SS&C Technologies Holdings, Inc.
SS&C Technologies Holdings Inc (Form: 8-K, Received: 10/25/2017 16:11:22)

 

 

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): October 25, 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 October 25, 2017, SS&C Technologies Holdings, Inc. (the “Company”) announced its financial results for the quarter ended September 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 October 25, 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: October 25, 2017

 

By:

/s/ Patrick J. Pedonti

 

 

 

Patrick J. Pedonti

 

 

 

Senior Vice President and Chief Financial Officer

 

 

Exhibit 99.1

 

 

 

 

 

SS&C Technologies Reports Third Quarter 2017 Earnings

 

 

 

 

Q3 2017 GAAP revenue $418.3 million, up 9.1 percent, Fully Diluted GAAP Earnings Per Share $0.30, up 57.9 percent

Adjusted revenue $419.6 million, up 7.1 percent, Adjusted Diluted Earnings Per Share $0.50, up 19.0 percent

 

WINDSOR, CT, October 25, 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 third quarter ended September 30, 2017.

GAAP Results

SS&C reported GAAP revenue of $418.3 million for the third quarter of 2017, up 9.1 percent compared to $383.3 million in the third quarter of 2016. GAAP operating income for the third quarter of 2017 was $103.9 million, or 24.8 percent of GAAP revenue compared to $76.9 million, or 20.1 percent of GAAP revenue in 2016’s third quarter, representing a 35.1 percent increase.

 

GAAP net income for the third quarter of 2017 was $64.2 million, up 65.8 percent compared to $38.7 million in 2016’s third quarter. On a fully diluted GAAP basis, earnings per share in the third quarter of 2017 were $0.30 per share, up 57.9 percent compared to $0.19 per share on a fully diluted GAAP basis in the third quarter of 2016.

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

Adjusted revenue was $419.6 million for the third quarter of 2017, up 7.1 percent compared to $391.9 million in the third quarter of 2016. Adjusted operating income for the third quarter of 2017 was $170.1 million, or 40.5 percent of adjusted revenue compared to $150.5 million, or 38.4 percent of adjusted revenue in 2016’s third quarter, representing a 13.1 percent increase.

 

Adjusted net income for the third quarter of 2017 was $105.5 million, up 20.6 percent compared to $87.5 million in 2016’s third quarter. Adjusted diluted earnings per share in the third quarter of 2017 were $0.50 per share, up 19.0 percent compared to $0.42 per share in the third quarter of 2016.

Highlights:

 

Adjusted diluted earnings per share were $0.50 for Q3 2017, increasing 19.0 percent from Q3 2016’s $0.42 adjusted diluted earnings per share.

 

For the nine months of 2017, net cash provided by operating activities was $307.1 million, an increase of 29.6 percent.

 

Adjusted consolidated EBITDA increased 14.2 percent to $178.8 million in Q3 2017. Adjusted consolidated EBITDA margin was 42.6 percent for the quarter.

 

SS&C paid off $292.8 million of debt in the nine months of 2017, bringing our net debt to consolidated EBITDA leverage ratio to 3.19x.

“We are pleased with our ability to report adjusted diluted earnings per share up 19.0 percent on a 7.1 percent increase in adjusted revenue” says Bill Stone, Chairman and Chief Executive Officer of SS&C Technologies. “We had many deals push to Q4; nevertheless we ramped up our margins with 42.6 percent adjusted consolidated EBITDA margin across the entire business.  We expect a solid Q4.”


Annual Run Rate Basis

Annual Run Rate Basis (ARRB) recurring revenue, defined as adjusted recurring revenue on an annualized basis, was $1,580.1 million based on adjusted recurring revenue $395.0 million for the third quarter of 2017. This represents an increase of 9.6 percent from $360.3 million and $1,441.3 million run-rate in the same period in 2016 and an increase of 2.0 percent from $387.4 million for the second quarter of 2017, an annual run rate of $1,549.7 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 $307.1 million for the nine months ended September 30, 2017, compared to $237.0 million for the same period in 2016, representing a 29.6 percent increase.  SS&C ended the third quarter with $103.3 million in cash and cash equivalents and $2,266.8 million in gross debt, for a net debt balance of $2,163.5 million.  SS&C’s consolidated net leverage ratio as defined in our credit agreement stood at 3.19 times consolidated EBITDA as of September 30, 2017.

