SOURCE: Advent Software

October 30, 2012 16:15 ET

Advent Software Reports Third Quarter 2012 Results

Company Achieves Record Quarterly Revenue of $90 Million and Third Quarter Non-GAAP Operating Margin of Over 23%

SAN FRANCISCO, CA--(Marketwire - Oct 30, 2012) -  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 third quarter ended September 30, 2012.

"Advent is pleased to report solid financial results for the third quarter, which included strong quarterly revenues, healthy operating cash flows, and over 23% non-GAAP operating margin," said Pete Hess, Chief Executive Officer of Advent. "While there have been some headwinds in the market, these results demonstrate the resiliency of our business model. We are excited to have added prestigious clients in the quarter and our competitive position remains very strong."

THIRD QUARTER 2012 RESULTS

GAAP Results for Continuing Operations
The Company reported quarterly revenue of $90.2 million for the third quarter of 2012, compared to $84.6 million in the third quarter of 2011, a 7% increase.

Operating income for the third quarter of 2012 was $12.6 million, or 14% of revenue, compared to $10.6 million or 13% of revenue for the third quarter of 2011. 

Net income for the third quarter of 2012 was $7.7 million compared to $6.8 million in the third quarter of 2011.

On a fully diluted basis, earnings per share in the third quarter of 2012 were $0.15, up $0.02 when compared to the third quarter of 2011. 

Operating cash flows in the third quarter of 2012 totaled $25.3 million, compared with $23.8 million in the third quarter of 2011. Cash, cash equivalents and marketable securities totaled $143.5 million as of September 30, 2012, compared to $136.4 million as of December 31, 2011.

The Company repurchased approximately 639,000 shares of its common stock in the third quarter of 2012 for total cash outlays of $15.2 million at an average price of $23.71 per share.

Total deferred revenue as of September 30, 2012 was $162.4 million, compared to $174.9 million as of December 31, 2011.

Non-GAAP Results for Continuing Operations
Non-GAAP operating income for the third quarter of 2012 was $20.8 million, or 23% of revenue. This represents a 13% increase compared to $18.5 million of non-GAAP operating income, or 22% of revenue, in the third quarter of 2011. On a fully diluted basis, non-GAAP earnings per share were $0.26 in the third quarter of 2012 and represent a 17% increase from non-GAAP diluted earnings per share of $0.22 in the third quarter of 2011.

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

THIRD QUARTER HIGHLIGHTS

  • Third Quarter Bookings: The Annual Contract Value (ACV) of our new contract bookings in the third quarter of 2012 will contribute $7.1 million in annual revenue once the contracts are fully implemented. New clients represented a broad cross-section of the investment management industry, from hedge funds and asset managers to family offices, fund administrators and the growing advisory market. New clients included BTG Pactual, the largest independent investment bank in Latin America, Tiedeman Trust Company, Stephens Inc., Clarfeld Financial Advisors, Clariden Leu, a Swiss private bank based in Zurich, and Rand Merchant Bank, a leading African investment bank headquartered in South Africa. In the third quarter, Advent also signed its first hedge fund client in mainland China.

  • Enhanced Functionality Across Product Lines: Advent hosted our annual client conference in September during which a number of product announcements were made across the platforms, including: the availability of a multi-custodial rebalancing solution and an alternative investments solution within the Black Diamond platform; the launch of the new Interest Rate Swaps (IRS) functionality for the Syncova® product; the launch of Geneva® 9.0 which includes integrated solutions targeted at new market segments, and the beta release of major enhancements to the cloud-enabled, end-to-end platform for asset management*.

  • Industry Recognition and Award-Winning Solutions: Advent was awarded "Best Portfolio Management System Provider" in Waters Magazine's annual readers' choice rankings. Advent Portfolio Exchange® (APX) -- Advent's end-to-end portfolio management solution for asset and wealth management -- was named "Best in Class" in the CEB TowerGroup Portfolio Management Systems Technology Analysis in all four technology categories assessed: Portfolio Tools, Advisory Experience, Workflow Management and Enterprise Support. APX was also awarded "Excellence in Performance Measurement" by the FSO Knowledge Xchange.

