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8-K - FORM 8-K - SS&C Technologies Holdings Incd619325d8k.htm

Exhibit 99.1

 

LOGO

YTD Operating Cash Flow Increased to $154.3 million, up 154.3%, Q3 GAAP Diluted Earnings Per Share of $0.51, and Adjusted Diluted Earnings Per Share of $0.52, Board Authorizes $100 million Share Buy Back

WINDSOR, CT, October 31, 2013 (GLOBE NEWSWIRE) – SS&C Technologies Holdings, Inc. (NASDAQ: SSNC), a global provider of investment and financial software-enabled services and software, today announced its financial results for the quarter that ended September 30, 2013.

“SS&C’s businesses are generating strong financial performances and momentum remains positive, particularly with our SS&C GlobeOp and SS&C PORTIA acquisitions. We are pleased with our latest acquisition, Prime Management, which gives SS&C entry to the Insurance Linked Securities (ILS) administration market,” said Bill Stone, Chairman and Chief Executive Officer, SS&C Technologies. “We significantly improved cash flow from operations to $154 million for the first nine months of 2013 compared to $61 million in the same period of 2012, and adjusted diluted EPS increased 33 percent to $0.52 in the third quarter of 2013 compared to $0.39 in the same period of 2012. We also had our strongest license revenue quarter since we went public in early 2010.”

Results

SS&C reported GAAP revenue of $179.5 million for the third quarter of 2013, compared to $165.6 million in the third quarter of 2012, an 8.4 percent increase. GAAP operating income for the third quarter of 2013 was $47.9 million, or 26.7 percent of revenue. This represents an increase of 28.5 percent compared to $37.2 million, or 22.5 percent of revenue, in the third quarter of 2012. GAAP net income for the third quarter of 2013 was $43.5 million compared to $17.6 million in the third quarter of 2012. On a fully diluted GAAP basis, earnings per share in the third quarter of 2013 were $0.51 compared to $0.21 per share in the third quarter of 2012.

Adjusted operating income (a non-GAAP measure defined in note 2 to the attached Condensed Consolidated Financial Information) in the third quarter of 2013 was $71.1 million, or 39.6 percent of adjusted revenue. This represents a 15.2 percent increase compared to $61.8 million, or 37.2 percent of adjusted revenue, in the third quarter of 2012. Adjusted net income (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) for the third quarter of 2013 was $44.5 million compared to $32.1 million in 2012’s third quarter, a 38.5 percent increase. Adjusted diluted earnings per share (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) in the third quarter of 2013 were $0.52 compared to $0.39 in the third quarter of 2012, a 33.3 percent increase.

Operating Cash Flow

SS&C generated net cash from operating activities of $154.3 million for the nine months ended September 30, 2013, compared to $60.7 million for the same period in 2012, representing a 154.3 percent increase. SS&C ended the quarter with $81.6 million in cash, and $844.0 million in gross debt, for a net debt balance of $762.4 million. SS&C’s leverage ratio as defined in our credit agreement stood at 2.7 times consolidated EBITDA as of September 30, 2013.

Annual Run Rate Basis

Annual Run Rate Basis (ARRB) recurring revenue, defined as the sum of maintenance and software-enabled services revenue for the quarter on an annualized basis, was $657.2 million based on maintenance and software-enabled services revenue of $164.3 million for the third quarter of 2013. This represents an increase of 8.7 percent from $151.1 million and $604.5 million annual run-rate in the same period in 2012 and an increase of 0.5 percent from $163.5 million for the second quarter of 2013, an annual run rate of $653.8 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.


Share Repurchase Program

SS&C also announced today that its Board of Directors has authorized the repurchase of up to $100 million of the Company’s common stock from time to time on the open market or in privately negotiated transactions.

“At current levels, we believe the Company’s stock represents an attractive investment opportunity,” said Mr. Stone. “This action reflects our ongoing commitment to improving the investment value of SS&C’s stock while at the same time growing our business.”

