Q2 GAAP revenue $411.0 million, up 10.2 percent, Fully Diluted GAAP Earnings Per Share $0.24, up 71.4 percent
Adjusted revenue $414.1 million, up 7.7 percent, Adjusted Diluted Earnings Per Share $0.46, up 17.9 percent
WINDSOR, Conn., July 27, 2017 /CNW/ -- 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, 2017.
GAAP Results
SS&C reported GAAP revenue of $411.0 million for the second quarter of 2017, up 10.2 percent compared to $373.1 million in the second quarter of 2016. GAAP operating income for the second quarter of 2017 was $90.0 million, or 21.9 percent of GAAP revenue compared to $66.0 million, or 17.7 percent of GAAP revenue in 2016's second quarter, representing a 36.3 percent increase.
GAAP net income for the second quarter of 2017 was $51.2 million, up 81.3 percent compared to $28.2 million in 2016's second quarter. On a fully diluted GAAP basis, earnings per share in the second quarter of 2017 were $0.24 per share, up 71.4 percent compared to $0.14 per share on a fully diluted GAAP basis in the second quarter of 2016.
Adjusted Non-GAAP Results (defined in Notes 1-4 below)
Adjusted revenue was $414.1 million for the second quarter of 2017, up 7.7 percent compared to $384.4 million in the second quarter of 2016. Adjusted operating income for the second quarter of 2017 was $157.3 million, or 38.0 percent of adjusted revenue compared to $140.5 million, or 36.6 percent of adjusted revenue in 2016's second quarter, representing a 12.0 percent increase.
Adjusted net income for the second quarter of 2017 was $96.2 million, up 21.1 percent compared to $79.4 million in 2016's second quarter. Adjusted diluted earnings per share in the second quarter of 2017 were $0.46 per share, up 17.9 percent compared to $0.39 per share in the second quarter of 2016.
Highlights:
"Q2 2017 marks our 21st straight quarter of revenue growth, growing adjusted revenue 7.7 percent, and, in the first six months we generated $193.8 million in cash flow up 39.1 percent," says Bill Stone, Chairman and Chief Executive Officer of SS&C Technologies. "SS&C's continuous investment in our 8,200 strong workforce and a relentless focus on customer service, delivers a superior customer experience. We have become one of the world's largest financial technology companies and our investments have strengthened our competitive advantage. We have been honored to receive numerous industry awards for technology and service over the past several years, and this quarter SS&C was named to Forbes' America's Best Midsized Employers.
Looking forward we will continue to explore opportunities to reinvent the way we capture, process and deliver investment information. The various consumers of our output rely on us to stay abreast of new financial instruments, tax and financial reporting requirements, and changing investment strategies. SS&C's clients understand our commitment and, during Q2 we spent over $39 million in research and development."
Annual Run Rate Basis
Annual Run Rate Basis (ARRB) recurring revenue, defined as adjusted recurring revenue on an annualized basis, was $1,549.7 million based on adjusted recurring revenue $387.4 million for the second quarter of 2017. This represents an increase of 8.8 percent from $356.1 million and $1,424.3 million run-rate in the same period in 2016 and an increase of 0.1 percent from $387.2 million for the first quarter of 2017, an annual run rate of $1,548.9 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.
Operating Cash Flow
SS&C generated net cash from operating activities of $193.8 million for the six months ended June 30, 2017, compared to $139.3 million for the same period in 2016, representing a 39.1 percent increase. SS&C ended the quarter with $90.4 million in cash and cash equivalents and $2,351.2 million in gross debt, for a net debt balance of $2,260.8 million. SS&C's leverage ratio as defined in our credit agreement stood at 3.45 times consolidated EBITDA as of June 30, 2017.
