SS&C Technologies Holdings Inc

(Unaudited)

Note 1—Basis of Presentation and Principles of Consolidation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These accounting principles were applied on a basis consistent with those of the audited Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2024 (the “2023 Form 10-K”). In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments (consisting of only normal recurring adjustments, except as noted elsewhere in the notes to the Condensed Consolidated Financial Statements) necessary for a fair statement of our financial position as of September 30, 2024, the results of our operations for the three and nine months ended September 30, 2024 and 2023, and our cash flows for the nine months ended September 30, 2024 and 2023. These statements do not include all of the information and footnotes required by GAAP for annual financial statements. The Condensed Consolidated Financial Statements contained herein should be read in conjunction with the audited Consolidated Financial Statements and footnotes as of and for the year ended December 31, 2023, which were included in the 2023 Form 10-K. The December 31, 2023 Consolidated Balance Sheet data were derived from audited financial statements but do not include all disclosures required by GAAP for annual financial statements. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the expected results for any subsequent quarters or the full year.

The accompanying unaudited condensed consolidated financial statements include the accounts of SS&C Technologies Holdings, Inc. and its subsidiaries, including a variable interest entity (“VIE”) for which we are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.

Recent Accounting Pronouncements Not Yet Effective

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The standard is applicable to all public entities, including public entities with a single reportable segment, and requires enhanced reportable segment disclosures. The disclosures include significant segment expenses regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss. The standard also requires disclosure of the title and position of the CODM as well as how the CODM uses the reported measures of a segment’s profit or loss to assess segment performance and decide how to allocate resources. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 31, 2024. Early adoption is permitted. We are currently evaluating the potential impact the standard will have on our disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740). The standard requires more enhanced disclosures specifically related to effective tax rate reconciliation and income taxes paid. The new requirements will be effective for fiscal years beginning after December 15, 2024, on a prospective basis. Early adoption and retrospective application are permitted. We are currently evaluating the potential impact the standard will have on our income tax disclosures.

Note 2—Property, Plant and Equipment, net

Property, plant and equipment and the related accumulated depreciation are as follows (in millions):

Depreciation expense for the three and nine months ended September 30, 2024 was $18.9 million and $55.2 million, respectively. Depreciation expense for the three and nine months ended September 30, 2023 was $18.0 million and $55.1 million, respectively. As of September 30, 2024 and December 31, 2023, assets held for sale were $5.9 million and $9.0 million, respectively, and are presented in prepaid expenses and other current assets in our condensed consolidated balance sheet. As of September 30, 2024, we are exploring a sale of certain real estate assets with a carrying value of approximately $49 million. As the potential sale is not currently considered probable within twelve months, these assets have not been classified as held for sale. An estimated loss of approximately$35 million would be recorded if the held for sale criteria were met. Unpaid property, plant and equipment additions of $5.9 million and $2.9 million are included in accounts payable and other accrued expenses as of September 30, 2024 and December 31, 2023, respectively, in our condensed consolidated balance sheet.

Note 3—Investments

Investments are as follows (in millions):

Realized and unrealized gains and losses for our equity securities are as follows (in millions):

Fair Value Measurement

Authoritative accounting guidance on fair value measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of September 30, 2024 and December 31, 2023, we held certain investment assets and certain liabilities that are required to be measured at fair value on a recurring basis. These investments include money market funds and marketable equity securities where fair value is determined using quoted prices in active markets. Accordingly, the fair value measurements of these investments have been classified as Level 1 in the tables below. Investments for which we elected net asset value as a practical expedient for fair value and investments measured using the fair value measurement alternative are excluded from the tables below. Fair value for deferred compensation liabilities that are credited with deemed gains or losses of the underlying hypothetical investments, primarily equity securities, have been classified as Level 1 in the tables below.

