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8-K - 8-K - SS&C Technologies Holdings Incssnc-8k_20180501.htm

Exhibit 99.1

 

Q1 2018 GAAP revenue $421.9 million, up 3.5 percent, Fully Diluted GAAP Earnings Per Share $0.24, up 4.3 percent

Adjusted revenue $434.6 million, up 6.1 percent, Adjusted Diluted Earnings Per Share $0.53, up 20.5 percent

 

WINDSOR, CT, May 1, 2018 (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 first quarter ended March 31, 2018.

GAAP Results

SS&C reported GAAP revenue of $421.9 million for the first quarter of 2018, up 3.5 percent compared to $407.7 million in the first quarter of 2017. GAAP operating income for the first quarter of 2018 was $86.8 million, or 20.6 percent of GAAP revenue, compared to $89.7 million, or 22.0 percent of GAAP revenue, in 2017’s first quarter, representing a 3.2 percent decrease.

GAAP net income for the first quarter of 2018 was $51.3 million, up 6.4 percent compared to $48.1 million in 2017’s first quarter. On a fully diluted GAAP basis, earnings per share in the first quarter of 2018 were $0.24 per share, up 4.3 percent compared to $0.23 per share on a fully diluted GAAP basis in the first quarter of 2017.  

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

Adjusted revenue was $434.6 million for the first quarter of 2018, up 6.1 percent compared to $409.5 million in the first quarter of 2017. Adjusted operating income for the first quarter of 2018 was $171.9 million, or 39.6 percent of adjusted revenue, compared to $155.4 million, or 38.0 percent of adjusted revenue, in 2017’s first quarter, representing a 10.6 percent increase.

Adjusted net income for the first quarter of 2018 was $114.8 million, up 23.6 percent compared to $92.9 million in 2017’s first quarter. Adjusted diluted earnings per share in the first quarter of 2018 were $0.53 per share, up 20.5 percent compared to $0.44 per share in the first quarter of 2017.

First Quarter Highlights:

 

Adjusted net income was $114.8 million for Q1 2018, increasing 23.6 percent from Q1 2017’s adjusted net income of $92.9 million.

 

Q1 2018 net cash provided by operating activities was $69.9 million, an increase of 20.8 percent.

 

Adjusted consolidated EBITDA increased 10.5 percent to $178.7 million in Q1 2018. Adjusted consolidated EBITDA margin was 41.1 percent for the quarter, up over 160 basis points from Q1 2017’s 39.5 percent adjusted consolidated EBITDA margin.

 

SS&C raised $7.4 billion in cash from debt and $1.4 billion in cash from the sale of our common stock to primarily fund the acquisition of DST Systems, which we closed on April 16, 2018, and refinance existing debt.

 

“SS&C had a great start to 2018. We announced the acquisition of DST Systems in January and closed on April 16, 2018.  We grew adjusted revenue over 6 percent, confirming the strength of our global business” said Bill Stone, Chairman and Chief Executive Officer. “We are delighted with our results, which we accomplished alongside the announcement, financing, and ultimately closing of our largest acquisition to date.”


Operating Cash Flow

SS&C generated net cash from operating activities of $69.9 million for the three months ended March 31, 2018, compared to $57.9 million for the same period in 2017, representing a 20.8 percent increase.  SS&C ended the first quarter with $74.1 million in cash and cash equivalents and $2,030.9 million in gross debt, for a net debt balance of $1,956.8 million.  SS&C’s consolidated net leverage ratio as defined in our credit agreement stood at 2.74 times consolidated EBITDA as of March 31, 2018.

Guidance

 

 

 

Q2 2018

 

 

FY 2018

Adjusted Revenue ($M)

 

$895.0 – $915.0

 

 

$3,344.0 – $3,404.0  

Adjusted Net Income ($M)

 

$131.6 – $140.8

 

 

$546.7 – $575.3

Cash from Operating Activities ($M)

 

 

 

 

Capital Expenditures (% of revenue)

 

 

 

 

Diluted Shares (M)

 

249.4 – 248.6

 

 

243.5 – 243.0

Effective Income Tax Rate (%)

 

 

25%

 

 

25%

 

SS&C does not provide reconciliations of guidance for Adjusted Revenues and Adjusted Net Income to comparable GAAP measures, in reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K. SS&C is unable, without unreasonable efforts, to forecast certain items required to develop meaningful comparable GAAP financial measures. These items include acquisition transactions and integration, foreign exchange rate changes, as well as other non-cash and other adjustments as defined under the Company’s Credit agreement, that are difficult to predict in advance in order to include in a GAAP estimate.