Guidance

 

 

 

Q4 2017

 

 

FY 2017

Adjusted Revenue ($M)

 

$427.0 – $437.0

 

 

$1,670.2 – $1,680.2

Adjusted Net Income ($M)

 

$110.0 – $113.9

 

 

$404.7 – $408.6

Cash from Operating Activities ($M)

 

 

 

 

$485.0 – $500.0

Capital Expenditures (% of revenue)

 

 

 

 

2.9% – 3.0%

Diluted Shares (M)

 

213.2 – 212.8

 

 

211.7 – 211.5

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 Q3 2017 earnings call will take place at 5:00 p.m. eastern time today, October 25, 2017. The call will discuss Q3 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 Third Quarter 2017 Conference Call”; conference ID #95952330. A replay will be available after 8:00 p.m. eastern time on October 25, 2017, until midnight on November 2, 2017. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code #95952330. The call will also be available for replay on SS&C’s website after October 25, 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 fourth 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. Forward-looking statements include statements concerning plans, objectives, goals, strategies, expectations, intentions, projections, developments, future events, performance, underlying assumptions, and other statements that are other than statements of historical facts. 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. Forward-looking statements speak only as of the date on which they are made and, except to the extent required by applicable securities laws, we undertake no obligation to update or revise any 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 September 30,

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software-enabled services

 

$

282,133

 

 

$

248,772

 

 

$

831,103

 

 

$

699,091

 

Maintenance and term licenses

 

 

112,819

 

 

 

106,925

 

 

 

336,990

 

 

 

305,437

 

Total recurring revenues

 

 

394,952

 

 

 

355,697

 

 

 

1,168,093

 

 

 

1,004,528

 

Perpetual licenses

 

 

3,576

 

 

 

4,389

 

 

 

10,226

 

 

 

14,643

 

Professional services

 

 

19,723

 

 

 

23,218

 

 

 

58,611

 

 

 

61,341

 

Total non-recurring revenues

 

 

23,299

 

 

 

27,607

 

 

 

68,837

 

 

 

75,984

 

Total revenues

 

 

418,251

 

 

 

383,304

 

 

 

1,236,930

 

 

 

1,080,512

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software-enabled services

 

 

155,497

 

 

 

143,074

 

 

 

468,391

 

 

 

403,045

 

Maintenance and term licenses

 

 

46,662

 

 

 

45,458

 

 

 

140,927

 

 

 

138,864

 

Total recurring cost of revenues

 

 

202,159

 

 

 

188,532

 

 

 

609,318

 

 

 

541,909

 

Perpetual licenses

 

 

642

 

 

 

608

 

 

 

1,857

 

 

 

1,749

 

Professional services

 

 

17,001

 

 

 

18,887

 

 

 

49,778

 

 

 

51,532

 

Total non-recurring cost of revenues

 

 

17,643

 

 

 

19,495

 

 

 

51,635

 

 

 

53,281

 

Total cost of revenues

 

 

219,802

 

 

 

208,027

 

 

 

660,953

 

 

 

595,190

 

Gross profit

 

 

198,449

 

 

 

175,277

 

 

 

575,977

 

 

 

485,322

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

28,181

 

 

 

27,328

 

 

 

88,544

 

 

 

85,724

 

Research and development

 

 

37,376

 

 

 

37,701

 

 

 

114,904

 

 

 

114,975

 

General and administrative

 

 

28,975

 

 

 

33,345

 

 

 

88,910

 

 

 

91,239

 

Total operating expenses

 

 

94,532

 

 

 

98,374

 

 

 

292,358

 

 

 

291,938

 

Operating income

 

 

103,917

 

 

 

76,903

 

 

 

283,619

 

 

 

193,384

 

Interest expense, net

 

 

(26,250

)

 

 

(31,648

)

 

 

(81,565

)

 

 

(97,583

)

Other (expense) income, net

 

 

(2,535

)

 

 

2,655

 

 

 

(3,803

)

 

 

