Q3 2021 SS&C Technologies Holdings Inc Earnings Call

October 28, 2021

[music].

Okay.

Ladies and gentlemen, thank you for standing by. At this time I would like to welcome everyone to the SS&C Technologies' third quarter 2021 earnings call. All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time simply press star then the number one on your telephone keypad. If you would like to withdraw your question simply press star one again.

If you would like to ask a question during this time, simply press star then the number one on your telephone keypad.

If you would like to withdraw your question simply press Star one again.

I would now like to turn the call over to Justine Stone Investor Relations for opening remarks, you may proceed.

Hi, everyone, welcome and thank you for joining us for our Q3 2021 earnings call. I'm Justine Stone, Head of Investor Relations for SS&C. With me today is Bill Stone, Chairman and Chief Executive Officer, Rahul Kanwar, President and Chief Operating Officer, and Patrick Pedonti, our Chief Financial Officer.

Before we get started we need to review the Safe Harbor statement. Please note that various remarks we make today about future expectations plans and prospects, including the financial outlook. We provide constitute forward-looking statements for the purposes of the Safe Harbor provisions under the private security Litigation Reform Act of 1995.

the private security 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.

The risk factors section of our most recent annual report on Form 10-K, which is on file with the FTC and can also be accessed on our website. These forward-looking statements represent our expectations only as of today October 28, 2021, while the company may elect to update these forward-looking statements. It specifically disclaims any obligation to do so. During today's call, we'll be referring to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to comparable GAAP financial measures is included in today's earnings release, which is located in the Investor Relations section of our website at www.ssctech.com.

these forward-looking statements. It specifically disclaims any obligation to do so. During today's call, we'll be referring to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to comparable GAAP financial measures is included in today's earnings release, which is located in the Investor Relations section of our website at www.ssctech.com.

You don't S. S C Tech dotcom.

Also in the third quarter, we entered into a joint venture named Omani Rx LLC, in which we are the majority interest holder and primary beneficiary. All earnings figures discussed today, including operating income EBITDA, net income and EPS are attributable to assets in fee-based on the ownership interest retained by SS&C.

interest retained by SS&C.

I will now turn the call over to Bill.

Thanks, Christine and thank everyone for joining. Our results for the third quarter or $1.266 billion and adjusted revenue. Up 9.5%. And adjusted diluted earnings per share up 20%. Adjusted consolidated EBITDA was $530 million. And we are on track to end the year with over $2 billion in EBITDA.

95%.

And adjusted diluted earnings per share up 20%.

Adjusted consolidated EBITDA was $530 million.

And we are on track to end the year with over $2 billion.

EBITDA.

Our adjusted consolidated EBITDA margin grew to 42.6% in the quarter up 230 basis points from Q3 2020. Our third-quarter adjusted organic revenue was 8.2%.

6% in the quarter up 230 basis points.

Q3 2020.

Our third quarter adjusted organic revenue was eight 2%.

As we continue to gain momentum in Q2, 7.2% organic revenue.

All of our businesses outperformed our expectations in our alternatives, interlinkes and software businesses drove the topline growth. We are accelerating our new business wins in competitive takeaways. Capitalizing on strong markets.

The topline growth, we are accelerating our new business wins in competitive takeaways.

Capitalizing on strong markets.

The past few quarters highlights SS&C financial power. So digesting large acquisitions, we were able to drive strong top-line growth organically, while improving margins over 200 basis points in growing earnings at 20%.

This financial power.

So digesting large acquisitions, we were able to drive strong top line growth organically, while improving margins over 200 basis points.

Growing earnings at 20%.

We are maintaining our lower cost structure through the pandemic and continue to drive efficiencies through automation.

Machine learning robotics process automation and artificial intelligence capabilities are being implemented across our businesses and products.

We are currently rolling out our strategic development enhancement within the hedge fund services portal.

Whereby we are leveraging various AI principles and concepts to enhance control, provide greater transparency around NAV anomalies exceptions and key operational processes. This new product is called [go central]. These types of dwell metrics, not only generate revenue, but are margin enhancing. SS&C generated net cash from operating activities of $944.8 million for the nine months ended September 30th, 2021 up 25% from the same period last year.

This new product is called <unk>.

These types of dwell metrics, not only generate revenue, but our margin enhancing.

<unk> generated net cash from operating activities of $944 8 million for the nine months ended.

September 32021.

25%.

Same period last year.

We repurchased $2.1 million shares of common stock in Q3 2021 at an average price of $75.97 per share for 162.9. At our current valuation, we will continue to aggressively buyback stock. We paid down $317.8 million in debt for the first nine months of 2021, and our leverage ratio stands at 1.97 times secured and 2.96 times total leverage.

Two 1 million shares of common stock in Q3 2021 at an average price.

$75 97 per share for 100.

$52 $962 nine.

No.

At our current valuation, we will continue to aggressively buyback stock.

Pay down $317 8 million in debt for the first nine months of 2021, and our leverage ratio stands at 197 times secured and 296 times total leverage.

We remain committed to a shareholder friendly capital allocation strategy and now that we're under three <unk>. EMS Levered, we have increased flexibility to allocate more cash towards buybacks.

EMS Levered, we have increased flexibility to allocate more cash towards buybacks.

Our business is running on all cylinders, our pipelines are strong and increasingly complex global large deals as organizations review, their complete operating model and technology stack.

Several of our products have met milestones the most recent being precision LM.

Exceeding 100 classes. The growth comes as banks and nonbank lenders have increased their investment portfolio is private credit lending activities and exposure to commercial and residential loans.

Precision added 20 new clients in the last 12 months. We are capitalizing on market trends and recently launched our ESG reporting solutions platform. For asset managers to better monitor and report on ESG exposure.

We are capitalizing on market trends and recently launched our ESG reporting solutions platform.

