SS&C TECHNOLOGIES INC - 10-Q Quarterly Report

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 þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

Number of shares outstanding of the issuer’s classes of common stock as of November 4, 2004:

This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “should,” and similar expressions are intended to identify forward-looking statements. The important factors discussed below under the caption “Certain Factors That May Affect Future Operating Results,” among others, could cause actual results to differ materially from those indicated by forward-looking statements made herein and presented elsewhere by management from time to time. The Company does not undertake an obligation to update its forward-looking statements to reflect future events or circumstances.

In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments, except as noted elsewhere in the notes to the consolidated financial statements) necessary to present fairly its financial position as of September 30, 2004 and the results of its operations for the three months and nine months ended September 30, 2004 and 2003. These statements do not include all of the information and footnotes required by generally accepted accounting principles for annual financial statements. The financial statements contained herein should be read in conjunction with the consolidated financial statements and footnotes as of and for the year ended December 31, 2003, which were included in the Company’s Annual Report on Form 10-K, as amended, filed with the Securities and Exchange Commission. The December 31, 2003 consolidated balance sheet data were derived from audited financial statements, but do not include all disclosures required by generally accepted accounting principles for annual financial statements. The results of operations for the three months and nine months ended September 30, 2004 are not necessarily indicative of the expected results for the full year.

At September 30, 2004, the cost basis, fair market value, and unrealized gains and losses by major security type, were as follows (in thousands):

The Company has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and related interpretations in accounting for its stock options. Under APB 25, when the exercise price of employee stock options equals or exceeds the market price of the underlying stock on the date of grant and the grants are for a fixed number of shares, no compensation expense is recorded.

The Company follows the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148. Accordingly, no compensation cost has been recognized for the stock option plans and employee stock purchase plan. Had compensation cost for the Company’s stock option plans and employee stock purchase plan been determined consistent with the fair value method prescribed in SFAS No. 123, the Company’s net income and earnings per share would have been adjusted to the pro forma amounts indicated in the table below for the periods indicated (in thousands except per share amounts):

The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts.

Earnings per share is calculated in accordance with Statement of Financial Accounting Standards No. 128, “Earnings Per Share.” Basic earnings per share includes no dilution and is computed by dividing income available to the Company’s common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common and common equivalent shares outstanding during the period. Common equivalent shares consist of stock options using the treasury stock method. Common equivalent shares are excluded from the computation of diluted earnings per share if the effect of including such common equivalent shares is antidilutive because their exercise prices exceed the fair value of common stock. Options to purchase 189,000 and 91,500 shares were outstanding at September 30, 2004 and 2003, respectively, but were excluded from the computation of diluted earnings per share because the effect of

including the options would be antidilutive. Income available to stockholders is the same for basic and diluted earnings per share. A reconciliation of the shares outstanding is as follows (in thousands):

Total comprehensive income consists of net income and other accumulated comprehensive income disclosed in the equity section of the balance sheet. The following table sets forth the components of comprehensive income (in thousands):

On May 22, 2003, the Company’s Board of Directors authorized the continued repurchase of shares of the Company’s Common Stock up to an additional expenditure of $30 million. Under the repurchase program, which was originally initiated in May 2000 and expired in May 2004, the Company repurchased a total of 8.2 million shares of Common Stock for approximately $53.4 million. The Company did not repurchase any shares during the nine months ended September 30, 2004. See Note 11.

In June 2004, the Company completed an underwritten public offering of 4.05 million shares of the Company’s common stock. The Company received net proceeds of approximately $74.4 million from the offering.

On April 12, 2004, the Company acquired all of the outstanding shares of OMR Systems Corporation and OMR Systems International Limited (together “OMR”) for $19.7 million, plus the costs of effecting

the transaction. OMR provides treasury processing software and outsourcing solutions to banks in Europe and the United States and offers comprehensive hedge fund administration.

The net assets and results of operations of OMR have been included in the Company’s consolidated financial statements from April 12, 2004. The purchase price was allocated to tangible and intangible assets based on their fair value at the date of acquisition. The fair value of intangible assets, including trade names and customer relationships, was based on an independent appraisal and was determined using the income approach. The completed technology is amortized on a straight-line basis over seven years, the estimated life of the product. Other acquired intangibles are amortized over lives ranging from seven to nine years, the estimated lives of the assets. The remainder of the purchase price was allocated to goodwill.

On February 17, 2004, the Company acquired substantially all the assets of NeoVision Hypersystems, Inc. (“NeoVision”) for $1.6 million and the assumption of certain liabilities. The Company paid $0.8 million during the first quarter of 2004 and made the remaining payment in the second quarter of 2004. NeoVision is a provider of tactical visual analytical solutions for the financial industry. NeoVision’s products complement the Company’s existing product offerings and provide traders, brokers and portfolio managers with the ability to quickly track, analyze and assess market positions and performance.

The net assets and results of operations of NeoVision have been included in the Company’s consolidated financial statements from February 15, 2004. The purchase price was allocated to tangible and intangible assets based on their fair value at the date of acquisition. The fair value of the completed technology was determined using the future cash flows method. The acquired technology is amortized on a straight-line basis over five years, the estimated life of the product. The remainder of the purchase price was allocated to goodwill.

On January 16, 2004, the Company acquired substantially all the assets of Investment Advisory Network, LLC (“IAN”) for $3 million and the assumption of certain liabilities. IAN provides web-based wealth management services to financial institutions, broker-dealers and financial advisors who offer managed accounts to the private wealth market.

The net assets and results of operations of IAN have been included in the Company’s consolidated financial statements from January 1, 2004. The purchase price was allocated to tangible and intangible assets based on their fair value at the date of acquisition. The fair value of the completed technology was determined using the future cash flows method. The acquired technology is amortized on a straight-line basis over five years, the estimated life of the product. The remainder of the purchase price was allocated to goodwill.

The following summarizes the allocation of the purchase price for the acquisitions of OMR, NeoVision and IAN (in thousands):

The following unaudited pro forma condensed consolidated results of operations are provided for illustrative purposes only and assume that the acquisitions of OMR, NeoVision and IAN occurred on January 1, 2003. This unaudited pro forma information (in thousands, except per share data) should not

be relied upon as being indicative of the historical results that would have been obtained if these acquisitions had actually occurred on that date, nor of the results that may be obtained in the future.

