Tim Gokey: David, thank you very much. It’s Tim and thank you for the question on AI. It’s an area that we’re pretty excited about, as you know and we have talked about being a leader in AI in our space. We’ve talked about how we’re bringing that to — really into all of our products. We think in the future, every product will be part — will have AI as part of it and then to introduce commercial products as well and use it for internal efficiency, and do all that in a safe way. We are really pleased by the progress of OpsGPT and BondGPT. With OpsGPT, we’re in production with our first client and we’re actively engaged with another five. BondGPT, we have three proofs-of-concepts underway, eight additional discussions. So there’s lots of good activity around those.
We’re also doing things in the asset management side with our global demand model, where we have six of the largest 50 asset managers already signed up and an additional 10 of the largest 100 in contracting. So, I think people are really attracted to these use cases. When we see sort of the biggest areas going forward, I think it’s really deepening in these sort of unique areas that — where it really makes sense for us to be the one to invest. It doesn’t make sense for others to invest in the sort of depth of capital markets or in some of these marketing areas in asset management and we think there’s real opportunity for us there. We’re excited about how it’s going to drive things in the fixed income world. When you think about this in the future, it’s really there will be a commodity part of it where it’s part of just having a good product, and then there will be a more exclusive part of it where, if you have proprietary data, you can really leverage something and create something unique and we think there are definitely areas where we have proprietary data.
So we continue to be excited about AI. It will be a while for it to sort of begin to show in the economics, but we begin to be excited about it. I think on the M&A side, let me just turn to that, I think that’s a really important question and David, as you know, our growth is primarily organic and we have a long runway for that with the $60 billion market opportunity and as you know, our three-year objective for M&A is sort of one point to two points and we’ve been on this sort of pause post our BTCS acquisition, but now as you point out, having reached our leverage and our free cash flow conversion goals, we do have flexibility to invest. And I think in past calls, I have been cautious about buyers and sellers coming together on price and I do think now, looking at the market that, that logjam is beginning to break up.
We are beginning to see more tuck-in opportunities that have the potential to meet both our strategic and financial criteria and as you know, we always look for opportunities that tightly align with our strategy where we’re the right owner and that’s IRR sort of in the really attractive mid-to-high teens well in excess of our cost of capital. So we do think that there will be opportunities this year. We think there’ll be opportunities when you look across the areas that we do. Wealth management has some very interesting things going on. Data and analytics have some very interesting things going on and we’re beginning to see all the PE firms really polishing up their properties to make them look attractive to strategics like ourselves and so we think there will be a stream of opportunities.
We’ll be very, very selective. If you see us do something, you’ll know that we’re doing it because it’s very attractive and will — and enough opportunities out there that we can be very disciplined in doing things that we think will have very good returns for shareholders.
Edmund Reese: And I’ll just add, Tim, the opportunities are out there. David, we have two months left in this fiscal year, which is why I highlight the fact that the majority of our capital will be allocated towards share repurchases in this fiscal year, but as I said a number of times in my prepared remarks, we’re in a really, really strong position because of the point that you made on being at the right leverage ratio and the capital we’re generating through our free cash flow. So as Tim said, there are very attractive opportunities out there as we go into our next fiscal year and I think we’ll be in a great capital position to be able to supplement our organic growth with M&A.
David Togut: Understood. Thanks so much, Tim and Edmund.
Operator: The next question comes from Will Vu of Wolfe Research. Please go ahead.
William Vu: Hey guys. Thanks for taking my questions. This is Will on for Darrin here. I had two related to some of the bookings trends. First and foremost, you guys in the past have talked about some of the underlying bookings being more — or being less transformative. And I was curious as to if you guys can comment on some of the more recent characteristics within your pipeline. Are you seeing any deal sizes expanding or any of that. And then my second question being, as we look on the wealth management side, kind of curious how — what opportunities are really resonating with some of your prospective customers that you’re seeing on this end? Thanks.
