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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-26994
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ADVENT SOFTWARE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 94-2901952
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
301 BRANNAN STREET, SAN FRANCISCO, CALIFORNIA 94107
(Address of principal executive offices and zip code)
(415) 543-7696
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Acts: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of Class)
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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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [X] No[ ]
The number of shares of the registrant's Common Stock outstanding as of June 28,
2002 was 33,544,245. The aggregate market value of the registrant's Common Stock
held by non-affiliates, based upon the closing price on June 28, 2002, as
reported on the NASDAQ National Market System, was approximately $665 million.
Shares of Common Stock held by each officer and director and by each person who
owns 5% or more of the outstanding Common Stock have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.
As of February 28, 2003, there were 31,879,795 shares of the registrant's Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the following documents are incorporated by reference into Parts II and
III of this Form 10-K: (1) 2002 Annual Report to Stockholders of the Registrant
(Part II of this Form 10-K); and (2) Definitive Proxy Statement for the
registrant's Annual Meeting of Stockholders to be held May 14, 2003 (Part III of
this Form 10-K).
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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. 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 and include statements about our products and expected
financial performance. 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 below as well as other risks identified from time to time in other 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.
PART 1
ITEM 1. BUSINESS
OVERVIEW
We are a leading provider of Enterprise Investment Management solutions
that automate and integrate mission-critical functions of investment management
organizations through software products, data integration and professional
services. Our solutions enable organizations of all sizes to run their business
more effectively, enhance client service and performance, and improve
productivity and communication throughout the entire organization.
Advent offers software products, data and data integration services and
professional services to the investment community. Advent Office(R), our suite
of integrated software products, addresses the demand to automate the entire
range of investment management functions, including portfolio management, client
relationship management, trade order management, data warehousing, partnership
accounting, reconciliation management, and web-based portfolio, performance and
analytic reporting. Advent Office(R) includes Axys(R), Advent Partner(R),
Moxy(R), Qube(R), REX(TM) and WealthLine(R). Other financial management software
products we offer are GIFTS(R), FIMS(TM) FoundationPower(TM), AdvisorMart(R),
AdvisorMart Institutional(TM), Financial Office(TM) and Web Office(TM). In
addition, Advent provides data and data integration services such as Advent
Custodial Data(TM), Advent TrustedNetwork(R), Advent Corporate Actions(TM).
We were founded in 1983, incorporated in 1983 in California and
reincorporated in Delaware in November 1995. Our principal executive offices are
located at 301 Brannan Street, San Francisco, California 94107, and our
telephone number is (415) 543-7696. Our internet home page is located at
WWW.ADVENT.COM; however, the information in, or that can be accessed through,
our home page is not part of this report. Our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to
such reports are available, free of charge, on or through our internet home page
as soon as reasonably practicable after we electronically file such material
with, or furnish it to, the Securities and Exchange Commission, or SEC.
INDUSTRY BACKGROUND AND OUR CLIENTS
Our clients include a range of organizations that manage or advise on
assets. They include firms such as asset
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managers, investment advisors, brokerage firms, hedge funds, family offices,
banks and trusts. Our clients also include corporations, public funds,
foundations, universities and non-profit organizations that manage investment
portfolios and perform similar portfolio management functions. In 2002, 2001 and
2000, no one customer accounted for more than 10% of our total revenues, and our
international revenue accounted for less than 8% of our total revenues.
Over the past decade, the investment management industry has
experienced significant growth, which has led to increased demand for software
products that automate, simplify and integrate functions within investment
management organizations. As a result, investment managers are faced with
increasingly complicated portfolio accounting and management requirements as
well as extensive and evolving industry standards and government regulations.
These trends have increased the volume and complexity of information
and data flows within investment management organizations and between
organizations and third parties, such as brokerage firms, clients, custodians,
banks, pricing services and other data providers. Consequently, in order to
operate efficiently, investment management organizations must automate and
integrate their mission-critical and labor-intensive functions, including (i)
investment decision support and client relationship management, (ii) order
management and trading and (iii) portfolio accounting, performance measurement,
report generation and compliance. Investment management organizations
historically have relied on internally developed systems, timesharing services
or simple spreadsheet-based systems to manage information flows. Due to inherent
limitations in each of these types of systems, investment management
organizations are demanding highly functional, easy-to-use, scalable, flexible
and cost-effective software applications that automate and integrate their
mission-critical business functions.
ADVENT SOLUTIONS
Advent is evolving from a product-focused company to a solution-focused
company. Advent solutions are comprised of various combinations of software
products, data integration tools and professional services all aimed at solving
our clients' critical business issues.
SOFTWARE PRODUCTS
We offer an integrated suite of software products for automating and
integrating data and work flows across the investment management organization,
as well as the information flows 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 software product focuses on specific mission-critical
functions of the investment management organization and is tailored to meet the
needs of the particular client, as determined by size, assets under management
and complexity of the investment environment.
AXYS(R), our core application, introduced in 1993, is a highly
functional portfolio accounting and management system targeted towards
investment management organizations of all sizes. Axys provides investment
professionals with broad portfolio accounting functionality, timely decision
support, sophisticated performance measurement and flexible reporting.
Specifically, clients can record, account for and report on a variety of
investment instruments, including equities, fixed income, mutual funds and cash.
Axys users gain access on demand to portfolio holdings, asset allocation,
realized and unrealized gains and losses, actual and projected income and other
valuable data. Portfolio performance can be measured for individual portfolios
or related groups, and for any specified time period. Investment professionals
can choose from over 200 pre-defined reports with flexible "as of date"
reporting, which can be customized as to formats and fonts. In addition, clients
can easily generate fully customized reports with the assistance of Report
Writer Pro. Clients can also produce presentation-quality graphics via an
integrated link with Microsoft Excel's charting capability. Lastly, Axys offers
integrated multi-currency capabilities which, among other things, allows reports
to be restated in any currency, tracks reclaimable foreign withholding tax and
can identify components of return attributable to market prices versus currency
rate fluctuations.
Axys also provides integration with a variety of investment tools and
data. These tools include (i) Moxy, our trade order management solution, (ii)
pricing, corporate actions, analytics and fundamental data via interfaces to
data vendors, (iii) automatic data entry and reconciliation of trades with
interfaces to the Depository Trust Clearing Corporation (DTCC), brokerage firms
and custodians, (iv) integrating through the internet via our custodial data
service and software, (vi) internet reporting via Advent Browser Reporting for
Enterprise Users, our internet reporting service and (vii) data extracts in XML
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format for publishing information of other systems, including professionals' web
sites.
ADVENT PARTNER(R), introduced in December 1996, is a partnership
allocation system that integrates with both Axys and Geneva. This product is
specifically designed for hedge funds, fund administrators, prime brokers and
accounting firms that face the complex and time-consuming task of consistently
and accurately accounting for and reporting on partnerships and hedge funds. The
Windows-based system tracks partner-specific information and handles the
complexities of allocating realized and unrealized gains and losses for tax
purposes. In addition, Advent Partner, calculates performance incentive and
management fees, provides on-demand partner and partnership reporting on an
economic or tax allocation basis, and streamlines the production of partnership
tax returns.
GENEVA(R), introduced in 1995 and made commercially available in
October 1997, is a portfolio accounting system designed to meet the needs of
asset managers and service providers with complex, international accounting
requirements and/or deep securities coverage needs. Clients currently include
industry leading hedge funds, institutional asset managers, prime brokers, and
fund administrators. Geneva offers feature-rich accounting, flexible reporting
(including profit and loss reporting by strategy) and sophisticated
multi-currency capabilities.
MOXY(R), introduced in 1995, automates and streamlines the trading and
order management process. Moxy facilitates accurate trade order management and
preparation, tracks trade-order status, automates the allocation of block trades
across multiple portfolios and electronically interfaces with Axys to provide an
integrated solution. Moxy supports fixed income, mutual funds and equity trading
and offers multi-currency capabilities. Moxy enables investment managers to
accurately adjust portfolio holdings, rebalance portfolios against models,
interactively assess "what-if" scenarios and automatically create orders to be
executed. For traders, Moxy tracks cash and positions during the trading day,
enables the accurate preparation of block trades and internal electronic trade
tickets, facilitates compliance with investment restrictions and trading
requirements and minimizes trading errors. Moxy also allows traders and others
to view the status of orders via customizable screens and maintain an electronic
audit trail of the trade process. Moxy automates the allocation process of
partial and complete executions and allows the user to send allocation results
using OASYS, an electronic allocation system, to communicate allocations to
brokers electronically. Moxy also provides internet-ready electronic order
routing based on the industry standard FIX messaging protocol so that Moxy users
can route trades electronically to any FIX-compliant broker or crossing network
that supports the internet or other TCP/IP connections. Moxy users can choose to
route equity orders via SunGard Direct(TM) which links them to participating
brokers and execution venues. Trades are executed, processed, settled and
accounted for without manual intervention. Moxy electronically posts allocated
trades into Axys on demand, eliminating time-consuming and error-prone manual
entry.
