PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ADVENT SOFTWARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	September 30			December 31
	2013			2012
ASSETS
Current assets:
Cash and cash equivalents	$	41,380		$	58,217
Short-term marketable securities	—			111,192
Accounts receivable, net	56,597			61,069
Deferred taxes, current	18,934			18,934
Prepaid expenses and other	30,917			25,868
Current assets of discontinued operation	—			88
Total current assets	147,828			275,368
Property and equipment, net	31,602			37,269
Goodwill	206,956			206,932
Other intangibles, net	30,478			38,205
Long-term marketable securities	—			61,552
Deferred taxes, long-term	20,399			24,524
Other assets	16,024			12,994
Noncurrent assets of discontinued operation	1,609			1,609

Total assets	$	454,896		$	658,453

LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable	$	9,771		$	5,190
Accrued liabilities	35,713			37,096
Deferred revenues	165,152			174,388
Income taxes payable	—			5,593
Current portion of long-term debt	20,000			10,000
Current liabilities of discontinued operation	625			262
Total current liabilities	231,261			232,529
Deferred revenue, long-term	7,617			8,787
Long-term income taxes payable	5,335			5,335
Long-term debt	330,000			85,000
Other long-term liabilities	11,556			13,139
Noncurrent liabilities of discontinued operation	2,928			3,804

Total liabilities	588,697			348,594

Commitments and contingencies (See Note 12)

Stockholders’ (deficit) equity:
Common stock	509			505
Additional paid-in capital	32,673			453,585
Accumulated deficit	(176,869		)	(154,261		)
Accumulated other comprehensive income	9,886			10,030
Total stockholders’ (deficit) equity	(133,801		)	309,859

Total liabilities and stockholders’ (deficit) equity	$	454,896		$	658,453

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

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ADVENT SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended September 30						Nine Months Ended September 30
	2013			2012			2013			2012

Net revenues:
Recurring revenues	$	88,116		$	81,090		$	260,862		$	240,752
Non-recurring revenues	8,651			9,084			24,518			26,050

Total net revenues	96,767			90,174			285,380			266,802

Cost of revenues:
Recurring revenues	17,782			17,216			52,173			51,962
Non-recurring revenues	11,501			13,011			31,088			33,615
Amortization of developed technology	2,508			2,586			7,405			7,700

Total cost of revenues	31,791			32,813			90,666			93,277

Gross margin	64,976			57,361			194,714			173,525

Operating expenses:
Sales and marketing	18,546			17,965			58,967			56,122
Product development	17,369			17,077			52,254			50,377
General and administrative	10,894			8,752			43,895			27,619
Amortization of other intangibles	953			955			2,863			2,867
Recapitalization costs	—			—			6,041			—
Restructuring (benefit) charges	(157		)	(17		)	2,959			53

Total operating expenses	47,605			44,732			166,979			137,038

Income from continuing operations	17,371			12,629			27,735			36,487

Interest and other income (expense), net	(2,977		)	(130		)	(4,610		)	(1,105		)

Income from continuing operations before income taxes	14,394			12,499			23,125			35,382
Provision for income taxes	4,561			4,812			5,390			13,181

Net income from continuing operations	$	9,833		$	7,687		$	17,735		$	22,201

Discontinued operation:
Net (loss) income from discontinued operation (net of applicable taxes of $(16), $(13), $45 and $134, respectively)	(20		)	11			68			233

Net income	$	9,813		$	7,698		$	17,803		$	22,434

Basic net income (loss) per share:
Continuing operations	$	0.19		$	0.15		$	0.35		$	0.44
Discontinued operation	(0.00		)	0.00			0.00			0.00
Total operations	$	0.19		$	0.15		$	0.35		$	0.44

Diluted net income (loss) per share:
Continuing operations	$	0.18		$	0.15		$	0.33		$	0.42
Discontinued operation	(0.00		)	0.00			0.00			0.00
Total operations	$	0.18		$	0.15		$	0.33		$	0.43

Weighted average shares used to compute net income (loss) per share:
Basic	51,576			50,401			51,241			50,722
Diluted	53,937			52,248			53,329			52,764

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

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

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ADVENT SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended September 30				Nine Months Ended September 30
	2013		2012		2013			2012

Net income	$	9,813	$	7,698	$	17,803		$	22,434

Other comprehensive income (loss), net of taxes
Foreign currency translation adjustments	3,495		3,033		(155		)	2,496
Available-for-sale securities (net of applicable (benefit) taxes of $(11), $18, $(20) and $7, respectively)	36		38		11			22
Total other comprehensive income (loss), net of taxes	3,531		3,071		(144		)	2,518

Comprehensive income	$	13,344	$	10,769	$	17,659		$	24,952

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

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ADVENT SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands)

(Unaudited)

												Accumulated
						Additional						Other			Total
	Common Stock					Paid-In			Accumulated			Comprehensive			Stockholders’
	Shares		Amount			Capital			Deficit			Income			Equity (Deficit)

Balances, December 31, 2011	50,997		$	510		$	429,734		$	(154,053	)	$	6,870		$	283,061

Stock-based award activity	670		7			(1,053		)	—			—			(1,046		)
Common stock repurchased and retired	(1,651	)	(17		)	(10,634		)	(30,624		)	—			(41,275		)
Common stock issued under employee stock purchase plan	155		2			3,446			—			—			3,448
Stock-based compensation	—		—			15,535			—			—			15,535
Tax benefit from exercise of stock options	—		—			4,693			—			—			4,693
Net income	—		—			—			22,434			—			22,434
Unrealized gain on marketable securities	—		—			—			—			22			22
Foreign currency translation adjustments	—		—			—			—			2,496			2,496
Balances, September 30, 2012	50,171		$	502		$	441,721		$	(162,243	)	$	9,388		$	289,368

Balances, December 31, 2012	50,457		$	505		$	453,585		$	(154,261	)	$	10,030		$	309,859

Stock-based award activity	1,909		19			10,320			—			—			10,339
Common stock repurchased and retired	(1,600	)	(16		)	(829		)	(40,411		)	—			(41,256		)
Common stock issued under employee stock purchase plan	174		1			3,210			—			—			3,211
Stock-based compensation	—		—			33,474			—			—			33,474
Tax shortfall from exercise of stock options	—		—			(1,174		)	—			—			(1,174		)
Tax benefit from exercise of stock options	—		—			4,220			—			—			4,220
Cash dividends declared on common stock	—		—			(470,133		)	—			—			(470,133		)
Net income	—		—			—			17,803			—			17,803
Unrealized gain on marketable securities	—		—			—			—			11			11
Foreign currency translation adjustments	—		—			—			—			(155		)	(155		)
Balances, September 30, 2013	50,940		$	509		$	32,673		$	(176,869	)	$	9,886		$	(133,801	)

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

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ADVENT SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended September 30
	2013			2012
Cash flows from operating activities:
Net income	$	17,803		$	22,434
Adjustment to net income for discontinued operation net income	(68		)	(233		)
Net income from continuing operations	17,735			22,201

Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:
Stock-based compensation	40,597			15,344
Excess tax benefit from stock-based compensation	(4,220		)	(4,693		)
Depreciation and amortization	18,903			19,372
Amortization of debt issuance costs	593			285
Provision for doubtful accounts	290			209
(Reduction of) provision for sales reserves	(196		)	1,019
Deferred income taxes	6,281			4,043
Other	(45		)	(521		)
Effect of statement of operations adjustments	62,203			35,058
Changes in operating assets and liabilities:
Accounts receivable	4,181			8,062
Prepaid and other assets	(860		)	4,137
Accounts payable	3,843			(2,066		)
Accrued liabilities	(9,801		)	(7,137		)
Deferred revenues	(10,210		)	(13,506		)
Income taxes payable	(5,190		)	7,024
Effect of changes in operating assets and liabilities	(18,037		)	(3,486		)

Net cash provided by operating activities from continuing operations	61,901			53,773

Cash flows from investing activities:
Cash used in acquisition	—			(700		)
Purchases of property and equipment	(2,161		)	(5,383		)
Capitalized software development costs	(2,556		)	(1,942		)
Purchases of marketable securities	(57,863		)	(91,926		)
Sales and maturities of marketable securities	228,619			69,600

Net cash provided by (used in) investing activities from continuing operations	166,039			(30,351		)

Cash flows from financing activities:
Proceeds from common stock issued from exercises of stock options	18,382			4,211
Proceeds from common stock issued under the employee stock purchase plan	3,211			3,448
Excess tax benefits from stock-based compensation	4,220			4,693
Withholding taxes related to equity award net share settlement	(8,043		)	(5,257		)
Proceeds from debt	375,000			—
Repayment of debt	(120,000		)	(3,750		)
Debt issuance costs	(5,725		)	—
Repurchase of common stock	(41,256		)	(41,275		)
Payment of cash dividend	(470,133		)	—

Net cash used in financing activities from continuing operations	(244,344		)	(37,930		)

Net cash transferred to discontinued operation	(358		)	(593		)

Effect of exchange rate changes on cash and cash equivalents	(75		)	258

Net change in cash and cash equivalents from continuing operations	(16,837		)	(14,843		)
Cash and cash equivalents of continuing operations at beginning of period	58,217			65,525

Cash and cash equivalents of continuing operations at end of period	$	41,380		$	50,682

Supplemental disclosure of cash flow information:
Noncash investing activities:
Capital expenditures included in accounts payable	$	738		$	—
Cash flows from discontinued operation:
Net cash used in operating activities	$	(358	)	$	(593	)
Net cash provided by investing activities	—			—
Net cash transferred from continuing operations	358			593
Net change in cash and cash equivalents from discontinued operation	—			—
Cash and cash equivalents of discontinued operation at beginning of period	—			—
Cash and cash equivalents of discontinued operation at end of period	$	—		$	—

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

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

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ADVENT SOFTWARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Basis of Presentation

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

Advent has prepared these condensed consolidated financial statements in accordance with the rules and regulations of the US Securities and Exchange Commission (“SEC”) applicable to interim financial information. Certain information and footnote disclosures included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted in these interim statements pursuant to such SEC rules and regulations. These interim financial statements should be read in conjunction with the audited financial statements and related notes included in Advent’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012. Interim results are not necessarily indicative of the results to be expected for the full year, and no representation is made thereto.

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

Recent Accounting Pronouncements

With the exception of the below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the nine months ended September 30, 2013, as compared to the recent accounting pronouncements described in Advent’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, that are of significance, or potential significance, to the Company’s condensed consolidated financial statements.

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). ASU 2013-02 provides additional guidance regarding reclassifications out of accumulated other comprehensive income (“AOCI”). ASU 2013-02 requires entities to report the effect of significant reclassifications out of AOCI on the respective line items in net income unless the amounts are not reclassified in their entirety to net income. For amounts that are not required to be reclassified in their entirety to net income in the same reporting period, entities are required to cross-reference other disclosures that provide additional detail about those amounts. ASU 2013-02 is effective prospectively for reporting periods beginning after December 15, 2012. The adoption of this ASU in the first quarter of 2013 had no impact on the Company’s condensed consolidated financial statements as the guidance relates only to additional disclosures. See Note 16, “Accumulated Other Comprehensive Income” for further information.

In March 2013, the FASB issued ASU No. 2013-05, Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (“ASU 2013-05”). ASU 2013-05 clarifies the applicable guidance applied for the release of cumulative translation adjustments into net income when a reporting entity either sells a part or all of its investment in a foreign entity or ceases to have a controlling financial interest in a subsidiary or group of assets that constitute a business within a foreign entity. ASU 2013-05 is effective prospectively for reporting periods beginning after December 15, 2013, with early adoption permitted. ASU 2013-05 was early adopted by the Company effective April 1, 2013 and had no impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 requires, unless certain conditions exists, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, similar tax loss, or a tax credit carryforward. ASU 2013-11 is effective prospectively for reporting periods beginning after December 15, 2013, with early adoption permitted. Retrospective application is permitted. ASU 2013-11 was early adopted by the Company effective April 1, 2013 and had no impact on the Company’s condensed consolidated financial statements.

Note 2—Cash Equivalents and Marketable Securities

Cash, cash equivalents and marketable securities primarily consist of money market mutual funds, US government and US Government Sponsored Entities (GSE’s), foreign government debt securities and high credit quality corporate debt securities. All marketable securities were considered available-for-sale and were carried at fair value on the Company’s condensed consolidated balance sheet. Short-term marketable securities mature twelve months or less, and long-term marketable securities mature greater than twelve months, from the date of the condensed consolidated balance sheet.

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At September 30, 2013, the Company had no marketable securities.

Marketable securities at December 31, 2012 are summarized as follows (in thousands):

					Gross			Gross
					Unrealized			Unrealized
			Gross		Losses			Losses
	Amortized		Unrealized		Less than			12 Months		Aggregate
Balance at December 31, 2012	Cost		Gains		12 Months			or Longer		Fair Value

Corporate debt securities	$	110,540	$	13	$	(45	)	$	—	$	110,508
US government debt securities	59,811		7		(3		)	—		59,815
Foreign government debt securities	2,415		6		—			—		2,421
Total	$	172,766	$	26	$	(48	)	$	—	$	172,744

Unrealized gains and losses are a component of “Accumulated other comprehensive income” in the accompanying condensed consolidated balance sheet.

During the nine months ended September 30, 2013 and 2012, $228.6 million and $69.6 million, respectively, of marketable securities were sold or matured, which did not have any associated material gross realized gains or losses.

Note 3—Derivative Financial Instruments

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

The Company uses foreign currency forward contracts to hedge a portion of its receivable balances denominated in Euro, Swedish Krona, British Pounds, South African Rand and Norwegian Kroner. The Company recognizes gains and losses on these contracts, as well as related costs, in “Interest and other income (expense), net” in the accompanying condensed consolidated statements of operations along with the gains and losses of the related hedged items. The Company records the fair value of derivative instruments as either “Prepaid expenses and other” or “Accrued liabilities” in the accompanying condensed consolidated balance sheets based on current market rates.

At September 30, 2013 and December 31, 2012, net derivative assets (liabilities) associated with forward contracts of approximately $0 and $(27,000), respectively, were included in “Prepaid expenses and other” or “Accrued liabilities” in the accompanying condensed consolidated balance sheets. The effect of the derivative financial instruments on the condensed consolidated statements of operations for the nine months ended September 30, 2013 was to increase foreign exchange gains by approximately $45,000 and reflects net realized and unrealized gains related to our derivative financial instruments. The derivative financial instruments had no effect in the same period last year.

As of September 30, 2013, Advent had no outstanding foreign currency forward contracts.

Note 4—Discontinued Operation

During 2009, the Company discontinued the operations of its MicroEdge subsidiary, which provided products and services to the not-for-profit business community, to concentrate on its core investment management business. Certain assets and obligations of the Company’s discontinued operation were excluded from the sale and are reflected on the Company’s balance sheets as current and noncurrent assets and liabilities of discontinued operation as of September 30, 2013 and December 31, 2012. These assets included deferred tax assets. Liabilities excluded from the sale included sales tax and other tax-related obligations and continuing lease obligations included as part of the restructuring noted below.

The Company continually evaluates the adequacy of the remaining liabilities related to this disposition. Although the Company believes that these estimates accurately reflect costs for its facility exit costs, actual results may differ, thereby requiring the Company to record additional provisions or reverse a portion of such provisions.

