SS&C Technologies Holdings, Inc.

SS&C Technologies Reports 20th Straight Quarter of Revenue Growth in Q1 2017

Q1 GAAP revenue $407.7 million, Fully Diluted GAAP Earnings Per Share $0.23,
Adjusted revenue $409.5 million, Adjusted Diluted Earnings Per Share $0.44

WINDSOR, Conn., April 27, 2017 /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 first quarter ended March 31, 2017

GAAP Results

SS&C reported GAAP revenue of $407.7 million for the first quarter of 2017, up 25.8 percent compared to $324.1 million in the first quarter of 2016. GAAP operating income for the first quarter of 2017 was $89.7 million, or 22.0 percent of GAAP revenue compared to $50.4 million, or 15.6 percent of GAAP revenue in 2016's first quarter, representing a 77.9 percent increase.  

GAAP net income for the first quarter of 2017 was $48.1 million, up 587.3 percent compared to $7.0 million in 2016's first quarter. On a fully diluted GAAP basis, earnings per share in the first quarter of 2017 was $0.23 per share, up 666.7 percent compared to $0.03 per share on a fully diluted GAAP basis in the first quarter of 2016.

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

Adjusted revenue was $409.5 million for the first quarter of 2017, up 19.4 percent compared to $343.1 million in the first quarter of 2016. Adjusted operating income for the first quarter of 2017 was $155.4 million, or 38.0 percent of adjusted revenue compared to $135.2 million, or 39.4 percent of adjusted revenue in 2016's first quarter, representing a 15.0 percent increase.

Adjusted net income for the first quarter of 2017 was $92.9 million, up 23.2 percent compared to $75.4 million in 2016's first quarter. Adjusted diluted earnings per share in the first quarter of 2017 was $0.44 per share, up 18.9 percent compared to $0.37 per share in the first quarter of 2016.

Highlights:

  • SS&C adjusted revenue for Q1 2017 was $409.5 million, up 19.4 percent from Q1 2016 adjusted revenue of $343.1 million.
  • Adjusted diluted earnings per share was $0.44 for Q1 2017, increasing 18.9 percent from Q1 2016's $0.37 adjusted diluted earnings per share.
  • Q1 2017 net cash from operating activities was $56.5 million, an increase of 203.6 percent.
  • SS&C paid off $60.2 million of debt, bringing our net debt to consolidated EBITDA leverage ratio to 3.74x.
  • Amended our Credit Agreement to reduce the spreads on our Term Loans, effectively reducing our interest rates by 0.75% and saving the Company interest on the outstanding debt over the long term.

 

"SS&C had a strong start to 2017, with adjusted revenues up 19.4 percent and adjusted diluted earnings per share up 18.9 percent for the first quarter," says Bill Stone, Chairman and Chief Executive Officer. "Our businesses continue to perform, and hedge fund asset flow indicators suggest renewed confidence. We are also actively expanding our service offering for long-only and institutional outsourcing, as well as the creation of our newest SS&C GlobeOp division servicing Real Assets.  We believe real estate, infrastructure, and property management solutions present a big opportunity."

"We have a number of other key initiatives in process including our new relationship with the Academy of Certified Portfolio Managers and extending our Black Diamond marketing efforts to highlight our 1,000th Black Diamond client."

"We were able to reprice our Term Debt in our Credit Facility and reduce our annual borrowing cost.  We continue to manage our recent acquisitions and we are pleased with the continued margin improvement."

Annual Run Rate Basis

Annual Run Rate Basis (ARRB) recurring revenue, defined as adjusted recurring revenue on an annualized basis, was $1,548.9 million based on adjusted recurring revenue $387.2 million for the first quarter of 2017. This represents an increase of 22.6 percent from $315.7 million and $1,262.9 million run-rate in the same period in 2016 and an increase of 5.1 percent from $368.5 million for the fourth quarter of 2016, an annual run rate of $1,473.8 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Operating Cash Flow

SS&C generated net cash from operating activities of $56.5 million for the three months ended March 31, 2017, compared to $18.6 million for the same period in 2016, representing a 203.6 percent increase.  Cash flow in the first quarter was impacted by the payment of annual employee cash incentive, net debt repayments and an increase in accounts receivables offset by cash flow on earnings and proceeds from the exercise of stock options.  SS&C ended the quarter with $108.8 million in cash and cash equivalents and $2,499.4 million in gross debt, for a net debt balance of $2,390.6 millionSS&C's leverage ratio as defined in our credit agreement stood at 3.74 times consolidated EBITDA as of March 31, 2017.

Guidance



Q2 2017



FY 2017

Adjusted Revenue ($M)


$408.0 - $416.0



$1,664.0 - $1,686.0


Adjusted Net Income ($M)


$93.7 - $98.0



$399.0 - $412.0


Cash from Operating Activities ($M)



-



$485.0  - $500.0


Capital Expenditures (% of revenue)



-



2.8% - 3.2%


Diluted Shares (M)


210.0 - 210.4



210.2 - 211.0


Effective Income Tax Rate (%)



28%



28%














SS&C does not provide reconciliations of guidance for Adjusted Revenues and Adjusted Net Income to comparable GAAP measures, in reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K.  SS&C is unable, without unreasonable efforts, to forecast certain items required to develop meaningful comparable GAAP financial measures. These items include acquisition transactions and integration, foreign exchange rate changes, as well as other non-cash and other adjustments as defined under the Company's Credit agreement, that are difficult to predict in advance in order to include in a GAAP estimate.

