SS&C Technologies Holdings, Inc. (SSNC) Bundle
Understanding SS&C Technologies Holdings, Inc. (SSNC) Revenue Streams
Understanding SS&C Technologies Holdings, Inc.’s Revenue Streams
The company’s total revenues for the third quarter of 2024 amounted to $1,465.8 million, representing an increase of 7.3% compared to $1,365.9 million in the same period of 2023. For the nine months ended September 30, 2024, total revenues reached $4,352.3 million, reflecting a 6.4% increase from $4,091.2 million in the prior year.
Breakdown of Primary Revenue Sources
The company’s revenue is primarily derived from two segments:
- Software-enabled services: Revenue for this segment was $1,206.2 million for the three months ended September 30, 2024, up 7.5% from $1,122.1 million in 2023. For the nine months, it increased to $3,586.3 million, a 7.3% rise from $3,342.8 million.
- License, maintenance, and related: This segment generated $259.6 million in the third quarter of 2024, marking a 6.5% increase from $243.8 million in the same quarter of 2023. Year-to-date, this segment totaled $766.0 million, up 2.4% from $748.4 million.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rates for each segment are as follows:
| Segment | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | Growth Rate (%) |
|---|---|---|---|
| Software-enabled services | $1,206.2 | $1,122.1 | 7.5% |
| License, maintenance, and related | $259.6 | $243.8 | 6.5% |
Contribution of Different Business Segments to Overall Revenue
In the third quarter of 2024, the contributions of each segment to total revenue were:
| Segment | Revenue (in millions) | Percentage of Total Revenue (%) |
|---|---|---|
| Software-enabled services | $1,206.2 | 82.3% |
| License, maintenance, and related | $259.6 | 17.7% |
Analysis of Significant Changes in Revenue Streams
During the third quarter of 2024, the increase in revenue was driven primarily by organic growth in the software-enabled services segment, which saw an increase of $73.4 million in organic revenues. Additionally, acquisitions contributed approximately $7.0 million in revenue, while foreign currency translation had a positive impact of $3.7 million.
For the nine months ended September 30, 2024, the increase in total revenue was largely attributed to a rise in organic revenues of $237.7 million, along with contributions from acquisitions amounting to $14.7 million and favorable foreign currency translation effects of $8.7 million.
The following table summarizes the revenue contributions by geographic region for the third quarter of 2024:
| Region | Revenue (in millions) |
|---|---|
| United States | $1,007.4 |
| United Kingdom | $173.2 |
| Europe (excluding UK) | $126.7 |
| Asia-Pacific and Japan | $72.0 |
| Canada | $54.4 |
| Americas (excluding US and Canada) | $32.1 |
A Deep Dive into SS&C Technologies Holdings, Inc. (SSNC) Profitability
Profitability Metrics
Gross Profit Margin: As of September 30, 2024, the gross profit margin was 48.0% compared to 47.9% for the same period in 2023. The gross profit for the nine months ended September 30, 2024, was $2,109.7 million, up from $1,932.5 million in 2023.
Operating Profit Margin: The operating income for the three months ended September 30, 2024, was $325.1 million, yielding an operating margin of 22.1%. In comparison, for the same period in 2023, operating income was $306.4 million, reflecting an operating margin of 22.4%.
Net Profit Margin: The net income attributable to common stockholders for the nine months ended September 30, 2024, was $512.3 million, resulting in a net profit margin of 11.8%. This was an increase from $412.7 million and a net profit margin of 10.1% for the same period in 2023.
Trends in Profitability Over Time
Over the past year, the profitability metrics have shown an upward trend:
- Gross profit increased from $1,932.5 million in 2023 to $2,109.7 million in 2024.
- Operating income rose from $874.7 million in 2023 to $985.6 million in 2024.
- Net income improved from $412.7 million in 2023 to $512.3 million in 2024.
Comparison of Profitability Ratios with Industry Averages
The industry average for gross profit margin is approximately 45%, indicating that the company is performing above the average. The operating margin in the industry typically hovers around 20%, while the net profit margin average is around 10%. The company's margins exceed these averages, positioning it favorably within its sector.
Analysis of Operational Efficiency
The following table summarizes key profitability metrics and operational efficiency indicators:
| Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Gross Profit Margin | 48.0% | 47.9% | 48.5% | 47.2% |
| Operating Profit Margin | 22.1% | 22.4% | 22.7% | 21.4% |
| Net Profit Margin | 11.2% | 11.4% | 11.8% | 10.1% |
| Operating Income | $325.1 million | $306.4 million | $985.6 million | $874.7 million |
| Net Income | $164.4 million | $156.0 million | $512.3 million | $412.7 million |
The operational efficiency can be further analyzed through the cost of revenues, which was 52.0% in Q3 2024, indicating effective cost management strategies compared to 52.1% in Q3 2023.
Debt vs. Equity: How SS&C Technologies Holdings, Inc. (SSNC) Finances Its Growth
Debt vs. Equity: How SS&C Technologies Holdings, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, the total debt for SS&C Technologies Holdings, Inc. amounted to $7,202.7 million, which includes:
- Senior secured credit facilities: $4,490.0 million
- 5.5% senior notes due 2027: $2,000.0 million
- 6.5% senior notes due 2032: $750.0 million
- Less: current portion of long-term debt: $47.1 million
The long-term debt as of the same date was $7,155.6 million.
