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8-K - FORM 8-K - SS&C Technologies Holdings Incd42851d8k.htm

Exhibit 99.1

 

LOGO

GAAP Revenue $280.9 million; Adjusted Revenue $311.4 million, up 61.7 percent

WINDSOR, CT, November 2, 2015 (PR Newswire) – SS&C Technologies Holdings, Inc. (NASDAQ: SSNC), a global provider of investment and financial software-enabled services and software, today announced its financial results for the quarter ended September 30, 2015.

SS&C reported for the third quarter of 2015 GAAP revenue of $280.9 million, GAAP operating income of $15.0 million, GAAP net loss of $34.6 million and diluted loss per share of $0.36.

Financial Highlights:

 

    Adjusted revenue (defined below) of $311.4 million in the third quarter 2015, representing an increase of 61.7 percent from third quarter 2014

 

    Adjusted operating income (defined below) increased 59.3 percent to $125.3 million, or 40.2 percent of adjusted revenue

 

    Adjusted consolidated EBITDA (defined below) increased to $130.8 million, a 59.3 percent increase from third quarter 2014

 

    Adjusted diluted EPS (defined below) increased to $0.68 in the third quarter 2015, representing an increase of 11.5 percent

“SS&C’s third quarter once again defines our company as a company that executes. We delivered three hundred and eleven million in adjusted revenue, one hundred and thirty million in adjusted consolidated EBITDA and $0.68 in adjusted diluted earnings per share,” says Bill Stone, Chairman and CEO of SS&C Technologies. “We are delivering new products and services through a world class sales and marketing organization. The opportunities presenting themselves today are larger and more lucrative than ever. SS&C has the talent, technology and will to win. We believe over the next several years we will demonstrate the superiority of our customer delivery model and our overall business model”

Results

Adjusted revenue (a non-GAAP measure defined in note 1 to the attached Condensed Consolidated Financial Information) in the third quarter of 2015 was $311.4 million, or 61.7% increase from the third quarter of 2014. Adjusted operating income (a non-GAAP measure defined in note 2 to the attached Condensed Consolidated Financial Information) in the third quarter of 2015 was $125.3 million, or 40.2 percent of adjusted revenue. This represents a 59.3 percent increase compared to $78.6 million, or 40.8 percent of adjusted revenue, in the third quarter of 2014. Adjusted net income (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) for the third quarter of 2015 was $68.6 million compared to $53.3 million in 2014’s third quarter, a 28.7 percent increase. Adjusted diluted earnings per share (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) in the third quarter of 2015 were $0.68 compared to $0.61 in the third quarter of 2014, an 11.5 percent increase.

Operating Cash Flow

SS&C generated net cash from operating activities of $120.6 million for the nine months ended September 30, 2015, compared to $164.3 million for the same period in 2014. The cash from operating activities was affected by $66.4 million of costs related to the financing and acquisition of Advent and the pending acquisitions. SS&C ended the quarter with $503.8 million in cash, and $2,900.0 million in gross debt for a net debt position of $2,396.2 million.


Annual Run Rate Basis

Annual Run Rate Basis (ARRB) adjusted recurring revenue, defined as adjusted recurring revenue for the quarter on an annualized basis, was $1,152.2 million based on adjusted recurring revenue of $288.0 million for the third quarter of 2015. This represents an increase of 62.7 percent from $177.0 million and $708.1 million annual run-rate in the same period in 2014 and an increase of 52.1 percent from $189.4 million for the second quarter of 2015, an annual run rate of $757.6 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Guidance

 

     Q4 2015    FY 2015

Adjusted Revenue ($M)

   312.0 – 320.0    1,042.6 – 1,050.6

Adjusted Net Income ($M)

   68.4 – 72.2    248.4 – 252.2

Cash from Operating Activities ($M)

      210.0 – 220.0

Capital Expenditures (% of revenue)

      2.0% – 2.4%

Diluted Shares (M)

   101.9 – 102.4    95.3 – 95.5

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 earnings call will take place at 5:00 p.m. eastern time today, November 2, 2015. The call will discuss Q3 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 Third Quarter Earnings Conference Call” conference ID# 57585753. A replay will be available after 8:00 p.m. eastern time on November 2, 2015, until midnight on November 6, 2015. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code # 57585753. The call will also be available for replay on SS&C’s website after November 2, 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 fourth 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. 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. SS&C’s technology and services helps firms minimize risk, work together seamlessly, and discover new opportunities in a constantly evolving world.


Follow SS&C on Twitter, Linkedin and Facebook.

