All right, we will go ahead and get started. Thank you, everybody, for joining us this afternoon. I'm Patrick O'Shaughnessy, the capital markets analyst here at Raymond James. And up next, we have SS&C Technologies. And on their behalf, we have President Rahul Kanwar. Rahul, thank you for joining us.
Patrick, thanks for having us. We appreciate it.
Maybe just to kick this off, you know, we don't do slides much these days, but can you just give a couple-minute overview on what SS&C is and how people should understand it?
Sure. So we're a pretty large player in both financial services, and we have a healthcare business. We are what we would call mission-critical services. So that largely for us is a big part of it is around the investment lifecycle. So we are the world's biggest fund administrator. That's one of our businesses, represents about 25% of our company. So we do all of the outsourced accounting, reporting, investor management for hedge funds, private equity funds, funds of funds. Another big business for us is what we call Global Investor and Distribution Solutions, or GIDS. And that's a, you know, does the same kinds of things, but much more focused on the end client. So we're a transfer agent for U.S. mutual funds. We take care of the shareholder services for a lot of the wealth managers in the U.S. and U.K. and other parts of the world.
We've got a software business, and the company is at its heart a software company. So that we call Wealth and Investment Technologies. And there we have products like Advent Geneva, which is a flagship portfolio accounting system that's used by hedge funds around the world. We own a company called Intralinks, which is virtual data rooms particularly used in the M&A process. And then we've got a healthcare business where we do pharmacy benefits management and medical claims processing. And all in all, that's 27,000 people in 40 countries around the world. We've been in business since 1986. We run pretty close to 40% EBITDA margins and generate a lot of cash.
All right, great intro. Thank you. What are some of SS&C's key initiatives as we kick off 2025?
Well, I think a big part of it for us has been, you know, the last several years we've really tried to focus on just executing on revenue growth. And for us, that has meant making sure we have the right leadership at the right levels, particularly at the business units, investing in sales and marketing. If you look at our numbers, you'll see R&D investment has gone up a lot over the last couple of years. So investing in our products and innovation. And then the customer management process. We have 22,000 customers around the world. So almost anybody that we would want to do business with is already a customer. It's making sure their experience is a really positive one, which then sets it up for us to do more things with them.
Coming into 2025, you know, it is largely just continuing to do that and hopefully get momentum in some of those areas.
And you mentioned your R&D spend has gone up a lot in recent years, and your sales and marketing has as well. Is that just kind of a different philosophy in terms of the amount of investment that you need to drive the sort of revenue results you want? Or how should we think about the growth in those expense areas?
I think that it's not so much a different philosophy as it is, you know, if you look at SS&C, I've been at SS&C since 2005, and the company was started in 1986. We've always had kind of two different ways in which we grew. One was organic, and the other one was acquisition, right? So the only thing that happens is at different times in our life, one tends to, you know, just mostly opportunistic and driven by the market, one tends to take more of a priority then. So in periods of time where we're really trying to drive that organic, it's very focused on product, very focused on customers, very focused on, you know, just execution.
That's not to say that those focuses aren't equally, but acquisitions tend to sometimes, you know, in 2018, we went from 10,000 people to 27,000 people because we did three big acquisitions. That tends to occupy some of the management bandwidth in those times.
And then maybe drilling into the topic of organic revenue growth, you guys grew 6% constant currency in 2024, up from 3% in 2023. I think the midpoint of your guide for 2025 is around 5%. Can you maybe drill down into, are there some specific things that you're doing differently that are achieving those better results?
There's a lot of things that we are doing. You know, it's a little hard to, it's a little hard to say we did this thing and that resulted in, you know, 300 basis points of organic growth. What I would say is we've done a lot of little things over a period of time that are finally starting to show up in the numbers in meaningful ways, and we're pleased about that, but we also don't think that, you know, that stops anytime soon. We think it continues, and if anything, maybe we can improve, but some of those categories are, one, you know, I talked a little bit about just making sure we have the right leadership in the businesses, right?
