SS&C Technologies Reports Q2 2018 Results, Announces Management Changes

WINDSOR, Conn., Aug. 2, 2018 /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 second quarter ended June 30, 2018. 

GAAP Results

SS&C reported GAAP revenue of $895.8 million for the second quarter of 2018, up 118.0 percent compared to $411.0 million in the second quarter of 2017.  GAAP operating loss for the second quarter of 2018 was ($50.7) million, or (5.7) percent of GAAP revenue, compared to $89.9 million, or 21.9 percent of GAAP revenue, in 2017's second quarter, representing a 156.4 percent decrease.  

GAAP net loss for the second quarter of 2018 was ($63.7) million, down 224.7 percent compared to $51.1 million in 2017's second quarter.  On a fully diluted GAAP basis, loss per share in the second quarter of 2018 were $(0.27) per share, down 212.5 percent compared to $0.24 earnings per share on a fully diluted GAAP basis in the second quarter of 2017. 

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

Adjusted revenue was $908.5 million for the second quarter of 2018, up 119.4 percent compared to $414.0 million in the second quarter of 2017.  Adjusted operating income for the second quarter of 2018 was $271.8 million, or 29.9 percent of adjusted revenue, compared to $157.4 million, or 38.0 percent of adjusted revenue, in 2017's second quarter, representing a 72.7 percent increase.  

Adjusted net income for the second quarter of 2018 was $154.6 million, up 60.7 percent compared to $96.2 million in 2017's second quarter.  Adjusted diluted earnings per share in the second quarter of 2018 were $0.62 per share, up 34.8 percent compared to $0.46 per share in the second quarter of 2017.

Management Changes

SS&C Technologies announced today Rahul Kanwar, Executive Vice President, has been named President and Chief Operating Officer.  Normand A. Boulanger will become Vice Chairman and have executive responsibilities for revenue management and technology innovation.

"Rahul Kanwar is an extremely talented individual who I have had the pleasure of working with since our March of 2005 acquisition of EisnerFast, the fund administration area of Eisner LLP.  Rahul has guided our alternatives business since 2005 and has had increasing responsibility throughout the last 13 years" says Bill Stone, Chairman and Chief Executive Officer. "Norm Boulanger has been with SS&C since 1994 and has been instrumental in our success.  Norm has had increasing responsibilities throughout his 24 year career at SS&C since beginning as a manager in our professional services business. All of us have worked closely together and we look forward to continuing on as these talented executives assume new critical roles."

Second Quarter Highlights:

• Adjusted net income was $154.6 million for Q2 2018, increasing 60.7 percent from Q2 2017's adjusted net income of $96.2 million.
• Adjusted consolidated EBITDA increased 78.3 percent to $291.8 million in Q2 2018. Adjusted consolidated EBITDA margin was 32.2 percent for the quarter.
• Paid down $408.2 million in debt since acquiring DST Systems, bringing our leverage ratio to 4.40 times consolidated EBITDA as of June 30, 2018.
• On July 31, 2018, SS&C announced a definitive agreement to acquire Eze Software in an all cash transaction of $1.45 billion.

"SS&C Technologies had strong performance across board in Q2 2018. We saw growth, stability, and innovation within our fund administration and software businesses, and the DST integration is progressing smoothly" said Bill Stone, Chairman and Chief Executive Officer. "Client feedback has been positive and we are leveraging our capabilities across the combined organization. We also announced our intention to acquire Eze Software, expected to close in Q4 2018. This acquisition will further SS&C's prominence in the hedge fund market, and strengthen our offering in front-office trading solutions."

Operating Cash Flow

SS&C generated net cash from operating activities of $119.7 million for the six months ended June 30, 2018, compared to $195.2 million for the same period in 2017, representing a 38.7 percent decrease. Operating cash flow was impacted by approximately $135.0 million of transaction costs related to the acquisition of DST Systems. SS&C ended the second quarter with $785.1 million in cash and cash equivalents and $6,992.5 million in gross debt, for a net debt balance of $6,207.4 million.  SS&C's consolidated net leverage ratio as defined in our credit agreement stood at 4.40 times consolidated EBITDA as of June 30, 2018.

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 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 2018 earnings call will take place at 5:00 p.m. eastern time today, August 2, 2018.  The call will discuss Q2 2018 results and our guidance and business outlook.  Interested parties may dial 844-343-4183 (US and Canada) or 647-689-5128 (International), and request the "SS&C Technologies Second Quarter 2018 Conference Call"; conference ID #3579163.  A replay will be available after 8:00 p.m. eastern time on August 2, 2018, until midnight on August 9, 2018.  The replay dial-in number is 800-585-8367 or 416-621-4642; access code #3579163.  The call will also be available for replay on SS&C's website after August 2, 2018; access: http://investor.ssctech.com/results.cfm.

Certain information contained in this press release relating to, among other things, the Company's financial guidance for the third quarter and full year of 2018 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 and other industries in which the Company's clients operate, the Company's ability to realize anticipated benefits from its acquisitions, including DST Systems, the effect of the customer consolidation on demand for the Company's products and services, the increasing focus of the Company's business on the hedge fund industry, the variability of revenue as a result of activity in the securities markets, the ability to retain and attract clients, fluctuations in customer demand for the Company's products and services, the intensity of competition with respect to the Company's products and services, the exposure to litigation and other claims, terrorist activities and other catastrophic events, disruptions, attacks or failures affecting the Company's software-enabled services, risks associated with the Company's foreign operations, privacy concerns relating to the collection and storage of person information, evolving regulations and increased scrutiny from regulators,  the Company's ability to protect intellectual property assets and litigation regarding intellectual property rights, delays in product development, investment decisions concerning cash balances, regulatory and tax risks, risks associated with the Company's joint ventures, changes in accounting standards, risks related to the Company's substantial indebtedness, the market price of the Company's stock prevailing from time to time, and the risks discussed in the "Risk Factors" section of the Company's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, which are 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 Technologies

SS&C is a global provider of investment and financial software-enabled services and software for the global financial services and healthcare industries.  Founded in 1986, SS&C is headquartered in Windsor, Connecticut and has offices around the world.  Some 13,000 financial services and healthcare organizations, from the world's largest institutions to local firms, manage and account for their investments using SS&C's products and services.  

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SS&C Technologies Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Information

Note 1. Reconciliation of Revenues to Adjusted Revenues

Adjusted revenues represents revenues adjusted to include a) amounts that would have been recognized if deferred revenue were not adjusted to fair value at the date of acquisition and b) amounts that would have been recognized if not for adjustments to deferred revenue and retained earnings related to the adoption of ASC 606.  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 software-enabled services and license, maintenance and related revenues and adjusted software-enabled services and license, maintenance and related revenues.

Note 2. Reconciliation of Operating (Loss) Income to Adjusted Operating Income

Adjusted operating income represents operating (loss) 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 (loss) income, as that term is defined under GAAP, and should not be considered as an alternative to operating (loss) 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 (loss) income, the GAAP measure we believe to be most directly comparable to adjusted operating income.

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

EBITDA represents net (loss) 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 (loss) income, net (loss) 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 (loss) income.

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

Adjusted net income and adjusted diluted earnings per share represent net (loss) income and (loss) earnings per share before amortization of intangible assets and deferred financing costs, stock-based compensation, capital-based taxes and other items.  Adjusted net income and adjusted diluted earnings per share are not recognized terms under GAAP, do not represent net (loss) income or diluted (loss) earnings per share, as those terms are defined under GAAP, and should not be considered as alternatives to net (loss) income or diluted (loss) 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 (loss) income and diluted (loss) earnings per share.

SOURCE SS&C

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