SOURCE: Advent Software

Advent Software

February 03, 2014 16:15 ET

Advent Software Reports Fourth Quarter and Full Year 2013 Results

Company Achieves Record Quarterly Revenue of $97.6 Million, up 6% and Record Operating Cash Flow of $36.7 Million, up 12%

SAN FRANCISCO, CA--(Marketwired - Feb 3, 2014) - Advent Software, Inc. (NASDAQ: ADVS), a leading provider of software and services to the global investment management industry, announced today its financial results for the fourth quarter and year ended December 31, 2013.

"The fourth quarter capped off a year of record revenue and operating cash flow, while we also expanded non-GAAP operating margin to 30% for the year," said Pete Hess, Chief Executive Officer of Advent. "Advent's success, including our strong renewal rates, demonstrates our ability to help customers respond to the evolving trends in investment management. We are excited about our solutions and ability to expand the value we provide to clients and shareholders."

FOURTH QUARTER AND FULL YEAR 2013 RESULTS

GAAP Results for Continuing Operations
The Company reported quarterly revenue of $97.6 million for the fourth quarter of 2013, compared to $92.0 million in the fourth quarter of 2012, a 6% increase. Total annual revenue for the year ended December 31, 2013 was $383.0 million, compared to $358.8 million recorded in 2012, a 7% increase.

Operating income for the fourth quarter of 2013 was $18.4 million, or 18.9% of revenue, compared to $12.7 million or 13.8% of revenue for the fourth quarter of 2012. Operating income for the year ended December 31, 2013 was $46.1 million, or 12.0% of revenue, compared to $49.2 million, or 13.7% of revenue, for 2012. Our operating income for fiscal year 2013 included recapitalization charges of $6.0 million, and stock compensation expense of $48.2 million, of which $26.7 million was due to the modification of equity awards.

Net income for the fourth quarter of 2013 was $11.0 million compared to $8.0 million in the fourth quarter of 2012. Net income for the year ended December 31, 2013 was $28.8 million compared to $30.2 million for 2012, a 5% decrease. On a fully diluted basis, earnings per share in the fourth quarter of 2013 were $0.20, compared to $0.16 in the fourth quarter of 2012. On a fully diluted basis, earnings per share for the year ended December 31, 2013 was $0.54, compared to $0.58 for 2012.

Operating cash flow in the fourth quarter of 2013 was $36.7 million, compared with $32.8 million in the fourth quarter of 2012. Operating cash flow for the year ended December 31, 2013 totaled $98.6 million, compared with $86.6 million in 2012, a 14% increase.

Cash, cash equivalents, and marketable securities totaled $34 million as of December 31, 2013, compared to $231 million as of December 31, 2012. Total outstanding debt as of December 31, 2013 was $305 million compared to $95 million as of December 31, 2012. In 2013, the Company paid a one-time special dividend totaling $470 million that was partially financed by long-term debt proceeds.

Deferred revenue as of December 31, 2013 was $194 million, compared to $183 million as of December 31, 2012.

Non-GAAP Results for Continuing Operations
Non-GAAP operating income for the fourth quarter of 2013 was $28.9 million, or 29.6% of revenue. This represents a 17% increase compared to $24.6 million, or 26.7% of revenue, in the fourth quarter of 2012. Non-GAAP operating income for the year ended December 31, 2013 was $115.3 million, or 30.1% of revenue. This represents a 36% increase compared to $85.0 million of non-GAAP operating income, or 23.7% of revenue, for 2012.

On a fully diluted basis, non-GAAP earnings per share were $0.32 in the fourth quarter of 2013 and they represent a 5% increase from non-GAAP diluted net income per share of $0.30 in the fourth quarter of 2012. On a fully diluted basis, non-GAAP net income per share was $1.32 for the year ended December 31, 2013, a 28% increase compared to $1.03 per share for 2012.

The reconciliation between GAAP and non-GAAP financial measures is provided at the end of this press release.

