SS&C Technologies Holdings Inc (SSNC) 2025 Q3 法說會逐字稿

Thank you for standing by. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to today's SS&C Technologies' Q3 2025 earnings call. (Operator Instructions) Thank you.

I'd now like to turn the call over to Justine Stone, Head of Investor Relations. Justine.

Hi, everyone. Welcome and thank you for joining us for our Q3 2025 earnings call. I'm Justine Stone, Investor Relations for SS&C. With me today is Bill Stone, Chairman and Chief Executive Officer; Rahul Kanwar, President and Chief Operating Officer; and Brian Schell, our Chief Financial Officer.

Before we get started, we need to review the Safe Harbor statement. Please note the various remarks we make today about future expectations, plans, and prospects, including the financial outlook we provide, constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigations Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our Risk Factor section of our most recent annual report on Form 10-K, which is on file with the SEC and can also be accessed on our website.

These forward-looking statements represent our expectations only as of today, October 23, 2025, while the company's financial measures to comparable GAAP financial measures is included in today's release which is located in the Investor Relations section of our website at www.ssctech.com.

I will now turn the call over to Bill.

Thanks, Justine, and welcome everyone. Our third-quarter results include recor- adjusted revenue of $1.569 billion, up 7%, and adjusted diluted earnings per share of $1.57, a 17.2% increase. We delivered record-adjusted consolidated EBITDA of $619 million, up 9.3%, resulting in quarterly adjusted consolidated EBITDA margin of 39.5%.

Our third-quarter adjusted organic revenue growth was 5.2%, with performance driven by GlobeOp with a 9.6% revenue growth and our Global Investor and Distribution Services, or GIDS business, with a 9% revenue growth. We saw strength across all alternative markets, and we are capitalizing on international opportunities.

In our GIDS business, we successfully completed a large lift out in Australia on July 1 and announced an additional lift out for our US life and pensions provider. Q3 Financial Services recurring revenue growth was 6.7%.

For the nine months ended September 30, '25, cash from operating activities was $1.101 million, up 22% over the prior year. In Q3, we returned $305 million to shareholders, which included acquiring 2.8 million shares for $240 million at an average price of $86.82 and $65.8 million in common stock dividends. This quarter, we've raised our common stock dividend to $1.08, an 8% increase.

SS&C's strong cash flow characteristics allow us to return capital to our shareholders in multiple ways. We continue to believe our shares are undervalued, and we'll continue to prioritize share repurchase.

High-quality acquisitions that meet our financial criteria are also a key element of SS&C's capital allocation strategy. In September, we announced the acquisition of Curo Fund Services, a South African fund administration business. This acquisition deepens our relationship with two meaningful clients and gives SS&C a local presence in the African market.

Our Calastone acquisition closed on October 14, the global team of 250 employees will join our GIDS business. reporting under Nick Wright. We are excited about Calastone's proprietary global funds network and the additional capabilities in money markets, ETFs, and digital assets they bring to the SS&C solutions set.

Tokenization is gaining meaningful traction amongst our clients, and we are pleased to offer a solution that supports their evolving digital asset strategies.

I'll now turn it over the call to Rahul to discuss the quarter in more detail.

Thanks, Bill. We had a strong third quarter with solid organic growth of 5.2% and improved margins. Across our business, we remain focused on taking care of our customers and deepening our product set and expertise. And we're pleased to see that focus translate into financial results. We continue to pay close attention to our cost structure and view intelligent automation and AI as both a revenue opportunity and a way to reduce repetitive tasks while enhancing career paths for our employees.

We've seen the results of these efforts reflected in improved EBITDA margins to date and expect this positive trend to continue.

GlobeOp had a good quarter with continued strength within our hedge fund client base, international wins in private markets, and benefits from the ongoing trend towards retail alternatives. Looking ahead, we view GlobeOp as a key beneficiary of emerging technologies and aim to dramatically enhance user interfaces and client experiences as meaningful, competitive differentiators.

