SS&C Technologies Holdings, Inc.

Ladies and gentlemen, thank you for standing by. My name is Abby and I'll be your conference operator today. At this time, I would like to welcome everyone to the SSNC Technologies second quarter 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 would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you, and I would now like to turn the conference over to Justine Stone, Head of Investor Relations. You may begin.

Welcome, and thank you for joining us for our Q2 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 Safe Harbor provisions under the Private Securities Litigation 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 the risk factors section of our most recent annual report on Form 10-K, which is on file at the SEC and can also be accessed on our website. These forward-looking statements represent our expectations only as of today, July 23rd, 2025. While the company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so. During today's call, we will be referring to certain non-GAAP financial measures or 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.sfctechs.com. I will now turn the call over to Bill.

Thanks, Justine, and welcome, everyone. Our second quarter results include record adjusted revenue of $1,537,800,000. up 5.9%, and adjusted earnings per share of $1.45, a 9.8% increase. We delivered record adjusted consolidated EBITDA, passing $600 million in the quarter for the first time, up 7.4%, resulting in a quarterly adjusted consolidated EBITDA margin of 39%. Second quarter adjusted organic revenue growth was 3.5%, with performance driven by GLOBOP, GIDS, and WIT businesses. Globop organic growth of 7.3% was driven by double-digit growth in private markets and retail alternatives. GIST continues to win key clients and deliver high-level professional services. Health finished with a quarter with flat organic growth. Q2 financial services recurring revenue growth was 3.9%, which includes software-enabled services and maintenance revenue. Internationally, we are seeing strength in Europe, Australia, and the Middle East, spanning multiple business units. This broad success reflects a positive trend of increased international win rates attributable to the investments we have made over the past several years and our ability to provide increasingly sophisticated services. Overall, we deliver our service with a client-focused approach, and our retention rate is stable at 97%. For the six months into June 30th, 2025, cash from operating activities was $645.1 million, up 14% year over year. In Q2, we bought back 3.4 million shares for $269 million at an average price of $77.99. We will continue to buy back shares opportunistically and recently grew our share repurchase authorization to $1.5 billion. We are continuously investing in our AI strategy. We believe some of our most significant competitive advantages lies in partnering Blue Prism with our business units to identify workflows, build new AI agents, and deploy them internally. Our approach successfully resulted in our first AI agent sale to an insurance conglomerate in the Midwest. The client processes hundreds of credit agreements monthly, and the AI agent produces manual effort by up to 80%, speeds up processing by 3x, and improves accuracy to 99% plus. We believe this win is indicative of future opportunities across our 22,000 strong client base. I'll now turn it over to Rahul to discuss the quarter in more detail.

Thanks, Bill. We had a solid second quarter with 3.5% organic revenue growth and 50 basis points of margin expansion year over year. Our fund administration business, Globob, continues to show strength, with private markets growing over 10%, driven by the complexity of credit and hybrid funds, as well as family offices. Retail alternatives, while still a smaller part of this business, is growing 20%, with substantial runway. But Tatea, our class action services business, won 30 new clients in Q2, with two-thirds of them being SS&C client cross-sites. Our newer software solutions continue to gain traction. Genesis is well positioned to support both new and existing customers with multiple implementations underway. Our most recent client Go Live was a 75 billion plus bank trust in the Midwest where we replaced a competitor. Similarly, Singularity has had recent success winning large insurance companies. We're focused on continuing to enhance asset coverage and functionality and are launching new features in bank loans, commercial mortgage loans, and enhanced income monitoring tools. We have noticed previously that the strength in our business and the diversification of our revenue across product lines and types of customers often allows us to overcome macroeconomic challenges that may arise and still perform in a predictable way. We proved that this quarter with success, despite Intralinks having some macroeconomic challenges, including declines in global deal volume and active deal flow in Q2. Early indicators do show activity is picking up in the second half of the year, and our brand-new platform, Deal Center, combines the power of AI with an enhanced user experience and increases our win rates. With that, I'll turn it over to Brian to walk through the financials.

