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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission file number: 0-26994

ADVENT SOFTWARE, INC.
(Exact name of Registrant as specified in its charter)

        Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý    No o

        The number of shares of the Registrant's Common Stock outstanding as of October 31, 2002 was 32,698,093.

INDEX

PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

ADVENT SOFTWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

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

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ADVENT SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share data)

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)

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

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ADVENT SOFTWARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.    Basis of Presentation

        The condensed consolidated financial statements include the accounts of Advent Software, Inc. ("Advent") and its wholly owned subsidiaries. We have eliminated all significant intercompany balances and transactions.

        We prepared the condensed consolidated financial statements in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC") applicable to interim financial information. Certain information and footnote disclosures included in financial statements prepared in accordance with generally accepted accounting principles have been omitted in these interim statements pursuant to such SEC rules and regulations. We recommend that these interim financial statements be read in conjunction with the audited financial statements and related notes included in our 2001 Annual Report on Form 10-K filed with the SEC. Interim results are not necessarily indicative of the results to be expected for the full year.

        In our opinion, the condensed consolidated financial statements include all adjustments necessary to present fairly the financial position and results of operations for each interim period shown.

2.    Accounting Policies

        In June 2002, we began to offer term licenses as an alternative to the perpetual licenses we have historically offered to customers. We recognize revenue for term licenses ratably over the period of the contract term. We recognize revenue on perpetual licenses upon shipment assuming all other revenue recognition criteria have been met. Looking forward, it is too early to predict any trends or adoption rates with respect to customer preferences related to term or perpetual licensing.

        In July 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No. 146 nullifies the guidance of the Emerging Issues Task Force ("EITF") in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". Under EITF Issue No. 94-3, an entity recognized a liability for an exit cost on the date that the entity committed itself to an exit plan. In SFAS 146, the Board acknowledges that an entity's commitment to a plan does not, by itself, create a present obligation to the other parties that meets the definition of a liability and requires that a liability for a cost that is associated with an exit or disposal activity be recognized when the liability is incurred. It also establishes that fair value is the objective for the initial measurement of the liability. SFAS 146 will be effective for exit or disposal activities that are initiated after December 31, 2002. We do not expect a significant impact on our financial position and results of operations for the adoption of SFAS 146.

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3.    Net Income (Loss) Per Share

4.    Acquisitions

        In February 2002, we acquired Kinexus Corporation, a privately held company located in New York. Kinexus provides internal account aggregation and manual data management services which we will use in our Advent TrustedNetwork service. The acquisition has been accounted for using the purchase method of accounting and accordingly, the purchase price has been allocated to the tangible and intangible assets and liabilities acquired on the basis of their respective fair values on the acquisition date. The results of operations are included in the consolidated financial statements beginning on the acquisition date. In order to further increase our deployment of Advent TrustedNetwork, we acquired Kinexus at amounts exceeding the tangible and identifiable intangible fair values of assets and liabilities resulting in goodwill of $25.3 million.

        The total purchase price of approximately $45.5 million included cash of approximately $34 million, closing costs of $3 million and a warrant to purchase 165,176 shares of our Common Stock valued at $8.5 million. The fair value of the warrant was calculated using the Black-Scholes method using the following assumptions: fair value of common stock of $51.34 per share, interest rate of 3%, volatility of 65.9% and a dividend rate of zero. The warrant had an exercise price of $0.01 per share, was exercised in February 2002 and had a contractual term of one year. There is $3.8 million of additional contingent consideration that is held in escrow for 14 months, which if released will be recorded as additional goodwill. There is also a potential earn-out distribution to shareholders of up to $115 million over the next two years in cash or stock at the option of Advent under a formula based on revenues and expenses for the years ending December 31, 2002 and 2003, which if earned will be recorded as additional goodwill. As of September 30, 2002, there have been no payments or accruals related to this earn-out provision.

        In the quarter ended June 30, 2002, there was an adjustment to Kinexus goodwill and liabilities assumed decreasing both by approximately $4.1 million. We reduced the estimated liability assumed in connection with a vacant Kinexus facility located in downtown Manhattan within a few blocks of the World Trade Center site based on additional analysis on the local commercial rental market.

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        The updated allocation of the Kinexus purchase price to tangible and intangible assets and liabilities is summarized below (in thousands).

        Goodwill is not expected to be deductible for tax purposes.

        Liabilities assumed of $39.7 million include cash advances from Advent of $4.9 million, change-in-control separation obligations of $11.1 million and remaining estimated long-term lease obligations of $4.1 million. The purchase price is subject to further refinement and change over the next few months due primarily to assessing the liabilities assumed. The amount allocated to identifiable intangibles was determined based on management's estimates using established valuation techniques.

        In July 2002, we acquired Techfi Corporation, a privately held company. Techfi provides software, technology and services to the financial intermediary market. This acquisition was in keeping with our strategy to add products and services that meet the needs of a wide variety of sectors in the financial services industry, as we added the capability that Techfi brings particularly in the financial planning and independent broker/dealer areas. The acquisition has been accounted for using the purchase method of accounting and accordingly, the purchase price has been allocated to the tangible and intangible assets and liabilities acquired on the basis of their respective fair values on the acquisition date. The results of operations are included in the consolidated financial statements beginning on the acquisition date. The total purchase price of approximately $22.8 million includes cash of approximately $20.2 million, acquisition related expenses of $0.8 million and options to purchase 70,000 shares of our Common Stock valued at approximately $1.8 million. The options were valued using the Black-Scholes method to determine fair value, have an exercise price of $17.39 per share, vest over five years, and expire in August 2012. There is $2.3 million of additional contingent consideration that is held in escrow for 14 months, which if released will be recorded as additional goodwill. The acquisition price of Techfi exceeded the tangible and identifiable intangible fair values of assets and liabilities resulting in goodwill of $17 million, which is not expected to be deductible for tax purposes. At the acquisition date, Techfi's primary purchased in-process research and development ("IPR&D") projects involved the development of a web-enabled system for portfolio management, performance reporting and contact management; distributable macro language to automate operational tasks like downloading, importing and report printing and enhancements to their currently offered AdvisorMart service.

        Purchased IPR&D for Techfi represents the present value of the estimated after-tax cash flows expected to be generated by the purchased technology, which, at the acquisition date, had not yet reached technological feasibility. The cash flow projections for revenues were based on estimated projected revenue and expenses beyond 2003 and expected industry benchmarks. Revenue estimates also include an estimated annual attrition percentage to account for the fact that, as time passes, the portion of projected revenue attributable to purchased IPR&D technologies will become less as newer technology replaces the capabilities and functionality of the purchased IPR&D technologies. Estimated

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operating expenses and income taxes were deducted from estimated revenue projections to arrive at after-tax cash flows. Projected operating expenses included costs of goods sold, research and development, sales and marketing expenses, general and administrative expenses, including estimated costs to maintain the products once they have been introduced into the market and are generating revenue. The rates utilized to discount projected cash flows were 20% to 35% for in-process technologies and were based primarily on rates of return and the overall level of market acceptance and the amount of time each respective technology has been in the marketplace. The purchased IPR&D is expected to be fully completed and revenues are expected to commence in the fourth quarter of 2002.

        As of the date of acquisition, Advent concluded that the purchased in-process technology had no alternative future use after taking into consideration the potential use of the technology in different products, the stage of development and life-cycle of each project and resale of the software. The value of the purchased IPR&D of approximately $1.5 million was expensed at the time of the acquisition.

        The preliminary allocation of the Techfi purchase price to tangible and intangible assets and liabilities is summarized below (in thousands).

        In September 2002, we acquired all of the common stock of our distributor's operation located in Greece, Advent Hellas, for a total purchase price of approximately $6.6 million in cash. In addition, in connection with this acquisition, we are required to pay 50% of operating margins that exceed 20% for the two years after the acquisition. The acquisition was accounted for using the purchase method of accounting and the results of operations are included in our consolidated financial statements beginning on the acquisition date. We acquired our Greek distributor's operation at amounts exceeding the tangible and identifiable intangible fair values of assets and liabilities resulting in goodwill of $5.4 million in order to expand control over European channels for our products and services. The preliminary allocation of the Advent Hellas purchase price was based on the estimated fair value of the net tangible liabilities of $0.2 million at the acquisition date (consisting of current assets of $0.8 million; property, plant and equipment of $0.03 million; other assets of $0.01 million; current liabilities of approximately $1 million), goodwill of $5.4 million, which is not deductible for tax purposes, and an identified intangible for a licensing agreement of $1.4 million which has an amortization period of 7 years.

