SS&C Technologies Reports Record Q2 2013 Revenue, Up 46.8%

WINDSOR, Conn., Aug. 1, 2013 (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 June 30, 2013.

"Our second quarter results are further evidence that our business strategy is on target and our software-enabled services business continues to drive growth, with software-enabled services revenue up 62.6 percent over the same period in 2012," said Bill Stone, Chairman and Chief Executive Officer, SS&C Technologies Holdings, Inc. "We are building world-class systems and processes and integrating them with subject matter expertise. Our Regulatory Solutions Group which was formed 1 year ago recently signed its 100 th customer. We intend to be the thought leader and customer service leader. New capabilities in trading, risk, investor communications, and asset coverage will cement our leadership position."

Results

SS&C reported GAAP revenue of $177.5 million for the second quarter of 2013, compared to $120.9 million in the second quarter of 2012, a 46.8 percent increase. GAAP operating income for the second quarter of 2013 was $45.3 million, or 25.5 percent of revenue. This represents an increase of 114.4 percent compared to $21.1 million, or 17.5 percent of revenue, in the second quarter of 2012. GAAP net income for the second quarter of 2013 was $26.1 million compared to a GAAP net loss of $5.8 million in the second quarter of 2012. On a fully diluted GAAP basis, earnings per share in the second quarter of 2013 were $0.31 compared to a fully diluted GAAP loss of $0.07 per share in the second quarter of 2012.

Adjusted operating income (a non-GAAP measure defined in note 2 to the attached Condensed Consolidated Financial Information) in the second quarter of 2013 was $68.8 million, or 38.7 percent of adjusted revenue. This represents a 49.9 percent increase compared to $45.9 million, or 37.8 percent of adjusted revenue, in the second quarter of 2012. Adjusted net income (a non-GAAP measure defined in note 4 to the attached Condensed Consolidated Financial Information) for the second quarter of 2013 was $41.0 million compared to $27.2 million in 2012's second quarter, a 50.5 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 2013 were $0.48 compared to $0.33 in the second quarter of 2012, a 45.5 percent increase.

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 $653.8 million based on maintenance and software-enabled services revenue of $163.5 million for the second quarter of 2013. This represents an increase of 51.5 percent from $107.9 million and $431.5 million annual run-rate in the same period in 2012 and an increase of 1.1 percent from $161.8 million for the first quarter of 2013, an annual run rate of $647.0 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Operating Cash Flow

SS&C ended the quarter with $60.6 million in cash, and $919.0 million in gross debt, for a net debt balance of $858.4 million. SS&C generated net cash from operating activities of $70.0 million for the six months ended June 30, 2013, compared to $35.7 million for the same period in 2012, representing a 96.2 percent increase.

New Los Angeles Office

The increase in our software-enabled services can be attributed primarily to the growth of our alternative investment services. "We continue to see momentum in this business," said Stone. "Ares Management LLC, a $65.9 billion Los Angeles-based asset management firm, which signed a Strategic Partnership Agreement with SS&C GlobeOp to provide certain administrative support services. In conjunction with such Strategic Partnership Agreement, SS&C has entered into a long-term lease in Century City to facilitate this opportunity."

Guidance
  Q3 2013 FY 2013
Adjusted Revenue ($M) $179.0 – $183.0 $714.0 – $722.0
Adjusted Net Income ($M) $42.5 – $44.0 $165.0 – $167.5
Cash from Operating Activities ($M) N/A $181.0 – $187.0
Capital Expenditures (% of revenue) N/A 2.4% – 2.8%
Diluted Shares (M) 86.9 – 87.2 85.5 – 85.9
Effective Income Tax Rate (%) 30% 30%

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, August 1, 2013. The call will discuss Q2 2013 results and our guidance and business outlook. Interested parties may dial 877-312-8798 (U.S. and Canada) or 253-237-1193 (International) and request the "SS&C Technologies 2013 Second Quarter Earnings Conference Call," conference ID # 17176429. A replay will be available after 8:00 p.m. eastern time on August 1, 2013, until midnight on August 8, 2013. The dial-in number is 855-859-2056 (U.S. and Canada) 404-537-3406 (International); access code # 17176429. The call will also be available for replay on SS&C's website after August 1, 2013; 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 2013, 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, 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 5,500 financial services organizations, from the world's largest institutions to local firms, manage and account for their investments using SS&C's products and services. These clients in the aggregate manage over $26 trillion in assets.

