01—Abstract
Summary
Summary of the 10-K filed February 27, 2014. Cited figures are marked; the original filing is the authoritative source.
SS&C Technologies Holdings, Inc. (NASDAQ: SSNC) reported revenues of $712.7 milliona for 2013, up from $551.8 million in 2012, with 92% of total revenues coming from contractually recurring software-enabled services and maintenance revenues.
Operating income rose to $183.0 millionb from $123.2 million, and net income was $117.9 million, or $1.38 per diluted share, compared with $45.8 million, or $0.55 per diluted share, in 2012. Gross margin declined to 45.4% in 2013 from 50.3% in 2011, which the company attributes mainly to amortization of intangibles from the 2012 acquisitions of GlobeOp and the PORTIA Business. Cash provided by operating activities was $208.3 million, and the company repaid $239.0 million of debt during the year.
Total debt was $774.5 millionc at December 31, 2013, down from $1,012.1 million a year earlier, and the company was in compliance with its credit agreement covenants, with an actual net senior secured leverage ratio of 2.38 times against a 5.50 times maximum. The company authorized a $100 million stock repurchase program in October 2013 and repurchased 23,900 shares in the fourth quarter. It has never paid cash dividends.
The principal risk highlighted is litigation involving subsidiary GlobeOp, including the Millennium Actions, where the U.S. class action has a proposed settlement funded by GlobeOp's insurers and the UK arbitration remains pending with claims by the Master Fund exceeding $160 milliond. The Anwar and derivative actions related to the Fairfield Greenwich funds were settled and concluded.
Other notable risks include hedge fund industry concentration, India operations, and the influence of Chairman and CEO William C. Stone, who beneficially owned approximately 20.1% of common stock.
02—Key points
Key Highlights
- Revenues rose to $712.7 million in 2013 from $551.8 million in 2012, and 92% of revenues were contractually recurring.
- Operating income was $183.0 million in 2013 versus $123.2 million in 2012; net income was $117.9 million, or $1.38 per diluted share.
- Gross margin decreased to 45.4% in 2013 from 50.3% in 2011, reflecting amortization of intangibles from the GlobeOp and PORTIA acquisitions.
- Net cash from operating activities was $208.3 million, and $239.0 million of debt was repaid during 2013.
- Total debt fell to $774.5 million at year-end 2013 from $1,012.1 million; the leverage ratio was 2.38 times against a 5.50 times covenant maximum.
- The board authorized a $100 million share repurchase program in October 2013; 23,900 shares were repurchased in the fourth quarter at an average price of $39.46.
- GlobeOp faces Millennium litigation, including a UK arbitration with damages claimed above $160 million, while the Fairfield Greenwich-related actions were settled and concluded.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, SS&C Technologies Holdings kept $0.17.
- Revenue$712.7M100.0%
- Cost of revenue−$388.8M54.6%
- Gross profit$323.9M45.4%
- Operating costs−$140.9M19.8%
- Operating income$183.0M25.7%
- Interest, other & tax−$65.1M9.1%
- Net income$117.9M16.5%
Where FY2013 revenue went
$712.7M- Cost of revenue: $388.8M, 55% of revenue
- Net income: $117.9M, 17% of revenue
- Other operating costs: $87.1M, 12% of revenue
- R&D: $53.9M, 7.6% of revenue
- Interest, other & tax: $65.1M, 9.1% of revenue
Kept 17% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 27, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $712.70M$551.84M | +29.1% |
| Cost of Revenue | $388.80M$299.92M | +29.6% |
| Gross Profit | $323.90M$251.93M | +28.6% |
| R&D Expenses | $53.86M$45.78M | +17.7% |
| Operating Expenses | $140.93M$128.71M | +9.5% |
| Operating Income | $182.97M$123.22M | +48.5% |
| Interest Expense | $42.40M$32.92M | +28.8% |
| Net Income | $117.89M$45.82M | +157.3% |
| EPS (Basic) | $1.45$0.59 | +145.8% |
| EPS (Diluted) | $1.38$0.55 | +150.9% |
| Shares Outstanding (Basic) | 81.19M78.32M | +3.7% |
| Shares Outstanding (Diluted) | 85.62M82.89M | +3.3% |
05—Questions
Frequently Asked Questions
How much of SS&C's revenue is recurring, and how did revenue grow in 2013?
Contractually recurring revenues, defined as software-enabled services and maintenance revenues, were $656.0 million in 2013 and represented 92.0% of total revenues. Total revenues increased to $712.7 million from $551.8 million in 2012, with the GlobeOp and PORTIA Business acquisitions contributing $119.2 million of the increase on a full-year basis.
Why did gross margin decline, and what drove the change?
Gross margin decreased to 45.4% in 2013 from 50.3% in 2011. The company attributes the decline mainly to amortization expense on intangible assets acquired with GlobeOp and the PORTIA Business in 2012, partly offset by cost synergies with the acquired businesses.
What is the status of the GlobeOp litigation?
The Anwar and derivative actions tied to the Fairfield Greenwich funds were settled, the settlement was approved on November 22, 2013, and the matters are concluded, with the settlement funded entirely by GlobeOp's insurers. In the Millennium Actions, a January 2014 settlement of the U.S. class action is subject to court approval, while the UK arbitration remains pending and the Master Fund's claim against GlobeOp is not affected by that settlement. The company cannot predict the outcome and states the amount of any potential loss cannot be reasonably estimated.
How is SS&C's debt position and liquidity?
Total long-term debt including the current portion was $774.5 million at December 31, 2013, compared with $1,012.1 million a year earlier. Cash and cash equivalents were $84.5 million. The company stated it expects cash on hand and operating cash flows to fund current obligations for at least the next twelve months and was in compliance with its covenants.
Does SS&C pay dividends, and what capital returns are in place?
SS&C has never declared or paid cash dividends and does not expect to pay dividends in the foreseeable future, as it intends to use earnings for growth. Its ability to pay dividends is limited by its holding company status and the senior credit facility. The board authorized up to $100 million in share repurchases in October 2013, under which 23,900 shares were bought in the fourth quarter of 2013.
06—Continue