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 June 30, 1998
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 July 31,
1998 was 8,164,564.
<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 11
ITEM 2. Changes in Securities 11
ITEM 3. Defaults Upon Senior Securities 11
ITEM 4. Submission of Matters to a Vote of Security Holders 11
ITEM 5. Other Information 12
ITEM 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ADVENT SOFTWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, DEC 31,
1998 1997
- --------------------------------------------------------------------------------
(in thousands) (unaudited)
ASSETS
Current assets:
Cash and short-term investments $ 39,945 $ 36,056
Accounts receivable, net 13,782 12,226
Prepaid expenses and other 1,200 1,391
Deferred income taxes 1,418 1,418
------------- -------------
Total current assets 56,345 51,091
------------- -------------
Fixed assets, net 9,027 7,424
Other assets, net 4,365 770
------------- -------------
Total assets $ 69,737 $ 59,285
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 859 $ 814
Accrued liabilities 3,521 2,977
Deferred revenues 9,192 6,832
Income taxes payable 2,530 1,632
------------- -------------
Total current liabilities 16,102 12,255
------------- -------------
Long-term liabilities:
Other liabilities 551 537
------------- -------------
Total liabilities 16,653 12,792
------------- -------------
Stockholders' equity:
Common stock 81 76
Additional paid-in-capital 45,786 37,776
Retained earnings 7,217 8,641
------------- -------------
Total stockholders' equity 53,084 46,493
------------- -------------
Total liabilities and
stockholders' equity $ 69,737 $ 59,285
============= =============
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
ADVENT SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------ ------------------------------
1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues:
License and development fees $ 8,603 $ 5,482 $ 15,537 $ 9,484
Maintenance and other recurring 5,796 4,419 11,192 8,614
Professional services and other 2,307 1,798 4,026 3,155
-------------- ------------- ------------- -------------
Net revenues 16,706 11,699 30,755 21,253
-------------- ------------- ------------- -------------
Cost of revenues:
License and development fees 634 124 1,155 276
Maintenance and other recurring 1,527 1,143 3,032 2,110
Professional services and other 943 1,021 1,763 1,840
-------------- ------------- ------------- -------------
Total cost of revenues 3,104 2,288 5,950 4,226
-------------- ------------- ------------- -------------
Gross margin 13,602 9,411 24,805 17,027
-------------- ------------- ------------- -------------
Operating expenses:
Sales and marketing 5,692 3,783 10,781 7,068
Product development 3,009 2,223 5,670 4,344
General and administrative 1,634 1,236 3,465 2,325
Purchased research and development and other 5,422 - 5,422 -
-------------- ------------- ------------- -------------
Total operating expenses 15,757 7,242 25,338 13,737
-------------- ------------- ------------- -------------
Income (loss) from operations (2,155) 2,169 (533) 3,290
Interest income, net 388 307 731 572
-------------- ------------- ------------- -------------
Income (loss) before income taxes (1,767) 2,476 198 3,862
Provision (benefit) for income taxes (185) 954 522 1,488
-------------- ------------- ------------- -------------
Net income (loss) $ (1,582) $ 1,522 $ (324) $ 2,374
============== ============= ============= =============
NET INCOME (LOSS) PER SHARE DATA
DILUTED
Net income (loss) per share $ (0.20) $ 0.19 $ (0.04) $ 0.30
Shares used in per share calculations 8,022 8,006 7,953 8,009
BASIC
Net income (loss) per share $ (0.20) $ 0.20 $ (0.04) $ 0.32
Shares used in per share calculations 8,022 7,479 7,953 7,438
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
-------------------------------
1998 1997
- ---------------------------------------------------------------------------------------------------
(in thousands) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (324) $ 2,374
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Purchased research and development 4,493 -
Depreciation and amortization 1,729 906
Provision for doubtful accounts 105 (53)
Deferred income taxes (1,500) (196)
Deferred rent 14 (50)
Cash provided by (used in) operating assets and
liabilities:
Accounts receivable (2,210) (1,882)
Prepaid and other current assets 144 (670)
Accounts payable 45 (182)
Accrued liabilities 544 (54)
Deferred revenues 2,361 839
Income taxes payable 899 1,422
Net liabilities assumed in pooling of interests
with Microedge (1,061) -
-------------------------------
Net cash provided by operating activities 5,239 2,454
-------------------------------
Cash flows from investing activities:
Acquisition of fixed assets (2,957) (1,576)
Deposits 106 -
-------------------------------
Net cash used in investing activities (2,851) (1,576)
-------------------------------
Cash flows from financing activities:
Proceeds from exercise of stock options and warrants 1,501 1,039
-------------------------------
Net cash provided by financing activities 1,501 1,039
-------------------------------
Net increase in cash and short-term investments 3,889 1,917
Cash and short-term investments at beginning of period 36,056 31,650
-------------------------------
Cash and short-term investments at end of period $ 39,945 $ 33,567
===============================
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ 1,134 $ 849
Supplemental disclosure of non-cash transactions:
Purchase of assets of the Grants Division of
Blackbaud, Inc. for issuance of common stock,
net of purchased research & development $ 2,021 $ -
- ---------------------------------------------------------------------------------------------------
</TABLE>
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 1997
Report on Form 10-K filed with the SEC. Interim results are not necessarily
indicative of the results to be expected for the full year.