Follow SS&C on Twitter, Linkedin and Facebook.

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,    2013 June 30, 2012 June 30,  2013 June 30,  2012
Revenues:        
Software-enabled services $ 138,047 $ 84,889 $ 273,786 $ 149,464
Software licenses    6,626    5,768  12,696  9,578
Maintenance 25,410 22,976 51,425 42,474
Professional services 7,374 7,217 12,768 13,009
Total revenues 177,457 120,850 350,675 214,525
         
Cost of revenues:        
Software-enabled services 80,245 47,063 160,972 79,975
Software licenses 1,348 1,543 2,622 2,845
Maintenance 10,283 9,789 20,803 18,455
Professional services 4,885 4,705 9,805 8,677
Total cost of revenues 96,761 63,100 194,202 109,952
         
Gross profit 80,696 57,750 156,473 104,573
         
Operating expenses:        
Selling and marketing 10,563 8,286 20,027 15,658
Research and development 13,639 10,646 27,441 19,285
General and administrative 11,202 8,271 21,717 12,859
Transaction costs -- 9,421 -- 13,574
Total operating expenses 35,404 36,624 69,185 61,376
         
Operating income 45,292 21,126 87,288 43,197
         
Interest expense, net (11,784) (4,485) (24,289) (5,034)
Other income (expense), net 2,370 (18,543) 2,516 (14,417)
Loss on extinguishment of debt -- (4,355) -- (4,355)
         
Income (loss) before income taxes 35,878 (6,257)  65,515  19,391
Provision (benefit) for income taxes     9,759     (497) 17,967 7,268
         
Net income (loss) $  26,119 $ (5,760) $ 47,548 $ 12,123
         
Basic earnings (loss) per share $   0.32 $ (0.07) $   0.59 $    0.16
Basic weighted average number of common shares outstanding 81,186 78,098 80,268 77,908
Diluted earnings (loss) per share $   0.31 $ (0.07) $    0.56 $    0.15
Diluted weighted average number of common and common equivalent shares outstanding 85,280 78,098 84,550 82,491

See Notes to Condensed Consolidated Financial Information.
SS&C Technologies Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands) (unaudited)
     
  June 30, 2013 December 31, 2012
ASSETS    
Current assets:    
Cash $   60,586  $ 86,160
Accounts receivable, net 97,372 91,690
Prepaid income taxes 21,738   9,651
Deferred income taxes 5,681 5,408
Prepaid expenses and other current assets 24,504 11,548
Restricted cash 2,460 2,460
Total current assets  212,341  206,917
     
Property and equipment, net 53,703 55,039
     
Deferred income taxes 1,100 1,459
Goodwill 1,526,428 1,559,607
Intangible and other assets, net 489,045 539,883
     
Total assets  $ 2,282,617  $  2,362,905
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Current portion of long-term debt $  20,196   $   22,248
Accounts payable    8,542  10,528
Income taxes payable -- 1,314
Accrued employee compensation and benefits 22,931 39,812
Other accrued expenses 32,543 22,650
Deferred maintenance and other revenue 59,655 63,700
Total current liabilities  143,867 160,252
     
Long-term debt, net of current portion 890,618 989,890
Other long-term liabilities 17,421 17,102
Deferred income taxes 115,139 120,158
Total liabilities 1,167,045 1,287,402
     
Total stockholders' equity 1,115,572 1,075,503
     
Total liabilities and stockholders' equity  $ 2,282,617   $ 2,362,905

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,   2013   June 30,   2012
Cash flow from operating activities:    
Net income  $ 47,548  $ 12,123
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 49,742 25,885
Stock-based compensation expense 4,035 2,412
Income tax benefit related to exercise of stock options (4,941) (1,592)
Amortization of loan origination costs and original issue discount  2,988  6,445  
Loss on sale or disposition of property and equipment  322  1
Deferred income taxes (4,474) (2,157)
Provision for doubtful accounts  314  272
Changes in operating assets and liabilities, excluding effects  from acquisitions:    
Accounts receivable (6,418) (8,286)
Prepaid expenses and other assets (4,712) 6,237
Accounts payable   (2,248)  (464)
Accrued expenses   (14,245) 1,643
Income taxes prepaid and payable   5,600  (8,208)
Deferred maintenance and other revenue (3,506) 1,362
Net cash provided by operating activities  70,005  35,673
     
