News Column

SS&C Reports Record Fourth Quarter and 2013 Results

February 11, 2014

WINDSOR, Conn., Feb. 11, 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 fourth quarter and full year ended December 31, 2013.

Financial Highlights:

• Revenue increased to $182.5 million in the fourth quarter 2013, up 6.3 percent, and to $712.7 million for the full year 2013, up 29.1 percent.

 • GAAP net income increased 67.1 percent to $26.9 million in the fourth quarter 2013 and diluted earnings per share for the fourth quarter 2013 increased 63.2 percent to $0.31.

 • Adjusted net income (defined below) increased 31.5 percent to $46.0 million for the fourth quarter 2013 and adjusted diluted EPS (defined below) increased 26.2 percent to $0.53 for the same period.

 • Adjusted consolidated EBITDA (defined below) increased 8.5 percent to $76.0 million in the fourth quarter 2013. For full year 2013, adjusted consolidated EBITDA increased 32.4 percent to $291.9 million.

 • Annual Run Rate Basis (ARRB) recurring revenue, (defined below), was $665.8 million based on maintenance and software-enabled services revenue of $166.5 million for the fourth quarter of 2013. This represents an increase of 5.9 percent from the $628.7 million run-rate for the same period in 2012.

"I am pleased to announce we set records with our GAAP and adjusted revenues, EBITDA, operating cash flow, and earnings per share in 2013," said Bill Stone, Chairman and Chief Executive Officer, SS&C Technologies. "We added new clients, completed the integration of the PORTIA and GlobeOp acquisitions, added Los Angeles and Luxembourg as key locations and closed our acquisition of Prime Management Limited. We were able to repay $239 million in debt and ended the year with leverage of 2.4x, which is an improvement from leverage of 4.2x at the time of our acquisition of GlobeOp in June 2012."

GAAP Results

SS&C reported GAAP revenue of $182.5 million for the fourth quarter of 2013, up 6.3 percent compared to $171.8 million in the fourth quarter of 2012. Revenue for the year ended December 31, 2013 was $712.7 million, up 29.1 percent over $551.8 million in 2012. GAAP operating income for the fourth quarter of 2013 was $47.8 million, up 11.8 percent from $42.8 million in 2012's fourth quarter. GAAP operating income for the year ended December 31, 2013 was $183.0 million, up 48.5 percent from $123.2 million for 2012. On a fully diluted GAAP basis, earnings per share in the fourth quarter of 2013 was $0.31 compared to fully diluted GAAP earnings per share of $0.19 for the fourth quarter of 2012, an increase of 63.2 percent. On a fully diluted basis, GAAP earnings per share for the year ended December 31, 2013, was $1.38, a 150.9 percent increase over 2012's $0.55 per share.

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

Adjusted revenue in the fourth quarter of 2013 was $182.5 million, up 6.1 percent compared to $172.0 million in the fourth quarter of 2012. Adjusted revenue for the year ended December 31, 2013 was $712.8 million, up 28.9 percent over $552.9 million for 2012. Adjusted operating income in the fourth quarter of 2013 was $72.2 million, or 39.6 percent of adjusted revenue. This represents a 9.2 percent increase compared to adjusted operating income of $66.1 million and 38.4 percent of adjusted revenue in the fourth quarter of 2012. Adjusted operating income for the year ended December 31, 2013 was $276.9 million, up 32.0 percent from adjusted operating income of $209.8 million in 2012.

Adjusted net income for the fourth quarter of 2013 was $46.0 million, up 31.5 percent compared to $35.0 million in 2012's fourth quarter. Adjusted net income for the year ended December 31, 2013 was $169.0 million, up 43.9 percent compared to $117.4 million for 2012. Adjusted diluted earnings per share for the fourth quarter of 2013 was $0.53 per share, up 26.2 percent compared to $0.42 per share for the fourth quarter of 2012. Adjusted diluted earnings per share for the year ended December 31, 2013 was $1.97 per share, up 38.7 percent compared to $1.42 per share for 2012.

Annual Run Rate Basis

Annual Run Rate Basis (ARRB) recurring revenue, defined as the sum of maintenance and software-enabled services revenue on an annualized basis, was $665.8 million based on maintenance and software-enabled services revenue of $166.5 million for the fourth quarter of 2013. This represents an increase of 5.9 percent from the $628.7 million run-rate in the same period in 2012 and a sequential increase of 1.3 percent from the $657.2 million run rate for the third quarter of 2013. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Operating Cash Flow

SS&C ended the year with $84.5 million in cash, and $782.0 million in gross debt for a net debt balance of $697.5 million. SS&C generated net cash from operating activities of $208.3 million for the year ended December 31, 2013, compared to $134.4 million for 2012, an increase of 54.9 percent.

