SOURCE: Advent Software

Advent Software

October 27, 2014 16:15 ET

Advent Software Reports Third Quarter 2014 Results

GAAP Diluted EPS of $0.22, up 22%; Non-GAAP Diluted EPS of $0.37, up 18%; Operating Cash Flow of $28 Million, up 24%

SAN FRANCISCO, CA--(Marketwired - Oct 27, 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 third quarter ended September 30, 2014.

"Advent posted another solid performance in the quarter, with excellent profitability and robust cash flow," said Pete Hess, Chief Executive Officer of Advent. "We had great attendance at AdventConnect, our annual client conference, and clients and prospects responded enthusiastically to the many enhancements we showcased across our solution suite, as evidenced by our strong renewals and healthy bookings this quarter."

THIRD QUARTER 2014 RESULTS

GAAP Results for Continuing Operations
Advent reported quarterly revenue of $99.0 million for the third quarter of 2014, compared to $96.8 million in the third quarter of 2013, a 2% increase.

Operating income for the third quarter of 2014 was $20.2 million, or 20.5% of revenue, compared to operating income of $17.4 million in the third quarter of 2013, a 17% increase. 

Net income for the third quarter of 2014 was $12.0 million, compared to net income of $9.8 million in the third quarter of 2013. On a fully diluted basis, earnings per share for the third quarter of 2014 were $0.22 compared to $0.18 in the third quarter of 2013, a 22% increase.

Operating cash flow for the third quarter of 2014 was $28.3 million, compared with $22.8 million in the third quarter of 2013, a 24% increase.

Cash and cash equivalents totaled $37 million as of September 30, 2014, compared to $41 million as of June 30, 2014. Total outstanding debt as of September 30, 2014 was $255 million compared to $280 million as of June 30, 2014.

Deferred revenue as of September 30, 2014 was $184 million, compared to $183 million as of June 30, 2014.

During the quarter, Advent's Board of Directors approved a quarterly dividend of $0.13 per share. The cash dividend payment was made on October 15, 2014 to shareholders of record of Advent's common stock at the close of business on September 30, 2014.

Non-GAAP Results for Continuing Operations
Non-GAAP operating income for the third quarter of 2014 was $32.1 million, or 32.4% of revenue, an 11% increase compared to $29.0 million, or 30.0% of revenue, in the third quarter of 2013.

On a fully diluted basis, non-GAAP earnings per share were $0.37 for the third quarter of 2014 and represent an 18% increase from non-GAAP diluted net income per share of $0.31 in the third quarter of 2013.

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

HIGHLIGHTS

  • Solid Third Quarter Bookings with Strong Renewals:  The Annual Contract Value (ACV) of our new contract bookings in the third quarter of 2014 will contribute $7.2 million in annual revenue once the contracts are fully implemented. The initial renewal rate for the second quarter of 2014 was 95%. The renewal rate from the first quarter of 2014 increased by three points to 97% as additional cash was collected.
  • Continued Client Success: New customers added in the third quarter include St. Denis J. Villere & Company, Ziegler Capital Management, LLC, Churchill Management Company, and Prince Street Capital Management, LLC, while Raymond James Investment Services Ltd and Somerset Capital Management Limited deepened their Advent relationships by buying additional products.
  • AdventConnect 2014 Showcases Product Upgrades: Advent showcased enhancements across its product suite at AdventConnect including: new capabilities within Geneva® to address regulations like FATCA and AIFMD; improved CRM workflow and platform reporting enhancements for APX; and in Black Diamond(SM), Advent unveiled a new Salesforce integration, a new investor experience, along with upgrades to rebalancing and data mining functionality. The company also further strengthened Moxy® and Advent Rules Manager® with enhanced real-time pricing among many other new capabilities. 
  • Award-Winning Solutions & Company: Advent Portfolio Exchange® (APX) was awarded "Best Client Reporting System" at the Systems in the City Awards 2014 ceremony in London.