        The following pro forma supplemental information presents selected financial information as though the purchases of Kinexus and Techfi had been completed as of the beginning of the periods being reported on and after giving effect to purchase accounting adjustments. The pro forma consolidated net income (loss) amounts include certain pro forma adjustments, primarily the

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amortization of identifiable intangible assets, tax provision (benefit) adjustments on pro forma pre-tax income (loss) at a statutory tax rate of 41% and the elimination of interest income on cash used in the acquisition. The pro forma consolidated information below does not include acquisitions completed in 2001 nor does it include the acquisition of Advent Hellas in September 2002 as they were not material (in thousands, except per share data):

5.    Other Assets

        Components of other assets were as follows (in thousands):

        Interest income and other expense includes a non-cash charge of approximately $3.2 million during the quarter ended September 30, 2002 related to the write-down of our long-term equity investments, primarily an investment in myCFO, Inc. On September 27, 2002, Harris Wealth Management Group announced that it has reached an agreement to acquired certain assets of myCFO, Inc. resulting in no anticipated recovery of our initial investment. Additionally, during the quarter ended June 30, 2002, we had a charge of approximately $9 million related to the write-down of our long-term equity investments, primarily our investment in Encompys, Inc. In May 2002, the Board of Directors of Encompys, Inc. informed us that it had decided to sell the assets of Encompys or wind down operations. Encompys was formed in April 2001 by Accenture, Microsoft, Compaq and the Bank of New York to provide an Internet-based straight-through-processing solution for the global asset management community.

        We recorded a benefit from income taxes of approximately $4 million, or 33%, in the third quarter of 2002. The third quarter effective tax rate reflects the effect of the in-process research and development write off and the write-downs of certain investments. The annual effective tax rate is anticipated to be 6% for 2002 compared to the 2001 effective tax rate of 34%. The actual effective tax rate for the entire 2002 fiscal year could vary substantially depending on actual results achieved. The anticipated 2002 tax rate differs from the statutory rate primarily due to the write-offs of in-process research and development and changes in valuation allowances for certain deferred tax assets, resulting from the write-downs of certain investments, all of which are not anticipated to be deductible for tax purposes. We currently do not expect any goodwill to be deductible for tax purposes.

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        We adopted Statement of Financial Accounting Standards No. 142 (SFAS 142), "Goodwill and Other Intangible Assets" in the first fiscal quarter of 2002. SFAS 142 supercedes Accounting Principles Board Opinion No. 17 "Intangible Assets" and discontinues the amortization of goodwill. SFAS 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their initial recognition. The provisions of SFAS 142 (1) prohibit the amortization of goodwill and indefinite-lived intangible assets, (2) require that goodwill and indefinite-lived intangibles assets be tested annually for impairment (and in interim periods if certain events occur indicating that the carrying value of goodwill and/or indefinite-lived intangible assets may be impaired), (3) require that reporting units be identified for the purpose of assessing potential future impairments of goodwill, and (4) remove the forty-year limitation on the amortization period of intangible assets that have finite lives.

        SFAS 142 requires that goodwill be tested annually for impairment using a two-step process. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired, thus the second step of the impairment test is unnecessary. The second step of the goodwill impairment test, used to measure the amount of impairment loss, compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess. The implied fair value of goodwill shall be determined by allocating the fair value of a reporting unit to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the price paid to acquire the reporting unit. During the second quarter of 2002, we completed this first step of the transitional goodwill impairment test measured as of January 1, 2002. This first test did not indicate impairment and, therefore, no changes were made based on the outcome of this testing. The second step of the transitional impairment test is not required.

        The changes in the carrying value of goodwill and intangible assets for the nine months ended September 30, 2002 were as follows (in thousands):

        Additions to goodwill include $29.4 million, $16.8 million, and $5.4 million related to the acquisitions of Kinexus in February 2002, Techfi in July 2002, and Advent Hellas in September 2002, respectively, approximately $1 million adjustment to the purchase price of our Scandinavian subsidiaries and $0.2 million additional consideration paid to the former NPO stockholders in connection with performance based earn-outs. The $4.3 million of acquisition and other adjustments are primarily the result of a revaluation of an assumed liability for a lease of a vacant Kinexus facility located in downtown Manhattan within a few blocks of the World Trade Center site.

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        As of September 30, 2002, the estimated intangibles amortization expense for each calendar year ended December 31 is: $10.4 million for 2002; $11.8 million for 2003; $11.4 million for 2004; $6.6 million for 2005; $4.1 million for 2006; and $2.5 million thereafter.

        Net income (loss) on a pro forma basis, excluding goodwill amortization expense, would have been as follows (in thousands, except per share data):

6.    Stock Related

        In March 2001, Advent's Board of Directors authorized the repurchase of up to one million shares of outstanding common stock. On May 8, 2002 and June 28, 2002, the Board of Directors authorized the repurchase of an additional one million and two million shares, respectively. A total of 430,000 shares were repurchased in 2001. During the six months ended June 30, 2002, Advent repurchased 1,455,000 shares at an average price of $22.90 per share. We repurchased an additional 900,000 shares in July 2002 at an average price of $18.16 per share. The purchases may be made, from time to time, on the open market or in privately negotiated transactions and will be funded from available working capital. The repurchase program will allow us to help manage the dilution of our shares from our employee stock programs.

        In February and May 2002, the Board of Directors and the stockholders, respectively, approved the 2002 Stock Plan which includes an "evergreen" provision which adds an annual increase to the plan on the last day of the Company's fiscal year beginning in 2002 equal to the lesser of (i) 1,000,000 shares, (ii) 2% of the Company's outstanding shares on such date, or (iii) a lesser number of shares determined by the Board of Directors. The plan allows for the grant of options to purchase Common Stock to employees and consultants under substantially the same terms as the 1992 Stock Plan described in our Annual Report on Form 10-K for the year ended December 31, 2001. All remaining options from the expired 1992 Stock Plan have rolled over to the 2002 Stock Plan.

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7.    Commitments and Contingencies

        A European distributor and its subsidiaries that operate in certain European locations have the exclusive right to sell our software in the European Union, excluding certain locations, until July 1, 2004 subject to achieving certain revenue levels. During this period the distributor also has the contingent right to require us to purchase any one or any group of their subsidiaries. Our requirement to purchase is contingent upon the distributor achieving specified operating margins greater than 20% and specified customer satisfaction criteria. The purchase price would be two times the preceding twelve months total revenue of the purchased subsidiaries plus potential additional consideration equal to 50% of operating margins greater than 20% that are achieved in the two years subsequent to our acquisition. In addition, Advent has the right to purchase any one or any group of the distributor's subsidiaries under certain conditions. In the event these rights are exercised by Advent or the distributor, the purchase of these subsidiaries would principally result in an increase in intangible assets, goodwill and amortization of intangible assets. Please see Note 4 for further information on the purchase of the European distributor's Greek subsidiary in September 2002. We do not expect to purchase any more of the European distributor's subsidiaries for the remainder of 2002.

        Our operating lease commitments after 2001 increased to $63 million for the years 2002 through 2012, cumulatively, primarily due to a new operating lease for additional facilities in San Francisco signed in 2002 and leases assumed in connection with the Kinexus acquisition. Approximately $8 million related to vacant Kinexus facilities was originally included in net liabilities assumed in February 2002. The recorded liability was later reduced by approximately $4 million in the quarter ended June 30, 2002 based on additional analysis on the local commercial rental market.

        On November 8, 2001, Charles Schwab & Co, Inc. ("Schwab") filed suit against us because of our intention to cease maintenance of an existing software interface and to transition to a new, and what we believe to be improved, software interface (the "Advent Custodial Data" or "ACD" system). On July 22, 2002, we settled our dispute with Schwab. Pursuant to the settlement agreement, Advent will extend maintenance of the point-to-point interface for licensed users through December 30, 2004 to be paid for by the licensed users. Concurrent with maintenance of the point-to-point interface, Advent and Schwab will fully support and continue to offer ACD service and will work together to further enhance the Schwab ACD interface. Advent and Schwab will cooperate to create an orderly transition from the point-to-point interface to ACD by year-end 2004. Finally, Advent's ACD pricing for Schwab customers will not differ based on the custodial relationship of the advisor, and Schwab will not develop a substitute for the point-to-point interface.

        From time to time we are subject to various other legal proceedings, claims and litigation arising in the ordinary course of business. We do not expect that the ultimate costs to resolve these matters will have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

8.    Subsequent Events

        In November 2002, the Company commenced a voluntary stock option exchange program made available to certain eligible employees of the Company. The Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Chief Technology Officer and Executive Vice President of Business Development are specifically excluded from participating in the exchange program. Under this program, eligible employees were given the option to cancel each outstanding stock option granted to them at an exercise price greater than or equal to $20 per share, in exchange for a new option to buy 0.8 shares of the Company's Common Stock to be granted on June 5, 2003, six months and one day from December 4, 2002, the expiration date of the offer, and the date the old options of participating employees will be cancelled. There is no credit given for option vesting during the period between cancellation of the outstanding option and the grant of the new option. The exercise price of the new

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options will be equal to the fair market value of the Company's Common Stock on the date of grant. In total, 3,336,504 option shares are eligible to participate in this program. The exchange program is not expected to result in additional compensation charges or variable option plan accounting.

        In November 2002, we purchased all of the outstanding membership interests of AdventOutsource Data Management, LLC ("AdventOutsource"), formerly Uoutsource Data Management, LLC, for approximately $947,000 in cash plus net liabilities of approximately $4 million plus acquisition costs. AdventOutsource is an application service provider of portfolio reconciliation and reporting services via the internet. AdventOutsource stores the client's data, provides secure access over the Web to their accounts, and delivers the Axys functionality in portfolio management, accounting and reporting. In addition to the initial cash consideration, there is also a potential earn-out distribution to the selling members of up to $5 million through December 31, 2004 under a formula based on revenue results for the years ending December 31, 2003 and 2004. For the remainder of 2002 through 2005, AdventOutsource operating lease commitments approximate $1 million.

