Please ensure Javascript is enabled for purposes of website accessibility

SS&C Technologies Holdings Inc. Banks Another Earnings Beat

By Steve Symington - May 6, 2016 at 7:26PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The financial services software company delivered a decent first quarter following its year of transition.

Image source: SS&C Technologies.

SS&C Technologies (SSNC 1.31%) announced first-quarter 2016 results Thursday after market close. And similar to its post-earnings drop in February after light guidance overshadowed an otherwise solid fourth quarter, SS&C stock fell nearly 6% Friday as investors contemplated its latest results.

Let's take a closer look at why the market is frowning upon the financial services software company today:

SS&C Technologies results: The raw numbers

 

Q1 2016 Actuals

Q1 2015 Actuals

Growth (YOY)

Adjusted Revenue

$343.1 million

$206.1 million

66.5%

Adjusted Net Income

$75.4 million

$52.7 million

43%

Adjusted Earnings Per Share

$0.74

$0.60

23.23%

Data source: SS&C Technologies.

What happened with SS&C this quarter?

  • Based on generally accepted accounting principles (GAAP) -- which excludes $19 million in purchase accounting adjustments to deferred revenue from its acquisition of Advent last year -- revenue grew 57.5% year over year, to $324.1 million.
  • GAAP net income fell 73.3%, to $7.0 million, or $0.07 per share.
  • Adjusted recurring subscription revenue increased 62.8%, to $315.7 million, while adjusted non-recurring revenue increased 125%, to $27.4 million.
  • Adjusted results once again exceeded SS&C's guidance, which called for revenue of $327 million to $333 million, and adjusted net income per share of $0.70 to $0.74.
  • Adjusted consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 74.1% year over year, to $141.6 million.
  • Organic growth at constant currencies was 2.2%.
  • Cash flow from operations fell 40.4% year over year, to $18.6 million, driven by the company's annual employee cash incentive, higher debt-interest payments from senior credit facility and notes put in place to acquire Advent last July, and an increase in accounts receivables.
  • 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. Operating cash flow in 2015 was negatively affected by $67 million in costs related to the financing and acquisition of Advent, Primatics Financial, and current pending acquisitions.
  • Closed on acquisition of Citi Alternative Investor Services on March 11, 2016 for $321 million.
  • Released the latest version of its Geneva platform to strengthen its fund-administration service through new operational workflows and efficiencies.
  • Announced automation of agent notices processing within SS&C Bank Loan Services.
  • Rolled out significant improvements to reporting and client communications within its Black Diamond wealth platform.
  • Enhanced capabilities for straight-through-margining service model for collateral management with its Over the Counter Collateral Optimized (OTCCO) service.
  • Paid down $29.8 million in debt, bringing debt paid down during the past three quarters following the Advent acquisition to $290 million.
  • Ended the quarter with $101.8 million in cash, and just over $2.79 billion in gross debt -- something to watch 

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

We are committed to providing advanced, reliable, and efficient software to our customers, this quarter announcing exciting new releases of SS&C products. These products underpin our growing fund administration and middle office operations businesses. Today, SS&C conducted a grand opening ceremony of the new office in Evansville, Indiana as the growing mid-west operating center surpasses 200 employees. This office continues to service our global customer base and we are excited to occupy the signature building in Sterling Square.

Looking forward
For the current quarter, SS&C expects adjusted revenue of $378 million to $384 million (up 78.8% at the midpoint), and adjusted net income of $76 million to $78.5 million. On a per-share basis, adjusted net income in Q1 should be roughly $0.74 to $0.76,  up from $0.66 per share in the same year-ago period. SS&C also anticipates operating cash flow will improve to $100 million in the current quarter.

For full-year 2016, adjusted revenue should be $1.505 billion to $1.535 billion, with adjusted net income of $321 million to $337.5 million. Based on estimated share counts at year end, adjusted net income per diluted share for fiscal 2016 is expected to be in the range of approximately $3.12 to $3.28, up from $2.66 per share in fiscal 2015. SS&C also expects operating cash flow for the year to be in the range of $375 million to $390 million.

By comparison, both ranges are roughly in line with analysts' consensus estimates, which called for full-year adjusted revenue and earnings of $1.52 billion and $3.22 per share, respectively.

SS&C's second-quarter guidance technically fell short of analysts' consensus estimates calling for revenue of $387.7 million. But keeping in mind that we don't generally lend much credence too Wall Street's near-term demands -- and combined with SS&C Technologies' usual habit of under promising and over delivering -- it's hard to believe that that would justify today's plunge.

As long as SS&C continues to improve its products, demonstrate reasonably healthy organic growth, and improve its balance sheet following its recent large acquisitions, I suspect the stock will eventually reflect its efforts to reward patient shareholders over the long term.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

SS&C Technologies Holdings, Inc. Stock Quote
SS&C Technologies Holdings, Inc.
SSNC
$58.83 (1.31%) $0.76

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.