The timing and amount of any shares repurchased will be determined by the Company’s management based on its evaluation of market conditions and other factors. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The repurchase program may be suspended or discontinued at any time. Any repurchased shares will be available for use in connection with SS&C’s stock plans and for other corporate purposes.

Guidance

 

     Q4 2013    FY 2013

Adjusted Revenue ($M)

   $180.0 – $184.0    N/A

Adjusted Net Income ($M)

   $44.0 – $45.8    N/A

Cash from Operating Activities ($M)

   N/A    $190.0 – $200.0

Capital Expenditures (% of revenue)

   N/A    2.3% – 2.6%

Diluted Shares (M)

   86.7 – 87.0    85.5 – 85.8

Effective Income Tax Rate (%)

   24% – 27%    16% – 18%

Non-GAAP Financial Measures

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

Earnings Call and Press Release

SS&C’s Q3 earnings call will take place at 5:00 p.m. eastern time today, October 31, 2013. The call will discuss Q3 2013 results and our guidance and business outlook. Interested parties may dial 877-312-8798 (U.S. and Canada) or 253-237-1193 (International) and request the “SS&C Technologies 2013 Third Quarter Earnings Conference Call,” conference ID # 79725516. A replay will be available after 8:00 p.m. eastern time on October 31, 2013, until midnight on November 6, 2013. The dial-in number is 855-859-2056 (U.S. and Canada) 404-537-3406 (International); access code # 79725516. The call will also be available for replay on SS&C’s website after October 31, 2013; access: http://investor.ssctech.com/results.cfm.

Certain information contained in this press release relating to, among other things, our financial guidance for the fourth quarter and full year of 2013 and our intention to repurchase shares of our common stock from time to time and the intended use of any repurchased shares, constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Without limiting the foregoing, the words “believes”, “anticipates”, “plans”, “expects”, “estimates”, “projects”, “forecasts”, “may” and “should” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words. Such statements reflect management’s best judgment based on factors currently known but are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such risks and uncertainties include, but are not limited to, the state of the economy and the financial services industry, the Company’s ability to finalize large client contracts, fluctuations in customer demand for the Company’s products and services, intensity of competition from application vendors, delays in product development, the Company’s ability to control expenses, terrorist activities, exposure to litigation, the Company’s ability to integrate acquired businesses, the effect of the acquisitions on customer demand for the Company’s products and services, the market price of the Company’s stock prevailing from time to time, the Company’s cash flow from operations, general economic conditions, and those risks discussed in the “Risk Factors” section of the Company’s most recent Annual Report on Form 10-K, which is on file with the Securities and Exchange Commission and can also be accessed on our website. The Company cautions investors that it may not update any or all of the foregoing forward-looking statements.


About SS&C Technologies

SS&C is a global provider of investment and financial software-enabled services and software focused exclusively on the global financial services industry. Founded in 1986, SS&C has its headquarters in Windsor, Connecticut and offices around the world. Some 5,500 financial services organizations, from the world’s largest institutions to local firms, manage and account for their investments using SS&C’s products and services. These clients in the aggregate manage over $26 trillion in assets.

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

For more information

Patrick Pedonti

Chief Financial Officer

Tel: +1-860-298-4738

E-mail: InvestorRelations@sscinc.com

Justine Stone

Investor Relations Coordinator

Tel: +1- 212-367-4705

E-mail: Justine.stone@sscinc.com


SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operation

(in thousands, except per share data)

(unaudited)

 

     Three Months Ended     Nine Months Ended  
     September 30,
2013
    September 30,
2012
    September 30,
2013
    September 30,
2012
 

Revenues:

        

Software-enabled services

   $ 138,123      $ 125,605      $ 411,909      $ 275,069   

Software licenses

     8,184        5,885        20,880        15,463   

Maintenance

     26,178        25,519        77,603        67,993   

Professional services

     7,020        8,553        19,788        21,562   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     179,505        165,562        530,180        380,087   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenues:

        

Software-enabled services

     79,875        75,965        240,847        155,940   

Software licenses

     1,286        1,764        3,908        4,609   

Maintenance

     10,150        10,883        30,953        29,338   

Professional services

     4,884        5,126        14,689        13,803   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

