SS&C Technologies Holdings, Inc.

SS&C Technologies Reports Record Revenue, Record Earnings, and Record Cash flow for Q4 and FY 2016

Q4 GAAP revenue $400.9 million, Fully Diluted GAAP Earnings Per Share $0.28, Adjusted revenue $404.6 million, Adjusted Diluted Earnings Per Share $0.46

WINDSOR, Conn., Feb. 15, 2017 /CNW/ -- 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 fourth quarter and full year ended December 31, 2016

GAAP Results

SS&C reported GAAP revenue of $400.9 million for the fourth quarter of 2016, compared to $300.9 million in the fourth quarter of 2015. GAAP revenue for the year ended December 31, 2016 was $1,481.4 million, increasing from $1,000.3 million in 2015. GAAP operating income for the fourth quarter of 2016 was $95.3 million, compared to $48.3 million in 2015's fourth quarter. GAAP operating income for the year ended December 31, 2016 was $288.7 million, an increase from $164.7 million for 2015. On a fully diluted GAAP basis, earnings per share in the fourth quarter of 2016 was $0.28 compared to fully diluted GAAP earnings per share of $0.06 in the fourth quarter of 2015. On a fully diluted GAAP basis, earnings per share for the year ended December 31, 2016 was $0.64, up from 2015's $0.22 per share.

Adjusted Non-GAAP Results (defined in Notes 1-4 below)

Adjusted revenue in the fourth quarter of 2016 was $404.6 million, up 24.2 percent compared to $325.8 million in the fourth quarter of 2015. Adjusted revenue for the year ended December 31, 2016 was $1,524.0 million, up 44.3 percent over $1,056.4 million for 2015. Adjusted operating income in the fourth quarter of 2016 was $160.4 million, or 39.6 percent of adjusted revenue. This represents a 20.3 percent increase compared to adjusted operating income of $133.3 million and 40.9 percent of adjusted revenue in the fourth quarter of 2015. Adjusted operating income for the year ended December 31, 2016 was $586.6 million, up 39.2 percent from adjusted operating income of $421.5 million in 2015.

Adjusted net income for the fourth quarter of 2016 was $95.2 million, up 29.3 percent compared to $73.6 million in 2015's fourth quarter. Adjusted net income for the year ended December 31, 2016 was $337.5 million, up 33.1 percent compared to $253.6 million for 2015. Adjusted diluted earnings per share in the fourth quarter of 2016 was $0.46 per share, up 27.8 percent compared to $0.36 per share in the fourth quarter of 2015. Adjusted diluted earnings per share for the year ended December 31, 2016 was $1.64, up 23.3 percent compared to $1.33 for 2015.

Highlights:

"SS&C closed out 2016 with over $1.5 billion in adjusted revenues, and adjusted consolidated EBITDA margins above 40 percent" says Bill Stone, Chairman and Chief Executive Officer. "Our year is marked by our acquisitions of Citi Alternative Investor Services, Salentica, Wells Fargo Global Fund Services, and Conifer Financial Services - expanding our reach and capability in fund administration and RIAs. The talent we acquired, both organically and through acquisitions, increase our market opportunity and our ability to win bigger, more complex mandates from top financial institutions."

Annual Run Rate Basis

Annual Run Rate Basis (ARRB) recurring revenue, defined as adjusted recurring revenue on an annualized basis, was $1,473.8 million based on adjusted recurring revenue $368.5 million for the fourth quarter of 2016. This represents an increase of 24.9 percent from $295.0 million and $1,180.0 million run-rate in the same period in 2015 and an increase of 2.3 percent from $360.3 million for the third quarter of 2016, an annual run rate of $1,441.3 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Operating Cash Flow

SS&C ended the year with $117.6 million in cash, and $2,559.6 million in gross debt for a net debt balance of $2,442.0 million. Net cash from operating activities was $181.4 million in Q4 2016, a 64.8 percent increase from $110.1 million in Q4 2015. For the full year ended December 31, 2016, SS&C generated net cash from operating activities of $418.4 million, compared to $230.6 million for the same period in 2015, an 81.4 percent increase. SS&C's leverage ratio as defined in our credit agreement stood at 3.93 times consolidated EBITDA as of December 31, 2016.

