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8-K - 8-K - SS&C Technologies Holdings Incssnc-8k_20180215.htm

Exhibit 99.1

Q4 2017 GAAP revenue $438.4 million, up 9.3 percent, Fully Diluted GAAP Earnings Per Share $0.77, up 175.0 percent

Adjusted revenue $439.4 million, up 8.6 percent, Adjusted Diluted Earnings Per Share $0.54, up 17.4 percent

 

WINDSOR, CT, February 15, 2018 (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 fourth quarter and full year ended December 31, 2017.

GAAP Results

SS&C reported GAAP revenue of $438.4 million for the fourth quarter of 2017, up 9.3 percent compared to $400.9 million in the fourth quarter of 2016. GAAP revenue for the year ended December 31, 2017 was $1,675.3 million, increasing 13.1percent from $1,481.4 million in 2016.  GAAP operating income for the fourth quarter of 2017 was $113.3 million, or 25.8 percent of GAAP revenue, compared to $95.3 million, or 23.8 percent of GAAP revenue, in 2016’s fourth quarter, representing an 18.9 percent increase. GAAP operating income for the year ended December 31, 2017 was $396.9 million, or 23.7 percent of GAAP revenue, compared to $288.7 million, or 19.5 percent of GAAP revenue, for 2016, representing a 37.5 percent increase.

GAAP net income for the fourth quarter of 2017 was $165.3 million, up 190.0 percent compared to $57.0 million in 2016’s fourth quarter. GAAP net income for the year ended December 31, 2017 was $328.9 million, up 151.0 percent compared to $131.0 million in 2016.  On a fully diluted GAAP basis, earnings per share in the fourth quarter of 2017 were $0.77 per share, up 175.0 percent compared to $0.28 per share on a fully diluted GAAP basis in the fourth quarter of 2016.  On a fully diluted GAAP basis, earnings per share for the year ended December 31, 2017 were $1.55, up 142.2 percent from 2016’s $0.64 per share.

Net income for the fourth quarter of fiscal year 2017 includes a benefit for the estimated impact from the enactment of the Tax Cuts and Jobs Act in December 2017 related to the transition tax on accumulated overseas profits and the revaluation of our U.S. deferred tax assets and liabilities, resulting in a net total tax benefit of $88.0 million. The impacts of U.S. tax reform may differ from this estimate, and the estimated charges may accordingly be adjusted over the course of 2018.

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

Adjusted revenue was $439.4 million for the fourth quarter of 2017, up 8.6 percent compared to $404.6 million in the fourth quarter of 2016. Adjusted revenue for the year ended December 31, 2017 was $1,682.5 million, increasing 10.4% from $1,524.0 million in 2016.  Adjusted operating income for the fourth quarter of 2017 was $182.4 million, or 41.5 percent of adjusted revenue, compared to $160.4 million, or 39.6 percent of adjusted revenue, in 2016’s fourth quarter, representing a 13.7 percent increase. Adjusted operating income for the year ended December 31, 2017 was $665.3 million, or 39.5 percent of adjusted revenue, compared to $586.6 million, or 38.5 percent of adjusted revenue, for 2016, representing a 13.4 percent increase.

Adjusted net income for the fourth quarter of 2017 was $114.5 million, up 20.3 percent compared to $95.2 million in 2016’s fourth quarter. Adjusted net income for the year ended December 31, 2017 was $409.2 million, up 21.2 percent compared to $337.5 million in 2016.  Adjusted diluted earnings per share in the fourth quarter of 2017 were $0.54 per share, up 17.4 percent compared to $0.46 per share in the fourth quarter of 2016. Adjusted diluted earnings per share for the year ended December 31, 2017 were $1.93, up 17.7 percent from 2016’s $1.64 per share.

Fourth Quarter Highlights:

 

Adjusted diluted earnings per share were $0.54 for Q4 2017, increasing 17.4 percent from Q4 2016’s $0.46 adjusted diluted earnings per share.


 

Adjusted consolidated EBITDA increased 14.7 percent to $191.3 million in Q4 2017. Adjusted consolidated EBITDA margin was 43.5 percent for the quarter.

 

For the year ended December 31, 2017, net cash provided by operating activities was $470.4 million, an increase of 12.4 percent.

