SS&C Technologies Reports Q3 2016 Results

Q3 GAAP revenue $383.3 million, Fully Diluted GAAP Earnings Per Share $0.19, Adjusted revenue $391.9 million, Adjusted Diluted Earnings Per Share $0.42

WINDSOR, Conn., Oct. 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 third quarter ended September 30, 2016. 

GAAP Results

SS&C reported GAAP revenue of $383.3 million for the third quarter of 2016, compared to $280.9 million in the third quarter of 2015, a 36.5 percent increase. GAAP operating income for the third quarter of 2016 was $76.9 million, or 20.0 percent of revenue. This represents an increase of over 400 percent compared to $15.0 million, or 5.3 percent of revenue, in 2015's third quarter. GAAP net income for the third quarter of 2016 was $38.7 million compared to a $34.6 million GAAP net loss in the third quarter of 2015. On a fully diluted GAAP basis, earnings per share in the third quarter of 2016 were $0.19.

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

Adjusted revenue in the third quarter of 2016 was $391.9 million, up 25.8 percent compared to $311.4 million in the third quarter of 2015. Adjusted operating income in the third quarter of 2016 was $150.5 million, or 38.4 percent of adjusted revenue. This represents a 20.1 percent increase compared to adjusted operating income of $125.3 million, or 40.2 percent of adjusted revenue, in the third quarter of 2015.

Adjusted net income for the third quarter of 2016 was $87.5 million, up 27.5 percent compared to $68.6 million in 2015's third quarter. Adjusted diluted earnings per share in the third quarter of 2016 were $0.42 per share, up 23.5 percent compared to $0.34 per share in the third quarter of 2015.

Highlights:

  • SS&C adjusted revenue for Q3 2016 was $391.9 million, our 18th straight quarter with record adjusted revenue.
  • SS&C paid off $113.2 million in debt in Q3 2016, and $528.6 million since acquiring Advent over one year ago.
  • Our net debt to consolidated EBITDA leverage ratio has been reduced to 4.08x.

"SS&C is pleased to report record adjusted revenues of $391.9 million for Q3 2016, and adjusted diluted earnings per share of $0.42 cents," says Bill Stone, Chairman and Chief Executive Officer. "Our business has grown sharply over the past year and our last twelve months' consolidated EBTIDA is over $600 million. We have integrated the people and products from Advent, Varden, Primatics and Citi Alternative Investor Services. At SS&C, we change. Our research and development spend, acquisitions and onboarding talent encourages creativity and critical thinking. This enables us to service our clients' demands in a complex and evolving regulatory environment."

Annual Run Rate Basis

Annual Run Rate Basis (ARRB) recurring revenue, defined as adjusted recurring revenue on an annualized basis, was $1,441.3 million based on adjusted recurring revenue $360.3 million for the third quarter of 2016. This represents an increase of 25.1 percent from $288.0 million and $1,152.2 million run-rate in the same period in 2015 and an increase of 1.2 percent from $356.1 million for the second quarter of 2016, an annual run rate of $1,424.3 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 $237.0 million for the nine months ended September 30, 2016, compared to $120.6 million for the same period in 2015, representing a 96.6 percent increase. SS&C ended the quarter with $101.8 million in cash and cash equivalents, and $2,551.5 million in gross debt, for a net debt balance of $2,449.7 million. SS&C's leverage ratio as defined in our credit agreement stood at 4.08 times consolidated EBITDA as of September 30, 2016.

Guidance



Q4 2016



FY 2016


Adjusted Revenue ($M)


$394.0 – $403.0



$1,513.4 – $1,522.4


Adjusted Net Income ($M)


$89.4 – $92.4



$331.8 – $334.8


Cash from Operating Activities ($M)




$380.0 - $390.0


Capital Expenditures (% of revenue)




2.5% – 2.8%


Diluted Shares (M)


207.8 – 208.2



205.9 – 206.1


Effective Income Tax Rate (%)




27% – 29%


 

Non-GAAP Financial Measures

Adjusted revenue, adjusted operating income, adjusted consolidated EBITDA, adjusted net income and adjusted diluted earnings per share are non-GAAP measures. See the accompanying notes to the attached Condensed Consolidated Financial Information for the reconciliations and definitions for each of these non-GAAP measures and the reasons our management believes these measures provide useful information to investors regarding our financial condition and results of operations.

