SS&C Technologies

The views expressed below are those of Anchor Capital Advisors, LLC (“Anchor”) as of the date written and are subject to change at any time. They are based on our proprietary research of the stated company and the following is a summary of the primary factors that support our beliefs and rationale for investing in the company. Please see additional disclosures at the end of this publication.

SSNC: NASDAQ[1]

SS&C Technologies engages in the development of mission critical software and services that allow financial services providers to automate or outsource complex business processes, as well as manage processing requirements. The company was founded by the current CEO Bill Stone in February 1986 and is headquartered in Windsor, CT. [2]

Investment thesis

As the confirmation through our research shows, SS&C has had a history of strong revenue growth and free cash flow growth thanks to intelligent acquisitions and margin improvements. In our opinion, management is aligned with large ownership in the business. The business appears defensive, thanks to strong revenue retention and has industry leading margins.

Confirmation through research

Thanks to what we consider intelligent acquisitions, the company has seen EPS grow from $0.45 in 2010 when the company went public to nearly $3.00 in 2018.[3] In that time revenue has grown from $329 million to $3.4 billion, and free cash flow from $70 million to $1.06 billion.[4] The company has acquired a number of businesses and brought EBITDA margins up anywhere from 9% to 36%.[5] We believe management is aligned, as the CEO Bill Stone owns 12.5% of the company, and over $1.5 billion worth of stock at a $50.92 stock price.[6] The company has what we believe is a defensive model, with 95% LTM revenue retention rate,[7] and strong margins, with a goal by the end of 2019 of 40% EBITDA.[8]

Variant Perception

The market is assigning a high quality compounder, a below market valuation. We believe that the market is not assigning a fair value to the business considering the company’s history of above-average top and bottom line growth, defensive business model, strong management alignment, and strong margins profile.