SS&C Technologies Holdings Inc (SSNC) 2010 Q3 法說會逐字稿

Good afternoon. My name is Matthew, and I will be your conference operator today. At this time, I'd like to welcome everyone to the SS&C Technologies 2010 Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. We will be taking questions in the order we receive them. Please note that this conference is being recorded and will be made available on SS&C's website www.ssctech.com.

I'd now like to turn the conference over to William C. Stone, Chairman and Chief Executive Officer. Mr. Stone, you may begin your conference.

Thank you, Matthew. Welcome and thank all of you for joining us today for our Q3 2010 earnings call. I am Bill Stone. I'm the Chairman and CEO as Matthew said. With me is Norm Boulanger, our President and Chief Operating Officer and Patrick Pedonti, our Chief Financial Officer.

First, I'll start with the Safe Harbor statements. Various remarks we make on this conference call about our future expectations, plans and prospects constitute forward-looking statements for purposes of Safe Harbor provision 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. These are included in SS&C filings with the Securities and Exchange Commission and particularly the Company's Annual Report on Form 10-K for the year ended December 31, 2009.

I'll start with a brief overview of the quarter and I'll turn it over to Norm, who will take you through some of the operational highlights and then we'll have Patrick go through the financials.

Obviously, we are pleased with our third quarter. Revenue was up, cash flow was up, leverage was down, and we continue to maintain world-class operating margins. We reported adjusted revenue of $83 million, up from $68.9 million in the third quarter of 2009. This is a continuation of our strong results since the beginning of the second quarter in 2009 and revenues were up $14 million -- over $14 million this quarter or 20.5% year-over-year. Software-enabled services continues to drive our growth, with revenue up almost 29% to the historical high of $53.8 million.

Our annual run rate basis of recurring revenue, defined as our maintenance and software-enabled services, was at $72.1 million, a run rate of $288.6 million. This represents an increase of 22.7% over the $58.8 million and $235.1 million run rate in the same period of 2009. Also on a quarter -- sequential quarter basis, it's up 2.4% from Q2 2010's $70.4 and $281.8 million run-rate. We believe this annual run rate basis is a good indicator of our visibility. And these are GAAP recognized revenue numbers, this is not contract value.

Licenses give us great insight into how our people use our software to run their operations.

At SS&C, we're almost always the largest consumer of our software in our various SaaS businesses and we get the ideas in collaboration with very large complex companies on how they run their business with our software. It also gives us an idea of collaboration between them and us so that we get to show them best practices and they get to show us their best practices.

Our maintenance revenue is a great source of capital. It's been $54 million so far this year. It also gives us a great access to that intellectual capability of those clients we talk to everyday. These relationships are also tremendous sources of new revenue and they combined with our SaaS customers account for more than 50% of our growth as we up-sell and cross-sell them.

Professional services is a very difficult process where we take these very sophisticated systems and install them in places like yours. This takes a lot of knowledge, a lot of skill and a lot of ability. These are the most difficult jobs we have in the Company and we have great teams of professionals doing these jobs. We hire professionals, train them in our products and build them out at market rates. This leads to a professional services organization, which has delivered margin to 26% and 37% in the last two quarters.

Finally, our SaaS business, which we define as ASP/BPO, is 65% of our third quarter revenue and is the key overall growth engine. We have grown from $13 million in 2002 to an expected $200 million over the last 12 months -- $200 million over the last 12 months. This is a high compound annual growth rate and there is still tremendous running room. Using our licenses and maintenance clients as entrees into the talent and skill of our professional services organization delivers us highly recurring revenues with very strong margins.

With that I'll turn it over to Norm.

Thanks, Bill. In Q3, we continued our focus on sales execution and operating efficiencies. We're seeing demand in two general areas. First, where we have experienced the strongest growth is our software-as-a-service solutions. We continue to see interest from hedge funds, private equity, asset managers and insurance companies. They are looking for business process outsourcing including middle-office functions, which provide the most cost efficient, highest capability solutions for their needs.

Demand for our SaaS service along with high retention rates has allowed us to grow our annual run rate basis. Second, companies have been very focused on solving very specific problems. They're centered largely on reconciliation, client reported, performance measurement and attribution, bank loans, seeing a lot of interest in derivative accounting and as well as derivatives valuation, and risk management.