FINANCIAL GUIDANCE 
Advent updates the following financial guidance for the fourth quarter and fiscal year 2012:

         
Guidance   Q4 2012   FY 2012
Total Revenue ($M)   $89-$93   $356-$360
  YoY Revenue Growth   4% - 8%   9% - 10%
GAAP Operating Margin   n/a   13.0% - 13.2%
Amortization of Intangibles (% of revenue)   n/a   3%
Stock Compensation Expense (% of revenue)   n/a   6%
Restructuring Charge (% of revenue)   n/a   1%
Non-GAAP Operating Margin   n/a   23.0% - 23.2%
Operating Cash Flow ($M)   n/a   $83-$86
Capital Expenditures ($M)   n/a   $11-$13
Growth of Weighted Average Shares Outstanding, excluding any share repurchases   n/a   0.25%-0.75% per quarter
Effective Tax Rate (GAAP)   n/a   35% - 40%
Effective Tax Rate (non-GAAP)   n/a   35%
         
         

INVESTOR CALL
Advent Software, Inc. will host its third quarter 2012 earnings conference call at 5:00 p.m. Eastern time today. The third quarter 2012 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 (888) 895-5479 and request conference ID #33664446. Telephone replay will be available through midnight November 6, 2012. The replay number for domestic callers is (888) 843-7419, and for international callers is (630) 652-3042, with the conference ID of #33664446.

The conference call will also be webcast live and then archived on http://investor.advent.com.

* Advent's platform for asset management offers Advent Portfolio Exchange® (APX), Moxy®, Advent Rules Manager®, Advent Revenue Center®, Advent® General Ledger Exchange (Advent® GLX), Advent Tradex®, Advent Corporate Actions® (ACA), and Advent Custodial Data® (ACD) for clients to select among in order to support key workflows and data across the entire investment process.

ABOUT ADVENT
Advent Software, Inc. (www.advent.com), a global firm, has provided trusted solutions to the world's leading financial professionals since 1983. Firms in more than 60 countries use Advent technology. Advent's quality software, data, services and tools enable financial professionals to improve service and communication to their clients, allowing them to grow their business while controlling costs. Advent is the only financial services software company to be awarded the Service Capability and Performance certification for being a world-class support organization. For more information on Advent products visit http://www.advent.com/about/resources/demos/pr.

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 (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 statements regarding our organizational structure, operating efficiencies, margin expansion and market opportunities, 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 Advent Portfolio Exchange®, Geneva®, and Moxy® products; the successful development, release and market acceptance of new products, services and enhancements; uncertainties and fluctuations in the financial markets; the Company's ability to satisfy contractual performance requirements; difficulties in achieving organizational objectives and integrating merged businesses, such as Syncova Solutions Ltd and Black Diamond Performance Reporting LLC, and achieving expected synergies and results; 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 2011 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 SOFTWARE, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(In thousands)  
(GAAP, Unaudited)  
             
    September 30     December 31  
    2012     2011  
ASSETS                
Current assets:                
  Cash and cash equivalents   $ 50,682     $ 65,525  
  Short-term marketable securities     92,776       69,908  
  Accounts receivable, net     53,775       62,125  
  Deferred taxes, current     16,306       16,294  
  Prepaid expenses and other     23,299       23,660  
    Total current assets     236,838       237,512  
Property and equipment, net     39,263       42,301  
Goodwill     206,335       204,621  
Other intangibles, net     41,523       49,521  
Long-term marketable securities     -       917  
Deferred taxes, long-term     26,389       30,751  
Other assets     12,574       15,927  
Noncurrent assets of discontinued operation     2,006       2,006  
                 
    Total assets   $ 564,928     $ 583,556  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Accounts payable   $ 8,492     $ 10,558  
  Accrued liabilities     31,787       40,029  
  Deferred revenues     154,201       166,945  
  Income taxes payable     5,303       2,972  
  Short-term debt     5,000       5,000  
  Current liabilities of discontinued operation     591       488  
    Total current liabilities     205,374       225,992  
Deferred revenues, long-term     8,183       7,926  
Long-term debt     41,250       45,000  
Other long-term liabilities     17,049       16,944  
Noncurrent liabilities of discontinued operation     3,704       4,633  
                 
    Total liabilities     275,560       300,495  
                 
                 
Stockholders' equity:                
  Common stock     502       510  
  Additional paid-in capital     441,721       429,734  
  Accumulated deficit     (162,243 )     (154,053 )
  Accumulated other comprehensive income     9,388       6,870  
    Total stockholders' equity     289,368       283,061  
                 
    Total liabilities and stockholders' equity   $ 564,928     $ 583,556  
                     
                     
   
ADVENT SOFTWARE, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(In thousands, except per share data)  
(GAAP, Unaudited)  
                         
                         
    Three Months Ended September 30     Nine Months Ended September 30  
    2012     2011     2012     2011  
                                 
Net revenues:                                
Recurring revenues   $ 81,090     $ 74,951     $ 240,752     $ 213,726  
Non-recurring revenues     9,084       9,615       26,050       26,237  
                                 
  Total net revenues     90,174       84,566       266,802       239,963  
                                 
Cost of revenues (1):                                
Recurring revenues     17,216       15,727       51,962       45,618  
Non-recurring revenues     13,011       12,520       33,615       29,670  
Amortization of developed technology     2,586       2,588       7,700       6,265  
                                 
