SS&C Technologies Holdings Inc

NASDAQ:SSNC

Earnings Call Transcript 2021-Q1

[Operator]

Good day and thank you for standing by, and welcome to the SS&C Technologies First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please note, that today's call is being recorded. [Operator Instructions]

I would now like to turn the conference over to Mrs. Justine Stone. Thank you. Please go ahead.

[Justine Stone, Investor Relations]

Hi, everyone. Welcome and thank you for joining us for our Q1 2021 earnings call. I'm Justine Stone, Investor Relations for SS&C. With me today is Bill Stone, Chairman and Chief Executive Officer; Rahul Kanwar, President and Chief Operating Officer; and Patrick Pedonti, our Chief Financial Officer. Before we get started, we need to review the Safe Harbor statement.

Please note that various remarks we make today about future expectations, plans and prospects, including the financial outlook we provide, constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements, as a result of various important factors, including those discussed in our Risk Factors section of our most recent Annual Report on Form 10-K which is on file with the SEC and can also be accessed on our website. These forward-looking statements represent our expectations only as of today, April 26, 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 will be referring to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to comparable GAAP financial measures is included in today's earnings release which is located in the Investor Relations section of our website at www.ssctech.com.

I will now turn the call over to Bill.

[Bill Stone, Chairman & Chief Executive Officer]

Thanks everyone for joining. Our results for the first quarter are $1.235 billion in adjusted revenue, up 4.9% and $1.18 in adjusted earnings per share, up 14.6%. Our adjusted consolidated EBITDA was $491.9 million for the quarter, and our adjusted consolidated EBITDA margin was 39.8%. Our first quarter adjusted organic revenue was up 2.9%, strengthening our Alternatives business, Intralinks and our software businesses contribute to this growth surpassing our own expectations; DST and PST came in at 0.1% growth for both financial services and healthcare.

Operating cash flow was $185.7 million for the three months ended March 31, 2021, up 25.7%. We bought back 2.7 million shares of common stock in Q1 2021 at an average price of $67.50 per share, $481.4 million. Our secured net leverage ratio now stands at 2.29 times, and our total net leverage ratio is at 3.35 times. We continued our focus on organic revenue growth and we're beginning to see some positive trends. We are growing our sales force and building new revenue generating products and services. We continue to make product improvements and new technologies across our business. In SS&C Health, our digital capabilities continue to grow in partnership with our customers, and expert user experience designed to pilot the SS&C digital experience platform launched in early Q2 2021, with the platform expanding to over 2 million members by early Q4 2020. This represents an exciting opportunity for our customers to unify their digital solutions or by the single member experience aligning to member and market expectations.

We continue to integrate Vidado across to our various business lines and have won new mandates using this technology. ESG investing has become increasingly more important to our investors and our clients. While we are working to expand and improve our own disclosures and policies, we are also building solutions to help our clients address their ESG needs. Our Learning Institute is developing an introduction to ESG online course to be released in Q2 2021; this of course will introduce user to environmental, social and governance factors used by investors and lenders to making investment decisions. The course will equivalent learners with basic fluency in core ESG concepts, explore risk and outline ongoing debates in the field. We completed the Capital Life & Pension Services Ireland acquisition in the first quarter adding 308 [ph] employees. This acquisition makes SS&C the largest technology and service providers in international life and pensions market in Ireland and provides us with an excellent opportunity to expand in Ireland and across Europe.

We also are continuing our efforts to acquire Mainstream Group. They're already ordinance is [ph] recommending our proposal. Mainstream has provided investment illustration in a lot of funding accounting superannuation administration, share registry and unit registry services to leading fund managers and superannuation funds family offices and dealer groups. Earlier this month, we announced a reduction in force at 2.2% of our global employee base; these decisions are always difficult. We have delayed our plans since the first quarter of 2020, and we have and will continue to treat everyone fairly, provide severance and transition assistance. The markets we serve and our customers demand innovation and overall productivity increases; these pressures often dictate cost containment efforts. Our ability to continue to give pay raises, bonuses and other career development opportunities require us to manage our costs carefully and fairly.