FOURTH QUARTER AND FULL YEAR 2013 HIGHLIGHTS

  • Strong Renewal Rate: Advent delivered a strong initially reported renewal rate for Q3 2013 of 97%, compared to 94% the same period last year. This is the highest initial renewal rate reported in five years.
  • International Success: Advent saw enhanced success in the international market, signing SMT Fund Services, part of Sumitomo Mitsui Bank Group, as well as Nordea Bank AB in the fourth quarter.
  • Solid Growth in Black Diamond: Total assets on the platform increased 64% for the year to over $220 billion and the number of clients increased 29%, including many large advisory firms, such as McGladrey Wealth Management and Essex Financial. Black Diamond also achieved its highest renewal rate and client satisfaction scores in its history.
  • New Releases Across the Product Portfolio: Advent announced global availability of new releases to several key products that includes compelling new functionality for asset and wealth management firms, alternative managers, family offices, and administrators. The updated products include Geneva®, Advent Portfolio Exchange® (APX), Moxy®, Advent Rules Manager®, and Advent Revenue Center®.

FINANCIAL GUIDANCE

Advent updates the following financial guidance for the first quarter and fiscal year 2014:

         
Guidance   Q1 2014   FY 2014
 Total Revenue ($M)   $95 -$97   $395-$403
 GAAP Operating Margin   n/a   21.0% - 21.5%
 Stock Compensation Expense (% of revenue)   n/a   8%
 Amortization of Intangibles (% of revenue)   n/a   2%
 Non-GAAP Operating Margin   n/a   31.0% - 31.5%
 Operating Cash Flow ($M)   n/a   $105 - $115
 Capital Expenditures ($M)   n/a   $8 - $11
 Effective Tax Rate (GAAP)   n/a   35% - 40%
 Effective Tax Rate (non-GAAP)   n/a   35%
         

INVESTOR CALL
Advent Software, Inc. will host its Q4 2013 quarterly earnings conference call at 5:00 p.m. Eastern time today. The Q4 2013 earnings presentation and trended disclosures file, which include highlights and detailed financial information, are currently available at http://investor.advent.com. To participate via phone, please dial 866-578-5771 and request conference ID #16791928. Telephone replay will be available through midnight February 10, 2014. The replay number for domestic callers is 888-286-8010, and for international callers is 617-801-6888, with the conference ID of #88334133. The conference call will also be webcast live and then archived on http://investor.advent.com.

ABOUT ADVENT
Over the last 30 years of industry change, our core mission to help our clients focus on their unique strategies and deliver exceptional investor service has never wavered. With unparalleled precision and ahead of the curve solutions, we've helped over 4,300 firms in nearly 60 countries -- from established global institutions to small start-up practices -- to grow their business and thrive. Advent technology helps firms minimize risk, work together seamlessly, and discover new opportunities in a constantly evolving world. Together with our clients, we are shaping the future of investment management. For more information on Advent products visit http://www.advent.com.

ABOUT NON-GAAP FINANCIAL INFORMATION
This press release includes non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP), please see the accompanying tables entitled "Reconciliation of Selected Continuing Operations' GAAP Measures to Non-GAAP Measures."

FORWARD-LOOKING STATEMENTS
The financial projections under Financial Guidance and any other forward-looking statements included in this presentation reflect management's best judgment based on factors currently known and involve risks and uncertainties; our actual results may differ materially from those discussed here. These risks and uncertainties include: potential fluctuations in new contract bookings, renewal rates, operating results and future growth rates; continued market acceptance of our products; the successful development, release and market acceptance of new products and product enhancements; uncertainties and fluctuations in the financial markets; the Company's ability to satisfy contractual performance requirements and other risks detailed from time to time in our SEC reports including, but not limited to, our quarterly reports on Form 10-Q and our 2012 Annual Report on Form 10-K. The Company disclaims any intention or obligation to publicly update or revise any forward-looking statements including any guidance, whether as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Advent, the Advent logo, and Advent Software, are registered trademarks of Advent Software, Inc. Any other company names or marks mentioned herein are those of their respective owners.