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 2018 earnings call will take place at 5:00 p.m. eastern time today, May 1, 2018. The call will discuss Q1 2018 results and our guidance and business outlook. Interested parties may dial 844-343-4183 (US and Canada) or 647-689-5128 (International), and request the “SS&C Technologies First Quarter 2018 Conference Call”; conference ID #8777697. A replay will be available after 8:00 p.m. eastern time on May 1, 2018, until midnight on May 8, 2018. The replay dial-in number is 800-585-8367 or 416-621-4642; access code #8777697. The call will also be available for replay on SS&C’s website after May 1, 2018; access: http://investor.ssctech.com/results.cfm.

 

Certain information contained in this press release relating to, among other things, the Company’s financial guidance for the second quarter and full year of 2018 constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include statements concerning plans, objectives, goals, strategies, expectations, intentions, projections, developments, future events, performance, underlying assumptions, and other statements that are other than statements of historical facts.  Without limiting the foregoing, the words “believes”, “anticipates”, “plans”, “expects”, “estimates”, “projects”, “forecasts”, “may”, “assume”, “anticipates”, “intend”, “will”, “continue”, “opportunity”, “predict”, “potential”, “future”, “guarantee”, “likely”, “target”, “indicate”, “would”, “could” 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 and other industries in which the Company’s clients operate, the Company’s ability to realize anticipated benefits from its acquisitions, including DST Systems, the effect of the customer consolidation on demand for the Company’s products and services, the increasing focus of the Company’s business on the hedge fund industry, the variability of revenue as a result of activity in the securities markets, the ability to retain and attract clients, fluctuations in customer demand for the Company’s products and services, the intensity of competition with respect to the Company’s products and services, the exposure to litigation and other claims, terrorist activities and other catastrophic events, disruptions, attacks or failures affecting the Company’s software-enabled services, risks associated with the Company’s foreign operations, privacy concerns relating to the collection and storage of person information, evolving regulations and increased scrutiny from regulators,  the Company’s ability to protect intellectual property assets and litigation regarding intellectual property rights, delays in product development, investment decisions concerning cash balances, regulatory and tax risks, risks associated with the Company’s joint ventures, changes in accounting standards, risks related to the Company’s substantial indebtedness, the market price of the Company’s stock prevailing from time to time, and the risks discussed in the “Risk Factors” section of the Company’s most recent


Annual Report on Form 10-K and Quarterly Report on Form 10-Q, which are on file with the Securities and Exchange Commission and can also be accessed on our website.  Forward-looking statements speak only as of the date on which they are made and, except to the extent required by applicable securities laws, we undertake no obligation to update or revise any forward-looking statements.

About SS&C Technologies

SS&C is a global provider of investment and financial software-enabled services and software for the global financial services and healthcare industries. Founded in 1986, SS&C is headquartered in Windsor, Connecticut and has offices around the world. Some 13,000 financial services and healthcare organizations, from the world's largest institutions to local firms, manage and account for their investments using SS&C's products and services.

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

E-mail: InvestorRelations@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,

 

 

 

2018

 

 

2017

 

Revenues:

 

 

 

 

 

 

 

 

Software-enabled services

 

$

294,803

 

 

$

276,452

 

License, maintenance and related

 

 

127,126

 

 

 

131,247

 

Total revenues

 

 

421,929

 

 

 

407,699

 

Cost of revenues:

 

 

 

 

 

 

 

 

Software-enabled services

 

 

167,416

 

 

 

154,006

 

License, maintenance and related

 

 

62,164

 

 

 

63,453

 

Total cost of revenues

 

 

229,580

 

 

 

217,459

 

Gross profit

 

