Market

SS&C; Technologies Holdings (SSNC) Q1 2022 Earnings Call Transcript | The Motley Fool

Image source: The Motley Fool.

SS&C Technologies Holdings (SSNC 1.63%)
Q1 2022 Earnings Call
Apr 28, 2022, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to the SS&C Technologies first quarter 2022 earnings call. Today’s call is being recorded, [Operator instructions] Thank you. And I would now like to turn the call over to Justine Stone, head of investor relations. Please go ahead.

Justine StoneHead of Investor Relations

Hi, everyone. Welcome, and thank you for joining us for our first quarter 2022 earnings call. I’m Justine Stone, investor relations for SS&C Technologies. With me today is Bill Stone, chairman and chief executive officer; Rahul Kanwar, president and chief operating officer; and Patrick Pedonti, our chief financial officer.

Before we get started, we need to review the safe harbor statement. Please note that various remarks we make today about future expectations and prospects, including the financial outlook we provide, constitute forward-looking statements for the purposes of the safe harbor provisions under 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 with the SEC and how to be accessed on our website. These forward-looking statements represent our expectations only as of today, April 28, 2022.

While the company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so. During today’s call, we will refer to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to comparable GAAP financial measures is included in today’s earnings release, which is located in the Investor Relations section of our website at www.ssctech.com. Also in the third quarter 2021, we entered into a joint venture named DomaniRx LLC, which we are the majority interest holder and primary beneficiary.

All earnings figures discussed today, including operating income, EBITDA, net income, and EPS, are attributable to SS&C based on ownership interest retained by SS&C. I will now turn the call over to Bill.

Bill StoneChairman and Chief Executive Officer

Thanks, everyone, for joining. Our results for the first quarter were $1.296 billion in adjusted revenue, up 4.9% and $1.25. And adjusted diluted earnings per share up 5.9%. Adjusted consolidated EBITDA was $514.9 million for the quarter, the highest first quarter in our 35-year history.

Our EBITDA margin was 39.8%. Our first quarter adjusted organic revenue was up 4.3%. Our alternative Intralinks and Advent businesses were the growth leaders for the quarter. Ex the impact of our healthcare business, our Q1 2022 organic growth in financial service, which is over 90% of our revenue was 5.9%.

The SS&C generated net cash from operating activities of $183.5 million for the three months ended March 31, 2022. In the quarter, we bought back $2.3 million shares, an average price of $75.22 per share for total of $170.9 million. We also used cash on hand to help fund the acquisition of Blue Prism and Hubwise, which both closed in March. Our consolidated net leverage ratio now stands at 3.48, and our net secured leverage ratio is 2.51.

We expect to reduce our gross leverage to 3.0 by the end of the year while remaining active with our share repurchase program. These are exceptional numbers given the global uncertainty and result and hesitancy of our customers. We’re excited to add Blue Prism team and their automation capabilities and the SS&C’s arsenal. Blue Prism will continue growing revenues at 15% to 20% with the potential to accelerate with its successful cross-sale act initiatives.

We estimate the enterprise grade intelligent automation market to be in excess of $150 billion based off McKinsey’s estimates 30% of all roles could be automated. Companies across the world continue to struggle with the labor market and we are in a great position to capitalize on this disruption. Currently, Blue Prism, like most fast-growing new technology companies, is operating at a loss. Through revenue growth and cost controls, we expect 15% to 20% EBITDA margin exiting 2023 and 30% to 40% EBITDA margin exiting 2024.

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

Rahul KanwarPresident and Chief Operating Officer

Thanks, Bill. We had a good quarter across the board led by strong performance from Advent, Intralinks, and Alternatives fund administration. The Alternatives business continues to strengthen from market-driven gains and internal development efforts. Investor allocations to hedge funds are at all-time highs, and assets under administration continue to grow despite market volatility.

We remain focused on extending the depth and breadth of our technological capabilities. GoCentral and Treasury Management Solutions both launched this quarter, have generated significant interest already. GoCentral utilizing AI and RPA technology throughout will contribute to our win rates going forward as well as advancing the automation journey across all client operations. Our private markets and Advent teams have been closely partnering to enhance a holistic operating and technology model in support of hybrid and credit funds.

