SS&C Technologies Holdings, Inc.
SS&C Technologies Holdings Inc (Form: 8-K, Received: 07/27/2017 16:12:07)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 27, 2017

 

SS&C TECHNOLOGIES HOLDINGS, INC.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware

001-34675

71-0987913

(State or Other Jurisdiction

of Incorporation)

(Commission
File Number)

(IRS Employer
Identification No.)

 

80 Lamberton Road, Windsor, CT

06095

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: (860) 298-4500

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

 

 

 


Item 2.02. Results of Operations and Financial Condition

On July 27, 2017 , SS&C Technologies Holdings, Inc. (the “Company”) announced its financial results for the quarter ended June 30, 2017. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information in this Form 8-K (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits

 

(d)

Exhibits

The following exhibit relating to Item 2.02 shall be deemed to be furnished, and not filed:

 

99.1

Press Release, issued by the Company on July 27, 2017 .

 


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

SS&C TECHNOLOGIES HOLDINGS, INC.

 

 

 

 

Date: July 27, 2017

 

By:

/s/ Patrick J. Pedonti

 

 

 

Patrick J. Pedonti

 

 

 

Senior Vice President and Chief Financial Officer

 


EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press release, issued by the Company on July 27, 2017

 

Exhibit 99.1

Q2 GAAP revenue $411.0 million, up 10.2 percent, Fully Diluted GAAP Earnings Per Share $0.24, up 71.4 percent

Adjusted revenue $414.1 million, up 7.7 percent, Adjusted Diluted Earnings Per Share $0.46, up 17.9 percent

 

WINDSOR, CT, July 27, 2017 (PR 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 second quarter ended June 30, 2017.

GAAP Results

SS&C reported GAAP revenue of $411.0 million for the second quarter of 2017, up 10.2 percent compared to $373.1 million in the second quarter of 2016. GAAP operating income for the second quarter of 2017 was $90.0 million, or 21.9 percent of GAAP revenue compared to $66.0 million, or 17.7 percent of GAAP revenue in 2016’s second quarter, representing a 36.3 percent increase.

 

GAAP net income for the second quarter of 2017 was $51.2 million, up 81.3 percent compared to $28.2 million in 2016’s second quarter. On a fully diluted GAAP basis, earnings per share in the second quarter of 2017 were $0.24 per share, up 71.4 percent compared to $0.14 per share on a fully diluted GAAP basis in the second quarter of 2016.

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

Adjusted revenue was $414.1 million for the second quarter of 2017, up 7.7 percent compared to $384.4 million in the second quarter of 2016. Adjusted operating income for the second quarter of 2017 was $157.3 million, or 38.0 percent of adjusted revenue compared to $140.5 million, or 36.6 percent of adjusted revenue in 2016’s second quarter, representing a 12.0 percent increase.

 

Adjusted net income for the second quarter of 2017 was $96.2 million, up 21.1 percent compared to $79.4 million in 2016’s second quarter. Adjusted diluted earnings per share in the second quarter of 2017 were $0.46 per share, up 17.9 percent compared to $0.39 per share in the second quarter of 2016.

Highlights:

 

SS&C adjusted revenue for Q2 2017 was $414.1 million, up 7.7 percent from Q2 2016 adjusted revenue of $384.4 million.

 

Adjusted diluted earnings per share were $0.46 for Q2 2017, increasing 17.9 percent from Q2 2016’s $0.39 adjusted diluted earnings per share.

 

For the first six months of 2017, net cash provided by operating activities was $193.8 million, an increase of 39.1 percent.

 

SS&C paid off $208.4 million of debt for the first six months of 2017, bringing our net debt to consolidated EBITDA leverage ratio to 3.45x.