 

192,349

 

 

 

190,240

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling and marketing

 

 

31,150

 

 

 

30,242

 

Research and development

 

 

38,919

 

 

 

38,449

 

General and administrative

 

 

35,433

 

 

 

31,832

 

Total operating expenses

 

 

105,502

 

 

 

100,523

 

Operating income

 

 

86,847

 

 

 

89,717

 

Interest expense, net

 

 

(25,354

)

 

 

(29,020

)

Other income (expense), net

 

 

438

 

 

 

(71

)

Loss on extinguishment of debt

 

 

 

 

 

(2,326

)

Income before income taxes

 

 

61,931

 

 

 

58,300

 

Provision for income taxes

 

 

10,681

 

 

 

10,153

 

Net income

 

$

51,250

 

 

$

48,147

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.25

 

 

$

0.24

 

Diluted earnings per share

 

$

0.24

 

 

$

0.23

 

 

 

 

 

 

 

 

 

 

Basic weighted average number of common shares outstanding

 

 

206,993

 

 

 

203,376

 

Diluted weighted average number of common and common equivalent shares outstanding

 

 

217,656

 

 

 

209,704

 

 

 

 

 

 

 

 

 

 

Cash dividends declared and paid per common share

 

$

0.07

 

 

$

0.0625

 

 

 

 

 

 

 

 

 

 

Net income

 

$

51,250

 

 

$

48,147

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

Foreign currency exchange translation adjustment

 

 

5,217

 

 

 

10,779

 

Total comprehensive income, net of tax

 

 

5,217

 

 

 

10,779

 

Comprehensive income

 

$

56,467

 

 

$

58,926

 

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,

 

 

 

2018

 

 

2017

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

74,077

 

 

$

64,057

 

Accounts receivable, net

 

 

264,076

 

 

 

243,900

 

Contract asset

 

 

11,942

 

 

 

 

Prepaid expenses and other current assets

 

 

35,559

 

 

 

38,742

 

Prepaid income taxes

 

 

 

 

 

12,166

 

Restricted cash

 

 

543

 

 

 

592

 

Total current assets

 

 

386,197

 

 

 

359,457

 

Property, plant and equipment, net

 

 

101,994

 

 

 

100,956

 

Deferred income taxes

 

 

2,041

 

 

 

2,324

 

Contract asset

 

 

22,076

 

 

 

 

Goodwill

 

 

3,711,181

 

 

 

3,707,823

 

Intangible and other assets, net

 

 

1,326,095

 

 

 

1,368,956

 

Total assets

 

$

5,549,584

 

 

$

5,539,516

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

37,338

 

 

$

37,863

 

Accounts payable

 

 

17,637

 

 

 

27,087

 

Income taxes payable

 

 

16,182

 

 

 

6,031

 

Accrued employee compensation and benefits

 

 

42,193

 

 

 

96,016

 

Interest payable

 

 

7,620

 

 

 

16,425

 

Other accrued expenses

 

 

60,875

 

 

 

55,637

 

Deferred revenue

 

 

193,024

 

 

 

204,601

 

Total current liabilities

 

 

374,869

 

 

 

443,660

 

Long-term debt, net of current portion

 

 

1,949,232

 

 

 

2,007,332

 

Other long-term liabilities

 

 

120,621

 

 

 

118,679

 

Deferred income taxes

 

 

288,954

 

 

 

283,457

 

Total liabilities

 

 

2,733,676

 

 

 

2,853,128

 

Total stockholders’ equity

 

 

2,815,908

 

 

 

2,686,388

 

Total liabilities and stockholders’ equity

 

$

5,549,584

 

 

$

5,539,516

 

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,

 

 

 

2018

 

 

2017

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

51,250

 

 

$

48,147

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

61,372

 

 

 

58,557

 

Stock-based compensation expense

 

 

12,702

 

 

 

10,900

 

Amortization and write-offs of loan origination costs

 

 

2,626

 

 

 

2,656

 

Loss on extinguishment of debt

 

 

 

 

 

2,326

 

Loss on sale or disposition of property and equipment

 

 

28

 

 

 

10

 