This new offering marries Geneva’s core technology capabilities and private markets administration services in a manner that offers clients flexible delivery models. In Q2, we expect to close our first combined deal and have several large prospects in the pipeline targeted for later this year. Intralinks remained strong in both M&A and Alternatives coming off of 2021’s record-breaking M&A environment. We continue to take market share and anticipate steady continuation of deal volume for the remainder of the year.

As expected, healthcare revenue declined 15.5% in the quarter. We’re investing heavily in DomaniRx, and we continue to move toward the development of a cloud native, API-driven claims adjudication platform based off the vast experience of ourselves and the other two founding partners. With the upcoming launch of DomaniRx and the interest to this new technology has generated, we expect a strong recovery in 2023. Now I will mention some key deals for Q1.

A $5 billion broker-dealer chose Black Diamond due to our superior service and support model over competitors as well as our trading and rebalancing functionality. An existing Gits client, a top U.S. mutual fund, expanded their relationship with our event center solution. One of our largest mutual fund clients expanded their transfer agency BPO services.

A $14 billion hedge fund and existing Geneva client chose our SOMS and fixed link solutions. They viewed as in Geneva both as Tier 1 platform and found the two together to be an extremely powerful solution. A $1 billion AUA real asset fund shows a suite of SS&C private market services, including investor tax and fund services because of our expertise in various asset types and fund structures. I will now turn it over to Patrick to run through the financials.

Patrick PedontiChief Financial Officer

Thank you. Results for the first quarter were GAAP revenues of $1.295 billion, GAAP net income of $172.1 million, and diluted GAAP EPS of $0.64. On an adjusted basis, revenue was $1.296 billion, including the impact of the adoption of the revenue standard 606 and for deferred revenue adjustments for prior acquisitions. Adjusted revenue was up 4.9%.

Adjusted operating income attributable to SS&C increased 4.8%. And adjusted EPS was $1.25, a 5.9% increase over Q1 2021. Overall, adjusted revenues increased $60.8 million or 4.9% in Q1. Our acquisitions contributed $17.4 million.

Foreign exchange had an unfavorable impact of $8.7 million or 0.7% in the quarter. Adjusted organic revenue increase on a constant currency basis was 4.3%. We had strength across several product lines, including Alternatives, Intralinks, and the Advent businesses. Adjusted operating income for the first quarter was $498.7 million, an increase of $22.9 million or 4.8% from the first quarter of ’21.

Adjusted operating margins were flat at 38.5% in the first quarter as compared to the first quarter of 2021. Expenses increased 1.7% on a constant currency basis and acquisitions added $17.6 million in expenses, and foreign currency decreased cost by $7.8 million. Consolidated EBITDA, which is defined in Note 3 in our earnings release, was $514.9 million or 39.7% of revenue, an increase of $23 million or 4.7% from Q1 2021. Net interest expense for the quarter was $49.3 million and includes $2.6 million of noncash amortized financing costs and OID.

The average rate in the quarter for our credit facility and senior notes was 3.11%, compared to 3.01% in the first quarter of ’21. We recorded a GAAP tax provision of $63.5 million or 27% of pre-tax income. Adjusted net income just defined in Note 4 our earnings release was $334.4 million, and adjusted EPS was $1.25. The effective tax rate used for adjusted net income was 26%.

Diluted shares increased to $267.6 million from $267 million in Q4 of 2021. The impact of option exercises and an increase in the average share price partially offset by share repurchases. On the balance sheet and cash flow, we ended the first quarter with $558 million of cash and cash equivalents and $7.6 billion of gross debt. SS&C’s net debt defined in our credit agreement excludes cash and cash equivalents of $145 million held at the DomaniRx JV.

So the net was — the net debt was $7.2 billion as of March 31st. Operating cash flow for the three months ended March was $183.5 million, a $2.2 million decrease compared to the same period in 2021. And a couple of highlights in the first quarter. Our net borrowings were $1.583 billion, compared to net borrowings of $70 million in 2021 period.

