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SS&C Technologies Holdings Inc (NASDAQ:SSNC)
Q2 2019 Earnings Call
Jul 29, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Cheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the SS&C Technologies Q2 2019 Earnings Conference Call. [Operator Instructions]

Justine Stone, you may begin your conference.

Justine Stone -- Investor Relations

Hi everyone, welcome, and thank you for joining us for our Q2 2019 earnings call. I am 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 the purposes of the 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, 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, July 29, 2019. 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.

William Stone -- Chairman of the Board and Chief Executive Officer

Thanks, Justine, and thanks, everyone. Our results for the quarter are $1.155.8 billion in adjusted revenue and we earned $0.91 in adjusted diluted earnings per share. Our adjusted consolidated EBITDA was $448 million, bringing our adjusted EBITDA margin to 38.8%. Q2 organic revenue growth was 3.6%. Adjustments made to organic revenue growth include FX, DST out-of-pocket revenue, which we've spoken about before is zero margin and lost clients from DST prior to the acquisition closed [Phonetic]. Patrick will walk you through the exact numerical amounts in his talk.

We have also included a slide deck of our earnings release, which can be found on our Investor Relations website under Quarterly Results. We will update the slide deck quarterly. Topline performance was driven by several businesses. Our alternatives business grew over 5% and 4.8% organically and our real assets business is thriving. Geneva, our best-in-class portfolio accounting system had a strong licence quarter and our RIA Solution Black Diamond continues to post double-digit growth. Black Diamond now has over $1 trillion in assets across 1,400 customers.

We are also seeing the DST sales organization moving more to up to a more aggressive and proactive culture, the cross-sell and upsell opportunity at existing clients is massive and we are starting to see these opportunities come to fruition. Waddell & Reed marks the latest example of firms moving from an in-house technology solutions to outsourcing with us.

In the past two years, 20 of our largest clients have outsourced some or all of their operational functions to us. We expect this trend to continue as asset managers focus on their core competencies and move toward cost effective variable expense operating model. Inorganically, the M&A market is very active. We were able to incorporate financial record keeping from a wider range of end-markets including international opportunities with our leverage ratio at 4.21, consolidated EBITDA, we have ample capacity for high quality acquisition.

I'll now turn it over to Rahul.

Rahul Kanwar -- President and Chief Operating Officer

Thanks, Bill. We had a strong quarter with innovation, sales performance across the business, good future pipeline development and continued integration. Innovation remains at the forefront. We are investing in a number of new products and services across our business. These include Singularity, our smart cloud-based investment in operation system; Core, our central data gathering and enrichment system and sideline [Phonetic], which allows for advanced visualization on large and complex datasets. We delivered enhancements to our business process management solution, known as AWD, which is particularly relevant to the financial services, insurance banking and healthcare industries, which are data-intensive and complex processes. Our services and outsourcing business remains strong. Highlights include our private equity and real assets business, which continue to win new mandates and gain market share. As investment firms search for operating leverage, our suite of products and services designed to simplify scale and transform their operations is gaining momentum.

We continued during the quarter to integrate the newest additions to SS&C Intralinks and Eze. Eze is now selling more into larger and traditional asset managers, which was one of our objectives for this acquisition. There are new product the Eze Eclipse platform is a cloud-based solution that further differentiates us in the marketplace. As Geneva and GlobeOp give us a unique front, middle and back office offering. At Intralinks we're seeing progress in the alternatives business combined with our fund administration business. Seven out of the top 10 M&A deals in North America used Intralinks in 2019 and we continue to invest in next generation capabilities, including artificial intelligence to derive insights from deal room data.

Now, I will mention some key deals for Q2 2019. A Chinese fund administrator chose Geneva as the portfolio management system for the $100 billion plus assets under administration. A $12 billion asset manager and Advent client for over 25 years, upgraded their on-premise software to our hosted outsourced services model. A $4 billion asset manager and longtime access client upgraded their system to Black Diamond.

One of the world's largest private equity firms chose Intralinks' investor reporting [Indecipherable]. The Hong Kong-based hedge fund chose the combination of Eze's front-to-back solution and SS&C GlobeOp fund administration services. An existing fund administration client took on more services from SS&C GlobeOp including Investor Services, regulatory reporting and tax services. An existing SS&C Health client chose our business process management platform AWD to streamline their operations. An existing client in DST Asset Management chose DST digital solutions for their statement composition and design.

I will now turn it over to Patrick to run through the financials.

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

Thank you. Results for the second quarter were GAAP revenues of $1.148 billion, GAAP net income of $121.1 million diluted earnings per share of $0.45. Adjusted revenue was $1.155.8 billion, excluding the adjustments for implementing the new revenue recognition standard and for acquired deferred revenue adjustment for the DST Intralinks acquisition. Overall, we had a strong quarter adjusted revenue was up 27%, adjusted operating income increased 56.8% and diluted EPS was $0.91, an increase of 46.8% over 2018.

Adjusted revenue increased $247.3 million. The acquisitions of DST, CACEIS [Phonetic], Eze and Intralinks contributed $244.3 million. Foreign exchange had an unfavorable impact of $90.2 million or 1% in the quarter. DST pre-acquisition terminated clients and the reduction of out-of-pocket revenue impacted the quarter for $20 million. Organic revenue growth on a constant currency basis and adjusted, adjusting for the reduction of the DST revenue was 3.6% and driven by strength in the alternatives in Advent businesses. Adjusted operating income for the second quarter was $426.2 million, an increase of $154.4 million or 56.8% over Q2 2018 . Foreign exchange had a positive impact of $8.2 million on expenses in the quarter.

