Ladies and gentlemen, thank you for standing by, and welcome to the SS and C Technologies Second Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Justine Stone.
Thank you. Please go ahead.
Hi, everyone. Welcome and thank you for joining us for our Q2 2020 earnings call. I'm Justine Stone, Investor Relations for SS and C. With me today is Bill Stone, Chairman and Chief Executive Officer Rahul Canlar, President and Chief Operating Officer and Patrick Vedanti, 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 the Risk Factors section of our most recent Annual Report on Form 10 ks, 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, July 28, 2020. 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.
Thanks, Justine, and thanks, everyone, for joining us today. I hope you and yours are home safe and healthy. I'll discuss our results for the quarter and then talk through our assumptions for the remainder of the year as we continue to navigate in a COVID-nineteen world. Our results for the 2nd quarter were $140,800,000 in adjusted revenue, down 1.3% and $1.04 in adjusted diluted earnings per share, up 14.3 percent. Our adjusted consolidated EBITDA was $448,400,000 and adjusted consolidated EBIT margin remained constant at 39.3%.
Our Q2 adjusted organic revenue was down 1.4%. Many perpetual license software and complex outsourcing deals have been pushed as well as delayed fund launches, but firms are now adjusting to the new environment. We continue to see strength in the alternative fund administration and EZ businesses with 4.6% and 3.6% organic growth, respectively. We were encouraged by Intralinks solid performance of 3% organic growth. DST in our perpetual license businesses saw a bit more Q2 weakness, but we are encouraged by our large deal pipeline and initial Q3 acceptances of our bids.
Operating cash flow was $555,700,000 for the 1st 6 months ended June 30, 2020, a 33.4% increase from the 400 $16,600,000 for the prior 6 months. Our secured net leverage ratio was 2.53x and our total net leverage ratio was 3.6x. With our secured leverage levels well below 3x, we will consider other uses of free cash flow, including stock buybacks, which you have seen we have renewed and increased our authorized buyback program to 7 $50,000,000 In Q2, we bought back 500,000 shares of common stock at an average price of $58,600,000 per share or $27,900,000 Despite the challenges of COVID-nineteen and the global economic shutdown as presented us, SS and C has maintained a high level of service to our customers and has continued to win mandates. 1 of our largest strategic partners has transitioned all technology operations in Canada and Europe to SS and C's International Potential Services Business. This equates to tens of 1,000,000 of dollars in revenue annually, and we started to recognize a portion of this in Q2.
We also have set a high alternative asset under administration, a high level mark of $1,810,000,000,000 This was driven by lower than average fund closures in Q2, new mandates growth. We believe alternative asset management are well positioned in these volatile markets. Black Diamond continues to grow nicely and had its best ever sales quarter in Q2, including a contract with the wealth management division of a top 10 U. S. Bank.
We have updated our 2020 scenario analysis, which can be found on Pages 45 of our earnings results slides. We are now using the 20 21 scenario as our baseline with an incremental increase or decrease in revenue of about $40,000,000 dollars dependent upon the state of the economy for the rest of 2020. We anticipate earnings per share to come in at $4.10 as our baseline. This is up $0.27 from our original 2021 scenario. We are also excited about changes to our senior management team.
Dan DelMastro is assuming the range of SS and C Health. And as previously announced in Q2, Karen Geiger and Steve Levent are leading our Advent business. I'll now turn it over to Rahul to discuss the quarter in more detail.
Thanks, Bill. Our operations are well settled due to remote working conditions as a result of COVID and our clients have complemented us on the quality of our delivery. We have maintained revenue retention rates and continue to grow in some of our key markets. We saw growth in alternative fund services as and Intralinks in Q2. Drivers included competitive takeaways in alternatives, heightened trading volumes in EZ and a large payment protection plan win for Intralinks, offsetting a reduction in M and A volumes.
As expected, we saw a slowdown in professional license sales in our institutional and investment management and other software license businesses. DST revenue was impacted by reduced volumes and activity in both financial services and healthcare as well as a reduction in interest revenues due to the interest rate decline. Our pipeline remains strong and we are optimistic about being able to win large mandates at DSP and elsewhere in our business over the next few quarters. The products and services we provide are mission critical to our client base and we have seen a significant increase in login and usage activity on our web and mobile client portals and applications. There is increased inbound interest for cloud hosting and outsource services as firms in this remote working environment look to us to provide access to production systems and augment their staff and processing capability.