In the quarter, we paid $1.553 billion for the Blue Prism and Hubwise acquisition net of cash acquired. To fund the Hubwise acquisition, we borrowed two incremental loans for a total of $1.530 billion that mature in March 2029 and bear interest at SOFR plus 2.25% with a 50 bp SOFR 4. Treasury stock buybacks were $170.9 million for purchases of 2.3 million shares at an average price of $75.22. And in July 2021, the board authorized up to $1 billion of stock buybacks.

And the program to date, treasury stock buybacks totaled $333.7 million for purchase of 4.4 million shares. In the quarter, we declared and paid a $51.1 million common stock dividend, an increase of 24% from last year. We paid income taxes of $42 million, compared to $42.5 million in the first quarter of ’21. Our accounts receivable DSO upticked a little bit in the quarter, up to 52.7 days, compared to 49.5 days as of December 2021.

Capital expenditures and capitalized software were $35.6 million or approximately 2.7% of adjusted revenue, and the spending was predominantly for internal use capitalized software and our IT infrastructure. On the LTM consolidated — our LTM consolidated EBITDA that we use for covenant compliance was $2.635 billion as of March 2022. Based on new debt based on a net debt of $7.2 billion, our total leverage ratio was 3.48%, and our secured leverage ratio was 2.51%. On outlook for the remainder of the year, I’ll first cover a few assumptions we’ve made.

We’ll continue focusing on our client service and our retention rates. Our client retention rates will continue to be in the range of most recent results. We have assumed foreign currency exchange will be at current levels for the remainder of the year, and that will impact revenue negatively by approximately $43 million in Q3 through Q4. Our recent acquisitions of Blue Prism and Hubwise will contribute approximately $203 million of revenue for the remainder of the year.

And on that basis, adjusted organic growth for the year will be in the range of 2.4% to 5.6% and adjusted organic growth in Q2 in the range of 1.7% to 4.8%. On interest rates, we have assumed that near-term LIBOR will be about 70 bps, and the spread on our credit agreement is 175 bps and 225 bps on a new facility that we put in place for the Blue Prism acquisition. And we expect LIBOR rates to increase approximately 100 bps through the rest of the year. This will impact our expected interest cost by about $0.06 compared to previous guidance.

Blue Prism will impact EPS a dilution of about $0.09 for the year, including the impact of the new debt facility. We expect staff costs to increase due to continued wage inflation and impact Q2 operating results. We will manage our expenses in the second half of the year by controlling variable expenses and maintaining our operating margins. We’ll continue to use our free cash flow to pay both pay down debt and stock buybacks, and we’ve assumed a tax rate of 26% on an adjusted basis for the year.

So in summary, for the second quarter of 2022, we expect revenue in the range of $1.328 billion to $1.368 billion, diluted shares in the range of $267.2 million to $266.7 million, and adjusted EPS in the range of $1.13 to $1.19. For the full year ’22, we expect revenue in the range of $5.315 billion to $5.510 billion, diluted shares in the range of $268 million to $266.4 million, and adjusted EPS in the range of $4.99 to $5.21. And we expect cash from operating activities to be in the range of $1.315 billion to $1.375 billion. And I’ll turn it over back to Bill for final comments.

Bill StoneChairman and Chief Executive Officer

Thanks, Patrick. And as Patrick just mentioned, we’re guiding organic revenue growth of 4% for the year and reducing our EPS guidance due to the dilution from Blue Prism and the interest rate increases. The start of 2022 has been a challenging environment for our clients. Uncertainty and instability in the world and the labor force have made our clients and prospects more hesitant to sign deals.

This uncertainty can also be a catalyst for change, the need for operational stability from a reliable trusted provider. We are aggressively investing in our sales force and R&D efforts to capture this opportunity. GoCentral, Singularity, Genesis, Aloha, Treasury Management, and others are rolling out now. Costs will be controlled through reduced incremental hiring, utilizing AI and automation, including Blue Prism’s digital workers, to accomplish this and a reduction in our global real estate footprint.

And I’ll now open it up for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] All right. We’ll take our first question from Alex Kramm with UBS.

Alex KrammUBS — Analyst

Yeah. Hey. Good evening, everyone. Maybe just starting on the DST side here, growth of 0.9% in the quarter, decel quarter over quarter.