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 Q1 2017 earnings call will take place at 5:00 p.m. eastern time today, April 27, 2017. The call will discuss Q1 2017 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 First Quarter 2017 Conference Call"; conference ID #3714534. A replay will be available after 8:00 p.m. eastern time on April 27, 2017, until midnight on May 4, 2017. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code #3714534. The call will also be available for replay on SS&C's website after April 27, 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 second 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 Operations
(in thousands, except per share data)
(unaudited)

 



Three Months Ended March 31,




2017



2016


Revenues:









Software-enabled services


$

276,452



$

205,647


Maintenance and term licenses



110,557




95,120


Total recurring revenues



387,009




300,767


Perpetual licenses



2,828




5,215


Professional services



17,862




18,149


Total non-recurring revenues



20,690




23,364


Total revenues



407,699




324,131


Cost of revenues:









Software-enabled services



154,006




113,728


Maintenance and term licenses



46,985




46,946


Total recurring cost of revenues



200,991




160,674


Perpetual licenses



565




498


Professional services



15,903




15,512


Total non-recurring cost of revenues



16,468




16,010


Total cost of revenues



217,459




176,684


Gross profit



190,240




147,447


Operating expenses:









Selling and marketing



30,242




29,861


Research and development



38,449




36,447


General and administrative



31,832




30,695


Total operating expenses



100,523




97,003


Operating income



89,717




50,444


Interest expense, net



(29,020)




(33,089)


Other expense, net



(71)




(1,847)


Loss on extinguishment of debt



(2,326)





Income before income taxes



58,300




15,508


Provision for income taxes



10,153




8,503


Net income


$

48,147



$

7,005











Basic earnings per share


$

0.24



$

0.04


Diluted earnings per share


$

0.23



$

0.03











Basic weighted average number of common shares outstanding



203,376




197,520


Diluted weighted average number of common and common equivalent shares outstanding



209,704




204,262











Cash dividends declared and paid per common share


$

0.0625



$

0.0625











Net income


$

48,147



$

7,005


Other comprehensive income, net of tax:









Foreign currency exchange translation adjustment



10,779




9,321


Total comprehensive income, net of tax



10,779




9,321


Comprehensive income


$

58,926



$

16,326


See Notes to Condensed Consolidated Financial Information.


SS&C Technologies Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

 



March 31,



December 31,




2017



2016


ASSETS









Current assets:









Cash and cash equivalents


$

108,842



$

117,558


Accounts receivable, net



247,553




241,307


Prepaid expenses and other current assets



33,256




31,119


Prepaid income taxes



15,674




23,012


Restricted cash



2,071




2,116


Total current assets



407,396




415,112


Property, plant and equipment, net



81,927




80,395


Deferred income taxes



2,342




2,410


Goodwill



3,659,631




3,652,733


Intangible and other assets, net



1,507,787




1,556,321


Total assets


$

5,659,083



$

5,706,971


LIABILITIES AND STOCKHOLDERS' EQUITY









Current liabilities:









Current portion of long-term debt


$

100,812



$

126,144


Accounts payable



23,642




16,490


Income taxes payable






3,473


Accrued employee compensation and benefits



42,060




104,118


Interest payable



7,420




21,470


Other accrued expenses



54,685




53,708


Deferred revenue



249,296




235,222


Total current liabilities



477,915




560,625


Long-term debt, net of current portion



2,343,737




2,374,986


Other long-term liabilities



65,057




59,227


Deferred income taxes



443,300




453,555


Total liabilities



3,330,009




3,448,393


Total stockholders' equity



2,329,074




2,258,578


Total liabilities and stockholders' equity


$

5,659,083



$

5,706,971


See Notes to Condensed Consolidated Financial Information.

SS&C Technologies Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)



Three Months Ended March 31,




2017



2016


Cash flow from operating activities:









Net income


$

48,147



$

7,005


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









Depreciation and amortization



58,557




55,273


Stock-based compensation expense



10,900




15,347


Income tax benefit related to exercise of stock options






(8,174)


Amortization and write-offs of loan origination costs



2,656




2,653


Loss on extinguishment of debt



963





Loss (gain) on sale or disposition of property and equipment



10




(2)


Deferred income taxes



(7,295)




(6,274)


Provision for doubtful accounts



1,154




679


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









Accounts receivable



(7,087)




(33,203)


Prepaid expenses and other assets



(2,532)




(1,221)


Accounts payable



6,106




3,592


Accrued expenses



(72,908)




(52,843)


Income taxes prepaid and payable



5,077




10,526


Deferred revenue



12,777




25,260


Net cash provided by operating activities



56,525




18,618


Cash flow from investing activities:









