SS&C Technologies Holdings Inc. Reports Operating Results (10-Q)

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Nov 10, 2010
SS&C Technologies Holdings Inc. (SSNC, Financial) filed Quarterly Report for the period ended 2010-09-30.

Ss&c Technologies Holdings Inc. has a market cap of $1.29 billion; its shares were traded at around $18.01 . SSNC is in the portfolios of Ron Baron of Baron Funds.

Highlight of Business Operations:

The total cost of revenues was $42.3 million and $34.8 million for the three months ended September 30, 2010 and 2009, respectively. The gross margin was 49% for each of the three-month periods ended September 30, 2010 and 2009. Our costs of revenues increased by $7.5 million primarily as a result of acquisitions, which added costs of revenues of $3.8 million, an increase of $2.0 million in costs to support organic revenue growth, an increase of $0.8 million in amortization expense, an increase in stock-based compensation of $0.7 million and an increase in costs of $0.2 million related to foreign currency translation. The total cost of revenues was $122.4 million and $102.4 million for the nine months ended September 30, 2010 and 2009, respectively. The gross margin was 50% for the nine months ended September 30, 2010 compared to 49% for the comparable period in 2009. Our costs of revenues increased by $20.0 million primarily as a result of acquisitions, which added costs of revenues of $11.8 million, an increase of $3.1 million in amortization expense, an increase in costs of $2.1 million related to foreign currency translation, an increase of $1.6 million in costs to support organic revenue growth and an increase in stock-based compensation of $1.4 million. The increase in amortization expense for the three-month and nine-month periods ended September 30, 2010 is primarily related to recent acquisitions.

Cost of Maintenance. Cost of maintenance revenues consists primarily of technical client support, costs associated with the distribution of products and regulatory updates and amortization of intangible assets. The cost of maintenance revenues was $8.2 million and $7.0 million for the three months ended September 30, 2010 and 2009, respectively. The increase in cost of maintenance revenues of $1.2 million, or 17%, was primarily due to acquisitions, which added $0.5 million in costs, an increase of $0.4 million in amortization expense, an increase of $0.2 million in costs to support organic revenue growth, and an increase in stock-based compensation of $0.1 million. Cost of maintenance revenues as a percentage of these revenues was 45% for the three months ended September 30, 2010 compared to 41% for the three months ended September 30, 2009. The cost of maintenance revenues was $24.3 million and $20.3 million for the nine months ended September 30, 2010 and 2009, respectively. The increase in cost of maintenance revenues of $4.0 million, or 19%, was primarily due to acquisitions, which added $2.0 million in costs, an increase of $1.6 million in amortization expense, an increase in costs of $0.4 million related to foreign currency translation and an increase in stock-based compensation of $0.3 million, partially offset by a decrease in costs to support organic maintenance revenues of $0.3 million. Cost of maintenance revenues as a percentage of these revenues was 45% for the nine months ended September 30, 2010 compared to 42% for the nine months ended September 30, 2009. The increase in costs as a percentage of revenues for both periods is primarily related to our recent acquisitions. The increase in amortization expense for the three-month and nine-month periods ended September 30, 2010 is primarily related to recent acquisitions.

Cost of Software-Enabled Services. Cost of software-enabled services revenues consists primarily of the cost related to personnel utilized in servicing our software-enabled services clients and amortization of customer relationship intangible assets. The cost of software-enabled services revenues was $28.6 million and $22.5 million for the three months ended September 30, 2010 and 2009, respectively. The increase in costs of software-enabled services revenues of $6.1 million, or 27%, was primarily related to our acquisitions, which added $3.0 million in costs, an increase of $1.8 million in costs to support the growth of organic software-enabled services revenues, an increase of $0.6 million in amortization expense, an increase in stock-based compensation of $0.5 million, and an increase in costs of $0.2 million related to foreign currency translation. Cost of software-enabled services revenues as a percentage of these revenues was 53% for the three months ended September 30, 2010 compared to 54% for the three months ended September 30, 2009. The cost of software-enabled services revenues was $82.1 million and $65.1 million for the nine months ended September 30, 2010 and 2009, respectively. The increase in costs of software-enabled services revenues of $17.0 million, or 26%, was primarily related to our acquisitions, which added $8.6 million in costs, an increase of $3.9 million in costs to support the growth of organic software-enabled services revenues, an increase of $2.0 million in amortization expense, an increase in costs of $1.5 million related to foreign currency translation and an increase in stock-based compensation of $1.0 million. Cost of software-enabled services revenues as a percentage of these revenues was 53% for the nine months ended September 30, 2010 compared to 54% for the nine months ended September 30, 2009. The increase in amortization expense for the three-month and nine-month periods ended September 30, 2010 is primarily related to recent acquisitions.

