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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-K

Commission file number: 0-26994

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

600 Townsend Street, San Francisco, California 94103
(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 Act:

Securities registered pursuant to Section 12(g) of the Act: None

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         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o    No ý

         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 (the "Exchange Act") during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o    No o

         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 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. ý

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "small reporting company" in Rule 12b-2 of the Exchange Act.

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

         The number of shares of the registrant's common stock outstanding as of June 30, 2009 was 25,437,431. The aggregate market value of the registrant's common stock held by non-affiliates, based upon the closing price on June 30, 2009, as reported on the NASDAQ National Market System, was approximately $381 million. 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. As of February 28, 2010, there were 25,876,754 shares of the registrant's common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Registrants definitive Proxy Statement for the Annual Meeting of Stockholders to be held June 2, 2010 are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part herein.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

PART I

Item 1.    Business

Overview

        Advent Software, Inc. was founded and incorporated in 1983 in California and reincorporated in Delaware in November 1995. We offer software and services that automate work flows and data across investment management organizations, as well as the information flows between an investment management organization and external parties. Our products are intended to increase operational efficiency, improve the accuracy of client information and enable better decision-making. Each solution focuses on specific mission-critical functions of the investment management organization and is tailored to meet the needs of the particular client, as determined by size, assets under management and complexity of the investment process.

        Historically, our business was organized into two reportable segments, Advent Investment Management ("AIM") and MicroEdge. Advent Investment Management is our core business and derives revenues from the development, marketing and sale of software products, hosting services, data interfaces and related maintenance and services that automate, integrate and support certain mission-critical functions of investment management organizations primarily in the United States, Europe, Asia, the Middle East and Africa. MicroEdge derived revenues from the sale of software and services for grant management, matching gifts and volunteer tracking for the grantmaking community primarily in the United States and United Kingdom. In October 2009, we completed the sale of MicroEdge and we now report a single operating segment, AIM. The results of MicroEdge have been reclassified as a discontinued operation for all periods presented. Unless otherwise noted, discussion in this document pertains to our continuing operations.

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        Our principal executive offices are located at 600 Townsend Street, San Francisco, California 94103, and our telephone number is (415) 543-7696. Our internet address is www.advent.com. On our Investor Relations web site, which is accessible through www.advent.com, we post the following filings as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission: our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any amendments to those reports. All such filings on our Investor Relations web site are available free of charge. Information contained or referenced on our website is not incorporated by reference in and does not form a part of this Annual Report on Form 10-K. The SEC maintains an internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The public may also read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington DC, 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

        Advent's common stock (ticker symbol: ADVS) has traded on the NASDAQ Stock Market since its initial public offering on November 15, 1995. Our fiscal year ends on December 31^st.

Clients

        Advent's core clients are investment management institutions and service providers that manage, advise and perform recordkeeping functions on financial assets. Examples of these institutions include global and US-based asset managers, registered investment advisors, prime brokers, fund administrators, hedge funds, family offices, broker dealers, foundations, endowments, fund of funds and wealth managers. We have a diverse client base ranging from small clients to some of the largest institutional clients in the world. In fiscal 2009, 2008 and 2007, no single customer accounted for more than 10% of our total net revenues. Geographically, the US continues to represent our primary market, with international sales representing 13%, 14% and 14% of total net revenues in 2009, 2008 and 2007, respectively.

Our Industry

        Over the past decade, the investment management industry has transformed dramatically. These changes include: a significant increase in cross border cash and other asset flows and global investment activity; the evolution and maturation of electronic markets; the proliferation of research information from a myriad of sources; the increase of assets managed in alternative strategies; and the creation of increasingly complex securities instruments used by hedge funds and in alternative strategies. All of these factors have created opportunities over the years for our investment manager clients, but they have also resulted in substantially increased complexity in their operations and processes. We believe that investment managers have clear needs that translate into demand for Advent solutions: portfolio accounting and analysis; trade order management and post-trade processing; research management; account management; and custodial reconciliation.

Recent Market Trends

        In the fall of 2008, dislocation and decreasing confidence in the credit markets drove global equity markets into significant decline. Although many markets recovered in 2009, the impact on investment management organizations in 2009 was twofold: first, the decline in market valuations in 2008 impacted the solvency, size and buying power of some of our clients; and second, these firms face increasing pressure from regulators and investors to provide operational transparency. In addition to market trends, a series of high-profile cases of investment fraud have emphasized the importance of checks and

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balances between investment management companies and their investors' custodial firms. We anticipate the following trends to continue, some of which will drive demand for Advent solutions:

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Ongoing volatility in the financial markets and turmoil in the credit markets;



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Increased scrutiny from regulators resulting in demand from institutional investors for more sophisticated reporting and operational transparency;



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Rising number of wirehouse advisors exiting large brokerages due to the recent market troubles;



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Emergence of a "multi-prime" brokerage model that helps small and midsize hedge funds diversify their counterparty risk through multiple prime relationships;



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Increasing demand for software delivery flexibility and a Software-as-a-Service (SaaS) model; and



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Continued growth of investment management firms and sovereign wealth funds in emerging markets, including the Middle East and Asia.

        In this climate, the need to operate more efficiently while enhancing investor confidence is driving investment management organizations to continue to leverage Advent to automate and integrate their mission-critical and labor-intensive functions, including: (i) investment decision support; (ii) trade order management and compliance; (iii) portfolio accounting, performance measurement and report generation; (iv) client relationship management; (v) straight-through-processing that includes connectivity and data integration; and (vi) research management. Investment management organizations historically have relied on internally-developed systems, third-party systems, outsourced services or spreadsheet-based systems to manage these information flows.

        During 2009, many investment managers' revenues decreased as a result of decreases in their assets under management and some hedge funds and other types of clients have gone out of business. While we are not immune to downturns in technology spending, we believe we are well-positioned to maintain our competitive position in the longer term for the following reasons:

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Our portfolio accounting, trade order management, and compliance software is mission-critical to our customers;



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Our technology can be utilized to increase operational efficiency;



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We offer a wide range of deployment options to suit clients of any size and strategy;



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As a market leader in investment management technology, customers who spend money will attempt to minimize risk and therefore, favor our stability, reliability and scalability;



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A more regulated, compliance-oriented industry will drive an increased need for our systems; and



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Our recurring revenue model and large customer base will continue to provide longer term stability.

        Particularly in difficult market conditions, we believe that the need to streamline operations increases the value of Advent's ability to offer an integrated, proven, and cost-effective suite to clients and prospects seeking operational efficiency and an established business partner. We believe our recent financial results validate the strength and stability of our business and the attractiveness of our product portfolio to our customers. In addition, we saw an improved demand environment during the second half of 2009 from prospects and customers across all the markets we serve. As such, we expect an improved demand environment for 2010 and expect to grow revenues by 5% to 8% in 2010. As the current economic situation evolves, we will continue to evaluate the impact of this environment on our business and we will remain focused on delivering solutions for our customers.

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Seasonality

        We experience seasonality in our license bookings. We believe that this seasonality in our bookings results primarily from customer budgeting cycles and expect this seasonality to continue in the future. The fourth quarter of the year typically has more licensing activity. This can result in term license bookings and perpetual license fee revenue being the highest in the fourth quarter, followed by lower bookings and perpetual license revenue in the first quarter of the following year.

        We also experience seasonality in our operating cash flows and expect this seasonality to continue in the future. We experience lower operating cash flows in the first quarter of the year as we make payments of our year-end liabilities including payables, bonuses, commissions and payroll taxes. Conversely, we experience relatively stronger operating cash flows in the fourth quarter of the year since we traditionally have more licensing activity in the fourth quarter of the year and bill annually at the anniversary of the contract signing date, resulting in higher collections during the fourth quarter.

        For additional information regarding factors that affect the timing of the recognition of software license revenue, see "Management's Discussion and Analysis of Financial Condition and Results of Operations / Critical Accounting Policies and Estimates / Revenue Recognition."

Strategy

Mission

        Our mission is to strengthen and grow our business as a leading provider of mission-critical software and services for the investment management industry.

        We plan to strengthen and grow our core business by:

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Expanding our solution "footprint" to help our customers and prospects leverage the benefits of technology across more areas of the investment management process, including research management, compliance, performance attribution, analysis, reconciliation and billing;



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Enhancing our core portfolio accounting and trade order management applications to capitalize on new market opportunities;



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Expanding our international presence;



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Continuing to migrate our largest and most complex Axys customers to Advent Portfolio Exchange ("APX") or Geneva;



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Continuing our rapid product refresh cycle; and



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Delivering high quality services and support as well as flexible delivery models that ensure our customers' satisfaction and success.

Customer Focus

        At December 31, 2009, we served approximately 4,700 customers. The needs of our customers, and the investment management industry as a whole, continue to evolve, as noted above. We are committed to making the required investments in product development to continue delivering mission-critical solutions to our customers as their needs change. We believe our strategy and customer focus are driving increasing market acceptance for our products. We signed 72 new APX clients and 38 new Geneva clients during fiscal 2009.

        Our customers use our products for an average of over 10 years. Although the current environment has created pressure on our clients to decrease their information technology budgets, which has impacted our customer renewal rates in 2009, we experienced continued loyalty from our customers. In spite of the challenges faced by the investment management industry in 2009, our initially

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disclosed renewal rates, which we report one quarter in arrears, showed improvement during latter half of 2009.

Business Model

        During 2009, we substantially completed the transition of our business to a predominately term license model. Under this model, customers purchase a license to use our software for a fixed period of time and we recognize the license revenue ratably over the length of the contract. Conversely, under a perpetual pricing model, customers purchase a license to use our software indefinitely and we recognize all license revenue at the time of sale. Although the term license model has the effect of lowering license revenues compared to a perpetual model in its early periods, we believe the term license business model increases the total potential value of our customer relationships because our customer focus, the stability of our customer base and the market acceptance of our products results in a long customer relationship. We believe that a term license business model ultimately provides more predictable revenue streams.

        We continue to focus on growing our recurring revenues. Total recurring revenues, which we define as term license, perpetual maintenance, and other recurring revenues, have increased from 79% of total net revenues in 2007 to 80% in 2008 and 86% in 2009, and we expect them to increase in future years. These recurring revenue sources provide us with increased ability to make strategic decisions to invest in our business while remaining confident that our operating results will be reasonably predictable.

        In 2010, we plan to continue to invest in client support, product development, and sales and marketing. Our investment in client support will enable us to continue to improve the services we provide to our clients in their day-to-day use of our software and build a scalable organization to support our largest and most complex customers. Our investments in product development are designed to enable us to develop new products as well as maintain our rapid pace of enhancements and upgrades to our existing products. Our investment in sales and marketing will help us expand our international presence and capitalize on new market opportunities.

        Overall, despite the current economic environment and our intention to continually invest to support our growth, we plan to grow our operating margins as a percentage of revenues in 2010. In the longer term, we believe that our mission critical products, market leadership position and our reasonably predictable term license revenue model will enable us to consistently grow operating margins.

Products and Services

        Advent products are intended to automate those mission-critical functions in the investment management process that will increase operational efficiency, facilitate timely regulatory compliance, improve the accuracy of client reporting and enable better decision-making. Each product focuses on specific functions within an investment management organization and pricing, for the most part, is determined by size of the implementation and assets under management.

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        We offer solutions for customers in numerous markets, which include:

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Advent® for Asset Managers



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Advent® for Trusts, Private Client Services and Private Banking Organizations



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Advent® for Hedge Funds



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Advent® for Family Offices



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Advent® for Fund of Funds



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Advent® for Pensions and Endowments



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Advent® for Wealth Managers



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Advent® for Independent Advisors



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Advent® for Prime Brokers



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Advent® for Fund Administrators

        These solutions are comprised of various combinations of Advent software products, data integration tools and professional services all aimed at meeting our clients' critical business needs.

Software Products

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Geneva® is a global investment management platform designed to meet the real-time needs of global asset managers, hedge funds, prime brokers and fund administrators worldwide. Geneva integrates all phases of the investment management process—portfolio management, accounting and reporting, client investor management, and light trade capture and risk capabilities. It delivers the industry's only "main memory" database system, offering more accurate and flexible reporting, and eliminating batch processing and time-consuming error corrections. Geneva enables firms to grow into new markets, deliver greater operational efficiencies, enhance investor service, process high trade volumes across multiple securities, improve compliance and security, and lower operating costs and risks.



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Advent Portfolio Exchange® (APX) is a comprehensive portfolio management solution that integrates the front-office functions of prospecting, marketing, and customer relationship management with the back-office operations of portfolio accounting and reporting. This enterprise solution allows users across the firm to manage both institutional and high-net worth clients with a full range of instruments including domestic and international equities, mutual funds, fixed income, equity options and derivatives, and variable rate securities. With an integrated CRM, performance analytics reports and automated report packaging, APX delivers easy access to critical data and enables users to deliver superior client service without increasing operational costs or overhead. APX technology leverages a single SQL database to deliver client and portfolio data to operations, marketing and portfolio managers through a browser-based user interface.



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Axys® is a turnkey portfolio management and reporting system for small to mid-size investment management organizations. Axys provides investment professionals with broad portfolio accounting functionality on a variety of investment instruments, including equities, fixed income, mutual funds and cash. By using Axys, clients have a timely decision support tool with immediate access to portfolio holdings, asset allocation, realized and unrealized gains and losses, actual and projected income and other valuable data including sophisticated performance measurement and flexible reporting. In addition to a comprehensive set of standard reports, clients can easily generate fully customized reports with the assistance of Report Writer Pro which is included with the product.

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Tamale RMS® (Research Management Solution), which Advent added to its product suite with the October 2008 acquisition of Tamale, is a software solution that helps portfolio managers and analysts easily capture, access and share their research, in order to manage investment ideas more effectively. Tamale RMS creates a research workspace for portfolio managers and analysts that contains all of their research-related information, such as: notes, reports, financial models, contacts, calendar appointments and essential Web sites at their fingertips. It features an open, enabling platform that allows firms to build custom workflows to easily integrate both quantitative and qualitative information. Tamale RMS organizes information around the workflow of each investment professional and provides features that optimize the research process. In addition, custom reports and templates can be created easily to extend the value of Tamale RMS within research-driven investment management firms.



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Moxy® automates and streamlines the portfolio construction, trading and order management process for the investment management community. Moxy also provides Internet-ready electronic order routing based on the industry standard FIX messaging protocol so that users can route trades electronically to any FIX-compliant broker, crossing networks, and various dark pools of liquidity that supports the internet or other TCP/IP connection. Trades are executed, processed, settled and accounted for without manual intervention. Through its streamlined integration with Advent's industry-leading portfolio management platforms, Moxy enables true internal and external straight through processing (STP) through various post trade interfaces like OASYS for broker notification and brings together mission-critical functions across investment management organizations. Moxy is built on a new multi-tiered architecture that leverages MSFT SQL and .NET technology.



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Advent Rules Manager® is a tightly integrated solution that meets investment management firms' increasingly complex trading compliance and portfolio monitoring requirements. Advent Rules Manager is a rules-based system that enables firms to easily and accurately define their trading and portfolio policies, and automates their control and review. Automated record keeping and easy reporting save time and eliminate the cost of hiring additional resources. Firms can efficiently manage portfolios, trading, compliance workflow, and safeguard their client commitments. Putting policies into practice, firms strengthen their competitive advantages and are able to attract and retain institutional clients. Advent Rules Manager helps firms record, test and compare their compliance practices against their policies, demonstrating that their compliance program is managed proactively.



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Advent Revenue Center® provides asset managers with a solution that automates complex billing processes, from fee creation to accounts-receivable management. This solution integrates seamlessly with Advent's proven suite and not only reduces billing errors, but improves management's insight into the firm's revenue base. It has a rules-based billing structure approach that makes it extremely flexible in handling unique billing structures, supporting complex workflows, forecasting the effect of fee schedule modifications and generating both client and audit/management reporting. With its flexible rules-based architecture, firms can deliver superior customer service and increase profitably, even as their businesses grow in complexity. The product is built with SQL 2005, SQL Reporting Services and .NET technology.



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Advent Partner® is a single source solution for onshore and offshore investor accounting and servicing. It integrates with Axys, APX and Geneva. This product is specifically designed for hedge funds, family offices, fund administrators, and accounting firms that face the complex and time-consuming task of consistently and accurately accounting for and reporting on investor contributions and redemptions, capital gain/loss and income allocations, and management incentive fees. In addition, Advent Partner provides comprehensive economic and tax allocation reporting and streamlines the production of US K-1 partnership tax returns.

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Rex® enables reconciliation management. Rex is integrated with Axys and APX and is designed for firms that want to electronically reconcile information stored in Axys or APX against custodial information. Rex works in conjunction with Advent Custodial Data, which provides data from a firm's custodian(s).



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Advent® General Ledger Exchange (Advent® GLX) is an easy-to-use general ledger ("GL") interface, which enables clients to gain efficiencies through eliminating duplicate data entry. With Advent GLX, clients can import portfolio transactions and unrealized gains and losses from APX and Axys, translate portfolio data into GL journal entries, and export directly into their ledger systems.



