SS&C Technologies Holdings, Inc.

SS&C Technologies Reports Q3 2014 Results

Q3 GAAP Diluted Earnings Per Share of $0.47, and Adjusted Diluted Earnings Per Share of $0.61, Up 17.3%

WINDSOR, Conn., Oct. 29, 2014 (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, 2014.

Financial Highlights:

"SS&C continues to perform and during Q3 we closed two large and complex fund administration deals - a testament to the dedication and persistence of our team. We continue to see momentum in Q4 and have already sold services to two of the world's largest asset managers this quarter, with significant cross-sell and up-sell potential," said Bill Stone, Chairman and CEO of SS&C Technologies. "We are building a considerable number of new software systems including: regulatory compliance, investor communications, REIT processing and powerful new features and functions in our portal and mobile applications. SS&C is aggressively hiring talented new employees at all levels and we are relentlessly focused on client satisfaction."

Results

SS&C reported GAAP revenue of $192.6 million for the third quarter of 2014, compared to $179.5 million in the third quarter of 2013, a 7.3 percent increase. GAAP operating income for the third quarter of 2014 was $54.4 million, or 28.2 percent of revenue. This represents an increase of 13.6 percent compared to $47.9 million, or 26.7 percent of revenue, in the third quarter of 2013. GAAP net income for the third quarter of 2014 was $40.8 million compared to $43.5 million in the third quarter of 2013, a 6.1 percent decrease. On a fully diluted GAAP basis, earnings per share in the third quarter of 2014 were $0.47. 

Adjusted operating income (a non-GAAP measure defined in note 2 to the attached Condensed Consolidated Financial Information) in the third quarter of 2014 was $78.6 million, or 40.8 percent of revenue. This represents a 10.5 percent increase compared to $71.1 million, or 39.6 percent of revenue, in the third quarter of 2013.  Adjusted net income (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) for the third quarter of 2014 was $53.3 million compared to $44.5 million in 2013's third quarter, a 19.8 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 2014 were $0.61 compared to $0.52 in the third quarter of 2013, a 17.3 percent increase.

Operating Cash Flow

SS&C generated net cash from operating activities of $164.3 million for the nine months ended September 30, 2014, compared to $154.3 million for the same period in 2013, representing a 6.5 percent increase. SS&C ended the quarter with $75.1 million in cash, and $608.0 million in gross debt, for a net debt balance of $532.9 million. SS&C's leverage ratio as defined in our credit agreement stood at 1.71 times consolidated EBITDA as of September 30, 2014.

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 $699.5 million based on maintenance and software-enabled services revenue of $174.9 million for the third quarter of 2014. This represents an increase of 6.4 percent from $164.3 million and $657.2 million annual run-rate in the same period in 2013 and an increase of 2.1 percent from $171.2 million for the second quarter of 2014, an annual run rate of $685.0 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Guidance      

 Q4 2014FY 2014
Adjusted Revenue ($M) $193.0 - $199.0 N/A
Adjusted Net Income ($M) $53.3 - $54.7 N/A
Cash from Operating Activities ($M) N/A $225.0 - $235.0
Capital Expenditures (% of revenue) N/A 2.3% - 2.6%
Diluted Shares (M) 87.7 - 88.0 87.2 - 87.3
Effective Income Tax Rate (%) 28% 28%

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 29, 2014. The call will discuss Q3 2014 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 2014 Third Quarter Earnings Conference Call" conference ID #17314836. A replay will be available after 8:00 p.m. eastern time on October 29, 2014, until midnight on November 4, 2014. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code #17314836. The call will also be available for replay on SS&C's website after October 29, 2014; 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 2014, 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 6,900 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,
 2014201320142013
Revenues:        
 Software-enabled services $149,285 $138,123 $440,215 $411,909
 Software licenses 9,196 8,184 26,561 20,880
 Maintenance 25,595 26,178 76,812 77,603
 Professional services 8,522 7,020 23,542 19,788
 Total revenues 192,598 179,505 567,130 530,180
         
Cost of revenues:        
 Software-enabled services 84,978 79,875 256,709 240,847
 Software licenses 892 1,286 2,549 3,908
 Maintenance  9,990 10,150 29,998 30,953
 Professional services 5,523 4,884 15,859 14,689
 Total cost of revenues 101,383 96,195 305,115 290,397
         
Gross profit 91,215 83,310 262,015 239,783
         
Operating expenses:        
 Selling and marketing 11,581 10,849 35,682 30,876
 Research and development 13,935 13,117 41,461 40,558
 General and administrative 11,336 11,480 38,095 33,197
 Total operating expenses 36,852 35,446 115,238 104,631
         
Operating income 54,363 47,864 146,777 135,152
         
Interest expense, net  (6,071)  (9,036)  (19,738)  (33,325)
Other income (expense), net  1,532  (110) 787 2,406
         
Income before income taxes 49,824 38,718 127,826 104,233
Provision (benefit) for income taxes  8,997  (4,748) 33,306 13,219
         
Net income  $40,827 $43,466 $94,520 $91,014
         
Basic earnings per share $0.49 $0.53 $1.14 $1.13
         
Basic weighted average number of common shares outstanding 83,532 81,784 83,127 80,779
         
Diluted earnings per share $0.47 $0.51 $1.08 $1.07
         
Diluted weighted average number of common and common equivalent shares outstanding 87,392 86,068 87,125 85,126
         
