Q4 2020 SS&C Technologies Holdings Inc Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to.
S. S N C technologies fourth quarter and full year earnings 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 keypad. Please be advised that today's conference is being recorded if you require any further assistance during the call you May press.
Zero.
Our deferred revenue.
To welcome your host for today Miss.
MS Justine stone ma'am the floor is yours.
Hi, everyone welcome and thank you for joining us for our fourth quarter and full year 2020 earnings call I'm Justine Stone Investor Relations for F. N C technologies.
With me today is Bill Stone, Chairman and Chief Executive Officer, Rahul Kanwar, President and Chief operating Officer, and Patrick <unk>, Our Chief Financial Officer before we get started we need to review the Safe Harbor statement. Please.
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 the purposes of Safe Harbor provisions under the 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.
That's 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 of today February 10th 'twenty 'twenty one while the company may elect to update these forward looking statements. It specifically disclaims any.
And to do so.
During today's call, we'll be referring to certain non-GAAP financial measures 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 S. S. C Tech dotcom.
I'll now turn the call over to Bill.
Thanks, Christine and thanks, everyone for joining our results for the fourth quarter were 1 billion 206.
And just revenue, it's down a half a percent and a $1 13.
Adjusted diluted earnings per share, which is up almost 5% for the full year, we had 4.681 billion and adjusted revenue up 3% and $4 30, and adjusted diluted earnings per share up 12, 3%.
Our adjusted consolidated EBITDA was $475 8 million for the fourth quarter and our adjusted.
Op margin was 39, 4%.
Our Q4, adjusted organic revenue was down 2% and for the full year, our 2020 organic revenue was down 5%.
As expected we had weakness in our <unk>.
Large license software business in the fourth quarter.
What are our alternatives business are interlinked and markets business grew nicely in the DST business saw improvement from the previous quarter.
Operating cash flow was $1 84 7 million 184.7.
For the 12 months ended December 31 2020.
10%, if you exclude a one time $250 million upfront license payment paid in the second half of 2019.
1.18, and $4 7 million represents.
103% cash conversion rate on our adjusted net income of 1 billion $146 eight.
Billion.
We put cash.
To good use in 2020, we paid down $738 million of debt, bringing our secured net leverage ratio to three one times and our total net leverage ratio.
The $3 three nine times, we bought back $3 7 million shares of common stock at an average price of $6 99 for total consideration.
227 million.
This year, we faced many challenges which.
Precedent in our 35 year history <unk>.
You can see adjusted quietly and with authority, we've moved 99% of our forest.
Force to promote supporting clients with expertise and resources, we continued to meet or deliver deliverables engage with our prospects.
And we built and deployed solutions we.
We are concerned we continue to see success with our newest products is eclipse ended the year with 170 clients want doubling its client base, we have leveraged algorithmic capabilities and develop scenario wasn't sure.
Pandemic specific analytical tool and cook.
Cause infection rate.
Susceptibility in death rates into the investment scenarios.
Based on movements in equity and fixed income FX and commodity markets.
And that's just to see how we successfully launched our flu a flu pilot program with the support of our internal call centers.
This program provides outreach to assess and see how clients.
Hence the rights of flu vaccinations.
We developed a similar kovacs program focused on ensuring the successful completion of the Covid vaccine series for members receiving and the vaccination from SSC health partner pharmacy.
While 2020 was a tumultuous year on a global basis and see performed with distinction.
We were able to outperform estimates collect our receivables to widen our customers and generate more revenue than any year in our history.
Like many of the financial services.
Industry, we earn revenue on flow in 2020, this revenue was down $20 million or over 75%.
We overcame all difficulties and posted $4 $3 million.
Four point.
$4 30, and adjusted earnings per share.
12, six above the 383 per share in 2019, 47% above the $2 two in 2018.
And 122, 8% or 90.
93 in 2017.
Good numbers, we think.
I'll now turn the call over to Rahul to discuss the quarter in more detail.
Thanks Bill.
As he noted we had a strong quarter with a broad based lift in revenue from Q3 across many of our business lines.
DST SMC health alternative interlink regulatory and algorithm ex all posted improved performance in Q4.
Our alternatives business grew five 5% in Q4, and five 7% for the year clients remain optimistic about their growth outlook, which is reflected in our data, including the capital movement and other indices we publish.
Bill mentioned, the rapid adoption of ASIC clicks in his earlier comments and in Q4, we launched the <unk> app powered by Eclipse and made it available in iOS and Android App stores in November user adoption and design collaboration for the apps next phase had been strong.
Interlink 15 substantial growth since the recovery of the M&A market in the back half of 2020, we remain very focused on driving technological differentiation and the virtual data room space in the context of a strengthening M&A environment.
Despite the challenges of 2020, we ended the year with accomplishments to be proud off and set up our business with strength ahead. During the year, we made several executive appointments, including Dan Delmastro head of Esol from free Health, Karen Geiger and Steve, leaving co heads of essence since the advent, Kevin Rafferty General manager Okay.
So since the retirement solutions.
<unk> head of global Investor in distribution solutions gross Matt back head of tax services for instance in fee Colbaugh and hired and promoted numerous other senior executives.
These executives are working with our customers and prospects driving change and defining new products and services to fuel future growth.
We continue to invest in our sales and marketing organization and are seeing success gathering leads and interacting with prospects using digital and virtual platforms.
Under the direction of the inland Greaves, our global head of sales, we launched a comprehensive solutions program.
It brings product and service owners together across SMC can develop integrated and targeted offerings. These solutions are geared to our client specific needs and focused on their asset classes structures regulatory and customer requirements and other business objectives. We have seen early success with clients selecting multiple products and services and anticipate.
This new effort will drive further collaboration within essence fee and distinguish our offerings in the marketplace now I will mention some key deals for Q4.