The following tables present assets and liabilities measured at fair value on a recurring basis (in millions):

(1)

As of September 30, 2024, included $189.1 million of cash and cash equivalents, $2.5 million of restricted cash and $1,394.0 million of funds receivable and funds held on behalf of clients on the Condensed Consolidated Balance Sheet. As of December 31, 2023, included $131.7 million of cash and cash equivalents, $1.8 million of restricted cash and $2,079.1 million of funds receivable and funds held on behalf of clients on the Condensed Consolidated Balance Sheet.

(2)

Included in Investments on the Condensed Consolidated Balance Sheet.

(3)

Included in Other long-term liabilities on the Condensed Consolidated Balance Sheet.

We have partnership interests in various private equity funds that are not included in the tables above. Our investments in private equity funds were $11.4 million and $11.5 million at September 30, 2024 and December 31, 2023, respectively, of which $10.1 million and $9.2 million, respectively, were measured using net asset value as a practical expedient for fair value and $1.3 million and $2.3 million, respectively, were accounted for under the equity method of accounting. The investments in private equity funds represent underlying investments in domestic and international markets across various industry sectors.

Generally, our investments in private equity funds are non-transferable or are subject to long holding periods, and withdrawals from the private equity firm partnerships are typically not permitted. The maximum risk of loss related to our private equity fund investments is limited to the carrying value of its investments in the entities.

Note 4—Unconsolidated Affiliates

Investments in unconsolidated affiliates are as follows (in millions):

Investments in unconsolidated affiliates are accounted for under the equity method of accounting. We record our proportionate share of the results of the unconsolidated affiliates and amortization expense related to basis differences in Equity in earnings of unconsolidated affiliates, net on the Condensed Consolidated Statements of Comprehensive Income.

Equity in earnings of unconsolidated affiliates, net are as follows (in millions):

During the nine months ended September 30, 2024, we received a distribution of $26.9 million from our unconsolidated affiliate, Orbit Private Investments L.P. which reduced our investment in the affiliate. We recorded the distribution as a $2.4 million operating cash inflow and a $24.5 million investing cash inflow in our condensed consolidated statements of cash flows due to the nature of the distribution.

Note 5—Acquisitions

Battea-Class Action Services, LLC

On September 27, 2024, we purchased all of the outstanding stock of Battea-Class Action Services, LLC (“Battea”) for approximately $671 million in cash, plus the costs of effecting the transaction. We financed the acquisition in part by entering into an Incremental Joinder to our existing amended and restated credit agreement, dated as of April 16, 2018 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Battea is a market-leading provider of securities class action claims and settlement recovery services.

The net assets and results of operations of Battea have been included in our Condensed Consolidated Financial Statements from September 27, 2024. The fair value of the acquired receivables represents the contractual value net of the allowance for potentially uncollectible accounts. The preliminary fair value of the intangible assets, consisting of customer relationships, completed technologies and trade names, was determined using the income approach. The intangible assets will be amortized each year based on the ratio that the projected cash flows for the intangible assets bear to the total of current and expected future cash flows for the intangible assets. The customer relationships, completed technologies and trade names are expected to be amortized over approximately thirteen, eleven andthirteen years, respectively, in each case the estimated life of the assets. The remainder of the purchase price was allocated to goodwill which is attributed to intangible assets that do not qualify for separate recognition. A portion of goodwill is tax deductible.

There are $4.1 million in revenues from Battea’s operations included in the Condensed Consolidated Statements of Comprehensive Income from the date of acquisition through September 30, 2024.

The following summarizes the preliminary allocation of the purchase price for the September 2024 acquisition of Battea (in millions). The fair values of the acquired assets and the related evaluation of taxes, are provisional pending receipt of the final valuation for those assets. The valuation of the acquired liabilities is also preliminary.

The following unaudited pro forma information is provided for illustrative purposes only and assumes that the acquisition of Battea occurred on January 1, 2023, after giving effect to certain adjustments, including amortization of intangibles, interest, transaction costs and tax effects. This unaudited pro forma information (in millions) should not be relied upon as being indicative of the historical results that would have been obtained if the acquisition had actually occurred on that date, nor of the results that may be obtained in the future.

