SS&C Technologies Reports Third Quarter 2017 Earnings

Q3 2017 GAAP revenue $418.3 million, up 9.1 percent, Fully Diluted GAAP Earnings Per Share $0.30, up 57.9 percent

Adjusted revenue $419.6 million, up 7.1 percent, Adjusted Diluted Earnings Per Share $0.50, up 19.0 percent

WINDSOR, Conn., Oct. 25, 2017 /PRNewswire/ -- SS&C Technologies Holdings, Inc. (NASDAQ: SSNC), a global provider of investment and financial software-enabled services and software, today announced its financial results for the third quarter ended September 30, 2017.

GAAP Results
SS&C reported GAAP revenue of $418.3 million for the third quarter of 2017, up 9.1 percent compared to $383.3 million in the third quarter of 2016. GAAP operating income for the third quarter of 2017 was $103.9 million, or 24.8 percent of GAAP revenue compared to $76.9 million, or 20.1 percent of GAAP revenue in 2016's third quarter, representing a 35.1 percent increase.

GAAP net income for the third quarter of 2017 was $64.2 million, up 65.8 percent compared to $38.7 million in 2016's third quarter. On a fully diluted GAAP basis, earnings per share in the third quarter of 2017 were $0.30 per share, up 57.9 percent compared to $0.19 per share on a fully diluted GAAP basis in the third quarter of 2016.

Adjusted Non-GAAP Results (defined in Notes 1-4 below)
Adjusted revenue was $419.6 million for the third quarter of 2017, up 7.1 percent compared to $391.9 million in the third quarter of 2016. Adjusted operating income for the third quarter of 2017 was $170.1 million, or 40.5 percent of adjusted revenue compared to $150.5 million, or 38.4 percent of adjusted revenue in 2016's third quarter, representing a 13.1 percent increase.

Adjusted net income for the third quarter of 2017 was $105.5 million, up 20.6 percent compared to $87.5 million in 2016's third quarter. Adjusted diluted earnings per share in the third quarter of 2017 were $0.50 per share, up 19.0 percent compared to $0.42 per share in the third quarter of 2016.

Highlights:

    --  Adjusted diluted earnings per share were $0.50 for Q3 2017, increasing
        19.0 percent from Q3 2016's $0.42 adjusted diluted earnings per share.
    --  For the nine months of 2017, net cash provided by operating activities
        was $307.1 million, an increase of 29.6 percent.
    --  Adjusted consolidated EBITDA increased 14.2 percent to $178.8 million in
        Q3 2017. Adjusted consolidated EBITDA margin was 42.6 percent for the
        quarter.
    --  SS&C paid off $292.8 million of debt in the nine months of 2017,
        bringing our net debt to consolidated EBITDA leverage ratio to 3.19x.

"We are pleased with our ability to report adjusted diluted earnings per share up 19.0 percent on a 7.1 percent increase in adjusted revenue" says Bill Stone, Chairman and Chief Executive Officer of SS&C Technologies. "We had many deals push to Q4; nevertheless we ramped up our margins with 42.6 percent adjusted consolidated EBITDA margin across the entire business. We expect a solid Q4."

Annual Run Rate Basis
Annual Run Rate Basis (ARRB) recurring revenue, defined as adjusted recurring revenue on an annualized basis, was $1,580.1 million based on adjusted recurring revenue $395.0 million for the third quarter of 2017. This represents an increase of 9.6 percent from $360.3 million and $1,441.3 million run-rate in the same period in 2016 and an increase of 2.0 percent from $387.4 million for the second quarter of 2017, an annual run rate of $1,549.7 million. We believe ARRB of our recurring revenue is a good indicator of visibility into future revenue.

Operating Cash Flow
SS&C generated net cash from operating activities of $307.1 million for the nine months ended September 30, 2017, compared to $237.0 million for the same period in 2016, representing a 29.6 percent increase. SS&C ended the third quarter with $103.3 million in cash and cash equivalents and $2,266.8 million in gross debt, for a net debt balance of $2,163.5 million. SS&C's consolidated net leverage ratio as defined in our credit agreement stood at 3.19 times consolidated EBITDA as of September 30, 2017.

