Attached files

file filename
8-K - FORM 8-K - SS&C Technologies Holdings Incd810986d8k.htm

Exhibit 99.1

 

LOGO

Q3 GAAP Diluted Earnings per Share of $0.47, and Adjusted Diluted Earnings per Share of $0.61, up 17.3%

WINDSOR, CT, October 29, 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 September 30, 2014.

Financial Highlights:

 

    Record revenue of $192.6 million in the third quarter of 2014, representing an increase of 7.3 percent from the third quarter of 2013.

 

    Adjusted diluted EPS (defined below) increased to $0.61 in the third quarter of 2014, representing an increase of 17.3 percent from the third quarter of 2013.

 

    Net cash from operating activities of $164.3 million for the first nine months of 2014, representing a 6.5 percent increase from the same period in 2013.

 

    Paid down $174.0 million of debt in the first nine months of 2014, bringing our net debt to consolidated EBITDA leverage ratio to 1.71x at September 30, 2014.

“SS&C continues to perform and during Q3 we closed two large and complex fund administration deals – a testament to the dedication and persistence of our team. We continue to see momentum in Q4 and have already sold services to two of the world’s largest asset managers this quarter, with significant cross-sell and up-sell potential” said Bill Stone, Chairman and CEO of SS&C Technologies. “We are building a considerable number of new software systems including: regulatory compliance, investor communications, REIT processing and powerful new features and functions in our portal and mobile applications. SS&C is aggressively hiring talented new employees at all levels and we are relentlessly focused on client satisfaction.”

Results

SS&C reported GAAP revenue of $192.6 million for the third quarter of 2014, compared to $179.5 million in the third quarter of 2013, a 7.3 percent increase. GAAP operating income for the third quarter of 2014 was $54.4 million, or 28.2 percent of revenue. This represents an increase of 13.6 percent compared to $47.9 million, or 26.7 percent of revenue, in the third quarter of 2013. GAAP net income for the third quarter of 2014 was $40.8 million compared to $43.5 million in the third quarter of 2013, a 6.1 percent decrease. On a fully diluted GAAP basis, earnings per share in the third quarter of 2014 were $0.47.

Adjusted operating income (a non-GAAP measure defined in note 2 to the attached Condensed Consolidated Financial Information) in the third quarter of 2014 was $78.6 million, or 40.8 percent of revenue. This represents a 10.5 percent increase compared to $71.1 million, or 39.6 percent of revenue, in the third quarter of 2013. Adjusted net income (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) for the third quarter of 2014 was $53.3 million compared to $44.5 million in 2013’s third quarter, a 19.8 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 2014 were $0.61 compared to $0.52 in the third quarter of 2013, a 17.3 percent increase.


Operating Cash Flow

SS&C generated net cash from operating activities of $164.3 million for the nine months ended September 30, 2014, compared to $154.3 million for the same period in 2013, representing a 6.5 percent increase. SS&C ended the quarter with $75.1 million in cash, and $608.0 million in gross debt, for a net debt balance of $532.9 million. SS&C’s leverage ratio as defined in our credit agreement stood at 1.71 times consolidated EBITDA as of September 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 $699.5 million based on maintenance and software-enabled services revenue of $174.9 million for the third quarter of 2014. This represents an increase of 6.4 percent from $164.3 million and $657.2 million annual run-rate in the same period in 2013 and an increase of 2.1 percent from $171.2 million for the second quarter of 2014, an annual run rate of $685.0 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Guidance

 

     Q4 2014   FY 2014

Adjusted Revenue ($M)

   $193.0 – $199.0   N/A

Adjusted Net Income ($M)

   $53.3 – $54.7   N/A

Cash from Operating Activities ($M)

   N/A   $225.0 – $235.0

Capital Expenditures (% of revenue)

   N/A   2.3% – 2.6%

Diluted Shares (M)

   87.7 – 88.0   87.2 – 87.3

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 Q3 earnings call will take place at 5:00 p.m. eastern time today, October 29, 2014. The call will discuss Q3 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 Third Quarter Earnings Conference Call” conference ID #17314836. A replay will be available after 8:00 p.m. eastern time on October 29, 2014, until midnight on November 4, 2014. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code #17314836. The call will also be available for replay on SS&C’s website after October 29, 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 fourth 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.


