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**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 
| **x**      | ** ** | **Quarterly  report pursuant to Section 13 or 15(d) of the Securities Exchange  Act of 1934 for the quarterly period ended March 31, 2009** |
|------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                                                                                 |
| ** ** | ** ** | **or**                                                                                                                                                     |
| ** ** | ** ** | ** **                                                                                                                                                 |
| **o**      | ** ** | **Transition  report pursuant to Section 13 or 15(d) of the Securities Exchange  Act of 1934**                                                   |

 

**Commission file number:  0-26994**

 

**ADVENT SOFTWARE, INC.**

(Exact name of registrant as specified in itscharter)

 
| **Delaware**                                               | ** ** | **94-2901952**                       |
|------------------------------------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of  incorporation or          |       | (IRS Employer Identification Number) |
| organization)                                              |       |                                 |
|                                                       |       |                                 |
| **600 Townsend Street, San Francisco,  California 94103**  |
| (Address of principal executive offices and  zip code)     |
| ** **                                                 | ** ** | ** **                           |
| **(415) 543-7696**                                    |
| (Registrant’s telephone number, including  area code) |

 

Indicate bycheck mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.

Yes x  No o

 

Indicate by check mark whether theregistrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and postedpursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files). Yes o    No o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “large accelerated filer,” “acceleratedfiler,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.(Check one):

 
| Large  accelerated filer o |   | Accelerated filer x         |
|----------------------------|--------|-----------------------------|
|                       |   |                        |
| Non-accelerated filer o    |   | Smaller reporting company o |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  Yes  o No x

 

The number of shares of the registrant’s Common Stock outstanding as ofApril 30, 2009 was 25,220,723.

 

 

 

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**INDEX**

 
| **PART I. FINANCIAL INFORMATION** | ** **                                                                                  |
|----------------------------------------|---------------------------------------------------------------------------------------------|
| Item 1.                                | Financial Statements                                                                        |   |
|                                   | Condensed Consolidated Balance Sheets                                                       |   |
|                                   | Condensed Consolidated Statements of  Operations                                            |   |
|                                   | Condensed Consolidated Statements of Cash  Flows                                            |   |
|                                   | Notes to  Condensed Consolidated Financial Statements                                       |   |
| Item 2.                                | Management’s Discussion and Analysis of  Financial Condition and Results of Operations |   |
| Item 3.                                | Quantitative and Qualitative Disclosures  About Market Risk                                 |   |
| Item 4.                                | Controls and Procedures                                                                     |   |
| **PART II. OTHER INFORMATION**    | ** **                                                                                  |
| Item 1.                                | Legal Proceedings                                                                           |   |
| Item 1A.                               | Risk Factors                                                                                |   |
| Item 2.                                | Unregistered Sales of Equity Securities and  Use of Proceeds                                |   |
| Item 3.                                | Defaults Upon Senior Securities                                                             |   |
| Item 4.                                | Submission of Matters to a Vote of Security  Holders                                        |   |
| Item 5.                                | Other Information                                                                           |   |
| Item 6.                                | Exhibits                                                                                    |   |
| **Signatures**                         | ** **                                                                                  |

 

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**PART I.FINANCIAL INFORMATION**

 

**Item 1. Financial Statements**

 

**ADVENT SOFTWARE, INC.**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

**(In thousands)**

**(Unaudited)**

 
| ** **                                      | ** ** | **March 31** | ** ** | **December 31** | ** ** |
|-------------------------------------------------|------------|-------------------|------------|----------------------|------------|
| ** **                                      | ** ** | **2009**          | ** ** | **2008**             | ** ** |
| **ASSETS**                                      | ** ** | ** **        | ** ** | ** **           | ** ** |
| Current assets:                                 |       |              |       |                 |       |
| Cash and cash equivalents                       |       | $                 | 36,339     |                 | $          | 48,351 |   |
| Accounts receivable, net                        |       | 49,304            |       | 51,670               |       |
| Deferred taxes, current                         |       | 13,119            |       | 13,121               |       |
| Prepaid expenses and other                      |       | 17,396            |       | 20,153               |       |
| Total current assets                            |       | 116,158           |       | 133,295              |       |
| Property and equipment, net                     |       | 39,916            |       | 41,240               |       |
| Goodwill                                        |       | 147,744           |       | 149,609              |       |
| Other intangibles, net                          |       | 27,149            |       | 29,110               |       |
| Deferred taxes, long-term                       |       | 54,785            |       | 54,786               |       |
| Other assets                                    |       | 11,850            |       | 11,554               |       |
|                                            |       |              |       |                 |       |
| Total assets                                    |       | $                 | 397,602    |                 | $          | 419,594 |   |
|                                            |       |              |       |                 |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**   |       |              |       |                 |       |
| Current liabilities:                            |       |              |       |                 |       |
| Accounts payable                                |       | $                 | 6,351      |                 | $          | 5,625 |   |
| Accrued liabilities                             |       | 24,706            |       | 27,924               |       |
| Deferred revenues                               |       | 139,726           |       | 146,714              |       |
| Income taxes payable                            |       | 3,892             |       | 978                  |       |
| Total current liabilities                       |       | 174,675           |       | 181,241              |       |
| Deferred income taxes                           |       | 243               |       | 286                  |       |
| Long-term debt                                  |       | 15,000            |       | 25,000               |       |
| Deferred revenue, long-term                     |       | 7,698             |       | 6,449                |       |
| Other long-term liabilities                     |       | 10,449            |       | 10,795               |       |
|                                            |       |              |       |                 |       |
| Total liabilities                               |       | 208,065           |       | 223,771              |       |
|                                            |       |              |       |                 |       |
| Commitments and contingencies (See Note 10)     |       |              |       |                 |       |
|                                            |       |              |       |                 |       |
| Stockholders’ equity:                      |       |              |       |                 |       |
| Common stock                                    |       | 252               |       | 257                  |       |
| Additional paid-in capital                      |       | 360,680           |       | 365,351              |       |
| Accumulated deficit                             |       | (176,238          | )          | (176,484             | )          |
| Accumulated other comprehensive income          |       | 4,843             |       | 6,699                |       |
| Total stockholders’ equity                 |       | 189,537           |       | 195,823              |       |
|                                            |       |              |       |                 |       |
| Total liabilities and stockholders’ equity |       | $                 | 397,602    |                 | $          | 419,594 |   |

 

The accompanying notes are an integral partof these condensed consolidated financial statements.

 

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**ADVENT SOFTWARE, INC.**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

**(In thousands, except per share data)**

**(Unaudited)**

 
| ** **                                                     | ** ** | **Three Months Ended March 31** | ** ** |
|----------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                     | ** ** | **2009**                                            | ** ** | **2008** | ** ** |
| **Net revenues:**                                              |       |                                                |       |   |   |
| Term license, maintenance and other  recurring                 |       | $                                                   | 60,897     |   | $ | 49,139 |   |
| Perpetual license fees                                         |       | 3,902                                               |       | 5,625 |   |
| Professional services and other                                |       | 7,987                                               |       | 6,709 |   |
|                                                           |       |                                                |       |   |   |
| Total net revenues                                             |       | 72,786                                              |       | 61,473 |   |
|                                                           |       |                                                |       |   |   |
| **Cost of revenues:**                                          |       |                                                |       |   |   |
| Term license, maintenance and other  recurring                 |       | 12,136                                              |       | 10,934 |   |
| Perpetual license fees                                         |       | 175                                                 |       | 317 |   |
| Professional services and other                                |       | 8,681                                               |       | 7,726 |   |
| Amortization of developed technology                           |       | 1,517                                               |       | 722 |   |
|                                                           |       |                                                |       |   |   |
| Total cost of revenues                                         |       | 22,509                                              |       | 19,699 |   |
|                                                           |       |                                                |       |   |   |
| Gross margin                                                   |       | 50,277                                              |       | 41,774 |   |
|                                                           |       |                                                |       |   |   |
| **Operating expenses:**                                        |       |                                                |       |   |   |
| Sales and marketing                                            |       | 17,077                                              |       | 15,390 |   |
| Product development                                            |       | 13,595                                              |       | 12,890 |   |
| General and administrative                                     |       | 9,263                                               |       | 9,227 |   |
| Amortization of other intangibles                              |       | 444                                                 |       | 487 |   |
| Restructuring charges                                          |       | 45                                                  |       | 56 |   |
|                                                           |       |                                                |       |   |   |
| Total operating expenses                                       |       | 40,424                                              |       | 38,050 |   |
|                                                           |       |                                                |       |   |   |
| Income from operations                                         |       | 9,853                                               |       | 3,724 |   |
| Interest and other income (expense), net                       |       | (377                                                | )          | 227 |   |
|                                                           |       |                                                |       |   |   |
| Income before income taxes                                     |       | 9,476                                               |       | 3,951 |   |
| Provision for income taxes                                     |       | 3,247                                               |       | 1,316 |   |
|                                                           |       |                                                |       |   |   |
| **Net income**                                                 |       | $                                                   | 6,229      |   | $ | 2,635 |   |
|                                                           |       |                                                |       |   |   |
| Net income per share:                                          |       |                                                |       |   |   |
| Basic                                                          |       | $                                                   | 0.25       |   | $ | 0.10 |   |
| Diluted                                                        |       | $                                                   | 0.24       |   | $ | 0.09 |   |
|                                                           |       |                                                |       |   |   |
| Weighted average shares used to compute net  income per share: |       |                                                |       |   |   |
| Basic                                                          |       | 25,249                                              |       | 26,570 |   |
| Diluted                                                        |       | 25,844                                              |       | 28,080 |   |

 

The accompanying notes are an integral partof these condensed consolidated financial statements.

 

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**ADVENTSOFTWARE, INC.**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(In thousands)**

**(Unaudited)**

 
| ** **                                                                         | ** ** | **Three Months Ended March 31** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                         | ** ** | **2009**                                            | ** ** | **2008** | ** ** |
| **Cash flows from operating activities:**                                          |       |                                                |       |   |   |
| Net income                                                                         |       | $                                                   | 6,229      |   | $ | 2,635 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities: |       |                                                |       |   |   |
| Stock-based compensation                                                           |       | 4,063                                               |       | 3,391 |   |
| Depreciation and amortization                                                      |       | 4,355                                               |       | 3,262 |   |
| Loss on dispositions of fixed assets                                               |       | 27                                                  |       | 1 |   |
| Provision for doubtful accounts                                                    |       | 187                                                 |       | 249 |   |
| Provision for (reduction of) sales returns                                         |       | 809                                                 |       | (104 | ) |
| Deferred income taxes                                                              |       | (40                                                 | )          | (75 | ) |
| Other                                                                              |       | 128                                                 |       | 7 |   |
| Effect of statement of operations  adjustments                                     |       | 9,529                                               |       | 6,731 |   |
| Changes in operating assets and  liabilities:                                      |       |                                                |       |   |   |
| Accounts receivable                                                                |       | 2,176                                               |       | 2,933 |   |
| Prepaid and other assets                                                           |       | 2,427                                               |       | (1,382 | ) |
| Accounts payable                                                                   |       | 715                                                 |       | 290 |   |
| Accrued liabilities                                                                |       | (3,493                                              | )          | (5,691 | ) |
| Deferred revenues                                                                  |       | (6,548                                              | )          | 2,626 |   |
| Income taxes payable                                                               |       | 2,914                                               |       | 1,122 |   |
| Effect of changes in operating assets and  liabilities                             |       | (1,809                                              | )          | (102 | ) |
|                                                                               |       |                                                |       |   |   |
| Net cash provided by operating activities                                          | ** ** | **13,949**                                          | ** ** | **9,264** | ** ** |
|                                                                               |       |                                                |       |   |   |
| **Cash flows from investing activities:**                                          |       |                                                |       |   |   |
| Purchases of property and equipment                                                |       | (1,085                                              | )          | (2,496 | ) |
| Capitalized software development costs                                             |       | (43                                                 | )          | (205 | ) |
| Change in restricted cash                                                          |       | —                                              |       | (248 | ) |
|                                                                               |       |                                                |       |   |   |
| Net cash used in investing activities                                              | ** ** | **(1,128**                                          | **)**      | **(2,949** | **)** |
|                                                                               |       |                                                |       |   |   |
| **Cash flows from financing activities:**                                          |       |                                                |       |   |   |
| Proceeds from issuance of common stock                                             |       | 1,339                                               |       | 2,213 |   |
| Withholding taxes related to equity award  net share settlement                    |       | (1,473                                              | )          | (426 | ) |
| Repurchase of common stock                                                         |       | (14,578                                             | )          | — |   |
| Debt repayment of long-term borrowing                                              |       | (10,000                                             | )          | — |   |
|                                                                               |       |                                                |       |   |   |
| Net cash provided by (used in) financing  activities                               | ** ** | **(24,712**                                         | **)**      | **1,787** | ** ** |
|                                                                               |       |                                                |       |   |   |
| Effect of exchange rate changes on cash and  cash equivalents                      | ** ** | **(121**                                            | **)**      | **317** | ** ** |
|                                                                               |       |                                                |       |   |   |
| **Net change in cash and cash equivalents**                                        | ** ** | **(12,012**                                         | **)**      | **8,419** | ** ** |
| **Cash and cash equivalents at beginning of  period**                              | ** ** | **48,351**                                          | ** ** | **49,589** | ** ** |
|                                                                               |       |                                                |       |   |   |
| **Cash and cash equivalents at end of period**                                     | ** ** | **$**                                               | **36,339** | ** ** | **$** | **58,008** | ** ** |

 

The accompanying notes are an integral partof these condensed consolidated financial statements.

 

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**ADVENT SOFTWARE, INC.**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

 

**Note 1—Basis ofPresentation**

 

The condensed consolidated financial statements include the accounts ofAdvent Software, Inc. (“Advent” or the “Company”) and its wholly ownedsubsidiaries. All inter-company balances and transactions have been eliminated.

 

Advent has prepared these condensed consolidated financial statementsin accordance with the rules and regulations of the Securities andExchange Commission (“SEC”) applicable to interim financial information.Certain information and footnote disclosures included in financial statementsprepared in accordance with accounting principles generally accepted in theUnited States of America have been omitted in these interim statements pursuantto such SEC rules and regulations. These interim financial statementsshould be read in conjunction with the audited financial statements and relatednotes included in Advent’s Annual Report on Form 10-K for the year ended December 31,2008. Interim results are not necessarily indicative of the results to beexpected for the full year, and no representation is made thereto.

 

These condensed consolidated financial statements include alladjustments necessary to state fairly the financial position and results ofoperations for each interim period shown. All such adjustments occur in theordinary course of business and are of a normal, recurring nature.

 

**Note 2—RecentAccounting Pronouncements**

 

There have been no recent accounting pronouncements or changes inaccounting pronouncements during the three months ended March 31, 2009, ascompared to the recent accounting pronouncements described in Advent’s AnnualReport on Form 10-K for the fiscal year ended December 31, 2008, thatare of significance, or potential significance, to the Company.

 

**Note 3—Stock-Based Compensation**

 

                **Equity AwardActivity**

 

Asummary of the status of the Company’s stock option and stock appreciationright (“SAR”) activity for the period presented follows:

 
| ** **                            | ** ** | ** **         | ** ** | ** **   | ** ** | **Weighted**         | ** ** | ** **         | ** ** |
|---------------------------------------|------------|--------------------|------------|--------------|------------|----------------------|------------|--------------------|------------|
| ** **                            | ** ** | ** **         | ** ** | **Weighted** | ** ** | **Average**          | ** ** | **Aggregate**      | ** ** |
| ** **                            | ** ** | **Number of**      | ** ** | **Average**  | ** ** | **Remaining**        | ** ** | **Intrinsic**      | ** ** |
| ** **                            | ** ** | **Shares**         | ** ** | **Exercise** | ** ** | **Contractual Life** | ** ** | **Value**          | ** ** |
| ** **                            | ** ** | **(in thousands)** | ** ** | **Price**    | ** ** | **(in years)**       | ** ** | **(in thousands)** | ** ** |
| ** **                            | ** ** | ** **         | ** ** | ** **   | ** ** | ** **           | ** ** | ** **         | ** ** |
| Outstanding at December 31, 2008 |       | 4,093              |       | $            | 28.26      |                 |       |               |       |   |
| Options & SARs granted       |       | 95                 |       | $            | 25.55      |                 |       |               |       |   |
| Options & SARs exercised     |       | (102               | )          | $            | 20.05      |                 |       |               |       |   |
| Options & SARs canceled      |       | (50                | )          | $            | 35.22      |                 |       |               |       |   |
| Outstanding at March 31, 2009    |       | 4,036              |       | $            | 28.32      |                 | 6.21       |               | $          | 30,517 |   |
| Exercisable at March 31, 2009    |       | 2,431              |       | $            | 24.28      |                 | 4.94       |               | $          | 25,057 |   |

 

The aggregate intrinsicvalue is calculated as the difference between the exercise price of theunderlying awards and the Company’s closing stock price of $33.31 as of March 31,2009 for options and SARs that were in-the-money as of that date.

 

Theweighted average grant date fair value of options and SARs granted (asdetermined under SFAS 123R), total intrinsic value of options and SARsexercised and cash received from option exercises during the first quarter of2009 and 2008 were as follows (in thousands, except weighted average grant datefair value):

 

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| ** **                                | ** ** | **Three Months Ended March 31** | ** ** |
|-------------------------------------------|------------|--------------------------------------|------------|
| ** **                                | ** ** | **2009**                             | ** ** | **2008** | ** ** |
| *Options and SARs*                        |       |                                 |       |   |   |
| Weighted average grant date fair value    |       | $                                    | 12.71      |   | $ | 19.24 |   |
| Total intrinsic value of awards exercised |       | $                                    | 900        |   | $ | 3,914 |   |
|                                      |       |                                 |       |   |   |
| *Options*                                 |       |                                 |       |   |   |
| Cash received from exercises              |       | $                                    | 1,339      |   | $ | 2,213 |   |

 

The Company settlesexercised employee stock options and SARs with newly issued common shares.

 

A summary of the status ofthe Company’s restricted stock unit (“RSU”) activity for the three months endedMarch 31, 2009 is as follows:

 
| ** **                                          | ** ** | ** **         | ** ** | **Weighted**   | ** ** |
|-----------------------------------------------------|------------|--------------------|------------|----------------|------------|
| ** **                                          | ** ** | **Number of**      | ** ** | **Average**    | ** ** |
| ** **                                          | ** ** | **Shares**         | ** ** | **Grant Date** | ** ** |
| ** **                                          | ** ** | **(in thousands)** | ** ** | **Fair Value** | ** ** |
| ** **                                          | ** ** | ** **         | ** ** | ** **     | ** ** |
| Outstanding and unvested at  December 31, 2008 |       | 700                |       | $              | 37.89      |   |
| RSUs granted                                        |       | 5                  |       | $              | 30.40      |   |
| RSUs vested                                         |       | (118               | )          | $              | 36.95      |   |
| RSUs canceled                                       |       | (6                 | )          | $              | 41.07      |   |
| Outstanding and unvested at March 31,  2009    |       | 581                |       | $              | 37.99      |   |

 

Theweighted average grant date fair value was determined based on the closingmarket price of the Company’s common stock on the date of the award. Theaggregate intrinsic value of RSUs outstanding at March 31, 2009 was $19.4million, using the closing price of $33.31 per share as of March 31, 2009.

 

**Stock-BasedCompensation Expense**

 

Theeffect of stock-based employee compensation expense recognized on Advent’scondensed consolidated statement of operations for the first quarter of 2009and 2008 were as follows (in thousands):

 
| ** **                                                      | ** ** | **Three Months Ended March 31** | ** ** |
|-----------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                      | ** ** | **2009**                             | ** ** | **2008** | ** ** |
| **Statement of operations classification**                      |       |                                 |       |   |   |
| Cost of term license, maintenance and other  recurring revenues |       | $                                    | 369        |   | $ | 290 |   |
| Cost of professional services and other  revenues               |       | 305                                  |       | 237 |   |
| Total cost of revenues                                          |       | 674                                  |       | 527 |   |
|                                                            |       |                                 |       |   |   |
| Sales and marketing                                             |       | 1,205                                |       | 1,038 |   |
| Product development                                             |       | 1,114                                |       | 871 |   |
| General and administrative                                      |       | 1,070                                |       | 955 |   |
| Total operating expenses                                        |       | 3,389                                |       | 2,864 |   |
|                                                            |       |                                 |       |   |   |
| Total stock-based employee compensation  expense                |       | $                                    | 4,063      |   | $ | 3,391 |   |
|                                                            |       |                                 |       |   |   |
| Tax effect on stock-based employee  compensation                |       | (1,815                               | )          | (1,300 | ) |
|                                                            |       |                                 |       |   |   |
| Net effect on net income                                        |       | $                                    | 2,248      |   | $ | 2,091 |   |

 

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Adventcapitalized $26,000 and $21,000 of stock compensation expense during the firstquarters of 2009 and 2008, respectively, associated with the Company’s softwaredevelopment, internal-use software and professional services implementationprojects.

 

Asof March 31, 2009, total unrecognized compensation cost related tounvested awards not yet recognized under all equity compensation plans,adjusted for estimated forfeitures, was $27.9 million and is expected to berecognized through the remaining vesting period of each grant, with a weightedaverage remaining period of 2.6 years.

