SS&C Technologies Holdings Inc

NASDAQ:SSNC

Earnings Call Transcript 2021-Q3

[Operator]

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the SS&C Technologies Third Quarter 2021 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions].

I would now like to turn the call over to Justine Stone, Investor Relations, for opening remarks. You may proceed.

[Justine Stone, Head of Investor Relations]

Hi, everyone. Welcome, and thank you for joining us for our Q3 2021 earnings call. I'm Justine Stone, Head of 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 the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk 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, October 28, 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.

Also in the third quarter, we entered into a joint venture named DomaniRx LLC, which we -- in 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 the ownership interest retained by SS&C.

I will now turn the call over to Bill.

[Bill Stone, Chairman, Chief Executive Officer]

Thanks, Justine, and thanks, everyone, for joining. Our results for the third quarter are $1.266 billion in adjusted revenue, up 9.5%; and $1.32 in adjusted diluted earnings per share, up 20%. Adjusted consolidated EBITDA was $530 million, and we are on track to end the year with over $2 billion in EBITDA.

Our adjusted consolidated EBITDA margin grew to 42.6% in the quarter, up 230 basis points from Q3 2020. Our third quarter adjusted organic revenue was 8.2% as we continue to gain momentum and beat Q2's 7.2% organic revenue. All of our businesses outperformed our expectations and our alternatives, Intralinks and software businesses drove the top line growth. We have accelerated our new business wins and competitive takeaways, while capitalizing on strong markets.

The past few quarters highlights SS&C's financial power. Without digesting large acquisitions, we were able to drive strong top line growth organically while improving margins over 200 basis points and growing earnings at 20%. We have maintained our lower cost structure through the pandemic and continue to drive efficiencies through automation. Machine learning, robotics process automation and artificial intelligence capabilities are being implemented across our businesses and products. We are currently rolling out our strategic development enhancement within the hedge fund services portal, whereby we are leveraging various AI principles and concepts to enhance controls, provide greater transparency around NAV anomalies, exceptions and key operational processes. This new product is called [GoCentral]. These types of development efforts not only generate revenue, but are margin enhancing.

SS&C generated net cash from operating activities of $944.8 million for the 9 months ended September 30, 2021, up 25% from the same period last year. We repurchased 2.1 million shares of common stock in Q3 2021 at an average price of $75.97 per share for $152.9 -- or $162.9 million. At our current valuation, we will continue to aggressively buy back stock.

We paid down $317.8 million in debt for the first 9 months of 2021, and our leverage ratio stands at 1.7x secured and 2.96x total leverage. We remain committed to a shareholder-friendly capital allocation strategy. And now that we are under 3.0x levered, we have increased flexibility to allocate more cash towards buybacks.

Our business is running on all cylinders. Our pipelines are strong with increasingly complex global large deals as organizations review their complete operating model and technology stack. Several of our products have met milestones, the most recent being Precision LM exceeding 100 clients. The growth comes as banks and nonbank lenders have increased their investment portfolio's private credit lending activities and exposure to commercial and residential loans. Precision LM added 20 new clients in the last 12 months.

We are capitalizing on market trends and recently launched our ESG reporting solutions platform for asset managers to better monitor and report on ESG exposure. Our solution provides accurate and detailed ESG ratings data, which a game changer to help investors understand sustainable investing and ESG exposures.

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

[Rahul Kanwar, President, Chief Operating Officer]

Thanks, Bill. Most of our global offices have reopened, and we're seeing employees attending in increasing numbers on a voluntary basis. We're optimistic that the added opportunities for in-person collaboration, combined with the work anywhere flexibility we're providing to our staff will enhance innovation and execution. Our businesses are benefiting from the global trend towards outsourced technology and services. As firms evaluate their desired post-pandemic operational state, our fund administration, middle office and advent businesses are seeing greater demand. This trend also impacts private market alternatives with firms looking at their operational capability and limited partners assessing the resilience and scalability of the managers they invest with.

Our functional depth continues to grow in lockstep with the steady addition of signed and live clients. Collaboration across SS&C teams, combined with R&D investments have resulted in a new generation of enterprise solutions. These allow asset managers, banks, insurance companies, alternative managers, retirement and wealth management firms and others to look to SS&C as a strategic partner that offers a comprehensive solution set to address several of their requirements. As a result, we're seeing larger deal sizes and greater appreciation for the ways in which we can deliver value to our customers.

