UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2009

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 0-26994

ADVENT SOFTWARE, INC.

(Exact name of registrant as specified in its charter)

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

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)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No 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 whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer x

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

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

The number of shares of the registrant’s Common Stock outstanding as of July 31, 2009 was 25,491,455.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ADVENT SOFTWARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	June 30			December 31
	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	47,038		$	48,351
Accounts receivable, net	45,516			51,670
Deferred taxes, current	13,133			13,121
Prepaid expenses and other	17,574			20,153
Total current assets	123,261			133,295
Property and equipment, net	38,244			41,240
Goodwill	151,232			149,609
Other intangibles, net	26,849			29,110
Deferred taxes, long-term	54,785			54,786
Other assets	10,642			11,554

Total assets	$	405,013		$	419,594

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,966		$	5,625
Accrued liabilities	26,083			27,924
Deferred revenues	141,131			146,714
Income taxes payable	6,141			978
Total current liabilities	177,321			181,241
Deferred income taxes	280			286
Long-term debt	—			25,000
Deferred revenue, long-term	6,987			6,449
Other long-term liabilities	10,148			10,795
Total liabilities	194,736			223,771

Commitments and contingencies (See Note 10)

Stockholders’ equity:
Common stock	254			257
Additional paid-in capital	369,509			365,351
Accumulated deficit	(168,216		)	(176,484		)
Accumulated other comprehensive income	8,730			6,699
Total stockholders’ equity	210,277			195,823

Total liabilities and stockholders’ equity	$	405,013		$	419,594

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

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ADVENT SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended June 30					Six Months Ended June 30
	2009		2008			2009		2008
Net revenues:
Term license, maintenance and other recurring	$	59,742	$	50,838		$	120,639	$	99,977
Perpetual license fees	3,323		5,242			7,225		10,867
Professional services and other	6,467		7,947			14,454		14,656

Total net revenues	69,532		64,027			142,318		125,500

Cost of revenues:
Term license, maintenance and other recurring	12,272		11,379			24,408		22,313
Perpetual license fees	128		224			303		541
Professional services and other	8,010		8,519			16,691		16,245
Amortization of developed technology	1,446		732			2,963		1,454

Total cost of revenues	21,856		20,854			44,365		40,553

Gross margin	47,676		43,173			97,953		84,947

Operating expenses:
Sales and marketing	16,280		15,626			33,357		31,016
Product development	12,881		13,008			26,476		25,898
General and administrative	9,438		9,232			18,701		18,459
Amortization of other intangibles	444		242			888		729
Restructuring charges (benefit)	2		(1		)	47		55

Total operating expenses	39,045		38,107			79,469		76,157

Income from operations	8,631		5,066			18,484		8,790

Interest and other income, net	2,201		3,559			1,824		3,786

Income before income taxes	10,832		8,625			20,308		12,576
Provision for income taxes	2,810		1,270			6,057		2,586

Net income	$	8,022	$	7,355		$	14,251	$	9,990

Net income per share:
Basic	$	0.32	$	0.28		$	0.56	$	0.37
Diluted	$	0.31	$	0.26		$	0.55	$	0.36

Weighted average shares used to compute net income per share:
Basic	25,288		26,712			25,265		26,641
Diluted	26,140		28,119			26,053		28,046

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

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ADVENT SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30
	2009			2008
Cash flows from operating activities:
Net income	$	14,251		$	9,990
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	9,152			7,252
Depreciation and amortization	8,664			6,220
Loss on dispositions of fixed assets	40			2
Provision for doubtful accounts	217			485
Provision for sales returns	797			4
Gain on investments	(2,056		)	(3,393		)
Deferred income taxes	(18		)	(66		)
Other	8			3
Effect of statement of operations adjustments	16,804			10,507
Changes in operating assets and liabilities:
Accounts receivable	5,929			5,688
Prepaid and other assets	3,435			(571		)
Accounts payable	(1,670		)	3,034
Accrued liabilities	(2,416		)	(5,870		)
Deferred revenues	(5,842		)	10,282
Income taxes payable	5,163			1,979
Effect of changes in operating assets and liabilities	4,599			14,542

Net cash provided by operating activities	35,654			35,039

Cash flows from investing activities:
Purchases of property and equipment	(1,789		)	(9,777		)
Capitalized software development costs	(1,314		)	(420		)
Proceeds from sale of investments	2,056			3,393
Change in restricted cash	—			(248		)

Net cash used in investing activities	(1,047		)	(7,052		)

