SS&C Technologies Releases Q1 2020 Earnings

WINDSOR, Conn., April 30, 2020 /PRNewswire/ -- SS&C Technologies Holdings, Inc. (NASDAQ: SSNC), a global provider of investment, financial, and healthcare software-enabled services and software, today announced its financial results for the first quarter ended March 31, 2020.

Due to the uncertainty caused by COVID-19, we are withdrawing our quarterly and 2020 guidance, instead providing 2020 scenario analysis, based on a number of assumptions, which can be found in our Q1 2020 earnings results slides at investor.ssctech.com.

GAAP Results

SS&C reported GAAP revenue of $1,173.6 million for the first quarter of 2020, up 3.2 percent compared to $1,137.2 million in the first quarter of 2019. GAAP operating income for the first quarter of 2020 was $218.8 million, or 18.6 percent of GAAP revenue, compared to GAAP operating income of $202.0 million, or 17.8 percent of GAAP revenue, in 2019's first quarter, representing an 8.3 percent increase.

GAAP net income for the first quarter of 2020 was $99.2 million compared to GAAP net income of $80.8 million in 2019's first quarter, up 22.8%. On a fully diluted GAAP basis, earnings per share in the first quarter of 2020 were $0.37 per share compared to earnings per share of $0.31 on a fully diluted GAAP basis in the first quarter of 2019, up 19.4%.

Adjusted Non-GAAP Results (defined in Notes 1-4 below)

Adjusted revenue was $1,178.0 million for the first quarter of 2020, up 2.4 percent compared to $1,150.0 million in the first quarter of 2019. Adjusted operating income for the first quarter of 2020 was $444.2 million, or 37.7 percent of adjusted revenue, compared to $420.9 million, or 36.6 percent of adjusted revenue, in 2019's first quarter, representing a 5.5 percent increase and an increase of 110 basis points in adjusted operating margin.

Adjusted net income for the first quarter of 2020 was $274.0 million, up 14.5 percent compared to $239.4 million in 2019's first quarter. Adjusted diluted earnings per share in the first quarter of 2020 were $1.03 per share, up 13.2 percent compared to $0.91 per share in the first quarter of 2019.

SS&C's COVID-19 Response

SS&C is operating in a global public health crisis. Covid-19's impact is devastating to many and nations are being tested from human and economic perspectives. As long as the duration and scale of the pandemic and economic slowdown remains we expect markets to be volatile. The slowdown in the global economy will take time to recover.

Due to this uncertainty, we are withdrawing our quarterly and 2020 guidance. We are providing 2020 scenario analysis, based on a number of assumptions, which can be found in our Q1 2020 earnings results slides at investor.ssctech.com.

First Quarter Highlights:

    --  Cash flow provided by operations for Q1 2020 was $147.7 million, up 7.5
        percent from $137.4 million in Q1 2019.
    --  Paid down $2,142.3 million of net debt since our April 2018 acquisition
        of DST Systems, bringing our net leverage ratio to 3.74 times
        consolidated EBITDA, and our net secured leverage ratio to 2.67 times
        consolidated EBITDA.
    --  In the first quarter, SS&C drew down $246 million of its available
        capacity under the Revolving Credit Facility as a precautionary measure
        in order to increase liquidity and preserve financial flexibility in
        light of current uncertainty resulting from the COVID-19 pandemic.
    --  Adjusted operating income margins were 37.7 percent of adjusted revenue
        in Q1 2020 compared to 36.6 percent in Q1 2019.
    --  Adjusted consolidated EBITDA increased 4.5 percent to $463.5 million in
        Q1 2020.  Adjusted consolidated EBITDA margin was 39.3 percent of
        adjusted revenue.
    --  SS&C acquired Captricity, the maker of Vidado data transformation
        platform on March 24, 2020.
    --  SS&C announced our plan to acquire Capita's Life Insurance and Pension
        Servicing business in Ireland on April 21, 2020.  We expect this
        acquisition to close in Q2 2020.
    --  SS&C today announced our plan to acquire Innovest for a total
        consideration of $120.0 million. We expect this acquisition to close in
        Q2 2020.

