Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the SS&C Technologies Second Quarter 2022 Earnings Conference Call. It is now my pleasure to turn today’s call over to Justine Stone, Head of Investor Relations. Please go ahead..

Hi, everyone. Welcome and thank you for joining us for our Q2 2022 earnings call. I’m Justine Stone, Investor Relations for SS&C Technologies. With me today is Bill Stone, Chairman and Chief Executive Officer; Rahul Kanwar, President and Chief Operating Officer; and Patrick Pedonti, our Chief Financial Officer.

Before we get started, let’s review the safe harbor statement. Please note that various remarks we make today about future expectations, plans and prospects, including 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 July 27, 2022. 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.

In the third quarter 2021, we entered into a joint venture named DomaniRx LLC, which we are the more majority interest holder and primary beneficiary. All earnings figures discussed today, including operating income, EBITDA, net income and EPS are attributable to SS&C based on the ownership interest retained by SS&C.

I will now turn the call over to Bill..

Thanks, Justine, and thanks, everyone, for joining. Our results for the first quarter are $1.33 billion and adjusted revenue, up 5.5% and $1.10 in adjusted diluted earnings per share, down 11%. Adjusted consolidated EBITDA was $464.3 million for the quarter, and our EBITDA margin was 35.4%.

Continued elevated labor prices, higher-than-expected interest rates, FX headwinds and a weaker economic backdrop, put pressure on our results versus our expectations. Our first quarter adjusted organic revenue was up 2.2%. Our Alternatives, Intralinks and Advent businesses continued to be the growth leaders.

Ex the impact of our health care business, our Q2 ‘22 organic growth in Financial Services about 94% of our revenue was up 4.4%. SS&C generated net cash from operating activities of $446.5 million for the 6 months ended June 30.

We were restricted from buying back stock in Q2 ‘22 due to some M&A discussions, which have ended and we paid down $234.7 million in debt. Our consolidated net leverage ratio now stands at 3.45, and our secured net -- our net secured leverage ratio was 2.48x consolidated EBITDA and our goal is to reduce leverage to 3 or less.

Overall, our business is seeing more headwinds than we initially expected, especially compared to ‘21. We believe there are 3 main challenges affecting our revenue growth, the weakness in the health care business, while somewhat expected as we invest in DomaniRx, which will continue to be 100 to 200 basis headwind to total company organic growth.

We have a lot of faith in Domani and what it can deliver in 2023 and beyond, and development is currently on target for broad scale release on 1/1/’24. Second, the full M&A market is affecting Intralinks by about $20 million from our original plan. They’re still growing close to 15% and has -- still has excellent margins.

And despite the dip in DOY, total deal value, Intralinks continues to gain market share and expect to continue to grow in about the 15% level. Lastly, the Financial Services business has taken the brunt of the FX impact.

As many of you know, the dollar has been unprecedentedly strong and we expect an additional $28 million in FX headwinds in the second half. On the expense side, our labor costs remain elevated, but there are signs of this plateauing.

We communicated bonuses in the second round of merit increases in March and April, which has curbed some of the attrition, along with our employee focus initiatives, which we have highlighted in our slide deck. We’ll be tightly controlling our cost for the remainder of the year.

Real estate reductions, IT spending and implementing Blue Prism’s digital workers throughout our operations will drive our margins back up to historical levels exiting the year. I’ll now turn it over to Rahul to discuss the quarter in more detail..

Thanks, Bill. Our business remains resilient in the face of macroeconomic challenges that manifested in Q2. As you noted, Bill, foreign exchange headwinds impacted our international business with the largest impact to our European agency and wealth revenue streams.

Intralinks is also seeing some muting in the demand environment due to a reduction in M&A volumes, but grew 14.2% in Q2. The Alternatives business demonstrated our long-standing thesis that diversification among fund types, asset classes and our commercial models gives us a strong hedge against market pressures.

The Alternatives business grew nicely despite some impact to new fund launches and fund inflows. GoCentral continues to roll out new functionality, enabling more efficiencies in daily processing and NABs and providing an important market differentiator in our sales process.

We now have 69 clients on GoCentral in production, totaling 1,500 funds with an approximate AUM of over $300 billion. As in our Financial Markets business had a strong quarter in the wake of market volatility and are well positioned to take advantage of shifting investment strategies given the breadth of our product offering.

DomaniRx joint venture also notes continues to make progress. The new cloud-based system can now successfully execute a financial cycle, and we have completed the initial build and configuration of the API gateway and developer portal.

