SS&C Technologies Holdings, Inc.
SS&C Technologies Holdings Inc (Form: 8-K, Received: 02/15/2017 16:26:44)

 

 

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): February 15, 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))

 

 

 


Item 2.02. Results of Operations and Financial Condition

On February 15, 2017 , SS&C Technologies Holdings, Inc. (the “Company”) announced its financial results for the quarter and fiscal year ended December 31, 2016. 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 February 15, 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: February 15, 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 February 15, 2017

 

Exhibit 99.1

 

Q4 GAAP revenue $400.9 million, Fully Diluted GAAP Earnings Per Share $0.28,

Adjusted revenue $404.6 million, Adjusted Diluted Earnings Per Share $0.46

 

WINDSOR, CT, February 15, 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 fourth quarter and full year ended December 31, 2016.

GAAP Results

SS&C reported GAAP revenue of $400.9 million for the fourth quarter of 2016, compared to $300.9 million in the fourth quarter of 2015. GAAP revenue for the year ended December 31, 2016 was $1,481.4 million, increasing from $1,000.3 million in 2015. GAAP operating income for the fourth quarter of 2016 was $95.3 million, compared to $48.3 million in 2015’s fourth quarter. GAAP operating income for the year ended December 31, 2016 was $288.7 million, an increase from $164.7 million for 2015. On a fully diluted GAAP basis, earnings per share in the fourth quarter of 2016 was $0.28 compared to fully diluted GAAP earnings per share of $0.06 in the fourth quarter of 2015. On a fully diluted GAAP basis, earnings per share for the year ended December 31, 2016 was $0.64, up from 2015’s $0.22 per share.

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

Adjusted revenue in the fourth quarter of 2016 was $404.6 million, up 24.2 percent compared to $325.8 million in the fourth quarter of 2015. Adjusted revenue for the year ended December 31, 2016 was $1,524.0 million, up 44.3 percent over $1,056.4 million for 2015. Adjusted operating income in the fourth quarter of 2016 was $160.4 million, or 39.6 percent of adjusted revenue. This represents a 20.3 percent increase compared to adjusted operating income of $133.3 million and 40.9 percent of adjusted revenue in the fourth quarter of 2015. Adjusted operating income for the year ended December 31, 2016 was $586.6 million, up 39.2 percent from adjusted operating income of $421.5 million in 2015.

Adjusted net income for the fourth quarter of 2016 was $95.2 million, up 29.3 percent compared to $73.6 million in 2015’s fourth quarter. Adjusted net income for the year ended December 31, 2016 was $337.5 million, up 33.1 percent compared to $253.6 million for 2015. Adjusted diluted earnings per share in the fourth quarter of 2016 was $0.46 per share, up 27.8 percent compared to $0.36 per share in the fourth quarter of 2015. Adjusted diluted earnings per share for the year ended December 31, 2016 was $1.64, up 23.3 percent compared to $1.33 for 2015.

Highlights:

 

SS&C adjusted revenue for Q4 2016 was $404.6 million, up 24.2 percent from Q4 2015 revenue of $325.8 million.

 

Adjusted diluted earnings per share was $0.46 for Q4 2016, increasing 27.8 percent from Q4 2015’s $0.36 adjusted diluted earnings per share.

 

Q4 2016 net cash from operating activities was $181.4 million, an increase of 64.8 percent.

 

Net cash from operating activities increased 81.4 percent to $418.4 million for the twelve months ended December 31, 2016.

 

SS&C closed Wells Fargo Global Fund Services and Conifer Financial Services acquisitions in December 2016, adding a total of $159.9 billion in assets under administration.


 

SS&C paid off $263.4 million of debt net of the revolver draw down which was used to fund the fourth quarter acquisitions, bringing ou r net debt to consolidated EBITDA leverage ratio to 3 . 93 x.