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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 consolidated financial statements and related notes. Except for historical information, the following discussion contains forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934. These forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our anticipated product offerings, revenues, gross margins and operating costs and expenses. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those discussed in the forward-looking statements include, but are not limited to, those discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Other Factors Which May Affect Future Operations and Forward-Looking Statements" and elsewhere in this document as well as other information set forth in our Form 10-K for the year ended December 31, 2001, and other documents we file from time to time with the Securities and Exchange Commission.

Accounting Policies

        In June 2002, we began to offer term licenses as an alternative to the perpetual licenses we have historically offered to customers. We recognize revenue for term licenses ratably over the period of the contract term. We recognize revenue on perpetual licenses upon shipment assuming all other revenue recognition criteria have been met. Looking forward, it is too early to predict any trends or adoption rates with respect to customer preferences related to term or perpetual licensing.

        In July 2002, the FASB issued SFAS No.146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No. 146 nullifies the guidance of the Emerging Issues Task Force (EITF) in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". Under EITF Issue No. 94-3, an entity recognized a liability for an exit cost on the date that the entity committed itself to an exit plan. In SFAS 146, the Board acknowledges that an entity's commitment to a plan does not, by itself, create a present obligation to the other parties that meets the definition of a liability and requires that a liability for a cost that is associated with an exit or disposal activity be recognized when the liability is incurred. It also establishes that fair value is the objective for the initial measurement of the liability. SFAS 146 will be effective for exit or disposal activities that are initiated after December 31, 2002. We do not expect a significant impact on our financial position and results of operations for the adoption of SFAS 146.

Acquisitions

        In February 2002, we acquired Kinexus Corporation, a privately held company located in New York. Kinexus provides internal account aggregation and manual data management services which we will use in our Advent TrustedNetwork service. The acquisition has been accounted for using the purchase method of accounting and accordingly, the purchase price has been allocated to the tangible and intangible assets and liabilities acquired on the basis of their respective fair values on the acquisition date. The results of operations are included in the consolidated financial statements beginning on the acquisition date. In order to further increase our deployment of Advent TrustedNetwork, we acquired Kinexus at amounts exceeding the tangible and identifiable intangible fair values of assets and liabilities resulting in goodwill of $25.3 million.

        The total purchase price of approximately $45.5 million included cash of approximately $34 million, closing costs of $3 million and a warrant to purchase 165,176 shares of our Common Stock valued at $8.5 million. The fair value of the warrant was calculated using the Black-Scholes method

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using the following assumptions: fair value of common stock of $51.34 per share, interest rate of 3%, volatility of 65.9% and a dividend rate of zero. The warrant had an exercise price of $0.01 per share, was exercised in February 2002 and had a contractual term of one year. There is $3.8 million of additional contingent consideration that is held in escrow for 14 months, which if released will be recorded as additional goodwill. There is also a potential earn-out distribution to shareholders of up to $115 million over the next two years in cash or stock at the option of Advent under a formula based on revenues and expenses for the years ending December 31, 2002 and 2003, which if earned will be recorded as additional goodwill. As of September 30, 2002, there have been no payments or accruals related to this earn-out provision.

        In the quarter ended June 30, 2002, there was an adjustment to Kinexus goodwill and liabilities assumed decreasing both by approximately $4.1 million. We reduced the estimated liability assumed in connection with a vacant Kinexus facility located in downtown Manhattan within a few blocks of the World Trade Center site based on additional analysis on the local commercial rental market.

        The updated allocation of the Kinexus purchase price to tangible and intangible assets and liabilities is summarized below (in thousands).

        Goodwill is not expected to be deductible for tax purposes.

        Liabilities assumed of $39.7 million include cash advances from Advent of $4.9 million, change-in-control separation obligations of $11.1 million and remaining estimated long-term lease obligations of $4.1 million. The purchase price is subject to further refinement and change over the next few months due primarily to assessing the liabilities assumed. The amount allocated to identifiable intangibles was determined based on management's estimates using established valuation techniques.

        In July 2002, we acquired Techfi Corporation, a privately held company. Techfi provides software, technology and services to the financial intermediary market. This acquisition was in keeping with our strategy to add products and services that meet the needs of a wide variety of sectors in the financial services industry, as we added the capability that Techfi brings particularly in the financial planning and independent broker/dealer areas. The acquisition has been accounted for using the purchase method of accounting and accordingly, the purchase price has been allocated to the tangible and intangible assets and liabilities acquired on the basis of their respective fair values on the acquisition date. The results of operations are included in the consolidated financial statements beginning on the acquisition date. The total purchase price of approximately $22.8 million includes cash of approximately $20.2 million, acquisition related expenses of $0.8 million and options to purchase 70,000 shares of our Common Stock valued at approximately $1.8 million. The options were valued using the Black-Scholes method to determine fair value, have an exercise price of $17.39 per share, vest over five years, and expire in August 2012. There is $2.3 million of additional contingent consideration that is held in escrow for 14 months, which if released will be recorded as additional goodwill. The acquisition price of Techfi

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exceeded the tangible and identifiable intangible fair values of assets and liabilities resulting in goodwill of $17 million, which is not expected to be deductible for tax purposes. At the acquisition date, Techfi's primary purchased in-process research and development ("IPR&D") projects involved the development of a web-enabled system for portfolio management, performance reporting and contact management; distributable macro language to automate operational tasks like downloading, importing and report printing; and enhancements to their currently offered AdvisorMart service.

        Purchased IPR&D for Techfi represents the present value of the estimated after-tax cash flows expected to be generated by the purchased technology, which, at the acquisition date, had not yet reached technological feasibility. The cash flow projections for revenues were based on estimated projected revenue and expenses beyond 2003 and expected industry benchmarks. Revenue estimates also include an estimated annual attrition percentage to account for the fact that, as time passes, the portion of projected revenue attributable to purchased IPR&D technologies will become less as newer technology replaces the capabilities and functionality of the purchased IPR&D technologies. Estimated operating expenses and income taxes were deducted from estimated revenue projections to arrive at after-tax cash flows. Projected operating expenses included costs of goods sold, research and development, sales and marketing expenses, general and administrative expenses, including estimated costs to maintain the products once they have been introduced into the market and are generating revenue. The rates utilized to discount projected cash flows were 20% to 35% for in-process technologies and were based primarily on rates of return and the overall level of market acceptance and the amount of time each respective technology has been in the marketplace. The purchased IPR&D is expected to be fully completed and revenues are expected to commence in the fourth quarter of 2002.

        As of the date of acquisition, Advent concluded that the purchased in-process technology had no alternative future use after taking into consideration the potential use of the technology in different products, the stage of development and life cycle of each project and resale of the software. The value of the purchased IPR&D of approximately $1.5 million was expensed at the time of the acquisition.

        The preliminary allocation of the Techfi purchase price to tangible and intangible assets and liabilities is summarized below (in thousands).

        In September 2002, we acquired all of the common stock of our distributor's operation located in Greece, Advent Hellas, for a total purchase price of approximately $6.6 million in cash. In addition, in connection with this acquisition, we are required to pay 50% of operating margins that exceed 20% for the two years after the acquisition. The acquisition was accounted for using the purchase method of accounting and the results of operations are included in our consolidated financial statements beginning

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on the acquisition date. We acquired our Greek distributor's operation at amounts exceeding the tangible and identifiable intangible fair values of assets and liabilities resulting in goodwill of $5.4 million in order to expand control over European channels for our products and services. The preliminary allocation of the Advent Hellas purchase price was based on the estimated fair value of the net tangible liabilities of $0.2 million at the acquisition date (consisting of current assets of $0.8 million; property, plant and equipment of $0.03 million; other assets of $0.01 million; current liabilities of approximately $1 million), goodwill of $5.4 million which is not deductible for tax purposes, and an identified intangible for a licensing agreement of $1.4 million which has an amortization period of 7 years.

        In November 2002, we purchased all of the outstanding membership interests of AdventOutsource Data Management, LLC. ("AdventOutsource"), formerly Uoutsource Data Management, LLC, for approximately $947,000 in cash plus net liabilities of approximately $4 million plus acquisition costs. AdventOutsource is an application service provider of portfolio reconciliation and reporting services via the Internet. AdventOutsource stores the client's data, provides secure access over the Web to their accounts, and delivers the Axys functionality in portfolio management, accounting and reporting. In addition to the initial cash consideration, there is also a potential earn-out distribution to the selling members of up to $5 million through December 31, 2004 under a formula based on revenue results for the years ending December 31, 2003 and 2004.

