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spk06: Ladies and gentlemen, thank you for standing by and welcome to the SS&C Technologies 4th Quarter and Full Year Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be question and answer sessions. To ask a question during the session, you will need to press star 1 on your telephone keypad. Please be advised that today's conference is being recorded. If you require any further assistance during the call, you may press star zero. And without further ado, I would like to welcome your host for today, Ms. Justine Stone. Ma'am, the floor is yours.
spk07: Hi, everyone. Welcome and thank you for joining us for our fourth quarter and full year 2020 earnings call. I'm Justine Stone, Investor Relations for SSMC Technologies. With me today is Bill Stone, Chairman and Chief Executive Officer, Rahul Kanwar, President and Chief Operating Officer, and Patrick Pedanti, our Chief Financial Officer. Before we get started, we need to review the safe harbor statement. Please note the various remarks we make today about future expectations, plans, and prospects, including the financial outlook we provide, constitute poor business statements for the purposes of safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the risk factors section of our most recent annual report on Form 10-K, which is on file at the SEC and can also be accessed on our website. These forward-looking statements represent our expectations only as of today, February 10th, 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. 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. I will now turn the call over to Bill.
spk03: Thanks, Justine, and thanks, everyone, for joining. Our results for the fourth quarter are 1,206,000. In adjusted revenue, it's down 0.5 percent and $1.13 in adjusted diluted earnings per share, which is up almost 5 percent. For the full year, we had $4.681 billion in adjusted revenue, up 0.3 percent and $4.30 in adjusted diluted earnings per share, up 12.3 percent. Our adjusted consolidated EBITDA was $475.8 million for the fourth quarter, and our adjusted consolidated EBITDA margin was 39.4 percent. Our Q4 adjusted organic revenue was down 2%, and for the full year, our 2020 organic revenue was down 0.5%. As expected, we had weakness in our large licensed software business in the fourth quarter, but our alternative business, our interlinked, and our edge business grew nicely, and the DST business saw improvement from the previous quarter. Operating cash flow was $1.84.7 million, $1.84.7 million. billion for the 12 months into December 31st, 2020, up 10% if you exclude a one-time $250 million upfront license payment paid in the second half of 2019. 1.184.7 million represents a 103% cash conversion rate on our adjusted net income of $1,146.8 billion. We put cash To good use in 2020, we paid down $738 million in debt, bringing our secured net leverage ratio to 2.31 times and our total net leverage ratio to 3.39 times. We bought back 3.7 million shares of common stock at an average price of $60.99 for a total consideration of $227 million. This year, we faced many challenges which were unprecedented in our 35-year history. SS&C adjusted quietly and with authority. We moved 99% of our workforce to remote, supporting clients with expertise and resources. We continued to meet our deliverables, engage with our prospects, and we built and deployed solutions. We have continued to see success with our newest products. As Eclipse ended the year with 170 clients, we're doubling its client base. We have leveraged algorithmic capabilities and developed a scenario as a service A pandemic-specific analytical tool, which is infection rate, susceptibility, and death rates into the investment scenarios based on movements in equity, fixed income, FX, and commodity markets. In SS&C Health, we successfully launched our flu pilot program with the support of our internal call centers. This program provides outreach to SS&C Health clients in order to enhance the rates of flu vaccinations. We developed a similar COVAX program focused on ensuring the successful completion of the COVID vaccine series for members receiving the vaccination from SS&C health partner pharmacies. While 2020 was a tumultuous year on a global basis, SS&C performed with distinction. We were able to outperform estimates, collect our receivables, delight our customers, and generate more revenue than any year in our history. Like many in the financial services, Industry, we earned revenue on float. In 2020, this revenue was down 20 million or over 75 percent. We overcame all difficulties and posted $4.3 million, $4.4 and 30 cents in adjusted earnings per share, 12.6 above the 383 per share in 2019, 47 percent above the 292 in 2018, and 122.8 percent above the $193 in 2017. Good numbers, we think. I'll now turn the call over to Rahul to discuss the quarter in more detail.
spk11: Thanks, Bill. As you noted, we had a strong quarter with a broad-based lift in revenue from Q3 across many of our business lines. DSD, SSMC Health, Alternatives, Interlink, Regulatory and Algorithmics all posted improved performance in Q4. Our Alternatives business grew 5.5%. in Q4 and 5.7% for the year. Clients remain optimistic about their growth outlook, which is reflected in our data, including the capital movement and other indices we publish. Bill mentioned the rapid adoption of AzEclipse in his earlier comments, and in Q4, we launched the AzApp powered by Eclipse and made it available in iOS and Android app stores in November. User adoption and design collaboration for the app's next phase have been strong. Intralinks has seen substantial growth since the recovery of the M&A market in the back half of 2020. We remain very focused on driving technological differentiation in the virtual data room space in the context of a strengthening M&A environment. Despite the challenges of 2020, we ended the year with accomplishments to be proud of and set up our business for strength ahead. During the year, we made several executive appointments, including Dan Del Mastro, head of SS&C Health, Karen Geiger and Steve Levin, co-heads of SS&C Advent, Kevin Rafferty, General Manager of SS&C Retirement Solutions, Nick Wright, Head of Global Investor and Distribution Solutions, Chris Matbeck, Head of Tax Services for SS&C Global, and hired and promoted numerous other senior executives. These executives are working with our customers and prospects, driving change and defining new products and services to fuel future growth. We continue to invest in our sales and marketing organizations and are seeing success gathering leads and interacting with prospects using digital and virtual platforms. Under the direction of Eamon Greaves, our global head of sales, we launched a comprehensive solutions program that brings product and service owners together across SS&C to develop integrated and targeted offerings. These solutions are geared to our clients' specific needs and focused on their asset classes, structures, regulatory and end customer requirements, and other business objectives. We have seen early success with clients selecting multiple products and services and anticipate that this new effort will drive further collaboration within SS&C and distinguish our offerings in the marketplace. Now I will mention some key deals for Q4. A $1 billion hedge fund launch shows our hosted Geneva solution along with Geneva World Investor and E-Investor. A large UK wealth manager, chose to transform their operations using our global investor and distribution solutions and Advent software. An existing retirement customer bought AWD, our workflow management tool. A Colorado-based alternative investment manager chose a full suite of SSNC offerings, including Global Fund Services, Loan Servicing with Precision LM, our Edge Trading Platform, and Interlinks. An existing fund services client extended their relationship to include risk, investor services, and regulatory solutions, including our new Blue Sky reporting offering. A large SSNC Health client adopted our digital platform portfolio with a mobile app that enhances the member-payer interaction for 10,000-plus members. I will now turn it over to Patrick to run through the financials. Thank you.