 

“Q2 2017 marks our 21 st straight quarter of revenue growth, growing adjusted revenue 7.7 percent, and, in the first six months we generated $193.8 million in cash flow up 39.1 percent,” says Bill Stone, Chairman and Chief Executive Officer of SS&C Technologies. “SS&C’s continuous investment in our 8,200 strong workforce and a relentless focus on customer service, delivers a superior customer experience.  We have become one of the world's largest financial technology companies and our investments have strengthened our competitive advantage. We have been honored to receive numerous industry awards for technology and service over the past several years, and this quarter SS&C was named to Forbes’ America's Best Midsized Employers.


 

Looking forward we will continue to explore opportunities to reinvent the way we capture, process and deliver investment information.  The various consumers of our output rely on us to stay abreast of new financial instruments, tax and financial reporting requirements, and changing investment strategies.  SS&C’s clients understand our commitment and, during Q2 we spent over $39 million in research and development."

Annual Run Rate Basis

Annual Run Rate Basis (ARRB) recurring revenue, defined as adjusted recurring revenue on an annualized basis, was $1,549.7 million based on adjusted recurring revenue $387.4 million for the second quarter of 2017. This represents an increase of 8.8 percent from $356.1 million and $1,424.3 million run-rate in the same period in 2016 and an increase of 0.1 percent from $387.2 million for the first quarter of 2017, an annual run rate of $1,548.9 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 $193.8 million for the six months ended June 30, 2017, compared to $139.3 million for the same period in 2016, representing a 39.1 percent increase.  SS&C ended the quarter with $90.4 million in cash and cash equivalents and $2,351.2 million in gross debt, for a net debt balance of $2,260.8 million.  SS&C’s leverage ratio as defined in our credit agreement stood at 3.45 times consolidated EBITDA as of June 30, 2017.

Guidance

 

 

 

Q3 2017

 

 

FY 2017

Adjusted Revenue ($M)

 

$420.0 – $428.0

 

 

$1,669.0 – $1,689.0

Adjusted Net Income ($M)

 

$103.5 – $108.0

 

 

$403.0 – $413.0

Cash from Operating Activities ($M)

 

 

 

 

$485.0  – $500.0

Capital Expenditures (% of revenue)

 

 

 

 

2.8% – 3.2%

Diluted Shares (M)

 

212.4 – 213.0

 

 

211.3 – 212.1

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 Q2 2017 earnings call will take place at 5:00 p.m. eastern time today, July 27, 2017. The call will discuss Q2 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 Second Quarter 2017 Conference Call”; conference ID #3714534. A replay will be available after 8:00 p.m. eastern time on July 27, 2017, until midnight on August 3, 2017. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code #3714534. The call will also be available for replay on SS&C’s website after July 27, 2017; access: http://investor.ssctech.com/results.cfm .

 

Certain information contained in this press release relating to, among other things, our financial guidance for the third quarter and full year of 2017 constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Without limiting the foregoing, the words “believes”, “anticipates”, “plans”, “expects”, “estimates”, “projects”, “forecasts”, “may”, “assume”, “anticipates”, “intend”, “will”, “continue”, “opportunity”, “predict”, “potential”, “future”, “guarantee”, “likely”, “target”, “indicate”, “would”, “could” and “should” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words. Such statements reflect management’s best judgment based on factors currently known but are subject to risks and uncertainties, which could cause


actual results to differ materially from those anticipated. Such risks and uncertainties include, but are not limited to, the state of the economy and the financial services industry, the Company’s ability to finalize large client contracts, fluctuations in customer demand for the Company’s products and services, intensity of competition from application vendors, delays in product development, the Company’s ability to control expenses, terrorist activities, exposure to litigation, the Company’s ability to integrate acquired businesses, the effect of the acquisitions on customer demand for the Company’s products and services, the market price of the Company’s stock prevailing from time to time, the Company’s cash flow from operations, general economic conditions, and those risks discussed in the “Risk Factors” section of the Company’s most recent Annual Report on Form 10-K, which is on file with the Securities and Exchange Commission and can also be accessed on our website. The Company cautions investors that it may not update any or all of the foregoing forward-looking statements.

