SS&C Technologies Holdings, Inc. (SSNC) Earnings Call Transcript & Summary

Hi, everyone. Thank you for joining us this morning at RBC's Technology Conference. I'm Justine Stone, Head of Relation -- Head of Investor Relations for SS&C Technologies. And with us today, I have Bill Stone, our Chairman and CEO. Bill is going to give a brief presentation on SS&C, and we will open up for questions via the web portal and take questions at the end. Bill, I will hand it off to you.

Thanks, Justine, and thanks, everybody, for coming in this morning and seeing our presentation. SS&C's -- have -- a pretty active company. We have lots of software and services for both the financial services industry and the health care industries. And really, we have over 24,000, 25,000 people that work for us worldwide. And we really focus on making sure they're well trained. They're obviously very bright and educated. And they have a lot of different educational and other certifications such as CPAs and chartered accountants and CFAs and PhDs and so forth and so on. We focus on making our clients serve their clients better. We give them technology. We give them services, and we give them expertise. And we're also very flexible about how we deliver that. We can do it via license our service model, and we can do it both term or perpetual. So we've done that in a pretty broad way. And our strategy is pretty simple, right? I mean, we want to provide that excellent customer service. We do that by giving solutions, right, not just a bit of this or a bit of that. And we also leverage the technology that we hold, that IP. And we like to be able to gather data that allows them to have insights and analytics against that data that we're processing for them on a daily basis. And again, we view what we do as accounting and technology. There's an awful lot of accounting that is required now by different regulators as well as generally accepted accounting principles or IFRS or other standards. And then we have to be able to use technology in order to be able to do that. We really do listen to our clients and figure out what's best way to supply that. We give them that digital experience so that it's -- ease of use. We have over 18,000, 19,000 clients. So we have proven that we can execute. We bring in our services team, our consultants to allow us to deploy our technology and train our customers. And again, we're not tied to a prime broker or a bank or a custodian or a broker dealer. We're an independent company, and that allows our clients to have a lot of confidence in our ability to deliver. And again, when you look at technology, it is getting increasingly digitized. Your inputs that are coming in are from SWIFT messages or FIX messages or flat files, structured, unstructured data. And you have to be able to take that data and be able to digitize it, put it into the databases and deliver analytics against it. You have to be able to real-time compute. We use a lot of things like intelligent automation, natural language processing, our robotic processing, machine learning. So it is a pretty sophisticated platform, and it does a lot of things for our clients. We have been successful. We went public for a second time on March 31, 2010. The first time we went public was 1996. We went private in 2005. We're proud of this performance since March 31, 2010. We've had a revenue growth CAGR of over 28%. And we had cash flow from operations CAGR of over 30%. Our stock performance is 23%, and our EPS growth is 24%. World-class numbers, I believe. When you look at what we do for a variety of different segments of the financial services and health care industries, you can see that SS&C is a major player in this. We're -- we -- our Intralinks platform has handled almost $35 trillion in financial transactions. We're the largest mutual fund transfer agency with almost 50 million accounts. We have 75 of the top 100 hedge funds of our clients. We have 40 fund administrators that use our technology. We do pay an awful lot of pharmacy claims, almost 500 million. And we cover 48 million lives with our medical applications. So we're a big player across a lot of different things for our clients. And I think it's pretty obvious with these 12 boxes you see. We had a good Q3. We grew our organic revenue growth by 8.2%. Total growth was 9.5%. We drove earnings per share, our adjusted earnings per share up 20%. And our cash flow from operations was $945 million, up 25% from Q3 of 2020. We have a high-margin business model. As you can see, we operated at over 40% operating margin in Q3. And we also had adjusted revenue for the 9 months ended up over 8%. And our year-to-date EBITDA is over $500 million a quarter and ended Q3 at $1.541 billion, up 11%. We have very high-quality earnings. Our cash flow is higher than our earnings and I believe will continue to be so. So I think on average, it's been 111%. We're very shareholder-friendly. Our capital allocation is pretty well balanced in 2021 with stock buyback to 53% and our debt pay down at 34%. And we paid 13% in cash dividends. Some of you might have noticed that we increased our dividend yesterday from $0.16 per share per quarter to $0.20 per share. That's a 25% increase. And we continue to generate tremendous cash flow. And we believe we'll be able to continue to pay down debt, buy back our stock and increase dividends in years to come. We have used leverage when you can get the term debt at LIBOR plus 175 basis points, which generally is a little bit less than 2%. It's a very shareholder-friendly way to generate capital. But we pay down the debt quickly. And you can see from 2012, when we acquired GlobeOp, we got 4.2, we paid down to 1.5. When we bought Advent in 2015, we got up to 4.5, and we quickly went down below 3x. And obviously, here when we bought -- in 2018, we closed on DST and Intralinks and Eze. And we've got up to 5x levered. But we have paid it down to below 3x today. Again, as we talked about, EPS was up almost 25% on a 5-year average, 18.7% up this year on adjusted EPS. You go back to 2016, we made $1.64, and 2021 we made about $5. Again, as I said, we are strong, growing. And we focus on our customers, and we think that's a great process for success -- continued success. We'd be glad to take any questions from anybody.