820

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

(2,326

)

 

 

 

Income before income taxes

 

 

75,132

 

 

 

47,910

 

 

 

195,925

 

 

 

96,621

 

Provision for income taxes

 

 

10,905

 

 

 

9,163

 

 

 

32,400

 

 

 

22,648

 

Net income

 

$

64,227

 

 

$

38,747

 

 

$

163,525

 

 

$

73,973

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.31

 

 

$

0.19

 

 

$

0.80

 

 

$

0.37

 

Diluted earnings per share

 

$

0.30

 

 

$

0.19

 

 

$

0.77

 

 

$

0.36

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average number of common shares outstanding

 

 

205,568

 

 

 

201,782

 

 

 

204,506

 

 

 

199,365

 

Diluted weighted average number of common and common equivalent shares outstanding

 

 

212,359

 

 

 

206,635

 

 

 

211,080

 

 

 

205,334

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared and paid per common share

 

$

0.07

 

 

$

0.0625

 

 

$

0.195

 

 

$

0.1875

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

64,227

 

 

$

38,747

 

 

$

163,525

 

 

$

73,973

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency exchange translation adjustment

 

 

19,951

 

 

 

(12,060

)

 

 

51,696

 

 

 

(29,532

)

Total comprehensive income (loss), net of tax

 

 

19,951

 

 

 

(12,060

)

 

 

51,696

 

 

 

(29,532

)

Comprehensive income

 

$

84,178

 

 

$

26,687

 

 

$

215,221

 

 

$

44,441

 

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,

 

 

 

2017

 

 

2016

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

103,279

 

 

$

117,558

 

Accounts receivable, net

 

 

238,677

 

 

 

241,307

 

Prepaid expenses and other current assets

 

 

32,688

 

 

 

31,119

 

Prepaid income taxes

 

 

13,832

 

 

 

23,012

 

Restricted cash

 

 

592

 

 

 

2,116

 

Total current assets

 

 

389,068

 

 

 

415,112

 

Property, plant and equipment, net

 

 

103,580

 

 

 

80,395

 

Deferred income taxes

 

 

2,166

 

 

 

2,410

 

Goodwill

 

 

3,692,573

 

 

 

3,652,733

 

Intangible and other assets, net

 

 

1,411,234

 

 

 

1,556,321

 

Total assets

 

$

5,598,621

 

 

$

5,706,971

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

39,527

 

 

$

126,144

 

Accounts payable

 

 

27,776

 

 

 

16,490

 

Income taxes payable

 

 

 

 

 

3,473

 

Accrued employee compensation and benefits

 

 

73,521

 

 

 

104,118

 

Interest payable

 

 

7,344

 

 

 

21,470

 

Other accrued expenses

 

 

45,087

 

 

 

53,708

 

Deferred revenue

 

 

212,811

 

 

 

235,222

 

Total current liabilities

 

 

406,066

 

 

 

560,625

 

Long-term debt, net of current portion

 

 

2,177,681

 

 

 

2,374,986

 

Other long-term liabilities

 

 

85,767

 

 

 

59,227

 

Deferred income taxes

 

 

421,468

 

 

 

453,555

 

Total liabilities

 

 

3,090,982

 

 

 

3,448,393

 

Total stockholders’ equity

 

 

2,507,639

 

 

 

2,258,578

 

Total liabilities and stockholders’ equity

 

$

5,598,621

 

 

$

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)

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

163,525

 

 

$

73,973

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

176,879

 

 

 

170,910

 

Stock-based compensation expense

 

 

31,572

 

 

 

40,402

 

Income tax benefit related to exercise of stock options

 

 

 

 

 

(44,975

)

Amortization and write-offs of loan origination costs

 

 

7,915

 

 

 

7,994

 

Loss on extinguishment of debt

 

 

963

 

 

 

 

Loss on sale or disposition of property and equipment

 

 

730

 

 

 

159

 

Deferred income taxes

 

 

(24,661

)

 

 

(39,712

)

Provision for doubtful accounts

 

 

2,829

 

 

 

2,684

 

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

 

 

 

 

 

 

 

 

Accounts receivable

 

 

1,820

 

 

 