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Qube® is designed to help securities professionals develop and improve client relationships by automating scheduling, tracking client communications and managing client data. Qube, whose functionality is included in APX, integrates with portfolio information in Axys and enables investment professionals to interactively screen client investment profiles and notes from conversations to identify appropriate candidates for various investment opportunities. Since APX provides a superior solution to meet our clients' needs, we have announced the end-of-product-life date for Qube. The product is no longer available for sale, and support will end in 2011.



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WealthLine® is a Web-based wealth management reporting platform providing tools for financial institutions to collaborate with their clients. WealthLine gives financial advisors a sophisticated, customizable, and cost-effective solution for furnishing personalized content and exceptional service to their clients. Advent has announced the end-of-product-life date for Wealthline. The product is no longer available for sale, and support will end in 2011.



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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 are in their own offices.



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Advent Warehouse® 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.

Outsourcing Services

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Advent OnDemand^sm delivers Advent's suite of investment solutions via the SaaS (software-as-a-service) model, with or without full business process outsourcing, which includes account aggregation, reconciliation and reference data management. Advent OnDemand comprises the offerings formerly known as Advent Back Office Service (ABOS) and Advent Wealth Service (AWS) as well as a new managed hosting delivery option, wherein Advent hosts the hardware and/or software for clients.

Data and Data Integration Services

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Advent® Custodial Data (ACD) enables firms to efficiently retrieve and reconcile accounts through a single, standard, Advent-supported solution. ACD uses direct-feed interfaces to consolidate account level information from more than 470 custodial sources for reconciliation and posting into Advent's portfolio management, accounting and reporting systems, APX, Geneva and Axys. With efficient reconciliation, firms can maintain accurate cash and securities balances, reduce settlement risk, produce client statements earlier and ensure compliant trading. In addition, they can cost effectively grow their business, with the flexibility to add new accounts or to establish relationships with new custodians.

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Advent Corporate Actions® (ACA) is a straight-through-processing service that delivers customized, position-level corporate action reports for a broad range of action and security types, along with scrubbed, market effective transactions for mandatory US equity and ADR events, including tax compliant details. Using ACA, firms can track actions from announcement through effective date; receive alerts containing revisions and processing tips; and gain access to a dedicated team of corporate action specialists who assist advisory staff with processing details and the interpretation and confirmation of complex tax opinions.



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Advent® Market Data is our subscription-based and transaction-based service and allows clients to download pricing, corporate actions and other data from third party vendors such as Financial Times/Interactive Data ("FTID").

Support and Maintenance Services

        Due to the mission-critical nature of our products, almost all of our perpetual license clients purchase support and maintenance, which entitles them to technical support through Advent's Client Services group and product upgrades as they become available. Term license customers also receive support and maintenance services as part of the term license offering. We continually upgrade and enhance our products to respond to changing market needs, evolving regulatory requirements and new technologies.

        We offer a tiered support structure to meet the diverse needs of our client base. Advent's services are scalable, which means that they adapt to meet the specific needs of a firm no matter how large or small.

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Advent Plus® is the foundation of our support plans and includes the following features and benefits:



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Access to the Advent Support Center to help ensure reliable system performance without interruption



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Less downtime and increased employee productivity as a result of timely support response



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Freedom to focus a firm's IT resources in other areas



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Access to Advent product upgrades and enhancements including SEC regulatory and CFA Institute compliance updates



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Advent Preferred® offers faster response times and access to seasoned support representatives. In addition to the services of the Advent Plus plan, Advent Preferred offers:



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Faster access to more experienced support representatives and incident escalation for addressing resolution of questions and issues



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Additional support hours



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Migration planning sessions to help ensure smoother migrations and upgrades



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Advent Pinnacle® is our most comprehensive plan provided to all Geneva clients and provides unlimited access to our most experienced team of support representatives. In addition to the services included in Advent Preferred, Advent Pinnacle provides:



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Maximum support coverage including scheduled extended hours support



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Unlimited support hours



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The highest level of access to Advent product and technical experts—both in response and resolution

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Features that promote continuous improvement of your Advent applications, including industry networking events and built-in discounts to Advent Professional Services.

        In February 2009, our Investment Management Group's client support organization achieved certification under the Service Capability and Performance (SCP) Support Standard for the fourth consecutive year.

Professional Services

        Professional services consist of consulting, project management, implementation and integration services, custom report writing, and training. Many of Advent's clients purchase professional services from us to support their implementations, assist in the conversion of their historical data and provide ongoing training and education. Professional services may be required for as little as a few days or up to several months for large implementations. We believe that these services facilitate a client's early success with our products, strengthen the client relationship and generate valuable feedback for our product development group. In 2009, our Investment Management Group's professional services organization achieved certification under the SCP Support Standard.

Alliance Program

        Our Alliance Program is designed to benefit our clients and our partners. The program provides a means by which partners can develop, promote, and sell their products, services, and solutions in conjunction with our solutions. Advent's Alliance Program was created to further extend our product and service offerings.

Sales and Marketing

        We primarily license and sell Advent products and services through four sales groups, which are organized by product and customer type. The sales groups include a direct sales organization (comprised of both field sales and telesales representatives) as well as product marketing and product management groups, which are responsible for assessing market opportunities and collaborating with our product development organization on product planning and management. Product marketing coordinates our market validation process, through which we interview existing clients and sales prospects, and gather information to define scope, features and functionality of new products and product upgrades. The sales groups are as follows:

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Global Accounts, selling solutions based on Geneva, Advent Partner and Advent Custodial Data as well as associated products and services, into the prime broker, hedge fund, fund administrator and global asset management markets;



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Investment Management Group, selling solutions based on APX, Axys, Moxy, Advent Revenue Center, Advent Rules Manager, Advent Custodial Data, Advent Corporate Actions, Advent OnDemand and associated products and services into asset management firms, wealth management firms, banks and trusts, hedge funds, family offices and financial advisories;



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Tamale, selling the Tamale® RMS solution to investment professionals at hedge funds, endowments, funds of funds, asset management firms, pension funds, endowments and private equity firms to manage their workflow and research process; and



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EMEA, selling solutions from across the entire Advent product portfolio to investment management firms of every profile in Europe, the Middle East and Africa.

        We have sales and support offices throughout the world, including San Francisco, New York, Boston, London, Oslo, Copenhagen, Stockholm, Amsterdam, Zurich, Dubai, Hong Kong and Beijing.

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        Our corporate marketing organization is responsible for providing support to the Company through lead generation activities, brand support, sales and marketing materials, and the provision of marketing events, such as conferences and seminars.

Product Development

        In fiscal 2009, 2008 and 2007, our product development expenses were $48.4 million, $42.9 million and $36.6 million, respectively. We also capitalized $3.0 million, $2.5 million and $3.3 million of software development costs in 2009, 2008 and 2007, respectively. Our product development organization builds product enhancements and new products, incorporates new technologies into existing products and sustains the quality of our current products. 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 generally relied upon internal development for our products. We have in the past acquired, and may again in the future acquire, additional technologies or products from third parties. For example, in October 2008, we acquired Tamale Software, a provider of research management software which helps investment professionals manage their workflow and research process. We intend to continue to support industry standard operating environments, architectures and network protocols.

Unfilled License Orders, Deferred Revenues and Backlog

        Unfilled license orders represent license orders that have been received from our customers for the license of our software products but have not been shipped as of the end of the applicable fiscal period. We do not believe that unfilled license orders are a consistent or reliable indicator of future results. Our customers generally do not cancel orders for our software products. Unfilled license orders as of December 31, 2009 and 2008 totaled $1.2 million and $1.5 million, respectively.

        Total deferred revenue includes deferred perpetual license, term license, maintenance, outsourcing, data services and professional services. Deferred perpetual license revenue is recognized when a contingency, such as a future product deliverable committed in the contract, is removed. Deferred term license revenue is generally recognized over the contract length. Deferred maintenance revenue is generally recognized over the service period, which is typically twelve months. Deferred professional services revenue is either recognized over the period the specific services are rendered, or over the related contract period when sold in conjunction with a multi-year term license.

        During 2009, we substantially completed our transition to selling mostly term licenses. We believe that the move to a term license model increases the value over the long-term of each customer relationship and improves the predictability of our revenues. We generally recognize revenue from term licenses ratably over the period of the contract term which varies from one to five years but is typically three years. For these term contracts, we invoice the customer annually in advance. As a result, the first year's contract value is included in deferred revenue while subsequent years of the contracted value are not (unless the subsequent years are prepaid by the client, which is typically not the case). During the subsequent years, annual term billing results in an increase in deferred revenues at the commencement of each annual billing period. Total deferred revenues were $146.1 million and $141.3 million at December 31, 2009 and 2008, respectively.

        We define backlog as the value of multi-year term license, outsourcing and data service contracts which contain a binding commitment for the full contract term, less any amounts from those contracts already invoiced. We exclude annual contracts from the backlog calculation since they contain annual renewal options (for example, annual term licenses, annual maintenance or data reconciliation

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contracts). Our total backlog was approximately $100.4 million and $151.7 million as of December 31, 2009 and 2008, respectively. Backlog decreased by $51.3 million in 2009 due to the following factors:

•

When the initial three-year term contracts are renewed, they are generally renewed for a one-year period (which generates deferred revenue, but does not affect backlog);



•

2009 bookings of annual term license contract value ("ACV") were down over 20% compared to 2008; and



•

Our data services contract with TIAA-CREF and our hosted services contract with Fidelity Investments, which were both signed in 2008, are five-year contracts. The invoicing of these two customers during 2009 also contributed to the overall decrease in backlog.

        For additional information regarding factors that affect the timing of the recognition of software license revenue, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Revenue Recognition."

Competition

        The market for investment management software is characterized by the relative size of the organizations that manage and advise on investment portfolios. The market is competitive and highly fragmented. It is subject to rapid change and is sensitive to new product introductions and marketing efforts by industry participants. Competitors vary in size, scope of services offered and platforms supported. Our largest single source of competition is from proprietary systems used by our existing and potential clients, some of whom develop their own software for their particular needs and therefore may be reluctant to license software products offered by third party vendors such as Advent. We also face significant competition from other providers of software and related services as well as providers of outsourced services such as Charles River Development, the Checkfree APL subsidiary of Fiserv, DST International, the Eagle Investment Systems subsidiary of Bank of New York/Mellon Financial Corporation, the Eze Castle Software subsidiary of BNY ConvergEx Group, FT Interactive Data, the IBSI division of SunGard, INDATA, the LatentZero division of Fidessa group plc, Linedata Services, the Macgregor division of Investment Technology Group, the PORTIA division of Thomson Financial, Schwab Performance Technologies, SimCorp A/S and SS&C Technologies. Many of our largest competitors have longer operating histories and greater financial, technical, sales and marketing resources than we do, due, in part to a wave of consolidation that has occurred in our markets. Since 2005, many of our competitors have been acquired by larger enterprises, and it is possible that even larger competitors will be created through additional acquisitions of companies and technologies. We believe that Advent competes effectively in terms of the most predominant competitive differentiators, which include product performance and functionality, ease of use, scalability, ability to integrate external data sources, product and company reputation, client service and price.

Intellectual Property and Other Proprietary Rights

        Our success depends significantly upon our proprietary technology. We currently rely on a combination of copyright, trademark, patent and trade secret law, as well confidentiality procedures and contractual provisions to protect our proprietary rights. We have registered trademarks and copyrights for many of our products and services and will continue to evaluate the registration of additional trademarks and copyrights as appropriate. We generally enter into confidentiality agreements with our employees, customers, resellers, vendors and others. We seek to protect our software, documentation and other written materials under trade secret and copyright laws. We also have two issued patents. While we do not believe we are dependent on any one of our intellectual property rights, we do rely on the combination of intellectual property rights and other measures to protect our proprietary rights. Despite these efforts, existing intellectual property laws may afford only limited protection. In addition, it may be possible for unauthorized third parties to copy certain portions of our products or to reverse

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engineer or otherwise obtain and use our proprietary information. In addition, we cannot be certain that others will not develop or acquire substantially equivalent or superseding proprietary technology, equivalent or better products will not be marketed in competition with our products, or others may not design around any patent that we have or that may be issued to us or other intellectual property rights of ours, thereby substantially reducing the value of our proprietary rights. We cannot be sure that we will develop proprietary products or technologies 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. 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. Litigation may be necessary to protect our proprietary technology which may be time-consuming and expensive, with no assurance of success. As a result, we cannot be sure that our means of protecting our proprietary rights will be adequate.

Employees

        As of December 31, 2009, we had 998 employees, including approximately 376 in client services and support, 185 in sales and marketing, 279 in product development and 158 in general and administration. Of these employees, 852 were located in the United States and 146 were based internationally. We endeavor to maintain competitive compensation, benefits, equity participation and work environment policies in order to attract and retain qualified personnel. 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.

Executive Officers of Registrant

        The following sets forth certain information regarding the executive officers of the Company as of March 1, 2010:

        Ms. DiMarco founded Advent in June 1983. She served as Chairman of the Board from November 1995 until December 2003. Ms. DiMarco currently serves as Chief Executive Officer since her permanent appointment to the position in December 2003, after serving on an interim basis from May 2003. Ms. DiMarco also served as Chief Financial Officer from December 2008 to September 2009, after serving on an interim basis from July 2008. Previously, she had served as President from June 1983 to April 1997 and again from May 2003 to December 2008, and as Chief Executive Officer from June 1983 to November 1999. She is a former member of the Board of Trustees of the UC Berkeley Foundation, serves on the Advisory Board of the College of Engineering at the University of California, Berkeley, and is a San Francisco Foundation board member and Chairman of its Investment Committee and former member of the Audit Committee. Ms. DiMarco holds a B.S. in Business Administration from the University of California at Berkeley.

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        Mr. Hess joined Advent in 1994. He was appointed as President of Advent in December 2008. Mr. Hess is responsible for the worldwide marketing, sales and services for the Company's Investment Management, Global Accounts, Straight-Through-Processing (STP) and Tamale Research Management groups as well as the Company's international operations. From February 2007 to December 2008, Mr. Hess served as Executive Vice President and General Manager of Advent's Investment Management Group. From May 2004 to February 2007, Mr. Hess served as Executive Vice President and General Manager of our Global Accounts group. In this role, Mr. Hess had global responsibility for strategy, product marketing, sales, services, and support of Advent solutions for the asset management industry's largest firms. Mr. Hess has held a variety of other positions in the company including Vice President of Sales and Vice President of Marketing. Mr. Hess holds a B.A. from Princeton University.

        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, for Oracle Corporation. Ms. Chang holds a B.S. in Biochemistry from Taiwan University.

        Mr. Brennan joined Advent in March 2004 as Vice President of Human Resources and is responsible for all aspects of Human Resources and facilities and real estate management. In February 2009, Mr. Brennan was promoted to Senior Vice President. Prior to joining Advent, Mr. Brennan was Vice President of Human Resources from 1999 to 2004 for Wind River Systems. Prior to Wind River, Mr. Brennan held various positions at Visa International from 1991 to 1999. Mr. Brennan began his human resources career with assignments at Westinghouse Electric Company and Pacific Gas and Electric. Mr. Brennan also serves as the current Chairman of the Board of the Goodwill of the Greater East Bay. Mr. Brennan has a master's degree in Industrial and Labor Relations from Cornell University, and a bachelor's degree in English Literature and Music from Hamilton College.

        Mr. Cox joined Advent in June 2006. He was appointed Senior Vice President and Chief Financial Officer in September 2009. Mr. Cox is responsible for the oversight of the Company's financial functions. From July 2008 to September 2009, Mr. Cox served as Vice President and Principal Accounting Officer, and served as Corporate Controller from June 2006 to July 2008. Prior to joining Advent, Mr. Cox served as Assistant Controller of UTStarcom from 2004 to 2006. From 1994 to 2004, Mr. Cox held various positions at PricewaterhouseCoopers, LLP. Mr. Cox holds a B.A. in Economics from Ohio University.

Item 1A.    Risk Factors

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

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

        Total recurring revenues represented 86%, 80% and 79% of total net revenues in fiscal 2009, 2008 and 2007, respectively. We expect to continue to derive a significant portion of our revenue from our clients' renewal of term license, perpetual maintenance and other recurring contracts and such renewals

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are critical to our future success. Some factors that may affect the renewal rate of our contracts include:

•

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



•

The impact of customers consolidating or going out of business;



•

The price, performance and functionality of our solutions;



•

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



•

The effectiveness of our maintenance and support services; and



•

Our ability to develop complementary products and services.

        Most of our perpetual license customers have historically renewed their annual maintenance although our customers have no obligation to renew such maintenance after the first year of their license agreements. In addition, our customers may select maintenance levels less advantageous to us upon renewal, which may reduce recurring revenue from these customers. The current market downturn has caused, and may in the future cause, some clients not to renew their maintenance or reduce their level of maintenance, which would affect our renewal rates and revenue. Our renewal rates are based on cash collections and are disclosed one quarter in arrears. Our reported renewal rates for the first three quarters of 2009 were below the levels we disclosed for our quarterly periods of 2008. The decrease in renewal rates reflects increases in the number of customers who have gone out of business or reduced maintenance expenditures, as well as from slower payments received from renewal clients.