Cash flows from financing activities:
Proceeds from exercises of stock options	2,383			3,240
Withholding taxes related to equity award net share settlement	(1,792		)	(1,271		)
Proceeds from common stock issued under the employee stock purchase plan	2,946			2,576
Common stock repurchased and retired	(14,578		)	—
Repayment of long-term borrowing	(25,000		)	—

Net cash provided by (used in) financing activities	(36,041		)	4,545

Effect of exchange rate changes on cash and cash equivalents	121			322

Net change in cash and cash equivalents	(1,313		)	32,854
Cash and cash equivalents at beginning of period	48,351			49,589

Cash and cash equivalents at end of period	$	47,038		$	82,443

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

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ADVENT SOFTWARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Basis of Presentation

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

Advent has prepared these condensed consolidated financial statements in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim financial information. Certain information and footnote disclosures included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted in these interim statements pursuant to such SEC rules and regulations. These interim financial statements should be read in conjunction with the audited financial statements and related notes included in Advent’s Annual Report on Form 10-K for the year ended December 31, 2008. Interim results are not necessarily indicative of the results to be expected for the full year, and no representation is made thereto.

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

Note 2—Recent Accounting Pronouncements

With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the six months ended June 30, 2009, as compared to the recent accounting pronouncements described in Advent’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, that are of significance, or potential significance, to the Company.

In April 2009, the Financial Accounting Standards Board (“FASB”) issued Staff Position (“FSP”) FAS 157-4, “Determining Fair Value When the Volume or Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”). FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157 when the volume and level of activity for the asset or liability have significantly decreased and requires that companies provide interim and annual disclosures of the inputs and valuation technique(s) used to measure fair value. FSP FAS 157-4 is effective for interim and annual reporting periods ending after June 15, 2009 and is to be applied prospectively. The Company’s adoption of FSP FAS 157-4 during the three months ended June 30, 2009 did not have a material impact to the Company’s condensed consolidated financial statements.

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments.” FSP FAS 115-2 and FAS 124-2 amends the other-than-temporary impairment guidance to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. FSP FAS 115-2 and FAS 124-2 is effective for interim and annual reporting periods ending after June 15, 2009. The Company’s adoption of FSP FAS 115-2 and FAS 124-2 during the three months ended June 30, 2009 did not have a material impact to the Company’s condensed consolidated financial statements.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” FSP FAS 107-1 and APB 28-1 requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FSP FAS 107-1 and APB 28-1 is effective for interim and annual reporting periods ending after June 15, 2009. The Company’s adoption of FSP FAS 107-1 and APB 28-1 during the quarter ended June 30, 2009 did not have a material impact the Company’s condensed consolidated financial statements.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The provisions of SFAS 165 are effective for interim and annual reporting periods ending after June 15, 2009 and are effective for the Company in the second quarter of fiscal 2009. Since SFAS 165 only requires additional disclosures, adoption of SFAS 165 did not have an impact to the Company’s condensed consolidated financial position, results of operations or cash flows. See Note 16, “Subsequent Event” to our condensed consolidated financial statements for our discussion of the subsequent event that has occurred since the balance sheet date of June 30, 2009.

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Note 3—Stock-Based Compensation

Equity Award Activity

A summary of the status of the Company’s stock option and stock appreciation right (“SAR”) activity for the period presented follows:

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

Outstanding at December 31, 2008	4,093		$	28.26
Options & SARs granted	549		$	31.15
Options & SARs exercised	(194	)	$	20.68
Options & SARs canceled	(70	)	$	35.94
Outstanding at June 30, 2009	4,378		$	28.84	6.47	$	28,285
Exercisable at June 30, 2009	2,590		$	25.29	5.08	$	24,025

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the Company’s closing stock price of $32.79 as of June 30, 2009 for options that were in-the-money as of that date.

The weighted average grant date fair value of options and SARs granted (as determined under SFAS 123R), total intrinsic value of options and SARs exercised and cash received from option exercises during the six months ended June 30, 2009 and 2008 were as follows (in thousands, except weighted average grant date fair value):

	Six Months Ended June 30
	2009		2008
Options and SARs
Weighted average grant date fair value	$	14.57	$	18.41
Total intrinsic value of awards exercised	$	2,078	$	5,091

Options
Cash received from exercises	$	2,383	$	3,240

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

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A summary of the status of the Company’s restricted stock unit (“RSU”) activity for the six months ended June 30, 2009 is as follows:

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

Outstanding and unvested at December 31, 2008	700		$	37.89

RSUs granted	190		$	32.30

RSUs vested	(139	)	$	36.58

RSUs canceled	(11	)	$	39.86

Outstanding and unvested at June 30, 2009	740		$	36.67

The weighted average grant date fair value was determined based on the closing market price of the Company’s common stock on the date of the award. The aggregate intrinsic value of RSUs outstanding at June 30, 2009 was $24.3 million, using the closing price of $32.79 per share as of June 30, 2009.