Guidance
| Q3 2017 |
FY 2017 |
|||||||||
| Adjusted Revenue ($M) |
$420.0 – $428.0 |
$1,669.0 – $1,689.0 |
||||||||
| Adjusted Net Income ($M) |
$103.5 – $108.0 |
$403.0 – $413.0 |
||||||||
| Cash from Operating Activities ($M) |
– |
$485.0 – $500.0 |
||||||||
| Capital Expenditures (% of revenue) |
– |
2.8% – 3.2% |
||||||||
| Diluted Shares (M) |
212.4 – 213.0 |
211.3 – 212.1 |
||||||||
| Effective Income Tax Rate (%) |
28% |
28% |
||||||||
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 2017 earnings call will take place at 5:00 p.m. eastern time today, July 27, 2017. The call will discuss Q2 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 Second Quarter 2017 Conference Call"; conference ID #3714534. A replay will be available after 8:00 p.m. eastern time on July 27, 2017, until midnight on August 3, 2017. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code #3714534. The call will also be available for replay on SS&C's website after July 27, 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 third 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. 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. 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 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.
Follow SS&C on Twitter, LinkedIn and Facebook.
| SS&C Technologies Holdings, Inc. and Subsidiaries |
|||||||||||||||||||
| Condensed Consolidated Statements of Operations |
|||||||||||||||||||
| (in thousands, except per share data) |
|||||||||||||||||||
| (unaudited) |
|||||||||||||||||||
| Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||||
| 2017 |
2016 |
2017 |
2016 |
||||||||||||||||
| Revenues: |
|||||||||||||||||||
| Software-enabled services |
$ |
272,518 |
$ |
244,672 |
$ |
548,970 |
$ |
450,319 |
|||||||||||
| Maintenance and term licenses |
113,614 |
103,392 |
224,171 |
198,512 |
|||||||||||||||
| Total recurring revenues |
386,132 |
348,064 |
773,141 |
648,831 |
|||||||||||||||
| Perpetual licenses |
3,822 |
5,039 |
6,650 |
10,254 |
|||||||||||||||
| Professional services |
21,026 |
19,974 |
38,888 |
38,123 |
|||||||||||||||
| Total non-recurring revenues |
24,848 |
25,013 |
45,538 |
48,377 |
|||||||||||||||
| Total revenues |
410,980 |
373,077 |
818,679 |
697,208 |
|||||||||||||||
| Cost of revenues: |
|||||||||||||||||||
| Software-enabled services |
158,888 |
146,243 |
312,894 |
259,971 |
|||||||||||||||
| Maintenance and term licenses |
47,280 |
46,460 |
94,265 |
93,406 |
|||||||||||||||
| Total recurring cost of revenues |
206,168 |
192,703 |
407,159 |
353,377 |
|||||||||||||||
| Perpetual licenses |
650 |
643 |
1,215 |
1,141 |
|||||||||||||||
| Professional services |
16,874 |
17,133 |
32,777 |
32,645 |
|||||||||||||||
| Total non-recurring cost of revenues |
17,524 |
17,776 |
33,992 |
33,786 |
|||||||||||||||
| Total cost of revenues |
223,692 |
210,479 |
441,151 |
387,163 |
|||||||||||||||
| Gross profit |
187,288 |
162,598 |
377,528 |
310,045 |
|||||||||||||||
| Operating expenses: |
|||||||||||||||||||
| Selling and marketing |
30,121 |
28,535 |
60,363 |
58,396 |
|||||||||||||||
| Research and development |
39,079 |
40,827 |
77,528 |
77,274 |
|||||||||||||||
| General and administrative |
28,103 |
27,199 |
59,935 |
57,894 |
|||||||||||||||
| Total operating expenses |
97,303 |
96,561 |
197,826 |
193,564 |
|||||||||||||||
| Operating income |
89,985 |
66,037 |
179,702 |
116,481 |
|||||||||||||||
| Interest expense, net |
(26,295) |
(32,846) |
(55,315) |
(65,935) |
|||||||||||||||
| Other (expense) income, net |
(1,197) |
12 |
(1,268) |
(1,835) |
|||||||||||||||
| Loss on extinguishment of debt |
— |
— |
(2,326) |
— |
|||||||||||||||
| Income before income taxes |
62,493 |
33,203 |
120,793 |
48,711 |
|||||||||||||||
| Provision for income taxes |
11,342 |
4,982 |
21,495 |
13,485 |
|||||||||||||||
| Net income |
