SS&C Technologies Releases Q1 2023 Earnings Results
Q1 2023 GAAP revenue
Adjusted revenue
Three Months Ended | |||
(in millions, except per share data): | 2023 | 2022 | Change |
GAAP Results | |||
Revenue | 5.2 % | ||
Operating income | 280.1 | 291.8 | (4.0) % |
Operating income margin | 20.6 % | 22.5 % | -190 bp |
Diluted earnings per share attributable to | (23.4) % | ||
Adjusted Non-GAAP Results (defined in Notes 1 - 4 below) | |||
Adjusted revenue | 5.2 % | ||
Adjusted operating income attributable to | 493.0 | 498.7 | (1.1) % |
Adjusted operating income margin | 36.2 % | 38.5 % | -230 bp |
Adjusted diluted earnings per share attributable to | (11.2) % | ||
First Quarter 2023 Highlights:
- Q1 2023 GAAP and Adjusted Revenue growth was 5.2 percent.
SS&C generated net cash from operating activities of$254.8 million March 31, 2023 , up 38.9 percent compared to the same time period 2022.- Q1 2023 we bought back 2.3 million shares for
$134.7 million $59.19 - We paid down
$44.6 million SS&C . SS&C reported GAAP net income attributable toSS&C of$126.0 million SS&C of$509.0 million - GAAP net income margin for Q1 2023 was 9.2 percent. Adjusted consolidated EBITDA margin for Q1 2023 was 37.3 percent.
- SS&C Blue Prism was named a leader in Robotics Process Automation in Forrester's Q1 2023 Analyst Report, "The
Forrester Wave ".
"
Operating Cash Flow
Guidance
Q2 2023 | FY 2023 | |||
Adjusted Revenue ($M) | ||||
Adjusted Net Income attributable to | ||||
Adjusted Diluted Earnings per Share | ||||
Cash from Operating Activities ($M) | – | |||
Capital Expenditures (% of revenue) | – | |||
Diluted Shares (M) | 256.5 – 257.5 | 255.0 – 258.5 | ||
Effective Income Tax Rate (%) | 26 % | 26 % |
Non-GAAP Financial Measures
Adjusted revenue, adjusted operating income, adjusted consolidated EBITDA, adjusted net income and adjusted diluted earnings per share are non-GAAP measures. See the accompanying notes for the reconciliations and definitions for each of these non-GAAP measures and the reasons our management believes these measures provide useful information to investors regarding our financial condition and results of operations.
Earnings Call and Press Release
Certain information contained in this press release relating to, among other things, the Company's financial guidance for the second quarter and full year of 2023 constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, expectations, intentions, projections, developments, future events, performance, underlying assumptions, and other statements that are other than statements of historical facts. Without limiting the foregoing, the words "believes", "anticipates", "plans", "expects", "estimates", "projects", "forecasts", "may", "assume", "intend", "will", "continue", "opportunity", "predict", "potential", "future", "guarantee", "likely", "target", "indicate", "would", "could" and "should" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words. Such statements reflect management's best judgment based on factors currently known but are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such risks and uncertainties include, but are not limited to, the state of the economy and the financial services industry and other industries in which the Company's clients operate, the Company's ability to realize anticipated benefits from its acquisitions, including
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Three Months Ended | ||||||||
2023 | 2022 | |||||||
Revenues: | ||||||||
Software-enabled services | $ | 1,114.2 | $ | 1,085.2 | ||||
License, maintenance and related | 248.5 | 209.8 | ||||||
Total revenues | 1,362.7 | 1,295.0 | ||||||
Cost of revenues: | ||||||||
Software-enabled services | 631.0 | 595.5 | ||||||
License, maintenance and related | 94.7 | 79.7 | ||||||
Total cost of revenues | 725.7 | 675.2 | ||||||
Gross profit | 637.0 | 619.8 | ||||||
Operating expenses: | ||||||||
Selling and marketing | 139.8 | 110.9 | ||||||
Research and development | 118.2 | 105.8 | ||||||
General and administrative | 98.9 | 111.3 | ||||||
Total operating expenses | 356.9 | 328.0 | ||||||
Operating income | 280.1 | 291.8 | ||||||
