SS&C Technologies Reports Q2 2016 Results

Q2 GAAP revenue $373.1 million, Fully Diluted GAAP Earnings Per share $0.14, Adjusted revenue $384.4 million, Adjusted Diluted Earnings Per Share $0.39

WINDSOR, Conn., July 27, 2016 /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 second  quarter ended June 30, 2016. 

GAAP Results

SS&C reported GAAP revenue of $373.1 million for the second quarter of 2016, compared to $212.8 million in the second quarter of 2015, a 75.3 percent increase. GAAP operating income for the second quarter of 2016 was $66.0 million, or 17.7 percent of revenue. This represents a 13.2 percent increase compared to $58.4 million, or 27.4 percent of revenue, in 2015's second quarter. GAAP net income for the second quarter of 2016 was $28.2 million compared to $39.1 million in the second quarter of 2015, a 27.9 percent decrease. On a fully diluted GAAP basis, earnings per share in the second quarter of 2016 were $0.14.

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

Adjusted revenue in the second quarter of 2016 was $384.4 million, up 80.4 percent compared to $213.1 million in the second quarter of 2015. Adjusted operating income in the second quarter of 2016 was $140.5 million, or 36.6 percent of adjusted revenue. This represents a 64.3 percent increase compared to adjusted operating income of $85.5 million, or 40.1 percent of adjusted revenue, in the second quarter of 2015.

Adjusted net income for the second quarter of 2016 was $79.4 million, up 35.3 percent compared to $58.7 million in 2015's second quarter. Adjusted diluted earnings per share in the second quarter of 2016 were $0.39 per share, up 18.2 percent compared to $0.33 per share in the second quarter of 2015.

Highlights:

  • SS&C adjusted revenue for Q2 2016 was $384.4 million, our 13th straight quarter with record adjusted revenue.
  • Second quarter R&D spend contributed to new releases of SS&C's CAMRA, Global Wealth Platform, Black Diamond, and SS&C Geneva, SS&C APX, SS&C Moxy, and SS&C TradeEx products.
  • SS&C paid off $125.5 million in debt in Q2 2016, and $415.3 million since acquiring Advent one year ago.
  • Our net debt to adjusted consolidated EBITDA leverage ratio has been reduced to 4.36x.

"SS&C once again delivers record adjusted revenues of $384.4 million for the second quarter of 2016, and we grew our adjusted consolidated EBITDA 65.0 percent to a record $147.5 million," says Bill Stone, Chairman and Chief Executive Officer. "After a full quarter of ownership, the Citi Alternative Investor Services group is adjusting nicely into SS&C's fast-paced, sales-oriented culture. Great strides have already been made in the integration, including a significant upgrade of the Geneva Platform, and a revitalized focus on top line growth."

Annual Run Rate Basis                                                                                              

Annual Run Rate Basis (ARRB) recurring revenue, defined as adjusted recurring revenue on an annualized basis, was $1,424.3 million based on adjusted recurring revenue $356.1 million for the second quarter of 2016. This represents an increase of 88.0 percent from $189.4 million and $757.6 million run-rate in the same period in 2015 and an increase of 12.8 percent from $315.7 million for the first quarter of 2016, an annual run rate of $1,262.9 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Operating Cash Flow

SS&C generated net cash from operating activities of $139.3 million for the six months ended June 30, 2016, compared to $100.7 million for the same period in 2015, representing a 38.3 percent increase. SS&C ended the quarter with $95.2 million in cash and cash equivalents, and $2,664.7 million in gross debt, for a net debt balance of $2,569.5 million. SS&C's leverage ratio as defined in our credit agreement stood at 4.36 times consolidated EBITDA as of June 30, 2016.

