SS&C Technologies Holdings (SSNC 0.30%) announced fourth-quarter 2017 results on Thursday after the market closed. And though shares of the financial software-and-services leader were down slightly on the news, the company highlighted better-than-expected growth on broad-based demand for its products and services, completed implementations after previously delayed deals, and its massive planned acquisition of industry peer DST Systems (DST +0.00%).
Let's take a closer look at how SS&C Technologies ended the year, and what investors can expect from the company in the coming quarters.
IMAGE SOURCE: SS&C TECHNOLOGIES.
SS&C Technologies results: The raw numbers
| Metric |
Q4 2017 |
Q4 2016 |
Year-Over-Year Growth |
|---|---|---|---|
|
GAAP revenue |
$438.4 million |
$400.9 million |
9.3% |
|
GAAP net income |
$165.3 million |
$57.0 million | 190% |
|
GAAP earnings per share (diluted) |
$0.77 |
$0.28 | 175% |
DATA SOURCE: SS&C TECHNOLOGIES.
What happened with SS&C this quarter?
- On an adjusted (non-GAAP) basis, which excludes purchase accounting adjustments to deferred revenue from acquisitions, revenue grew 8.6% year over year, to $439.4 million -- above guidance for a range of $427 million to $437 million.
- Adjusted net income increased 20.3% year over year, to $114.5 million, and adjusted net income per share rose 17.4%, to $0.54 -- both above SS&C's guidance for adjusted earnings of $110 million to $113.9 million, or $0.52 to $0.53 on a per-share basis.
- Adjusted recurring revenue grew 11.2%, to $409.6 million, including 9.8% growth in software-enabled services, to $282.9 million, and 15.9% growth in maintenance and term licenses, to $126.7 million.
- Adjusted non-recurring revenue declined 15.2%, to $29.8 million, including a 1.5% increase from perpetual licenses, to $9.5 million, and a 24.4% decline in professional services.
- Adjusted consolidated EBITDA increased 14.5%, to $191.3 million.
- For the full year of 2018, cash from operations grew 12.4%, to $470.4 million.
- On January 11, 2018, the company announced an agreement to acquire DST Systems for $84 per share in cash -- funded by a combination of debt and equity financing -- for an enterprise value of $5.4 billion including assumption of debt.
- The acquisition is expected to close in either the second or third quarter of 2018, creating a combined company with pro forma revenue of $3.9 billion and consolidated EBITDA of $1.3 billion.
- SS&C expects to realize $150 million of annual run-rate cost synergies by 2020.
- The deal should be immediately accretive to adjusted earnings per share, even before synergies, with mid-teens earnings growth expected in 2019.
What management had to say
SS&C Chairman and CEO Bill Stone stated
SS&C had a strong fourth quarter in both revenue and earnings. Our growth came on the back of robust sales, completed implementations, and large new clients moving to full run-rate revenue. We also continued delivering acquisition synergies. We are pleased with the fourth quarter and now look forward to capitalizing on new products and services, and opportunities at DST.
Looking ahead
SS&C expects first-quarter 2018 adjusted revenue of $427 million to $437 million, adjusted net income of $113 million to $117.5 million, and adjusted earnings per share of roughly $0.53 to $0.54.
Finally, for the full-year 2018, SS&C expects adjusted revenue of $1.755 billion to $1.785 billion, adjusted net income of $480 million to $502 million, and adjusted net income per share of approximately $2.26 to $2.27. For perspective -- and this partly explains today's modest decline -- consensus estimates predicted slightly higher adjusted earnings of $2.30 per share on revenue of $1.78 billion.
All told, there were no big surprises in SS&C's results or outlook. Rather, the market will likely remain focused on the successful completion and subsequent integration of its enormous acquisition of DST in the coming months. In the meantime, I think investors should be pleased with its performance and industry leaderhsip position today.
