SS&C Technologies Holdings Inc (SSNC) 2016 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the SS&C first-quarter 2016 earnings call.

(Operator instructions)

As a reminder this conference call is being recorded.

I would now like to introduce your host for today's conference, Ms. Justine Stone. Ma'am, you may begin.

Hi everyone. Welcome and thank you for joining us for our Q1 2016 earnings call. I'm Justine Stone, Investor Relations for SS&C Technologies.

On the call with me today is Bill Stone, Chairman and Chief Executive Officer; Norm Boulanger, President and Chief Operating Officer; Rahul Kanwar, Senior Vice President and Managing Director of Alternative Assets; and Patrick Pedonti, Chief Financial Officer.

Before we get started we need to review the safe harbor statement. Please note that various remarks we make today about future expectations, plans, and prospects, including the financial outlook we provide, constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the risk factors section of our most recent annual report on Form 10-K, which is on file with the SEC and can also be accessed on our website. These forward-looking statements represent our expectations only as of today, May 5, 2016. 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 to comparable GAAP financial measures is included in today's earnings release, which is located in the investor relation section of our website at www.ssctech.com.

I will now turn the call over to Bill.

Thanks, Justine.

SS&C reported record adjusted revenues of $343 million in the first quarter of 2016, adjusted diluted earnings per share of $0.74. Integration is going smoothly on the Advent, Primatics, and Varden acquisitions, and their pipelines are robust. On March 11 we closed Citi Alternative Investment Services, giving us $187 million in annual run rate revenue, 265 clients across the world, and 1,400 professionals in North America, Europe, and the Asia Pac. Mike Sleightholme and Joe Patellaro, who run the hedge and private equity businesses, are very capable executives, experts in their fields, and we expect the integration goals will be on track for the next couple of years.

We also announced three executive hires in recent months, individuals with proven track records and fresh perspectives to add to our management team. As we often say, management matters and we are excited to extend the bench to these talented individuals. Ron Tannenbaum has been appointed Managing Director of Business Development for Alternatives in Europe, and was an original partner and cofounder of GlobeOp prior to our acquisition of them in June 2012.

Stephanie Miller is Senior Vice President and Managing Director and joins SS&C after heading up J.P. Morgan's fund administration business for the last several years. Stephanie brings nearly 15 years running top fund administration businesses, and will focus on developing and implementing solutions for the largest global fund managers. Adam Hall, founder of Nervanix, a neuroscience and education company, joins us as Senior Vice President of Global Training and Learning Solutions, and will help SS&C accelerate the next generation of learning solutions.

So as we expand our management team, integrate the Advent, Primatics, Varden, and Citi Alternative Investment Services acquisitions, and move into larger space in our Evansville, Indiana operations center, we are primed for growth.

Now I will turn it over to Norm to take you through some of the operational highlights for the quarter.

Thanks, Bill.

SS&C was able to secure several key wins in the operational goals for the quarter. Advent had their most profitable Q1 ever, achieved through a combination of strong sales and lower cost base. Primatics has dramatically increased their sales pipeline three times, by leveraging the SS&C sales organization, and cross selling across our contacts and client base. We are also working on product extensions and integration between Primatics EVOLV and our mortgage and bank loan services.

We also had several product upgrades announced in Q1. HiPortfolio's latest release has enhanced automation features and improved integrations with other systems. Precision LM, our cloud based loan origination and servicing solution, added comprehensive support for residential whole loan accounting, and will be the underlying platform for our residential home loan accounting services.

SS&C Advent also rolled out next-generation solutions for Black Diamond, Geneva, and APX. We have significantly advanced Black Diamond's reporting and client communications experience. The new features aim to empower the advisors to tell their story through reporting in digital content, encompassing total net worth, income generation, planning, and goal setting. These enhancements helped Black Diamond earn the Best Client Communications Solution title at the 2016 Family Wealth Report Awards. The latest release of Geneva platform adds new operational workflows and efficiencies, and embodies the combined effect of the recent Advent acquisition, technology experts from both sides of the business coming together for the benefit of joint fund administration clients.