We have accelerated our go-to-market plans and DomaniRx can now be delivered in the modular fashion sold as individual products, including finance, drug management and communications hub for existing SS&C health clients and prospects starting in Q4 2022.

SS&C private markets grew 15% in the second quarter despite a slowdown in fundraising following several years of elevated activity. Prospects and clients and private markets are more than ever looking to partner with key service providers that can drive efficiencies utilizing technology, expertise and data.

Private credit and hybrid funds are a particularly attractive subsegment. We continue to innovate in this space incorporating Geneva and other leading technologies and have multiple large private credit deals in the pipeline. Now I will mention some key deals for Q2.

A $42 billion AUM hedge fund, an existing Geneva user chose SS&C’s tax optimizer to replace a big floor accounting firm solution.

An existing retirement client extended their TRAC-4 account record-keeping services with SS&C to service a recently acquired business, an existing GIDS client added SS&C event center services, a large customer added our transfer agency services for retail alternatives for their nontraded real estate investment trust.

An existing customer extended their Silvan, Porsche and Recon licenses to a newly acquired division, significantly improving their workflow.

An investment manager in Australia is seeking to transform its operating model to gain operational efficiency and provide improved services shows SS&C’s Aloha due to its advanced technology and our global wealth expertise. A large U.S. insurer chose SS&C’s Singularity after a multiyear sales process.

The Dutch private equity firm launching a registered investment fund for the first time chose SS&C for interval fund services and retail all transfer agency services. I will now turn it over to Patrick to run through the financials..

Thank you. Results for the second quarter were GAAP revenues of $1,328.7 billion, GAAP net income of $110.6 million and diluted earnings per share of $0.42. Adjusted revenues were $1,330 million, including the impact of the adoption of revenue standard 606 and for acquired deferred revenue adjustments for the acquisition.

Adjusted net income was $289.6 million. Adjusted revenue was up 5.5%. Adjusted operating income decreased 8.2% and adjusted diluted EPS was $1.10, an 11.3% decrease over Q2 2021. Adjusted revenue increased $69 million or 5.5% in Q2. Our acquisitions contributed $65.6 million.

Foreign exchange had an unfavorable impact of $24 million or 1.9% in the quarter. Adjusted organic revenue increased on a constant currency basis was 2.2%. We had strength across several product lines, including Alternatives, Intralinks, Ads and the Advent businesses.

Ad strength was impacted by weakness in our GIDS transfer agency business and health care businesses. Adjusted operating income for the second quarter was $455.3 million, a decrease of $40.5 million or 8.2% in the second quarter of 2021.

Adjusted operating margins were 34.2% in the second quarter of ‘22 compared to 39.3% in the second quarter of 2021. Expenses increased 8.1% on a constant currency basis. Acquisitions added $67.8 million in expenses and foreign currency decreased costs by $20.6 million.

Our cost structure was impacted by wage inflation, high recruiting costs, and higher staff to support our businesses. Net interest expense for the second quarter was $67.7 million and includes $3.9 million of noncash amortized financing costs and OID.

The average rate in the quarter, including the senior notes was 3.45% compared to 3.02% in the second quarter of 2021. We recorded a GAAP tax provision of $45.2 million or 29.1% of pretax income. Adjusted net income, as defined in Note 4 in the earnings release was $289.6 million and adjusted EPS was $1.10.

The effective tax rate used for adjusted net income was 26%. Diluted shares decreased to $263.9 million from $267.6 million in Q1. The impact of option exercises was offset by the decrease in the average share price during the quarter.

On our balance sheet and cash flow, we ended the second quarter with $438.3 million of cash and cash equivalents and $7.4 million of gross debt. Net debt has defined our credit agreement, which excludes cash and cash equivalents of $148.3 million held by DomaniRx was $7.1 billion as of June 30.

Operating cash flow in the 6 months ended June 30 was $447.5 million, a $114.8 million decrease compared to the same period in 2021. During the 3 months ended June 30, we paid down $234.7 million of debt.

Operating cash flows were down as a result of several factors, including payment of transaction expenses associated with the Blue Prism acquisition of approximately $67 million, which includes amounts paid by Blue Prism in the post-acquisition period and our operating activities compared to last year.

Overall, for acquisitions year-to-date, we’ve paid $1.597 billion, that includes Blue Prism, Hubwise, O’Shares and MineralWare and that number is net of cash acquired. Treasury stock buybacks were $170.9 million for purchase of 2.3 million shares in the 6 months. We did not buy any shares in the second quarter of 2022.

