ssnc-ex991_36.htm

WINDSOR, CT, October 27, 2016 (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 third quarter ended September 30, 2016.

SS&C reported GAAP revenue of $383.3 million for the third quarter of 2016, compared to $280.9 million in the third quarter of 2015, a 36.5 percent increase. GAAP operating income for the third quarter of 2016 was $76.9 million, or 20.0 percent of revenue. This represents an increase of over 400 percent compared to $15.0 million, or 5.3 percent of revenue, in 2015’s third quarter. GAAP net income for the third quarter of 2016 was $38.7 million compared to a $34.6 million GAAP net loss in the third quarter of 2015. On a fully diluted GAAP basis, earnings per share in the third quarter of 2016 were $0.19.

Adjusted revenue in the third quarter of 2016 was $391.9 million, up 25.8 percent compared to $311.4 million in the third quarter of 2015. Adjusted operating income in the third quarter of 2016 was $150.5 million, or 38.4 percent of adjusted revenue. This represents a 20.1 percent increase compared to adjusted operating income of $125.3 million, or 40.2 percent of adjusted revenue, in the third quarter of 2015.

Adjusted net income for the third quarter of 2016 was $87.5 million, up 27.5 percent compared to $68.6 million in 2015’s third quarter. Adjusted diluted earnings per share in the third quarter of 2016 were $0.42 per share, up 23.5 percent compared to $0.34 per share in the third quarter of 2015.

“SS&C is pleased to report record adjusted revenues of $391.9 million for Q3 2016, and adjusted diluted earnings per share of $0.42 cents,” says Bill Stone, Chairman and Chief Executive Officer. “Our business has grown sharply over the past year and our last twelve months’ consolidated EBTIDA is over $600 million. We have integrated the people and products from Advent, Varden, Primatics and Citi Alternative Investor Services. At SS&C, we change. Our research and development spend, acquisitions and onboarding talent encourages creativity and critical thinking. This enables us to service our clients’ demands in a complex and evolving regulatory environment.”

Annual Run Rate Basis (ARRB) recurring revenue, defined as adjusted recurring revenue on an annualized basis, was $1,441.3 million based on adjusted recurring revenue $360.3 million for the third quarter of 2016. This represents an increase of 25.1 percent from $288.0 million and $1,152.2 million run-rate in the same period in 2015 and an increase of 1.2 percent from $356.1 million for the second quarter of 2016, an annual run rate of $1,424.3 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

SS&C generated net cash from operating activities of $237.0 million for the nine months ended September 30, 2016, compared to $120.6 million for the same period in 2015, representing a 96.6 percent increase. SS&C ended the quarter with $101.8 million in cash and cash equivalents, and $2,551.5 million in gross debt, for a net debt balance of $2,449.7 million. SS&C’s leverage ratio as defined in our credit agreement stood at 4.08 times consolidated EBITDA as of September 30, 2016.

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.

SS&C’s Q3 2016 earnings call will take place at 5:00 p.m. eastern time today, October 27, 2016. The call will discuss Q3 2016 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 2016 Conference Call”; conference ID#93683809. A replay will be available after 8:00 p.m. eastern time on October 27, 2016, until midnight on November 3, 2016. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code #93683809. The call will also be available for replay on SS&C’s website after October 27, 2016; 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 2016 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.

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 10,000 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.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Revenues:
Software-enabled services	$	248,772		$	180,744		$	699,091		$	484,434
Maintenance and term licenses		106,925			80,097			305,437			159,049
Total recurring revenues		355,697			260,841			1,004,528			643,483
Perpetual licenses		4,389			6,508			14,643			22,526
Professional services		23,218			13,545			61,341			33,388
Total non-recurring revenues		27,607			20,053			75,984			55,914
Total revenues		383,304			280,894			1,080,512			699,397
Cost of revenues:
Software-enabled services		143,074			96,151			403,045			273,301
Maintenance and term licenses		45,458			43,391			138,864			69,896
Total recurring cost of revenues		188,532			139,542			541,909			343,197
Perpetual licenses		608			1,036			1,749			3,081
Professional services		18,887			11,286			51,532			27,396
Total non-recurring cost of revenues		19,495			12,322			53,281			30,477
Total cost of revenues		208,027			151,864			595,190			373,674
Gross profit		175,277			129,030			485,322			325,723
Operating expenses:
Selling and marketing		27,328			37,082			85,724			64,400
Research and development		37,701			37,389			114,975			74,517
General and administrative		33,345			39,607			91,239			70,370
Total operating expenses		98,374			114,078			291,938			209,287
Operating income		76,903			14,952			193,384			116,436
Interest expense, net		(31,648	)		(32,645	)		(97,583	)		(43,664	)
Other income, net		2,655			6,953			820			5,282
Loss on extinguishment of debt		—			(30,417	)		—			(30,417	)
Income (loss) before income taxes		47,910			(41,157	)		96,621			47,637
Provision (benefit) for income taxes		9,163			(6,547	)		22,648			16,873
Net income (loss)	$	38,747		$	(34,610	)	$	73,973		$	30,764
Basic earnings (loss) per share	$	0.19		$	(0.18	)	$	0.37		$	0.17
Basic weighted average number of common shares outstanding		201,782			193,706			199,365			177,772
Diluted earnings (loss) per share	$	0.19		$	(0.18	)	$	0.36		$	0.16
Diluted weighted average number of common and common equivalent shares outstanding		206,635			193,706			205,334			186,470
Net income (loss)	$	38,747		$	(34,610	)	$	73,973		$	30,764
Other comprehensive loss, net of tax:
Foreign currency exchange translation adjustment		(12,060	)		(38,005	)		(29,532	)		(51,416	)
Total comprehensive loss, net of tax		(12,060	)		(38,005	)		(29,532	)		(51,416	)
Comprehensive income (loss)	$	26,687		$	(72,615	)	$	44,441		$	(20,652	)

