01—Abstract
Summary
Summary of the 10-K filed March 12, 2012. Cited figures are marked; the original filing is the authoritative source.
SS&C Technologies Holdings, Inc. (SSNC) reported revenues of $370.8 milliona for fiscal 2011, up from $328.9 million in 2010 and $270.9 million in 2009, with net income of $51.0 million, or $0.63 diluted EPS, versus $32.4 million in 2010.
Contractually recurring revenues (software-enabled services and maintenance) were $324.3 millionb, or 87.4% of total revenues in 2011, and operating cash flow rose to $110.4 million from $75.6 million in 2010. Management attributes the revenue growth to $19.7 million in organic growth plus $18.7 million from acquisitions completed since 2010 and $3.5 million of favorable foreign currency translation. Operating income reached $93.8 million, a 25.3% operating margin.
The balance sheet strengthened over the year. Total debt fell to $100.0 millionc at December 31, 2011, from $290.8 million at the prior year end, after the company repaid $291.1 million of debt, including redeeming its 11 3/4% senior subordinated notes, using a new $125 million Senior Credit Facility, a $52.0 million follow-on stock offering and operating cash flow. Cash was $40.3 million and stockholders' equity was $980.1 million.
The company reports compliance with its financial covenants, with an actual total leverage ratio of 0.66x against a 3.25x maximum. Looking ahead, the filing discloses two significant pending transactions: a February 2012 proposal to acquire GlobeOp Financial Services at an aggregate equity value of approximately $940 milliond, and a February 28, 2012 agreement to acquire Thomson Reuters' PORTIA business for $170 million, financed by a $175 million senior secured term loan from Bank of America. Both remain subject to conditions, and there can be no certainty that a GlobeOp offer will be made.
Investors should also note the concentrated ownership: Carlyle affiliates held about 36.6% and William C. Stone about 22.9% of common stock as of March 8, 2012.
02—Key points
Key Highlights
- Revenue of $370.8 million in 2011, up 12.7% from $328.9 million in 2010; software-enabled services grew to $246.0 million.
- Contractually recurring revenues were $324.3 million, or 87.4% of total revenues in 2011.
- Net income of $51.0 million (diluted EPS $0.63) versus $32.4 million (diluted EPS $0.44) in 2010; operating income margin of 25.3%.
- Net cash from operating activities of $110.4 million, up from $75.6 million in 2010.
- Total debt reduced to $100.0 million at year end from $290.8 million, with $291.1 million of debt repaid during 2011; covenant leverage ratio of 0.66x versus a 3.25x maximum.
- Pending acquisitions: a proposal for GlobeOp Financial Services (about $940 million equity value) and the Thomson Reuters PORTIA business ($170 million, financed by a $175 million term loan).
- Concentrated ownership: Carlyle affiliates held about 36.6% and William C. Stone about 22.9% of common stock as of March 8, 2012.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, SS&C Technologies Holdings kept $0.14.
- Revenue$370.8M100.0%
- Cost of revenue−$184.3M49.7%
- Gross profit$186.5M50.3%
- Operating costs−$92.8M25.0%
- Operating income$93.8M25.3%
- Interest, other & tax−$42.8M11.5%
- Net income$51.0M13.8%
Where FY2011 revenue went
$370.8M- Cost of revenue: $184.3M, 50% of revenue
- Other operating costs: $57.1M, 15% of revenue
- Net income: $51.0M, 14% of revenue
- R&D: $35.6M, 9.6% of revenue
- Interest, other & tax: $42.8M, 12% of revenue
Kept 14% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed March 12, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $370.83M$328.90M | +12.7% |
| Cost of Revenue | $184.29M$165.93M | +11.1% |
| Gross Profit | $186.54M$162.97M | +14.5% |
| R&D Expenses | $35.65M$31.44M | +13.4% |
| Operating Expenses | $92.76M$83.13M | +11.6% |
| Operating Income | $93.78M$79.84M | +17.5% |
| Interest Expense | $14.75M$30.58M | −51.8% |
| Net Income | $51.02M$32.41M | +57.4% |
| EPS (Basic) | $0.67$0.47 | +42.6% |
| EPS (Diluted) | $0.63$0.44 | +43.2% |
| Shares Outstanding (Basic) | 76.48M69.03M | +10.8% |
| Shares Outstanding (Diluted) | 80.71M73.08M | +10.4% |
05—Questions
Frequently Asked Questions
How much did SS&C's revenue and profitability grow in 2011?
Total revenues rose to $370.8 million in 2011 from $328.9 million in 2010, an increase of 12.7%. Net income increased to $51.0 million from $32.4 million, and diluted EPS rose to $0.63 from $0.44. Operating income was $93.8 million, compared with $79.8 million in 2010.
How much of SS&C's revenue is recurring?
Contractually recurring revenues, defined as software-enabled services and maintenance revenues, were $324.3 million in 2011, representing 87.4% of total revenues. The company says most software-enabled services contracts have initial terms of one to five years and renew automatically annually unless terminated, and that revenue retention rates have exceeded 90% in each of the last five years for its core enterprise products.
How did SS&C change its debt position in 2011?
The company repaid $291.1 million of debt, including redeeming its 11 3/4% senior subordinated notes. It entered into a $125 million Senior Credit Facility on December 15, 2011, of which $100 million was drawn, and funded repayments with that facility, $52.0 million of net proceeds from a February 2011 follow-on stock offering, and operating cash flow. Total debt at year end was $100.0 million, and the company reported compliance with its covenants.
What major transactions did SS&C disclose after year end?
SS&C made a February 23, 2012 proposal to GlobeOp's independent directors for a cash offer of 485 pence per share, implying an aggregate equity purchase price of approximately $940 million, though there is no certainty an offer will be made. On February 28, 2012, SS&C agreed to acquire the assets of Thomson Reuters' PORTIA business for $170 million, with closing expected in the second quarter of 2012, subject to regulatory approval. Bank of America committed a $175 million senior secured term loan to fund the PORTIA purchase.
Who controls SS&C, and what are the key risks to investors?
As of March 8, 2012, investment funds affiliated with The Carlyle Group beneficially owned about 36.6% of common stock and William C. Stone, Chairman and CEO, owned about 22.9%. Under a stockholders' agreement, they vote in favor of each other's board nominees, so they exercise control over matters requiring stockholder approval. The filing also highlights risks including economic conditions affecting the financial services industry, client consolidation, competition, dependence on senior management, and covenant restrictions under the senior credit facility.
06—Continue