SS&C Technologies Holdings, Inc.

SS&C Technologies Reports Third Quarter 2017 Earnings

Q3 2017 GAAP revenue $418.3 million, up 9.1 percent, Fully Diluted GAAP Earnings Per Share $0.30, up 57.9 percent

Adjusted revenue $419.6 million, up 7.1 percent, Adjusted Diluted Earnings Per Share $0.50, up 19.0 percent     

WINDSOR, Conn., Oct. 25, 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 third quarter ended September 30, 2017

SS&C Technologies (PRNewsFoto/SS&C Technologies)

GAAP Results
SS&C reported GAAP revenue of $418.3 million for the third quarter of 2017, up 9.1 percent compared to $383.3 million in the third quarter of 2016. GAAP operating income for the third quarter of 2017 was $103.9 million, or 24.8 percent of GAAP revenue compared to $76.9 million, or 20.1 percent of GAAP revenue in 2016's third quarter, representing a 35.1 percent increase.  

GAAP net income for the third quarter of 2017 was $64.2 million, up 65.8 percent compared to $38.7 million in 2016's third quarter. On a fully diluted GAAP basis, earnings per share in the third quarter of 2017 were $0.30 per share, up 57.9 percent compared to $0.19 per share on a fully diluted GAAP basis in the third quarter of 2016.

Adjusted Non-GAAP Results (defined in Notes 1-4 below)
Adjusted revenue was $419.6 million for the third quarter of 2017, up 7.1 percent compared to $391.9 million in the third quarter of 2016. Adjusted operating income for the third quarter of 2017 was $170.1 million, or 40.5 percent of adjusted revenue compared to $150.5 million, or 38.4 percent of adjusted revenue in 2016's third quarter, representing a 13.1 percent increase.

Adjusted net income for the third quarter of 2017 was $105.5 million, up 20.6 percent compared to $87.5 million in 2016's third quarter. Adjusted diluted earnings per share in the third quarter of 2017 were $0.50 per share, up 19.0 percent compared to $0.42 per share in the third quarter of 2016.

Highlights:

"We are pleased with our ability to report adjusted diluted earnings per share up 19.0 percent on a 7.1 percent increase in adjusted revenue" says Bill Stone, Chairman and Chief Executive Officer of SS&C Technologies. "We had many deals push to Q4; nevertheless we ramped up our margins with 42.6 percent adjusted consolidated EBITDA margin across the entire business. We expect a solid Q4."

Annual Run Rate Basis
Annual Run Rate Basis (ARRB) recurring revenue, defined as adjusted recurring revenue on an annualized basis, was $1,580.1 million based on adjusted recurring revenue $395.0 million for the third quarter of 2017. This represents an increase of 9.6 percent from $360.3 million and $1,441.3 million run-rate in the same period in 2016 and an increase of 2.0 percent from $387.4 million for the second quarter of 2017, an annual run rate of $1,549.7 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 $307.1 million for the nine months ended September 30, 2017, compared to $237.0 million for the same period in 2016, representing a 29.6 percent increase. SS&C ended the third quarter with $103.3 million in cash and cash equivalents and $2,266.8 million in gross debt, for a net debt balance of $2,163.5 million. SS&C's consolidated net leverage ratio as defined in our credit agreement stood at 3.19 times consolidated EBITDA as of September 30, 2017.

Guidance


 

Q4 2017


 

FY 2017

Adjusted Revenue ($M)


$427.0 - $437.0


$1,670.2 - $1,680.2

Adjusted Net Income ($M)


$110.0 - $113.9


$404.7 - $408.6

Cash from Operating Activities ($M)



-


$485.0 - $500.0

Capital Expenditures (% of revenue)



-


2.9% - 3.0%

Diluted Shares (M)


213.2 - 212.8


211.7 - 211.5

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 Q3 2017 earnings call will take place at 5:00 p.m. eastern time today, October 25, 2017. The call will discuss Q3 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 Third Quarter 2017 Conference Call"; conference ID #95952330. A replay will be available after 8:00 p.m. eastern time on October 25, 2017, until midnight on November 2, 2017. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code #95952330. The call will also be available for replay on SS&C's website after October 25, 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 fourth 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. Forward-looking statements include statements concerning plans, objectives, goals, strategies, expectations, intentions, projections, developments, future events, performance, underlying assumptions, and other statements that are other than statements of historical facts. 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. Forward-looking statements speak only as of the date on which they are made and, except to the extent required by applicable securities laws, we undertake no obligation to update or revise any 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 September 30,



Nine Months Ended September 30,




2017



2016



2017



2016


Revenues:

















Software-enabled services


$

282,133



$

248,772



$

831,103



$

699,091


Maintenance and term licenses



112,819




106,925




336,990




305,437


Total recurring revenues



394,952




355,697




1,168,093




1,004,528


Perpetual licenses



3,576




4,389




10,226




14,643


Professional services



19,723




23,218




58,611




61,341


Total non-recurring revenues



23,299




27,607




68,837




75,984


Total revenues



418,251




383,304




1,236,930




1,080,512


Cost of revenues:

















