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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X]Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 2000
or
[ ]Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission file number: 0-26994
ADVENT SOFTWARE, INC.(R)
(Exact name of registrant as specified in its charter)
Delaware 94-2901952
(State of incorporation) (IRS Employer Identification Number)
301 Brannan Street, San Francisco, California 94107
(Address of principal executive offices and zip code)
(415) 543-7696
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Acts: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of Class)
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 [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The number of shares of the registrant's Common Stock outstanding as of March 8,
2001 was 30,804,505. The aggregate market value of the registrant's Common Stock
held by non-affiliates, based upon the closing price on March 8, 2001, as
reported on the NASDAQ National Market System, was approximately $1.0 billion.
Shares of Common Stock held by each officer and director and by each person who
owns 5% or more of the outstanding Common Stock have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the following documents are incorporated by reference into Parts II and
III of this Form 10-K: (1) 2000 Annual Report to Stockholders of the Registrant
(Part II of this Form 10-K); and (2) Definitive Proxy Statement for the
registrant's Annual Meeting of Stockholders to be held May 3, 2001 (Part III of
this Form 10-K).
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
From time to time, we make oral and written statements that may constitute
"forward-looking statements" as defined by the Securities and Exchange
Commission ("SEC") in its rules, regulations and releases including Section 27A
of the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended.
Forward-looking statements can be identified by the use of terminology such as
"may", "will", "should", "expect", "plan" "anticipate", "believe", "estimate",
"predict", "potential", "continue" or other similar terms or the negative of
such terms. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements.
Forward-looking statements are made in this Form 10-K, as well as in other
filings with the SEC and from time to time in public announcements. Such
forward-looking statements are based on our current plans and expectations and
are subject to risks and uncertainties that could cause actual results to differ
materially from those described in the forward-looking statements. Where such
forward-looking statements appear, we have sought to accompany such statements
with meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those described in the
forward-looking statements. Such factors include, but are not limited to, the
"Risk Factors" set forth in "Management's Discussion and Analysis of Financial
Condition and Results of Operations," as well as other risks identified from
time to time in other SEC reports, registration statements and public
announcements.
We cannot guarantee future results, levels of activity, performance or
achievements reflected in forward-looking statements. Moreover, neither we nor
any other person assumes responsibility for the accuracy and completeness of
such statements. We do not have any obligation to release updates or any changes
in events, conditions or circumstances on which any forward-looking statement is
based or to conform such statements to actual results.
PART I
Item 1. BUSINESS
Overview
We are a leading provider of Enterprise Investment Management solutions that
automate and integrate mission-critical functions of investment management
organizations through software products, services and data integration. Our
solutions enable organizations of all sizes to run their business more
effectively, enhance client service and performance, and improve productivity
and communication throughout their organization.
Advent Office(TM), our suite of integrated products, addresses the demand to
automate the entire range of investment management functions, including
portfolio management, client relationship management, trade order management,
data warehousing, partnership accounting, reconciliation management, and
web-based portfolio, performance and analytic reporting.
We were founded in 1983, incorporated in 1983 in California and reincorporated
in Delaware in November 1995. Our principal executive offices are located at 301
Brannan Street, San Francisco, California 94107, and our telephone number is
(415) 543-7696.
Industry Background and Our Clients
Our clients include a range of organizations that manage investment
portfolios, including investment advisors, brokerage firms, banks and hedge
funds. Our clients also include corporations, public funds, foundations,
universities and non-profit organizations that manage investment portfolios and
perform similar portfolio management functions. Recently, the investment
management industry has experienced significant growth, which, in combination
with other factors, has led to increasing demand for software products that
automate, simplify and integrate functions within investment management
organizations. This increasing demand is driven by several industry dynamics.
Financial assets under management have increased substantially during the last
decade. As the value of total financial assets under management has increased,
there has been a substantial increase in the number of investment management
organizations and a steady introduction of increasingly sophisticated financial
instruments. As a result, investment managers are faced with increasingly
complicated portfolio accounting and management requirements as well as
extensive and evolving industry standards and government regulations.
These dynamics have increased the volume and complexity of information and
data flows within investment management organizations and between such
organizations and third parties, such as brokerage firms, clients, custodians,
banks, pricing services and other data providers. Consequently, investment
management organizations require more sophisticated and integrated software
products for their front, middle and back offices.
The front office operations of an investment manager include the marketing and
customer relationship management aspect of dealing with customers; the middle
office focuses on trade order management and trading workflow; and the back
office includes the accounting functions of the organization. In order to
operate efficiently within this environment, investment management organizations
must automate and integrate their mission-critical and labor-intensive
functions, including (i) investment decision support and client relationship
management, (ii) order management and trading and (iii) portfolio accounting,
performance measurement, report generation and compliance. Investment management
organizations historically have relied on internally developed systems,
timesharing services or simple spreadsheet-based systems to manage information
flows. Due to inherent limitations in each of these types of systems, investment
management organizations are demanding highly functional, easy-to-use, scalable,
cost-effective and flexible software applications that automate and integrate
their mission-critical business functions.
The Advent Solution
The Advent solution combines a fully integrated suite of client-centric
software products, with a full range of professional services - from
implementation management and training to technical support and consulting
services, all aimed at accomplishing our clients' business objectives.
Software Products
We offer an integrated suite of software products for automating and
integrating work and data flows across the investment management organization,
as well as the information flows between the investment management organization
and external parties. Our products are intended to reduce client costs, improve
the accuracy of client information and generally enable clients to improve the
service they provide to their customers rather than focusing on operational
details. Each software component in the Advent Office suite focuses on certain
mission-critical functions of the investment management organization. Each
Advent Office implementation is tailored to meet the needs of a particular
market segment, as determined by size, assets under management and complexity of
the investment environment.