About SS&C Technologies

SS&C is a global provider of investment and financial software-enabled services and software focused exclusively on the global financial services industry. Founded in 1986, SS&C has its headquarters in Windsor, Connecticut and offices around the world. Some 11,000 financial services organizations, from the world’s largest institutions to local firms, manage and account for their investments using SS&C’s products and services. These clients in the aggregate manage over $44 trillion in assets.

Follow SS&C on Twitter, Linkedin and Facebook.

For more information

Patrick Pedonti

Chief Financial Officer

Tel: +1-860-298-4738

E-mail: InvestorRelations@sscinc.com

 

Justine Stone

Investor Relations

Tel: +1-212-367-4705

E-mail: InvestorRelations@sscinc.com


SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software-enabled services

 

$

272,518

 

 

$

244,672

 

 

$

548,970

 

 

$

450,319

 

Maintenance and term licenses

 

 

113,614

 

 

 

103,392

 

 

 

224,171

 

 

 

198,512

 

Total recurring revenues

 

 

386,132

 

 

 

348,064

 

 

 

773,141

 

 

 

648,831

 

Perpetual licenses

 

 

3,822

 

 

 

5,039

 

 

 

6,650

 

 

 

10,254

 

Professional services

 

 

21,026

 

 

 

19,974

 

 

 

38,888

 

 

 

38,123

 

Total non-recurring revenues

 

 

24,848

 

 

 

25,013

 

 

 

45,538

 

 

 

48,377

 

Total revenues

 

 

410,980

 

 

 

373,077

 

 

 

818,679

 

 

 

697,208

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software-enabled services

 

 

158,888

 

 

 

146,243

 

 

 

312,894

 

 

 

259,971

 

Maintenance and term licenses

 

 

47,280

 

 

 

46,460

 

 

 

94,265

 

 

 

93,406

 

Total recurring cost of revenues

 

 

206,168

 

 

 

192,703

 

 

 

407,159

 

 

 

353,377

 

Perpetual licenses

 

 

650

 

 

 

643

 

 

 

1,215

 

 

 

1,141

 

Professional services

 

 

16,874

 

 

 

17,133

 

 

 

32,777

 

 

 

32,645

 

Total non-recurring cost of revenues

 

 

17,524

 

 

 

17,776

 

 

 

33,992

 

 

 

33,786

 

Total cost of revenues

 

 

223,692

 

 

 

210,479

 

 

 

441,151

 

 

 

387,163

 

Gross profit

 

 

187,288

 

 

 

162,598

 

 

 

377,528

 

 

 

310,045

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

30,121

 

 

 

28,535

 

 

 

60,363

 

 

 

58,396

 

Research and development

 

 

39,079

 

 

 

40,827

 

 

 

77,528

 

 

 

77,274

 

General and administrative

 

 

28,103

 

 

 

27,199

 

 

 

59,935

 

 

 

57,894

 

Total operating expenses

 

 

97,303

 

 

 

96,561

 

 

 

197,826

 

 

 

193,564

 

Operating income

 

 

89,985

 

 

 

66,037

 

 

 

179,702

 

 

 

116,481

 

Interest expense, net

 

 

(26,295

)

 

 

(32,846

)

 

 

(55,315

)

 

 

(65,935

)

Other (expense) income, net

 

 

(1,197

)

 

 

12

 

 

 

(1,268

)

 

 

(1,835

)

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

(2,326

)

 

 

 

Income before income taxes

 

 

62,493

 

 

 

33,203

 

 

 

120,793

 

 

 

48,711

 

Provision for income taxes

 

 

11,342

 

 

 

4,982

 

 

 

21,495

 

 

 

13,485

 

Net income

 

$

51,151

 

 

$

28,221

 

 

$

99,298

 

 

$

35,226

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.25

 

 

$

0.14

 

 

$

0.49

 

 

$

0.18

 

Diluted earnings per share

 

$

0.24

 

 

$

0.14

 

 

$

0.47

 

 