And some of that is just getting acquisitions to operate by the same playbook and having people that are focused on end markets and customers and sales and view product as being a way of making that entire process better for the customers, so it's that, it's the R&D process. We've done a little bit more in terms of having more cohesion across the different parts of our business and selling more enterprise solutions that take three, four, five, six of our products and services and make them work together, and that's translated into better opportunities, bigger opportunities for us.
All right. I think that touches on my next question, which is how integrated are SS&C's various businesses today? And does tighter integration lead to a different go-to-market approach?
I think we have a pretty good mix of kind of two different go-to-market processes. One is what we have always done, which is each business unit has a sales force and, you know, has individual opportunities that are driven by the products and services in that business unit. What we've changed over time is we've made those business units bigger, and we have taken most of the things within the company that relate to a particular end market and put them together, right? So that's one part of it.
The other part of it, and we've really just done this in the last couple of years, is we now have an enterprise-wide sales and customer management overlay that then looks at kind of what all those business units are doing across the company and finds opportunities for us to say, "Okay, that's a big customer. They use three of our products and services. We know they have a requirement in these other four areas. Let's go present that in a really, really sophisticated and comprehensive way." And that's opened doors for us.
So in recent quarters, SS&C has, I think, provided more and helpful disclosures on your revenue components and organizing by GIDS, for example. Is that kind of how you internally are managing the business? And now externally, we are seeing things the same way that you guys are internally?
Yeah, I think that's exactly right. If anything, the reporting over time has gotten even closer aligned to how we were already managing it, you know, including somebody was pointing out some recent changes we just made just in the past few months, just small moves between business units. Most of that just gets it to, "Okay, that's exactly the way we think about it internally." And so we're, you know, completely on the same page.
Digging into fund administration, what inning do you think that we're in in terms of private asset managers outsourcing the operations? And how well does SS&C compete for that business?
We have today the world's biggest fund administration business. That's an important part of our company. It has been for a long time. It's, you know, $2.4 trillion in alternative assets, and there's probably another $600 billion-$800 billion of, you know, '40 Act and registered funds and things like that. The private markets is a big part of that business. It's now a bigger part because it's been faster growing, but it's, you know, 30%-40% of that business. And we have benefited there from, directly to your question, we benefited from the fact that most of the big private firms did not traditionally outsource. As they kind of embraced the benefit of outsourcing, and I would say we're not very far along.
If you're a middle market firm or if you're a new firm, it's very likely that you have selected somebody to outsource many of the functions that would have traditionally been done internally. But if you're one of the biggest firms, you still have a huge amount of infrastructure internally. And what you've done is you've outsourced around the edges, maybe the latest fund or some particular function. And over time, we're just going to get deeper and deeper in those places. So there's a lot left.
Within fund admin, do you look at the competitive landscape as being different in the private asset space versus hedge funds, or is it kind of the same companies that you're coming across?
I think that at the largest, at the largest size of clients, there's a lot of convergence. There's a lot of people that have multiple different things that they're doing in one umbrella, which is also what makes somebody like SS&C attractive to them, that they don't have to go select vendors for each one of their sleeves or asset classes or strategies or even, you know, Asia versus Europe, those kinds of things.
And then it sounds like SS&C is looking to do more fund admin work with traditional asset managers who are existing transfer agency clients. Can you talk about what sort of traction you're seeing in that market segment?
Yeah, it's mostly driven by demand. The problems, some of the problems we're trying to solve in all of these kinds of places is they have a lot of operating infrastructure internally. There's a lot of people in the back office. There's a lot of different systems. Those systems don't always interoperate well. So there's homegrown technology that takes data out of a variety of different systems and puts them in a data lake and somebody reports, and if any of this sounds familiar, it's what we see every day, right?
So what we're trying to do is say, "Okay, what you really need is you need a technological leap here." You also don't particularly like managing the headcount and the HR type issues and a variety of other things because in an investment organization, you know, generally speaking, the primary focus is and should be on the investment part of the organization. And sometimes these things become deprioritized a little bit, and we can take all of that for you. And so it's driven by demand. It's customers trying to solve technology problems. It's customers trying to solve personnel problems. It's customers trying to get operating leverage, right? So it isn't every time I start a fund, I have to hire two people. And those are the things that help us.