   
   
ADVENT SOFTWARE, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(In thousands)  
(GAAP, Unaudited)  
    December 31     December 31  
    2013     2012  
ASSETS                
Current assets:                
  Cash and cash equivalents   $ 33,828     $ 58,217  
  Short-term marketable securities     -       111,192  
  Accounts receivable, net     58,717       61,069  
  Deferred taxes, current     24,898       18,934  
  Prepaid expenses and other     30,114       25,868  
  Current assets of discontinued operation     100       88  
    Total current assets     147,657       275,368  
Property and equipment, net     31,698       37,269  
Goodwill     207,818       206,932  
Other intangibles, net     27,392       38,205  
Long-term marketable securities     -       61,552  
Deferred taxes, long-term     23,020       24,524  
Other assets     17,372       12,994  
Noncurrent assets of discontinued operation     1,337       1,609  
                 
    Total assets   $ 456,294     $ 658,453  
                 
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY                
Current liabilities:                
  Accounts payable   $ 5,348     $ 5,190  
  Accrued liabilities     41,625       37,096  
  Deferred revenues     186,107       174,388  
  Income taxes payable     -       5,593  
  Current portion of long-term debt     20,000       10,000  
  Current liabilities of discontinued operation     600       262  
    Total current liabilities     253,680       232,529  
Deferred revenues, long-term     7,809       8,787  
Long-term income taxes payable     7,667       5,335  
Long-term debt     285,000       85,000  
Other long-term liabilities     11,171       13,139  
Noncurrent liabilities of discontinued operation     2,782       3,804  
                 
    Total liabilities     568,109       348,594  
                 
                 
Stockholders' (deficit) equity:                
  Common stock     513       505  
  Additional paid-in capital     42,533       453,585  
  Accumulated deficit     (165,870 )     (154,261 )
  Accumulated other comprehensive income     11,009       10,030  
    Total stockholders' (deficit) equity     (111,815 )     309,859  
                 
    Total liabilities and stockholders' (deficit) equity   $ 456,294     $ 658,453  
                 
                 
   
   
ADVENT SOFTWARE, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(In thousands, except per share data)  
(GAAP, Unaudited)  
                         
                         
    Three Months Ended December 31     Twelve Months Ended December 31  
    2013     2012     2013     2012  
Net revenues:                                
Recurring revenues   $ 89,019     $ 83,875     $ 349,881     $ 324,627  
Non-recurring revenues     8,560       8,142       33,078       34,192  
                                 
  Total net revenues     97,579       92,017       382,959       358,819  
                                 
Cost of revenues (1):                                
Recurring revenues     18,417       16,991       70,590       68,953  
Non-recurring revenues     8,956       9,890       40,044       43,505  
Amortization of developed technology     1,682       2,558       9,087       10,258  
                                 
  Total cost of revenues     29,055       29,439       119,721       122,716  
                                 
  Gross margin     68,524       62,578       263,238       236,103  
                                 
Operating expenses (1):                                
Sales and marketing     20,098       18,566       79,065       74,688  
Product development     17,464       16,637       69,718       67,014  
General and administrative     10,842       10,144       54,737       37,763  
Amortization of other intangibles     912       958       3,775       3,825  
Recapitalization costs     -       -       6,041       -  
Restructuring charges     811       3,581       3,770       3,634  
                                 
  Total operating expenses     50,127       49,886       217,106       186,924  
                                 
Income from continuing operations     18,397       12,692       46,132       49,179  
Interest and other income (expense), net     (2,603 )     (515 )     (7,213 )     (1,620 )
                                 
Income from continuing operations before income taxes     15,794       12,177       38,919       47,559  
Provision for income taxes     4,777       4,147       10,167       17,328  
                                 
  Net income from continuing operations   $ 11,017     $ 8,030     $ 28,752     $ 30,231  
                                 
Discontinued operation:                                
  Net (loss) income from discontinued operation (net of applicable taxes of $(11), $(8), $34 and $126, respectively)     (18 )     (49 )     50       184  
                                 