Stock-Based Compensation Expense

The effect of stock-based employee compensation expense recognized on Advent’s condensed consolidated statement of operations for the three and six months ended June 30, 2009 and 2008 was as follows (in thousands):

	Three Months Ended June 30						Six Months Ended June 30
	2009			2008			2009			2008
Statement of operations classification
Cost of term license, maintenance and other recurring revenues	$	505		$	323		$	874		$	613
Cost of professional services and other revenues	353			258			658			495
Total cost of revenues	858			581			1,532			1,108

Sales and marketing	1,526			1,099			2,732			2,137
Product development	1,367			1,009			2,481			1,880
General and administrative	1,338			1,172			2,407			2,127
Total operating expenses	4,231			3,280			7,620			6,144

Total stock-based employee compensation expense	$	5,089		$	3,861		$	9,152		$	7,252

Tax effect on stock-based employee compensation	(1,694		)	(1,351		)	$	(3,509	)	$	(2,651	)

Net effect on net income	$	3,395		$	2,510		$	5,643		$	4,601

Advent capitalized stock-based employee compensation expense of $120,000 and $85,000 during the six months ended June 30, 2009 and 2008, respectively, associated with the Company’s software development, internal-use software and professional services implementation projects.

As of June 30, 2009, total unrecognized compensation cost related to unvested awards not yet recognized under all equity compensation plans, adjusted for estimated forfeitures, was $34.0 million and is expected to be recognized through the remaining vesting period of each grant, with a weighted average remaining period of 2.7 years.

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Valuation Assumptions

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option valuation model and the straight-line attribution approach with the following assumptions:

	Three Months Ended June 30		Six Months Ended June 30
	2009	2008	2009	2008
Stock Options & SARs
Expected volatility	50.7% - 52.0%	42.8% - 43.5%	50.7% - 57.7%	41.8% - 43.5%
Expected life (in years)	4.17 - 5.10	3.82 - 5.27	4.17 - 5.47	3.82 - 5.27
Risk-free interest rate	1.8% - 3.0%	2.8% - 3.9%	1.8% - 3.0%	2.6% - 3.9%
Expected dividends	None	None	None	None


Employee Stock Purchase Plan
Expected volatility	58.3% - 72.8%	43.8% - 46.0%	58.3% - 72.8%	43.8% - 46.0%
Expected life (in months)	6	6	6	6
Risk-free interest rate	0.3% - 0.4%	2.0% - 3.4%	0.3% - 0.4%	2.0% - 3.4%
Expected dividends	None	None	None	None

The expected stock price volatility was determined based on an equally weighted average of historical and implied volatility of the Company’s common stock. Advent determined that a blend of implied volatility and historical volatility is more reflective of the market conditions and a better indicator of expected volatility than using purely historical volatility. The expected life was determined 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. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The dividend yield assumption is based on the Company’s history of not paying dividends and the resultant future expectation of dividend payouts.

Note 4—Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income by the sum of weighted average number of common shares outstanding and the potential number of dilutive common shares outstanding during the period, excluding the effect of any anti-dilutive securities. Potential common shares consist of the shares issuable upon the exercise of stock options and SARs, the vesting of restricted stock awards and from withholdings associated with the Company’s employee stock purchase plan. Potential common shares are reflected in diluted earnings per share by application of the treasury stock method, which in the current period includes consideration of unamortized stock-based compensation and windfall tax benefits, as a result of the implementation of SFAS 123R.

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

	Three Months Ended June 30				Six Months Ended June 30
	2009		2008		2009		2008
Numerator:
Net income	$	8,022	$	7,355	$	14,251	$	9,990


Denominator:
Denominator for basic net income per share-weighted average shares outstanding	25,288		26,712		25,265		26,641

Dilutive common equivalent shares:
Employee stock options and other	852		1,407		788		1,405

Denominator for diluted net income per share-weighted average shares outstanding, assuming exercise of potential dilutive common shares	26,140		28,119		26,053		28,046

Basic net income per share	$	0.32	$	0.28	$	0.56	$	0.37
Diluted net income per share	$	0.31	$	0.26	$	0.55	$	0.36

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Weighted average stock options, SARs and RSUs of approximately 2.4 million and 2.6 million for the three and six months ended June 30, 2009, respectively, were excluded from the calculation of diluted net income per share because their inclusion would have been anti-dilutive. Similarly, weighted average stock options, SARs and RSUs of approximately 1.4 million and 1.0 million for the three and six months ended June 30, 2008, respectively, were excluded from the calculation of diluted net income per share.