I heard you on the selling environment. And obviously, there’s a lot of uncertainty in the world. But I would also say that coming into this year, we still had traditional asset managers, I think, do very well on the back of multiyear highs in equity markets, etc. So I think your customer base is actually doing fairly well.

So just wondering what in particular you’re seeing at DST, and in this environment if we can see that growth rate kind of tick up again in that business. Thanks.

Bill StoneChairman and Chief Executive Officer

Well, I’ll give it a shot, Alex, and I’ll have Rahul comment. But we continue to roll out additional capabilities in our DST businesses, and we have lots of large opportunities. And it comes down to not only closing those opportunities but also then getting those clients live. So there’s a bunch of pent-up revenue that hopefully will start to roll into those financial statements in the second half of 2022.

But they’re large-scale organizations. And while we have teams working on it, we also rely on the clients to help us in that process. And these uncertainties are not helping them move more quickly. I don’t know, Rahul.

Do you have any other color?

Rahul KanwarPresident and Chief Operating Officer

So the one thing I’d add also is these are — these customers are some of our biggest customers across the company. So the DST relationships are strategic for us. And they frequently buy from us in other areas, including Alternatives, Advent, and others. And obviously, that’s not reflected in the DST financial services line, but it does speak to the value of the relationship.

Alex KrammUBS — Analyst

Fair point. And then maybe just on the margin real quick. Clearly, margins flat year over year. I think last quarter.

You already talked about some inflationary pressure. I think you brought this up again today. So just wondering, are things a little bit tougher than you expected, given the big resignation that everybody talks about? Or — and how do you think that’s going to continue to impact? Or how are you going to navigate that environment?

Bill StoneChairman and Chief Executive Officer

Well, I think that’s a great question, Alex. And we are instituting all kinds of things to improve our retention and be able to create an environment where we are an employer of choice, but there’s wage inflation, and that the overall power has really moved from capital to labor. And while I don’t think that’s necessarily a bad thing, I think for the short term, adjusting your sights on going for price increases and being able to move inflationary costs through to the revenue side, I think, is what we’re working on and being sensitive to our employees and making sure that we remain an employer of choice.

Alex KrammUBS — Analyst

All right. Great. I’ll jump back in the queue. Thank you.

Operator

All right. We’ll take our next question from Andrew Schmidt with Citi.

Andrew SchmidtCiti — Analyst

Hey, guys. Thanks for taking my questions. Good to see the resiliency here. First set of questions on Blue Prism.

Just back the envelope, it looks like they should be approaching 100% or 1% point accretive on a pro forma basis when we think about just total growth. Just want to make sure I have that correct. And then if you could talk a little bit about just the opportunity to plug Blue Prism into the SS&C direct sales force because it seems like that’s one of the big river opportunities. Just time frame and process there, that would be helpful.

Thanks a lot.

Bill StoneChairman and Chief Executive Officer

Rahul, do you want to take that?

Rahul KanwarPresident and Chief Operating Officer

Yes. So maybe Patrick can comment on the first one on the accretive billing.

Patrick PedontiChief Financial Officer

I think your question was around revenue, right? How much does it add to revenue growth?

Andrew SchmidtCiti — Analyst

That’s right. On a pro forma basis.

Patrick PedontiChief Financial Officer

Yeah. Yeah. So I think what we have in our financials for this year and our forecast is the first quarter had about $10.8 million, and that just represents for a half a month. And then for the remainder of the year, I think we’re estimating somewhere around $196 million of revenue for the second, third, and fourth quarters.

Rahul KanwarPresident and Chief Operating Officer

Right. And then I think to the second — sorry.

Andrew SchmidtCiti — Analyst

Yeah. I was going to say, I guess, the question is more around just combined company growth rates. It seems like it should — obviously, is accretive, but the growth. But it seems like it should be approaching that kind of 100 basis point accretion when — obviously, when we have this in the base in 2023.

Just want to make sure that’s the great ballpark.

