SS&C Technologies Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
October 24, 2024

There are 12 speakers on the call.

Operator

Thank you for standing by. My name is John, and I'll be your conference operator for today. At this time, I would like to welcome everyone to the SS and C Technologies Third Quarter 20 24 Earnings Call.

Operator

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you. I would now like to turn the call over to Justine Stone, Head of Investor Relations. Please go ahead.

Speaker 1

Hi, everyone. Welcome and thank you for joining us for our Q3 twenty twenty four earnings call. I'm Justine Stone, Investor Relations for SS and C Technologies. With me today is Bill Stone, Chairman and Chief Executive Officer, Rupul Panwar, President and Chief Operating Officer and Brian Schell, our Chief Financial Officer. Before we get started, we need to review the Safe Harbor statement.

Speaker 1

Please note that 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 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 ks, 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 24, 2024. 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.

Speaker 1

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.ssctech. I will now turn the call over to Bill.

Speaker 2

Thanks, Justine, and welcome, everyone. Our 3rd quarter results are record adjusted revenue of $1,466,800,000 up 7.3 percent. Our adjusted diluted earnings per share were $1.29 up 10.3 percent. We also reported record adjusted consolidated EBITDA of $566,200,000 with 38.6 percent EBITDA margins. Our 3rd quarter adjusted organic revenue growth was 6.4%.

Speaker 2

This growth was driven by strength in our alternatives, Gids, WID and Intralinks businesses. The surprise upside came largely in our GIDS and WIT businesses, accelerated license revenue in the Wealth and Investment Technologies business and non recurring professional services fees in the Global Investor

Speaker 3

and

Speaker 2

Distribution Solutions Business. Global Investor Distribution Services Business drove the outperformance. Our recurring revenue growth rate for Financial Services was 7.2%, which includes all software enabled services and maintenance revenue. 3rd quarter cash from operating activities was $336,600,000 up 39% from Q3 2023. Our cash flow conversion percentage for the quarter was 103%.

Speaker 2

We bought back 1,200,000 shares for $89,400,000 at an average price of $72.72 per share. Absent high quality acquisitions, we continue to believe share repurchases are the best capital use. In September, we closed the $670,000,000 Platea Class Action Services acquisition. Platea meets our financial criteria, about $95,000,000 in annual revenue, growing high single digits and 45 percent plus EBITDA margin. This acquisition will immediately be accretive to earnings.

Speaker 2

With our fund administration business and we're already making progress cross selling. I'll now turn this call over to Rahul to discuss the quarter and more to Matea.

Speaker 4

Thanks, Bill. We had another strong quarter with organic revenue growth of 6.4%. The wealth and investment technology business unit grew 10.9% for the quarter. The reorganization from earlier in 2024 has brought development teams together and we're currently integrating the capabilities of our Aloha solution into the new Genesis platform. This will accelerate our ability to deliver the deepest set of cloud native front to back technology to the investment management market.

Speaker 4

The Black Diamond Wealth Platform has reached a major milestone with the rollout of advanced grouping functionality. This initiative enables Black Diamond Advisors to further personalize their client reporting and compete effectively in the alternative asset reporting space for RIAs and family offices. Our Global Investor and Distribution Solutions business had another strong quarter. And in addition to new business wins, we have brought in additional revenue through special projects at our largest clients. The healthcare industry is facing higher than expected utilization and rising costs for Medicare Advantage.

Speaker 4

SS and C is poised to support our healthcare clients and prospects through these headwinds. With the integration of our Domane Rx platform, automation opportunities and lift outs, we can reduce operating costs for health insurers over time. Q4 is off to a strong start for SS and C Health. We signed 2 large license deals for about $8,000,000 in revenue at the beginning of October that will push from Q3. Our internal automation efforts are progressing as well.

Speaker 4

Since acquiring Blue Prism in 2022, our total revenue has grown about 600,000,000 dollars and our headcount is down. For 2024 year to date, we estimate a benefit of approximately 10.50 full time equivalents thus far in the year because of rolling out Blue Prism digital workers as well as automating and optimizing the existing processes. We'll now turn it over to Brian to run through the financials.