I would like to review some of the key deals for Q1. An $8 billion asset manager chose a suite of SS&C Advent products, including APX, Moxy, and Revenue Center as a hosted solution. SS&C won the business of a $50 billion institutional asset manager to host Geneva. A current Geneva fund administration client expanded their relationship with SS&C, licensing e-Investor, our end-to-end investor transaction processing platform.

A large real estate investment manager chose SS&C's Precision LM mortgage software as a hosted solution. Auto insurance carrier licensed a suite of SS&C products, including CAMRA, our investment accounting platform, our performance and performance attribution system, reconciliation, and Antares, our trade order management system. This will be delivered on a hosted solution.

Two West Coast registered investment advisors replaced a competitor's solution with integrated Global Wealth Platform. A wealth manager chose to outsource with Black Diamond because of our trust interface and strong integration with Charles Schwab. And finally a family office chose to outsource with Black Diamond because of our superior performance reporting and flexibility with asset scheme.

I will now turn it over to Rahul discuss alternatives business.

Thanks, Norm.

SS&C's alternatives business saw a 14% increase in revenue for the first quarter of 2016, compared to the same quarter in 2015. During the quarter, we closed the acquisition of Citi's Alternative Investment Services business, which provides hedge and private equity fund administration. Initial client feedback has been positive. We also recently completed the upgrade of the hedge fund services group to the latest version of Advent Geneva, their first major upgrade in several years. We are well on our way with integration and have a lot of confidence in the ability of Michael Sleightholme, Joe Patellaro, and their management teams.

Our private capital group is gaining traction. This quarter we signed on to provide services for one of the largest foundations in the country. Traditionally handled by the custodian banks, SS&C offers an exciting alternative for family offices, foundations, and endowments, with better technology and more expertise in alternative investments.

Shortly after quarter end, Kwang Sin, a long-tenured senior executive of Primatics, assumed the role of General Manager of the Primatics business unit. Kwang and his management team are charged with driving Primatics' growth and strategy forward. Key deals for Q1 2016 include a multibillion dollar foundation chose SS&C over their current custodian to co-source their backoffice accounting and operations. A newly founded investment firm aiming to allocate pension plan assets to similar alternative funds, to smaller alternative funds ranging from $250 million to $1 billion in assets selected SS&C for fund administration.

We were chosen to provide middle and backoffice fund administration for a hedge fund focusing on commodities. This was a competitive takeaway from a large investment bank. A startup hedge fund chose SS&C for fund administration, regulatory solutions, financial statements, and performance and attribution. And a large UK-based investment firm signed on with SS&C to do fund administration, regulatory compliance, and tax services for four of their strategic funds.

I will now turn it over to Patrick.

Thanks, Rahul.

Results for the first quarter of 2016 were GAAP revenue of $324.1 million, GAAP net income of $7 million, and diluted EPS of $0.07. Adjusted revenue was $343.1 million, excluding the adjustment for the acquired deferred revenues for the Advent, Varden, and Primatics acquisitions.

We had a strong quarter. Adjusted revenue was up 66.5%. We expanded our operating margins to 39.4%, and diluted EPS was $0.74, up 23% over 2015. Adjusted revenue increased $137 million, or 66.5% in the quarter. Advent contributed $107.9 million of adjusted revenue in the quarter, and the other three acquisitions including Varden, Primatics, and 20 days of the Citi fund administration business contributed $27.5 million combined.

Foreign exchange had negative impact of $3.1 million, or 1.5% in the quarter. And organic growth on a constant currency basis was 2.2% for Q1. On a pro forma basis, the acquisitions including Advent, Primatics, and Varden combined had revenue growth of 5.8% in Q1.

