Ladies and gentlemen, thank you for standing by, and welcome to the SS and C Technologies 4th Quarter and Full Year 2019 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer 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 Q4 full year 2019 earnings call. I'm Justine Stone, Investor Relations for SS and C Technologies. With me today is Bill Stone, Chairman and Chief Executive Officer Rahul Kanwar, President and Chief Operating Officer and Patrick Sedante, 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 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, February 12, 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 atwww.ssctech.com. I'd also like to request that when we get to the question and answer section of the call, please limit yourself to one question and one follow-up. Thank you. And I will now turn the call over to Bill.
Thanks everyone for joining us today. Our results for the Q4 are $1,212,000,000 in adjusted revenue and $1.08 in adjusted balloon earnings per share. Our adjusted consolidated EBITDA was $490,500,000 and our adjusted consolidated EBITDA margin was 40 0.5%, up 180 basis points from Q3. Q4 organic revenue growth was 4.7%. The beat was largely driven by revenue growth in our software businesses and strong growth in our fund administration business.
2019 net cash from operating activities came in very strong at $573,000,000 for the 4th quarter and $1,328,300,000 for the year. Our 2019 adjusted net income was $10,900,000 giving us a 131% cash conversion rate. We paid down $1,123,000,000 in debt last year and over $2,000,000,000 since the April 2018 DST acquisition. Our secured net leverage ratio was 2.7 and our total net leverage ratio was 3.77. In January this year, we repriced our secured credit facilities from LIBOR plus 2.25 to LIBOR plus 1.75.
We expect to save over $25,000,000 annually in interest costs. We closed on the Algorithmic acquisition, which brings a host of software and services covering market risk, credit risk, balance sheet risk, asset management risk and insurance risk. These solutions cater to the existing SS and C customer base as well as significantly extends SS and C's reach into financial risk management. Algorithmics has developed sophisticated ways of calculating and managing large amounts of data at scale. Additionally, Algorithmics offers a variety of microservices, which we can embed into SS and C's reporting engines, further enabling our clients.
Now I will turn it over to Rahul. Thanks, Bill.
We had a good quarter
in revenue growth, cash flow generation and exited the year with over 40 percent EBITDA margins. Advent, Institutional and Investment Management, Intralinks and SS and P Global all contributed nicely to overall strong results across our business. We remain focused on innovation to constantly deliver increased functionality to our customers and differentiate our products and services. Our Asset Management Solutions business developed advanced bank verification, which enhances account security and we expect the majority of our asset management client base to adopt this capability throughout 2020. In health, we piloted a fraud, waste and abuse tool used to identify and prevent the payment of suspicious claims.
This further diversifies our health care offering and expands our target market. Our Intralinks business released new deal marketing, buy side due diligence and investor vision platforms as well as frictionless deal prep. The frictionless deal prep allows our customers to easily spin off virtual data rooms without time consuming contracts or license commitments. We look forward to delivering significant enhancements across our product suite in 2020 to help us drive revenue growth. Now I'll mention some key deals for Q4 2019.
A global asset manager based in Boston chose SS and C's full suite of hedge fund services. They were particularly impressed with our e investor and investor vision products. An existing private equity client switched from a big four accounting firm to SS and C for tax services. An $8,000,000,000 U. K.-based family office chose a suite of Advent products to satisfy their portfolio management and trading needs.
The European fund administrator and existing clients greatly expanded their commitment to Advent Geneva. An asset manager with $4,500,000,000 in assets chose to partner with SS and C as to build out asset management functionality in as Eclipse. A health plan out of New Mexico chose SS and C Health BPO Services. A $50,000,000,000 plus in asset manager and an Advent client since 1992 expanded their Moxie license for additional seats and existing UK based client expanded their use of our workflow product AWD. I will now turn it over to Patrick to run through the financials.
Thanks, Raul. Results for the 4th quarter of 2019 were GAAP revenues of $1,203,500,000 GAAP net income of $141,600,000 and diluted EPS of $0.54 Adjusted revenue was $1,212,200,000 excluding the impact of adoption of the revenue standard 606, required revenue adjustments for DST, Intralinks and Aladorabanks acquisitions. We had a strong quarter. Adjusted revenue was up 7%, adjusted operating income increased 11.5 percent and adjusted diluted EPS was $1.08 a 13.7 percent increase over the Q4 of 2018. Adjusted revenue increased $79,400,000 or 7 percent over Q4 2018.
