Q1 2022 SS&C Technologies Holdings Inc Earnings Call

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Okay.

Good day, everyone and welcome to the S S and C. Technologies' first quarter 2022 earnings call.

Today's call is being recorded and all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Like to ask a question during this time simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press star one again.

Thank you and I would now like to turn the call over to Justine Stone head of Investor Relations. Please go ahead.

Okay.

Hi, everyone welcome and thank you for joining us for our first quarter 'twenty, Jimmy Choo earnings call I'm, Justine Stone Investor relations for assets and C technologies.

Me today is Bill Stone, Chairman and Chief Executive Officer, Rahul Kanwar, President and Chief operating Officer, and Patrick Banacci, 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 Safe Harbor provisions under private Securities Litigation Reform Act of 1995 actual actual results may differ materially.

From those indicated by these forward looking statements as a result of various important factors, including those discussed in the risk factors section of our most recent annual report on Form 10-K , which is on file with the SEC and costs, we accessed on our website.

These forward looking statements represent our expectations only as of today April 28, 2022, while the company may elect to update these forward looking statements. It specifically disclaims any obligation to do so.

During today's call, we will referring to certain non-GAAP financial measures. A reconciliation reconciliation of these non-GAAP financial measures to comparable GAAP financial measures is included in today's earnings release, which is located in the inverse.

The relations section of our website at www.

S. S C Tech Dot Com also in the third quarter 2021 we entered into a joint venture named Germani Rx LLC, 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 us.

Based on the owner ship interest retained by Esol from C. I will now turn the call over to Bill.

Thanks, everyone for joining our results for the first quarter were.

$1.296 billion and adjusted revenue up four 9% <unk> dollars 25.

Diluted earnings per share up five 9%.

Consolidated EBITDA was $514 9 million for the quarter, the highest first quarter in our 35 year history.

<unk> margin was 39, 8%.

Adjusted organic revenue was up four 3%.

Our alternative interlinked and advent businesses, where the growth leaders for the quarter.

Ex the impact of our health care business, our Q1 2022 organic growth in financial service.

Which is over 90% of our revenue was five 9%.

Yes, definitely generated net cash from operating activities of one point of $183 5 million for the three months ended March 31 2022.

In the quarter, we bought back two 3 million shares an average price of $75 22.

Per share for a total of $179 million.

We also used cash on help on and to help fund the acquisition of Blue Prism in Hawaii, which both closed in March.

Consolidated net leverage ratio now stands at $3 four eight.

And our net secured leverage ratio is two five watt we.

We expect to reduce our gross leverage to three <unk> by the end of the year, while remaining active with our share repurchase program.

These are exceptional numbers given the global uncertainty and result, hesitancy of our customers.

We're excited to add blue prism team and their automation capabilities that assistance. These arsenal.

<unk> will continue growing revenues at 15% to 20% with the potential to accelerate with its successful cross sale.

Initiatives.

We estimate an enterprise grade intelligent automation market to be in excess of 160 billion.

Based off Mackenzie estimate, 30% of all roles can be automated.

Companies across the world due to the struggle with the labor market and we are in a great position to capitalize on this disruption.

Currently blue Prism like most fast growing new technology companies is operating at a loss through.

Through revenue growth and cost controls, we expect 15% to 20% EBITDA margin exiting 2023, and 30%, 40% EBITDA margin exiting 2024.

I'll now turn the call over to Rick who will discuss the quarter in more detail.

Yeah.

Thanks Bill.

We had a good quarter across the board led by strong performance from advent control links and alternatives Fund administration.

Alternatives business continues to strengthen for market driven gains and internal development efforts investor allocations to hedge funds are at all time highs and assets under administration continued to grow despite market volatility.

We remain focused on extending the depth and breadth of our technological capabilities go central and Treasury management solutions. Both launched this quarter have generated significant interest already go central utilizing AI in RPE technology throughout will contribute to our win rates going forward as well as advancing the automation journey across all client opera.

