SunGard Data Systems Inc. (“SunGard” or the “Company”), one of the world’s leading financial software companies, today reported results for the second quarter ended June 30, 2015.
For the quarter, revenue was $687 million, up 2% year over year (up 6% adjusting for currency). Operating income was $108 million and the operating income margin was 15.9% in the quarter. Operating income increased 43% year over year and the operating income margin increased 4.5 points year over year, driven by the increase in revenue, and a 3% decrease in total costs and expenses. Adjusted EBITDA was $178 million, up 12% year over year, and the adjusted EBITDA margin was 26.0%, up 2.3 points year over year. Adjusted EBITDA is defined in Note 1 attached to this release.
For the first six months, revenue was $1.4 billion, up 2% year over year (up 6% adjusting for currency). Operating income was $223 million and the operating income margin was 16.5%, compared to an operating loss of $212 million for the first six months of 2014. The first quarter of 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 77% year over year and the operating income margin improved 6.9 points year over year, driven by the increase in revenue and 5% decrease in total costs and expenses. Adjusted EBITDA was $353 million, up 16% year over year, and the adjusted EBITDA margin was 26.0%, up 3 points year over year.
Russ Fradin, president and chief executive officer, commented, “Our second quarter performance reflects the continued transformation of SunGard and demonstrates the progress we’re making in improving the business. Clients and prospects are embracing the new products and services that we’ve brought to market, clearly demonstrating that we are on the right track and validating the development, sales and delivery investments that we’ve been making. We saw revenue growth of 6% at constant currency in the second quarter and improved our margins and cash flow as well. I’m pleased with our execution, knowing that we are driving value for both our clients and the company.”
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) Services, which includes professional and business processing services revenue.
Financial Systems (“FS”) segment revenue was $631 million in the quarter, up 2% year over year (up 6% year over year adjusting for currency), driven by growth in all revenue categories. Software revenue was up 2% (up 8% adjusting for currency) driven by a combination of new sales and renewals of software license fees. SaaS and cloud revenue grew 2% (up 4% 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 3% (up 8% adjusting for currency) driven by growth in business processing revenue from the new utilities and Professional Services. Adjusted EBITDA for the period was $173 million, up 13% from the prior year, and the adjusted EBITDA margin was 27.5%, up 2.6 points from last year.
Year to date, FS revenue was $1.2 billion, up 3% year over year (up 6% adjusting for currency). For the same period, adjusted EBITDA was $347 million, an increase of 19%, compared to the prior year, and the adjusted EBITDA margin was 27.8%, up 3.8 points from last year.
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:
• GMI and Stream were selected by one of the world’s top 20 global banks for a fully hosted derivatives clearing solution.
• Front Arena was selected by a global provider of agricultural, financial and industrial products to provide an integrated front to back office solution for portfolio risk management.
• XSP was selected by a Dutch pension investment management firm to help improve corporate actions operations, processing and risk management.
• AvantGard GETPAID was chosen by a Danish shipping company to help manage its credit risk and collections.
• Adaptiv 360 was selected by one of Japan’s largest asset managers to help manage the firm’s operational risks and support its expansion.
• Prophet Enterprise was chosen by a leading UK financial services company to help improve its insurance actuarial modeling and risk management.
Public Sector & Education (“PS&E”) segment revenue was $56 million in the quarter, up 2% year over year, driven by a 5% growth in Services revenue and a 3% growth in Software revenue. Adjusted EBITDA was $17 million, down 1% year over year, and the adjusted EBITDA margin was 30.1%, down 1.2 points from last year.
Year to date, PS&E revenue was $110 million, up 2% year over year. For the same period, adjusted EBITDA was $33 million, flat compared to the prior year, and the adjusted EBITDA margin was 29.8%, down 0.9 points from last year.
Notable deals during the quarter included the following:
• Our public safety solution was selected by a county in Georgia for computer-aided emergency dispatch, records management, mobile computing and jails management.
• TRAKiT, from our recent CRW Systems acquisition, was selected by a city in Virginia to help manage its land permitting, licensing, and code compliance and planning.
• eSchoolPLUS was chosen by one of the largest school districts in Oklahoma to help manage its student information.
• eFinancePLUS was selected by a Pennsylvania school district to help manage critical financial, procurement, payroll and personnel functions.
For the six months ended June 30, 2015, the continuing operations of the Company generated $182 million in cash flow from operations, up $96 million year over year. Capital expenditures were $55 million, down $3 million year over year. During the first half, the Company also spent $25 million on acquisitions.
At June 30, 2015, total debt was $4.7 billion and cash was $538 million. The Company’s leverage ratio, as defined in its senior secured credit agreement, was 4.95x, down from 5.41x at December 31, 2014. The leverage ratio is calculated using adjusted EBITDA as defined in Note 2 of this release. See Note 3 of this release for supplemental information on debt.