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

[Rahul Kanwar, President & Chief Operating Officer]

Thanks, Bill. We had a strong quarter with a broad-based lift in revenue, both year-over-year and sequentially. Interlinks had robust growth as the M&A market is off to a brisk start and economic stimulus continues. Increased carve-outs and restructuring, and overall economic activity driving acquisitions contributed to [indiscernible] accounts and win rates remain high.

In our Alternatives business, the number of qualified prospects has returned to pre-COVID levels, and there is increased fundraising momentum across strategies. Our existing clients are growing organically through new fund launches and performance, and we continue to win new clients at healthy levels. We ended the quarter with over $2 trillion in assets under administration for the first time, a significant milestone. Our software business performed well, outsourced technology trends across wealth asset management and alternatives remain strong. Customers increasingly demand the ability to select and configure their operating model, including both, software applications and outsourced services. Our capabilities are proving to be a valuable differentiator as one indicator over 90% of SS&C advance Q1 new sales included hosting or other operational services. Managed service offerings for our Geneva and it's applications continue to get traction in the marketplace.

Now, I will mention some key deals for Q1. A top Alternatives fund administrator, an existing Geneva client, extended their Geneva license to [indiscernible] funds. A new hedge fund launch shows a suite of SS&C products, including as AZO MS, EMS, Global Fund Services, Ad Outsourced Services and Pix Link [ph]. A large Canadian asset manager expanded vision and Pacer licensing to support it's business plan. This client shows SS&C real assets fund services, investor services and financial statement preparation for their real estate funds. A newly launched retail brokerage and wealth management business in Southeast Asia chose GWP for it's end-to-end capabilities. One of Asia's leading investment firms chose SS&C GlobeOp fund services for bank loan servicing, a Swiss-based asset manager chose SS&C's fund services and regulatory solutions for valuation capabilities around complex derivatives, an existing mutual fund customer chose SS&C's digital investor experience, a large multinational asset manager and existing transfer agency client expanded their relationship with us to include their Luxembourg business.

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

[Patrick Pedonti, Chief Financial Officer]

Thanks. Results for the first quarter of 2021 were GAAP revenues of $1,233.4 million. GAAP net income was $174.9 million and diluted EPS of $0.65. Adjusted revenues were $1,235.4 million, including the impact of the adoption of the revenue standard 606 and for the acquired deferred revenue adjustments for acquisitions. Adjusted revenue was up 4.9%, adjusted operating income increased 7.1%, and adjusted EPS was $1.18, a 14.6% increase over Q1 2020.

Adjusted revenue increased $57.4 million. Our acquisitions contributed $18.6 million in the quarter, foreign exchange had a favorable impact of $16.1 million or 1.4%, adjusted organic revenue increased on a constant currency basis by 2.9% driven by strength in the Alternatives Fund Administration, Advent and Intralinks products. These were offset by weakness in the institutional asset management, healthcare and the NS [ph] products. Adjusted operating income for the first quarter was $475.8 million, an increase of $31.6 million or 7.1% from the first quarter of 2020. Foreign exchange had a negative impact of $13.2 million on expenses in the quarter.

Adjusted operating margins increased from 37.7% in the first quarter of 2020 to 38.5% in the first quarter of 2021, driven by cost controls, expenses increased 3.5% on a constant currency basis, acquisitions added $6.3 million, and foreign currency increased costs by $13.2 million. Adjusted consolidated EBITDA was $491.9 million or 39.8% of adjusted revenue, an increase of $28.4 million from Q1 2020. Net interest expense for the first quarter was $51.4 million, it includes $3.3 million of non-cash amortized financing costs and OID. Average interest rate in the quarter for the amount of credit agreement including our senior notes was 3.01% compared to 4.18% in the first quarter of 2020, and resulted in an interest expense decrease of $26 million or 33% in the quarter. We recorded a GAAP tax provision in the quarter of $60.8 million or 25.8% of pre-tax income. Adjusted net income is defined in Note 4 of the earnings release, it was $316.5 million, and adjusted diluted EPS was $1.18, and the effective tax rate used for adjusted net income was 26%. Diluted shares remain unchanged in Q4 at $268.1 million. The impact of an increase in the average share price and option exercises was offset by the share repurchases.

