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8-K - FORM 8-K - SS&C Technologies Holdings Incd32630d8k.htm

Exhibit 99.1

 

LOGO

Adjusted Revenue $213.1 million, up 12.9 percent, Adjusted Diluted EPS $0.66, up 15.8 percent

WINDSOR, CT, July 29, 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 quarter ended June 30, 2015.

Financial Highlights:

 

    Adjusted revenue (defined below) of $213.1 million in the second quarter 2015, representing an increase of 12.9 percent from the second quarter 2014

 

    Adjusted operating income (defined below) increased 15.6 percent to $85.5 million, or 40.1 percent of adjusted revenue

 

    Adjusted Net Income (defined below) increased 18.5 percent to $58.7 million in the second quarter of 2015

 

    Ended the quarter with $729.8 million in cash

“Our company had another strong quarter with record adjusted revenues, up 12.9%, and record adjusted diluted EPS of $0.66. The business had broad strength and we overcame foreign currency headwinds as all major currencies lost ground to the U.S. Dollar,” said Bill Stone, Chairman and Chief Executive Officer, SS&C Technologies. “Our acquisition of DST Global Solutions has begun to bear fruit as EBITDA margins climbed to over 40% for this business. We continue to see opportunities around the globe and the Advent acquisition integration is in full swing. We have expanded our offices in Boston, New York, and Windsor, and announced yesterday our Evansville, Indiana expansion.”

Results

SS&C reported GAAP revenue of $212.8 million for the second quarter of 2015, compared to $188.7 million in the second quarter of 2014, a 12.7 percent increase. GAAP operating income for the second quarter of 2015 was $58.4 million, or 27.4 percent of revenue. This represents an increase of 28.6 percent compared to $45.4 million, or 24.1 percent of revenue, in the second quarter of 2014. GAAP net income for the second quarter of 2015 was $39.1 million compared to $27.2 million in the second quarter of 2014, a 43.6 percent increase. On a fully diluted GAAP basis, earnings per share in the second quarter of 2015 were $0.44.

Adjusted operating income (a non-GAAP measure defined in note 2 to the attached Condensed Consolidated Financial Information) in the second quarter of 2015 was $85.5 million, or 40.1 percent of adjusted revenue. This represents a 15.6 percent increase compared to $74.0 million, or 39.2 percent of adjusted revenue, in the second quarter of 2014. Adjusted net income (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) for the second quarter of 2015 was $58.7 million compared to $49.6 million in 2014’s second quarter, an 18.5 percent increase. Adjusted diluted earnings per share (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) in the second quarter of 2015 were $0.66 compared to $0.57 in the second quarter of 2014, a 15.8 percent increase.

Operating Cash Flow

SS&C generated net cash from operating activities of $100.7 million for the six months ended June 30, 2015, compared to $92.8 million for the same period in 2014. SS&C ended the quarter with $729.8 million in cash, and $471.0 million in gross debt.


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 $743.8 million based on maintenance and software-enabled services revenue of $186.0 million for the second quarter of 2015. This represents an increase of 8.6 percent from $171.2 million and $685.0 million annual run-rate in the same period in 2014 and a decrease of 1.8 percent from $189.3 million for the first quarter of 2015, an annual run rate of $757.1 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Guidance

 

     Q3 2015      FY 2015  

Adjusted Revenue ($M)

     $305.0 –$311.0         $1,044.0 – $1,056.0   

Adjusted Net Income ($M)

     $61.9 – $64.7         $243.0 – $248.5   

Cash from Operating Activities ($M)

     —           $280.0 –$295.0   

Capital Expenditures (% of revenue)

     —           2.4% – 2.8

Diluted Shares (M)

     102.5 – 103.0         95.6 – 96.0   

Effective Income Tax Rate (%)

     —           27% – 29

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 29, 2015. The call will discuss Q2 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 Second Quarter Earnings Conference Call” conference ID# 83122689. A replay will be available after 8:00 p.m. eastern time on July 29, 2015, until midnight on August 5, 2015. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code # 83122689. The call will also be available for replay on SS&C’s website after July 29, 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 third 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 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 10,000 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 $44 trillion in assets. SS&C’s technology and services helps firms minimize risk, work together seamlessly, and discover new opportunities in a constantly evolving world.