Guidance




                   Q4 2017                   FY 2017

    Adjusted
     Revenue ($M)      $427.0 - $437.0   $1,670.2 - $1,680.2

    Adjusted Net
     Income ($M)       $110.0 - $113.9       $404.7 - $408.6

    Cash from
     Operating
     Activities
     ($M)                              -                     $485.0 - $500.0

    Capital                                                           2.9% -
     Expenditures                                                       3.0%
     (% of
     revenue)                          -

    Diluted Shares     213.2 - 212.8      211.7 -
     (M)                                  211.5

    Effective
     Income Tax
     Rate (%)                                           28%

                                   28%

SS&C does not provide reconciliations of guidance for Adjusted Revenues and Adjusted Net Income to comparable GAAP measures, in reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K. SS&C is unable, without unreasonable efforts, to forecast certain items required to develop meaningful comparable GAAP financial measures. These items include acquisition transactions and integration, foreign exchange rate changes, as well as other non-cash and other adjustments as defined under the Company's Credit agreement, that are difficult to predict in advance in order to include in a GAAP estimate.

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 to the attached Condensed Consolidated Financial Information 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
SS&C's Q3 2017 earnings call will take place at 5:00 p.m. eastern time today, October 25, 2017. The call will discuss Q3 2017 results and our guidance and business outlook. Interested parties may dial 877-312-8798 (US and Canada) or 253-237-1193 (International), and request the "SS&C Technologies Third Quarter 2017 Conference Call"; conference ID #95952330. A replay will be available after 8:00 p.m. eastern time on October 25, 2017, until midnight on November 2, 2017. The dial-in number is 855-859-2056 (US and Canada) or 404-537-3406 (International); access code #95952330. The call will also be available for replay on SS&C's website after October 25, 2017; access: http://investor.ssctech.com/results.cfm.

Certain information contained in this press release relating to, among other things, our financial guidance for the fourth quarter and full year of 2017 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", "anticipates", "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, the Company's ability to finalize large client contracts, fluctuations in customer demand for the Company's products and services, intensity of competition from application vendors, delays in product development, the Company's ability to control expenses, terrorist activities, exposure to litigation, the Company's ability to integrate acquired businesses, the effect of the acquisitions on customer demand for the Company's products and services, the market price of the Company's stock prevailing from time to time, the Company's cash flow from operations, general economic conditions, and those risks discussed in the "Risk Factors" section of the Company's most recent Annual Report on Form 10-K, which is on file with the Securities and Exchange Commission and can also be accessed on our website. Forward-looking statements speak only as of the date on which they are made and, except to the extent required by applicable securities laws, we undertake no obligation to update or revise any forward-looking statements.

About SS&C Technologies
SS&C is a global provider of investment and financial software-enabled services and software focused exclusively on the global financial services industry. Founded in 1986, SS&C has its headquarters in Windsor, Connecticut and offices around the world. Some 11,000 financial services organizations, from the world's largest institutions to local firms, manage and account for their investments using SS&C's products and services. These clients in the aggregate manage over $44 trillion in assets.

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                                                                                 SS&C Technologies Holdings, Inc. and Subsidiaries
                                                                                  Condensed Consolidated Statements of Operations
                                                                                       (in thousands, except per share data)
                                                                                                    (unaudited)


                                                                       Three Months Ended September 30,                            Nine Months Ended September 30,
                                                                       --------------------------------                            -------------------------------

                                                                          2017                                                2016                                   2017        2016
                                                                          ----                                                ----                                   ----        ----

    Revenues:

    Software-enabled services                                                                    $282,133                                                   $248,772        $831,103     $699,091

    Maintenance and term licenses                                                                 112,819                                                    106,925         336,990      305,437
                                                                                                  -------                                                    -------         -------      -------

    Total recurring revenues                                                                      394,952                                                    355,697       1,168,093    1,004,528
                                                                                                  -------                                                    -------       ---------    ---------

    Perpetual licenses                                                                              3,576                                                      4,389          10,226       14,643

    Professional services                                                                          19,723                                                     23,218          58,611       61,341
                                                                                                   ------                                                     ------          ------       ------

    Total non-recurring revenues                                                                   23,299                                                     27,607          68,837       75,984
                                                                                                   ------                                                     ------          ------       ------