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The following table sets forth an analysis of the components of the restructuring charges related to the Company’s discontinued operation and the payments and non-cash charges made against the accrual during the nine months ended September 30, 2013 (in thousands):

	Facility Exit
	Costs

Balance of restructuring accrual at December 31, 2012	$	4,030
Restructuring adjustments	(205		)
Cash payments	(444		)
Adjustment of prior restructuring costs	90

Balance of restructuring accrual at September 30, 2013	$	3,471

Of the remaining restructuring accrual of $3.5 million at September 30, 2013, $0.5 million is included in “Current liabilities of discontinued operation” in the accompanying condensed consolidated balance sheet. The facility exit costs will be paid over the remaining lease term through November 2018.

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

	Three Months Ended September 30					Nine Months Ended September 30
	2013			2012		2013		2012

Net revenues	$	—		$	—	$	—	$	—

Net (loss) income from operation of discontinued operation (net of applicable taxes of $(16), $(13), $45 and $134, respectively)	$	(20	)	$	11	$	68	$	233

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

	September 30		December 31
	2013		2012

Assets:
Prepaid rent	$	—	$	88
Total current assets of discontinued operation	$	—	$	88

Deferred taxes, long-term	$	1,609	$	1,609
Total noncurrent assets of discontinued operation	$	1,609	$	1,609

Liabilities:
Accrued expenses and taxes	$	625	$	262
Total current liabilities of discontinued operation	$	625	$	262

Accrued restructuring, long-term portion	$	2,928	$	3,804
Total noncurrent liabilities of discontinued operation	$	2,928	$	3,804

Note 5—Special Dividend

On June 13, 2013, the Company’s Board of Directors declared a one-time special cash dividend (the “Special Dividend”) of $9.00 per share payable on each Common Share to stockholders of record at the close of business on July 1, 2013 (the “Dividend Record Date”). Based on the 52,237,055 shares of common stock outstanding on the Dividend Record Date, the dividend totaled $470.1 million and was paid to stockholders on July 9, 2013. The dividend reduced additional paid-in capital as the Company did not have retained earnings. With the exception of the Special Dividend, Advent has not historically declared any cash dividends and currently has no plans to pay cash dividends in the future.

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The Company financed the Special Dividend with cash, cash equivalents and marketable securities as well as borrowings under its Restated Credit Agreement. Refer to Note 10, “Debt” for additional information about the Company’s Restated Credit Agreement.

Note 6—Financial Statement Detail

Recurring and non-recurring revenues

The following is a summary of recurring and non-recurring revenues (in thousands):

	Three Months Ended September 30				Nine Months Ended September 30
	2013		2012		2013		2012

Term license revenues	$	47,087	$	39,352	$	133,369	$	117,733
Perpetual maintenance revenues	16,632		17,071		49,401		50,380
Assets under administration revenues	1,471		1,653		6,376		5,189
Other recurring revenues	22,926		23,014		71,716		67,450

Total recurring revenues	$	88,116	$	81,090	$	260,862	$	240,752

	Three Months Ended September 30				Nine Months Ended September 30
	2013		2012		2013		2012

Professional servies and other revenues	$	8,281	$	8,488	$	22,675	$	23,835
Perpetual license fees	370		596		1,843		2,215

Total non-recurring revenues	$	8,651	$	9,084	$	24,518	$	26,050

Prepaid expenses and other

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

	September 30		December 31
	2013		2012

Prepaid contract expense	$	10,318	$	9,798
Deferred commissions	6,411		7,370
Prepaid income tax	5,854		—
Debt issuance costs	1,417		—
Other	6,917		8,700

Total prepaid expenses and other	$	30,917	$	25,868

Other assets

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

	September 30		December 31
	2013		2012

Prepaid contract expense, long-term	$	4,409	$	3,598
Debt issuance costs	5,254		1,146
Long-term deferred commissions	3,452		3,909
Deposits	2,610		2,555
Other	299		1,786

Total other assets	$	16,024	$	12,994

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Deposits include a restricted cash balance of $1.3 million at September 30, 2013 and December 31, 2012 primarily related to the Company’s San Francisco headquarters and facilities in New York. Refer to Note 12, “Commitments and Contingencies” for additional information.

Accrued liabilities

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

	September 30		December 31
	2013		2012

Salaries and benefits payable	$	20,569	$	23,365
Deferred rent, current portion	1,868		1,353
Accrued restructuring, current portion	245		3,142
Other	13,031		9,236

Total accrued liabilities	$	35,713	$	37,096

Accrued restructuring charges are discussed further in Note 9, “Restructuring Charges”. At September 30, 2013 and December 31, 2012, “Other” accrued liabilities included accruals for sales and business taxes and other miscellaneous items.

Other long-term liabilities

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

	September 30		December 31
	2013		2012

Deferred rent	$	9,397	$	10,502
Long-term deferred tax liability	1,656		2,141
Other	503		496

Total other long-term liabilities	$	11,556	$	13,139

Note 7—Goodwill

The changes in the carrying value of goodwill for the nine months ended September 30, 2013 were as follows (in thousands):

	Goodwill

Balance at December 31, 2012	$	206,932
Translation adjustments	24

Balance at September 30, 2013	$	206,956

Foreign currency translation adjustments reflect the impact of translating goodwill balances denominated in various foreign currencies to the U.S. Dollar. The $24,000 translation adjustment resulted from a weakening of the U.S. Dollar exchange rate versus other currencies during the nine months ended September 30, 2013.

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Note 8—Other Intangibles, Net

Other intangibles are summarized as follows (in thousands, except weighted average amortization period):

	Weighted
	Average
	Amortization
	Period			Accumulated
	(Years)	Gross		Amortization			Net

Purchased technologies	5.1	$	50,201	$	(37,285	)	$	12,916
Product development costs	3.0	21,135		(16,677		)	4,458

Developed technology sub-total		71,336		(53,962		)	17,374

Customer relationships	6.4	40,825		(28,987		)	11,838
Other intangibles	4.1	4,637		(3,371		)	1,266

Other intangibles sub-total		45,462		(32,358		)	13,104

Balance at September 30, 2013		$	116,798	$	(86,320	)	$	30,478

	Weighted
	Average
	Amortization
	Period			Accumulated
	(Years)	Gross		Amortization			Net


Purchased technologies	5.1	$	50,642	$	(31,934	)	$	18,708
Product development costs	3.0	18,431		(14,937		)	3,494

Developed technology sub-total		69,073		(46,871		)	22,202

Customer relationships	6.4	40,924		(26,919		)	14,005
Other intangibles	4.1	4,645		(2,647		)	1,998

Other intangibles sub-total		45,569		(29,566		)	16,003

Balance at December 31, 2012		$	114,642	$	(76,437	)	$	38,205

The changes in the carrying value of other intangibles during the nine months ended September 30, 2013 are summarized as follows (in thousands):

				Accumulated
	Gross			Amortization			Net

Balance at December 31, 2012	$	114,642		$	(76,437	)	$	38,205
Additions	2,704			—			2,704
Amortization	—			(10,268		)	(10,268		)
Translation adjustments	(548		)	385			(163		)

Balance at September 30, 2013	$	116,798		$	(86,320	)	$	30,478

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Based on the carrying amount of other intangibles as of September 30, 2013, the estimated future amortization is as follows (in thousands):

	Three
	Months Ending
	December 31		Years Ending December 31
	2013		2014		2015		2016		2017		Thereafter		Total

Developed technology	$	1,823	$	6,586	$	5,554	$	2,990	$	421	$	—	$	17,374
Other	908		3,377		3,215		2,712		1,869		1,023		13,104

Total	$	2,731	$	9,963	$	8,769	$	5,702	$	2,290	$	1,023	$	30,478

Note 9—Restructuring Charges

During the nine months ended September 30, 2013, Advent recorded additional restructuring charges of $3.0 million related to severance and benefit costs associated with a re-organization plan approved in October 2012, bringing the total recognized cost to approximately $6.6 million through September 30, 2013. Total restructuring charges are expected to be approximately $7 million upon completion.

The following table sets forth an analysis of the changes in the restructuring accrual during the nine months ended September 30, 2013 (in thousands):

	Facility Exit		Severance &
	Costs		Benefits			Total

Balance of restructuring accrual at December 31, 2012	$	4	$	3,138		$	3,142
Restructuring charges	96		2,863			2,959
Cash payments	—		(5,856		)	(5,856		)

Balance of restructuring accrual at September 30, 2013	$	100	$	145		$	245

The remaining restructuring accrual of $0.2 million at September 30, 2013 is included in “Accrued liabilities” in the accompanying condensed consolidated balance sheet. Advent expects to pay the remaining accrued severance and benefit obligations by December 31, 2013.

Note 10—Debt

On June 12, 2013, Advent entered into an Amended and Restated Credit Agreement (the “Restated Credit Agreement”). The Restated Credit Agreement amends and restates Advent’s existing Credit Agreement, dated November 30, 2011. Advent accounted for the restructuring of debt with respect to its existing term and revolving loans as a modification at the creditor and instrument level. The Restated Credit Agreement provides for (i) a $200 million revolving credit facility, with a $25 million letter of credit sublimit and a $10 million swingline loan sublimit and (ii) a $225 million term loan facility. Advent may request revolving loans, swingline loans or the issuance of letters of credit until June 12, 2018, subject to demonstrating pro forma compliance with the financial covenant requirement under the Restated Credit Agreement. The Restated Credit Agreement also contains an incremental facility permitting Advent, subject to certain requirements, to arrange with the Lenders and/or new lenders for up to an aggregate of $75 million in additional commitments, which commitments may be for revolving loans or term loans. The proceeds of the revolving loans and term loans made under the Restated Credit Agreement may be used for general corporate purposes, including to finance dividends, repurchase Common Shares, finance acquisitions, or to finance other investments.

Minimum principal payments with respect to the term loans will be made in 20 equal consecutive quarterly principal installments of $5.0 million, commencing on September 13, 2013, with the remaining outstanding principal balance and all accrued and unpaid interest due on June 12, 2018. Principal payments with respect to the revolving loans, together with all accrued and unpaid interest, are due on June 12, 2018. Advent may prepay the term loans and revolving loans at any time without penalty.

The revolving loans and term loans bear interest, at Advent’s option, at the alternate base rate plus a margin of 0.25% to 1.25% or an adjusted LIBOR rate (based on one, two, three or six-month interest periods) plus a margin of 1.25% to 2.25%, in each case with such margin being determined based on the consolidated leverage ratio for the preceding four fiscal quarter period. The “alternate base rate” means the highest of (i) the Agent’s prime rate, (ii) the federal funds rate plus a margin equal to 0.50% and (iii) the adjusted LIBOR rate for a one-month interest period plus a margin equal to 1.00%. Swingline loans accrue interest at a per annum rate based on the alternate base rate plus the applicable margin for alternate base rate loans. Advent is also obligated to pay other customary closing fees, arrangement fees, administration fees, commitment fees and letter of credit fees for a credit facility of this size and type.

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The obligations under the Restated Credit Agreement are guaranteed by Advent’s present and future domestic subsidiaries, subject to certain exceptions. The loan is secured by substantially all of the assets of Advent and the guarantors party thereto, including all of the capital stock of Advent’s domestic subsidiaries and 66% of the capital stock of Advent’s or a guarantor’s first-tier foreign subsidiaries.

The Restated Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict Advent and its subsidiaries’ ability to, among other things, incur indebtedness, grant liens, merge or consolidate, dispose of assets, pay dividends or make distributions, make investments, make acquisitions, prepay certain indebtedness, enter into certain transactions with affiliates, enter into sale and leaseback transactions, enter into swap agreements and enter into restrictive agreements, in each case subject to customary exceptions for a credit facility of this size and type. Advent is also required to maintain compliance with a consolidated leverage ratio and a consolidated interest coverage ratio. At September 30, 2013 and December 31, 2012, Advent had a total debt balance of $350.0 million under its Restated Credit Agreement, of which $130.0 million was under the revolving credit facility, and $95.0 million under its former Credit Agreement, respectively, and was in compliance with all associated covenants as of these dates as follows:

		Calculation as of
	Covenant	September 30, 2013

Leverage ratio	Maximum 4.00x	3.29x

Interest coverage ratio	Minimum 2.50x	20.3x

		Calculation as of
	Covenant	December 31, 2012

Leverage ratio	Maximum 2.50x	0.99x

Interest coverage ratio	Minimum 3.50x	48.8x

Liquidity	Minimum $50.0 million	$223.3 million

The Restated Credit Agreement includes customary events of default that include, among other things, non-payment defaults, defaults due to the inaccuracy of representations and warranties, covenant defaults, cross default to material indebtedness, bankruptcy and insolvency defaults, material judgment defaults, defaults due to an unenforceability of the security documents or guarantees, and a change of control default. The occurrence of an event of default could result in the acceleration of the obligations under the Restated Credit Agreement. A default interest rate will apply on all obligations during the existence of a payment event of default under the Restated Credit Agreement at a per annum rate equal to 2.00% above the otherwise applicable interest rate.

Note 11—Income Taxes

The following table summarizes the activity relating to the Company’s unrecognized tax benefits during the nine months ended September 30, 2013 (in thousands):

	Total

Balance at December 31, 2012	$	12,148
Gross increases related to current period tax positions	1,987
Balance at September 30, 2013	$	14,135

At September 30, 2013 and December 31, 2012, Advent had gross unrecognized tax benefits of $14.1 million and $12.1 million, respectively. During the nine months ended September 30, 2013, the Company increased the amount of unrecognized tax benefits by approximately $2.0 million relating to federal research credits, California research credits, Massachusetts research credits and California enterprise zone credits. If recognized, the total unrecognized tax benefits would decrease Advent’s tax provision and increase net income by $11.7 million. The impact on net income reflects the liabilities for unrecognized tax benefits, net of the federal tax benefit of state income tax items. The Company’s liabilities for unrecognized tax benefits relate primarily to federal research credits, California research and enterprise zone tax credits and various state net operating losses.

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Advent is subject to taxation in the U.S. and various states and jurisdictions outside the U.S. Advent is currently undergoing a State of California franchise tax examination for the 2006 and 2007 tax years and a Florida income tax examination for the 2009, 2010 and 2011 tax years. Advent is not under examination in any other income tax jurisdiction at the present time and does not anticipate the total amount of its unrecognized tax benefits to significantly change over the next 12 months. The material jurisdictions that are subject to examination by tax authorities include federal for tax years after 2009 and California for tax years after 2005.

As of September 30, 2013, Advent made no provision for a cumulative total of $17.3 million of undistributed earnings for certain non-U.S. subsidiaries, which are deemed to be permanently reinvested.

Note 12—Commitments and Contingencies

Lease Obligations

Advent leases office space and equipment under non-cancelable operating lease agreements, which expire at various dates through June 2025. Some operating leases contain escalation provisions for adjustments in the consumer price index. Advent is responsible for maintenance, insurance, and property taxes. Excluding leases and associated sub-leases for MicroEdge facilities, as of September 30, 2013, Advent’s remaining operating lease commitments through 2025 were approximately $56.6 million.

On October 1, 2009, Advent completed the sale of the Company’s MicroEdge subsidiary. At September 30, 2013, the gross operating lease commitments and sub-lease income related to this discontinued operation facility totaled $6.6 million and $2.9 million, respectively.

