SS&C Technologies Holdings, Inc.

SS&C Technologies Reports Q2 2015 Results

Adjusted Revenue $213.1 million, up 12.9 percent, Adjusted Diluted EPS $0.66, up 15.8 percent

WINDSOR, Conn., July 29, 2015 /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 quarter ended June 30, 2015.

SS&C Technologies

Financial Highlights:

  • Adjusted revenue (defined below) of $213.1 million in the second quarter 2015, representing an increase of 12.9 percent from the second quarter 2014
  • Adjusted operating income (defined below) increased 15.6 percent to $85.5 million, or 40.1 percent of adjusted revenue
  • Adjusted Net Income (defined below) increased 18.5 percent to $58.7 million in the second quarter of 2015
  • Ended the quarter with $729.8 million in cash

"Our company had another strong quarter with record adjusted revenues, up 12.9%, and record adjusted diluted EPS of $0.66.  The business had broad strength and we overcame foreign currency headwinds as all major currencies lost ground to the U.S. Dollar," said Bill Stone, Chairman and Chief Executive Officer, SS&C Technologies. "Our acquisition of DST Global Solutions has begun to bear fruit as EBITDA margins climbed to over 40% for this business. We continue to see opportunities around the globe and the Advent acquisition integration is in full swing. We have expanded our offices in Boston, New York, and Windsor, and announced yesterday our Evansville, Indiana expansion."

Results
SS&C reported GAAP revenue of $212.8 million for the second quarter of 2015, compared to $188.7 million in the second quarter of 2014, a 12.7 percent increase. GAAP operating income for the second quarter of 2015 was $58.4 million, or 27.4 percent of revenue. This represents an increase of 28.6 percent compared to $45.4 million, or 24.1 percent of revenue, in the second quarter of 2014. GAAP net income for the second quarter of 2015 was $39.1 million compared to $27.2 million in the second quarter of 2014, a 43.6 percent increase. On a fully diluted GAAP basis, earnings per share in the second quarter of 2015 were $0.44.  

Adjusted operating income (a non-GAAP measure defined in note 2 to the attached Condensed Consolidated Financial Information) in the second quarter of 2015 was $85.5 million, or 40.1 percent of adjusted revenue. This represents a 15.6 percent increase compared to $74.0 million, or 39.2 percent of adjusted revenue, in the second quarter of 2014.  Adjusted net income (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) for the second quarter of 2015 was $58.7 million compared to $49.6 million in 2014's second quarter, an 18.5 percent increase.  Adjusted diluted earnings per share (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) in the second quarter of 2015 were $0.66 compared to $0.57 in the second quarter of 2014, a 15.8 percent increase.

Operating Cash Flow
SS&C generated net cash from operating activities of $100.7 million for the six months ended June 30, 2015, compared to $92.8 million for the same period in 2014. SS&C ended the quarter with $729.8 million in cash, and $471.0 million in gross debt.

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 $743.8 million based on maintenance and software-enabled services revenue of $186.0 million for the second quarter of 2015. This represents an increase of 8.6 percent from $171.2 million and $685.0 million annual run-rate in the same period in 2014 and a decrease of 1.8 percent from $189.3 million for the first quarter of 2015, an annual run rate of $757.1 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Guidance      


Q3 2015

FY 2015

Adjusted Revenue ($M)

$305.0 - $311.0

$1,044.0 - $1,056.0

Adjusted Net Income ($M)

$61.9 - $64.7

$243.0 - $248.5

Cash from Operating Activities ($M)

-

$280.0 - $295.0

Capital Expenditures (% of revenue)

-

2.4% - 2.8%

Diluted Shares (M)

102.5 - 103.0

95.6 - 96.0

Effective Income Tax Rate (%)

-

27% - 29%

Non-GAAP Financial Measures
Adjusted revenue, adjusted operating income, adjusted consolidated EBITDA, adjusted net income and adjusted diluted earnings per share are non-GAAP measures. See the accompanying notes to the attached Condensed Consolidated Financial Information for the reconciliations and definitions for each of these non-GAAP measures and the reasons our management believes these measures provide useful information to investors regarding our financial condition and results of operations.

Earnings Call and Press Release
SS&C's Q2 earnings call will take place at 5:00 p.m. eastern time today, July 29, 2015. The call will discuss Q2 2015 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 2015 Second Quarter Earnings Conference Call" conference ID# 83122689. A replay will be available after 8:00 p.m. eastern time on July 29, 2015, until midnight on August 5, 2015. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code # 83122689. The call will also be available for replay on SS&C's website after July 29, 2015; access: http://investor.ssctech.com/results.cfm.

