SS&C Technologies Inc 2026 Q3 Earnings Call

Hi, everyone. Welcome, and thank you for joining us for our third quarter 2026 earnings call. I'm Justine Stone, Head of IR for SS&C. With me today is Bill Stone, Chairman and Chief Executive Officer; Rahul Kanwar, President and Chief Operating Officer; and Brian Schell, our Chief Financial Officer. Before we get started, we need to review the safe harbor statement. 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 Factor section of our most recent annual report on Form 10-K, 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 22, 2026. While the company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so. During today's call, we'll be referring to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to comparable GAAP financial measures is included in today's earnings release, which is located on the investor relations section of our website at www.ssctech.com. I will now turn the call over to Bill.

Thanks, Justine, and welcome everyone. I'm happy to report another strong quarter for SS&C with growth in revenues, earnings, and margin expansion. We have momentum to finish the year strong. Our third quarter results were adjusted revenues of $1.691 billion, up 7.8%, and adjusted diluted earnings per share of $1.78 at 14.8% increase. We delivered record adjusted consolidated EBITDA of $674.8 million, up 9%, and an adjusted EBITDA margin of 39.9%, 40 basis points improvement. Adjusted organic revenue growth was 5.2% with continued performance by our largest businesses. Throughout the quarter, we had strong sales to both new and existing customers, achieved implementation milestones, and benefited from market tailwinds. Our pipelines continue to grow, and we are bullish on several large mandates as we look into 2027. For the nine months ended September 30, 2026, cash from operating activities were $1.216 billion, up 10.4% year-over-year.

This quarter, we returned $225 million to shareholders, which included 1.9 million shares repurchased for $154.8 million and $70.5 million in dividends. In August, we increased our common stock dividend 11.1% to $1.20 per share annually, which reflects the strength and consistency of our cash flow. Our business keeps generating strong, recurring free cash flow, and that gives us real flexibility in how we put capital to work. We can raise our dividend, keep buying back shares, pay down debt, and pursue high-quality acquisitions all at once. We do not have to choose. On M&A, the opportunity set is growing as private equity firms look to exit some of their holdings. We continue to pursue the right deals aggressively, but we will stay disciplined on price. Financial services technology and services M&A continue to command high valuations, making our own stock one of the most attractive investments we can make.

Last month, more than 1,000 leaders from financial services and healthcare clients joined us in Orlando for SS&C Deliver, our annual client conference. The message from that room was clear. Our clients are no longer asking whether to transform. They are asking how fast, and with whom. At Deliver, we unveiled a portfolio of next-generation solutions built on two SS&C platforms, AI Gateway, our AI governance platform, and WorkHQ, our award-winning agentic orchestration platform. Together, they let our clients put AI agents to work on their most complex, highly regulated workflows. These agents work securely with governance built in from day one. Agentic AI is moving quickly from experimentation into production. We see it inside SS&C, where our Customer Zero program is driving innovation and efficiency across all operations.

To date, over 900 agentic workflows, 200 AI agents, and over 60 digital workers have been built in the WorkHQ development environment as our business units explore dozens of use cases. We are bringing the same approach to tokenization. As traditional and digital assets come together, our clients need infrastructure that handles both, and SS&C already sits at the center of that infrastructure. Across all of this, our clients are rethinking their operating models end to end. That is a transformation, not a single technology purchase. It takes a partner with deep domain expertise, global scale, and a proven track record of execution. Few companies can bring all three. SS&C can, and we are doing it today. I will now turn the call over to Rahul to discuss the quarter in more detail.

Thanks, Bill. As you noted, we delivered strong third-quarter results with 5.2% organic revenue growth and 39.9% EBITDA margins. These results are driven by deep customer relationships and the critical role our products and services play. Our clients keep growing with us, and the multiple ways we deliver broad and deep solutions, including outsourcing, co-sourcing, and lift-outs, are a competitive advantage. In our technology businesses, we see a steady rate of multi-year renewals, reflecting our customers' confidence in the enduring benefit they will receive from our applications. We also see sustained interest in our new products and services, reinforcing that as a technology provider and outsourcer with scale, we are uniquely positioned to deliver the next generation of AI-enhanced applications. We handle huge volumes of trades, reconciliations, NAV calculations, investor transactions, regulatory filings, and hundreds of other functions that require expertise.