The acquisitions of Intralinks, Investrac and Algorithmics contributed $48,100,000 in the quarter. Foreign exchange had unfavorable impact of $1,400,000 or 0.1 percent in the quarter. Organic growth on a constant currency basis was 4.7%, driven by its strength in the institutional investment management, alternatives and the advent businesses. Adjusted operating income for the 4th quarter was $470,000,000 an increase of $48,500,000 or 11.5 percent over the Q4 of 2018. Foreign exchange had a negative impact of $400,000 on expenses in the quarter.
And adjusted operating margins improved from 37.2% in the Q4 of 2018 to 38.8 percent in the Q4 of 2019. Adjusted consolidated EBITDA, as defined in note 3 in our earnings release was $490,500,000 or 40.5 percent of adjusted revenue, an increase of 10.3% over Q4 2018. Net interest expense for the quarter was $100,500,000 and includes $15,100,000 of non cash amortized financing costs and OID. In addition, we expensed deferred financing costs associated with the payoff of our B1 term loan. The average interest rate in the quarter for the credit facilities, including the senior notes, was 4.53% compared to 4.77% in the Q4 of 2018.
We reported a GAAP tax provision of $19,300,000 or 12% pretax income. For full year, the GAAP tax provision was $93,200,000 or 17.5%. Adjusted net income was $284,600,000 and adjusted EPS was 1.08 dollars Adjusted net income excludes $162,200,000 of amortization of intangible assets, $16,700,000 of stock based compensation, dollars 15,100,000 of amortization of non cash amortized financing costs in OID, dollars 11,200,000 of purchase accounting adjustment, mostly deferred revenue adjustment and depreciation related to the revaluation of assets for acquisitions $6,700,000 for revenue adjustments related to adoption of Standard 606 $13,300,000 of non operating costs, including $7,000,000 of foreign exchange impact, dollars 3,800,000 in legal settlements and $4,500,000 in severance costs related to staff reductions. This was offset by $4,500,000 gain in mark to market adjustments on investments. And the effective tax rate we used for adjusted net income was 26%.
Diluted shares increased 3 point 4% in the 4th quarter, mostly due to the shares issued for the Intralinks acquisition in 2018 and option issuance. And this was offset by the Q3 2019 share repurchases. On the balance sheet and cash flow, as of December 31, we had approximately $153,000,000 of cash and cash equivalent and approximately $7,200,000 of gross debt for a net debt position of $7,100,000,000 Operating cash flow for the 12 months was $1,328,300,000 a $688,200,000 or 107% increase compared to the same period in 2019. Highlights for the 12 months are we paid net debt of $1,123,800,000 and that brings the total to $2,046,600,000 of debt paid since we did the DST acquisition. For the year, we paid $353,100,000 of cash interest compared to $268,100,000 in 2018.
On cash taxes for 2019, we paid $222,700,000 compared to $143,400,000 in the same period last year. Our accounts receivable DSO was 49.7 days as of December compared to 51.2 days as of September 2019. We used $130,400,000 of cash or 2.8 percent of revenue, adjusted revenue, mostly for capitalized software, IT and leasehold improvements. For the year, we declared and paid 107,700,000 dollars in common stock dividends compared to $70,900,000 last year. And we received option exercise proceeds of $125,700,000 compared to $84,900,000 in 2018.
Treasury stock buybacks. We made treasury stock buybacks of 60,300,000 or 1,300,000 shares at an average price of $45 in the Q3 of 2019. The impact on diluted share in the quarter was $1,300,000 for the Q4
of 2019.
Our LTM consolidated EBITDA, which is used for the covenant compliance, was $1,877,500,000 as of December and includes $49,600,000 of acquired EBITDA and cost savings related to the acquisition. Based on the net debt of approximately $7,100,000 our total leverage ratio was 3.77x and the secured was 2.7x as of December. For outlook for the year, for the Q1 of 2020, our current expectation for the Q1 is adjusted revenue in the range of $1,150,000,000 to $1,190,000,000 Adjusted net income of $248,500,000 to $264,500,000 and diluted shares in the range of $267,500,000 to $268,500,000 dollars And we expect the adjusted tax rate to continue at 26%. For the full year 2020, our current expectation is adjusted revenue in the range of $4,692,000,000 to 4,852,000,000 dollars adjusted net income of $1,084,500,000 to 1,130, 9,500,000 and diluted shares in the range of $270,000,000 to 273,000,000 Organic growth for the year is expected to be in the range of 0.5% to 3.9% for the full year. And for the full year, we continue to expect the adjusted tax rate to be 26% and cash from operating activities to be in the range of $1,220,000,000 to 1,260,000,000 dollars and capital expenditures to be in the range of 2.9% to 3.1 percent of adjusted revenues.
