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8-K - FORM 8-K - SS&C Technologies Holdings Incd719408d8k.htm

Exhibit 99.1

 

LOGO

Q1 GAAP Diluted Earnings Per Share of $0.30, and Adjusted Diluted Earnings Per Share of $0.56, Q1 Operating 2014 Cash Flow Increased to $38.6 million, up 86.8%

WINDSOR, CT, May 1, 2014 (GLOBE 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 quarter that ended March 31, 2014.

Financial Highlights:

 

    Record revenue of $185.8 million in the first quarter 2014, representing an increase of 7.3 percent from the first quarter 2013

 

    Adjusted diluted EPS (defined below) increased to $0.56 in the first quarter of 2014, representing an increase of 24.4 percent

 

    Net cash from operating activities of $38.6 million for the first three months of 2014, representing an 86.8 percent increase

 

    Launched new REIT Servicing Group to address growing REIT investment accounting and reporting needs

 

    Expanded office space in Windsor, Connecticut and Evansville, Indiana and secured new Boston, Massachusetts and Dublin, Ireland facilities

“SS&C continues to perform. High quality new wins in fund administration, institutional outsourcing, commercial mortgage systems, trading and fix network services validate our business model’s strength. We deliver mission critical solutions on a worldwide basis and our quality and breadth resonate with customers. We continue to generate cash, have paid down $420 million in debt since June of 2012, and we are poised to roll out new products and services,” said Bill Stone, Chairman and Chief Executive Officer, SS&C Technologies. “SS&C possesses the workforce, technology and discipline to be the long-term winner. Our opportunity is strong and our commitment matches the opportunity. With our solid foothold in the alternative investment, asset management and insurance markets and our best quarter for our institutional group in three years, SS&C is well positioned for 2014.”

Results

SS&C reported GAAP revenue of $185.8 million for the first quarter of 2014, compared to $173.2 million in the first quarter of 2013, a 7.3 percent increase. GAAP operating income for the first quarter of 2014 was $47.0 million, or 25.3 percent of revenue. This represents an increase of 12.0 percent compared to $42.0 million, or 24.2 percent of revenue, in the first quarter of 2013. GAAP net income for the first quarter of 2014 was $26.4 million compared to $21.4 million in the first quarter of 2013, a 23.4 percent increase. On a fully diluted GAAP basis, earnings per share in the first quarter of 2014 were $0.30 compared to $0.26 per share in the first quarter of 2013, a 15.4 percent increase.


Adjusted operating income (a non-GAAP measure defined in note 2 to the attached Condensed Consolidated Financial Information) in the first quarter of 2014 was $72.6 million, or 39.1 percent of adjusted revenue. This represents a 12.1 percent increase compared to $64.8 million, or 37.4 percent of adjusted revenue, in the first quarter of 2013. Adjusted net income (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) for the first quarter of 2014 was $48.3 million compared to $37.6 million in 2013’s first quarter, a 28.5 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 2014 were $0.56 compared to $0.45 in the first quarter of 2013, a 24.4 percent increase.

Operating Cash Flow

SS&C generated net cash from operating activities of $38.6 million for the three months ended March 31, 2014, compared to $20.6 million for the same period in 2013, representing an 86.8 percent increase. SS&C ended the quarter with $78.4 million in cash, and $737.0 million in gross debt, for a net debt balance of $658.6 million. SS&C’s leverage ratio as defined in our credit agreement stood at 2.2 times consolidated EBITDA as of March 31, 2014.

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 $683.6 million based on maintenance and software-enabled services revenue of $170.9 million for the first quarter of 2014. This represents an increase of 5.7 percent from $161.8 million and $647.0 million annual run-rate in the same period in 2013 and an increase of 2.7 percent from $166.5 million for the fourth quarter of 2013, an annual run rate of $665.8 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Guidance

 

     Q2 2014   FY 2014

Adjusted Revenue ($M)

   $186.5 – $190.0   $757.0 – $775.0

Adjusted Net Income ($M)

   $48.5 – $50.4   $197.5 – $206.8

Cash from Operating Activities ($M)

   N/A   $220.0 – $230.0

Capital Expenditures (% of revenue)

   N/A   2.3% – 2.8%

Diluted Shares (M)

   87.2 – 87.5   87.7 – 88.2

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, May 1, 2014. The call will discuss Q1 2014 results and our guidance and business outlook. Interested parties may dial 877-312-8798 (U.S. and Canada) or 253-237-1193 (International) and request the “SS&C Technologies 2014 First Quarter Earnings Conference Call,” conference ID #22362068. A replay will be available after 8:00 p.m. eastern time on May 1, 2014, until midnight on May 7, 2014. The dial-in number is 855-859-2056 (U.S. and Canada) 404-537-3406 (International); access code #22362068. The call will also be available for replay on SS&C’s website after May 1, 2014; 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 2014, 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 6,900 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.

