SS&C(SSNC) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (unaudited) SS&C Technologies Holdings, Inc.'s unaudited condensed consolidated financial statements detail financial position, performance, and cash flows for the periods ended September 30, 2023 Condensed Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $16,180.0 | $16,653.3 | | Total Liabilities | $9,975.7 | $10,550.4 | | Total Equity | $6,201.5 | $6,100.8 | Condensed Consolidated Statements of Comprehensive Income Highlights (in millions, except per share data) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $1,365.9 | $1,321.0 | $4,091.2 | $3,944.7 | | Operating Income | $306.4 | $304.2 | $874.7 | $841.6 | | Net Income | $156.6 | $159.8 | $413.7 | $441.4 | | Diluted EPS | $0.61 | $0.61 | $1.62 | $1.68 | Condensed Consolidated Statements of Cash Flows Highlights (in millions) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $826.7 | $764.6 | | Net cash used in investing activities | ($167.1) | ($1,707.8) | | Net cash used in financing activities | ($812.6) | ($751.7) | Notes to Condensed Consolidated Financial Statements Detailed notes support the financial statements, covering revenue disaggregation, debt structure, compensation, and legal contingencies Revenue by Source - Q3 2023 vs Q3 2022 (in millions) | Revenue Source | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Software-enabled services | $1,122.1 | $1,049.8 | | Maintenance and term licenses | $211.6 | $237.4 | | Professional services | $26.8 | $27.7 | | Perpetual licenses | $5.4 | $6.1 | - As of September 30, 2023, total debt consisted of $4.83 billion in senior secured credit facilities and $2.0 billion in 5.5% senior notes due 2027[34] - In connection with the DST ERISA legal proceedings, the company recorded an accrued liability of $55.1 million; the settlement was granted final approval on October 25, 2023[51][61] - Subsequent to the quarter end, on October 1, 2023, the company acquired OneVue Fund Services Pty Ltd. for approximately $32.5 million in cash[72] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, highlighting revenue growth, increased interest expense, strong liquidity, and debt covenant compliance Results of Operations Operating results are detailed, showing revenue growth from software-enabled services, improved gross margin, and increased net interest expense Revenue Change - Q3 2023 vs Q3 2022 (in millions) | Revenue Source | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Software-enabled services | $1,122.1 | $1,049.8 | 6.9% | | License, maintenance and related | $243.8 | $271.2 | (10.1)% | | Total revenues | $1,365.9 | $1,321.0 | 3.4% | - The increase in Q3 2023 revenues was primarily driven by $29.4 million in organic growth, strength in SS&C GlobeOp fund administration, virtual data room services, Global Investor and Distribution Solutions, and the Blue Prism business[78] - Net interest expense for Q3 2023 was $120.6 million, a significant increase from $86.0 million in Q3 2022, driven by a higher average interest rate on debt (6.87% vs. 4.55%)[86] Liquidity and Capital Resources The company's cash requirements and sources are outlined, detailing operating cash flow, uses of cash, and available liquidity Summary of Cash Flows - Nine Months Ended Sep 30, 2023 (in millions) | Activity | Amount | | :--- | :--- | | Net cash provided by operating activities | $826.7 | | Purchases of common stock for treasury | ($341.0) | | Net repayments of debt | ($224.5) | | Dividends paid on common stock | ($160.9) | | Capitalized software development costs | ($140.9) | - As of September 30, 2023, the company had $523.7 million available for borrowing under its $600.0 million Revolving Credit Facility[101] Covenant Compliance The company's compliance with its maximum consolidated net secured leverage ratio is detailed, including Consolidated EBITDA calculations Consolidated Net Secured Leverage Ratio as of Sep 30, 2023 | Metric | Requirement | Actual | | :--- | :--- | :--- | | Maximum consolidated net secured leverage to Consolidated EBITDA ratio | 6.25x | 2.21x | - Consolidated EBITDA attributable to SS&C common stockholders for the twelve months ended September 30, 2023, was $2,063.8 million[117] Quantitative and Qualitative Disclosures About Market Risk The company's exposure to market risks, including interest rate, equity price, and foreign currency fluctuations, is discussed - At September 30, 2023, the company had approximately $4,905.1 million in variable interest rate debt; a 100 basis point increase in rates would increase annual interest expense by about $49.1 million[127] - The company has $49.0 million in investments exposed to equity price risk; a 10% change in fair value would impact net income by approximately $3.6 million[128] - For the nine months ended September 30, 2023, about 31% of revenues were from clients outside the United States, with the majority of foreign currency exposure denominated in the British pound[129] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls over financial reporting - The CEO and CFO concluded that as of September 30, 2023, the company's disclosure controls and procedures were effective at the reasonable assurance level[132] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[133] PART II. OTHER INFORMATION Legal Proceedings Legal proceedings are detailed, including the final approval of the DST ERISA settlement and assessment of other ongoing matters - The company incorporates by reference the details of legal proceedings from Note 14, which describes the DST ERISA matters[135] - A settlement for the DST ERISA matters was granted final approval on October 25, 2023; DST will pay approximately $55.1 million to fund its share of the global settlement[51][61] Risk Factors No material changes to previously disclosed risk factors were identified since the last annual report - There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[137] Issuer Purchases of Equity Securities Details of common stock repurchases during Q3 2023 are provided, including the new $1 billion repurchase program Share Repurchases in Q3 2023 | Period | Total Shares Purchased (millions) | Average Price Paid per Share | | :--- | :--- | :--- | | July 2023 | — | $ — | | August 2023 | 1.5 | $56.65 | | September 2023 | 0.2 | $54.49 | | Total | 1.7 | | - In July 2023, the Board of Directors authorized a new stock repurchase program, allowing for the purchase of up to $1 billion of outstanding common stock[36][139] Exhibits This section lists the exhibits filed with the Form 10-Q, including executive offer letters and required SOX certifications - The exhibits filed with the report include an offer letter for Brian N. Schell and certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[142]