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

Guidance   Q4 2014   FY 2014
 Total Revenue ($M)   $99 - $102   $395 - $398
 GAAP Operating Margin   n/a   20.5% - 21.0%
 Stock Compensation Expense (% of revenue)   n/a   8.0%
 Amortization of Intangibles (% of revenue)   n/a   2.0%
 Restructuring (% of revenue)   n/a   1.0%
 Non-GAAP Operating Margin   n/a   31.5% - 32.0%
 Operating Cash Flow ($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 Q3 2014 quarterly earnings conference call at 5:00 p.m. Eastern time today. The Q3 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 877-546-5020 and request conference ID # 79682130. Telephone replay will be available through midnight November 6, 2014. The replay number for domestic callers is 888-286-8010, and for international callers is 617-801-6888, with the conference ID of # 32551486. 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" and "Reconciliation of Projected Continuing Operations' GAAP Operating Income % to Non-GAAP Operating Income %".

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, Geneva®, Advent Portfolio Exchange®, Moxy® and Advent Rules Manager® are registered trademarks, and Black Diamond is a mark, 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)  
   
    September 30     December 31  
    2014     2013  
ASSETS                
Current assets:                
  Cash and cash equivalents   $ 36,692     $ 33,828  
  Accounts receivable, net     55,280       58,717  
  Deferred taxes, current     24,897       24,898  
  Prepaid expenses and other     24,724       30,114  
  Current assets of discontinued operation     -       100  
    Total current assets     141,593       147,657  
Property and equipment, net     28,502       31,698  
Goodwill     205,178       207,818  
Other intangibles, net     21,004       27,392  
Deferred taxes, long-term     21,213       23,020  
Other assets     14,055       17,372  
Noncurrent assets of discontinued operation     1,337       1,337  
                 
    Total assets   $ 432,882     $ 456,294  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT                
Current liabilities:                
  Accounts payable   $ 10,155     $ 5,348  
  Dividends payable     6,712       -  
  Accrued liabilities     34,677       41,625  
  Deferred revenues     176,288       186,107  
  Current portion of long-term debt     20,000       20,000  
  Current liabilities of discontinued operation     632       600  
    Total current liabilities     248,464       253,680  
Deferred revenues, long-term     7,250       7,809  
Long-term income taxes payable     7,667       7,667  
Long-term debt     235,000       285,000  
Other long-term liabilities     8,447       11,171  
Noncurrent liabilities of discontinued operation     2,324       2,782  
                 
    Total liabilities     509,152       568,109  
                 
                 
Stockholders' deficit:                
  Common stock     516       513  
  Additional paid-in capital     58,394       42,533  
  Accumulated deficit     (142,765 )     (165,870 )
  Accumulated other comprehensive income     7,585       11,009  
    Total stockholders' deficit     (76,270 )     (111,815 )
                   
    Total liabilities and stockholders' deficit   $ 432,882     $ 456,294  
                 
                 
                 
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
 
  2014     2013     2014     2013  
Net revenues:                              
Recurring revenues $ 90,689     $ 88,116     $ 272,352     $ 260,862  
Non-recurring revenues   8,293       8,651       23,804       24,518  
                               
    Total net revenues   98,982       96,767       296,156       285,380  
                               
Cost of revenues (1):                              
Recurring revenues   20,088       17,782       59,304       52,173  
Non-recurring revenues   8,106       11,501       23,675       31,088  
Amortization of developed technology   1,690       2,508       5,178       7,405  
                               
    Total cost of revenues   29,884       31,791       88,157       90,666  
                               
    Gross margin   69,098       64,976       207,999       194,714  
                               
Operating expenses (1):                              
Sales and marketing   17,658       18,546       55,687       58,967  
Product development   16,962       17,369       51,805       52,254  
General and administrative   10,846       10,894       32,115       43,895  
Amortization of other intangibles   809       953       2,588       2,863  
Recapitalization costs   -       -       -       6,041  
Restructuring charges (benefit)   2,579       (157 )     4,494       2,959  
                               