Distributor Relationship

        We rely on a number of strategic alliances to help us achieve market acceptance of our products and to leverage our development, sales, and marketing resources. In 1998 we established one such relationship with a company in Scandinavia to distribute our products within Scandinavia. In the third quarter of 1999, this distributor formed Advent Europe. Advent Europe and its subsidiaries have the exclusive right to distribute our software in the European Union, excluding certain locations, until July 1, 2004 subject to achieving certain revenue levels. Incorporated in The Netherlands, Advent Europe is an independent entity and is not financially backed by us and is entirely capitalized by independent third party investors. It makes tax and language modifications to Advent Office to fit the various needs of the local jurisdictions and then markets and licenses the Advent Office suite and related services. All transactions between Advent Europe and us are transacted in U.S. dollars and are arms length transactions. Revenue from sales to this distributor is recognized when the distributor submits a signed contract, the product has been delivered, the fee is fixed and determinable, and the resulting receivable is reasonably assured. Our revenues from this distributor in each of the three years ended December 31, 2001, 2000, and 1999 and in the quarters ended March 31, 2002, June 30, 2002, and September 30, 2002 were less than 4% of our total net revenue.

        Through July 1, 2004, subject to achieving certain revenue levels, Advent Europe also has the contingent right to require us to purchase any one or any group of their subsidiaries. Our requirement to purchase is contingent upon the distributor achieving specified operating margins in excess of 20% as well as customer satisfaction criteria as specified in the agreement. The purchase price would be two times the preceding twelve months total revenue of the purchased subsidiaries plus an earn-out equal to 50% of operating margins that exceed 20% for the two years after the acquisition. In addition, we have the right to purchase any one or any group of the distributor's subsidiaries under certain conditions. In the event these rights are exercised by us or the distributor, the purchase of these subsidiaries would principally result in an increase in intangible assets, goodwill and amortization of intangible assets. In November 2001, we acquired three of Advent Europe's companies located in Norway, Sweden, and Denmark. During the nine months ended September 30, 2002, a net $1 million was paid in connection with an adjustment to the original purchase price for these three Scandinavian subsidiaries. In addition to the purchase price paid for these three companies, there is potential additional consideration equal to 50% of operating margins greater than 20% that are achieved in the

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two years subsequent to our acquisition of these companies as described above. As of September 30, 2002, no additional potential consideration has been earned or paid. In September 2002, we acquired all of the common stock of Advent Hellas, our distributor's operation located in Greece, for a total purchase price of approximately $6.6 million in cash. We do not expect to purchase any more of the European distributor's subsidiaries for the remainder of 2002. Please see Note 4 for additional information.

Employee Stock Option Exchange Program

        On November 1, 2002, the Company commenced a voluntary stock option exchange program made available to certain eligible employees of the Company. The Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Chief Technology Officer and Executive Vice President of Business Development are specifically excluded from participating in the exchange program. Under this program, eligible employees were given the option to cancel each outstanding stock option granted to them at an exercise price greater that or equal to $20 per share, in exchange for a new option to buy 0.8 shares of the Company's Common Stock to be granted on June 5, 2003, six months and one day from December 4, 2002, the expiration date of the offer, and the date the old options of participating employees will be cancelled. There is no credit given for option vesting during the period between cancellation of the outstanding option and the grant of the new option. The exercise price of the new options will be equal to the fair market value of the Company's Common Stock on the date of grant. In total, 3,336,504 option shares are eligible to participate in this program. The exchange program is not expected to result in additional compensation charges or variable option plan accounting.

Results of Operations

REVENUES

        Our net revenues are made up of three components: license and development fees, maintenance and recurring, and professional services and other. Our net revenues for the third quarter ended 2002 decreased 10% to $35.1 million, compared with net revenues of $39.2 million for the same period in 2001. This decrease primarily resulted from a decline in license revenue and development fees. The target clients for our products include a range of financial services organizations that manage investment portfolios, including investment advisors, brokerage firms, banks and hedge funds. In addition, we target corporations, public funds, universities and non-profit organizations, which also manage investment portfolios and have many of the same needs. The success of many of our clients is intrinsically linked to the health of the financial markets. We believe that the demand for our products was negatively affected by the current economic environment, downturns in the financial markets, and by pending and proposed regulatory activity in the financial services market. These factors have resulted in reduced revenue growth across the industry, longer sales cycles, deferral and delay of information technology projects and generally reduced expenditure for software related services. We expect a continued difficult environment for the remainder of 2002.

        Net revenues for the nine months ended September 30, 2002 increased 5% to $123.2 million, compared with net revenues of $117.8 million for the same period in 2001, primarily due to increases in our maintenance and other recurring revenues.

        License Revenue and Development Fees.    License revenue and development fees for the third quarter of 2002 decreased 48% to $9.2 million compared with license revenue and development fees of $17.6 million for the third quarter of 2001. License revenue and development fees for the nine months ended September 30, 2002 decreased 20% to $44.2 million, compared with $55.2 million for the same period in 2001. These decreases in license and development fees were primarily due to decreased sales of the Advent Office suite of products during the second and third quarters of 2002. Sales of these

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products decreased principally due to the impact of current economic conditions and the slowing economy on the financial services clients.

        Maintenance and Other Recurring Revenues.    Maintenance and other recurring revenues for the third quarter of 2002 increased 25% to $21.7 million, compared with maintenance and other recurring revenue of $17.4 million for the third quarter of 2001. Maintenance and other recurring revenues for the nine months ended September 30, 2002 increased 33% to $64.9 million, compared with $48.7 million for the same period in 2001. These increases were primarily due to an increase in the client base and higher average maintenance fees as clients selected more components for a full feature, multi-product solution and expanded the number of users and sites licensing our software. Revenue associated with our acquisition of Kinexus and increased demand for pricing data and other data services associated with our Wealth Management Solutions also contributed to the increases in maintenance and other recurring revenues.

        Professional Services and Other Revenues.    Professional services and other revenues for the third quarter of 2002 remained consistent at $4.2 million, compared with $4.2 million for the same period in 2001. Professional services and other revenues for the nine months ended September 30, 2002, also remained consistent at $14.1 million as compared with $13.9 million for the same period in 2001. Revenues during the third quarter of 2002 include additional services revenue earned through our newly acquired subsidiary, Kinexus, partially offset by a decrease in the demand for our other professional services. Revenues during the third quarter of 2001 included revenue from our bi-annual user conference held in the third quarter of last year. This year our bi-annual user conference will be held in the fourth quarter.

COST OF REVENUES

        Our cost of revenues is made up of three components: cost of license and development fees, cost of maintenance and other recurring and cost of professional services and other. Our cost of revenues for the third quarter of 2002 increased 26% to $9.2 million compared with cost of revenues of $7.3 million for the third quarter of 2001. Cost of revenues for the nine months ended September 30, 2002, increased 25% to $27 million compared with $21.6 million for the same period in 2001. Cost of revenues as a percentage of net revenues increased to 26% from 19% for the three months ended September 30, 2002 and 2001, respectively, and to 22% from 18% for the nine months ended September 30, 2002 and 2001, respectively.

        Cost of License and Development Fees.    Cost of license and development fees revenue consists primarily of the cost of product media and duplication, manuals, packaging materials, the fixed direct labor involved with producing and distributing our software; labor costs associated with generating development fees; and royalties paid to third parties. Cost of license and development fees will fluctuate between periods due to the mix of license and development fee revenues. Cost of license and development fees increased 6% to $1.8 million in the third quarter of 2002 from $1.7 million in the third quarter of 2001 and 10% to $5.3 million for the nine months ended September 30, 2002 compared with $4.8 million for the same period of 2001. The increase in cost of license and development fees is directly related to the product mix in license and development fees revenue. Cost of license and development fees as a percentage of the related revenues increased to 20% from 9% for the three months ended September 30, 2002 and 2001, respectively, and to 12% from 9% for the nine months ended September 30, 2002 and 2001, respectively. The increase as a percentage of revenue is primarily due to the fixed costs associated with our product distribution combined with a decrease in revenues and to a lesser extent product mix for the three and nine months ended September 30, 2002.

        Cost of Maintenance and Other Recurring.    Cost of maintenance and other recurring revenues are primarily comprised of the direct costs of providing technical support and other services for recurring revenues, the engineering costs associated with product updates and royalties paid to third party

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subscription-based and transaction-based vendors. Cost of maintenance and other recurring revenues increased 35% to $5.8 million for the third quarter of 2002 from $4.3 million for the third quarter of 2001 and increased 36% to $16.6 million for the nine months ended September 30, 2002, compared with $12.2 million for the same period in 2001. These increases were due to additional staffing required to support an increasing customer base, continued interface development and increased royalties paid to third party subscription-based and transaction-based vendors. Cost of maintenance and other recurring revenues as a percentage of the related revenues increased to 27% from 24% for the three months ended September 30, 2002 and 2001, respectively, and remained relatively flat at 26% compared with 25% for the nine months ended September 20, 2002 and 2001, respectively.