Thanks, Roland. Good day, everyone. Unless noted otherwise, the quarterly comparisons are Q2 2024. As disclosed in our press release, our Q2 2025 gap results reflect revenues of $1.537 billion, net income of $181 million, and diluted earnings per share of 72 cents. Our adjusted non-gap results include revenues of $1.538 billion, an increase of 5.9%, and adjusted diluted EPS of $1.45, a 9.8% increase. The adjusted revenue increase of $85 million was primarily driven by incremental revenue contributions from Globop of $28 million, WIT of $15 million, acquisitions of $21 million, and a favorable impact from foreign exchange of $14 million. As a result, adjusted organic revenue growth on a constant currency basis was 3.5%, and core expenses increased 3.1%, or $28 million. Adjusted consolidated EBITDA was $600.4 million, reflecting an increase of $42 million, or 7.4%, and a margin of 39%, a 50 basis point expansion. Note EBITDA of $600.4 million is a quarterly record high for SS&C. Net interest expense for 2Q25 was $106 million, a decrease of $8 million, primarily reflecting lower short-term interest rates. Adjusted net income was $366 million, up 10.2%, and adjusted diluted EPS was $1.45, an increase of 9.8%. Our effective non-GAAP tax rate was 24%. Note, for comparison purposes, we have recast the 2024 quarterly adjusted net income to reflect the full-year effective tax rate of 23.1%. Cash flow from operating activities grew 14%, which was driven by growth in earnings. Our year-to-date cash flow conversion was 88% compared to 85% last year. SS&C ended the second quarter with $480 million in cash and cash equivalents and $6.9 billion in gross debt. SS&C's net debt was $6.4 billion and our last 12 months consolidated EBITDA was $2.4 billion. Resulting that leverage ratio is 2.72 times. As we look forward to the third 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 our 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 in our guidance interest rates to remain at current levels an effective tax rate of approximately 24% on an adjusted basis, capital expenditures to be in the 4.1 to 4.5% of revenues, and no impact related to the Calistone acquisition. For the third quarter of 25, we expect revenue to be in the range of $1.525 billion to $1.565 billion, and 4.5% organic revenue growth at the midpoint. Adjusted net income in the range of $364 to $380 million, interest expense excluding amortization of deferred financing costs and original listed discount in the range of $101 to $103 million, diluted shares in the range of $252.5 to $253.5 million, and adjusted diluted EPS in the range of $1.44 to $1.50. For the full year 25, we are raising our top line guidance by $15 million at the midpoint and now expect revenue to be in the range of 6.143 to 6.243 billion dollars and 4.5% organic revenue growth at the midpoint. For the full year 25, we're also raising our earnings guidance. Specifically, we expect adjusted net income to be in the range of 1.462 to 1.542 billion dollars, diluted shares in the range of 251.5 to 254.5 million, adjusted diluted EPS in the range of $5.82 to $6.06, up 10 cents at the midpoint, and cash from operating activities to be in the range of $1.479 to $1.559 billion. Our 2025 guidance reflects our solid results in the first half of 2025 with a continued positive outlook for the remainder of the year. And now back to Bill.

Thanks, Brian. On Monday, we announced a definitive agreement to acquire Calistone, expected to close in Q4 of this year. We're excited about the attractive geographies, additional capabilities that we can provide in the ETFs, digital assets, and money market products, and cross-sell opportunities. The acquisition is accretive to revenue growth, EBITDA margin, and will be EPS accretive within 12 months. This is in line with our capital allocation strategy of finding high-quality businesses which are a strategic fit. I will now open it up for questions.

Thank you. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. To be able to take as many questions as possible, we ask that you please limit yourself to one question and one follow-up. Again, it is star one if you would like to join the queue. And our first question comes from the line of Jeff Schmidt with William Blair. Your line is open.

Hi, thank you. On the Calistone deal, could you discuss the revenue synergy potential here You called out some cross-selling opportunities. Where do you see the biggest cross-selling opportunities, and could you quantify it at all?

Well, it's still early. I wouldn't say that we have anything that I can pinpoint, but they have 4,500 clients, and we have probably 10,000 that could be addressable with those 4,500. And things like crypto and other digital assets, as well as ETFs. So they're very strong on ETFs. And so we have a pretty nice ETF business ourselves. So we think the cross-selling and up-selling in that space will be pretty attractive. And we would expect Calistone, which has been growing in excess of 10, closer to 15% for the last several years, that we'll have an opportunity to perhaps accelerate that.