Operating margins improved sequentially from 36.6% in the first quarter to 36.9% in the second quarter. DST operating margins were 33.8% in the second quarter and the annual run rate implemented cost synergies reached $288 million as of June 30, 2019. Adjusted consolidated EBITDA was $448.2 million or 38.8% of adjusted revenue, an increase of 53.6% of our Q2 2018. Net interest expense for the second quarter was, was $104.3 million and includes $4.5 million of non-cash amortized financing costs and OID. The average interest rate in the quarter for our credit facility and our senior notes combined was 4.96% compared to 4.39% in the second quarter of 2018. We recorded a GAAP tax provision in the quarter of $34.2 million or 22% of pre-tax income. We currently expect the GAAP tax rate to be approximately 23% for the full year.

Adjusted net income was $241.6 million and adjusted EPS was $0.91. The adjusted net income excluded $158.8 million of amortization of intangible assets; $18.2 million of stock-based compensation; $4.4 million of amortization non-cash debt issuance costs; $12.1 million of purchase accounting adjustments, mostly deferred revenue adjustments and depreciation related to revaluation of assets; $3.9 million of revenue adjustments related to adoption of revenue standard 606; and $26.3 million of non-operating net gains, including a $29.5 million gain from mark-to-market adjustments on investments net of $4.5 million of severance cost related to staff reductions. The effective tax rate used for adjusted net income was 26%.

Diluted shares increased 7.3% over Q2 '18, mostly due to shares issued the Intralinks acquisition in the fourth quarter of 2018 and employee stock option exercises. On our balance sheet and cash flow as of June, we had approximately $131 million of cash and cash equivalents, and approximately $7.9 million of gross debt for a net debt of approximately $7.8 billion. Operating cash flow for the six months ended June was $416.6 million, a $296.9 million or 248% increase compared to the same period in 2018.

Couple of highlights for the six-month period ended June, we've paid down $414.9 million of net debt year-to-date and that brings the total paid since the DST acquisition in April 2008 to $1.339 billion. We paid $73.5 million of cash interest, compared to $100 million the same period last year. The unsecured note interests is due semi-annually in September and March. So we did not make a payment on the unsecured notes in the second quarter. We paid $125.8 million, cash taxes, compared to $67.9 million in the same period last year. Our accounts receivable DSO improved in the quarter to 51.8 days compared to 53.7 as of March 2019. We used $59.5 million of cash for capital expenditures and capitalized software, mostly for IT and leasehold improvements.

Our LTM consolidated EBITDA used for covenant compliance was $1.853 billion as of June 2019. Based on a net debt of $7.8 million, our total leverage ratio was 4.21 as of June and our secured leverage ratio was 3.13 as of June 30. An outlook for the third quarter of 2019, our current expectation for the third quarter is adjusted revenue in the range of $1.123 billion to $1.153 billion. Adjusted net income of $227.5 million to $243.5 million and diluted shares in the range of $266.4 million to $267.6 million. Our current expectation for the full year is adjusted revenue in the range of $4.571 billion to $4.631 billion. Adjusted net income of $947.5 million to $988.5 million and diluted shares in the range of $265.7 million to $266.7 million. We continue to expect that the adjusted tax rate will be 26% for the full year. Cash from operating activities will be in the range of $1.50 billion to $1.80 billion in capital expenditures in the range of 2.6% to 2.8% of adjusted revenue.

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

William Stone -- Chairman of the Board and Chief Executive Officer

Thanks, Patrick. We continue to work hard for our shareholders even though our growth has slowed, we believe that we are putting the things in place to start to accelerate it again. Our three 2019 acquisitions have encountered some headwinds. Trading volumes are down across all three and this will impact Eze's network fees by about $10 million for the rest of the year. We have also seen M&A slow and with that slowing Intralinks revenue growth will slow by about $23 million. Finally, DST has attrition and revenue for the year is expected to be down $53 million from our guidance at the end of Q1. Obviously, our core businesses are also in Financial Services, which have slowed and trading has slowed and so we're going to have some trade win, some headwinds in there and we expect that the overall core business to be down about $32 million.

With all that at the midpoint, we're going to be at $4.6 billion in revenue, which is up about 34% from last year and our earnings again will be considerably stronger than that. And as we announced last week, we believe the new management team at SS&C Health has a tremendous opportunity to grow. Sean Hogan, our new President of SS&C Health will be responsible for both our Health and Pharmacy Solutions Group and is in-charge [Phonetic] growing new businesses; Rob Kulis, President of SS&C Health Solutions is focused on extending SS&C's position in claims and medical management, planned growth and advisory enablement; and Marc Palmer, President of Pharmacy Solution, who has been with our team since 2014 is responsible for providing technology enabled solutions that improve clinical and financial outcomes for clients. We're excited about this team and expanding our market position and maximizing our exclusive relationships with Johns Hopkins going forward.

I will now open it up for questions.

Questions and Answers:

Operator

[(Operator Instructions] The first question comes from Brad Zelnick of Credit Suisse. Please go ahead, your line is open.