Speaker 5

Thanks, Arjal, and good day, everyone. As noted in our press release, our Q3 'twenty four GAAP results reflect revenues of $1,466,000,000 net income of $164,000,000 and diluted earnings per share of $0.65 Our adjusted non GAAP results include revenues of $1,467,000,000 an increase of 7.3 percent over Q3 2023 and adjusted diluted EPS of $1.29 a 10.3 percent increase over Q3 'twenty three. The adjusted revenue increase of $100,000,000 over Q3 'twenty three was primarily driven by incremental revenue contributions from the WIT, alternatives, GIDS and InterLink businesses. Acquisitions contributed $8,000,000 with about $4,000,000 attributable to Batya and foreign exchange had a favorable impact of approximately $5,000,000 As a result, adjusted organic revenue growth on a constant currency basis was 6.4%. Our core expenses increased 6.8% or $58,000,000 excluding acquisitions and on a constant currency basis.

Speaker 5

Adjusted consolidated EBITDA was $566,000,000 or 38.6 percent of adjusted revenue, an increase of $32,000,000 or 6 percent from Q3 2023. Net interest expense for the Q3 of 2024 was $110,000,000 a decrease of $11,000,000 from Q3 2023. Adjusted net income was $327,000,000 up 10% and adjusted diluted EPS was $1.29 an increase of 10.3%. The effective tax rate used for adjusted net income was 26%. An increase in the average share price drove the diluted share count up to 254,100,000 from 252,300,000 at Q2 'twenty four.

Speaker 5

SS and C entered the Q3 with $694,700,000 in cash and cash equivalents and $7,200,000,000 in gross debt. The higher than normal cash balance reflects opportunistic borrowing that will be deployed during the Q4. SS and C's net debt as defined in our credit agreement, which excludes cash and cash equivalents of $159,000,000 held at DemoniaRx was $6,700,000,000 Our last 12 month consolidated EBITDA used for covenant compliance was $2,279,000,000 Based on net debt of approximately $6,700,000,000 our total leverage ratio was 2.9 times.

Speaker 1

As we look forward to

Speaker 5

the Q4 and the remainder of the year with respect to guidance, note that we will continue to focus on client service and assume that retention rates will remain in the range of our most recent results. We will continue to manage our expenses with a cost disciplined approach by controlling and aligning variable expenses to ensure efficiency, increasing productivity, improve our operating margins and leverage our scale and create capacity and effectively investing in the business through marketing and sales and R and D to take advantage of future growth opportunities. Specifically, we have assumed foreign currency exchange interest rates to remain at current levels. Tax rate of approximately 26% on an adjusted basis, which is unchanged from prior guidance. Capital expenditures to be 4.1% to 4.5 percent of revenues, which is also unchanged from prior guidance and a stronger weighting to share repurchases versus debt reduction subject to changes in market conditions or financing needs.

Speaker 5

For the Q4 of 2024, we expect revenue to be in the range of $1,460,000,000 to $1,500,000,000 and 2.4 percent organic revenue growth at the midpoint. Adjusted net income in the range of $329,000,000 to $345,000,000 interest expense excluding amortization of deferred financing costs and original issue discount in the range of 110 to $112,000,000 diluted shares in the range of $254,600,000 to $255,600,000 and adjusted diluted EPS in the range of $1.29 to 1 0.35 dollars For the full year 2024, we expect revenue to be in the range of $5,815,000,000 to $5,855,000,000 and 4.9 percent organic revenue growth at the midpoint. Adjusted net income in the range of $1,299,000,000 to $1,315,000,000 diluted shares in the range of $253,600,000 to 253,800,000 dollars adjusted diluted EPS in the range of $5.12 to $5.18 and cash from operating activities to be in the range of $1,330,000,000 to $1,370,000,000 And now back to Bill.

Speaker 2

Thanks, Brian. We feel our business is strengthening and we were able to expand our horizons. The Bethea purchase is already showing very positive signs. Our deliver client conference was a great success and I would like to thank David Rubinstein for being our keynote speaker. I will now open it up for questions.