Our Intelligent Automation & Analytics business, built around the Blue Prism acquisition in 2022, is at the center of how we capture the opportunities new technologies bring. As Bill mentioned, we have hundreds of AI-enhanced processes and agents in production, many more in development. These make us faster and more accurate and expand our capacity to take on new business as our clients grow. Externally, our new products are gaining traction. We are also bringing AI directly to clients through collaborations with frontier model companies, integrations with the leading AI platforms, and new features built into our applications. Our global footprint is growing and remains a competitive advantage. We are expanding our presence in the Middle East, Australia, and Europe, and have recently expanded our operations in Luxembourg and Thailand. With that, I will turn it over to Brian to walk through the financials.

Thanks, Rahul, and good day, everyone. Unless noted otherwise, the quarterly comparisons are to Q3 2025. As disclosed in our press release, our Q3 2026 GAAP results reflect revenues of $1.69 billion, net income of $199 million, and diluted earnings per share of $0.83. Our adjusted non-GAAP results include revenues of $1.691 billion, an increase of 7.8%, and adjusted diluted EPS of $1.78, a 14.8% increase. The adjusted revenue increase of $122 million included acquisitions of $39 million and a small favorable impact from foreign exchange of approximately $1.7 million. As a result, adjusted organic revenue growth on a constant currency basis was 5.2%, and our core expenses increased 4.3%, or $42 million, which also excludes acquisitions and impact of FX. Adjusted consolidated EBITDA was $675 million, reflecting an increase of $56 million, or 9%, a margin of 39.9%, the 40 basis point expansion.

Net interest expense for the third quarter was $107 million, an increase of $3 million compared to last year. Adjusted net income was $429 million, up 9.6%, resulting in the adjusted diluted EPS of $1.78. Our effective non-GAAP tax rate was 22.5% this quarter. Note for comparison purposes, we have recast the 2025 adjusted net income to reflect the full year effect of tax rate of 22%. The diluted share count is down nearly 5% to 240.6 million from 252.6 million shares year-over-year, primarily due to the continued impact of treasury share purchases. Cash flow from operating activities grew 10%, largely driven by growth and earnings. SS&C ended the third quarter with $525 million in cash and cash equivalents and $7.5 billion in gross debt. SS&C's net debt was $7 billion, and our last 12 months consolidated EBITDA was $2.7 billion. The resulting net leverage ratio is 2.63.

We are currently in the process of refinancing our $2 billion of notes due next year and will provide an update when that has been completed. As we look forward to the fourth quarter and full year 2026 with respect to guidance, we will continue to focus on client service and expect that retention rates will be in the range of our most recent results. We will continue to manage our business to support our long-term growth and manage our expenses by controlling and aligning variable expenses, increasing productivity, and leveraging technology and AI tools to improve our operating margins and strategically investing in the business, especially with respect to R&D and sales and marketing.

Specifically, we have assumed short-term interest rates to remain at current levels, an effective tax rate of approximately 22.5% on an adjusted basis, capital expenditures to be 4.4%-4.8% of revenues, and a stronger weighting to share repurchases versus debt reduction. For the fourth quarter of 2026, we expect revenue to be in the range of $1.7 billion-$1.74 billion and 4% organic revenue growth at the midpoint. Adjusted net income in the range of $454 million-$470 million. Interest expense, excluding amortization of deferred financing costs and original issue discount in the range of $103 million-$105 million and adjusted diluted EPS in the range of $1.88-$1.94. For the full year 2026, we increased several revenue and earnings expectations as follows. Revenue to be in the range of $6.736 billion-$6.776 billion, and 5.5% organic revenue growth at the midpoint.

Adjusted net income in the range of $1.726 billion-$1.742 billion. Adjusted diluted EPS in the range of $7.11-$7.17, reflecting approximately 16.3% growth at the midpoint. We are now targeting EBITDA growth of 10%, EBITDA margin expansion of 90 basis points for the year, and exiting the year with 41% EBITDA margins. Now, back to Bill. Thanks, Brian.