On cash flow and our balance sheet; as of March 31, we had approximately $253.7 million in cash and cash equivalents, and approximately $6.6 billion of gross debt for a net debt position of approximately $6.3 billion. Operating cash flow for the three months ended March was $185.7 million, a $38 million or 25.7% increase compared to the same period of 2020. For the three months ended at March 31, we were purchased treasury stock buybacks of $181.4 million for purchases of 2.7 million shares at an average price of $67.15 per share, compared to no treasury buybacks in the first quarter of 2020. Programming date [ph] treasury stock buybacks totaled $469.5 million for purchases of 7.8 million shares at an average price of $60.38 with $280.5 million remaining on the current program which was initially $750 million that the board approved.

Net debt borrowings in the quarter were $70.6 million compared to net borrowings of $150.1 million in 2020. We declared an issue and paid a dividend of $41.2 million as compared to $31.9 million last year, an increase of 29%. We paid interest in the quarter of $76.6 million compared to $102.5 million last year. In the quarter we paid $42.5 million in income taxes compared to $17.7 million in 2020. Our accounts receivable DSO was 48.9 days as of March 31, compared to 48.4 days as of December 2020, and 52.4 days as of March 2020. Capital expenditures of capitalized software totaled $31.4 million or 2.5% of adjusted revenue. Spending was predominantly for capitalized software and IT infrastructure. Our LTM EBITDA that we used for covenant compliance was $1,886.4 million as of March 2021, it includes $4 million of acquired EBITDA and cost savings related to our acquisitions. And based on that debt of approximate $6.3 billion, our total leverage ratio was 3.35 times and our secured ratio was 2.29 times.

For our outlook for the remainder year, the following assumptions are included in the outlook for 2021. We'll continue to focusing on client service and our retention rates will continue to the range [ph] of most recent results. We've assumed foreign currency exchange will be at current levels for the remainder of the year. We expect the impact on DST Health unit pre-acquisition client terminations to impact revenue by approximately $17 million for the remainder of the year. Adjusted organic growth for the year will be in the range of 1.7% to 4.7%. Adjusted organic growth for Q2 will be in the range of 2.4% to 5.9%. Interest rate on our term loan facility will approximately be one month LIBOR plus the current spread which is 175 bps. We will continue to manage expenses during this period of controlled variable expenses and stuff higher. And we'll continue to invest in our business long-term with capital expenses about 2.8% of revenue. And we expect the tax rate to be approximately 26% for the full year.

For the second quarter of 2021, we expect revenue in the range of $1,190 million to $1,230 million. Adjusted net income in the range of $294 million to $310 million, and diluted shares to be in the range of $267.8 million to $268.3 million. For the full year of 2021 we expect revenue in the range of $4,825 million to $4,965 million. Adjusted net income in the range of $1,213 million to $1,279 million, and diluted shares in the range of $267.4 million to $268.9 million. And for the full year, we expect cash from operating activities to be in the range of $1,280 million to $1,340 million.

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

[Bill Stone, Chairman & Chief Executive Officer]

Thanks, Patrick. With almost $500 million in an adjusted consolidated EBITDA for the quarter exceeding $2 trillion in assets under administration in our Alternatives business, adjusted revenue growth of almost 3% [ph], and reducing our security and total leverage ratios to $2.2 million and 3.35 times, we have built a powerful franchise. The franchise continue to add talent and opportunities as we embark on a new post-COVID world.

I will now open for questions.

[Operator]

We will now take questions. [Operator Instructions] And our first question comes from Dan Perlin with RBC.

[Dan Perlin, RBC Capital Markets]

Good evening, everyone and great start to the year. So, Bill, I just wanted to drill down a little bit; it sounds like maybe client budgets are starting to come back in the growth mode, you'd get called out Alternatives, maybe the impact of pre-COVID levels and new fundraising and Intralinks. I'm just wondering, as you're having those conversations today with clients, where do we stand in terms of the real demand environment? What the current pipeline look like for you guys? I mean, obviously, we see your guidance which seems pretty reasonable but I'm just also wondering kind of the tonal difference that you're having with clients today versus maybe a quarter or two ago?

