Advent Software Reports Third Quarter 2013 Results

October 28, 2013

SAN FRANCISCO, CA--(Marketwired - Oct 28, 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 third quarter ended September 30, 2013.

"Advent delivered record revenues and solid profitability, demonstrating the value customers continue to place on our solutions," said Pete Hess, Chief Executive Officer at Advent. "Third quarter highlights also included our successful annual client conference, AdventConnect, where we shared a well-received preview of our new cloud-based solution platform, which launches next year. It's exciting to see the enthusiasm as we continue to sharpen our focus on our clients' success."

THIRD QUARTER 2013 RESULTS  

GAAP Results for Continuing Operations
The Company reported quarterly revenue of $96.8 million for the third quarter of 2013, compared to $90.2 million in the third quarter of 2012, a 7% increase.

Operating income for the third quarter of 2013 was $17.4 million, or 18.0% of revenue, compared to $12.6 million or 14.0% of revenue for the third quarter of 2012. 

Net income for the third quarter of 2013 was $9.8 million compared to $7.7 million in the third quarter of 2012.

On a fully diluted basis, earnings per share in the third quarter of 2013 were $0.18, compared to $0.15 in the third quarter of 2012. 

Operating cash flow in the third quarter of 2013 was $22.8 million, compared with $25.3 million in the third quarter of 2012.

Cash, cash equivalents and marketable securities totaled $41 million as of September 30, 2013, compared to $404 million as of June 30, 2013. On July 9, 2013, the Company paid a one-time special cash dividend of $9 per share totaling approximately $470 million. The special dividend was financed with cash on hand and proceeds from Advent's recently closed $425 million senior credit facility. Total outstanding debt as of September 30, 2013 was $350 million compared to $225 million as of June 30, 2013.

Deferred revenue as of September 30, 2013 was $173 million, compared to $174 million as of June 30, 2013.

Non-GAAP Results for Continuing Operations
Non-GAAP operating income for the third quarter of 2013 was $29.0 million, or 30.0% of revenue. This represents a 39% increase compared to $20.8 million, or 23.1% of revenue, in the third quarter of 2012. On a fully diluted basis, non-GAAP earnings per share were $0.31 in the third quarter of 2013 and represent a 22% increase from non-GAAP diluted earnings per share of $0.26 in the third quarter of 2012.

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

THIRD QUARTER HIGHLIGHTS

  • Continued Market Demand: Advent saw continued success across all of its client segments, from hedge funds and asset managers to family offices, fund administrators and the growing advisory market. The Company added new clients including: Crabel Capital Management, Seer Capital Management LP, Whitebox Advisors, Evercore Wealth Management, Cain, Watters & Associates, Essex Financial Services, Watermark Asset Management, Sparebanken Vest, Herald Investment Management, and CACEIS. Existing clients that expanded their relationship with Advent or migrated to a new Advent platform included: Vastardis Fund Services, Sentinel Investments, Weeden Prime Services, Swift Run Capital Management, Towneley Capital Management, Brown Advisory, and BTIG.

  • Client Conference Success: With over 1,000 attendees, AdventConnect 2013 was the Company's largest client conference in its 30 year history. At the conference, Advent unveiled a number of new enhancements and product solutions including Geneva® 10.0, Tamale RMS® 7.0 and Advent Direct™.

FINANCIAL GUIDANCE

Advent updates the following financial guidance for the fourth quarter and fiscal year 2013:

         
Guidance   Q4 2013   FY 2013
Total Revenue ($M)   $95 -$97   $380-$382
  YoY Revenue Growth   3% - 5%   6%
GAAP Operating Margin   n/a   11.0% - 11.5%
Stock Compensation Expense (% of revenue)   n/a   13.0%
Amortization of Intangibles (% of revenue)   n/a   3.0%
Recapitalization Costs (% of revenue)   n/a   1.5%
Restructuring Charges (% of revenue)   n/a   1.0%
Non-GAAP Operating Margin   n/a   29.5% - 30.0%
Operating Cash Flow ($M)   n/a   $93 - $97
Capital Expenditures ($M)   n/a   $8 - $10
Effective Tax Rate (GAAP)   n/a   25% - 30%
Effective Tax Rate (non-GAAP)   n/a   35%
         

INVESTOR CALL
Advent Software, Inc. will host its Q3 2013 quarterly earnings conference call at 5:00 p.m. Eastern time today. The Q3 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 (877) 280-4962 and request conference ID #26629001. Telephone replay will be available through midnight November 4, 2013. The replay number for domestic callers is (888) 286-8010, and for international callers is (617) 801-6888, with the conference ID of #34661098.

