29 November 2014

SunGard Q4 revenue flat

04 February 2014  |  821 views  |  0 Source: SunGard

SunGard, one of the world's leading software and technology services companies, today reported results for the fourth quarter ended December 31, 2013. For the fourth quarter, revenue was $1.1 billion, flat year over year.

Currency had no material impact on reported revenue for the quarter compared to the prior year. Operating income was $179 million, down 7% year over year. Operating margin was 16.1% in the quarter, down 1.1 points. Adjusted EBITDA was $372 million, down 6% year over year, and the adjusted EBITDA margin was 33.4%, down 2.1 points year over year. Adjusted EBITDA is defined in Note 1 attached to this release.

For the full year, revenue was $4.1 billion, down 2% year over year (down 2% adjusting for currency). Operating income was $461 million and the operating margin improved to 11.2%, compared to an operating income of $71 million last year, which included a goodwill impairment charge of $385 million. Excluding the goodwill impairment charge, operating income increased 1% year over year. Adjusted EBITDA was $1.2 billion, down 2% year over year, and the adjusted EBITDA margin was 29.1%, down 0.1 points year over year.

Russ Fradin, president and chief executive officer, commented, "SunGard's fourth quarter results reflect the investments we're making across the company to bring new products and services to market and to increase sales capacity, and I'm pleased with the progress we've made. In Financial Systems, we saw strong acceptance of our solutions, which resulted in improved revenue trends in the second half of the year. The Company's performance in 2013 demonstrates the strength of our business, based on highly recurring revenue flows, focused investments, disciplined cost management and operational excellence, which allowed us to increase cash from continuing operations by over $100 million. I'm confident that our strategic direction and operational improvements will continue to drive greater value for both our clients and the company."

On January 24, 2014, the Company announced its intent to split-off its Availability Services business from the Software and Processing businesses. These businesses are fundamentally different, serving vastly different customer needs and having very different business profiles. The Company expects this transaction to close as early as March 31, 2014, subject to satisfaction of various customary conditions.

Fradin commented, "The strategic separation into two financially strong, independent companies will bring greater clarity and alignment to each company's mission."

Andrew Stern, chief executive officer of SunGard Availability Services, commented, "We've made progress at SunGard Availability Services to strengthen and broaden our portfolio of products beyond traditional disaster recovery. As an independent company with $1.4 billion in revenue, we will have the scale, services, and focus to help ensure the availability of critical systems and data for our customers. Our fourth quarter results reflect the significant investments we've made in our Enterprise Managed Services, Cloud, and Recovery-as-a-Service (RaaS) solutions. Our infrastructure and services address today's availability challenges, positioning us well for future growth."

Financial Systems ("FS") revenue was $717 million in the fourth quarter, up 1% year over year (flat year over year adjusting for currency). Growth in software license fees of 6%, to $97 million, and Professional Services of 7%, to $149 million, was partially offset by modest declines in other areas of the business. Adjusted EBITDA for the period was $253 million, down 2% from the prior year, and the adjusted EBITDA margin was 35.3%, down 0.8 points from last year. For the full year, FS revenue was $2.6 billion, down 2% year over year (also down 2% adjusting for currency). Adjusted EBITDA was $746 million, up 3% from the prior year, and the adjusted EBITDA margin was 29.2%, up 1.3 points from last year.

Notable deals in the quarter included the following:
• SunGard's Adaptiv Credit Risk was renewed by one of South Africa's foremost banks to support its counterparty credit risk solution.
• SunGard's Valdi Order Management System was selected by one of the largest U.S. banks to replace its internal trading infrastructure and help expand its current order and trade processing ability.
• SunGard's iWorks Compass was selected by a leading UK business process outsourcer to replace and consolidate a number of legacy pension administration systems.
• SunGard's Ambit Commercial Lending solution was chosen by a member bank of a U.S. government-sponsored lending network to help provide end-to-end automation of its commercial lending business.
• SunGard's AvantGard Quantum solution was selected by a leading international financial institution to help manage its global cash and risk with a consolidated view into global bank accounts, reconciliations and payments.
• SunGard's Global Plus was renewed by a global financial services firm based in Canada to support its wealth management practice to better serve the needs of high net worth individuals.
• SunGard's IntelliMatch was selected by a leading online broker to support its high-volume tax reconciliation process. The solution will be provided as a hosted managed service and integrated with the broker's existing implementation of SunGard's Wall Street Concepts.

