SS&C Technologies Pulls Back After a Solid Quarter

By Steve Symington Markets Fool.com

SS&C Technologies Holdings(NASDAQ: SSNC) announced first-quarter 2017 results Thursday after the market closed,highlighted by its 20th straight quarter of revenue growth and continued improvements in its balance sheet.

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SS&C stock declined around 2.4% Friday on the news -- though shares did set a fresh 52-week high leading up to the report. Let's have a closer look, then, at how SS&C kicked off the year, and what investors can expect from the company going forward.

Image source: Getty Images.

SS&C Technologies results: The raw numbers

Metric

Q1 2017

Q1 2016

Year-Over-Year Growth

GAAP revenue

$407.7 million

$324.1 million

25.8%

GAAP net income

$48.1 million

$7.0 million

587.3%

GAAP earnings per share (diluted)

$0.23

$0.03

666.7%

Data source: SS&C Technologies.

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What happened with SS&C this quarter?

  • On an adjusted (non-GAAP) basis -- which excludes purchase accounting adjustments to deferred revenue related to acquisitions-- revenue increased 19.4%, to $409.5 million.
  • Adjusted net income grew 23.2%, to $92.9 million, and adjusted net income per diluted share increased 18.9%, to $0.44.
  • Both the top and bottom lines were near the high ends of SS&C's guidance rangesprovided last quarter, which called for revenue of $402.5 million to $408.5 million, and adjusted net income of $89 million to $92.5 million.
  • Adjusted recurring revenue rose 22.6% year over year, to $387.2 million, Within that, software-enabled services revenue increased 34.3% to $276.5 million, and maintenance and term licenses revenue rose 0.7%, to $110.8 million.
  • Adjusted non-recurring revenue declined 18.5%, to $22.3 million, including a 45.8% decline in perpetual licenses, to $2.8 million, and a 12.1% decline in professional services revenue, to $19.5 million.
  • Adjusted consolidated earnings before interest, taxes, depreciation, and amortization increased 14.2%, to $161.7 million.
  • Cash flow from operations totaled $56.5 million, up from $18.6 million in last year's first quarter.
  • The company paid down $60.2 million of debt, bringing the net debt-to-consolidated EBITDA leverage ratio to 3.74, down from 3.9 at the end of last quarter.
  • SS&C also amended its credit agreement to reduce spreads on term loans, which reduced interest rates and, consequently, annual borrowing costs by 0.75%.

What management had to say

SS&C CEO Bill Stone added:

SS&Chad a strong start to 2017, with adjusted revenues up 19.4% and adjusted diluted earnings per share up 18.9% for the first quarter.Our businesses continue to perform, andhedge fundasset flow indicators suggest renewed confidence. We are also actively expanding our service offering for long-only and institutional outsourcing, as well as the creation of our newest SS&C GlobeOp division servicing real assets. We believe real estate, infrastructure, and property management solutions present a big opportunity.

Looking ahead

In the second quarter, SS&C Technologies expects adjusted revenue to be in the range of $408 million to $416 million, which should translate to adjusted net income in the range of $93.7 million to $98 million.

Given its performance so far in the year, SS&C also increased its guidance for the full year to call for adjusted revenue of $1.664 billion to $1.686 billion (up from $1.655 billion to $1.685 billion previously), cash from operations of $485 million to $500 million (up from $480 million to $500 million before), and adjusted net income of $399 million to $412 million (versus previous guidance for $392 million to $409 million).

In the end, this was a straightforward beat-and-raise from SS&C Technologies, so it might seem surprising that shares pulled back on Friday as a result. But shares are also still up around 28% so far in 2017, so it's hard to blame short-term investors for taking some of their profits off the table. However, as SS&C continues to deliver on its long-term growth strategy and pay down its debts incurred from previous acquisitions, it should emerge nicely positioned to continue generating shareholder value in the coming years.

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Steve Symington has no position in any stocks mentioned. The Motley Fool recommends SS & C Technologies. The Motley Fool has a disclosure policy.