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


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,     June 30,     June 30,     June 30,  
     2015     2014     2015     2014  

Revenues:

        

Software-enabled services

   $ 150,123      $ 145,547      $ 303,690      $ 290,930   

Software licenses

     16,090        9,866        23,416        17,365   

Maintenance

     35,836        25,691        71,554        51,217   

Professional services

     10,719        7,618        19,843        15,020   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     212,768        188,722        418,503        374,532   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenues:

        

Software-enabled services

     88,548        86,040        177,150        171,731   

Software licenses

     1,390        806        2,780        1,657   

Maintenance

     11,969        10,077        25,770        20,008   

Professional services

     7,596        5,310        16,110        10,336   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

     109,503        102,233        221,810        203,732   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     103,265        86,489        196,693        170,800   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Selling and marketing

     13,931        12,203        27,318        24,101   

Research and development

     17,520        13,939        37,128        27,526   

General and administrative

     13,463        14,958        30,763        26,759   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     44,914        41,100        95,209        78,386   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     58,351        45,389        101,484        92,414   

Interest expense, net

     (5,419     (6,569     (11,019     (13,667

Other (expense) income, net

     (164     (59     (1,671     (745
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     52,768        38,761        88,794        78,002   

Provision for income taxes

     13,640        11,516        23,420        24,309   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 39,128      $ 27,245      $ 65,374      $ 53,693   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share

   $ 0.46      $ 0.33      $ 0.77      $ 0.65   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic weighted average number of common shares outstanding

     85,405        83,118        84,837        82,921   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per share

   $ 0.44      $ 0.31      $ 0.73      $ 0.62   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted weighted average number of common and common equivalent shares outstanding

     89,552        87,091        88,987        86,999   
  

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Condensed Consolidated Financial Information.


SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

     June 30,      December 31,  
     2015      2014  

ASSETS

     

Current assets:

     

Cash and cash equivalents

   $ 729,808       $ 109,577   

Accounts receivable, net

     94,733         94,359   

Prepaid income taxes

     5,090         11,857   

Deferred income taxes

     2,857         2,975   

Prepaid expenses and other current assets

     13,789         14,927   

Restricted cash

     1,478         1,477   
  

 

 

    

 

 

 

Total current assets

     847,755         235,172   

Property and equipment, net

     51,324         54,277   

Deferred income taxes

     1,892         1,135   

Goodwill

     1,558,785         1,573,227   

Intangible and other assets, net

     376,615         421,511   
  

 

 

    

 

 

 

Total assets

   $ 2,836,371       $ 2,285,322   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Current portion of long-term debt

   $ 17,224       $ 20,470   

Accounts payable

     8,659         12,004   

Income taxes payable

     —           1,116   

Accrued employee compensation and benefits

     28,030         53,975   

Deferred income taxes

     —           110   

Other accrued expenses

     29,504         30,666   

Deferred maintenance and other revenue

     67,280         73,254   
  

 

 

    

 

 

 

Total current liabilities

     150,697         191,595   

Long-term debt, net of current portion

     448,382         618,435   

Other long-term liabilities

     25,086         26,446   

Deferred income taxes

     94,692         102,176   
  

 

 

    

 

 

 

Total liabilities

     718,857         938,652   

Total stockholders’ equity

     2,117,514         1,346,670   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 2,836,371       $ 2,285,322   
  

 

 

    

 

 

 

See Notes to Condensed Consolidated Financial Information.


SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

     Six Months Ended  
     June 30,     June 30,  
     2015     2014  

Cash flow from operating activities:

    

Net income

   $ 65,374      $ 53,693   

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

    

Depreciation and amortization

     52,103        49,832   

Stock-based compensation expense

     8,314        5,770   

Income tax benefit related to exercise of stock options

     (5,065     (8,235

Amortization of loan origination costs

     2,874        2,956   

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

     209        698   

Deferred income taxes

     (7,395     (5,550

Provision for doubtful accounts

     299        473   

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

    

Accounts receivable

     (1,804     1,532   

Prepaid expenses and other assets

     2,488        (1,403

Accounts payable

     (2,405     789   

Accrued expenses

     (20,186     (15,507

Income taxes prepaid and payable

     11,064        13,250   

Deferred maintenance and other revenue

     (5,148     (5,478
  

 

 

   

 

 

 

Net cash provided by operating activities

     100,722        92,820   
  

 

 

   

 

 

 

Cash flow from investing activities:

    