        Cost of Professional Services and Other.    Cost of professional services revenue primarily consists of personnel related costs associated with the client services and support organization in providing consulting, custom report writing, and conversions of data from clients' previous systems. To the extent that such personnel are not fully utilized in consulting, training, conversion or custom report writing projects, they are utilized for pre-sales, marketing and engineering activities and the related costs are charged to operating expenses. Cost of professional services and other revenue increased 7% to $1.5 million for the third quarter of 2002, compared with $1.4 million for the same period in 2001. Cost of professional services and other revenue increased 11% to $5 million for the nine months ended September 30, 2002, compared with $4.5 million for the same time period in 2001. These increases are primarily due to changes in product mix. Revenues and costs of professional services in 2001 included revenues and costs related to our bi-annual user conference held in the third quarter of last year. This year our bi-annual conference will be held in the fourth quarter. Cost of professional services and other as a percentage of the related revenues increased to 36% for the third quarter of 2002, compared with 34% for the same period in 2001 and increased to 36% for the nine months ended September 30, 2002, compared with 33% for the same period in 2001. These increases are due to changes in product mix. Revenues and costs of professional services in 2001 included revenues and costs related to our bi-annual user conference held in the third quarter of last year. This year our bi-annual conference will be held in the fourth quarter.

OPERATING EXPENSES

        Sales and Marketing.    Sales and marketing expenses consist primarily of the cost of personnel involved in the sales and marketing process, sales commissions, advertising and promotional materials, sales facilities expense, trade shows and seminars. Our sales and marketing expenses for the third quarter of 2002 increased 20% to $16.6 million, compared with sales and marketing expenses of $13.8 million for the third quarter of 2001 and increased 26% to $48.9 million for the nine months ended September 30, 2002, compared with $38.7 million for the same time period in 2001. The increase in expense was primarily due to an increase in sales and marketing personnel, additional personnel related to our acquisitions of Kinexus and Techfi and increased marketing programs targeting our core markets and our Wealth Management initiatives such as Advent TrustedNetwork and Wealthline. Sales and marketing expenses as a percentage of net revenues increased to 47% in the third quarter compared with 35% in the same period in 2001 and increased to 40% for the nine months ended September 30, 2002, compared with 33% for the same period in 2001. The increase as a percentage of revenue was primarily due to increased expenses combined with a decrease in revenues during the three and nine months ended September 30, 2002.

        Product Development.    Research and 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. Costs associated with product updates are included in cost of maintenance and other recurring revenue. Our product development expenses for the third quarter of 2002 increased 49% to $10.3 million, compared with product development expenses of $6.9 million for the third quarter of 2001 and expenses for the nine

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months ended September 30, 2002 increased 54% to $29.2 million, compared with $19 million for the same period in 2001. Product development expenses increased primarily due to a growth in personnel as we increased our product development efforts to accelerate the rate of product enhancements and new product introductions, both released and unreleased, in connection with Geneva, Advent Office, and our Wealth Management initiatives such as Wealthline and Advent TrustedNetwork. We also incurred additional personnel costs related to our acquisitions of Kinexus and Techfi. Product development expenses also increased as a percentage of net revenues to 29% for the third quarter of 2002 compared to 18% in the third quarter of 2001 and increased to 24% from 16% for the nine months ended September 30, 2002 and 2001, respectively. The increase as a percentage of revenue was primarily due to increased development expenses combined with a decrease in revenues during the three and nine-month period ended September 30, 2002.

        General and Administrative.    General and administrative expenses consist primarily of personnel costs for finance, administration, operations and general management, as well as accounting and legal expenses. Our general and administrative expenses for the third quarter of 2002 increased 39% to $5.3 million compared with general and administrative expenses of $3.8 million for the third quarter of 2001 and increased 41% for the nine months ended September 30, 2002 to $15.1 million compared to $10.7 million for the same period in 2001. The increase was primarily due to increased number of personnel and related costs required to support the growth and increasing complexities of our business, an increase in personnel related to our acquisitions of Kinexus and Techfi and an increase in legal fees. General and administrative expenses as a percentage of net revenues increased to 15% in the third quarter of 2002 from 10% in the same period in 2001 and increased to 12% for the nine months ended September 30, 2002 compared with 9% for the same period in 2001. The increase as a percentage of revenue was primarily due to increased expenses combined with a decrease in revenues during the three-month period ended September 30, 2002.

        Amortization of Intangibles.    This amortization is based on the intangibles acquired in connection with our acquisitions. We typically record goodwill and other intangibles based on the application of established valuation techniques using our estimates of market potential, product introductions, technology trends, and any other relevant cash flow assumptions. We periodically assess our estimates related to the valuation model to determine if assets acquired have been impaired. If we determine that there has been impairment, there could be additional charges to income. In accordance with FAS 142 issued in July 2001, we did not record any amortization of goodwill in the first, second and third quarters of 2002. We recorded amortization of other intangibles totaling $2.9 million in the third quarter of 2002 compared with $1.5 million in the third quarter of 2001 and $7.4 million for the nine months ended September 30, 2002 compared with $3.5 million for the same time period in 2001. The increases are attributed to the acquisitions of Kinexus, Techfi, Rex Development Partners L.P., three Scandinavian distributors, and NPO Solutions, Inc.

INTEREST INCOME AND OTHER EXPENSE, NET

        Interest income and other expense, net consists primarily of interest income, realized gains and losses on investments that are other than temporary, and miscellaneous non-operating income and expense items. Interest income and other expense, net was a net expense of $1.8 million in the third quarter of 2002, compared with a net income of $1.5 million for the same period in 2001. Interest income and other expense, net was a net expense of $8.1 million for the nine months ended September 30, 2002, compared with a net income totaling $4.8 million for the same period of 2001. The increase in expense for the three months ended September 30, 2002 is primarily the result of a $2 million write-off of our investment in myCFO, Inc. based on a September 27, 2002 announcement by the Harris Wealth Management Group that it has reached an agreement to acquire certain assets of myCFO, Inc. resulting in no anticipated recovery of our initial investment. The increase in expense for the nine months ended September 30, 2002 is primarily the result of charges of $13 million for

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other-than-temporary investment losses, mainly due to the write off our investments in Encompys, Inc. and myCFO, Inc. In May 2002, the Board of Directors of Encompys, Inc. informed us that it had decided to sell the assets of Encompys and wind down the operations. Encompys was formed in April 2001 by Accenture, Microsoft, Compaq and the Bank of New York to provide an Internet-based straight-through-processing solution for the global asset management community.

PROVISION FOR INCOME TAXES

        We recorded a benefit from income taxes of approximately $4 million, or 33%, in the third quarter of 2002. The third quarter effective tax rate reflects the effect of the purchased in-process research and development write off and the write-downs of certain investments. The annual effective tax rate is anticipated to be 6% for 2002 compared to the 2001 effective tax rate of 34%. The actual effective tax rate for the entire 2002 fiscal year could vary substantially depending on actual results achieved. The anticipated 2002 tax rate differs from the statutory rate primarily due to the write offs of purchased in-process research and development and changes in valuation allowances for certain deferred tax assets resulting from the write-downs of certain investments all of which are not deductible for tax purposes.

Liquidity and Capital Resources

        Our cash, cash equivalents and short-term marketable securities at September 30, 2002 were $172.5 million, decreasing by $116.1 million from $288.6 million at December 31, 2001. The decrease was primarily due to payments made in connection with the Kinexus acquisition, including a $34 million cash purchase price, $3 million in closing costs, $3.8 million of additional contingent consideration to be held in escrow for 14 months, $11.1 million for change-in-control separation payments and approximately $8 million in payments for other assumed Kinexus liabilities; payments made in connection with our Techfi acquisition, including a $20.2 million cash purchase price, $0.8 million in closing costs and $2.3 million of additional contingent consideration to be held in escrow for 14 months; payments made in connection with our Advent Hellas acquisition totaling a $6.5 million cash purchase price; as well as $50 million for the repurchase of stock, partially offset by $25 million in cash generated from operations.

        The net cash of $25 million provided by operating activities for the nine months ended September 30, 2002 was primarily due to net income excluding non-cash items such as depreciation, amortization, the one time write-off of in process research and development fees associated with our Techfi acquisition and the other-than-temporary losses from investments and a $18 million decrease in accounts receivable primarily due to a decrease in revenues in the third quarter of 2002 compared to the fourth quarter of 2001 and increased collections. Increases in net cash provided by operating activities were partially offset by a $4.6 million decrease in accrued liabilities, primarlily compensation related liabilities, a $3 million decrease in deferred revenue due to lower sales and a $6.3 million decrease in income taxes payable, due primarily to a $0.8 million benefit from income taxes recorded for the nine months ended September 30, 2002, compared to a provision for income taxes of $9.9 million recorded for the same period in 2001.

        Net cash used in investing activities of $58 million for the nine months ended September 30, 2002, is primarily due to $62 million paid in connection with the purchase of Kinexus and other purchase price adjustments, $23.5 million paid in connection with the purchase of Techfi, $6.5 million paid in connection with the purchase of Advent Hellas, $8 million in net purchases of other investments and $4 million for the acquisition of fixed assets, partially offset by a net $46 million received from net maturities and sales of short-term marketable securities.

        Net cash used for financing activities of $36 million for the nine months ended September 30, 2002 was primarily for the repurchase of common stock in the amount of $50 million partially offset by

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$13 million in proceeds received from the exercise of stock options and the issuance of stock under the Employee Stock Purchase Plan.