Note 5—Goodwill

The changes in the carrying value of goodwill for the six months ended June 30, 2009 were as follows (in thousands):

	Goodwill

Balance at December 31, 2008	$	149,609
Translation adjustments	1,677
Other	(54		)

Balance at June 30, 2009	$	151,232

Foreign currency translation adjustments totaling $1.7 million reflect the general weakening of the U.S. dollar versus European currencies during the six months ended June 30, 2009.

Note 6—Other Intangibles

The following is a summary of other intangibles as of June 30, 2009 (in thousands):

	Average
	Amortization	Other					Other
	Period	Intangibles,		Accumulated			Intangibles,
	(Years)	Gross		Amortization			Net

Purchased technologies	4.9	$	30,616	$	(16,231	)	$	14,385
Product development costs	3.0	10,204		(5,450		)	4,754

Developed technology sub-total		40,820		(21,681		)	19,139

Customer relationships	6.1	30,033		(23,338		)	6,695
Other intangibles	4.1	1,587		(572		)	1,015

Other intangibles sub-total		31,620		(23,910		)	7,710

Balance at June 30, 2009		$	72,440	$	(45,591	)	$	26,849

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The following is a summary of other intangibles as of December 31, 2008 (in thousands):

	Average
	Amortization	Other					Other
	Period	Intangibles,		Accumulated			Intangibles,
	(Years)	Gross		Amortization			Net

Purchased technologies	4.9	$	30,337	$	(14,361	)	$	15,976
Product development costs	3.0	8,823		(4,272		)	4,551

Developed technology sub-total		39,160		(18,633		)	20,527

Customer relationships	6.1	30,023		(22,618		)	7,405
Other intangibles	4.0	1,578		(400		)	1,178

Other intangibles sub-total		31,601		(23,018		)	8,583

Balance at December 31, 2008		$	70,761	$	(41,651	)	$	29,110

The changes in the carrying value of other intangibles during the six months ended June 30, 2009 were as follows (in thousands):

	Other					Other
	Intangibles,		Accumulated			Intangibles,
	Gross		Amortization			Net

Balance at December 31, 2008	$	70,761	$	(41,651	)	$	29,110
Additions	1,313		—			1,313
Stock-based compensation additions	67		—			67
Amortization	—		(3,851		)	(3,851		)
Translation adjustments	299		(89		)	210

Balance at June 30, 2009	$	72,440	$	(45,591	)	$	26,849

Based on the carrying amount of intangible assets as of June 30, 2009, the estimated future amortization is as follows (in thousands):

	Six
	Months Ended
	December 31		Years Ended December 31
	2009		2010		2011		2012		2013		Thereafter		Total
Estimated future amortization of:
Developed technology	$	3,101	$	5,768	$	4,480	$	3,600	$	2,190	$	—	$	19,139
Other intangibles	801		1,212		1,092		1,093		1,047		2,465		7,710

Total	$	3,902	$	6,980	$	5,572	$	4,693	$	3,237	$	2,465	$	26,849

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Note 7—Balance Sheet Detail

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

	June 30		December 31
	2009		2008

Prepaid commission	$	5,403	$	6,019
Prepaid contract expense	5,863		7,473
Prepaid royalty	1,185		1,744
Other	5,123		4,917

Total prepaid expenses and other	$	17,574	$	20,153

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

	June 30		December 31
	2009		2008

Long-term investments	$	500	$	500
Long-term prepaid commissions	3,508		4,915
Deposits	2,961		3,255
Prepaid contract expense, long-term	3,670		2,859
Other	3		25

Total other assets, net	$	10,642	$	11,554

Long-term investments include an equity investment in a privately held company. This equity investment is carried at the lower of cost or fair value at June 30, 2009 and December 31, 2008. Deposits include restricted cash of $1.9 million to secure a bank letter of credit associated with the Company’s definitive lease agreement, as amended, with Toda Development, Inc. (“Toda”) for its San Francisco headquarters facility.

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

	June 30		December 31
	2009		2008

Salaries and benefits payable	$	16,191	$	18,492
Accrued restructuring, current portion	564		823
Other	9,328		8,609

Total accrued liabilities	$	26,083	$	27,924

Accrued restructuring charges are discussed further in Note 9, “Restructuring Charges.” Other accrued liabilities include accruals for royalties, sales and business taxes, acquisition related costs, and other miscellaneous items.