Operator

Thank you. Ladies and gentlemen, we will now begin our question and answer session. Your first question comes from the line of Jeff Schmitt from William Blair. Please go ahead.

Speaker 6

Thank you. Could you discuss the market opportunity for DominiRx? Just because I think the top 3 players in that space handle maybe 70% or 80% of prescription claims, I think. And you've just mentioned before you don't plan on kind of focusing on that group that much. So how big is sort of the remaining market opportunity from a revenue perspective?

Speaker 6

And then how are kind of those early conversations going?

Speaker 2

Yes. Well, we would say you're right. It's probably about 70%, 80% is what the UnitedHealthcare, Aetna, CVS and Cigna Express Script process. I think there's something like 5000000000 to 6000000000 scripts a year in the United States. So if you take 20% of 6000000000, you got 1,200,000,000 and if you take 30%, you got 1,800,000,000, right?

Speaker 2

So that's a lot of scripts. So we think we have a lot of run room. We also think that we can license our technology, maybe to one of those 3 or maybe more. And we also have a large number of others that are like us or like the big three, but a lot smaller. So they might do 200,000,000, 300,000,000 scripts rather than the 1,500,000,000 scripts.

Speaker 2

So we think there's plenty of run room. We think there's a lot of things in healthcare that need help with. And so pharmacy claims is 1, but there are other things like medical claims and other things that we think we're well positioned to be able to help the healthcare industry.

Speaker 6

Okay, great. And then just on the TrustSuite business, I think you've mentioned it last quarter, but it's the INITRUST combination. Could you discuss kind of the size of that business and the type of growth you're seeing there? How does that stack up versus competitors like an FCI product?

Speaker 2

Yes. I think the TrustSuite product really does take the InterTrust product and Black Diamond and really creates a very pleasing user interface and a lot of capability with technology that is pretty

Speaker 1

state

Speaker 2

of the art. Most of the truss systems out in the marketplace today are multi decade old. And we think that we have a lot of run room. And we've been pretty pleased with the acceptance rate of TrustSuite.

Speaker 6

Any sense just on the size of that business today from revenue perspective or in the growth or?

Speaker 2

Well, it's still a little nascent, but we would expect it to do probably in 2024, upwards to $10,000,000 in revenue. And then in 2025, we would expect to see perhaps a multiple of that.

Operator

Your next question comes from the line of Surinder Thind from Jefferies. Please go ahead.

Speaker 7

Thank you. Bill, can you provide maybe any color on the outlook for 4Q in terms of the slowdown in the organic growth rate that's implied? And then is there some maybe some licensing noise around licensing deals and things like that? Or how should we think about 4Q number?

Speaker 2

Yes. I think the major thing with Q4 in 'twenty four compared to 'twenty three is Q4 of 'twenty three was substantially better than any of the other quarters in 'twenty three. So we're kind of getting a little bit of comp challenge to us. And we have a big pipeline. We have a lot of stuff going on.

Speaker 2

We're always cautious. We've had 3 or 4 pretty good quarters in a row, and we expect Q4 to be a pretty good quarter, too.

Speaker 7

Got it. And then in terms of the follow-up, just obviously, a lot of news in the healthcare space with potentially Cigna and Humana back in merger talks, some weak results out at elavance and some other things. What's the potential impact? Or is there any read through there? Are things something that we should be aware of related to the MoneyRx?

Speaker 2

No. I think as Rahul spoke earlier, we got a pretty big uplift in revenue for healthcare in October, stuff that had pushed from September. I still think we have a great opportunity here. DelimaniRx is really new technology that there's nothing like it out in the marketplace that can handle scale. A lot of people that used our RxNova system considered it the gold standard for Medicare and Medicare Advantage already and DelaunayRx is far exceeding RxNova's capabilities.

Speaker 7

So Bill, I guess just to clarify, is the commentary there that there shouldn't be any strategic impact on the relationship there that you have? Or I guess that's what I was trying to get rather than the actual near term business.

Speaker 2

You mean Humana and Cigna?

Speaker 7

That is correct, yes.

