Earnings Call Transcript - SSNC Q4 2020

Operator, Operator

Ladies and gentlemen, thank you for standing by and welcome to the SS&C Technologies Fourth Quarter and Full Year Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded.

Justine Stone, Investor Relations

Hi, everyone. Welcome and thank you for joining us for our fourth quarter and full year 2020 earnings call. I'm Justine Stone, Investor Relations for SS&C Technologies. With me today is Bill Stone, Chairman and Chief Executive Officer; Rahul Kanwar, President and Chief Operating Officer; and Patrick Pedonti, our Chief Financial Officer. Before we get started, we need to review the Safe Harbor statement. Please note that various remarks we make today about future expectations, plans and prospects, including the financial outlook we provide, constitute forward-looking statements for purposes of 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, February 10th, 2021. While the Company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so. During today's call, we will be referring to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to comparable GAAP financial measures is included in today's earnings release, which is located in the Investor Relations section of our website at www.ssctech.com. I will now turn the call over to Bill.

Bill Stone, Chairman and CEO

Thanks, Justine. And thanks everyone for joining. Our results for the fourth quarter were $1.206 billion. In adjusted revenue, it's down 0.5% and $1.13 in adjusted diluted earnings per share, which is up almost 5%. For the full year, we had $4.681 billion in adjusted revenue, up 0.3% and $4.30 of adjusted diluted earnings per share, up 12.3%. Our adjusted consolidated EBITDA was $475.8 million for the fourth quarter and our adjusted consolidated EBITDA margin was 39.4%. Our Q4 adjusted organic revenue was down 2% and for the full year of 2020, organic revenue was down 0.5%. As expected, we had weakness in our large license software business in the fourth quarter. But our alternatives business and our ads business grew nicely and the DST business saw improvement from the previous quarter. Operating cash flow was $1.1847 billion for the 12 months ended December 31st, 2020, up 10% if you exclude the one-time $250 million upfront license payment paid in the second half of 2019. $1.1847 billion represents a 103% cash conversion rate on our adjusted net income of $1,146.8 billion.

Rahul Kanwar, President and COO

Thanks, Bill. As you noted, we had a strong quarter with a broad-based lift in revenue from Q3, across many of our business lines. DST, SS&C Health, the Alternatives, Intralinks, Regulatory and Algorithmics all posted improved performance in Q4. Our Alternatives business grew 5.5% in Q4 and 5.7% for the year. Clients remain optimistic about their growth outlook, which is reflected in our data, including the Capital Movement and other indices we publish. Bill mentioned the rapid adoption of Eze Eclipse in his earlier comments and in Q4, we launched the Eze app powered by Eclipse and made it available in iOS and Android app stores in November. User adoption and design collaboration for the app's next phase have been strong.