Indemnifications

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

Legal Contingencies

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

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

Based on currently available information, the Company’s management does not believe that the ultimate outcome of unresolved matters, individually and in the aggregate, is likely to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

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Note 13—Stock-Based Compensation

Equity Award Modification

On June 12, 2013, the Company’s Board of Directors approved a one-time special cash dividend (the “Special Dividend”) of $9.00 per share payable on each Common Share. In connection with the declaration of the Special Dividend, equity award modifications affecting approximately 900 employees and non-employee directors were made on June 12, 2013 (the “Modification Date”) for awards outstanding as of July 9, 2013 in a manner that was intended to preserve the pre-cash dividend economic value of these awards granted under the 2002 Stock Plan, 1998 non-statutory Stock Option Plan and 1995 Director Option Plan.

The Company recalculated the Black-Scholes fair values of its eligible outstanding options and SARs on the Modification Date, reflecting the reduction in their exercise prices of up to $9.00 per share, to determine the non-cash incremental stock-based compensation expense. For holders of outstanding stock options and SARs for which there otherwise could be a negative tax consequence, the exercise price was reduced only to the extent that there would be no tax consequence; and Advent made a cash payment of $5.4 million in July 2013 to the option and SAR holders for the difference between $9.00 and the exercise price reduction of the award. Additionally, Advent modified eligible outstanding RSUs to allow for a cash payment of an amount equivalent to $9.00 per share of the Company’s common stock underlying the unvested RSU upon vesting.

The following table summarizes the Black-Scholes inputs used in calculating the fair value and incremental expense to be recognized in connection with the equity award modification that occurred in June 2013:

Stock Options & SARs	Pre-Modification	Post-Modification
Market price of Advent stock	$26.10	$26.10
Exercise price	$8.28 - $32.85	$7.84 - $23.85
Risk-free interest rate	0.04% - 1.49%	0.04% - 1.23%
Volatility	31.33% - 37.45%	31.33% - 37.40%
Expected life (in years)	0.26 - 6.40	0.26 - 5.38
Expected dividends	None	None

The following table sets forth the financial impact of the equity award modification that occurred during the nine months ended September 30, 2013 (in millions):

				Stock-Based
		Total		Compensation		Unamortized
		Incremental		Expense		Stock-Based
	Cash	Stock-Based		Recognized During the		Compensation
	or	Compensation		Nine Months Ended		Expense as of
	Non-Cash	Expense		September 30, 2013		September 30, 2013

Modification of options and SARs	Non-cash	$	25.1	$	17.0	$	8.1
Modification of options and SARs	Cash	5.4		5.4		—
Modification of RSUs	Cash	10.7		2.2		8.5

Total excluding estimated forfeitures		$	41.2	$	24.6	$	16.6
Total including estimated forfeitures		$	38.1	$	24.4	$	13.7

Stock-based compensation expense of $24.4 million, net of estimated forfeitures, was recognized during the second quarter of 2013 for awards that were vested as of the Modification Date. The vested portion of each award was determined on a grant-by-grant basis, based on the extent to which the award was vested as of the Modification Date. The remaining unamortized stock-based compensation expense, including estimated forfeitures, of approximately $13.7 million at September 30, 2013 related to the modification of unvested options, SAR and RSU awards, is being recognized over the original remaining vesting periods of the awards, which range from 1 to 44 months.

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Stock-Based Compensation Expense

Stock-based compensation expense related to stock options, stock appreciation rights (“SARs”), employee stock purchase plan (“ESPP”) shares, and restricted stock units (“RSUs”) was recognized in the Company’s condensed consolidated statement of operations, including the impact of the equity award modification, for the periods presented as follows (in thousands):

	Three Months Ended September 30						Nine Months Ended September 30
	2013			2012			2013			2012
Statement of operations classification
Cost of recurring revenues	$	853		$	615		$	2,647		$	1,810
Cost of non-recurring revenues	578			331			2,690			926
Total cost of revenues	1,431			946			5,337			2,736

Sales and marketing	2,874			1,877			10,920			5,263
Product development	2,083			1,440			6,941			4,338
General and administrative	2,003			1,108			17,399			3,007
Total operating expenses	6,960			4,425			35,260			12,608

Total stock-based employee compensation expense	8,391			5,371			40,597			15,344

Tax effect on stock-based employee compensation expense	(2,938		)	(2,154		)	(16,100		)	(5,983		)

Effect on net income from continuing operations, net of tax	$	5,453		$	3,217		$	24,497		$	9,361

As of September 30, 2013, total compensation cost related to unvested awards not yet recognized under all equity compensation plans and including the impact of the equity award modification, adjusted for estimated forfeitures, was $56.7 million and is expected to be recognized through the remaining vesting period of each grant, with a weighted average remaining period of 2.7 years.

Valuation Assumptions

Advent uses the Black-Scholes option pricing model and the straight-line attribution approach to determine the grant date fair value of stock options, SARs and the ESPP. The fair value of RSUs is equal to the Company’s closing stock price on the date of grant.

The following Black-Scholes option pricing model assumptions were used for stock options and SARs granted, and for the ESPP, in the following periods:

	Three Months Ended September 30		Nine Months Ended September 30
	2013	2012	2013	2012
Stock Options & SARs
Risk-free interest rate	1.5% - 1.8%	0.7% - 0.8%	0.5% - 1.8%	0.6% - 1.2%
Volatility	35.1% - 38.3%	39.6% - 42.9%	33.4% - 38.8%	38.4% - 42.9%
Expected life (in years)	5.06	5.14	3.94 - 5.06	4.02 - 5.14
Expected dividends	None	None	None	None

Employee Stock Purchase Plan
Risk-free interest rate			0.1%	0.1%
Volatility			31.8%	31.0%
Expected life (in years)			0.5	0.5
Expected dividends			None	None

Volatility for the periods presented was calculated using an equally weighted average of the Company’s historical and implied volatility of its common stock. The Company believes that this blended calculation of volatility is the most appropriate indicator of expected volatility and best reflects expected market conditions.

Expected life for the periods presented was determined based on the Company’s historical experience of similar awards, giving consideration to the contractual terms or offering periods, vesting schedules and expectations of future employee behavior.

Risk-free interest rate for the periods presented was based on the U.S. Treasury yield curve in effect at the date of grant for periods corresponding with the expected life.

The dividend yield assumption is based on the Company’s history of not paying regular dividends and the future expectation of no recurring dividend payouts.

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Equity Award Activity

The Company’s stock option and SAR activity for the nine months ended September 30, 2013 was as follows:

					Weighted
			Weighted		Average	Aggregate
	Number of		Average		Remaining	Intrinsic
	Shares		Exercise		Contractual Life	Value
	(in thousands)		Price (1)		(in years)	(in thousands)

Outstanding at December 31, 2012	7,668		$	10.82
Options & SARs granted	1,190		$	21.45
Options & SARs exercised	(2,494	)	$	6.02
Options & SARs canceled	(337	)	$	13.94
Outstanding at September 30, 2013	6,027		$	14.85	6.95	$	101,850
Exercisable at September 30, 2013	2,985		$	11.68	4.94	$	59,911

(1) The weighted average exercise prices have been adjusted to reflect the impact of the equity award modification.

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the Company’s closing stock price of $31.75 on September 30, 2013 for options and SARs that were in-the-money as of that date.

The weighted average grant date fair value of options and SARs granted, total intrinsic value of options and SARs exercised and cash received from options exercised during the periods presented were as follows (in thousands, except weighted average grant date fair value):

	Nine Months Ended September 30
	2013		2012
Options and SARs
Weighted average grant date fair value	$	10.44	$	9.39
Total intrinsic value of awards exercised	$	34,259	$	8,729

Options
Cash received from exercises	$	18,382	$	4,211

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

The Company’s RSU activity for the nine months ended September 30, 2013 was as follows:

			Weighted
	Number of		Average
	Shares		Grant Date
	(in thousands)		Fair Value

Outstanding and unvested at December 31, 2012	1,273		$	18.16
RSUs granted	380		$	30.49
RSUs vested	(341	)	$	22.30
RSUs canceled	(137	)	$	25.15

Outstanding and unvested at September 30, 2013	1,175		$	20.13

The weighted average grant date fair value of RSUs was determined based on the closing market price of the Company’s common stock on the date of the award. The aggregate intrinsic value of RSUs outstanding at September 30, 2013 was $37.3 million based on the Company’s closing stock price of $31.75 per share on that date. Additionally, at September 30, 2013, certain unvested RSUs outstanding had a right to a total of $10.4 million of cash payments upon vesting related to the equity award modification in June 2013.

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Note 14—Net Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net (loss) income per share (in thousands, except per-share data):

	Three Months Ended September 30					Nine Months Ended September 30
	2013			2012		2013		2012
Numerator:
Net income (loss):
Continuing operations	$	9,833		$	7,687	$	17,735	$	22,201
Discontinued operation	(20		)	11		68		233

Total operations	$	9,813		$	7,698	$	17,803	$	22,434

Denominator:
Denominator for basic net income (loss) per share- weighted average shares outstanding	51,576			50,401		51,241		50,722

Dilutive common equivalent shares:
Employee stock options and other	2,361			1,847		2,088		2,042

Denominator for diluted net income (loss) per share - weighted average shares outstanding, assuming exercise of potential dilutive common equivalent shares	53,937			52,248		53,329		52,764

Net income (loss) per share (1):
Basic:
Continuing operations	$	0.19		$	0.15	$	0.35	$	0.44
Discontinued operation	(0.00		)	0.00		0.00		0.00

Total operations	$	0.19		$	0.15	$	0.35	$	0.44

Diluted:
Continuing operations	$	0.18		$	0.15	$	0.33	$	0.42
Discontinued operation	(0.00		)	0.00		0.00		0.00

Total operations	$	0.18		$	0.15	$	0.33	$	0.43

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

Weighted average stock options, SARs and RSUs of approximately 1.3 million and 2.4 million for the three and nine months ended September 30, 2013, respectively, were excluded from the calculation of diluted net income (loss) per share because their inclusion would have been anti-dilutive. Similarly, 3.9 million and 2.5 million were excluded in the comparable periods of 2012, respectively.

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Note 15—Fair Value Measurements

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

Level Input		Input Definition

Level 1		Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2		Inputs other than quoted prices included within Level 1 that are observable for the asset or liability through corroboration with market data at the measurement date.

Level 3		Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

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

If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then the Company uses quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable either directly or indirectly. The Company classifies its foreign government debt securities, corporate debt securities and certain of its U.S. government debt securities as having Level 2 inputs. Foreign debt securities primarily include Canadian bonds. The Company obtains the fair value of Level 2 financial instruments from its custody bank, which uses various professional pricing services to gather pricing data which may include quoted market prices for identical or comparable instruments, or inputs other than quoted prices that are observable either directly or indirectly. The custody bank then analyzes gathered pricing inputs and applies proprietary valuation techniques, such as consensus pricing, weighted average pricing, distribution-curve-based algorithms, or pricing models such as discounted cash flow techniques to provide the Company with a fair valuation of each security. The Company’s procedures include controls to ensure that appropriate fair values are recorded such as comparing prices obtained to independent sources. Advent reviews the internal controls in place at the custodian bank on an annual basis.

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including available-for-sale securities. The fair value of these certain financial assets was determined using the following inputs as of September 30, 2013 and December 31, 2012 (in thousands):

	Fair Value
	as of
	September 30, 2013		Level 1		Level 2		Level 3
Financial Assets:
Money market funds (1)	$	10,000	$	10,000	$	—	$	—

Financial Liabilities:
Debt (5)	$	350,000	$	—	$	350,000	$	—

	Fair Value
	as of
	December 31, 2012		Level 1		Level 2		Level 3
Financial Assets:
Money market funds (1)	$	47,086	$	47,086	$	—	$	—
U.S. government debt securities (3)	$	59,815	$	55,817	$	3,998	$	—
Corporate debt securities (3)	$	110,508	$	—	$	110,508	$	—
Foreign government debt securities (2)	$	2,421	$	—	$	2,421	$	—

Financial Liabilities:
Debt (5)	$	95,000	$	—	$	95,000	$	—

(1) Included in cash and cash equivalents in the Company’s condensed consoldiated balance sheet.

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

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

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

(5) Included in current portion of long-term debt and long-term debt in the Company’s condensed consolidated balance sheet.

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There were no transfers between Level 1 and Level 2 assets during the nine months ended September 30, 2013 and Advent does not have any significant assets or liabilities that utilize unobservable or Level 3 inputs.

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

The carrying amount of debt approximates fair value as the underlying variable interest rate approximates current market rates and the Company’s credit risk has not changed significantly since the date of issuance.

Note 16 — Accumulated Other Comprehensive Income

The following tables summarize the changes in the accumulated balances for each component of accumulated other comprehensive income and reclassifications from accumulated other comprehensive income for the nine months ended September 30, 2013 (in thousands):

Changes in Accumulated Other Comprehensive Income by Component

	Unrealized
	Gain (Loss) on			Foreign
	Available-For-Sale			Currency
	Securities			Translation			Total

Balance at December 31, 2012	$	(11	)	$	10,041		$	10,030

Other comprehensive income (loss) before reclassification (net of taxes of $(20) and $0, respectively)	22			(155		)	(133		)
Amounts reclassified from accumulated other comprehensive income	(11		)	—			(11		)

Net current period other comprehensive income (loss)	11			(155		)	(144		)

Balance at September 30, 2013	$	—		$	9,886		$	9,886

Reclassifications From Accumulated Other Comprehensive Income

There were no transfers out of accumulated other comprehensive income since March 31, 2013.

Note 17 — Common Stock Repurchase Programs

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

In connection with the secondary market offering of common stock by the Company’s largest shareholder during the third quarter of 2013, the Board authorized and Advent repurchased an additional 1.6 million shares of the Company’s common stock. At September 30, 2013 there remained approximately 0.4 million shares previously authorized by the Board for repurchase.

The following table provides a summary of the quarterly repurchase activity during the nine months ended September 30, 2013 under the stock repurchase programs approved by the Board (in thousands, except per share data):

	Total			Average
	Number			Price
	of Shares			Paid
	Purchased	Cost		Per Share

Q1 2013	—	$	—	$	—
Q2 2013	—	—		—
Q3 2013	1,600	41,256		25.785

Total	1,600	$	41,256	$	25.785

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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

Overview

We offer integrated software products and services for automating and integrating data and work flows across the investment management organization, as well as between the investment management organization and external parties. Our products are intended to increase operational efficiency, improve the accuracy of client information and enable better decision-making. Each solution focuses on specific mission-critical functions of the investment management organization (portfolio accounting and reporting; trade order management and post-trade processing; research management; account management; and custodial reconciliation) and is tailored to meet the needs of the particular market segment of the investment management industry, as determined by size, assets under management and complexity of the investment process.

On October 1, 2009, we completed the sale of our MicroEdge, Inc. subsidiary. The results of MicroEdge have been reclassified as a discontinued operation for all periods presented. Unless otherwise noted, discussion in this document pertains to our continuing operations.

Operating Overview

Operating highlights of our third quarter of 2013 include:

· Advent client conference. With over 1,000 attendees, we hosted our largest client conference in our 30 year history. We unveiled a number of new enhancements and product solutions including Geneva® 10.0, Tamale® 7.0 and Advent Direct™.