Over the last few months, we have also seen an increase in interest from banks and the mortgage loan processors for our solution such as LMS, our Loan Management System, as well as our solutions for municipal finance, money markets, and structured bonds. And there's a few wins this quarter that I'd like to highlight, Bank of Montreal purchased our unified high network platform on an outsourced basis for the middle and back office processing.

A large private bank and wealth management company licensed our client reporting solution Pages and also contracted us to facilitate data aggregation using our Evare services as well as hosting the client reporting portal. Large asset manager licensed our debt derivatives product. They also provide outsourcing services in that particular business and that's the key strategic decision that they made. MetLife International expanded our SaaS services that we have a renewal that came up and they expanded the service levels that we were providing them.

Private advisors are long-time SS&C customers for their hedge fund of funds, selected SS&C Fund Services to be administrator for their private equity fund of funds.

International Finance Bank and Mischler Financial Group purchased our Lightning SaaS offering. We view our Q3 sales results in particular organic growth rate of 8.7% as a solid result, particularly, when considering the uncertainty our customers and prospects face in [safe] economic and political environment.

In Q3 we also continue to leverage technology to improve operating efficiencies and to deliver new products to the market. As a Company that provides both software and SaaS services, SS&C has a significant software development expertise especially compared to outsourcing companies. We have more securities operations and accounting expertise in companies that provide software only. A deployment of this expertise in our business is a key differentiator, providing services to clients by utilizing necessary software leads to new products, new services and new operating tools. This has allowed us and our customers to improve scale of their business and lower their cost as they manage additional dollars to [earn in] their portfolios.

If you consider Q3, our growth is largely driven by our SaaS services, which has higher IT infrastructure and labor cost, not required for software only companies. In Q3, we were able to achieve consolidated EBITDA margins of 41%, while continuing to absorb TheNextRound, Tradeware, and the Geller GIPS business. Three acquisitions we are quite excited about or which currently have lower margins. We also released a number of products and service updates.

Last quarter, we mentioned SS&C has continued to invest in web portals for our clients and their customers. Some of the new portals we developed in Q3 include new web-based reporting portal for our fund service administration clients and their investors. It's called sscfundservices.com. For our leading SKYLINE property management and accounting software, we introduced new web-based dashboard that allows users to view, monitor and manage real-time property financial and business performance data all from single screen.

Finally, we enhanced Lightning, our capital markets solution portal. Capability by allowing customers to post their own forms, including train confirmations, payment notices, safekeeping receipts, and 1099s.

We also released a number of enhancements for our several products including Risk Analytics, Global Wealth Platform, Tradeware MarketCenter as well as implemented additional enhancements in order to support FAS 157 and FDIC reported automation requirements.

Now I'll turn it over to Patrick for the financial highlights.

Thanks, Norm. Results for Q3 2010 are GAAP revenues of $83 million and reported GAAP net income for the period was $9.9 million and diluted EPS was $0.13. Adjusted revenues excluding one-time acquisition related purchase accounting adjustments, which was small in this quarter was $83 million, an increase of $14.1 million or 21% over Q3 2009. Excluding acquisition revenue and positive impact from foreign currency, organic revenue increased [8.7%].

Acquisition including the TheNextRound, Tradeware, and the Geller GIPS business contributed $7.6 million in the quarter and foreign exchange positively impacted us by $600,000 or a little under 1% as foreign currencies strengthened.

The business had strong growth in fund services to hedge funds, funds of funds and private equity funds. SaaS revenue to institutional asset managers and SS&C products sold to -- SS&C licensed products sold to asset managers. We also had strong contributions from the recent acquisition.

Adjusted operating income for the third quarter was $32.7 million, an increase of $5 million or 18% from the third quarter of 2009. Operating margins fell slightly to 39.3% from 40.2% in Q3 2009 as recent acquisitions impacted the margins. We expect operating margins with these acquisitions to improve and we saw a significant improvement in Q3 2010 over Q2 2010.

Consolidated EBITDA, which is used in calculating our covenant compliance, was $34 million or 40.9% of adjusted revenue in the quarter. This is an improvement of $5.3 million or 18% from Q3 2009.

