================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X]Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 1997
or
[_]Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission file number: 0-26994
ADVENT SOFTWARE, INC.
(Exact name of small business issuer as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
94-2901952
(IRS Employer Identification Number)
301 Brannan Street, San Francisco, California 94107
(Address of principal executive offices and zip code)
(415) 543-7696
(Issuer's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes[x] No[_]
The number of shares of the issuer's Common Stock outstanding as of
April 30, 1997 was 7,463,542.
================================================================================
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to the Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ADVENT SOFTWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1997 December 31, 1996
---------------------------------- ---------------- ----------------------
(in thousands) (unaudited)
ASSETS
Current assets:
Cash and short-term investments $34,135 $31,650
Accounts receivable, net 7,290 8,499
Prepaid expenses and other 783 592
Deferred income taxes 1,287 1,064
------ ------
Total current assets 43,495 41,805
------ ------
Fixed assets, net 4,367 3,862
Other assets, net 865 1,024
------ ------
Total assets $48,727 $46,691
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 827 $ 646
Accrued liabilities 2,360 2,627
Deferred revenues 5,375 5,071
Income taxes payable 988 686
------ ------
Total current liabilities 9,550 9,030
------ ------
Long-term liabilities:
Other liabilities 574 599
------ ------
Total liabilities 10,124 9,629
------ ------
Stockholders' equity:
Common stock 74 73
Additional paid-in-capital 35,750 35,061
Retained earnings 2,779 1,928
------ ------
Total stockholders' equity 38,603 37,062
Total liabilities and
stockholders' equity $48,727 $46,691
======= =======
----------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
ADVENT SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter Ended March 31,
---------------------------------
1997 1996
---------------------------------------- ---------------------------------
(in thousands, except per share data) (unaudited)
Revenues:
License $ 4,001 $ 2,588
Maintenance and other recurring 4,195 3,201
Professional services and other 1,357 1,186
------- -------
Net revenues 9,553 6,975
------- -------
Cost of revenues:
License 152 104
Maintenance and other recurring 967 704
Professional services and other 819 538
------- -------
Total cost of revenues 1,938 1,346
------- -------
Gross margin 7,615 5,629
------- -------
Operating expenses:
Sales and marketing 3,284 2,666
Product development 2,121 1,403
General and administrative 1,089 999
Purchased research and development
and other -- 5,648
------- -------
Total operating expenses 6,494 10,716
------- -------
Income (loss) from operations 1,121 (5,087)
Interest income, net 265 326
------- -------
Income (loss) before income taxes 1,386 (4,761)
Provision for income taxes 535 341
------- -------
Net income (loss) $ 851 $(5,102)
======= =======
Net income (loss) per share $ 0.11 $ (0.74)
Shares used in per share calculations 8,012 6,914
======= =======
--------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
ADVENT SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarter Ended March 31,
-------------------------
1997 1996
- ----------------------------------------------------- -------------------------
(in thousands) (unaudited)
Cash flows from operating activities:
Net income (loss) $ 851 $ (5,102)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Purchased research and development and other -- 5,648
Depreciation and amortization 444 292
Provision for doubtful accounts (53) (44)
Deferred income taxes (196) --
Deferred rent (25) (12)
Cash provided by (used in) operating assets
and liabilities:
Accounts receivable 1,261 (42)
Prepaid and other current assets (190) (57)
Accounts payable 181 (591)
Accrued liabilities (267) (44)
Deferred revenues 304 (340)
Income taxes payable 864 (461)
------ ------
Net cash provided by (used in) operating
activities 3,174 (753)
------ ------
Cash flow from investing activities:
Net cash used in acquisition of the DX Group -- (3,963)
Acquisition of fixed assets (890) (234)
------ ------
Net cash used in investing activities (890) (4,197)
------ ------
Cash flow from financing activities:
Payment of debt acquired in the DX Group
acquisition -- (288)
Proceeds from exercise of stock options and
warrants 201 275
------ ------
Net cash provided by (used in) financing
activities 201 (13)
------ ------
Net increase (decrease) in cash and short-term
investments 2,485 (4,963)
Cash and short-term investments at beginning of
quarter 31,650 35,084
------ ------
Cash and short-term investments at end of quarter $34,135 $30,121
======= =======
Supplemental disclosure of cash flow information:
Issuance of note payable in acquisition of the
DX Group $ -- $ 800
Cash paid for income taxes $ -- $ 653
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
ADVENT SOFTWARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The condensed consolidated financial statements include the accounts of
Advent Software, Inc. (Advent) and its wholly owned subsidiaries. All
significant intercompany balances and transactions have been eliminated.
The condensed consolidated financial statements have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission (SEC) applicable to interim financial information. Certain
information and footnote disclosures included in financial statements prepared
in accordance with generally accepted accounting principles have been omitted in
these interim statements pursuant to such SEC rules and regulations. Management
recommends that these interim financial statements be read in conjunction with
the audited financial statements and notes thereto included in Advent's 1996
Report on Form 10-K filed with the SEC.
In management's opinion, the condensed consolidated financial statements
include all adjustments necessary to present fairly the financial position and
results of operations for each interim period shown.
