Great. Hello, everyone. My name is Alexey Gogolev, and today I'm delighted to welcome at our Boston TMC Conference SS&C CFO Brian Schell and company IR Chand Madaka. Wonderful to see you both at our conference, and I hope that you, Brian and Chand, are getting along well since that Branko's Chiefs game back in January. Speaking of competition, Brian, maybe you could start by elaborating a bit more on the competitive environment for each of the subsegments of the wealth investment technology. Specifically, I'm asking this in light of the recent acquisitions that were conducted by one of the competitors.
Sure. First off, thank you. And thank you for the team. It's been a terrific conference and a lot of great conversations today. With respect to competition, and particularly within the WIT business, the wealth investment technology, I kind of break that down probably in four broad categories. As far as the kind of that almost defined by the, I'll call it the asset type of, you know, an industry that they're in. First would be the insurance market and catering to that. You know, there's a product there, our primary cloud-based product there, Singularity. We continue to try to serve the high end of that market, the more complex, the larger firms that have the most complex needs. That business continues to be pretty steady from that standpoint.
I'll come back to the broader point of what we see competitively and the movement. Within the asset management space, you know, our primary offering there is Genesys. We continue to see, you know, again, also cloud-based. That's probably the most competitive environment that we're seeing as far as, you know, everyone there. The new offerings, we think, you know, some of the competitive advantages there are in our ability to integrate with, you know, with EZ and having a pretty seamless offering. Quickly transitioned then to the alt space as the third category, which is probably the largest, what we're probably more traditionally known for, servicing that community with private markets, hedge fund, other alternatives. You know, primarily service with Geneva as, I'll call it, you know, kind of the industry gold standard. Then a cloud-based version with EZ also integrates with Eclipse.
Finally, the wealth platform with, you know, primarily, you know, with Black Diamond. All of that competitive environment, we see it's there. It's not necessarily increased per se. Like I mentioned, the asset management is probably the most competitive. As we wrap that all together, what does that look like, right? Particularly with M&A activity going on, what we see and where we compete most effectively has been the largest and most complex of those managers who are looking at either multi-strategy, multi-asset class. We actually, essentially, we do not replicate what the custodial records are. We actually have a true accounting of the records, which at that more sophisticated, more complex level, we think is necessary and they actually require.
Those focus solutions across those different types of asset managers are really more of what we're looking at and be able to support with our scale. Again, there will continue to be, you know, competition, but reinvestment in R&D and innovation will continue to be something that we're focused on.
Within the wealth and investment technology segment, the products that you've mentioned, can you talk about how they integrate and overlap with one another? What sort of customers do you typically target with those solutions?
Yeah, so that's, you know, there's been a little bit of, as you know, we've, I'll call it simplified a little bit of our go-to-market offering, and we've consolidated a couple of product offerings. Where that shows up is a, like I said, a much simpler go-to-market offering to the client that we're talking to from the solution set that they're seeing. It's also a simplification of our sales force in that go-to-market effort. We're seeing a much more efficient R&D spend as we continue to, I'll call it simplify our product lineup. Those enhancements that we may have been making to five to eight different products are now a much smaller set because it can deliver more focused, you know, kind of enhancements and innovation that we're trying to do because of that set.
That overlap, particularly with EZ into Genesys and into Eclipse, you know, the moving it towards a cloud-based offering, which then also allows us to offer the enhanced services as far as so they do not have to be on-prem. We can actually service them with a big part of our business as well. Those type of integrated support items, you know, we think are very important overall.
There is obviously a significant benefit of owning multiple SS&C products simultaneously. How does that enable you to better compete in some of those more saturated verticals?
I would say that, you know, the most obvious, and while maybe not the biggest quite yet, but probably one of the probably the highest growing areas would be retail alts, for example, right? With owning the software and also providing the services, like you think about Geneva, and you think about that combination of our transfer agency capabilities within the gigs world with our fund administration business within that alt space and really having a dominant position of being able to serve that retail alt space here as well as maybe the ops advisors as well. We're seeing a lot of really wins when it comes to people doing that because it's still a bit more of a manual process. It's still complex, but we have a couple of market share leading kind of solutions brought together.
With retail alts is the first one that I can think of when we do that, right? You see the combination of our ability to deliver Geneva with our fund administration business. You see the, I mentioned briefly, the EZ integration being seamless with Eclipse. There are multiple layers there that we want to make sure it feels very native as if just at a simple, not even extension, but very much part of that software, you know, solution.
