<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 September 30, 1998
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 000-28430
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 Identification No.)
incorporation or organization)
80 Lamberton Road
Windsor, Connecticut 06095
(Address of principal executive offices) (Zip Code)
860-298-4500
(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 [X] No [_]
Number of shares outstanding of the issuer's classes of common stock as of
October 31, 1998:
Class Number of Shares Outstanding
- -------------------------------------- ----------------------------
Common Stock, par value $.01 per share 14,624,621
<PAGE>
SS&C TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
Page Number
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<C> <S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at
September 30, 1998 and December 31, 1997 3
Consolidated Condensed Statements of Operations
for the three- and nine-month periods ended
September 30, 1998 and 1997 4
Consolidated Condensed Statements of Cash Flows
for the nine-month periods ended
September 30, 1998 and 1997 5
Notes to Consolidated Condensed Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURE 18
EXHIBIT INDEX 19
</TABLE>
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. 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 1--FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,051 $ 23,660
Marketable securities 35,767 35,058
Accounts receivable, net 16,406 7,591
Unbilled accounts receivable, net 6,791 5,472
Income taxes 393 1,157
Other 3,203 1,563
-------------- -------------
Total current assets 71,611 74,501
Property and equipment, net 8,615 4,018
Unbilled accounts receivable - related party 263 420
Unbilled accounts receivable, net 793 828
Intangible assets, net 8,290 2,336
Deferred income taxes 5,919 3,205
-------------- -------------
Total assets $ 95,491 $ 85,308
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt - related party $ 527 $ 668
Current portion of long-term debt - 313
Accounts payable 2,640 1,440
Accrued bonus payable 1,309 1,663
Deferred licensing and professional services revenues 969 1,618
Accrued expenses 3,018 4,077
Deferred maintenance revenues 10,360 7,528
-------------- -------------
Total current liabilities 18,823 17,307
-------------- -------------
Long-term debt
Related party 250 250
-------------- -------------
Total liabilities 19,073 17,557
-------------- -------------
Stockholders' equity:
Common stock 146 137
Additional paid-in capital 79,860 69,089
Accumulated deficit (3,588) (1,475)
-------------- -------------
Total stockholders' equity 76,418 67,751
-------------- -------------
Total liabilities and stockholders' equity $ 95,491 $ 85,308
============== =============
</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 PER SHARE INFORMATION)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------ -----------------------
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
1998 1997 1998 1997
----------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Software licenses $ 9,096 $ 5,714 $ 23,861 $ 14,515
Maintenance 4,908 2,478 12,917 6,833
Professional services 4,445 2,344 11,399 7,224
--------- --------- ---------- ----------
Total revenues 18,449 10,536 48,177 28,572
--------- --------- ---------- ----------
Cost of revenues:
Software licenses 238 298 551 902
Maintenance 1,453 745 3,663 2,366
Professional services 3,408 1,519 8,075 4,405
--------- --------- ---------- ----------
Total cost of revenues 5,099 2,562 12,289 7,673
--------- --------- ---------- ----------
Gross profit 13,350 7,974 35,888 20,899
--------- --------- ---------- ----------
Operating expenses:
Selling and marketing 4,075 3,268 12,030 8,398
Research and development 5,230 2,588 13,160 7,219
General and administrative 1,785 2,302 6,243 5,349
Write-off of purchased in-process research
and development - - 7,980 -
--------- --------- ---------- ----------
Total operating expenses 11,090 8,158 39,413 20,966
--------- --------- ---------- ----------
Operating income (loss) 2,260 (184) (3,525) (67)
Interest and other income, net 503 485 1,614 1,506
Equity in investee loss, net of taxes (850) - (850) -
--------- --------- ---------- ----------
Income (loss) before income taxes 1,913 301 (2,761) 1,439
Provision for (benefit from) income taxes 939 109 (648) 513
--------- --------- ---------- ----------
Net income (loss) $ 974 $ 192 $ (2,113) $ 926
========= ========= ========== ==========
Basic earnings (loss) per share $ 0.07 $ 0.01 $ (0.15) $ 0.07
========= ========= ========== ==========
Weighted average number of common
shares outstanding 14,572 13,565 14,328 13,475
========= ========= ========== ==========
Diluted earnings (loss) per share $ 0.06 $ 0.01 $ (0.15) $ 0.07
========= ========= ========== ==========
Weighted average number of common
and common equivalent shares outstanding 15,562 14,246 14,328 14,024
========= ========= ========== ==========
</TABLE>
See accompanying notes to Consolidated Condensed Financial Statements.