From time to time, the Company is subject to legal proceedings and claims that arise in the normal course of its business. In the opinion of management, the Company is not a party to any litigation that it believes could have a material effect on the Company or its business.

In 2001, the Internal Revenue Service (“IRS”) notified the Company of purported federal income tax deficiencies for the years 1996 through 1999, relating to the Company’s research and experimentation credits. In 2003, the Company reached a tentative settlement with the IRS that allowed 50% of the research and experimentation credits associated with the years 1996 through 1999, or $351,000. The settlement still requires final approval by the IRS, although in the opinion of management, the final settlement will not be materially different from the amounts recorded. This amount has been included in the Company’s tax provision for the year ended December 31, 2003.

The Company manages its business primarily on a geographic basis. The Company attributes net sales to an individual country based upon location of the customer. The Company’s reportable regions consist of the Americas, Europe and Asia Pacific and Japan. The European region includes European countries as well as the Middle East and Africa Revenues by geography were (in thousands):

On October 18, 2004, the Company’s Board of Directors authorized the repurchase of shares of the Company’s Common Stock up to an expenditure of $50 million. The repurchase program expires in October 2005.

Certain of our accounting policies require the application of significant judgment by our management, and such judgments are reflected in the amounts reported in our consolidated financial statements. In applying these policies, our management uses its judgment to determine the appropriate assumptions to be used in the determination of estimates. Those estimates are based on our historical experience, terms of existing contracts, management’s observation of trends in the industry, information provided by our clients and information available from other outside sources, as appropriate. Actual results may differ significantly from the estimates contained in the our consolidated financial statements. There have been no material changes to our critical accounting estimates and assumptions or the judgments affecting the application of those estimates and assumptions since the filing of Amendment No. 1 to our Annual Report on Form 10K/A. Our critical accounting policies are described in our annual filing on Form 10-K/A and include:


	•	Revenue Recognition

	•	Allowance for Doubtful Accounts

	•	Long-Lived Assets, Intangible Assets and Goodwill

	•	Acquisition Accounting

	•	Income Taxes

	•	Marketable Securities

The following table sets forth revenues (in thousands) and changes in revenues for the periods indicated:

The following table sets forth the percentage of our revenues represented by each of the following sources of revenues for the periods indicated:

We derive our revenues from software licenses, related maintenance and professional services and outsourcing services. Revenues for the three months ended September 30, 2004 were $25.2 million, increasing 57% from $16.0 million in the same period in 2003. Revenue growth for the three months ended September 30, 2004, was primarily a result of our acquisitions of the fund services business, IAN, NeoVision and OMR, which added an aggregate of $7.3 million in revenue. Revenues for businesses owned at least for 12 months (organic revenues) grew $1.9 million, or 12%, compared to the three months ended September 30, 2003. Organic growth came from increased demand for SS&C Direct outsourcing services, Total Return product and services, Debt & Derivatives product and services, CAMRA product and Lightning product and services for a total of $2.3 million. This was offset by a decrease of $0.4 million from sales of other products.

Revenues for the nine months ended September 30, 2004 were $68.8 million, increasing 44% from $47.7 million in the same period in 2003. Revenue growth was primarily the result of acquisitions, which accounted for $15.0 million of the increase. Organic revenue grew $6.2 million, or 13%, compared to the nine months ended September 30, 2003. Organic revenue growth came from increased demand for CAMRA product and services, SS&C Direct outsourcing services, Total Return product, Lightning product and services and Debt & Derivatives product and services for a total of $8.0 million. This was offset primarily by a decrease in revenue from the LMS product and services and Mabel product and services.

Software Licenses. Software license revenues were $4.1 million and $3.0 million for the three months ended September 30, 2004 and 2003, respectively. The increase of $1.1 million was mainly due to an increase of $0.9 million in sales for CAMRA, a $0.4 million increase in sales of our Derivatives products and an increase of $0.3 million in sales of Total Return, offset by decreases in sales of our AdvisorWare, PTS and Municipal Finance products totaling $0.5 million. Software license revenues were $12.4 million and $10.1 million for the nine months ended September 30, 2004 and 2003, respectively. The increase of $2.3 million was mainly due to an increase of $2.5 million in sales of CAMRA, increases of $0.8 million, $0.5 million and $0.3 million in sales of Total Return, Derivatives and Lightning products, respectively, offset by a decrease of $0.8 million in sales of our LMS product, a decrease of $0.6 million in sales of AdvisorWare and decreases in sales of PTS and Skyline products totaling $0.4 million. The increased license revenues were mainly due to two large sales of CAMRA product licenses in the period, and an increase in the number of license sales for Total Return, Derivatives and Lightning products compared to the prior year. Software license revenues will vary depending on the timing, size and nature of our license transactions. For example, the average size of our software license transactions and the number of large transactions may fluctuate on a period-to-period basis. Additionally, software license revenues will vary among the various products that we offer, due to differences such as the timing of new releases and variances in economic conditions affecting opportunities in the vertical markets served by such products.

Maintenance. Maintenance revenues were $9.5 million and $8.0 million for the three months ended September 30, 2004 and 2003, respectively. Maintenance revenues were $26.7 million and $23.3 million for the nine months ended September 30, 2004 and 2003, respectively. Maintenance revenue growth was mainly due to the acquisition of OMR in April 2004, which contributed $1.4 million and $2.7 million of maintenance revenues for the three and nine months ended September 30, 2004, respectively, and increases in CAMRA maintenance of $0.1 million and $0.4 million for those periods, respectively. The increase in CAMRA revenues was mainly due to favorable client maintenance renewals and annual maintenance fee increases. We typically provide maintenance services under one-year renewable contracts that provide for an annual increase in fees, generally tied to the percentage change in the consumer price index. Future maintenance revenue growth is dependent on our ability to retain existing clients, add new license clients, and increase average maintenance fees.

Professional Services. Professional services revenues were $3.0 million and $1.7 million for the three months ended September 30, 2004 and 2003, respectively. The increase in professional services revenues was primarily due to our acquisitions of OMR and IAN, which contributed $1.8 million of the increase.