And I'll turn it over back to Bill for final comments.
Thanks, Patrick. 2020 is off to a good start. Just the other day, we announced that Ares Management, an alternative client with $144,000,000,000 in assets has extended its outsourcing relationship with SS and C. Originally selected to provide fund administration and middle office services for a portion of Ares business, SS and C now supports Ares across credit, private equity and real estate. Ares is an important client for SS and C and we remain focused on delivering innovation and expertise to help Ares fulfill its strategic objectives.
We have also entered into a multi year renewal agreement with Humana, one of SS and C Health's flagship clients. This agreement extends our relationship with the healthcare provider to engage SS and C Health as a technology partner beyond pharmacy claims processing. We will deliver a range of digital technologies to support Humana's strategy of providing an integrated healthcare approach, simplifying the healthcare experience and reducing healthcare expenses. SS and C Health is marching to a different drummer and we appreciate Humana's recognition. Now I'll open it up for questions.
Your first question comes from Brad Zelnick with Credit Suisse. Your line is now open.
Fantastic. Thank you so much and congrats on a strong finish to the year guys. My question first is just on pricing. Last quarter you talked about being more methodical about price increases. Can you give us an update on your initiatives across the businesses and the timeline for when these changes might actually be taken effect?
And what are the opportunities across the portfolio, which businesses would seem more ready to take price increases?
So Brad, this is Rahul. Just to give you an update, we've been working pretty methodically through that price process, I'd say probably for 2 months or so now, and we expect to continue working on it through the end of the quarter and maybe into April. In our software businesses, Advent and Institutional Investment Management, etcetera, we already had a reasonably good process for contractual price increases. So while we're taking a look at those businesses, I think the biggest opportunity for us is in some of our outsourcing businesses where we haven't in the past been as diligent. So that includes fund services and others.
And we're working through that with customers. And thus far, they've been pretty receptive to that process and it's going well.
Thanks for the color, Raul. And just maybe to follow-up on software enabled services versus revenue that appears in the license maintenance and other line. I think just the mix of what we were modeling and perhaps others came in a little bit differently than expected. Can you just remind us, Patrick, maybe the rhythm of the business and as we model these lines going forward, how we should think about where the value and the revenue ends up showing up?
Well, Brad, I think when you look at our business, I would say that the software enabled services business is by far our largest business and that is primarily a monthly pay business. And I think it's almost all recurring revenue. And then obviously, in the software businesses, more and more of that is becoming term licenses rather than perpetual licenses. So that has a much higher recurring basis in it aside from maintenance. And that business still has some end of the quarter types of accelerations.
Okay. Thanks so much. Nice job, guys.
Your next question comes from Rayna Kumar with Evercore ISI. Your line is open.
Good evening. Thanks for taking my question. You called out a pretty large range for the organic growth for 2020, the 0.5% and 3.9%. What factors have to be in place to get you to the high end versus the low end? And then secondly, if you can just call out your expectations for the first quarter organic growth?
Yes. I think, Rayna, as far as the spread, we're getting into larger deals. And I think that as we close these deals, I think the organic revenue growth goes up. But we're not trying to get ahead of ourselves, and we're trying to make sure that our guidance to you is both directionally the right way and then also from a magnitude standpoint that we're giving you how we look at it. And then I think the Q1 Patrick, do you have that right in front of you maybe?
I do. The Q1 is very similar to the full year. On the low end, it's 0.4% increase and on the high end, it's 3.8% increase.
Great. That's very helpful. And just as a follow-up, what are your expectations for top line growth for alternatives business and DSP and software, just so we can have a good breakdown of the drivers for the organic growth?
Well, I think, Rayna, what we have traditionally thought is, is that the fund administration business is going to be mid single digits. The DST business is going to be flat to plus 1 to minus 1. And then our software business will probably range somewhere in the 3% to 5% range.