[Bill Stone, Chairman & Chief Executive Officer]

Well, Dan, I think what you're seeing across the world is is that, you know, the world's opening up and knock on wood that we can continue to do that. The different governments, whether it's the EU or United States or all of the North American and Asia is pumping money into the economies. And that's giving investment managers confidence as their fund flows start to fill their coffers, and that makes them either launch new funds, get into new investment types or new strategies and that reflects in the increased demand we're seeing and also we've increased the size of our sales force and we continue to train, and that is proving to be pretty effective. And so we're cautiously optimistic, no one can really predict what the pandemic is going to do next; hopefully, it's going to fade off into the sunset, but we don't have a perfect crystal ball on that. But I would say that's the primary drivers of our of our demand increase.

[Dan Perlin, RBC Capital Markets]

Yes, that's good. And the follow-up is on this new kind of division that you guys launched, this Intelligent Automation Solutions, where it sounds like you're trying to help clients with their digital transformations. That -- I guess I'm wondering that sounds like, not so much a deviation from your historical product forward business but it does sound like it might be broader in around consulting and maybe some other IT kind of functions. So I'm wondering two things; one, do you think that that's opening up the funnel for new opportunities that you guys are going to be able to bring in? And then secondly, is there a product roadmap that needs to go along with that in order to be successful there? Thanks.

[Bill Stone, Chairman & Chief Executive Officer]

Well, we're pretty excited about adding Gautam and his experience and expertise. And then being able to make our bundles increasingly more user-friendly and more powerful. So we're excited about our opportunities, we think we have lots of exciting technology, and we think that we're increasingly becoming more adept at binding our different products together, which gives our clients more comfort as they grow and expand and want to have fewer suppliers and rely heavily on that.

Rahul, would you agree with that comment?

[Rahul Kanwar, President & Chief Operating Officer]

Bill, I would. And I would just add to the second part of the question that, there already is a fair amount of IP within SS&C that relates to intelligent automation, whether it's our AWD product or various initiatives we have across the company on natural language processing and artificial intelligence. And Gautam and his team are charged with pulling those together, as Bill said, to make sure that they are knitted together in the right way for a particular use case or a particular application in a given industry, as well as build new product, but we have a pretty good foundation.

[Dan Perlin, RBC Capital Markets]

Great. Thank you guys.

[Operator]

And our next question comes from Surinder Thind with Jeffries.

[Surinder Thind, Jeffries]

Good afternoon, and congratulations on the quarter. My first question is regarding the guidance; can you break down the outlook for organic growth amongst the various segments for the full year? Meaning as Intralinks, DST and then SS&C core.

[Bill Stone, Chairman & Chief Executive Officer]

Yes, I think in general, we expect our Alternative business to grow in the 4% to 7% range, we expect Intralinks to be a little bit better than that, then our software businesses, 1% to 2%. And we're striving hard to make -- to keep DST in positive; so 0% to 1%. And we think we have the pipelines and capabilities to hit those numbers and that's what we're striving for, as does a lot better when there is more volatility in the market, and obviously, recently volatility has picked up which will help DS business.

Rahul, do you have other points you'd like to make?

[Rahul Kanwar, President & Chief Operating Officer]

No Bill, I think you've covered it. And I would just say, and we saw this in Q1; we are seeing pretty good lift across our business, right, so it is pretty broad-based, so we're pretty optimistic about what happens in Q2 to Q4.

[Surinder Thind, Jeffries]

That's helpful. And then, as a quick follow-up; can you maybe -- is there any color that you can provide on the Schwab transaction and their switching away from DST to BNY Mellon for the transfers of their [ph] business? And what kind of an impact that might have on you guys?

[Bill Stone, Chairman & Chief Executive Officer]

We don't expect that to have much of an impact on our overall business, the, revenue side of that was not particularly large. And you know, sometimes some of these -- some of the big custodians are under tremendous pressure, and so we are -- we're holding our own and bringing out new technology and moving a lot faster, and we're not going to always win, that's -- Schwab did acquisitions, and they're going to bring in new technologies that were used by the acquisitions candidates that they acquired. So, no way this is going to happen occasionally, and Schwab's still a great customer of ours and we have a lot of respect for them, and we're not going anywhere; we'll be there and we were pretty optimistic about what we're building and how we're delivering it.