 

**Valuation Assumptions**

 

The fair value of eachoption grant is estimated on the date of grant using the Black-Scholes optionvaluation model and the straight-line attribution approach with the followingassumptions:

 
| ** **                        | ** ** | **Three Months Ended March 31** | ** ** |
|-----------------------------------|------------|--------------------------------------|------------|
| **Stock Options & SARs** | ** ** | **2009**                             | ** ** | **2008** | ** ** |
| Expected volatility               |       | 51.4% - 57.7%                        |       | 41.8% - 42.8% |   |
| Expected life (in years)          |       | 5.10 - 5.47                          |       | 5.27 |   |
| Risk-free interest rate           |       | 1.9% - 2.3%                          |       | 2.6% - 3.2% |   |
| Expected dividends                |       | None                                 |       | None |   |

 

Theexpected stock price volatility was determined based on an equally weightedaverage of historical and implied volatility of the Company’s commonstock. Advent determined that a blend of implied volatility andhistorical volatility is more reflective of the market conditions and a betterindicator of expected volatility than using purely historical volatility. The expected life was determined based onhistorical experience of similar awards, giving consideration to thecontractual terms of the stock-based awards, vesting schedules and expectationsof future employee behavior. The risk-free interest rate is based on the US Treasuryyield curve in effect at the time of grant for periods corresponding with theexpected life of the option. The dividend yield assumption is based onthe Company’s history of not paying dividends and the resultant futureexpectation of dividend payouts.

 

**Note 4—NetIncome Per Share**

 

Basic netincome per share is computed by dividing net income by the weighted averagenumber of common shares outstanding during the period. Diluted net income pershare is computed by dividing net income by the sum of the weighted averagenumber of common shares outstanding and the potential number of dilutive commonshares outstanding during the period, excluding the effect of any anti-dilutivesecurities. Potential common shares consist of the shares issuable upon the exerciseof stock options and SARs, the vesting of restricted stock awards and fromwithholdings associated with the Company’s employee stock purchase plan. Potential common shares are reflected indiluted earnings per share by application of the treasury stock method, whichin the current period includes consideration of unamortized stock-basedcompensation and windfall tax benefits, as a result of the implementation ofSFAS 123R.

 

The following table sets forth the computation of basic and diluted netincome per share (in thousands, except per-share data):

 

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| ** **                                                                                                                                | ** ** | **Three Months Ended March 31** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                                                                                | ** ** | **2009**                             | ** ** | **2008** | ** ** |
| **Numerator:**                                                                                                                            |       |                                 |       |   |   |
| Net income                                                                                                                                |       | $                                    | 6,229      |   | $ | 2,635 |   |
|                                                                                                                                      |       |                                 |       |   |   |
| **Denominator:**                                                                                                                          |       |                                 |       |   |   |
| Denominator for basic net income per  share-weighted average shares outstanding                                                           |       | 25,249                               |       | 26,570 |   |
|                                                                                                                                      |       |                                 |       |   |   |
| Dilutive common equivalent shares: Employee  stock options and other                                                                      |       | 595                                  |       | 1,510 |   |
|                                                                                                                                      |       |                                 |       |   |   |
| Denominator for diluted net income per  share-weighted average shares outstanding, assuming exercise of potential  dilutive common shares |       | 25,844                               |       | 28,080 |   |
|                                                                                                                                      |       |                                 |       |   |   |
| Basic net income per share                                                                                                                |       | $                                    | 0.25       |   | $ | 0.10 |   |
| Diluted net income per share                                                                                                              |       | $                                    | 0.24       |   | $ | 0.09 |   |

 

For the first quarters of 2009 and 2008, weighted average stock options,SARs and RSUs of approximately 2.5 million and 0.8 million, respectively, wereexcluded from the calculation of diluted net income per share because theirinclusion would have been anti-dilutive.

 

**Note 5—Goodwill**

 

The changes in the carrying value of goodwill for the three monthsended March 31, 2009 were as follows (in thousands):

 
| ** **                        | ** ** | **Goodwill** | ** ** |
|-----------------------------------|------------|--------------|------------|
| ** **                        | ** ** | ** **   | ** ** |
| Balance at December 31, 2008 |       | $            | 149,609    |   |
| Translation adjustments           |       | (1,807       | )          |
| Other                             |       | (58          | )          |
|                              |       |         |       |
| Balance at March 31, 2009    |       | $            | 147,744    |   |

 

Foreigncurrency translation adjustments totaling $1.8 million reflect the generalstrengthening of the US dollar versus European currencies during the firstquarter of 2009.

 

**Note 6—OtherIntangibles**

 

The following is a summary of other intangibles as of March 31,2009 (in thousands):

 
| ** **                     | ** ** | **Average**      | ** ** | ** **       | ** ** | ** **       | ** ** | ** **       | ** ** |
|--------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|
| ** **                     | ** ** | **Amortization** | ** ** | **Other**        | ** ** | ** **       | ** ** | **Other**        | ** ** |
| ** **                     | ** ** | **Period**       | ** ** | **Intangibles,** | ** ** | **Accumulated**  | ** ** | **Intangibles,** | ** ** |
| ** **                     | ** ** | **(Years)**      | ** ** | **Gross**        | ** ** | **Amortization** | ** ** | **Net**          | ** ** |
| ** **                     | ** ** | ** **       | ** ** | ** **       | ** ** | ** **       | ** ** | ** **       | ** ** |
| Purchased technologies         |       | 4.9              |       | $                | 30,287     |             | $          | (15,239          | )          | $ | 15,048 |   |
| Product development costs      |       | 3.0              |       | 8,866            |       | (4,901           | )          | 3,965            |       |
|                           |       |             |       |             |       |             |       |             |       |
| Developed technology sub-total |       |             |       | 39,153           |       | (20,140          | )          | 19,013           |       |
|                           |       |             |       |             |       |             |       |             |       |
| Customer relationships         |       | 6.1              |       | 30,021           |       | (22,976          | )          | 7,045            |       |
| Other intangibles              |       | 4.0              |       | 1,576            |       | (485             | )          | 1,091            |       |
|                           |       |             |       |             |       |             |       |             |       |
| Other intangibles sub-total    |       |             |       | 31,597           |       | (23,461          | )          | 8,136            |       |
|                           |       |             |       |             |       |             |       |             |       |
| Balance at March 31, 2009 |       |             |       | $                | 70,750     |             | $          | (43,601          | )          | $ | 27,149 |   |

 

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The followingis a summary of other intangibles as of December 31, 2008 (in thousands):

 
| ** **                        | ** ** | **Average**      | ** ** | ** **       | ** ** | ** **       | ** ** | ** **       | ** ** |
|-----------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|
| ** **                        | ** ** | **Amortization** | ** ** | **Other**        | ** ** | ** **       | ** ** | **Other**        | ** ** |
| ** **                        | ** ** | **Period**       | ** ** | **Intangibles,** | ** ** | **Accumulated**  | ** ** | **Intangibles,** | ** ** |
| ** **                        | ** ** | **(Years)**      | ** ** | **Gross**        | ** ** | **Amortization** | ** ** | **Net**          | ** ** |
|                              |       |             |       |             |       |             |       |             |       |
| Purchased technologies            |       | 4.9              |       | $                | 30,337     |             | $          | (14,361          | )          | $ | 15,976 |   |
| Product development costs         |       | 3.0              |       | 8,823            |       | (4,272           | )          | 4,551            |       |
|                              |       |             |       |             |       |             |       |             |       |
| Developed technology sub-total    |       |             |       | 39,160           |       | (18,633          | )          | 20,527           |       |
|                              |       |             |       |             |       |             |       |             |       |
| Customer relationships            |       | 6.1              |       | 30,023           |       | (22,618          | )          | 7,405            |       |
| Other intangibles                 |       | 4.0              |       | 1,578            |       | (400             | )          | 1,178            |       |
|                              |       |             |       |             |       |             |       |             |       |
| Other intangibles sub-total       |       |             |       | 31,601           |       | (23,018          | )          | 8,583            |       |
|                              |       |             |       |             |       |             |       |             |       |
| Balance at December 31, 2008 |       |             |       | $                | 70,761     |             | $          | (41,651          | )          | $ | 29,110 |   |

 

The changes in the carrying value of other intangibles during the threemonths ended March 31, 2009 were as follows (in thousands):

 
| ** **                        | ** ** | **Other**        | ** ** | ** **       | ** ** | **Other**        | ** ** |
|-----------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|
| ** **                        | ** ** | **Intangibles,** | ** ** | **Accumulated**  | ** ** | **Intangibles,** | ** ** |
| ** **                        | ** ** | **Gross**        | ** ** | **Amortization** | ** ** | **Net**          | ** ** |
|                              |       |             |       |             |       |             |       |
| Balance at December 31, 2008 |       | $                | 70,761     |             | $          | (41,651          | )          | $ | 29,110 |   |
| Additions                         |       | 43               |       | —           |       | 43               |       |
| Amortization                      |       | —           |       | (1,962           | )          | (1,962           | )          |
| Translation adjustments           |       | (54              | )          | 12               |       | (42              | )          |
|                              |       |             |       |             |       |             |       |
| Balance at March 31, 2009    |       | $                | 70,750     |             | $          | (43,601          | )          | $ | 27,149 |   |

 

Based on the carrying amount of intangible assets as of March 31,2009, the estimated future amortization is as follows (in thousands):

 
| ** **                        | ** ** | **Nine**         | ** ** | ** **                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | ** ** | ** ** |
|-----------------------------------|------------|------------------|------------|-----------------------------|------------|------------|------------|------------|------------|------------|------------|----------------|------------|------------|------------|
| ** **                        | ** ** | **Months Ended** | ** ** | ** **                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | ** ** | ** ** |
| ** **                        | ** ** | **December 31**  | ** ** | **Years Ended December 31** | ** ** | ** ** | ** ** |
| ** **                        | ** ** | **2009**         | ** ** | **2010**                    | ** ** | **2011**   | ** ** | **2012**   | ** ** | **2013**   | ** ** | **Thereafter** | ** ** | **Total**  | ** ** |
| Estimated future amortization of: | ** ** | ** **       | ** ** | ** **                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | ** ** | ** ** |
| Developed technology              |       | $                | 4,272      |                        | $          | 5,258      |       | $          | 3,970      |       | $          | 3,323          |       | $          | 2,190      |   | $ | — |   | $ | 19,013 |   |
| Other intangibles                 |       | 1,243            |       | 1,209                       |       | 1,089      |       | 1,089      |       | 1,044      |       | 2,462          |       | 8,136      |       |
|                              |       |             |       |                        |       |       |       |       |       |       |       |           |       |       |       |
| Total                             |       | $                | 5,515      |                        | $          | 6,467      |       | $          | 5,059      |       | $          | 4,412          |       | $          | 3,234      |   | $ | 2,462 |   | $ | 27,149 |   |

 

**Note7—Balance Sheet Detail**

 

The following is a summary of prepaid expenses and other (inthousands):

 

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| ** **                       | ** ** | **March 31** | ** ** | **December 31** | ** ** |
|----------------------------------|------------|-------------------|------------|----------------------|------------|
| ** **                       | ** ** | **2009**          | ** ** | **2008**             | ** ** |
| ** **                       | ** ** | ** **        | ** ** | ** **           | ** ** |
| Prepaid commission               |       | $                 | 5,611      |                 | $          | 6,019 |   |
| Prepaid contract expense         |       | 6,102             |       | 7,473                |       |
| Prepaid royalty                  |       | 1,364             |       | 1,744                |       |
| Other                            |       | 4,319             |       | 4,917                |       |
|                             |       |              |       |                 |       |
| Total prepaid expenses and other |       | $                 | 17,396     |                 | $          | 20,153 |   |

 

The following is a summary of other assets, net (in thousands):

 
| ** **                          | ** ** | **March 31** | ** ** | **December 31** | ** ** |
|-------------------------------------|------------|-------------------|------------|----------------------|------------|
| ** **                          | ** ** | **2009**          | ** ** | **2008**             | ** ** |
|                                |       |              |       |                 |       |
| Long-term investments               |       | $                 | 500        |                 | $          | 500 |   |
| Long-term prepaid commissions       |       | 4,200             |       | 4,915                |       |
| Deposits                            |       | 3,180             |       | 3,255                |       |
| Prepaid contract expense, long-term |       | 3,955             |       | 2,859                |       |
| Other                               |       | 15                |       | 25                   |       |
|                                |       |              |       |                 |       |
| Total other assets, net             |       | $                 | 11,850     |                 | $          | 11,554 |   |

 

Long-terminvestments include an equity investment in a privately held company. Thisequity investment is carried at the lower of cost or fair value at March 31,2009 and December 31, 2008. Deposits include restricted cash of $1.9million to secure a bank letter of credit associated with the Company’sdefinitive lease agreement, as amended, with Toda Development, Inc. (“Toda”)for its San Francisco headquarters facility.

 

Thefollowing is a summary of accrued liabilities (in thousands):

 
| ** **                             | ** ** | **March 31** | ** ** | **December 31** | ** ** |
|----------------------------------------|------------|-------------------|------------|----------------------|------------|
| ** **                             | ** ** | **2009**          | ** ** | **2008**             | ** ** |
|                                   |       |              |       |                 |       |
| Salaries and benefits payable          |       | $                 | 12,870     |                 | $          | 18,492 |   |
| Accrued restructuring, current portion |       | 562               |       | 823                  |       |
| Other                                  |       | 11,274            |       | 8,609                |       |
|                                   |       |              |       |                 |       |
| Total accrued liabilities              |       | $                 | 24,706     |                 | $          | 27,924 |   |

 

Accruedrestructuring charges are discussed further in Note 9, “Restructuring Charges.”Other accrued liabilities include accruals for royalties, sales and businesstaxes, acquisition related costs, and other miscellaneous items.

 

Thefollowing is a summary of other long-term liabilities (in thousands):

 
| ** **                               | ** ** | **March 31** | ** ** | **December 31** | ** ** |
|------------------------------------------|------------|-------------------|------------|----------------------|------------|
| ** **                               | ** ** | **2009**          | ** ** | **2008**             | ** ** |
|                                     |       |              |       |                 |       |
| Deferred rent                            |       | $                 | 8,236      |                 | $          | 8,444 |   |
| Accrued restructuring, long-term portion |       | 1,056             |       | 1,195                |       |
| Other                                    |       | 1,156             |       | 1,156                |       |
|                                     |       |              |       |                 |       |
| Total other long-term liabilities        |       | $                 | 10,449     |                 | $          | 10,795 |   |

 

**Note 8—Comprehensive Income**

 

Thecomponents of comprehensive income were as follows for the periods presented(in thousands):

 

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| ** **                              | ** ** | **Three Months Ended March 31** | ** ** |
|-----------------------------------------|------------|--------------------------------------|------------|
| ** **                              | ** ** | **2009**                             | ** ** | **2008** | ** ** |
|                                    |       |                                 |       |   |   |
| Net income                              |       | $                                    | 6,229      |   | $ | 2,635 |   |
| Foreign currency translation adjustment |       | (1,856                               | )          | 2,417 |   |
|                                    |       |                                 |       |   |   |
| Total comprehensive income              |       | $                                    | 4,373      |   | $ | 5,052 |   |

 

**Note 9—Restructuring Charges**

 

Minorrestructuring initiatives have been implemented in the Company’s AdventInvestment Management and MicroEdge operating segments to reduce costs andimprove operating efficiencies. These initiatives have resulted in restructuringcharges comprised primarily of costs related to properties abandoned inconnection with facilities consolidation, associated write-down of leaseholdimprovements and severance and associated employee termination costs related toheadcount reductions. Advent’s restructuring charges included accruals forestimated losses on facility costs based on the Company’s contractualobligations net of estimated sublease income. Advent reassesses this liabilityperiodically based on market conditions.

 

##### ***During the first quarter of 2009 and 2008, Advent recordedrestructuring charges of $45,000 and $56,000, respectively, which related tothe present value amortization of facility exit obligations.***

##### *** ***

The following table sets forth an analysis of the components of thepayments and restructuring charges made against the accrual during the firstquarter of 2009 (in thousands):

 
| ** **                                                  | ** ** | **Facility Exit** | ** ** | **Severance &** | ** ** | ** ** | ** ** |
|-------------------------------------------------------------|------------|-------------------|------------|--------------------------|------------|------------|------------|
| ** **                                                  | ** ** | **Costs**         | ** ** | **Benefits**             | ** ** | **Total**  | ** ** |
|                                                        |       |              |       |                     |       |       |       |
| Balance of restructuring accrual at  December 31, 2008 |       | $                 | 1,735      |                     | $          | 283        |       | $ | 2,018 |   |
| Restructuring charges (benefits)                            |       | 48                |       | (3                       | )          | 45         |       |
| Cash payments                                               |       | (180              | )          | (265                     | )          | (445       | )          |
|                                                        |       |              |       |                     |       |       |       |
| Balance of restructuring accrual at  March 31, 2009    |       | $                 | 1,603      |                     | $          | 15         |       | $ | 1,618 |   |

 

Of the remaining restructuring accrual of $1.6 million at March 31,2009, $0.6 million and $1.0 million are included in accrued liabilities andother long-term liabilities, respectively, on the accompanying condensedconsolidated balance sheet. The remaining excess facility costs of $1.6 millionare stated at estimated fair value, net of estimated sublease income ofapproximately $3.4 million. Advent expects to pay the remaining obligationsassociated with the vacated facilities no later than over the remaining leaseterms, which expire on various dates through 2012.

 

#### **Note10—Commitments and Contingencies**

####  

*Lease Obligations*

 

Advent leases office space and equipment under non-cancelable operatinglease agreements, which expire at various dates through December 2018.Some operating leases contain escalation provisions for adjustments in theconsumer price index. Advent is responsible for maintenance, insurance, andproperty taxes. As of March 31, 2009, Advent’s remaining operating leasecommitments through 2018 were approximately $46.3 million, net of futureminimum rental receipts of $3.9 million to be received under non-cancelablesub-leases.

 

*Indemnifications*

 

Aspermitted or required under Delaware law and to the maximum extent allowableunder that law, Advent has certain obligations to indemnify its current andformer officers and directors for certain events or occurrences while theofficer or director is, or was serving, at Advent’s request in such capacity.These indemnification obligations are valid as long as the director or officeracted in good faith and in a manner the person reasonably believed to be in ornot opposed to the best interests of the corporation, and, with respect to anycriminal action or proceeding, had no reasonable cause to believe his or herconduct was unlawful. The maximum potential amount of future payments Adventcould be required to make under these indemnification obligations is unlimited;however, Advent has a director and officer insurance policy that mitigatesAdvent’s exposure and enables Advent to recover a portion of any future amountspaid. The Company believes the estimated fair value of these indemnificationobligations is minimal.

 

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*LegalContingencies*

 

On March 8, 2005, certain of the former shareholders of Kinexusand the shareholders’ representative filed suit against Advent in the DelawareChancery Court. The complaint alleges that Advent breached the Agreement andPlan of Merger dated as of December 31, 2001 pursuant to which Adventacquired all of the outstanding shares of Kinexus due principally to the factthat no amount was paid by Advent on an earn-out of up to $115 million. Theearn-out, which was payable in cash or stock at the election of Advent, wasbased upon Kinexus meeting certain revenue targets in both 2002 and 2003. Thecomplaint seeks unspecified compensatory damages, an accounting and restitutionfor unjust enrichment. Advent advised the shareholders’ representative in January 2003that the earn-out terms had not been met in 2002 and accordingly no earn-outwas payable for 2002 and would not be payable for 2003. There has been nofurther activity in this case since additional document discovery andinterrogatory answers were provided by the parties in December 2008.Advent disputes the plaintiff’s claim and believes that it has meritoriousdefenses and intends to vigorously defend this action.  Management has not determined that anypotential loss associated with this litigation is either probable or reasonablyestimable at this time and accordingly has not accrued any amounts for any potentialloss.

 

Fromtime to time, Advent is involved in claims and legal proceedings that arise inthe ordinary course of business. Based on currently available information,management does not believe that the ultimate outcome of these unresolvedmatters, individually and in the aggregate, is likely to have a materialadverse effect on the Company’s financial position or results of operations.However, litigation is subject to inherent uncertainties and our view of thesematters may change in the future. Were an unfavorable outcome to occur, thereexists the possibility of a material adverse impact on our financial positionand results of operations for the period in which the unfavorable outcomeoccurs, and potentially in future periods.

 

**Note11—Segment Information**

 

*Description of Segments*

 

Advent’s organizational structure is based on a number of factors thatthe chief operating decision maker (“CODM”) uses to evaluate, view and run itsbusiness operations which include, but are not limited to, customer base,homogeneity of products and technology. Advent’s operating segments are basedon this organizational structure and information reviewed by Advent’s CODM toevaluate the operating segment results. Advent has determined that itsoperations are organized into two reportable segments: Advent InvestmentManagement and MicroEdge. Future changes to this organizational structure mayresult in changes to the business segments disclosed.

 

Advent Investment Management is the Company’s core business and derivesrevenues from the development, marketing and sale of software products, datainterfaces and related maintenance and services that automate, integrate andsupport certain mission-critical functions of investment managementorganizations. MicroEdge derives revenues from the sale of software and servicesfor grant management, matching gifts and volunteer tracking for thegrant-making community.

 

*Segment Data*

 

The results of the operating segments are derived directly from Advent’sinternal management reporting system. The accounting policies used to deriveoperating segment results are substantially the same as those used by theconsolidated company. Management measures the performance of each operatingsegment based on several metrics, including income from operations. Theseresults are used, in part, to evaluate the performance of, and to assignresources to, each of the operating segments. Certain operating expenses,including stock-based employee compensation expense, and amortization ofdeveloped technology and other intangibles, which Advent manages separately atthe corporate level, are not allocated to the operating segments. Advent doesnot separately accumulate and review asset information by segment.

