SS&C Technologies Reports Q3 2015 Results

02 Nov, 2015, 16:05 ET from SS&C

GAAP Revenue $280.9 million; Adjusted Revenue $311.4 million, up 61.7 percent 

WINDSOR, Conn., Nov. 2, 2015 /PRNewswire/ -- SS&C Technologies Holdings, Inc. (NASDAQ: SSNC), a global provider of investment and financial software-enabled services and software, today announced its financial results for the quarter ended September 30, 2015.

SS&C reported for the third quarter of 2015 GAAP revenue of $280.9 million, GAAP operating income of $15.0 million, GAAP net loss of $34.6 million and diluted loss per share of $0.36.

Financial Highlights:

  • Adjusted revenue (defined below) of $311.4 million in the third quarter 2015, representing an increase of 61.7 percent from third quarter 2014
  • Adjusted operating income (defined below) increased 59.3 percent to $125.3 million, or 40.2 percent of adjusted revenue
  • Adjusted consolidated EBITDA (defined below) increased to $130.8 million, a 59.3 percent increase from third quarter 2014
  • Adjusted diluted EPS (defined below) increased to $0.68 in the third quarter 2015, representing an increase of 11.5 percent

"SS&C's third quarter once again defines our company as a company that executes. We delivered three hundred and eleven million in adjusted revenue, one hundred and thirty million in adjusted consolidated EBITDA and $0.68 in adjusted diluted earnings per share," says Bill Stone, Chairman and CEO of SS&C Technologies. "We are delivering new products and services through a world class sales and marketing organization.  The opportunities presenting themselves today are larger and more lucrative than ever.  SS&C has the talent, technology and will to win.  We believe over the next several years we will demonstrate the superiority of our customer delivery model and our overall business model."

Results

Adjusted revenue (a non-GAAP measure defined in note 1 to the attached Condensed Consolidated Financial Information) in the third quarter of 2015 was $311.4 million, or 61.7% increase from the third quarter of 2014. Adjusted operating income (a non-GAAP measure defined in note 2 to the attached Condensed Consolidated Financial Information) in the third quarter of 2015 was $125.3 million, or 40.2 percent of adjusted revenue. This represents a 59.3 percent increase compared to $78.6 million, or 40.8 percent of adjusted revenue, in the third quarter of 2014.  Adjusted net income (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) for the third quarter of 2015 was $68.6 million compared to $53.3 million in 2014's third quarter, a 28.7 percent increase.  Adjusted diluted earnings per share (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) in the third quarter of 2015 were $0.68 compared to $0.61 in the third quarter of 2014, an 11.5 percent increase.

Operating Cash Flow

SS&C generated net cash from operating activities of $120.6 million for the nine months ended September 30, 2015, compared to $164.3 million for the same period in 2014. The cash from operating activities was affected by $66.4 million of costs related to the financing and acquisition of Advent and the pending acquisitions. SS&C ended the quarter with $503.8 million in cash, and $2,900.0 million in gross debt for a net debt position of $2,396.2 million.

Annual Run Rate Basis                                              

Annual Run Rate Basis (ARRB) adjusted recurring revenue, defined as adjusted recurring revenue for the quarter on an annualized basis, was $1,152.2 million based on adjusted recurring revenue of $288.0 million for the third quarter of 2015. This represents an increase of 62.7 percent from $177.0 million and $708.1 million annual run-rate in the same period in 2014 and an increase of 52.1 percent from $189.4 million for the second quarter of 2015, an annual run rate of $757.6 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Guidance      

Q4 2015

FY 2015

Adjusted Revenue ($M)

312.0 – 320.0

1,042.6 – 1,050.6

Adjusted Net Income ($M)

68.4 – 72.2

248.4 – 252.2

Cash from Operating Activities ($M)

210.0 – 220.0

Capital Expenditures (% of revenue)

2.0% – 2.4%

Diluted Shares (M)

101.9 – 102.4

95.3 – 95.5

Effective Income Tax Rate (%)

27% – 29%

 

Non-GAAP Financial Measures   

Adjusted revenue, adjusted operating income, adjusted consolidated EBITDA, adjusted net income and adjusted diluted earnings per share are non-GAAP measures. See the accompanying notes to the attached Condensed Consolidated Financial Information for the reconciliations and definitions for each of these non-GAAP measures and the reasons our management believes these measures provide useful information to investors regarding our financial condition and results of operations.

