<PAGE> 1
UNITED STATES 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 MARCH 31, 2000
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, CT 06095
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING 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 April
30, 2000:
<TABLE>
<CAPTION>
Class Number of Shares Outstanding
<S> <C>
Common Stock, par value $.01 per share 16,113,481
</TABLE>
<PAGE> 2
SS&C TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
Page Number
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at
March 31, 2000 and December 31, 1999 2
Consolidated Statements of Operations for
the three-month periods ended March 31, 2000 and 1999 3
Consolidated Statements of Cash Flows for
the three-month periods ended March 31, 2000 and 1999 4
Notes to Consolidated Financial
Statements 5-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-10
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 10
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURE 12
EXHIBIT INDEX 13
</TABLE>
This Quarterly Report on Form 10-Q may 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.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SS&C TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(unaudited)
----------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 10,383 $ 14,304
Investments in marketable securities 42,995 36,034
Accounts receivable, net of allowance for doubtful accounts 12,453 11,079
Income taxes receivable 2,477 2,722
Prepaid expenses and other current assets 2,708 2,360
Deferred income taxes 4,265 4,271
-------- --------
Total current assets 75,281 70,770
-------- --------
Property and equipment:
Building and leasehold improvements 2,961 2,872
Equipment, furniture, and fixtures 14,643 14,145
-------- --------
17,604 17,017
Less accumulated depreciation (7,982) (7,105)
-------- --------
Net property and equipment 9,622 9,912
-------- --------
Accounts receivable 282 301
Deferred income taxes 7,211 7,211
Goodwill, net of accumulated amortization 190 296
Intangible and other assets, net of accumulated amortization 2,217 1,227
-------- --------
Total assets $ 94,803 $ 89,717
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 131 $ 131
Accounts payable 1,346 1,503
Accrued employee compensation and benefits 971 1,695
Other accrued expenses 2,186 2,448
Deferred maintenance and other revenue 14,375 11,376
-------- --------
Total current liabilities 19,009 17,153
Long-term debt 10 11
-------- --------
Total liabilities 19,019 17,164
-------- --------
Stockholders' equity:
Common stock 161 161
Additional paid in capital 88,119 88,119
Accumulated other comprehensive income 2,759 (461)
Accumulated deficit (15,255) (15,266)
-------- --------
Total stockholders' equity 75,784 72,553
-------- --------
Total liabilities and stockholders' equity $ 94,803 $ 89,717
======== ========
</TABLE>
See accompanying notes to Consolidated Financial Statements.
2
<PAGE> 4
SS&C TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31, March 31,
2000 1999
-------- --------
<S> <C> <C>
Revenues:
Software licenses $ 4,138 $ 8,006
Maintenance and other recurring revenue 7,572 6,683
Professional services 3,410 4,758
-------- --------
Total revenues 15,120 19,447
-------- --------
Cost of revenues:
Software licenses 238 1,012
Maintenance and other recurring revenue 3,101 2,268
Professional services 2,826 3,322
-------- --------
Total cost of revenues 6,165 6,602
-------- --------
Gross profit 8,955 12,845
-------- --------
Operating expenses:
Selling and marketing 3,543 4,614
Research and development 4,081 4,442
General and administrative 2,621 2,662
-------- --------
Total operating expenses 10,245 11,718
-------- --------
Operating income (loss) (1,290) 1,127
-------- --------
Interest income, net 614 563
Other income, net 693 284
-------- --------
Income before income taxes 17 1,974
Provision for income taxes 6 492
======== ========
Net income $ 11 $ 1,482
======== ========
Basic earnings per share $ 0.00 $ 0.10
======== ========
Basic weighted average number of common shares outstanding 16,044 15,380
======== ========
Diluted earnings per share $ 0.00 $ 0.09
======== ========
Diluted weighted average number of common and common
equivalent shares outstanding 16,113 16,102
======== ========
</TABLE>
See accompanying notes to Consolidated Financial Statements.
