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

[indiscernible] 14th Annual FinTech Conference. This is my 9th. So super excited to kick off some of my sessions today hosting SS&C Technologies. We have Rahul Kanwar, Chief Operating Officer. Rahul, great to see you; and Justine Stone, Head of IR. Thanks for coming.

I think why don’t we start off with this? I think recently, you held your Deliver Conference in Phoenix. It seems like it was a fairly successful event. Why don’t you expand a little bit on some of the new announcements that SS&C made, AI Agent catalog, Gateway and SS&C Agent Services were some key announcements there. Great if you could just kind of recap for us how the event went and take us through some of your announcements.

[indiscernible] the most recent one we just had a couple of weeks ago in Phoenix, we had probably our biggest conference ever. We had over 1,000 attendees, 200 sessions and maybe what's most telling is half those sessions are moderated or the speakers are our customers. [indiscernible] speaks to the high level of engagement that we have with those customers. So we're really using that conference as a couple of different things. One is that feedback loop that's really important to us as we build technology, right? So lots of customers coming and talking to us about how they use our software where they have requirements. And so that's a big part of it. I think the other big part of it is it does allow us to the point you just made. It does allow us to showcase our innovation. So we're -- in particular, we have really across all of our businesses, a very good focus on product road map, what we're building, how we're taking advantage of whatever new technologies are out there, whether that's AI and generative AI, whether that's tokenization, whether it's -- whatever it is latest in digital, which is really important to our customers, web portals, mobile apps, things like that. And so in particular, this year, we were able to announce and show a number of different AI agents that we have built within SS&C and I think the thing that's probably most important about that is we're processing at scale millions and millions and millions of transactions. These AI agents are being production tested on real-life scenarios. This isn't some tech company with a bunch of tech kit and you go figure out how you're going to use it. This already does. So when we talk about an AI agent that does, let's say, Credit Agreements. It’s done thousands, if not hundreds of thousands of Credit Agreements. So we had a number of those kinds of things that we revealed that were pretty well accepted and that was a very successful conference.

I imagine huge [indiscernible] client base, productively, so on so forth. What are some of these recent announcements? Obviously, you captured a lot with you the AI technology capabilities that are out there. But how do you think about the strategy in terms of targeting what your clients were asking. I hope this kind of like the theme of [indiscernible] it's a great question because if you're not careful, you try to solve almost everything, right? I mean there's no [indiscernible] and focus like in those things is pretty important. So we tend to listen more than we talk when it comes to those kinds of things, right? So we tend to just try to understand where the biggest pain points are, where the biggest opportunities are. So that's one part of it. I think the other part of it is coming back to -- we have the world's biggest fund administration business. We've got the world's biggest transfer agency business. We've got the world's best portfolio accounting system for alternatives. So we've got lots of examples internally where we see millions and millions and millions of workflows happening every single day, week, month, year, and we get a good sense of, "hey, you know what, it turns out that Credit Agreement [indiscernible] really is an issue," right? Or when people call into one of our customer service hubs, it's taken them a little too long to get an answer or whatever the case may be, right? And then that becomes what you tend to focus your automation efforts. Let’s talk a little bit about recent results, just recap and maybe we could tease out like what were some of the items that you believe drove the quarter? And what were some of the main drivers there?

Yes. So we had a pretty good quarter in Q3. And I think it was really driven by strong revenue growth that some of our biggest businesses, over 9% growth in both our GlobeOp business and our GIDS, Global Investor and Distribution Solutions business. So -- and those two together account for over 50% of our revenue. So strong growth there is important. We also had margin expansion in the quarter, and I think that is attributed to just -- we're always paying attention to costs and making sure that we are efficient. And we have this big kind of AI and automation push throughout our organization that really allows us to both invest in where we see the need, whether that's R&D or sales and marketing, but to essentially keep headcount flat and grow our revenues without growing our expense base at the same [time].