We believe that our Enterprise Investment Management solution is well suited
for the investment management functions of corporations, public funds,
partnerships, foundations, universities and non-profit organizations. An
Enterprise Investment Management solution is an evolutionary process that
encompasses three phases:
o Investment Process Integration - involves the integration of front-, mid-,
and back-office components with each other as well as with standard
productivity applications such as Microsoft Word(R) and Excel(R). This
integration eliminates ineffective communication between processes and
minimizes processing errors, enabling growth by reducing bottlenecks within
the organization.
o Data Collection and Reconciliation - enables the investment organization to
integrate the external data regarding pricing and settlements so that the
firm can quickly and efficiently settle transactions and monitor
performance in an automated fashion.
o Customer Responsiveness - incorporates numerous capabilities enabling our
clients to provide more personal, effective communication with their
customers. This capability enables decision makers for the firm to have
timely access to information in order to make more effective decisions on
behalf of the clients.
Back Office
We offer three portfolio accounting and management systems: Axys(R), Advent
Partner(R) and Geneva(R), each targeted at a different market segment, to
automate the back office functions. We also offer additional back office
applications, including our REX(TM) solution, which provides reconciliation
management, and our Advent Warehouse(TM) solution, which provides data
warehousing capabilities.
Axys, our core product, introduced in 1993, is a highly functional portfolio
accounting and management system targeted towards investment management
organizations of all sizes. Axys provides investment professionals with broad
portfolio accounting functionality, timely decision support, sophisticated
performance measurement and flexible reporting. Specifically, clients can
record, account for and report on a variety of investment instruments, including
equities, fixed income, mutual funds and cash. Axys users gain access on demand
to portfolio holdings, asset allocation, realized and unrealized gains and
losses, actual and projected income and other valuable data. Portfolio
performance can be measured for individual portfolios or related groups, and for
any specified time period. Investment professionals can choose from over 200
pre-defined reports with flexible "as-of" reporting, which can be customized as
to formats and fonts. Clients can easily generate fully customized reports with
the assistance of the Axys Report Writer. Clients can also produce
presentation-quality graphics via an integrated link with Microsoft Excel's
charting capability. In addition, Axys offers integrated multi-currency
capabilities which, among other things, allows reports to be restated in any
currency, tracks reclaimable foreign withholding tax, and can identify
components of return attributable to market prices versus currency rate
fluctuations.
Axys also provides integration with a variety of investment tools and data.
These tools include (i) Moxy(R), our trade order management solution, (ii)
pricing, corporate actions, analytics and fundamental data via interfaces to
data vendors, (iii) automatic data entry and reconciliation of trades with
interfaces to the Depository Trust Corporation ("DTC"), brokerage firms and
custodians, (iv) integrating through the Internet via our custodial data service
and software and (vi) Internet reporting via Advent Browser Reporting(R) for
Enterprise Users, our Internet reporting service.
Advent Partner, introduced in December 1996, is an investment partnership
allocation solution, which integrates with Axys. This product is specifically
designed for hedge funds, venture funds and limited investment partnerships that
face the complex and time-consuming task of consistently and accurately
accounting for and reporting on partnership tax allocation and other activities.
The Windows-based system tracks partner-specific information, handles the
complexities of allocating realized and unrealized gains and losses for tax
purposes, allocates performance incentive fees, provides on-demand partner and
partnership reporting on an economic or tax allocation basis and streamlines the
production of partnership tax returns.
Geneva, introduced to target organizations in 1995 and made commercially
available in October 1997, is a high-end portfolio accounting system designed to
meet the needs of large, global investment management organizations with
complex, international accounting requirements. Geneva offers feature-rich
global accounting, extensive reporting (including profit and loss reporting by
strategy) and sophisticated multi-currency capabilities. In addition, Geneva's
highly flexible design allows users to add newly created financial instruments
and tailor accounting treatments to their specific needs.
REX, introduced in the second quarter of 1997, is the Advent Office solution
for reconciliation management. REX is integrated with Axys and is designed for
firms that want to electronically reconcile their Axys information against their
custodial information. REX automates matching and helps users identify
exceptions, correct or add transactions to their portfolios or communicate and
track changes required by their custodian.
Advent Warehouse, introduced in 1998, is a data warehouse solution designed to
allow investment professionals to readily access investment data regardless of
how the data was created or maintained, without impacting the performance of
their high volume transaction-based Advent Office systems. Relational technology
and data warehousing tools provide an open environment for ad hoc decision
support and customized reporting on enterprise wide investment information.
Investment professionals can take advantage of the sea of information captured
during the investment process to improve client service and gain competitive
advantage.
Advent Corporate Actions(TM), introduced in May 1999, is a comprehensive,
integrated corporate actions solution from our subsidiary, Hub Data, and is
designed to integrate with Axys to automate and simplify the process of manually
tracking and processing corporate actions. Advent Corporate Actions
electronically tracks and consolidates corporate action information from a host
of high-quality sources and delivers daily e-mail reports to portfolio managers
and other key staff.
MyAdvent(TM), introduced in May 2000 and expected to be available in 2001,
will provide a browser-based portal to Advent Office for investment
professionals to quickly view summary information they need in one place in
order to know exactly where they stand at any point in the day. Users will be
able to review information then immediately drill down into detailed data and
functionality in other Advent Office components, and in Advent Alliance Partner
applications.
