SS&C Technologies Holdings (SSNC 0.88%) announced strong second-quarter 2018 results on Thursday after the market closed, marking the financial services software company's first full quarter of consolidated results following its $5.4 billion acquisition of DST. If that weren't enough, SS&C detailed another large acquisition to further bolster its reach.
With shares up more than 4% and closing at a fresh 52-week high to end the week, let's take a closer look at how SS&C ended the first half, as well as what investors should expect in the coming months.
IMAGE SOURCE: SS&C TECHNOLOGIES.
SS&C Technologies results: The raw numbers
| Metric | Q2 2018 | Q2 2017 | Year-Over-Year Growth |
|---|---|---|---|
|
GAAP revenue |
$895.8 million |
$411.0 million |
118% |
|
GAAP net income (loss) |
($63.7 million) |
$51.1 million | N/A |
|
GAAP earnings (loss) per diluted share |
($0.27) |
$0.24 |
N/A |
DATA SOURCE: SS&C TECHNOLOGIES, INC.
What happened with SS&C this quarter?
- On a non-GAAP basis -- which adjusts for recently adopted accounting standards and purchase accounting adjustments to deferred revenue from acquisitions -- revenue increased 119.4% to $908.5 million. This pronounced growth was largely driven by contributions from the DST acquisition.
- Adjusted net income went up 60.7% year over year to $154.6 million, while adjusted net income per share grew 34.8% to $0.46.
- By comparison, SS&C's guidance provided in May called for lower adjusted earnings in the range of $131.6 million to $140.8 million and adjusted revenue of $895 million to $915 million.
- Within the top line, adjusted software-enabled services revenue grew 173.1% to $908.5 million, while license and maintenance revenue rose 16.1% to $164.3 million.
- Adjusted consolidated EBITDA jumped 78.3% to $291.8 million.
- Subsequent to the end of the quarter on July 31, 2018, SS&C announced a definitive agreement to acquire financial services software company Eze Software for $1.45 billion in cash. The purchase will add 1,050 employees in 15 offices and over 2,500 clients across five continents.
What management had to say
SS&C chairman and CEO Bill Stone stated:
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. 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.
Looking ahead
For the third quarter of 2018, SS&C expects adjusted revenue ranging from $992 million to $1.012 billion, which should translate to adjusted net income of $162 million to $168 million. Based on its anticipated diluted share count, that should mean adjusted earnings per share in the range of $0.64 to $0.66.
SS&C modestly increased its full-year 2018 guidance to call for adjusted revenue to be in the range of $3.356 billion to $3.396 billion (up from $3.344 billion to $3.404 billion previously) and adjusted net income of $607 million to $617 million (up from $546.7 million to $575.3 million before).
All things considered, this was a straightforward quarterly beat-and-raise scenario from SS&C, followed by the extension of its successful pursuit of substantial acquisitive growth. And I think investors were justified in driving the stock to new heights in response.