    Total revenues                                                                                418,251                                                    383,304       1,236,930    1,080,512
                                                                                                  -------                                                    -------       ---------    ---------

    Cost of revenues:

    Software-enabled services                                                                     155,497                                                    143,074         468,391      403,045

    Maintenance and term licenses                                                                  46,662                                                     45,458         140,927      138,864
                                                                                                   ------                                                     ------         -------      -------

    Total recurring cost of revenues                                                              202,159                                                    188,532         609,318      541,909
                                                                                                  -------                                                    -------         -------      -------

    Perpetual licenses                                                                                642                                                        608           1,857        1,749

    Professional services                                                                          17,001                                                     18,887          49,778       51,532
                                                                                                   ------                                                     ------          ------       ------

    Total non-recurring cost of revenues                                                           17,643                                                     19,495          51,635       53,281
                                                                                                   ------                                                     ------          ------       ------

    Total cost of revenues                                                                        219,802                                                    208,027         660,953      595,190
                                                                                                  -------                                                    -------         -------      -------

    Gross profit                                                                                  198,449                                                    175,277         575,977      485,322
                                                                                                  -------                                                    -------         -------      -------

    Operating expenses:

    Selling and marketing                                                                          28,181                                                     27,328          88,544       85,724

    Research and development                                                                       37,376                                                     37,701         114,904      114,975

    General and administrative                                                                     28,975                                                     33,345          88,910       91,239
                                                                                                   ------                                                     ------          ------       ------

    Total operating expenses                                                                       94,532                                                     98,374         292,358      291,938
                                                                                                   ------                                                     ------         -------      -------

    Operating income                                                                              103,917                                                     76,903         283,619      193,384

    Interest expense, net                                                                        (26,250)                                                  (31,648)       (81,565)    (97,583)

    Other (expense) income, net                                                                   (2,535)                                                     2,655         (3,803)         820

    Loss on extinguishment of debt                                                                      -                                                         -        (2,326)           -
                                                                                                      ---                                                       ---         ------          ---

    Income before income taxes                                                                     75,132                                                     47,910         195,925       96,621

    Provision for income taxes                                                                     10,905                                                      9,163          32,400       22,648
                                                                                                   ------                                                      -----          ------       ------

    Net income                                                                                    $64,227                                                    $38,747        $163,525      $73,973
                                                                                                  =======                                                    =======        ========      =======


    Basic earnings per share                                                                        $0.31                                                      $0.19           $0.80        $0.37

    Diluted earnings per share                                                                      $0.30                                                      $0.19           $0.77        $0.36


    Basic weighted average number of common shares outstanding                                    205,568                                                    201,782         204,506      199,365

    Diluted weighted average number of common and common equivalent                               212,359                                                    206,635         211,080      205,334
    shares outstanding


    Cash dividends declared and paid per common share                                               $0.07                                                    $0.0625          $0.195      $0.1875


    Net income                                                                                    $64,227                                                    $38,747        $163,525      $73,973

    Other comprehensive income (loss), net of tax:

    Foreign currency exchange translation adjustment                                               19,951                                                   (12,060)         51,696     (29,532)
                                                                                                   ------                                                    -------          ------      -------

    Total comprehensive income (loss), net of tax                                                  19,951                                                   (12,060)         51,696     (29,532)
                                                                                                   ------                                                    -------          ------      -------

    Comprehensive income                                                                          $84,178                                                    $26,687        $215,221      $44,441
                                                                                                  =======                                                    =======        ========      =======


                                                                    See Notes to Condensed Consolidated Financial Information.


