Back to GetFilings.com



Table of Contents

 
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
     
þ
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
    For the quarterly period ended March 31, 2005
 
OR
 
o
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 000-28430
SS&C TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
     
Delaware
  06-1169696
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
80 Lamberton Road
Windsor, CT 06095

(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code)
860-298-4500
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
      Indicate by check mark whether the registrant:(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o
      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes þ          No o
      Number of shares outstanding of the issuer’s classes of common stock as of May 4, 2005
     
Class   Number of Shares Outstanding
     
Common stock, par value $0.01 per share
  22,999,321
 
 


SS&C TECHNOLOGIES, INC.
INDEX
             
        Page
        Number
         
 PART I. FINANCIAL INFORMATION
   Financial Statements     2  
     Consolidated Balance Sheets at March 31, 2005 and December 31, 2004     2  
     Consolidated Statements of Operations for the three months ended March 31, 2005 and 2004     3  
     Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and 2004     4  
     Notes to Consolidated Financial Statements     5  
   Management’s Discussion and Analysis of Financial Condition and Results of Operations     11  
   Quantitative and Qualitative Disclosures About Market Risk     23  
   Controls and Procedures     24  
 PART II. OTHER INFORMATION
   Unregistered Sales of Equity Securities and Use of Proceeds     24  
   Exhibits     25  
 SIGNATURE     26  
 EXHIBIT INDEX     27  
 EX-10.4 EMPLOYMENT CONTRACT KEVIN MILNE
 EX-31.1 Section 302 CEO Certification
 EX-31.2 Section 302 CFO Certification
 EX-32 Section 906 CEO and CFO Certifications
      This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects”, “should”, and similar expressions are intended to identify forward-looking statements. The important factors discussed below under the caption “Certain Factors That May Affect Future Operating Results,” among others, could cause actual results to differ materially from those indicated by forward-looking statements made herein and presented elsewhere by management from time to time. The Company does not undertake an obligation to update its forward-looking statements to reflect future events or circumstances.

1


Table of Contents

Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
SS&C TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
                   
    March 31,   December 31,
    2005   2004
         
    (In thousands)
    (Unaudited)
ASSETS
Current assets
               
 
Cash and cash equivalents
  $ 22,965     $ 28,913  
 
Investments in marketable securities
    85,284       101,922  
 
Accounts receivable, net of allowance for doubtful accounts of $869 and $766, respectively
    15,764       13,545  
 
Prepaid expenses and other current assets
    1,966       1,607  
             
Total current assets
    125,979       145,987  
             
Property and equipment
               
 
Leasehold improvements
    4,113       4,100  
 
Equipment, furniture, and fixtures
    18,369       18,016  
             
      22,482       22,116  
 
Less accumulated depreciation
    (17,345 )     (16,763 )
             
 
Net property and equipment
    5,137       5,353  
             
Deferred income taxes
    5,866       5,894  
Goodwill
    33,671       16,227  
Intangible and other assets, net of accumulated amortization of $6,325 and $5,570, respectively
    22,197       12,202  
             
Total assets
  $ 192,850     $ 185,663  
             
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities
               
 
Accounts payable
  $ 1,411     $ 1,073  
 
Income taxes payable
    3,169       609  
 
Accrued employee compensation and benefits
    2,632       6,248  
 
Other accrued expenses
    2,987       3,549  
 
Deferred income taxes
    289       188  
 
Dividend payable
          1,850  
 
Deferred maintenance and other revenue
    25,329       16,052  
             
Total current liabilities
    35,817       29,569  
             
Commitments and contingencies (Note 10)
               
Stockholders’ equity
               
 
Common stock
    314       313  
 
Additional paid-in capital
    186,039       185,032  
 
Accumulated other comprehensive income
    672       1,140  
 
Retained earnings
    29,012       23,029  
             
      216,037       209,514  
 
Less: cost of common stock in treasury; 8,450 and 8,191 shares
    59,004       53,420  
             
Total stockholders’ equity
    157,033       156,094  
             
Total liabilities and stockholders’ equity
  $ 192,850     $ 185,663  
             
See accompanying notes to Consolidated Financial Statements.

2


Table of Contents

SS&C TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
                     
    Three Months Ended
     
    March 31,   March 31,
    2005   2004
         
    (In thousands, except
    per share data)
    (Unaudited)
Revenues:
               
 
Software licenses
  $ 4,495     $ 4,140  
 
Maintenance
    9,843       7,982  
 
Professional services
    2,621       1,850  
 
Outsourcing
    10,457       5,217  
             
   
Total revenues
    27,416       19,189  
             
Cost of revenues:
               
 
Software licenses
    595       445  
 
Maintenance
    2,148       1,648  
 
Professional services
    1,654       1,279  
 
Outsourcing
    5,411       2,742  
             
   
Total cost of revenues
    9,808       6,114  
             
Gross profit
    17,608       13,075  
             
Operating expenses:
               
 
Selling and marketing
    2,443       2,220  
 
Research and development
    3,483       2,956  
 
General and administrative
    2,519       1,869  
             
   
Total operating expenses
    8,445       7,045  
             
Operating income
    9,163       6,030  
             
Interest income
    572       183  
Other income (expense), net
    50       (32 )
             
Income before income taxes
    9,785       6,181  
Provision for income taxes
    3,816       2,411  
             
Net income
  $ 5,969     $ 3,770  
             
Basic earnings per share
  $ 0.26     $ 0.20  
             
Weighted average number of common shares outstanding
    23,018       18,687  
             
Diluted earnings per share
  $ 0.25     $ 0.19  
             
Weighted average number of common shares outstanding, assuming dilution
    24,169       20,201  
             
Dividends declared per common share
  $     $ 0.07  
             
See accompanying notes to Consolidated Financial Statements.

3


Table of Contents

SS&C TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
                       
    Three Months Ended
     
    March 31,   March 31,
    2005   2004
         
    (In thousands)
    (Unaudited)
Cash flow from operating activities:
               
 
Net income
  $ 5,969     $ 3,770  
             
Adjustments to reconcile net income to net cash provided by operating activities:
               
 
Depreciation and amortization
    1,373       908  
 
Net realized losses on investments in marketable securities
          26  
 
Deferred income taxes
    129       128  
 
Income tax benefit related to exercise of stock options
    487       1,116  
 
Provision for doubtful accounts
    (143 )     137  
 
Changes in operating assets and liabilities, excluding effects from acquisitions:
               
   
Accounts receivable
    (1,181 )     (289 )
   
Prepaid expenses and other assets
    (322 )     130  
   
Accounts payable
    340       (273 )
   
Accrued expenses
    (4,193 )     (2,006 )
   
Income taxes payable
    2,564       1,065  
   
Deferred maintenance and other revenues
    7,793       4,087  
             
     
Total adjustments
    6,847       5,029  
             
 
Net cash provided by operating activities
    12,816       8,799  
             
Cash flow from investing activities:
               
 
Additions to property and equipment
    (308 )     (177 )
 
Cash paid for business acquisitions, net of cash acquired
    (25,793 )     (3,855 )
 
Cash paid for long-term investment
    (2,000 )      
 
Purchases of marketable securities
    (78,175 )     (11,300 )
 
Sales of marketable securities
    94,572       22,834  
             
 
Net cash provided by (used in) investing activities
    (11,704 )     7,502  
             
Cash flow from financing activities:
               
 
Exercise of options
    520       817  
 
Purchase of common stock for treasury
    (5,584 )      
 
Common stock dividends
    (1,836 )     (1,333 )
             
 
Net cash used in financing activities
    (6,900 )     (516 )
             
Effect of exchange rate changes on cash
    (160 )     (72 )
             
Net increase (decrease) in cash and cash equivalents
    (5,948 )     15,713  
Cash and cash equivalents, beginning of period
    28,913       15,261  
             
Cash and cash equivalents, end of period
  $ 22,965     $ 30,974  
             
See accompanying notes to Consolidated Financial Statements.

