SS&C Technologies Keeps Moving Forward

By Markets Fool.com

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Image source: SS&C Technologies.

Shares of SS&C Technologies(NASDAQ: SSNC) are little-changed since the financial-services technology specialist announced second-quarter 2016 results on July 27. But that doesn't mean investors should be disappointed with the company's position today. Let's take a closer look at how SS&C capped the first half of the year:

SS&C Technologies results: The raw numbers

Q2 2016 Actuals

Q2 2015 Actuals

Growth (YOY)

Adjusted revenue

$384.4 million

$213.1 million

80.4%

Adjusted net income

$79.4 million

$58.7 million

35.3%

Adjusted earnings per share (diluted)

$0.39

$0.33

18.2%

Data source: SS&C Technologies.

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What happened with SS&C this quarter?

  • Based on generally accepted accounting principles (GAAP) -- which excludes $11.3 million in purchase accounting adjustments to deferred revenue from its acquisition of Advent last year -- revenue grew 75.3% year over year, to $373.1 million.
  • GAAP net income declined 27.9% year over year, to $28.2 million, or $0.14 per share.
  • Adjusted recurring subscription revenue grew 88% year over year, to $356.1 million.
  • Adjusted non-recurring revenue increased 19.7%, to $28.3 million.
  • Adjusted results again outpaced SS&C's guidance provided in May, which called for adjusted revenue of $378 million to $384 million, adjusted net income of $76 million to $78.5 million, and adjusted earnings per share of $0.37 to $0.38 (adjusted for a 2-for-1 stock split implemented during the quarter).
  • Adjusted consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) grew 65% year over year, to $147.5 million.
  • Organic growth on a constant currency basis was negative 3.4%.
  • Cash flow from operations for the first six months of the year grew 38.3% year over year, to $139.2 million, driven by higher cash earnings and lower tax payments.
  • Debt of $125.5 million was paid down during the quarter, bringing debt paid down in the four quarters following the Advent acquisition to $415.3 million.
  • The ratio of net debt to adjusted consolidated EBITDA leverage was reduced to 4.36.
  • Research and development spending during the quarter contributed to new releases of CAMRA, Global Wealth Platform, SS&C Geneva, SS&C APX, SS&C Moxy, and SS&C TradeEx products.
  • The quarter ended with $95.2 million in cash, and just over $2.665 billion in gross debt -- something for long-term investors to continue to watch.

What management had to say

SS&C Technologies CEO Bill Stone noted his company achieved new records in both adjusted revenue and adjusted consolidated EBITDA.

Stone also touched on SS&C's $321 million acquisition of Citigroup's Alternative Investor Services, stating:

After a full quarter of ownership, the Citi Alternative Investor Services group is adjusting nicely into SS&C's fast-paced, sales-oriented culture. Great strides have already been made in the integration, including a significant upgrade of the Geneva Platform, and a revitalized focus on top line growth.

Looking ahead

For the current quarter, SS&C expects adjusted revenue of $388 million to $394 million, adjusted net income of $82.5 million to $85 million, and adjusted net income per share of roughly $0.40 to $0.41.

SS&C also revised its guidance for the full-year 2016, calling for adjusted revenue of $1.511 billion to $1.524 billion (narrowed from $1.505 billion to $1.535 billion previously), with adjusted net income of $326 million to $334 million (compared to $321 million to $337.5 million previously). Based on estimated share counts at year end, adjusted net income per diluted share for 2016 is expected to be in the range of roughly $1.59 to $1.63 (compared to roughly $1.56 to $1.64 previously, adjusted for the 2-for-1 split), up from $2.66 per share in 2015. SS&C also expects operating cash flow for the year to be in the range of $380 million to $395 million, up from its previous expected range of $375 million to $390 million.

All told, with the exception of SS&C's slightly negative organic growth -- which, management later elaborated, should turn positive for the remainder of the year with the help of strong growth from Advent, a robust sales pipeline, and cross-selling from acquired businesses -- this was a slightly better-than-expected quarter, as the company continues to release innovative new products and improve its balance sheet. With shares still down around 8% year to date, as long as SS&C Technologies continues to move in the right direction, I think shareholders should be pleased with where it stands.

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Steve Symington has no position in any stocks mentioned. The Motley Fool recommends SS and C Technologies. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.