In the 6 months, we’ve declared and paid $102.4 million of common stock to adds as compared to $82.1 million last year, an increase of 24.6%. Total interest paid in the quarter was $112.6 million, and that compares to $97.8 million in 2021.

In the 6 months this year, we’ve paid $156.5 million of income taxes compared to $144.2 million in the same period last year. Our accounts receivable DSO ticked up a little in the quarter up to 55.9 days compared to 52.7 days as of March 2022. Capital expenditures and capitalized software were totaled $85.9 million or 3.3% of adjusted revenue.

Spending was predominantly for capitalized software and IT infrastructure. In our LTM consolidated EBITDA that we use for covenant compliance was $2.456 billion as of June. And based on a net debt of $7.1 million, our total leverage ratio was 3.45x and secured leverage 2.48x as of June 30.

On outlook for the remainder of the year, a couple of -- I’ll go through a couple of assumptions. We have assumed that foreign currency exchange will be at current levels for the remainder of the year. We’ve assumed average interest rates will increase 100 bps in the third quarter, an additional 50 bps in the fourth quarter.

We expect to reduce our cost structure through staff reductions, productivity improvement, facility reduction and controlling variable expenses to improve our operating margins. And we’ll continue to invest in our business in the long term with capital expenditures and cap software of approximately 3.4%.

On cash flow, we will focus on improving our working capital requirements to generate cash. In addition, we are recapitalizing one of our real estate joint ventures to generate approximately $70 million of cash distribution.

I would also assume we’ll continue to allocate free cash flow to both debt and stock buyback and we’ll use a tax rate of 26% on an adjusted basis. So for the third quarter of 2022, we expect revenues in the range of $1.324 billion to $1.364 billion. That will result in adjusted organic growth in the range of 1.6% to 4.8%.

Adjusted net income in the range of $302 million to $318 million, and diluted shares in the range of $263.2 million, $262.7 million. For the full year of 2022, we expect revenue in the range of $5.320 billion to $5.406 billion.

Adjusted organic growth in the range of 0.6% to 4.8%, adjusted net income in the range of $1.256 billion to $1.297 billion and diluted shares in the range of $264.6 million to $263.6 million. And on operating cash flow for the full year, we expect operating cash flow to be in the range of $1.180 billion to $1.220 billion.

And I’ll turn it over to Bill for final comments. Thank you..

Thanks, Patrick. We appreciate your continued interest in SS&C, and we believe we’re on the right track to deliver stronger revenue growth and a more digitized workforce, which will be a lower expense base. Our Deliver Conference is the first week in October, and we hope to see you in Orlando. I’ll now open it up to questions..

Your first question comes from the line of Alex Kramm with UBS Financial..

There was a comment in the deck, I think, around like stepping up conversations on pricing with your clients. So just hoping that you can flesh this out a little bit more.

And in particular, maybe remind us what you thought at the beginning of the year, pricing could add and how maybe those fresh discussions could maybe change that number? And then most importantly, is that already reflected in your updated organic growth guide? Or could that be incremental to what you just laid out?.

Well, I think, Alex, that we have incorporated some price increases into our guidance and we are implementing as we speak and we have implemented. And I think we have CPI most of our license maintenance and obviously, CPI is quite a bit higher than it was over the last few years.

And then also, we’ve had individual businesses raising prices throughout. And I think Rahul might have a few numbers on that..

Yes. I think where we have CPI, obviously, we’re in the range of -- it’s CPI plus 3, CPI plus 4 and some of those numbers look like anywhere between 7% and 10%.

We’re also doing -- going back to customers as we’ve talked about with price increases, where contracts are renewing or where just in the context of the inflationary environment makes sense. And in general, I would say we’re targeting 5 to 7 or higher percentage increases.

Now this is an ongoing conversation and in some cases, we’ll end up a little better. And in some cases, we’ll end up a little bit worse. And as Bill noted, some of that has already been reflected in the future forecast..

Okay. Fair enough. And then maybe just quick one. You mentioned no buybacks this quarter because of M&A discussions.

Maybe anything to flesh out there in general? Maybe what kind of areas you’ve been looking at? And then just to clarify, was that to buy something? Or are you actually looking to maybe divest some businesses, if you can be that specific..

Yes. Well, it really -- we don’t really comment on what we’re buying or selling, Alex. But we look at our portfolio all the time. And we’re pretty interested in being able to bolster our private markets business. We’re excited about some of the new stuff we’re doing in TAC.