4


Table of Contents

SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
1. Basis of Presentation
      In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments, except as noted elsewhere in the notes to the consolidated financial statements) necessary to present fairly its financial position as of March 31, 2005 and the results of its operations for the three months ended March 31, 2005 and 2004. These statements do not include all of the information and footnotes required by generally accepted accounting principles for annual financial statements. The financial statements contained herein should be read in conjunction with the consolidated financial statements and footnotes as of and for the year ended December 31, 2004 which were included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission. The December 31, 2004 consolidated balance sheet data were derived from audited financial statements, but do not include all disclosures required by generally accepted accounting principles for annual financial statements. The results of operations for the three months ended March 31, 2005 are not necessarily indicative of the expected results for the full year.
2. Marketable Securities
      At March 31, 2005, the cost basis, fair market value, and unrealized gains and losses by major security type, were as follows (in thousands):
                           
        Gross    
        Unrealized    
    Cost   Gains/(Losses)   Fair Value
             
State, municipal and county government bonds
  $ 70,863     $ (61 )   $ 70,802  
US Government securities
    6,569       (68 )     6,501  
Corporate bonds
    3,030       (3 )     3,027  
Equities
    3,962       992       4,954  
                   
 
Total
  $ 84,424     $ 860     $ 85,284  
                   
3. Stock-based Compensation
      The Company has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and related interpretations in accounting for its employee stock options. Under APB 25, because the exercise price of employee stock options equals the market price of the underlying stock on the date of grant and the grants are for a fixed number of shares, no compensation expense is recorded. The Company follows the disclosure-only provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation”, amended by SFAS No. 148. Had compensation cost for the Company’s stock option plans and employee stock purchase plan been determined consistent with SFAS No. 123, the Company’s net income and earnings

5


Table of Contents

SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
per share would have been adjusted to the pro forma amounts indicated in the table below for the periods ending (in thousands except per share amounts):
                   
    March 31,   March 31,
    2005   2004
         
Net income, as reported
  $ 5,969     $ 3,770  
Deduct: total stock-based employee compensation determined under fair value based method for all awards, net of related tax effects
    269       211  
             
Net income, pro forma
  $ 5,700     $ 3,559  
             
Reported net income per share
               
 
Basic
  $ 0.26     $ 0.20  
 
Diluted
    0.25       0.19  
Pro forma net income per share
               
 
Basic
  $ 0.25     $ 0.19  
 
Diluted
    0.24       0.18  
      The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts.
      In December 2004, the Financial Accounting Standards Board, or FASB, issued SFAS No. 123 (revised 2004), “Share-Based Payment”. SFAS No. 123(R) requires that the compensation cost relating to equity awards be recognized in financial statements based on the fair value of the instruments issued. As amended by the SEC on April 14, 2005, this standard is effective for annual periods beginning after June 15, 2005 and includes two transition methods. The Company will be required to apply SFAS No. 123(R) as of January 1, 2006.
      The Company is currently evaluating the two methods of adoption allowed by SFAS 123R: the modified-prospective transition method and the modified-retrospective transition method. Adoption of SFAS 123R will materially increase stock compensation expense and decrease net income. In addition, SFAS 123R requires that the excess tax benefits related to stock compensation be reported as a cash inflow from financing activities rather than as a reduction of taxes paid in cash from operations.
4. Basic and Diluted Earnings Per Share
      Earnings per share is calculated in accordance with SFAS No. 128, “Earnings Per Share”. Basic earnings per share includes no dilution and is computed by dividing income available to the Company’s common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common and common equivalent shares outstanding during the period. Common equivalent shares consist of stock options using the treasury stock method. Common equivalent shares are excluded from the computation of diluted earnings per share if the effect of including such common equivalent shares is antidilutive because their exercise prices exceed the average fair value of common stock during the period. Options to purchase 66,170 and 55,500 shares were outstanding at March 31, 2005 and 2004, respectively, but were excluded from the computation of diluted earnings per share because the effect of

6


Table of Contents

SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
including the options would be antidilutive. Income available to stockholders is the same for basic and diluted earnings per share. A reconciliation of the shares outstanding is as follows (in thousands):
                 
    March 31,   March 31,
    2005   2004
         
Weighted average common shares outstanding — used in calculation of basic earnings per share
    23,018       18,687  
Dilutive effect of employee stock options
    1,151       1,514  
             
Weighted average common shares outstanding — used in calculation of diluted earnings per share
    24,169       20,201  
             
5. Comprehensive Income
      SFAS No. 130, “Reporting Comprehensive Income”, requires that items defined as comprehensive income, such as foreign currency translation adjustments and unrealized gains (losses) on marketable securities, be separately classified in the financial statements and that the accumulated balance of other comprehensive income be reported separately from retained earnings and additional paid-in capital in the equity section of the balance sheet. Total comprehensive income consists of net income and other accumulated comprehensive income disclosed in the equity section of the balance sheet.
      The following table sets forth the components of comprehensive income (in thousands):
                 
    Three Months Ended
     
    March 31,   March 31,
    2005   2004
         
Net income
  $ 5,969     $ 3,770  
Foreign currency translation (loss)
    (227 )     (102 )
Unrealized gains (losses) on marketable securities
    (241 )     77  
             
Total comprehensive income
  $ 5,501     $ 3,745  
             
6. Stock Repurchase Program
      On October 18, 2004, the Company’s Board of Directors authorized the continued repurchase of shares of the Company’s common stock up to an additional expenditure of $50 million through October 17, 2005. During the three months ended March 31, 2005, the Company repurchased 259,050 shares for approximately $5.6 million. As of March 31, 2005, the Company had repurchased a total of 8.5 million shares of common stock for approximately $59.0 million. The Company uses the cost method to account for treasury stock purchases. Under the cost method, the price paid for the stock is charged to the treasury stock account.
7. Cash Dividend
      As part of its semi-annual cash dividend program, the Company paid a dividend of $0.08 per share on March 3, 2005 to stockholders of record as of February 10, 2005.
8. Acquisitions
      On February 28, 2005, the Company purchased all of the membership interests in EisnerFast LLC (“EisnerFast”), for $25.3 million in cash. Eisnerfast provides fund accounting and administration services to on-and off-shore hedge and private equity funds, funds of funds, and investment advisors.

7


Table of Contents

SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
      The net assets and results of operations of Eisnerfast have been included in the Company’s consolidated financial statements from March 1, 2005. The purchase price was allocated to tangible and intangible assets based on their fair value at the date of acquisition. The fair value of the intangible assets, comprised of client contracts and client relationships, was determined using the future cash flows method. The intangible assets are amortized each year based on the ratio that current cash flows for the intangible asset bear to the total of current and expected future cash flows for the intangible asset. The intangible assets are amortized over nine years, the estimated life of the assets. The remainder of the purchase price was allocated to goodwill.
      On February 25, 2005, the Company entered into a definitive agreement to make an offer to acquire all of the outstanding common shares and Class C shares of Financial Models Company Inc. (FMC) of Mississauga, Ontario, Canada for C$17.70 per share in cash, or an aggregate amount of approximately US$159 million. The transaction was completed in April 2005.
      On February 11, 2005, the Company acquired substantially all the assets of Achievement Technologies, Inc. (“Achievement”) for $470,000, plus the costs of effecting the acquisition, and the assumption of certain liabilities. Achievement provides a software solution for facilities maintenance and management to real estate property managers.
      The net assets and results of operations of Achievement have been included in the Company’s consolidated financial statements from February 1, 2005. The purchase price was allocated to tangible and intangible assets based on their fair value at the date of acquisition. The fair value of the completed technology was determined using the future cash flows method. The acquired technology is amortized on a straight-line basis over five years, the estimated life of the product. The remainder of the purchase price was allocated to goodwill.
      The following summarizes the allocation of the purchase price for the acquisitions of Eisnerfast and Achievement (in thousands):
                 
    Eisnerfast   Achievement
         
Assets acquired, net of cash received
  $ 1,089     $ 3  
Purchased technology
          210  
Acquired client contracts
    8,587        
Goodwill
    17,094       350  
Liabilities assumed
    (1,449 )     (91 )
             
Consideration paid
  $ 25,321     $ 472  
             
      The following unaudited pro forma condensed consolidated results of operations is provided for illustrative purposes only and assumes that the acquisitions of Eisnerfast and Achievement occurred on January 1, 2004. This unaudited pro forma information (in thousands, except per share data) should not be relied upon as being indicative of the historical results that would have been obtained if these acquisitions had actually occurred on that date, nor of the results that may be obtained in the future.
                 