Earnings Call and Press Release 

SS&C's Q3 earnings call will take place at 5:00 p.m. eastern time today, November 2, 2015. The call will discuss Q3 2015 results and our guidance and business outlook. Interested parties may dial 877-312-8798 (US and Canada) or 253-237-1193 (International), and request the "SS&C Technologies 2015 Third Quarter Earnings Conference Call" conference ID# 57585753. A replay will be available after 8:00 p.m. eastern time on November 2, 2015, until midnight on November 6, 2015. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code # 57585753. The call will also be available for replay on SS&C's website after November 2, 2015; access: http://investor.ssctech.com/results.cfm.

Certain information contained in this press release relating to, among other things, our financial guidance for the fourth quarter and full year of 2015, constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.  Without limiting the foregoing, the words "believes", "anticipates", "plans", "expects", "estimates", "projects", "forecasts", "may" and "should" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words. Such statements reflect management's best judgment based on factors currently known but are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such risks and uncertainties include, but are not limited to, the state of the economy and the financial services industry, the Company's ability to finalize large client contracts, fluctuations in customer demand for the Company's products and services, intensity of competition from application vendors, delays in product development, the Company's ability to control expenses, terrorist activities, exposure to litigation, the Company's ability to integrate acquired businesses, the effect of the acquisitions on customer demand for the Company's products and services, the market price of the Company's stock prevailing from time to time, the Company's cash flow from operations, general economic conditions, and those risks discussed in the "Risk Factors" section of the Company's most recent Annual Report on Form 10-K, which is on file with the Securities and Exchange Commission and can also be accessed on our website. The Company cautions investors that it may not update any or all of the foregoing forward-looking statements.

About SS&C Technologies

SS&C is a global provider of investment and financial software-enabled services and software focused exclusively on the global financial services industry. Founded in 1986, SS&C has its headquarters in Windsor, Connecticut and offices around the world. Some 10,000 financial services organizations, from the world's largest institutions to local firms, manage and account for their investments using SS&C's products and services. These clients in the aggregate manage over $44 trillion in assets. SS&C's technology and services helps firms minimize risk, work together seamlessly, and discover new opportunities in a constantly evolving world.

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SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operation

(in thousands, except per share data)

(unaudited)

Three Months Ended

Nine Months Ended

    September 30,

       2015

September 30,

2014

September 30,

 2015

September 30,

 2014

Revenues:

 Recurring revenues

$  260,841

$  177,035

$   643,483

$   524,107

 Non-recurring revenues

20,053

15,563

55,914

43,023

     Total revenues

280,894

192,598

699,397

567,130

Cost of revenues:

   Recurring revenues

139,542

94,991

343,197

286,775

   Non-recurring revenues

12,322

6,392

30,477

18,340

     Total cost of revenues

151,864

101,383

373,674

305,115

Gross profit

129,030

91,215

325,723

262,015

Operating expenses:

  Selling and marketing

37,082

11,581

64,400

35,682

  Research and development

37,389

13,935

74,517

41,461

  General and administrative

39,607

11,336

70,370

38,095

     Total operating expenses

114,078

36,852

209,287

115,238

Operating income

14,952

54,363

116,436

146,777

Interest expense, net

(32,645)

(6,071)

(43,664)

(19,738)

Other income, net

6,953

1,532

5,282

787

Loss on extinguishment of debt

(30,417)

-

(30,417)

-

(Loss) income before income taxes

(41,157)

49,824

47,637

127,826

(Benefit) provision for income taxes

(6,547)

8,997

16,873

33,306

Net (loss) income

$   (34,610)

$   40,827

$    30,764

$    94,520

Basic (loss) earnings per share

$       (0.36)

$       0.49

$        0.35

$        1.14

Basic weighted average number of common shares outstanding

96,853

83,532

88,886

83,127

Diluted (loss) earnings per share

$       (0.36)

$    0.47

$        0.33

$       1.08

Diluted weighted average number of common and common equivalent shares outstanding

 

96,853

87,392

93,235

87,125

See Notes to Condensed Consolidated Financial Information.

