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8-K - FORM 8-K - SS&C Technologies Holdings Incd915781d8k.htm

Exhibit 99.1

 

LOGO

Adjusted Revenue $206.1 million, up 10.9 percent, Adjusted Net Income $52.7 million, up 9.2 percent

WINDSOR, CT, April 27, 2015 (PR Newswire) – SS&C Technologies Holdings, Inc. (NASDAQ: SSNC), a global provider of investment and financial software-enabled services and software, today announced its financial results for the first quarter ended March 31, 2015.

Financial Highlights:

 

    Adjusted revenue (defined below) of $206.1 million in the first quarter 2015, representing an increase of 10.9 percent from the first quarter 2014

 

    Adjusted diluted EPS (defined below) increased to $0.60 in the first quarter of 2015, representing an increase of 7.1 percent

 

    Implemented $11.2 million of annual cost synergies at the DST Global Solutions business, realized $1.0 million in the first quarter.

 

    Brought down our leverage ratio to 1.48x

“We believe 2015 will be a significant year,” said Bill Stone, Chairman and Chief Executive Officer, SS&C Technologies. “Revenue in the first quarter was adversely affected by the strength of the U.S. Dollar in the amount of $3.2 million. Despite the headwinds, we grew 10.9% in adjusted revenue in the first quarter, and over 9% in adjusted net income. We are already seeing the benefits of the DST acquisition, including realized cost synergies, cross sell opportunities, and a shift towards a hosted and outsourced model. The announcement of our intention to acquire Advent has received positive feedback from customers, employees, and shareholders. We have become a larger company with considerable resources. New doors are opening with our prospects, and we look forward to capitalizing on these opportunities.”

Results

SS&C reported GAAP revenue of $205.7 million for the first quarter of 2015, compared to $185.8 million in the first quarter of 2014, a 10.7 percent increase. GAAP operating income for the first quarter of 2015 was $43.1 million, or 21.0 percent of revenue. This represents a decrease of 8.3 percent compared to $47.0 million, or 25.3 percent of revenue, in the first quarter of 2014. GAAP net income for the first quarter of 2015 was $26.2 million compared to $26.4 million in the first quarter of 2014, a 0.8 percent decrease. On a fully diluted GAAP basis, earnings per share in the first quarter of 2015 were $0.30.

Adjusted operating income (a non-GAAP measure defined in note 2 to the attached Condensed Consolidated Financial Information) in the first quarter of 2015 was $77.4 million, or 37.5 percent of adjusted revenue. This represents a 6.6 percent increase compared to $72.6 million, or 39.1 percent of adjusted revenue, in the first quarter of 2014. Adjusted net income (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) for the first quarter of 2015 was $52.7 million compared to $48.3 million in 2014’s first quarter, a 9.2 percent increase. Adjusted diluted earnings per share (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) in the first quarter of 2015 were $0.60 compared to $0.56 in the first quarter of 2014, a 7.1 percent increase.

 

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Operating Cash Flow

SS&C generated net cash from operating activities of $31.2 million for the three months ended March 31, 2015, compared to $38.6 million for the same period in 2014, representing a 19.2 percent decrease. SS&C ended the quarter with $88.3 million in cash, and $601.0 million in gross debt, for a net debt balance of $512.7 million. SS&C’s leverage ratio as defined in our credit agreement stood at 1.48 times consolidated EBITDA as of March 31, 2015.

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 $757.1 million based on maintenance and software-enabled services revenue of $189.3 million for the first quarter of 2015. This represents an increase of 10.8 percent from $170.9 million and $683.6 million annual run-rate in the same period in 2014 and an increase of 4.5 percent from $181.1 million for the fourth quarter of 2014, an annual run rate of $724.4 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Guidance

 

     Q2 2015     FY 2015  

Adjusted Revenue ($M)

   $ 209.0 – $215.0      $ 846.0 – $862.0   

Adjusted Net Income ($M)

   $ 55.5 – $58.0      $ 228.2 – $236.6   

Cash from Operating Activities ($M)

     —        $ 260.0 – $275.0   

Capital Expenditures (% of revenue)

     —          2.4% – 2.8

Diluted Shares (M)

     88.9 – 89.3        89.0 – 89.4   

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 Q1 earnings call will take place at 5:00 p.m. eastern time today, April 27, 2015. The call will discuss Q1 2015 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 2015 First Quarter Earnings Conference Call” conference ID# 26316186. A replay will be available after 8:00 p.m. eastern time on April 27, 2015, until midnight on May 3, 2015. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code # 26316186. The call will also be available for replay on SS&C’s website after April 27, 2015; access: http://investor.ssctech.com/results.cfm.

Certain information contained in this press release relating to, among other things, our financial guidance for the second quarter and full year of 2015, 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

 

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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. Over 7,000 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.