SS&C Investment Accounting Accelerator at USI

On January 24, 2014, SS&C in collaboration with the award winning accounting program at the University of Southern Indiana announced the creation of the SS&C Investment Accounting Accelerator. "SS&C's ability to grow its Evansville, Indiana facility will be predicated on the availability of trained accountants in investments," said Mr. Stone. "Valuation and defined, sophisticated reporting requirements will be taught at the undergraduate level and enhance our ability to fulfill our recruitment goals." The USI announcement comes after SS&C announced it would expand its presence in Evansville, where the University of Southern Indiana is located, by leasing a second office facility.

Guidance

 Q1 2014FY 2014
Adjusted Revenue ($M)$183.0$187.0$755.0$775.0
Adjusted Net Income ($M)$45.5$47.0$195.0$204.0
Cash from Operating Activities ($M) N/A$220.0$230.0
Capital Expenditures (% of revenue) N/A 2.3% – 2.8%
Diluted Shares (M) 87.2 – 87.4 88.0 – 88.5
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 Q4 and Full Year 2013 earnings call will take place at 5:00 p.m. eastern time today, February 11, 2014. The call will discuss Q4 and Full Year 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 Fourth Quarter and 2013 Earnings Conference Call," conference ID # 35204678. A replay will be available after 8:00 p.m. eastern time on February 11, 2014, until midnight on February 17, 2014. The dial-in number is 855-859-2056 (U.S. and Canada) 404-537-3406 (International); access code # 35204678. The call will also be available for replay on SS&C's website after February 11, 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 first 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)
         
         
 Three Months EndedYear Ended
  December 31,December 31,December 31,December 31,
 2013201220132012
Revenues:        
Software-enabled services$140,656$131,408$552,565$406,477
Software licenses 7,807 7,003 28,687 22,466
Maintenance 25,806 25,767 103,409 93,760
Professional services 8,253 7,577 28,041 29,139
Total revenues 182,522 171,755 712,702 551,842
         
Cost of revenues:        
Software-enabled services 81,872 78,274 322,719 234,214
Software licenses 1,394 1,727 5,302 6,336
Maintenance  10,093 11,056 41,046 40,394
Professional services 5,044 5,170 19,733 18,973
Total cost of revenues 98,403 96,227 388,800 299,917
         
Gross profit 84,119 75,528 323,902 251,925
         
Operating expenses:        
Selling and marketing 11,009 9,230 41,885 33,858
Research and development 13,304 13,301 53,862 45,779
General and administrative 11,990 10,270 45,187 34,797
Transaction costs --  (47) -- 14,275
Total operating expenses 36,303 32,754 140,934 128,709
         
Operating income 47,816 42,774 182,968 123,216
         
Interest expense, net  (7,954)  (13,741)  (41,279)  (32,501)
Other income (expense), net   1,092  350  3,498  (15,875)
Loss on extinguishment of debt   --   --   --   (4,355)
         
Income before income taxes 40,954 29,383 145,187 70,485
Provision for income taxes  14,073 13,301 27,292 24,665
         
Net income$26,881$16,082$117,895$45,820
         
Basic earnings per share$0.33$0.20$1.45$0.59
         
Basic weighted average number of common shares outstanding 82,428 78,912 81,195 78,321
         
Diluted earnings per share$0.31$0.19$1.38$0.55
         
Diluted weighted average number of common and common equivalent shares outstanding 86,716 83,354 85,616 82,888
         
See Notes to Condensed Consolidated Financial Information.
 
SS&C Technologies Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
     
     
     
 December 31,December 31,
 20132012
ASSETS    
Current assets:    
Cash $84,470$86,160
Accounts receivable, net  91,221 91,690
Prepaid income taxes 19,932 9,651
Deferred income taxes 6,526 5,408
Prepaid expenses and other current assets 16,567 11,548
Restricted cash 2,460 2,460
Total current assets 221,176 206,917
     
Property and equipment, net 51,697 55,039
     
Deferred income taxes 1,077 1,459
Goodwill 1,541,386 1,559,607
Intangible and other assets, net  459,988 539,883
     
Total assets$2,275,324$2,362,905
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Current portion of long-term debt$23,212$22,248
Accounts payable 8,368 10,528
Income taxes payable 2,169 1,314
Accrued employee compensation and benefits 44,664 39,812
Other accrued expenses 26,028 22,650
Deferred maintenance and other revenue 62,561 63,700
Total current liabilities 167,002 160,252
     
Long-term debt, net of current portion 751,295 989,890
Other long-term liabilities 14,913 17,102
Deferred income taxes 110,406 120,158
Total liabilities 1,043,616 1,287,402
     
Total stockholders' equity 1,231,708 1,075,503
     
Total liabilities and stockholders' equity$2,275,324$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)
     