Organic revenues decreased by $0.5 million, mainly due to lower revenue for CAMRA product services, which was due to several large professional services contracts in 2003, which did not repeat in 2004. Professional service revenues were $7.6 million and $4.6 million for the nine months ended September 30, 2004 and 2003, respectively. The increase in professional services revenues was mainly due to our acquisitions of OMR and IAN, which accounted for $3.3 million of the increase. Organic professional services revenues decreased by $0.3 million. Increases of $0.4 million for CAMRA and $0.3 million for Lightning services were offset by reductions of $0.8 million for LMS and reductions of $0.2 million each for AdvisorWare and Antares product services. The increase in CAMRA services was the result of a large CAMRA project that was completed in the first quarter of 2004. We had a large LMS implementation project in the nine months ended September 30, 2003, for which there was no comparable project in 2004. Our overall software license revenue levels and market demand for professional services will continue to have an effect on our professional services revenues.

Outsourcing. Outsourcing revenues were $8.6 million and $3.3 million for the three months ended September 30, 2004 and 2003, respectively. Increased demand and the addition of new clients for our SS&C Direct outsourcing services contributed $1.2 million of the increase and $4.0 million of the increase came from our recent acquisitions of the fund services business, IAN and OMR. Outsourcing revenues for the nine months ended September 30, 2004 and 2003 were $22.1 million and $9.6 million, respectively. Increased demand and the addition of new clients for our SS&C Direct outsourcing services contributed $3.5 million of the increase and $8.9 million of the increase came from our recent acquisitions of the fund services business, IAN and OMR. Future outsourcing revenue growth is dependent on our ability to retain existing clients, add new clients and increase average outsourcing fees.

The total cost of revenues was $9.2 million and $4.9 million for the three months ended September 30, 2004 and 2003, respectively. The total cost of revenues increase was mainly due to the increase of $4.0 million in costs associated with the recent acquisitions and increased personnel costs of $0.3 million to support increased organic revenues. The total cost of revenues for the nine months ended September 30, 2004 and 2003 was $24.3 million and $15.1 million, respectively. The gross margin decreased to 65% for the nine months ended September 30, 2004 from 68% for the comparable period in 2003. The total cost of revenues increase was mainly due to the increase of $8.3 million in costs associated with the recent acquisitions and increased personnel and expenses of $0.9 million to support the increased organic revenues. The decrease in gross margins was primarily attributable to the recent acquisition of OMR, which had been operating at gross margins lower than our historical gross margins.

Cost of Software Licenses. Cost of software license revenues consists primarily of amortization expense of completed technology, royalties, third-party software, and the costs of product media, packaging and documentation. The cost of software license revenues was $0.6 million and $0.4 million for the three months ended September 30, 2004 and 2003, respectively. The cost of software license revenues for the nine months ended September 30, 2004 and 2003 was $1.6 million and $1.4 million, respectively. The increase in costs was due to amortization of completed technology associated with the acquisition of OMR. Cost of software license revenues as a percentage of such revenues decreased to 13% for the nine months ended September 30, 2004 from 14% for the nine months ended September 30, 2003.

Cost of Maintenance. Cost of maintenance revenues consists primarily of technical client support and costs associated with the distribution of products and regulatory updates. The cost of maintenance revenues was $2.2 million and $1.5 million for the three months ended September 30, 2004 and 2003, respectively. The increase in cost of maintenance revenues was primarily due the recent acquisitions, which added $0.7 million in costs. The cost of maintenance revenues for the nine months ended September 30, 2004 and 2003 was $6.2 million and $4.5 million, respectively. The increase in cost of maintenance revenues was due to $1.4 million in additional costs associated with acquisitions, increased personnel costs of $0.2 million and increased costs of $0.1 million related to the engagement of a third party with actuarial expertise to assist with the management of our PTS business. The cost of maintenance revenues as a percentage of these revenues increased to 23% for the nine months ended September 30, 2004 from 19%

Cost of Professional Services. Cost of professional services revenues consists primarily of the cost related to personnel utilized to provide implementation, conversion and training services to our software licensees, as well as system integration, custom programming and actuarial consulting services. The cost of professional services revenues was $1.8 million and $1.0 million for the three months ended September 30, 2004 and 2003, respectively. The cost of professional services revenues for the nine months ended September 30, 2004 and 2003 was $4.8 million and $3.3 million, respectively. The increase in cost of professional services revenues for each of these periods was primarily attributable to recent acquisitions, which added $0.7 million and $1.6 million in costs during the three months and nine months ended September 30, 2004, respectively. The cost of professional services revenues as a percentage of such revenues decreased to 64% for the nine months ended September 30, 2004 from 71% for the nine months ended September 30, 2003. This improvement in gross margins was primarily attributable to the recent acquisitions, which are generating higher gross margins than our historical gross margins.

Cost of Outsourcing. Cost of outsourcing revenues consists primarily of the cost related to personnel utilized in servicing our outsourcing clients. The cost of outsourcing revenues was $4.6 million and $1.9 million for the three months ended September 30, 2004 and 2003, respectively. The increase in cost of outsourcing revenues was due to $2.4 million of additional costs attributable to recent acquisitions, and increased personnel costs of $0.2 million to support the growth in organic revenue. The cost of outsourcing revenues for the nine months ended September 30, 2004 and 2003 was $11.7 million and $6.0 million, respectively. The increase in cost of outsourcing revenues was due to $5.0 million of additional costs attributable to recent acquisitions, and increased personnel costs of $0.7 million to support the growth in organic revenues. The cost of outsourcing revenues as a percentage of such revenues decreased to 53% for the nine months ended September 30, 2004 from 62% for the nine months ended September 30, 2003. We have improved margins in outsourcing revenues by managing costs and improving efficiencies through the automation of processes that were previously done manually.

Total operating expenses were $8.5 million and $6.5 million for the three months ended September 30, 2004 and 2003, respectively. The increase in operating expenses was due to recent acquisitions, which added $1.5 million in costs and additional personnel costs of $0.6 million, offset by a reduction of $0.2 million in bad debt expense. Total operating expenses for the nine months ended September 30, 2004 and 2003 were $23.8 million and $20.2 million, respectively, representing 35% and 42% of total revenues in those respective periods. The increase in operating costs was due to the recent acquisitions, which added $3.5 million in costs and additional personnel costs of $0.8 million, offset by a reduction of $0.8 million in bad debt expense, which was due to the collection of a significant, aged receivable that had been fully reserved.