 

 

 

SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

September 30,

2015

December 31,

2014

ASSETS

Current assets:

Cash and cash equivalents

$    503,810

$       109,577

Accounts receivable, net

154,980

94,359

Prepaid income taxes

27,981

11,857

Deferred income taxes

8,898

2,975

Prepaid expenses and other current assets

25,094

14,927

Restricted cash

3,208

1,477

     Total current assets

723,971

235,172

Property and equipment, net

72,026

54,277

Deferred income taxes

950

1,135

Goodwill

3,501,892

1,573,227

Intangible and other assets, net

1,478,384

421,511

     Total assets

$   5,777,223

$   2,285,322

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt

$        33,000

$        20,470

Accounts payable

15,392

12,004

Income taxes payable

-

1,116

Accrued employee compensation and benefits

58,713

53,975

Deferred income taxes

-

110

Interest payable

8,193

-

Other accrued expenses

38,892

30,666

Deferred maintenance and other revenue

183,693

73,254

     Total current liabilities

337,883

191,595

Long-term debt, net of current portion

2,795,942

618,435

Other long-term liabilities

74,931

26,446

Deferred income taxes

493,220

102,176

     Total liabilities

3,701,976

938,652

Total stockholders' equity

2,075,247

1,346,670

     Total liabilities and stockholders' equity

$   5,777,223

$   2,285,322

See Notes to Condensed Consolidated Financial Information.

 

 

 

SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

      Nine Months Ended

September 30,

         2015

September 30,

2014

Cash flow from operating activities:

     Net income

$      30,764

$      94,520

Adjustments to reconcile net income to net cash provided

     by operating activities:

100,840

74,493

    Depreciation and amortization  

Stock-based compensation expense

31,435

8,554

Income tax benefit related to exercise of stock options

(11,141)

(10,735)

Amortization of loan origination costs and original issue discount

5,473

4,397

    Loss on extinguishment of debt

3,954

-

    Loss on sale or disposition of property and equipment

339

672

    Deferred income taxes

(19,643)

(11,661)

    Provision for doubtful accounts

601

672

    Changes in operating assets and liabilities, excluding effects         

          from acquisitions:

          Accounts receivable

(5,234)

(395)

          Prepaid expenses and other assets

(5,109)

(5,302)

          Accounts payable

(1,755)

636

          Accrued expenses 

(35,824)

(637)

          Income taxes prepaid and payable

(1,125)

13,715

          Deferred maintenance and other revenue

26,992

(4,664)

     Net cash provided by operating activities

120,567

164,265

Cash flow from investing activities:

     Additions to property and equipment

(9,462)

(11,879)

     Proceeds from sale of property and equipment

56

27

     Cash paid for business acquisitions, net of cash acquired

(2,614,785)

-

     Additions to capitalized software

(3,370)

(2,688)

     Net changes in restricted cash

-

983

     Net cash used in investing activities

(2,627,561)

(13,557)

Cash flow from financing activities:

     Cash received from debt borrowings, net of original issue              

         discount

3,068,075

-

     Repayments of debt

(823,448)

(174,000)

Proceeds from common stock issuance, net

717,802

-

Proceeds from exercise of stock options

10,618

16,070

Income tax benefit related to exercise of stock options

11,141

10,735

Purchase of common stock for treasury

-

(11,223)

Payment of fees related to refinancing activities

(45,781)

(512)

