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8-K - FORM 8-K - SS&C Technologies Holdings Incd221241d8k.htm

Exhibit 99.1

 

LOGO

Q2 GAAP revenue $373.1 million, Fully Diluted GAAP Earnings Per share $0.14,

Adjusted revenue $384.4 million, Adjusted Diluted Earnings Per Share $0.39

WINDSOR, CT, July 27,2016 (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 second quarter ended June 30, 2016.

GAAP Results

SS&C reported GAAP revenue of $373.1 million for the second quarter of 2016, compared to $212.8 million in the second quarter of 2015, a 75.3 percent increase. GAAP operating income for the second quarter of 2016 was $66.0 million, or 17.7 percent of revenue. This represents a 13.2 percent increase compared to $58.4 million, or 27.4 percent of revenue, in 2015’s second quarter. GAAP net income for the second quarter of 2016 was $28.2 million compared to $39.1 million in the second quarter of 2015, a 27.9 percent decrease. On a fully diluted GAAP basis, earnings per share in the second quarter of 2016 were $0.14.

Adjusted Non-GAAP Results (defined in Notes 1-4 below)

Adjusted revenue in the second quarter of 2016 was $384.4 million, up 80.4 percent compared to $213.1 million in the second quarter of 2015. Adjusted operating income in the second quarter of 2016 was $140.5 million, or 36.6 percent of adjusted revenue. This represents a 64.3 percent increase compared to adjusted operating income of $85.5 million, or 40.1 percent of adjusted revenue, in the second quarter of 2015.

Adjusted net income for the second quarter of 2016 was $79.4 million, up 35.3 percent compared to $58.7 million in 2015’s second quarter. Adjusted diluted earnings per share in the second quarter of 2016 were $0.39 per share, up 18.2 percent compared to $0.33 per share in the second quarter of 2015.

Highlights:

 

    SS&C adjusted revenue for Q2 2016 was $384.4 million, our 13th straight quarter with record adjusted revenue.

 

    Second quarter R&D spend contributed to new releases of SS&C’s CAMRA, Global Wealth Platform, Black Diamond, and SS&C Geneva, SS&C APX, SS&C Moxy, and SS&C TradeEx products.

 

    SS&C paid off $125.5 million in debt in Q2 2016, and $415.3 million since acquiring Advent one year ago.

 

    Our net debt to adjusted consolidated EBITDA leverage ratio has been reduced to 4.36x.

“SS&C once again delivers record adjusted revenues of $384.4 million for the second quarter of 2016, and we grew our adjusted consolidated EBITDA 65.0 percent to a record $147.5 million,” says Bill Stone, Chairman and Chief Executive Officer. “After a full quarter of ownership, the Citi Alternative Investor Services group is adjusting nicely into SS&C’s fast-paced, sales-oriented culture. Great strides have already been made in the integration, including a significant upgrade of the Geneva Platform, and a revitalized focus on top line growth.”


Annual Run Rate Basis

Annual Run Rate Basis (ARRB) recurring revenue, defined as adjusted recurring revenue on an annualized basis, was $1,424.3 million based on adjusted recurring revenue $356.1 million for the second quarter of 2016. This represents an increase of 88.0 percent from $189.4 million and $757.6 million run-rate in the same period in 2015 and an increase of 12.8 percent from $315.7 million for the first quarter of 2016, an annual run rate of $1,262.9 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Operating Cash Flow

SS&C generated net cash from operating activities of $139.3 million for the six months ended June 30, 2016, compared to $100.7 million for the same period in 2015, representing a 38.3 percent increase. SS&C ended the quarter with $95.2 million in cash and cash equivalents, and $2,664.7 million in gross debt, for a net debt balance of $2,569.5 million. SS&C’s leverage ratio as defined in our credit agreement stood at 4.36 times consolidated EBITDA as of June 30, 2016.

Guidance

 

     Q3 2016      FY 2016  

Adjusted Revenue ($M)

   $ 388.0 – $394.0       $ 1,511.0 – $1,524.0   

Adjusted Net Income ($M)

   $ 82.5 – $85.0       $ 326.0 – $334.0   

Cash from Operating Activities ($M)

     —         $ 380.0 – $395.0   

Capital Expenditures (% of revenue)

     —           2.5% – 2.8%   

Diluted Shares (M)

     206.0 – 206.4         205.2 – 205.9   

Effective Income Tax Rate (%)

     —           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 2016 earnings call will take place at 5:00 p.m. eastern time today, July 27, 2016. The call will discuss Q2 2016 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 Second Quarter 2016 Conference Call”; conference ID#46494657. A replay will be available after 8:00 p.m. eastern time on July 27, 2016, until midnight on August 3, 2016. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code #46494657. The call will also be available for replay on SS&C’s website after July 27, 2016; 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 2016 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.

