SS&C Technologies Holdings, Inc.

SS&C Technologies Reports Q3 2013 Results

YTD Operating Cash Flow Increased to $154.3 Million, Up 154.3%, Q3 GAAP Diluted Earnings per Share of $0.51, and Adjusted Diluted Earnings per Share of $0.52, Board Authorizes $100 Million Share Buy Back

WINDSOR, Conn., Oct. 31, 2013 (GLOBE NEWSWIRE) -- 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 that ended September 30, 2013.

"SS&C's businesses are generating strong financial performances and momentum remains positive, particularly with our SS&C GlobeOp and SS&C PORTIA acquisitions. We are pleased with our latest acquisition, Prime Management, which gives SS&C entry to the Insurance Linked Securities (ILS) administration market," said Bill Stone, Chairman and Chief Executive Officer, SS&C Technologies. "We significantly improved cash flow from operations to $154 million for the first nine months of 2013 compared to $61 million in the same period of 2012, and adjusted diluted EPS increased 33 percent to $0.52 in the third quarter of 2013 compared to $0.39 in the same period of 2012. We also had our strongest license revenue quarter since we went public in early 2010."

Results

SS&C reported GAAP revenue of $179.5 million for the third quarter of 2013, compared to $165.6 million in the third quarter of 2012, an 8.4 percent increase. GAAP operating income for the third quarter of 2013 was $47.9 million, or 26.7 percent of revenue. This represents an increase of 28.5 percent compared to $37.2 million, or 22.5 percent of revenue, in the third quarter of 2012. GAAP net income for the third quarter of 2013 was $43.5 million compared to $17.6 million in the third quarter of 2012. On a fully diluted GAAP basis, earnings per share in the third quarter of 2013 were $0.51 compared to $0.21 per share in the third quarter of 2012.

Adjusted operating income (a non-GAAP measure defined in note 2 to the attached Condensed Consolidated Financial Information) in the third quarter of 2013 was $71.1 million, or 39.6 percent of adjusted revenue. This represents a 15.2 percent increase compared to $61.8 million, or 37.2 percent of adjusted revenue, in the third quarter of 2012. Adjusted net income (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) for the third quarter of 2013 was $44.5 million compared to $32.1 million in 2012's third quarter, a 38.5 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 2013 were $0.52 compared to $0.39 in the third quarter of 2012, a 33.3 percent increase.

Operating Cash Flow

SS&C generated net cash from operating activities of $154.3 million for the nine months ended September 30, 2013, compared to $60.7 million for the same period in 2012, representing a 154.3 percent increase. SS&C ended the quarter with $81.6 million in cash, and $844.0 million in gross debt, for a net debt balance of $762.4 million. SS&C's leverage ratio as defined in our credit agreement stood at 2.7 times consolidated EBITDA as of September 30, 2013.

Annual Run Rate Basis

Annual Run Rate Basis (ARRB) recurring revenue, defined as the sum of maintenance and software-enabled services revenue for the quarter on an annualized basis, was $657.2 million based on maintenance and software-enabled services revenue of $164.3 million for the third quarter of 2013. This represents an increase of 8.7 percent from $151.1 million and $604.5 million annual run-rate in the same period in 2012 and an increase of 0.5 percent from $163.5 million for the second quarter of 2013, an annual run rate of $653.8 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Share Repurchase Program

SS&C also announced today that its Board of Directors has authorized the repurchase of up to $100 million of the Company's common stock from time to time on the open market or in privately negotiated transactions.

"At current levels, we believe the Company's stock represents an attractive investment opportunity," said Mr. Stone. "This action reflects our ongoing commitment to improving the investment value of SS&C's stock while at the same time growing our business."

The timing and amount of any shares repurchased will be determined by the Company's management based on its evaluation of market conditions and other factors. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The repurchase program may be suspended or discontinued at any time. Any repurchased shares will be available for use in connection with SS&C's stock plans and for other corporate purposes.

Guidance

 Q4 2013FY 2013
Adjusted Revenue ($M) $180.0 -- $184.0 N/A
Adjusted Net Income ($M) $44.0 -- $45.8 N/A
Cash from Operating Activities ($M) N/A $190.0 — $200.0
Capital Expenditures (% of revenue) N/A 2.3% - 2.6%
Diluted Shares (M) 86.7 — 87.0 85.5 — 85.8
Effective Income Tax Rate (%) 24% - 27% 16%-18%