        As a result of our relatively recent transition to term licensing, we only have limited experience with renewals of our term license contracts. During the third quarter of 2007, we commenced renewing term license contracts signed in the third quarter of 2004. These were the first three-year term license contracts to be renewed by Advent since our transition to a term pricing model began. Our customers have no obligation to renew their term license contracts and given the small number of contracts subject to renewal that were renewed in the second half of 2007 through 2009, we cannot yet conclude whether customers will renew at a rate consistent with our perpetual maintenance customers. Additionally, we cannot predict whether the renewals will be less advantageous to us than the original term contract. For example, the renewal periods for our term license contracts are typically shorter than our original term license contract and customers may request a reduction in the number of users or products licensed, resulting in a lower annual term license fee. Further, customers may elect to not renew their term license contracts at all. We may incur significantly more costs in securing our term license contract renewals than we incur for our perpetual maintenance renewals. If our term license contract customers renew under terms less favorable to us or choose not to renew their contracts, or if it costs significantly more to secure a renewal for us, our operating results may be harmed.

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

        The purchase of our software products often requires prospective customers to provide significant executive-level sponsorship and to make major systems architecture decisions. As a result, we must generally engage in relatively lengthy sales and contracting efforts. Sales transactions may therefore be delayed during the customer decision process because we must provide a significant level of education to prospective customers regarding the use and benefit of our products. Our business and prospects are subject to uncertainties in the financial markets that can cause customers to remain cautious about capital and information technology expenditures, particularly in the current economic environment, or to decrease their information technology budgets as an expense reduction measure. The sales cycle

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associated with the purchase of our solutions is typically between two and twelve months depending upon the size of the client, and is subject to a number of significant risks over which we have little or no control, including broader financial market volatility, adverse economic conditions, customers' budgeting constraints, internal selection procedures, and changes in customer personnel, among others. Ongoing volatility in the US and global financial markets has further exacerbated this risk.

        As a result of a lengthy and unpredictable sales cycle, we have limited ability to forecast the timing and amount of specific perpetual license sales, or term license sales which we report quarterly as annual term license contract value (ACV). The timing of large individual license sales is especially difficult to forecast, and we may not be successful in closing large license transactions on a timely basis or at all. Customers may postpone their purchases of our existing products or product enhancements in advance of the anticipated introduction of new products or product enhancements by us or our competitors. Accordingly, our level of ACV bookings and perpetual license revenue in any particular period is subject to significant fluctuation. For example, during fiscal 2009, our ACV bookings and perpetual license revenue decreased by 23% and 33%, respectively, compared to fiscal 2008.

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

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

        During fiscal 2009, 2008 and 2007, we recognized 86%, 80% and 79%, respectively, of total net revenues from recurring sources, which we define as revenues from term license, maintenance on perpetual licenses, and other recurring revenue. We generally recognize revenue from these sources ratably over the terms of these agreements, which typically range from one to three years. As a result, almost all of our revenues in any quarter are generated from contracts entered into during previous periods.

        Consequently, a significant decline in new business generated in any quarter may not materially affect our results of operations in that quarter but will have an impact on our revenue growth rate in future quarters. Additionally, a decline in renewals of term agreements, maintenance or data and other subscription contracts during a quarter will not be fully reflected in our financial performance in that quarter. For example, because we recognize revenue ratably, the non-renewal of term agreements or maintenance contracts late in a quarter may have very little impact on revenue for that quarter, but will reduce revenue in future quarters. In addition, we may be unable to adjust our costs in response to reduced revenue.

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

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

Uncertain economic and financial market conditions adversely affect our business.

        The market for investment management software systems has been and currently is negatively affected by a number of factors, including reductions in capital expenditures by customers and poor performance of major financial markets. The current market downturn, dissolution and acquisitions of our clients and prospects, the decline in Assets Under Administration (AUA) or Assets Under Management (AUM) as a result of significant declines in asset values of our clients and the accompanying market uncertainty affects and will continue to affect both our ability to sell our solutions and the amount of revenue we receive from such sales. The target clients for our products include a range of financial services organizations that manage investment portfolios. The success of many of our clients is intrinsically linked to the health of the financial markets. The demand for our solutions has been and currently is disproportionately affected by fluctuations, disruptions, instability and downturns in the economy and financial services industry, which may cause clients and potential clients to exit the industry or delay, cancel or reduce any planned expenditures for investment management systems and software products. Since the fall of 2008, we have experienced some clients and prospects delaying or cancelling additional license purchases. In addition, some prospects and clients have gone out of business, undergone personnel reductions or turnover, or have been acquired, which we expect to continue as the financial markets face continued hardship.

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

        We have, in the past, experienced a number of market downturns in the financial services industry and resulting declines in information technology spending, which has caused longer sales and contracting cycles, deferral or delay of information technology projects and generally reduced expenditures for software and related services. The severity of the market downturn and worsening volatility and uncertainty in the financial markets and the financial services sector in the last 18 months makes it difficult for us to forecast operating results and may result in a material adverse effect on our revenues and results of operations in the longer term.

Our stock price may fluctuate significantly.

        Like many other companies, our stock price has been subject to wide fluctuations in recent months as a result of market volatility. If net revenues or earnings in any quarter or our financial guidance for future periods fail to meet the investment community's expectations, our stock price is likely to decline.

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Even if our revenues or earnings meet or exceed expectations, our stock price is subject to decline in this period of high market volatility because our stock price is affected by trends in the financial services sector and by broader market trends unrelated to our performance. Unfavorable or uncertain economic and market conditions, which can be caused by many factors, including declines in economic growth, business activity or investor or business confidence; limitation on the availability or increases in the cost of credit or capital; increases in inflation, interest rates, exchange rate volatility, default rates or the price of basic commodities; corporate, political or other scandals that reduce investor confidence in capital markets; outbreaks of hostilities or other geopolitical instability; natural disasters or pandemics; or a combination of these or other factors, have adversely affected, and may in the future adversely affect, our business, profitability and stock price.

We operate in a highly competitive industry.

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

        The market for our products is characterized by rapid technological change, changes in customer demands, evolving industry standards and new regulatory requirements. New products based on recent technologies or new industry standards can render existing products obsolete and unmarketable. As a result, our future success will continue to depend upon our ability to develop new products or product enhancements that address the future needs of our target markets and respond to their changing standards and practices. We continue to release numerous products and product upgrades and we believe our future success depends on continuing such releases. Additionally, in October 2008, we acquired Tamale Software which enables us to offer a new product in the nascent research management field. However, it is too early to know whether these products will meet anticipated sales or will be broadly accepted in the market, that a market will develop as expected for these new products or that we will continue to introduce more products.

        We may not be successful in developing, introducing, marketing and licensing our new products or product enhancements on a timely and cost effective basis, or at all, and our new products and product enhancements may not adequately meet the requirements of the marketplace or achieve market acceptance. Delays in the commencement of commercial shipments of new products or enhancements or delays in client implementations or migrations may result in client dissatisfaction and delay or loss of

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product revenues. Additionally, existing clients may be reluctant to go through the process of migrating from our Axys product to our APX product, which may slow the migration of our customer base to APX. In addition, clients may delay purchases in anticipation of new products or product enhancements. Our ability to develop new products and product enhancements is also dependent upon the products of other software vendors, including certain system software vendors, such as Microsoft Corporation, database vendors and development tool vendors. If the products of such vendors have design defects or flaws, are unexpectedly delayed in their introduction, are unavailable on acceptable terms, or the vendors exit the business, our business could be seriously harmed.

We depend heavily on our Axys®, Geneva®, APX and Moxy® products.

        We derive a majority of our net revenues from the license and maintenance revenues from our Axys, Geneva, APX and Moxy products. In addition, Moxy and many of our applications, such as Partner and various data services, have been designed to provide an integrated solution with Axys, Geneva and APX. As a result, we believe that for the foreseeable future a majority of our net revenues will depend upon continued market acceptance of Axys, Geneva, APX, and Moxy, and upgrades to those products. This is particularly true as a result of our divestiture of our MicroEdge grants management products, which further concentrates our revenue streams.

Our operating results may fluctuate significantly.

        Revenues from recurring sources have grown from 79% in 2007, to 80% in 2008 and to 86% in fiscal 2009. During fiscal 2009, term license revenues comprised approximately 44% of term license, maintenance and other recurring revenues as compared to approximately 35% and 25% in fiscal 2008 and 2007, respectively. Term license contracts are comprised of both software licenses and maintenance services. Individual perpetual software licenses vary significantly in value, and the value and timing of these transactions can therefore cause our quarterly perpetual license revenues to fluctuate. As we continue to sign term license agreements for new customers, grow our subscription, data management and outsourced services revenues, and our customers renew their perpetual maintenance, we expect our revenue from recurring sources to continue to represent over 85% of our total net revenues.

        When a customer purchases a term license together with implementation services, we do not recognize any revenue under the contract until the implementation services are substantially completed and then we recognize revenue ratably over the remaining length of the contract. If the implementation services are still in progress as of quarter-end, we will defer all of the contract revenues to a subsequent quarter. At the point professional services are substantially completed, we recognize a pro-rata amount of the term license revenue, professional services fees earned and related expenses, based on the elapsed time from the start of the term license to the substantial completion of professional services. During 2009, the revenue recognized from completed implementations exceeded the revenue deferred from projects being implemented, resulting in a net recognition of revenue of $6.1 million for fiscal 2009, composed of $3.5 million of term license revenue and $2.6 million of professional services revenue. In future periods, our revenues related to completed implementations may be lower depending on the number of projects that reach substantial completion during the quarter. Term license revenue for the remaining contract years and the remaining deferred professional services revenue and related expenses are recognized ratably over the remaining contract length. The term license component of the deferred revenue balance will increase or decrease in the future depending on the amount of new term license bookings relative to the number of implementations that reach substantial completion in a particular quarter. Although our substantial revenue from recurring sources under our term license model provides us with longer term stability and more visibility in the short term, our quarterly net revenues and operating results may still fluctuate significantly depending on these and other factors. Our expense levels are relatively fixed in the short-term. Due to the fixed nature of these expenses, combined with the relatively high gross margin historically achieved on our

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products, an unanticipated decline in net revenues in any particular quarter may adversely affect our operating results.

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

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

If our relationship with Financial Times/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 Financial Times/Interactive Data ("FTID"). FTID 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 our software would need to be redesigned to operate with additional alternative data vendors if FTID's services were unavailable for any reason. Non-renewal of our current agreement with FTID would require at least two years' prior notice by either us or them and the agreement may be terminated upon 90 days advance notice for an uncured material breach of the other party. While we have contracts with other data vendors for substantially similar financial data with which our products can be used, if our relationship with FTID was terminated or their services were unavailable to clients for any reason, we cannot be certain that we could enter into contracts with additional alternative data providers, or that these other relationships would provide similar commission rates to us or if the amount of data used by our clients would remain the same, and our operating results could suffer or our resources could be constrained from the costs of redesigning our software.

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

        In recent years, Advent has entered into contracts relating to our subscription, data management revenue streams and outsourced services with contract values that are substantially larger than we have customarily entered into in the past, including our agreement with TIAA-CREF. It is too early to know whether we will be able to continue to sign large recurring revenue contracts of this nature or if such clients will renew their contracts at similar rates, if at all. Some of these agreements are subject to milestones, acceptance and penalties and there is no assurance that these agreements will be fully implemented. In addition, we have revenue sharing agreements with other companies that provide revenue to Advent for our clients' use of those companies' services and products. Our operating results could be adversely impacted if these agreements are not fully implemented, terminated or not renewed, or if we are unable to continue to generate similar opportunities and enter similar or larger sized contracts in the future.

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

        Our clients rely on our outsourcing and data services to meet their operational needs, including account aggregation and reconciliation. Because our services are complex, we utilize third party data

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and other vendors, and our clients use our services in a variety of ways, our services may have undetected errors or defects, service disruptions, delays, or incomplete or incorrect data that could result in unanticipated downtime for our customers, failure to meet service levels and service disruptions. In addition, our security measures could be breached or unauthorized access to our information or our customers' information could occur. Such potential errors, defects, delays, disruptions or other performance problems may damage our clients' business, harm our reputation, result in losing future sales, cause clients to withhold payment or terminate or not renew their agreements with us, and subject us to litigation and other possible liabilities.

We must recruit and retain key employees.

        We believe that our future success is dependent on the continued employment of our senior management and our ability to identify, attract, motivate and retain qualified technical, sales and other personnel. Members of our executive management team have acquired specialized knowledge and skills with respect to Advent. We need technical resources such as our product development engineers to develop new products and enhance existing products; we rely upon sales personnel to sell our products and services and maintain healthy business relationships; we must recruit professional service consultants to support our implementations; we must hire client services personnel to provide technical support to our growing installed base of customers; and we must attract and retain financial and accounting personnel to comply with our public company reporting requirements. We need to identify, attract, motivate and retain such employees with the requisite education, backgrounds and industry experience. However, experienced high quality personnel in the information technology industry continue to be in high demand and competition for their talents remains intense, especially in the San Francisco Bay Area where the majority of our employees are located.

        We have relied on our ability to grant equity compensation as one mechanism for recruiting and retaining such highly skilled personnel. In making employment decisions, particularly in the high-technology industries and San Francisco Bay Area, job candidates often consider the value of the equity awards they are to receive in connection with their employment and market downturns may result in our incentives becoming less valuable. Additionally, accounting regulations requiring the expensing of equity compensation impair our ability to provide these incentives without reporting significant compensation costs.

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

We face challenges in expanding our international operations in which we may have limited experience and resources.

        We market and sell our products in the United States and, to a growing extent, internationally. From 2001 through 2005, we acquired the subsidiaries of our independent distributor. In addition, we have begun to expand our sales in relatively new jurisdictions for Advent, such as the Middle East, Eastern Europe, and Asia. In 2006, we opened a branch office of Advent Europe Ltd. in the United Arab Emirates, and we established Advent Software (Asia) Ltd. a subsidiary of Advent Software, Inc. in Hong Kong in 2008. In addition, in the third quarter of 2009, we established a subsidiary of Advent Software (Asia), Ltd. in Beijing, China. More recently in March 2010, our wholly-owned Norwegian subsidiary, Advent Norway AS, acquired the entire share capital of Goya AS, a Norwegian software

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company that provides transfer agency-related solutions to mutual fund managers and mutual fund distributors.

        We cannot be certain that establishing businesses in other countries will produce the desired levels of revenues, such as in the case of our former Greek subsidiary, Advent Hellas, which produced less than satisfactory revenues and profitability before its sale by Advent in 2005. Also, the recent worldwide decline in financial markets may disrupt our sales efforts in overseas markets. We currently have limited experience in developing localized versions of our products and marketing and distributing our products internationally. In other instances, we may rely on the efforts and abilities of foreign business partners in such markets. For example, we outsourced certain engineering activities to a business partner located in China. Now, Advent has transitioned those contract developers to become employees of Advent as part of our recently opened Beijing office. In addition, international operations are subject to other inherent risks, including:

•

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



•

Adverse changes in foreign currency exchange rates;



•

Greater difficulty in accounts receivable collection and longer collection periods;



•

Difficulty of enforcement of contractual provisions in local jurisdictions;



•

Unexpected changes in foreign laws and regulatory requirements;



•

US and foreign trade-protection measures and export and import requirements;



•

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



•

Resistance of local cultures to foreign-based companies and difficulties establishing local partnerships or engaging local resources;



•

Difficulties in and costs of staffing and managing foreign operations;



•

Reduced protection for intellectual property rights in some countries;



•

Foreign tax structures and potentially adverse tax consequences; and



•

Political and economic instability.

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

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

        Periodically we seek to grow through the acquisition of additional complementary businesses. In October 2008, we completed the acquisition of Tamale Software, Inc., which provides research management software. In December 2006, we acquired East Circle Solutions, Inc., a developer of investment management billing solutions to integrate their product into our software offerings. More recently in March 2010, our wholly-owned Norwegian subsidiary, Advent Norway AS, acquired the

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entire share capital of Goya AS, a Norwegian software company that provides transfer agency-related solutions to mutual fund managers and mutual fund distributors.

        The process of integrating our acquisitions has required and will continue to require significant resources, particularly in light of our relative inexperience in integrating acquisitions, potential regulatory requirements and operational demands. In particular, our Tamale acquisition reflects our entry into the research management software market, where we have no prior experience. Integrating these acquisitions in the past has been time-consuming, expensive and disruptive to our business. This integration process has strained our managerial resources, resulting in the diversion of these resources from our core business objectives and may do so in the future. Failure to achieve the anticipated benefits of these acquisitions or to successfully integrate the operations of these entities has harmed and could potentially harm our business, results of operations and cash flows in future periods. The assumptions we made in determining the value of, and relative risks, of these acquisitions could be erroneous. For example, in the first quarter of 2003, we closed our Australian subsidiary because it failed to perform at a satisfactory profit level and similarly in the fourth quarter of 2005, we disposed of our Advent Hellas subsidiary because of less than satisfactory profitability. In addition, as we have expanded into new business areas and built new offerings through strategic alliances and internal development, as well as acquisitions, some of this expansion has required significant management time and resources without generating required revenues. We have had difficulty and may continue to have difficulty creating demand for such offerings. Furthermore, we may face other unanticipated costs from our acquisitions, such as disputes involving earn-out and incentive compensation amounts.