Our Global Investor and Distribution Solutions business had an excellent quarter, driven in part by successful lift-outs across the globe. We're encouraged by the potential these mandates unlock.

SS&C continues to help accelerate the global transformation from traditional automation to AI-powered automation selling purpose-built agents as a managed service. With SS&C as customer zero, we can leverage millions of daily use cases to build deep and comprehensive solution sets, which provide for both internal efficiency and external revenue opportunities.

As one example, we sold an AI agent to a UK-based health care organization to automate MRI, CT, and ultrasound request processing, saving over 15,000 radiologist hours annually. This frees clinical capacity, reduces outsourcing costs, and addresses a global hospital challenge, as well as points to the utility of these AI agents in a wide range of applications.

With that, I'll turn it over to Brian to walk through the financials.

Thanks, Rahul, and good day, everyone. Unless noted otherwise, the quarterly comparisons are Q3 2024. As disclosed in our press release, our Q3 2025 GAAP results reflect revenues of $1.568 billion, net income of $210 million, and diluted earnings per share of $0.83. Our adjusted non-GAAP results include revenues of $1.569 billion, an increase of 7%, and adjusted diluted EPS of $1.57, and a 17.2% increase.

The adjusted revenue increase of $102 million was primarily driven by incremental revenue contributions from GlobeOp of $37 million, GIDS of $33 million, acquisitions of $17 million, and a favorable impact from foreign exchange of $9 million. As a result, adjusted organic revenue growth on a constant currency basis was 5.2%, and core expenses increased 4.1% or $37 million.

Adjusted consolidated EBITDA was $619 million, reflecting an increase of $53 million or 9.3%, and margin expansion of 90 basis points to 39.5%. Net EBITDA of $619 million is a quarterly record high for SS&C.

Net interest expense for the third quarter of '25 was $104 million, a decrease of $6 million, primarily reflecting lower short-term interest rates. Adjusted net income was $396 million, up 16.5% and adjusted diluted EPS was $1.57, an increase of 17.2%. Our effective non-GAAP tax rate was 21.1%.

Note, for comparison purposes, we have recast the 2024 adjusted net income to reflect the full-year effective tax rate of 23.1%. Also note that diluted share count is down year-over-year to $252.6 million from $254.1 million, primarily as a result of share repurchases.

Cash flow from operating activities grew 22%, which was primarily driven by growth in earnings. Our quarterly cash flow conversion was 115%, up from 99% last year. Our year-to-date cash flow conversion is 98% versus 89% last year.

SS&C ended the third quarter with $388 million in cash and cash equivalents and $6.6 billion in gross debt. SS&C's net debt was $6.2 billion and our LTM consolidated EBITDA was $2.4 billion. The resulting net leverage ratio is 2.59 times.

As we look forward to the fourth quarter and the remainder of the year with respect to guidance, we will continue to focus on client service and assume that retention rates will be in the range of our most recent results. We'll continue to manage our business to support long-term growth and manage our expenses by controlling and aligning variable expenses, increasing productivity to improve our operating margins, and effectively investing in the business through marketing, sales, and R&D.

Specifically, we have assumed short-term interest rates to remain at current level, an effective tax rate of approximately 23% on an adjusted basis, and capital expenditures to be 4.2% to 4.6% of revenues, and revenues of approximately $20 million for the Calastone acquisition. For the fourth quarter of '25, we expect revenue to be in the range of $1.59 billion to $1.63 billion and 4.5% organic revenue growth at the midpoint.

Adjusted net income in the range of $394 million to $410 million. Interest expense, excluding amortization of deferred financing costs and original issue discount in the range of $106 million to $108 million, iluted shares in the range of $251.5 million to $252.5 million, and adjusted diluted EPS in the range of $1.56 to $1.62.

