The Fourth of July fireworks came early this week as Greece made headlines over the weekend with an announcement that the country had been unable to reach a deal with its creditors. The potential of a “Grexit” — Greece exiting the European Union (EU) — has been a known possibility for quite some time now, although given the market’s reaction on Monday you would think it was a surprise.
NASDAQ was hit hardest on Monday, thanks to developments in Greece as well as weakness in technology following earnings from Micron Technology (MU) that hinted at weak demand for both PCs and smartphones.
The selling took a lot of stocks down, but depending on the stock, these sell-offs can be good buying opportunities.
That’s the case with SS&C Technologies (SSNC), a leading cloud-based provider of services and software for the global financial services industry. The company makes it easier for clients to manage their front and back office operations while still meeting regulatory responsibilities.
SSNC has been growing rapidly in recent years — so much so, in fact, that I once had to find a new office because the company needed more space and was taking over my previous one! That being said, the one important aspect of SSNC’s growth that really caught my attention was its disciplined and highly-focused acquisition strategy to increase its products and services, as well as to capitalize on evolving market opportunities. Since 1995, SSNC has acquired 40 businesses — not including my office, of course.
Most recently, SSNC bought Advent Software (ADVS) for $44.25 a share in cash and assumption of all debt, for a total consideration of $2.7 billion. Like SSNC, Advent also provides software and software-related services to its 4,500 investment management clients, and management believes the deal will save the company $45 million annually after three years.
Aside from its strategic acquisitions, SSNC plans to build additional growth by developing new software-enabled services, including cloud- and mobile-based services. The company’s product development team works closely with marketing and client service personnel to ensure that the end result properly reflects marketplace trends and clients’ changing needs. I expect this strategy to help SSNC gain market share over time.
SS&C Technologies has consistently grown revenues, with sales more than tripling from $248.2 million in 2007 to $767.8 million in 2014. Plus, while revenues did decline during the 2009 financial crisis, they only fell by 3.2%, which is a very strong result in what was a difficult time for financials and demonstrates its resilience. The company was also profitable, with earnings per share (on a GAAP basis) increasing from 49 cents in 2012 — the first year of meaningful EPS results following the company’s 2010 IPO — to $1.50 in 2014, with results increasing each year.
The solid results have continued so far into 2015.
All in all, SSNC is a solid company with high customer retention and a history of strategic acquisitions that provide further strength. From a macro perspective, SSNC has the wind at its back as investment firms will continue to develop increasingly complex products in order to differentiate themselves in a changing environment and very competitive marketplace, which will create more demand.