        We may make additional acquisitions of complementary companies, products or technologies in the future. In addition, we periodically evaluate the performance of all our products and services and may sell or discontinue current products, product lines or services, particularly as we focus on ways to streamline our operations. For example, in October 2009, we divested our MicroEdge subsidiary. Failure to achieve the anticipated benefits of any acquisition or divestiture could harm our business, results of operations and cash flows. Furthermore, we may have to incur debt, write-off investments, infrastructure costs or other assets, incur severance liabilities, write-off impaired goodwill or other intangible assets or issue equity securities to pay for any future acquisitions. Financing may not be available to us on sufficiently advantageous terms, or at all, and we have let our Credit Facility with Wells Fargo Foothill lapse. The issuance of equity securities could dilute our existing stockholders' ownership. Finally, we may not identify suitable businesses to acquire or negotiate acceptable terms for future acquisitions.

Our investment portfolio may become impaired by deterioration of the capital markets.

        Our cash equivalent, short-term and long-term investment portfolio as of December 31, 2009 consisted of US government and commercial debt securities. We follow an established investment policy and set of guidelines to monitor and help mitigate our exposure to interest rate and credit risk. The policy sets forth credit quality standards and limits our exposure to any one issuer, as well as our maximum exposure to various asset classes.

        As a result of current adverse financial market conditions, investments in some financial instruments may pose risks arising from recent market liquidity and credit concerns. As of December 31, 2009, we had no impairment charges associated with our short-term or long-term investment portfolio relating to such adverse financial market conditions. Although we believe our current investment portfolio has very little risk of material impairment, we cannot predict future market conditions or market liquidity and can provide no assurance that our investment portfolio will remain materially unimpaired. In addition, the decrease in interest rates has materially decreased the interest income we receive on our investments.

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

        Our success depends significantly upon our proprietary technology. We currently rely on a combination of copyright, trademark, patent and trade secret law, as well as confidentiality procedures and contractual provisions to protect our proprietary rights. We have registered trademarks and copyrights for many of our products and services and will continue to evaluate the registration of additional trademarks and copyrights as appropriate. We generally enter into confidentiality agreements with our employees, customers, resellers, vendors and others. We seek to protect our software, documentation and other written materials under trade secret and copyright laws. We also have two issued patents. Despite our efforts, existing intellectual property laws may afford only limited protection. It may be possible for unauthorized third parties to copy certain portions of our products or to reverse engineer or otherwise obtain and use our proprietary information. In addition, we cannot be certain that others will not develop or acquire substantially equivalent or superseding proprietary technology, equivalent or better products will not be marketed in competition with our products, or others may not design around any patent that we have or that may be issued to us or other intellectual property rights of ours, thereby substantially reducing the value of our proprietary rights. We cannot be sure that we will develop proprietary products or technologies 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. 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 and so our expansion into international markets may expose our proprietary rights to increased risks. Litigation may be necessary to protect our proprietary technology which may be time-consuming and expensive, with no assurance of success. As a result, we cannot be sure that our means of protecting our proprietary rights will be adequate.

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

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

Catastrophic events could adversely affect our business.

        We are a highly automated business and rely on our network infrastructure and enterprise applications, internal technology systems and our website for our development, marketing, operational, support, and sales activities. A disruption or failure of these systems in the event of major earthquake, fire, telecommunications failure, cyber-attack, terrorist attack, or other catastrophic event could cause system interruptions, reputational harm, delays in our product development and loss of critical data and could affect our ability to sell and deliver products and services and other critical functions of our

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business. Our corporate headquarters, a significant portion of our research and development activities, our data centers, and certain other critical business operations are located in the San Francisco Bay Area, which is a region of seismic activity. We have developed certain disaster recovery plans and certain backup systems to reduce the potentially adverse effect of such events, but a catastrophic event that results in the destruction or disruption of any of our data centers or our critical business or information technology systems could severely affect our ability to conduct normal business operations and, as a result, our future operating results could be adversely affected. Further, such disruptions could cause further instability in the financial markets or the spending of our clients and prospects upon which we depend. Although we are in the process of creating an enterprise risk management program, it is not currently implemented and, when implemented, may not adequately protect us.

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

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

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

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

        Our Chief Executive Officer and the Chairman of our board of directors own or control, indirectly or directly, a substantial number of shares of our common stock (approximately 37% as of February 26, 2010). As a result, if these parties were to act together, they will have the ability to exert significant influence on matters submitted to our stockholders for approval, such as the election or removal of directors, amendments to our certificate of incorporation or the approval of a business combination. These actions may be taken even if they are opposed by other stockholders or it may be difficult to approve these actions without their consent. This concentration of ownership may also have the effect of delaying or preventing a change of control of our company or discouraging others from making tender offers for our shares, which could prevent our stockholders from receiving a premium for their shares.

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

        The Sarbanes-Oxley Act ("the Act") of 2002 required changes in some of our corporate governance and securities disclosure and/or compliance practices. As part of the Act's requirements, the SEC has enacted new rules on a variety of subjects, and the Nasdaq Stock Market has enacted new corporate governance listing requirements. These developments have increased and may in the future increase our accounting and legal compliance costs and could also expose us to additional liability if we

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fail to comply with these new rules and reporting requirements. In fiscal 2009, 2008 and 2007, we incurred approximately $0.5 million, $0.8 million and $0.9 million, respectively, in Sarbanes-Oxley related expenses consisting of external consulting costs and auditor fees. In addition, such developments may make retention and recruitment of qualified persons to serve on our board of directors, or as executive officers, more difficult. We continue to evaluate and monitor regulatory and legislative developments and cannot reliably estimate the timing or magnitude of all costs we may incur as a result of the Act or other related legislation or regulation.

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

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

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

        We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. These principles are subject to interpretation by us, the SEC and various bodies formed to interpret and create accounting principles. A change in these principles or a change in the interpretations of these principles can have a significant effect on our reported results and may even retroactively affect previously reported transactions. Some of our accounting principles that recently have been or may be affected include:

•

Software revenue recognition;



•

Accounting for stock-based compensation;



•

Accounting for income taxes; and



•

Accounting for business combinations and related goodwill.

        In December 2007, the Financial Accounting Standards Board ("FASB") issued ASC 805, "Business Combinations", which changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition related restructuring liabilities, the treatment of acquisition related transaction costs and the recognition of changes in the acquirer's income tax valuation allowance. ASC 805 is effective for financial statements issued for fiscal years beginning after December 15, 2008. In the event we have a business combination, we currently believe that the adoption of ASC 805 will result in the recognition of certain types of expenses in our results of operations that we currently capitalize pursuant to existing accounting standards and may also impact our financial statement in other ways. Additionally, the nature and magnitude of the specific

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effects will depend upon the nature, terms and size of the acquisitions the Company consummates after the effective date.

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

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

        In addition, we could be subject to examination of our income tax returns by the IRS and other domestic and foreign tax authorities. These examinations would be expected to focus on areas where considerable judgment is exercised by the company. We regularly assess the likelihood of outcomes resulting from an examination to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from an examination. We believe such estimates to be reasonable; however, there can be no assurance that the final determination of any of these examinations will not have an adverse effect on our operating results and financial position.

Security risks may harm our business.

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

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

        Some of our clients utilized trading commissions ("soft dollar arrangements") to pay for software products and services. During each of fiscal 2009, 2008 and 2007, the total value of Advent products and services paid with soft dollars was approximately 4% of our total billings. Such soft dollar arrangements could be impacted by changes in the regulations governing those arrangements.

        In July 2006, the SEC published an Interpretive Release that provides guidance on money managers' use of client commissions to pay for brokerage and research services under the safe harbor set forth in Section 28(e) of the Securities Exchange Act of 1934. The Interpretive Release clarifies that money managers may use client commissions ("soft dollars") to pay only for eligible brokerage and research services. Among other matters, the Interpretive Release states that eligible brokerage includes those products and services that relate to the execution of the trade from the point at which the money manager communicates with the broker-dealer for the purpose of transmitting an order for execution, through the point at which funds or securities are delivered or credited to the advised account. In

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addition, for potentially "mixed-use" items (such as trade order management systems) that are partly eligible and partly ineligible, the Interpretive Release states that money managers must make a reasonable allocation of client commissions in accordance with the eligible and ineligible uses of the items. Based on this guidance, our customers may change their method of paying all or a portion of certain Advent products or services from soft to hard dollars, and as a result reduce their usage of these products or services in order to avoid increasing expenses, which could cause our revenues to decrease.

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

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

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

        Any failure to implement or maintain improvements in our internal control over financial reporting, or difficulties encountered in the implementation of these improvements in our controls, could cause significant deficiencies or material weaknesses in our internal controls and consequently cause us to fail to meet our reporting obligations. Any failure to implement or maintain required new or improved internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative impact on the trading price of our stock. In addition, during 2009, we moved certain compliance functions from external providers to internal resources, and we cannot be certain that these changes will be as effective or will control costs as anticipated.

Item 1B.    Unresolved Staff Comments

        None.

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Item 2.    Properties

        Our principal executive offices are located in San Francisco, California. The table below summarizes the principal properties that we leased as of December 31, 2009:

        On October 1, 2009, Advent completed the sale of the Company's MicroEdge subsidiary. With the exception of the MicroEdge facilities in New York City, the leases related to MicroEdge have been transferred to the Purchaser. In connection with the sale of MicroEdge, the Company entered into a sub-lease agreement with Microedge LLC, whereby Microedge LLC will sub-lease approximately 24,000 square feet of the 29,000 square feet of office space located at 619 West 54th Street in New York, New York from the Company. MicroEdge LLC will sub-lease the premises for two years with the option to extend the sub-lease term through the end of the lease term in 2018. The sub-lease agreement became effective upon the close of sale of MicroEdge on October 1, 2009. The Company's contractual lease obligation related to this facility is not reflected in the table above.

        During 2009, we opened a new office in Beijing, China. The office is staffed with more than 50 employees who were previously contractors of the Company.

        We continue to assess our needs with respect to office space and may, in the future, vacate or add additional facilities. We believe that our current facilities are adequate for our needs in the immediate and foreseeable future.

Item 3.    Legal Proceedings

        On March 8, 2005, certain of the former shareholders of Kinexus and the shareholders' representative filed suit against Advent in the Delaware Chancery Court. The complaint alleges that

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Advent breached the Agreement and Plan of Merger dated as of December 31, 2001 pursuant to which Advent acquired all of the outstanding shares of Kinexus due principally to the fact that no amount was paid by Advent on an earn-out of up to $115 million. The earn-out, which was payable in cash or stock at the election of Advent, was based upon Kinexus meeting certain revenue targets in both 2002 and 2003. The complaint seeks unspecified compensatory damages, an accounting and restitution for unjust enrichment. Advent advised the shareholders' representative in January 2003 that the earn-out terms had not been met in 2002 and accordingly no earn-out was payable for 2002 and would not be payable for 2003. There has been no further activity in this case since additional document discovery and interrogatory answers were provided by the parties in December 2008. Advent disputes the plaintiffs' claims and believes that it has meritorious defenses and intends to vigorously defend this action. Management believes that any potential loss associated with this litigation is neither probable nor reasonably estimable at this time and accordingly has not accrued any amounts for any potential loss.

        From time to time, we are involved in claims and legal proceedings that arise in the ordinary course of business. Based on currently available information, management does not believe that the ultimate outcome of these unresolved matters, individually or in the aggregate, is likely to have a material adverse effect on the Company's financial position or results of operations. However, litigation is subject to inherent uncertainties and our view of these matters may change in the future. Were an unfavorable outcome to occur, there exists the possibility of a material adverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods.

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

        None.

PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information for Common Stock

        Our common stock is listed on the NASDAQ Stock Market under the symbol "ADVS." The closing price of our common stock on February 26, 2010 was $40.32. The table below summarizes the range of high and low reported sales prices on the NASDAQ Stock Market for our common stock for the periods indicated.

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Stockholders

        As of February 26, 2010, there were approximately 81 holders of record of our common stock. However, because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate with any level of accuracy the total number of stockholders represented by these record holders.

Dividends

        We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings to fund development and growth of our business and to repurchase our common stock, and do not anticipate paying cash dividends in the foreseeable future.

Recent Sales of Unregistered Securities

        None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

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

        On October 30, 2008, Advent's Board authorized the repurchase of up to 3.0 million shares of the Company's outstanding common stock. During the fourth quarter of 2009, Advent did not make any repurchases of common stock. At December 31, 2009, there remained approximately 1.0 million shares authorized by the Board for repurchase.

        In addition to the above, we have withheld shares through net share settlements during the three months ended December 31, 2009. The following tables provides a month-to-month summary of the repurchase activity upon the vesting of restricted stock units and the exercise of stock-settled stock appreciation rights under our equity compensation plan to satisfy tax withholding obligations during the three months ended December 31, 2009 (in thousands, except per share data):

Securities Authorized for Issuance Under Equity Compensation Plans

        Information regarding securities authorized for issuance under equity compensation plans is incorporated by reference from our Proxy Statement to be filed for our 2010 Annual Meeting of Stockholders.

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Performance Graph

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Advent Software, Inc., The S&P 500 Index
And The NASDAQ Computer & Data Processing Index

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*

$100 invested on 12/31/04 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.

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Item 6.    Selected Financial Data

        The following selected financial data are derived from our consolidated financial statements. This data should be read in conjunction with the consolidated financial statements and notes thereto, and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations".

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

        We report or otherwise provide to investors certain non-GAAP and operational information, including non-GAAP operating income and earnings per share, and our term license bookings metrics (expressed as annual term license contract value, "ACV") and maintenance renewal rates, that is intended to provide investors with certain of the information that management uses as a basis for planning and forecasting of future periods. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. In addition, undue reliance should not be place upon non-GAAP or operating information because this information is neither standardized across companies nor subjected to the same control activities and audit procedures that produce our GAAP financial results.

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

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Overview

        We offer integrated software products and services for automating and integrating data and work flows across the investment management organization, as well as between the investment management organization and external parties. Our products are intended to increase operational efficiency, improve the accuracy of client information and enable better decision-making. Each solution focuses on specific mission-critical functions of the front, middle and back offices of investment management organizations and is designed to meet the needs of the particular client, as determined by size, assets under management and complexity of their investment process. On October 1, 2009, we completed the sale of MicroEdge, Inc., our wholly-owned subsidiary, as further described below. The results of MicroEdge have been reclassified as a discontinued operation for all periods presented. Unless otherwise noted, discussion in this document pertains to our continuing operations. See Notes 1 and 3 of Notes to Consolidated Financial Statements.

Current Economic Environment

        During 2009, our business continued to be impacted by the generally weak macro-economic environment. The current environment has created pressure on our clients to decrease their information technology budgets, which negatively impacted our customer renewal rates and bookings of annual term license contract value ("ACV") in 2009. For example, initially disclosed renewal rates, which we report one quarter in arrears, ranged from 85% to 93% during 2009 compared to a range of 98% to 103% during 2008. Additionally, the ACV added during 2009 decreased to $21.8 million from $28.1 million during 2008. Despite the negative impact on our renewal rates and overall bookings, we continued to proactively control our costs and achieved growth in our continuing operations' operating profit margin and earnings per share over 2008.

        During 2009, many investment managers' revenues decreased as a result of decreases in their assets under management and some hedge funds and other types of clients have gone out of business. While we are not immune to downturns in technology spending, should our customers continue to reduce or limit their spending, we believe we are well positioned to maintain our competitive position in the longer term for the following reasons:

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Our portfolio accounting, trade order management, and compliance software is mission-critical to our customers;



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Our technology can be utilized to increase operational efficiency;



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We offer a wide range of deployment options to suit clients of any size and strategy;



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As a market leader in investment management technology, customers who spend money will attempt to minimize risk and therefore, favor our stability, reliability and scalability;



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A more regulated, compliance-oriented industry will drive an increased need for our systems; and



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Our recurring revenue model and large customer base will continue to provide longer term stability.

        We also believe that investment managers will be increasingly focused on providing increased and differentiated levels of service to their customers. These factors have traditionally been demand drivers for our products.

        We believe our recent financial results validate the strength and stability of our business and the attractiveness of our product portfolio to our customers. For example, our continuing operations have grown revenue, operating income and margin, and operating cash flows during 2009 compared to 2008. In addition, we saw an improved demand environment during the second half of 2009 from prospects

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and customers across all the markets we serve. As such, we expect an improved demand environment for 2010 and expect to grow revenues by 5% to 8% in 2010. As the current economic situation evolves, we will continue to evaluate the impact of this environment on our business and we will remain focused on delivering solutions for our customers. We remain positive about our relative market position and our product delivery plans and we intend to remain focused on executing in the areas we can control by continuing to provide high value products while managing our expenses and headcount growth.

Operating Overview

        Operating highlights of 2009 include:

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Expanded customer relationships and continued acceptance of our product offerings. We experienced continued demand for both our newest and largest portfolio management and accounting platforms: Advent Portfolio Exchange ("APX") and Geneva. We signed 72 APX contracts, bringing the total number of licenses sold globally to 353, and we signed 38 new Geneva clients which brings the total number of Geneva licenses sold to 242 as of December 31, 2009. We sold Tamale RMS to numerous firms including asset managers, endowment managers and funds of funds.



