SEI Investments Company (SEIC) Earnings Call Transcript & Summary

All right. Good afternoon. Thanks for joining us. I'm Patrick O'Shaughnessy, the capital markets analyst here at Raymond James. Up next, we have SEI Investments. And presenting on their behalf, we have Dennis McGonigle, CFO; and Wayne Withrow, Head of Independent Adviser Solutions. Format for this is going to be a Q&A session, fireside chat, so I'm the fire. Feel free to submit questions via the online functionality, and I will do my best to work them into the conversation. And with that, let's go ahead and get started. So Wayne, Dennis, thank you for joining me today.

Our pleasure.

Thanks, Patrick.

So I want to start off with kind of a high-level question here. I calculate SEI's average board tenure to be 30 years, and I believe that each of your business unit has been with the company for at least 25 years. In a world in which some of your fintech competitors haven't been around for 3, much less 30 years, how do you make sure that SEI stays innovative and nimble enough to compete?

Sure. I think is a great question because I think it exemplifies a lot of our terrific cultural attributes as well as our leadership at the top, but then how that leadership has filtered down over the years throughout the company. One of our key principles is -- in terms of our operating model and our business model is innovation and reinvestment in the business. And if Al West, our CEO, has imparted anything culturally through the organization, it's that we need to continue to think strategically about where things are going 3, 5, 7 even beyond that horizon years out, and they try to sort out not so much what customers need today, but what we think the markets are going to benefit from in the future. And so the longevity of our Board, the longevity of our executive management team it's our responsibility to continue to inculcate that into our culture. So that future leaders of the organization. And we've had many leaders today that started with the firm is just by our own tenure, who became leaders. And we have a terrific bench of future leaders that will run the company well past my time with the firm, for example, that really adopt and embrace that cultural element of a business model element of SEI. Sometimes, we're not the -- we sometimes get caught up in the market telling us, well, how come you don't have this product today. But the fact of the matter is we're generally working on solutions for tomorrow. And so when we look at markets, we look at what's the highest level business problem we can solve for? What's the most comprehensive solution we can build for that business. How do we build it so that it is -- has a long-tailed value element to it, and then we go ahead and execute. And so culturally, we try to drive home innovation. We try to sustain it through constant strategic thinking. And we use -- we do the best job we can to develop leaders in the future. And we -- speaking for myself, I believe very strongly in not just kind of by peer level leadership and the next level of leadership, but really kind of multiple layers down through the company that we're -- we have great talent and great talent that understands that we're a long-term company, long-term oriented. And they'll be great leaders of the franchise for as far as we can see. I don't know, Wayne, you have anything?

I mean the only thing I'd add is -- I add 2 things. Number one, organizationally, we're a very flat organization. So you can't assume that at the top is running everything and it goes through all these silos. I mean we're very flat in innovation ideas operate at all levels within the company, and it doesn't have to necessarily come up to what would be a formalized organizational structure. So I think that's a huge advantage to us. Secondly, I mean, culturally, we're built around innovation. I mean, among versus anything else, we value innovation as part of our culture. And part of that culture, and if you talk to Al, I mean, I think I would tell you part of his job is he's Chief Culture Officer, and he promotes this flat organization. We post supports open dialogue and open exchange of ideas, innovation, and all that's important. And it's also important and use the sport analogy, I mean, there is a certain benefit to having people that work together. If everybody has a role to play and you need to trust and know each other and rely on it. So I mean, if you're a baseball player and they calling you to bunk to advance to run in the second base. You have to have confidence that your teammate is going to get a hit and get that run across because they're asking you to do something else. And I think that there's a certain level of trust among all of us and a certain level, we know how to react. So the value of the team is very, very important.

Got it. And then staying on the theme of innovation. 2020 was a year in which you ramped up internal investing on your One SEI initiative, with increase in expenses largely allocated to your investments in new business segment. What sort of capabilities are you creating? And is there already a sales pipeline building for those capabilities?