"The COVID-19 global pandemic has quickly and broadly altered how the world conducts business. The health and safety of our employees and our clients is paramount, and SS&C moved swiftly to ensure our 23,000 employees were informed, protected, and prepared," says Bill Stone, Chairman and CEO of SS&C Technologies. "These times are unprecedented, and they call for focus, innovation and real customer commitments. The transition to working remotely was seamless, in large part due to the long hours worked by our CTO, Anthony Caiafa and his IT and infrastructure team, Blair Williams and his business continuity team, and all of our client service teams dealt with an influx of volume. SS&C's products and services are mission critical, and now more than ever clients depend on our expertise and hardened infrastructure."

Operating Cash Flow

SS&C generated net cash from operating activities of $147.7 million for the three months ended March 31, 2020, compared to $137.4 million for the same period in 2019, representing a 7.5 percent increase. SS&C ended the first quarter with $373.7 million in cash and cash equivalents and $7,377.0 million in gross debt, for a net debt balance of $7,003.3 million. SS&C's consolidated net leverage ratio as defined in our credit agreement stood at 3.74 times consolidated EBITDA as of March 31, 2020. SS&C's net secured leverage ratio stood at 2.67 times consolidated EBITDA as of March 31, 2020.

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

SS&C's Q1 2020 earnings call will take place at 5:00 p.m. eastern time today, April 30, 2020. The call will discuss Q1 2020 results and business outlook. Interested parties may dial 833-968-2327 (US and Canada) or 778-560-2848 (International), and request the "SS&C Technologies First Quarter 2020 Conference Call"; conference ID #4970198. In connection with the earnings call, a presentation will be available on SS&C's website at http://investor.ssctech.com/results.cfm. A replay will be available after 10:00 p.m. eastern time on April 30, 2020, until midnight on May 7, 2020. The replay dial-in number is 800-585-8367 or 416-621-4642; access code #4970198. The call will also be available for replay on SS&C's website after April 30, 2020; access: http://investor.ssctech.com/results.cfm.

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 2020 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 DST Systems, Inc., the effect of customer consolidation on demand for the Company's products and services, the increasing focus of the Company's business on the hedge fund industry, the variability of revenue as a result of activity in the securities markets, the ability to retain and attract clients, fluctuations in customer demand for the Company's products and services, the intensity of competition with respect to the Company's products and services, the exposure to litigation and other claims, terrorist activities and other catastrophic events, disruptions, attacks or failures affecting the Company's software-enabled services, risks associated with the Company's foreign operations, privacy concerns relating to the collection and storage of personal information, evolving regulations and increased scrutiny from regulators, the Company's ability to protect intellectual property assets and litigation regarding intellectual property rights, delays in product development, investment decisions concerning cash balances, regulatory and tax risks, risks associated with the Company's joint ventures, changes in accounting standards, risks related to the Company's substantial indebtedness, the market price of the Company's stock prevailing from time to time, and the risks discussed in the "Risk Factors" section of the Company's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, which are 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 services and software for the financial services and healthcare industries. Founded in 1986, SS&C is headquartered in Windsor, Connecticut, and has offices around the world. Some 18,000 financial services and healthcare organizations, from the world's largest companies to small and mid-market firms, rely on SS&C for expertise, scale, and technology.

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            SS&C Technologies Holdings, Inc. and Subsidiaries


                                                                                         
       
         Condensed Consolidated Statements of Comprehensive (Loss) Income


                                                                                               
          
              (in millions, except per share data)


                                                                                                         
            
              (unaudited)




                                                                                                                                                                         Three Months Ended March 31,



                                                                                                                                                                    2020                              2019




     
              Revenues:



     Software-enabled services                                                                                                                                           $
            989.5                   $
         972.0



     License, maintenance and related                                                                                                                                              184.1                          165.2




     Total revenues                                                                                                                                                              1,173.6                        1,137.2




     
              Cost of revenues:



     Software-enabled services                                                                                                                                                     583.5                          586.9



     License, maintenance and related                                                                                                                                               82.1                           75.0




     Total cost of revenues                                                                                                                                                        665.6                          661.9




     Gross profit                                                                                                                                                                  508.0                          475.3




     
              Operating expenses:



     Selling and marketing                                                                                                                                                          91.4                           87.0



     Research and development                                                                                                                                                      104.9                           94.8



     General and administrative                                                                                                                                                     92.9                           91.5




     Total operating expenses                                                                                                                                                      289.2                          273.3




     Operating income                                                                                                                                                              218.8                          202.0



     Interest expense, net                                                                                                                                                        (77.4)                       (101.6)



     Other (expense) income, net                                                                                                                                                  (15.3)                           3.5



     Equity in earnings of unconsolidated affiliates, net                                                                                                                            0.7



