<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to __________________
Commission File Number 0-28430
SS&C TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 06-1169696
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Corporate Place
705 Bloomfield Avenue
Bloomfield, Connecticut 06002
(Address of principal executive offices) (Zip Code)
860-242-7887
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes ________ No X
----------
Number of shares outstanding of the issuer's classes of common stock as of July
31, 1996:
Class Number of Shares Outstanding
- -------------------------------------- ----------------------------
Common Stock, par value $.01 per share 12,279,920
1
<PAGE>
SS&C TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance
Sheets at December 31, 1995 and June 30, 1996 3
Consolidated Condensed Statements of
Operations for the Three-month and
Six-month periods ended June 30, 1995
and 1996 4
Consolidated Condensed Statements of
Cash Flows for the Six-month periods
ended June 30, 1995 and 1996 5
Notes to Consolidated Condensed
Financial Statements 6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURE 16
EXHIBIT INDEX 17
</TABLE>
This Quarterly Report on Form 10-Q contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words "believes," "anticipates," "plans," "expects,"
and similar expressions are intended to identify forward-looking statements.
The important factors discussed below under the caption "Certain Factors That
May Affect Future Operating Results," among others, could cause actual results
to differ materially from those indicated by forward-looking statements made
herein and presented elsewhere by management from time to time.
2
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
--------------- ---------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $1,585 $52,847
Accounts receivable, net 5,325 4,763
Unbilled accounts receivable 5,202 4,627
Income taxes 262 643
Other 604 557
--------------- ---------------
Total current assets 12,978 63,437
Property and equipment, net 2,568 2,848
Unbilled accounts receivable - 1,219
Intangible assets, net 2,695 2,240
Deferred income taxes 3,061 3,137
Other 505 505
--------------- ---------------
Total assets $21,807 $73,386
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt, related party $1,288 $1,390
Accounts payable 387 1,236
Accrued expenses 2,053 1,770
Deferred revenues 5,626 4,802
Income taxes 369 -
--------------- ---------------
Total current liabilities 9,723 9,198
Long-term debt
Related party 1,390 -
Other 450 450
--------------- ---------------
Total liabilities 11,563 9,648
--------------- ---------------
Series A, redeemable convertible preferred stock 750 -
--------------- ---------------
Stockholders' equity:
Series B, convertible preferred stock 31 -
Series C, convertible preferred stock 31 -
Common stock 71 136
Additional paid-in capital 15,216 69,045
Accumulated deficit (3,450) (3,038)
Less treasury stock, at cost (2,405) (2,405)
--------------- ---------------
Total stockholders' equity 9,494 63,738
--------------- ---------------
Total liabilities and stockholders' equity $21,807 $73,386
=============== ===============
</TABLE>
See accompanying notes to Consolidated Condensed Financial Statements.
3
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except share and per share information)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------------- --------------------------------
June 30, June 30, June 30, June 30,
1995 1996 1995 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Software licenses $ 2,547 $ 3,180 $ 4,079 $ 7,434
Maintenance 918 1,520 1,639 2,826
Professional services 1,456 1,518 1,836 2,839
------------ ------------ ------------ ------------
Total revenues 4,921 6,218 7,554 13,099
------------ ------------ ------------ ------------
Cost of revenues:
Software licenses 100 142 149 247
Maintenance 139 447 299 821
Professional services 1,108 1,132 1,526 2,112
------------ ------------ ------------ ------------
Total cost of revenues 1,347 1,721 1,974 3,180
------------ ------------ ------------ ------------
Gross profit 3,574 4,497 5,580 9,919
------------ ------------ ------------ ------------
Operating expenses:
Selling and marketing 1,172 2,047 1,870 4,245
Research and development 1,584 1,645 2,254 3,200
General and administrative 400 774 1,047 1,910
Write-off of purchased in-process
research and development - - 7,889 -
------------ ------------ ------------ ------------
Total operating expenses 3,156 4,466 13,060 9,355
------------ ------------ ------------ ------------
Operating income (loss) 418 31 (7,480) 564
Interest income (expense), net (1) 134 45 121
------------ ------------ ------------ ------------
Income (loss) before income taxes 417 165 (7,435) 685
Provision (benefit) for income taxes 171 66 (3,050) 273
------------ ------------ ------------ ------------
Net income (loss) $ 246 $ 99 $ (4,385) $ 412
============ ============ ============ ============
Historical net income (loss) per common and
common equivalent shares outstanding $ 0.02 $ 0.01 $ (0.53) $ 0.04
============ ============ ============ ============
Historical weighted average number of common
and common equivalent shares outstanding 9,999,973 11,140,250 5,771,950 10,578,017
============ ============ ============ ============
Pro forma net income (loss) per common
and common equivalent shares outstanding $ 0.02 $ 0.01 $ (0.53) $ 0.04
============ ============ ============ ============
Pro forma weighted average number of common
and common equivalent shares outstanding 9,999,973 11,140,250 8,322,890 10,578,017
============ ============ ============ ============
</TABLE>
See accompanying notes to Consolidated Condensed Financial Statements.