Earnings Call and Press Release

SS&C's Q3 2016 earnings call will take place at 5:00 p.m. eastern time today, October 27, 2016. The call will discuss Q3 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 Third Quarter 2016 Conference Call"; conference ID#93683809. A replay will be available after 8:00 p.m. eastern time on October 27, 2016, until midnight on November 3, 2016. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code #93683809. The call will also be available for replay on SS&C's website after October 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 fourth 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.

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SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operation

(in thousands, except per share data)

(unaudited)





Three Months Ended September 30,



Nine Months Ended September 30,




2016



2015



2016



2015


Revenues:

















Software-enabled services


$

248,772



$

180,744



$

699,091



$

484,434


Maintenance and term licenses



106,925




80,097




305,437




159,049


Total recurring revenues



355,697




260,841




1,004,528




643,483


Perpetual licenses



4,389




6,508




14,643




22,526


Professional services



23,218




13,545




61,341




33,388


Total non-recurring revenues



27,607




20,053




75,984




55,914


Total revenues



383,304




280,894




1,080,512




699,397


Cost of revenues:

















Software-enabled services



143,074




96,151




403,045




273,301


Maintenance and term licenses



45,458




43,391




138,864




69,896


Total recurring cost of revenues



188,532




139,542




541,909




343,197


Perpetual licenses



608




1,036




1,749




3,081


Professional services



18,887




11,286




51,532




27,396


Total non-recurring cost of revenues



19,495




12,322




53,281




30,477


Total cost of revenues



208,027




151,864




595,190




373,674


Gross profit



175,277




129,030




485,322




325,723


Operating expenses:

















Selling and marketing



27,328




37,082




85,724




64,400


Research and development



37,701




37,389




114,975




74,517


General and administrative



33,345




39,607




91,239




70,370


Total operating expenses



98,374




114,078




291,938




209,287


Operating income



76,903




14,952




193,384




116,436


Interest expense, net



(31,648)




(32,645)




(97,583)




(43,664)


Other income, net



2,655




6,953




820




5,282


Loss on extinguishment of debt






(30,417)







(30,417)


Income (loss) before income taxes



47,910




(41,157)




96,621




47,637


Provision (benefit) for income taxes



9,163




(6,547)




22,648




16,873


Net income (loss)


$

38,747



$

(34,610)



$

73,973



$

30,764


Basic earnings (loss) per share


$

0.19



$

(0.18)



$

0.37



$

0.17


Basic weighted average number of common shares

   outstanding



201,782




193,706




199,365




177,772


Diluted earnings (loss) per share


$

0.19



$

(0.18)



$

0.36



$

0.16


Diluted weighted average number of common and common

   equivalent shares outstanding



206,635




193,706




205,334




186,470


Net income (loss)


$

38,747



$

(34,610)



$

73,973



$

30,764


Other comprehensive loss, net of tax:

















Foreign currency exchange translation adjustment



(12,060)




(38,005)




(29,532)




(51,416)


Total comprehensive loss, net of tax



(12,060)




(38,005)




(29,532)




(51,416)


Comprehensive income (loss)


$

26,687



$

(72,615)



$

44,441



$

(20,652)


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,




2016



2015


ASSETS









Current assets:









Cash and cash equivalents


$

101,800



$

434,159


Accounts receivable, net



237,495




169,951


Prepaid expenses and other current assets



32,720




27,511


Prepaid income taxes



39,776




40,627


Restricted cash



2,116




2,818


Total current assets



413,907




675,066


Property, plant and equipment, net



71,128




67,143


Deferred income taxes



2,071




2,199


Goodwill



3,616,060




3,549,212


Intangible and other assets, net



1,519,294




1,508,622


Total assets


$

5,622,460



$

5,802,242


LIABILITIES AND STOCKHOLDERS' EQUITY









Current liabilities:









Current portion of long-term debt


$

29,813



$

32,281


Accounts payable



16,480




11,957


Income taxes payable






1,428


Accrued employee compensation and benefits



74,006




83,894


Interest payable



13,259




28,903


Other accrued expenses



50,979




36,231


Deferred revenue



231,285




222,024


Total current liabilities



415,822




416,718


Long-term debt, net of current portion



2,460,457




2,719,070


Other long-term liabilities



61,968




51,434


Deferred income taxes



459,025




509,574


Total liabilities



3,397,272




3,696,796


Total stockholders' equity



2,225,188




2,105,446


Total liabilities and stockholders' equity


$

5,622,460



$

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 Nine Months Ended September 30,




2016



2015


Cash flow from operating activities:









Net income


$

73,973



$

30,764


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









Depreciation and amortization



170,910




100,840


Stock-based compensation expense



40,402




31,435


Income tax benefit related to exercise of stock options



(44,975)




(11,141)


Amortization and write-offs of loan origination costs



7,994




5,473


Loss on extinguishment of debt






3,954


Loss on sale or disposition of property and equipment



159




339


Deferred income taxes



(39,712)




(27,030)


Provision for doubtful accounts



2,684




601


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









Accounts receivable



(14,603)




(5,234)


Prepaid expenses and other assets



(2,595)




(5,109)


Accounts payable



2,610




(1,755)


Accrued expenses



(18,429)




(28,437)


Income taxes prepaid and payable



44,840




(1,125)


Deferred revenue



13,758




26,992


Net cash provided by operating activities



237,016




120,567


Cash flow from investing activities:









Additions to property and equipment



(18,870)




(9,462)


Proceeds from sale of property and equipment



69




56


Cash paid for business acquisitions, net of cash acquired



(309,432)




(2,614,785)


Additions to capitalized software



(6,137)




(3,370)


Purchase of long-term investment



(1,000)





Net changes in restricted cash



700





Net cash used in investing activities



(334,670)




(2,627,561)


Cash flow from financing activities:









Cash received from debt borrowings, net of original issue discount






3,068,075


Repayments of debt



(268,550)




(823,448)


Proceeds from exercise of stock options



34,767




10,618


Withholding taxes related to equity award net share settlement



(7,051)





Income tax benefit related to exercise of stock options



44,975




11,141


Proceeds from common stock issuance, net






717,802


Purchase of common stock for treasury



(13)





Payment of fees related to refinancing activities



(503)




(45,781)


Dividends paid on common stock



(37,452)




(33,216)


Net cash (used in) provided by financing activities



(233,827)




2,905,191


Effect of exchange rate changes on cash and cash equivalents



(878)




(3,964)


Net (decrease) increase in cash and cash equivalents



(332,359)




394,233


Cash and cash equivalents, beginning of period



434,159




109,577


Cash and cash equivalents, end of period


$

101,800



$

503,810


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 September 30,



Nine Months Ended September 30,


(in thousands)


2016



2015



2016



2015


Revenues


$

383,304



$

280,894



$

1,080,512



$

699,397


Purchase accounting adjustments to
deferred revenue



8,562




30,532




38,880




31,231


Adjusted revenues


$

391,866



$

311,426



$

1,119,392



$

730,628



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)


2016



2015



2016



2015


Software-enabled services


$

248,772



$

180,744



$

699,091



$

484,434


Maintenance and term licenses



106,925




80,097




305,437




159,049


Total recurring revenues



355,697




260,841




1,004,528




643,483


Perpetual licenses



4,389




6,508




14,643




22,526


Professional services



23,218




13,545




61,341




33,388


Total non-recurring revenues



27,607




20,053




75,984




55,914


Total revenues


$

383,304



$

280,894



$

1,080,512



$

699,397



















Software-enabled services


$

248,809



$

180,744



$

699,358



$

484,434


Maintenance and term licenses



111,527




107,296




332,801




186,947


Total adjusted recurring revenues



360,336




288,040




1,032,159




671,381


Perpetual licenses



4,389




6,508




14,643




22,526


Professional services



27,141




16,878




72,590




36,721


Total adjusted non-recurring revenues



31,530




23,386




87,233




59,247


Total adjusted revenues


$

391,866



$

311,426



$

1,119,392



$

730,628


 