Advent Outsource, introduced in September 2000, is a service that brings our
portfolio reporting solution to investment firms in an application service
provider ("ASP") model. Investment management firms that wish to outsource the
management of their portfolio reporting will be able to leverage the full power
of Axys, our portfolio accounting, management and reporting solution. Investment
firms that choose Advent Outsource will have their client data housed for them,
and will be provided secure access over the Internet to their accounts. This ASP
solution is especially attractive to firms that may not have the resources
required to maintain technology operations in-house or are looking specifically
to outsource all of their data management.
Middle Office
Moxy, introduced in 1995, automates and streamlines the trading and order
management process. Moxy facilitates accurate trade order management and
preparation, tracks trade-order status, automates the allocation of block trades
across multiple portfolios and electronically interfaces with Axys to provide an
integrated solution. Moxy supports fixed income, mutual funds and equity trading
and offers multi-currency capabilities. Moxy enables investment managers to
accurately adjust portfolio holdings, rebalance portfolios against models,
interactively assess "what-if" scenarios and automatically create orders to be
executed. For traders, Moxy tracks cash and positions during the trading day,
enables the accurate preparation of block trades and internal electronic trade
tickets, facilitates compliance with investment restrictions and trading
requirements and minimizes trading errors. Moxy also allows traders and others
to view the status of orders via customizable screens and maintain an electronic
audit trail of the trade process. Moxy automates the allocation process of
partial and complete executions and allows the user to send allocation results
using OASYS, an electronic allocation system, to communicate allocations to
brokers electronically. Moxy also provides Internet-ready electronic order
routing based on the industry standard FIX messaging protocol so that Moxy users
can route trades electronically to any FIX-compliant broker or crossing network
that supports the Internet or other TCP/IP connections. Moxy users can choose to
route equity orders via SunGard Direct(TM) which links them to participating
brokers and execution venues. Trades are executed, processed, settled and
accounted for without manual intervention. Moxy electronically posts allocated
trades into Axys on demand, eliminating time-consuming and error-prone manual
entry.
Front Office
Qube(R), introduced in 1995, is designed to help securities professionals
develop and improve client relationships by automating scheduling, client
communications and client data. For example, Qube integrates with portfolio
information on Axys and enables investment professionals to interactively screen
client investment profiles and notes of conversations to identify appropriate
candidates for various investment opportunities. In addition, Qube can be used
to enhance direct marketing campaigns by matching clients with market
opportunities. Qube captures extensive investment profile information, has
online query capability, networking features and mail merge capabilities and
facilitates information sharing across professionals in an office.
Advent Browser Reporting for Decision Makers, introduced in 1998, puts the
power of data analysis on the portfolio managers' desktop via the Internet.
Using our Online Analytical Processing tools (OLAP), investment data can be
sliced and diced to improve the decision making process. Advent Browser
Reporting for Investors, also introduced in 1998, allows investment managers to
post Axys reports to a secure website where their clients can access these
reports 24 hours a day, 7 days a week. Advent Browser Reporting for Enterprise
Users allows investment professionals the ability to access Axys from remote
locations via the Internet and run Axys reports as if they were in their office.
Advent TrustedNetworkSM, introduced in March 2000, is an automated account
consolidation solution that enables financial institutions to use the Internet
to deliver cross-institutional, consolidated views of individual investor
portfolios. The investment advisors can provide a consolidated statement showing
the individual investor's portfolio of assets, transaction data (buys, sells,
interest, dividends, deposits and withdrawals), performance analysis and other
detailed account information. The data can be manipulated and new data
interpolated from it. The consolidated information can then be shared
simultaneously between investors and trusted financial advisors. Our solution,
in contrast to account aggregation solutions, is designed to employ our data
gathering and reporting tools to accept account and transactional information
from bank and brokerage back office systems, aggregate those transactions by
investor, and deliver the information to participating institutions and their
clients online.
Grants Management
GIFTS(R) for Windows is a proposal tracking and grants management system that
allows the user to retrieve and classify requests, generate personalized
letters, manage contacts, schedule and monitor activities, maintain complete
organization history, track payments, contingencies and report requests. This
software is primarily used by the philanthropic community such as foundations,
corporations and other organizations to manage their grant-making activities.
Maintenance Support and Subscription-Based/Transaction-Based Services
We earn recurring revenues by offering a choice of maintenance contracts and
by providing subscription-based and transaction-based services. Our
subscription-based and transaction-based services allow clients to (1) download
pricing, corporate actions and other data from third party vendors such as
Interactive Data Corporation ("Interactive Data"), a wholly owned indirect
subsidiary of Pearson plc, and (2) interface with DTC, certain brokerage firms
and custodians for trading activity. 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 Interactive Data's revenues
from providing such data to our clients.
Our Hub Data subsidiary consolidates securities information and data from
various third party providers such as Merrill Lynch, Interactive Data, J.J.
Kenny, a division of The McGraw-Hill Companies, Xcitek, CCH Incorporated,
Telekurs and others, and provides data feeds and services to a range of
financial institutions via electronic interfaces to many portfolio software
systems.
Due to the mission-critical nature of our products, many clients purchase
annual maintenance contracts, which entitle them to technical support and
product upgrades as they become available. We continually upgrade and enhance
our products to respond to changing market needs, evolving regulatory
requirements and new technologies.
Internet Initiative
We believe the Internet will be a low-cost communications platform used to
integrate external information into our products, thereby providing our clients
with straight through processing ("STP") of business information. To take
advantage of the Internet, we have launched an Internet Initiative, developing
services, both announced and unannounced, to bring Internet-based products and
services to our clients. We launched REX, our first Internet service during the
second quarter of 1997. Using the Internet, REX consolidates communication and
information from all participating custodians, enabling our clients to quickly
and easily reconcile transactions and holdings with a click of the mouse. Our
second Internet-based product, Advent Browser Reporting, was introduced in 1998.
