SOURCE: Advent Software

July 28, 2014 16:15 ET

Advent Software Reports Second Quarter 2014 Results

Record Second Quarter Revenue of $100.4 Million and GAAP Diluted EPS of $0.24

SAN FRANCISCO, CA--(Marketwired - Jul 28, 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 second quarter ended June 30, 2014.

"We are pleased to report that Advent had an excellent second quarter with record revenues, robust profitability, and growing operating cash flow," said Pete Hess, Chief Executive Officer of Advent. "Increasing demand for Advent's solutions, including Advent Direct® Investor Management, and continued client loyalty are evidence of our strong competitive position."

SECOND QUARTER 2014 RESULTS

GAAP Results for Continuing Operations
The Company reported quarterly revenue of $100.4 million for the second quarter of 2014, compared to $96.1 million in the second quarter of 2013, a 4% increase.

Operating income for the second quarter of 2014 was $21.8 million, or 21.7% of revenue, compared to a loss of $5.8 million for the second quarter of 2013. Advent's results for the second quarter of 2013 included costs associated with its recapitalization transaction. These costs, on a pre-tax basis, were composed of $6.7 million of third party costs which were not included in capitalized debt issue costs and $21.9 million of stock-based compensation expense associated with the modification of equity awards.

Net income for the second quarter of 2014 was $12.7 million, compared to a loss of $4.2 million in the second quarter of 2013. On a fully diluted basis, earnings per share in the second quarter of 2014 were $0.24 compared to a loss of $0.08 in the second quarter of 2013.

Operating cash flow in the second quarter of 2014 was $22.4 million, compared with $21.9 million in the second quarter of 2013.

Cash and cash equivalents totaled $41 million as of June 30, 2014, compared to $45 million as of March 31, 2014. Total outstanding debt as of June 30, 2014 was $280 million compared to $295 million as of March 31, 2014.

Deferred revenue as of June 30, 2014 was $183.1 million, compared to $187.8 million as of March 31, 2014.

The Company repurchased approximately 426,000 shares of its common stock in the second quarter of 2014 for a total cash outlay of $12.4 million and at an average price of $29.11 per share.

Non-GAAP Results for Continuing Operations
Non-GAAP operating income for the second quarter of 2014 was $33.2 million, or 33.1% of revenue, a 7% increase compared to $31.0 million, or 32.3% of revenue, in the second quarter of 2013.

On a fully diluted basis, non-GAAP earnings per share were $0.38 in the second quarter of 2014 and represent a 4% increase from non-GAAP diluted net income per share of $0.37 in the second quarter of 2013.

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

HIGHLIGHTS

  • Advent's Black Diamond Platform Surpasses 500-Client Milestone. Advent's Black Diamond platform has surpassed 540 clients and has exceeded $245 billion in assets on its portfolio management, reporting, and rebalancing platform. The client base has increased by more than 125 percent and assets by more than 240 percent since its acquisition by Advent in June 2011.
  • Award-Winning Solutions & Company: Advent's solutions continued to receive industry awards and win honors around the world during the second quarter. Advent was awarded "Best Fund Accounting and Reporting Systems Firm" by Hedgeweek, as well as "Best Client Reporting Solution" by FTF News. In Europe, Advent was named "Best Portfolio Management Solution" at Wealth Briefing European Awards 2014 and "Best Technology - Fund Accounting" at the HFM Week European Hedge Fund Service Awards.
  • Continued Client Success: Advent had a strong second quarter, with a number of existing clients expanding their relationship with Advent, and many new noteworthy clients around the world, including Beta Capital Management, Carroll Financial Associates, Fiera Capital Corporation, Finix Services, Merced Capital L.P., Busey Wealth Management, Mesirow Financial Administrative Corp., William E. Hamm and Associates, Neon Capital Management, and the Georgia Division of Investment Services.
  • Quarterly Dividend: Advent's Board of Directors declared its first quarterly cash dividend to its shareholders during the second quarter of 2014. The quarterly cash dividend payment of $0.13 per common share was paid on July 15, 2014 to shareholders of record on June 30, 2014.