[indiscernible] I want to dig into each one of those areas [indiscernible] are some of the exciting growth opportunities that we will see [indiscernible]

Yes. Well, GlobeOp itself, it's the largest alternative fund administrator in the world, and we really have the [indiscernible] of our hedge fund clients, and they performed really well this quarter, which helped to drive some of the higher growth this quarter than what we were saying before, 7% or 8%. I think they grew 9.6% in Q3. We also continue to see strong growth in private markets. So that's where we've got private equity, private assets, real assets, private credit. That's been growing in the double digits pretty consistently for the past couple of years. And then kind of the newest piece of the business, the smallest piece is also the fastest growing in retail alternatives, growing over 20%. But really, we have a unique offering where we are both the fund accounting and the transfer agency services that are required to account for all of the retail investors that are now getting into the alternatives. We think that this is a -- there's a lot of runway ahead for these types of funds. Everyone wants to get into alternatives. So high net worth individuals want an avenue to be able to invest in alternatives and get those kind of returns. So we think that that's a great business, and we see kind of continued growth from that.

Yes. [indiscernible] across our coverage [indiscernible] huge opportunity [indiscernible] in multiple quarters of our coverage. So it seems like [indiscernible]

Yes. We're the only one that provide both of those.

I do want to talk a little bit about [indiscernible] benefit growth rate really through the first half of '26. Maybe you could discuss some other factors that you're excited about in the segment to continue that growth rate on mid-single digits, higher than the low single digit expectations that I think perhaps [indiscernible]. But are there any specific areas that you're excited about opportunities in the pipeline?

There are. And some of it is -- we've done a lot of work in particular, to try to strengthen our competitive positioning in this business over the last any number of years, 4, 5 years for sure. So we have a lot of confidence in that management team. We've got to look at the sales teams organized the way we want them. We've got product development and innovation where we want it. And we have spent a significant amount of time with our customers understanding where their requirements are, right? So these things don't happen by accident. You don't go from one set of performance to a different set of performance without having to do something. So we feel like what we've done is laid a foundation that is really in a pretty good spot. That's being validated in the market with wins like places -- great big institutional places like Insignia that have lots of choices and runs detailed RFPs and do their diligence in a fair amount of detail. It's also being validated every single day and what we see in terms of the opportunities that we have, the pipeline that we have, the RFPs that we're participating in. So we've got a fair amount of confidence that what we have here is a business that will continue to perform well. And some of the reasons are for most of our customers that are in the money management business, right? And that can take a lot of different forms, the institutional managers [indiscernible] to plans, it sort of doesn't matter. One of the biggest things that they're very focused on is the end client experience, right? So if somebody logs into a web portal, somebody calls in somewhere, somebody goes on a mobile app, somebody talks to a financial advisor, what's that experience like? How rich is that experience? And is it differentiated, right? And what they're increasingly finding the technology is moving so fast that the best way to get that differentiation is to do it at scale, so which means that we are now being exposed to outsourcing opportunities that we haven't traditionally, folks with lots and lots of internal systems that are saying, "Hey, I know I got to bring all this together. I know I need a generational upgrade rather than try to do it all by myself, why don't I get some help and see if I can retain that configurability that I'm really looking for, but get a lot of scale. " And so that's been really good for GIDS. It's a global business. Half the revenue comes from outside the U.S., lots of momentum.

[indiscernible] How are some of your [indiscernible]

It's obviously a really important part of the process because large projects, large-scale projects implementation is the sort of both the key risk as well as the key opportunity if you can get really good at it. One of the things that has helped us with some of the bigger ones is this lift concept, right? So in effect, what we're doing is we're accepting the current operation as is, and we're keeping it going. So we already have -- on day 1, we have the people, we have the systems, we have the revenue, right? And then what that does is it takes some of the -- it's not that the work doesn't have to get done, it still has to get done, but it gives you a lot more flexibility as to which pieces you incorporate at which points in the cycle and you're getting the economic benefit throughout.

It sound like having [indiscernible] product to start, right? And then you can iterate from that point [indiscernible] Exactly. That's good to hear that [indiscernible] for sure. I [indiscernible] want to talk a little bit about if you could [indiscernible] talk high level about how you feel about organic growth for each of your business units, talk about -- why don't we start with Wealth and Investment Technologies [indiscernible]