We're making investments in our business to innovate and support our clients. Black Diamond's new timeline feature that allows for personalized digital communication at scale was adopted by over 60 clients in Q2. In SSC Health, we're developing dashboards that are updated in real time related to COVID-nineteen product utilization and trends. We're using the Vidado technology to help state and local governments scan handwritten medical documents and forms. Algorithmic continues to perform well and we have several ongoing projects to incorporate the technology into our existing solutions.
Now I will mention some key deals for Q2. Large fund administration client using Geneva upgraded to our cloud delivery solution giving them our application and IT infrastructure in one solution. The U. S. Bank bought our Black Diamond solution to help them attract registered investment advisors.
An independent money manager with over $100,000,000,000 in assets, bought a suite of SS and C products including Global Wealth Platform. They needed a comprehensive end to end solution with scalability to handle high volumes. An existing healthcare client added our drug discount rep to their suite of services. A large Brazilian asset manager chose SS and C Gold Box Fund Services Suite, citing our team's expertise and technology. A commercial real estate company chose PrecisionLM for their loan origination and servicing.
A $20,000,000,000 U. K.-based investment manager looking to consolidate vendors moved an additional fund from a competitor
to SS and C Globe UP.
A $28,000,000,000 alternative manager upgraded to AZ Eclipse. They were impressed with the interface and anywhere, anytime functionality. I will now turn it over to Patrick to run through the financials.
Thank you. The results for the Q2 were GAAP revenues of 1,138,100,000 dollars GAAP net income of $169,500,000 and diluted EPS of $0.64 Adjusted revenue was $1,140,800,000 excluding the impact of the adoption of the revenue standard 606 and for acquired deferred revenue adjustments for the acquisition. Adjusted revenue was down 1.3%. Adjusted operating income increased 0.9 percent and adjusted EPS was $1.04 a 14.3 increase over Q2 2019. Adjusted revenue decreased $15,000,000 or 1.3 percent over Q2 2019.
The acquisitions contributed $25,100,000 Foreign exchange had an unfavorable impact of $7,200,000 or 0.6 percent in the quarter. An organic decline on a constant currency basis was 1.4%, driven by weakness in the healthcare, transfer agency, advanced software products due to the current environment. These were offset by strength in fund administration, the Eze Business, Intralinks and Institutional Products. Adjusted operating income for the Q2 of 2020 was 430,100,000 dollars an increase of $3,900,000 or 0.9 percent from the Q2 of 2019. Foreign exchange had a positive impact of $8,300,000 on expenses in the quarter.
Adjusted operating margins improved from 36 0.9% in 2019 to 37.7% in the Q2 of 2020, driven by lower personnel costs, lower third party service expenses, lower out of pocket expenses and lower travel expenses. Adjusted consolidated EBITDA defined in Note 3 of the earnings release was $448,400,000 or 39.3 percent of adjusted revenue, a slight increase of $200,000 over Q2 'nineteen. Interest expense for the Q2 was 220 2020 was 60,500,000 and includes $3,500,000 of non cash amortized financing costs, NOID. The average rate in the quarter for our credit facility and the senior notes was 3.19% compared to 4 point 9 6% in the Q2 of 2019 and resulted in an interest expense decrease of $43,800,000 We recorded a GAAP tax provision of $29,500,000 or 14.8 percent of pretax income. Adjusted net income, as defined in Note 4 in the earnings release, was $276,100,000 dollars and adjusted EPS was $1.04 Effective tax rate used for adjusted net income was 26%.
Diluted shares increased slightly to 165,800,000 in the quarter. The impact of option exercises and share issuance was offset by a decrease in the average share price. On our balance sheet and cash flow, as of June 30, we had approximately $262,000,000 of cash, cash equivalents and approximately $7,000,000,000 of gross debt for a net debt position of approximately $6,700,000,000 Operating cash flow for the 6 months ended June 2020 was 557 $700,000 a $139,000,000 increase or 33.4% compared to the same period in 20 19. For the 1st 6 months of this year, we paid off gross debt of $503,300,000 and we borrowed $246,000,000 on our revolver in the first quarter. The $246,000,000 revolver was paid off in the 2nd quarter.
