Advent Software 10-Q 2012 Q1 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 March 31, 2012

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 x  No o

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

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o
(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  o No x

The number of shares of the registrant’s Common Stock outstanding as of April 30, 2012 was 50,661,224.

INDEX

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets
	Condensed Consolidated Statements of Operations
	Condensed Consolidated Statements of Comprehensive Income
	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.	Mine Safety Disclosures
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)

	March 31			December 31
	2012			2011
ASSETS
Current assets:
Cash and cash equivalents	$	70,828		$	65,525
Short-term marketable securities	70,258			69,908
Accounts receivable, net	59,518			62,125
Deferred taxes, current	16,300			16,294
Prepaid expenses and other	26,697			23,660
Total current assets	243,601			237,512
Property and equipment, net	41,482			42,301
Goodwill	206,476			204,621
Other intangibles, net	46,749			49,521
Long-term marketable securities	—			917
Deferred taxes, long-term	30,747			30,751
Other assets	13,986			15,927
Noncurrent assets of discontinued operation	2,006			2,006
Total assets	$	585,047		$	583,556
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	10,993		$	10,558
Accrued liabilities	30,772			40,029
Deferred revenues	166,270			166,945
Income taxes payable	5,225			2,972
Short-term debt	5,000			5,000
Current liabilities of discontinued operation	475			488
Total current liabilities	218,735			225,992
Deferred revenue, long-term	8,068			7,926
Long-term debt	43,750			45,000
Other long-term liabilities	17,147			16,944
Noncurrent liabilities of discontinued operation	4,527			4,633
Total liabilities	292,227			300,495
Stockholders’ equity:
Common stock	509			510
Additional paid-in capital	434,885			429,734
Accumulated deficit	(151,825		)	(154,053		)
Accumulated other comprehensive income	9,251			6,870
Total stockholders’ equity	292,820			283,061
Total liabilities and stockholders’ equity	$	585,047		$	583,556

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 March 31
	2012			2011
Net revenues:
Recurring revenues	$	78,720		$	67,327
Non-recurring revenues	8,184			7,999
Total net revenues	86,904			75,326
Cost of revenues:
Recurring revenues	16,926			14,788
Non-recurring revenues	9,668			7,239
Amortization of developed technology	2,541			1,516
Total cost of revenues	29,135			23,543
Gross margin	57,769			51,783
Operating expenses:
Sales and marketing	18,446			18,184
Product development	16,799			12,642
General and administrative	9,669			9,084
Amortization of other intangibles	956			320
Restructuring charges	104			26
Total operating expenses	45,974			40,256
Income from continuing operations	11,795			11,527
Interest and other income (expense), net	(172		)	31
Income from continuing operations before income taxes	11,623			11,558
Provision for income taxes	4,306			3,654
Net income from continuing operations	$	7,317		$	7,904
Discontinued operation:
Net income (loss) from discontinued operation (net of applicable taxes of $(15) and $1,344, respectively)	(23		)	1,824
Net income	$	7,294		$	9,728
Basic net income (loss) per share:
Continuing operations	$	0.14		$	0.15
Discontinued operation	(0.00		)	0.03
Total operations	$	0.14		$	0.19
Diluted net income (loss) per share:
Continuing operations	$	0.14		$	0.14
Discontinued operation	(0.00		)	0.03
Total operations	$	0.14		$	0.18
Weighted average shares used to compute net income per share:
Basic	51,024			52,201
Diluted	53,363			55,339

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

Net income per share is based on actual calculated values and totals may not sum due to rounding.

4

ADVENT SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended March 31
	2012			2011
Net income	$	7,294		$	9,728
Other comprehensive income, net of taxes
Foreign currency translation	2,386			2,559
Unrealized gain (loss) on marketable securities (net of applicable taxes of $(3) and $3, respectively)	(5		)	6
Total other comprehensive income, net of taxes	2,381			2,565
Total comprehensive income, net of taxes	$	9,675		$	12,293

5

ADVENT SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended March 31
	2012			2011
Cash flows from operating activities:
Net income	$	7,294		$	9,728
Adjustment to net income for discontinued operation	23			(1,824		)
Net income from continuing operations	7,317			7,904
Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:
Stock-based compensation	4,889			4,459
Excess tax benefit from stock-based compensation	(1,493		)	(1,344		)
Depreciation and amortization	6,377			4,417
Amortization of debt issuance costs	95			—
Provision for doubtful accounts	52			71
Provision for (reduction of) sales returns	497			(706		)
Deferred income taxes	(27		)	(72		)
Other	(151		)	38
Effect of statement of operations adjustments	10,239			6,863
Changes in operating assets and liabilities:
Accounts receivable	2,471			509
Prepaid and other assets	(1,264		)	(1,453		)
Accounts payable	434			(670		)
Accrued liabilities	(8,325		)	(5,773		)
Deferred revenues	(1,029		)	961
Income taxes payable	3,746			3,252
Effect of changes in operating assets and liabilities	(3,967		)	(3,174		)
Net cash provided by operating activities from continuing operations	13,589			11,593
Cash flows from investing activities:
Cash used in acquisitions, net of cash acquired	(700		)	(24,648		)
Purchases of property and equipment	(1,951		)	(1,436		)
Capitalized software development costs	(342		)	(1,612		)
Purchases of marketable securities	(33,595		)	(26,140		)
Sales and maturities of marketable securities	34,224			29,408
Net cash used in investing activities from continuing operations	(2,364		)	(24,428		)
Cash flows from financing activities:
Proceeds from common stock issued from exercises of stock options	1,267			3,161
Withholding taxes related to equity award net share settlement	(782		)	(2,608		)
Repayment of loan borrowing	(1,250		)	—
Excess tax benefits from stock-based compensation	1,493			1,344
Repurchase of common stock	(6,788		)	—
Net cash provided by (used in) financing activities from continuing operations	(6,060		)	1,897
Net cash transferred (to) from discontinued operation	(142		)	3,078
Effect of exchange rate changes on cash and cash equivalents	280			213
Net change in cash and cash equivalents from continuing operations	5,303			(7,647		)
Cash and cash equivalents of continuing operations at beginning of period	65,525			81,948
Cash and cash equivalents of continuing operations at end of period	$	70,828		$	74,301
Supplemental disclosure of cash flow information
Cash flow from discontinued operation:
Net cash provided by (used in) operating activities	$	(142	)	$	74
Net cash provided by investing activities	—			3,004
Net cash transferred from (to) continuing operations	142			(3,078		)
Effect of exchange rates on cash and cash equivalents	—			—
Net change in cash and cash equivalents from discontinued operations	—			—
Cash and cash equivalents of discontinued operation at beginning of period	—			—
Cash and cash equivalents of discontinued operation at end of period	$	—		$	—

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.

6

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, 2011. 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 the below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2012, as compared to the recent accounting pronouncements described in Advent’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). ASU 2011-11 requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. Entities are required to disclose both gross and net information about these instruments. ASU 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The adoption of ASU is not expected to have a material impact on the Company’s condensed consolidated financial statements.

In December 2011, the FASB issued ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05 (“ASU 2011-12”), which defers indefinitely the provision within ASU 2011-05 requiring entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the income statement and the statement in which other comprehensive income is presented.  ASU 2011-12 does not change the other provisions instituted within ASU 2011-05.  The Company adopted the provisions of ASU 2011-05 and ASU 2011-12 on January 1, 2012, and the adoption did not have a material impact on the condensed consolidated financial statements.

Note 3—Cash Equivalents and Marketable Securities

At March 31, 2012, cash equivalents and marketable securities primarily consisted of money market mutual funds, US government and US Government Sponsored Entities (GSE’s), foreign government debt securities and high credit quality corporate debt securities. The Company’s marketable securities are classified as available-for-sale, with long-term investments, if applicable, having a maturity date greater than one year from the date of the balance sheet.

7

Marketable securities are summarized as follows (in thousands):

					Gross			Gross
					Unrealized			Unrealized
			Gross		Losses			Losses
	Amortized		Unrealized		Less than			12 Months		Aggregate
Balance at March 31, 2012	Cost		Gains		12 Months			or Longer		Fair Value
Corporate debt securities	$	56,552	$	2	$	(22	)	$	—	$	56,532
US government debt securities	8,661		1		—			—		8,662
Foreign government debt securities	5,066		—		(2		)	—		5,064
Total	$	70,279	$	3	$	(24	)	$	—	$	70,258

					Gross			Gross
					Unrealized			Unrealized
			Gross		Losses			Losses
	Amortized		Unrealized		Less than			12 Months		Aggregate
Balance at December 31, 2011	Cost		Gains		12 Months			or Longer		Fair Value
Corporate debt securities	$	52,606	$	10	$	(11	)	$	—	$	52,605
US government debt securities	11,318		5		—			—		11,323
Foreign government debt securities	6,914		—		(17		)	—		6,897
Total	$	70,838	$	15	$	(28	)	$	—	$	70,825

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 marketable securities are primarily due to a decrease in the fair value of debt securities as a result of an increase in interest rates during the three months ending March 31, 2012. For fixed income securities that have unrealized losses as of March 31, 2012, the Company has determined that (i) it does not have the intent to sell any of these investments prior to maturity 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 a majority of the Company’s portfolio is backed by the federal government. As of March 31, 2012, 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 March 31, 2012 were temporary in nature.

During the first quarter of 2012 and 2011, $34.2 million and $29.4 million, respectively, of marketable securities matured, which did not have any associated material gross realized gains or losses.

Note 4—Derivative Financial Instruments

The Company enters into foreign currency forward contracts with financial institutions to reduce the risk that the Company’s cash flows and earnings will be adversely affected by foreign currency exchange rate fluctuations. These forward contracts are not designated for trading or speculative purposes.

The Company recognizes derivative instruments as either assets or liabilities on the accompanying consolidated balance sheets at fair value based on current market rates. The Company records changes in the fair value (e.g., gains or losses) of the derivatives in “Interest income and other income (expense), net” on the accompanying condensed consolidated statements of operations.

Non-designated Hedges

The Company uses foreign currency forward contracts to hedge a portion of the balances denominated in Euro, Swedish Krona, British Pounds, South African Rand and Norwegian Kroner. These derivative instruments are not designated as hedging instruments. The Company recognizes gains and losses on these contracts, as well as related costs, in “Interest and other income (expense), net” along with the gains and losses of the related hedged items. The Company records the fair value of derivative instruments as either “Prepaid expenses and other” or “Accrued liabilities” on the accompanying condensed consolidated balance sheets based on current market rates.

At March 31, 2012 and December 31, 2011, net derivative assets associated with the forward contracts of approximately $35,000 and $25,000, respectively, were included in “Prepaid expenses and other.” The effect of the derivative financial instruments on the condensed consolidated statements of operations for the three months ended March 31, 2012 and 2011 was to increase (decrease) foreign exchange gains and losses by approximately $19,000 and $(90,000), respectively, which reflects both realized and unrealized gains (losses) related to our derivative financial instruments.

8

As of March 31, 2012, the Company had outstanding forward contracts with a notional value of R2.3 million South African Rand (ZAR), or approximately $303,000.

Note 5 — Acquisitions

Black Diamond Performance Reporting, LLC (“Black Diamond”)

On June 1, 2011, Advent acquired all the outstanding ownership units of Black Diamond, a privately held, Florida-based company which now operates as a wholly owned subsidiary of the Company. Black Diamond provides web-based, outsourced portfolio management and reporting platforms for investment advisors. The total purchase price of $72.4 million, net of cash acquired of $0.2 million, was paid in cash. Of the total purchase price, $7.0 million was placed into escrow until December 2012 to be held as partial security for any losses incurred by the Company in the event of certain breaches of the representation and warranties contained in the acquisition agreement or certain other events. Pro forma results of operations have not been presented because the effect of the acquisition was not material to the Company’s consolidated results of operations.