Adjusted operating income was $135.2 million, an increase of $57.8 million, or 75% from first quarter of 2015. Operating margins increased to 39.4%, from 37.5% in Q1 2015. Operating margins continue to expand in our core businesses and remain strong at Advent. The Primatics and Citi acquisitions temporarily adversely impacted margins, but we expect them to improve over the next four quarters. Advent had 47% operating margins, and annual run rate synergies of $38.1 million.

Adjusted consolidated EBITDA was $141.6 million, or 41.3% of revenue. It increased $60.3 million, or 74% from 2015. Net interest expense for the quarter was $33.1 million, and includes $2.7 million of non-cash amortized financing costs in OID. The average interest rate in the quarter, including the notes, was 4.35%.

We recorded a GAAP tax provision of $8.5 million, or approximately 54% of pretax income. The provision included a one-time deferred tax charge of $5.7 million for the impact on state taxes as a result of the Citi acquisition. We expect the GAAP effective tax rate to be between 20% and 22% for the full year. And we continue to project our tax rate for adjusted earnings to be between 27% and 29% for the full year 2016.

Adjusted net income was $75.4 million, and EPS was $0.74. Adjusted net income excludes $49.7 million of amortization of intangible assets; $15.3 million of stock-based compensation; $1.2 million of acquisition deal costs; $2.7 million of non-cash debt issuance costs; $1.8 million of severance pay related to the Advent and HPA reductions; $0.5 million of capital-based taxes; and $2.6 million, which is mostly related to FX translation of certain balance sheet items. And the effective tax rate we used for adjusted income was 28%.

On the balance sheet and cash flow, as of March 31 we had $101.8 million of cash on the balance sheet, and $2.79 billion of gross debt, for a net debt position of $2.68 billion. Operating cash flow for the three months ended March 16, 2016 was $18.6 million, a $12.5 million decrease from 2015. Cash flow in the first quarter was impacted by our annual employee cash incentive payment, increase in cash interest payment, mainly due to the $17.5 million of semi-annual bond interest that's due in the first quarter, and an increase in accounts receivable.

Highlights for the quarter is we paid $29.8 million of debt, and a total of approximately $290 million in the last three quarters since we closed the Advent acquisition. We used $5 million for capital expenditures and capitalized software. In the quarter we paid $40.8 million in interest expense, compared to $4.6 million in 2015. Cash tax payments in the quarter were $5.1 million. Our accounts receivable DSO was 61 days as of March 2016, was adversely impacted by acquired receivables in the Citi acquisition, and if you exclude the Citi receivables, the DSO was 55 days as of March '16.

For the Citi acquisition, we paid a net amount of $318 million, and that's net of cash acquired in the acquisition. That acquisition closed on March 11.

On financing activities, proceeds from option exercises was $7.6 million, and the tax benefit related to the option exercises were $8.2 million. And we issued -- our dividend in the first quarter was $12.4 million.

LTM consolidated EBITDA, which we use for our covenant compliance, was $585.3 million as of March, and includes $83.1 million of acquired EBITDA and cost savings related to the acquisition. And based on the net debt of $2.7 billion, our total leverage as of the end of March was 4.6 times.

On our current outlook for the full year 2016, our current expectation is that adjusted revenue will be in the range of $1.505 billion and $1.535 billion. And adjusted net income in the range of $321 million and $337.5 million. And diluted shares for the full year between 102.6 million and 103.3 million.

We have assumed that we'll achieve about $38 million to $40 million of synergies with the Advent acquisition for the full year, and our adjusted operating margins for the company will be between 37.5 % and 38.2% of revenue, which includes the impact of the Citi acquisition.

For the full year 2016 we expect cash from operating activity to be in the range of $375 million to $390 million, and capital expenditures to be between 2.5% and 2.8% of revenues. For Q2 we currently expect revenue to be between $378 million and $384 million; adjusted net income between $76 million and $78.5 million; and diluted shares between 102.5 million and 103, million for the quarter.

And I'll turn it back over to Bill.

Thanks, Patrick.