So there are some things we've already created and have gone to market with in terms of the One SEI strategy, and it kind of ties the one SEI strategy or one SEI approach really ties to the first question as well, which is we've done a lot and built a lot of things over the past decade, let's say. A lot of large technology components and stocks of capabilities, a lot of operational capabilities. But like a lot of firms as they grow and mature, we had a little bit of, I'd say, silo elements creeping into the culture. And so first and foremost, One SEI strategy was before you get to the actual technology spend is intended to knock down those silo walls and free up all of our assets for use across the firm, either in enhancing existing market opportunity or creating new market opportunity for the company. That being said, a lot of the spend last year in this space was in decompart -- modularizing some of the larger stacks of technology to allow them to operate independently and/or operate as part of some other construct of technologies and operational services. The most, I guess, public element of that was in our institutional business. We launched this ECIO business initiative, solution initiative into the kind of multibillion-dollar asset-sponsored markets, foundations endowments, universities, jumbo, DB markets, TAF Harley plans. And it's -- there where we've taken some of the capabilities in our IMS Group modularized those and are coupling those with some of our OCIO capabilities to create a kind of a solution set for the do-it-yourself side of that institutional market but also provide capabilities in areas where they really shouldn't do it themselves, where there should be kind of a -- they should be more of a hybrid, where there's the opportunity for them to operate more in a hybrid mood. We've done some things in the -- which we launched before. We kind of announced here around the same time we announced One SEI in the IT services space. So taking our capabilities in data protection, network services, things we do day-in and day-out for ourselves and in our existing businesses and then coupling those capabilities and packaging them in a way that we can sell them as a service in the market. We've done some modularization work with some of our front-end technologies on SWP to decouple them from kind of the back end of SWP. We have one client going live later this year that will take advantage of that, modularized technology, both as part of an SWP stack, but independent of the back end part of SWP tied into other custody platforms. So that will be the first kind of front-end independent technology as part of SWP. Wayne, your business is working on the SEI Trade, so maybe you want to spend a minute on that?

Yes. I mean I think that's -- it's a tactical example of that, where I think that if you look at IMS, they build SEI Trade, which is sort of a digital sign up, paper will management, capital call process, the whole customer experience and kind of hedge fund private equity world, which is very complex, and they built this robust digital experience. Well, we have the same requirements. When you look at online suitability and new account setup and all that stuff, so we took that exact same technology and integrated into our account open process in SWP. Now SEI Trade was not an SWP application. It's a stand-alone application. What we incorporated in; a, rather than build it ourselves, so -- and we need kind of SEI Trade on training wheels, if you will. What you need to do to open up a mutual fund RAP account is different than what you need to do to invest in a private equity partnership. So -- but we could utilize a lot of that, and we could have one platform. But I think -- so that's a tactical example, and that's in beta as we speak. So that's a real live example. We could have build it ourselves. We could have done a separate one, but we didn't need to do it. But one of the bigger points ties into your first question, I would not look at SEI Trade. If you ask me, I would not -- Dennis answered it as SEI Trade as the product, SEI Trade as a technology strategy, and all that is true. But SEI Trade is a cultural attitude, too. It's meant to reinforce the cultural attitude of One SEI, altogether, single platform, leveraged, everybody all together moving forward. And so it allows us to rally behind the corporation as opposed to rallying behind an individual product or an individual market.

Got it. Very helpful. I want to turn to the Private Bank segment for a few questions here. You've had some good client win headlines over the last few quarters, including U.S. Bank. As we move into 2021, presumably pandemic-related sales frictions will decline, and you have One SEI initiatives coming online. So how optimistic are you that SEI is going to be able to generate consistent sales momentum as we move through the year?

I mean I would -- I absolutely say we're optimistic in that, I would say we have, over the past couple of years, built a more consistent -- I'll use the word predictable, though predictable is -- I'll use that loosely because things aren't as predictable when we're selling these larger complex events, but predictable in the sense that we have events coming out of the bottom of the funnel, sales funnel. We have events kind of operating -- or prospects operating kind of inside the funnel, and we have prospects entering the funnel. And it's, I'd say, a more complete picture in terms of sales activity. Whereas maybe 3 years ago, 4 years ago, we have -- we'd have a couple -- deal come out of the funnel or a couple of deals come out of the funnel, but we really didn't have anything kind of backing those up inside the funnel progressing through. So I feel better that we are getting into more of a rhythm and more of a complete picture around selling activity. Similar to what we have in our IMS business, for example, where we seem to have a constant $35 million backlog of uninstalled -- sold and uninstalled revenue. And the reason we tend to have that roughly a similar number quarter-to-quarter, period-to-period is because we're installing selling, replenishing. So it's a -- there's a rhythm to the business. And I feel like banking is kind of getting close to that sort of rhythm. Now banking will have the different element of much larger -- potentially larger, I'll call them most stand-alone events that would create more variability maybe quarter-to-quarter. But that being said, I feel like we are getting closer to a more consistent rhythm with the business. And you know how we calculate our numbers, Patrick, from a sales standpoint. And as we talked on the first quarter -- our fourth quarter call that we got the year off to a pretty good start by getting some clients -- some contracts signed right after the new year. Now arguably -- we made the argument. The heavy-lifting was done last year. It was just a timing of contract signing, and I would say COVID fatigue really set in, in the second half of December. So people were -- this thing, worn out, they carried over. But that being said, that's a good sign for 2021. The other thing I'd say is that as we get -- each client we sign, each client we install, begets more interest, more activity more momentum. So I think that's the other thing about -- we always talk about momentum, but that's the -- I feel pretty good that we're gaining that more consistent momentum in the business.