We paid $133,100,000 of cash interest compared to $169,900,000 in the same period last year. We paid $34,700,000 in cash taxes compared to $125,800,000 in the same period last year as we deferred some tax payments into Q3 2020. Accounts receivable DSO was 53.3 days compared to 52.5 as of March and 49.7 as December 2019. We used approximately $52,000,000 of cash or 2.2 percent of adjusted revenue for capital expenditures and capitalized software, mostly for IT as well as leasehold improvements. The 1st 6 months we declared and paid $64,000,000 of common stock dividends compared to $50,600,000 in the same period last year.
And we used $27,800,000 cash to buy back 500,000 shares of treasury stock at an average price of $58.62 Our LTM consolidated EBITDA that we use for covenant compliance was $1,864,000,000 as of June 2020 and includes $16,100,000 of acquired EBITDA and cost savings related to our acquisitions. Based on our net debt of $6,700,000,000 our total leverage ratio was 3.6x and our secured leverage ratio was 2.53x as of June 30. On the remainder of the year, through the current unpredictability of the market and economic conditions, we are providing 3 scenarios for the year depending on the timing of the recovery. These are the assumptions on these scenarios. Markets will continue to be volatile, large scale outsourcing deals and license deals are impacted, AUA levels remain flat and fund launches are delayed.
As we're focusing on client service, retention rates will continue to be in the range of our most recent results. We've assumed foreign currency exchange to be at where they are at current levels. Adjusted organic growth for the year will be in the range of negative 1% to negative 2.7 percent. Interest rates on our term loan facility will be approximately the 1 month LIBOR plus the spread, which is currently 175 bps. We will manage our expenses during this period by controlling variable expenses and staff hiring.
We'll continue to invest in our business for the long term with capital expenditures of approximately 2.5% of revenues. And we'll continue to use a tax rate of approximately 26% on an adjusted basis. The first scenario assumes that the economic conditions start improving in the Q4 of 2020. And in this assumption, we expect approximately the following results: adjusted revenue of $4,640,000,000 adjusted net income of 1,107,000,000 dollars diluted shares of $267,500,000 and operating cash flow of $1,100,000,000 The second scenario assumes economic conditions start improving in the Q1 of 2021. Under this assumption, we expect approximately the following results: adjusted revenue of $4,600,000,000 adjusted net income of 1,093,500,000 dollars diluted shares of $267,000,000 and operating cash flow of 1,090,000,000 dollars The 3rd scenario assumes that the economic conditions don't start improving until the second half of twenty twenty one.
And under this assumption, we expect approximately the following dollars diluted shares of 266,500,000 and operating cash flow of 1,075,000,000 dollars And I'll turn it back over to Bill for closing comments.
Thanks, Patrick. In closing, I'd like to thank the 23,300 people for staying focused 23,300 people that work for SS and C for staying focused and delivering. We're blessed to have such a talented workforce. I'd also like to reiterate the confidence we have in our business model, its cash flow characteristics and resiliency. While we cannot control the macroeconomic headwinds of COVID-nineteen, we can't control the quality of our deliverables high touch customer service.
We have solid visibility into our earnings and cash flow generation for the remainder of the year, and we will continue to manage costs, track receivables and support our sales force in winning new Our pipeline continues to grow with specific large opportunities within SS and CL and Retirement Solutions. We believe we will come out of this current crisis as a stronger company. With that, I'll turn it over
Your first question comes from the line of Surinder Thiem with Jefferies. Your line is open.
Thank you for taking my questions, gentlemen. Can you help me when I look at the second half for guidance, can you break that down in terms of your expectations for what you're seeing in terms of maybe growth of DST versus the rest of the business, if you can break that down versus as an insurance as well, please?
Well, I think that overall, we think the business is, I think, fund administration, the Eze business and Intralinks will probably grow at the low end of our expectations at the beginning of the year, but still probably grow somewhere between 3% and 4.5%. We would expect DST to probably be flat to down 2%. We have several very large deals in DST, but they have to sign and they have to start generating revenue. So we're optimistic about DST in 2021. But for 2020, they will continue to be revenue challenged, but we still will generate tremendous cash flow and earnings.
