Q3 2022 SS&C Technologies Holdings Inc Earnings Call
[music].
Good afternoon, My name is Abby and I will be your conference operator today.
At this time I would like to welcome everyone to the F. N C Technologies' third quarter 2022 earnings conference call.
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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 followed by the number one on your telephone keypad.
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We also ask that you kindly limit yourself to one question and one follow up question.
Thank you Justine stone head of Investor Relations you May begin your conference.
Hi, everyone welcome and thank you for joining us for our Q3 2022 earnings.
I'm Justine stone Investor Relations for FMC technologies with me today is Bill Stone, Chairman and Chief Executive Officer, Rahul Kanwar, President and Chief operating Officer, and Patrick <unk>, Our Chief Financial Officer before we get started we need to review the Safe Harbor statement. Please 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 Securities Litigation Reform Act of 1995 actual results may differ materially from those indicated by these forward looking statements as a result of various important factors, including those discussed in the risk factor.
Her section of our most recent annual report on Form 10-K, which is on file with the FCC and can also be accessed on our website.
Forward looking statements represent our expectations only as of today October 2027th 2022.
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 Dot S F.
The attack Dotcom.
I will now turn the call over to Bill.
Thanks, Christine and thanks to everyone for joining us.
For the third quarter of $1 3 billion and adjusted revenue up four 4% and up seven 5% on a constant currency basis.
Yeah.
Diluted earnings per share were $1 50 down 12, 9%.
Adjusted consolidated EBITDA was <unk>.
502 million for the quarter.
Our EBITDA margin was 38%.
Our third quarter adjusted organic revenue was up one 6%.
We saw strong growth in our software businesses, including advent and institutional investment management as well as.
Private markets Fund administration and retirement solutions.
Ex the impact of our health care business, our Q3 2022 organic growth in financial services.
It was 94% of our revenue was three 3%.
We generated net cash from operating activities of $764 6 million for the nine months ended March 30.
We paid down $55 6 million in debt in Q3, and our consolidated net leverage ratio.
A $3 five one of our net secured leverage ratio was 2.5 to consolidated EBITDA.
Q3, we bought back three 7 million shares.
$14 5 million in average prices.
50 762.
Bought back 6 million shares to date in 2022.
We are currently.
Planning on allocating 50% of our cash flow.
Stock buybacks and 50% debt.
Hey, Dan.
In August we closed a small acquisition tier one financial and are now working to integrate with our existing customer relationship management offering.
Great one of the largest financial services focus CRM system in the marketplace with capabilities that are applicable to nearly all.
About 20000 clients.
We continue to see revenue headwinds from the weaker economic backdrop and negative foreign exchange impacts from the equity markets. You are seeing in our heads in the Alps businesses and a slower M&A market has been back to the <unk> business.
Our assets under administration came in at $2 two trillion down from Q2 and flat year to date.
This is compared to a 271 billion increase in AUR.
In 2021.
However, we believe hiring and cost pressures on our clients that our clients face.
Due to increased outsourcing.
As firms globally continue the modernization efforts, we have unique opportunities to assist in staff augmentation automation and recordkeeping solutions.
Our Q3 20 <unk>.
EBITDA margin was 38%.
Are on track to exit 'twenty two at near <unk>.
Corporate average margins of 40%.
We've already seen large successes implementing blue prism is digital workers throughout our organization.
We have for instance, validated 1200 monthly client statements using digital workers, replacing over 40 hours of manual chip.
We expect to have over 100 digital workers employed by the end of the year and over 10 X. This number in 2023.
No error in the era of high labor costs Blue Prism will prove to be a very smart acquisition.
On a constant currency basis Blue Prism group revenue at 16%.
In Q3.
Our clients and prospects remain engaged.
At the beginning of October efficacy hosted our first deliver client conference in Orlando, Florida since 2019.
We hosted over 1000 people and feedback has been very polished.
We look forward to next year.
Deliver in Austin, Texas.
I'll now turn the call over to Rahul to discuss the quarter in more detail.
Thanks, Bill our.