4
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SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
September 30, September 30,
1998 1997
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,113) $ 926
--------- ---------
Adjustments to reconcile net income (loss) to net
cash (used in) provided by
operating activities:
Depreciation and amortization 3,651 1,395
Purchased in-process research and development 7,980 -
Deferred income taxes (2,714) -
Provision for doubtful accounts 877 978
Changes in operating assets and liabilities, net
of acquisition effects:
Accounts receivable (7,833) (764)
Unbilled accounts receivable 1,189 583
Other current assets (1,577) (573)
Accounts payable (305) 422
Accrued expenses (1,522) 530
Deferred revenues (568) 1,745
Income taxes 764 353
--------- ---------
Total adjustments (58) 4,669
--------- ---------
Net cash (used in) provided by operating activities (2,171) 5,595
--------- ---------
Cash flows from investing activities:
Cash paid for business acquisitions (5,261) -
Purchases of property and equipment (5,116) (1,282)
Purchases of marketable securities (42,261) (35,163)
Proceeds from sales of marketable securities 41,552 21,082
Capitalized software and other (2,913) (206)
--------- ---------
Net cash used in investing activities (13,999) (15,569)
--------- ---------
Cash flows from financing activities:
Proceeds from exercise of options and issuance of shares 2,015 436
Release of collateral requirement on letter of credit - 505
Repayment of debt (454) (1,991)
--------- ---------
Net cash provided by (used in) financing activities 1,561 (1,050)
--------- ---------
Net decrease in cash and cash equivalents (14,609) (11,024)
Cash and cash equivalents, at beginning of period 23,660 36,286
--------- ---------
Cash and cash equivalents, at end of period $ 9,051 $ 25,262
========= =========
</TABLE>
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 September 30, 1998 and the results of its operations
for the three and nine months ended September 30, 1998 and 1997. 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 as of and for the year ended
December 31, 1997 included in the Company's Form 10-K filed with the Securities
and Exchange Commission. The December 31, 1997 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 and nine months ended September 30, 1998 are
not necessarily indicative of the results to be expected for the full year.
Basic and Diluted Earnings (Loss) Per Share
Basic earnings (loss) per share includes no dilution and is computed by dividing
net income (loss) by the weighted average number of common shares outstanding
for the period. Diluted earnings (loss) per share is computed based on net
income (loss) divided by the weighted average number of common and common
equivalent shares outstanding during the period. Common equivalent shares
comprise stock options using the treasury stock method. Common equivalent shares
are excluded from the computation if their effect is antidilutive. Outstanding
options to purchase 2.7 million shares were not included in the computation of
diluted loss per share for the nine months ended September 30, 1998 because the
effect of including the options would be antidilutive.
Net income is the same for basic and diluted earnings per share. A
reconciliation of the shares outstanding is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
September 30, 1998 September 30, 1997 September 30, 1998 September 30, 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average common
shares outstanding 14,572 13,565 14,328 13,475
Weighted average common
stock equivalents-options 990 681 -- 549
- -----------------------------------------------------------------------------------------------------------
Weighted average common
and common equivalent
shares outstanding 15,562 14,246 14,328 14,024
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Comprehensive Income (Loss)
The Company adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income ("SFAS No. 130"), effective January 1, 1998. SFAS
No. 130 requires that items defined as comprehensive income, such as foreign
currency translation adjustments, be separately classified in the financial
statements and that the accumulated balance of other comprehensive income be
reported separately from retained earnings and additional paid-in capital in the
equity section of the balance sheet. There were no material differences between
net income (loss) and comprehensive income (loss) for the three and nine months
ended September 30, 1998.
6
<PAGE>
Accounting Standards
In June 1997, Statement of Financial Accounting Standards No. 131, Disclosures
about Segments of an Enterprise and Related Information ("SFAS No. 131"), was
issued. SFAS No. 131 requires public companies to report all financial and
descriptive information about operating segments in their financial statements
and requires selected information about operating segments to be reported in
interim financial reports issued to stockholders. Operating segment financial
information is required to be reported on the basis that is used internally for
evaluating segment performance and allocation of resources. SFAS No. 131 is
effective for financial statements for periods beginning after December 15, 1997
and requires presentation of comparative information for prior periods
presented. SFAS No. 131 does not need to be applied to interim financial
statements in 1998. The adoption of SFAS No. 131 is expected to impact the way
the Company reports information on its operating segments.
On June 15, 1998, Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133")
was issued. SFAS No. 133 is effective for all fiscal quarters of all fiscal
years beginning after June 15, 1999 (January 1, 2000 for the Company). SFAS No.
133 requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. Management of the Company anticipates that, due to its
limited use of derivative instruments, the adoption of SFAS No. 133 will not
have a significant effect on the Company's results of operations or its
financial position.
2. COMMITMENTS AND CONTINGENCIES:
On March 18, 1997 and April 8, 1997, two separate purported class action
lawsuits ("Complaints") were filed against the Company, certain of its officers
and the two leading managers of the Company's initial public offering. On July
8, 1997, a Consolidated Amended Class Action Complaint was filed in the United
States District Court for the District of Connecticut (the "Consolidated
Complaint") in which the Complaints were consolidated and amended. The
Consolidated Complaint claims that the Prospectus for the Company's initial
public offering allegedly made material misrepresentations in violation of
Sections 11 and 12(2) of the Securities Act of 1933. The plaintiffs in the suit
are seeking an undetermined amount of damages, and costs and expenses of the
litigation. The matter is currently in the discovery phase. The Company believes
it has meritorious defenses to the claims made in the lawsuit and intends to
contest the Consolidated Complaint vigorously. Although the amounts claimed may
be substantial, management cannot predict the ultimate outcome or estimate the
potential loss, if any, related to these claims. Management believes that the
disposition of this matter will not have a material adverse effect on the
Company's consolidated financial position. However, the adverse resolution of
one or more of the claims could materially affect the Company's results of
operations or liquidity in any one annual or quarterly reporting period.