Good to hear.

I mean, I would -- I mean, I could speak for my business and only because it ties back to your first question on innovation. So if you go back to the pre-COVID world, you look at the old -- we have a bunch of asset managers on the phone. If you look at kind of the asset management world, I mean the way we organized, right? I mean we were -- we had geographic territories, and we had, what you would call wholesalers, and 36 spread across the countries lived in their territories. So they that stuff. And then we had sort of a centralized lead generation lead qualification process that gave leads to all these people. Well, reorganized, actually at the beginning of this year because now we said, you know what, we're going to take the first end of the sales process. So take the top 15%, 20% for us. And we're going to make that national in scope, and we're going to digitize it. And I don't mean this literally. But philosophically if you think about it, geography doesn't matter. But before all sales was organized by geography, but in today's world geography doesn't matter, COVID was kind enough to teach that to us. If you think about Amazon versus your local mall, geography doesn't matter. So how do we to institute that into our sales process? So we created a digital distribution team that takes over the first 15% to 20% of the sales process. So if you're an adviser in my market and you're in Boston and you had the Boston regional adviser, and he's strong on technology, but not strong on investments, whatever it is for our multi-facet application, you kind of get what he gets to offer, right? Because I mean, he could do it all, but he definitely has strengths and weaknesses, to be honest. Well, now when we do lead generation, we have this national digital scope, we can drive them into qualification and to online educational forms that's tailored to what they're most interested in and what they most value. And when it pops out the back end, until it gets to the in-person sales process, it's qualified further down the value chain for us with what that -- we don't have to do the discovery one-on-one upfront. We can understand what they're looking for, what they value and then we can sell into that. So that required a pretty major organizational change for us to do that, but that was -- it was -- I think it's an innovation in how the sales process works.

And so it sounds like there was kind of disruption and reinvention to the sales process during 2020 and that you feel like across the business, you'll reap the benefits in 2021.

It was January 1, 2021. So we did reorganize the sales territories. We changed how we designated clients, how we ranked them, if you will, what the sales process were. It did disturb existing relationships, with it some advisers, no doubt about it. But we had to change. We had to innovate -- we had to change it. We wanted to move forward to fit into this new world as opposed to -- we're just going to keep doing it that way because that's where we always did it, and we didn't want to take the risk of making the change. So I would say it's beginning of March now. I think we're through it. It maybe was a little painful. I'm glad I'm not having this conversation 5 weeks ago. It was maybe a little painful at that point, but we're in a much, much better spot today and different than perhaps the rest of the competition.

Got you. And while I think 2020 certainly had its fair share of challenges, for most of the business, it was actually a pretty good year on the margin front. Can you talk to, -- across the company, what are some of the tailwinds -- obviously, the market has been helpful. But what are some of the tailwinds that you've been seeing on the margin front, and how sustainable should we expect that margin levels exiting 2020 are going to be going forward?