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: InvestorRelations@sscinc.com


SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operation

(in thousands, except per share data)

(unaudited)

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2016     2015     2016     2015  

Revenues:

        

Software-enabled services

   $ 244,672      $ 150,123      $ 450,319      $ 303,690   

Maintenance and term licenses

     103,392        38,978        198,512        78,952   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total recurring revenues

     348,064        189,101        648,831        382,642   
  

 

 

   

 

 

   

 

 

   

 

 

 

Perpetual licenses

     5,039        12,948        10,254        16,018   

Professional services

     19,974        10,719        38,123        19,843   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-recurring revenues

     25,013        23,667        48,377        35,861   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     373,077        212,768        697,208        418,503   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenues:

        

Software-enabled services

     146,243        88,548        259,971        177,150   

Maintenance and term licenses

     46,460        12,338        93,406        26,505   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total recurring cost of revenues

     192,703        100,886        353,377        203,655   
  

 

 

   

 

 

   

 

 

   

 

 

 

Perpetual licenses

     643        1,021        1,141        2,045   

Professional services

     17,133        7,596        32,645        16,110   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-recurring cost of revenues

     17,776        8,617        33,786        18,155   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

     210,479        109,503        387,163        221,810   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     162,598        103,265        310,045        196,693   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Selling and marketing

     28,535        13,931        58,396        27,318   

Research and development

     40,827        17,520        77,274        37,128   

General and administrative

     27,199        13,463        57,894        30,763   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     96,561        44,914        193,564        95,209   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     66,037        58,351        116,481        101,484   

Interest expense, net

     (32,846     (5,419     (65,935     (11,019

Other income (expense), net

     12        (164     (1,835     (1,671
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     33,203        52,768        48,711        88,794   

Provision for income taxes

     4,982        13,640        13,485        23,420   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 28,221      $ 39,128      $ 35,226      $ 65,374   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share

   $ 0.14      $ 0.23      $ 0.18      $ 0.39   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic weighted average number of common shares outstanding

     198,765        170,810        198,143        169,674   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per share

   $ 0.14      $ 0.22      $ 0.17      $ 0.37   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted weighted average number of common and common equivalent shares outstanding

     204,916        179,104        204,596        177,974   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 28,221      $ 39,128      $ 35,226      $ 65,374   

Other comprehensive (loss) income, net of tax:

        

Foreign currency exchange translation adjustment

     (26,793     22,808        (17,472     (13,411
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive (loss) income, net of tax

     (26,793     22,808        (17,472     (13,411
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 1,428      $ 61,936      $ 17,754      $ 51,963   
  

 

 

   

 

 

   

 

 

   

 

 

 

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,  
     2016      2015  

ASSETS

     

Current assets:

     

Cash and cash equivalents

   $ 95,222       $ 434,159   

Accounts receivable, net

     239,428         169,951   

Prepaid expenses and other current assets

     32,598         27,511   

Prepaid income taxes

     39,319         40,627   

Restricted cash

     2,818         2,818   
  

 

 

    

 

 

 

Total current assets

     409,385         675,066   

Property, plant and equipment, net

     69,557         67,143   

Deferred income taxes

     2,018         2,199   

Goodwill

     3,636,495         3,549,212   

Intangible and other assets, net

     1,571,384         1,508,622   
  

 

 

    

 

 

 

Total assets

   $ 5,688,839       $ 5,802,242   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Current portion of long-term debt

   $ 30,878       $ 32,281   

Accounts payable

     20,033         11,957   

Income taxes payable

     —           1,428   

Accrued employee compensation and benefits

     55,836         83,894   

Interest payable

     22,386         28,903   

Other accrued expenses

     45,964         36,231   

Deferred revenue

     238,785         222,024   
  

 

 

    

 

 

 

Total current liabilities

     413,882         416,718   

Long-term debt, net of current portion

     2,569,971         2,719,070   

Other long-term liabilities

     61,915         51,434   

Deferred income taxes

     478,641         509,574   
  

 

 

    

 

 

 

Total liabilities

     3,524,409         3,696,796   

Total stockholders’ equity

     2,164,430         2,105,446   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 5,688,839       $ 5,802,242   
  

 

 

    

 

 

 

See Notes to Condensed Consolidated Financial Information.


SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

     For the Six Months Ended June 30,  
     2016     2015  

Cash flow from operating activities:

    

Net income

   $ 35,226      $ 65,374   

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

    

Depreciation and amortization

     113,440        52,103   

Stock-based compensation expense

     27,913        8,314   

Income tax benefit related to exercise of stock options

     (23,760     (5,065

Amortization and write-offs of loan origination costs

     5,312        2,874   

Loss on sale or disposition of property and equipment

     150        209   

Deferred income taxes

     (24,056     (7,395

Provision for doubtful accounts

     1,257        299   

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

    

Accounts receivable

     (13,458     (1,804

Prepaid expenses and other assets

     (1,516     2,488   

Accounts payable

     7,870        (2,405

Accrued expenses

     (25,851     (20,186

Income taxes prepaid and payable

     23,757        11,064   

Deferred revenue

     13,052        (5,148
  

 

 

   

 

 

 

Net cash provided by operating activities

     139,336        100,722   
  

 

 

   

 

 

 

Cash flow from investing activities:

    

Additions to property and equipment

     (13,593     (5,750

Proceeds from sale of property and equipment

     43        —     

Cash paid for business acquisitions, net of cash acquired

     (317,554     (7,863

Additions to capitalized software

     (3,306     (1,792

Purchase of long-term investment

     (1,000     —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (335,410     (15,405
  

 

 

   

 

 

 

Cash flow from financing activities:

    

Repayments of debt

     (155,325     (174,000

Proceeds from exercise of stock options

     19,212        8,735   

Withholding taxes related to equity award net share settlement

     (4,615     —     

Income tax benefit related to exercise of stock options

     23,760        5,065   

Proceeds from common stock issuance, net

     —          717,866   

Purchase of common stock for treasury

     (10     —     

Payment of fees related to refinancing activities

     (223     —     

Dividends paid on common stock

     (24,790     (21,101
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (141,991     536,565   
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (872     (1,651
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (338,937     620,231   

Cash and cash equivalents, beginning of period

     434,159        109,577   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 95,222      $ 729,808   
  

 

 

   

 

 

 

See Notes to Condensed Consolidated Financial Information.


SS&C Technologies Holdings, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Information

Note 1. Reconciliation of Revenues to Adjusted Revenues

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

 

     Three Months Ended June 30,      Six Months Ended June 30,  
(in thousands)    2016      2015      2016      2015  

Revenues

   $ 373,077       $ 212,768       $ 697,208       $ 418,503   

Purchase accounting adjustments to deferred revenue

     11,335         302         30,318         699   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted revenues

   $ 384,412       $ 213,070       $ 727,526       $ 419,202   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following is a breakdown of recurring and non-recurring revenues and adjusted recurring and non-recurring revenues.

 

     Three Months Ended June 30,      Six Months Ended June 30,  
(in thousands)    2016      2015      2016      2015  

Software-enabled services

   $ 244,672       $ 150,123       $ 450,319       $ 303,690   

Maintenance and term licenses

     103,392         38,978         198,512         78,952   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total recurring revenues

     348,064         189,101         648,831         382,642   
  

 

 

    

 

 

    

 

 

    

 

 

 

Perpetual licenses

     5,039         12,948         10,254         16,018   

Professional services

     19,974         10,719         38,123         19,843   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total non-recurring revenues

     25,013         23,667         48,377         35,861   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

   $ 373,077       $ 212,768       $ 697,208       $ 418,503   
  

 

 

    

 

 

    

 

 

    

 

 

 

Software-enabled services

   $ 244,763       $ 150,123       $ 450,549       $ 303,690   

Maintenance and term licenses

     111,324         39,280         221,274         79,651   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total adjusted recurring revenues

     356,087         189,403         671,823         383,341   
  

 

 

    

 

 

    

 

 

    

 

 

 

Perpetual licenses

     5,039         12,948         10,254         16,018   

Professional services

     23,286         10,719         45,449         19,843   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total adjusted non-recurring revenues

     28,325         23,667         55,703         35,861   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total adjusted revenues

   $ 384,412       $ 213,070       $ 727,526       $ 419,202   
  

 

 

    

 

 

    

 

 

    

 

 

 

Note 2. Reconciliation of Operating Income to Adjusted Operating Income

Adjusted operating income represents operating income adjusted for amortization of acquisition-related intangible assets, stock-based compensation, 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)    2016      2015      2016      2015  

Operating income

   $ 66,037       $ 58,351       $ 116,481       $ 101,484   

Amortization of intangible assets

     51,995         22,312         101,675         44,493   

Stock-based compensation

     12,566         4,208         27,913         8,314   

Capital-based taxes

     —           (636      472         (636

Unusual or non-recurring charges (1)