3. INTANGIBLES, INVESTMENTS AND OTHER ASSETS:
On March 20, 1998, the Company completed its acquisition (the "Quantra
Acquisition") of substantially all of the assets of Quantra Corporation
("Quantra") pursuant to an Asset Purchase Agreement, dated as of March 20, 1998,
among the Company, Quantra and AEGON USA Realty Advisors, Inc., the sole
stockholder of Quantra. The purchase price for the Quantra Acquisition consisted
of 546,019 unregistered shares of the Company's Common Stock, $2.3 million in
cash and the assumption of certain liabilities of Quantra of approximately $4.1
million, plus the costs of effecting the transaction. The Company and Quantra
also entered into an Escrow Agreement pursuant to which an additional $1.2
million will be held in escrow to reimburse the Company in connection with
certain acquisition costs and the breaches of representations, warranties and
covenants, if any, by Quantra.
The Quantra Acquisition was accounted for as a purchase and, accordingly, the
net assets and results of operations of Quantra have been included in the
consolidated condensed financial statements from the acquisition date. The
purchase price was allocated to tangible and intangible assets and liabilities
based on their fair market value on the date of the acquisition.
7
<PAGE>
The following summarizes the allocation of the purchase price (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Accounts receivable $ 1,451
Unbilled accounts receivable 2,694
Equipment and furniture 425
Other assets 63
Complete technology 3,169
Incomplete technology 7,489
-------
Total purchase price $15,291
=======
</TABLE>
On April 9, 1998, the Company completed its acquisition (the "Savid
Acquisition") of the outstanding shares of Savid International Inc. and The
Savid Group, Inc. (together "Savid") pursuant to a Stock Purchase Agreement,
dated as of April 9, 1998, between the Company, Savid and the sole stockholder
("Stockholder") of Savid. The purchase price of the Savid Acquisition consisted
of $739,000 in cash, net of cash received, and the assumption of certain
liabilities of Savid of $118,000, plus the costs of effecting the transaction. A
further cash payment of $750,000 shall be paid as additional consideration
provided that the aggregate revenues for the period from and including April 15,
1998 through and including April 14, 2001 are greater than or equal to
$3,000,000. The Company shall pay to the Stockholder an aggregate of 10% of the
license fees with respect to sales and/or licensing of the Savid product during
the period commencing on April 15, 1998 and ending on April 14, 2003.
The Savid Acquisition was accounted for as a purchase and, accordingly, the net
assets and results of operations of Savid have been included in the consolidated
condensed financial statements from the acquisition date. The purchase price was
allocated to tangible and intangible assets and liabilities based on their fair
market value on the date of the acquisition.
The following summarizes the allocation of the purchase price (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Accounts receivable $ 30
Equipment and furniture 4
Complete technology 336
Incomplete technology 491
----
Total purchase price $861
====
</TABLE>
For the Quantra and Savid acquisitions, the allocation to complete technology is
based on future risk-adjusted cash flows. Complete technology has been
capitalized and included in intangible assets. Complete technology will be
amortized over two to six years based on the ratio that current gross revenues
of the products bears to the total of current and anticipated future gross
revenues of the products. The allocation to incomplete technology is also based
on future risk-adjusted cash flows and has been expensed in 1998, in accordance
with generally accepted accounting principles. The incomplete technology had not
achieved technological feasibility and had no alternative uses.
On May 1, 1998, the Company invested approximately $2.2 million in cash plus an
exclusive distribution agreement for the CAMRA product in exchange for a 24%
ownership interest in Caminus Energy Ventures, LLC ("CEV") a limited liability
company organized to provide comprehensive consulting services and software
technology to the power and gas trading business. The exclusive distribution
agreement allows CEV to sell the Company's software products within energy-
related markets over a five-year period based on certain terms and conditions.
The Company may be required to invest up to an additional $0.8 million in
accordance with the terms of the subscription agreement and in proportion to the
overall investment from all investors such that the Company's equity position
will not fall below 24%. The Company also received a warrant to purchase up to
an additional 8.4% ownership interest in CEV upon certain terms and conditions.
The Company commenced the reporting of its share of CEV's earnings on a two-
month lag beginning in the quarter ended September 30, 1998. This lag in
reporting will be consistent from period to period. In the third quarter of
fiscal 1998, the Company recognized a $0.9 million non-operating loss, net of
taxes for its proportionate share of a write-off of in-process research and
development attributable to CEV's acquisition of two companies as well as the
operating results of CEV for the three-month period ended July 31, 1998.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
RESULTS OF OPERATIONS
Revenues
The Company's revenues are derived from software licenses and related
maintenance and professional services. Total revenues for the three and nine
months ended September 30, 1998 were $18.4 million and $48.2 million,
respectively, representing increases of 75% and 69% from the $10.5 million and
$28.6 million, respectively, reported for the comparable periods of the prior
year. For the three and nine months ended September 30, 1998, the 1998 Quantra
and Savid acquisitions (collectively, the "1998 acquisitions") accounted for
approximately 35% to 40% of the period-over-period increases in total revenues.