     Loss on extinguishment of debt                                                                                                                                                (2.8)                         (7.1)




     Income before income taxes                                                                                                                                                    124.0                           96.8



     Provision for income taxes                                                                                                                                                     24.8                           16.0




     Net income                                                                                                                                                           $
            99.2                    $
         80.8






     Basic earnings per share                                                                                                                                             $
            0.39                    $
         0.32



     Diluted earnings per share                                                                                                                                           $
            0.37                    $
         0.31





     Basic weighted average number of common shares outstanding                                                                                                                    255.3                          251.5



     Diluted weighted average number of common and common equivalent shares outstanding                                                                                            265.6                          263.7





     Net income                                                                                                                                                           $
            99.2                    $
         80.8



     
              Other comprehensive (loss) income, net of tax:



     Change in unrealized loss on interest rate swaps                                                                                                                              (2.4)



     Foreign currency exchange translation adjustment                                                                                                                            (150.7)                          41.8




     Total other comprehensive (loss) income, net of tax                                                                                                                         (153.1)                          41.8




     Comprehensive (loss) income                                                                                                                                        $
            (53.9)                  $
         122.6


                                                           
       
         SS&C Technologies Holdings, Inc. and Subsidiaries


                                                             
       
             Condensed Consolidated Balance Sheets


                                                                  
           
                (in millions)


                                                                   
           
                (unaudited)




                                                                                                  March 31,                      December 31,


                                                                                                       2020                               2019




     
                Assets



     Current assets:



     Cash and cash equivalents                                                                                      $
        373.7                  $
         152.8



     Funds receivable and funds held on behalf of clients                                                               1,073.1                       1,729.9



     Accounts receivable, net                                                                                             686.6                         669.7



     Contract asset                                                                                                        27.7                          20.0



     Prepaid expenses and other current assets                                                                            167.3                         204.5



     Restricted cash                                                                                                        8.3                           9.0




     Total current assets                                                                                               2,336.7                       2,785.9



     Property, plant and equipment, net                                                                                   436.4                         466.4



     Operating lease right-of-use assets                                                                                  358.0                         375.3



     Investments                                                                                                          175.5                         160.1



     Unconsolidated affiliates                                                                                            228.2                         234.8



     Contract asset                                                                                                        78.6                          78.6



     Goodwill                                                                                                           7,859.7                       7,959.9



     Intangible and other assets, net                                                                                   4,501.0                       4,680.1




     Total assets                                                                                                $
        15,974.1               $
         16,741.1




     
                Liabilities and Stockholders' Equity



     Current liabilities:



     Current portion of long-term debt                                                                              $
        320.0                   $
         76.3



     Client funds obligations                                                                                           1,073.1                       1,729.9



     Accounts payable                                                                                                      42.8                          36.9



     Income taxes payable                                                                                                   7.9                          13.3



     Accrued employee compensation and benefits                                                                           163.4                         290.6



     Interest payable                                                                                                       0.2                          27.6



     Other accrued expenses                                                                                               253.9                         268.4



     Deferred revenue                                                                                                     348.0                         333.2




     Total current liabilities                                                                                          2,209.3                       2,776.2



     Long-term debt, net of current portion                                                                             6,986.3                       7,077.8



     Operating lease liabilities                                                                                          331.8                         348.6



     Other long-term liabilities                                                                                          317.9                         333.7



     Deferred income taxes                                                                                              1,041.2                       1,088.7




     Total liabilities                                                                                                 10,886.5                      11,625.0



     Total stockholders' equity                                                                                         5,087.6                       5,116.1




     Total liabilities and stockholders' equity                                                                  $
        15,974.1               $
         16,741.1


                                                                                                      
      
         SS&C Technologies Holdings, Inc. and Subsidiaries


                                                                                                       
      
         Condensed Consolidated Statements of Cash Flows


                                                                                                            
           
                (in millions)


                                                                                                             
           
                (unaudited)




                                                                                                                                                                            Three Months Ended March 31,



                                                                                                                                                                 2020                                    2019




     
                Cash flow from operating activities:



     Net income                                                                                                                                                         $
             99.2                         $
           80.8



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



     Depreciation and amortization                                                                                                                                                184.7                                 202.8



     Equity in earnings of unconsolidated affiliates, net                                                                                                                         (0.7)



     Cash distributions received from unconsolidated affiliates                                                                                                                     2.0                                   0.1