FINANCIAL GUIDANCE
Advent updates the following financial guidance for the third quarter and fiscal year 2014:

         
Guidance   Q3 2014   FY 2014
Total Revenue ($M)   $99 - $102   $395 - $403
GAAP Operating Margin   n/a   20.0% - 20.5%
Stock Compensation Expense (% of revenue)   n/a   8.5%
Amortization of Intangibles (% of revenue)   n/a   2.0%
Restructuring (% of revenue)   n/a   0.5%
Non-GAAP Operating Margin   n/a   31.0% - 31.5%
Operating Cash Flow ($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 Q2 2014 quarterly earnings conference call at 5:00 p.m. Eastern time today. The Q2 2014 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 877-474-9504 and request conference ID # 25698158. Telephone replay will be available through midnight August 4, 2014. The replay number for domestic callers is 888-286-8010, and for international callers is 617-801-6888, with the conference ID of # 31161812. 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 more than 50 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 declare future dividends; 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 2013 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, Advent Software, and Advent Direct 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)  
   
    June 30     December 31  
    2014     2013  
ASSETS                
Current assets:                
  Cash and cash equivalents   $ 41,332     $ 33,828  
  Accounts receivable, net     58,188       58,717  
  Deferred taxes, current     24,902       24,898  
  Prepaid expenses and other     26,507       30,114  
  Current assets of discontinued operation     -       100  
      Total current assets     150,929       147,657  
Property and equipment, net     31,585       31,698  
Goodwill     208,471       207,818  
Other intangibles, net     23,295       27,392  
Deferred taxes, long-term     21,845       23,020  
Other assets     14,763       17,372  
Noncurrent assets of discontinued operation     1,337       1,337  
                 
    Total assets   $ 452,225     $ 456,294  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT                
Current liabilities:                
  Accounts payable   $ 9,977     $ 5,348  
  Dividends payable     6,693       -  
  Accrued liabilities     37,671       41,625  
  Deferred revenues     175,288       186,107  
  Current portion of long-term debt     20,000       20,000  
  Current liabilities of discontinued operation     618       600  
    Total current liabilities     250,247       253,680  
Deferred revenues, long-term     7,854       7,809  
Long-term income taxes payable     7,667       7,667  
Long-term debt     260,000       285,000  
Other long-term liabilities     9,938       11,171  
Noncurrent liabilities of discontinued operation     2,478       2,782  
                 
    Total liabilities     538,184       568,109  
                 
                 
Stockholders' deficit:                
  Common stock     514       513  
  Additional paid-in capital     55,828       42,533  
  Accumulated deficit     (154,298 )     (165,870 )
  Accumulated other comprehensive income     11,997       11,009  
    Total stockholders' deficit     (85,959 )     (111,815 )
                   
    Total liabilities and stockholders' deficit   $ 452,225     $ 456,294  
                     
                     
                     
ADVENT SOFTWARE, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(In thousands, except per share data)  
(GAAP, Unaudited)  
                             
    Three Months Ended June 30       Six Months Ended June 30  
    2014     2013       2014       2013  
Net revenues:                                
Recurring revenues   $ 92,534     $ 88,263     $ 181,664     $ 172,746  
Non-recurring revenues     7,836       7,860       15,510       15,867  
                                 
  Total net revenues     100,370       96,123       197,174       188,613  
                                 
Cost of revenues (1):                                
Recurring revenues     20,589       17,979       39,216       34,391  
Non-recurring revenues     7,514       10,019       15,569       19,587  
Amortization of developed technology     1,688       2,398       3,488       4,897  
                                 
  Total cost of revenues     29,791       30,396       58,273       58,875  
                                 
  Gross margin     70,579       65,727       138,901       129,738  
                                 
Operating expenses (1):                                
Sales and marketing     18,299       23,217       38,029       40,421  
Product development     17,204       17,923       34,843       34,885  
General and administrative     10,713       22,641       21,270       33,001  
Amortization of other intangibles     870       953       1,779       1,910  
Recapitalization costs     -       6,041       -       6,041  
Restructuring charges     1,740       801       1,914       3,116  
                                 