    2005   2004
         
Revenues
  $ 29,152     $ 21,426  
Net income
    6,376       4,101  
Basic earnings per share
  $ 0.28     $ 0.22  
Diluted earnings per share
  $ 0.26     $ 0.20  

8


Table of Contents

SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
9. Revolving Credit Facility
      On March 4, 2005, the Company entered into a firm commitment letter with Fleet National Bank, a Bank of America Company, regarding a two-year, $75 million senior revolving credit facility intended (1) to finance a portion of the Company’s proposed acquisition of FMC; (2) to pay fees and expenses incurred in connection with the FMC acquisition; and (3) to provide ongoing working capital and cash for other general corporate purposes of the Company. The Company entered into the credit facility and closed the acquisition of FMC in April 2005.
10. Commitments and Contingencies
      From time to time, the Company is subject to legal proceedings and claims that arise in the normal course of its business. In the opinion of management, the Company is not a party to any litigation that it believes could have a material effect on the Company or its business.
11. International Sales and Geography Information
      The Company manages its business primarily on a geographic basis. The Company attributes net sales to an individual country based upon location of the customer. The Company’s reportable regions consist of the United States, Americas, excluding the United States, Europe and Asia Pacific and Japan. The European region includes European countries as well as the Middle East and Africa.
      Revenues by geography were (in thousands):
                 
    Three Months Ended
     
    March 31,   March 31,
    2005   2004
         
United States
  $ 20,904     $ 16,306  
Americas excluding United States
    1,020       857  
Europe
    4,904       1,480  
Asia Pacific and Japan
    588       546  
             
    $ 27,416     $ 19,189  
             
12. Subsequent Events
      On April 13, 2005, the Company entered into a credit agreement with Fleet National Bank regarding a two-year, $75,000,000 senior revolving credit facility intended to finance a portion of the Company’s acquisition of Financial Models Company Inc. (FMC) and related fees and expenses and to provide ongoing working capital and cash for other general corporate purposes. Pursuant to the terms of the credit agreement, the Company is permitted to borrow funds from Fleet, initially in the principal amount of $75,000,000 and including a $5,000,000 sublimit for the issuance of standby and commercial letters of credit. By June 3, 2005, the maximum amount of borrowings under the Credit Agreement will be reduced to $50,000,000 and all amounts outstanding in excess of $50,000,000 must be repaid. Loans outstanding under the credit agreement may be prepaid at any time in whole or in part without premium or penalty, with limited exceptions. In addition, there are customary negative covenants, including financial covenants and covenants relating to liens, investments, indebtedness, fundamental changes, dispositions, and dividends and distributions. Upon execution of the Credit Agreement on April 13, 2005, the Company drew down the full amount of the Loan, which consisted of (1) $65,000,000 as a Eurodollar Rate Loan with an interest period of thirty days at a rate per annum equal to the British Bankers Association LIBOR Rate plus 100 basis points, and (2) $10,000,000 as a Base Rate Loan bearing interest at a fluctuating rate per annum equal to the higher of the Federal Funds Rate plus 0.5% or the “prime rate” as publicly announced

9


Table of Contents

SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
by Bank of America, N.A. The obligations of the Company under the credit agreement are guaranteed by OMR Systems Corporation, a wholly-owned subsidiary of the Company.
      On April 19, 2005, the Company completed its previously announced acquisition of FMC, purchasing substantially all the outstanding stock of the FMC for approximately $159.0 million in cash, plus the costs of effecting the acquisition. The Company financed the FMC acquisition with $75 million of borrowings under the credit facility and approximately $84 million from cash on hand. FMC provides comprehensive investment management systems and services to the international investment management industry. The net assets and results of operations of FMC will be included in the Company’s consolidated financial statements from April 19, 2005.
13. Recent Accounting Pronouncement
      In March 2005, the SEC issued Staff Accounting Bulletin (“SAB”) No. 107, which expresses the views of the SEC regarding the interaction between SFAS No. 123R and certain SEC rules and regulations, and also provides the SEC’s view regarding the valuation of share-based payment arrangements for public companies. As the Company continues to review the requirements of SFAS 123R, the views of the SEC as stated within SAB No. 107 will also be considered, as appropriate.

10


Table of Contents

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
CRITICAL ACCOUNTING POLICIES
      Certain of our accounting policies require the application of significant judgment by our management, and such judgments are reflected in the amounts reported in our consolidated financial statements. In applying these policies, our management uses its judgment to determine the appropriate assumptions to be used in the determination of estimates. Those estimates are based on our historical experience, terms of existing contracts, management’s observation of trends in the industry, information provided by our clients and information available from other outside sources, as appropriate. Actual results may differ significantly from the estimates contained in our consolidated financial statements. There have been no material changes to our critical accounting estimates and assumptions or the judgments affecting the application of those estimates and assumptions since the filing of our Annual Report on Form 10-K for the year ended December 31, 2004. Our critical accounting policies are described in our annual filing on Form 10-K and include:
  •  Revenue Recognition
 
  •  Allowance for Doubtful Accounts
 
  •  Long-Lived Assets, Intangible Assets and Goodwill
 
  •  Acquisition Accounting
 
  •  Income Taxes
 
  •  Marketable Securities
Results of Operations for the Three Months Ended March 31, 2005 and 2004
      The following table sets forth revenues (in thousands) and changes in revenues for the periods indicated:
                             
    Three Months Ended    
    March 31,    
        Percentage
    2005   2004   Change
             
Revenues:
                       
 
Software licenses
  $ 4,495     $ 4,140       9 %
 
Maintenance
    9,843       7,982       23 %
 
Professional services
    2,621       1,850       42 %
 
Outsourcing
    10,457       5,217       100 %
                   
   
Total revenues
  $ 27,416     $ 19,189       43 %
                   
      The following table sets forth the percentage of our revenues represented by each of the following sources of revenues for the periods indicated:
                   
    Three Months
    Ended
    March 31,
     
    2005   2004
         
Revenues:
               
