Advent Software 10-Q 2010 Q2 Quarterly report

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 June 30, 2010
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 its charter)

Delaware	94-2901952
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification Number)

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 by check mark whether the registrant (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 o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer x
Non-accelerated filer ¨	Smaller reporting company ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨  No x

The number of shares of the registrant’s Common Stock outstanding as of July 31, 2010 was 25,568,161.

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.	Removed and Reserved
Item 5.	Other Information
Item 6.	Exhibits
Signatures

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ADVENT SOFTWARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	June 30			December 31
	2010			2009
ASSETS
Current assets:
Cash and cash equivalents	$	42,641		$	57,877
Short-term marketable securities	59,892			31,273
Accounts receivable, net	47,175			44,246
Deferred taxes, current	15,137			15,081
Prepaid expenses and other	19,773			22,350
Current assets of discontinued operation	—			494
Total current assets	184,618			171,321
Property and equipment, net	38,925			33,945
Goodwill	143,344			144,827
Other intangibles, net	22,644			22,965
Long-term marketable securities	—			28,495
Deferred taxes, long-term	40,504			40,502
Other assets	9,490			10,142
Noncurrent assets of discontinued operation	2,095			2,095
Total assets	$	441,620		$	454,292
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	8,832		$	4,708
Accrued liabilities	26,136			31,066
Deferred revenues	139,520			140,186
Income taxes payable	5,541			1,616
Current liabilities of discontinued operation	207			719
Total current liabilities	180,236			178,295
Deferred revenue, long-term	5,857			5,879
Other long-term liabilities	14,281			12,969
Noncurrent liabilities of discontinued operation	5,177			5,115
Total liabilities	205,551			202,258
Commitments and contingencies (See Note 12)
Stockholders’ equity:
Common stock	255			259
Additional paid-in capital	390,749			386,623
Accumulated deficit	(160,946		)	(145,584		)
Accumulated other comprehensive income	6,011			10,736
Total stockholders’ equity	236,069			252,034
Total liabilities and stockholders’ equity	$	441,620		$	454,292

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

3

ADVENT SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended June 30					Six Months Ended June 30
	2010			2009		2010			2009
Net revenues:
Term license, maintenance and other recurring	$	60,233		$	54,763	$	119,084		$	111,070
Perpetual license fees	2,739			2,578		5,041			5,263
Professional services and other	6,300			5,727		11,835			13,060
Total net revenues	69,272			63,068		135,960			129,393
Cost of revenues:
Term license, maintenance and other recurring	12,730			11,464		25,157			22,809
Perpetual license fees	65			78		138			190
Professional services and other	6,309			7,507		12,893			15,562
Amortization of developed technology	1,683			1,324		3,199			2,729
Total cost of revenues	20,787			20,373		41,387			41,290
Gross margin	48,485			42,695		94,573			88,103
Operating expenses:
Sales and marketing	17,048			15,132		33,908			30,911
Product development	13,107			11,230		25,168			23,349
General and administrative	9,872			8,657		19,423			17,296
Amortization of other intangibles	331			438		646			877
Restructuring charges	555			12		584			56
Total operating expenses	40,913			35,469		79,729			72,489
Income from continuing operations	7,572			7,226		14,844			15,614
Interest and other income (expense), net	(229		)	2,151		(935		)	1,779
Income from continuing operations before income taxes	7,343			9,377		13,909			17,393
Provision for income taxes	2,496			2,218		4,819			4,871
Net income from continuing operations	$	4,847		$	7,159	$	9,090		$	12,522
Discontinued operation:
Net income (loss) from discontinued operation (net of applicable taxes of $(17), $592, $(50) and $1,186, respectively)	(27		)	863		(75		)	1,729
Net income	$	4,820		$	8,022	$	9,015		$	14,251
Basic net income (loss) per share:
Continuing operations	$	0.19		$	0.28	$	0.35		$	0.50
Discontinued operation	(0.00		)	0.03		(0.00		)	0.07
Total operations	$	0.19		$	0.32	$	0.35		$	0.56
Diluted net income (loss) per share:
Continuing operations	$	0.18		$	0.27	$	0.34		$	0.48
Discontinued operation	(0.00		)	0.03		(0.00		)	0.07
Total operations	$	0.18		$	0.31	$	0.33		$	0.55
Weighted average shares used to compute net income per share:
Basic	25,700			25,288		25,785			25,265
Diluted	27,053			26,140		27,105			26,053

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

4

ADVENT SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30
	2010			2009
Cash flows from operating activities:
Net income	$	9,015		$	14,251
Adjustment to net income for discontinued operation	75			(1,729		)
Net income from continuing operations	9,090			12,522
Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:
Stock-based compensation	8,828			8,778
Depreciation and amortization	8,819			8,237
Loss on dispositions of fixed assets	20			40
Provision for doubtful accounts	65			219
Provision for (reduction of) sales returns	(624		)	797
Gain on investment	—			(2,056		)
Deferred income taxes	(60		)	(11		)
Other	358			178
Effect of statement of operations adjustments	17,406			16,182
Changes in operating assets and liabilities:
Accounts receivable	(2,711		)	4,733
Prepaid and other assets	3,246			3,436
Accounts payable	4,092			(1,713		)
Accrued liabilities	(4,382		)	(2,244		)
Deferred revenues	(329		)	(5,136		)
Income taxes payable	3,899			4,043
Effect of changes in operating assets and liabilities	3,815			3,119
Net cash provided by operating activities from continuing operations	30,311			31,823
Cash flows from investing activities:
Cash used in acquisitions, net of cash acquired	(4,719		)	—
Purchases of property and equipment	(9,952		)	(1,278		)
Capitalized software development costs	(1,407		)	(1,238		)
Purchases of marketable securities	(3,000		)	—
Sales and maturities of marketable securities	3,000			—
Proceeds from sale of investments	—			2,056
Net cash used in investing activities from continuing operations	(16,078		)	(460		)
Cash flows from financing activities:
Proceeds from common stock issued from exercises of stock options	5,506			2,383
Withholding taxes related to equity award net share settlement	(3,163		)	(1,792		)
Proceeds from common stock issued under the employee stock purchase plan	2,929			2,946
Repurchase of common stock	(34,399		)	(14,578		)
Repayment of long-term borrowing	—			(25,000		)
Net cash used in financing activities from continuing operations	(29,127		)	(36,041		)
Net cash transferred (to) from discontinued operation	(31		)	4,817
Effect of exchange rate changes on cash and cash equivalents	(311		)	122
Net change in cash and cash equivalents from continuing operations	(15,236		)	261
Cash and cash equivalents of continuing operations at beginning of period	57,877			45,098
Cash and cash equivalents of continuing operations at end of period	$	42,641		$	45,359

	Six Months Ended June 30
	2010			2009
Supplemental disclosure of cash flow information
Cash flow from discontinued operation:
Net cash (used in) provided by operating activities	$	(296	)	$	3,831
Net cash provided used in investing activities	—			(588		)
Net cash transferred (to) from continuing operations	31			(4,817		)
Effect of exchange rates on cash and cash equivalents	(1		)	(1		)
Net change in cash and cash equivalents from discontinued operations	(266		)	(1,575		)
Cash and cash equivalents of discontinued operation at beginning of period	266			3,253
Cash and cash equivalents of discontinued operation at end of period	$	—		$	1,678

The cash flows from the discontinued operation, as presented in the condensed consolidated statement of cash flows, relate to the operations of MicroEdge.

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

5

ADVENT SOFTWARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Basis of Presentation

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

Advent has prepared these condensed consolidated financial statements 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 accounting principles generally accepted in the United States of America have been omitted in these interim statements pursuant to such SEC rules and regulations. These interim financial statements should be read in conjunction with the audited financial statements and related notes included in Advent’s Annual Report on Form 10-K for the year ended December 31, 2009. Interim results are not necessarily indicative of the results to be expected for the full year, and no representation is made thereto.

These condensed consolidated financial statements include, in the opinion of management, all adjustments necessary to state fairly the financial position and results of continuing operations for each interim period shown. All such adjustments occur in the ordinary course of business and are of a normal, recurring nature.

Note 2—Recent Accounting Pronouncements

With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the six months ended June 30, 2010, as compared to the recent accounting pronouncements described in Advent’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, that are of significance, or potential significance, to the Company.

In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2009-13, Multiple-Deliverable Revenue Arrangements, (amendments to FASB Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition) (“ASU 2009-13”) and ASU 2009-14,  Certain Arrangements That Include Software Elements, (amendments to FASB ASC Topic 985,  Software) (“ASU 2009-14”). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. ASU 2009-14 removes tangible products from the scope of software revenue guidance and provides guidance on determining whether software deliverables in an arrangement that includes a tangible product are covered by the scope of the software revenue guidance. ASU 2009-13 and ASU 2009-14 should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company has not early adopted this guidance and does not expect adoption of ASU 2009-13 or ASU 2009-14 to have a material impact on the Company’s condensed consolidated financial statements.

In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance became effective for entities with a reporting period beginning January 1, 2010, except for the disclosure on the roll forward activities for Level 3 fair value measurements, which will become effective for the reporting period beginning April 1, 2011. The adoption of these changes had no material impact on the Company’s condensed consolidated financial statements.

Note 3 — Cash Equivalents and Marketable Securities

At June 30, 2010, cash equivalents and short-term marketable securities primarily consisted of money market mutual funds, US government and US Government Sponsored Entities (GSE’s) and high credit quality corporate debt securities that are guaranteed by the US government. The Company’s short-term marketable securities are classified as available-for-sale, with long-term investments, if applicable, having a maturity date greater than one year from the end of the period.

6

At June 30, 2010, marketable securities were summarized as follows (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized			Aggregate
	Cost		Gains		Losses			Fair Value
Corporate debt securities	$	23,425	$	8	$	(3	)	$	23,430
US government debt securities	36,442		20		—			36,462
Total	$	59,867	$	28	$	(3	)	$	59,892

The following table summarizes marketable securities with unrealized gains and losses by contractual maturity dates at June 30, 2010 (in thousands):

	Less than 12 months
			Net
	Amortized		Unrealized
	Cost		Gains
Corporate debt securities	$	23,425	$	5
US government debt securities	36,442		20
Total	$	59,867	$	25

Advent regularly reviews its investment portfolio to identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition, credit quality and near-term prospects of the investee, and Advent’s ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

The gross unrealized losses related to investments are primarily due to a decrease in the fair value of debt securities as a result of an increase in interest rates since the acquisition of the securities. For fixed income securities that have unrealized losses as of June 30, 2010,  the Company has determined that (i) it does not have the intent to sell any of these investments and (ii) it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. In addition, the Company has evaluated these fixed income securities and has determined that no credit losses exist. As of June 30, 2010, all securities in an unrealized loss position have been in an unrealized loss position for less than one year. The Company’s management has determined that the unrealized losses on its fixed income securities as of June 30, 2010 were temporary in nature.

During the six months ended June 30, 2010, $3.0 million of marketable securities matured, which did not have any associated gross realized gains or losses, and were reinvested in the purchase of additional marketable securities.

Note 4—Discontinued Operation

During 2009, the Company decided to discontinue its operations in the not-for-profit business community to concentrate on its core investment management business. In connection with this decision, the Company completed the sale of MicroEdge on October 1, 2009 to an affiliate of Vista Equity Partners III, LLC (“Purchaser”). The Company sold net assets in MicroEdge totaling $3.0 million.  The total consideration received by the Company in connection with the divestiture was approximately $30 million in cash, of which $27 million in cash was paid on the closing date. The remaining $3 million of the Purchase Price has been placed in escrow for eighteen (18) months from the date of the close and will be held as security for losses incurred by the Purchaser in the event of certain breaches of the representations and warranties contained in the Agreement or certain other events. Any gain on sale associated with the $3.0 million held in escrow will be recorded when realized. In connection with the sale of MicroEdge, the Company recorded an associated gain of $13.6 million in “net income from discontinued operation, net of applicable taxes” in its fourth quarter of 2009 results.

As part of the disposition, certain assets and obligations of our discontinued operation were excluded from the sale and are reflected on the Company’s balance sheet as of June 30, 2010 and December 31, 2009. Assets excluded from the sale include cash and deferred tax assets.  Liabilities excluded from the sale include sales tax and other tax-related obligations, future payments related to a two year service and maintenance agreement, certain legal costs and employee related compensation payments incurred as of the period ended September 30, 2009, and continuing lease obligations included as part of the restructuring noted below. Legal costs and liabilities related to employee compensation were all paid as of December 31, 2009 and certain sales tax obligations have been paid through June 30, 2010.

7

In connection with the sale of MicroEdge, the Company vacated its MicroEdge facilities in New York and entered into a sub-lease agreement with the Purchaser whereby the Purchaser will sub-lease the premises for two years with the option to extend the sub-lease term through the end of the lease term in 2018.

The following table sets forth an analysis of the components of the restructuring charges related to the Company’s discontinued operation and the payments and non-cash charges made against the accrual during the six months ended June 30, 2010 (in thousands):

	Facility Exit			Severance and
	Costs			Benefits			Total
Balance of restructuring accrual at December 31, 2009	$	5,115		$	—		$	5,115
Restructuring charges	6			—			6
Cash payments	(26		)	(8		)	(34		)
Adjustment of prior restructuring costs	82			8			90
Balance of restructuring accrual at June 30, 2010	$	5,177		$	—		$	5,177

Net revenues and income from the Company’s discontinued operation were as follows for the following periods (in thousands):

	Three Months Ended June 30					Six Months Ended June 30
	2010			2009		2010			2009
Net revenues	$	—		$	6,464	$	—		$	12,925
Net income (loss) from discontinued operation (net of applicable taxes of $(17), $592, $(50), and $1,186, respectively)	$	(27	)	$	863	$	(75	)	$	1,729

The following table sets forth the assets and liabilities of the MicroEdge discontinued operation included in the condensed consolidated balance sheets of the Company (in thousands):

	June 30		December 31
	2010		2009
Assets:
Cash and cash equivalents	$	—	$	266
Prepaid expenses and other	—		228
Total current assets of discontinued operation	$	—	$	494
Deferred taxes, long-term	$	2,095	$	2,095
Total noncurrent assets of discontinued operation	$	2,095	$	2,095
Liabilities:
Accrued liabilities and income taxes payable	$	207	$	719
Total current liabilities of discontinued operation	$	207	$	719
Accrued restructuring, long-term portion	$	5,177	$	5,115
Total noncurrent liabilities of discontinued operation	$	5,177	$	5,115

8

Note 5—Stock-Based Compensation

Equity Award Activity

A summary of the status of the Company’s stock option and stock appreciation right (“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, 2009	3,945		$	29.14
Options & SARs granted	473		$	43.43
Options & SARs exercised	(361	)	$	24.89
Options & SARs canceled	(64	)	$	35.89
Outstanding at June 30, 2010	3,993		$	31.11	6.42	$	63,683
Exercisable at June 30, 2010	2,448		$	26.66	5.08	$	49,982

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the Company’s closing stock price of $46.96 as of June 30, 2010 for options and SARs that were in-the-money as of that date.

The weighted average grant date fair value of options and SARs granted (as determined under ASC 718), total intrinsic value of options and SARs exercised and cash received from option exercises during the six months ended June 30, 2010 and 2009 were as follows (in thousands, except weighted average grant date fair value):

	Six Months Ended June 30
	2010		2009
Options and SARs
Weighted average grant date fair value	$	14.95	$	14.57
Total intrinsic value of awards exercised	$	6,614	$	2,078
Options
Cash received from exercises	$	5,506	$	2,383

The Company settles exercised stock options and SARs with newly issued common shares.

A summary of the status of the Company’s restricted stock unit (“RSU”) activity for the six months ended June 30, 2010 is as follows:

			Weighted
	Number of		Average
	Shares		Grant Date
	(in thousands)		Fair Value
Outstanding and unvested at December 31, 2009	685		$	36.33
RSUs granted	207		$	43.49
RSUs vested	(170	)	$	41.66
RSUs canceled	(17	)	$	36.69
Outstanding and unvested at June 30, 2010	705		$	37.14

The weighted average grant date fair value was determined based on the closing market price of the Company’s common stock on the date of the award. The aggregate intrinsic value of RSUs outstanding at June 30, 2010 was $33.1 million, using the closing price of $46.96 per share as of June 30, 2010.

9

Stock-Based Compensation Expense

Stock-based employee compensation expense recognized on Advent’s condensed consolidated statement of operations for the three and six months ended June 30, 2010 and 2009 was as follows (in thousands):

	Three Months Ended June 30						Six Months Ended June 30
	2010			2009			2010			2009
Statement of operations classification
Cost of term license, maintenance and other recurring revenues	$	428		$	484		$	842		$	836
Cost of professional services and other revenues	262			336			552			631
Total cost of revenues	690			820			1,394			1,467
Sales and marketing	1,418			1,469			2,716			2,615
Product development	1,317			1,274			2,526			2,315
General and administrative	1,118			1,322			2,192			2,381
Total operating expenses	3,853			4,065			7,434			7,311
Total stock-based compensation expense	4,543			4,885			8,828			8,778
Tax effect on stock-based employee compensation	(2,043		)	(1,626		)	(3,969		)	(3,366		)
Effect on net income from continuing operations, net of tax	2,500			3,259			4,859			5,412
Effect on net income from discontinued operation, net of tax	—			136			—			231
Effect on net income, net of tax	$	2,500		$	3,395		$	4,859		$	5,643

Advent capitalized stock-based employee compensation expense of $0 and $0.1 million during the six months ended June 30, 2010 and 2009, respectively, associated with the Company’s software development, internal-use software and professional services implementation projects.