Okay. And then capital expenditures have been over 4% of revenues the last two years. You're expecting it again this year. Previously, they were more like 2% to 3%. And I was just curious how much of that increase is going to kind of higher maintenance capex versus investments in growth.

Well, I would say that, you know, we have a large suite of products. technology products, and so those take some of those R&D dollars. And also, we're moving into different products and services. We've had considerable success in Australia, and we have built software specifically for that market. And we do that across any number of our geographies and any number of our product suites. As Rahul said, we have significant development in private assets and retail in our Globop division. And we also have brought out Genesis in our wealth and investment technology division. And we also are still investing in Domani Rx. And we have what we think are lots of opportunities.

Okay. So it sounds like more, I guess, investments in growth. And should we expect it to kind of stay up at these higher levels going forward?

Anthony Chiappa, who's our CTO, thinks it will. As much as we try to slow him down, technology is our seed corn. We've got to be careful that we don't cut off our nose to spite our face. We're going to continue to invest in our business. We're generating lots of cash. We're paying down debt. We're buying back stock. We're looking at acquisitions. But we're not going to starve our development teams or our services teams.

Great. Thank you.

And our next question comes from the line of Alexey Gogolev with JP Morgan. Your line is open.

Thank you very much for letting me ask the question. First of all, Brian, organic growth guidance for 2Q, was ahead of your initial forecast, and yet you almost did not change your organic revenue outlook for a full year, and it still sort of remains around 4.5%. Mechanically, this implies that you're now assuming slightly weaker organic growth in the second half. Were there any deals that were pulled forward that resulted in better performance in the quarter?

No, I think just thanks for the question. I think if you look at kind of in the aggregate, if you look at the first half and versus the second half, they're roughly equivalent as far as organic growth grows. Obviously, and we, you know, we continue to go against higher and higher quarterly numbers, which, you know, is obviously in 2024. So I think the Our expectations around the second half continue to be strong, you know, all in into the overall aggregate for the 4.5% for the full year.

Okay. Thank you, Brian. And then another question related to acquisitions. I don't know, maybe, Bill, this is perhaps for you. What would you see as a comfortable level of leverage? Should you see any potential attractive deals beyond the one that you announced earlier this week?

Yeah, I would be comfortable for us to be in the mid fours. You know, so that, you know, we're 272. Now, if you go into 450, you know, that's almost two turns, which would be, you know, 4.8 billion. You know, plus we would have some cash to be able to probably do $5 billion acquisition. You know, so it depends how good the acquisition is. We're not afraid to run the business with a debt load because we're a very sticky business. We have great relationships with our clients. Our clients are growing. And we're in the sweet spots of financial services, we think.

Thank you, Bill.

And our next question comes from the line of Kevin McVey with UBS. Your line is open.

Great. Thank you, and congratulations on the results and the deal. Bill, I think you mentioned, you know, within GIDS, a high level of professional services. Is there any way to think about, number one, what percentage of the revenue is professional services? And then is that a leading indicator? You know, is it professional services? You do the work and then ultimately it pivots to revenue. Is that a fair way to think about it? And typically, what's the lead time? I mean, I know some of the wins are getting bigger, but just are we thinking about that right?

Well, I think, you know, the professional services is really to build out the service or build out the technology to meet the demands of any of these specific clients. Generally, that's a three to six month process, and generally we get paid for that three to six, which is revenue. But then it usually turns into a services contract where we do the work. Like with Insignia, we rebadge 1,300 people from Insignia to us. So our charge is to help them grow and also to manage our expenses in a way that and it becomes increasingly profitable.

That's helpful. And I think the other thing you mentioned was the EBITDA obviously at a record high. Any way to think about, and this may be more Brian, just the pacing of the seasonality on that? Obviously it's a Q2, which is a terrific outcome, but any shift in kind of the seasonality of the business and how we're thinking about the EBITDA over the course of the year?

As you look at the course of the revenue growth over time, right? And some of that will depend upon the revenue growth and the various kind of business units and where it comes from. Obviously, with RevRec and 606, if you get a little bit more revenue coming in from some of those businesses, obviously has a higher margin within that particular quarter at the time that it's booked. So you tend to get a little bit more of that revenue in Q4. So you get a little bit of lift all else being equal for the, I'll call it kind of that core infrastructure expense, doesn't really adjust the same way up. So you'll get a little bit of that pickup. So you just kind of, we look at it over the different lines of businesses and roll that up over time. And obviously, as you continue to grow the revenues over different periods of time, you're just continuing to leverage your scale, right? It's just, our goal is to, optimally is to grow the revenues faster than expenses. And you just have a little bit of that revenue seasonality in Q4. So you can tend to get a little bit of a pickup in the EBITDA margin.