And we continue to look at unique asset classes that we think our clients may be moving more strongly into. So we have a variety of different conversations going on at any one time.

And I think we thought that there was a pretty good chance that something would happen, and that’s why we felt like we had material nonpublic information, so we didn’t trade our stock. But those conversations have ended. And I would guess that we will be active in Q3 in stock buybacks..

Sounds good. Just thought I’d go check if there was more to disclose..

Your next question is from the line of Peter Heckmann with D.A. Davidson..

Bill, can you comment on what do you think is the bottom in terms of year-over-year growth in health care? Are we seeing it this quarter? Is that -- are the client losses fully reflected?.

Well, I think that as we start showing some of the modules of DomaniRx, we will start getting kind of a reversal of trend. And that’s why we have such a focus on that. For health care to be down the 24% it was, we had some more attrition than we really didn’t expect. But again, it’s 6% of our revenue or so.

And so while -- hey, we don’t like reductions in revenue in anything, but we’re pretty optimistic that we’re spending a lot of money. There’s a lot of interest in that health care business and there has been ever since we bought DST. So I think we have a lot of optionality when it comes to health care.

And to date, we have felt like owning it is a lot better than divesting it..

Got it. Got it.

And if we thought about the health care business without the attrition, can you give us an idea of how revenue would look just based on the underlying metrics? Would this be -- I mean, is attrition the main issue here? Or is there also an issue around number of prescriptions processed or claims or covered lives?.

Yes. I think that the biggest driver is the number of claims we adjudicate and pay. And that’s probably the biggest driver on the revenue. And we’re probably -- we’ve been up close to $500 million range, and we’re probably down in the $380 million, $390 million. But with Domani, we expect a large uptick in that.

As always, there’s a lot of regulation of PBMs and fees that they charge and different states have different rules. And so we’re constantly monitoring that and being able to comply with new rules all the time. And in general, they are not -- the new rules are not revenue enhanced. So we deal with that regulatory environment as well..

Your next question comes from the line of Andrew Schmidt with Citi..

I wanted to dig in a little bit on the DST Financial Services. And I know you partially mentioned this, but if you could just talk a little bit more in depth to what drove the step down in organic growth in the second quarter.

And then based on implementation and sales pipeline, how you’re thinking about growth in this business in the back half and into next year?.

Well, we have very robust pipelines, and we have a reasonably strong backlog of projects that we’re implementing now that should get -- give us some lift. I think the challenge on some of this is these are very large organizations and the implementations are sometimes drawn out.

And again, they’re still our customers, and we support them all the way through the process. But sometimes, the rev rec gets delayed. I would say that we think that the ability for us to deploy digital workers throughout our business is to help us both in our sales pipeline development as well in our -- in reducing the rate of increase of personnel.

So we think we have identified several hundred FTEs that these digital workers are going to be able to be substituted for. So instead of hiring another 350, we think we’re going to be able to deploy digital workers in order to satisfy those needs.

And these are in like reconciliations, break resolution and different things, compliance with Blue Sky laws and so forth and so on. So we’re very optimistic about our margin rebounding back to our historical levels. And like I said, we’ve had some FX headwinds.

We’ve had labor becoming dominant and therefore, having way higher wage rates than has been the norm over the last 5 or 10 years. And even with all of this, we run at 35% margin. So we have an excellent business that I think over the next number of quarters will just be more excellent..

Got it. I appreciate the detailed response. And then this is a related question, but I recall last quarter, the retention issues were having an impact on implementation. And it seems like that was starting to get smoothed out.

But if you could just give us an update in terms of where we’re at in terms of just stabilizing just the workforce and the implementation time lines across the business, that would be helpful..

Well, it’s not the hemorrhage that it was in the -- towards the back half of the first quarter and the beginning of the second quarter. It’s not quite that.

Obviously, you’ve seen slowdowns in a lot of the major companies in their hiring and also a number of them that have announced cutbacks, those kinds of things tend to give people pause, right? You don’t really want to switch jobs and then be subject to a risk.

People also like working for us because we are profitable, and we do realize our biggest asset is our people. And so we’ve done a number of things, and you can see some of it in that we put together. But we’re really optimistic about what Blue Prism is going to be able to do for us. I was on a call with a prospect today on Blue Prism.