Interest expense, net | (111.9) | (49.3) | ||||||
Other income (expense), net | 5.4 | (9.0) | ||||||
Equity in earnings of unconsolidated affiliates, net | 5.7 | 1.3 | ||||||
Loss on extinguishment of debt | (0.6) | — | ||||||
Income before income taxes | 178.7 | 234.8 | ||||||
Provision for income taxes | 52.5 | 63.5 | ||||||
Net income | 126.2 | 171.3 | ||||||
Net (income) loss attributable to noncontrolling interest | (0.2) | 0.8 | ||||||
Net income attributable to | $ | 126.0 | $ | 172.1 | ||||
Basic earnings per share attributable to | $ | 0.50 | $ | 0.67 | ||||
Diluted earnings per share attributable to | $ | 0.49 | $ | 0.64 | ||||
Basic weighted-average number of common shares outstanding | 250.4 | 255.8 | ||||||
Diluted weighted-average number of common and common equivalent shares outstanding | 257.0 | 267.6 | ||||||
Net income | $ | 126.2 | $ | 171.3 | ||||
Other comprehensive income (loss), net of tax: | ||||||||
Change in unrealized gain on interest rate swaps | — | 1.2 | ||||||
Foreign currency exchange translation adjustment | 42.0 | (28.3) | ||||||
Change in defined benefit pension obligation | 0.1 | (1.1) | ||||||
Total other comprehensive income (loss), net of tax | 42.1 | (28.2) | ||||||
Comprehensive income | 168.3 | 143.1 | ||||||
Comprehensive (income) loss attributable to noncontrolling interest | (0.2) | 0.8 | ||||||
Comprehensive income attributable to | $ | 168.1 | $ | 143.9 | ||||
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2023 | 2022 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 433.3 | $ | 440.1 | ||||
Funds receivable and funds held on behalf of clients | 429.2 | 966.3 | ||||||
Accounts receivable, net | 811.0 | 778.6 | ||||||
Contract asset | 45.0 | 42.3 | ||||||
Prepaid expenses and other current assets | 156.2 | 193.8 | ||||||
Restricted cash | 2.5 | 3.3 | ||||||
Total current assets | 1,877.2 | 2,424.4 | ||||||
Property, plant and equipment, net | 326.6 | 343.9 | ||||||
Operating lease right-of-use assets | 250.4 | 260.6 | ||||||
Investments | 192.9 | 193.9 | ||||||
Unconsolidated affiliates | 257.7 | 266.9 | ||||||
Contract asset | 112.8 | 115.9 | ||||||
8,889.6 | 8,863.0 | |||||||
Intangible and other assets, net | 4,101.2 | 4,184.7 | ||||||
Total assets | $ | 16,008.4 | $ | 16,653.3 | ||||
Liabilities, Redeemable Noncontrolling Interest and Equity | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 129.4 | $ | 55.7 | ||||
Client funds obligations | 429.2 | 966.3 | ||||||
Accounts payable | 41.4 | 49.5 | ||||||
Income taxes payable | 83.7 | 34.3 | ||||||
Accrued employee compensation and benefits | 140.3 | 235.8 | ||||||
Interest payable | 0.2 | 28.4 | ||||||
Other accrued expenses | 331.4 | 356.1 | ||||||
Deferred revenue | 493.6 | 464.7 | ||||||
Total current liabilities | 1,649.2 | 2,190.8 | ||||||
Long-term debt, net of current portion | 6,909.6 | 7,023.9 | ||||||
Operating lease liabilities | 228.2 | 237.0 | ||||||
Other long-term liabilities | 232.1 | 225.8 | ||||||
Deferred income taxes | 846.9 | 872.9 | ||||||
Total liabilities | 9,866.0 | 10,550.4 | ||||||
Redeemable noncontrolling interest | 1.6 | 2.1 | ||||||
6,084.0 | 6,044.2 | |||||||
Noncontrolling interest | 56.8 | 56.6 | ||||||
Total equity | 6,140.8 | 6,100.8 | ||||||
Total liabilities, redeemable noncontrolling interest and equity | $ | 16,008.4 | $ | 16,653.3 | ||||
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Three Months Ended | ||||||||
2023 | 2022 | |||||||
Cash flow from operating activities: | ||||||||
Net income | $ | 126.2 | $ | 171.3 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 165.9 | 165.6 | ||||||
Equity in earnings of unconsolidated affiliates, net | (5.7) | (1.3) | ||||||
Distributions received from unconsolidated affiliates | 15.0 | — | ||||||
Stock-based compensation expense | 41.9 | 39.9 | ||||||
Net (gains) losses on investments | (1.0) | 3.8 | ||||||
Amortization and write-offs of loan origination costs and original issue discounts | 3.5 | 2.6 | ||||||
Loss on extinguishment of debt | 0.6 | — | ||||||
Loss on sale or disposition of property and equipment | 6.4 | — | ||||||
Deferred income taxes | (30.2) | (33.3) | ||||||
