SS&C Technologies Reports Q1 2015 Results

Adjusted Revenue $206.1 million, up 10.9 percent, Adjusted Net Income $52.7 million, up 9.2 percent

WINDSOR, Conn., April 27, 2015 /CNW/ -- 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, 2015.

Financial Highlights:

  • Adjusted revenue (defined below) of $206.1 million in the first quarter 2015, representing an increase of 10.9 percent from the first quarter 2014
  • Adjusted diluted EPS (defined below) increased to $0.60 in the first quarter of 2015, representing an increase of 7.1 percent
  • Implemented $11.2 million of annual cost synergies at the DST Global Solutions business, realized $1.0 million in the first quarter.
  • Brought down our leverage ratio to 1.48x

"We believe 2015 will be a significant year," said Bill Stone, Chairman and Chief Executive Officer, SS&C Technologies. "Revenue in the first quarter was adversely affected by the strength of the U.S. Dollar in the amount of $3.2 million. Despite the headwinds, we grew 10.9% in adjusted revenue in the first quarter, and over 9% in adjusted net income. We are already seeing the benefits of the DST acquisition, including realized cost synergies, cross sell opportunities, and a shift towards a hosted and outsourced model. The announcement of our intention to acquire Advent has received positive feedback from customers, employees, and shareholders. We have become a larger company with considerable resources. New doors are opening with our prospects, and we look forward to capitalizing on these opportunities."

Results
SS&C reported GAAP revenue of $205.7 million for the first quarter of 2015, compared to $185.8 million in the first quarter of 2014, a 10.7 percent increase. GAAP operating income for the first quarter of 2015 was $43.1 million, or 21.0 percent of revenue. This represents a decrease of 8.3 percent compared to $47.0 million, or 25.3 percent of revenue, in the first quarter of 2014. GAAP net income for the first quarter of 2015 was $26.2 million compared to $26.4 million in the first quarter of 2014, a 0.8 percent decrease. On a fully diluted GAAP basis, earnings per share in the first quarter of 2015 were $0.30.  

Adjusted operating income (a non-GAAP measure defined in note 2 to the attached Condensed Consolidated Financial Information) in the first quarter of 2015 was $77.4 million, or 37.5 percent of adjusted revenue. This represents a 6.6 percent increase compared to $72.6 million, or 39.1 percent of adjusted revenue, in the first quarter of 2014.  Adjusted net income (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) for the first quarter of 2015 was $52.7 million compared to $48.3 million in 2014's first quarter, a 9.2 percent increase.  Adjusted diluted earnings per share (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) in the first quarter of 2015 were $0.60 compared to $0.56 in the first quarter of 2014, a 7.1 percent increase.

Operating Cash Flow
SS&C generated net cash from operating activities of $31.2 million for the three months ended March 31, 2015, compared to $38.6 million for the same period in 2014, representing a 19.2 percent decrease. SS&C ended the quarter with $88.3 million in cash, and $601.0 million in gross debt, for a net debt balance of $512.7 million. SS&C's leverage ratio as defined in our credit agreement stood at 1.48 times consolidated EBITDA as of March 31, 2015.

Annual Run Rate Basis
Annual Run Rate Basis (ARRB) recurring revenue, defined as the sum of maintenance and software-enabled services revenue for the quarter on an annualized basis, was $757.1 million based on maintenance and software-enabled services revenue of $189.3 million for the first quarter of 2015. This represents an increase of 10.8 percent from $170.9 million and $683.6 million annual run-rate in the same period in 2014 and an increase of 4.5 percent from $181.1 million for the fourth quarter of 2014, an annual run rate of $724.4 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Guidance


Q2 2015

FY 2015

Adjusted Revenue ($M)

$209.0 – $215.0

$846.0 – $862.0

Adjusted Net Income ($M)

$55.5 –  $58.0

$228.2 –  $236.6

Cash from Operating Activities ($M)

$260.0 –  $275.0

Capital Expenditures (% of revenue)

2.4% – 2.8%

Diluted Shares (M)

88.9 – 89.3

89.0 – 89.4

Effective Income Tax Rate (%)

28%

28%

 

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 earnings call will take place at 5:00 p.m. eastern time today, April 27, 2015. The call will discuss Q1 2015 results and our guidance and business outlook. Interested parties may dial 877-312-8798 (US and Canada) or 253-237-1193 (International), and request the "SS&C Technologies 2015 First Quarter Earnings Conference Call" conference ID# 26316186. A replay will be available after 8:00 p.m. eastern time on April 27, 2015, until midnight on May 3, 2015. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code # 26316186. The call will also be available for replay on SS&C's website after April 27, 2015; access: http://investor.ssctech.com/results.cfm.