Thank you. And then just as a follow-up. When I look at your margin guidance, obviously versus the guidance I was provided last quarter, the expectation is sort of margins to be better, but it's also expected that margins will be relatively steady regardless of the revenue outcome. And so are you guys targeting margins at this point? Or how should we think about that aspect?
I think that in general, we target margins at about 40% EBITDA margins. And we haven't really changed that. And it's going to bounce between 38 42. And a lot of that's going to at the beginning of this COVID thing, we bought a lot of equipment, shipped it out, expensed it all right. And so there's going to be times when our expenses are a little bit higher and there will be other times when our revenue is a little bit higher.
But I would say that in general, that's about where we target our consolidated EBITDA percentages.
Your next question comes from the line of Ken Hill with Rosenblatt. Your line is open.
Hi, good afternoon, everyone. Just wanted to ask one on kind of
the capital allocation front. You guys have leverage. It seems like where you need it, you have the share repurchase authorization there. But hoping you could talk a little bit about M and A and how that fits into the picture and maybe what you're seeing as it relates to the ability to approach companies right now in the environment, evaluate transactions and actually start implementing on them? That would be helpful.
Thanks.
Well, we constantly go after acquisition candidates and we're methodical about it and then we're also disciplined about what we're going to pay. Even in today's world, I mean, there was a company that just sold today for somewhere around 30 times EBITDA. And it's very difficult for us to do that and see how we ever make money with that. But we have plenty of firepower. We have plenty of management bandwidth.
So we're active, but right now, even in today's world, it's a pretty high price for good assets.
Okay, Fair enough. I just had one question then
on the guidance differences between the baseline scenario, the kind of 2021 recovery piece. It looked like revenues went up by about $50,000,000 Is it
fair to assume that's in a
vest coming in there? I think
that was you get to target that around $40,000,000 ish in revenue growing at a high single digit rate. And then kind of any thoughts on the impact on net income? Is that actually coming in at a higher margin, just given the net income uptake was greater in your most recent guidance? I think this is Rahul. The change in the scenario, Innovest is definitely a part of it, probably about half.
I think the rest of it is we did a little better in Q2 and we expect to do a little better in Q3 and Q4 on that baseline 21 scenario. Margin on Innovest, at least right now, we expect to be about 20% or so, and then we've got improvement plans to get up from there. Got it. All right. Thanks for the detail there.
Your next question comes from the line of Alex Kramm with UBS. Your line is open.
Yes. Hey, good evening. In terms of your scenarios, you obviously are saying economic recovery, but can you kind of lay out what really needs to happen for the business to reaccelerate in terms of the pandemic? I mean, it seems like your business is very reliant upon going into seeing clients doing installs or using consultants on premise. So any flavor you can give us like how you think that will progress from here considering that we're all in the financial service industry and I think we're all very conservative in terms of going back to offices and letting people back in our premises.
So and then maybe how have you changed your business to kind of get around that and how much of your business can do off premise, I guess, or
cloud. Does that make sense?
Yes. So Alex, if you take a look at it, right, 99% of our people work from home, right? So we are either working on an individual client's account where the data resides in our data farms and the systems reside in our data farms, are we're working where the systems and data reside in their data farms, often which might be a 3rd party data farm. So the work, even the implementation work is pretty similar. The difference is that you're doing it from your home rather than from your desk.
And you're not surrounded by other people doing the same thing. Working from home. So in some ways, you get better productivity because you get the focus and there's not the interruption of the office. And in another way, there's challenges because you don't have access as readily to expertise right around you. But in general, and begin the implementation.
What's more challenging a little bit is, is on large scale sales opportunity. It's a lot of Zoom meetings and a lot of relationship building from a touch point. Hey, we know Alex Grant at UBS or we know Sorento at Jefferies or we know somebody else, right? And trying to connect all those dots to get whoever is in the buying position to be comfortable to buy from us. And that becomes a little bit more challenging when it's done from a remote basis and they can't look you in the eye and ask you the really hard
comment on
that. Bill, I would just add, obviously, I agree with that. And I would just add, in particular, it's the large capital expenditures, right? So people that are buying perpetual licenses or they're going to kick off some project that has a lengthy conversion period and they really need to get comfortable with our team and environment. That's where we've seen some slowdown so far this year.