(14,603

)

Prepaid expenses and other assets

 

 

1,416

 

 

 

(2,595

)

Accounts payable

 

 

8,597

 

 

 

2,610

 

Accrued expenses

 

 

(45,644

)

 

 

(18,429

)

Income taxes prepaid and payable

 

 

6,781

 

 

 

44,840

 

Deferred revenue

 

 

(25,632

)

 

 

13,758

 

Net cash provided by operating activities

 

 

307,090

 

 

 

237,016

 

Cash flow from investing activities:

 

 

 

 

 

 

 

 

Additions to property and equipment

 

 

(29,779

)

 

 

(18,870

)

Proceeds from sale of property and equipment

 

 

1

 

 

 

69

 

Cash paid for business acquisitions, net of cash acquired

 

 

1,805

 

 

 

(309,432

)

Additions to capitalized software

 

 

(8,168

)

 

 

(6,137

)

Purchase of long-term investment

 

 

 

 

 

(1,000

)

Net cash used in investing activities

 

 

(36,141

)

 

 

(335,370

)

Cash flow from financing activities:

 

 

 

 

 

 

 

 

Cash received from debt borrowings

 

 

45,000

 

 

 

 

Repayments of debt

 

 

(337,800

)

 

 

(268,550

)

Proceeds from exercise of stock options

 

 

46,278

 

 

 

34,767

 

Withholding taxes related to equity award net share settlement

 

 

(4,090

)

 

 

(7,051

)

Income tax benefit related to exercise of stock options

 

 

 

 

 

44,975

 

Purchase of common stock for treasury

 

 

 

 

 

(13

)

Payment of fees related to refinancing activities

 

 

 

 

 

(503

)

Dividends paid on common stock

 

 

(39,917

)

 

 

(37,452

)

Net cash used in financing activities

 

 

(290,529

)

 

 

(233,827

)

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

 

 

3,777

 

 

 

(880

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(15,803

)

 

 

(333,061

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

119,674

 

 

 

436,977

 

Cash, cash equivalents and restricted cash, end of period

 

$

103,871

 

 

$

103,916

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash activities:

 

 

 

 

 

 

 

 

Property and equipment acquired through tenant improvement allowances

 

$

10,846

 

 

$

 

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 September 30,

 

 

Nine Months Ended September 30,

 

(in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenues

 

$

418,251

 

 

$

383,304

 

 

$

1,236,930

 

 

$

1,080,512

 

Purchase accounting adjustments to deferred revenue

 

 

1,314

 

 

 

8,562

 

 

 

6,241

 

 

 

38,880

 

Adjusted revenues

 

$

419,565

 

 

$

391,866

 

 

$

1,243,171

 

 

$

1,119,392

 

 

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

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Software-enabled services

 

$

282,133

 

 

$

248,772

 

 

$

831,103

 

 

$

699,091

 

Maintenance and term licenses

 

 

112,819

 

 

 

106,925

 

 

 

336,990

 

 

 

305,437

 

Total recurring revenues

 

 

394,952

 

 

 

355,697

 

 

 

1,168,093

 

 

 

1,004,528

 

Perpetual licenses

 

 

3,576

 

 

 

4,389

 

 

 

10,226

 

 

 

14,643

 

Professional services

 

 

19,723

 

 

 

23,218

 

 

 

58,611

 

 

 

61,341

 

Total non-recurring revenues

 

 

23,299

 

 

 

27,607

 

 

 

68,837

 

 

 

75,984

 

Total revenues

 

$

418,251

 

 

$

383,304

 

 

$

1,236,930

 

 

$

1,080,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software-enabled services

 

$

282,133

 

 

$

248,809

 

 

$

831,103

 

 

$

699,358

 

Maintenance and term licenses

 

 

112,903

 

 

 

111,527

 

 

 

338,582

 

 

 

332,801

 

Total adjusted recurring revenues

 

 

395,036

 

 

 

360,336

 

 

 

1,169,685

 

 

 

1,032,159

 

Perpetual licenses

 

 

3,576

 

 

 

4,389

 

 

 

10,226

 

 

 

14,643

 

Professional services

 

 

20,953

 

 