“SS&C closed out 2016 with over $1.5 billion in adjusted revenues, and adjusted consolidated EBITDA margins above 40 percent” says Bill Stone, Chairman and Chief Executive Officer. “Our year is marked by our acquisitions of Citi Alternative Investor Services, Salentica, Wells Fargo Global Fund Services, and Conifer Financial Services – expanding our reach and capability in fund administration and RIAs. The talent we acquired, both organically and through acquisitions, increase our market opportunity and our ability to win bigger, more complex mandates from top financial institutions.”

Annual Run Rate Basis

Annual Run Rate Basis (ARRB) recurring revenue, defined as adjusted recurring revenue on an annualized basis, was $1,473.8 million based on adjusted recurring revenue $368.5 million for the fourth quarter of 2016. This represents an increase of 24.9 percent from $295.0 million and $1,180.0 million run-rate in the same period in 2015 and an increase of 2.3 percent from $360.3 million for the third quarter of 2016, an annual run rate of $1,441.3 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Operating Cash Flow

SS&C ended the year with $117.6 million in cash, and $2,559.6 million in gross debt for a net debt balance of $2,442.0 million. Net cash from operating activities was $181.4 million in Q4 2016, a 64.8 percent increase from $110.1 million in Q4 2015. For the full year ended December 31, 2016, SS&C generated net cash from operating activities of $418.4 million, compared to $230.6 million for the same period in 2015, an 81.4 percent increase. SS&C’s leverage ratio as defined in our credit agreement stood at 3.93 times consolidated EBITDA as of December 31, 2016.

Guidance

 

 

 

Q1 2017

 

 

FY 2017

Adjusted Revenue ($M)

 

$402.5 – $408.5

 

 

$1,655.0 – $1,685.0

Adjusted Net Income ($M)

 

$89.0 – $92.5

 

 

$392.0 – $409.0

Cash from Operating Activities ($M)

 

 

 

 

$480.0  – $500.0

Capital Expenditures (% of revenue)

 

 

 

 

2.5% – 3.0%

Diluted Shares (M)

 

207.5 – 208.0

 

 

208.0 – 210.0

Effective Income Tax Rate (%)

 

 

29%

 

 

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 Q4 and Full Year 2016 earnings call will take place at 5:00 p.m. eastern time today, February 15, 2017. The call will discuss Q4 and Full Year 2016 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 Fourth Quarter and Full Year 2017 Conference Call”; conference ID #53329711. A replay will be available after 8:00 p.m. eastern time on February 15, 2017, until midnight on February 22, 2017. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code #53329711. The call will also be available for replay on SS&C’s website after February 15, 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 first 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 Operation

(in thousands, except per share data)

(unaudited)

 

 

Three Months Ended December 31,

 

 

Twelve Months Ended December 31,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software-enabled services

 

$

257,700

 

 

$

185,736

 

 

$

956,791

 

 

$

670,170

 

Maintenance and term licenses

 

 

109,273

 

 

 

87,373

 

 

 

414,710

 

 

 

246,422

 

Total recurring revenues

 

 

366,973

 

 

 

273,109

 

 

 

1,371,501

 

 

 

916,592

 

Perpetual licenses

 

 

9,317

 

 

 

8,941

 

 

 

23,960

 

 

 

31,467

 

Professional services

 

 

24,634

 

 

 

18,838

 

 

 

85,975

 

 

 

52,226

 

Total non-recurring revenues

 

 

33,951

 

 

 

27,779

 

 

 

109,935

 

 

 

83,693

 

Total revenues

 

 

400,924

 

 

 

300,888

 

 

 

1,481,436

 

 

 

1,000,285

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software-enabled services

 

 

141,311

 

 

 

100,093

 

 

 

544,356

 

 

 

373,394

 

Maintenance and term licenses

 

 

45,298

 

 

 

43,969

 

 

 

184,162

 

 

 

113,865

 

Total recurring cost of revenues

 

 

186,609

 

 

 

144,062

 

 

 

728,518

 

 

 

487,259

 

Perpetual licenses

 