Net income   $ 10,999     $ 7,981     $ 28,802     $ 30,415  
                                 
Basic net income (loss) per share (2):                                
  Continuing operations   $ 0.22     $ 0.16     $ 0.56     $ 0.60  
  Discontinued operation     (0.00 )     (0.00 )     0.00       0.00  
    Total operations   $ 0.22     $ 0.16     $ 0.56     $ 0.60  
                                 
Diluted net income (loss) per share (2):                                
  Continuing operations   $ 0.20     $ 0.16     $ 0.54     $ 0.58  
  Discontinued operation     (0.00 )     (0.00 )     0.00       0.00  
    Total operations   $ 0.20     $ 0.15     $ 0.54     $ 0.58  
                                 
Weighted average shares used to compute net income (loss) per share:                                
  Basic     51,105       50,276       51,207       50,614  
  Diluted     53,844       51,802       53,378       52,425  
                                 
(1) Includes stock-based employee compensation expense as follows:                                
                                 
  Cost of recurring revenues   $ 844     $ 595     $ 3,491     $ 2,405  
  Cost of non-recurring revenues     563       310       3,253       1,236  
    Total cost of revenues     1,407       905       6,744       3,641  
                                 
  Sales and marketing     2,345       1,902       13,265       7,165  
  Product development     1,922       1,483       8,863       5,821  
  General and administrative     1,908       1,167       19,307       4,174  
    Total operating expenses     6,175       4,552       41,435       17,160  
                                 
  Total stock-based employee compensation expense   $ 7,582     $ 5,457     $ 48,179     $ 20,801  
                                 
(2) Net income (loss) per share is based on actual calculated values and totals may not sum due to rounding.  
                                 
                                 
   
   
ADVENT SOFTWARE, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands)  
(Unaudited)  
             
    Twelve Months Ended December 31  
    2013     2012  
Cash flows from operating activities:                
  Net income   $ 28,802     $ 30,415  
  Adjustment to net income for discontinued operation net income     (50 )     (184 )
  Net income from continuing operations     28,752       30,231  
                 
  Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:                
    Stock-based compensation     48,179       20,801  
    Excess tax benefit from stock-based compensation     (7,477 )     (7,785 )
    Depreciation and amortization     24,393       25,879  
    Amortization of debt issuance costs     947       381  
    Provision for doubtful accounts     278       403  
    (Reduction of) provision for sales reserves     (306 )     1,154  
    Deferred income taxes     4,589       5,230  
    Other     29       (252 )
      Effect of statement of operations adjustments     70,632       45,811  
  Changes in operating assets and liabilities:                
    Accounts receivable     2,074       575  
    Prepaid and other assets     (1,762 )     822  
    Accounts payable     27       (5,368 )
    Accrued liabilities     (6,089 )     (2,055 )
    Deferred revenues     11,047       7,151  
    Income taxes payable     (6,117 )     9,453  
      Effect of changes in operating assets and liabilities     (820 )     10,578  
                 
Net cash provided by operating activities from continuing operations     98,564       86,620  
                 
Cash flows from investing activities:                
  Cash used in acquisition     -       (700 )
  Purchases of property and equipment     (5,616 )     (6,369 )
  Capitalized software development costs     (1,995 )     (2,137 )
  Purchases of marketable securities     (57,863 )     (220,994 )
  Sales and maturities of marketable securities     228,619       118,588  
  Change in restricted cash     -       95  
                 
Net cash provided by (used in) investing activities from continuing operations     163,145       (111,517 )
                 
Cash flows from financing activities:                
  Proceeds from common stock issued from exercises of stock options     19,495       5,173  
  Proceeds from common stock issued under the employee stock purchase plan     6,293       6,661  
  Excess tax benefits from stock-based compensation     7,477       7,785  
  Withholding taxes related to equity award net share settlement     (11,833 )     (5,496 )
  Proceeds from debt     375,000       50,000  
  Repayment of debt     (165,000 )     (5,000 )
  Debt issuance costs     (5,725 )     -  
  Repurchase of common stock     (41,256 )     (41,275 )
  Payment of cash dividend     (470,133 )     -  
                 