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, October 31, 2013. The call will discuss Q3 2013 results and our guidance and business outlook. Interested parties may dial 877-312-8798 (U.S. and Canada) or 253-237-1193 (International) and request the "SS&C Technologies 2013 Third Quarter Earnings Conference Call," conference ID # 79725516. A replay will be available after 8:00 p.m. eastern time on October 31, 2013, until midnight on November 6, 2013. The dial-in number is 855-859-2056 (U.S. and Canada) 404-537-3406 (International); access code # 79725516. The call will also be available for replay on SS&C's website after October 31, 2013; 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 2013 and our intention to repurchase shares of our common stock from time to time and the intended use of any repurchased shares, 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 5,500 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 $26 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 EndedNine Months Ended
  September 30,September 30,September 30,September 30,
 2013201220132012
Revenues:        
 Software-enabled services $138,123 $125,605 $411,909 $275,069
 Software licenses 8,184 5,885 20,880 15,463
 Maintenance 26,178 25,519 77,603 67,993
 Professional services 7,020 8,553 19,788 21,562
 Total revenues 179,505 165,562 530,180 380,087
         
Cost of revenues:        
 Software-enabled services 79,875 75,965 240,847 155,940
 Software licenses 1,286 1,764 3,908 4,609
 Maintenance  10,150 10,883 30,953 29,338
 Professional services 4,884 5,126 14,689 13,803
 Total cost of revenues 96,195 93,738 290,397 203,690
         
Gross profit 83,310 71,824 239,783 176,397
         
Operating expenses:        
 Selling and marketing 10,849 8,970 30,876 24,628
 Research and development 13,117 13,193 40,558 32,478
 General and administrative 11,480 11,668 33,197 24,527
 Transaction costs -- 748 -- 14,322
 Total operating expenses 35,446 34,579 104,631 95,955
         
Operating income 47,864 37,245 135,152 80,442
         
Interest expense, net (9,036) (13,726) (33,325) (18,760)
Other (expense) income, net  (110) (1,808) 2,406 (16,225)
Loss on extinguishment of debt  -- -- -- (4,355)
         
Income before income taxes 38,718 21,711 104,233 41,102
(Benefit) provision for income taxes  (4,748) 4,096 13,219 11,364
         
Net income  $43,466 $17,615 $91,014 $29,738
         
Basic earnings per share $0.53 $0.22 $1.13 $0.38
         
Basic weighted average number of common shares outstanding 81,784 78,548 80,779 78,123
         
Diluted earnings per share $0.51 $0.21 $1.07 $0.36
         
Diluted weighted average number of common and common equivalent shares outstanding 86,068 83,202 85,126 82,744
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,
 20132012
ASSETS    
Current assets:    
Cash  $81,575 $86,160
Accounts receivable, net  85,871 91,690
Prepaid income taxes 23,203 9,651
Deferred income taxes 4,031 5,408
Prepaid expenses and other current assets 20,263 11,548
Restricted cash 2,460 2,460
 Total current assets 217,403 206,917
     
Property and equipment, net 53,317 55,039
     
Deferred income taxes 733 1,459
Goodwill 1,542,947 1,559,607
Intangible and other assets, net  478,432 539,883
     
 Total assets $2,292,832 $2,362,905
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Current portion of long-term debt $21,782 $22,248
Accounts payable 17,298 10,528
Income taxes payable --  1,314
Accrued employee compensation and benefits 34,730 39,812
Other accrued expenses 28,675 22,650
Deferred maintenance and other revenue 59,108 63,700
 Total current liabilities 161,593 160,252
     
Long-term debt, net of current portion 814,377 989,890
Other long-term liabilities 12,569 17,102
Deferred income taxes 108,246 120,158
 Total liabilities 1,096,785 1,287,402
     
Total stockholders' equity 1,196,047 1,075,503
     
 Total liabilities and stockholders' equity $2,292,832 $2,362,905
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, September 30, 
 20132012
Cash flow from operating activities:    
 Net income $91,014 $29,738
Adjustments to reconcile net income to net cash provided by operating activities:    
 Depreciation and amortization 74,441 50,620
 Stock-based compensation expense 6,010 3,798
 Income tax benefit related to exercise of stock options (11,796) (2,863)
 Amortization of loan origination costs and original issue discount 4,408 7,814
 Loss on sale or disposition of property and equipment 316 13
 Deferred income taxes (10,049) (7,723)
 Provision for doubtful accounts 528 473
 Changes in operating assets and liabilities, excluding effects from acquisitions:
 Accounts receivable 5,911 (14,652)
 Prepaid expenses and other assets (8,405) 8,873
 Accounts payable 5,189 (2,240)
 Accrued expenses  (7,611) (5,420)
 Income taxes prepaid and payable 8,854 (4,333)
 Deferred maintenance and other revenue (4,534) (3,432)
 Net cash provided by operating activities 154,276 60,666
     