Note 6—Goodwill

The change in carrying value of goodwill as of and for thenine months ended September 30, 2024 is as follows (in millions):

Note 7—Debt

At September 30, 2024 and December 31, 2023, debt consisted of the following (in millions):

The table below provides a summary of the key terms of our Senior Secured Credit Facilities and Senior Notes:

(1)

The Term A-9 Loans will mature on the earlier to occur of (1) September 27, 2029 or (2) 91 days prior to the maturity of (x) the 5.5% Senior Notes if more than $150.0 million aggregate principal amount remains outstanding on the 91 st day prior to such maturity or (y) the Revolving Credit Facility if more than $150.0 million aggregate principal amount of commitments remain outstanding on the 91 st day prior to such maturity, whichever of (x) or (y) comes first.

(2)

Scheduled quarterly payment required for the first eight fiscal quarters commencing with the fiscal quarter ending December 31, 2024. The scheduled quarterly payment will increase to 1.250% for each quarter thereafter until the maturity date of the Term A-9 Loans.

Senior Secured Credit Facilities and Senior Notes

On May 9, 2024, we entered into the Incremental Joinder & First Amendment to Credit Agreement (the “Amendment”) which amended our Credit Agreement. Pursuant to the Amendment, we borrowed $3,935.0 million in aggregate principal amount of incremental term B-8 loans (the “Term B-8 Loans”). The Term B-8 Loans bear interest at, at our option, the Base Rate (as defined in the Amendment), plus 1.00% per annum, or the Term SOFR Rate (as defined in the Amendment), plus 2.00% per annum.

Also on May 9, 2024, we issued $750.0 million aggregate principal amount of 6.5% Senior Notes due 2032 (the “6.5% Senior Notes”). The 6.5% Senior Notes are senior unsecured obligations and rank equal in right of payment with all of our existing and future senior indebtedness. The 6.5% Senior Notes are fully and unconditionally guaranteed, jointly and severally, by SS&C Holdings and all of its existing domestic restricted subsidiaries (other than SS&C Technologies) that guarantee our existing senior secured credit facilities and future domestic restricted subsidiaries that guarantee our existing senior secured credit facilities and certain other indebtedness. Interest on the 6.5% Senior Notes is payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2024.

The net proceeds of the Term B-8 Loans and from the sale of the 6.5% Senior Notes were used to repay all amounts owed under the term B-3 loans, the term B-4 loans, the term B-5 loans, the term B-6 loans and the term B-7 loans (together, the “Existing Term Loans”) under the Credit Agreement, as well as to pay related fees and expenses.

On September 27, 2024, in connection with our acquisition of Battea, we entered into an Incremental Joinder to our Credit Agreement (the “September 2024 Incremental Joinder”). Pursuant to the September 2024 Incremental Joinder, we borrowed $800.0 million in aggregate principal amount of incremental term A-9 loans (“Term A-9 Loans”), the net proceeds of which were used to finance in part the acquisition of Battea, the payment of fees and expenses related thereto and for working capital and general corporate purposes. The Term A-9 Loans bear interest at, at our option, the Base Rate (as defined in the Incremental Joinder), plus 0.50% per annum, or the Term SOFR Rate (as defined in the Incremental Joinder), plus 1.50% per annum, in each case with two leverage-based adjustments that increase the interest rate margin by 0.25% per annum if our consolidated net secured leverage ratio is greater than 3.50x and 4.25x, respectively, and one leverage-based adjustment that reduces the interest rate margin by 0.125% per annum if our consolidated net secured leverage ratio is less than or equal to 2.50x.