4
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------
June 30, June 30,
1995 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (4,385) $ 412
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 512 804
Deferred income taxes (3,195) (57)
Purchased in-process research and development 7,889 -
Provision for doubtful accounts 130 151
Changes in operating assets and liabilities, excluding
effects from acquisitions:
Accounts receivable (398) 411
Unbilled accounts receivable (1,649) (644)
Other (149) 47
Accounts payable (180) 849
Accrued expenses (1,544) (283)
Deferred revenues 2,388 (824)
Income taxes (379) (769)
------------ ------------
Total adjustments 3,425 (315)
------------ ------------
Net cash provided by (used in) operating activities (960) 97
------------ ------------
Cash flows from investing activities:
Additions to property and equipment (413) (629)
Acquisition of Chalke, net of cash received (7,426) -
------------ ------------
Net cash used in investing activities (7,839) (629)
------------ ------------
Cash flows from financing activities:
Exercise of options - 443
Issuance of convertible preferred stock 7,316 -
Issuance of common stock 1,404 52,639
Repayment of debt - (1,288)
------------ ------------
Net cash provided by financing activities 8,720 51,794
------------ ------------
Net increase (decrease) in cash and cash equivalents (79) 51,262
Cash and cash equivalents, at beginning of period 3,084 1,585
------------ ------------
Cash and cash equivalents, at end of period $ 3,005 $ 52,847
============ ============
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ - $ 212
Income taxes 524 922
</TABLE>
Supplemental disclosure of non-cash investing activities:
On March 31, 1995, the Company purchased all of the assets of Chalke
Incorporated for $12.7 million. The purchase price was paid in the form of cash
of $7.4 million, a promissory note with a present value of $2.7 million, the
assumption of liabilities of $2.6 million and the costs of effecting the
transaction.
See accompanying notes to Consolidated Condensed Financial Statements.
5
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
1. Summary of Significant Accounting Policies:
Basis of Presentation
In the opinion of the Company, the accompanying unaudited consolidated condensed
financial statements contain all adjustments (consisting of only normal
recurring adjustments, except as noted elsewhere in the notes to the
consolidated condensed financial statements) necessary to present fairly its
financial position as of June 30, 1996 and the results of its operations for the
three and six months ended June 30, 1995 and 1996. These statements are
condensed and therefore do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The statements should be read in conjunction with the consolidated
financial statements and footnotes for the year ended December 31, 1995 included
in the Company's Registration Statement on Form S-1 (File No. 333-3094) filed on
April 2, 1996. The December 31, 1995 consolidated condensed balance sheet data
were derived from audited financial statements, but do not include all
disclosures required by generally accepted accounting principles. The results of
operations for the three months and six months ended June 30, 1996 are not
necessarily indicative of the results to be expected for the full year.
Net Income (Loss) per Common and Common Equivalent Share
The pro forma net income (loss) per common share is computed based upon the
weighted average number of common shares and common equivalent shares
outstanding after certain adjustments described below. The computation of net
income (loss) per common and common equivalent share is based on net income
(loss) divided by the weighted average number of common and common equivalent
shares outstanding during the period after giving effect to all stock splits.
Common equivalent shares comprise stock options and warrants using the treasury
stock method. Common equivalent shares from stock options and warrants are
excluded from the computation if their effect is anti-dilutive. Pursuant to the
Securities and Exchange Commission Staff Accounting Bulletin No. 83, common and
common equivalent shares, issued at prices below the anticipated public offering
price during the 12 months immediately preceding the initial filing date have
been included in the calculation as if they were outstanding for all periods
presented (using the treasury stock method and the anticipated initial public
offering price). In addition, all outstanding shares of preferred stock which
were converted into common stock upon the closing of the initial public
offering are treated as having been converted into common stock at the date of
original issuance.
Net income (loss) per common share on a historical basis is computed in the same
manner as pro forma net income (loss) per common share except that all
preferred stock is considered to be a common stock equivalent based on its terms
and conditions except that for the six months ended June 30, 1995 preferred
stock is excluded as the effect of inclusion would be anti-dilutive.
Fully diluted net income (loss) per share is not presented as it is the same as
the amounts disclosed in historical net income per share for the three months
ended June 30, 1996 and the six months ended June 30, 1995 and 1996 and would be
anti-dilutive for the three months ended June 30, 1995.
