Financial firms and health institutions focus on making clients
wealthy and healthy, respectively. So, they might be wise to turn
to DST Systems to handle their information processing tasks. The
company provides information processing software and services to
the mutual fund, insurance, retirement, and healthcare industries.
The company's financial services segment offers software and
systems used to handle a wide range of tasks including shareowner
recordkeeping, investment management, and business process
management. Among the healthcare offerings are claims adjudication
and benefit and care management. DST makes most of its sales to
customers in the US. The company was acquired by SS&C
Technologies Holdings in 2018.
Change in Company Type
In 2018, SS&C Technologies Holdings, a financial services
software company, paid about $5.4 billion for DST. The transaction
significantly increased SS&C's scale, boosting its revenue to
from $1.6 billion to a combined $3.9 billion. The deal SS&C
into the US retirement and wealth management markets while adding
more than 110 million investor positions across DST's client base.
DST become a wholly owned SS&C subsidiary.
Operations
DST Systems' Domestic Financial Services business produces about
55% of revenue. The segment supports direct and intermediary sales
of mutual funds, alternative investments, securities brokerage
accounts, and retirement plans. Its software also handles reports
to investors for confirmations, statements and tax forms, web
access, and electronic delivery of documents. Systems include TA
2000 and TRAC. The company offers its AWD workflow software to
clients and licenses it to third parties.
The International Financial Services segment, which accounts for
almost a quarter of its revenue, offers investor and policyholder
administration and technology services on a Remote and BPO basis in
the UK and in Canada, Ireland, and Luxembourg through the IFDS
joint venture.
The Healthcare Services segment, which provides medical and
pharmacy claims administration, generates about a fifth of sales.
The segment provides healthcare organizations with pharmacy and
healthcare administration software and health outcomes optimization
services. Specific tasks handled by DST software include claims
adjudication, benefit management, care management, and business
intelligence.
DST sold its North American Customer Communications business in
2016 for about $410 million, followed by the sale of its UK
counterpart in 2017 for about $45 million.
DST operates its own data centers that provide secure
infrastructure for its products and services.
Geographic Reach
The US is DST Systems' largest market, accounting for about 75%
of sales. The UK is its largest international market with about 25%
of sales. The Kansas City, Missouri-based company also has
customers in Australia, Canada, and several other geographic
markets.
Sales and Marketing
DST Systems markets its products directly and through
subsidiaries, joint venture affiliates, and strategic alliances.
The Domestic Financial Services business works in some areas
through joint ventures with State Street Corp. In the US, the
companies work through Boston Financial Data Services and through
International Financial Data Services overseas.
DST's five largest customers overall account for about 25% of
its revenue. The healthcare business is the more heavily
concentrated with its five largest customers generating almost half
of revenue, including nearly 20% from one customer. International
Financial Services' five largest customers supply almost 55% of the
segment's revenue with the largest customer generating nearly
25%.
Primary customers for Financial Services are mutual fund
managers, insurers, and platform providers. The main healthcare
customers are managed care organizations, preferred provider
organizations, third-party administrators, dental, vision, and
behavioral health organizations. The company also works with
government sponsored programs such as the Health Insurance
Exchanges that operate under the Patient Protection and Affordable
Care Act, Medicare Advantage, Medicare Part D, and Medicaid.
Financial Performance
Charting DST Systems' five-year revenue record shows a dip to
about $1.4 billion in 2015 before rebounding in 2015 and 2016,
following a series of divestments and acquisitions.
In 2017 revenue jumped about 42% to $2.2 billion, which include
reimbursements for out-of-pocket expenses (about 6% of total
revenue). A good chunk of the increase came from BFDS and IFDS UK,
in which DST took controlling interest in 2017.
Net income increased about 6% to $451 million in 2017 from 2016
due to the acquired interests in BFDS and IFDS UK. The company also
recorded a gain on the sale of securities in 2017.
DST's cash fell to about $80 million in 2017 from $199 million
in 2016. A difference was that the company had about $248 million
from discontinued operations that it didn't have in 2017.
Strategy
The acquisition by DST Systems by SS&C Technologies unites
two major players in financial software. The combined product
portfolios cover a wide range of financial services and it provides
SS&C with DST's healthcare component. The deal doesn't do much,
however, to expand their geographic reach other than to deepen
their UK business. The companies are not strangers. SS&C bought
DST's Global Solutions subsidiary in 2014.
Mergers and Acquisitions
DST Systems has been active on the acquisition front to
complement its product line and expand into new geographic areas.
DST has balanced its acquisition strategy by purchasing technology
providers and service providers, with an emphasis on business
process outsourcing concerns and consulting firms.
In 2017 DST acquired the remaining interests in IFDS UK and BFDS
that it didn't own for about $330 million. The businesses have been
strategically important to DST, which intends to make enhancements
as full owner.
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.