SS&C Technologies Holdings (SSNC +1.00%) released first-quarter 2019 results on Tuesday after the market closed, showcasing yet another quarter of hearty growth thanks to its three large acquisitions over the past year.
The financial services software company also detailed progress improving its balance sheet while successfully integrating those purchases into its existing core business. Thanks to a slight downward revision to its full-year revenue outlook and plans to hopefully revitalize revenue growth in the second half, the market isn't particularly happy with SS&C today, driving shares down around 8% in after-hours trading.
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SS&C Technologies results: The raw numbers
| Metric | Q1 2019 | Q1 2018 | Year-Over-Year Growth |
|---|---|---|---|
|
GAAP revenue |
$1.137 billion |
$421.9 million |
169.5% |
|
GAAP net income |
$80.8 million |
$51.3 million | 57.5% |
|
GAAP earnings per diluted share |
$0.31 |
$0.24 | 29.2% |
DATA SOURCE: SS&C TECHNOLOGIES. GAAP = generally accepted accounting principles.
What happened with SS&C this quarter?
- Adjusted for new accounting standards and purchase accounting adjustments to deferred revenue from acquisitions, (non-GAAP) revenue climbed 164.7% year over year, to $1.15 billion.
- Adjusted net income soared 108.5% to $239.4 million, and rose 71.7% on a per-share basis to $0.91.
- By comparison, these results were comfortably above the midpoints of SS&C's guidance (provided in February) for adjusted revenue of $1.132 billion to $1.162 billion and adjusted earnings per share of $0.83 to $0.89.
- Adjusted software-enabled services revenue grew 229.7% to $972 million, while license and maintenance revenue increased 30% to $165.2 million.
- Adjusted consolidated EBITDA jumped 148.1% to $443.4 million.
- SS&C has implemented $265 million in cost synergies since its acquisition of DST Systems in early 2018, reaching roughly 88% of its $300 million goal.
- On March 28, the company issued $2 billion in fixed unsecured senior notes at an annual interest rate of 5.5%, removing $1.99 billion of its variable-rate debt.
What management had to say
SS&C chairman and CEO Bill Stone elaborated:
SS&C delivered record revenue and record earnings in Q1 2019[...]. We are delighted with progress made in our 2018 acquisitions: DST, Eze and Intralinks. Product integrations, pipeline growth, and collaboration between business units are all advances. We continue to build software and cross sell our products and services. We are optimistic we will accelerate revenue in the back half of this year.
Looking ahead
For the second quarter of 2019, SS&C is targeting adjusted revenue of $1.138 billion to $1.168 billion, with adjusted net income of $234.8 million to $251.5 million. Based on its expected diluted share count, that equates to adjusted net income per share of roughly $0.87 to $0.94. By comparison -- and though we don't usually pay close attention to Wall Street's demands -- most analysts were modeling roughly the same earnings (at $0.91 per share) on revenue slightly above the high end of SS&C's expected range.
Sure enough, SS&C modestly reduced its full-year 2019 outlook for revenue in the range of $4.675 billion to $4.765 billion (down from $4.69 billion to $4.79 billion before). But it also raised its guidance for 2019 adjusted net income to be in the range of $993 million to $1.042 billion (up from $970 million to $1.015 billion previously).
Given the stock's decline in response, however, it's apparent the market is more concerned with SS&C's top-line weakness -- however slight it might be -- than its bottom-line strength.