Accounting Standards
SFAS No. 123, "Accounting for Stock-Based Compensation," must be adopted by the
Company in 1996. This standard encourages, but does not require, recognition of
compensation expense based on the fair value of equity instruments granted to
employees. The Company does not plan to record compensation for equity
instruments granted to employees and therefore the adoption of this standard
will have no impact on its financial position or results of operations. The
Company will adopt the disclosure provision of SFAS No. 123 in 1996.
6
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements - Continued
(unaudited)
2. Capital Stock:
On April 25, 1996, the Company reincorporated in the State of Delaware and
exchanged each outstanding share of common stock for ten shares of common stock,
$.01 par value, and exchanged each outstanding share of preferred stock Series
A, Series B, and Series C for one share of preferred stock Series A, Series B
and Series C, respectively. Holders of outstanding options are entitled, upon
exercise, to purchase ten times the number of common stock shares provided in
each option, at an exercise price per share of one-tenth the price per share in
the option. The outstanding preferred stock was convertible into ten shares of
common stock for each share of preferred stock. The Company authorized a total
of 25,000,000 shares of common stock, $.01 par value, and a total of 1,000,000
shares of preferred stock, $.01 par value. The outstanding Series A, Series B
and Series C preferred stock was subsequently converted into common stock on
June 5, 1996, the closing date of the Company's initial public offering. As of
June 30, 1996, there was no preferred stock outstanding.
The Company consummated an initial public offering of 3,750,000 shares of common
stock on June 5, 1996, of which 723,750 shares were sold by selling
stockholders. The Company received proceeds from the offering of approximately
$52,639,000, net of underwriting discounts and commission, and offering expenses
paid by the Company.
3. Related Party Transactions:
The Company licenses its CAMRA and FILMS applications software and certain other
programs to a related party for a total purchase price of $2,054,786, including
a five-year maintenance program beginning in February 1996. The purchase price
was allocated to license fees of $1,543,561, maintenance fees over the five-year
period of $375,000 and deferred interest of $136,225 resulting from an extended
payment plan. Terms include $900,000 payable upon execution of the agreement in
January 1996 and quarterly installments of $52,500 for five years. All
outstanding receivables and payables between the parties as of January 27, 1996
were forgiven, resulting in an additional $104,786 allocated to the purchase
price. Interest was imputed at 9% for payments on the license fee. The amount
collected from the related party during the six months ended June 30, 1996 was
$1,006,500, including sales tax. There was no balance currently due and payable
at June 30, 1996.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended June 30, 1995 and 1996
Revenues
The Company's revenues are derived from software licenses and related
maintenance and professional services. Total revenues increased 26% from $4.9
million in the three months ended June 30, 1995 to $6.2 million in the three
months ended June 30, 1996.
Software Licenses. Software license revenues increased 25% from $2.5 million
in the three months ended June 30, 1995 to $3.2 million in the three months
ended June 30, 1996, representing 49% of the revenue growth between the periods.
This was primarily due to the introduction and market acceptance of PTS 2000.
Maintenance. Maintenance revenues increased 66% from $918,000 in 1995 to
$1.5 million in 1996. The increase was primarily due to the beginning of revenue
recognition on a majority of the Chalke Incorporated ("Chalke") maintenance
clients acquired on March 31, 1995. In addition, the Company's installed base of
clients with maintenance contracts grew as a result of increased license sales.
Professional Services. Professional services revenues were $1.5 million for
the three months ended June 30, 1995 and 1996.
Cost of Revenues
Total cost of revenues increased 28% from $1.3 million for the three months
ended June 30, 1995 to $1.7 million for the three months ended June 30, 1996.
The gross margin remained relatively stable, decreasing from 73% for the three
months ended June 30, 1995 to 72% for the three months ended June 30, 1996.
Cost of Software Licenses. Cost of software license revenues relates
primarily to royalties, as well as the costs of product media, packaging,
documentation and labor involved in the distribution of the Company's software.
The cost of software licenses increased 42% from $100,000 for the three months
ended June 30, 1995 to $142,000 for the three months ended June 30, 1996. The
cost of software license revenues as a percentage of such revenues remained
stable at 4% for each of the periods.
Cost of Maintenance. Cost of maintenance revenues primarily comprises
technical customer support and development costs associated with product and
regulatory updates. The cost of maintenance revenues increased 222% from
$139,000 for the three months ended June 30, 1995 to $447,000 for the three
months ended June 30, 1996. The increase was primarily attributable to the
inclusion of Chalke maintenance clients and the corresponding costs associated
with providing the services. The cost of maintenance revenues as a percentage of
such revenues increased from 15% for the three months ended June 30, 1995 to 29%
for the three months ended June 30, 1996. The increase in costs reflected the
continued development of a dedicated support infrastructure for the Company's
combined operations, including Chalke. The cost of maintenance revenues as a
percentage of such revenues has remained at approximately 30% for the last four
fiscal quarters and is expected to remain at that level through the end of 1996.