Guidance



Q1 2017



FY 2017


Adjusted Revenue ($M)


$402.5 - $408.5



$1,655.0 - $1,685.0


Adjusted Net Income ($M)


$89.0 - $92.5



$392.0 - $409.0


Cash from Operating Activities ($M)


-



$480.0  - $500.0


Capital Expenditures (% of revenue)


-



2.5% - 3.0%


Diluted Shares (M)


207.5 - 208.0



208.0 - 210.0


Effective Income Tax Rate (%)


29%



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 Q4 and Full Year 2016 earnings call will take place at 5:00 p.m. eastern time today, February 15, 2017. The call will discuss Q4 and Full Year 2016 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 Fourth Quarter and Full Year 2017 Conference Call"; conference ID #53329711. A replay will be available after 8:00 p.m. eastern time on February 15, 2017, until midnight on February 22, 2017. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code #53329711. The call will also be available for replay on SS&C's website after February 15, 2017; access: http://investor.ssctech.com/results.cfm.

Certain information contained in this press release relating to, among other things, our financial guidance for the first quarter and full year of 2017 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", "assume", "anticipates", "intend", "will", "continue", "opportunity", "predict", "potential", "future", "guarantee", "likely", "target", "indicate", "would", "could" 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 11,000 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.

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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 December 31,



Twelve Months Ended December 31,




2016



2015



2016



2015


Revenues:

















Software-enabled services


$

257,700



$

185,736



$

956,791



$

670,170


Maintenance and term licenses



109,273




87,373




414,710




246,422


Total recurring revenues



366,973




273,109




1,371,501




916,592


Perpetual licenses



9,317




8,941




23,960




31,467


Professional services



24,634




18,838




85,975




52,226


Total non-recurring revenues



33,951




27,779




109,935




83,693


Total revenues



400,924




300,888




1,481,436




1,000,285


Cost of revenues:

















Software-enabled services



141,311




100,093




544,356




373,394


Maintenance and term licenses



45,298




43,969




184,162




113,865


Total recurring cost of revenues



186,609




144,062




728,518




487,259


Perpetual licenses



650




35




2,399




3,116


Professional services



18,040




14,579




69,572




41,975


Total non-recurring cost of revenues



18,690




14,614




71,971




45,091


Total cost of revenues



205,299




158,676




800,489




532,350


Gross profit



195,625




142,212




680,947




467,935


Operating expenses:

















Selling and marketing



31,374




30,550




117,098




94,950


Research and development



37,714




35,898




152,689




110,415


General and administrative



31,226




27,462




122,465




97,832


Total operating expenses



100,314




93,910




392,252




303,197


Operating income



95,311




48,302




288,695




164,738


Interest expense, net



(30,871)




(33,693)




(128,454)




(77,357)


Other income (expense), net



2,555




(1,404)




3,375




3,878


Loss on extinguishment of debt












(30,417)


Income before income taxes



66,995




13,205




163,616




60,842


Provision for income taxes



9,972




1,107




32,620




17,980


Net income


$

57,023



$

12,098



$

130,996



$

42,862


Basic earnings per share


$

0.28



$

0.06



$

0.65



$

0.24


Basic weighted average number of common shares

   outstanding



202,895




195,320




200,252




182,196


Diluted earnings per share


$

0.28



$

0.06



$

0.64



$

0.22


Diluted weighted average number of common and common

   equivalent shares outstanding



207,207




203,906




205,793




190,896


Net income


$

57,023



$

12,098



$

130,996



$

42,862


Other comprehensive loss, net of tax:

















Foreign currency exchange translation adjustment



(26,371)




(16,633)




(55,903)




(68,049)


Total comprehensive loss, net of tax



(26,371)




(16,633)




(55,903)




(68,049)


Comprehensive income (loss)


$

30,652



$

(4,535)



$

75,093



$

(25,187)



See Notes to Condensed Consolidated Financial Information.