3
<PAGE> 5
SS&C TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31, March 31,
2000 1999
-------- --------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 11 $ 1,482
-------- --------
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 1,105 1,481
Deferred income taxes 6 (91)
Provision for doubtful accounts 317 286
Changes in operating assets and liabilities, excluding effects
from acquisitions:
Accounts receivable (1,763) (1,272)
Prepaid expenses and other current assets (348) (373)
Income taxes receivable 245 --
Accounts payable (157) 705
Accrued expenses (986) (1,987)
Taxes payable -- 439
Deferred maintenance and other revenues 2,999 2,055
-------- --------
Total adjustments 1,418 1,243
-------- --------
Net cash provided by operating activities 1,429 2,725
-------- --------
Cash flow from investing activities
Additions to property and equipment (613) (781)
Proceeds from sale of property and equipment 7 --
Proceeds from note receivable (Note 15) -- 2,250
Issuance of convertible note receivable (1,000) --
Additions to capitalized software and other intangibles (93) (88)
Purchases of marketable securities (7,150) (7,200)
Sales of marketable securities 3,500 6,119
-------- --------
Net cash provided by (used in) investing activities (5,349) 300
-------- --------
Cash flow from financing activities:
Repayment of debt (1) (183)
Proceeds from exercise of options -- 410
-------- --------
Net cash provided by (used in) financing activities (1) 227
-------- --------
Net (decrease) increase in cash and cash equivalents (3,921) 3,252
Cash and cash equivalents, beginning of period 14,304 13,047
======== ========
Cash and cash equivalents, end of period $ 10,383 $ 16,299
======== ========
</TABLE>
Supplemental disclosure of non-cash investing activities:
As more fully described in Note 4, effective March 11, 1999, SS&C
Technologies, Inc. purchased all the outstanding stock of HedgeWare, Inc. for
685,683 shares of the Company's common stock.
See accompanying notes to Consolidated Financial Statements.
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SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
1. Summary of Significant Accounting Policies:
Basis of Presentation
In the opinion of the Company, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments, except as noted elsewhere in the notes to the consolidated
financial statements) necessary to present fairly its financial position as of
March 31, 2000 and the results of its operations for the three months ended
March 31, 2000 and 1999. These statements do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. The financial statements contained herein should be read
in conjunction with the consolidated financial statements and footnotes as of
and for the year ended December 31, 1999 which were included in the Company's
Form 10-K filed with the Securities and Exchange Commission. The December 31,
1999 consolidated 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 ended
March 31, 2000 are not necessarily indicative of the expected results for the
full year.
Basic and Diluted Earnings Per Share
Earnings per share is calculated in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings Per Share". Basic earnings per share
includes no dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share is computed by dividing net income by the
weighted average number of common and common equivalent shares outstanding
during the period. Common equivalent shares are comprised of stock options using
the treasury stock method. Common equivalent shares are excluded from the
computations of earnings per share if the effect of including such common
equivalent shares is antidilutive. Outstanding options to purchase 2.3 million
and 0.7 million shares at March 31, 2000 and 1999, respectively, were not
included in the computation of diluted earnings per share because the effect of
including the options would be antidilutive. Income available to stockholders is
the same for basic and diluted earnings per share. A reconciliation of the
shares outstanding is as follows (in thousands):
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
------ ------
<S> <C> <C>
Basic weighted average shares outstanding 16,044 15,380
Weighted average common stock equivalents -- options 69 722
------ ------
Diluted weighted average shares outstanding 16,113 16,102
====== ======
</TABLE>
Comprehensive Income
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130") requires that items defined as comprehensive income,
such as foreign currency translation adjustments and unrealized gains (losses)
on marketable securities, 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.