Thanks, Bill. Give me a second while I compile the questions. The first one that we have is about the demand environment. Can you bring us up to speed on the shape of the recovery in your various businesses?

Well, obviously, the worldwide economy has recovered from the pandemic or at least largely has recovered. And what that's done is people are anxious to improve their operations and grow. And SS&C has been a beneficiary of that. And I think you can see that I think our organic growth in the first quarter was 4%. Second quarter was 7.2%, and the third quarter was 8.2%. So I think we're focusing on the right things. We're about halfway through Q4, and we continue to execute. And hopefully, we end the year strong.

And you mentioned organic growth, and you posted 8.2% in Q3 '21, which is one of the highest levels we've seen in a long time. What are the key drivers to that? And how sustainable is it?

Well, I mean, we had a lot of strength across a lot of our different businesses that were up double digits. And we think that the hedge fund industry, if you look at our capital movements or our redemption indicators, have been very strong. I think 15 straight months of lower redemptions than the previous year's months. So I think the hedge fund industry, private equity, Intralinks, our private assets, our real assets business, Advent are all performing very well. And we believe it will continue.

The next question that's come in is about the competitive environment. And the -- it seems to have heated up across the entire fintech universe. And what are your thoughts around some of these new cloud native players that have become public in the recent months?

Well, our revenue in the third quarter was up $110 million from the previous year's quarter. And I think just from a scale and a functionality perspective, SS&C is a very, very strong competitor. And we think that there's a lot of hype in some of the new offerings that are coming out. And we like our competitive position. And I think we will continue to offer new solutions such as Singularity and Aloha and others. You've got Genesis coming out of Advent. There's just a lot of technology that we build on a quarterly and annual basis.

The next question that has come in is about M&A. How are we thinking about the opportunities for M&A and given SS&C's capacity and the prices in the market today.

Well, prices are expensive. And we recently, yesterday, we announced that we are bidding for Blue Prism, which is a robotic process automation company based in London, and we bid $1.6 billion. And that's topping a bid by Vista that was in at $1.5 billion. We like Blue Prism. We think it fits very well with our Chorus line of technology, which we set a press release out on maybe a month or 6 weeks ago about what we're doing with Chubb. So we're very excited about our opportunities there. And there are some other things that are in the marketplace that we're looking at. And we're trying to stay disciplined, but we're trying to also improve the quality and growth prospects of our current set of technologies and services.

The next question that's come in is about DomaniRx, the joint venture to create a new cloud-based claims adjudication platform. Can you maybe talk about why this is an attractive long-term opportunity for SS&C in the health space?

Well, us and our partners, Humana and Anthem, we view that giving -- given the number of pharmaceuticals that are in the marketplace, the stuff that is in the pipeline for pharmaceuticals, we -- the aging population and increased wealth and the focus on health care, we think all of the demographics of this are very positive for us. And having some expert partners with our technology capability, we just believe DomaniRx is the right platform at the right time. And we're excited about its prospects going forward.

Can you give a couple of more minutes if any other questions come in? It looks like we are all out. But thanks for doing this today. And if you have any final comments, go ahead.

No. Again, we appreciate you coming out this morning. And we'll continue to execute, and we look forward to seeing you and talking with you in the future. Thanks.

All right. Thank you.