For asset managers to better monitor and report on ESG exposure.

Our solution provides accurate and detailed in ESG ratings data, which is a game-changer to help investors understand sustainable investing in ESG exposures. I'll now turn the call over to Rahul to discuss the quarter in more detail.

I'll now turn the call over to Rahul to discuss the quarter in more detail.

Thanks Bill. Most of our global offices have reopened and we're seeing employees attending in increasing numbers on a voluntary basis.

Most of our global offices have reopened and we're seeing employees attending in increasing numbers on a voluntary basis.

We're optimistic that the added opportunities for in-person collaboration combined with the work anywhere flexibility, we're providing to our staff will enhance innovation and execution.

Our businesses are benefiting from the global trend towards outsource technology and services. As firms to evaluate their desired post-pandemic operational state. Our fund administration Middle office and advent businesses are seeing greater demand.

This trend also impacts private market alternatives with firms looking at their operational capability and limited partners in assessing the resilience and scalability of the managers they invest with. Our functional depth continues to grow in lockstep with the steady addition of signed and live clients.

Our functional depth.

<unk> continues to grow in lockstep with the steady addition of signed and live clients.

Collaboration across SS&C teams combined with R&D investments have resulted in a new generation of enterprise solutions. This allow asset managers banks insurance companies alternative managers retirement, and wealth management firms and others to look to look to SS&C as a strategic partner that offers a comprehensive solution set to address several of their requirements. As a result, we're seeing larger deal sizes and greater appreciation for the ways in which we can deliver value to our customers.

Allow asset managers banks insurance companies alternative managers retirement, and wealth management firms and others look to assets and fee as a strategic partner that offers a comprehensive solution set to address several of their requirements. As a result, we're seeing larger deal sizes and greater appreciation for the ways in which we can deliver value to our customers.

Now I will mention some key deals. One of the world's largest hedge funds in existing middle office clients chose SS&C to run shadow accounting. And managed account platform chose SS&C for fund services financial statements, bank loan servicing and reconciliation.

One of the largest world's largest hedge funds in existing middle office clients chose essence and seem to run shadow accounting.

And managed account platform chose essence since Nicole Bob for fund services financial statements Bank loan servicing and reconciliation.

A $30 billion plus hedge fund who had been running access for over 20 years upgrading to Geneva, and Geneva cloud delivery after three year evaluation.

The 10 billion-plus Canadian Prime broker added advanced in cobalt to their technology stack, citing its scalability. A$50 billion AUA asset manager chose black Diamond because of our partnership focus. US-based wealth managers saw the higher level of support and stability and chose a combination of as the EMS and market trader to replace their current solution. A top US insurance company chose Chorus.

Asset manager chose black Diamond because of our partnership focus.

U S based wealth manager saw the higher level of support and stability and chose a combination of as the EMS and market trader to replace their current solution.

A top U S insurance company chose chorus.

Our latest automated workflow solution, an existing fund administration client expanded their relationship to include retail alternatives for agency digital Investor and Chorus, I'll now turn it over to Patrick to run through the financials.

Thanks. Results for the third quarter 2021 were GAAP revenues of 1 billion $264.4 million. GAAP net income of $184.4 million and diluted EPS of 69 cents. Adjusted revenues were $1 billion $266.3 million. Including the impact of the adoption of the revenue standard 606 and for acquired deferred revenue adjustments for acquisitions.

Results for the third quarter 2021 were GAAP revenues of 1 billion $264 4 million.

GAAP net income of $184 4 million and diluted EPS of <unk> 69.

Adjusted revenues were $1 $266 3 million.

Including the impact of the adoption of the revenue standard 606 and for acquired deferred revenue adjustments for acquisitions.

Adjusted revenue was up 9.5%. Adjusted operating income increased 16.8%. And adjusted EPS was $1.32, a 20% increase over Q3 2020. Overall, adjusted revenue increased $110.1 million or 9.5%. In Q over Q3, 2020, our acquisitions contributed $10 million in the quarter. Foreign exchange had a favorable impact of $10.4 million or 0.9% in the quarter. Adjusted organic revenue increase on a constant currency basis was 8.2%.

Adjusted operating income increased 16.8%.

And adjusted EPS was $1.32, a 20% increase over Q3 2020.

Overall, adjusted revenue increased $110.1 million or 9.5%.

In Q over Q3, 2020, our acquisitions contributed $10 million in the quarter.

Foreign exchange had a favorable impact of $10.4 million or 0.9% in the quarter.

Adjusted organic revenue increase on a constant currency basis was 8.2%.

Eight 2%.

We had strength across several product lines, including alternative assets. Advent software retirement business Alps. Our brokerage business and the interlinks business.

Advent software retirement business Alps.

Brokerage business and the <unk>.

<unk> business is.

Adjusted operating income for the third quarter was $524.1 million, an increase of $75.3 million. Or 16.8% over the third quarter of 2020. Adjusted operating margins increased 38.8%.

Or 16, 8% over the third quarter of 2020.

Adjusted operating margins increased 38, 8%.

Adjusted operating margins increased from 38.8% in Q3 2020 to 41.4% in the third quarter of 2021, or 260 basis points improvement.

And by strong revenue increase and cost controls.

Expenses increased 2.2% on a constant currency basis. In addition, acquisitions added $9.6 million of expenses and foreign currency increased cost by $8.4 million. Adjusted consolidated EBITDA, which is defined in note three of our earnings release was 538.9 million.

Adjusted consolidated EBITDA, which is defined in note three of our earnings release was 538.9.

Or 42.6% of adjusted revenue, an increase of $72.6 million or 15.6% from Q3 2020.

<unk> increased $72 6 million or 15, 6% from Q3 2020.