Selling and Marketing. Selling and marketing expenses consist primarily of the personnel costs associated with the selling and marketing of our products, including salaries, commissions and travel and entertainment. Such expenses also include the cost of branch sales offices, trade shows and marketing and promotional materials. Selling and marketing expenses were $2.8 million and $2.2 million for the three months ended September 30, 2004 and 2003, respectively. Selling and marketing expenses for the nine months ended September 30, 2004 and 2003 were $7.8 million and $6.3 million, respectively, representing 11% and 13%, respectively, of total revenues in those periods. The increase in selling and marketing expenses for each of these periods is primarily attributable to our recent acquisitions, which added $0.4 million and $1.2 million in costs for the three months and nine months ended September 30, 2004, respectively, and additional personnel costs of $0.2 million in each of those periods.

Research and Development. Research and development expenses consist primarily of personnel costs attributable to the development of new software products and the enhancement of existing products.

Research and development expenses were $3.7 million and $2.6 million for the three months ended September 30, 2004 and 2003, respectively. The increase in research and development expenses was mainly attributable to recent acquisitions, which added $0.9 million in costs and additional personnel costs of $0.2 million. Research and development expenses for the nine months ended September 30, 2004 and 2003 were $10.2 million and $8.5 million, respectively, representing 15% and 18% of total revenues in those periods, respectively. The increase in research and development expenses was attributable to recent acquisitions, which added $1.9 million in costs, and additional personnel costs of $0.2 million, offset by reduced facilities costs of $0.2 million and reduced amortization expense of $0.2 million.

General and Administrative. General and administrative expenses consist primarily of personnel costs related to management, accounting and finance, information management, human resources and administration and associated overhead costs, as well as fees for professional services. General and administrative expenses were $1.9 million and $1.7 million for the three months ended September 30, 2004 and 2003, respectively. The increase in general and administrative expenses was due to recent acquisitions, which added $0.2 million in costs, and additional personnel costs of $0.2 million, offset by a decrease in bad debt expense of $0.2 million. General and administrative expenses for the nine months ended September 30, 2004 and 2003 were $5.8 million and $5.3 million, respectively, representing 8% and 11% of total revenues in those periods, respectively. The increase in general and administrative expenses was mainly due to recent acquisitions, which added $0.5 million in costs, increased personnel costs of $0.4 million and additional costs of $0.2 million related to the engagement of external consultants to assist in compliance with the Sarbanes-Oxley Act of 2002, offset by a decrease of $0.8 million in bad debt expense.

Interest and Other Income, Net. Interest and other income, net consists primarily of interest income and other non-operational income and expenses. Interest income, net was $472,000 and $223,000 for the three months ended September 30, 2004 and 2003, respectively. The increase was primarily due to a higher average cash and investments balance, which more than doubled over the prior year due to the public stock offering completed in June 2004. Interest income, net for the nine months ended September 30, 2004 and 2003 was $837,000 and $707,000, respectively, reflecting higher average cash balances, offset by lower market interest rates. Other income, net decreased to a net expenditure of $21,000 for the nine months ended September 30, 2004 from a net income of $231,000 for the nine months ended September 2003. Included in other income, net for the nine months ended September 30, 2003 was a non-operational gain of $259,000 resulting from the sale of marketable securities.

Provision for Income Taxes. We had an effective tax rate of 39% for both the nine months ended September 30, 2004 and 2003. In future years, we expect to have sufficient levels of profitability to realize the deferred tax assets at September 30, 2004.

Our liquidity needs have historically been to finance the costs of operations pending the billing and collection of client receivables, to acquire complementary businesses or assets, to invest in research and development and to repurchase shares of our common stock. We have historically relied on cash flow from operations for liquidity. We expect that our future liquidity needs will consist of financing the costs of operations pending the billing and collection of client receivables, strategic acquisitions that allow us to expand our product offerings and client base, investments in research and development, repurchase of our Common Stock and payment of dividends, if any, to our stockholders. Our operating cash flow is primarily affected by the overall profitability of the sales of our products and services, our ability to invoice and collect from clients in a timely manner, our ability to efficiently implement our acquisition strategy and our ability to manage costs.

Our cash, cash equivalents and marketable securities at September 30, 2004 were $121.3 million, which is an increase of $68.9 million from $52.4 million at December 31, 2003. The increase was primarily

Net cash provided by operating activities was $19.4 million for the nine months ended September 30, 2004. Cash provided by operating activities was primarily due to earnings of $13.0 million adjusted for non-cash items of $6.6 million, including a $2.4 million tax benefit related to stock option exercises, an increase of $0.4 million in accounts payable and accrued expenses and a decrease of $0.5 million in accounts receivable. These items were partially offset by a decrease of $1.3 million in deferred revenue. Our accounts receivable days sales outstanding at September 30, 2004 was 52 days, compared to 61 days as of June 30, 2004, 43 days as of December 31, 2003 and 49 days as of September 30, 2003. The increase from December 31, 2003 was primarily due to the transition of receivables related to our acquisition of OMR.

Investing activities used net cash of $86.3 million for the nine months ended September 30, 2004. Cash used by investing activities was primarily due to the $62.2 million net purchases of marketable securities and the $23.5 million net cash paid for the acquisitions of IAN, NeoVision and OMR.

Financing activities provided net cash of $73.6 million for the nine months ended September 30, 2004. Cash provided by financing activities was primarily due to the $74.4 million in proceeds from our public stock offering. The exercise of stock options provided cash of $1.9 million, offset by $2.9 million for the payment of our semi-annual cash dividends.

As of September 30, 2004, we had $21.9 million of cash and cash equivalents and $99.3 million in marketable securities. We believe that our current cash, cash equivalents and marketable securities balances and anticipated cash flow from operations will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months.

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Historically, our revenues and operating results have fluctuated significantly from quarter to quarter. Our quarterly operating results may continue to fluctuate due to a number of factors, including:


	•	the timing, size and nature of our individual license and service transactions,

	•	the timing of the introduction and the market acceptance of new products, product enhancements or services by us or our competitors,

	•	the relative proportions of revenues derived from license fees, maintenance, professional services and outsourcing,

	•	the tendency of some of our clients to wait until the end of a fiscal quarter or our fiscal year in the hope of obtaining more favorable terms,

	•	changes in client budgets and decision-making processes that could affect both the timing and the size of any transaction,

	•	the amount and timing of operating costs and other expenses,

	•	cancellations of maintenance and/or outsourcing arrangements by our clients,


	•	changes in local, national and international regulatory requirements,

	•	changes in our personnel, and

	•	fluctuations in economic and financial market conditions.