Advent Browser Reporting is a reporting component of Advent Office, which
enables users to access Advent Office information through a web browser. In
1999, we introduced Advent Corporate Actions, an enterprise-wide notification
service that automates and simplifies the process of tracking corporate actions
such as mergers, spin-offs and bankruptcies. We announced several Internet-based
products and services during 2000 including: Advent Outsource, MyAdvent and
Advent TrustedNetwork. Advent Outsource brings our portfolio reporting solution
to investment firms in an ASP model. MyAdvent is a browser-based portal to the
Advent Office suite. Advent TrustedNetwork enables financial institutions to
deliver cross-institutional, consolidated views of individual investor
portfolios across the Internet.
Additionally we have added Distance Learning and Advent Connection. Distance
Learning is Advent's online interactive classroom offering education services
via the Internet. Now our clients can participate in an interactive education
session with a certified Advent instructor from their office or home. Advent
Connection is our client-only website which provides technical information,
support, educational offerings, discussion groups and a software center that
allows our clients to download free client reports.
From time to time, as we begin the development of new products and services,
including our Internet Initiative, we plan to continue to enter into development
agreements with information providers, clients, or other companies in order to
accelerate the delivery of new products and services.
Alliance Program
Our Alliance Program was launched in May 1998 and is designed to benefit both
our clients and our partners. The program provides a formal process through
which partners can develop, promote, and sell their products, services, and
solutions in conjunction with our suite of applications. Our Alliance Program
was created to further extend our breadth of product and service offerings.
Professional Services
Professional services consist of consulting, implementation management,
integration management, custom report writing, and training. To ensure a
successful product implementation, consultants assist clients with the initial
installation of a system, assist in the conversion of the client's historical
data and provide ongoing training and education. Consulting services may be
required for as little as two days for small systems or for up to many weeks for
large implementations. We believe that consulting services facilitate a client's
early success with our products, strengthen the relationship with the client and
generate valuable feedback for us.
Implementation management provides a single point-of-contact who will work
closely with our client's project team to plan the implementation, to optimize
the use of our products, to coordinate Advent resources, to advocate on their
behalf, and to minimize schedule delays and project risks. Additionally,
implementation managers provide documentation for the implementation from
planning through production.
Integration management provides services to clients with more complex needs.
Integration managers work with clients to integrate their systems and workflows
with our products during implementation. The services include: development of
custom interfaces from back-office systems to our Axys and Moxy products,
configuration and management of large volumes of data, and strategies for
deployment of our products for distributed sites.
We provide our clients with custom report writing services that enable clients
to tailor end-user reports to their own specifications. We also provide training
sessions to our clients at various sites across the country. Additionally, we
host semi-annual conferences in the United States, as well as Australasian and
European conferences, that provide product information and user workshops for
our clients.
Clients
Our clients vary significantly in size and assets under management and include
investment advisors, brokerage firms, banks, hedge funds, corporations, public
funds, universities and non-profit organizations. At present, we have licensed
products to over 6,000 institutions in 45 countries for use by more than 60,000
concurrent users.
Sales and Marketing
Sales
We license and sell our products and services primarily through a direct sales
organization comprised of field sales and telesales representatives. Our field
sales force is organized by geographic region and is primarily responsible for
selling our suite of products to mid-sized and large investment management
organizations. We have sales offices in San Francisco, California, New York, New
York, Cambridge, Massachusetts, Sydney, Australia and Melbourne, Australia. Our
telesales organization is primarily focused on selling our products to existing
Axys clients and small and mid-sized investment management organizations. Our
telesales representatives are located in San Francisco, California, and New
York, New York. Our sales force is supported by extensive, ongoing product and
sales training.
Marketing
Our marketing department is responsible for assessing market opportunities,
product planning and management and specific sales support. In addition to its
traditional marketing functions, our marketing organization is actively involved
in a process called "Market Validation." Market Validation uses a system of
interaction with and input from potential and existing clients, product
development, sales and client services and support departments to define the
scope, features and functionality of new products and product upgrades. In
addition, our product managers are responsible for all phases of a product life
cycle from product development through product introduction and beyond. Our
marketing department is also responsible for corporate marketing, including
generating client leads, targeted direct mail campaigns, seminars, advertising,
trade shows and conferences and public relations efforts and also provides the
sales force with appropriate written and electronic materials to use during the
sales process.
Product Development
In recent years, we have substantially increased our product development
expenditures in order to accelerate the rate of new product introductions,
incorporate new technologies and sustain the quality of our products. In 2000,
1999, and 1998, our product development expenditures were approximately $21.6
million, $16.8 million, and $12.6 million, respectively. Our product development
activities include the identification and validation of product specifications
as well as engineering, quality assurance and documentation.
Our new products and product upgrades require varying degrees of development
time, depending upon the complexity of the accounting requirements and
securities regulations which they are intended to address, as well as the number
and type of features incorporated. To date, we have primarily relied upon the
internal development of our products. We have in the past acquired, and may
again in the future acquire, additional technologies or products from third
parties. We intend to continue to support industry standard operating
environments, client/server architectures and network protocols.
