Advent Software Reports Second Quarter 2013 Results

Company Achieves Record Quarterly Revenue of $96 Million, Non-GAAP Earnings per Share of $0.37, and Non-GAAP Operating Profit of $31 Million

Marketwired

SAN FRANCISCO, CA--(Marketwired - Jul 29, 2013) - 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, 2013.

"I am pleased to report Advent delivered a strong second quarter with record revenue and non-GAAP profitability, and strong renewals," said Pete Hess, Chief Executive Officer at Advent. "We continue to win new business, while also investing in our solutions, and we're doing it all while ensuring that we deliver the operational efficiency gains we're committed to achieving. It is exciting to see these results as we continue to execute on our strategy and deliver results and value to our shareholders and clients."

SECOND QUARTER 2013 RESULTS

Recapitalization Transaction
As previously announced, the Company entered into a new $425 million senior credit facility and declared a one-time special cash dividend of $9 per share. In connection with the dividend, the Company modified its outstanding equity awards to preserve the pre-dividend economic value. The special dividend was approved by Advent's Board of Directors on June 12, 2013 and paid to stockholders on July 9, 2013. Of the $9 per share distribution, totaling $470 million, Advent currently expects between $2 to $3 per share to be characterized as a dividend for tax purposes, and the remaining amount of the distribution to be characterized as a return of capital.

GAAP Results for Continuing Operations
The Company reported quarterly revenue of $96.1 million for the second quarter of 2013, compared to $89.7 million in the second quarter of 2012, a 7% increase.

Advent's results for the second quarter of 2013 included costs associated with the 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 equity award modification.

Operating loss for the second quarter of 2013 was $(5.8) million, or (6.1)% of revenue, compared to operating income of $12.1 million or 13.4% of revenue for the second quarter of 2012. 

Net loss for the second quarter of 2013 was $(4.2) million compared to net income of $7.2 million in the second quarter of 2012.

Diluted net loss per share in the second quarter of 2013 was $(0.08), compared to diluted net income per share of $0.14 in the second quarter of 2012. 

Operating cash flow in the second quarter of 2013 was $21.9 million, compared with $14.9 million in the second quarter of 2012.

Cash, cash equivalents and marketable securities totaled $404 million as of June 30, 2013, compared to $247 million as of March 31, 2013, a 64% increase. Total outstanding debt as of June 30, 2013 was $225 million compared to $93 million as of March 31, 2013. After payment of the special dividend on July 9th, 2013, total outstanding debt was $350 million. Total deferred revenue as of June 30, 2013 was $174 million, compared to $177 million as of March 31, 2013.

Non-GAAP Results for Continuing Operations
Non-GAAP operating income for the second quarter of 2013 was $31.0 million, or 32.3% of revenue. This represents a 55% increase compared to $20.0 million from continuing operations, or 22.3% of revenue, in the second quarter of 2012. On a fully diluted basis, non-GAAP earnings per share were $0.37 in the second quarter of 2013 and represent a 56% increase from non-GAAP diluted earnings per share of $0.24 in the second quarter of 2012.

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

SECOND QUARTER HIGHLIGHTS

  • Second Quarter Bookings and Client Success: The annual contract value of our new contract bookings in the second quarter of 2013 will contribute $6.7 million in incremental annual revenue once the contracts are fully implemented. New clients include Income Partners Asset Management, Al Rajhi Capital, DMA Direct, Halkyon Alpha LLC, F-Squared Investment Management, and Tages Capital. Atlantis Investment Management and Heptagon Capital Management, two UK asset managers, have grown their relationships with Advent this quarter, increasing the benefits to their businesses delivered by Advent Portfolio Exchange® and Tamale®, respectively. Saudi Fransi Capital is in production with Geneva®, Moxy® and Tradex® to support their business. 