The timing, size and nature of individual license and outsourcing transactions are important factors in our quarterly operating results. Many of the products we provide through licensing transactions are relatively complex, and licensing transactions involve a significant commitment of capital, with attendant delays frequently associated with large capital expenditures and implementation procedures within an organization. Moreover, licensing arrangements may require coordination within an organization’s various divisions and operations. For these and other reasons, the sales cycles for these transactions are often lengthy and unpredictable. Our inability to close license transactions on a timely basis or at all could adversely affect our quarterly revenues and operating results.

Our clients include a range of organizations in the financial services industry. The success of these clients is intrinsically linked to the health of the financial markets. In addition, we believe that 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, could disproportionately affect demand for our products and services. In addition, if financial services firms continue to consolidate, as they have over the past decade, there could be a material adverse effect on our business and financial results. For example, if a client merges with a firm using its own solution or another vendor’s solution, it could decide to consolidate its processing on a non-SS&C system, which could have an adverse effect on our financial results. Any resulting decline in demand for our products and services could have a material adverse effect on our business, financial condition and results of operations.

If we are unable to keep existing clients satisfied, sell additional products and services to existing clients or attract new clients, then our revenues and net income would remain stagnant or decline. A variety of factors could affect our ability to successfully retain and attract clients, including:


	•	the level of demand for our products and services,

	•	the level of client spending for information technology,

	•	the level of competition from internal client solutions and from other vendors,

	•	the quality of our client service,

	•	our ability to update our products and services and develop new products and services needed by clients,

	•	our ability to understand the organization and processes of our clients, and

	•	our ability to integrate and manage acquired businesses.

We have made and may in the future make acquisitions of companies, products or technologies that we believe could complement or expand our business, augment our market coverage, enhance our technical

capabilities or otherwise offer growth opportunities. Failure to achieve the anticipated benefits of an acquisition could harm our business, results of operations and cash flows. Acquisitions could subject us to contingent or unknown liabilities, and we may have to incur debt or severance liabilities, write-off investments, infrastructure costs, impaired goodwill or other assets, or issue equity securities to pay for any future acquisitions. The issuance of equity securities could dilute our existing stockholders’ ownership.

Our success is also dependent on our ability to complete the integration of the operations of recently acquired businesses, including Amicorp Group’s fund services business, Investment Advisory Network, NeoVision Hypersystems and OMR Systems, and any businesses we acquire in the future in an efficient and effective manner. Successful integration in the rapidly changing financial services industry may be more difficult to accomplish than in other industries. We may not realize the benefits we anticipate from these acquisitions, such as lower costs or increased revenues. We may also realize such benefits more slowly than anticipated, due to our inability to:


	•	combine operations, facilities and differing firm cultures,

	•	retain the clients or employees of acquired entities,

	•	generate market demand for new products and services,

	•	coordinate geographically dispersed operations and successfully adapt to the complexities of international operations,

	•	integrate the technical teams of these companies with our engineering organization,

	•	incorporate acquired technologies and products into our current and future product lines, and

	•	integrate the products and services of these companies with our business, where we do not have distribution, marketing or support experience for these products and services.

Integration may not be smooth or successful. The inability of management to successfully integrate the operations of acquired companies could have a material adverse effect on our business, financial condition and results of operations. The acquisitions may also place a significant strain on our management, administrative, operational and other resources. To manage growth effectively, we must continue to improve our management and operational controls, enhance our reporting systems and procedures, integrate new personnel and manage expanded operations. If we are unable to manage our growth and the related expansion in our operations from recent and future acquisitions, our business may be harmed through a decreased ability to monitor and control effectively our operations, and a decrease in the quality of work and innovation of our employees.

We may not identify suitable businesses to acquire or negotiate acceptable terms for acquisitions. Historically, a significant portion of our growth has occurred as a result of our ability to acquire similar or complementary businesses on favorable terms. We have relied heavily on acquisitions for adding new products, increasing revenues and adding to our client base, and we expect to continue to do so in the future. This growth strategy is subject to a number of risks that could adversely affect our business and financial results, including:


	•	we may not be able to find suitable businesses to acquire at affordable valuations or on other acceptable terms,

	•	we may face competition for acquisitions from other potential acquirers or from the possibility of the acquisition target pursuing an initial public offering of its stock, and

	•	we may find it more difficult or costly to complete acquisitions due to changes in accounting, tax, securities or other regulations.

Our success and ability to compete depends in part upon our ability to protect our proprietary technology. We rely on a combination of trade secret, copyright and trademark law, nondisclosure agreements and technical measures to protect our proprietary technology. We have registered trademarks for many of our products and will continue to evaluate the registration of additional trademarks as appropriate. We generally enter into confidentiality agreements with our employees and clients. We seek to protect our software, documentation and other written materials under trade secret and copyright laws, which afford only limited protection. These efforts may be insufficient to prevent third parties from asserting intellectual property rights in our technology. Furthermore, it may be possible for unauthorized third parties to copy portions of our products or to reverse engineer or otherwise obtain and use our proprietary information, and third parties may assert ownership rights in our proprietary technology.

The laws governing our intellectual property afford only limited protection. Others may develop substantially equivalent or superseding proprietary technology, or competitors may offer equivalent products in competition with our products, thereby substantially reducing the value of our proprietary rights. We cannot be sure that our proprietary technology does not include open-source software, free-ware, share-ware or other publicly available technology. There are many patents in the investment management field. As a result, we are subject to the risk that others will claim that the important technology we have developed, acquired or incorporated into our products will infringe the rights, including the patent rights, such persons may hold. Third parties also could claim that our software incorporates publicly available software and that, as a result, we must publicly disclose our source code. Because we rely on confidentiality for protection, such an event could result in a material loss of intellectual property rights. We cannot be sure that we will develop proprietary products or technologies that are patentable, that any patent, if issued, would provide us with any competitive advantages or would not be challenged by third parties, or that the patents of others will not adversely affect our ability to do business. Expensive and time-consuming litigation may be necessary to protect our proprietary rights.