 

Segment information for the periods presented is as follows (inthousands):

 

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| ** **                                           | ** ** | **Three Months Ended March 31** | ** ** |
|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                           | ** ** | **2009**                                            | ** ** | **2008** | ** ** |
| Net revenues:                                        |       |                                                |       |   |   |
| Advent Investment Management                         |       | $                                                   | 66,325     |   | $ | 55,264 |   |
| MicroEdge                                            |       | 6,461                                               |       | 6,209 |   |
|                                                 |       |                                                |       |   |   |
| Total net revenues                                   |       | $                                                   | 72,786     |   | $ | 61,473 |   |
|                                                 |       |                                                |       |   |   |
| Income from operations:                              |       |                                                |       |   |   |
| Advent Investment Management                         |       | $                                                   | 14,125     |   | $ | 7,936 |   |
| MicroEdge                                            |       | 1,752                                               |       | 388 |   |
| Unallocated corporate operating costs and  expenses: |       |                                                |       |   |   |
| Stock-based employee compensation                    |       | (4,063                                              | )          | (3,391 | ) |
| Amortization of developed technology                 |       | (1,517                                              | )          | (722 | ) |
| Amortization of other intangibles                    |       | (444                                                | )          | (487 | ) |
|                                                 |       |                                                |       |   |   |
| Total income from operations                         |       | $                                                   | 9,853      |   | $ | 3,724 |   |

 

*Major Customers*

 

No singlecustomer represented 10% or more of Advent’s total net revenues in any periodpresented.

 

**Note 12—Debt**

 

On February 14, 2007, Advent and certain of its subsidiariesentered into a senior secured credit facility agreement (the “Credit Facility”)with Wells Fargo Foothill, Inc. (the “Lender”) for a term of three years.Under the Credit Facility, the Lender will provide the Company with a revolvingline of credit up to an aggregate amount of $75.0 million to fund therepurchase of outstanding common stock, capital expenditures and generalcorporate requirements. The Company has the option of selecting an interestrate for any drawdown under the Facility equal to either: (a) the BaseRate (Wells Fargo prime rate); or (b) the then applicable LIBOR Rate plus1.50% per annum. The loan is secured by the Company’s property and assets andis subject to a financial covenant. The financial covenant in the Facility islimited to a maximum ratio of senior debt to earnings before interest, taxes,depreciation, and amortization (EBITDA), adjusted for cost capitalizations,extraordinary gains (losses) and non-cash stock-based employee compensation.Covenant testing will commence upon either the occurrence of an event ofdefault or when excess availability, defined as the Credit Facility line of$75.0 million less amounts drawn, plus qualified cash and cash equivalents isless than $50.0 million.

 

In November 2008, the Company drew down $25.0 million againstits Credit Facility which bore interest at the Wells Fargo prime rate of 4.0%. In January 2009, the Company repaid $10.0 million of the debtunder its Credit Facility. During February 2009, Advent elected to movefrom the Wells Fargo prime rate into a monthly LIBOR rate contract on theremaining $15.0 million which bears a rate of 0.45% plus an applicablemargin of 1.50% for an all-in rate of 1.95%.

 

As of March 31, 2009 and December 31, 2008, the outstandingdebt balance was $15.0 million and $25.0 million, respectively, and Adventwas in compliance with all associated covenants.

 

**Note 13—Income Taxes**

 

The following table summarizes the activity relating to the Company’sunrecognized tax benefits during the three months ended March 31, 2009 (inthousands):

 
| ** **                                               | ** ** | **Total**  | ** ** |
|----------------------------------------------------------|------------|------------|------------|
| ** **                                               | ** ** | ** ** | ** ** |
| Balance at December 31, 2008                        |       | $          | 6,904      |   |
|                                                     |       |       |       |
| Gross increases related to current period  tax positions |       | 309        |       |
|                                                     |       |       |       |
| Balance at March 31, 2009                           |       | $          | 7,213      |   |

 

At March 31, 2009 and December 31, 2008 Advent had$7.2 million and $6.9 million of gross unrecognized tax benefits,respectively. During the first three months of 2009, Advent increased theamount of unrecognized tax benefits by $0.3 

 

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millionrelating to federal and California research credits. If recognized, the totalunrecognized tax benefits would decrease Advent’s tax provision and increasenet income $6.0 million at March 31, 2009. The impact on net income reflects the liabilities for unrecognized taxbenefits net of the federal tax benefit of state income tax items.  The Company’s liabilities for unrecognizedtax benefits relate to federal research credits, California research andenterprise zone tax credits and various state net operating losses.

 

Advent is subject to taxation in the US and various states and foreignjurisdictions. The material jurisdictions that are subject to examination bytax authorities include California for tax years after fiscal 2003 and the USand New York for tax years after 2004.

 

**Note 14—FairValue Measurements**

 

TheCompany measures certain financial assets and liabilities at fair value on arecurring basis, including available-for-sale securities. The fair value ofthese certain financial assets was determined using the following inputs as of March 31,2009 (in thousands):

 
| ** **             | ** ** | **Fair Value Measurements at Reporting Date Using** | ** ** |
|------------------------|------------|-----------------------------------------------------------------------------------|------------|
| ** **             | ** ** | ** **                                                                        | ** ** | ** ** | ** ** | **Significant** | ** ** | ** ** | ** ** |
| ** **             | ** ** | ** **                                                                        | ** ** | **Quoted Prices in** | ** ** | **Other** | ** ** | **Significant** | ** ** |
| ** **             | ** ** | ** **                                                                        | ** ** | **Active Markets for** | ** ** | **Observable** | ** ** | **Unobservable** | ** ** |
| ** **             | ** ** | ** **                                                                        | ** ** | **Identical Assets** | ** ** | **Inputs** | ** ** | **Inputs** | ** ** |
| ** **             | ** ** | **Total**                                                                         | ** ** | **(Level 1)** | ** ** | **(Level 2)** | ** ** | **(Level 3)** | ** ** |
| Assets                 | ** ** | ** **                                                                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Money Market Funds (1) |       | $                                                                                 | 12,005     |   | $ | 12,005 |   | $ | — |   | $ | — |   |
|                        |            |                                                                                   |            |  |  |  |  |  |  |  |  |  |  |

 

----

(1)                    Included incash and cash equivalents on our condensed consolidated balance sheet

 

Fixedincome available-for-sale securities consist of cash equivalents with remainingmaturities of three months or less at the date of purchase and are composedprimarily of US Government and Treasury Obligation money market mutual funds.The fair value of these securities is determined through market, observable andcorroborated sources.

 

Thecarrying amounts of cash and cash equivalents, accounts receivable, accountspayable and accrued liabilities approximate fair value based on the short-termmaturities of these instruments. In accordance with SFAS No. 107, “DisclosuresAbout Fair Value Instruments” at March 31, 2009, the fair value of theCompany’s debt, calculated using quoted market prices and yields for the sameor similar type of borrowings, approximated its carrying value.

 

TheCompany also has direct investment in a privately-held company accounted forunder the cost method which is not reported in the table of assets measured atfair value above. This investment, which totaled $0.5 million at March 31,2009, is periodically assessed for other-than-temporary impairment. If Adventdetermines that an other-than-temporary impairment has occurred, the Companywrites down the investment to its fair value. Advent estimates fair value usinga variety of valuation methodologies. Such methodologies include comparing theprivate company with publicly traded companies in similar lines of business,applying revenue and price/earnings multiples to estimated future operatingresults for the private company and estimating discounted cash flows for thatcompany.

 

**Note 15—Common Stock Repurchase Program**

 

Advent’s Board has approved common stockrepurchase programs authorizing management to repurchase shares of the Company’scommon stock. The timing and actual number of shares subject to repurchase areat the discretion of Advent’s management and are contingent on a number offactors, including the price of Advent’s stock, Advent’s cash balances andworking capital needs, general business and market conditions, regulatoryrequirements, and alternative investment opportunities. Repurchased shares arereturned to the status of authorized and un-issued shares of common stock.

 

On October 30, 2008, Advent’s Boardauthorized the repurchase of up to 3.0 million shares of the Company’s commonstock. Consistent with prior repurchase programs, there was no expiration dateand repurchases could be limited or terminated at any time at the discretion ofmanagement.

 

During the first quarter of 2009, the Companyrepurchased 690,000 shares of its common stock under the stock repurchaseprogram approved by the Board in October 2008 for an average price pershare of $21.13. At March 31, 2009, there remained approximately 1.0million shares authorized by the Board for repurchase.

 

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**Note16—Subsequent Events**

** **

In April 2009, the Company received the second and final deferredcontingent payment of $2.1 million related to the sale of its ownership in LatentZeroLimited (“LatentZero”) and will record the associated gain of $2.1 million in “interestand other income (expense), net” in its second quarter of 2009 results. In April 2007,the Company, together with other LatentZero shareholders, sold their ownershipin LatentZero to royalblue group plc. Total payments received by Adventfrom the sale of its LatentZero ownership were $15.4 million.

 

In April 2009, the Company repaid $7.5 million of the debt underits Credit Facility, resulting in a $7.5 million balance as of April 30,2009.

 

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**Item 2.****Management’s Discussion and Analysis of Financial Condition and Resultsof Operations**

 

**SPECIAL NOTE REGARDING FORWARD-LOOKINGSTATEMENTS**

 

You should read the following discussion in conjunction with ourconsolidated financial statements and related notes. The following discussioncontains forward-looking statements within the meaning of Section 27A ofthe Securities Act of 1933 as amended and Section 21E of the SecuritiesExchange Act of 1934 as amended, including, but not limited to statementsreferencing our expectations relating to future revenues, expenses andoperating margins. Forward-looking statements can be identified by the use ofterminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,”“estimate,” “predict,” “potential,” “continue” or other similar terms and thenegative of such terms regarding beliefs, plans, expectations or intentionsregarding the future. Forward-looking statements include, among others,statements regarding the future of the investment management market andopportunities for us related thereto, future expansion, acquisition, divestmentof or investment in other businesses, projections of revenues, future cost andexpense levels, expected timing and amount of amortization expenses related topast acquisitions, the adequacy of resources to meet future cash requirements,estimates or predictions of actions by customers, suppliers, competitors orregulatory authorities, future client wins, future hiring and future productintroductions. Such forward-looking statements are based on our current plansand expectations and involve known and unknown risks and uncertainties whichmay cause our actual results or performance to be materially different from anyresults or performance expressed or implied by such forward-looking statements.Such factors include, but are not limited to the “Risk Factors” set forth in “Item1A. Risk Factors” in this Form 10-Q, as well as other risks identifiedfrom time to time in other Securities and Exchange Commission (“SEC”) reports.You should not place undue reliance on our forward-looking statements, as theyare not guarantees of future results, levels of activity or performance andrepresent our expectations only as of the date they are made.

 

Unless expressly stated or the context otherwise requires, the terms “we”,“our”, “us”, the “Company” and “Advent” refer to Advent Software, Inc. andits subsidiaries.

 

**Overview**

 

We offerintegrated software, products and services for automating and integrating dataand work flows across the investment management organization, as well asbetween the investment management organization and external parties. Ourproducts are intended to increase operational efficiency, improve the accuracyof client information and enable better decision-making. Each solution focuseson specific mission-critical functions of the front, middle and back offices ofinvestment management organizations and is designed to meet the needs of theparticular client, as determined by size, assets under management andcomplexity of the investment environment.

 

Oursoftware solutions also support the grant management, gifts matching andvolunteer tracking processes for the grant-making community.

 

*CurrentEconomic Environment*

 

Since2008, the effects of the subprime mortgage and broader credit crisis have beennegatively impacting the United States. Concerns about the subprime mortgagemarket led to a liquidity crunch, which hampered businesses and contributed toinvestment depreciation and depressed earnings. Some of the most affectedcompanies were investment banks, as fixed-income operations were harmed due tothe value decline of structured finance products, necessitating largewrite-downs. Hedge funds, private equity firms, investment management firms andcommercial banks were also affected greatly by the liquidity crunch anddepressed asset values.

 

Althoughglobal markets found temporary respite in the summer of 2008, US home pricescontinued to fall; foreclosures and defaults began to climb, precipitating theglobal economic crisis. Going forward, we believe that the effects of thesubprime mortgage and broader credit crisis, coupled with a decline in globalgross domestic product (“GDP”), will continue to weigh on operating results forinvestment services firms throughout at least 2009.  During the first quarter of 2009, real grossdomestic product (GDP) decreased at an estimated annual rate of approximately6%. The equity markets are still experiencing intense volatility (S&P 500Index down 12% and 22% during the first quarter of 2009 and fourth quarter of2008, respectively) and the credit markets remain tight amid uncertainty.

 

Webelieve that fiscal 2009 will continue to be a difficult period for theinvestment management industry in the United States and worldwide. During thefirst quarter of 2009, investment managers have seen their revenues decrease asa result of 

 

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decreasesin their assets under management and decreased asset values, and we believethat some hedge funds and other types of clients will go out of business during2009.

 

Thecurrent recession may also create pressure on our clients to decrease theirinformation technology budgets, which could negatively impact our business.While we are not immune to downturns in technology spending, should ourcustomers reduce their spending, we believe we are well positioned to maintainour competitive position in the longer term for the following reasons:

 

·                  Our solutionsare mission critical to our customers;

·                  Our technologycan be utilized to increase operational efficiency and manage costs;

·                  As a marketleader in investment management technology, we expect the customers who spendmoney will attempt to minimize risk and, therefore, look to our stability,reliability and scalability;

·                  We expect anincreased need for systems in the face of a more regulated, compliance-orientedindustry; and

·                  Our recurringrevenue model and large customer base will continue to provide longer termstability.

 

Wealso believe that investment managers will be increasingly focused on providingincreased and differentiated levels of service to their customers.  These factors have traditionally been demanddrivers for our products.

 

Asthe current economic situation evolves, we will continue to evaluate the impactof this environment on our business and we will remain focused on deliveringsolutions for our customers. Additionally, we intend to continue to carefullymanage our expenses and headcount growth.

 

*Operating Overview*

 

Operatinghighlights of our first quarter of 2009 include:

 

·                  *Expandedcustomer relationships and acceptance of our product offerings*. We experienced continued demand for bothour newest and largest portfolio management and accounting platforms: AdventPortfolio Exchange (“APX”) and Geneva. We signed 12 APX contracts, bringing thetotal number of licenses sold globally to 294, and we added 9 new Genevaclients which brings the total number of Geneva licenses sold to 213 as of March 31,2009.

 

·                  *Newand incremental bookings*.The term license contracts signed in the first quarter of 2009 will contributeapproximately $3.3 million in annual revenue (“annual term license contractvalue” or “ACV”) once they are fully implemented.

 

·                  *ProductRelease*. We releasedTamale RMS 4.0 which introduced an open flexible framework that allows firms tocustomize the application to meet their specific research process workflowrequirements.

 

*FinancialOverview*

 

Thecomponents of revenue during the first quarters of 2009 and 2008, andassociated dollar and percentage fluctuations were as follows (in thousands,except % change):

 

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| ** **                                                        | ** ** | **Three Months Ended March 31** | ** ** | **$**      | ** ** | **%**      | ** ** |
|-------------------------------------------------------------------|------------|-----------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                                        | ** ** | **2009**                                            | ** ** | **2008**   | ** ** | **Change** | ** ** | **Change** | ** ** |
|                                                              |       |                                                |       |       |       |       |       |   |   |
| Term license revenues                                             |       | $                                                   | 26,032     |       | $          | 14,372     |       | $ | 11,660 |   | 81 | % |
| Maintenance revenues                                              |       | 22,346                                              |       | 22,499     |       | (153       | )          | -1 | % |
| Other recurring revenues                                          |       | 12,519                                              |       | 12,268     |       | 251        |       | 2 | % |
| **Total term license, maintenance and other  recurring revenues** | ** ** | **60,897**                                          | ** ** | **49,139** | ** ** | **11,758** | ** ** | **24** | **%** |
| *Recurring revenue as % of total revenue*                         | * *   | *84*                                                | *%*        | *80*       | *%*        | * *   | * *   | * * | * * |
|                                                              |       |                                                |       |       |       |       |       |   |   |
| Asset under administration (AUA) fees                             |       | 1,494                                               |       | 1,979      |       | (485       | )          | -25 | % |
| Other perpetual license fees                                      |       | 2,408                                               |       | 3,646      |       | (1,238     | )          | -34 | % |
| **Total perpetual license fees**                                  | ** ** | **3,902**                                           | ** ** | **5,625**  | ** ** | **(1,723** | **)**      | **-31** | **%** |
|                                                              |       |                                                |       |       |       |       |       |   |   |
| **Professional services and other**                               | ** ** | **7,987**                                           | ** ** | **6,709**  | ** ** | **1,278**  | ** ** | **19** | **%** |
|                                                              |       |                                                |       |       |       |       |       |   |   |
| **Total net revenues**                                            | ** ** | **$**                                               | **72,786** | ** ** | **$**      | **61,473** | ** ** | **$** | **11,313** | ** ** | **18** | **%** |

 

Werecognized revenue of $72.8 million during the first quarter of 2009, whichrepresented an increase of 18% over the same quarter of last year. Thisincrease was driven by significant growth in term license revenue as wecontinue to layer in incremental ACV sold in previous periods. Perpetuallicense fees in the first quarter of 2009 were down compared to the firstquarter of 2008 as we licensed fewer perpetual seats and modules to ourexisting perpetual client base.We have grown net revenue year-over-year for several reasons, including thefollowing:

 

·                  Ourproduct innovation helped drive acquisition of new customers, resulting inincremental term license contract value and professional services billings.

 

·                  Ourcompletion of term license implementations resulted in incremental term licenseand professional services revenues.

 

·                  Ourexisting term licenses and maintenance revenues provide a consistent, recurringrevenue stream.

 

Totalrecurring revenues, which we define as term license, perpetual maintenance, andother recurring revenues, have increased to 84% of total net revenues duringthe first quarter of 2009, as compared to 80% during the same period of 2008.Term license revenues increased to 36% of total net revenues in the firstquarter of 2009, as compared to 23% in the same period in 2008.

 

Total expenses, including cost ofrevenues, were $62.9 million in the first quarter of 2009, compared with $57.7million in the first quarter of 2008. Our expenses increased in 2009 from 2008largely as a result of increased payroll, variable compensation and benefitexpenses resulting from increases in headcount primarily from our acquisitionof Tamale Software, Inc. on October 1, 2008.

 

Ourincome from operations in the first quarter of 2008 was $9.9 million or 14% ofrevenue, compared to $3.7 million or 6% of revenue in the first quarter of2008.

 

Duringthe first quarter of 2009, we recognized $3.2 million of income tax expense,compared to $1.3 million in the first quarter of 2008.

 

Weearned net income of $6.2 million, resulting in diluted earnings per share of$0.24 for the first quarter of 2009, compared to $2.6 million or $0.09 in thefirst quarter of 2008.

 

Wegenerated $13.9 million in cash from operations in the first quarter of 2009,which compares to $9.3 million in the first quarter of 2008, primarily as aresult of revenue growth and collections of resulting customer receivables.

 

*TermLicense and Term License Deferral*

 

Weare continuing the process of converting the Company’s license revenues from aperpetual model to a predominantly term model. Under a perpetual pricing model, customers purchase a license to useour software indefinitely and generally we recognize all license revenue at thetime of sale; maintenance is purchased under an annual renewable contract, 

 

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and recognized ratably over the contract period.Under a term pricing model, customers purchase a license to use our softwareand receive maintenance for a limited period of time and we recognize all ofthe revenue ratably over the length of the contract. This had the effect oflowering revenues in the Advent Investment Management (AIM) segment in theearly stages of the transition, but increasing the total potential value of thecustomer relationship. Because our products are used by customers for anaverage of approximately ten years, we believe this change to our businessmodel is significant for the long-term growth and value of the business as weexpect total revenues from a customer to increase over time. For example, overa ten-year period, a customer may enter into two or more contracts for the samesoftware product and services under a term license model.

 

When a customer purchases a term license together with implementationservices, we do not recognize any revenue under the contract until theimplementation services are complete and the remaining services aresubstantially complete. If the implementation services are still in progress asof quarter-end, we will defer all of the contract revenues to a subsequentquarter. At the point professional services are substantially completed,we recognize a pro-rata amount of the term license revenue, professionalservices fees earned and related expenses, based on the elapsed time from thestart of the term license to the substantial completion of professionalservices. Term license revenue for the remaining contract years and theremaining deferred professional services revenue and related expenses arerecognized ratably over the remaining contract length.

 

In the first quarter of 2009, for the first time, the revenuerecognized from completed implementations exceeded the revenue deferred fromprojects being implemented. This resulted in an increase to revenue of $2.7million composed of $2.3 million to term license revenue and $0.4 million toprofessional services revenue. We expect that the term license component of thedeferred revenue balance will increase or decrease in the future depending onthe amount of new term license bookings relative to the number ofimplementations that reach substantial completion in a particular quarter.