1 billion hedge fund launch chose our hosted Geneva solution, along with Geneva World Investor and Investor.
Large UK wealth manager chose to transform their operations using our global investor in distribution solutions, and advent software and existing retirement customer bought AWD, our workflow management tool a Colorado based alternative investment manager chose the full suite of vessels since the offerings, including Global fund services loan servicing.
With precision L. M R <unk> trading platform and intra links and existing fund services client extended their relationship to include risk investment services, and regulatory solutions, including our new Blue Sky reporting offering.
A large <unk> health clients adopt at our digital platform portfolio with a mobile app that enhances the member payer interaction for 10000 plus members.
I'll now turn it over to Patrick to run through the financials.
Thank you.
<unk> for the fourth quarter were GAAP revenues of 1 billion $203 4 million.
GAAP net income of $197 1 million and diluted EPS of <unk> 74 cents.
On an adjusted basis revenues were $1 billion to $106 1 million.
Including the impacts of the adoption of the revenue stand at 606 and acquired deferred revenue adjustments for acquisitions.
Adjusted revenue was down <unk>, 5% adjusted operating income decreased two 4% and adjusted diluted EPS was $1 13, four 6% increase over Q4 2019.
Adjusted revenue decreased $6 1 million or a half a percent over Q4 19, our acquisitions contributed $27.4 million.
Foreign exchange had a favorable impact of $6 million or 5% in the quarter adjusted.
Adjusted organic revenue decline.
The client on a constant currency basis was 2% driven by weakness.
And the advent.
Institutional.
Software products and D. S. T financial services. These were offset by strength in Fund Administration, Inc.
<unk> links in the business and.
We had strong sequential growth in the DST financial services and health care businesses over the third quarter.
Adjusted operating income for the fourth quarter was $458 8 million <unk>.
The decline of $12 2 million or two 4% from the fourth quarter 2019.
Foreign exchange had a negative impact of $3 5 million on expenses in the quarter.
Adjusted operating margins were 38, 8% compared to 38.
0.0% in 2019.
Net.
The expenses were driven by higher employee compensation and benefits higher sales commissions and professional services.
These expenses were partially offset by lower travel and contractor expenses.
Adjusted EBITDA.
Defined in note three of our earnings release was $475.8 million.
With 39, 4% of adjusted revenue.
Net interest expense for the fourth quarter was.
It was $53 3 million and includes $3 4 million of noncash amortized financing costs and OID.
The average rate in the quarter for our amended credit facility and our senior notes was 2.99% compared to $4 five 3% in the fourth quarter of 2019.
And resulted in net interest expense decrease of 47.
$2 million or 47%.
We recorded a GAAP tax provision of $37 7 million or 16, 1% of pretax income.
Adjusted net income as defined in note four of our earnings release was $302 6 million and adjusted diluted EPS was $1 13 day.
<unk> tax rate used for adjusted net income was 26%.
Diluted shares increased to 206 to $8 1 million from $266 7 million in Q3.
The impact of the increase in the average share price and option exercises was partially offset by share repurchases in the quarter.
Our balance sheet and cash flow as of December 31st we had approximately $209 3 million in cash and cash equivalents.
And approximately $6 5 billion of gross debt.
For a net debt position of approximately $6 3 billion.
Operating cash flow for the 12 months ended December 2020.
Was 1 billion $184 7 million down $143 6 million compared to the same period in 2019.
The decrease was impacted by a onetime.
Upfront $250 million license payments that were received in 2019.
For the full year net debt payments.
Made net payments of $738 2 million.
Treasury stock buyback of $227 8 million for purchase of the 3.7 million shares at.
At an average price of $60.99.
We declared and paid $136 1 million in common stock dividend as compared to $107 6 million last year, an increase of 26, 4%.
Paid interest for the period was 320.
$236 2 million.
Compared to $353 million.
Last year due to lower debt levels and lower average interest rate.
For the full year, our average interest rate was 3.35% compared to $4 seven 4.78% in 2019.
For the year, we paid income taxes of 277 4 million.
Two $222 7 million in 2019.
We saw improvements in our accounts receivable DSO.
As of December 2020 at 48.4 days.
And that compares to 54 days as of September 2020, and $49 seven day as of December 2019.
Capital expenditures and capitalized software were $106 4 million or two 3% of adjusted revenue.
Pending was predominantly for capitalized software.
And it infrastructure and also some facility lease hold improvements.
Our LTM consolidated EBITDA that we use for covenant compliance was 1 billion $856 3 million as of December 2020.
Baseline net debt of approximately $6 three.
Our total leverage ratio was 3.39 times and our secured leverage ratio was 231 times as of December 31.
On our outlook for 'twenty 'twenty one.
First I'll cover some of the assumptions in our outlook.
Well.
We currently expect markets to be volatile large scale outsourcing deals and license deals to continue to be at moderate levels.
But with improvements in the back half of 2021.
Our fund services business will continue to perform.
As we focus on client service, our retention rates will continue to be in the range of our most recent results.
We have used foreign currency exchange at current levels.
We expect the impact.
On DST health unit pre acquisition client terminations.
To impact revenue by approximately $25 million for the full year of 2021.
Adjusted organic growth for the year will be in a range between zero and 4% positive <unk>.
Adjusted organic growth for Q1, and the range of negative two 3% to positive one 1%.
Interest rates on our term facility will be approximately one month LIBOR.
Plus the spread which is currently a 175 bps.
We will continue to manage expenses during this period by controlling variable expenses and staff hiring.
On capital expenditures will continue to invest in our business and spent approximately two 8%.
Revenue on capital expenditures and <unk>.
Capitalized software.
We expect our adjusted tax rate to continue to be 26%.