Competition
The market for investment management software is segmented by the relative
size of the organizations that manage investment portfolios. The market in each
segment is intensely competitive and highly fragmented, subject to rapid change
and highly sensitive to new product introductions and marketing efforts by
industry participants. Our competitors include providers of software and related
services as well as providers of timeshare services. 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 such as Advent. With respect to
the market for our portfolio accounting products, we currently compete primarily
with Financial Models Company, Inc., Shaw Data, a division of SunGard Data
Systems, Inc., Thomson Financial, a division of The Thomson Corporation, and
with a number of other smaller companies. We believe that the principal
competitive factors affecting our market include product performance and
functionality, ease of use, scalability, ability to integrate external data
sources, product and company reputation, client service and support and price.
We may not compete successfully against current and future competitors, and
competitive pressures could result in price reductions, reduced operating
margins or the loss of market share.
Intellectual Property and Other Proprietary Rights
Our success is dependent in part on our ability to protect our proprietary
technology. We rely on a combination of copyright and trademark laws, trade
secrets, software security measures, confidentiality agreements and license
agreements to establish and protect our proprietary rights and our software. 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. 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. Furthermore,
confidentiality agreements between us and our employees or any license
agreements with our clients may not provide meaningful protection of our
proprietary information in the event of any unauthorized use or disclosure of
it. In addition, the laws of certain countries do not protect our proprietary
rights to the same extent, as do the laws of the United States. Accordingly, we
may not be able to protect our proprietary software in the United States or
abroad against unauthorized third party copying or use, which could
significantly harm our business.
Employees
As of March 1, 2001, we had approximately employees 701 on a full-time basis,
including in 94 sales, 123 in professional services, 41 in marketing, 206 in
product development, 130 in client services and support and 107 in finance,
administration, operations and general management. We believe that we maintain
competitive compensation, benefits, equity participation and work environment
policies to assist in attracting and retaining qualified personnel. Our success
depends to a significant extent upon the continued contributions of its senior
management and other key personnel, many of who would be difficult to replace.
The loss of the service of one or more senior managers or other employees could
have a material adverse effect upon our business, operating results and
financial condition. None of our employees are represented by a labor union. We
have not experienced any work stoppages and we believe our employee relations
are good.
Item 2. PROPERTIES
Our principal executive offices are located in San Francisco, California where
we lease approximately 59,000 square feet under a lease that expires in 2008
with a five-year extension option; approximately 32,000 square feet under a
lease that expires in 2004 with a five-year extension option; approximately
18,400 square feet under a lease that expires in 2005 with a five-year extension
option; and approximately 60,000 square feet under a lease that expires in 2011
with two consecutive five-year extension options. We lease two separate offices
in New York; approximately 30,100 square feet under a lease that expires in 2010
with a five-year extension option and approximately 29,000 square feet under a
lease that expires in 2008 with a five-year extension option. We also lease
space (typically less than 10,000 square feet) in various geographic locations
in New Jersey, Massachusetts, Melbourne, Australia, and Sydney, Australia
primarily for sales and support personnel. We believe that these facilities are
adequate for our near-term needs and that suitable additional or alternative
space will be available as needed.
Item 3. 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.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
None.
PART I
Executive Officers of the Registrant
The following sets forth certain information regarding the executive officers
of Advent as of March 8, 2001:
Name Age Position
- ------------------------ --- --------------------------------
Stephanie G. DiMarco 43 Chairman of the Board
Peter M. Caswell 44 President and Chief Executive Officer
Lily S. Chang 52 Executive Vice President and
Chief Technology Officer
Collin A. Cohen 37 Executive Vice President, Corporate\
and New Business Development
Irv H. Lichtenwald 45 Executive Vice President, CFO and
Secretary
Armistead D. Puryear 54 Senior Vice President, Sales
Ms. DiMarco founded Advent in June 1983. She became Chairman of the Board
in November 1995. In addition, she served as President until April 1997 and
Chief Executive Officer until November 1999. Ms. DiMarco holds a B.S. in
Business Administration from the University of California at Berkeley.
Mr. Caswell joined Advent in December 1993 as Vice President, Sales and
Professional Services. In 1996, Mr. Caswell took on responsibility for our
marketing efforts and was promoted to Senior Vice President. In April 1997, Mr.
Caswell became President and Chief Operating Officer. In November 1999, Mr.
Caswell was promoted to President, Chief Executive Officer, and member of the
Board of Directors. Prior to joining Advent, Mr. Caswell held various management
positions, including Vice President and General Manager, Western Region, with
Dun & Bradstreet Software Services, Inc. and its predecessor, Management Science
America, Inc., a supplier of computer software for finance, marketing,
manufacturing and human resource functions. Mr. Caswell holds a diploma in
Management Studies (M.B.A. equivalent) and a Higher National Diploma in
Agriculture (B.S. equivalent) from Seale Hayne College in England.
Ms. Chang joined Advent in May 1993 as Vice President, Technology. In April
1997, Ms. Chang was promoted to Executive Vice President, Technology and was
also named Chief Technology Officer. From July 1989 to May 1993, Ms. Chang held
various positions, including Vice President, Strategic Accounts and Vice
President of Oracle Financial Applications, with Oracle Corporation, a software
licensing and consulting business. Ms. Chang holds a B.S. in Biochemistry from
Taiwan University.
Mr. Cohen joined Advent in March 1998 responsible for Corporate and New
Business Development. In January 2001, Mr. Cohen was promoted to Executive Vice
President. Prior to joining Advent, Mr. Cohen was a Principal at American
Industrial Partners, a buyout fund managing approximately $800 million in
equity. Mr. Cohen also was a Senior Manager at Bain & Company, a leading
international management consulting firm. Mr. Cohen holds an M.B.A. from Harvard
University and a B.A. from Stanford University.
Mr. Lichtenwald joined Advent in March 1995 as Chief Financial Officer.