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

	June 30		December 31
	2009		2008

Deferred rent	$	8,043	$	8,444
Accrued restructuring, long-term portion	944		1,195
Other	1,161		1,156

Total other long-term liabilities	$	10,148	$	10,795

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Note 8—Comprehensive Income

The components of comprehensive income were as follows for the periods presented (in thousands):

	Three Months Ended June 30				Six Months Ended June 30
	2009		2008		2009		2008

Net income	$	8,022	$	7,355	$	14,251	$	9,990
Foreign currency translation adjustment	3,886		5		2,031		2,422

Total comprehensive income	$	11,908	$	7,360	$	16,282	$	12,412

Note 9—Restructuring Charges

Minor restructuring initiatives were implemented in the Company’s Advent Investment Management segment in 2006 and in the MicroEdge operating segment in 2008, to reduce costs and improve operating efficiencies. These initiatives have resulted in restructuring charges comprised primarily of costs related to properties abandoned in connection with facilities consolidation, associated write-down of leasehold improvements and severance and associated employee termination costs related to headcount reductions. Advent’s restructuring charges included accruals for estimated losses on facility costs based on the Company’s contractual obligations net of estimated sublease income. Advent reassesses this liability periodically based on market conditions.

During the six months ended June 30, 2009 and 2008, Advent recorded restructuring charges of $47,000 and $55,000, respectively, which related to the present value amortization of facility exit obligations partially offset by adjustments to facility exit assumptions.

The following table sets forth an analysis of the components of the payments and restructuring charges made against the accrual during the six months ended June 30, 2009 (in thousands):

	Facility Exit			Severance &
	Costs			Benefits			Total

Balance of restructuring accrual at December 31, 2008	$	1,735		$	283		$	2,018
Restructuring charges	18			—			18
Cash payments	(286		)	(271		)	(557		)
Adjustment of prior restructuring costs	41			(12		)	29

Balance of restructuring accrual at June 30, 2009	$	1,508		$	—		$	1,508

Of the remaining restructuring accrual of $1.5 million at June 30, 2009, $0.6 million and $0.9 million are included in accrued liabilities and other long-term liabilities, respectively, on the accompanying condensed consolidated balance sheet. The remaining excess facility costs of $1.5 million are stated at estimated fair value, net of estimated sublease income of approximately $3.0 million. Advent expects to pay the remaining obligations associated with the vacated facilities no later than over the remaining lease terms, which expire on various dates through 2012.

Note 10—Commitments and Contingencies

Lease Obligations

Advent leases office space and equipment under non-cancelable operating lease agreements, which expire at various dates through December 2018. Some operating leases contain escalation provisions for adjustments in the consumer price index. Advent is responsible for maintenance, insurance, and property taxes. As of June 30, 2009, Advent’s remaining operating lease commitments through 2018 were approximately $44.9 million, net of future minimum rental receipts of $3.4 million to be received under non-cancelable sub-leases.

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Indemnifications

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

Legal Contingencies

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 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 plaintiff’s claim and believes that it has meritorious defenses and intends to vigorously defend this action. Management has not determined that any potential loss associated with this litigation is either probable or reasonably estimable at this time and accordingly has not accrued any amounts for any potential loss.

From time to time, Advent is 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 and 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.

Note 11—Segment Information

Description of Segments

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. Advent has determined that its operations are organized into two reportable segments: Advent Investment Management and MicroEdge. Future changes to this organizational structure may result in changes to the business segments disclosed.

Advent Investment Management is the Company’s core business and derives revenues from the development, marketing and sale of software products, data interfaces and related maintenance and services that automate, integrate and support certain mission-critical functions of investment management organizations. MicroEdge derives revenues from the sale of software and services for grant management, matching gifts and volunteer tracking for the grant-making community.

Segment Data

The results of the operating segments are derived directly from Advent’s internal management reporting system. The accounting policies used to derive operating segment results are substantially the same as those used by the consolidated company. Management measures the performance of each operating segment based on several metrics, including income from operations. These results are used, in part, to evaluate the performance of, and to assign resources to, each of the operating segments. Certain operating expenses, including stock-based employee compensation expense, and amortization of developed technology and other intangibles, which Advent manages separately at the corporate level, are not allocated to the operating segments. Advent does not separately accumulate and review asset information by segment.