· New and incremental bookings. The term license, Advent OnDemand and Black Diamond contracts signed in the third quarter of 2013 will contribute approximately $7.1 million in annual revenue (“annual contract value” or “ACV”) once they are fully implemented. This was consistent with $7.1 million of ACV booked from contracts signed in the same period last year.

· Renewal rates. Renewal rates, which are based on cash collections and therefore reported one quarter in arrears, were 92% for the second quarter of 2013. This represents an increase of 5 percentage points over the same period last year.

· Operating cash flows. Cash flows from operations in the third quarter of 2013 were $22.8 million which represents a decrease of 10% compared with $25.3 million in the same period last year. During the third quarter of 2013, we paid $5.4 million to option and SAR holders in connection with the equity award modification with no similar payments in the prior year. Cash flows from operations during the nine months ended September 30, 2013 were $61.9 million, which represents an increase of 15% from $53.8 million in the comparable period of 2012.

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· Special dividend. On June 12, 2013, our Board of Directors (the “Board”) declared a one-time special cash dividend of $9 per share payable on July 9, 2013 to shareholders of record on July 1, 2013 (the “Special Dividend”). A total of $470.1 million was paid on July 9, 2013.

· Secondary security offering. During the third quarter of 2013, we incurred legal and professional fees of $0.6 million associated with the secondary market offering of our common stock by our former largest shareholder.

· Repurchase of common stock. In connection with the secondary security offering, our Board of Directors authorized and we repurchased 1.6 million shares of our common stock for a total cash outlay of $41.3 million at an average price of $25.785 per share during the third quarter of 2013.

· Equity award modification. We incurred stock-based compensation expense of $8.4 million in the third quarter of 2013 up from $5.4 million in the same period of 2012. In connection with the declaration of the Special Dividend, equity award modifications affecting approximately 900 employees and non-employee directors were made for awards outstanding as of July 9, 2013 in a manner to preserve the pre-cash dividend economic value of these awards resulting in the $3.0 million increase in the third quarter of 2013.

Financial Overview

Financial highlights of our third quarter of 2013 and 2012 were as follows (in thousands, except per share amounts, percentages and margin changes):

							Percentage /
	Three Months Ended September 30						Margin
	2013			2012			Change

Net revenues	$	96,767		$	90,174		7	%
Gross margin	$	64,976		$	57,361		13	%
Gross margin percentage	67.1		%	63.6		%	3.5 pts
Operating income	$	17,371		$	12,629		38	%
Operating margin percentage	18.0		%	14.0		%	4.0 pts
Net income from continuing operations	$	9,833		$	7,687		28	%
Net income from continuing operations per diluted share	$	0.18		$	0.15		24	%
Operating cash flows	$	22,835		$	25,256		-10	%

Term License and Term License Deferral

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

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The term license component of the deferred revenue balance related to implementations in process will increase or decrease in the future depending on the amount of new term license bookings relative to the number of implementations that reach completion in a particular quarter. For the three and nine months ended September 30, 2013 and 2012, changes in the net term license component of deferred revenues increased (decreased) the Company’s revenues, costs and operating income as follows (in thousands):

	Three Months Ended September 30								Nine Months Ended September 30
	2013		2012			Change			2013			2012			Change

Term license revenues	$	314	$	(1,541	)	$	1,855		$	(1,155	)	$	127		$	(1,282	)
Professional services and other	154		163			(9		)	(1,847		)	(289		)	(1,558		)

Total net revenues	$	468	$	(1,378	)	$	1,846		$	(3,002	)	$	(162	)	$	(2,840	)


Professional services costs	$	12	$	(30	)	$	42		$	(1,264	)	$	(500	)	$	(764	)
Sales commissions costs	154		(219		)	373			(62		)	(34		)	(28		)
Total net costs	$	166	$	(249	)	$	415		$	(1,326	)	$	(534	)	$	(792	)

Operating income	$	302	$	(1,129	)	$	1,431		$	(1,676	)	$	372		$	(2,048	)

As of September 30, 2013 and December 31, 2012, deferred revenue and directly related expense balances associated with our term licensing deferral were as follows (in thousands):

	September 30		December 31
	2013		2012
Deferred revenues
Short-term	$	32,746	$	29,735
Long-term	6,638		6,647

Total	$	39,384	$	36,382

Directly-related expenses
Short-term	$	11,301	$	10,787
Long-term	4,409		3,598

Total	$	15,710	$	14,385

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

Critical Accounting Policies and Estimates

There have been no significant changes in our critical accounting policies and estimates during the nine months ended September 30, 2013 as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

Recent Accounting Pronouncements

With the exception of the pronouncements included in Note 1, “Basis of Presentation” to the accompanying condensed consolidated financial statements, there have been no recent accounting pronouncements or changes in accounting pronouncements during the nine months ended September 30, 2013, as compared to those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, that are of significance, or potential significance, to our condensed consolidated financial statements.

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RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

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

	Three Months Ended September 30				Nine Months Ended September 30
	2013		2012		2013		2012

Net revenues:
Recurring revenues	91	%	90	%	91	%	90	%
Non-recurring revenues	9		10		9		10

Total net revenues	100		100		100		100

Cost of revenues:
Recurring revenues	18		19		18		19
Non-recurring revenues	12		14		11		13
Amortization of developed technology	3		3		3		3

Total cost of revenues	33		36		32		35

Gross margin	67		64		68		65

Operating expenses:
Sales and marketing	19		20		21		21
Product development	18		19		18		19
General and administrative	11		10		15		10
Amortization of other intangibles	1		1		1		1
Recapitalization costs	*		*		2		*
Restructuring (benefit) charges	*		*		1		*

Total operating expenses	49		50		59		51

Income from continuing operations	18		14		10		14
Interest and other income (expense), net	(3	)	*		(2	)	*

Income from continuing operations before income taxes	15		14		8		13
Provision for income taxes	5		5		2		5

Net income from continuing operations	10		9		6		8

Discontinued operation:
Net (loss) income from discontinued operation	*		*		*		*

Net income	10	%	9	%	6	%	8	%

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

* Less than 1%.

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NET REVENUES

	Three Months Ended September 30						Nine Months Ended September 30
	2013		2012		Change		2013		2012		Change

Total net revenues (in thousands)	$	96,767	$	90,174	$	6,593	$	285,380	$	266,802	$	18,578

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

Revenues from recurring and non-recurring sources, as a percentage of total net revenues for the periods presented, were as follows:

	Three Months Ended September 30				Nine Months Ended September 30
As a percentage of total net revenues	2013		2012		2013		2012

Revenues from recurring sources	91	%	90	%	91	%	90	%
Revenues from non-recurring sources	9	%	10	%	9	%	10	%

Revenues derived from sales outside the U.S. were 18% and 16% of total net revenues in the third quarter of 2013 and 2012, respectively. For the nine months ended September 30, 2013 and 2012, revenues derived from sales outside the U.S. were 18% and 17%, respectively, of total net revenues. The increase as a percentage of total revenues during the year-to-date period of 2013, when compared to the same period last year, primarily reflects a slight rebound in growth outside the U.S. as the European sovereign debt crisis continues to subside. We plan to continue expanding our sales efforts outside the U.S., both in our current markets and elsewhere. Except for the U.S., the revenues from customers in any single country did not exceed 10% of total net revenues for the three and nine months ended September 30, 2013.

We expect total net revenues from continuing operations to be between $95 million and $97 million in the fourth quarter of 2013, and to be between $380 million and $382 million for fiscal year 2013.

Recurring Revenues

	Three Months Ended September 30									Nine Months Ended September 30
(in thousands, except percent of total net revenues)	2013			2012			Change			2013			2012			Change

Term license revenues	$	47,087		$	39,352		$	7,735		$	133,369		$	117,733		$	15,636
Maintenance revenues	16,632			17,071			(439		)	49,401			50,380			(979		)
Other recurring revenues	24,397			24,667			(270		)	78,092			72,639			5,453

Total recurring revenues	$	88,116		$	81,090		$	7,026		$	260,862		$	240,752		$	20,110

Percent of total net revenues	91		%	90		%				91		%	90		%

Revenues from term licenses, which include both software license and maintenance services for term licenses, increased $7.7 million and $15.6 million during the three and nine months ended September 30, 2013, respectively, when compared to the same periods of 2012. The growth of term license revenues reflects the continued layering of incremental annual contract value (ACV) of term licenses sold in previous periods into our term revenue and the continued market acceptance of our products.

For our term licenses, we defer all revenue on new bookings until our implementation services are complete. The change in our term license implementation deferral increased/(decreased) term license revenues as follows (in thousands):

	Three Months Ended September 30							Nine Months Ended September 30
	2013		2012			Change		2013			2012		Change

Term license revenues	$	314	$	(1,541	)	$	1,855	$	(1,155	)	$	127	$	(1,282	)

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During the three months ended September 30, 2013, an increase in new service engagements as a result of bookings from the second half of 2012 and the first half of 2013 drove the increase in implementation services. However, a number of projects completed in the three months ended September 30, 2013, caused a net release in deferred term license revenues for the third quarter of 2013.

Generally, we no longer sell perpetual licenses to new customers. As a result, maintenance revenues from perpetual licenses decreased $0.4 million and $1.0 million during the three and nine months ended September 30, 2013, when compared to the same periods of 2012. This decrease was due to maintenance de-activations from customer attrition, maintenance level downgrades, reductions in products licensed or number of users by clients, perpetual license customers migrating to term licenses, and a decrease in new perpetual license customers, partially offset by the impact of price increases.

Other recurring revenues, which primarily include revenues from incremental assets under administration fees from perpetual licenses, data services, outsourced services, Advent OnDemand, web-based services and Black Diamond, decreased $0.3 million and increased $5.5 million during the three and nine months ended September 30, 2013, respectively, when compared to the same periods of 2012. The increase in other recurring revenues for the nine months ended September 30, 2013 was primarily due to growth in revenues of $4.7 million from our Black Diamond product and to a lesser extent, growth in revenues from data services, outsourced services, and web-based services. The three and nine month periods ended September 30, 2013 also reflected lower fees from a renewed agreement with one of our larger clients effective with the third quarter of 2013.

Our renewal rates are based on cash collections and are disclosed one quarter in arrears. We disclose our renewal rates one quarter in arrears in order to include substantially all payments received against the invoices for that quarter. We also update our renewal rates from the initially disclosed rates to include all cash collections subsequent to the initial disclosure. The following summarizes our initial and updated renewal rates (operational metric) since the second quarter of 2012:

	Renewal Quarter
Renewal Rates	Q313	Q213	Q113	Q412	Q312	Q212
Based on cash collections relative to prior year collections

Initially Disclosed Renewal Rate (1)	(2)	92%	94%	91%	94%	87%
Updated Disclosed Renewal Rate (3)	n/a	n/a	97%	95%	98%	92%

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

(2) The initially disclosed renewal rate for the third quarter of 2013 is not currently available as it is disclosed one quarter in arrears in order to include substantially all payments against invoices for this quarter.

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

Non-Recurring Revenues

	Three Months Ended September 30									Nine Months Ended September 30
(in thousands, except percent of total net revenues)	2013			2012			Change			2013			2012			Change

Professional services and other revenues	$	8,281		$	8,488		$	(207	)	$	22,675		$	23,835		$	(1,160	)
Perpetual license fees	370			596			(226		)	1,843			2,215			(372		)

Total non-recurring revenues	$	8,651		$	9,084		$	(433	)	$	24,518		$	26,050		$	(1,532	)

Percent of total net revenues	9		%	10		%				9		%	10		%

Non-recurring revenues consists of perpetual license fees, professional services and other revenues. Perpetual license revenues are derived from the licensing of software products under a perpetual arrangement. Professional services and other revenues include fees for consulting, project management, custom implementation and integration, custom report writing, training and our client conference. Professional services and other revenues in the three months ended September 30, 2013 and 2012, respectively, included $1.0 million and $0.9 million of conference-related revenues.

Professional services projects related to Axys, Moxy and Partner products generally can be completed in a two- to six-month time period, while services related to Geneva and APX products may require four- to nine-months. We defer professional services revenue for services performed on term license implementations that are not considered substantially complete. Service revenue is deferred until the implementation is complete and remaining services are substantially completed. Upon substantial completion, we recognize a pro-rata amount of professional services fees earned based on the elapsed time from the start of the term license to the substantial completion of professional services. The remaining deferred professional services revenue is recognized ratably over the remaining contract term.

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

	Change From			Change From
	2012 to 2013			2012 to 2013
	QTD			YTD

Decreased consulting services	$	(2,780	)	$	(7,065	)
Decreased revenue related to term license implementation deferral	(9		)	(1,558		)
Increased data conversion	1,217			3,561
Increased training	683			2,171
Increased custom reports	672			1,312
Various other items	10			419

Total change	$	(207	)	$	(1,160	)

On January 1, 2013, we began accounting for professional service revenues on a more granular level. As a result, professional services revenue, which was previously classified as consulting services, is now being classified as data conversion, training and customer reports revenue which is reflected in the decrease in consulting services revenues and the increase in data conversion revenues during the three and nine months ended September 30, 2013. The overall decrease in professional services and other revenues primarily reflects the increase in net term license implementation deferral associated with in-process term license implementations as a result of more ongoing projects in 2013 than in the comparable period last year.

The change in our term license implementation deferral increased/(decreased) professional services and other revenues for the three and nine months ended September 30, 2013, as follows (in thousands):

	Three Months Ended September 30							Nine Months Ended September 30
	2013		2012		Change			2013			2012			Change

Professional services and other	$	154	$	163	$	(9	)	$	(1,847	)	$	(289	)	$	(1,558	)

Total perpetual license fees decreased $0.2 million and $0.4 million during the three and nine months ended September 30, 2013 when compared to the same periods of 2012, primarily due to a decrease in sales of perpetual seat licenses and modules to our existing perpetual client base as we evolve our business model to sell principally term licenses.

COST OF REVENUES

	Three Months Ended September 30									Nine Months Ended September 30
(in thousands, except percent of total net revenues)	2013			2012			Change			2013			2012			Change

Stock-based compensation expense	$	1,431		$	946		$	485		$	5,337		$	2,736		$	2,601
All other cost of revenues	$	30,360		$	31,867		$	(1,507	)	$	85,329		$	90,541		$	(5,212	)
Percent of total net revenues	31		%	35		%				30		%	34		%
Total cost of revenues	$	31,791		$	32,813		$	(1,022	)	$	90,666		$	93,277		$	(2,611	)
Percent of total net revenues	33		%	36		%				32		%	35		%

Cost of revenues is made up of three components: cost of recurring revenues, cost of non-recurring revenues and amortization of developed technology, and are discussed individually in the following discussion. Gross margin improved to 67% in the third quarter of 2013 from 64% in the third quarter of 2012 as we expanded our recurring revenue gross margins from our improved efficiency in our global support organization and experienced better margins in our professional services practice.