For the first quarter of 2021, we expect revenue in the range of $1.158 billion to 1 billion in $198 million.
Adjusted earnings per share to be in the range of a $1 five.
To a $1 11.
For the full year of 2021, we expect revenue to be in the range of 4.685 billion.
To 4.875 billion.
And adjusted earnings per share to be in the range of $4 36.
$4.64.
For the full year, we expect cash from operating activities to be in the range of $1 $240 million.
Two $1.320 billion.
Now I'll turn it over to Bill for final comments.
Yes.
Excuse me I think Mr. Bill got disconnected, but he's reconnecting now.
Okay. Thank you.
Excuse me Mr. Bill Stone has reconnected.
Sorry about that thanks Patrick.
Okay.
We continue to operate in a global pandemic.
99%.
Of our global workforce is still remote and business travel and in person sales meetings are essentially nonexistent.
Over the past 11 months, we've learned how to operate under these circumstances.
Utilizing video conferencing, where fake web based marketing and promoting the power of our business model and reliability of our people and technologies.
As you can tell from this call we were optimistic we believe our performance during this pandemic will pay dividends well into the future well into the future.
We will now open it up for questions.
Thank you presenters as a reminder to ask a question you will need to press star one on your telephone keypad to withdraw. Your question you May press the pound key <unk>. Please please limit yourself to one question and one follow up so although to allow other participants for questions.
<unk>.
Please Jim.
Please jump back into the queue. If you have any additional questions.
Yeah.
Well pause for just a moment to compile the Q&A roster.
Our first question comes from the line of David <unk>.
From Evercore Evercore ISI your line is open.
Thank you good afternoon could you comment on our fourth quarter 2020, total organic revenue growth quantify please and then if you could breakdown organic revenue growth for the fourth quarter by fund administration interlinked.
<unk> DSP.
For the fourth quarter.
Total total adjusted organic growth was down 2%.
The alternative fund administration business was up five 5%.
And DST, we can provide you a kind of a breakout between the two.
Groups.
The financial services group was down one 1%.
And the health care group was up three 1% net.
I think that combined to be down 3%.
For the full year.
And interlinked close up three 8%.
Got it.
Thanks for that and just as my follow up could you comment on.
Your acquisition pipeline and appetite to acquire.
In the year ahead based on the quality of the pipeline and valuations that you see.
Well, we constantly look at an acquisition and we're disciplined about it.
C. We deployed $8 $3 billion.
No not 2018.
And that thought DST eze and <unk>.
We spent inc.
About 110.
$38 million.
In 2020, which was less than we would've expected, but but we looked at lots of things and obviously.
In the public domain that we looked at Linc administration down in Australia.
But we are disciplined about it.
We're quite aware that all the questions that we get on on the conference calls from our shareholders our organic revenue growth.
So we want to make sure that we focus.
On our organic revenue growth and as Rahul.
Detailed in his remarks, we've made lots of changes.
All of our businesses are getting better.
All of them.
Because if they don't get better we get different executives.
And that's how we operate.
So we're very optimistic about where we're going about.
Generate tons of cash paying down a bunch of debt looking at great acquisitions.
And earning more money for our shareholders and then deciding how we're going to allocate our capital whether thats going to be on acquisitions, which is generally our first choice.
But we also like to pay down debt and we also watch to evaluate buying back our shares. So I don't think our our business client or our strategy has changed.
I believe that what we're doing is executing.
That's what we'll continue so theres a lot of stuff for sale have you see stuff getting.
Giving purchased all the time and the question becomes is this is that strategic forest will drive our organic revenue growth and what is it going to do over the long term. So those are the criteria that we haven't been.
I think we will probably buy some things in 2021.
As usual, we'll be disciplined about it and we.
Going into 2021.
With some optimism.
Understood. Thank you very much.
Our next question comes from the line of Andrew Schmidt from Citi. Your line is open.
Hey, guys. Thanks for taking my questions here.
I wanted to touch on the sales cycle briefly I know you mentioned in your revenue assumptions do you expect customer appetite in buying behavior to improve throughout the year, but wondering what you're seeing more recently, we had heading into 2021 are you seeing.
Customer behavior and buying patterns improve obviously, we're still largely rote environment, but just curious what youre seeing from a sales cycle perspective, especially as it pertains to large deals.
Well I'll give it a quick shot in mineral whole can comment, but we have a pretty full pipeline. We have larger deals. We have what we believe or are a number of large deals that we hope to close this quarter.
We had a.
You know a very reasonable January.
And I believe that.
We will continue to execute and were seeing some strength across.
Our different businesses I think are our.
Our indicators that we have and then for links are.
As strong as they've ever been and I think we have a larger pipeline than we've ever had.
Some services the hedge fund industry has proven to be quite resilient.
And I think it will continue to be.
More and more private assets become.
You know the most attractive place to put money, whether that's private equity or private credit.
Our real estate I think that.
<unk> is well positioned to do well there.
And I think that the.
Business is getting stronger our retirements business grew very nicely.
In Q4, and we expect it to grow very nicely throughout 2021.
We have some challenges.
And our health care business, but.
Astro and his team are doing a good job in a very focused.
And so with that up.
But I'll take a crack.
So.
I think the thing that I would add is.
This past in this pandemic pandemic, we have gotten more comfortable and our customers as prospects have gotten more comfortable transacting over digital and virtual and we always had an element of that but obviously we've had to rely on it a lot more so we've seen our yields for virtual events and other things that we do to gather pipeline go up pretty.
Substantially and we've also seen contract signings and things like that which we're certainly slow at the start of this process take.
Kick back up so we feel pretty good about the current state its better than it was three months ago, and we think it's going to keep getting better throughout the course of the year.