Patrick PedontiChief Financial Officer

If you think about it, right, it’s roughly — we’re getting $200 million in 10 months, right? So let’s call it $230 million or something like that. And at a 20% growth rate, that’s $46 million, which would be pretty close to 1%. So that’s how we think about it as well.

Andrew SchmidtCiti — Analyst

Great. Perfect. Thank you for that.

Rahul KanwarPresident and Chief Operating Officer

And the second part of the question — yes. To the second part of the question, we’re actually pretty excited about the opportunity. We obviously have 18,000 clients most of whom, I’d say, virtually all of them are candidates to have greater automation and to have digital workers, right? So that cross-sell component is pretty important to us. We also have a wealth of direct applications ourselves, whether in our outsourcing business, where we’re performing many of the tasks that folks would look to have digital workers do.

So we’re working hard and our teams are working hard on coming up with applications for if you’re a hedge fund or an insurance company, here’s something we might be able to do for you using this technology. And rolling that out, we think, will be pretty powerful. So that’s all underway.

Andrew SchmidtCiti — Analyst

Perfect. Appreciate that. And then when we think about just the core business, Intralinks from a growth perspective was a real surprise from my perspective, given the M&A volumes out there. And it seems like a lot of that is due to share gain.

Maybe you could talk a little bit about just the drivers there and how you see that playing out for the full year from a growth perspective. Thanks.

Rahul KanwarPresident and Chief Operating Officer

Well, we have a great business in inland. They continue to find growth throughout new clients, and they’ve done a lot of things with helping the Alternatives industry with portals and other things in — along those lines, information delivery. And then obviously, they continue to be very strong in the VDR market and M&A in general. So we expect similar growth for the rest of the year.

Andrew SchmidtCiti — Analyst

Perfect. Thanks, Rahul, Bill, and Patrick. Appreciate the comments.

Operator

And we’ll take our next question from Peter Heckmann with D.A. Davidson.

Peter HeckmannD.A. Davidson — Analyst

Thanks for taking the question. Can you just remind us of some of the dynamics in the healthcare business the decline in revenue, the timing of any customer losses and whether that would be fully reflected in the run rate number for the first quarter? And then just remind us how the JV works. If I remember correctly, you want a majority, so you’re consolidating that with revenue and then have a minority interest coming out. But from your comments, it sounds like we’re going to start to see that joint venture start to ramp.

Would that be from new customers or increased volumes or both?

Bill StoneChairman and Chief Executive Officer

Yes. So Domani is 80% owned by us and 10% owned by each of our partners, and that’s right on how we do the accounting on that. We have a lot of interest in Domani, and the platform that we’re building is pretty much on track. We hope to roll that out to one of our partners on the 1st of January ’23 and then the second one in 1st January of ’24, but we also have tremendous interest in others coming in as customers in DomaniRx as partners.

So we expect revenue to ramp nicely in 2023 through the next five or 10 years, and so we’re excited about it. We think it’s the first really cloud-based claims adjudication process in the PBM world, and we’re excited about where we are.

Peter HeckmannD.A. Davidson — Analyst

Got it. Got it. And then just as regards just the decline in revenue this quarter. Can you remind me and I — was that a loss of 1 large customer? Or was it an aggregate of several? And if you could just remind me when that actual deconversion happened.

Did that happened January 1st?

Patrick PedontiChief Financial Officer

It happened January 1st.

Bill StoneChairman and Chief Executive Officer

And several, right? So — and it’s a total of about $70 million to $80 million, and one of them represents about half.

Peter HeckmannD.A. Davidson — Analyst

Got it. OK. And then do you think on the O’Shares acquisition, do you feel like that should close by the end of the summer?

Patrick PedontiChief Financial Officer

I think it’s scheduled — right now, a little unpredictable because there’s some approval requirements, but I think it’s scheduled for the end of June.

Peter HeckmannD.A. Davidson — Analyst

OK. I appreciate it.

Operator

And we’ll take our next question from James Faucette with Morgan Stanley.

Jonathan LeeMorgan Stanley — Analyst

This is Jonathan on for James. So you had alluded to driving price increases to offset wage inflation. And if I think back to the Analyst Day from last year, I think you had talked about, call it, 100 basis points of pricing uplift to drive growth. How are these sort of price increased conversations going with customers? And is that enough to sort of offset the magnitude of wage inflation that you’re seeing?