Tim Gokey: Will, thanks. It’s Tim. I’ll take those. I think on the booking trends, we are — I do think that the main thrust continues to be lots of, I don’t want to say exactly bite-sized opportunities, but very manageably-sized opportunities. And so we do have some that are, call it, more than $5 million, but we don’t have any of these sort of mega things that will take many years to influence. So we really feel good about sort of that flow that we’re seeing. We are seeing in areas of demand, and I mentioned this a little bit in the script, but we’re seeing it around things that will drive revenue, certainly on the BTCS side, certainly around adviser tools, securities class action, other things that really drive revenue nicely.
We’re seeing things that drive costs, lots of activity around print to digital and of course, regulatory with tailored shareholder report. So all areas that really align with the investments that we’ve been making and so that really makes us feel good about the return on the investments that we’re going to see. And I think that, that really — your sort of second part of the question was about wealth management and I think that is just emblematic of getting return on areas where we’ve made significant investments. As you know, a very attractive market, we’ve talked about the $16 billion market, how it’s growing, and we’re getting really good traction with a whole series of component sales. Our sales were up 75% for the year. Our current pipeline is over $200 million.
And when you say sort of what opportunities are people looking for, I think that it’s a combination of each has sort of a different specific pain point and want to address it, but at the same time, they’re looking to sort of say, how do I begin to put in place a digital road map and sort of a North Star that they can build to over time? So, I think the open API framework, the enterprise integration service layer, all of those things in terms of how we can bring things together, they really like that as a vision. Meanwhile, they tend to say, let me start with an existing pain point like tax, like client onboarding, like corporate actions, some things that are very tangible. And so we have great conversations going on both here in the US, but also lots of good conversations in Canada.
So we feel really good about the outlook there.
William Vu: That’s great. Thanks.
Operator: The next question comes from Patrick O’Shaughnessy of Raymond James. Please go ahead.
Patrick O’Shaughnessy: Hey. Good morning, guys. When you kind of think about the factors that are driving 6% recurring revenue growth this fiscal year as compared to the high end of your range of 9%, what are the factors that are kind of resulting in revenue coming towards the lower end of the range and then how does that inform your outlook point for next year?
Edmund Reese: Good morning, Patrick. Thanks for that question. I did want an opportunity to dive deeper into that. So, thanks for the question. We are tracking, to your point, 6% at the low end of what I would highlight is a strong organic recurring revenue range and there are two items that are really impacting that. First, I would say, is position growth. You know that our outlook was mid to high single digit position growth, and you just heard both Tim and I talk about 6% equity position growth and fund growth at about 3% for the full year. So that’s one thing relative to the outlook that we had. The second, as you know, a strong component of our recurring revenue growth is converting sales to revenue and there I’d highlight lower revenue in our customer communications business.
But again, you heard me talk about starting to see that tick up in the fourth quarter as we onboard new clients. So, I think the key point for me is that we do have positive momentum going into fiscal ’25 and ’26 with sales, which impacts next year revenue, estimated to be up 15% to 30%, and position growth starting to tick up. I was very deliberate about mentioning Q1 ’25 testing data showing mid single digit at this point. I think that’s a good trend, because as we know, it normally ticks up. So, look, delivering 6% in fiscal ’24 and momentum going into fiscal ’25, I think has us in a pretty good place relative to the three-year objectives. The second part of your question is like would it — it’s all focused on the go forward and what it means for the outlook.
And for me, as you know, I like to put that in terms of our three-year objectives. And as I just mentioned, we have great line of sight into fiscal year ’24. And I would say that’s a strong start on the three-year cycle. And I’ll just remind you, we’re coming off a year of 7% recurring revenue growth and 9% adjusted EPS growth, and now sort of on track to deliver approximately 6% and 10%, respectively. And so, those numbers are right in line with our guidance, right in line with the growth algorithm as we think about the long-term objective. And I just talked about the drivers of growth being stable and the momentum that we have moving forward. So, we feel good about where we are relative to the three-year objectives. And as our usual practice, we’ll come back and talk more specifically about ’25 in a more robust way on our Q4 call.