 

SS&C paid off $467.5 million of debt during the year ended December 31, 2017, bringing our net debt to consolidated EBITDA leverage ratio to 2.90x.

 

SS&C entered into a definitive agreement to acquire DST Systems and is expected to close in Q2 or Q3 2018.

“SS&C had a strong fourth quarter in both revenue and earnings.  Our growth came on the back of robust sales, completed implementations, and large new clients moving to full run-rate revenue.  We also continued delivering acquisition synergies,” says Bill Stone, Chairman and Chief Executive Officer of SS&C Technologies. “We are pleased with the fourth quarter and now look forward to capitalizing on new products and services, and opportunities at DST.”

Annual Run Rate Basis

Annual Run Rate Basis (ARRB) recurring revenue, defined as adjusted recurring revenue on an annualized basis, was $1,638.4 million based on adjusted recurring revenue $409.6 million for the fourth quarter of 2017. This represents an increase of 11.2 percent from $1,473.8 million and $368.5 million run-rate in the same period in 2016 and an increase of 3.7 percent from an annual run rate of $1,580.1 million and $395.0 million for the third quarter of 2017. 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 $470.4 million for the twelve months ended December 31, 2017, compared to $418.4 million for the same period in 2016, representing a 12.4 percent increase.  SS&C ended the fourth quarter with $64.1 million in cash and cash equivalents and $2,092.2 million in gross debt, for a net debt balance of $2,028.1 million.  SS&C’s consolidated net leverage ratio as defined in our credit agreement stood at 2.90 times consolidated EBITDA as of December 31, 2017.

Guidance

 

 

 

Q1 2018

 

 

FY 2018

Adjusted Revenue ($M)

 

$427.0 – $437.0

 

 

$1,755.0 – $1,785.0

Adjusted Net Income ($M)

 

$113.0 – $117.5

 

 

$480.0 – $502.0

Cash from Operating Activities ($M)

 

 

 

 

$570.0 – $590.0

Capital Expenditures (% of revenue)

 

 

 

 

2.7% – 3.1%

Diluted Shares (M)

 

215.2 – 214.8

 

 

217.5 – 216.5

Effective Income Tax Rate (%)

 

 

23%

 

 

23%

 

SS&C does not provide reconciliations of guidance for Adjusted Revenues and Adjusted Net Income to comparable GAAP measures, in reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K. SS&C is unable, without unreasonable efforts, to forecast certain items required to develop meaningful comparable GAAP financial measures. These items include acquisition transactions and integration, foreign exchange rate changes, as well as other non-cash and other adjustments as defined under the Company’s Credit agreement, that are difficult to predict in advance in order to include in a GAAP estimate.

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 Q4 2017 and Full Year 2017 earnings call will take place at 5:00 p.m. eastern time today, February 15, 2018. The call will discuss Q4 2017 and Full Year 2017 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 Fourth Quarter and Full Year 2017 Conference Call”; conference ID #95952330. A replay will be available after 8:00 p.m. eastern time on February 15, 2018, until midnight on February 22, 2018. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code #95952330. The call will also be available for replay on SS&C’s website after February 15, 2018; access: http://investor.ssctech.com/results.cfm.


 

Certain information contained in this press release relating to, among other things, our financial guidance for the first quarter and full year of 2018 constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, expectations, intentions, projections, developments, future events, performance, underlying assumptions, and other statements that are other than statements of historical facts. Without limiting the foregoing, the words “believes”, “anticipates”, “plans”, “expects”, “estimates”, “projects”, “forecasts”, “may”, “assume”, “anticipates”, “intend”, “will”, “continue”, “opportunity”, “predict”, “potential”, “future”, “guarantee”, “likely”, “target”, “indicate”, “would”, “could” 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. Forward-looking statements speak only as of the date on which they are made and, except to the extent required by applicable securities laws, we undertake no obligation to update or revise any 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 11,000 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 Operations

(in thousands, except per share data)

(unaudited)

 

 

Three Months Ended December 31,

 

 

Twelve Months Ended December 31,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software-enabled services

 

$

282,905

 

 

$

257,700

 

 

$

1,114,008

 

 

$

956,791

 

Maintenance and term licenses

 

 

126,668

 

 

 

109,273

 

 

 

463,658

 

 

 

414,710

 

Total recurring revenues

 