Our business continues to display resilience, despite some impact from FX, primarily the British pound.
Reduced M&A deal volumes and volatility in the overall economic environment.
Our plans to grow. Despite these issues are centered around new product launches amplifier sales and marketing campaigns and continuing our focus on customer satisfaction and delivery.
Our fund administration business with significant growth initiative is to enhance the offering for hybrid and credit funds leveraging the full software capabilities of advent products in partnership with Globe Op strong fund services capabilities.
<unk>, we launched deal services, which enables our customers to stay focused on the execution of their M&A deals.
While we take on labor intensive tasks, such as reduction of the service and reporting as a service.
These offerings have already proven to be a differentiator for us helping to drive recent wins, we saw strength in our software business. This quarter Aloha on newest platform and institutional and investment management has had some early success eight new clients signed in Q3, bringing our total Aloha client base to 29 clients about a third of which are new logos to <unk>.
Let's see.
In September we appointed I guess small data lead the consolidated <unk> business, including private markets hedge in the insurance outsourcing.
We continue to see a convergence between hedge and private markets. I guess has delivered strong revenue growth and built an excellent leadership team and our real assets in private markets business over the past five years.
We're confident he will lead the combined robot business in the next phase of its growth.
We're starting to gain traction with our rollout of blue prism internally and across our client base within our outsourcing and service businesses. We view Blue Prism is a significant competitive differentiator.
That's widespread application that will generate accuracy and timeliness benefits for our client base and free up our talented staff to focus on higher level and analytical roles and accelerate their career growth.
We are targeting having digital workers, the 5% to 10% of our overall employee base by the end of 2023.
We expect the savings of approximately $50000 annually for each such role that we migrate day blue prism.
Now I will mention some key deals for Q3.
A wealth manager with 260000 accounts chose black Diamond to offer best in class solution to their end clients and large employee base and existing fund services client expanded their relationship with S&P.
Food additional funds and loan servicing on their private book.
Large real estate manager based in Singapore, and New York Josephson since he's middle office capabilities due to our real estate expertise and global operating model and existing Portia client upgraded to our new Aloha solution, noting the enhanced fixed income functionality.
A large transfer agency client selected assets Anthony for their web modernization project.
A large financial services group in Africa, Joe's assistance to any quarter. Its best in breed technology in bto capabilities, including TWD <unk> policy administration, and Blue Prism RPE will.
Riding an end to end solution to administer a broad range of multi asset multi region product types for their individual retail investors.
I will now turn it over to Patrick to run through the financials.
Thank you the results for the third quarter of 2022 were GAAP revenues of $1 billion $321 million GAAP net income.
The $160 million and delivered GAAP EPS of <unk> 61.
Sure.
We're $1.322 billion.
Adjusted revenue was up four 4% adjusted operating income decreased four 3%.
And adjusted diluted EPS was $1 <unk>, a 12, 9% decrease from Q3 2021.
Overall, adjusted revenue increased $55 7 million or four 4% over the third quarter of 2021.
Our acquisitions contributed $68 2 million in revenue.
Foreign exchange had unfavorable impact of $32 7 million or two 6% in the quarter.
Adjusted organic revenue increase on a constant currency basis, one 6%.
We have strength across several product lines, including alternatives.
And that <unk>.
Institutional investment manager and management and the <unk> business.
That strength was impacted by weakness in our goods transfer agency business and the health care business.
Adjusted operating income for the third quarter.
It was $486 1 million.
A decrease of $38 million or seven 3%.
From Q3 2021.
Adjusted operating margins were 36, 8% in the third quarter compared to 41, 1% in the third quarter of 2021.
Expenses overall increased nine 2% on a constant currency basis.
Acquisitions added $53 1 million of expenses and foreign currency decreased cost by $27.6 million.
Our cost structure has been impacted by wage inflation and higher staffing to support our business.
But we've improved operating margins sequentially.
34, 2% in the second quarter of 2021.
To 36, 8% in the third quarter as we managed our cost structure.
Adjusted consolidated EBITDA was $501 7 million or 38%.
Adjusted revenue a decrease of $39 million from Q2 2002.