Dividends paid on common stock

(33,216)

-

    Net cash provided by (used in) financing activities

2,905,191

(158,930)

Effect of exchange rate changes on cash

(3,964)

(1,168)

Net increase (decrease) in cash

394,233

(9,390)

Cash, beginning of period

109,577

84,470

Cash, end of period

$       503,810

$       75,080

See Notes to Condensed Consolidated Financial Information

     

SS&C Technologies Holdings, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Information

Note 1.  Reconciliation of Revenue to Adjusted Revenue

Adjusted revenue represents revenue adjusted for one-time purchase accounting adjustments to fair value deferred revenue acquired in business combinations. Adjusted revenue is presented because we use this measure to evaluate performance of our business against prior periods and believe it is a useful indicator of the underlying performance of the Company. Adjusted revenue is not a recognized term under generally accepted accounting principles (GAAP). Adjusted revenue does not represent revenue, as that term is defined under GAAP, and should not be considered as an alternative to revenue as an indicator of our operating performance. Adjusted revenue as presented herein is not necessarily comparable to similarly titled measures. Below is a reconciliation between adjusted revenue and revenue, the GAAP measure we believe to be most directly comparable to adjusted revenue.  Also below is our breakdown of recurring and non-recurring adjusted revenue.

Three Months Ended September 30,

Nine Months Ended

  September 30,

 (in thousands)

2015

2014

2015

2014

Revenue

$   280,894

$    192,598

$     699,397

$     567,130

Purchase accounting adjustments to         

   deferred revenue

 

30,532

 

-

 

31,231

 

-

Adjusted revenue

$   311,426

$    192,598

$    730,628

$     567,130

Recurring revenue

$   288,040

$    177,035

$     671,381

$     524,107

Non-recurring revenue

23,386

15,563

59,247

43,023

Adjusted revenue

$   311,426

$    192,598

$    730,628

$     567,130

 

 

Note 2. Reconciliation of Operating Income to Adjusted Operating Income

Adjusted operating income represents operating income adjusted for amortization of acquisition-related intangible assets and purchase accounting adjustments for deferred revenue and other expenses. Adjusted operating income is presented because we use this measure to evaluate performance of our business and believe it is a useful indicator of the underlying performance of the Company.  Adjusted operating income is not a recognized term under GAAP.  Adjusted operating income does not represent operating income, as that term is defined under GAAP, and should not be considered as an alternative to operating income as an indicator of our operating performance.  Adjusted operating income as presented herein is not necessarily comparable to similarly titled measures.  The following is a reconciliation between adjusted operating income and operating income, the GAAP measure we believe to be most directly comparable to adjusted operating income.

Three Months Ended

September 30,

Nine Months Ended

September 30,

 (in thousands)

2015

2014

2015

2014

Operating income

$    14,952

$    54,363

$     116,436

$     146,777

Amortization of intangible assets

43,289

21,318

87,782

63,929

 Stock-based compensation

23,121

2,784

31,435

8,554

Capital-based taxes

-

-

(636)

6

Unusual or non-recurring charges

16,672

180

25,251

6,019

 Purchase accounting adjustments

27,274

-

27,973

(27)

Adjusted operating income

$  125,308

$    78,645

$  288,241

$  225,258

 

 

Note 3. Reconciliation of Net Income to EBITDA, Consolidated EBITDA and Adjusted Consolidated EBITDA

EBITDA represents net income before interest expense, income taxes, depreciation and amortization.  Consolidated EBITDA, defined under our Credit Agreement entered into in July 2015, is used in calculating covenant compliance, and is EBITDA adjusted for certain items.  Consolidated EBITDA is calculated by subtracting from or adding to EBITDA items of income or expense described below.  Adjusted consolidated EBITDA is calculated by subtracting acquired EBITDA from consolidated EBITDA. EBITDA, consolidated EBITDA and adjusted consolidated EBITDA are presented because we use these measures to evaluate performance of our business and believe them to be useful indicators of an entity's debt capacity and its ability to service debt. EBITDA, consolidated EBITDA and adjusted consolidated EBITDA are not recognized terms under GAAP and should not be considered in isolation or as alternatives to operating income, net income or cash flows from operating activities as indicators of our operating performance.  The following is a reconciliation of EBITDA, consolidated EBITDA and adjusted consolidated EBITDA to net income.