Cost of Recurring Revenues

	Three Months Ended September 30								Nine Months Ended September 30
(in thousands, except percent of total net revenues)	2013			2012			Change		2013			2012			Change


Stock-based compensation expense	$	853		$	615		$	238	$	2,647		$	1,810		$	837
All other cost of recurring revenues	$	16,929		$	16,601		$	328	$	49,526		$	50,152		$	(626	)
Percent of total recurring revenues	19		%	20		%			19		%	21		%
Total cost of recurring revenues	$	17,782		$	17,216		$	566	$	52,173		$	51,962		$	211
Percent of total recurring revenues	20		%	21		%			20		%	22		%

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

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

	Change From			Change From
	2012 to 2013			2012 to 2013
	QTD			YTD

Increased outside services	$	657		$	625
Increased stock-based compensation	238			837
Increased allocation-in of facility and infrastructure expenses	211			734
Decreased payroll and related	(220		)	(1,133		)
Decreased travel and entertainment	(121		)	(722		)
Various other items	(199		)	(130		)

Total change	$	566		$	211

The increase in the cost of recurring revenues for the three and nine months ended September 30, 2013 was primarily due to increased outside services, the increase in stock-based compensation expense associated with our equity award modification in 2013 and an increase in allocation-in of facility and infrastructure expenses. These increases were partially offset by the decreases in payroll and related costs which reflects lower salary and bonus expenses as a result of less headcount from the re-organization plan that was approved in October 2012 and decrease in travel and entertainment costs due to less travel associated with providing technical support services. Headcount in our client support group decreased to 339 at September 30, 2013 from 362 at September 30, 2012.

Cost of Non-Recurring Revenues

	Three Months Ended September 30									Nine Months Ended September 30
(in thousands, except percent of total net revenues)	2013			2012			Change			2013			2012			Change

Stock-based compensation expense	$	578		$	331		$	247		$	2,690		$	926		$	1,764
All other cost of non-recurring revenues	$	10,923		$	12,680		$	(1,757	)	$	28,398		$	32,689		$	(4,291	)
Percent of total non-recurring revenues	126		%	140		%				116		%	125		%
Total cost of non-recurring revenues	$	11,501		$	13,011		$	(1,510	)	$	31,088		$	33,615		$	(2,527	)
Percent of total non-recurring revenues	133		%	143		%				127		%	129		%

Cost of non-recurring revenues consists of expenses associated with perpetual license fees, professional services and other fees. Costs associated with perpetual license fees consists primarily of royalties and other fees paid to third parties, the fixed direct labor and third party costs involved in producing and distributing our software, and cost of product media including duplication, manuals and packaging materials. Costs associated with professional services and other revenue consists primarily of personnel related costs associated with the professional services organization in providing consulting, custom report writing and data conversion from clients’ previous systems. Also included are direct costs associated with third-party consultants. Cost of non-recurring revenues in the three months ended September 30, 2013 and 2012, respectively, included approximately $2.3 million and $2.0 million of conference-related costs.

At the point professional services are substantially completed, we recognize a pro-rata amount of the related expenses based on the elapsed time from the start of the term license to the substantial completion of professional services. The remainder of the related expenses is recognized ratably over the remaining contract term. Indirect costs such as management and other overhead expenses are recognized in the period in which they are incurred.

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

	Change From			Change From
	2012 to 2013			2012 to 2013
	QTD			YTD

Decreased payroll and related	$	(781	)	$	(1,513	)
Decreased outside contractors	(492		)	(910		)
Decreased travel and entertainment	(403		)	(876		)
Increased (decreased) cost related to term license implementation deferral	42			(764		)
Increased stock-based compensation	247			1,764
Various other items	(123		)	(228		)

Total change	$	(1,510	)	$	(2,527	)

The decrease in the cost of non-recurring revenues during the three and nine months ended September 30, 2013 primarily reflects a decrease in payroll and related costs which reflects lower salary and bonus expenses from less headcount as a result of the 2012 re-organization plan, decreased utilization of third-party contractors, changes in deferred professional service costs as projects are started and completed, and classification of certain costs of our professional services team into cost of recurring and product development. Certain professional services resources were redeployed to our cost of recurring or product development groups in 2013 and, as a result, their associated costs are now classified in cost of recurring or product development effective January 1, 2013. Travel and entertainment costs decreased primarily due to less travel activity by consultants. These decreases were partially offset by an increase in stock-based compensation expense associated with the equity award modification.

The change in our term license deferral increased/(decreased) professional services costs for the three and nine months ended September 30, 2013 and 2012 as follows (in thousands):

	Three Months Ended September 30							Nine Months Ended September 30
	2013		2012			Change		2013			2012			Change

Professional services costs	$	12	$	(30	)	$	42	$	(1,264	)	$	(500	)	$	(764	)

Gross margins for non-recurring revenues were (33)% and (43)% for the three months ended September 30, 2013 and 2012, respectively, and (27)%, and (29)% during the nine months ended September 30, 2013 and 2012, respectively. The improvement in gross margin during the 2013 periods was primarily due to higher billable utilization of professional services consultants partially offset by the incremental stock-based compensation expense associated with our modification of outstanding equity awards. Gross margins were negatively impacted by our annual user conference that is typically held in the third quarter, with costs, net of associated revenues, of approximately $1.3 million and $1.1 million in the three months ended September 30, 2013 and 2012, respectively.

Amortization of Developed Technology

	Three Months Ended September 30									Nine Months Ended September 30
	2013			2012			Change			2013			2012			Change

Amortization of developed technology (in thousands)	$	2,508		$	2,586		$	(78	)	$	7,405		$	7,700		$	(295	)
Percent of total net revenues	3		%	3		%				3		%	3		%

Amortization of developed technology represents amortization of acquisition-related intangibles and capitalized software development costs. The decrease during the three and nine months ended September 30, 2013 compared to the same periods last year resulted from decreased amortization from other developed technology assets that were fully amortized during 2012 and the first nine months of 2013, which were partially offset by additional amortization from software development costs capitalized during 2012 and the first nine months of 2013.

OPERATING EXPENSES

Sales and Marketing

	Three Months Ended September 30									Nine Months Ended September 30
(in thousands, except percent of total net revenues)	2013			2012			Change			2013			2012			Change

Stock-based compensation expense	$	2,874		$	1,877		$	997		$	10,920		$	5,263		$	5,657
All other sales and marketing	$	15,672		$	16,088		$	(416	)	$	48,047		$	50,859		$	(2,812	)
Percent of total net revenues	16		%	18		%				17		%	19		%
Total sales and marketing expense	$	18,546		$	17,965		$	581		$	58,967		$	56,122		$	2,845
Percent of total net revenues	19		%	20		%				21		%	21		%

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

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

	Change From			Change From
	2012 to 2013			2012 to 2013
	QTD			YTD

Increased stock-based compensation	$	997		$	5,657
Decreased payroll and related	(248		)	(2,327		)
Decreased travel and entertainment	(258		)	(567		)
Various other items	90			82

Total change	$	581		$	2,845

The increase in total sales and marketing expenses in absolute dollars during the three and nine months ended September 30, 2013 compared to the same periods last year was due to the increase in stock-based compensation expense associated with the equity award modification, which was partially offset by lower payroll and related expenses resulting from reduced headcount due to the re-organization plan that was approved in October 2012. Headcount decreased to 184 at September 30, 2013 from 212 at September 30, 2012.

Product Development

	Three Months Ended September 30									Nine Months Ended September 30
(in thousands, except percent of total net revenues)	2013			2012			Change			2013			2012			Change

Stock-based compensation expense	$	2,083		$	1,440		$	643		$	6,941		$	4,338		$	2,603
All other product development expense	$	15,286		$	15,637		$	(351	)	$	45,313		$	46,039		$	(726	)
Percent of total net revenues	16		%	17		%				16		%	17		%
Total product development expense	$	17,369		$	17,077		$	292		$	52,254		$	50,377		$	1,877
Percent of total net revenues	18		%	19		%				18		%	19		%

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

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

	Change From			Change From
	2012 to 2013			2012 to 2013
	QTD			YTD

Increased stock-based compensation	$	643		$	2,603
Increased allocation-in of facility and infrastructure expenses	183			543
Decreased payroll and related	(257		)	(850		)
Increased capitalization of product development	(398		)	(614		)
Various other items	121			195

Total change	$	292		$	1,877

The increase in total product development expenses during the three and nine months ended September 30, 2013 was primarily due to an increase in stock-based compensation costs associated with our equity award modification in 2013. Additionally, we allocate facility and infrastructure expenses based on headcount and, during the first nine months of 2013, we allocated more of these costs to our product development department as relative headcount in other departments decreased more than product development headcount decreased. These increases were partially offset by a decrease in payroll and related costs due to less headcount from the October 2012 re-organization plan and an increase in capitalized costs associated with the timing of our product releases resulting in more costs being capitalized during the three and nine months ended September 30, 2013.

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General and Administrative

	Three Months Ended September 30								Nine Months Ended September 30
(in thousands, except percent of total net revenues)	2013			2012			Change		2013			2012			Change

Stock-based compensation expense	$	2,003		$	1,108		$	895	$	17,399		$	3,007		$	14,392
All other general and administrative expense	$	8,891		$	7,644		$	1,247	$	26,496		$	24,612		$	1,884
Percent of total net revenues	9		%	8		%			9		%	9		%
Total general and administrative expense	$	10,894		$	8,752		$	2,142	$	43,895		$	27,619		$	16,276
Percent of total net revenues	11		%	10		%			15		%	10		%

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

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

	Change From			Change From
	2012 to 2013			2012 to 2013
	QTD			YTD

Increased stock-based compensation	$	895		$	14,392
Increased payroll and related	561			1,453
Increased legal and professional	1,056			880
Increased computers and telecom	213			468
Increased allocation-out of facility and infrastructure expenses	(429		)	(1,472		)
Various other items	(154		)	555

Total change	$	2,142		$	16,276

The increase in total general and administrative expenses for the three and nine months ended September 30, 2013 was primarily due to increased stock-based compensation expense resulting from the equity award modification. As the compensation of our directors and several of our executive management team members are included in general and administrative expenses, approximately 43%, or $17.4 million, of the total stock compensation expense of $40.6 million recorded during the nine months ended September 30, 2013 was included in general and administrative. To a lesser extent, the increase was also due to increased legal and professional fees primarily resulting from transaction related fees of $0.6 million associated with the secondary offering of our common stock by our largest shareholder in the third quarter of 2013, increased payroll and related expenses resulting from higher bonuses and contractor expense, and increased computers and telecom costs. These increases were partially offset by an increase in the allocation-out of corporate expenses to other departments. Corporate expenses, such as facility and information costs, are initially recognized in our general and administrative department and then allocated out to other departments based on relative headcount. As our facility costs increased and headcount in our other departments grew at a higher rate than our general and administrative department, we allocated-out more facility and information technology costs during the nine months ended September 30, 2013.

Amortization of Other Intangibles

	Three Months Ended September 30									Nine Months Ended September 30
	2013			2012			Change			2013			2012			Change

Amortization of other intangibles (in thousands)	$	953		$	955		$	(2	)	$	2,863		$	2,867		$	(4	)
Percent of total net revenues	1		%	1		%				1		%	1		%

Other intangibles represent amortization of non-technology related to acquired intangible assets.

Recapitalization Costs

	Three Months Ended September 30								Nine Months Ended September 30
	2013			2012			Change		2013			2012			Change

Recapitalization costs (in thousands)	$	—		$	—		$	—	$	6,041		$	—		$	6,041
Percent of total net revenues	0		%	0		%			2		%	0		%

During the nine months ended September 30, 2013, in conjunction with the debt modification, Special Dividend and equity award modification in the second quarter of 2013, we incurred a total of $6.0 million in operating expenses related to financial advisory, legal, and valuation fees.

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We do not expect to incur any further recapitalization costs during the fourth quarter of 2013.

Restructuring (Benefit) Charges

	Three Months Ended September 30									Nine Months Ended September 30
	2013			2012			Change			2013			2012			Change

Restructuring (benefit) charges (in thousands)	$	(157	)	$	(17	)	$	(140	)	$	2,959		$	53		$	2,906
Percent of total net revenues	0		%	0		%				1		%	0		%

During the nine months ended September 30, 2013, we continued the re-organization plan which was approved in October 2012 to align strategy and function, reduce operating costs and improve profitability. As a result, we recorded restructuring charges of $3.0 million during the nine months ended September 30, 2013 for employee termination benefits associated with a workforce reduction. During the three months ended September 30, 2013, we recorded a restructuring benefit of $0.2 million due to adjustments to assumptions associated with the re-organization plan. The total recognized cost associated with the re-organization plan through September 30, 2013 was approximately $6.6 million and is expected to total approximately $7 million upon completion.

We expect annual operating expense run rate savings of $12 million as a result of the re-organization plan.

For additional analysis of the components of the payments and charges made against the restructuring accrual during the nine months ended September 30, 2013, see Note 9, “Restructuring Charges” to the accompanying condensed consolidated financial statements for additional information.

Interest and Other Income (Expense), Net

	Three Months Ended September 30									Nine Months Ended September 30
	2013			2012			Change			2013			2012			Change

Interest and other income (expense), net (in thousands)	$	(2,977	)	$	(130	)	$	(2,847	)	$	(4,610	)	$	(1,105	)	$	(3,505	)
Percent of total net revenues	(3		)%	0		%				(2		)%	0		%

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

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

	Change From			Change From
	2012 to 2013			2012 to 2013
	QTD			YTD

Increase in interest expense	$	(2,194	)	$	(3,275	)
Impact of foreign exchange	(616		)	(364		)
(Decrease) increase in interest income	(16		)	161
Various other items	(21		)	(27		)

Total change	$	(2,847	)	$	(3,505	)

Interest and other income (expense), net increased during the three and nine months ended September 30, 2013 compared to the same periods last year, primarily due to increased interest expense resulting from higher outstanding debt balances and amortization of debt issuance costs associated with our new debt agreement executed in the second quarter of 2013 and, to a lesser extent, foreign exchange impact due to fluctuations in the U.S. Dollar exchange rate against certain foreign currencies.

We expect interest expense to be approximately $2.5 million in the fourth quarter of 2013 based on our current debt outstanding of $350.0 million.

Provision for Income Taxes

	Three Months Ended September 30									Nine Months Ended September 30
	2013			2012			Change			2013			2012			Change

Provision for income taxes (in thousands)	$	4,561		$	4,812		$	(251	)	$	5,390		$	13,181		$	(7,791	)
Effective tax provision rate	32		%	38		%				23		%	37		%

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The effective tax rate for the nine months ended September 30, 2013 is significantly lower than the rate for the same period of the prior year. This is due to the significant reduction in our expected annual pre-tax book income from the equity award modification that occurred in the second quarter of 2013, which resulted in an increase to the percentage impact of our net favorable permanent items on our effective tax rate. Additionally, the reinstatement of the federal research credit in January 2013 resulted in our recognition of the benefit of the entire 2012 credit in the first nine months of 2013.

We expect our annual effective tax rate for 2013 to be between 25% and 30%.

Discontinued Operation

	Three Months Ended September 30								Nine Months Ended September 30
(in thousands)	2013			2012		Change			2013		2012		Change

Net revenues	$	—		$	—	$	—		$	—	$	—	$	—
Net (loss) income from operation of discontinued operation (net of applicable taxes of $(16), $(13), $45 and $134, respectively)	$	(20	)	$	11	$	(31	)	$	68	$	233	$	(165	)

The fluctuation in net income from operation of discontinued operation for the three and nine months ended September 30, 2013 was due to the adjustment of our sub-lease income assumptions associated with a restructured facility in New York City.

LIQUIDITY AND CAPITAL RESOURCES

Overview

During the nine months ended September 30, 2013, our cash, cash equivalents and marketable securities balance decreased by $189.6 million to $41.4 million, and our debt balance increased by $255.0 million to $350.0 million, primarily to fund the payment of a $470.1 million Special Dividend and the repurchase of $41.3 million of Advent’s common stock. These transactions resulted in negative working capital and a stockholders’ deficit balance on our balance sheet at September 30, 2013.