That's great good to hear about the improvement, especially in the DST side.
To tag on to that when you think about the FY 'twenty, one organic growth outlook the zero to four.
What what are the three what are the primary things that drive sort of the bottom and the top end and then.
Within that what are the assumptions for free for DSP is the your precious Inc.
Any color there would be helpful.
Yeah.
No again right.
<unk>.
When you when.
When you're selling $20 million to $50 million deals.
For a year or $10 million to $25 million deals for the.
For the year multiyear deals.
If we win them.
We will be at 4%.
Don't win them.
We will be closer to that zero percent.
But we're confident that we're going to win a lot more than we lose.
We're going to continue to perform well.
Feedback from our clients has been tremendous based on.
One on the work that our entire staff is put in them.
The attention to detail that we have delivered.
And in places like advent and others that do net net promoter score it's high as it's ever been customer satisfaction as we track.
He is very high and our retention rates stick at 96, or so percent and so I think that we have low.
A lot of optimism that we can perform.
No I'm going to win.
No.
You've got to throw passes if somebody's got to catch them and they've got it goes across golar.
The nature of the Beast.
And I don't know, where all you would have anything else to add to that.
Just just I guess on the on the second part of that on DSD in particular.
Could you talk about the pieces of DSD separately, the DSD financial services business, which is really everything except health.
Thing to see.
Low single digits type growth.
Kind of what's been so at the midpoint, maybe something like 25% or something like that and the health business as Bill mentioned, we do have some challenges and we're still dealing with some COVID-19 impacts and we expect that to be flat to slightly down for the year.
Got it that's good context very helpful guys I appreciate it thanks.
Our next question comes from the line of Alex Kramm from UBS. Your line is open.
Hey, good evening, everyone can you talk about the cost structure and the margin a little bit if I.
If I look at the guidance correctly here it looks like continued margin expansion. So so any any any more details there, but but more importantly, it's just operating leverage or is it still.
A lot of efficiency gains that you're getting I know you've been doing a lot of that so just wondering we are still finding opportunities to I guess cuts if that's what's happening.
Well I think Alex we would say that we manage.
Cut cut where we have to end.
But we you know we have a large work force with almost 25000 people.
There's opportunities everywhere and we have to get more efficient.
If you can get.
You know.
5% efficiency then.
25000 people, that's 12 months people I think.
So we need to drive revenue in order to be able to continue to grow our workforce and continue to.
To.
Increase our margins.
So thats what everyone addresses he is focused on them.
We manage it.
Understood.
Every week.
So.
We picked the places that we want to put all our resources and I think we've spent $600 million between.
Between R&D and capitalized software.
$40 million zone.
So we're investing back in our business.
We think that there is tremendous opportunity for us and we think we have some.
Some very large competitors.
But that just aren't going to be able to keep up.
The longer 2021 gross in 2022.
We're going to continue to execute on our.
Much higher levels than our competitors.
Okay, Great and then secondly, quick one I think the buybacks were pretty soft in the fourth quarter is that just because you were looking at deals and and maybe also your cash balance is fairly low I think so so just have to you can.
Step back or or whether they come from and what's your expectations for for 2021, I mean, you you accelerated nicely in 2020, so that's still a pretty focused on.
On repurchases all else equal.
Well again, we try to allocate our capital as best we can.
Obviously, we think.
We think our stock is up.
Yes.
Certainly not overvalued.
So we look at that.
What fondly.
But it's not our first choice.
When.
<unk>.
Even as we buy and if we buy more than we did in.
In 2020, it would not surprise me, but I don't believe that we will.
Probably spend more than we pay down debt.
So obviously, if we do acquisitions and interest rates stay where they are we'll probably.
Use a lot of debt on acquisitions.
But we generate a ton of cash we.
Generating cash is January will generate a ton of cash throughout the year.
Yes.
Silver Carol.
Makes sense. Thank you.
Our next question comes from the line of Brad Zelnick from Credit Suisse. Your line is open.
Great. Thank you so much for taking my questions. My first is for Bill Bill.
I'm wondering if you have any perspective on the higher trading volumes and volatility related to retail flows in the equity markets and how if at all in any way impacted parts of your business, maybe the health of fund admin clients or anything else elsewhere, it's noting and bill I know you've been around long enough to see just about everything curious.
If you have any perspective on this force in the market and if in any way, it's an opportunity for <unk>.
Well.
You know me and most of us have been around for quite a while Brad as you well know.
As I look back on my <unk>.
400 years in the business.
These things happen right they get they get to be bubbles and when you start taking technology and spreading it around the world.
And then allow people to collaborate.
As always.
Difficult for the regulator to.
To be able to manage.
All of the.
Barry.
Schemes so.
So to speak that people can deploy to drive up stocks or drive down stocks.
And so I.
I think I think the regulators will catch up and I think that.
This will be another thing that.
It isn't much different than you know.
2000, and you know, how many eyeballs or looking at your screens the sentence.
So I think.
The drive up on some of these very well known.
Very well known stocks I think is probably a little bit.
A bubble maybe more than a little bit.
But I don't know about you know, where we would step in and have it as an advantage for us other than in our regulatory services business that can help our clients see insights into that and then our algorithm ex business, where we have an awful lot of cash.
Once that are constantly looking at this stuff. So we can give our clients in fact.
Into what's happening and I think that can be very valuable.
Thank you Bill it makes perfect sense to me.
I appreciate the thoughtful answer maybe for Raul Robert in your prepared remarks, you talked about a comprehensive solutions program under aim on graves can.
<unk> products and services just curious what prompted this now whats the opportunity really in and with total respect it sounds obvious. So why wasn't this something you were already doing.
So about a year about a year ago I'd say in the fourth quarter of 2019, we put him in charge of global sales.