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
Advent has adopted the provisions of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income", and effective January 1,
1998. This statement requires the disclosure of comprehensive income and its
components in a full set of general-purpose financial statements. Comprehensive
income is defined as net income plus revenues, expenses, gains and losses that,
under generally accepted accounting principles, are excluded from net income.
The components of comprehensive income that are excluded from net income are not
significant, individually or in aggregate, and therefore, no separate statement
of comprehensive income has been presented.
Advent has adopted the provisions of Statement of Position ("SOP") 97-2 on
Software Revenue Recognition, which supersedes SOP 91-1. Under SOP 97-2, revenue
recognized on contracts with multiple obligations (e.g. deliverable and
undeliverable products, services and maintenance) must be allocated to each
component of the contract based on evidence of its fair value which is specific
to Advent. Revenue allocated to undelivered products is recognized when the
criteria for license revenue are met. The adoption of SOP 97-2 has not resulted
in any significant changes to Advent's revenue recognition policy.
In June of 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments, and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. Management has not yet evaluated the effects of
this change on its operations. The Company will adopt SFAS No. 133 as required
for its first quarterly filing of fiscal year 2000.
3. ACQUISITION OF MICROEDGE, INC.
In February 1998, Advent issued 250,000 shares of Advent's common stock in
exchange for all of the outstanding shares of MicroEdge, Inc., a private
software development company based in New York. MicroEdge is the leading
provider of software products to foundations, corporations and other
organizations to manage their grant-making activities. This business combination
was accounted for as a pooling of interests. The results of operations as well
as the assets and liabilities of MicroEdge in 1997 were not material to the
consolidated results of operations or financial position of Advent. Accordingly,
the Company did not restate its financial statements for periods prior to
January 1, 1998. The results of operations of MicroEdge are included in the
Company's financial statements beginning January 1, 1998.
6
<PAGE>
4. ACQUISITION OF GRANTS MANAGEMENT DIVISION OF BLACKBAUD, INC.
In May 1998, Advent issued 170,000 shares of Advent's common stock for
substantially all of the assets of the Grants Management Division of Blackbaud,
Inc., a privately held company located in Charleston, South Carolina. This
acquisition combines the Grants Management product line from Blackbaud with
MicroEdge with a consolidated installed base of over 1,200 organizations and
over 5,000 users. This transaction was accounted for as a purchase. Advent
incurred a one-time write-off of in-process research and development and other
expenses of $5.4 million in connection with this transaction. The results of the
Grants Management product line of Blackbaud, Inc. were not material to Advent's
consolidated results of operations for fiscal year 1997 and 1998.
5. NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
- ------------------------------------------------------------------------------------- ---------------------------
<S> <C> <C> <C> <C>
Net income (loss) $ (1,582) $ 1,522 $ (324) $ 2,374
RECONCILIATION OF SHARES USED IN BASIC AND DILUTED
PER SHARE CALCULATIONS
BASIC
Weighted average common shares outstanding 8,022 7,479 7,953 7,438
------------- ------------ ------------ -------------
Shares used in basic net income (loss) per
share calculation 8,022 7,479 7,953 7,438
============= ============ ============ =============
Basic net income (loss) per share $ (0.20) $ 0.20 $ (0.04) $ 0.32
============= ============ ============ =============
DILUTED
Weighted average common shares outstanding 8,022 7,479 7,953 7,438
Dilutive effect of stock options and warrants - 527 - 571
------------- ------------ ------------ -------------
Shares used in diluted net income (loss) per
share calculation 8,022 8,006 7,953 8,009
============= ============ ============ =============
Diluted net income (loss) per share $ (0.20) $ 0.19 $ (0.04) $ 0.30
------------- ------------ ------------ -------------
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
ACQUISITIONS
In February 1998, Advent issued 250,000 shares of Advent's common stock in
exchange for all of the outstanding shares of MicroEdge, Inc., a private
software development company based in New York. MicroEdge is the leading
provider of software products to foundations, corporations and other
organizations to manage their grant-making activities. This business combination
was accounted for as a pooling of interests. The results of operations as well
as the assets and liabilities of MicroEdge in 1997 were not material to the
consolidated results of operations or financial position of Advent.