    Total operating expenses   48,854       47,605       146,689       166,979  
                               
Income from continuing operations   20,244       17,371       61,310       27,735  
Interest and other income (expense), net   (1,423 )     (2,977 )     (5,596 )     (4,610 )
                               
Income from continuing operations before income taxes   18,821       14,394       55,714       23,125  
Provision for income taxes   6,818       4,561       20,149       5,390  
                               
    Net income from continuing operations $ 12,003     $ 9,833     $ 35,565     $ 17,735  
                               
Discontinued operation:                              
    Net (loss) income from discontinued operation (net of applicable taxes of $(14), $(16), $(38) and $45, respectively)   (20 )     (20 )     (57 )     68  
                               
Net income $ 11,983     $ 9,813     $ 35,508     $ 17,803  
                               
Basic net income (loss) per share (2):                              
    Continuing operations $ 0.23     $ 0.19     $ 0.69     $ 0.35  
    Discontinued operation   (0.00 )     (0.00 )     (0.00 )     0.00  
      Total operations $ 0.23     $ 0.19     $ 0.69     $ 0.35  
                               
Diluted net income (loss) per share (2):                              
    Continuing operations $ 0.22     $ 0.18     $ 0.66     $ 0.33  
    Discontinued operation   (0.00 )     (0.00 )     (0.00 )     0.00  
      Total operations $ 0.22     $ 0.18     $ 0.66     $ 0.33  
                               
Weighted average shares used to compute net income (loss) per share:                              
    Basic   51,579       51,576       51,464       51,241  
    Diluted   53,877       53,937       53,574       53,329  
                               
Cash dividends declared per common share $ 0.13       -     $ 0.26       -  
                               
(1) Includes stock-based employee compensation expense as follows:                              
                               
    Cost of recurring revenues $ 793     $ 853     $ 2,469     $ 2,647  
    Cost of non-recurring revenues   293       578       1,022       2,690  
      Total cost of revenues   1,086       1,431       3,491       5,337  
                                   
    Sales and marketing   2,461       2,874       7,757       10,920  
    Product development   2,005       2,083       5,853       6,941  
    General and administrative   1,707       2,003       5,470       17,399  
      Total operating expenses   6,173       6,960       19,080       35,260  
                                   
    Total stock-based employee compensation expense $ 7,259     $ 8,391     $ 22,571     $ 40,597  
                               
(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)  
             
    Nine Months Ended September 30  
    2014     2013  
Cash flows from operating activities:                
  Net income   $ 35,508     $ 17,803  
  Adjustment to net income for discontinued operation net loss (income)     57       (68 )
  Net income from continuing operations     35,565       17,735  
                   
  Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:                
    Stock-based compensation     22,571       40,597  
    Excess tax benefit from stock-based compensation     (9,003 )     (4,220 )
    Depreciation and amortization     16,138       18,903  
    Amortization of debt issuance costs     1,079       593  
    Loss on disposal of fixed assets     2,786       -  
    (Reduction of) provision for doubtful accounts     (6 )     290  
    Reduction of sales reserves     (538 )     (196 )
    Deferred income taxes     10,370       6,281  
    Other     (500 )     (45 )
        Effect of statement of operations adjustments     42,897       62,203  
    Changes in operating assets and liabilities:                
      Accounts receivable     3,443       4,181  
      Prepaid and other assets     7,789       (860 )
      Accounts payable     3,919       3,843  
      Accrued liabilities     (12,279 )     (9,801 )
      Deferred revenues     (9,841 )     (10,210 )
      Income taxes payable     84       (5,190 )
        Effect of changes in operating assets and liabilities     (6,885 )     (18,037 )
                   
  Net cash provided by operating activities from continuing operations     71,577       61,901  
                 