Now, I will mention some key deals. One of the largest -- world's largest hedge funds and existing middle-office client chose SS&C to run shadow accounting. A managed account platform chose SS&C GlobeOp for fund services, financial statements, bank loan servicing and reconciliation. A $30 billion-plus hedge fund who had been running Axys for over 20 years upgraded to Geneva and Geneva cloud delivery after 3-year valuation. A $10 billion-plus Canadian prime broker added Advent Syncova to their technology stack, citing its scalability. A $50 billion AUA asset manager chose Black Diamond because of our partnership focus. A U.S.-based wealth manager saw the higher level of support and stability and chose a combination of Eze EMS and market trader to replace their current solution. A top U.S. insurance company chose Chorus our latest automated workflow solution. An existing fund administration client expanded their relationship to include retail alternatives, transfer agency, digital investor and Chorus.

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

[Patrick Pedonti, Chief Financial Officer]

Thanks, Rahul. Results for the third quarter 2021 were GAAP revenues of $1,264.4 million, GAAP net income of $184.4 million and diluted EPS of $0.69. Adjusted revenues were $1,266.3 million, including the impact with the adoption of the revenue standard 606 and for acquired deferred revenue adjustments for acquisitions. Adjusted revenue was up 9.5%, adjusted operating income increased 16.8% and adjusted EPS was $1.32, a 20% increase over Q3 2020. Overall, adjusted revenue increased $110.1 million or 9.5% over Q3 2020.

Our acquisitions contributed $10 million in the quarter. Foreign exchange had a favorable impact of $10.4 million or 0.9% in the quarter. Adjusted organic revenue increase on a constant currency basis was 8.2%. We had strength across several product lines, including alternative assets, Advent software, retirement business, ALPS, our brokerage business and the Intralinks business.

Adjusted operating income for the third quarter was $524.1 million, an increase of $75.3 million or 16.8% over the third quarter of 2020. Adjusted operating margins increased 38.8% -- adjusted operating margins increased from 38.8% in Q3 2020 to 41.4% in the third quarter of 2021 or 260 basis points improvement, driven by strong revenue increase and cost controls.

Expenses increased 2.2% on a constant currency basis. In addition, acquisitions added $9.6 million of expenses and foreign currency increased costs by $8.4 million. Adjusted consolidated EBITDA, which is defined in Note 3 of our earnings release, was $538.9 million or 42.6% of adjusted revenue and increased $72.6 million or 15.6% from Q3 2020. Adjusted consolidated EBITDA margins increased 230 basis points from the third quarter of 2020.

Net interest expense for the third quarter was $50.2 million and includes $3.3 million of noncash amortized financing costs and OID. The average rate in the quarter for our credit facility and our senior notes was 3.1% compared to 3% in the third quarter of 2020. A reduction in our debt balance resulted in interest expense decreasing $4.5 million or 8.2%.

During the third quarter, in connection with the legacy DST ERISA matters and associated legal proceedings, we recorded an expense of $43.4 million to other income and expense. Due to the inherent uncertainties associated with the resolution of this litigation, the ultimate resolution and any potential exposure related to this matter is somewhat uncertain at this time.

We recorded a GAAP tax provision in the quarter of $60.6 million or 24.7% of pretax income, and expect the GAAP tax provision to be approximately 26% for the full year. Adjusted net income was $352.9 million and adjusted EPS was $1.32, and the effective tax rate used for adjusted net income was also 26%. Diluted shares increased to -- decreased from 266.5 million from 267.6 million in the second quarter. The impact of share repurchases was partially offset by an increase in the average share price and option exercises.

On the balance sheet and cash flow, we ended the third quarter with $351.1 million in cash and cash equivalents and $6.2 billion of gross debt. SS&C's net debt, as defined by our credit agreement, which includes -- excludes any cash and cash equivalents of $138 million held at the DomaniRx JV was $6 billion as of September 30.

Cash flow for the 9 months ended September 30 was $944.9 million, $189.8 million or 25% increase compared to the same period in 2020.