Adjusted consolidated EBITDA margins increased 230 basis points from the third quarter of 2020.

Net interest expense for the third quarter was $50.2 million and includes $3.3 million of non-cash amortized financing costs and OID. The average rate in the quarter for our credit facility and our senior notes was 3.1% compared to 3% in the third quarter of 2020.

The average rate in the quarter for our credit facility and our senior notes was three 1%. Prior to 3% in the third quarter of 2020.

Prior to 3% in the third quarter of 2020.

A reduction in our debt balance would resulted in interest expense decreasing $4.5 million or 8.2%.

Our debt balance would.

Resulted in interest expense decreasing $4 5 million or eight 2%.

During the third quarter and in connection with the legacy DST ERISA matters and associated legal proceedings, we recorded an expense of $43.4 million.

In connection with the legacy DST ERISA.

Matters and associated legal proceedings, we recorded an expense of $43 4 million.

to other income and expense.

The inherent uncertainty associated with the resolution of this litigation the ultimate resolution of and any potential exposure related to this matter is somewhat uncertain at this time.

And any potential exposure related to this matter is somewhat uncertain at this time.

We recorded a GAAP tax provision in the quarter of $60.6 million or 24.7% of pretax income in.

And expect the GAAP tax provision to be approximately 26% for the full year.

Adjusted net income was $352.9 million and adjusted EPS was $1.32, and the effective tax rate used for adjusted net income was also 26%.

Diluted shares decreased to $266.5 million from $267.6 million in the second quarter.

From $267.6 million.

The impact of share repurchases was partially offset by an increase in the average share price and option exercises.

On the balance sheet and cash flow, we ended the third quarter with $351.1 million in cash and cash equivalents and $6 2 billion of gross step. SS&C net debt as defined by our credit agreement. Which excludes any cash and cash equivalents of $138 million. Tell that the demand Rx JV was $6 billion as of September 30. Cash flow for the nine months ended September 30th was $944.9 million. $189 8 million or 25% increase compared to the same period in 2020.

<unk> net debt as defined by our credit agreement.

Which includes excludes any cash and cash equivalents of $138 million.

Tell that the demand Rx JV was $6 billion as of September 30.

Cash flow for the nine months ended September 30th was $944 9 million.

$189 8 million or 25% increase compared to the same period in 2020.

A couple of highlights for the nine months. We've purchased treasury stock buybacks of $487 9 million for purchases of $6 8 million shares. At an average price of $71.74 per share. In July 2021 that the board authorized a new stock. Our repurchase program for up to $1 billion of stock buybacks.

Treasury stock buybacks of $487 9 million for purchases of $6 8 million shares.

At an average price of 71.

74 cents per share.

In July 2021 that the board authorized a new stock.

Our repurchase program for up to $1 billion of stock buybacks.

The program today Treasury stock buybacks was $102 million per person to $2.1 million shares at an average price of $75.97. Net debt payments were $317.8 million compared to $330 million in the same period of 2020. We declared and paid $122.8 million of common stock dividends, an increase of 22.9% the prior year. In the nine months, we paid $173.2 million of interest. Compared to $212.7 million in 2020. And income taxes, we paid $230.8 million compared to $182.5 million in the same period in 2020.

Net debt payments.

$317 8 million compared to $330 million in the same period of 2020.

We declared and paid a $122 8 million of common stock dividends, an increase of 22, 9%.

The prior year.

Okay.

In the nine months, we paid $173 2 million of interest.

Compared to $212 7 million in 2020.

And income taxes, we paid $238 million compared to $182 5 million.

Same period in 2020.

Capital expenditures and capitalized software were $96.2 million or 2.6% of year to date, adjusted revenue compared to $80 million or 2.3%. Year to date in Q3 of 2020. Our LTM EBITDA, which is used for covenant compliance was $2 billion. $19.5 million as of September 2021. And includes $1.8 million of acquired EBITDA and cost savings related to acquisition.

Two 6%.

Year to date, adjusted revenue compared to $80 million or two 3%.

Year to date in Q3 of 2020.

Okay.

Our LTM EBITDA, which is used for covenant compliance was $2 billion.

$19 5 million as of September 2021.

And includes $1 $8 million of acquired EBITDA and cost savings related to acquisition and.

And based on net debt of 6 billion. Our total leverage was 2.96 times. And our secured leverage ratio was 1.97. The outlook for the fourth quarter. I'll cover a couple of assumptions first.

And our secured leverage ratio was one point.

Seven.

Okay.

On outlook for.

The fourth quarter.

I'll cover a couple of assumptions first.

We will continue to focus on delivering quality client service and we expect our retention rates will continue in the range of our most recent results.

On delivering quality client service and we expect our retention rates will continue in the range of our most recent results.

We will expect foreign currency exchange to be at approximately current levels.

And adjusted organic growth for the year will be in the range of 4.8% to 5.9%.

Adjusted organic growth for the fourth quarter will be in the range of 1.1% to 5.3%.

Interest rates on our term loan will be approximately the one month LIBOR. The spread which is currently a 175 bps.

Approximately the one month LIBOR.

The spread which is currently a 175 bps.

We expect expenses to increase sequentially due in part to the impact of higher personnel costs as a result of our annual merit increases. Which took effect on October 1st.

In part to the impact of higher personnel costs as a result of our annual merit increases.

Which took effect October one.

And we're seeing increased employee benefit cost.

We will continue to invest in our business long term and our capital expenditures will be approximately 2.8%.

And we will continue to allocate free cash flow to both stock buybacks and some debt pay down.

So for the fourth quarter of 2021, we expect revenue in the range of $1 billion $225 million to $1 billion $275 million.

Adjusted net income in the range of $311 million to $334 million.

Diluted shares in the range of 266.2 million to 266.7 million.

2 million to 206.7 million.