His mandate was really to help us collaborate more effectively and more than collaborate integrate right. So that if you're going to see a customer in a customer's a bank or an insurance company or a hedge fund manager, we're bringing together different parts of the organization.
And offering that comprehensive solution and the more we can do that the more strategically become for them. The more likely it is to buy Baker right. So just remember that we as bill pointed out we bought DST eze and interval lengths in 2018.
And we're trying to sell things that work together right. So it takes some time to integrate them. It takes some time to get the user interfaces and the functionality that they want.
We feel like we're in a good place with that product offering.
The right focus behind the sales and marketing of that was the right. So I think we are formalizing things we've done all along but we're off to a good start.
Makes sense. Thank you guys.
Our next question comes from the line of Ashish Tobira from Deutsche Bank. Your line is open.
Thanks for taking my question Ron I, just wanted to go back to a comment that you made on the ESP if I heard you right.
The DSD financial could potentially drill 10, 5% this year interest click when he was at the midpoint just wanted to confirm if I heard that right and then maybe just a question on that one is.
Obviously, that's pretty strong compared to the DST financial growth profile, historically, whats really driving that strength is that net.
There are a couple of large deals that you won last year out of those.
Implementation really driving it and then if you can any provide any incremental color within DST financials that have you seen.
Pockets of strength or buckets of strong demand.
Any color would be helpful. Thanks.
Sure. So yes, we have at the midpoint, approximately three 5% or so organic growth.
The retirement business, where we've talked about a number of large deals.
And done some press releases on them is clearly one of the bright spots.
We're also seeing good strength in our UK based off wealth and insurance services business and really across all of DST, we've been working hard for.
Since 2018 really focused on the sales efforts there focused on the product development efforts there.
On digital and web portals and different ways in which our end customers can interact with their clients.
What they deem most valuable we're starting to see some signs that the work we've done is paying off and we're pretty well.
We're pretty bullish on what might happen with that business not just in 2021, but beyond.
That's great very helpful color and maybe just a quick question on pricing and the alternatives fund admin site that was surprising increase back in end of 2018 and opinion 19 or into 2020.
<unk> for a more annual price increases going forward.
And any thoughts on 'twenty one thanks.
So we're doing and I think we said this last year.
We really tried to set this up as a price conversation that was going to happen once a year.
And it's been reasonable increases.
And I think our customers, while nobody welcomes that they understand what we're coming from we're.
Working our way through that process right now and it's going pretty well and we do expect it to have.
And a positive impact on alternatives, but really across our business.
That's very helpful. Thanks, and great and good quarter. Thank you.
Our next question comes from the line of my Young Tandon from Needham Your line is open.
Thank you good evening Bill just wanted to get a sense from you or maybe Robert can chime in too how should we think about the growth within the installed base.
Land and expand versus contribution from new logos.
Get back to some level of normalcy in terms of organic trends across your portfolio of solutions.
Yeah.
That's a very good question and it really is.
Kind of at the core of what we're doing.
We bought DST and closed in April 2018.
In 2020.
DFT clients represented 75 of our top 100 clients.
And there are all of the largest investment organizations in the world and they are.
Tremendous opportunity.
Alright.
There's a lot of work and we've done a lot of work.
And.
We double EBITDA.
Because it doesn't matter because our organic revenue growth growth didn't go up but our earnings went way up our cash went way up cash flow went way up in and it gave us tremendous opportunity.
Drilling too.
All of those great decline start showing them all of our opportunities.
Rhythmics is it.
Treasure trove of expertise.
A worldwide business. So we have opportunities to go into these large organizations I think.
You know, we just did a million dollar deal with one of our clients on our new Blue Sky portal.
And that that makes it so easy for our clients to be able to comply with all the regulations in all 50 states and it's a pain in the net.
More things that we can take away from our clients who are paying to them.
The larger our.
Our land and expand.
<unk> gross and that's why we put him in charge.
I think several other of our top sales executives are also now.
Drilling into all of our different opportunities at our client base, our 18000 clients.
But you know you can't go into a place as large as DST.
And start to swing you slide channel right.
Right you got to go in there and you've got to understand and you got to be willing to.
Except the slings and arrows.
The wall Street for a while but there's no way we'd be at $4 7 billion.
Revenue.
Without without those three acquisitions in.
I guess like Mike Slide home and.
And Kevin Rafferty, and John July and Danny Delmastro Tory.
And a whole bunch of other people at DST have done a great job.
And I think that those people understand.
So thats supposed to feel extra beyond the GAAP.
And this breaks up its not in our DNA.
But you know.
A lot of brakes.
It's a breaks and so we had to break those breaks and then on the GAAP level.
But remember it's $2 billion in revenue.
$2 billion.
Now that it starts growth.
That's going to really put some wind in our sales and allow us.
If we execute and I believe we are execute it's going to get better and better and better.
And that's why you see.
The changes we've made the bundling of our products.
You know the the.
Improved outlook that we have because of all the work we've done.
No.
When they.
Stone cutter.
Swings that acts out of pizza granted it doesn't crack the first time.
Mike cracks a 100 per tonne.
But something tells me those 99 swings he made before she made before it correct.
I had an impact on me correct.
And that's the same thing we've done we know it.
Granted we know we've got a swing we got to stay focused we know we've got a push.
It's not easy for everybody.
That's what we do that's how we manage and that's how we generate cash flow that's how we generate earnings.
And you know.
It used to be earnings and cash flow were really important.
Al.
The kind of reported.
But they are not as important as organic revenue growth, but we did the things we think were necessary in order to.
Set the platform ticket revenue.
Great. That's very helpful perspective, Thank you for that and if I can just follow up briefly has the pandemic and the effect of that flushed out some of the competition in the fragmented portions of your markets. In other words are you now even stronger and some of the segments, where you might have had more competition from.