Helpful. Thank you.

And our next question comes from the line of Dan Perlin with RBC Capital Markets. Your line is open.

Thanks, good evening. I was wondering if you could comment on what Batia is actually growing at, like revenue growth rates in the quarter, kind of on a year-over-year basis, as we're kind of contemplating that rolling into organic growth in the fourth quarter.

Yeah, it's basically growing at a historical growth rate, because I know that was, obviously, we didn't own it during the second quarter. So it's growing at, you know, kind of that... low double-digit growth rate. And we're going to see a seasonally, like when we said this on a prior call as well, is that when we look at Patea, and it can be very seasonal as well, right, as far as it can be very lumpy in any one quarter based on what's going on and clearing class action suits. And when we look at historically over the last, call it five or six years, the frequency of the fourth quarter or the second half being the lumpiest of the full year over 50% of the time, you'll see a higher percentage of the revenues weighted toward the back half of the year as courts tend to clear their dockets towards the end of the year versus early part of the year. And this year is shaping up to be similar to one of those years. So we'd expect to see accelerated growth rate in the second half, similar to what they've done historically. It wasn't necessarily the case last year, but more the case looking this year.

Got it. That's great. And then just, I guess more philosophically, Bill, like the Calistone deal here, again, you've got an asset that's growing, I think organically, you said 10 plus percent. We just talked about Batia growing low double digits, and maybe there's some lumpiness to it. But in aggregate, like these are assets that have organic growth that's better than kind of your current run rate and margins that are not like big fixer-uppers, which are somewhat counterintuitive relative to what you've historically done over the years. So I'm just wondering, like, is the tone from the top that, you know, you're going to point a lot more assets and capital into kind of expanding that organic growth trajectory as these assets kind of keep rolling in? Because it would seem as though that's a strategic move on your part, but I'm not sure if it's entirely... focus point. I'm just trying to get a sense there. Thank you.

Yeah, you know, Dan, I think of course, you know, I mean, you only need to get hit in the head about a thousand times before you decide that you guys really love organic revenue growth. You know, I like growth and I like earnings, you know, but we have a lot of opportunities where, you know, we find, you know, good teams like they have at Caledon and, you know, we've known Julian Hammerson for several years and and a very impressive guy and and i think that you know when we find that same thing that we had with um with mike michael mccree and and p hansen at um epitaea so you know it's finding the right the right mix and you know trying not to you know get too investment banker influenced as to what we should do you know we we like to made over 600 million dollars and consolidated EBITDA this quarter, and we're well on our way to make more money in the second half than we made in the first half. As Brian said, there's some seasonality, and we still sell some software, too, so that generally is in the fourth quarter and generally in the last two weeks of the fourth quarter. It's always the last two weeks of the quarter, but it's a larger chunk in Q4, so I don't think that's going to change.

Got it. That's great. Thank you so much, Bill.

And our next question comes from the line of Peter Heckman with DA Davidson. Your line is open.

Hey, good morning. All right. Good afternoon, everyone. On Callistone, could you explain a little bit more what their funds network does? I did a little bit of work on the website, and I'm not sure I'm 100% grasping it. Is it really a BPO function for things like post-trade processing and and trade reconciliation, or am I reading that incorrectly?

That's a couple of the services that they provide. And they have, obviously, a big network that really allows them to have straight-through processing, but with very little manual intervention.

And on a multi-country basis?

I think they're in 57 countries, that's the number.

Okay. I didn't hear an update on the health solutions segment. Anything new there? And are we still thinking that, you know, we're in the process of kind of really marketing and selling the solution and thinking about, you know, incremental revenue or any real material revenue acceleration occurring, you know, maybe a year out from now? Is that how we should be thinking about it?