  Total cost of revenues     32,813       30,835       93,277       81,553  
                                 
  Gross margin     57,361       53,731       173,525       158,410  
                                 
Operating expenses (1):                                
Sales and marketing     17,965       18,444       56,122       55,311  
Product development     17,077       14,387       50,377       41,496  
General and administrative     8,752       9,307       27,619       27,136  
Amortization of other intangibles     955       960       2,867       1,851  
Restructuring (benefit) charges     (17 )     57       53       131  
                                 
  Total operating expenses     44,732       43,155       137,038       125,925  
                                 
Income from continuing operations     12,629       10,576       36,487       32,485  
Interest and other income (expense), net     (130 )     (815 )     (1,105 )     (837 )
                                 
Income from continuing operations before income taxes     12,499       9,761       35,382       31,648  
Provision for income taxes     4,812       2,935       13,181       9,848  
                                 
  Net income from continuing operations   $ 7,687     $ 6,826     $ 22,201     $ 21,800  
                                 
Discontinued operation:                                
  Net income (loss) from discontinued operation (net of applicable taxes of $(13), $(17), $134, and $1,311, respectively)     11       (27 )     233       1,773  
                                 
Net income   $ 7,698     $ 6,799     $ 22,434     $ 23,573  
                                 
Basic net income per share (2):                                
  Continuing operations   $ 0.15     $ 0.13     $ 0.44     $ 0.42  
  Discontinued operation     0.00       0.00       0.00       0.03  
    Total operations   $ 0.15     $ 0.13     $ 0.44     $ 0.45  
                                 
Diluted net income per share (2):                                
  Continuing operations   $ 0.15     $ 0.13     $ 0.42     $ 0.40  
  Discontinued operation     0.00       0.00       0.00       0.03  
    Total operations   $ 0.15     $ 0.13     $ 0.43     $ 0.43  
                                 
Weighted average shares used to compute net income per share:                                
  Basic     50,401       51,625       50,722       52,114  
  Diluted     52,248       53,625       52,764       54,590  
                                 
(1) Includes stock-based employee compensation expense as follows:                                
                                 
  Cost of recurring revenues   $ 615     $ 528     $ 1,810     $ 1,535  
  Cost of non-recurring revenues     331       381       926       973  
    Total cost of revenues     946       909       2,736       2,508  
                                 
  Sales and marketing     1,877       1,757       5,263       4,726  
  Product development     1,440       1,377       4,338       3,798  
  General and administrative     1,108       1,022       3,007       3,135  
    Total operating expenses     4,425       4,156       12,608       11,659  
                                 
  Total stock-based employee compensation expense   $ 5,371     $ 5,065     $ 15,344     $ 14,167  
                                 
(2) Net income 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)  
(GAAP, Unaudited)  
             
             
    Nine Months Ended
September 30
 
    2012     2011  
Cash flows from operating activities:                
  Net income   $ 22,434     $ 23,573  
  Adjustment to net income for discontinued operation     (233 )     (1,773 )
  Net income from continuing operations   $ 22,201     $ 21,800  
                 
  Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:                
    Stock-based compensation     15,344       14,167  
    Excess tax benefit from stock-based compensation     (4,693 )     (4,195 )
    Depreciation and amortization     19,372       16,254  
    Amortization of debt issuance costs     285       -  
    Provision for doubtful accounts     209       159  
    Provision for (reduction of) sales returns     1,019       (212 )
    Non-cash impairment loss     -       500  
    Deferred income taxes     4,043       (395 )
    Other     (521 )     39  
        Effect of statement of operations adjustments     35,058       26,317  
    Changes in operating assets and liabilities:                
      Accounts receivable     8,062       (4,669 )
      Prepaid and other assets     4,137       (1,141 )
      Accounts payable     (2,066 )     3,261  
      Accrued liabilities     (7,137 )     (4,552 )
      Deferred revenues     (13,506 )     5,987  
      Income taxes payable     7,024       8,607  
        Effect of changes in operating assets and liabilities     (3,486 )     7,493  
                 
Net cash provided by operating activities from continuing operations     53,773       55,610  
                 
Cash flows from investing activities:                
  Cash used in acquisitions, net of cash acquired     (700 )     (97,092 )
  Purchases of property and equipment     (5,383 )     (7,679 )
  Capitalized software development costs     (1,942 )     (2,280 )
  Purchases of marketable securities     (91,926 )     (38,907 )
  Sales and maturities of marketable securities     69,600       85,432  
                 
Net cash used in investing activities from continuing operations     (30,351 )     (60,526 )
                 