But as Bill said in his remarks, we're starting to see people get more comfortable even in this remote working environment and make some of those that
and we have people that and
we have people go back to making decisions on some of those larger deals.
Okay, fair enough. And then you said DST is still going to be fairly challenged this year, but maybe more positive next year. So do you think it can actually grow next year? And any sort of ranges where you think next year can already be for that business?
Well, we've gotten some solid acceptances of our bids in Q3. I mean, we haven't signed the contracts yet, but we're in the midst of contract negotiations on those and we've been selected. And that totals upwards $50,000,000 $60,000,000 and we have a full pipeline of other deals. And so we're getting some traction. And so we think that there's an opportunity that DST in 2021 could be positive in the 1% to 2%
Very good. I'll hop back in the queue. Thank you.
Your next question comes from the line of Brad Zelnick with Credit Suisse. Your line is open. Great.
Thank you so much and congrats to everybody on the great quarter and especially with the performance on Intralinks. Can you talk about the puts and takes between M and A activity and corporate use cases? And how should we calibrate our expectations going forward for Intralinks coming off of this large PPP related win and just the overall strength in the quarter?
Well, first, I think, Ken Bisconti and Bob Petracci, who we put in charge of that business, I guess, about 8 or 9 months ago, have really done a great job, right? They're on top of it. They know their customers. They know their markets and they're aggressive. And Intralinks also has a very good development organization and they've been bringing out new products and services.
And I think that even though M and A has been down, I think, 7% so far in the 1st 6 months, they've been able to use their data room capability for other things, such as tracking this TTP program for 1 of the largest banks in the country and also for other banks. And so I would just say that it's pretty flexible business. It's a really bright workforce and Ken and Bob are good leaders. And Rahul may say something else.
Well, I would add
that secure document exchange, right, is obviously a lot broader than just M and A. So we found some good use cases for it with the payment protection program. But there's a is plenty of other use cases that I think Bob and Ken and their sales teams and development teams are working on.
Thanks guys. Can I just follow-up one for Patrick? I appreciate the very thorough disclosure and I might have missed it. But can you just help to reconcile the really strong first half cash flow generation and the scenario guidance that actually ticks down on cash flow. Is that just the acquisitions or am I missing something else?
Well, the main difference is that we were able to defer about $50,000,000 $60,000,000 of cash tax payments from Q2 to Q3 as per the legislation that Congress passed. So we had to make a cash tax payment about $60,000,000 in July 'fifteen. So essentially, we moved tax payments from Q2 to Q3. So that helped Q2 cash flow a little bit. But we also had strong collections and good revenues for the quarter that the cash flow.
Okay. Thanks very much. Be well, everybody.
Your next question comes from the line of Andrew Schmidt with Citi. Your line is open.
Hey, guys. Thank you for taking my questions and hope everyone's doing well. Question on organic growth. I was wondering if you could talk a little bit about just thoughts on how organic growth should trend sequentially into the Q3. It seems like the outlook suggests that there's a sequential decline in organic revenue.
So just trying to reconcile what's going on from quarter to quarter would be helpful.
Well, we still have some runoff in the DST business. So that's a bit of a headwind. We've also had, as you know, some challenges in being able to close large perpetual license deals. And then on the large outsourcing deals we have, sometimes the revenue doesn't ramp up for a couple of quarters. So those are three reasons for kind of a flat organic revenue picture between the 2nd quarter and the Q4.
Mehul, you have a comment on that?
No. I think that I think in
the baseline scenario, we are assuming that sales and sales activity remains at current levels and doesn't get a lot better and doesn't get a lot worse from here, hence kind of the flattish outlook. If that starts to come back, then we expect to be closer to our economic improvement scenario. Got it. That's helpful. Thank you for that.
And then retention, that's a pretty bright spot sticking with the 96% rate. That's an LTM measure. Can you just talk a little bit about how it trended in the most recent quarter? And then if there are any variations by product or service? That would be helpful.
I think the LTM trended down from 96.4% to 96 percent. So it's a little bit of a decline on the LTM basis. And pretty much all the businesses have high retention rates in that range. There's no really outliers. They're pretty much hanging in that range, most of the businesses.
Got it. Thank you very much, guys.
Your next
Your next question comes from the
line of Ashish Sabadra with Deutsche Bank. Your line is open.