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New and incremental bookings.  The term license contracts signed in 2009 will contribute approximately $21.8 million in annual revenue ("annual term license contract value" or "ACV") once they are fully implemented.



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Tamale product release.  We released Tamale RMS 4.0 which introduced an open flexible framework that allows firms to customize the application to meet their specific research process workflow requirements.



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Further expansion into Asia Pacific.  We opened a new office in Beijing, China. The office is staffed with more than 50 employees who were previously part of the company's contract workforce. It is our largest office outside of North America.



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Repurchase of common stock.  We repurchased 0.7 million shares under our Board authorized share repurchase program for a total cash outlay of $14.6 million and an average price of $21.13 per share.

Divestiture of MicroEdge

        During 2009, management determined that the continued growth in the not-for-profit community would require a significant investment of resources and decided to focus on the core business. In connection with this decision, management explored divesting the MicroEdge subsidiary and on October 1, 2009, we completed the sale of MicroEdge. See Note 3, "Discontinued Operation", to the consolidated financial statements for a description of the principal terms of the divestiture.

        In accordance with FASB ASC 205-20, "Discontinued Operations", MicroEdge's results have been reclassified as a discontinued operation in the consolidated statements of operations for all periods presented. The results of operations and the related charges for our discontinued operation are classified as "net income from discontinued operation, net of applicable taxes" in the accompanying consolidated statements of operations for all periods presented. In addition, the assets and liabilities of MicroEdge have been reclassified as assets and liabilities of discontinued operation in the Company's consolidated balance sheet for all periods presented.

        Unless noted otherwise, discussion in this document pertains only to continuing operations.

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Financial Overview

        The components of revenue from continuing operations during 2009 and 2008, and associated dollar and percentage fluctuations were as follows (in thousands, except % change):

        We recognized revenue of $259.5 million from continuing operations during 2009, which represented an increase of 9% over the prior year. This increase was driven by significant growth in term license revenue (Geneva and APX) as we continued to layer in incremental ACV sold in previous periods, and to a lesser extent, price increases and revenues from our new research management solution, Tamale RMS, which we introduced in the fourth quarter of 2008. Perpetual license fees in 2009 were down compared 2008 as we licensed fewer perpetual seats to our existing perpetual client base and fewer modules to new clients. Incremental assets under administration fees from perpetual licenses decreased by $1.9 million in 2009 compared to 2008, as clients experienced declines in the market value of AUA balances due to market conditions. Professional services and other revenues also decreased due to reduced spending by our customers on consulting services during 2009. We have grown net revenue year-over-year for several reasons, including the following:

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Our existing term licenses and maintenance revenues provide a consistent, recurring revenue stream.



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Our product innovation helped drive acquisition of new customers, resulting in incremental term license contract value and professional services billings.



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Our completion of term license implementations result in incremental term license revenues.

        Total recurring revenues, which we define as term license, perpetual maintenance, and other recurring revenues, increased to 86% of total net revenues during 2009, as compared to 80% during 2008. Term license revenues increased 49% in 2009 from the prior year period and represented 38% of total net revenues in 2009, as compared to 28% in 2008.

        Total expenses from continuing operations, including cost of revenues, were $231.6 million in 2009, compared with $219.9 million in 2008. Our expenses increased in 2009 from 2008 largely as a result of increased payroll, variable compensation and benefit expenses resulting from increases in headcount primarily from our acquisition of Tamale Software, Inc. on October 1, 2008.

        Our operating income from continuing operations in 2009 increased to $27.9 million or 11% of revenue from $18.0 million or 8% of revenue in 2008 which is reflective of revenue growth and our cost reduction initiatives.

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        Our continuing operations' income tax expense was $8.3 million resulting in a 29% effective tax rate during 2009, compared to $3.9 million or 18%, respectively, in 2008.

        Net income from continuing operations was $20.8 million, resulting in diluted earnings per share of $0.79 for 2009, compared to $17.3 million or $0.62 in 2008.

        Our continuing operations generated operating cash flow of $72.4 million in 2009, which compares to $70.3 million in 2008.

Term License and Term License Deferral

        We are substantially through the process of converting the Company's license revenues from a perpetual model to a predominantly term model. Under a perpetual pricing model, customers purchase a license to use our software indefinitely and generally we recognize all license revenue at the time of sale; maintenance is purchased under an annual renewable contract, and recognized ratably over the contract period. Under a term pricing model, customers purchase a license to use our software and receive maintenance for a limited period of time and we recognize all of the revenue ratably over the length of the contract. This had the effect of lowering revenues for our continuing operations in the early stages of the transition, but increasing the total potential value of the customer relationship.

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

        The term license component of the deferred revenue balance related to implementations in process will increase or decrease in the future depending on the amount of new term license bookings relative to the number of implementations that reach completion in a particular quarter. During 2009, the revenue recognized from completed implementations exceeded the revenue deferred from projects being implemented, resulting in a net recognition of revenue of $6.1 million for fiscal 2009 composed of $3.5 million of term license revenue and $2.6 million of professional services revenue. We do not expect this trend of revenue recognition exceeding revenue deferral to continue. For example, during 2008, the revenue deferred from projects being implemented exceeded the revenue recognized from completed implementations by $9.6 million composed of $2.8 million of term license revenue and $6.8 million of professional services revenue.

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        Amounts of revenues and directly-related expenses deferred as of December 31, 2009 and 2008 associated with our term licensing deferral were as follows (in millions):

        Deferred net revenues and directly-related expenses are classified as "Deferred revenues" (short-term and long-term), and "Prepaid expenses and other," and "Other assets," respectively, on the consolidated balance sheets.

Term License Bookings

        The following table summarizes the Company's quarterly term license bookings (operational information) and the associated average term and annual term license contract value (in thousands):

Critical Accounting Policies and Estimates

        Management's discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements and related notes, which have been prepared in accordance with accounting principles generally accepted in the United States of America. We review the accounting policies used in reporting our financial results on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities.

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        On an ongoing basis, we evaluate the process we use to develop estimates. We base our estimates on historical experience and on other information that we believe is reasonable for making judgments at the time the estimates are made. Actual results may differ from our estimates due to actual outcomes being different from those on which we based our assumptions.

        We believe the following accounting policies contain the more significant judgments and estimates used in the preparation of our consolidated financial statements:

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Revenue recognition and deferred revenues;



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Income taxes;



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Stock-based compensation;



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Restructuring charges and related accruals;



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Business combinations;



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Disposition;



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Goodwill;



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Impairment of long-lived assets;



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Legal contingencies; and



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Sales returns and accounts receivable allowances.

        Revenue recognition.    Our revenue recognition policies contain our most significant judgments and estimates. Our revenue policy is further described in Note 1, "Summary of Significant Accounting Policies", to the consolidated financial statements.

        We recognize revenue from term license, maintenance and other recurring; perpetual license fees, and professional services and other. We offer a wide variety of products and services to a large number of financially sophisticated customers. While many of our lower-priced license transactions, maintenance contracts, subscription-based transactions and professional services projects conform to a standard structure, many of our larger transactions are complex and may require significant review and judgment in our application of generally accepted accounting principles.

        Software licenses.    We recognize revenue from the licensing of software when persuasive evidence of an arrangement exists, the product has been delivered, the fee is fixed or determinable and collection of the resulting receivable is probable. We generally use a signed license agreement as evidence of an arrangement. Sales through our distributors are evidenced by a master agreement governing the relationship together with binding order forms and signed contracts from the distributor's customers. Revenue is recognized once shipment to the distributor's customer has taken place and when all other revenue recognition criteria have been met. Delivery occurs when a product is delivered to a common carrier F.O.B shipping point, or upon confirmation that product delivered F.O.B shipping destination has been received, or upon notification that software is available for electronic download through our fulfillment vendor. Some of our arrangements include acceptance provisions, and if such acceptance provisions are present, delivery is deemed to occur upon acceptance. We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction. We assess whether the collectability of the resulting receivable is probable based on a number of factors, including the credit worthiness of the customer determined through review of credit reports, our transaction history with the customer, other available information and pertinent country risk if the customer is located outside the United States. Our standard payment terms are due at 180 days or less, but payment terms may vary based on the country in which the agreement is executed. Software licenses are sold with maintenance and, frequently, professional services.

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        We typically license our products on a per server, per user basis with the price per customer varying based on the selection of the products licensed, the assets under administration, the number of site installations and the number of authorized users. We have substantially completed our transition from selling mostly perpetual licenses to selling a mix of term and perpetual licenses, and expect term license revenue to continue to increase as a proportion of total recurring revenues (which we define as term license, maintenance and other recurring revenues) in the future. Term license revenue comprised approximately 44%, 35% and 25% of total term license, maintenance and other recurring revenues in 2009, 2008 and 2007, respectively. Revenue recognition for software licensed under term and perpetual license models differs depending on which type of contract a customer signs:

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Term licenses

Term license contracts include both the software license and maintenance services. We offer multi-year term licenses by which a customer makes a binding commitment that typically spans three years. For multi-year term licenses, we have not established vendor specific objective evidence, or VSOE, of fair value for the software license and maintenance components and, as a result, in situations where we are also performing related professional services, we defer all revenue and directly related expenses under the arrangement until the implementation services are complete and the remaining services are substantially complete. At the point professional services are substantially completed, we recognize a pro-rata amount of the term license revenue, professional services fees earned and related expenses, based on the elapsed time from the start of the term license to the substantial completion of professional services. We determine whether services are substantially complete by consulting with the professional services group and applying management judgment. Term license revenue for the remaining contract years and the remaining deferred professional services revenue and related expenses are recognized ratably over the remaining contract length. When multi-year term licenses are sold and do not include related professional services, we recognize the entire term license revenue ratably over the period of the contract term from the effective date of the license agreement assuming all other revenue recognition criteria have been met. Revenues from term licenses are included in "Term license, maintenance and other recurring" revenues on the consolidated statement of operations.

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Perpetual licenses

We allocate revenue to delivered components, normally the license component of the arrangement, using the residual method, based on VSOE of fair value of the undelivered elements (generally the maintenance and professional services components), which is specific to us. We determine the fair value of the undelivered elements based on the historical evidence of the Company's stand-alone sales of these elements to third parties and/or renewal rates. If VSOE of fair value does not exist for any undelivered elements, then the entire arrangement fee is deferred until delivery of that element has occurred unless the only undelivered element is maintenance. Revenues from perpetual licenses are included in "Perpetual license fees" revenue on the consolidated statement of operations.

        Certain of our perpetual and term license contracts include asset-based fee structures that provide additional revenues based on the assets that the client manages using our software ("Assets Under Administration" or "AUA"). Contracts containing an AUA fee structure have a defined measurement period which requires the client to self-report actual AUA in arrears of the specified period. AUA fees above the stated minimum fee for the same period are considered incremental fees. Because incremental fees are not determinable until the conclusion of the measurement period, they are both earned and recognized upon completion of the measurement period, on a quarterly or annual basis. Incremental fees from perpetual AUA contracts are included in "Perpetual license fees" on the consolidated statement of operations. Incremental fees from term AUA contracts are included in "Term license, maintenance and other recurring" revenue on the consolidated statement of operations. The

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Company recognizes AUA contract minimum fees over the period of service and continues to recognize incremental fees in arrears once clients contractually report the AUA to the company, because the incremental fees are not determinable until reported.

        Maintenance and other recurring revenues.    We offer annual maintenance programs on perpetual licenses that provide for technical support and updates to our software products. Maintenance fees are bundled with perpetual license fees in the initial licensing year and charged separately for renewals of annual maintenance in subsequent years. Fair value for maintenance is based upon either renewal rates stated in the contracts or separate sales of renewals to customers. Generally, we recognize maintenance revenue ratably over the contract term.

        We offer other recurring revenue services that are either subscription or transaction based which primarily include the provision of software interfaces to download securities information from third party data providers, partial or full business process outsourcing, account aggregation, reconciliation, reference data management, and hosting of hardware and/or software. We recognize revenue from recurring revenue transactions either ratably over the subscription period or as the transactions occur based on the terms of the arrangement.

        Professional services and other revenues.    We offer a variety of professional services that include project management, implementation, data conversion, integration, custom report writing and training. We base fair value for professional services upon separate sales of these services to customers. Our professional services are generally billed based on hourly rates together with reimbursement for travel and accommodation expenses. We recognize revenue as professional services are performed, except in the case of multi-year term license contracts which are described in the "term licenses" section above. Certain professional services arrangements involve acceptance criteria and in these cases, revenue and related expenses are recognized upon acceptance. Professional services and other revenues also include revenue from our user conferences.

        Directly related expenses.    When we defer service revenues, we also defer the direct costs incurred in the delivery of those services to the extent those costs are recoverable through the future revenues on non-cancelable contracts as prepaid contract expense. We recognize those deferred costs as costs of professional services revenues proportionally and over the same period that the deferred revenue is recognized as service revenue. When we defer license revenue, we defer the direct incremental costs incurred as a result of selling the contract (i.e. sales commissions earned by the sales force as a part of their overall compensation) because those costs would not have been incurred but for the acquisition of that contract. We recognize those costs as sales and marketing expense proportionally and over the same period as the license revenues.

        Income taxes.    We account for worldwide income taxes under an asset and liability approach that requires the expected future tax consequences of temporary differences between book and tax bases of assets and liabilities to be recognized as deferred tax assets and liabilities. Significant judgment is required to determine our worldwide income tax provision. In the ordinary course of business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Many of these uncertainties arise as a consequence of cost reimbursement arrangements among related entities, the process of identifying items of revenue and expense that have differing or preferential tax treatment and segregation of foreign and domestic income and expense to the appropriate taxing jurisdictions to reasonably allocate earnings. Although we believe that our judgments and estimates are reasonable, the final outcome could be different from that which is reflected in our income tax provision and accruals.

        A valuation allowance is recorded to reduce the recognized net deferred tax assets to an amount that will more likely than not be realized. In order for us to realize our deferred tax assets, we must be able to generate sufficient future taxable income in the jurisdiction where the tax asset is located. We

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consider forecasted earnings, identified future taxable income and prudent and reasonable tax planning strategies in assessing the need for a valuation allowance.

        We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed during the subsequent year. Adjustments based on filed returns are generally recorded in the period when the return is filed and the tax implication is known.

        We are subject to audits by state, federal and foreign tax authorities. Our estimates for the potential outcome of any uncertain tax matter are judgmental. We believe we have adequately provided for any reasonably foreseeable outcome related to these matters. However, our future results may include adjustments to our estimated tax liabilities.

        Stock-based compensation.    We currently use the Black-Scholes option pricing model to determine the fair value of stock options, stock appreciation rights ("SAR") and employee stock purchase plan shares. The fair value of our restricted stock units is calculated based on the fair market value of our stock on the date of grant. The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include our expected stock price volatility over the term of the awards, actual and projected employee exercise behavior, the risk-free interest rate and expected dividends.

        We estimate the volatility of our common stock based on an equally weighted average of historical and implied volatility of the Company's common stock. We determined that a blend of historical and implied volatility is more reflective of the market conditions and a better indicator of expected volatility than using purely historical volatility. We estimate the expected life of options and SARs granted based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. We base the risk-free interest rate on the US Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option and SAR. We do not anticipate paying any cash dividends in the foreseeable future and therefore use an expected dividend yield of zero in the option pricing model.

        These variables are sensitive and change on a daily basis. As a result, the financial result from issuing the same number of options or SARs can vary significantly over time. The following table reflects the change in the fair value of a hypothetical option or SAR as a result of a hypothetical change in one of the underlying assumptions:

        Historically, our SAR and stock option awards granted to employees cliff vest 20% after one year and monthly thereafter over the next 48 months. Starting in February 2009, we reduced the vesting period from 5 years to 4 years, and SARs and stock option awards granted to employees now cliff vest 25% after one year and monthly thereafter over the next 36 months. Our restricted stock unit ("RSU") awards cliff vest 50% after two years and 50% after four years. ASC 718, "Compensation—Stock Compensation", requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based on

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our annual forfeiture rate. The annual forfeiture rate is based on our historical forfeiture experience over the last ten years. Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, different assumptions and estimates could materially impact our reported financial results. A decrease in our annual forfeiture rate assumption would increase stock-based compensation expense. The estimated impact of a hypothetical 500 basis point decrease in the annual forfeiture rate on 2009 stock-based compensation expense would have been an increase of approximately $0.2 million.

        Restructuring charges and related accruals.    We have developed and implemented formalized plans for restructuring our business to better align our resources to market conditions and recorded significant charges. In connection with these plans, we recorded estimated expenses for severance and benefits, lease cancellations, asset write-offs and other restructuring costs. Given the significance of, and the timing of the execution of such activities, this process is complex and involves periodic reassessments of estimates made at the time the original decisions were made, including evaluating real estate market conditions for expected vacancy periods and sub-lease rents. We continually evaluate the adequacy of the remaining liabilities under our restructuring initiatives. Although we believe that these estimates accurately reflect the costs of our restructuring plans, actual results may differ, thereby requiring us to record additional provisions or reverse a portion of such provisions.

        Business combinations.    When we acquire businesses, we allocate the purchase price to tangible assets and liabilities and identifiable intangible assets acquired. Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates are based on historical experience and information obtained from the management of the acquired companies. These estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable. In addition, unanticipated events and circumstances may occur which may affect the accuracy or validity of such estimates.