As of June 30, 2010, total unrecognized compensation cost related to unvested awards not yet recognized under all equity compensation plans, adjusted for estimated forfeitures, was $34.0 million and is expected to be recognized through the remaining vesting period of each grant, with a weighted average remaining period of 2.6 years.

Valuation Assumptions

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option valuation model and the straight-line attribution approach with the following assumptions:

	Three Months Ended June 30		Six Months Ended June 30
	2010	2009	2010	2009
Stock Options & SARs
Expected volatility	35.2% - 38.8%	50.7% - 52.0%	35.2% - 38.8%	50.7% - 57.7%
Expected life (in years)	3.86 - 4.96	4.17 - 5.10	3.86 - 4.96	4.17 - 5.47
Risk-free interest rate	1.8% - 2.7%	1.8% - 3.0%	1.8% - 2.7%	1.8% - 3.0%
Expected dividends	None	None	None	None
Employee Stock Purchase Plan
Expected volatility	29.5% - 29.9%	58.3% - 72.8%	29.5% - 29.9%	58.3% - 72.8%
Expected life (in months)	6	6	6	6
Risk-free interest rate	0.2%	0.3% - 0.4%	0.2%	0.3% - 0.4%
Expected dividends	None	None	None	None

The expected stock price volatility was determined based on an equally weighted average of historical and implied volatility of the Company’s common stock. Advent determined that a blend of implied volatility and historical volatility is more reflective of the market conditions and a better indicator of expected volatility than using purely historical volatility. The expected life was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. The risk-free interest rate is based on the US Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The dividend yield assumption is based on the Company’s history of not paying dividends and the resultant future expectation of dividend payouts.

10

Note 6—Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income by the sum of weighted average number of common shares outstanding and the potential number of dilutive common shares outstanding during the period, excluding the effect of any anti-dilutive securities. Potential common shares consist of the shares issuable upon the exercise of stock options and SARs, the vesting of restricted stock awards and from withholdings associated with the Company’s employee stock purchase plan. Potential common shares are reflected in diluted earnings per share by application of the treasury stock method, which in the current period includes consideration of unamortized stock-based compensation and windfall tax benefits.

The following table sets forth the computation of basic and diluted net income (loss) per share for continuing operations and the Company’s discontinued operation (in thousands, except per-share data):

	Three Months Ended June 30					Six Months Ended June 30
	2010			2009		2010			2009
Numerator:
Net income (loss):
Continuing operations	$	4,847		$	7,159	$	9,090		$	12,522
Discontinued operation	(27		)	863		(75		)	1,729
Total operations	$	4,820		$	8,022	$	9,015		$	14,251
Denominator:
Denominator for basic net income per share-weighted average shares outstanding	25,700			25,288		25,785			25,265
Dilutive common equivalent shares:
Employee stock options and other	1,353			852		1,320			788
Denominator for diluted net income (loss) per share-weighted average shares outstanding, assuming exercise of potential dilutive common shares	27,053			26,140		27,105			26,053
Net income (loss) per share:
Basic:
Continuing operations	$	0.19		$	0.28	$	0.35		$	0.50
Discontinued operation	(0.00		)	0.03		(0.00		)	0.07
Total operations	$	0.19		$	0.32	$	0.35		$	0.56
Diluted:
Continuing operations	$	0.18		$	0.27	$	0.34		$	0.48
Discontinued operation	(0.00		)	0.03		(0.00		)	0.07
Total operations	$	0.18		$	0.31	$	0.33		$	0.55

Weighted average stock options, SARs and RSUs of approximately 0.9 million and 1.3 million for the three and six months ended June 30, 2010, respectively, were excluded from the calculation of diluted net income (loss) per share because their inclusion would have been anti-dilutive. Similarly, weighted average stock options, SARs and RSUs of approximately 2.4 million and 2.6 million for the three and six months ended June 30, 2009, respectively, were excluded from the calculation of diluted net income per share.

11

Note 7—Goodwill

The changes in the carrying value of goodwill for the six months ended June 30, 2010 were as follows (in thousands):

	Goodwill
Balance at December 31, 2009	$	144,827
Additions	3,175
Translation adjustments	(4,658		)
Balance at June 30, 2010	$	143,344

Additions to goodwill of $3.2 million relate to the acquisition of Goya AS. In March 2010, the Company’s wholly-owned Norwegian subsidiary, Advent Norway AS, acquired the entire share capital of Goya AS, a Norwegian software company that provides transfer agency-related solutions to mutual fund managers and mutual fund distributors. Cash consideration of $4.7 million, net of cash acquired, was paid upon closing in March 2010.

Foreign currency translation adjustments totaling $4.7 million reflect the general strengthening of the US dollar versus European currencies during the six months ended June 30, 2010.

Note 8—Other Intangibles

The following is a summary of other intangibles as of June 30, 2010 (in thousands):

	Weighted
	Average
	Amortization	Other					Other
	Period	Intangibles,		Accumulated			Intangibles,
	(Years)	Gross		Amortization			Net
Purchased technologies	5.0	$	28,006	$	(17,053	)	$	10,953
Product development costs	3.0	12,942		(7,978		)	4,964
Developed technology sub-total		40,948		(25,031		)	15,917
Customer relationships	6.0	27,548		(21,514		)	6,034
Other intangibles	4.1	1,580		(887		)	693
Other intangibles sub-total		29,128		(22,401		)	6,727
Balance at June 30, 2010		$	70,076	$	(47,432	)	$	22,644

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

	Weighted
	Average
	Amortization	Other					Other
	Period	Intangibles,		Accumulated			Intangibles,
	(Years)	Gross		Amortization			Net
Purchased technologies	4.9	$	26,556	$	(15,416	)	$	11,140
Product development costs	3.0	11,468		(6,428		)	5,040
Developed technology sub-total		38,024		(21,844		)	16,180
Customer relationships	6.0	27,038		(21,040		)	5,998
Other intangibles	3.9	1,507		(720		)	787
Other intangibles sub-total		28,545		(21,760		)	6,785
Balance at December 31, 2009		$	66,569	$	(43,604	)	$	22,965

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The changes in the carrying value of other intangibles during the six months ended June 30, 2010 were as follows (in thousands):

	Other						Other
	Intangibles,			Accumulated			Intangibles,
	Gross			Amortization			Net
Balance at December 31, 2009	$	66,569		$	(43,604	)	$	22,965
Additions	3,699			—			3,699
Amortization	—			(3,845		)	(3,845		)
Translation adjustments	(192		)	17			(175		)
Balance at June 30, 2010	$	70,076		$	(47,432	)	$	22,644

Additions to intangible assets of $3.7 million during the six months ended June 30, 2010 include intangible asset additions of $2.2 million from the acquisition of Goya AS and capitalized product development costs of approximately $1.5 million.

Based on the carrying amount of intangible assets as of June 30, 2010, the estimated future amortization is as follows (in thousands):

	Six
	Months Ended
	December 31		Years Ended December 31
	2010		2011		2012		2013		2014		Thereafter		Total
Estimated future amortization of:
Developed technology	$	3,148	$	5,266	$	4,379	$	2,592	$	242	$	290	$	15,917
Other intangibles	622		1,163		1,163		1,118		983		1,678		6,727
Total	$	3,770	$	6,429	$	5,542	$	3,710	$	1,225	$	1,968	$	22,644

Note 9—Balance Sheet Detail

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

	June 30		December 31
	2010		2009
Prepaid commission	$	5,008	$	5,483
Prepaid contract expense	5,901		5,815
Prepaid royalty	961		1,138
Tenant improvement allowance	1,957		3,863
Other	5,946		6,051
Total prepaid expenses and other	$	19,773	$	22,350

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

	June 30		December 31
	2010		2009
Long-term investment	$	500	$	500
Long-term prepaid commissions	3,009		3,204
Deposits	2,901		2,821
Prepaid contract expense, long-term	3,080		3,617
Total other assets	$	9,490	$	10,142

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Long-term investment is an equity investment in a privately held company. This equity investment is carried at the lower of cost or fair value at June 30, 2010 and December 31, 2009. Deposits include restricted cash balances of $1.4 million at each of June 30, 2010 and December 31, 2009 related to the Company’s San Francisco headquarters and facilities in Boston and New York.

The following is a summary of accrued liabilities (in thousands):

	June 30		December 31
	2010		2009
Salaries and benefits payable	$	15,327	$	21,273
Accrued restructuring, current portion	738		518
Other	10,071		9,275
Total accrued liabilities	$	26,136	$	31,066

Accrued restructuring charges are discussed further in Note 11, “Restructuring Charges”. Other accrued liabilities include accruals for royalties, sales and business taxes, acquisition related costs, and other miscellaneous items.

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

	June 30		December 31
	2010		2009
Deferred rent	$	11,252	$	10,595
Accrued restructuring, long-term portion	809		716
Other	2,220		1,658
Total other long-term liabilities	$	14,281	$	12,969

Note 10—Comprehensive Income

The components of comprehensive income (loss) were as follows for the periods presented (in thousands):

	Three Months Ended June 30					Six Months Ended June 30
	2010			2009		2010			2009
Net income from continuing operations	$	4,847		$	7,159	$	9,090		$	12,522
Unrealized gain on marketable securities, net of taxes	19			—		79			—
Foreign currency translation adjustment	(2,281		)	3,319		(4,804		)	1,552
Comprehensive income from continuing operations	2,585			10,478		4,365			14,074
Comprehensive income (loss) from discontinued operation	(28		)	1,431		(76		)	2,207
Total comprehensive income	$	2,557		$	11,909	$	4,289		$	16,281

The Company recorded taxes of $9,000, and $51,000 during the three and six months ended June 30, 2010, respectively, related to the marketable securities component of other comprehensive income.

The components of accumulated other comprehensive income, net of related taxes, were as follows (in thousands):

	June 30		December 31
	2010		2009
Accumulated net unrealized gain (loss) on marketable securities	$	17	$	(62	)
Accumulated foreign currency translation adjustments	5,994		10,798
Accumulated other comprehensive income, net of taxes	$	6,011	$	10,736

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Note 11—Restructuring Charges

Minor restructuring initiatives were implemented in the Company’s Advent Investment Management segment since 2006 to reduce costs and improve operating efficiencies. These initiatives have resulted in restructuring charges comprised primarily of costs related to properties abandoned in connection with facilities consolidation and associated write-down of leasehold improvements. Advent’s restructuring charges included accruals for estimated losses on facility costs based on the Company’s contractual obligations net of estimated sublease income. Advent reassesses this liability periodically based on market conditions.

During the six months ended June 30, 2010, Advent recorded a restructuring charge of $0.6 million which primarily related to facility and exit costs associated with the relocation of its facilities in New York City in the second quarter of 2010. During the six months ended June 30, 2009, the Company recorded a restructuring charge $0.1 million which related to the present value amortization of facility exit obligations partially offset by adjustments to facility exit assumptions.

The following table sets forth an analysis of the components of the payments and restructuring charges made against the accrual during the six months ended June 30, 2010 (in thousands):

	Facility Exit
	Costs
Balance of restructuring accrual at December 31, 2009	$	1,234
Restructuring charges	557
Reversal of deferred rent related to facilities exited	14
Cash payments	(285		)
Adjustment of prior restructuring costs	27
Balance of total restructuring accrual at June 30, 2010	$	1,547

Of the remaining restructuring accrual of $1.5 million at June 30, 2010, $0.7 million and $0.8 million are included in accrued liabilities and other long-term liabilities, respectively, on the accompanying condensed consolidated balance sheet. The remaining excess facility costs of $1.5 million are stated at estimated fair value, net of estimated sublease income of approximately $1.5 million. Advent expects to pay the remaining obligations associated with the vacated facilities over the remaining lease terms, which expire on various dates through 2012.

Note 12—Commitments and Contingencies

Lease Obligations

Advent leases office space and equipment under non-cancelable operating lease agreements, which expire at various dates through June 2025. Some operating leases contain escalation provisions for adjustments in the consumer price index. Advent is responsible for maintenance, insurance, and property taxes. Excluding leases and associated sub-leases for MicroEdge facilities, as of June 30, 2010, Advent’s remaining operating lease commitments through 2025 are approximately $67.4 million, net of future minimum rental receipts of $1.5 million to be received under non-cancelable sub-leases.

In connection with the sale of MicroEdge, the Company entered into a sub-lease agreement with the Purchaser, whereby Purchaser will sub-lease approximately 24,000 square feet of the 29,000 square feet of office space located at 619 West 54th Street in New York, New York from the Company. The Purchaser will sub-lease the premises for two years with the option to extend the sub-lease term through the end of the lease term in 2018. The sub-lease agreement became effective upon the close of sale of MicroEdge on October 1, 2009. The operating lease commitment related to this discontinued operation facility is approximately $8.7 million, less estimated sub-lease income for two years of $1.2 million. With the exception of the MicroEdge facilities in New York City, the leases related to MicroEdge have been transferred to the Purchaser.

Indemnifications

As permitted or required under Delaware law and to the maximum extent allowable under that law, Advent has certain obligations to indemnify its current and former officers and directors for certain events or occurrences while the officer or director is, or was serving, at Advent’s request in such capacity. These indemnification obligations are valid as long as the director or officer acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The maximum potential amount of future payments Advent could be required to make under these indemnification obligations is unlimited; however, Advent has a director and officer insurance policy that mitigates Advent’s exposure and enables Advent to recover a portion of any future amounts paid. The Company believes the estimated fair value of these indemnification obligations is minimal.

15

Legal Contingencies

On March 8, 2005, certain of the former shareholders of Kinexus Corporation and the shareholders’ representative filed suit against Advent in the Delaware Chancery Court. The complaint alleges that Advent breached the Agreement and Plan of Merger dated as of December 31, 2001 pursuant to which Advent acquired all of the outstanding shares of Kinexus due principally to the fact that no amount was paid by Advent on an earn-out of up to $115 million. The earn-out, which was payable in cash or stock at the election of Advent, was based upon Kinexus meeting certain revenue targets in both 2002 and 2003. The complaint seeks unspecified compensatory damages, an accounting and restitution for unjust enrichment. Advent advised the shareholders’ representative in January 2003 that the earn-out terms had not been met in 2002 and accordingly no earn-out was payable for 2002 and would not be payable for 2003. There has been no further activity in this case since additional document discovery and interrogatory answers were provided by the parties in December 2008. Advent disputes the plaintiff’s claim and believes that it has meritorious defenses and intends to vigorously defend this action. Management has not determined that any potential loss associated with this litigation is either probable or reasonably estimable at this time and accordingly has not accrued any amounts for any potential loss.

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

Note 13—Segment Information

Description of Segments

ASC 280, “Segment Reporting” establishes standards for reporting information about operating segments in a company’s financial statements. Advent’s organizational structure is based on a number of factors that the chief operating decision maker (“CODM”) uses to evaluate, view and run its business operations which include, but are not limited to, customer base, homogeneity of products and technology. Advent currently has one operating segment as determined by this organizational structure and information reviewed by Advent’s CODM to evaluate the operating segment results.

Major Customers

No single customer represented 10% or more of Advent’s total net revenues in any period presented.

Note 14—Debt

On February 14, 2007, Advent and certain of its subsidiaries entered into a senior secured $75 million credit facility agreement (the “Credit Facility”) with Wells Fargo Foothill, Inc. (the “Lender”) for a term of three years. As of December 31, 2009, there were no outstanding borrowings under the Credit Facility and the Company was in compliance with all associated covenants.

In February 2010, Advent’s Credit Facility expired in accordance with the terms of the senior secured facility agreement with the Lender. Advent elected not to renew the Credit Facility as the Company determined its existing cash, cash equivalents, short-term and long-term marketable securities, together with cash expected to be generated from operations, would be sufficient to fund its operating activities, anticipated capital expenditures and authorized stock repurchases.

Note 15—Income Taxes

The following table summarizes the activity relating to the Company’s unrecognized tax benefits during the six months ended June 30, 2010 (in thousands):

	Total
Balance at December 31, 2009	$	7,467
Gross increases related to current period tax positions	173
Balance at June 30, 2010	$	7,640

16

At June 30, 2010 and December 31, 2009, Advent had $7.6 million and $7.5 million of gross unrecognized tax benefits, respectively. During the first six months of 2010, Advent increased the amount of unrecognized tax benefits by approximately $170,000 relating to California research and enterprise zone credits. If recognized, the total unrecognized tax benefits would decrease Advent’s tax provision and increase net income $6.3 million. The impact on net income reflects the liabilities for unrecognized tax benefits net of the federal tax benefit of state income tax items. The Company’s liabilities for unrecognized tax benefits relate to federal research credits, California research and enterprise zone tax credits and various state net operating losses.

Advent is subject to taxation in the US and various state and foreign jurisdictions. Advent does not anticipate the total amount of its unrecognized tax benefits to significantly change over the next 12 months. The material jurisdictions that are subject to examination by tax authorities include federal for tax years after 2005 and California for tax years after 2004. During the first half of 2010, New York concluded an income tax audit for tax years up through 2007 and there were no material income tax assessments. Advent is currently undergoing a franchise tax examination by the State of California for the 2006 and 2007 tax years. At the present time, we are not aware of any material adjustments as a result of the audit.