A couple of highlights for the 9 months. We've purchased treasury stock buybacks of $487.9 million or purchases of 6.8 million shares at an average price of $71.74 per share. In July 2021, the Board authorized a new stock repurchase program for up to $1 billion of stock buybacks. The program to date, treasury stock buybacks of $162 million for purchase of 2.1 million shares at an average price of $75.97. Net debt payments were $317.8 million compared to $330 million in the same period of 2020. We declared and paid $122.8 million of common stock dividends, an increase of 22.9% the prior year.

In the 9 months, we paid $173.2 million of interest expense compared to $212.7 million in 2020. In income taxes, we've paid $230.8 million compared to $182.5 million in the same period in 2020. Capital expenditures and capitalized software were $96.2 million or 2.6% of year-to-date adjusted revenue compared to $80 million or 2.3% year-to-date in Q3 of 2020.

Our LTM EBITDA, which is used for covenant compliance, was $2,019.5 million as of September 2021 and includes $1.8 million of acquired EBITDA and cost savings related to acquisition. And based on a net debt of $6 billion, our total leverage was 2.96x and our secured leverage ratio was 1.97x.

On outlook for the fourth quarter, I'll cover a couple of assumptions first. So we'll continue to focus on delivering quality client service, and we expect our retention rates will continue in the range of our most recent results. We'll expect foreign currency exchange to be at approximately current levels. And adjusted organic growth for the year will be in the range of 4.8% to 5.9%. Adjusted organic growth for the fourth quarter will be in the range of 1.1% to 5.3%. Interest rates on our term loan will be approximately the 1-month LIBOR plus the spread, which is currently 175 bps. We expect expenses to increase sequentially due in part to the impact of higher personnel costs as a result of our annual merit increases, which took effect October 1, and we're seeing increased employee benefit costs.

We'll continue to invest in our business long term and capital expenditures will be approximately 2.8%. And we'll continue to allocate free cash flow to both stock buybacks and some debt paydown.

But for the fourth quarter of 2021, we expect revenue in the range of $1.225 billion to $1.275 billion. Adjusted net income in the range of $311 million to $334 million. Diluted shares in the range of 266.2 million to 266.7 million. And for the full year, the range for revenue will be $4.988 billion to $5.038 billion, adjusted net income in the range of $1.312 billion to $1.335 billion and diluted shares in the range of 266.9 million to 267.4 million.

And for the full year, we expect cash from operating activities to be in the range of $1.365 billion to $1.385 billion.

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

[Bill Stone, Chairman, Chief Executive Officer]

Thanks, Patrick. We're proud of the progress we've made this year. All of our businesses are gaining momentum, capitalizing on opportunities and continuously improving. Organic growth was up 8.2%, and we expect around 5.5% for the full year. Hopefully, we can surprise you positively. Alternative assets under administration increased another 80 billion in Q3 for a total increase of 480 billion since the first quarter of 2020. We now have 2.2 trillion in assets under administration, and we’re hundreds of billions ahead of our next competitor.

Our EBITDA margins were up 230 basis points. And we’re operating at our highest margins since the large acquisitions we made in 2018. We have a number of strong leaders and an abundance of opportunity, which we will showcase on November 10 Virtual Analyst Day. Please see our events on our Investor Relations webpage to register and reach out to Justine for additional information.

I'll now open it for questions.

[Operator]

[Operator Instructions]. Your first question comes from Surinder Thind of Jefferies.

[Surinder Thind, Jefferies]

Congratulations on the quarter, gentlemen. My first question is related to just the margin profile. There was a significant increase in the margins quarter-over-quarter. And then we had a similar increase last quarter. On the call, you talked a little bit about automation being one of the drivers. Is there any additional color that you can provide in terms of what might be a normalized level? When I look at the gross margins for your software services-enabled business, it seems that's where you're realizing most of the savings.

[Bill Stone, Chairman, Chief Executive Officer]

Well, I'll give a little crack and then Rahul and Patrick, you guys can chime in. But since the pandemic, we're not leasing near as much space as we did in the end of 2020, and I believe that will continue into 2022. And we also have had less aggressive hiring than we have had in the past, not that we aren't hiring, we are, but we have probably had some pickup because of the number of people we had versus what we had expected. So I think those are 2 big things. And I think that our pricing discipline has helped us, and I believe it will continue. Rahul?

[Rahul Kanwar, President, Chief Operating Officer]

Bill, I agree with all of that. And I think the things that I would add are: we've also had an opportunity to spend a fair amount of energy on R&D. So Bill talked about machine learning and some of the other things we're doing, and that has resulted in productivity, right? And we expect those productivity gains to continue.

