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

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May 14, 2010
SS&C Technologies Holdings Inc. (SSNC, Financial) filed Quarterly Report for the period ended 2010-03-31.

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Highlight of Business Operations:

Maintenance. Maintenance revenues were $18.0 million and $15.5 million for the three months ended March 31, 2010 and 2009, respectively. The increase in maintenance revenues of $2.5 million, or 16%, was primarily due to revenue from acquisitions, which contributed $2.7 million in the aggregate, and a favorable impact from foreign currency translation of $0.3 million. These increases were partially offset by decreases in organic maintenance revenues of $0.5 million. We typically provide maintenance services under one-year renewable contracts that provide for an annual increase in fees, which are generally tied to the percentage change in the consumer price index. Future maintenance revenue growth is dependent on our ability to retain existing clients, add new license clients, and increase average maintenance fees.

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 $8.0 million and $6.5 million for the three months ended March 31, 2010 and 2009, respectively. The increase in cost of maintenance revenues of $1.5 million, or 24%, was primarily due to acquisitions, which added $1.2 million in costs, an increase in costs of $0.2 million related to foreign currency translation, and an additional amortization expense of $0.2 million as a result of increasing cash flows. These increases were partially offset by a decrease in other costs to support organic maintenance revenues of $0.1 million. Cost of maintenance revenues as a percentage of these revenues was 44% for the three months ended March 31, 2010 compared to 42% for the three months ended March 31, 2009.

Cost of Professional Services. Cost of professional services revenues consists primarily of the cost related to personnel utilized to provide implementation, conversion and training services to our software licensees, as well as system integration, custom programming and actuarial consulting services. The cost of professional services revenues was $3.4 million and $4.0 million for the three months ended March 31, 2010 and 2009, respectively. The decrease in costs of professional services revenues of $0.6 million, or 16%, was primarily related to a reduction of $1.3 million in costs to support organic professional services revenues, primarily as a result of one significant implementation project that occurred during 2009, partially offset by our acquisitions, which added $0.5 million in costs, and an increase in costs of $0.2 million related to foreign currency translation. Cost of professional services revenues as a percentage of these revenues was 62% for the three months ended March 31, 2010 compared to 77% for the three months ended March 31, 2009.

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 intangible assets. The cost of software-enabled services revenues was $25.9 million and $20.6 million for the three months ended March 31, 2010 and 2009, respectively. The increase in costs of software-enabled services revenues of $5.3 million, or 26%, was primarily related to our acquisitions, which added $3.6 million in costs, an increase in costs of $0.9 million related to foreign currency translation and an increase of $0.8 million in costs to support the growth of organic software-enabled services revenues. Cost of software-enabled services revenues as a percentage of these revenues was 53% for the three months ended March 31, 2010 compared to 55% for the three months ended March 31, 2009.

Research and Development. Research and development expenses consist primarily of personnel costs attributable to the enhancement of existing products and the development of new software products. Research and development expenses were $7.8 million and $5.9 million for the three months ended March 31, 2010 and 2009, respectively, representing 10% and 9% of total revenues in those periods, respectively. The increase in research and development expenses of $1.9 million, or 32%, was primarily related to our acquisitions, which added $1.3 million in costs, an increase in costs of $0.3 million related to foreign currency translation, and an increase of $0.3 million in costs to support organic revenue growth.

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 $5.7 million and $5.1 million for the three months ended March 31, 2010 and 2009, respectively, representing 7% and 8% of total revenues in those periods, respectively. The increase in general and administrative expenses of $0.6 million, or 12%, was primarily related to our acquisitions, which added $0.6 million in costs, and an increase in costs of $0.1 million related to foreign currency translation, partially offset by a decrease of $0.1 million in other general and administrative costs to support organic revenue growth.

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