$

0.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average number of common shares outstanding

 

 

204,550

 

 

 

198,765

 

 

 

203,966

 

 

 

198,143

 

Diluted weighted average number of common and common equivalent shares outstanding

 

 

211,299

 

 

 

204,916

 

 

 

210,478

 

 

 

204,596

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared and paid per common share

 

$

0.0625

 

 

$

0.0625

 

 

$

0.1250

 

 

$

0.1250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

51,151

 

 

$

28,221

 

 

$

99,298

 

 

$

35,226

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency exchange translation adjustment

 

 

20,966

 

 

 

(26,793

)

 

 

31,745

 

 

 

(17,472

)

Total comprehensive income (loss), net of tax

 

 

20,966

 

 

 

(26,793

)

 

 

31,745

 

 

 

(17,472

)

Comprehensive income

 

$

72,117

 

 

$

1,428

 

 

$

131,043

 

 

$

17,754

 

See Notes to Condensed Consolidated Financial Information.



SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

June 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

90,370

 

 

$

117,558

 

Accounts receivable, net

 

 

235,811

 

 

 

241,307

 

Prepaid expenses and other current assets

 

 

32,875

 

 

 

31,119

 

Prepaid income taxes

 

 

18,032

 

 

 

23,012

 

Restricted cash

 

 

1,880

 

 

 

2,116

 

Total current assets

 

 

378,968

 

 

 

415,112

 

Property, plant and equipment, net

 

 

100,908

 

 

 

80,395

 

Deferred income taxes

 

 

2,136

 

 

 

2,410

 

Goodwill

 

 

3,676,586

 

 

 

3,652,733

 

Intangible and other assets, net

 

 

1,459,803

 

 

 

1,556,321

 

Total assets

 

$

5,618,401

 

 

$

5,706,971

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

37,183

 

 

$

126,144

 

Accounts payable

 

 

32,668

 

 

 

16,490

 

Income taxes payable

 

 

 

 

 

3,473

 

Accrued employee compensation and benefits

 

 

60,846

 

 

 

104,118

 

Interest payable

 

 

16,156

 

 

 

21,470

 

Other accrued expenses

 

 

43,044

 

 

 

53,708

 

Deferred revenue

 

 

234,077

 

 

 

235,222

 

Total current liabilities

 

 

423,974

 

 

 

560,625

 

Long-term debt, net of current portion

 

 

2,261,791

 

 

 

2,374,986

 

Other long-term liabilities

 

 

81,770

 

 

 

59,227

 

Deferred income taxes

 

 

432,688

 

 

 

453,555

 

Total liabilities

 

 

3,200,223

 

 

 

3,448,393

 

Total stockholders’ equity

 

 

2,418,178

 

 

 

2,258,578

 

Total liabilities and stockholders’ equity

 

$

5,618,401

 

 

$

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)

 

 

Six Months Ended June 30,

 

 

 

2017

 

 

2016

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

99,298

 

 

$

35,226

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

117,213

 

 

 

113,440

 

Stock-based compensation expense

 

 

21,278

 

 

 

27,913

 

Income tax benefit related to exercise of stock options

 

 

 

 

 

(23,760

)

Amortization and write-offs of loan origination costs

 

 

5,281

 

 

 

5,312

 

Loss on extinguishment of debt

 

 

963

 

 

 

 

Loss on sale or disposition of property and equipment

 

 

12

 

 

 

150

 

Deferred income taxes

 

 

(14,970

)

 

 

(24,056

)

Provision for doubtful accounts

 

 

3,218

 

 

 

1,257

 

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

 

 

 

 

 

 

 

 

Accounts receivable

 

 

3,411

 

 

 

(13,458

)

Prepaid expenses and other assets

 

 

(1,326

)

 

 

(1,516

)

Accounts payable

 

 

14,895

 

 

 

7,870

 

Accrued expenses

 

 

(54,543

)

 

 

(25,851

)

Income taxes prepaid and payable

 