The announced Insignia lift out in Australia is a pretty interesting deal for you guys. Are there a lot more opportunities out there like that? And why is SS&C positioned to capture deals of that nature?
I think there are a number of large opportunities like that in Australia and in other parts of the world. And most of the reason why we are a good fit for, you know, that particular kind of opportunity is the required end solution is a blend of technology and services, right? So if you kind of look at our competitive landscape and who we compete with, you know, on the one hand, we have just service companies that are using third-party software. In some cases, they're using our software. And that's great. Other than if you believe, as I do, that scale is achieved through automation and writing code and making applications work better, then it's harder to do that if you don't actually own the applications. You're leaning on vendors. So that's one part of it. The other part of it is an in-depth services capability.
Because remember, at its very core, they're trusting somebody to do their NAV for them or their regulatory filing in some part of the world or their taxes. They want to know that you know what you're doing, and so that blend makes us a pretty good choice for them.
More broadly, how do you think about the growth opportunities for SS&C in North America versus the rest of the world?
North America has always been a great market for us. It's where, you know, the bulk of our revenue comes from. It's where the bulk of our opportunity. I think really what we have seen over the last several years is Europe, Asia-Pac have become more important parts of that puzzle for us. So we do think we're going to go around the world. North America is going to remain a really big piece of that.
So obviously, GenAI, robotic process automation, you know, GenAI in particular, a big topic conversation these days. Can you talk about how you are deploying GenAI and RPA within SS&C at your clients to either drive efficiencies or generate incremental revenue with your clients?
Sure. It's sort of a multi-part answer, right? So maybe I could just give you a couple of different flavors. One being, for most of the financial and number-related workflows, you know, we find that machine learning and robotic process automation has a lot of applicability and generative AI and large language models and things like that. While they have a lot of value in other parts, they don't really help you reconcile your portfolio to the Street and resolve breaks, things like that, right? So what we're doing there is we have a big investment in something called Blue Prism that we acquired. It's going to be three years in April. And that has helped us tremendously internally in terms of our cost structure. But, you know, it's a good business and we expect it to kind of continue to be a good business for long term.
So now when it comes to GenAI, GenAI takes that machine learning and robotic process automation, makes it better. Makes it better because you can interact with these modules. And this is really true for all of our applications, not just RPA. You can interact with them in natural language ways. You can ask the system to do something for you or make a change in a workflow or run a report or give you an answer or tell you what something means without having to point and click and select things in a text box or whatever or a dialogue box or something like that. And so that's how we're using GenAI. We're using it to improve the user interface. We're also using it in our software development process. And finally, we have pretty strategically built applications across the company that are sort of native GenAI use cases.
So for example, in our Intralinks virtual data room, there's now a GenAI capability that takes the thousands of PDFs. And Intralinks, for those of you that aren't familiar, is an M&A process. So, if you're trying to sell a company, you put all your information in there and people come in and do due diligence. Well, it used to be that if you had 500 PDFs in there, somebody would have to go read many of them and distill insights and all those things. Now the machine will give you, "Here's what the company does. Here are some of the risks. Here's what the contracts say. Here's how it compares to others." A bunch of useful information. And so that's a valuable use.
As you're using GenAI or RPA to take out costs internally and drive internal efficiencies, how do you think about the benefits of that accruing to your P&L versus you passing that on to your clients?
Yeah. No, it's a really good thought, right, and I guess the danger is at some point, does your pricing, you know, do you lose your pricing capability? We don't think that's the case. It really never has been the case, right? We've been in these businesses now for a long, long, long time. We have seen technology, and in a lot of ways, we have brought that groundbreaking technology that drives a lot of efficiency, drives a lot of accuracy, automation to many of these businesses. It hasn't really resulted in price reductions. What it has resulted in is better service quality, more timely, more accurate, more value, maybe broader things that folks can do with us.