 

650

 

 

 

35

 

 

 

2,399

 

 

 

3,116

 

Professional services

 

 

18,040

 

 

 

14,579

 

 

 

69,572

 

 

 

41,975

 

Total non-recurring cost of revenues

 

 

18,690

 

 

 

14,614

 

 

 

71,971

 

 

 

45,091

 

Total cost of revenues

 

 

205,299

 

 

 

158,676

 

 

 

800,489

 

 

 

532,350

 

Gross profit

 

 

195,625

 

 

 

142,212

 

 

 

680,947

 

 

 

467,935

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

31,374

 

 

 

30,550

 

 

 

117,098

 

 

 

94,950

 

Research and development

 

 

37,714

 

 

 

35,898

 

 

 

152,689

 

 

 

110,415

 

General and administrative

 

 

31,226

 

 

 

27,462

 

 

 

122,465

 

 

 

97,832

 

Total operating expenses

 

 

100,314

 

 

 

93,910

 

 

 

392,252

 

 

 

303,197

 

Operating income

 

 

95,311

 

 

 

48,302

 

 

 

288,695

 

 

 

164,738

 

Interest expense, net

 

 

(30,871

)

 

 

(33,693

)

 

 

(128,454

)

 

 

(77,357

)

Other income (expense), net

 

 

2,555

 

 

 

(1,404

)

 

 

3,375

 

 

 

3,878

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

(30,417

)

Income before income taxes

 

 

66,995

 

 

 

13,205

 

 

 

163,616

 

 

 

60,842

 

Provision for income taxes

 

 

9,972

 

 

 

1,107

 

 

 

32,620

 

 

 

17,980

 

Net income

 

$

57,023

 

 

$

12,098

 

 

$

130,996

 

 

$

42,862

 

Basic earnings per share

 

$

0.28

 

 

$

0.06

 

 

$

0.65

 

 

$

0.24

 

Basic weighted average number of common shares

   outstanding

 

 

202,895

 

 

 

195,320

 

 

 

200,252

 

 

 

182,196

 

Diluted earnings per share

 

$

0.28

 

 

$

0.06

 

 

$

0.64

 

 

$

0.22

 

Diluted weighted average number of common and common

   equivalent shares outstanding

 

 

207,207

 

 

 

203,906

 

 

 

205,793

 

 

 

190,896

 

Net income

 

$

57,023

 

 

$

12,098

 

 

$

130,996

 

 

$

42,862

 

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency exchange translation adjustment

 

 

(26,371

)

 

 

(16,633

)

 

 

(55,903

)

 

 

(68,049

)

Total comprehensive loss, net of tax

 

 

(26,371

)

 

 

(16,633

)

 

 

(55,903

)

 

 

(68,049

)

Comprehensive income (loss)

 

$

30,652

 

 

$

(4,535

)

 

$

75,093

 

 

$

(25,187

)

See Notes to Condensed Consolidated Financial Information.



SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

  

 

December 31,

 

 

December 31,

 

 

 

2016

 

 

2015

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

117,558

 

 

$

434,159

 

Accounts receivable, net

 

 

241,307

 

 

 

169,951

 

Prepaid expenses and other current assets

 

 

31,119

 

 

 

27,511

 

Prepaid income taxes

 

 

23,012

 

 

 

40,627

 

Restricted cash

 

 

2,116

 

 

 

2,818

 

Total current assets

 

 

415,112

 

 

 

675,066

 

Property, plant and equipment, net

 

 

80,395

 

 

 

67,143

 

Deferred income taxes

 

 

2,410

 

 

 

2,199

 

Goodwill

 

 

3,652,733

 

 

 

3,549,212

 

Intangible and other assets, net

 

 

1,556,321

 

 

 

1,508,622

 

Total assets

 

$

5,706,971

 

 

$

5,802,242

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

126,144

 

 

$

32,281

 

Accounts payable

 

 

16,490

 

 

 

11,957

 