Cost of Professional Services. Cost of professional services revenues
consist primarily of the cost related to personnel utilized to provide
implementation, conversion and training services to the Company's software
licensees, as well as custom programming, system integration and actuarial
consulting services. The cost of professional services revenues was $1.1 million
for the three months ended June 30, 1995 and 1996. The cost of professional
services revenues as a percentage of such revenues decreased from 76% for the
three months ended June 30, 1995 to 75% for the three months ended June 30,
1996.
8
<PAGE>
Operating Expenses
Selling and Marketing. Selling and marketing expenses consist primarily of
the cost of personnel associated with the selling and marketing of the Company's
products, including salaries, commissions and travel and entertainment. Such
expenses also include the cost of branch sales offices, advertising, trade
shows, marketing and promotional materials. Selling and marketing expenses
increased 75% from $1.2 million for the three months ended June 30, 1995 to $2.0
million for the three months ended June 30, 1996. The increase resulted
primarily from the hiring of additional personnel, including personnel hired in
the Chalke acquisition, during the second half of 1995 and first quarter of
1996. The increase is also partially attributable to increased marketing
activity to further enhance the Company's market presence. Selling and marketing
expenses for the three months ended June 30, 1995 and 1996 represented 24% and
33%, respectively, of total revenues for those periods. The Company intends to
continue its expansion of its sales staff during the remainder of 1996.
Research and Development. Research and development expenses consist
primarily of personnel costs attributable to the development of new software
products and the enhancement of existing products. Research and development
expenses were $1.6 million for the three months ended June 30, 1995 and 1996,
representing 32% and 26%, respectively, of total revenues for these periods. The
research and development expenses for the three months ended June 30, 1996
primarily reflected the ongoing development of two new products, Finesse and
COPE, and the further development of the Windows-based version of CAMRA and
FILMS. The decrease in percentage of total revenues in the three months ended
June 30, 1996 was due to the increase in total revenues over the same period in
1995.
General and Administrative. General and administrative expenses primarily
comprise personnel costs related to management, accounting, human resources and
administration and associated overhead costs, as well as fees for professional
services. General and administrative expenses increased 94% from $400,000 for
the three months ended June 30, 1995 to $774,000 for the three months ended June
30, 1996, representing 8% and 12%, respectively, of total revenues for those
periods. The increase in general and administrative expenses was generally
attributable to additional personnel costs associated with the Company's
expanded operations.
Interest Income (Expense). The Company recorded interest expense of $1,000
in the three months ended June 30, 1995 and net interest income of $134,000 in
the three months ended June 30, 1996. The net interest income was primarily due
to the interest earned on investing the proceeds from the Company's initial
public offering for approximately one month.
Provision for Income Taxes. The Company had effective tax rates of
approximately 41% and 40% for the three months ended June 30, 1995 and 1996,
respectively.
Six Months Ended June 30, 1995 and 1996
Revenues
Total revenues increased 73% from $7.6 million for the six months ended
June 30, 1995 to $13.1 million for the six months ended June 30, 1996. The
increase was primarily attributable to the growing market acceptance of the
Company's CAMRA and FILMS products, which accounted for an aggregate of $2.4
million of the increase, the introduction and market acceptance of PTS 2000 and
the inclusion of Chalke division revenues for the entire six-month period ended
June 30, 1996. An additional component of the increase was $1.5 million of
revenues associated with the Company's licensing of its CAMRA and FILMS products
to a related party. See Note 3 of Notes to Consolidated Condensed Financial
Statements. The licensing of PTS 2000 accounted for $740,000 of software license
revenues for the six months ended June 30, 1996. Chalke division revenues,
excluding the PTS 2000 software license revenues increased from $1.3 million for
the six months ended June 30, 1995 to $2.4 million for the six months ended June
30, 1996. This increase was primarily attributable to Chalke revenues being
included for the full six months ended June 30, 1996, as compared to being
included for only three months in the six months ended June 30, 1995.
9
<PAGE>
Software Licenses. Software license revenues increased 82% from $4.1
million for the six months ended June 30, 1995 to $7.4 million for the six
months ended June 30, 1996. This increase was primarily attributable to the
increased market acceptance of the Company's CAMRA and FILMS products, including
the licensing of these products for $1.5 million to a related party, and to the
introduction and market acceptance of PTS 2000. The increase in the CAMRA and
FILMS software license revenues accounted for $2.4 million of the increase in
software license revenues and PTS 2000 accounted for $740,000 of the increase in
software license revenues.
