01—Abstract
Summary
Summary of the 10-K filed February 28, 2018. Cited figures are marked; the original filing is the authoritative source.
SS&C Technologies Holdings, Inc. reported 2017 revenues of $1,675.3 milliona, up from $1,481.4 million in 2016, with net income of $328.9 million (diluted EPS of $1.55) compared with $131.0 million in 2016.
Contractually recurring revenues were $1,577.7 millionb, representing 94% of total revenues. Operating income rose to $396.9 million from $288.7 million, and the company reported a $88.0 million provisional tax benefit from the Tax Cuts and Jobs Act, which contributed to a income tax benefit of $46.2 million for the year. Cash provided by operating activities was $470.4 million, and total debt was $2,092.2 million at December 31, 2017.
The most significant pending development is the agreement announced January 11, 2018 to acquire DST Systems, Inc. for an enterprise value of approximately $5.4 billionc, consisting of $84 per share in cash plus assumed debt. The filing states the closing is expected by the third quarter of 2018, subject to DST stockholder approval and regulatory clearances, and that the company plans to fund it and refinance existing debt of both companies through a combination of debt and equity. The filing states the acquisition will have a material impact on the company's financial position, results of operations and cash flows, and that interest expense is expected to increase substantially.
During 2017 the company acquired CommonWealth Fund Services for approximately $16.4 milliond, and it paid $54.4 million in dividends. Cash and cash equivalents were $64.1 million at year end, and the company reported a 2.04x consolidated net senior secured leverage ratio against a 5.00x covenant maximum.
02—Key points
Key Highlights
- Revenue rose to $1,675.3 million in 2017 from $1,481.4 million in 2016; 78% of revenues came from North America and 22% from outside North America.
- Contractually recurring revenues were $1,577.7 million, or 94% of total revenues, supported by software-enabled services and maintenance and term licenses.
- Net income was $328.9 million (basic EPS $1.60, diluted EPS $1.55), up from $131.0 million in 2016, helped by a $88.0 million provisional net tax benefit from the Tax Act.
- Operating income increased to $396.9 million from $288.7 million, and cash from operations was $470.4 million versus $418.4 million in 2016.
- Pending acquisition of DST Systems, Inc. at an enterprise value of approximately $5.4 billion ($84 per share in cash plus assumed debt), with closing expected by the third quarter of 2018.
- Total indebtedness was $2,092.2 million at December 31, 2017, and the company expects substantially higher debt and interest expense after financing the DST acquisition.
- Quarterly dividend was raised to $0.07 per share in the second half of 2017; total 2017 dividends paid were $54.4 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, SS&C Technologies Holdings kept $0.20.
- Revenue$1.68B100.0%
- Cost of revenue−$886.4M52.9%
- Gross profit$788.9M47.1%
- Operating costs−$392.0M23.4%
- Operating income$396.9M23.7%
- Interest, other & tax−$68.0M4.1%
- Net income$328.9M19.6%
Where FY2017 revenue went
$1.68B- Cost of revenue: $886.4M, 53% of revenue
- Net income: $328.9M, 20% of revenue
- Other operating costs: $238.7M, 14% of revenue
- R&D: $153.3M, 9.2% of revenue
- Interest, other & tax: $68.0M, 4.1% of revenue
Kept 20% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 28, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $1.68B$1.48B | +13.1% |
| Cost of Revenue | $886.40M$800.50M | +10.7% |
| Gross Profit | $788.90M$680.90M | +15.9% |
| R&D Expenses | $153.30M$152.70M | +0.4% |
| Operating Expenses | $392.00M$392.30M | −0.1% |
| Operating Income | $396.90M$288.60M | +37.5% |
| Interest Expense | $108.60M$129.90M | −16.4% |
| Net Income | $328.90M$131.00M | +151.1% |
| EPS (Basic) | $1.60$0.65 | +146.2% |
| EPS (Diluted) | $1.55$0.64 | +142.2% |
| Shares Outstanding (Basic) | 204.90M200.30M | +2.3% |
| Shares Outstanding (Diluted) | 211.60M205.80M | +2.8% |
05—Questions
Frequently Asked Questions
What is the DST Systems acquisition and how will it be financed?
SS&C agreed on January 11, 2018 to acquire DST Systems, Inc. for an enterprise value of approximately $5.4 billion, comprising $84 per share of DST common stock in cash plus the assumption of debt. The company plans to fund the acquisition and refinance certain of its existing debt and all of DST's existing debt with a combination of debt and equity, and expects to incur substantial indebtedness under a new senior secured credit facility and may issue new senior unsecured notes.
What conditions must be met before the DST acquisition can close?
The closing, expected by the third quarter of 2018, remains subject to DST stockholder approval, clearances from relevant regulatory authorities, including expiration or termination of Hart-Scott-Rodino waiting periods, and satisfaction of customary closing conditions. The filing states that no assurance can be given that these approvals will be obtained in a timely manner or at all.
How much debt does the company carry and how is it structured?
As of December 31, 2017, total indebtedness was $2,092.2 million, including $1,492.2 million of variable-rate senior secured credit facility debt and $600.0 million of 5.875% senior notes due 2023. The company also had $149.1 million available under its revolving credit facility, and was in compliance with its financial and non-financial covenants.
What drove the increase in 2017 net income?
Net income rose to $328.9 million from $131.0 million, largely reflecting a higher operating income of $396.9 million and an income tax benefit of $46.2 million, which included a provisional $88.0 million benefit from the Tax Cuts and Jobs Act. Revenue growth was driven primarily by acquisitions, including CommonWealth, GFS, Conifer and Citigroup AIS, as well as organic growth in fund administration services and term licenses.
How concentrated is the customer base?
The filing states the company serves approximately 11,000 clients, and that its largest client accounted for less than 2% of 2017 revenues. The top 10 clients represented approximately 10% of total revenues, with no single client accounting for more than 2% of total revenues.
06—Continue