Software-enabled services



155,497




143,074




468,391




403,045


Maintenance and term licenses



46,662




45,458




140,927




138,864


Total recurring cost of revenues



202,159




188,532




609,318




541,909


Perpetual licenses



642




608




1,857




1,749


Professional services



17,001




18,887




49,778




51,532


Total non-recurring cost of revenues



17,643




19,495




51,635




53,281


Total cost of revenues



219,802




208,027




660,953




595,190


Gross profit



198,449




175,277




575,977




485,322


Operating expenses:

















Selling and marketing



28,181




27,328




88,544




85,724


Research and development



37,376




37,701




114,904




114,975


General and administrative



28,975




33,345




88,910




91,239


Total operating expenses



94,532




98,374




292,358




291,938


Operating income



103,917




76,903




283,619




193,384


Interest expense, net



(26,250)




(31,648)




(81,565)




(97,583)


Other (expense) income, net



(2,535)




2,655




(3,803)




820


Loss on extinguishment of debt









(2,326)





Income before income taxes



75,132




47,910




195,925




96,621


Provision for income taxes



10,905




9,163




32,400




22,648


Net income


$

64,227



$

38,747



$

163,525



$

73,973



















Basic earnings per share


$

0.31



$

0.19



$

0.80



$

0.37


Diluted earnings per share


$

0.30



$

0.19



$

0.77



$

0.36



















Basic weighted average number of common shares outstanding



205,568




201,782




204,506




199,365


Diluted weighted average number of common and common equivalent
shares outstanding



212,359




206,635




211,080




205,334



















Cash dividends declared and paid per common share


$

0.07



$

0.0625



$

0.195



$

0.1875



















Net income


$

64,227



$

38,747



$

163,525



$

73,973


Other comprehensive income (loss), net of tax:

















Foreign currency exchange translation adjustment



19,951




(12,060)




51,696




(29,532)


Total comprehensive income (loss), net of tax



19,951




(12,060)




51,696




(29,532)


Comprehensive income


$

84,178



$

26,687



$

215,221



$

44,441



See Notes to Condensed Consolidated Financial Information.

 

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




September 30,



December 31,




2017



2016


ASSETS









Current assets:









Cash and cash equivalents


$

103,279



$

117,558


Accounts receivable, net



238,677




241,307


Prepaid expenses and other current assets



32,688




31,119


Prepaid income taxes



13,832




23,012


Restricted cash



592




2,116


Total current assets



389,068




415,112


Property, plant and equipment, net



103,580




80,395


Deferred income taxes



2,166




2,410


Goodwill



3,692,573




3,652,733


Intangible and other assets, net



1,411,234




1,556,321


Total assets


$

5,598,621



$

5,706,971


LIABILITIES AND STOCKHOLDERS' EQUITY









Current liabilities:









Current portion of long-term debt


$

39,527



$

126,144


Accounts payable



27,776




16,490


Income taxes payable






3,473


Accrued employee compensation and benefits



73,521




104,118


Interest payable



7,344




21,470


Other accrued expenses



45,087




53,708


Deferred revenue



212,811




235,222


Total current liabilities



406,066




560,625


Long-term debt, net of current portion



2,177,681




2,374,986


Other long-term liabilities



85,767




59,227


Deferred income taxes



421,468




453,555


Total liabilities



3,090,982




3,448,393


Total stockholders' equity



2,507,639




2,258,578


Total liabilities and stockholders' equity


$

5,598,621



$

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)




Nine Months Ended September 30,




2017



2016


Cash flow from operating activities:









Net income


$

163,525



$

73,973


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









Depreciation and amortization



176,879




170,910


Stock-based compensation expense



31,572




40,402


Income tax benefit related to exercise of stock options






(44,975)


Amortization and write-offs of loan origination costs



7,915




7,994


Loss on extinguishment of debt



963





Loss on sale or disposition of property and equipment



730




159


Deferred income taxes



(24,661)




(39,712)


Provision for doubtful accounts



2,829




2,684


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









Accounts receivable



1,820




(14,603)


Prepaid expenses and other assets



1,416




(2,595)


Accounts payable



8,597




2,610


Accrued expenses



(45,644)




(18,429)


Income taxes prepaid and payable



6,781




44,840


Deferred revenue



(25,632)




13,758


Net cash provided by operating activities



307,090




237,016


Cash flow from investing activities:









Additions to property and equipment



(29,779)




(18,870)


Proceeds from sale of property and equipment



1




69


Cash paid for business acquisitions, net of cash acquired



1,805




(309,432)


Additions to capitalized software



(8,168)




(6,137)


Purchase of long-term investment






(1,000)


Net cash used in investing activities



(36,141)




(335,370)


Cash flow from financing activities:









Cash received from debt borrowings



45,000





Repayments of debt



(337,800)




(268,550)


Proceeds from exercise of stock options



46,278




34,767


Withholding taxes related to equity award net share settlement



(4,090)




(7,051)


Income tax benefit related to exercise of stock options






44,975


Purchase of common stock for treasury






(13)


Payment of fees related to refinancing activities






(503)


Dividends paid on common stock



(39,917)




(37,452)


Net cash used in financing activities



(290,529)