Patrick Pedonti, CFO

Thank you. Results for the fourth quarter were GAAP revenues of $1,203.4 million. GAAP net income was $197.1 million and diluted EPS of $0.74. On an adjusted basis, revenues were $1,206.1 million, including the impact of the adoption of the revenue standard 606 and acquired deferred revenue adjustments for acquisitions. Adjusted revenue was down 0.5%, adjusted operating income decreased 2.4% and adjusted diluted EPS was $1.13, a 4.6% increase over Q4 2019. Adjusted revenue decreased $6.1 million or 0.5% over Q4 '19. Our acquisitions contributed $27.4 million, foreign exchange had a favorable impact of $6 million or 0.5% in the quarter. Adjusted organic revenue decline on a constant currency basis was 2% driven by weakness in the Advent, Institutional, Software Products and DST Financial Services. These were offset by strength in Fund Administration, Intralinks and the Eze business. And we had strong sequential growth in the DST Financial Services and Healthcare businesses over the third quarter. Adjusted operating income for the fourth quarter was $458.8 million, a decline of $12.2 million or 2.4% from the fourth quarter 2019. Foreign exchange had a negative impact of $3.5 million on expenses in the quarter. Adjusted operating margins were 38.8%, compared to 38.0% in 2019. The expenses were driven by higher employee compensation and benefits, higher sales commissions and professional services and these expenses were partially offset by lower travel and contractor expenses. Adjusted EBITDA defined in Note 3 of our earnings release, was $475.8 million, or 39.4% of adjusted revenue. Net interest expense for the fourth quarter was $53.3 million and includes $3.4 million of non-cash amortized financing costs and OID. The average rate in the quarter for our amended credit facility and our senior notes was 2.99%, compared to 4.53% in the fourth quarter of 2019 and resulted in an interest expense decrease of $47.2 million or 47%. We recorded a GAAP tax provision of $37.7 million or 16.1% of pre-tax income. Adjusted net income as defined in Note 4 of our earnings release was $302.6 million and adjusted diluted EPS was $1.13. The effective tax rate used for adjusted net income was 26%. Diluted shares increased to $268.1 million from $266.7 million in Q3. The impact of the increase in the average share price and option exercises was partially offset by share repurchases in the quarter. Our balance sheet and cash flow as of December 31st, we had approximately $29.3 million in cash and cash equivalents and approximately $6.5 billion of gross debt for a net debt position of approximately $6.3 billion.

Operator, Operator

Excuse me, I think Mr. Bill got disconnected, but he is reconnecting now.

Patrick Pedonti, CFO

Okay, thank you.

Bill Stone, Chairman and CEO

Sorry about that. Thanks, Patrick. We continue to operate in the global pandemic. 99% of our global workforce is still remote and business travel and in-person sales meetings are essentially non-existent. Over the past 11 months, we have learned how to operate under these circumstances. Utilizing video conferencing, web-based marketing and promoting the power of our business model and reliability of our people and technology. As you can tell from this call, we are optimistic. We believe our performance during this pandemic will pay dividends well into the future. We will now open it up for questions.

Operator, Operator

Thank you, Presenters. We'll pause for just a moment to compile the Q&A roster. Our first question comes from the line of David Togut from Evercore ICE. Your line is open.

David Togut, Analyst

Thank you. Good afternoon. Could you comment on fourth quarter 2020 total organic revenue growth, quantify please? And then, if you could break down organic revenue growth for the fourth quarter by Fund Administration, Intralinks and CST?

Bill Stone, Chairman and CEO

For the fourth quarter, total adjusted organic growth was down 2%. The Alternatives Fund Administration business was up 5.5% and DST, we can provide you kind of a breakout between the two groups. The Financial Services group was down 1.1% and the Healthcare group was up 3.1%. I think that combined to be down 0.3% for the full year. And Intralinks was up 3.8%.

David Togut, Analyst

Got it. Thanks for that. And just as my follow-up, could you comment on your acquisition pipeline and appetite to acquire in the year ahead, based on the quality of the pipeline and valuations that you see?

Bill Stone, Chairman and CEO

Well, we constantly look at acquisitions and we're disciplined about it. Obviously, we deployed $8.3 billion in 2018 and that bought DST and Intralinks. We spent about $138 million in 2020, which was less than we would have expected, but we looked at lots of things and obviously in the public domain, you know that we looked at Link Administration down in Australia. So, we're disciplined about it and we're quite aware that all the questions that we get on the conference calls and from our shareholders, are organic revenue growth or unit. So, we want to make sure that we focus on our organic revenue growth and as Rahul had detailed in his remarks, we've made lots of changes. All of our businesses are getting better. All of them. Because if they don't get better, we get different executives and that's how we operate. So, we're very optimistic about where we're going, about generating tons of cash, paying down a bunch of debt, looking at great acquisitions and earning more money for our shareholders and then deciding how we're going to allocate our capital, whether that's going to be on acquisitions, which is generally our first choice. But we also like to pay down debt and we also like to evaluate buying back our shares. So, I don't think our business plan, our strategy has changed. I believe that what we're doing is executing and I think that's what we'll continue. So, there is a lot of stuff for sale, and you see stuff getting purchased all the time. And the question becomes, is that strategic for us? Will it drive our organic revenue growth and what is it going to do over the long term? So, those are the criteria that we have and I think we will probably buy some things in 2021, but as usual, we'll be disciplined about it and we are going into 2021 with some optimism.