        At September 30, 2002, we had $174.2 million in working capital. We currently have no significant capital commitments other than commitments under our operating leases. During the nine months ended September 30, 2002, our operating lease commitments increased to $63 million for the remainder of 2002 through 2012, cumulatively, primarily due to additional leases assumed in connection with the Kinexus and Techfi acquisitions and a new operating lease for additional facilities in San Francisco signed in the second quarter of 2002, partially offset by a successful exit from a lease commitment for unoccupied space in San Francisco. In November 2002, total operating lease commitments through 2005 increased approximately $1 million in connection with the acquisition of AdventOutsource.

        At September 30, 2002 and December 31, 2001, 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 exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

        Our principal source of liquidity is our operating cash flows, which are dependent upon continued market acceptance of our products and services. We believe that our available sources of funds and anticipated cash flows from operations will be adequate to finance current operations and anticipated capital expenditures for at least the next twelve months.

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Other Factors Which May Affect Future Operations

        Investors should carefully consider the risks described below before making an investment decision. In addition, these risks are not the only ones we face. Additional risks we are not presently aware of or that we currently believe are immaterial may also impair our business operations. Our business could be harmed by any of these risks. The trading price of our common stock could decline due to any of these risks.

Our Operating Results Fluctuate Significantly and We May Not Be Able to Maintain Our Historical Growth Rates.

        Licenses into multi-user networked environments have increased both in individual size and number, and the timing and size of individual license transactions are becoming increasingly important factors in quarterly operating results. The sales cycles for these transactions are often lengthy and unpredictable. We may not be successful in closing large license transactions such as these on a timely basis or at all. Accordingly, because revenues from large licenses are increasing as a portion of our net revenues, the timing of such licenses could cause additional variability in our quarterly operating results. Software product backlog at the beginning of any quarter typically represents only a small portion of that quarter's expected revenues. Our expense levels are based in significant part on our expectations of future revenues and therefore are relatively fixed in the short term. Due to the fixed nature of these expenses combined with the relatively high gross margin historically achieved by us on products and services, an unanticipated decline in net revenues in any particular quarter is likely to disproportionately adversely affect our operating results.

        We have often recognized a substantial portion of each quarter's license revenues in the last month, weeks or even days of that quarter. As a result, the magnitude of quarterly fluctuations in revenue or earnings may not be evident until late in or after the close of a particular quarter and a disruption late in the quarter may have a disproportionately large negative impact on our quarterly results.

        Both of these factors impacted our results in the second and third quarters of fiscal 2002 and may continue to impact our results. Additionally, in June 2002, we announced that we would begin to offer term licenses as an alternative to the perpetual licenses we have previously sold. Although we believe that this will give us more predictable revenue in the long term, it may potentially decrease our revenues in the short term as some clients make the shift from perpetual to term and therefore we recognize less revenue at the beginning of the contract.

        Because of the above factors, we believe that period-to-period comparisons of our operating results are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of future performance.

Our stock price has fluctuated significantly since our initial public offering in November 1995.

        Like many companies in the technology and emerging growth sector, our stock price may be subject to wide fluctuations, particularly during times of high market volatility. If net revenues or earnings in any quarter fail to meet the investment community's expectations, our stock price is likely to decline. In addition, our stock price may be affected by trends in the financial service sector and by broader market trends unrelated to our performance.

Our Sales Cycle Is Long and We Have Limited Ability to Forecast the Timing and Amount of Specific Sales.

        Because the purchase of our software products often requires significant, executive-level investment and systems architecture decisions by prospective customers, we must generally engage in a relatively lengthy sales effort. These transactions may be delayed during the customer decision process because

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we must provide a significant level of education to prospective customers regarding the use and benefit of our products. As a result, the sales cycle associated with the purchase of our software products is typically between two and twelve months depending upon the size of the client, though it can be considerably longer, and is subject to a number of significant risks over which we have little or no control, including customers' budgeting constraints and internal selection procedures, among other factors. As a result of a lengthy and unpredictable sales cycle, we have limited ability to forecast the timing and amount of specific sales. The timing of large individual sales is especially difficult to forecast. As a result, there can be no assurance that we will be successful in closing large license transactions on a timely basis or at all. In addition, customers may postpone their purchases of our existing products or product enhancements in advance of the anticipated introduction of new products or product enhancements by us or our competitors or due to economic conditions. Because our expenses are generally relatively fixed in the near term, any shortfall from anticipated revenues could result in significant variations in our operating results from quarter to quarter.

We Depend Heavily on Our Product, Axys.

        In 2001, 2000, and 1999, and to date in 2002, we derived a majority of our net revenues from the licensing of Axys, part of our Advent Office suite, and related applications and services. In addition, many of our other applications, such as Moxy, Qube and various data interfaces were designed to operate with Axys to provide an integrated solution. As a result, we believe that a majority of our net revenues, for the foreseeable future, will depend upon continued market acceptance of Axys, enhancements or upgrades to Axys and related products and services.

We Depend upon Financial Markets.

        The target clients for our products include a range of organizations that manage investment portfolios, including investment advisors, brokerage firms, banks and hedge funds. In addition, we target corporations, public funds, universities and non-profit organizations, which also manage investment portfolios and have many of the same needs. The success of many of our clients is intrinsically linked to the health of the financial markets. We believe that demand for our products could be disproportionately affected by fluctuations, disruptions, instability or downturns in the financial markets which may cause clients and potential clients to exit the industry or delay, cancel or reduce any planned expenditures for investment management systems and software products. In addition, a slowdown in formation of new investment firms or a decline in the growth of assets under management would cause a decline in demand for our products. We believe that the economic downturn in the financial markets negatively impacted the demand for our products in the second and third quarters of fiscal 2002, and that a continuing downturn could have a material adverse effect on our business and results of operations.

Difficulties in Integrating Our Acquisitions Could Adversely Impact Our Business and We Face Risks Associated With Potential Acquisitions, Investments or Divestitures.

        In 2001, we completed acquisitions of Rex Development Partners, L.P., NPO Solutions, Inc., certain assets of ManagerLink.com LLC and our Scandinavian distributors located in Norway, Sweden and Denmark. In 2002, we completed the acquisition of Kinexus Corporation, Techfi Corporation, Advent Hellas, our Greek distributor, and AdventOutsource Data Management, LLC. Our acquisition of Kinexus Corporation is our largest acquisition to date, and the number of acquisitions completed in 2001 and 2002 is unprecedented for us.

        The complex process of integrating Kinexus and our other acquisitions has required and will continue to require significant resources, particularly in light of our relative inexperience integrating acquisitions. Integrating these acquisitions has been and will continue to be time consuming, expensive and disruptive to our business. This integration process has strained our managerial controls, and has

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resulted in the diversion of management and financial resources from our core business objectives. Failure to achieve the anticipated benefits of these acquisitions or to successfully integrate the operations of these entities could harm our business, results of operations and cash flows. We may not realize the benefits we anticipate from these acquisitions because of the following significant challenges:

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expected synergy benefits from these acquisitions, such as lower costs or increased revenues, may not be realized or may be realized more slowly than anticipated, particularly with regard to costs associated with a reduction in headcount and facilities;



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potentially incompatible cultural differences between the companies;



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incorporating these companies' technologies and products into our current and future product lines;



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geographic dispersion of operations and the complexities of international operations;



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integrating the technical teams of these companies with our engineering organizations;



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generating market demand for an expanded product line;



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integrating the products of these companies with our business, because we do not have distribution, manufacturing, marketing or support experience for these products;



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the difficulty of leveraging our combined technologies and capabilities across all product lines and customer bases; and



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our inability to retain previous customers or employees of these entities.

        We have incurred and expect to continue to incur significant costs and commit significant management time integrating the operations, technology, development programs, products, information systems, customers and personnel of these acquisitions. These costs have been and will likely continue to be substantial and include costs for:

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integrating and reorganizing operations, including combining teams, facilities and processes in various functional areas;



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identifying duplicative or redundant resources and facilities, developing plans for resource consolidation and implementing those plans;



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fees and expenses of professionals and consultants involved in completing the integration process;



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settling existing liabilities of these companies;



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uncovering through our audit process new issues reflected on the companies' financial statements;



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costs associated with vacating, subleasing and closing facilities;



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employee relocation, redeployment or severance costs;



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integrating technology and products; and



•

other transaction costs associated with the acquisition, including financial advisor, attorney, accountant and exchange agent fees.

We may make additional acquisitions of complementary companies, products or technologies in the future, which would further exacerbate these issues. In addition, we continually evaluate the performance of all our products and product lines and may sell or discontinue current products or product lines. Failure to achieve the anticipated benefits of any future acquisition or divestiture could also harm our business, results of operations and cash flows. Furthermore, we may have to incur debt,

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write-off investments, infrastructure costs or other assets, incur severance liabilities, write-off impaired goodwill or other intangible assets or issue equity securities to pay for any future acquisitions. The issuance of equity securities could dilute our existing stockholders' ownership. Finally, we may not identify suitable businesses to acquire or negotiate acceptable terms for acquisitions.

Difficulties We May Encounter Managing a Substantially Larger Business Could Adversely Affect Our Operating Results.