spk02: Results for the fourth quarter were GAAP revenues of $1,203.4 billion, GAAP net income of $197.1 million, and diluted EPS of $0.74. On an adjusted basis, revenues were $1,206.1 million, including the impact of the adoption of the Revenue Standard 606 and acquired deferred revenue adjustments for acquisitions. Adjusted revenue was down 0.5 percent, adjusted operating income decreased 2.4 percent, and adjusted diluted EPS was $1.13. a 4.6% increase over Q4 2019. Adjusted revenue decreased 6.1 million, or 0.5% over Q4 2019. Our acquisitions contributed 27.4 million. Foreign exchange had a favorable impact of 6 million, or 0.5% in the quarter. Adjusted organic revenue decline on a constant currency basis was 2% driven by weakness in the ADVENT, institutional software products, and DST financial services. These were offset by strength and fund administration, interlinks, and the as-business. And we had strong sequential growth in the DST financial services and healthcare businesses over the third quarter. Adjusted operating income for the fourth quarter was $458.8 million. a decline of 12.2 million or 2.4% from the fourth quarter of 2019. Foreign exchange had a negative impact of 3.5 million on expenses in the quarter. Adjusted operating margins were 38.8% compared to 38.0% in 2019. The expenses were driven by higher employee compensation and benefits, higher sales commissions, and professional services, and these expenses were partially offset by lower travel and contractor expenses. Adjusted EBITDA defined in Note 3 of our earnings release was $475.8 million with 39.4 percent of adjusted revenue. Net interest expense for the fourth quarter was $53.3 million and includes $3.4 million of non-cash amortized financing costs and OID. The average rate in the quarter for our amended credit facility and our senior notes was 2.99% compared to 4.53% in the fourth quarter of 2019 and resulted in an interest expense decrease of $47.2 million, or 47%. We recorded a gap tax provision of $37.7 million, or 16.1 percent of pre-tax income. Adjusted net income, as defined in Note 4 of our earnings release, was $302.6 million, and adjusted diluted EPS was $1.13. The effective tax rate used for adjusted net income was 26 percent. Diluted shares increased to $268.1 million, from $266.7 million in Q3. The impact of the increase in the average share price and option exercises was partially offset by share repurchases in the quarter. On our balance sheet and cash flow, as of December 31st, we had approximately $209.3 million in cash and cash equivalents and approximately $6.5 billion of gross debt for a net debt position of approximately $6.3 billion. Operating cash flow for the 12 months ended December 2020 was $1,184.7 million, down $143.6 million compared to the same period in 2019. The decrease was impacted by a one-time upfront $250 million license payment that were received in 2019. For the full year, net debt payments made net debt payments of $738.2 million. Treasury stock buyback of $227.8 million for purchases of 3.7 million shares at an average price of $60.99. We declared and paid $136.1 million in common stock dividend as compared to $107.6 million last year, an increase of 26.4%. Paid interest for the period was $236.2 million compared to $353 million last year due to the lower debt levels and lower average interest rate. For the full year, our average interest rate was 3.35% compared to 4.78% in 2019. For the year, we paid income taxes of $277.4 million compared to $222.7 million in 2019. We saw improvements in our accounts receivable DSO as of December 2020 at $48 And that compares to 50.4 days as of September 2020 and 49.7 days of December 2019. Capital expenditures and capitalized software were $106.4 million or 2.3 percent of adjusted revenue. Spending was predominantly for capitalized software and IT infrastructure and also some facility leasehold improvements. Our LTM consolidated EBITDA that we used for covenant compliance was $1,856.3 million as of December 2020. Based on that debt of approximately $6.3 billion, our total leverage ratio was 3.39 times, and our secured leverage ratio was 2.31 times as of December 31st. On our outlook for 2021, First, I'll cover some of the assumptions in our outlook. We currently expect markets to be volatile, large-scale outsourcing deals and licensed deals to continue to be at moderate levels, but with improvements in the back half of 2021. Our fund services business will continue to perform. As we focus on client service, our retention rates will continue to be in the range of our most recent results. We've used foreign currency exchange at current levels. We expect the impact on DST Health Unit pre-acquisition client terminations to impact revenue by approximately $25 million for the full year 2021. Adjusted organic growth for the year will be in the range between zero and 4 percent positive. Adjusted organic growth for Q1 in the range of negative 2.3 percent to positive 1.1 percent. Interest rates on our term facility will be approximately one month LIBOR plus the spread, which is currently 175 bps. We will continue to manage expenses during this period by controlling variable expenses and staff hiring. On capital expenditures, we'll continue to invest in our business and spend approximately 2.8 percent of revenue on capital expenditures and capitalized software. We expect our adjusted tax rate to continue to be 26 percent. For the first quarter of 2021, we expect revenue in the range of $1,158 million to $1,198 million. Adjusted earnings per share to be in the range of $1.05 to $1.11. For the full year of 2021, we expect revenue to be in the range of $4,685,000 to $4,875,000. And adjusted earnings per share to be in the range of $4.36 to $4.64. For the full year, we expect cash from operating activities to be in the range of $1,240,000,000 to $1,320,000,000. And I'll turn it over to Bill for final comments.