<unk>.

Private markets and I've been teams have been closely partnering to enhance our holistic operating and technology model and support of hybrid and credit funds.

This new offering Mary's Geneva, as core technology capabilities, and private markets administration services in a manner that offers clients flexible delivery models in Q2, we expect to close our first combined deal and have several large prospects in the pipeline targeted for later this year.

<unk> remained strong in both M&A and alternatives coming off of 2021 record breaking M&A environment.

We continue to take market share and anticipate steady continuation of deal volume for the remainder of the year.

As expected healthcare revenue declined 15, 5% in the quarter were investing heavily in the Omani Rx and we continue to move towards the development of a cloud native API driven claims adjudication platform based off the vast experience of ourselves and the other two founding partners.

With the upcoming launch of demanding Rx and the interest in this new technology has generated we expect a strong recovery in 2023.

I will now I will mention some key deals for Q1.

5 billion broker dealer chose black diamond due to our superior service and support model over our competitors as well as our trading and rebalancing functionality and existing gate decline a top U S. Mutual fund expanded their relationship with our event center solution.

One of our largest mutual fund clients expanded their transfer agency PPO services.

The a $14 billion hedge fund and existing Geneva client chose our <unk> in fixed length solutions.

You'd advent Geneva, Bolthouse tier one platforms and found the two together to be an extremely powerful solution.

A $1 billion real assets fund chose a suite of vessels since the private market services, including Investor tax and pump services because of our expertise in various asset types and fund structures.

I will now turn it over to Patrick to run through the financials.

Thank you results for the first quarter were GAAP revenues of $1.295 billion.

GAAP net income.

Of $172 1 billion and.

Diluted GAAP EPS of <unk> 64 cents.

On an adjusted basis revenue was 1 billion $2 96.

Including the impact of the adoption of the staff of the.

Revenue standard 606 and for deferred revenue adjustments for prior acquisitions.

Adjusted revenue was up four 9% adjusted operating income.

Attributable to assets see increased four 8% and adjusted EPS was $1 25, a five 9% increase over Q1 2021.

Overall, adjusted revenues increased $68 million or four 9% in Q1, our acquisitions contributed $17 4 million.

Foreign exchange had an unfavorable impact of $8 7 million or <unk>, 7% in the quarter.

Adjusted organic revenue.

The increase on a constant currency basis was four 3%.

Strengths across several product lines, including alternatives.

Intra links and the advent businesses.

Adjusted operating income for the first quarter was $498 7 million, an increase of $22 9 million or four 8%.

The first quarter of 'twenty one.

Adjusted operating margins were flat at 38, 5% in the first quarter as compared to the first quarter of 2021.

Expenses increased one 7% on a constant currency basis, and acquisitions added $17 6 million in expenses and foreign currency decreased cost by $7 8 billion.

Yeah.

Consolidated EBITDA.

Which is defined in note three in our earnings release was $514 9 million or 39, 7% of revenue an increase of $23 million or four 7%.

Q1 2021.

Net interest expense for the quarter was $49 3 million and includes $2 6 million of noncash amortized financing costs and OID.

Average rate in the quarter for our credit facility and senior notes was 3.11%.

Compared to three point or 1% in the first quarter of 'twenty one.

We recorded a GAAP tax provision of $63 5 million or 27% of pretax income.

Adjusted net income.

Just defined in note four for earnings release was $334 4 million and adjusted EPS.

It was $1 25, the effective tax rate used for adjusted net income was 26%.

Diluted shares increased $267 6 million from 267 in Q4 2021.

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

Sure.

On the balance sheet and cash flow, we ended the first quarter with $558 million of cash and cash equivalents at.

$7 6 billion of gross debt.

<unk> net debt defined in our credit agreement.

Excluding cash and cash equivalents of 145 million held as at the money <unk> JV.

