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8-K - 8-K - SS&C Technologies Holdings Incd769234d8k.htm

Exhibit 99.1

 

LOGO

Q2 GAAP Diluted Earnings Per Share of $0.31, and Adjusted Diluted Earnings Per Share of $0.57, Q2 YTD Operating Cash Flow Increased to $92.8 million, up 32.6%

WINDSOR, CT, July 31, 2014 (GLOBE NEWSWIRE) – SS&C Technologies Holdings, Inc. (NASDAQ: SSNC), a global provider of investment and financial software-enabled services and software, today announced its financial results for the quarter that ended June 30, 2014.

Financial Highlights:

 

    Record revenue of $188.7 million in the second quarter 2014, representing an increase of 6.3 percent from the second quarter 2013

 

    Adjusted diluted EPS (defined below) increased to $0.57 in the second quarter of 2014, representing an increase of 18.8 percent

 

    Net cash from operating activities of $92.8 million for the first six months of 2014, representing a 32.6 percent increase

 

    Paid down $107.0 million of debt in the first six months of 2014, bringing our net debt to consolidated EBITDA leverage ratio to 1.97x

“SS&C has had nine straight quarters of record revenues. Our earnings and cash flows are strong and give us the financial flexibility to reinvest in our products and services, pursue acquisitions, buyback stock and/or pay down debt.” said Bill Stone, Chairman and Chief Executive Officer, SS&C Technologies. “Our strong and consistent performance on both the top and bottom line is a testament to SS&C’s best-in-class software and services, as well as management’s ability to expand margins by increasing productivity and utilizing the latest technology.”

Results

SS&C reported GAAP revenue of $188.7 million for the second quarter of 2014, compared to $177.5 million in the second quarter of 2013, a 6.3 percent increase. GAAP operating income for the second quarter of 2014 was $45.4 million, or 24.1 percent of revenue. This represents an increase of 0.2 percent compared to $45.3 million, or 25.5 percent of revenue, in the second quarter of 2013. GAAP net income for the second quarter of 2014 was $27.2 million compared to $26.1 million in the second quarter of 2013, a 4.3 percent increase. On a fully diluted GAAP basis, earnings per share in the second quarter of 2014 were $0.31.

Adjusted operating income (a non-GAAP measure defined in note 2 to the attached Condensed Consolidated Financial Information) in the second quarter of 2014 was $74.0 million, or 39.2 percent of adjusted revenue. This represents a 7.6 percent increase compared to $68.8 million, or 38.7 percent of adjusted revenue, in the second quarter of 2013. Adjusted net income (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) for the second quarter of 2014 was $49.6 million compared to $41.0 million in 2013’s second quarter, a 20.9 percent increase. Adjusted diluted earnings per share (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) in the second quarter of 2014 were $0.57 compared to $0.48 in the second quarter of 2013, an 18.8 percent increase.

 

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Operating Cash Flow

SS&C generated net cash from operating activities of $92.8 million for the six months ended June 30, 2014, compared to $70.0 million for the same period in 2013, representing a 32.6 percent increase. SS&C ended the quarter with $73.5 million in cash, and $675.0 million in gross debt, for a net debt balance of $601.5 million. SS&C’s leverage ratio as defined in our credit agreement stood at 1.97 times consolidated EBITDA as of June 30, 2014.

Annual Run Rate Basis

Annual Run Rate Basis (ARRB) recurring revenue, defined as the sum of maintenance and software-enabled services revenue for the quarter on an annualized basis, was $685.0 million based on maintenance and software-enabled services revenue of $171.2 million for the second quarter of 2014. This represents an increase of 4.8 percent from $163.5 million and $653.8 million annual run-rate in the same period in 2013 and an increase of 0.2 percent from $170.9 million for the first quarter of 2014, an annual run rate of $683.6 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Guidance

 

     Q3 2014   FY 2014

Adjusted Revenue ($M)

   $190.0 –$194.0   $757.0 –$770.0

Adjusted Net Income ($M)

   $50.5 –$52.2   $198.5 –$206.0

Cash from Operating Activities ($M)

   N/A   $225.0 –$235.0

Capital Expenditures (% of revenue)

   N/A   2.3% – 2.8%

Diluted Shares (M)

   87.4 – 87.7   87.5 – 87.8

Effective Income Tax Rate (%)