Debt issuance costs and loss on extinguishment of debt

We evaluated the borrowing of our Term B-8 Loans and issuance of 6.5% Senior Notes and the repayment of our Existing Term Loans in accordance with FASB Accounting Standards Codification 470-50, Debt Modifications and Extinguishments. We determined that the new debt borrowing and issuance and existing debt repayment were two independent transactions due to the fact that (i) no single investor held a significant concentration of both the old and the new debt, (ii) none of the old investors were included in negotiations with creditors about modifying the old debt, and (iii) all lenders were provided the same opportunity to participate in the new debt regardless of whether they were an existing lender. Consequently, the refinancing was accounted for as a debt extinguishment. As a result, the Existing Term Loans borrowing costs of $27.7 million were expensed and are included in Loss on extinguishment of debt in the Condensed Consolidated Statement of Comprehensive Income during the nine months ended September 30, 2024.

In connection with the May 2024 and September 2024 debt transactions, we capitalized an aggregate of $4.0 million and $38.6 million during the three and nine months ended September 30, 2024, respectively, in financing costs, which represent new third-party costs.

Fair Value of Debt

The carrying amounts and fair values of financial instruments are as follows (in millions):

The above fair values, which are Level 2 liabilities, were computed based on comparable quoted market prices. The fair values of cash, accounts receivable, net, short-term borrowings, and accounts payable approximate the carrying amounts due to the short-term maturities of these instruments.

Note 8—Stockholders’ Equity

Stock repurchase program

In July 2023, our Board of Directors authorized a stock repurchase program, which enabled us to repurchase up to $1 billion in the aggregate of our outstanding common stock on the open market or in privately negotiated transactions until the one-year anniversary of the Board’s authorization, unless earlier terminated by the Board. In July 2024, our Board of Directors authorized a stock repurchase program, which enables us to repurchase up to $1 billion in the aggregate of our outstanding common stock on the open market or in privately negotiated transactions until the one-year anniversary of the Board’s authorization, unless earlier terminated by the Board. During thethree and nine months ended September 30, 2024, we repurchased 1.2 million and 5.7 million shares, respectively, of common stock for approximately $88.3 million and $369.3 million, respectively, which includes a 1% excise tax on stock repurchases. During thethree and nine months ended September 30, 2023, we repurchased 1.7 million and 6.0 million shares, respectively, of common stock for approximately $97.8 million and $344.4 million, respectively, which includes a 1% excise tax on stock repurchases. We use the cost method to account for treasury stock purchases. Under the cost method, the price paid for the stock is charged to the treasury stock account.

Dividends

We paid quarterly cash dividends of $0.24 per share of common stock in each of March 2024 and June 2024 and $0.25 per share of common stock in September 2024 totaling $182.6 million in the aggregate. We paid quarterly cash dividends of $0.20 per share of common stock in each of March 2023 and June 2023 and $0.24 per share of common stock in September 2023 totaling $160.9 million in the aggregate.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss balances, net of tax, consist of the following (in millions):

Adjustments to accumulated other comprehensive loss are as follows (in millions):

Note 9—Variable Interest Entity

In July 2021, we entered into an agreement whereby we obtained an 80.2% interest in DomaniRx, LLC (“DomaniRx”), a variable interest entity under GAAP. We have the power to direct the majority of the activities of DomaniRx that most significantly impact its economic performance, the obligation to absorb losses and the right to receive benefits from DomaniRx. Accordingly, we determined that we are the primary beneficiary of DomaniRx and consolidate its results.

During the three months ended September 30, 2024, the Board of DomaniRx authorized a mandatory additional capital contribution in accordance with each member’s ownership interest in DomaniRx in the amount of $75.0 million. Our cash capital contribution during the three months ended September 30, 2024 was $60.2 million.

The carrying value of the assets and liabilities associated with DomaniRx included in our condensed consolidated balance sheet at September 30, 2024 and December 31, 2023, which are limited for use in its operations and do not have recourse against our general credit or our senior secured credit facilities, are as follows:

Note 10—Revenues

We generate revenues primarily through our software-enabled services. Our software-enabled services are generally provided under contracts with initial terms ofone tofive years that require monthly or quarterly payments and are subject to automatic annual renewal at the end of the initial term unless terminated by either party. We also generate revenues by licensing our software to clients through either perpetual or term licenses and by selling maintenance services. We classify license revenues related to sales-based royalty arrangements as term license revenue. Maintenance services are generally provided under annually renewable contracts. Our pricing typically scales as a function of our clients’ assets under management, the complexity of asset classes managed, the volume of transactions and the level of service the client requires. Revenues from professional services consist mostly of services provided on a time and materials basis.