The following table sets forth the components of comprehensive income (in
thousands):
<TABLE>
<CAPTION>
Three months ended
-------------------------
March 31, March 31,
2000 1999
------- --------
<S> <C> <C>
Net income $ 11 $ 1,482
Foreign currency translation gains (losses) (90) (57)
Unrealized gains on marketable securities 3,310 --
------- -------
Total comprehensive income $ 3,231 $ 1,425
======= =======
</TABLE>
Recent Accounting Pronouncements
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB Opinion No. 25" ("FIN44"). FIN 44
clarifies the following: the definition of an employee for purposes of applying
APB Opinion No. 25; the criteria for determining whether a plan qualifies as a
non-compensatory plan; the accounting consequence of various modifications to
the terms of previously fixed stock options or awards; and the accounting for an
exchange of stock compensation awards in a business combination. FIN 44 is
effective July 1, 2000, however, for certain transactions the guidance is
effective after December 15, 1998 and January 12, 2000. The Company does not
expect the application of FIN 44 to have a material impact on the Company's
financial position or results of operations.
Reclassifications
Certain amounts in the 1999 consolidated financial statements have been
reclassified to be comparable with the 2000 presentation. These classifications
have had no effect on net income, working capital or net equity.
5
<PAGE> 7
2. Related Party Transactions:
Aegon USA Realty Advisors, Inc. ("Aegon") is the parent company of QSC Holding
Inc. (formerly known as Quantra Corporation), which sold substantially all of
its assets to the Company in March 1998. The president of Aegon also retains a
seat on the board of directors of the Company. During the first quarter ended
March 31, 1999 Aegon purchased a license for certain of the Company's products
for $1.68 million. This amount was paid in full during the quarter ended March
31, 1999.
3. Commitments and Contingencies:
On May 7, 1999, the Company announced that it had entered into an agreement for
the settlement of the consolidated securities class action lawsuit pending
against the Company. The settlement provided that all claims against the
Company, certain of its officers and directors, and underwriters would be
dismissed. Under the terms of the settlement, in exchange for the dismissal and
release of all claims, the Company paid to the class $7.5 million in cash,
together with shares of Common Stock of the Company valued at $1.3 million. The
Company recorded a charge for the settlement of approximately $9.3 million,
including legal fees, in the quarter ended June 30, 1999.
From time to time, the Company is subject to certain legal proceedings and
claims that arise in the normal course of its business. In the opinion of
management, the Company is not a party to any other litigation that it believes
could have a material effect on the Company or its business.
4. Acquisitions:
On March 11, 1999, the Company acquired all of the outstanding stock of
HedgeWare, Inc. ("HedgeWare"), a provider of portfolio, financial, partnership
and tax accounting software and service support to hedge fund managers and
traders, for 685,683 shares of Common Stock of the Company in a business
combination accounted for as a pooling-of-interests. Accordingly, the financial
statements for all periods prior to the combination have been restated to
reflect the combined operations. In connection with the acquisition, the
Company, HedgeWare and the former stockholders of HedgeWare entered into an
Escrow Agreement providing, among other things, that 89,139 shares of Common
Stock were initially held in escrow to reimburse the Company in connection with
breaches of representations, warranties or covenants, if any, as well as
potential rental obligations and sales tax liabilities of HedgeWare. In
accordance with the terms of the Escrow Agreement, on April 12, 2000, 61,506 of
the 89,139 shares of common stock were released from escrow. Currently, 27,633
shares of common stock are held in escrow pursuant to this Escrow Agreement.
HedgeWare had elected to be treated as a Subchapter S Corporation for income tax
purposes and, as such, income taxes are provided from March 11, 1999 for
HedgeWare's results of operations. During the quarter ended March 31, 1999, the
Company issued stock valued at $3.1 million in satisfaction of certain
HedgeWare's stockholder and employee-related accrued expenses that existed as of
the effective date of the merger. All periods prior to March 11, 1999 have been
restated to reflect HedgeWare, Inc., as a pooling-of-interests acquisition.
On March 31, 1999, the Company acquired all of the outstanding stock of The
Brookside Corporation (Brookside). Pursuant to the stock purchase agreement, all
of the outstanding shares of common stock of Brookside held by its sole
stockholder were exchanged for an aggregate of 27,600 shares of Common Stock of
the Company. The consolidated results of operations for the three months ended
March 31, 1999 include the results of operations of Brookside from the beginning
of the quarter. The consolidated financial statements for prior periods have not
been restated since the impact of such restatement would not be material.