Purchase Price Allocation

The acquisition was accounted for in accordance with the purchase method of accounting. The total purchase price was allocated to net tangible and intangible assets based on their estimated fair values as of June 1, 2011. The fair value assigned to identifiable intangible assets acquired has been determined primarily by using valuation methods that discount expected future cash flows to present value using estimates and assumptions determined by management. The excess purchase price over the value of the net tangible and identifiable intangible assets was recorded as goodwill, which is fully deductible for income tax purposes.

The allocation of the purchase price and the estimated useful lives associated with certain assets was as follows:

	Estimated	Purchase Price
	Life	Allocation
	(Years)	(in thousands)
Identifiable intangible assets (liabilities):
Developed research and development	5	$	13,200
Customer relationships	7	11,300
Trade name and trademarks	5	1,300
Non-competition agreements	3	1,100
Industry partner agreements	5	500
Goodwill		44,299
Deferred revenues		(230		)
Net tangible assets		975
Purchase price, net of cash acquired		$	72,444

Tangible assets and current liabilities

Black Diamond’s tangible assets and liabilities as of June 1, 2011 were reviewed and adjusted to their fair value as necessary. Current assets are primarily comprised of accounts receivable and prepaids. Non-current assets were primarily comprised of facility deposits and fixed assets. Current liabilities include accrued liabilities, accrued compensation and benefits, sales commissions payable, sales tax payable and deferred revenues. In connection with the acquisition of Black Diamond, Advent assumed Black Diamond’s contractual obligations related to its deferred revenues. Black Diamond’s deferred revenues were derived primarily from set up fees related to the implementation of its web-based services and from contracts where revenue is recognized upon completion of the project. Advent recorded an adjustment to reduce the carrying value of deferred revenues to represent the Company’s estimate of the fair value of the contractual obligations assumed.

9

Syncova Solutions Ltd. (“Syncova”)

On February 28, 2011, Advent acquired all the outstanding shares of Syncova, a privately held, United Kingdom-based company, which now remains as a wholly-owned subsidiary of the Company. Syncova provides margin management and financing software to hedge funds and prime brokers. Syncova’s solutions enable hedge funds and prime brokers to calculate expected margin, reconcile and control differences. Syncova’s product offerings will be a part of Advent’s solution for the alternative and high end asset management markets. The total purchase price of $24.6 million, net of cash acquired of $0.8 million, was paid in cash.  Of the total proceeds, the equivalent of $4.8 million will be held in escrow subject to claims through February 2013. Pro forma results of operations have not been presented because the effect of the acquisition was not material to the Company’s consolidated results of operations.

Purchase Price Allocation

The acquisition was accounted for in accordance with the purchase method of accounting. The total purchase price was allocated to net tangible and intangible assets based on their estimated fair values as of February 28, 2011. The fair value assigned to identifiable intangible assets acquired has been determined primarily by using valuation methods that discount expected future cash flows to present value using estimates and assumptions determined by management. The excess purchase price over the value of the net tangible and identifiable intangible assets was recorded as goodwill, which is fully deductible for income tax purposes.

The allocation of the purchase price and the estimated useful lives associated with certain assets was as follows:

	Estimated	Purchase Price
	Useful Life	Allocation
	(Years)	(in thousands)
Identifiable intangible assets:
Developed research and development	6	$	8,580
In-process research and development	*	1,133
Customer relationships	8	2,104
Non-competition agreements	3	162
Goodwill		15,991
Deferred tax asset		1,128
Deferred tax liability		(2,996		)
Deferred revenues		(2,035		)
Net tangible assets		581
Purchase price, net of cash acquired		$	24,648

*In-process research and development relates to costs attributed to a product version that was released in the fourth quarter of 2011 and is being amortized on a straight-line basis over the useful life of 3 years.

Tangible assets and current liabilities

Syncova’s tangible assets and liabilities as of February 28, 2011 were reviewed and adjusted to their fair value as necessary. Current assets are primarily comprised of accounts receivable and deferred tax assets. Non-current assets were primarily comprised of facility deposits and fixed assets. Current liabilities include accrued liabilities, deferred tax assets and deferred revenues. In connection with the acquisition of Syncova, Advent assumed Syncova’s contractual obligations related to its deferred revenues. Syncova’s deferred revenues were derived primarily from term license arrangements, and service and maintenance related to perpetual licenses. As a result, Advent recorded an adjustment to reduce the carrying value of deferred revenues to represent the Company’s estimate of the fair value of the contractual obligations assumed.

Note 6—Discontinued Operation

During 2009, the Company decided to discontinue the operations of its MicroEdge subsidiary, which provided products and services to 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 $30.0 million in cash, of which $27.0 million in cash was paid on the closing date. The remaining $3.0 million of the Purchase Price was held in escrow and was released to the Company in March 2011, resulting in the Company recording a net gain of $1.7 million in “net income from discontinued operation, net of applicable taxes” in the first quarter of 2011.

10

As part of the disposition, certain assets and obligations of the Company’s discontinued operation were excluded from the sale and are reflected on the Company’s balance sheet as of March 31, 2012 and December 31, 2011. 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, and continuing lease obligations included as part of the restructuring noted below.

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 contracted to 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 was amended during the first quarter of 2011. Under the amended sub-lease agreement, the Purchaser will sub-lease the premises through the end of the lease term, with an option to terminate in September 2013, subject to penalties.

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 first quarter of 2012 (in thousands):

	Facility Exit
	Costs
Balance of restructuring accrual at December 31, 2011	$	5,034
Net restructuring benefit	(3		)
Cash payments	(141		)
Accretion of prior restructuring costs	40
Balance of restructuring accrual at March 31, 2012	$	4,930

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

	Three Months Ended March 31
	2012			2011
Net revenues	$	—		$	—
Income (loss) from operation of discontinued operation (net of applicable taxes of $(15) and $65 respectively)	$	(23	)	$	99
Gain on disposal of discontinued operation (net of applicable taxes of $0 and $1,279, respectively)	—			1,725
Net income (loss) from discontinued operation	$	(23	)	$	1,824

11

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):

	March 31		December 31
	2012		2011
Assets:
Deferred taxes, long-term	$	2,006	$	2,006
Total noncurrent assets of discontinued operation	$	2,006	$	2,006
Liabilities:
Total current liabilities of discontinued operation	$	475	$	488
Accrued restructuring, long-term portion	$	4,527	$	4,633
Total noncurrent liabilities of discontinued operation	$	4,527	$	4,633

Note 7—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, 2011	7,029		$	18.01
Options & SARs granted	57		$	25.60
Options & SARs exercised	(289	)	$	16.63
Options & SARs canceled	(79	)	$	23.05
Outstanding at March 31, 2012	6,718		$	18.08	5.88	$	52,330
Exercisable at March 31, 2012	4,281		$	14.80	4.45	$	46,334

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 $25.60 as of March 31, 2012 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 first quarter of 2012 and 2011 were as follows (in thousands, except weighted average grant date fair value):

	Three Months Ended March 31
	2012		2011
Options and SARs
Weighted average grant date fair value	$	9.62	$	10.14
Total intrinsic value of awards exercised	$	2,928	$	5,892
Options
Cash received from exercises	$	1,267	$	3,161

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

12

A summary of the status of the Company’s restricted stock unit (“RSU”) activity for the three months ended March 31, 2012 is as follows:

			Weighted
	Number of		Average
	Shares		Grant Date
	(in thousands)		Fair Value
Outstanding and unvested at December 31, 2011	1,253		$	16.51
RSUs granted	12		$	25.72
RSUs vested	(20	)	$	22.12
RSUs canceled	(35	)	$	22.47
Outstanding and unvested at March 31, 2012	1,210		$	16.34

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 March 31, 2012 was $31.0 million, using the closing price of $25.60 per share as of March 31, 2012.

Stock-Based Compensation Expense

Stock-based employee compensation expense recognized on Advent’s condensed consolidated statement of operations for the first quarter of 2012 and 2011 was as follows (in thousands):

	Three Months Ended March 31
	2012			2011
Statement of operations classification
Cost of recurring revenues	$	585		$	503
Cost of non-recurring revenues	331			247
Total cost of revenues	916			750
Sales and marketing	1,657			1,500
Product development	1,460			1,175
General and administrative	856			1,034
Total operating expenses	3,973			3,709
Total stock-based compensation expense	4,889			4,459
Tax effect on stock-based employee compensation	(1,788		)	(1,862		)
Effect on net income from continuing operations, net of tax	$	3,101		$	2,597

Advent capitalized stock-based employee compensation expense of $5,000 and $0.1 million during the first quarter of 2012 and 2011, respectively, associated with the Company’s software development, internal-use software and professional services implementation projects.

As of March 31, 2012, total unrecognized compensation cost related to unvested awards not yet recognized under all equity compensation plans, adjusted for estimated forfeitures, was $29.5 million and is expected to be recognized through the remaining vesting period of each grant, with a weighted average remaining period of 2.1 years.

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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 March 31
Stock Options & SARs	2012	2011
Expected volatility	40.2% - 42.6%	37.2% - 39.6%
Expected life (in years)	5.14	4.95
Risk-free interest rate	0.9% - 1.2%	1.9% - 2.4%
Expected dividends	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 believes 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.

Note 8—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.

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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 March 31
	2012			2011
Numerator:
Net income (loss):
Continuing operations	$	7,317		$	7,904
Discontinued operation	(23		)	1,824
Total operations	$	7,294		$	9,728
Denominator:
Denominator for basic net income (loss) per share- weighted average shares outstanding	51,024			52,201
Dilutive common equivalent shares:
Employee stock options and other	2,339			3,138
Denominator for diluted net income (loss) per share- weighted average shares outstanding, assuming exercise of potential dilutive common shares	53,363			55,339
Net income (loss) per share:
Basic:
Continuing operations	$	0.14		$	0.15
Discontinued operation	(0.00		)	0.03
Total operations	$	0.14		$	0.19
Diluted:
Continuing operations	$	0.14		$	0.14
Discontinued operation	(0.00		)	0.03
Total operations	$	0.14		$	0.18

Weighted average stock options, SARs and RSUs of approximately 2.5 million and 0.3 million for the first quarters of 2012 and 2011, respectively, were excluded from the calculation of diluted net income per share because their inclusion would have been anti-dilutive.

Note 9—Goodwill

The changes in the carrying value of goodwill for the three months ended March 31, 2012 were as follows (in thousands):

	Goodwill
Balance at December 31, 2011	$	204,621
Additions	84
Translation adjustments	1,771
Balance at March 31, 2012	$	206,476

During the first quarter of 2012, the US dollar weakened against the Pound Sterling, Euro and other European currencies in the first quarter of 2012.