Maintenance. Maintenance revenues increased 72% from $1.6 million for the
six months ended June 30, 1995 to $2.8 million for the six months ended June 30,
1996. The increase was primarily due to the beginning of revenue recognition on
a majority of the Chalke maintenance clients acquired on March 31, 1995. In
addition, the Company's installed base of clients with maintenance contracts
grew as a result of increased license sales.
Professional Services. Professional services revenues increased 55% from
$1.8 million for the six months ended June 30, 1995 to $2.8 million for the six
months ended June 30, 1996. A significant portion of this increase was a result
of the increased demand for the Company's implementation, conversion and
training services due to the Company's increasing number of license sales. The
Company's strategy of increasing rates and consulting resource utilization also
contributed to the increase.
Cost of Revenues
Cost of Software Licenses. The cost of software license revenues increased
66% from $149,000 for the six months ended June 30, 1995 to $247,000 for the six
months ended June 30, 1996, representing 4% and 3%, respectively, of software
license revenues in those periods.
Cost of Maintenance. The cost of maintenance revenues increased 175% from
$299,000 for the six months ended June 30, 1995 to $821,000 for the six months
ended June 30, 1996, representing 18% and 29%, respectively, of maintenance
revenues in those periods. The increase in cost of maintenance revenues, in
absolute dollars and as a percentage of maintenance revenues, primarily reflects
the continued development of a dedicated support infrastructure for the
Company's combined operations, including Chalke.
Cost of Professional Services. The cost of professional services revenues
increased 38% from $1.5 million for the six months ended June 30, 1995 to $2.1
million for the six months ended June 30, 1996, representing 83% and 74%,
respectively, of professional services revenues in those periods. The decrease
in the cost of professional services as a percentage of professional services
revenues is due primarily to the focus the Company has made to the consulting
services unit. As part of its business strategy, the Company focused on
consulting services as a stand-alone source of revenues and profits and reduced
the cost of professional services revenues as a percentage of professional
services revenues through increased utilization, improved efficiencies
and increased billing rates for professional services.
Operating Expenses
Selling and Marketing. Selling and marketing expenses increased 127% from
$1.9 million for the six months ended June 30, 1995 to $4.2 million for the six
months ended June 30, 1996. The increase resulted primarily from the hiring of
additional personnel during the second half of 1995 and first quarter of 1996.
The increase is also attributable to increased marketing activity to further
enhance the Company's market presence. Selling and marketing expenses for the
six months ended June 30, 1995 and 1996 represented 25% and 32%, respectively,
of total revenues for those periods. The Company intends to continue its
expansion of its sales staff during the remainder of 1996.
Research and Development. Research and development expenses increased 42%
from $2.3 million for the six months ended June 30, 1995 to $3.2 million for the
six months ended June 30, 1996, representing 30% and 24%, respectively, of total
10
<PAGE>
revenues for those periods. The increase in absolute dollars is primarily due to
additional resources devoted to the development of three new products - Finesse,
COPE and PTS 2000. The Company's research and development expenses in 1995 do
not include the charge to operations of $7.9 million associated with the write-
off of purchased in-process research and development related to Chalke products
that were under development at the time of the Chalke acquisition but had not
yet reached technological feasibility. See "Write-off of Purchased In-Process
Research and Development" below.
General and Administrative. General and administrative expenses increased
82% from $1.0 million for the six months ended June 30, 1995 to $1.9 million for
the six months ended June 30, 1996, representing 14% and 15%, respectively, of
total revenues for those periods. The increase in general and administrative
expenses is primarily related to Chalke expenses included for the entire six-
month period in 1996 and additional personnel costs associated with the
Company's overall expanded operations.
Write-off of Purchased In-Process Research and Development. In the first
quarter of 1995, the Company expensed $7.9 million of purchased in-process
research and development associated with two products acquired in March 1995 as
part of the acquisition of Chalke. Because these products had not reached
technological feasibility at the time of the acquisition and, in the Company's
judgment, there was no alternative use for the related research and development,
such in-process research and development was therefore charged to expense. There
were no comparable expenses in 1996.
Interest Income. Net interest income increased from $45,000 for the six
months ended June 30, 1995 to $121,000 for the six months ended June 30, 1996.
The increase was primarily due to the interest earned on investing the proceeds
from the initial public offering for approximately one month.
Provision (Benefit) for Income Taxes. The Company had effective tax rates of
approximately (41%) and 40% for the six months ended June 30, 1995 and 1996,
respectively. Primarily as a result of the write-off of in-process research and
development related to the Chalke acquisition, the Company recognized a tax
benefit of $3.2 million for the six months ended June 30, 1995.
