SS&C Technologies Holdings, Inc.
SS&C Technologies Holdings Inc (Form: 8-K, Received: 04/27/2017 16:17:13)

 

 

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): April 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 April 27, 2017 , SS&C Technologies Holdings, Inc. (the “Company”) announced its financial results for the quarter ended March 31, 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 April 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: April 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 April 27, 2017

 

Exhibit 99.1

Q1 GAAP revenue $407.7 million, Fully Diluted GAAP Earnings Per Share $0.23,

Adjusted revenue $409.5 million, Adjusted Diluted Earnings Per Share $0.44

 

WINDSOR, CT, April 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 first quarter ended March 31, 2017.

GAAP Results

SS&C reported GAAP revenue of $407.7 million for the first quarter of 2017, up 25.8 percent compared to $324.1 million in the first quarter of 2016. GAAP operating income for the first quarter of 2017 was $89.7 million, or 22.0 percent of GAAP revenue compared to $50.4 million, or 15.6 percent of GAAP revenue in 2016’s first quarter, representing a 77.9 percent increase.

GAAP net income for the first quarter of 2017 was $48.1 million, up 587.3 percent compared to $7.0 million in 2016’s first quarter. On a fully diluted GAAP basis, earnings per share in the first quarter of 2017 was $0.23 per share, up 666.7 percent compared to $0.03 per share on a fully diluted GAAP basis in the first quarter of 2016.

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

Adjusted revenue was $409.5 million for the first quarter of 2017, up 19.4 percent compared to $343.1 million in the first quarter of 2016. Adjusted operating income for the first quarter of 2017 was $155.4 million, or 38.0 percent of adjusted revenue compared to $135.2 million, or 39.4 percent of adjusted revenue in 2016’s first quarter, representing a 15.0 percent increase.

Adjusted net income for the first quarter of 2017 was $92.9 million, up 23.2 percent compared to $75.4 million in 2016’s first quarter. Adjusted diluted earnings per share in the first quarter of 2017 was $0.44 per share, up 18.9 percent compared to $0.37 per share in the first quarter of 2016.

Highlights:

 

SS&C adjusted revenue for Q1 2017 was $409.5 million, up 19.4 percent from Q1 2016 adjusted revenue of $343.1 million.

 

Adjusted diluted earnings per share was $0.44 for Q1 2017, increasing 18.9 percent from Q1 2016’s $0.37 adjusted diluted earnings per share.

 

Q1 2017 net cash from operating activities was $56.5 million, an increase of 203.6 percent.

 

SS&C paid off $60.2 million of debt, bringing our net debt to consolidated EBITDA leverage ratio to 3.74x.

 

Amended our Credit Agreement to reduce the spreads on our Term Loans, effectively reducing our interest rates by 0.75% and saving the Company interest on the outstanding debt over the long term.

 

“SS&C had a strong start to 2017, with adjusted revenues up 19.4 percent and adjusted diluted earnings per share up 18.9 percent for the first quarter,” says Bill Stone, Chairman and Chief Executive Officer. “Our businesses continue to perform, and hedge fund asset flow indicators suggest renewed confidence. We are also actively expanding our service offering for long-only and institutional outsourcing, as well as the creation of our newest SS&C GlobeOp division servicing Real Assets.  We believe real estate, infrastructure, and property management solutions present a big opportunity.”


“We have a number of other key initiatives in process including our new relationship with the Academy of Certified Portfolio Managers and extending our Black Diamond marketing efforts to highlight our 1,000 th Black Diamond client.”

“We were able to reprice our Term Debt in our Credit Facility and reduce our annual borrowing cost. We continue to manage our recent acquisitions and we are pleased with the continued margin improvement.”

Annual Run Rate Basis

Annual Run Rate Basis (ARRB) recurring revenue, defined as adjusted recurring revenue on an annualized basis, was $1,548.9 million based on adjusted recurring revenue $387.2 million for the first quarter of 2017. This represents an increase of 22.6 percent from $315.7 million and $1,262.9 million run-rate in the same period in 2016 and an increase of 5.1 percent from $368.5 million for the fourth quarter of 2016, an annual run rate of $1,473.8 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 $56.5 million for the three months ended March 31, 2017, compared to $18.6 million for the same period in 2016, representing a 203.6 percent increase.  Cash flow in the first quarter was impacted by the payment of annual employee cash incentive, net debt repayments and an increase in accounts receivables offset by cash flow on earnings and proceeds from the exercise of stock options.  SS&C ended the quarter with $108.8 million in cash and cash equivalents and $2,499.4 million in gross debt, for a net debt balance of $2,390.6 million.  SS&C’s leverage ratio as defined in our credit agreement stood at 3.74 times consolidated EBITDA as of March 31, 2017.