Net interest expense for the quarter was $6.7 million and includes $493,000 of non-cash amortized financing costs. Interest expense was down $2.4 million from Q3 2009 as we have paid down a little over $115 million of debt since September 30, 2009. We recorded a tax provision in the quarter of $3.6 million, or 27% of pre-tax GAAP income. We expect the GAAP effective rate, excluding some one-time items, which we recorded this year, to be approximately about 30%.

Adjusted net income, defined in our note 4 in financial statements, was $17.2 million, and adjusted diluted EPS was $0.23. The adjusted net income excludes $8.7 million of amortization of intangibles, [$3.9 million] of stock-based compensation, $407,000 of capital-based taxes, and $676,000 of unusual and non-recurring gains, mostly acquisition-related items.

For the year, adjusted revenue was $243 million, an increase of $43 million or 21.6% over the same period in 2009. Excluding acquisitions and the impact of foreign exchange, organic revenue year-to-date is 5.7%.

Adjusted operating income was $95.2 million, 39.2% of revenues, an increase of $17.6 million compared to 2009. Adjusted net income increased $14.1 million year-to-date or 42%, from $33.3 million in 2009 to $47.4 million in 2010. And adjusted diluted EPS for the nine-month 2010 is $0.66. Adjusted consolidated EBITDA for the nine months is $99.4 million, an increase of 23% over the same period in 2009.

On our balance sheet and cash flow, we ended the quarter with $87 million in cash and $290 million of debt for a net debt position of about $203 million. We generated $47.6 million of operating cash flow for the nine months ended September 30, a $2.6 million or 6% improvement over the same period of 2009.

Cash used, its highlights in the nine months include the acquisition of GIPS for $11.4 million in cash. We've spent $3.9 million in capital expenditures, about 1.3% of revenue. And we've paid down $107.7 million of debt, including the sub note redemption we completed in the second quarter.

As far as cash income taxes, we paid $15.7 million year-to-date compared to $16.7 million last year. $3.5 million is a reduction -- of this reduction is included in cash flow from financing and not cash flow from operations as it's a tax benefit as a result of the stock option exercises. We continue to have good accounts receivable collections and DSO at the end of September was 49 days, compared to 53 days on December 2009.

Our LTM consolidated EBITDA using our covenants includes acquisitions as it fell in for the full period was $131.8 million for the last 12 months, as of September. So our EBITDA growth and our lower debt position has reduced our leverage from approximately [6.8] at the closing, when we went private in November of 2005 to two times as of September 30.

Concerning the outlook for the fourth quarter, we expect revenue of $84 million to $86 million, which will represent growth of about 18% to 21%. We expect EBITDA margins to be in the range of 41% to 41.5% of revenue.

Adjusted net income to be between $17.4 million and $18.1 million and that's assuming a 35% tax rate. And fully diluted shares to be in the range of 76 million to 76.5 million shares for the quarter.

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

Thanks, Patrick. As you can tell we're pleased with the third quarter results. We believe we've got a strong team and we know where we want to go in 2011. We believe there is market opportunity and our pipelines reflect this opportunity.

Finally, I would say that we try to be very thoughtful and very disciplined about the way we invest in the future through organic growth and acquisitions. We talked a lot about that as respect to our business model and our growth plans.

You'll note that we just announced a small acquisition of thinklink from TD Ameritrade in Q4. thinklink is an Internet-deployed trade order management system, execution system, liquidity engine and provides connectivity to algorithmic trading systems.

We are quite excited about this acquisition although it's small, we think it has a very nice strategic fit with our Tradeware, MDS, Antares and derivatives products.

So with that, I will open it up to questions. Matthew?

Thank you. (Operator Instructions). Our first question comes to us from Tim Willi. And your line is now open.

Thank you and good afternoon. I just had a couple of questions. First, a housekeeping question, Patrick, when you talked about the EBITDA margin, was that the consolidated adjusted EBITDA definition that you also present or was that a more conventional EBITDA calculation?

No, we use the adjusted consolidated EBITDA, which is in note three on the press release.