QUBE(R), introduced in 1995, is designed to help securities
professionals develop and improve client relationships by automating scheduling,
tracking client communications and managing client data. Qube integrates with
portfolio information on Axys and enables investment professionals to
interactively screen client investment profiles and notes of conversations to
identify appropriate candidates for various investment opportunities. Qube
captures extensive investment profile information, has online query capability,
mail-merge capabilities and facilitates information sharing across professionals
in an office.
REX(TM), introduced in 1997, is the Advent Office solution for
reconciliation management. REX is integrated with Axys and is designed for firms
that want to electronically reconcile their Axys information against their
custodial information. REX works in conjunction with Advent Custodial Data(TM),
which provides data from a firm's custodians, and automates matching and helps
users identify exceptions, correct or add transactions to their portfolios or
communicate and track changes required by their custodian.
MYADVENT(R), introduced in May 2000, provides a browser-based portal to
Advent Office allowing investment professionals to quickly view summary
information in order to know exactly where they stand at any point in the day.
Users are able to review information and immediately drill down into detailed
data and functionality within other Advent Office components, as well as our
Alliance Partner applications.
WEALTHLINE(R), announced in November 2001, is an investor-facing
advisor-branded secure web communication/collaboration platform. Through the
integration of Advent's software solutions and Advent TrustedNetwork data
service with financial content, secure document publishing and online
collaboration tools advisors
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can provide investors content and tools, such as Axys holdings dynamically tied
to market data services, Axys reports and graphs, important financial documents,
aggregated checking, savings, and credit card balances, as well as stock and
mutual fund quotes, charts, and news. WealthLine delivers to financial advisors
the technology and tools to provide a premium level of service to their high net
worth investors.
ADVENT BROWSER REPORTING FOR ENTERPRISE USERS(SM), introduced in 1999,
allows investment professionals the ability to access Axys from remote locations
via the internet and run Axys reports as if they were in their office.
ADVENT WAREHOUSE(R), introduced in 1998, is a data warehouse solution
designed to allow investment professionals to readily access investment data
regardless of how the data was created or maintained, without impacting the
performance of their high volume transaction-based Advent Office systems.
Relational technology and data warehousing tools provide an open environment for
ad hoc decision support and customized reporting on enterprise wide investment
information. Investment professionals can take advantage of the sea of
information captured during the investment process to improve client service and
gain competitive advantage.
ADVENT INX(R), introduced in 2001, is a development toolkit for
on-demand delivery of portfolio information and derived data. Advent INX is a
solution intended for high-volume investor oriented websites and large internal
integration projects.
ADVENT PACKAGER(TM), launched in September of 2002, allows firms to
create customized statements or "packages" for their clients and other
professional contacts based on a browser-based interface which makes it easy to
track who needs what, and when. Advent Packager simplifies our client's
workflow, and enhances their statements.
ADVENT OUTSOURCE(SM), introduced in September 2000, is a service that
brings our portfolio reporting solution to investment firms that wish to
outsource the management of their portfolio reporting. Investment firms that
choose Advent Outsource are able to leverage the full power of Axys, have their
client data housed for them and will be provided secure access over the internet
to their accounts. This solution is especially attractive to firms that may not
have the resources required to maintain technology operations in-house or are
looking specifically to outsource all of their data management.
GIFTS(R), the windows-based application released in 1994, is a tracking
and grants management system that allows the user to retrieve and classify grant
proposals, generate personalized letters, manage contacts and reviews, schedule
and monitor activities, maintain complete organization history, track payments
and contingencies, and create reports. This software is primarily used by the
philanthropic and grant-making communities, including foundations, corporations,
and government organizations, to manage their grant-making activities. The
Internet Grant Application Module (IGAM) allows grant seekers to submit online
grant applications and facilitates more efficient tracking and processing of
applications by the grant-maker. GIFTS Connections, an internet suite of modules
including MyGIFTS, ReviewerConnnect, and GranteeConnect, enables Web browser
access to personalized, relevant information for anyone involved in the
grant-making process, from any location.
FIMS(TM), the windows-based application launched in 1998, is a modular,
integrated information management system for nonprofit organizations. Modules
include Internet Grant Applications, HostNet, Advisor Xpress, Profiles
(Communications), Gifts (Fundraising/Development), Grants, Accounts Payable,
General Ledger (Fund Accounting and Portfolio Balancing) and FACTS (Pooled
Investment Allocation), united in a single database.
FOUNDATIONPOWER(TM), the windows-based application released in 1993, is
a Windows based customized information management application for nonprofit
organizations. Because each system is customized to only one foundation, it
reflects the procedures, policies and nomenclature at each organization.
ADVISORMART(R), released in May 2000, is a secure, hosted on-line
consolidated reporting and portfolio management system for financial planners
and individual advisors. AdvisorMart provides account reconciliation, investment
tracking and reporting services in a hosted environment. Financial planners and
investment advisors can access their account data via the internet to generate
reports and manage client portfolios. AdvisorMart also allows the financial
planner or investment advisor to communicate with an investor online.
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ADVISORMART INSTITUTIONAL(TM), released in March 2001, is an enterprise
wide, hosted, account consolidation and portfolio management platform for
independent broker-dealers, their financial advisors and the advisor's clients.
AdvisorMart Institutional downloads and reconciles transactional level feeds
from custodians, clearing firms and brokerages to create a reconciled database
for each institution. Individual financial advisors of these institutions access
the service via the internet to create presentation quality performance reports
including a consolidated statement.
FINANCIAL OFFICE(TM) consists of three separate but integrated software
products for financial planners and investment managers. The three products in
the system include:
PORTFOLIO(TM), released in the spring of 1999, provides portfolio
management and performance reporting to financial planners and
investment advisors. The system interfaces with most of the major
custodians. Financial planners and advisors download their custodial
information and then create a graphical report for their investors.
Information can be viewed by client, account or at the transaction
level.
TRADER(TM), released in September 2000, is the trade system that
allows users to generate trades and rebalance client portfolios to
their model allocations.
CONTACT(TM), released in May 2001, is a contact management system
that allows advisors to track and manage client and prospect data.
Users can also manage client documents such as financial plans and
reports and track very specific client information such as income, tax
bracket and other items that are important to their overall plan.
WEB OFFICE(TM), released in May 2002, is a web-based system for
financial planners, investment advisors and smaller broker/dealers. With Web
Office, the firm hosts and manages their database in-house, but can also allow
external users dynamic access to their data. Administrative users at the firm
will download and reconcile account information for all clients, accounts and
transactions associated with their firm. All other users will then access the
system via the web and will be provided with dynamic account, performance and
transaction information.
DATA AND DATA INTEGRATION SERVICES
ADVENT CUSTODIAL DATASM (ACD), introduced in 1997, provides data from a
firm's custodians in a single, secure account at Advent. Advent Custodial Data
then electronically feeds all this information into Advent Office(TM), which
allows a firm to further process the data against their own records.
ADVENT TRUSTEDNETWORK(R), introduced in 2000, is an automated account
consolidation solution that enables investment professionals to generate
cross-institutional, consolidated reports for their clients. With Advent
TrustedNetwork, investment professionals can report on an individual investor's
portfolio of assets regardless of where they are held. Advent TrustedNetwork
sources account information via direct feeds from hundreds of participating
financial institutions.
ADVENT CORPORATE ACTIONS(TM), introduced in May 1999, is a
comprehensive, integrated corporate actions module which integrates with Axys to
automate and simplify the process of manually tracking and processing corporate
actions. Advent Corporate Actions electronically tracks and consolidates
corporate action information from a host of high-quality sources and delivers
daily e-mail reports to portfolio managers and other key staff.
ADVENT WEALTH SERVICE, launched in the fourth quarter of 2002, is an
outsourced data management, reconciliation and reporting service for family
offices, private banks and high net worth advisors and managers. Advent Wealth
Service provides 100% account coverage by combining Advent TrustedNetwork(R)
with Advent's high quality data management and account consolidation services.
Using Advent Wealth Service, and leveraging their existing portfolio reporting
and reconciliation solutions, clients can report on in-house managed accounts
and externally managed accounts, view complete asset allocation information, and
provide holistic advice to their clients.