 

 

SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)




December 31,



December 31,




2016



2015


ASSETS









Current assets:









Cash and cash equivalents


$

117,558



$

434,159


Accounts receivable, net



241,307




169,951


Prepaid expenses and other current assets



31,119




27,511


Prepaid income taxes



23,012




40,627


Restricted cash



2,116




2,818


Total current assets



415,112




675,066


Property, plant and equipment, net



80,395




67,143


Deferred income taxes



2,410




2,199


Goodwill



3,652,733




3,549,212


Intangible and other assets, net



1,556,321




1,508,622


Total assets


$

5,706,971



$

5,802,242


LIABILITIES AND STOCKHOLDERS' EQUITY









Current liabilities:









Current portion of long-term debt


$

126,144



$

32,281


Accounts payable



16,490




11,957


Income taxes payable



3,473




1,428


Accrued employee compensation and benefits



104,118




83,894


Interest payable



21,470




28,903


Other accrued expenses



53,708




36,231


Deferred revenue



235,222




222,024


Total current liabilities



560,625




416,718


Long-term debt, net of current portion



2,374,986




2,719,070


Other long-term liabilities



59,227




51,434


Deferred income taxes



453,555




509,574


Total liabilities



3,448,393




3,696,796


Total stockholders' equity



2,258,578




2,105,446


Total liabilities and stockholders' equity


$

5,706,971



$

5,802,242



See Notes to Condensed Consolidated Financial Information.

 

 

SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)




For the Year Ended December 31,




2016



2015


Cash flow from operating activities:









Net income


$

130,996



$

42,862


Adjustments to reconcile net income to net cash provided by operating activities:









Depreciation and amortization



228,683




150,834


Stock-based compensation expense



50,564




44,079


Income tax benefit related to exercise of stock options



(46,207)




(32,960)


Amortization and write-offs of loan origination costs



10,680




8,126


Loss on extinguishment of debt






3,954


Loss on sale or disposition of property and equipment



162




336


Deferred income taxes



(47,836)




(39,806)


Provision for doubtful accounts



3,486




1,137


Changes in operating assets and liabilities, excluding effects from acquisitions:









Accounts receivable



(10,850)




(12,160)


Prepaid expenses and other assets



(2,844)




(6,019)


Accounts payable



(1,300)




(5,586)


Accrued expenses



20,679




4,073


Income taxes prepaid and payable



65,117




11,514


Deferred revenue



17,077




60,240


Net cash provided by operating activities



418,407




230,624


Cash flow from investing activities:









Additions to property and equipment



(27,926)




(13,600)


Proceeds from sale of property and equipment



71




64


Cash paid for business acquisitions, net of cash acquired



(457,511)




(2,730,956)


Additions to capitalized software



(9,621)




(4,273)


Purchase of long-term investment



(1,000)





Net changes in restricted cash



700




453


Net cash used in investing activities



(495,287)




(2,748,312)


Cash flow from financing activities:









Cash received from debt borrowings, net of original issue discount



120,000




3,068,075


Repayments of debt



(383,436)




(903,448)


Proceeds from exercise of stock options



39,239




30,092


Withholding taxes related to equity award net share settlement



(7,430)




(6,939)


Income tax benefit related to exercise of stock options



46,207




32,960


Proceeds from common stock issuance, net






717,802


Purchase of common stock for treasury



(15)





Payment of fees related to refinancing activities



(519)




(46,025)


Dividends paid on common stock



(50,140)




(45,451)


Net cash (used in) provided by financing activities



(236,094)




2,847,066


Effect of exchange rate changes on cash and cash equivalents



(3,627)




(4,796)


Net (decrease) increase in cash and cash equivalents



(316,601)




324,582


Cash and cash equivalents, beginning of period



434,159




109,577


Cash and cash equivalents, end of period


$

117,558



$

434,159



See Notes to Condensed Consolidated Financial Information.

