SunGard first quarter revenue slides

Source: SunGard

SunGard, one of the world's leading software and technology services companies, today reported results for the first quarter ended March 31, 2012. For the first quarter, revenue was $1.04 billion, down 4% year over year.

Excluding one of our capital markets businesses, a broker/dealer, revenue decreased 2%. Currency had no material impact on reported revenue in the quarter compared to the prior year. Operating income was $51 million in the quarter compared to operating income of $49 million in the first quarter of 2011. Adjusted EBITDA was $242 million and adjusted operating income was $157 million. Adjusted EBITDA and adjusted operating income are defined in Notes 1 and 2 in the Notes attached to this release.

During the quarter, the Company generated $75 million in cash flow from operations, up $22 million year over year, and reduced debt by $1.22 billion, ending the quarter with $1.38 billion of cash. On April 2, 2012, the Company used available cash to further reduce debt by an additional $500 million by redeeming its 10.625% senior notes due 2015.

Russ Fradin, president and chief executive officer, commented, "We've continued to make progress on a number of fronts, including closing the sale of our Higher Education business, reducing debt, improving cash flow and better managing our operating costs. Software license sales could have been better, even though last year's first quarter was exceptionally strong for license sales. I'm confident we're focused on the right issues and initiatives to improve our performance over the long term."

Financial Systems revenue was $632 million in the first quarter, down 6% year over year (down 5% adjusting for currency). Excluding the broker/dealer business, revenue decreased 3% year over year (down 2% adjusting for currency). Software license fees were $21 million, a decrease of $29 million compared to the first quarter of 2011, which was an exceptionally strong license quarter including one deal worth $14 million.

Notable deals in the quarter included the following:
• A US regional trust organization selected SunGard's AddVantage to provide a unified wealth management solution for serving its Registered Investment Advisor, Trust and Investment clients from a single common platform.
• An Indianapolis-based provider of life insurance, annuities and retirement planning selected SunGard's Omni to help process payroll and improve census data management.
• The commercial real estate group of a leading global capital markets investment bank selected SunGard's Front Arena, on a hosted basis, to help capture commercial loans and address the processing of OTC derivatives hedges.
• A regional bank in Southeast Asia selected SunGard's Adaptiv, as a managed service, for its central credit risk and exposure reporting platform.

Availability Services revenue was $356 million in the first quarter, down 2% year over year (down 2% as well adjusting for currency). The decline in revenue was primarily driven by North American recovery services.

Notable deals in the quarter included the following:
• One of Canada's largest retailers selected SunGard to design a customized infrastructure solution and provide enterprise cloud services.
• A global luxury retailer selected SunGard to provide disaster recovery planning and managed recovery services.
• A leading provider of staffing services selected SunGard for advanced recovery services.

All Other revenue, comprised of our Public Sector and K-12 businesses, was $51 million in the first quarter, up 1% year over year. Software license fees were $2 million in the quarter, unchanged compared to the first quarter of 2011.

Notable deals in the quarter included the following:
• A county in Texas selected SunGard Public Sector to provide solutions for computer-aided dispatch, records management, jails management and mobile computing.
• One of the largest school districts in Kansas selected SunGard's K-12 BusinessPLUS as its new ERP system to help manage financial and payroll functions.

Financial Position

For the first quarter of 2012, the Company generated $75 million in cash flow from operations, invested approximately $60 million in capital expenditures and spent $6 million on one acquisition net of acquired cash. In January of 2012, the Company completed the sale of its Higher Education business for a gross purchase price of $1.775 billion and used the net proceeds to repay $1.22 billion of debt. Over the remainder of the year, the Company expects to pay approximately $450 million in taxes related to this sale. At March 31, 2012, the Company's leverage ratio as defined in its senior secured credit agreement was 4.2x and net debt (total debt of $6.61 billion less cash of $1.38 billion) was $5.23 billion.

During the quarter, the Company refinanced its senior secured credit agreement to renew the Company's $880 million revolving credit commitments through November 2016, extend the maturity date of $908 million of its term loans from 2014 to 2017, and obtain amendments to permit the potential separation of the Availability Services business and modify certain other provisions of the credit agreement.

On April 2, 2012, the Company paid $527 million plus accrued interest using available cash to redeem its $500 million 10.625% senior notes due 2015. 

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