6
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THREE MONTHS ENDED March 31, 2000 and 1999
Revenues
The Company's revenues are derived from software licenses, related maintenance
and professional services and outsourcing services provided by SS&C Direct.
Total revenues decreased 22% from $19.4 million in the three months ended March
31, 1999 to $15.1 million in the three months ended March 31, 2000. The decrease
of $4.3 million was due to a decrease in software licenses and professional
services offset by an increase in maintenance and other recurring revenue.
Software Licenses. Software license revenues decreased 48% from $8.0 million in
the three months ended March 31, 1999 to $4.1 million in the three months ended
March 31, 2000. The decrease of $3.9 million was due mainly to a $2.2 million
decrease in license fees from CAMRA 2000 and AdvisorWare 2000 and a $1.6 million
decrease in license fees from LMS 2000.
Maintenance and Other Recurring Revenue. Maintenance and other recurring revenue
increased 13% from $6.7 million in the three months ended March 31, 1999 to $7.6
million in the three months ended March 31, 2000. The increase was primarily due
to growth in the Company's installed base of clients requiring maintenance
services and an increase in outsourcing revenues.
Professional Services. Professional services revenues decreased 28% from $4.8
million in the three months ended March 31, 1999 to $3.4 million in the three
months ended March 31, 2000. Demand for the Company's implementation, conversion
and training services has decreased primarily due to the decrease in sales of
the Company's software license. The professional services revenue will continue
to be affected by the overall license revenue levels.
Cost of Revenues
Total cost of revenues decreased by 7% from $6.6 million in the three months
ended March 31, 1999 to $6.2 million in the three months ended March 31, 2000.
The gross margin decreased from 66% for the three months ended March 31, 1999 to
59% for the three months ended March 31, 2000, primarily due to the lower
software license sales.
Cost of Software Licenses. Cost of software license revenues relates primarily
to royalties, the costs of product media, packaging, documentation and labor
involved in the distribution of the Company's software and the amortization of
completed technology. The cost of software licenses decreased 76% from $1.0
million in the three months ended March 31, 1999 to $238 thousand in the three
months ended March 31, 2000. The cost of software license revenues as a
percentage of such revenues decreased from 13% in the three months ended March
31, 1999 to 6% in the three months ended March 31, 2000. The decrease in costs
was due primarily to the reduction in amortization for completed technology. The
completed technology amortization related to the Quantra acquisition was
completed in the fourth quarter of 1999.
Cost of Maintenance and Other Recurring Revenue. Cost of maintenance and other
recurring revenue primarily consists of technical customer support and
development costs associated with product and regulatory updates and the costs
of SS&C Direct outsourcing. The cost of maintenance and other recurring revenue
increased 37% from $2.3 million in the three months ended March 31, 1999 to $3.1
million in the three months ended March 31, 2000. The increase was primarily due
to increased personnel for the infrastructure to support the expanded installed
client base and the Company's SS&C Direct outsourcing business. The cost of
maintenance and other recurring revenues as a percentage of such revenues
increased from 34% in the three months ended March 31, 1999 to 41% in the same
period of 2000. This increase was primarily due to the increased infrastructure
to support the anticipated growth in the SS&C Direct outsourcing business.
Cost of Professional Services. Cost of professional service revenues consists
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 service revenues decreased 15% from $3.3 million in the
three months ended March 31, 1999 to $2.8 million in the three months ended
March 31, 2000. The cost of professional service revenues as a percentage of
revenues increased from 70% in the three months ended March 31, 1999 to 83% in
the three months ended March 31, 2000. The dollar decrease in the cost of
professional services was primarily attributable to lower personnel related
costs due to the corresponding decrease in implementation and conversion
services. The increase in the cost of professional services as a percentage of
professional services revenue was due to lower efficiencies as a result of lower
revenues.