So the net was the net debt was $7 2 billion as of March 31.

Operating cash flow for the three months ended March was $183 5 million, a $2 2 million decrease compared to the same period in.

In 2021.

And a couple of highlights from the first quarter, our net borrowings.

We're a $1 $583 million compared to net borrowings of $70 million in 2020 one period.

In the quarter, we paid $1.553 billion for the Blue Prism and hub wise acquisition.

Net of cash acquired.

To fund the hub wife's acquisition, we borrowed two incremental loans for a total of $1.530 billion that mature in March 2029.

And bear interest at Sulphur plus.

Plus 2.25% would have 50 bps so for floor.

Treasury stock buybacks.

$170 9 million for purchases of two 3 million shares.

At an average price of $75 22.

And in July 2021, the board authorized.

Up to $1 billion of stock buybacks in the program to date.

Treasury stock buybacks totaled $333 7 million for purchase of four 4 million shares.

In the quarter, we did we declared and paid a <unk> 51 1 million common stock dividend, an increase of 24% from last year.

We paid income taxes of 42 million compared to 42.5 in the first quarter of 'twenty one.

Our accounts receivable DSO uptick a little bit in the quarter up to 52.7 days compared to 49.5 days as of December 2021.

Capital expenditures and capitalized software were $35 6 million or approximately 2.7%.

Of adjusted revenue in the spending was predominantly.

For internal use capitalized software and our it infrastructure.

On an LTM consolidated.

Our LTM consolidated EBITDA, we used for covenant compliance.

It was $2 billion.

6% to $3 5 million as of March 2021 'twenty two based on the new debt.

Based on net debt of $7 2 billion total leverage ratio was 3.48.

And our secured leverage ratio was 2.51.

On outlook for the remainder of the year, our first cover a few assumptions we've made.

Oh, we'll continue focusing our client service and our retention rates.

Our client retention rates will continue to be in the range of most recent results.

We have assumed foreign currency exchange will be at current levels for the remainder of year.

And that will impact revenue negatively by approximately $43 million.

In Q3 through Q4.

Our recent acquisitions of Blue Prism and hub wise will contribute approximately $203 million of revenue for the remainder of the year.

And on that basis, adjusted organic growth for the year will be in the range of 2.4% to five 6% and.

And adjusted organic growth in Q2 in the range of 1.7 to for corn and 8%.

On interest rates, we have assumed that near term LIBOR will be about 70 bps.

And the spread on our credit agreement is 175, Bips and 225 bps on the new facility.

Put in place.

For global Prism acquisition.

And we expect LIBOR rates to increase approximately 100 beds through the rest of the year.

This will impact our expected.

Interest costs.

By about six cents compared to previous guidance.

Blue Prism.

Will impact P. P S.

The dilution of about nine cents for the year, including the impact of the new debt facility.

We expect that staff costs to increase to the continued wage inflation and impact Q2 operating results.

We will manage our expenses in the second half of the year by controlling variable expenses and maintaining our operating margins.

We will continue to use our free cash flow to pay both Paypal.

Down debt and stock buybacks.

And we've assumed a tax rate of 26% and adjusted basis for the year.

So in summary for the second quarter of 2022, we expect revenue in the range of $1.328 billion to $1.368 billion.

Diluted shares in the range of $267 2 million to $206 7 million.

Adjusted EPS in a range of $1 13 to $1 19.

For the full year of 'twenty, two we expect revenue in the range of $5.350 billion to $5.510 billion.

We would share some a range of 268 million to $256 4 million and.

And adjusted EPS in a range of $4.99.

The $5.21.

And we expect cash from operating activities to be in the range of a 1 billion $3 15.

Two $1.375 billion.

Ill turn it over back to Bill for final comments.

Yes.

Yes.

Thanks, Patrick and as Patrick just mentioned, we're guiding your organic revenue growth of 4% for the year.