Hey.
Interest expense for the third quarter of 2022 was 86 million and includes $3 7 million of noncash amortized financing costs and OID.
Average interest rate in the quarter for our credit facility and the senior notes was 455% compared to three two.
2% in the third quarter of 2021.
The increase in the interest rates.
Contributor.
An increase of $26 6 million of interest expense in the quarter.
And the higher average debt balance related to the financing of the Blue Prism acquisition added $8 6 million in interest.
A recorded a GAAP tax provision for the quarter was $53 4 million up 25% of pre tax.
Adjusted net income, which is defined in note four was $298 8 million and adjusted EPS was $1 15.
That attack rate used for adjusted net income was 26%.
Diluted shares decreased to $269 million from $263 9 million in Q2 share repurchase repurchases and lower average stock price during the quarter led the decrease.
On the balance sheet and cash flow, we ended the third quarter.
With 401 billion of cash and cash equivalents and $7 3 billion of gross debt.
That says it says net debt defined per our credit agreement, which excludes the cash.
Of $151 6 million held at the mine a Rx was <unk> 7 billion as of September 30th.
Operating cash flow for the nine months ended September .
It was $764 6 million.
$180 3 million or 19% decrease compared to the same period in 2021.
Operating cash flows were impacted by transaction expenses associated with the Blue Prism acquisition.
Of approximately $67 million.
Which includes amounts paid by Blue Prism and the post acquisition period.
In addition, it was impacted by the quarterly bonus that we initiated this year.
In Q3 of approximately $29 million.
Interest paid.
And this period.
It was $223 4 million.
Compared to $173 2 million in.
In the same period of 2021.
In the nine months, we paid $211.5 million in taxes compared to $238 million in 2021.
Our accounts receivable DSO improved to 51 seven days from 55 nine days as of June 2022.
Okay.
On investing in and financing.
Financing cash flows.
We've paid about.
$1.629 billion.
Acquisitions, including Blue Prism.
Why's mineral mineral wear OS shares and in tier one.
Capital expenditures and capitalized software of 158.
Or 4%.
Adjusted revenue.
Spending was predominantly for capitalized software and it infrastructure.
In addition, we received a distribution of <unk> 62 points two mill at $66 2 million.
One of our joint venture partners.
During the three months ended September 13th we paid down net debt of $55 6 million.
And we bought back in the quarter 214 points 5 million, we spent $214 5 million.
437 million shares at an average price of $67 $62.
And year to date, we have declared and paid a dividend of $153 million.
Our common stock shareholders as compared to $122 8 million last year.
An increase of 19, 9%.
On outlook.
For the fourth quarter.
On assumptions.
Continuing to focus on client service.
We expect our retention client retention rates to continue in the same range as most recent results.
We have assumed foreign currency exchange at approximately the current levels.
And that will result in a negative impact of approximately $37 million on revenue growth in the fourth quarter.
On adjusted organic revenue growth for the year, we expect 1.6% to four 6%.
On adjusted organic growth for the fourth quarter, we expect to be in the range of minus one 9% deposit of one 9%.
On interest rates, we've assumed average rates of above five 5% in the fourth quarter.
That compares to $4 five 5% we had in the third quarter of 2022.
We will continue to manage expenses during this period by controlling variable expenses and maintaining improving our operating margins.
We expect our GAAP tax rate to be approximately 26% on an adjusted basis.
So for the fourth quarter of 2022, we expect revenue in the range of $1 $305 million.
1 billion 355 billion adjusted net.
Net income in the range of $285 3 million to $307 5 million.
And diluted shares in the range of $255 million to $267 million.
And for the full year, we expect cash from operating activities to be in the range of $1 billion.
125 million.
Two 1.145 billion.
And I'll turn it over back to Bill for final comments.
Thanks, Patrick <unk> continues to be a highly profitable cash generating enterprise we.
We continue to win large scale world, we're known businesses and we are constantly improving our processes.
Sales development marketing and management are all improving.
We hope to show you with improved financial performance in upcoming quarters.
