DST Systems provides information processing software and services to the mutual fund, insurance, retirement, and healthcare industries, among others, primarily in North America. Its two top segments (customer communications and financial services) together contribute most of sales. Its financial services segment offers software and systems used to handle a wide range of tasks including shareowner recordkeeping, investment management, and business process management. The customer communications division includes integrated print and electronic billing and statement products. Among the healthcare offerings are claims adjudication and benefit and care management. DST generates most of its sales in the US.
The customer communications segment accounted for almost half of sales with financial services accounting for about 40% of sales. The healthcare services segment, which provides medical and pharmacy claims administration, generates about 13% of sales.
The company is also involved in real estate and equity investments in various companies.
The US is DST's largest market, accounting for 86% of sales. Its largest international market is the UK (about 10% of sales). The company also has customers in Australia, Canada, and several other geographic markets.
Sales and Marketing
DST markets its products directly, as well as through subsidiaries, joint venture affiliates, and strategic alliances.
DST's revenue rose about 3% while its profit took a 40% tumble in 2015.
The company's revenue growth, which rose to $2.8 billion, came from the customer communications unit. It had higher out-of-pocket reimbursement revenue from new client volumes as well as greater professional services revenue. Financial services and healthcare service did not match 2014 sales in 2015.
DST's net income dropped to $358 million in 2015 from $593 million in 2014. The 2014 profit included a gain related to the sale of DST's Global Solutions in 2014. The company also had decreases in other income sources in 2015.
The company's operations generated $220 million in cash flow in 2015, off from $312 million in 2015.
Mergers and Acquisitions
The company has historically been very active on the acquisition front to complement its product line and expand into new geographic areas. DST has balanced its acquisition strategy by purchasing both complementary software and technology providers as well as service providers, with a particular emphasis on buying business process outsourcing (BPO) and consulting firms.
In 2016 DST bought Kaufman Rossin Fund Services, a provider of administration services to the investment community, for $95 million. This acquisition provides DST with products for the alternative investment market.
In 2015 DST acquired Wealth Management Systems, a provider of retirement plan rollover technology, content, communications, and practice management, for $64 million. DST will sell Wealth Management products through DST Retirement Solutions.
Also in 2015 DST's wholly-owned subsidiary ALPS agreed to buy Red Rocks Capital, a private equity and other private asset investment firm, for about $65 million. Red Rocks adds expertise and experience in alternative investments to ALPS and DST. ALPS and Red Rocks have had business engagements since 2007.
In a third 2015 deal DST acquired kasina, a strategic advisory firm to the asset management industry. DST hopes to combine its analytics and sales reporting tools with kasina’s understanding of challenges that face asset managers and insurers to uncover new revenue opportunities for the financial industry.