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,
 20142013
ASSETS    
Current assets:    
Cash  $75,080 $84,470
Accounts receivable, net  90,122 91,221
Prepaid income taxes 14,863 19,932
Deferred income taxes 3,925 6,526
Prepaid expenses and other current assets 13,384 16,567
Restricted cash 1,477 2,460
 Total current assets 198,851 221,176
     
Property and equipment, net 53,507 51,697
     
Deferred income taxes 1,506 1,077
Goodwill 1,523,971 1,541,386
Intangible and other assets, net  392,024 459,988
     
 Total assets $2,169,859 $2,275,324
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Current portion of long-term debt $21,641 $23,212
Accounts payable 9,606 8,368
Income taxes payable --  2,169
Accrued employee compensation and benefits 35,036 44,664
Other accrued expenses 23,445 26,028
Deferred maintenance and other revenue 57,550 62,561
 Total current liabilities 147,278 167,002
     
Long-term debt, net of current portion 579,910 751,295
Other long-term liabilities 18,617 14,913
Deferred income taxes 95,954 110,406
 Total liabilities 841,759 1,043,616
     
Total stockholders' equity 1,328,100 1,231,708
     
 Total liabilities and stockholders' equity $2,169,859 $2,275,324
     
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, 
 20142013
Cash flow from operating activities:    
 Net income $94,520 $91,014
Adjustments to reconcile net income to net cash provided by operating activities:    
 Depreciation and amortization 74,493 74,441
 Stock-based compensation expense 8,554 6,010
 Income tax benefit related to exercise of stock options  (10,735)  (11,796)
 Amortization of loan origination costs and original issue  discount 4,397 4,408
 Loss on sale or disposition of property and equipment 672 316
 Deferred income taxes  (11,661)  (10,049)
 Provision for doubtful accounts 672 528
 Changes in operating assets and liabilities, excluding effects from acquisitions:    
 Accounts receivable  (395) 5,911
 Prepaid expenses and other assets  (5,302)  (8,405)
 Accounts payable 636 5,189
 Accrued expenses   (637)  (7,611)
 Income taxes prepaid and payable 13,715 8,854
 Deferred maintenance and other revenue  (4,664)  (4,534)
 Net cash provided by operating activities 164,265 154,276
     
Cash flow from investing activities:    
 Additions to property and equipment  (11,879)  (9,933)
 Proceeds from sale of property and equipment  27 61
 Additions to capitalized software  (2,688)  (1,570)
 Other 983  -- 
 Net cash used in investing activities  (13,557)  (11,442)
     
Cash flow from financing activities:    
Repayment of debt   (174,000)  (177,000)
Proceeds from exercise of stock options 16,070 22,360
Income tax benefit related to exercise of stock options 10,735 11,796
Purchase of common stock for treasury  (11,223) --
Payment of fees related to refinancing activities  (512)  (1,917)
Net cash used in financing activities  (158,930)  (144,761)
     
Effect of exchange rate changes on cash  (1,168)  (2,658)
     
Net decrease in cash   (9,390)  (4,585)
Cash, beginning of period 84,470 86,160
Cash, end of period $75,080 $81,575
     
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 Ended Nine Months Ended
  September 30, September 30,
 (in thousands)2014201320142013
Revenue $192,598 $179,505 $567,130 $530,180
Purchase accounting adjustments to deferred revenue -- -- -- 136
Adjusted revenue $192,598 $179,505 $567,130 $530,316

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)2014201320142013
Operating income  $54,363 $47,864 $146,777 $135,152
Amortization of intangible assets 21,318 21,247 63,929 63,439
Stock-based compensation 2,784 1,975 8,554 6,010
Capital-based taxes -- -- 6 --
Unusual or non-recurring charges 180 106 6,019 91
Purchase accounting adjustments --  (47)  (27)  (6)
Adjusted operating income $78,645 $71,145 $225,258 $204,686

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 2012, 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 EndedNine Months Ended Twelve Months Ended
 September 30,September 30,September 30,
 (in thousands)20142013201420132014
Net income  $40,827 $43,466 $94,520 $91,014 $121,401
Interest expense, net 6,071 9,036 19,738 33,325 27,692
Taxes 8,997  (4,748) 33,306 13,219 47,379
Depreciation and amortization 24,661 24,699 74,493 74,441 99,832
 EBITDA 80,556 72,453 222,057 211,999 296,304
Stock-based compensation 2,784 1,975 8,554 6,010 10,930
Capital-based taxes -- -- 6 -- 188
Unusual or non-recurring charges  (1,353) 217 5,231 (2,315) 4,425
Purchase accounting adjustments --  (47)  (27)  (6)  (73)
Other 118 (38) 201 179 257
 Consolidated EBITDA 82,105 74,560 236,022 215,867 312,031

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)2014201320142013
GAAP - Net income  $40,827 $43,466 $94,520 $91,014
Plus: Amortization of intangible assets 21,318 21,247 63,929 63,439
Plus: Amortization of deferred financing costs  and original issue discount 1,441 1,420 4,397 4,408
Plus: Stock-based compensation 2,784 1,975 8,554 6,010
Plus: Capital-based taxes -- -- 6 --
Plus: Unusual and non-recurring items  (1,353) 217 5,231  (2,315)
Plus: Purchase accounting adjustments --  (47)  (27)  (6)
Income tax effect (1)  (11,726)  (23,807)  (25,469)  (39,511)
Adjusted net income $53,291 $44,471 $151,141 $123,039
         
Adjusted diluted earnings per share $0.61 $0.52 $1.73 $1.45
         
GAAP diluted earnings per share $0.47 $0.51 $1.08 $1.07
         
Diluted weighted-average shares outstanding  87,392 86,068 87,125 85,126

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

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