Advent's subscription-based and transaction-based services allow
clients to (1) download pricing, corporate actions and other data from third
party vendors such as Interactive Data Corporation and (2) interface with DTC,
certain brokerage firms and custodians for trading activity. Many of our clients
use our proprietary interface to electronically retrieve pricing
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and other data from Interactive Data. Interactive Data pays us a commission
based on Interactive Data's revenues from providing such data to our clients.
Our Hub Data subsidiary consolidates securities information and data
from various third party providers such as Merrill Lynch, Interactive Data, J.J.
Kenny, a division of The McGraw-Hill Companies, Xcitek, CCH Incorporated,
Telekurs and others, and provides data feeds and services to a range of
financial institutions via electronic interfaces to many portfolio software
systems.
PROFESSIONAL SERVICES
Professional services consist of consulting including implementation
management, integration management, custom report writing, and training. Many of
our clients purchase consulting services from us to support their
implementations, assist in the conversion of the clients' historical data and
provide ongoing training and education. Consulting services may be required for
as little as two days for small systems or for up to many weeks for large
implementations. We believe that consulting services facilitate a client's early
success with our products, strengthen the relationship with the client and
generate valuable feedback for us.
IMPLEMENTATION MANAGEMENT provides a single point-of-contact who will
work closely with our client's project team to plan the implementation, to
optimize the use of our products, to coordinate Advent resources, to advocate on
their behalf, and to minimize schedule delays and project risks. Additionally,
implementation managers provide documentation for the implementation from
planning through production.
INTEGRATION MANAGEMENT provides services to clients with multifaceted
needs. Integration Managers' work with clients to integrate Advent products with
their existing systems and workflows. The services include: development of
custom interfaces from back-office systems to our Axys and Moxy products,
configuration and management of large volumes of data, and strategies for
deployment of our products for distributed sites.
CUSTOM REPORT WRITING SERVICES enable clients to tailor end-user
reports to their own specifications. We also provide training sessions to our
clients at various sites across the country.
Additionally, we host semi-annual conferences in the United States, as
well as Australian and European conferences, that provide product information
and user workshops for our clients.
MAINTENANCE SUPPORT SERVICES
Due to the mission-critical nature of our products, many clients
purchase annual maintenance contracts, which entitle them to technical support
and product upgrades as they become available. We continually upgrade and
enhance our products to respond to changing market needs, evolving regulatory
requirements and new technologies.
ALLIANCE PROGRAM
Our Alliance Program was launched in May 1998 and is designed to
benefit both our clients and our partners. The program provides a formal process
through which partners can develop, promote, and sell their products, services,
and solutions in conjunction with our suite of applications. Our Alliance
Program was created to further extend our breadth of product and service
offerings.
SALES AND MARKETING
We license and sell our products and services primarily through a
direct sales organization comprised of field sales and telesales
representatives. Our field sales force is organized by geographic region and is
primarily responsible for selling our suite of products to medium and large
investment management organizations. We have sales offices in San Francisco,
California; New York, New York; Cambridge, Massachusetts; Denver, Colorado;
Sydney and Melbourne, Australia; Oslo, Norway; Stockholm, Sweden; Copenhagen,
Denmark; and Athens, Greece. Our telesales organization is primarily focused on
selling our products to existing Axys clients and small and medium- sized
investment management
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organizations. Our sales force is supported and enhanced by extensive, ongoing
product and sales training.
Our marketing department is responsible for assessing market
opportunities, influencing product planning and management, providing guidance
to corporate development, and offering support to the sales organization. This
is all founded upon a rigorous process of market validation, through which we
survey, interview and synthesize information from prospects, existing clients,
product development, sales and our client services department to define the
scope, features and functionality of new products and product upgrades. In
addition, our product managers are responsible for all phases of a product life
cycle from product development through product introduction and beyond. Our
marketing department is also responsible for corporate marketing, including
generating client leads, targeted direct mail campaigns, seminars, advertising,
trade shows and conferences and public relations efforts and also provides the
sales force with appropriate written and electronic materials to use during the
sales process.
PRODUCT DEVELOPMENT
In recent years, we have substantially increased our product
development expenditures in order to accelerate the rate of new product
introductions, incorporate new technologies and sustain the quality of our
products. In 2002, 2001, and 2000, our product development expenditures were
approximately $39.6 million, $27.4 million, and $21.6 million respectively. Our
product development activities include the identification and validation of
product specifications as well as engineering, quality assurance and
documentation.
Our new products and product upgrades require varying degrees of
development time, depending upon the complexity of the accounting requirements
and securities regulations which they are intended to address, as well as the
number and type of features incorporated. To date, we have primarily relied upon
the internal development of our products. We have in the past acquired, and may
again in the future acquire, additional technologies or products from third
parties. We intend to continue to support industry standard operating
environments, client/server architectures and network protocols.
COMPETITION
The market for investment management software is divided by the
relative size of the organizations that manage and advise on investment
portfolios. The market is intensely competitive and highly fragmented, subject
to rapid change and extremely sensitive to new product introductions and
marketing efforts by industry participants. Our competitors include providers of
software and related services as well as providers of timeshare services.
Competitors vary in size, scope of services offered and platforms supported. In
addition, we compete indirectly with 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 independent vendors such as
Advent. Our biggest competition comes from proprietary systems. Beyond that, we
compete against some of the following vendors: Financial Models Company, Inc.,
CheckFree Corporation, Schwab Performance Technologies, StatementOne, Inc.,
Eagle, a subsidiary of Mellon Financial Corporation, Thomson Financial,
Macgregor Financial Technologies, Charles River Development, Reuters Group PLC,
Bloomberg Tradebrook, LLC, Siebel Systems, Inc. and Sungard Data Systems, Inc.
We believe that the most predominant competitive differentiators are product
performance and functionality, ease of use, scalability, ability to integrate
external data sources, product and company reputation, client service and price.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
Our success is dependent in part on our ability to protect our
proprietary technology. We rely on a combination of copyright and trademark
laws, trade secrets, software security measures, confidentiality agreements and
license agreements to establish and protect our proprietary rights and our
software. We have registered trademarks for many of our products and services
and will continue to evaluate the registration of additional trademarks as
appropriate. We generally enter into confidentiality agreements with our
employees and with our resellers and customers. Despite these efforts, 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.
We do not have any patents, and existing copyright laws afford only limited
protection. In addition, we cannot be certain that others will not develop
substantially equivalent or superseding proprietary technology, or that
equivalent products will not be marketed in competition with our products,
thereby substantially reducing the value of our proprietary rights. Furthermore,
confidentiality agreements between us and our employees or any license
agreements with
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our clients may not provide meaningful protection of our proprietary information
in the event of any unauthorized use or disclosure of it. In addition, the laws
of certain countries do not protect our proprietary rights to the same extent as
do the laws of the United States. Accordingly, we may not be able to protect our
proprietary software in the United States or abroad against unauthorized third
party copying or use, which could significantly harm our business.
EMPLOYEES
As of December 31, 2002, we had approximately 981 employees on a full
time basis, including 131 in sales, 236 in professional services, 34 in
marketing, 275 in product development, 149 in client services and support and
156 in finance, administration, operations and general management. We believe
that we maintain competitive compensation, benefits, equity participation and
work environment policies to assist in attracting and retaining qualified
personnel. Our success depends to a significant extent upon the continued
contributions of our senior management and other key personnel, many of who
would be difficult to replace. The loss of the service of one or more senior
managers, or other employees could have a material adverse effect upon our
business, operating results and financial condition. None of our employees are
represented by a labor union. We have not experienced any work stoppages and we
believe our employee relations are good.
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ITEM 2. PROPERTIES
Our principal executive offices are located in San Francisco,
California where we lease three separate facilities: approximately 59,000 square
feet under a lease that expires in 2008 with a five-year extension option;
approximately 50,400 square feet under leases that expire through 2006 with
five-year extension options; and 48,100 square feet under a lease that expires
in 2012 with a five year extension option. We lease five separate offices in New
York; approximately 30,100 square feet under a lease that expires in 2010 with a
five-year extension option; approximately 29,000 square feet under a lease that
expires in 2008 with a five-year extension option; approximately 19,000 square
feet under a lease that expires in 2006; approximately 17,300 square feet under
a lease that expires in 2008; and approximately 24,000 square feet under a lease
that expires in 2012. We also lease space (typically individually less than
12,000 square feet) in various geographic locations throughout the United
States; Sydney and Melbourne, Australia; Oslo, Norway; Stockholm, Sweden;
Copenhagen, Denmark; and Athens, Greece primarily for sales and support
personnel. We believe that these facilities are adequate for our near-term needs
and that suitable additional or alternative space will be available as needed.
