by the end of August, you know, and and we will get a a big pickup in in, Georgia.
expense savings from removing those contractors to employees
And then third, you know, obviously travel and entertainment is, you know dormant the most part and so that saved us a tremendous amount of money and then there's a bunch of thoughts to go with the commute and you know paying for all kinds of different things for our for our people to get in into and and and back home. So there's no way too expensive and stuff like that. So I think the expense in general will tend to be will be pretty moderate.
They'll just a follow-up and the move from contractors to employees. Like when did that process really begin in Earnest? And it sounds like it's completing soon.
I think we we notified until about about a year ago because that's what the contract said and we started.
Onboarding as employees. I'll probably about March and you know, we were hoping to be done by the end of June but cold it kind of bumped into that a little bit off. So now we expect it to be done by the end of August said pretty accurate the whole. Yeah, that's right bill.
Okay. Thank you.
Your next question comes from the line of James faucette with Morgan Stanley. Your line is open. Hey, this is Jonathan on for James. Thanks for taking my questions. How is pricing held up and down any sort of appetite or further price increases in this environment.
Well, we certainly have an appetite for it. I guess you're probably asking whether or not our clients.
That's fair. Yeah, you know if I if I could add it's held up pretty well in the sense that deals that we are winning. You know, we're not we're not seeing any any Trends 250 just to kind of revise pricing down or anything like that and and I think on the price increase process, we're pretty pleased with how that went at the end of the year. And and we think most of our clients, you know, or understand that we need to deliver more value and in exchange, we would like a little bit of an uptake on a regular basis. So so we do think that that process is going to be good for us over the long term.
I understood and it may be early days. But how are you thinking about the potential for cost take outs for you know Twenty One versus the expense controls that you have in place for 20?
Yeah, I wouldn't say that we have anything that is.
is right on the on the horizon, you know, the people that run our businesses are in charge of
I was going through their budgets and and and and making sure that we have, you know, meaningful work for everyone. But but you know, we're strong profitable company and you know, we we we liked our Workforce and and we want to support them. And you know our our most of our costs are employee-related. So, you know, we're we're very very often the circumspect about how we go about that that process and you know, we think this this movement bringing the contractors into the fold and you know, most of the stuff you can do through a generation if you want to have a smaller Workforce, so we're we're optimistic that we're going to be able to have great margins High cash flow and and and really good earnings.
Appreciate the color. Thanks.
Again, if you would like to ask a question, press star one on your telephone, we do ask participants to limit themselves to one question and one follow-up. Your next question comes from the line of box crammed with UBS. The line is open. Yes. Hello again. Just just want to come back to organic growth 4 minutes. I think there's still a little bit of confusion here what changed at least there's four months. So I think you old kind of range was 0 to -2 and now it's -1 to -2.7. So I think you said a lot of things on this call, but you just kind of took em up what really changed and it cuz I think you did better than you thought in the second quarter as well.
Well again, I think the the the organic Revenue numbers are going to get tied to our ability to a new business and and be able to drive that business into Revenue in in Q3 and Q4 and obviously in Q2 as well. But but given that that that's the real Revenue pops you get in this business or when you do large-scale Perpetual licenses because they they close immediately. So given that that that has slowed down. I think that's kind of the the biggest issue on on organic Revenue growth impact between between
No cute, too and then the second half of the year.
Okay. No, thanks. Thanks for confirming then. Just one quick one, you know you raised your buyback authorization significantly, but you really haven't shown much apathy to buy back. So I mean it's nice to have the authorization but you know with the stock basically trading it the lowest relative level. It's has in history. I think relatively has to be five hundred. I mean, what would it take for you to you know actually do something with the authorization?
You know Alex it takes courage, you know, and and you know it also it takes not having Acquisitions you're thinking about closing and and deciding that the Acquisitions are are inferior to buying back on stock. You know, we we we try to be judicious about about buying our stock and and understanding the ramifications of buying back stock vs. Down dead. You know, I mean, I think the first year Finance person can figure out that buying back stock from an economic standpoint is better for us than paying down debt, but
You know, there's still a perception that no Leverage is better than some leverage and you know, it's just a you know, it's always a catch-22 but but we didn't I didn't raise our authorization to just freezer authorization if if we go in it's like most things we do. We don't go in half-hearted, right? We spend $8,000 and 2018 to to buy companies and you know over the last ten or twelve years. I think we spend about fourteen billion to buy company. So what we're not afraid to make decisions and make decisions. It's just trying to do it at the right time and maybe we've been a little bit too searching perfect when we could have had excellent times, but but you know, we're not we're not bashful about our track record. We kind of like
Fair enough. Thank you.
Your next question comes from the line of Patrick O'Shaughnessy with Raymond James your lines open. Hey, just one question for me a follow up on the question earlier about pricing. There were no lawsuits filed this past quarter that seemed at least indirectly related to your pricing initiatives to what extent were those lawsuits and and those client disagreements outliers in terms of push back to price an effort or um, you know, is there or has there been some you know some broad resistance to you guys trying to adjust your pricing?
I I think they were outliers.
You know, I I
You know, you're not you're not going to be able to to do.
Price increases, you know, and and I you know, it's also you know.
Some of the things are contractual there's contractual issues and both cases that have nothing to do with pricing. So so I just think they're outliers and off and
You know, we don't we have great relationships with our clients, you know, which is evidenced by our 96.2% retention rate in that type of stuff. So so I I think they are both outliers. I don't know if you have a different comment a whole bill I had agree with that and you know, like like they'll set the issues in those items or you know for the most part the ignition issues on related to this pricing initiative we've had
Thank you.
No, no further questions at this time. I will turn the call back over to Bill Stone.
Well again, thanks everybody for being on the call. We are, you know focused on our business and and excited about our opportunities, and we we believe that we have great opportunities through the rest of this year and really set ourselves up for a great 2021. So, thanks again, and we look forward to talking to you at the end of October. Thanks. Bye ladies and gentlemen concludes today's conference call. Thank you for participating you may now disconnect.
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