7
<PAGE> 9
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. These expenses decreased 23% from
$4.6 million in the three months ended March 31, 1999 to $3.5 million in the
three months ended March 31, 2000 representing 24% and 23%, respectively, of
total revenues for those periods. The dollar decrease was largely attributable
to lower personnel related costs due to a reduction of personnel and reduced
spending in advertising, promotional and marketing costs.
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 decreased 8%
from $4.4 million in the three months ended March 31, 1999 to $4.1 million in
the three months ended March 31, 2000 representing 23% and 27%, respectively, of
those revenues for those periods. The dollar decrease was mainly due to lower
personnel related costs due to a reduction in research and development
employees. The Company believes that due to the sophistication of its products,
research and development spending should remain at approximately these levels.
General and Administrative. General and administrative expenses are primarily
comprised of 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 decreased 2% from
$2.7 million in the three months ended March 31, 1999 to $2.6 million in the
three months ended March 31, 2000, representing 14% and 17%, respectively, of
total revenues for those periods.
Interest and Other Income Net. Interest and other income, net consist primarily
of interest income and other non-operational income and expenses. Interest
income, net was $614 thousand for the three months ended March 31, 2000 compared
to $563 thousand in the same period of 1999. Included in other income, net for
the period ended March 31, 2000 was a non-operational gain of $482 thousand
resulting from the sale of Caminus common stock.
Provision for Income Taxes. The Company had an effective tax rate of 25% and 35%
in the periods ending March 31, 1999 and 2000, respectively. The lower tax rate
in the period ended March 31, 1999 was due to the non-taxable income of
HedgeWare, which prior to the acquisition on March 11, 1999 had been treated as
an S corporation.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and marketable securities at March 31, 2000
were $53.4 million compared with $50.3 million at December 31, 1999. The
increase in marketable securities during the three months ended March 31, 2000
includes an unrealized gain of $3.3 million.
Cash provided by operations was $1.4 million for the three months ended March
31, 2000. Cash provided by operating activities was primarily due to earnings
plus non-cash expenses and an increase in deferred revenues partially offset by
an increase in accounts receivable and a decrease in accounts payable and
accrued expenses.
Investing activities used cash of $5.3 million for the three months ended March
31, 2000. Cash used in investing activities was mainly due to additions to
property and equipment, a net purchase of marketable securities of $3.7 million
and the issuance of a convertible note to WealthMetrics.com, Inc. of $1.0
million.
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 at least the next 12 months.
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
8
<PAGE> 10
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 the Financial Services Industry. The Company's clients include a
range of organizations in the financial services industry. The success of these
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.
Business Model Change. The Company is in the process of modifying its business
model from one based on license fees derived from licensing proprietary software
to a business model based on both licensing its software and transaction fees
for the use of SS&C Direct outsourcing services. Due to this change in the
business model, the Company's revenues will increasingly depend on its ability
to attract customers to SS&C Direct and on the number and volume of uses of the
Company's outsourcing services. The number of users and the volume of their
activity are largely outside of the Company's control. Thus, the Company's past
operating results may not be a meaningful indicator of its future performance.
Product Concentration. To date, substantially all of the Company's revenues have
been attributable to the licensing of its CAMRA 2000, AdvisorWare 2000, Total
Return 2000, LMS 2000, and SKYLINE software and the provision of maintenance and
consulting services in support of such software. The Company expects that the
licensing of CAMRA 2000, AdvisorWare 2000, Total Return 2000, LMS 2000, SKYLINE,
and Antares 2000 software products will continue to account for a significant
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, 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 service 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 all of the markets served
by the Company, there can be no assurance that such competitors will not compete
against the Company in the future in additional markets. 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 used 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 ability to protect 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
9
<PAGE> 11
taken by the Company to protect its proprietary technology will be adequate to
prevent 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 result in a delay in or an inability to
achieve market acceptance and thus could have a material adverse effect 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. Over the last 12 months, three Senior Vice
Presidents terminated their employment with the Company. 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, is 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 be able to 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 continued 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 foreign markets. A portion of the Company's international
sales is denominated in foreign currency. The Company occasionally hedges some
of the risk associated with foreign exchange fluctuations; 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 other 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
third-party 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, 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company generally places its marketable security investments in high credit
quality instruments, such as U.S. Government and Federal Agency obligations,
tax-exempt municipal obligations and corporate obligations. The Company does not
expect any material loss from its marketable security investments and therefore
believes that its potential interest rate exposure is not material.
