WINDSOR, Conn., Oct. 29, 2014 (GLOBE NEWSWIRE) -- SS&C Technologies Holdings, Inc. (Nasdaq:SSNC), a global provider of investment and financial software-enabled services and software, today announced its financial results for the quarter that ended September 30, 2014.
Financial Highlights:
- Record revenue of $192.6 million in the third quarter of 2014, representing an increase of 7.3 percent from the third quarter of 2013.
- Adjusted diluted EPS (defined below) increased to $0.61 in the third quarter of 2014, representing an increase of 17.3 percent from the third quarter of 2013.
- Net cash from operating activities of $164.3 million for the first nine months of 2014, representing a 6.5 percent increase from the same period in 2013.
- Paid down $174.0 million of debt in the first nine months of 2014, bringing our net debt to consolidated EBITDA leverage ratio to 1.71x at September 30, 2014.
"SS&C continues to perform and during Q3 we closed two large and complex fund administration deals – a testament to the dedication and persistence of our team. We continue to see momentum in Q4 and have already sold services to two of the world's largest asset managers this quarter, with significant cross-sell and up-sell potential," said Bill Stone, Chairman and CEO of SS&C Technologies. "We are building a considerable number of new software systems including: regulatory compliance, investor communications, REIT processing and powerful new features and functions in our portal and mobile applications. SS&C is aggressively hiring talented new employees at all levels and we are relentlessly focused on client satisfaction."
Results
SS&C reported GAAP revenue of $192.6 million for the third quarter of 2014, compared to $179.5 million in the third quarter of 2013, a 7.3 percent increase. GAAP operating income for the third quarter of 2014 was $54.4 million, or 28.2 percent of revenue. This represents an increase of 13.6 percent compared to $47.9 million, or 26.7 percent of revenue, in the third quarter of 2013. GAAP net income for the third quarter of 2014 was $40.8 million compared to $43.5 million in the third quarter of 2013, a 6.1 percent decrease. On a fully diluted GAAP basis, earnings per share in the third quarter of 2014 were $0.47.
Adjusted operating income (a non-GAAP measure defined in note 2 to the attached Condensed Consolidated Financial Information) in the third quarter of 2014 was $78.6 million, or 40.8 percent of revenue. This represents a 10.5 percent increase compared to $71.1 million, or 39.6 percent of revenue, in the third quarter of 2013. Adjusted net income (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) for the third quarter of 2014 was $53.3 million compared to $44.5 million in 2013's third quarter, a 19.8 percent increase. Adjusted diluted earnings per share (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) in the third quarter of 2014 were $0.61 compared to $0.52 in the third quarter of 2013, a 17.3 percent increase.
Operating Cash Flow
SS&C generated net cash from operating activities of $164.3 million for the nine months ended September 30, 2014, compared to $154.3 million for the same period in 2013, representing a 6.5 percent increase. SS&C ended the quarter with $75.1 million in cash, and $608.0 million in gross debt, for a net debt balance of $532.9 million. SS&C's leverage ratio as defined in our credit agreement stood at 1.71 times consolidated EBITDA as of September 30, 2014.
Annual Run Rate Basis
Annual Run Rate Basis (ARRB) recurring revenue, defined as the sum of maintenance and software-enabled services revenue for the quarter on an annualized basis, was $699.5 million based on maintenance and software-enabled services revenue of $174.9 million for the third quarter of 2014. This represents an increase of 6.4 percent from $164.3 million and $657.2 million annual run-rate in the same period in 2013 and an increase of 2.1 percent from $171.2 million for the second quarter of 2014, an annual run rate of $685.0 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.
Guidance
| Q4 2014 | FY 2014 | |
| Adjusted Revenue ($M) | $193.0 – $199.0 | N/A |
| Adjusted Net Income ($M) | $53.3 – $54.7 | N/A |
| Cash from Operating Activities ($M) | N/A | $225.0 – $235.0 |
| Capital Expenditures (% of revenue) | N/A | 2.3% – 2.6% |
| Diluted Shares (M) | 87.7 – 88.0 | 87.2 – 87.3 |
| Effective Income Tax Rate (%) | 28% | 28% |
Non-GAAP Financial Measures
Adjusted revenue, adjusted operating income, adjusted consolidated EBITDA, adjusted net income and adjusted diluted earnings per share are non-GAAP measures. See the accompanying notes to the attached Condensed Consolidated Financial Information for the reconciliations and definitions for each of these non-GAAP measures and the reasons our management believes these measures provide useful information to investors regarding our financial condition and results of operations.