Certain information contained in this press release relating to, among other things, our financial guidance for the third quarter and full year of 2015, 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 10,000 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. SS&C's technology and services helps firms minimize risk, work together seamlessly, and discover new opportunities in a constantly evolving world.

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SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operation

(in thousands, except per share data)

(unaudited)




Three Months Ended


Six Months Ended



 June 30,

 2015


June 30,

2014


June 30,

 2015


June 30,

 2014

Revenues:









 Software-enabled services


$  150,123


$  145,547


$   303,690


$   290,930

 Software licenses


16,090


9,866


23,416


17,365

 Maintenance


35,836


25,691


71,554


51,217

 Professional services


10,719


7,618


19,843


15,020

     Total revenues


212,768


188,722


418,503


374,532










Cost of revenues:









   Software-enabled services


88,548


86,040


177,150


171,731

   Software licenses


1,390


806


2,780


1,657

   Maintenance 


11,969


10,077


25,770


20,008

   Professional services


7,596


5,310


16,110


10,336

     Total cost of revenues


109,503


102,233


221,810


203,732










Gross profit


103,265


86,489


196,693


170,800










Operating expenses:









  Selling and marketing


13,931


12,203


27,318


24,101

  Research and development


17,520


13,939


37,128


27,526

  General and administrative


13,463


14,958


30,763


26,759

     Total operating expenses


44,914


41,100


95,209


78,386










Operating income


58,351


45,389


101,484


92,414










Interest expense, net


(5,419)


(6,569)


(11,019)


(13,667)

Other (expense) income, net 


(164)


(59)


(1,671)


(745)










Income before income taxes


52,768


38,761


88,794


78,002

Provision for income taxes 


13,640


11,516


23,420


24,309










Net income 


$   39,128


$   27,245


$    65,374


$    53,693










Basic earnings per share


$       0.46


$       0.33


$        0.77


$        0.65

Basic weighted average number of
common shares outstanding


 

85,405


 

83,118


 

84,837


 

82,921

Diluted earnings per share


$      0.44


$    0.31


$        0.73


$       0.62

Diluted weighted average number of
common and common equivalent
shares outstanding


 

 

89,552


 

 

87,091


 

 

88,987


 

 

86,999


See Notes to Condensed Consolidated Financial Information.

        

SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)





June 30,

2015

December 31,

2014

ASSETS




Current assets:





Cash and cash equivalents


$      729,808

$      109,577


Accounts receivable, net 


94,733

94,359


Prepaid income taxes


5,090

11,857


Deferred income taxes


2,857

2,975


Prepaid expenses and other current assets


13,789

14,927


Restricted cash


1,478

1,477


     Total current assets


847,755

235,172






Property and equipment, net


51,324

54,277






Deferred income taxes


1,892

1,135

Goodwill


1,558,785

1,573,227

Intangible and other assets, net 


376,615

421,511







     Total assets


$   2,836,371

$   2,285,322






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:





Current portion of long-term debt


$        17,224

$        20,470


Accounts payable


8,659

12,004


Income taxes payable

-

1,116


Accrued employee compensation and benefits

28,030

53,975


Deferred income taxes


-

110


Other accrued expenses


29,504

30,666


Deferred maintenance and other revenue


67,280

73,254


     Total current liabilities


150,697

191,595






Long-term debt, net of current portion


448,382

618,435

Other long-term liabilities 


25,086

26,446

Deferred income taxes


94,692

102,176


     Total liabilities


718,857

938,652





Total stockholders' equity


2,117,514

1,346,670







     Total liabilities and stockholders' equity


$   2,836,371

$   2,285,322


See Notes to Condensed Consolidated Financial Information.

            

SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)



    Six Months Ended


      June 30,

         2015

June 30,

2014

Cash flow from operating activities:



     Net income

$     65,374

$    53,693

Adjustments to reconcile net income to net cash provided



     by operating activities:



    Depreciation and amortization

52,103

49,832

    Stock-based compensation expense

8,314

5,770

    Income tax benefit related to exercise of stock options

(5,065)

(8,235)

    Amortization of loan origination costs 

2,874

2,956

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

209

698

    Deferred income taxes

(7,395)

(5,550)

    Provision for doubtful accounts

299

473

    Changes in operating assets and liabilities, excluding effects          

          from acquisitions:



          Accounts receivable

(1,804)

1,532

          Prepaid expenses and other assets

2,488

(1,403)

          Accounts payable

(2,405)

789

          Accrued expenses  

(20,186)