Okay. Just want to make sure I had that clear. And then in terms of -- just sort of two other things. In terms of end-market demand or sort of looking through your franchise, when you think about equity focused managers, fixed income focused managers to the extent that you can sort of make that delineation. Is there anything you would note in terms of one type of investment manager maybe having a stronger appetite to purchase right now and more active in the sales cycle? Just any thoughts around that given what's going on with the big rally in the bond markets and obviously a very good year, again, for people that are managing that money more so than equity.

Yes. Tim, this is Bill Stone. I would say that what we're seeing mostly is in our Fund Services business that the fixed income markets have become more active. And what you see in that is that there's a lot of CDO and CLO money that's now being actively managed again as people start looking at those assets not as so toxic as they were before and starting to see that they might really generate the cash flows that were anticipated when they were structured in the first place. So with that we do see a strengthening on the fixed income side. And on the other side that we see is more and more people wanting to use derivatives to make sure that they are protected. So we are seeing that in both the equity and the fixed income side of the business.

Is there anything around the revenue or profit profile of your sort of core products in those verticals that you would point to in terms of thinking about margins or average selling price going forward?

I think more again when you look in that software as a service line or software-enabled services line, generally the fixed income markets are more complex from a standpoint of doing the NAV calculations and valuations as well as the reporting. So in general, we get higher basis point charges on that fixed income. So, in general those margins should improve.

Yes. Okay. Great. Then my last question was just around sort of the Wall Street financial reform. It seems and I think you said this on the last call that there is no negatives that come out of it and clearly probably some opportunities, is there anything in terms of thinking about the timing of business that would manifest itself as a result of the legislation? Obviously there is a lot of rule writing that has to go on, et cetera. Do you think this is something that to the extent that the dynamic actually takes place, it may be something that's a year out or what have you as opposed to anything in the near-term or do you really think you're already seeing it take grip in the selling cycles?

Well, I think it is maybe right now a little bit more subtle than actual acquisition of systems. But what it is, is people getting prepared, right, so they want to have some flexibility built into their systems and built into their operations. And we are seeing some of that with different modules and stuff that people are purchasing, particularly our reporting engines and our risk analytic engines, those types of things are becoming increasingly popular for our client base, because they realize that when these rules come out, they are not going to be given a tremendous amount of time to comply and so they're trying to get partially down the road now.

Okay. Great. That's all I have. Thanks so much.

Thank you. Our next question comes from Adam Frisch. Your line is open.

Thanks. Good afternoon, guys. Nice job on the quarter.

Thanks.

Okay. If I cut out, Glenn is on the line with me, so sorry if there's a connection thing, but maybe the next thing you guys can fix is AT&T's network, little far out of scope. Anyways, how should we think about the conflicting forces of lower trading volumes that we are seeing at least on the equity side and I think it's fairly similar in other asset classes. End markets and -- I don't know with steady means anymore, but I guess you can say on a relative basis they are steadier than they were before in terms of holding recent levels. Are those -- how does those two forces washout in near-term revenues?

Well, I think the trading -- the reduction of the trading revenues can impact us particularly in the fixed network, and stuff that we do along that side. But really that's on the margin, right. That's only going to hit us even in the hundreds of thousands of dollars, not the millions of dollars of revenue.

Okay.

And I think if you look on the forces of FINRA and the changes that are happening with Dodd-Frank and really the continuing wave of business that we see post-Madoff. Everybody has not gotten to the point of total transparency or total comfort with having a fund administrator, sometimes they want two of them, sometimes they want a fund administrator and they want a shadow. Right, so two people are doing NAV calculations, sometimes they like to value derivatives more than once, right. So we might run two models for them with two different ways of doing it.

So there is a lot of stuff along those lines that in general the asset management world and particularly the funds world, when it's going pretty well is extremely profitable. What they're really trying to do is to get that risk adjusted return to be as high as possible and part of that is by using technology and using operational efficiencies and internal controls.

Okay. Thanks. Next question you've had a good trend in customer signings in the quarter, anything unique you can call out from them, anything about terms, conditions, length of negotiation, sales cycles, et cetera? Anything out of the ordinary in terms of bookings and the patterns we're seeing there?

