SS&C Demonstrates the Fruits of Its Acquisitions

SS&C Technologies Holdings (NASDAQ:SSNC) released exceptional fourth-quarter 2018 results on Thursday after the market closed, handily beating its guidance yet again and capping a year in which it spent more than $8 billion in pursuit of acquisitive growth. But that wasn't the only bright spot in SS&C's report.

With shares up 6.3% on Friday in response, let's take a closer look at how the financial-services software leader finished 2018, as well as what investors should be watching in the year ahead.

IMAGE SOURCE: SS&C Technologies.

SS&C Technologies results: The raw numbers Metric Q4 2018 Q4 2017 Year-Over-Year Growth

GAAP revenue	$1.111 billion	$438.4 million	153.4%
GAAP net income	$58.7 million	$165.4 million	(64.5%)
GAAP earnings per diluted share	$0.23	$0.77	(70.1%)

DATA SOURCE: SS&C TECHNOLOGIES, INC. GAAP = generally accepted accounting principles.

What happened with SS&C this quarter? On a non-GAAP basis, which adjusts for new accounting standards and purchase accounting adjustments to deferred revenue from acquisitions, SS&C's revenue grew 157.8%, to $1.133 billion, driven by its acquisition of DST early last year. Adjusted net income jumped 112.2%, to $243 million, and climbed 75.9% on a per-share basis, to $0.95. Both the top and bottom lines arrived above the high ends of SS&C's guidance provided in November, which called for adjusted revenue of $1.075 billion to $1.085 billion and adjusted net income per share of $0.82 to $0.86. Adjusted software-enabled services revenue increased 234.3%, to $935.2 million. Adjusted license and maintenance revenue rose 13.1%, to $175.8 million. Adjusted consolidated EBITDA grew 132.5%, to $444.8 million.  On November 16, 2018, SS&C closed on its previously announced $1.5 billion acquisition of Intralinks Holdings, comprised of $1 billion in cash and $500 million in SS&C stock. On February 12, 2019, SS&C approved a 25% increase in its quarterly dividend to $0.10 per share. What management had to say

SS&C chairman and CEO Bill Stone stated:

SS&C Technologies finished 2018 strong, with total adjusted revenues of $3,478.7 million and adjusted diluted earnings per share of $2.92. We spent over $8 billion to acquire DST Systems, Eze Software, and Intralinks in 2018, and we are seeing success in both top line growth and margin improvement. Our core business remains strong, with solid organic revenue growth and margin expansion contributing to our earnings beat.

Looking ahead

For the first quarter of 2019, SS&C expects adjusted revenue of $1.132 billion to $1.162 billion and adjusted net income of $217 million to $233 million. Based on the company's expected diluted share count next quarter, that should translate to adjusted earnings per share in the approximate range of $0.83 to $0.89.

Finally, for the full-year 2019, SS&C sees adjusted revenue climbing to a range of $4.69 billion to $4.79 billion, with adjusted net income of $970 million to $1.015 billion. Adjusted net income per share should be in the range of $3.65 to $3.82. By comparison -- and though we don't usually pay close attention to Wall Street's demands -- most analysts were modeling 2019 earnings of only $3.57 per share on revenue near the midpoint of SS&C's guidance range.

In the end, from SS&C's strong quarterly beat to its higher-than-expected profit targets for the coming year, there was nothing not to love about this report -- and SSNC shares are responding accordingly.