The Company purchases from time to time forward contracts to attempt to minimize
the impact that exchange rate fluctuations have on its international sales
transactions. The Company invoices customers primarily in U.S. dollars and in
local currency in those countries in which the Company has branch and subsidiary
operations. The Company is exposed to foreign exchange rate fluctuations from
when customers are invoiced in local currency until collection occurs. Through
March 31, 2000, foreign currency fluctuations have not had a material impact on
the Company's financial position or results of operation, and therefore the
Company believes that its potential foreign currency exchange rate exposure is
not material.
The foregoing risk management discussion and the effect thereof are
forward-looking statements. Actual results in the future may differ materially
from these projected results due to unforeseen developments in global financial
markets. The analytical methods used by the Company to assess and minimize risk
discussed above should not be considered projections of future events or losses.
10
<PAGE> 12
PART II - OTHER INFORMATION
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 March 31, 2000,
the Company has used the net offering proceeds to the Company as follows:
<TABLE>
<CAPTION>
<S> <C>
Corporate move and equipment purchases $ 13,073,000
Acquisition of other business 5,333,000
Repayment of indebtedness 3,496,000
Working capital 4,586,000
Marketable securities 26,312,000
</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. There have been no reports filed on Form 8-K in the quarter ended March 31,
2000.
11
<PAGE> 13
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: May 15, 2000 By:/s/ Anthony R. Guarascio
Anthony R. Guarascio
Senior Vice President and Chief
Financial Officer
(Principal Financial and Accounting Officer)
12
<PAGE> 14
EXHIBIT INDEX
Exhibit Number Description
27.1 Financial Data Schedule for the three months ended
March 31, 2000.
27.2 Restated Financial Data schedule for the three months ended
March 31, 1999.
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS INCLUDED IN THIS ANNUAL REPORT ON FORM 10-K AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 10,383
<SECURITIES> 42,995
<RECEIVABLES> 12,735
<ALLOWANCES> 4,346
<INVENTORY> 0
<CURRENT-ASSETS> 75,281
<PP&E> 17,604
<DEPRECIATION> 7,982
<TOTAL-ASSETS> 94,803
<CURRENT-LIABILITIES> 19,009
<BONDS> 0
0
0
<COMMON> 161
<OTHER-SE> 75,623
<TOTAL-LIABILITY-AND-EQUITY> 94,803
<SALES> 15,120
<TOTAL-REVENUES> 15,120
<CGS> 0
<TOTAL-COSTS> 6,165
<OTHER-EXPENSES> 10,245
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 17
<INCOME-TAX> 6
<INCOME-CONTINUING> 6
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS INCLUDED IN THIS ANNUAL REPORT ON FORM 10-K AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 16,299
<SECURITIES> 43,344
<RECEIVABLES> 25,919
<ALLOWANCES> 3,697
<INVENTORY> 0
<CURRENT-ASSETS> 88,927
<PP&E> 14,469
<DEPRECIATION> 5,770
<TOTAL-ASSETS> 108,255
<CURRENT-LIABILITIES> 21,300
<BONDS> 0
0
0
<COMMON> 156
<OTHER-SE> 83,638
<TOTAL-LIABILITY-AND-EQUITY> 108,255
<SALES> 19,447
<TOTAL-REVENUES> 19,447
<CGS> 0
<TOTAL-COSTS> 6,602
<OTHER-EXPENSES> 11,718
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,974
<INCOME-TAX> 492
<INCOME-CONTINUING> 1,482
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,482
<EPS-BASIC> .10
<EPS-DILUTED> .09
</TABLE>