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Note 10—Other Intangibles

The following is a summary of other intangibles as of March 31, 2012 (in thousands):

	Weighted					��
	Average
	Amortization	Other					Other
	Period	Intangibles,		Accumulated			Intangibles,
	(Years)	Gross		Amortization			Net
Purchased technologies	5.1	$	50,582	$	(26,300	)	$	24,282
Product development costs	3.0	16,553		(12,922		)	3,631
Developed technology sub-total		67,135		(39,222		)	27,913
Customer relationships	6.4	40,915		(24,803		)	16,112
Other intangibles	4.1	4,645		(1,921		)	2,724
Other intangibles sub-total		45,560		(26,724		)	18,836
Balance at March 31, 2012		$	112,695	$	(65,946	)	$	46,749

The following is a summary of other intangibles as of December 31, 2011 (in thousands):

	Weighted
	Average
	Amortization	Other					Other
	Period	Intangibles,		Accumulated			Intangibles,
	(Years)	Gross		Amortization			Net		��
Purchased technologies	5.1	$	50,661	$	(24,777	)	$	25,884
Product development costs	3.0	16,202		(12,278		)	3,924
Developed technology sub-total		66,863		(37,055		)	29,808
Customer relationships	6.4	40,917		(24,164		)	16,753
Other intangibles	4.1	4,642		(1,682		)	2,960
Other intangibles sub-total		45,559		(25,846		)	19,713
Balance at December 31, 2011		$	112,422	$	(62,901	)	$	49,521

The changes in the carrying value of other intangibles during the three months ended March 31, 2012 were as follows (in thousands):

	Other						Other
	Intangibles,			Accumulated			Intangibles,
	Gross			Amortization			Net
Balance at December 31, 2011	$	112,422		$	(62,901	)	$	49,521
Additions	351			—			351
Amortization	—			(3,497		)	(3,497		)
Translation adjustments	(78		)	452			374
Balance at March 31, 2012	$	112,695		$	(65,946	)	$	46,749

Additions to intangible assets of $0.4 million during the three months ended March 31, 2012 were associated with capitalized product development costs.

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Based on the carrying amount of intangible assets as of March 31, 2012, the estimated future amortization is as follows (in thousands):

	Nine
	Months Ended
	December 31		Years Ended December 31
	2012		2013		2014		2015		2016		Thereafter		Total
Estimated future amortization of:
Developed technology	$	7,445	$	8,227	$	5,109	$	4,360	$	2,518	$	254	$	27,913
Other intangibles	2,872		3,785		3,392		3,230		2,706		2,851		18,836
Total	$	10,317	$	12,012	$	8,501	$	7,590	$	5,224	$	3,105	$	46,749

Note 11—Balance Sheet Detail

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

	March 31		December 31
	2012		2011
Prepaid contract expense	$	9,413	$	8,858
Prepaid commission	7,433		7,471
Deposits	1,122		1,186
Prepaid royalty	969		1,121
Other receivables	947		704
Other	6,813		4,320
Total prepaid expenses and other	$	26,697	$	23,660

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

	March 31		December 31
	2012		2011
Long-term prepaid commissions	$	4,989	$	5,587
Deposits	2,650		2,697
Prepaid contract expense, long-term	6,347		7,643
Total other assets	$	13,986	$	15,927

Deposits include restricted cash balances of $1.4 million at March 31, 2012 and December 31, 2011 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):

	March 31		December 31
	2012		2011
Salaries and benefits payable	$	17,006	$	26,299
Accrued restructuring, current portion	529		1,050
Other	13,237		12,680
Total accrued liabilities	$	30,772	$	40,029

Accrued restructuring charges are discussed further in Note 12, “Restructuring Charges”. Other accrued liabilities include accruals for royalties, sales and business taxes, and other miscellaneous items.

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

	March 31		December 31
	2012		2011
Deferred rent	$	10,607	$	10,631
Long-term deferred tax liability	2,900		2,930
Other	3,640		3,383
Total other long-term liabilities	$	17,147	$	16,944

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

	March 31			December 31
	2012			2011
Accumulated net unrealized gain on marketable securities	$	(18	)	$	(13	)
Accumulated foreign currency translation adjustments	9,269			6,883
Accumulated other comprehensive income, net of taxes	$	9,251		$	6,870

Note 12—Restructuring Charges

During the first quarter of 2012 and 2011, Advent recorded restructuring charges of $104,000 and $26,000, respectively. Restructuring charges during the first quarter of 2012 primarily represents a lease termination payment we incurred associated with a facility in Europe. Restructuring charges during the first quarter of 2011 primarily relate to the present value amortization of facility exit obligations, partially offset by adjustments to other facility exit assumptions.

The following table sets forth an analysis of the components of the restructuring charges and the payments and non-cash charges made against the accrual during the first quarter of 2012 (in thousands):

	Facility Exit			Severance &
	Costs			Benefits			Total
Balance of restructuring accrual at December 31, 2011	$	448		$	602		$	1,050
Restructuring charge (benefit)	122			(21		)	101
Cash payments	(117		)	(508		)	(625		)
Accretion of prior restructuring costs	3			—			3
Balance of total restructuring accrual at March 31, 2012	$	456		$	73		$	529

The remaining restructuring accrual of $0.5 million at March 31, 2012 is included in accrued liabilities on the accompanying condensed consolidated balance sheet. The remaining excess facility costs of $0.5 million are stated at estimated fair value, net of estimated sub-lease income of approximately $0.1 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 13—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 March 31, 2012, Advent’s remaining operating lease commitments through 2025 are approximately $69.9 million, net of future minimum rental receipts of $0.2 million to be received under non-cancelable sub-leases.

On October 1, 2009, Advent completed the sale of the Company’s MicroEdge subsidiary. See Note 6, “Discontinued Operation,” to the consolidated financial statements for a description of the principal terms of the divestiture. The gross operating lease commitment related to this discontinued operation facility is approximately $5.5 million, less estimated sub-lease income of $2.6 million. With the exception of the MicroEdge facilities in New York City, the lease obligations related to MicroEdge have been transferred to the Purchaser.

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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.

Legal Contingencies

From time to time, in the course of its operations, the Company is a party to litigation matters and claims, including claims related to employee relations, business practices and other matters other than those specified below, but does not consider these matters to be material either individually or in the aggregate at this time. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict and the Company’s view of these matters may change in the future as the litigation and events related thereto unfold. An unfavorable outcome in any legal matter, if material, could have a material adverse effect on the Company’s financial position, liquidity or results of operations in the period in which the unfavorable outcome occurs and potentially in future periods.

Advent reviews the status of each litigation matter or other claim and records a provision for a liability when it is considered both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed quarterly and adjusted as additional information becomes available. If either or both of the criteria are not met, the Company reassesses whether there is at least a reasonable possibility that a loss, or additional losses, may be incurred. If there is a reasonable possibility that a loss may be incurred, the Company discloses the estimate of the amount of loss or range of loss, discloses that the amount is immaterial (if true), or discloses that an estimate of loss cannot be made. In assessing potential loss contingencies, the Company considers a number of factors, including those listed in the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 450-20, Contingencies—Loss Contingencies, regarding assessing the probability of a loss occurring and assessing whether a loss is reasonably estimable. The Company expenses legal fees as incurred.

On March 8, 2005, certain of the former shareholders of Kinexus Corporation and the shareholders’ representative (Kinexus Representative LLC, Morriss Holdings LLC, MIC III LLC, MIC V LLC, Berkeley Holdings and Doug Morriss) 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. On March 9, 2012, counsel for plaintiffs filed a motion to withdraw from representing plaintiffs.  On April 10, 2012, Advent filed a motion to dismiss for failure to prosecute.  The Court has not yet ruled on either motion and briefs on Advent’s motion to dismiss are scheduled for May 2012.  The trial is currently scheduled for November 2012. Advent disputes the plaintiffs’ claim and believes that it has 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.

Based on currently available information, management does not believe that the ultimate outcome of the 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 14—Debt

On November 30, 2011, Advent entered into a Credit Agreement (the “Credit Agreement”) by and among Advent, the lenders party thereto (the “Lenders”), U.S. Bank National Association, as documentation agent, Wells Fargo Bank, National Association, as syndication agent, and JPMorgan Chase Bank, N.A., as administrative agent for the Lenders (“Agent”).

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The Credit Agreement provides for (i) a $50.0 million revolving credit facility, with a $25.0 million letter of credit sublimit and a $10.0 million swingline loan sublimit (the “Revolving Credit Facility”), (ii) a $50.0 million term loan facility (the “Term Loan A Facility”), and (iii) a $50.0 million delayed draw term loan facility (the “Delayed Draw Term Loan Facility” and, together with the Term Loan A Facility, the “Term Loan Facility”).  Advent may request borrowings under the Revolving Credit Facility until November 30, 2016.  Advent may request borrowings under the Delayed Draw Term Loan Facility until November 30, 2012.  The Credit Agreement also contains an increase option permitting Advent, subject to certain requirements, to arrange with the Lenders and/or new lenders for up to an aggregate of $50.0 million in additional commitments, which commitments may be for revolving loans or term loans.  The proceeds of the loans made under the Credit Agreement may be used for general corporate purposes.

The loans bear interest, at Advent’s option, at the base rate plus a spread of 0.75% to 1.75% or an adjusted LIBOR rate (based on one, two, three or six-month interest periods) plus a spread of 1.75% to 2.75%, in each case with such spread being determined based on the consolidated leverage ratio for the preceding four fiscal quarter period and certain other factors.  The base rate means the highest of JPMorgan Chase Bank, N.A.’s prime rate, the federal funds rate plus a margin equal to 0.50% and the adjusted LIBOR rate for a 1-month interest period plus a margin equal to 1.00%.  Swing line loans accrue interest at a per annum rate based on the base rate plus the applicable margin for base rate loans. On November 30, 2011, Advent borrowed $50.0 million of term loans under the Term Loan A Facility and incurred approximately $1.9 million of debt issuance costs that have been deferred and will be amortized over the life of the agreement. As of March 31, 2012 and December 31, 2011, the outstanding debt balance was $48.8 million and $50.0 million, respectively.

The obligations under the Credit Agreement are secured by substantially all of the assets of Advent. The Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict Advent and its subsidiaries’ ability to, among other things, incur indebtedness, grant liens, merge or consolidate, dispose of assets, pay dividends or make distributions, make investments, make acquisitions, prepay certain indebtedness, enter into certain transactions with affiliates, enter into sale and leaseback transactions, enter into swap agreements and enter into restrictive agreements, in each case subject to customary exceptions for a credit facility of this size and type. Advent is also required to maintain compliance with a consolidated leverage ratio, a consolidated interest coverage ratio and a minimum level of liquidity. As of March 31, 2012 and December 31, 2011, Advent was in compliance with all associated covenants.

The Credit Agreement includes customary events of default that include among other things, non-payment defaults, defaults due to the inaccuracy of representations and warranties, covenant defaults, cross default to material indebtedness, bankruptcy and insolvency defaults, material judgment defaults, defaults due to an unenforceability of the security documents or guarantees, and a change of control default. The occurrence of an event of default could result in the acceleration of the obligations under the Credit Agreement.

Note 15—Income Taxes

The following table summarizes the activity relating to the Company’s unrecognized tax benefits during the first quarter of 2012 (in thousands):

	Total
Balance at December 31, 2011	$	11,144
Gross increases related to current period tax positions	207
Balance at March 31, 2012	$	11,351

At March 31, 2012 and December 31, 2011, Advent had $11.4 million and $11.1 million of gross unrecognized tax benefits, respectively. During the three months ended March 31, 2012, Advent increased the amount of unrecognized tax benefits by approximately $0.2 million relating to California research credits and California enterprise zone credits. If recognized, the total unrecognized tax benefits would decrease Advent’s tax provision and increase net income by $9.4 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 primarily 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 states and foreign jurisdictions. Advent is currently undergoing a State of California franchise tax examination for the 2006 and 2007 tax years. Advent is not under examination in any other income tax jurisdiction at the present time and 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 2007 and California for tax years after 2005.