     96,195        93,738        290,397        203,690   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     83,310        71,824        239,783        176,397   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Selling and marketing

     10,849        8,970        30,876        24,628   

Research and development

     13,117        13,193        40,558        32,478   

General and administrative

     11,480        11,668        33,197        24,527   

Transaction costs

     —          748        —          14,322   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     35,446        34,579        104,631        95,955   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     47,864        37,245        135,152        80,442   

Interest expense, net

     (9,036     (13,726     (33,325     (18,760

Other (expense) income, net

     (110     (1,808     2,406        (16,225

Loss on extinguishment of debt

     —          —          —          (4,355
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     38,718        21,711        104,233        41,102   

(Benefit) provision for income taxes

     (4,748     4,096        13,219        11,364   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 43,466      $ 17,615      $ 91,014      $ 29,738   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share

   $ 0.53      $ 0.22      $ 1.13      $ 0.38   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic weighted average number of common shares outstanding

     81,784        78,548        80,779        78,123   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per share

   $ 0.51      $ 0.21      $ 1.07      $ 0.36   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted weighted average number of common and common equivalent shares outstanding

     86,068        83,202        85,126        82,744   
  

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Condensed Consolidated Financial Information.


SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

     September 30,
2013
     December 31,
2012
 

ASSETS

     

Current assets:

     

Cash

   $ 81,575       $ 86,160   

Accounts receivable, net

     85,871         91,690   

Prepaid income taxes

     23,203         9,651   

Deferred income taxes

     4,031         5,408   

Prepaid expenses and other current assets

     20,263         11,548   

Restricted cash

     2,460         2,460   

Total current assets

     217,403         206,917   
  

 

 

    

 

 

 

Property and equipment, net

     53,317         55,039   

Deferred income taxes

     733         1,459   

Goodwill

     1,542,947         1,559,607   

Intangible and other assets, net

     478,432         539,883   
  

 

 

    

 

 

 

Total assets

   $ 2,292,832       $ 2,362,905   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Current portion of long-term debt

   $ 21,782       $ 22,248   

Accounts payable

     17,298         10,528   

Income taxes payable

     —           1,314   

Accrued employee compensation and benefits

     34,730         39,812   

Other accrued expenses

     28,675         22,650   

Deferred maintenance and other revenue

     59,108         63,700   
  

 

 

    

 

 

 

Total current liabilities

     161,593         160,252   

Long-term debt, net of current portion

     814,377         989,890   

Other long-term liabilities

     12,569         17,102   

Deferred income taxes

     108,246         120,158   
  

 

 

    

 

 

 

Total liabilities

     1,096,785         1,287,402   

Total stockholders’ equity

     1,196,047         1,075,503   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 2,292,832       $ 2,362,905   
  

 

 

    

 

 

 

See Notes to Condensed Consolidated Financial Information.


SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

     Nine Months Ended  
     September 30,
2013
    September 30,
2012
 

Cash flow from operating activities:

    

Net income

   $ 91,014      $ 29,738   

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

    

Depreciation and amortization

     74,441        50,620   

Stock-based compensation expense

     6,010        3,798   

Income tax benefit related to exercise of stock options

     (11,796    
(2,863

Amortization of loan origination costs and original issue discount

     4,408        7,814   

Loss on sale or disposition of property and equipment

     316        13   

Deferred income taxes

     (10,049     (7,723

Provision for doubtful accounts

     528        473   

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

    

Accounts receivable

     5,911        (14,652

Prepaid expenses and other assets

     (8,405     8,873   

Accounts payable

     5,189        (2,240

Accrued expenses

     (7,611     (5,420

Income taxes prepaid and payable

     8,854        (4,333

Deferred maintenance and other revenue

     (4,534     (3,432
  

 

 

   

 

 

 

Net cash provided by operating activities

     154,276        60,666   
  

 

 

   

 

 

 

Cash flow from investing activities:

    