Certain Factors That May Affect Future Operating Results
Fluctuations in Quarterly Performance. The Company's revenues and operating
results historically have varied substantially from quarter to quarter. The
Company's quarterly operating results may continue to fluctuate due to a number
of factors, including the timing, size and nature of the Company's individual
license transactions; the timing of the introduction and the market acceptance
of new products or product enhancements by the Company or its competitors; the
relative proportions of revenues derived from license fees, maintenance,
consulting and other recurring revenues and professional services; changes in
the Company's operating expenses; personnel changes and fluctuations in economic
and financial market conditions. The timing, size and nature of individual
license transactions are important factors in the Company's quarterly operating
results. Many such license transactions involve large dollar amounts, and the
sales cycles for these transactions are often lengthy and unpredictable. There
can be no assurance that the Company will be successful in closing large license
transactions on a timely basis or at all.
Dependence on Financial Services Industry. The Company's clients include a range
of organizations in the financial services industry, and the success of such
clients is intrinsically linked to the health of the financial markets. In
addition, because of the capital expenditures required in connection with an
investment in the Company's products, the Company believes that demand for its
products could be disproportionately affected by fluctuations, disruptions,
instability or downturns in the financial markets, which may cause clients and
potential clients to exit the industry or delay, cancel or reduce any planned
expenditures for investment management systems and software products. Any
resulting decline in demand for the Company's products could have a material
adverse effect on the Company's business, financial condition and results of
operations.
11
<PAGE>
Product Concentration. To date, substantially all of the Company's revenues have
been attributable to the licensing of its CAMRA, PTS and FILMS software and the
provision of maintenance and consulting services in connection therewith. The
Company currently expects that the licensing of CAMRA, PTS and FILMS software,
and the provision of related services, will account for a substantial portion of
its revenues for the foreseeable future. As a result, factors adversely
affecting the pricing of or demand for such products and services, such as
competition or technological change, could have a material adverse effect on the
Company's business, financial condition and results of operations.
Management of Growth. The Company's business has grown significantly in size and
complexity over the past three years. The growth in the size and complexity of
the Company's business as well as its client base has placed and is expected to
continue to place a significant strain on the Company's management and
operations. The Company's senior management has had limited experience in
managing publicly traded companies. The Company's ability to compete
effectively and to manage future growth, if any, will depend on its ability to
continue to implement and improve operational, financial and management
information systems on a timely basis and to expand, train, motivate and manage
its work force. There can be no assurance that the Company's personnel,
systems, procedures and controls will be adequate to support the Company's
operations. If the Company's management is unable to manage growth effectively,
the quality of the Company's products and its business, financial condition and
results of operations could be materially adversely affected.
Competition. The market for financial services software is competitive, rapidly
evolving and highly sensitive to new product introductions and marketing efforts
by industry participants. Although the Company believes that none of its
competitors currently competes against the Company in each of the industry
segments served by the Company, there can be no assurance that such competitors
will not compete against the Company in the future in additional industry
segments. In addition, many of the Company's current and potential future
competitors have significantly greater financial, technical and marketing
resources, generate higher revenues and have greater name recognition than does
the Company.
Rapid Technological Change. The market for the Company's products and services
is characterized by rapidly changing technology, evolving industry standards and
new product introductions. The Company's future success will depend in part
upon its ability to enhance its existing products and services and to develop
and introduce new products and services to meet changing client requirements.
The process of developing software products such as those offered by the Company
is extremely complex and is expected to become increasingly complex and
expensive in the future with the introduction of new platforms and technologies.
There can be no assurance that the Company will successfully complete the
development of new products in a timely fashion or that the Company's current or
future products will satisfy the needs of the financial markets.
Dependence on Database Supplier. The relational database design in many of the
Company's software products incorporates PFXplus, a "C"-based database
management system licensed to the Company by POWERflex Corporation Proprietary
Limited, an Australian vendor ("Powerflex"). If Powerflex were to increase its
fees under the license agreement, the Company's results of operations could be
materially adversely affected. Moreover, if Powerflex were to terminate the
license agreement, the Company would have to seek an alternative relational
database for its software products. While the Company believes that it could
migrate its products to an alternative database, there can be no assurance that
the Company would be able to license in a timely fashion a database with similar
features and on terms acceptable to the Company.
Dependence on Proprietary Technology. The Company's success and ability to
compete is dependent in part upon its proprietary technology. The Company
relies on a combination of trade secret, copyright and trademark law,
nondisclosure agreements and technical measures to protect its proprietary
technology. There can be no assurance that the steps taken by the Company to
limit access to its proprietary technology will be adequate to deter
misappropriation or independent third-party development of such technology.
12
<PAGE>
Product Defects and Product Liability. The Company's software products are
highly complex and sophisticated and could from time to time contain design
defects or software errors that could be difficult to detect and correct.