Certain information contained in this press release relating to, among other things, our financial guidance for the second quarter and full year of 2015, constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.  Without limiting the foregoing, the words "believes", "anticipates", "plans", "expects", "estimates", "projects", "forecasts", "may" and "should" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words. Such statements reflect management's best judgment based on factors currently known but are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such risks and uncertainties include, but are not limited to, the state of the economy and the financial services industry, the Company's ability to finalize large client contracts, fluctuations in customer demand for the Company's products and services, intensity of competition from application vendors, delays in product development, the Company's ability to control expenses, terrorist activities, exposure to litigation, the Company's ability to integrate acquired businesses, the effect of the acquisitions on customer demand for the Company's products and services, the market price of the Company's stock prevailing from time to time, the Company's cash flow from operations, general economic conditions, and those risks discussed in the "Risk Factors" section of the Company's most recent Annual Report on Form 10-K, which is on file with the Securities and Exchange Commission and can also be accessed on our website. The Company cautions investors that it may not update any or all of the foregoing forward-looking statements.

About SS&C Technologies
SS&C is a global provider of investment and financial software-enabled services and software focused exclusively on the global financial services industry. Founded in 1986, SS&C has its headquarters in Windsor, Connecticut and offices around the world. Over 7,000 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 $26 trillion in assets.

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SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)






Three Months Ended March 31,


2015


2014

Revenues:




     Software-enabled services

$   153,567


$   145,383

     Software licenses

7,326


7,499

     Maintenance

35,718


25,526

     Professional services

9,124


7,402

         Total revenues

205,735


185,810





Cost of revenues:




     Software-enabled services

88,602


85,691

     Software licenses

1,390


851

     Maintenance

13,801


9,931

     Professional services

8,514


5,026

         Total cost of revenues

112,307


101,499





Gross profit

93,428


84,311





Operating expenses:




     Selling and marketing

13,387


11,898

     Research and development

19,608


13,587

     General and administrative

17,300


11,801

         Total operating expenses

50,295


37,286





Operating income

43,133


47,025





Interest expense, net

(5,600)


(7,098)

Other (expense) income, net

(1,507)


(686)





Income before income taxes

36,026


39,241

Provision for income taxes

9,780


12,793





Net income

$    26,246


$    26,448





Basic earnings per share

$      0.31


$      0.32





Basic weighted average number of common shares outstanding

84,263


82,722





Diluted earnings per share

$      0.30


$      0.30





Diluted weighted average number of common and common equivalent shares outstanding

 

88,456


 

86,901







 

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,



2015


2014

ASSETS





Current assets:





   Cash


$       88,330


$      109,577

   Accounts receivable, net


103,802


94,359

   Prepaid income taxes


11,912


11,857

   Deferred income taxes


2,627


2,975

   Prepaid expenses and other current assets


11,681


14,927

   Restricted cash


1,478


1,477

       Total current assets


219,830


235,172






Property and equipment, net


52,810


54,277






Deferred income taxes


1,298


1,135

Goodwill


1,541,768


1,573,227

Intangible and other assets, net


391,033


421,511






       Total assets


$  2,206,739


$  2,285,322






LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:





   Current portion of long-term debt


$      19,061


$      20,470

   Accounts payable


12,144


12,004

   Income taxes payable


-


1,116

   Accrued employee compensation and benefits


18,970


53,975

   Other accrued expenses


37,462


30,666

   Deferred income taxes


151


110

   Deferred maintenance and other revenue


80,729


73,254

       Total current liabilities


168,517


191,595






Long-term debt, net of current portion


576,192


618,435

Other long-term liabilities


27,096


26,446

Deferred income taxes


97,169


102,176

       Total liabilities


868,974


938,652






Total stockholders' equity


1,337,765


1,346,670


       Total liabilities and stockholders' equity


$  2,206,739


$  2,285,322






 

See Notes to Condensed Consolidated Financial Information.

 

SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)






Three Months Ended March 31,


2015


2014





Cash flow from operating activities:




     Net income

$      26,246


$      26,448

Adjustments to reconcile net income to net cash provided




     by operating activities:




    Depreciation and amortization

25,996


24,936

    Stock-based compensation expense

4,106


2,975

    Income tax benefit related to exercise of stock options

(2,839)


(2,453)

    Amortization of loan origination costs

1,435


1,520

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

209


53

    Deferred income taxes

(2,131)


(1,441)

    Provision for doubtful accounts

437


184

    Changes in operating assets and liabilities, excluding effects

        from acquisitions:




          Accounts receivable

(12,058)


2,956

          Prepaid expenses and other assets

4,744


1,165

          Accounts payable

(333)


(1,765)

          Accrued expenses

(25,283)


(26,343)

          Income taxes prepaid and payable

1,517


7,986

          Deferred maintenance and other revenue

9,121


2,333

     Net cash provided by operating activities

31,167


38,554





Cash flow from investing activities:




     Additions to property and equipment

(2,249)


(2,758)

     Additions to capitalized software

(928)


(856)

     Net changes in restricted cash

-


983

     Net cash used in investing activities

(3,177)


(2,631)





Cash flow from financing activities:




    Repayments of debt

(44,000)


(45,000)

    Income tax benefit related to exercise of stock options

2,839


2,453

    Proceeds from exercise of stock options

4,661


3,993

    Purchase of common stock for treasury

-


(3,492)

    Dividends paid on common stock

(10,539)


-

    Payment of fees related to refinancing activities

-


(512)

     Net cash used in financing activities

(47,039)


(42,558)





Effect of exchange rate changes on cash

(2,198)


536





Net decrease in cash

(21,247)


(6,099)

Cash, beginning of period

109,577


84,470

Cash, end of period

$       88,330


$       78,371






 

See Notes to Condensed Consolidated Financial Information.