You know we grew organically 2.2% this quarter, and Advent, Primatics, and Varden grew about 6%, 7%, and 5%, respectively. The Citi acquisition has gone extremely well in the last two months and we are seeing opportunity around the globe. The acquisition pipeline is robust and we are generating lots of cash. We are guiding for more growth, and our market and financial position continues to grow stronger.

We'll now open it up for questions.

(Operator instructions)

Chris Shutler, William Blair.

Thank you, this is actually Andrew Nicholas filling in for Chris. First off I just wanted to dive in a little bit to the guidance. Just was curious if you could provide what your organic growth expectations are for both second quarter and the full year, and then also if you wouldn't mind updating on what is included in terms of Citi?

Patrick, you want to take that?

Yes, I'll take that, Bill. So first for the full year, we expect organic growth for the full year to be somewhere between 4% and 5.5% for the full year based on the range in our guidance.

We currently are estimating that the Citi acquisition will contribute approximately $150 million of revenue for the full year, including $11.5 million which we had in Q1.

On Q2, we do have a difficult comp on the license revenue because in Q2 of last year we had one-time extraordinary license of $6.5 million. So that's having a negative impact on our organic growth.

But currently we think organic, we'll see a little bit of a decline somewhere between 3.5% and 2.5%, and that's mostly due to that $6.5 million of extraordinary license we had in Q2 last year.

Okay, that's helpful. So with that said, if you're maintaining the 4% to 5.5% organic growth for the full year, just curious if you could talk about what factors will help you reaccelerate organic growth in the back half of the year, and how much of that has to do with Advent's success, and if you could provide any additional color on Advent's quarter and how that outlook is looking, that'd be helpful. Thank you.

I think Advent grew about 6% in Q1, and I think if you look at Q1 on a pro forma basis, if you include the acquisitions and you compare it to the prior year, I think the total company grew about 3.5% in Q1. So clearly we think that Advent's going to become organic in the second half of the year.

We expect them to continue growing or accelerate a little bit in the second half, and we currently expect to see some improvement in our alternatives business in the second half, and that'll help increase organic growth.

This is Norm. In addition to that, we're obviously investing heavily in our sales organization, and we are seeing some strength in some of the pipelines of our business, like the HiPortfolio solution's got a relatively strong pipeline that's building up. And the cross sales effort that our team is underway for all these new acquisitions, we think will start to pay more dividends in the second half of the year.

Appreciate it. Thank you.

Mayank Tandon, Needham & Company.

Thank you. Bill, just on Citi, could you once again remind us of how does it help diversify your [exporter] across various asset classes, and also has it given you now even more scale to compete on larger opportunities, and finally I'd love to get a sense of the synergies from Citi. What are some of the levers you're pulling to generate those cost synergies, to get the margins potentially up to your corporate average over the next, I believe you've said three years?

Yes, Mayank, I think that what we've gotten with Citi is $185 million, $190 million from revenue, 1,400 people spread out across Asia, Europe, and North America. And 265 clients, and we really have a nice client base in private equity in the Asia-Pacific region, which is a reasonably quick growing region of the world. We also get some real talent from both Joe Patellaro and Michael Sleightholme.

And for instance, we have a pretty strong footprint in India, and Nandini Sankar who runs that for us was able to go to Gurgaon and lease space, build it out, and start moving people. I think we've moved 150 people into our Gurgaon office, our employees, and we plan to have about 400 there, and those 400 will replace 500 people that currently are contractors to Citi. So contractors for Citi, I think, on an all in basis were about 35,000 a year. And all in employees of SS&C are about 17,000.

So that's just one example of upwards $9 million, $10 million where we'll get almost immediate synergy coming from that. You know obviously we've had to move quickly. We have people training those people that came in. But we have very good processes that are controlled in a very great way. And Nandini's done a great job for us, and I know Rahul has been able to stay on top of that as well.