Software license revenues accounted for approximately 50% of total revenues in
each of the three and nine months ended September 30, 1998 and 1997. Software
license revenues for the three and nine months ended September 30, 1998 were
$9.1 million and $23.9 million, respectively, representing increases of 59% and
64% over the $5.7 million and $14.5 million, respectively, in the comparable
periods of the prior year. For the three and nine months ended September 30,
1998, the 1998 acquisitions accounted for approximately 50% and 30%,
respectively, of total increases over the comparable period in the prior year.
The remaining growth in license revenues was primarily the result of continuing
strong domestic sales and growing international sales of the Company's CAMRA
product, sales of the Antares products, as well as continuing strong sales of
the Company's Total Return product. Revenues in the third quarter of 1998 also
benefited from the launch of the SKYLINE for Windows product and strong sales of
the Mortgage Loan Management System product.
Maintenance revenues accounted for approximately one-quarter of total revenues
in each of the three and nine months ended September 30, 1998 and 1997.
Maintenance revenues for the three and nine months ended September 30, 1998 were
$4.9 million and $12.9 million, respectively, representing increases of 98% and
89% from the $2.5 million and $6.8 million, respectively, in the comparable
periods of the prior year. For the three and nine months ended September 30,
1998, the 1998 acquisitions accounted for approximately 50% and 40%,
respectively, of the increases over the comparable period in the prior year. The
remaining increases in revenues were primarily the result of the expanding
customer base in the asset management product line.
Revenues from professional services, which include implementation, conversion,
outsourcing and training services, accounted for approximately one-quarter of
total revenues in each of the three and nine months ended September 30, 1998 and
1997. Professional services revenues for the three and nine months ended
September 30, 1998 were $4.4 million and $11.4 million, respectively,
representing increases of 90% and 58% from the $2.3 million and $7.2 million,
respectively, in the comparable periods of the prior year. For the three and
nine months ended September 30, 1998, the 1998 acquisitions accounted for
approximately 20% and 30%, respectively, of the increases over the comparable
period in the prior year. The higher revenues were primarily the result of
increasing sales both domestically and internationally of implementation and
conversion services.
Gross Profit
Gross profit, as a percentage of total revenues, for each of the three and nine
months ended September 30, 1998 was 72% and 74%, respectively, as compared with
76% and 73%, respectively, in the comparable periods of 1997.
9
<PAGE>
Software license gross profit, as a percentage of software license revenues,
exceeded 90% for each of the three and nine months ended September 30, 1998 and
1997, as the cost of software license revenues, which primarily includes
royalties, costs of product media, packaging, documentation and delivery,
remained proportionately small.
Maintenance gross profit, as a percentage of maintenance revenues, for the three
and nine months ended September 30, 1998 was 71% and 72%, respectively, as
compared with 70% and 65%, respectively, in the comparable periods of 1997. For
the three and nine months ended September 30, 1998, cost of maintenance
revenues, which primarily consists of technical customer support and development
costs associated with product and regulatory updates, increased by 95% to $1.5
million and 55% to $3.7 million, respectively, from $0.7 million and $2.4
million in the comparable periods of 1997. Margins improved as increased
efficiencies in servicing the growing customer base more than offset the
incremental costs required to service the higher volume.
Professional services gross profit, as a percentage of professional services
revenues, for the three and nine months ended September 30, 1998 was 23% and
29%, respectively, as compared with 35% and 39%, respectively, in the comparable
periods of 1997. Cost of professional services revenues includes employee and
other costs related to providing implementation, conversion and training
services to the Company's software licensees, as well as custom programming,
outsourcing, systems integration and actuarial consulting services. For the
three and nine months ended September 30, 1998, these costs increased by 124% to
$3.4 million and by 83% to $8.1 million, respectively, from $1.5 million and
$4.4 million in the comparable periods of 1997, causing margins to decline by
approximately ten to twelve percentage points. The margin declines were
primarily attributable to the initial hiring and training of new staff in the
United States and the opening of a separate professional services organization
servicing mostly European clients.
Operating Income (Loss) and Net Income (Loss)
Selling and marketing expenses, as a percentage of total revenues, for the three
and nine months ended September 30, 1998 were 22% and 25%, respectively, as
compared with 31% and 29%, respectively, for the comparable periods of 1997. For
the three and nine months ended September 30, 1998, selling and marketing
expenses increased by 25% to $4.1 million and by 43% to $12.0 million,
respectively, from $3.3 million and $8.4 million, respectively, in the
comparable periods of 1997. The increase in these expenses was primarily the
result of the addition of direct sales staff in connection with the 1998
acquisitions, the hiring of additional staff in connection with the Antares
product, and the enhancement of the Company's central marketing staff.