Debt-to-Equity Ratio
The debt-to-equity ratio for SS&C Technologies as of September 30, 2024, was calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity
Total Equity stood at $6,888.1 million as of September 30, 2024. Therefore, the debt-to-equity ratio is:
Debt-to-Equity Ratio = $7,202.7 million / $6,888.1 million = 1.05
This ratio is slightly above the industry average of approximately 1.0, indicating a higher reliance on debt compared to equity financing.
Recent Debt Issuances and Credit Ratings
In May 2024, SS&C Technologies refinanced a portion of its debt, which included capitalizing approximately $4.0 million in financing costs. The weighted-average interest rates for the senior secured credit facilities were 6.76% as of September 30, 2024, down from 7.35% in the previous year.
The company holds a credit rating of B2 from Moody's and B from S&P, reflecting a stable outlook but highlighting the company's reliance on debt financing.
Balance Between Debt Financing and Equity Funding
SS&C balances its growth through a combination of debt and equity financing. In the nine months ended September 30, 2024, the company repurchased 5.7 million shares of common stock, totaling approximately $369.3 million. This indicates a proactive approach to managing equity alongside its debt obligations.
The company also declared cash dividends totaling $182.6 million during the same period, reflecting its commitment to returning value to shareholders while managing its debt levels.
| Debt Type | Amount Outstanding (in millions) | Maturity Date | Interest Rate |
|---|---|---|---|
| Senior Secured Credit Facilities | $4,490.0 | May 9, 2031 | 6.76% |
| 5.5% Senior Notes | $2,000.0 | September 30, 2027 | 5.50% |
| 6.5% Senior Notes | $750.0 | June 1, 2032 | 6.50% |
| Total Debt | $7,202.7 |
Assessing SS&C Technologies Holdings, Inc. (SSNC) Liquidity
Assessing SS&C Technologies Holdings, Inc. Liquidity
Current and Quick Ratios
The current ratio for SS&C Technologies Holdings, Inc. as of September 30, 2024, stood at 1.36, reflecting a solid liquidity position. The quick ratio, which excludes inventory from current assets, was reported at 1.21, indicating that the company can cover its short-term liabilities without relying on inventory sales.
Analysis of Working Capital Trends
As of September 30, 2024, SS&C Technologies reported working capital of $1,505.0 million, an increase from $1,445.0 million in the previous quarter. This upward trend in working capital suggests improved operational efficiency and a stronger financial cushion to meet short-term obligations.
Cash Flow Statements Overview
The cash flow statements for the nine months ending September 30, 2024, show the following trends (in millions):
| Cash Flow Type | 2024 | 2023 | Change from Prior Year |
|---|---|---|---|
| Operating Activities | $902.0 | $826.7 | $75.3 |
| Investing Activities | ($802.6) | ($167.1) | ($635.5) |
| Financing Activities | ($790.1) | ($812.6) | $22.5 |
| Net Decrease in Cash | ($688.5) | ($157.2) | ($531.3) |
Cash Flow Analysis
Net cash provided by operating activities was $902.0 million, primarily due to net income of $513.3 million adjusted for non-cash items of $640.0 million. However, this was offset by changes in working capital accounts totaling $251.3 million. The investing activities represented a significant outflow of $802.6 million, mainly attributed to $646.9 million spent on business acquisitions and $149.7 million on capitalized software development costs. In financing activities, the company saw a net cash outflow of $790.1 million, which included $182.6 million in dividends paid and $369.3 million for the purchase of common stock for treasury.
Potential Liquidity Concerns or Strengths
Despite the significant cash outflows in investing and financing activities, the robust operating cash flow of $902.0 million underscores a strong operational performance. Additionally, the company holds approximately $251.9 million in cash and cash equivalents at non-U.S. subsidiaries, reflecting a healthy liquidity buffer. The liquidity ratios and working capital trends indicate that the company is well-positioned to manage its short-term obligations effectively.
Is SS&C Technologies Holdings, Inc. (SSNC) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio: The current P/E ratio is approximately 24.3 based on the trailing twelve months (TTM) earnings of $2.08 per share.
Price-to-Book (P/B) Ratio: The P/B ratio stands at 3.8, indicating that the stock is trading at a premium compared to its book value of $19.79 per share.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: The EV/EBITDA ratio is approximately 12.9, calculated from an enterprise value of $10.7 billion and EBITDA of $829 million.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 24.3 |
| P/B Ratio | 3.8 |
| EV/EBITDA | 12.9 |
Stock Price Trends: Over the past 12 months, the stock price has ranged from a low of $60.00 to a high of $78.00. Currently, the stock is priced at approximately $75.00, reflecting a year-to-date increase of 15.4%.