Provision for credit losses | 5.0 | 2.8 | ||||||
Changes in operating assets and liabilities, excluding effects from acquisitions: | ||||||||
Accounts receivable | (35.3) | (32.4) | ||||||
Prepaid expenses and other assets | 38.7 | 7.9 | ||||||
Contract assets | 0.1 | (7.0) | ||||||
Accounts payable | (9.3) | 8.2 | ||||||
Accrued expenses and other liabilities | (155.7) | (186.5) | ||||||
Income taxes prepaid and payable | 59.6 | 48.8 | ||||||
Deferred revenue | 29.1 | (6.9) | ||||||
Net cash provided by operating activities | 254.8 | 183.5 | ||||||
Cash flow from investing activities: | ||||||||
Cash paid for business acquisitions, net of cash acquired and asset acquisitions | — | (1,553.1) | ||||||
Additions to property and equipment | (10.5) | (10.8) | ||||||
Additions to capitalized software | (42.6) | (24.8) | ||||||
Proceeds from sales / maturities of investments | 0.9 | 2.5 | ||||||
Collection of other non-current receivables | 2.4 | 2.7 | ||||||
Net cash used in investing activities | (49.8) | (1,583.5) | ||||||
Cash flow from financing activities: | ||||||||
Cash received from debt borrowings, net of original issue discount | 145.0 | 1,632.1 | ||||||
Repayments of debt | (189.6) | (48.2) | ||||||
Payment of deferred financing fees | — | (12.4) | ||||||
Net decrease in client funds obligations | (541.9) | (156.9) | ||||||
Proceeds from exercise of stock options | 15.3 | 48.8 | ||||||
Withholding taxes paid related to equity award net share settlement | (0.1) | (0.5) | ||||||
Purchases of common stock for treasury | (133.3) | (170.9) | ||||||
Dividends paid on common stock | (50.7) | (51.1) | ||||||
Net cash (used in) provided by financing activities | (755.3) | 1,240.9 | ||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 0.9 | (4.5) | ||||||
Net decrease in cash, cash equivalents and restricted cash | (549.4) | (163.6) | ||||||
Cash, cash equivalents and restricted cash, beginning of period | 1,337.6 | 3,171.4 | ||||||
Cash, cash equivalents and restricted cash and cash equivalents, end of period | $ | 788.2 | $ | 3,007.8 | ||||
Reconciliation of cash, cash equivalents and restricted cash and cash equivalents: | ||||||||
Cash and cash equivalents | $ | 433.3 | $ | 558.1 | ||||
Restricted cash and cash equivalents | 2.5 | 3.4 | ||||||
Restricted cash and cash equivalents included in funds receivable and funds held on behalf of | 352.4 | 2,446.3 | ||||||
$ | 788.2 | $ | 3,007.8 | |||||
Disclosures Relating to Non-GAAP Financial Measures
Note 1. Reconciliation of Revenues to Adjusted Revenues
Adjusted revenues represents revenues adjusted to include a) amounts that would have been recognized if deferred revenue were not adjusted to fair value at the date of acquisition and b) amounts that would have been recognized if not for adjustments to deferred revenue and retained earnings related to the adoption of ASC 606. Adjusted revenues is presented because we use this measure to evaluate performance of our business against prior periods and believe it is a useful indicator of the underlying performance of our business. Adjusted revenues is not a recognized term under generally accepted accounting principles ("GAAP"). Adjusted revenues does not represent revenues, as that term is defined under GAAP, and should not be considered as an alternative to revenues as an indicator of our operating performance. Adjusted revenues as presented herein is not necessarily comparable to similarly titled measures presented by other companies. Below is a reconciliation of adjusted revenues to revenues, the GAAP measure we believe to be most directly comparable to adjusted revenues.
Three Months Ended | |||||||||
(in millions) | 2023 | 2022 | |||||||
Revenues | $ | 1,362.7 | $ | 1,295.0 | |||||
ASC 606 adoption impact | (0.8) | (0.5) | |||||||
Purchase accounting adjustments impact on revenue | 1.5 | 1.7 | |||||||
Adjusted revenues | $ | 1,363.4 | $ | 1,296.2 | |||||
The following is a breakdown of software-enabled services and license, maintenance and related revenues and adjusted software-enabled services and license, maintenance and related revenues.