And for the full year. The range for revenue will be $4 billion $988 million to $5 billion $38 million. Adjusted net income in the range of a $1.312 billion to $1 billion $335 million. Diluted shares in the range of $266.9 to $267.4 million. And for the full year, we expect cash from operating activities to be in the range of $1 billion $365 million to $1 billion $385 million. And now I'll turn it over back to Bill for final comments.

The range for revenue will be.

$4 billion $988 million to $5 billion 38 million.

Adjusted net income in the range of a $1.312 billion to $1 $335 million.

Diluted shares in the range of $266 nine to $267 4 million.

And for the full year, we expect cash from operating activities to be in the range of $1 billion 365 million.

It's a $1 billion 385 million.

And now I'll turn it over back to Bill for final comments.

Yes.

Yeah.

Okay.

Bill, are you there? You might be muted.

Thanks, Patrick, we are proud of the progress we've made this year. All of our businesses are gaining momentum capitalizing on opportunities and continuously improving. Organic growth was up 8.2% and we expect around 5.5% for the full year.

Organic growth was up eight 2% and we expect around five 5% for the full year.

Hopefully we can surprise you positively.

Turning to the assets under administration increased another $80 billion in Q3 for a total increase of 480 billion since the first quarter of 2020.

In Q3 for a total increase of 480 billion since the first quarter of 2020.

We now have $2.2 trillion in assets under administration and we're hundreds of billions ahead of our next competitor.

Of our next competitor.

EBITDA margins were up 230 basis points, and we were operating at our highest margins since the large acquisitions we made in 2018.

Since the large acquisitions, we made in 2018.

We have a number of strong leaders and an abundance of opportunity, which we will showcase on November 10th, Virtual analyst day.

Virtual analyst day.

Please see our events on our Investor Relations webpage.

To register and reach out to Justine for additional information.

I'll now open it for questions.

For questions.

The floor is now open for your questions to ask a question simply press Star then the number one on your telephone keypad, we do ask to please limit your one question and one follow up question.

Your first question comes from [inaudible] of Jefferies.

Congratulations on the quarter, gentlemen. My first question is related to just the margin profile. There was a significant increase in the margins quarter over quarter. And then we had a similar increase last quarter, on the call you talked a little bit about automation being one of the drivers. Is there any additional color that you can provide in terms of what might be at normalized level? When I look at the gross margins for your software services enabled business, It seems that's where you're realizing most of the savings.

My first question is related to just the margin profile.

There was a significant increase in the margins quarter over quarter.

And then we had a similar increase last quarter on the call you talked a little bit about automation being one of the drivers is there any additional color that you can provide in terms of what might be at normalized level.

When I look at the gross margins for your software services enabled business, It seems that's where you're realizing most of the savings.

Well I'll give it a little crack and then Rahul and Patrick you guys can chime in but.

You know, since the pandemic, we're not leasing near as much space as we did in the end of 2020.

We're not leasing near as much space as we did then and now.

The end of 2020.

And I believe that will continue into 2022.

And we also have had less aggressive hiring than we have had in the past not that we aren't hiring we are.

Less aggressive hiring than we have had in the past not that we arent hiring we are.

But we have some pickup because of the number of people, we had versus what we had expected.

<unk> had some.

Some pickup because of.

The number of people, we had versus what we had expected.

So I think those are two big things and I think that our pricing discipline has helped us.

And I believe it will continue.

Rahul.

Hello. I agree with all of that and I think the things that I would add are we've also had an opportunity to spend a fair amount of energy on R&D. So you know Bill talked about machine learning and some of the other things we're doing and that has resulted in productivity.

Agree with all of that and I think the things that I would add are we've also had an opportunity to spend a fair amount of.

Energy on R&D. So you know bill talked about machine learning and <unk>.

Some of the other things, we're doing and that has resulted in productivity.

Alright, and we expect those productivity gains to continue.

So just to clarify is the current level margins that you're generating in the neighborhood of what we should expect on a go-forward basis subject to any kind of seasonality?

Margins that you're generating in the neighborhood of what we should expect on a go forward basis subject to any kind of seasonality.

I think that's right, I mean again. We've always been around 40%. I think the latest prints two six. So I would say, it's going to be somewhere between 40 and 44.

We've always been around 40%.

I think the latest prints two six.

So I would say, it's going to be somewhere between 40 and.

44.

And it will fluctuate based on on investments, we make.

And we tend not to be particularly aggressive about capitalizing software and stuff like that so. I think we will continue to not be particularly aggressive on that. I would think that our margins will depend on some of the ability.

I think we will continue to not be particularly aggressive on that and so.

I would think that our margins.

We'll depend on.

Some of the B to B ability too.

Which we have proven that we can close big deals, but and we have proven that we can get them live. The difference between getting them live in the third quarter and getting them live in the fourth quarter can often impact the margin in 10 to 20 basis point range.

The difference between getting them live.

The third quarter and getting them live in the fourth quarter.

Ken often impact margin and.

The 10 to 20 basis point range.

That's helpful and as my follow up Bill.

In terms of just the capital allocation strategy now that you're kind of below the three times leverage ratio you talked about having additional flexibility. If we were to translate that into practically, what does that mean? Is that you're going to primarily now focus on share repurchase at this point?

We were to translate that into practically what does that mean is that debt.

That youre going to primarily now focus on share repurchase at this point or is there.

Or is that you're willing to take leverage down further? Is there kind of a level that you are not willing to go below four when it comes to leverage? Just any color you can provide there in terms of while you wait for the REIT acquisition.

Yes. If you look at our what we expect free cash flow, which is around 1 billion and 350, I think that share counts Patrick quoted were $2.66 to 67.

If you look at the, if you look at our what we expect free cash flow, which is around 1 billion and 350, I think and I think that share counts Patrick quoted were $2.66 to 67.