 

Amounts of revenues and directly-related expenses deferred as of March 31,2009 and December 31, 2008 associated with our term licensing deferralwere as follows (in millions):

 
| ** **                | ** ** | **March 31** | ** ** | **December 31** | ** ** |
|---------------------------|------------|-------------------|------------|----------------------|------------|
| ** **                | ** ** | **2009**          | ** ** | **2008**             | ** ** |
| Deferred revenues         | ** ** | ** **        | ** ** | ** **           | ** ** |
| Short-term                |       | $                 | 21.9       |                 | $          | 26.0 |   |
| Long-term                 |       | 6.2               |       | 4.8                  |       |
|                      |       |              |       |                 |       |
| Total                     |       | $                 | 28.1       |                 | $          | 30.8 |   |
|                      |       |              |       |                 |       |
| Directly-related expenses |       |              |       |                 |       |
| Short-term                |       | $                 | 6.6        |                 | $          | 8.1 |   |
| Long-term                 |       | 3.2               |       | 2.1                  |       |
|                      |       |              |       |                 |       |
| Total                     |       | $                 | 9.8        |                 | $          | 10.2 |   |

 

Deferred net revenues and directly-related expenses are classified as “Deferredrevenues” (short-term and long-term), and “Prepaid expenses and other,” and “Otherassets, net,” respectively, on the condensed consolidated balance sheets.

 

**Critical Accounting Policies and Estimates**

 

Management’sdiscussion and analysis of our financial condition and results of operationsare based on our condensed consolidated financial statements and related notes,which have been prepared in accordance with accounting principles generallyaccepted in the United States of America. We review the accounting policiesused in reporting our financial results on a regular basis. The preparation ofthese financial statements requires us to make estimates and judgments thataffect the reported amounts of assets, liabilities, revenues and expenses, andrelated disclosure of contingent liabilities.

 

Onan ongoing basis, we evaluate the process we use to develop estimates. We baseour estimates on historical experience and on other information that we believeis reasonable for making judgments at the time they are made. Actual resultsmay differ from these estimates due to actual outcomes being different from thoseon which we based our assumptions.

 

Webelieve the following accounting policies contain the more significantjudgments and estimates used in the preparation of our condensed consolidatedfinancial statements.

 

·                  Revenuerecognition and deferred revenues;

 

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·                  Incometaxes;

 

·                  Stock-basedcompensation;

 

·                  Restructuringcharges and related accruals;

 

·                  BusinessCombinations;

 

·                  Goodwill;

 

·                  Impairmentof long-lived assets;

 

·                  Legalcontingencies; and

 

·                  Salesreturns and accounts receivable allowances

 

Therehave been no significant changes in our critical accounting policies andestimates during the first quarter of 2009 as compared to the criticalaccounting policies and estimates disclosed in “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” included in ourAnnual Report on Form 10-K for the year ended December 31, 2008.

 

**RecentAccounting Pronouncements**

 

There have been no recent accounting pronouncements or changes inaccounting pronouncements during the three months ended March 31, 2009, ascompared to the recent accounting pronouncements described in Advent’s AnnualReport on Form 10-K for the fiscal year ended December 31, 2008, thatare of significance, or potential significance, to the Company.

 

**RecentDevelopments**

 

In April 2009, we received $2.1 million related to the final deferredcontingent payment from the sale of our ownership in LatentZero Limited. Wewill record this gain on sale of $2.1 million in “interest and other income,net” which will be reflected in our second quarter of 2009 results.

 

In April 2009, the Company repaid $7.5 million of the debt underour Credit Facility, resulting in a $7.5 million balance as of April 30,2009.

 

SeeNote 16, “Subsequent Events”, to the condensed consolidated financialstatements for further information.

 

**RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2009AND 2008**

 

The following table sets forth, for theperiods indicated, certain financial information as a percentage of total netrevenues. The financial information and the ensuing discussion should be readin conjunction with the accompanying condensed consolidated financialstatements and notes thereto:

 

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| ** **                                     | ** ** | **Three Months Ended March 31** | ** ** |
|------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                     | ** ** | **2009**                                            | ** ** | **2008** | ** ** |
| **Net revenues:**                              |       |                                                |       |   |   |
| Term license, maintenance and other  recurring |       | 84                                                  | %          | 80 | % |
| Perpetual license fees                         |       | 5                                                   |       | 9 |   |
| Professional services and other                |       | 11                                                  |       | 11 |   |
|                                           |       |                                                |       |   |   |
| Total net revenues                             |       | 100                                                 |       | 100 |   |
|                                           |       |                                                |       |   |   |
| **Cost of revenues:**                          |       |                                                |       |   |   |
| Term license, maintenance and other  recurring |       | 17                                                  |       | 18 |   |
| Perpetual license fees                         |       | *                                                   |       | 1 |   |
| Professional services and other                |       | 12                                                  |       | 13 |   |
| Amortization of developed technology           |       | 2                                                   |       | 1 |   |
|                                           |       |                                                |       |   |   |
| Total cost of revenues                         |       | 31                                                  |       | 32 |   |
|                                           |       |                                                |       |   |   |
| Gross margin                                   |       | 69                                                  |       | 68 |   |
|                                           |       |                                                |       |   |   |
| **Operating expenses:**                        |       |                                                |       |   |   |
| Sales and marketing                            |       | 23                                                  |       | 25 |   |
| Product development                            |       | 19                                                  |       | 21 |   |
| General and administrative                     |       | 13                                                  |       | 15 |   |
| Amortization of other intangibles              |       | 1                                                   |       | 1 |   |
| Restructuring charges                          |       | *                                                   |       | * |   |
|                                           |       |                                                |       |   |   |
| Total operating expenses                       |       | 56                                                  |       | 62 |   |
|                                           |       |                                                |       |   |   |
| Income from operations                         |       | 14                                                  |       | 6 |   |
| Interest and other income (expense), net       |       | (1                                                  | )          | 0 |   |
|                                           |       |                                                |       |   |   |
| Income before income taxes                     |       | 13                                                  |       | 6 |   |
| Provision from income taxes                    |       | 4                                                   |       | 2 |   |
|                                           |       |                                                |       |   |   |
| **Net income**                                 |       | 9                                                   | %          | 4 | % |

 

----

*Lessthan 1%

 

# **NET REVENUES**

 
| ** **                        | ** ** | **Three Months Ended March 31** | ** ** | ** ** | ** ** |
|-----------------------------------|------------|-----------------------------------------------------|------------|------------|------------|
| ** **                        | ** ** | **2009**                                            | ** ** | **2008**   | ** ** | **Change** | ** ** |
| Total net revenues (in thousands) |       | $                                                   | 72,786     |       | $          | 61,473 |   | $ | 11,313 |   |
|                                   |            |                                                     |            |            |            |  |  |  |  |  |

 

Our netrevenues are made up of three components: term license, maintenance and otherrecurring revenue; perpetual license fees; and professional services and otherrevenue. Term license fees include both the software license fees andmaintenance fees recorded under a time based contract. Maintenancerevenues are derived from maintenance fees charged for perpetual licensearrangements and recurring revenues are derived from our subscription-based ortransaction-based services.Perpetuallicense revenues are derived from the licensing of software products under aperpetual arrangement. Professionalservices and other revenues include fees for consulting, training services, andservices and our client conferences. Sales returns, which we generally donot provide to customers, are accounted for as deductions to these threerevenue categories based on our historical experience.

 

Prior to fiscal 2006, each of the major revenue categories varied as apercentage of net revenues. However, since fiscal 2006, revenues from recurringsources have grown from 75% in 2006, to 77% in 2007, to 79% in 2008 and to 84%in the first quarter of 2009 and conversely revenues from perpetual licenseshave decreased from 15% in 2006, to 12% in 2007, to 9% in 

 

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2008 and to 5% in the first quarter of 2009. As we continue to signterm license agreements for new customers, grow our subscription, datamanagement and outsourced services revenues, and our customers renew theirperpetual maintenance, we expect our revenue from recurring sources to continueto represent over 80% of our total net revenues.

 

Netrevenues increased in the first quarter of 2009 principally due to revenuesfrom term license arrangements entered into in prior periods reflectingcustomer adoption for many of our products and services, which principallyincludes sales of our APX and Geneva products. The year-over-year growth intotal net revenues for the first quarter of 2009 was due principally tosubstantially higher term license revenue, which reflected $11.7 million or 81%growth in term license revenues during the first quarter of 2009 as compared tothe same quarter in 2008.

 

Additionally in the first quarter of 2009, for the first time, therevenue recognized from completed implementations exceeded the revenue deferredfrom projects being implemented. This resulted in an increase to revenue of$2.7 million composed of $2.3 million to term license revenue and $0.4 millionto professional services revenue.

 

Revenuederived from sales to Europe, Middle East and Africa (“EMEA”) contributed toour growth in 2009 and increased 7% in the first three months of 2009 incomparison to the same period in 2008. Revenues from sales to EMEA were $8.9million and $8.3 million in the first quarter of 2009 and 2008, respectively.We plan to continue expanding our international growth, both in our currentmarkets and elsewhere. The revenues from customers in any single internationalcountry did not exceed 10% of total net revenues.

 

We expect total net revenues for the second quarter of 2009 to bebetween $68 million and $70 million.

 

***Term License, Maintenance and Other RecurringRevenues***

 
| **(in thousands, except percent of**      | ** ** | **Three Months Ended March 31** | ** ** | ** ** | ** ** |
|---------------------------------------------------------------|------------|-----------------------------------------------------|------------|------------|------------|
| **total net revenues)**                             | ** ** | **2009**                                            | ** ** | **2008**   | ** ** | **Change** | ** ** |
|                                                          |       |                                                |       |       |       |   |   |
| Term license revenues                                         |       | $                                                   | 26,032     |       | $          | 14,372 |   | $ | 11,660 |   |
| Maintenance revenues                                          |       | 22,346                                              |       | 22,499     |       | (153 | ) |
| Other recurring revenues                                      |       | 12,519                                              |       | 12,268     |       | 251 |   |
| Total term license, maintenance and other recurring  revenues |       | $                                                   | 60,897     |       | $          | 49,139 |   | $ | 11,758 |   |
|                                                          |       |                                                |       |       |       |   |   |
| Percent of total net revenues                                 |       | 84                                                  | %          | 80         | %          |   |   |

 

The increase in term license revenues reflected the continued marketacceptance of our Geneva, APX, Partner and Moxy products. Revenues from termlicenses, which include both the software license and maintenance services forterm licenses, grew $11.7 million or 81% during the first quarter of 2009compared to the same quarter in 2008, and represented 43% of total termlicense, maintenance and other recurring revenues as compared to 29% in thefirst quarter of 2008. We began our transition to a term licensing model in2004 and have experienced growth in our term license bookings through 2008. Thegrowth of term license revenues in the first quarter of 2009 reflectsthe continued layering of incremental ACV sold in previous quarters into ourterm revenue. In addition, we acquired Tamale Software in October 2008which contributed to our term revenues in the first quarter of 2009.

 

Maintenance revenues decreased by $0.2 million or 1% during the firstquarter of 2009 compared to the same quarter of 2008. This decrease wasattributable to the perpetual license customers migrating to term licenses,maintenance de-activations due to customer attrition or customers downgradingmaintenance levels which were partially offset by the impact of priceincreases.

 

Ourrenewal rates are based on cash collections and are disclosed one quarter inarrears. We disclose our renewal rates one quarter in arrears in order toinclude substantially all payments received against the invoices for thatquarter. We also update our renewal rates from the initial disclosure toinclude all cash collections subsequent to the initial disclosure. Thefollowing summarizes our initial and updated renewal rates for the previousfive quarters:

 

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| **Renewal Rates**                                                                                        | ** ** | **Q109**   | ** ** | **Q408**   | ** ** | **Q308**   | ** ** | **Q208**   | ** ** | **Q108**   | ** ** |
|---------------------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| ** **                                                                                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| *Current Methodology (based on cash  collections relative to prior year collections)*                         | * *   |
| Initially Disclosed Rate (1)                                                                                  |       | 94         | %          | 98         | %          | 103        | %          | 103        | %          | n/a        |       |
| Updated Disclosed Rate (2)                                                                                    |       | —     |       | 100        | %          | 109        | %          | 106        | %          | n/a        |       |
|                                                                                                          |       |       |       |       |       |       |       |       |       |       |       |
| *Previous Methodology (based on cash  collections relative to original list price including price increases)* |       |
| Initially Disclosed Rate (1)                                                                                  |       | 82         | %          | 88         | %          | 86         | %          | 92         | %          | 91         | %          |
| Updated Disclosed Rate (2)                                                                                    |       | —     |       | 88         | %          | 92         | %          | 95         | %          | 91         | %          |

 

----

(1)                                  “InitiallyDisclosed Rate” is based on cash collections and reported one quarter inarrears

 

(2)                                  “UpdatedDisclosed Rate” reflects initially disclosed rate updated for subsequent cashcollections

 

Ourrenewal rates for the fourth quarter of 2008 were below the ranges of ourprevious four quarters. The decrease in renewal rates reflects increases in thenumber of customers who have gone out of business as well as from slowerpayments received from renewal clients.

 

Other recurring revenues increased $0.3 million or 2% during the firstquarter of 2009. This was primarily due to growth in our subscription, datamanagement and outsourced services totaling $0.1 million, and highertransaction charges of $0.2 million.

 

As a percentage of total net revenues, total term license, maintenanceand other recurring revenues increased to 84% during the first quarter of 2009from 80% during the first quarter of 2008. This increase as a percentage oftotal net revenues were attributable to the continued emphasis in term licensesales relative to perpetual license sales.

 

***Perpetual License Fees***

 
| **(in thousands, except percent of** | ** ** | **Three Months Ended March 31** | ** ** | ** ** | ** ** |
|----------------------------------------------------------|------------|-----------------------------------------------------|------------|------------|------------|
| **total net revenues)**                        | ** ** | **2009**                                            | ** ** | **2008**   | ** ** | **Change** | ** ** |
| ** **                                               | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| AUA fees                                                 |       | $                                                   | 1,494      |       | $          | 1,979 |   | $ | (485 | ) |
| Other perpetual license fees                             |       | 2,408                                               |       | 3,646      |       | (1,238 | ) |
| ** **                                               | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total perpetual license fees                             |       | $                                                   | 3,902      |       | $          | 5,625 |   | $ | (1,723 | ) |
|                                                     |       |                                                |       |       |       |   |   |
| Percent of total net revenues                            |       | 5                                                   | %          | 9          | %          |   |   |

 

Total perpetual license fees decreased 31% in the first quarter of 2009compared to 2008. As a percentage of total net revenues, perpetual license feesdecreased to 5% in the first quarter of 2009 from 9% in the same period of2008. Consistent with our transition to term licensing, perpetual license feescontinue to account for a smaller percentage of total net revenues.Additionally, we licensed fewer perpetual seats and modules to our existingperpetual client base. Incremental AUA fees from perpetual licenses were $1.5million in the first quarter of 2009, which is down from $2.0 million in thefirst quarter of 2008 as clients experienced declines in the market value ofAUA balances during 2009 due to market conditions.

 

***Professional Services and Other Revenues***

 
| ** **                                               | ** ** | **Three Months Ended March 31** | ** ** | ** ** | ** ** |
|----------------------------------------------------------|------------|-----------------------------------------------------|------------|------------|------------|
| ** **                                               | ** ** | **2009**                                            | ** ** | **2008**   | ** ** | **Change** | ** ** |
| Professional services and other revenues (in  thousands) |       | $                                                   | 7,987      |       | $          | 6,709 |   | $ | 1,278 |   |
| Percent of total net revenues                            |       | 11                                                  | %          | 11         | %          |   |   |
|                                                          |            |                                                     |            |            |            |  |  |  |  |  |

 

Professional services and other revenues primarily include consulting,project management, custom integration, and training. Professional servicesprojects related to Axys, Moxy and Partner products generally can be completedin a two- to six-month time period, while services related to Geneva and APXproducts may require a four- to nine-month implementation period.

 

We continue to defer professional services revenue for servicesperformed on term license implementations that are not considered substantiallycomplete. Service revenue is deferred until the implementation is complete andremaining services 

 

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are substantially completed. Upon substantial completion, we recognizea pro-rata amount of professional services fees earned based on theelapsed time from the start of the term license to the substantial completionof professional services. The remaining deferred professional services revenueis recognized ratably over the remaining contract length. We haveexperienced an increase in implementation services from the sales success ofour APX and Geneva products.

 

Professional services and other revenues fluctuated due to thefollowing (in thousands):

 
| ** **                                          | ** ** | **Change From**                   | ** ** |
|-----------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                          | ** ** | **Q1 08 to Q1 09** | ** ** |
| ** **                                          | ** ** | ** **                             | ** ** |
| Decreased net term license implementation  deferral |       | $                                      | 2,338      |   |
| Decreased consulting services                       |       | (851                                   | )          |
| Various other items                                 |       | (209                                   | )          |
|                                                |       |                                   |       |
| Total change                                        |       | $                                      | 1,278      |   |

 

Professional services and other revenues were $8.0 million, an increaseof $1.3 million or 19% over the first quarter of 2008. We deferred lessprofessional services revenue for services performed on term licenseimplementations which contributed to $2.3 million of the increase. During thefirst quarter of 2009, a number of professional service implementation projectsreached substantial completion. Revenues from consulting services decreasedduring the first quarter of 2009 due to a decrease in international demand forthese services and a higher use of non-Advent consultants by our customers.

 

***Revenues by Segment***

 
| ** **                   | ** ** | **Three Months Ended March 31** | ** ** | ** ** | ** ** |
|------------------------------|------------|-----------------------------------------------------|------------|------------|------------|
| **(in thousands)**      | ** ** | **2009**                                            | ** ** | **2008**   | ** ** | **Change** | ** ** |
| ** **                   | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Advent Investment Management |       | $                                                   | 66,325     |       | $          | 55,264 |   | $ | 11,061 |   |
| MicroEdge                    |       | 6,461                                               |       | 6,209      |       | 252 |   |
|                         |       |                                                |       |       |       |   |   |
| Total net revenues           |       | $                                                   | 72,786     |       | $          | 61,473 |   | $ | 11,313 |   |

 

We have two reportable segments: Advent Investment Management (“AIM”)and MicroEdge. AIM derives revenues from the development, marketing and sale ofsoftware products, data interfaces and related maintenance and services thatautomate, integrate and support certain mission critical functions ofinvestment management organizations. MicroEdge derives revenues from the saleof software and services for grant management, matching gifts and volunteer trackingfor the grant-making community.

 

The 20% increase in AIM’s revenue during the first quarter of 2009reflected the 81% increase in term license revenues described in the “Term,Maintenance and Other Recurring Revenue” section above. EMEA revenues were $8.9million in the first quarter of 2009, an increase of $0.6 million or 7%, andthey represented 12% of total revenues down from 14% in the first quarter of2008 as domestic sales grew at a greater rate.

 

The4% increase in MicroEdge revenues in the first quarter of 2009 primarilyreflected an increase in perpetual license sales in MicroEdge’s core product,GIFTS, and to a lesser extent an increase in maintenance revenues due to priceincreases and continued strong customer retention. The technology spendingpatterns of organizations in MicroEdge’s primary markets (independentfoundations, community foundations and corporations) are directly affected byeconomic fluctuations as foundation budgets are largely driven by endowmentincome. Given that endowments often contain market-exposed components, they aresignificantly affected by the economy and foundation spending typicallydecreases in an economic downturn. Community foundations are subject to similarinfluences, compounded by the fact that in many cases much of their ongoingfunding and endowment comes from active donors who may increase or reduce theirgiving depending on the economic climate and the related effect on their incomeand wealth. Corporations typically fund charitable activities from operatingbudgets, and the allocation to charitable donations and supporting companycharitable operations is often closely tied to a company’s performance. Thus,corporate philanthropy and spending on related technology are correlated withcompany and overall economic performance.

 

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### **COST OF REVENUES**

 
| ** **                            | ** ** | **Three Months Ended March 31** | ** ** | ** ** | ** ** |
|---------------------------------------|------------|--------------------------------------|------------|------------|------------|
| ** **                            | ** ** | **2009**                             | ** ** | **2008**   | ** ** | **Change** | ** ** |
| Total cost of revenues (in thousands) |       | $                                    | 22,509     |       | $          | 19,699 |   | $ | 2,810 |   |
| Percent of total net revenues         |       | 31                                   | %          | 32         | %          |   |   |
|                                       |            |                                      |            |            |            |  |  |  |  |  |

 

Ourcost of revenues is made up of four components: cost of term license,maintenance and other recurring; cost of perpetual license fees; cost ofprofessional services and other; and amortization of developed technology. Theincrease in total cost of revenues in absolute dollars was due principally toheadcount additionsin our client support and services groups to support our new term licensebookings since the first quarter of 2008 and associated increase in clientimplementation projects. The increase in gross margin percentage during thefirst quarter of 2009 resulted principally from the recognition of term licenseand professional services revenue from several projects that reachedsubstantial completion during the first quarter of 2009. We defer revenues anddirect costs associated with services performed on term licenseimplementations. Indirect costs such as management and other overhead expensesare recognized in the period in which they are incurred.

 

***Cost of Term License, Maintenanceand Other Recurring***

 
| ** **                                                           | ** ** | **Three Months Ended March 31** | ** ** | ** ** | ** ** |
|----------------------------------------------------------------------|------------|--------------------------------------|------------|------------|------------|
| ** **                                                           | ** ** | **2009**                             | ** ** | **2008**   | ** ** | **Change** | ** ** |
| Cost of term license, maintenance and other recurring (in thousands) |       | $                                    | 12,136     |       | $          | 10,934 |   | $ | 1,202 |   |
| Percent of total term license, maintenance and recurring revenue     |       | 20                                   | %          | 22         | %          |   |   |
|                                                                      |            |                                      |            |            |            |  |  |  |  |  |

 

Costof term license fees consists primarily of royalties and other fees paid tothird parties, the fixed direct labor and third party costs involved in producing and distributing our software,and cost of product media including duplication, manuals and packagingmaterials. Cost of maintenance and other recurring revenues is primarilycomprised of the direct costs of providing technical support under maintenanceagreements and other services for recurring revenues and royalties paid tothird party subscription-based and transaction-based vendors.