Follow SS&C on Twitter, Linkedin and Facebook. The SS&C Technologies logo is available at www.globenewswire.com/newsroom/prs/?pkgid=8587

For more information

Patrick Pedonti

Chief Financial Officer

Tel: +1-860-298-4738

E-mail: InvestorRelations@sscinc.com

Justine Stone

Investor Relations Coordinator

Tel: +1- 212-367-4705

E-mail: Justine.stone@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,  
     2014     2013  

Revenues:

    

Software-enabled services

   $ 145,383      $ 135,739   

Software licenses

     7,499        6,070   

Maintenance

     25,526        26,015   

Professional services

     7,402        5,394   
  

 

 

   

 

 

 

Total revenues

     185,810        173,218   
  

 

 

   

 

 

 

Cost of revenues:

    

Software-enabled services

     85,691        80,727   

Software licenses

     851        1,274   

Maintenance

     9,931        10,520   

Professional services

     5,026        4,920   
  

 

 

   

 

 

 

Total cost of revenues

     101,499        97,441   
  

 

 

   

 

 

 

Gross profit

     84,311        75,777   
  

 

 

   

 

 

 

Operating expenses:

    

Selling and marketing

     11,898        9,464   

Research and development

     13,587        13,802   

General and administrative

     11,801        10,515   
  

 

 

   

 

 

 

Total operating expenses

     37,286        33,781   
  

 

 

   

 

 

 

Operating income

     47,025        41,996   

Interest expense, net

     (7,098     (12,505

Other (expense) income, net

     (686     146   
  

 

 

   

 

 

 

Income before income taxes

     39,241        29,637   

Provision for income taxes

     12,793        8,208   
  

 

 

   

 

 

 

Net income

   $ 26,448      $ 21,429   
  

 

 

   

 

 

 

Basic earnings per share

   $ 0.32      $ 0.27   
  

 

 

   

 

 

 

Basic weighted average number of common shares outstanding

     82,722        79,340   
  

 

 

   

 

 

 

Diluted earnings per share

   $ 0.30      $ 0.26   
  

 

 

   

 

 

 

Diluted weighted average number of common and common equivalent shares outstanding

     86,901        83,770   
  

 

 

   

 

 

 

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,  
     2014      2013  

ASSETS

     

Current assets:

     

Cash

   $ 78,371       $ 84,470   

Accounts receivable, net

     87,787         91,221   

Prepaid income taxes

     12,279         19,932   

Deferred income taxes

     5,587         6,526   

Prepaid expenses and other current assets

     15,661         16,567   

Restricted cash

     1,477         2,460   
  

 

 

    

 

 

 

Total current assets

     201,162         221,176   
  

 

 

    

 

 

 

Property and equipment, net

     53,213         51,697   

Deferred income taxes

     1,008         1,077   

Goodwill

     1,533,941         1,541,386   

Intangible and other assets, net

     439,043         459,988   
  

 

 

    

 

 

 

Total assets

   $ 2,228,367       $ 2,275,324   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Current portion of long-term debt

   $ 23,306       $ 23,212   

Accounts payable

     8,974         8,368   

Income taxes payable

     —           2,169   

Accrued employee compensation and benefits

     16,145         44,664   

Other accrued expenses

     26,869         26,028   

Deferred maintenance and other revenue

     64,810         62,561   
  

 

 

    

 

 

 

Total current liabilities

     140,104         167,002   

Long-term debt, net of current portion

     706,544         751,295   

Other long-term liabilities

     16,116         14,913   

Deferred income taxes

     107,851         110,406   
  

 

 

    

 

 

 

Total liabilities

     970,615         1,043,616   
  

 

 

    

 

 

 

Total stockholders’ equity

     1,257,752         1,231,708   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 2,228,367       $ 2,275,324   
  

 

 

    

 

 

 

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,
 
     2014     2013  

Cash flow from operating activities:

    

Net income

   $ 26,448      $ 21,429   

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

    