Congrats on the solid results. Question about the DST deals that
are in the pipeline right now. I was just wondering if you could provide any flavor or color around whether those are transfer agency deals, any color on those fronts? And then also on
the health care side, I understand some of the headwinds near term because of the elective surgeries are getting pushed out. But can you just talk about the momentum in that business, ability to sign new deals on the health care front as well? Thanks.
Yes. So on the deal picture, we have several large deals in both our Retirement Services business and our healthcare business. And so those look pretty good to us. And we have a couple of very nice deals in financial services. So it's across the board in DST and it's been a lot of hard work and a lot of people have done yeoman's work in filling out RFPs and meeting with various prospects.
So that's been the kind of and I would say, we probably have a pipeline of maybe 10 deals in the ESG business that has somewhere between $10,000,000 $30,000,000 in revenue attached. And then the second part of your question
was about I'm sorry, but I don't recall. Yes.
No, it was just about healthcare and the deal flow on
that front as well.
And just the near term headwind that we are seeing on the healthcare side, just as you think about when do we start to see that normalize going forward?
Well, that's right. I mean, in particular, right, at the beginning of the pandemic, everybody rushed out and got their prescriptions refilled and there was a lot of value into us. But obviously, once you've done that, you don't need to continuously refill it. So that part of the business slowed down a little bit. And then we get a lot of business in paying the claims on elective surgery in our health plan business and stuff like that.
So without any elective surgeries, there's again less prescriptions for pain, less prescription for antibiotics and other things like that. So we're waiting for the elective surgery process to come back. And obviously, if the hospital beds are all taken up by COVID patients, then that's not going to happen. So those are the types of things that went into our thought process on our scenario. So I think they're well thought out.
I think we have opportunities in healthcare. And I would tell you that we're pretty optimistic that we're going to have a really good 'twenty one and we're going to have a very solid end of 2020.
That's very helpful. And maybe just a quick question on alternatives. Alternatives delivered a pretty strong growth in this quarter as well. And, Rahul, you mentioned share gains there, competitive wins on that front. I was just wondering if you could talk about both private equity as well as hedge funds, what are you seeing
on both those fronts? Thanks.
Yes. So it's been pretty much across the board there as well. In our hedge business, we've seen new funds, clients year. And our private equity and real assets businesses are remain very strong, both in terms of wins as well as the prospects that we have in several large deals that we're working. So across the board alternatives has been pretty good.
That's great. Thanks.
Your next question comes from the line of Peter Heckmann with Davidson. Your line is open.
Good afternoon. Thanks for taking my question. Patrick, just minutiae, but was there a one time gain from a sale of an asset in the quarter?
There was. You can see the adjustments in the cash flow statement.
Got that for you.
There's mark to market and the gain.
Got it.
Got it. The $16,500,000
There's the gain and $34,000,000 was the proceeds for the proceeds.
Right.
And then within your scenario
guidance, have you assumed any level of buybacks?
We haven't assumed any level of buybacks in the scenarios and diluted shares count.
Okay, great. And then just can you give me an approximate number for just the professional software license fees in the quarter?
Professional services revenue in the quarter?
I'm sorry, perpetual software license fees or Total license fee revenue would be fine. Just trying to get a feel. Perpetual
licenses?
Yes.
It was $5,900,000 Great.
Thanks so much. I'll get back in the queue.
Your next question comes from the line of Jackson Ader with JPMorgan. Your line is open.
Great. Thanks for taking my questions, guys. First one actually is on as the, call it, 3.5 organic growth or so. I'm curious how much of that was driven by, if you can rank or maybe the volumes that you saw in the market versus new logo wins?
Go ahead, Rahul. Yes. So, I would say probably 60% of it was market volumes and volatility and 40% of it was new sales bolt on as well as the new puts platform. So Mike Huttner and his team have been doing a pretty good job of both accelerating the development and innovation we have on that as well as getting the prospects to buy even in this environment. So pretty pleased about that and I have say, sixty-forty.
And so just a quick follow-up on that. Is that about what you guys are kind of expecting in the long term? Or is that being impacted by the economic outlook as well, just in terms of logo additions, and call it non volume related Eze business?