I think this was talked about on our earnings call, kind of, business-to-business, in that I think, generally, our margins and our profits are -- across all of our businesses are correlated to revenue growth. So if we get top line revenue growth, I believe we do a pretty good job of getting that to the bottom line. And banking has been the one challenged segment in that, but that's why that $73 million, $75 million backlog is so important because as we reticulate that revenue, that's really the beginnings of moving the needle on margins because we feel like we have a very scalable business at this point in terms of fixed cost structure efficiency -- efficiently operating business, kind of room to absorb clients and new revenue. The first half of the year, that will be -- it look like last year, essentially in the second half of the year, particularly later in the half, when we start to bring on clients, we should start to see the benefit of that. I'll let Wayne speak to his business. The institutional business, as we saw in the fourth quarter, the markets gave us some revenue. We did have kind of a neutral sales quarter. That being said, there was good margin improvement because we're able to get a lot of that revenue to the bottom line because of our cost structure and how efficient we operate. Going forward, I'd say it's similarly true that if we matriculate revenue there, I'm not saying we want to be in that kind of low 50s, mid-50s margin range, but it is a very scalable business. Now the reverse is true as well. I mean, so if we lose some revenue, it's generally very profitable revenue that goes out because we don't have a lot of variability in our cost structure. So you kind of get the pros of leverage and scale -- and the negatives because we run very efficiently. And we know the institutional business has still got a little bit of transition in it, particularly with the U.S. corporate DB marketplace being so challenged. IMS, I think it's -- could that business have higher margins? Arguably, any business could have higher margins if you make certain decisions. But in that business, in particular, but really kind of across our businesses, reinvestment in the business is really important. So all the way back to your first question about innovation, 30-year average, 10-year old at Jazz. Well, the way somebody who's on this on a -- in a meeting like this 20 years from now is going to be able to talk about SEI is because we continually reinvest in these businesses. And we keep them fresh and relevant not just for today, but planning for -- to be fresh, relevant 5 years from now. So IMS is really, I'd say, more a function of continued reinvestment relative to margins. The business model is very strong to improve margins, but we will continue to invest. And adviser, Wayne, you may want to speak to that.

Yes. I mean the way I look at advisers, Patrick, is; number one, going forward in terms of expecting, I'd be happy to keep the margins flat where they are. I mean -- and that will be a challenge. I'm not saying I'm telling you I can do that. That will be changed to do that. So for all of you that have been paying attention, the move from active to passive and the move the fee compression in asset management are the 2 biggest themes going on right now. I think it's important to understand that against the backdrop of those 2 giant themes, we've been able to maintain profitability and margins as we migrate and take advantage of those. So as we move the lower fee products, as we move the past, it surpasses probably, I don't know, 12% of our portfolios now as we take a -- we've been able to maintain profitability and margins as we slowly migrate. So -- and that's our goal. And as we try to maintain those margins, there is, for me, at least, a point at which I don't want them -- I want them to be, and then I want to free up reinvestment so I'm here at 20 years. It's not about just making as much as I can make today. It's about how am I going to pass this on to the next-generation as healthy as I received it?

Yes. I mean I would just -- I mean, to close out maybe this question, I would just emphasize that we have made the hard decisions and investments over the past 5, 10 years in retooling the entire company at an infrastructure level, kind of at a foundational level and then innovating kind of on top of that foundation. And so we're built for -- I believe, for the challenges of the next 10-plus years in the industries we're competing in. And we -- because of what we've done over the past 10 years, I believe we put ourselves in a much stronger position to take advantage of, not just the opportunities the next 10 years will present, but also to deal with the challenges that the next 10 years are going to present to our broader industries. We're built for the future. We couldn't have said that 15 years ago. We were not. We were like, arguably, when a lot of our -- some of our competitors are kind of sitting on top of today. But -- and that goes back all the way to that first question. Wayne, I and Al and Steve and everybody else that's kind of a leadership position, we really have the mindset that we're not here just for today for SEI. We're here so somebody else is running a great company 10 years from now when we're not around.

What you just reminded me of -- and this is -- it's more of a proof statement, nobody cares about it because probably some people are on the phone or on the phone that aren't even this old, but SEI, I think is 52 years old now. And we can talk about the -- with pain, we can talk about over the $1 billion we put into the new platform. But understand, if you just tuned in, that seems like you retooled the company, as Dennis said, but that's our fourth retool since we started. Our whole technology platform was built on Honeywell when we started -- when Al started. I wasn't here. And then actually, when I started, Dennis was here too, that whole platform was retooled and put onto a prime computer platform, and that was all prime-based platform. And then in the '80s, we redid it again into an IBM-type mainframe platform. And now, the SWP is just a whole new platform on a server-based, Oracle-based open architecture platform. So SWP is not new news to us. This is just -- it's the fourth time we've done it. Not me, but the big -- the royal weight.

Got you. You kind of mentioned competition a little bit and making sure that you're investing so that you can stay relevant against competition. As we focus on the adviser segment here for a second, competition would probably kill to have your margins, Wayne. But I would say that the environment is probably as fierce as ever. There's publicly traded firms, investment, asset market. There's private firms, independent broker-dealers are boosting their technology offerings. How do you make -- what specific things would you point to make SEI stand out to advisers against that competitive backdrop?