I just think that when you add that we're going to now have 2,500 employees in India, as well as 200 in Beijing, a strong office in Melbourne with DST, a strong office in Bangkok, a strong office in Hong Kong and in Singapore, I think what we have is this footprint that is getting increasingly known.

And in Asia Pacific, Citibank is a really big player. And so when we buy something from Citi, we get a lot of publicity, and we get our name known. And I think that's going to help us.

We're bringing in this expertise like Ron Tannenbaum and Stephanie Miller, and that gives us insights into how other large scale fund administrators such as J.P. Morgan and Citco, both of which Stephanie had senior roles at. And I just think that our knowledge and our capability, Mike and Joe, and I just think that we have a really strong team.

We had our entire senior team from fund administration in New York last week and that went extremely well. We have wonderful products and services being delivered, whether that's FATCA or Form PF or AIFMD Annex IV, or a number of other things.

And so I think our position and our financial strength is something that's really going to allow us to move the Citi into a very, very nice acquisition that will accrete quite nicely into our earnings.

That's very helpful. Just to be clear, are you still modeling the 15% EBITDA margin goal for FY16? And then is the goal still 40% three years out on the Citi transaction through synergies?

I believe those are the numbers, Mayank, I don't think we've changed those and I think maybe we have gotten more confident.

Great, one last -- sure.

Yes. Those numbers are correct for this year and our target, longer term.

Thanks. One last one, Patrick. Did I hear you right? You said that Q2 organic constant currency growth will be down 3.5% to 2.5% relative to 1Q?

Relative to 2Q 2015.

Got it. Thank you.

Sterling Auty, J.P. Morgan.

Hi, this is Mine Kansu in for Sterling. Thanks for taking my questions. Just a quick follow-up on the cost synergies from all your acquisitions actually. How do you characterize the realization of cost synergies based on your plan so far?

Yes, go ahead, Patrick.

I'm not sure I totally heard your question but our target for Advent was $45 million. We're running at about $38 million right now, $45 million at the end of three years, that's our target, already we're running at $38 million after three quarters. Obviously the next $7 million is tougher. We've got to consolidate facilities and consolidate data centers and eliminate third-party software expenses, stuff that takes a low bit longer, but we're obviously very confident now of hitting our target probably earlier than we expect.

On the DST acquisition, I think we've owned them over a year now and our final synergies on that business was about $15 million.

Okay, great. And then just to follow up on macro, regarding your revenue guide, how much worse would the market need to go before there's a cut in your estimates? Thank you.

I don't think that we are nearly as exposed to certain markets as some of the analysts and share owners believe. I think that we have explained any number of times that I think our exposure to equities as defined by the S&P 500 is about 14% of our fund administration business, which is about half of our business, which would put us at about 7% of our revenue would be directly exposed.

So I think that we're in pretty good shape. Obviously if you have another global financial crisis, then we'll have to reevaluate and come out and we're very transparent. But there's no, we don't have any better crystal ball than you do, but we have a great business, we've got great clients, and we believe we have the best franchise in our businesses.

Okay, thank you.

John DiFucci, Jefferies.

Hi guys, this is AJ Ljubich on John. Following up on that, I know, Bill, for some time you guys have been saying you're about 14% directionally exposed to equities. Since the Citi deal has closed, have you guys sort of refreshed that and is it still a relatively consistent directional exposure?

I would say yes. I don't know if Rahul would comment. I think that their client base is pretty similar to our client base. They have large funds that are credit-based funds and commodity-based funds and big business and private equity. Rahul, would you have a comment?

Yes, Bill, I'd confirm that. I think in general the Citi business is more heavily weighted towards private equity, so it increases our total percentage of private equity across the business, and that obviously reduces the exposure to the public equity markets.

Great, thank you. And just a quick follow up. Do you guys have an AUA estimate as of the end of the quarter?

Yes, it's $1.06 trillion.

Thank you.

Rayna Kumar, Evercore ISI.