Cash flow from investing activities:    
Additions to property and equipment   (7,724)  (4,817)
Proceeds from sale of property and equipment   55   --
Cash paid for business acquisitions, net of cash acquired  -- (957,539)
Additions to capitalized software     (428)     (322) 
Other -- 87
Net cash used in investing activities   (8,097)   (962,591)
     
Cash flow from financing activities:    
Cash received from debt borrowings, net of loan origination costs -- 1,304,980
Repayment of debt  (102,000)  (290,000)
Proceeds from exercise of stock options 14,086 7,468
Payment of contingent consideration -- (1,800)
Income tax benefit related to exercise of stock options 4,941 1,592
Other (1,917) --
Net cash (used in) provided by financing activities   (84,890)  1,022,240
Effect of exchange rate changes on cash  (2,592)  (1,168)
Net (decrease) increase in cash (25,574) 94,154
Cash, beginning of period  86,160  40,318
Cash, end of period  $ 60,586  $ 134,472
Supplemental disclosure of non-cash activities:    
Excess tax benefit related to stock option exercises $ 12,956 $ -- 

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) 2013 2012 2013 2012
Revenue $  177,457 $ 120,850 $  350,675 $ 214,525
Purchase accounting adjustments to deferred revenue 22 351 136 351
Adjusted revenue $ 177,479  $  121,201  $ 350,811 $ 214,876

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) 2013 2012 2013 2012
Operating income $ 45,292 $ 21,126 $ 87,288 $ 43,197
Amortization of intangible assets 21,174 13,564 42,192 22,420
Stock-based compensation 1,929 1,183 4,035 2,412
Capital-based taxes -- -- -- (765)
Unusual or non-recurring charges 395 9,691 (15) 14,375
Purchase accounting adjustments (24) 300 41 248
Other -- -- -- --
Adjusted operating income $ 68,766  $ 45,864  $ 133,541 $ 81,887

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 2013, 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) 2013 2012 2013 2012 2013
Net income (loss)  $ 26,119  $ (5,760)  $ 47,548  $   12,123  $ 81,245
Interest expense, net 11,784 8,840  24,289  9,389  51,756
Taxes 9,759 (497) 17,967 7,268 35,364
Depreciation and amortization 24,990 15,680  49,742  25,885  99,671
EBITDA  72,652    18,263  139,546  54,665  268,036
Stock-based compensation 1,929 1,183 4,035 2,412 7,213
Capital-based taxes -- -- -- (765) (20)
Acquired EBITDA and cost savings -- 12,238   --  12,238  632
Unusual or non-recurring charges (1,976) 28,235 (2,532)   28,793  304
Purchase accounting adjustments (24) 300  41  248  687
Other 6 (48) 217 (91) 291
Consolidated EBITDA  72,587  60,171  141,307  97,500  277,143
Less: acquired EBITDA -- (12,238) -- (12,238) (632)
Adjusted Consolidated EBITDA $ 72,587 $ 47,933 $ 141,307 $   85,262 $ 276,511

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) 2013 2012  2013   2012 
GAAP – Net income (loss) $ 26,119 $ (5,760) $ 47,548 $ 12,123
Plus: Amortization of intangible assets 21,174 13,563 42,192 22,419
Plus: Amortization of deferred financing costs and original issue discount 1,600 531 2,988 589
Plus: Stock-based compensation 1,929 1,183 4,035 2,412
Plus: Capital-based taxes -- -- -- (765)
Plus: Unusual and non-recurring items (1,976) 28,235 (2,532) 28,793
Plus: Loss on extinguishment of debt -- 4,355 -- 4,355
Plus: Purchase accounting adjustments (24) 300 41 248
Income tax effect (1) (7,815) (15,166) (15,704) (19,837)
Adjusted net income $ 41,007  $ 27,241  $ 78,568 $ 50,337
         
Adjusted diluted earnings per share $   0.48 $   0.33 $   0.93 $   0.61
         
GAAP diluted earnings per share $   0.31 $   (0.07) $   0.56 $   0.15
         
Diluted weighted-average shares outstanding 85,280 82,822 84,550 82,491

(1) An estimated normalized effective tax rate of 30% has been used to adjust the provision for income taxes for the purpose of computing adjusted net income. 
CONTACT: Patrick Pedonti Chief Financial Officer         Tel: +1-860-298-4738         E-mail: InvestorRelations@sscinc.com

SS&C Technologies