 
Software licenses
    16 %     21 %
 
Maintenance
    36 %     42 %
 
Professional services
    10 %     10 %
 
Outsourcing
    38 %     27 %

11


Table of Contents

     Revenues
      We derive our revenues from software licenses, related maintenance and professional services and outsourcing services. Revenues were $27.4 million and $19.2 million for the three months ended March 31, 2005 and 2004, respectively. The $8.2 million, or 43%, revenue increase came from both organic growth and acquisitions. Organic growth accounted for $1.1 million of the increase and came from increased demand of $1.1 million for SS&C Direct outsourcing services, $0.4 million for SKYLINE products and services and $0.2 million for Antares products and services, offset by reduced sales of $0.3 million for wealth management services, $0.2 million for CAMRA products and services and $0.1 million for PortPro services. The remaining $7.1 million increase was due to sales of products and services that we acquired in our acquisitions of OMR, Achievement Technologies and Eisnerfast.
      Software Licenses. Software license revenues were $4.5 million and $4.1 million for the three months ended March 31, 2005 and 2004, respectively. The increase of $0.4 million, or 9%, was mainly due to an increase of $0.4 million in sales of our SKYLINE product and a $0.2 million increase in our Antares product, offset by decreases in sales of our Total Return and CAMRA products of $0.1 million each. The increased SKYLINE license revenues were mainly due to the release of SKYLINE 2005 during the fourth quarter of 2004. Software license revenues will vary depending on the timing, size and nature of our license transactions. For example, the average size of our software license transactions and the number of large transactions may fluctuate on a period-to-period basis. Additionally, software license revenues will vary among the various products that we offer, due to differences such as the timing of new releases and variances in economic conditions affecting opportunities in the vertical markets served by such products.
      Maintenance. Maintenance revenues were $9.8 million and $8.0 million for the three months ended March 31, 2005 and 2004, respectively. The increase of $1.8 million, or 23%, was due to our acquisition of OMR, which added $1.5 million, and organic revenue growth of $0.3 million. Organic maintenance revenue growth was across all product lines, with CAMRA maintenance accounting for 54% of the increase. The increase was mainly due to favorable client maintenance renewals and annual maintenance fee increases. We typically provide maintenance services under one-year renewable contracts that provide for an annual increase in fees, generally tied to the percentage change in the consumer price index. Future maintenance revenue growth is dependent on our ability to retain existing clients, add new license clients, and increase average maintenance fees.
      Professional Services. Professional services revenues were $2.6 million and $1.9 million for the three months ended March 31, 2005 and 2004, respectively. The increase in professional services revenues was primarily due to our acquisition of OMR, which added $1.0 million, offset by reductions of $0.2 million for CAMRA product services and $0.1 million for Real-Time product services. The decrease in CAMRA services was primarily the result of a large CAMRA project that was completed in the first quarter of 2004, for which there was no comparable project in 2005. Our overall software license revenue levels and market demand for professional services will continue to have an effect on our professional services revenues.
      Outsourcing. Outsourcing revenues were $10.5 million and $5.2 million for the three months ended March 31, 2005 and 2004, respectively. The increase in outsourcing revenues of $5.2 million, or 100%, was attributable to both organic growth and acquisitions. Our acquisitions of OMR and Eisnerfast added $4.5 million in the aggregate. Organic revenue growth came from increased demand and the addition of new clients for our SS&C Direct outsourcing services, which contributed $1.1 million of the increase, offset by a decrease of $0.3 million, as a result of a lost client, in SS&C Wealth Management services and $0.1 million in PortPro services. Future outsourcing revenue growth is dependent on our ability to retain existing clients, add new clients and increase average outsourcing fees.
     Cost of Revenues
      The total cost of revenues was $9.8 million and $6.1 million for the three months ended March 31, 2005 and 2004, respectively. The gross margin decreased to 64% for the three months ended March 31, 2005 from 68% for the comparable period in 2004. The decrease in gross margin is attributable to our

12


Table of Contents

acquisition of OMR, which had been operating at overall gross margins lower than our historical gross margins. The total cost of revenues increase was mainly due to $3.6 million in costs associated with the acquisitions of OMR and Eisnerfast and increased personnel and other expenses of $0.3 million, primarily to support the increase in outsourcing revenues, offset by a decrease in employee bonus expense of $0.2 million. The decrease in employee bonus plan expense was primarily due to a favorable adjustment to our accruals as a result of lower-than-expected payments in 2005 for the 2004 employee bonus plan.
      Cost of Software Licenses. Cost of software license revenues consists primarily of amortization expense of completed technology, royalties, third-party software, and the costs of product media, packaging and documentation. The cost of software licenses was $0.6 million and $0.4 million for the three months ended March 31, 2005 and March 31, 2004, respectively. Cost of software license revenues as a percentage of such revenues increased to 13% for the three months ended March 31, 2005 from 11% for the three months ended March 31, 2004. The increase in cost of software license revenues was primarily due to the amortization of completed technology associated with our acquisition of OMR, which added $0.2 million in costs.
      Cost of Maintenance. Cost of maintenance revenues consists primarily of technical client support and costs associated with the distribution of products and regulatory updates. The cost of maintenance revenues was $2.1 million and $1.6 million for the three months ended March 31, 2005 and March 31, 2004, respectively. The cost of maintenance revenues as a percentage of these revenues was 22% and 21% for the three months ended March 31, 2005 and March 31, 2004, respectively. The increase in costs of $0.5 million was due to our acquisition of OMR, which added $0.7 million in costs, offset by a decrease in personnel-related expenses, including bonus, of $0.2 million.
      Cost of Professional Services. Cost of professional services revenues consists primarily of the cost related to personnel utilized to provide implementation, conversion and training services to our software licensees, as well as system integration, custom programming and actuarial consulting services. The cost of professional services revenues was $1.7 million and $1.3 million for the three months ended March 31, 2005 and 2004, respectively. The increase was mainly due to our acquisition of OMR, which added $0.5 million in costs, offset by a decrease in bonus expense of $0.1 million. The cost of professional services revenues as a percentage of such revenues decreased to 63% for the three months ended March 31, 2005 from 69% for the three months ended March 31, 2004.
      Cost of Outsourcing. Cost of outsourcing revenues consists primarily of the cost related to personnel utilized in servicing our outsourcing clients. The cost of outsourcing revenues was $5.4 million and $2.7 million for the three months ended March 31, 2005 and 2004, respectively. The increase in cost of outsourcing revenues of $2.7 million, or 97%, was mainly due to the acquisitions of OMR and Eisnerfast, which contributed $2.3 million in additional costs, and increased personnel related costs of $0.4 million to support the growth in organic revenue. The cost of outsourcing revenues as a percentage of such revenues decreased to 52% for the three months ended March 31, 2005 from 53% for the three months ended March 31, 2004.
     Operating Expenses
      Total operating expenses were $8.4 million and $7.0 million for the three months ended March 31, 2005 and March 31, 2004, respectively, representing 31% and 37% of total revenues in those periods, respectively. Included in 2005 are additional operating costs of $1.1 million associated with our acquisitions of OMR and Eisnerfast, additional professional services fees of $0.2 million related to compliance with the Sarbanes-Oxley Act and increased other expenses of $0.1 million related to administrative expenses. We continued to contain expenses through 2004 and into 2005 and, although we expect an increase in our operating expenses due to increased sales of our products and services, we expect to continue to manage spending levels throughout 2005.
      Selling and Marketing. Selling and marketing expenses consist primarily of the personnel costs associated with the selling and marketing of our products, including salaries, commissions and travel and entertainment. Such expenses also include the cost of branch sales offices, trade shows and marketing and