                                                SS&C Technologies Holdings, Inc. and Subsidiaries
                                                      Condensed Consolidated Balance Sheets
                                                                 (in thousands)
                                                                   (unaudited)


                                                September 30,                                         December 31,

                                                         2017                                                  2016
                                                         ----                                                  ----

    ASSETS

    Current assets:

    Cash and cash equivalents                                                       $103,279                          $117,558

    Accounts receivable, net                                                         238,677                           241,307

    Prepaid expenses and other current
     assets                                                                           32,688                            31,119

    Prepaid income taxes                                                              13,832                            23,012

    Restricted cash                                                                      592                             2,116
                                                                                         ---                             -----

    Total current assets                                                             389,068                           415,112

    Property, plant and equipment, net                                               103,580                            80,395

    Deferred income taxes                                                              2,166                             2,410

    Goodwill                                                                       3,692,573                         3,652,733

    Intangible and other assets, net                                               1,411,234                         1,556,321
                                                                                   ---------                         ---------

    Total assets                                                                  $5,598,621                        $5,706,971
                                                                                  ==========                        ==========

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:

    Current portion of long-term debt                                                $39,527                          $126,144

    Accounts payable                                                                  27,776                            16,490

    Income taxes payable                                                                   -                            3,473

    Accrued employee compensation and
     benefits                                                                         73,521                           104,118

    Interest payable                                                                   7,344                            21,470

    Other accrued expenses                                                            45,087                            53,708

    Deferred revenue                                                                 212,811                           235,222
                                                                                     -------                           -------

    Total current liabilities                                                        406,066                           560,625

    Long-term debt, net of current portion                                         2,177,681                         2,374,986

    Other long-term liabilities                                                       85,767                            59,227

    Deferred income taxes                                                            421,468                           453,555
                                                                                     -------                           -------

    Total liabilities                                                              3,090,982                         3,448,393

    Total stockholders' equity                                                     2,507,639                         2,258,578
                                                                                   ---------                         ---------

    Total liabilities and stockholders'
     equity                                                                       $5,598,621                        $5,706,971
                                                                                  ==========                        ==========


                                           See Notes to Condensed Consolidated Financial Information.


                                                                                           SS&C Technologies Holdings, Inc. and Subsidiaries
                                                                                            Condensed Consolidated Statements of Cash Flows
                                                                                                            (in thousands)
                                                                                                              (unaudited)


                                                                                                                                                 Nine Months Ended September 30,
                                                                                                                                                 -------------------------------

                                                                                                                                                                            2017           2016
                                                                                                                                                                            ----           ----

    Cash flow from operating activities:

    Net income                                                                                                                                                                    $163,525           $73,973

    Adjustments to reconcile net income to net cash provided by operating activities:

    Depreciation and amortization                                                                                                                                                  176,879           170,910

    Stock-based compensation expense                                                                                                                                                31,572            40,402

    Income tax benefit related to exercise of stock options                                                                                                                              -         (44,975)

    Amortization and write-offs of loan origination costs                                                                                                                            7,915             7,994

    Loss on extinguishment of debt                                                                                                                                                     963                 -

    Loss on sale or disposition of property and equipment                                                                                                                              730               159

    Deferred income taxes                                                                                                                                                         (24,661)         (39,712)

    Provision for doubtful accounts                                                                                                                                                  2,829             2,684

    Changes in operating assets and liabilities, excluding effects from acquisitions:

    Accounts receivable                                                                                                                                                              1,820          (14,603)

    Prepaid expenses and other assets                                                                                                                                                1,416           (2,595)

    Accounts payable                                                                                                                                                                 8,597             2,610

    Accrued expenses                                                                                                                                                              (45,644)         (18,429)

    Income taxes prepaid and payable                                                                                                                                                 6,781            44,840

    Deferred revenue                                                                                                                                                              (25,632)           13,758
                                                                                                                                                                                   -------            ------

    Net cash provided by operating activities                                                                                                                                      307,090           237,016
                                                                                                                                                                                   -------           -------

    Cash flow from investing activities:

    Additions to property and equipment                                                                                                                                           (29,779)         (18,870)

    Proceeds from sale of property and equipment                                                                                                                                         1                69

    Cash paid for business acquisitions, net of cash acquired                                                                                                                        1,805         (309,432)

    Additions to capitalized software                                                                                                                                              (8,168)          (6,137)

    Purchase of long-term investment                                                                                                                                                     -          (1,000)
                                                                                                                                                                                       ---           ------

    Net cash used in investing activities                                                                                                                                         (36,141)        (335,370)
                                                                                                                                                                                   -------          --------

    Cash flow from financing activities:

    Cash received from debt borrowings                                                                                                                                              45,000                 -