Note 16—Fair Value Measurements

The accounting guidance for fair value measurements establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level Input	Input Definition
Level 1	Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2	Inputs other than quoted prices included within Level 1 that are observable for the asset or liability through corroboration with market data at the measurement date.
Level 3	Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

In general, and where applicable, the Company uses quoted prices in active markets for identical assets or liabilities to determine fair value. The Company applied this valuation technique to measure the fair value of the Company’s Level 1 investments, such as treasury obligation money market mutual funds and US government debt securities. Money market funds consist of cash equivalents with remaining maturities of three months or less at the date of purchase and are composed primarily of US government debt securities and treasury obligation money market mutual funds. Advent’s US government debt securities are securities sponsored by the federal government.

If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then the Company uses quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable either directly or indirectly. We classify our corporate debt securities as having Level 2 inputs. These corporate debt securities are guaranteed by the US government. The valuation techniques used to measure the fair value of our financial instruments having Level 2 inputs were derived from non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques. Our procedures include controls to ensure that appropriate fair values are recorded such as comparing prices obtained from multiple independent sources.

17

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including available-for-sale securities. The fair value of these certain financial assets was determined using the following inputs as of June 30, 2010 (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)	$	31,744	$	31,744	$	—	$	—
US government debt securities (2)	36,462		36,462		—		—
Corporate debt securities (2)	23,430		—		23,430		—
Total	$	91,636	$	68,206	$	23,430	$	—

(1)    Included in cash and cash equivalents on the Company’s condensed consolidated balance sheet

(2)    Included in short-term marketable securities on the Company’s condensed consolidated balance sheet

There were no material transfers between Level 1 and Level 2 assets during the six months ended June 30, 2010 and the Company does not have any significant assets that utilize unobservable or Level 3 inputs.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value based on the short-term maturities of these instruments.

The Company also has a direct investment in a privately-held company accounted for under the cost method which is not reported in the table of assets measured at fair value above. This investment, which has a carrying value of $0.5 million at June 30, 2010, is periodically assessed for other-than-temporary impairment. If Advent determines that an other-than-temporary impairment has occurred, the Company writes down the investment to its fair value. Advent estimates fair value using a variety of valuation methodologies. Such methodologies include comparing the private company with publicly traded companies in similar lines of business, applying revenue and price/earnings multiples to estimated future operating results for the private company and estimating discounted cash flows for that company.

Note 17—Common Stock Repurchase Program

Advent’s Board has approved common stock repurchase programs authorizing management to repurchase shares of the Company’s common stock. The timing and actual number of shares subject to repurchase are at the discretion of Advent’s management and are contingent on a number of factors, including the price of Advent’s stock, Advent’s cash balances and working capital needs, general business and market conditions, regulatory requirements, and alternative investment opportunities. Repurchased shares are returned to the status of authorized and unissued shares of common stock.

On October 30, 2008, Advent’s Board authorized the repurchase of up to 3.0 million shares of the Company’s common stock. In May 2010, Advent’s Board authorized the repurchase of up to an additional 1.0 million shares of the Company’s common stock. Consistent with prior repurchase programs, there was no expiration date and repurchases could be limited or terminated at any time at the discretion of management.

The following table provides a summary of the quarterly repurchase activity during the six months ended June 30, 2010 under the stock repurchase program approved by the Board in October 2008 and May 2010 (in thousands, except per share data):

	Total			Average
	Number			Price
	of Shares			Paid
	Purchased	Cost		Per Share
Q1 2010	249	$	10,542	$	42.41
Q2 2010	555	23,857		43.02
Total	804	$	34,399	$	42.83

At June 30, 2010, there remained approximately 1.2 million shares authorized by the Board for repurchase.

18

Note 18—Subsequent Events

From July 1, 2010 through August 6, 2010, the Company repurchased approximately 32,000 shares of stock, under the repurchase program that was approved by the Board of Directors in October 2008, at an average price of $45.89.

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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

You should read the following discussion in conjunction with our consolidated financial statements and related notes. The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended, including, but not limited to statements referencing our expectations relating to future revenues, expenses and operating margins. Forward-looking statements can be identified by the use of terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or other similar terms and the negative of such terms regarding beliefs, plans, expectations or intentions regarding the future. Forward-looking statements include, among others, statements regarding the future of the investment management market and opportunities for us related thereto, future expansion, acquisition, divestment of or investment in other businesses, and the impact of our divestment of MicroEdge, projections of revenues, future cost and expense levels, expected timing and amount of amortization expenses related to past acquisitions, the adequacy of resources to meet future cash requirements, estimates or predictions of actions by customers, suppliers, competitors or regulatory authorities, future client wins, future hiring and future product introductions and acceptance. Such forward-looking statements are based on our current plans and expectations and involve known and unknown risks and uncertainties which may cause our actual results or performance to be materially different from any results or performance expressed or implied by such forward-looking statements. Such factors include, but are not limited to the “Risk Factors” set forth in “Item 1A. Risk Factors” in this Form 10-Q, as well as other risks identified from time to time in other Securities and Exchange Commission (“SEC”) reports. You should not place undue reliance on our forward-looking statements, as they are not guarantees of future results, levels of activity or performance and represent our expectations only as of the date they are made.

We report or otherwise provide to investors certain non-GAAP and operational information, including non-GAAP operating income and earnings per share, and our bookings metrics (expressed as annual contract value, “ACV”) and maintenance renewal rates, that is intended to provide investors with certain of the information that management uses as a basis for planning and forecasting of future periods. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. In addition, undue reliance should not be placed upon non-GAAP or operating information because this information is neither standardized across companies nor subjected to the same control activities and audit procedures that produce our GAAP financial results.

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

Overview

We offer integrated software products and services for automating and integrating data and work flows across the investment management organization, as well as between the investment management organization and external parties. Our products are intended to increase operational efficiency, improve the accuracy of client information and enable better decision-making. Each solution focuses on specific mission-critical functions of the front, middle and back offices of investment management organizations and is designed to meet the needs of the particular client, as determined by size, assets under management and complexity of their investment process. Unless otherwise noted, discussion in this document pertains to our continuing operations.

Current Economic Environment

During the first half of 2010, our business continued to benefit from an improved economic environment which began during the last half of 2009. For example, we grew bookings, revenues and renewal rates during the first six months of 2010 as compared to the comparable period of 2009. We maintain our expectations of an improved demand environment for the remainder of 2010, and are expecting to grow revenues by 7% to 8% in fiscal 2010 compared to the prior year primarily as a result of our recent booking activity from the prior 12 months. We expect that our clients and prospects, who decreased information technology spending as part of their expense reduction measures in 2009, will be able to increase their capital and information technology spending as the economic environment continues to stabilize. As the current economic situation evolves, we will continue to evaluate its impact on our business and we will remain focused on delivering innovative solutions for our customers. We remain positive about our relative market position and we intend to remain focused on executing in the areas we can control by continuing to provide high value products while managing our expenses and headcount growth.

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Operating Overview

Operating highlights of our second quarter of 2010 include:

·New and incremental bookings. The term license and Advent OnDemand contracts signed in the second quarter of 2010 will contribute approximately $6.5 million in annual revenue (“annual contract value” or “ACV”), once they are fully implemented. This represents a 51% increase over the $4.3 million of ACV booked from term license and Advent OnDemand contracts signed in the second quarter of 2009. The increase in ACV reflects bookings strength across all of our geographies, product lines and deployment models. In addition, included in the $6.5 million booked in the second quarter of 2010 is a perpetual license contract that is economically similar to a 5 year term license agreement except that the license is generally irrevocable after the fifth year’s payment of annual license and maintenance fees.

·International traction and expansion.  We continue to execute on our international growth strategy, with revenues from international sources totaling 15% in the second quarter of 2010. Also in the second quarter of 2010, We signed a contract with the biggest banking group in the Middle East in terms of assets.

·Expanding international presence and visibility: We announced the opening of a new office in Singapore and, in May 2010, Advent hosted its EMEA Conference in Vienna, Austria where customers representing 17 countries were in attendance.

·Launch of Geneva 8.0.  We launched the newest version of Geneva, which introduces middle office functionality, out-of-the-box integration to counterparties and data providers, and easy-to-use, customizable access to real-time data. The new features complement Geneva’s existing world-class asset coverage, reporting and accounting functionality of Geneva.

·Launch of Tamale RMS 5.0. We released Tamale RMS 5.0, the next generation of Advent’s leading research management solution. The latest release introduces new configurable templates, dynamic dashboards and views combined with a new framework for seamless data integration that helps firms streamline and optimize their investment processes.

·Build-out of new facilities. During 2009, we signed lease agreements for our future facilities in New York City (the “Grace Building”) and Boston, and commenced the build-out of those facilities during the first quarter of 2010.  During the second quarter of 2010, we completed the build-out of the office space at the Grace Building and moved our New York City operations there to consolidate our facility space.

Acquisition of Goya AS

During the first quarter of 2010, our wholly-owned Norwegian subsidiary, Advent Norway AS, acquired the entire share capital of Goya AS, a Norwegian software company that provides transfer agency-related solutions to mutual fund managers and mutual fund distributors. Cash consideration of $4.7 million, net of cash acquired, was paid upon closing in March 2010.

Term License and Term License Deferral/Recognition

We are substantially through the process of converting the Company’s license revenues from a perpetual license model to a term license model. When a customer purchases a term license together with implementation services, we do not recognize any revenue under the contract until the implementation services are complete and the remaining services are substantially complete. If the implementation services are still in progress as of quarter-end, we will defer all of the contract revenues to a subsequent quarter. At the point professional services are substantially completed, we recognize a pro-rata amount of the term license revenue, professional services fees earned and related expenses, based on the elapsed time from the start of the term license to the substantial completion of professional services. Term license revenue for the remaining contract years and the remaining deferred professional services revenue and related expenses are recognized ratably over the remaining contract length.

20

The term license component of the deferred revenue balance related to implementations in process will increase or decrease in the future depending on the amount of new term license bookings relative to the number of implementations that reach substantial completion in a particular quarter. For the three months ended June 30, 2010 and 2009, the term license deferral/recognition increased (decreased) the Company’s revenues as follows (in millions):

	Three Months Ended June 30
	2010			2009		Change
Term license revenues	$	(1.2	)	$	0.8	$	(2.0	)
Professional services and other	(0.1		)	0.9		(1.0		)
Total net revenues	$	(1.3	)	$	1.7	$	(3.0	)

Amounts of revenues and directly-related expenses deferred as of June 30, 2010 and December 31, 2009 associated with our term licensing deferral was as follows (in millions):

	June 30		December 31
	2010		2009
Deferred revenues
Short-term	$	21.7	$	20.1
Long-term	4.8		4.6
Total	$	26.5	$	24.7
Directly-related expenses
Short-term	$	6.4	$	6.2
Long-term	2.5		2.4
Total	$	8.9	$	8.6

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

Financial Overview

The components of revenue from continuing operations during the second quarters of 2010 and 2009, and associated dollar and percentage fluctuations were as follows (in thousands, except % change):

	Three Months Ended June 30						$			%
	2010			2009			Change			Change
Term license revenues	$	26,201		$	24,540		$	1,661		7	%
Maintenance revenues	18,382			18,747			(365		)	-2	%
Other recurring revenues	15,650			11,476			4,174			36	%
Total term license, maintenance and other recurring revenues	60,233			54,763			5,470			10	%
Recurring revenue as % of total revenue	87		%	87		%
Asset under administration (AUA) fees	1,494			1,359			135			10	%
Other perpetual license fees	1,245			1,219			26			2	%
Total perpetual license fees	2,739			2,578			161			6	%
Professional services and other	6,300			5,727			573			10	%
Total net revenues	$	69,272		$	63,068		$	6,204		10	%

Total net revenues increased $6.2 million or 10% during the second quarter of 2010, which was primarily attributed to an increase in other recurring revenues of $4.2 million as we recognized revenues from outsourced services and data services contracts that went live in September 2009. Additionally, term license revenues increased by $1.7 million or 7% compared to the same period of 2009, mainly as a result of our recent bookings activity from the previous 12 months and growth in sales of our APX products. These increases were partially offset by a decrease of $0.4 million in perpetual maintenance revenues primarily due to perpetual license customers’ migration to term licenses, attrition and downgrade of maintenance levels.

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Perpetual license fees in the second quarter of 2010 increased 6% or $0.2 million compared to the second quarter of 2009 as our clients experienced modest growth in AUA balances. Professional services and other revenues also increased due to greater consulting activity as a result of the continued growth in bookings driving additional implementations during the second quarter of 2010.

Total recurring revenues, which we define as term license, perpetual maintenance, and other recurring revenues, increased by $5.5 million and remained flat at 87% of total net revenues during the second quarter of 2010, as compared to the comparable period in 2009. The increase in absolute dollars was driven by the increases other recurring revenues and, to a lesser extent, term license revenues.

The components of cost of revenues and operating expenses, operating income, interest and other income (expense) net, provision for income taxes and net income from continuing operations during the second quarters of 2010 and 2009, and associated dollar and percentage fluctuations, were as follows (in thousands, except % change):

	Three Months Ended June 30					$			%
	2010			2009		Change			Change
Cost of revenues:
Term license, maintenance and other recurring	$	12,730		$	11,464	$	1,266		11	%
Perpetual license fees	65			78		(13		)	-17	%
Professional services and other	6,309			7,507		(1,198		)	-16	%
Amortization of developed technology	1,683			1,324		359			27	%
Total cost of revenues	20,787			20,373		414			2	%
Operating expenses
Sales and marketing expense	17,048			15,132		1,916			13	%
Product development	13,107			11,230		1,877			17	%
General and administrative	9,872			8,657		1,215			14	%
Amortization of other intangibles	331			438		(107		)	-24	%
Restructuring charges	555			12		543			4525	%
Total operating expenses	40,913			35,469		5,444			15	%
Income from continuing operations	7,572			7,226		346			5	%
Interest and other income (expense), net	(229		)	2,151		(2,380		)	-111	%
Income from continuing operations before income taxes	7,343			9,377		(2,034		)	-22	%
Provision for income taxes	2,496			2,218		278			13	%
Net income from continuing operations	$	4,847		$	7,159	$	(2,312	)	-32	%

Total expenses from continuing operations, including cost of revenues, increased to $61.7 million in the second quarter of 2010 from $55.8 million in the second quarter of 2009 principally due to increased operating expenses. Our operating expenses increased in the second quarter of 2010 from the same period in 2009 largely as a result of increased payroll, variable compensation and benefit expenses resulting from a small increase in headcount to expand internationally, and increased facilities costs related to new offices in Beijing, New York and Boston. During 2009, we signed lease agreements for our future facilities in New York and Boston and commenced the build-out of those facilities during the first quarter of 2010. We continued to occupy our current facilities in New York and Boston through the second quarter of 2010 and incurred rent and utilities expense in both our current and future facilities during the second quarter.

As we completed the build-out of the new facility (the “Grace Building”) located in New York City in May 2010, we moved our New York City operations to consolidate our facility space there. As a result of completely exiting one of our former facilities and making it available for sub-lease, we reported restructuring expense for facility and exit costs that will continue to be incurred without economic benefit to us totaling $0.6 million during the second quarter of 2010.

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Our operating income from continuing operations in the second quarter of 2010 increased slightly to $7.6 million or 11% of revenue from $7.2 million or 11% of revenue in the second quarter of 2009 which is reflective of both revenue growth and increased operating expenses in the second quarter of 2010 as discussed above.

Interest and other expense was $0.2 million in the second quarter of 2010 compared to income of $2.2 million in the comparable period of 2009. The expense in the second quarter of 2010 primarily represents foreign exchange losses as the US dollar strengthened against the Pound Sterling, Euro and other European currencies. The income in the second quarter of 2009 was primarily due to the final deferred contingent payment of $2.1 million that we received in April 2009 as a result of the sale of our ownership in LatentZero Limited to Fidessa group plc (formerly royalblue group plc) in April 2007.

Our continuing operations’ income tax expense was $2.5 million resulting in a 34% effective tax rate during the second quarter of 2010, compared to $2.2 million or 24%, respectively, in the second quarter of 2009. The increase in the effective tax rate in the second quarter of 2010 compared with the second quarter of 2009 is primarily due to the lapsing of the federal research credit in 2010 and the tax benefit recognized in 2009 on the release of the valuation allowance against capital loss carryforwards as a result of our gain on the sale of LatentZero Limited.

Net income from continuing operations was $4.8 million, resulting in diluted earnings per share of $0.18 for the second quarter of 2010, compared to $7.2 million or $0.27 in the second quarter of 2009.

Our continuing operations generated operating cash flow of $17.8 million in the second quarter of 2010, compared to $21.0 million in the second quarter of 2009. During the second quarter of 2010, we repurchased approximately 0.6 million shares under our Board authorized share repurchase program for a total cash outlay of $23.9 million and an average price of $43.02 per share.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements and related notes, which have been prepared in accordance with accounting principles generally accepted in the United States of America. We review the accounting policies used in reporting our financial results on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities.

On an ongoing basis, we evaluate the process we use to develop estimates. We base our estimates on historical experience and on other information that we believe is reasonable for making judgments at the time the estimates are made. Actual results may differ from our estimates due to actual outcomes being different from those on which we based our assumptions.

We believe the following accounting policies contain the more significant judgments and estimates used in the preparation of our condensed consolidated financial statements.

·Revenue recognition and deferred revenues;

·Income taxes;

·Stock-based compensation;

·Restructuring charges and related accruals;

·Business combinations;

·Disposition;

·Goodwill;

·Impairment of long-lived assets;

·Legal contingencies; and

·Sales returns and accounts receivable allowances

There have been no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2010 as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2009.

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Recent Accounting Pronouncements

With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the six months ended June 30, 2010, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, that are of significance, or potential significance, to the Company.