Yes. So Wealth and Investment Technologies, the business is really where we kind of house a lot of our financial services software. And we have different kind of verticals within there. But if you think about it, the alternatives business within [indiscernible] that's where we have our Geneva product, which is really widely regarded as the best of the best in portfolio accounting for large asset managers, hedge funds and fund administrators. So that continues to kind of hold that space and it continues to grow nicely. The next big piece of the [indiscernible] business would be Wealth, our Black Diamond Wealth platform, again, continues to do really well and is probably the largest kind of provider in the RIA space. We have a partnership with Morningstar, where as they are kind of decommissioning one of their offerings, we are making it the migration to Black Diamond very seamless. And I think we've won over 400 clients in Morningstar this past year to get on the Black Diamond platform. So that's been going really well, and we think that that's going to continue to drive growth for the Black Diamond platform into '26. We've got the insurance. Our insurance offering in Singularity that continues to grow really well. We have a couple of competitors in that space that might not be quite as strong in kind of recent quarters and going through some disruption. So I think that that's something that we can take advantage of. And then lastly, we have kind of our traditional investment management space, which look is a crowded field competitively, but we think we have a really strong offering in our newest Geneva solution that has all the bells and whistles of new technology that is really based on the functional expertise that we've built over years. So Wealth and Investment Technologies to sum it up, we think is a mid-single-digit grower in the whole and a lot of it is dependent on renewal cycles and license deals and things like that, so it can look pretty lumpy, but we have pretty good visibility into the future first [indiscernible] is performed. [indiscernible]

[indiscernible] basis? Or is it a whole ecosystem or platform kind of approach? [indiscernible]

It's a little bit of both. Increasingly, and some of it is a function of who we are as a company. Increasingly, the most important deals for us are one where we can have a package of a lot of different parts of our business, right? So they may be interested in -- so in particular, they may be interested in Black Diamond and they may also be interested in our trust accounting, which is what we call Trust Suite. They may overlap that and look at our model capabilities at [indiscernible] as advisors. In some cases, they may also have separately managed accounts or funds that we're doing fund administration for. So there's a lot of different things. And so the most important thing and folks don't understand, sometimes don't often appreciate how deep and complicated some of these businesses can get and how many asset classes they're in and how brand their ambitions are. So the fact that we've got this wealth of products and services that we can offer has been a big advantage for us. And we tend to think that it's not one size fits all for these types of systems. So we have purpose-built solutions for industry verticals that we think that we know that insurance companies need this certain type of accounting system. And we know that alternatives need something different. They don't need the same thing. So that's kind of how we've approached the market.

So then in the interim is [indiscernible]

Yes. Look, we feel really good about the organic opportunity at Intralinks. If you kind of ask this little historical context, we bought Intralinks in 2018. And for many of those years, it's been one of our best growing businesses, right? So it's somewhat correlated to the M&A markets and what the M&A markets do and we understand that. But at the same time, the underlying product is about as strong as it's ever been. There's been a lot of work done in terms of new generations of both the virtual data room as well as the alternatives, the investor reporting platforms. There's more AI infusion there. There's a lot more service capabilities around setting up data rooms and privacy processing and reaction and all kinds of things like that. So the fundamentals are really strong. And what we're starting to see as the market comes back is we're starting to see that reflected in the numbers.

The previous [indiscernible] is kind of great competitors in this area, but curious how you're thinking about the M&A cycle [indiscernible]

I think our early indicators on, so we track what we call opportunity creation and deal count and things like that. So things that are pretty early in the M&A life cycle process. And all of those indicators over the last, let's say, 6 weeks, 8 weeks or so have been trending positive.

[indiscernible] Then let's [indiscernible] Intelligent Automation & Analytics and Healthcare. Again, the [indiscernible]

Well, I think we talked about a little bit at the beginning with what we're rolling out with our Agent AI capabilities and how we are providing those to our clients. So I think the consultative approach, the SS&C as customer is what we're calling it, we pretty much can build and on ourselves. And then we look at our clients and our prospects and like you guys have a similar problem, this is what we did with Credit Agreements. So how can we apply this to your business specifically. So we've had -- we've already had some successes with these AI agent sales and the pipeline is building. So I think we see some positive momentum going in for that Intelligent Automation & Analytics.

