Advent Software Reports Fourth Quarter

The following excerpt is from the company's SEC filing.

SAN FRANCISCO — February 3, 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 fourth quarter and year ended December 31, 2013.

“The fourth quarter capped off a year of record revenue and operating cash flow, while we also expanded non-GAAP operating margin to 30% for the year,” said Pete Hess, Chief Executive Officer of Advent. “Advent’s success, including our strong renewal rates, demonstrates our ability to help customers respond to the evolving trends in investment management.  We are excited about our solutions and ability to expand the value we provide to our clients and shareholders.”

The Company reported quarterly revenue of $97.6 million for the fourth quarter of 2013, compared to $92.0 million in the fourth quarter of 2012, a 6% increase.  Total annual revenue for the year ended December 31, 2013 was $383.0 million, compared to $358.8 million recorded in 2012, a 7% increase.

Operating income for the fourth quarter of 2013 was $18.4 million, or 18.9% of revenue, compared to $12.7 million or 13.8% of revenue for the fourth quarter of 2012.  Operating income for the year ended December 31, 2013 was $46.1 million, or 12.0% of revenue, compared to $49.2 million, or 13.7% of revenue, for 2012. Our operating income for fiscal year 2013 included recapitalization charges of $6.0 million and stock compensation expense of $48.2 million, of which $26.7 million was due to the modification of equity awards.

Net income for the fourth quarter of 2013 was $11.0 million compared to $8.0 million in the fourth quarter of 2012. Net income for the year ended December 31, 2013 was $28.8 million compared to $30.2 million for 2012, a 5% decrease. On a fully diluted basis, earnings per share in the fourth quarter of 2013 were $0.20, compared to $0.16 in the fourth quarter of 2012.  On a fully diluted basis, earnings per share for the year ended December 31, 2013 was $0.54, compared to $0.58 for 2012.

Operating cash flow in the fourth quarter of 2013 was $36.7 million, compared with $32.8 million in the fourth quarter of 2012. Operating cash flow for the year ended December 31, 2013 totaled $98.6 million, compared with $86.6 million in 2012, a 14% increase.

Cash, cash equivalents, and marketable securities totaled $34 million as of December 31, 2013, compared to $231 million as of December 31, 2012. Total outstanding debt as of December 31, 2013 was $305 million compared to $95 million as of December 31, 2012. In 2013, the Company paid a one-time special dividend totaling $470 million that was partially financed by long-term debt proceeds.

  Non-GAAP Results for Continuing Operations   Non-GAAP operating income for the fourth quarter of 2013 was $28.9 million, or 29.6% of revenue. This represents a 17% increase compared to $24.6 million, or 26.7% of revenue, in the fourth quarter of 2012.  Non-GAAP operating income for the year ended December 31, 2013 was $115.3 million, or 30.1% of revenue. This represents a 36% increase compared to $85.0 million of non-GAAP operating income, or 23.7% of revenue, for 2012.   On a fully diluted basis, non-GAAP earnings per share were $0.32 in the fourth quarter of 2013 and they represent a 5% increase from non-GAAP diluted net income per share of $0.30 in the fourth quarter of 2012. On a fully diluted basis, non-GAAP net income per share was $1.32 for the year ended December 31, 2013, a 28% increase compared to $1.03 per share for 2012.   The reconciliation between GAAP and non-GAAP financial measures is provided at the end of this press release.   FOURTH QUARTER AND FULL YEAR 2013 HIGHLIGHTS   ·                  Strong Renewal Rate: Advent delivered a strong initially reported renewal rate for Q3 2013 of 97%, compared to 94% the same period last year. This is the highest initial renewal rate reported in five years.   ·                  International Success: Advent saw enhanced success in the international market, signing SMT Fund Services, part of Sumitomo Mitsui Bank Group, as well as Nordea Bank AB in the fourth quarter.   ·                  Solid Growth in Black Diamond: Total assets on the platform increased 64% for the year to over $220 billion and the number of clients increased 29%, including many large advisory firms such as McGladrey Wealth Management and Essex Financial.  Black Diamond also achieved its highest renewal rate and client satisfaction scores in its history.   ·                  New Releases Across the Product Portfolio: Advent announced global availability of new releases to several key products that includes compelling new functionality for asset and wealth management firms, alternative managers, family offices, and administrators. The updated products include Geneva®, Advent Portfolio Exchange® (APX), Moxy®, Advent Rules Manager®, and Advent Revenue Center®.   FINANCIAL GUIDANCE   Advent updates the following financial guidance for the first quarter and fiscal year 2014:   Guidance   Q1 2014   FY 2014   Total Revenue ($M)   $95 -$97   $395-$403   GAAP Operating Margin   n/a   21.0% - 21.5%   Stock Compensation Expense (% of revenue)   n/a   8%   Amortization of Intangibles (% of revenue)   n/a   2%   Non-GAAP Operating Margin   n/a   31.0% - 31.5%   Operating Cash Flow ($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 Q4 2013 quarterly earnings conference call at 5:00 p.m. Eastern time today.  The Q4 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 866-578-5771 and request conference ID #16791928.  Telephone replay will be available through midnight February 10, 2014.  The replay number for domestic callers is 888-286-8010, and for international callers is 617-801-6888, with the conference ID of #88334133. 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 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 (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, the Advent logo, and Advent Software, are registered trademarks of Advent Software, Inc.  Any other company names or marks mentioned herein are those of their respective owners.   CONTACTS Media Contact: Amanda Diamondstein-Cieplinska Advent Software, Inc. (415) 645-1668  