Dividend Yield: The company has a dividend yield of 1.3% based on an annual dividend of $0.96 per share. The payout ratio is around 46.2% of the net income.
| Dividend Metric | Value |
|---|---|
| Annual Dividend per Share | $0.96 |
| Dividend Yield | 1.3% |
| Payout Ratio | 46.2% |
Analyst Consensus: The current consensus among analysts is a Hold, with a majority suggesting that the stock is fairly valued at the current market price. Out of 10 analysts, 4 rate it as a Buy, 5 as a Hold, and 1 as a Sell.
| Analyst Rating | Count |
|---|---|
| Buy | 4 |
| Hold | 5 |
| Sell | 1 |
Key Risks Facing SS&C Technologies Holdings, Inc. (SSNC)
Key Risks Facing SS&C Technologies Holdings, Inc.
Industry Competition: The company operates in a highly competitive environment with numerous players offering similar services. This competition can lead to pricing pressures and reduced margins. The firm has reported that its revenues increased by $99.9 million, or 7.3%, in Q3 2024 compared to the same quarter in 2023, indicating resilience despite competitive pressures.
Regulatory Changes: Changes in regulations can significantly impact operations, especially in the financial services sector. New compliance requirements may increase operational costs and complexity. The company is currently evaluating the potential impact of ASU 2023-09, which requires enhanced income tax disclosures, effective for fiscal years beginning after December 15, 2024.
Market Conditions: Economic downturns can adversely affect client spending on technology services. Approximately 31% of the company's revenues come from clients outside the United States, exposing it to macroeconomic conditions affecting those markets.
Operational, Financial, and Strategic Risks
The company's operational risks include dependency on technology and the need for continual investment in innovation. In Q3 2024, total operating expenses increased by $66.3 million, or 6.3%, primarily due to increased resource needs to support organic growth. Financial risks are highlighted by the total debt amounting to $7,202.7 million as of September 30, 2024, which includes senior secured credit facilities and senior notes.
Interest Rate Risk: The weighted-average interest rate on senior secured credit facilities was reported at 6.76%. A 100 basis point increase in interest rates could lead to an increase in interest expense by approximately $44.9 million annually.
Mitigation Strategies
The company has adopted various strategies to mitigate risks. For example, it maintains a diversified client base to reduce dependency on any single market. As of September 30, 2024, cash and cash equivalents stood at approximately $251.9 million in non-U.S. subsidiaries. Additionally, the company has a stock repurchase program authorized for up to $1 billion to manage equity effectively.
Financial Performance Overview
| Financial Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenues | $1,465.8 million | $1,365.9 million | 7.3% |
| Net Income | $164.4 million | $156.0 million | 2.2% |
| Basic EPS | $0.67 | $0.63 | 6.3% |
| Total Debt | $7,202.7 million | $6,720.0 million | 7.1% |
Equity Price Risk: The fair value of investments subject to equity price risk was approximately $51.3 million as of September 30, 2024. A 10% change in fair value could impact net income by $3.8 million.
The company continues to monitor its risk exposure, especially in terms of foreign currency exchange rates and interest rates, to safeguard its financial health and maintain competitiveness in the market.
Future Growth Prospects for SS&C Technologies Holdings, Inc. (SSNC)
Future Growth Prospects for SS&C Technologies Holdings, Inc.
Analysis of Key Growth Drivers
SS&C Technologies is poised for significant growth driven by various factors including product innovations, market expansions, and strategic acquisitions. In 2024, the company reported an increase in revenues by $99.9 million, or 7.3%, compared to the previous year, primarily due to organic revenue growth and contributions from acquisitions.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, the company achieved revenues of $4,352.3 million, up from $4,091.2 million in the same period of 2023, reflecting a growth rate of 6.4%. The projected revenue growth is attributed to strong performances in software-enabled services and ongoing client demand in fund administration.
Strategic Initiatives and Partnerships
Recent acquisitions, including the Iress Managed Funds Administration Business and Battea-Class Action Services, are expected to enhance service offerings and expand market reach. The company allocated $646.9 million for business acquisitions in the nine months ended September 30, 2024.
Competitive Advantages
SS&C's competitive advantages include a robust technology platform and a diversified client base across various geographies. As of September 30, 2024, the company held $1,010.6 million in expected revenue from remaining performance obligations related to license and maintenance services. This positions SS&C to leverage its existing infrastructure to capture additional market share efficiently.
| Financial Metrics | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Total Revenues (in millions) | $4,352.3 | $4,091.2 | 6.4% |
| Operating Cash Flow (in millions) | $902.0 | $826.7 | 9.1% |
| Net Income (in millions) | $513.3 | $412.7 | 24.4% |
| Earnings Per Share (Diluted) | $2.02 | $1.62 | 24.7% |
| Debt (in millions) | $7,202.7 | $6,720.0 | 7.1% |
With these strategic initiatives and financial metrics, the company is well-positioned for future growth, leveraging its technological advancements and market presence to drive revenue and earnings. The ongoing focus on acquisitions and product enhancements will further solidify its competitive edge in the financial services industry.
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Article updated on 8 Nov 2024
Resources:
- SS&C Technologies Holdings, Inc. (SSNC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of SS&C Technologies Holdings, Inc. (SSNC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View SS&C Technologies Holdings, Inc. (SSNC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.