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


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,     September 30,     September 30,     September 30,  
     2014     2013     2014     2013  

Revenues:

        

Software-enabled services

   $ 149,285      $ 138,123      $ 440,215      $ 411,909   

Software licenses

     9,196        8,184        26,561        20,880   

Maintenance

     25,595        26,178        76,812        77,603   

Professional services

     8,522        7,020        23,542        19,788   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     192,598        179,505        567,130        530,180   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenues:

        

Software-enabled services

     84,978        79,875        256,709        240,847   

Software licenses

     892        1,286        2,549        3,908   

Maintenance

     9,990        10,150        29,998        30,953   

Professional services

     5,523        4,884        15,859        14,689   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

     101,383        96,195        305,115        290,397   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     91,215        83,310        262,015        239,783   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Selling and marketing

     11,581        10,849        35,682        30,876   

Research and development

     13,935        13,117        41,461        40,558   

General and administrative

     11,336        11,480        38,095        33,197   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     36,852        35,446        115,238        104,631   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     54,363        47,864        146,777        135,152   

Interest expense, net

     (6,071     (9,036     (19,738     (33,325

Other income (expense), net

     1,532        (110     787        2,406   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     49,824        38,718        127,826        104,233   

Provision (benefit) for income taxes

     8,997        (4,748     33,306        13,219   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 40,827      $ 43,466      $ 94,520      $ 91,014   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share

   $ 0.49      $ 0.53      $ 1.14      $ 1.13   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic weighted average number of common shares outstanding

     83,532        81,784        83,127        80,779   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per share

   $ 0.47      $ 0.51      $ 1.08      $ 1.07   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted weighted average number of common and common equivalent shares outstanding

     87,392        86,068        87,125        85,126   
  

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Condensed Consolidated Financial Information.


SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

     September 30,      December 31,  
     2014      2013  

ASSETS

     

Current assets:

     

Cash

   $ 75,080       $ 84,470   

Accounts receivable, net

     90,122         91,221   

Prepaid income taxes

     14,863         19,932   

Deferred income taxes

     3,925         6,526   

Prepaid expenses and other current assets

     13,384         16,567   

Restricted cash

     1,477         2,460   
  

 

 

    

 

 

 

Total current assets

     198,851         221,176   

Property and equipment, net

     53,507         51,697   

Deferred income taxes

     1,506         1,077   

Goodwill

     1,523,971         1,541,386   

Intangible and other assets, net

     392,024         459,988   
  

 

 

    

 

 

 

Total assets

   $ 2,169,859       $ 2,275,324   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Current portion of long-term debt

   $ 21,641       $ 23,212   

Accounts payable

     9,606         8,368   

Income taxes payable

     —           2,169   

Accrued employee compensation and benefits

     35,036         44,664   

Other accrued expenses

     23,445         26,028   

Deferred maintenance and other revenue

     57,550         62,561   
  

 

 

    

 

 

 

Total current liabilities

     147,278         167,002   

Long-term debt, net of current portion

     579,910         751,295   

Other long-term liabilities

     18,617         14,913   

Deferred income taxes

     95,954         110,406   
  

 

 

    

 

 

 

Total liabilities

     841,759         1,043,616   

Total stockholders’ equity

     1,328,100         1,231,708   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 2,169,859       $ 2,275,324   
  

 

 

    

 

 

 

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,     September 30,  
     2014     2013  

Cash flow from operating activities:

    

Net income

   $ 94,520      $ 91,014   

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

    

Depreciation and amortization

     74,493        74,441   

Stock-based compensation expense

     8,554        6,010   

Income tax benefit related to exercise of stock options

     (10,735     (11,796

Amortization of loan origination costs and original issue discount

     4,397        4,408   

Loss on sale or disposition of property and equipment

     672        316   

Deferred income taxes

     (11,661     (10,049

Provision for doubtful accounts

     672        528   

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

    

Accounts receivable

     (395     5,911   

Prepaid expenses and other assets

     (5,302     (8,405

Accounts payable

     636        5,189   

Accrued expenses

     (637     (7,611

Income taxes prepaid and payable

     13,715        8,854   

Deferred maintenance and other revenue

     (4,664     (4,534
  

 