Brad Zelnick -- Credit Suisse -- Analyst

Great. Thanks so much for taking the question. Bill, I appreciate your commentary and some of the numbers that you gave us in your final remarks bridging from the prior guidance to your current outlook for the full year. But I specifically wanted to drill down into the DST revision downward $53 million from where you were guiding out of Q1. Can you just talk us through what's changed more specifically, is that relationships that you expected to endure that maybe now are leaving? Where they're heading to because I thought this was a stickier kind of business with very high switching costs for the customer?

William Stone -- Chairman of the Board and Chief Executive Officer

Well, I mean that's a good question, Brad. I think, realize that you're talking about $2.2 billion business, right? So when you talk about $53 million that sounds like an enormous amount of money, but it's just really tied up in a few customers and some of the attrition in DST prior to us acquiring them, they were able to get off quicker than we had expected and I think that you're going to have some attrition. I think the business is way stronger. We're earning way more money and the changes to the business and the operating model and the sales culture and the cross-sell and up-sell and getting releases on their technology out on time and we've made three releases on the advanced workflow distribution system AWD and that's made a huge impact in our client.

So I think there's a lot of things that we're doing right and you know there is a kind of a slowing on WallStreet right now, but that is not exactly putting wind [Phonetic]in our sales, we have things like large fixed network fees and and we have our own data business and so none of those things are really adding to any growth whatsoever. And I think that's what's really happened. And we're still optimistic on DST. We have lots of things. Sean is a really talented guy and with Rob and Marc Palmer, we think we have a great group there and we've made changes across financial services, whether it's people like Bernie O'Connor or putting in Mike Sleightholme or bringing in a whole new group of managers, probably 10 of the senior people from DST have left in the first 7-8 months of 2019 and we're rebuilding and rearming and we think that we'll will end up with a really great business that's growing in mid single digits relative going to take us a couple of more quarters than we expected.

Brad Zelnick -- Credit Suisse -- Analyst

Thanks for the perspective Bill, and maybe just a follow-up, I mean look, there's clearly a lot of bright spots and good things happening within the portfolio, but in light of what you characterize is just a broader slowdown in Financial Services. If we think about the expense structure and maybe a question for Patrick. How do you think about the investments you're making? The hiring plans going into the remainder of the year in light of these various pressures, whether it's in the context of synergies that you're able to deliver on the deals that you've done or even in the core business? Any updated thinking there would be helpful? Thanks.

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

Well, as you know, we manage our expenses pretty tightly and as people understand when they don't hit their revenue target, they're not going to hit their expense target either. So we've implemented plans and again, we're still going to generate close to $1 billion in free cash flow and we're paying off debt quickly. I think we paid off $1.339 billion since the DST acquisition and so we're going to continue to do those things and and we're still going to invest in products that we think we're going to give us competitive edge. We're still winning large deals and I think that will continue.

Brad Zelnick -- Credit Suisse -- Analyst

Okay, thanks a lot. I'll get back in the queue.

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

If you look at the guidance we provided for the quarter, I think you'll see that, obviously we talked about the revenue reduction, but we've also got cost controls that we're putting in place and the plan is showing reducing costs from our previous guidance.

Brad Zelnick -- Credit Suisse -- Analyst

Thanks, Patrick.

Operator

Your next question comes from the line of Dan Perlin of RBC Capital Markets. Please go ahead, your line is open.

Dan Perlin -- RBC Capital Markets -- Analyst

Thanks. So, Patrick, I just trying to make sure I understand what's the -- what are you embedding based on this definition that is used for organic growth in third quarter and then for the full year, so let me to start there first?

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

Yes, sure. So, right now, what we're seeing and what's embedded in the guidance for Q3 and Q4 is approximately $10 million of FX in the six months and about $38 million of DST loss clients that we were notified prior to the acquisition.

Dan Perlin -- RBC Capital Markets -- Analyst

Okay. So is the -- OK, so, you're suggesting it's going to be running below the 3% plus range in the back half of the year, is that what you're calculation [Indecipherable].

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

I think at the midpoint, it will probably -- I mean it will run in the range of 1% to 1.5% at this point.

Dan Perlin -- RBC Capital Markets -- Analyst

Okay. Bill, when we talk about, [Indecipherable] things you're talking about getting back to the mid-single-digit growth rates as a Company and it's taken a couple of quarters, I mean this seem to unravel pretty quick and you've always prided yourself on being able to kind of hit EPS numbers even if organic growth going to be down, and this quarter kind of a lot of those things actually fell apart in the kind of calculus and so I'm just trying to understand why you think you can get this thing back of the mid-single digits when I think a lot of these acquisitions maybe ended up surprising -- certainly surprised us, but maybe they surprise you guys as well?

William Stone -- Chairman of the Board and Chief Executive Officer

Well, again I wouldn't say that they performed exactly like we had thought they would or had expected they would. But they're still good businesses and we don't have to you know -- I think second quarter was actually really good. Frankly, its record earnings, record revenues until it's not second quarter that was a problem, Dan, I think it's maybe the third and fourth quarter that are more of a problem and we -- it's not like we don't have chances. We got chances, but it in these kinds of somewhat headwinds, you have to execute at a very, very high level and make -- getting the team to work together and recognize that some of the things we have, we'll work with two systems, right. You don't need to build two of them. But, if it is a big organization now with lots of people and lots of things that you have to change and I think that's something that the intensity level in different parts of the business will probably be ratcheted up over the next several quarters.

Dan Perlin -- RBC Capital Markets -- Analyst

Okay. Thank you.