Thank you. Your next question comes from Andrew Schmidt with Citi. Your line is open.
Hey, guys. Thanks for taking my questions. First question on DST. You guys made some sales changes there last year, well, DST
and then across the business as
a whole. But wondering if you could talk about just any change in the pipeline you've seen or just generally how the pipeline is shaping up across healthcare, financial, the Financial Institutions segment, things like that. Any color on the impact that the sales changes have had would be helpful.
Yes. I would say, again, I think our biggest acquisition prior to DST was Globop, and Globop had about 2,500 people, and DST had 16,500. So we're not finished. So there's still a lot of work to do, but we're making progress. And I think that we worked hard on Humana.
We spent 100, if not 1,000 of hours on working with Humana, and that's pretty rewarding to see that they signed up with us. And we think we're going to have a larger and larger relationship with them, and they're very demanding, which helps our business. So we have some pretty high hopes in the healthcare space. I think there's still some fundamental things going on in financial services fund industry as far as active to passive and sub accounting versus full mutual fund accounting. But again, we're innovating.
We're bringing new people into it. We're adding apps and other things that we think are going to help us over the long term. And over the short to medium term, we're making a whole lot of money.
Got it. That makes sense. And then just as my follow-up, you guys did a good job delevering the Q4 and quickly reaching targeted debt levels. With your cash flow this year and reaching targeted debt levels, can you talk a little bit about just priorities for use of cash? And then just any comments about around the M and A pipeline, whether there's any sizable deals out there you think are can be realized or just anything of that nature would be helpful.
Yes. I mean, we have a strong pipeline on acquisition prospects. I wouldn't say we have anything of $1,000,000,000 size or such, but we have several in the $100,000,000 range and similar to algorithmics. And I would say that we're active. And we try to be disciplined in that process, and that's gone pretty well for us.
And I think that we will probably execute on a couple in the first couple of quarters.
And the other stuff about
I'm sorry, the other stuff about using our cash is that I think in the Q1, we maybe have already paid down another $100,000,000 or so. And we have so much cash flow that share buybacks look increasingly attractive when we make this much money and we have this much value, we think, in our share price. So I think that that's something that we might use some more of that $500,000,000 authorization we got a few quarters ago. But again, we're very disciplined about it. We want to make sure that financially, we remain very, very strong.
Understood. Thank you, guys.
Your next question comes from Alex Kramm with UBS. Your line is open.
Yes, hey, good evening. Just coming back to the organic growth outlook for a second here. Not to put you too much on the spot, Bill, but I think last quarter, you made a comment that you're hoping to get back to 3% to 5% in 2020 already. That was probably more of an off the cuff comment. But now that we have like more exact guidance, maybe bigger picture, what do you think the biggest difference are now versus what you're thinking?
Obviously, you've done better in the 4th quarter. Is it a little bit of a base effect? Or are some businesses still doing a little bit worse than you originally had thought maybe 90 days ago? Yes.
I think, Alex, is that some of the stuff came in, in Q4 that we might have thought was going to come in, in Q1. And this the accounting in this stuff is the Byzantine at best, right? So when you look at 606 and
some of these other things, to
be able to truly predict for you, when somebody goes from a 3 year deal to a 5 year deal, and all of a sudden you're recognizing 2 or 3 times as much money as what you were expecting to recognize, it becomes a little more of a guess. And so I think we have plenty of stuff in the pipeline. I think there's all kinds of stuff. And it's a little bit like last year. You start looking at things and they're not closing.
You start wanting to give you guys and gals more information and then they start closing and then it looks like withdrawal. So I think that that's more of the nature of the businesses that we're in, the size of the deals that we have opportunities of and then that the impact of winning on our financial statements is pretty unique and pretty impressive.
Okay, fair enough. And then very quick one for Patrick, I guess. Can you just how much interest expense are you building into your budget? And does that contemplate or does the guidance actually contemplate further debt pay down from here? Or is it as of today?
No. When we provide our guidance, we just assume that all free cash flow is going to go to pay down debt. That's what's assumed in our guidance. And then on interest expense, we think it's plus or minus in the range of 290,000,000 dollars for the year.
Okay. That's all I wanted. Thank you.
Cash base.
Your next question comes from Surinder Thind with Jefferies. Your line is open.