  Total operating expenses     48,826       71,576       97,835       119,374  
                                 
Income (loss) from continuing operations     21,753       (5,849 )     41,066       10,364  
Interest and other income (expense), net     (1,948 )     (1,330 )     (4,173 )     (1,633 )
                                 
Income (loss) from continuing operations before income taxes     19,805       (7,179 )     36,893       8,731  
Provision (benefit) for income taxes     7,150       (3,024 )     13,331       829  
                                 
  Net income (loss) from continuing operations   $ 12,655     $ (4,155 )   $ 23,562     $ 7,902  
                                 
Discontinued operation:                                
  Net (loss) income from discontinued operation (net of applicable taxes of $(10), $76, $(24) and $61, respectively)    
(16
)    
110
     
(37
)    
88
 
                                 
Net income (loss)   $ 12,639     $ (4,045 )   $ 23,525     $ 7,990  
                                 
Basic net income (loss) per share (2):                                
  Continuing operations   $ 0.25     $ (0.08 )   $ 0.46     $ 0.15  
  Discontinued operation     (0.00 )     0.00       (0.00 )     0.00  
    Total operations   $ 0.25     $ (0.08 )   $ $ 0.46     $ 0.16  
                                 
Diluted net income (loss) per share (2):                                
  Continuing operations   $ 0.24     $ (0.08 )   $ 0.44     $ 0.15  
  Discontinued operation     (0.00 )     0.00       (0.00 )     0.00  
    Total operations   $ 0.24     $ (0.08 )   $ $ 0.44     $  0.15  
                                 
Weighted average shares used to compute net income (loss) per share:                                
  Basic     51,456       51,639       51,314       51,101  
  Diluted     53,540       51,639       53,486       52,243  
                                 
Cash dividends declared per common share   $ 0.13       -     $ 0.13       -  
                                 
(1) Includes stock-based employee compensation expense as follows:                                
                                 
  Cost of recurring revenues   $ 834     $ 1,306     $ 1,676     $ 1,794  
  Cost of non-recurring revenues     354       1,730       729       2,112  
    Total cost of revenues     1,188       3,036       2,405       3,906  
                                   
  Sales and marketing     2,661       6,523       5,296       8,046  
  Product development     1,923       3,532       3,848       4,858  
  General and administrative     1,912       14,098       3,763       15,396  
    Total operating expenses     6,496       24,153       12,907       28,300  
                                   
  Total stock-based employee compensation expense   $ 7,684     $ 27,189     $ 15,312     $ 32,206  
                                 
(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)  
             
    Six Months Ended June 30  
    2014     2013  
Cash flows from operating activities:                
  Net income   $ 23,525     $ 7,990  
  Adjustment to net income for discontinued operation net loss (income)     37       (88 )
  Net income from continuing operations     23,562       7,902  
                 
  Adjustments to reconcile net income to net cash providedby operating activities from continuing operations:                
             
    Stock-based compensation     15,312       32,206  
    Excess tax benefit from stock-based compensation     (6,841 )     (2,783 )
    Depreciation and amortization     10,814       12,673  
    Amortization of debt issuance costs     713       239  
    (Reduction of) provision for doubtful accounts     (6 )     411  
    Reduction of sales reserves     (555 )     (150 )
    Deferred income taxes     7,763       1,791  
    Other     182       (148 )
      Effect of statement of operations adjustments     27,382       44,239  
    Changes in operating assets and liabilities:                
    Accounts receivable     535       5,282  
    Prepaid and other assets     5,661       (4,643 )
    Accounts payable     3,675       3,582  
    Accrued liabilities     (7,282 )     (3,472 )
    Deferred revenues     (10,219 )     (8,634 )
    Income taxes payable     -       (5,190 )
      Effect of changes in operating assets and liabilities     (7,630 )     (13,075 )
                 
Net cash provided by operating activities from continuing operations     43,314       39,066  
                 