[Surinder Thind, Jefferies]

So just to clarify, is the current level of margins that you're generating in the neighborhood of what we should expect on a go-forward basis, subject to any kind of seasonality?

[Bill Stone, Chairman, Chief Executive Officer]

I think that's right. I mean, again, right, it's -- we've always been around 40, and I think the latest 42.6, and so I would say it's going to be somewhere between 40 and 44. And it will fluctuate based on investments we make. And we tend not to be particularly aggressive about capitalizing software and stuff like that, so I think we will continue to not be particularly aggressive on that. And so I would think that our margins will depend on some of the ability to -- which we have proven that we can close big deals, but -- and we have proven that we can get them live, but the difference between getting them live in, say, the third quarter and getting them live in the fourth quarter can often impact margin in the 10 basis point to 20 basis point range.

[Surinder Thind, Jefferies]

That's helpful. And as my follow-up, Bill, in terms of just the capital allocation strategy now that you're kind of below the 3x leverage ratio, you talked about having additional flexibility. If we were to translate that into practically, what does that mean? Is that you're going to primarily now focus on share repurchases at this point? Or is there -- you're willing to take leverage down further? Is there kind of a level that you're not willing to go below when it comes to leverage? Just any color you can provide there in terms of why you wait for the right acquisition.

[Bill Stone, Chairman, Chief Executive Officer]

Yes. Surinder, if you look at the -- if you look at our -- what we expect in cash flow, which is around $1.350 billion, I think and I think that share counts Patrick quoted were 266 million, 267 million, you're talking about $5 a share in cash. And so obviously, on a finance basis, buying back shares is a lot better than paying off 2% debt.

Now at the same time, we would like to deploy that $4 billion we have in 2% debt to faster-growing assets and obviously, with better margins. And so we're constantly on the lookout to try to do that. And I would tell you that primarily our lookout right now is that we have a lot of faith in our development teams, but we have a lot of excitement around DomaniRx. We think that things like [GoCentral] and other things that we are bringing out are indicative of our development capability. And I would say that we will continue to drive cash towards those things. But I think, on the surface, we would probably be a little more aggressive in stock buybacks than we would be in debt repayment.

[Operator]

Your next question comes from Michael Young of Truist Securities.

[Michael Young, Truist Securities]

Wanted to ask kind of a follow-up on the margin profile question and just think about it in the context of some of the macro drivers, mainly inflation. Net-net, does that kind of help you guys on the pricing side and being able to push pricing higher more so than it impacts on the cost side? Any thoughts there would be helpful.

[Bill Stone, Chairman, Chief Executive Officer]

I think that's a great question. I think that, obviously, inflationary times and all of your organizations are similar issues with the increasing wages, which I'm not -- I hope to pay our people more, so -- and I know that our clients like to have continuity with the talented people that we have on their accounts. So I think they also understand that there will have to be some revenue adjustments to them, some price increases. So net-net, I think you're right, we might be able to get 50 basis points, maybe 100 basis points more on the revenue side than on the expense side. But I wouldn't say it's going to be -- I mean, if inflation goes wild, and that's a lot different. But if inflation stays 2%, 3%, 4%, then I think it will be -- could be a little bit of a tailwind, but it's not going to be massive.

[Michael Young, Truist Securities]

Okay. That's helpful. And then maybe just a second just on kind of general sales pipeline as we're kind of getting back to normal, maybe post pandemic more in-person sales ability, et cetera. Are you seeing strength or opportunities to land kind of larger deals? Or any update there just kind of on pipeline and progress there?

[Bill Stone, Chairman, Chief Executive Officer]

Yes. I believe we are. We're also engaging at higher and higher levels in organizations. And we have a number of very successful lift-outs that we have done that we are going to turn it into a pitch book on how we could maybe take some of your people as well as these accounting processes and reporting processes, risk processes, compliance processes and other things that we do exceptionally well and try to be able to really streamline these large financial institutions, middle and back offices. And also, obviously, we have front to back, so we can do trading and compliance and risk and ESG and other things. And so we're pretty optimistic about our opportunity to continue to go upscale.

[Operator]

Your next question comes from Andrew Schmidt of Citi.