ITEM 3. LEGAL PROCEEDINGS
From time to time we are involved in litigation incidental to the
conduct of our business. We are not party to any lawsuit or proceeding that, in
our opinion, is likely to seriously harm our business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
None.
11
Executive Officers of the Registrant
The following sets forth certain information regarding the executive officers of
Advent as of February 28, 2003:
NAME AGE POSITION
-------------------- --- ------------------------------------------
Stephanie G. DiMarco 45 Chairman of the Board
Peter M. Caswell 46 Chief Executive Officer, President and Director
Lily S. Chang 54 Executive Vice President and Chief Technology Officer
Collin A. Cohen 39 Executive Vice President, Product Management, Corporate
Development and Corporate Communications
John P. Geraci 50 Executive Vice President, Eastern Region and European Sales and
Services
Irv H. Lichtenwald 47 Executive Vice President, Chief Financial Officer, Chief
Accounting Officer and Secretary
Dan T. H. Nye 36 Executive Vice President, Marketing, Western Region Sales and
Services, and Support
Graham V. Smith 43 Treasurer and Chief Financial Officer Designate
Ms. DiMarco founded Advent in June 1983. She became Chairman of the Board in
November 1995. In addition, she served as President until April 1997 and Chief
Executive Officer until November 1999. Ms. DiMarco holds a B.S. in Business
Administration from the University of California at Berkeley.
Mr. Caswell joined Advent in December 1993 as Vice President, Sales and
Professional Services. In 1996, Mr. Caswell took on responsibility for our
marketing efforts and was promoted to Senior Vice President. In April 1997, Mr.
Caswell became President and Chief Operating Officer. In November 1999, Mr.
Caswell was promoted to President, Chief Executive Officer, and member of the
Board of Directors. Prior to joining Advent, Mr. Caswell held various management
positions, including Vice President and General Manager, Western Region, with
Dun & Bradstreet Software Services, Inc. and its predecessor, Management Science
America, Inc., a supplier of computer software for finance, marketing,
manufacturing and human resource functions. Mr. Caswell holds a diploma in
Management Studies (M.B.A. equivalent) and a Higher National Diploma in
Agriculture (B.S. equivalent) from Seale Hayne College in England.
Ms. Chang joined Advent in May 1993 as Vice President, Technology. In April
1997, Ms. Chang was promoted to Executive Vice President, Technology and was
also named Chief Technology Officer. From July 1989 to May 1993, Ms. Chang held
various positions, including Vice President, Strategic Accounts and Vice
President of Oracle Financial Applications, with Oracle Corporation, a software
licensing and consulting business. Ms. Chang holds a B.S. in Biochemistry from
Taiwan University.
Mr. Cohen joined Advent in March 1998 as Vice President of Corporate
Development. He is currently an Executive Vice President responsible for the
Product Management, Corporate Development and Corporate Communications. Prior to
joining Advent, Mr. Cohen was a Principal at American Industrial Partners, a
buyout fund. Mr. Cohen also was a Senior Manager at Bain & Company, a leading
international management consulting firm. Mr. Cohen holds an M.B.A. from Harvard
University and a B.A. from Stanford University.
Mr. Geraci joined Advent Software in April 2001 and in August 2001 became our
Executive Vice President, Eastern Region and Europe Sales and Services. Mr.
Geraci has 21 years of experience in the applications software industry. Prior
to joining Advent, Mr. Geraci spent three and one-half years with IMI Software
as President IMI Americas and Chief Operating Officer. IMI specialized in
complex, mission critical order management software. Additionally, Mr. Geraci
was Senior Vice President of Western Europe for MSA Software as well as
President of Information Associates. Prior to his business experience, Mr.
Geraci spent 6 years in the United States Army. He received a Bachelor degree
from the US Military Academy at West Point and an Executive M.B.A. from Emory
University.
Mr. Lichtenwald joined Advent in March 1995 as Chief Financial Officer. From
February 1984 to March 1995,
12
Mr. Lichtenwald served as Chief Financial Officer of Trinzic Corporation, a
computer software developer, and its predecessor Aion Corporation. From February
1982 to February 1984, he served as controller of Visicorp, a computer software
developer. Mr. Lichtenwald holds an M.B.A. from the University of Chicago and a
B.B.A. from Saginaw Valley State College. Mr. Lichtenwald is a Certified Public
Accountant. Mr. Lichtenwald serves on the Board of Directors for Commerce One,
an E-Commerce solutions company, and Sagent Technology, a business intelligence
software company. Mr. Lichtenwald has announced his retirement from Advent
effective March 15th, 2003.
Mr. Nye joined Advent in April 2002 as Executive Vice President. He is
responsible for Marketing, Western Region Sales and Services, and Support. From
1995 to 2001, Mr. Nye worked at software maker Intuit where he held various
management positions including Vice President and General Manager of the Small
Business Division, Vice President and General Manager of the International
Division, and Director of Marketing for Small Business Products. From 1994 to
1995 Mr. Nye served in the Corporate Marketing Group at Intel Corporation and
held various brand management roles at Proctor and Gamble between 1988 and 1992.
Mr. Nye received an M.B.A. from Harvard Business School and a B.A. from Hamilton
College.
Mr. Smith joined Advent in January of 2003 as Treasurer and Chief Financial
Officer Designate. From 2002 to 2003 Mr. Smith served as Chief Financial Officer
of Vitria Technology, an enterprise application integration software company.
From 1998 to 2002 Mr. Smith served as Chief Financial Officer of Nuance
Communications, a voice recognition software company. From 1987 to 1998 Mr.
Smith worked for the Oracle Corporation in a various senior finance roles, most
recently as Vice President of Finance for worldwide operations. Mr. Smith holds
a B.Sc. from Bristol University in England and is a member of the Institute of
Chartered Accountants in England and Wales. Mr. Smith will assume the role of
Chief Financial Officer on March 15th, 2003, the retirement date of Mr.
Lichtenwald.
13
PART II
With the exception of the information incorporated by reference to the 2002
Annual Report to Stockholders in Part II of this Form 10-K, Advent's 2002 Annual
Report to Stockholders is not deemed to be filed as part of this Form 10-K.
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
We have approximately 70 stockholders of record at February 28, 2003. Because
many of our shares of Common Stock are held by brokers and other institutions on
behalf of stockholders, we are unable to estimate the total number of
stockholders represented by these record holders. Other information required by
this Item is incorporated by reference to the sections entitled "Selected
Financial Data - Price Range of Common Stock" and "Corporate Information - Stock
Information" in our 2002 Annual Report to Stockholders. The information required
by this item regarding equity compensation plans is incorporated by reference to
the information set forth in Item 12 of this Annual Report on Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
Other information required by this Item is incorporated by reference to the
sections entitled "Selected Financial Data - Selected Annual Data" and "Selected
Financial Data - Selected Quarterly Data" in our 2002 Annual Report to
Stockholders.
14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is incorporated by reference to the
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in our 2002 Annual Report to Stockholders.
RISK FACTORS
INVESTORS SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE
MAKING AN INVESTMENT DECISION. IN ADDITION, THESE RISKS ARE NOT THE ONLY ONES WE
FACE. ADDITIONAL RISKS WE ARE NOT PRESENTLY AWARE OF OR THAT WE CURRENTLY
BELIEVE ARE IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS OPERATIONS. OUR BUSINESS
COULD BE HARMED BY ANY OF THESE RISKS. THE TRADING PRICE OF OUR COMMON STOCK
COULD DECLINE DUE TO ANY OF THESE RISKS.
OUR OPERATING RESULTS FLUCTUATE SIGNIFICANTLY AND WE MAY NOT BE ABLE TO MAINTAIN
OUR HISTORICAL GROWTH RATES.
Licenses into multi-user networked environments have increased both in
individual size and number, and the timing and size of individual license
transactions are becoming increasingly important factors in quarterly operating
results. The sales cycles for these transactions are often lengthy and
unpredictable. We may not be successful in closing large license transactions
such as these on a timely basis or at all. Accordingly, because revenues from
large licenses may increase as a portion of our net revenues, the timing of such
licenses could cause additional variability in our quarterly operating results.
Software product backlog at the beginning of any quarter typically represents
only a small portion of that quarter's expected revenues. Our expense levels are
based in significant part on our expectations of future revenues and therefore
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
products and services, an unanticipated decline in net revenues in any
particular quarter is likely to disproportionately adversely affect our
operating results. We have often recognized a substantial portion of each
quarter's license revenues in the last month, weeks or even days of that
quarter. As a result, the magnitude of quarterly fluctuations in revenue or
earnings may not be evident until late in or after the close of a particular
quarter and a disruption late in the quarter may have a disproportionately large
negative impact on our quarterly results. These factors impacted our results in
the second, third and fourth quarters of fiscal 2002 and may continue to impact
our results. Additionally, in June 2002, we announced that we would begin to
offer term licenses as an alternative to the perpetual licenses we have
previously sold. Although we believe that this will give us more predictable
revenue over time , it may potentially decrease revenues in the short-term as
some clients make the shift from perpetual to term and as a result we recognize
less revenue at the beginning of the contract.