    Repayments of debt                                                                                                                                                           (337,800)        (268,550)

    Proceeds from exercise of stock options                                                                                                                                         46,278            34,767

    Withholding taxes related to equity award net share settlement                                                                                                                 (4,090)          (7,051)

    Income tax benefit related to exercise of stock options                                                                                                                              -           44,975

    Purchase of common stock for treasury                                                                                                                                                -             (13)

    Payment of fees related to refinancing activities                                                                                                                                    -            (503)

    Dividends paid on common stock                                                                                                                                                (39,917)         (37,452)
                                                                                                                                                                                   -------           -------

    Net cash used in financing activities                                                                                                                                        (290,529)        (233,827)
                                                                                                                                                                                  --------          --------

    Effect of exchange rate changes on cash, cash equivalents and restricted cash                                                                                                    3,777             (880)
                                                                                                                                                                                     -----              ----

    Net decrease in cash, cash equivalents and restricted cash                                                                                                                    (15,803)        (333,061)

    Cash, cash equivalents and restricted cash, beginning of period                                                                                                                119,674           436,977
                                                                                                                                                                                   -------           -------

    Cash, cash equivalents and restricted cash, end of period                                                                                                                     $103,871          $103,916
                                                                                                                                                                                  ========          ========


    Supplemental disclosure of non-cash activities:

    Property and equipment acquired through tenant improvement allowances                                                                                                          $10,846      $          -


                                                                                      See Notes to Condensed Consolidated Financial Information.

SS&C Technologies Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Information

Note 1. Reconciliation of Revenues to Adjusted Revenues

Adjusted revenues represents revenues adjusted for one-time purchase accounting adjustments to fair value deferred revenue acquired in business combinations. Adjusted revenues are 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 the Company. Adjusted revenues are 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. Below is a reconciliation between adjusted revenues and revenues, the GAAP measure we believe to be most directly comparable to adjusted revenues.


                                                                        Three Months Ended               Nine Months Ended
                                                                          September 30,                    September 30,
                                                                          -------------                    -------------

                                                       (in thousands) 2017                 2016               2017                2016
                                                                      ----                 ----               ----                ----

    Revenues                                                                  $418,251          $383,304                   $1,236,930  $1,080,512

    Purchase accounting adjustments to deferred revenue                          1,314             8,562                        6,241      38,880
                                                                                 -----             -----                        -----      ------

    Adjusted revenues                                                         $419,565          $391,866                   $1,243,171  $1,119,392
                                                                              ========          ========                   ==========  ==========

The following is a breakdown of recurring and non-recurring revenues and adjusted recurring and non-recurring revenues.


                                                           Three Months Ended               Nine Months Ended
                                                             September 30,                    September 30,
                                                             -------------                    -------------

                                          (in thousands) 2017                 2016               2017                2016
                                                         ----                 ----               ----                ----

    Software-enabled services                                    $282,133          $248,772                     $831,103    $699,091

    Maintenance and term licenses                                 112,819           106,925                      336,990     305,437
                                                                  -------           -------                      -------     -------

    Total recurring revenues                                      394,952           355,697                    1,168,093   1,004,528
                                                                  -------           -------                    ---------   ---------

    Perpetual licenses                                              3,576             4,389                       10,226      14,643

    Professional services                                          19,723            23,218                       58,611      61,341
                                                                   ------            ------                       ------      ------

    Total non-recurring revenues                                   23,299            27,607                       68,837      75,984
                                                                   ------            ------                       ------      ------

    Total revenues                                               $418,251          $383,304                   $1,236,930  $1,080,512
                                                                 ========          ========                   ==========  ==========


    Software-enabled services                                    $282,133          $248,809                     $831,103    $699,358

    Maintenance and term licenses                                 112,903           111,527                      338,582     332,801
                                                                  -------           -------                      -------     -------

    Total adjusted recurring revenues                             395,036           360,336                    1,169,685   1,032,159
                                                                  -------           -------                    ---------   ---------

    Perpetual licenses                                              3,576             4,389                       10,226      14,643

    Professional services                                          20,953            27,141                       63,260      72,590
                                                                   ------            ------                       ------      ------

    Total adjusted non-recurring revenues                          24,529            31,530                       73,486      87,233
                                                                   ------            ------                       ------      ------