 

2,562

 

 

 

23,757

 

Deferred revenue

 

 

(3,471

)

 

 

13,052

 

Net cash provided by operating activities

 

 

193,821

 

 

 

139,336

 

Cash flow from investing activities:

 

 

 

 

 

 

 

 

Additions to property and equipment

 

 

(19,368

)

 

 

(13,593

)

Proceeds from sale of property and equipment

 

 

1

 

 

 

43

 

Cash paid for business acquisitions, net of cash acquired

 

 

1,805

 

 

 

(317,554

)

Additions to capitalized software

 

 

(5,636

)

 

 

(3,306

)

Purchase of long-term investment

 

 

 

 

 

(1,000

)

Net cash used in investing activities

 

 

(23,198

)

 

 

(335,410

)

Cash flow from financing activities:

 

 

 

 

 

 

 

 

Cash received from debt borrowings

 

 

45,000

 

 

 

 

Repayments of debt

 

 

(253,400

)

 

 

(155,325

)

Proceeds from exercise of stock options

 

 

35,855

 

 

 

19,212

 

Withholding taxes related to equity award net share settlement

 

 

(3,057

)

 

 

(4,615

)

Income tax benefit related to exercise of stock options

 

 

 

 

 

23,760

 

Purchase of common stock for treasury

 

 

 

 

 

(11

)

Payment of fees related to refinancing activities

 

 

 

 

 

(222

)

Dividends paid on common stock

 

 

(25,521

)

 

 

(24,790

)

Net cash used in financing activities

 

 

(201,123

)

 

 

(141,991

)

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

 

 

3,076

 

 

 

(872

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(27,424

)

 

 

(338,937

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

119,674

 

 

 

436,977

 

Cash, cash equivalents and restricted cash, end of period

 

$

92,250

 

 

$

98,040

 

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 June 30,

 

 

Six Months Ended June 30,

 

(in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenues

 

$

410,980

 

 

$

373,077

 

 

$

818,679

 

 

$

697,208

 

Purchase accounting adjustments to deferred revenue

 

 

3,107

 

 

 

11,335

 

 

 

4,927

 

 

 

30,318

 

Adjusted revenues

 

$

414,087

 

 

$

384,412

 

 

$

823,606

 

 

$

727,526

 

 

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

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Software-enabled services

 

$

272,518

 

 

$

244,672

 

 

$

548,970

 

 

$

450,319

 

Maintenance and term licenses

 

 

113,614

 

 

 

103,392

 

 

 

224,171

 

 

 

198,512

 

Total recurring revenues

 

 

386,132

 

 

 

348,064

 

 

 

773,141

 

 

 

648,831

 

Perpetual licenses

 

 

3,822

 

 

 

5,039

 

 

 

6,650

 

 

 

10,254

 

Professional services

 

 

21,026

 

 

 

19,974

 

 

 

38,888

 

 

 

38,123

 

Total non-recurring revenues

 

 

24,848

 

 

 

25,013

 

 

 

45,538

 

 

 

48,377

 

Total revenues

 

$

410,980

 

 

$

373,077

 

 

$

818,679

 

 

$

697,208

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software-enabled services

 

$

272,518

 

 

$

244,763

 

 

$

548,970

 

 

$

450,549

 

Maintenance and term licenses

 

 

114,916

 

 

 

111,324

 

 

 

225,679

 

 

 

221,274

 

Total adjusted recurring revenues

 

 

387,434

 

 

 

356,087

 

 

 

774,649

 

 

 

671,823

 

Perpetual licenses

 

 

3,822

 

 

 

5,039

 

 

 

6,650

 

 

 

10,254

 

Professional services

 

 

22,831

 

 

 

23,286

 

 

 

42,307

 

 

 

45,449

 

Total adjusted non-recurring revenues

 

 

26,653

 

 

 

28,325

 

 

 

48,957

 

 

 

55,703

 

Total adjusted revenues

 

$

414,087

 

 