And I think it -- again, SS&C is making big investments, big investment in this business because we believe accounting is not going away. We don’t think tax returns are going away or financial statements are going away or any of the other of the mission-critical things we do are going away.

So these are 3 core to the Sky, but we’ll be at still about $5.3 billion or so in revenue at the end of this year, maybe better. And I don’t think that we’re anywhere near what we can be, and we’re expecting us to execute better. But the first thing you got to do is you got to maintain your workforce and you got to focus on customer service.

And so that’s what we’ve been doing. We have spent tremendous amounts of money on our selling and marketing and R&D. I think R&D is up about 18%. I think our sales and marketing is up about 40%. So I think we are spending the money. I think we’re spending it wisely and we expect it to pay dividends..

Your next question comes from the line of Patrick O’Shaughnessy with Raymond James..

So you guys -- your presentation notes that you’re committed to reducing your debt in a rising interest rate environment. But on the call today, you also indicated that you look to be active in the share repurchase market.

How do you think about balancing those priorities right now?.

Carefully, right? So we’ll look at it depending on how much cash we generate. But I would guess that we’ll probably -- right now, I think our forecast has this at about 50-50. 50% debt reduction, 50% stock buybacks. But that could fluctuate as much as 15%. So it could be 65-35. It just depends on what happens with either market..

Got it. That’s helpful. And Patrick, maybe a question for you.

Do you have a general rule of thumb for how much a given change in FX would impact the company’s EBITDA or EPS?.

For the second quarter?.

Just in general, but I mean, in the second quarter, if you have that, but just in general, dollars..

Yes. I mean in the second quarter, the impact of the EPS was probably somewhere around $0.01 to $0.015 negative to EPS. And I would suspect it’d be -- based on where current exchange rates are today, it’d be pretty similar in the third quarter and fourth quarter..

Your next question is from the line of James Faucette with Morgan Stanley..

It’s Michael on for James. I just wanted to hit on the sort of like the hedge fund backdrop quickly. Obviously, we’ve seen the number of launches slowing but you’ve also seen the size of those launches also decreasing.

So just anecdotally, how are you sort of performing in the blue-chip launches? What’s your share capture and sort of how are you thinking about hedge funds in general in this current environment?.

Do you want to take that, Rahul?.

Sure. I think what we’re seeing is what we tend to see in periods of market volatility and when people come into pressure, which is more viewed as the leader in the fund administration space and in the hedge fund space as well as private equity. And so we actually tend to perform better in terms of market share in these kinds of environments.

We saw that in the financial crisis in ‘08, ‘09, and we’re seeing that again. So as you know, there aren’t as many new launches.

And the ones that are aren’t as large, but most of our revenue capture is new clients and conversions and takeaways as opposed to new launches, which take generally some period of time before they become material to us. And so that process is going pretty well, and we’re winning our share of what’s out there in the marketplace.

And if anything strengthening and we expect that as things turn around, that will be pretty positive for us..

Great. And then just quickly, I saw on the deck that you’re also looking at headcount in Blue Prism specifically.

Can you just comment on the nature of those potential headcount reductions? Is that sort of back-office staff? Is it quota-carrying sales reps? How should we think about that?.

Yes, we almost never cut back on salespeople. I think this is much more on, as you combine these companies, right, there’s a number of functions that are duplicative. And so we’re moving relatively quickly on being able to reduce that headcount, whether that’s in legal, finance, IT and other support organizations.

But we’re excited about what we have with Blue Prism and what our opportunities are..

Your next question is from the line of Chris Donat with Piper Sandler..

Bill, I wanted to ask another question on the price increases you’re putting in related to inflation and other things. I’m just curious if you can give us some color on the receptivity from your clients.

I would imagine, given the market conditions, they have very little appetite for the price increases, but they recognize the inflation side of it for you. Just wondering how they’re reacting to it. Is it grudgingly or with a lot of pushback? Just some color would be helpful..

Yes. I mean you kind of characterized it. Nobody particularly likes to have price increases. At the same time, they want their current team to be well paid and well respected. So -- and they realize that that’s not for free.

And so I think that -- this is an industry that is populated by big boys and girls, and we’re certainly not mega tech companies that walk in and say, 25% more, take or leave it. That’s not our MO. And so they know that we’re really just passing on the inflation that’s hitting us.

And our guess is, is that they’re trying to pass on expense increases that they have. So it’s a natural cycle, and you do it with as much sensitivity as you can and with a little bit of determination and persistence.