We have acquired and may acquire important technology rights through our acquisitions and have often incorporated and may incorporate features of this technology across many products and services. As a result, we are subject to the above risks and the additional risk that the seller of the technology rights may not have appropriately protected the intellectual property rights we acquired. Indemnification and other rights under applicable acquisition documents are limited in term and scope and therefore provide us with only limited protection.

In addition, we currently rely on third-party licenses in providing our products and services. If we lost such licenses or such licenses were found to infringe upon the rights of others, we would need to seek alternative means of obtaining the licensed technology to continue to provide our products or services. Our inability to replace such technology, or to replace such technology in a timely manner, could have a negative impact on our operations and financial results.

In recent years, there has been significant litigation in the United States involving patents and other intellectual property rights. While we are not currently a party to any litigation asserting that we have violated third-party intellectual property rights, we may be a party to litigation in the future to enforce our intellectual property rights or as a result of an allegation that we infringe others’ intellectual property, including patents, trademarks and copyrights. Any parties asserting that our products or services infringe upon their proprietary rights would force us to defend ourselves and possibly our clients against the alleged infringement. Third parties could claim that our software incorporates publicly available software and that, as a result, we must publicly disclose our source code. These claims and any resulting lawsuit, if successful, could subject us to significant liability for damages and invalidation of our proprietary rights.

These lawsuits, regardless of their success, could be time-consuming and expensive to resolve, adversely affect our sales, profitability and prospects and divert management time and attention away from our operations. We may be required to re-engineer our products or services or obtain a license of third-party technologies on unfavorable terms.

We expect that our gross and operating margins may fluctuate from period to period as we continue to introduce new products, experience fluctuations in the relative proportions of revenues derived from our products and services, continue to hire and acquire additional personnel and increase other expenses to support our business. Historically, we derived our revenues principally from the licensing of our products. However, we are increasingly deriving our revenues from outsourcing and related services, which have lower profit margins. For the years ended December 31, 2001, 2002 and 2003, our outsourcing revenues represented 11%, 20% and 20%, respectively, of our total revenues. The gross margins for outsourcing services were 7%, 32% and 39% in 2001, 2002 and 2003, respectively. We expect that the portion of our revenues derived from outsourcing and related services will continue to increase, which, because of the lower margins associated with such revenues, could adversely affect our profitability.

To date, substantially all of our revenues have been attributable to the licensing of, or outsourcing solutions relating to, our CAMRA, TradeThru, AdvisorWare, SKYLINE and LMS software and the provision of maintenance and professional services in support of such licensed software. We expect that the revenues from these software products and related services will continue to account for a significant portion of our total revenues for the foreseeable future. As a result, factors adversely affecting the pricing of or demand for such products and services, such as competition or technological change, could have a material adverse effect on our ability to sustain or grow our revenues and harm our business, financial condition and results of operations.

Recently enacted changes in the laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002 and rules adopted by the Securities and Exchange Commission and NASDAQ, could cause us to incur increased costs as we evaluate the implications of new rules and respond to new requirements. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control for financial reporting. We currently do not have an internal audit group and we will require significant resources and management oversight to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting. As a result, management’s attention may be diverted from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, we may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge, and we cannot assure you that we will be able to do so in a timely fashion.

As we evaluate our internal controls and procedures in order to determine whether they are effective, we may determine that significant changes to such controls and procedures are necessary. In addition, our controls and procedures may not be able to prevent other than inconsequential error or fraud in the future. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, and not absolute, assurances that the objectives of the system are met. Faulty

judgments, simple errors or mistakes, or the failure of our personnel to adhere to established controls and procedures may make it impossible for us to ensure that the objectives of the control system are met. A failure of our controls and procedures could delay our ability to identify error or fraud and cause loss of investor and client confidence and serious harm to our business, financial condition, results of operations and cash flows.

The market for financial services software and services is competitive, rapidly evolving and highly sensitive to new product and service introductions and marketing efforts by industry participants. The market is also highly fragmented and served by numerous firms that target only local markets or specific client types. We also face competition from information systems developed and serviced internally by the IT departments of financial services firms.

Some of our current and potential competitors have significantly greater financial, technical and marketing resources, generate higher revenues and have greater name recognition. Our current or potential competitors may develop products comparable or superior to those developed by us, or adapt more quickly than us to new technologies, evolving industry trends or changing client or regulatory requirements. It is also possible that alliances among competitors may emerge and rapidly acquire significant market share. Increased competition may result in price reductions, reduced gross margins and loss of market share, any of which could materially adversely affect our business, financial condition and results of operations.

Rapidly changing technology, evolving industry standards and new product and service introductions characterize the market for our products and services. Our future success will depend in part upon our ability to enhance our existing products and services and to develop and introduce new products and services to meet changing client needs and evolving regulatory requirements. The process of developing software products such as those offered by us is extremely complex and is expected to become increasingly complex and expensive in the future due to the introduction of new platforms and technologies. Our ability to keep up with technology and business changes is subject to a number of risks, including:


	•	we may find it difficult or costly to update our services and software and to develop new products and services quickly enough to meet our clients’ needs,

	•	we may find it difficult or costly to make some features of our software work effectively and securely over the Internet,

	•	we may find it difficult or costly to update our software and services to keep pace with business, regulatory and other developments in the industries where our clients operate, and

	•	we may be exposed to liability for security breaches that allow unauthorized persons to gain access to confidential information stored on our computers or transmitted over our network.

Our failure to develop new products and services in a timely fashion or to address promptly the needs of the financial markets could adversely affect our business, financial condition and results of operations.

Our software products are highly complex and sophisticated and could contain design defects or software errors that are difficult to detect and correct. Errors or bugs may result in loss of or delay in market acceptance of our software products or loss of client data or require design modifications. We cannot assure you that, despite testing by us and our clients, errors will not be found in new products,

We believe that our success is due in part to our experienced management team. We depend in large part upon the continued contribution of our senior management and, in particular, William C. Stone, our chief executive officer and chairman of the board. Losing the services of one or more members of our senior management could adversely affect our business and results of operations. Mr. Stone has been instrumental in developing our business strategy and forging our business relationships since he founded the company in 1986. We maintain no key man life insurance policies for Mr. Stone or any other senior officers or managers.