From February 1984 to March 1995, Mr. Lichtenwald served as Chief Financial
Officer of Trinzic Corporation, a computer software developer, and its
predecessor Aion Corporation. From February 1982 to February 1984, he served as
controller of Visicorp, a computer software developer. Mr. Lichtenwald holds an
M.B.A. from the University of Chicago and a B.B.A. from Saginaw Valley State
College. Mr. Lichtenwald is a Certified Public Accountant.
Mr. Puryear joined Advent in December 1994 as Director of Client Sales. In
July 1998, Mr. Puryear was promoted to Senior Vice President, Sales with
responsibility for sales to Advent's client base, new business development and
telemarketing. Before joining Advent, he was with Oracle Corporation and was
responsible for their Western Sales Telesales organization. Mr. Puryear has 14
years of software and technology experience as well as two years in the
investment management industry with Paine Webber, Inc. Prior to his business
career he was a pilot in the U.S. Air Force and received a Bachelor of Science
degree from the U.S. Air Force Academy.
PART II
With the exception of the information incorporated by reference to the 2000
Annual Report to Stockholders in Part II of this Form 10-K, Advent's 2000 Annual
Report to Stockholders is not deemed to be filed as part of this Form 10-K.
Item 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Advent had approximately 67 stockholders of record at March 8, 2001. Because
many of our shares of Common Stock are held by brokers and other institutions on
behalf of stockholders, we are unable to estimate the total number of
stockholders represented by these record holders. Other information required by
this Item is incorporated by reference to the sections entitled "Selected
Financial Data - Price Range of Common Stock" and "Corporate Information - Stock
Information" in Advent's 2000 Annual Report to Stockholders.
Item 6. SELECTED FINANCIAL DATA
Other information required by this Item is incorporated by reference to the
sections entitled "Selected Financial Data - Selected Annual Data" and "Selected
Financial Data - Selected Quarterly Data" in Advent's 2000 Annual Report to
Stockholders.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is incorporated by reference to the
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in Advent's 2000 Annual Report to Stockholders.
Risk Factors
Our Operating Results Fluctuate Significantly And We May Not Be Able To Maintain
Our Existing 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 transactions of this size 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 site licenses are increasing as a portion of our net revenues, the timing
of such licenses could cause additional variability in our quarterly operating
results. We typically ship our software products shortly after receipt of a
signed license agreement and initial payment and, consequently, 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 generally realized lower revenues from license fees in the first
quarter of the year than in the last quarter of the prior year. We believe that
this has been due primarily to the concentration by some clients of larger
capital purchases in the fourth quarter of the calendar year and their lower
purchasing activity during the subsequent first quarter. We believe our annual
incentive compensation plans, which tend to produce increased year-end sales
activity, compound this factor. Furthermore, 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.
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 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 acceptance process because 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
acceptance procedures. 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. 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.
The implementation of our solutions involves a significant commitment of
resources by customers and by us over an extended period of time. Also, the size
and complexity of any particular implementation project can cause delays in the
sales cycle that precedes it. Any such delays could seriously harm our business.
We Depend Heavily On Our Product, Axys.
In 2000, 1999 and 1998, we derived a substantial majority of our net revenues
from the licensing of Axys and related products and services. In addition, many
of our other products, 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 Are Continuing to Expand Our Internet Initiative.
To take advantage of the Internet, we are continuing to expand an Internet
Initiative under which we are developing services, both announced and
unannounced, to bring Internet-based products and services to clients. The first
of these services, Rex, was launched during the second quarter of 1997. The
second service, Advent Browser Reporting, was launched in the third quarter of
1998. During 2000 we announced a number of new products and services which take
advantage of Internet technology, including Advent TrustedNetwork, MyAdvent,
eActions(TM) (through our Hub Data subsidiary), Internet-enabled enhancements to
Gifts for Windows (through our MicroEdge subsidiary) and Advent Outsource, a
service that delivers Advent Office functionality through an ASP model. As we
develop new products and services under our Internet Initiative, we have and
will continue to enter into development agreements with information providers,
clients or other companies in order to accelerate the delivery of new products
and services. We may not be successful in marketing our Internet services or in
developing other Internet services. 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
Electronic Commerce.
A significant barrier to electronic commerce and communications is the secure
transmission of confidential information over public networks. 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 we do not prevent them
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 our Internet Initiative. These areas are 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 generate significant revenues in these areas. The
success of our Internet Initiative, in particular, 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 also expect that our gross and operating margins may fluctuate from period
to period as we continue to introduce new recurring revenue products, expand our
professional services organization and associated revenue, continue to hire
additional personnel and increase other expenses to support our business. We
plan our expense levels based primarily on forecasted revenue levels. 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.
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. Any resulting decline in demand for our products could have a material
adverse effect on 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:
o reductions in capital expenditures by large customers;
o poor performance of major financial markets; and
o increasing competition.
The above factors may, in turn, give rise to a number of market trends that may
slow revenue growth across the industry, including:
o longer sales cycles;
o deferral or delay of information technology projects and generally reduced
expenditures for software and related services; and
o increased price competition.
Although we do not believe these factors have impacted our revenues to date,
if the current economic slowdown continues the presence of these factors in the
market for large management software systems could adversely affect our business
and results of operations.
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 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. 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. We have established a subsidiary located in Australia to market
and license 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 order to further expand our
international operations, we would 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 investments in establishing 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:
o The impact of recessions in economies outside the United States;
o Greater difficulty in accounts receivable collection and longer collection
periods;
o Unexpected changes in regulatory requirements;
o Difficulties in successfully adapting our products to the language, regulatory
and technology standards of other countries;
o Difficulties and costs of staffing and managing foreign operations;
o Reduced protection for intellectual property rights in some countries;
o Potentially adverse tax consequences; and
o Political and economic instability.