Around 1 billion and $3 50, I think and I think that share counts Patrick quoted were $2 66 to 67.

You're talking about $5 a share IN Cash. And so obviously, on a finance basis buying back shares is a lot better than paying off 2% debt. At the same time. We would like to deploy at $4 billion, so we have a 2% debt to faster-growing assets. And obviously with better margins. And so we're constantly on the lookout to try to do that. And I would tell you that primarily our lookout right now is that we have a lot of faith in our development teams. But we have a lot of excitement around demand Rx. We think the things like co central wind and other things that we are bringing out.

Cash.

And so obviously, on a finance basis buying back shares is a lot better than paying off 2% debt.

Rather than paying off 2% debt.

At the same time.

We would we would like to deploy.

At $4 billion, so we have a 2% debt.

Two faster growing assets. And obviously with better margins.

And obviously with better margins.

And so we're constantly on the lookout to try to do that.

And I would tell you that primarily our look out right now.

We have a lot of faith in our development teams.

But we have a lot of excitement around demand Rx.

We think the things like co central wind and other things that we are bringing out.

Are indicative of our development capability and I would say that we will continue to drive cash towards those things, but I think on the surface.

We would probably be a little more aggressive in stock buybacks than we would be debt repayment.

That's helpful. Thank you Bill.

Your next question comes from Michael Young of Truth Securities.

Hey. Thanks for taking the question. Wanted to ask kind of a follow up on the margin profile question. Then just think about it in the context of some of the macro drivers mainly inflation net net does that kind of help you guys on the pricing side and being able to push pricing higher? More so than it impacts on the cost side? Any thoughts there would be helpful.

Wanted to ask kind of a follow up on the margin profile question. Then just think about it in the context of some of the macro drivers mainly inflation net net does that kind of help you guys on the pricing side and being able to push pricing higher.

So then it impacts on the cost side any thoughts there would be helpful.

Hey, I think that's a great question I think that. Obviously, an inflationary times. All of your organization. Some were issues with the increasing wages.

Obviously, an inflationary times.

All of your organization.

There were issues with.

With with the.

Increasing wages, which I.

I hope to pay our people more so.

And I know that our clients like to have continuity with the talented people that we have on their accounts.

I think they also understand that there will have to be some revenue adjustments to them, some price increases.

Some revenue adjustments to them some price increases.

So net net. I think you're right, we might be able to get 50 basis points, maybe 100 basis points more on the revenue side than on the expense side.

I think youre right, we might be able to get.

50 basis points, maybe 100 basis points more on the revenue side than on the expense side.

I wouldn't say, it's going to be. If inflation goes wild, that's a lot different right. If inflation stays 234% then I think it will be. Could be a little bit of a tailwind, but it's not going to be massive.

Nice and goals, while that's a lot different right.

Pricing stays.

234%.

Then I think it will be.

Could be a little bit of a tailwind, but it's not going to be massive.

Okay. That's helpful. And then maybe just the second just on kind of a general sales pipeline, we're kind of getting back to normal maybe post-pandemic, more in-person sales, ability et cetera. Are you seeing strength or opportunities to land kind of larger deals or any update there just kind of on pipeline and progress there?

On deals or any update there just kind of on pipeline and progress there.

Yes, I believe we are also engaging at higher and higher levels of an organization.

We're also engaging.

At higher and higher levels of an organization and we.

We have a number of very successful lift outs that we have done. That we are going to turn into a pitch book on how we could maybe take some of your people as well as these accounting processes reporting processes risk processes compliance processes and other things that we do exceptionally well.

That we are going to turn into a.

Yes.

A pitch book on how we could.

Maybe take some of your people as well as these accounting processes reporting processes risk processes compliance processes and other things that we do exceptionally well.

And try to be able to really streamline these large financial institutions. Middle and back offices.

Middle and back offices.

And also. Obviously, we have front to back so we can do trading and compliance and risk in ESG and other things and so.

Obviously, we have front to back so we can do.

Trading and compliance and risk in ESG and other things and so.

We're pretty optimistic about our opportunity to continue to go upscale.

Okay.

Your next question comes from Andrew Schmidt of Citi.

Hey, guys. Thanks for taking my questions and congrats on a good quarter here.

First, I just wanted to dig into the third-quarter organic revenue growth performance, really nice to see the acceleration in growth.

Could you talk about just the factors that drove that acceleration from the second quarter to third quarter? Patrick, you mentioned strength in a few products, but.

If we could dig into that a little bit more, that'd be helpful. And then based on the momentum you have in the third quarter just. How you're thinking about the fourth quarter set-up from an organic growth perspective?

Based on the momentum you have in the third quarter just.

How youre thinking about the fourth quarter set up from an organic growth perspective.

Based on these factors because it does seem like you have some pretty good momentum here. So just curious to get your thoughts around third quarter then how stack select fourth-quarter performance.

So just curious to get your thoughts around third quarter then.

Hello stack select fourth quarter performance.

Well again. We do believe we have some momentum in and again as we said in our remarks as well as in our press release. Our software businesses advent in particular in administration businesses. As well as our interlinked businesses have been particularly strong.

We do believe we have some momentum in and again as we said in that.

In our remarks as well as in our press release.

Our software businesses advent in particular and and.

Andrew.

And administration businesses.

As well as our interlinked businesses have been particularly strong.

And we would expect all three of those to continue on that strong pattern.

We would expect.

Three of those to continue.

That Pat.

Strong pattern.

And I think that again as we add tens of billions of dollars to our RUI. Those revenues start to flow into our financial statement extent. So obviously got some tailwind as well. Rahul, could you add to that?

Are those.

Those those revenues start to flow into our financial statement extent.

So you got some tailwind as.

As well.