Errors, bugs or viruses may result in loss of or delay in market acceptance or
loss of client data. Although the Company has not experienced material adverse
effects resulting from any software defects or errors, there can be no assurance
that, despite testing by the Company and its clients, errors will not be found
in new products, which errors could result in a delay in or inability to achieve
market acceptance and thus could have a material adverse impact upon the
Company's business, financial condition and results of operations.
Because of these and other factors, past financial performance should not be
considered an indication of future performance. The Company's quarterly
operating results may vary significantly, depending on factors such as the
timing, size and nature of licensing transactions and new product introductions
by the Company or its competitors. Investors should not use historical trends to
anticipate future results and should be aware that the trading price of the
Company's common stock may be subject to wide fluctuations in response to
quarterly variations in operating results and other factors, including those
discussed above.
Liquidity And Capital Resources
During the six months ended June 30, 1995 and 1996, the Company financed its
operations primarily through cash flows generated from operations and from
private and public sales of securities. Cash provided by (used in) operations
was $(960,000) and $97,000 for the six months ended June 30, 1995 and 1996,
respectively. The increase in the cash flow provided by operations of $1,057,000
between these periods consisted primarily of a decrease in accounts and unbilled
receivables of $1.8 million, an increase in accounts payable and accrued
expenses of $2.3 million, an increase in depreciation and amortization and other
accounts of $200,000 and a decrease in deferred revenue accounts of $3.2
million. Accounts and unbilled receivables increased $1.9 million for the six
months ended June 30, 1995 on revenues and deferred revenues of $13.9 million as
compared to an increase of $82,000 in the six months ended June 30, 1996 on
revenues and deferred revenues of $17.9 million. During the six months ended
June 30, 1996, accounts receivable decreased $562,000 while the unbilled
receivables increased $644,000. The Company's accounts and unbilled receivables
include four clients with receivables totaling $1.2 million which are due beyond
twelve months. Accounts payable and accrued expenses decreased $1.7 million for
the six months ended June 30, 1995 as compared to an increase of $566,000 for
the six months ended June 30, 1996. In 1996, the increase was attributable to
outstanding offering costs and an increase in operating costs attributable to
increased activity. Deferred revenues increased $2.4 million for the six months
ended June 30, 1995 as compared to an $824,000 decrease for the six months ended
June 30, 1996. The decrease in deferred revenue during the six months ended June
30, 1996 was primarily attributable to the turning of existing deferred license
revenues into revenues and the structure of contracts on new license revenues
allowing for revenue recognition in the current period. During the six months
ended June 30, 1995, 58% of the increase was attributable to two contracts in
deferred revenue totaling $1.4 million.
Investing activities used cash of $7.8 million and $629,000 for the six
months ended June 30, 1995 and 1996, respectively. In 1995, the Company used
cash of $7.4 million to finance the acquisition of Chalke. The remaining
$413,000 was used to acquire property and equipment. Investing activities during
the six months ended June 30,1996 consisted of acquiring property and equipment.
Net cash of $8.7 million provided by financing activities in 1995 resulted from
the issuance of Convertible Preferred Stock of $7.3 million and the issuance of
common stock upon the exercise of warrants for $1.4 million related to the
financing of the Chalke acquisition. Net cash of $51.8 million provided by
financing activities in 1996 resulted from proceeds of $52.6 million from the
issuance of common stock in the initial public offering, proceeds of $443,000
from the exercise of stock options and the repayment of $1.3 million of debt.
As of June 30, 1996, the Company had $52.8 million in cash and cash
equivalents. In connection with the Chalke acquisition, the Company issued a
promissory note in the principal amount of $3.0 million, with an imputed
interest rate of 7.91% per annum. There is one payment of $1.5 million
remaining, which is due on March 31, 1997.
13
<PAGE>
The Company believes that its current cash balances and net cash provided by
operating activities will be sufficient to meet its working capital and capital
expenditure requirements for the next 12 months.
14
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Pursuant to a Written Consent of Sole Stockholder in Lieu of a
Meeting, dated April 1, 1996, the sole stockholder of the Company, Securities
Software & Consulting, Inc., a Connecticut corporation ("SS&C Connecticut")
approved (i) the Agreement and Plan of Merger providing for the merger of SS&C
Connecticut with and into the Company, (ii) the Amended and Restated
Certificate of Incorporation of the Company, (iii) the Amended and Restated By-
laws of the Company, (iv) the Company's 1994 Stock Option Plan, (v) the
Company's 1996 Director Stock Option Plan, and (vi) the Company's 1996 Employee
Stock Purchase Plan. On April 1, 1996, SS&C Connecticut held 100 shares of
Common Stock of the Company.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. The exhibits listed in the Exhibit Index filed as part of this
report are filed as part of or are included in this report.
b. The Company filed no reports on Form 8-K during the quarter for
which this report is filed.