Earnings Call and Press Release
SS&C's Q3 earnings call will take place at 5:00 p.m. eastern time today, October 29, 2014. The call will discuss Q3 2014 results and our guidance and business outlook. Interested parties may dial 877-312-8798 (US and Canada) or 253-237-1193 (International), and request the "SS&C Technologies 2014 Third Quarter Earnings Conference Call" conference ID #17314836. A replay will be available after 8:00 p.m. eastern time on October 29, 2014, until midnight on November 4, 2014. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code #17314836. The call will also be available for replay on SS&C's website after October 29, 2014; access: http://investor.ssctech.com/results.cfm.
Certain information contained in this press release relating to, among other things, our financial guidance for the fourth quarter and full year of 2014, constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Without limiting the foregoing, the words "believes", "anticipates", "plans", "expects", "estimates", "projects", "forecasts", "may" and "should" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words. Such statements reflect management's best judgment based on factors currently known but are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such risks and uncertainties include, but are not limited to, the state of the economy and the financial services industry, the Company's ability to finalize large client contracts, fluctuations in customer demand for the Company's products and services, intensity of competition from application vendors, delays in product development, the Company's ability to control expenses, terrorist activities, exposure to litigation, the Company's ability to integrate acquired businesses, the effect of the acquisitions on customer demand for the Company's products and services, the market price of the Company's stock prevailing from time to time, the Company's cash flow from operations, general economic conditions, and those risks discussed in the "Risk Factors" section of the Company's most recent Annual Report on Form 10-K, which is on file with the Securities and Exchange Commission and can also be accessed on our website. The Company cautions investors that it may not update any or all of the foregoing forward-looking statements.
About SS&C Technologies
SS&C is a global provider of investment and financial software-enabled services and software focused exclusively on the global financial services industry. Founded in 1986, SS&C has its headquarters in Windsor, Connecticut and offices around the world. Some 6,900 financial services organizations, from the world's largest institutions to local firms, manage and account for their investments using SS&C's products and services. These clients in the aggregate manage over $26 trillion in assets.
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| SS&C Technologies Holdings, Inc. and Subsidiaries | ||||
| Condensed Consolidated Statements of Operation | ||||
| (in thousands, except per share data) | ||||
| (unaudited) | ||||
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | September 30, | September 30, | |
| 2014 | 2013 | 2014 | 2013 | |
| Revenues: | ||||
| Software-enabled services | $149,285 | $138,123 | $440,215 | $411,909 |
| Software licenses | 9,196 | 8,184 | 26,561 | 20,880 |
| Maintenance | 25,595 | 26,178 | 76,812 | 77,603 |
| Professional services | 8,522 | 7,020 | 23,542 | 19,788 |
| Total revenues | 192,598 | 179,505 | 567,130 | 530,180 |
| Cost of revenues: | ||||
| Software-enabled services | 84,978 | 79,875 | 256,709 | 240,847 |
| Software licenses | 892 | 1,286 | 2,549 | 3,908 |
| Maintenance | 9,990 | 10,150 | 29,998 | 30,953 |
| Professional services | 5,523 | 4,884 | 15,859 | 14,689 |
| Total cost of revenues | 101,383 | 96,195 | 305,115 | 290,397 |
| Gross profit | 91,215 | 83,310 | 262,015 | 239,783 |
| Operating expenses: | ||||
| Selling and marketing | 11,581 | 10,849 | 35,682 | 30,876 |
| Research and development | 13,935 | 13,117 | 41,461 | 40,558 |
| General and administrative | 11,336 | 11,480 | 38,095 | 33,197 |
| Total operating expenses | 36,852 | 35,446 | 115,238 | 104,631 |
| Operating income | 54,363 | 47,864 | 146,777 | 135,152 |
| Interest expense, net | (6,071) | (9,036) | (19,738) | (33,325) |
| Other income (expense), net | 1,532 | (110) | 787 | 2,406 |