Income taxes payable

 

 

3,473

 

 

 

1,428

 

Accrued employee compensation and benefits

 

 

104,118

 

 

 

83,894

 

Interest payable

 

 

21,470

 

 

 

28,903

 

Other accrued expenses

 

 

53,708

 

 

 

36,231

 

Deferred revenue

 

 

235,222

 

 

 

222,024

 

Total current liabilities

 

 

560,625

 

 

 

416,718

 

Long-term debt, net of current portion

 

 

2,374,986

 

 

 

2,719,070

 

Other long-term liabilities

 

 

59,227

 

 

 

51,434

 

Deferred income taxes

 

 

453,555

 

 

 

509,574

 

Total liabilities

 

 

3,448,393

 

 

 

3,696,796

 

Total stockholders’ equity

 

 

2,258,578

 

 

 

2,105,446

 

Total liabilities and stockholders’ equity

 

$

5,706,971

 

 

$

5,802,242

 

See Notes to Condensed Consolidated Financial Information.


SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

  

 

For the Year Ended December 31,

 

 

 

2016

 

 

2015

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

130,996

 

 

$

42,862

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

228,683

 

 

 

150,834

 

Stock-based compensation expense

 

 

50,564

 

 

 

44,079

 

Income tax benefit related to exercise of stock options

 

 

(46,207

)

 

 

(32,960

)

Amortization and write-offs of loan origination costs

 

 

10,680

 

 

 

8,126

 

Loss on extinguishment of debt

 

 

 

 

 

3,954

 

Loss on sale or disposition of property and equipment

 

 

162

 

 

 

336

 

Deferred income taxes

 

 

(47,836

)

 

 

(39,806

)

Provision for doubtful accounts

 

 

3,486

 

 

 

1,137

 

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

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(10,850

)

 

 

(12,160

)

Prepaid expenses and other assets

 

 

(2,844

)

 

 

(6,019

)

Accounts payable

 

 

(1,300

)

 

 

(5,586

)

Accrued expenses

 

 

20,679

 

 

 

4,073

 

Income taxes prepaid and payable

 

 

65,117

 

 

 

11,514

 

Deferred revenue

 

 

17,077

 

 

 

60,240

 

Net cash provided by operating activities

 

 

418,407

 

 

 

230,624

 

Cash flow from investing activities:

 

 

 

 

 

 

 

 

Additions to property and equipment

 

 

(27,926

)

 

 

(13,600

)

Proceeds from sale of property and equipment

 

 

71

 

 

 

64

 

Cash paid for business acquisitions, net of cash acquired

 

 

(457,511

)

 

 

(2,730,956

)

Additions to capitalized software

 

 

(9,621

)

 

 

(4,273

)

Purchase of long-term investment

 

 

(1,000

)

 

 

 

Net changes in restricted cash

 

 

700

 

 

 

453

 

Net cash used in investing activities

 

 

(495,287

)

 

 

(2,748,312

)

Cash flow from financing activities:

 

 

 

 

 

 

 

 

Cash received from debt borrowings, net of original issue discount

 

 

120,000

 

 

 

3,068,075

 

Repayments of debt

 

 

(383,436

)

 

 

(903,448

)

Proceeds from exercise of stock options

 

 

39,239

 

 

 

30,092

 

Withholding taxes related to equity award net share settlement

 

 

(7,430

)

 

 

(6,939

)

Income tax benefit related to exercise of stock options

 

 

46,207

 

 

 

32,960

 

Proceeds from common stock issuance, net

 

 

 

 

 

717,802

 

Purchase of common stock for treasury

 

 

(15

)

 

 

 

Payment of fees related to refinancing activities

 

 

(519

)

 

 

(46,025

)

Dividends paid on common stock

 

 

(50,140

)

 

 

(45,451

)

Net cash (used in) provided by financing activities

 

 

(236,094

)

 

 

2,847,066

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(3,627

)

 

 

(4,796

)