For more information

Patrick Pedonti

Chief Financial Officer

Tel: +1-860-298-4738

E-mail: InvestorRelations@sscinc.com

Justine Stone

Investor Relations

Tel: +1-212-367-4705


SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operation

(in thousands, except per share data)

(unaudited)

 

     Three Months Ended     Nine Months Ended  
     September 30,
2015
    September 30,
2014
    September 30,
2015
    September 30,
2014
 

Revenues:

        

Recurring revenues

   $ 260,841      $ 177,035      $ 643,483      $ 524,107   

Non-recurring revenues

     20,053        15,563        55,914        43,023   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     280,894        192,598        699,397        567,130   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenues:

        

Recurring revenues

     139,542        94,991        343,197        286,775   

Non-recurring revenues

     12,322        6,392        30,477        18,340   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

     151,864        101,383        373,674        305,115   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     129,030        91,215        325,723        262,015   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Selling and marketing

     37,082        11,581        64,400        35,682   

Research and development

     37,389        13,935        74,517        41,461   

General and administrative

     39,607        11,336        70,370        38,095   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     114,078        36,852        209,287        115,238   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     14,952        54,363        116,436        146,777   

Interest expense, net

     (32,645     (6,071     (43,664     (19,738

Other income, net

     6,953        1,532        5,282        787   

Loss on extinguishment of debt

     (30,417     —          (30,417     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

     (41,157     49,824        47,637        127,826   

(Benefit) provision for income taxes

     (6,547     8,997        16,873        33,306   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

   $ (34,610   $ 40,827      $ 30,764      $ 94,520   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic (loss) earnings per share

   $ (0.36   $ 0.49      $ 0.35      $ 1.14   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic weighted average number of common shares outstanding

     96,853        83,532        88,886        83,127   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted (loss) earnings per share

   $ (0.36   $ 0.47      $ 0.33      $ 1.08   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted weighted average number of common and common equivalent shares outstanding

     96,853        87,392        93,235        87,125   
  

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Condensed Consolidated Financial Information.


SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

     September 30,
2015
     December 31,
2014
 

ASSETS

  

  

Current assets:

     

Cash and cash equivalents

   $ 503,810       $ 109,577   

Accounts receivable, net

     154,980         94,359   

Prepaid income taxes

     27,981         11,857   

Deferred income taxes

     8,898         2,975   

Prepaid expenses and other current assets

     25,094         14,927   

Restricted cash

     3,208         1,477   
  

 

 

    

 

 

 

Total current assets

     723,971         235,172   

Property and equipment, net

     72,026         54,277   

Deferred income taxes

     950         1,135   

Goodwill

     3,501,892         1,573,227   

Intangible and other assets, net

     1,478,384         421,511   
  

 

 

    

 

 

 

Total assets

   $ 5,777,223       $ 2,285,322   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Current portion of long-term debt

   $ 33,000       $ 20,470   

Accounts payable

     15,392         12,004   

Income taxes payable

     —           1,116   

Accrued employee compensation and benefits

     58,713         53,975   

Deferred income taxes

     —           110   

Interest payable

     8,193         —     

Other accrued expenses

     38,892         30,666   

Deferred maintenance and other revenue

     183,693         73,254   
  

 

 

    

 

 

 

Total current liabilities

     337,883         191,595   

Long-term debt, net of current portion

     2,795,942         618,435   

Other long-term liabilities

     74,931         26,446   

Deferred income taxes

     493,220         102,176   
  

 

 

    

 

 

 

Total liabilities

     3,701,976         938,652   

Total stockholders’ equity

     2,075,247         1,346,670   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 5,777,223       $ 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)

 

     Nine Months Ended  
     September 30,
2015
    September 30,
2014
 

Cash flow from operating activities:

    

Net income

   $ 30,764      $ 94,520   

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

    

Depreciation and amortization

     100,840        74,493   

Stock-based compensation expense

     31,435        8,554   

Income tax benefit related to exercise of stock options

     (11,141     (10,735

Amortization of loan origination costs and original issue

discount

     5,473        4,397   

Loss on extinguishment of debt

     3,954        —     

Loss on sale or disposition of property and equipment

     339        672   

Deferred income taxes

     (19,643     (11,661

Provision for doubtful accounts

     601        672   

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

    

Accounts receivable

     (5,234     (395

Prepaid expenses and other assets

     (5,109     (5,302

Accounts payable

     (1,755     636   

Accrued expenses

     (35,824     (637

Income taxes prepaid and payable

     (1,125     13,715   

Deferred maintenance and other revenue

     26,992        (4,664
  

 

 

   

 

 

 

Net cash provided by operating activities

     120,567        164,265   
  

 

 

   

 

 

 

Cash flow from investing activities:

    

Additions to property and equipment

     (9,462     (11,879

Proceeds from sale of property and equipment

     56        27   

Cash paid for business acquisitions, net of cash acquired

     (2,614,785     —     

Additions to capitalized software

     (3,370     (2,688

Net changes in restricted cash

     —          983   
  

 

 

   

 

 

 

Net cash used in investing activities

     (2,627,561     (13,557
  

 

 

   

 

 

 

Cash flow from financing activities:

    