| Income before income taxes | 49,824 | 38,718 | 127,826 | 104,233 |
| Provision (benefit) for income taxes | 8,997 | (4,748) | 33,306 | 13,219 |
| Net income | $40,827 | $43,466 | $94,520 | $91,014 |
| Basic earnings per share | $0.49 | $0.53 | $1.14 | $1.13 |
| Basic weighted average number of common shares outstanding | 83,532 | 81,784 | 83,127 | 80,779 |
| Diluted earnings per share | $0.47 | $0.51 | $1.08 | $1.07 |
| Diluted weighted average number of common and common equivalent shares outstanding | 87,392 | 86,068 | 87,125 | 85,126 |
| See Notes to Condensed Consolidated Financial Information. | ||||
| SS&C Technologies Holdings, Inc. and Subsidiaries | ||
| Condensed Consolidated Balance Sheets | ||
| (in thousands) | ||
| (unaudited) | ||
| September 30, | December 31, | |
| 2014 | 2013 | |
| ASSETS | ||
| Current assets: | ||
| Cash | $75,080 | $84,470 |
| Accounts receivable, net | 90,122 | 91,221 |
| Prepaid income taxes | 14,863 | 19,932 |
| Deferred income taxes | 3,925 | 6,526 |
| Prepaid expenses and other current assets | 13,384 | 16,567 |
| Restricted cash | 1,477 | 2,460 |
| Total current assets | 198,851 | 221,176 |
| Property and equipment, net | 53,507 | 51,697 |
| Deferred income taxes | 1,506 | 1,077 |
| Goodwill | 1,523,971 | 1,541,386 |
| Intangible and other assets, net | 392,024 | 459,988 |
| Total assets | $2,169,859 | $2,275,324 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current liabilities: | ||
| Current portion of long-term debt | $21,641 | $23,212 |
| Accounts payable | 9,606 | 8,368 |
| Income taxes payable | -- | 2,169 |
| Accrued employee compensation and benefits | 35,036 | 44,664 |
| Other accrued expenses | 23,445 | 26,028 |
| Deferred maintenance and other revenue | 57,550 | 62,561 |
| Total current liabilities | 147,278 | 167,002 |
| Long-term debt, net of current portion | 579,910 | 751,295 |
| Other long-term liabilities | 18,617 | 14,913 |
| Deferred income taxes | 95,954 | 110,406 |
| Total liabilities | 841,759 | 1,043,616 |
| Total stockholders' equity | 1,328,100 | 1,231,708 |
| Total liabilities and stockholders' equity | $2,169,859 | $2,275,324 |
| See Notes to Condensed Consolidated Financial Information. | ||
| SS&C Technologies Holdings, Inc. and Subsidiaries | ||
| Condensed Consolidated Statements of Cash Flows | ||
| (in thousands) | ||
| (unaudited) | ||
| Nine Months Ended | ||
| September 30, | September 30, | |
| 2014 | 2013 | |
| Cash flow from operating activities: | ||
| Net income | $94,520 | $91,014 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation and amortization | 74,493 | 74,441 |
| Stock-based compensation expense | 8,554 | 6,010 |
| Income tax benefit related to exercise of stock options | (10,735) | (11,796) |
| Amortization of loan origination costs and original issue discount | 4,397 | 4,408 |
| Loss on sale or disposition of property and equipment | 672 | 316 |
| Deferred income taxes | (11,661) | (10,049) |
| Provision for doubtful accounts | 672 | 528 |
| Changes in operating assets and liabilities, excluding effects from acquisitions: | ||
| Accounts receivable | (395) | 5,911 |
| Prepaid expenses and other assets | (5,302) | (8,405) |
| Accounts payable | 636 | 5,189 |
| Accrued expenses | (637) | (7,611) |
| Income taxes prepaid and payable | 13,715 | 8,854 |
| Deferred maintenance and other revenue | (4,664) | (4,534) |
| Net cash provided by operating activities | 164,265 | 154,276 |
| Cash flow from investing activities: | ||
| Additions to property and equipment | (11,879) | (9,933) |
| Proceeds from sale of property and equipment | 27 | 61 |
| Additions to capitalized software | (2,688) | (1,570) |
| Other | 983 | -- |
| Net cash used in investing activities | (13,557) | (11,442) |
| Cash flow from financing activities: | ||
| Repayment of debt | (174,000) | (177,000) |
| Proceeds from exercise of stock options | 16,070 | 22,360 |
| Income tax benefit related to exercise of stock options | 10,735 | 11,796 |
| Purchase of common stock for treasury | (11,223) | -- |
| Payment of fees related to refinancing activities | (512) | (1,917) |
| Net cash used in financing activities | (158,930) | (144,761) |
| Effect of exchange rate changes on cash | (1,168) | (2,658) |
| Net decrease in cash | (9,390) | (4,585) |
| Cash, beginning of period | 84,470 | 86,160 |