We obviously talked about one of the segments, but you know, this is a very large business. Zooming out, could you talk about broader trends that you're seeing for those key divisions and key verticals? Where's the most potential for growth acceleration longer term?
Yeah, I'll start with where we kind of ended with the WIT business. I would say some of the milestones that we see around there have been those that aren't already converted to a cloud-based solution. Those conversions to a cloud-based solution, I think, is going to be important and have had a lot of success along the way. A lot of what we see on that, it's not a simple revenue replacement of a one-for-one. A lot of times we see clients taking on enhanced services when they upgrade to a cloud-based set. Sometimes we see a conversion that results in anywhere from one and a half to two and a half times the original, you know, revenue contract size because it also enables not just on-prem to cloud, but also the ability to outsource a portion of those services.
We see those add-on services that they want us or have the flexibility then for us to be able to take on. Some of the others that we've seen is this, especially with the large ones, because a lot of our client set, while we do serve all ranges of clients from the startups to the most complex organizations across the globe, obviously there's more concentration in the large organizations, but we see them increasingly successful and increasingly looking for more, I'll call it answers to complex either asset classes, geographies, or solutions that they're looking for. I think we're well tailored to see that from that standpoint. You know, we see the same thing in healthcare as it gets more complex. Looking for a, you know, a modern technology solution in the healthcare industry is another item we see, you know, very broad brush.
That complexity continues to be a theme that we see, you know, across kind of all of our verticals.
If we talk about your growth algorithm, can you remind us what is the level of price increases that you're assuming this year and how does it compare to previous years?
Yeah, the last couple of years and this year will be not much different than the prior year. Looking at, I'll call it, you know, 1.5%-ish. And that's been pretty consistent, you know, call it, you know, basis points above and below that the last couple of years. It hasn't been a primary focus. We have a lot of contracts that we've been building in, CPI changes linked, you know, overall that, you know, will kick in based on, call it, renewal of a, you know, of a year. Even if it's not a brand new contract, it's just the, I'll call it the year anniversary based on a CPI change, whatever month that may have been signed up for. And it's agreed upon index. So it hasn't been a huge part.
There are some areas where they're a little bit more price sensitive, but others we've been, you know, pretty moderate in our pricing approach. I think down the road it is an opportunity for us as we continue to look at it and be more surgical about, you know, where does it make sense, where do we have new offerings, where do we maybe, have we maybe potentially underpriced our offering and take a harder look at that going forward.
I've always had the perception that SS&C is more of a premium pricing solution, but has the pricing gap with competitors narrowed?
My sense is given that we haven't been as, you know, it hasn't been as big a part of our growth strategy. That's likely the case. I think our premium position is more about our, I would say our broader solution set and the premium offering because you can do so much more with it that it comes with a higher price tag versus, you know, we charge 20% more for the exact same product. I think it's a more, you know, capable product than that has a higher price tag.
One of your largest segments, the alternatives business, it's been performing pretty well despite the volatility. How much of your revenues are correlated to the stock market?
It's hard to prove what that correlation is to the stock market per se. I'll just give you a real quick, you know, kind of here's why it's not. It's helpful, I think, for a lot of reasons and whether it's sentiment, influencing flows or whatnot. About 60% of that particular business in the alt space is tied to hedge fund business and the revenues. That was up, you know, call it mid-single digit. That's a group of large multi-strategy funds. I can't say, oh, they're just long only. They're long short. They may have all types of blended strategies that are involved in their strategy. You don't see as much of a positive correlation to AUA to say the S&P was up 10% type of approach.
The other thing that also, I'll call it mutes the impact or, you know, kind of really dampens the correlation is the increasing portion of that business that is now comprised of private markets, right? You have private credit, which is growing very, very strong. You have private equity. Essentially, when you have the private credit, you need a sophisticated software to be able to manage that type of asset. As that has grown, we've seen our share grow to be able to administer that. That is now probably in excess of 25% of the global business. That grew in the teens. You have then the third component of that, which is the retail alts, a little over 10% of that business. That grew north of 20% on a year-over-year basis.
Again, those that the last two do not have as strong of a correlation for obvious reasons. You do not have the day-to-day mark. You do not have that volatility, that fluctuation. You have an increasing asset class that is growing in dollars flowing into those assets that really mute the impact of the overall kind of revenues tied to, say, for example, the S&P 500 index.
With regards to the AUA that you disclose, while it did grow in Q1, growth decelerated. Is this something that is more company specific or industry specific?