Net cash (used in) provided by financing activities from continuing operations     (285,682 )     17,848  
                 
Net cash transferred to discontinued operation     (375 )     (561 )
                 
Effect of exchange rate changes on cash and cash equivalents     (41 )     302  
                 
Net change in cash and cash equivalents from continuing operations     (24,389 )     (7,308 )
Cash and cash equivalents of continuing operations at beginning of period     58,217       65,525  
                 
Cash and cash equivalents of continuing operations at end of period   $ 33,828     $ 58,217  
                 
    Twelve Months Ended December 31  
    2013     2012  
Supplemental disclosure of cash flow information:                
Cash flows from discontinued operation:                
  Net cash used in operating activities   $ (375 )   $ (561 )
  Net cash transferred from continuing operations     375       561  
  Net change in cash and cash equivalents from discontinued operation     -       -  
  Cash and cash equivalents of discontinued operation at beginning of period     -       -  
  Cash and cash equivalents of discontinued operation at end of period   $ -     $ -  
                 
The cash flows from the discontinued operation, as presented in the condensed consolidated statement of cash flows, relate to the operations of MicroEdge, Inc.  
   
   
   
   
ADVENT SOFTWARE, INC.  
RECONCILIATION OF SELECTED CONTINUING OPERATIONS' GAAP MEASURES TO NON-GAAP MEASURES  
(In thousands, except per share data)  
(Unaudited)  
                         
To supplement our condensed consolidated financial statements presented in accordance with generally accepted accounting principles in the United States of America (or GAAP), Advent uses non-GAAP measures of continuing operations' gross margin, operating income, net income and net income per share, which are adjusted to exclude certain costs, expenses and income we believe appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of Advent's underlying operational results and trends and our marketplace performance. In addition, these non-GAAP results are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with GAAP.  
                         
    Three Months Ended December 31  
    2013     2012  
    Amount     % of Net Revenues     Amount     % of Net Revenues  
                             
GAAP gross margin   $ 68,524     70.2 %   $ 62,578     68.0 %
  Amortization of acquired intangibles     1,177             1,908        
  Stock-based compensation     1,407             905        
Non-GAAP gross margin   $ 71,108     72.9 %   $ 65,391     71.1 %
                             
GAAP operating income   $ 18,397     18.9 %   $ 12,692     13.8 %
  Amortization of acquired intangibles     2,089             2,866        
  Stock-based compensation     7,582             5,457        
  Restructuring charges     811             3,581        
Non-GAAP operating income   $ 28,879     29.6 %   $ 24,596     26.7 %
                             
GAAP net income   $ 11,017           $ 8,030        
  Amortization of acquired intangibles     2,089             2,866        
  Stock-based compensation     7,582             5,457        
  Restructuring charges     811             3,581        
  Income tax adjustment (1)     (4,420 )           (4,281 )      
Non-GAAP net income   $ 17,079           $ 15,653        
                             
GAAP net income   $ 11,017           $ 8,030        
  Net interest     2,510             408        
  Provision for income taxes     4,777             4,147        
  Depreciation expense     2,895             2,991        
  Amortization expense     2,594             3,516        
  Stock-based compensation     7,582             5,457        
Adjusted EBITDA   $ 31,375           $ 24,549        
                             
Diluted net income per share                            
  GAAP   $ 0.20           $ 0.16        
  Non-GAAP   $ 0.32           $ 0.30        
                             
Shares used to compute diluted net income per share     53,844             51,802        
                             
(1) The estimated non-GAAP effective tax rate was 35% for the three months ended December 31, 2013 and 2012, respectively, and has been used to adjust the provision for income taxes for non-GAAP net income and non-GAAP diluted net income per share purposes.  
   