Our international revenues are generally denominated in U.S. dollars, with
the exception of our subsidiary, Advent Australia Pty., Ltd. ("Advent
Australia"). The revenues, expenses, assets and liabilities of our subsidiary,
Advent Australia, are primarily denominated in Australian dollars. 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
Advent Australia's revenues, expenses, assets and liabilities. 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 Face Risks Associated with Potential Acquisitions or Divestitures.
We may acquire or make investments in complementary companies, products or
technologies. In addition, we continually evaluate the performance of all our
products and product lines and may sell or discontinue current products or
product lines. If we buy a company, we could have difficulty in integrating that
company's personnel and operations. In addition, the key personnel of the
acquired company may decide not to work for us. If we make other types of
acquisitions, we could have difficulty in assimilating the acquired technology
or products into our operations. These difficulties could disrupt our ongoing
business, distract our management and employees and increase our expenses.
Furthermore, we may have to incur debt, write-off software development costs or
other assets, incur severance liabilities, amortize expenses related to goodwill
and other intangible assets or issue equity securities to pay for any future
acquisitions. The issuance of equity securities could dilute our existing
stockholders' ownership.
In addition, potential acquisition candidates targeted by us may not have
audited financial statements, detailed financial information or any degree of
internal controls. There can be no assurance that an audit subsequent to any
successful completion of an acquisition will not reveal matters of significance,
including issues regarding revenues, expenses, liabilities, contingent or
otherwise, technology, products, services or intellectual property. There can be
no assurance that we would be successful in overcoming these or any other
significant risks encountered and the failure to do so could have a material
adverse effect upon our business, operating results and financial condition.
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). Additionally, our continued success depends, in part, on our
ability to identify, attract, motivate and retain qualified technical, and 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.
Business Interruptions Could Adversely Affect Our Business.
Our operations are vulnerable to interruption by fire, earthquake, power
loss, telecommunications failure and other events beyond our control. Our
facilities in California are currently subject to electrical blackouts as a
consequence of a shortage of available electrical power. Although we do have a
backup generator, which we would be able to utilize to maintain critical
functionalities, in the event these blackouts continue or increase in severity,
they could disrupt the operations of our affected facilities. In connection with
the shortage of available power, prices for electricity have risen dramatically,
and will likely continue to increase for the foreseeable future. Such price
changes will increase our operating costs, which could in turn hurt our
profitability.
Item 7a. 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 formation of Advent
Australia whose revenues and capital spending are transacted in Australian
dollars we have greater exposure to foreign currency fluctuations. Results of
operations from Advent Australia 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.
Estimated Fair Value at December 31,
2001 2002 Thereafter Total
Federal Instruments $ 11,350 $ 7,000 $ - $ 18,350
Weighted Average Interest Rate 6.63 6.90 6.73
Commercial Paper & Short-term obligations 59,375 59,375
Weighted Average Interest Rate 6.00 6.00
Corporate Notes & Bonds 584 584
Weighted Average Interest Rate 6.13 6.13
Municipal Notes & Bonds 42,575 10,450 53,025
Weighted Average Interest Rate 6.61 5.60 6.41
--------------------------------------------------------------
Total Portfolio, excluding equity securities $ 113,884 $ 17,450 $ - $ 131,334
At December 31, 2000, cash, cash equivalents and short-term marketable
securities totaled approximately $152 million, which is comprised of the $131
million in our investment portfolio presented above and $21 million in cash and
cash equivalents.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(1) Financial Statements.
The following financial statements of Advent and the Report of
Independent Accountants are incorporated by reference to page 34
through 51 of Advent's 2000 Annual Report to Stockholders:
Consolidated Balance Sheets - December 31, 2000 and 1999
Consolidated Statements of Income and Comprehensive Income -
Years Ended December 31, 2000, 1999 and 1998
Consolidated Statements of Stockholders' Equity - Years Ended
December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows - Years Ended
December 31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
Report of Independent Accountants
(2) Financial Statement Schedule.
The following financial statement schedule of Advent for the
years ended December 31, 2000, 1999 and 1998 is filed as part of
this Form 10-K and should be read in conjunction with Advent's
Consolidated Financial Statements.
Report of Independent Accountants S-1
Schedule II - Valuation and Qualifying Accounts S-2
Schedules not listed above have been omitted because they are
not applicable or are not required or because the required
information is included in the Consolidated Financial Statements or
Notes thereto.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Certain information required by Part III is omitted from this Form 10-K in
that the Registrant will file a definitive proxy statement pursuant to
Regulation 14A of the Securities Exchange Act of 1934, as amended, ("Proxy
Statement") not later than 120 days after the end of the fiscal year covered by
this Form 10-K and certain information included therein is incorporated herein
by reference. Only those sections of the Proxy Statement that specifically
address the items set forth herein are incorporated by reference and such
incorporation does not include, specifically, the Performance Graph included in
such Proxy Statement.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item relating to our directors and nominees
and disclosure relating to compliance with Section 16(a) of the Securities
Exchange Act of 1934 ("Exchange Act") is included under the captions "Election
of Directors" and "Compliance with Section 16(a) of the Exchange Act" in our
Proxy Statement for the 2001 Annual Meeting of Stockholders and is incorporated
by reference. The information required by this item relating to our executive
officers and key employees is included under the caption "Executive Officers of
the Registrant" under Item 4 in Part I of this Form 10-K.