 

Costof term license, maintenance and other recurring fluctuated due to thefollowing (in thousands):

 
| ** **                    | ** ** | **Change From**    | ** ** |
|-------------------------------|------------|--------------------|------------|
| ** **                    | ** ** | **Q1 08 to Q1 09** | ** ** |
| Increased payroll and related |       | $                  | 1,253      |   |
| Various other items           |       | (51                | )          |
|                          |       |               |       |
| Total change                  |       | $                  | 1,202      |   |

 

Theincreases for the first quarter of 2009 were due primarily to an increase incompensation and related costs resulting from increases in salary costs andheadcount which enables us to deliver the services we provide to our growingnumber of clients in their day-to-day use of our software.

 

***Cost of Perpetual License Fees***

*** ***
| ** **                                    | ** ** | **Three Months Ended March 31** | ** ** | ** ** | ** ** |
|-----------------------------------------------|------------|--------------------------------------|------------|------------|------------|
| ** **                                    | ** ** | **2009**                             | ** ** | **2008**   | ** ** | **Change** | ** ** |
|                                          |       |                                 |       |       |       |   |   |
| Cost of perpetual license fees (in thousands) |       | $                                    | 175        |       | $          | 317 |   | $ | (142 | ) |
| Percent of total perpetual license revenues   |       | 4                                    | %          | 6          | %          |   |   |
|                                               |            |                                      |            |            |            |  |  |  |  |  |

 

Costof perpetual license fees consists primarily of royalties and other fees paidto third parties, the fixed direct labor and third party costs involved inproducing and distributing our software, and cost of product media includingduplication, manuals and packaging materials. The cost of perpetual licensefees has decreased by $0.1 million compared with the same period in 2008resulting from a reduction in payroll and related expenses due to a decline inheadcount as we continue to transition away from perpetual licensing.

 

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***Cost of Professional Services and Other***

 
| ** **                                                | ** ** | **Three Months Ended March 31** | ** ** | ** ** | ** ** |
|-----------------------------------------------------------|------------|--------------------------------------|------------|------------|------------|
| ** **                                                | ** ** | **2009**                             | ** ** | **2008**   | ** ** | **Change** | ** ** |
| Cost of professional services and other (in thousands)    |       | $                                    | 8,681      |       | $          | 7,726 |   | $ | 955 |   |
| Percent of total professional services and other revenues |       | 109                                  | %          | 115        | %          |   |   |
|                                                           |            |                                      |            |            |            |  |  |  |  |  |

 

Costof professional services and other revenue consists primarily of personnelrelated costs associated with the client services organization in providingconsulting, custom report writing and conversions of data from clients’previous systems. Also included are direct costs associated with third-partyconsultants and travel expenses. Also, we defer direct professional servicescosts until we have completed the term license implementation services.

 

Costof professional services and other fluctuated due to the following (inthousands):

 
| ** **                                                          | ** ** | **Change From**    | ** ** |
|---------------------------------------------------------------------|------------|--------------------|------------|
| ** **                                                          | ** ** | **Q1 08 to Q1 09** | ** ** |
| Decreased net service cost deferral related to term implementations |       | $                  | 1,025      |   |
| Increased payroll and related                                       |       | 449                |       |
| Decreased travel and entertainment                                  |       | (260               | )          |
| Decreased outside services                                          |       | (166               | )          |
| Various other items                                                 |       | (93                | )          |
|                                                                |       |               |       |
| Total change                                                        |       | $                  | 955        |   |

 

Theincrease in the first quarter of 2009 reflects less cost deferral associatedwith our term implementations and an increase in payroll related expenses.During the first quarter of 2009, we recognized revenue on several professionalservice implementation projects that reached substantial completion. We defer direct costs associated withservices performed on term license implementations until a project reachessubstantial completion. As a result, we recognized salary costs that hadbeen deferred related to these projects. During the first quarter of 2009, lesscost deferral from our term implementations resulted in a $1.0 million increasein costs as we recognized net professional service costs of $0.2 million,compared to a deferral of net professional service costs of $0.8 million in thefirst quarter of 2008. Additionally, we increased our utilization ofcontractors during the first quarter of 2009 which contributed to the increasein payroll related expenses. The decrease in travel and entertainment expensesas well as outside services reflects less activity and utilization during thefirst quarter of 2009.

 

***Amortization of Developed Technology***

 
| ** **                                         | ** ** | **Three Months Ended March 31** | ** ** | ** ** | ** ** |
|----------------------------------------------------|------------|--------------------------------------|------------|------------|------------|
| ** **                                         | ** ** | **2009**                             | ** ** | **2008**   | ** ** | **Change** | ** ** |
| Amortization of developed techology (in thousands) |       | $                                    | 1,517      |       | $          | 722 |   | $ | 795 |   |
| Percent of total net revenues                      |       | 2                                    | %          | 1          | %          |   |   |
|                                                    |            |                                      |            |            |            |  |  |  |  |  |

 

Amortizationof developed technology represents amortization of acquisition-relatedintangible assets and of capitalized software development costs previouslycapitalized under SFAS 86. The increase during the first quarter of 2009reflected increased amortization from technology-related intangible assetsassociated with Tamale Software which we acquired in October 2008, and additionalamortization from software development costs capitalized during 2008.

 

### **OPERATING EXPENSES**

### ** **

***Sales and Marketing***

 
| ** **                         | ** ** | **Three Months Ended March 31** | ** ** | ** ** | ** ** |
|------------------------------------|------------|--------------------------------------|------------|------------|------------|
| ** **                         | ** ** | **2009**                             | ** ** | **2008**   | ** ** | **Change** | ** ** |
| Sales and marketing (in thousands) |       | $                                    | 17,077     |       | $          | 15,390 |   | $ | 1,687 |   |
| Percent of total net revenues      |       | 23                                   | %          | 25         | %          |   |   |
|                                    |            |                                      |            |            |            |  |  |  |  |  |

 

Salesand marketing expenses consist primarily of the costs of personnel involved inthe sales and marketing process, sales commissions, advertising and promotionalmaterials, sales facilities expense, trade shows, and seminars.

 

Salesand marketing expenses fluctuated due to the following (in thousands):

 

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| ** **                         | ** ** | **Change From**    | ** ** |
|------------------------------------|------------|--------------------|------------|
| ** **                         | ** ** | **Q1 08 to Q1 09** | ** ** |
| Increased payroll and related      |       | $                  | 2,332      |   |
| Decreased travel and entertainment |       | (316               | )          |
| Decreased marketing                |       | (315               | )          |
| Various other items                |       | (14                | )          |
|                               |       |               |       |
| Total change                       |       | $                  | 1,687      |   |

 

Theincrease in expense in absolute dollars in the first quarter of 2009 reflectedthe growth of our business, while the decrease of expense as a percentage ofrevenue reflected our achievement of efficiencies of scale associated withincreased revenue growth. The increase in payroll and related expense was dueto an increase in headcount to 202 at March 31, 2009 from 185 at March 31,2008. The decreases in travel and entertainment costs, as well as marketingcosts were primarily due to the reduced activity by our sales personnel during2009.

 

***Product Development***

 
| ** **                         | ** ** | **Three Months Ended March 31** | ** ** | ** ** | ** ** |
|------------------------------------|------------|--------------------------------------|------------|------------|------------|
| ** **                         | ** ** | **2009**                             | ** ** | **2008**   | ** ** | **Change** | ** ** |
|                               |       |                                 |       |       |       |   |   |
| Product development (in thousands) |       | $                                    | 13,595     |       | $          | 12,890 |   | $ | 705 |   |
| Percent of total net revenues      |       | 19                                   | %          | 21         | %          |   |   |
|                                    |            |                                      |            |            |            |  |  |  |  |  |

 

Productdevelopment expenses consist primarily of salary and benefits for ourdevelopment staff as well as contractors’ fees and other costs associated withthe enhancements of existing products and services and development of newproducts and services.

 

Productdevelopment expenses fluctuated due to the following (in thousands):

 
| ** **                    | ** ** | **Change From**    | ** ** |
|-------------------------------|------------|--------------------|------------|
| ** **                    | ** ** | **Q1 08 to Q1 09** | ** ** |
| Increased payroll and related |       | $                  | 1,675      |   |
| Decreased outside services    |       | (735               | )          |
| Various other items           |       | (235               | )          |
|                          |       |               |       |
| Total change                  |       | $                  | 705        |   |

 

The increase in productdevelopment expense during the first quarter of 2009 was primarily due toincreases in payroll related costs resulting from an increase in headcountattributable to our acquisition of Tamale Software, Inc. on October 1,2008, as well as increases in headcount to help us continue the enhancement ofour existing product suite including new versions of Geneva, APX, Moxy, Advent Rules Manager,Advent Revenue Center and Tamale RMS. Headcount increased to 259 at March 31,2009 from 229 at March 31, 2008. During the first quarter of 2008, weutilized an outside service provider to assist in the development of our Genevaproduct which we did not utilize in the first quarter of 2009, this resultingin the $0.7 million decrease.

 

***General and Administrative***

 
| ** **                                | ** ** | **Three Months Ended March 31** | ** ** | ** ** | ** ** |
|-------------------------------------------|------------|--------------------------------------|------------|------------|------------|
| ** **                                | ** ** | **2009**                             | ** ** | **2008**   | ** ** | **Change** | ** ** |
| General and administrative (in thousands) |       | $                                    | 9,263      |       | $          | 9,227 |   | $ | 36 |   |
| Percent of total net revenues             |       | 13                                   | %          | 15         | %          |   |   |
|                                           |            |                                      |            |            |            |  |  |  |  |  |

 

Generaland administrative expenses consist primarily of personnel costs forinformation technology, finance, administration, operations and generalmanagement, as well as legal and accounting expenses.

 

Generaland administrative expenses fluctuated due to the following (in thousands):

 

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| ** **                       | ** ** | **Change From**    | ** ** |
|----------------------------------|------------|--------------------|------------|
| ** **                       | ** ** | **Q1 08 to Q1 09** | ** ** |
| Increased payroll and related    |       | $                  | 432        |   |
| Decreased legal and professional |       | (338               | )          |
| Various other items              |       | (58                | )          |
|                             |       |               |       |
| Total change                     |       | $                  | 36         |   |

 

Theincrease in expenses in the first quarter of 2009 is primarily due to theincreases in payroll andother related costs as a result of an increase in headcount. Headcount increased to 168 at March 31,2009 from 164 at March 31, 2008. The decrease in legal andprofessional fees primarily reflects a reduction in accounting fees. As a percentageof revenue, the two-point decrease in general and administrative expensereflects our achievement of efficiencies of scale associated with increasedrevenue growth.

 

***Amortization of Other Intangibles***

*** ***
| ** **                                       | ** ** | **Three Months Ended March 31** | ** ** | ** ** | ** ** |
|--------------------------------------------------|------------|--------------------------------------|------------|------------|------------|
| ** **                                       | ** ** | **2009**                             | ** ** | **2008**   | ** ** | **Change** | ** ** |
| Amortization of other intangibles (in thousands) |       | $                                    | 444        |       | $          | 487 |   | $ | (43 | ) |
| Percent of total net revenues                    |       | 1                                    | %          | 1          | %          |   |   |
|                                                  |            |                                      |            |            |            |  |  |  |  |  |

 

Otherintangibles represent non-technology related intangible assets. The slightdecrease during the first quarter of 2009 resulted from assets from prioracquisitions becoming fully amortized during 2008, partially offset byadditional amortization from non-technology related intangible assetsassociated with Tamale Software, which we acquired in October 2008.

 

***Restructuring Charges***

 
| ** **                           | ** ** | **Three Months Ended March 31** | ** ** | ** ** | ** ** |
|--------------------------------------|------------|--------------------------------------|------------|------------|------------|
| ** **                           | ** ** | **2009**                             | ** ** | **2008**   | ** ** | **Change** | ** ** |
|                                 |       |                                 |       |       |       |   |   |
| Restructuring charges (in thousands) |       | $                                    | 45         |       | $          | 56 |   | $ | (11 | ) |
| Percent of total net revenues        |       | 0                                    | %          | 0          | %          |   |   |
|                                      |            |                                      |            |            |            |  |  |  |  |  |

 

Minor restructuringinitiatives have been implemented in our AIM and MicroEdge operating segmentsto reduce costs and improve operating efficiencies. These initiatives haveresulted in restructuring charges comprised primarily of costs related toproperties abandoned in connection with facilities consolidation, associatedwrite-down of leasehold improvements severance and associated employeetermination costs related to headcount reductions. Our restructuring chargesincluded accruals for estimated losses on facility costs based on ourcontractual obligations net of estimated sublease income. We reassess thisliability periodically based on market conditions.

 

##### ***During thefirst quarter of 2009 and 2008, we recorded a restructuring charge of $45,000and $56,000, respectively, which relate to the present value amortization offacility exit obligations.***

##### *** ***

Foradditional analysis of the components of the payments and charges made againstthe restructuring accrual during the first quarter of 2009, see Note 9, “RestructuringCharges” to our condensed consolidated financial statements.

 

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***Operating Income by Segment***

 
| ** **                                                                            | ** ** | **Three Months Ended March 31** | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------------------------|------------|--------------------------------------|------------|------------|------------|
| **(in thousands)**                                                                    | ** ** | **2009**                             | ** ** | **2008**   | ** ** | **Change** | ** ** |
| ** **                                                                            | ** ** | ** **                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Advent Investment Management                                                          |       | $                                    | 14,125     |       | $          | 7,936 |   | $ | 6,189 |   |
| MicroEdge                                                                             |       | 1,752                                |       | 388        |       | 1,364 |   |
| Unallocated corporate operating costs and expenses Stock-based  employee compensation |       | (4,063                               | )          | (3,391     | )          | (672 | ) |
| Amortization of developed technology                                                  |       | (1,517                               | )          | (722       | )          | (795 | ) |
| Amortization of other intangibles                                                     |       | (444                                 | )          | (487       | )          | 43 |   |
|                                                                                  |       |                                 |       |       |       |   |   |
| Total income from operations                                                          |       | $                                    | 9,853      |       | $          | 3,724 |   | $ | 6,129 |   |

 

Operating income for the AIMsegment increased by approximately $6.2 million in the first quarter of 2009compared with the first quarter of 2008 primarily as a result of an increase inAIM revenue of $11.1 million or 20%. This increase in AIM’s revenue was partially offset by increasedexpenses of $4.9 million or 10% primarily due to payroll and other related costs from higher headcountof 963 employees at March 31, 2009 from 870 at March 31, 2008, as theAIM segment has added personnel primarily in the client support, productdevelopment, professional services and sales and marketing groups.

 

MicroEdge’soperating income increased by $1.4 million from the first quarter of 2008 dueto a decrease in total costs of $1.1 million. This decrease primarily resultedfrom minor restructuring initiatives that have been implemented in theMicroEdge operating segment to reduce costs and improve operating efficiencies.

 

### ***Interest and Other Income(Expense), Net***

 
| ** **                                              | ** ** | **Three Months Ended March 31** | ** ** | ** ** | ** ** |
|---------------------------------------------------------|------------|--------------------------------------|------------|------------|------------|
| ** **                                              | ** ** | **2009**                             | ** ** | **2008**   | ** ** | **Change** | ** ** |
| Interest and other income (expense), net (in thousands) |       | $                                    | (377       | )          | $          | 227 |   | $ | (604 | ) |
| Percent of total net revenues                           |       | -1                                   | %          | 0          | %          |   |   |
|                                                         |            |                                      |            |            |            |  |  |  |  |  |

 

Interestand other income (expense), net consists of interest expense and income,realized gains and losses on investments and foreign currency gains and losses.

 

Interestand other income (expense), net fluctuated due to the following (in thousands):

 
| ** **                          | ** ** | **Change From**    | ** ** |
|-------------------------------------|------------|--------------------|------------|
| ** **                          | ** ** | **Q1 08 to Q1 09** | ** ** |
| Decrease in interest income         |       | $                  | (313       | ) |
| Increase in foreign exchange losses |       | (207               | )          |
| Various other items                 |       | (84                | )          |
|                                |       |               |       |
| Total change                        |       | $                  | (604       | ) |

 

Smallercash balances, declining market interest rates and a more conservativeinvestment portfolio all contributed to the decrease in interest income duringthe first quarter of 2009, compared to the first quarter of 2008.

 

Foreignexchanges losses increased during the first quarter of 2009 as the US dollarstrengthened against foreign currencies during the comparable period of 2008.

 

Interestand other income (expense), net for the second quarter of 2009 will include again of $2.1 million related to the final payment received from our sale ofLatentZero Limited.

 

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### ***Provisionfor Income Taxes***

 
| ** **                                | ** ** | **Three Months Ended March 31** | ** ** | ** ** | ** ** |
|-------------------------------------------|------------|--------------------------------------|------------|------------|------------|
| ** **                                | ** ** | **2009**                             | ** ** | **2008**   | ** ** | **Change** | ** ** |
| Provision for income taxes (in thousands) |       | $                                    | 3,247      |       | $          | 1,316 |   | $ | 1,931 |   |
| Effective tax rate                        |       | 34                                   | %          | 33         | %          |   |   |
|                                           |            |                                      |            |            |            |  |  |  |  |  |

 

We recorded a provisionof $3.2 million resulting in a 34% effective tax rate for the first quarter of2009, compared to $1.3 million and a 33% effective tax rate during thefirst quarter of 2008. The increase in effective tax rate over the prior yearperiod primarily reflects the differing percentage impact of each quarter’sdiscrete tax benefits in relation to the quarter’s pre-tax income.

 

We currently expect anannual effective tax rate for 2009 between 30% and 35%. Our expectation isbased on a projected fiscal 2009 effective tax rate of 36%, adjusted fordiscrete tax benefits for tax deductions due to disqualifying dispositions ofincentive stock options and employee stock purchase plan shares.

 

### **LIQUIDITYAND CAPITAL RESOURCES**

### ** **

Ouraggregate cash and cash equivalents were $36.3 million at March 31, 2009,compared with $48.4 million at December 31, 2008. Cash equivalents arecomprised of highly liquid investments purchased with an original or remainingmaturity of 90 days or less at the date of purchase.

 

Thetable below, for the periods indicated, provides selected cash flow information(in thousands):

 
| ** **                                          | ** ** | **Three Months Ended March 31** | ** ** |
|-----------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                          | ** ** | **2009**                             | ** ** | **2008** | ** ** |
|                                                |       |                                 |       |   |   |
| Net cash provided by operating activities           |       | $                                    | 13,949     |   | $ | 9,264 |   |
| Net cash used in investing activities               |       | $                                    | (1,128     | ) | $ | (2,949 | ) |
| Net cash provided by (used in) financing activities |       | $                                    | (24,712    | ) | $ | 1,787 |   |

 

***Cash Flows from Operating Activities***

 

Ourcash flows from operating activities represent the most significant source offunding for our operations. The major uses of our operating cash includefunding payroll (salaries, commissions, bonuses and benefits), generaloperating expenses (marketing, travel, computer and telecommunications, legaland professional expenses, and office rent) and cost of revenues. Our cashprovided by operating activities generally follows the trend in our netrevenues and operating results.

 

Ourcash provided by operating activities of $13.9 million during the three monthsended March 31, 2009 was primarily the result of our net income andnon-cash charges including stock-based compensation and depreciation andamortization during the quarter. Cash flows resulting from changes in assetsand liabilities included decreases in accounts receivable, accrued liabilitiesand deferred revenue. The decrease in accounts receivable reflected strongcollections and lower bookings during the first quarter of 2009 in comparisonto the fourth quarter of 2008. Days’ sales outstanding were 61 days during thefirst quarter of 2009, compared to 64 days in the fourth quarter of 2008 and 66days in the first quarter of 2008. The decrease in deferred revenue reflectedlower bookings and the recognition of revenue as several term license implementationprojects reached substantial completion during the first quarter of 2009. Thedecrease in accrued liabilities reflected cash payments of fiscal 2008liabilities including year-end bonuses, commissions, and payroll taxes.  Other changes in assets and liabilitiesincluded a decrease in prepaid and other assets and an increase in income taxespayable.

 

Ourcash provided by operating activities of $9.3 million during the three monthsended March 31, 2008 was primarily the result of our net income andnon-cash charges including stock-based compensation and depreciation andamortization during the quarter. Cash flows resulting from changes in assetsand liabilities included decreases in accounts receivable and increases indeferred revenue. The decrease in accounts receivable primarily reflectedcollections during the quarter. Days’ sales outstanding were 66 days during thefirst quarter of 2008, compared to 74 days in the fourth quarter of 2007 and 66days in the first quarter of 2007. The increase in deferred revenue primarilyreflected our continued transition to the term license model. Under the termmodel, we generally bill and collect for a term agreement in equal installmentsin advance of each annual period. These amounts are deferred at billing andrecognized over the annual term period. This has the effect of increasingdeferred revenue when compared to a perpetual license model where no licenserevenue is deferred. Other changes in assets and liabilities included an

 

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increasein our prepaid and other assets and decreases in accrued liabilities. Thedecrease in accrued liabilities reflected cash payments of fiscal 2007liabilities including year-end payables and bonuses, commissions and payrolltaxes.