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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 and foreign 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. The Company classifies a portion of its foreign government debt securities and corporate debt securities as having Level 2 inputs. These corporate debt securities are guaranteed by the US government. Foreign debt securities primarily include Swedish and Canadian bonds. The Company obtains the fair value of Level 2 financial instruments from its custody bank, which uses various professional pricing services to gather pricing data which may include quoted market prices for identical or comparable instruments, or inputs other than quoted prices that are observable either directly or indirectly. The custody bank then analyzes gathered pricing inputs and applies proprietary valuation techniques, such as consensus pricing, weighted average pricing, distribution-curve-based algorithms, or pricing models such as discounted cash flow techniques to provide the Company with a fair valuation of each security. The Company’s procedures include controls to ensure that appropriate fair values are recorded such as comparing prices obtained to independent sources. Advent reviews the internal controls in place at the custodian bank on an annual basis.

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 March 31, 2012 (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)	$	28,066	$	28,066	$	—	$	—
US government debt securities (2)	8,662		8,662		—		—
Corporate debt securities (2)	56,532		—		56,532		—
Foreign government debt securities (3)	7,414		—		7,414		—
Total	$	100,674	$	36,728	$	63,946	$	—

(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.

(3)      Included in cash and cash equivalents and short-term marketable securities on the Company’s condensed consolidated balance sheet.

There were no significant transfers between Level 1 and Level 2 assets during the first quarter of 2012 and Advent does not have any significant assets that utilize unobservable or Level 3 inputs.

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The carrying amounts of cash and cash equivalents, marketable securities, accounts receivable, accounts payable and accrued liabilities approximate fair value based on the short-term maturities of these instruments. In accordance with ASC 825, “Financial Instruments”, at March 31, 2012 the fair value of the Company’s debt was estimated at $48.2 million, using quoted market prices and yields for the same or similar type of borrowings, taking into account the underlying terms of the debt instruments. At March 31, 2012, the carrying value exceeded the estimated fair value of the debt by $0.5 million.

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.

In May 2010, Advent’s Board authorized the repurchase of up to 2.0 million shares of the Company’s common stock. In October 2011, Advent’s Board authorized the repurchase of up to an additional 2.0 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.

During the first quarter of 2012, the Company repurchased 0.3 million shares of its common stock under the stock repurchase program approved by the Board in May 2010 and October 2011 for an average price per share of $25.38. At March 31, 2012, there remained approximately 1.8 million shares authorized by the Board for repurchase.

Note 18—Subsequent Event

From April 1, 2012 through May 10, 2012, the Company repurchased approximately 348,000 shares of stock, under the repurchase program that was approved by the Board of Directors in October 2011, at an average price of $25.56.

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, 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.

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 investment management organization (portfolio accounting and reporting; trade order management and post-trade processing; research management; account management; and custodial reconciliation) and is tailored to meet the needs of the particular market segment of the investment management industry, as determined by size, assets under management and complexity of the investment process. On October 1, 2009, we completed the sale of our MicroEdge, Inc. subsidiary. The results of MicroEdge have been reclassified as a discontinued operation for all periods presented. Unless otherwise noted, discussion in this document pertains to our continuing operations.

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Current Economic Environment

During the first quarter of 2012, our business continued to benefit from an improved economic environment that began in late 2010. The positive momentum of an improved economic environment began in late 2010 continued into early 2011 with signs of an improving US economy and the release of strong corporate earnings. However, macroeconomic and geopolitical concerns during the course of 2011 and the beginning of 2012 continue to make customers cautious.

We grew bookings by 45%, revenue by 15% and operating cash flows by 17% during the first quarter of 2012 as compared to the first quarter of 2011. We maintain our expectation of an improved demand environment for the remainder of 2012 and are expecting to grow revenues by 11% to 13% in fiscal 2012 compared to the prior year. 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 market position, current product portfolio and future product development.

Operating Overview

Operating highlights of our first quarter of 2012 include:

·New and incremental bookings. The term license, Advent OnDemand and Black Diamond contracts signed in the first quarter of 2012 will contribute approximately $7.4 million in annual revenue (“annual contract value” or “ACV”) once they are fully implemented. This represents a 45% increase from the $5.1 million of ACV booked from contracts signed in the first quarter of 2011.

·Stabilization in renewal rate.  Our initially disclosed renewal rate is reported one quarter in arrears and was 95% for the fourth quarter of 2011, resulting in a stabilized range of 91% to 95% for 2011, compared to an initially reported quarterly renewal rate range of 90% to 95% for 2010 and 85% to 89% for 2009.

·Repurchase of common stock. During the first quarter of 2012, we repurchased 0.3 million shares under our Board authorized share repurchase program for a total cash outlay of $6.8 million and an average price of $25.38 per share.

Term License and Term License Deferral/Recognition

We have substantially completed our transition 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.

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 completion in a particular quarter. For the three months ended March 31, 2012 and 2011, the net term license deferral increased (decreased) the Company’s revenues as follows (in millions):

	Three Months Ended March 31
	2012			2011			Change
Term license revenues	$	0.3		$	(1.5	)	$	1.8
Professional services and other	(0.7		)	(1.7		)	1.0
Total net revenues	$	(0.4	)	$	(3.2	)	$	2.8

During the first quarter of 2012, we deferred net revenues of $0.4 million and directly-related expenses of $0.5 million associated with our term licensing model. The impact of these deferrals on our operating income was less than $0.1 million. We currently expect that the deferred revenue balance will continue to increase through 2012.

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Amounts of revenues and directly-related expenses deferred as of March 31, 2012 and December 31, 2011 associated with our term licensing deferral were as follows (in millions):

	March 31		December 31
	2012		2011
Deferred revenues
Short-term	$	31.3	$	30.5
Long-term	6.5		6.9
Total	$	37.8	$	37.4
Directly-related expenses
Short-term	$	10.6	$	10.0
Long-term	3.5		3.6
Total	$	14.1	$	13.6

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 net revenue from continuing operations during the first quarters of 2012 and 2011, and associated dollar and percentage fluctuations were as follows (in thousands, except % change):

	Three Months Ended March 31						$			%
	2012			2011			Change			Change
Term license revenues	$	38,616		$	30,442		$	8,174		27%
Maintenance revenues	16,660			18,066			(1,406		)	-8%
Other recurring revenues	23,444			18,819			4,625			25%
Total recurring revenues	78,720			67,327			11,393			17%
Recurring revenue as % of total revenue	91		%	89		%
Professional services and other	6,978			6,880			98			1%
Perpetual license fees	1,206			1,119			87			8%
Total non-recurring revenues	8,184			7,999			185			2%
Total net revenues	$	86,904		$	75,326		$	11,578		15%

Total net revenues increased by $11.6 million or 15% during the first quarter of 2012, which was primarily due to an increase in term license revenues and other recurring revenues. Term license revenues increased by $8.2 million primarily due to the implementation of our bookings activity from the previous 12 months, growth in sales of our APX, Geneva, Tamale and Moxy products, and $1.2 million of revenues from our recently acquired Syncova business. Other recurring revenues increased by $4.6 million or 25% during the first quarter of 2012 compared to the same period of 2011, due to $3.7 million of revenues from our recently acquired Black Diamond business as well as growth in revenue from our data services, Advent OnDemand and Assets Under Administration (“AUA”) fees.

Total recurring revenues increased by $11.4 million and represented 91% of total net revenues during the first quarter of 2012, compared to 89% in the same period in 2011. The increase in absolute dollars was driven by the increase in term license and other recurring revenues.

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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 first quarters of 2012 and 2011, and associated dollar and percentage fluctuations, were as follows (in thousands, except % change):

	Three Months Ended March 31					$			%
	2012			2011		Change			Change
Cost of revenues:
Recurring revenues	$	16,926		$	14,788	$	2,138		14%
Non-recurring revenues	9,668			7,239		2,429			34%
Amortization of developed technology	2,541			1,516		1,025			68%
Total cost of revenues	29,135			23,543		5,592			24%
Operating expenses
Sales and marketing expense	18,446			18,184		262			1%
Product development	16,799			12,642		4,157			33%
General and administrative	9,669			9,084		585			6%
Amortization of other intangibles	956			320		636			199%
Restructuring charges	104			26		78			300%
Total operating expenses	45,974			40,256		5,718			14%
Income from continuing operations	11,795			11,527		268			2%
Interest and other income (expense), net	(172		)	31		(203		)	-655%
Income from continuing operations before income taxes	11,623			11,558		65			1%
Provision for income taxes	4,306			3,654		652			18%
Net income from continuing operations	$	7,317		$	7,904	$	(587	)	-7%

Total expenses from continuing operations, including cost of revenues, increased to $75.1 million in the first quarter of 2012 from $63.8 million in the first quarter of 2011. Our operating income and margin from continuing operations in the first quarter of 2012 was $11.8 million and 13.6%, compared to $11.5 million and 15.3% in the first quarter of 2011. Although we were able to grow revenues and operating income during this period, the 1.7 points decrease in operating margin was primarily the result of the deterioration in gross margins associated with our non-recurring revenue. The decrease in the gross margins associated with non-recurring revenues is primarily the result of lower billable utilization of our professional service resources and service concessions during the first quarter of 2012. Additionally, we incurred additional operating expenses and intangible asset amortization incurred as a result of our acquisitions of Syncova Solutions Ltd (“Syncova”) and Black Diamond Performance Reporting LLC (“Black Diamond”) in February 2011 and June 2011, respectively. Also, the timing in the capitalization of our product development costs contributed to the increase in total expenses.

Interest and other income (expense), net was $(0.2) million in the first quarter of 2012 compared to $31,000 in the comparable period of 2011. The net other expense during the first quarter of 2012 primarily reflects interest expense resulting from the draw-down of $50.0 million of debt in November 2011.

Our continuing operations’ income tax expense was $4.3 million resulting in an effective tax rate of 37% during the first quarter of 2012, compared to $3.7 million or 32%, respectively, in the first quarter of 2011. This increase of $0.7 million primarily reflects the expiration of the Federal Research Credit at the end of 2011.

Net income from continuing operations was $7.3 million, resulting in diluted earnings per share of $0.14 for the first quarter of 2012, compared to $7.9 million or $0.14 in the first quarter of 2011.

Our continuing operations generated operating cash flow of $13.6 million in the first quarter of 2012, compared to $11.6 million in the first quarter of 2011, an increase of 17%.

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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 first quarter of 2012 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, 2011.

Recent Accounting Pronouncements

With the exception of the below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2012, as compared to the recent accounting pronouncements described in Advent’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, that are of significance, or potential significance, to the Company.

In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). ASU 2011-11 requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. Entities are required to disclose both gross and net information about these instruments. ASU 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The adoption of ASU is not expected to have a material impact on our condensed consolidated financial statements.

In December 2011, the FASB issued ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05 (“ASU 2011-12”), which defers indefinitely the provision within ASU 2011-05 requiring entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the income statement and the statement in which other comprehensive income is presented.  ASU 2011-12 does not change the other provisions instituted within ASU 2011-05. We adopted the provisions of ASU 2011-05 and ASU 2011-12 on January 1, 2012, and the adoption did not have a material impact on the condensed consolidated financial statements.

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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011

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:

	Three Months Ended March 31
	2012	2011
Net revenues:
Recurring revenues	91%	89%
Non-recurring revenues	9	11
Total net revenues	100	100
Cost of revenues:
Recurring revenues	19	20
Non-recurring revenues	11	10
Amortization of developed technology	3	2
Total cost of revenues	34	31
Gross margin	66	69
Operating expenses:
Sales and marketing	21	24
Product development	19	17
General and administrative	11	12
Amortization of other intangibles	1	*
Restructuring charges	*	*
Total operating expenses	53	53
Income from continuing operations	14	15
Interest and other income (expense), net	*	*
Income from continuing operations before income taxes	13	15
Provision for income taxes	5	5
Net income from continuing operations	8	10
Discontinued operation:
Net income (loss) from discontinued operation	*	2
Net income	8%	13%

Percentages are based on actual values. Totals may not sum due to rounding.