Reducing our EPS guidance due to dilution from Blue Prism.

And the interest rate increases the start of 2022 has been a challenging environment for our clients.

Certainty and instability in the world and their labor force.

We have made our clients and prospects more hesitant to sign deals.

Uncertainty can also be a catalyst for change the need for operational stability from a reliable trusted provider.

We are aggressively investing in our sales force and R&D efforts to capture this opportunity.

<unk> Centrum singularity, Genesis Aloha Treasury management and others.

Our rolling out now cost will be controlled through reduced incremental hiring utilizing AI and automation.

Including Blue Prism digital workers to.

To accomplish this in a reduction in our global real estate footprint.

And I'll now open it up for questions.

Thank you as a reminder, everyone. If you would like to ask a question. Please press star one on your telephone keypad. Please limit yourself to one question and one follow up question, if you'd like to ask additional questions. Please feel free to re queue and once again, everyone that is star one.

Alright, well take our first question is from Alex Kramm with UBS.

Yeah, Hey, good evening everyone.

Maybe just starting on the on the D. S. T side here growth of <unk>, 9% in the quarter day sales quarter over quarter I heard you on the selling environment and obviously, there's a lot of uncertainty in the world, but I would also say that you know.

Coming into this year, we still had traditional asset managers I think do very well in the back of multiyear highs in equity markets etcetera. So I think I think your customer base is actually doing.

Fairly well so just wondering what in particular are you seeing at DST and.

Oh in this environment, if we can see that growth rates kind of tick up again in that business. Thanks.

Yeah.

Well I'll give it a shot Alex to not have Rahul comment, but you know we continue to to rollout.

Additional capabilities in our in our D. S. T businesses, then we have lots of large.

Opportunities and it comes down to.

You know not only closing those opportunities, but also then getting those clients lives. So there's a bunch of pent up revenue.

But that hopefully we will start to roll into that into those.

Financial statements in the second half of <unk> of.

2022 .

But they're large scale there are large scale organizations in and while we have.

Teams working on it we also rely on on the clients to help us in that process.

And these uncertainties are not are not helping mountains.

Move more quickly.

Raul do you have any other color.

Yes.

The thing I'd add also is.

These are these are these customers are some of our biggest customers across the company.

So the DSD relationships are strategic for us and they frequently buy it from us in other areas, including alternatives add Ben and others, and obviously thats not reflected in the DSD financial services line, but it does speak to the value of that relationship.

Fair point, Thank you for that and then maybe just on the margin real quick.

Clearly margins flat year over year, I think last quarter, you already talked about some inflationary pressure I think you brought this up again today. So just wondering.

Are things a little bit tougher than you expected given the you know.

The big resignation that everybody talks about or.

And how you how do you think that's going to continue to impact or how are you going to navigate that environment.

Yeah.

Well I think that that's a.

That's a great question, Alex and we are.

We are instituting all kinds of.

Of things to improve our retention in and be able to create an environment where.

We are.

Yeah.

Employer of choice.

But there is wage inflation in that.

So overall.

No.

Power has really moved from capital and labor.

And while I don't think that's necessarily a bad thing I think for the short term.

Adjusting your sights on on.

Throw in for price increases and being able to move inflationary costs.

The revenue side I think is what we're working on and being.

Sensitive to our to our employees and making sure that we remain a.

Employer of choice.

All right great I'll jump back in the queue. Thank you.

And we'll take our next question from Andrew Schmidt with Citi.

Yes.

Hey, guys. Thanks for taking my questions good to see the resiliency here.

First first set of questions on Blue Prism spec the envelope it looks like they should be approaching 100% of our 1% appoint accretive on a pro forma basis. When we think about just total.

Total growth just want to make sure I have that correct.

And then if you could talk a little bit about just the opportunity to plug blue prism into the SBC direct salesforce because it seems like that's one of the Big River, an opportunity just timeframe and process there that would be helpful. Thanks a lot.