Additions to property and equipment



(5,990)




(2,808)


Proceeds from sale of property and equipment






2


Cash paid for business acquisitions, net of cash acquired



1,805




(317,554)


Additions to capitalized software



(3,277)




(2,169)


Net cash used in investing activities



(7,462)




(322,529)


Cash flow from financing activities:









Cash received from debt borrowings



45,000





Repayments of debt



(105,200)




(29,825)


Proceeds from exercise of stock options



14,017




7,629


Withholding taxes related to equity award net share settlement



(589)




(1,559)


Income tax benefit related to exercise of stock options






8,174


Dividends paid on common stock



(12,715)




(12,353)


Net cash used in financing activities



(59,487)




(27,934)


Effect of exchange rate changes on cash, cash equivalents and restricted cash



1,663




(488)


Net decrease in cash, cash equivalents and restricted cash



(8,761)




(332,333)


Cash, cash equivalents and restricted cash, beginning of period



119,674




436,977


Cash, cash equivalents and restricted cash, end of period


$

110,913



$

104,644


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 are 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 March 31,


(in thousands)


2017



2016


Revenues


$

407,699



$

324,131


Purchase accounting adjustments to deferred revenue



1,820




18,983


Adjusted revenues


$

409,519



$

343,114


 

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

 



Three Months Ended March 31,


(in thousands)


2017



2016


Software-enabled services


$

276,452



$

205,647


Maintenance and term licenses



110,557




95,120


Total recurring revenues



387,009




300,767


Perpetual licenses



2,828




5,215


Professional services



17,862




18,149


Total non-recurring revenues



20,690




23,364


Total revenues


$

407,699



$

324,131











Software-enabled services


$

276,452



$

205,786


Maintenance and term licenses



110,763




109,950


Total adjusted recurring revenues



387,215




315,736


Perpetual licenses



2,828




5,215


Professional services



19,476




22,163


Total adjusted non-recurring revenues



22,304




27,378


Total adjusted revenues


$

409,519



$

343,114


 

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 March 31,


(in thousands)


2017



2016


Operating income


$

89,717



$

50,444


Amortization of intangible assets



52,408




49,680


Stock-based compensation



10,900




15,347


Capital-based taxes



375




472


Purchase accounting adjustments (1)



352




15,628


Other (2)



1,684




3,618


Adjusted operating income


$

155,436



$

135,189


 

(1)         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.

(2)     Other includes expenses and income that are permitted to be excluded per the terms of our Credit Agreement from Consolidated EBITDA, a financial measure used in calculating our covenant compliance. These include expenses and income related to currency transactions, facilities and workforce restructuring, legal settlements and business combinations, among other infrequently occurring transactions.

 

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, as amended,  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 March 31,



Twelve Months Ended March 31,


(in thousands)


2017



2016



2017


Net income


$

48,147



$

7,005



$

172,138


Interest expense, net



29,020




33,089




124,385


Provision for income tax



10,153




8,503




34,270


Depreciation and amortization



58,557




55,273




231,967


EBITDA



145,877




103,870




562,760


Stock-based compensation



10,900




15,347




46,117


Capital-based taxes



375




472




1,385


Acquired EBITDA and cost savings (1)



808




4,768




6,627


Non-cash portion of straight-line rent expense



68




784




1,482


Loss on extinguishment of debt



2,326







2,326


Purchase accounting adjustments (2)



352




15,628




16,343


Other (3)



1,755




5,465




2,181


Consolidated EBITDA


$

162,461



$

146,334



$

639,221


Less:  acquired EBITDA



(808)




(4,768)




(6,627)


Adjusted Consolidated EBITDA


$

161,653



$

141,566



$

632,594


 

(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)         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)         Other includes expenses and income that are permitted to be excluded per the terms of our Credit Agreement from Consolidated EBITDA, a financial measure used in calculating our covenant compliance. These include expenses and income related to currency transactions, facilities and workforce restructuring, legal settlements and business combinations, among other infrequently occurring transactions.

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 March 31,


(in thousands, except per share data)


2017



2016


GAAP - Net income


$

48,147



$

7,005


Plus: Amortization of intangible assets



52,408




49,680


Plus: Amortization of deferred financing costs and original issue discount



2,656




2,653


Plus: Stock-based compensation



10,900




15,347


Plus: Capital-based taxes



375




472


Plus: Loss on extinguishment of debt



2,326





Plus: Purchase accounting adjustments (1)



352




15,628


Plus: Other (2)



1,755




5,465


Income tax effect (3)



(25,987)




(20,828)


Adjusted net income


$

92,932



$

75,422


Adjusted diluted earnings per share


$

0.44



$

0.37


GAAP diluted earnings per share


$

0.23



$

0.03


Diluted weighted-average shares outstanding



209,704




204,262


 

(1)         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.

(2)         Other includes expenses and income that are permitted to be excluded per the terms of our Credit Agreement from Consolidated EBITDA, a financial measure used in calculating our covenant compliance. These include expenses and income related to currency transactions, facilities and workforce restructuring, legal settlements and business combinations, among other infrequently occurring transactions.

(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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