Because of the above factors, we believe that period-to-period
comparisons of our operating results are not necessarily meaningful and that
these comparisons cannot be relied upon as indicators of future performance.
OUR STOCK PRICE HAS FLUCTUATED SIGNIFICANTLY SINCE OUR INITIAL PUBLIC OFFERING
IN NOVEMBER 1995.
Like many companies in the technology and emerging growth sector, our
stock price may be subject to wide fluctuations, particularly during times of
high market volatility. If net revenues or earnings in any quarter fail to meet
the investment community's expectations, our stock price is likely to decline.
In addition, our stock price may be affected by trends in the financial services
sector and by broader market trends unrelated to our performance.
OUR SALES CYCLE IS LONG AND WE HAVE LIMITED ABILITY TO FORECAST THE TIMING AND
AMOUNT OF SPECIFIC SALES.
Because the purchase of our software products often requires
significant, executive-level investment and systems architecture decisions by
prospective customers, we must generally engage in a relatively lengthy sales
effort. These transactions may 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. As a result, the sales
cycle associated with the purchase of our software products is typically between
two and twelve months depending upon the size of the client, and it can be
considerably longer, and is subject to a number of significant risks over which
we have little or no control, including customers' budgeting constraints and
internal selection procedures, among others. As a result of a lengthy and
unpredictable sales cycle, we have limited ability to forecast the timing and
amount of specific sales. The timing of large individual sales is especially
difficult to forecast. Therefore there can be no assurance that we will be
successful in closing large license
15
transactions on a timely basis or at all. In addition, 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 or due to economic conditions. Because our expenses are
generally 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.
WE DEPEND HEAVILY ON OUR PRODUCT, AXYS.
In 2002, 2001 and 2000, we derived a majority of our net revenues from
the licensing of Axys, part of our Advent Office suite, and related applications
and services. In addition, many of our other applications, such as Moxy, Qube
and various data interfaces were designed to operate with Axys to provide an
integrated solution. As a result, we believe that a majority of our net
revenues, for the foreseeable future will depend upon continued market
acceptance of Axys, enhancements or upgrades to Axys and related products and
services. As our clients include a range of organizations including asset
managers, investment advisors, brokerage firms, hedge funds, family offices,
banks and trusts and others, the degree of continued market acceptance will also
depend on the number of firms within each of the categories and the degree to
which Axys previously penetrated those firms.
WE DEPEND UPON FINANCIAL MARKETS.
The target clients for our products include a range of organizations
that manage investment portfolios, including investment advisors, brokerage
firms, banks and hedge funds. In addition, we target corporations, public funds,
universities and non-profit organizations, which also manage investment
portfolios and have many of the same needs. The success of many of our clients
is intrinsically linked to the health of the financial markets. We believe that
demand for our products could be disproportionately affected by fluctuations,
disruptions, instability or downturns in the financial markets 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, a slowdown in formation of new investment firms or a
decline in the growth of assets under management would cause a decline in demand
for our products. We believe that the economic downturn in the financial markets
negatively impacted the demand for our products in the second, third and fourth
quarters of fiscal 2002, and that a continuing downturn could have a material
adverse effect on our business and results of operations.
DIFFICULTIES IN INTEGRATING OUR ACQUISITIONS COULD ADVERSELY IMPACT OUR BUSINESS
AND WE FACE RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS, INVESTMENTS OR
DIVESTITURES.
In 2001, we completed acquisitions of Rex Development Partners, L.P.,
NPO Solutions, Inc., certain assets of ManagerLink.com LLC and our Scandinavian
distributors located in Norway, Sweden and Denmark. In 2002, we completed the
acquisition of Kinexus Corporation, Techfi Corporation, our Greek distributor
Advent Hellas and Advent Outsource Data Management, LLC. Our acquisition of
Kinexus Corporation is our largest acquisition to date, and the number of
acquisitions completed in 2001 and 2002 was unprecedented.
The complex process of integrating Kinexus and our other acquisitions
has required and will continue to require significant resources, particularly in
light of our relative inexperience in integrating acquisitions. Integrating
these acquisitions has been and will continue to be time consuming, expensive
and disruptive to our business. This integration process has strained our
managerial controls, and has resulted in the diversion of management and
financial resources from our core business objectives. Failure to achieve the
anticipated benefits of these acquisitions or to successfully integrate the
operations of these entities could harm our business, results of operations and
cash flows. We may not realize the benefits we anticipate from these
acquisitions because of the following significant challenges:
o expected synergy benefits from these acquisitions, such as lower
costs or increased revenues, may not be realized or may be
realized more slowly than anticipated, particularly with regard to
costs associated with a reduction in headcount and facilities;
o potentially incompatible cultural differences between the
companies;
o incorporating these companies' technologies and products into our
current and future product lines;
16
o geographic dispersion of operations and the complexities of
international operations;
o integrating the technical teams of these companies with our
engineering organizations;
o generating market demand for an expanded product line;
o integrating the products of these companies with our business,
because we do not have distribution, manufacturing, marketing or
support experience for these products;
o the difficulty of leveraging our combined technologies and
capabilities across all product lines and customer bases; and
o our inability to retain previous customers or employees of these
entities.
We have incurred and expect to continue to incur significant costs and
commit significant management time in integrating the operations, technology,
development programs, products, information systems, customers and personnel of
these acquisitions. These costs have been and will likely continue to be
substantial and include costs for:
o integrating and reorganizing operations, including combining
teams, facilities and processes in various functional areas;
o identifying duplicative or redundant resources and facilities,
developing plans for resource consolidation and implementing
those plans;
o fees and expenses of professionals and consultants involved in
completing the integration process;
o settling existing liabilities of these companies;
o uncovering through our audit process new issues reflected on the
companies' financial statements;
o costs associated with vacating, subleasing and closing facilities;
o employee relocation, redeployment or severance costs;
o integrating technology and products; and
o other transaction costs associated with the acquisition, including
financial advisor, attorney, accountant and exchange agent fees.
We may make additional acquisitions of complementary companies,
products or technologies in the future, which would further exacerbate these
issues. In addition, we continually evaluate the performance of all our products
and product lines and may sell or discontinue current products or product lines.
Failure to achieve the anticipated benefits of any future acquisition or
divestiture could also 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. 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 acquisitions.
DIFFICULTIES WE MAY ENCOUNTER MANAGING A SUBSTANTIALLY LARGER BUSINESS COULD
ADVERSELY AFFECT OUR OPERATING RESULTS.
Our business has grown in recent years through both internal expansion
and acquisitions, and that growth along with any continued growth may cause a
significant strain on our infrastructure, internal systems and managerial
resources. For example, during 2001 and 2002, we acquired Rex Development
Partners, L.P., NPO Solutions, Inc., certain assets of
17
ManagerLink.com LLC, our Scandinavian and Greek distributors (located in Norway,
Sweden, Denmark and Greece), Kinexus Corporation, Techfi Corporation and Advent
Outsource Data Management, LLC. Further, our headcount increased from 481
employees at December 31, 1998 to 981 at December 31, 2002. To manage our growth
effectively, we must continue to improve and expand our infrastructure,
including operating and administrative systems and controls, and continue
managing headcount, capital and processes in an efficient manner. Our
productivity and the quality of our products may be adversely affected if we do
not integrate and train our new employees quickly and effectively and coordinate
among our executive, engineering, finance, marketing, sales, operations and
customer support organizations, all of which add to the complexity of our
organization and increase our operating expenses. In addition, our revenues may
not grow at a sufficient rate to absorb the costs associated with a larger
overall headcount. Integrating our recent acquisitions will complicate these
tasks.
WRITING OFF INVESTMENTS COULD HARM OUR RESULTS OF OPERATIONS.
In addition, we have made investments in privately held companies,
which we classify as "other assets" on our balance sheet. The value of these
investments is influenced by many factors, including the operating effectiveness
of these companies, the overall health of these companies' industries, the
strength of the private equity markets and general market conditions. Due to
these and other factors, we have previously determined, and may in the future
determine, that the value of these investments is impaired, which has caused and
would cause us to write down the stated value of these investments such as the
write-off of our investments in Encompys and MyCFO during 2002. Furthermore, we
cannot be sure that future investment, license, fixed asset or other asset
write-downs will not happen, particularly if the current economic downturn
continues. If future write-downs do occur, they could harm our business and
results of operations.