Rahul you want to take that.

Okay.

Yes, so maybe ill, maybe Patrick and comment on the first one on the accretive Bill and Yep.

I think your question was around revenue right, how much does that add to revenue growth.

Yes, right on a pro forma basis.

So.

Yeah, I think what we have in our financials for this year and our forecast of the first quarter at about $10 8 million.

Just for purposes.

A half a month.

And then for the remainder of the year except for <unk>.

Estimating somewhere around $196 million of revenue for the second third and fourth quarters.

Right and then I think the I guess the second yeah, yes, sorry.

Yeah, I was going to say I guess the question is more around just.

Buying company growth rates it seems like it should obviously, there's accretive but the growth but.

It seems like it should be approaching that kind of.

100 basis point accretion when.

Obviously, when we have this in the base in 2023, I just want to make sure that's the right.

Great ballpark.

Yes.

I think if you think about it right yeah. So it's roughly we're getting $200 million in 10 months right. So.

So let's call it 230 or something like that.

And so 20% growth rate, that's $46 million, which would be pretty close to 1%. So that's how we should think about it as well.

Great perfect. Thank you for that.

And then again.

As part of the question.

So the second part of the question.

We're actually pretty excited about the opportunities. We obviously have 18000 clients most of whom I would say virtually all of them are candidates to have greater automation and they have digital workers right. So so that cross sell component is pretty important to us. We also have a wealth of direct applications ourselves whether in our outsourcing business.

We'll work performing many of the tasks that.

Folks would look to have digital mortgage due so we're working hard and our teams are working hard on coming up with applications for if you're a hedge fund or an insurance company here is something that we might be able to do for you using this technology and rolling that out we think will be pretty powerful so that's all underway.

Perfect I appreciate that.

And then when we think about just the core business intra links from a growth perspective was it was a real surprise my perspective, given the M&A volumes out there.

And it seems like a lot of that is due to share gains maybe you could talk a little about just the drivers there and how you see that.

That playing out for the full year from a from a growth perspective. Thanks.

Well, we you know.

We have.

Have a great business and interlinked.

They continue to find pockets of growth.

We're out their client base.

And new clients and they've done a lot of things with them.

With help from the alternatives industry.

With portals and other things along those lines.

Information delivery and then obviously they continue to be very strong.

And the V D var market and M&A in general.

We expect.

Similar growth for the rest of the year.

Perfect. Thanks, Bill role Patrick I appreciate the comments.

And we'll take our next question from Peter Heckmann with Davidson.

Okay.

Thanks for taking the question can you just remind us of some of the dynamics in the healthcare business.

The decline in revenue the timing.

Of any customer losses, and whether that would be fully reflected in the run rate number for the first quarter and then just remind us how the JV works.

If I remember correctly you own a majority of your consolidated that with revenue and then have a minority interest coming out.

But from your comments it sounds like we're going to start to see that joint venture start to ramp would that be from new customers or or increase volumes or both.

Yes.

The money is 80% owned by us and 10% owned by each of our partners.

And Thats right on how we are how we do the accounting on that.

We have a lot of interest into money in.

And the platform that we're building as is.

<unk> is pretty much on track.

We hope to roll that out to one of our partners on the first of.

On.

First January 23, and then the second one on first January of.

24, but we also have tremendous interest and others coming in has as customers.

And the Omani hardest partners. So we expect revenue to ramp nicely in 2023 through.

The next five or 10 years and so we're excited about it.

We think it's the first really.

No cloud based.

Claims adjudication process.

The P P M World and.

And we're excited about where we are.

Got it got it and then just as regards to just the decline in revenue this quarter.

Can you remind me.

Great.

Was that was that.

Loss of one large customer or was it an aggregate of set ROE and if you could just remind me when that actual conversion happened and that happened January one.

It happens.

<unk>.

And several right so.

Total of about $70 million to $80 million and.