        Disposition.    When we dispose of a subsidiary, we account for the divestiture in accordance with ASC 205-20, "Discontinued Operations". The results of operations and the related charges for the discontinued operation are classified as "Net income from discontinued operation, net of applicable taxes" in the accompanying consolidated statements of operations for all periods presented. In addition, the assets and liabilities of the discontinued operation are reclassified as assets and liabilities of discontinued operation in our consolidated balance sheet for all periods presented.

        The calculation of the gain on disposal of our discontinued operation required management to make significant estimates in the resulting facility exit costs. In connection with the sale of MicroEdge, the Company vacated its MicroEdge facilities in New York and entered into a sub-lease agreement with the Purchaser whereby the Purchaser will sub-lease the premises for two years with the option to extend the sub-lease term through the end of the lease term in 2018. Given the significance of, and the timing of the execution of such activities, this process is complex and involves periodic reassessments of estimates made at the time the original decisions were made, including evaluating the probability that the Purchaser will decide to sub-lease the premises beyond the initial two-year period and through 2018, evaluating real estate market conditions for expected vacancy periods and sub-lease rents. We continually evaluate the adequacy of the remaining liabilities related to this disposition. Although we believe that these estimates accurately reflect costs for our facility exit costs, actual results may differ, thereby requiring us to record additional provisions or reverse a portion of such provisions.

        Additionally, $3 million of the Purchase Price has been placed in escrow for eighteen (18) months following the close to be held as security for losses incurred by the Purchaser in the event of certain breaches of the representations and warranties contained in the Agreement or certain other events.

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Given the uncertainty associated with the potential losses, any gain on sale associated with the $3.0 million held in escrow will be recorded by the Company when realized.

        Goodwill.    We review our goodwill for impairment annually during the fourth quarter of our fiscal year (as of November 1) and more frequently if an event or circumstance indicates that an impairment loss has occurred. We are required to test our goodwill for impairment at the reporting unit level. Historically, we determined that the Company had three reporting units for the purposes of goodwill impairment testing. With the divestiture of MicroEdge on October 1, 2009, we determined that the Company now has two reporting units, Domestic and International, which comprise our Advent Investment Management segment, for the goodwill impairment testing performed during the fourth quarter of 2009. The test for goodwill impairment is a two-step process:

        The first step compares the fair value of each reporting unit with its respective carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of our reporting unit is considered not impaired, thus the second step of the impairment test is unnecessary.

        The second step, used to measure the amount of impairment loss, compares the implied fair value of each reporting unit's goodwill with the respective carrying amount of that goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess.

        Determining the fair value of a reporting unit is subjective and requires judgment at many points during the test including the development of future revenue and expense forecasts used to calculate future cash flows, the selection of risk-adjusted discount rates, and determination of market comparable entities. During the fourth quarter of 2009, Advent completed the first step of its annual impairment test and determined that none of the reporting units were at risk for failing step one of the impairment testing. Therefore, the second step of the impairment test was not necessary to perform.

        Impairment of long-lived assets.    We review our other long-lived assets including property and equipment and other intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Determining whether an impairment trigger has occurred is subjective and requires judgment. Our recoverability test compares the assets' carrying amount to their expected future undiscounted net cash flows. We estimate future revenue and expense amounts to calculate future cash flows. We believe our forecast revenue and expense amounts are reasonable but forecast amounts are inherently uncertain and unpredictable.

        Legal contingencies.    From time to time, Advent is involved in claims and legal proceedings that arise in the ordinary course of business. We use our judgment to assess both the likelihood and potential amount of a contingency. We periodically review our assessment whenever there is a change in the facts and circumstances of these proceedings. Litigation is subject to inherent uncertainties and our view of these matters may change in the future. Were an unfavorable outcome to occur, there exists the possibility of a material adverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods.

        Sales returns and accounts receivable allowances.    Our standard practice is to enforce our contract terms and not allow our customers to return software. We have, however, allowed customers to return software on a limited case-by-case basis and have recorded sales returns provisions as offsets to revenue in the period the sales return becomes probable. We use our judgment in estimating our sales returns. We analyze customer demand, acceptance of products and historical returns when evaluating the adequacy of the allowance for sales returns, which are not generally provided to customers. Beginning in 2004, we implemented a methodology to supplement our judgment for calculating the value of reserves that considered the last 18 months of experience into account. Beginning in the second quarter of 2007, we changed our methodology to include the last 12 months of return experience.

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        Our ability to estimate returns is based on our long history of experience with relatively homogenous transactions and the fact that the return period is short. The estimates for returns are adjusted periodically based upon changes in historical rates of returns and other related factors. We have recorded a sales returns provision to decrease revenue for these situations based on our historical experience of $0.3 million, $0.2 million and $0.1 million in fiscal 2009, 2008 and 2007, respectively.

        We use our judgment in estimating our allowance for doubtful accounts. In order to estimate our allowance for doubtful accounts, we analyze specific accounts receivables, historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in customer payment terms. We have recorded a provision for bad debt expense of $0.2 million, $0.6 million and $0.1 million in fiscal 2009, 2008 and 2007, respectively.

Reclassifications

        Certain prior period amounts have been reclassified to conform to the current period presentation to better reflect our view of the current business. These reclassifications do not affect total net revenues, net income, cash flows, or stockholders' equity. See Note 1, "Summary of Significant Accounting Policies," of Notes to our consolidated financial statements for a complete description of the reclassifications.

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Results of Operations for Fiscal Years 2009, 2008 and 2007

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

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NET REVENUES

        Our net revenues are made up of three components: term license, maintenance and other recurring revenue; perpetual license fees; and professional services and other revenue. The revenues from a term license, which includes both software license and maintenance services, are earned under a time based contract. Maintenance revenues are derived from maintenance fees charged for perpetual license arrangements and recurring revenues are derived from our subscription-based and transaction-based services. Perpetual license revenues are derived from the licensing of software products under a perpetual arrangement and include Assets Under Administration ("AUA") fees for certain perpetual arrangements. Professional services and other revenues include fees for consulting, fees from training, and project management services and our client conferences. Sales returns, which we generally do not provide to customers, are accounted for as deductions to these three revenue categories based on our historical experience.

        Since fiscal 2007, revenues from recurring sources have grown and conversely revenues from perpetual licenses have decreased as follows:

        As we continue to sign term license agreements for new customers, grow our subscription, data management and outsourced services revenues, and our customers renew their perpetual maintenance, we expect our revenue from recurring sources to continue to increase as a percentage of net revenues.

        Net revenues increased in 2009 and 2008 due to continued customer adoption for many of our products and services, which principally includes increases in sales of our APX and Geneva products. The year-over-year growth in total net revenues for 2009 was due principally to substantially higher term license, maintenance and other recurring revenues, which reflected 16% and 26% growth in term license revenues during 2009 and 2008, respectively.

        Revenue derived from sales to the Europe, Middle East and Africa ("EMEA") region were $32.6 million, $34.2 million and $26.6 million in 2009, 2008 and 2007, respectively. The decrease in EMEA revenue for 2009 is primarily due to declines in the market values of AUA balances for our EMEA customers, as well as economic conditions in those regions. We plan to continue expanding our international sales efforts, both in our current markets and elsewhere. The revenues from customers in any single international country did not exceed 10% of total net revenues.

        We expect net revenues to be in the range of $272 million to $280 million for fiscal 2010. Additionally, as we continue to sign term license agreements for new customers, we expect our revenue from recurring sources to continue to represent over 85% of our total net revenues.

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Term License, Maintenance and Other Recurring Revenues

        We began our transition to a term license model in 2004 and have experienced growth in our term license ACV bookings through 2008, and experienced a 22% decline in 2009. Revenues from term licenses, which include both the software license and maintenance services for term licenses, grew 49% in 2009 from 2008 and represented 44% of total term license, maintenance and other recurring revenues in 2009, up from 35% in 2008 and 25% in 2007. The growth of term license revenues in 2009 and 2008 reflects the continued layering of incremental ACV sold in previous periods into our term revenue and the continued market acceptance of our Geneva, APX, Axys, Partner, Moxy and Tamale products. In addition, during 2009, the revenue recognized from completed implementations exceeded the revenue deferred from projects being implemented, resulting in a net recognition of revenue of $3.5 million during 2009. This is in contrast to our historical trend of net revenue deferral through 2008. In 2008, term license revenue deferred from projects being implemented exceeded the revenue recognized from completed implementations by $2.8 million. Revenues from our new research management solution, Tamale RMS, which we introduced in October 2008, also contributed to the growth of our term license revenues in 2009.

        Maintenance revenues decreased by $3.3 million during 2009. The decrease in maintenance revenues during 2009 was attributable to perpetual license customers migrating to term licenses, maintenance de-activations due to customer attrition, and customers downgrading maintenance levels, partially offset by the impact of price increases. The increase in maintenance revenues of $4.1 million during 2008 were attributable to the impact of price increases on annual perpetual maintenance renewals purchased by our installed customer base, up-selling to higher value maintenance plans and, to a lesser extent, an increase in new perpetual maintenance support contracts, partially offset by maintenance de-activations and downgrades, and perpetual license customers migrating to term licenses.

        Other recurring revenues, which primarily include revenues from the provision of software interfaces to download securities information from third party data providers, partial or full business process outsourcing, account aggregation, reconciliation, reference data management, and hosting of hardware and/or software, increased $2.3 million and $7.0 million during 2009 and 2008, respectively. This was primarily due to revenue increases associated with growth in our subscription, data management and outsourced services of $2.5 million and $4.5 million during 2009 and 2008, respectively, and changes in transaction charges of $(0.3) million and $2.5 million.

        As a percentage of total net revenues, total term license, maintenance and other recurring revenues increased to 86% during 2009 from 80% and 79% in 2008 and 2007, respectively. These increases as a percentage of total net revenues were primarily attributable to the continued emphasis in term license sales relative to perpetual license sales. Our renewal rates are based on cash collections and are disclosed one quarter in arrears. We disclose our renewal rates one quarter in arrears in order to include substantially all payments received against the invoices for that quarter. We also update our renewal rates from the initially disclosed rates to include all cash collections subsequent to the initial

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disclosure. The following summarizes our initial and updated renewal rates (operational metric) for the previous five quarters:

        As we continue to sign term license agreements for new customers, we expect our revenue from recurring sources to continue to represent over 85% of our total net revenues. In addition, we expect other recurring revenues to increase due to new bookings in recent years, including the data services contract with TIAA-CREF and the hosted services contract with Fidelity Investments which were both fully implemented in 2009.

Perpetual License Fees

        Consistent with our transition to term licensing, perpetual license fees continue to account for a smaller percentage of total net revenues. Additionally, we licensed fewer perpetual seats and modules to our existing perpetual client base. Incremental assets under administration fees from perpetual licenses decreased by $1.9 million in 2009 compared to 2008 and $0.1 million in 2008 compared to 2007, as clients experienced declines in the market value of AUA balances due to market conditions.

        We expect AUA fees will increase in 2010, as compared to 2009, due to an increase in assets that our clients manage using our software resulting from more favorable market conditions. Conversely, we expect other perpetual license fees to decrease as we continue our emphasis on term licenses.

Professional Services and Other Revenues

        Professional services and other revenues include consulting, project management, custom integration, training and our client conference. Professional services projects related to Axys, Moxy and Partner products generally can be completed in a two-to six-month time period, while services related to Geneva and APX products may require a four- to nine-month implementation period.

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        We defer professional services revenue for services performed on term license implementations that are not considered substantially complete. Service revenue is deferred until the implementation is complete and remaining services are substantially completed. Upon substantial completion, we recognize a pro-rata amount of professional services fees earned based on the elapsed time from the start of the term license to the substantial completion of professional services. The remaining deferred professional services revenue is recognized ratably over the remaining contract length.

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

        The revenue decrease in 2009 represented a contraction in new services engagements in addition to lower utilization of our consultants and related reimbursable travel resulting from a decrease in demand for consulting services in 2009 compared to 2008. In addition, we experienced a decline in revenues associated with our annual client conference as we did not hold a conference in 2009. These decreases were partially offset by the recognition of net professional services revenue related to the completion of term license implementations. The impact of our term license implementation recognition (deferral) on professional services revenues was as follows:

        As more professional service implementation projects reached substantial completion during 2009, the revenue recognized from completed implementations exceeded the revenue deferred from projects being implemented, resulting in a net recognition of revenue of $2.6 million, representing a $9.4 million increase to professional services revenue compared to the net deferral of $6.8 million during 2008.

        The revenue increase in 2008 is primarily due to more revenue generating professional services headcount utilized and third party service providers hired in 2008 associated with implementations of our APX and Geneva products. Additionally, we experienced an increase in implementation services during 2008, compared to 2007, after the launch of our APX product and the sales success of our Geneva product, which are both sold under a term license model. As a result, we deferred professional services revenues of $6.8 million during 2008, which represented a 30% decrease in net deferrals compared to 2007.

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Revenues by Segment

        On October 1, 2009, Advent completed the sale of its MicroEdge subsidiary. Accordingly, the results of MicroEdge have been classified as a discontinued operation in the consolidated statements of operations for all periods presented. Following the divestiture, the Company operates under one reportable segment, Advent Investment Management. See Note 3, "Discontinued Operation" to the consolidated financial statements for further discussion.

        The elimination of revenue in our "Other" segment in fiscal 2009 and 2008 and the revenue amount in fiscal 2007 resulted from the wind down of the "soft dollar" business of our SEC-registered broker/dealer subsidiary, Second Street Securities, as it no longer fit our corporate strategy.

COST OF REVENUES

        Our cost of revenues is made up of four components: cost of term license, maintenance and other recurring; cost of perpetual license fees; cost of professional services and other; and amortization of developed technology. The slight increase in cost of revenues in absolute dollars in 2009 was due principally to an increase in costs from less cost deferral from our term implementations, and costs resulting from headcount additions associated with our acquisition of Tamale in October 2008, partially offset by a decrease in costs associated with the cancelation of our 2009 annual client conference. To a lesser extent, increased amortization associated with our developed technology also contributed to the overall increase.

        Cost of revenues as a percent of total net revenues decreased in 2009 resulting principally from the recognition of term license and professional services revenue from several projects that reached substantial completion in 2009. We defer revenues and direct costs associated with services performed on term license implementations. Indirect costs such as management and other overhead expenses are recognized in the period in which they are incurred. The increase in gross margin percentage in 2009 is primarily due to the net recognition of term license and professional services revenue from several projects that reached substantial completion during 2009. Consistent with historical trends, we are still experiencing negative gross margins on professional services revenues.

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Cost of Term License, Maintenance and Other Recurring

        Cost of term license fees consists primarily of royalties and other fees paid to third parties, the fixed direct labor and third-party costs involved in producing and distributing our software, and cost of product media including duplication, manuals and packaging materials. Cost of maintenance and other recurring revenues is primarily comprised of the direct costs of providing technical support services under maintenance agreements and other services for recurring revenues, and royalties paid to third party subscription-based and transaction-based vendors. Gross margins for term licenses were 79%, 77% and 77% during 2009, 2008 and 2007, respectively. The increase in gross margin in 2009 when compared to 2008 was due to the impact of cost control measures implemented during 2009.

        Cost of term license, maintenance and other recurring fluctuated due to the following (in thousands):

        The absolute dollar amount increases in 2009 and 2008 were due primarily to an increase in compensation and related costs resulting from increases in salary costs and headcount which enables us to deliver the services we provide to our growing number of clients in their day-to-day use of our software. During 2009, headcount decreased to 270 employees at December 31, 2009 from 278 employees at December 31, 2008, but was higher on average year over year as we increased headcount by 21 heads from our Tamale acquisition in October 2008. Headcount increased to 278 employees at December 31, 2008 from 227 employees at December 31, 2007. Royalty expenses decreased in 2009 compared to 2008, resulting from the cessation during 2009 of royalty contracts with certain software vendors. Royalty fees increased in 2008 due to an increase in payments to third party subscription-based and transaction based vendors. Decreases to outside services and recruiting expenses reflect less activity and utilization during 2009 compared to 2008.

        We expect cost of term license, maintenance and other recurring revenue to increase in dollar amount but not as a percentage of related revenue in 2010 as compared to 2009.

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Cost of Perpetual License Fees

        Cost of perpetual license fees consists primarily of royalties and other fees paid to third parties, the fixed direct labor and third party costs involved in producing and distributing our software, and cost of product media including duplication, manuals and packaging materials. The cost of perpetual license fees fluctuated during 2009 and 2008 as a result of changes in payroll and related expenses and product media costs. Payroll and related expenses decreased during 2009 and 2008 due to a decline in headcount. During 2009, we experienced a decrease in product related costs as we continue to transition away from perpetual licensing. We expect these fees to decrease slightly in 2010 as a result of our continuing transition away from perpetual licensing.

Cost of Professional Services and Other

        Cost of professional services and other revenue consists primarily of personnel related costs associated with the client services organization in providing consulting, custom report writing and conversions of data from clients' previous systems. Also included are direct costs associated with third-party consultants and travel expenses. Additionally, we defer direct professional services costs until we have completed the term license implementation services.