  ADVENT SOFTWARE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (GAAP, Unaudited)       December 31   December 31       2013   2012   ASSETS           Current assets:           Cash and cash equivalents   $ 33,828   $ 58,217   Short-term marketable securities   —   111,192   Accounts receivable, net   58,717   61,069   Deferred taxes, current   24,898   18,934   Prepaid expenses and other   30,114   25,868   Current assets of discontinued operation   100   88   Total current assets   147,657   275,368   Property and equipment, net   31,698   37,269   Goodwill   207,818   206,932   Other intangibles, net   27,392   38,205   Long-term marketable securities   —   61,552   Deferred taxes, long-term   23,020   24,524   Other assets   17,372   12,994   Noncurrent assets of discontinued operation   1,337   1,609               Total assets   $ 456,294   $ 658,453               LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY           Current liabilities:           Accounts payable   $ 5,348   $ 5,190   Accrued liabilities   41,625   37,096   Deferred revenues   186,107   174,388   Income taxes payable   —   5,593   Current portion of long-term debt   20,000   10,000   Current liabilities of discontinued operation   600   262   Total current liabilities   253,680   232,529   Deferred revenues, long-term   7,809   8,787   Long-term income taxes payable   7,667   5,335   Long-term debt   285,000   85,000   Other long-term liabilities   11,171   13,139   Noncurrent liabilities of discontinued operation   2,782   3,804               Total liabilities   568,109   348,594               Stockholders’ (deficit) equity:           Common stock   513   505   Additional paid-in capital   42,533   453,585   Accumulated deficit   (165,870 ) (154,261 ) Accumulated other comprehensive income   11,009   10,030   Total stockholders’ (deficit) equity   (111,815 ) 309,859               Total liabilities and stockholders’ (deficit) equity   $ 456,294   $ 658,453    

