01—Abstract
Summary
Summary of the 10-K filed February 29, 2016. Cited figures are marked; the original filing is the authoritative source.
SS&C Technologies Holdings, Inc. (NASDAQ: SSNC) reported total revenues of $1,000.3 milliona for the year ended December 31, 2015, up from $767.9 million in 2014.
Revenues were 92% contractually recurring, and the company generated 74% of revenues from North America and 26% from outside North America. Operating income was $164.7 millionb and net income was $42.9 million, compared with $200.4 million and $131.1 million in 2014. The year was dominated by the July 2015 acquisition of Advent Software, Inc. for approximately $2.6 billion in cash, funded with $3.1 billion of debt financing and $717.8 million of net proceeds from a June 2015 common stock offering.
Total indebtedness at year-end was $2,820.0 million, and interest expense rose to $79.3 millionc from $27.2 million, with a $30.4 million loss on extinguishment of debt recorded in 2015. Cash flow from operations was $230.6 million in 2015, compared with $252.5 million in 2014. Cash and cash equivalents ended the year at $434.2 million.
Management also reported a Consolidated EBITDA of $551.5 milliond under its senior credit facility, against a covenant maximum net senior secured leverage ratio of 5.50x and an actual ratio of 3.24x. The company has also agreed to acquire Citigroup's Alternative Investor Services business for $425 million, with closing expected in the first quarter of 2016. The filing notes that the company is exposed to concentration in the hedge fund industry following the Advent and GlobeOp acquisitions, to substantial leverage, and to foreign currency risk.
William C. Stone, Chairman and CEO, beneficially owned approximately 16.8% of the outstanding common stock as of February 24, 2016. Quarterly dividends of $0.125 per share totaled $45.5 million in 2015.
02—Key points
Key Highlights
- Revenues rose to $1,000.3 million in 2015 from $767.9 million in 2014, driven by acquisitions and demand for fund administration services.
- Recurring revenues were $916.6 million, or 92% of total revenues, including software-enabled services of $670.2 million.
- Net income fell to $42.9 million ($0.45 diluted EPS) from $131.1 million ($1.50 diluted EPS) in 2014, reflecting higher interest expense and acquisition-related costs.
- Advent Software acquisition for approximately $2.6 billion in cash closed July 2015, funded by $3.1 billion of debt and a $717.8 million equity offering.
- Total indebtedness was $2,820.0 million at December 31, 2015, with the company in compliance with covenants and a net senior secured leverage ratio of 3.24x versus a 5.50x maximum.
- Operating cash flow was $230.6 million in 2015, compared with $252.5 million in 2014, and cash and equivalents increased to $434.2 million.
- A pending $425 million acquisition of Citigroup's Alternative Investor Services business is expected to close in the first quarter of 2016.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, SS&C Technologies Holdings kept $0.04.
- Revenue$1.00B100.0%
- Cost of revenue−$532.4M53.2%
- Gross profit$467.9M46.8%
- Operating costs−$303.2M30.3%
- Operating income$164.7M16.5%
- Interest, other & tax−$121.9M12.2%
- Net income$42.9M4.3%
Where FY2015 revenue went
$1.00B- Cost of revenue: $532.4M, 53% of revenue
- Other operating costs: $192.8M, 19% of revenue
- Interest, other & tax: $121.9M, 12% of revenue
- Net income: $42.9M, 4.3% of revenue
- R&D: $110.4M, 11% of revenue
Kept 4.3% as net incomeNet income $42.9M · 4.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 29, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $1.00B$767.86M | +30.3% |
| Cost of Revenue | $532.35M$410.73M | +29.6% |
| Gross Profit | $467.94M$357.13M | +31.0% |
| R&D Expenses | $110.42M$57.29M | +92.7% |
| Operating Expenses | $303.20M$156.76M | +93.4% |
| Operating Income | $164.74M$200.37M | −17.8% |
| Interest Expense | $79.33M$27.18M | +191.9% |
| Net Income | $42.86M$131.13M | −67.3% |
| EPS (Basic) | $0.24$0.79 | −69.6% |
| EPS (Diluted) | $0.22$0.75 | −70.7% |
| Shares Outstanding (Basic) | 182.20M166.63M | +9.3% |
| Shares Outstanding (Diluted) | 190.90M174.66M | +9.3% |
05—Questions
Frequently Asked Questions
How did the Advent Software acquisition change SS&C's financial profile?
Advent was acquired in July 2015 for approximately $2.6 billion in cash. Advent contributed $155.8 million of revenue in 2015. The deal was funded largely with debt, which raised total indebtedness to $2,820.0 million and increased interest expense to $79.3 million from $27.2 million in 2014. Goodwill rose to $3,549.2 million from $1,573.2 million.
Why did net income decline in 2015 despite higher revenues?
Net income fell to $42.9 million from $131.1 million. The filing attributes the increase in costs to acquisition-related expenses, including a $30.4 million loss on extinguishment of debt, $13.5 million of professional fees for Advent, and higher stock-based compensation of $44.1 million versus $11.5 million in 2014. Interest expense also increased substantially.
How much of SS&C's revenue is recurring?
Contractually recurring revenues, which include software-enabled services and maintenance and term licenses, were $916.6 million in 2015, or 92% of total revenues. The filing notes that software-enabled services are typically sold under non-cancelable initial terms of one to five years with automatic annual renewal.
What are the main risks around SS&C's debt load?
The company reported annual interest payments of approximately $124.0 million on its senior credit facility and senior notes, and about $2,220.0 million of its debt bears variable rates. A 1% change in interest rates would change annual interest expense by approximately $19.6 million. The credit agreement contains restrictive covenants, and failure to comply could lead to acceleration of debt.
Who controls SS&C and what are the dividend policies?
Chairman and CEO William C. Stone beneficially owned approximately 16.8% of outstanding shares as of February 24, 2016, and has the right under a stockholders' agreement to nominate two board members. The company paid quarterly dividends of $0.125 per share in 2015, totaling $45.5 million, and declared another $0.125 dividend on February 24, 2016. Dividend payments are limited by the holding company structure and credit agreement terms.
06—Continue