Operator

Your next question comes from Alex Kramm of UBS, please go ahead, your line is open.

Alex Kramm -- UBS -- Analyst

Yes. Hey, thank you. Just to clarify again, I think, Patrick you just said, at the mid point 1% to 1.5% organic growth was that a 3Q comment or for the full year, maybe just give us to two periods separately please?

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

Yes, that was the range for the second half. But right now at the midpoint, the full year is about 1.7% and the third quarter is about 1.4%.

Alex Kramm -- UBS -- Analyst

Okay, great. And then thank you. And then just maybe just the second quarter again. I mean, I'm just looking about up what you changed here in terms of the organic growth presentation. If I think about this correctly, I think you said last quarter that you thought organic growth is going to be less than half of a percent, if I take that adjustment out I still get to I think 1.3% or so I just want to make sure I'm comparing the numbers correctly. Did organic growth actually come in a little bit better than you thought for the second quarter and if so why or am I just not comparing these numbers correctly with the new presentation?

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

No. So, the -- as we said earlier, we included the [Indecipherable] clients putting up pre-acquisition. We're at 3.6%, net loss revenue was $16.1 million in the quarter. So, that takes, that helps see organic growth by about 1.8%. So, we were at about -- under the old calculation, we were up by 1.8% organic growth, which is definitely an improvement over the guidance.

Alex Kramm -- UBS -- Analyst

Any particular reasons why? Sorry, pr anything that there was better than you had expected?

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

Yes, we had --

Rahul Kanwar -- President and Chief Operating Officer

We had a, sorry, Patrick. We had a pretty good quarter in alternatives, but we had a particularly strong quarter in our Advent license business and so those are some of the reasons.

Alex Kramm -- UBS -- Analyst

Okay. Thank you.

Operator

Your next question comes from Rayna Kumar of Evercore ISI. Please go ahead, your line is open.

Rayna Kumar -- Evercore ISI -- Analyst

Hi, thanks for taking my question. The $53 million reduction in the DST revenue, is that related to the Financial Services business or the healthcare business? And if it's both how much comes from each business?

Rahul Kanwar -- President and Chief Operating Officer

It is wide. It is across the business. I don't, have the exact across each group, but I would suspect, probably two-third's of it is out of the financial services business and the rest are the healthcare.

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

And it -- takes the majority of the financial services is from Europe.

Rayna Kumar -- Evercore ISI -- Analyst

Understood. If you could also help us -- give us an idea of the alternatives organic revenue growth that you're expecting, specifically for the third quarter and then for 2019 as a whole?

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

We're expecting about 4.2% in the third quarter and about 4.2% for the full year at the midpoint of the guidance.

Rayna Kumar -- Evercore ISI -- Analyst

Thank you.

Operator

Your next question comes from Andrew Schmidt of Citi. Please go ahead, your line is open.

Andrew Schmidt -- Citi -- Analyst

Hey, guys. Thank you for taking my question. Quick question on the core business. You mentioned a $32 million reduction, I wonder -- I was wondering if you could talk about, to what extent the reduction is -- market really is the factor versus attrition, and other factors, just to drill down a little bit there that'd be great?

Rahul Kanwar -- President and Chief Operating Officer

So you think there is a few different things going on. One being, as Bill said that in general the environment with reduced trading volumes and some slowdown in the pace of activity has a impact on the demand environment across our business. So that's probably a part of it. I think we are seeing a little bit of an overhang in our hedge fund business is kind of one example. And then I think in our software businesses, particularly in Advent, we still have a little bit of a comp issue with 606 and revenue is recognized on renewals and that's a part of the issue.

Andrew Schmidt -- Citi -- Analyst

Got it. That's helpful. And then, switching back to DST. So wondering if you could talk about to what extent the attrition you're experiencing continues into FY '20 and then at what point do you think the initiatives you set in place can offset some of the incremental attrition you've recently experienced?

William Stone -- Chairman of the Board and Chief Executive Officer

Yes, I think that I think that -- I think Sean started three weeks ago, so we're not going to load him up with too much just quite yet. But we think he will start having an impact toward the end of this quarter and then the fourth quarter. But these are large contracts and the revenue doesn't start flowing until sometimes 60 days to 90 days after after you sign them, in some cases six month after you sign them. So we still have a bunch of revenue that we're still getting ready to start recording, but it takes time to get them installed and get them processing. So -- but I would think that by the second quarter of next year, we should have all kinds of new singularity sales of new integrations with AWD and precision LM and opportunities throughout the transfer agency business with some of the stuff that we've done in AI and machine learning and robotic process automation. But the stuff takes time to get people to adopted and we have all kinds of enthusiasm, that doesn't count for much revenue. We need to get the revenue, we need to get the ink on the contracts and get the people installed and we need to have an intensity kick up.

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

I think it's important to note that the -- the major part of what's impacting the DST revenue, our clients that terminated pre-acquisition that are now coming off the platform. But if you look at DST revenue retention, since we've acquired them, where you look at revenue retention over the last 90 -- last 12 months, it's averaging at about 96%. So, we've had pretty good retention at DST since we acquired them, but we're getting impacted by some of the terminations pre-acquisition.

Andrew Schmidt -- Citi -- Analyst

Okay. That's helpful. But just to be clear that incremental $53 million is attrition post the acquisition correct, was completed?