spk06: Excuse me, I think Mr. Bill got disconnected, but he's reconnecting now.
spk12: Okay, thank you.
spk06: Excuse me, Mr. Bill Stone is reconnected.
spk03: Sorry about that. Thanks, Patrick. We continue to operate in a global pandemic. 99% of our global workforce is still remote, and business travel and in-person sales meetings are essentially nonexistent. Over the past 11 months, we have learned how to operate under these circumstances. utilizing video conferencing website, web-based marketing, and promoting the power of our business model and reliability of our people and technology. As you can tell from this call, we are optimistic and we believe our performance during this pandemic will pay dividends well into the future, well into the future. We will now open it up for questions.
spk06: Thank you, presenters. As a reminder, to ask a question, you will need to press star 1 on your telephone keypad. To withdraw your question, you may press the pound key or the hash key. Please limit yourself to one question and one follow-up to allow other participants for questions. Please jump back into the queue if you have any additional questions. We'll pause for just a moment to compile the Q&A roster. Our first question comes from the line of David Tagut from Evercore ICE. Your line is open.
spk08: Thank you. Good afternoon. Could you comment on fourth quarter 2020 total organic revenue growth? Quantify, please. If you could break down organic revenue growth for the fourth quarter by fund administration, Intralinks, and DST.
spk02: For the fourth quarter, total adjusted organic growth was down 2 percent. The alternatives fund administration business was up 5.5 percent. And DST, we can provide you kind of a breakout between the two groups. The financial services group was down 1.1 percent, and the healthcare group was up 3.1 percent. I think that combined to be down 0.3 percent for the full year. And interlinks was up 3.8 percent.
spk08: Got it. Thanks for that. And just as my follow-up, could you comment on your acquisition pipeline and, you know, appetite to acquire, you know, in the year ahead based on the quality of the pipeline and valuations that you see?
spk03: Well, you know, we constantly look at acquisitions and we're disciplined about it. You know, obviously we deployed $8.3 billion in the 2018. And that bought DST as and interlinks. You know, we spent, I think, about 138 million in 2020, which was less than we would have expected. But we looked at lots of things. And obviously, in the public domain, you know that we looked at link administration down in Australia. So we're disciplined about it, you know, and we're, we're quite aware that all the questions that we get on the conference calls and from our shareholders are organic revenue growth oriented. So we want to make sure that we focus on our organic revenue growth. And as Rahul had detailed in his remarks, we've made lots of changes. All of our businesses are getting better. All of them. Because if they don't get better, we get different executives. And that's how we operate. So we're very optimistic about where we're going, about generating tons of cash, paying down a bunch of debt, looking at great acquisitions, and earning more money for our shareholders, and then deciding how we're going to allocate our capital, whether that's going to be on acquisitions, which is generally our first choice. But we also like to pay down debt, and we also like to evaluate buying back our shares. So I don't think our business plan or our strategy has changed completely. I believe that what we're doing is executing, and I think that's what will continue. So there's a lot of stuff for sale, and you see stuff getting purchased all the time. And the question becomes, is that strategic for us? Will it drive our organic revenue growth? And what is it going to do over the long term? So those are the criteria that we have. And, you know, I think we will probably buy some things in 2021. But as usual, we'll be disciplined about it. And, you know, we are going into 2021 with, you know, with some optimism.
spk08: Understood. Thank you very much.
spk06: Our next question comes from the line of Andrew Schmidt from Citi. Your line is open.
spk09: Hey, guys. Thanks for taking my questions here. I wanted to touch on the sales cycle briefly. I know you mentioned in your revenue assumptions you expect customer appetite and buying behavior to improve throughout the year, but wondering what you're seeing more recently as we're heading into 2021. Are you seeing customer behavior and buying patterns improve? Obviously, you're still in a largely remote environment, but just curious what you're seeing from a sales cycle perspective, especially as it pertains to large deals.
spk03: Well, I'll give that a quick shot and then Rahul can comment. But, you know, we have a pretty full pipeline. We have large deals. We have what we believe are a number of large deals that we hope to close this quarter. We had a, you know, a very reasonable January. And I believe that we will continue to execute. And we're seeing some strength across our different businesses. I think our Our indicators that we have in interlinks are all as strong as they've ever been. I think we have a larger pipeline in January than we've ever had. And, you know, fund services, the hedge fund industry has proven to be quite resilient, and I think it will continue to be as more and more private assets become the, you know, the most attractive place to put money, whether that's private equity or private credit. our real estate. I think that SS&C is well positioned to do well there. And I think that the DST business is getting stronger. Our retirements business grew very nicely in Q4, and we expect it to grow very nicely throughout 2021. You know, we have some challenges in our healthcare business, but, you know, Danny Del Mastro and his team are doing a good job and are very focused. And so with that up, but Rahul will take a crack.
spk11: So, you know, I think the thing that I would add is as time has passed in this pandemic, we have gotten more comfortable and our customers as prospects have gotten more comfortable transacting over digital and virtual. And, you know, we always had an element of that, but obviously we've had to rely on it a lot more. So we've seen our yield for virtual events and you know, other things that we do to gather pipeline go up pretty substantially. And we've also seen contract signings and things like that, which were certainly slow at the start of this process, you know, tick back up. So we feel pretty good about the current state. It's better than it was three months ago, and we think it's going to keep getting better throughout the course of the year.
spk09: That's great. Good to hear about the improvement, especially on the DST side. Maybe to tab onto that, when we think about the FY21 organic growth outlook, the zero to four, what are the three, what are the primary things that drive sort of the bottom and the top end? And then, you know, within that, you know, what are the assumptions for DST as the year progresses? Any color there would be helpful.
