SS&C Technologies Holdings, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a stand-alone fourth-quarter report. SS&C provides software-enabled services and software to financial services and healthcare clients. It reported more than 20,000 clients, and no single client represented 5% or more of annual revenue.
Financial performance
| Metric | FY2022 | FY2021 | Change / context |
|---|---|---|---|
| Revenue | $5,283.0 million | $5,051.0 million | Up 4.6% |
| Gross profit / gross margin | $2,515.3 million / 47.6% | $2,409.3 million / 47.7% | Gross profit up; margin down 0.1 percentage point |
| Operating income | $1,142.9 million | $1,242.3 million | Down 8.0% |
| Net income | $649.0 million | $800.6 million | Down 18.9% |
| Diluted EPS | $2.48 | $2.99 | Down 17.1% |
| Cash from operations | $1,134.3 million | $1,429.0 million | Down $294.7 million |
| Total debt at year-end | $7,129.9 million | — | Includes $5,129.1 million of variable-rate debt |
Software-enabled services generated $4,273.9 million, or 80.9% of revenue, versus $4,256.1 million, or 84.3%, in 2021. License, maintenance and related revenue rose 26.9% to $1,009.1 million, substantially reflecting acquisitions. Research and development expense was $447.3 million. Interest expense increased to $312.2 million from $205.7 million; the reported average debt rate rose to 4.22% from 3.05%. The effective tax rate was 25.9%, versus 22.8%.
Cash, liquidity and capital allocation
- Cash and cash equivalents were $440.1 million at year-end. Cash, cash equivalents and restricted cash totaled $1,337.6 million, including cash held for clients; client funds obligations were $966.3 million. These client balances are not equivalent to freely available corporate cash.
- Cash used in investing was $1,757.6 million, including $1,636.2 million for acquisitions. Financing activities used $1,184.5 million, including the $1,709.0 million decline in client funds obligations, $476.1 million of share repurchases and $203.1 million of dividends; net debt borrowings were $1,127.3 million.
- The revolving facility was expanded to $600 million and extended to December 2027; $597.5 million was available at year-end. Management stated cash on hand, operating cash flow and available credit should fund current obligations, working capital and capital spending for at least 12 months.
- The company reported a 2.40x consolidated net secured leverage ratio for covenant purposes, against a maximum of 6.25x. This is a defined credit-agreement measure, not a GAAP metric.
Material changes, outlook and risks
- Revenue growth included $223.6 million from acquisitions and $101.7 million of organic growth, partly offset by $93.3 million of unfavorable foreign-currency translation. Operating expenses rose 17.6%, with acquisitions, personnel, travel, marketing and technology costs contributing. Blue Prism added $201.2 million of revenue from its acquisition date.
- SS&C acquired Blue Prism for approximately $1.6 billion in cash, funded principally with $1.53 billion of incremental term loans, and completed several smaller acquisitions. Goodwill increased to $8,863.0 million; management reported no goodwill impairment and stated estimated reporting-unit fair values exceeded carrying values.
- No specific numerical revenue or earnings guidance is provided in the supplied filing text. Management cited continued demand for outsourcing and cloud solutions, automation, and growth opportunities in financial services and healthcare, while noting macroeconomic, inflation, interest-rate and currency uncertainties.
- Key risks include substantial indebtedness and variable-rate exposure, market and client activity affecting fee levels, acquisition integration, competition, cybersecurity and service interruptions, regulatory and privacy requirements, foreign operations and currency movements.
- DST-related ERISA litigation remained unresolved. The company had recorded a $51.5 million liability; further exposure was uncertain. The auditor and management concluded internal control over financial reporting was effective, but Blue Prism—representing about 1% of assets and 4% of revenue—was excluded from the 2022 control assessment and audit.
- Other notable items: foreign-currency translation reduced other comprehensive income by $311.6 million; 2022 other income included investment gains, including a $39.5 million fair-value increase in the related-party SILAC investment. The filing reports an unrecognized tax-benefit balance of $126.1 million and related penalties and interest liability of $28.4 million.
Most important facts for investors to verify
- Debt maturities, interest-rate sensitivity and refinancing needs, particularly the $3,753.4 million scheduled debt maturity in 2025 and the disclosed $51.3 million annual interest sensitivity to a 100-basis-point rate increase.
- Underlying organic growth and margin trends, separating acquisition contribution, currency effects and client-fund reimbursement activity.
- Blue Prism integration, realized synergies and the assumptions supporting acquired intangible-asset valuations and goodwill.
- Developments and potential additional costs in the DST ERISA matters, alongside the related-party investment and tax contingencies.
- Cash available for corporate use versus restricted and client-held balances, and the sustainability of dividends and repurchases given debt and acquisition spending.