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

The attrition post acquisition for the year of '19 is somewhere around 20 million for '18. A lot of the slowdown is the pre-acquisition terminations and and some of the professional services work that's not being replaced.

Rahul Kanwar -- President and Chief Operating Officer

Yes, OK. I think the other, the other kind of point is we're comparing guidance to guidance, right. So included in our guidance that at the end of the last call for DST had a sales projection in it. So it's not all attrition and lost clients, it is also, as we're going out in the marketplace and we're competing for these big deals like Bill said, getting ink on paper and then getting that revenue started is a process and we're finding that's taking more time than we had anticipated.

William Stone -- Chairman of the Board and Chief Executive Officer

And I think the total amount of revenue that had been terminated prior to our acquisition was $119 million of which $80 million has already been absorbed, but there is still $39 million to go. So if the $53 million -- if that $39 million is probably not completely in that $53 million because that $39 million might run off some in 2020. But it all depends on how quickly -- very large organizations can get off a platform that is someone says very sticky.

Andrew Schmidt -- Citi -- Analyst

Understood guys. Thanks for the walkover [Phonetic]. I appreciate it.

Operator

Your next question comes from Surinder Thind of Jefferies. Please go ahead, your line is open.

Surinder Thind -- Jefferies -- Analyst

Good afternoon. Couple of quick questions here. Just revisiting the organic growth, is there a way that you can perhaps simplify it or give pro forma number, there's lots of different growth numbers out there, but if we just think of it in terms of all of the acquisitions having closed, maybe at the beginning of 2018. What does that organic growth number in 2019 look like, excluding the -- obviously the adjustments for DST? Are you able to provide that number and then maybe what the breakdown might be at the individual level in terms of like as in Intralinks, DST and core?

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

You mean pro forming 2018 for the acquisitions?

Surinder Thind -- Jefferies -- Analyst

Correct, yes. If what 2019 looks like versus 2018 on a pro forma basis?

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

[Speech Overlap] numbers.

Surinder Thind -- Jefferies -- Analyst

I apologize I didn't hear that.

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

We haven't prepared those numbers pro forma.

Surinder Thind -- Jefferies -- Analyst

Okay understood. Maybe a different big picture question here. Following up on an earlier question about the cost structure. At what point do you guys think about or how much -- how lean are you currently running in? It is maybe the better would asked this question in terms of the flexibility that you might have, if we were to kind of remain around the current growth rates of flattish to maybe slightly positive?

William Stone -- Chairman of the Board and Chief Executive Officer

We we ran the second quarter at 38.8% EBITDA margins. We have opportunities wherever we want to have opportunities. The growth rate impacts us a little bit, but it doesn't really impact us that much on how much cash we generate or even how much earnings. Our adjusted earnings last year were $2.92 and I think at the midpoint, our adjusted earnings are going to be $3.63. I don't know, I know you guys [Indecipherable] portfolios, I know, but I think that's 20%, rather it was $4 instead of $3.63. But as far as a Company that is very profitable, we think in general, pretty well run, perhaps we could forecast better and I wish we had, but we didn't. So, it doesn't mean we've just started eating [Indecipherable]. We'll figure this out. We figured it out all the time before. We'll figure out this time and we'll start growing again. We always had before and we will now.

Surinder Thind -- Jefferies -- Analyst

Okay. Hard to argue with your track record of execution. That's it from me. Thank you.

Operator

Your next question comes from Ken Hill of Rosenblatt Securities. Please go ahead, your line is open.

Kenneth Hill -- Rosenblatt Securities -- Analyst

Yeah, thanks. So, I had one question on one of the deals you mentioned in your prepared remarks, the Waddell & Reed deal outsourcing some functionality. There was some core transfer agency services. Can you outline the size of the type of deal? And maybe if kind of shying away from specific numbers or just kind of think through the market and the opportunity set for what else is kind of still out there given I think you have 20 of your largest clients outsourcing to you guys right now. So just kind of trying to get a grasp on what's still left there?

William Stone -- Chairman of the Board and Chief Executive Officer

Yeah, I think one of the things to think about is that they're not outsourcing everything to us. So a lot of these places still have huge internal workforces that increasingly become expensive and giving the attention of the senior executives at the large-fund companies and other financial institution, we still think there is in the enormous opportunity. Waddell & Reed is a great, great company. We got a nice deal with them. I think the -- it will be double-digit millions in revenue, but it's not going to be as much as some people are forecasting, it's not $30 million, $40 million a year, it's less than that, but it's still a very good deal and it will be profitable for us and it's also a great name that that we can really showcase a number of our products. So we're excited about that, but there is probably if you just take the top 50, there is probably several hundred million dollars with an outsourcing opportunity in the top 50.

Kenneth Hill -- Rosenblatt Securities -- Analyst

Okay. I appreciate the color on that one. One question then on a smaller piece and they kind of shy away from giving organic growth for some of the newer acquisitions, which I don't believe are included in your organic growth rate right now. But just on -- specifically, I think you noted some headwinds there, but also had some good client sign up since the last quarter, just wondering if you could talk about maybe the revenue growth trajectory and for that business.

William Stone -- Chairman of the Board and Chief Executive Officer

Yeah, the Eze's [Phonetic] business has been basically flat, really. But they've done a great job on managing their expenses. Their EBITDA margin is up. They have a big fixed -- big fixed business, but they get paid when trading volume drop off, so does the payments that they get. But generally things come back and we like the team we have and we're optimistic and as eclipses as we noted just signed their 70th client. And so we're cautiously optimistic.