I think we're expecting non volume related growth to get to continue to get better from here. Obviously, when you sell a deal, in the beginning, you don't get all the revenue, you get some kind of ramp down revenue during the implementation period. I think that's kind of where we are right now on the new clients that we have sold recently. And so we expect those clients to get up to full strength and we expect to continue to sell more run rate revenue. So we do expect it to grow over time.
That's great. And then if I could just sneak in one quick one. The DST headwinds, we've hashed it out certainly pretty thoroughly tonight, but just to ask the different ways, is the DST exposure or maybe the perpetual mix, what is anything surprising you as far as maybe how relatively less resilient that business has been relative
to the other businesses that you have?
I don't think so. I think that it's a big complex business that is getting a pretty hefty overhaul. And as you go through this pretty hefty overhaul, there's all kinds of things you find, right? This is a business that when we bought it had 16,400 headcount and $420,000,000 $30,000,000 in EBITDA and now it has less headcount and closer to $800,000,000 each time. So we're trying to do things in a wise way.
We think there's some great opportunities and we have some great clients and we have to suggest to them and present to them things they want to buy. We can't be in the business of building things we want to build. We have to build things that people want to buy. And I think we're making progress in that regard. And I think that's the we'll end up being holy grail.
There's no nothing magic here. It's just hard work with very large clients and generally very big systems that need some innovation and some new product delivery.
Okay, understood. Thank you.
Your next question comes from the line of Chris Shutler with William Blair. Your line is open.
Hi, everyone. Good afternoon. Could you talk about the reasons for the management changes at both Advent and DST Health recently?
At Advent, Rob Rowley, who was running that business for the last couple of years for us and had been with Advent for 19 years, had got an offer to go be an operating partner at a large private equity firm and he decided to do it. He's also from California and he was living in New York with us And there's a good chance he'll move back to the West Coast. So he is a great guy. We wish him well. And Karen and people that Steve had been running the Black Diamond business for a long time.
And Karen has been the number 2 person to Rob for a number of years. And so we're both excited about Karen and Steve's opportunity and also we wish Robert well. So not much else there. And then we've been banging around the healthcare business a little bit now for over 2 years 3 months. And Danny Del Maestro started a company called ArrowMed in Connecticut and grew that to a pretty large company and sold it to Cardinal Health and was a senior executive at Cardinal Health for 4 years, I think, and then left there.
And we were fortunate enough to pick him up. And we've been impressed with his presence and sales capability and executive capability. So we decided to put him in charge. And we think he's done a great job for us and he has great client relationships and we're excited about our opportunities.
Okay. Thanks, Bill. And then I guess looking at the scenarios, the baseline scenarios, revenue is, I think, a little bit lower if we normalize for Innovest, but the profit is up nicely versus your original guidance or the original scenarios rather. So I guess the question is where are you taking out costs considerably more aggressively than the original scenarios?
Well, I think a couple of things. I mean, obviously, we appreciate that the Federal Reserve has interest rates at 19 basis points or something. So interest costs are a lot less.
That helped.
Yes, that helped. And then obviously, we're also moving from 1900 contractors or so. We will have, I believe, none by the end of August. And when we'll get a big pickup in expense savings from moving those contractors to employees. And then 3rd, obviously, travel and entertainment is dormant to most part.
And so that saved us a tremendous amount of money. And then there's a bunch of things that go with the commute and paying for all kinds of different things for our people to get in into and back home. So there's none of those commute expenses and stuff like that. So I think the expense in general will tend to be will be pretty moderated.
Bill, just a follow-up on that, the move from contractors to employees, like when did that process really begin in earnest? And it sounds like it's completing soon.
I think we notified Sintel about a year ago because that's what the contract said. We started onboarding as employees probably in about March. And we were hoping to be done by the end of June, but COVID kind of bumped into that a little bit. So now we expect it to be done by the end of August. Is that pretty accurate or a
whole? Yes, that's right, Bill.
Okay. Thank you.
Your next question comes from the line of James Faucette with Morgan Stanley. Your line is open.
Hey, this is Jonathan on for James. Thanks for taking my questions. How is pricing held up? And is there any sort of appetite for further price increases in this environment?
Well, we certainly have appetite for it. I guess you're probably asking one of our clients have appetite for.
That's fair.