 

Weexpect that cash provided by operating activities may fluctuate in futureperiods as a result of a number of factors including fluctuations in our netrevenues and operating results, new term license bookings that increasedeferred revenues, collection of accounts receivable, and timing of payments.

 

***Cash Flows from Investing Activities***

 

Netcash used in investing activities of $1.1 million for the first quarter of 2009is related to capital expenditures consisting of internal use software of $0.8million and $0.3 million in computer and software equipment.

 

Netcash used in investing activities of $2.9 million for the first quarter of 2008reflects capital expenditures of $2.5 million primarily related to thebuild-out of additional space at our San Francisco headquarters facility,capitalized software development costs of $0.2 million and change in restrictedcash of $0.2 million.

 

***Cash Flows from Financing Activities***

 

Netcash used in financing activities for the first quarter of 2009 of $24.7million reflected the repurchase of 0.7 million shares of our common stock for$14.6 million, proceeds of $10.0 million used to pay down our outstanding debt,and payments totaling $1.5 million to satisfy withholding taxes on equityawards that are net share settled.  Thiswas partially offset by cash received from the exercise of employee stockoptions of $1.3 million.  Net cashprovided by financing activities for the first quarter of 2008 reflectedproceeds of $1.8 million received from the exercise of employee stock options,net of taxes paid associated with the exercise of stock-settled stockappreciation rights and vesting of restricted stock units.

 

Ourliquidity and capital resources in any period could be affected by the exerciseof outstanding employee stock options and SARs, and issuance of common stockunder our employee stock purchase plan. The resulting increase in the number of outstandingshares from this and from the issuance of common stock from our RSUs could alsoaffect our per share results of operations. However, we cannot predict thetiming or amount of proceeds from the exercise of these securities, or whetherthey will be exercised at all.

 

AtMarch 31, 2009, we had negative working capital of $(58.5) million,compared to negative working capital of $(47.9) million at December 31,2008. Our negative working capital is due to our recent common stockrepurchases, totaling $14.6 million and $61.6 million during the first quarterof 2009 and fiscal 2008, respectively and our deferred revenue balance,primarily resulting from our transition to a predominately term pricing model.Excluding deferred revenues and deferred taxes, we had working capital of $68.1million at March 31, 2009, compared to $85.6 million at December 31,2008.

 

***Credit Facility***

 

In February 2007,Advent Software, Inc. and certain of our domestic subsidiaries enteredinto a senior secured credit facility agreement (the “Credit Facility”) withWells Fargo Foothill, Inc. (the “Lender”). Under the Credit Facility, theLender will provide the Company with a revolving line of credit up to anaggregate amount of $75 million, subject to a borrowing base formula, toprovide backup liquidity for general corporate purposes, including stockrepurchases, or investment opportunities for a period of three years. As of March 31,2009 and December 31, 2008, the Company maintained a debt balance of $15.0million and $25.0 million, respectively, and was in compliance with allassociated covenants. InApril 2009, the Company repaid $7.5 million of the debt under its CreditFacility, resulting in a $7.5 million balance as of April 30, 2009.

 

***Common Stock Repurchases***

 

On October 30, 2008,our Board authorized the repurchase of up to 3.0 million shares of the Company’scommon stock.

 

During the first quarterof 2009, the Company repurchased 690,000 shares of its common stock under thestock repurchase program approved by the Board in October 2008 for an averageprice per share of $21.13. At March 31, 2009, there remained approximately1.0 million shares authorized by the Board for repurchase.

 

We expect that for thenext year, our operating expenses will continue to constitute a significant useof cash flow. In addition, we may use cash to fund acquisitions, repurchaseadditional common stock, or invest in other businesses, when opportunitiesarise. Based upon the predominance of our revenues from recurring sources, termlicense bookings performance

 

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and current expectations,we believe that our cash and cash equivalents, cash generated from operationsand availability under our Credit Facility will be sufficient to satisfy ourworking capital needs, capital expenditures, investment requirements, stockrepurchases and financing activities for the next year. However, if we identifyopportunities that exceed our current expectation, we may choose to seekadditional capital resources through equity or debt financing. However, suchfinancing may not be available at all particularly in the current economicenvironment, or if available may not be obtainable on terms favorable to us andcould be dilutive

 

**Off-BalanceSheet Arrangements and Contractual Obligations**

 

Thefollowing table summarizes our contractual cash obligations as of March 31,2009 (in thousands):

 
| ** **                                            | ** ** | **Nine**             | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | ** ** | ** ** |
|-------------------------------------------------------|------------|----------------------|------------|----------------------------------|------------|------------|------------|------------|------------|------------|------------|----------------|------------|------------|------------|
| ** **                                            | ** ** | **Months Ended**     | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | ** ** | ** ** |
| ** **                                            | ** ** | **December 31** | ** ** | **Years Ended December 31** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                            | ** ** | **2009**             | ** ** | **2010**                         | ** ** | **2011**   | ** ** | **2012**   | ** ** | **2013**   | ** ** | **Thereafter** | ** ** | **Total**  | ** ** |
| Operating lease obligations, net  of sub-lease income |       | $                    | 5,361      |                             | $          | 6,706      |       | $          | 6,243      |       | $          | 5,393          |       | $          | 4,783      |   | $ | 17,818 |   | $ | 46,304 |   |
|                                                  |       |                 |       |                             |       |       |       |       |       |       |       |           |       |       |       |
| Debt                                                  |       | —               |       | 15,000                           |       | —     |       | —     |       | —     |       | —         |       | 15,000     |       |
|                                                  |       |                 |       |                             |       |       |       |       |       |       |       |           |       |       |       |
| Total                                                 |       | $                    | 5,361      |                             | $          | 21,706     |       | $          | 6,243      |       | $          | 5,393          |       | $          | 4,783      |   | $ | 17,818 |   | $ | 61,304 |   |

 

At March 31, 2009and December 31, 2008, we had a gross liability of $7.2 million and $6.9million for uncertain tax positions associated with the adoption of FIN 48.Since almost all of this liability relates to reserves against deferred taxassets that we do not expect to utilize in the short term, we cannot estimatethe timing of potential future cash settlements and have not included any estimatesin the table of contractual cash obligations above. Additionally, our cashpayments for income taxes will continue to be nominal over the next few yearsas we have significant net operating losses, capital losses and tax creditcarryforwards to utilize.

 

At March 31, 2009and December 31, 2008, we did not have any relationships withunconsolidated entities or financial partnerships, such as entities oftenreferred to as structured finance or special purpose entities, which would havebeen established for the purpose of facilitating off-balance sheet arrangementsor other contractually narrow or limited purposes. As such, we are notmaterially exposed to any financing, liquidity, market or credit risk thatcould arise if we had engaged in such relationships.

 

**Item 3.Quantitative and Qualitative Disclosures About Market Risk**

 

We are exposed tofinancial market risks, including changes in foreign currency exchange ratesand interest rates. Historically, much of our revenues and capital spending wastransacted in US dollars. However, since the acquisitions of Advent Denmark,Advent Norway, Advent Sweden, Advent Netherlands, and Advent Europe’s remainingdistributors in the United Kingdom and Switzerland, whose service and certainlicense revenues and capital spending, are transacted in local countrycurrencies, we have greater exposure to foreign currency fluctuations.Additionally as of March 31, 2009, $38.9 million of goodwill and $1.7million of other intangibles from the acquisition of these entities are denominatedin foreign currency. Therefore a hypothetical change of 10% could increase ordecrease our assets and equity by approximately $3 million and could increaseor decrease our condensed consolidated results of operations or cash flows byapproximately $0.3 million.

 

Our interest rate riskrelated primarily to our investment portfolio, which consisted of $48.4 millionin cash and cash equivalents as of December 31, 2008 and $36.3 million incash equivalents as of March 31, 2009. Cash equivalent securities werecomprised of overnight US government and treasury obligation money marketmutual funds which would not be materially affected by an immediate sharpincrease or decrease in interest rates.

 

Effective November 2008,we also have interest rate risk relating to debt under our line of creditfacility which is indexed to the Wells Fargo LIBOR rate. As of March 31,2009, we had $15.0 million borrowed against the facility. In April 2009,the Company repaid $7.5 million of the debt under its Credit Facility,resulting in a $7.5 million dollar balance as of April 30, 2009.

 

We have also invested inseveral privately-held companies. These non-marketable investments areclassified as other assets on our consolidated balance sheets. Our investmentsin privately-held companies could be affected by an adverse movement in thefinancial markets for publicly-traded equity securities, although the impactcannot be directly quantified. These investments are inherently risky as themarket for the technologies or products these privately-held companies have

 

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under development aretypically in the early stages and may never materialize. It is our policy toreview investments in privately held companies on a regular basis to evaluatethe carrying amount and economic viability of these companies. This policyincludes, but is not limited to, reviewing each of the companies’ cash position,financing needs, earnings/revenue outlook, operational performance,management/ownership changes and competition. The evaluation process is basedon information that we request from these privately held companies. Thisinformation is not subject to the same disclosure regulations as US publiclytraded companies, and as such, the basis for these evaluations is subject totiming and the accuracy of the data received from these companies.

 

Our investments inprivately held companies are assessed for impairment when a review of theinvestee’s operations indicates that a decline in value of the investment isother-than-temporary. Such indicators include, but are not limited to, limitedcapital resources, limited prospects of receiving additional financing, andprospects for liquidity of the related securities. Impaired investments inprivately held companies are written down to estimated fair value. We estimatefair value using a variety of valuation methodologies. Such methodologiesinclude comparing the private company with publicly traded companies in similarlines of business, applying revenue and price/earnings multiples to estimatedfuture operating results for the private company and estimating discounted cashflows for that company. We could lose our entire investment in these companies.At March 31, 2009 and December 31, 2008, our net investment in oneprivately-held company totaled $0.5 million.

 

**Item 4. Controls and Procedures**

 

**Evaluation of disclosure controls and procedures.**

 

TheCompany’s management evaluated, with the participation of the PrincipalExecutive and Financial Officer, the effectiveness of the Company’s disclosurecontrols and procedures, as such term is defined under Rule 13a-15(f) ofthe Securities and Exchange Act of 1934, as of the end of the period covered bythis Quarterly Report on Form 10-Q. Based on this evaluation, thePrincipal Executive and Financial Officer has concluded our disclosure controlsand procedures were effective as of March 31, 2009 to ensure thatinformation we are required to disclose in reports that we file or submit underthe Securities Exchange Act of 1934 (i) is recorded, processed, summarizedand reported within the time periods specified in Securities and ExchangeCommission rules and forms and (ii) is accumulated and communicatedto Advent’s management, including our Principal Executive and FinancialOfficer, as appropriate to allow timely decisions regarding requireddisclosure.

 

**Changes in internal control overfinancial reporting.**

 

There were no changes in our internal control overfinancial reporting which were identified in connection with the evaluationrequired by Rule 13a-15(e) of the Exchange Act that occurred duringthe first quarter ended March 31, 2009 that has materially affected, or isreasonably likely to materially affect, Advent’s internal control overfinancial reporting.

 

**PART II.OTHER INFORMATION**

 

**Item 1.    LegalProceedings**

 

OnMarch 8, 2005, certain of the former shareholders of Kinexus and theshareholders’ representative filed suit against Advent in the Delaware ChanceryCourt. The complaint alleges that Advent breached the Agreement and Plan ofMerger dated as of December 31, 2001 pursuant to which Advent acquired allof the outstanding shares of Kinexus due principally to the fact that no amountwas paid by Advent on an earn-out of up to $115 million. The earn-out, whichwas payable in cash or stock at the election of Advent, was based upon Kinexusmeeting certain revenue targets in both 2002 and 2003. The complaint seeksunspecified compensatory damages, an accounting and restitution for unjustenrichment. Advent advised the shareholders’ representative in January 2003that the earn-out terms had not been met in 2002 and accordingly no earn-outwas payable for 2002 and would not be payable for 2003. There has been nofurther activity in this case since additional document discovery andinterrogatory answers were provided by the parties in December 2008.Advent disputes the plaintiff’s claim and believes that it has meritoriousdefenses and intends to vigorously defend this action.  Management has not determined that anypotential loss associated with this litigation is either probable or reasonablyestimable at this time and accordingly has not accrued any amounts for anypotential loss.

 

From time to time, we areinvolved in claims and legal proceedings that arise in the ordinary course ofbusiness. Based on currently available information, management does not believethat the ultimate outcome of these unresolved matters, individually and in theaggregate, is likely to have a material adverse effect on the Company’sfinancial position or results of operations. However, litigation is subject toinherent uncertainties and our view of these matters may change in the future.

 

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Were an unfavorableoutcome to occur, there exists the possibility of a material adverse impact onour financial position and results of operations for the period in which theunfavorable outcome occurs, and potentially in future periods.

 

**Item 1A. Risk Factors**

 

*Investors should carefully consider the risks described below beforemaking an investment decision. The trading price of our common stock coulddecline due to any of, but are not limited to, these risks. In assessing theserisks, investors should also refer to the other information contained orincorporated by reference in this Quarterly Report on Form 10-Q filed withthe SEC, including our condensed consolidated financial statements and relatednotes thereto.*

 

**Uncertain economic and financial market conditions adversely affect ourbusiness.**

 

Themarket for investment management software systems has been and currently isnegatively affected by a number of factors, including reductions in capitalexpenditures by customers and poor performance of major financial markets. Thecurrent market downturn, dissolution and acquisitions of our clients andprospects, the decline in Assets Under Administration (AUA) or Assets UnderManagement (AUM) as a result of significant declines in asset values of ourclients and the accompanying market uncertainty affects and will continue toaffect both our ability to sell our solutions and the amount of revenue wereceive from such sales. The target clients for our products include a range offinancial services organizations that manage investment portfolios. Inaddition, in our MicroEdge business segment, we target corporations, publicfunds, universities and non-profit organizations, which also manage investmentportfolios and have many of the same needs. The success of many of our clientsis intrinsically linked to the health of the financial markets. The demand forour solutions has been and currently is disproportionately affected byfluctuations, disruptions, instability and downturns in the economy andfinancial services industry, which may cause clients and potential clients toexit the industry or delay, cancel or reduce any planned expenditures forinvestment management systems and software products. We have recentlyexperienced some clients and prospects delaying or cancelling additionallicense purchases. For example, our bookings in the first quarter of 2009 werelower than they have been in previous quarters. In addition, some prospects andclients have gone out of business, undergone personnel reductions or turnover,or have been acquired, which we expect to continue as the financial marketsface continued hardship.

 

Beginningin the second half of 2007, difficulties in the mortgage and broader creditmarkets in the United States and elsewhere resulted in a relatively sudden andsubstantial decrease in the availability of credit and a corresponding increasein funding costs.  More recently, thecurrent volatility and uncertainty in the financial markets generally has alsocaused large losses, layoffs, dissolutions and acquisitions by financialinstitutions and other clients, have resulted and will likely continue toresult in reduced expenditures for software and related services. Additionally,the economic downturn has also decreased our clients’ AUA or AUM, which in turncauses our revenues to decrease since some pricing is based on assets underadministration or management. In addition, the failure of existing investment firmsor the slowdown in the formation of new investment firms could cause a declinein demand for our solutions. Consolidation of financial services firms andother clients will result in reduced technology expenditures or acquiredcustomers using the acquirer’s own proprietary software and services solutionsor the solutions of another vendor.  Insome circumstances where both acquisition parties are customers of Advent, thecombined entity may require fewer Advent products and services than eachindividually licensed, thus reducing our revenue. Challenging economicconditions may also cause our customers to experience difficulty with gainingtimely access to sufficient credit or our customers may become unable to payfor the products or services they have purchased, which could result in theirinability to fulfill or make timely payments to us. If that were to occur, ourability to collect receivables would be negatively affected, and our reservesfor doubtful accounts and write-offs of accounts receivable may increase.

 

The technology spendingpatterns of organizations in MicroEdge’s primary markets (independentfoundations, community foundations and corporations) are directly affected byeconomic fluctuations as foundation budgets are largely driven by endowmentincome. Given that endowments often contain market-exposed components, they aresignificantly affected by the economy and foundation spending typicallydecreases in an economic downturn. Community foundations are subject to similarinfluences, compounded by the fact that in many cases much of their ongoingfunding and endowment comes from active donors who may increase or reduce theirgiving depending on the economic climate and the related effect on their incomeand wealth. Corporations typically fund charitable activities from operatingbudgets, and the allocation to charitable donations and supporting companycharitable operations is often closely tied to a company’s performance. Thus,corporate philanthropy and spending on related technology are correlated withcompany and overall economic performance.

 

Wehave, in the past, experienced a number of market downturns in the financialservices industry and resulting declines in information technology spending,which has caused longer sales and contracting cycles, deferral or delay ofinformation technology projects and generally reduced expenditures for softwareand related services. The severity of the market downturn and worseningvolatility and uncertainty in the financial markets and the financial servicessector in recent months makes it difficult for us to forecast operating resultsand may result in a material adverse effect on our revenues and results ofoperations in the longer term.

 

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**Our sales cycle is long and we have limited ability to forecast thetiming and amount of specific sales and the timing of specific implementations.**

 

Thepurchase of our software products often requires prospective customers toprovide significant executive-level sponsorship and to make major systemsarchitecture decisions. As a result, we must generally engage in relativelylengthy sales and contracting efforts. Sales transactions may therefore bedelayed during the customer decision process because we must provide asignificant level of education to prospective customers regarding the use andbenefit of our products. Our business and prospects are subject to uncertaintiesin the financial markets that can cause customers to remain cautious aboutcapital and information technology expenditures particularly in the currenteconomic environment. The sales cycle associated with the purchase of oursolutions is typically between two and twelve months depending upon the size ofthe client, and is subject to a number of significant risks over which we havelittle or no control, including broader financial market volatility, adverseeconomic conditions, customers’ budgeting constraints, internal selectionprocedures, and changes in customer personnel, among others. Recent volatilityin the US and global financial markets has further exacerbated this risk.

 

Asa result of a lengthy and unpredictable sales cycle, we have limited ability toforecast the timing and amount of specific perpetual license sales, or termlicense sales which we report quarterly as annual term license contract value(ACV). The timing of large individual license sales is especially difficult toforecast, and we may not be successful in closing large license transactions ona timely basis or at all. Customers may postpone their purchases of ourexisting products or product enhancements in advance of the anticipatedintroduction of new products or product enhancements by us or our competitors.Accordingly, our perpetual license revenue or our level of ACV in anyparticular period is subject to significant fluctuation. For example, duringthe first quarter of 2009, our perpetual license revenue decreased by 31% and ACVdecreased by 40% compared to the first quarter of the previous year.

 

Whena customer purchases a term license together with implementation services we donot recognize any revenue under the contract until the implementation servicesare substantially complete. The timing of large implementations is difficult toforecast. Customers may delay or postpone the timing of their particularprojects due to the availability of resources or other customer specificpriorities. If we are not able to complete an implementation project for a termlicense in a quarter, it will cause us to defer all of the proportionatecontract revenues to a subsequent quarter. Because our expenses are relativelyfixed in the near term, any shortfall from anticipated revenues could result ina significant variation in our operating results from quarter to quarter.

 

**If our existing customers do not renew their term license, perpetualmaintenance or other recurring contracts, our business will suffer.**

 

Revenues recognized from recurring contractsrepresented 84%, 79% and 77% of total net revenues in the first quarter of2009, fiscal 2008 and 2007, respectively. We expect to continue to derive asignificant portion of our revenue from our clients’ renewal of term license,perpetual maintenance and other recurring contracts and such renewals arecritical to our future success. Some factors that may affect the renewal rateof our contracts include:

 

·                  The impact of the currentextreme market volatility on our clients and prospects;

·                  The price, performance andfunctionality of our solutions;

·                  The availability, price,performance and functionality of competing products and services;

·                  The effectiveness of ourmaintenance and support services; and

·                  Our ability to developcomplementary products and services.

 

Most of our perpetuallicense customers have historically renewed their annual maintenance althoughour customers have no obligation to renew such maintenance after the first yearof their license agreements. In addition, our customers may select maintenancelevels less advantageous to us upon renewal, which may reduce recurring revenuefrom these customers. The current market downturn has caused, and may in thefuture cause, some clients not to renew their maintenance or reduce their levelof maintenance, which would affect our renewal rates and revenue. Our renewalrates are based on cash collections and are disclosed one quarter in arrears.Our renewal rates for the fourth quarter of 2008 were below the ranges of ourprevious four quarters. The decrease in renewal rates reflects increases in thenumber of customers who have gone out of business as well as from slowerpayments received from renewal clients.

 

Asa result of our relatively recent transition to term licensing, we only havelimited experience with renewals of our term license contracts. During thethird quarter of 2007, we commenced renewing term license contracts signed inthe third quarter of 2004.  These werethe first three-year term license contracts to be renewed by Advent since ourtransition to a term pricing model began. Our customers have no obligation torenew their term license contracts and given the small number of contractssubject to renewal that were renewed in the second half of 2007 and during2008, we cannot yet conclude whether customers will renew in a

 

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mannerconsistent with our perpetual maintenance customers.  Additionally, we cannot predict whether therenewals will be less advantageous to us than the original term contract. Forexample, the renewal periods for our term license contracts are typicallyshorter than our original term license contract and customers may request areduction in the number of users or products licensed, resulting in a lowerannual term license fee.  Further,customers may elect to not renew their term license contracts at all. We mayincur significantly more costs in securing our term license contract renewalsthan we incur for our perpetual maintenance renewals. If our term licensecontract customers renew under terms less favorable to us or choose not torenew their contracts, or if it costs significantly more to secure a renewalfor us, our operating results may be harmed.