Additions to property and equipment

     (9,933     (8,839

Proceeds from sale of property and equipment

     61        —     

Cash paid for business acquisitions, net of cash acquired

     —          (964,523

Additions to capitalized software

     (1,570     (640

Other

     —          87   
  

 

 

   

 

 

 

Net cash used in investing activities

     (11,442     (973,915
  

 

 

   

 

 

 

Cash flow from financing activities:

    

Cash received from debt borrowings, net of loan origination costs

     —          1,304,210   

Repayment of debt

     (177,000     (366,600

Proceeds from exercise of stock options

     22,360        12,325   

Payment of contingent consideration

     —          (1,800

Income tax benefit related to exercise of stock options

     11,796        2,863   

Other

     (1,917     —     
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (144,761     950,998   
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

     (2,658     2,188   
  

 

 

   

 

 

 

Net (decrease) increase in cash

     (4,585     39,937   

Cash, beginning of period

     86,160        40,318   
  

 

 

   

 

 

 

Cash, end of period

   $ 81,575      $ 80,255   
  

 

 

   

 

 

 

Supplemental disclosure of non-cash activities:

    

Excess tax benefit related to stock option exercises

   $ 10,279      $ —     

See Notes to Condensed Consolidated Financial Information.


SS&C Technologies Holdings, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Information

Note 1. Reconciliation of Revenue to Adjusted Revenue

Adjusted revenue represents revenue adjusted for one-time purchase accounting adjustments to fair value deferred revenue acquired in business combinations. Adjusted revenue is presented because we use this measure to evaluate performance of our business against prior periods and believe it is a useful indicator of the underlying performance of the Company. Adjusted revenue is not a recognized term under generally accepted accounting principles (GAAP). Adjusted revenue does not represent revenue, as that term is defined under GAAP, and should not be considered as an alternative to revenue as an indicator of our operating performance. Adjusted revenue as presented herein is not necessarily comparable to similarly titled measures. The following is a reconciliation between adjusted revenue and revenue, the GAAP measure we believe to be most directly comparable to adjusted revenue.

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
(in thousands)    2013      2012      2013      2012  

Revenue

   $ 179,505       $ 165,562       $ 530,180       $ 380,087   

Purchase accounting adjustments to deferred revenue

     —           465         136         816   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted revenue

   $ 179,505       $ 166,027       $ 530,316       $ 380,903   
  

 

 

    

 

 

    

 

 

    

 

 

 

Note 2. Reconciliation of Operating Income to Adjusted Operating Income

Adjusted operating income represents operating income adjusted for amortization of acquisition-related intangible assets and purchase accounting adjustments for deferred revenue and other expenses. Adjusted operating income is presented because we use this measure to evaluate performance of our business and believe it is a useful indicator of the underlying performance of the Company. Adjusted operating income is not a recognized term under GAAP. Adjusted operating income does not represent operating income, as that term is defined under GAAP, and should not be considered as an alternative to operating income as an indicator of our operating performance. Adjusted operating income as presented herein is not necessarily comparable to similarly titled measures. The following is a reconciliation between adjusted operating income and operating income, the GAAP measure we believe to be most directly comparable to adjusted operating income.

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
(in thousands)    2013     2012     2013     2012  

Operating income

   $ 47,864      $ 37,245      $ 135,152      $ 80,442   

Amortization of intangible assets

     21,247        21,325        63,439        43,745   

Stock-based compensation

     1,975        1,386        6,010        3,798   

Capital-based taxes

     —          (20     —          (785

Unusual or non-recurring charges

     106        1,416        91        15,791   

Purchase accounting adjustments

     (47     413        (6     661   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income

   $ 71,145      $ 61,765      $ 204,686      $ 143,652   
  

 

 

   

 

 

   

 

 

   

 

 

 


Note 3. Reconciliation of Net Income to EBITDA, Consolidated EBITDA and Adjusted Consolidated EBITDA