13


Table of Contents

promotional materials. Selling and marketing expenses were $2.4 million and $2.2 million for the three months ended March 31, 2005 and 2004, respectively, representing 9% and 12%, respectively, of total revenues in those years. The increase in selling and marketing expenses of $0.2 million, or 10%, was due to the acquisition of OMR, which added $0.2 million in costs.
      Research and Development. Research and development expenses consist primarily of personnel costs attributable to the development of new software products and the enhancement of existing products. Research and development expenses were $3.5 million and $3.0 million for the three months ended March 31, 2005 and 2004, respectively, representing 13% and 15% of total revenues in those periods, respectively. Additional costs of $0.7 million which were added due to the acquisition of OMR were offset by reductions in personnel-related expenses, including bonus, of $0.2 million.
      General and Administrative. General and administrative expenses consist primarily of personnel costs related to management, accounting and finance, information management, human resources and administration and associated overhead costs, as well as fees for professional services. General and administrative expenses were $2.5 million and $1.9 million for the three months ended March 31, 2005 and 2004, respectively, representing 9% and 10% of total revenues in those periods, respectively. Our acquisition of OMR added costs of $0.2 million, accounting fees increased $0.2 million related to compliance with the Sarbanes-Oxley Act, and personnel-related expenses and other expenses each increased $0.1 million. The increase in personnel was to support the increase in revenues and overall growth of the organization.
      Interest and Other Income, Net. Interest and other income, net consists primarily of interest income and other non-operational income and expenses. Interest income, net was $572,000 and $183,000 for the three months ended March 31, 2005 and 2004, respectively. The increase in interest income was primarily the result of higher average cash and marketable securities balances due to proceeds from our public offering in June 2004.
      Provision for Income Taxes. We had an effective tax rate of 39% for each of the three months ended March 31, 2005 and 2004. In future years, we expect to have sufficient levels of profitability to realize the deferred tax assets at March 31, 2005.
     Liquidity and Capital Resources
      Our liquidity needs have historically been to finance the costs of operations pending the billing and collection of client receivables, to acquire complementary businesses or assets, to invest in research and development and to repurchase shares of our common stock. Through March 31, 2005, we had historically relied on cash flow from operations for liquidity. In April 2005, we entered into a two-year $75 million credit agreement with Fleet National Bank, the proceeds of which were used to finance a portion of the $159 million purchase price for the outstanding shares of FMC. Upon execution of the agreement, we drew down the full amount of the loan, which consisted of (1) $65 million as a Eurodollar Rate Loan with an interest period of thirty days at a rate per annum equal to the British Bankers Association LIBOR Rate plus 100 basis points, and (2) $10 million as a Base Rate Loan bearing interest at a fluctuating rate per annum equal to the higher of the Federal Funds Rate plus 0.5% or the “prime rate” as publicly announced by Bank of America. By June 3, 2005, the maximum amount of borrowings under the agreement will be reduced to $50 million and all amounts outstanding in excess of $50 million must be repaid.
      At March 31, 2005, we had $23.0 million of cash and cash equivalents and $85.3 million in marketable securities. In April 2005, we used approximately $84 million of cash on hand to finance a portion of our acquisition of FMC. We expect that our future liquidity needs will consist of financing the costs of operations pending the billing and collection of client receivables, strategic acquisitions that allow us to expand our product offerings and client base, investments in research and development, repayment of debt and payment of dividends, if any, to our stockholders. Our operating cash flow is primarily affected by the overall profitability of the sales of our products and services, our ability to invoice and collect from clients in a timely manner, our ability to efficiently implement our acquisition strategy and our ability to manage costs. We believe that our current cash, cash equivalents and marketable securities balances and

14


Table of Contents

anticipated cash flow from operations will be sufficient to meet our working capital, capital expenditure and debt servicing requirements for at least the next 12 months.
     Cash Flow
      Our cash, cash equivalents and marketable securities at March 31, 2005 were $108.2 million, which is a decrease of $22.6 million from $130.8 million at December 31, 2004. The decrease was primarily due to cash paid for acquisitions, purchase of common stock for treasury and payment of dividends, offset by net income and the collection of maintenance fees. A larger amount of annual maintenance fees are typically collected during the first quarter compared to other quarters during the year.
      Net cash provided by operating activities was $12.8 million for the three months ended March 31, 2005. Cash provided by operating activities was primarily due to earnings of $6.0 million adjusted for non-cash items of $6.8 million, including a $0.5 million tax benefit related to stock option exercises, an increase of $2.7 million in income taxes payable and an increase of $7.8 million in deferred maintenance and other revenues. These items were partially offset by a decrease of $4.2 million in accrued expenses and an increase of $1.2 million in accounts receivable. Our accounts receivable days sales outstanding at March 31, 2005 was 52 days, compared to 45 days as of December 31, 2004.
      Investing activities used net cash of $11.7 million for the three months ended March 31, 2005. Cash used by investing activities was primarily due to the $25.8 million paid in cash for the acquisitions of Achievement Technologies and Eisnerfast and the $2.0 million strategic investment in CBA Mezzanine Capital Holdings, LLC (“MezzCap”), offset by $16.4 million net sales of marketable securities. We believe our investment in MezzCap, a privately owned commercial real estate finance company, offers potential synergies with LMS, our loan management product.
      Financing activities used net cash of $6.9 million for the three months ended March 31, 2005. Cash used in financing activities was primarily due to $5.6 million used to repurchase common stock for treasury and the payment of our semi-annual cash dividend of $1.8 million. This use of cash was partially offset by the proceeds from the exercise of stock options, which provided cash of $0.5 million.
     Off-Balance Sheet Arrangements
      We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
     Risks Relating to Our Business
Our revenues and operating results have fluctuated significantly, and may continue to fluctuate significantly, from quarter to quarter
      Historically, our revenues and operating results have fluctuated significantly from quarter to quarter. Our quarterly operating results may continue to fluctuate due to a number of factors, including:
  •  the timing, size and nature of our individual license and service transactions,
 
  •  the timing of the introduction and the market acceptance of new products, product enhancements or services by us or our competitors,
 
  •  the relative proportions of revenues derived from license fees, maintenance, professional services and outsourcing,
 
  •  the tendency of some of our clients to wait until the end of a fiscal quarter or our fiscal year in the hope of obtaining more favorable terms,

15


Table of Contents

  •  changes in client budgets and decision-making processes that could affect both the timing and the size of any transaction,
 
  •  the amount and timing of operating costs and other expenses,
 
  •  cancellations of maintenance and/or outsourcing arrangements by our clients,
 
  •  changes in local, national and international regulatory requirements,
 
  •  changes in our personnel, and
 
  •  fluctuations in economic and financial market conditions.
      The timing, size and nature of individual license and outsourcing transactions are important factors in our quarterly operating results. Many of the products we provide through licensing transactions are relatively complex, and licensing transactions involve a significant commitment of capital, with attendant delays frequently associated with large capital expenditures and implementation procedures within an organization. Moreover, licensing arrangements may require coordination within an organization’s various divisions and operations. For these and other reasons, the sales cycles for these transactions are often lengthy and unpredictable. Our inability to close license transactions on a timely basis or at all could adversely affect our quarterly revenues and operating results.
We may not achieve the anticipated benefits from our acquisitions and may face difficulties in integrating our acquisitions, which could adversely affect our revenues, subject us to unknown liabilities, increase costs and place a significant strain on our management
      We have made and may in the future make acquisitions of companies, products or technologies that we believe could complement or expand our business, augment our market coverage, enhance our technical capabilities or otherwise offer growth opportunities, including our acquisition of FMC. Failure to achieve the anticipated benefits of an acquisition could harm our business, results of operations and cash flows. Acquisitions could subject us to contingent or unknown liabilities, and we may have to incur debt or severance liabilities, write-off investments, infrastructure costs, impaired goodwill or other assets, or issue equity securities to pay for any future acquisitions. The issuance of equity securities could dilute our existing stockholders’ ownership.
      Our success is also dependent on our ability to complete the integration of the operations of acquired businesses in an efficient and effective manner. Successful integration in the rapidly changing financial services industry may be more difficult to accomplish than in other industries. We may not realize the benefits we anticipate from these acquisitions, such as lower costs or increased revenues. We may also realize such benefits more slowly than anticipated, due to our inability to:
  •  combine operations, facilities and differing firm cultures,
 