So I'm personally excited to [indiscernible] the Calastone acquisition [indiscernible] a little bit high level on what this [indiscernible] and how do you think this enhances [indiscernible]

Yes. Look, I think the Calastone does a few different things, but probably one of the most important ones is it's a network, right? So it's a network with about 4,500 or so participants that facilitates the process of individuals investing in investment organizations, right, very simply. So if you kind of look at kind of that traditional ecosystem where it's custodians and it's financial advisors and it's the end clients and it's the fund manager groups and things like that and then the various flows and the movement of paper and the movement of information, it turns that all into an electronic process, right? And like most networks, its strength is how many participants it has, right? So our -- part of our thesis is that in addition to the 4,500 or so that Calstone already has, we've got 23,000, 24,000 customers, many of whom are likely going to be interested, and we're seeing that already. So that's one part of it. I think the other part of it is there's a number of things that our clients are interested in, whether it's things like tokenization, taking funds and selling tokens and making that a far more seamless process. Calstone has a fair amount of technology already built around tokenization. We have seen already in our experience with Calstone in the past that some of their cash management tools and their web portals are really attractive to our customers. So we have customers that are using them now and implementing some of those now. We think we can do more of that. So there's a fair amount of overlap with our GIDS business. And all of it just really comes down to investment accounting, investment processing, investment workflows need to become more and more electronic, right? And we want to be at the forefront of that. [indiscernible] I would say that at least from my seat with investors, we've been talking about tokenization for the past 5 years, but really in the past 6 months, the competition had a good [indiscernible].

Are there opportunities to partner on the tokenization side?

There are, mostly with customers, most with -- we have customers that want the -- they're [indiscernible] pilots and they're setting up funds. And so that's probably our biggest opportunity. And let's [indiscernible] I think we missed in a lot of international growth over the past couple of years and Australia has been a big market for us with some [indiscernible] and have been building up that business in Australia for a number of years and it's really kind of taken off in the past 12 months or so. I would say, we continue to see [indiscernible] business a lot of strength in Europe and in U.K., [indiscernible] and then the Middle East, we opened two offices in the Middle East that really servicing. Both our Wealth and Investment Technologies business, but also fund administration business servicing some of those big sovereign wealth funds, which we still see a lot more opportunity going forward. Curo Fund Services, we acquired a South African based. Again, just kind of gives us a local presence in the South African market, opens up some opportunities there. And then just talking about Calastone, they really are a global network and they have touch points across all continents. And I think in particular, Asia Pac and Latin America and Brazil gives us more presence in those area.

It sounds like [indiscernible] so you are developing more [indiscernible] in your own business [indiscernible] internally and then [indiscernible]

So we have -- and because it's such a hot area, it changes every day, right? We had this conversation a week from now, I probably have a couple of different examples or additional examples. But in particular, if you kind of look at the businesses that, obviously, we do a fair amount of processing, Healthcare is one of them. So in Healthcare, we just recently deployed an agent that helps radiologists, so an effect of some of the processing -- preprocessing. And we think in the one client organization that we deployed, it's going to save them 15,000 radiologist hours each year, which is really powerful because we're talking about highly skilled people that have, obviously, there's limitations to how much supply we have. Similarly, within SS&C and with our customers, we're doing a fair amount of work in credit and the documentation related to credit, so that's been a fair amount of it. We're doing a fair amount of work as it relates to managing customers, dialing into customer support kind of organizations and the workflow so somebody calls and says, "Hey, I have this trust now and I need to transfer my assets and what are the steps. And that used to be a very human kind of procedural kind of process. And what you find is if you can train the technology on enough use cases, you actually can give it control, right? You can say, all right, you know what, here's a goal -- here's a goal I want to accomplish and here's a set of parameters and go do it. And we're finding that just -- it's mind boggling how quickly that is coming along. [indiscernible] that's right, that's the advantage, right? The advantage of when Justine talks a lot, we call ourselves customer [indiscernible]. The advantage is that there's pitfalls to this stuff, too, right? You got to be really careful, governance is truly important to us. We built our own governance product. We think the first of its kind so that we're trying to do all of this in a really carefully controlled way. But having lots of examples of it working well makes the system smarter.

Maybe we talk about how AI [indiscernible]

I think it's the -- I would say it's more of the latter. We're not always -- and this is true -- it's true for AI, but it's true for most of these things. We're not really trying to be the ones who invent whatever the latest way to deploy AI. What we are trying to do is say, “hey, deep in our workflows, deep in the things that our customers care about is a lot of complexity." It's hard to understand. It's hard to process. There's institutional frameworks that have been built up over decades. And our customers, when they look at AI are not just looking at [indiscernible] that's pretty cool. I can go get ChatGPT to summarize my history paper, right? That's not -- that's a great use case, but that's not the one we have, right? The one we have much more is, "hey, I've got 25 applications right now in my back office or my front office, and I need to find some way to integrate the application, pull the data, get real insights out of them and then use that to do some kind of processing that maybe is hard for me to do today." So the integrations are really important. The security is really important. The fact that it's tried and tested is really important because a lot of times, we're talking about customer data, right? We're talking about things that they have an obligation to safeguard. So the barriers to entry become that much higher, and that's where we play.