In October 2009, the Financial Accounting and Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2009-13, Multiple-Deliverable Revenue Arrangements, (amendments to FASB ASC Topic 605, Revenue Recognition ) (“ASU 2009-13”) and ASU 2009-14,  Certain Arrangements That Include Software Elements  (amendments to FASB ASC Topic 985,  Software ) (“ASU 2009-14”). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. ASU 2009-14 removes tangible products from the scope of software revenue guidance and provides guidance on determining whether software deliverables in an arrangement that includes a tangible product are covered by the scope of the software revenue guidance. ASU 2009-13 and ASU 2009-14 should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company has not early adopted this guidance and does not expect adoption of ASU 2009-13 or ASU 2009-14 to have a material impact on our condensed consolidated financial statements.

In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance became effective for us beginning with the reporting period beginning January 1, 2010, except for the disclosure on the roll forward activities for Level 3 fair value measurements, which will become effective for us starting with the reporting period beginning April 1, 2011. The adoption of these changes had no material impact on our condensed consolidated financial statements.

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009

The following table sets forth, for the periods indicated, certain financial information as a percentage of total net revenues. The financial information and the ensuing discussion should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto:

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	Three Months Ended June 30				Six Months Ended June 30
	2010		2009		2010		2009
Net revenues:
Term license, maintenance and other recurring	87	%	87	%	88	%	86	%
Perpetual license fees	4		4		4		4
Professional services and other	9		9		9		10
Total net revenues	100		100		100		100
Cost of revenues:
Term license, maintenance and other recurring	18		18		19		18
Perpetual license fees	*		*		*		*
Professional services and other	9		12		9		12
Amortization of developed technology	2		2		2		2
Total cost of revenues	30		32		30		32
Gross margin	70		68		70		68
Operating expenses:
Sales and marketing	25		24		25		24
Product development	19		18		19		18
General and administrative	14		14		14		13
Amortization of other intangibles	*		1		*		1
Restructuring charges	1		*		*		*
Total operating expenses	59		56		59		56
Income from continuing operations	11		11		11		12
Interest and other income (expense), net	*		3		(1	)	1
Income from continuing operations before income taxes	11		15		10		13
Provision for income taxes	4		4		4		4
Net income from continuing operations	7		11		7		10
Discontinued operation:
Net income (loss) from discontinued operation	*		1		*		1
Net income	7	%	13	%	7	%	11	%

*Less than 1%

NET REVENUES

	Three Months Ended June 30						Six Months Ended June 30
	2010		2009		Change		2010		2009		Change
Total net revenues (in thousands)	$	69,272	$	63,068	$	6,204	$	135,960	$	129,393	$	6,567

Our net revenues are made up of three components: term license, maintenance and other recurring revenue; perpetual license fees; and professional services and other revenue. The revenues from a term license, which includes both software license and maintenance services, are earned under a time based contract. Maintenance revenues are derived from maintenance fees charged for perpetual license arrangements and other recurring revenues are derived from our subscription-based and transaction-based services. Perpetual license revenues are derived from the licensing of software products under a perpetual arrangement and include Assets Under Administration (“AUA”) fees for certain perpetual arrangements. Professional services and other revenues include fees for consulting, fees from training, and project management services and our client conferences. Sales returns, which we generally do not provide to customers, are accounted for as deductions to these three revenue categories based on our historical experience.

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Since fiscal 2007, revenues from recurring sources have grown and conversely revenues from perpetual licenses have decreased as follows:

							YTD
							June
As a percentage of net revenues	2007		2008		2009		2010
Revenues from recurring sources	79	%	80	%	86	%	88	%
Revenues from perpetual license fees	11	%	7	%	4	%	4	%

As we continue to sign term license agreements for new customers, grow our subscription, data management and outsourced services revenues, and our customers renew their perpetual maintenance, we expect our revenue from recurring sources to continue to represent over 85% of our total net revenues.

Total net revenues increased $6.2 million in the second quarter of 2010 compared to the same quarter in 2009.  The year-over-year growth in total net revenues for the second quarter of 2010 was due to higher revenues from recurring sources, primarily term license and other recurring revenues, which reflected $5.5 million or 10% growth in the second quarter of 2010 compared to the same quarter in 2009. The increase in term license and other recurring is primarily due to revenue being recognized from several large data service and outsourcing arrangements where implementation was completed in September 2009 and, to a lesser extent, to increased term license revenue due to growth in sales of our APX products.

Revenues derived from international sales were $10.5 million and $20.0 million for the three and six months ended June 30, 2010, which reflected an increase of $1.8 million and $1.9 million when compared to the comparable periods in 2009. The increase primarily reflects increased demand in international locations over the previous 12 months. We plan to continue expanding our international sales efforts, both in our current markets and elsewhere. The revenues from customers in any single international country did not exceed 10% of total net revenues.

We expect total net revenues from continuing operations to be between $70 million and $72 million in the third quarter of 2010.

Term License, Maintenance and Other Recurring Revenues

(in thousands, except percent of	Three Months Ended June 30									Six Months Ended June 30
total net revenues)	2010			2009			Change			2010			2009			Change
Term license revenues	$	26,201		$	24,540		$	1,661		$	51,100		$	50,573		$	527
Maintenance revenues	18,382			18,747			(365		)	36,859			37,492			(633		)
Other recurring revenues	15,650			11,476			4,174			31,125			23,005			8,120
Total term license, maintenance and other recurring revenues	$	60,233		$	54,763		$	5,470		$	119,084		$	111,070		$	8,014
Percent of total net revenues	87		%	87		%				88		%	86		%

Total recurring revenues, which we define as term license, perpetual maintenance, and other recurring revenues, increased to 87% and 88% of total net revenues during the three and six months ended June 30, 2010, respectively, compared to 87% and 86% in the comparable periods of 2009.

Revenues from term licenses, which include both the software license and maintenance services for term licenses, grew during the three and six months ended June 30, 2010 compared to the comparable periods of 2009. The growth of term license revenues reflects continued market acceptance of our Geneva, APX, Partner, Tamale and Moxy products and the continued layering of incremental ACV sold in the previous 12 months into our term revenue.

These increases were partially offset by the net term license revenue deferral during the three months ended June 30, 2010. For our term licenses, we defer all revenue on new bookings until our implementation services are complete. For the three and six months ended June 30, 2010 and 2009, the term license deferral/recognition increased (decreased) the Company’s term license revenues as follows (in millions):

	Three Months Ended June 30								Six Months Ended June 30
	2010			2009		Change			2010			2009		Change
Term license revenues	$	(1.2	)	$	0.8	$	(2.0	)	$	(1.9	)	$	3.1	$	(5.0	)

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In the first half of 2009, the revenue recognized from completed implementations exceeded the revenue deferred from projects being implemented as several large implementations were completed, resulting in a net recognition of term license revenue of $0.8 million and $3.1 million during the three and six months ended June 30, 2009, respectively. In the first half of 2010, we returned to our prior trend of net term license revenue deferral, as our ACV bookings increased 58% from the first half of 2009, and we deferred net term license revenues of $1.2 million and $1.9 million during the three and six months ended June 30, 2010. Term license revenues represented 43% of total term license, maintenance and other recurring revenues during the three and six months ended June 30, 2010, as compared to 45% and 46% in the comparable periods of 2009.

Maintenance revenues decreased $0.4 million and $0.6 million during the three and six months ended June 30, 2010, respectively, when compared to the same periods in 2009. The decrease in maintenance revenues was attributable to maintenance de-activations due to customer attrition, customers downgrading maintenance levels, perpetual license customers migrating to term licenses, and continued decrease in new perpetual license customers, partially offset by the impact of price increases.

Other recurring revenues, which primarily include revenues from the provision of software interfaces to download securities information from third party data providers, partial or full business process outsourcing, account aggregation, reconciliation, reference data management, and hosting of hardware and/or software, increased $4.2 million and $8.1 million during the three and six months ended June 30, 2010, respectively when compared to the same periods in 2009. The increase in other recurring revenues is primarily due to growth in revenues from outsourced services, and in data services as several large arrangements went live in September 2009.

Our renewal rates are based on cash collections and are disclosed one quarter in arrears. We disclose our renewal rates one quarter in arrears in order to include substantially all payments received against the invoices for that quarter. We also update our renewal rates from the initially disclosed rates to include all cash collections subsequent to the initial disclosure. The following summarizes our initial and updated renewal rates (operational metric) for the previous five quarters:

Renewal Rates	Q210		Q110		Q409		Q309		Q209
Based on cash collections relative to prior year collections
Initially Disclosed Rate (1)	90	%	89	%	89	%	87	%	85	%
Updated Disclosed Rate (2)	n/a		92	%	89	%	90	%	88	%

(1)   “Initially Disclosed Rate” is based on cash collections and reported one quarter in arrears

(2)   “Updated Disclosed Rate” reflects initially disclosed rate updated for subsequent cash collections

We expect our revenue from recurring sources to continue to represent over 85% of our total net revenues as we continue to sign term license agreements and, to a lesser extent, Advent OnDemand contracts with new customers.

Perpetual License Fees

(in thousands, except percent of	Three Months Ended June 30								Six Months Ended June 30
total net revenues)	2010			2009			Change		2010			2009			Change
AUA fees	$	1,494		$	1,359		$	135	$	2,763		$	2,853		$	(90	)
Other perpetual license fees	1,245			1,219			26		2,278			2,410			(132		)
Total perpetual license fees	$	2,739		$	2,578		$	161	$	5,041		$	5,263		$	(222	)
Percent of total net revenues	4		%	4		%			4		%	4		%

Total perpetual license fees increased $0.2 million during the three months ended June 30, 2010 as our clients experienced modest growth in AUA balances. Total perpetual license fees decreased $0.2 million during the six months ended June 30, 2010 as we licensed fewer perpetual seats and modules to our existing perpetual client base.

Professional Services and Other Revenues

	Three Months Ended June 30								Six Months Ended June 30
	2010			2009			Change		2010			2009			Change
Professional services and other revenues (in thousands)	$	6,300		$	5,727		$	573	$	11,835		$	13,060		$	(1,225	)
Percent of total net revenues	9		%	9		%			9		%	10		%

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

We defer professional services revenue for services performed on term license implementations that are not considered substantially complete. Service revenue is deferred until the implementation is complete and remaining services are substantially completed. Upon substantial completion, we recognize a pro-rata amount of professional services fees earned based on the elapsed time from the start of the term license to the substantial completion of professional services. The remaining deferred professional services revenue is recognized ratably over the remaining contract length.

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

	Change From			Change From
	2009 to 2010			2009 to 2010
	QTD			YTD
Increased (decreased) consulting services	$	1,197		$	(169	)
Increased (decreased) project management	145			(207		)
Decreased net term license implementation recognition	(1,007		)	(1,167		)
Various other items	238			318
Total change	$	573		$	(1,225	)

The fluctuations in professional services and other revenues during the three and six months ended June 30, 2010 were driven by timing of consulting services. During the second quarter of 2010, we experienced an increase in new service engagements resulting in the revenue increases in consulting services and project management. Additionally, during the three and six months ended June 30, 2010, we recognized less net professional services revenue related to the completion of term license implementations. The impact of our term license implementation recognition on professional services revenues for the three and six months ended June 30, 2010 and 2009 was as follows (in thousands):

	Three Months Ended June 30								Six Months Ended June 30
	2010			2009		Change			2010		2009		Change
Net (deferral) recognition of professional services revenue related to term license implementations	$	(140	)	$	867	$	(1,007	)	$	107	$	1,274	$	(1,167	)

We expect professional services and other revenues in the third quarter of 2010 to include approximately $0.7 million of conference revenue from our annual user conference.

COST OF REVENUES

	Three Months Ended June 30								Six Months Ended June 30
	2010			2009			Change		2010			2009			Change
Total cost of revenues (in thousands)	$	20,787		$	20,373		$	414	$	41,387		$	41,290		$	97
Percent of total net revenues	30		%	32		%			30		%	32		%

Our cost of revenues is made up of four components: cost of term license, maintenance and other recurring; cost of perpetual license fees; cost of professional services and other; and amortization of developed technology. The increase in total cost of revenues in absolute dollars for the three and six months ended June 30, 2010 was due principally to increases in the cost of term license, maintenance and other recurring related to new hires to support our increase in demand for technical support and outsourcing data services and to an increase in amortization of developed technology costs, partially offset by decreased payroll and related costs from our professional services group during the first half of 2010. Cost of revenues as a percent of total net revenues decreased for the three and six months ended June 30, 2010 due to growth in term license, maintenance and other recurring revenues and decreased payroll and related costs from our professional services group during the first half of 2010.

Cost of Term License, Maintenance and Other Recurring

	Three Months Ended June 30								Six Months Ended June 30
	2010			2009			Change		2010			2009			Change
Cost of term license, maintenance and other recurring (in thousands)	$	12,730		$	11,464		$	1,266	$	25,157		$	22,809		$	2,348
Percent of total term license, maintenance and other recurring revenue	21		%	21		%			21		%	21		%

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Cost of term license fees consists primarily of royalties and other fees paid to third 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 packaging materials. Cost of maintenance and other recurring revenues is primarily comprised of the direct costs related to providing and supporting our outsourced services, providing technical support services under maintenance agreements and other services for recurring revenues, and royalties paid to third party subscription-based and transaction-based vendors. We defer revenues and direct costs associated with services performed on term license implementations until the project is reached substantially complete. Indirect costs such as management and other overhead expenses are recognized in the period in which they are incurred.

Cost of term license, maintenance and other recurring fluctuated due to the following (in thousands):

	Change From			Change From
	2009 to 2010			2009 to 2010
	QTD			YTD
Increased payroll and related costs	$	671		$	1,397
Increased allocation-in of facility and infrastructure expenses	175			517
Increased depreciation and amortization	175			332
Increased travel and entertainment	147			364
Decreased royalty	(153		)	(599		)
Various other items	251			337
Total change	$	1,266		$	2,348

The increases in absolute dollars for the three and six months ended June 30, 2010 were due primarily to an increase in compensation and related costs resulting from increases in salary costs and headcount which enables us to deliver the technical support services we provide to our growing number of clients in their day-to-day use of our software. We allocate facility and infrastructure expenses based on headcount and consistent with the increase in departmental headcount, we allocated more of these costs to our term license, maintenance and other recurring departments. The increase in travel and entertainment costs resulted from increased travel associated with providing client support services. This increase was partially offset by decreases to royalty expenses resulting from decreased renewal activity with third party subscription-based and transaction-based vendors.

Cost of Perpetual License Fees

	Three Months Ended June 30									Six Months Ended June 30
	2010			2009			Change			2010			2009			Change
Cost of perpetual license fees (in thousands)	$	65		$	78		$	(13	)	$	138		$	190		$	(52	)
Percent of total perpetual license revenues	2		%	3		%				3		%	4		%

Cost of perpetual license fees consists primarily of royalties and other fees paid to third 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 packaging materials. The decrease in cost of perpetual license fees for the three and six months ended June 30, 2010 compared with the same periods in 2009 resulted primarily from a reduction in royalties and product media costs as we continue to transition away from perpetual licensing.

Cost of Professional Services and Other

	Three Months Ended June 30									Six Months Ended June 30
	2010			2009			Change			2010			2009			Change
Cost of professional services and other (in thousands)	$	6,309		$	7,507		$	(1,198	)	$	12,893		$	15,562		$	(2,669	)
Percent of total professional services and other revenues	100		%	131		%				109		%	119		%

Cost of professional services and other revenue consists primarily of personnel related costs associated with the client services organization in providing consulting, custom report writing and conversions of data from clients’ previous systems. Also included are direct costs associated with third-party consultants and travel expenses. Additionally, we defer direct professional services costs until we have completed the term license implementation services.

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Cost of professional services and other fluctuated due to the following (in thousands):

	Change From			Change From
	2009 to 2010			2009 to 2010
	QTD			YTD
Decreased payroll and related costs	$	(546	)	$	(1,723	)
Increased service cost deferral related to term implementations	(699		)	(848		)
Various other items	47			(98		)
Total change	$	(1,198	)	$	(2,669	)

The decrease in payroll and related costs during the three and six months ended June 30, 2010 reflects the redeployment of consulting employees to other areas of our business during the past year.

We defer direct costs associated with services performed on term license implementations until a project reaches substantial completion. Indirect costs such as management and other overhead expenses are recognized in the period in which they are incurred, with no revenue to offset them. At the point professional services are substantially completed, we recognize a pro-rata amount of the term license revenue, professional services fees earned and related expenses, based on the elapsed time from the start of the term license to the substantial completion of professional services. Term license revenue for the remaining contract years and the remaining deferred professional services revenue and related expenses are recognized ratably over the remaining contract length.

The impact of our term license implementations on the recognition of professional services costs for the three and six months ended June 30, 2010 and 2009 was as follows (in thousands):

	Three Months Ended June 30								Six Months Ended June 30
	2010			2009		Change			2010			2009		Change
Net recognition (deferral) of professional services costs related to term license implementations	$	(258	)	$	441	$	(699	)	$	(202	)	$	646	$	(848	)

Gross margins for professional services and other were (0)%, and (9)% during the three and six months ended June 30, 2010, respectively, compared to (31)% and (19)% in the comparable periods of 2009. The gross margin improvement for the three and six months ended June 30, 2010 was primarily due to the redeployment of consulting employees to other areas of our business as we work more through third party providers, and higher utilization of our current consulting employees.

We expect expense for professional services and other to increase in the third quarter of 2010 compared to the second quarter for 2010, as we will incur approximately $1.5 million of costs associated with our annual user conference.