 

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

Note 1. Reconciliation of Revenues to Adjusted Revenues

Adjusted revenues represents revenues adjusted for one-time purchase accounting adjustments to fair value deferred revenue acquired in business combinations. Adjusted revenues are 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 revenues is not a recognized term under generally accepted accounting principles (GAAP). Adjusted revenues does not represent revenues, as that term is defined under GAAP, and should not be considered as an alternative to revenues as an indicator of our operating performance. Adjusted revenues as presented herein is not necessarily comparable to similarly titled measures. Below is a reconciliation between adjusted revenues and revenues, the GAAP measure we believe to be most directly comparable to adjusted revenues. 



Three Months Ended
December 31,



Twelve Months Ended
December 31,


(in thousands)


2016



2015



2016



2015


Revenues


$

400,924



$

300,888



$

1,481,436



$

1,000,285


Purchase accounting adjustments to deferred revenue



3,723




24,923




42,603




56,154


Adjusted revenues


$

404,647



$

325,811



$

1,524,039



$

1,056,439


The following is a breakdown of recurring and non-recurring revenues and adjusted recurring and non-recurring revenues.



Three Months Ended
December 31,



Twelve Months Ended
December 31,


(in thousands)


2016



2015



2016



2015


Software-enabled services


$

257,700



$

185,736



$

956,791



$

670,170


Maintenance and term licenses



109,273




87,373




414,710




246,422


Total recurring revenues



366,973




273,109




1,371,501




916,592


Perpetual licenses



9,317




8,941




23,960




31,467


Professional services



24,634




18,838




85,975




52,226


Total non-recurring revenues



33,951




27,779




109,935




83,693


Total revenues


$

400,924



$

300,888



$

1,481,436



$

1,000,285



















Software-enabled services


$

257,706



$

186,151



$

957,064



$

670,585


Maintenance and term licenses



110,744




108,849




443,545




295,796


Total adjusted recurring revenues



368,450




295,000




1,400,609




966,381


Perpetual licenses



9,317




8,941




23,960




31,467


Professional services



26,880




21,870




99,470




58,591


Total adjusted non-recurring revenues



36,197




30,811




123,430




90,058


Total adjusted revenues


$

404,647



$

325,811



$

1,524,039



$

1,056,439


Note 2. Reconciliation of Operating Income to Adjusted Operating Income

Adjusted operating income represents operating income adjusted for amortization of acquisition-related intangible assets, stock-based compensation, 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
December 31,



Twelve Months Ended
December 31,



(in thousands)


2016



2015



2016



2015



Operating income


$

95,311



$

48,302



$

288,695



$

164,738



Amortization of intangible assets



51,731




44,131




204,945




131,913



Stock-based compensation



10,162




12,644




50,564




44,079



Capital-based taxes



10




1,464




1,482




828



Unusual or non-recurring charges (1)



1,381




4,776




9,266




30,027



Purchase accounting adjustments (2)



1,788




21,954




31,619




49,927



Adjusted operating income


$

160,383



$

133,271



$

586,571



$

421,512




(1)

Unusual or non-recurring charges include proceeds from legal and other settlements, severance expenses, transaction costs and other one-time expenses, such as expenses associated with facilities consolidations and acquisitions.

(2)

Purchase accounting adjustments include (a) an adjustment to increase revenues by the amount that would have been recognized if deferred revenue were not adjusted to fair value at the date of acquisitions and (b) an adjustment to increase personnel and commissions expense by the amount that would have been recognized if prepaid commissions and deferred personnel costs were not adjusted to fair value at the date of the acquisitions.