Guidance                                                                                                                        


Q3 2016

FY 2016

Adjusted Revenue ($M)

$388.0 – $394.0

$1,511.0 – $1,524.0

Adjusted Net Income ($M)

$82.5 – $85.0

$326.0 – $334.0

Cash from Operating Activities ($M)

$380.0 – $395.0

Capital Expenditures (% of revenue)

2.5% – 2.8%

Diluted Shares (M)

206.0 – 206.4

205.2 – 205.9

Effective Income Tax Rate (%)

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 Q2 2016 earnings call will take place at 5:00 p.m. eastern time today, July 27, 2016. The call will discuss Q2 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 Second Quarter 2016 Conference Call"; conference ID#46494657. A replay will be available after 8:00 p.m. eastern time on July 27, 2016, until midnight on August 3, 2016. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code #46494657. The call will also be available for replay on SS&C's website after July 27, 2016; access: http://investor.ssctech.com/results.cfm.

Certain information contained in this press release relating to, among other things, our financial guidance for the third quarter and full year of 2016 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. Some 10,000 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. 

 

SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operation

(in thousands, except per share data)

(unaudited)










Three Months Ended June 30,



Six Months Ended June 30,




2016



2015



2016



2015


Revenues:

















Software-enabled services


$

244,672



$

150,123



$

450,319



$

303,690


Maintenance and term licenses



103,392




38,978




198,512




78,952


Total recurring revenues



348,064




189,101




648,831




382,642


Perpetual licenses



5,039




12,948




10,254




16,018


Professional services



19,974




10,719




38,123




19,843


Total non-recurring revenues



25,013




23,667




48,377




35,861


Total revenues



373,077




212,768




697,208




418,503


Cost of revenues:

















Software-enabled services



146,243




88,548




259,971




177,150


Maintenance and term licenses



46,460




12,338




93,406




26,505


Total recurring cost of revenues



192,703




100,886




353,377




203,655


Perpetual licenses



643




1,021




1,141




2,045


Professional services



17,133




7,596




32,645




16,110


Total non-recurring cost of revenues



17,776




8,617




33,786




18,155


Total cost of revenues



210,479




109,503




387,163




221,810


Gross profit



162,598




103,265




310,045




196,693


Operating expenses:

















Selling and marketing



28,535




13,931




58,396




27,318


Research and development



40,827




17,520




77,274




37,128


General and administrative



27,199




13,463




57,894




30,763


Total operating expenses



96,561




44,914




193,564




95,209


Operating income



66,037




58,351




116,481




101,484


Interest expense, net



(32,846)




(5,419)




(65,935)




(11,019)


Other income (expense), net



12




(164)




(1,835)




(1,671)


Income before income taxes



33,203




52,768




48,711




88,794


Provision for income taxes



4,982




13,640




13,485




23,420


Net income


$

28,221



$

39,128



$

35,226



$

65,374


Basic earnings per share


$

0.14



$

0.23



$

0.18



$

0.39


Basic weighted average number of common shares

   outstanding



198,765




170,810




198,143




169,674


Diluted earnings per share


$

0.14



$

0.22



$

0.17



$

0.37


Diluted weighted average number of common and common

   equivalent shares outstanding



204,916




179,104




204,596




177,974


Net income


$

28,221



$

39,128



$

35,226



$

65,374


Other comprehensive (loss) income, net of tax:

















Foreign currency exchange translation adjustment



(26,793)




22,808




(17,472)




(13,411)


Total comprehensive (loss) income, net of tax



(26,793)




22,808




(17,472)




(13,411)


Comprehensive income


$

1,428



$

61,936



$

17,754



$

51,963


See Notes to Condensed Consolidated Financial Information.


 

SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)










June 30,



December 31,




2016



2015


ASSETS









Current assets:









Cash and cash equivalents


$

95,222



$

434,159


Accounts receivable, net



239,428




169,951


Prepaid expenses and other current assets



32,598




27,511


Prepaid income taxes



39,319




40,627


Restricted cash



2,818




2,818


Total current assets



409,385




675,066


Property, plant and equipment, net



69,557




67,143


Deferred income taxes



2,018




2,199


Goodwill



3,636,495




3,549,212


Intangible and other assets, net



1,571,384




1,508,622


Total assets


$

5,688,839



$

5,802,242


LIABILITIES AND STOCKHOLDERS' EQUITY









Current liabilities:









Current portion of long-term debt


$

30,878



$

32,281


Accounts payable



20,033




11,957


Income taxes payable






1,428


Accrued employee compensation and benefits



55,836




83,894


Interest payable



22,386




28,903


Other accrued expenses



45,964




36,231


Deferred revenue



238,785




222,024


Total current liabilities



413,882




416,718


Long-term debt, net of current portion



2,569,971




2,719,070


Other long-term liabilities



61,915




51,434


Deferred income taxes



478,641




509,574


Total liabilities



3,524,409




3,696,796


Total stockholders' equity



2,164,430




2,105,446


Total liabilities and stockholders' equity


$

5,688,839



$

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 Six Months Ended June 30,




2016



2015


Cash flow from operating activities:









Net income


$

35,226



$

65,374


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









Depreciation and amortization



113,440




52,103


Stock-based compensation expense



27,913




8,314


Income tax benefit related to exercise of stock options



(23,760)




(5,065)


Amortization and write-offs of loan origination costs



5,312




2,874


Loss on sale or disposition of property and equipment



150




209


Deferred income taxes



(24,056)




(7,395)


Provision for doubtful accounts



1,257




299


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









Accounts receivable



(13,458)




(1,804)


Prepaid expenses and other assets



(1,516)




2,488


Accounts payable



7,870




(2,405)


Accrued expenses



(25,851)




(20,186)


Income taxes prepaid and payable



23,757




11,064


Deferred revenue



13,052




(5,148)


Net cash provided by operating activities



139,336




100,722


Cash flow from investing activities:









Additions to property and equipment



(13,593)




(5,750)


Proceeds from sale of property and equipment



43





Cash paid for business acquisitions, net of cash acquired



(317,554)




(7,863)


Additions to capitalized software



(3,306)




(1,792)


Purchase of long-term investment



(1,000)





Net cash used in investing activities



(335,410)




(15,405)











Cash flow from financing activities:









Repayments of debt



(155,325)




(174,000)


Proceeds from exercise of stock options



19,212




8,735


Withholding taxes related to equity award net share settlement



(4,615)





Income tax benefit related to exercise of stock options



23,760




5,065


Proceeds from common stock issuance, net






717,866


Purchase of common stock for treasury



(10)





Payment of fees related to refinancing activities



(223)





Dividends paid on common stock



(24,790)




(21,101)


Net cash (used in) provided by financing activities



(141,991)




536,565


Effect of exchange rate changes on cash and cash equivalents



(872)




(1,651)


Net (decrease) increase in cash and cash equivalents



(338,937)




620,231


Cash and cash equivalents, beginning of period



434,159




109,577


Cash and cash equivalents, end of period


$

95,222



$

729,808


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 June 30,



Six Months Ended June 30,


(in thousands)


2016



2015



2016



2015


Revenues


$

373,077



$

212,768



$

697,208



$

418,503


Purchase accounting adjustments to deferred revenue



11,335




302




30,318




699


Adjusted revenues


$

384,412



$

213,070



$

727,526



$

419,202


 

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










Three Months Ended June 30,



Six Months Ended June 30,


(in thousands)


2016



2015



2016



2015


Software-enabled services


$

244,672



$

150,123



$

450,319



$

303,690


Maintenance and term licenses



103,392




38,978




198,512




78,952


Total recurring revenues



348,064




189,101




648,831




382,642


Perpetual licenses



5,039




12,948




10,254




16,018


Professional services



19,974




10,719




38,123




19,843


Total non-recurring revenues



25,013




23,667




48,377




35,861


Total revenues


$

373,077



$

212,768



$

697,208



$

418,503



















Software-enabled services


$

244,763



$

150,123



$

450,549



$

303,690


Maintenance and term licenses



111,324




39,280




221,274




79,651


Total adjusted recurring revenues



356,087




189,403




671,823




383,341


Perpetual licenses



5,039




12,948




10,254




16,018


Professional services



23,286




10,719




45,449




19,843


Total adjusted non-recurring revenues



28,325




23,667




55,703




35,861


Total adjusted revenues


$

384,412



$

213,070



$

727,526



$

419,202





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 June 30,



Six Months Ended June 30,


(in thousands)