$ |
51,151 |
$ |
28,221 |
$ |
99,298 |
$ |
35,226 |
|||||||||||
| Basic earnings per share |
$ |
0.25 |
$ |
0.14 |
$ |
0.49 |
$ |
0.18 |
|||||||||||
| Diluted earnings per share |
$ |
0.24 |
$ |
0.14 |
$ |
0.47 |
$ |
0.17 |
|||||||||||
| Basic weighted average number of common shares outstanding |
204,550 |
198,765 |
203,966 |
198,143 |
|||||||||||||||
| Diluted weighted average number of common and common equivalent shares outstanding |
211,299 |
204,916 |
210,478 |
204,596 |
|||||||||||||||
| Cash dividends declared and paid per common share |
$ |
0.0625 |
$ |
0.0625 |
$ |
0.1250 |
$ |
0.1250 |
|||||||||||
| Net income |
$ |
51,151 |
$ |
28,221 |
$ |
99,298 |
$ |
35,226 |
|||||||||||
| Other comprehensive income (loss), net of tax: |
|||||||||||||||||||
| Foreign currency exchange translation adjustment |
20,966 |
(26,793) |
31,745 |
(17,472) |
|||||||||||||||
| Total comprehensive income (loss), net of tax |
20,966 |
(26,793) |
31,745 |
(17,472) |
|||||||||||||||
| Comprehensive income |
$ |
72,117 |
$ |
1,428 |
$ |
131,043 |
$ |
17,754 |
|||||||||||
| See Notes to Condensed Consolidated Financial Information. |
|||||||||||||||||||
| SS&C Technologies Holdings, Inc. and Subsidiaries |
||||||||
| Condensed Consolidated Balance Sheets |
||||||||
| (in thousands) |
||||||||
| (unaudited) |
||||||||
| June 30, |
December 31, |
|||||||
| 2017 |
2016 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
90,370 |
$ |
117,558 |
||||
| Accounts receivable, net |
235,811 |
241,307 |
||||||
| Prepaid expenses and other current assets |
32,875 |
31,119 |
||||||
| Prepaid income taxes |
18,032 |
23,012 |
||||||
| Restricted cash |
1,880 |
2,116 |
||||||
| Total current assets |
378,968 |
415,112 |
||||||
| Property, plant and equipment, net |
100,908 |
80,395 |
||||||
| Deferred income taxes |
2,136 |
2,410 |
||||||
| Goodwill |
3,676,586 |
3,652,733 |
||||||
| Intangible and other assets, net |
1,459,803 |
1,556,321 |
||||||
| Total assets |
$ |
5,618,401 |
$ |
5,706,971 |
||||
| LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
| Current liabilities: |
||||||||
| Current portion of long-term debt |
$ |
37,183 |
$ |
126,144 |
||||
| Accounts payable |
32,668 |
16,490 |
||||||
| Income taxes payable |
— |
3,473 |
||||||
| Accrued employee compensation and benefits |
60,846 |
104,118 |
||||||
| Interest payable |
16,156 |
21,470 |
||||||
| Other accrued expenses |
43,044 |
53,708 |
||||||
| Deferred revenue |
234,077 |
235,222 |
||||||
| Total current liabilities |
423,974 |
560,625 |
||||||
| Long-term debt, net of current portion |
2,261,791 |
2,374,986 |
||||||
| Other long-term liabilities |
81,770 |
59,227 |
||||||
| Deferred income taxes |
432,688 |
453,555 |
||||||
| Total liabilities |
3,200,223 |
3,448,393 |
||||||
| Total stockholders' equity |
2,418,178 |
2,258,578 |
||||||
| Total liabilities and stockholders' equity |
$ |
5,618,401 |
$ |
5,706,971 |
||||
| 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, |
||||||||
| 2017 |
2016 |
|||||||
| Cash flow from operating activities: |
||||||||
| Net income |
$ |
99,298 |
$ |
35,226 |
||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
117,213 |
113,440 |
||||||
| Stock-based compensation expense |
21,278 |
27,913 |
||||||
| Income tax benefit related to exercise of stock options |
— |
(23,760) |
||||||
| Amortization and write-offs of loan origination costs |
5,281 |
5,312 |
||||||
| Loss on extinguishment of debt |
963 |
— |
||||||
| Loss on sale or disposition of property and equipment |
12 |
150 |
||||||
| Deferred income taxes |
(14,970) |
(24,056) |
||||||
| Provision for doubtful accounts |
3,218 |
1,257 |
||||||
| Changes in operating assets and liabilities, excluding effects from acquisitions: |
||||||||
| Accounts receivable |
3,411 |
(13,458) |
||||||
| Prepaid expenses and other assets |