This is Norm. I don't think, I'd say there's anything out of the ordinary. I think when people finally get to the point where they're ready to make a decision that's always been the challenge what that cycle looks like.

I think over the course of the year people become a little more cautious given the uncertainty in the marketplace, but once they make it, I still think it's pretty similar to what they have been in the past. It's really a matter of how many people will be in a position to make a decision and are not affected by some of the market conditions and hold off. But once you get to that point I think sales cycles are very similar to what they were in the past.

Okay, great. Patrick, our tax rate was a little high in the quarter. I just want to touch base with you on what you are expecting in the fourth quarter or next year just to make sure we're in line, more of a housekeeping item?

Okay. Well, for adjusted EBITDA we're going to continue using a 35% effective rate. That's where we think we'll be in the long run. I mean, this year we are at 30%, but we've got a couple of benefits that were booked during the year. They were one time.

Okay. Got it. We're there at 35% for next quarter.

Yes.

Okay. Thanks.

Thank you. The next question comes from Terry Tillman. Your line is open.

Yes. Thanks, guys. I'll attempt to ask these questions without having a coughing fit. Nice job on the quarter by the way. So we know the organic growth overall was 9%. Bill or Norm or Patrick, can you talk about actually just isolating the hedge fund administration business, that flagship business, how that business is growing organically; and maybe segment the growth you are seeing from just basis points increase from more complex services you are offering existing clients versus the new customer signings in terms of kind of comparing the two drivers of growth there?

Well, I think, if you look at the overall software-enabled services business, and the hedge business is about half of that. That whole business is growing at about 30%, and that business was also we had the Geller GIPS business that's in that business, which is probably about half of our growth in the hedge fund administration business, including private equity and fund of funds. And if you take that, I would say that probably -- I talked about it last quarter, but there's been a number of things where clients have really stepped up, gone from monthly accounting to daily accounting and the charge went from $20,000 a month to $200,000 thousand a month. We've had others that have gone from about $180,000 to $1 million a year and stuff like that. So I would say that the increase in services and the complexity of services is probably about a third of our increase in revenue growth.

Okay.

And then I would also say that new signings is probably another 20% or so and I would put the GIPS thing at maybe 40% to 50%.

Got it. Okay, great.

And if you look at organic growth in our software-as-a-service business, in the first couple of quarters this year we're running about 8% to 9% and then in Q3 we were at 13%.

Perfect, thanks. And then maybe Bill, just a question in terms of -- I think you've kind of tweaked up higher the organic growth. I think originally we were talking about maybe 5%, 6% and I think last quarter you talked about for the year ratcheting up a little higher, if my math's right, to 6% or 7%.

Can you maybe give us any kind of commentary taking into account positive tailwinds and just what you see today and assuming stable markets, which I know is a lot to assume there. What should we think about maybe sustainable organic growth over the next couple of years on an organic basis?

Well, I think one of the thing -- I think Terry that the biggest thing is that we have -- we've done a lot of signings, right. And we've just signed these in Q2 and Q3, right. So really we're just ramping in that business right now.

So I think there is some pretty good wins in our sales as far as organic growth is concerned. And I would guess that over 2010, you're going to look at probably right at double-digits, maybe little higher than 10%. I think we have an opportunity. We have a couple of months left here in Q4.

And we have a pretty strong sales force that have a lot of pipeline and we've just closed some great deals. And I know they are really busting it to get this done and we talk every other Monday. So they realize we're very anxious for them to commit and then hit, right. So we got to do both. And so I think we got a lot of win in our sales and I think over the next three to five years, if we execute, we have an opportunity to move the 10% up to maybe 15%.

Okay.

But again, as you said, the stock market is at 11,000, it's been at 14,000, it's been at 6,800 and that's all in the last couple of years, right. So volatility is probably the coin of the realm and we're going to have to operate under different volatility circumstances. And I think we'll execute well, if there is a lot of up-tick, the market goes back to 14,000, people start really investing pretty rapidly, the retail investor comes back in the market, I think we will boom.

Okay. Okay. Great. And then just last question, Patrick. The deferred maintenance revenue or just deferred revenue, if I just call it that one line item. It was actually, I thought meaningfully lower than what [I was like to form] maybe I just didn't have the right assumption. Is there anything going on there sequentially? I don't know if that just typically bleeds down into the third quarter. Can you help me on that and then can you confirm again, did you say an EBITDA margin of 41% in 4Q? Thanks guys.