spk03: Again, when you're selling $20 million to $50 million deals for a year or $10 million to $25 million deals for the year, multi-year deals, if we win them, we will be at that 4%. And if we don't win them, we will be closer to that 0%. But we're confident that we are going to win a lot more than we lose. We're going to continue to perform. The feedback from our clients has been tremendous based on the work that our entire staff has put in and the attention to detail that we have delivered. You know, in places like Advent and others that do net promoter scores as high as it's ever been, customer satisfaction as we track, is very high, and our retention rates stick at 96 or so percent. And so I think that we have a lot of optimism that we can perform. You know, we've got to win. You know, you've got to throw passes, somebody's got to catch them, and they've got to go across the goal line, right? I mean, that's the nature of the beast, and I don't know if Rahul, you would have anything else to add to that.
spk11: Just I guess on the second part of that, on DSD in particular. So, you know, to talk about the pieces of DSD separately, the DSD financial services business, which is really everything except health, we're expecting to see, you know, low single digits type growth. That's kind of what's in. So at the midpoint, maybe something like 3.5% or something like that. And the health business, as Bill mentioned, we do have some challenges, and we're still dealing with some COVID impacts, and we expect that to be flat to slightly down for the year.
spk09: John, that's good context. Very helpful, guys. Appreciate it. Thanks.
spk06: Our next question comes from the line of Alex Cram from UBS. Your line is open.
spk05: Yeah, hey, good evening, everyone. Can you talk about the cost structure and the margin a little bit? If I look at the guidance correctly here, looks like continued margin expansion so so any any any more details there but but more importantly it's just operating leverage or is it still um a lot of efficiency gains that you're getting i you know you've been doing a lot of that so just just wondering um we are still finding opportunities to to i guess cut if that's that's what's happening well i i think alex we would say that we manage um you know we cut cut where we have to and
spk03: You know, but we, you know, we have a large workforce. We have almost 25,000 people. And, you know, there's opportunities everywhere, right? And we have to get more efficient. And, you know, if you can get, you know, 5% efficiency, then, you know, on 25,000 people, that's 1,250 people, I think, right? So, you know, we need to drive revenue in order to be able to continue to grow our workforce and continue to increase our margins and So that's what everyone at SSNC is focused on. And, you know, we manage it. We manage it every week. You know, so, you know, we pick places that we want to, you know, put our resources in. I think we spent $600 million between R&D and capitalized software and software. $140 million or so in acquisitions we did. So, you know, we're investing back in our business, you know, and we think that there is tremendous opportunity for us, and we think we have some very large competitors that just aren't going to be able to keep up. And we think as long as 2021 goes and 2022, you know, we're going to continue to execute on a much higher level than our competitors.
spk05: Okay, great. And then secondly, quick one. I think the buybacks were pretty soft in the fourth quarter. Is that just because you were looking at deals and maybe also your cash balance is fairly low, I think? So just had to step back? Or where did that come from? And what's your expectations for 2021? I mean, you accelerated nicely in 2020. So that's still pretty focused on repurchases, all else equal?
spk03: Well, you know, again, we try to allocate our capital as best we can, and obviously we think our stock is certainly not overvalued. So, you know, we look at that somewhat fondly, but it's not our first choice. You know, and, you know, even as we buy in it, if we buy more than we did in In 2020, it would not surprise me, but I don't believe that we will probably spend more than we pay down debt. So, you know, obviously, if we do acquisitions, it's an interest rate to stay where they are. We'll probably use a lot of debt on acquisitions. But we generate a ton of cash. You know, we generate a ton of cash in January. We'll generate a ton of cash throughout the year. And... And hopefully we will use it wisely for the best interests of our shareholders.
spk05: Makes sense. Thank you.
spk06: Our next question comes from the line of Brad Selnick from Credit Suisse. Your line is open.
spk13: Great. Thank you so much for taking my questions. My first is for Bill. Bill, I'm wondering if you have any perspective on the higher trading volumes and volatility related to retail flows in the equity markets and how, if at all in any way, they've impacted parts of your business, maybe the health of fund admin clients or anything else worth noting. And, Bill, I know you've been around long enough to see just about everything. Curious if you have any perspective on this force in the market and if in any way it's an opportunity for us to see.
spk03: Well, you know, me and Moses have been around for quite a while, Brad, as you well know. So, you know, as I look back on my, you know, 400 years in the business, you know, these things happen, right? They get to be bubbles. And, you know, when you start taking technology and spreading it around the world and then allow people to collaborate, you know, as always, you know, it's difficult for the all of the various schemes, so to speak, that people can deploy to drive up stocks or drive down stocks. And so, you know, I think the regulators will catch up. And I think that, you know, this will be another thing that, you know, isn't much different than, you know, year 2000 and, you know, how many eyeballs are looking at your screens and And so I think that, you know, the drive up on some of these, you know, very well-known stocks I think is, you know, probably a little bit above, maybe more than a little bit. But I don't know about, you know, where we would step in and have it as an advantage for us other than our regulatory services business that can help our clients see insights into that. And then our algorithmics business where we have an awful lot of quants that are constantly looking at this stuff. So we can give our clients insights into what's happening, and I think that can be very valuable.
spk13: Thank you, Bill. It makes perfect sense to me. I appreciate the thoughtful answer. Maybe for Raul. Raul, in your prepared remarks, you talked about a comprehensive solutions program under Amon Graves. Combining products and services. Just curious what prompted this now. What's the opportunity really? And with total respect, it sounds obvious. So why wasn't this something you were already doing?