(1,326) |
(1,516) |
||||||
| Accounts payable |
14,895 |
7,870 |
||||||
| Accrued expenses |
(54,543) |
(25,851) |
||||||
| Income taxes prepaid and payable |
2,562 |
23,757 |
||||||
| Deferred revenue |
(3,471) |
13,052 |
||||||
| Net cash provided by operating activities |
193,821 |
139,336 |
||||||
| Cash flow from investing activities: |
||||||||
| Additions to property and equipment |
(19,368) |
(13,593) |
||||||
| Proceeds from sale of property and equipment |
1 |
43 |
||||||
| Cash paid for business acquisitions, net of cash acquired |
1,805 |
(317,554) |
||||||
| Additions to capitalized software |
(5,636) |
(3,306) |
||||||
| Purchase of long-term investment |
— |
(1,000) |
||||||
| Net cash used in investing activities |
(23,198) |
(335,410) |
||||||
| Cash flow from financing activities: |
||||||||
| Cash received from debt borrowings |
45,000 |
— |
||||||
| Repayments of debt |
(253,400) |
(155,325) |
||||||
| Proceeds from exercise of stock options |
35,855 |
19,212 |
||||||
| Withholding taxes related to equity award net share settlement |
(3,057) |
(4,615) |
||||||
| Income tax benefit related to exercise of stock options |
— |
23,760 |
||||||
| Purchase of common stock for treasury |
— |
(11) |
||||||
| Payment of fees related to refinancing activities |
— |
(222) |
||||||
| Dividends paid on common stock |
(25,521) |
(24,790) |
||||||
| Net cash used in financing activities |
(201,123) |
(141,991) |
||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash |
3,076 |
(872) |
||||||
| Net decrease in cash, cash equivalents and restricted cash |
(27,424) |
(338,937) |
||||||
| Cash, cash equivalents and restricted cash, beginning of period |
119,674 |
436,977 |
||||||
| Cash, cash equivalents and restricted cash, end of period |
$ |
92,250 |
$ |
98,040 |
||||
| See Notes to Condensed Consolidated Financial Information. |
||||||||
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 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.
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| (in thousands) |
2017 |
2016 |
2017 |
2016 |
||||||||||||
| Revenues |
$ |
410,980 |
$ |
373,077 |
$ |
818,679 |
$ |
697,208 |
||||||||
| Purchase accounting adjustments to deferred revenue |
3,107 |
11,335 |
4,927 |
30,318 |
||||||||||||
| Adjusted revenues |
$ |
414,087 |
$ |
384,412 |
$ |
823,606 |
$ |
727,526 |
||||||||
The following is a breakdown of recurring and non-recurring revenues and adjusted recurring and non-recurring revenues.
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| (in thousands) |
2017 |
2016 |
2017 |
2016 |
||||||||||||
| Software-enabled services |
$ |
272,518 |
$ |
244,672 |
$ |
548,970 |
$ |
450,319 |
||||||||
| Maintenance and term licenses |
113,614 |
103,392 |
224,171 |
198,512 |
||||||||||||
| Total recurring revenues |
386,132 |
348,064 |
773,141 |
648,831 |
||||||||||||
| Perpetual licenses |
3,822 |
5,039 |
6,650 |
10,254 |
||||||||||||
| Professional services |
21,026 |
19,974 |
38,888 |
38,123 |
||||||||||||
| Total non-recurring revenues |
24,848 |
25,013 |
45,538 |
48,377 |
||||||||||||
| Total revenues |
$ |
410,980 |
$ |
373,077 |
$ |
818,679 |
$ |
697,208 |
||||||||
| Software-enabled services |
$ |
272,518 |
$ |
244,763 |
$ |
548,970 |
$ |
450,549 |
||||||||
| Maintenance and term licenses |
114,916 |
111,324 |
225,679 |
221,274 |
||||||||||||
| Total adjusted recurring revenues |
387,434 |
356,087 |
774,649 |
671,823 |
||||||||||||
| Perpetual licenses |
3,822 |
5,039 |
6,650 |
10,254 |
||||||||||||
| Professional services |
22,831 |
23,286 |
42,307 |
45,449 |
||||||||||||
| Total adjusted non-recurring revenues |
26,653 |
28,325 |
48,957 |
55,703 |
||||||||||||
| Total adjusted revenues |
$ |
414,087 |
$ |
384,412 |
$ |
823,606 |
$ |
727,526 |
||||||||
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.
