SS&C Technologies Holdings, Inc.

We're thrilled to close out the day today with SS&C. We've got CEO Bill Stone. Really appreciate you taking some time out. Brian Sheldon, new CFO, and Justine Stone, who does a terrific job with IR. I'm Kevin McVeigh, one of the UBS software analysts. I recently came over from Credit Suisse and really thrilled to be covering SS&C as part of our application software effort here. I'd like to keep this as collaborative as possible. I'm going to start with a couple of questions, but you can pass around a microphone. If anyone has any questions, you can come through the iPad or just email me, kevin.mcveigh at ubs.com. And that's M-C-V-E-I-G-H. We'll try to keep it as collaborative as possible. Again, we really appreciate you folks taking some time out, Bill especially. So, Bill, I feel like I started the same question last year, and I think it's really important because you've been one of the most effective CEOs in the sector for a long time. And I think from starting the company, you've seen a lot of different tech cycles, and I think one of the things that's always impressed me is your ability to identify trends early and really attack those trends, but also the opportunities around the people you hire, retain, and create I think it's a real strategic rationale. So I wanted to start maybe talking about specific points in time for mass SNC from maybe the founding up until maybe the first buyout and then the second buyout and kind of where we are today with maybe a little bit of an emphasis on DST, interlinks, because I think there were just specific events that really helped position you for where you are today and go into kind of more of the current environment. But I think It's one of the things I don't think the market fully appreciates is the optionality and the embedded IP you've created over three decades. And there's a real skill to that that manifests itself, in my mind at least, through the cash flow, the market profile, the business. And what I think and feel very confident about is accelerating organic growth.