* Less than 1%.

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NET REVENUES

	Three Months Ended March 31
	2012		2011		Change
Total net revenues (in thousands)	$	86,904	$	75,326	$	11,578

We derive our revenues from two sources: recurring revenues and non-recurring revenues. Recurring revenues are comprised of term license, perpetual maintenance arrangements and other recurring revenue (which includes revenues from Black Diamond, Advent OnDemand and incremental Assets Under Administration (“AUA”) fees from perpetual licenses). 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 on perpetual license arrangements. Other recurring revenues are derived from our subscription services and transaction-based services as well as AUA fees for certain perpetual arrangements. Non-recurring revenues consists of professional services and other revenue and perpetual license fees. Professional services and other revenues include fees for consulting, fees from training, and project management services and our client conferences. Perpetual license revenues are derived from the licensing of software products under a perpetual arrangement. Sales returns, which we generally do not provide to customers, are accounted for as deductions to these two revenue categories based on our historical experience.

Since fiscal 2009, recurring revenues have represented close to 90% of revenues.

				Three Months Ended
				March 31
As a percentage of net revenues	2009	2010	2011	2012
Revenues from recurring sources	88%	89%	89%	91%
Revenues from non-recurring sources	12%	11%	11%	9%

Revenues derived from international sales grew to $15.1 million in the first quarter of 2012 from $12.8 million in the first quarter of 2011. The increase primarily reflects an increase in new business in international locations booked in the prior 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 $88 million and $90 million in the second quarter of 2012, and to be between $361 million and $368 million for fiscal 2012.

Recurring Revenues

(in thousands, except percent of	Three Months Ended March 31
total net revenues)	2012			2011			Change
Term license revenues	$	38,616		$	30,442		$	8,174
Maintenance revenues	16,660			18,066			(1,406		)
Other recurring revenues	23,444			18,819			4,625
Total recurring revenues	$	78,720		$	67,327		$	11,393
Percent of total net revenues	91		%	89		%

Revenues from term licenses, which include both the software license and maintenance services for term licenses, increased $8.2 million during the first quarter of 2012 compared to same quarter of 2011. The growth of term license revenues reflects the continued layering of incremental annual contract value (ACV) sold in previous periods into our term revenue, revenues from Syncova, which we acquired in February 2011 and the continued market acceptance of our products. Additionally, adding to the increase in term license revenues was the decrease in the net deferral of term license revenues. For our term licenses, we defer all revenue on new bookings until our implementation services are complete. For the three months ended March 31, 2012 and 2011, the term license deferral increased (decreased) the Company’s term license revenues as follows (in millions):

	Three Months Ended March 31
	2012		2011			Change
Term license revenues	$	0.3	$	(1.5	)	$	1.8

During the three months ended March 31, 2012, a large number of projects were completed, leading to a decrease in the net deferral of term license revenues. During the three months ended March 31, 2011, we saw an increase in new service engagements as a result of bookings from the latter half of 2010 and first quarter of 2011 driving implementations. As a result, relatively more projects were in the implementation phase causing the increase in the term deferral for the three months ended March 31, 2011.

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Maintenance revenues decreased $1.4 million during the three months ended March 31, 2012, when compared to the same quarter of 2011. These decreases were due to maintenance de-activations from customer attrition, maintenance level downgrades, reductions in products licensed or number of users by clients, 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 incremental assets under administration fees from perpetual licenses, data services, outsourced services, Advent OnDemand, web-based services and Black Diamond, increased $4.6 million during the first quarter of 2012 when compared to the same quarter of 2011. The increase in other recurring revenues is primarily due to growth in revenues from data services, outsourced services, web-based services and $3.7 million from Black Diamond, which we acquired on June 1, 2011.  Incremental assets under administration fees from perpetual licenses remained flat at $1.6 million during the first quarter of 2012 when compared to the same period in 2011, as the AUA balances of our clients remained consistent.

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) since the fourth quarter of 2010:

	Renewal Quarter
Renewal Rates	Q112	Q411	Q311	Q211	Q111	Q410
Based on cash collections relative to prior year collections
Initially Disclosed Renewal Rate (1)	(2)	95%	93%	92%	91%	95%
Updated Disclosed Renewal Rate (3)	n/a	n/a	94%	97%	94%	96%

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

(2)   The initially disclosed renewal rate for the first quarter of 2012 is not currently available as it is disclosed one quarter in arrears in order to include substantially all payments against invoices for this quarter.

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

Non-Recurring Revenues

(in thousands, except percent of	Three Months Ended March 31
total net revenues)	2012			2011			Change
Professional services and other revenues	$	6,978		$	6,880		$	98
Perpetual license fees	1,206			1,119			87
Total non-recurring revenues	$	8,184		$	7,999		$	185
Percent of total net revenues	9		%	11		%

Non-recurring revenues consists of perpetual license fees, professional services and other revenue. Perpetual license revenues are derived from the licensing of software products under a perpetual arrangement. Professional services and other revenues include fees for consulting, project management, custom implementation and integration, custom report writing and fees from training.

Total perpetual license fees increased in the three months ended March 31, 2012, primarily due to revenue from new perpetual licenses which was partially offset by fewer sales of perpetual seats licenses and modules to our existing perpetual client base.

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.

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

	Change From
	Q1 11 to Q1 12
Decreased net term license implementation deferral	$	970
Decreased consulting services	(973		)
Various other items	101
Total change	$	98

The essentially flat period to period revenues in professional services and other revenues during the three months ended March 31, 2012 primarily reflects the impact of the decrease in net term license implementation deferral associated with in-process term license implementations, which was offset by the decrease in consulting revenue as a result of the decrease in billable utilization for professional services resources.

The impact of our term license implementation deferral on professional services revenues for the three months ended March 31, 2012 and 2011 was as follows (in thousands):

	Three Months Ended March 31
	2012			2011			Change
Net deferral of professional services revenue related to term license implementations	$	(739	)	$	(1,709	)	$	970

During the first quarter of 2012 and 2011, the revenue deferred from projects being implemented exceeded the revenue recognized from completed projects. The decrease in the net term license revenue deferral of $1.0 million resulted from relatively more completed projects during the first quarter of 2012.

COST OF REVENUES

	Three Months Ended March 31
	2012			2011			Change
Total cost of revenues (in thousands)	$	29,135		$	23,543		$	5,592
Percent of total net revenues	34		%	31		%

Our cost of revenues is made up of three components: cost of recurring revenues, cost of non-recurring revenues and amortization of developed technology.

Gross margin decreased to 66% in the first quarter of 2012 from 69% in the first quarter of 2011.  The decrease in gross margin percentage during the first quarter of 2012 resulted primarily from negative gross margins in professional services due to lower billable utilization of professional service consultants and from an increase in the amortization of developed technology and in payroll and related costs from headcount additions, primarily from acquisitions of Black Diamond and Syncova.

Cost of Recurring Revenues

	Three Months Ended March 31
	2012			2011			Change
Cost of recurring revenues (in thousands)	$	16,926		$	14,788		$	2,138
Percent of total recurring revenue	22		%	22		%

Cost of recurring revenues consists of the direct costs related to providing and supporting our outsourced services, providing technical support services under maintenance and term license agreements and other services for recurring revenues, and royalties paid to third party vendors.

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Cost of recurring revenues fluctuated due to the following (in thousands):

	Change From
	Q1 11 to Q1 12
Increased payroll and related costs	$	1,226
Increased allocation-in of facility and infrastructure expenses	323
Increased outside services	271
Increased computers and telecom	135
Various other items	183
Total change	$	2,138

The overall increase in absolute dollars for the first quarter of 2012 was due primarily to increases in payroll and related costs, and the allocation-in of facility and infrastructure expenses. The increase in payroll and related costs resulted from salary increases and additional 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. Headcount increased from 307 at March 31, 2011 to 341 (33 heads from Black Diamond) at March 31, 2012. 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 recurring revenue department. The increase in outside services reflects more activity and utilization during the first quarter of 2012. The increase in computers and telecom is primarily due to higher costs associated with our maintenance contracts.

Compared to the first quarter of 2012, we expect the cost of recurring revenues to increase in dollar amount in the second quarter of 2012 primarily associated with payroll and related costs as a result of increases in headcount and costs associated with investments in information technology related projects.

Cost of Non-Recurring Revenues

	Three Months Ended March 31
	2012			2011			Change
Cost of non-recurring (in thousands)	$	9,668		$	7,239		$	2,429
Percent of total non-recurring revenues	118		%	90		%

Cost of non-recurring revenues consists of expenses associated with perpetual license fees, professional services and other. Costs associated with 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. Costs associated with professional services and other revenue consists primarily of personnel related costs associated with the professional 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. Additionally, we defer revenues and direct costs associated with services performed on term license implementations until the project is substantially complete. Indirect costs such as management and other overhead expenses are recognized in the period in which they are incurred.

Cost of non-recurring revenues fluctuated due to the following (in thousands):

	Change From
	Q1 11 to Q1 12
Increased payroll and related costs	$	1,005
Decreased service cost deferral related to term implementations	939
Increased allocation-in of facility and infrastructure expenses	279
Increased outside contractors	177
Various other items	29
Total change	$	2,429

The increase in absolute dollars for first quarter of 2012 primarily reflects increases in payroll and related expenses and, to a lesser extent, a decrease in the net deferral of professional service costs as a result of a larger number of completed projects during the first quarter of 2012. Payroll and related expenses increased as our headcount increased primarily due to additions from our acquisitions of Syncova and Black Diamond. 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 professional services and other department.

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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 implementation (deferral) recognition on professional services costs for the three months ended March 31, 2012 and 2011 was as follows (in thousands):

	Three Months Ended March 31
	2012			2011			Change
Net deferral of professional services costs related to term license implementations	$	(467	)	$	(1,406	)	$	939

The decrease in the net deferral for the three months ended March 31, 2012 was primarily a result of a larger number of completed projects during the first quarter of 2012.

Gross margins for non-recurring revenues were (18)%, and 10% during the first quarter of 2012 and 2011, respectively. The gross margin deterioration in the first quarter of 2012 when compared to the same period in 2011 was primarily from the negative gross margins in professional services due to lower billable utilization of professional services consultants and service concessions.

Amortization of Developed Technology

	Three Months Ended March 31
	2012			2011			Change
Amortization of developed technology (in thousands)	$	2,541		$	1,516		$	1,025
Percent of total net revenues	3		%	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 first quarter of 2012 resulted from additional amortization from technology related intangible assets associated with Syncova and Black Diamond which we acquired in February 2011 and June 2011, respectively, and additional amortization from software development costs capitalized during 2011, which were partially offset by decreased amortization from other developed technology assets that fully amortized during 2011.

OPERATING EXPENSES

Sales and Marketing

	Three Months Ended March 31
	2012			2011			Change
Sales and marketing (in thousands)	$	18,446		$	18,184		$	262
Percent of total net revenues	21		%	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
	Q1 11 to Q1 12
Increased marketing	$	215
Increased payroll and related costs	194
Various other items	(147		)
Total change	$	262

The increase in sales and marketing expenses for the first quarter of 2012 primarily reflects the growth of our sales and marketing efforts during the first quarter of 2012. The increase in marketing expenses primarily reflects an increase in marketing collateral and tradeshow costs during the first quarter of 2012. The increase in payroll and related costs for the first quarter of 2012 primarily reflects an increase in commissions paid to our sales personnel.