Net (decrease) increase in cash and cash equivalents

 

 

(316,601

)

 

 

324,582

 

Cash and cash equivalents, beginning of period

 

 

434,159

 

 

 

109,577

 

Cash and cash equivalents, end of period

 

$

117,558

 

 

$

434,159

 

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 is 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 December 31,

 

 

Twelve Months Ended December 31,

 

(in thousands)

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Revenues

 

$

400,924

 

 

$

300,888

 

 

$

1,481,436

 

 

$

1,000,285

 

Purchase accounting adjustments to deferred revenue

 

 

3,723

 

 

 

24,923

 

 

 

42,603

 

 

 

56,154

 

Adjusted revenues

 

$

404,647

 

 

$

325,811

 

 

$

1,524,039

 

 

$

1,056,439

 

 

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

 

  

 

Three Months Ended December 31,

 

 

Twelve Months Ended December 31,

 

(in thousands)

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Software-enabled services

 

$

257,700

 

 

$

185,736

 

 

$

956,791

 

 

$

670,170

 

Maintenance and term licenses

 

 

109,273

 

 

 

87,373

 

 

 

414,710

 

 

 

246,422

 

Total recurring revenues

 

 

366,973

 

 

 

273,109

 

 

 

1,371,501

 

 

 

916,592

 

Perpetual licenses

 

 

9,317

 

 

 

8,941

 

 

 

23,960

 

 

 

31,467

 

Professional services

 

 

24,634

 

 

 

18,838

 

 

 

85,975

 

 

 

52,226

 

Total non-recurring revenues

 

 

33,951

 

 

 

27,779

 

 

 

109,935

 

 

 

83,693

 

Total revenues

 

$

400,924

 

 

$

300,888

 

 

$

1,481,436

 

 

$

1,000,285

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software-enabled services

 

$

257,706

 

 

$

186,151

 

 

$

957,064

 

 

$

670,585

 

Maintenance and term licenses

 

 

110,744

 

 

 

108,849

 

 

 

443,545

 

 

 

295,796

 

Total adjusted recurring revenues

 

 

368,450

 

 

 

295,000

 

 

 

1,400,609

 

 

 

966,381

 

Perpetual licenses

 

 

9,317

 

 

 

8,941

 

 

 

23,960

 

 

 

31,467

 

Professional services

 

 

26,880

 

 

 

21,870

 

 

 

99,470

 

 

 

58,591

 

Total adjusted non-recurring revenues

 

 

36,197

 

 

 

30,811

 

 

 

123,430

 

 

 

90,058

 

Total adjusted revenues

 

$

404,647

 

 

$

325,811

 

 

$

1,524,039

 

 

$

1,056,439

 

 

Note 2. Reconciliation of Operating Income to Adjusted Operating Income

Adjusted operating income represents operating income adjusted for amortization of acquisition-related intangible assets, stock-based compensation, 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 December 31,

 

 

Twelve Months Ended December 31,

 

(in thousands)

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Operating income

 

$

95,311

 

 

$

48,302

 

 

$

288,695

 

 

$

164,738

 

Amortization of intangible assets

 

 

51,731

 

 

 

44,131

 

 

 

204,945

 

 

 

131,913

 

Stock-based compensation

 

 

10,162

 

 

 

12,644

 

 

 

50,564

 

 

 

44,079

 

Capital-based taxes

 

 

10

 

 

 

1,464

 

 

 

1,482

 

 

 

828

 

Unusual or non-recurring charges (1)

 

 

1,381

 

 

 

4,776

 

 

 

9,266

 

 

 

30,027

 

Purchase accounting adjustments (2)

 

 

1,788

 

 

 

21,954

 

 

 

31,619

 

 

 

49,927

 

Adjusted operating income

 

$

160,383

 

 

$

133,271

 

 

$

586,571

 

 

$

421,512

 


 

(1)

Unusual or non-recurring charges include proceeds from legal and other settlements, severance expenses, transaction costs and other one-time expenses, such as expenses associated with facilities consolidations and 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.

