Advent Software, Inc. (ADVS)

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Advent Software, Inc. (ADVS)

Q1 2009 Earnings Call

April 28, 2009 5:00 pm ET


Heidi Flaherty – VP IR

Stephanie DiMarco – CFO & CEO

Jim Cox – Principal Accounting Officer

Peter Hess – President


Sterling Auty - JPMorgan

Gil Luria - Wedbush Securities

Andrey Glukhov – Brean, Murray, Carret & Co.

Tim Fox - Deutsche Bank

Jonathan Maietta - Needham & Company

Thomas McCrohan - Janney Montgomery Scott

Justin Hughes – Philadelphia Financial



Good afternoon, at this time I would like to welcome everyone to Advent’s first quarter 2009 earnings conference call. (Operator instructions) Ms. Flaherty, you may begin your conference.

Heidi Flaherty

Good afternoon. I am Heidi Flaherty, Vice President of Financial Planning and Investor Relations. Thank you for joining us today for Advent's first quarter 2009 earnings call. Hosting our call today are Stephanie DiMarco, Advent's Chief Executive and Financial Officer and Jim Cox, Advent’s Principal Accounting Officer. Also with us today from New York, is our President, Peter Hess.

To begin, Stephanie will give a brief overview of the quarter then Jim will review the financials. Stephanie will then return to discuss Advent’s recent business highlights, after which we will open up the call for your questions.

On our IR home page, you will find a presentation that summarizes our first quarter results and an updated summary of trended operating metrics. These two documents will assist you in understanding our business.

Most of you participating in this call are aware of the regulations regarding forward-looking statements. Accordingly, we would like to note that during the course of this conference call, we will make forward-looking statements regarding future events or the future performance of the company including estimated future operating results, anticipated benefits of acquisitions including Tamale Software, international growth, domestic demand, market acceptance of our products and new product releases, uncertain market conditions and the general momentum in the business.

We wish to caution you that such statements are just predictions that involve risks and uncertainties and that actual events or results could differ materially. We discuss a number of these business risks in detail in the company's SEC reports, including our Quarterly Reports on Form 10-Q and our 2008 Annual Report on Form 10-K and any forward-looking statements must be considered in the context of such risks and uncertainties.

The company disclaims any intention or obligation to publicly update or revise any forward-looking statements whether as a result of events or circumstances after the date hereof or to reflect the occurrence on unanticipated events.

As a reminder, we include non-GAAP financial measures in our disclosures. These non-GAAP financial results are not meant to be considered in isolation or as a substitute for results prepared on a GAAP basis. Please refer to the tables entitled Reconciliation of Selected GAAP Measures to Non-GAAP Measures in our earnings release, which is filed with the SEC on a Form 8-K and available on our website for a reconciliation of GAAP to non-GAAP financial measures.

I will now turn the call over to Stephanie.

Stephanie DiMarco

Thanks Heidi, and welcome everyone. Thank you for joining us this afternoon. I am pleased to report that Advent delivered a strong first quarter. Revenues were $73 million, up 18% year over year, GAAP earnings per share were $0.24 and non-GAAP earnings per share were a record $0.38.

First quarter operating cash flow was $14 million, up 51% year over year, GAAP operating margin was 14%, up 7.5 points, and non-GAAP operating margin was 21%, up eight points. Later in the call I’ll talk more about the first quarter results as well as how we view the current economic climate’s impact on our business.

But first let me turn the call over to Jim Cox, to review our financial results.

Jim Cox

Thanks Stephanie, there are four areas I will cover today, first bookings and revenue, second expenses and profitability, third balance sheet items, and finally guidance.

We were pleased with our revenue performance in the first quarter. Revenue as Stephanie said was $72.8 million, up 18% over the first quarter of 2008. Term license revenue was up $11.7 million over the first quarter of 2008 and was the primary growth driver as we continue to layer incremental ACV booked in previously quarters into our term revenue.

The portfolio of total revenue that is recurring has been growing consistently and is now 84%, up from 80% in the same period last year. New term license annual contract values signed this quarter was $3.3 million. The first quarter is historically our toughest bookings quarter and the economic backdrop certainly created a tough selling environment.

In general we have to work a bit longer and a bit harder to get deals signed. Having said that, we booked new business in this environment because our value proposition remains compelling to our customers.

Our initial blended renewal rate for the fourth quarter of last year was 94%, which shows a sequential reduction of 4% from the third quarter. We are finding it more difficult to increase prices on our renewals. Additionally renewal rates on initial term renewals are lower then perpetual maintenance renewals. We are evaluating this trend and believe the main reason for this difference is longer renewal negotiations that result in cash not being collected at the time of initial disclosure.

As you know our renewal rates are disclosed one quarter in arrears and are based on cash collections, so they are updated as cash continues to be collected. In the fourth quarter there was one large term renewal which has not yet been collected that if collected, could increase the rate by five percentage points.

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