SS&C Technologies Holdings (NASDAQ: SSNC) announced fourth-quarter 2017 results on Thursday after the market closed. And though shares of the financial software-and-services leader were down slightly on the news, the company highlighted better-than-expected growth on broad-based demand for its products and services, completed implementations after previously delayed deals, and its massive planned acquisition of industry peer DST Systems (NYSE: DST).
Let's take a closer look at how SS&C Technologies ended the year, and what investors can expect from the company in the coming quarters.
SS&C Technologies results: The raw numbers
GAAP net income
GAAP earnings per share (diluted)
What happened with SS&C this quarter?
- On an adjusted (non-GAAP) basis, which excludes purchase accounting adjustments to deferred revenue from acquisitions, revenue grew 8.6% year over year, to $439.4 million -- above guidance for a range of $427 million to $437 million.
- Adjusted net income increased 20.3% year over year, to $114.5 million, and adjusted net income per share rose 17.4%, to $0.54 -- both above SS&C's guidance for adjusted earnings of $110 million to $113.9 million, or $0.52 to $0.53 on a per-share basis.
- Adjusted recurring revenue grew 11.2%, to $409.6 million, including 9.8% growth in software-enabled services, to $282.9 million, and 15.9% growth in maintenance and term licenses, to $126.7 million.
- Adjusted non-recurring revenue declined 15.2%, to $29.8 million, including a 1.5% increase from perpetual licenses, to $9.5 million, and a 24.4% decline in professional services.
- Adjusted consolidated EBITDA increased 14.5%, to $191.3 million.
- For the full year of 2018, cash from operations grew 12.4%, to $470.4 million.
- On January 11, 2018, the company announced an agreement to acquire DST Systems for $84 per share in cash -- funded by a combination of debt and equity financing -- for an enterprise value of $5.4 billion including assumption of debt. The acquisition is expected to close in either the second or third quarter of 2018, creating a combined company with pro forma revenue of $3.9 billion and consolidated EBITDA of $1.3 billion. SS&C expects to realize $150 million of annual run-rate cost synergies by 2020. The deal should be immediately accretive to adjusted earnings per share, even before synergies, with mid-teens earnings growth expected in 2019.
- The acquisition is expected to close in either the second or third quarter of 2018, creating a combined company with pro forma revenue of $3.9 billion and consolidated EBITDA of $1.3 billion.
- SS&C expects to realize $150 million of annual run-rate cost synergies by 2020.
- The deal should be immediately accretive to adjusted earnings per share, even before synergies, with mid-teens earnings growth expected in 2019.
What management had to say
SS&C Chairman and CEO Bill Stone stated
SS&C expects first-quarter 2018 adjusted revenue of $427 million to $437 million, adjusted net income of $113 million to $117.5 million, and adjusted earnings per share of roughly $0.53 to $0.54.
Finally, for the full-year 2018, SS&C expects adjusted revenue of $1.755 billion to $1.785 billion, adjusted net income of $480 million to $502 million, and adjusted net income per share of approximately $2.26 to $2.27. For perspective -- and this partly explains today's modest decline -- consensus estimates predicted slightly higher adjusted earnings of $2.30 per share on revenue of $1.78 billion.
All told, there were no big surprises in SS&C's results or outlook. Rather, the market will likely remain focused on the successful completion and subsequent integration of its enormous acquisition of DST in the coming months. In the meantime, I think investors should be pleased with its performance and industry leaderhsip position today.
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