Amortization of Developed Technology

	Three Months Ended June 30								Six Months Ended June 30
	2010			2009			Change		2010			2009			Change
Amortization of developed techology (in thousands)	$	1,683		$	1,324		$	359	$	3,199		$	2,729		$	470
Percent of total net revenues	2		%	2		%			2		%	2		%

Amortization of developed technology represents amortization of acquisition-related intangibles, and amortization of capitalized software development costs previously capitalized under ASC 985. The increase during the three and six months ended June 30, 2010 resulted from additional amortization from software development costs capitalized during 2009 and 2010, and to a lesser extent, amortization from technology related intangible assets associated with Goya AS which we acquired in March 2010, partially offset by decreased amortization from other developed technology assets that were fully amortized during 2009.

OPERATING EXPENSES

Sales and Marketing

	Three Months Ended June 30								Six Months Ended June 30
	2010			2009			Change		2010			2009			Change
Sales and marketing (in thousands)	$	17,048		$	15,132		$	1,916	$	33,908		$	30,911		$	2,997
Percent of total net revenues	25		%	24		%			25		%	24		%

Sales and marketing expenses consist primarily of the costs of personnel involved in the sales and marketing process, sales commissions, advertising and promotional materials, sales facilities expense, trade shows, and seminars.

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Sales and marketing expense fluctuated due to the following (in thousands):

	Change From		Change From
	2009 to 2010		2009 to 2010
	QTD		YTD
Increased payroll and related costs	$	610	$	1,143
Increased travel and entertainment	522		765
Increased marketing	376		475
Increased allocation-in of facility and infrastructure expenses	280		645
Various other items	128		(31		)
Total change	$	1,916	$	2,997

The increase in expense in absolute dollars and as a percentage of revenue for the three and six months ended June 30, 2010 reflects the growth of our sales and marketing efforts in 2010. The increase in payroll related costs and allocation-in of facility and infrastructure expenses was due principally to headcount growth to 199 at June 30, 2010 from 180 at June 30, 2009, as we continue to expand our sales and marketing efforts internationally. In the second quarter of 2010, we held our EMEA client conference and opened an office in Singapore. The costs associated with these events, which did not occur in 2009, contributed to the increases in travel and entertainment, and marketing costs during the three and six months ended June 30, 2010.

In the third quarter of 2010, we expect sales and marketing expenses to increase in dollar amount but remain relatively flat as a percentage of total net revenues, as we increase our marketing activities in support of planned product launches.

Product Development

	Three Months Ended June 30								Six Months Ended June 30
	2010			2009			Change		2010			2009			Change
Product development (in thousands)	$	13,107		$	11,230		$	1,877	$	25,168		$	23,349		$	1,819
Percent of total net revenues	19		%	18		%			19		%	18		%

Product development expenses consist primarily of salary and benefits for our development staff as well as contractors’ fees and other costs associated with the enhancements of existing products and services and development of new products and services.

Product development expenses fluctuated due to the following (in thousands):

	Change From			Change From
	2009 to 2010			2009 to 2010
	QTD			YTD
Decreased (increased) capitalization of product development	$	1,095		$	(169	)
Increased payroll and related costs	756			1,585
Increased allocation-in of facility and infrastructure expenses	297			734
Decreased outside services	(313		)	(538		)
Various other items	42			207
Total change	$	1,877		$	1,819

The increase in total product development expenses for the three months ended June 30, 2010 was primarily due to a decrease in the capitalization of our product development costs.  The fluctuations in the capitalization of our product development costs in the first half of 2010 were primarily attributable to timing of product releases as we capitalized $1.3 million of costs primarily associated with Geneva 7.7 and to a lesser extent Revenue Center 3.0, in the second quarter of 2009 as compared to $1.2 million of costs associated with Geneva 8.0 during the first quarter of 2010. The increases in payroll and related costs, and allocation-in of facility and infrastructure expenses resulted from headcount additions to help continue the enhancement of our existing product suite including new versions of Geneva, APX, Moxy, Advent Rules Manager, Advent Revenue Center, Partner and Tamale RMS, and to a lesser extent, headcount additions in our China office which was opened in September 2010 and in Norway where we acquired additional personnel from our acquisition of Goya AS in March 2010. These increases in expense were partially offset by the decrease in outside service costs which resulted from the conversion of third party contractors in China to employees during the fourth quarter of 2009.

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General and Administrative

	Three Months Ended June 30								Six Months Ended June 30
	2010			2009			Change		2010			2009			Change
General and administrative (in thousands)	$	9,872		$	8,657		$	1,215	$	19,423		$	17,296		$	2,127
Percent of total net revenues	14		%	14		%			14		%	13		%

General and administrative expenses consist primarily of personnel costs for information technology, finance, administration, human resources, operations and general management, as well as legal and accounting expenses.

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

	Change From			Change From
	2009 to 2010			2009 to 2010
	QTD			YTD
Increased facilities	$	805		$	1,707
Increased payroll and related costs	586			799
Increased travel and entertainment	230			389
Increased (decreased) computers and telecom	(192		)	235
Increased allocation-out of facility and infrastructure expenses	(367		)	(1,197		)
Various other items	153			194
Total change	$	1,215		$	2,127

The increase in total general and administrative expenses in absolute dollars during the three and six months ended June 30, 2010 is primarily due to the increases in facilities costs related to our new facilities in New York and Boston and, to a lesser extent, our new office in Beijing which we opened during the fourth quarter of 2009. During 2009, we signed lease agreements for our future facilities in New York City and Boston and commenced the build-out of those facilities during the first half of 2010. We will be incurring rent expense at both our current and future facilities in New York City and Boston until we vacate our current facilities. We incurred additional rent expense of $0.6 million and $1.2 million resulting from the new facilities during the three and six months ended June 30, 2010, respectively.

Payroll and other related costs increased during the three and six months ended June 30, 2010 as a result of higher salary expense due to annual merit increases, higher bonus costs and lower capitalization of payroll costs associated with our internally developed software projects which qualify for capitalization. The increase in travel and entertainment costs during the three and six months ended June 30, 2010 is primarily due to higher travel-related activity by our general and administrative personnel associated with the growth of our business and international expansion. The decrease in computer and telecom expense during the three months ended June 30, 2010 resulted from less computer supply expense while the increase during the six months ended June 30, 2010 primarily reflects higher communications costs associated with our international expansion. These cost increases were partially offset by less expense due to the allocation-out of corporate expenses to other departments. Corporate expenses, such as facility and information costs, are initially recognized in our general and administrative department and then allocated out to other departments based on headcount. As headcount in our other departments grew at a higher rate during the past year than our general and administrative department, we allocated-out more facility and information technology costs resulting in less general and administrative expense during the first half of 2010.

We anticipate facility expense to decrease slightly in the third quarter of 2010 as we consolidated into our new facilities in New York City in May 2010 and expect to consolidate into our new Boston facility in August 2010.

Amortization of Other Intangibles

	Three Months Ended June 30									Six Months Ended June 30
	2010			2009			Change			2010			2009			Change
Amortization of other intangibles (in thousands)	$	331		$	438		$	(107	)	$	646		$	877		$	(231	)
Percent of total net revenues	0		%	1		%				0		%	1		%

Amortization of other intangibles represents amortization of non-technology related intangible assets. The decrease during 2010 is a result of an asset from a prior acquisition becoming fully amortized during 2009, partially offset by increased amortization from intangible assets associated with Goya AS, which we acquired in March 2010.

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Restructuring Charges

	Three Months Ended June 30								Six Months Ended June 30
	2010			2009			Change		2010			2009			Change
Restructuring charges (in thousands)	$	555		$	12		$	543	$	584		$	56		$	528
Percent of total net revenues	1		%	0		%			0		%	0		%

During the six months ended June 30, 2010, we recorded a restructuring charge of $0.6 million which primarily related to facility and exit costs associated with the relocation and consolidation of our facilities in New York City in the second quarter of 2010. During the six months ended June 30, 2009, we recorded a restructuring charge $0.1 million which related to the present value amortization of facility exit obligations partially offset by adjustments to facility exit assumptions.

For additional analysis of the components of the payments and charges made against the restructuring accrual during the first half of 2010, see Note 11, “Restructuring Charges” to our condensed consolidated financial statements.

Interest and Other Income (Expense), Net

	Three Months Ended June 30									Six Months Ended June 30
	2010			2009			Change			2010			2009			Change
Interest and other income (expense), net (in thousands)	$	(229	)	$	2,151		$	(2,380	)	$	(935	)	$	1,779		$	(2,714	)
Percent of total net revenues	0		%	3		%				-1		%	1		%

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

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

	Change From			Change From
	2009 to 2010			2009 to 2010
	QTD			YTD
Decreased gain on sale of private equity investments	$	(2,056	)	$	(2,058	)
Increased foreign exchange loss	(442		)	(934		)
Decreased interest expense	104			261
Increased interest income	3			29
Various other items	11			(12		)
Total change	$	(2,380	)	$	(2,714	)

In April 2009, the Company received the final deferred contingent payment of $2.1 million as a result of the Company’s sale of its ownership in LatentZero Limited (“LatentZero”) to Fidessa group plc (formerly royalblue group plc) in April 2007. Total payments received by Advent from the sale of its LatentZero ownership were $15.4 million.

Foreign exchange losses increased during the three and six months ended June 30, 2010 as the US dollar strengthened against the Pound Sterling, Euro and other foreign currencies compared to the same period in 2009.

The decrease of interest expense during the first half of 2010 resulted from zero debt outstanding during the six months ended June 30, 2010, compared to a debt balance of $15 million to $25 million during the first half of 2009. In February 2010, Advent’s Credit Facility expired in accordance with the terms of the senior secured facility agreement with the Lender and Advent elected not to renew the Credit Facility.

The increase in interest income during the six months ended June 30, 2010 reflects a higher cash and investment balance during the first half of 2010 compared to the same period in 2009.

Provision for Income Taxes

	Three Months Ended June 30								Six Months Ended June 30
	2010			2009			Change		2010			2009			Change
Provision for income taxes (in thousands)	$	2,496		$	2,218		$	278	$	4,819		$	4,871		$	(52	)
Effective tax rate	34		%	24		%			35		%	28		%

The increase in the effective tax rate during the first half of 2010 compared to the first half of 2009 primarily reflects the impact of the suspension of a federal research credit during fiscal 2010 and the tax benefit recognized in 2009 on the release of the valuation

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allowance against capital loss carryforwards as a result of our gain on the sale of LatentZero Limited, partially offset by an increase in the benefit recognized for employee disqualified dispositions of incentive stock options.

We currently expect an annual effective tax rate for 2010 between 35% and 40%. The expected effective tax rate excludes benefit from the federal research credit which lapsed in 2009.

Discontinued Operation

	Three Months Ended June 30								Six Months Ended June 30
(in thousands)	2010			2009		Change			2010			2009		Change
Net revenues	$	—		$	6,464	$	(6,464	)	$	—		$	12,925	$	(12,925	)
Income (loss) from operation of discontinued operation (net of applicable taxes of $(17), $592, $(30), and $1,186, respectively)	(27		)	863		(890		)	(45		)	1,729		(1,774		)
Loss on disposal of discontinued operation (net of applicable taxes of $0, $0, $(20), and $0, respectively)	—			—		—			(30		)	—		(30		)
Net income (loss) from discontinued operation	$	(27	)	$	863	$	(890	)	$	(75	)	$	1,729	$	(1,804	)

Net revenues from our discontinued operation, MicroEdge, were $6.5 million and $12.9 million for the three and six months ended June 30, 2009, respectively, and represent perpetual license sales in MicroEdge’s core product, GIFTS.

On October 1, 2009, we completed the sale of MicroEdge and recorded an associated gain of $13.6 million, net of tax, in our fourth quarter of 2009 results. Pursuant to the Agreement and Plan of Merger, the purchase price was subject to certain adjustments for working capital. During the first quarter of 2010, the final working capital adjustment was settled, resulting in a downward adjustment to the gain on sale of MicroEdge of $30,000, net of tax.

LIQUIDITY AND CAPITAL RESOURCES

The following is a summary of our cash, cash equivalents and marketable securities (in thousands):

	June 30		December 31
	2010		2009
Cash and cash equivalents	$	42,641	$	57,877
Short-term and long-term marketable securities	$	59,892	$	59,768

Cash and cash equivalents, and short-term and long-term marketable securities primarily consist of money market mutual funds, US government and US Government Sponsored Entities (GSE’s) and high credit quality corporate debt securities. Cash and cash equivalents are comprised of highly liquid investments purchased with an original or remaining maturity of 90 days or less at the date of purchase. Our short-term and long-term marketable securities are classified as available-for-sale, with long-term investments having a maturity date greater than one year from the end of the period.

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

	Six Months Ended June 30
	2010			2009
Net cash provided by operating activities from continuing operations	$	30,311		$	31,823
Net cash used in investing activities from continuing operations	$	(16,078	)	$	(460	)
Net cash used in financing activities from continuing operations	$	(29,127	)	$	(36,041	)
Net cash (used in) provided by operating activities from discontinued operation	$	(296	)	$	3,831
Net cash used in investing activities from discontinued operation	$	—		$	(588	)

Cash Flows from Operating Activities for Continuing Operations

Our cash flows from operating activities represent the most significant source of funding for our operations. The major uses of our operating cash include funding payroll (salaries, commissions, bonuses and benefits), general operating expenses (marketing, travel,

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computer and telecommunications, legal and professional expenses, and office rent) and cost of revenues. Our cash provided by operating activities generally follows the trend in our net revenues and operating results.

Our cash provided by operating activities of $30.3 million during the six months ended June 30, 2010 was primarily the result of our net income and non-cash charges including stock-based compensation and depreciation and amortization. Cash inflows resulting from changes in assets and liabilities included decreases in prepaid and other assets, and increases in accounts payable and income taxes payable. The decrease in prepaid and other assets reflects the payment received on our tenant improvement allowance from our Grace Building landlord. Cash outflows resulting from changes in assets and liabilities included an increase in accounts receivable and decrease in accrued liabilities. Several customer receivables due in the second quarter of 2010 were not collected until July 2010 resulting in the increase in accounts receivable at June 30, 2010 compared to December 31, 2009. The decrease in accrued liabilities reflected cash payments of fiscal 2009 liabilities including year-end bonuses, commissions, and payroll taxes.

Our cash provided by operating activities from continuing operations of $31.8 million during the six months ended June 30, 2009 was primarily the result of our net income and non-cash charges including stock-based compensation and depreciation and amortization, partially offset by a gain from our equity investment activity. Cash flows resulting from changes in assets and liabilities included decreases in accounts receivable, deferred revenue, accounts payable and accrued liabilities. Days’ sales outstanding were 62 and 60 days during the first and second quarters of 2009. The decrease in deferred revenue reflected the recognition of revenue as several term license implementation projects reached substantial completion during the first and second quarters of 2009 and lower level of bookings. The decreases in accounts payable and accrued liabilities reflected cash payments of fiscal 2008 year-end liabilities including year-end bonuses, commissions, and payroll taxes.

We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors including fluctuations in our net revenues and operating results, new bookings that increase deferred revenues, collection of accounts receivable, and timing of payments.

Cash Flows from Investing Activities for Continuing Operations

Net cash used in investing activities from continuing operations of $16.1 million for the six months ended June 30, 2010 reflects net cash used of $4.7 million related to the acquisition of Goya AS, purchases of marketable securities of $3.0 million, expenditures of $1.4 million for internal use software development costs and capital expenditures of $10.0 million primarily related to the build-out of our new facilities in New York and Boston and, to a lesser extent, computer and software equipment purchases. These expenditures were partially offset by proceeds received from the maturity of short-term marketable securities of $3.0 million.

Net cash used in investing activities of $0.5 million for the six months ended June 30, 2009 reflects capital expenditures of $1.3 million primarily related to internal use software and capitalized software development costs of $1.2 million, partially offset by the receipt of $2.1 million for the final deferred contingent consideration from the sale of our ownership interest in LatentZero.

Cash Flows from Financing Activities for Continuing Operations

Net cash used in financing activities from continuing operations for the six months ending June 30, 2010 of $29.1 million reflects the repurchase of 0.8 million shares of our common stock for $34.4 million and payments totaling $3.2 million to satisfy withholding taxes on equity awards that are net share settled.  These financing cash outflows were partially offset by cash received from the exercise of employee stock options of $5.5 million and proceeds from the issuance of common stock under the employee stock purchase plan of $2.9 million.

Net cash used in financing activities of $36.0 million for the six months ended June 30, 2009 reflected the repayment of $25.0 million on our credit facility, repurchase of 0.7 million shares of our common stock for $14.6 million, and payments totaling $1.8 million to satisfy withholding taxes on equity awards that are net share settled. These financing cash outflows were partially offset by cash received from the exercise of employee stock options of $2.4 million and proceeds from the issuance of common stock under the employee stock purchase plan of $2.9 million.

Cash Flows from Operating Activities for Discontinued Operation

Our cash used in operating activities from discontinued operation of $0.3 million during the six months ended June 30, 2010 was primarily the result of its net loss. Cash flows resulting from changes in assets and liabilities included decreases in prepaid and other assets and accrued liabilities. The decrease in accrued liabilities primarily reflects cash payments of sales taxes. Other changes in assets and liabilities include a decrease in income taxes payable.

