SS&C Technologies Holdings Inc (SSNC) Q3 2025 Earnings Call Transcript

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. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. Once again, star one. And if you'd like to withdraw your question, simply press star one again. Thank you. I'd now like to turn the call over to Justine Stone, Head of Investor Relations.

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 Security Litigations Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements are results 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 FCC and can also be accessed on our website. These forward-looking statements represent our expectations only as of today, October 23rd, 2025. While the company may elect to update these for looking statements, it specifically disclaims any obligation to do so. During today's call, we'll be referring to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to comparable GAAP financial measures is included in today's earnings release, which is located in the Investor Relations section of our website at www.ssbtech.com. I will now turn the call over to Bill.

Thanks, Justine, and welcome, everyone. Our third quarter results include record 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 a quarterly adjusted consolidated EBITDA margin of 39.5%. Our third quarter adjusted organic revenue growth was 5.2% with performance driven by Globop with a 9.6% revenue growth and our global investor and distribution services, our goods business with a 9% revenue growth. We saw strength across all alternative markets and we were capitalizing on international opportunities. In our goods business, we successfully completed a large liftout in Australia on July 1 and announced an additional liftout for our U.S. life and pensions provider. Q3 financial services recurring revenue growth was 6.7%. For the nine months ended September 30, 2025, 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, 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. These strong cash flow characteristics allow us to return capital to our shareholders in multiple ways. We continue to believe our shares are undervalued and will continue to prioritize share repurchases. 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 Calistone acquisition closed on October 14th. The global team of 250 employees will join our goods business, reporting into Nick Wright. We are excited about Calistone's proprietary global funds network and the additional capabilities in money markets, ETFs, and digital assets they bring to the SS&C solution set. Tokenization is gaining meaningful traction traction amongst our clients, and we are pleased to offer a solution that supports their evolving digital asset strategies. We're with a 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. GlobeUp had a good quarter with continued strength within our hedge fund client base, international wins in private markets, and benefits from the ongoing trend toward retail alternatives. Looking ahead, we view GlobeUp 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 liftouts across the globe. We're encouraged by the potential these mandates unlock. ssnc continues to help accelerate the global transformation from traditional automation to ai-powered automation selling purpose-built agents as a managed service with ssnc 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 healthcare 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 gap results reflect revenues of $1.568 billion, net income of $210 million, and diluted earnings per share of $0.83. Our adjusted non-gap results include revenues of $1.569 billion and an increase of 7%, and adjusted diluted EPS of $1.57, 17.2% increase. The adjusted revenue increase of $102 million was primarily driven by incremental revenue contributions from Globop 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%. Note 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 affected 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 and 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. 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 will 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 levels, 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 Calistone acquisition. For the fourth quarter of 2025, we expect revenue to be in the range of $1.59% to $1.63 billion, and 4.5% organic revenue growth at the midpoint. Adjusted net income in the range of $394 to $410 million. Interest expense, excluding amortization of deferred financing costs and original issue discount, in the range of $106 to $108 million. Diluted shares in the range of $251.5 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 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 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 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 year's conference will feature the latest and greatest SSNC's offerings, and we'll have our Chief Technology Officer there, Anthony Kiafa, will talk about all of our AI advancements within SSNC in the market. And our keynote speaker is Victor Kahani, 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.

And at this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Once again, star one. We ask that you please limit your questions to one primary and one follow-up. And if you do have additional questions after that, you can rejoin the queue. And we will pause just a moment to compile the Q&A roster. All right, looks like our first question today comes from the line of Dan Perlin with RBC Capital Markets. Dan, please go ahead.

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

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

Got it. 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. So I think the contribution to our organic growth was driven by this liftout, but maybe if you could provide a little more details around that, that would be great.

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

Got it. Thank you very much.

All right. Thank you, Dan. And our next question comes from the line of Jeff Schmidt with William Blair. Jeff, please go ahead.

Hi, thank you. On the Cura 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 U.S. 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 are very large insurers, and they jointly own Kuro. So that's why it's going into GITS.

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

$15 million or so, I think.

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

Well, you know, we call ourselves Customer Zero, so we're doing it across our entire business. You know, 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, 27,000 people we have and literally thousands of experts, you know, we believe that we bring, you know, the functional expertise to make really smart agents. You know, you can use the greatest technology, but if you don't know what the hell you're talking about, they're 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.