Three Months Ended | |||||||||
(in millions) | 2023 | 2022 | |||||||
Software-enabled services | $ | 1,114.2 | $ | 1,085.2 | |||||
License, maintenance and related | 248.5 | 209.8 | |||||||
Total revenues | $ | 1,362.7 | $ | 1,295.0 | |||||
Software-enabled services | $ | 1,114.9 | $ | 1,086.5 | |||||
License, maintenance and related | 248.5 | 209.7 | |||||||
Total adjusted revenues | $ | 1,363.4 | $ | 1,296.2 | |||||
Note 2. Reconciliation of Operating Income to Adjusted Operating Income
Adjusted operating income represents operating income adjusted for amortization of intangible assets, stock-based compensation, purchase accounting adjustments for deferred revenue and related costs, ASC 606 adoption impact and other expenses. Adjusted operating income is presented because we use this measure to evaluate performance of our business and believe it is a useful indicator of our underlying performance. Adjusted operating income is not a recognized term under GAAP. Adjusted operating income does not represent operating income, as that term is defined under GAAP, and should not be considered as an alternative to operating income as an indicator of our operating performance. Adjusted operating income as presented herein is not necessarily comparable to similarly titled measures by other companies. The following is a reconciliation between adjusted operating income and operating income, the GAAP measure we believe to be most directly comparable to adjusted operating income.
Three Months Ended | |||||||||
(in millions) | 2023 | 2022 | |||||||
Operating income | $ | 280.1 | $ | 291.8 | |||||
Amortization of intangible assets | 146.8 | 146.4 | |||||||
Stock-based compensation | 41.9 | 39.9 | |||||||
Purchase accounting adjustments (1) | 4.8 | 5.2 | |||||||
ASC 606 adoption impact | (0.7) | (0.4) | |||||||
Acquisition related (2) | 2.3 | 13.9 | |||||||
Facilities and workforce restructuring | 17.8 | 1.7 | |||||||
Other (3) | 0.6 | 0.1 | |||||||
Adjusted operating income | $ | 493.6 | $ | 498.6 | |||||
Adjusted operating (income) loss attributable to noncontrolling interest (4) | (0.6) | 0.1 | |||||||
Adjusted operating income attributable to | $ | 493.0 | $ | 498.7 | |||||
(1) | Purchase accounting adjustments include (a) an adjustment to increase revenues by the amount that would have been recognized if deferred revenue were not adjusted to fair value at the date of acquisition, (b) an adjustment to increase personnel and commissions expense by the amount that would have been recognized if prepaid commissions and deferred personnel costs were not adjusted to fair value at the date of the acquisitions and (c) an adjustment to decrease depreciation expense by the amount that would not have been recognized if property, plant and equipment were not adjusted to fair value at the date of acquisition. |
(2) | Acquisition related includes costs related to both current acquisitions and the resolution of pre-acquisition matters for prior period acquisitions. |
(3) | Other includes additional expenses and income that are permitted to be excluded per the terms of our Credit Agreement from Consolidated EBITDA, a financial measure used in calculating our covenant compliance. |
(4) | In 2021, we entered into a joint venture named |
Note 3. Reconciliation of Net Income to EBITDA, Consolidated EBITDA and Adjusted Consolidated EBITDA
EBITDA represents net income before interest expense, income taxes, depreciation and amortization. Consolidated EBITDA, defined under our Credit Agreement entered into in
Three Months Ended | Twelve Months | |||||||||||
(in millions) | 2023 | 2022 | 2023 | |||||||||
Net income | $ | 126.2 | $ | 171.3 | $ | 604.0 | ||||||
Interest expense, net | 111.9 | 49.3 | 370.5 | |||||||||
Provision for income taxes | 52.5 | 63.5 | 216.1 | |||||||||
Depreciation and amortization | 165.9 | 165.6 | 671.9 | |||||||||
EBITDA | 456.5 | 449.7 | 1,862.5 | |||||||||
Stock-based compensation | 41.9 | 39.9 | 126.9 | |||||||||
Acquired EBITDA and cost savings (1) | — | (6.4) | 5.2 | |||||||||
Loss on extinguishment of debt | 0.6 | — | 6.1 | |||||||||
Equity in earnings of unconsolidated affiliates, net | (5.7) | (1.3) | (30.3) | |||||||||
Purchase accounting adjustments (2) | 2.0 | 2.9 | 8.4 | |||||||||
ASC 606 adoption impact | (0.7) | (0.4) | (2.3) | |||||||||
Foreign currency translation (gains) losses | (0.5) | 9.7 | 1.0 | |||||||||
Investment gains | (11.2) | (4.7) | (45.3) | |||||||||
Facilities and workforce restructuring | 17.8 | 1.7 | 48.4 | |||||||||