2. Recent Accounting Pronouncements
During February 1997, the Financial Accounting Standards Board issues
Statement No. 128, "Earnings Per Share", (SFAS 128) which specifies the
computation, presentation and disclosure requirements for net income per share.
SFAS 128 will become effective for Advent's 1997 fiscal year end. Advent's
management does not expect the adoption of SFAS 128 to have a material impact on
Advent's financial condition or results of operations.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
ACQUISITIONS
In February, 1996, Advent acquired Data Exchange, Inc. (the DX Group), a
private company based in New York, for $4.0 million in cash and an $800,000 note
payable. This note payable was paid during the third quarter of 1996 and did not
bear interest. The transaction was accounted for as a purchase. Advent incurred
a one-time charge of $5.6 million in connection with the write-off of in-process
research and development. This expense was recorded in purchased research and
development and other expenses. As a result of this expense, there was a net
loss per share of ($0.74) for the first quarter of 1996. Excluding this
write-off net income per share would have been $0.07.
In November 1996, Advent issued 35,000 shares of Advent's common stock in
exchange for all of the outstanding shares of Bold Software, Inc., a private
software development company based in New York. This business combination was
accounted for as a pooling of interests. Prior year amounts have not been
restated to include Bold Software's results of operations as such operations
were immaterial. As a result of this business combination, Advent introduced
Advent Partner, a tax layering and partnership allocation solution which
integrates with Axys.
RESULTS OF OPERATIONS
NET REVENUES. Advent's net revenues for the first quarter of 1997 increased
37% to $9.6 million, as compared with net revenues of $7.0 million for the first
quarter of 1996, reflecting increases in each component of net revenues. License
revenue for the first quarter of 1997 increased 55% to $4.0 million as compared
with license revenue of $2.6 million for the first quarter of 1996, due
primarily to higher revenues derived from licensing of Qube, Moxy and Geneva. In
addition, Advent Partner contributed license revenues in first quarter of 1997.
As discussed above, Advent Partner was introduced as a result of the acquisition
of Bold Software and, therefore, there was no comparable revenue in first
quarter of 1996. Maintenance and other recurring revenue for the first quarter
of 1997 increased 31% to $4.2 million, as compared with maintenance and other
recurring revenue of $3.2 million for the first quarter of 1996, due primarily
to a larger customer base and higher average maintenance fees. Higher average
maintenance fees are due to increased complexity of the maintenance services
provided and increased client utilization of proprietary interfaces to access
pricing and other data supplied by third parties through Advent's proprietary
interfaces. Professional services and other revenue for the first quarter of
1997 increased 14% to $1.4 million, as compared with professional services and
other revenue of $1.2 million for the first quarter of 1996, due primarily to
higher product sales activity.
COST OF REVENUES. Advent's cost of revenues for the first quarter of 1997
increased 44% to $1.9 million, as compared with cost of revenues of $1.3 million
for the first quarter of 1996. Cost of revenues as a percentage of net revenues
was relatively stable at 20% for the first quarter of 1997 as compared with 19%
in the first quarter of 1996.
SALES AND MARKETING. Advent's sales and marketing expenses for the first
quarter of 1997 increased 23% to $3.3 million, as compared with sales and
marketing expenses of $2.7 million for the first quarter of 1996. Sales and
marketing expenses as a percentage of net revenues decreased to 34% in the first
quarter of 1997 from 38% in the first quarter of 1996. The increase in expenses
was due primarily to an increase in sales and marketing personnel. The decrease
in sales and marketing expenses as a percentage of net revenues was due
primarily to the ability of Advent's sales and marketing organization to support
an increased revenue base that was in part due to an increase in
multiple-product license sales represented in that revenue base. In addition,
the decrease was also due to an increase in maintenance and other recurring
revenues which did not have significant associated sales and marketing expenses.
PRODUCT DEVELOPMENT. Advent's product development expenses for the first
quarter of 1997 increased 51% to $2.1 million, as compared with product
development expenses of $1.4 million for the first quarter of 1996. Product
development expenses as a percentage of net revenues increased to 22% in the
first quarter of 1997 from 20% in the first quarter of 1996. These increases
were primarily due to an
7
<PAGE>
increase in personnel as Advent has increased its product development
efforts to accelerate the rate of new product introductions.
GENERAL AND ADMINISTRATIVE. Advent's general and administrative expenses for
the first quarter of 1997 increased 9% to $1.1 million, as compared with general
and administrative expenses of $1.0 million for the first quarter of 1996.
General and administrative expenses as a percentage of net revenues decreased to
11% for the first quarter of 1997 as compared with 14% in the first quarter of
1996. The relatively small increase in general and administrative expenses and
the decrease in these expenses as a percentage of net revenues reflect the
ability of Advent's administrative support organization to support an increased
revenue base.
PURCHASED RESEARCH AND DEVELOPMENT AND OTHER. On February 15, 1996, Advent
acquired Data Exchange, Inc. (the DX Group), a private company based in New
York, for $4.0 million in cash and an $800,000 note payable. In the first
quarter of 1996, Advent incurred a one-time charge of $5.6 million in connection
with the write-off of in-process research and development due to the acquisition
of the DX Group. There was no comparable charge in the first quarter of 1997.