Yes. If I could add, it's held up pretty well in the sense that deals that we are winning, we're not seeing any trends that forces to kind of revise pricing down or anything like that. And I think on the price increase process, we were pretty pleased with how that went at the end of the year. And we think most of our clients understand that we need to deliver more value. And in exchange, we would like a little bit of an uptick on a regular basis.
So we do think that that process is going to be good
for us over the long term.
Understood. And it may be early days, but how are you thinking about the potential for cost takeouts for 2021 versus the expense controls that you have in place for 2020?
Yes, I wouldn't say that we have anything that is right on the horizon. The people that run our businesses are in charge of going through their budgets and making sure that we have meaningful work for everyone. But we're a strong profitable company and we like our workforce and we want to support them. And our most of our costs are employee related. So we're very, very circumspect about how we go about that process.
And we think this movement of bringing the contractors into the fold. And most of the stuff you can do through attrition if you want to have a smaller workforce. So we're optimistic that we're going to be able to have great margins, high cash flow and really good earnings.
Appreciate the color. Thanks.
Your next question comes from the line of Alex Kramm with UBS. Your line is open.
Yes. Hello again. Just want to come back to organic growth for a minute. I think there's still a little bit of confusion here what changed, at least just for me. So I think your old kind of range was 0 to negative 2 and now it's negative 1 to negative 2.7.
So I think you said a lot of things on this call, but can you just kind of sum up what really changed? And because I think you did better than you thought in the Q2 as well.
Well, again, Alex, I think the organic revenue numbers are going to get tied to our ability to close new business and be able to drive that business into revenue in Q3 and Q4 and obviously in Q2 as well. But given that the real revenue pops you get in this business or when you do large scale perpetual licenses because they close immediately. So given that, that has slowed down, I think that that's kind of the biggest issue on organic revenue growth impact between Q2 and then the second half of the year.
Okay. No, thanks for confirming that. And then just one quick one. You raised your buyback authorization significantly, but you really haven't shown much appetite to buy back. So it's nice to have the authorization, but with the stock basically trading at the lowest relative level it has in history, I think, relative to the S&P 500, I mean, what does it take for you to actually do something with the authorization?
Alex, it takes courage. And it also it takes not having acquisitions that you're thinking about closing and deciding that the acquisitions are inferior to buying back our own stock. So we try to be judicious about buying our stock and understanding the ramifications of buying back stock versus paying down debt. I mean, I think a 1st year finance person can figure out that buying back stock from an economic standpoint is better for us than paying down debt. But there's still a perception that no leverage is better than some leverage.
And it's not just that it's always a catch-twenty 2. But we didn't raise our authorization to just raise our authorization. If we go in, it's like most things we do. We don't go in half hearted, right? We spent $8,400,000,000 in 2018 to buy companies.
And over the last 10 or 12 years, I think we spent about 14,000,000,000 dollars to buy companies. So we're not afraid to make decisions and make large decisions. It's just trying to do it at the right time. And maybe we've been a little bit too searching perfect when we could have had excellent times. But we're not bashful about our track record.
We kind of like
it. Fair enough. Thank you.
Your next question comes from the line of Patrick O'Shaughnessy with Raymond James. Your line is open.
Hey, just one question for me. A follow-up on the question earlier about pricing. There were a couple of lawsuits filed this past quarter that seem at least indirectly related to your pricing initiatives. To what extent were those lawsuits and those client disagreements outliers in terms of pushback to pricing efforts? Or is there or has there been some broad resistance to you guys trying to adjuster pricing?
I think they were outliers. You're not going to be able to do price increases. And it's also some of the things are contractual. There's contract issues in both cases that have nothing to do with pricing. So I just think they're outliers and we don't we have great relationships with our clients, which is evidenced by our 96 0.2% retention rate in that type of stuff.
So I think those are both outliers. I don't know if you have a different comment, Rahul?
Bill, I'd agree with that. And like Bill said, the issues in those items are, the most part, the significant issues are unrelated to this pricing initiative we've had.
Thank you.
There are no further questions at this time. I will turn the call back over to Bill Stone.
Well, again, thanks everybody for being on the call. We are focused on our business and excited about our opportunities. And we believe that we have great opportunities through the rest of this year and really set ourselves up for a great 2021. So thanks again and we look forward to talking to you at the end of October. Thanks.
Bye.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.