Research and development expenses, as a percentage of total revenues, for the
three and nine months ended September 30, 1998 were 28% and 27%, respectively,
as compared with 25% for both comparable periods of 1997. For the three and
nine months ended September 30, 1998, these expenses increased by 102% to $5.2
million and by 82% to $13.2 million, respectively, from $2.6 million and $7.2
million, respectively, in the comparable periods of 1997. The increases in
research and development expenses were principally the result of increased
spending on Antares, CAMRA 2000 version 3.0, Skyline for Windows and PRO-Ject
version 2.0 programs.
General and administrative expenses, as a percentage of total revenues, for the
three and nine months ended September 30, 1998 were 10% and 13%, respectively,
as compared with 22% and 19%, respectively, in the comparable periods of the
prior year. For the three and nine months ended September 30, 1998, general and
administrative expenses decreased by 22% to $1.8 million and increased by 17% to
$6.2 million, respectively, from $2.3 million and $5.3 million, respectively, in
the comparable periods of 1997. The collection of approximately $0.6 million of
fully-reserved receivables and the reassignment of certain administrative staff
at acquired businesses contributed to the decrease in the expenses in the third
quarter of 1998 when compared to the comparable period of the prior year. For
the nine months ended September 30, 1998, the dollar increase in general and
administrative expenses over the comparable period of the prior year primarily
related to the growth in the volume and complexity of the overall business.
Each time the Company acquires a business in a purchase transaction which
includes in-process research and development relating to products that have not
reached technological feasibility and, in the Company's judgment, have no
alternative use for the related research and development, these costs are
charged off to expense. For the nine
10
<PAGE>
months ended September 30, 1998, the write-off of purchased in-process research
and development relating to the 1998 acquisitions of Quantra and Savid totaled
$8.0 million. The Company determined the value of the acquired research and
development in each acquisition through the income forecast method. The income
forecast method generally is used in the valuation of income producing
intangible assets, particularly where the intangible assets are not capable of
being readily replaced or replicated. The income forecast method requires a
projection of revenues and expenses specifically attributable to the intangible
assets. Such revenues were segmented into three categories: license, maintenance
and consulting and projected over a five to six year period. License revenue
projections were based on expected unit sales over the projected lives of the
respective product lines. Unit sales projections were based on management's
estimated sales among the various target markets, including the upgrade of
existing clients as well as initial product sales to new customers. Average net
selling prices were based on management's best estimate of the average price
less expected discounts. The other categories of revenue were generally
estimated as a percentage of total license revenues and ranged from 15% to 20%
(on cumulative revenues) for maintenance and from 10% to 30% for consulting
depending on the product. Savid consulting revenues were projected to be
insignificant. Expense assumptions are based on the imposition of the Company's
cost structure on the acquired technologies and products. Implicit royalty
streams are added when applicable. The discounted cash flow technique is then
applied to the potential income streams after making necessary adjustments with
respect to such factors as the wasting nature of the acquired tangible assets,
the allowance of a fair return on the net tangible and other intangible assets
employed and considerations of development cost and risk. The latter adjustment
is made to separate the value of the specific intangible asset being valued from
the portion of the purchase price that already has been allocated to the net
tangible and other intangible assets employed. Therefore, the value of a
particular intangible asset (such as an in-process research and development
program) is the present value of the after-tax cash flows potentially
attributable to it, net of the return on fair value attributable to tangible and
other intangible assets. Discount rates used in valuing the in-process research
and development were determined on a project-by-project basis taking into
consideration the technologies involved. The actual discount rates used were
23%-28% for Quantra projects and 20% for Savid projects. The in-process research
and development acquired as part of these acquisitions related primarily to the
following projects under development:
Quantra
-------
Mortgage Loan Management System ("MLMS") this project involves upgrading
the software from 16-bit to 32-bit architecture. MLMS is a complete
software solution designed to process and provide information required by
managers of mortgage loan portfolios. The Company estimated that the
remaining cost required to achieve technological feasibility was
approximately $2.8 million as of the acquisition date. This included an
estimated $1.7 million to convert the code and to internally test the new
product, assuming that development proceeds as expected and that key
technological hurdles can be successfully achieved. An approximate $1.5
million operating loss is expected in 1998 as part of this development
effort. The Company currently expects to benefit from the acquisition of
MLMS beginning with a product launch in the second half of 1999.
Real Estate Management System ("REMS") this project involves completing
the development and/or upgrading of approximately half of the twenty-one
modules of this integrated, modular suite of software,
designed to process and provide information for managers of real estate
portfolios. The development will be done in three independent stages
focusing on specific modules and mostly involve the development and
integration of these modules with a central data management module. The
first stage requires approximately $1.3 million to complete and the second
and third stages each require approximately $1.8 million to complete. The
Company currently expects to benefit from the acquisition of REMS beginning
with the module launches in late 1998, 1999 and 2000, respectively.
SKYLINE for Windows this project involved the upgrading of the property
management software from a DOS to Windows platform. The product achieved
technological feasibility in the third quarter of 1998 and the Company has
already begun to benefit from the acquisition of this research and
development.
