Information technology software solutions and services provider, Advent Software Inc. (ADVS) recently announced a special cash dividend of $9 per share to be paid on Jul 9 to shareholders of record as of Jul 1.
The special cash dividend was approved by Advent’s board of directors on Jun 12 and the company clarified that the amount carried a dividend factor (roughly $2–$4 per share) and a return-of-capital factor. The decision to return value as well as a portion of capital is based on Advent’s strong liquidity position and positive free cash flow generation capabilities.
Advent mentioned that the special dividend worth $470.0 million will be paid using cash-in-hand and a senior credit facility. The credit facility, which amounts to $425.0 million, consists of a $225.0 million term-loan facility and a $200.0 million revolving credit facility. Both the term loan and revolving credit facility will carry an interest of LIBOR plus 225 basis points. Notably, the company repaid the outstanding loans before taking the new loan of $425.0 million.
The decision to pay a special dividend is actually a windfall for shareholders as Advent had never declared any dividends earlier. The company also plans to retain future earnings for funding development and business growth, instead of declaring any dividend. Nevertheless, Advent will remain proactive on the share buyback front.
Now let’s have a look at how Advent performed in the first quarter of 2013. Advent recorded earnings per share of 23 cents, in line with the Zacks Consensus Estimate. Revenues grew 6.4% year over year to $92.5 million. Efficient cost optimization led to an operating margin of 17.5%, which was up from 13.6% in the year-ago quarter.
Cash and marketable securities were $184.7 million versus $169.4 million in the prior quarter. Long-term debt balance declined $2.5 million to $82.5 million. Cash flow from operating activities was $17.2 million and capital expenditure was $959,000.
Given the strong balance sheet and ability to pay off debt, we think the move makes sense. We are also positive on Advent’s recurring revenue model, higher renewal rates, strong product portfolio and new product launches.
Currently, Advent has a Zacks Rank #1 (Strong Buy). Similar stocks that warrant a look include Aspen Technology Inc. (AZPN), Pegasystems Inc. (PEGA) and SAP AG (SAP). All three stocks have a Zacks Rank #1 (Strong Buy).
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