	September 30,		December 31,
	2016		2015
ASSETS
Current assets:
Cash and cash equivalents	$	101,800	$	434,159
Accounts receivable, net		237,495		169,951
Prepaid expenses and other current assets		32,720		27,511
Prepaid income taxes		39,776		40,627
Restricted cash		2,116		2,818
Total current assets		413,907		675,066
Property, plant and equipment, net		71,128		67,143
Deferred income taxes		2,071		2,199
Goodwill		3,616,060		3,549,212
Intangible and other assets, net		1,519,294		1,508,622
Total assets	$	5,622,460	$	5,802,242
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	29,813	$	32,281
Accounts payable		16,480		11,957
Income taxes payable		—		1,428
Accrued employee compensation and benefits		74,006		83,894
Interest payable		13,259		28,903
Other accrued expenses		50,979		36,231
Deferred revenue		231,285		222,024
Total current liabilities		415,822		416,718
Long-term debt, net of current portion		2,460,457		2,719,070
Other long-term liabilities		61,968		51,434
Deferred income taxes		459,025		509,574
Total liabilities		3,397,272		3,696,796
Total stockholders’ equity		2,225,188		2,105,446
Total liabilities and stockholders’ equity	$	5,622,460	$	5,802,242

	For the Nine Months Ended September 30,
	2016			2015
Cash flow from operating activities:
Net income	$	73,973		$	30,764
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		170,910			100,840
Stock-based compensation expense		40,402			31,435
Income tax benefit related to exercise of stock options		(44,975	)		(11,141	)
Amortization and write-offs of loan origination costs		7,994			5,473
Loss on extinguishment of debt		—			3,954
Loss on sale or disposition of property and equipment		159			339
Deferred income taxes		(39,712	)		(27,030	)
Provision for doubtful accounts		2,684			601
Changes in operating assets and liabilities, excluding effects from acquisitions:
Accounts receivable		(14,603	)		(5,234	)
Prepaid expenses and other assets		(2,595	)		(5,109	)
Accounts payable		2,610			(1,755	)
Accrued expenses		(18,429	)		(28,437	)
Income taxes prepaid and payable		44,840			(1,125	)
Deferred revenue		13,758			26,992
Net cash provided by operating activities		237,016			120,567
Cash flow from investing activities:
Additions to property and equipment		(18,870	)		(9,462	)
Proceeds from sale of property and equipment		69			56
Cash paid for business acquisitions, net of cash acquired		(309,432	)		(2,614,785	)
Additions to capitalized software		(6,137	)		(3,370	)
Purchase of long-term investment		(1,000	)		—
Net changes in restricted cash		700			—
Net cash used in investing activities		(334,670	)		(2,627,561	)
Cash flow from financing activities:
Cash received from debt borrowings, net of original issue discount		—			3,068,075
Repayments of debt		(268,550	)		(823,448	)
Proceeds from exercise of stock options		34,767			10,618
Withholding taxes related to equity award net share settlement		(7,051	)		—
Income tax benefit related to exercise of stock options		44,975			11,141
Proceeds from common stock issuance, net		—			717,802
Purchase of common stock for treasury		(13	)		—
Payment of fees related to refinancing activities		(503	)		(45,781	)
Dividends paid on common stock		(37,452	)		(33,216	)
Net cash (used in) provided by financing activities		(233,827	)		2,905,191
Effect of exchange rate changes on cash and cash equivalents		(878	)		(3,964	)
Net (decrease) increase in cash and cash equivalents		(332,359	)		394,233
Cash and cash equivalents, beginning of period		434,159			109,577
Cash and cash equivalents, end of period	$	101,800		$	503,810

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 is 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.