For the full year 2025, we are raising our top-line guidance by $37 million at the midpoint and now expect revenue to be in the range of $6.21 billion to $6.25 billion and 4.6% revenue growth at the midpoint. For the full year 2025, we are also raising the midpoint of our earnings guidance.

Specifically, we expect adjusted net income in the range of $1.522 billion to $1.538 billion, adjusted diluted EPS in the range of $6.02 to $6.08, up $0.11 at the midpoint, and cash from operating activities to be in the range of $1.515 billion to $1.575 billion. Our 2025 guidance reflects our record results thus far in 2025, and we look forward to continued execution during Q4.

And now back to Bill.

Thanks, Brian. SS&C's record adjusted revenues and adjusted EBITDA this quarter attest to our strong and long-term financial and operating strength. The 22% increase to $1.1 billion in operating cash flow through three quarters gives us the flexibility to pursue growth opportunities as we continue to pay down debt and repurchase shares.

We also look forward to hosting almost 1,000 clients and prospects at our Annual Deliver Conference beginning this Sunday in Phoenix, Arizona. This conference will feature the latest and greatest SS&C's offerings, and we'll have our Chief Technology Officer there, Anthony Caiafa will talk about all of our AI advancements within SS&C in the market. And our keynote speaker is Victor Haghani founder and CIO of Elm Wealth and a co-founder of Long-Term Capital Management.

So we appreciate all of you being here on the call, and I'll now open it to questions.

(Operator Instructions) Dan Perlin, RBC Capital Markets.

Thanks. Good evening, everyone, and nice quarter here. I just wanted to try and get a sense around the 4Q organic guide around 4.5%. keeping in mind that Battea is contributing into that organic growth. So I'm just wondering, can you tell us at least directionally what the contribution of Battea would be in that 4.5% and -- or is that just a conservative jumping off point. It felt like it should be contributing, I think, more meaningfully in the fourth quarter.

Yeah. I think that the -- the one thing that I would just highlight is Q4 of the year before was by far our strongest quarter. So we think that's a reasonable jump in all point, not overly conservative, but also something that hopefully we can positively improve on. And Battea's contribution, I think we did about $16 million in Q4 last year. We expect to do about $25 million in Q4 this year.

Got it. Okay. That's great. And then just secondly, I mean, GIDS had a very successful organic quarter. I wanted to make sure I understood maybe the mechanics behind that a little bit. I think the contribution to that organic growth was driven by this lift out, but maybe if you could provide a little more details around that, that would be great. Thank you.

Yeah, that was a big chunk. We had a big lift out in Sydney, Australia, that we completed July 1. So we had a half a year from that. And we also sold other large lift outs as well, and we have a pipeline. So we're pretty confident in Q4 for GIDS and '26.

Got it. Thank you very much.

Jeff Schmidt, William Blair.

Thank you. On the Curo Fund Services deal, could you discuss what attracted you to that business? And how much revenue is that generating? I guess why is that going to be held under GIDS if it's a fund administration business?

The African market is still quite a bit behind the European and the US markets in fund administration and a lot of where you find these kinds of companies is in the life and pensions area. So the two large clients, we have very large insurers and they jointly owned Curo. So that's why it's going into GIDS.

Okay. And did you mention how much revenue that's generating?

It's negligible. It's $15 million or so, I think.

Okay. And then you had talked in recent quarters just about implementing agentic AI and Blue Prism. I think that had been more bot-based automation in the past. So could you give us an update on where you stand there? And what other businesses are you developing that for?

Well, we call ourselves customer zero. So we're doing it across our entire business. And as we have been leaders in most of the technologies that have come out over the last several years, we're now infusing all of those technologies with AI agents and making them smarter and faster.

And again, with 27,000 people we have and literally thousands of experts, we believe that we bring the functional expertise to make really smart agents. You can use the greatest technology, but if you don't know what the hell you're talking about, they are not going to be particularly good agents.