  •  retain the clients or employees of acquired entities,
 
  •  generate market demand for new products and services,
 
  •  coordinate geographically dispersed operations and successfully adapt to the complexities of international operations,
 
  •  integrate the technical teams of these companies with our engineering organization,
 
  •  incorporate acquired technologies and products into our current and future product lines, and
 
  •  integrate the products and services of these companies with our business, where we do not have distribution, marketing or support experience for these products and services.
      Integration may not be smooth or successful. The inability of management to successfully integrate the operations of acquired companies could have a material adverse effect on our business, financial condition and results of operations. The acquisitions may also place a significant strain on our management, administrative, operational and other resources. To manage growth effectively, we must

16


Table of Contents

continue to improve our management and operational controls, enhance our reporting systems and procedures, integrate new personnel and manage expanded operations. If we are unable to manage our growth and the related expansion in our operations from recent and future acquisitions, our business may be harmed through a decreased ability to monitor and control effectively our operations, and a decrease in the quality of work and innovation of our employees.
General economic and market conditions and a weakening of the financial services industry may cause clients and potential clients to reduce expenditures on our products and services, which would result in lost revenues and reduced income
      Our clients include a range of organizations in the financial services industry. The success of these clients is intrinsically linked to the health of the financial markets. In addition, we believe that fluctuations, disruptions, instability or downturns in the financial markets, which may cause clients and potential clients to exit the industry or delay, cancel or reduce any planned expenditures for investment management systems and software products, could disproportionately affect demand for our products and services. In addition, if financial services firms continue to consolidate, as they have over the past decade, there could be a material adverse effect on our business and financial results. For example, if a client merges with a firm using its own solution or another vendor’s solution, it could decide to consolidate its processing on a non-SS&C system, which could have an adverse effect on our financial results. Any resulting decline in demand for our products and services could have a material adverse effect on our business, financial condition and results of operations.
If we are unable to retain and attract clients, our revenues and net income would remain stagnant or decline
      If we are unable to keep existing clients satisfied, sell additional products and services to existing clients or attract new clients, then our revenues and net income would remain stagnant or decline. A variety of factors could affect our ability to successfully retain and attract clients, including:
  •  the level of demand for our products and services,
 
  •  the level of client spending for information technology,
 
  •  the level of competition from internal client solutions and from other vendors,
 
  •  the quality of our client service,
 
  •  our ability to update our products and services and develop new products and services needed by clients,
 
  •  our ability to understand the organization and processes of our clients, and
 
  •  our ability to integrate and manage acquired businesses.
If we are unable to meet our debt obligations, we may be forced to reduce or delay capital expenditures, restructure or refinance indebtedness or seek additional debt or equity financings, any of which may materially and adversely affect our business
      In April 2005, we entered into a $75 million senior revolving credit facility with Fleet National Bank, a Bank of America company, and borrowed the entire amount available under the facility to finance part of the $159 million purchase price for the outstanding shares of FMC. On June 3, 2005, the Fleet facility automatically reduces to a $50 million facility, and we must repay $25 million of the outstanding indebtedness. The maturity date for the remaining indebtedness under the facility is April 12, 2007. Our ability to repay our indebtedness will depend on our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors. Some of these factors are beyond our control.

17


Table of Contents

      If we are unable to service our indebtedness or other obligations, we will be forced to examine alternative strategies. These strategies may include reducing or delaying capital expenditures, restructuring or refinancing indebtedness or seeking additional debt or equity financings. Any of these strategies may materially and adversely affect our business.
      Our level or indebtedness could have important consequences to our stockholders, including the following:
  •  we will have cash interest expense and principal repayment obligations with respect to outstanding indebtedness,
 
  •  our degree of leverage and debt service obligations could limit our ability to plan for, and make us more vulnerable than some of our competitors to the effects of, a downturn in business or other adverse developments,
 
  •  we may need to dedicate cash flow from our operations to debt service payments, making these funds unavailable for other purposes,
 
  •  our ability to obtain additional financing in the future for working capital, capital expenditures, debt service requirements or other purposes could be impaired, and
 
  •  we may have a competitive disadvantage relative to the other companies in our industry with less debt.
      Our indebtedness subjects us to financial and operating restrictions that could hinder the operation of our business.
      Our senior revolving credit facility with Fleet National Bank imposes operating and financial restrictions on us. These restrictions may limit our ability to:
  •  incur additional indebtedness,
 
  •  create liens on assets,
 
  •  pay dividends inconsistent with past practice,
 
  •  sell assets,
 
  •  enter into transactions with affiliates,
 
  •  enter into sale and leaseback transactions,
 
  •  engage in mergers or acquisitions, and
 
  •  make investments.
      Failure to comply with any of these restrictions could limit the availability of borrowings or result in a default under our facility. We can give no assurance that we will be able to obtain a waiver or amendment for any future noncompliance with our facility. The terms of any debt or equity financings undertaken by us to meet future cash requirements could further restrict our operational flexibility and adversely affect our financial condition.
We may be unable to identify suitable businesses to acquire, which would hinder our ability to grow our revenues and client base and adversely affect our business and financial results
      We may not identify suitable businesses to acquire or negotiate acceptable terms for acquisitions. Historically, a significant portion of our growth has occurred as a result of our ability to acquire similar or complementary businesses on favorable terms. We have relied heavily on acquisitions for adding new products, increasing revenues and adding to our client base, and we expect to continue to do so in the

18


Table of Contents

future. This growth strategy is subject to a number of risks that could adversely affect our business and financial results, including:
  •  we may not be able to find suitable businesses to acquire at affordable valuations or on other acceptable terms,
 
  •  we may face competition for acquisitions from other potential acquirers or from the possibility of the acquisition target pursuing an initial public offering of its stock, and
 
  •  we may find it more difficult or costly to complete acquisitions due to changes in accounting, tax, securities or other regulations.
If we are unable to protect our proprietary technology, our success and our ability to compete will be subject to various risks, such as third-party infringement claims, unauthorized use of our technology, disclosure of our proprietary information or inability to license technology from third parties
      Our success and ability to compete depends in part upon our ability to protect our proprietary technology. We rely on a combination of trade secret, patent, copyright and trademark law, nondisclosure agreements and technical measures to protect our proprietary technology. We have registered trademarks for many of our products and will continue to evaluate the registration of additional trademarks as appropriate. We generally enter into confidentiality agreements with our employees and clients. We seek to protect our software, documentation and other written materials under trade secret and copyright laws, which afford only limited protection. These efforts may be insufficient to prevent third parties from asserting intellectual property rights in our technology. Furthermore, it may be possible for unauthorized third parties to copy portions of our products or to reverse engineer or otherwise obtain and use our proprietary information, and third parties may assert ownership rights in our proprietary technology.
      Existing patent and copyright laws afford only limited protection. Others may develop substantially equivalent or superseding proprietary technology, or competitors may offer equivalent products in competition with our products, thereby substantially reducing the value of our proprietary rights. We cannot be sure that our proprietary technology does not include open-source software, free-ware, share-ware or other publicly available technology. There are many patents in the investment management field. As a result, we are subject to the risk that others will claim that the important technology we have developed, acquired or incorporated into our products will infringe the rights, including the patent rights, such persons may hold. Third parties also could claim that our software incorporates publicly available software and that, as a result, we must publicly disclose our source code. Because we rely on confidentiality for protection, such an event could result in a material loss of intellectual property rights. We cannot be sure that we will develop proprietary products or technologies that are patentable, that any patent, if issued, would provide us with any competitive advantages or would not be challenged by third parties, or that the patents of others will not adversely affect our ability to do business. Expensive and time-consuming litigation may be necessary to protect our proprietary rights.
      We have acquired and may acquire important technology rights through our acquisitions and have often incorporated and may incorporate features of this technology across many products and services. As a result, we are subject to the above risks and the additional risk that the seller of the technology rights may not have appropriately protected the intellectual property rights we acquired. Indemnification and other rights under applicable acquisition documents are limited in term and scope and therefore provide us with only limited protection.
      In addition, we currently rely on third-party licenses in providing our products and services. If we lost such licenses or such licenses were found to infringe upon the rights of others, we would need to seek alternative means of obtaining the licensed technology to continue to provide our products or services. Our inability to replace such technology, or to replace such technology in a timely manner, could have a negative impact on our operations and financial results.