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2016		2015		2016		2015
Software-enabled services	$	248,772	$	180,744	$	699,091	$	484,434
Maintenance and term licenses		106,925		80,097		305,437		159,049
Total recurring revenues		355,697		260,841		1,004,528		643,483
Perpetual licenses		4,389		6,508		14,643		22,526
Professional services		23,218		13,545		61,341		33,388
Total non-recurring revenues		27,607		20,053		75,984		55,914
Total revenues	$	383,304	$	280,894	$	1,080,512	$	699,397

Software-enabled services	$	248,809	$	180,744	$	699,358	$	484,434
Maintenance and term licenses		111,527		107,296		332,801		186,947
Total adjusted recurring revenues		360,336		288,040		1,032,159		671,381
Perpetual licenses		4,389		6,508		14,643		22,526
Professional services		27,141		16,878		72,590		36,721
Total adjusted non-recurring revenues		31,530		23,386		87,233		59,247
Total adjusted revenues	$	391,866	$	311,426	$	1,119,392	$	730,628

Adjusted operating income represents operating income adjusted for amortization of acquisition-related intangible assets, stock-based compensation, 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 September 30,				Nine Months Ended September 30,
(in thousands)	2016		2015		2016		2015
Operating income	$	76,903	$	14,952	$	193,384	$	116,436
Amortization of intangible assets		51,539		43,289		153,214		87,782
Stock-based compensation		12,489		23,121		40,402		31,435
Capital-based taxes		1,000		—		1,472		(636	)
Unusual or non-recurring charges (1)		2,966		16,672		7,885		25,251
Purchase accounting adjustments (2)		5,573		27,274		29,831		27,973
Adjusted operating income	$	150,470	$	125,308	$	426,188	$	288,241

Note 3. Reconciliation of Net Income (Loss) to EBITDA, Consolidated EBITDA and Adjusted Consolidated EBITDA

EBITDA represents net income (loss) before interest expense, income taxes, depreciation and amortization. Consolidated EBITDA, defined under our Credit Agreement entered into in July 2015, 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 September 30,					Nine Months Ended September 30,						Twelve Months Ended September 30,
(in thousands)	2016		2015			2016			2015			2016
Net income (loss)	$	38,747	$	(34,610	)	$	73,973		$	30,764		$	86,071
Interest expense, net		31,648		32,645			97,583			43,664			131,276
Income tax provision (benefit)		9,163		(6,547	)		22,648			16,873			23,755
Depreciation and amortization		57,470		48,737			170,910			100,840			220,904
EBITDA		137,028		40,225			365,114			192,141			462,006
Stock-based compensation		12,489		23,121			40,402			31,435			53,046
Capital-based taxes		1,000		—			1,472			(636	)		2,936
Acquired EBITDA and cost savings (1)		—		1,482			5,814			92,717			14,670
Unusual or non-recurring charges (2)		311		9,719			7,065			19,969			13,244
Loss on extinguishment of debt		—		30,417			—			30,417			—
Purchase accounting adjustments (3)		5,573		27,274			29,831			27,973			51,785
Other (4)		269		78			1,822			220			2,452
Consolidated EBITDA	$	156,670	$	132,316		$	451,520		$	394,236		$	600,139
Less: acquired EBITDA		—		(1,482	)		(5,814	)		(92,717	)		(14,670	)
Adjusted Consolidated EBITDA	$	156,670	$	130,834		$	445,706		$	301,519		$	585,469

Note 4. Reconciliation of Net Income (Loss) to Adjusted Net Income and Diluted Earnings (Loss) Per Share to Adjusted Diluted Earnings Per Share

Adjusted net income and adjusted diluted earnings per share represent net income (loss) and earnings (loss) 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 (loss) or diluted earnings (loss) per share, as those terms are defined under GAAP, and should not be considered as alternatives to net income (loss) or diluted earnings (loss) 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 (loss) and diluted earnings (loss) per share.

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except per share data)	2016			2015			2016			2015
GAAP – Net income (loss)	$	38,747		$	(34,610	)	$	73,973		$	30,764
Plus: Amortization of intangible assets		51,539			43,289			153,214			87,782
Plus: Amortization of deferred financing costs and original issue discount		2,682			2,599			7,994			5,473
Plus: Stock-based compensation		12,489			23,121			40,402			31,435
Plus: Capital-based taxes		1,000			—			1,472			(636	)
Plus: Unusual and non-recurring items (1)		311			9,719			7,065			19,969
Plus: Loss on extinguishment of debt		—			30,417			—			30,417
Plus: Purchase accounting adjustments (2)		5,573			27,274			29,831			27,973
Income tax effect (3)		(24,858	)		(33,220	)		(71,600	)		(53,140	)
Adjusted net income	$	87,483		$	68,589		$	242,351		$	180,037
Adjusted diluted earnings (loss) per share	$	0.42		$	0.34		$	1.18		$	0.97
GAAP diluted earnings per share	$	0.19		$	(0.18	)	$	0.36		$	0.16
Diluted weighted-average shares outstanding		206,635			202,624			205,334			186,470

		Q4 2016			FY 2016
Adjusted Revenue ($M)	$394.0 – $403.0			$1,513.4 – $1,522.4
Adjusted Net Income ($M)	$89.4 – $92.4			$331.8 – $334.8
Cash from Operating Activities ($M)			—	$380.0 - $390.0
Capital Expenditures (% of revenue)			—	2.5% – 2.8%
Diluted Shares (M)	207.8 – 208.2			205.9 – 206.1
Effective Income Tax Rate (%)			—	27% – 29%