 

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
September 30,



Nine Months Ended
September 30,


(in thousands)


2016



2015



2016



2015


Operating income


$

76,903



$

14,952



$

193,384



$

116,436


Amortization of intangible assets



51,539




43,289




153,214




87,782


Stock-based compensation



12,489




23,121




40,402




31,435


Capital-based taxes



1,000







1,472




(636)


Unusual or non-recurring charges (1)



2,966




16,672




7,885




25,251


Purchase accounting adjustments (2)



5,573




27,274




29,831




27,973


Adjusted operating income


$

150,470



$

125,308



$

426,188



$

288,241




(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 (Loss) to EBITDA, Consolidated EBITDA and Adjusted Consolidated EBITDA


EBITDA represents net income (loss) 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
September 30,



Nine Months Ended
September 30,



Twelve Months
Ended
September 30,


(in thousands)


2016



2015



2016



2015



2016


Net income (loss)


$

38,747



$

(34,610)



$

73,973



$

30,764



$

86,071


Interest expense, net



31,648




32,645




97,583




43,664




131,276


Income tax provision (benefit)



9,163




(6,547)




22,648




16,873




23,755


Depreciation and amortization



57,470




48,737




170,910




100,840




220,904


EBITDA



137,028




40,225




365,114




192,141




462,006


Stock-based compensation



12,489




23,121




40,402




31,435




53,046


Capital-based taxes



1,000







1,472




(636)




2,936


Acquired EBITDA and cost savings (1)






1,482




5,814




92,717




14,670


Unusual or non-recurring charges (2)



311




9,719




7,065




19,969




13,244


Loss on extinguishment of debt






30,417







30,417





Purchase accounting adjustments (3)



5,573




27,274




29,831




27,973




51,785


Other (4)



269




78




1,822




220




2,452


Consolidated EBITDA


$

156,670



$

132,316



$

451,520



$

394,236



$

600,139


Less:  acquired EBITDA






(1,482)




(5,814)




(92,717)




(14,670)


Adjusted Consolidated EBITDA


$

156,670



$

130,834



$

445,706



$

301,519



$

585,469




(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 (Loss) to Adjusted Net Income and Diluted Earnings (Loss) Per Share to Adjusted Diluted Earnings Per Share


Adjusted net income and adjusted diluted earnings per share represent net income (loss) and earnings (loss) 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 (loss) or diluted earnings (loss) per share, as those terms are defined under GAAP, and should not be considered as alternatives to net income (loss) or diluted earnings (loss) 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 (loss) and diluted earnings (loss) per share.




Three Months Ended
September 30,



Nine Months Ended
September 30,


(in thousands, except per share data)


2016



2015



2016



2015


GAAP – Net income (loss)


$

38,747



$

(34,610)



$

73,973



$

30,764


Plus: Amortization of intangible assets



51,539




43,289




153,214




87,782


Plus: Amortization of deferred financing costs and original issue discount



2,682




2,599




7,994




5,473


Plus: Stock-based compensation



12,489




23,121




40,402




31,435


Plus: Capital-based taxes



1,000







1,472




(636)


Plus: Unusual and non-recurring items (1)



311




9,719




7,065




19,969


Plus: Loss on extinguishment of debt






30,417







30,417


Plus: Purchase accounting adjustments (2)



5,573




27,274




29,831




27,973


Income tax effect (3)



(24,858)




(33,220)




(71,600)




(53,140)


Adjusted net income


$

87,483



$

68,589



$

242,351



$

180,037


Adjusted diluted earnings (loss) per share


$

0.42



$

0.34



$

1.18



$

0.97


GAAP diluted earnings per share


$

0.19



$

(0.18)



$

0.36



$

0.16


Diluted weighted-average shares outstanding



206,635




202,624




205,334




186,470




(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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