   28%   28%

Non-GAAP Financial Measures

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

Earnings Call and Press Release

SS&C’s Q2 earnings call will take place at 5:00 p.m. eastern time today, July 31, 2014. The call will discuss Q2 2014 results and our guidance and business outlook. Interested parties may dial 877-312-8798 (US and Canada) or 253-237-1193 (International), and request the “SS&C Technologies 2014 Second Quarter Earnings Conference Call” conference ID# 69661370. A replay will be available after 8:00 p.m. eastern time on July 31, 2014, until midnight on August 6, 2014. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code # 69661370. The call will also be available for replay on SS&C’s website after July 31, 2014; access: http://investor.ssctech.com/results.cfm.

Certain information contained in this press release relating to, among other things, our financial guidance for the third quarter and full year of 2014, constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Without limiting the foregoing, the words “believes”, “anticipates”, “plans”, “expects”, “estimates”, “projects”, “forecasts”, “may” and “should” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words. Such statements reflect management’s best judgment based on factors currently known but are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such risks and uncertainties include, but are not limited to, the state of the economy and the financial services industry, the Company’s ability to finalize large client contracts, fluctuations in customer demand for the Company’s products and services, intensity of competition from application vendors, delays in product development, the Company’s ability to control expenses, terrorist activities, exposure to litigation, the Company’s ability to integrate acquired businesses, the effect of the acquisitions on customer demand for the Company’s products and services, the market price of the Company’s stock prevailing from time to time, the Company’s cash flow from operations, general economic conditions, and those risks discussed in the “Risk Factors” section of the Company’s most recent Annual Report on Form 10-K, which is on file with the Securities and Exchange Commission and can also be accessed on our website. The Company cautions investors that it may not update any or all of the foregoing forward-looking statements.

 

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About SS&C Technologies

SS&C is a global provider of investment and financial software-enabled services and software focused exclusively on the global financial services industry. Founded in 1986, SS&C has its headquarters in Windsor, Connecticut and offices around the world. Some 6,900 financial services organizations, from the world’s largest institutions to local firms, manage and account for their investments using SS&C’s products and services. These clients in the aggregate manage over $26 trillion in assets.

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

For more information

Patrick Pedonti

Chief Financial Officer

Tel: +1-860-298-4738

E-mail: InvestorRelations@sscinc.com

Justine Stone

Investor Relations Coordinator

Tel: +1-212-367-4705

E-mail: Justine.stone@sscinc.com

 

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SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operation

(in thousands, except per share data)

(unaudited)

 

     Three Months Ended     Six Months Ended  
     June 30,
2014
    June 30,
2013
    June 30,
2014
    June 30,
2013
 

Revenues:

        

Software-enabled services

   $ 145,547      $ 138,047      $ 290,930      $ 273,786   

Software licenses

     9,866        6,626        17,365        12,696   

Maintenance

     25,691        25,410        51,217        51,425   

Professional services

     7,618        7,374        15,020        12,768   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     188,722        177,457        374,532        350,675   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenues:

        

Software-enabled services

     86,040        80,245        171,731        160,972   

Software licenses

     806        1,348        1,657        2,622   

Maintenance

     10,077        10,283        20,008        20,803   

Professional services

     5,310        4,885        10,336        9,805   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

     102,233        96,761        203,732        194,202   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     86,489        80,696        170,800        156,473   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Selling and marketing

     12,203        10,563        24,101        20,027   

Research and development

     13,939        13,639        27,526        27,441   

General and administrative

     14,958        11,202        26,759        21,717   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     41,100        35,404        78,386        69,185   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     45,389        45,292        92,414        87,288   

Interest expense, net

     (6,569     (11,784     (13,667     (24,289

Other (expense) income, net

     (59     2,370        (745     2,516   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     38,761        35,878        78,002        65,515   

Provision for income taxes

     11,516        9,759        24,309        17,967   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 27,245      $ 26,119      $ 53,693      $ 47,548   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share

   $ 0.33      $ 0.32      $ 0.65      $ 0.59   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic weighted average number of common shares outstanding

     83,118        81,186        82,921        80,268   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per share

   $ 0.31      $ 0.31      $ 0.62      $ 0.56   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted weighted average number of common and common equivalent shares outstanding

     87,091        85,280        86,999        84,550   
  

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Condensed Consolidated Financial Information.