Bill StoneChairman and Chief Executive Officer

Well, I mean, I think it’s a process, and I think the process is well underway. And obviously, inflation has ticked up almost month after month for the last five or six months, and so we’re planning on raising our prices to be able to cover our increased cost. And I think our customers understand that, that’s what’s happening across the board for almost all of the vendors, and we’re no different. And we have a very talented labor force, and we’re going to make sure that we take care of them and continue to be a very strong and trusted partner.

Jonathan LeeMorgan Stanley — Analyst

Got it. And a follow-up on the RPA opportunity. How are you thinking about the headcount or the magnitude of investment required to service the broader RPA platform that you have inclusive of Blue Prism?

Bill StoneChairman and Chief Executive Officer

Well, we — again, we have a large development organization. We have many, many talented RPA developers as well as AI and LP and machine learning. So we have a big staff, and Blue Prism complements it great. So we think that, in general, we’re going to be able to deploy hundreds of digital workers, and hopefully, over the next two or three years, thousands of them, which will allow us to grow and not add the headcount like we would have if we didn’t have such technologies.

And I think that’s the holy grail of doing this acquisition, is to bring that high-powered technology that allows you to substitute digital workers for human workers. It doesn’t replace human workers per se in total, but it certainly augments them in a very, very strong way.

Jonathan LeeMorgan Stanley — Analyst

Appreciate the color. Thank you.

Operator

We’ll take our next question from Kevin McVeigh with Credit Suisse.

Kevin McVeighCredit Suisse — Analyst

Great. Is there any way to think about what the potential revenue opportunity is across your existing client base for Blue Prism? I think we’re — you obviously have 18,000 clients. Over time, is there any way to think about what the revenue contribution can be again across the existing client base?

Bill StoneChairman and Chief Executive Officer

Rahul, do you want to take that?

Rahul KanwarPresident and Chief Operating Officer

Yes. Sure, Bill. Thanks. So it’s a huge market, right? And as a multiple of the change that Blue Prism does, we anticipate that just in our current client base, we probably have three, four, five times debt amount of opportunity.

And some of the consultants out there are representing this as $150 billion or more market, right? And potentially as much as 30% of, as Bill noted, all the line jobs that are done lend themselves to this kind of technology. So we’re just trying. We’re obviously — we’re mindful of the size of the market. And at the same time, we have to focus on specific things that we can do better than anybody else.

And Blue Prism already has a number of those in the customers that they have deployed, and we’re working with them when building out additional use cases and applications.

Kevin McVeighCredit Suisse — Analyst

That’s helpful. And then it seems like the revenue retention was up 90 basis points sequentially. Historically, there’s been a little seasonality. Should it stay that 96.4? Or how should we think about the revenue retention? I think you said to stay around that level.

Is that right? I just wanted to confirm that.

Patrick PedontiChief Financial Officer

Yes. I think it might stay around that in the historical ranges over the last couple of years.

Kevin McVeighCredit Suisse — Analyst

Thank you, Patrick.

Operator

All right. We’ll take our next question from Alex Kramm with UBS.

Alex KrammUBS — Analyst

That was quick. Hello again. I just had a couple of follow-ups here. One, on the interest expense.

Thanks, Patrick, for the color in terms of the rising interest rate environment, etc. Maybe to make it even easier for some of us, can you actually give us the kind of dollar amount of interest expense that you expect for the next three quarters as you bake in that rate increase?

Patrick PedontiChief Financial Officer

Sure. I think including the new debt on Blue Prism, I think, which is about $36 million or $37 million for the year, we expect about $250 million this year in total.

Alex KrammUBS — Analyst

OK. And in terms of the ramp, I guess, it’s — I guess I don’t know if you have any assumptions you want to share given that —

Patrick PedontiChief Financial Officer

Yeah. I think right now the average interest rate on our original facility is probably around 2.45%, and the new facility is 50 basis points higher than that because of the spread. And then I would say it goes up another 50 basis points in Q3 and another 50 basis points in Q4.

