01—Abstract
Summary
Summary of the 10-K filed March 1, 2013. Cited figures are marked; the original filing is the authoritative source.
SS&C Technologies Holdings, Inc. reported revenues of $551.8 milliona for fiscal 2012, up from $370.8 million in 2011, with the increase driven largely by the GlobeOp Financial Services S.A. and Thomson Reuters PORTIA Business acquisitions.
Contractually recurring revenues (software-enabled services and maintenance) were $500.2 millionb, or 90.6% of total revenues. Net income fell to $45.8 million from $51.0 million in 2011, with diluted EPS of $0.55 versus $0.63, as transaction costs, a $14.3 million loss on foreign currency contracts tied to the GlobeOp offer, and higher amortization weighed on results. Operating income rose to $123.2 million from $93.8 million.
Gross margin declined to 45.7% from 49.6% in 2010, reflecting amortization of acquired intangibles. The company's debt rose sharply to $1,012.1 millionc at year-end 2012 from $100.0 million, following a March 2012 credit agreement used to fund the GlobeOp acquisition ($834.4 million) and the PORTIA Business acquisition ($170.0 million). Cash from operating activities was $134.4 million, and the company reported cash and cash equivalents of $86.2 million.
Management stated it was in compliance with the credit agreement's covenants, with a net senior secured leverage ratio of 3.65xd against a 5.50x maximum. Carlyle affiliates held approximately 27.1% of common stock and chairman and CEO William C. Stone approximately 22.0% as of February 25, 2013.
The filing also discloses pending litigation against GlobeOp, including the Anwar action and Walker actions related to Fairfield Greenwich funds, and the Millennium Actions, in which claims include $844 million in a putative class action and in excess of $160 million in arbitration. Management states it is vigorously contesting these matters and cannot predict their outcome.
02—Key points
Key Highlights
- Total revenues rose to $551.8 million in 2012 from $370.8 million in 2011, driven by acquisitions of GlobeOp and the PORTIA Business.
- Contractually recurring revenues were $500.2 million, or 90.6% of total revenues in 2012, versus 87.4% in 2011.
- Net income declined to $45.8 million from $51.0 million; diluted EPS was $0.55 versus $0.63 in 2011.
- Operating income increased to $123.2 million from $93.8 million, while gross margin decreased to 45.7% from 49.6% in 2010.
- Total debt increased to $1,012.1 million at December 31, 2012, from $100.0 million a year earlier, after a March 2012 credit agreement funded acquisitions.
- Cash from operating activities was $134.4 million in 2012, compared with $110.4 million in 2011.
- Pending litigation against subsidiary GlobeOp includes the Anwar and Walker actions and the Millennium Actions, with the Millennium class action seeking $844 million; management is vigorously contesting these matters.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, SS&C Technologies Holdings kept $0.08.
- Revenue$551.8M100.0%
- Cost of revenue−$299.9M54.3%
- Gross profit$251.9M45.7%
- Operating costs−$128.7M23.3%
- Operating income$123.2M22.3%
- Interest, other & tax−$77.4M14.0%
- Net income$45.8M8.3%
Where FY2012 revenue went
$551.8M- Cost of revenue: $299.9M, 54% of revenue
- Other operating costs: $82.9M, 15% of revenue
- Interest, other & tax: $77.4M, 14% of revenue
- Net income: $45.8M, 8.3% of revenue
- R&D: $45.8M, 8.3% of revenue
Kept 8.3% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed March 1, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $551.84M$370.83M | +48.8% |
| Cost of Revenue | $299.92M$184.29M | +62.7% |
| Gross Profit | $251.93M$186.54M | +35.1% |
| R&D Expenses | $45.78M$35.65M | +28.4% |
| Operating Expenses | $128.71M$92.76M | +38.8% |
| Operating Income | $123.22M$93.78M | +31.4% |
| Interest Expense | $32.92M$14.75M | +123.2% |
| Net Income | $45.82M$51.02M | −10.2% |
| EPS (Basic) | $0.59$0.67 | −11.9% |
| EPS (Diluted) | $0.55$0.63 | −12.7% |
| Shares Outstanding (Basic) | 78.32M76.48M | +2.4% |
| Shares Outstanding (Diluted) | 82.89M80.71M | +2.7% |
05—Questions
Frequently Asked Questions
How much did the GlobeOp and PORTIA acquisitions contribute to 2012 revenue?
The filing states that revenues from the acquisitions of GlobeOp and the PORTIA Business contributed $168.1 million in revenues in 2012. GlobeOp contributed $142.7 million and the PORTIA Business contributed $25.4 million of revenues included in the consolidated statement of comprehensive income for 2012.
Why did net income decline in 2012 despite higher revenue and operating income?
The filing attributes the decline to transaction costs of $14.3 million tied to the GlobeOp and PORTIA acquisitions, a $14.3 million loss on foreign currency contracts recorded in other expense, a $4.4 million loss on extinguishment of debt, and higher interest expense of $32.9 million, which reflected the larger debt balance from the new credit facility.
How is the company's debt structured and is it in compliance with its covenants?
Borrowings under the credit facility totaled $1,021.0 million at December 31, 2012, with a weighted-average interest rate of 4.42%. The company states it was in compliance with the financial and non-financial covenants as of December 31, 2012, with a net senior secured leverage ratio of 3.65x against a covenant maximum of 5.50x.
What are the main litigation risks facing the company?
GlobeOp is a defendant in the Anwar class action related to Greenwich Sentry funds, in derivative actions brought by a litigation trustee, and in the Millennium Actions. The Millennium putative class action asserts claims of $844 million, and a UK arbitration claim seeks over $160 million. The company states it cannot predict the outcome and is vigorously contesting the matters, and GlobeOp's insurance may not fully cover these claims.
06—Continue