 

**Our current operating results may not be reflective of our futurefinancial performance.**

 

In the first quarter of 2009 and in fiscal 2008 and2007, we recognized 84%, 79% and 77%, respectively, of total net revenues fromrecurring sources, which we define as revenues from term license, maintenanceon perpetual licenses, and other recurring revenue. We generally recognize revenuefrom these sources ratably over the terms of these agreements, which typicallyrange from one to three years. As a result, almost all of our revenues in anyquarter are generated from contracts entered into during previous periods.

 

Consequently, a significant decline in new businessgenerated in any quarter may not materially affect our results of operations inthat quarter but will have an impact on our revenue growth rate in futurequarters. Additionally, a decline in renewals of term agreements, maintenanceor data contracts during a quarter will not be fully reflected in our financialperformance in that quarter. For example, because we recognize revenue ratably,the non-renewal of term agreements or maintenance contracts late in a quartermay have very little impact on revenue for that quarter, but will reducerevenue in future quarters. In addition, we may be unable to adjust our costsin response to reduced revenue.

 

Further, because of the large percentage of revenuefrom recurring sources, our historical operating results on a generallyaccepted accounting principles (GAAP) basis will not necessarily be the sole ormost relevant factor in predicting our future operating results. Accordingly,we report non-GAAP information, such as our quarterly term license bookingsmetrics (expressed as annual term license contract value, “ACV”) andmaintenance renewal rates, that is intended to provide investors with certainof the information that management uses as a basis for planning and forecastingof future periods. However, placing undue reliance upon non-GAAP or operatinginformation is not appropriate because this information is neither standardizedacross companies nor subjected to the same control activities and auditprocedures that produce our GAAP financial results.

 

The current market downturn has started to cause,and may in the future cause more, clients not to renew their licenses ormaintenance, which would affect our renewal rates. Also, the significantdeclines in market value of our clients affect their AUA or AUM.  Consequently, we may also experience adecline in the ACV of bookings since the pricing of some of our products isbased upon our client’s AUA or AUM. Furthermore, we have some contracts for which clients pay us fees basedon the greater of a negotiated annual minimum fee or a calculated fee that isdetermined by the client’s AUA or AUM. If a client previously had paid us basedon the calculated fee, rather than the annual minimum fee, we would experiencea decline in revenue as a result of any decline in those clients’ AUA or AUM.

 

**Our stock price may fluctuate significantly.**

 

Likemany other companies, our stock price has been subject to wide fluctuations inrecent months as part of the high market volatility. If net revenues or earningsin any quarter or our financial guidance for future periods fail to meet theinvestment community’s expectations, our stock price is likely to decline. Evenif our revenues or earnings meet or exceed expectations, our stock price issubject to decline in this period of high market volatility because our stockprice is affected by trends in the financial services sector and by broadermarket trends unrelated to our performance. Unfavorable or uncertain economicand market conditions, which can be caused by many factors, including declinesin economic growth, business activity or investor or business confidence;limitation on the availability or increases in the cost of credit or capital;increases in inflation, interest rates, exchange rate volatility, default ratesor the price of basic commodities; corporate, political or other scandals thatreduce investor confidence in capital markets; outbreaks of hostilities orother geopolitical instability; natural disasters or pandemics; or acombination of these or other factors, have adversely affected, and may in thefuture adversely affect, our business, profitability and stock price.

 

**We operate in a highly competitive industry.**

 

Themarket for investment management software is competitive and highly fragmented,is subject to rapid change and is sensitive to new product introductions andmarketing efforts by industry participants. Our largest single source ofcompetition is from proprietary systems used by existing and potential clients,many of whom develop their own software for their particular needs andtherefore may be reluctant to license software products offered by third partyvendors such as Advent. We also face significant competition from otherproviders of software and related services as well as providers of outsourcedservices. Many of our competitors have longer operating histories and greaterfinancial, technical, sales and marketing resources than we do. In

 

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addition,consolidation has occurred among some of the competitors in our markets. Competitors vary in size, scope ofservices offered and platforms supported. In recent years, many of ourcompetitors have merged with each other or with other larger third parties, andit is possible that even larger companies will emerge through additionalacquisitions of companies and technologies. Any further consolidation among ourcompetitors may result in stronger competitors in our markets and may thereforeeither result in a loss of market share or harm our results of operations. Inaddition, we also face competition from potential new entrants into our marketthat may develop innovative technologies or business models. Furthermore,competitors may respond to worsening market conditions by lowering prices,offering better contractual terms and attempting to lure away our customers andprospects to lower cost solutions. We cannot guarantee that we will be able tocompete successfully against current and future competitors or that competitivepressure will not result in price reductions, reduced operating margins or lossof market share, any one of which could seriously harm our business.

 

**We depend heavily on our Axys®, Geneva, APX and Moxy products.**

 

Wederive a majority of our net revenues from the license and maintenance revenuesfrom our Axys, Geneva, APX and Moxy products. In addition, Moxy and many of ourapplications, such as Partner and various data services have been designed toprovide an integrated solution with Axys, Geneva and APX. As a result, webelieve that for the foreseeable future a majority of our net revenues willdepend upon continued market acceptance of Axys, Geneva, APX, and Moxy, andupgrades to those products.

 

**We must continue to introduce new products and product enhancements.**

 

Themarket for our products is characterized by rapid technological change, changesin customer demands, evolving industry standards and new regulatory requirements.New products based on new technologies or new industry standards can renderexisting products obsolete and unmarketable. As a result, our future successwill continue to depend upon our ability to develop new products or productenhancements that address the future needs of our target markets and respond totheir changing standards and practices. We continue to release numerous newproducts and product upgrades and we believe our future success depends oncontinuing such releases. Additionally, in October 2008, we acquiredTamale Software which enables us to offer a new product in the nascent researchmanagement field. However, it is too early to know whether these products willmeet anticipated sales or will be broadly accepted in the market or that we willcontinue to introduce more products.

 

Wemay not be successful in developing, introducing, marketing and licensing ournew products or product enhancements on a timely and cost effective basis, orat all, and our new products and product enhancements may not adequately meetthe requirements of the marketplace or achieve market acceptance. Delays in thecommencement of commercial shipments of new products or enhancements or delaysin client implementations or migrations may result in client dissatisfactionand delay or loss of product revenues. Additionally, existing clients may bereluctant to go through the sometimes complex and time consuming process ofmigrating from our Axys to APX product, which may slow the migration of ourcustomer base to APX. In addition, clients may delay purchases in anticipationof new products or product enhancements. Our ability to develop new productsand product enhancements is also dependent upon the products of other softwarevendors, including certain system software vendors, such as MicrosoftCorporation, Sun Microsystems, database vendors and development tool vendors.If the products of such vendors have design defects or flaws, are unexpectedlydelayed in their introduction, are unavailable on acceptable terms, or thevendors exit the business, our business could be seriously harmed.

 

**Our operating results may fluctuate significantly.**

 

Revenuesfrom recurring sources have grown from 75% in fiscal 2006, to 77% in 2007, to79% in 2008 and to 84% in the first quarter of fiscal 2009. Term licenserevenues comprised approximately 43% of term license, maintenance and otherrecurring revenues during the first quarter of 2009 compared to 29% in thefirst quarter of 2008. During fiscal 2008, term license revenues comprisedapproximately 32% of term license, maintenance and otherrecurring revenues as compared to approximately 22% and 14% in fiscal 2007 and2006, respectively. Term license contracts are comprised of both softwarelicenses and maintenance services. Individual perpetual software licenses varysignificantly in value, and the value and timing of these transactions cantherefore cause our quarterly perpetual license revenues to fluctuate. As wecontinue to sign term license agreements for new customers, grow our subscription,data management and outsourced services revenues, and our customers renew theirperpetual maintenance, we expect our revenue from recurring sources to continueto represent over 80% of our total net revenues.

 

Whena customer purchases a term license together with implementation services, wedo not recognize any revenue under the contract until the implementationservices are substantially completed and then we recognize revenue ratably overthe remaining length of the contract. If the implementation services are stillin progress as of quarter-end, we will defer all of the contract revenues to asubsequent quarter. For example, during the first quarter of 2008, we deferrednet revenues of $1.9 million and directly related expenses of $0.8 million. At the point professional services aresubstantially completed, we recognize a pro-rata amount of the term licenserevenue, professional services fees earned and related expenses, based on theelapsed time from

 

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the start of the termlicense to the substantial completion of professional services. For the firsttime, in the first quarter of 2009, the revenue recognized from completedimplementations exceeded the revenue deferred from projects being implementedwith net revenues of $2.7 million and $0.4 million of directly relatedexpenses. Termlicense revenue for the remaining contract years and the remaining deferredprofessional services revenue and related expenses are recognized ratably overthe remaining contract length. The term license component ofthe deferred revenue balance will increase or decrease in the future dependingon the amount of new term license bookings relative to the number ofimplementations that reach substantial completion in a particular quarter.Although our substantial revenue from recurring sources under our term license model provides us with longerterm stability and more visibility in the short term,  our quarterly net revenues and operatingresults may still fluctuate significantly depending on these and other factors.Our expense levels are relatively fixed in the short-term. Due to the fixed natureof these expenses, combined with the relatively high gross margin historicallyachieved on our products, an unanticipated decline in net revenues in anyparticular quarter may adversely affect our operating results.

 

Inaddition, we experience seasonality in our licensing. We believe that thisseasonality results primarily from customer budgeting cycles and the annualnature of some AUA or AUM contracts, and expect this seasonality to continue inthe future.  The fourth quarter of theyear typically has more licensing activity. That can result in term license bookings and perpetual license feerevenue being the highest in the fourth quarter, followed by lower term licensebookings and perpetual license revenue in the first quarter of the followingyear. This seasonality may be adversely affected by the current market downturnand worsening economic conditions.  Also,term licenses entered into during a quarter may not result in recognition ofassociated revenue until later quarters, as we begin recognizing revenue forsuch licenses when the related implementation services are substantiallycomplete. In addition, we may incur commission and bonus expenses in the periodin which we enter into a license, but not recognize the associated revenueuntil later periods.

 

Becauseof the above factors, we believe that quarter-to-quarter comparisons of ouroperating results are not necessarily reliable indicators of futureperformance.

 

**If our relationship with Financial Times/Interactive Data is terminatedor other large subscription-based relationships are terminated, our businessmay be harmed.**

 

Manyof our clients use our proprietary interface to electronically retrieve pricingand other data from Financial Times/Interactive Data (“FTID”). FTID pays us acommission based on their revenues from providing this data to our clients. Oursoftware products have been customized to be compatible with their system andthis software would need to be redesigned if their services were unavailablefor any reason. Termination of our current agreement with FTID would require atleast two years’ notice by either us or them, or 90 days in the case ofmaterial breach. Our operating results would be adversely impacted if ourrelationship with FTID was terminated or their services were unavailable to ourclients for any reason. In recent years, Advent has entered into contractsrelating to our subscription, data management revenue streams and outsourcedservices with contract values that are substantially larger than we havecustomarily entered into in the past, including our agreement withTIAA-CREF.  It is too early to knowwhether we will be able to continue to sign large recurring revenue contractsof this nature, and our operating results could be adversely impacted if thoseagreements are not fully implemented, terminated or not renewed or if we areunable to continue to generate similar opportunities.  Some of these agreements are subject tomilestones, acceptance and penalties and there is no assurance that theseagreements will be fully implemented, renewed, or that Advent will be able toenter similar or larger sized contracts in the future.

 

**We must retain and recruit key employees.**

 

Webelieve that our future success is dependent on the continuedemployment of our senior management and our ability to identify, attract,motivate and retain qualified technical, sales and otherpersonnel. Members of our executive management team have acquiredspecialized knowledge and skills with respect to Advent. We need technicalresources such as our product development engineers to develop new products andenhance existing products; we rely upon sales personnel to sell our productsand services and maintain healthy business relationships; we must recruitprofessional service consultants to support the anticipated increase in productimplementations; we must hire client services personnel to provide technicalsupport to our growing installed base of customers; and we must attract andretain financial and accounting personnel to comply with the requirements of Section 404of the Sarbanes-Oxley Act of 2002. We need to identify, attract, motivateand retain such employees with the requisite education, backgrounds andindustry experience.  However, experienced high quality personnel in theinformation technology industry continue to be in high demand and competitionfor their talents remains intense, especially in the San Francisco Bay Areawhere the majority of our employees are located.

 

Wehave relied on our ability to grant equity compensation as one mechanism forrecruiting and retaining such highly skilled personnel. In making employmentdecisions, particularly in the high-technology industries and San Francisco BayArea, job candidates often consider the value of the equity awards they are toreceive in connection with their employment. Fluctuations in our stock pricemay make it more difficult to retain and motivate employees. The recent significant adverse volatilityin our

 

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stock price has resultedin many employees’ stock option and/or stock appreciation right exercisesexceeding the underlying stock’s market value as well as the deterioration inthe value of employees restricted stock units granted, thus lessening theeffectiveness of retaining employees through stock-based awards. Additionally,accounting regulations requiring the expensing of equity compensation impairour ability to provide these incentives without reporting significant compensationcosts.

 

Wemay also choose to create additional performance and retention incentives inorder to retain our employees, including the granting of additional stockoptions, restricted stock, restricted stock units, stock appreciation rights,performance shares or performance units to employees or issuing incentive cashbonuses. Such incentives may either dilute our existing stockholder base orresult in unforeseen operating expenses which may have a material adverseeffect on our operating results, or could result in our stock price falling; ormay not be valued as highly by our employees which may create retention issues.

 

**We face challenges in expanding our international operations in whichwe may have limited experience or business partners.**

 

Wemarket and sell our products in the United States and, to a growing extent,internationally. From 2001 through 2005, we acquired the subsidiaries of ourindependent distributor. In addition, we have begun to expand our sales inrelatively new jurisdictions for Advent, such as the Middle East, EasternEurope, and Asia. In 2006 we opened a branch office of Advent Europe Ltd. inthe United Arab Emirates, and we established a subsidiary of Advent Software, Inc.in Hong Kong in 2008.  We cannot becertain that establishing businesses in other countries will produce thedesired levels of revenues, such as in the case of our former Greek subsidiary,Advent Hellas, which produced less than satisfactory revenues and profitabilitybefore its sale by Advent in 2005. Also, the recent worldwide decline infinancial markets may disrupt our sales efforts in overseas markets. Wecurrently have limited experience in developing localized versions of ourproducts and marketing and distributing our products internationally. In otherinstances, we may rely on the efforts and abilities of foreign businesspartners in such markets. For example, we have begun to outsource certainengineering activities with a business partner located in China. In addition,international operations are subject to other inherent risks, including:

 

·                  The impact ofrecessions and market fluctuations in economies outside the United States;

·                  Adverse changesin foreign currency exchange rates;

·                  Greaterdifficulty in accounts receivable collection and longer collection periods;

·                  Difficulty ofenforcement of contractual provisions in local jurisdictions;

·                  Unexpectedchanges in foreign laws and regulatory requirements;

·                  US and foreigntrade-protection measures and export and import requirements;

·                  Difficulties insuccessfully adapting our products to the language, regulatory and technologystandards of other countries;

·                  Resistance oflocal cultures to foreign-based companies and difficulties establishing localpartnerships or engaging local resources;

·                  Difficulties inand costs of staffing and managing foreign operations;

·                  Reducedprotection for intellectual property rights in some countries;

·                  Foreign taxstructures and potentially adverse tax consequences; and

·                  Political andeconomic instability.

 

Therevenues, expenses, assets and liabilities of our international subsidiariesare primarily denominated in local foreign currencies. We have not historicallyundertaken foreign exchange hedging transactions to cover potential foreigncurrency exposure. Future fluctuations in currency exchange rates may adverselyaffect revenues and accounts receivable from international sales and the USdollar value of our foreign subsidiaries’ revenues, expenses, assets andliabilities. Our international service revenues and certain license revenuesfrom our European subsidiaries are generally denominated in local foreigncurrencies.

 

**Difficultiesin integrating our acquisitions and expanding into new business areas haveimpacted and could continue to adversely impact our business and we face risksassociated with potential acquisitions, investments, divestitures andexpansion.**

 

Periodicallywe seek to grow through the acquisition of additional complementary businesses.In October 2008, we completed the acquisition of Tamale Software, Inc.,which provides research management software. In November 2007, ourMicroEdge subsidiary acquired Vivid Orange Limited, a United Kingdom companyproviding corporate community involvement and employee charitable givingtechnology.  In December 2006, weacquired East Circle Solutions, Inc., a developer of investment managementbilling solutions to integrate their product into our software offerings. From2001 through the middle of 2003, we made five major acquisitions, includingKinexus Corporation, Techfi Corporation and Advent Outsource Data ManagementLLC, and also acquired all of the common stock of five of our Europeandistributor’s subsidiaries. In addition, we purchased our European distributor’sremaining two subsidiaries in the United Kingdom and Switzerland in May 2004.

 

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Theprocess of integrating our acquisitions has required and will continue torequire significant resources, particularly in light of our relativeinexperience in integrating acquisitions, potential regulatory requirements andoperational demands. In particular, our Tamale acquisition reflects our entryinto the research management software market, where we have no prior experience.Integrating these acquisitions in the past has been time-consuming, expensiveand disruptive to our business. This integration process has strained ourmanagerial resources, resulting in the diversion of these resources from ourcore business objectives and may do so in the future. Failure to achieve theanticipated benefits of these acquisitions or to successfully integrate theoperations of these entities has harmed and could potentially harm ourbusiness, results of operations and cash flows in future periods. Theassumptions we made in determining the value of, and relative risks, of theseacquisitions could be erroneous. For example, in the first quarter of 2003, weclosed our Australian subsidiary because it failed to perform at a satisfactoryprofit level and similarly in the fourth quarter of 2005, we disposed of ourAdvent Hellas subsidiary because of less than satisfactory profitability. Inaddition, as we have expanded into new business areas and built new offeringsthrough strategic alliances and internal development, as well as acquisitions,some of this expansion has required significant management time and resourceswithout generating required revenues. We have had difficulty and may continueto have difficulty creating demand for such offerings. Furthermore, we may faceother unanticipated costs from our acquisitions, such as disputes involvingearn-out and incentive compensation amounts, similar to those we haveexperienced with our Kinexus and Advent Outsource acquisitions.

 

Wemay make additional acquisitions of complementary companies, products ortechnologies in the future. In addition, we periodically evaluate theperformance of all our products and services and may sell or discontinuecurrent products, product lines or services, particularly as we focus on waysto streamline our operations. Failure to achieve the anticipated benefits ofany acquisition or divestiture could harm our business, results of operationsand cash flows. Furthermore, we may have to incur debt, write-off investments,infrastructure costs or other assets, incur severance liabilities, write-offimpaired goodwill or other intangible assets or issue equity securities to payfor any future acquisitions. The issuance of equity securities could dilute ourexisting stockholders’ ownership. Finally, we may not identify suitablebusinesses to acquire or negotiate acceptable terms for future acquisitions.

 

**Impairment of investments could harm our results of operations.**

 

Wehave made and may make future investments in privately held companies, many ofwhich are considered in the start-up or development stages. These investments,which we classify as other assets on our consolidated balance sheets, areinherently risky, as the market for the technologies or products these companieshave under development is typically in the early stages and may nevermaterialize. The value of the investment in these companies is influenced bymany factors, including the operating effectiveness of these companies, theoverall health of these companies’ industries, the strength of the privateequity markets and general market conditions. Due to these and other factors,we have previously determined, and may in the future determine, that the valueof these investments is impaired, which has caused and would cause us to writedown the carrying value of these investments, such as the $0.6 millionwrite-down of one of our investments during the second quarter of 2007.Furthermore, we cannot be sure that future investment, license, fixed asset orother asset write-downs will not occur. If future write-downs do occur, theycould harm our business and results of operations.

 

**If weare unable to protect our intellectual property, we may be subject to increasedcompetition that could seriously harm our business.**

 

Oursuccess depends significantly upon our proprietary technology. We currentlyrely on a combination of copyright, trademark, patent and trade secret law, aswell as confidentiality procedures and contractual provisions to protect ourproprietary rights. We have registered trademarks and copyrights for many ofour products and services and will continue to evaluate the registration ofadditional trademarks and copyrights as appropriate. We generally enter intoconfidentiality agreements with our employees, customers, resellers, vendorsand others. We seek to protect our software, documentation and other writtenmaterials under trade secret and copyright laws. We also have one registeredpatent. Despite our efforts, existing intellectual property laws may affordonly limited protection. It may be possible for unauthorized third parties tocopy certain portions of our products or to reverse engineer or otherwiseobtain and use our proprietary information. In addition, we cannot be certainthat others will not develop or acquire substantially equivalent or supersedingproprietary technology, equivalent or better products will not be marketed incompetition with our products, or others may not design around any patent thatmay be issued to us or other intellectual property rights of ours, therebysubstantially reducing the value of our proprietary rights. We cannot be surethat we will develop proprietary products or technologies that are patentable,that any patent, if issued, would provide us with any competitive advantages orwould not be challenged by third parties, or that the patents of others willnot adversely affect our ability to do business. Despite our efforts to protectour proprietary rights, unauthorized parties may attempt to copy aspects of ourproducts or to obtain and use information that we regard as proprietary. Inaddition, the laws of some foreign countries do not protect proprietary rightsto as great an extent as do the laws of the United States. Litigation may benecessary to protect our proprietary technology which may be time-consuming andexpensive, with no assurance of success. As a result, we cannot be sure that our means of protecting ourproprietary rights will be adequate.