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Segment information for the periods presented is as follows (in thousands):

	Three Months Ended June 30						Six Months Ended June 30
	2009			2008			2009			2008
Net revenues:
Advent Investment Management	$	63,076		$	57,979		$	129,401		$	113,243
MicroEdge	6,456			6,048			12,917			12,257

Total net revenues	$	69,532		$	64,027		$	142,318		$	125,500

Income from operations:
Advent Investment Management	$	13,881		$	9,290		$	28,005		$	17,226
MicroEdge	1,729			611			3,482			999
Unallocated corporate operating costs and expenses:
Stock-based employee compensation	(5,089		)	(3,861		)	(9,152		)	(7,252		)
Amortization of developed technology	(1,446		)	(732		)	(2,963		)	(1,454		)
Amortization of other intangibles	(444		)	(242		)	(888		)	(729		)

Total income from operations	$	8,631		$	5,066		$	18,484		$	8,790

On July 27, 2009, the Company executed an Agreement and Plan of Merger to sell the MicroEdge segment, as further described in Note 16, “Subsequent Event”. Following the disposition of MicroEdge, the Company will operate under one reporting segment.

Major Customers

No single customer represented 10% or more of Advent’s total net revenues in any period presented.

Note 12—Debt

On February 14, 2007, Advent and certain of its subsidiaries entered into a senior secured credit facility agreement (the “Credit Facility”) with Wells Fargo Foothill, Inc. (the “Lender”) for a term of three years. Under the Credit Facility, the Lender will provide the Company with a revolving line of credit up to an aggregate amount of $75.0 million to fund the repurchase of outstanding common stock, capital expenditures and general corporate requirements. The Company has the option of selecting an interest rate for any drawdown under the Facility equal to either: (a) the Base Rate (Wells Fargo prime rate); or (b) the then applicable LIBOR Rate plus 1.50% per annum. The loan is secured by the Company’s property and assets and is subject to a financial covenant. The financial covenant in the Facility is limited to a maximum ratio of senior debt to earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted for cost capitalizations, extraordinary gains (losses) and non-cash stock-based employee compensation. Covenant testing will commence upon either the occurrence of an event of default or when excess availability, defined as the Credit Facility line of $75.0 million less amounts drawn, plus qualified cash and cash equivalents is less than $50.0 million.

In November 2008, the Company drew down $25.0 million against its Credit Facility which bore interest at the Wells Fargo prime rate of 4.0%. In January 2009, the Company repaid $10.0 million of the debt under its Credit Facility. During February 2009, Advent elected to move from the Wells Fargo prime rate into a monthly LIBOR rate contract on the remaining $15.0 million which bears a rate of 0.45% plus an applicable margin of 1.50% for an all-in rate of 1.95%. During the second quarter of 2009, the Company repaid the remaining outstanding balance of $15.0 million. As of June 30, 2009, there were no outstanding borrowings under the Credit Facility.

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Note 13—Income Taxes

The following table summarizes the activity relating to the Company’s unrecognized tax benefits during the six months ended June 30, 2009 (in thousands):

	Total

Balance at December 31, 2008	$	6,904

Gross increases related to current period tax positions	542

Balance at June 30, 2009	$	7,446

At June 30, 2009 and December 31, 2008, Advent had $7.4 million and $6.9 million of gross unrecognized tax benefits, respectively. During the first six months of 2009, Advent increased the amount of unrecognized tax benefits by $0.5 million relating to federal and California research credits. If recognized, the total unrecognized tax benefits would decrease Advent’s tax provision and increase net income $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. The Company’s liabilities for unrecognized tax benefits relate to federal research credits, California research and enterprise zone tax credits and various state net operating losses.

Advent is subject to taxation in the US and various states and foreign jurisdictions. The material jurisdictions that are subject to examination by tax authorities include California for tax years after fiscal 2003 and the US and New York for tax years after 2004. Currently, Advent and our subsidiary MicroEdge are under examination by the State of New York for tax years 2005 through 2007.

Note 14—Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including available-for-sale securities. The fair value of these certain financial assets was determined using the following inputs as of June 30, 2009 (in thousands):

Fair Value Measurements at Reporting Date Using

Significant

Quoted Prices in

Other

Significant

Active Markets for

Observable

Unobservable

Identical Assets

Inputs

Total

(Level 1)

(Level 2)

(Level 3)

Assets

Money Market Funds (1)

36,508

—

(1) Included in cash and cash equivalents on the Company’s condensed consolidated balance sheet

Money market funds consist of cash equivalents with remaining maturities of three months or less at the date of purchase and are composed primarily of US government and treasury obligation money market mutual funds. The fair value of these securities is determined through market, observable and corroborated sources.