     1,301         994         4,919         8,579   

Purchase accounting adjustments (2)

     8,630         302         24,258         699   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted operating income

   $ 140,529       $ 85,531       $ 275,718       $ 162,933   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Unusual or non-recurring charges include proceeds from legal and other settlements, severance expenses, transaction costs and other one-time expenses, such as expenses associated with facilities consolidations and acquisitions.
(2) Purchase accounting adjustments include (a) an adjustment to increase revenues by the amount that would have been recognized if deferred revenue were not adjusted to fair value at the date of acquisitions and (b) an adjustment to increase personnel and commissions expense by the amount that would have been recognized if prepaid commissions and deferred personnel costs were not adjusted to fair value at the date of the acquisitions.


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 July 2015, 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)    2016     2015     2016     2015     2016  

Net income

   $ 28,221      $ 39,128      $ 35,226      $ 65,374      $ 12,714   

Interest expense, net

     32,846        5,419        65,935        11,019        162,690   

Income tax provision

     4,982        13,640        13,485        23,420        8,045   

Depreciation and amortization

     58,167        26,107        113,440        52,103        212,171   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     124,216        84,294        228,086        151,916        395,620   

Stock-based compensation

     12,566        4,208        27,913        8,314        63,678   

Capital-based taxes

     —          (636     472        (636     1,936   

Acquired EBITDA and cost savings (1)

     1,046        389        5,814        2,156        28,468   

Unusual or non-recurring charges (2)

     1,289        1,158        6,754        10,250        22,652   

Purchase accounting adjustments (3)

     8,630        302        24,258        699        73,486   

Other (4)

     769        47        1,553        142        2,940   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated EBITDA

   $ 148,516      $ 89,762      $ 294,850      $ 172,841      $ 588,780   

Less: acquired EBITDA

     (1,046     (389     (5,814     (2,156     (28,468
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Consolidated EBITDA

   $ 147,470      $ 89,373      $ 289,036      $ 170,685      $ 560,312   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Acquired EBITDA reflects the EBITDA impact of significant businesses that were acquired during the period as if the acquisition occurred at the beginning of the period, as well as cost savings enacted in connection with acquisitions.
(2) Unusual or non-recurring charges include foreign currency gains and losses, proceeds from legal and other settlements, severance expenses, transaction costs and other one-time expenses, such as expenses associated with the facilities consolidations, acquisitions and the sale of fixed assets.
(3) Purchase accounting adjustments include (a) an adjustment to increase revenues by the amount that would have been recognized if deferred revenue were not adjusted to fair value at the date of acquisitions and (b) an adjustment to increase personnel and commissions expense by the amount that would have been recognized if prepaid commissions and deferred personnel costs were not adjusted to fair value at the date of the acquisitions.
(4) Other includes the non-cash portion of straight-line rent expense.

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, other unusual and non-recurring items, purchase accounting adjustments, and loss on extinguishment of debt 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)    2016     2015     2016     2015  

GAAP – Net income

   $ 28,221      $ 39,128      $ 35,226      $ 65,374   

Plus: Amortization of intangible assets

     51,995        22,312        101,675        44,493   

Plus: Amortization of deferred financing costs and original issue discount

     2,659        1,439        5,312        2,874   

Plus: Stock-based compensation

     12,566        4,208        27,913        8,314   

Plus: Capital-based taxes

     —          (636     472        (636

Plus: Unusual and non-recurring items (1)

     1,289        1,158        6,754        10,250   

Plus: Purchase accounting adjustments (2)

     8,630        302        24,258        699   

Income tax effect (3)

     (25,914     (9,194     (46,742     (19,920
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 79,446      $ 58,717      $ 154,868      $ 111,448   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted diluted earnings per share

   $ 0.39      $ 0.33      $ 0.76      $ 0.63   

GAAP diluted earnings per share

   $ 0.14      $ 0.22      $ 0.17      $ 0.37   

Diluted weighted-average shares outstanding

     204,916        179,104        204,596        177,974   

 

(1) Unusual or non-recurring charges include foreign currency gains and losses, proceeds from legal and other settlements, severance expenses, transaction costs and other one-time expenses, such as expenses associated with the facilities consolidations, acquisitions and the sale of fixed assets.
(2) Purchase accounting adjustments include (a) an adjustment to increase revenues by the amount that would have been recognized if deferred revenue were not adjusted to fair value at the date of acquisitions and (b) an adjustment to increase personnel and commissions expense by the amount that would have been recognized if prepaid commissions and deferred personnel costs were not adjusted to fair value at the date of the acquisitions.
(3) 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.