EBITDA represents net income before interest expense, income taxes, depreciation and amortization. Consolidated EBITDA, defined under our Credit Agreement entered into in March 2013, is used in calculating covenant compliance, and is EBITDA adjusted for certain items. Consolidated EBITDA is calculated by subtracting from or adding to EBITDA items of income or expense described below. Adjusted consolidated EBITDA is calculated by subtracting acquired EBITDA from consolidated EBITDA. EBITDA, consolidated EBITDA and adjusted consolidated EBITDA are presented because we use these measures to evaluate performance of our business and believe them to be useful indicators of an entity’s debt capacity and its ability to service debt. EBITDA, consolidated EBITDA and adjusted consolidated EBITDA are not recognized terms under GAAP and should not be considered in isolation or as alternatives to operating income, net income or cash flows from operating activities as indicators of our operating performance. The following is a reconciliation of EBITDA, consolidated EBITDA and adjusted consolidated EBITDA to net income.

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
   

Twelve Months
Ended

September 30,

 
(in thousands)    2013     2012     2013     2012     2013  

Net income

   $ 43,466      $ 17,615      $ 91,014      $ 29,738      $ 107,096   

Interest expense, net

     9,036        13,726        33,325        23,115        47,066   

Taxes

     (4,748     4,096        13,219        11,364        26,520   

Depreciation and amortization

     24,699        24,735        74,441        50,620        99,635   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     72,453        60,172        211,999        114,837        280,317   

Stock-based compensation

     1,975        1,386        6,010        3,798        7,802   

Capital-based taxes

     —          (20     —          (785     —     

Acquired EBITDA and cost savings

     —          333        —          34,841        40   

Unusual or non-recurring charges

     217        3,223        (2,315     32,016        (2,702

Purchase accounting adjustments

     (47     413        (6     661        227   

Other

     (38     (50     179        (141     303   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated EBITDA

     74,560        65,457        215,867        185,227        285,987   

Less: acquired EBITDA

     —          (333     —          (34,841     (40
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Consolidated EBITDA

   $ 74,560      $ 65,124      $ 215,867      $ 150,386      $ 285,947   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Note 4. Reconciliation of Net Income to Adjusted Net Income and Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share

Adjusted net income and adjusted diluted earnings per share represent net income and earnings per share before amortization of intangible assets and deferred financing costs, stock-based compensation, capital-based taxes and other unusual and non-recurring items. Adjusted net income and adjusted diluted earnings per share are not recognized terms under GAAP, do not represent net income or diluted earnings per share, as those terms are defined under GAAP, and should not be considered as alternatives to net income or diluted earnings per share as indicators of our operating performance. Adjusted net income and adjusted diluted earnings per share are important to management and investors because they represent our operational performance exclusive of the effects of amortization of intangible assets and deferred financing costs, stock-based compensation, capital-based taxes and other unusual and non-recurring items that are not operational in nature or comparable to those of our competitors. The following is a reconciliation between adjusted net income and adjusted diluted earnings per share and net income and diluted earnings per share.

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
(in thousands, except per share data)    2013     2012     2013     2012  

GAAP – Net income

   $ 43,466      $ 17,615      $ 91,014      $ 29,738   

Plus: Amortization of intangible assets

     21,247        21,325        63,439        43,745   

Plus: Amortization of deferred financing costs and original issue discount

     1,420        1,370        4,408        1,959   

Plus: Stock-based compensation

     1,975        1,386        6,010        3,798   

Plus: Capital-based taxes

     —          (20     —          (785

Plus: Unusual and non-recurring items

     217        3,223        (2,315     32,016   

Plus: Loss on extinguishment of debt

     —          —          —          4,355   

Plus: Purchase accounting adjustments

     (47     413        (6     661   

Income tax effect (1)

     (23,807     (13,197     (39,511     (33,034
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 44,471      $ 32,115      $ 123,039      $ 82,453   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted diluted earnings per share

   $ 0.52      $ 0.39      $ 1.45      $ 1.00   

GAAP diluted earnings per share

   $ 0.51      $ 0.21      $ 1.07      $ 0.36   

Diluted weighted-average shares outstanding

     86,068        83,202        85,126        82,744   

 

(1) An estimated normalized effective tax rate of 30% has been used to adjust the provision for income taxes for the purpose of computing adjusted net income.