At the end of January 2014, the Company completed the sale of two small businesses within the FS segment with combined annual revenues of $48 million. These businesses are included in our 2013 financial results as discontinued operations.

Availability Services ("AS") revenue was $344 million in the fourth quarter, down 2% year over year (down 3% adjusting for currency), reflecting a reduction in traditional recovery services business. During 2013, we continued to enhance our portfolio of services by investing in Recovery-as-a-Service and Cloud-based offerings. As a result of these investments, adjusted EBITDA was $112 million, down 14% from the prior year, and the adjusted EBITDA margin was 32.5%, down 4.2 points from last year. For the full year, AS revenue was $1.4 billion, down 2% year over year (also down 2% adjusting for currency), and adjusted EBITDA was $436 million, down 9% from prior year, and the adjusted EBITDA margin was 31.8%, down 2.4 points from last year.

Notable deals in the quarter included the following:
• SunGard Availability Services was selected by a large Canadian firm to deploy and maintain a fully managed, cloud-based SAP ERP environment. SunGard AS is certified by SAP on system administration and cloud hosting.
• SunGard Availability Services' Managed Services and Enterprise Cloud solutions were selected by a global mobile technology services provider to help respond to increased demand for management software services and help reduce its total cost of IT ownership and management.
• SunGard Availability Services' Recovery Services, Managed Services, Consulting Services and Channel Sales solutions were selected by a large privately-held food and beverage distributer to help support its product distribution and recovery time objectives.
• SunGard Availability Services was selected by a leading international investment bank seeking a dedicated crisis management center for its back-office Eastern European operations in Poland, allowing the customer to do workgroup recovery operations away from flood-risk areas.
• SunGard Availability Services' Recover2Cloud solution and Managed Services were selected by a Canadian technology services provider to support the expansion of its business capabilities and services.

Public Sector and Education revenue was $55 million in the fourth quarter, up 4% year over year, reflecting strong demand for newly introduced software solutions. Adjusted EBITDA was $18 million, down 8% year over year, and the adjusted EBITDA margin was 32.8%, down 4.1 points from last year, reflecting an increased mix of professional services revenue in the quarter. For the full year, revenue was $210 million, an increase of 3% year over year, and adjusted EBITDA was $66 million, flat from the prior year, and the adjusted EBITDA margin was 31.6%, down 0.9 points from last year.

Notable deals in the quarter included the following:
• SunGard Public Sector's ONESolution was selected by a city in Florida to support county-wide sharing of public safety information across records management and mobile computing solutions.
• SunGard Public Sector's ONESolution was selected by a city in Georgia to provide public safety solutions for computer-aided emergency dispatch, records management, mobile computing and jails management.
• SunGard K-12 Education's eFinancePLUS was selected by a large Illinois public school district to help manage its financial and human resources functions.

Financial Position
For the twelve months ended December 31, 2013, the continuing operations of the Company generated $735 million in cash flow from operations, up $101 million year over year, driven by improved capital structure and working capital disciplines. Capital expenditures were $258 million, flat from the prior year. The Company used its cash flow and available cash to repay $277 million of debt during 2013. In addition, in January 2014, the Company repaid $250 million of senior secured notes that matured on January 15, 2014 as well as $60 million of its accounts receivable facility borrowings.

In January, the Company also launched an amendment to its senior secured credit agreement to allow for the separation of AS and to provide certain other financial flexibility. Under the credit agreement amendment, Availability Services will be permitted to raise up to $1.5 billion of debt. Upon split-off, SunGard expects to reduce its existing debt by the amount of debt raised by Availability Services less transaction costs.

At December 31, 2013, total debt was $6.4 billion and cash was $706 million. The Company's leverage ratio, as defined in its senior secured credit agreement, was 4.56x, down from 4.75x at the end of 2012. The leverage ratio is calculated using adjusted EBITDA as defined in Note 2 attached to this release. Also see Note 3 attached to this release for supplemental information on debt and capital expenditures. 

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