In May 1998, Advent issued 170,000 shares of Advent's common stock for
substantially all of the assets of the Grants Management Division of Blackbaud,
Inc., a privately held company located in Charleston, South Carolina. This
acquisition combines the Grants Management product line from Blackbaud with
MicroEdge with a consolidated installed base of over 1,200 organizations and
over 5,000 users. Advent incurred a one-time write-off of in-process research
and development and other expenses of $5.4 million in connection with this
transaction.
7
<PAGE>
RESULTS OF OPERATIONS
NET REVENUES. Advent's net revenues for the second quarter of 1998 increased
43% to $16.7 million, compared with net revenues of $11.7 million for the second
quarter of 1997, reflecting increases in each component of net revenues.
Advent's net revenues for the six months ended June 30, 1998 increased 45% to
$30.8 million, compared with net revenues of $21.3 million for the six months
ended June 30, 1997, reflecting increases in each component of net revenues.
License revenue and development fees for the second quarter of 1998 increased
57% to $8.6 million compared with license revenue and development fees of $5.5
million for the second quarter of 1997. License revenue and development fees for
the six months ended June 30, 1998 increased 64% to $15.5 million compared with
license revenue and development fees of $9.5 million for the six months ended
June 30, 1997. The increase in license and development fees revenue for the
three and six months ended June 30, 1998 was primarily due to higher development
fees and the addition of MicroEdge, Inc. Maintenance and other recurring revenue
for the second quarter of 1998 increased 31% to $5.8 million, compared with
maintenance and other recurring revenue of $4.4 million for the second quarter
of 1997. Maintenance and other recurring revenue for the six months ended June
30, 1998 increased 30% to $11.2 million, compared with maintenance and other
recurring revenue of $8.6 million for the six months ended June 30, 1997. The
increases in both periods were due primarily to a larger customer base,
increased account management service, and the addition of MicroEdge.
Professional services and other revenue for the second quarter of 1998 increased
28% to $2.3 million, compared with professional services and other revenue of
$1.8 million for the second quarter of 1997. Professional services and other
revenue for the six months ended June 30, 1998 increased 28% to $4.0 million,
compared with professional services and other revenue of $3.2 million for the
six months ended June 30, 1997. The increase for the three and six months ended
June 30, 1998 was primarily due to higher product sales activity and
multi-product sales, which generally require more professional services, the
addition of MicroEdge, and revenues generated from Advent's spring conference.
COST OF REVENUES. Advent's cost of revenues for the second quarter of 1998
increased 36% to $3.1 million, compared with cost of revenues of $2.3 million
for the second quarter of 1997. Advent's cost of revenues for the six months
ended June 30, 1998 increased 41% to $6.0 million, compared with cost of
revenues of $4.2 million for the six months ended June 30, 1997. Cost of
revenues as a percentage of net revenues was relatively stable at 19% for the
three and six months ended June 30, 1998 compared with 20% for the three and six
months ended June 30, 1997. Cost of license and development fees increased 411%
to $634,000 in the second quarter of 1998 from $124,000 in the second quarter of
1997. Cost of license and development fees increased 318% to $1.2 million for
the six months ended June 30, 1998, from $276,000 for the six months ended June
30, 1997. Cost of license and development fees as a percentage of the related
revenues increased to 7% in the second quarter of 1998 from 2% in the second
quarter of 1997. Cost of license and development fees as a percentage of the
related revenues increased to 7% for the six months ended June 30, 1998 from 3%
for the six months ended June 30, 1997. The increase in license and development
fees for the three and six months ended June 30, 1998 was due to the costs
associated with increased development fee projects. Cost of maintenance and
other recurring revenues as a percentage of the related revenues was stable at
26% in the second quarter of 1998 and 1997. Cost of maintenance and other
recurring revenues as a percentage of the related revenues increased to 27% for
the six months ended June 30, 1998 from 24% for the six months ended June 30,
1997. Cost of maintenance and other recurring revenues increased 34% to $1.5
million for the second quarter of 1998, from $1.1 million for the second quarter
of 1997. Cost of maintenance and other recurring revenue increased 44% to $3.0
million for the six months ended June 30, 1998, from $2.1 million for the six
months ended June 30, 1997. This increase was due to increased staffing required
to support larger and more complicated implementations. Cost of professional
services and other revenue decreased 8% to $943,000 for the second quarter of
1998, compared with $1.0 million for the second quarter of 1997 and remained
stable at $1.8 million for the six months ended June 30, 1998 and 1997. Cost of
professional services and other revenue as a percentage of professional services
and other revenue decreased to 41% in the second quarter of 1998 from 57% in the
second quarter of 1997 and decreased to 44% for the six months ended June 30,
1998 from 58% for the six months ended June 30, 1997. The decrease was primarily
due to savings associated with decreased staffing in professional services as
the Company redeployed resources from professional services to implementation
management and development fee projects in response to growing demands in those
areas.