        Our business has grown in recent years through both internal expansion and acquisitions, and that growth along with any continued growth may cause a significant strain on our infrastructure, internal systems and managerial resources. For example, during 2001 and 2002, we acquired Rex Development Partners, L.P., NPO Solutions, Inc., certain assets of ManagerLink.com LLC, our Scandinavian and Greek distributors (located in Norway, Sweden, Denmark and Greece), Kinexus Corporation, Techfi Corporation and AdventOutsource Data Management, LLC. Further, our headcount increased from 481 employees at December 31, 1998 to 837 employees at December 31, 2001 and 972 at September 30, 2002. To manage our growth effectively, we must continue to improve and expand our infrastructure, including operating and administrative systems and controls, and continue managing headcount, capital and processes in an efficient manner. Our productivity and the quality of our products may be adversely affected if we do not integrate and train our new employees quickly and effectively and coordinate among our executive, engineering, finance, marketing, sales, operations and customer support organizations, all of which add to the complexity of our organization and increase our operating expenses. In addition, our revenues may not grow at a sufficient rate to absorb the costs associated with a larger overall headcount. Integrating our recent acquisitions will complicate these tasks.

Writing Off Investments Could Harm Our Results of Operations

        In addition, we have made investments in privately held companies, which we classify as "other assets" on our balance sheet. The value of these investments is influenced by many factors, including the operating effectiveness of these companies, the overall health of these companies' industries, the strength of the private equity markets and general market conditions. Due to these and other factors, we have previously determined, and may in the future determine, that the value of these investments is impaired, which has caused and would cause us to write down the stated value of these investments such as the write-off of our investments in Encompys and MyCFO. Further, we cannot be sure that future investment, license, fixed asset or other asset write-downs will not happen, particularly if the current economic downturn continues. If future write-downs do occur, they could harm our business and results of operations.

General Economic Conditions May Reduce Our Revenues.

        We believe that the market for large management software systems may be negatively impacted by a number of factors, including reductions in capital expenditures by large customers; poor performance of major financial markets, and increasing competition. Those factors may, in turn, give rise to a number of market trends, which we experienced in the second and third quarters of fiscal 2002, that may slow revenue growth across the industry, including longer sales cycles, deferral or delay of information technology projects and generally reduced expenditures for software and related services, and increased price competition. If the current economic slowdown continues, the presence of these factors in the market for large management software systems will likely materially adversely affect our business and results of operations.

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Business Interruptions Could Adversely Affect Our Business.

        Our operations are exposed to interruption by fire, earthquake, power loss, telecommunications failure, and other events beyond our control. Additionally, we are vulnerable to interruption caused by political and terrorist incidents. For example, our facilities in New York were temporarily closed due to the September 11, 2001 terrorist attacks. Immediately after the terrorist attacks, our clients who were located in the World Trade Center area were concentrating on disaster recovery rather than licensing additional software components, while the grounding of transportation impeded our ability to deliver professional services at client sites. Additionally, during the temporary closure of the U.S. stock markets, our clients did not use our market data services. Such interruptions could affect our ability to sell and deliver products and services and other critical functions of our business and could seriously harm us. Further, such attacks could cause instability in the financial markets upon which we depend.

We Are Continuing to Expand Our Internet Based Enabled Solutions, such as Advent TrustedNetwork and Wealthline.

        To take advantage of the internet, we are continuing to develop solutions to bring internet-based products and services to our clients. As we develop these new products and services, we have entered, and will continue to enter, into development agreements and other agreements with information providers, clients or other companies in order to accelerate the delivery of new products and services, such as our relationship with Microsoft for Wealthline. We may not be successful in marketing our internet services or in developing other internet services or maintaining these relationships. Additionally, we may not be successful in being able to replace our current technology with new technology. Our failure to do so could seriously harm our business. In addition, we cannot assure you that there will not be disruptions in internet services beyond our control or that of our third party vendors. Any such disruptions could harm our business.

Security Risks and Concerns May Deter the Use of the Internet for Conducting Business.

        A significant barrier to commerce and communications over public networks is the secure transmission of confidential information. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments could result in compromises or breaches of our security systems or those of other web sites to protect proprietary information. If any well-publicized compromises of security were to occur, it could have the effect of substantially reducing the use of the internet for commerce and communications. Anyone who circumvents our security measures could misappropriate proprietary information or cause interruptions in our services or operations. The internet is a public network, and data is sent over this network from many sources. In the past, computer viruses, software programs that disable or impair computers, have been distributed and have rapidly spread over the internet. Computer viruses could be introduced into our systems or those of our customers or other third parties, which could disrupt or make it inaccessible to customers. We may be required to expend significant capital and other resources to protect against the threat of security breaches or to alleviate problems caused by breaches. To the extent that our activities may involve the storage and transmission of proprietary information, security breaches could expose us to a risk of loss or litigation and possible liability. Our security measures may be inadequate to prevent security breaches, and our business would be harmed if our security is breached.

We Face Risks Related to Our New Business Areas.

        We have expanded in recent periods into a number of new business areas to foster long-term growth including international operations, strategic alliances, and Advent TrustedNetwork. These areas are still relatively new to our product development and sales personnel. New business areas require significant management time and resources prior to generating significant revenues and may divert management from our core business. There is no assurance that we will compete effectively or will

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generate significant revenues in these areas. The success of our ability to develop and market new internet based products and services, such as Advent TrustedNetwork, and Wealthline, is difficult to predict because it represents a new area of business for our entire industry. Additionally, to help manage our growth, we will need to continually improve our operational, financial, management and information systems and controls.

We Expect Our Gross and Operating Margins May Fluctuate Over Time.

        We expect that our gross and operating margins may fluctuate from period to period as we continue to introduce new products, change our professional services organization and associated revenue, continue to hire and acquire additional personnel and increase other expenses to support our business. Because these expenses are relatively fixed in the short term, a fluctuation in revenue could lead to operating results differing from expectations.

We Must Continue to Introduce New Products and Product Enhancements.

        The market for our products is characterized by rapid technological change, changes in customer demands and evolving industry standards. As a result, our future success will continue to depend upon our ability to develop new products or product enhancements that address the future needs of our target markets and to respond to these changing standards and practices. We may not be successful in developing, introducing and marketing new products or product enhancements on a timely and cost effective basis, or at all, and our new products and product enhancements may not adequately meet the requirements of the marketplace or achieve market acceptance. Delays in the commencement of commercial shipments of new products or enhancements may result in client dissatisfaction and delay or loss of product revenues. If we are unable, for technological or other reasons, to develop and introduce new products or enhancements of existing products in a timely manner in response to changing market conditions or client requirements, or if new products or new versions of existing products do not achieve market acceptance, our business would be seriously harmed. In addition, our ability to develop new products and product enhancements is dependent upon the products of other software vendors, including certain system software vendors, such as Microsoft Corporation, database vendors and development tool vendors. If the products of such vendors have design defects or flaws, or if such products are unexpectedly delayed in their introduction, our business could be seriously harmed. Software products as complex as those offered by us may contain undetected defects or errors when first introduced or as new versions are released. Although we have not experienced adverse effects resulting from any software errors, we cannot assure you that, despite testing by us and our clients, defects or errors will not be found in new products after commencement of commercial shipments, resulting in loss of or delay in market acceptance, which could seriously harm our business.

If Our Relationship with Interactive Data Is Terminated, Our Business May Be Harmed.

        Many of our clients use our proprietary interface to electronically retrieve pricing and other data from Interactive Data. Interactive Data pays us a commission based on their revenues from providing this data to our clients. Our software products have been customized to be compatible with their system and this software would need to be redesigned if their services were unavailable for any reason. Termination of our agreement with Interactive Data would require at least two years notice by either us or them, or 90 days in the case of material breach. If our relationship with Interactive Data were terminated or their services were unavailable to our clients for any reason, replacing these services could be costly and time consuming.

We Face Intense Competition.

        The market for investment management software is intensely competitive and highly fragmented, subject to rapid change and highly sensitive to new product introductions and marketing efforts by

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industry participants. Our competitors include providers of software and related services as well as providers of timeshare services.

        Our competitors vary in size, scope of services offered and platforms supported. In addition, we compete indirectly with existing and potential clients, many of whom develop their own software for their particular needs and therefore may be reluctant to license software products offered by independent vendors like us. Many of our competitors have longer operating histories and greater financial, technical, sales and marketing resources than we do. In addition, we also face competition from potential new entrants into our market that may develop innovative technologies or business models. We cannot guarantee that we will be able to compete successfully against current and future competitors or that competitive pressures will not result in price reductions, reduced operating margins and loss of market share, any one of which could seriously harm our business.

We Face Challenges in Expanding Our International Operations.