Alex KrammUBS — Analyst

Super helpful. And then just as we think about capital deployment here, are you assuming basically mostly pay off debt given the rising interest rate environment? Or do you still think there’s appetite for buybacks as we step through the year? And then — yes, and that’s it. And then — sorry, just one last quick one. Stock-based comp increased quarter over quarter.

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

Bill StoneChairman and Chief Executive Officer

Well, I think we’ll be — I’ll take part of this, Patrick and then turn it to you. Yes, I think we’re going to aggressively buy back our stock. We still see it as a financially quite a bit more effective than buying and paying down debt. Although as interest rates continue to rise, then we’ll revisit that.

But right now, we’re going to generate $5 a share in cash and our stock is trading at $70 or so, $69, and plus we pay a 1.2% dividend, I think. And so I think economically, it makes a lot more sense to buy back stock, but rising interest rates could change for sure. We have tried to move a lot of the cash bonus programs into more equity bonus programs and have them as a complement to the cash and then have cash be less of a driver of the bonus program. So I would think that the equity stock-based compensation is probably pretty close to what it will be going forward.

And I think that, again, it’s a tough labor market out there, and we’re going to do everything we can in order to reduce attrition as much as we can. And I think we’ve done a pretty good job to date.

Alex KrammUBS — Analyst

All right. Helpful. Thanks again.

Operator

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

Chris DonatPiper Sandler — Analyst

Hey. Good afternoon and thanks for taking my questions. I had one for Rahul on the Alternatives business, and it shows the 10.7% growth in Alternatives in the first quarter in your slide deck and then with the private markets growing over 18%. I’m just curious if you can comment on what’s driving that strength in private markets, what you see for competition.

And is this a lot of in-house opportunities shifting to SS&C?

Rahul KanwarPresident and Chief Operating Officer

Sure. I think it’s a little bit of all of that. But mostly, it’s a continuation of a trend, where folks that had in-house operations as they start new funds, they use us or somebody like us. And we would say that the investment that we have made in technology and process over the last decade or so is market differentiating.

And so we have a really strong business. We’re the biggest provider of private market, and that’s both private equity and real asset funds in the world, and the capability keeps getting better. So we’re a natural place for many of these funds to come to. And it is a combination of these are hot asset classes, particularly in the private lending, private credit, and private equity as well as real assets.

So because they are hot asset classes, there’s a lot of new launches, and they’re in these transfers of internal. So all of that leads to, I think, a growth trend that is both positive and, we think, sustainable.

Chris DonatPiper Sandler — Analyst

OK. Got it. And then, Bill, just on the healthcare business, your optimism for the future for this year for that. What’s the best way for those of us on the outside to track progress there? Is that something we’ll see a flurry of press releases? Or will we need to wait until second quarter results or third quarter results? Just how should we try to keep an eye on that one and progress you’re making?

Bill StoneChairman and Chief Executive Officer

Yeah. I think as we sign new customers and new partners, so we would have press releases. But people are kicking the tires on the technology and want to make sure that we’re going to deliver on our milestones. And knock on wood, we’ve done a pretty good job so far, so I think more to come.

And I think that these are large-scale healthcare organizations, and so there are large chunks of revenue, and I think we’ll prove to have been wise to have gone down this path.

Chris DonatPiper Sandler — Analyst

OK. Thank you.

Operator

We’ll take our next question from Andrew Schmidt with Citi.

Andrew SchmidtCiti — Analyst

Hey, guys. Thanks for taking my follow-up here. I wanted to ask about the opportunity to implement the Blue Prism digital workforce across SS&C client operations. Is there any way to size or think about that opportunity from a productivity perspective? And then is that included in the Blue Prism margin ramp? Or is this a separate opportunity? Thanks.

Bill StoneChairman and Chief Executive Officer

Yes. We would view it as a separate opportunity. I think Blue Prism has a lot of running room and being able to market its products out to our client base. And then the productivity increases that we get inside SS&C, I think, will really inert to the business units where they deploy Blue Prism.

So that was one of the strategic reasons for doing it, and I think it’s going to be something that really strengthens our business.