[Andrew Schmidt, Citigroup]

First, I just want to dig into the third quarter organic revenue growth performance. Really nice to see the acceleration in growth. Do you talk about just the factors that drove that acceleration in the second quarter, the third quarter? Patrick, I know you mentioned strength in a few products, but if we could dig into that a little bit more, that would be helpful.

And then based on the momentum you have in the third quarter, just how you're thinking about the fourth quarter setup from an organic growth perspective based on those factors? Because it does seem like you have some pretty good momentum here. So just curious to get your thoughts around third quarter, and then how those factors relate to the fourth quarter performance.

[Bill Stone, Chairman, Chief Executive Officer]

Well, again, we do believe we have some momentum. And again, as we said in our remarks as well as in our press release, our software businesses, Advent, in particular, and our fund administration businesses as well as our Intralinks businesses have been particularly strong, and we would expect all 3 of those to continue that strong pattern. And I think that again, as we add the tens of billions of dollars to our or AUA, those revenues start to flow into our financial statements, and obviously, that's some tailwind as well. Rahul, could you add to that?

[Rahul Kanwar, President, Chief Operating Officer]

No, I think I'd echo all of that. I'd also say that some of what we've done in the last 18 months-or-so is really fostered this collaboration within SS&C, where our products and services are much more integrated and our teams are much more integrated when they go talk to large asset managers or large banks or whatever prospects they might have. And that's resulted in the opportunities that we have in front of us, have larger ticket sizes. And sometimes they take a little longer to sell, but if you have enough of them, that's pretty additive to the revenue process. And we think that, that helps us drive sustainable growth.

[Andrew Schmidt, Citigroup]

Got it. That's helpful. And not to front-run the Analyst Day, but it does seem like the comments on the margin front are pretty constructive in terms of your runway there based on both scale and the efficiency initiatives. And then on the top line, it seems like based on your comments, Rahul, that you have pretty good visibility based on some of the -- or I should say, better visibility based on some of the investments you've made. Is providing an intermediate or longer-term outlook based on those factors something you might consider just to help people think about the longer-term algorithm for the business?

[Bill Stone, Chairman, Chief Executive Officer]

Yes. I believe that we're constantly studying how we deliver information to all of you. And I think over the next quarter or 2, we will start being a little more granular and try to give you a little bit longer viewpoint of where we think things are going to be, and I think that might be well received by the analyst and investing community.

[Operator]

Your next question comes from Peter Heckmann of D.A. Davidson.

[Peter Heckmann, D.A. Davidson]

I just wanted to follow up on fund administration. The company continues to gain share. Can you talk a little bit about where you're gaining share? And kind of how you're gaining share? Is it primarily from the smaller and mid-tier fund administrators? Or is there a mix of funds outsourcing for the first time? And what other dynamics should we be thinking about? I know there's some transition going on in, I think, the domicile of Malta, don't know if that's going to require any changes in your business. But really what -- how does this continue to win new contracts and continue to gather AUA?

[Bill Stone, Chairman, Chief Executive Officer]

Well, I believe we're somewhat, by far, the most innovative fund administrator in the world. And we use our own software in our fund administration business as do 40 other fund administrators. But we're always on the current release, and we're always pushing the envelope. So the kinds of products like [GoCentral], we will be the first to adopt and the first to demonstrate and it will create excitement. And then often, larger financial institutions have more difficulty installing releases in large-scale systems. And so sometimes they get behind on a few releases, and they don't do the training like we do the training, and there's a whole series of things that we do. And we have a very strong sales force, very capable. And increasingly, our marketing is more targeted, and our audience is more interested because of the breadth and depth of what we deliver. Can you add to that, Rahul?

[Rahul Kanwar, President, Chief Operating Officer]

So that covers a lot of ground. I think maybe a couple of other things. On some of the types of things that we're seeing that are additive are new funds for sure, but also in particularly in the private markets business with private equity and real estate, we've said now for several quarters, if not years, that the larger funds are embracing outsourcing. They just happen to be doing it at their own pace. And as Bill just pointed out, as we get bigger and we make more investments than we get more recognized out in the marketplace, that pace of change for them and the rate at which they're able to embrace our services is just accelerating.

So I think we're seeing acceptance, greater acceptance in the larger players. We continue to be very, very strong in the start-ups. And then we have a large and prestigious client base that continues to raise assets and add new funds and all of those things work together.