GENERAL ECONOMIC CONDITIONS MAY REDUCE OUR REVENUES.
We believe that the market for large investment management software
systems may be negatively impacted by a number of factors, including reductions
in capital expenditures by large customers; poor performance of major financial
markets, and increasing competition. Those factors may, in turn, give rise to a
number of market trends, which we experienced in the second, third and fourth
quarters of fiscal 2002, that may slow revenue growth across the industry,
including longer sales cycles, deferral or delay of information technology
projects and generally reduced expenditures for software and related services,
and increased price competition. If the current economic slowdown continues, the
presence of these factors in the market for large investment management software
systems will likely materially adversely affect our business and results of
operations.
BUSINESS INTERRUPTIONS COULD ADVERSELY AFFECT OUR BUSINESS.
Our operations are exposed to interruption by fire, earthquake, power
loss, telecommunications failure, and other events beyond our control.
Additionally, we are vulnerable to interruption caused by political and
terrorist incidents. For example, our facilities in New York were temporarily
closed due to the September 11, 2001 terrorist attacks. Immediately after the
terrorist attacks, our clients who were located in the World Trade Center area
were concentrating on disaster recovery rather than licensing additional
software components, while the grounding of transportation impeded our ability
to deliver professional services at client sites. Additionally, during the
temporary closure of the U.S. stock markets, our clients did not use our market
data services. Such interruptions could affect our ability to sell and deliver
products and services and other critical functions of our business and could
seriously harm us. Further, such attacks could cause instability in the
financial markets upon which we depend.
WE ARE CONTINUING TO EXPAND OUR INTERNET BASED ENABLED SOLUTIONS, SUCH AS ADVENT
TRUSTEDNETWORK AND WEALTHLINE.
To take advantage of the internet, we are continuing to develop
solutions to bring internet-based products and services to our clients. As we
develop these new products and services, we have entered, and will continue to
enter, into development agreements and other agreements with information
providers, clients or other companies in order to accelerate the delivery of new
products and services, such as our relationship with Microsoft for WealthLine.
We may not be successful in marketing our internet services or in developing
other internet services or maintaining these relationships. Internet-based
products contain certain unique technical challenges, such as scalability and
latency requirements, that we may not be
18
successful in solving, and if we cannot successfully overcome such challenges
our products may fail. Additionally, we may not be successful in being able to
replace our current technology with new technology. Our failure to do so could
seriously harm our business. In addition, we cannot assure you that there will
not be disruptions in internet services beyond our control or that of our third
party vendors. Any such disruptions could harm our business.
SECURITY RISKS AND CONCERNS MAY DETER THE USE OF THE INTERNET FOR CONDUCTING
BUSINESS.
A significant barrier to commerce and communications over public
networks is the secure transmission of confidential information. Advances in
computer capabilities, new discoveries in the field of cryptography or other
events or developments could result in compromises or breaches of our security
systems or those of other web sites to protect proprietary information. If any
well-publicized compromises of security were to occur, it could have the effect
of substantially reducing the use of the internet for commerce and
communications. Anyone who circumvents our security measures could
misappropriate proprietary information or cause interruptions in our services or
operations. The internet is a public network, and data is sent over this network
from many sources. In the past, computer viruses, software programs that disable
or impair computers, have been distributed and have rapidly spread over the
internet. Computer viruses could be introduced into our systems or those of our
customers or other third parties, which could disrupt or make it inaccessible to
customers. We may be required to expend significant capital and other resources
to protect against the threat of security breaches or to alleviate problems
caused by breaches. To the extent that our activities may involve the storage
and transmission of proprietary information, security breaches could expose us
to a risk of loss or litigation and possible liability. Our security measures
may be inadequate to prevent security breaches, and our business would be harmed
if our security were breached.
WE FACE RISKS RELATED TO OUR NEW BUSINESS AREAS.
We have expanded in recent periods into a number of new business areas
to foster long-term growth including international operations, strategic
alliances, and Advent TrustedNetwork. These areas are still relatively new to
our product development and sales personnel. New business areas require
significant management time and resources prior to generating significant
revenues and may divert management from our core business. There is no assurance
that we will compete effectively or will generate significant revenues in these
areas. The success of our ability to develop and market new internet based
products and services, such as Advent TrustedNetwork and WealthLine, is
difficult to predict because it represents a new area of business for our entire
industry. While our traditional offerings are marketed to investment managers
and advisors, certain of our new offerings are also targeted for use by our
clients' customers. We may have difficulty creating demand from our clients'
customers as we market to them indirectly through our clients. Revenue growth
may suffer if we cannot create demand among our client's customers. Also, we
have recently entered into new markets through our acquisitions, and we may not
be successful in competing in those areas. Additionally, to help manage our
growth, we will need to continually improve our operational, financial,
management and information systems and controls.
WE EXPECT OUR GROSS AND OPERATING MARGINS MAY FLUCTUATE OVER TIME.
We expect that our gross and operating margins may fluctuate from
period to period as we continue to introduce new products, change our
professional services organization and associated revenue, continue to hire and
acquire additional personnel and increase other expenses to support our
business. Because these expenses are relatively fixed in the short term, a
fluctuation in revenue could lead to operating results differing from
expectations.
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 and evolving industry standards. 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 to respond to these changing standards and practices. We may not be
successful in developing, introducing and marketing 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 may result in client
dissatisfaction and delay or loss of product revenues. If we are unable, for
technological or other reasons, to develop and introduce new products or
enhancements of existing products in a timely
19
manner in response to changing market conditions or client requirements, or if
new products or new versions of existing products do not achieve market
acceptance, our business would be seriously harmed. In addition, our ability to
develop new products and product enhancements is 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, or if such products are
unexpectedly delayed in their introduction, our business could be seriously
harmed. Our software products are complex and may contain undetected defects or
errors when first introduced or as new versions are released. Although we have
not experienced adverse effects resulting from any software errors, we cannot be
sure that despite testing by us and our clients, defects or errors will not be
found in new products after commencement of commercial shipments, resulting in
loss of or delay in market acceptance, which could seriously harm our business.
IF OUR RELATIONSHIP WITH INTERACTIVE DATA CORPORATION IS TERMINATED, OUR
BUSINESS MAY BE HARMED.
Many of our clients use our proprietary interface to electronically
retrieve pricing and other data from Interactive Data Corporation. Interactive
Data Corporation pays us a commission based on their revenues from providing
this data to our clients. Our software products have been customized to be
compatible with their system and this software would need to be redesigned if
their services were unavailable for any reason. Termination of our agreement
with Interactive Data Corporation would require at least two years notice by
either us or them, or 90 days in the case of material breach. If our
relationship with Interactive Data Corporation were terminated or their services
were unavailable to our clients for any reason, replacing these services could
be costly and time consuming.
WE FACE INTENSE COMPETITION.
The market for investment management software is intensely competitive
and highly fragmented; is subject to rapid change and is extremely sensitive to
new product introductions and marketing efforts by industry participants. Our
competitors include providers of software and related services as well as
providers of timeshare services, and include some of the following vendors:
Financial Models Company, Inc., CheckFree Corporation Schwab Performance
Technologies, StatementOne, Inc., Eagle, a subsidiary of Mellon Financial
Corporation, Thomson Financial, Macgregor Financial Technologies ,Charles River
Development, Reuters Group PLC, Bloomberg Tradebrook, LLC, Siebel Systems, Inc.
and Sungard Data Systems, Inc. We experience significant competition from
proprietary systems.
Our competitors vary in size, scope of services offered and platforms
supported. In addition, we compete indirectly with 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 independent
vendors like Advent. Many of our competitors have longer operating histories and
greater financial, technical, sales and marketing resources than we do. In
addition, we also face competition from potential new entrants into our market
that may develop innovative technologies or business models. We cannot guarantee
that we will be able to compete successfully against current and future
competitors or that competitive pressures will not result in price reductions,
reduced operating margins and loss of market share, any one of which could
seriously harm our business.
WE FACE CHALLENGES IN EXPANDING OUR INTERNATIONAL OPERATIONS.
We market and sell our products in the United States and, to a lesser
extent, internationally. In November 1998, we purchased an independent
distributor in Australia, which markets and licenses our products in Australia.
In addition, we entered into a distributor relationship in 1999 with Advent
Europe, an independent distributor of our products in selected European markets.
In November 2001, we acquired the Norwegian, Swedish, and Danish companies of
this independent distributor and in September 2002, we purchased their Greek
subsidiary. In order to further expand our international operations, we will
need to continue to establish additional locations, acquire other businesses or
enter into additional distribution relationships in other parts of the world.