Andrew SchmidtCiti — Analyst

That’s helpful. And then just on the margin for the year, just taking out Blue Prism, has that outlook changed at all relative to the prior outlook, perhaps contemplating some incremental wage and cost pressure? And then how do you feel about just cost being stable from this point forward just from a — because obviously, we’ve seen some volatility, some big pickups. Just curious if there’s more to come or your comfort level there. Thanks a lot.

Bill StoneChairman and Chief Executive Officer

Yes. I mean we obviously don’t have a crystal ball either. So depending on what happens in the marketplace, we’re going to have to react and react in a way that is competitive. Right now, we think we have done the right things, and we have to rearrange some of our compensation policies, and we’re trying to make sure that we’re sensitive to our talented workforce.

And right now, we think we’re in reasonable shape. But rather than have one bonus at the — paid the first quarter after the year, we’re going to spread out some of that bonus so that we pay parts of it in Q2, part of it in Q3, and then the majority of it in the first quarter of ’23. So there’s a number of changes that we’re making. And hopefully, they’re being well received by our workforce and that they know that they’re foremost in our mind and they’re our biggest assets.

So given that there aren’t any more changes and interest rates are or inflation don’t keep going off the chart, I think we’re in reasonable shape.

Andrew SchmidtCiti — Analyst

Got it. Thank you very much, Bill. Appreciate it.

Operator

Our next question comes from Patrick O’Shaughnessy with Raymond James. Please go ahead.

Patrick O’ShaughnessyRaymond James — Analyst

Hey. Good afternoon. Question about Blue Prism. How do you guys mechanically cross-sell Blue Prism to your client base? Is it the legacy SS&C salespeople who have this kind of added to their arsenal? Is it team-based approach with the legacy Blue Prism people? Or how is that going to work?

Bill StoneChairman and Chief Executive Officer

Well, it’s both. Obviously, we’re training our current sales force and getting some use cases, right? So you have to have like a digital worker that’s called reconciliation or a digital worker that’s called VERIFI or some other where we take an expert and they work with an engineer and they create a digital worker and it has a rules-based repetitive capability that we then deploy. And so we have to have the use cases. We have to train our sales forces what that use case is, and we have to kind of use both Blue Prism personnel as well as our own.

But we’re pretty optimistic about it, and it’s something that everybody is interested in. So salespeople like to sell stuff that everybody wants to buy. So I think we feel pretty strongly that the adoption will be swifter than usual, I think.

Patrick O’ShaughnessyRaymond James — Analyst

Got it. That’s helpful. Thank you. And then a question for Patrick.

Your full year adjusted net income outlook decreased by, I believe, it’s $48 million at the midpoint relative to your previous outlook. But the operating cash flow outlook decreased by $130 million at the midpoint. What’s driving that differential?

Patrick PedontiChief Financial Officer

There’s a couple of things that are driving the differential. One is, and I think Bill mentioned, that we are now going to institute for some employees a quarterly bonus. So instead of having an annual bonus for this year in the first quarter ’23, we’re going to make some payments this year. So that’s affecting cash flow by $60 million to $80 million.

And then there were about $20 million or $25 million of deal costs related to Blue Prism acquisition and financing that are hitting the cash flow.

Operator

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

Bill StoneChairman and Chief Executive Officer

Well, again, we appreciate you all being on the call today, and we look forward to executing over the next several months and talking to you at the end of the second quarter. Thanks a lot. Bye.

Operator

[Operator signoff]

Duration: 48 minutes

Call participants:

Justine StoneHead of Investor Relations

Bill StoneChairman and Chief Executive Officer

Rahul KanwarPresident and Chief Operating Officer

Patrick PedontiChief Financial Officer

Alex KrammUBS — Analyst

Andrew SchmidtCiti — Analyst

Peter HeckmannD.A. Davidson — Analyst

Jonathan LeeMorgan Stanley — Analyst

Kevin McVeighCredit Suisse — Analyst

Chris DonatPiper Sandler — Analyst

Patrick O’ShaughnessyRaymond James — Analyst

More SSNC analysis

All earnings call transcripts



Most Related Links :
honestcolumnist Governmental News Finance News

Source link

Back to top button