I think that -- 2 things. I'd say, number one, when you look at growth and you look growth in advisory, look at growth costs, we're always interested in profitable growth. So we need to grow in a way that's profitable, and we're not -- it's not growth at any price. And then the second thing is we need to -- as we grow and as we invest, we need to invest in what's important to the clients and not just what's new and generates revenue. So when we look at the tools, what is it that we want to build that's differentiated that we can add value and what is it we want to buy and integrate. So you mentioned -- Envestnet as an example. Well, Envestnet, some of the subsystems on Envestnet, specifically, aggregation of outside accounts and performance measurement, are Envestnet platforms that we white-labeled and integrated in SWP. We didn't really want to kind of build that ourselves. We were happy to buy it from them and integrate them, and they do a nice job, and it's not a business we want to be. And we want to be involved in the total offering, and that was a component we needed. And then when you look at the way we integrate our platform and outside platforms into a total solution is what's important. We don't necessarily need to own all the components, we need to look and feel and operate as if we own all the components. And it goes back to innovation thing. If you want to be -- take financial planning, because I know that everybody is going to probably want to talk about that right now. How many financial planning software tools that -- and I could buy one. I'm sure I could buy one. I could build one. Sure, I could build one. I mean this is not curing cancer. But if you want to be on the forefront of innovation and developing that, I'd rather buy someone else's and that's kind of the business they're in, and I'll integrate it like it looks like mine and I can continue to add more value to the end investor. And I'll take advantage of their innovation. We bought -- you probably know, I mean, we own 7% of a small financial planning software that was bought by Orion and ended up being pretty good for us. But we're happy in some of those areas to be a partner with other people that are creating some of these solutions and just make it look like it's ours.

Yes. That's an interesting perspective, I think, particularly in light of an acquisition in the space yesterday, financial planning software, as you alluded to.

I didn't just make that up.

Last quarter on the conference call, Steve Meyer spoke about how the Private Bank segment is starting to branch out to more of a wealth manager approach. It's in the early days of an initiative to target large RIAs. How do we think about where the advisers business ends in terms of targeting RIAs and where the private banks business begins?

Yes. I mean, the way I would answer that is you can't look at RIAs -- you can't look at the phrase -- RIA is just a legal structure. It's a legal organizational structure that a wealth manager -- you could be an RIA, you could be a wirehouse broker, you could be a bank affiliate. So an RIA, it's just a legal structure. So the question is more, if you're in the financial planning space or the financial wealth management space for, what is your philosophy and what do you do? So when you look at -- so for example, Steve's question, are they interested in -- are they big enough that they're interested in a totally bespoke solution and they can afford to buy a technology platform, integrated and customized for them and drive enough value from the expense associated with that to grow their business? Do they have that level of scale? So if you look -- take the private banking sector. What Wells Fargo does with the platform is completely different than what U.S. Bank does with the platform. We provide the plumbing and we provide the ability to customize, but they customize it to fit their business. I think the same is true for RIAs. If you look at my business, the RIAs that I serve and the affiliated advisers I serve are more at a scale level where they're looking for a more packaged-type approach as opposed to a completely bespoke approach. So I would say that when you look at what Steve's emphasis in the -- what we talked about in the RIA market, that is a segment that we never penetrated or did not have an adequate solution for before because we couldn't customize it or couldn't get to what was important to them. And I think having Steve focus on that from a technology perspective broadens our addressable market. So it's -- if you talk about a blunt instrument, I would say, size. But I think it's more of a -- as much a mindset from the advisory firm as it is size.

Got it. That makes sense.

We used to have a delineation of -- Wayne, you'll remember, there is the 3 segments of the market: the pure outsourcers, so RIAs -- just want to sell and service clients, and they want everything to be kind of programmatic and in a box; and then you had the other end of the spectrum, which was the full do-it-your-selfers, so firms that manage money, pit themselves as portfolio managers, want good technology, want good, maybe even operational capabilities, but from an investment standpoint, they're kind of stand-alone. And they tend to be the bigger firms, multibillion-dollar type firms. And then in the middle, you had kind of that hybrid firm that midsized firm, maybe $200 million-plus that wanted to outsource kind of front-to-back office in certain segments of the market that they were selling to, but they want to dive their own secret sauce and do their own things in other segments of the market. And that's kind of where we migrated the business to that to address that type of adviser that is larger, but wants kind of full front-to-back office capabilities, including the front office portfolio management strategy work and good technology to implement but wants a little bit of freedom, wants freedom to add their own secret sauce, if you will. So that's how we used to talk about it. And I'd say, generally, it still holds up that. But size is not necessarily the -- just the only determinant. It's more, again, how they run their business.