Speaker 2

That's certainly a rumor at the present. And I think there's opportunity no matter what happens. And we've done we've had Humana as a client for a long time. Cigna was our biggest health care client when we acquired DST. Obviously, they spent $60,000,000,000 or $70,000,000,000 buying ESI.

Speaker 2

So we didn't think they'd keep using us, as you could imagine. So we think there's plenty of opportunity for us. Whatever happens with the Humana at Cigna, we think it will be positive towards us. And lots of stuff is happening in healthcare, as Rahul had alluded to before. And we just have to play it out.

Speaker 2

But everybody is concerned about their health. People are not going to stop spending money on their health. And we think it's a very good spot for us to be in.

Speaker 7

Thank you, Bill. That's helpful.

Operator

Your next question comes from the line of Andrew Schmidt from Citi. Please go ahead.

Speaker 8

Hey, Bill. Hey, Raul. Hey, Brian. Thanks for taking my questions this evening. I wanted to just maybe ask a question on 25%.

Speaker 8

I know it's a little bit early, but you do have the 48% medium term organic growth outlook out there. Wondering if 25, if you think about it within the context of that, is it shaping up similar to the medium term? And then if you could just talk about maybe the pipeline or the sales cycles accordingly, because I know obviously there's a lot of work that's done in advance to hit those targets. So if you could comment on just your visibility there in terms of what you're seeing in the pipe, that'd be great. Thanks a lot.

Speaker 2

Yes. I think that we have

Speaker 1

I think

Speaker 2

our sales force is the strongest it's been. So we have a lot of people out there banging on doors and we have a lot of capable people. We have tremendous number of opportunities all over the world. You got to win, right? And then you got to get them live.

Speaker 2

So the revenue streams in. But I would say that we're pretty bullish on 2025. And we have the resources, we have the cash, we have the access to markets. We're really excited about the cross sell opportunities with the payer. I think that we have an opportunity to surprise you positively.

Speaker 8

Got it. That's great to hear, Bill. Very constructive. And then if I could just ask about R and D. I think one of the highlights at the Analyst Day was just the breadth of the product pipeline.

Speaker 8

It's bigger than I've seen in some time. Has there been a shift towards more spend on organic R and D? Obviously, with the step down in M and A and more focus on organic growth, it would make sense. But I'm just curious about just the philosophy in terms of new product R and D spend. Thank you very much.

Speaker 2

Yes. Why don't I give you a little answer and I'll let Rahul kind of get in a little deeper. But if you notice on our percentage of CapEx, we're at 4.1 to 4.5. Historically, we've been at 3, 3.5. So we have poured a lot more money into R and D and our CTO, Anthony Key Alpha, he's gotten a little older, he's 38, so he knows how to spend faster.

Speaker 2

So we think that, that will probably continue.

Speaker 4

Raul? The thing I would add to that is, as we have organized our business increasingly effectively, right, and had more and more products and services pointed at specific segments of the market or specific types of customers, what we need to build has become increasingly clearer. So we get a lot of good feedback from our sales force. We get a lot of good feedback from the folks covering those accounts. And a lot of times we can get anchor clients and folks that want to partner with us on funded development, which then results in revenue a lot faster.

Speaker 4

So it's easier to back those kinds of things and that's part of the positive dynamic that's going on.

Speaker 8

Got it. Thank you very much.

Operator

Your next question comes from the line of Dan Perlin from RBC Capital Markets. Please go ahead.

Speaker 3

Thanks. Good evening. I just want to revisit the 4th quarter organic number again. Sorry, maybe to beat a dead horse here. But like the 2.4 versus the 6.4 you did this quarter and I went back and just looking at your comps.

Speaker 3

So it's definitely easier across some of them, but by no means all of them. So that 400 basis point deceleration, is there any way you can just help kind of contextualize maybe the areas where we should be focused on that as we think about modeling across those segments? And then in that same

Operator

kind of

Speaker 3

question, Phil, I thought I heard you say there was some maybe some bigger license fees that you pulled in, into this quarter around wealth and investment and did that influence maybe this kind of 4th quarter, I guess, guidance around the organic number as well? Thanks.

