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SS&C Delivers Another Earnings Beat (and Another Huge Acquisition)

By Steve Symington – Nov 1, 2018 at 6:57PM

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From effective expense management to its third big acquisition this year, the financial services software leader is on a roll.

SS&C Technologies Holdings (SSNC -1.56%) released better-than-expected third-quarter 2018 results on Wednesday after the market closed. It highlighted the fruits of its $5.4 billion acquisition of DST earlier this year, the initial integration efforts of its recently closed purchase of fellow financial services company Eze Software, and yet another big acquisition to further expand its scope.

Shares closed up slightly on the news. Let's dig in for a better idea of what drove SS&C's results to start the second half.

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IMAGE SOURCE: GETTY IMAGES.

SS&C Technologies results: The raw numbers

Metric Q3 2018 Q3 2017 Year-Over-Year Growth

GAAP revenue

$992.4 million

$418.2 million

137.3%

GAAP net income (loss)

$57.0 million

$64.2 million

(11.2%)

GAAP earnings (loss) per diluted share

$0.23

$0.30

(23.3%)

DATA SOURCE: SS&C TECHNOLOGIES, INC. GAAP = generally accepted accounting principles.

What happened with SS&C this quarter?

  • Adjusted for the adoption of new accounting standards and purchase accounting adjustments to deferred revenue from acquisitions, SS&C's non-GAAP revenue climbed 139.1%, to $1.003 billion, driven by the DST acquisition.
  • Adjusted net income climbed 89.4%, to $199.8 million, while adjusted net income per diluted share rose 58%, to $0.79.
  • For perspective, in August, SS&C told investors to expect roughly the same adjusted revenue (in the range of $992 million to $1.012 billion), but with significantly lower adjusted net income per share of $0.64 to $0.66.
  • Adjusted software-enabled services revenue nearly tripled, to $827.3 million.
  • Adjusted license and maintenance revenue grew 25.5%, to $172.4 million.
  • Adjusted consolidated EBITDA increased 104.6%, to $365.9 million.
  • On September 6, 2018, SS&C announced it has agreed to acquire Intralinks Holdings for $1.5 billion, including $1 billion in cash and $500 million in SS&C stock. 
  • On October 1, 2018, SS&C closed on its previously announced $1.45 billion acquisition of Eze Software.

What management had to say

SS&C chairman and CEO Bill Stone noted the company achieved a "strong beat" on the bottom line relative to guidance, adding:

We were able to manage our expenses at both DST and core SS&C better than we anticipated, and had solid growth anchored in multi-term renewals in our Institutional and Investment Management business, a high margin business. The acquisition of Eze Software closed October 1, and we are pleased with the early integration efforts. We also announced our intention to acquire Intralinks, a strong business with high growth characteristics and world class technology. We believe this acquisition will strengthen SS&C's technology stack and contribute to our revenue growth goals.

Looking ahead

For the fourth quarter of 2018, SS&C expects adjusted revenue of $1.075 billion to $1.085 billion and adjusted net income of $210 million to $220 million. Based on its expected diluted share count for the quarter, that should translate to adjusted earnings per share of $0.82 to $0.86.

SS&C now expects full-year 2018 adjusted revenue of $3.421 billion to $3.431 billion (up from $3.356 billion to $3.396 billion before) and adjusted net income of $678 million to $688 million (up from $607 million to $617 million previously).

Those increased outlook ranges should include incremental contributions from the Eze Software purchase. With SS&C's relative earnings beat in the third quarter, its encouraging early progress integrating Eze, and the impending purchase of yet another large peer in the space, investors should be more than pleased with SS&C's position today.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends SS&C Technologies Holdings. The Motley Fool has a disclosure policy.

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