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| (in thousands) |
2017 |
2016 |
2017 |
2016 |
||||||||||||
| Operating income |
$ |
89,985 |
$ |
66,037 |
$ |
179,702 |
$ |
116,481 |
||||||||
| Amortization of intangible assets |
52,742 |
51,995 |
105,150 |
101,675 |
||||||||||||
| Stock-based compensation |
10,378 |
12,566 |
21,278 |
27,913 |
||||||||||||
| Capital-based taxes |
375 |
— |
750 |
472 |
||||||||||||
| Purchase accounting adjustments (1) |
2,653 |
8,630 |
3,005 |
24,258 |
||||||||||||
| Other (2) |
1,212 |
1,301 |
2,896 |
4,919 |
||||||||||||
| Adjusted operating income |
$ |
157,345 |
$ |
140,529 |
$ |
312,781 |
$ |
275,718 |
||||||||
| (1) |
Purchase accounting adjustments include (a) an adjustment to increase revenues by the amount that would have been recognized if deferred revenue were not adjusted to fair value at the date of acquisitions and (b) an adjustment to increase personnel and commissions expense by the amount that would have been recognized if prepaid commissions and deferred personnel costs were not adjusted to fair value at the date of the acquisitions. |
| (2) |
Other includes expenses and income that are permitted to be excluded per the terms of our Credit Agreement from Consolidated EBITDA, a financial measure used in calculating our covenant compliance. These include expenses and income related to currency transactions, facilities and workforce restructuring, legal settlements and business combinations, among other infrequently occurring transactions. |
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.
| Three Months Ended |
Six Months Ended |
Twelve |
||||||||||||||||||
| (in thousands) |
2017 |
2016 |
2017 |
2016 |
2017 |
|||||||||||||||
| Net income |
$ |
51,151 |
$ |
28,221 |
$ |
99,298 |
$ |
35,226 |
$ |
195,068 |
||||||||||
| Interest expense, net |
26,295 |
32,846 |
55,315 |
65,935 |
117,834 |
|||||||||||||||
| Provision for income tax |
11,342 |
4,982 |
21,495 |
13,485 |
40,630 |
|||||||||||||||
| Depreciation and amortization |
58,656 |
58,167 |
117,213 |
113,440 |
232,456 |
|||||||||||||||
| EBITDA |
147,444 |
124,216 |
293,321 |
228,086 |
585,988 |
|||||||||||||||
| Stock-based compensation |
10,378 |
12,566 |
21,278 |
27,913 |
43,929 |
|||||||||||||||
| Capital-based taxes |
375 |
— |
750 |
472 |
1,760 |
|||||||||||||||
| Acquired EBITDA and cost savings (1) |
81 |
1,046 |
889 |
5,814 |
6,274 |
|||||||||||||||
| Non-cash portion of straight-line rent expense |
478 |
769 |
546 |
1,553 |
1,191 |
|||||||||||||||
| Loss on extinguishment of debt |
— |
— |
2,326 |
— |
2,326 |
|||||||||||||||
| Purchase accounting adjustments (2) |
2,653 |
8,630 |
3,005 |
24,258 |
10,366 |
|||||||||||||||
| Other (3) |
2,409 |
1,289 |
4,164 |
6,754 |
3,301 |
|||||||||||||||
| Consolidated EBITDA |
$ |
163,818 |
$ |
148,516 |
$ |
326,279 |
$ |
294,850 |
$ |
655,135 |
||||||||||
| Less: acquired EBITDA |
(81) |
(1,046) |
(889) |
(5,814) |
(6,274) |
|||||||||||||||
| Adjusted Consolidated EBITDA |
$ |
163,737 |
$ |
147,470 |
$ |
325,390 |
$ |
289,036 |
$ |
648,861 |
||||||||||
| (1) |
Acquired EBITDA reflects the EBITDA impact of significant businesses that were acquired during the period as if the acquisition occurred at the beginning of the period, as well as cost savings enacted in connection with acquisitions. |
| (2) |