Operator

Yes. Again, I'll give you

Speaker 2

a little of Dan and I'll have Rahul get maybe a little bit more for Brian. We did have a really good Q3 for Wealth and Investment Technology and the Global Investor and Distribution Services business. So we're not quite ready to see if they can repeat that in Q4, although we're optimistic they'll have good quarters. So I think that's a little bit. And then as I said before, I think the comp is a little more difficult in Q4 than it was in Q3.

Speaker 4

Yes. And I would Bill, I would just add on that last point on comp. If you look at the 2023 by quarter, 1st 3 quarters, we did about $1,360,000,000 in each quarter, right approximately. And in Q4, we did $1,411,000,000 So Q4 was $45,000,000 to $50,000,000 higher than the other three quarters. And that's really what you're seeing.

Speaker 4

If you kind of look at our Q4 guidance in absolute numbers, we're ahead of any other quarter this year. Our low point is $40,000,000 ahead of our low point in the prior quarter. So we feel good about where we are. Most of

Speaker 3

this is accomplished. Got it. Okay. That's really helpful. That's really helpful.

Speaker 3

Thank you. Just on Blue Prism for the moment in terms of cost opportunities, and I think you said, you're like a little over 10.50 maybe, kind of automated employees. Like where how much further can we go with that? Are you expecting that to continue to be a meaningful contributor to the ability to have a more efficient cost structure as you go into next year? Or are we kind of top taking that a little bit for the organization?

Speaker 3

Thank you.

Speaker 2

Yes, Dan, I think that's a great question. And I think we are pretty enthusiastic about where we can go with our Blue Prism digital workers. Brian could get into more deeply. But we've done an awful lot of acquisitions, so we have an awful lot of systems. We like to have fewer systems and more digital workers.

Speaker 2

And I know we have plans to do that throughout accounting and finance. And Nick Wright in the Global Investor and Distribution Services business has done a great job of deploying digital workers and Vigesh Malvi in our fund administration businesses as well as many others. And so we're pretty optimistic, I think, on Blue Prism's capabilities.

Speaker 7

That's great. Thank you very much.

Speaker 3

Yes. I was just going to add

Speaker 5

to that that I just across I'll call it more infrastructure to Bill's point, right? So we don't want to create the digital worker for 10 different systems and then be able to have to rebuild. So we're leveraging that the broader consolidated system. And so to echo Bill's point, we are pretty enthusiastic about what we're going to be able to leverage. And then the other point that we've made on prior phone calls is that, I think the level of sophistication continues to increase over time as well about the impact that some of the digital workers can have as we mature as an organization and our learnings continue to increase about how to utilize the digital workers.

Speaker 2

But we also are integrating Thank you. AI into this new software. Yes. So large language models and other things are also enhancing Blue Prism's capabilities.

Speaker 7

Right. I'm going

Speaker 3

to say thank you for the last time, but I never really want to cut that off. That was my mistake. So that was my apologies.

Operator

Your next question comes from the line of Kevin McVeigh from UBS. Please go ahead.

Speaker 9

Great. Thank you. Brian, I think you may have mentioned that you're carrying a higher than expected cash balance that you expect to deploy in Q4. Would that be kind of capital return, M and A, just any thoughts around that?

Speaker 8

Yes. I wouldn't necessarily assume M

Speaker 5

and A on any material size for Q4 as far as anything around that purposes. But we are like I said, we took an opportunistic point of view on the funding given where rates were and what we're able to raise that at versus our current cost structure. So we're looking to again effectively deploy that share repurchase in combination with the rest of our operating cash flow and further debt reduction. Again, utilizing that lower cost of funds, will have executed that in Q4.

Speaker 9

Got it. And then just obviously the organic growth was really strong, but it sounds like there were was it $8,000,000 in total healthcare licenses that were pushed. So is the way

Operator

to think about it would have been

Speaker 9

that much stronger if that was in there and that I could shift it to Q4. Is that right? That's right. Thank you.

Operator

Your next question comes from the line of Peter Heckmann from D. A. Davidson. Please go ahead.