Kenneth Hill -- Rosenblatt Securities -- Analyst

Okay. Thanks for taking the questions.

Operator

Your next question comes from Peter Heckmann of Davidson. Please go ahead, your line is open.

Peter Heckmann -- DA Davidson & Co. -- Analyst

Good afternoon, thanks for taking my question. On the Eze side, when you think about lower trading volumes and how that moves around and then you look out a little bit further, is there an opportunity with I believe Bloomberg is going to sense that their order management system, is there an opportunity to really break out, it could be more of a leader there when you combine it with Geneva and GlobeOp and really take some share amd that business that you think can grow double-digits organically over the next three years?

William Stone -- Chairman of the Board and Chief Executive Officer

Yeah, I -- we would have the kind of the opposite. We don't think that Bloomberg is going to retire their system. In fact, we compete against them often. But I think you know to say double-digit growth on a $300 million business over the next three years, I think would be optimistic, but I do think we can get to mid-single digits. But, we have a pretty good sales force and Jeff Shoreman is a pretty good leader. So I think we have a great opportunity to maximize what we can get out of as that [Indecipherable].

Rahul Kanwar -- President and Chief Operating Officer

Also, just to add to that, what they are doing successfully is going up market. So we have been able to get more traditional asset managers to buy in larger chunk than in the past and we think that will continue.

Peter Heckmann -- DA Davidson & Co. -- Analyst

Got it, got it. And then, Patrick, today you say there is a $0.5 million one-time gain in the quarter from an asset sale?

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

No, it's a non-cash mark-to-market gain.

Peter Heckmann -- DA Davidson & Co. -- Analyst

Mark to market, OK.

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

We adjusted it out of adjusted earnings.

Peter Heckmann -- DA Davidson & Co. -- Analyst

Thank you very much.

Operator

Your next question comes from Chris Shutler of William Blair. Please go ahead, your line is open.

Chris Shutler -- William Blair -- Analyst

Hey guys, good afternoon. You called out the 1.8% organic in Q2 if you include the DST clients loss prior to the acquisition. Could you just give us the comparable number for Q3, Q4 and the full year under that definition?

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

I think under that -- so at the midpoint, we're saying, organic growth of about 1.7%, excluding those -- with the impact of those terminated clients and those terminated clients are adjusting organic growth compared to the previous [Indecipherable] by about 1.6%. So under the old method or if you excluded that it would be about flat.

Chris Shutler -- William Blair -- Analyst

Okay, got it. And then, Patrick, could you break out the revenue contribution in the quarter from each of the acquisitions DST, Intralinks etc?

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

Yes. DST remember is only half a month, right. It's only the half a month -- DST is $91.8 million as an Intralinks combined are $152.9 million -- sorry $150.8 million and then CACEIS [Phonetic] is $1.7 million.

Chris Shutler -- William Blair -- Analyst

Okay, perfect. Thanks for that. And then, sorry just a bunch of different items that were mentioned pretty quickly. Could you run through the -- you talked about the different headwinds, could you run through what you said for each of the businesses against Eze as trading volumes in $10 million and just could you be clear on the time-frame. So was it -- were all of the items you mentioned relative to the prior guidance?

William Stone -- Chairman of the Board and Chief Executive Officer

Yes, they are all relative to the prior guidance and its impact on full-year guidance.

Chris Shutler -- William Blair -- Analyst

Okay. In the 4.2% that you mentioned earlier was the health business in the quarter?

William Stone -- Chairman of the Board and Chief Executive Officer

The health business in the quarter was I think over 5%, 5.3% and it was 4.8% organic.

Chris Shutler -- William Blair -- Analyst

Okay.

Rahul Kanwar -- President and Chief Operating Officer

It was 4.2% was the Q3 organic, that's in the guidance for alternatives.

Chris Shutler -- William Blair -- Analyst

For the back half.

Rahul Kanwar -- President and Chief Operating Officer

Just Q3.

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

Q3, 4.2%, full-year of 4.2%.

Chris Shutler -- William Blair -- Analyst

Okay, thank you guys.

Operator

Your next question comes from Chris Donat of Sandler O'Neill. Please go ahead, your line is open.

Christopher Donat -- Sandler O'Neill -- Analyst

Hi, thanks for taking my questions. Just wanted to follow up on the last question and deal with the tail-end of your prepared remarks on Eze and Intralinks. Can we expect that sort of volatility or variability in earnings out of them tied to trading volumes and M&A activity going forward? I mean, I know that what's taken away can sometimes be added back in a better environment. I'm just trying to get a sense on, on how much you have like the incremental margins of like 80% or 90% or 70% or something on these businesses when times are good, but then sometimes times aren't as good?

William Stone -- Chairman of the Board and Chief Executive Officer

Well, I don't think that they have both put in some reasonable expense controls given that they had a little softness in revenue. But we don't look at it as particularly volatile. It is something where we're getting similar kind of statistics that we track, that would say that we should be generating more revenue than we are. But I think that has to do with how many documents they put in the data room how or often the access it or many people access it. So that has been a little bit soft. And so I think it's something where you need to -- they added and win more deals and make sure that the innovations that we bring to the market are well accepted.

Christopher Donat -- Sandler O'Neill -- Analyst

Okay. And then just thinking about the Eclipse products from from Eze. Is that something that -- how should we think about the future revenue contribution from that? Is that something that is potentially going to cannibalize existing Eze revenue or is that really additive to the new product that will be an addition to existing Eze revenue?