Deferred income taxes

 

 

(12,425

)

 

 

(7,295

)

Provision for doubtful accounts

 

 

44

 

 

 

1,154

 

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

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(19,818

)

 

 

(7,087

)

Prepaid expenses and other assets

 

 

(30

)

 

 

(2,532

)

Contract assets

 

 

26,847

 

 

 

 

Accounts payable

 

 

(10,548

)

 

 

6,106

 

Accrued expenses

 

 

(54,389

)

 

 

(72,908

)

Income taxes prepaid and payable

 

 

19,680

 

 

 

5,077

 

Deferred revenue

 

 

(7,395

)

 

 

12,777

 

Net cash provided by operating activities

 

 

69,944

 

 

 

57,888

 

Cash flow from investing activities:

 

 

 

 

 

 

 

 

Additions to property and equipment

 

 

(7,163

)

 

 

(5,990

)

Cash paid for business acquisitions, net of cash acquired

 

 

(191

)

 

 

1,805

 

Additions to capitalized software

 

 

(3,945

)

 

 

(3,277

)

Net cash used in investing activities

 

 

(11,299

)

 

 

(7,462

)

Cash flow from financing activities:

 

 

 

 

 

 

 

 

Cash received from debt borrowings

 

 

45,000

 

 

 

45,000

 

Repayments of debt

 

 

(106,250

)

 

 

(105,200

)

Proceeds from exercise of stock options

 

 

29,132

 

 

 

14,017

 

Withholding taxes paid related to equity award net share settlement

 

 

(2,171

)

 

 

(589

)

Fees paid for debt extinguishment

 

 

 

 

 

(1,363

)

Dividends paid on common stock

 

 

(14,504

)

 

 

(12,715

)

Net cash used in financing activities

 

 

(48,793

)

 

 

(60,850

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

119

 

 

 

1,663

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

9,971

 

 

 

(8,761

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

64,649

 

 

 

119,674

 

Cash, cash equivalents and restricted cash, end of period

 

$

74,620

 

 

$

110,913

 

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 to include a) amounts that would have been recognized if deferred revenue were not adjusted to fair value at the date of acquisition and b) amounts that would have been recognized if not for adjustments to deferred revenue and retained earnings related to the adoption of ASC 606.  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 are 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 March 31,

 

(in thousands)

 

2018

 

 

2017

 

Revenues

 

$

421,929

 

 

$

407,699

 

ASC 606 adoption impact

 

 

11,842

 

 

 

-

 

Purchase accounting adjustments to deferred revenue

 

 

790

 

 

 

1,820

 

Adjusted revenues

 

$

434,561

 

 

$

409,519

 

 

The following is a breakdown of software-enabled services and license, maintenance and related revenues and adjusted software-enabled services and license, maintenance and related revenues.

 

 

Three Months Ended March 31,

 

(in thousands)

 

2018

 

 

2017

 

Software-enabled services

 

$

294,803

 

 

$

276,452

 

License, maintenance and related

 

 

127,126

 

 

 

131,247

 

Total revenues

 

$

421,929

 

 

$

407,699

 

 

 

 

 

 

 

 

 

 

Software-enabled services

 

$

294,803

 

 

$

276,452

 

License, maintenance and related

 

 

139,758

 

 

 

133,067

 

Total adjusted revenues

 

$

434,561

 

 

$

409,519

 

 

Note 2. Reconciliation of Operating Income to Adjusted Operating Income

Adjusted operating income represents operating income adjusted for amortization of intangible assets, stock-based compensation, purchase accounting adjustments for deferred revenue and related costs 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 March 31,

 

(in thousands)

 

2018

 

 

2017

 

Operating income

 

$

86,847

 

 

$

89,717

 

Amortization of intangible assets

 

 

54,551

 

 

 

52,408

 

Stock-based compensation

 

 

12,702

 

 

 

10,900

 

Capital-based taxes

 

 

 

 

 

375

 

Purchase accounting adjustments (1)

 

 

599

 

 

 

352

 

ASC 606 adoption impact

 

 

11,929

 

 

 

 

Other (2)

 

 

5,249

 

 

 

1,684

 

Adjusted operating income

 

$

171,877

 

 

$

155,436

 

 

(1)

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 acquisition 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.