The.
Startups and smaller players that are not as well funded.
Well I think.
Actually.
I think we're going to do better against the larger ones the biggest ones.
I think to use so.
Third parties in India has not been very effective for an awful lot of March.
Prices.
We use our own free.
Almost 100% and it's taken us.
You know a year or two years, two and a half years comment on this too but but.
But we had I think 16800 contractors from Centel network.
T that we've now.
Completely re batched.
They're not all work for us.
And we have less and less.
Outsiders.
Inside <unk> and we operate better when we're in charge of People's raises People's bonuses peoples promotions People's careers.
And that's been a really big.
A really big help for our for our business.
So Neil over in India has done a great job for us.
We're going to continue to execute and I think we're going to continue to.
To surprise positively on a role what do you think.
Well I would just coming back to what you said about customer satisfaction and net promoter scores, we have seen really high levels of accolades from our customers throughout the <unk>.
Both large and small customers and we do think that this has been a disruptive time for many in the marketplace. So relatively place we're getting stronger.
On an absolute basis, but also relative to others.
We are really well positioned going forward.
Great. Thank you so much.
Our next question comes from the line of Jackson Ader from Jpmorgan. Your line is open.
Great. Thanks for taking my questions guys.
Bill the first one for you on.
Main reasons, you win and lose Youre talking about being at the high end or low end of the guidance range just depends on whether you're actually Wyndham. These sales are not and I'm curious.
The reason that you win and the reasons that you lose have they changed over the last.
Over the last couple of years, just curious on your thoughts.
Well I think I think.
For a number of the businesses.
So we inherited.
With DST, they hadn't had a win in a number of years.
Alright so.
Changing that.
Entire.
Added to.
You got to believe you can win.
We're going to win.
Your prospects to know immediately if.
Youre not confident.
So you know.
You know not knocking that in security out of people.
And it's not comfortable for people, but thats, where we are right now.
Let's get at it.
<unk> built software.
And whether thats, a fraud waste and abuse app that we bid for.
Four.
S SMC health or whether thats the improvements that we've made to the.
To the the transfer agency business, that's a large business for us are what we've done in the retirement business.
First you have to have a superior product.
And then you have to have a very trained work force.
Alright, so that they can implement.
And you have to have a knowledgeable marketing team.
At current market.
And you have to have.
A great sales force.
So as I've said many times right.
We as a sales team.
Every week.
Some of these places we bought didn't meet except every month.
So there is there's a big difference in the culture.
In the drive in.
And again you have to recognize that.
We did $1 $24 billion in cash flow.
In 2020.
In 2017.
We did about 400 G.
So you know we've tripled our cash flow.
And again, that's a very positive thing it gives us lots of resources to invest in.
Training education more technology, we've hired some great people that have done some great work for us.
Anthony Chaos John.
All kinds of people who've done just great jobs Boston.
And I think that that's going to continue.
They like women.
They get paid more when they win.
Alright, So I think that's that's been.
The major the major reasons why we win.
Is it more organized to Amens doing a great job getting it more organized than it was and and we're competitive.
And we're not going to just sit back and.
And not go after.
Our competitors' clients day.
Correct.
And.
And they go like that.
That's fine that's the nature of the competition.
Great.
I appreciate that that's what it what about the link.
Asset.
What did you find really attractive about it.
And what are some of the main.
Main reasons that you kind of went through there.
Well I mean.
I think it's a good business.
We really like Australia as a market.
We have done very well in Canada, and we feel like we can replicate that in.
In Australia, we've got a nice business.
Uh huh.
And Australia, and we want to have a bigger outsourcing businesses.
In Australia, and link would have fit that bill, but but there's a lot of work to do online channel.
You know I believe they've started their process, but.
We have some.
A lot of work on DST, we have lots of.
Positive momentum.
On this call.
And we didn't really want to.
No.
Have another situation where.
I got to tell you guys.
Two or three.
Your change.
And so we decided that that.
That really didn't fit with what we wanted to do and so and so we went through you know it still a good company I think they will do fine but.
But it wasn't something that we wanted to we wanted to tackle right now.
Okay, great that makes sense. Thank you.
Our next question comes from the line of Peter Heckmann from D. A day.
Davidson Your line is open.
Thank you and good afternoon, everyone.
One maintenance question I didn't hear you mention the pending capita acquisition is that deal is still pending or has it closed.
Consumer revenue is still pending.
Yes.
Okay.
But it's not that.
Theoretically you're still you're still pursuing the close.
Yeah, we had one.
Non large client that catheter that was not going to fit in.
With that acquisition and they had to find alternatives.
While we believe that has been rectified and we would expect.
Expect it to close in the next.
You know 60 90 days.
And.
But we have expected that a couple of times in the past so.
So we went out.
We want to make sure it's not that big of an acquisition.
Okay, and then just in terms of when we're looking out over the next couple of years.
Could you identify any pending regulations.
Kind of like a seesaw.
Whether it's in the U S or globally that you think can serve as demand drivers for.
For spanned our upgrade activity anything out there that we should be monitoring.
Well I mean, obviously you have a new new.
Administration of the United States, and there's going to be much more active in financial services isn't going to do financial services.
As a money part for taxes, and so theres going to be a lot of regulation.
No different in form Pf and other things that came out.
You know in 2012, 2014 timeframe and so.
We would expect that.
You know what's going to be.
I'm guessing it will be pretty similar from.
When it was 2008 2016 and and there will be.
There will be opportunities to help our clients.
Meet those new regulations, and those new tax requirements.
Cost effective way as possible.
Got it got it okay, if I could just sneak in one more.
There was a.
Joint venture announced by a number of financial services companies State Street Pimco Man group.