11
<PAGE>
Savid
-----
The first project involves upgrading five existing debt and derivative
modules from a DOS to Windows platforms. The second project involves the
development of a new risk management module. The Company estimated that the
remaining cost required to achieve technological feasibility for both
projects was approximately $0.2 million as of the acquisition date. Three
of the five modules in the first project achieved technological feasibility
in the third quarter 1998 and the Company has already begun to benefit from
the acquisition of this research and development. The Company expects to
benefit from the acquisition of the remaining research and development
beginning with module launches beginning in the second half of 1999.
All development efforts for Quantra and Savid products are proceeding as
expected and assume that technological feasibility can be achieved. If these
projects are not successfully completed, the sales and profitability of the
Company may be adversely affected in future periods and the value of certain
related intangibles may become impaired.
On September 29, 1998 the Staff of the Securities and Exchange Commission
provided comments to the Company regarding the Company's first and second
quarter 1998 in-process research and development charges. On October 29, 1998
the Company responded to the Staff's comments and is awaiting a reply.
Operating income for the three months ended September 30, 1998 was $2.3 million,
or 12% of total revenues, as compared with an operating loss of $0.2 million, or
2% of total revenues, in the three months ended September 30, 1997. For the
nine months ended September 30, 1998, the operating loss was $3.5 million, or 7%
of total revenues, as compared with an operating loss of $0.1 million, or less
than 1% of total revenues, in the nine months ended September 30, 1997.
Excluding the one-time, acquisition-related write-offs of in-process research
and development expenses, operating income for the nine months ended September
30, 1998 was $4.5 million, or 9% of total revenues.
Interest and other income, net for both of the three and nine months ended
September 30, 1998, remained steady from the comparable periods of the prior
year. The effective tax rate, excluding the Company's equity in investee loss
for the period, for each of the three and nine months ended September 30, 1998
was 34% as compared with 36% in the comparable periods of the prior year. The
decrease in the effective tax rate was primarily the result of the fluctuations
in pre-tax earnings of foreign operations in countries where the tax rates were
lower than in the United States.
Net income for the three months ended September 30, 1998 was $1.0 million, or
$0.06 diluted earnings per share, as compared with $0.2 million, or $0.01
diluted earnings per share, in the three months ended September 30, 1997. For
the nine months ended September 30, 1998, the net loss was $2.1 million, or
$0.15 diluted loss per share, as compared with net income of $0.9 million, or
$0.07 diluted earnings per share, in the nine months ended September 30, 1997.
Excluding the one-time, acquisition-related write-offs of in-process research
and development expenses and the equity in investee loss, net income for the
nine months ended September 30, 1998 was $4.0 million, or $0.27 diluted earnings
per share, net of the tax benefit.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents during the nine months ended September 30, 1998
decreased by $14.6 million primarily as a result of business acquisitions and
capital expenditures. Cash and cash equivalents during the nine months ended
September 30, 1997 decreased by $11.0 million primarily as a result of a $14.1
million net transfer of cash into short-term marketable securities and a $2.0
million repayment of debt being partly offset by $5.6 million of cash provided
by operations.
Operations used cash of $2.2 million for the nine months ended September 30,
1998 principally as a result of higher accounts receivable. For the comparable
period of the prior year, operations provided cash of $5.6 million, primarily as
a result of non-cash charges, higher liabilities and the net income for the
period.
12
<PAGE>
Investing activities for the nine months ended September 30, 1998 and 1997 used
$14.0 million and $15.6 million, respectively. In 1998, the Company acquired
the Quantra and Savid businesses, made an equity investment in CEV, acquired
office and other equipment and invested in capitalized software. During the nine
months ended September 30, 1997, the Company invested $14.1 million, net, in
short-term marketable securities.
Financing activities for the nine months ended September 30, 1998 provided cash
of $1.6 million as compared with using $1.1 million in the comparable period of
the prior year. During 1998, approximately $2.0 million received from the
exercise of options and the related issuance of shares was partly offset by
payments of debt, while in the comparable period of 1997, the repayment of $2.0
million of debt was partially offset by proceeds from other financing
activities.
As of September 30, 1998, the Company had $44.8 million in cash, cash
equivalents and marketable securities. The Company believes that its current
cash balances and cash being generated in operations will be sufficient to meet
its working capital and capital expenditure requirements for at least the next
twelve months.
YEAR 2000
The so-called "Year 2000" problem relates to computer systems that have time-
sensitive programs containing two-digit fields for the year and that may confuse
the year 2000 with the year 1900. If the Company or a third party dealing with
the Company uses a computer system or software application which partly or fully
fails as a result of its inability to recognize the year 2000, the results could
conceivably have a material adverse effect on the Company.
The Company has utilized both in-house and outside consultants to test whether
its products are Year 2000 compliant. Most of the Company's key products have
already passed rigorous testing to be certified as Year 2000 compliant. The
Company is currently testing its remaining supported products and expects them
to be certified as Year 2000 compliant by the end of 1998. In the event that
any Year 2000 compliance issues with its supported products arise, it is the
Company's intention to rectify those problems through the software support
process. Costs associated with the testing and modifications to make the
Company's products Year 2000 compliant have not had and are not expected to have
a material adverse effect on the Company's business, financial condition or
results of operations and cash flows.