Sales and marketing expense decreased as a percentage of total net revenues to 21% in the first quarter of 2012 from 24% in the comparable quarter of 2011. The decrease is primarily due to lower salary costs as a result of a classification of certain members of our sales team into the product development group. The function of certain members of our product management team was more aligned with our product development group in 2012 and, as a result, their associated costs are now classified in product development effective January 1, 2012.

Product Development

	Three Months Ended March 31
	2012			2011			Change
Product development (in thousands)	$	16,799		$	12,642		$	4,157
Percent of total net revenues	19		%	17		%

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
	Q1 11 to Q1 12
Increased payroll and related costs	$	2,385
Decreased capitalization of product development	1,270
Increased allocation-in of facility and infrastructure expenses	303
Various other items	199
Total change	$	4,157

The increase in total product development expenses during the first quarter of 2012 was primarily due to an increase in payroll and related costs resulting from increases in headcount to help us 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. Headcount increased to 327 (11 and 8 heads from Black Diamond and Syncova, respectively) at March 31, 2012 from 301 at March 31, 2011. Also, contributing to the increases in headcount and payroll expenses in our product development group was the classification of costs for certain members of our product management team into our product development group effective January 1, 2012, as the roles of these individuals were more aligned with our product development efforts in 2012. 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 product development department. The fluctuation in the capitalization of our product development costs is attributable to lower capitalized costs from our Geneva product due to timing. During the first quarter of 2011, we capitalized $1.5 million associated with Geneva 8.5 compared to only $0.1 million in the first quarter of 2012 for Geneva 9.0. As Geneva 9.0 will be released in June 2012, the majority of capitalized costs will occur in the second quarter of 2012.

Compared to the first quarter of 2012, we expect product development expenses to decrease in dollar amount in the second quarter of 2012 primarily due to capitalization of product development costs related to Geneva 9.0.

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General and Administrative

	Three Months Ended March 31
	2012			2011			Change
General and administrative (in thousands)	$	9,669		$	9,084		$	585
Percent of total net revenues	11		%	12		%

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
	Q1 11 to Q1 12
Increased facilities	$	454
Increased payroll and related costs	343
Increased travel and entertainment	199
Increased depreciation	182
Increased allocation-out of facility and infrastructure expenses	(874		)
Various other items	281
Total change	$	585

The increase in total general and administrative expenses in absolute dollars during the first quarter of 2012 was primarily due to the increase in facilities, and payroll and related costs. The increase in facilities was primarily associated with additional rent expense related to new offices in London and, in Jacksonville for our Black Diamond personnel. Payroll and related costs increased during the first quarter of 2012 as a result of additional headcount which increased slightly to 169 at March 31, 2012 from 162 at March 31, 2011. The increase in travel and entertainment costs was primarily due to increase in costs for offsite meetings that were held during the first quarter of 2012. Depreciation also increased due to leasehold improvement additions related to Black Diamond. These increases were partially offset by an increase in the allocation-out of corporate expenses to other departments. Corporate expenses, such as facility and information technology costs, are initially recognized in our general and administrative department and then allocated out to other departments based on headcount. As our facility costs increased and headcount in our other departments grew at a higher rate 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 quarter of 2012.

Compared to the first quarter of 2012, we expect general and administrative expenses to increase in dollar amount in the second quarter of 2012, primarily due to increases in legal expenses related to the Kinexus litigation and increases in payroll and related as a result of increases in headcount associated with hiring information technology personnel.

Amortization of Other Intangibles

	Three Months Ended March 31
	2012			2011			Change
Amortization of other intangibles (in thousands)	$	956		$	320		$	636
Percent of total net revenues	1		%	0		%

Amortization of other intangibles represents amortization of non-technology related intangible assets. The increase during the first quarter of 2012 resulted from increased amortization from intangible assets associated with Syncova and Black Diamond which we acquired in February 2011 and June 2011, respectively.

Restructuring Charges

	Three Months Ended March 31
	2012			2011			Change
Restructuring charges (in thousands)	$	104		$	26		$	78
Percent of total net revenues	0		%	0		%

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During the first quarter of 2012 and 2011, we recorded restructuring charges of $104,000 and $26,000, respectively. The restructuring charges incurred in the first quarter of 2012 primarily related to facility and exit costs associated with our office in Oslo, Norway.

For additional analysis of the components of the payments and charges made against the restructuring accrual during the first quarter of 2012, see Note 12, “Restructuring Charges” to our condensed consolidated financial statements.

Interest and Other Income (Expense), Net

	Three Months Ended March 31
	2012			2011			Change
Interest and other income (expense), net (in thousands)	$	(172	)	$	31		$	(203	)
Percent of total net revenues	0		%	0		%

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
	Q1 11 to Q1 12
Increase in interest expense	$	(519	)
Change in foreign exchange gains	323
Various other items	(7		)
Total change	$	(203	)

The increase in interest expense of $0.5 million during the first quarter of 2012 resulted from the draw-down of $50.0 million of debt in November 2011. During the first quarter of 2012, we earned a net foreign exchange gain as the US dollar weakened against the Pound Sterling, Euro and other foreign currencies resulting in an increase of $0.3 million in foreign exchange gains compared to the comparable period of 2011.

Provision for Income Taxes

	Three Months Ended March 31
	2012			2011			Change
Provision for income taxes (in thousands)	$	4,306		$	3,654		$	652
Effective tax rate	37		%	32		%

The increase in the effective tax rate for the three months ended March 31, 2012 compared to the first three months of 2011 primarily reflects the expiration of the Federal Research Credit at the end of 2011.

We currently expect our annual effective tax rate for 2012 to be between 35% and 40%.

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Discontinued Operation

	Three Months Ended March 31
(in thousands)	2012			2011		Change
Net revenues	$	—		$	—	$	—
Income (loss) from operation of discontinued operation applicable taxes of $(15)and $65 respectively)	$	(23	)	$	99	$	(122	)
Gain on disposal of discontinued operation (net of taxes of $0 and $1,279, respectively)	—			1,725		(1,725		)
Net income (loss) from discontinued operation	$	(23	)	$	1,824	$	(1,847	)

In connection with the sale of our MicroEdge subsidiary in the fourth quarter of 2009, $3.0 million of the proceeds had been placed in escrow. As this $3.0 million was released from escrow and received by the Company in March 2011, our discontinued operation recorded a gain of $1.7 million in “net income from discontinued operation, net of applicable taxes” in the first quarter of 2011.

LIQUIDITY AND CAPITAL RESOURCES

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

	March 31		December 31
	2012		2011
Cash and cash equivalents	$	70,828	$	65,525
Short-term and long-term marketable securities	$	70,258	$	70,825

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), foreign debt securities 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):

	Three Months Ended March 31
	2012			2011
Net cash provided by operating activities from continuing operations	$	13,589		$	11,593
Net cash used in investing activities from continuing operations	$	(2,364	)	$	(24,428	)
Net cash provided by (used in) financing activities from continuing operations	$	(6,060	)	$	1,897
Net cash provided by (used in) operating activities from discontinued operation	$	(142	)	$	74
Net cash provided by investing activities from discontinued operation	$	—		$	3,004

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, 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, operating results and bookings.

Our cash provided by operating activities from continuing operations of $13.6 million during the three months ended March 31, 2012 was primarily the result of our net income plus non-cash charges including stock-based compensation, and depreciation and amortization. Cash flows resulting from changes in assets and liabilities include a decrease in accounts receivable, accrued liabilities and deferred revenues. Days’ sales outstanding were 62 days during the first quarter of 2012, compared to 66 days in the fourth

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quarter of 2011 and 60 days in the first quarter of 2011. The decrease in deferred revenue is primarily a result of less renewal activity during the first quarter of 2012. The decrease in accrued liabilities reflects cash payments of fiscal 2011 liabilities including year-end bonuses, commissions, and payroll taxes. Other changes in assets and liabilities included an increase in prepaid and other assets and income taxes payable.

Our cash provided by operating activities from continuing operations of $11.6 million during the three months ended March 31, 2011 was primarily the result of our net income plus non-cash charges including stock-based compensation, and depreciation and amortization. Cash flows resulting from changes in assets and liabilities included a decrease in accounts receivable and accrued liabilities and an increase in deferred revenue. Days’ sales outstanding were 60 days during the first quarter of 2011, compared to 61 days in the fourth quarter of 2010 and 57 days in the first quarter of 2010. The decrease in accrued liabilities reflected cash payments of fiscal 2010 liabilities including year-end bonuses, commissions, and payroll taxes. The increase in deferred revenue reflected additional billings associated with recent bookings, maintenance renewals and the deferral of professional services revenue. Other changes in assets and liabilities included an increase in prepaid and other assets, income taxes payable and a decrease in accounts payable.

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 term license bookings that increase deferred revenue, collection of accounts receivable, payment of federal income taxes and timing of payments. We also expect that cash provided by operating activities will be between $90 million and $96 million during fiscal year 2012.

Cash Flows from Investing Activities for Continuing Operations

Net cash used in investing activities from continuing operations of $2.4 million for the first quarter of 2012 reflects  purchases of marketable securities of $33.6 million, capital expenditures of $2.0 million primarily related to purchases of software licenses and, to a lesser extent, the build-out of our new facilities in New Rochelle, capitalized software development costs of $0.3 million and the final installment payment of $0.7 million related to our acquisition of East Circle, which we acquired in December 2006. These expenditures were offset by proceeds received from the sale and maturity of marketable securities of $34.2 million.

Net cash used in investing activities from continuing operations of $24.4 million for the first quarter of 2011 reflects purchases of marketable securities of $26.1 million, net cash used of $24.6 million related to the acquisition of Syncova Solutions, Ltd, capitalized software development costs of $1.6 million and capital expenditures of $1.4 million primarily related to the computer equipment purchases. These expenditures were offset by proceeds received from the sale and maturity of marketable securities of $29.4 million.

We expect capital expenditures, including capitalized software development costs, to be between $13 million and $15 million for fiscal year 2012, which includes our normal rate of capital expenditure plus an additional investment for enhancements to our IT infrastructure and the upgrade of our enterprise software system.

Cash Flows from Financing Activities for Continuing Operations

Net cash used in financing activities from continuing operations for the first quarter of 2012 of $6.1 million reflects the repurchase of 0.3 million shares of our common stock for $6.8 million, the repayment of $1.3 million towards our debt and payments totaling $0.8 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 $1.3 million and tax benefits relating to excess stock-based compensation deductions of $1.5 million, which represents the reduction in income taxes payable resulting from tax deductions from stock-based compensation.

Net cash provided by financing activities from continuing operations for the first quarter of 2011 of $1.9 million reflects cash received from the exercise of employee stock options of $3.2 million and tax benefits relating to excess stock-based compensation deductions of $1.3 million. This was partially offset by payments totaling $2.6 million to satisfy withholding taxes on equity awards that are net share settled.

Cash Flows from Operating Activities for Discontinued Operation

Net cash used in operating activities from discontinued operation of $0.1 million during the three months ended March 31, 2012 primarily reflects a decrease in accrued restructuring related to cash payments of its facility lease.

Our cash provided by operating activities from discontinued operation of $74,000 during the three months ended March 31, 2011 was primarily the result of our net income from discontinued operation of $1.8 million and an increase in income taxes payable of $1.4 million, partially offset by the gain of $3.0 million from the release of funds held in escrow in connection with the sale of MicroEdge on October 1, 2009.

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Cash Flows from Investing Activities for Discontinued Operation

Net cash provided by investing activities from discontinued operation of $3.0 million during the three months ended March 31, 2011 reflects cash received from the release of proceeds held in escrow in connection with the sale of MicroEdge on October 1, 2009.