We think we have the largest, most sophisticated clients because we deliver. And I think that's what you're going to find with our delivery of AI agents.

Okay. Thank you.

Alexei Goggoev, JPMorgan.

Hi, Bill, it's clearly a competitive market out there. Could you elaborate on the potential impact from the lost business at State Street in-sourced SPDR. Will that impact on revenue be felt in 2026 or in 4Q of this year?

I mean, we'll have a small impact. We still believe our WIT business will still grow, and that was an ancillary business anyway. And it's not something that we were investing in to see if we could do more distribution of SPDR-like products.

So while we don't ever like to lose revenue, but at the same time, this wasn't our focus. It's not really going to hurt us much and we look forward to taking those resources that we had there and apply them to things that we think can grow faster.

Thank you, Bill. And then Brian, with GIDS and GlobeOp's growth performing quite well this quarter, how much does that revenue mix shift change margin outlook? I think you seem to have suggested that 3Q 2024, SS&C had strong performance of Intralinks and significant license sale that boosted WIT business. And both of those have visibly higher margins than GIDS and GlobeOps. Can you elaborate on margin impact this quarter?

Yeah. No, I think what you saw is you saw the strength of the margin impact, actually, obviously, with the GlobeOp. It, obviously, already has very strong margins above the consolidated average and you saw an incremental contribution from them.

I think that some of the things that GIDS has been doing is continue to try and work on their margin as well. But I'd say more broadly, because of the different growth areas, we're continuing to see positive signs from the rest of the business.

So that's why you've been able to continue to see actually a margin uptake, right, from overall, right? So we're projecting that a greater than 50 basis point margin improvement in EBITDA, which has always been our our general target. And so that mix shift hasn't affected our overall plans on a consolidated level.

And at 39.5%, you can compare us to any of our peers, we perform admirably relatively..

Thank you, Bill. Thanks, Brian.

Peter Heckmann, DA Davidson.

Hey, good afternoon, everyone. I wanted to follow up on Calastone a little bit. Two things there. Talk a little bit about how their existing operations complement your existing UK operations for advisory firms and then in wealth management firms. And then number two is remind us, is there any significant seasonality of Calastone's revenue?

I seem to remember there was some seasonality to the first quarter for year-end statement, but I can't remember if that was correct.

So we're excited about Calastone. Jason Hammerson has built a great business, got 250 people, and I believe, have about 4,600 clients, fund companies and other asset managers and wealth managers around the world, and it really has a powerful tokenization process.

It has very powerful ETFs. And many of you know that it looks like dual share class ETFs has been approved, and that's going to be another boon to the ETF market, which is pretty strong in the United States. And the mutual fund industry, where Calastone is also real strong, it's still strong in Asia and in Europe.

So we really like the synergies we get with Calastone acquisition, and we look forward to building on our distribution networks together.

Okay. And then on the seasonality revenue, anything significant there to call out?

I don't think so. I think, Pete, it's a great company, but relative size is not going to impact our growth rates are -- and there's no seasonality in any one quarter that's going to make much of a difference.

Really going to stand out. Okay, that's all I have for now. I'll get back to the queue. I appreciate it.

Patrick O'Shaughnessy, Raymond James.

Hey, good afternoon. So it sounds like, at least anecdotally, the M&A pipeline is starting to pick up. But obviously, that really hasn't translated to improved growth for Intralinks quite yet. What are you seeing out there in terms of the pipeline for Intralinks and the competitive landscape?

Yeah. I think it's a little bit like you just pointed out, we are seeing the early indicators of the pipeline. So the opportunities that we're talking to and the data rooms that are getting opened, we're seeing those numbers improve. Generally, revenue lags several weeks to maybe a few months from there, but we are starting to see some positive signs.

Got it. I appreciate that. And then health care business, two consecutive quarters of positive year-over-year growth. What's your confidence level that, that business has positively inflected in a sustainable way?