INTEREST INCOME, NET. Advent's interest income, net for the first quarter of
1997 decreased 19% to $265,000, as compared with interest income, net of
$326,000 for the first quarter of 1996. This decrease was due to a smaller cash
balance that resulted from the acquisition of the DX Group in the first quarter
of 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments totaled $34.1 million at March 31, 1997 as
compared to $31.7 million at December 31, 1996. The increase in cash and
short-term investments was primarily due cash provided by operating activities.
Advent believes that its existing cash and short-term investments and cash
expected to be generated from operations will be sufficient to meet its cash and
capital requirements at least through fiscal 1997.
FORWARD-LOOKING STATEMENTS
The discussion in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contains trend analysis and other
forward-looking statements that are based on current expectations and
assumptions made by management. Words such as "expects", "anticipates",
"intends", "plans", "believes", "seeks", "estimates", and variations of such
words and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and
involve certain risks and uncertainties which are difficult to predict.
Therefore, actual results could differ materially from those expressed or
forecasted in the forward-looking statements as a result of the factors
summarized below and other risks detailed from time to time in reports filed
with the Securities and Exchange Commission, including Advent's 1996 Annual
Report to Stockholders, incorporated by reference in Advent's 1996 Form 10-K
Report. Additionally, the financial statements for the periods presented are not
necessarily indicative of results to be expected for any future period, nor for
the entire year.
Advent operates in a rapidly changing environment that involves a number of
risks, some of which are beyond Advent's control. These risks include the
potential for period to period fluctuations in operating results and the
dependence on the successful development and market acceptance of new products
and product enhancements on a timely, cost effective basis, as well as the
stability of financial markets, maintenance of Advent's relationship with
Interactive Data and price and product/performance competition. In particular,
Advent's net revenues and operating results have varied substantially from
period-to-period on a quarterly basis and may continue to fluctuate due to a
number of factors. Advent's software products typically are shipped shortly
after receipt of a signed license agreement and initial payment and,
consequently, software backlog at the beginning of any quarter typically
represents only a small portion of that quarter's expected revenues. In
addition, as Advent's licenses into multi-user
8
<PAGE>
networked environments have increased both in individual size and number,
the timing and size of individual license transactions are becoming increasingly
important factors in Advent's quarterly operating results. The sales cycles for
these transactions are often lengthy and unpredictable, and the ability to close
large license transactions on a timely basis or at all could cause additional
variability in Advent's quarterly operating results. Advent's future success
will continue to depend upon its ability to develop new products, such as Moxy,
Qube, and Geneva, that address the future needs of its target markets and to
respond to emerging industry standards and practices. Advent is directing a
significant amount of its product development efforts on the on-going
development of Geneva. The failure to successfully develop and achieve
widespread market acceptance of a fully commercial version of Geneva on a timely
basis would adversely affect Advent's business and operating results.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
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 And Reports On Form 8-K
(a) Exhibits
11.1 Statement Regarding Computation of Net Income (Loss) Per
Share
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this Form 10-Q to be signed on its behalf by the
undersigned, thereunto duly authorized.
ADVENT SOFTWARE, INC.
Dated: May 12, 1997 By: /s/ STEPHANIE G. DIMARCO
----------------------------
Stephanie G. DiMarco
Chairman of the Board and
Chief Executive Officer
Dated: May 12, 1997 By: /s/ IRV H. LICHTENWALD
--------------------------
Irv H. Lichtenwald
Senior Vice President of Finance,
Chief Financial Officer
and Secretary
10
<PAGE>
EXHIBIT 11.1
ADVENT SOFTWARE, INC
STATEMENT REGARDING COMPUTATION OF NET INCOME (LOSS) PER SHARE
(amounts in thousands, except per share data)
Quarter Ended March 31,
1997 1996
------ ------
Primary and Fully Diluted:
Weighted average common shares outstanding
for the period................................ 7,396 6,914
Common equivalent shares:
Options and warrants....................... 616 --
------ ------
Shares used in per share calculations........ 8,012 6,914
------ ------
Net income (loss)............................ $ 851 $(5,102)
======= ========
Net income (loss) per share.................. $ 0.11 $ (0.74)
======= ========
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 34,135
<SECURITIES> 0
<RECEIVABLES> 7,472
<ALLOWANCES> 182
<INVENTORY> 0
<CURRENT-ASSETS> 43,495
<PP&E> 8,805
<DEPRECIATION> 4,438
<TOTAL-ASSETS> 48,727
<CURRENT-LIABILITIES> 9,550
<BONDS> 0
0
0
<COMMON> 74
<OTHER-SE> 38,529
<TOTAL-LIABILITY-AND-EQUITY> 48,727
<SALES> 4,001
<TOTAL-REVENUES> 9,553
<CGS> 152
<TOTAL-COSTS> 1,938
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,386
<INCOME-TAX> 535
<INCOME-CONTINUING> 851
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 851
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