One of them represents.

About half.

Got it Okay and then.

Do you think on the <unk> acquisition.

Feel like that should close by the end of the summer.

I think as scheduled.

Right now Hello, unpredictable because it is summer approval requirements, but I think it's scheduled for the end of June .

Okay I appreciate it.

And we'll take our next question from James Fawcett with Morgan Stanley .

Hey, this is Jonathan on for James Thanks for taking my question.

You had alluded to driving price increases to offset wage inflation and if I think back to the analyst day from last year, you had talked about call. It 100 basis points of pricing uplift.

To drive growth.

How are these are price increasing price increased conversations going with customers and is that enough to sort of offset the magnitude of wage inflation that you're seeing.

Okay.

Well I mean I think it's.

It's a process and I think the process is well underway.

And you know obviously.

Inflation has picked up.

Now almost a month after month for the last five or six months or so.

No we're planning on on.

Yeah, you know raising our prices to be able to cover.

Our increased costs and I think our customers understand that but that's what's happening across the board for almost all of our vendors and.

And we're no different and we have a very talented.

Labor Force and we're going to make sure that we take care of them.

And continue to be a Perry.

Strong and trusted partner.

Got it and then a follow up on the RPI opportunity. How are you thinking about the head count or the magnitude of investment required to service the debt.

Broader RPI platform that you have inclusive.

Prism.

Well again, we have a large development organization. When you have many many talented RPI developers as well as a I N.

And LP and and and machine learning, So we have a big staffing and blue prism complemented great. So.

We think that in general we're kind of be able to deploy.

Hundreds of digital workers.

Hopefully over the next two or three years thousands of them.

Will allow us to.

To grow.

And not a head to head count likely would have if we didn't have such technologies.

That's the whole Holy Grail of doing this acquisition is to is to bring that.

The high powered technology allows you to substitute digital workers for.

For human workers, it doesn't replace human workers per se in total, but it certainly.

<unk> augments them in a very very strong way.

I appreciate the color Bill Thank you.

We will take our next question from Kevin Mcveigh with credit Suisse.

Great. Thanks, so much.

Is there any way to think about what the potential revenue opportunity is across your existing client base for blue prism.

Will you obviously have 18000 clients.

Over time is there any way to think about what the revenue contribution can be.

Again across the existing client base.

Yeah.

Okay.

Yes, well you want to take that.

Yes.

Yes, sure Bill. Thanks, So it's a huge market.

And as a multiple of the.

200, and change that supers and does we anticipate that just in our current client base, we probably have 345 times that amount of opportunity.

And some of the consultants out there are representing this is a 150 billion or more market right and potentially as much as 30%.

As Bill noted on quality.

The line jobs that are done lend themselves to this kind of technology. So we're just trying to we're obviously we're mindful of.

The size of the market and at the same time, we have to focus on specific things that we can do better than anybody else and bloopers them already has a number of those and the customers that they have deployed and we're working with them on building out additional use cases and applications.

Okay.

That's helpful. And then it seems like the revenue retention was up 90 basis points sequentially.

Historically, it's been a little seasonality should it stay at that 96, four or how should we think about the revenue retention I think you said stay around that level is that right I just wanted to confirm that.

Yeah.

Stay around that.

No.

Okay, great. Thank you and the historical ranges.

Over the last couple of years.

Okay. Thank you Patrick.

Yes.

We will take our next question from Alex Kramm with UBS.

Oh that was quick Hello, again, and just had a just had a couple of follow ups here one on the on the interest expense. Thanks, Patrick for all the color in terms of the rising interest rate environment et cetera, maybe to make it even easier for some of us.

Can you actually give us the kind of dollar amounts of interest expense that you expect for the next three quarters as you bake in that that rate increase.

Sure.

I think.

Particularly including the new debt on Blue Prism, I think which is about.

36 or $37 million for the year.

We expect about 250 million.