Rahul could you add to that.

No, I think all of that I'd also say that some of what we've done in the last 18 months or so is really fostered this collaboration within SS&C, where our products and services are much more integrated and our teams are much more integrated when they go talk to large asset managers of large banks or whatever prospects they might have.

I think all of that I'd also say that.

Some of what we've done in the last 18 months or so is really.

Fostered this collaboration within SMC, where our products and.

services are much more integrated and our teams are much more integrated when they go talk to large asset managers of large banks or whatever prospects they might have.

That's resulted in the opportunities that we have in front of us have larger ticket sizes and sometimes they take a little longer to sell but if you have enough of them.

Now that's pretty additive to the revenue process, and we think that that helps us drive sustainable growth.

Got it. That's helpful. Not to front-run the analyst day, but it does it does seem like you would have with the comments on the margin front are pretty constructive in terms of your runway there. Based on both scale and efficiency initiatives and then on the top line it seems like based on your comments role, that you have pretty good visibility based on some of the, I should say better visibility based on some of the investments you've made. It's providing an intermediate or longer-term outlook based on this fact or something you might consider? Just to help people think about the longer term average for the business. Thanks.

To front run the analyst day, but it does it does seem like you would have with the comments on the margin front, a pretty constructive in terms of your runway there.

Just on both scale and efficiency initiatives and then on the top line. It seems like based on your comments role that you have pretty good visibility based on some of the I should say better visibility based on some of the investments you've made.

It's providing an intermediate or longer term outlook based on this fact or something you might consider.

Just to help people think about the longer term.

Average for the business. Thanks.

Yes, I believe that we're constantly studying how we deliver information to all of you and I think over the next quarter or two we will start being a little more granular. And try to give you a little bit longer viewpoint of where we think things are going to be.

We're constantly studying how we.

How we deliver information to all of you and.

I think over the next quarter or two we will start being a little more granular.

And try to give you a little bit longer.

Viewpoint of where we think things are going to be.

And I think that that might be pretty well received by the analyst and investing community.

<unk>.

Well received by the analyst and.

And investing community.

Got it. Thank you very much appreciate it guys.

Thanks.

Your next question comes from Peter Heckmann of D. A Davidson.

Okay.

Hey, good afternoon, I just wanted to follow up on fund administration and the company continues to gain share. Can you talk a little bit about where you are gaining share and kind of how you're gaining share or is it primarily from the smaller and mid-tier fund administrators or is there a mix of funds outsourcing for the first time?

Can you talk a little bit about.

Where you are gaining share and kind of how youre gaining share or is it primarily from the smaller and mid tier fund administrators or is there a mix of <unk>.

<unk> outsourcing for the first time.

What other dynamics should we be thinking about it? I know there's some transition going on and I think the domicile of Malta don't know if that's going to require any changes in your business, but.

Yes.

Transition going on and I think the domicile of Malta don't know if thats going to require any changes in your business, but.

Really what.

How does this continue to win new contracts and continue to get gather EUA? Alright.

Win new contracts and continue to get gather EUA.

Alright.

I believe we're somewhat by far the most innovative administrator in the world, we use our own software. Under administration business as new 40, other sundry administrators.

By far the most innovative.

An administrator in the world.

We are.

We use our own software NR.

Under administration business as new 40, other sundry administrators.

But we're always on a current release, we're always pushing the envelope. So the kinds of products like go central. We will be the first to adopt and the first to demonstrate and it will create excitement. And then often larger financial institutions have more difficulty installing releases in large scale systems, and so sometimes they get behind on a few releases and they don't do the training like we do training and you know there's a whole series of things that we do.

Pushing the envelope.

So the kinds of products like <unk> central.

It will be the first to adopt in the first to demonstrate in and it will create excitement.

And then often.

Larger financial institutions have more difficulty.

Installing them.

Releases in.

And large scale systems, and so sometimes sei.

They get behind a few releases may not do.

I'll do the training like we do training and you know Theres a whole series of things that we do.

And we have a very strong sales force very capable.

Increasingly our marketing is more targeted and our audience is more interested because of the breadth and depth of what we deliver.

To add to that Rahul.

Yes.

That covers a lot of ground I think maybe maybe a couple of things.

On some of the.

The types, though.

Thanks that we're seeing that our attitude bar.

New funds for sure, but also we and particularly in the private markets business with private equity and real estate, we've said now for.

Several quarters, if not years that the larger funds are embracing outsourcing they just happen to be doing it at their own pace and as Bill just pointed out as we get bigger and we made more investments that we get.

We will recognize that in the marketplace that pace of change for them and the rate inflationary able to embrace our services is just accelerating so I think we're seeing acceptance of greater acceptance into larger players. We continue to be very very strong in the startups and then we have a large.

And prestigious client base that continues to raise assets and add new funds and all of those things work together.

Okay, and maybe just as a follow up has there been much change in pricing.

On a net basis.

The more illiquid assets and the more complex assets, Mike to help raise the overall, but can you comment on how pricing has trended the last couple of years.

Pricing has been pretty pretty.

Stable with D D.

The thing that changes the baseline as we have more products and services to sell into any individual manager that we're speaking with so overall deal size is larger but the prices for kind of the same type of services is pretty comparable to what it was.

Okay I appreciate it.

Your next question comes from Matt Tandon of Needham <unk> Company.

Thank you and good evening Bill just given your comments around demand and it sounds like decision, making also.

Improving I was just curious as you look out into 'twenty, two and beyond and maybe you will talk about this at the analyst day, but just wondering is the trend line growth for <unk> potentially better what I mean by that is I think in the past you've talked about the.

Mid single digit organic growth and then supplement that with M&A, but obviously youre growing a little bit faster right now is that sustainable or do you think growth reports that could trend as.

As you look out a little bit longer term.