Cash flow from investing activities:    
 Additions to property and equipment (9,933) (8,839)
 Proceeds from sale of property and equipment 61  --
 Cash paid for business acquisitions, net of cash acquired  --  (964,523)
 Additions to capitalized software (1,570) (640)
 Other -- 87
 Net cash used in investing activities (11,442) (973,915)
     
Cash flow from financing activities:    
 Cash received from debt borrowings, net of loan origination  costs  -- 1,304,210
 Repayment of debt  (177,000) (366,600)
Proceeds from exercise of stock options 22,360 12,325
Payment of contingent consideration -- (1,800)
Income tax benefit related to exercise of stock options 11,796 2,863
Other (1,917) --
 Net cash (used in) provided by financing activities (144,761) 950,998
     
Effect of exchange rate changes on cash (2,658) 2,188
     
Net (decrease) increase in cash  (4,585) 39,937
Cash, beginning of period 86,160 40,318
Cash, end of period $81,575 $80,255
     
Supplemental disclosure of non-cash activities:    
Excess tax benefit related to stock option exercises  $10,279 $ -- 
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. The following is a reconciliation between adjusted revenue and revenue, the GAAP measure we believe to be most directly comparable to adjusted revenue.

 Three Months EndedNine Months Ended
 September 30, September 30,
 (in thousands)2013201220132012
Revenue $179,505 $165,562 $530,180 $380,087
Purchase accounting adjustments to deferred revenue -- 465 136 816
Adjusted revenue $179,505 $166,027 $530,316 $380,903

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 EndedNine Months Ended
 September 30,September 30,
 (in thousands)2013201220132012
Operating income  $47,864 $37,245 $135,152 $80,442
Amortization of intangible assets 21,247 21,325 63,439 43,745
 Stock-based compensation 1,975 1,386 6,010 3,798
Capital-based taxes -- (20) -- (785)
Unusual or non-recurring charges 106 1,416 91 15,791
 Purchase accounting adjustments (47) 413 (6) 661
Adjusted operating income $71,145 $61,765 $204,686 $143,652

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 March 2013, 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.

     Twelve Months
 Three Months EndedNine Months Ended  Ended
 September 30,September 30,September 30,
 (in thousands)20132012201320122013
Net income  $43,466 $17,615 $91,014 $29,738 $107,096
Interest expense, net 9,036 13,726 33,325 23,115 47,066
Taxes (4,748) 4,096 13,219 11,364 26,520
Depreciation and amortization 24,699 24,735 74,441 50,620 99,635
 EBITDA 72,453 60,172 211,999 114,837 280,317
Stock-based compensation 1,975 1,386 6,010 3,798 7,802
Capital-based taxes -- (20) -- (785) --
Acquired EBITDA and cost savings -- 333  -- 34,841 40
Unusual or non-recurring charges 217 3,223 (2,315) 32,016 (2,702)
Purchase accounting adjustments (47) 413 (6) 661 227
Other (38) (50) 179 (141) 303
 Consolidated EBITDA 74,560 65,457 215,867 185,227 285,987
Less: acquired EBITDA -- (333) -- (34,841) (40)
 Adjusted Consolidated EBITDA $74,560 $65,124 $215,867 $150,386 $285,947

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 and other unusual and non-recurring items 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 Nine Months Ended
 September 30,September 30,
 (in thousands, except per share data)2013201220132012
GAAP — Net income  $43,466 $17,615 $91,014 $29,738
Plus: Amortization of intangible assets 21,247 21,325 63,439 43,745
Plus: Amortization of deferred financing costs         
 and original issue discount 1,420 1,370 4,408 1,959
Plus: Stock-based compensation 1,975 1,386 6,010 3,798
Plus: Capital-based taxes -- (20) -- (785)
Plus: Unusual and non-recurring items 217 3,223 (2,315) 32,016
Plus: Loss on extinguishment of debt -- -- -- 4,355
Plus: Purchase accounting adjustments (47) 413 (6) 661
 Income tax effect (1) (23,807) (13,197) (39,511) (33,034)
Adjusted net income $44,471 $32,115 $123,039 $82,453
         
Adjusted diluted earnings per share $0.52 $0.39 $1.45 $1.00
         
GAAP diluted earnings per share $0.51 $0.21 $1.07 $0.36
         
Diluted weighted-average shares outstanding  86,068 83,202 85,126 82,744
(1) An estimated normalized effective tax rate of 30% has been used to adjust the provision for income taxes for the purpose of computing adjusted net income.
CONTACT: For more information

         Patrick Pedonti

         Chief Financial Officer

         Tel: +1-860-298-4738

         E-mail: InvestorRelations@sscinc.com

         

         Justine Stone

         Investor Relations Coordinator

         Tel: +1- 212-367-4705

         E-mail: Justine.stone@sscinc.com