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 4,400 firms in nearly 60 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 (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 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 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, Advent Software, Geneva, and Tamale RMS are registered trademarks of, and the Advent logo 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  
    2013     2012  
ASSETS                
Current assets:                
  Cash and cash equivalents   $ 41,380     $ 58,217  
  Short-term marketable securities     -       111,192  
  Accounts receivable, net     56,597       61,069  
  Deferred taxes, current     18,934       18,934  
  Prepaid expenses and other     30,917       25,868  
  Current assets of discontinued operation     -       88  
    Total current assets     147,828       275,368  
Property and equipment, net     31,602       37,269  
Goodwill     206,956       206,932  
Other intangibles, net     30,478       38,205  
Long-term marketable securities     -       61,552  
Deferred taxes, long-term     20,399       24,524  
Other assets     16,024       12,994  
Noncurrent assets of discontinued operation     1,609       1,609  
                 
    Total assets   $ 454,896     $ 658,453  
                 
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY                
Current liabilities:                
  Accounts payable   $ 9,771     $ 5,190  
  Accrued liabilities     35,713       37,096  
  Deferred revenues     165,152       174,388  
  Income taxes payable     -       5,593  
  Current portion of long-term debt     20,000       10,000  
  Current liabilities of discontinued operation     625       262  
    Total current liabilities     231,261       232,529  
Deferred revenues, long-term     7,617       8,787  
Long-term income taxes payable     5,335       5,335  
Long-term debt     330,000       85,000  
Other long-term liabilities     11,556       13,139  
Noncurrent liabilities of discontinued operation     2,928       3,804  
                 
    Total liabilities     588,697       348,594  
                 
                 
Stockholders' (deficit) equity:                
  Common stock     509       505  
  Additional paid-in capital     32,673       453,585  
  Accumulated deficit     (176,869 )     (154,261 )
  Accumulated other comprehensive income     9,886       10,030  
    Total stockholders' (deficit) equity     (133,801 )     309,859  
                   
    Total liabilities and stockholders' (deficit) equity   $ 454,896     $ 658,453  
                     
                     
                     
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  
    2013     2012     2013     2012  
Net revenues:                                
Recurring revenues   $ 88,116     $ 81,090     $ 260,862     $ 240,752  
Non-recurring revenues     8,651       9,084       24,518       26,050  
                                 
    Total net revenues     96,767       90,174       285,380       266,802  
                                 
Cost of revenues (1):                                
Recurring revenues     17,782       17,216       52,173       51,962  
Non-recurring revenues     11,501       13,011       31,088       33,615  
Amortization of developed technology     2,508       2,586       7,405       7,700  
                                 
    Total cost of revenues     31,791       32,813       90,666       93,277  
                                 
    Gross margin     64,976       57,361       194,714       173,525  
                                 
Operating expenses (1):                                
Sales and marketing     18,546       17,965       58,967       56,122  
Product development     17,369       17,077       52,254       50,377  
General and administrative     10,894       8,752       43,895       27,619  
Amortization of other intangibles     953       955       2,863       2,867  
Recapitalization costs     -       -       6,041       -  
Restructuring (benefit) charges     (157 )     (17 )     2,959       53  
                                 
    Total operating expenses     47,605       44,732       166,979       137,038  
                                 
Income from continuing operations     17,371       12,629       27,735       36,487  
Interest and other income (expense), net     (2,977 )     (130 )     (4,610 )     (1,105 )
                                 
Income from continuing operations before income taxes     14,394       12,499       23,125       35,382  
Provision for income taxes     4,561       4,812       5,390       13,181  
                                 
    Net income from continuing operations   $ 9,833     $ 7,687     $ 17,735     $ 22,201  
                                 
Discontinued operation:                                
    Net (loss) income from discontinued operation (net of applicable taxes of $(16), $(13), $45 and $134, respectively)     (20 )     11       68       233  
Net income   $ 9,813     $ 7,698     $ 17,803     $ 22,434  
                                 
Basic net income (loss) per share (2):                                
  Continuing operations   $ 0.19     $ 0.15     $ 0.35     $ 0.44  
  Discontinued operation     (0.00 )     0.00       0.00       0.00  
    Total operations   $ 0.19     $ 0.15     $ 0.35     $ 0.44  
                                 
Diluted net income (loss) per share (2):                                
  Continuing operations   $ 0.18     $ 0.15     $ 0.33     $ 0.42  
  Discontinued operation     (0.00 )     0.00       0.00       0.00  
    Total operations   $ 0.18     $ 0.15     $ 0.33     $ 0.43  
                                 
Weighted average shares used to compute net income (loss) per share:                                
  Basic     51,576       50,401       51,241       50,722  
  Diluted     53,937       52,248       53,329       52,764  
                                 
(1) Includes stock-based employee compensation expense as follows:                                
                                 
  Cost of recurring revenues   $ 853     $ 615     $ 2,647     $ 1,810  
  Cost of non-recurring revenues     578       331       2,690       926  
    Total cost of revenues     1,431       946       5,337       2,736  
                                   
  Sales and marketing     2,874       1,877       10,920       5,263  
  Product development     2,083       1,440       6,941       4,338  
  General and administrative     2,003       1,108       17,399       3,007  
    Total operating expenses     6,960       4,425       35,260       12,608  
                                 
  Total stock-based employee compensation expense   $ 8,391     $ 5,371     $ 40,597     $ 15,344  
                                 
(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
 
    2013     2012  
Cash flows from operating activities:                
  Net income   $ 17,803     $ 22,434  
  Adjustment to net income for discontinued operation net income     (68 )     (233 )
  Net income from continuing operations     17,735       22,201  
                   
  Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:                
    Stock-based compensation     40,597       15,344  
    Excess tax benefit from stock-based compensation     (4,220 )     (4,693 )
    Depreciation and amortization     18,903       19,372  
    Amortization of debt issuance costs     593       285  
    Provision for doubtful accounts     290       209  
    (Reduction of) provision for sales reserves     (196 )     1,019  
    Deferred income taxes     6,281       4,043  
    Other     (45 )     (521 )
        Effect of statement of operations adjustments     62,203       35,058  
    Changes in operating assets and liabilities:                
      Accounts receivable     4,181       8,062  
      Prepaid and other assets     (860 )     4,137  
      Accounts payable     3,843       (2,066 )
      Accrued liabilities     (9,801 )     (7,137 )
      Deferred revenues     (10,210 )     (13,506 )
      Income taxes payable     (5,190 )     7,024  
        Effect of changes in operating assets and liabilities     (18,037 )     (3,486 )
                 
Net cash provided by operating activities from continuing operations     61,901       53,773  
                 
Cash flows from investing activities:                
  Cash used in acquisition     -       (700 )
  Purchases of property and equipment     (2,161 )     (5,383 )
  Capitalized software development costs     (2,556 )     (1,942 )
  Purchases of marketable securities     (57,863 )     (91,926 )
  Sales and maturities of marketable securities     228,619       69,600  
                 
Net cash provided by (used in) investing activities from continuing operations     166,039       (30,351 )
                 
Cash flows from financing activities:                
  Proceeds from common stock issued from exercises of stock options     18,382       4,211  
  Proceeds from common stock issued under the employee stock purchase plan     3,211       3,448  
  Excess tax benefits from stock-based compensation     4,220       4,693  
  Withholding taxes related to equity award net share settlement     (8,043 )     (5,257 )
  Proceeds from debt     375,000       -  
  Repayment of debt     (120,000 )     (3,750 )
  Debt issuance costs     (5,725 )     -  
  Repurchase of common stock     (41,256 )     (41,275 )
  Payment of cash dividend     (470,133 )     -  
                 
Net cash used in financing activities from continuing operations     (244,344 )     (37,930 )
                 
Net cash transferred to discontinued operation     (358 )     (593 )
                 
Effect of exchange rate changes on cash and cash equivalents     (75 )     258  
                 
Net change in cash and cash equivalents from continuing operations     (16,837 )     (14,843 )
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   $ 41,380     $ 50,682  
                 
             
    Nine Months Ended
September 30
 
    2013     2012  
Supplemental disclosure of cash flow information:                
Noncash investing activities:                
  Capital expenditures included in accounts payable   $ 738     $ -  
Cash flows from discontinued operation:                
  Net cash used in operating activities   $ (358 )   $ (593 )
  Net cash provided by investing activities     -       -  
  Net cash transferred from continuing operations     358       593  
  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.
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 September 30  
    2013     2012  
    Amount     % of Net Revenues     Amount     % of Net Revenues  
                             
GAAP gross margin   $ 64,976     67.1 %   $ 57,361     63.6 %
  Amortization of acquired intangibles     1,883             1,894        
  Stock-based compensation     1,431             946        
Non-GAAP gross margin   $ 68,290     70.6 %   $ 60,201     66.8 %
                             
GAAP operating income   $ 17,371     18.0 %   $ 12,629     14.0 %
  Amortization of acquired intangibles     2,836             2,849        
  Stock-based compensation     8,391             5,371        
  Restructuring benefit     (157 )           (17 )      
  Recapitalization costs     -             -        
  Transaction related fees     565             -        
Non-GAAP operating income   $ 29,006     30.0 %   $ 20,832     23.1 %
                             
GAAP net income   $ 9,833           $ 7,687        
  Amortization of acquired intangibles     2,836             2,849        
  Stock-based compensation     8,391             5,371        
  Restructuring benefit     (157 )           (17 )      
  Recapitalization costs     -             -        
  Transaction related fees     565             -        
  Income tax adjustment (1)     (4,549 )           (2,434 )      
Non-GAAP net income   $ 16,919           $ 13,456        
                             
GAAP net income   $ 9,833           $ 7,687        
  Net interest     2,631             422        
  Provision for income taxes     4,561             4,812        
  Depreciation expense     2,771             2,980        
  Amortization expense     3,461             3,541        
  Stock-based compensation     8,391             5,371        
Adjusted EBITDA   $ 31,648           $ 24,813        
                             
Diluted net income per share                            
  GAAP   $ 0.18           $ 0.15        
  Non-GAAP   $ 0.31           $ 0.26        
                             
Shares used to compute diluted net income per share     53,937             52,248        
                             
(1) The estimated non-GAAP effective tax rate was 35% for the three months ended September 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 11.0% to 11.5%
       
  Projected stock-based compensation adjustment   13.0%  
  Projected amortization of acquired developed technology and other acquired intangible asset adjustment   3.0%  
  Projected recapitalization costs   1.5%  
  Projected restructuring charge adjustment   1.0%  
       
Projected non-GAAP 29.5% to 30.0%