$

384,412

 

 

$

823,606

 

 

$

727,526

 

 

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 June 30,

 

 

Six Months Ended June 30,

 

(in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Operating income

 

$

89,985

 

 

$

66,037

 

 

$

179,702

 

 

$

116,481

 

Amortization of intangible assets

 

 

52,742

 

 

 

51,995

 

 

 

105,150

 

 

 

101,675

 

Stock-based compensation

 

 

10,378

 

 

 

12,566

 

 

 

21,278

 

 

 

27,913

 

Capital-based taxes

 

 

375

 

 

 

 

 

 

750

 

 

 

472

 

Purchase accounting adjustments (1)

 

 

2,653

 

 

 

8,630

 

 

 

3,005

 

 

 

24,258

 

Other (2)

 

 

1,212

 

 

 

1,301

 

 

 

2,896

 

 

 

4,919

 

Adjusted operating income

 

$

157,345

 

 

$

140,529

 

 

$

312,781

 

 

$

275,718

 

 

(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 infre quently 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 June 30,

 

 

Six Months Ended June 30,

 

 

Twelve Months Ended June 30,

 

(in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2017

 

Net income

 

$

51,151

 

 

$

28,221

 

 

$

99,298

 

 

$

35,226

 

 

$

195,068

 

Interest expense, net

 

 

26,295

 

 

 

32,846

 

 

 

55,315

 

 

 

65,935

 

 

 

117,834

 

Provision for income tax

 

 

11,342

 

 

 

4,982

 

 

 

21,495

 

 

 

13,485

 

 

 

40,630

 

Depreciation and amortization

 

 

58,656

 

 

 

58,167

 

 

 

117,213

 

 

 

113,440

 

 

 

232,456

 

EBITDA

 

 

147,444

 

 

 

124,216

 

 

 

293,321

 

 

 

228,086

 

 

 

585,988

 

Stock-based compensation

 

 

10,378

 

 

 

12,566

 

 

 

21,278

 

 

 

27,913

 

 

 

43,929

 

Capital-based taxes

 

 

375

 

 

 

 

 

 

750

 

 

 

472

 

 

 

1,760

 

Acquired EBITDA and cost savings (1)

 

 

81

 

 

 

1,046

 

 

 

889

 

 

 

5,814

 

 

 

6,274

 

Non-cash portion of straight-line rent expense

 

 

478

 

 

 

769

 

 

 

546

 

 

 

1,553

 

 

 

1,191

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

2,326

 

 

 

 

 

 

2,326

 

Purchase accounting adjustments (2)

 

 

2,653

 

 

 

8,630

 

 

 

3,005

 

 

 

24,258

 

 

 

10,366

 

Other (3)

 

 

2,409

 

 

 

1,289

 

 

 

4,164

 

 

 

6,754

 

 

 

3,301

 

Consolidated EBITDA

 

$

163,818

 

 

$

148,516

 

 

$

326,279

 

 

$

294,850

 

 

$

655,135

 

Less:  acquired EBITDA

 

 

(81

)

 

 

(1,046

)

 

 

(889

)

 

 

(5,814

)

 

 

(6,274

)

Adjusted Consolidated EBITDA

 

$

163,737

 

 

$

147,470

 

 

$

325,390

 

 

$

289,036

 

 

$

648,861

 

 

(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 June 30,

 

 

Six Months Ended June 30,

 

(in thousands, except per share data)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

GAAP – Net income

 

$

51,151

 

 

$

28,221

 

 

$

99,298

 

 

$

35,226

 

Plus: Amortization of intangible assets

 

 

52,742

 

 

 

51,995

 

 

 

105,150

 

 

 

101,675

 

Plus: Amortization of deferred financing costs and original issue discount

 

 

2,625

 

 

 

2,659

 

 

 

5,281

 

 

 

5,312

 

Plus: Stock-based compensation

 

 

10,378

 

 

 

12,566

 

 

 

21,278

 

 

 

27,913