spk11: So, you know, about a year ago, I'd say in the fourth quarter of 2019, we put Eamon in charge of global sales. And his mandate was really to help us collaborate more effectively and, you know, more than collaborate. So that if you go see a customer and a customer is a bank or an insurance company or a hedge fund manager, we're bringing together different parts of the organization and offering that comprehensive solution. And the more we can do of that, the more strategic we become for them, the more likely it is to buy bigger, right? So just remember that we, as Bill pointed out, we bought DST as an interlinks in 2018. And we're trying to sell things that work together, right? So it takes some time to integrate them. It takes some time to get the user interfaces and the functionality that they want. And we feel like we're in a good place with that product offering. We're putting the right focus behind the sales and marketing of that was the right move. So I think we're formalizing things we've done all along, but we're off to a good start.
spk13: Makes sense. Thank you, guys.
spk06: Our next question comes from the line of Ashish Sabhadra from Deutsche Bank. Your line is open.
spk01: Thanks for taking my question. Rahul, I just wanted to go back to a comment that you made on the DST. If I heard you right, the DST financial could potentially grow 3.5% this year in fiscal year 21 at the midpoint. Just wanted to confirm if I heard that right. And then maybe just a question on that one is, Obviously, that's pretty strong compared to the DST financial growth profile historically. What's really driving that strength is that there were a couple of large deals that you won last year. Is the implementation really driving it? And then if you can provide any incremental color within DST financial, where are you seeing pockets of strength or pockets of strong demand? Any color will be helpful. Thanks.
spk11: Sure. So, yeah, we have at the midpoint, you know, approximately three and a half percent or so organic growth. The retirement business where we've talked about a number of large deals, you know, and done some press releases on them is clearly one of the bright spots. We're also seeing good strength in our UK-based wealth and insurance services business. And really across all the DST, you know, we've been working hard for since 2018 really, focused on the sales efforts there, focused on the product development efforts there, focused on digital and web portals and different ways in which our end customers can interact with their clients, and that's what they deem most valuable. We're starting to see some signs that the work we've done is paying off, and we're pretty bullish on what might happen with that business, not just in 2021 but beyond. Right.
spk01: That's great. Very helpful color. And maybe just a quick question on uprising in the alternatives fund admin side. There was a rising increase back in end of 2018, end of 2019, early 2020. Are there opportunities for more annual price increases going forward? Any thoughts on 21? Thanks.
spk11: So we're doing, you know, and I think we said this last year, we really tried to set this up as a price conversation that was going to happen once a year. And it's been reasonable increases that I think our customers, while nobody welcomes them, they understand where we're coming from. We're working our way through that process right now, and it's going pretty well, and we do expect it to have a positive impact on alternatives, but really across our business.
spk01: That's very helpful. Thanks, and great and good quarter. Thank you.
spk06: Our next question comes from the line of Mayank Tanbun from Needham. Your line is open.
spk13: Thank you. Good evening. Bill, just wanted to get a sense from you or maybe Rahul can chime in too. How should we think about the growth within the install base, i.e. land and expand versus contribution from new logos as you get back to some level of normalcy in terms of organic trends across your portfolio of solutions?
spk03: Man, that's a very good question. And it really is kind of at the core of what we're doing. You know, we bought DST and closed in April of 2018. You know, in 2020, DST clients represented 75 of our top 100 clients. And they're all the largest investment organizations in the world, and they're tremendous opportunities. right? But there's a lot of work to do at DST. And we've done a lot of work, you know, and, you know, we've doubled EBITDA. You know, I know it doesn't matter because it doesn't matter because our organic revenue growth didn't go up, but our earnings went way up, our cash went way up, cash flow went way up, and it gave us tremendous opportunity to drill into all those great big clients and start showing them all of our opportunities. You know, algorithmics is a treasure trove of expertise, you know, with a worldwide business. So, you know, we have opportunities to go into these large organizations. And I think, you know, we just did a million-dollar deal with one of our clients on our new Blue Sky portal, you know, and that makes it so easy for our clients to be able to comply with all the regulations in all 50 states, you know, and it's a pain in the neck. You know, and the more things that we can take away from our clients that are a pain to them, the larger our land and expand process goes. And that's why we put Eamon in charge. You know, I think several others of our top sales executives are also now drilling into all of our different opportunities that our client base are 18,000 clients. But, you know, you can't go into a place as large as dst and and and start just swinging a sledgehammer right you got to go in there you got to understand and you got to be willing to you know accept the slings and arrows you know of wall street for a while but there's no way we'd be at 4.7 million dollars revenue without uh without those three acquisitions and you know guys guys like mike slide home and And Kevin Rafferty and John Geely and Danny D'Omastro and Tori Dorgati and a whole bunch of other people at DST have done a great job. You know, and I think that those people understand that SST likes to be on the gas pedal. And this brake stuff is not in our DNA. But, you know, they had a lot of brakes, lots of brakes. And so we had to brake those brakes and then get on the gas pedal. But remember, it's $2 billion in revenue, $2 billion. Now that it starts growing, that's going to really put some wind in our sails and allow us, if we execute, and I believe we are executing, it's going to get better and better and better. And that's why you see the changes we've made, the bundling of our product, and, you know, the improved outlook. that we have because of all the work we've done. You know, when a stonecutter swings that axe at a piece of granite, it doesn't crack the first time. It might crack the hundredth time. But something tells me those 99 swings he made before she made, before it cracked, had an impact on it cracking. And that's the same thing we've done. We know it's granted. We know we've got to swing. We know we've got to stay focused. We know we've got to push. That's not easy for everybody. But that's what we do. That's how we manage. That's how we generate cash flow. That's how we generate earnings. And, you know, it used to be earnings and cash flow were really important. Now they're kind of important, but they're not as important as organic revenue growth. But we did the things we think were necessary in order to set the platform to get organic revenue.
