SS&C Technologies Caps a Solid Transformational Year

SS&C Technologies (SSNC 0.92%) announced fourth-quarter 2015 earnings Thursday after market close. Though shares initially dipped nearly 15% early Friday, they quickly rebounded to trade down a more modest 4% as investors mulled its largely solid report.

Let's take a closer look at what SS&C accomplished.

SS&C Technologies results: The raw numbers

Data source: SS&C Technologies.

What happened with SS&C this quarter?

• Based on generally accepted accounting principles (GAAP) -- which excludes $24.9 million in purchase accounting adjustments to deferred revenue from its acquisition of Advent last year -- revenue rose 49.9% year over year to $300.9 million.
• That includes a 48.4% increase in recurring subscription revenue to $273.1 million and a 66.3% increase in non-recurring revenue to $27.8 million.
• GAAP net income was $12.1 million, or $0.12 per share.
• Adjusted results exceeded SS&C's guidance for non-GAAP revenue of $312 million to $320 million and non-GAAP net income of $68.4 million to $72.2 million, or $0.67 to $0.71 on a per-share basis. Analysts' consensus estimates called for adjusted revenue of $319.4 million and adjusted earnings of $0.70 per share.
• Adjusted consolidated EBITDA climbed 66.2% to $139.8 million.
• Cash flow from operations grew 24.7% year over year in Q4 to $110.1 million, bringing full-year cash from operations to $230.6 million, down from $252.5 million in 2014. 2015 operating cash flow was negatively affected by $67 million in costs related to the financing and acquisition of Advent, Primatics Financial, and current pending acquisitions.
• Closed on its $122 million acquisition of Primatics in November, expanding loan accounting and reporting technology and services.
• Expects to close on its $425 million acquisition of Citi's Alternative Investor Services Business -- initially announced last August -- by the end of Q1 2016.
• Released second major round of product upgrades for the year in October, including enhancements for Geneva, Advent Portfolio Exchange, Axys, Moxy, Advent Revenue Center, Advent Rules Manager, Tamale RMS, and Syncova.
• Q3 ended with $434.2 million in cash and $2.82 billion in gross debt.

What management had to say 
SS&C Technologies CEO Bill Stone stated:

2015 was a transformational year and the fourth quarter provides a glimpse of the power of our business model. [...] Advent, DST Global Solutions, Primatics and Varden all contributed to our robust fourth quarter. The worldwide workforce of SS&C now totals almost 6,100 people and they are a talented, hardworking group. We look forward to adding the 1,400 dedicated Citi Alternative Investor Services employees to our team at the closing of the acquisition, which is expected to occur in the first quarter. 

Looking forward 
For the current quarter, SS&C expects adjusted revenue of $327 million to $333 million (up 60% at the midpoint) and adjusted net income of $72 million to $75 million. On a per-share basis, adjusted net income in Q1 should be roughly $0.70 to $0.74, up from $0.60 per share in the same year-ago period.

Finally, for full-year 2015, adjusted revenue should be $1.36 billion to $1.38 billion, with adjusted net income of $312.5 million to $325 million. Adjusted net income per share for fiscal 2015 should be in the range of $3.02 to $3.17, up from the $2.66 per share SS&C just achieved in 2015. By comparison, analysts' consensus estimates called for full-year adjusted revenue and earnings of $1.47 billion and $3.20 per share, respectively.

In the end, its slight guidance shortfall notwithstanding -- and keeping in mind the company's propensity for underpromising and overdelivering -- there were really no big surprises from SS&C Technologies this quarter. Over the long term as SS&C continues to increase its moat through modest organic growth and complementary acquisitions, I see no reason its stock can't continue to rise from here.