Our success is also dependent upon our ability to attract, train and retain highly skilled technical and sales personnel. Competition for the hiring of such personnel in the software industry can be intense. Locating candidates with the appropriate qualifications, particularly in the desired geographic location and with the necessary subject matter expertise, is difficult. Our failure to attract and retain a sufficient number of highly skilled employees could adversely affect our business, financial condition and results of operations.

For the years ended December 31, 2001, 2002 and 2003, international revenues accounted for 19%, 16% and 17%, respectively, of our total revenues. We sell certain of our products, such as Altair and Mabel, primarily overseas. Our international business may be subject to a variety of risks, including:


	•	difficulties in obtaining U.S. export licenses,

	•	potentially longer payment cycles,

	•	increased costs associated with maintaining international marketing efforts,

	•	foreign currency fluctuations,

	•	the introduction of non-tariff barriers and higher duty rates, and

	•	difficulties in enforcement of third-party contractual obligations and intellectual property rights.

Such factors could have a material adverse effect on our business, financial condition or results of operations.

A war, terrorist attack, natural disaster or other catastrophe may adversely affect our business. A catastrophic event could have a direct negative impact on us or an indirect impact on us by, for example, affecting our clients, the financial markets or the overall economy and reducing our ability to provide, our clients’ ability to use, and the demand for, our products and services. The potential for a direct impact is due primarily to our significant investment in infrastructure. Although we maintain redundant facilities and have contingency plans in place to protect against both man-made and natural threats, it is impossible to fully anticipate and protect against all potential catastrophes. A computer virus, security breach, criminal act, military action, power or communication failure, flood, severe storm or the like could lead to service interruptions and data losses for clients, disruptions to our operations, or damage to important facilities. In addition, such an event may cause clients to cancel their agreements with us for our products or services. Any of these could have a material adverse effect on our business, revenues and financial condition.

The trading price of our common stock has been, and is expected to continue to be, highly volatile. The following factors may significantly and adversely affect the trading price of our common stock:


	•	actual or anticipated fluctuations in our operating results,

	•	announcements of technological innovations,

	•	new products or new contracts by us or our competitors,

	•	developments with respect to copyrights or propriety rights,

	•	conditions and trends in the financial services and software industries,

	•	changes in financial estimates by securities analysts, and

	•	general market conditions and other factors.

Our charter and bylaws contain provisions, including a staggered board of directors, that may make it more difficult for a third party to acquire us, or may discourage bids to do so. These provisions could limit the price that investors might be willing to pay for shares of our common stock and could make it more difficult for a third party to acquire, or could discourage a third party from acquiring, a majority of our outstanding common stock. Our board of directors also has the authority to issue up to 1,000,000 shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without any further vote or action by the stockholders. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock could make it more difficult for a third party to acquire, or may discourage a third party from acquiring, a majority of our outstanding common stock.

We have no derivative financial instruments. We generally place our marketable security investments in high credit quality instruments, primarily U.S. Government and Federal Agency obligations, tax-exempt municipal obligations and corporate obligations. We do not expect any material loss from our marketable security investments and therefore believe that our potential interest rate exposure is not material.

The following table provides information about our financial instruments that are sensitive to changes in interest rates (dollars in thousands):

We invoice clients primarily in U.S. dollars and in local currency in those countries in which we have branch and subsidiary operations. We are exposed to foreign exchange rate fluctuations from the time clients are invoiced in local currency until collection occurs. Through September 30, 2004, foreign currency fluctuations have not had a material effect on our financial position or results of operations, and therefore we believe that our potential foreign currency exchange rate exposure is not material.

The foregoing risk management discussion and the effect thereof are forward-looking statements. Actual results in the future may differ materially from these projected results due to actual developments in global financial markets. The analytical methods used by us to assess and minimize risk discussed above should not be considered projections of future events or losses.

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of September 30, 2004. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of September 30, 2004, our disclosure controls and procedures were (1) designed to ensure that material information relating to us, including our consolidated subsidiaries, is made known to our chief executive officer and chief financial officer by others within those entities, particularly during the period in which this report was being prepared, and (2) effective, in that they provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended September 30, 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

On October 18, 2004, we announced a stock repurchase program providing for expenditures of up to $50 million over the period extending from October 18, 2004 through October 17, 2005. We may purchase our shares in open market, negotiated and block transactions. During the three months ended September 30, 2004, we did not have a stock repurchase program in effect or repurchase any of our shares.

The exhibits listed in the Exhibit Index immediately preceding such exhibits are filed as part of this Report.

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.


	By:	/s/ PATRICK J. PEDONTI



	Patrick J. Pedonti
	Senior Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended September 30, 2004

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Delaware		06-1169696
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


Class		Number of Shares Outstanding

Common stock, par value $0.01 per share		23,072,260


		Page
		Number

PART I.	FINANCIAL INFORMATION		2
Item 1.	Financial Statements		2
	Consolidated Balance Sheets at September 30, 2004 and December 31, 2003		2
	Consolidated Statements of Operations for the three months and nine months ended September 30, 2004 and 2003		3
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2004 and 2003		4
	Notes to Consolidated Financial Statements		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		22
Item 4.	Controls and Procedures		23

PART II.	OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		23
Item 6.	Exhibits		23
	SIGNATURE		24
	EXHIBIT INDEX
EX-31.1 Section 302 CEO Certification
EX-31.2 Section 302 CFO Certification
EX-32 Section 906 CFO Certification


		September 30,			December 31,
		2004			2003


		(In thousands)
		(Unaudited)
ASSETS
Current assets
	Cash and cash equivalents	$	21,916		$	15,261
	Investments in marketable securities		99,345			37,120
	Accounts receivable, net of allowance for doubtful accounts of $993 and $1,449, respectively		14,419			8,571
	Prepaid expenses and other current assets		1,622			1,434
	Deferred income taxes		298			620

Total current assets			137,600			63,006

Property and equipment
	Leasehold improvements		3,764			3,593
	Equipment, furniture, and fixtures		17,486			15,805

			21,250			19,398
	Less accumulated depreciation		(16,074	)		(14,634	)

	Net property and equipment		5,176			4,764

Deferred income taxes			5,769			6,417
Goodwill			16,226			3,841
Intangible and other assets, net of accumulated amortization of $4,890 and $3,168, respectively			12,882			4,557

Total assets		$	177,653		$	82,585

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities
	Accounts payable	$	1,030		$	916
	Income taxes payable		26			91
	Accrued employee compensation and benefits		4,820			3,484
	Other accrued expenses		3,162			2,039
	Deferred maintenance and other revenue		18,009			14,467