Cash received from debt borrowings, net of original issue discount

     3,068,075        —     

Repayments of debt

     (823,448     (174,000

Proceeds from common stock issuance, net

     717,802        —     

Proceeds from exercise of stock options

     10,618        16,070   

Income tax benefit related to exercise of stock options

     11,141        10,735   

Purchase of common stock for treasury

     —          (11,223

Payment of fees related to refinancing activities

     (45,781     (512

Dividends paid on common stock

     (33,216     —     
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     2,905,191        (158,930
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

     (3,964     (1,168
  

 

 

   

 

 

 

Net increase (decrease) in cash

     394,233        (9,390

Cash, beginning of period

     109,577        84,470   
  

 

 

   

 

 

 

Cash, end of period

   $ 503,810      $ 75,080   
  

 

 

   

 

 

 

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 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. Below is a reconciliation between adjusted revenue and revenue, the GAAP measure we believe to be most directly comparable to adjusted revenue. Also below is our breakdown of recurring and non-recurring adjusted revenue.

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
(in thousands)    2015      2014      2015      2014  

Revenue

   $ 280,894       $ 192,598       $ 699,397       $ 567,130   

Purchase accounting adjustments to deferred revenue

     30,532         —           31,231         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted revenue

   $ 311,426       $ 192,598       $ 730,628       $ 567,130   
  

 

 

    

 

 

    

 

 

    

 

 

 

Recurring revenue

   $ 288,040       $ 177,035       $ 671,381       $ 524,107   

Non-recurring revenue

     23,386         15,563         59,247         43,023   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted revenue

   $ 311,426       $ 192,598       $ 730,628       $ 567,130   
  

 

 

    

 

 

    

 

 

    

 

 

 

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 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)    2015      2014      2015      2014  

Operating income

   $ 14,952       $ 54,363       $ 116,436       $ 146,777   

Amortization of intangible assets

     43,289         21,318         87,782         63,929   

Stock-based compensation

     23,121         2,784         31,435         8,554   

Capital-based taxes

     —           —           (636      6   

Unusual or non-recurring charges

     16,672         180         25,251         6,019   

Purchase accounting adjustments

     27,274         —           27,973         (27
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted operating income

   $ 125,308       $ 78,645       $ 288,241       $ 225,258   
  

 

 

    

 

 

    

 

 

    

 

 

 

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
September 30,
    Nine Months Ended
September 30,
   

Twelve Months
Ended

September 30,

 
(in thousands)    2015     2014     2015     2014     2015  

Net (loss) income

   $ (34,610   $ 40,827      $ 30,764      $ 94,520      $ 67,371   

Interest expense, net

     32,645        6,071        43,664        19,738        49,398   

Taxes

     (6,547     8,997        16,873        33,306        30,094   

Depreciation and amortization

     48,737        24,661        100,840        74,493        126,178   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     40,225        80,556        192,141        222,057        273,041   

Stock-based compensation

     23,121        2,784        31,435        8,554        34,364   

Capital-based taxes

     —          —          (636     6        (636

Acquired EBITDA and cost savings

     1,482        —          92,717        —          143,671   

Unusual or non-recurring charges

     9,719        (1,353     19,969        5,231        19,614   

Loss on extinguishment of debt

     30,417        —          30,417        —          30,417   

Purchase accounting adjustments

     27,274        —          27,973        (27     28,476   

Other

     78        118        220        201        334   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated EBITDA

     132,316        82,105        394,236        236,022        529,281   

Less: acquired EBITDA

     (1,482     —          (92,717     —          (143,671
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Consolidated EBITDA

     130,834        82,105        301,519        236,022        385,610   

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
September 30,
     Nine Months Ended
September 30,
 
(in thousands, except per share data)    2015      2014      2015      2014  

GAAP – Net (loss) income

   $ (34,610    $ 40,827       $ 30,764       $ 94,520   

Plus: Amortization of intangible assets

     43,289         21,318         87,782         63,929   

Plus: Amortization of deferred financing costs and original issue discount

     2,599         1,441         5,473         4,397   

Plus: Stock-based compensation

     23,121         2,784         31,435         8,554   

Plus: Capital-based taxes

     —           —           (636      6   

Plus: Unusual and non-recurring items

     9,719         (1,353      19,969         5,231   

Plus: Loss on extinguishment of debt

     30,417         —           30,417         —     

Plus: Purchase accounting adjustments

     27,274         —           27,973         (27

Income tax effect (1)

     (33,220      (11,726      (53,140      (25,469
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted net income

   $ 68,589       $ 53,291       $ 180,037       $ 151,141   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted diluted earnings per share

   $ 0.68       $ 0.61       $ 1.93       $ 1.73   

GAAP diluted earnings per share

   $ (0.36    $ 0.47       $ 0.33       $ 1.08   

Diluted weighted-average shares outstanding

     101,312         87,392         93,235         87,125   

 

(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.