Well, I think, I think, Pete, that, you know, almost all of these health plans, Medicaid and Medicare are all, you know, they begin in January 1. So, you know, really, you find out whether or not you won these deals in, like, October 1. You know, so that's the selling season is right now through the end of the year. And, you know, primarily, you're not closing any deals in December because you have to get These people up and running on January one so it's just recognizing those dynamics and in that in that business and then also recognizing that there is. Their lumpy you know, this is their whole business and know a small deal in healthcare is you know i'm demanding or amethyst like $5 million and a big one could be 100 million. So you gotta. You've got to recognize that some of it is going to be the maturation of that selling and marketing process and then being able to really get some traction where people start singing the praises of having a brand new system and data and analysis at their fingertips versus we've had some of the CEOs at major healthcare companies talk about two or three weeks to get the data. In a usable form, so we think there's a lot of advantages and it's you know. We make money in our healthcare business we generate cash and we think it's a it's a huge opportunity, we have a new board member who lives in London and he acts like it's not just the United States that needs healthcare solution so there's there's opportunity.

Okay, good to hear appreciate it.

And our next question comes from the line of James Fawcett with Morgan Stanley. Your line is open.

Hi, guys. Thanks for taking our question. I'm Michael Infante. I'm for James. I just wanted to ask a technical question on Callistone and specifically their PMI platform. I know that's blockchain native and it's obviously still quite early, but any sense of the technical or commercial hurdles that would prevent you from routing a big chunk of SS&C administered flows through DMI over the next several years and maybe what that would mean from a cost savings perspective relative to SWIFT messaging?

Well, you know, that's something that we're looking at and, you know, getting all of the technical aspects and all the specifications is one of the reasons you see it as 4.1 to 4.5 and and what we spend on R&D, and we have people working, and Julian at Calistone is quite technical, and his team is quite technical, so we'll have our technical teams together, and we'll do what is optimal for our clients, and I'm sure that the scale that we bring is gonna allow us to have better pricing.

Justin Capposian- got it helpful just a quick housekeeping follow up on the test, I think you suggested last quarter that you were still working through some of the red REC dynamics there. Justin Capposian- Which, in and of itself that asset is again seasonally concentrated and fiscal for Q, but do you have more visibility on what that red REC looks like now and are you still comfortable with that full year range being 100 to 110 of contribution thanks.

I think we're definitely making progress on it as we get more history, and we have really good visibility into what is already, in effect, been adjudicated and is waiting to be released. So, yeah, we feel better about it. I wouldn't say we're 100% of the way there, but we are getting closer.

Yeah, and we operate with the different law firms that have won these cases and staying on top of them so that they stay on top of the judges so that the judges release the funds. And that's when everybody gets paid.

Got it. Thanks, guys.

And as a reminder, it is star one if you would like to ask a question. And our next question comes from the line of Surrender Thinned with Jeffries. Your line is open.

Thank you. Bill, can you just provide kind of an update on Blue Prism strategically where you think you're in the product lifecycle in terms of all the new features and functionality and just kind of what you see in the pipeline at this point?

Well, you know, we're really kind of rolling out, you know, kind of a case study of what we did. You know, so we got, we bought Blue Prism, I think, in like March, April of 2022, I think. And You know, we've deployed several thousand digital workers and doing increasingly complex tasks. And we think that we have saved or at least not spent a couple hundred million dollars because of that investment. And as we show what we're doing with the agentic AI and Blue Prism, we're starting to get some real interest as a solution for a lot of their manual issues. We remain optimistic that Blue Prism has a lot of runway, but it's competitive and it's wild west out there, so you gotta do this in a wise manner and you gotta protect your clients.

Got it. And then just kind of on the interlinks piece and the whole idea of volumes still count. How significant has the degradation been from the beginning of the year to now? And then maybe how you're thinking about the back half.

I think the answer to both of those is related. There's a little bit of a lag. So we have some leading indicators, the number of opportunities, the number of deals in the market, as well as what we have in bookings, which then translates to revenue. So I think most of what we're seeing now is we're seeing the early indicators of that revenue come back. So bookings are up. deal counts are up, things like that. There usually is a couple-month lag, but we do expect some growth from this point in the back half of the year.

Got it. Meaning that you expect growth in the back half to be positive in terms of numbers. Appreciate that. Thank you.

And we have no further questions, so I will now turn the call back over to Mr. Bill Stone for closing remarks.

Thank you, and thanks, everybody, for being on the call. We're working hard for our shareholders, as we always do, and it's nice to present good results, and we look forward to seeing you in October. Thanks a lot.

And, ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.