SS&C Technologies Holdings, Inc. Q2 FY2025 earnings call

• Record adjusted revenue and earnings per share achieved. - Adjusted consolidated EBITDA reached a new high. - Organic revenue growth driven by GlobeOp, GIDS and WIT. - International strength in Europe, Australia and the Middle East. - Stable retention rate at 97%. - Continued share buyback and investment in AI. - Battea won 30 new clients in Q2 with 2/3 being cross-sells. - Genesis and Singularity had recent success with client implementations. - DealCentre combines AI to increase win rates. - Announcement of Calastone acquisition with strategic fit and accretive benefits.

Second quarter results included record adjusted revenue of $1.5378 billion, up 5.9%, and adjusted earnings per share of $1.45, a 9.8% increase. Adjusted consolidated EBITDA passed $600 million, up 7.4%, with a quarterly adjusted consolidated EBITDA margin of 39%. Second quarter adjusted organic revenue growth was 3.5%. GlobeOp organic growth was 7.3% driven by double-digit growth in private markets and retail alternatives. GIDS won key clients and delivered high-level professional services. Health had flat organic growth. Q2 Financial Services recurring revenue growth was 3.9%. Internationally, Europe, Australia and the Middle East showed strength. Retention rate was stable at 97%. Cash from operating activities for the 6 months ended June 30, 2025, was $645.1 million, up 14% year-over-year. In Q2, 3.4 million shares were bought back for $269 million. The company is continuously investing in AI, with the first AI agent sale to an insurance conglomerate in the Midwest.

• Third quarter 2025 revenue expected to be in the range of $1.525 billion to $1.565 billion, with 4.5% organic revenue growth at the midpoint. Adjusted net income expected in the range of $364 million to $380 million. - Full year 2025 revenue guidance raised to $6.143 billion to $6.243 billion, with 4.5% organic revenue growth at the midpoint. Adjusted net income expected in the range of $1.462 billion to $1.542 billion. - Calastone acquisition is accretive to revenue growth, EBITDA margin and EPS within 12 months.

Actual results may differ materially from forward-looking statements due to various important factors, including those discussed in the Risk Factors section of the most recent annual report on Form 10-K.

Q: On the Calastone deal, could you discuss the revenue synergy potential here? You've called out some cross-selling opportunities. Where do you see the biggest cross-selling opportunities? And could you quantify it at all?

A: It's still early. They have 4,500 clients and SS&C has around 10,000 addressable clients in areas like crypto, digital assets and ETFs. Cross-selling and upselling in ETFs space is attractive and Calastone's growth can be accelerated.

Q: Capital expenditures have been over 4% of revenues in the last 2 years. You're expecting it again this year. Previously, they're 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 A: We have a large suite of technology products, moving into different products and services. Have significant development in private assets, retail alts in GlobeOp and Genesis in Wealth and Investment Technologies division. Also investing in DomaniRx and software for various geographies.

Q: Organic growth guidance for 2Q was ahead of your initial forecast, and yet you almost did not change your organic revenue outlook for 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?

A: I think if you look at kind of in the aggregate, if you look at the first half versus the second half, they're roughly equivalent as far as organic growth grows. Our expectations around the second half continue to be strong all in into the overall aggregate for the 4.5% for the full year.

Q: 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?

A: Comfortable level of leverage to be in the mid-4s. Current net leverage ratio is 2.72x, and we can be in mid-4s for a comfortable level.

Q: On the Calastone deal, 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 trade reconciliation? Or am I reading that incorrectly?

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

Q: I was wondering if you could comment on what Battea 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?

A: It's basically growing at a historical growth rate. Battea can be very seasonal with 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.

Q: I just wanted to ask a technical question on Calastone and specifically their DMI 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?

A: That's something that we're looking at and getting all the technical aspects and all the specifications is one of the reasons you see it in R&D spend. We'll have our technical teams together, and we'll do what is optimal for our clients and expect better pricing due to scale.

Q: Can you just provide kind of an update on Blue Prism strategically, where you think you are on the product life cycle in terms of all the new features and functionality and just kind of what you see in the pipeline at this point?

A: We bought Blue Prism in 2022 and have deployed several thousand digital workers. We remain optimistic that Blue Prism has a lot of runway but it's competitive and a Wild West out there, so we have to do it wisely to protect clients.

Q: And then just kind of on the Intralinks piece and the whole idea of volumes, deal counts. 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?

A: There's a little bit of a lag. We have leading indicators like number of opportunities and bookings which translate to half of the year, and we expect growth in the back half to be positive.