So I think it’s going pretty well, and I think our people understand that these are the things that are going to kind of maintain our bonus structure and our ability to compensate well..

Okay. And then for my follow-up, wanted to see if I’m connecting things correctly here. You’ve got the cost controls and reducing your real estate footprint. Separately, you’ve got under HR initiatives, the hybrid work and you’ve made some comments about having some employee attrition, but I think, you said you think it’s plateauing.

Is the hybrid work initiative and the real estate footprint, are those related issues? Are they really separate?.

Well, if people don’t come into the office, which they don’t, I would say they’re related, right? So we don’t need real estate footprint that we have, and we’re doing much more of a hoteling concept rather than everybody having their office or their own space.

So that’s just changed the way we work, and we’re trying to be as flexible as we can be as long as we can maintain customer service and be able to hit our deliverables and meet our growth targets. But yes, for sure, they’re related..

Your next question is from the line of Kevin McVeigh with Credit Suisse..

Is there any way to think about, maybe this is for Patrick, what the cost controls, what the impact is on the guidance -- the revised guidance, I guess, maybe start there? And is that fully in it? Or any way to think about how that comes in over the course of the year?.

Yes. I think if you look at the baseline costs for Q2, we’ve got in the back half of the year about $50 million in cost reductions, of which you think about $25 million have already been completed.

And then the rest is mostly reducing -- continuing to reduce facilities and productivity improvement with the Blue Prism product and then holding back as much as possible on other discretionary spending..

That’s helpful. And then it looks like the revenue retention and the AUA really kind of hung in there despite the market volatility.

Anything to call out there?.

I’m sorry, can you repeat that?.

Bill, it looks like the revenue retention rates improved from Q1 to Q2. And then the AUA was actually flat sequentially despite the market volatility.

Anything to call out amongst clients, just anything in particular that drove that?.

I think what Rahul said earlier about in these kind of tumultuous times, people like quality. We think that’s going to help us over the next couple of years. There’s been an awful lot of acquisitions in the fund services space and extremely high prices paid and SS&C has not been much of a participant in that.

We think that’s going to put some of our competitors under immense strain and we think we’ll be a beneficiary of that. And that shields up in our AUA as well..

Your next question comes from the line of Jeff Schmitt with William Blair..

On Blue Prism, it sounds like it’s performing better out of the gate than you expected. Yes, and maybe I missed it, but do you have an update on your revenue growth in EBITDA margin projections for that company? I think you were expecting like 15% to 20% top line and then you thought you can get the 30% to 40% margins by maybe, it was, 2024 exit.

Is that still the case or do you see any change to that?.

Yes. I think in the second quarter, Blue Prism grew right at 17%. That was maybe about what we expected, maybe a little bit better. And I think they kind of -- a couple of million dollars in operating losses. We expect them to move to profitability in the second half of this year and probably end the year at about 10%.

We think next year, they’d be up to about 25% and then around 40% in 2024, which are our corporate averages, and we’re pretty optimistic. And we’re really optimistic about what it’s going to do for our own business besides all the customers we’re going to be able to really help..

Right, right. That’s helpful. And on the health care business, if the client loss is there, are those mainly for the medical claims part of the business, not the pharmacy claims? I’m just curious how big of a difference sort of the margins are in those 2 businesses.

Like how much -- just trying to get a sense on how much EBITDA you’re losing if that’s sort of the medical claims business that’s -- that you’re losing there..

Yes. The business as a whole still remains profitable, pretty profitable, actually. And we are -- as we have had some attrition in our client base, we’ve had some attrition in our workforce. So we’re trying to maintain that kind of profitability ratio. And obviously, the DomaniRx is $1 billion of and our 2 partners.

And so we remain pretty optimistic because that’s a pretty big bet for us. And at least what we see in the marketplace today, there’s not going to be a competitor to DomaniRx when we come out of the gate.

And that’s what gives us the optimism, right? I mean we’re not in general -- we’re a bunch of accountants and systems people, right? So in general, we’re pretty silver when it comes to those kinds of things. And we don’t just take fires. We like to place pretty strategic bets that we expect great returns on..

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

Again, we appreciate all of the interest that all of you show. And obviously, we hope to improve upon our results. And as I said, right, we’ve had a lot of headwinds in the second quarter and we still came out with about 35% EBITDA margins. And we look forward to talking to you at the end of October, and we hope to see all of you in Orlando.

Thanks again. Bye..

Ladies and gentlemen, thank you for participating. This concludes today’s conference call. You may now disconnect..