Our cash provided by operating activities from discontinued operation of $3.8 million during the six months ended June 30, 2009 was primarily the result of our net income and non-cash charges including stock-based compensation and depreciation and amortization. Cash flows resulting from changes in assets and liabilities included decreases in accounts receivable and deferred

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revenues. The decrease in accounts receivable primarily reflected collections during the first half of 2009 of invoices billed in our previous fourth quarter. The decrease in deferred revenue reflected the recognition of revenue and lower level of bookings during the six months ended June 30, 2009. Other changes in liabilities included a decrease in accrued liabilities and an increase in income taxes payable.

Cash Flows from Investing Activities for Discontinued Operation

Net cash used in investing activities from discontinued operation of $0.6 million for the six months ending June 30, 2009 reflects capital expenditures of $0.5 million primarily related to the capitalization of costs associated with internal use software and capitalized software development costs of approximately $0.1 million.

Working Capital

At June 30, 2010, we had working capital of $4.6 million, compared to negative working capital of $(6.7) million at December 31, 2009. The increase in our working capital at June 30, 2010 is primarily due to the generation of operating cash flow of $30.3 million, and the shift of $28.5 million of marketable securities from long-term to short-term as they will mature by March 31, 2011, partially offset by common stock repurchases of $34.4 million, capital expenditures of $10.0 million, and cash paid to acquire Goya AS of $4.7 million. Our negative working capital at the end of fiscal 2009 was due to our historical common stock repurchases and our deferred revenue balance. Excluding deferred revenues and deferred taxes, we had working capital of $129.0 million at June 30, 2010, compared to $118.4 million at December 31, 2009.

Credit Facility and Expiration

In February 2007, Advent and certain of our domestic subsidiaries entered into a senior secured credit facility agreement (the “Credit Facility”) with Wells Fargo Foothill, Inc. (the “Lender”). Under the Credit Facility, the Lender provided the Company with a revolving line of credit up to an aggregate amount of $75 million, subject to a borrowing base formula, to provide backup liquidity for general corporate purposes, including stock repurchases, or investment opportunities for a period of three years. As of December 31, 2009, there was no outstanding balance under the Credit Facility and the Company was in compliance with all associated covenants.

In the past, we had utilized the Credit Facility to facilitate the timing of stock repurchases. In February 2010, the Credit Facility expired and we elected not to renew the Credit Facility due to the limited expected use of the Credit Facility. We believe our existing cash, cash equivalents, short-term and long-term marketable securities, together with cash expected to be generated from operations, will be sufficient to fund our operating activities, anticipated capital expenditures and authorized stock repurchases. Although the expiration of the Credit Facility may restrict our liquidity, we believe the costs associated with the Credit Facility would exceed the anticipated benefit of the additional liquidity. For example, our interest expense and other fees related to the Credit Facility was approximately $2 million during the three-year term of the Credit Facility.

Common Stock Repurchases

On October 30, 2008, our Board authorized the repurchase of up to 3.0 million shares of the Company’s common stock. In May 2010, Advent’s Board authorized the repurchase of up to an additional 1.0 million shares of the Company’s common stock. During the six months ended June 30, 2010, the Company repurchased 0.8 million shares of its common stock at a cost of $34.4 million. At June 30, 2010, there remained approximately 1.2 million shares authorized by the Board for repurchase.

Off-Balance Sheet Arrangements and Contractual Obligations

The following table summarizes our contractual cash obligations, excluding cash obligations for our MicroEdge discontinued operation, as of June 30, 2010 (in thousands):

	Six
	Months Ended
	December 31		Years Ended December 31
	2010		2011		2012		2013		2014		Thereafter		Total
Operating lease obligations, net of sub-lease income	$	4,132	$	8,288	$	7,123	$	6,420	$	6,716	$	34,757	$	67,436

As of June 30, 2010, MicroEdge had operating lease commitments totaling $8.7 million, less sublease income of $1.2 million, which are not reflected in the above table. On October 1, 2009, we completed the sale of our MicroEdge subsidiary. In connection with the sale of MicroEdge, the Company entered into a sublease agreement with Microedge LLC, whereby Microedge

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LLC will sub-lease approximately 24,000 square feet of office space located at 619 West 54th Street in New York, New York from the Company. Microedge LLC will sub-lease the premises for two years with the option to extend the sub-lease term through the end of the lease term in 2018. The sub-lease agreement became effective upon the close of sale of MicroEdge on October 1, 2009. With the exception of the MicroEdge facilities in New York City, the leases related to MicroEdge have been transferred to the Purchaser.

At June 30, 2010 and December 31, 2009, we had a gross liability of $7.6 million and $7.5 million for uncertain tax positions. Since almost all of this liability relates to reserves against deferred tax assets that we do not expect to utilize in the short term, we cannot estimate the timing of potential future cash settlements and have not included any estimates in the table of contractual cash obligations above. Additionally, our cash payments for income taxes will continue to be nominal over the next few years as we have significant net operating losses, capital losses and tax credit carryforwards to utilize.

At June 30, 2010 and December 31, 2009, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Other Liquidity and Capital Resources Considerations

As noted above, we expect our cash payments for federal income taxes to remain nominal over the next few years as we have significant net operating losses and tax credit carryforwards to utilize against current income taxes. However, our cash payments for federal income taxes could increase as early as fiscal 2012.

Our liquidity and capital resources in any period could be affected by the exercise of outstanding employee stock options and issuance of common stock under our employee stock purchase plan, as cash received from these transactions would increase our liquidity. Conversely, our liquidity is negatively affected by an employee’s vesting of restricted stock units and exercise of stock-settled stock appreciation rights, as cash is used to satisfy withholding taxes on these equity awards which are net share settled. The resulting increase in the number of outstanding shares could also affect our per share results of operations. However, we cannot predict the timing or amount of proceeds from the exercise of these securities, or whether they will be exercised at all.

We expect that for the next year, our operating expenses will continue to constitute a significant use of cash flow. In addition, we may use cash to fund other acquisitions, repurchase additional common stock, or invest in other businesses, when opportunities arise. Based upon the predominance of our revenues from recurring sources, bookings performance and current expectations, we believe that our cash and cash equivalents, and cash generated from operations will be sufficient to satisfy our working capital needs, capital expenditures, investment requirements, stock repurchases and financing activities for the next year.

If we identify opportunities that exceed our current expectation, we may choose to seek additional capital resources through debt or equity financing. However, such financing may not be available at all, particularly in light of the uncertain current economic environment, or if available may not be obtainable on terms favorable to us and could be dilutive.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Since the acquisitions of Advent Denmark, Advent Norway, Advent Sweden, Advent Netherlands, Goya AS and Advent Europe’s remaining distributors in the United Kingdom and Switzerland, and the opening of offices in Hong Kong, China and Singapore, whose service and certain license revenues and capital spending are transacted in local country currencies, we have greater exposure to foreign currency fluctuations. As of June 30, 2010, approximately $40 million of goodwill and intangible assets are denominated in foreign currency. Therefore, a hypothetical change of 10% could increase or decrease our assets and equity by approximately $4 million. Additionally, as of June 30, 2010, approximately $4 million of monetary assets and liabilities are denominated in foreign currency. Therefore, a hypothetical change of 10% would cause the revaluation of these amounts resulting in a gain or loss of approximately $0.4 million on our consolidated results of operations. We do not currently hedge these foreign currency exposures.

We maintain an investment portfolio of various holdings, types, and maturities. Our interest rate risk relates primarily to our investment portfolio, which consisted of $102.5 million in cash and cash equivalents and short-term marketable securities as of June 30, 2010. Our short-term securities are generally classified as available-for-sale and, consequently, are recorded on our consolidated balance sheet at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income.

Fluctuations in interest rates have a direct impact on the fair value of our investment portfolio. As interest rates increase, the fair value of our investment portfolio decreases, and conversely, as interest rates decrease, the fair value of our investment portfolio increases. We do not currently hedge these interest rate exposures.

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The following table presents hypothetical changes in fair value of our short-term securities of $59.9 million at June 30, 2010. For June 30, 2010, the market changes reflect an immediate hypothetical parallel shifts in the yield curve of plus or minus 25 basis points (“BPS”), 50 BPS and 100 BPS. For balances at June 30, 2010 the hypothetical fair values are as follows (in millions, except percentages):

	Decrease in Interest Rates									Increase in Interest Rates
	-100 Basis Points			-50 Basis Points			-25 Basis Points			25 Basis Points			50 Basis Points			100 Basis Points
Total Fair Value	$	60.2		$	60.0		$	60.0		$	59.8		$	59.8		$	59.6
% Change in Fair Value	0.44		%	0.22		%	0.11		%	-0.11		%	-0.22		%	-0.44		%

We have also invested in several privately-held companies. These non-marketable investments are classified as other assets on our consolidated balance sheets. Our investments in privately-held companies could be affected by an adverse movement in the financial markets for publicly-traded equity securities, although the impact cannot be directly quantified. These investments are inherently risky as the market for the technologies or products these privately-held companies have under development are typically in the early stages and may never materialize. It is our policy to review investments in privately held companies on a regular basis to evaluate the carrying amount and economic viability of these companies. This policy includes, 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 based on information that we request from these privately held companies. This information is not subject to the same disclosure regulations as US publicly traded companies, and as such, the basis for these evaluations is subject to timing and the accuracy of the data received from these companies.

Our investments in privately held companies are assessed for impairment when a review of the investee’s operations indicates that a decline in value of the investment is other-than-temporary. Such indicators include, but are not limited to, limited capital resources, limited prospects of receiving additional financing, and prospects for liquidity of the related securities. Impaired investments in privately held companies are written down to estimated fair value. We estimate fair value using a variety of valuation methodologies. Such methodologies include comparing the private company with publicly traded companies in similar lines of business, applying revenue and price/earnings multiples to estimated future operating results for the private company and estimating discounted cash flows for that company. We could lose our entire investment in these companies. At June 30, 2010 and December 31, 2009, our net investment in a privately-held company totaled $0.5 million.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures.

The Company’s management evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures, as such term is defined under Rule 13a-15(f) of the Securities and Exchange Act of 1934, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded our disclosure controls and procedures were effective as of June 30, 2010 to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) is accumulated and communicated to Advent’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting.

There were no changes in our internal control over financial reporting which were identified in connection with the evaluation required by Rule 13a-15(e) of the Exchange Act that occurred during the second quarter ended June 30, 2010 that has materially affected, or is reasonably likely to materially affect, Advent’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

On March 8, 2005, certain of the former shareholders of Kinexus Corporation and the shareholders’ representative filed suit against Advent in the Delaware Chancery Court. The complaint alleges that Advent breached the Agreement and Plan of Merger dated as of December 31, 2001 pursuant to which Advent acquired all of the outstanding shares of Kinexus due principally to the fact that no amount was paid by Advent on an earn-out of up to $115 million. The earn-out, which was payable in cash or stock at the election of Advent, was based upon Kinexus meeting certain revenue targets in both 2002 and 2003. The complaint seeks unspecified compensatory damages, an accounting and restitution for unjust enrichment. Advent advised the shareholders’ representative in January 2003 that the earn-out terms had not been met in 2002 and accordingly no earn-out was payable for 2002 and would not be payable for 2003. There has been no further activity in this case since additional document discovery and interrogatory answers were provided by the parties in December 2008. Advent disputes the plaintiffs’ claim and believes that it has

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meritorious defenses and intends to vigorously defend this action. Management believes that any potential loss associated with this litigation is neither probable nor reasonably estimable at this time and accordingly has not accrued any amounts for any potential loss.

From time to time, we are involved in claims and legal proceedings that arise in the ordinary course of business. Based on currently available information, management does not believe that the ultimate outcome of these unresolved matters, individually or in the aggregate, is likely to have a material adverse effect on the Company’s financial position or results of operations. However, litigation is subject to inherent uncertainties and our view of these matters may change in the future. Were an unfavorable outcome to occur, there exists the possibility of a material adverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods.

Item 1A. Risk Factors

Investors should carefully consider the risks described below before making an investment decision. The trading price of our common stock could decline due to any of, but are not limited to, these risks. In assessing these risks, investors should also refer to the other information contained or incorporated by reference in this Quarterly Report on Form 10-Q filed with the SEC, including our condensed consolidated financial statements and related notes thereto and our Annual Report on Form 10-K for the year ended December 31, 2009.

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

Total recurring revenues represented 88%, 86% and 80% of total net revenues during the first half of 2010, fiscal 2009 and 2008, respectively. We expect to continue to derive a significant portion of our revenue from our clients’ renewal of term license, perpetual maintenance and other recurring contracts and such renewals are critical to our future success. Some factors that may affect the renewal rate of our contracts include:

·The impact of the current economic environment and market volatility on our clients and prospects;

·The impact of customers consolidating or going out of business;

·The price, performance and functionality of our solutions;

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

·The effectiveness of our maintenance and support services; and

·Our ability to develop complementary products and services.

Most of our perpetual license customers have historically renewed their annual maintenance although our customers have no obligation to renew such maintenance after the first year of their license agreements. In addition, our customers may select maintenance levels less advantageous to us upon renewal, which may reduce recurring revenue from these customers. The recent market downturn caused, and may in the future cause, some clients not to renew their maintenance or reduce their level of maintenance, which would affect our renewal rates and revenue. Our renewal rates are based on cash collections and are disclosed one quarter in arrears. Our reported renewal rates for our quarterly periods of 2009 and first quarter of 2010 were below the levels we disclosed for our quarterly periods of 2008. The decrease in renewal rates reflects increases in the number of customers who have gone out of business or reduced maintenance expenditures, as well as from slower payments received from renewal clients.

We only have limited experience with renewals of our term license contracts. During the third quarter of 2007, we commenced renewing term license contracts signed in the third quarter of 2004.  These were the first three-year term license contracts to be renewed by Advent since our transition to a term pricing model began. Our customers have no obligation to renew their term license contracts and given the small number of contracts subject to renewal that were renewed in the second half of 2007 through 2009, we cannot yet conclude whether customers will renew at a rate consistent with our perpetual maintenance customers. Additionally, we cannot predict whether the renewals will be less advantageous to us than the original term contract. For example, the renewal periods for our term license contracts are typically shorter than our original term license contract and customers may request a reduction in the number of users or products licensed, resulting in a lower annual term license fee.  Further, customers may elect to not renew their term license contracts at all. We may incur significantly more costs in securing our term license contract renewals than we incur for our perpetual maintenance renewals. If our term license contract customers renew under terms less favorable to us or choose not to renew their contracts, or if it costs significantly more to secure a renewal for us, our operating results may be harmed.

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

The purchase of our software products often requires prospective customers to provide significant executive-level sponsorship and to make major systems architecture decisions. As a result, we must generally engage in relatively lengthy sales and contracting efforts. Sales transactions may therefore be delayed during the customer decision process because we must provide a significant level of

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education to prospective customers regarding the use and benefit of our products. Our business and prospects are subject to uncertainties in the financial markets that can cause customers to remain cautious about capital and information technology expenditures, particularly as a result of the uncertain economic environment, or to decrease their information technology budgets as an expense reduction measure. The sales cycle associated with the purchase of our solutions is typically between two and twelve months depending upon the size of the client, and is subject to a number of significant risks over which we have little or no control, including broader financial market volatility, adverse economic conditions, customers’ budgeting constraints, internal selection procedures, and changes in customer personnel, among others. Ongoing volatility in the US and global financial markets has further exacerbated this risk.

As a result of a lengthy and unpredictable sales cycle, we have limited ability to forecast the timing and amount of specific perpetual license sales, or term license sales which we report quarterly as annual contract value (ACV). The timing of large individual license sales is especially difficult to forecast, and we may not be successful in closing large license transactions on a timely basis or at all. Customers may postpone their purchases of our existing products or product enhancements in advance of the anticipated introduction of new products or product enhancements by us or our competitors. Accordingly, our level of ACV bookings and perpetual license revenue in any particular period is subject to significant fluctuation. For example, during fiscal 2009, our ACV bookings and perpetual license revenue decreased by 23% and 33%, respectively, compared to fiscal 2008. During the first half of 2010, our perpetual license revenue decreased by 4%, compared to the first half of 2009.

When a customer purchases a term license together with implementation services we do not recognize any revenue under the contract until the implementation services are substantially complete. The timing of large implementations is difficult to forecast. Customers may delay or postpone the timing of their particular projects due to the availability of resources or other customer specific priorities. If we are not able to complete an implementation project for a term license in a quarter, it will cause us to defer all of the proportionate contract revenues to a subsequent quarter. Because our expenses are relatively fixed in the near term, any shortfall from anticipated revenues could result in a significant variation in our operating results from quarter to quarter.

Our current operating results may not be reflective of our future financial performance.

During the first half of 2010, fiscal 2009 and 2008, we recognized 88%, 86% and 80%, respectively, of total net revenues from recurring sources, which we define as revenues from term license, maintenance on perpetual licenses, and other recurring revenue. We generally recognize revenue from these sources ratably over the terms of these agreements, which typically range from one to three years. As a result, almost all of our revenues in any quarter are generated from contracts entered into during previous periods.

Consequently, a significant decline in new business generated in any quarter may not materially affect our results of operations in that quarter but will have an impact on our revenue growth rate in future quarters. Additionally, a decline in renewals of term agreements, maintenance or data and other subscription contracts during a quarter will not be fully reflected in our financial performance in that quarter. For example, because we recognize revenue ratably, the non-renewal of term agreements or maintenance contracts late in a quarter may have very little impact on revenue for that quarter, but will reduce revenue in future quarters. In addition, we may be unable to adjust our costs in response to reduced revenue.