(233,827)


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



3,777




(880)


Net decrease in cash, cash equivalents and restricted cash



(15,803)




(333,061)


Cash, cash equivalents and restricted cash, beginning of period



119,674




436,977


Cash, cash equivalents and restricted cash, end of period


$

103,871



$

103,916











Supplemental disclosure of non-cash activities:









Property and equipment acquired through tenant improvement allowances


$

10,846



$



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
September 30,



Nine Months Ended
September 30,


(in thousands)


2017



2016



2017



2016


Revenues


$

418,251



$

383,304



$

1,236,930



$

1,080,512


Purchase accounting adjustments to deferred revenue



1,314




8,562




6,241




38,880


Adjusted revenues


$

419,565



$

391,866



$

1,243,171



$

1,119,392


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



Three Months Ended
September 30,



Nine Months Ended
September 30,


(in thousands)


2017



2016



2017



2016


Software-enabled services


$

282,133



$

248,772



$

831,103



$

699,091


Maintenance and term licenses



112,819




106,925




336,990




305,437


Total recurring revenues



394,952




355,697




1,168,093




1,004,528


Perpetual licenses



3,576




4,389




10,226




14,643


Professional services



19,723




23,218




58,611




61,341


Total non-recurring revenues



23,299




27,607




68,837




75,984


Total revenues


$

418,251



$

383,304



$

1,236,930



$

1,080,512



















Software-enabled services


$

282,133



$

248,809



$

831,103



$

699,358


Maintenance and term licenses



112,903




111,527




338,582




332,801


Total adjusted recurring revenues



395,036




360,336




1,169,685




1,032,159


Perpetual licenses



3,576




4,389




10,226




14,643


Professional services



20,953




27,141




63,260




72,590


Total adjusted non-recurring revenues



24,529




31,530




73,486




87,233


Total adjusted revenues


$

419,565



$

391,866



$

1,243,171



$

1,119,392


Note 2. Reconciliation of Operating Income to Adjusted Operating Income

Adjusted operating income represents operating income adjusted for amortization of intangible assets, stock-based compensation, purchase accounting adjustments for deferred revenue and related costs 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)


2017



2016



2017



2016


Operating income


$

103,917



$

76,903



$

283,619



$

193,384


Amortization of intangible assets



52,874




51,539




158,024




153,214


Stock-based compensation



10,294




12,489




31,572




40,402


Capital-based taxes



250




1,000




1,000




1,472


Purchase accounting adjustments (1)



777




5,573




3,782




29,831


Other (2)



2,005




2,966




4,901




7,885


Adjusted operating income


$

170,117



$

150,470



$

482,898



$

426,188




(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
September 30,



Nine Months Ended
September 30,



Twelve
Months Ended
September 30,


(in thousands)


2017



2016



2017



2016



2017


Net income


$

64,227



$

38,747



$

163,525



$

73,973



$

220,548


Interest expense, net



26,250




31,648




81,565




97,583




112,436


Provision for income tax



10,905




9,163




32,400




22,648




42,372


Depreciation and amortization



59,666




57,470




176,879




170,910




234,652


EBITDA



161,048




137,028




454,369




365,114




610,008


Stock-based compensation



10,294




12,489




31,572




40,402




41,734


Capital-based taxes



250




1,000




1,000




1,472




1,010


Acquired EBITDA and cost savings (1)



365







3,581




5,814




6,859


Non-cash portion of straight-line rent expense



1,933




269




2,479




1,822




2,855


Loss on extinguishment of debt









2,326







2,326


Purchase accounting adjustments (2)



777




5,573




3,782




29,831




5,570


Other (3)



4,540




311




8,704




7,065




7,530


Consolidated EBITDA


$

179,207



$

156,670



$

507,813



$

451,520



$

677,892


Less:  acquired EBITDA



(365)







(3,581)




(5,814)




(6,859)


Adjusted Consolidated EBITDA


$

178,842



$

156,670



$

504,232



$

445,706



$

671,033




(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
September 30,



Nine Months Ended
September 30,


(in thousands, except per share data)


2017



2016



2017



2016


GAAP - Net income


$

64,227



$

38,747



$

163,525



$

73,973


Plus: Amortization of intangible assets



52,874




51,539




158,024




153,214


Plus: Amortization of deferred financing costs and original issue discount



2,634




2,682




7,915




7,994


Plus: Stock-based compensation



10,294




12,489




31,572




40,402


Plus: Capital-based taxes



250




1,000




1,000




1,472


Plus: Loss on extinguishment of debt









2,326





Plus: Purchase accounting adjustments (1)



777




5,573




3,782




29,831


Plus: Other (2)



4,540




311




8,704




7,065


Income tax effect (3)



(30,115)




(24,858)




(82,189)




(71,600)


Adjusted net income


$

105,481



$

87,483



$

294,659



$

242,351


Adjusted diluted earnings per share


$

0.50



$

0.42



$

1.40



$

1.18


GAAP diluted earnings per share


$

0.30



$

0.19



$

0.77



$

0.36


Diluted weighted-average shares outstanding



212,359




206,635




211,080




205,334




(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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