 

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 2016, 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 December 31,

 

 

Twelve Months Ended December 31,

 

(in thousands)

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Net income

 

$

57,023

 

 

$

12,098

 

 

$

130,996

 

 

$

42,862

 

Interest expense, net

 

 

30,871

 

 

 

33,693

 

 

 

128,454

 

 

 

77,357

 

Income tax provision

 

 

9,972

 

 

 

1,107

 

 

 

32,620

 

 

 

17,980

 

Depreciation and amortization

 

 

57,773

 

 

 

49,994

 

 

 

228,683

 

 

 

150,834

 

EBITDA

 

 

155,639

 

 

 

96,892

 

 

 

520,753

 

 

 

289,033

 

Stock-based compensation

 

 

10,162

 

 

 

12,644

 

 

 

50,564

 

 

 

44,079

 

Capital-based taxes

 

 

10

 

 

 

1,464

 

 

 

1,482

 

 

 

828

 

Acquired EBITDA and cost savings (1)

 

 

726

 

 

 

3,175

 

 

 

9,094

 

 

 

109,492

 

Unusual or non-recurring charges (2)

 

 

(1,174

)

 

 

6,179

 

 

 

5,891

 

 

 

26,148

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

30,417

 

Purchase accounting adjustments (3)

 

 

1,788

 

 

 

21,954

 

 

 

31,619

 

 

 

49,927

 

Other (4)

 

 

376

 

 

 

630

 

 

 

2,198

 

 

 

1,529

 

Consolidated EBITDA

 

$

167,527

 

 

$

142,938

 

 

$

621,601

 

 

$

551,453

 

Less:  acquired EBITDA

 

 

(726

)

 

 

(3,175

)

 

 

(9,094

)

 

 

(109,492

)

Adjusted Consolidated EBITDA

 

$

166,801

 

 

$

139,763

 

 

$

612,507

 

 

$

441,961

 

 

(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)

Unusual or non-recurring charges include foreign currency gains and losses, proceeds from legal and other settlements, severance expenses, transaction costs and other one-time expenses, such as expenses associated with the facilities consolidations, acquisitions and the sale of fixed assets.

(3)

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.

(4)

Other includes the non-cash portion of straight-line rent expense.

 

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 December 31,

 

 

Twelve Months Ended December 31,

 

(in thousands, except per share data)

 

2016

 

 

2015

 

 

2016

 

 

2015

 

GAAP – Net income

 

$

57,023

 

 

$

12,098

 

 

$

130,996

 

 

$

42,862

 

Plus: Amortization of intangible assets

 

 

51,731

 

 

 

44,131

 

 

 

204,945

 

 

 

131,913

 

Plus: Amortization of deferred financing costs and original issue discount

 

 

2,686

 

 

 

2,653

 

 

 

10,680

 

 

 

8,126

 

Plus: Stock-based compensation

 

 

10,162

 

 

 

12,644

 

 

 

50,564

 

 

 

44,079

 

Plus: Capital-based taxes

 

 

10

 

 

 

1,464

 

 

 

1,482

 

 

 

828

 

Plus: Unusual and non-recurring items (1)

 

 

(1,174

)

 

 

6,179

 

 

 

5,891

 

 

 

26,148

 

Plus: Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

30,417

 

Plus: Purchase accounting adjustments (2)

 

 

1,788

 

 

 

21,954

 

 

 

31,619

 

 

 

49,927

 

Income tax effect (3)

 

 

(27,043

)

 

 

(27,517

)

 

 

(98,643

)

 

 

(80,657

)

Adjusted net income

 

$

95,183

 

 

$

73,606

 

 

$

337,534

 

 

$

253,643

 

Adjusted diluted earnings per share

 

$

0.46

 

 

$

0.36

 

 

$

1.64

 

 

$

1.33

 

GAAP diluted earnings per share

 

$

0.28