[Peter Heckmann, D.A. Davidson]

Okay. Maybe just as a follow-up. Has there been much change in pricing on a net basis? And you would think as the more illiquid assets and the more complex assets might help raise the overall, but can you comment on how pricing has trended in the last couple of years?

[Rahul Kanwar, President, Chief Operating Officer]

Pricing has been pretty stable with the thing that changes the baseline is we have more products and services to sell into any individual manager that we're speaking with. So overall deal size is larger, but the prices for kind of the same kinds of services is pretty comparable to what it was.

[Operator]

Your next question comes from Mayank Tandon of Needham & Company.

[Mayank Tandon, Needham & Company]

Bill, just given your comments around demand, and it sounds like decision-making also is improving. I was just curious, as you look out into '22 and beyond, and maybe you'll talk about this at the Analyst Day, but just wondering, is the trend line growth for SS&C potentially better? What I mean by that is, I think in the past, you've talked about say, mid-single-digit organic growth and then supplement that with M&A. But obviously, you're growing a little bit faster right now. Is that sustainable? Or do you think growth reverts that to trend as you look out a little bit longer term?

[Bill Stone, Chairman, Chief Executive Officer]

Well, Mayank, we like the current trend. Going back to previous seasons doesn't enthrall us. But as I've said before, when we deployed $8.4 billion in capital in 2018, we got something like $2.9 million in -- $2.9 billion in revenue and probably close to $1 billion in EBITDA. If you try to do that in 2021, who knows how much you would have to pay. And so we feel pretty good about when we gathered assets and the discipline that we have shown. And again, trying to -- we still like to make money, and we want everybody to also understand that we're good citizens in all of our communities, and we pay well and all those things. But our earnings are $1.33, $1.64, $1.94 to something like $2.92, $3.83, and last year, we did $4.30 and now we're saying we're going to do somewhere around very close to $5. And so I think that focus is going to stay the same. I think our opportunity to grow faster is because of the breadth and depth of what we're offering. And then the size of our current client base, in particular, it's the largest hedge funds, the biggest banks, the biggest mutual fund companies, the most complex issuers.

As I say, if you want to double your capacity in a server, you pull out 1 wire and stick in another wire. You want to do derivative mortgage-backed securities on a retrospective or prospective basis, you better get deep into an accounting book, right? And so I think the complexity of the world, the complexity investing world to drive for increasing information across a number of different analytics isn't going to change. All of you are insatiable. So all we have to do is make sure that what we deliver to you is stuff that you want. And I think as long as we do that and keep our size and our strength and our expertise, I think the future does look bright for us.

[Mayank Tandon, Needham & Company]

Right. There seems to be plenty of runway, no question. Bill, as a quick follow-up on the health. I don't think I caught anything in terms of an update on the health business. Any updates on that in terms of positioning? Competition, how that's faring in maybe your longer-term thoughts on how core that is to your business? Versus maybe -- I know you've talked about in the past potentially looking at it as part of the core, but just curious on what the latest is on the health side.

[Bill Stone, Chairman, Chief Executive Officer]

Well, I mean, we announced DomaniRx, I think, in the last quarter, and that's capitalized with $1 billion. And PBM is a pretty hot area, pharmacy benefit management. And in particular, the capabilities of your technology, and we have a really bright team that are building out our new platform on for Domani. And we have obviously some pretty sophisticated partners with us with Anthem and Humana, and we expect others to convene with us, large-scale, sophisticated health care providers and health care commands. And we believe that it is a very big opportunity for us. And how you ultimately monetize that, Mayank, I think it's still in the formative stages. We're now our nose to the grindstone and getting the product done and getting excitement adding new customers. And I think the health care business will perform well over the next several years.

[Operator]

Your next question comes from Jackson Ader of JPMorgan.

[Jackson Ader, JPMorgan]

The first one, so State Street bought Brown Brothers or the accounting and fund administration piece. And I was just curious whether you had any comments on that? That seems like it would be right up your alley, SS&C's alley, I should say. And $3.5 billion wouldn't have topped your former largest deals. I'm just curious your thoughts on the deal and whether you guys were also interested?