Further, because of the large percentage of revenue from recurring sources in our term license business model, our historical operating results on a generally accepted accounting principles (GAAP) basis will not necessarily be the sole or most relevant factor in predicting our future operating results. Accordingly, we report certain non-GAAP or operational information, including our quarterly bookings metrics (expressed as ACV) and maintenance renewal rates, that is intended to provide investors with certain of the information that management uses as a basis for planning and forecasting of future periods. However, we believe that undue reliance should not be placed upon non-GAAP or operating information because this information is neither standardized across companies nor subjected to the same control activities and audit procedures that produce our GAAP financial results.

The recent market downturn caused, and may in the future cause more clients not to renew their term licenses or perpetual license maintenance. Also, significant declines in market value of our clients affect their AUA or AUM.  Consequently, we may also experience a decline in the ACV of bookings since the pricing of some of our products is based upon our client’s AUA or AUM.  Furthermore, we have some contracts for which clients pay us fees based on the greater of a negotiated annual minimum fee or a calculated fee that is determined by the client’s AUA or AUM. If a client previously paid us based on the calculated fee, rather than the annual minimum fee, we would experience a decline in revenue as a result of any decline in those clients’ AUA or AUM.

Uncertain economic and financial market conditions adversely affect our business.

The market for investment management software systems has been and continues to be negatively affected by a number of factors, including reductions in capital expenditures by customers and volatile performance of major financial markets. The market downturn and fluctuations over the last 18 to 24 months, dissolution and acquisitions of our clients and prospects, the decline in Assets Under Administration (AUA) or Assets Under Management (AUM) as a result of significant declines in asset values of our clients and the accompanying market uncertainty affects and will continue to affect both our ability to sell our solutions and the amount of revenue we receive from such sales. The target clients for our products include a range of financial services organizations that manage

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investment portfolios. The success of many of our clients is intrinsically linked to the health of the financial markets. The demand for our solutions has been and continues to be disproportionately affected by fluctuations, disruptions, instability and downturns in the economy and financial services industry, which may cause clients and potential clients to exit the industry or delay, cancel or reduce any planned expenditures for investment management systems and software products. Since the fall of 2008, we have experienced some clients and prospects delaying or cancelling additional license purchases. In addition, some prospects and clients have gone out of business, undergone personnel reductions or turnover, or have been acquired, which we expect to continue should the financial markets face future hardship.

In addition, the failure of existing investment firms or the slowdown in the formation of new investment firms could cause a decline in demand for our solutions. Consolidation of financial services firms and other clients will result in reduced technology expenditures or acquired customers using the acquirer’s own proprietary software and services solutions or the solutions of another vendor.  In some circumstances where both acquisition parties are customers of Advent, the combined entity may require fewer Advent products and services than each individually licensed, thus reducing our revenue. Challenging economic conditions may also cause our customers to experience difficulty with gaining timely access to sufficient credit or our customers may become unable to pay for the products or services they have purchased, which could result in their inability to fulfill or make timely payments to us. If that were to occur, our ability to collect receivables would be negatively affected, and our reserves for doubtful accounts and write-offs of accounts receivable may increase.

We have, in the past, experienced a number of market downturns in the financial services industry and resulting declines in information technology spending, which has caused longer sales and contracting cycles, deferral or delay of information technology projects and generally reduced expenditures for software and related services. The severity of the market downturn and volatility and uncertainty in the financial markets and the financial services sector in the last several years makes it difficult for us to forecast operating results and may result in a material adverse effect on our revenues and results of operations in the longer term.

Our stock price may fluctuate significantly.

Like many other companies, our stock price has been subject to wide fluctuations in recent quarters as a result of market volatility. If net revenues or earnings in any quarter or our financial guidance for future periods fail to meet the investment community’s expectations, our stock price is likely to decline. Even if our revenues or earnings meet or exceed expectations, our stock price is subject to decline in periods of high market volatility because our stock price is affected by trends in the financial services sector and by broader market trends unrelated to our performance. Unfavorable or uncertain economic and market conditions, which can be caused by many factors, including declines in 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 rates or the price of basic commodities; corporate, political or other scandals that reduce investor confidence in capital markets; outbreaks of hostilities or other geopolitical instability; natural disasters or pandemics; or a combination of these or other factors, have adversely affected, and may in the future adversely affect, our business, profitability and stock price.

We operate in a highly competitive industry.

The market for investment management software is competitive and highly fragmented, is subject to rapid change and is sensitive to new product introductions and marketing efforts by industry participants. Our largest single source of competition is from proprietary systems used by existing and potential clients, many of whom develop their own software for their particular needs and therefore may be reluctant to license software products offered by third party vendors such as Advent. We also face significant competition from other providers of software and related services as well as providers of outsourced services. Many of our competitors have longer operating histories and greater financial, technical, sales and marketing resources than we do. In addition, consolidation has occurred among some of the competitors in our markets. Competitors vary in size, scope of services offered and platforms supported. In recent years, many of our competitors have merged with each other or with other larger third parties, and it is possible that even larger companies will emerge through additional acquisitions of companies and technologies. Consolidation among our competitors may result in stronger competitors in our markets and may therefore either result in a loss of market share or harm our results of operations. In addition, we also face competition from potential new entrants into our markets that may develop innovative technologies or business models. Furthermore, competitors may respond to weak market conditions by lowering prices, offering better contractual terms and attempting to lure away our customers and prospects to lower cost solutions. We cannot guarantee that we will be able to compete successfully against current and future competitors or that competitive pressure will not result in price reductions, reduced operating margins or loss of market share, any one of which could seriously harm our business. We must continue to introduce new products and product enhancements.

The market for our products is characterized by rapid technological change, changes in customer demands, evolving industry standards and new regulatory requirements. New products based on recent technologies or new industry standards can render existing products obsolete and unmarketable. As a result, our future success will continue to depend upon our ability to develop new products or product enhancements that address the future needs of our target markets and respond to their changing standards and practices. We continue to release numerous products and product upgrades and we believe our future success depends on continuing such releases.

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Additionally, in October 2008, we acquired Tamale Software which enables us to offer a new product in the nascent research management field and in March 2010, Advent Norway AS acquired Goya AS to allow us to provide transfer agency-related solutions to mutual fund managers and mutual fund distributors. However, it is too early to know whether these products will meet anticipated sales or will be broadly accepted in the market, that a market will develop as expected for these new products or that we will continue to introduce more products.

We may not be successful in developing, introducing, marketing and licensing our new products or product enhancements on a timely and cost effective basis, or at all, and our new products and product enhancements may not adequately meet the requirements of the marketplace or achieve market acceptance. Delays in the commencement of commercial shipments of new products or enhancements or delays in client implementations or migrations may result in client dissatisfaction and delay or loss of product revenues. Additionally, existing clients may be reluctant to go through the process of migrating from our Axys product to our APX product, which may slow the migration of our customer base to APX. In addition, clients may delay purchases in anticipation of new products or product enhancements. Our ability to develop new products and product enhancements is also dependent upon the products of other software vendors, including certain system software vendors, such as Microsoft Corporation, database vendors and development tool vendors. If the products of such vendors have design defects or flaws, are unexpectedly delayed in their introduction, are unavailable on acceptable terms, or the vendors exit the business, our business could be seriously harmed.

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

We derive a majority of our net revenues from the license and maintenance revenues from our Axys, Geneva, APX and Moxy products. In addition, Moxy and many of our applications, such as Partner and various data services, have been designed to provide an integrated solution with Axys, Geneva and APX. As a result, we believe that for the foreseeable future a majority of our net revenues will depend upon continued market acceptance of Axys, Geneva, APX, and Moxy, and upgrades to those products. This is particularly true as a result of our divestiture of our MicroEdge grants management products, which further concentrates our revenue streams.

Our operating results may fluctuate significantly.

Revenues from recurring sources have grown from 80% in 2008, to 86% in 2009 to 88% in the first half of 2010. During the first half of 2010, term license revenues comprised approximately 43% of term license, maintenance and other recurring revenues as compared to approximately 44% and 35% in fiscal 2009 and 2008, respectively. Term license contracts are comprised of both software licenses and maintenance services. Individual perpetual software licenses vary significantly in value, and the value and timing of these transactions can therefore cause our quarterly perpetual license revenues to fluctuate. As we continue to sign term license agreements for new customers, grow our subscription, data management and outsourced services revenues, and our customers renew their perpetual maintenance, we expect our revenue from recurring sources to continue to represent over 85% of our total net revenues.

When a customer purchases a term license together with implementation services, we do not recognize any revenue under the contract until the implementation services are substantially completed and then we recognize revenue ratably over the remaining length of the contract. If the implementation services are still in progress as of quarter-end, we will defer all of the contract revenues to a subsequent quarter. At the point professional services are substantially completed, we recognize a pro-rata amount of the term license revenue, professional services fees earned and related expenses, based on the elapsed time from the start of the term license to the substantial completion of professional services. During 2009, the revenue recognized from completed implementations exceeded the revenue deferred from projects being implemented, resulting in a net recognition of revenue of $6.1 million for fiscal 2009, composed of $3.5 million of term license revenue and $2.6 million of professional services revenue. In future periods, our revenues related to completed implementations may be lower depending on the number of projects that reach substantial completion during the quarter. Term license revenue for the remaining contract years and the remaining deferred professional services revenue and related expenses are recognized ratably over the remaining contract length. The term license component of the deferred revenue balance will increase or decrease in the future depending on the amount of new term license bookings relative to the number of implementations that reach substantial completion in a particular quarter. Although our substantial revenue from  recurring sources under our term license model provides us with longer term stability and more visibility in the short term,  our quarterly net revenues and operating results may still fluctuate significantly depending on these and other factors. Our expense levels are relatively fixed in the short-term. Due to the fixed nature of these expenses, combined with the relatively high gross margin historically achieved on our products, an unanticipated decline in net revenues in any particular quarter may adversely affect our operating results.

In addition, we experience seasonality in our licensing. We believe that this seasonality results primarily from customer budgeting cycles and expect this seasonality to continue in the future.  The fourth quarter of the year typically has more licensing activity.  That can result in term license bookings and perpetual license fee revenue being the highest in the fourth quarter, followed by lower term license bookings and perpetual license revenue in the first quarter of the following year. This seasonality has been, and may be in the future, adversely affected by market downturns we experienced and uncertain economic conditions.  Also, term licenses entered into during a quarter may not result in recognition of associated revenue until later quarters, as we begin recognizing revenue for such licenses when the related implementation services are substantially complete. In addition, we may incur commission and bonus expenses in the period in which we enter into a license, but not recognize the associated revenue until later periods.

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Because of the above factors, we believe that quarter-to-quarter comparisons of our operating results are not necessarily reliable indicators of future performance.

If our relationship with Financial Times/Interactive Data is terminated, our business may be harmed.

Many of our clients use our proprietary interface to electronically retrieve pricing and other data from Financial Times/Interactive Data (“FTID”). FTID pays us a commission based on their revenues from providing this data to our clients. Our software products have been customized to be compatible with their system and our software would need to be redesigned to operate with additional alternative data vendors if FTID’s services were unavailable for any reason. Non-renewal of our current agreement with FTID would require at least two years’ prior notice by either us or them and the agreement may be terminated upon 90 days advance notice for an uncured material breach of the other party. While we have contracts with other data vendors for substantially similar financial data with which our products can be used, if our relationship with FTID was terminated or their services were unavailable to clients for any reason, we cannot be certain that we could enter into contracts with additional alternative data providers, or that these other relationships would provide similar commission rates to us or if the amount of data used by our clients would remain the same, and our operating results could suffer or our resources could be constrained from the costs of redesigning our software.

If our large subscription-based clients or if our revenue sharing relationships are terminated, our business may be harmed.

In recent years, Advent has entered into contracts relating to our subscription, data management revenue streams and outsourced services with contract values that are substantially larger than we have customarily entered into in the past, including our agreement with TIAA-CREF.  It is too early to know whether we will be able to continue to sign large recurring revenue contracts of this nature or if such clients will renew their contracts at similar rates, if at all. Some of these agreements are subject to milestones, acceptance and penalties and there is no assurance that these agreements will be fully implemented.  In addition, we have revenue sharing agreements with other companies that provide revenue to Advent for our clients’ use of those companies’ services and products. Our operating results could be adversely impacted if these agreements are not fully implemented, terminated or not renewed, or if we are unable to continue to generate similar opportunities and enter similar or larger sized contracts in the future.

Our outsourcing and data integration services are subject to risks that may harm our business.

Our clients rely on our outsourcing and data services to meet their operational needs, including account aggregation and reconciliation.  Because our services are complex, we utilize third party data and other vendors, and our clients use our services in a variety of ways, our services may have undetected errors or defects, service disruptions, delays, or incomplete or incorrect data that could result in unanticipated downtime for our customers, failure to meet service levels and service disruptions.  In addition, our security measures could be breached or unauthorized access to our information or our customers’ information could occur.  Such potential errors, defects, delays, disruptions or other performance problems may damage our clients’ business, harm our reputation, result in losing future sales, cause clients to withhold payment or terminate or not renew their agreements with us, and subject us to litigation and other possible liabilities.

We must recruit and retain key employees.

We believe that our future success is dependent on the continued employment of our senior management and our ability to identify, attract, motivate and retain qualified technical, sales and other personnel. Members of our executive management team have acquired specialized knowledge and skills with respect to Advent. We need technical resources such as our product development engineers to develop new products and enhance existing products; we rely upon sales personnel to sell our products and services and maintain healthy business relationships; we must recruit professional service consultants to support our implementations; we must hire client services personnel to provide technical support to our growing installed base of customers; and we must attract and retain financial and accounting personnel to comply with our public company reporting requirements. We need to identify, attract, motivate and retain such employees with the requisite education, backgrounds and industry experience.  However, experienced high quality personnel in the information technology industry continue to be in high demand and competition for their talents remains intense, especially in the San Francisco Bay Area where the majority of our employees are located.

We have relied on our ability to grant equity compensation as one mechanism for recruiting and retaining such highly skilled personnel. In making employment decisions, particularly in the high-technology industries and San Francisco Bay Area, job candidates often consider the value of the equity awards they are to receive in connection with their employment and market downturns may result in our incentives becoming less valuable. Additionally, accounting regulations requiring the expensing of equity compensation impair our ability to provide these incentives without reporting significant compensation costs.

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

We face challenges in expanding our international operations in which we may have limited experience and resources.

We market and sell our products in the United States and, to a growing extent, internationally. From 2001 through 2005, we acquired the subsidiaries of our independent distributor. In addition, we have begun to expand our sales in relatively new jurisdictions for Advent, such as the Middle East, Eastern Europe, and Asia. In 2006, we opened a branch office of Advent Europe Ltd. in the United Arab Emirates, and we established Advent Software (Asia) Ltd. a subsidiary of Advent Software, Inc. in Hong Kong in 2008.  In addition, in the third quarter of 2009, we established a subsidiary of Advent Software (Asia), Ltd. in Beijing, China. More recently in March 2010, our wholly-owned Norwegian subsidiary, Advent Norway AS, acquired the entire share capital of Goya AS, a Norwegian software company that provides transfer agency-related solutions to mutual fund managers and mutual fund distributors.

We cannot be certain that establishing businesses in other countries will produce the desired levels of revenues, such as in the case of our former Greek subsidiary, Advent Hellas, which produced less than satisfactory revenues and profitability before its sale by Advent in 2005. Also, the recent worldwide volatility in financial markets may disrupt our sales efforts in overseas markets. We currently have limited experience in developing localized versions of our products and marketing and distributing our products internationally. In other instances, we may rely on the efforts and abilities of foreign business partners in such markets. For example, we outsourced certain engineering activities to a business partner located in China. Now, Advent has transitioned those contract developers to become employees of Advent as part of our recently opened Beijing office. In addition, international operations are subject to other inherent risks, including:

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

·Adverse changes in foreign currency exchange rates;

·Greater difficulty in accounts receivable collection and longer collection periods;

·Difficulty of enforcement of contractual provisions in local jurisdictions;

·Unexpected changes in foreign laws and regulatory requirements;

·US and foreign trade-protection measures and export and import requirements;

·Difficulties in successfully adapting our products to the language, regulatory and technology standards of other countries;

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

·Difficulties in and costs of staffing and managing foreign operations;

·Reduced protection for intellectual property rights in some countries;

·Foreign tax structures and potentially adverse tax consequences; and

·Political and economic instability.

The revenues, expenses, assets and liabilities of our international subsidiaries are primarily denominated in local foreign currencies. We have not historically undertaken foreign exchange hedging transactions to cover potential foreign currency exposure. Future fluctuations in currency exchange rates may adversely affect revenues and accounts receivable from international sales and the US dollar value of our foreign subsidiaries’ revenues, expenses, assets and liabilities. Our international service revenues and certain license revenues from our European subsidiaries are generally denominated in local foreign currencies.

Difficulties in integrating our acquisitions and expanding into new business areas have impacted and could continue to adversely impact our business and we face risks associated with potential acquisitions, investments, divestitures and expansion.

Periodically we 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 December 2006, we acquired East Circle Solutions, Inc., a developer of investment management billing solutions to integrate their product into our software offerings. More recently in March 2010, our  wholly-owned Norwegian subsidiary, Advent Norway AS, acquired the entire share capital of Goya AS, a Norwegian software company that provides transfer agency-related solutions to mutual fund managers and mutual fund distributors.