I would say it's they're probably somewhat correlated. I think it's more company, but what we've seen is because we've had success in the growth of that AUA, it's showing a more positive growth pattern than, say, the entire industry from best we can tell from the assets and all of our research. It's better than that than the rest of the industry that we've seen. The underlying trends that what we believe is happening is because we do serve some of the largest and most complex funds, we've seen them be the most successful, like within the industry. Their success has translated to a higher market share and our success. You've seen the AUA grow, we think as a higher rate, say, than the, I'll call it the net inflow outflow of the broader industry.
Perfect. And then moving to the retirement segment, obviously another very big area for your business. Can you elaborate on the impact of the recent acquisition of Insignia on Gates' division and your long-term outlook, especially as you expand into international markets?
Yeah, so this was a terrific partnership that we're very excited about, both Insignia as a partner as well as, you know, establishing even greater presence in Australia as well as, you know, the broader, you know, superannuation, you know, kind of industry and that retirement, as you mentioned. We mentioned on the last call that, you know, kind of the range of the $35 million-$70 million for the back half of, you know, this year on the lower end of that, and then for the full year, you know, doubling that with an expectation that that goes live in the beginning of the third quarter. It is a second half impact for SS&C as kind of a baseline expectation. We are working very hard towards that.
We think it gives us an even stronger, you know, like I said, footprint there in Australia, establishes much more of a baseline scale for us. We have seen a lot of terrific brand recognition that we think has continued to lead to more business, not just among the superannuation funds and additional services because we followed up with another press release, you know, a couple of weeks after that, after our earnings call. We are seeing that filter into the international community and within Europe, talking to clients and recognizing that providing such a critical service to, you know, a superannuation fund continues to, let's say, win market share and share of wallet from even some of the existing clients because of proven leadership with other large institutions.
Do you think that business, the Gates business, could return to single digit organic growth over time?
I do. The expectation, I think, of that, you know, I was originally at low to, you know, zero to, you know, low single digit. Now it's, you know, looks more consistently at that low to mid-single digit growth rate as that business continues to grow, expand, capture more share of wallet with existing clients as well as have real success growing internationally. It has been a really good growth story for us.
Perfect. Switching to Blue Prism, can you quantify the impact of so-called digital workers on your business internally?
We have, I would say right now, probably over 3,000 digital workers. It is a little hard to specify the dollar impact. We can put a dollar number to every digital worker that we may or may not have, or if it were to, quote, be replace a person, but not all digital worker, you know, tasks are the equivalent of an FTE.
We do believe that it's, you know, I'll call it, you know, I think last summer we did put out there was, you know, roughly $100 million of dollars we didn't have to reinvest in people that we created capacity that we could reinvest in something else in technology and R&D that because we didn't have to put it into, you know, the reconciliation work, some of the support work that you can program to do that really wasn't as value added that you could have said you could simply do it with a digital worker. It's been a wonderful way for us to be more productive and more efficient and being able to, I'll say, support the client growth in a much more efficient means.
What we've also seen is that using it internally for us for other things has allowed us to innovate and it's started to turn into sales as well. For example, within our procurement team, we were putting in place digital workers to help analyze, you know, contracts that were coming in. You can utilize the digital worker to look at, you know, non-standard terms, call them out, quickly flag them, compare them to what they should be. You don't have an analyst having to pour over that contract or that, you know, that agreement and you can quickly get through and process so many more. Actually, we, you know, wireframe that capability and that can be part of the slate of a sale to a client and say, have you tested this? Is this more than proof of concept? Yes, we're using it ourselves.
Here's how it works. Here's, you know, and you can quote, purchase this and with those changes. I'd say the benefit has continued to allow us to reinvest in client-facing activities and then the technology itself.
Speaking about the automation and analytics division more broadly, you have announced this collaboration of different stacks, technology stacks back at the investor day last year under the leadership of Rob Stone. Can you describe what has been done so far and what is the ultimate strategy that you are pursuing here?
Yeah, so I think that what we've been able to do here is, and we talked a little bit about on the call as we think about where that's going with intelligent automation, with the digital worker, the RPA, and how does that bleed into agentic AI and what does that continuum look like? I think what we're learning and what we're seeing and working with our clients, you know, broadly, we've seen softness in RPA across the board, not just obviously Blue Prism, but more broadly. We think it's important as we look in all the workflow tools with and including our risk management tools that we think there's an opportunity to continue to extend that. With agentic AI, we think that's probably going to become more a standard part of the RPA suite so that it can then start doing more and more complex tasks.
