SS&C Technologies Holdings Inc (SSNC) 2009 Q1 法說會逐字稿

Good morning. My name is Kadisha, and I will be your conference operator today. At this time, I would like to welcome everyone to the 2009 first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. (Operator Instructions). Thank you.

I'd now like to turn the call over to our host, Mr. Bill Stone, Chairman and Chief Executive Officer. Sir, you may begin.

Thank you for joining us on our Q1 2009 earnings call. With me today is Patrick Pedonti, our Chief Financial Officer, and before we get started we need to review the Safe Harbor Statements. Various remarks we may make on this conference call about our future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in SS&C's filings with the Securities and Exchange Commission, including the company's annual report on Form 10-K for the year-ended December 31, 2008.

I'll begin with a brief overview of the quarter and then I'll turn it over to Patrick who will give us a walk through of the financials and then I'll close with some questions. For Q1 we reported revenue of $63.7 million, which is down from $68.5 million in the first quarter of 2008. This is a continuation of the slowdown that we've started to experience in the third quarter of 2008. Q1 results include MDS for the full quarter and Evare for almost a month. Revenues were down $4.8 million and the negative impact of foreign currency movement was responsible for $4.2 million as the dollar strengthened from Q1 2008. As you all know, we both take the rides up on currency fluctuations and the rides down so we're not necessarily concerned too much about currency.

We continue to manage our expenses diligently and decreased operating expenses by over $1.6 million from Q1 2008, and we're pleased to report net income of $3.9 million for the quarter. New license revenue was $5.8 million, a reduction of 13% from the first quarter of 2008. We did see a number of substantial sized deals signed during the quarter as as insurance companies' investment managers continue to see SS&C products as critical to addressing their accounting, information management, performance, and reporting needs. Our software as a service business also was lower in the first quarter of 2008, which is consistent with the reduction in assets and the deleveraging and the funds that we administer.

We are encouraged by the number of new deals and the expansion of deals in our funds services business during the quarter, and also what we're seeing so far in Q2. During the quarter, we continued to invest in R&D and release new versions of many of our products including new portfolio evaluation, enhancement in AdvisorWare, new collateral management capabilities in Lightning and expanded transparency and pre-checks in MarginMan. During the quarter, we acquired the assets and business of Evare, LLC, a Burlington, Massachusetts-based provider for financial data acquisition, transformation and delivery.

Financial institutions spend a considerable amount of time each day in gathering disparate data in disparate formats to conduct reconciliations to communicate with various counterparties, depositories and customers. Evare's high powered service and deep understanding of the complexity of these processes offer a broad range of Financial Services participants considerable operational cost savings. Our clients have responded well to this deal and we are working diligently on integrating our securities valuation corporation data as well as our SS&C Net Service and Recon product to the Evare offerings.

I'll now turn it over to Patrick to go through the financial results in detail.

Thanks, Bill.

Results for Q1 2009 were revenue of $63.7 million and we'll report net income for the period of $3.9 million. Included in those numbers is acquisition amortization of $7.4 million and stock based compensation of $1.3 million. Revenues decreased $4.8 million or 7% from Q1 2008. Excluding acquisition revenue and the negative impact of foreign currency, revenue decreased 3.8%. The acquisitions of MDS and Evare contributed $2 million of revenue in the quarter and foreign exchange negatively impacted us by $4.2 million or 6.2% in the quarter as the U.S. dollar strengthened.

Foreign currency impacted maintenance revenue negatively by about $800,000, and our software enabled services revenue by about $2.3 million. In our financial statements we've included Note 1 and 2 to present operating income and EBITDA in a comparable basis. Adjusted operating income for the first quarter was $23.1 million, a decrease of $1.5 million or 6% from the first quarter of 2008. As the revenue decrease was offset by employee reductions we initiated in the fourth quarter and expense controls initiated in the first quarter. Even during the slowdown, we have improved our operating margins from 35.9% in the first quarter 2008 to 36.3% in 2009.

Consolidated EBITDA in note 2 of the financial statements is defined in our credit agreement and is used in calculating our covenant compliance. Consolidated EBITDA for the quarter was $25.2 million and includes approximately $200,000 for acquired EBITDA for the Evare acquisition to affect the acquisition for the full quarter. LTM, last 12 month EBITDA as of March 31, 2009, was $113.4 million. Net interest expense for the first quarter was $9.4 million and includes $570,000 of amortized financing costs.

Turning to our balance sheet and our cash flow we ended the quarter with $35.5 million cash and $407.5 million of debt for a net debt position of $372 million. We increased our cash position in the quarter to give us the ability to take advantage of potential acquisitions in the future. We've generated $11 million of operating cash flow for the quarter, and we invested that operating cash flow in the acquisition of Evare and we paid down debt. The acquisition of Evare used $3.5 million in cash.

In addition we implemented temporary controls on our capital expenditures and reduced capital expenditures in the quarter to $102,000, compared to normally running 2 to 2.5% of revenue. We paid down $531,000 of debt, just a required payment as we increased our cash position. In addition as we've discussed, we've become a tax payer in 2008 and in 2009, we've paid $7.4 million in income taxes in the first quarter compared to $3.1 million in the first quarter of 2008. Included in the first quarter tax payment was $3.5 million which was a deposit for the 2008 tax liability since we weren't required to make that deposit until the first quarter of 2009.

Our LTM consolidated EBITDA as of March was 113.4. Our EBITDA growth and lower debt position have reduced our leverage from approximately 6.8 when we closed and went private in November of 2005 to 3.9 as of March 31, 2008, and 3.3 as of March 31, 2009. Our accounts receivable DSO was 60 days on March 31, an increase from 51 as of March 31, 2008, as we saw accounts receivable aging increase in this environment. We've seen improvements in the DSO since the end of the first quarter.

Now I'll turn it back to Bill for final comments.

Thanks, Patrick.

We continue to see many opportunities in the marketplace and we are working diligently to win them. Acquisition pricing has moderated and we are also quite bullish on our Evare opportunity. The fund services industry as you know has been roiled by the decline in the stock market, the evaporation of credit and various scandals. This has lead to a retrenchment in the overall industry and SS&C is not immune. We have also weathered a very severe downturn in business from AV and Amro, which as you know, was broken up and sold to Royal Bank of Scotland.

We watch our expenses and our capital budgets and we manage our business. We have a good pipeline of new business and we have a solid group of clients who we were with last week at our annual user meeting. The mood was cautiously optimistic and very realistic about employing new products and services to broaden their reach and lower their operating costs. SS&C excels at both. I would now like to open up the lines to any questions anybody might have.

(Operator Instructions). Your first question comes from the line of Tim Clark with Oxford Financial.

Yes, I was curious as far as the profitability of your Evare acquisition, is the business profitable when you purchased it? If not, how much or how long do you think it will take to be profitable?

It was profitable on acquisition.

Okay, thank you.

(Operator Instructions). There are no more questions in queue, sir.

Well, we appreciate you all being so vociferous this morning, but we do appreciate you coming and we will be here again at the end of Q2. Thanks.

Ladies and gentlemen, this concludes today's conference. You may now disconnect.