| Cash, end of period | $75,080 | $81,575 |
| Supplemental disclosure of non-cash activities: | ||
| Excess tax benefit related to stock option exercises | $ -- | $10,279 |
| See Notes to Condensed Consolidated Financial Information. | ||
SS&C Technologies Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Information
Note 1. Reconciliation of Revenue to Adjusted Revenue
Adjusted revenue represents revenue adjusted for one-time purchase accounting adjustments to fair value deferred revenue acquired in business combinations. Adjusted revenue is presented because we use this measure to evaluate performance of our business against prior periods and believe it is a useful indicator of the underlying performance of the Company. Adjusted revenue is not a recognized term under generally accepted accounting principles (GAAP). Adjusted revenue does not represent revenue, as that term is defined under GAAP, and should not be considered as an alternative to revenue as an indicator of our operating performance. Adjusted revenue as presented herein is not necessarily comparable to similarly titled measures. The following is a reconciliation between adjusted revenue and revenue, the GAAP measure we believe to be most directly comparable to adjusted revenue.
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| (in thousands) | 2014 | 2013 | 2014 | 2013 |
| Revenue | $192,598 | $179,505 | $567,130 | $530,180 |
| Purchase accounting adjustments to deferred revenue | -- | -- | -- | 136 |
| Adjusted revenue | $192,598 | $179,505 | $567,130 | $530,316 |
Note 2. Reconciliation of Operating Income to Adjusted Operating Income
Adjusted operating income represents operating income adjusted for amortization of acquisition-related intangible assets and purchase accounting adjustments for deferred revenue and other expenses. Adjusted operating income is presented because we use this measure to evaluate performance of our business and believe it is a useful indicator of the underlying performance of the Company. Adjusted operating income is not a recognized term under GAAP. Adjusted operating income does not represent operating income, as that term is defined under GAAP, and should not be considered as an alternative to operating income as an indicator of our operating performance. Adjusted operating income as presented herein is not necessarily comparable to similarly titled measures. The following is a reconciliation between adjusted operating income and operating income, the GAAP measure we believe to be most directly comparable to adjusted operating income.
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| (in thousands) | 2014 | 2013 | 2014 | 2013 |
| Operating income | $54,363 | $47,864 | $146,777 | $135,152 |
| Amortization of intangible assets | 21,318 | 21,247 | 63,929 | 63,439 |
| Stock-based compensation | 2,784 | 1,975 | 8,554 | 6,010 |
| Capital-based taxes | -- | -- | 6 | -- |
| Unusual or non-recurring charges | 180 | 106 | 6,019 | 91 |
| Purchase accounting adjustments | -- | (47) | (27) | (6) |
| Adjusted operating income | $78,645 | $71,145 | $225,258 | $204,686 |
Note 3. Reconciliation of Net Income to EBITDA, Consolidated EBITDA and Adjusted Consolidated EBITDA
EBITDA represents net income before interest expense, income taxes, depreciation and amortization. Consolidated EBITDA, defined under our Credit Agreement entered into in March 2012, is used in calculating covenant compliance, and is EBITDA adjusted for certain items. Consolidated EBITDA is calculated by subtracting from or adding to EBITDA items of income or expense described below. Adjusted consolidated EBITDA is calculated by subtracting acquired EBITDA from consolidated EBITDA. EBITDA, consolidated EBITDA and adjusted consolidated EBITDA are presented because we use these measures to evaluate performance of our business and believe them to be useful indicators of an entity's debt capacity and its ability to service debt. EBITDA, consolidated EBITDA and adjusted consolidated EBITDA are not recognized terms under GAAP and should not be considered in isolation or as alternatives to operating income, net income or cash flows from operating activities as indicators of our operating performance. The following is a reconciliation of EBITDA, consolidated EBITDA and adjusted consolidated EBITDA to net income.