  • Award-Winning Solutions & Company: Advent's solutions continued to receive industry awards and win honors around the world this quarter. Advent was named "Technology Vendor of the Year" by Citywealth magazine in the UK; the FSO Knowledge Exchange named Advent Rules Manager®, one of Advent Portfolio Exchange's associated products, for "Excellence in Risk Management & Compliance"; Advent was awarded the "Best Fund Accounting and Reporting Software" for the HFMWeek European award; and the UK Systems in the City Awards recognized Advent for "Best Research Management Tool" for Tamale RMS®. Advent also continues to win accolades among industry analysts. Advent was recognized as Best-in-Class across three categories for the Advisor Desktop analysis by leading industry analyst -- CEB TowerGroup -- and Best-in-Class for the Performance Measurement analysis. Advent also made the list of San Francisco Business Times' Top Corporate Givers.

FINANCIAL GUIDANCE
Advent updates the following financial guidance for the third quarter and fiscal year 2013:

         
Guidance   Q3 2013   FY 2013
Total Revenue ($M)   $93-$95   $375-$379
  YoY Revenue Growth   3% - 5%   5% - 6%
GAAP Operating Margin   n/a   10.0% - 10.5%
Amortization of Intangibles (% of revenue)   n/a   3.0%
Stock Compensation Expense (% of revenue)   n/a   13.0%
Restructuring Charges (% of revenue)   n/a   1.0%
Recapitalization Costs (% of revenue)   n/a   1.5%
Non-GAAP Operating Margin   n/a   28.5% - 29.0%
Operating Cash Flow ($M)   n/a   $93-$97
Capital Expenditures ($M)   n/a   $10-$12
         
Effective Tax Rate (GAAP)   n/a   30% - 35%
Effective Tax Rate (non-GAAP)   n/a   35%
         
         

INVESTOR CALL

Advent Software, Inc. will host its Q2 2013 quarterly earnings conference call at 5:00 p.m. Eastern time today. The Q2 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 (800) 706-7745 and request conference ID #45297160. Telephone replay will be available through midnight August 5, 2013. The replay number for domestic callers is (888) 286-8010, and for international callers is (617) 801-6888, with the conference ID of #97701426.

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

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 in the United States of America (U.S. 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 momentum and market opportunities, the tax characterization of our special dividend, 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; difficulties in achieving organizational objectives 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, Advent Software, Advent Rules Manager, Advent Portfolio Exchange, Tamale, and Tamale RMS, are registered trademarks of Advent Software, Inc. Tradex is a registered mark of Advent Norway AS in Norway and the European Union. All 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  
    2013     2012  
ASSETS                
Current assets:                
  Cash and cash equivalents   $ 388,743     $ 58,217  
  Short-term marketable securities     6,013       111,192  
  Accounts receivable, net     55,375       61,069  
  Deferred taxes, current     18,931       18,934  
  Prepaid expenses and other     34,152       25,868  
  Current assets of discontinued operation     -       88  
    Total current assets     503,214       275,368  
Property and equipment, net     32,917       37,269  
Goodwill     204,417       206,932  
Other intangibles, net     32,858       38,205  
Long-term marketable securities     9,230       61,552  
Deferred taxes, long-term     23,509       24,524  
Other assets     16,816       12,994  
Noncurrent assets of discontinued operation     1,609       1,609  
                 
    Total assets   $ 824,570     $ 658,453  
                 
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY                
Current liabilities:                
  Accounts payable   $ 8,773     $ 5,190  
  Accrued liabilities     40,159       37,096  
  Deferred revenues     166,284       174,388  
  Income taxes payable     -       5,593  
  Current portion of long-term debt     20,000       10,000  
  Dividends payable     470,133       -  
  Current liabilities of discontinued operation     610       262  
    Total current liabilities     705,959       232,529  
Deferred revenues, long-term     8,107       8,787  
Long-term income taxes payable     5,335       5,335  
Long-term debt     205,000       85,000  
Other long-term liabilities     11,910       13,139  
Noncurrent liabilities of discontinued operation     3,072       3,804  
                 