     Stock-based compensation expense                                                                                                                                              22.5                                  20.4



     Net losses (gains) on investments                                                                                                                                             11.3                                 (7.7)



     Amortization and write-offs of loan origination costs and original issue discounts                                                                                             3.5                                   4.3



     Loss on extinguishment of debt                                                                                                                                                 0.4



     Loss on sale or disposition of property and equipment                                                                                                                          3.7                                   2.5



     Deferred income taxes                                                                                                                                                       (32.3)                               (29.6)



     Provision for doubtful accounts                                                                                                                                                2.3                                   0.6



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



     Accounts receivable                                                                                                                                                         (27.2)                                (2.9)



     Prepaid expenses and other assets                                                                                                                                             13.2                                  21.9



     Contract assets                                                                                                                                                             (10.5)                                  4.2



     Accounts payable                                                                                                                                                               6.4                                   3.6



     Accrued expenses and other liabilities                                                                                                                                     (171.0)                              (161.8)



     Income taxes prepaid and payable                                                                                                                                              38.1                                (16.6)



     Deferred revenue                                                                                                                                                               2.1                                  14.8




     Net cash provided by operating activities                                                                                                                                    147.7                                 137.4




     
                Cash flow from investing activities:



     Cash paid for business acquisitions, net of cash acquired                                                                                                                   (16.3)                                  3.2



     Additions to property and equipment                                                                                                                                          (8.5)                               (16.3)



     Additions to capitalized software                                                                                                                                           (18.0)                               (16.4)



     Investments in securities                                                                                                                                                   (40.0)



     Proceeds from sales / maturities of investments                                                                                                                                6.9                                  10.8



     Collection of other non-current receivables                                                                                                                                    2.6                                   2.6




     Net cash used in investing activities                                                                                                                                       (73.3)                               (16.1)




     
                Cash flow from financing activities:



     Cash received from debt borrowings                                                                                                                                           246.0                               2,140.0



     Repayments of debt                                                                                                                                                          (95.9)                            (2,278.4)



     Fees paid for debt extinguishment and refinancing activities                                                                                                                                                      (4.6)



     Net decrease in client funds obligations                                                                                                                                   (670.7)                               (79.3)



     Proceeds from exercise of stock options                                                                                                                                       38.1                                  45.1



     Withholding taxes paid related to equity award net share settlement                                                                                                          (3.3)                                (9.5)



     Dividends paid on common stock                                                                                                                                              (31.9)                               (25.2)




     Net cash used in financing activities                                                                                                                                      (517.7)                              (211.9)




     Effect of exchange rate changes on cash, cash equivalents and restricted cash                                                                                                (7.1)                                  0.7




     Net decrease in cash, cash equivalents and restricted cash                                                                                                                 (450.4)                               (89.9)



     Cash, cash equivalents and restricted cash, beginning of period                                                                                                            1,789.4                               1,113.3




     
                Cash, cash equivalents and restricted cash and cash equivalents, end of period                                                                     $
             1,339.0                      $
           1,023.4






     
                Reconciliation of cash, cash equivalents and restricted cash and cash equivalents:



     Cash and cash equivalents                                                                                                                                         $
             373.7                        $
           154.6



     Restricted cash and cash equivalents                                                                                                                                           8.3                                   5.6



     Funds receivable and funds held on behalf of clients                                                                                                                         957.0                                 863.2



                                                                                                                                                                      $
             1,339.0                      $
           1,023.4

SS&C Technologies Holdings, Inc. and Subsidiaries
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 March 31,




     (in millions)                                     2020                            2019




     Revenues                                               $
     1,173.6                      $
     1,137.2



     ASC 606 adoption impact                                       2.2                             4.2



     Purchase accounting adjustments impact on revenue             2.2                             8.6




     Adjusted revenues                                      $
     1,178.0                      $
     1,150.0

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 March 31,




     (in millions)                    2020                              2019




     Software-enabled services               $
       989.5                        $
       972.0



     License, maintenance and related             184.1                             165.2




     Total revenues                        $
       1,173.6                      $
       1,137.2






     Software-enabled services               $
       991.3                        $
       980.8



     License, maintenance and related             186.7                             169.2




     Total adjusted revenues               $
       1,178.0                      $
       1,150.0

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 March 31,




     (in millions)                       2020                            2019




     Operating income                         $
     218.8                        $
     202.0



     Amortization of intangible assets           157.6                           170.8



     Stock-based compensation                     22.5                            20.4



     Purchase accounting adjustments (1)           9.5                            17.5



     ASC 606 adoption impact                       2.3                             4.2



     Other (2)                                    33.5                             6.0




     Adjusted operating income                $
     444.2                        $
     420.9




              (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)              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 foreign currency
                                  transactions, facilities and
                                  workforce restructuring, legal
                                  settlements and business
                                  acquisitions.