Total operating expenses were $21.1 million and $16.4 million for the three months ended September 30, 2010 and 2009, respectively. The increase in total operating expenses of $4.7 million, or 28%, was primarily due to our acquisitions, which added $1.7 million in costs, an increase in stock-based compensation of $1.7 million, an increase of $1.2 million in costs to support organic revenue growth and an increase in costs of $0.1 million related to foreign currency translation. Total operating expenses as a percentage of total revenues were 25% for the three-month period ended September 30, 2010 compared to 24% for the three-month period ended September 30, 2009. Total operating expenses were $61.6 million and $49.5 million for the nine months ended September 30, 2010 and 2009, respectively. The increase in total operating expenses of $12.1 million, or 24%, was primarily due to our acquisitions, which added $7.0 million in costs, an increase in stock-based compensation of $3.5 million, an increase in costs of $1.0 million related to foreign currency translation and an increase of $0.7 million in costs to support organic revenues. These increases were partially offset by a decrease of $0.1 million in amortization expense related to intangible assets acquired in prior years. Total operating expenses as a percentage of total revenues were 25% for each of the nine-month periods ended September 30, 2010 and 2009.

Selling and Marketing. Selling and marketing expenses consist primarily of the personnel costs associated with the selling and marketing of our products, including salaries, commissions and travel and entertainment. Such expenses also include amortization of trade name intangible assets, the cost of branch sales offices, trade shows and marketing and promotional materials. Selling and marketing expenses were $6.3 million and $5.0 million for the three months ended September 30, 2010 and 2009, respectively, representing 8% and 7%, of total revenues in each of those periods, respectively. The increase in selling and marketing expenses of $1.3 million, or 26%, was primarily related to our acquisitions, which added $0.8 million in costs, an increase in stock-based compensation of $0.3 million and an increase of $0.2 million in costs to support organic revenue growth. Selling and marketing expenses were $18.9 million and $15.2 million for the nine months ended September 30, 2010 and 2009, respectively, representing 8% of total revenues in each of those periods. The increase in selling and marketing expenses of $3.7 million, or 24%, was primarily related to our acquisitions, which added $2.6 million in costs, an increase in stock-based compensation of $0.6 million, an increase of $0.4 million in costs to support organic revenues and an increase in costs of $0.2 million related to foreign currency translation. These increases were partially offset by a decrease of $0.1 million in amortization expense related to intangible assets acquired in prior years.

General and Administrative. General and administrative expenses consist primarily of personnel costs related to management, accounting and finance, information management, human resources and administration and associated overhead costs, as well as fees for professional services. General and administrative expenses were $6.9 million and $4.5 million for the three months ended September 30, 2010 and 2009, respectively, representing 8% and 7%, of total revenues in each of those periods, respectively. The increase in general and administrative expenses of $2.4 million, or 54%, was primarily related to an increase in stock-based compensation of $1.1 million, an increase of $1.1 million in costs to support organic revenues and our acquisitions, which added $0.2 million in costs. The increase in costs to support organic revenues includes approximately $0.3 million related to one-time items in either the current or prior year period. The remaining increase of approximately $0.8 million was related to normal business activity, primarily capital-based taxes and insurance. General and administrative expenses were $19.2 million and $14.7 million for the nine months ended September 30, 2010 and 2009, respectively, representing 8% and 7%, of total revenues in each of those periods, respectively. The increase in general and administrative expenses of $4.5 million, or 31%, was primarily related to an increase in stock-based compensation of $2.4 million, our acquisitions, which added $1.6 million in costs, an increase in costs of $0.3 million related to foreign currency translation and an increase in costs of $0.2 million to suppRead the The complete Report