I think there has been a bit of a slowdown as people evaluate is that an RPA, is that AI, is that somewhere in between? Do I need an LLM to be able to leverage that? That is what we are working through right now. We are doing it internally. Like I said, you know, the best client sales tool is, you know, having relied on ourself, developed yourself and using yourself and then showing them that this is how it works and this is what we do. I expect to continue to see more of that innovation as he brings those more and more closer together and be efficient with those investment dollars.
Thank you. Pivoting to Interlinks, can you discuss how the division has weathered the somewhat weaker deal flow and how they're expanding into deal adjacent services?
Yeah, so it's definitely a weaker flow and not just the printed, but I'd say the underlying activity as well. No, so, but we continue to, I'll say, win mandates, even if we haven't seen the mandates to move forward, right, to populate the data room and start consuming information, which is really more where the revenue generation occurs. There hasn't been as much conviction from the participants in the M&A market to have as much activity as there was in 2024 as far as the underlying diligence activity. We'll see how that continues to progress, but it has obviously slowed down significantly. As far as some of the other things that we're doing, the non-transaction side is they're doing a little bit more in the capital market side, not just the M&A side. There's been a little bit more constant activity on capital markets.
That's become a little bit increasing share. The other is the non-transaction, the more portal services that we're using. We're seeing more sales and leverage with firms using Interlinks, including that's one of the things I didn't mention earlier, but we're using Interlinks quite a bit in our LP communication embedded in some of our tools within Geneva and some of our other items that allows people to, you know, access their information. Interlinks is doing more and more of that type of work.
Switching to healthcare, can you elaborate on some of the results of your JV with the big healthcare majors, the DemaniRx platform, and what phases of pharmacy claims does this cloud-based technology handle?
Yeah, so this is, you know, at the end of the day, this is modern technology in the healthcare space with a goal of reducing tech costs that are associated with, you know, again, it sounds silly, but old technology, right? If you have the newer technology, you have less maintenance, easier to change, you have lower latency, probably, you know, in all likelihood, we think in this case obviously tighter cyber protection and like I said, better ability to make those changes more quickly and access the data and understand it on a more real-time basis. Working with our partners, embedding those type of tools and outcomes was very important to them.
We wanted them as part of that planning process and to have some skin in the game in the process such that, you know, they would, you know, essentially at the end of the day, add their lives or their clients to that tool, again, to achieve all those efficiencies and built on that backbone of that technology and yet still remain independent and, but control the direction of where that goes. You know, serving those regulated markets, I think, is important. We do it today. Now with DemoniRx, we do it, you know, like I said, in a more modern tech way with lower costs. Right now, we're processing more of the primary programs, our discount card programs.
I'd say the next phase with these regulated environments is going to be regulated markets will be Medicare, Medicaid, and commercial kind of following as the larger firms as they roll on lives. It can be state by state because of the regulation or different programs over time. It will be a ramp-up process the way this works as far as the volumes go. You know, it's not as much of a 2025 revenue effort and more likely the most significant impact with any contract sales that are going to be happening is going to be more of a 2027 impact because, you know, a lot of times, certainly on the commercial side, it's a one-one start date. All the planning and process, we're probably almost beyond one-one 2026.
Doesn't mean there won't be incremental revenues because there's a lot of preparation, there's a lot of professional services, but the big, big, you know, kind of needle-moving changes with the large contracts that I know that you, we've talked to Bill about before, take a little bit longer lead time.
2027 more likely.
For a large, the impact of a very large contract does not mean it cannot be signed before that, but the revenue impact in all likelihood is more of a 2027 impact. Again, that does not mean 2026 is not going to grow. We still have growth expectations around 2026. We have growth expectations for 2025. It is just the large, large escalation of the revenue that we see that could come with a very large, you know, contract is in more likelihood 2027.
Very helpful. Thank you. Looking at the overall business, can you provide a bit more color on the duality of the raise of the overall revenue guide and then a more conservative outlook for the organic growth guide?
Yeah, we still feel good about 2025. We still feel as good today as we did before. I think where the guidance reflects is we wanted the results of Q1 to flow through for the full year. It's like that was an overperformance. We did see obviously an increase in the FX rates. We didn't want to necessarily rely on those to raise the guidance in total revenues. We decided that we're going to kind of more stand pat. We decided that if we de-risk a little bit, we're going to take a little bit off of the organic revenue growth, at least in this period of where we're looking at right now. You know, we've been through a lot of cycles. We haven't seen any specific signs of contract delays or longer sales cycles or no, I'm not going to do this.