I'll now open it up to questions.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
We ask that you kindly limit yourself to one question and one follow up question.
We'll pause for a moment to compile the question and answer roster.
Your first question comes from the line of Andrew Schmidt from Citi. Your line is open.
Hey, guys. Thanks for taking my questions I, just wanted to start off with the fourth core organic growth assumptions.
Could just unpack that and traps breakdown major assumptions by business I think that would be helpful.
And then I know, it's a little bit early to talk about 2023, but it does sound like some optimistic commentary in terms of <unk>.
Client engagement and pipeline et cetera, obviously, the macro mains uncertain, but I was wondering if there is.
Our framework that we can use to start thinking about 2023.
Based on what you see today, thanks, a lot guys.
Okay.
Well I didn't get it.
Some of the detail and maybe Patrick and Rahul can chime in after but.
We expect that that similar to Q3 that that we will have.
Some significant.
Strength in our software businesses.
Now we've brought out a number of new products or who talked about Aloha I think singularity is up to about 60 clients Geneva continues to be very strong in.
And we have a lot of software that we've built over the past year and we're excited about some of those opportunities I think are.
Our technology offerings are going to be.
Well received.
And then on the fund administration business, we continue to win large.
Large mandates.
Have lots of opportunities obviously the.
The real revenue.
Growth is one when we get these clients' lives. So so that will be in Q4 Q1 Q2. So.
I think fund administration businesses and services businesses.
Both in private markets as well as.
As well as.
Hedge funds will will also be pretty strong and insurance as well. We think that's got opportunity. So I think we have a lot of things that are moving in a positive direction.
Obviously, the British pound is at historic lows and.
And you know.
We're not.
Not to have any China rebounded everything.
At the same time, there is probably a good likelihood that it won't stay at historic lows.
And so.
Interest rates are going to do what interest rates do.
We should have.
More than adequate cash flow to pay.
Pay down a bunch of debt and buy back stock so.
I don't know if you have any comment Rahul.
Hello.
The only added thing I would have is that the underlying business fundamentals that we look at whether it's.
How many deals we have in the pipeline or how many wins we have and.
Our path to innovation and rollout of new products all remain pretty strong.
Clearly the economic backdrop, the FX rates M&A volumes things like that are impacting us right now and so 2023 to your question on the framework for 2023 that will really just depend on how much that rebalance, but the things that we control, we actually feel are going reasonably well.
Alright. Thank you Bill. Thank you Rahul I appreciate the comments.
Okay.
Your next question comes from the line of Alex Kramm from UBS. Your line is open.
Just just actually wanted to follow up on your comments you made about fund admin just now.
It sounds like Youre relatively bullish still but if I look at the way over the last few quarters. I think you mentioned the prepared remark has been flat or even down and you see the alternatives growth come down at the same time, if I if I just eyeball, how those trends in a way it's been it almost looks like Thats Fed fund admin business could go negative in the <unk>.
Fourth quarter, So just wondering where are your.
Positive commentary is coming from if this is more of a 2023 out local war.
Or if it's if I'm missing something on the <unk> because as I said it seems like that business is decelerating right now given the market backdrop.
Well I think.
Alex It.
We're still.
Still doing pretty well with takeaways and we're doing pretty well with timing.
Major fund complexes.
And we think some of that revenue will start flowing through.
In Q4 and all throughout 2023.
And we would say, particularly in.
In private credit and some other stuff.
Strategy that it's quite strong and.
And we don't see.
Yeah.
If the market falls another.
<unk> hundred points or something or 5000 points.
Okay, but other than that I think that.
I think they're talking about October being the best October .
October and about 20 years.
In the equity markets.
And those kinds of things give us some some tailwind just like when they fall it gives us some headwind.
But I think we are.
We are pretty optimistic about our our fund administration business.
And we think that we're all very well.
But.
<unk> is a very talented executive and he's already move into <unk>.
<unk> some of the stuff, we do in our sales forces.
Is really starting to.
To sell bundles.
Our products and broad scale solutions.
The whole program is a comment on that too.
Yeah, I think on the on the changes in any way.