[Bill Stone, Chairman, Chief Executive Officer]

We would have been. I think that, that was maybe baked already. And so both of them are good clients, and we wish them well. And hopefully, there's not a large financial institution that wants to get out of the fund administration business, they hopefully create a little bit more of an option.

[Jackson Ader, JPMorgan]

Yes. Okay. Understood. And then Bill, you mentioned one of the things that helps -- I think you mentioned that one thing that helps margins is big go-lives that happened to fall into a particular quarter. Was there anything in this third quarter that may be pulled forward from the fourth quarter that would explain the organic revenue growth decel as we look out to 4Q?

[Bill Stone, Chairman, Chief Executive Officer]

Well, I think, again, we want to make sure we don't get ahead of ourselves. We don't get over our skis. And if there's going to be a surprise, we prefer it to be positive. So we have been circumspect on how aggressive to be on guidance. And I think it has, at least over the last few quarters, has served us well. And I think as our sales and marketing organizations get increasingly sophisticated, our ability to really have a higher growth rate and feel very comfortable by hitting those. I think we will be emerging for you. And I think that right now, we have a pipeline that's bigger than we've ever had. Pipeline is nice, but that didn't account for revenue. You've got to close that pipeline. And again, we have a really strong sales force and we're pretty excited about what we can do. All right.

[Operator]

Okay. Your next question comes from James Faucette of Morgan Stanley.

[Jonathan Lee, Morgan Stanley]

This is Jonathan on for James. And there's been a flurry of capital markets activity around the higher growth assets in the investment management solutions space. And with that in mind, I think you touched on this earlier, how are you thinking about your acquisition strategy around growth-oriented assets? What are you seeing in the market? What types of assets are you looking for?

[Bill Stone, Chairman, Chief Executive Officer]

Less expensive ones than there are in the market right now. So when you start looking at 10x and 12x revenue, it becomes for -- the math, it becomes pretty tough. And so particularly when you have as talented development teams as we have. So the trade-off is we don't really want to have the elapsed time and risk of developing software if we could buy some of that functionality at only a moderately ridiculous price. But when it's a completely ridiculous price, then we get a little more circumspect. So I think we like the wealth management sector. We like regtech. We think insurtech looks pretty good. We will almost always be in the bidding for front administration businesses. So those things. And we also think that we have a growing and strong presence in Asia that we would like to buttress as well.

[Jonathan Lee, Morgan Stanley]

And you mentioned development teams and the skill sets that you have there. So on the topic of hiring, are you seeing any headwinds as it relates to finding and hiring that talent for those development teams given the constrained talent environment?

[Bill Stone, Chairman, Chief Executive Officer]

Yes. So what we have figured out is to pay people more.

[Operator]

Your next question comes from Chris Donat of Piper Sandler.

[Christopher Donat, Piper Sandler]

Wanted to just ask another one on the category of fourth quarter guidance and revenue. Just because the revenue guidance is down 3% or up -- a range of down 3% to up 1% from the third quarter. And just can you remind us what the swing factors can be in your revenue besides the timing of onboarding? How much like services work you can have or other factors that can affect the revenue recognition quarter-to-quarter, especially with your 96.5% revenue retention level, you're in a pretty predictable world?

[Bill Stone, Chairman, Chief Executive Officer]

Well, I think that's a good question, too. I would say that the 2 things that come to my mind is the fourth quarter is usually our biggest license revenue quarter. And in general, licenses are a little more difficult to predict than recurring revenue increases. And the second thing is that the fourth quarter is not a particularly long and not a particularly strong quarter for adjacent services in our fund administration businesses like tax work and other things like financial statements, almost all of that work comes in the first quarter and second quarter. So those are a couple of things, and Rahul probably has some other comments.

[Rahul Kanwar, President, Chief Operating Officer]

I think those are -- you hit the big ones. It's the seasonality of the special services that we do in fund administration. It's -- it tends to be a bigger license quarter. And I think, sequentially, the difference between the midpoint of our guidance for Q4 and our actual for Q3 is something like $15 million, right? So we're not really that far off and I think well ahead of anything we've said for Q4 during the course of the year.

[Christopher Donat, Piper Sandler]

Okay. Got it. And then, Rahul, I just want to make sure I heard you correctly. I thought you said you had a $30 billion hedge fund client that was running Axys for 20 years, is that right? And how many other clients are out there running Advent legacy Axys software, or did I hear it wrong?