2016



2015



2016



2015


Operating income


$

66,037



$

58,351



$

116,481



$

101,484


Amortization of intangible assets



51,995




22,312




101,675




44,493


Stock-based compensation



12,566




4,208




27,913




8,314


Capital-based taxes






(636)




472




(636)


Unusual or non-recurring charges (1)



1,301




994




4,919




8,579


Purchase accounting adjustments (2)



8,630




302




24,258




699


Adjusted operating income


$

140,529



$

85,531



$

275,718



$

162,933



















(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 2015, is used in calculating covenant compliance, and is EBITDA adjusted for certain items.  Consolidated EBITDA is calculated by subtracting from or adding to EBITDA items of income or expense described below.  Adjusted consolidated EBITDA is calculated by subtracting acquired EBITDA from consolidated EBITDA. EBITDA, consolidated EBITDA and adjusted consolidated EBITDA are presented because we use these measures to evaluate performance of our business and believe them to be useful indicators of an entity's debt capacity and its ability to service debt. EBITDA, consolidated EBITDA and adjusted consolidated EBITDA are not recognized terms under GAAP and should not be considered in isolation or as alternatives to operating income, net income or cash flows from operating activities as indicators of our operating performance.  The following is a reconciliation of EBITDA, consolidated EBITDA and adjusted consolidated EBITDA to net income.

 



Three Months Ended

June 30,



Six Months Ended

June 30,



Twelve

Months Ended

June 30,


(in thousands)


2016



2015



2016



2015



2016


Net income


$

28,221



$

39,128



$

35,226



$

65,374



$

12,714


Interest expense, net



32,846




5,419




65,935




11,019




162,690


Income tax provision



4,982




13,640




13,485




23,420




8,045


Depreciation and amortization



58,167




26,107




113,440




52,103




212,171


EBITDA



124,216




84,294




228,086




151,916




395,620


Stock-based compensation



12,566




4,208




27,913




8,314




63,678


Capital-based taxes






(636)




472




(636)




1,936


Acquired EBITDA and cost savings (1)



1,046




389




5,814




2,156




28,468


Unusual or non-recurring charges (2)



1,289




1,158




6,754




10,250




22,652


Purchase accounting adjustments (3)



8,630




302




24,258




699




73,486


Other (4)



769




47




1,553




142




2,940


Consolidated EBITDA


$

148,516



$

89,762



$

294,850



$

172,841



$

588,780


Less:  acquired EBITDA



(1,046)




(389)




(5,814)




(2,156)




(28,468)


Adjusted Consolidated EBITDA


$

147,470



$

89,373



$

289,036



$

170,685



$

560,312























(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 June 30,



Six Months Ended June 30,


(in thousands, except per share data)


2016



2015



2016



2015


GAAP – Net income


$

28,221



$

39,128



$

35,226



$

65,374


Plus: Amortization of intangible assets



51,995




22,312




101,675




44,493


Plus: Amortization of deferred financing costs and
  original issue discount



2,659




1,439




5,312




2,874


Plus: Stock-based compensation



12,566




4,208




27,913




8,314


Plus: Capital-based taxes






(636)




472




(636)


Plus: Unusual and non-recurring items (1)



1,289




1,158




6,754




10,250


Plus: Purchase accounting adjustments (2)



8,630




302




24,258




699


Income tax effect (3)



(25,914)




(9,194)




(46,742)




(19,920)


Adjusted net income


$

79,446



$

58,717



$

154,868



$

111,448


Adjusted diluted earnings per share


$

0.39



$

0.33



$

0.76



$

0.63


GAAP diluted earnings per share


$

0.14



$

0.22



$

0.17



$

0.37


Diluted weighted-average shares outstanding



204,916




179,104




204,596




177,974



















(1)     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.

(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)     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: 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, http://www.ssctech.com


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