Speaker 10

Hi, good afternoon. Thanks for taking the questions. As regards to Bethea, I understand or at least I inferred from a comment you made at the Investor Day that revenue can be somewhat project oriented. I guess, how should we think about modeling that? Is there something to think about in terms of seasonality?

Speaker 10

Or is it just kind of look to you guys in terms of 1 quarter out, in terms of how you expect that business to contribute?

Speaker 2

Yes. I think, first of all, it's interesting you call class action lawsuits projects. We would tend to call them lawsuits. And so you got the vagaries of the court system. But I think additionally that there is some seasonality in Bataya and Q4 tends to be the largest quarter of the 4 quarters.

Speaker 2

And there's a bunch of court cases that have already been adjudicated. The courts have to release the payments on the class actions and that's when we get paid. But we're we would say that we're going to try to give you all as much insight into Bethea as we can. They have 900 clients. We have 22,000.

Speaker 2

We think there's an opportunity for a lot of extension in Bethea's business.

Speaker 10

Okay. That's fair. That's fair. And then just in terms of thinking about the fund shareholder record keeping business and some of the acceleration, I guess, I had speculated just looking at money market flows that the industry may have gotten a number of several million accounts just from flows back into money market accounts. Do you think that affected the GIDS organic revenue or and if so, is there a way to quantify it?

Speaker 4

I think most of our strength in the GIDS organic revenue is really just coming from as we're building technology, we're attracting more and more customers and maybe customers that are in slightly different segments than so we have many more wealth management firms, which some of our biggest clients are wealth management firms, but we've got a number of new prospects. And as we continue to build out our call center capabilities and BPO capabilities, more and more of these customers are willing to lift out internal functions and give them to us. And that's a part of it. So while the macro trends in the market may have had some impact, most of it is just us expanding our product suite.

Speaker 2

It also too, I think, would be important for people to understand that an awful lot of the large scale financial firms in the United States and more so even around the world have a very difficult time deploying large scale new systems. So their choices are to try to build a great big system, maybe go to a body shop, Indian body shop like a Tata or an HCL or an Infosys or one of the other ones, that is fraught with challenges. And an increasingly attractive solution for them is to lift it out to us. And we have world class data centers. We have world class developers.

Speaker 2

We have world class processes. And I think as they see it, they get increasingly intrigued.

Speaker 10

Okay. That's helpful. I appreciate the color.

Operator

Your next question comes from the line of James Faucette from Morgan Stanley. Please go ahead.

Speaker 11

Hey, it's Michael Infante on for James. Thanks for taking our question. Just wanted to follow-up on some of the comp commentary again. There's obviously a wealth of variance factors as we think about 2025 organic growth. But given the comps will get progressively tougher, at least relative to the 4Q 2023 comp as we progress throughout the year, how should we be thinking about some of the drivers that can push you to the midpoint or beyond next year?

Speaker 11

Thanks.

Speaker 4

In general, I think I would just come back to we feel like our business is strengthening, right? So we do have we haven't been through the 2025 revenue planning and budgeting process as yet. But we do feel like you can kind of look at our recurring revenue financial services as a sort of a leading indicator that the stable reoccurring and recurring revenue base is continually growing and that ought to help us in 2025.

Speaker 2

The other thing is if you look at Q3 of 2024 compared to Q3 of 2023, we added $100,000,000 in revenue. So people look at these FinTech Companies and talk about them. They did $200,000,000 in revenue for a year. We added $100,000,000 in Q3. And I think we're not saying that our business is strengthening because we think we're going to slow down.

Speaker 2

We think we're going to accelerate. Look, the deals are bigger, right? The size of the organizations are bigger. The size of the number of people that we would absorb are higher. So with all of that becomes some increased analysis, increased negotiation on contracts.

Speaker 2

And so we're being cautiously optimistic, but we're not backing away from the midterm 4 to 8.

Speaker 11

That's clear. Maybe just on Blue Prism, obviously a lot of internal expense savings in the form of lower headcount, but I'd be curious to hear just how you're thinking about how the net new opportunity for Blue Prism has evolved of late and some of the initiatives that you have in place to return that business to double digit growth next year? Thanks.