We talk about frequently how that doesn't exactly correlate to what we expect from revenue outlook, there's some impact but it's.
Weakly correlated so.
<unk> taken that is.
Is not going up but and if you look at our historical range on fund administration growth at somewhere in between.
More than 89% and so when when we have tough market like this we expect to be at the lower end of that range, but I wouldn't expect us to get negative unless there was a dramatic change in macroeconomic outlook.
Okay.
That's great. Thank you and then just quickly as a follow up I think on previous calls you've talked about how the LIBOR labor markets.
This has driven some implementation challenges I think it was primarily on DST. So just maybe an update how if those are you know.
Gone through it.
If it's easier to implement or are there still challenges.
I guess the question is what's the what's the backlog ligand is that going to help DST or other businesses, where that's been an impact.
Alex that's a great question.
We have a very large backlog of sold businesses that were in the midst of implementations and.
Just for instance, one client.
Several hundred thousand dollars a month, but when when when they go live which we.
Hope happens in the next five or six months.
That moves from several hundred thousands of several mode.
So you can imagine that we're pretty focused.
But we can be as is.
As focused as we wanted to be but we really have to get these clients live.
Get into a steady state.
Of them using our products and services Donna.
Day to day week to week month to month basis, and I think we are quite focused on that.
But has it sorry, but it hasnt been improving or or still some challenges.
Or it's improving but it's never a moving fast now since you know what I mean.
So that the.
The rapidity.
<unk> is the key and I.
I would say, we're getting better and.
I would say, we need to get better faster.
So I think that Thats now, but these are very large organization.
Complex implementations.
And Youre doing it while there is still operating sometimes.
Sometimes they are operating sometimes theyre doing acquisitions.
Sometimes we're doing divestitures.
All of that adds to the complexity of these implementations.
But we think we have a great team, we think we have great opportunities.
Its execution.
Fair enough. Thanks again guys.
Your next question comes from the line of Peter Heckmann from D. A Davidson your line is open.
Good afternoon.
Two quick questions can you give us an update on the development work on <unk>.
How are you feeling about the.
The timetable for the first quarter conversion.
Well I think that you know.
Good morning Rx.
The very large system.
Yes.
And we're trying to make sure that we are are really.
Aligning our deliveries.
Around times when these.
These large hub.
Health plans.
Are making decisions on new providers. So that's a work in process.
But we are certainly.
Focused on Toumani Rx.
Raul do you have.
Cheaper comp comment.
Bill.
I think that's right.
Yes.
Okay, and then just on the.
Kind of the legacy FMC Investor management software.
I think you said it was up 16%.
I guess I would assume that most of that business is coming on at subscription but were there some larger license in licenses in there that would have affected that number.
Yes, we sold a few.
On Prem.
Good side licenses.
And even even sometimes.
Even though we may hosted.
They may they may still do all the work so it's not a.
Business process outsourcing.
Service, So yes, we sold in.
We have.
Our refreshed.
Group of technologies that we think has has some.
Has some links to the.
Two its acceptance in the market, so we're doing quite well against our competitors.
We believe that will that will continue.
Alright Thats helpful. Thank you.
Your next question comes from the line of Jeff Smith from William Blair. Your line is open.
Hi, good afternoon, everyone.
And it just seems like the type of environment, where you could really kind of push through pricing increases that you couldnt typically yet.
What what type of pricing increases are you getting in the fund administration business and are there other businesses, where you are getting sort of material.
Increases relative to historical levels.
Yes, I think.
No.
Our program to two to get some price increases in that as well.
Pretty well and I think it's.
The price increases are.
There are more substantial than they have been over.
Over the last.
Probably five years.
As you know obviously inflation has gone up.
People recognize that they want to keep the same team we have very talented people in.
They want to keep the St. James So the.
And while no one likes that have their prices increased but I understand that keep these talented people and continuing to deliver service at a very high level.
There's going to be some pricing increases and we've had.
I would say.
Pretty good success with that.
Yes.
Okay.