Deferred revenues primarily represent unrecognized fees billed or collected for maintenance and professional services. Deferred revenues are recognized as (or when) we perform under the contract. Deferred revenues are recorded on a net basis with contract assets at the contract level. Accordingly, as of September 30, 2024 and December 31, 2023, approximately $62.6 million and $72.0 million, respectively, of deferred revenue is presented net within contract assets arising from the same contracts. The amount of revenues recognized in the period that was included in the opening deferred revenues balance was $73.4 millionfor the nine months ended September 30, 2024.

As of September 30, 2024, revenue ofapproximately $1,010.6 million is expected to be recognized from remaining performance obligations for license, maintenance and related revenues, of which $498.7 million is expected to be recognized over the next twelve months.

We record revenue net of any taxes assessed by governmental authorities.

Revenue Disaggregation

The following table disaggregates our revenues by geography (in millions):

The following table disaggregates our revenues by source (in millions):

Note 11—Stock-based Compensation

Stock options, SARs, PSUs and RSUs

The amount of stock-based compensation expense recognized in our Condensed Consolidated Statements of Comprehensive Income for thethree and nine months ended September 30, 2024 and 2023 was as follows (in millions):

The stock-based compensation expense related to performance awards is adjusted for changes in our assessment of the performance target level that is probable of being achieved and the number of performance-based equity awards expected to vest. In December 2021, we granted performance-based stock options (“PSOs”) for which the 3-year performance period ends in December 2024. If the threshold level of performance is not achieved for these PSOs, $48.6 million of previously recorded stock-based compensation expense will be reversed.

The following table summarizes stock option and stock appreciation rights (“SARs”) activity, as well as performance stock units (“PSUs”) and restricted stock units (“RSUs”) activity, for thenine months ended September 30, 2024 (shares in millions):

Note 12—Income Taxes

The effective tax rate was 26.7% and 24.6% for the three months ended September 30, 2024 and 2023, respectively, and 21.5% and 28.8% for the nine months ended September 30, 2024 and 2023, respectively. The change in the effective tax rate for the three months ended September 30, 2024 compared to the prior year wasprimarily related to a proportionate change in the composition of income before income taxes from foreign and domestic tax jurisdictions, partially offset by an increased recognition of windfall tax benefits from stock awards in the current year. The change in the effective tax rate for the nine months ended September 30, 2024 compared to the prior year was primarily related to releases of uncertain tax positions in the current year due to closed audits, an increased recognition of windfall tax benefits from stock awards in the current year and a proportionate change in the composition of income before income taxes from foreign and domestic tax jurisdictions. The effective tax rates for the three and nine months ended September 30, 2024 include tax benefits of $1.1 million and $41.9 million, respectively, related to releases of uncertain tax positions and $1.5 million and $7.2 million, respectively, of tax refunds, due to closed audits and statute of limitations expirations.

Note 13—Earnings per Share

The following table sets forth the computation of basic and diluted EPS (in millions, except per share amounts):

Weighted-average stock options, SARs, RSUs and PSUs representing 13.3 million and 14.5 million shares were outstanding for thethree and nine months ended September 30, 2024, respectively, but were not included in the computation of diluted EPS because the effect of including them would be anti-dilutive. Weighted-average stock options, SARs, RSUs and PSUs representing 23.2 million and 23.5 million shares were outstanding for thethree and nine months ended September 30, 2023, respectively, but were not included in the computation of diluted EPS because the effect of including them would be anti-dilutive.

Note 14—Commitments and Contingencies

From time to time, we are subject to legal proceedings and claims. In our opinion, we are not involved in any litigation or proceedings that would have a material adverse effect on us or our business.