   
   
   
ADVENT SOFTWARE, INC.  
RECONCILIATION OF SELECTED CONTINUING OPERATIONS' GAAP MEASURES TO NON-GAAP MEASURES  
(In thousands, except per share data)  
(Unaudited)  
                         
To supplement our condensed consolidated financial statements presented in accordance with generally accepted accounting principles in the United States of America (or GAAP), Advent uses non-GAAP measures of continuing operations' gross margin, operating income, net income and net income per share, which are adjusted to exclude certain costs, expenses and income we believe appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of Advent's underlying operational results and trends and our marketplace performance. In addition, these non-GAAP results are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with GAAP.  
                         
    Twelve Months Ended December 31  
    2013     2012  
    Amount     % of Net Revenues     Amount     % of Net Revenues  
                             
GAAP gross margin   $ 263,238     68.7 %   $ 236,103     65.8 %
  Amortization of acquired intangibles     6,841             7,599        
  Stock-based compensation     6,744             3,641        
Non-GAAP gross margin   $ 276,823     72.3 %   $ 247,343     68.9 %
                             
GAAP operating income   $ 46,132     12.0 %   $ 49,179     13.7 %
  Amortization of acquired intangibles     10,616             11,424        
  Stock-based compensation     48,179             20,801        
  Restructuring charges     3,770             3,634        
  Recapitalization costs     6,041             -        
  Transaction related fees     565             -        
Non-GAAP operating income   $ 115,303     30.1 %   $ 85,038     23.7 %
                             
GAAP net income   $ 28,752           $ 30,231        
  Amortization of acquired intangibles     10,616             11,424        
  Stock-based compensation     48,179             20,801        
  Restructuring charges     3,770             3,634        
  Recapitalization costs     6,692             -        
  Transaction related fees     565             -        
  Income tax adjustment (1)     (27,892 )           (11,868 )      
Non-GAAP net income   $ 70,682           $ 54,222        
                             
GAAP net income   $ 28,752           $ 30,231        
  Net interest     6,949             1,732        
  Provision for income taxes     10,167             17,328        
  Depreciation expense     11,531             11,796        
  Amortization expense     12,862             14,083        
  Stock-based compensation     48,179             20,801        
Adjusted EBITDA   $ 118,440           $ 95,971        
                             
Diluted net income per share                            
  GAAP   $ 0.54           $ 0.58        
  Non-GAAP   $ 1.32           $ 1.03        
                             
Shares used to compute diluted net income per share     53,378             52,425        
                             
(1) The estimated non-GAAP effective tax rate was 35% for the twelve months ended December 31, 2013 and 2012, respectively, and has been used to adjust the provision for income taxes for non-GAAP net income and non-GAAP diluted net income per share purposes.  
   
   
 
 
ADVENT SOFTWARE, INC.
RECONCILIATION OF PROJECTED CONTINUING OPERATIONS' GAAP OPERATING INCOME %
TO NON-GAAP OPERATING INCOME %
(Preliminary and unaudited)
       
       
       
Advent provides projections for the non-GAAP measure of its continuing operations' operating income percentage. This non-GAAP measure excludes certain costs and expenses which we believe is appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. Adjustments to our projected continuing operations' GAAP results are made with the intent of providing management and investors a more complete understanding of Advent's underlying operational results and trends and our marketplace performance. In addition, these adjusted non-GAAP projections are among the information management uses as a basis for planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States of America.
       
  Twelve Months Ending December 31, 2014
  Continuing Operations
  Operating Income %
       
  Projected GAAP 21.0% to 21.5%
       
    Projected stock-based compensation adjustment   8.0%  
    Projected amortization of acquired developed technology and other acquired intangible asset adjustment   2.0%  
       
  Projected non-GAAP 31.0% to 31.5%
       
       

Contact Information

  • CONTACTS
    Media Contact:
    Amanda Diamondstein-Cieplinska
    Advent Software, Inc.
    (415) 645-1668
    Email Contact

    Investor Relations Contact:
    Justin Ritchie
    Advent Software, Inc.
    (415) 645-1683
    Email Contact