SS&C Technologies Holdings Inc. Banks Another Earnings Beat

Image source: SS&C Technologies.

SS&C Technologiesannounced first-quarter 2016 results Thursday after market close. And similar to its post-earnings drop in February after light guidance overshadowed an otherwise solid fourth quarter, SS&C stock fell nearly 6% Friday as investors contemplated its latest results.

Let's take a closer look at why the market is frowning upon the financial services software company today:

SS&C Technologies results: The raw numbers

Q1 2016 Actuals

Q1 2015 Actuals

Growth (YOY)

Adjusted Revenue

$343.1 million

$206.1 million


Adjusted Net Income

$75.4 million

$52.7 million


Adjusted Earnings Per Share




Data source: SS&C Technologies.

What happened with SS&C this quarter?

  • Based on generally accepted accounting principles (GAAP) -- which excludes $19 million in purchase accounting adjustments to deferred revenue from itsacquisition of Adventlast year -- revenue grew 57.5% year over year, to $324.1 million.
  • GAAP net income fell 73.3%, to $7.0 million, or $0.07 per share.
  • Adjusted recurring subscription revenue increased 62.8%, to $315.7 million, while adjusted non-recurring revenue increased 125%, to $27.4 million.
  • Adjusted results once again exceeded SS&C's guidance, which called for revenue of $327 million to $333 million, and adjusted net income per share of $0.70 to $0.74.
  • Adjusted consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 74.1% year over year, to $141.6 million.
  • Organic growth at constant currencies was 2.2%.
  • Cash flow from operations fell 40.4% year over year, to $18.6 million, driven by the company's annual employee cash incentive, higher debt-interest payments from senior credit facility and notes put in place to acquire Advent last July, and an increase in accounts receivables.
  • Cash flow from operations grew 24.7% year over year in Q4, to $110.1 million, bringing full-year cash from operations to $230.6 million, down from $252.5 million in 2014. Operating cash flow in 2015 was negatively affected by $67 million in costs related to the financing and acquisition of Advent, Primatics Financial, and current pending acquisitions.
  • Closed on acquisition of Citi Alternative Investor Services on March 11, 2016 for $321 million.
  • Released the latest version of its Geneva platform to strengthen its fund-administration service through new operational workflows and efficiencies.
  • Announced automation of agent notices processing within SS&C Bank Loan Services.
  • Rolled out significant improvements to reporting and client communications within its Black Diamond wealth platform.
  • Enhanced capabilities for straight-through-margining service model for collateral management with its Over the Counter Collateral Optimized (OTCCO) service.
  • Paid down $29.8 million in debt, bringing debt paid down during the past three quarters following the Advent acquisition to $290 million.
  • Ended the quarter with $101.8 million in cash, and just over $2.79 billion in gross debt -- something to watch

What management had to saySS&C Technologies CEO Bill Stone added:

Looking forwardFor the current quarter, SS&C expects adjusted revenue of $378 million to $384 million (up 78.8% at the midpoint), and adjusted net income of $76 million to $78.5 million. On a per-share basis, adjusted net income in Q1 should be roughly $0.74 to $0.76, up from $0.66 per share in the same year-ago period. SS&C also anticipates operating cash flow will improve to $100 million in the current quarter.

For full-year 2016, adjusted revenue should be $1.505 billion to $1.535 billion, with adjusted net income of $321 million to $337.5 million. Based on estimated share counts at year end, adjusted net income per diluted share for fiscal 2016 is expected to be in the range of approximately $3.12 to $3.28, up from $2.66 per share in fiscal 2015. SS&C also expects operating cash flow for the year to be in the range of$375 million to $390 million.

By comparison, both ranges are roughly in line with analysts' consensus estimates, which called for full-year adjusted revenue and earnings of $1.52 billion and $3.22 per share, respectively.

SS&C's second-quarter guidance technically fell short of analysts' consensus estimates calling for revenue of $387.7 million. But keeping in mind that we don't generally lend much credence too Wall Street's near-term demands -- and combined with SS&C Technologies' usual habit of under promising and over delivering -- it's hard to believe that that would justify today's plunge.

As long as SS&C continues to improve its products, demonstrate reasonably healthy organic growth, and improve its balance sheet following its recent large acquisitions, I suspect the stock will eventually reflect its efforts to reward patient shareholders over the long term.

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Steve Symington has no position in any stocks mentioned. The Motley Fool recommends SS&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.

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