(2)

Other includes expenses and income that are permitted to be excluded per the terms of our Credit Agreement from Consolidated EBITDA, a financial measure used in calculating our covenant compliance. These include expenses and income related to currency transactions, facilities and workforce restructuring, legal settlements and business combinations.


 

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, as amended, 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,

 

(in thousands)

 

2018

 

 

2017

 

 

2018

 

Net income

 

$

51,250

 

 

$

48,147

 

 

$

331,967

 

Interest expense, net

 

 

25,354

 

 

 

29,020

 

 

 

103,807

 

Provision (benefit) for income taxes

 

 

10,681

 

 

 

10,153

 

 

 

(45,706

)

Depreciation and amortization

 

 

61,372

 

 

 

58,557

 

 

 

240,004

 

EBITDA

 

 

148,657

 

 

 

145,877

 

 

 

630,072

 

Stock-based compensation

 

 

12,702

 

 

 

10,900

 

 

 

43,289

 

Capital-based taxes

 

 

 

 

 

375

 

 

 

(61

)

Acquired EBITDA and cost savings (1)

 

 

 

 

 

808

 

 

 

2,144

 

Non-cash portion of straight-line rent expense

 

 

(24

)

 

 

68

 

 

 

4,293

 

Loss on extinguishment of debt

 

 

 

 

 

2,326

 

 

 

 

Purchase accounting adjustments (2)

 

 

599

 

 

 

352

 

 

 

4,563

 

ASC 606 adoption impact

 

 

11,929

 

 

 

 

 

 

11,929

 

Other (3)

 

 

4,811

 

 

 

1,755

 

 

 

18,450

 

Consolidated EBITDA

 

$

178,674

 

 

$

162,461

 

 

$

714,679

 

Less:  acquired EBITDA

 

 

 

 

 

(808

)

 

 

(2,144

)

Adjusted Consolidated EBITDA

 

$

178,674

 

 

$

161,653

 

 

$

712,535

 

 

(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)

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 acquisition 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)

Other includes expenses and income that are permitted to be excluded per the terms of our Credit Agreement from Consolidated EBITDA, a financial measure used in calculating our covenant compliance. These include expenses and income related to currency transactions, facilities and workforce restructuring, legal settlements and business combinations.

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 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 March 31,

 

(in thousands, except per share data)

 

2018

 

 

2017

 

GAAP – Net income

 

$

51,250

 

 

$

48,147

 

Plus: Amortization of intangible assets

 

 

54,551

 

 

 

52,408

 

Plus: Amortization of deferred financing costs and original issue discount

 

 

2,626

 

 

 

2,656

 

Plus: Stock-based compensation

 

 

12,702

 

 

 

10,900

 

Plus: Capital-based taxes

 

 

 

 

 

375

 

Plus: Loss on extinguishment of debt

 

 

 

 

 

2,326

 

Plus: Purchase accounting adjustments (1)

 

 

599

 

 

 

352

 

Plus: ASC 606 adoption impact

 

 

11,929

 

 

 

 

Plus: Other (2)

 

 

4,811

 

 

 

1,755

 

Income tax effect (3)

 

 

(23,623

)

 

 

(25,987

)

Adjusted net income

 

$

114,845

 

 

$

92,932

 

Adjusted diluted earnings per share

 

$

0.53

 

 

$

0.44

 

GAAP diluted earnings per share

 

$

0.24

 

 

$

0.23

 

Diluted weighted-average shares outstanding

 

 

217,656

 

 

 

209,704

 

 

(1)

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 acquisition 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.

(2)

Other includes expenses and income that are permitted to be excluded per the terms of our Credit Agreement from Consolidated EBITDA, a financial measure used in calculating our covenant compliance. These include expenses and income related to currency transactions, facilities and workforce restructuring, legal settlements and business combinations.

(3)

An estimated normalized effective tax rate of 23% and 28% for the three months ended March 31, 2018 and 2017, respectively, has been used to adjust the provision for income taxes for the purpose of computing adjusted net income.