SS&C Technologies Reports Third Quarter 2017 Earnings

Q3 2017 GAAP revenue $418.3 million, up 9.1 percent, Fully Diluted GAAP Earnings Per Share $0.30, up 57.9 percent

Adjusted revenue $419.6 million, up 7.1 percent, Adjusted Diluted Earnings Per Share $0.50, up 19.0 percent     

WINDSOR, Conn., Oct. 25, 2017 /PRNewswire/ -- 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 third quarter ended September 30, 2017. 

GAAP ResultsSS&C reported GAAP revenue of $418.3 million for the third quarter of 2017, up 9.1 percent compared to $383.3 million in the third quarter of 2016. GAAP operating income for the third quarter of 2017 was $103.9 million, or 24.8 percent of GAAP revenue compared to $76.9 million, or 20.1 percent of GAAP revenue in 2016's third quarter, representing a 35.1 percent increase.  

GAAP net income for the third quarter of 2017 was $64.2 million, up 65.8 percent compared to $38.7 million in 2016's third quarter. On a fully diluted GAAP basis, earnings per share in the third quarter of 2017 were $0.30 per share, up 57.9 percent compared to $0.19 per share on a fully diluted GAAP basis in the third quarter of 2016.

Adjusted Non-GAAP Results (defined in Notes 1-4 below)Adjusted revenue was $419.6 million for the third quarter of 2017, up 7.1 percent compared to $391.9 million in the third quarter of 2016. Adjusted operating income for the third quarter of 2017 was $170.1 million, or 40.5 percent of adjusted revenue compared to $150.5 million, or 38.4 percent of adjusted revenue in 2016's third quarter, representing a 13.1 percent increase.

Adjusted net income for the third quarter of 2017 was $105.5 million, up 20.6 percent compared to $87.5 million in 2016's third quarter. Adjusted diluted earnings per share in the third quarter of 2017 were $0.50 per share, up 19.0 percent compared to $0.42 per share in the third quarter of 2016.

Highlights:

• Adjusted diluted earnings per share were $0.50 for Q3 2017, increasing 19.0 percent from Q3 2016's $0.42 adjusted diluted earnings per share.
• For the nine months of 2017, net cash provided by operating activities was $307.1 million, an increase of 29.6 percent.
• Adjusted consolidated EBITDA increased 14.2 percent to $178.8 million in Q3 2017. Adjusted consolidated EBITDA margin was 42.6 percent for the quarter.
• SS&C paid off $292.8 million of debt in the nine months of 2017, bringing our net debt to consolidated EBITDA leverage ratio to 3.19x.

"We are pleased with our ability to report adjusted diluted earnings per share up 19.0 percent on a 7.1 percent increase in adjusted revenue" says Bill Stone, Chairman and Chief Executive Officer of SS&C Technologies. "We had many deals push to Q4; nevertheless we ramped up our margins with 42.6 percent adjusted consolidated EBITDA margin across the entire business. We expect a solid Q4."

Annual Run Rate BasisAnnual Run Rate Basis (ARRB) recurring revenue, defined as adjusted recurring revenue on an annualized basis, was $1,580.1 million based on adjusted recurring revenue $395.0 million for the third quarter of 2017. This represents an increase of 9.6 percent from $360.3 million and $1,441.3 million run-rate in the same period in 2016 and an increase of 2.0 percent from $387.4 million for the second quarter of 2017, an annual run rate of $1,549.7 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Operating Cash FlowSS&C generated net cash from operating activities of $307.1 million for the nine months ended September 30, 2017, compared to $237.0 million for the same period in 2016, representing a 29.6 percent increase. SS&C ended the third quarter with $103.3 million in cash and cash equivalents and $2,266.8 million in gross debt, for a net debt balance of $2,163.5 million. SS&C's consolidated net leverage ratio as defined in our credit agreement stood at 3.19 times consolidated EBITDA as of September 30, 2017.

Guidance

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 MeasuresAdjusted 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 ReleaseSS&C's Q3 2017 earnings call will take place at 5:00 p.m. eastern time today, October 25, 2017. The call will discuss Q3 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 Third Quarter 2017 Conference Call"; conference ID #95952330. A replay will be available after 8:00 p.m. eastern time on October 25, 2017, until midnight on November 2, 2017. 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 October 25, 2017; 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 2017 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 TechnologiesSS&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.

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SS&C Technologies Holdings, Inc. and SubsidiariesNotes 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. 

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

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.

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.

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.

 

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