19


Table of Contents

We could become subject to litigation regarding intellectual property rights, which could seriously harm our business and require us to incur significant costs, which, in turn, could reduce or eliminate profits
      In recent years, there has been significant litigation in the United States involving patents and other intellectual property rights. While we are not currently a party to any litigation asserting that we have violated third-party intellectual property rights, we may be a party to litigation in the future to enforce our intellectual property rights or as a result of an allegation that we infringe others’ intellectual property, including patents, trademarks and copyrights. Any parties asserting that our products or services infringe upon their proprietary rights would force us to defend ourselves and possibly our clients against the alleged infringement. Third parties could claim that our software incorporates publicly available software and that, as a result, we must publicly disclose our source code. These claims and any resulting lawsuit, if successful, could subject us to significant liability for damages and invalidation of our proprietary rights. These lawsuits, regardless of their success, could be time-consuming and expensive to resolve, adversely affect our sales, profitability and prospects and divert management time and attention away from our operations. We may be required to re-engineer our products or services or obtain a license of third-party technologies on unfavorable terms.
We expect our gross and operating margins may fluctuate over time, which could cause our financial results to differ from investor expectations or negatively affect our profitability
      We expect that our gross and operating margins may fluctuate from period to period as we continue to introduce new products, experience fluctuations in the relative proportions of revenues derived from our products and services, continue to hire and acquire additional personnel and increase other expenses to support our business. Historically, we derived our revenues principally from the licensing of our products. However, we are increasingly deriving our revenues from outsourcing and related services, which have lower profit margins. For the years ended December 31, 2004, 2003 and 2002, our outsourcing revenues represented 32%, 20% and 20%, respectively, of our total revenues. The gross margins for outsourcing services were 47%, 39% and 32% in 2004, 2003 and 2002, respectively. We expect that the portion of our revenues derived from outsourcing and related services will continue to increase, which, because of the lower margins associated with such revenues, could adversely affect our profitability.
Our failure to continue to derive substantial revenues from the licensing of, or outsourcing solutions related to, our CAMRA, TradeThru, AdvisorWare, SKYLINE and LMS software, and the provision of maintenance and professional services in support of such licensed software, could adversely affect our ability to sustain or grow our revenues and harm our business, financial condition and results of operations
      To date, substantially all of our revenues have been attributable to the licensing of, or outsourcing solutions related to, our CAMRA, TradeThru, AdvisorWare, SKYLINE and LMS software and the provision of maintenance and professional services in support of such licensed software. We expect that the revenues from these software products and services will continue to account for a significant portion of our total revenues for the foreseeable future. As a result, factors adversely affecting the pricing of or demand for such products and services, such as competition or technological change, could have a material adverse effect on our ability to sustain or grow our revenues and harm our business, financial condition and results of operations.
We face significant competition with respect to our products and services, which may result in price reductions, reduced gross margins or loss of market share
      The market for financial services software and services is competitive, rapidly evolving and highly sensitive to new product and service introductions and marketing efforts by industry participants. The market is also highly fragmented and served by numerous firms that target only local markets or specific client types. We also face competition from information systems developed and serviced internally by the IT departments of financial services firms.

20


Table of Contents

      Some of our current and potential competitors have significantly greater financial, technical and marketing resources, generate higher revenues and have greater name recognition. Our current or potential competitors may develop products comparable or superior to those developed by us, or adapt more quickly than us to new technologies, evolving industry trends or changing client or regulatory requirements. It is also possible that alliances among competitors may emerge and rapidly acquire significant market share. Increased competition may result in price reductions, reduced gross margins and loss of market share, any of which could materially adversely affect our business, financial condition and results of operations.
Our inability to introduce new products and services could adversely affect our revenues and cause us to lose current or potential clients
      Rapidly changing technology, evolving industry standards and new product and service introductions characterize the market for our products and services. Our future success will depend in part upon our ability to enhance our existing products and services and to develop and introduce new products and services to meet changing client needs and evolving regulatory requirements. The process of developing software products such as those offered by us is extremely complex and is expected to become increasingly complex and expensive in the future due to the introduction of new platforms and technologies. Our ability to keep up with technology and business changes is subject to a number of risks, including:
  •  we may find it difficult or costly to update our services and software and to develop new products and services quickly enough to meet our clients’ needs,
 
  •  we may find it difficult or costly to make some features of our software work effectively and securely over the Internet,
 
  •  we may find it difficult or costly to update our software and services to keep pace with business, regulatory and other developments in the industries where our clients operate, and
 
  •  we may be exposed to liability for security breaches that allow unauthorized persons to gain access to confidential information stored on our computers or transmitted over our network.
      Our failure to develop new products and services in a timely fashion or to address promptly the needs of the financial markets could adversely affect our business, financial condition and results of operations.
Undetected software design defects, errors or failures may result in loss of or delay in market acceptance of our products that could adversely affect our revenues, financial condition and results of operations
      Our software products are highly complex and sophisticated and could contain design defects or software errors that are difficult to detect and correct. Errors or bugs may result in loss of or delay in market acceptance of our software products or loss of client data or require design modifications. We cannot assure you that, despite testing by us and our clients, errors will not be found in new products, which errors could result in a delay in or an inability to achieve market acceptance and thus could have a material adverse effect upon our revenues, financial condition and results of operations.
If we cannot attract, train and retain qualified managerial, technical and sales personnel, we may not be able to provide adequate technical expertise and customer service to our clients or maintain focus on our business strategy
      We believe that our success is due in part to our experienced management team. We depend in large part upon the continued contribution of our senior management and, in particular, William C. Stone, our chief executive officer and chairman of the board. Losing the services of one or more members of our senior management could adversely affect our business and results of operations. Mr. Stone has been instrumental in developing our business strategy and forging our business relationships since he founded the company in 1986. We maintain no key man life insurance policies for Mr. Stone or any other senior officers or managers.
      Our success is also dependent upon our ability to attract, train and retain highly skilled technical and sales personnel. Competition for the hiring of such personnel in the software industry can be intense.

