WMB Holdings Inc. (d/b/a CSC)

Overview Key strengths Key risks High client retention rates and high percentage of recurring revenue provides earnings stability. Aggressive leverage to fund recent Intertrust acquisition. Above average EBITDA margins. Complex Intertrust integration and need to stabilize its margins. Diversified customer base. Margin declines in 2022 due to higher-than-expected inflation. Given Intertrust's large employee base and global footprint, we view the integration as complex. In addition, Intertrust's EBITDA margin has been declining for many years. In recent years this was due to regulatory changes in the Netherlands that reduced the volume of new corporate entities, a mix shift toward lower-margin funds services, and one-time costs related to compliance remediation and restructuring. The latter had an outsized impact in the second half

...We lowered our 2023 margin and cash flow estimates for WMB Holdings Inc. (d/b/a CSC) due to higher interest rates, higher personnel costs primarily to support the Intertrust integration, other cost inflation, and unfavorable foreign currency movements. Given Intertrust's large employee base and global footprint, we view the integration as complex. In addition, Intertrust's EBITDA margin has been declining for many years. In recent years this was due to regulatory...

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