Good afternoon. Congratulations on a strong 4Q here, gentlemen.
I'd like to start off on a question about
the margin profile of your expenses.
Can you provide a little bit of
color in terms of how we should be thinking about the trajectory forward or what the current baseline is? As I look back over the couple of quarters, it seems like your ability to generate additional cost savings continues to surpass expectations. And so how should we think about margins and maybe margin improvement in the year ahead?
Well, we prefer to outperform than to underperform. So that is consistent with our objectives. It's a big place now, right? And so there's lots of ways to manage costs and keep people aware of things that we can do in a bit more efficient basis. We're still a very high margin place and we don't toss nickels around like their manhole covers.
But we do pay attention to expenses and we have a solid management team and Patrick's got a solid finance and accounting team that pays attention. And so I think that we will continue to get more efficient, continue to get more productive, and I think that will translate into additional cost savings.
That's helpful. And then when I kind
of think about the year ahead, any color you can provide on just kind of how EZN Intralinks ended 2019 versus 2018? And kind of how you're thinking about them in the year ahead at this point?
Well, I think in general, we have new management in each one of those businesses. And I would say that right now, the Intralinks business is quite strong. They brought out a number of new products. And Bob Petracci and Kim Vistante are doing a great job. And Mike Hutner over in Eze is also doing a great job.
He's got some headwinds still about how much volatility we're having in the equity markets. And the more the merrier for Eze as far as that's concerned. And but we have eclipses gaining momentum. We've got a talented team. And I think overall, those will prove to have been wise decisions.
Thank you. I'll get back in the queue for follow-up.
Your next question comes from Kristen Love with Piper Sandler. Your line is open.
Hi, guys. Thanks for taking my question. So it was definitely a strong quarter for revenues relative to your 4Q 2019 guidance. Can you talk about some of
the drivers you saw there?
I heard your comments earlier, Bill, about strength in the software businesses and fund administration, but is there any other detail that you can provide? Well, again, I think that we signed a couple of multiple year deals with 606. You're recognizing $10,000,000 and other things of that nature that are coming into the business. And you're going to have some strength in certain quarters and you're going to have a little less strength in other quarters. And reality is the business was the same in both quarters.
It's just a question of did the contract get signed on June 28 or July 3. And so I think that's before, it wasn't quite as much of a swing, but it's pretty dramatic now.
Your next question comes from Dan Perlin with RBC Capital Markets. Your line is open.
Thanks and congrats on ending the year so strong. The question I had is around this license and maintenance line. I mean, it was a big quarter. I'm just trying to make sure I understand kind of what's in it. So the $48,000,000 of acquired revenue, how much is there a big chunk of that, that falls into that bill?
And that's really just the first. I'm trying to understand kind of what's embedded in that significant step up. But I understand that the whole cadence idea about 1 quarter is better than the other, but it's I mean, it's pretty dramatic.
Well, again, we won some pretty big deals that we've got to recognize pretty significant money in the 4th quarter, in the 3rd and 4th quarters. And that's been something that has driven that line. And I think that we have increasing numbers of products that we're selling that is giving us opportunities to have pretty dramatic changes. Hopefully, they're dramatic to the upside, but they won't always be. It's just not the nature of how this all operates.
But we're bigger and bigger and we're more extended with better people all over the world. And I think we're going to have a really good 2020.
I think on acquisitions in that line, I think it was about $3,800,000 of algorithmics in that maintenance and term license line, and the rest of it is all large multiyear contracts we signed.
That's awesome. So to that same extent, just extending on that theme for a second, you have talked about when you're looking at opportunities, they are more sizable than maybe they have been in the past this quarter, obviously, which what you just described clearly indicates that you're winning those. So how do we think about SSC going forward when you're talking about winning these deals? I mean, in the past, they were smaller. Now they're clearly much, much larger.
Does that mean it's going to be the duration between these are going to be bigger or longer? Is it going to be that much more lumpy? Is it going skew more towards these license now, do
you think? I'm just trying
to get a handle on how we frame what 2020 looks like. Thank you.
Yes. I mean, I think that there's you have to stay close to the market. You have to be willing to present to that market the way in which it wants to consume your products and services. It used to be that big debate between perpetual and term. Now it's a big debate between full outsourcing, some outsourcing, some hosting, what year contracts, some are 2 years, some are 4 years, some are 1 year, some are 3 years, some are 10 years.