Item 11. EXECUTIVE COMPENSATION
Information required by this Item is incorporated by reference to our Proxy
Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this Item is incorporated by reference to our Proxy
Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item is incorporated by reference to our Proxy
Statement.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Form 10-K:
1. Consolidated Financial Statements required to be filed by
Item 8 of Form 10-K. See the list of Financial Statements
contained in Item 8 of this Report.
2. Financial Statement Schedule required to be filed by Item
8 of Form 10-K. See the list of Financial Statement
Schedule contained in Item 8 of this Report.
3. Exhibits.
The Exhibits listed on the accompanying Index to Exhibits immediately
following the financial statement schedules are filed as part of, or
incorporated by reference into, this Form 10-K.
Exhibit
Number Description of Document
3.1 Second Amended and Restated Certificate of Incorporation of Registrant.
3.2*** Amended and Restated Bylaws of Registrant.
4.1+ Specimen Common Stock Certificate of Registrant.
10.1+ Form of Indemnification Agreement for Executive Officers and Directors.
10.2++ 1992 Stock Plan, as amended.
10.3+ 1993 Profit Sharing & Employee Savings Plan, as amended.
10.4+ 1995 Employee Stock Purchase Plan.
10.5+++ 1995 Director Option Plan.
10.6+ Full Service Office Lease dated April 14, 1992,
as amended, between Brannan Street Properties
and Advent for facilities located at 301 Brannan
in San Francisco, California.
10.7+ Severance Agreement between Advent and Peter M. Caswell dated December
10, 1993.
10.8+* Agreement between Advent and Interactive Data
Corporation dated January 1, 1995.
10.9** Office Lease dated August 1, 1998, between SOMA Partners, L.P. and
Advent for facilities located at 301 Brannan in San Francisco,
California.
10.10*** Office Lease dated July 22, 1999, between 405
Lexington, L.L.C. and Advent for facilities
located at 666 Third Avenue in New York, New
York.
13.1 Selected Portions of Advent Software, Inc.'s 2000 Annual Report to
Stockholders.
21.1 Subsidiaries of Advent.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
24.1 Power of Attorney (included on page 18 of this Form 10-K).
- --------------
+ Incorporated by reference to the exhibit filed with
Advent's registration statement filed on Form SB-2
(commission file number 33-97912-LA), declared
effective on November 15, 1995
++ Incorporated by reference to the exhibit filed with
Advent's registration statement filed on Form S-8
on May 28, 1999.
+++ Incorporated by reference to the exhibit filed with
Advent's registration statement filed on Form S-8
on August 11, 2000.
* Confidential treatment requested as to certain portions of this
exhibit.
** Incorporated by reference to Advent's Annual Report on Form 10-K for
the year ended December 31, 1998.
*** Incorporated by reference to Advent's Annual Report
on Form 10-K for the year ended December 31, 1999.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on this 12th day of March, 2001.
ADVENT SOFTWARE, INC.
By: /s/ Peter M. Caswell
------------------------
Peter M. Caswell
Chief Executive Officer,
President and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Peter M. Caswell and Irv H. Lichtenwald, jointly
and severally, his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Form 10-K, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
or her substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934 this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- ------------------------ ----------------------------------- -----------------
/s/ Peter M. Caswell Chief Executive Officer, President March 12, 2001
- --------------------
Peter M. Caswell and Director
(Principal Executive Officer)
/s/ Irv H. Lichtenwald Executive Vice President, Chief March 12, 2001
- ----------------------
Irv H. Lichtenwald Financial Officer and Secretary
(Principal Financial Officer)
/s/ Patricia Voll Vice President, Finance March 12, 2001
- ------------------
Patricia Voll (Principal Accounting Officer)
/s/ Stephanie G. DiMarco Chairman of the Board and March 12, 2001
- ------------------------
Stephanie G. DiMarco Director
/s/ Frank H. Robinson Director March 12, 2001
- ---------------------
Frank H. Robinson
/s/ Wendell G. Van Auken Director March 12, 2001
- ------------------------
Wendell G. Van Auken
/s/ William F. Zuendt Director March 12, 2001
- ---------------------
William F. Zuendt
/s/ Monte Zweben Director March 12, 2001
- ----------------
Monte Zweben
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Advent Software, Inc.
Our audits of the consolidated financial statements referred to in our report
dated January 19, 2001 appearing on page 51 of the 2000 Annual Report to
Shareholders of Advent Software, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the financial statement schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
San Francisco, California
January 19, 2001, except for the matters discussed in Note 9, as to which the
date is March 5, 2001.
Schedule II
ADVENT SOFTWARE, INC
VALUATION AND QUALIFYING ACCOUNTS
for the years ended December 31, 1998, 1999, and 2000
Additions
Balance at Charged Charged Balance at
Beginning To to Other End of
Description of Period Expense Accounts Deductions Period
- ---------------------------------------- --------------- ------------- ------------ -------------- -------------
Allowance for doubtful accounts:
1998 $ 265,000 $ 471,000 -- $ 374,000 $ 362,000
1999 $ 362,000 $1,130,000 -- $ 776,000 $ 716,000
2000 $ 716,000 $1,154,000 -- $ 907,000 $ 963,000
Additions
Balance at Charged Charged Balance at
Beginning To to Other End of
Description of Period Expense Accounts Deductions Period
- ---------------------------------------- --------------- ------------- ------------ ------------- -------------
Allowance for returns:
1998 $ 222,000 $1,756,000 -- $1,421,000 $ 557,000
1999 $ 557,000 $1,890,000 -- $1,550,000 $ 897,000
2000 $ 897,000 $1,493,000 -- $1,210,000 $1,180,000