Advent Software Q2 net income hit by stock compensation expenses

Results

The Company reported total net revenues for the second quarter of 2006 of $44.4 million, compared with $43.7 million in the first quarter of 2006, and $40.9 million in the same quarter last year.

Total expenses, including cost of revenues, for the second quarter of 2006 were $43.9 million, compared with $42.6 million in the first quarter of 2006, and $41.6 million in the same quarter last year. Expenses for the second and first quarters of 2006 included $3.5 million and $3.2 million, respectively, of stock-based compensation expense due to the January 1, 2006 implementation of SFAS 123.

Net income for the second quarter of 2006 was $1.6 million, compared with $3.4 million in the first quarter of 2006. In the second quarter of 2005, the Company reported net income of $3.9 million, which did not include stock-based compensation expense.

Diluted earnings per share in the second quarter of 2006 was $0.05, compared to $0.11 in the previous quarter. Diluted earnings per share in the second quarter of 2005 was $0.13, and did not include the impact of stock- based compensation expense.

Cash, cash equivalents and short-term investments totaled $97.2 million as of June 30, 2006. This compares to $136.5 million at March 31, 2006. Under the terms of the Board-authorized stock repurchase program announced on April 27, 2006, Advent repurchased 1.6 million shares (of the 2.3 million shares authorized) of the Company's common stock in the second quarter, for a total outlay of $52.8 million. Cash flow from operations in the second quarter of 2006 was approximately $12.1 million, compared with $9.3 million in the first quarter of 2006 and $8.1 million in the second quarter of 2005.

"We are very pleased to report another strong quarter for Advent, which reflects the ongoing strength and momentum of Advent's core business," said Stephanie DiMarco, Chief Executive Officer. "The robust demand for our industry-leading solutions has allowed us to expand our customer base while investing for growth and managing our costs - positioning Advent for continued leadership in our market."

Second Quarter Highlights

Expanding Customer Relationships: Advent signed 89 customer agreements in the second quarter and saw strong demand for its newest platform solution, Advent Portfolio Exchange, with 18 clients choosing the solution to manage their investment operations needs, including Aronson + Johnson + Ortiz, The Fiduciary Group and the Bedrock Group. The Company also licensed Geneva, Advent's premier global investment accounting and portfolio management software, to 11 new customers representing firms from the hedge fund, prime broker and fund administrator market segments.

Continuing Momentum in the Transition to Term: Demonstrating both the success of the Company's transition to term licenses and continued acceptance of Advent's products in the market, Advent signed new term contract bookings in the second quarter totaling $12.9 million with an average term of 3.1 years. This compares with $7.9 million in the first quarter of 2006, marking the highest term bookings quarter since the transition to the term license model began two years ago.

Investing in Innovation: In the second quarter, the Company released Advent Portfolio Exchange V. 1.5, which offers expanded scalability and enhanced integration features, marking a significant milestone in the on-going maturation of this next-generation platform. The Company also delivered key enhancements to Geneva, and 70 percent of the client base has either upgraded to or is currently implementing Geneva 6.0.

"As our second quarter highlights demonstrate, Advent continues to deliver on our commitment to provide and implement superior and reliable products to the market that help our customers better serve their clients," continued DiMarco. "Going forward, we will continue to execute on our strategy to strengthen and grow our core business - delivering mission-critical software and services that drive success for the investment management community."

Guidance

Advent issued the following guidance for Q3 2006:

• Revenues are projected to be in the range of $44 million to $46 million. There is no change to full year guidance of $180-$185 million, as term license accounting is causing a significant deferral of revenues to future periods.
• Expenses, including cost of revenues, amortization of developed technology and intangibles and stock-based compensation expense, are projected to be in the range of $43.5 million to $44.5 million.
• Diluted weighted average shares outstanding will increase by roughly 0.5 percent in the third quarter from the second quarter amount of 31.3 million shares, excluding the impact of any share repurchases.