    Total liabilities     939,383       348,594  
                 
                 
Stockholders' (deficit) equity:                
  Common stock     522       505  
  Additional paid-in capital     24,582       453,585  
  Accumulated deficit     (146,271 )     (154,261 )
  Accumulated other comprehensive income     6,354       10,030  
    Total stockholders' (deficit) equity     (114,813 )     309,859  
                 
    Total liabilities and stockholders' (deficit) equity   $ 824,570     $ 658,453  
                     
                     
   
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  
    2013     2012     2013     2012  
Net revenues:                                
Recurring revenues   $ 88,263     $ 80,942     $ 172,746     $ 159,662  
Non-recurring revenues     7,860       8,782       15,867       16,966  
                                 
  Total net revenues     96,123       89,724       188,613       176,628  
                                 
Cost of revenues (1):                                
Recurring revenues     17,979       17,820       34,391       34,746  
Non-recurring revenues     10,019       10,936       19,587       20,604  
Amortization of developed technology     2,398       2,573       4,897       5,114  
                                 
  Total cost of revenues     30,396       31,329       58,875       60,464  
                                 
  Gross margin     65,727       58,395       129,738       116,164  
                                 
Operating expenses (1):                                
Sales and marketing     23,217       19,711       40,421       38,157  
Product development     17,923       16,501       34,885       33,300  
General and administrative     22,641       9,198       33,001       18,867  
Amortization of other intangibles     953       956       1,910       1,912  
Recapitalization costs     6,041       -       6,041       -  
Restructuring charges     801       (34 )     3,116       70  
                                 
  Total operating expenses     71,576       46,332       119,374       92,306  
                                 
(Loss) income from continuing operations     (5,849 )     12,063       10,364       23,858  
Interest and other income (expense), net     (1,330 )     (803 )     (1,633 )     (975 )
                                 
(Loss) income from continuing operations before income taxes     (7,179 )     11,260       8,731       22,883  
(Benefit) provision for income taxes     (3,024 )     4,063       829       8,369  
                                 
  Net (loss) income from continuing operations   $ (4,155 )   $ 7,197     $ 7,902     $ 14,514  
                                 
Discontinued operation:                                
  Net income from discontinued operation (net of applicable taxes of $76, $162, $61 and $147, respectively)     110       245       88       222  
                                 
Net (loss) income   $ (4,045 )   $ 7,442     $ 7,990     $ 14,736  
                                 
Basic net (loss) income per share (2):                                
  Continuing operations   $ (0.08 )   $ 0.14     $ 0.15     $ 0.29  
  Discontinued operation     0.00       0.00       0.00       0.00  
    Total operations   $ (0.08 )   $ 0.15     $ 0.16     $ 0.29  
                                 
Diluted net (loss) income per share (2):                                
  Continuing operations   $ (0.08 )   $ 0.14     $ 0.15     $ 0.27  
  Discontinued operation     0.00       0.00       0.00       0.00  
    Total operations   $ (0.08 )   $ 0.14     $ 0.15     $ 0.28  
                                 
Weighted average shares used to compute net (loss) income per share:                                
  Basic     51,639       50,754       51,101       50,887  
  Diluted     51,639       52,977       52,243       53,117  
                                 
(1) Includes stock-based employee compensation expense as follows:                                
                                 
  Cost of recurring revenues   $ 1,306     $ 610     $ 1,794     $ 1,195  
  Cost of non-recurring revenues     1,730       264       2,112       595  
    Total cost of revenues     3,036       874       3,906       1,790  
                                 
  Sales and marketing     6,523       1,729       8,046       3,386  
  Product development     3,532       1,438       4,858       2,898  
  General and administrative     14,098       1,043       15,396       1,899  
    Total operating expenses     24,153       4,210       28,300       8,183  
                                 
  Total stock-based employee compensation expense   $ 27,189     $ 5,084     $ 32,206     $ 9,973  
                                 
(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)  
(Unaudited)  
             