[Rahul Kanwar, President, Chief Operating Officer]

No, you heard it right. And that's a great question, right? So there exists, within that client base, opportunities like that. And I think that opportunity resulted in a sort of a 10x revenue pickup, right, and lots of value to that particular customer. But we have others where these -- some of these products that have been around for a while are very functional and people really like them. But invariably, they start investing in things or have new requirements and they need to upgrade, and we've got a natural upgrade path. And when that happens, it can be pretty positive for them and for us from a revenue standpoint.

[Operator]

Your next question comes from Patrick O'Shaughnessy of Raymond James.

[Patrick O'Shaughnessy, Raymond James]

So as tableaus kind of touched on earlier, but there's been a couple of recent IPOs of firms that compete against SS&C in certain areas, and those competitors are pitched as cloud native or they're SaaS-based. Curious about how comfortable you are with your competitive positioning, particularly on the software side of the business?

[Bill Stone, Chairman, Chief Executive Officer]

Yes, that's a great question, Patrick. I think that we are very competitive on the software side, in particular, to just name a few products would be our Singularity platform, our Geneva platform or Eze Eclipse platform or our Intralinks platforms, Precision LM, those are all best-in-class. And I think relative to, say, [Infusion] or [Clearwater], I think, this quarter, we added $110 million in revenue, which is about half of Clearwater's annual revenue. And I think it's more than maybe double what [Infusion] does. So competitively, I think they have some good technologies at both of those companies. But when they get into bigger and bigger companies, they're going to find that being able to do syndicated bank loans, interest rate derivatives, compliance and risk and other functional requirements, I think is going to really start to tip the scale towards us. Plus we have a new product called Aloha that has IBOR and all kinds of other unique features in it. So we're pretty proud of our development teams, and we're looking to step on the gas on the sales and marketing.

[Patrick O'Shaughnessy, Raymond James]

And then -- so you guys have obviously been pretty aggressive on the share repurchase front over the last several quarters. But like on a year basis, your fully diluted share count is essentially flat. As the impact of the repurchases has been offset by a lot of dilution, stock-based compensation-related dilution. So obviously, there's variables at play in terms of your capital allocation opportunities and the stock share price. But at a high level, would you expect to start making a bigger dent in your diluted share count going forward?

[Bill Stone, Chairman, Chief Executive Officer]

Well, again, I think the answer to that is yes, although I think that our -- one of the stated goals of our Board and our comp committee is to make sure we have adequate equity awards for our staff, and so that's a balancing act. And I think that it's -- we go from a few years back, having $250 million in authorization, then a $750 million in authorization, now we have $1 billion. And I think that, yes, we would like to make a bigger dent in that. And I think we will continue to be quite aggressive when it comes to buying back stock. We're just waiting, Patrick. We're $5 billion in revenue now. I mean, 3 years ago, we were $3 billion in revenue -- so $3.5 million, so things take time.

[Operator]

Your next question comes from Jackson Ader of JPMorgan.

[Jackson Ader, JPMorgan]

Patrick, do we have -- could we get the organic revenue growth by segment fund administration, as Intralinks, et cetera?

[Patrick Pedonti, Chief Financial Officer]

Yes, sure. In Q3, so the fund administration business was up, I think, 14.8% organically in the quarter. Intralinks was up 23.5% in the quarter. Our DST Financial Services segment was up 3.7%. And then our core software business plus some other of the smaller products, but mostly Advent in our institutional businesses in this segment, it was up 6.9% in the quarter.

[Jackson Ader, JPMorgan]

Okay. Awesome. Just a quick follow-up on that Intralinks number. How much of that was driven by M&A activity in the market that might be outside of your control like more market factors versus like SS&C's own execution?

[Bill Stone, Chairman, Chief Executive Officer]

We're really proud of our team's execution. They're gaining market share. And I believe they're innovating, and we're very pleased with all the aspects of that team.

[Operator]

At this time, there are no further questions. I will now turn the floor back over to Bill Stone for any additional or closing remarks.

[Bill Stone, Chairman, Chief Executive Officer]

Again, thanks, everybody, for being on this call, and we look forward to talking to you after the fourth quarter. And please stay safe, and we'll see you next quarter. Thanks a lot.

[Operator]

Ladies and gentlemen, this concludes today's event. You may now disconnect. Thank you for your participation.