 

409,573

 

 

 

366,973

 

 

 

1,577,666

 

 

 

1,371,501

 

Perpetual licenses

 

 

9,453

 

 

 

9,317

 

 

 

19,679

 

 

 

23,960

 

Professional services

 

 

19,339

 

 

 

24,634

 

 

 

77,950

 

 

 

85,975

 

Total non-recurring revenues

 

 

28,792

 

 

 

33,951

 

 

 

97,629

 

 

 

109,935

 

Total revenues

 

 

438,365

 

 

 

400,924

 

 

 

1,675,295

 

 

 

1,481,436

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software-enabled services

 

 

159,742

 

 

 

141,311

 

 

 

628,133

 

 

 

544,356

 

Maintenance and term licenses

 

 

47,237

 

 

 

45,298

 

 

 

188,164

 

 

 

184,162

 

Total recurring cost of revenues

 

 

206,979

 

 

 

186,609

 

 

 

816,297

 

 

 

728,518

 

Perpetual licenses

 

 

738

 

 

 

650

 

 

 

2,595

 

 

 

2,399

 

Professional services

 

 

17,755

 

 

 

18,040

 

 

 

67,533

 

 

 

69,572

 

Total non-recurring cost of revenues

 

 

18,493

 

 

 

18,690

 

 

 

70,128

 

 

 

71,971

 

Total cost of revenues

 

 

225,472

 

 

 

205,299

 

 

 

886,425

 

 

 

800,489

 

Gross profit

 

 

212,893

 

 

 

195,625

 

 

 

788,870

 

 

 

680,947

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

29,905

 

 

 

31,374

 

 

 

118,449

 

 

 

117,098

 

Research and development

 

 

38,430

 

 

 

37,714

 

 

 

153,334

 

 

 

152,689

 

General and administrative

 

 

31,264

 

 

 

31,226

 

 

 

120,174

 

 

 

122,465

 

Total operating expenses

 

 

99,599

 

 

 

100,314

 

 

 

391,957

 

 

 

392,252

 

Operating income

 

 

113,294

 

 

 

95,311

 

 

 

396,913

 

 

 

288,695

 

Interest expense, net

 

 

(25,908

)

 

 

(30,871

)

 

 

(107,473

)

 

 

(128,454

)

Other (expense) income, net

 

 

(681

)

 

 

2,555

 

 

 

(4,484

)

 

 

3,375

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

(2,326

)

 

 

 

Income before income taxes

 

 

86,705

 

 

 

66,995

 

 

 

282,630

 

 

 

163,616

 

(Benefit) provision for income taxes

 

 

(78,634

)

 

 

9,972

 

 

 

(46,234

)

 

 

32,620

 

Net income

 

$

165,339

 

 

$

57,023

 

 

$

328,864

 

 

$

130,996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.80

 

 

$

0.28

 

 

$

1.60

 

 

$

0.65

 

Diluted earnings per share

 

$

0.77

 

 

$

0.28

 

 

$

1.55

 

 

$

0.64

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average number of common shares outstanding

 

 

206,162

 

 

 

202,895

 

 

 

204,923

 

 

 

200,252

 

Diluted weighted average number of common and common equivalent shares outstanding

 

 

213,858

 

 

 

207,207

 

 

 

211,632

 

 

 

205,793

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared and paid per common share

 

$

0.07

 

 

$

0.0625

 

 

$

0.265

 

 

$

0.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

165,339

 

 

$

57,023

 

 

$

328,864

 

 

$

130,996

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency exchange translation adjustment

 

 

4,722

 

 

 

(26,371

)

 

 

56,418

 

 

 

(55,903

)

Total comprehensive income (loss), net of tax

 

 

4,722

 

 

 

(26,371

)

 

 

56,418

 

 

 

(55,903

)

Comprehensive income

 

$

170,061

 

 

$

30,652

 

 

$

385,282

 

 

$

75,093

 

See Notes to Condensed Consolidated Financial Information.



SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

64,057

 

 

$

117,558

 

Accounts receivable, net

 

 

243,900

 

 

 

241,307

 

Prepaid expenses and other current assets

 

 

38,742

 

 

 

31,119

 

Prepaid income taxes

 

 

12,166

 

 

 

23,012

 

Restricted cash

 

 

592

 

 

 

2,116

 

Total current assets

 

 

359,457

 

 

 

415,112

 

Property, plant and equipment, net

 

 

100,956

 

 

 

80,395

 

Deferred income taxes

 

 

2,324

 

 

 

2,410

 

Goodwill

 

 

3,707,823

 

 

 

3,652,733

 

Intangible and other assets, net

 

 

1,368,956

 

 

 

1,556,321

 

Total assets

 

$

5,539,516

 

 

$

5,706,971

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

37,863

 

 

$

126,144

 

Accounts payable

 

 

27,087

 

 

 

16,490

 

Income taxes payable

 

 

6,031

 

 

 

3,473

 

Accrued employee compensation and benefits

 

 

96,016

 

 

 

104,118

 

Interest payable

 

 

16,425

 

 

 

21,470

 

Other accrued expenses

 

 

55,637

 

 

 

53,708

 

Deferred revenue

 

 

204,601

 

 

 

235,222

 

Total current liabilities

 

 

443,660

 

 

 

560,625

 

Long-term debt, net of current portion

 

 

2,007,332

 

 

 

2,374,986

 

Other long-term liabilities

 

 

118,679

 

 

 

59,227

 

Deferred income taxes

 

 

283,457

 

 

 

453,555

 

Total liabilities

 

 

2,853,128

 

 

 

3,448,393

 

Total stockholders’ equity

 

 

2,686,388

 

 

 

2,258,578

 

Total liabilities and stockholders’ equity

 

$

5,539,516

 

 

$

5,706,971

 

See Notes to Condensed Consolidated Financial Information.


SS&C Technologies Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

328,864

 

 

$

130,996

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

237,189

 

 

 

228,683

 

Stock-based compensation expense

 

 

41,487

 

 

 

50,564

 

Income tax benefit related to exercise of stock options

 

 

 

 

 

(46,207

)

Amortization and write-offs of loan origination costs

 

 

10,552

 

 

 

10,680

 

Loss on extinguishment of debt

 

 

963

 

 

 

 

Loss on sale or disposition of property and equipment

 

 

901

 

 

 

162

 

Deferred income taxes

 

 

(152,012

)

 

 

(47,836

)

Provision for doubtful accounts

 

 

2,411

 

 

 

3,486

 

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

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(1,848

)

 

 

(10,850

)

Prepaid expenses and other assets

 

 

(7,342

)

 

 

(2,844

)

Accounts payable

 

 

13,841

 

 

 

(1,300

)

Accrued expenses

 

 

(14,806

)

 

 

20,679

 

Income taxes prepaid and payable

 

 

45,640

 

 

 

65,117

 

Deferred revenue

 

 

(35,478

)

 

 

17,077

 

Net cash provided by operating activities

 

 

470,362

 

 

 

418,407

 

Cash flow from investing activities:

 

 

 

 

 

 

 

 

Additions to property and equipment

 

 

(35,570

)

 

 

(27,926

)

Proceeds from sale of property and equipment

 

 

4

 

 

 

71

 

Cash paid for business acquisitions, net of cash acquired

 

 

(17,413

)

 

 

(457,511

)

Additions to capitalized software

 

 

(10,404

)

 

 

(9,621

)

Purchase of long-term investment

 

 

 

 

 

(1,000

)

Net cash used in investing activities

 

 

(63,383

)

 

 

(495,987

)

Cash flow from financing activities:

 

 

 

 

 

 

 

 

Cash received from debt borrowings

 

 

45,000

 

 

 

120,000

 

Repayments of debt

 

 

(512,450

)

 

 

(383,436

)

Proceeds from exercise of stock options

 

 

60,219

 

 

 

39,239

 

Withholding taxes paid related to equity award net share settlement

 

 

(4,825

)

 

 

(7,430

)

Income tax benefit related to exercise of stock options

 

 

 

 

 

46,207

 

Purchase of common stock for treasury

 

 

 

 

 

(15

)

Payment of fees related to refinancing activities

 

 

 

 

 

(519

)

Dividends paid on common stock

 

 

(54,357

)

 

 

(50,140

)

Net cash used in financing activities

 

 

(466,413

)

 

 

(236,094

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

4,409

 

 

 

(3,629

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(55,025

)

 

 