 

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SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

     June 30,
2014
     December 31,
2013
 

ASSETS

     

Current assets:

     

Cash

   $ 73,520       $ 84,470   

Accounts receivable, net

     89,428         91,221   

Prepaid income taxes

     12,780         19,932   

Deferred income taxes

     5,367         6,526   

Prepaid expenses and other current assets

     17,454         16,567   

Restricted cash

     1,477         2,460   
  

 

 

    

 

 

 

Total current assets

     200,026         221,176   

Property and equipment, net

     53,212         51,697   

Deferred income taxes

     1,037         1,077   

Goodwill

     1,547,504         1,541,386   

Intangible and other assets, net

     420,652         459,988   
  

 

 

    

 

 

 

Total assets

   $ 2,222,431       $ 2,275,324   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Current portion of long-term debt

   $ 23,814       $ 23,212   

Accounts payable

     8,503         8,368   

Income taxes payable

     —           2,169   

Accrued employee compensation and benefits

     25,418         44,664   

Other accrued expenses

     27,369         26,028   

Deferred maintenance and other revenue

     57,265         62,561   
  

 

 

    

 

 

 

Total current liabilities

     142,369         167,002   

Long-term debt, net of current portion

     644,384         751,295   

Other long-term liabilities

     17,469         14,913   

Deferred income taxes

     104,267         110,406   
  

 

 

    

 

 

 

Total liabilities

     908,489         1,043,616   

Total stockholders’ equity

     1,313,942         1,231,708   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 2,222,431       $ 2,275,324   
  

 

 

    

 

 

 

See Notes to Condensed Consolidated Financial Information.

 

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SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

     Six Months Ended  
     June 30,
2014
    June 30,
2013
 

Cash flow from operating activities:

    

Net income

   $ 53,693      $ 47,548   

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

    

Depreciation and amortization

     49,832        49,742   

Stock-based compensation expense

     5,770        4,035   

Income tax benefit related to exercise of stock options

     (8,235     (4,941

Amortization of loan origination costs and original issue discount

     2,956        2,988   

Loss on sale or disposition of property and equipment

     698        322   

Deferred income taxes

     (5,550     (4,474

Provision for doubtful accounts

     473        314   

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

    

Accounts receivable

     1,532        (6,418

Prepaid expenses and other assets

     (1,403     (4,712

Accounts payable

     789        (2,248

Accrued expenses

     (15,507     (14,245

Income taxes prepaid and payable

     13,250        5,600   

Deferred maintenance and other revenue

     (5,478     (3,506
  

 

 

   

 

 

 

Net cash provided by operating activities

     92,820        70,005   
  

 

 

   

 

 

 

Cash flow from investing activities:

    

Additions to property and equipment

     (9,460     (7,724

Proceeds from sale of property and equipment

     1        55   

Additions to capitalized software

     (1,704     (428

Other

     983        —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (10,180     (8,097
  

 

 

   

 

 

 

Cash flow from financing activities:

    

Repayment of debt

     (107,000     (102,000

Proceeds from exercise of stock options

     12,337        14,086   

Income tax benefit related to exercise of stock options

     8,235        4,941   

Purchase of common stock for treasury

     (7,386     —     

Other

     (512     (1,917
  

 

 

   

 

 

 

Net cash used in financing activities

     (94,326     (84,890
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

     736        (2,592
  

 

 

   

 

 

 

Net decrease in cash

     (10,950     (25,574

Cash, beginning of period

     84,470        86,160   
  

 

 

   

 

 

 

Cash, end of period

   $ 73,520      $ 60,586   
  

 

 

   

 

 

 

Supplemental disclosure of non-cash activities:

    

Excess tax benefit related to stock option exercises

   $ —        $ 12,956   

See Notes to Condensed Consolidated Financial Information.