Again this year.

In total.

Okay and in terms of in terms of the ramp I guess its a I guess a I don't know if you have any assumptions you want to sure.

Well I would I would think I mean.

Yeah, I think right now.

You know.

The average interest rate on our <unk>.

Our original facility is probably wrong.

2.45%.

And the new facility is 50 basis points higher than that because of the spread.

And then I would say.

It goes up another 50 basis points in Q3, and another 50 basis.

In Q4.

Okay.

Super helpful. Thanks for that and then just just as we think about capital deployment. Here are you are assuming basically mostly.

Pay off debts, given the rising interest rate environment or do you still think there's appetite for for buybacks as we step through the year.

And then yes, and that's that's one and then sorry, just one last quick one stock based comp increased quarter over quarter.

Is that a good and any any reason why the big step up I think there was a second highest in company history and is that a good run rate to think to think about for now.

Well, Alex I think it will be.

I'll take part of this Patrick kind of Tim.

Yeah, I think we're going to aggressively buy back our stock.

<unk>.

We still see it as a.

Financially quite a bit.

Quite a bit.

More effective than buying and paying down debt. Although you know if interest rates continue to rise.

We'll revisit that but right now.

You know, we're going to generate $5 a share in cash and our stock trading at 70 Bucks yourself of $69.

And plus we paid out 1.2% dividend I think so I think economically it makes a lot more sense to buy back stock.

But rising interest rates could could change that for sure.

We have tried to move a lot of the cash bonus programs.

Into more equity bonus programs.

And have them as a complement to the cash in.

And then have cash be less of that.

Less of a driver of the bonus program. So I would think that the equity.

Stock based compensation is probably.

Probably pretty close to where it will be going forward.

Hum.

I think you know again.

It's a tough labor market out there and we're going to do everything we can in order to.

To reduce attrition as much as we can and I think we've done it.

Pretty good job to date.

Alright, it's helpful. Thanks again.

We'll take our next question from Chris Donat with Piper Sandler.

Hey, good afternoon, thanks for taking my questions.

I had one for Raul on the alternatives business and it shows the.

The 10, 7% growth in alternatives in the first quarter in your slide deck, and then with the private market is growing over 18% I'm. Just curious if you can comment on.

What's driving that strength in private markets like you see for competition and if there's a lot of in house.

Opportunities shifting to SSN fee.

Okay.

Sure.

It's a little bit of.

All of that but mostly it's a continuation of a trend.

Sure.

Folks that had in house operations as they start new funds.

They use us or somebody like us and we would say that the <unk>.

Not that we have made in technology and process over.

The last decade or so.

As market differentiating and so so we have a really strong business what are the biggest.

Provider of private market and Thats, both private equity and real assets funds in the world and Andy capability keeps getting better so were natural place for many of these funds to come too.

And.

It is a combination of these are hot asset classes, particularly the private lending private credit and private equity as well as real asset. So because they are hard asset classes. There's a lot of new launches and then Dennis transfers of internal so all of that leads to I think a growth trend that is both positive and we think sustainable.

Yeah.

Okay got it and then bill.

Bill just on the health care business.

Your optimism for the future.

For this year for that.

What's the best way for those of us on the outside to track progress. There. If that's something we will see a flurry of press releases or will we need to wait until second quarter results. Our third quarter results just how should we try to keep an eye on that one and progress you're making.

Yeah, I think you know as we.

As we sign new customers New partners.

We would have press releases.

But.

People.

We're kicking the tires on the technology and want to make sure that.

We're going to deliver on our milestones.

Knock on wood, we've done a pretty good job so far so I think.

More to come.

And I think that.

These are large scale.

Health care organizations and so there.

You know large chunks of revenue.

Inc.

And I think will prove to have been wise to have gone down this path.

Okay. Thank you.

And we'll take our next question from Andrew Schmidt with Citi.

Hey, guys. Thanks for taking my follow ups here.