 

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**If weinfringe the intellectual property rights of others, we may incur additionalcosts or be prevented from selling our products and services.**

 

Wecannot be certain that our products or services do not infringe theintellectual property rights of others. As a result, we may be subject tolitigation and claims, including claims of misappropriation of trade secrets orinfringement of patents, copyrights and other intellectual property rights ofthird parties that would be time-consuming and costly to resolve and may leadto unfavorable judgments or settlements. If we discovered that our products orservices violated the intellectual property rights of third parties, we mayhave to make substantial changes to our products or services or obtain licensesfrom such third parties. We might not be able to obtain such licenses onfavorable terms or at all, and we may be unable to change our productssuccessfully or in a timely or cost-effective manner. Failure to resolve aninfringement matter successfully or in a timely manner would damage ourreputation and force us to incur significant costs, including payment ofdamages, redevelopment costs, diversion of management’s attention andsatisfaction of indemnification obligations that we have with our clients, aswell as prevent us from selling certain products or services.

 

**Information we provide to investors is accurate only as of the date wedisseminate it.**

 

Fromtime to time, we may publicly disseminate forward-looking information orguidance in compliance with Regulation FD. This information or guidancerepresents our outlook only as of the date we disseminate it, and we do notundertake to update such information or guidance.

 

**Catastrophic events could adversely affect our business.**

 

Weare a highly automated business and rely on our network infrastructure andenterprise applications, internal technology systems and our Web site for ourdevelopment, marketing, operational, support, and sales activities. Adisruption or failure of these systems in the event of major earthquake, fire,telecommunications failure, cyber-attack, terrorist attack, or othercatastrophic event could cause system interruptions, reputational harm, delaysin our product development and loss of critical data and could affect ourability to sell and deliver products and services and other critical functionsof our business. Our corporate headquarters, a significant portion of ourresearch and development activities, our data centers, and certain othercritical business operations are located in the San Francisco Bay Area, whichis a region of seismic activity. We have developed certain disaster recoveryplans and certain backup systems to reduce the potentially adverse effect ofsuch events, but a catastrophic event that results in the destruction ordisruption of any of our data centers or our critical business or informationtechnology systems could severely affect our ability to conduct normal businessoperations and, as a result, our future operating results could be adverselyaffected. Further, such disruptions could cause further instability in thefinancial markets or the spending of our clients and prospects upon which wedepend.

 

Inaddition to the severe market conditions of recent months, other catastrophicevents such as abrupt political change, terrorist acts, conflicts or wars maycause damage or disruption to the economy, financial markets and our customers.The potential for future attacks, the national and international responses toattacks or perceived threats to national security and other actual or potentialconflicts or wars  have created manyeconomic and political uncertainties. Although it is impossible to predict theoccurrences or consequences of any such events, they could unsettle thefinancial markets or result in a decline in information technology spending,which could have a material adverse effect on our revenues.

 

**Undetectedsoftware errors or failures found in new products may result in loss of ordelay in market acceptance of our products that could seriously harm ourbusiness.**

 

Ourproducts may contain undetected software errors or scalability limitations atany point in their lives, but particularly when first introduced or as newversions are released. Despite testing by us and by current and potentialcustomers, errors may not be found in new products until after commencement ofcommercial shipments, resulting in a loss of or a delay in market acceptance,damage to our reputation, customer dissatisfaction and reductions in revenuesand margins, any of which could seriously harm our business. Additionally, ouragreements with customers that attempt to limit our exposure to liabilityclaims may not be enforceable in jurisdictions where we operate, particularlyas we expand into new international markets.

 

**Two of our principal stockholders have an influenceover our business affairs and may make business decisions with which youdisagree and which may adversely affect the value of your investment.**

 

Our Chief ExecutiveOfficer and the Chairman of our board of directors own or control, indirectlyor directly, a substantial number of shares of our common stock (approximately38% as of March 20, 2009). As a result, if these people act together, theywill have the ability to exert significant influence on matters submitted toour stockholders for approval, such as the election or removal of directors,amendments to our certificate of incorporation or the approval of a businesscombination.

 

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These actions may betaken even if they are opposed by other stockholders or it may be difficult toapprove these actions without their consent. This concentration of ownershipmay also have the effect of delaying or preventing a change of control of ourcompany or discouraging others from making tender offers for our shares, whichcould prevent our stockholders from receiving a premium for their shares.

 

**Changes in securities laws and regulations may increase our costs ormay harm demand.**

 

The Sarbanes-Oxley Act (“theAct”) of 2002 required changes in some of our corporate governance andsecurities disclosure and/or compliance practices. As part of the Act’s requirements,the SEC has enacted new rules on a variety of subjects, and the NasdaqStock Market has enacted new corporate governance listing requirements. Thesedevelopments have increased and may in the future increase our accounting andlegal compliance costs and could also expose us to additional liability if wefail to comply with these new rules and reporting requirements. In fiscal2008, 2007 and 2006, we incurred approximately $0.8 million, $0.9 million and$1.3 million, respectively, in Sarbanes-Oxley related expenses consisting ofexternal consulting costs and auditor fees, and the Company anticipatessimilarly spending a significant amount for its 2009 compliance activities. Inaddition, such developments may make retention and recruitment of qualifiedpersons to serve on our board of directors, or as executive officers, moredifficult. We continue to evaluate and monitor regulatory and legislativedevelopments and cannot reliably estimate the timing or magnitude of all costswe may incur as a result of the Act or other related legislation or regulation.

 

In addition, ourcustomers operate within a highly regulated environment. In light of thecurrent conditions in the US financial markets and economy, Congress andregulators have increased their focus on the regulation of the financialservices industry. The information provided by, or resident in, the software orservices we provide to our customers could be deemed relevant to a regulatoryinvestigation or other governmental or private legal proceeding involving ourcustomers, which could result in requests for information from us that could beexpensive and time consuming for us. In addition, clients subject toinvestigations or legal proceedings may be adversely impacted possibly leadingto their liquidation, bankruptcy, receivership, reductions in AUM or AUA, ordiminished operations that would adversely affect our revenues and collectionof receivables.

 

Our customers must complywith governmental and quasi-governmental rules, regulations, directives andstandards.  New legislation or changes in government or quasi-governmentalrules, regulations, directives or standards may reduce demand for our servicesor increase our expenses. We develop, configure and market products andservices to assist customers in meeting these requirements. New legislation, ora significant change in rules, regulations, directives or standards, couldcause our services to become obsolete, reduce demand for our services orincrease our expenses in order to continue providing services to clients.

 

**Changes in, or interpretations of, accounting principles could resultin unfavorable accounting charges.**

 

We prepare our consolidatedfinancial statements in conformity with accounting principles generallyaccepted in the United States of America. These principles are subject tointerpretation by us, the SEC and various bodies formed to interpret and createaccounting principles. A change in these principles or a change in theinterpretations of these principles can have a significant effect on ourreported results and may even retroactively affect previously reportedtransactions. Some of our accounting principles that recently have been or maybe affected include:

 

·                  Software revenuerecognition;

·                  Accounting for stock-basedcompensation;

·                  Accounting for income taxes;and

·                  Accounting for businesscombinations and related goodwill.

 

In particular, in the firstquarter of 2006, we adopted SFAS 123R which requires the measurement of allstock-based compensation to employees, including grants of employee stockoptions, restricted stock units and stock appreciation rights, using afair-value-based method and the recording of such expense in our consolidatedstatements of operations. The adoption of SFAS 123R had a significant adverseeffect on our results of operations. It will continue to significantlyadversely affect our results of operations and has resulted in changes to ourcompensation practices, such as an increased reliance on using equity vehiclessuch as stock-settled stock appreciation rights (“SAR”) and restricted stockunits (“RSU”).

 

Wealso adopted FIN 48 in the first quarter of 2007. The adoption of FIN 48resulted in an increase in both assets and liabilities in our consolidatedbalance sheet as of the beginning of fiscal 2007 and may create increasedvolatility in our future operating results.

 

Additionally,in December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141(revised 2007), (“SFAS 141R”), “Business Combinations,” which changes theaccounting for business combinations including the measurement of acquirershares issued in consideration for a business combination, the recognition ofcontingent consideration,

 

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theaccounting for pre-acquisition gain and loss contingencies, the recognition ofcapitalized in-process research and development, the accounting for acquisitionrelated restructuring liabilities, the treatment of acquisition relatedtransaction costs and the recognition of changes in the acquirer’s income taxvaluation allowance. FAS 141R is effective for financial statements issued forfiscal years beginning after December 15, 2008. We currently believe thatthe adoption of SFAS 141R will result in the recognition of certain types ofexpenses in our results of operations that we currently capitalize pursuant toexisting accounting standards and may also impact our financial statement inother ways. Additionally, the nature and magnitude of the specific effects willdepend upon the nature, terms and size of the acquisitions the Companyconsummates after the effective date.

 

**Borrowings under our credit facility must be repaid if we fail tocomply with certain covenants.**

 

In February 2007,we entered into a senior secured facility agreement which provides us with arevolving line of credit up to an aggregate amount of $75.0 million. We have inthe past, and may in the future, borrow under the credit facility in order tofund working capital requirements, make share repurchases of our common stockor fund acquisitions. In addition, if our anticipated cash flow from our recurringsources of revenue is materially impaired due to customer defaults or failureto renew term licenses or maintenance contracts, our ability to borrow underthe credit facility, or continue to meet the contractual covenants, may becompromised. Our continued ability to borrow under our credit facility issubject to compliance with certain financial and non-financial covenants. Thefinancial covenant is limited to a maximum ratio of senior debt to earningsbefore interest, taxes, depreciation, and amortization (EBITDA), adjusted forcost capitalizations, extraordinary gains (losses) and non-cash stockcompensation. Our failure to comply with such covenants could cause defaultunder the agreement, and we may then be required to repay such debt withcapital from other sources. Under those circumstances, other sources of capitalmay not be available to us, or be available only on unfavorable terms,particularly in the current economic environment. In the event of a defaultwhich is not remedied within the prescribed timeframe, the assets of theCompany (subject to the amount borrowed) may be attached or seized by thelender. On October 30, 2008, the Board of Directors authorized a sharerepurchase program of up to 3.0 million shares, and in November 2008, weborrowed $25.0 million under the credit facility to fund a portion of theserepurchases, of which $15.0 million and $7.5 million was outstanding as of March 31,2009 and April 30, 2009, respectively.

 

**Security risks may harm our business.**

 

Maintainingthe security of computers, computer networks, hosted solutions and thetransmission of confidential information over public networks is essential tocommerce and communications, particularly in the market in which Adventoperates. Efforts of others to seek unauthorized access to Advent’s or itsclients’ computers and networks or introduce viruses, worms and other malicioussoftware programs that disable or impair computers into our systems or those ofour customers or other third parties, could disrupt or make our systemsinaccessible or allow access to proprietary information and data of Advent orits clients.  Advances in computercapabilities, new discoveries in the field of cryptography or other events ordevelopments, also could result in compromises or breaches of our securitysystems. Our security measures may be inadequate to prevent security breaches,exposing us to a risk of data loss, financial loss, harm to reputation,business interruption, litigation and other possible liabilities, as well aspossibly requiring us to expend significant capital and other resources toprotect against the threat of security breaches or to alleviate problems causedby such breaches.

 

**Potentialchanges in securities laws and regulation governing the investment industry’suse of soft dollars may reduce our revenues.**

 

Asof December 31, 2008, approximately 360 or 4% of our clients utilizedtrading commissions (“soft dollar arrangements”) to pay for software productsand services. During fiscal 2007 and 2006, the total value of Advent productsand services paid with soft dollars was approximately 4% and 5% of our totalbillings. Such soft dollar arrangements could be impacted by changes in theregulations governing those arrangements.

 

During the fourth quarterof 2006, we completed the wind down of the “soft dollar” business of ourSEC-registered broker/dealer subsidiary, Second Street Securities, as it nolonger fits with our corporate strategy. Second Street Securities’ soft dollarbusiness offered our customers the ability to pay for Advent products and otherthird party products and services through brokerage commissions and otherfee-based arrangements. We will continue to allow clients to utilize softdollar arrangements to pay for Advent software products and services throughother independent broker/dealers.

 

In July 2006, theSEC published an Interpretive Release that provides guidance on money managers’use of client commissions to pay for brokerage and research services under thesafe harbor set forth in Section 28(e) of the Securities Exchange Actof 1934. The Interpretive Release clarifies that money managers may use clientcommissions (“soft dollars”) to pay only for eligible brokerage and research services. Among othermatters, the Interpretive Release states that eligible

 

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brokerage includes thoseproducts and services that relate to the execution of the trade from the pointat which the money manager communicates with the broker-dealer for the purposeof transmitting an order for execution, through the point at which funds orsecurities are delivered or credited to the advised account.  In addition, for potentially “mixed-use” items(such as trade order management systems) that are partly eligible and partlyineligible, the Interpretive Release states that money managers must make areasonable allocation of client commissions in accordance with the eligible andineligible uses of the items. Based on this new guidance, our customers maychange their method of paying all or a portion of certain Advent products orservices from soft to hard dollars, and as a result reduce their usage of theseproducts or services in order to avoid increasing expenses, which could causeour revenues to decrease.

 

**If wefail to maintain an effective system of internal control, we may not be able toaccurately report our financial results or our filings may not be timely. As aresult, current and potential stockholders could lose confidence in ourfinancial reporting, which would harm our business and the trading price of ourstock.**

 

Effective internal control is necessary for us toprovide reliable financial reports. If we cannot provide reliable financialreports, our business and operating results could be harmed. We have in thepast discovered, and may in the future discover, areas of our internal controlthat need improvement including control deficiencies that may constitutematerial weaknesses.

 

We do not expect that our internal control overfinancial reporting will prevent all errors or fraud. A control system, nomatter how well designed and operated, can provide only reasonable, notabsolute, assurance that the control system’s objectives will be met. Further,the design of a control system must reflect the fact that there are resourceconstraints, and the benefits of controls must be considered relative to theircosts. Controls can be circumvented by individual acts of some persons, bycollusion of two or more people, or by management override of the controls.Over time, controls may become inadequate because changes in conditions ordeterioration in the degree of compliance with policies or procedures mayoccur. Because of the inherent limitations in a cost-effective control system,misstatements due to error or fraud may occur and not be detected.

 

Any failure to implement or maintain improvements inour internal control over financial reporting, or difficulties encountered inthe implementation of these improvements in our controls, could causesignificant deficiencies or material weaknesses in our internal controls andconsequently cause us to fail to meet our reporting obligations. Any failure toimplement or maintain required new or improved internal controls could alsocause investors to lose confidence in our reported financial information, whichcould have a negative impact on the trading price of our stock.

 

**Our ability to conclude that acontrol deficiency is not a material weakness or that an accounting error doesnot require a restatement can be affected by a number of factors, including ourlevel of pre-tax income.**

 

Under the Sarbanes-OxleyAct of 2002, our management is required to assess the impact of controldeficiencies based upon both quantitative and qualitative factors, anddepending upon that analysis we classify such identified deficiencies as eithera control deficiency, significant deficiency or a material weakness.

 

One element of ourquantitative analysis of any control deficiency is its actual or potentialfinancial impact, and any impact that is greater than 5% of our pre-tax incomein any quarter may be more likely to result in that deficiency being determinedto be a significant deficiency or a material weakness. For example, ourassessment of a control deficiency as a significant deficiency or materialweakness remains dependent in part on our level of profitability during aparticular quarter. If our quarterly or fiscal year pre-tax income were todecrease, this will make it statistically less likely for us and ourindependent registered public accounting firm to determine that a controldeficiency is not a material weakness.

 

In addition, ifmanagement or our independent registered public accountants identify errors inour interim or annual financial statements, it is statistically more likelythat such errors may meet the quantitative threshold established under StaffAccounting Bulletin No. 99, “Materiality”, that could, depending upon thecomplete qualitative and quantitative analysis, result in our having to restatepreviously issued financial statements.

 

**Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds**

 

**Issuer Purchases of Equity Securities**

 

OurBoard of Directors (the “Board”) has approved common stock repurchase programsauthorizing management to repurchase shares of the Company’s common stock inthe open market. The timing and actual number of shares subject to

 

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repurchaseare at the discretion of management and are contingent on a number of factors,including the price of our stock, general market conditions and alternativeinvestment opportunities. The purchases are funded from available workingcapital or debt.

 

On October 30, 2008, Advent’s Board authorizedthe repurchase of up to 3.0 million shares of the Company’s outstanding commonstock. During the first quarter of 2009, Advent repurchased an aggregate of690,000 shares of common stock for a total cash outlay of $14.6 million and atan average price of $21.13 per share. The following table provides amonth-to-month summary of the repurchase activity under the stock repurchaseprogram approved by the Board in October 2008 during the three monthsended March 31, 2009:

 
| ** **         | ** ** | ** **                | ** ** | ** **    | ** ** | **Maximum**                   | ** ** |
|--------------------|------------|---------------------------|------------|---------------|------------|-------------------------------|------------|
| ** **         | ** ** | **Total**                 | ** ** | **Average**   | ** ** | **Number of Shares That**     | ** ** |
| ** **         | ** ** | **Number**                | ** ** | **Price**     | ** ** | **May Yet Be Purchased** | ** ** |
| ** **         | ** ** | **of Shares**             | ** ** | **Paid**      | ** ** | **Under Our Share**           | ** ** |
| ** **         | ** ** | **Purchased**             | ** ** | **Per Share** | ** ** | **Repurchase Programs**       | ** ** |
| ** **         | ** ** | **(shares in thousands)** | ** ** |
| ** **         | ** ** | ** **                | ** ** | ** **    | ** ** | ** **                    | ** ** |
| January 2009  |       | 593                       |       | $             | 20.89      |                          | 1,077      |   |
| February 2009 |       | 97                        |       | 22.59         |       | 979                           |       |
| March 2009    |       | —                    |       | —        |       | 979                           |       |
|               |       |                      |       |          |       |                          |       |
| Total              |       | 690                       |       | $             | 21.13      |                          | 979        |   |

 

In addition to therepurchases disclosed above, we withheld shares through net share settlements duringthe three months ended March 31, 2009. These share withholdings fromemployees represent shares cancelled when surrendered in lieu of cash paymentsfor withholding taxes due. The following tables provides a month-to-monthsummary of the repurchase activity upon the employee vesting of restrictedstock units and the exercise of stock-settled stock appreciation rights underour equity compensation plan to satisfy tax withholding obligations during thethree months ended March 31, 2009 (in thousands, except per share data):

 
| ** ** | ** ** | **Total**       | ** ** | ** **    | ** ** | **Maximum Number**     | ** ** |
|------------|------------|-----------------|------------|---------------|------------|------------------------|------------|
| ** ** | ** ** | **Number**      | ** ** | **Average**   | ** ** | **of Shares that May** | ** ** |
| ** ** | ** ** | **of Shares**   | ** ** | **Price Per** | ** ** | **Yet Be Purchased**   | ** ** |
| **Month**  | ** ** | **Repurchased** | ** ** | **Share**     | ** ** | **Under the Plan**     | ** ** |
|       |       |            |       |          |       |                   |       |
| January    |       | 2               |       | $             | 21.50      |                   | —     |   |
| February   |       | 44              |       | $             | 29.05      |                   | —     |   |
| March      |       | 5               |       | $             | 29.42      |                   | —     |   |
|       |       |            |       |          |       |                   |       |
| Total      |       | 51              |       | $             | 28.81      |                   | —     |   |

 
| **Item 3.** | **Defaults Upon Senior Securities**                                                                                                                                                                                                                                                    |
|-------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **  | ** **                                                                                                                                                                                                                                                                             |
| ** **  | None.                                                                                                                                                                                                                                                                                  |
| ** **  |                                                                                                                                                                                                                                                                                   |
| **Item 4.** | **Submission of Matters to a Vote of Security Holders**                                                                                                                                                                                                                                |
| ** **  |                                                                                                                                                                                                                                                                                   |
| ** **  | None.                                                                                                                                                                                                                                                                                  |
| ** **  |                                                                                                                                                                                                                                                                                   |
| **Item 5.** | **Other Information**                                                                                                                                                                                                                                                                  |
| ** **  |                                                                                                                                                                                                                                                                                   |
| ** **  | None.                                                                                                                                                                                                                                                                                  |
| ** **  |                                                                                                                                                                                                                                                                                   |
| **Item 6.** | **Exhibits**                                                                                                                                                                                                                                                                           |
| ** **  | ** **                                                                                                                                                                                                                                                                             |
| ** **  | 31.1                           Certification  of Principal Executive and Financial Officer under Section 302 of the  Sarbanes-Oxley Act of 2002 |

 

 

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| ** ** | 32.1                           Certification  of Principal Executive and Financial Officer under Section 906 of the  Sarbanes-Oxley Act of 2002 |
|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

 
|   |                     | ADVENT  SOFTWARE, INC. |
|--------|--------------------------|------------------------|
|   |                     |                   |
|   |                     |                   |
|   | Dated:  May 7, 2009 | By:                    | /s/  Stephanie G. DiMarco |
|   |                     |                   | Stephanie  G. DiMarco*Chief Executive Officer and**Chief Financial Officer  (Principal Executive and Financial Officer)* |
|   |                     |                   |   |
|   |                     |                   |   |
|   | Dated:  May 7, 2009 | By:                    | /s/  James S. Cox |
|   |                     |                   | James  S. Cox*Vice President and Corporate Controller**(Principal Accounting Officer)* |

 

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