01—Abstract
Summary
Summary of the 10-K filed February 28, 2017. Cited figures are marked; the original filing is the authoritative source.
SS&C Technologies Holdings, Inc. reported revenues of $1,481.4 milliona for the year ended December 31, 2016, up from $1,000.3 million in 2015, with the increase driven largely by acquisitions including Citigroup's Alternative Investor Services business, Wells Fargo's Global Fund Services business, and Conifer Financial Services, along with Advent Software, Inc., Varden and Primatics.
Contractually recurring revenues were $1,371.5 millionb, representing 93% of total revenues. Operating income rose to $288.7 million and net income to $131.0 million (diluted EPS of $0.64), compared with $42.9 million in 2015, which had included a $30.4 million loss on extinguishment of debt. Cash provided by operating activities was $418.4 million.
The company's balance sheet carries substantial leverage: total indebtedness was $2,559.6 millionc at year-end, with $1,959.6 million at variable rates, and a 1% change in interest rates would change annual interest expense by approximately $19.6 million. Cash and cash equivalents fell to $117.6 million from $434.2 million, reflecting acquisition spending of $457.5 million, debt repayments of $383.4 million and dividends of $50.1 million. The company reported it was in compliance with its financial and non-financial covenants, with a net senior secured leverage ratio of 2.96x against a 5.25x maximum.
Investors should weigh the company's growth through acquisitions and recurring revenue base against its high debt load, rising interest expense of $129.9 milliond, and a concentration of its revenue exposure to hedge fund clients following recent acquisitions. The filing also notes international revenues were 27% of total revenues in 2016, and that the company expects to adopt the new revenue recognition standard effective January 1, 2018.
02—Key points
Key Highlights
- Revenues rose to $1,481.4 million in 2016 from $1,000.3 million in 2015; 93% of revenues were contractually recurring.
- Net income was $130.996 million ($0.64 diluted EPS) versus $42.9 million in 2015, with operating income of $288.7 million.
- Total indebtedness was $2,559.6 million at December 31, 2016, including $1,959.6 million of variable-rate debt; a 1% rate change would alter annual interest expense by about $19.6 million.
- Acquisitions in 2016 included Citigroup's Alternative Investor Services business ($296.1 million), Wells Fargo's Global Fund Services business ($73.2 million) and Conifer Financial Services ($86.7 million), funded with cash and $120.0 million in borrowings.
- Cash from operating activities was $418.4 million, while year-end cash and cash equivalents declined to $117.6 million from $434.2 million.
- Quarterly dividends of $0.0625 per share were paid throughout 2016, totaling $50.1 million; a further $0.0625 dividend was declared on February 17, 2017.
- Interest expense rose to $129.9 million from $79.3 million, and the net senior secured leverage ratio was 2.96x against a 5.25x covenant maximum.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, SS&C Technologies Holdings kept $0.09.
- Revenue$1.48B100.0%
- Cost of revenue−$800.5M54.0%
- Gross profit$680.9M46.0%
- Operating costs−$392.3M26.5%
- Operating income$288.6M19.5%
- Interest, other & tax−$157.6M10.6%
- Net income$131.0M8.8%
Where FY2016 revenue went
$1.48B- Cost of revenue: $800.5M, 54% of revenue
- Other operating costs: $239.6M, 16% of revenue
- Net income: $131.0M, 8.8% of revenue
- R&D: $152.7M, 10% of revenue
- Interest, other & tax: $157.6M, 11% of revenue
Kept 8.8% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 28, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $1.48B$1.00B | +48.1% |
| Cost of Revenue | $800.50M$532.35M | +50.4% |
| Gross Profit | $680.90M$467.94M | +45.5% |
| R&D Expenses | $152.70M$110.42M | +38.3% |
| Operating Expenses | $392.30M$303.20M | +29.4% |
| Operating Income | $288.60M$164.74M | +75.2% |
| Interest Expense | $129.90M$79.33M | +63.7% |
| Net Income | $131.00M$42.86M | +205.6% |
| EPS (Basic) | $0.65$0.24 | +170.8% |
| EPS (Diluted) | $0.64$0.22 | +190.9% |
| Shares Outstanding (Basic) | 200.30M182.20M | +9.9% |
| Shares Outstanding (Diluted) | 205.80M190.90M | +7.8% |
05—Questions
Frequently Asked Questions
How much did SS&C's revenue and profitability grow in 2016?
Revenues increased to $1,481.4 million in 2016 from $1,000.3 million in 2015. Net income was $131.0 million, compared with $42.9 million in 2015, and operating income was $288.7 million versus $164.7 million. The filing attributes much of the revenue growth to acquisitions, and organic revenues increased $71.4 million.
How much debt does SS&C carry and what are the main terms?
Total indebtedness was $2,559.6 million at December 31, 2016, including $1,865.6 million of senior secured credit facility term loans, $94.0 million drawn on the revolving credit facility and $600.0 million of 5.875% senior notes due 2023. Of the total, $1,959.6 million bears variable interest rates, and the company was in compliance with its covenants.
What is SS&C's exposure to the hedge fund industry?
The filing states that a higher percentage of clients are now hedge funds or funds of hedge funds following acquisitions of Conifer, GFS, Citigroup AIS, Advent and GlobeOp. It notes that these clients are affected by fluctuations in hedge fund assets under management and investor withdrawals, which could adversely affect the company's business.
Did SS&C pay dividends and repurchase shares in 2016?
The company paid quarterly cash dividends of $0.0625 per share in each quarter of 2016, totaling $50.1 million. The filing reports no repurchases of common stock under the repurchase program in 2015, and the program expired in November 2015.
06—Continue