 

27,141

 

 

 

63,260

 

 

 

72,590

 

Total adjusted non-recurring revenues

 

 

24,529

 

 

 

31,530

 

 

 

73,486

 

 

 

87,233

 

Total adjusted revenues

 

$

419,565

 

 

$

391,866

 

 

$

1,243,171

 

 

$

1,119,392

 

 

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 September 30,

 

 

Nine Months Ended September 30,

 

(in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Operating income

 

$

103,917

 

 

$

76,903

 

 

$

283,619

 

 

$

193,384

 

Amortization of intangible assets

 

 

52,874

 

 

 

51,539

 

 

 

158,024

 

 

 

153,214

 

Stock-based compensation

 

 

10,294

 

 

 

12,489

 

 

 

31,572

 

 

 

40,402

 

Capital-based taxes

 

 

250

 

 

 

1,000

 

 

 

1,000

 

 

 

1,472

 

Purchase accounting adjustments (1)

 

 

777

 

 

 

5,573

 

 

 

3,782

 

 

 

29,831

 

Other (2)

 

 

2,005

 

 

 

2,966

 

 

 

4,901

 

 

 

7,885

 

Adjusted operating income

 

$

170,117

 

 

$

150,470

 

 

$

482,898

 

 

$

426,188

 

 

(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 infrequently 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 September 30,

 

 

Nine Months Ended September 30,

 

 

Twelve Months Ended September 30,

 

(in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2017

 

Net income

 

$

64,227

 

 

$

38,747

 

 

$

163,525

 

 

$

73,973

 

 

$

220,548

 

Interest expense, net

 

 

26,250

 

 

 

31,648

 

 

 

81,565

 

 

 

97,583

 

 

 

112,436

 

Provision for income tax

 

 

10,905

 

 

 

9,163

 

 

 

32,400

 

 

 

22,648

 

 

 

42,372

 

Depreciation and amortization

 

 

59,666

 

 

 

57,470

 

 

 

176,879

 

 

 

170,910

 

 

 

234,652

 

EBITDA

 

 

161,048

 

 

 

137,028

 

 

 

454,369

 

 

 

365,114

 

 

 

610,008

 

Stock-based compensation

 

 

10,294

 

 

 

12,489

 

 

 

31,572

 

 

 

40,402

 

 

 

41,734

 

Capital-based taxes

 

 

250

 

 

 

1,000

 

 

 

1,000

 

 

 

1,472

 

 

 

1,010

 

Acquired EBITDA and cost savings (1)

 

 

365

 

 

 

 

 

 

3,581

 

 

 

5,814

 

 

 

6,859

 

Non-cash portion of straight-line rent expense

 

 

1,933

 

 

 

269

 

 

 

2,479

 

 

 

1,822

 

 

 

2,855

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

2,326

 

 

 

 

 

 

2,326

 

Purchase accounting adjustments (2)

 

 

777

 

 

 

5,573

 

 

 

3,782

 

 

 

29,831

 

 

 

5,570

 

Other (3)

 

 

4,540

 

 

 

311

 

 

 

8,704

 

 

 

7,065

 

 

 

7,530

 

Consolidated EBITDA

 

$

179,207

 

 

$

156,670

 

 

$

507,813

 

 

$

451,520

 

 

$

677,892

 

Less:  acquired EBITDA

 

 

(365

)

 

 

 

 

 

(3,581

)

 

 

(5,814

)

 

 

(6,859

)

Adjusted Consolidated EBITDA

 

$

178,842

 

 

$

156,670

 

 

$

504,232

 

 

$

445,706

 

 

$

671,033

 

 

(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 September 30,

 

 

Nine Months Ended September 30,

 

(in thousands, except per share data)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

GAAP – Net income

 

$

64,227

 

 

$

38,747

 

 

$

163,525

 

 

$

73,973

 

Plus: Amortization of intangible assets

 

 

52,874

 

 

 

51,539

 

 

 

158,024

 

 

 

153,214

 

Plus: Amortization of deferred financing costs and original issue discount

 

 

2,634

 

 

 

2,682

 

 

 

7,915

 

 

 

7,994

 

Plus: Stock-based compensat