The process of integrating our acquisitions has required and will continue to require significant resources, particularly in light of our relative inexperience in integrating acquisitions, potential regulatory requirements and operational demands. In particular, our Tamale acquisition reflects our entry into the research management software market, where we have no prior experience. Integrating these acquisitions in the past has been time-consuming, expensive and disruptive to our business. This integration process has strained

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our managerial resources, resulting in the diversion of these resources from our core business objectives and may do so in the future. Failure to achieve the anticipated benefits of these acquisitions or to successfully integrate the operations of these entities has harmed and could potentially harm our business, results of operations and cash flows in future periods. The assumptions we made in determining the value of, and relative risks, of these acquisitions could be erroneous. For example, in the first quarter of 2003, we closed our Australian subsidiary because it failed to perform at a satisfactory profit level and similarly in the fourth quarter of 2005, we disposed of our Advent Hellas subsidiary because of less than satisfactory profitability. In addition, as we have expanded into new business areas and built new offerings through strategic alliances and internal development, as well as acquisitions, some of this expansion has required significant management time and resources without generating required revenues. We have had difficulty and may continue to have difficulty creating demand for such offerings. Furthermore, we may face other unanticipated costs from our acquisitions, such as disputes involving earn-out and incentive compensation amounts.

We may make additional acquisitions of complementary companies, products or technologies in the future. In addition, we periodically evaluate the performance of all our products and services and may sell or discontinue current products, product lines or services, particularly as we focus on ways to streamline our operations. For example, in October 2009, we divested our MicroEdge subsidiary. Failure to achieve the anticipated benefits of any acquisition or divestiture could harm our business, results of operations and cash flows. Furthermore, we may have to incur debt, write-off investments, infrastructure costs or other assets, incur severance liabilities, write-off impaired goodwill or other intangible assets or issue equity securities to pay for any future acquisitions. Financing may not be available to us on sufficiently advantageous terms, or at all, and we have let our Credit Facility with Wells Fargo Foothill lapse. The issuance of equity securities could dilute our existing stockholders’ ownership. Finally, we may not identify suitable businesses to acquire or negotiate acceptable terms for future acquisitions.

Our investment portfolio may become impaired by deterioration of the capital markets.

Our cash equivalent, short-term and long-term investment portfolio as of June 30, 2010 consisted of US government and commercial debt securities. We follow an established investment policy and set of guidelines to monitor and help mitigate our exposure to interest rate and credit risk. The policy sets forth credit quality standards and limits our exposure to any one issuer, as well as our maximum exposure to various asset classes.

As a result of adverse financial market conditions, investments in some financial instruments may pose risks arising from recent market liquidity and credit concerns. As of June 30, 2010, we had no impairment charges associated with our short-term or long-term investment portfolio relating to such adverse financial market conditions. Although we believe our current investment portfolio has very little risk of material impairment, we cannot predict future market conditions or market liquidity and can provide no assurance that our investment portfolio will remain materially unimpaired. In addition, the decrease in interest rates has materially decreased the interest income we receive on our investments.

If we are unable to protect our intellectual property, we may be subject to increased competition that could seriously harm our business.

Our success depends significantly upon our proprietary technology. We currently rely on a combination of copyright, trademark, patent and trade secret law, as well as confidentiality procedures and contractual provisions to protect our proprietary rights. We have registered trademarks and copyrights for many of our products and services and will continue to evaluate the registration of additional trademarks and copyrights as appropriate. We generally enter into confidentiality agreements with our employees, customers, resellers, vendors and others. We seek to protect our software, documentation and other written materials under trade secret and copyright laws. We also have three issued patents. Despite our efforts, existing intellectual property laws may afford only limited protection. It may be possible for unauthorized third parties to copy certain portions of our products or to reverse engineer or otherwise obtain and use our proprietary information. In addition, we cannot be certain that others will not develop or acquire substantially equivalent or superseding proprietary technology, equivalent or better products will not be marketed in competition with our products, or others may not design around any patent that we have or that may be issued to us or other intellectual property rights of ours, thereby substantially reducing the value of our proprietary rights. We cannot be sure that we will develop proprietary products or technologies that are patentable, that any patent, if issued, would provide us with any competitive advantages or would not be challenged by third parties, or that the patents of others will not adversely affect our ability to do business. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. In addition, the laws of some foreign countries do not protect proprietary rights to as great an extent as do the laws of the United States and so our expansion into international markets may expose our proprietary rights to increased risks. Litigation may be necessary to protect our proprietary technology which may be time-consuming and expensive, with no assurance of success.  As a result, we cannot be sure that our means of protecting our proprietary rights will be adequate.

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If we infringe the intellectual property rights of others, we may incur additional costs or be prevented from selling our products and services.

We cannot be certain that our products or services do not infringe the intellectual property rights of others. As a result, we may be subject to litigation and claims, including claims of misappropriation of trade secrets or infringement of patents, copyrights and other intellectual property rights of third parties that would be time-consuming and costly to resolve and may lead to unfavorable judgments or settlements. If we discovered that our products or services violated the intellectual property rights of third parties, we may have to make substantial changes to our products or services or obtain licenses from such third parties. We might not be able to obtain such licenses on favorable terms or at all, and we may be unable to change our products successfully or in a timely or cost-effective manner. Failure to resolve an infringement matter successfully or in a timely manner would damage our reputation and force us to incur significant costs, including payment of damages, redevelopment costs, diversion of management’s attention and satisfaction of indemnification obligations that we have with our clients, as well as prevent us from selling certain products or services.

Catastrophic events could adversely affect our business.

We are a highly automated business and rely on our network infrastructure and enterprise applications, internal technology systems and our website for our development, marketing, operational, support, and sales activities. A disruption or failure of these systems in the event of major earthquake, fire, telecommunications failure, cyber-attack, terrorist attack, or other catastrophic event could cause system interruptions, reputational harm, delays in our product development and loss of critical data and could affect our ability to sell and deliver products and services and other critical functions of our business. Our corporate headquarters, a significant portion of our research and development activities, our data centers, and certain other critical business operations are located in the San Francisco Bay Area, which is a region of seismic activity. We have developed certain disaster recovery plans and certain backup systems to reduce the potentially adverse effect of such events, but a catastrophic event that results in the destruction or disruption of any of our data centers or our critical business or information technology systems could severely affect our ability to conduct normal business operations and, as a result, our future operating results could be adversely affected. Further, such disruptions could cause further instability in the financial markets or the spending of our clients and prospects upon which we depend. Although we are in the process of creating an enterprise risk management program to attempt to manage some of these risks, it is not currently implemented and, when implemented, may not adequately protect us.

In addition to the recent severe market conditions, other catastrophic events such as abrupt political change, terrorist acts, conflicts or wars may cause damage or disruption to the economy, financial markets and our customers. The potential for future attacks, the national and international responses to attacks or perceived threats to national security and other actual or potential conflicts or wars have created many economic and political uncertainties. Although it is impossible to predict the occurrences or consequences of any such events, they could unsettle the financial markets or result in a decline in information technology spending, which could have a material adverse effect on our revenues.

Undetected errors or failures found in new products and services may result in loss of or delay in market acceptance of our products and services that could seriously harm our business.

Our products and services may contain undetected errors or scalability limitations at any point in their lives, but particularly when first introduced or as new versions are released. For example, during the first half of 2010, we released new versions of Axys, Geneva, APX and Tamale RMS. Despite testing by us and by current and potential customers, errors may not be found in new products and services until after commencement of commercial shipments or use, resulting in a loss of or a delay in market acceptance, damage to our reputation, customer dissatisfaction and reductions in revenues and margins, any of which could seriously harm our business. Additionally, our agreements with customers that attempt to limit our exposure to liability claims may not be enforceable in jurisdictions where we operate, particularly as we expand into new international markets.

Two of our principal stockholders have an influence over our business affairs and may make business decisions with which you disagree and which may adversely affect the value of your investment.

Our Chief Executive Officer and the Chairman of our board of directors own or control, indirectly or directly, a substantial number of shares of our common stock (approximately 8% and 31%, respectively, as of July 31, 2010). As a result, if these parties were to act together, they would have the ability to exert significant influence on matters submitted to our stockholders for approval, such as the election or removal of directors, amendments to our certificate of incorporation or the approval of a business combination. These actions may be taken even if they are opposed by other stockholders or it may be difficult to approve these actions without their consent. This concentration of ownership may also have the effect of delaying or preventing a change of control of our company or discouraging others from making tender offers for our shares, which could prevent our stockholders from receiving a premium for their shares.

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

Most of our customers operate within a highly regulated environment. In light of the recent conditions in the US financial markets and economy, Congress and regulators have increased their focus on the regulation of the financial services industry. The information provided by, or resident in, the software or services we provide to our customers could be deemed relevant to a regulatory

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investigation or other governmental or private legal proceeding involving our customers, which could result in requests for information from us that could be expensive and time consuming for us. In addition, clients subject to investigations or legal proceedings may be adversely impacted possibly leading to their liquidation, bankruptcy, receivership, reductions in AUM or AUA, or diminished operations that would adversely affect our revenues and collection of receivables.

Our customers must comply with governmental, self-regulatory organization and other rules, regulations, directives and standards.  New legislation or changes in such rules, regulations, directives or standards may reduce demand for our services or increase our expenses. We develop, configure and market products and services to assist customers in meeting these requirements. New legislation, or a significant change in rules, regulations, directives or standards, could cause our services to become obsolete, reduce demand for our services or increase our expenses in order to continue providing services to clients.

The recently enacted Dodd-Frank Wall Street Reform and Protection Act of 2010 (“Dodd-Frank Act”) represents a comprehensive overhaul of the financial services industry within the United States, establishes the new federal Bureau of Consumer Financial Protection (the “BCFP”), and will require the BCFP and other federal agencies to implement many new rules. While the general framework of the reforms is set forth in the Dodd-Frank Act, it provides for numerous studies and reports and the adoption and implementation of rules and regulations by regulatory agencies over the next four years to fully clarify and implement the Act’s requirements.

We believe that it is too early to know the precise long-term impact on our business of the increased regulation of financial institutions. While it could lead to increased demand for Advent’s products and services, demand could be negatively impacted by the deferral of purchase decisions by our customers until the new regulations have been adopted and the full impact and expense of the new regulatory environment is more clearly understood. The Dodd-Frank Act contains numerous other provisions affecting financial institutions of all types, many of which may have an impact on our operating environment in substantial and unpredictable ways. Accordingly, it is difficult to predict at this time what specific impact the Dodd-Frank Act and the forthcoming implementing rules and regulations will have on our business and the financial services industry.

Additionally, as a publicly-traded company, we are subject to significant regulations including the Dodd-Frank Act and the Sarbanes-Oxley Act (“the Sarbanes-Oxley Act”) of 2002. There are significant corporate governance and executive compensation-related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas. Our efforts to comply with these requirements could result in an increase of our operating and compliance costs.

The Sarbanes-Oxley Act of 2002 required changes in some of our corporate governance and securities disclosure and/or compliance practices. As part of the Act’s requirements, the SEC enacted new rules on a variety of subjects, and the Nasdaq Stock Market enacted new corporate governance listing requirements. These developments have increased and may in the future increase our accounting and legal compliance costs and could also expose us to additional liability if we fail to comply with these or other new rules and reporting requirements. In fiscal 2009, 2008 and 2007, we incurred approximately $0.5 million, $0.8 million and $0.9 million, respectively, in Sarbanes-Oxley related expenses consisting of external consulting costs. In addition, such developments may make retention and recruitment of qualified persons to serve on our board of directors, or as executive officers, more difficult.

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

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. These principles are subject to interpretation by us, the SEC and various bodies formed to interpret and create accounting principles. A change in these principles or a change in the interpretations of these principles can have a significant effect on our reported results and may even retroactively affect previously reported transactions. Some of our accounting principles that recently have been or may be affected include:

·Software revenue recognition;

·Accounting for stock-based compensation;

·Accounting for income taxes; and

·Accounting for business combinations and related goodwill.

Changes in, or interpretations of, tax rules and regulations may adversely affect our effective tax rates.

We are a US based multinational company subject to tax in multiple US and foreign tax jurisdictions. Unanticipated changes in our tax rates could affect our future results of operations. Our future effective tax rates could be unfavorably affected by changes in, or interpretation of, tax rules and regulations in the jurisdictions in which we do business, by unanticipated decreases in the amount of revenue or earnings in countries with low statutory tax rates, by lapses of the availability of the US research and development tax credit, or by changes in the valuation of our deferred tax assets and liabilities.

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In addition, we could be subject to examination of our income tax returns by the IRS and other domestic and foreign tax authorities. These examinations would be expected to focus on areas where considerable judgment is exercised by the company. We regularly assess the likelihood of outcomes resulting from an examination to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from an examination. We believe such estimates to be reasonable; however, there can be no assurance that the final determination of any of these examinations will not have an adverse effect on our operating results and financial position.

Security risks may harm our business.

Maintaining the security of computers, computer networks, hosted solutions and the transmission of confidential information over public networks is essential to commerce and communications, particularly in the market in which Advent operates. Efforts of others to seek unauthorized access to Advent’s or its clients’ information, computers and networks or introduce viruses, worms and other malicious software programs that disable or impair computers into our systems or those of our customers or other third parties, could disrupt or make our systems and services inaccessible or allow access to proprietary information and data of Advent or its clients.  Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments, could also result in compromises or breaches of our security systems. 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 as possibly requiring us to expend significant capital and other resources to protect against the threat of security breaches or to alleviate problems caused by such breaches.

Potential changes in securities laws and regulations governing the investment industry’s use of soft dollars may reduce our revenues.

Some of our clients utilized trading commissions (“soft dollar arrangements”) to pay for software products and services. During each of fiscal 2009, 2008 and 2007, the total value of Advent products and services paid with soft dollars was approximately 4% of our total billings. Such soft dollar arrangements could be impacted by changes in the regulations governing those arrangements.

In July 2006, the SEC published an Interpretive Release that provides guidance on money managers’ use of client commissions to pay for brokerage and research services under the safe harbor set forth in Section 28(e) of the Securities Exchange Act of 1934. The Interpretive Release clarifies that money managers may use client commissions (“soft dollars”) to pay only for eligible brokerage and research services. Among other matters, the Interpretive Release states that eligible brokerage includes those products and services that relate to the execution of the trade from the point at which the money manager communicates with the broker-dealer for the purpose of transmitting an order for execution, through the point at which funds or securities 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 partly ineligible, the Interpretive Release states that money managers must make a reasonable allocation of client commissions in accordance with the eligible and ineligible uses of the items. Based on this guidance, our customers may change their method of paying all or a portion of certain Advent products or services from soft to hard dollars, and as a result reduce their usage of these products or services in order to avoid increasing expenses, which could cause our revenues to decrease.

If we fail to maintain an effective system of internal control, we may not be able to accurately report our financial results or our filings may not be timely. As a result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our stock.

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

We do not expect that our internal control over financial reporting will prevent all errors or fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Controls can be circumvented by individual acts of some persons, by collusion of two or more people, or by management override of the controls. Over time, controls may become inadequate because changes in conditions or deterioration in the degree of compliance with policies or procedures may occur. 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 in our internal control over financial reporting, or difficulties encountered in the implementation of these improvements in our controls, could cause significant deficiencies or material weaknesses in our internal controls and consequently cause us to fail to meet our reporting obligations. Any failure to implement or maintain required new or improved internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative impact on the trading price of our stock. In addition, during 2009, we moved certain

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compliance functions from external providers to internal resources, and we cannot be certain that these changes will be as effective or will control costs as anticipated.

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

Issuer Purchases of Equity Securities

Our Board of Directors (the “Board”) has approved common stock repurchase programs authorizing management to repurchase shares of the Company’s common stock in the open market. The timing and actual number of shares subject to repurchase are at the discretion of management and are contingent on a number of factors, including the price of our stock, general market conditions and alternative investment opportunities. The purchases are funded from available working capital or debt.

On October 30, 2008, Advent’s Board authorized the repurchase of up to 3.0 million shares of the Company’s outstanding common stock. In May 2010, Advent’s Board authorized the repurchase of up to an additional 1.0 million shares of the Company’s common stock. During the second quarter of 2010, the Company repurchased 0.6 million shares of its common stock under the stock repurchase program approved by the Board in October 2008 for an average price per share of $43.02. At June 30, 2010, there remained approximately 1.2 million shares authorized by the Board for repurchase. The following table provides a month-to-month summary of the repurchase activity under the stock repurchase program approved by the Board in October 2008 and May 2010 during the three months ended June 30, 2010:

				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)
April 2010	65	$	44.61	665
May 2010 (1)	215	$	42.49	1,450
June 2010	275	$	43.07	1,175
Total	555	$	43.02	1,175

(1)In May 2010, Advent’s Board authorized the repurchase of up to an additional 1.0 million shares of the Company’s common stock.

In addition to the repurchases disclosed above, we withheld shares through net share settlements during the three months ended June 30, 2010. The following table provides a month-to-month summary of the purchase activity upon the employee vesting of restricted stock units and the exercise of stock-settled stock appreciation rights under our equity compensation plan to satisfy tax withholding obligations during the three months ended June 30, 2010 (in thousands, except per share data):

	Total			Maximum Number
	Number	Average		of Shares that May
	of Shares	Price Per		Yet Be Purchased
Month	Purchased (1)	Share		Under the Plan
April	17	$	45.70	—
May	37	$	43.53	—
June	5	$	47.03	—
Total	59	$	44.44	—

(1)These purchases represent shares cancelled when surrendered in lieu of cash payments for withholding taxes due from employees. These shares were not purchased as part of a publicly announced program to purchase shares.

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Item 3.Defaults Upon Senior Securities

None.

Item 5.Other Information

None.

Item 6.Exhibits

31.1Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002

31.2Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002

32.1Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002

32.2Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002

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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 6, 2010	By:	/s/ James S. Cox
		James S. Cox
		Senior Vice President and
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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