And then on the EBIT margin expansion in the quarter. I think you said it was 260 basis points from the prior quarter you pointed out a couple of drivers of that utilizing blue prism, reducing the real estate footprint, how much did they drive that increase I mean can we get sort of the components of that.
Alright, I think what we said was 260 basis points.
And I would say that the.
The management of variable expenses.
It was probably.
100 to 120 of those 260 basis points.
And probably the real estate footprint maybe.
Maybe another.
What do you think Patrick 40, 50 basis points maybe.
So probably probably around $5 million in the quarter $5 million to $7 million.
And there is a variety of other things that we've done about.
We buy lots of services from from lots of different people.
And we've gotten some.
Got some help with more volume, but at a lesser.
At a less rate.
But I think those are the major components.
And I think I think also blue prism.
Operating margins improved in the quarter.
Okay, how big of an impact with that or is it still small at this point.
Okay.
I think they were up over 10% operating margin. So it was pretty significant in the quarter sequentially.
Okay. That's great. Thank you.
Your next question comes from the line of Kevin Mcveigh from Credit Suisse. Your line is open.
Great. Thanks, so much.
I don't know.
Bill or Rahul, but.
Any sense of given some of the volatility any changes in the competitive dynamics of the business and I Wonder if you could give us just an update on kind of blue prism in terms of go to market.
Oh, that's been helping from a competitive perspective.
Well I think.
Competitively.
I believe we're in a very strong position and we continue to have takeaways.
We continue to have.
Outreach from the industry coming to us.
And we think that that's going to continue the breadth and depth of our offering.
We believe is unmatched.
We think that Thats, a very strong position to be in.
And then the addition of Blue Prism.
<unk> has really been a.
Demonstrable.
Ways that people can use digital workers for things like.
Statement verification.
Conciliation.
Whole host of other things and as Rahul said is that we.
We hope we come out of 2023 with between.
Between five and 10% of our workforce.
Digital workers.
And I think that Thats, a significant number of people.
And then just following up on that.
Is that helping bill internally in terms of managing some of the cost pressure that you saw earlier in the year seen a little bit of a benefit from blue Prism and then the environment overall is that starting to help on the cost side in terms of.
It feels like leavers, maybe not as tight as it was earlier this year is that fair.
I think it is fair.
Alright, though right and it's going to be a while.
Before before labor it's not.
And in the ascendancy.
I think that.
Most of the.
People's businesses that are on this call.
There is pressures on.
On various whether it's.
Investment banking fees or.
Other types of fees.
At.
And you see that happening where the.
There are significant cuts.
Around large scale.
Financial institutions and that generally puts.
More talented labor in the workforce and we are getting a.
A lot of great resumes.
And our ability to really deploy blue prism.
Is something that allows us to put people into <unk>.
Higher level analytical physicians have given them.
Our career paths that are that are we think pretty excited.
Very helpful. Thanks Bill.
Your next question comes from the line of James Faucette from Morgan Stanley . Your line is open.
I want to go back to Jeff's questions on pricing et cetera, I think you've mentioned that as a function of your pricing reviews. We've enabled more automatic escalators at least some more contracts.
And I guess recognizing that those are mainly in the licensing business.
That comment really directed at new customer signings or you've been able to go further and include some of those escalators in contracts that don't that Didnt previously have them in.
Should that ultimately result in more consistent pricing changes in future periods.
Okay.
Yes.
Okay.
Okay.
Rahul maybe you can get a few.
Sure.
Yes, so I think it's both were.
We are.
Obviously.
Making that a standard in new customer contracts, but but as part of the conversation with current customers that did not have escalators in their contract.
We're both agreeing to.
Updated price levels at.
At the present and also sort of having this regimen in our CPI or something index to a cost of living type adjustments built into the contract.
And that also has to Bill's point, we don't nobody really wants to talk about these things, but they understand where we're coming from and so that has gone reasonably well and it does make for as you point out a more automatic and consistent process going forward.
And I guess just as a quick follow up then I'll pose my second question is at the same time, but does that mean that we should start to see some of that benefit in future periods or is it still too nascent just to think about that impacting next year is kind of a follow up there and then my second question was just.