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

The Company also has a direct investment in a privately-held company accounted for under the cost method which is not reported in the table of assets measured at fair value above. This investment, which totaled $0.5 million at June 30, 2009, is periodically assessed for other-than-temporary impairment. If Advent determines that an other-than-temporary impairment has occurred, the Company writes down the investment to its fair value. Advent estimates fair value using a 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.

Note 15—Common Stock Repurchase Program

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, including the price of Advent’s stock, Advent’s cash balances and working capital needs, general business and market conditions, regulatory requirements, and alternative investment opportunities. Repurchased shares are returned to the status of authorized and unissued shares of common stock.

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On October 30, 2008, Advent’s Board authorized the repurchase of up to 3.0 million shares of the Company’s common stock. Consistent with prior repurchase programs, there was no expiration date and repurchases could be limited or terminated at any time at the discretion of management.

The following table provides a summary of the quarterly repurchase activity during the six months ended June 30, 2008 under the stock repurchase program approved by the Board in October 2008 (in thousands, except per share data):

	Total			Average
	Number			Price
	of Shares			Paid
	Purchased	Cost		Per Share

Q1 2009	690	$	14,578	$	21.13
Q2 2009	—	—		—

Total	690	$	14,578	$	21.13

At June 30, 2009, there remained approximately 1.0 million shares authorized by the Board for repurchase.

Note 16—Subsequent Event

In accordance with the recently issued Statement of Financial Accounting Standards No. 165 “Subsequent Events” (“SFAS 165”), the Company evaluated subsequent events after the balance sheet date of June 30, 2009 through August 6, 2009, which is the date the financial statements were issued.

On July 27, 2009, Advent Software, Inc. (the “Company”) entered into an Agreement and Plan of Merger (the “Agreement”), by and among the Company, Microedge Holdings, LLC (“Purchaser”), a Delaware limited liability company and an affiliate of Vista Equity Partners III, LLC, Microedge Merger Sub, LLC, a New York limited liability company and a wholly-owned subsidiary of Purchaser (“Merger Sub”), MicroEdge, Inc. (“MicroEdge”) a wholly-owned subsidiary of the Company, and, with respect to Article VII, Article VIII and Article IX thereof only, U.S. Bank National Association as escrow agent. The Agreement provides that, upon the terms and subject to the conditions set forth in the Agreement, the Purchaser will acquire MicroEdge through the merger of MicroEdge with and into Merger Sub.

Under the terms of the agreement, the Purchaser will pay approximately $30 million in cash (the “Purchase Price”) to Advent for all of the outstanding capital stock of MicroEdge subject to adjustment for a working capital adjustment and certain other specified items. Approximately $3 million of the Purchase Price will be placed into escrow for eighteen (18) months following the closing date 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. The Company anticipates that the acquisition will close in the fourth quarter of 2009 and will result in a gain on sale.

Effective with the Company’s reporting for the third quarter ended September 30, 2009, MicroEdge’s results of operations will be reported as a discontinued operation in accordance with Statement of Financial Accounting Standards No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”).

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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

You should read the following discussion in conjunction with our consolidated financial statements and related notes. 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

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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-Q, as well as other risks identified from time to time in other Securities and Exchange Commission (“SEC”) reports. You should not place undue reliance on our forward-looking statements, as they are not guarantees of future results, levels of activity or performance and represent our expectations only as of the date they are made.

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

Overview

We offer integrated software, products and services for automating and integrating data and work flows across the investment management organization, as well as between the investment management organization and external parties. Our products are intended to increase operational efficiency, improve the accuracy of client information and enable better decision-making. Each solution focuses on specific mission-critical functions of the 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 the investment environment.

Our software solutions within our MicroEdge subsidiary also support the grant management, gifts matching and volunteer tracking processes for the grant-making community. On July 27, 2009, we entered into a definitive agreement to divest our MicroEdge subsidiary for approximately $30 million. We anticipate that the acquisition will close in the fourth quarter of 2009 and will result in a gain on sale. Effective with the Company’s reporting for the third quarter ended September 30, 2009, MicroEdge’s results of operations will be reported as a discontinued operation in accordance with Statement of Financial Accounting Standards No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). See Note 16, “Subsequent Event” to our condensed consolidated financial statements for further discussion of the subsequent event related to the MicroEdge subsidiary.