So, Dan, depending on what that mix is in any particular quarter is what's going to really determine how big of amplitude you're going to have in the change from quarter to quarter. So I don't think it's that much different, although we're bidding on $400,000,000 a year stuff, right? And again, it's not we're not right at the precipice of signing one of those, but we're knocking on the door at enough of them and we're getting better each time. And I think that we manage our business pretty well. And I would guess that the next 5 years will look like the last 5 years.
Thank you.
Your next question comes from Mayank Tandon with Needham. Your line is open.
Thank you. Good evening. Bill, Rahul mentioned several deal wins and maybe Rahul can answer this, but just wanted to get a sense of those deal wins. What are the determining factors on those wins? Is it product capabilities?
Is it price? Other factors that may have played a role in tilting the balance in your favor versus your competition?
Mike, if I kind of just look down the list, I would say that the fund services wins, and there's a number of them, right? There's a family office, there's an asset manager, there's a private equity client. In general, we have, we think, much more capability in that marketplace than the folks we compete against. We're the only software company. We're the biggest fund administrator we have, over any number of years, built a pretty impressive array of additional modules and services so that when a big organization looks at us, not only can we address their core requirements, but also do lots of other little things that are sources of operating leverage to have us do.
On the software side, and we had a number of large software deals as we've talked about, I think it once again is a combination of that software is benefiting from the user base that we have collected both in our licensed customers and the fact that many of these systems we're using ourselves and continuously improving. When we go out in the marketplace and we're constantly looking at our sales force and making sure we've got the right people showing up for the right meetings and going through their presentation in the best way possible. And as Bill said, we're getting better, right? And I think that's really what's reflected in these deals.
Right. Okay. Great. That's helpful. And then, Bill, what does the healthcare growth and margin profile look like versus your core financial focused business?
And just given the success you've had with Humana, should we then look for the next big deal to come on the Healthcare side? There seem to be a lot of opportunities versus on the core financial services side.
Well, from your lips to God's ears, Mayank, we think there's a number of big deals in healthcare. We run that business to I think about 30% margins. We have opportunities to improve that and we're working on those. Sean Hogan, who runs that business, has done a really nice job for us and he's got a good team. And we have a bunch of people that are out there knocking down doors and we have some new applications that are coming out that I think are being well received.
And those tend to be pretty big revenue opportunities. And the more innovation, the more technology we can bring to bear, I think the more our margins go up and our revenue profile improves.
Okay. Fair enough. Thanks, Bill.
Your next question comes from Chris Shutler with William Blair. Your line is open.
Hi, guys. Good afternoon. How much
do you expect pricing to contribute
to revenue growth in 2020? And how much did it contribute in 2019? I think that I don't know that we have completely quantified yet because we're still working through the process of discussing with customers, things like that. But I would say that out of the revenue range that or the organic growth range that Patrick laid out, maybe 15%, 20% of that on the high end might be might come from pricing. Okay.
How fast did the alternatives business grow in the 4th quarter? About 5%, I think, right? I think it's a
little bit higher than the prior.
Okay. And
lastly, can I just ask about
the share count? Do you think it was $264,000,000 in the quarter fully diluted? Why the jump in Q1 and further for the full year? Just wondering how conservative that is.
Well, the diluted share count is very sensitive to stock price.
Yes.
And I think the average stock price in Q4 was $56 Right? Got it. Yes. So that has a big impact. So it's really not there's going to be some option exercises, but typical most likely.
But the big difference is how diluted shares is calculated based on the stock price.
Your next question comes from Peter Heckmann with Davidson. Your line is open.
Hey, good afternoon. Congratulations on that Humana extension. That was what we were looking at. Has there been any developments as regards to the Cigna piece, which I think is scheduled to renew here within the next 20 months or
so? I think we have a contract with Cigna through 2022. So I know it's not quite 20 months, but I mean, come on, they bought Express Scripts. We're not hanging our hat on Cigna continuing to have us handle their pharmacy claims. But we have other great relationship with Cigna and we have other ways to replace that revenue.
And we're a big customer of Cigna. So we'll replace some of it or we won't be such a big customer of Cigna. So we that's how that game works and we can play too.
That's right. That's right. And Patrick, just from a housekeeping standpoint, the revenue at DST that stemmed from customer contracts that had traded out prior to the close of the deal, can you quantify any trailing drag here into 2020? I think in 2020, it's $42,000,000 And more truck path loaded, I would assume.