(15,507)

          Income taxes prepaid and payable

11,064

13,250

          Deferred maintenance and other revenue

(5,148)

(5,478)

     Net cash provided by operating activities

100,722

92,820




Cash flow from investing activities:



     Additions to property and equipment

(5,750)

(9,460)

     Proceeds from sale of property and equipment

-

1

     Cash paid for business acquisitions, net of cash acquired

(7,863)

-

     Additions to capitalized software

(1,792)

(1,704)

     Net changes in restricted cash

-

983

     Net cash used in investing activities

(15,405)

(10,180)




Cash flow from financing activities:



     Repayments of debt 

(174,000)

(107,000)

Proceeds from exercise of stock options

8,735

12,337

Proceeds from common stock issuance, net

717,866

-

Income tax benefit related to exercise of stock options

5,065

8,235

Payment of fees related to refinancing activities

-

(512)

Purchase of common stock for treasury

-

(7,386)

Dividends paid on common stock

(21,101)

-

    Net cash provided by (used in) financing activities

536,565

(94,326)




Effect of exchange rate changes on cash

(1,651)

736




Net increase (decrease) in cash 

620,231

(10,950)

Cash, beginning of period

109,577

84,470

Cash, end of period

$     729,808

$       73,520


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 
June 30,


Six Months Ended
June 30,

 (in thousands)

2015


2014


2015


2014

Revenue

$   212,768


$    188,722


$     418,503


$     374,532

Purchase accounting adjustments to         

   deferred revenue

 

302


 

-


 

699


 

-

Adjusted revenue

$   213,070


$    188,722


$    419,202


$     374,532

      

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 Ended

June 30,


Six Months Ended

June 30,

 (in thousands)

2015


2014


2015


2014

Operating income 

$    58,351


$    45,389


$     101,484


$     92,414

Amortization of intangible assets

22,312


21,285


44,493


42,611

  Stock-based compensation

4,208


2,795


8,314


5,770

Capital-based taxes

(636)


-


(636)


6

Unusual or non-recurring charges

994


4,511


8,579


5,839

 Purchase accounting adjustments

302


-


699


(27)

Adjusted operating income

$    85,531


$    73,980


$  162,933


$  146,613

      

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 Ended

June 30,


Six Months Ended

June 30,


Twelve Months
Ended

June 30,

 (in thousands)

2015


2014


2015


2014


2015


Net income 

$   39,128


$   27,245


$   65,374


$   53,693


$    142,808


Interest expense, net

5,419


6,569


11,019


13,667


22,824


Taxes

13,640


11,516


23,420


24,309


45,638


Depreciation and amortization

26,107


24,896


52,103


49,832


102,102


     EBITDA

84,294


70,226


151,916


141,501


313,372


Stock-based compensation

4,208


2,795


8,314


5,770


14,027


Capital-based taxes

(636)


-


(636)


6


(636)


Unusual or non-recurring charges

1,158


4,570


10,250


6,584


8,542


Acquired EBITDA and cost savings

389


-


2,156


-


19,645


Purchase accounting adjustments

302


-


699


(27)


1,202


Other

47


132


142


83


374


    Consolidated EBITDA

89,762


77,723


172,841


153,917


356,526


Less:  acquired EBITDA

(389)


-


(2,156)


-


(19,645)


    Adjusted Consolidated EBITDA

$   89,373


$   77,723


$  170,685


$  153,917


$   336,881


















        

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

June 30,


            Six Months Ended

   June 30,

 (in thousands, except per share data)

2015


2014


2015


2014

GAAP - Net income 

$    39,128


$    27,245


$     65,374


$     53,693

Plus: Amortization of intangible assets

22,312


21,285


44,493


42,611

Plus: Amortization of deferred financing costs








    and original issue discount

1,439


1,436


2,874


2,956

Plus: Stock-based compensation

4,208


2,795


8,314


5,770

Plus: Capital-based taxes

(636)


-


(636)


6

Plus: Unusual and non-recurring items

1,158


4,570


10,250


6,584

Plus: Purchase accounting adjustments

302


-


699


(27)

 Income tax effect (1)

(9,194)


(7,761)


(19,920)


(13,743)

Adjusted net income

$    58,717


$    49,570


$   111,448


$   97,850









Adjusted diluted earnings per share

$        0.66


$        0.57


$        1.25


$        1.12









GAAP diluted earnings per share

$        0.44


$        0.31


$        0.73


$        0.62









Diluted weighted-average shares outstanding  

89,552


87,091


88,987


86,999


(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.

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SOURCE SS&C

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