The Company is in the process of identifying anticipated costs, problems and
uncertainties associated with making its internal-use computer systems Year 2000
compliant. The Company currently utilizes a computing network comprised of a
series of local-area-networks ("LANs") that are connected via a wide-area-
network ("WAN"). Important computer systems used by operations include those
used in developing products and in communicating with and in servicing
customers. Important computer systems used in financial and administrative
management include general ledgers, time and project management systems and a
human resource system. Substantially all operating systems, the LANs, the WAN,
the general ledgers and the human resource system have either been updated to be
and/or were certified by the vendor to be Year 2000 compliant. In general, the
Company expects to resolve any remaining Year 2000 issues with respect to its
internal-use computer systems and software applications as they arise through
upgrade, conversion, modification or replacement of non-compliant systems and
applications.
The Company is also reviewing the possible impact of Year 2000 problems on its
central and satellite office facilities and their systems. Although there can
be no assurance that the utility (e.g. heat, light, power and telephones)
suppliers will achieve Year 2000 compliance requirements in a timely manner, the
Company presently has no reason to believe they will not. The failure of any of
these key suppliers to properly address their Year 2000 problems could lead to a
shutdown of the affected operations and could delay or halt both development of
Company products and provision of Company services.
There can be no assurance that the systems of other parties upon which the
Company's business relies directly or indirectly will be Year 2000 compliant.
The costs of becoming Year 2000 compliant, or the failure thereof by the Company
or other parties, could have a material adverse effect on the Company's
business, financial condition or results of operations. The Company has
identified potential vulnerabilities associated with the change of the
13
<PAGE>
century, both in its own product offerings and in the systems utilized by the
Company. The Company is devoting resources to resolving the issues inherent in
its own product offerings, as well as with providers of systems to the Company
to ensure that business is not substantially interrupted as a result of the
century change. However, given the possibility of system failure as a result of
the century change, the Company is currently in the process of formulating one
or more contingency plans, which it anticipates implementing during 1999.
FOREIGN CURRENCY - CONVERSION TO EURO
Certain of the member countries of the European Union have agreed to adopt a new
currency, the Euro, as their common legal currency. On January 1, 1999, these
countries will establish fixed conversion rates between their existing
currencies and the Euro. The Company has not yet completed its analysis of the
potential impact the conversion to the Euro may have on its business or results
of operations.
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, including without limitation
those caused by or related to actual or perceived Year 2000 problems affecting
the industry, 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.
Product Concentration. To date, substantially all of the Company's revenues have
been attributable to the licensing of its CAMRA, PTS, FILMS and Total Return
software products and the provision of maintenance and consulting services in
connection therewith. The Company currently expects that the licensing of
CAMRA, PTS, and Total Return software products, as well as MLMS and certain
other products acquired by the Company in connection with recent acquisitions,
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 several 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 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,
14
<PAGE>
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.
Integration of Operations. The Company's success is dependent in part on its
ability to complete its integration of the operations of its recent acquisitions
in an efficient and effective manner. The successful integration in a rapidly
changing financial services industry may be more difficult to accomplish than in
other industries. The combination of these companies and any future acquisitions
will require, among other things, integration of the companies' respective
product offerings and coordination of their sales and marketing and research and
development efforts. There can be no assurance that such integration will be
accomplished smoothly or successfully. The difficulties of such integration may
be increased by the necessity of coordinating geographically separated
organizations. The integration of certain operations will require the dedication
of management resources which may temporarily distract attention from the day-
to-day business of the combined company. The inability of management to
successfully integrate the operations of these companies could have a material
adverse effect on the business, financial condition, and results of operations
of the Company.
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.
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
15
<PAGE>
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.
Key Personnel. The Company's success is dependent in part upon its ability to
attract, train, and retain highly skilled technical, managerial, and sales
personnel. The loss of services of one or more of the Company's key employees
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company continues to hire a significant
number of additional sales, service, and technical personnel. Competition for
the hiring of such personnel in the software industry is intense. Locating
candidates with the appropriate qualifications, particularly in the desired
geographic location, can be difficult. Although the Company expects to continue
to attract and retain sufficient numbers of highly skilled employees for the
foreseeable future, there can be no assurance that the Company will do so.