I think
it's pretty even. Okay. I mean, it's a little bit front loaded. There's probably like, I think, it's $46,000,000 for the whole year. And the current estimate is that it runs $15,000,000 $11,000,000 $10,000,000 $10,000,000 Great.
Thank you very much.
Your next question comes from Ashish Sabadra with Deutsche Bank. Your line is open.
Thanks. Let me add my congratulations as well to such a strong quarter. A question on innovation. So, Rahul, you mentioned a number of new product innovation that you've introduced in the market. And maybe you can just talk about the receptivity of that product.
And as we think about the innovation building up and helping drive more wins, how should we think about the contribution from innovation in the midterms over the next 3 years? How should we think about the contribution from these new product innovation? Thanks.
So I think on the first part of it, right, the way Ashish we go about building these things is we try to get some anchor clients and we try to get market buy in, right? And that's how we embark on some of our largest projects. So we certainly, when we complete them, already have validated that there will be good market reception. And that's been the case. That's been the case for some of the development we talked about in the Intralinks business.
It's certainly the case of what we do with our portfolio systems and things like that. We expect that to continue. One of the biggest ways in which we differentiate ourselves from the others in the marketplace and really bring a lot of value is continuing to add product, continuing to add features and functions and just try to understand what customers are dealing with, whether it's demands of big institutions or demands of regulators and how we help them solve that. So that's a big part of our sales and revenue growth process, and we expect that to continue over the next several years.
That's great. And then maybe just a question on pricing. Should we think about these pricing increases as a onetime? Or is there opportunity for you to continue to have pricing increases on a more annual basis going forward? I just want to better understand the pricing power in the business.
It seems like it's pretty good, but if you can just provide some more color on that front? Thanks.
I think the way we're doing this with our customers, particularly in businesses where we haven't done it on a consistent in a consistent way is we are setting the expectation that this is an annual conversation, right? So which is kind of why we're being thoughtful about it, right? We're really not trying to annoy people or get into long discussions. We're just trying to have cost of living type increases and take a look at an account review and do that in a pretty formal way once a year. And we think the customers that are receptive and will make that a part of our normal practices going forward.
That's great. Congrats on that again on such a solid quarter. Thanks.
Your next question comes from James Faucette with Morgan Stanley. Your line is open.
Hi, guys. It's Jonathan on for James. Congrats on the quarter and thanks for taking my questions. I want to dig in a little more on pricing actions. You mentioned you're working through the pricing process for about 2 months.
You've seen any customer attrition because of that? We have not.
In fact, I would say that the conversations we've had, the targets we set by customer, we're pleasantly surprised by how close and in some cases, how much better we can get. So it is going pretty well, but we're being thoughtful about it. We really value those relationships. We want to make sure that we're bringing a lot of value, but no, we really haven't had any negative fallout as a result.
Got it. That's helpful. And you mentioned some of the deals that came in during the quarter were expected to be in Q1. Can you give us the impact of that benefit to the
quarter? Yes. I wouldn't say that we have that as a number for you. And even that as to how much revenue, you'd almost have
to go back deal by
deal and we haven't done
that. Got it. Thank
Your next question comes from Jackson Ader with JPMorgan. Your line is open.
Great. Good evening, guys. Thanks for taking my question. I apologize if you addressed this on the call. We just bounced around a little bit.
But was there any impact from some of the market volumes coming the year over year comparison in the Q4 relative to the Q4 of 2018 on the Edge business in terms of trading volumes?
Very little, probably some, but really not material either to us or certainly not to the company.
Okay. Fair enough. And then an update on the RIA business. We know that this has been certainly a tailwind over most of 2019. What should we be expecting here in 2020 from that business?
I
mean, that's been growing at 20%, 25% a year for a number of years. And I would guess it will continue to do that in 2020. Obviously, the Envestnet situation is something to we monitor closely. And so I think that that's a good business. It's going to continue to be a good business.
There's a lot of activity there and Black Diamond and our team is a strong team.
There are no further questions at this time. I'll now turn the call back over to Bill Stone.
Well, again, thanks all of you for listening in. We feel very good about our Q4. We feel very good about 2020, and we look forward to talking to you at the end of the Q1. Thanks.