[Surinder Thind, Jeffries]

Thank you, Bill.

[Operator]

And our next question comes from Alex Kramm with UBS.

[Alex Kramm, UBS]

Good evening, everyone. Can you maybe just talk about pricing in the quarter, maybe across the board? But then also on the hedge fund administration sides, you've been talking about this for a couple years now that you're trying to get a little bit more; so anything you can share on the quarter will be helpful?

[Bill Stone, Chairman & Chief Executive Officer]

Rahul, you won't take that?

[Rahul Kanwar, President & Chief Operating Officer]

Sure. Alex, you know, I think as we've said previously, the -- we've developed a pretty good process now where, once a year we go back to these customers and we talk to them about the contracts, particularly ones that are coming up on renewal; and to seek generally a modest increase that's in line with what happens to our costs. So we're in that process and have been in that process for three or four months now. And there really hasn't been much to report other than nobody's happy to get approached about a price increase, but we've had good constructive dialogue, there really has not been any fallout out of that process, and we think that our mission, which was to be able to have that conversation and deliver a lot of value to go with that, we're doing that. So it's gone well; like I said, it's pretty modest overall. And we -- but we expect to be able to keep doing it on an annual basis over the long-term.

[Alex Kramm, UBS]

Okay, fair enough. And then maybe just turning back to the quarter, I think you mentioned DST but can you break out maybe some of the other businesses, like the Alternative business growth for the quarter, but then also, Intralinks and Eze [ph], I don't think you mentioned it. So anything you can share in terms of how the growth came together for the quarter? Sorry, if I missed it.

[Bill Stone, Chairman & Chief Executive Officer]

The Alternatives this past -- we feel, the alternative business grew 6.7% in the quarter, Intralinks was 10%. And as Bill mentioned, DS business had lot lower volumes and was down 3% for the quarter. And the DST business combined, health and financial services, was essentially flat on an adjusted basis.

[Alex Kramm, UBS]

All right, thank you.

[Operator]

And our next question comes from Andrew Schmidt with Citi.

[Andrew Schmidt, Citi]

Hey Bill, Rahul, Patrick; hope you're doing well. Thanks for taking my questions. So question on DST, I think you mentioned last quarter financial services for the year on organic basis expected to be low-single, healthcare maybe slightly down. Any update to the growth trajectory of DST this year? And then, any commentary on how the pipeline is specifically shifting up for DST versus the other parts of the business will be helpful. Thank you.

[Bill Stone, Chairman & Chief Executive Officer]

Well, again, we've done lots of changes in DST and we're pretty focused on it. We have some really good pipeline business in there, and I think that it's the execution part of it, right, you have to win, and then you have to convert. So we won a number of large mandates, and -- you know, in the third and fourth quarter last year in our retirement services business, and -- that revenue is -- we'll build throughout 2021. And that will get reasonably significant lift off DST, and then we [indiscernible]. I mean, that's the challenge to this. But we do think we're bringing out some really exciting new digital technologies and capabilities. And I think it's -- ultimately, you have to have superior products and superior services. When you have that, then then the ability to train your sales force and win the deals I think it was -- becomes increasingly positive.

Is that your take up, Rahul?

[Rahul Kanwar, President & Chief Operating Officer]

It is Bill. And, you know, the DST financial business; we're thinking as planned for the year, low single digits, probably 2.5% or so organic growth, and the health business, 1.3%. So the average of those two things is kind of a little over 2%, that's what's in our plan right now.

[Andrew Schmidt, Citi]

Got it. That's super helpful. I appreciate the technology commentary, that's great to hear. I guess just as a follow-up, just switching gears to institutional asset management market. Obviously, we saw the announcement of large asset manager switching to front to back investment servicing platform. Are you seeing more demand or more conversation amongst the larger traditional asset managers just to overhaul their tech infrastructure? Obviously, we've been talking about this for a number of years but it does seem like some things are starting to break loose, at least -- obviously, can we share your commentary there on that market?