  Year Ended
  December 31,  December 31, 
 20132012
Cash flow from operating activities:    
Net income$117,895$45,820
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  99,780  75,814
Stock-based compensation expense  8,386  5,590
Income tax benefit related to exercise of stock options  (24,194)  (3,531)
Amortization of loan origination costs and original issue discount  5,830  9,215
Loss on sale or disposition of property and equipment  317  13
Deferred income taxes  (11,069)  (6,350)
Provision for doubtful accounts  666  413
Changes in operating assets and liabilities, excluding effects from acquisitions:    
Accounts receivable  814  (14,051)
Prepaid expenses and other assets  (4,695)  7,579
Accounts payable  (4,032)  1,835
Accrued expenses   1,695  3,015
Income taxes prepaid and payable  18,060  5,039
Deferred maintenance and other revenue  (1,184)  4,021
Net cash provided by operating activities  208,269  134,422
     
Cash flow from investing activities:    
Additions to property and equipment  (11,921)  (17,187)
Proceeds from sale of property and equipment  67  374
Cash paid for business acquisitions, net of cash acquired  (3,657)  (967,149)
Additions to capitalized software  (2,399)  (1,105)
Other  --   87
Net cash used in investing activities  (17,910)  (984,980)
     
Cash flow from financing activities:    
Cash received from debt borrowings, net of loan origination costs  (1,917)  1,304,037
Repayment of debt   (239,000)  (425,600)
Proceeds from exercise of stock options  27,817  14,354
Payment of contingent consideration  --   (1,800)
Income tax benefit related to exercise of stock options  24,194  3,531
Purchase of common stock for treasury  (943)  -- 
Net cash (used in) provided by financing activities  (189,849)  894,522
     
Effect of exchange rate changes on cash  (2,200)  1,878
     
Net (decrease) increase in cash   (1,690)  45,842
Cash, beginning of period  86,160  40,318
Cash, end of period$84,470$86,160
     
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 December 31,Year Ended December 31,
(in thousands)2013201220132012
Revenue$182,522$171,755$712,702$551,842
Purchase accounting adjustments to deferred revenue -- 285 136 1,101
Adjusted revenue$182,522$172,040$712,838$552,943


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 EndedYear Ended
 December 31,December 31,
(in thousands)2013201220132012
Operating income$47,816$42,774$182,968$123,216
Amortization of intangible assets  21,597  21,373  85,036  65,118
Stock-based compensation  2,376  1,792  8,386  5,590
Capital-based taxes  182  --   182  (785)
Unusual or non-recurring charges  286  (37)  377  15,754
Purchase accounting adjustments  (46)  233  (52)  894
Adjusted operating income$72,211$66,135$276,897$209,787


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 EndedYear Ended
 December 31,December 31,
(in thousands)2013201220132012
Net income$26,881$16,082$117,895$45,820
Interest expense, net  7,954  13,741  41,279  36,856
Taxes  14,073  13,301  27,292  24,665
Depreciation and amortization  25,339  25,194  99,780  75,814
EBITDA  74,247  68,318  286,246  183,155
Stock-based compensation  2,376  1,792  8,386  5,590
Capital-based taxes  182  --   182  (785)
Acquired EBITDA and cost savings  --   40  890  35,531
Unusual or non-recurring charges  (806)  (387)  (3,121)  31,629
Purchase accounting adjustments  (46)  233  (52)  894
Other  56  124  235  (17)
Consolidated EBITDA  76,009  70,120  292,766  255,997
Less: acquired EBITDA  --   (40)  (890)  (35,531)
Adjusted Consolidated EBITDA$76,009$70,080$291,876$220,466


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 EndedYear Ended
 December 31,December 31,
(in thousands, except per share data)2013201220132012
GAAP – Net income$26,881$16,082$117,895$45,820
Plus: Amortization of intangible assets  21,597  21,373  85,036  65,118
Plus: Amortization of deferred financing costs and original issue discount  1,422  1,401  5,830  3,360
Plus: Stock-based compensation  2,376  1,792  8,386  5,590
Plus: Capital-based taxes  182  --   182  (785)
Plus: Unusual and non-recurring items  (806)  (387)  (3,121)  31,629
Plus: Loss on extinguishment of debt  --   --   --   4,355
Plus: Purchase accounting adjustments  (46)  233  (52)  894
Income tax effect (1)  (5,631)  (5,527)  (45,142)  (38,561)
Adjusted net income$45,975$34,967$169,014$117,420
         
Adjusted diluted earnings per share$0.53$0.42$1.97$1.42
         
GAAP diluted earnings per share$0.31$0.19$1.38$0.55
         
Diluted weighted-average shares outstanding 86,716 83,354 85,616 82,888
         
(1) An estimated normalized effective tax rate of 30% has been used to adjust the provision for income taxes for the purposes of computing adjusted net income.

CONTACT: Patrick Pedonti Chief Financial Officer Tel: +1-860-298-4738 E-mail: InvestorRelations@sscinc.comJustine Stone Investor Relations Coordinator Tel: +1-212-367-4705 E-mail: Justine.stone@sscinc.com



SS&C Technologies

Source: SS&C Technologies


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