Cash flows from investing activities:                
  Purchases of property and equipment     (4,370 )     (1,611 )
  Capitalized software development costs     (963 )     (1,916 )
  Change in restricted cash     (173 )     -  
  Purchases of marketable securities     -       (57,863 )
  Sales and maturities of marketable securities     -       213,444  
                 
Net cash (used in) provided by investing activities from continuing operations     (5,506 )     152,054  
                 
Cash flows from financing activities:                
  Proceeds from common stock issued from exercises of stock options     2,141       16,212  
  Proceeds from common stock issued under the employee stock purchase plan     3,493       3,211  
  Excess tax benefits from stock-based compensation     6,841       2,783  
  Withholding taxes related to equity award net share settlement     (5,127 )     (6,509 )
  Proceeds from debt     -       225,000  
  Repayment of debt     (25,000 )     (95,000 )
  Repurchase of common stock     (12,411 )     -  
  Debit issuance costs     -       (5,725 )
                 
Net cash (used in) provided by financing activities from continuing operations     (30,063 )     139,972  
                 
Net cash transferred to discontinued operation     (223 )     (208 )
                 
Effect of exchange rate changes on cash and cash equivalents     (18 )     (358 )
                 
Net change in cash and cash equivalents from continuing operations     7,504       330,526  
Cash and cash equivalents of continuing operations at beginning of period     33,828       58,217  
                 
Cash and cash equivalents of continuing operations at end of period   $ 41,332     $ 388,743  
                 
     Six Months Ended June 30  
      2014       2013  
Supplemental disclosure of cash flow information:                
Noncash investing activities:                
  Capital expenditures included in accounts payable   $ 1,086     $ -  
                 
Cash flows from discontinued operation of MicroEdge, Inc.:                
  Net cash used in operating activities   $ (223 )   $ (208 )
  Net cash transferred from continuing operations     223       208  
   
   
   
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 June 30  
    2014     2013  
    Amount     % of Net Revenues     Amount     % of Net Revenues  
                             
GAAP gross margin   $ 70,579     70.3 %   $ 65,727     68.4 %
  Amortization of acquired intangibles     1,192             1,883        
  Stock-based compensation     1,188             3,036        
Non-GAAP gross margin   $ 72,959     72.7 %   $ 70,646     73.5 %
                             
GAAP operating income (loss)   $ 21,753     21.7 %   $ (5,849 )   -6.1 %
  Amortization of acquired intangibles     2,063             2,836        
  Stock-based compensation     7,684             27,189        
  Restructuring charges     1,740             801        
  Recapitalization costs     -             6,041        
Non-GAAP operating income   $ 33,240     33.1 %   $ 31,018     32.3 %
                             
GAAP net income (loss)   $ 12,655           $ (4,155 )      
  Amortization of acquired intangibles     2,063             2,836        
  Stock-based compensation     7,684             27,189        
  Restructuring charges     1,740             801        
  Recapitalization costs     -             6,692        
  Income tax adjustment (1)     (3,802 )           (13,642 )      
Non-GAAP net income   $ 20,340           $ 19,721        
                             
GAAP net income (loss)   $ 12,655           $ (4,155 )      
  Net interest     1,875             1,351        
  Provision (benefit) for income taxes     7,150             (3,024 )      
  Depreciation expense     2,781             2,920        
  Amortization expense     2,558             3,352        
  Stock-based compensation     7,684             27,189        
Adjusted EBITDA   $ 34,703           $ 27,633        
                             
Diluted net income (loss) per share                            
  GAAP   $ 0.24           $ (0.08 )      
  Non-GAAP   $ 0.38           $ 0.37        
                             
Shares used to compute GAAP diluted net income (loss) per share     53,540             51,639        
Shares used to compute Non-GAAP diluted net income per share     53,540             53,772        
                             
(1)   The estimated non-GAAP effective tax rate was 35% for the three months ended June 30, 2014 and 2013, 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   20.0 %   to     20.5 %
                   
  Projected stock-based compensation adjustment         8.5 %      
  Projected amortization of acquired developed technology and other acquired intangible asset adjustment        
2.0
%      
  Projected restructuring charge adjustment         0.5 %      
                   
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