Cash flows from investing activities:                
  Purchases of property and equipment     (6,845 )     (2,161 )
  Capitalized software development costs     (1,427 )     (2,556 )
  Change in restricted cash     (173 )     -  
  Purchases of marketable securities     -       (57,863 )
  Sales and maturities of marketable securities     -       228,619  
                 
Net cash (used in) provided by investing activities from continuing operations     (8,445 )     166,039  
                 
Cash flows from financing activities:                
  Proceeds from common stock issued from exercises of stock options     3,171       18,382  
  Proceeds from common stock issued under the employee stock purchase plan     3,493       3,211  
  Excess tax benefits from stock-based compensation     9,003       4,220  
  Withholding taxes related to equity award net share settlement     (5,665 )     (8,043 )
  Proceeds from debt     -       375,000  
  Repayment of debt     (50,000 )     (120,000 )
  Payment of cash dividend     (6,693 )     (470,133 )
  Repurchase of common stock     (12,878 )     (41,256 )
  Debit issuance costs     -       (5,725 )
                 
Net cash used in financing activities from continuing operations     (59,569 )     (244,344 )
                 
Net cash transferred to discontinued operation     (383 )     (358 )
                 
Effect of exchange rate changes on cash and cash equivalents     (316 )     (75 )
                 
Net change in cash and cash equivalents from continuing operations     2,864       (16,837 )
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   $ 36,692     $ 41,380  
             
    Nine Months Ended September 30  
    2014     2013  
Supplemental disclosure of cash flow information:                
Noncash investing activities:                
  Capital expenditures included in accounts payable   $ 1,019     $ 738  
                 
Cash flows from discontinued operation of MicroEdge, Inc.:                
  Net cash used in operating activities   $ (383 )   $ (358 )
  Net cash transferred from continuing operations     383       358  
                 
                 
                 
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 September 30
  2014   2013
  Amount     % of Net Revenues   Amount     % of Net Revenues
                       
GAAP gross margin $ 69,098     69.8%   $ 64,976     67.1%
  Amortization of acquired intangibles   1,194           1,883      
  Stock-based compensation   1,087           1,431      
Non-GAAP gross margin $ 71,379     72.1%   $ 68,290     70.6%
                       
GAAP operating income $ 20,244     20.5%   $ 17,371     18.0%
  Amortization of acquired intangibles   2,002           2,836      
  Stock-based compensation   7,259           8,391      
  Restructuring charges (benefit)   2,579           (157 )    
  Transaction related fees   -           565      
Non-GAAP operating income $ 32,084     32.4%   $ 29,006     30.0%
                       
GAAP net income $ 12,003         $ 9,833      
  Amortization of acquired intangibles   2,002           2,836      
  Stock-based compensation   7,259           8,391      
  Restructuring charges (benefit)   2,579           (157 )    
  Transaction related fees   -           565      
  Income tax adjustment (1)   (3,914 )         (4,549 )    
Non-GAAP net income $ 19,929         $ 16,919      
                       
GAAP net income $ 12,003         $ 9,833      
  Net interest   1,741           2,631      
  Provision for income taxes   6,818           4,561      
  Depreciation expense   2,825           2,771      
  Amortization expense   2,499           3,460      
  Stock-based compensation   7,259           8,391      
Adjusted EBITDA $ 33,145         $ 31,647      
                       
Diluted net income per share                      
  GAAP $ 0.22         $ 0.18      
  Non-GAAP $ 0.37         $ 0.31      
                       
Shares used to compute diluted net income per share   53,877           53,937      
   
(1) The estimated non-GAAP effective tax rate was 35% for the three months ended September 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 20.5%   to   21.0%
             
    Projected stock-based compensation adjustment     8.0%    
    Projected amortization of acquired developed technology and other acquired intangible asset adjustment     2.0%    
    Projected restructuring charge adjustment     1.0%    
             
  Projected non-GAAP 31.5%   to   32.0%
           

Contact Information

  • CONTACTS
    Media Contact:
    Kendall Reischl
    Advent Software, Inc.
    (415) 645-1771
    Email Contact

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