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 April 2018, 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 (as defined below) 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. These measures are not necessarily comparable to similarly titled measures by other companies. The following is a reconciliation of EBITDA, Consolidated EBITDA and Adjusted Consolidated EBITDA to net income.


                                                                    Three Months Ended March 31,                           Twelve Months
                                                                                                      Ended March 31,




     (in millions)                                        2020                                2019                   2020




     Net income                                                 $
       99.2                           $
              80.8                      $
       456.9



     Interest expense, net                                           77.4                                      101.6                           380.8



     Provision for income taxes                                      24.8                                       16.0                           102.0



     Depreciation and amortization                                  184.7                                      202.8                           757.1




     EBITDA                                                         386.1                                      401.2                         1,696.8



     Stock-based compensation                                        22.5                                       20.4                            74.5



     Acquired EBITDA and cost savings (1)                           (1.0)                                       5.8                            25.1



     Non-cash portion of straight-line rent expense                 (0.1)                                                                      0.1



     Loss on extinguishment of debt                                   2.8                                        7.1                             2.8



     Equity in earnings of unconsolidated affiliates, net           (0.7)                                                                    (4.4)



     Purchase accounting adjustments (2)                              1.8                                        8.0                             7.8



     ASC 606 adoption impact                                          2.3                                        4.2                            17.0



     Other (3)                                                       48.8                                        2.5                            53.4




     Consolidated EBITDA                                       $
       462.5                          $
              449.2                    $
       1,873.1



     Less:  acquired EBITDA and cost savings (1)                      1.0                                      (5.8)                         (25.1)




     Adjusted Consolidated EBITDA                              $
       463.5                          $
              443.4                    $
       1,848.0




              (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 acquisition 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 foreign currency
                                  transactions, investment gains
                                  and losses, facilities and
                                  workforce restructuring, legal
                                  settlements, business
                                  acquisitions and other items.

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, purchase accounting adjustments and other items. We consider adjusted net income and adjusted diluted earnings per share to be 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, purchase accounting adjustments, loss on extinguishment of debt and other items, that are not operational in nature or comparable to those of our competitors. Adjusted net income and adjusted diluted earnings per share are not recognized terms under GAAP. Adjusted net income and adjusted diluted earnings per share 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 as presented herein are not necessarily comparable to similarly titled measures presented by other companies. Below is a reconciliation of adjusted net income and adjusted diluted earnings per share to net income and diluted earnings per share, the GAAP measures we believe to be most directly comparable to adjusted net income and adjusted diluted earnings per share.


                                                                                          Three Months Ended March 31,




     (in millions, except per share data)                                       2020                                  2019




     GAAP - Net income                                                                $
       99.2                             $
        80.8



     Plus: Amortization of intangible assets                                              157.6                                  170.8



     Plus: Amortization of deferred financing costs and original issue discount             3.5                                    4.3



     Plus: Stock-based compensation                                                        22.5                                   20.4



     Plus: Loss on extinguishment of debt                                                   2.8                                    7.1



     Plus: Purchase accounting adjustments (1)                                              9.5                                   17.5



     Plus: ASC 606 adoption impact                                                          2.3                                    4.2



     (Less): Equity in earnings of unconsolidated affiliates, net                         (0.7)



     Plus: Other (2)                                                                       48.8                                    2.5



     Income tax effect (3)                                                               (71.5)                                (68.2)




     Adjusted net income                                                             $
       274.0                            $
        239.4




     Adjusted diluted earnings per share                                              $
       1.03                             $
        0.91



     GAAP diluted earnings per share                                                  $
       0.37                             $
        0.31



     Diluted weighted-average shares outstanding                                          265.6                                  263.7




              (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)              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
                                  foreign currency transactions,
                                  investment gains and losses,
                                  facilities and workforce
                                  restructuring, legal settlements,
                                  business acquisitions and other
                                  items.



              (3)              An estimated normalized effective
                                  tax rate of approximately 26% for
                                  the three months ended March 31,
                                  2020 and 2019, respectively, 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