Cash flows from financing activities:                
  Proceeds from common stock issued from exercises of stock options     4,211       5,482  
  Withholding taxes related to equity award net share settlement     (5,257 )     (5,111 )
  Proceeds from common stock issued under the employee stock purchase plan     3,448       3,146  
  Repurchase of common stock     (41,275 )     (51,582 )
  Repayment of debt     (3,750 )     -  
  Excess tax benefits from stock-based compensation     4,693       4,195  
                 
Net cash used in financing activities from continuing operations     (37,930 )     (43,870 )
                 
Net cash transferred (to) from discontinued operation     (593 )     2,954  
                 
Effect of exchange rate changes on cash and cash equivalents     258       215  
                 
Net change in cash and cash equivalents from continuing operations     (14,843 )     (45,617 )
Cash and cash equivalents of continuing operations at beginning of period     65,525       81,948  
                 
Cash and cash equivalents of continuing operations at end of period   $ 50,682     $ 36,331  
                 
                 
    Nine Months Ended
September 30
 
    2012     2011  
Supplemental disclosure of cash flow information                
Cash flow from discontiued operation:                
  Net cash used in operating activities   $ (593 )   $ (50 )
  Net cash provided by investing activities     -       3,004  
  Net cash transferred from (to) continuing operations     593       (2,954 )
  Effect of exchange rates on cash and cash equivalents     -       -  
  Net change in cash and cash equivalents from discontinued operations     -       -  
  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.  
                 
                 
                 
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 on a GAAP basis, Advent uses non-GAAP measures of continuing operations' operating income, net income and net income per share, which are adjusted to exclude certain costs, expenses, gains and losses 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 adjusted 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 generally accepted accounting principles in the United States of America.
                             
    Three Months Ended September 30, 2012 for Continuing Operations  
    Gross   Gross     Operating     Operating     Net  
    Margin   Margin %     Income     Income %     Income  
                                   
GAAP   $ 57,361   64 %   $ 12,629     14 %   $ 7,687  
                                   
  Amortization of acquired developed technology     1,894           1,894             1,894  
  Amortization of other acquired intangibles     -           955             955  
  Stock-based compensation - cost of revenues     946           946             946  
  Stock-based compensation - operating expenses     -           4,425             4,425  
  Restructuring benefit     -           (17 )           (17 )
  Income tax adjustment for non-GAAP (1)     -           -             (2,434 )
                                   
Non-GAAP   $ 60,201   67 %   $ 20,832     23 %   $ 13,456  
                                   
Diluted net income per share                                  
  GAAP                             $ 0.15  
  Non-GAAP                             $ 0.26  
                                   
Shares used to compute diluted net income per share                               52,248  
                                   
    Three Months Ended September 30, 2011 for Continuing Operations  
    Gross   Gross     Operating     Operating     Net  
    Margin   Margin %     Income     Income %     Income  
                                   
GAAP   $ 53,731   64 %   $ 10,576     13 %   $ 6,826  
                                   
  Amortization of acquired developed technology     1,821           1,821             1,821  
  Amortization of other acquired intangibles     -           960             960  
  Stock-based compensation - cost of revenues     909           909             909  
  Stock-based compensation - operating expenses     -           4,156             4,156  
  Investment loss     -           -             500  
  Restructuring charges     -           57             57  
  Income tax adjustment for non-GAAP (1)     -           -             (3,422 )
                                   
Non-GAAP   $ 56,461   67 %   $ 18,479     22 %   $ 11,807  
                                   
Diluted net income per share                                  
  GAAP                             $ 0.13  
  Non-GAAP                             $ 0.22  
                                   
Shares used to compute diluted net income per share                               53,625  
                                   
(1) The estimated non-GAAP effective tax rate was 35% for the three months ended September 30, 2012 and 2011, respectively, and has been used to adjust the provision for income taxes for non-GAAP purposes.
   
   
   
ADVENT SOFTWARE, INC.
RECONCILIATION OF PROJECTED CONTINUING OPERATIONS' GAAP OPERATING INCOME %
TO NON-GAAP OPERATING INCOME %
(Preliminary and unaudited)
 
Advent provides projections of non-GAAP measures of its continuing operations' operating income, which exclude certain costs, expenses, gains and losses which it believes is appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our projected continuing operations' GAAP results are made with the intent of providing management and investors a more complete understanding continuing operations' 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, 2012
    Continuing Operations
    Operating Income %
             
Projected GAAP   13.0%   to   13.2%
             
  Projected amortization of acquired developed technology and other acquired intangible asset adjustment       3%    
  Projected stock-based compensation adjustment       6%    
  Projected restructuring charge adjustment       1%    
             
Projected non-GAAP   23.0%   to   23.2%
             

Contact Information

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

    Investor Relations Contact:
    Meg Pardo
    Advent Software, Inc.
    (415) 645-1584
    Email Contact