In virtually every organization we're in, we're such a small percentage of their spend and such a high percentage of what they care about in terms of their experience that they would much rather see us improve the experience a little bit than try to get some price back.
Then maybe on the pricing topic more generally, can you talk to pricing's contributor to your organic revenue growth at this point, maybe how that compares to a few years ago? Are there more levers to pull there? Do you feel like you have a pretty comprehensive pricing plan in place at this point?
I would say that we have made some progress, right? We're more disciplined about it than we were three, four years ago. That has resulted in some pricing that shows up in our financial statement. That's probably to the tune of, I don't know, somewhere between 150 and 200 basis points, I would say last year, something like that. You know, look, we have software companies that sell to us too. There's people that come in and say, "Your prices are going up 20%, and if you don't like it, you can get off the system," right? So it's hard to be, you know, kind of thump yourself on the chest and say, "We're doing such a great job." At the same time, we really value those customer relationships, right? We want them to be happy. We want them to buy more from us.
We want them to kind of grow because they're getting a lot more value. We don't know that we have quite found the sweet spot yet. We think we can probably do a little more on pricing and still preserve that dynamic.
You guys recently announced that you're winding down your European transfer agency joint venture with State Street. I think it's a relatively small JV for you, but can you walk us through what that means operationally and financially for SS&C?
I think operationally, it just simplifies it for both organizations. State Street has been a really good long-term partner for us in those joint ventures. They're also a pretty good customer for us in others of our software and products. And we anticipate having, you know, a really good relationship with them going forward. It's important to note that the customers of that JV, we expect to remain as customers of both of our organizations. We're really just taking the processing out of the joint venture and into kind of the respective organizations. So we're doing transfer agency. We're doing accounting. State Street's doing custody. That's how it operates today. No real financial impact. Makes it a little simpler operationally. Maybe we'll save a little bit of money because it's a little more efficient, but not a big deal either way.
At another conference recently, your chairman and CEO, Bill Stone, said, "We're just getting started in regards to your healthcare franchise." That business has sort of kind of wandered through the wilderness ever since you guys acquired DST. It feels like maybe it started to turn the corner of late. So where do you think strategically you guys could go with healthcare?
Yeah, we're pretty excited. We're pretty excited about it. So, you know, I think one accomplishment that I would highlight is we rolled out at the start of 2024 our new system called DomaniRx, which is a brand new purpose-built cloud-native API for the pharmacy benefits management process, right? And that's a multi-year software development, million hours of code writing, all these things. And, you know, as anybody that's been around large-scale system builds, those are not without risk. We got it done. It went live. It's operating at scale. Millions and millions of claims are being processed. That's a pretty big differentiator in this industry, right? And so we're getting a fair amount of interest from potential customers, from competitors that would potentially want to license our technology. They might want to license certain modules. So we're pretty optimistic.
So it's a relatively small business within SS&C that has done some really good things that we think poise it for growth.
Can you maybe walk through why SS&C is a good owner for that business? I think a lot of times people say financial services, healthcare, it doesn't make any sense. Putting them together, what are the synergies that you guys see?
Yeah, and I think the characteristic there is the parts of healthcare that we're trying to address are probably closer to the financial services business at SS&C than they are to healthcare. So what we're not doing is we don't have any doctors on staff. We don't have any nurses. We don't have any pharmacies. We're not really delivering care in any way. What we are doing is when you go to the pharmacy and you try to fill a script, there's sort of a backend, almost like a trade process where somebody validates that and makes sure that's what you're entering. And somebody takes care of all the money movements and the authorizations and things like that. That's the part we do. Really just core plumbing, right? That needs to be done at scale. It's sophisticated. There's privacy concerns.
Latency is a big issue, kind of like high-frequency trading or something like that, right? So there's a lot of things that we think we're pretty good at. The reason it's a good market for SS&C is there's a lot of stuff happening in healthcare. It's very dynamic. There's a lot of money chasing sort of, you know, opportunities. There's a fair amount of regulation. It's sensitive data. And there isn't a lot of new technology, right? So if we can enter with some brand new technology that we have built and proven, we think we have a pretty good opportunity.