[Bill Stone, Chairman & Chief Executive Officer]

Well, we are bringing out a number of new products and services and focused in that area. You know, the large scale asset managers, it's a multi-year process for that. And the new technologies, right, the RPA, the AI, the ML, the natural language processing; those things are increasingly sophisticated and increasingly powerful. And managers are looking at what they have today, and then how they transition to newer technologies and to streamline their operations. And infrastructure costs; so we think increasingly, that will get adopted and you know, it's -- you know, COVID kind of put up a difficult thing to rip out your infrastructure and bring new. At the same time, it created an awful lot of review and analysis. But now I think that that's going to change, and we're planning on being at the forefront.

[Andrew Schmidt, Citi]

Makes sense. Let's hope we're getting to that stage. Thanks a lot, Bill. I appreciate the comments.

[Operator]

And our next question comes from Rayna Kumar with Evercore ISI.

[Rayna Kumar, Evercore ISI]

Hi, good evening. Thanks for taking my question. Can you give us your thoughts on the current outlook for large license deals? So now that vaccine is becoming more prevalent in the U.S., are you -- do you think you're going to start to do more face-to-face meetings to close up some of these larger deals that you spoke about on the fourth quarter earnings call?

[Bill Stone, Chairman & Chief Executive Officer]

Well, you know, as Rahul spoke earlier, Rayna, that he -- you know, the thing you're seeing now is increasingly infrastructure bundles with large licenses, so that -- you know, the technology aspects of maintaining current code, right, so releases have to go in and has to be handled, and it has to be done in a very professional way; that's our expertise. You know, often it's not these large scale managers that are very expert in using the applications, but not necessarily as expert in maintaining them, upgrading them, planning for those things. And so -- you know, we think that bundling capability is giving us a little more running room. We think that the large license sales, I think, are not going to be as robust as they were 10 years ago because there's more options for people, and I think they will adopt some of those options that make their entire infrastructure easier to manage.

Do you approve that, Rahul?

[Rahul Kanwar, President & Chief Operating Officer]

I do. And we've seen -- as Bill just mentioned, we've seen that strength in our Advent business, and we're starting to see more of those conversations in our institutional investment management business.

[Rayna Kumar, Evercore ISI]

That's extremely helpful. And just on the DST business, a clarification question. Did you say DST for the full year could be up 0% to 1% organically or 2%? And what gives you confidence that DST will continue to improve in 2021 versus what we saw in 2020? Thank you.

[Bill Stone, Chairman & Chief Executive Officer]

Yes. I think I said 0% to 1% but Rahul, correct me. And I think -- I think we're shooting at combined around 2%. And you know, I mean we have -- we have opportunities, I mean, tremendous opportunities. You know, opportunities only translate into financial statements when contracts get signed, right. So, we are executing on large scale deals; hopefully over the next couple of quarters, it will come to fruition and we'll be able to share with you. But we're cautiously optimistic that the big things are going to happen for us, and we've been working hard to make sure that happens. And at the same time, continue to drive earnings, drive cash flow, and increase shareholder value, that's our job.

Rahul, you have any more on that?

[Rahul Kanwar, President & Chief Operating Officer]

Bill, I don't. We are -- you know, we're also -- we've got reasonably good visibility, at least in the current quarter and all that out. So, that's also part of where the confidence comes from.

[Rayna Kumar, Evercore ISI]

Thank you.

[Operator]

And our next question comes from James Faucette with Morgan Stanley.

[James Faucette, Morgan Stanley]

Thanks very much. I wanted to touch on quickly acquisitions during the course of the core, Rahul had kind of mentioned, that you might be looking a little bit more tweaking your M&A strategy a little bit, and it seems like, the mainstream may fit the criteria you outlined. And should we expect acquisition similar to this going forward in terms of price you're willing to pay growth rates, etcetera?