We entered into these transactions aware of the impact they would have on our balance sheet and believe that our cash balance, cash generated from operations and availability under our debt agreement will be sufficient to satisfy our working capital needs, capital expenditures, and interest and repayment of debt principal for the next 12 to 24 months based upon (1) the significant percentage of our revenues historically coming from recurring sources (91% during the nine months ended September 30, 2013), (2) our historical renewal rates in the mid 90% range, (3) our large and broadly distributed customer base, (4) our backlog of future revenue that is not included on our balance sheet and (5) our history of significant, positive operating cash flows.

Cash, Cash Equivalents, Marketable Securities and Cash Flows

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

	September 30		December 31
	2013		2012

Cash and cash equivalents	$	41,380	$	58,217
Short-term and long-term marketable securities	$	—	$	172,744

Cash and cash equivalents, and short-term and long-term marketable securities primarily consist of money market mutual funds, U.S. government and U.S. Government Sponsored Entities (GSE’s), foreign debt securities and high credit quality corporate debt securities. Cash and cash equivalents are comprised of highly liquid investments purchased with an original or remaining maturity of 90 days or less at the date of purchase. At December 31, 2012, our short-term and long-term marketable securities were classified as available-for-sale, with long-term investments having a maturity date greater than one year from the end of the period.

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

	Nine Months Ended September 30
	2013			2012

Net cash provided by operating activities from continuing operations	$	61,901		$	53,773
Net cash provided by (used in) investing activities from continuing operations	$	166,039		$	(30,351	)
Net cash used in financing activities from continuing operations	$	(244,344	)	$	(37,930	)
Net cash used in operating activities from discontinued operation	$	(358	)	$	(593	)

Cash Flows from Operating Activities for Continuing Operations

Our cash flows from operating activities for continuing operations represent the most significant source of funding for our operations. The major uses of our operating cash include funding payroll (salaries, commissions, bonuses and benefits), general operating expenses (marketing, travel, computer and telecommunications, legal and professional expenses, and office rent), cost of revenues and interest from debt service. Our cash provided by operating activities generally follows the trend in our net revenues, operating results and bookings.

Our cash provided by operating activities from continuing operations of $61.9 million during the nine months ended September 30, 2013 was primarily the result of our net income plus non-cash charges including stock-based compensation, and depreciation and amortization. Cash flows resulting from changes in assets and liabilities include decreases in accounts receivable, accrued liabilities and deferred revenue. Days’ sales outstanding were 54 days during the nine months ended September 30, 2013, compared to 55 days in the same period of 2012. Accrued liabilities decreased primarily as a result of a decrease in accrued restructuring costs of $2.6 million as the October 2012 re-organization plan nears completion, and cash payments for fiscal 2012 liabilities including year-end bonuses, commissions, and payroll taxes. The decrease in deferred revenue primarily resulted from the ratable recognition of deferred term license, maintenance and other recurring revenues over their contract period during the nine months ended September 30, 2013, and the release of deferred revenue associated with our term license implementations. Other changes in assets and liabilities included an increase in accounts payable and a decrease in income taxes payable. Additionally, we paid $5.4 million during the third quarter of 2013 to option and SAR holders in connection with the equity award modification.

Our cash provided by operating activities from continuing operations of $53.8 million during the nine months ended September 30, 2012 was primarily the result of our net income plus non-cash charges including stock-based compensation, and depreciation and amortization. Cash flows resulting from changes in assets and liabilities include a decrease in accounts receivable, accrued liabilities and deferred revenues. Days’ sales outstanding were 55 days during the nine months ended September 30, 2012, compared to 64 days in same period of 2011. The decrease in deferred revenue primarily resulted from the ratable recognition of deferred term license, maintenance and other recurring revenues over their contract period during the nine months ended September 30, 2012, and the release of deferred revenue associated with our term license implementations. The decrease in accrued liabilities reflects cash payments of fiscal 2011 liabilities including year-end bonuses, commissions, and payroll taxes. Other changes in assets and liabilities included an increase in prepaid and other assets, and income taxes payable.

We expect that cash provided by operating activities for continuing operations may fluctuate in future periods as a result of a number of factors including fluctuations in our net revenues and operating results, new term license bookings that increase deferred revenue, collection of accounts receivable, payment of federal income taxes and timing of payments. We expect cash provided by operating activities to be between $93 million and $97 million for fiscal year 2013.

Cash Flows from Investing Activities for Continuing Operations

Net cash provided by investing activities from continuing operations of $166.0 million for the nine months ended September 30, 2013 reflects sales and maturities of marketable securities of $228.6 million, partially offset by purchases of marketable securities of $57.9 million, capitalized software development costs of $2.6 million and capital expenditures of $2.2 million primarily related to information technology purchases. Proceeds from the sales and maturities of marketable securities were used to partially finance the Special Dividend of $470.1 million that was paid in July 2013.

Net cash used in investing activities from continuing operations of $30.4 million for the nine months ended September 30, 2012 reflects purchases of marketable securities of $92.0 million, capital expenditures of $5.4 million primarily related to purchases of software licenses and, to a lesser extent, the build-out of our new facilities in New Rochelle and Jacksonville, capitalized software development costs of $1.9 million and the final installment payment of $0.7 million related to our acquisition of East Circle, which we acquired in December 2006. These expenditures were offset by proceeds received from the sale and maturity of marketable securities of $69.6 million.

We expect capital expenditures to be between $8 million and $10 million for fiscal year 2013.

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At September 30, 2013 and December 31, 2012, we had a total debt balance of $350.0 million under our Restated Credit Agreement, of which $130.0 million was under our revolving credit facility, and $95.0 million under our former Credit Agreement, respectively, and we were in compliance with all associated covenants as of these dates as follows:

		Calculation as of
	Covenant	September 30, 2013

Leverage ratio	Maximum 4.00x	3.29x

Interest coverage ratio	Minimum 2.50x	20.3x

		Calculation as of
	Covenant	December 31, 2012

Leverage ratio	Maximum 2.50x	0.99x

Interest coverage ratio	Minimum 3.50x	48.8x

Liquidity	Minimum $50.0 million	$223.3 million

Common Stock Repurchases

In connection with the secondary security offering by our largest shareholder in the third quarter of 2013, the Board authorized and we repurchased 1.6 million shares of the Company’s common stock. At September 30, 2013 there remained approximately 0.4 million shares previously authorized by the Board for repurchase. The following table provides a summary of the quarterly repurchase activity during the nine months ended September 30, 2013 under the stock repurchase programs approved by the Board (in thousands, except per share data):

	Total			Average
	Number			Price
	of Shares			Paid
	Purchased	Cost		Per Share

Q1 2013	—	$	—	$	—
Q2 2013	—	—		—
Q3 2013	1,600	41,256		25.785
Total	1,600	$	41,256	$	25.785

Off-Balance Sheet Arrangements and Contractual Obligations

The following table summarizes our contractual cash obligations as of September 30, 2013 (in thousands):

	Three
	Months Ending
	December 31		Years Ending December 31
	2013		2014		2015		2016		2017		Thereafter		Total
Operating lease obligations	$	2,578	$	10,061	$	9,608	$	7,904	$	4,209	$	22,210	$	56,570
Debt*	5,000		20,000		20,000		20,000		20,000		265,000		350,000
Total	$	7,578	$	30,061	$	29,608	$	27,904	$	24,209	$	287,210	$	406,570

*Excludes interest payments on our variable rate debt as amounts are uncertain. Refer to Note 10 “Debt” in the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q, for information about the terms of our debt.

As of September 30, 2013, the principal outstanding balance under our Restated Credit Agreement was $350.0 million, which is due in full no later than June 12, 2018.

At September 30, 2013 and December 31, 2012, we had a gross liability of $14.1 million and $12.1 million, respectively, for uncertain tax positions. If recognized, the impact on our statement of operations would be to decrease our income tax expense and increase our net income by $11.7 million. The impact on net income reflects the liabilities for unrecognized tax benefits net of the federal tax benefit of state income tax items. Since almost all of this liability relates to reserves against deferred tax assets that we do not expect to utilize in the short term, we cannot estimate the timing of potential future cash settlements and have not included any estimates in the table of contractual cash obligations above. We expect our cash payments for federal income taxes will be 20% or less of taxable income through 2013 as we have significant net operating losses and tax credit carryforwards to utilize.

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At September 30, 2013 and December 31, 2012, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Other Liquidity and Capital Resources Considerations

Our liquidity and capital resources in any period could also be affected by the exercise of outstanding employee stock options and SARs, and issuance of common stock under our employee stock purchase plan. The resulting increase in the number of outstanding shares from this and from the issuance of common stock from our RSUs could also affect our per share results of operations. However, we cannot predict the timing or amount of proceeds from the exercise of these securities, or whether they will be exercised at all.

We expect that for the next two years, our debt service costs and other operating expenses will constitute a significant use of cash flow. Accordingly, we anticipate having less available cash to fund acquisitions, repurchase additional common stock, or invest in other businesses, when opportunities arise. Based upon the predominance of our revenues from recurring sources, bookings performance and current expectations, we believe that our cash balances, cash generated from operations and availability under our debt agreement will be sufficient to satisfy our working capital needs, capital expenditures and interest and repayment of debt principal for the next 12 to 24 months. However, we may identify opportunities that require us to raise funds, such as acquisitions or other investments in complementary businesses, products or technologies, and may raise such additional funds through public or private debt or equity financing. However, such financing may not be available at all, or if available, may not be obtainable on favorable terms, and could be dilutive.

The Company has reviewed its needs in the United States for possible repatriation of undistributed earnings or cash of its non-U.S. subsidiaries. The Company presently intends to continue to invest indefinitely all earnings and cash outside of the United States of all non-U.S. subsidiaries to fund investments or meet working capital and property, plant and equipment requirements in those locations. At September 30, 2013, we had approximately $6.1 million of cash in our non-U.S. subsidiaries.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, we are exposed to financial market risks, including changes in interest rates on outstanding debt and marketable securities and changes in foreign currency exchange rates on non-U.S. dollar denominated assets and liabilities. The Company regularly assesses these risks and has established policies and business practices to protect against the adverse effects of these and other potential exposures.

Foreign Currency Risk

Foreign Currency Transaction Risk

The Company transacts in various foreign currencies and offsets the risks associated with the effects of certain foreign currency exposures by entering into foreign currency forward contracts with financial institutions. These forward contracts are not designated as hedging instruments, nor are they for trading or speculative purposes. Foreign currency exposures typically arise from sales to customers that are denominated in currencies other than the U.S. dollar.

We recognize gains and losses on these contracts, as well as related costs, in “Interest and other income (expense), net” on the accompanying condensed consolidated statements of operations along with the gains and losses of the related hedged items. We record the fair value of derivative instruments as “Prepaid expenses and other” or “Accrued liabilities” on the accompanying condensed consolidated balance sheets based on current market rates.

At September 30, 2013 and December 31, 2012, net derivative assets (liabilities) associated with forward contracts of approximately $0 and $(27,000), respectively, were included in “Prepaid expenses and other” or “Accrued liabilities” in the accompanying condensed consolidated balance sheets. The effect of the derivative financial instruments on the condensed consolidated statements of operations for the nine months ended September 30, 2013 was to increase foreign exchange gains by approximately $45,000 which reflects net realized and unrealized gains related to our derivative financial instruments; and had no effect in the same period last year.

As of September 30, 2013, we had no outstanding foreign currency forward contracts.

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Item 1A. Risk Factors

Investors should carefully consider the risks described below before making an investment decision. The trading price of our common stock could decline due to any of, but are not limited to, these risks. In assessing these risks, investors should also refer to the other information contained or incorporated by reference in this Quarterly Report on Form 10-Q filed with the SEC, including our condensed consolidated financial statements and related notes thereto and our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

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

Total recurring revenues, which we define as term license, maintenance from perpetual arrangements, other recurring revenue and Asset Under Administration (AUA) fees for certain perpetual arrangements, represented 91%, 90% and 89% of total net revenues during the nine months ended September 30, 2013 and fiscal years 2012 and 2011, respectively. We expect to continue to derive a significant portion of our revenue from our clients’ renewal of term license, perpetual maintenance and other recurring contracts and such renewals are critical to our future success. Some factors that may affect the renewal rate of our contracts include:

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

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

· The price, performance and functionality of our solutions;

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

· The effectiveness of our maintenance and support services; and

· Our ability to develop complementary products and services.

Most of our base of perpetual license customers have historically renewed their annual maintenance although our customers have no obligation to renew such maintenance after the first year of their license agreements. Our perpetual license maintenance revenues have been trending downward and decreased 2%, 5% and 3% during the nine months ended September 30, 2013 and fiscal years 2012 and 2011, respectively. In addition, market downturns, such as the downturn beginning in the fall of 2008 and subsequent market fluctuations, and other factors have caused, and may in the future cause, some clients not to renew their maintenance; reduce their level of maintenance; not renew their term license contracts; or renew such term licenses for fewer products or users, all of which adversely affects our renewal rates and revenue from these customers. Our renewal rates are based on cash collections and are disclosed one quarter in arrears. Our reported quarterly renewal rate for perpetual maintenance and term license renewals may fluctuate. For example, our disclosed quarterly renewal rates during 2011 and 2010 were higher than the corresponding periods in 2009, but below those in 2008, and our disclosed quarterly renewal rates for 2012 fluctuated both above and below the previous year’s rates. Decreases in renewal rates reflect reduced maintenance expenditures, reduced term license renewals, customer attrition, and reductions in products licensed or number of users by clients, as well as from slower payments received from renewal clients.

We have relatively limited experience with renewals of our term license contracts. We have even less experience with renewals of certain other recurring contracts, such as our SaaS-based offerings, Advent OnDemand and Black Diamond which we acquired in June 2011. Our customers have no obligation to renew their term license or other recurring contracts and given the relatively limited number of years in which we have experience renewing term license and other recurring contracts and fluctuations in term license renewal rates, it is difficult to predict expected renewal rates. Additionally, we cannot predict whether the renewals will be less advantageous to us than the original term or other recurring contract. For example, the renewal periods for our term license contracts are typically shorter than our original term license contract and customers may request a reduction in the number of users or products licensed, resulting in a lower annual term license. Further, customers may elect to not renew their term license or other recurring contracts at all. We may incur significantly more costs in securing our term license or other recurring contract renewals than we incur for our perpetual maintenance renewals. If our term license or other recurring contract customers renew under terms less favorable to us or choose not to renew their contracts, or if it costs significantly more to secure a renewal for us, our operating results may be harmed.

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

The licensing of our software products and services often requires prospective customers to provide significant executive-level sponsorship and to make major systems architecture decisions. As a result, we must generally engage in relatively lengthy sales and contracting efforts. Sales transactions may therefore be delayed during the customer decision process because we must provide a significant level of education to prospective customers regarding the use and benefit of our products. Our business and prospects are subject to uncertainties in the financial markets that can cause customers to remain cautious about capital and information technology expenditures, particularly in uncertain economic environments, or to decrease their information technology budgets as an expense reduction measure. The sales cycle associated with the purchase of our solutions is typically between two and twelve months depending upon the size of the client, and is subject to a number of significant risks that have impacted our sales and over which we have little or no control, including broader financial market volatility, adverse economic conditions, customers’ budgeting constraints, internal selection procedures, and changes in customer personnel, among others.