I [indiscernible] hear that [indiscernible]. We actually heard from an unrelated company that we cover like yes, we're able to sell our AI solution. [indiscernible] and then it got stuck in legal department because customer data, things like that and in the [indiscernible] world as we speak, so it's a really interesting [indiscernible]

Well, we made a big investment with this with Blue Prism when we acquired it in 2022. And I think the use cases for AI, we both can use it internally and have -- it started out with RPA and it has evolved into a more intelligent automation and AI-driven automation. So there are both internally efficiencies and cost savings that we use in our big outsourcing and services department. Those same automation and efficiencies that we're achieving help us be a better offering to our clients in that sense. So we -- it helps our good business and it helps our GlobeOp business with client wins because what we are providing is a better, more efficient, more accurate service. And then we turn around and we take what we've done internally and built it and we can sell it and generate revenue directly from those AI-powered services.

[indiscernible] That sounds very compelling. Just curious how you see the pipeline conversion playing out implementing to [indiscernible] I'm sure [indiscernible] for everybody to try to [indiscernible] technology. But from your perspective, how do you see that pipeline and conversion cycles that -- efforts that [indiscernible] Every client is different.

Every client is different. But the challenge of these kinds of things, right, is who's the sponsor within the customer organization, right? And so a lot of times, when you kind of talk about emerging technologies, sponsors is the IT department. And the IT departments are really important in a lot of places. What we find what we have is, in addition to the IT department, we have business sponsors, executives, folks that are in operations, folks that are in the financial part of the organization because to them, they can see the functional advantages, right? So then it's not a -- here's a science project, let's make sense of it someday. This is, okay, you're already doing reconciliations, and I just lost 3 people in my reconciliations department. Can we get this in tomorrow? So that's one part of it. The second part of it is we've got a -- we're blessed we've got a worldwide sales force that's out there talking to prospects and customers every day. They're not necessarily just talking about AI. They're talking about fund administration, GIDS and a bunch of other things. This is a sort of a very natural thing to include in that process. So it's a lot easier to develop the pipeline.

That sounds super interesting. It's almost like enterprise [indiscernible]. So let's talk about capital allocation a little bit here. Your leverage remains very manageable [indiscernible] balance sheet certainly appears to be strong. Can you talk about how – can you talk about balancing further acquisitions or some of your other capital allocation funds?

Yes. We have strong cash flow characteristics. And look, we're always looking at acquisitions. And with our leverage being pretty reasonable, we're not constrained. We don't have any really financial constraints or any management bandwidth constraints to do any really size acquisition. If it were to come across the [indiscernible], we would be interested in it. I would say that we are picky. We have metrics like growth accretive -- revenue growth accretive, we'd like them to be able -- if they're not currently at our corporate average margins, a path to get to corporate average margins within a reasonable time frame. And then look, how does it fit within our business? Can we cross-sell across the customer bases? Does it provide something that our clients would want to buy are kind of the qualitative things that we look at. But absent acquisitions, I would say that we are still -- we have a share buyback authorization in place that we are putting to use and we'll continue to put to use, especially feeling like our stock is undervalued. And then at the margins, we'll pay down debt every quarter.

[indiscernible] framework in terms of evaluating potential acquisitions. But when we think a little bit more on the strategic side, think [indiscernible] the opportunity to have more scale [indiscernible]

Well, there's a lot of different businesses. So the answer is probably not the same in every one. But I'd say maybe a few different categories. One is we are absolutely looking to extend the service offering every chance we get, right? So that may be buying something like [indiscernible], which complements our fund administration business with class action processing. It may be buying something like Curo, which then gives us an entry into a market where there are likely other customers we can go and get. So that's a big part of it. Capability set is also important. And we've put Calastone maybe in that category where it's a slightly different set of capabilities than what we have today, but there is overlap. Maybe the thing that ties them all together is we do feel like with 23,000 customers in financial services and healthcare, we've got this unique opportunity where if we can find more things that they're interested in, that ought to just drive growth. So that really is, I think, what brings us all together.

Well, I think we're coming out [indiscernible] Rahul, thank you so much for coming. Very insightful. Thank you very much.

Thank you.