8
<PAGE>
SALES AND MARKETING. Advent's sales and marketing expenses for the second
quarter of 1998 increased 50% to $5.7 million, compared with sales and marketing
expenses of $3.8 million for the second quarter of 1997. Advent's sales and
marketing expenses for the six months ended June 30, 1998 increased 53% to $10.8
million, compared with sales and marketing expenses of $7.1 million for the six
months ended June 30, 1997. Sales and marketing expenses as a percentage of net
revenues increased to 34% in the second quarter of 1998 from 32% in the second
quarter of 1997. Sales and marketing expenses as a percentage of net revenues
increased to 35% for the six months ended June 30, 1998 from 33% for the six
months ended June 30, 1997. The increase in expense for the three and six months
ended June 30, 1998 was primarily due to an increase in sales and marketing
personnel and expenses resulting from the introduction of Advent Office and
Advent Warehouse as well as focused efforts towards our Internet Initiative.
PRODUCT DEVELOPMENT. Advent's product development expenses for the second
quarter of 1998 increased 35% to $3.0 million, compared with product development
expenses of $2.2 million for the second quarter of 1997. Advent's product
development expenses for the six months ended June 30, 1998 increased 31% to
$5.7 million, compared with product development expenses of $4.3 million for the
six months ended June 30, 1997. Product development expenses as a percentage of
net revenues decreased to 18% in the second quarter of 1998 from 19% in the
second quarter of 1997. Product development expenses as a percentage of net
revenues decreased to 18% for the six months ended June 30, 1998 from 20% for
the six months ended June 30, 1997. Product development expenses for the three
and six months ended June 30, 1998 increased primarily due to an increase in
personnel as Advent has increased its product development efforts to accelerate
the rate of product enhancements and new product introductions, and to the
addition of MicroEdge. Product development expenses as a percentage of net
revenues for the three and six months ended June 30, 1998 decreased primarily
due to savings associated with decreased staffing in product development as the
Company re-deployed resources from product development to license and
development fee projects in response to growing demands in that area.
GENERAL AND ADMINISTRATIVE. Advent's general and administrative expenses for
the second quarter of 1998 increased 32% to $1.6 million, compared with general
and administrative expenses of $1.2 million for the second quarter of 1997.
Advent's general and administrative expenses for the six months ended June 30
1998, increased 49% to $3.5 million, compared with general and administrative
expenses of $2.3 million for the six months ended June 30, 1997. The increase
for the three and six months ended June 30, 1998 was due to increased staffing
to support the growth of the Company. General and administrative expenses as a
percentage of net revenues decreased to 10% for the second quarter of 1998 from
11% in the second quarter of 1997. General and administrative expenses as a
percentage of net revenues were unchanged at 11% for the six months ended June
30, 1998, compared with the six months ended June 30, 1997. The decrease for the
second quarter of 1998 compared with the second quarter of 1997 is due to
economies of scale.
PURCHASED RESEARCH AND DEVELOPMENT AND OTHER. In May 1998, Advent issued
170,000 shares of Advent's common stock for substantially all of the assets of
the Grants Management Division of Blackbaud, Inc., a privately held company
located in Charleston, South Carolina. Advent incurred a one-time write-off of
in-process research and development and other expenses of $5.4 million in
connection with this transaction.
INTEREST INCOME, NET. Advent's net interest income for the second quarter of
1998 increased 26% to $388,000, compared with net interest income of $307,000
for the second quarter of 1997. Advent's net interest income for the six months
ended June 30, 1998 increased 28% to $731,000, compared with net interest income
of $572,000 for the six months ended June 30, 1997. The increase in the second
quarter 1998 and the six months ended June 30, 1998, compared with the second
quarter of 1997 and the six months ended June 30, 1998 was due to a higher cash
and short-term investment balance.