It looked like they were going to be focusing on on business process outsourcing for the fund industry.
Is that something that's on your radar and do you think that would be something that would be potentially competing with.
Any operations of SMC or branch DST.
Well hey, those are.
Large sophisticated companies with with a lot of great people in and.
My guess is there's probably a little bit of politics in every one of those places.
So when they all get together.
Might be like the United Nations.
So we'll have to see what happens.
What happens with that.
We're well aware.
But we're also.
Executing on our plan.
Now hopefully we will see them in our rearview mirror.
Fair enough fair enough I appreciate it thanks.
Okay.
As a reminder, please please limit yourself to one question and one follow up so that the other participants will be able to ask your question. Our next question comes from the line of Michael Young from truly Securities. Your line is open.
Hey, Thanks for the question.
Wanted to just kind of ask maybe high level, you know coming from 2020, which was heavily impacted pandemic year to some hopes of reopening. This year could you just maybe give some color on the conversations with clients and how they've trended and could there be sort of a backlog of activity as people kind of refocus on operating income.
<unk> businesses in 2021, just any color on that would be helpful.
Well I think.
Because as you well know right when you have a crisis such as this.
The rapidity of change probably goes up tenfold.
So company.
Companies that would have never believed.
They could operate.
Yeah.
Now operate from remote.
Yes, I think that it's.
It's going to change.
So how we.
All execute on.
On our strategy uses and how we deploy our greatest asset obviously is our people.
Keeping them safe as is Paramount.
There's going to be a lot of things that are going to be important that we.
We focus on them.
And I think.
Obviously, you guys are a recent merger of two large banking organizations.
And my guess is that there is a lot of change going on at true too.
You have a.
A major acquisition during a pandemic so there's.
Added impetus to.
Streamlining your operations make him an efficient as possible make sure you have redundancy cyber.
Cyber security is a very big deal.
And I think that that we need to be.
Cognizant of what is.
What is out there.
No we need to be prudent.
When we know we need to act quickly.
But.
But it.
It seems to me to be.
Poor strength.
Okay and my second question I, just wanted to follow up on a few of your comments I think you've kind of highlighted how the markets.
More eager and revenue growth versus good stable cash.
Cash flow businesses is there any desire with either your next M&A deal or just kind of how you're managing internally to try to ramp up the revenue growth piece of the business as opposed to just cash flow.
We're trying.
I would tell you that our focus.
Is probably you know.
We're not going to forget about cash flow and we're not going to convey that forget about earnings.
But our focus is on.
<unk> revenue.
And anybody who has any conversations with me knows exactly.
R&D conversations with Patrick or any conversation with role or any conversation with aiming or justin or anyone else in the company.
Everybody knows its revenue.
You can't.
Pigeon hole everything you got to make sure.
Yes.
You know everybody admires, Jeff Bezos, and he's apparently did their own revenue growth.
And it's admirable.
But not everybody has a has an Amazon business.
So we need to be prudent.
We're not going to go.
By up to 100000, 200000 square feet of office space.
New York and London Paris.
Frankfurt and other places.
We think that would be a poor use of our <unk>.
Cash or you know not that we don't have strong cash amount that we probably couldn't afford it we probably could.
But.
We're not Google.
We don't have more money then.
Most nation.
Well, we're going to be prudent we're going to think.
And we're going to make sure.
Our people are safe and they're not coming back into the offices.
Until we can make sure that.
Environment is safe for them in.
And.
And we're ready so.
I think that's how we're trying to operate in a.
We're very focused on revenue growth, that's a little more difficult getting a large scale licenses when you don't get.
In person meetings.
So, but we're working at it.
Some day Olson and were women.
Like I said the songs <unk>.
Services business has been strong natural lengths is kind of very very full pipeline.
<unk> you are doing a great job there.
The Truckee and are doing a great job, there and I think that the opportunities are greater than they've ever been.
But those are opportunities still gotta catch the ball over the goal line.
Yes.
Okay. Thank you.
Our next question comes from the from the line of Chris Donat from Piper Sandler Your line is open.
Good afternoon, Thanks for taking my question.
Bill wanted to ask one question about.
The redemption indicators that we see for <unk> and <unk>.
January was the lowest number on record since 2008.
Do you think thats, mostly market forces or is there anything changing in the competitive landscape. That's that's keeping redemptions from.
From leaving.
S FNC.
I mean I think that.
I think that we have really are.
Blue chip roster of.
Our funds.
But that being said it's probably.
Sure.
The heavy plant some of what's happening in the market I mean, if you look at.
That's the amount of assets going into private equity and real estate private credit.
And hedge funds I think youll see that net.
People are starving for.
For our return starving for income.
And they're not finding it in corporate bonds or core government bonds for sure.
So I think.
That.
People redeem.
Either when they have a life event like buying a house or.
Our retiring or something or.
They haven't alternate place to put their money.
If they don't have an alternative place to put their money they tend to stand Pat and I think.
The hedge fund industry in particular, and the other ones the real estate industry as well as investment in <unk> as well as the.
Private equity industry is learning to communicate with their investors.
And that communication.
And again, that's something that SSC is.
Is very well positioned.
April to help our customers communicate.
With their customers.
With their investors and I think that's another reason why.
The redemption indicators for base.
Historically low.
Okay. Thanks for that and then Patrick one question about guidance.
Well for the fourth quarter, you commented that there was less travel and less usage of contractors in the fourth quarter.
Are those two things that you would expect to stay low through the remainder of 2021 or do you expect travel and contractor usage to increase kind of over the course of the year as things get to some level of new normal.
Yes, the contractor reduction is.
Due to the fact that we moved the India contractors to in house employees, So that'll be a program.
For 2021.