David Togut, Analyst

Understood. Thank you very much.

Operator, Operator

Our next question comes from the line of Andrew Schmidt from Citi. Your line is open.

Andrew Schmidt, Analyst

Thank you for taking my questions. I wanted to briefly discuss the sales cycle. You mentioned in your revenue assumptions that you expect customer interest and purchasing behavior to improve throughout the year. However, I am curious about what you've observed recently as we move into 2021. Are you noticing any changes in customer behavior and purchasing patterns? I know we are still in a largely remote environment, but I'm interested in your insights on the sales cycle, particularly regarding large deals.

Bill Stone, Chairman and CEO

I'll give that a quick shot and then Rahul can comment. But, we have a pretty full pipeline. We have large deals, we have what we believe are a number of large deals that we hope to close this quarter. We have a very reasonable January and I believe that we will continue to execute and we're seeing some strength across our different businesses. I think our indicators that we have in Intralinks are all as strong as they've ever been. I think we have a pipeline and gaining rhythm we've ever had and some services, the hedge fund industry has proven to be quite resilient and I think will continue to be, as more and more private assets become the most attractive place to put money, whether that's private equity or private credit or real estate. I think that SS&C is well positioned to do well there. And I think that the DST business is getting stronger. Our Retirements business grew very nicely in Q4 and we expect it to grow very nicely throughout 2021. We have some challenges in our Healthcare business, but, Daniel DelMastro and his team are doing a good job and they are very focused. And so, with that I'll let Rahul take a crack.

Rahul Kanwar, President and COO

You know, I think the thing that I would add is, as time has passed in this pandemic, we have gotten more comfortable and our customers as prospects have gotten more comfortable transacting over digital and virtual and we always had an element of that. But obviously, we've had to rely on it a lot more. So, we've seen our yield for virtual events and all the things that we do to get the pipeline go up pretty substantially. And we've also seen contract signings and things like that, which we're certainly slow at the start of this process, pick back up. So, we feel pretty good about the current state, it's better than it was three months ago and we think it's going to keep getting better throughout the course of the year.

Andrew Schmidt, Analyst

That's great. It's encouraging to hear about the improvement, particularly in the DST area. Regarding the FY '21 organic growth outlook, with a 4% this year, what are the main factors that influence the lower and upper ends of that growth? Additionally, what assumptions do you have for DST as the year continues? Any insights on that would be appreciated.

Bill Stone, Chairman and CEO

No, again, right. The when you when you're selling $20 million to $50 million deals for a year or $10 million to $25 million deals for the year, multi-year deals, if we win them, we will be at that 4% and if we don't win them, we will be closer to that 0%. But we're confident that we are going to win a lot more than we lose, we're going to continue to perform. The feedback from our clients has been tremendous, based on the work that our entire staff is put in and the attention to detail that we have delivered. In places like Advent and others, that do Net Promoter Scores, highest it's ever been, customer satisfaction, as we track is very high. And our retention rates will stick at 96% or so. And so I think that we have a lot of optimism that we can perform. You know we got to win. You got to throw passes, somebody has got to catch them and they got to go across the goal line. I mean, that's the nature of the beast. And I don't know if Rahul, you would have anything else to add to that.

Rahul Kanwar, President and COO

Just I guess on the second part of that, on DST in particular. So, to talk about the pieces that DST separately. The DST Financial Services business, which is really everything except Health, we're expecting to see low single-digit type growth, that's kind of what's been so at the midpoint, maybe something like 3.5% or something like that, and the Health business, as Bill mentioned, we do have some challenges and we're still dealing with some COVID impacts and we expect that to be flat to slightly down for the year.

