Advent Software (ADVS)

Q2 2011 Earnings Call

July 25, 2011 5:00 pm ET


Stephanie DiMarco - Founder, Chief Executive Officer and Director

David Hess - President

James Cox - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Heidi Flaherty - Vice President of Financial Planning and Investor Relations


David Scharf - JMP Securities LLC

Sterling Auty - JP Morgan Chase & Co

Gil Luria - Wedbush Securities Inc.

Alan Dworsky - Mt. Auburn Company



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Good day, ladies and gentlemen, and welcome to the Second Quarter 2011 Advent Software, Inc. Earnings Conference Call. My name is Jonathan, and I'm your operator for today. [Operator Instructions] And as a reminder, this conference call is being recorded for replay purposes. I'd now like to hand the call off to Ms. Heidi Flaherty, Vice President of Finance and Investor Relations. You may proceed, ma'am.

Heidi Flaherty

Thanks, Jonathan. Thank you for joining us today for Advent's Second Quarter 2011 Earnings Call. Hosting our call today are Stephanie DiMarco, Advent’s Chief Executive Officer; Peter Hess, Advent's President; and Jim Cox, Advent’s Chief Financial Officer.

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 and the future performance of the company. 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 discussed a number of these risks in detail in the company’s SEC reports, including our quarterly report on Form 10-Q and our 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 of 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 Continuing Operations', 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 the GAAP to non-GAAP financial measures.

I'll now turn the call over to Stephanie.

Stephanie DiMarco

Thanks, Heidi and welcome, everyone. Thank you for joining us. I'm pleased to report that Advent had a strong second quarter. Revenues were $60 million -- I'm sorry, $80 million, a 16% increase and new bookings were $6.6 million while operating profitability was up 26% year-over-year. Later in the call, I'll talk more about our accomplishments and highlights. But first, let me turn the call over to Jim, who will provide further details on the numbers.

James Cox

Thanks, Stephanie. Our second quarter results reflects strong revenue growth and continued leverage in our operating model. Total net revenue in the second quarter was $80.1 million, up 16% over the second quarter of 2010. International revenue comprised 20% of that total, up from 15% in the same quarter last year. It's nice to see that our investments in our international business are showing traction, as more of our large international customers, including Emirates National Bank of Dubai and the Singapore sovereign wealth fund, Temasek, have gone live. Because we do not recognized any revenues until our services are substantially complete, when large customers go live, we recognize multiple quarters worth of deferred revenues. Therefore, in the third quarter, we expect the percentage of international revenue will be a couple percent lower as these clients move to their regular revenue run rate.

Recurring revenue, which includes term licenses, perpetual maintenance and other recurring revenues in the AUA fee, was up $9.7 million or 16% over the prior year, and accounted for 89% of total revenue. This increase was primarily driven by the 23% growth in term fee revenue after normalizing for the effects of the implementation deferrals in both periods.

Other recurring revenues grew $3.2 million or 19% over the prior year, including $1 million of revenues from Black Diamond. Nonrecurring revenue, which includes perpetual license, professional services and other grew by $1.1 million or 14% over second quarter of 2010. Professional services revenue drove this growth as our consultants across the world were busy implementing our products for our clients. After eliminating the $1.7 million decrease in gross margin from the term service deferral, nonrecurring revenue gross margins were breakeven.

Moving to bookings and renewals. Annual contract value for new contracts signed during the second quarter was $6.6 million, up 1% from the second quarter of last year as we experienced the slowdown in decision-making in the last weeks of the quarter especially on larger deals. Based upon our pipeline, we expect stronger bookings in the second half of the year.

Our renewal rate, which is based on cash collections, and therefore reported 1 quarter in arrears, was 91% in the first quarter, up 1 point over the same period last year. While the rate was up year-over-year, it was down from the fourth quarter of 2010. As we indicated in the last quarter's call, the decrease was primarily due to 1 client who had given us notice they would consolidate onto their new parent company's platform a couple of years ago. Our renewal rate for the fourth quarter of 2010 increased from the initially reported rate of 95% to an updated 96% as we received additional collections.

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