(317,303

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

119,674

 

 

 

436,977

 

Cash, cash equivalents and restricted cash, end of period

 

$

64,649

 

 

$

119,674

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash activities:

 

 

 

 

 

 

 

 

Property and equipment acquired through tenant improvement allowances

 

$

10,334

 

 

$

2,818

 

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 are 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 December 31,

 

 

Twelve Months Ended December 31,

 

(in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenues

 

$

438,365

 

 

$

400,924

 

 

$

1,675,295

 

 

$

1,481,436

 

Purchase accounting adjustments to deferred revenue

 

 

991

 

 

 

3,723

 

 

 

7,232

 

 

 

42,603

 

Adjusted revenues

 

$

439,356

 

 

$

404,647

 

 

$

1,682,527

 

 

$

1,524,039

 

 

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

 

 

Three Months Ended December 31,

 

 

Twelve Months Ended December 31,

 

(in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Software-enabled services

 

$

282,905

 

 

$

257,700

 

 

$

1,114,008

 

 

$

956,791

 

Maintenance and term licenses

 

 

126,668

 

 

 

109,273

 

 

 

463,658

 

 

 

414,710

 

Total recurring revenues

 

 

409,573

 

 

 

366,973

 

 

 

1,577,666

 

 

 

1,371,501

 

Perpetual licenses

 

 

9,453

 

 

 

9,317

 

 

 

19,679

 

 

 

23,960

 

Professional services

 

 

19,339

 

 

 

24,634

 

 

 

77,950

 

 

 

85,975

 

Total non-recurring revenues

 

 

28,792

 

 

 

33,951

 

 

 

97,629

 

 

 

109,935

 

Total revenues

 

$

438,365

 

 

$

400,924

 

 

$

1,675,295

 

 

$

1,481,436

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software-enabled services

 

$

282,905

 

 

$

257,706

 

 

$

1,114,008

 

 

$

957,064

 

Maintenance and term licenses

 

 

126,689

 

 

 

110,744

 

 

 

465,271

 

 

 

443,545

 

Total adjusted recurring revenues

 

 

409,594

 

 

 

368,450

 

 

 

1,579,279

 

 

 

1,400,609

 

Perpetual licenses

 

 

9,453

 

 

 

9,317

 

 

 

19,679

 

 

 

23,960

 

Professional services

 

 

20,309

 

 

 

26,880

 

 

 

83,569

 

 

 

99,470

 

Total adjusted non-recurring revenues

 

 

29,762

 

 

 

36,197

 

 

 

103,248

 

 

 

123,430

 

Total adjusted revenues

 

$

439,356

 

 

$

404,647

 

 

$

1,682,527

 

 

$

1,524,039

 

 

Note 2. Reconciliation of Operating Income to Adjusted Operating Income

Adjusted operating income represents operating income adjusted for amortization of intangible assets, stock-based compensation, purchase accounting adjustments for deferred revenue and related costs 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 December 31,

 

 

Twelve Months Ended December 31,

 

(in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Operating income

 

$

113,294

 

 

$

95,311

 

 

$

396,913

 

 

$

288,695

 

Amortization of intangible assets

 

 

53,288

 

 

 

51,731

 

 

 

211,312

 

 

 

204,945

 

Stock-based compensation

 

 

9,915

 

 

 

10,162

 

 

 

41,487

 

 

 

50,564

 

Capital-based taxes

 

 

(686

)

 

 

10

 

 

 

314

 

 

 

1,482

 

Purchase accounting adjustments (1)

 

 

534

 

 

 

1,788

 

 

 

4,316

 

 

 

31,619

 

Other (2)

 

 

6,009

 

 

 

1,381

 

 

 

10,910

 

 

 

9,266

 

Adjusted operating income

 

$

182,354

 

 

$

160,383

 

 

$

665,252

 

 

$

586,571

 

 

(1)

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.

(2)

Other includes expenses and income that are permitted to be excluded per the terms of our Credit Agreement from Consolidated EBITDA, a financial measure used in calculating our covenant compliance. These include expenses and income related to currency transactions, facilities and workforce restructuring, legal settlements and business combinations, among other infrequently occurring transactions.