Andrew Schmidt, Analyst

Got it. That's good context. Very helpful, guys. I appreciate it, thanks.

Operator, Operator

Our next question comes from the line of Alex Kramm from UBS. Your line is open.

Alex Kramm, Analyst

Good evening, everyone. Could you provide some insight into the cost structure and margins? From the guidance, it seems like we can expect continued margin expansion. Can you share more details on that? Specifically, is this driven by operating leverage, or are there still significant efficiency gains to be realized? I know you've been focusing on that, so I’m curious about any remaining opportunities for further cost reductions.

Bill Stone, Chairman and CEO

Well, I think, Alex, we would say that we manage, we cut where we have to, and you know, but we have a large workforce, we have almost 25,000 people. And there is opportunities everywhere, right and we have to get more efficient. And if you get, you know, 5% efficiency, then on 25,000 people, that's 1200 people I think, right. So, we need to drive revenue in order to be able to continue to grow our workforce and continue to increase our margins, and so that's what everyone at SS&C is focused on and we manage it. We manage it every week. Also, we picked places that we want to put our resources in, I think we spent $600 million between R&D and capitalized software and $140 million or so in acquisitions we did. So, we're investing back in our business, and we think that there is tremendous opportunity for us and we think we have some very large competitors, but that just aren't going to be able to keep up. We think, over 2021 goals in 2022, we are going to continue to execute on a much higher level than our competitors.

Alex Kramm, Analyst

Okay, great. Secondly, I noticed the buybacks were quite low in the fourth quarter. Was that due to your focus on seeking deals and perhaps your cash balance being relatively low? Can you clarify where the buybacks will come from and what your expectations are for 2021? You had a strong acceleration in 2020, so are you still planning to prioritize repurchases moving forward?

Bill Stone, Chairman and CEO

Well, again, we try to allocate our capital as best we can. And obviously, we think our stock is certainly not overvalued. So, we look at that somewhat fondly, but it's not our first choice. You know and even as we buy any, if we buy more than we did in 2020, it would not surprise me, but I don't believe that we will probably spend more than we pay down debt. So obviously, if we do acquisitions, the interest rates stay where they are, we'll probably use a lot of debt on acquisitions. So, we generate a ton of cash, we generated a ton of cash in January, we'll generate a ton of cash throughout the year. And we hopefully, we'll use it wisely for the best-in-class.

Operator, Operator

Our next question comes from the line of Brad Zelnick from Credit Suisse. Your line is open.

Brad Zelnick, Analyst

Great, thank you so much for taking my questions. My first is for Bill. Bill, I'm wondering if you have any perspective on the higher trading volumes and volatility related to retail flows in the equity markets and how, if at all in any way, they have impacted parts of your business, maybe the health of fund admin clients or anything else worth noting? And Bill, I know you've been around long enough to see just about everything, curious if you have any perspective on this force in the market. And if in any way it's an opportunity for SS&C?

Bill Stone, Chairman and CEO

Well, Moses and I have both been in this industry for quite some time, Brad, as you know. Looking back over my extensive experience, these situations do occur. As technology spreads globally and facilitates collaboration, it becomes challenging for regulators to oversee all the different tactics people use to manipulate stock prices. I believe regulators will eventually adapt, and this situation is reminiscent of what we saw in 2000 regarding the attention on digital platforms. I think the recent surge in some well-known stocks might be a bit of a bubble, possibly more than just a little. However, I'm not certain how this plays to our advantage, aside from our Regulatory Services business, which can provide clients with insights, and our Algorithmics division, where many analysts are consistently monitoring these trends. This capability can be extremely valuable for our clients.

Brad Zelnick, Analyst

Thank you, Bill. Makes perfect sense to me. I appreciate the thoughtful answer. Maybe for Rahul. Rahul in your prepared remarks you talked about a comprehensive solutions program under Eamonn Greaves, combining products and services. Just curious, what prompted this now, what's the opportunity really and with total respect, it sounds obvious. So, why wasn't this something you were already doing?