| Three Months Ended | Nine Months Ended | Twelve Months Ended | |||
| September 30, | September 30, | September 30, | |||
| (in thousands) | 2014 | 2013 | 2014 | 2013 | 2014 |
| Net income | $40,827 | $43,466 | $94,520 | $91,014 | $121,401 |
| Interest expense, net | 6,071 | 9,036 | 19,738 | 33,325 | 27,692 |
| Taxes | 8,997 | (4,748) | 33,306 | 13,219 | 47,379 |
| Depreciation and amortization | 24,661 | 24,699 | 74,493 | 74,441 | 99,832 |
| EBITDA | 80,556 | 72,453 | 222,057 | 211,999 | 296,304 |
| Stock-based compensation | 2,784 | 1,975 | 8,554 | 6,010 | 10,930 |
| Capital-based taxes | -- | -- | 6 | -- | 188 |
| Unusual or non-recurring charges | (1,353) | 217 | 5,231 | (2,315) | 4,425 |
| Purchase accounting adjustments | -- | (47) | (27) | (6) | (73) |
| Other | 118 | (38) | 201 | 179 | 257 |
| Consolidated EBITDA | 82,105 | 74,560 | 236,022 | 215,867 | 312,031 |
Note 4. Reconciliation of Net Income to Adjusted Net Income and Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share
Adjusted net income and adjusted diluted earnings per share represent net income and earnings per share before amortization of intangible assets and deferred financing costs, stock-based compensation, capital-based taxes and other unusual and non-recurring items. Adjusted net income and adjusted diluted earnings per share are not recognized terms under GAAP, do not represent net income or diluted earnings per share, as those terms are defined under GAAP, and should not be considered as alternatives to net income or diluted earnings per share as indicators of our operating performance. Adjusted net income and adjusted diluted earnings per share are important to management and investors because they represent our operational performance exclusive of the effects of amortization of intangible assets and deferred financing costs, stock-based compensation, capital-based taxes and other unusual and non-recurring items that are not operational in nature or comparable to those of our competitors. The following is a reconciliation between adjusted net income and adjusted diluted earnings per share and net income and diluted earnings per share.
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| (in thousands, except per share data) | 2014 | 2013 | 2014 | 2013 |
| GAAP – Net income | $40,827 | $43,466 | $94,520 | $91,014 |
| Plus: Amortization of intangible assets | 21,318 | 21,247 | 63,929 | 63,439 |
| Plus: Amortization of deferred financing costs and original issue discount | 1,441 | 1,420 | 4,397 | 4,408 |
| Plus: Stock-based compensation | 2,784 | 1,975 | 8,554 | 6,010 |
| Plus: Capital-based taxes | -- | -- | 6 | -- |
| Plus: Unusual and non-recurring items | (1,353) | 217 | 5,231 | (2,315) |
| Plus: Purchase accounting adjustments | -- | (47) | (27) | (6) |
| Income tax effect (1) | (11,726) | (23,807) | (25,469) | (39,511) |
| Adjusted net income | $53,291 | $44,471 | $151,141 | $123,039 |
| Adjusted diluted earnings per share | $0.61 | $0.52 | $1.73 | $1.45 |
| GAAP diluted earnings per share | $0.47 | $0.51 | $1.08 | $1.07 |
| Diluted weighted-average shares outstanding | 87,392 | 86,068 | 87,125 | 85,126 |
(1) An estimated normalized effective tax rate of 28% has been used to adjust the provision for income taxes for the purpose of computing adjusted net income.