15
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SS&C TECHNOLOGIES, INC.
Date: August 13, 1996 By:/s/ John S. Wieczorek
------------------------
John S. Wieczorek
Vice President, Chief
Financial Officer and
Treasurer
(Principal Financial Officer)
16
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
17
<PAGE>
Exhibit 11
SS&C Technologies, Inc.
Statement Regarding The Computation of Net income (loss)
per common and common equivalent shares
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30, 1995 June 30, 1996 June 30, 1995 June 30, 1996
------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Historical - Primary (1):
Weighted average
issued common and preferred
stock outstanding (2)............. 9,094,170 10,156,087 5,287,570 9,625,128
Weighted average cheap stock (3).. 484,380 484,380 484,380 484,380
Weighted average common stock
equivalents....................... 1,086,750 698,500 -- 698,500
Less: Assumed purchase of
treasury stock.............. (665,327) (198,717) -- (229,991)
---------- ----------- ----------- ----------
Weighted average number of
common and common
equivalent shares
outstanding 9,999,973 11,140,250 5,771,950 10,578,017
========= =========== =========== ==========
Net income (loss)............................ $246,000 $98,743 ($4,385,012) $411,922
========= =========== =========== ==========
Net income (loss) per share.................. $0.02 $0.01 ($0.76) $0.04
========= =========== =========== ==========
Pro forma - Primary (1):
Weighted average issued common and
preferred stock outstanding (2)... 9,094,170 10,156,087 7,838,510 9,625,128
Weighted average cheap stock (3).. 484,380 484,380 484,380 484,380
Weighted average common stock
equivalents....................... 1,086,750 698,500 -- 698,500
Less: Assumed purchase of
treasury stock.................... (665,327) (198,717) -- (229,991)
Weighted average number of --------- ---------- ----------- ----------
common and common equivalent
shares outstanding 9,999,973 11,140,250 8,322,890 10,578,017
========= =========== =========== ==========
Net income (loss)............................ $246,000 $98,743 ($4,385,012) $411,922
========== =========== =========== ==========
Net income (loss) per share.................. $0.02 $0.01 ($0.53) $0.04
========== =========== =========== ==========
-------------
</TABLE>
Notes:
(1) All common and common equivalent share amounts have been restated to
reflect the 10-for-1 stock split as if in effect from the date of issuance.
(2) All shares of convertible preferred stock are considered common stock
equivalents and are included using the if-converted method, adjusted for the
10-for-1 stock split, except where their effect would be anti-dilutive.
(3) In accordance with Securities and Exchange Commission Staff Accounting
Bulletin No. 83, issuances of common stock and common stock equivalents,
within one year prior to the initial filing of the registration statement,
at share prices below the assumed initial public offering price are
considered to have been made in anticipation of the contemplated public
offering. Accordingly, these stock issuances are treated as if issued and
outstanding, using the treasury stock method for options, for all periods
prior to the initial filing of the registration statement in April 1996.
(4) Fully diluted net income per common and common equivalent shares is not
presented as it is the same as historical net income per common and common
equivalent shares for the three months ended June 30, 1996 and the six
months ended June 30, 1995 and 1996, and it was $0.03 for the three months
ended June 30, 1995, due to the inclusion of anti-dilutive options.
1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S FINANCIAL STATEMENTS INCLUDED IN THIS QUARTERLY
REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> APR-01-1996 JAN-01-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 52,847 52,847
<SECURITIES> 0 0
<RECEIVABLES> 9,971 9,971
<ALLOWANCES> 638 638
<INVENTORY> 0 0
<CURRENT-ASSETS> 63,437 63,437
<PP&E> 4,595 4,595
<DEPRECIATION> 1,747 1,747
<TOTAL-ASSETS> 73,386 73,386
<CURRENT-LIABILITIES> 9,198 9,198
<BONDS> 0 0
0 0
0 0
<COMMON> 136 136
<OTHER-SE> 63,602 63,602
<TOTAL-LIABILITY-AND-EQUITY> 73,386 73,386
<SALES> 6,218 13,099
<TOTAL-REVENUES> 6,218 13,099
<CGS> 0 0
<TOTAL-COSTS> 1,721 3,180
<OTHER-EXPENSES> 1,645 3,200
<LOSS-PROVISION> 32 168
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 165 685
<INCOME-TAX> 66 273
<INCOME-CONTINUING> 99 412
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 99 412
<EPS-PRIMARY> .01 .04
<EPS-DILUTED> .01 .04
</TABLE>