Rahul Kanwar, President and COO

So, about a year ago, at the end of fourth quarter of 2019, we put Eamonn in charge of Global Sales. And his mandate was really to help us collaborate more effectively and more than collaborate, integrate, right. So that, if you could see a customer and a customer is a bank or an insurance company or a hedge fund manager, we're bringing together different parts of the organization and offering that comprehensive solution and the more we can do of that, the more strategic become for them, the more likely it is to buy bigger, right. So, just remember that we, as Bill pointed out, we bought DST as an Intralinks in 2018 and we're trying to sell things that work together. Right. So, it takes some time to integrate them, it takes some time to get the user interfaces and the functionality that they want and we feel like we're in a good place with that product offering, we're putting the right focus behind the sales and marketing of that, was the right move. So, I think where, for what I think, things we've done all along, but we're off to a good start.

Brad Zelnick, Analyst

Makes sense. Thank you, guys.

Operator, Operator

Our next question comes from the line of Ashish Sabadra from Deutsche Bank. Your line is open.

Ashish Sabadra, Analyst

Thanks for taking my question. Rahul, I wanted to revisit a comment you made about the DST. If I understood correctly, the DST Financial could potentially grow 3.5% this year, at the midpoint for fiscal '21. Can you confirm if that's accurate? Also, I'm curious about what is contributing to that strength, as it seems quite robust compared to the historical growth profile of DST financial. Is it due to the large deals we secured last year or is the implementation process driving this growth? Additionally, could you provide more detail on where within DST financial you're seeing strong demand or areas of strength? Any insights would be appreciated. Thanks.

Rahul Kanwar, President and COO

Sure. So, we have at the midpoint, approximately 3.5% or so, organic growth. The Retirement business, where we've talked about a number of large deals and done some press releases on them, is clearly one of the bright spots. We're also seeing good strength in our UK-based Wealth and Insurance Services business and really across all of DST. We've been working hard since 2018 really, focused on the sales efforts there, focused on the product development efforts there, focused on digital and web portals and different ways in which our end customers can interact with their clients, and that's what they deem most valuable, we're starting to see some signs that the work we've done is paying off, and we're pretty bullish on what might happen with that business, not just in 2021, but beyond.

Ashish Sabadra, Analyst

That's great, very helpful color. And maybe just a quick question on pricing in the Alternatives Fund Admin side, there was a pricing increase back in end of 2018 or early 2020. Are there opportunities for more annual price increases going forward, any thoughts on '21? Thanks.

Rahul Kanwar, President and COO

So, we're doing and I think we said this last year, we really try to set this up as a price conversation that was going to happen once a year. Right. And it's been reasonable increases, that I think our customers, well nobody welcomes them, they understand where we're coming from. We're working our way through that process right now and it's going pretty well and we do expect it to have a positive impact on Alternatives, but really across our business.

Ashish Sabadra, Analyst

That's very helpful. Thanks and great and good quarter. Thank you.

Operator, Operator

Our next question comes from the line of Mayank Tandon from Needham. Your line is open.

Mayank Tandon, Analyst

Thank you. Good evening. Bill, just wanted to get a sense from you or maybe Rahul can chime in too. How should we think about the growth within the installed base, i.e., land and expand versus contribution from new logos? Have you got back to some level of normalcy in terms of organic trends across your portfolio of solutions?