 

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 2016, 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
December 31,



Twelve Months Ended
December 31,



(in thousands)


2016



2015



2016



2015



Net income


$

57,023



$

12,098



$

130,996



$

42,862



Interest expense, net



30,871




33,693




128,454




77,357



Income tax provision



9,972




1,107




32,620




17,980



Depreciation and amortization



57,773




49,994




228,683




150,834



EBITDA



155,639




96,892




520,753




289,033



Stock-based compensation



10,162




12,644




50,564




44,079



Capital-based taxes



10




1,464




1,482




828



Acquired EBITDA and cost savings (1)



726




3,175




9,094




109,492



Unusual or non-recurring charges (2)



(1,174)




6,179




5,891




26,148



Loss on extinguishment of debt












30,417



Purchase accounting adjustments (3)



1,788




21,954




31,619




49,927



Other (4)



376




630




2,198




1,529



Consolidated EBITDA


$

167,527



$

142,938



$

621,601



$

551,453



Less:  acquired EBITDA



(726)




(3,175)




(9,094)




(109,492)



Adjusted Consolidated EBITDA


$

166,801



$

139,763



$

612,507



$

441,961




(1)

Acquired EBITDA reflects the EBITDA impact of significant businesses that were acquired during the period as if the acquisition occurred at the beginning of the period, as well as cost savings enacted in connection with acquisitions.

(2)

Unusual or non-recurring charges include foreign currency gains and losses, proceeds from legal and other settlements, severance expenses, transaction costs and other one-time expenses, such as expenses associated with the facilities consolidations, acquisitions and the sale of fixed assets.

(3)

Purchase accounting adjustments include (a) an adjustment to increase revenues by the amount that would have been recognized if deferred revenue were not adjusted to fair value at the date of acquisitions and (b) an adjustment to increase personnel and commissions expense by the amount that would have been recognized if prepaid commissions and deferred personnel costs were not adjusted to fair value at the date of the acquisitions.

(4)

Other includes the non-cash portion of straight-line rent expense.

 

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
December 31,



Twelve Months Ended
December 31,



(in thousands, except per share data)


2016



2015



2016



2015



GAAP - Net income


$

57,023



$

12,098



$

130,996



$

42,862



Plus: Amortization of intangible assets



51,731




44,131




204,945




131,913



Plus: Amortization of deferred financing costs and original issue discount



2,686




2,653




10,680




8,126



Plus: Stock-based compensation



10,162




12,644




50,564




44,079



Plus: Capital-based taxes



10




1,464




1,482




828



Plus: Unusual and non-recurring items (1)



(1,174)




6,179




5,891




26,148



Plus: Loss on extinguishment of debt












30,417



Plus: Purchase accounting adjustments (2)



1,788




21,954




31,619




49,927



Income tax effect (3)



(27,043)




(27,517)




(98,643)




(80,657)



Adjusted net income


$

95,183



$

73,606



$

337,534



$

253,643



Adjusted diluted earnings per share


$

0.46



$

0.36



$

1.64



$

1.33



GAAP diluted earnings per share


$

0.28



$

0.06



$

0.64



$

0.22



Diluted weighted-average shares outstanding



207,207




203,906




205,793




190,896




(1)

Unusual or non-recurring charges include foreign currency gains and losses, proceeds from legal and other settlements, severance expenses, transaction costs and other one-time expenses, such as expenses associated with the facilities consolidations, acquisitions and the sale of fixed assets.

(2)

Purchase accounting adjustments include (a) an adjustment to increase revenues by the amount that would have been recognized if deferred revenue were not adjusted to fair value at the date of acquisitions and (b) an adjustment to increase personnel and commissions expense by the amount that would have been recognized if prepaid commissions and deferred personnel costs were not adjusted to fair value at the date of the acquisitions.

(3)

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

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