Well, thanks for having me, Kevin. I appreciate all of you taking some time. And, you know, it is appreciating that I was one of the most effective rather than one of the oldest So both of which may have been more, I'm not sure which one would have been more accurate. But I started this business in 1986, right? And I wasn't 21, I was 30, 30 years old. And I'd been an operations executive at a broker dealer. I'd been a DPA at KPMG. I'd worked in St. Louis. I got transferred to Hartford. I got to run the Aetna audit as a kid. So I got to learn a lot of things. And when I started in 86, You know, it was kind of the golden age of entrepreneurs getting into technology. Gates, Jobs, Joy, a few others that were all about the same age. And the reason that it was so effective is that the technology was changing. You know, for those of you that are too young, you know, the Charlie Chaplin and the IBM PC was 1981. You know, by 1986, they were up to, say, the 386. then the 486, and then the Pentium chip came out, and then Novell Networks. And Novell Networks really, since the late 80s until now, has been the primary way in which people get data and access all the data out in server farms. Smart client, server farms, client goes out, grabs the data that you want, you get to ask questions, and you get things like what Google did in and others and they make it easier and more broad and all those kinds of things but fundamentally it was client server technology from the late 80s to really until about now and now this chat GPT or generative AI and you know intelligent automation and you know natural language processing and so forth and so on you know machine learning pick one you know but what that's doing is changing the world so you know, I'm pretty proud that I was kind of a driving force of us buying Blue Prism. You know, and if you go way back in SS&C's history, you know, General Atlantic Partners came into SS&C in 1994. Bill Ford, who now runs General Atlantic Partners, we were his first investment. So Bill and I go back for, you know, almost 30 years, I guess. And, you know, I thought those guys knew everything. organized like this, do this, do this, go hire these people, go use this, use this. The best lawyer in the country is John Burgess. If you don't use him, use Dave Segretti. Burgess is at Hale and Dorr. Segretti is at Wilson Sincini. I didn't know who these people were, you know, but I was smart enough to say he seems to know. So let's do what he says, you know. And so we did that. We started growing pretty fast. We bought something called Chalk, which was one of the biggest actuarial firms in the country in 1995. Jane Chalk was the was the founder and we were doing about 14 doing about 14 million in revenue and they were doing about 10 and so when we went public that year we did 26 in 1996 and you know managing 62 actuaries was not something that I had always had my heart set on and that didn't last that particularly long you know but it was a very good acquisition for us we made a lot of money and then in the 96th Republic and you know we were our red herring was 9 to 11 and we priced at 19. I'll never forget being a strong management in Milwaukee and the guy holds up our red herring goes this is gold pure gold I'm going oh my god he's buying this hook line and thicker this is a bad thing you know it's like how do you dampen this enthusiasm and well we didn't and And so we went public May 31st in 96 and 19. Stock went up to 25. August we reported we missed by a penny. Stock went to 3. I don't know if any of you know but when you're the CEO you get 5% of the shares for friends and family. So we sold 3.75 million so I got about 175,000 shares I got to hand out to friends and family. And by September I still had family. So But, you know, we recovered and we went back up to 27 and, you know, we were really kind of booming. We opened an office in London. We went from three to 100 people in London. And then, you know, Y2K stopped. You know, as soon as they figured out that all the computers weren't going to stop when it turned 2000, you know, all the consulting projects stopped. You know, so Y2K stopped and there were euro conversions. So, you know, like the Swiss Franc and the Deutsche Mark and all this stuff, French Franc, all was converting to the Euro, and that all stopped. So, I mean, like half our business stopped. So we were at 27, we went to five. You know, not fun. But by that time, I had friends again, and I didn't give them any stock, so I wasn't in any trouble. But so then you go back, you go through this, and in 2005, We were going private with Carlisle, and there was a company called Financial Models Corp based in Toronto, a really good company. And what we felt, they were going to merge with Line Data, which is a French company. And what I learned about Canadian takeover rules is that if you can come make a superior bid, then you're going to win. So we started analyzing it, and I thought that the price that they were going to pay was way too cheap. And they were at about $12.20 and we ended up paying $17.70. So we paid $165 million and they were making about $11 million in EBITDA. And this was like April 19th of 2005. By the end of 2005 they were making $34 million. By April of 2006 they were making $44 million. And by the end of 2006 they were making 48 million. We took something that was making 11 million turned into 48 million in about 18 months. What it taught me was is you know there's a lot of people who spend a lot of money on a lot of things that make no sense. So when I first went up and. And looked at their space which is in Mississauga very nice nice building. And they named all their. Conference rooms. After cities. So you'd see London and New York and Toronto and Paris and Montreal and yada yada. I saw Nairobi. I mean, how many conference rooms do you have to have to have Nairobi as one of your conference room names? I figured too many. So, you know, we cut their space way back and we save like $700,000 per floor in this space, you know, and it's like, wow. And so So that was a great deal in 2000 and 2005. And we went back public in 2010. And then in 2012, we saw it again. So now it's Globop. And Globop traded on the London Stock Exchange. They're going to go private with TPG. So we look at this, you know, we were like the number nine fund administrator and Globop was number eight or vice versa. They were nine, we were eight. But if we merge, we're going to be three. But we were really interested. And so, you know, we went to get an investment bank. So all the investment banks that I'd used, J.P. Morgan, Turn Me Down, Morgan Stanley, Goldman Sachs, Bank of America, one more, Credit Suisse, And finally, Deutsche Bank would be our banker. And so we go in there, and the guys at Globop says, you know, I did a survey of our clients. Nobody wants you. The guy's name was Hans Huffschmidt. He says, you know, Hans, you were an FX trader at Long-Term Capital, right? Salomon Brothers before that. So what you're saying is all your clients want this FX trader to be their accountant and not this CPA to be their accountant. But I might be so. But I bet you if I bid more than you and TPG bid, I bet everybody comes to me. Because nobody wants you. It's the story of my damn life. So, of course, we bid more and we won, right? And so that vaulted us to number three in fund administration. And in 2012, and literally, right, we've made a fortune. TPG was based in In San Francisco. And we. We. Made our final bid. San Francisco 49ers were playing. I think the Dallas Cowboys in the Super Bowl. I sent it at kickoff time. I sent that to TPG. Kickoff time. When we put our final bid in. So we won that. That really vaulted us to number three as a fund administration. And you know shortly thereafter we became number two. Took over from. from Sitco, then it was State Street and us, and we finally passed up State Street. State Street ultimately bought all of our technology and jettisoned all their technology. That was a little bit like Pepsi going to the Coke formula. So we did that one, and that was in 2012. And then in 2015, we bought Advent. And we were the biggest user of Geneva, and I kept telling Rahul that we either got to go buy Geneva or we got to get off. You know, he was a grown man. I hate to see him cry. So we ended up buying Geneva. But we're in Morgan Stanley's trading room or something. And they're going, we were at $44.25. They wanted $44.75. Morgan Stanley says, don't offer them another nickel. Don't give them another nickel. I said, you guys are out of your mind. I'm at $44.25. I offered them another quarter. It's going to make no difference. Either this is gonna work or it's not gonna work, and that quarter ain't gonna amount to a hill of beans. So we bought that. That was a great acquisition in 2015. And it's those things. And the Blue Prism, which we bought, and we also did DST and ES and Intralinks in 2018, and we probably have, you know, three billion in revenue and almost a billion in EBITDA out of those three acquisitions, and we paid 8.3 billion, which in today's dollars would be a bargain of all bargains, right? But since I did it in 2018, it's, you know, since that time I ate all dumb pills, but it's not really true. So, you know, we did Blue Prism about maybe 20 months ago. When we bought them, they had about a 4% negative EBITDA margin. They'll come out of the fourth quarter probably close to 35. So we've changed that almost 40% in margin expansion in about 20 months. So we still know what we're doing and the acquisitions aren't as attractive as they used to be because of the price. And we don't like to do things where we have to be perfect. So we don't. But we still, last quarter we made $533.9 million of consolidated EBITDA. We had the most revenue in our history. We'll probably do $2 billion to $2.1 billion in EBITDA for the year. We'll generate... pretty well in excess of a billion dollar in cash flow. And, you know, we're going to buy back $500 million or so in cash, I mean in stock. And we bought $500 million last year. We bought $500 million the year before. You know, as long as we're that cheap, we'll just keep buying our stock. So, you know, and we feel like it's a good store for our shareholders. And, you know, we're pretty confident. You know, and, you know, my financial advisor thinks I'm a little light on SSNC. You know, I've got to count. Stock up.

The scale is one of the things I've marveled at in terms of, to your point, you're at almost $6 billion of revenue, $2 billion EBITDA, $1 billion free cash flow. And I think you were up around six and a half times at the time you did DST Interlinks. And now you're back down to three. I mean, the cash flow gives you a lot of opportunity to continue to perpetually reinvest in the business, which you do both organically and inorganically. I want to spend a minute on Blue Prism because I think not only operationally how much you've improved it, but what it can do for your clients as well as internally. So you've scaled their margins. There's a huge opportunity across SSNC in and of itself. Maybe take us through that a little bit and what that can mean from a reinvestment perspective.