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The trading world has been rocked by glitches, scandals and flash crashes over the past few years, calling into question the industry's ability to safely its corral software and hardware efforts at a time of blistering change.
One company that appears to be using this period of circumspection to its advantage is financial software powerhouse SS&C Technologies SSNC . The company already provides code and systems to many of the world's largest financial services companies, and it is working to extend its reach beyond tools for information management, analysis, trading, accounting, reporting and compliance functions
The company's goal is to help its clients efficiently and rapidly analyze and manage the often mountainous amount of information they produce in order to increase productivity and reduce costs
William C. Stone founded SS&C Tech in 1986, and the company went public a decade later. In 2005, the Carlyle Group purchased company, taking it private. But then about 10 years later, in 2010, the private equity firm refloated the shares and the company began trading on the Nasdaq.
Stone has remained the CEO since its inception and through all of the changes. He has worked in the financial services sector his entire career, serving in various capacities at KPMG, the New York Stock Exchange, the Commodity Futures Trading Commission, and on the boards of several other firms.
SS&C has more than 3,900 employees worldwide in offices throughout North America, Europe, Asia Pacific and Australia. It has been able to fuel its growth over the years through an aggressive acquisition strategy that as saw it gobble up 34 companies with products, services or technologies in existing or sought after markets. Its deep portfolio includes more than 60 products that traverse the entire financial services landscape from asset management and municipal finance functions to insurance and pension funds. For example, it's the leading independent provider of fund administration services for hedge funds, fund of funds, private equity funds and managed accounts.
The company's GlobeOP software platform helps eliminate the complexities of fund set-up, accounting and valuation, investor relations, corporate services and back office processing. Another example is the firm's SKYLINE software solution, which has been the industry leader for over 20 years to the property management industry.
SS&C essentially has a product solution to meet every functional and operational need of any financial services firm, and these products can often be integrated to work in conjunction with each other. The bulk of the firm's revenues are generated from its portfolio reporting and management systems.
In addition to the suite of products, the company also offers a host of services including training and education, business process outsourcing, custom trading and post trade communications.
According to analysts with the investment firm Deutsche Bank, the overall expansion of assets under management, complexity of investment instruments, international accounting requirements and increased regulatory environment for investment firms has created the perfect storm for SS&C.
Global spending on software and technology services by financial firms is expected to grow more than 6% through 2013, nearing $200 billion annually.
As you might expect, the two biggest segments in terms of total spending are risk management and trading systems. As trading models become increasingly complex, the number of trading gaffes around the world the past few years have littered the headlines. Additionally, the recent financial meltdowns illustrate why firms have focused on beefing up their spending on risk management technology.
As a whole, the industry is highly fragmented because most financial services firms use systems from more than one vendor. As a result, there is no single dominant player in the North American or European markets, and consolidation in the industry has continued with numerous deals during the past few years, including those by SS&C.
The company is looking to further its growth through overseas expansion, as the U.S. currently accounts for 60% of total revenues. Additionally, it has historically spent about 10% of its annual revenues on research and development in an effort to develop new product lines in-house.
SS&C has grown revenues at a 12.5% annual clip the past five years, while net income has grown a whopping 116% annually during that same time frame. Its most recent quarterly results from last week saw the company beat earnings expectations by $0.01, while posting a growth in revenue of 32%. Despite an outstanding quarter, the shares fell by about 10% after the management team was cautious about the outlook for the remainder of the year.
This recent weakness could be an ideal opportunity to pick up shares of the leading provider of trusted technology to the financial services world.