[Bill Stone, Chairman & Chief Executive Officer]

Well, I think the answer for that is yes. You know, I -- you know, James, if you can tell us about what's the high end of this -- like there is not a lot of money chasing things. And we have a lot of confidence in our development teams and our sales organization, and we believe we can build almost anything; so the question becomes, is, where do you allocate your capital? And we want to allocate it what we'll give our shareholders as the best risk adjusted return. So, maybe these things that are selling at 20 times revenue; you know, maybe they are going to be moon-shots [ph]. But you've been at this long enough, 20 times revenue, that's a big number. So you've got to be -- you've got to do your due diligence, you've got to know how you're going to make that pay off. And so, I would say, yes, of course what we have to raise our prices to get good assets because good assets are selling for higher price. But we're still disciplined; like I said, we did almost $500 million in adjusted consolidated EBITDA, and that gives us a lot of flexibility. And as Patrick said, we're expecting somewhere around $1.003 billion [ph] in free cash flow. So we can use that to do lots of things, and we plan on doing lots of things. And so I think this is a good question and there is no specific answer other than certainly, if you're going to be in the M&A game, you're going to pay more now than you did 5 or 10 years ago.

[James Faucette, Morgan Stanley]

Yes, for sure. And I think the tweaks certainly makes sense. I wish I could tell you though, Bill, how high or how long it goes on. But I guess associated with that, it seems like there's been some recent focus on Australia given Link Group and Mainstream; is that a coincidence? Or is there something attractive about the Australian market that you're looking to gain exposure to? I'm just trying to get a little bit of insight into if there is anything specific there that we should be paying attention now -- attention to in that region of the world?

[Bill Stone, Chairman & Chief Executive Officer]

Well, I think Australia has a strong economy and they have -- you know, their superannuation fund concepts and distribution to their populace [ph] is, what they sort of -- they call it the "wall of money" I think and -- you know, when you have that and you have you have upwards 30 million people that are certainly in the top decile of the world's wealth. As far as full populations go, I think it's an attractive market, right; and they have -- no, it's English speaking, it's common law practices, primarily contractual processes similar to the UK and the U.S. and Canada, and so it -- that makes it pretty attractive, and makes what we do pretty transparent to them. And I think that's why we see the [indiscernible] Australian plus there were things that were for sale. So it's something that we try to take advantage of no matter where it is in the world.

[James Faucette, Morgan Stanley]

Yes, good. Thanks for that, Bill.

[Operator]

And our next question comes from Chris Donat with Piper Sandler.

[Christopher Donat, Piper Sandler]

Hi, good afternoon, everyone. It's Chris Donat. In terms of your second quarter guidance, just wondering about the -- looks like about a 2% decrease from the first quarter in terms of adjusted revenue? How should we think about that? Is that -- was that sort of coming off a strong quarter from Intralinks? Or were other -- was other revenue pulled forward in other sources? Or just help us understand what's the quarter-on-quarter change in revenue?

[Bill Stone, Chairman & Chief Executive Officer]

Rahul, you want to take that?

[Rahul Kanwar, President & Chief Operating Officer]

Sure. I think the biggest thing there is, we do have some seasonality in our business, couple of the areas. For example, in our alternatives business, we do a lot of year-end financial statements and tax work. In our transfer agency and invest businesses, we do some regulatory filings and reporting to investors that occur around the year-end process. And so there is pockets like that, where there is just more work that gets concentrated in Q1 than Q2, and that's primarily the difference.

[Christopher Donat, Piper Sandler]

Okay, got it. That makes sense. And then, you already touched on this a little bit, but I just want to make sure I'm understanding what's going on with the new Intelligent Automation Solutions Group. Is that separate from singularity or is there some overlap or where are we with singularity? And, there is a lot of themes here with machine learning and robotic process automation, which seemed like they overlap between the two.

[Bill Stone, Chairman & Chief Executive Officer]

Well, I think they do, right. I mean, Singularity is an investment analytics, accounting and reporting solution; and then our Intelligent Automation workflow product, AWD, would be integrated with that in order to be able to use all the singularities capabilities, and be able to put in a very sophisticated workflow process. So it is all related but it's the bundling of those things I think that gives us the powerful markets.

[Christopher Donat, Piper Sandler]

Okay, thanks, Bill.

[Operator]

And there are no further questions at this time. I'll turn the conference back over to Bill stone for final remarks.

[Bill Stone, Chairman & Chief Executive Officer]

Well, again, we appreciate all of you and, and hopefully, you know, we're, we're off to the races on here and Ducky Derby is coming up and in a week or two and, and I look forward to talking to you at the end the second quarter thanks.