Bill Stone, Chairman and CEO

That's a great question and it's really central to our strategy. We acquired DST and finalized the deal in April 2018. By 2020, DST’s clients made up 75 of our top 100 clients, all of whom are leading investment firms globally. There are considerable opportunities here, but we have a lot of work ahead. We've doubled our EBITDA, and while organic growth is important, our earnings and cash flow haven't reflected that yet. This acquisition has allowed us to engage deeply with these major clients and showcase our offerings. Algorithmics is a valuable resource with its global expertise, opening doors to these large companies. We recently secured a million-dollar deal through our new Blue Sky portal, which simplifies compliance with regulations across all 50 states—a challenging task for our clients. The more burdens we can alleviate for them, the more we can expand our presence. That's why we've appointed Eamonn to lead this effort. Our top sales executives are also exploring various opportunities within our 18,000-client base. However, entering a large entity like DST requires a thoughtful approach; we must understand the environment and be ready to endure some challenges in the process. We wouldn't be where we are now without our strategic acquisitions and key people at DST like Mike Sleightholme and Kevin Rafferty, who understand our drive for growth. While they faced some hurdles, we've worked to overcome those obstacles and focus on growth, especially with $2 billion in revenue that has the potential to drive our success. If we execute effectively—which I believe we are—it will keep improving. The product bundling and enhanced outlook stem from the groundwork we've laid. It’s much like a stone cutter who strikes granite; the first strike doesn’t show a crack, but it’s the cumulative effort that leads to success. We've recognized the challenges, but our focus and determination are how we manage and generate cash flow and earnings. Although earnings and cash flow have become somewhat less critical compared to organic revenue growth, we've implemented what we believe is necessary to build a solid foundation for that growth.

Mayank Tandon, Analyst

Great, that's very helpful perspective. Thank you for that. And, if I can just follow-up, briefly, has the pandemic and the effect of that flushed out some of the competition in the fragmented portions of your markets? In other words, are you now even stronger in some of the segments where you might have had more competition from some of the startups and smaller players that are not as well funded?

Bill Stone, Chairman and CEO

I believe we will perform better against the larger competitors. The use of third parties in India has not been particularly effective for many large organizations. We rely almost entirely on our own employees, and it has taken us a significant amount of time—up to two and a half years—to streamline everything. We previously had around 1,600 to 1,800 contractors from Syntel working for DST, but they have now transitioned to work directly for us. We are reducing the number of outside personnel within SS&C, and we see improved operations when we have control over raises, bonuses, promotions, and career development. This has been incredibly beneficial to our business. Sunil in India has done an excellent job, and I am confident we will continue to execute well and deliver positive surprises. Rahul, what are your thoughts?

Rahul Kanwar, President and COO

We've received significant praise from our customers, both large and small, regarding customer satisfaction and net promoter scores. We believe this is a challenging time for many in the marketplace. In comparison, we are improving in absolute terms and are also well-positioned relative to others moving forward.

Mayank Tandon, Analyst

Great, thank you so much.

Operator, Operator

Our next question comes from the line of Jackson Ader from JP Morgan. Your line is open.

Jackson Ader, Analyst

Thank you for taking my questions. Bill, my first question is about the main reasons for your wins and losses. You mentioned that whether you perform well at the high or low end of the guidance range depends on winning these deals. I'm interested to know if the reasons for your successes and failures have changed over the past couple of years. What are your thoughts on this?

Bill Stone, Chairman and CEO

I think many of the businesses we acquired with DST hadn't seen success for a long time. Changing that mindset is essential because you need to believe in winning to achieve it. If you're lacking confidence, your chances for success are diminished. Overcoming that insecurity isn't easy or comfortable, but it's a crucial part of our approach. Since we've developed software, whether it's the fraud prevention app for SS&C Health or the enhancements we've made to our transfer agency and retirement services, we first need superior products. We also require a well-trained workforce for implementation, a knowledgeable marketing team to promote our offerings, and an effective sales force. As I've mentioned before, we need our sales team to be consistently active, as some of the acquisitions we made only yielded results monthly. The difference in culture and motivation is significant. Additionally, we generated $1.184 billion in cash flow in 2020, compared to about $400 million in 2017, tripling our cash flow, which provides us with ample resources for investment in training, education, and technology. We've brought in talented individuals like Anthony Caiafa, John Bellone, and Jason White, who have significantly contributed. Their drive to win is incentivized financially, which I believe is a key factor in our success. The organization is becoming more structured, thanks to Eamonn's efforts. We are competitive and willing to pursue our rivals' clients directly, which they may not appreciate, but that's part of the competitive landscape.