PROVISION FOR INCOME TAXES. The Company recorded a provision for income
taxes of $522,000 for the six months ended June 30, 1998 based on its pre-tax
earnings using an effective tax rate of 264%. Income tax expense does not bear a
normal relationship to income before income taxes primarily due to the tax
impact of the costs arising from the Company's acquisitions. The Company is
planning to implement a tax planning strategy in the third quarter, which will
reduce the effective tax rate and expects the annual
9
<PAGE>
effective tax rate to be 34% for the remainder of fiscal 1998. The actual
effective tax rate for the entire fiscal year could vary substantially depending
on actual results achieved. The Company had an effective tax rate of 36.9% for
fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments totaled $39.9 million at June 30, 1998
compared with $36.1 million at December 31, 1997. The increase in cash and
short-term investments was primarily due to 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 1998.
IMPACT OF YEAR 2000 ISSUE
Advent's products have been and will continue to be Year 2000 compliant.
Year 2000 compliant means that Advent's products will continue to operate
substantially in accordance with Advent's published documentation on and after
January 1, 2000. In addition, internal systems that Advent relies upon for
day-to-day operations are believed to be Year 2000 compliant. Accordingly,
Advent does not anticipate incurring significant expenditures related to Year
2000 issues.
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 1997 Annual
Report to Stockholders, incorporated by reference in Advent's 1997 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. License 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 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 achieve widespread market acceptance of
Geneva on a timely basis would adversely affect Advent's business and operating
results. To take advantage of the Internet, Advent has launched an Internet
Initiative whereby it is developing services, both announced and
10
<PAGE>
unannounced, to bring Internet based products and services to clients. The first
of these services, Rex, was launched during the second quarter of 1997. As
Advent begins development of new products and services under its Internet
Initiative, it has and will continue to enter into development agreements with
information providers, clients, or other companies in order to accelerate the
delivery of new products and services. There can be no assurance that Advent
will be successful in marketing Rex or in developing other Internet services.
Advent's failure to do so could adversely affect Advent's business and operating
results.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
In connection with the May 22, 1998 acquisition of substantially all of the
assets of the Grants Management Division of Blackbaud, Inc., a privately held
company located in Charleston, South Carolina. Advent issued a total of 170,000
shares of Advent's common stock to Blackbaud. Advent relied upon the exemptions
from registration provided by Rule 506 of Regulation D, and Section 4(2) under
the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At Advent's Annual Meeting of Stockholders held May 13, 1997, the following
matters were voted upon by stockholders pursuant to proxies solicited pursuant
to Regulation 14A of the Securities Exchange Act of 1934:
The following individuals were elected to the Board of Directors:
Votes Votes
For Withheld
--------------- --------------
Stephanie G. DiMarco 6,242,313 104,105
Frank H. Robinson 6,242,503 103,915
Wendell G. Van Auken 6,242,503 103,915
William F. Zuendt 6,242,503 103,915
Monte Zweben 6,241,313 105,105
The following proposals were approved at Advent's Annual Meeting of
Stockholders:
<TABLE>
<CAPTION>
Votes Votes
For Against Abstained
---------------- ---------------- ----------------
<S> <C> <C> <C>
1. Amendment of the Company's 1992
Stock Plan, increasing the shares
reserved for issuance by 500,000. 4,088,161 1,363,779 894,878
2. Amendment of the Company's 1995 Stock Purchase Plan,
increasing the shares reserved for
issuance by 200,000. 4,974,227 469,611 902,580
3. Ratification of appointment of
PricewaterhouseCoopers LLP as
independent accountants for the 1998
fiscal year. 6,343,544 1,511 1,363
</TABLE>
11
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ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Asset Purchase Agreement between Advent, MicroEdge, Inc., a
New York corporation and wholly-owned subsidiary of Advent,
and Blackbaud, Inc., a South Carolina corporation dated May
22, 1998 (incorporated by reference to Advent's Report on Form
8-K dated May 22, 1998 and filed with the Commission on June
5, 1998).
4.1 Form of Declaration of Registration Rights (incorporated
by reference to Advent's Report on Form 8-K dated May 22, 1998
and filed with the Commission on June 5, 1998).
27 Financial Data Schedule
(b) Reports on Form 8-K
On June 5, 1998, Advent filed a report on Form 8-K dated May 22,
1998. The report was filed in connection with the acquisition by Advent
substantially all the assets of the Grants Management Division of
Blackbaud, Inc., a South Carolina corporation. No financial statements
were required to be filed.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADVENT SOFTWARE, INC.
Dated: August 13, 1998 By: /s/ STEPHANIE G. DIMARCO
----------------------------
Stephanie G. DiMarco
Chairman of the Board and
Chief Executive Officer
Dated: August 13, 1998 By: /s/ IRV H. LICHTENWALD
----------------------------
Irv H. Lichtenwald
Senior Vice President of Finance,
Chief Financial Officer
and Secretary
13
<PAGE>
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