    Six Months Ended June 30  
    2013     2012  
Cash flows from operating activities:                
  Net income   $ 7,990     $ 14,736  
  Adjustment to net income for discontinued operation net income     (88 )     (222 )
  Net income from continuing operations     7,902       14,514  
                 
  Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:                
    Stock-based compensation     32,206       9,973  
    Excess tax benefit from stock-based compensation     (2,783 )     (3,118 )
    Depreciation and amortization     12,673       12,851  
    Amortization of debt issuance costs     239       190  
    Gain on disposal of fixed assets     -       (16 )
    Provision for doubtful accounts     411       200  
    Provision for (reduction of) sales reserves     (150 )     735  
    Deferred income taxes     1,791       2,588  
    Other     (148 )     (144 )
        Effect of statement of operations adjustments     44,239       23,259  
    Changes in operating assets and liabilities:                
      Accounts receivable     5,282       5,109  
      Prepaid and other assets     (4,643 )     277  
      Accounts payable     3,582       532  
      Accrued liabilities     (3,472 )     (7,020 )
      Deferred revenues     (8,634 )     (12,000 )
      Income taxes payable     (5,190 )     3,847  
        Effect of changes in operating assets and liabilities     (13,075 )     (9,255 )
                 
Net cash provided by operating activities from continuing operations     39,066       28,518  
                 
Cash flows from investing activities:                
  Cash used in acquisition     -       (700 )
  Purchases of property and equipment     (1,611 )     (3,720 )
  Capitalized software development costs     (1,916 )     (1,700 )
  Purchases of marketable securities     (57,863 )     (72,270 )
  Sales and maturities of marketable securities     213,444       60,344  
                 
Net cash provided by (used in) investing activities from continuing operations     152,054       (18,046 )
                 
Cash flows from financing activities:                
  Proceeds from common stock issued from exercises of stock options     16,212       3,269  
  Proceeds from common stock issued under the employee stock purchase plan     3,211       3,448  
  Excess tax benefits from stock-based compensation     2,783       3,118  
  Withholding taxes related to equity award net share settlement     (6,509 )     (4,610 )
  Proceeds from debt     225,000       -  
  Repayment of debt     (95,000 )     (2,500 )
  Debt issuance costs     (5,725 )     -  
  Repurchase of common stock     -       (26,125 )
                 
Net cash provided by (used in) financing activities from continuing operations     139,972       (23,400 )
                 
Net cash transferred to discontinued operation     (208 )     (337 )
                 
Effect of exchange rate changes on cash and cash equivalents     (358 )     (10 )
                 
Net change in cash and cash equivalents from continuing operations     330,526       (13,275 )
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   $ 388,743     $ 52,250  
                 
                 
    Six Months Ended June 30  
    2013     2012  
Supplemental disclosure of cash flow information                
Cash flows from discontinued operation:                
  Net cash used in operating activities   $ (208 )   $ (337 )
  Net cash provided by investing activities     -       -  
  Net cash transferred from continuing operations     208       337  
  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.  
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)  
(In thousands)  
(GAAP, Unaudited)  
                           
                    Accumulated      
            Additional       Other   Total  
    Common Stock   Paid-In   Accumulated   Comprehensive   Stockholders'  
    Shares   Amount   Capital   Deficit   Income   Equity (Deficit)  
                               
Balances, December 31, 2011   50,997   $ 510   $ 429,734   $ (154,053 ) $ 6,870   $ 283,061  
                                     
Stock-based award activity   556     5     (1,333 )   -     -     (1,328 )
Common stock repurchased and retired   (1,012 )   (10 )   (6,515 )   (19,599 )   -     (26,124 )
Common stock issued under employee stock                                    
purchase plan   155     2     3,446     -     -     3,448  
Stock-based compensation   -     -     10,148     -     -     10,148  
Tax benefit from exercise of stock options   -     -     3,118     -     -     3,118  
Net income   -     -     -     14,736     -     14,736  
Unrealized loss on marketable securities   -     -     -     -     (16 )   (16 )
Foreign currency translation adjustments   -     -     -     -     (537 )   (537 )
Balances, June 30, 2012   50,696   $ 507   $ 438,598   $ (158,916 ) $ 6,317   $ 286,506  
                                     
