SS&C posts Q3 profit rise

Revenue on a GAAP basis for the third quarter of 2010 was $83.0 million, a 20.5% increase, over Q3 2009. GAAP net income was $9.9 million, an increase of 75.7% over the same period in 2009. Diluted earnings per share for Q3 2010 were $0.13, an increase of 44.4% over Q3 2009. GAAP operating income in the third quarter of 2010 was $19.6 million and included amortization of $8.7 million and stock-based compensation of $3.9 million, compared to $17.7 million of operating income in Q3 2009, an increase of 10.9%.

Adjusted net income and adjusted diluted earnings per share (non-GAAP measures defined in note 4 to the attached Condensed Consolidated Financial Information) were $17.2 million and $0.23, respectively, compared to $12.3 million and $0.19 in Q3 2009. This represents increases of 39.5% and 21.1%, respectively.

Adjusted operating income (a non-GAAP financial measure defined in note 2 to the attached Condensed Consolidated Financial Information) was $32.7 million for the three months ended September 30, 2010, compared to $27.7 million in Q3 2009, an increase of 17.9%. Adjusted Consolidated EBITDA (a non-GAAP financial measure defined in note 3 to the attached Condensed Consolidated Financial Information) in Q3 2010 was $34.0 million, compared to $28.7 million in Q3 2009, an increase of 18.5%.

Annual Run Rate Basis (ARRB) recurring revenue, defined as the addition of maintenance and software-enabled services revenue, was $72.1 million for the third quarter of 2010, an annual run rate of $288.6 million. This represents an increase of 22.7% from $58.8 million and $235.1 million run-rate in the same period in 2009 and an increase of 2.4% from Q2 2010's $70.4 million and $281.8 million run-rate. We believe ARRB of our recurring revenue is a good indicator of visibility.

"We continue to grow the business and we are pleased with our 8.7% organic revenue growth and our overall 20.5% revenue growth," said Bill Stone, Chairman and CEO, SS&ammmp;C Technologies Holdings, Inc. "License revenue, total revenue, earnings and cash flow were all solid and we continue to see momentum in software-enabled services revenue, achieving a 28.7% increase over Q3 2009. Year to date we are extremely pleased with a 21.6% increase in total adjusted revenue to $243.0 million from $199.9 million in 2009, and a 42.3% increase in adjusted net income to $47.4 million from $33.3 million."

"We continue to maintain strong operating margins and our 17.9% increase in adjusted operating income confirms our focus," continued Stone.

Cash Flow

SS&C generated net cash from operating activities of $47.6 million for the nine months ended September 30, 2010, compared to $45.0 million for the same period in 2009, representing a 5.8% increase. We ended the quarter with $87.0 million of cash on the balance sheet. SS&C's leverage ratio as defined in our credit agreement stood at 1.98 at the end of Q3 2010, down from 6.8 when we went private in November of 2005.

Product Releases

SS&C is one of the most diversified software and services companies in the financial services industry. Market trends and regulatory dynamics in the industry are positively affecting all of our major businesses and creating significant opportunities.

"We continue to be the largest consumer of our software products as we utilize them in the execution of our various SaaS businesses. As we use our products we can quickly identify and deploy product improvements and respond to client feedback and regulatory requirements, enhancing the competitiveness of our software and SaaS services," said Stone.

In Q3, we developed a stand-alone reporting service to help investment management organizations deal with Financial Accounting Standards Board's Statement No. 167 (FAS 167). FAS 167 is designed to improve the transparency of off-balance sheet entities that are currently exempt from consolidation.

We also released enhancements to some of our key platforms including SKYLINE, Lightning, Pacer and FundRunner.

Outlook

Based on the information available as of October 28, 2010, we currently expect fourth quarter revenues to be in the range of $84.0 to $86.0 million, and adjusted net income to be in the range of $17.4 to $18.1 million, assuming an effective tax rate of 35% and approximately 76.0 to 76.5 million diluted shares outstanding.