Jackson Ader, Analyst

Great. Yeah, I appreciate the thoughts. What about the Link asset? What did you find really attractive about it and what are some of the main reasons that you kind of went through there?

Bill Stone, Chairman and CEO

I think it's a strong business and we have a favorable view of Australia as a market. Our performance in Canada has been strong, and we believe we can achieve similar success in Australia. We have a solid operation there and aim to expand our outsourcing business, which Link could have supported. However, a lot of work is needed with Link, and while they have begun their process, we have significant focus on DST right now. We have positive momentum as discussed, and we didn't want to introduce another situation that could distract us from our current priorities. As a result, we decided Link wasn't the right fit for us at this time. It's still a good company, and I believe they will do well, but we chose not to pursue it right now.

Operator, Operator

Our next question comes from the line of Peter Heckmann from DA Davidson. Your line is open.

Peter Heckmann, Analyst

Thank you and good afternoon everyone. Just one maintenance question. I didn't hear you mention the pending Capita acquisition, is that deal still pending or has it closed?

Bill Stone, Chairman and CEO

It is still pending.

Patrick Pedonti, CFO

I think it's good for us though.

Peter Heckmann, Analyst

But it's not dead, at least theoretically. Are you still pursuing the close?

Bill Stone, Chairman and CEO

We had a significant client at Capita that wasn't going to integrate quickly with the acquisition, so they needed to look for other options. However, we believe that issue has been addressed and we anticipate the deal to close within the next 60 to 90 days, although we have made similar expectations in the past. We want to ensure that this acquisition isn't too large.

Peter Heckmann, Analyst

Right, right. Okay and then just in terms when we're looking out over the next couple of years, could you identify any pending regulations, kind of like a see saw whether it's in the US or globally, that you think can serve as demand drivers for spend or upgrade activity, anything out there that we should be monitoring?

Bill Stone, Chairman and CEO

There's a new administration in the United States that will be more active in Financial Services. I see Financial Services as a source for tax revenue, which will lead to regulation similar to what we saw with Form PF and other initiatives from 2012 to 2014. I anticipate that the situation will resemble what we experienced from 2008 to 2016, and there will be chances for us to assist our clients in meeting these new regulations and tax requirements in a cost-effective manner.

Peter Heckmann, Analyst

Got it, got it. Okay. If I could just sneak in one more. There was a joint venture announced by a number of Financial Services companies, Day 3, PIMCO, Man Group and it looked like they were going to be focusing on business process outsourcing for the fund industry. Is that something that's on your radar? And do you think that will be something that would be potentially competing with any operations of SS&C or perhaps DST?

Bill Stone, Chairman and CEO

I believe those are significant, sophisticated RF companies with many talented individuals, and there's likely some level of politics involved at each of these organizations. When they come together, it may resemble a meeting at the United Nations. We'll have to wait and see how that unfolds. We're aware of the situation, but we're also actively pursuing our plan, and hopefully, we will soon leave them behind.

Operator, Operator

Our next question comes from the line of Michael Young from Truist Securities. Your line is open.

Michael Young, Analyst

Hey, thanks for the question. I wanted to just kind of ask maybe high level, coming from 2020 which was heavily impacted pandemic year, to some hopes of reopening this year, could you just maybe give some color on the conversations with clients and how they've trended and could there be sort of a backlog of activity as people kind of refocus on operating core businesses in 2021? Just any color on that would be helpful.