Working Capital

At March 31, 2012, we had working capital of $25.3 million, compared to working capital of $12.0 million at December 31, 2011. The increase in our working capital at March 31, 2012 is primarily due to the generation of operating cash flow of $13.6 million, partially offset by cash paid to repurchase common stock of $6.8 million. Our working capital at December 31, 2011 was primarily due to the generation of operating cash flow of $83.2 million, and proceeds from long-term debt of $45.0 million, partially offset by the cash paid to acquire Syncova and Black Diamond of $24.6 million and $72.4 million, respectively, and cash used to repurchase common stock of $51.6 million during 2011.

Term Loan and Revolving Credit Facility

On November 30, 2011, Advent entered into a Credit Agreement (the “Credit Agreement”) by and among Advent, the lenders party thereto (the “Lenders”), U.S. Bank National Association, as documentation agent, Wells Fargo Bank, National Association, as syndication agent, and JPMorgan Chase Bank, N.A., as administrative agent for the Lenders (“Agent”).

The Credit Agreement provides for (i) a $50.0 million revolving credit facility, with a $25.0 million letter of credit sublimit and a $10.0 million swingline loan sublimit (the “Revolving Credit Facility”), (ii) a $50.0 million term loan facility (the “Term Loan A Facility”), and (iii) a $50.0 million delayed draw term loan facility (the “Delayed Draw Term Loan Facility” and, together with the Term Loan A Facility, the “Term Loan Facility”). Advent may request borrowings under the Revolving Credit Facility until November 30, 2016.  Advent may request borrowings under the Delayed Draw Term Loan Facility until November 30, 2012.  The Credit Agreement also contains an increase option permitting Advent, subject to certain requirements, to arrange with the Lenders and/or new lenders for up to an aggregate of $50.0 million in additional commitments, which commitments may be for revolving loans or term loans. The proceeds of the loans made under the Credit Agreement may be used for general corporate purposes.  On November 30, 2011, Advent borrowed $50.0 million of term loans under the Term Loan A Facility of which $1.2 million was repaid during the first quarter of 2012. At March 31, 2012, we had a total debt balance of $48.8 million and were in compliance with all associated covenants.

Common Stock Repurchases

In May 2010, Advent’s Board authorized the repurchase of up to 2.0 million shares of the Company’s common stock. In October 2011, Advent’s Board authorized the repurchase of up to an additional 2.0 million shares of the Company’s common stock. During the first quarter of 2012, the Company repurchased 0.3 million shares of its common stock at a cost of $6.8 million. At March 31, 2012, there remained approximately 1.8 million shares authorized by the Board for repurchase.

Off-Balance Sheet Arrangements and Contractual Obligations

The following table summarizes our contractual cash obligations as of March 31, 2012 (in thousands):

	Nine
	Months Ended
	December 31		Years Ended December 31
	2012		2013		2014		2015		2016		Thereafter		Total
Operating lease obligations, net of sub-lease income	$	6,805	$	8,898	$	9,547	$	9,522	$	8,068	$	27,084	$	69,924

On October 1, 2009, we completed the sale of our MicroEdge subsidiary. See Note 6, “Discontinued Operation”, to the consolidated financial statements for a description of the principal terms of the divestiture. With the exception of the MicroEdge facilities in New York City, the leases related to MicroEdge have been transferred to the purchaser.

In connection with the sale of MicroEdge, the Company entered into a sub-lease agreement with Microedge LLC, whereby Microedge LLC 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. Under the sub-lease agreement, the purchaser contracted to 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 was amended during the first quarter of 2011. Under the amended sub-lease agreement, the purchaser will sub-lease the premises through the end of the lease term, with an option to terminate in September 2013, subject to penalties. The sub-lease agreement became effective upon the close of sale of MicroEdge on October 1, 2009. As of March 31, 2012, MicroEdge had operating lease commitments totaling $5.5 million, less estimated sublease income of $2.6 million, which are not reflected in the above table.

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As of March 31, 2012, the principal outstanding under our Credit Agreement was $48.8 million, which is due in full no later than November 30, 2016.

At March 31, 2012 and December 31, 2011, we had a gross liability of $11.4 million and $11.1 million for uncertain tax positions. If recognized, the impact on our statement of operations would be to decrease our income tax expense and increase our net income by $9.4 million. The impact on net income reflects the liabilities for unrecognized tax benefits net of the federal tax benefit of state income tax items. 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. Our cash payments for federal income taxes will continue to be 10% or less of taxable income through 2012 as we have significant net operating losses and tax credit carryforwards to utilize.

At March 31, 2012 and December 31, 2011, 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 be at 10% or less of taxable income in 2012 as we utilize net operating losses and tax credit carryforwards against current income taxes. Beyond 2012, we expect cash payments for federal income taxes to be about 20% of taxable income as we near the end of our net operating losses carryforwards and utilize tax credits to reduce our cash taxes down to the alternative minimum tax (AMT) rate of 20%.

Our liquidity and capital resources in any period could also be affected by the exercise of outstanding employee stock options and SARs, and issuance of common stock under our employee stock purchase plan. The resulting increase in the number of outstanding shares from this and from the issuance of common stock from our RSUs 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, marketable securities, cash generated from operations and available to us under our debt agreement will be sufficient to satisfy our working capital needs, capital expenditures, investment requirements, stock repurchases, repayment of debt principal and interest, and financing activities in the next 12 months. However, 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, or if available, may not be obtainable on terms favorable to us and could be dilutive.

The Company has reviewed its needs in the United States for possible repatriation of undistributed earnings or cash of its foreign subsidiaries. The Company presently intends to continue to invest indefinitely all earnings and cash outside of the United States of all foreign subsidiaries to fund foreign investments or meet foreign working capital and property, plant and equipment requirements. At March 31, 2012, we had approximately $9.0 million of cash in our foreign subsidiaries.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to financial market risks, including changes in foreign currency exchange rates and interest rates. Historically, much of our revenues and capital spending was transacted in US dollars. However, since the acquisitions of Advent Denmark, Advent Norway, Advent Sweden, Advent Netherlands, and Advent Europe’s remaining distributors in the United Kingdom and Switzerland, as well as the opening of our Asia Pacific offices, whose service and certain license revenues and capital spending are transacted in local country currencies, we have greater exposure to foreign currency fluctuations. Additionally as of March 31, 2012, $67.7 million of goodwill and intangibles from the acquisition of these entities are denominated in foreign currency. Therefore a hypothetical change of 10% in exchange rates could increase or decrease our assets and equity by approximately $6.8 million and could increase or decrease our consolidated results of operations or cash flows by approximately $0.9 million.

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We maintain an investment portfolio of various holdings, types, and maturities. Our interest rate risk relates primarily to our investment portfolio, which consisted of $141.1 million in cash and cash equivalents, and short-term marketable securities as of March 31, 2012. Our marketable 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. At any time, a rise in interest rates could have a material adverse impact on the fair value of our investment portfolio. Conversely, declines in interest rates could have a material impact on interest earnings of our investment portfolio. We do not currently hedge these interest rate exposures.

Effective November 30, 2011, we also have interest rate risk relating to debt and associated accrued interest under our Term Loan A Facility which is indexed to JPMorgan Chase Bank, N.A.’s prime rate or LIBOR. The following table is a sensitivity analysis as of March 31, 2012, assuming a hypothetical plus or minus 25 basis points (“BPS”), 50 BPS and 75 BPS increase (decrease) in interest rates. For accrued interest balances at March 31, 2012 the hypothetical fair values are as follows (in thousands, except percentages):

	Decrease in Interest Rates									Increase in Interest Rates
	-75 Basis Points			-50 Basis Points			-25 Basis Points			25 Basis Points			50 Basis Points			75 Basis Points
Interest Expense Variation	$	(364	)	$	(243	)	$	(121	)	$	121		$	243		$	364
% Change in Interest Expense	-27.0		%	-18.0		%	-9.0		%	9.0		%	18.0		%	27.0		%

The following table presents hypothetical changes in fair value of our marketable securities of $72.3 million at March 31, 2012. The market changes reflect immediate hypothetical parallel shifts in the yield curve of plus or minus 25 BPS, 50 BPS, and 100 BPS. For balances at March 31, 2012, the hypothetical fair values are as follows (in thousands, 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	$	72,606		$	72,445		$	72,364		$	72,203		$	72,122		$	71,961
Change in Fair Value	$	323		$	161		$	81		$	(81	)	$	(161	)	$	(323	)
% Change in Fair Value	0.45		%	0.22		%	0.11		%	-0.11		%	-0.22		%	-0.45		%

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 March 31, 2012 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 first quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, Advent’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.    Legal Proceedings

On March 8, 2005, certain of the former shareholders of Kinexus Corporation and the shareholders’ representative (Kinexus Representative LLC, Morriss Holdings LLC, MIC III LLC, MIC V LLC, Berkeley Holdings and Doug Morriss) 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

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and would not be payable for 2003. On March 9, 2012, counsel for plaintiffs filed a motion to withdraw from representing plaintiffs.  On April 10, 2012, Advent filed a motion to dismiss for failure to prosecute.  The Court has not yet ruled on either motion and briefs on Advent’s motion to dismiss are scheduled for May 2012. The trial is currently scheduled for November 2012. Advent disputes the plaintiffs’ claim and believes that it has 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, in the course of its operations, the Company is a party to other litigation matters and claims, including claims related to employee relations, business practices and other matters not specifically identified but does not consider these matters to be material either individually or in the aggregate at this time. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict and the Company’s view of these matters may change in the future as the litigation and events related thereto unfold. An unfavorable outcome in any legal matter, if material, could have a material adverse effect on the Company’s financial position, liquidity or results of operations in 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, 2011.

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

Total recurring revenues, which we define as term license, maintenance from term and perpetual arrangements, other recurring revenue and Asset Under Administration (AUA) fees for certain perpetual arrangements, represented 91%, 89% and 89% of total net revenues during the first quarter of 2012, and fiscal years 2011 and 2010, 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 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. Our perpetual license maintenance revenues have been trending downward and decreased 8%, 3% and 2% during the first quarter of 2012, fiscal years 2011 and 2010, respectively. In addition, market downturns, such as the downturn beginning in the fall of 2008, and other factors have caused, and may in the future cause, some clients not to renew their maintenance; reduce their level of maintenance; not renew their term license contracts; or renew such term licenses for fewer products or users, all of which adversely affects our renewal rates and revenue from these customers. Our renewal rates are based on cash collections and are disclosed one quarter in arrears. Our reported quarterly renewal rate for perpetual maintenance and term license renewals may fluctuate. For example, our disclosed quarterly renewal rates during 2011 and 2010 were higher than the corresponding periods in 2009, but below those in 2008.  Decreases in renewal rates reflect reduced maintenance expenditures, reduced term license renewals, customer attrition, and reductions in products licensed or number of users by clients, as well as from slower payments received from renewal clients.

We have relatively limited experience with renewals of our term license contracts. We have even less experience with renewals of certain other recurring contracts, such as our SaaS-based offerings, Advent OnDemand and Black Diamond which we acquired in June 2011. Our customers have no obligation to renew their term license or other recurring contracts and given the relatively limited number of years in which we have experience renewing term license and other recurring contracts and fluctuations in term license renewal rates, it is difficult to predict expected renewal rates. Additionally, we cannot predict whether the renewals will be less advantageous to us than the original term or other recurring 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. Further, customers may elect to not renew their term license or other recurring contracts at all. We may incur significantly more costs in securing our term license or other recurring contract renewals than we incur for our perpetual maintenance renewals. If our term license or other recurring 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.