 

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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
June 30,
     Six Months Ended
June 30,
 
(in thousands)    2014      2013      2014      2013  

Revenue

   $ 188,722       $ 177,457       $ 374,532       $ 350,675   

Purchase accounting adjustments to deferred revenue

     —           22         —           136   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted revenue

   $ 188,722       $ 177,479       $ 374,532       $ 350,811   
  

 

 

    

 

 

    

 

 

    

 

 

 

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
June 30,
    Six Months Ended
June 30,
 
(in thousands)    2014      2013     2014     2013  

Operating income

   $ 45,389       $ 45,292      $ 92,414      $ 87,288   

Amortization of intangible assets

     21,285         21,174        42,611        42,192   

Stock-based compensation

     2,795         1,929        5,770        4,035   

Capital-based taxes

     —           —          6        —     

Unusual or non-recurring charges

     4,511         395        5,839        (15

Purchase accounting adjustments

     —           (24     (27     41   
  

 

 

    

 

 

   

 

 

   

 

 

 

Adjusted operating income

   $ 73,980       $ 68,766      $ 146,613      $ 133,541   
  

 

 

    

 

 

   

 

 

   

 

 

 

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

EBITDA represents net income before interest expense, income taxes, depreciation and amortization. Consolidated EBITDA, defined under our Credit Agreement entered into in March 2012, is used in calculating covenant compliance, and is EBITDA adjusted for certain items. Consolidated EBITDA is calculated by subtracting from or adding to EBITDA items of income or expense described below. Adjusted consolidated EBITDA is calculated by subtracting acquired EBITDA from consolidated EBITDA. EBITDA, consolidated EBITDA and adjusted consolidated EBITDA are presented because we use these measures to evaluate performance of our business and believe them to be useful indicators of an entity’s debt capacity and its ability to service debt. EBITDA, consolidated EBITDA and adjusted consolidated EBITDA are not recognized terms under GAAP and should not be considered in isolation or as alternatives to operating income, net income or cash flows from operating activities as indicators of our operating performance. The following is a reconciliation of EBITDA, consolidated EBITDA and adjusted consolidated EBITDA to net income.

 

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     Three Months Ended
June 30,
    Six Months Ended
June 30,
    Twelve Months
Ended

June 30,
2014
 
(in thousands)    2014      2013     2014     2013    

Net income

   $ 27,245       $ 26,119      $ 53,693      $ 47,548      $ 124,040   

Interest expense, net

     6,569         11,784        13,667        24,289        30,657   

Taxes

     11,516         9,759        24,309        17,967        33,634   

Depreciation and amortization

     24,896         24,990        49,832        49,742        99,870   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     70,226         72,652        141,501        139,546        288,201   

Stock-based compensation

     2,795         1,929        5,770        4,035        10,121   

Capital-based taxes

     —           —          6        —          188   

Acquired EBITDA and cost savings

     —           —          —          —          204   

Unusual or non-recurring charges

     4,570         (1,976     6,584        (2,532     5,995   

Purchase accounting adjustments

     —           (24     (27     41        (120

Other

     132         6        83        217        101   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated EBITDA

     77,723         72,587        153,917        141,307        304,690   

Less: acquired EBITDA

     —           —          —          —          (204
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Consolidated EBITDA

   $ 77,723       $ 72,587      $ 153,917      $ 141,307      $ 304,486   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

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
June 30,
    Six Months Ended
June 30,
 
(in thousands, except per share data)    2014     2013     2014     2013  

GAAP – Net income

   $ 27,245      $ 26,119      $ 53,693      $ 47,548   

Plus: Amortization of intangible assets

     21,285        21,174        42,611        42,192   

Plus: Amortization of deferred financing costs and original issue discount

     1,436        1,600        2,956        2,988   

Plus: Stock-based compensation

     2,795        1,929        5,770        4,035   

Plus: Capital-based taxes

     —          —          6        —     

Plus: Unusual and non-recurring items

     4,570        (1,976     6,584        (2,532

Plus: Loss on extinguishment of debt

     —          —          —          —     

Plus: Purchase accounting adjustments

     —          (24     (27     41   

Income tax effect (1)

     (7,761     (7,815     (13,743     (15,704
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 49,570      $ 41,007      $ 97,850      $ 78,568   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted diluted earnings per share

   $ 0.57      $ 0.48      $ 1.12      $ 0.93   

GAAP diluted earnings per share

   $ 0.31      $ 0.31      $ 0.62      $ 0.56   

Diluted weighted-average shares outstanding

     87,091        85,280        86,999        84,550   

 

(1) An estimated normalized effective tax rate of 28% has been used to adjust the provision for income taxes for the purposes of computing adjusted net income.

 

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