William Stone -- Chairman of the Board and Chief Executive Officer

Well, I mean obviously you're going to have some transfers from the Eze, one has to get the Eclipse cloud platform that that's going to happen. But what it does, it gives you a longer lifespan with that client and gives you opportunities to sell additional products into their and as Rahul said earlier, when you get into Eze client, they might want Geneva and then once they might Geneva, they might start really outsource these very assumptions to global. So you can pick up -- as the clip sale for $100,000 and turn it into $5 million of revenue. So the challenge is making sure that we are meeting those things in lots of different places, so that our people know what we need to do in order to be able to drive more revenue.

Christopher Donat -- Sandler O'Neill -- Analyst

Okay, got it. Thanks very much.

Operator

Your next question comes from Ashish Sabadra of Deutsche Bank. Please go ahead, your line is open.

Ashish Sabadra -- Deutsche Bank -- Analyst

Thanks for taking my question. So maybe just a quick follow-up. Rahul, you mentioned that the sales pipeline may be taking slightly longer than what you originally anticipated. Just wanted to better understand are these deals just pushed out? Are they lost or the client decided not to go ahead with it., any color on that front? And was this one or few deals -- one or two deals or if there were a lot of them? And any particular reasons for the delay? Any color that you can give us just to get comfort around maybe these are just pushed out?

Rahul Kanwar -- President and Chief Operating Officer

Sure. So I think the comment in specific is for DST ride-in and we had some expectations and some assumptions on what would happen as we brought in these new sales leaders and they went out and started to generate pipeline and I think as we look at it now, we're still very optimistic -- about the amount of pipeline that they have generated. So it's not as if those deals went away or were lost, they just haven't closed as fast as we would like, and they haven't -- I think what we're discovering is that we're working our way through their processes and we're doing well and we do expect the majority of those deals to close in the future just likely not enough to have a significant impact in Q3 and Q4.

Ashish Sabadra -- Deutsche Bank -- Analyst

No, that's very helpful. And maybe, I don't know, have you taken a more conservative view now just based on the experience that you've taken a more conservative view and there could potentially be upside, depending on the timing of the closing of these deals?

William Stone -- Chairman of the Board and Chief Executive Officer

We sure hope so.

That's helpful. And maybe Bill, a question for you. You talked about how EVOLV has done a great job of managing expense control and how should we think about -- I think one of the questions that we get from investors is, how should we think about earnings power in 2020 and beyond? And is there any way to think that could slow down going forward? Or could we continue to see this kind of a sustained earnings momentum going forward?

I mean I don't think that we're we're hanging our business model, and I think that we will execute. And as we execute, then you'll see the revenue growth and we also see that we'll manage expenses better and we'll have tremendous earnings and tremendous cash flow. I don't think this not our positive, I got it. And I can assure you, I like it less than you do. But nevertheless, we still have a good business. We have a lot of great people. We got a lot of great products and services. We got great customers. We are global organization. It's just large and things that you could turn the dial and change the Company pretty quickly. Now there's multiple bios that need to be changed and so we're going through that process and I think we're making progress all over the place, but we had a soft patch and we just got to plow through that and get back to the growth path.

Ashish Sabadra -- Deutsche Bank -- Analyst

That's helpful, thanks Bill.

Operator

Your next question comes from Mayank Tandon of Needham & Company. Please go ahead, your line is open.

Mayank Tandon -- Needham & Company -- Analyst

Thank you. Good evening. Bill, just given the challenges that you've identified today with some of these acquisitions, does this in some ways, maybe slow down the pace of future M&A as you digest these operations and try to address some of the challenges that you mentioned?

William Stone -- Chairman of the Board and Chief Executive Officer

Well, I think we've done this for almost 20 years as a public company and 33 years, 34 years in total. I don't think we will change. I mean I think that both the Eze acquisition and the DST acquisition and the Intralinks acquisitions were all end up being very good acquisitions for us over the long haul. In our earnings like I said, right, have gone from $0.62 last year's, last quarter, second quarter of '18 to $0.91 in the second quarter of '19. And I know it's only $0.29, but it is close to 50%, 46% I think. So I think it's -- Wall Street is a pretty tough place to pitch your forecasts, and we've been pretty good forecasters and we'll place a little bit bigger and maybe we need to forecast a little better.

Mayank Tandon -- Needham & Company -- Analyst

Right. Makes sense. Well, in that being, would you consider maybe in the short term focusing on a stock buyback, if your stock were to come under pressure, which it probably will given the downward revision to guidance. Just maybe broader pause on capital allocation going forward?

William Stone -- Chairman of the Board and Chief Executive Officer

Well I think, that will certainly be a discussion at our next board meeting. And again, how it goes right that [Indecipherable] and it always swings too far one way and it always swings too far the other way, and you try to do buybacks when do you think your stock is really undervalued, otherwise, we think that there is better uses for our cash flow.

Mayank Tandon -- Needham & Company -- Analyst

Got it. Thank you.

Operator

Your next question comes from Jackson Ader of JPMorgan. Please go ahead, your line is open.

Jackson Ader -- JPMorgan -- Analyst

Thanks. Good evening, guys, thanks for taking the question. So if we put the market driven headwinds aside, as we look at Eze and Intralinks, just in terms of maybe new logo wins or new logo deals, is there any kind of competitive pressures that you're feeling? Or do you feel like win rates in those businesses for new deals are still strong?