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As a result of a lengthy and unpredictable sales cycle, we have limited ability to forecast the timing and amount of specific perpetual license sales, or term license, Advent OnDemand and Black Diamond sales which we report quarterly as annual contract value (ACV) bookings. The timing of large individual license sales is especially difficult to forecast, and we may not be successful in closing large license transactions on a timely basis or at all. Customers may postpone their purchases of our existing products or product enhancements in advance of the anticipated introduction of new products or product enhancements by us or our competitors. Accordingly, our level of ACV bookings in any particular period is subject to significant fluctuation. For example, during 2011, our ACV bookings increased by 6%, compared to 2010. During 2012, our ACV bookings decreased by 3% compared to 2011. During the third quarter of 2013, our ACV bookings increased by 6% compared to the second quarter of 2013.

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

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

We derive most of our revenue from recurring sources. During the nine months ended September 30, 2013 and fiscal years 2012 and 2011, we recognized 91%, 90% and 89%, respectively, of total net revenues from recurring sources. We generally recognize revenue from these sources ratably over the terms of these agreements, which typically range from one to three years. As a result, almost all of our revenues in any quarter are generated from contracts entered into during previous periods.

Consequently, a significant decline in new business generated in any quarter may not materially affect our results of operations in that quarter but will have an impact on our revenue growth rate in future quarters. We also experience fluctuations and seasonality in our new business generated each quarter. For example, ACV in the second quarter of 2013 decreased by 7% compared to ACV bookings in the comparable 2012 period and decreased by 23% compared to the first quarter of 2013. ACV for fiscal 2012 decreased 3% compared to fiscal 2011. Additionally, a decline in renewals of term agreements, maintenance or data and other subscription contracts during a quarter will not be fully reflected in our financial performance in that quarter. For example, because we recognize revenue ratably, the non-renewal of term agreements or maintenance contracts late in a quarter may have very little impact on revenue for that quarter, but will reduce revenue in future quarters. In addition, we may be unable to adjust our costs in response to reduced revenue.

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

Uncertain economic and financial market conditions adversely affect our business.

The market for investment management software systems has been and may in the future be negatively affected by a number of factors, including reductions in capital expenditures by customers and volatile performance of major financial markets. For example, U.S. and European economies showed signs of weakening during periods in 2012 due to the growing uncertainty about the fate of the eurozone and continued weakness in U.S. labor markets. With this volatile environment and general uncertainty as a backdrop, our customers became cautious and slowed buying decisions which elongated some sales and cash collection cycles. Also, our new contract bookings, revenue, renewal rates and cash collections were lower than expected during 2012, especially in Europe and the Middle East, and may continue in 2013. Market conditions have also impacted our performance in the past. For example, macroeconomic concerns in 2011 and again in 2012, such as the European default risk and U.S. debt ceiling debate, resulted in a cautious buying environment and elongated sales cycles in some instances. Also, during the fall of 2008 through 2010, we experienced some clients and prospects delaying or cancelling additional license purchases, while others went out of business, reduced personnel, or were acquired. The target clients for our products include a range of financial services organizations that manage investment portfolios. The success of many of our clients is intrinsically linked to the health of the financial markets. The demand for our solutions has been and continues to be disproportionately affected by fluctuations, disruptions, instability and downturns in the economy and financial services industry, which may cause clients and potential clients to exit the industry or delay, cancel or reduce any planned expenditures for investment management systems and software products.

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

We have in the past experienced a number of market downturns in the financial services industry and resulting declines in information technology spending, which has caused longer sales and contracting cycles, deferral or delay of information technology projects and generally reduced expenditures for software and related services. The severity of the market downturn and volatility and uncertainty in the financial markets and the financial services sector in the last several years makes it difficult for us to forecast operating results and may result in a material adverse effect on our revenues and results of operations in the longer term. In addition, other events such as the federal government’s struggles in the past to reach agreement on the federal budget and debt ceiling have contributed, and may in the future contribute, to macroeconomic problems that result in a cautious buying environment with elongated sales cycles with our clients.

The market downturn beginning in the autumn of 2008 and subsequent economic uncertainty caused, and other downturns in the future may cause clients not to renew their term licenses or perpetual license maintenance. Also, significant declines in market value of our clients affect their Assets Under Administration (AUA) or Assets Under Management (AUM). Consequently, we may also experience a decline in the ACV of bookings since the pricing of some of our products is based upon our client’s AUA or AUM. Furthermore, we have some contracts for which clients pay us fees based on the greater of a negotiated annual minimum fee or a calculated fee that is determined by the client’s AUA or AUM. If a client previously paid us based on the calculated fee, rather than the annual minimum fee, we would experience a decline in revenue as a result of any decline in those clients’ AUA or AUM.

Borrowings under our credit agreement could limit our available working capital, adversely affect our financial results and ability to operate our business and must be repaid in full if we fail to comply with certain covenants.

In June 2013, we entered into the Restated Credit Agreement which provides us (i) a $225 million term loan facility and (ii) a $200 million revolving credit facility, with a $25 million letter of credit sublimit and a $10 million swingline loan sublimit. We have in the past, and may in the future, borrow under the Restated Credit Agreement in order to fund working capital requirements, make share repurchases of our common stock, pay dividends or fund acquisitions. In addition, if our anticipated cash flow from our recurring sources of revenue is materially impaired due to customer defaults or failure to renew term licenses, other recurring agreements or maintenance contracts, our ability to meet our debt service payment obligations or continue to meet the contractual covenants may be impaired, and our ability to make further borrowings may be compromised.

As a result of the Special Dividend declared in June 2013, we had a stockholders deficit balance on our balance sheet as of September 30, 2013. To fund the Special Dividend payment on July 9, 2013 and the repurchase of Advent’s common stock in August 2013, we drew down an aggregate $375 million of debt under our Restated Credit Agreement. As a result of these borrowings, we are obligated to make periodic principal and interest payments on the debt of approximately $28 million annually. This amount will fluctuate due to interest rates and future borrowings. Our ability to make payments on our indebtedness and to fund planned working capital requirements will depend on our ability to generate cash flow in the future. In addition, the existence of this indebtedness could have adverse consequences. For example, it could:

· Require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund acquisitions, working capital, capital expenditures, research and development efforts and other general corporate purposes;

· Increase our vulnerability to and limit our flexibility in planning for, or reacting to, change in our business and the industry in which we operate:

· Expose us to the risk of increased interest rates as borrowings under our Restated Credit Agreement are subject to variable rates of interest;

· Place us at a competitive disadvantage compared to our competitors that have less debt; and

· Limit our ability to borrow additional funds.

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Our continued ability to borrow under our credit agreement is subject to compliance with certain financial and non-financial covenants. The financial covenants require us to maintain compliance with a consolidated leverage ratio and a consolidated interest coverage ratio. Our failure to comply with such covenants could cause default under the agreement, and we may then be required to repay such debt with capital from other sources. Under those circumstances, other sources of capital may not be available to us, or be available only on unfavorable terms. In the event of a default which is not remedied within the prescribed timeframe, the assets of the Company (subject to the amount borrowed) may be attached or seized by the lender.

We operate in a highly competitive industry.

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

We also must continue to introduce new products and product enhancements. The market for our products is characterized by rapid technological change, changes in customer demands, evolving industry standards and new regulatory requirements. New products based on recent technologies or new industry standards can render existing products obsolete and unmarketable. As a result, our future success will continue to depend upon our ability to develop or acquire new products and product enhancements that address the needs of our target markets and respond to their changing standards and practices. We continue to release numerous products and product upgrades and we believe our future success depends on continuing such releases. Additionally, in October 2008, we acquired Tamale Software which enables us to offer a new product in the nascent research management field and in March 2010, Advent Norway AS acquired Goya AS to allow us to provide transfer agency-related solutions to mutual fund managers and mutual fund distributors. In addition, in February 2011, Advent Software, Inc. acquired Syncova Solutions, Ltd., a United Kingdom-based company that provides margin management and debt finance reconciliation and optimization software and in June 2011, we acquired Black Diamond, a Florida-based company that provides a web-based, outsourced portfolio management and reporting platforms for investment advisors. However, we cannot be certain whether these products will meet anticipated sales projections or will be broadly accepted in the market, whether a market will develop as expected for these new products or whether we will continue to introduce more products.

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

We depend heavily on our Geneva®, Advent Portfolio Exchange®, Axys® and Moxy® products.

We derive a majority of our net revenues from the license and maintenance revenues from our Geneva, Advent Portfolio Exchange (APX), Axys and Moxy products. In addition, Moxy and many of our applications, such as Partner and various data services, have been designed to provide an integrated solution with Geneva, APX and Axys. As a result, we believe that for the foreseeable future a majority of our net revenues will depend upon continued market acceptance of Geneva, APX, Axys and Moxy, and upgrades to those products.

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Our operating results may fluctuate significantly.

Most of our revenue comes from recurring sources which grew to 91% in the first nine months of 2013, from 90% in 2012 and 89% in both 2011 and 2010, respectively. During fiscal 2012, term license revenues comprised approximately 49% of recurring revenues as compared to approximately 46% and 43% in fiscal years 2011 and 2010, respectively.

When a customer purchases a term license together with implementation services, we do not recognize any revenue under the contract until the implementation services are substantially completed and then we recognize revenue ratably over the remaining term of the contract. If the implementation services are still in progress as of quarter-end, we will defer all of the contract revenues to a subsequent quarter. At the point professional services are substantially completed, we recognize the professional services fees earned and related expenses, and a pro-rata amount of the term license revenue based on the elapsed time from the start of the term license to the substantial completion of professional services. For example, we deferred net revenues of $3.2 million and $9.5 million in 2010 and 2011, respectively. During 2012, the revenue recognized from completed implementations exceeded the revenue deferred from projects in the process of being implemented, resulting in a net recognition of revenue of $1.0 million for fiscal 2012.

In future periods, our revenues related to completed implementations may vary depending on the number of projects that reach substantial completion during the quarter. Term license revenue for the remaining contract years and the remaining deferred professional services revenue and related expenses are recognized ratably over the remaining contract term. The term license component of the deferred revenue balance will increase or decrease in the future depending on the amount of new term license bookings relative to the number of implementations that reach substantial completion in a particular quarter. Although our substantial revenue from recurring sources under our term license model provides us with longer term stability and more visibility in the short term, our quarterly net revenues and operating results may still fluctuate significantly depending on these and other factors. Our expense levels are relatively fixed in the short-term. Due to the fixed nature of these expenses, combined with the relatively high gross margin historically achieved on our products, an unanticipated decline in net revenues in any particular quarter may adversely affect our operating results.

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

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

Our stock price may fluctuate significantly.

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

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

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

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

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

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

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

In addition, our reliance upon third-party service providers may expose us to risks arising from disruptions to, or failures in, the facilities and systems operated by such third parties. We currently serve customers from third-party-operated data center facilities. We do not control, or in some cases have limited control over, the operation of the data center facilities we use, and they are vulnerable to damage or interruption from earthquakes, floods, fires, power loss and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct, and to adverse events caused by operator error. We cannot rapidly switch to new data centers or move customers from one data center to another in the event of any adverse event. Despite precautions taken at these facilities, the occurrence of a natural disaster, an act of terrorism or other act of malfeasance, a decision to close the facilities without adequate notice or other unanticipated problems at these facilities could result in lengthy interruptions in our service and the loss of customer data.

Any damage to, or failure of, the systems in any data center (whether operated by us or by a third-party service provider) could result in interruptions in our service. Impairment of or interruptions in our service may reduce our revenues, cause clients to request credits or penalties from us, subject us to claims and litigation, cause our customers to terminate their subscriptions and adversely affect our renewal rates and our ability to attract new customers. Even with respect to data centers that are operated for us by third-party service providers, we may not be able to negotiate service contracts with these service providers that will fully protect us from these risks. Our business will also be harmed if our customers and potential customers believe our service is unreliable.

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

Our clients rely on our outsourcing and data services to meet their operational needs, including account aggregation and reconciliation. The amount and type of client-related data hosted by Advent also is substantially increasing, and we are providing outsourcing and data integration services in more jurisdictions outside the U.S. Furthermore, our business is becoming increasingly reliant on providing outsourcing and data services. This exposes the Company to many risks. In connection with cyber attacks and other intentional attempts at unauthorized access, our security measures and those of third parties upon whom we rely could be breached, resulting in unauthorized access to our information or our clients’ information. Furthermore, due to the complexity of our services and because we also utilize third party data and other vendors, our services may have previously-undetected errors or defects, service disruptions, delays, or incomplete or incorrect data that could result in unanticipated downtime for our customers, misrouted or unauthorized access to data, failure to meet service levels and service disruptions. Such potential errors, defects, delays, disruptions, performance problems and security breaches may damage our clients’ business, harm our reputation, result in losing future sales, require us to undertake expensive remediation steps, cause clients to withhold payment or terminate or not renew their agreements with us, and subject us to litigation and other possible liabilities.

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

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

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

In recent years, Advent has periodically entered into contracts relating to our subscription, data management revenue streams and outsourced services with contract values that are substantially larger than we have customarily entered into in the past. We do not know whether we will be able to continue to sign large recurring revenue contracts of this nature or if such clients will renew their contracts at similar rates and terms, if at all. For example, we renewed our agreement with TIAA-CREF in the second quarter of 2013, but at lower annual fees than the original agreement, which will result in a decrease in revenues associated with that agreement. In addition, some of these types of agreements are subject to milestones, acceptance and penalties and there is no assurance that these agreements will be fully implemented. We also have revenue sharing agreements with other companies that provide revenue to Advent for our clients’ use of those companies’ services and products. Our operating results could be adversely impacted if these agreements are not fully implemented, terminated or not renewed, or if we are unable to continue to generate similar opportunities and enter similar or larger sized contracts in the future.

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We must recruit and retain key employees.

We believe that our future success is dependent on the continued employment of our senior management and our ability to identify, attract, motivate and retain qualified technical, sales and other personnel. Members of our executive management team have acquired specialized knowledge and skills with respect to Advent. We need technical resources such as our product development engineers to develop new products and enhance existing products; we rely upon sales personnel to sell our products and services and maintain healthy business relationships; we must recruit professional service consultants to support our implementations; we must hire client services personnel to provide technical support to our growing installed base of customers; and we must attract and retain financial and accounting personnel to comply with our public company reporting requirements. We need to identify, attract, motivate and retain such employees with the requisite education, backgrounds and industry experience. However, experienced high quality personnel in the information technology industry continue to be in high demand and competition for their talents remains intense, especially in the San Francisco Bay Area where the largest number of our employees are located. In addition, from time to time, we may reorganize our business or reduce our workforce, as we did in late 2012, which may result in increased difficulty in hiring and retaining qualified personnel. Such reorganizations or reductions may distract our management and employees and may negatively impact our near-term financial results.

We also have begun a strategy to move certain functions from high cost areas like the San Francisco Bay Area, New York City and Boston, to lower cost areas to reduce our overall costs of operations. While we believe this strategy will have significant benefits, we may not be able to recruit and retain qualified personnel in such lower cost areas. Additionally, such a strategy may negatively impact our ability to retain and hire in our other office locations.