  ADVENT SOFTWARE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (GAAP, Unaudited)       Three Months Ended December 31   Twelve Months Ended December 31       2013   2012   2013   2012   Net revenues:                   Recurring revenues   $ 89,019   $ 83,875   $ 349,881   $ 324,627   Non-recurring revenues   8,560   8,142   33,078   34,192                       Total net revenues   97,579   92,017   382,959   358,819                       Cost of revenues (1):                   Recurring revenues   18,417   16,991   70,590   68,953   Non-recurring revenues   8,956   9,890   40,044   43,505   Amortization of developed technology   1,682   2,558   9,087   10,258                       Total cost of revenues   29,055   29,439   119,721   122,716                       Gross margin   68,524   62,578   263,238   236,103                       Operating expenses (1):                   Sales and marketing   20,098   18,566   79,065   74,688   Product development   17,464   16,637   69,718   67,014   General and administrative   10,842   10,144   54,737   37,763   Amortization of other intangibles   912   958   3,775   3,825   Recapitalization costs   —   —   6,041   —   Restructuring charges   811   3,581   3,770   3,634                       Total operating expenses   50,127   49,886   217,106   186,924                       Income from continuing operations   18,397   12,692   46,132   49,179   Interest and other income (expense), net   (2,603 ) (515 ) (7,213 ) (1,620 )                     Income from continuing operations before income taxes   15,794   12,177   38,919   47,559   Provision for income taxes   4,777   4,147   10,167   17,328                       Net income from continuing operations   $ 11,017   $ 8,030   $ 28,752   $ 30,231                       Discontinued operation:                   Net (loss) income from discontinued operation (net of applicable taxes of $(11), $(8), $34 and $126, respectively)   (18 ) (49 ) 50   184                       Net income   $ 10,999   $ 7,981   $ 28,802   $ 30,415                       Basic net income (loss) per share (2):                   Continuing operations   $ 0.22   $ 0.16   $ 0.56   $ 0.60   Discontinued operation   (0.00 ) (0.00 ) 0.00   0.00   Total operations   $ 0.22   $ 0.16   $ 0.56   $ 0.60                       Diluted net income (loss) per share (2):                   Continuing operations   $ 0.20   $ 0.16   $ 0.54   $ 0.58   Discontinued operation   (0.00 ) (0.00 ) 0.00   0.00   Total operations   $ 0.20   $ 0.15   $ 0.54   $ 0.58                       Weighted average shares used to compute net income (loss) per share:                   Basic   51,105   50,276   51,207   50,614   Diluted   53,844   51,802   53,378   52,425     (1) Includes stock-based employee compensation expense as follows:   Cost of recurring revenues   $ 844   $ 595   $ 3,491   $ 2,405   Cost of non-recurring revenues   563   310   3,253   1,236   Total cost of revenues   1,407   905   6,744   3,641                       Sales and marketing   2,345   1,902   13,265   7,165   Product development   1,922   1,483   8,863   5,821   General and administrative   1,908   1,167   19,307   4,174   Total operating expenses   6,175   4,552   41,435   17,160                       Total stock-based employee compensation expense   $ 7,582   $ 5,457   $ 48,179   $ 20,801     (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)       Twelve Months Ended December 31       2013   2012   Cash flows from operating activities:           Net income   $ 28,802   $ 30,415   Adjustment to net income for discontinued operation net income   (50 ) (184 ) Net income from continuing operations   28,752   30,231               Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:           Stock-based compensation   48,179   20,801   Excess tax benefit from stock-based compensation   (7,477 ) (7,785 ) Depreciation and amortization   24,393   25,879   Amortization of debt issuance costs   947   381   Provision for doubtful accounts   278   403   (Reduction of) provision for sales reserves   (306 ) 1,154   Deferred income taxes   4,589   5,230   Other   29   (252 ) Effect of statement of operations adjustments   70,632   45,811   Changes in operating assets and liabilities:           Accounts receivable   2,074   575   Prepaid and other assets   (1,762 ) 822   Accounts payable   27   (5,368 ) Accrued liabilities   (6,089 ) (2,055 ) Deferred revenues   11,047   7,151   Income taxes payable   (6,117 ) 9,453   Effect of changes in operating assets and liabilities   (820 ) 10,578               Net cash provided by operating activities from continuing operations   98,564   86,620               Cash flows from investing activities:           Cash used in acquisition   —   (700 ) Purchases of property and equipment   (5,616 ) (6,369 ) Capitalized software development costs   (1,995 ) (2,137 ) Purchases of marketable securities   (57,863 ) (220,994 ) Sales and maturities of marketable securities   228,619   118,588   Change in restricted cash   —   95               Net cash provided by (used in) investing activities from continuing operations   163,145   (111,517 )             Cash flows from financing activities:           Proceeds from common stock issued from exercises of stock options   19,495   5,173   Proceeds from common stock issued under the employee stock purchase plan   6,293   6,661   Excess tax benefits from stock-based