Risks Associated with International Operations. The Company intends to continue
to expand its international sales activity as part of its business strategy. To
accomplish such expansion, the Company must establish additional foreign
operations and hire additional personnel, requiring significant management
attention and financial resources that could materially adversely affect the
Company's business, financial condition or results of operations. An increase in
the value of the U.S dollar relative to foreign currencies could make the
Company's products more expensive and, therefore, potentially less competitive
in those markets. Through third quarter 1998, the Company's exposure to foreign
currency exchange risk was minimal and, at September 30, 1998, it has no
material unhedged monetary assets, liabilities or commitments. However, as the
European operations continue to conduct greater volumes of transactions in
British Pound Sterling and other European currencies, the foreign currency
exchange risk could become material. The Company hedges some of this risk;
however, significant fluctuations in the value of foreign currencies could have
an adverse effect on the earnings of the Company. In addition, the Company's
international business may be subject to a variety of risks, including
difficulties in obtaining U.S. export licenses, potentially longer payment
cycles, increased costs associated with maintaining international marketing
efforts, the introduction of non-tariff barriers and higher duty rates and
difficulties in enforcement of contractual obligations and intellectual property
rights. There can be no assurance that such factors will not have a material
adverse effect on the Company's business, financial condition or 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. 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
On March 18, 1997, Elery G. Montagna and Marjory G. Montagna filed a
purported class action lawsuit in the United States District Court for the
Southern District of New York (the "New York Complaint") against the Company and
certain of its executive officers, as well as against BT Alex. Brown
Incorporated (as successor to Alex. Brown & Sons Incorporated, "Alex. Brown")
and Hambrecht & Quist LLC ("Hambrecht & Quist"), the lead managers of the
Company's initial public offering. On April 8, 1997, Marc A. Feiner filed a
purported class action lawsuit in the United States District Court for the
District of Connecticut (the "Connecticut Complaint") against the Company, its
directors and certain of its executive officers, as well as against Alex. Brown
and Hambrecht & Quist. On July 8, 1997, Marc A. Feiner, Joseph Aogiere, Arthur
S. Davis, Theodore S. Davis, James Gregory, Brian Kreidler, Daniel Kreidler,
Robert Miller, Elery Montagna, Marjory Montagna and Gilda Shapiro Trust filed a
16
<PAGE>
Consolidated Amended Class Action Complaint in the United States District Court
for the District of Connecticut (the "Consolidated Complaint") in which the New
York Complaint and the Connecticut Complaint were consolidated and amended. The
Consolidated Complaint claims that the Prospectus for the Company's initial
public offering allegedly made material misrepresentations in violation of
Sections 11 and 12(2) of the Securities Act of 1933. The plaintiffs are seeking
an undetermined amount of damages and costs and expenses of the litigation. The
plaintiffs filed a motion to certify a class in this matter on May 29, 1998. The
Company filed its opposition to class certification on September 25, 1998, and
Alex. Brown and Hambrecht & Quist filed a separate opposition on September 29,
1998. The plaintiffs filed a reply brief on the class certification issue on
October 26, 1998, and the defendants filed surreply briefs on November 10, 1998.
The court has not yet ruled on the motion for class certification. The matter is
now proceeding into the discovery phase. The Company believes it has meritorious
defenses to the claims made in the lawsuit and intends to contest the
Consolidated Complaint vigorously. Although the amounts claimed may be
substantial, management cannot predict the ultimate outcome or estimate the
potential loss, if any, related to these claims. Management believes that the
disposition of this matter will not have a material adverse effect on the
Company's consolidated financial position. However, the adverse resolution of
one or more of these claims could materially affect the Company's results of
operations or liquidity in any one annual or quarterly reporting period.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
The following information relates to the use of proceeds from the Company's
initial public offering of Common Stock (the "Offering").
The effective date of the Company's Registration Statement on Form S-1 (File No.
333-3094) (the "Registration Statement") relating to the Offering, for which the
following use of proceeds information is being disclosed, was May 30, 1996.
From the effective date of the Registration Statement through September 30,
1998, the Company has used the net Offering proceeds to the Company as follows:
<TABLE>
<S> <C>
Acquisition of other businesses $ 5,261,000
Repayment of indebtedness $ 1,260,000
Corporate move and equipment purchases $ 4,363,000
Working capital $ 9,699,000
Municipal bonds $ 29,166,837
Municipal bond funds $ 3,024,000
</TABLE>
All of the above listed payments were direct or indirect payments to persons
other than: directors, officers, general partners of the Company or their
associates; persons owning ten percent or more of any class of equity securities
of the Company; or affiliates of the Company.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. The exhibits listed in the Exhibit Index immediately preceding such
exhibits are filed as part of or are included in this report.
b. On July 17, 1998, the Company filed a Current Report on Form 8-K,
dated July 17, 1998, announcing under Item 5 (Other Events) the Company's
financial results for the second quarter of 1998. No financial statements were
required to be filed with such report.
17
<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: November 16, 1998 By: /s/ Anthony R. Guarascio
------------------------------
Anthony R. Guarascio
Senior Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
18
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
27 Financial Data Schedule
19
<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 10Q AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 9,051
<SECURITIES> 35,767
<RECEIVABLES> 25,648
<ALLOWANCES> 2,643
<INVENTORY> 0
<CURRENT-ASSETS> 71,611
<PP&E> 13,423
<DEPRECIATION> 4,808
<TOTAL-ASSETS> 95,491
<CURRENT-LIABILITIES> 18,823
<BONDS> 0
0
0
<COMMON> 146
<OTHER-SE> 76,272
<TOTAL-LIABILITY-AND-EQUITY> 95,491
<SALES> 48,177
<TOTAL-REVENUES> 48,177
<CGS> 0
<TOTAL-COSTS> 12,289
<OTHER-EXPENSES> 39,413
<LOSS-PROVISION> 386
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,761)
<INCOME-TAX> (648)
<INCOME-CONTINUING> (2,113)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,113)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
</TABLE>