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

Twelve Months Ended

September 30,

 (in thousands)

2015

2014

2015

2014

2015

Net (loss) income

$  (34,610)

$   40,827

$   30,764

$   94,520

$    67,371

Interest expense, net

32,645

6,071

43,664

19,738

49,398

Taxes

(6,547)

8,997

16,873

33,306

30,094

Depreciation and amortization

48,737

24,661

100,840

74,493

126,178

     EBITDA

40,225

80,556

192,141

222,057

273,041

Stock-based compensation

23,121

2,784

31,435

8,554

34,364

Capital-based taxes

-

-

(636)

6

(636)

Acquired EBITDA and cost savings

1,482

-

92,717

-

143,671

Unusual or non-recurring charges

9,719

(1,353)

19,969

5,231

19,614

Loss on extinguishment of debt

30,417

-

30,417

-

30,417

Purchase accounting adjustments

27,274

-

27,973

(27)

28,476

Other

78

118

220

201

334

    Consolidated EBITDA

132,316

82,105

394,236

236,022

529,281

Less:  acquired EBITDA

(1,482)

-

(92,717)

-

(143,671)

    Adjusted Consolidated EBITDA

130,834

82,105

301,519

236,022

385,610

 

 

Note 4. Reconciliation of Net Income to Adjusted Net Income and Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share

Adjusted net income and adjusted diluted earnings per share represent net income and earnings per share before amortization of intangible assets and deferred financing costs, stock-based compensation, capital-based taxes and other unusual and non-recurring items. Adjusted net income and adjusted diluted earnings per share are not recognized terms under GAAP, do not represent net income or diluted earnings per share, as those terms are defined under GAAP, and should not be considered as alternatives to net income or diluted earnings per share as indicators of our operating performance.  Adjusted net income and adjusted diluted earnings per share are important to management and investors because they represent our operational performance exclusive of the effects of amortization of intangible assets and deferred financing costs, stock-based compensation, capital-based taxes, other unusual and non-recurring items, purchase accounting adjustments, and loss on extinguishment of debt that are not operational in nature or comparable to those of our competitors.  The following is a reconciliation between adjusted net income and adjusted diluted earnings per share and net income and diluted earnings per share.

 

Three Months Ended

September 30,

Nine Months Ended

September 30,

 (in thousands, except per share data)

2015

2014

2015

2014

GAAP – Net (loss) income

$    (34,610)

$    40,827

$     30,764

$     94,520

Plus: Amortization of intangible assets

43,289

21,318

87,782

63,929

Plus: Amortization of deferred financing costs

    and original issue discount

2,599

1,441

5,473

4,397

Plus: Stock-based compensation

23,121

2,784

31,435

8,554

Plus: Capital-based taxes

-

-

(636)

6

Plus: Unusual and non-recurring items

9,719

(1,353)

19,969

5,231

Plus: Loss on extinguishment of debt

30,417

-

30,417

-

Plus: Purchase accounting adjustments

27,274

-

27,973

(27)

 Income tax effect (1)

(33,220)

(11,726)

(53,140)

(25,469)

Adjusted net income

$    68,589

$    53,291

$   180,037

$   151,141

Adjusted diluted earnings per share

$        0.68

$        0.61

$        1.93

$        1.73

GAAP diluted earnings per share

$     (0.36)

$        0.47

$        0.33

$        1.08

Diluted weighted-average shares outstanding

101,312

87,392

93,235

87,125

(1) An estimated normalized effective tax rate of 28% has been used to adjust the provision for income taxes for the purpose of computing adjusted net income.

 

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SOURCE SS&C