 

   

 

 

 

Net cash provided by operating activities

     164,265        154,276   
  

 

 

   

 

 

 

Cash flow from investing activities:

    

Additions to property and equipment

     (11,879     (9,933

Proceeds from sale of property and equipment

     27        61   

Additions to capitalized software

     (2,688     (1,570

Other

     983        —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (13,557     (11,442
  

 

 

   

 

 

 

Cash flow from financing activities:

    

Repayment of debt

     (174,000     (177,000

Proceeds from exercise of stock options

     16,070        22,360   

Income tax benefit related to exercise of stock options

     10,735        11,796   

Purchase of common stock for treasury

     (11,223     —     

Payment of fees related to refinancing activities

     (512     (1,917
  

 

 

   

 

 

 

Net cash used in financing activities

     (158,930     (144,761
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

     (1,168     (2,658
  

 

 

   

 

 

 

Net decrease in cash

     (9,390     (4,585

Cash, beginning of period

     84,470        86,160   
  

 

 

   

 

 

 

Cash, end of period

   $ 75,080      $ 81,575   
  

 

 

   

 

 

 

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)    2014      2013      2014      2013  

Revenue

   $ 192,598       $ 179,505       $ 567,130       $ 530,180   

Purchase accounting adjustments to deferred revenue

     —           —           —           136   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted revenue

   $ 192,598       $ 179,505       $ 567,130       $ 530,316   
  

 

 

    

 

 

    

 

 

    

 

 

 

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)    2014      2013     2014     2013  

Operating income

   $ 54,363       $ 47,864      $ 146,777      $ 135,152   

Amortization of intangible assets

     21,318         21,247        63,929        63,439   

Stock-based compensation

     2,784         1,975        8,554        6,010   

Capital-based taxes

     —           —          6        —     

Unusual or non-recurring charges

     180         106        6,019        91   

Purchase accounting adjustments

     —           (47     (27     (6
  

 

 

    

 

 

   

 

 

   

 

 

 

Adjusted operating income

   $ 78,645       $ 71,145      $ 225,258      $ 204,686   
  

 

 

    

 

 

   

 

 

   

 

 

 

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.


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

Twelve Months
Ended

September 30,

 
(in thousands)    2014     2013     2014     2013     2014  

Net income

   $ 40,827      $ 43,466      $ 94,520      $ 91,014      $ 121,401   

Interest expense, net

     6,071        9,036        19,738        33,325        27,692   

Taxes

     8,997        (4,748     33,306        13,219        47,379   

Depreciation and amortization

     24,661        24,699        74,493        74,441        99,832   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     80,556        72,453        222,057        211,999        296,304   

Stock-based compensation

     2,784        1,975        8,554        6,010        10,930   

Capital-based taxes

     —          —          6        —          188   

Unusual or non-recurring charges

     (1,353     217        5,231        (2,315     4,425   

Purchase accounting adjustments

     —          (47     (27     (6     (73

Other

     118        (38     201        179        257   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated EBITDA

     82,105        74,560        236,022        215,867        312,031   

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)    2014     2013     2014     2013  

GAAP – Net income

   $ 40,827      $ 43,466      $ 94,520      $ 91,014   

Plus: Amortization of intangible assets

     21,318        21,247        63,929        63,439   

Plus: Amortization of deferred financing costs and original issue discount

     1,441        1,420        4,397        4,408   

Plus: Stock-based compensation

     2,784        1,975        8,554        6,010   

Plus: Capital-based taxes

     —          —          6        —     

Plus: Unusual and non-recurring items

     (1,353     217        5,231        (2,315

Plus: Purchase accounting adjustments

     —          (47     (27     (6

Income tax effect (1)

     (11,726     (23,807     (25,469     (39,511
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 53,291      $ 44,471      $ 151,141      $ 123,039   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted diluted earnings per share

   $ 0.61      $ 0.52      $ 1.73      $ 1.45   

GAAP diluted earnings per share

   $ 0.47      $ 0.51      $ 1.08      $ 1.07   

Diluted weighted-average shares outstanding

     87,392        86,068        87,125        85,126   

 

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