The expansion of our existing international operations and entry into additional
international markets will require significant management attention and
financial resources. We cannot be certain that establishing new business in
other countries will produce the desired levels of revenue. We currently have
limited experience in developing localized versions of our products and
marketing and distributing our products internationally. In addition,
international operations are subject to other inherent risks, including:
20
o The impact of recessions in economies outside the United States;
o Greater difficulty in accounts receivable collection and longer
collection periods;
o Unexpected changes in regulatory requirements;
o Difficulties in successfully adapting our products to the
language, regulatory and technology standards of other countries;
o Difficulties and costs of staffing and managing foreign
operations;
o Reduced protection for intellectual property rights in some
countries;
o Potentially adverse tax consequences; and
o Political and economic instability.
The revenues, expenses, assets and liabilities of our international
subsidiaries are primarily denominated in local currencies. We have not
historically undertaken foreign exchange hedging transactions to cover potential
foreign currency exposure. Future fluctuations in currency exchange rates may
adversely affect revenues from international sales and the U.S. dollar value of
our foreign subsidiaries' revenues, expenses, assets and liabilities. Our
international revenues from our distributors are generally denominated in local
foreign currencies.
UNDETECTED SOFTWARE ERRORS OR FAILURES FOUND IN NEW PRODUCTS MAY RESULT IN LOSS
OF OR DELAY IN MARKET ACCEPTANCE OF OUR PRODUCTS THAT COULD SERIOUSLY HARM OUR
BUSINESS.
Our products may contain undetected software errors or failures when
first introduced or as new versions are released. Despite testing by us and by
current and potential customers, errors may not be found in new products until
after commencement of commercial shipments, resulting in loss of or a delay in
market acceptance, which could seriously harm our business.
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 and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect our proprietary
rights. We have registered trademarks for many of our products and services and
will continue to evaluate the registration of additional trademarks as
appropriate. We generally enter into confidentiality agreements with our
employees and with our resellers and customers. We seek to protect our software,
documentation and other written materials under trade secret and copyright laws,
which afford only limited protection. Despite these efforts, 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. We do
not have any patents, and existing copyright laws afford only limited
protection. In addition, we cannot be certain that others will not develop
substantially equivalent or superseding proprietary technology, or that
equivalent products will not be marketed in competition with our products,
thereby substantially reducing the value of our proprietary rights. We cannot be
sure that we will develop proprietary products or technologies that are
patentable, that any patent, if issued, would provide us with any competitive
advantages or would not be challenged by third parties, or that the patents of
others will not adversely affect our ability to do business. Litigation may be
necessary to protect our proprietary technology. This litigation may be
time-consuming and expensive. 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. We cannot be sure that our means of
protecting our proprietary rights will be adequate or that our competitors will
not independently develop similar technology, duplicate our products or design
around any patent that may be issued to us or other intellectual property rights
of ours.
21
WE MUST RETAIN KEY EMPLOYEES AND RECRUIT QUALIFIED TECHNICAL AND SALES
PERSONNEL.
We believe that our success will depend on the continued employment of
our senior management and key technical personnel, none of whom has an
employment agreement with us. Additionally, our continued success depends, in
part, on our ability to identify, attract, motivate and retain qualified
technical, sales and other personnel. Because our future success is dependent on
our ability to continue to enhance and introduce new products, we are
particularly dependent on our ability to identify, attract, motivate and retain
qualified engineers with the requisite education, backgrounds and industry
experience. Competition for qualified engineers, particularly in Northern
California and the San Francisco Bay Area, is intense. The loss of the services
of a significant number of our engineers or sales people could be disruptive to
our development efforts or business relationships and could seriously harm our
business. We may also be required to create additional performance and retention
incentives in order to retain our employees, including the granting of
additional stock options to employees at current prices or issuing incentive
cash bonuses. Such incentives may either dilute our existing stockholder base or
result in unforeseen operating expenses, which may cause our stock price to
fall.
INFORMATION WE PROVIDE TO INVESTORS IS ACCURATE ONLY AS OF THE DATE WE
DISSEMINATE IT.
From time to time, we may publicly disseminate forward- looking
information or guidance in compliance with Regulation FD promulgated by the
Securities and Exchange Commission. This information or guidance represents our
outlook only as of the date we disseminate it.
22
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to financial market risks, including changes in foreign
currency exchange rates and interest rates. Much of our revenue and capital
spending is transacted in U.S. dollars. However, since the acquisitions of
Advent Australia, Advent Denmark, Advent Norway, Advent Sweden and Advent
Hellas, whose revenues and capital spending are transacted in local country
currencies, we have greater exposure to foreign currency fluctuations. Results
of operations from Advent Australia, Advent Denmark, Advent Norway, Advent
Sweden and Advent Hellas are not material to our operating results; therefore,
we believe that foreign currency exchange rates should not materially adversely
affect our overall financial position, results of operations or cash flows.
We believe that the fair value of our investment portfolio or related
income would not be significantly impacted by increases or decreases in interest
rates due mainly to the short-term nature of our investment portfolio. However,
immediate sharp increases in interest rates could have a material adverse affect
on the fair value of our investment portfolio. Conversely, immediate sharp
declines in interest rates could seriously harm interest earnings of our
investment portfolio.
The table below presents principal amounts by expected maturity (in
U.S. dollars) and related weighted average interest rates by year of maturity
for our investment portfolio (in thousands):
ESTIMATED FAIR VALUE AT DECEMBER 31, 2002
--------------------------------------------------------------
MATURING IN
--------------------------------------------------------------
2003 2004 2005 2006 2007 TOTAL
---------- ---------- ---------- ---------- ---------- -----------
Federal Instruments........................ $ 5,594 $ 17,077 $ 4,009 $ -- $ -- $ 26,680
Weighted Average Interest Rate............. 2.52% 2.6% 3.0% -- -- 2.64%
Commercial Paper & Short-term obligations.. $ 52,126 $ -- $ -- $ -- $ -- $ 52,126
Weighted Average Interest Rate............. 1.62% -- -- -- -- 1.62%
Corporate Notes & Bonds.................... $ 20,898 $ 6,362 $ 5,096 $ 1,026 $ 526 $ 33,908
Weighted Average Interest Rate............. 6.96% 6.44% 3.39% 5.25% 4.4% 6.23%
Municipal Notes & Bonds.................... $ 17,300 $ 13,102 $ 4,084 $ -- $ -- $ 34,486
Weighted Average Interest Rate............. 4.17% 4.83% 4.89% -- -- 4.50%
Corporate Equity Securities................ $ 335 $ -- $ -- $ -- $ -- $ 335
---------- ---------- ---------- ---------- ---------- -----------
Total Portfolio, excluding equity
securities............................... $ 96,253 $ 36,541 $ 13,188 $ 1,026 $ 526 $ 147,535
========== ========== ========== ========== ========== ===========
At December 31, 2002, cash, cash equivalents and short-term marketable
securities totaled approximately $173.8 million, which is comprised of the
$147.5 million in our investment portfolio, presented above, and $26.3 million
in other cash and cash equivalents.
We also invested in several privately held companies, most of which can
still be considered in the start-up or development stages and are classified as
"other assets" on our balance sheet. In 2002 we purchased approximately 15% of
the outstanding stock of LatentZero Limited ("LatentZero"), a privately held
company located in England. Our investment in LatentZero totaled approximately
$7 million and is accounted for under the equity method of accounting because
the Chairman of our Board of Directors is a member of LatentZero's Board of
Directors. Our portion of the net income or losses for this investment has not
been significant to date. At December 31, 2002 our net investments in privately
held companies including LatentZero were $11 million. These investments are
inherently risky as the market for the technologies or products they have under
development are typically in the early stages and may never materialize. The
value of these investments is influenced by many factors, including the
operating effectiveness of these companies, the overall health of the companies'
industries, the strength of the private equity markets and general market
conditions. We could lose our entire initial investment in these companies.
Item 8. Financial Statements and Supplementary Data
23
(1) Financial Statements.
The following financial statements of Advent and the Report of Independent
Accountants are incorporated by reference to page 27 through 52 of our 2002
Annual Report to Stockholders:
Consolidated Balance Sheets - December 31, 2002 and 2001
Consolidated Statements of Operations - Years Ended December 31, 2002, 2001, and
2000
Consolidated Statements of Stockholders' Equity - Years Ended December 31, 2002,
2001, and 2000
Consolidated Statements of Cash Flows - Years Ended December 31, 2002, 2001, and
2000
Notes to Consolidated Financial Statements
Report of Independent Accountants
(2) Financial Statement Schedule.