Well, I think, Patrick, that one of the things people should keep in mind is we built DomaniRx while we ran this health care business, and we had 1 million hours in that development. So the Domani runs at -- or our health care business runs at 30%, 35% margins.

We -- it's lumpy. You get $10 million, $20 million deals, sometimes way bigger than that. And we have a great client in Humana that we continue to build out further, and we have another great client in Centene.

And so we have opportunities. And it's just selling into large banks, large insurance companies, large asset managers. Sometimes I think they're nimble when I sell into large health care organizations.

All right, understood. Thank you.

Kevin McVeigh, UBS.

Great. Thanks so much and congratulations on terrific results. I think you came in $0.07 above the high end of the range, including some -- it seems like, obviously, implementation work. I guess where was the source of the upside just relative to where expectations were on the EPS?

Well, again, we talked a little bit about the lift out we did in Australia that lifted the GIDS business. And then we also have had very strong performance out of GlobeOp. And even though we had some weaker revenue performance on Intralinks, they're still very profitable. So all of our businesses are doing well with opportunities. And in Q3, we had most of them hitting a pretty good stride.

And we think in Q4, we have -- we're pretty good out of the gates, right? It's certainly towards the end of October, which is one-third of the quarter, and it's also got Thanksgiving and Christmas in the fourth quarter. So we're reasonably optimistic, as you can tell.

You sound really encouraged. I guess you mentioned tokenization a couple of times with Calastone. Is there an opportunity to implement that technology across the other business lines, similar to what you've done with Blue Prism?

There's opportunity. And one of the great things we always talk about is that you have to get right? So a lot of people dabbled in things like machine learning and natural language processing and robotic process automation and that -- but you buy a few licenses to UiPath or Automation Anywhere and you don't have any substance. SS&C spent $1.6 billion, $1.7 billion to buy Blue Prism so that we had 1,400 people that are steeped in these technologies.

And now with what we're doing with AI agents and being customer zero, we get to add all kinds of capabilities in a very controlled manner so that we become your trusted source for AI at a -- in a regulated and highly complex industries.

James Faucette, Morgan Stanley.

Thank you very much. Just wanted to ask a question on the general environment. Bill, you've had great insight previously into private credit flows, and there's been a lot of chatter about that market maybe beginning to show a little squishiness. Are you seeing anything from a flow perspective? Or do you consider that a bit of noise right now?

I think as more people get into it, James, that people need to learn and understand the vagaries of the private markets versus the public markets. But the smartest people in the industry are all over private credit and other new ways in which to develop returns that sometimes are not there in the public markets.

And so we've had a bunch of the biggest players in the industry are our clients, and we've had talks by a number of them. And they're talking 100, 200 basis points more in the private markets than what they can get in the public markets. And so as long as that's true, and there's no -- nothing that's showing that it's not, I don't think it's going to slow down.

Appreciate that. And then I wanted to ask on go-to-market. You've been more focused on selling some enterprise solutions that combine multiple products and services. The organic results are still really strong, but anything you can share qualitatively or quantitatively on the impact on that initiative and how it may be impacting things like average deal size or even customer retention?

Well, obviously, you work for a big investment bank and understand that you guys moving real quickly is an oxymoron, right? And so I think what we see is that these larger and larger institutions, the top management wants to move fast. And what they find is that, that really is out of character for these large commercial and investment banks. And what they like about us is that we're still a pretty big place. We've got 27,000 people.

We have 120 offices or 130 offices around the world. And so we can bring you scale and we still move pretty quickly. And relative to the gigantic banks, we moved very quickly.

Appreciate that. Thanks, Bill.

Thank you, James. And it looks like there are no further questions, so I will now turn the call back over to Bill Stone for closing remarks. Bill.

Dan, thank you. So I think from a standpoint of our third quarter we're we're happy to have performed well.

We look forward to talking to you after the new year and hopefully we will surprise you positively. So have a good quarter. Thanks.