        Cost of professional services and other fluctuated due to the following (in thousands):

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        The change in cost of professional services in 2009 and 2008 primarily reflects changes in expenses associated with payroll and related costs, outside services and travel and entertainment. Decreases in payroll and related expenses during 2009 resulted from the change in demand for consulting and training services related to term license contract sales. During the latter half of 2007, we hired a significant number of consultants resulting in increased payroll costs in 2008. Headcount increased to 132 employees at December 31, 2008 from 129 employees at December 31, 2007. The decrease in payroll and related expenses in 2009 reflects the redeployment of consulting employees to other areas of our business during the year. Headcount in our consulting group decreased to 105 at December 31, 2009. The decrease in outside services and travel and entertainment reflects a lower level of professional service activity and lower utilization of consulting employees during 2009 compared to 2008. During 2008, we experienced an increase in outside services and travel and entertainment resulting from an increase in demand for consulting and training services.

        We defer direct costs associated with services performed on term license implementations until a project reaches substantial completion. Indirect costs such as management and other overhead expenses are recognized in the period in which they are incurred, with no revenue to offset them. As the implementation services are completed, the deferred professional services revenue and expense associated with our term licenses are recognized ratably over the remaining contract length which we believe will improve margins over time. The impact of our term license implementation recognition (deferral) on professional services costs was as follows:

        As more professional service implementation projects related to our APX and Geneva products reached substantial completion during 2009, the costs recognized from completed implementations exceeded the revenue deferred from projects being implemented, resulting in a net recognition of costs of $1.3 million, representing a $4.1 million increase to costs of professional services compared to the deferral during 2008.

        Gross margins for professional services and other were (17)%, (15)% and (27)% during 2009, 2008 and 2007, respectively. The slight deterioration in 2009 when compared to 2008 was primarily due to the lower utilization of our consulting employees, partially offset by the benefit from the net recognition of professional services revenue from several projects that reached substantial completion during 2009. Professional services gross margins for 2008 and 2007 improved compared to the previous year, respectively, but continued to be negative as a result of the significant deferral of professional services revenues and costs associated with our term license implementation. In addition, headcount in our consulting group had increased during 2007, and to a lesser degree, in 2008. Since these new employees undergo a training period, typically of six months, before becoming fully billable, their associated costs had a near-term negative impact on gross margins.

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Amortization of Developed Technology

        Amortization of developed technology represents amortization of acquisition-related intangibles, and amortization of capitalized software development costs previously capitalized under ASC 985, "Costs of Software to be Sold, Leased, or Marketed". The increases in 2009 and 2008 reflect increased amortization from technology-related intangible assets associated with Tamale which we acquired in October 2008. Also contributing to the increase, but to a lesser extent, is amortization from software development costs previously capitalized under ASC 985.

OPERATING EXPENSES

Sales and Marketing

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

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

        The increase in expense in 2009 and 2008 primarily reflects the growth of payroll related costs. The increase in payroll and related expense were a result of an increase in headcount to 185 at December 31, 2009 from 181 (9 heads from Tamale acquisition) and 149 at December 31, 2008 and 2007, respectively, and increases in variable compensation paid to these individuals. Travel and entertainment, outside services and marketing costs decreased in 2009 compared to 2008 as a result of cost control measures implemented in 2009, as well as our decision to host a road show in lieu of the

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Advent client conference in 2009. The decrease in bad debt expense in 2009 is a result of fewer accounts being sent to collections in 2009 when compared to 2008.

        Higher travel and entertainment and outside services costs in 2008 compared to 2007 were primarily due to more employees attending the Advent client conference in 2008 and the $0.4 million fee associated with the cancellation of the 2009 Advent client conference. During 2008, we referred more accounts to collections which resulted in our increased provision for bad debt compared to 2007.

        In 2010, we expect sales and marketing expenses to increase in dollar amount but remain relatively flat as a percentage of total net revenues compared with 2009, as we will incur additional travel expenses for the 2010 Advent client conference and an increase our marketing activities in support of planned product launches.

Product Development

        Product development expenses consist primarily of salary and benefits for our development staff as well as contractors' fees and other costs associated with the enhancements of existing products and services and development of new products and services. We expense costs incurred to develop computer software products until technological feasibility is reached for the products. Once technological feasibility is reached, all software costs are capitalized until the product is made available for general release to customers. The capitalized costs are amortized using the greater of the ratio of the product's current gross revenues to the total of current expected gross revenues or on a straight-line basis over the software's estimated economic life of approximately three years.

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

        The increase in total product development expenses during fiscal 2009 and 2008 were primarily due to increases in payroll related costs resulting from an increase in headcount attributable to our acquisition of Tamale Software in October 2008 and also headcount additions to help continue the enhancement of our existing product suite including new versions of Geneva, APX, Moxy, Advent Rules Manager, Advent Revenue Center, Partner and Tamale RMS, and to a lesser extent, the conversion in December 2009 of approximately 50 individuals from third party contractor status to employee status in our new Beijing office. Headcount increased to 279 at December 31, 2009, from 216 and 186 at December 31, 2008 and 2007, respectively. The fluctuations in outside service cost during 2009 and 2008 were due to the utilization of an outside service provider in 2008 to assist in the

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development of our Geneva product. The fluctuations in the capitalization of our product development costs is attributable to the timing of product releases during fiscal 2009 and 2008 as we capitalized $3.0 million of costs during fiscal 2009 associated with new releases of Geneva, APX, Axys, Partner, Revenue Center and Rules Manager as compared with $2.5 million of costs in fiscal 2008 associated with Geneva, Axys and Partner. We invested 19%, 18% and 19% of our revenues in product development during 2009, 2008 and 2007, respectively.

        We expect product development expenses to increase in dollar amount in 2010 but to remain relatively flat as a percentage of revenues.

General and Administrative

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

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

        The increase in expenses during 2009 is primarily due to an increase in facilities related costs, as we incurred one-time expenses from the opening of a new office in Beijing, China and additional rent expense from occupying our current facilities in New York City while building out our new facilities. The increase in payroll and other related costs during fiscal 2009 is due to headcount additions, partially offset by a decrease from lower severance costs as we incurred severance costs associated with our former Chief Financial Officer during the third quarter of 2008. Headcount remained flat between December 31, 2009 and December 31, 2008 at 158, but was higher on average year over year as a result of our Tamale acquisition in October 2008. Additionally, depreciation was higher in 2009 as a result of a full year's depreciation of assets from the Tamale acquisition, which we acquired on October 2008 and accelerated depreciation associated with the planned exit of our facility in New York City in 2010. These cost increases were partially offset by a decrease in legal and professional fees as a result of lower accounting fees for external audit and Sarbanes-Oxley vendors, and lower legal fees. In addition, we incurred an increase in the allocation-out of facility and infrastructure expenses to other

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departments associated with higher allocable expenses (information technology and facilities charges) in 2009 and lower recruiting fees from a lower volume of external recruiting activities.

        The increase in expenses during 2008 is primarily due to payroll and other related costs being higher as a result of an increase in headcount and annual merit increases. Headcount increased to 158 at December 31, 2008 from 145 at December 31, 2007. Additionally, depreciation was higher in 2008 as a result of accelerated depreciation associated with the exit of our data center facility at 303 2^nd Street in November 2008 instead of our previous commitment date of May 2012. Facility expenses increased primarily due to higher rent expense from the leasing of additional space at our San Francisco headquarters facility during 2008. These cost increases were partially offset by lower recruiting fees from a lower volume of external recruiting activities, as well as a lower loss on disposal of assets as we wrote-off construction-in-progress assets at our 303 2^nd Street facility in San Francisco, California, as a result of our decision to cease improvement on the facility and relocate this data center facility in 2007.

        We expect general and administrative expenses to increase in 2010 due to additional rent expense of approximately $1 million. During 2009, we signed lease agreements for our future facilities in New York City and Boston. During the build-out phase for these facilities in 2010, we will incur rent expense at both our current facilities and our future facilities in these cities.

Amortization of Other Intangibles

        Other intangibles represent non-technology related intangible assets. The increase in amortization during 2009 was attributed to additional amortization from intangible assets acquired through the Tamale acquisition in October 2008. The decrease in amortization during 2008 was attributable to assets from prior acquisitions becoming fully amortized during fiscal 2008, partially offset by amortization from intangible assets acquired through the Tamale acquisition.

Acquired In-Process Research and Development ("IPR&D")

        During 2008, we expensed acquired IPR&D costs of $400,000 in connection with our Tamale acquisition. IPR&D was expensed because the acquired technology had not reached technological feasibility and had no alternative uses. Technological feasibility is defined as being equivalent to completion of a beta-phase working prototype in which there is no remaining risk relating to the development.

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Restructuring Charges

        Restructuring initiatives have been implemented in our AIM segment in 2006 to reduce costs and improve operating efficiencies by better aligning our resources to near-term revenue opportunities. These initiatives have resulted in restructuring charges comprised primarily of costs related to properties abandoned in connection with facilities consolidation, related write-down of leasehold improvements, severance and associated employee termination costs related to headcount reductions. Our restructuring charges included accruals for estimated losses on facility costs based on our contractual obligations net of estimated sub-lease income. We reassess this liability periodically based on market conditions.

        During 2009, we recorded restructuring charges of $0.1 million related to the present value amortization of facility exit obligations partially offset by adjustments to facility exit assumptions.

        During 2008, we recorded additional restructuring charges which related to a partial lease surrender fee of $0.1 million to exit the data center portion of our facility space located at 303 2^nd Street in San Francisco, California. These restructuring charges were partially offset by adjustments to our other facility exit assumptions.

        During 2007, we recorded aggregate restructuring charges of $1.0 million related to the modification of certain sub-lease assumptions for our prior San Francisco headquarters facility located at 301 Brannan Street, and to the accretion of interest on our existing obligations.

        For additional analysis of the components of the payments and charges made against the restructuring accrual in fiscal 2009, 2008 and 2007, see Note 7, "Restructuring Charges" to our consolidated financial statements.

        At December 31, 2009, we accrued $1.2 million of excess facility costs of which $0.5 million and $0.7 million are included in accrued liabilities and other long-term liabilities, respectively. The accrued facility exit costs of $1.2 million are stated at estimated fair value, net of estimated sub-lease income of $2.2 million. We expect to pay the remaining obligations in connection with vacated facilities over the remaining lease terms, which will expire on various dates through 2012.

Operating Income by Segment

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        ASC 280, "Segment Reporting" establishes standards for reporting information about operating segments in a company's financial statements. Advent's organizational structure is based on a number of factors that the chief operating decision maker ("CODM") uses to evaluate, view and run its business operations which include, but are not limited to, customer base, homogeneity of products and technology. Advent's operating segments are based on this organizational structure and information reviewed by Advent's CODM to evaluate the operating segment results.

        Historically, the Company determined that its operations were organized into two reportable segments: 1) Advent Investment Management, and 2) MicroEdge. On October 1, 2009, Advent completed the sale its MicroEdge subsidiary and accordingly, the results of MicroEdge have been classified as a discontinued operation in the consolidated statements of operations for all periods presented. The Company now operates under a single reportable segment, Advent Investment Management. See Note 3, "Discontinued Operation," for further information regarding the divestiture of MicroEdge.

        The operating income for our Other segment is associated with the winding down of our soft dollar component in 2006.

Interest Expense

        The decrease of interest expense of $0.1 million during 2009 reflects the impact of a lower interest rate and a smaller amount of debt being outstanding during the year in 2009 versus 2008. In November 2008, we drew down $25.0 million against our Credit Facility, which bore interest at the Wells Fargo prime rate of 4.0%. During the first quarter of 2009, the Company repaid $10.0 million of the debt and elected to move from the Wells Fargo prime rate into a monthly LIBOR rate contract on the remaining $15.0 million which bears an all-in rate of 1.95%. During the second quarter of 2009, the Company repaid the remaining outstanding balance of $15.0 million.

        The decrease of interest expense of $0.6 million during 2008 reflects the impact of debt being outstanding for a smaller portion of the year in 2008 versus 2007. During 2007, we drew down $25.0 million on our credit facility in June 2007, which was fully repaid in December 2007. In 2008, we drew down $25.0 million on our credit facility in November 2008, all of which remained outstanding as of December 31, 2008.

Interest Income and Other, net

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

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

        Declining market interest rates and a conservative investment portfolio contributed to the decrease in interest income during 2009, despite our higher overall cash balance. Declining market interest rates, a smaller average cash balance and more conservative investment portfolio all contributed to the decrease in interest income during 2008.

        Foreign exchange losses decreased during 2009 as the US dollar weakened against foreign currencies in 2009 and increased during 2008 as the US dollar strengthened against foreign currencies in 2008.

Gain on Sale of Equity Investments, net

        Gain on sale of equity investments includes realized gains on sale and impairment losses of our investments in privately held companies. The gain in 2009 reflects the second and final deferred contingent payment of $2.1 million related to the sale of our ownership in LatentZero Limited ("LatentZero") to royalblue group plc. while the gain in 2008 reflects the initial deferred contingent payment of $3.4 million that we received in April 2008. The gain in 2007 reflects an aggregate gain of $4.2 million from the sale of two private equity investments, including our investment in LatentZero Limited, partially offset by an impairment loss of $585,000 for a third private equity investment.

Provision For Income Taxes

        Our 2008 and 2009 effective tax rates differ from the statutory rate primarily due to the favorable effects of federal and state research credits and the release of valuation allowances relating to capital loss carryovers that were utilized to offset unanticipated capital gains in those years. The effective tax rate for 2008 is lower than 2009 primarily due to the 2008 inclusion of the favorable cumulative effect of the recognition of California enterprise zone credits for the years 2003 through 2008. These favorable effects were partially offset by the unfavorable impact of stock compensation expense relating to incentive stock options and the Company's employee stock purchase plan.

        We continue to maintain a valuation allowance against deferred tax assets relating to investment reserves and assorted state net operating losses because the likelihood of their realization is not more

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likely than not. We expect our effective tax rate for fiscal 2010 to be in the range of 35% to 40% of profit before taxes. Our expected effective tax rate for 2010 reflects the impact of the expiration of the Federal Research Credit which has lapsed and subsequently been restored in some previous periods. However, we expect our cash payments for federal income taxes to remain nominal over the next few years as we have significant net operating losses and tax credit carryforwards to utilize against current income taxes.

Discontinued Operation

        Net revenues of $18.9 million and income from operation of $2.5 million from our discontinued operation, MicroEdge, for fiscal 2009 represents revenues and expenses for the nine months ending September 30, 2009. In conjunction with the sale of MicroEdge on October 1, 2009, we recorded a gain on sale of discontinued operation of $13.6 million, net of applicable taxes. See Note 3, "Discontinued Operation", for further discussion on the divestiture of MicroEdge.

        Net revenues from our discontinued operation increased by $3.2 million during fiscal 2008 compared to 2007. This increase primarily reflected an increase in perpetual license sales in MicroEdge's core product, GIFTS, and an increase in maintenance revenues due to price increases and continued strong customer retention.

        The decrease in net income of $1.0 million during fiscal 2008 is primarily due to the restructuring program we initiated in 2008 in order to reduce our operating costs and focus our resources on key strategic priorities.

Liquidity and Capital Resources

Cash, Cash Equivalents, Marketable Securities and Cash Flows

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

        Cash and cash equivalents, short-term and long-term marketable securities primarily consist of money market mutual funds, US government and US Government Sponsored Entities (GSE's) and high credit quality corporate debt securities. Cash and cash equivalents are comprised of highly liquid investments purchased with an original or remaining maturity of 90 days or less at the date of purchase.

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Our short-term and long-term marketable securities are classified as available-for-sale, with long-term investments having a maturity date greater than one year from the end of the period.

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

Cash Flows from Operating Activities for Continuing Operations

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

        Our cash provided by operating activities from continuing operations of $72.4 million during fiscal 2009 was primarily the result of our net income of $20.8 million and non-cash charges including stock-based compensation of $18.2 million and depreciation and amortization of $16.7 million, partially offset by a gain from our equity investment activity of $2.1 million. Cash flows resulting from changes in assets and liabilities included increases in deferred revenue and accrued liabilities. The increase in deferred revenue reflected customer renewals and additional bookings. Under the term model, we generally bill and collect for a term agreement in equal installments in advance of each annual period. These amounts are deferred at billing and recognized over the annual term period. The increase in accrued liabilities primarily reflects an increase in accrued bonuses. Other changes in assets and liabilities include a decrease in accounts receivable, which primarily reflects an overall improvement in collections during 2009 of invoices billed in our previous fourth quarter. Days' sales outstanding were 62, 60, 55, and 61 days during the first, second third and fourth quarters of 2009, respectively, compared to 67, 60, 70 and 64 days during the first, second, third and fourth quarters of 2008.

        Cash provided by operating activities from continuing operations of $70.3 million during fiscal 2008 was primarily the result of our net income of $17.3 million and non-cash charges including stock-based compensation of $16.1 million, depreciation and amortization of $12.7 million, partially offset by a gain from our equity investment activity of $3.4 million. Cash flows resulting from changes in assets and liabilities included increases in deferred revenue and accounts payable. Other changes in assets and liabilities include a decrease in accrued liabilities, which reflected a decrease in accrued commissions and restructuring expenses.