21


Table of Contents

Locating candidates with the appropriate qualifications, particularly in the desired geographic location and with the necessary subject matter expertise, is difficult. Our failure to attract and retain a sufficient number of highly skilled employees could adversely affect our business, financial condition and results of operations.
Challenges in maintaining and expanding our international operations can result in increased costs, delayed sales efforts and uncertainty with respect to our intellectual property rights and results of operations
      For the years ended December 31, 2004, 2003 and 2002, international revenues accounted for 22%, 17% and 16%, respectively, of our total revenues. We sell certain of our products, such as Altair and Mabel, primarily overseas. Our international business may be subject to a variety of risks, including:
  •  difficulties in obtaining U.S. export licenses,
 
  •  potentially longer payment cycles,
 
  •  increased costs associated with maintaining international marketing efforts,
 
  •  foreign currency fluctuations,
 
  •  the introduction of non-tariff barriers and higher duty rates, and
 
  •  difficulties in enforcement of third-party contractual obligations and intellectual property rights.
      Such factors could have a material adverse effect on our business, financial condition or results of operations.
Catastrophic events may adversely affect our ability to provide, our clients’ ability to use, and the demand for, our products and services, which may disrupt our business and cause a decline in revenues
      A war, terrorist attack, natural disaster or other catastrophe may adversely affect our business. A catastrophic event could have a direct negative impact on us or an indirect impact on us by, for example, affecting our clients, the financial markets or the overall economy and reducing our ability to provide, our clients’ ability to use, and the demand for, our products and services. The potential for a direct impact is due primarily to our significant investment in infrastructure. Although we maintain redundant facilities and have contingency plans in place to protect against both man-made and natural threats, it is impossible to fully anticipate and protect against all potential catastrophes. A computer virus, security breach, criminal act, military action, power or communication failure, flood, severe storm or the like could lead to service interruptions and data losses for clients, disruptions to our operations, or damage to important facilities. In addition, such an event may cause clients to cancel their agreements with us for our products or services. Any of these could have a material adverse effect on our business, revenues and financial condition.
Recently enacted regulatory changes may cause us to incur increased costs and divert the attention of our management from the operation of our business, and failure or circumvention of our controls and procedures could delay our ability to identify error or fraud and cause loss of investor and client confidence and serious harm to our business, financial condition, results of operations and cash flows
      Recently enacted changes in the laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002 and rules adopted by the Securities and Exchange Commission and NASDAQ, could cause us to incur increased costs as we evaluate the implications of new rules and respond to new requirements. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control for financial reporting. As a result, management’s attention may be diverted from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, we may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge, and we cannot assure you that we will be able to do so in a timely fashion.

22


Table of Contents

      Our internal controls and procedures may not be able to prevent other than inconsequential error or fraud in the future. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, and not absolute, assurances that the objectives of the system are met. Faulty judgments, simple errors or mistakes, or the failure of our personnel to adhere to established controls and procedures may make it impossible for us to ensure that the objectives of the control system are met. A failure of our controls and procedures to detect other than inconsequential error or fraud could seriously harm our business, results of operations and financial condition.
     Risks Relating to Our Common Stock
Our stock price is volatile and may continue to be volatile in the future, which could result in substantial losses for our investors
      The trading price of our common stock has been, and is expected to continue to be, highly volatile. The following factors may significantly and adversely affect the trading price of our common stock:
  •  actual or anticipated fluctuations in our operating results,
 
  •  announcements of technological innovations,
 
  •  new products or new contracts by us or our competitors,
 
  •  developments with respect to copyrights or propriety rights,
 
  •  conditions and trends in the financial services and software industries,
 
  •  changes in financial estimates by securities analysts, and
 
  •  general market conditions and other factors.
William C. Stone has the ability to exercise substantial influence over all matters requiring stockholder and board approval and could make decisions about our business that conflict with the interests of other stockholders
      William C. Stone, our chief executive officer and chairman of the board of directors, owns approximately 27% of our outstanding common stock. Mr. Stone has the ability to exert significant influence over our affairs, including the election of directors and decisions related to our strategic and operating activities. This concentration of ownership and board representation may have the effect of delaying or preventing a change in control that other stockholders may find favorable.
Provisions of our charter and bylaws may delay or prevent transactions that are in your best interests
      Our charter and bylaws contain provisions, including a staggered board of directors, that may make it more difficult for a third party to acquire us, or may discourage bids to do so. These provisions could limit the price that investors might be willing to pay for shares of our common stock and could make it more difficult for a third party to acquire, or could discourage a third party from acquiring, a majority of our outstanding common stock. Our board of directors also has the authority to issue up to 1,000,000 shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without any further vote or action by the stockholders. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock could make it more difficult for a third party to acquire, or may discourage a third party from acquiring, a majority of our outstanding common stock.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
      We have no derivative financial instruments. We generally place our marketable security investments in high credit quality instruments, primarily U.S. Government and Federal Agency obligations, tax-exempt

23


Table of Contents

municipal obligations and corporate obligations. We do not expect any material loss from our marketable security investments and therefore believe that our potential interest rate exposure is not material.
      The following table provides information about our financial instruments that are sensitive to changes in interest rates (dollars in thousands):
                 
    Fair Value of
    Investments as of
    March 31, 2005
    Maturing in:
     
Investments   2005   2006
         
Fixed Rate Investments
  $ 8,049     $ 12,901  
Average Interest
    2.13 %     2.70 %
      We invoice clients primarily in U.S. dollars and in local currency in those countries in which we have branch and subsidiary operations. We are exposed to foreign exchange rate fluctuations from the time clients are invoiced in local currency until collection occurs. Through March 31, 2005, foreign currency fluctuations have not had a material effect on our financial position or results of operations, and therefore we believe that our potential foreign currency exchange rate exposure is not material.
      The foregoing risk management discussion and the effect thereof are forward-looking statements. Actual results in the future may differ materially from these projected results due to actual developments in global financial markets. The analytical methods used by us to assess and minimize risk discussed above should not be considered projections of future events or losses.
Item 4. Controls and Procedures
      Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2005. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2005, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
      There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2005, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
      On October 18, 2004, we announced a stock repurchase program providing for expenditures of up to $50 million over the period extending from October 18, 2004 through October 17, 2005.

24


Table of Contents

      The following table summarizes repurchases of our common stock in the quarter ended March 31, 2005 (in thousands, except share and per share data):
Issuer Purchases of Equity Securities
                                 
                Approximate
                Dollar Value of
                Shares That
            Total Number of   May yet be
            Shares Purchased as   Purchased
    Total Number of       Part of Publicly   Under the
    Shares   Average Price Paid   Announced Plans or   Plans or
Period   Purchased   per Share   Programs   Programs
                 
January 1, 2005-January 31, 2005
        $           $ 50,000  
February 1, 2005-February 28, 2005
    259,050       21.56       259,050       44,416  
March 1, 2005-March 31, 2005
                      44,416  
                         
Total
    259,050     $ 21.56       259,050     $ 44,416  
Item 6. Exhibits
      a. The exhibits listed in the Exhibit Index immediately preceding such exhibits are filed as part of this Report.

25


Table of Contents

SIGNATURE
      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  SS&C TECHNOLOGIES, INC.
  By:  /s/ Patrick J. Pedonti
 
 
  Patrick J. Pedonti
  Senior Vice President and Chief Financial Officer
  (Principal Financial and Accounting Officer)
Date: May 10, 2005

26


Table of Contents

Exhibit Index
         
Exhibit    
Number   Description
     
  2 .1+   Acquisition Agreement, dated February 25, 2005, between the Registrant and Financial Models Company Inc. is incorporated herein by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K, filed on March 2, 2005 (File No. 000-28430)
  2 .2+   Purchase Agreement, dated February 28, 2005, by and among the Registrant, EisnerFast LLC and EHS, LLC is incorporated herein by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K, filed on March 3, 2005 (File No. 000-28430)
  10 .1   Commitment Letter, dated as of March 4, 2005, between the Registrant and Fleet National Bank, a Bank of America Company, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on March 9, 2005 (File No. 000-28430)
  10 .2   1996 Director Stock Option Plan, as amended, including form of stock option agreement, is incorporated herein by reference to Exhibit 10.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004 ( File No. 000-28430) (the “Form 10-K”)
  10 .3   Description of Registrant Executive Officer and Compensation Arrangements is incorporated herein by reference to Exhibit 10.10 to the Form 10-K
  10 .4   Contract of Employment between Kevin Milne and the Registrant, effective as of June 9, 2004.
  31 .1   Certification of the Registrant’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  31 .2   Certification of the Registrant’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  32     Certification of the Registrant’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
The Registrant hereby agrees to furnish supplementally a copy of any omitted schedules to this agreement to the Securities and Exchange Commission upon its request.

27