On the we always ask about M&A environment.
You guys historically have done a great job, adding value and drew.
Through acquisitions, and we are starting to see some of the venture capital funding.
Amounts come down so just wondering if youre seeing some following an incremental opportunities there yet.
Yes.
Well I think the M&A M&A market.
I think there is youre seeing.
Some major software deals being being announced over the last few weeks.
But prices are still pretty firm in and.
I think that that.
Yeah.
The Clarion call for organic growth is something that we've put a lot of focus on them and have a lot of new products and services that we think will drive.
Significant revenue for us.
And then the.
The same thing with the pricing.
That stuff built in.
It will continue to build throughout 2023.
And hopefully we would we would be able to point to specific subs.
Several percentage.
Percentage increases in the overall.
Revenue streams on different different services and products.
That is caused by our price increases.
That's great context I appreciate it.
Your next question comes from the line of Patrick Matthew.
Murphy from Raymond James.
Hey, good afternoon.
So by my math your full year organic constant currency revenue growth outlook moved about 10 basis points lower versus last quarter's guidance.
That rate does that then imply that most of the revision lowered for the full year revenue and EPS Guide was just a function of FX.
I think we think that's a yes.
There is some FX impact, but I think.
I think the midpoint of our full year revenue guide is about 2% right now.
And in the third quarter, we were at about three 2%.
I appreciate it.
Hello, guys organic reduction in <unk>.
Probably.
I would say maybe $20 million.
Is FX.
From the guidance, we gave at the end of the second quarter.
I thought I heard earlier in the call you said the range for the full year organic constant currency was one 6% to $4 six did I mishear that.
Yes, I think so.
Thanks.
Okay.
I think the mid points around.
Two.
Okay.
Okay and I can go back to the transcript after the call and look at what you said earlier.
And then I guess, maybe a question about capital allocation Bill you touched on clearly the focus is on organic growth, but also just from an accretion standpoint, given where the share price is repurchases are pretty accretive given where interest rates are debt reduction is pretty.
Accretive does that kind of change your thinking versus M&A.
Relative to where maybe you've kind of been thinking historically.
Obviously.
Sorry forgive me.
And you understand that process.
Probably as well as anybody in.
And that's the way more art than it is.
Science, particularly when interest rates are going up.
And we view our stock is undervalued.
You'll get you'll get.
Kind of.
Kind of a.
Sure.
Anything you do is pretty positive.
But interest rates at $5 five compared to <unk>.
Our stock price at 50.
If the stock price at $50 is quite a bit financially better.
But we still like acquisitions, we like the talent, we give me like the ability.
To drive margins up we'd like to get the new tech the new technology, the new services.
Talent and so no I don't.
I think that the the overall philosophy is much different it's just that the <unk>.
<unk> to debt.
Can do and the impact as you said both are accretive.
But share buybacks are quite a bit more I think than.
And debt Paydown.
But people people with peripheral.
We drive our.
<unk>.
Our leverage ratio to below three <unk> and that's something that we're focused on and I think again.
We moved our.
Our EBITDA margins up I think 260 basis points and people wondering if our.
Our margins were permanently back.
Based on Q Q2.
Our view is if we have a lot of levers in this business blue prism, even what Rahul said, 5% to 10% of our workers.
Those numbers out.
And youre talking about tens of millions.
So.
And and work.
Trying to be conservative.
So I think theres, a theres a lot of opportunity for us.
And.
Even.
Even with our our 38% margin, which we would like it to be higher it's still stacks up pretty well against that.
Most of our competitors.
Great. Thank you very much.
Again, if you would like to ask a question Press Star then the number one on your telephone keypad.
Your next question comes from the line of tandem.
Tandon from Needham and company your line is open.
Hey, good evening, guys, it's actually Kyle Peterson on for <unk>. Thanks for taking my question. So I guess to kind of frame. The 2023 question that way.
You guys are really kind of a thing on the margin trajectory. So thinking about next year like is there any reason that with.
Blue Prism.
Integrated that you guys can get back to kind of historical EBITDA margins that you guys have operated.