Turning to M&A, your balance sheet leverage has been pretty stable, around three times for the last several quarters. How are you guys thinking about your capacity and your appetite for M&A right now? And does, you know, a new antitrust philosophy in D.C. change your thinking at all?
We remain really interested and, you know, look to M&A as being one of those things that has powered or helped power our growth for a long period of time, right? We kind of feel like it's M&A and it's organic growth, and you got to do both, right? So we look at deals every single day. We have an active pipeline, and we would continue to do that. That said, we're also pretty disciplined buyers, right? So we want to buy good companies that fit in with the rest of what we're trying to do. And hopefully we have some way to add value, whether it's to accelerate growth or build a more comprehensive product set or something like that. And so that just means that we look an awful lot and, you know, we're somewhat picky about where we actually act.
But we think M&A is an important part of our strategy. We'll continue to be.
You're picky, but I think you guys cast a relatively wide net in terms of the sort of business models that you look at. Good example is the recent Battea acquisition that you made. Can you talk about what that business is and what SS&C can bring to the table to cross-sell there?
Yeah, no, hey, that's a great point, Patrick, and I appreciate that. So Battea does class actions processing for asset managers, right? And simply what that is, is if you have a portfolio of securities, they will search through that portfolio and basically find opportunities for you to get money out of class action claims. And most of us, if you do it in your personal lives and, you know, somebody writes you and says you got a $1.22 , you pay no attention, right? And unfortunately, big institutions are not very different. They might pay a little bit of attention, but not often. And so what Battea does is it just takes that over for you. So it'll run, you know, it'll run your names. It'll tell you where you have opportunities. It'll go do the filings.
It'll make sure you become a registered part of that class. It'll track that all the way through. It'll lean on the claims administrators. It'll get you paid. That process takes many years. It's very expertise-driven. It's global. What it needs is distribution. It needs customers, right? We have 22,000 customers. We have 1,500 investment firms. So early innings for us, but we do think that we've been able to already positively influence how many introductions we've made and how many opportunities we have created for them. That's got to show up in the numbers, and we think it will over time.
Going back to our earlier conversation about the investments that you guys are making in sales and marketing and R&D, do we think about that as changing your margin profile or your incremental margins going forward, or are you able to do that and still demonstrate the sort of organic margin expansion that you historically have?
I think we can demonstrate a reasonable amount of margin expansion every year for the foreseeable future. Those investments, in some cases, help margin, but usually they help improve the product positioning in the market, the win rate, the revenue growth aspects.
All right, why don't I pause and see if there's any questions in the audience? All right, I don't see anybody raising their hand, so I'll keep going with one or two more. Your retention has been in the high 90s pretty consistently for several years. Is it an opportunity to take it even higher, or is this kind of, you know, you're already, you know, running at full steam in that regards, and I guess, you know, in addition, maybe potential better retention for your growth going forward, do you see it more as kind of cross-selling to existing clients, or do you see it as adding new logos?
I think that the retention rate, right? So this is gross retention. So really just, you know, the hardest way you can calculate it, right? It's just terminations, no benefit for any upsells or price increases or any of that kind of stuff. We're in the high 90s, 96%, 97%. There's always some element of it could probably take up a little bit, but, you know, remember, that includes people that go out of business, right? So it's pretty high. I do think that, you know, the real opportunity there and what we're very focused on is the net retention metric, right? So the cross-sell, the upsell. And to your question about the growth mix, the growth mix, when you have 22,000 customers and in some ways you already do business with most people that you're going to, it's almost always it's a cross-sell, right?
New logos is a part of the strategy for sure, but a lot of it is just making sure those current relationships are as strong as they can be.
All right, terrific. I think that's a good place to end. Thank you, everybody, for joining us, and thank you for the whole.
Thank you for having us. Appreciate it.