spk13: Great. That's very helpful perspective. Thank you for that. And if I can just follow up briefly, has the pandemic and the effect of that flushed out some of the competition in the fragmented portions of your markets? In other words, are you now even stronger in some of the segments where you might have had more competition from some of the startups and smaller players that are not as well-funded?
spk03: Well, I think actually I think we're going to do better against the larger ones, the biggest ones. You know, I think the use of third parties in India has not been very effective for an awful lot of very large places. And, you know, we use our own people almost 100%. And it's taken us, you know, a year, two years, two and a half years. But, you know, we had, I think, 1,600, 1,800 people Contractors from Centel that work for DST that we've now completely rebadged. They now work for us. And we have less and less outsiders inside SS&C. And we operate better when we're in charge of people's raises, people's bonuses, people's promotions, people's careers. And that's been a really big... a really big help for our business. And Sunil over in India has done a great job for us, and I think we're going to continue to execute, and I think we're going to continue to surprise positively. Anurag, what do you think?
spk11: Well, I would just, you know, coming back to what you said about customer satisfaction and net promoter scores, we've seen really high levels of accolades from our customers throughout the, you know, both large and small customers. And we do think that this has been a disruptive time for many in the marketplace. So relatively placed, we're getting stronger on an absolute basis, but also relative to others, I think we're really well positioned going forward.
spk13: Great. Thank you so much.
spk06: Our next question comes from the line of Jackson Eder from JP Morgan. Your line is open.
spk13: Great. Thanks for taking my questions, guys. Bill, the first one for you on... um you know main reasons you win and lose you're talking about being at the high end or low end of the guidance range just depends on whether you actually win some of these deals or not and i'm curious um the reasons that you win and the reasons that you lose have they changed over the last um over the last couple of years just curious on your thoughts well i think i think you know for a number of the businesses
spk03: that we inherited with DST, they hadn't had a win in a number of years. Right. So, you know, changing that entire attitude, you know, you've got to believe you can win if you're going to win. Right. Your prospects are going to know immediately if you're not confident. So, you know, You know, knocking that insecurity out of people is not easy, and it's not comfortable for people, but that's who we are, you know. Let's get at it, you know. And so we've built software, and whether that's a fraud, waste, and abuse app that we did for SS&C Health or whether that's the improvements that we've made to the – to the transfer agency business that's a large business for us or what we've done in the retirement business. So, you know, first you have to have a superior product. Then you have to have a very trained workforce, right, so that they can implement it. And you have to have a knowledgeable marketing team that can market it. And you have to have a great sales force. So, as I've said many times, right, you know, we – We meet as sales team every week. Some of these places we bought didn't meet except every month. So there's a big difference in the culture and in the drive. And again, you have to recognize that we did $1.184 billion in cash flow in 2020. In 2017, you know, we did about $400 million. So, you know, we've tripled our cash flow. And, you know, again, that's a very positive thing. It gives us lots of resources to invest in. Training, education, and more technology. We've hired some great people that have done some great work for us. You know, Anthony Chiappa, John Malone, Nick Wright, all kinds of people who've done just great jobs for us. And I think that's going to continue because they like winning. They get paid more when they win. I think that's been the major reasons why we win. It's more organized. Amon's doing a great job getting it more organized than it was. We're competitive. We're not going to just sit back and and not go after our competitors' clients directly, you know, and they ain't going to like it. But that's fine. That's the nature of competition.
spk13: Great. Yeah, I appreciate the thoughts. What about the link asset? You know, what did you find really attractive about it? And, you know, what are some of the main – main reasons that you kind of withdrew there.
spk03: Well, I mean, I think it's a good business. You know, we really like Australia as a market. You know, we have done very well in Canada, and we feel like we can replicate that in Australia. And we've got a nice business in Australia, and we want to have a bigger outsourcing business in Australia. And Link would have fit that bill but but there's a lot of work to do on lincoln and uh you know i believe they've started their process but you know we we we have um done a lot of work on dst we have lots of uh positive momentum as you can hear on this call and and we didn't really want to you know have another situation where you know i got to tell you guys another two or three your change, you know? And so, you know, we, we decided that, that, that really didn't fit with what we wanted to do. And so, and so we went through, you know, it's still a good company. I think they'll do fine, but, but it wasn't something that we wanted to, we wanted to tackle right now. Okay.
spk13: Great. That makes sense. Thank you.
spk06: Our next question comes from the line of Peter Heckman from DA Davidson. Your line is open.
spk13: Thank you, and good afternoon, everyone. Just one maintenance question. I didn't hear you mention the pending capital acquisition. Is that deal still pending or has it closed?
spk03: It's still pending. I think it's going to close soon.
spk13: But it's not dead, at least theoretically. You're still pursuing the close.
spk03: Yeah, we had one large client at Capita that was not going to fit in with that acquisition, and they had to find alternatives. But we believe that has been rectified, and we would expect it to close in the next, you know, 60, 90 days. Yeah. But, you know, we have expected that a couple times in the past, so we want to make sure. It's not that big of an acquisition anyway.
spk13: Right, right. Now that's right. Okay, and then just in terms of when we're looking out over the next couple years, could you identify any pending regulations, kind of like a CECL, whether it's in the U.S. or globally, that you think can serve as demand drivers for – for spend or upgrade activity, anything out there that we should be monitoring?
spk03: Well, I mean, obviously, you know, you have a new administration in the United States, and it's going to be much more active in financial services. They're going to view financial services as a money pot for taxes, and so there's going to be a lot of regulation. And, you know, no different than foreign PF and other things that came out last you know, in the 2012, 2014 timeframe. And we would expect that, you know, it's going to be, you know, I'm guessing it will be pretty similar from what it was 2008 to 2016. And there will be opportunities to help our clients meet those new regulations and those new tax requirements in as cost-effective way as possible.