Bill Stone, Chairman and CEO

Well, I think you know as you well know, right, when you have a crisis such as this, the rapidity of change probably goes up tenfold, so companies that would have never believed they could operate from a remote, now operate from remote. And I think that it's going to change part of them. So how we all execute on our strategy use and how we deploy our greatest asset, obviously is our people and keeping them safe is paramount. There is going to be a lot of things that are going to be important that we focus on and I think obviously you guys are our recent merger of two large banking organizations and my guess is that, there's a lot of change going on at Truist. And you have a no major acquisition during the pandemic. So, there is added impetus to streamline your operations, making this as efficient as possible. Make sure you have redundancy, cyber security is a very big deal. And I think that we need to be cognizant of what is out there. And we need to be prudent, when we know, we need to act quickly, but being precipitous seems to me to be a poor strategy.

Michael Young, Analyst

Okay. And my second question, I just wanted to follow up on a few of your comments, I think you've kind of highlighted, how the markets are more eager and revenue growth versus good stable cash flow businesses. Is there any desire with either your next M&A deal or just kind of how you're managing internally to try to ramp up the revenue growth piece of the business, as opposed to just cash flow?

Bill Stone, Chairman and CEO

We're focused on growing revenue and while we won't overlook cash or earnings, it's revenue that drives our conversations. Everyone involved with the company understands this priority. We recognize the importance of being prudent; for instance, we won't invest in excessive office space in major cities because we believe it would be an impractical use of our resources. Although we are in a strong cash position, we don't have the same financial flexibility as some larger companies. Ensuring a safe environment for our employees is also a priority before they return to the office. We're working diligently on revenue growth even though securing large-scale licenses is more challenging without in-person meetings. Our Funds and Services business is performing well, particularly Intralinks, which has a strong pipeline. Our team is doing an excellent job, and I believe we have more opportunities than ever, which we need to seize to achieve our goals.

Operator, Operator

Our next question comes from Chris Donat from Piper Sandler. Your line is open.

Christopher Donat, Analyst

Good afternoon. Thanks for taking my question. Bill, I wanted to ask one question about the Redemption Indicator that we see for GlobeOp and that January was the lowest number on record since 2008. Do you think that's mostly market forces or is there anything changing in the competitive landscape that's keeping Redemptions from leaving SS&C?

Bill Stone, Chairman and CEO

I mean, I think that we have really blue chip roster of funds. But that being said, it's probably a heavy, heavy dose of what's happening in the market. I mean if you look at the amount of assets going into private equity and real estate, private credit and hedge funds, I think you see that people are starving for return, starving for income and they're not finding it in corporate bonds or our government bonds for sure. So I think that people redeem either when they have a life event like buying a house or retiring or something or that they have an alternate place to put their money. And if they don't have an alternate place to put their money, they tend to stay intact. And I think the hedge fund industry in particular and the other ones, the real estate industry as well as investment industry as well as the private equity industry has learned to communicate with their investors and that communication is paramount. And again, that's something that SS&C is very well positioned and able to help our customers communicate with their customers, with their investors. And I think that's another reason why the Redemption Indicator remained historically low.

Christopher Donat, Analyst

Okay, thanks for that. And then, Patrick, one question about guidance and well for the fourth quarter you commented that there was less travel and less usage of contractors in the fourth quarter, are those two things that you would expect to stay low through the remainder of 2021? Or do you expect travel and contractor usage to increase kind of over the course of the years, as things get to some level of new normal?

Patrick Pedonti, CFO

Yeah. The contract reduction is through the fact that we moved the India contractors to in-house employees. So, that will not be a problem for 2021. And on travel, I think basically we've assumed that travel expenses won't be a heck of a lot different than Q1 and most of Q2 and then gradually start increasing in the third and fourth quarter, but not be back to pre-pandemic levels. So it's kind of the assumption we've made.

Operator, Operator

No further questions at this time. I will now turn back the call over to Mr. Bill Stone.

Bill Stone, Chairman and CEO

Thank you. I appreciate everyone for your insightful questions. We are committed to executing our plans, and I look forward to speaking with you in late April or early May. Thank you.

Operator, Operator

Thank you again for participating. This concludes today's conference call. You may now disconnect.