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 main segments (customer communications and financial services) each contribute nearly half of sales. Its customer communications division includes integrated print and electronic billing and statement products; the financial services segment offers software and systems used to handle a wide range of tasks including shareowner recordkeeping, investment management, business process management, and medical and pharmacy claims administration. DST generates most of its sales in the US.
The company is also involved in real estate and equity investments in various companies, although that segment generates only about 2% of sales.
The US is DST's largest market, accounting for more than 80% of sales. Its largest international market is the UK (about 10% of sales), which grew 15% year-over-year because of acquisitions.
Sales and Marketing
Mutual fund/investment customers account for more than 40% of the company's US revenue, with healthcare clients contributing nearly 20% and other financial services companies bringing in an addition 10%.
DST's revenue of $2.6 billion for 2012, up 8% from the prior year, marks the company's third consecutive year of growth. Sales for the financial services segment increased 10%, powered primarily by full-year results from ALPS Holdings, which was acquired in 2011. Customer communications growth of about 7% was also driven by 2011 acquisitions, including Lateral and Newkirk.
Net income rose substantially that year, jumping nearly 80% to $324 million. The company reported other income of $374 million (up from $39 million in 2011), primarily the result of the sale of investments in public and private companies.
Mergers and Acquisitions
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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.
Much of the company's acquisition dollars in 2011 were spent on the expansion of its financial services segment. DST paid $251.9 million that year for ALPS Holdings, a company that performed technology and back-office functions for financial services firms, and it acquired the assets of IntelliSource Healthcare Solutions, a developer of software for health insurance providers. Also in 2011 it bought Subserveo, a Canadian provider of compliance and surveillance services to broker-dealers. Additionally, DST acquired consultancy Finix Business Strategies and enterprise social networking software developer Finix Converge.
To boost its customer communications segment in 2011 DST acquired Newkirk Products, a company that performed communications services -- writing statements and reports -- for financial service firms, and Lateral Group Limited, a provider of marketing services such as database marketing, digital media. campaign management, print management, and online trading facilitation.
Director George Argyros owns about 22% of the company.