I wanted to ask about the opportunity to implement the blue prism digital workforce across the client operations.

Is there any way to size or think about that opportunity from a productivity perspective, and then is there.

That included in the Blue Prism margin ramp or is this a separate opportunity. Thanks.

Yeah, we would view it as a separate opportunity.

The prison has.

Has a lot of.

Good running room in and bringing them to market its products.

I have two are our client base and then now the productivity increases that we get inside necessity I think.

Well really in there to the business units, where they deploy blue prism.

So that was one of the strategic reasons for doing it and I think it's going to be something that really.

Really strengthens our business.

That's helpful. Thank you Bill and then just on the on the margin for the year, just taking out blue Prism is that outlook changed at all relative to the prior outlook, perhaps contemplating.

Some incremental.

Wage and cost pressure and then.

How do you feel about just cost being stable from this point forward.

Just from a because obviously we've seen some volatility some big pickups curious if theres more to come or your comfort level. There. Thanks a lot.

Yeah, I mean, we obviously don't have a crystal ball either so depending on what happens in the marketplace.

We're going to have to react and react in a way that is competitiveness.

Right now we think we have done the right things.

And you know we have.

So.

Rearrange some of our.

Some of our compensation policies and we're trying to make sure that we're.

Sensitive too to our talented workforce.

And right now we think we're in reasonable shape, but no rather than have one bonus at the.

Paid the first quarter after the year.

Going to spread out some of that some of that bonus so that we pay parts of it in Q2 parts of it in Q3 and then the majority of it in.

First quarter of.

23, so there's a number of changes that we're making and hopefully theyre being well received by our workforce.

And that they know that.

Foremost in our.

But in our mind and they're our biggest asset so given that there aren't any more changes in interest rates serve our inflation don't keep.

Going off the charts I think we are in reasonable shape.

Got it. Thank you very much bill appreciate it.

Our next question comes from Patrick O'shaughnessy with Raymond James. Please go ahead.

Hey, Good afternoon question about Blue Prism, how do you guys mechanically cross sell Blue Prism to your client base is it the legacy <unk> salespeople have this kind of added to their Arsenal is a team based approach with the legacy Blue prism people or how is that going to work.

Well its both obviously.

We're training our current sales force.

And getting some use cases right. So you have to have like a digital worker that's.

Called reconciliation are.

Work or it's called Verifier. Some other you know.

We've taken expert and they work and engineer and they create a digital worker.

You know a rules based.

Repetitive capability that.

We then deploy.

So we have to have the use cases, we have to train our sales forces.

What that use cases, and we have to kind of.

Use both blue prism personnel as well as the wrong, but we're pretty optimistic about it and and it's something that everybody's interested in.

So you know salespeople like sell stuff that everybody wants to buy so I think.

We feel pretty strongly that.

But the adoption will be will be.

No swifter than usual I think.

Got it that's helpful. Thank you and then a question for Patrick your full year adjusted net income outlook decreased by I believe its $48 million at the midpoint relative to your previous outlook.

But the operating cash flow outlook decreased by $130 million at the midpoint, what's driving that differential.

There's a couple of things that are driving the differential one as I think bill mentioned that we are now going out.

Institute for some employees a quarterly bonus.

So instead of having an annual bonus for this year in the first quarter of 'twenty three we're going to make some payments. This year, so that's affecting cash flow.

$60 million to $80 million.

Then there were about 20 or $25 million of deal costs related to.

Blue Prism.

Acquisition and financing.

That are hitting the cash flow.

Got it thank you very much.

Yeah.

And that concludes the question and answer session I would like to turn the call back over to Bill stone for any additional or closing remarks.

Well again, we appreciate.

You all being on the call today, and we look forward to executing over the next several months and talking to you.

At the end of the second quarter. Thanks, a lot.

And that does conclude todays presentation. Thank you for your participation and you may now disconnect.

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