Good evening. Your organic revenue growth target for the year implies 7% to 8% organic gains in the second half. I guess besides Advent anniversarying, why you expect organic revenue to step up so aggressively?

Well, again, Norm mentioned that we have an increasingly strong sales force. We're getting lot more cross sales that are beginning to roll into our business, and we believe that not only has, will you get Advent accelerating, but I believe Advent has some reasonably attractive comps coming into Q3 and Q4, and we think we'll be able to accelerate that, as well as bringing out, we have a whole suite of new products and services. We have a very capable, I believe the best sales force in the industry, and I think that it is something that we believe is quite achievable.

Great. That's very helpful.

The other thing also is that we're seeing our retention rates improve over last year. So that's going to start helping us out. You know if you look at last year, I think our retention rates are around a little above 94%. And we're now running a little above 95%. So that should also help us out with the second half of the year.

Understood. And could you also discuss your acquisition pipeline and what kinds of acquisitions you're seeing out there?

We're seeing acquisitions where we can buy technologies, financial technologies that complement what we have today. And we also are seeing fund administrators that are coming up for sale. And as you know, SS&C has been a consistent and successful acquirer of both sets of those types of companies. And it's something that we're ready.

Do you still expect Advent adjusted EBITDA margin to expand to low 50% plus margins? And if so, what is your timeline for that?

Again, I think that what you find is, is that Advent's gross margin runs at about 70%. And I think SS&C's gross margins run at mid-50s, mid to maybe a little higher than mid-50s.

And as we institute some of our business processes, as we start leveraging the expertise that is embedded in SS&C to help build out the platform of Advent Geneva and other products and services, as Varden is used to really help the Advent Direct alpha clients that we're hoping to move to Varden, and in that process, we think there's great opportunity to exceed 50%.

Again, we're not being precipitous, we're going to make sure we take care of our clients and we take care of our people. We're going to view it as a long-term goal, and we're going to achieve it.

Thank you.

Ashish Sabadra, Deutsche Bank.

Thanks, Just quickly going back to the second quarter organic growth guidance. Patrick, you also mentioned a $6.5 million difficult comps associated with license revenues in second quarter 2015. But if you exclude that, is there a way to think about organic growth even excluding that?

If you exclude that onetime license and you did a comparison, basically organic growth is around flat to up, maybe a tiny bit, depending on the range we're at for Q2.

Sure. So maybe my question was the organic growth was 2% in the first quarter. Why is it moderating to flat in the second quarter? Is that just conservatism there, or are there other things weighing on the organic growth in the second quarter?

There's a couple factors, obviously we have to execute on sales, but one of the factors is the revenue fluctuations relative to tax and common services over the course of first quarter versus the second quarter. So the timing of that has an impact to some degree.

Okay, that's helpful. And just quickly on the alternatives business, the 14% growth, is there a way to think about, I believe that includes Citi as well. Is there a way to think about that number excluding Citi, like how does that compare to the 5%, 5.5% that we saw in the fourth quarter of 2015?

I'm sorry, I didn't understand the question.

The alternative businesses revenues grew 14%. And does that include Citi, and is there a way to --

That does include Citi.

And is there a way to think about what the organic growth there would be, so we can compare that against the 5.5% we saw in the fourth quarter? Is there a way to compare that?

I think the alternatives business organic growth was around 5% in the first quarter excluding acquisitions.

And then just quickly, Patrick, you mentioned that the retention levels have gone up. How should we think about the alternatives organic growth progressing through the quarters?

Through the second half of the year?

Yes.

If you look at Q1 and you look at a pro forma basis, if you include all the acquisitions except for Citi, because that was only a partial quarter, I think I said we grew 3.5% in Q1.

So when we look at the second half of the year, to hit our targets for the year we've got to grow 6% to 7% in the second half of the year. And if we're running at 3.5% right now and we get an uplift on retention of 1%, and then we get some improvement in the alternatives business, and some of the asset management business, that's basically how we think we get there in the second half of the year.

