SunGard Data Systems Inc. (“SunGard” or the “Company”), one of the world’s leading financial software companies, today reported results for the first quarter ended March 31, 2015.
For the quarter, revenue was $671 million, up 3% year over year (up 6% adjusting for currency). Operating income was $115 million and the operating income margin was 17.1% in the quarter, compared to an operating loss of $289 million in the first quarter of 2014. The first quarter 2014 included a $339 million non-cash trade name impairment charge related to the split-off of the Availability Services business. Excluding this charge, operating income increased 129% year over year and the operating income margin increased 9.4 points year over year, driven by the increase in revenue, and an 8% decrease in total costs and expenses. Adjusted EBITDA was $175 million, up 21% year over year, and the adjusted EBITDA margin was 26.1%, up 3.9 points year over year. Adjusted EBITDA is defined in Note 1 attached to this release.
Russ Fradin, president and chief executive officer, commented, “We were pleased with our performance in the first quarter where we saw 6% revenue growth at constant currency. We’ve now grown revenue in three straight quarters, and the growth rate has accelerated. This reflects the investments we’ve made in new products, global sales and delivery capacity. We believe we are well positioned to continue this growth by bringing new technology to market and adding services that complement our software, including SaaS, Cloud and our new utility offerings. Recently, we announced two new utility offerings that leverage our industry standard software platforms and address our clients’ processing needs. These include a derivatives processing utility, with Barclays as its first customer, and a U.S. mutual fund transfer agency utility. Overall, I’m pleased with the strong start to the year and look to continue our momentum into the rest of 2015.”
SunGard reports its business in two key segments; Financial Systems and Public Sector & Education. Our segment revenue is classified into three categories: (i) Software revenue; (ii) Software-as-a-Service (“SaaS”) and Cloud revenue; and (iii) Professional and Business Processing Services (collectively referred to as “Services”) revenue. Notes 1 and 2 of this release provide current and historical information regarding this revenue classification. A discussion of the financial performance of each of these segments follows below.
Financial Systems (“FS”) segment revenue was $617 million in the quarter, up 3% year over year (up 6% year over year adjusting for currency), driven by growth in SaaS and Cloud revenue, and Services revenue. Software revenue was up 1% (up 5% adjusting for currency) driven by a combination of new sales and renewals of software license fees. SaaS and Cloud revenue grew 4% (up 5% adjusting for currency) driven by increased volumes from our existing customers and increased adoption of our offerings, all supported by our global delivery centers. Services revenue grew 5% (up 10% adjusting for currency) driven by broad-based growth in Professional Services tied to our new technology offerings. Adjusted EBITDA for the period was $174 million, up 25% from the prior year, and the adjusted EBITDA margin was 28.1%, up 4.9 points from last year.
In March, SunGard announced the creation of our futures and derivatives industry utility. This utility will help transform the cleared derivatives functions across the entire industry, resulting in a more sustainable operating model and improved cost structure for our clients. Barclays will be the utility’s first customer. Also, we added a full-service U.S. mutual fund transfer agency utility. This utility provides asset managers, third party administrators and custodians an independent service for mutual fund transfer activity. These new utilities, based on SunGard’s leading technologies, come as a response to the changing dynamics of the financial services industry and offer a full range of capabilities for our clients.
SunGard’s FS solutions address a broad range of customer’s needs across the financial services industry. During the quarter, notable deals included the following:
• Adaptiv Risk & Performance was chosen by a leading US bank to help manage market and credit risk.
• Valdi Order Validator was selected by a large US broker-dealer to mitigate its regulatory risk in pre-trade compliance.
• Quantum was selected by one of the world’s largest auto loan financing groups to provide a global treasury solution for improved access to cash and risk.
• Global Plus was selected by a global provider of financial and human resource services to help manage its trust operations in a Business Processing Services environment.
• Omni and IntelliMatch solutions were selected by a leading retirement savings and investment provider in the Middle East to help enhance its pension administration operations.
• Front Arena Treasury, APT and Ambit Capital Manager were selected by one of the largest Mexican pension funds to help comply with regulatory requirements for trading, portfolio management, market and credit risk, and reporting.
• GetPaid, our comprehensive order-to-cash solution, was selected by a global leader in safety and security.
Public Sector & Education (“PS&E”) segment revenue was $54 million in the quarter, up 1% year over year, driven by 4% growth in SaaS and Cloud revenue and 4% growth in Services revenue partially offset by a 1% decline in Software revenue. Adjusted EBITDA was $16 million, down 1% year over year, and the adjusted EBITDA margin was 29.5%, down 0.6 points from last year.
Notable deals during the quarter included the following:
• ONESolution was selected by a county in Florida to support and enhance the operations of its finance function.
• ONESolution was selected by a city in Georgia to provide its latest public safety solutions for computer-aided emergency dispatch, records management and mobile computing.
• eSchoolPLUS Professional Services was selected by a state department of education for the implementation of its student information management system at more than 250 school districts.
• eSchoolPLUS, IEPPLUS, PerformanceTRACKER and CurriculumCONNECTOR were selected by a western Pennsylvania school district to help manage all of its student data, special education information, assessment and curriculum needs.
For the quarter ended March 31, 2015, the continuing operations of the Company generated $154 million in cash flow from operations, up $68 million year over year. Capital expenditures were $28 million, flat year over year. During the first quarter, the Company also spent $4 million on an acquisition.
At March 31, 2015, total debt was $4.7 billion and cash was $555 million. The Company’s leverage ratio, as defined in its senior secured credit agreement, was 5.04x, down from 5.41x at December 31, 2014. The leverage ratio is calculated using adjusted EBITDA as defined in Note 3 of this release. See Note 4 of this release for supplemental information on debt.