Depreciation and amortization

     24,936        24,752   

Stock-based compensation expense

     2,975        2,106   

Income tax benefit related to exercise of stock options

     (2,453     (2,679

Amortization of loan origination costs and original issue discount

     1,520        1,388   

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

     53        (7

Deferred income taxes

     (1,441     (3,919

Provision for doubtful accounts

     184        184   

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

    

Accounts receivable

     2,956        (1,751

Prepaid expenses and other assets

     1,165        2,624   

Accounts payable

     (1,765     (4,267

Accrued expenses

     (26,343     (23,463

Income taxes prepaid and payable

     7,986        668   

Deferred maintenance and other revenue

     2,333        3,578   
  

 

 

   

 

 

 

Net cash provided by operating activities

     38,554        20,643   
  

 

 

   

 

 

 

Cash flow from investing activities:

    

Additions to property and equipment

     (2,758     (2,044

Proceeds from sale of property and equipment

     —          7   

Additions to capitalized software

     (856     (202

Other

     983        —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (2,631     (2,239
  

 

 

   

 

 

 

Cash flow from financing activities:

    

Repayments of debt

     (45,000     (45,000

Income tax benefit related to exercise of stock options

     2,453        2,679   

Proceeds from exercise of stock options

     3,993        8,931   

Purchase of common stock for treasury

     (3,492     —     

Other

     (512     (1,055
  

 

 

   

 

 

 

Net cash used in financing activities

     (42,558     (34,445
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

     536        (1,281
  

 

 

   

 

 

 

Net decrease in cash

     (6,099     (17,322

Cash, beginning of period

     84,470        86,160   
  

 

 

   

 

 

 

Cash, end of period

   $ 78,371      $ 68,838   
  

 

 

   

 

 

 
Supplemental disclosure of non-cash activities:     

Excess tax benefit related to stock option exercises

   $ —        $ 12,710   

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)    2014      2013  

Revenue

   $ 185,810       $ 173,218   

Purchase accounting adjustments to deferred revenue

     —           114   
  

 

 

    

 

 

 

Adjusted revenue

   $ 185,810       $ 173,332   
  

 

 

    

 

 

 

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)    2014     2013  

Operating income

   $ 47,025      $ 41,996   

Amortization of intangible assets

     21,326        21,018   

Stock-based compensation

     2,975        2,106   

Capital-based taxes

     6        —     

Unusual or non-recurring charges

     1,328        (410

Purchase accounting adjustments

     (27     65   
  

 

 

   

 

 

 

Adjusted operating income

   $ 72,633      $ 64,775   
  

 

 

   

 

 

 

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 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,
2014
 
(in thousands)    2014     2013    

Net income

   $ 26,448      $ 21,429      $ 122,914   

Interest expense, net

     7,098        12,505        35,872   

Taxes

     12,793        8,208        31,877   

Depreciation and amortization

     24,936        24,752        99,964   
  

 

 

   

 

 

   

 

 

 

EBITDA

   $ 71,275      $ 66,894      $ 290,627   

Stock-based compensation

     2,975        2,106        9,255   

Capital-based taxes

     6        —          188   

Acquired EBITDA and cost savings

     —          —          394   

Unusual or non-recurring charges

     2,014        (556     (551

Purchase accounting adjustments

     (27     65        (144

Other

     (49     211        (25
  

 

 

   

 

 

   

 

 

 

Consolidated EBITDA

     76,194        68,720        299,744   

Less: acquired EBITDA

     —          —          (394
  

 

 

   

 

 

   

 

 

 

Adjusted Consolidated EBITDA

   $ 76,194      $ 68,720      $ 299,350   
  

 

 

   

 

 

   

 

 

 

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)    2014     2013  

GAAP – Net income

   $ 26,448      $ 21,429   

Plus: Amortization of intangible assets

     21,326        21,018   

Plus: Amortization of deferred financing costs and original issue discount

     1,520        1,388   

Plus: Stock-based compensation

     2,975        2,106   

Plus: Capital-based taxes

     6        —     

Plus: Unusual and non-recurring items

     2,014        (556

Plus: Purchase accounting adjustments

     (27     65   

Income tax effect (1)

     (5,982     (7,889
  

 

 

   

 

 

 

Adjusted net income

   $ 48,280      $ 37,561   
  

 

 

   

 

 

 

Adjusted diluted earnings per share

   $ 0.56      $ 0.45   

GAAP diluted earnings per share

   $ 0.30      $ 0.26   

Diluted weighted average shares outstanding

     86,901        83,770   

 

(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.