 

SS&C Technologies Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Information

Note 1.  Reconciliation of Revenue to Adjusted Revenue

Adjusted revenue represents revenue adjusted for one-time purchase accounting adjustments to fair value deferred revenue acquired in business combinations. Adjusted revenue is presented because we use this measure to evaluate the performance of our business against prior periods and believe it is a useful indicator of the underlying performance of the Company. Adjusted revenue is not a recognized term under generally accepted accounting principles (GAAP). Adjusted revenue does not represent revenue, as that term is defined under GAAP, and should not be considered as an alternative to revenue as an indicator of our operating performance. Adjusted revenue as presented herein is not necessarily comparable to similarly titled measures. The following is a reconciliation between adjusted revenue and revenue, the GAAP measure we believe to be most directly comparable to adjusted revenue.


Three months ended March 31,

(in thousands)

2015


2014

Revenue

$   205,735


$   185,810

Purchase accounting adjustments to
   deferred revenue

 

397


 

-

Adjusted revenue

$   206,132


$   185,810

 

Note 2. Reconciliation of Operating Income to Adjusted Operating Income

Adjusted operating income represents operating income adjusted for amortization of acquisition-related intangible assets and purchase accounting adjustments for deferred revenue and other expenses. Adjusted operating income is presented because we use this measure to evaluate the 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)

2015


2014

Operating income

$   43,133


$   47,025

Amortization of intangible assets

22,181


21,326

 Stock-based compensation

4,106


2,975

Capital-based taxes

-


6

Unusual or non-recurring charges

7,585


1,328

Purchase accounting adjustments

397


(27)

Adjusted operating income

$   77,402


$   72,633

 

Note 3. Reconciliation of Net Income to EBITDA, Consolidated EBITDA and Adjusted Consolidated EBITDA

EBITDA represents net income before interest expense, income taxes, depreciation and amortization.  Consolidated EBITDA, defined under our Credit Agreement entered into in March 2012, is used in calculating covenant compliance, and is EBITDA adjusted for certain items.  Consolidated EBITDA is calculated by subtracting from or adding to EBITDA items of income or expense described below.  Adjusted consolidated EBITDA is calculated by subtracting acquired EBITDA and cost savings 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)

2015


2014


2015

Net income

$   26,246


$   26,448


$   130,925

Interest expense, net

5,600


7,098


23,974

Taxes

9,780


12,793


43,514

Depreciation and amortization

25,996


24,936


100,891

      EBITDA

$   67,622


$   71,275


$   299,304

 Stock-based compensation

4,106


2,975


12,614

 Capital-based taxes

-


6


-

 Acquired EBITDA and cost savings

1,767


-


21,325

 Unusual or non-recurring charges

9,092


2,014


11,954

 Purchase accounting adjustments

397


(27)


900

 Other

95


(49)


459

     Consolidated EBITDA

83,079


76,194


346,556

Less: acquired EBITDA and cost
     savings

(1,767)


-


(21,325)

     Adjusted Consolidated EBITDA

$   81,312


$   76,194


$   325,231

 

Note 4. Reconciliation of Net Income to Adjusted Net Income and Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share

Adjusted net income and adjusted diluted earnings per share represent net income and earnings per share before amortization of intangible assets and deferred financing costs, stock-based compensation, capital-based taxes and other unusual and non-recurring items. Adjusted net income and adjusted diluted earnings per share are not recognized terms under GAAP, do not represent net income or diluted earnings per share, as those terms are defined under GAAP, and should not be considered as alternatives to net income or diluted earnings per share as indicators of our operating performance.  Adjusted net income and adjusted diluted earnings per share are important to management and investors because they represent our operational performance exclusive of the effects of amortization of intangible assets and deferred financing costs, stock-based compensation, capital-based taxes and other unusual and non-recurring items that are not operational in nature or comparable to those of our competitors.  The following is a reconciliation between adjusted net income and adjusted diluted earnings per share and net income and diluted earnings per share.


Three months ended March 31,

 (in thousands, except per share data)

2015


2014

GAAP – Net income

$   26,246


$   26,448

Plus: Amortization of intangible assets

22,181


21,326

Plus: Amortization of deferred financing costs and original issue discount

1,435


1,520

Plus: Stock-based compensation

4,106


2,975

Plus: Capital-based taxes

-


6

Plus: Unusual and non-recurring items

9,092


2,014

Plus: Purchase accounting adjustments

397


(27)

 Income tax effect (1)

(10,726)


(5,982)

Adjusted net income

$   52,731


$   48,280





Adjusted diluted earnings per share

$       0.60


$       0.56

GAAP diluted earnings per share

$       0.30


$       0.30

 

 

Diluted weighted average shares outstanding

 

 

88,456


 

 

86,901

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

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SOURCE SS&C

For further 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: Justine.stone@sscinc.com


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