01—Abstract
Summary
Summary of the 10-K filed March 11, 2011. Cited figures are marked; the original filing is the authoritative source.
SS&C Technologies Holdings, Inc. reported 2010 revenues of $328.9 milliona, up from $270.9 million in 2009 and $280.0 million in 2008.
The filing states that 86% of 2010 revenues were contractually recurring (software-enabled services and maintenance), and that revenue retention rates on core enterprise contracts exceeded 90% in each of the last five years. Operating income was $79.8 millionb, net income was $32.4 million, and diluted EPS was $0.44. Cash provided by operating activities was $75.6 million, and cash and cash equivalents rose to $84.8 million at year-end.
The company's balance sheet improved meaningfully during 2010. Total debt fell to $290.8 millionc from $397.3 million, following an IPO that generated $134.6 million in net proceeds and the partial redemption of $71.75 million of 11¾% senior subordinated notes. In February 2011, the company completed a follow-on offering of 11,000,000 shares at $17.60, of which it sold 2,000,000 shares and selling stockholders sold 9,000,000.
The company also announced a redemption of $66.6 milliond of the notes and agreed to acquire BenefitsXML, Inc. for approximately $15.1 million in cash on March 10, 2011. Investors should note the concentration of ownership: as of March 9, 2011, Carlyle-affiliated funds beneficially owned approximately 46.4% of common stock and William C. Stone owned approximately 23.0%.
Lock-up agreements covering approximately 66,143,147 shares are expected to expire on May 4, 2011. The filing also discloses that the company has never paid dividends and that its ability to pay them is limited by its holding-company structure and debt covenants.
02—Key points
Key Highlights
- Revenue of $328.9 million in 2010, up 21.4% from $270.9 million in 2009; organic revenue increased $17.6 million, and acquisitions added $35.3 million.
- Contractually recurring revenues were 86% of total 2010 revenues, and software-enabled services revenues reached $211.8 million, or 64.4% of total revenues.
- Net income of $32.4 million (diluted EPS $0.44), with operating income of $79.8 million and operating income margin of 24.3%.
- Total debt reduced to $290.8 million at December 31, 2010, from $397.3 million in 2009, with the company citing a consolidated total leverage ratio of 1.85x against a 5.50x covenant maximum.
- IPO completed March 31, 2010 at $15.00 per share, with $134.6 million in net proceeds; a February 2011 follow-on offering at $17.60 per share raised approximately $52.1 million in net proceeds for the company.
- Concentrated ownership: Carlyle-affiliated funds held about 46.4% and William C. Stone about 23.0% of common stock as of March 9, 2011.
- Subsequent events include the $66.6 million notes redemption (at 102.9375%) and the March 10, 2011 acquisition of BenefitsXML, Inc. for approximately $15.1 million in cash.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, SS&C Technologies Holdings kept $0.10.
- Revenue$328.9M100.0%
- Cost of revenue−$165.9M50.4%
- Gross profit$163.0M49.6%
- Operating costs−$83.1M25.3%
- Operating income$79.8M24.3%
- Interest, other & tax−$47.4M14.4%
- Net income$32.4M9.9%
Where FY2010 revenue went
$328.9M- Cost of revenue: $165.9M, 50% of revenue
- Other operating costs: $51.7M, 16% of revenue
- Interest, other & tax: $47.4M, 14% of revenue
- Net income: $32.4M, 9.9% of revenue
- R&D: $31.4M, 9.6% of revenue
Kept 9.9% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed March 11, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $328.90M$270.92M | +21.4% |
| Cost of Revenue | $165.93M$137.74M | +20.5% |
| Gross Profit | $162.97M$133.18M | +22.4% |
| R&D Expenses | $31.44M$26.51M | +18.6% |
| Operating Expenses | $83.13M$66.07M | +25.8% |
| Operating Income | $79.84M$67.10M | +19.0% |
| Interest Expense | $30.58M$36.89M | −17.1% |
| Net Income | $32.41M$19.02M | +70.4% |
| EPS (Basic) | $0.47$0.31 | +51.6% |
| EPS (Diluted) | $0.44$0.30 | +46.7% |
| Shares Outstanding (Basic) | 69.03M60K | +114219.1% |
| Shares Outstanding (Diluted) | 73.08M64K | +114708.4% |
05—Questions
Frequently Asked Questions
How much of SS&C's revenue is recurring, and how sticky are its clients?
Contractually recurring revenues, defined as software-enabled services and maintenance, represented 86% of total 2010 revenues, up from 52% in 2000. The company states that average revenue retention rates on software-enabled services and maintenance contracts for its core enterprise products were greater than 90% in each of the last five years. No single client accounted for more than 5% of 2010 revenues.
How did the IPO and follow-on offering affect the balance sheet?
The March 2010 IPO generated $134.6 million in net proceeds, which the company used along with operating cash flow to redeem $71.75 million of its 11¾% senior subordinated notes and repay $36.3 million on its senior credit facility. Total debt fell to $290.8 million at year-end 2010. The February 2011 follow-on offering added approximately $52.1 million in net proceeds to the company, and the company said it planned to use these proceeds with existing cash to redeem $66.6 million of the notes in March 2011.
What are the main risks to ownership of the stock?
Lock-up agreements covering approximately 66,143,147 shares are expected to expire on May 4, 2011, and sales after expiration could cause the price to decline. Carlyle and Mr. Stone control matters requiring stockholder approval through their combined ownership and a stockholders' agreement. The company's stock has traded between $13.27 and $21.95 since its IPO, and the filing notes the company has never paid dividends and does not expect to do so in the foreseeable future.
How much debt does SS&C carry and what are its covenant constraints?
At December 31, 2010, total indebtedness was $290.8 million, consisting of $133.3 million of 11¾% senior subordinated notes due 2013 and $157.5 million under the term loan B facility. The company had $75.0 million available under its revolving credit facility. The credit agreement requires a maximum total leverage ratio of 5.50x and a minimum interest coverage ratio of 2.25x; actual ratios were 1.85x and 4.99x, and the company stated it was in compliance with all covenants at year-end 2010.
What acquisitions did SS&C complete and what is pending?
In 2010 the company acquired GIPS (February 2010), thinkorswim Technologies (October 2010), and TimeShareWare (December 2010), with cash paid of $45.8 million for these acquisitions. The company said it has acquired 31 businesses since 1995. On March 10, 2011, it purchased BenefitsXML, Inc. for approximately $15.1 million in cash, with its results to be included from March 11, 2011.
06—Continue