spk13: Got it, got it. Okay, if I could just sneak in one more. There was a joint venture announced by a number of financial services companies, State Street, PIMCO, Man Group, and it looked like they were going to be focusing on business process outsourcing for the fund industry. Is that something that's on your radar, and do you think that would be something that would be potentially competing with any operations of SS&C or perhaps DSTs?
spk03: Well, hey, those are large, sophisticated, powerful companies with a lot of great people. And my guess is there's probably a little bit of politics in every one of those places. So when they all get together, it might be like the United Nations. So we'll have to see what happens with that. You know, we're well aware, but we're also...
spk06: executing on our plan and now hopefully we'll see them in our rearview mirror fair enough fair enough I appreciate it Bill thanks as a reminder please please limit yourself to one question and one follow-up so that the other participants will be able to ask a question Our next question comes from the line of Michael Young from Truist Securities. Your line is open.
spk13: Hey, thanks for the question. wanted to just kind of ask maybe high level, you know, coming from 2020, which was a heavily impacted pandemic year to, you know, some hopes of reopening this year. Could you just maybe give some color on the conversations with clients and how they've trended? And could there be sort of a backlog of activity as people kind of refocus on operating core businesses in 2021? Just any color on that would be helpful.
spk03: Well, I think, you know, as, as you well know, right, when you have a crisis such as this, the rapidity of change, you know, probably goes up tenfold. So, you know, companies that would have never believed they could operate from a remote now operate from remote. And I think that it's going to change lots of things. You know, so how we operate all execute on on our strategies and how we deploy our you know our greatest asset obviously is our people and you know keeping them safe is is paramount um you know there's going to be a lot of things that are going to be important that we that we focus on and and i i think you know obviously you guys are a recent merger of two large banking organizations and And my guess is that there's a lot of change going on at Truist. And, you know, you have a major acquisition during a pandemic. So there's, you know, added impetus to streamline your operations, make them as efficient as possible, make sure you have redundancy. You know, cybersecurity is a very big deal. And I think that we need to be, you know, cognizant of what is out there. You know, and we need to be prudent. You know, when we know we need to act quickly, but being precipitous seems to me to be a poor strategy.
spk13: Okay. And my second question, I just wanted to follow up on a few of your comments. I think you've kind of highlighted how the market's, you know, more eager in revenue growth versus, you know, good, stable growth. cash flow businesses, is there any desire with either your next M&A deal or just kind of how you're managing internally to try to ramp up the revenue growth piece of the business as opposed to just cash flow?
spk03: We're trying. I would tell you that our focus is probably You know, we're not going to forget about cash flow and we're not going to forget about earnings. But our focus is on growing revenue. And anybody that has any conversations with me knows exactly what I'm talking about. Or any conversation with Patrick or any conversation with Raul or any conversation with Eamon or Justine or anyone else in the company. Everybody knows it's revenue. Now, you know, you can't pigeonhole everything. You got to make sure what it's, it's, you know, everybody admires Jeff Bezos and, and he's apparently did it on revenue growth, you know, and, and it's admirable. But not everybody has a, has an Amazon business, you know, so we need, we need to be prudent. You know, we're not, we're not going to go buy up a hundred thousand, 200,000. square feet of office space in New York and London and Paris and Frankfurt and other places, you know, because we think that would be a poor use of our cash. You know, not that we don't have strong cash and not that we probably couldn't afford it. We probably could. But we're not Google. You know, we don't have more money than, you know, most nations. Well, we're going to be prudent. We're going to think and we're going to make sure our people are safe and they're not coming back into the offices until we can make sure that that environment is safe for them and we're ready. So I think that's how we're trying to operate in a you know, we're, we're very focused on revenue growth. You know, it's a little more difficult getting a large scale licenses when you don't get in-person meetings, you know, so, but we're working at it. We're winning some deals and, and we're winning, you know, like, like I said, the services business has been strong. Entralinks has got a very, very full pipeline and, you know, Ken Visconti and Bob Petracci were doing a great job there. And, Petrocchi are doing a great job there. And I think that our opportunities are greater than they've ever been. You know, but those are opportunities. Still got to catch the ball, still got to get over the goal line.
spk13: Thank you.
spk06: Our next question comes from the line of Chris Donet from Piper Sandler. Your line is open.
spk12: Good afternoon. Thanks for taking my question. Bill, I wanted to ask one question about the redemption indicator that we see for Globop. January was the lowest number on record since 2008. Do you think that's mostly market forces, or is there anything changing in the competitive landscape that's keeping redemptions from leaving SSNC?
spk03: I mean, I think that we have really a blue-chip roster of funds. But that being said, it's probably, you know, a heavy, heavy dose of what's happening in the market. I mean, if you look at the amount of assets going into private equity and real estate and private credit and hedge funds, I think you see that, you know, people are starving for returns, starving for income. And they're not finding it in corporate bonds or government bonds, for sure. So I think, you know, that people redeem either when they have a life event like buying a house or retiring or something, or that they have an alternate place to put their money. And if they don't have an alternate place to put their money, they tend to stand pat, you know, and I think the hedge fund industry in particular, and the other ones, the real estate industry, as well as investment industry, as well as the private equity industry has learned to communicate with their investors. And that communication is paramount. And again, that's something that SS&C is very well positioned and able to help our customers communicate with their customers, you know, with their investors. And I think that's another reason why the redemption indicators remain historically low.
spk12: Okay. Thanks for that. And then, Patrick, one question about guidance. And, well, for the fourth quarter, you commented that there was less travel and less usage of contractors in the fourth quarter. Are those two things that you expect to stay low through the remainder of 2021, or do you expect travel and contractor usage to increase kind of over the course of the year as things get to some level of new normal?
spk02: Yeah, the contractor reduction is due to the fact that we moved the India contractors to in-house employees. So that will be permanent for 2021. Okay. And on travel, I think basically we've assumed that, you know, travel expenses won't be a heck of a lot different than Q1 and most of Q2, and then gradually start increasing in the third and fourth quarter, but not be back to, you know, pre-pandemic levels. That's kind of the assumption we've made. Got it.