Purchase accounting adjustments include (a) an adjustment to increase revenues by the amount that would have been recognized if deferred revenue were not adjusted to fair value at the date of acquisitions and (b) an adjustment to increase personnel and commissions expense by the amount that would have been recognized if prepaid commissions and deferred personnel costs were not adjusted to fair value at the date of the acquisitions. |
| (3) |
Other includes expenses and income that are permitted to be excluded per the terms of our Credit Agreement from Consolidated EBITDA, a financial measure used in calculating our covenant compliance. These include expenses and income related to currency transactions, facilities and workforce restructuring, legal settlements and business combinations, among other infrequently occurring transactions. |
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.
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| (in thousands, except per share data) |
2017 |
2016 |
2017 |
2016 |
||||||||||||
| GAAP – Net income |
$ |
51,151 |
$ |
28,221 |
$ |
99,298 |
$ |
35,226 |
||||||||
| Plus: Amortization of intangible assets |
52,742 |
51,995 |
105,150 |
101,675 |
||||||||||||
| Plus: Amortization of deferred financing costs and original issue discount |
2,625 |
2,659 |
5,281 |
5,312 |
||||||||||||
| Plus: Stock-based compensation |
10,378 |
12,566 |
21,278 |
27,913 |
||||||||||||
| Plus: Capital-based taxes |
375 |
— |
750 |
472 |
||||||||||||
| Plus: Loss on extinguishment of debt |
— |
— |
2,326 |
— |
||||||||||||
| Plus: Purchase accounting adjustments (1) |
2,653 |
8,630 |
3,005 |
24,258 |
||||||||||||
| Plus: Other (2) |
2,409 |
1,289 |
4,164 |
6,754 |
||||||||||||
| Income tax effect (3) |
(26,087) |
(25,914) |
(52,074) |
(46,742) |
||||||||||||
| Adjusted net income |
$ |
96,246 |
$ |
79,446 |
$ |
189,178 |
$ |
154,868 |
||||||||
| Adjusted diluted earnings per share |
$ |
0.46 |
$ |
0.39 |
$ |
0.90 |
$ |
0.76 |
||||||||
| GAAP diluted earnings per share |
$ |
0.24 |
$ |
0.14 |
$ |
0.47 |
$ |
0.17 |
||||||||
| Diluted weighted-average shares outstanding |
211,299 |
204,916 |
210,478 |
204,596 |
||||||||||||
| (1) |
Purchase accounting adjustments include (a) an adjustment to increase revenues by the amount that would have been recognized if deferred revenue were not adjusted to fair value at the date of acquisitions and (b) an adjustment to increase personnel and commissions expense by the amount that would have been recognized if prepaid commissions and deferred personnel costs were not adjusted to fair value at the date of the acquisitions. |
| (2) |
Other includes expenses and income that are permitted to be excluded per the terms of our Credit Agreement from Consolidated EBITDA, a financial measure used in calculating our covenant compliance. These include expenses and income related to currency transactions, facilities and workforce restructuring, legal settlements and business combinations, among other infrequently occurring transactions. |
| (3) |
An estimated normalized effective tax rate of 28% has been used to adjust the provision for income taxes for the purpose of computing adjusted net income. |
SOURCE SS&C
Patrick Pedonti, Chief Financial Officer, Tel: +1-860-298-4738, E-mail: [email protected], or Justine Stone, Investor Relations, Tel: +1-212-367-4705, E-mail: [email protected], http://www.ssctech.com
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