Guidance

 

 

 

Q2 2017

 

 

FY 2017

Adjusted Revenue ($M)

 

$408.0 – $416.0

 

 

$1,664.0 – $1,686.0

Adjusted Net Income ($M)

 

$93.7 – $98.0

 

 

$399.0 – $412.0

Cash from Operating Activities ($M)

 

 

 

 

$485.0  – $500.0

Capital Expenditures (% of revenue)

 

 

 

 

2.8% – 3.2%

Diluted Shares (M)

 

210.0 – 210.4

 

 

210.2 – 211.0

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 Q1 2017 earnings call will take place at 5:00 p.m. eastern time today, April 27, 2017. The call will discuss Q1 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 First Quarter 2017 Conference Call”; conference ID #3714534. A replay will be available after 8:00 p.m. eastern time on April 27, 2017, until midnight on May 4, 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 April 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 second 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 March 31,

 

 

 

2017

 

 

2016

 

Revenues:

 

 

 

 

 

 

 

 

Software-enabled services

 

$

276,452

 

 

$

205,647

 

Maintenance and term licenses

 

 

110,557

 

 

 

95,120

 

Total recurring revenues

 

 

387,009

 

 

 

300,767

 

Perpetual licenses

 

 

2,828

 

 

 

5,215

 

Professional services

 

 

17,862

 

 

 

18,149

 

Total non-recurring revenues

 

 

20,690

 

 

 

23,364

 

Total revenues

 

 

407,699

 

 

 

324,131

 

Cost of revenues:

 

 

 

 

 

 

 

 

Software-enabled services

 

 

154,006

 

 

 

113,728

 

Maintenance and term licenses

 

 

46,985

 

 

 

46,946

 

Total recurring cost of revenues

 

 

200,991

 

 

 

160,674

 

Perpetual licenses

 

 

565

 

 

 

498

 

Professional services

 

 

15,903

 

 

 

15,512

 

Total non-recurring cost of revenues

 

 

16,468

 

 

 

16,010

 

Total cost of revenues

 

 

217,459

 

 

 

176,684

 

Gross profit

 

 

190,240

 

 

 

147,447

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling and marketing

 

 

30,242

 

 

 

29,861

 

Research and development

 

 

38,449

 

 

 

36,447

 

General and administrative

 

 

31,832

 

 

 

30,695

 

Total operating expenses

 

 

100,523

 

 

 

97,003

 

Operating income

 

 

89,717

 

 

 

50,444

 

Interest expense, net

 

 

(29,020

)

 

 

(33,089

)

Other expense, net

 

 

(71

)

 

 

(1,847

)

Loss on extinguishment of debt

 

 

(2,326

)

 

 

 

Income before income taxes

 

 

58,300

 

 

 

15,508

 

Provision for income taxes

 

 

10,153

 

 

 

8,503

 

Net income

 

$

48,147

 

 

$

7,005

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.24

 

 

$

0.04

 

Diluted earnings per share

 

$

0.23

 

 

$

0.03

 

 

 

 

 

 

 

 

 

 

Basic weighted average number of common shares outstanding

 

 

203,376

 

 

 

197,520

 

Diluted weighted average number of common and common equivalent shares outstanding

 

 

209,704

 

 

 

204,262

 

 

 

 

 

 

 

 

 

 

Cash dividends declared and paid per common share

 

$

0.0625

 

 

$

0.0625

 

 

 

 

 

 

 

 

 

 

Net income

 

$

48,147

 

 

$

7,005

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

Foreign currency exchange translation adjustment

 

 

10,779

 

 

 

9,321

 

Total comprehensive income, net of tax

 

 

10,779

 

 

 

9,321

 

Comprehensive income

 

$

58,926

 

 

$

16,326

 

See Notes to Condensed Consolidated Financial Information.



SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

March 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

108,842

 

 

$

117,558

 

Accounts receivable, net

 

 

247,553

 

 

 

241,307

 

Prepaid expenses and other current assets

 

 

33,256

 

 

 

31,119

 

Prepaid income taxes

 

 

15,674

 

 

 

23,012

 

Restricted cash

 

 

2,071

 

 

 

2,116

 

Total current assets

 

 

407,396

 

 

 

415,112

 

Property, plant and equipment, net

 

 

81,927

 

 

 

80,395

 

Deferred income taxes

 

 

2,342

 

 

 

2,410

 

Goodwill

 

 

3,659,631

 

 

 

3,652,733

 

Intangible and other assets, net

 

 

1,507,787

 

 

 

1,556,321

 

Total assets

 

$

5,659,083

 

 

$

5,706,971

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

100,812

 

 

$

126,144

 

Accounts payable

 

 

23,642

 

 

 

16,490

 

Income taxes payable

 

 

 

 

 

3,473

 

Accrued employee compensation and benefits

 

 

42,060

 

 

 

104,118

 

Interest payable

 

 

7,420

 

 

 

21,470

 

Other accrued expenses

 

 

54,685

 

 

 

53,708

 

Deferred revenue

 

 

249,296

 

 

 

235,222

 

Total current liabilities

 

 

477,915

 

 

 

560,625

 

Long-term debt, net of current portion

 

 

2,343,737

 

 

 

2,374,986

 

Other long-term liabilities

 

 

65,057

 

 

 

59,227

 

Deferred income taxes

 

 

443,300

 

 

 

453,555

 

Total liabilities

 

 

3,330,009

 

 

 

3,448,393

 

Total stockholders’ equity

 

 

2,329,074

 

 

 

2,258,578

 

Total liabilities and stockholders’ equity

 

$

5,659,083

 

 

$

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)

 

 

Three Months Ended March 31,

 

 

 

2017

 

 

2016

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

48,147

 

 

$

7,005

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

58,557

 

 

 

55,273

 

Stock-based compensation expense

 

 

10,900

 

 

 

15,347

 

Income tax benefit related to exercise of stock options

 

 

 

 

 

(8,174

)

Amortization and write-offs of loan origination costs

 

 

2,656

 

 

 

2,653

 

Loss on extinguishment of debt

 

 

963

 

 

 

 

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

 

 

10

 

 

 

(2

)

Deferred income taxes

 

 

(7,295

)

 

 

(6,274

)

Provision for doubtful accounts

 

 

1,154

 

 

 

679

 

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

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(7,087

)

 

 

(33,203

)

Prepaid expenses and other assets

 

 

(2,532

)

 

 

(1,221

)

Accounts payable

 

 

6,106

 

 

 

3,592

 

Accrued expenses

 

 

(72,908

)

 

 

(52,843

)

Income taxes prepaid and payable

 

 

5,077

 

 

 

10,526

 

Deferred revenue

 

 

12,777

 

 

 

25,260

 

Net cash provided by operating activities

 

 

56,525

 

 

 

18,618

 

Cash flow from investing activities:

 

 

 

 

 

 

 

 

Additions to property and equipment

 

 

(5,990

)

 

 

(2,808

)

Proceeds from sale of property and equipment

 

 

 

 

 

2

 

Cash paid for business acquisitions, net of cash acquired

 

 

1,805

 

 

 

(317,554

)

Additions to capitalized software

 

 

(3,277

)

 

 

(2,169

)

Net cash used in investing activities

 

 

(7,462

)

 

 

(322,529

)

Cash flow from financing activities:

 

 

 

 

 

 

 

 

Cash received from debt borrowings

 

 

45,000

 

 

 

 

Repayments of debt

 

 

(105,200

)

 

 

(29,825

)

Proceeds from exercise of stock options

 

 

14,017

 

 

 

7,629

 

Withholding taxes related to equity award net share settlement

 

 

(589

)

 

 

(1,559

)

Income tax benefit related to exercise of stock options

 

 

 

 

 

8,174

 

Dividends paid on common stock

 

 

(12,715

)

 

 

(12,353

)

Net cash used in financing activities

 

 

(59,487

)

 

 

(27,934

)

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

 

 

1,663

 

 

 

(488

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(8,761

)

 

 

(332,333

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

119,674

 

 

 

436,977

 

Cash, cash equivalents and restricted cash, end of period

 

$

110,913

 

 

$

104,644

 

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 March 31,

 

(in thousands)

 

2017

 

 

2016

 

Revenues

 

$

407,699

 

 

$

324,131

 

Purchase accounting adjustments to deferred revenue

 

 

1,820

 

 

 

18,983

 

Adjusted revenues

 

$

409,519

 

 

$

343,114

 

 

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

 

 

Three Months Ended March 31,

 

(in thousands)

 

2017

 

 

2016

 

Software-enabled services

 

$

276,452

 