The following financial statement schedule for the years ended December 31,
2002, 2001, and 2000 is filed as part of this Form 10-K and should be read in
conjunction with our Consolidated Financial Statements.
Report of Independent Accountants S-1
Schedule II - Valuation and Qualifying Accounts S-2
Schedules not listed above have been omitted because they are not applicable or
are not required or because the required information is included in the
Consolidated Financial Statements or Notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
Certain information required by Part III is omitted from this Form 10-K
in that the Registrant will file a definitive proxy statement pursuant to
Regulation 14A of the Securities Exchange Act of 1934, as amended, ("Proxy
Statement") not later than 120 days after the end of the fiscal year covered by
this Form 10-K and certain information included therein is incorporated herein
by reference. Only those sections of the Proxy Statement that specifically
address the items set forth herein are incorporated by reference and such
incorporation does not include, specifically, the Performance Graph included in
such Proxy Statement.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item relating to our directors and
nominees and disclosure relating to compliance with Section 16(a) of the
Securities Exchange Act of 1934 is included under the captions "Election of
Directors" and "Compliance with Section 16(a) of the Exchange Act" in our Proxy
Statement for the 2003 Annual Meeting of Stockholders and is incorporated by
reference. The information required by this item relating to our executive
officers and key employees is included under the caption "Executive Officers of
the Registrant" under Item 4 in Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
24
Information required by this Item is incorporated by reference to our
Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this Item is incorporated by reference to our
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item is incorporated by reference to our
Proxy Statement.
PART IV
ITEM 14. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
Within 90 days prior to the filing date of this Annual Report on Form
10-K (the "Evaluation Date"), we evaluated, under the supervision of our chief
executive officer and our chief financial officer, the effectiveness of our
disclosure controls and procedures. Based on this evaluation, our chief
executive officer and chief financial officer concluded that our disclosure
controls and procedures are effective to ensure that information we are required
to disclose in reports that we file or submit under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms.
CHANGES IN INTERNAL CONTROLS.
Our review of our internal controls was made within the context of the
relevant professional auditing standards defining "internal controls,"
"significant deficiencies," and "material weaknesses." "Internal controls" are
processes designed to provide reasonable assurance that our transactions are
properly authorized, our assets are safeguarded against unauthorized or improper
use, and our transactions are properly recorded and reported, all to permit the
preparation of our financial statements in conformity with generally accepted
accounting principles. "Significant deficiencies" are referred to as "reportable
conditions," or control issues that could have a significant adverse effect on
the ability to record, process, summarize and report financial data in the
financial statements. A "material weakness" is a particularly serious reportable
condition where the internal control does not reduce to a relatively low level
the risk that misstatements caused by error or fraud may occur in amounts that
would be material in relation to the financial statements and not be detected
within a timely period by employees in the normal course of performing their
assigned functions. As part of our internal controls procedures, we also address
other, less significant control matters that we or our auditors identify, and we
determine what revision or improvement to make, if any, in accordance with our
on-going procedures.
Subsequent to the Evaluation Date, there were no significant changes in
our internal controls or in other factors that could significantly affect our
internal controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.
25
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Form 10-K:
1. Consolidated Financial Statements required to be filed by Item 8
of Form 10-K. See the list of Financial Statements contained in
Item 8 of this Report.
2. Financial Statement Schedule required to be filed by Item 8 of
Form 10-K. See the list of Financial Statement Schedule contained
in Item 8 of this Report.
3. Exhibits.
The Exhibits listed on the accompanying Index to Exhibits
immediately following the financial statement schedules are
filed as part of, or incorporated by reference into, this
Form 10-K.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------------------------------------------------------------------
2.1++++ Agreement and Plan of Merger by and among Advent Software, Inc.,
Kayak Acquisition Corp, and Kinexus Corporation dated as of December 31, 2001.
3.1**** Second Amended and Restated Certificate of Incorporation of Registrant.
3.2 Amended and Restated Bylaws of Registrant.
4.1+ Specimen Common Stock Certificate of Registrant.
10.1+ Form of Indemnification Agreement for Executive Officers and Directors.
10.2++ 1992 Stock Plan, as amended.
10.3+ 1993 Profit Sharing & Employee Savings Plan, as amended.
10.4+ 1995 Employee Stock Purchase Plan.
10.5+++ 1995 Director Option Plan.
10.6***** 2002 Stock Plan
10.7+ Severance Agreement between Advent and Peter M. Caswell dated December 10, 1993.
10.8+* Agreement between Advent and Interactive Data Corporation dated January 1, 1995.
10.9** Office Lease dated August 1, 1998, between SOMA Partners, L.P. and
Advent for facilities located at 301 Brannan in San Francisco, California.
10.10*** Office Lease dated July 22, 1999, between 405 Lexington, L.L.C. and
Advent for facilities located at 666 Third Avenue in New York, New York.
13.1 Selected Portions of Advent Software, Inc.'s 2002 Annual Report to Stockholders.
21.1 Subsidiaries of Advent.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
24.1 Power of Attorney (included on page 27 of this Form 10-K).
99.1 Certifications of Chief Executive Officer and Chief Financial Officer
----------
+ Incorporated by reference to the exhibit filed with Advent's registration statement
filed on Form SB-2 (commission file number 33-97912-LA), declared effective on
November 15, 1995
++ Incorporated by reference to the exhibit filed with Advent's registration statement
filed on Form S-8 on May 28, 1999.
+++ Incorporated by reference to the exhibit filed with Advent's registration statement
filed on Form S-8 on August 11, 2000.
++++ Incorporated by reference to the exhibit filed with Advent's report on Form 8-K
filed February 28, 2002.
* Confidential treatment requested as to certain portions of this exhibit.
** Incorporated by reference to Advent's Annual Report on Form 10-K for the year ended
December 31, 1998.
*** Incorporated by reference to Advent's Annual Report on Form 10-K for the year ended
December 31, 1999.
**** Incorporated by reference to Advent's Annual Report on Form 10-K for the year ended
December 31, 2000.
***** Incorporated by reference to Advent's Annual Report on Form 10-K for the year ended
December 31, 2001.
(b) Reports on Form 8-K
None.
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on this 14th day of
March, 2003.
ADVENT SOFTWARE, INC.
By: /s/ Peter M. Caswell
-----------------------------------
Peter M. Caswell
CHIEF EXECUTIVE OFFICER
PRESIDENT AND DIRECTOR
(PRINCIPAL EXECUTIVE OFFICER)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Peter M. Caswell and Irv H. Lichtenwald, jointly
and severally, his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Form 10-K, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
or her substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- ---------------------------------------------- -------------------------------------------- ----------------------------------------
/s/ Peter M. Caswell Chief Executive Officer, President and March 14, 2003
Peter M. Caswell Director
(Principal Executive Officer)
- ---------------------------------------------- -------------------------------------------- ----------------------------------------
/s/ Irv H. Lichtenwald Executive Vice President, March 14, 2003
Irv H. Lichtenwald Chief Financial Officer, Chief
Accounting Officer and Secretary
(Principal Financial Officer)
- ---------------------------------------------- -------------------------------------------- ----------------------------------------
/s/ Stephanie G. DiMarco Chairman of the Board and Director March 14, 2003
Stephanie G. DiMarco
- ---------------------------------------------- -------------------------------------------- ----------------------------------------
Terry Carlitz Director
- ---------------------------------------------- -------------------------------------------- ----------------------------------------
/s/ Frank H. Robinson Director March 14, 2003
Frank H. Robinson
- ---------------------------------------------- -------------------------------------------- ----------------------------------------
/s/ Wendell G. Van Auken Director March 14, 2003
Wendell G. Van Auken
- ---------------------------------------------- -------------------------------------------- ----------------------------------------
/s/ William F. Zuendt Director March 14, 2003
William F. Zuendt
- ---------------------------------------------- -------------------------------------------- ----------------------------------------
/s/ Monte Zweben Director March 14, 2003
Monte Zweben
- ---------------------------------------------- -------------------------------------------- ----------------------------------------
27
I, Peter M. Caswell, certify that:
1. I have reviewed this annual report on Form 10-K of Advent Software, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I am responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 14, 2003
/s/ Peter M. Caswell
--------------------------------------
Peter M. Caswell
CHIEF EXECUTIVE OFFICER AND PRESIDENT
28
I, Irv H. Lichtenwald, certify that:
1. I have reviewed this annual report on Form 10-K of Advent Software, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I am responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 14, 2003
/s/ Irv H. Lichtenwald
--------------------------------------
Irv H. Lichtenwald
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER,
CHIEF ACCOUNTING OFFICER AND SECRETARY
29