        We market and sell our products in the United States and, to a lesser extent, internationally. In November 1998, we purchased an independent distributor in Australia which markets and licenses our products in Australia. In addition, we entered into a distributor relationship in 1999 with Advent Europe, an independent distributor of our products in selected European markets. In November 2001, we acquired the Norwegian, Swedish, and Danish companies of this independent distributor and in September 2002, we purchased their Greek subsidiary. In order to further expand our international operations, we will need to continue to establish additional facilities, acquire other businesses or enter into additional distribution relationships in other parts of the world. The expansion of our existing international operations and entry into additional international markets will require significant management attention and financial resources. We cannot be certain that our establishment of facilities in other countries will produce desired levels of revenue. We currently have limited experience in developing localized versions of our products and marketing and distributing our products internationally. In addition, international operations are subject to other inherent risks, including:

•

The impact of recessions in economies outside the United States;



•

Greater difficulty in accounts receivable collection and longer collection periods;



•

Unexpected changes in regulatory requirements;



•

Difficulties in successfully adapting our products to the language, regulatory and technology standards of other countries;



•

Difficulties and costs of staffing and managing foreign operations;



•

Reduced protection for intellectual property rights in some countries;



•

Potentially adverse tax consequences; and



•

Political and economic instability.

        The revenues, expenses, assets and liabilities of our international subsidiaries are primarily denominated in local currencies. We have not historically undertaken foreign exchange hedging transactions to cover potential foreign currency exposure. Future fluctuations in currency exchange rates may adversely affect revenues from international sales and the U.S. dollar value of our foreign subsidiaries' revenues, expenses, assets and liabilities. Our international revenues from our distributors are generally denominated in local foreign currencies.

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Undetected Software Errors or Failures Found in New Products May Result in Loss of or Delay in Market Acceptance of Our Products That Could Seriously Harm Our Business.

        Our products may contain undetected software errors or failures when first introduced or as new versions are released. Despite testing by us and by current and potential customers, errors may not be found in new products until after commencement of commercial shipments, resulting in loss of or a delay in market acceptance, which could seriously harm our business.

If We Are Unable to Protect Our Intellectual Property We May Be Subject to Increased Competition That Could Seriously Harm Our Business.

        Our success depends significantly upon our proprietary technology. We currently rely on a combination of copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary rights. We have registered trademarks for many of our products and services and will continue to evaluate the registration of additional trademarks as appropriate. We generally enter into confidentiality agreements with our employees and with our resellers and customers. We seek to protect our software, documentation and other written materials under trade secret and copyright laws, which afford only limited protection. Despite these efforts, it may be possible for unauthorized third parties to copy certain portions of our products or to reverse engineer or otherwise obtain and use our proprietary information. We do not have any patents, and existing copyright laws afford only limited protection. In addition, we cannot be certain that others will not develop substantially equivalent or superseding proprietary technology, or that equivalent products will not be marketed in competition with our products, thereby substantially reducing the value of our proprietary rights. We cannot assure you that we will develop proprietary products or technologies that are patentable, that any patent, if issued, would provide us with any competitive advantages or would not be challenged by third parties, or that the patents of others will not adversely affect our ability to do business. Litigation may be necessary to protect our proprietary technology. This litigation may be time-consuming and expensive. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. In addition, the laws of some foreign countries do not protect proprietary rights to as great an extent as do the laws of the United States. We cannot assure you that our means of protecting our proprietary rights will be adequate or that our competitors will not independently develop similar technology, duplicate our products or design around any patent that may be issued to us or other intellectual property rights of ours.

We Must Retain Key Employees and Recruit Qualified Technical and Sales Personnel.

        We believe that our success will depend on the continued employment of our senior management and key technical personnel, none of whom has an employment agreement with us. Our Chief Financial Officer has announced his intent to retire at some point in the future. Additionally, our continued success depends, in part, on our ability to identify, attract, motivate and retain qualified technical, sales and other personnel. Because our future success is dependent on our ability to continue to enhance and introduce new products, we are particularly dependent on our ability to identify, attract, motivate and retain qualified engineers with the requisite education, backgrounds and industry experience. Competition for qualified engineers, particularly in Northern California and the San Francisco Bay Area, is intense. The loss of the services of a significant number of our engineers or sales people could be disruptive to our development efforts or business relationships and could seriously harm our business. We may also be required to create additional performance and retention incentives in order to retain our employees, including the granting of additional stock options to employees at current prices or issuing incentive cash bonuses. Such incentives may either dilute our existing stockholder base or result in unforeseen operating expenses, which may cause our stock price to fall.

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Item 3.    Quantitative and Qualitative Disclosures About Market Risk

        We are exposed to financial market risks, including changes in foreign currency exchange rates and interest rates. Much of our revenue and capital spending is transacted in U.S. dollars. However, since the acquisitions of Advent Australia, Advent Denmark, Advent Norway, Advent Sweden and Advent Hellas, whose revenues and capital spending are transacted in local country currencies, we have greater exposure to foreign currency fluctuations. Results of operations from Advent Australia, Advent Denmark, Advent Norway, Advent Sweden and Advent Hellas are not material to our operating results; therefore, we believe that foreign currency exchange rates should not materially adversely affect our overall financial position, results of operations or cash flows. We believe that the fair value of our investment portfolio or related income would not be significantly impacted by increases or decreases in interest rates due mainly to the short-term nature of our investment portfolio. However, immediate sharp increases in interest rates could have a material adverse affect on the fair value of our investment portfolio. Conversely, immediate sharp declines in interest rates could seriously harm interest earnings of our investment portfolio.

        The table below presents principal amounts by expected maturity (in U.S. dollars) and related weighted average interest rates by year of maturity for our investment portfolio (in thousands):

        At September 30, 2002, cash, cash equivalents and short-term marketable securities totaled approximately $172.5 million, which is comprised of the $132.7 million in our investment portfolio, presented above, and $39.8 million in other cash and cash equivalents.

        We also invested in numerous privately held companies, many of which can still be considered in the start-up or development stages and are classified as "other assets" in our balance sheet. These investments are inherently risky as the market for the technologies or products they have under development are typically in the early stages and may never materialize. The value of these investments is influenced by many factors, including the operating effectiveness of these companies, the overall health of the companies' industries, the strength of the private equity markets and general market conditions. We could lose our entire initial investment in these companies.

Item 4.    Controls and Procedures

Evaluation of disclosure controls and procedures.

        Within 90 days prior to the filing date of this Quarterly Report on Form 10-Q (the "Evaluation Date"), we evaluated, under the supervision of our chief executive officer and our chief financial officer, the effectiveness of our disclosure controls and procedures. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are

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effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in internal controls.

        Our review of our internal controls was made within the context of the relevant professional auditing standards defining "internal controls," "significant deficiencies," and "material weaknesses." "Internal controls" are processes designed to provide reasonable assurance that our transactions are properly authorized, our assets are safeguarded against unauthorized or improper use, and our transactions are properly recorded and reported, all to permit the preparation of our financial statements in conformity with generally accepted accounting principles. "Significant deficiencies" are referred to as "reportable conditions," or control issues that could have a significant adverse effect on the ability to record, process, summarize and report financial data in the financial statements. A "material weakness" is a particularly serious reportable condition where the internal control does not reduce to a relatively low level the risk that misstatements caused by error or fraud may occur in amounts that would be material in relation to the financial statements and not be detected within a timely period by employees in the normal course of performing their assigned functions. As part of our internal controls procedures, we also address other, less significant control matters that we or our auditors identify, and we determine what revision or improvement to make, if any, in accordance with our on-going procedures.

        Subsequent to the Evaluation Date, there were no significant changes in our internal controls or in other factors that could significantly affect our internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

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PART II.    OTHER INFORMATION

Item 1.    Legal Proceedings

        From time to time we are involved in litigation incidental to the conduct of our business. We are not party to any lawsuit or proceeding that, in our opinion, is likely to seriously harm our business.

        On November 8, 2001, Charles Schwab & Co, Inc. ("Schwab") filed suit against us because of our intention to cease maintenance of an existing software interface and to transition to a new, and what we believe to be improved, software interface (the "Advent Custodial Data" or "ACD" system). On July 22, 2002, we settled our dispute with Schwab. Pursuant to the settlement agreement, Advent will extend maintenance of the point-to-point interface for licensed users through December 30, 2004 to be paid for by the licensed users. Concurrent with maintenance of the point-to-point interface, Advent and Schwab will fully support and continue to offer ACD service and will work together to further enhance the Schwab ACD interface. Advent and Schwab will cooperate to create an orderly transition from the point-to-point interface to ACD by year-end 2004. Finally, Advent's ACD pricing for Schwab customers will not differ based on the custodial relationship of the advisor, and Schwab will not develop a substitute for the point-to-point interface.

Item 2.    Changes in Securities

        None.

Item 3.    Defaults Upon Senior Securities

        None

Item 4.    Submissions of Matters to a Vote of Security Holders

        None

Item 5.    Other Information

        None.

Item 6.    Exhibits And Reports On Form 8-K

(a)

Exhibits



99.1    Certification of Chief Executive Officer and Chief Financial Officer

35

SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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I, Irv H. Lichtenwald, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Advent Software, Inc.;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant's other certifying officer and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:    November 13, 2002

I, Peter M. Caswell, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Advent Software, Inc.;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant's other certifying officer and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:    November 13, 2002

QuickLinks

Item 1. Financial Statements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures

Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submissions of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits And Reports On Form 8-K