spk12: Thanks very much, Patrick.
spk06: Our next question comes from the line of James Fawcett from Morgan Stanley. Your line is open.
spk10: Hey, thanks. Just a couple of quick questions for me to follow up on previous questions and answers. First, on DST, I think you made a comment around some incremental work or improvements on DST that you're working on. Just wondering if you can touch on that. First of all.
spk03: Well, again, you know, I'll take 30 seconds and then give it to her whole, but we, you know, we have made a lot of changes. Mike's right. Omer's made a lot of changes. You know, Nick Wright took over in at the end of June last year, and he's done a great job for us. He's based in London. And Kevin Rafferty came in, and he's running our retirement solutions business, and he's doing it with John Geely, and they're both doing a great job for us. And, you know, we have a, you know, a focus on that business. So, you know, we've made a number of changes there. We talked about Danny Del Mastro and Tori Gargati running our healthcare business, and, you know, they brought it out quite a bit. increased level of focus and intensity. And I believe that that will pay off. And he took over, oh, I think maybe September or maybe it might have been August last year. And so we made a lot of changes. And the sales force is now reporting up through Amon as a global. And, you know, Mike has taken Rob Stone and some other top sales executives that we have and slotted them into the DST business, Janine Kilgallen, MVP, a bunch of others that are really top-flight people and know how we operate, how we prepare, and how we show our wares, you know, to our various prospects. Would you have anything else for us?
spk11: Bill, the only thing I would add is, you know, in addition to the sales focus and just overall more attention to the speed at which we execute and making sure that there's tangible things that we're trying to do and we're all marching with some, you know, just some pace to it, we're also really focused on product development and innovation. So a lot of our hires, even below the senior executives that you've that we've mentioned have been in folks that are bringing in new technologies, whether that's digital, which a lot of our clients are looking for, or things we can do with, you know, artificial intelligence and machine learning. We've had an acquisition at Vedado. There's others. So we're giving that sales force more tools to be able to differentiate themselves from our competitors, and that's helping.
spk10: Got it. Got it. And then I appreciate that. And then, Bill, you know, you started off talking about acquisitions and discipline. And look, clearly you've built and established an incredibly strong reputation of being able to find the right things at the right time and under the right circumstances. what kind of moves your guardrails, if you will, of discipline around? And I guess I'm thinking about the current environment and maybe more generally how you think this ultimate, how the current environment ultimately plays out and, and what do you at SSNC have to do to be prepared to take advantage of, of when things do change and, and, and start to adjust?
spk03: You know, James, you know, it, it, again, it, You've got to do the work, right? I mean, you have to have people find businesses that we can ultimately buy. You know, we have looked at making a number of different investments to get to know businesses better and then see if we can help them grow and then ultimately acquire them. We have to stay close to the private equity industry. We have to stay close to large-scale financial institutions that want to get rid of divisions or want to joint venture with us in ways that they can really improve their margin profile. So there's a number of those kinds of things that I think are the path to very accretive acquisitions that drive revenue growth. But it's work, right? I mean, it's looking at a lot of deals. It's having discipline about it. You know, it's not, you know, not turning this into, you know, the focus isn't on our business. The focus is on what we could do to buy additional businesses. You know, we have a lot of businesses. We have 18,000 clients. We have tremendous upsell and cross-sell opportunities. We have tremendous development teams, thousands of developers. We need to be able to build product, deliver product, market product, sell product, raise prices. We need to create this entire environment where we're the best. So when we went into fund administration in 2002, we didn't have a dollar in AUA. Now we have $2 trillion. It's the same thing. You've got to execute. And then you can bring in, you know, places like Eisner Fast, where we get people like Rahul Kanwar, Rene Moody, and Michael Gall, and Chris Madpack, and a bunch of others that add to the quality and capability and breadth and depth. And you keep marching through. And now that we're the largest as a fund administrator. both in hedge and private equity. And we're moving up fast in real estate. And, you know, Bagesh Malde has done a great job. And we just got a lot of great people. And, you know, there's also a lot of work to do with, you know, deploying $8.3 billion in 2018. Thanks a lot, Bill. Thank you very much.
spk06: Our next question comes from the line of Suninder Tend from Jeffress. Your line is open.
spk04: Thanks for taking the question, guys. Just following up on the comment about the focus around revenues and growth, can you talk a little bit about maybe how pricing fits in into that strategy in terms of how you think about it on an annual basis and then If there's any impact that we should be thinking about from a COVID perspective this year in the sense that maybe there's clients that have asked you to hold off on pricing increases, any color you can provide there would be helpful.
spk11: Rahul, you want that one? Yeah. So, you know, thus far in the annual pricing conversations that we've had, it really hasn't been that different than it was last year. Now, this was a pretty new process for us. Last year was the first time. But the conversations have gone well, and there are, you know, as I mentioned earlier, we are going to be reasonable, and to the extent that we have a customer that has some constraints, you know, obviously we're going to respect that and try to make it work to the satisfaction of, you know, both SSNC and that customer. But they've been going pretty well.
spk04: Got it. And then just a quick question. I guess a modeling question. Can you remind us of the expected impact on revenues in 2021 for the DSD clients that were terminated pre-acquisition?
spk02: It's $25 million for the full year.
spk04: Full year. Okay, thank you. Thanks, guys.
spk06: No further questions at this time. I will now turn back the call over to Mr. Billstone.
spk03: Thank you. Again, thanks, everybody, for your thoughtful questions. And, you know, again, we're going to execute, and I look forward to talking to you in late April or early May. Thanks.
spk06: Thank you again for participating. This concludes today's conference call. You may now disconnect.
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