        Cash provided by operating activities from continuing operations of $58.5 million during fiscal 2007 was primarily the result of our net income of $10.0 million, increase in deferred revenue of $33.4 million, and non-cash expenses including stock-based compensation of $12.9 million and depreciation and amortization of $10.0 million, partially offset by a net gain from equity investment activity of $3.7 million. The increase in deferred revenue primarily reflected our continued transition to the term license model.

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        We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors including fluctuations in our net revenues and operating results, new term license bookings that increase deferred revenue, collection of accounts receivable, and timing of payments.

        We expect operating cash flow to be between $77 million to $82 million for fiscal 2010.

Cash Flows from Investing Activities for Continuing Operations

        Net cash used in investing activities from continuing operations of $65.0 million in 2009 reflects purchases of short-term and long-term marketable securities of $60.0 million, capital expenditures of $4.6 million primarily related to the purchase of computer equipment, external software and capitalization of costs associated with internal use software, capitalized software development costs of $2.9 million and cash used for acquisition of $0.2 million related to an earn out payment to East Circle Solutions. These expenditures were partially offset by the receipt of $2.1 million for the final deferred contingent consideration from the sale of our ownership interest in LatentZero and a net decrease in our restricted cash balance of $0.6 million. During the third quarter of 2009, we reduced our restricted cash balance as a result of the reduction of the letter of credit associated with the lease of our San Francisco headquarters and in the fourth quarter of 2009 we increased our restricted cash balance to secure a letter of credit associated with the lease of our future New York City office.

        Net cash used in investing activities from continuing operations of $48.8 million in 2008 reflects cash used for the acquisition of Tamale totaling $27.8 million, capital expenditures of $21.9 million primarily related to the build-out of additional space at our San Francisco headquarters, and capitalized software development costs of $2.3 million, partially offset by the receipt of $3.4 million for the initial deferred contingent consideration of our sale of our ownership to LatentZero.

        Net cash provided by investing activities from continuing operations of $24.5 million in 2007 is primarily from proceeds of $24.9 million from the sale of short term investments and from the proceeds of $11.6 million from the sale of two private equity investments, including our stake in LatentZero Limited. This was partially offset by capital expenditures of $7.6 million, cash used for the acquisition of East Circle Solutions totaling $1.0 million, capitalized software development costs of $3.0 million and a change in restricted cash of $0.4 million to increase the bank letter of credit associated with lease amendments for our headquarters facility in San Francisco, California. In the event we default under the terms of this agreement, the letter of credit may be drawn upon by Toda.

        During 2009, we signed lease agreements for our future facilities in New York City and Boston which we will build-out and move into during 2010. Therefore, we expect our capital expenditures to increase in fiscal 2010 and to be in the range of $18 million to $22 million.

Cash Flows from Financing Activities for Continuing Operations

        Net cash used in financing activities from continuing operations of $27.0 million in 2009 reflected the repayment of $25.0 million on our credit facility, repurchase of 690,000 shares of our common stock for $14.6 million, and payments totaling $2.2 million to satisfy withholding taxes on equity awards that are net share settled. This was partially offset by cash received from the exercise of employee stock options of $8.6 million and proceeds of $5.6 million from the issuance of common stock under the Company's employee stock purchase plan.

        Net cash used in financing activities from continuing operations of $27.3 million in 2008 reflected the repurchase of 2.3 million shares of our common stock for $61.6 million and withholding taxes paid of $2.1 million associated with the exercise of stock-settled stock appreciation rights and vesting of restricted stock units, partially offset by the draw-down of $25.0 million against our credit facility, proceeds of $6.1 million received from the exercise of employee stock options and $5.0 million from the issuance of common stock under the employee stock purchase plan.

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        Net cash used in financing activities from continuing operations of $59.3 million in 2007 reflected the repurchase of 2.6 million shares of our common stock for $91.2 million and the repayment of $25.0 million on our credit facility. These cash outlays were partially offset by the draw-down of $25.0 million against our credit facility and proceeds from the issuance of our common stock of $31.4 million under our employee stock option and purchase plans.

Cash Flows from Operating Activities for Discontinued Operation

        Our cash provided by operating activities from discontinued operation of $2.6 million in 2009 was primarily the result of our income from discontinued operation for the nine months ended September 30, 2009 of $2.5 million and non-cash charges including stock-based compensation of $0.3 million and depreciation and amortization of $0.9 million. Cash flows resulting from changes in assets and liabilities included decreases in accounts receivable, accounts payable, accrued liabilities and deferred revenue. The decrease in accounts receivable primarily reflects an improvement in collections during the first nine months of 2009 of invoices billed in our previous fourth quarter. Days' sales outstanding were 51, 55 and 51 days during the first, second and third quarters of 2009, respectively, compared to 52, 52, 52 and 59 days during the first, second and third and fourth quarters of 2008. The decrease in accounts payable and accrued liabilities reflects cash payments of fiscal 2008 liabilities including year-end payables and bonuses, commissions and payroll taxes. The decrease in deferred revenue reflects the recognition of revenue and lower level of bookings during the nine months ended September 30, 2009.

        Our cash provided by operating activities from discontinued operation of $6.7 million in 2008 was primarily the result of our net income of $1.6 million and non-cash charges including stock-based compensation of $0.7 million, depreciation and amortization of $1.8 million and a non-cash impairment charge of $0.8 million. Cash flows resulting from changes in assets and liabilities include increases in accounts receivable and deferred revenue. The increase in accounts receivable reflected strong revenue growth in the fourth quarter of 2008 and an increase in days' sales outstanding. The increase in deferred revenue reflected an increased level of bookings in 2008.

        Our cash provided by operating activities from discontinued operation of $3.9 million in 2007 was primarily the result of our net income of $2.6 million and non-cash charges including stock-based compensation of $0.5 million and depreciation and amortization of $1.2 million. Cash flows resulting from changes in assets and liabilities include increases in accrued liabilities and deferred revenue. The increase in accrued liabilities reflected an increase in accrued bonus and legal fees. The increase in deferred revenue reflected an increased level of bookings in 2007.

Cash Flows from Investing Activities for Discontinued Operation

        Net cash provided by investing activities from discontinued operation of $26.4 million in 2009 reflects cash received from the sale of MicroEdge of $27.1 million, partially offset by capital expenditures of $0.6 million primarily related to the purchase of computer equipment and capitalization of costs associated with internal use software, and capitalized software development costs of $0.1 million.

        Net cash used in investing activities from discontinued operation of $1.4 million in 2008 reflects capital expenditures of $1.4 million primarily related to the purchase of computer equipment and software, and capitalized software development costs of $0.1 million.

        Net cash used in investing activities from discontinued operation of $8.5 million in 2007 reflects cash used for the acquisition of Vivid Orange totaling $7.2 million and capital expenditures of $1.3 million primarily related to the purchase of computer equipment.

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Working Capital

        At December 31, 2009, we had negative working capital of $(6.7) million, up from negative working capital of $(43.4) million at December 31, 2008. Our negative working capital in 2009 is due to our common stock repurchases of $14.6 million, our repayment on our credit facility of $25.0 million, our purchase of long-term marketable securities of $28.5 million and our deferred revenue balance, which reflects our term pricing model. Our negative working capital in 2008 is due to our common stock repurchases of $61.6 million, cash paid to acquire Tamale of $27.8 million, and our deferred revenue balance. Excluding deferred revenues and deferred taxes, we had working capital of $118.4 million at December 31, 2009, compared to $79.3 million at December 31, 2008.

Credit Facility and Expiration

        In February 2007, Advent and certain of our domestic subsidiaries entered into a senior secured credit facility agreement (the "Credit Facility") with Wells Fargo Foothill, Inc. (the "Lender"). Under the Credit Facility, the Lender will provide the Company with a revolving line of credit up to an aggregate amount of $75 million, subject to a borrowing base formula, to provide backup liquidity for general corporate purposes, including stock repurchases, or investment opportunities for a period of three years. During the third quarter of 2009, we reduced our line of credit by $1.0 million in connection with providing a deposit for our lease of the Grace Building. As of December 31, 2009, there was no outstanding balance under the Credit Facility and the Company was in compliance with all associated covenants.

        In the past, we had utilized the Credit Facility to facilitate the timing of stock repurchases. In February 2010, the Credit Facility expired and we elected not to renew the Credit Facility due to the limited expected use of the Credit Facility. We believe our existing cash, cash equivalents, short-term and long-term marketable securities, together with cash expected to be generated from operations, will be sufficient to fund our operating activities, anticipated capital expenditures and authorized stock repurchases. Although the expiration of the Credit Facility may restrict our liquidity, we believe the costs associated with the Credit Facility would exceed the anticipated benefit of the additional liquidity. For example, our interest expense and other fees related to the Credit Facility was approximately $2 million during the three-year term of the Credit Facility.

Common Stock Repurchases

        Advent's Board has approved common stock repurchase programs authorizing management to repurchase shares of the Company's common stock. The timing and actual number of shares subject to repurchase are at the discretion of Advent's management and are contingent on a number of factors and limitations, including the price of Advent's stock, corporate and regulatory requirements, alternative investment opportunities and other market conditions. The stock repurchase programs specify a maximum number of shares subject to repurchase, do not have an expiration date and may be limited or terminated at any time without prior notice. Repurchased shares are returned to the status of authorized and unissued shares of common stock. The purchases are funded from combination of available working capital and debt.

        The purchase price for the shares of our common stock repurchased was reflected as a reduction to stockholders' equity. In accordance with ASC 505-30, "Treasury Stock", we are required to allocate the purchase price of the repurchased shares as (i) an increase to accumulated deficit and (ii) a reduction of common stock and additional paid-in capital. Issuance of common stock and the tax benefit related to employee stock option plans are recorded as an increase to common stock and additional paid-in capital. As a result of future repurchases, we may continue to report an accumulated deficit included in stockholders' equity in our consolidated balance sheets.

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        The following is a summary of the repurchase programs authorized by the Board since fiscal 2007 (in thousands):

        The following is a summary of the Company's repurchase activity since fiscal 2007 (in thousands, except per share data):

        At December 31, 2009, there remained approximately 1.0 million shares authorized by the Board for repurchase.

Off-Balance Sheet Arrangements and Contractual Obligations

        The following table summarizes our contractual cash obligations as of December 31, 2009 (in thousands):

        On October 1, 2009, we completed the sale of our MicroEdge subsidiary. See Note 3, "Discontinued Operation", to the consolidated financial statements for a description of the principal terms of the divestiture. With the exception of the MicroEdge facilities in New York City, the leases related to MicroEdge have been transferred to the Purchaser.

        In connection with the sale of MicroEdge, the Company entered into a sub-lease agreement with Microedge LLC, whereby Microedge LLC will sub-lease approximately 24,000 square feet of the 29,000 square feet of office space located at 619 West 54th Street in New York, New York from the Company. MicroEdge LLC will sub-lease the premises for two years with the option to extend the sub-lease term through the end of the lease term in 2018. The sub-lease agreement became effective upon the close of sale of MicroEdge on October 1, 2009. The operating lease commitment related to this discontinued operation facility, which is approximately $10.4 million, less estimated sub-lease income for two years of $1.7 million, is not reflected in the above table.

        As of December 31, 2009, there was no outstanding balance under our credit facility.

        At December 31, 2009 and December 31, 2008, we had a gross liability of $7.5 million and $6.9 million, respectively, for uncertain tax positions associated with the adoption of ASC 740-10-25,

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"Income Taxes—Overall—Recognition". If recognized, the impact on our statement of operations would be to decrease our income tax expense and increase our net income by $6.2 million. The impact on net income reflects the liabilities for unrecognized tax benefits net of the federal tax benefit of state income tax items. Since almost all of this liability relates to reserves against deferred tax assets that we do not expect to utilize in the short term, we cannot estimate the timing of potential future cash settlements and have not included any estimates in the table of contractual cash obligations above. Our cash payments for federal income taxes will continue to be nominal through 2011 as we have significant net operating losses and tax credit carryforwards to utilize. On September 27, 2008, the state of California enacted tax law changes that suspended the utilization of California net operating losses and limited the utilization of California tax credits to 50% of our tax liability for the 2008 and 2009 tax periods. As a result, we expect to pay cash income taxes in California related to fiscal 2009 but do not expect the amount to exceed $1.2 million for the year.

        At December 31, 2009 and 2008, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Other Liquidity and Capital Resources Considerations

        As noted above, we expect our cash payments for federal income taxes to remain nominal over the next few years as we have significant net operating losses and tax credit carryforwards to utilize against current income taxes. However, our cash payments for federal income taxes could increase as early as fiscal 2012.

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

        We expect that for the next year, our operating expenses will continue to constitute a significant use of cash flow. In addition, we may use cash to fund other acquisitions, repurchase additional common stock, or invest in other businesses, when opportunities arise. Based upon the predominance of our revenues from recurring sources, term license bookings performance and current expectations, we believe that our cash and cash equivalents, and cash generated from operations will be sufficient to satisfy our working capital needs, capital expenditures, investment requirements, stock repurchases and financing activities for the next year. However, if we identify opportunities that exceed our current expectation, we may choose to seek additional capital resources through debt or equity financing. However, such financing may not be available at all particularly in the current economic environment, or if available may not be obtainable on terms favorable to us and could be dilutive.

Recent Accounting Pronouncements

        Refer to Note 1, "Summary of Significant Accounting Policies", to our consolidated financial statements for a discussion of recent accounting standards and pronouncements.

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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. Historically, much of our revenues and capital spending was transacted in US dollars. However, since the acquisitions of Advent Denmark, Advent Norway, Advent Sweden, Advent Netherlands, and Advent Europe's remaining distributors in the United Kingdom and Switzerland, whose service and certain license revenues and capital spending, are transacted in local country currencies, we have greater exposure to foreign currency fluctuations. Additionally as of December 31, 2009, $43.3 million of goodwill from the acquisition of these entities are denominated in foreign currency. Therefore a hypothetical change of 10% could increase or decrease our assets and equity by $3.0 million and could increase or decrease our consolidated results of operations or cash flows by approximately $0.3 million.

        We maintain an investment portfolio of various holdings, types, and maturities. Our interest rate risk relates primarily to our investment portfolio, which consisted of $117.6 million in cash and cash equivalents, short-term and long-term marketable securities as of December 31, 2009. Our short-term and long-term marketable securities are generally classified as available-for-sale and, consequently, are recorded on our consolidated balance sheet at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income. At any time, a rise in interest rates could have a material adverse impact on the fair value of our investment portfolio. Conversely, declines in interest rates could have a material impact on interest earnings of our investment portfolio. We do not currently hedge these interest rate exposures.

        The following table presents hypothetical changes in fair value of our short-term and long-term marketable securities of $59.8 million at December 31, 2009. For December 31, 2009 the market changes reflect an immediate hypothetical parallel shifts in the yield curve of plus or minus 25 basis points ("BPS"), plus 50 BPS, and plus 100 BPS. For balances at December 31, 2009 the hypothetical fair values are as follows (in millions, except percentages):

        We have also invested in several privately-held companies. These non-marketable investments are classified as other assets on our consolidated balance sheets. Our investments in privately-held companies could be affected by an adverse movement in the financial markets for publicly-traded equity securities, although the impact cannot be directly quantified. These investments are inherently risky as the market for the technologies or products these privately-held companies have under development are typically in the early stages and may never materialize. It is our policy to review investments in privately held companies on a regular basis to evaluate the carrying amount and economic viability of these companies. This policy includes, but is not limited to, reviewing each of the companies' cash position, financing needs, earnings/revenue outlook, operational performance, management/ownership changes and competition. The evaluation process is based on information that we request from these privately held companies. This information is not subject to the same disclosure regulations as US publicly traded companies, and as such, the basis for these evaluations is subject to timing and the accuracy of the data received from these companies.

        Our investments in privately held companies are assessed for impairment when a review of the investee's operations indicates that a decline in value of the investment is other than temporary. Such indicators include, but are not limited to, limited capital resources, limited prospects of receiving additional financing, and prospects for liquidity of the related securities. Impaired investments in privately held companies are written down to estimated fair value. We estimate fair value using a

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variety of valuation methodologies. Such methodologies include comparing the private company with publicly traded companies in similar lines of business, applying revenue and price/earnings multiples to estimated future operating results for the private company and estimating discounted cash flows for that company. We could lose our entire investment in these companies. During the second quarter of 2008, we received the initial deferred contingent payment as a result of the sale of our investment in April 2007 in LatentZero Limited. During the second quarter of 2009, we received the second and final deferred contingent payment related to the sale of our ownership in LatentZero. At December 31, 2009, our net investments in privately-held companies totaled $0.5 million. See Note 5, "Balance Sheet Detail", to our consolidated financial statements for further discussion.

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Item 8.    Financial Statements and Supplementary Data

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

        Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

        The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2009. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on management's assessment using the COSO criteria, management has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2009.

        The effectiveness of the Company's internal control over financial reporting as of December 31, 2009 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report which is included herein.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Advent Software, Inc.:

        In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Advent Software, Inc. and its subsidiaries at December 31, 2009 and December 31, 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
San Jose, California
March 12, 2010

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ADVENT SOFTWARE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

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

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ADVENT SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

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

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ADVENT SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
COMPREHENSIVE INCOME

(In thousands)

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

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ADVENT SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)