We have relied on our ability to grant equity compensation as one mechanism for recruiting and retaining such highly skilled personnel. In making employment decisions, particularly in the high-technology industries and San Francisco Bay Area, job candidates often consider the value of the equity awards they are to receive in connection with their employment and market downturns may result in our equity incentives becoming less valuable.

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

We face challenges in expanding our operations outside the United States.

We market and sell our products in the United States and, to a growing extent, outside the U.S. Revenues derived from sales outside the U.S. comprised 18%, 17% and 18% of our total revenues in the first nine months of 2013 and fiscal years 2012 and 2011, respectively. We have international subsidiaries in Hong Kong, China, Singapore, Denmark, Netherlands, Norway, Sweden, Switzerland, England, Ireland and in the United Arab Emirates.

We cannot be certain that establishing businesses in other countries will produce the desired levels of revenues. If we are not successful in international market expansion, our overall future growth prospects may be limited. Also, worldwide and regional volatility in financial markets may disrupt our sales efforts in overseas markets. We have relatively limited experience in developing localized versions of our products and marketing and distributing our products outside the U.S. In other instances, we may rely on the efforts and abilities of business partners in such markets. For example, we previously outsourced certain engineering activities to a business partner located in China until we transitioned those contract developers to become employees of our Beijing office. In addition, our operations are subject to other inherent risks, including:

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

· Adverse changes in foreign currency exchange rates;

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

· Difficulty of enforcement of contractual provisions in local jurisdictions;

· Unexpected changes in laws and regulatory requirements;

· Trade-protection measures and export and import requirements;

· Difficulties in successfully adapting our products to language, regulatory and technology standards;

· Cultural resistance to expansion into other countries and difficulties establishing local partnerships or engaging local resources;

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· Difficulties in and costs of staffing and managing geographically dispersed operations;

· Different levels of intellectual property right protections;

· Sovereign debt issues;

· Tax structures and potentially adverse tax consequences; and

· Political and economic instability.

The revenues, expenses, assets and liabilities of our subsidiaries outside the United States are primarily denominated in their respective local currencies. Future fluctuations in currency exchange rates may adversely affect revenues and accounts receivable recognized by these subsidiaries and the U.S. dollar value of related revenues, expenses, assets and liabilities reported by Advent. Our service revenues and certain license revenues from our European subsidiaries are generally denominated in their respective local currencies.

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

Periodically we seek to grow through the acquisition of additional complementary businesses. In October 2008, we completed the acquisition of Tamale Software, Inc., which provides research management software. In March 2010, our wholly-owned Norwegian subsidiary, Advent Norway AS, acquired the entire share capital of Goya AS, a Norwegian software company that provides transfer agency-related solutions to mutual fund managers and mutual fund distributors. More recently, in February 2011, Advent Software, Inc. acquired Syncova Solutions, Ltd., a United Kingdom-based company that provides margin management and debt finance reconciliation and optimization software and in June 2011, Advent Software, Inc. acquired Black Diamond, a Florida-based company that provides web-based, outsourced portfolio management and reporting platforms for independent advisors.

The process of integrating our acquisitions has required and will continue to require significant resources, particularly in light of our relative inexperience in integrating acquisitions, potential regulatory requirements and operational demands. In particular, our Tamale acquisition reflects our entry into the research management software market, where we have no prior experience. Integrating these acquisitions in the past has been time-consuming, expensive and disruptive to our business. This integration process has strained our managerial resources, resulting in the diversion of these resources from our core business objectives, and may do so in the future. Failure to achieve the anticipated benefits of these acquisitions or to integrate the operations of these entities successfully has harmed and could potentially harm our business, results of operations and cash flows in future periods. The assumptions we made in determining the value and relative risks of these acquisitions could be erroneous. In addition, as we have expanded into new business areas and built new offerings through strategic alliances and internal development, as well as acquisitions, some of this expansion has required significant management time and resources without generating required revenues. We have had difficulty and may continue to have difficulty creating demand for such offerings. Furthermore, we may face other unanticipated costs from our acquisitions, such as disputes involving earn-out and incentive compensation amounts.

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

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

Our success depends significantly upon our proprietary technology. We currently rely on a combination of copyright, trademark, patent and trade secret law, as well as confidentiality procedures and contractual provisions to protect our proprietary rights. We have registered trademarks and copyrights for many of our products and services and will continue to evaluate the registration of additional trademarks and copyrights as appropriate. We generally enter into confidentiality agreements with our employees, customers, resellers, vendors and others. We seek to protect our software, documentation and other written materials under trade secret and copyright laws. We also have four issued patents. Despite our efforts, existing intellectual property laws may afford only limited protection. It may be possible for unauthorized third parties to copy certain portions of our products or to reverse engineer or otherwise obtain and use our proprietary information. In addition, we cannot be certain that others will not develop or acquire substantially equivalent or superseding proprietary technology, equivalent or better products will not be marketed in competition with our products, or others may not design around any patent that we have or that may be issued to us or other intellectual property rights of ours, thereby substantially reducing the value of our proprietary rights. We cannot be sure that we will develop proprietary products or technologies

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that are patentable, that any patent, if issued, would operate to cover the differentiating features of our products and services, provide us with any competitive advantages or would not be challenged by third parties, or that the patents of others will not adversely affect our ability to do business. Despite our efforts to protect our proprietary rights, unauthorized parties may copy aspects of our products or to obtain and use information that we regard as proprietary and we may not have any effective practical remedy against such parties. In addition, the laws of some countries do not protect proprietary rights to as great an extent as do the laws of the United States and so our expansion into markets outside the U.S. may expose our proprietary rights to increased risks. Litigation may be necessary to protect our proprietary technology which may be time-consuming and expensive, with no assurance of success. As a result, we cannot be sure that our means of protecting our proprietary rights will be adequate.

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

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

Catastrophic events could adversely affect our business.

We are a highly automated business and rely on our network infrastructure and enterprise applications, internal technology systems and our website for our development, marketing, operational, support, and sales activities. A disruption or failure of these systems in the event of major earthquake, fire, telecommunications failure, cyber-attack, terrorist attack or other catastrophic event could cause system interruptions, reputational harm, delays in our product development and loss of critical data and could affect our ability to sell and deliver products and services and other critical functions of our business. Our corporate headquarters, a significant portion of our research and development activities, our data centers and certain other critical business operations are located in the San Francisco Bay Area, which is a region of seismic activity. We have developed certain disaster recovery plans and certain backup systems to reduce the potentially adverse effect of such events, but a catastrophic event that results in the destruction or disruption of any of our data centers or our critical business or information technology systems could severely affect our ability to conduct normal business operations and, as a result, our future operating results could be adversely affected. Further, such disruptions could cause further instability in the financial markets or the spending of our clients and prospects upon which we depend.

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

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

Our products and services may contain undetected errors or scalability limitations at any point in their lives, but particularly when first introduced or as new versions are released. We frequently release new versions of our products, such as during 2012, when we released new versions of APX, Axys, Geneva, Moxy and Tamale RMS, among others. Despite testing by us and by current and potential customers, errors may not be found in new products and services until after commencement of commercial shipments or use, resulting in a loss of or a delay in market acceptance, damage to our reputation, customer dissatisfaction and reductions in revenues and margins, any of which could seriously harm our business. Additionally, our agreements with customers that attempt to limit our exposure to liability claims may not be enforceable in jurisdictions where we operate, particularly as we expand into new markets outside the U.S.

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

Our founder and a fund associated with one of our directors own or control, indirectly or directly, a substantial number of shares of our common stock (approximately 5% and 15%, respectively, of total outstanding as of September 30, 2013). In addition, repurchases of our stock by us could increase the concentration of shares held by these parties or other current stockholders. As a result, either individually or if these parties were to act together, they would have the ability to exert significant influence on matters submitted to our stockholders for approval, such as the election or removal of directors, amendments to our certificate of incorporation or the approval of a business combination and they may attempt to influence the Company or effect changes in corporate governance. These actions may be taken even if they are opposed by other stockholders or it may be difficult to approve these actions without their consent and may cause management distraction. This concentration of ownership may also have the effect of delaying or preventing a change of control of our company or discouraging others from making tender offers for our shares, which could prevent our stockholders from receiving a premium for their shares.

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

Most of our customers operate within a highly regulated environment. In light of the recent conditions in the U.S. financial markets and economy, Congress and regulators have increased their focus on the regulation of the financial services industry. The information provided by, or resident in, the software or services we provide to our customers could be deemed relevant to a regulatory investigation or other governmental or private legal proceeding involving our customers, which could result in requests for information from us that could be expensive and time consuming for us. In addition, clients subject to investigations or legal proceedings may be adversely impacted possibly leading to their liquidation, bankruptcy, receivership, reductions in Assets Under Management or Assets Under Administration, or diminished operations that would adversely affect our revenues and collection of receivables.

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

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

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

Additionally, as a publicly-traded company, we are subject to significant regulations including the Dodd-Frank Act and the Sarbanes-Oxley Act of 2002 (“the Sarbanes-Oxley Act”). These regulations increase our accounting, operating and legal compliance costs and could also expose us to additional liability if we fail to comply with these or other new rules and reporting requirements. There are also significant corporate governance and executive compensation-related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas, which may further increase our costs.

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

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). These principles are subject to interpretation by us, the SEC and various bodies formed to interpret and create accounting principles and guidance. A change in these principles or a change in the interpretations of these principles can have a significant effect on our reported results and may even retroactively affect previously reported transactions. Additionally, proposed accounting standards could have a significant impact on our operational processes, revenues and expenses, and could cause unexpected financial reporting fluctuations. Some of our accounting principles that have been or may be affected include:

· Software revenue recognition;

· Accounting for stock-based compensation;

· Accounting for income taxes; and

· Accounting for business combinations and related goodwill.

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

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

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

In addition, we could be subject to examination of our income tax returns by state tax authorities, the U.S. Internal Revenue Service and other tax authorities outside the U.S. For example, we are currently undergoing a State of California franchise tax examination for the 2006 and 2007 tax years and a New York State franchise tax examination for the 2008 and 2009 tax years. These examinations generally focus on areas where considerable judgment is exercised by the Company. We regularly assess the likelihood of outcomes resulting from an examination to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from an examination. We believe such estimates to be reasonable; however, there can be no assurance that the final determination of any of these examinations will not have an adverse effect on our operating results and financial position.

Security risks may harm our business.

Maintaining the security of computers, computer networks, hosted solutions and the transmission of confidential information over public networks, and protecting against cyber attacks, physical attacks and other security breach incidents, is essential to commerce and communications, particularly in the market in which Advent operates. Efforts of others to seek unauthorized access to Advent’s or its clients’ information, computers and networks or introduce viruses, worms and other malicious software programs that disable or impair computers or corrupt data into our systems or those of our customers or other third parties, could disrupt or make our systems and services inaccessible or allow access to proprietary information and data of Advent or its clients. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments, could also be used by those seeking such unauthorized access and result in compromises or breaches of the security of our systems, data, products or services. Our security measures may be inadequate to prevent cyber attacks and other security breaches, exposing us to a risk of data loss, loss of data integrity, financial loss, harm to reputation, business interruption, litigation and other possible liabilities, as well as possibly requiring us to expend significant capital and other resources to protect against the threat of security breaches or to alleviate problems caused by such breaches.

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

Some of our clients utilized trading commissions (“soft dollar arrangements”) to pay for software products and services. During each of the first nine months of 2013 and fiscal years 2012 and 2011, the total value of Advent products and services paid with soft dollars was approximately 3% of our total billings. Such soft dollar arrangements could be impacted by changes in the regulations governing those arrangements.

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

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

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

We do not expect that our internal control over financial reporting will prevent all errors or fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Controls can be circumvented by individual acts of some persons, by collusion of two or more people, or by management override of the controls. Over time, controls may become inadequate because changes in conditions or deterioration in the degree of compliance with policies or procedures may occur. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Any failure to implement or maintain improvements in our internal control over financial reporting, or difficulties encountered in the implementation of these improvements in our controls, could cause significant deficiencies or material weaknesses in our internal controls and consequently cause us to fail to meet our reporting obligations. Any failure to implement or maintain required new or improved internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative impact on the trading price of our stock.

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

Issuer Purchases of Equity Securities

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

In August 2013, the Board authorized and we repurchased 1.6 million shares of the Company’s common stock. At September 30, 2013 there remained approximately 0.4 million shares previously authorized by the Board for repurchase. The following table provides a summary of the quarterly repurchase activity during the three months ended September 30, 2013 under the stock repurchase program approved by the Board (in thousands, except per share data):

				Maximum
	Total	Average		Number of Shares That
	Number	Price		May Yet Be Purchased
	of Shares	Paid		Under Our Share
	Purchased	Per Share		Repurchase Programs

July 2013	—	$	—	394
August 2013	1,600	$	25.785	394
September 2013	—	$	—	394

Total	1,600	$	25.785	394

We withheld shares through net share settlements during the three months ended September 30, 2013. The following table provides a month-to-month summary of the purchase activity upon the employee vesting of restricted stock units and the exercise of stock-settled stock appreciation rights under our equity compensation plan to satisfy tax and exercise withholding obligations during the three months ended September 30, 2013 (in thousands, except per share data):

	Total			Maximum Number
	Number	Average		of Shares that May
	of Shares	Price Per		Yet Be Purchased
Month	Purchased (1)	Share		Under the Plan

July	5	$	28.92	—
August	35	$	29.25	—
September	14	$	30.35	—

Total	54	$	29.51	—

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

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Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Index to exhibits

Exhibit

Incorporated by Reference

Filed

Furnished

Number

Exhibit Description

Form

Date

Number

Herewith

1.1

Underwriting Agreement, dated August 8, 2013, by and among certain stockholders of Advent Software, Inc. and the several underwriters thereto

8-K

8/7/2013

1.1

3.1

Amended and Restated Bylaws of Registrant (1)

10.1

1995 Director Option Plan, as amended*

10-Q

8/5/2013

10.3

10.2

1998 Nonstatutory Stock Option Plan, as amended*

10-Q

8/5/2013

10.4

10.3

2002 Stock Option Plan, as amended *

10-Q

8/5/2013

10.5

10.4

Stock Repurchase Agreement, dated August 8, 2013, by and between Advent Software, Inc. and representatives for several underwriters under the Underwriting Agreement

8-K

8/7/2013

10.1

31.1

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

31.2

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

32.1

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

32.2

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

101. INS

XBRL Instance

101.SCH

XBRL Taxonomy Extension Schema

101.CAL

XBRL Taxonomy Extension Calculation

101. LAB

XBRL Taxonomy Extension Labels

101.PRE

XBRL Extension Presentation

101.DEF

XBRL Taxonomy Extension Definition

(1) Supersedes the Amended and Restated Bylaws of Registrant filed with the SEC on Form 8-K on September 18, 2013.

* Denotes management contract or compensatory plan or arrangement required to be filed as an Exhibit to this Form 10-Q.

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

Large accelerated filer x		Accelerated filer o

Non-accelerated filer o		Smaller reporting company o
(Do not check if a smaller reporting company)

	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit)	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	40
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	53
Signatures		54

	ADVENT SOFTWARE, INC.


Dated: November 8, 2013	By:	/s/ James S. Cox
		James S. Cox Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

Nine Months Ended
September 30

Statement of Operations Classification:

Realized gains on sale of marketable securities

Interest and other income (expense), net

Income tax benefit

Provision for income taxes

Net income