William Stone -- Chairman of the Board and Chief Executive Officer

I think -- I think they're still strong. I mean obviously we don't clip at 70 and we have a good focus on there and I think Mike [Indecipherable] does a good job, who runs that sales organization for Jeff and Bob [Indecipherable] runs the sales organization for Leif O'Leary over Intralinks and I think Bob does a good job. I think it's an execution game and you got to execute all the time and it's every day and and it's a focus and it's also a close. And so I think we have a good team. We've got smart people and I think there is still good markets. And I think that, this is just -- this is just a patch that has come. I mean obviously we did OK in Q2, right. We hit our earnings number. We beat our revenue number. It's just we are looking out and we're going to tell you guys the truth. We're not going to sit there in sugar coated and we'll take our medicine and execute.

Jackson Ader -- JPMorgan -- Analyst

Yeah. Okay, understood. Follow-up question would be on the Black Diamond strength. Double-digit growth. I believe you said that was double-digit organic growth at the beginning of your prepared remarks. Where is that coming from?

William Stone -- Chairman of the Board and Chief Executive Officer

Well the IRA market right -- RIA market, registered investment advisor market is really what's driving most of financial services right. It's not de novo banks and it's not new mutual fund complexes or new insurance companies right. It's registered investment advisors and in some ways, hedge funds still and private equity firms real asset is another bright spot, but RIA, the big banks and the big broker dealers, they consolidate power and then they splinter. And so I think it's been one of those splintered phases right now. Although, you're starting to see some companies like BB&T and SunTrust Merchant and who knows if that's a new trend as well, but we win a lot of the spin-outs of the various wire houses.

Jackson Ader -- JPMorgan -- Analyst

Yeah. Okay, all right , thank you.

Operator

Your next question comes from Patrick O'Shaughnessy of Raymond James. Please go ahead, your line is open.

Patrick O'Shaughnessy -- Raymond James -- Analyst

Okay, thank you. So what would your outlook be like for the general health of your financial services customer base going forward? Would you expect things to get worse before they get better at this point?

William Stone -- Chairman of the Board and Chief Executive Officer

Patrick, I think you might know better than we know, but how we look at it is that, you know that would -- like the last question from JP Morgan. They got a $10 billion IT budget and they're big customer of ours, but we are not anywhere close to 10% of it. So there is opportunity. It's a question of making sure that you're building product and service that people want to buy. The same thing with Raymond James or same thing would Credit Suisse or same thing with Deutsche Bank or rest of the [Indecipherable]. I think that in general, you guys are well capitalized. I think earnings are pretty good in the financial space, but let's see what happened. They're going to cut interest rates in the quarter or half and are they going to resolve China and kind of trade issues and then you get more confident and more bullishness, and I think that tends to help us.

Patrick O'Shaughnessy -- Raymond James -- Analyst

Got it. Thank you. And then question on the M&A competitive environment. It looks like the bidding for GBST was very competitive. What have you broadly seen out there in terms of interest in the assets that you are taking a look at yourselves?

William Stone -- Chairman of the Board and Chief Executive Officer

I think in general, there's way more money chasing way few quality asset. We like GBST, we like their management team, but as the bidding started out, it had 250 Australian and I think ended up at 385. We got to 360. But we felt like we were stretchnig at 360. So always as much as we would have like to bought it at 360. We're not really crying on our soup that we lost it at 385. So we tend to be disciplined about what we do and we were disciplined about Eze and we were disciplined about Intralinks, but that doesn't mean it always pans out exactly like we have forecasted. So we have a little more work to do and we'll do it.

Patrick O'Shaughnessy -- Raymond James -- Analyst

Okay, thank you.

Operator

There are no further questions at this time. I would like to turn the call over to Bill Stone for closing remarks.

William Stone -- Chairman of the Board and Chief Executive Officer

Well, I appreciate everybody coming on the call. And hopefully, you heard the straight talk that we're pretty well known for. And you know we hit this quarter, but I know we've disappointed as far as our guidance is concerned, and we're going to get back on the train and work hard for our shareholders and we appreciate your interest and hopefully we will talk to all of you at the end of next quarter. Thanks.

Operator

[Operator Closing Remarks]

Duration: 60 minutes

Call participants:

Justine Stone -- Investor Relations

William Stone -- Chairman of the Board and Chief Executive Officer

Rahul Kanwar -- President and Chief Operating Officer

Patrick J. Pedonti -- Senior Vice President and Chief Financial Officer

Brad Zelnick -- Credit Suisse -- Analyst

Dan Perlin -- RBC Capital Markets -- Analyst

Alex Kramm -- UBS -- Analyst

Rayna Kumar -- Evercore ISI -- Analyst

Andrew Schmidt -- Citi -- Analyst

Surinder Thind -- Jefferies -- Analyst

Kenneth Hill -- Rosenblatt Securities -- Analyst

Peter Heckmann -- DA Davidson & Co. -- Analyst

Chris Shutler -- William Blair -- Analyst

Christopher Donat -- Sandler O'Neill -- Analyst

Ashish Sabadra -- Deutsche Bank -- Analyst

Mayank Tandon -- Needham & Company -- Analyst

Jackson Ader -- JPMorgan -- Analyst

Patrick O'Shaughnessy -- Raymond James -- Analyst

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