compensation   7,477   7,785   Withholding taxes related to equity award net share settlement   (11,833 ) (5,496 ) Proceeds from debt   375,000   50,000   Repayment of debt   (165,000 ) (5,000 ) Debt issuance costs   (5,725 ) —   Repurchase of common stock   (41,256 ) (41,275 ) Payment of cash dividend   (470,133 ) —               Net cash (used in) provided by financing activities from continuing operations   (285,682 ) 17,848               Net cash transferred to discontinued operation   (375 ) (561 )             Effect of exchange rate changes on cash and cash equivalents   (41 ) 302               Net change in cash and cash equivalents from continuing operations   (24,389 ) (7,308 ) 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   $ 33,828   $ 58,217         Twelve Months Ended December 31       2013   2012   Supplemental disclosure of cash flow information:           Cash flows from discontinued operation:           Net cash used in operating activities   $ (375 ) $ (561 ) Net cash transferred from continuing operations   375   561   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 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 December 31       2013   2012       Amount   % of Net Revenues   Amount   % of Net Revenues                       GAAP gross margin   $ 68,524   70.2%   $ 62,578   68.0%   Amortization of acquired intangibles   1,177       1,908       Stock-based compensation   1,407       905       Non-GAAP gross margin   $ 71,108   72.9%   $ 65,391   71.1%                       GAAP operating income   $ 18,397   18.9%   $ 12,692   13.8%   Amortization of acquired intangibles   2,089       2,866       Stock-based compensation   7,582       5,457       Restructuring charges   811       3,581       Non-GAAP operating income   $ 28,879   29.6%   $ 24,596   26.7%                       GAAP net income   $ 11,017       $ 8,030       Amortization of acquired intangibles   2,089       2,866       Stock-based compensation   7,582       5,457       Restructuring charges   811       3,581       Income tax adjustment (1)   (4,420 )     (4,281 )     Non-GAAP net income   $ 17,079       $ 15,653                           GAAP net income   $ 11,017       $ 8,030       Net interest   2,510       408       Provision for income taxes   4,777       4,147       Depreciation expense   2,895       2,991       Amortization expense   2,594       3,516       Stock-based compensation   7,582       5,457       Adjusted EBITDA   $ 31,375       $ 24,549                           Diluted net income per share                   GAAP   $ 0.20       $ 0.16       Non-GAAP   $ 0.32       $ 0.30                           Shares used to compute diluted net income per share   53,844       51,802         (1) The estimated non-GAAP effective tax rate was 35% for the three months ended December 31, 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 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.       Twelve Months Ended December 31       2013   2012       Amount   % of Net Revenues   Amount   % of Net Revenues                       GAAP gross margin   $ 263,238   68.7%   $ 236,103   65.8%   Amortization of acquired intangibles   6,841       7,599       Stock-based compensation   6,744       3,641       Non-GAAP gross margin   $ 276,823   72.3%   $ 247,343   68.9%                       GAAP operating income   $ 46,132   12.0%   $ 49,179   13.7%   Amortization of acquired intangibles   10,616       11,424       Stock-based compensation   48,179       20,801       Restructuring charges   3,770       3,634       Recapitalization costs   6,041       —       Transaction related fees   565       —       Non-GAAP operating income   $ 115,303   30.1%   $ 85,038   23.7%                       GAAP net income   $ 28,752       $ 30,231       Amortization of acquired intangibles   10,616       11,424       Stock-based compensation   48,179       20,801       Restructuring charges   3,770       3,634       Recapitalization costs   6,692       —       Transaction related fees   565       —       Income tax adjustment (1)   (27,892 )     (11,868 )     Non-GAAP net income   $ 70,682       $ 54,222                           GAAP net income   $ 28,752       $ 30,231       Net interest   6,949       1,732       Provision for income taxes   10,167       17,328       Depreciation expense   11,531       11,796       Amortization expense   12,862       14,083       Stock-based compensation   48,179       20,801       Adjusted EBITDA   $ 118,440       $ 95,971                           Diluted net income per share                   GAAP   $ 0.54       $ 0.58       Non-GAAP   $ 1.32       $ 1.03                           Shares used to compute diluted net income per share   53,378       52,425         (1) The estimated non-GAAP effective tax rate was 35% for the twelve months ended December 31, 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 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   21.0% to 21.5%           Projected stock-based compensation adjustment   8.0%   Projected amortization of acquired developed technology and other acquired intangible asset adjustment   2.0%           Projected non-GAAP   31.0% to 31.5%    

The above information was disclosed in a filing to the SEC. To see this filing in its entirety, click here. Advent Software next reports earnings on February 03, 2014.

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