 

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, as amended, 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 December 31,

 

 

Twelve Months Ended December 31,

 

(in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net income

 

$

165,339

 

 

$

57,023

 

 

$

328,864

 

 

$

130,996

 

Interest expense, net

 

 

25,908

 

 

 

30,871

 

 

 

107,473

 

 

 

128,454

 

(Benefit) provision for income taxes

 

 

(78,634

)

 

 

9,972

 

 

 

(46,234

)

 

 

32,620

 

Depreciation and amortization

 

 

60,310

 

 

 

57,773

 

 

 

237,189

 

 

 

228,683

 

EBITDA

 

 

172,923

 

 

 

155,639

 

 

 

627,292

 

 

 

520,753

 

Stock-based compensation

 

 

9,915

 

 

 

10,162

 

 

 

41,487

 

 

 

50,564

 

Capital-based taxes

 

 

(686

)

 

 

10

 

 

 

314

 

 

 

1,482

 

Acquired EBITDA and cost savings (1)

 

 

37

 

 

 

726

 

 

 

4,541

 

 

 

9,094

 

Non-cash portion of straight-line rent expense

 

 

1,906

 

 

 

376

 

 

 

4,385

 

 

 

2,198

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

2,326

 

 

 

 

Purchase accounting adjustments (2)

 

 

534

 

 

 

1,788

 

 

 

4,316

 

 

 

31,619

 

Other (3)

 

 

6,690

 

 

 

(1,174

)

 

 

15,394

 

 

 

5,891

 

Consolidated EBITDA

 

$

191,319

 

 

$

167,527

 

 

$

700,055

 

 

$

621,601

 

Less:  acquired EBITDA

 

 

(37

)

 

 

(726

)

 

 

(4,541

)

 

 

(9,094

)

Adjusted Consolidated EBITDA

 

$

191,282

 

 

$

166,801

 

 

$

695,514

 

 

$

612,507

 

 

(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)

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)

Other includes expenses and income that are permitted to be excluded per the terms of our Credit Agreement from Consolidated EBITDA, a financial measure used in calculating our covenant compliance. These include expenses and income related to currency transactions, facilities and workforce restructuring, legal settlements and business combinations, among other infrequently occurring transactions.

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 December 31,

 

 

Twelve Months Ended December 31,

 

(in thousands, except per share data)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

GAAP – Net income

 

$

165,339

 

 

$

57,023

 

 

$

328,864

 

 

$

130,996

 

Plus: Amortization of intangible assets

 

 

53,288

 

 

 

51,731

 

 

 

211,312

 

 

 

204,945

 

Plus: Amortization of deferred financing costs and original issue discount

 

 

2,637

 

 

 

2,686

 

 

 

10,552

 

 

 

10,680

 

Plus: Stock-based compensation

 

 

9,915

 

 

 

10,162

 

 

 

41,487

 

 

 

50,564

 

Plus: Capital-based taxes

 

 

(686

)

 

 

10

 

 

 

314

 

 

 

1,482

 

Plus: Loss on extinguishment of debt

 

 

 

 

 

 

 

 

2,326

 

 

 

 

Plus: Purchase accounting adjustments (1)

 

 

534

 

 

 

1,788

 

 

 

4,316

 

 

 

31,619

 

Plus: Other (2)

 

 

6,690

 

 

 

(1,174

)

 

 

15,394

 

 

 

5,891

 

Income tax effect (3)

 

 

(123,177

)

 

 

(27,043

)

 

 

(205,367

)

 

 

(98,643

)

Adjusted net income

 

$

114,540

 

 

$

95,183

 

 

$

409,198

 

 

$

337,534

 

Adjusted diluted earnings per share

 

$

0.54

 

 

$

0.46

 

 

$

1.93

 

 

$

1.64

 

GAAP diluted earnings per share

 

$

0.77

 

 

$

0.28

 

 

$

1.55

 

 

$

0.64

 

Diluted weighted-average shares outstanding

 

 

213,858

 

 

 

207,207

 

 

 

211,632

 

 

 

205,793

 

 

(1)

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.

(2)

Other includes expenses and income that are permitted to be excluded per the terms of our Credit Agreement from Consolidated EBITDA, a financial measure used in calculating our covenant compliance. These include expenses and income related to currency transactions, facilities and workforce restructuring, legal settlements and business combinations, among other infrequently occurring transactions.

(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.