And on travel I think basically we've assumed that.
Travel expenses won't be a heck of a lot different in Q1, and most of Q2 and then gradually start increasing in the third and fourth quarter, but not be back to you.
Pre pandemic levels Thats kind of the assumption we've made.
Got it thanks very much Patrick.
Our next question comes from the line of James Fawcett from Morgan Stanley. Your line is open.
Hey, Thanks, just a couple of quick questions for me to follow up on previous questions and answers first on on DST I think you made a comment around.
Some incremental work or improvement on DST.
That you're working on I'm, just wondering if you can touch on that.
First of all.
Well again I'll take.
30 seconds and then.
Rahul, but we have made a lot of change this is Mike.
A lot of changes.
Net.
Nick right.
Over in.
At the end of June last year, and he has done a great job force he's based in London.
And Kevin Rafferty came in and he is running our retirement.
Solutions business and he's doing it with John Ely, and they're both of them.
Great great job for us.
We haven't.
Let's focus on that business.
So we've made a number of changes there we talked about Danny Delmastro and tend toward grabbing running on our health care business.
They brought it up quite a bit.
Increased level of focus and intensity and I believe that that will pay offs seek took over.
Oh, I think we'd be September or maybe it might've been in August last year, and so we've made a lot of changes in the sales force.
Is now reporting up through a minute.
Global <unk> and <unk>.
Mike has taken Rob stone and some other.
Sales executives that we havent and slaughtered them into.
The DST business John Kilgallon.
A bunch of others that are there.
Really top flight people in and out no.
How we operate how we prepare and how we show our worse too.
To our various various prospects.
Would you have anything else flow.
Well the only the only thing I would add is in addition to the sales focus.
And just overall more attention to the speed at which we execute and making sure that there is tangible things that we're trying to do and we're all marching in.
Just some pace too is we're also really focused on product development and innovation. So a lot of our hires even below the senior executives that you mentioned had been in folks that are bringing in new technologies, whether that's digital which a lot of our clients are looking for or things, we can do with.
Artificial intelligence and machine learning, we made an acquisition of <unk>, there's others. So so we're giving that sales force more tools to be able to differentiate themselves from our competitors and that's helping.
Got it got it and then I appreciate that and then bill.
You started off talking about acquisitions and discipline and look clearly you've.
Built into established incredibly strong reputation of being able to find the right things at the right time and under the right circumstances.
What kind of moves your guardrails, if you will of discipline around it and I guess I'm thinking about the current environment and maybe more generally how you think this ultimately how the current environment ultimately plays out and what do you <unk>. Since you have to do to be prepared to take advantage of when things do change and.
And start to adjust.
Hello James.
It again.
Kind of do the work right I mean, you have to have people find businesses that we can.
We can.
Ultimately buy.
We have.
I have looked at making a number of different.
The investments to get to know.
No business is better.
And then see if we can.
Can help them grow and then.
And then ultimately acquire them.
We have to stay close to the private equity industry.
We have to stay close to large scale financial institutions that want to get rid of.
Divisions are one of the joint venture with us in ways that they can.
Really improve their margin profile.
So theres a number of those kinds of things so that I think are there.
The path to two very accretive acquisitions.
That drive revenue growth.
It's work right I mean, it's looking at a lot of deals.
Haven't disciplined about it.
It's not.
Not turning this into.
The focus is on our business the focus is on.
What we could do.
To buy additional businesses.
We have a lot of businesses, we have 18000 clients have tremendous upsell and cross sell opportunities.
We have tremendous development team thousands of developers.
All right, we need to be able to build product deliver product market product.
Cell product.
<unk> prices right.
Alright, we need to create this entire environment, where we're the best.
Alright, so when we went into fund administration in 2002, we didn't have a dollar.
And we have two trillion dollars.
It's the same thing.
Cute.
And then you can bring in.
Places like Eisner fast, where we get people like Rahul Kanwar Renee Mooney.
Yes, Scott.
Paul.
Chris Mad pack and a bunch of others.
Quality capability breadth depth.
And you keep marching through and now that we're the largest fund administrator boasts an edge and.
Private equity and we're moving up fast.
Real estate to put cash Maldives has done a great job, but we just got a lot of great people and.
You know there was awful lot of work to do with <unk>.
<unk> eight $3 billion.
2018.
Thanks, a lot bill thank you very much.
Our next question comes from the line ups in India 10 from Jefferies. Your line is open.
Thanks for taking the question guys.
Just following up on the comment about the focus around revenues and growth can you talk a little bit about maybe how pricing fits into that strategy in terms of how you think about it on an annual basis and then if there's any impact that we should be thinking about from.
From a COVID-19 perspective this year in the sense that maybe there is clients that have asked you to hold off on pricing increases and any color you can provide there would be helpful.
You want that one.
Yes, so thus.
Thus far in the annual pricing conversations that we've had and it really hasn't been that different than it was last year and now this was a.
Pretty new process for US last year was the first time, but.
The conversations have gone well and there are as I am.
Mentioned earlier, we are going to be reasonable and to the extent that we have a customer that has some constraints. Obviously, we're going to respect that and and try to make it work to the satisfaction of both vessels in C&I customer, but they've been going pretty well.
Got it and then just a quick.
I guess modeling question just.
Can you remind us of the expected impact on revenues in 2021 for DST clients that were terminated pre acquisition.
So it's $25 million for the full year.
Okay. Thank you.
Thanks, guys.
No further questions at this time I will now turn back the call over to Mr. Bill Stone.
Thank you.
Again, thanks, everybody for your thoughtful questions and and.
Again.
We're going to execute and I look forward to.
Talking to you in.
Late April early May.
Thanks.
Yeah.
Thank you again for participating this concludes today's conference call you may now disconnect.
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