For more information

Patrick Pedonti

Chief Financial Officer

Tel: +1-860-298-4738

E-mail: InvestorRelations@sscinc.com

Justine Stone

Investor Relations

Tel: +1-212-367-4705

E-mail: Justine.stone@sscinc.com

 

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SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

     Three Months Ended March 31,  
     2015     2014  

Revenues:

    

Software-enabled services

   $ 153,567      $ 145,383   

Software licenses

     7,326        7,499   

Maintenance

     35,718        25,526   

Professional services

     9,124        7,402   
  

 

 

   

 

 

 

Total revenues

  205,735      185,810   
  

 

 

   

 

 

 

Cost of revenues:

Software-enabled services

  88,602      85,691   

Software licenses

  1,390      851   

Maintenance

  13,801      9,931   

Professional services

  8,514      5,026   
  

 

 

   

 

 

 

Total cost of revenues

  112,307      101,499   
  

 

 

   

 

 

 

Gross profit

  93,428      84,311   
  

 

 

   

 

 

 

Operating expenses:

Selling and marketing

  13,387      11,898   

Research and development

  19,608      13,587   

General and administrative

  17,300      11,801   
  

 

 

   

 

 

 

Total operating expenses

  50,295      37,286   
  

 

 

   

 

 

 

Operating income

  43,133      47,025   

Interest expense, net

  (5,600   (7,098

Other (expense) income, net

  (1,507   (686
  

 

 

   

 

 

 

Income before income taxes

  36,026      39,241   

Provision for income taxes

  9,780      12,793   
  

 

 

   

 

 

 

Net income

$ 26,246    $ 26,448   
  

 

 

   

 

 

 

Basic earnings per share

$ 0.31    $ 0.32   
  

 

 

   

 

 

 

Basic weighted average number of common shares outstanding

  84,263      82,722   
  

 

 

   

 

 

 

Diluted earnings per share

$ 0.30    $ 0.30   
  

 

 

   

 

 

 

Diluted weighted average number of common and common equivalent shares outstanding

  88,456      86,901   
  

 

 

   

 

 

 

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)

 

     March 31,      December 31,  
     2015      2014  

ASSETS

     

Current assets:

     

Cash

   $ 88,330       $ 109,577   

Accounts receivable, net

     103,802         94,359   

Prepaid income taxes

     11,912         11,857   

Deferred income taxes

     2,627         2,975   

Prepaid expenses and other current assets

     11,681         14,927   

Restricted cash

     1,478         1,477   
  

 

 

    

 

 

 

Total current assets

  219,830      235,172   
  

 

 

    

 

 

 

Property and equipment, net

  52,810      54,277   

Deferred income taxes

  1,298      1,135   

Goodwill

  1,541,768      1,573,227   

Intangible and other assets, net

  391,033      421,511   
  

 

 

    

 

 

 

Total assets

$ 2,206,739    $ 2,285,322   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Current portion of long-term debt

$ 19,061    $ 20,470   

Accounts payable

  12,144      12,004   

Income taxes payable

  —        1,116   

Accrued employee compensation and benefits

  18,970      53,975   

Other accrued expenses

  37,462      30,666   

Deferred income taxes

  151      110   

Deferred maintenance and other revenue

  80,729      73,254   
  

 

 

    

 

 

 

Total current liabilities

  168,517      191,595   

Long-term debt, net of current portion

  576,192      618,435   

Other long-term liabilities

  27,096      26,446   

Deferred income taxes

  97,169      102,176   
  

 

 

    

 

 

 

Total liabilities

  868,974      938,652   
  

 

 

    

 

 

 

Total stockholders’ equity

  1,337,765      1,346,670   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

$ 2,206,739    $ 2,285,322   
  

 

 

    

 

 

 

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)

 

     Three Months Ended March 31,  
     2015     2014  

Cash flow from operating activities:

    

Net income

   $ 26,246      $ 26,448   

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

    

Depreciation and amortization

     25,996        24,936   

Stock-based compensation expense

     4,106        2,975   

Income tax benefit related to exercise of stock options

     (2,839     (2,453

Amortization of loan origination costs

     1,435        1,520   

Loss (gain) on sale or disposition of property and equipment

     209        53   

Deferred income taxes

     (2,131     (1,441

Provision for doubtful accounts

     437        184   

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

    

Accounts receivable

     (12,058     2,956   

Prepaid expenses and other assets

     4,744        1,165   

Accounts payable

     (333     (1,765

Accrued expenses

     (25,283     (26,343

Income taxes prepaid and payable

     1,517        7,986   

Deferred maintenance and other revenue

     9,121        2,333   
  

 

 

   

 

 

 

Net cash provided by operating activities

  31,167      38,554   
  

 

 

   

 

 

 

Cash flow from investing activities:

Additions to property and equipment

  (2,249   (2,758

Additions to capitalized software

  (928   (856

Net changes in restricted cash

  —        983   
  

 