Acquisition related (3) | 2.3 | 18.1 | 25.7 | |||||||||
Other (4) | 6.6 | (0.8) | 0.8 | |||||||||
Consolidated EBITDA | $ | 509.6 | $ | 508.4 | $ | 2,007.1 | ||||||
Acquired EBITDA and cost savings (1) | — | 6.4 | (5.2) | |||||||||
Adjusted Consolidated EBITDA | $ | 509.6 | $ | 514.8 | $ | 2,001.9 | ||||||
Adjusted Consolidated EBITDA attributable to noncontrolling interest (5) | (0.6) | 0.1 | (1.8) | |||||||||
Adjusted Consolidated EBITDA attributable to | $ | 509.0 | $ | 514.9 | $ | 2,000.1 | ||||||
(1) | Acquired EBITDA reflects the EBITDA impact of significant businesses that were acquired during the period as if the acquisition occurred at the beginning of the period, as well as cost savings enacted in connection with acquisitions. |
(2) | Purchase accounting adjustments include (a) an adjustment to increase revenues by the amount that would have been recognized if deferred revenue were not adjusted to fair value at the date of acquisitions (b) an adjustment to increase personnel and commissions expense by the amount that would have been recognized if prepaid commissions and deferred personnel costs were not adjusted to fair value at the date of the acquisitions and (c) an adjustment to increase or decrease rent expense by the amount that would have been recognized if lease obligations were not adjusted to fair value at the date of acquisitions. |
(3) | Acquisition related includes costs related to both current acquisitions and the resolution of pre-acquisition matters for prior period acquisitions. |
(4) | Other includes additional expenses and income that are permitted to be excluded per the terms of our Credit Agreement from Consolidated EBITDA, a financial measure used in calculating our covenant compliance. |
(5) | In 2021, we entered into a joint venture named |
Note 4. Reconciliation of Net Income to Adjusted Net Income and Diluted Earnings Per Share Attributable to
Adjusted net income and adjusted diluted earnings per share attributable to
Three Months Ended | |||||||||
(in millions, except per share data) | 2023 | 2022 | |||||||
GAAP – Net income | $ | 126.2 | $ | 171.3 | |||||
Amortization of intangible assets | 146.8 | 146.4 | |||||||
Amortization of deferred financing costs and original issue discount | 3.5 | 2.6 | |||||||
Stock-based compensation | 41.9 | 39.9 | |||||||
Loss on extinguishment of debt | 0.6 | — | |||||||
Purchase accounting adjustments (1) | 4.8 | 5.2 | |||||||
ASC 606 adoption impact | (0.7) | (0.4) | |||||||
Equity in earnings of unconsolidated affiliates, net | (5.7) | (1.3) | |||||||
Foreign currency translation (gains) losses | (0.5) | 9.7 | |||||||
Investment gains | (11.2) | (4.7) | |||||||
Facilities and workforce restructuring | 17.8 | 1.7 | |||||||
Acquisition related (2) | 2.3 | 18.1 | |||||||
Other (3) | 6.8 | (0.2) | |||||||
Income tax effect (4) | (47.6) | (54.0) | |||||||
Adjusted net income | $ | 285.0 | $ | 334.3 | |||||
Adjusted net (income) loss attributable to noncontrolling interest (5) | (0.6) | 0.1 | |||||||
Adjusted net income attributable to | $ | 284.4 | $ | 334.4 | |||||
Adjusted diluted earnings per share attributable to | $ | 1.11 | $ | 1.25 | |||||
GAAP diluted earnings per share attributable to | $ | 0.49 | $ | 0.64 | |||||
Diluted weighted-average shares outstanding | 257.0 | 267.6 | |||||||
(1) | Purchase accounting adjustments include (a) an adjustment to increase revenues by the amount that would have been recognized if deferred revenue were not adjusted to fair value at the date of acquisition, (b) an adjustment to increase personnel and commissions expense by the amount that would have been recognized if prepaid commissions and deferred personnel costs were not adjusted to fair value at the date of the acquisitions and (c) an adjustment to decrease depreciation expense by the amount that would not have been recognized if property, plant and equipment were not adjusted to fair value at the date of acquisition. |
(2) | Acquisition related includes costs related to both current acquisitions and the resolution of pre-acquisition matters for prior period acquisitions. |
(3) | Other includes additional expenses and income that are permitted to be excluded per the terms of our Credit Agreement from Consolidated EBITDA, a financial measure used in calculating our covenant compliance. |
(4) | An estimated normalized effective tax rate of approximately |
(5) | In 2021, we entered into a joint venture named |
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