Thank you.

Thank you, Jeff. And our next question comes from the line of Alexei Gogolev with J.P. Morgan. Alexei, please go ahead.

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 source, the FPDR? Will that impact on revenue be felt in 2026 or in 4K of this year?

I mean, we'll have a small impact, but we still believe our business will still grow, and, you know, that was kind of an ancillary business anyway, and, you know, it's not something that we were investing in to see if we could, you know, do more distribution of spider-like products. So, you know, 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 kids and Globop'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 SSMC had strong performance of interlinks and significant license sale that boosted WIT business, and both of those have visibly higher margins than Gibbs and Globops. 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 – Globoop 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 has continued 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, you know, a greater than 50 basis point margin improvement in EBITDA, which has always been our kind of our general target. And so that mixed shift has an effect on our overall plans on a consolidated level.

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

Thank you, Bill. Thanks, Brian.

Thank you, Alexi. And our next question comes from the line of Peter Heckman with D.A. Davidson. Peter, please go ahead.

Hey, good afternoon, everyone. I wanted to follow up on Calistone a little bit. Two things there. Talk a little bit about how their existing operations complement your existing UK operations for advisory firms and wealth management firms. And then number two is, remind us, is there any significant seasonality of Calistone's revenue? I assume 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 Calistone. 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 Calistone is also real strong, is still strong in Asia and in Europe. So we really like the synergies we get with Calistone 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. So I think, you know, Pete, it's a great company, but relative size is not going to impact our growth rates. And there's no seasonality in any one quarter that's going to make much of a difference. Really going to stand out. That's all I have for now.

I'll get back in the queue. I appreciate it.

All right. Thank you, Peter. And our next question comes from the line of Patrick O'Shaughnessy with Raymond James. Patrick, please go ahead.

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 interlinks quite yet. What are you seeing out there in terms of the pipeline for interlinks and the competitive landscape?

Yeah, I think it's, you know, 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, you know, the data rooms that are getting open, we're seeing those numbers improve. Generally, revenue lags, you know, several weeks to maybe a few months from there. But we are starting to see some positive signs.

Got it. Appreciate that. And then healthcare 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, you know, I think, Patrick, that, you know, one of the things people should keep in mind is, you know, we built Domani Rx, you know, while we ran this healthcare business. and we had a million hours in that development. So, you know, our healthcare business runs at 30%, 35% margins. You know, it's lumpy. You know, you get $10, $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, you know, 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.

Thanks, Patrick. And our next question comes from the line of Kevin McVeigh with UBS. Kevin, please go ahead. Great.

Thanks so much. And congratulations on terrific results. I think you came in seven cents above the high end of the range, you know, including kind of some, 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 liftout we did in Australia that lifted the GITS business. And then we also have had very strong performance out of Globop. And even though we had some weaker revenue performance on intralinks, you know, they're still very profitable. So, you know, all of our businesses are doing well with opportunities. And, you know, in Q3, we had most of them hitting a pretty good stride, and we think in Q4 we're pretty good out of the gates, right? You know, it's certainly towards the end of October, which is, you know, one-third of the quarter, and it's also got Thanksgiving and Christmas in the fourth quarter. So, you know, we're reasonably optimistic, as you can tell.

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

There's opportunity. And, you know, one of the great things we always talk about is that you have to get through it, right? So a lot of people dabbled in things like machine learning and natural language processing and robotic process automation and that, you know, but, you know, you buy a few licenses to UiPath or automation anywhere, and you don't have any substance. You know, 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 in a regulated and industries.

Thank you. Thank you, Kevin. And our next question comes from the line of James Fossett with Morgan Stanley. James, please go ahead.

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, you know, people need to learn and understand the vagaries of the private markets versus the public markets. But, you know, 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. So, you know, 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, you know, 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 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 GoToMarket, 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, you know, obviously you work for a big investment bank and understand that, you know, you guys moving real quickly is kind of an oxymoron, right? You know, and so I think what we see is that these larger and larger institutions, the top management wants to move fast, you know, and what they find is that, you know, that really is out of large, you know, commercial and investment banks. And what they like about us is that, you know, 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. Relative to the, you know, gigantic banks, we move.

Appreciate that, Collin.

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.

Dan, thank you So I think from a standpoint of our third quarter 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