Total current liabilities			27,047			20,997

Commitments and contingencies (Note 9)
Stockholders’ equity
	Common stock		312			268
	Additional paid-in capital		184,228			105,359
	Accumulated other comprehensive income		591			588
	Retained earnings		18,895			8,793

			204,026			115,008
	Less: cost of common stock in treasury; 8,191 shares		(53,420	)		(53,420	)

Total stockholders’ equity			150,606			61,588

Total liabilities and stockholders’ equity		$	177,653		$	82,585

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			Three Months Ended					Nine Months Ended

			September 30,			September 30,		September 30,			September 30,
			2004			2003		2004			2003


			(In thousands, except per share data)
			(Unaudited)
Revenues:
	Software licenses		$	4,116		$	3,032	$	12,444		$	10,137
	Maintenance			9,521			7,964		26,742			23,297
	Professional services			2,973			1,710		7,550			4,629
	Outsourcing			8,553			3,302		22,100			9,589

		Total revenues		25,163			16,008		68,836			47,652

Cost of revenues:
	Software licenses			600			431		1,630			1,373
	Maintenance			2,173			1,546		6,162			4,538
	Professional services			1,769			1,005		4,842			3,276
	Outsourcing			4,613			1,932		11,701			5,960

		Total cost of revenues		9,155			4,914		24,335			15,147

Gross profit				16,008			11,094		44,501			32,505

Operating expenses:
	Selling and marketing			2,844			2,178		7,791			6,319
	Research and development			3,703			2,627		10,211			8,506
	General and administrative			1,947			1,680		5,785			5,333

		Total operating expenses		8,494			6,485		23,787			20,158

Operating income				7,514			4,609		20,714			12,347
Interest income				472			223		837			707
Other income (expense), net				(5	)		152		(21	)		231

Income before income taxes				7,981			4,984		21,530			13,285
Provision for income taxes				3,138			1,943		8,504			5,181

Net income			$	4,843		$	3,041	$	13,026		$	8,104

Basic earnings per share			$	0.21		$	0.16	$	0.63		$	0.43

Basic weighted average number of common shares outstanding				23,019			18,494		20,525			18,638

Diluted earnings per share			$	0.20		$	0.15	$	0.60		$	0.41

Diluted weighted average number of common and common equivalent shares outstanding				24,176			19,814		21,873			19,800


				Gross
				Unrealized
		Cost		Gains		Fair Value

State, municipal and county government bonds		$	69,120	$	5	$	69,125
US Government securities			3,017		2		3,019
Corporate bonds			22,514		4		22,518
Equities			3,964		719		4,683

	Total	$	98,615	$	730	$	99,345


	OMR			NeoVision			IAN

Assets acquired, net of cash received	$	8,134		$	9		$	232
Purchased technology and intangibles		8,200			430			1,100
Goodwill		9,249			1,259			1,891
Liabilities assumed		(6,618	)		(91	)		(255	)

Consideration paid	$	18,965		$	1,607		$	2,968


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


	*Results of Operations for the three months and nine months ended September 30, 2004 and 2003*



		Three Months				Nine Months
		Ended				Ended
		September 30,				September 30,

		2004		2003		2004		2003

Revenues:
	Software licenses		16%		19%		18%		21%
	Maintenance		38%		50%		39%		49%
	Professional services		12%		11%		11%		10%
	Outsourcing		34%		20%		32%		20%


	*Our revenues and operating results have fluctuated significantly, and may continue to fluctuate significantly, from quarter to quarter*


	General economic and market conditions and a weakening of the financial services industry may cause clients and potential clients to reduce expenditures on our products and services, which would result in lost revenues and reduced income


	*If we are unable to retain and attract clients, our revenues and net income would remain stagnant or decline*


	We may not achieve the anticipated benefits from our acquisitions and may face difficulties in integrating our acquisitions, which could adversely affect our revenues, subject us to unknown liabilities, increase costs and place a significant strain on management


Item 1.	*Financial Statements*


1.	Basis of Presentation


2.	Marketable Securities


3.	Stock-Based Compensation


	*We may be unable to identify suitable businesses to acquire, which would hinder our ability to grow our revenues and client base and adversely affect our business and financial results*


	If we are unable to protect our proprietary technology, our success and our ability to compete will be subject to various risks, such as third-party infringement claims, unauthorized use of our technology, disclosure of our proprietary information or inability to license technology from third parties


	We could become subject to litigation regarding intellectual property rights, which could seriously harm our business and require us to incur significant costs, which, in turn, could reduce or eliminate profits


	*We expect our gross and operating margins may fluctuate over time, which could cause our financial results to differ from investor expectations or negatively affect our profitability*


	Our failure to continue to derive substantial revenues from CAMRA, TradeThru, AdvisorWare, SKYLINE and LMS software, and the provision of maintenance and professional services in support of such software, could adversely affect our business, financial condition and results of operations


	*We face significant competition with respect to our products and services, which may result in price reductions, reduced gross margins or loss of market share*


	*Our inability to introduce new products and services could adversely affect our business and results of operations*


	Undetected software design defects, errors or failures may result in loss of or delay in market acceptance of our products that could adversely affect our revenues, financial condition and results of operations


	If we cannot attract, train and retain qualified managerial, technical and sales personnel, we may not be able to provide adequate technical expertise and customer service to our clients or maintain focus on our business strategy


	Challenges in maintaining and expanding our international operations can result in increased costs, delayed sales efforts and uncertainty with respect to our intellectual property rights and results of operations


	*Catastrophic events may disrupt our business and hurt our results of operations*


	*Our stock price is volatile and may continue to be volatile in the future, which could result in substantial losses for our investors*


	*Provisions of our charter and bylaws may delay or prevent transactions that are in your best interests*


Item 3.	*Quantitative and Qualitative Disclosures About Market Risk*



	Fair Value of
	Investments as of
	September 30, 2004
	Maturing in:
Investments	2004		2005			2006

Fixed Rate Investments	$	0	$	6,922		$	6,924
Average Interest				2.04	%		2.54	%


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


Exhibit
Number			Description

	31	.1	Certification of the Registrant’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31	.2	Certification of the Registrant’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32		Certification of the Registrant’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002