Balances, December 31, 2012   50,457   $ 505   $ 453,585   $ (154,261 ) $ 10,030   $ 309,859  
                                     
Stock-based award activity   1,606     15     9,691     -     -     9,706  
Common stock issued under employee stock                                    
purchase plan   174     2     3,209     -     -     3,211  
Stock-based compensation   -     -     26,621     -     -     26,621  
Tax shortfall from exercise of stock options   -     -     (1,174 )   -     -     (1,174 )
Tax benefit from exercise of stock options   -     -     2,783     -     -     2,783  
Cash dividends declared on common stock   -     -     (470,133 )   -     -     (470,133 )
Net income   -     -     -     7,990     -     7,990  
Unrealized loss on marketable securities   -     -     -     -     (26 )   (26 )
Foreign currency translation adjustments   -     -     -     -     (3,650 )   (3,650 )
Balances, June 30, 2013   52,237   $ 522   $ 24,582   $ (146,271 ) $ 6,354   $ (114,813 )
                                     
                                     
 
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, income, 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 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  
      2013     2012  
      Amount     % of Net Revenues     Amount     % of Net Revenues  
                               
GAAP gross margin   $ 65,727     68.4 %   $ 58,395     65.1 %
  Amortization of acquired intangibles     1,883             1,901        
  Stock-based compensation     3,036             874        
Non-GAAP gross margin   $ 70,646     73.5 %   $ 61,170     68.2 %
                             
GAAP operating (loss) income   $ (5,849 )   (6.1 )%   $ 12,063     13.4 %
  Amortization of acquired intangibles     2,836             2,857        
  Stock-based compensation     27,189             5,084        
  Restructuring charges (benefit)     801             (34 )      
  Recapitalization costs     6,041             -        
Non-GAAP operating income   $ 31,018     32.3 %   $ 19,970     22.3 %
                             
GAAP net (loss) income   $ (4,155 )         $ 7,197        
  Amortization of acquired intangibles     2,836             2,857        
  Stock-based compensation     27,189             5,084        
  Restructuring charges (benefit)     801             (34 )      
  Recapitalization costs     6,692             -        
  Income tax adjustment (1)     (13,642 )           (2,645 )      
Non-GAAP net income   $ 19,721           $ 12,459        
                             
GAAP net (loss) income   $ (4,155 )         $ 7,197        
  Net interest     1,351             457        
  (Benefit) provision for income taxes     (3,024 )           4,063        
  Depreciation expense     2,920             2,943        
  Amortization expense     3,352             3,529        
  Stock-based compensation     27,189             5,084        
Adjusted EBITDA   $ 27,633           $ 23,273        
                             
Diluted net income (loss) per share                            
  GAAP   $ (0.08 )         $ 0.14        
  Non-GAAP   $ 0.37           $ 0.24        
                             
Shares used to compute GAAP diluted net (loss) income per share     51,639             52,977        
Shares used to compute Non-GAAP diluted net income per share     53,772             52,977        
                             
     
(1)   The estimated non-GAAP effective tax rate was 35% for the three months ended June 30, 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, expenses, gains and losses 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, 2013
  Continuing Operations
  Operating Income %
       
Projected GAAP 10.0% to 10.5%
       
  Projected amortization of acquired developed technology      
  and other acquired intangible asset adjustment   3.0%  
  Projected stock-based compensation adjustment   13.0%  
  Projected restructuring charge adjustment   1.0%  
  Projected recapitalization costs   1.5%  
       
Projected non-GAAP 28.5% to 29.0%
       
       
Contact:
CONTACTS
Media
Amanda Diamondstein-Cieplinska
Advent Software, Inc.
(415) 645-1668
Email Contact

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