Well Manny.

We like the current trends.

So.

Okay.

So going back to previous seasons.

It doesn't and throw us.

As I've said before we deployed $8 4 billion.

And.

In capital in 2018.

We got something Mike.

No.

$2 9 million and $2 9 billion in revenue and.

Probably close to $1 billion in EBITDA.

If you try to do that in 'twenty.

'twenty one.

Who knows how much you would have to pay.

So we feel pretty good about when we gathered assets and the discipline that we have Shaun.

And again trying trying to two we still like to make money.

Oh in EMS.

We want everybody to.

To also understand that we're good citizens in all of our communities and we pay well in all of those things.

But you know our earnings are.

There are $33 64.

Our 94 two.

Like $2 90 to 383 and last year, we did $4 30, and now we're saying we're going to do.

Somewhere around very close to $5.

So I think that focus is going to stay the same.

I think our opportunity to grow faster is because of.

The breadth and depth of what we're offering.

And then the size of our current client base in.

In particular, it's the largest hedge funds.

With the biggest banks the biggest mutual fund companies the most complex issues.

As I say, if you wanted to double your capacity.

And our server you pull out one wire and stick in another wire.

You want to do derivative mortgage backed securities on that.

Retrospective or prospective basis, you better get deep into an accounting book.

And so I think the complexity of the world the complexity investing world that the drive for increasing information.

A number of different.

Okay.

Current analytics isn't going to change.

All of you our insatiable.

So all we have to do is make sure that what we deliver to you is stuff that you.

And I think as long as we do that and keep our.

Our size and our strengths and our expertise.

I think the the future does.

Look bright for us.

Alright, so it seems to be plenty of runway no question Bill a quick follow up on the held but I don't think I caught anything in terms of an update on the health business any updates on that in terms of positioning competition. How that's fair again, maybe your longer term thoughts on how core that is to your business versus maybe up but.

I know you've talked about it in the past potentially.

Looking at it as part of the core but just curious on what the latest is on the outside.

Well I mean, we announced demanding are exiting last quarter.

That's correct capitalized with $1 billion.

<unk> is a pretty hot.

Todd area pharmacy benefit management.

The capabilities of your technology.

And we have a really bright team that are building out our our new platform for demand and we have obviously, some pretty sophisticated partners with us.

With.

Anthem and.

And Humana, and we expect others to can be with us.

Large scale sophisticated.

Health care providers and health care.

And we believe that that it is that <unk>.

Very big opportunity for us.

How you ultimately ultimately monetize that I think is still.

In the.

In the formative stages, we are now.

Our notice to the grindstone and getting the product done getting excitement, adding having new.

New customers and I think the healthcare business will perform well over the next several years.

Got it that's helpful. Thank you so much.

Your next question comes from Jackson Ader of Jpmorgan.

Great. Thanks for taking my questions guys.

The first one to state Street, Bob Brown brothers.

The accounting and fund administration piece and I was just curious whether you had any comments on that that seemed like it would be right up your alley.

Alex I should say.

$3 5 billion Wouldnt have top tier.

Former largest deal I'm just curious.

Your thoughts on the deal and whether you guys were we're also interested.

We would have been.

I think that that was maybe baked already.

And so both.

Both of them are good clients and we wish them well.

And hopefully.

There is another large.

Financial institution that wants to get out of the fund administration business day.

Okay, hopefully create a little bit more of an auction.

Yes, okay.

And then.

Bill you mentioned in one of the things that helps.

I think you mentioned that.

Margins.

Go lives that happened to fall into a particular quarter was there anything in this third quarter that maybe pulled forward from the fourth quarter that explained.

The organic revenue growth DSL as we look out to <unk>.

Okay.

Well.

I think.

Again.

<unk>.

We want to make sure we don't get ahead of ourselves, we don't get over our skis.

And if there is going to be a surprise, we prefer it to be positive.

So we have been.

Circumspect on how how aggressive to be on.

On on guidance.

And I think it is at least over the past few quarters has served us well.

I think as are our sales and marketing organizations get increasingly sophisticated our ability to to really.

No.

However, higher.

Growth rates in <unk>.

Feel very comfortable.

<unk>.

<unk> will be.

We will be emerging for you and I think that.

Right now we have pipeline thats bigger than we've ever had.

Pipeline is nice, but that doesn't count for revenue you got it.

You got close that pipeline and again, we have a really strong sales force.

And we're pretty excited.

About what we can do.

Alright, thank you.

Okay. Your next question comes from James Faucette of Morgan Stanley.

Hey, this is Jonathan on for James Thanks for taking our questions and Theres been a flurry of capital markets activity around the higher growth assets in the investment management solution space.

And with that in mind I think you've touched on this earlier how are you thinking about your acquisition strategy around growth oriented assets.

What are you seeing in the market what types of assets are you looking for.

Less expensive warrants than there are in the market right now.

So.

When you start looking at 10 to 12 times revenue it becomes.

Four four.

Mass.

Becomes pretty tough and so.

Particularly when you have a talented development teams as weak.

So the trade off is we don't.

Don't really want to to have the elapsed time.

And risk of developing software if we could buy.

Some of that functionality yet.

<unk>.

Only a moderately ridiculous price.

But wanted to completely ridiculous price.

Then we'd get a little more circumspect, so I think we like the wealth management.

A sector, we like Reg Tech, we think ensure teck looks pretty good.

We will almost always be in the bidding for fund administration businesses.

So those things and we also think that we have.

A growing and strong presence in Asia that we would like to buttressed as well.

Thanks for that Bill and you mentioned development teams.

The skill sets that you have there so on the topic of hiring are you seeing any headwind as it relates to finding and hiring talent for those development teams given the constrained environment.

Yes.

So what we have figured out is to pay people more.

Yes.