Right. And I go back a little bit to your first question on longevity and culture. I'd like to say that everybody above $3 billion goes to Steve and everybody under $3 billion goes to me. That would be kind of the easy way to do it. But that's not the way we operate. We look at, okay, what's the value proposition to that customer? What is that customer looking for? Because a $3 billion -- maybe you're looking for the same, it's $1 billion guide -- or may be entirely different. I mean, so we need to manage -- while all the sales forces all have quota and we want them to go after it as hard as they can, the kiss of death is if you're going after yours and you're not doing what's in the best interest of the customer and the best interest for SEI as a whole, you're just trying to make your quota, that's not a very good career move at SEI. The worst thing that could ever happen is, Steve's national sales manager call me and say, "Hey, I got this guy in your site, and he's not doing what's the right thing for the customer." That doesn't happen. But I think the fact that people know that could happen is not a good thing because we're in this together on behalf of SEI.

And you don't want to get Steve mad at you.

He's way bigger than me.

Wayne, you spoke about kind of some of the structural pricing pressure that you've seen in your business over the years. But I think advisers annualized AUM base only down a couple of basis points over the last 3 years, despite some of those challenges and headwinds that you spoke to. What sort of offsets are you seeing that's leading pricing to be maybe more resilient than what we would have otherwise expected?

Yes. I think there's a couple of different dynamics. Number one, as we migrated to lower-fee products, we've done it in kind of an unbundled fee methodology as opposed to just repricing all the legacy products. So the old legacy products that existed at old pricing levels and old model are still there, and we just didn't reprice everything, as you see that a lot of people in the market do. So people that like the old products, like the -- kind of the bundled-in pricing and -- which tends to be a little more expensive, they can stay there if they want. So then -- so it's part of that. Part of it is there is, as we sold more technology, there is some technology revenue in there that maybe doesn't have assets associated with it. So the revenue is in the numerator, but the assets are not in the denominator. So the way you see it. It's about the way we see it managed, but I understand what it really -- but I would -- and that's a couple of basis points. It's not a big number -- I mean a couple of 10ths. And then I think as we've disaggregated or deconstruct, as we call it, deconstructed our investment management value proposition. A lot of products are cheaper most products are cheaper, but not all. I mean, some are a little more expensive. I mean when you look at -- we have a customized solution in the ultra-high net worth solution, that's kind of more expensive than our old solution. But it has a different value proposition, maybe as a different ESG overlay or a different tax management overlay or the things that people are willing to pay for that didn't exist in the past. So as we try to move away from the commoditized portions of asset management, be it alpha generation or whatever you want to call it, and move to those parts that aren't as commoditized, be it tax or be it ESG or be it something, where we can make revenue and increase our margins, we're trying to do both of those simultaneously. Not that we're insulated from fee compression, because we're not. But we can manage the impact of that, and you see that in the numbers.

Got it. We've got a couple of minutes left, so maybe one last question. On the capital allocation front, SEI continues to be very selective regarding M&A. Of the various impediments to doing deals, valuations, strategic fit, cultural fit, what tends to be the biggest gating factor for you guys?

I think it depends on the property we're looking at. So -- but one thing we pay close attention to is cultural fit, will the workforce and the culture of the workforce fit with us. But that, frankly, comes after strategic fit. If it's a property that's going to enhance us strategically and enhance our ability to grow strategically, either because they have an existing business and an existing solution set that we can take advantage of, or they have talent that we are going to arguably hire on our own anyway that may give us a boost and speed to market. But then you have to get to the kind of culture side to that are they going to fit? And is the company you're acquiring going to fit culturally? Yes, valuation-wise, I think we probably have had to adjust our thinking on that to the market reality of valuations. Yes. That being said, we would still have a pretty sharp pencil on valuation as well, but we have had -- I think, had to adjust our thinking on what may -- on how the market has spoken on valuation at this point.

Yes. 10x revenue is the new 6x revenue.

Yes. And that could change again, so -- but we've -- we definitely haven't -- we're not -- we haven't ignored that factor, if you will. If the right thing came along, we would do it, not sure. Feel pretty confident.

All right. Terrific. Well, with that, we are out of time, so we can wrap it up. But I want to thank you guys for joining us today, and good luck with the rest of your meetings.

All right. Thanks, Patrick. Thanks for inviting us.

All right. Thank you, everyone.