    Total adjusted revenues                                      $419,565          $391,866                   $1,243,171  $1,119,392
                                                                 ========          ========                   ==========  ==========

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 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 the underlying performance of the Company. 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. 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                                     Nine Months Ended
                                                                                                           September 30,                                          September 30,
                                                                                                           -------------                                          -------------

    (in thousands)                                                                                     2017                             2016                               2017                               2016
                                                                                                       ----                             ----                               ----                               ----

    Operating income                                                                                           $103,917                                      $76,903                                     $283,619                                     $193,384

    Amortization of intangible assets                                                                            52,874                                       51,539                                      158,024                                      153,214

    Stock-based compensation                                                                                     10,294                                       12,489                                       31,572                                       40,402

    Capital-based taxes                                                                                             250                                        1,000                                        1,000                                        1,472

    Purchase accounting adjustments (1)                                                                             777                                        5,573                                        3,782                                       29,831

    Other (2)                                                                                                     2,005                                        2,966                                        4,901                                        7,885
                                                                                                                  -----                                        -----                                        -----                                        -----

    Adjusted operating income                                                                                  $170,117                                     $150,470                                     $482,898                                     $426,188
                                                                                                               ========                                     ========                                     ========                                     ========


    (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 acquisitions and (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.

    (2) Other includes 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. These include expenses and income related to currency
     transactions, facilities and workforce restructuring, legal settlements and business combinations, among other infrequently occurring transactions.

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 July 2015, as amended, is used in calculating covenant compliance, and is EBITDA adjusted for certain items. Consolidated EBITDA is calculated by subtracting from or adding to EBITDA items of income or expense described below. Adjusted consolidated EBITDA is calculated by subtracting acquired EBITDA from consolidated EBITDA. EBITDA, consolidated EBITDA and adjusted consolidated EBITDA are presented because we use these measures to evaluate performance of our business and believe them to be useful indicators of an entity's debt capacity and its ability to service debt. EBITDA, consolidated EBITDA and adjusted consolidated EBITDA are not recognized terms under GAAP and should not be considered in isolation or as alternatives to operating income, net income or cash flows from operating activities as indicators of our operating performance. The following is a reconciliation of EBITDA, consolidated EBITDA and adjusted consolidated EBITDA to net income.


                                                                                                                            Three Months Ended                                            Nine Months Ended                                        Twelve
                                                                                                                               September 30,                                                September 30,                                      Months Ended
                                                                                                                                                                                                                                               September 30,
                                                                                                                                                                                                                                               -------------

    (in thousands)                                                                                                        2017                                 2016                                  2017                                  2016                                      2017
                                                                                                                          ----                                 ----                                  ----                                  ----                                      ----

    Net income                                                                                                                     $64,227                                           $38,747                                          $163,525                                               $73,973                                            $220,548

    Interest expense, net                                                                                                           26,250                                            31,648                                            81,565                                                97,583                                             112,436

    Provision for income tax                                                                                                        10,905                                             9,163                                            32,400                                                22,648                                              42,372

    Depreciation and amortization                                                                                                   59,666                                            57,470                                           176,879                                               170,910                                             234,652
                                                                                                                                    ------                                            ------                                           -------                                               -------                                             -------

    EBITDA                                                                                                                         161,048                                           137,028                                           454,369                                               365,114                                             610,008

    Stock-based compensation                                                                                                        10,294                                            12,489                                            31,572                                                40,402                                              41,734

    Capital-based taxes                                                                                                                250                                             1,000                                             1,000                                                 1,472                                               1,010

    Acquired EBITDA and cost savings (1)                                                                                               365                                                 -                                            3,581                                                 5,814                                               6,859

    Non-cash portion of straight-line rent expense                                                                                   1,933                                               269                                             2,479                                                 1,822                                               2,855

    Loss on extinguishment of debt                                                                                                       -                                                -                                            2,326                                                     -                                              2,326

    Purchase accounting adjustments (2)                                                                                                777                                             5,573                                             3,782                                                29,831                                               5,570

    Other (3)                                                                                                                        4,540                                               311                                             8,704                                                 7,065                                               7,530
                                                                                                                                     -----                                               ---                                             -----                                                 -----                                               -----

