The feeling is mutual at DST Systems. The company provides information processing software and services to the mutual fund industry, primarily in North America. Its output solutions unit manages statement and bill mailings, as well as customer communications, while its financial services segment processes millions of mutual fund accounts and offers software, systems, and processing services for banks, investment firms, and insurance companies. DST's applications and services are used to handle a wide range of tasks including business process management, investment management, customer care, and health care claims processing and administration. The company's key overseas markets are Australia and the UK.
DST's ouput solutions business segment, which accounted for 51% of sales in 2011, provides integrated print and electronic statement and billing output software used to manage customized statement and bill production, direct marketing, fulfillment, postal optimization, payment, and distribution. The unit serves a wide range of industries in North America and the UK.
The company's financial services segment, which accounted for 49% of sales, provides applications and services mainly to the mutual fund, investment management, brokerage, retirement, insurance, and healthcare industries. Its software products include shareowner recordkeeping and distribution support tools for mutual fund companies, broker/dealers, and financial advisors; a participant recordkeeping system for the US retirement plan market; investment management systems for US and international investment managers and fund accountants; and medical and pharmacy claims administration processing systems and services for providers of health care plans, third party administrators, medical practice groups, and pharmacy benefit managers. During 2011 the company reorganized its financial services segment around five key vertical markets: asset management, brokerage, retirement, insurance, and healthcare.
The financial services segment reaches customers worldwide both directly and through subsidiaries and joint venture affiliates; to a lesser degree, it uses strategic partnerships to serve financial services customers.
DST is also involved in real estate and equity investments in various companies, although that segment only accounted for 2% of DST's sales in 2011 (and much of that involved leasing real estate to other business units of the company).
DST also owns a stake in Boston Financial Data Services, a 50/50 joint venture with State Street. Boston Financial is DST's largest customer, accounting for about 11% of its overall sales in 2011. Another partnership with State Street, International Financial Data Services, provides transfer agency services to mutual funds set up in Canada and the tax-friendly countries of Ireland and Luxembourg.
In 2012 DST combined its two sub-accounting service providers (DST TASS and Wall Street Advisor Services) to form DST Market Services. As a broker-dealer, the business specializes in mutual fund processing and sub-accounting services to help improve productivity, increase efficiency, and reduce operational risk. The business leverages DST's technology platform to deliver its sub-accounting software.
DST's revenue of $2.38 billion for 2011 represented a slight uptick in sales over the previous year. The company's net income, however, was down 43% in 2011 due to higher operating costs and the absence of sizable contract termination payments received in 2010 and cash dividends received in 2010 from a private equity investment.
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 restructured 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. The company concurrently established a subsidiary known as DST Brokerage Solutions to oversee Finix's operations and products, and focus on broker-dealer clients. The company offers applications for brokerage subaccounting, business practice management, business social networking, among others, as well as consulting services. Subserveo was rebranded DST Subserveo in Canada and made a part of DST Brokerage Solutions.
To boost its ouput solutions 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, which was established in 1969. – less