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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 licensing of our software products and services 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 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 in uncertain economic environments, 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 that have impacted our sales and 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.

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, Advent OnDemand and Black Diamond sales which we report quarterly as annual contract value (ACV) bookings. 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 in any particular period is subject to significant fluctuation. For example, during 2011, our ACV bookings increased by 6%, compared to 2010. During the first quarter of 2012, our ACV bookings decreased by 46% compared to the fourth quarter of 2011.

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 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 quarter of 2012 and fiscal years 2011 and 2010, we recognized 91%, 89% and 89%, respectively, of total net revenues from recurring sources. 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. We also experience fluctuations and seasonality in our new business generated each quarter. For example, ACV in the first quarter of 2012 increased by 45% compared to ACV bookings in the comparable 2011 period and decreased by 46% compared to the fourth quarter of 2011. ACV for fiscal 2011 increased 6% compared to the same period in 2010. 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 and term license 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.

Uncertain economic and financial market conditions adversely affect our business.

The market for investment management software systems has been and may in the future be negatively affected by a number of factors, including reductions in capital expenditures by customers and volatile performance of major financial markets. Ongoing macroeconomic concerns in 2011, such as the Euro-zone default risk and US debt ceiling debate, resulted in a cautious buying

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environment and elongated sales cycles in some instances. Since the fall of 2008 through 2010, we experienced some clients and prospects delaying or cancelling additional license purchases, while others went out of business, reduced personnel, or were acquired. The target clients for our products include a range of financial services organizations that manage 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.

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 prior to becoming a combined entity, 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.

The market downturn beginning in the autumn of 2008 caused, and other downturns in the future may cause clients not to renew their term licenses or perpetual license maintenance. Also, significant declines in market value of our clients affect their Assets Under Administration (AUA) or Assets Under Management (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.

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, particularly for SaaS businesses where barriers to entry are relatively lower. Furthermore, competitors may respond to weak market conditions by lowering prices, offering better contractual terms and attempting to lure away our customers and prospects with 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. 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. In addition, in February 2011, Advent Software, Inc. acquired Syncova Solutions, Ltd., a United Kingdom-based company that provides margin management and debt finance reconciliation and optimization software and in June 2011, we acquired Black Diamond, a Florida-based company that provides a web-based,

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outsourced portfolio management and reporting platforms for investment advisors. However, it is too early to know whether these products will meet anticipated sales or will be broadly accepted in the market, whether a market will develop as expected for these new products or whether 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 Geneva®, APX, Axys® and Moxy® products.

We derive a majority of our net revenues from the license and maintenance revenues from our Geneva, APX, Axys 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 Geneva, APX and Axys. As a result, we believe that for the foreseeable future a majority of our net revenues will depend upon continued market acceptance of Geneva, APX, Axys and Moxy, and upgrades to those products.

Our operating results may fluctuate significantly.

Revenues from recurring sources have grown from 89% in 2010, to 89% in 2011 and 91% in the first quarter of 2012, respectively. During the first quarter of 2012, term license revenues comprised approximately 49% of recurring revenues as compared to approximately 46% and 43% in fiscal years 2011 and 2010, respectively. Term license contracts are comprised of both software licenses and maintenance services.

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 the professional services fees earned and related expenses, and a pro-rata amount of the term license revenue 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 in the process of 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. Subsequently in fiscal years 2010, 2011 and during the first quarter of 2012, we returned to our prior trend of net term license revenue deferral. In future periods, our revenues related to completed implementations may vary 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 ACV 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 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.

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

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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 ACV bookings, 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 ACV bookings, 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.

Our increased emphasis on delivering our products as Software-as-a-Service (SaaS) may give rise to risks that could harm our business.

Currently, we offer our suite of products to our customers on premise and over the web on an Advent-hosted or third party-hosted basis. Advent OnDemand and Black Diamond are delivered over the web as our current SaaS product offerings. We plan to continue to expand our current and future SaaS product offerings, including making them available on mobile devices, and we believe that over time our SaaS-based product offerings will comprise an increasing share of our total recurring revenues as more customers adopt SaaS as their preferred solution. The SaaS-based delivery model may vary from the way we price and deliver our products to customers on premise under term licenses. The SaaS-based model will require continued investment in product development and SaaS operations, and may give rise to a number of risks, including the following:

·Increased competition from current or new SaaS-based solutions providers that offer lower priced or more advanced solutions;

·Our increased focus on SaaS-based products may raise concerns among our installed, term license customer base;

·Increased price competition with current or new competitors, resulting in eroding profit margins; and

·We may incur higher operating costs and customer-information security risks associated with hosting large quantities of customer information.

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.  The amount and type of client-related data hosted by Advent also is substantially increasing, and we are providing outsourcing and data integration services in more foreign jurisdictions. Furthermore, our business is becoming increasingly reliant on providing outsourcing and data services. This exposes the Company to many risks.  In connection with cyber attacks or other attempts at unauthorized access, our security measures and those of third parties upon whom we rely could be breached, resulting in unauthorized access to our information or our clients’ information.  Furthermore, due to the complexity of our services and because we also utilize third party data and other vendors, 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. Such potential errors, defects, delays, disruptions, performance problems and security breaches 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.

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

Many of our clients use our proprietary interface to retrieve pricing and other data electronically from Financial Times/Interactive Data (“FTID”). FTID pays us a commission which we classify as other recurring revenues. The commission is based on FTID’s 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 party 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 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.

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

In recent years, Advent has periodically 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 which is up for renewal in 2013. We do not 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.

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 equity incentives becoming less valuable.

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, 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.

We market and sell our products in the United States and, to a growing extent, internationally. Revenues derived from international sales comprised 17%, 18% and 15% of our total revenues in the first quarter of 2012, and fiscal years 2011 and 2010, respectively. We have international subsidiaries in Hong Kong, China, Singapore, Denmark, Netherlands, Norway, Sweden, Switzerland, England, and in the United Arab Emirates.

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, worldwide and regional 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 previously outsourced certain engineering activities to a business partner located in China until we transitioned those contract developers to become employees of our 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;

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·Sovereign debt issues;

·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. 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 impact our business adversely 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 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. More recently, in February 2011, Advent Software, Inc. acquired Syncova Solutions, Ltd., a United Kingdom-based company that provides margin management and debt finance reconciliation and optimization software and in June 2011, Advent Software, Inc. acquired Black Diamond, a Florida-based company that provides web-based, outsourced portfolio management and reporting platforms for independent advisors.

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 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 integrate the operations of these entities successfully 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 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 in Greece 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. Sufficient financing may not be available to us on sufficiently advantageous terms, or at all, and if our existing credit facility is inadequate to meet our needs its existence may make it significantly more difficult to acquire any additional debt. 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.

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

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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.

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.

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

Our cash equivalent and short-term investment portfolio as of March 31, 2012 and December 31, 2011 consisted of US government, foreign 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 March 31, 2012 and December 31, 2011, we had no impairment charges associated with our short-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.

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.

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, wars or political unrest, which has occurred recently in the Middle East, Egypt, Libya and Tunisia, 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. We frequently release new versions of our products, such as during 2011, when we released new versions of APX, Axys, Geneva, Moxy and Tamale RMS, among others. Despite testing by us and by current and

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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 7% and 31%, respectively, as of April 30, 2012). 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 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 Assets Under Management or Assets Under Administration, 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 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, established 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 following four years to clarify and implement the Dodd-Frank Act’s requirements fully.

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.

Additionally, as a publicly-traded company, we are subject to significant regulations including the Dodd-Frank Act and the Sarbanes-Oxley Act of 2002 (“the Sarbanes-Oxley Act”). 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 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 2011, 2010, and 2009, we incurred approximately $0.4 million, $0.4 million and $0.5 million, respectively, in Sarbanes-Oxley Act 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.

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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 (“US GAAP”). 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 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.

For example, the US-based Financial Accounting Standards Board (“FASB”) is currently working together with the International Accounting Standards Board (“IASB”) on several projects intended to further align accounting principles and facilitate more comparable financial reporting between companies who are required to follow GAAP under SEC regulations and those who are required to follow International Financial Reporting Standards (“IFRS”) outside of the US. These efforts by the FASB and IASB may result in different accounting principles under GAAP that may result in different financial results for us in areas including, but not limited to, principles for recognizing revenue, lease accounting and financial statement presentation. A change in accounting principles may have a material impact on our financial statements and may retroactively adversely affect previously reported transactions.

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.

In addition, we could be subject to examination of our income tax returns by the Internal Revenue Service 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.

Borrowings under our credit agreement must be repaid if we fail to comply with certain covenants.

In November 2011, we entered into a credit agreement which provides us credit for an aggregate amount of $150.0 million. We have in the past, and may in the future, borrow under the credit agreement in order to fund working capital requirements, make share repurchases of our common stock or fund acquisitions. In addition, if our anticipated cash flow from our recurring sources of revenue is materially impaired due to customer defaults or failure to renew term licenses, other recurring agreements or maintenance contracts, our ability to borrow under the credit agreement, or continue to meet the contractual covenants, may be compromised. Our continued ability to borrow under our credit agreement is subject to compliance with certain financial and non-financial covenants. The financial covenants require us to maintain compliance with a consolidated leverage ratio, a consolidated interest coverage ratio and a minimum level of liquidity. Our failure to comply with such covenants could cause default under the agreement, and we may then be required to repay such debt with capital from other sources. Under those circumstances, other sources of capital may not be available to us, or be available only on unfavorable terms. In the event of a default which is not remedied within the prescribed timeframe, the assets of the Company (subject to the amount borrowed) may be attached or seized by the lender.

Security risks may harm our business.

Maintaining the security of computers, computer networks, hosted solutions and the transmission of confidential information over public networks, and protecting against cyber attacks and other cyber incidents, 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 be used by those seeking such unauthorized access and result in compromises or breaches of the security of our systems, products or services. Our security measures may be inadequate to prevent cyber attacks and other 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.

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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 2011, 2010 and 2009, the total value of Advent products and services paid with soft dollars was approximately 3% 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 report our financial results accurately 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.

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.

In May 2010, Advent’s Board authorized the repurchase of up to 2.0 million shares of the Company’s common stock. In October 24, 2011, Advent’s Board authorized the repurchase of up to an additional 2.0 million shares of the Company’s common stock. During the first quarter of 2012, the Company repurchased 0.3 million shares of its common stock for an average price per share of $25.38. At March 31, 2012, there remained approximately 1.8 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 May 2010 and October 2011 during the three months ended March 31, 2012:

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				Maximum
	Total	Average		Number of Shares That
	Number	Price		May Yet Be Purchased
	of Shares	Paid		Under Our Share
	Purchased	Per Share		Repurchase Programs
	(shares in thousands)
January 2012	—	$	—	2,045
February 2012	—	$	—	2,045
March 2012	268	$	25.38	1,777
Total	268	$	25.38	1,777

We withheld shares through net share settlements during the three months ended March 31, 2012. 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 and exercise withholding obligations during the three months ended March 31, 2012 (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
January	4	$	24.79	—
February	21	$	27.31	—
March	5	$	25.40	—
Total	30	$	26.64	—

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

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Mine Safety Disclosures

Not applicable.

Item 5.    Other Information

None.

Item 6.    Exhibits

10.1	Executive Incentive Plan (incorporated herein by reference to Appendix B to the Registrant’s Proxy Statement on Schedule 14A filed on March 30, 2012)
31.1	Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002
101	The following materials from the Advent Software, Inc. Form 10-Q for the quarter ended March 31, 2012 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements.

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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: May 10, 2012	By:	/s/ James S. Cox
		James S. Cox Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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