We just took a little bit more conservative approach and held the top line revenue growth where it was in addition to the Q1 beat. The output says, all right, we're going to have a we're going to come out with a slightly lower organic revenue growth rate.
It looks like that it's somewhat H2 weighted. Are there any large deals that are potentially coming and could be impacting this?
Yeah, I would say there are probably three things I would say about why it looks, you know, with the weighting of two, you know, the second half. One is we expect Insignia to kick in the second half of the year. That's the guidance is built on Insignia coming on board in the second half. The second one is the Batea acquisition, which was about a year ago. Any revenue growth in Q4 will be organic at that point in time. The Batea transaction, while its revenue recognition has been lumpy in the past, it looks like it's following a pattern of more revenues likely concentrated in the fourth quarter as the courts tend to basically motion for payment to that come through, which is kind of the strongest RevRec, you know, milestone that occurs.
That is lining up somewhere, we think 2025 to what maybe 2023 looked like. The pipeline more broadly of where do we see the renewals and new opportunities from what we see based on everything that we are doing are more lining up in Q3 and Q4 than say Q2.
You mentioned Batea and some of the other deals that you've done. You're becoming acquisitive again. What sort of leverage do you feel would be feasible for SS&C? And could you consider using share sale versus debt?
I would say that we would likely just again, with historical practices, our preference would be debt. You know, we have a lot of conversations with the debt capital markets folks, our investors there, the rating agencies. And I personally believe our metrics are probably good enough to be investment grade at the, you know, the first year. But our financial policy and we're very, you know, we want to maintain the flexibility and we will lever up beyond what they would consider good investment grade metrics. I know SS&C has levered up to five times, a little over five times twice in its history. Yet the capital markets absorbed it, quickly supported the debt, and they then turned around and paid it down and reduced its leverage ratio with increasing earnings of the entities that were acquired.
There is a strong history and belief and credibility of being able to lever up. Whether that's still roughly five times, I don't know. I don't see any reason why it wouldn't be given the credibility and the history. That's not to say that there's an opportunity to five times lever up in the market right now, but that's just kind of an initial benchmark that I have in my head as to where that would be. That would be obviously a very large transaction at this point in time to do. That's where I would see it. The agencies understand that, that that's where we would want to maintain that leverage, or at least where we're sitting right now for that financial flexibility such that if the debt capital markets can help create shareholder value, that's what we're going to try and do.
There has been some consolidation in the market, especially international markets. International is about a third of your total business. Any opportunity that you see to expand further?
Yeah, so we talked about Insignia with the Australia. We see some of the continuation there. We have a solid pipeline into Europe as well. To a lesser extent, APAC, but we're seeing that grow. We see it. We see positive signs there. I mean, obviously the bulk of the assets and what we do are North America, you know, Canada and primarily the U.S.. You know, they continue to grow very successfully. Just by organic growth, we'll have to almost have an outsized, you know, revenue performance of new logos internationally.
Perfect. Are there any questions in the room? Great. Thank you very much, Brian. Great to see you. Oh, sorry.
I was just curious if you have any thoughts on how you're aligning incentives using equity compensation. Has that come up at all in terms of your philosophy? Is there any change or are you keeping it the same? We just see some conversation on retaining and attracting talent using equity. I just wanted to get your thoughts on that.
Yeah, I would say what's our CEO, founder, Bill Stone, many of you probably have met. He's a very strong proponent of equity incentives. And, you know, if he would, if we could, we could put a track record of, you know, how much wealth he's been able to create for a lot of employees and down to a very detailed level, for a more junior level than what has traditionally been. I would say the change that's been more recent is, which has been a little bit softer on the P&L line, is moving away from options and more into traditional RSUs. And the options are reserved for, because they tend to be more expensive from the company side, but obviously for the receiver of them, you get more leverage and exposure, is you've seen a little bit more of that transition.
You'll see a little bit different expense profile as we move forward as more of those folks get RSUs versus say a standard option.
[That seems in line with competitors, right?]
I think so. I mean, yeah, so from our research and more of our proxy work that we do with our compensation committee and as their advisors lay out what their peers are doing and everything else, I think we're in line with practices.
Has Bill's view on capital allocation changed recently, dividends versus buybacks?
Not that I'm aware of. He's obviously the largest shareholder, so he has a big vote as to, you know, that allocation as far as the dividends. Also, investor feedback, there seems to be a much stronger preference for, absent the M&A opportunity that's not there, focusing on share repurchases as a stronger weighting.
Great. Thank you very much, Brian. Great to see you.
Thank you for hosting.
Thanks.