Yes, EBITDA margin in fourth quarter are 41% to 41.5%, depending on where we are in the revenue range. And deferred revenue is all maintenance and it moves -- it moves depending on when the renewals are. So the third quarter traditionally is not a big renewal quarter. So I think, where it's at right now is pretty much where we've predicted it would be. That answers your question?

Yes.

Our next question is queue comes from Bryan Keane. Your line is open.

Hi, good afternoon. Patrick, just the adjusted EBITDA margins, if I got my math right, they were maybe down slightly in the third quarter and then it sounds like they're going to pick back up in the fourth quarter. So I was just thinking about the puts and takes that's causing those changes?

What we had in Q2 was a significant medical insurance one-time pick up that drove our margin, that drove our EBITDA margins, up, I think, to 41.4%, I think they were, yes. And so, if you really -- if you exclude that one-time medical insurance pick up in Q2, our margins improve from Q2 to Q3.

Okay. And then going forward, is the plan to still get slight EBITDA expansion even with the significant revenue growth or you know, the reason why I ask is, with the contracts ramping the organic growth picking up, I am just wondering if the margins have to drop a little bit as a result?

No, we don't think -- we don't think -- we think that margins will grow with organic revenue, but the only thing that could impact the margins are acquisitions. If we buy companies that have lower margins initially and we have to work to get their margins back up to ours that could impact us for a period of time. But when we look at our core business, excluding acquisitions in the last 12 months, those EBITDA margins have been increasing.

And we're also -- the acquisitions that we did last year are also improving quite nicely. And we're pretty excited about the opportunities that Geller business and Tradeware both are predicting for us over Q4 and next year.

Yes, by next year, can you get those acquisitions up to corporate EBITDA levels or will that take a little longer?

I think that will differ by business, right. There is a couple of factors that drives off the margins. One is the baseline cost, which we work pretty hard on when we acquire a firm to make sure it's at the level we think is appropriate. And the other is helping those guys drive the growth of their business and making sure they were disciplined in the pricing negotiations on the new business.

So each of these are kind of in the different spots, some of them are license business, some are outsourcing business. The outsourcing businesses are improving the fastest. Our Tradeware business will improve rapidly with revenue growth, because it's got tremendous scale. And (inaudible), business is a license business, which relies on license growth for gross margin improvement. So, I can't predict exactly when we'll be up 40%, but I still expect that we'll continue to work towards those goals each year.

Okay. Just last question for me, the acquisition thinklink, I know, it's small, but can you give us an idea of how much revenue per quarter it will generate?

Yes. It's really insignificant. It will be less than $1 million, probably somewhat less. And so it's -- I think we got 50 customers. I think the whole thing will be whether or not we can integrate that in with our other products and services in order to see if we can drive that revenue growth. But we think it's a good technology. It really hasn't had a sales force for the last few years and we think we can really add to that business.

Okay. Congratulations on a solid quarter.

Thanks.

Thank you. (Operator Instructions). Our next question comes from Tim Fox. Your line is open.

Hi, thanks. Good afternoon. First question was related to your discussion in your prepared remarks about your renewal expansions in the quarter. I'm just wondering if you could go into a little bit more detail about what exactly is driving the expansion on the renewals, are we talking cross-selling for the most part or are you talking going from monthly to daily NAVs, maybe a little bit more color on those expansions?

I think you may be referring to the [NAV international] deal?

Yes.

It's really additional services. So the way we kind of position our services [is we] license the software. We can host the software, which is basically the IT infrastructure. And then we'd just start doing things like managing your trade fees, pricing your portfolio, managing all the indicative data, doing the first paths of reconciliation. So, in that particular case, that went from a hosted solution to an extension of additional levels of service, so it's basically what we refer to as ASP plus.

And those things, Tim, in addition to those types of stuff is that, we have literally billions and billions of dollars in assets under administration and stuff that we're hosting and providing ASP services for. So there is a whole series of things that we do to cross-sell and up-sell and our sales force is really pinging those people all the time, as is our customer services organization and our consulting organization. So we'll get inquiries and then sometimes we can offer our services that take one of their pain points away.