 

   

 

 

 

Net cash used in investing activities

  (3,177   (2,631
  

 

 

   

 

 

 

Cash flow from financing activities:

Repayments of debt

  (44,000   (45,000

Income tax benefit related to exercise of stock options

  2,839      2,453   

Proceeds from exercise of stock options

  4,661      3,993   

Purchase of common stock for treasury

  —        (3,492

Dividends paid on common stock

  (10,539   —     

Payment of fees related to refinancing activities

  —        (512
  

 

 

   

 

 

 

Net cash used in financing activities

  (47,039   (42,558
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

  (2,198   536   
  

 

 

   

 

 

 

Net decrease in cash

  (21,247   (6,099

Cash, beginning of period

  109,577      84,470   
  

 

 

   

 

 

 

Cash, end of period

$ 88,330    $ 78,371   
  

 

 

   

 

 

 

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 the 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 March 31,  
(in thousands)    2015      2014  

Revenue

   $ 205,735       $ 185,810   

Purchase accounting adjustments to deferred revenue

     397         —     
  

 

 

    

 

 

 

Adjusted revenue

$ 206,132    $ 185,810   
  

 

 

    

 

 

 

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 the performance of our business and believe it is a useful indicator of the underlying performance of the Company. Adjusted operating income is not a recognized term under GAAP. Adjusted operating income does not represent operating income, as that term is defined under GAAP, and should not be considered as an alternative to operating income as an indicator of our operating performance. Adjusted operating income as presented herein is not necessarily comparable to similarly titled measures. The following is a reconciliation between adjusted operating income and operating income, the GAAP measure we believe to be most directly comparable to adjusted operating income.

 

     Three months ended March 31,  
(in thousands)    2015      2014  

Operating income

   $ 43,133       $ 47,025   

Amortization of intangible assets

     22,181         21,326   

Stock-based compensation

     4,106         2,975   

Capital-based taxes

     —           6   

Unusual or non-recurring charges

     7,585         1,328   

Purchase accounting adjustments

     397         (27
  

 

 

    

 

 

 

Adjusted operating income

$ 77,402    $ 72,633   
  

 

 

    

 

 

 

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 and cost savings from consolidated EBITDA. EBITDA, consolidated EBITDA and adjusted

 

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consolidated EBITDA are presented because we use these measures to evaluate performance of our business and believe them to be useful indicators of an entity’s debt capacity and its ability to service debt. EBITDA, consolidated EBITDA and adjusted consolidated EBITDA are not recognized terms under GAAP and should not be considered in isolation or as alternatives to operating income, net income or cash flows from operating activities as indicators of our operating performance. The following is a reconciliation of EBITDA, consolidated EBITDA and adjusted consolidated EBITDA to net income.

 

     Three months ended March 31,     

Twelve months
ended

March 31,

 
(in thousands)    2015      2014      2015  

Net income

   $ 26,246       $ 26,448       $ 130,925   

Interest expense, net

     5,600         7,098         23,974   

Taxes

     9,780         12,793         43,514   

Depreciation and amortization

     25,996         24,936         100,891   
  

 

 

    

 

 

    

 

 

 

EBITDA

$ 67,622    $ 71,275    $ 299,304   

Stock-based compensation

  4,106      2,975      12,614   

Capital-based taxes

  —        6      —     

Acquired EBITDA and cost savings

  1,767      —        21,325   

Unusual or non-recurring charges

  9,092      2,014      11,954   

Purchase accounting adjustments

  397      (27   900   

Other

  95      (49   459   
  

 

 

    

 

 

    

 

 

 

Consolidated EBITDA

  83,079      76,194      346,556   

Less: acquired EBITDA and cost savings

  (1,767   —        (21,325
  

 

 

    

 

 

    

 

 

 

Adjusted Consolidated EBITDA

$ 81,312    $ 76,194    $ 325,231   
  

 

 

    

 

 

    

 

 

 

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 March 31,  
(in thousands, except per share data)    2015      2014  

GAAP – Net income

   $ 26,246       $ 26,448   

Plus: Amortization of intangible assets

     22,181         21,326   

Plus: Amortization of deferred financing costs and original issue discount

     1,435         1,520   

Plus: Stock-based compensation

     4,106         2,975   

Plus: Capital-based taxes

     —           6   

Plus: Unusual and non-recurring items

     9,092         2,014   

Plus: Purchase accounting adjustments

     397         (27

Income tax effect (1)

     (10,726      (5,982
  

 

 

    

 

 

 

Adjusted net income

$ 52,731    $ 48,280   
  

 

 

    

 

 

 

Adjusted diluted earnings per share

$ 0.60    $ 0.56   

GAAP diluted earnings per share

$ 0.30    $ 0.30   

Diluted weighted average shares outstanding

  88,456      86,901   

 

(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.

 

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