Speaker 2

Yes. We think that's a great question. We are doing a lot internally here. We have some management changes we've done. We're accelerating our amount of money that we are pouring into Blue Prism.

Speaker 2

We've moved some really top technologists that Anthony had brought in. So we're excited about what we can do with Blue Prism and reaccelerating the growth. Again, we're still getting magic quadrants when people analyze it. And I think the addition of AI and the large language models and then obviously OpenAI is going to be all the more change in the world. But you've got to be on top of it.

Speaker 2

And I think we've done a pretty good job of really maximizing the potential internally on Blue Prism. And then we're going to redouble our focus on the external opportunities.

Operator

Your next question comes from the line of Alexei Gogolev from JPMorgan. Please go ahead.

Speaker 1

Hi, this is Ella Smith from Alexei's team. Thanks so much for taking our question. So first, I was hoping you could speak to the strong growth in alternatives AUM. Can you remind us what's driving that strong growth year to date? And how do you think about the forward growth of alternatives?

Speaker 2

We think primarily that strong growth in alternatives is based on brilliant management. Other people might think it's the market's pretty strong, right? So the hedge fund industry traditionally has a pretty good risk adjusted return levels. And I think as you look at our client base, almost all the large scale platforms are SS and C clients. And over the last several years, they have gotten the lion's share of all the new capital that flowed into hedge funds, same with private equity funds and now private credit.

Speaker 2

So we think we're well positioned to continue to be a beneficiary of our clients' success. And so we have a lot of focus on making sure that we're adding value, bringing out new technologies, new capabilities, new processes and being able to really help like our international clients as they move to T+1. In the U. S, we're going to move to shorter than T+1. Right?

Speaker 2

When you look at the Gen Xers, they're used to Venmo. I don't think moving money takes 24 hours, right? So I think those kinds of things are going to shorten. Obviously, that takes a lot of the risk out of the system. But systems that process that have to be really locked and loaded in it.

Speaker 2

That's something we're pretty good at.

Speaker 1

That makes a lot of sense, Bill. Thank you. And for my follow-up, I'm sorry if I missed this, but I noticed a strong step up in organic growth for Wealth and Investment Technologies. Could you please remind us what drove that? Was there a big deal or 2 signed there?

Speaker 2

Really big. No, we did have a strong wealth and investment technology. We're up 10.9%, I believe. And we got a couple of large license deals in Q3, and that really helped drive the organic revenue growth.

Operator

As there are no further questions at the queue at this time, I would now like to turn the call back over to Bill Stone for closing remarks.

Speaker 2

Again, thanks all of you for being on the call and thank the analysts for asking really pointed questions, which we appreciate. I do think that we're pretty optimistic about where our business sits and that we hope to talk to you again in 2025 and surprise you

Operator

positively. Thanks. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

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Key Takeaways

  • Record Q3 performance with $1.467 billion adjusted revenue (+7.3%), $1.29 adjusted EPS (+10.3%), $566.2 million adjusted EBITDA (38.6% margin) and 6.4% organic revenue growth led by GIDS, WIT and Intralinks.
  • Strong cash generation, with $336.6 million operating cash flow up 39% and 103% conversion, and the repurchase of 1.2 million shares for $89.4 million at $72.72 as the primary capital deployment strategy.
  • Completed the $670 million Platea Class Action Services acquisition, adding about $95 million in annual revenue at over 45% EBITDA margin, immediately accretive to earnings and offering cross-sell synergies in fund administration.
  • Wealth & Investment Technology delivered 10.9% organic growth in Q3, driven by integrating Aloha into the cloud-native Genesis platform and rolling out advanced grouping functionality in the Black Diamond Wealth Platform.
  • Healthcare segment accelerating with the integration of DomaniRx, two early October license deals totaling ~$8 million, and continued automation via Blue Prism yielding approximately 10.5 full-time-equivalent savings year-to-date.
AI Generated. May Contain Errors.
Earnings Conference Call
SS&C Technologies Q3 2024
00:00 / 00:00