Outside of alike.
Black Swan of that alright.
Yes, we think better.
Okay.
Matt.
So.
Yes, just a follow up.
Just I know it's coming.
Our past acquisitions, you guys have.
Sometimes it's come across.
Some some noncore assets that might not perfectly fit with your portfolio is are there anything.
Left on the balance sheet from whether its blue prism or anything else that you guys might.
Being able to monetize and uses to either pay down debt or or buy back your own stock at these levels.
We got a few buildings for sale if you're interested.
Okay.
Hey, Matt.
Yes.
We ask on our on our balance.
Yes.
Our balance sheet.
Uh huh.
Contact my broker and maybe we can work something out.
Thanks, Yes that is correct we have several cities.
Yeah, Yeah yeah.
Thanks, guys.
Yes, we have some other assets on our balance sheet.
But nothing particularly significant that's going to make up.
$100 million or anything like that.
Okay understood. Thanks, guys.
Your next question comes from the line of surrender and from Jefferies. Your line is open.
Thank you.
Can you, maybe dig a little bit deeper into the trends within DST financial services.
Okay.
Yeah, I think that DSD financial services, particularly that we had about a.
A pretty big.
U K business.
And so.
So a lot of the headwinds in maps.
Okay.
British pound.
The targets.
On.
Are we still talking about DSD financial services.
Yes.
Yes.
Yes so.
Large component of that business is in the U K.
And I think that we still have lots of opportunities there.
We've spent a lot of money in and we think we have improved our products.
And our service levels, but I think it is still a competitive business and I think that we have.
A chance to continue to improve that business.
And I think we have.
A stronger salesforce in there and that we are doing some smart things.
I think we will continue to do that.
Rahul do you have anything else to add to that.
Hello.
Other components of DSD connected services the retirement business, we have been.
For the last 12 or so months.
Working on a couple of big customers that were <unk>.
Getting much closer to that go live situation and we expect to see growth in those businesses as a result brokerage remains.
Pretty strong and we're encouraged by the fact that we're seeing more and more deals coming out of DSD financial services that are sort of cross sell enterprise type deals, where we're selling multiple of our products and services, including AD ban in fund services and other things, which is really what we had hoped would happen.
And so there's a lot of positive despite kind of some macro trends.
Understood and then in terms of just a follow up.
Pete.
Maybe any additional color in terms of just.
Talked about digital workers, maybe getting to 5% to 10% potentially 50 K in savings for each digital worker.
Now are you thinking that about that in terms of.
Reinventing existing processes is it primarily intended to be savings from future workers.
Can you talk a little bit about the dynamics.
I received kind of given some idea of where 2023 might end up but just with the longer term outlook for that might be.
Yeah.
Well I think if you go back to the rationale of why we bought Blue prism.
We believe we have.
We have the strongest.
A group of experts in the industry and it's the functional experts.
Sorry to the.
The high power technology, and technologists, and Blue Prism that allows us to build smarter and smarter.
Digital workers that can do increasingly sophisticated work.
That's why you have the <unk>.
Optimism.
But you hear here.
We do literally thousands and thousands of reconciliations.
Hundreds of thousands of.
Of limited partner statements and other things that are can.
It can be quite manually intensive.
And the more that we can build expert digital workers.
Take a mouth a lot of that.
Tds and time consuming work.
Off of our workforce the more we can we can get increasingly better and and drive margin.
We don't have to have as many people in that.
And those kinds of.
And those kinds of roles.
That's helpful. Thank you.
There are no further questions at this time, Mr. Bill Stone I'll turn the call back over to you.
So again, we appreciate everybody being on here and obviously.
We prefer to grow and.
But we also.
Good Smart thing, so I think about protecting our workforce.
Making sure that we're extremely competitive on on talent acquisition and talent retention.
As well as client acquisition and client retention.
We're going to focus on that and we're going to deliver on that and we think that will up.
Well for everybody so.
So thanks again, and we look forward to talking to you. After the after the end of year end of the year. Thank you.
This concludes today's conference call you may now disconnect.
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