Okay.

Your next question comes from Chris <unk> of Piper Sandler.

Thanks for taking my questions. One just ask another one on the category of fourth quarter guidance and revenue just because the.

The revenue guidance is down 3% or up.

Range of down 3% to up 1% from the third quarter and.

Just can you remind us what the swing factors can be in your revenue besides that the timing of Onboarding.

Yes, how much like <unk>.

Services work, you can have or other factors that can affect the revenue recognition quarter to quarter, especially with 96, 5% revenue retention level.

You are in a pretty predictable world.

Well I think that's a good question too I would I would say that the two.

Two things that come to my mind is the fourth quarter is usually our biggest license revenue quarter.

And in general licenses are a little more difficult to predict.

Recurring revenue increases.

And and the second thing as I said, the fourth quarter is not a particularly long and not a particularly strong quarter for <unk>.

For adjacent services in our <unk>.

In our fund administration businesses like.

Tax work and and other things like financial statements almost all of that work comes in the first quarter and second quarter. So those are a couple of things and Rahul probably has some some other comments.

I think.

You hit the big ones, it's the seasonality of the special services that we do in fund administration.

It tends to be a big license quarter.

And I think sequentially the difference between the midpoint of our guidance for Q4 and our actual for Q3 is.

Like 15 million Bucks right. So we're not we're not really that far off and I think well ahead of anything we've said for Q4 during the course of the year.

Okay got it and then I just want to make sure I heard you correctly.

I thought you said you had a $30 billion hedge fund client that was running access for 20 years.

That REIT and how many other clients are out there.

<unk> advent legacy access software or did I hear it wrong.

No you heard it right and that's a great question right. So so theres there exists within that client base opportunities like that and I think.

That opportunity resulted in a sort of a 10 X revenue pick up REIT and lots of value to that particular customer, but we have others where.

Some of these products that have been around for a while a very functional and people really like them.

But invariably they start investing in things or have new requirements and they need to upgrade and we've got a natural upgrade path and when that happens it can be pretty positive for them and for us from a revenue standpoint.

Okay.

Okay understood thanks very much.

Okay.

Your next question comes from Patrick O'shaughnessy of Raymond James.

Hey, good evening. So this was kind of touched on earlier, but theres been a couple of recent ipos affirms that compete against S. SMC in certain areas and those competitors are pitched as cloud native or the SaaS based curious about how comfortable you are with your competitive positioning, particularly on the software side of the business.

Yes, that's a great question Patrick.

That we are.

We are very competitive on the software side in particular.

To just name a few products would be.

Our singularity platform, our Geneva platform.

As the Eclipse platform are are are interlinked platforms.

Precision.

Those are all.

Okay.

Best in class.

And I think relative to say.

Infusion or.

Our clear.

Yes.

I think.

This quarter, we added $110 million in revenue.

Which is which.

Which is about.

Have a clear waters.

Annual revenue and.

And I think it's more than may be double what infusion so competitively I think.

I think they have.

Some good technologists.

At both of those companies.

But when they get into bigger and bigger companies, they're going to find that.

Being able to do syndicated bank loans.

First rate derivatives.

Clients and risk.

And other functional requirements.

I think it's going to really start to tip the scale towards us plus we have a new product called <unk> that has the LIBOR and all kinds of other features in it.

We're pretty pretty.

Proud of our development teams and we're looking to step on the gas on the sales and marketing.

Got it that's helpful. Thank you.

And then so you guys have obviously been pretty aggressive on the share repurchase front over the last several quarters, but like on a year over year basis. Your fully diluted share count is essentially flat as the impact of the repurchases has been offset by a lot of dilution.

Stock based compensation related dilution. So obviously there is variables at play you know in terms of your capital allocation opportunities in the stock share price, but at a high level would you expect to start making a bigger dent in your diluted share count going forward.

Well.

Again.

I think the answer to that is yes, although I think that our.

One of the stated.

David goals of our board and our comp committee is to make sure we have.

We have adequate.

Equity.

Awards for our for our staff our staff and so.

It's a balancing act.

I think that.

We go from here.

A few years back having $250 million in authorization and a $750 million authorization that we have $1 billion.

And I think that.

Yes, we would like to make.

A bigger dent in that.

And I think we will continue to be quite aggressive when it comes to buying back stock.

Yes, we're just way bigger Patrick.

Yes.

We're $5 billion in revenue now.

Three years ago.

Yes.

$3 billion in revenue so three five so it takes time.

Got you I appreciate it thank you.

Okay.

Your next question comes from Jackson Ader of JP Morgan.

Thanks, Brian jump back in.

Patrick do we have.

Could we get the organic revenue growth by segment funded ministration as intra lines et cetera.

Yes sure in Q3.

So.

The fund administration business was up.

14, 8% organically in the quarter.

Internal lengths was up 23, 5% in the quarter.

Our DST financial services segment was up three 7%.

And then R.

Our core software business plus some other smaller products.

But mostly advent in our institutional businesses in this segment was up six 9% in the quarter.

Okay.

Okay awesome.

Just a quick follow up on that <unk> number how much of that was driven by.

M&A activity in the market that might be outside of.

Your control like more market factors versus light.

On the execution.

Hello.

We're really proud of our team's execution.

We're gaining market share.

And and I believe they are innovating.

And we're very.

Very pleased with with all the aspects of it.

That team.

Okay, Alright, thank you very much.

Okay.

At this time there are no further questions I will now turn the floor back over to Bill stone for any additional or closing remarks.

Again, thanks, everybody for being on this call and we look forward to talking to you after the fourth quarter.

Please stay safe.

And.

We will see you next quarter. Thanks, a lot.

Okay.

Ladies and gentlemen. This concludes today's event you may now disconnect. Thank you for your participation.

Okay.

Yes.

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