Additions to property and equipment

     (5,750     (9,460

Proceeds from sale of property and equipment

     —          1   

Cash paid for business acquisitions, net of cash acquired

     (7,863     —     

Additions to capitalized software

     (1,792     (1,704

Net changes in restricted cash

     —          983   
  

 

 

   

 

 

 

Net cash used in investing activities

     (15,405     (10,180
  

 

 

   

 

 

 

Cash flow from financing activities:

    

Repayments of debt

     (174,000     (107,000

Proceeds from exercise of stock options

     8,735        12,337   

Proceeds from common stock issuance, net

     717,866        —     

Income tax benefit related to exercise of stock options

     5,065        8,235   

Payment of fees related to refinancing activities

     —          (512

Purchase of common stock for treasury

     —          (7,386

Dividends paid on common stock

     (21,101     —     
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     536,565        (94,326
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

     (1,651     736   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     620,231        (10,950

Cash, beginning of period

     109,577        84,470   
  

 

 

   

 

 

 

Cash, end of period

   $ 729,808      $ 73,520   
  

 

 

   

 

 

 

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
June 30,
     Six Months Ended
June 30,
 
(in thousands)    2015      2014      2015      2014  

Revenue

   $ 212,768       $ 188,722       $ 418,503       $ 374,532   

Purchase accounting adjustments to deferred revenue

     302         —           699         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted revenue

   $ 213,070       $ 188,722       $ 419,202       $ 374,532   
  

 

 

    

 

 

    

 

 

    

 

 

 

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)    2015      2014      2015      2014  

Operating income

   $ 58,351       $ 45,389       $ 101,484       $ 92,414   

Amortization of intangible assets

     22,312         21,285         44,493         42,611   

Stock-based compensation

     4,208         2,795         8,314         5,770   

Capital-based taxes

     (636      —           (636      6   

Unusual or non-recurring charges

     994         4,511         8,579         5,839   

Purchase accounting adjustments

     302         —           699         (27
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted operating income

   $ 85,531       $ 73,980       $ 162,933       $ 146,613   
  

 

 

    

 

 

    

 

 

    

 

 

 

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
June 30,
     Six Months Ended
June 30,
   

Twelve Months
Ended

June 30,

 
(in thousands)    2015     2014      2015     2014     2015  

Net income

   $ 39,128      $ 27,245       $ 65,374      $ 53,693      $ 142,808   

Interest expense, net

     5,419        6,569         11,019        13,667        22,824   

Taxes

     13,640        11,516         23,420        24,309        45,638   

Depreciation and amortization

     26,107        24,896         52,103        49,832        102,102   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

EBITDA

     84,294        70,226         151,916        141,501        313,372   

Stock-based compensation

     4,208        2,795         8,314        5,770        14,027   

Capital-based taxes

     (636     —           (636     6        (636

Unusual or non-recurring charges

     1,158        4,570         10,250        6,584        8,542   

Acquired EBITDA and cost savings

     389        —           2,156        —          19,645   

Purchase accounting adjustments

     302        —           699        (27     1,202   

Other

     47        132         142        83        374   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Consolidated EBITDA

     89,762        77,723         172,841        153,917        356,526   

Less: acquired EBITDA

     (389     —           (2,156     —          (19,645
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Adjusted Consolidated EBITDA

   $ 89,373      $ 77,723       $ 170,685      $ 153,917      $ 336,881   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

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)    2015     2014     2015     2014  

GAAP – Net income

   $ 39,128      $ 27,245      $ 65,374      $ 53,693   

Plus: Amortization of intangible assets

     22,312        21,285        44,493        42,611   

Plus: Amortization of deferred financing costs and original issue discount

     1,439        1,436        2,874        2,956   

Plus: Stock-based compensation

     4,208        2,795        8,314        5,770   

Plus: Capital-based taxes

     (636     —          (636     6   

Plus: Unusual and non-recurring items

     1,158        4,570        10,250        6,584   

Plus: Purchase accounting adjustments

     302        —          699        (27

Income tax effect (1)

     (9,194     (7,761     (19,920     (13,743
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 58,717      $ 49,570      $ 111,448      $ 97,850   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted diluted earnings per share

   $ 0.66      $ 0.57      $ 1.25      $ 1.12   

GAAP diluted earnings per share

   $ 0.44      $ 0.31      $ 0.73      $ 0.62   

Diluted weighted-average shares outstanding

     89,552        87,091        88,987        86,999   

 

(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.