 

$

205,647

 

Maintenance and term licenses

 

 

110,557

 

 

 

95,120

 

Total recurring revenues

 

 

387,009

 

 

 

300,767

 

Perpetual licenses

 

 

2,828

 

 

 

5,215

 

Professional services

 

 

17,862

 

 

 

18,149

 

Total non-recurring revenues

 

 

20,690

 

 

 

23,364

 

Total revenues

 

$

407,699

 

 

$

324,131

 

 

 

 

 

 

 

 

 

 

Software-enabled services

 

$

276,452

 

 

$

205,786

 

Maintenance and term licenses

 

 

110,763

 

 

 

109,950

 

Total adjusted recurring revenues

 

 

387,215

 

 

 

315,736

 

Perpetual licenses

 

 

2,828

 

 

 

5,215

 

Professional services

 

 

19,476

 

 

 

22,163

 

Total adjusted non-recurring revenues

 

 

22,304

 

 

 

27,378

 

Total adjusted revenues

 

$

409,519

 

 

$

343,114

 

 

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 March 31,

 

(in thousands)

 

2017

 

 

2016

 

Operating income

 

$

89,717

 

 

$

50,444

 

Amortization of intangible assets

 

 

52,408

 

 

 

49,680

 

Stock-based compensation

 

 

10,900

 

 

 

15,347

 

Capital-based taxes

 

 

375

 

 

 

472

 

Purchase accounting adjustments (1)

 

 

352

 

 

 

15,628

 

Other (2)

 

 

1,684

 

 

 

3,618

 

Adjusted operating income

 

$

155,436

 

 

$

135,189

 

 

(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 March 31,

 

 

Twelve Months Ended March 31,

 

(in thousands)

 

2017

 

 

2016

 

 

2017

 

Net income

 

$

48,147

 

 

$

7,005

 

 

$

172,138

 

Interest expense, net

 

 

29,020

 

 

 

33,089

 

 

 

124,385

 

Provision for income tax

 

 

10,153

 

 

 

8,503

 

 

 

34,270

 

Depreciation and amortization

 

 

58,557

 

 

 

55,273

 

 

 

231,967

 

EBITDA

 

 

145,877

 

 

 

103,870

 

 

 

562,760

 

Stock-based compensation

 

 

10,900

 

 

 

15,347

 

 

 

46,117

 

Capital-based taxes

 

 

375

 

 

 

472

 

 

 

1,385

 

Acquired EBITDA and cost savings (1)

 

 

808

 

 

 

4,768

 

 

 

6,627

 

Non-cash portion of straight-line rent expense

 

 

68

 

 

 

784

 

 

 

1,482

 

Loss on extinguishment of debt

 

 

2,326

 

 

 

 

 

 

2,326

 

Purchase accounting adjustments (2)

 

 

352

 

 

 

15,628

 

 

 

16,343

 

Other (3)

 

 

1,755

 

 

 

5,465

 

 

 

2,181

 

Consolidated EBITDA

 

$

162,461

 

 

$

146,334

 

 

$

639,221

 

Less:  acquired EBITDA

 

 

(808

)

 

 

(4,768

)

 

 

(6,627

)

Adjusted Consolidated EBITDA

 

$

161,653

 

 

$

141,566

 

 

$

632,594

 

 

(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 March 31,

 

(in thousands, except per share data)

 

2017

 

 

2016

 

GAAP – Net income

 

$

48,147

 

 

$

7,005

 

Plus: Amortization of intangible assets

 

 

52,408

 

 

 

49,680

 

Plus: Amortization of deferred financing costs and original issue discount

 

 

2,656

 

 

 

2,653

 

Plus: Stock-based compensation

 

 

10,900

 

 

 

15,347

 

Plus: Capital-based taxes

 

 

375

 

 

 

472

 

Plus: Loss on extinguishment of debt

 

 

2,326

 

 

 

 

Plus: Purchase accounting adjustments (1)

 

 

352

 

 

 

15,628

 

Plus: Other (2)

 

 

1,755

 

 

 

5,465

 

Income tax effect (3)

 

 

(25,987

)

 

 

(20,828

)

Adjusted net income

 

$

92,932

 

 

$

75,422

 

Adjusted diluted earnings per share

 

$

0.44

 

 

$

0.37

 

GAAP diluted earnings per share

 

$

0.23

 

 

$

0.03

 

Diluted weighted-average shares outstanding

 

 

209,704

 

 

 

204,262

 

 

(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.

(3)

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