And when we look at our opportunities and our pipeline, and how well some of the acquisitions are doing, specifically Advent, then that's how we get comfortable we can hit those targets in the second half of the year.

Okay. Thanks for the color.

Brian Essex, Morgan Stanley.

Good afternoon, thank you for taking the question. I was wondering if you could touch first on the Citi customer base and attrition within that base and how you're progressing in stabilizing that attrition.

Sure, I'll take that. I think in general there were some customers that were not included as part of the deal, in the sense that while this business was in the process of being sold, there were customers that had done market searches and decided to move away, so they are not included in what we acquired.

Since that point, attrition has been, or retention has been very, very strong. We're in constant contact with the customers. There's been very little if any [retention]], and as Norm said earlier, we're seeing opportunities to be able to grow into that client base with additional products and services.

And is there a way to think about, when you acquire a business like this, what you do differently that adds value incrementally over the way that maybe a Citi or other large financial institution viewed that business as part of its larger organization?

I think for us it's a few different things, right? It started with, I just said we're in constant contact with customers, right, so this is an incredibly customer focused place. We're talking to them. We're taking away their input and we're trying to use that to improve their experience.

I think the other thing is we get a lot of leverage from the ownership of technology. A lot of what impacts satisfaction in the customer experience is how quickly you can deploy new functionality and how quickly you can enhance and improve current functionality. And that obviously is one of our stronger points.

So I think a combination of that, and plus this is an important business for us, and it gets a lot of focus. All those things go to making it run better and run smoother and we've got a really good quality management team that we inherited with the Citi acquisition in particular, and so supporting them and empowering them and letting them perform are all things that are helpful in that process.

And also I think that if you look at our overall revenue, the fund administration business in SS&C's overall revenue is about $750 million out of $1.5 billion.

If you look at Citicorp's overall revenue it's $19 million and this was a $200 million business. So $50 million a quarter in revenue on a $4.8 billion or so revenue stream doesn't get a lot of management attention.

Whereas in our business, out of the $380 million we do in the second quarter, $190 million of it is going to be from fund administration services. So you can imagine the focus it gets.

Very helpful. And if I can squeak in one last one. [What would give you -- is one of levers for hitting your guidance targets for the remainder of the year. What gives you confidence around the alternatives business that you're going to see improvement there, enough to move the needle?

I think we have a really robust pipeline, right, and we have, knock on wood, great opportunities in which to grow our business. We have won a lot of business both in the fourth quarter and in the first quarter, and we believe that those dollars are going to start flowing through our business, as people raise capital, launch their funds, and also view us as a great alternative to current fund administrators.

Okay. Great. Well, thank you very much.

(Operator instructions)

[Christian Love], Sandler O'Neill.

Thanks, good evening. Looking at the monthly GlobeOp forward redemption numbers, it suggests that hedge funds are not facing increased redemptions, as recent year-on-year comparisons have been favorable. I find this somewhat surprising given the recent market volatility in 4Q 2015 and 1Q 2016. Is there anything in the GlobeOp sample that may cause it to differ from the broader market of hedge funds?

We don't think so. If anything it right trend a little bit towards larger, more multi-strategy, more complex, right? And as we've talked about, as Bill mentioned, with the equity exposure comment, those types of fund tend to be less correlated to the equity markets and therefore the redemptions, etcetera, don't track the markets quite as closely.

Okay, thanks. And to follow up on that, are you seeing any signs of concern among investors in hedge funds or other alternative assets?

We are not, no.

Okay, thank you.

Thank you. And I'm showing no further questions at this time. I'd like to turn the conference back over to Mr. Bill Stone for any closing comments.

You know once again we had a great quarter in Q1 and I'm here in Evansville, Indiana where we just did a ribbon-cutting at our new facility in Sterling Square. We had Governor Pence and Mayor Winnecke with us.

There's a lot of momentum here. We are excited about what our opportunities are and we look forward to talking to all of you after Q2. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.