And as you know in the Fund Services side of it, there are a bunch of things like Luxor that went from a few hundred thousand to $1.5 million or Mason Capital that went from $20,000 a month to $200,000 a month and things like that. But I think another one is Wexford that did very similar for us. And we have a number of other ones that are in the queue that we have an opportunity to upgrade our service level to them.

As you're well aware that one of the biggest risks that people have is that their assets or their liabilities are not valued correctly, and when these assets are volatile, the frequency of valuation and then also the accuracy of valuation becomes somewhat critical and so as they want more and more of that that really gives us an opportunity to drive revenue.

Great. That's helpful. And then just on the overall M&A pipeline, how are the prices out there for potential acquisitions, did they move much in recent quarters, anything attractive out there in near term?

We think it's very robust. We are active on a number of fronts. We are very excited about our opportunities this quarter as well as in 2011 and we would be somewhat disappointed if we don't close a number of acquisitions over the next several months.

Great. And just lastly, Patrick, your target for cash flow, I believe you mentioned last quarter was $60 million for the year. Is that still on target?

That is still on target, operating cash flow.

Great. Thanks and congratulations.

Thanks.

Thanks.

Thank you. And at this time -- pardon me, I do have one more question in queue. [Sonya Banerjee], your line is now open.

Hi, thanks so much for taking my call. I just had a couple of quick questions, relating to just kind of the geographical breakout of the business, can you speak through the demand that you saw from the various regions? Was there any change in demand from Asia or U.K. or is it pretty much consistent with last quarter?

Well, I would say that our Canadian business was maybe a little bit stronger than it had been in the last couple of quarters. And I would say that the business in Europe has been somewhat soft. But we think we have a good pipeline and we would not be at all surprised that if that business snapback in Q4.

Okay. Can you speak a little bit to any initiatives that you have in terms of driving additional business within these regions? I know that they were impacted pretty severely by the downturn, but do you guys have any initiatives with the sales force or anything else that would drive growth there?

We announced about three months ago or so that we have hired a new head of Australia, Phil Banas, who is doing a really good job for us down in Sydney and we have very good business down there. We also have hired a number of sales people in our U.K. business. So we are very optimistic about what we can do in the U.K. and across Europe. And then we've also been advertising on Bloomberg. And that gives us a lot of reach and so we think there is a lot of opportunity to drive opportunities through those marketing efforts.

Okay. And then in terms of the competitive landscape, has there been any change there. Are you seeing increased competition within any particular segments or the hedge fund administration business in particular? Just any change there or is it pretty much kind of business as usual?

Well, I think it's pretty much business as usual. But as the banks are being forced out of risk taking activities, they are looking for more and more steady state transaction based fees and that's going to leave them to accounting services and stuff along those lines. And we think we have some competitive advantages given our nimbleness, our expertise, the size of our business already and the sophistication of our clients. But I would imagine that you'll see a number of the large banks pushing harder and harder into accounting services for various financial services companies.

Okay. And just finally is there any update on your initiatives around just -- porting your applications to work on mobile devices or any other new products in the pipeline?

Well, when we acquired Micro Design Services down in Parsippany, we really acquired some really top-flight mobile talent. I know if you look at things at the New York Stock Exchange the people walking around the floor all that technology on their handhelds was built by us, our MarketLook product and others gives a real slick interface into the mobile devices. And so we're pretty optimistic that we're going to be able to be at the forefront of people being able to really manage fund on the go.

Some of the client portals that we're building for hedge fund services as well as other markets, we are looking to extend that on the mobile devices. I think that's a better application for a mobile device and we'll keep on running the accounting system handheld. But I think the executives would like a snapshot of looking at their risk, their liquidity and their business on a mobile device. So that will be an extension of the portals that we're covering.

Okay. That's all for me. Thanks.

Thank you. I have no other questions in the phone queue. I would like to return the program to our presenters for any closing remarks.

Thank you, Matthew. I thank everybody for listening to us on Q3. We look forward to reporting our annual results to you sometime in late February. Thank you.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude the program. And you may now disconnect.