01—Abstract
Summary
Summary of the 10-K filed February 28, 2020. Cited figures are marked; the original filing is the authoritative source.
SS&C Technologies Holdings, Inc. reported total revenues of $4,632.9 milliona for 2019, up from $3,421.1 million in 2018, with software-enabled services revenues of $3,869.2 million, or 83.5% of total revenues.
Operating income rose to $914.4 millionb from $429.1 million, and net income increased to $438.5 million from $103.2 million. Diluted earnings per share were $1.66 versus $0.42 in 2018. The company attributes much of the revenue growth to acquisitions, including DST Systems, Eze Software, Intralinks and, in late 2019, Algorithmics and Investrack.
Cash provided by operating activities was $1,328.3 millionc in 2019, compared with $640.1 million in 2018. Leverage remains significant. Total debt was $7,224.3 million at December 31, 2019, including $5,198.7 million of variable-rate senior secured credit facility debt and $2.0 billion of 5.5% Senior Notes due 2027 issued in March 2019.
Annual interest payments were estimated at approximately $324.0 milliond. In January 2020 the company reduced the term loan margin from LIBOR plus 2.25% to LIBOR plus 1.75%. The company also disclosed a plan, approved February 24, 2020, to reduce headcount by approximately 670 employees, with about $30.0 million of severance expected in the first quarter of 2020.
The auditor, PricewaterhouseCoopers LLP, issued an unqualified opinion on the financial statements and on internal control over financial reporting, and identified goodwill impairment testing for the DST reporting unit as a critical audit matter. Goodwill was $7,959.9 million at year-end. Management stated it has not yet determined the effect of the pending ERISA-related litigation involving DST, and the 10-K notes 427 individual arbitration demands filed through February 11, 2020.
02—Key points
Key Highlights
- Total revenues rose to $4,632.9 million in 2019 from $3,421.1 million in 2018; software-enabled services were $3,869.2 million, or 83.5% of revenues.
- Gross margin percentage was 43.6% in 2019, compared with 40.0% in 2018, per the filing's cost of revenues table.
- Operating income was $914.4 million, versus $429.1 million in 2018, and net income was $438.5 million, versus $103.2 million.
- Cash provided by operating activities was $1,328.3 million in 2019, compared with $640.1 million in 2018.
- Total debt was $7,224.3 million at December 31, 2019, with estimated annual interest payments of approximately $324.0 million.
- The company issued $2.0 billion of 5.5% Senior Notes due 2027 in March 2019 and repriced its term loans down by 50 basis points in January 2020.
- Management approved a headcount reduction of approximately 670 employees on February 24, 2020, with about $30.0 million of severance expected in Q1 2020.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, SS&C Technologies Holdings kept $0.09.
- Revenue$4.63B100.0%
- Cost of revenue−$2.61B56.4%
- Gross profit$2.02B43.6%
- Operating costs−$1.11B23.9%
- Operating income$914.4M19.7%
- Interest, other & tax−$475.9M10.3%
- Net income$438.5M9.5%
Where FY2019 revenue went
$4.63B- Cost of revenue: $2.61B, 56% of revenue
- Other operating costs: $723.1M, 16% of revenue
- Net income: $438.5M, 9.5% of revenue
- R&D: $383.7M, 8.3% of revenue
- Interest, other & tax: $475.9M, 10% of revenue
Kept 9.5% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 28, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $4.63B$3.42B | +35.4% |
| Cost of Revenue | $2.61B$2.05B | +27.3% |
| Gross Profit | $2.02B$1.37B | +47.5% |
| R&D Expenses | $383.70M$318.20M | +20.6% |
| Operating Expenses | $1.11B$940.90M | +17.6% |
| Operating Income | $914.40M$429.10M | +113.1% |
| Interest Expense | $409.60M$280.10M | +46.2% |
| Net Income | $438.50M$103.20M | +324.9% |
| EPS (Basic) | $1.73$0.44 | +293.2% |
| EPS (Diluted) | $1.66$0.42 | +295.2% |
| Shares Outstanding (Basic) | 252.90M232.50M | +8.8% |
| Shares Outstanding (Diluted) | 264.20M243.70M | +8.4% |
05—Questions
Frequently Asked Questions
How much of SS&C's revenue comes from recurring software-enabled services?
Software-enabled services revenues were $3,869.2 million in 2019, or 83.5% of total revenues of $4,632.9 million. The filing describes these as contractually recurring revenues, generally provided under contracts with initial terms of one to five years that automatically renew annually.
How much debt does SS&C carry and what does it cost?
Total debt was $7,224.3 million at December 31, 2019, including $5,198.7 million of senior secured credit facility borrowings at a weighted-average rate of 4.05% and $2.0 billion of 5.5% Senior Notes due 2027. The filing estimates annual interest payments of approximately $324.0 million. A 1% change in LIBOR would change annual interest expense by approximately $52.0 million.
What acquisitions drove the 2019 results?
The filing states that acquisitions of DST and CACEIS in the second quarter of 2018 and Eze and Intralinks in the fourth quarter of 2018, together with Investrack and Algorithmics in the fourth quarter of 2019, contributed $1,140.5 million to the increase in 2019 revenues. Algorithmics was acquired for approximately $89.6 million in cash on November 29, 2019.
What legal matters are pending?
DST, its compensation committee, and its plan advisory committee are defendants in ERISA-related litigation, including a complaint in the Southern District of New York and a Department of Labor action filed October 8, 2019. DST has also been named in 427 individual arbitration demands through February 11, 2020. Management said it continues to vigorously defend these matters and has not yet determined their effect on financial position or results of operations.
What changes did SS&C announce after year-end?
On January 31, 2020, the company amended its Credit Agreement to reduce the term loan margin from LIBOR plus 2.25% to LIBOR plus 1.75%. On February 14, 2020, the board declared a quarterly dividend of $0.125 per share, payable March 16, 2020. On February 24, 2020, management approved a plan to reduce headcount by approximately 670 employees. On February 27, 2020, the company agreed to acquire 40 million shares of Series A convertible preferred stock of SILAC, Inc. for $40.0 million, a related-person transaction involving Chairman and CEO William C. Stone.
06—Continue