    Consolidated EBITDA                                                                                                           $179,207                                          $156,670                                          $507,813                                              $451,520                                            $677,892

    Less:  acquired EBITDA                                                                                                           (365)                                                -                                          (3,581)                                              (5,814)                                            (6,859)
                                                                                                                                      ----                                               ---                                           ------                                                ------                                              ------

    Adjusted Consolidated EBITDA                                                                                                  $178,842                                          $156,670                                          $504,232                                              $445,706                                            $671,033
                                                                                                                                  ========                                          ========                                          ========                                              ========                                            ========


    (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 and (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.

    (3) Other includes 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. These include expenses and income related to currency transactions, facilities and workforce restructuring, legal settlements and business combinations,
     among other infrequently occurring transactions.

Note 4. Reconciliation of Net Income to Adjusted Net Income and Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share

Adjusted net income and adjusted diluted earnings per share represent net income and earnings per share before amortization of intangible assets and deferred financing costs, stock-based compensation, capital-based taxes and other unusual and non-recurring items. Adjusted net income and adjusted diluted earnings per share are not recognized terms under GAAP, do not represent net income or diluted earnings per share, as those terms are defined under GAAP, and should not be considered as alternatives to net income or diluted earnings per share as indicators of our operating performance. Adjusted net income and adjusted diluted earnings per share are important to management and investors because they represent our operational performance exclusive of the effects of amortization of intangible assets and deferred financing costs, stock-based compensation, capital-based taxes, other unusual and non-recurring items, purchase accounting adjustments, and loss on extinguishment of debt that are not operational in nature or comparable to those of our competitors. The following is a reconciliation between adjusted net income and adjusted diluted earnings per share and net income and diluted earnings per share.


                                                                                                                                                                                  Three Months Ended                                            Nine Months Ended
                                                                                                                                                                                     September 30,                                                September 30,
                                                                                                                                                                                     -------------                                                -------------

    (in thousands, except per share data)                                                                                                                                       2017                                 2016                                  2017                                  2016
                                                                                                                                                                                ----                                 ----                                  ----                                  ----

    GAAP - Net income                                                                                                                                                                    $64,227                                           $38,747                                          $163,525                                           $73,973

    Plus: Amortization of intangible assets                                                                                                                                               52,874                                            51,539                                           158,024                                           153,214

    Plus: Amortization of deferred financing costs and original issue discount                                                                                                             2,634                                             2,682                                             7,915                                             7,994

    Plus: Stock-based compensation                                                                                                                                                        10,294                                            12,489                                            31,572                                            40,402

    Plus: Capital-based taxes                                                                                                                                                                250                                             1,000                                             1,000                                             1,472

    Plus: Loss on extinguishment of debt                                                                                                                                                       -                                                -                                            2,326                                                 -

    Plus: Purchase accounting adjustments (1)                                                                                                                                                777                                             5,573                                             3,782                                            29,831

    Plus: Other (2)                                                                                                                                                                        4,540                                               311                                             8,704                                             7,065

    Income tax effect (3)                                                                                                                                                               (30,115)                                         (24,858)                                         (82,189)                                         (71,600)
                                                                                                                                                                                         -------                                           -------                                           -------                                           -------

    Adjusted net income                                                                                                                                                                 $105,481                                           $87,483                                          $294,659                                          $242,351
                                                                                                                                                                                        ========                                           =======                                          ========                                          ========

    Adjusted diluted earnings per share                                                                                                                                                    $0.50                                             $0.42                                             $1.40                                             $1.18

    GAAP diluted earnings per share                                                                                                                                                        $0.30                                             $0.19                                             $0.77                                             $0.36

    Diluted weighted-average shares outstanding                                                                                                                                          212,359                                           206,635                                           211,080                                           205,334


    (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 acquisitions and (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.

    (2) Other includes 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. These include expenses and income related to currency transactions, facilities and workforce restructuring, legal settlements and business
     combinations, among other infrequently occurring transactions.

    (3) An estimated normalized effective tax rate of 28% has been used to adjust the provision for income taxes for the purpose of computing adjusted net income.

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SOURCE SS&C