Current Economic Environment

In the fourth quarter of 2008, the gross domestic product (“GDP”) contracted at an estimated annual rate of 6% and decreased another 6% during the first quarter of 2009. The equity markets experienced intense volatility with the S&P 500 Index down 22% and 12% during the fourth quarter of 2008 and the first quarter of 2009, respectively. Although these macro-economic indicators stabilized during the second quarter of 2009 (GDP contracted at an estimated annual rate of 1% and the S&P 500 Index was up 15%), our business continued to be impacted by the generally weak macro-economic environment. The current recession has created pressure on our clients to decrease their information technology budgets, which negatively impacted our customer renewal rates and annual term license contract value (“ACV”) in the first half of 2009. Renewal rates, which we report one quarter in arrears, decreased to 85% for the second quarter of 2009 compared to 103% in the second quarter of 2008, while ACV decreased to $3.6 million in the second quarter of 2009, compared to $6.9 million in the comparable period of 2008.

We believe that fiscal 2009 will continue to be a difficult period for the investment management industry in the United States and worldwide. During the first half of 2009, investment managers have seen their revenues decrease as a result of decreases in their assets under management and some hedge funds and other types of clients have gone out of business and we believe more firms may go out of business during 2009. 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:

· Our solutions are mission critical to our customers;

· Our technology can be utilized to increase operational efficiency and manage costs;

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

· We expect an increased need for systems in the face of a more regulated, compliance-oriented industry; and

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

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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.

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. Additionally, we intend to continue to carefully manage our expenses and headcount growth.

Operating Overview

Operating highlights of our second quarter of 2009 include:

· Expanded customer relationships and 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 8 APX contracts, bringing the total number of licenses sold globally to 299, and we added 8 new Geneva clients which brings the total number of Geneva licenses sold to 221 as of June 30, 2009.

· Continued momentum in customer wins for Tamale. As of June 30, 2009, we have sold 31 Tamale contracts worldwide since our acquisition of Tamale Software in October 2008.

· New and incremental bookings. The term license contracts signed in the second quarter of 2009 will contribute approximately $3.6 million in annual revenue (“annual term license contract value” or “ACV”) once they are fully implemented.

Financial Overview

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

	Three Months Ended June 30						$			%
	2009			2008			Change			Change

Term license revenues	$	24,540		$	15,078		$	9,462		63	%
Maintenance revenues	22,384			22,892			(508		)	-2	%
Other recurring revenues	12,818			12,868			(50		)	0	%
Total term license, maintenance and other recurring revenues	59,742			50,838			8,904			18	%
Recurring revenue as % of total revenue	86		%	79		%

Asset under administration (AUA) fees	1,359			1,416			(57		)	-4	%
Other perpetual license fees	1,964			3,826			(1,862		)	-49	%
Total perpetual license fees	3,323			5,242			(1,919		)	-37	%

Professional services and other	6,467			7,947			(1,480		)	-19	%

Total net revenues	$	69,532		$	64,027		$	5,505		9	%

We recognized revenue of $69.5 million during the second quarter of 2009, which represented an increase of 9% over the same quarter of last year. This increase was driven by significant growth in term license revenue as we continued to layer in incremental ACV sold in previous periods. Perpetual license fees in the second quarter of 2009 were down compared to the second quarter of 2008 as we licensed fewer perpetual seats and modules to our existing perpetual client base. We have grown net revenue year-over-year for several reasons, including the following:

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

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

· Our completion of term license implementations resulted in incremental term license revenues.

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Total recurring revenues, which we define as term license, perpetual maintenance, and other recurring revenues, increased to 86% of total net revenues during the second quarter of 2009, as compared to 79% during the same period of 2008. Term license revenues increased 63% in the second quarter of 2009 from the prior year period and represented 35% of total net revenues in the second quarter of 2009, as compared to 24% in the same period in 2008.

Total expenses, including cost of revenues, were $60.9 million in the second quarter of 2009, compared with $59.0 million in the second quarter of 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 income from operations in the second quarter of 2009 increased to $8.6 million or 12% of revenue from $5.1 million or 8% of revenue in the second quarter of 2008 which is reflective of revenue growth and our cost reduction initiatives.

We recognized $2.8 million of income tax expense resulting in a 26% effective tax rate during the second quarter of 2009, compared to $1.3 million or 15%, respectively, in the second quarter of 2008.

We earned net income of $8.0 million, resulting in diluted earnings per share of $0.31 for the second quarter of 2009, compared to $7.4 million or $0.26 in the second quarter of 2008.

We generated $35.7 million in cash from operations in the first half of 2009, which compares to $35.0 million in the first half of 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 in the Advent Investment Management (“AIM”) segment in the early stages of the transition, but increasing the total potential value of the customer relationship. Because our products are used by customers for an average of approximately ten years, we believe this change to our business model is significant for the long-term growth and value of the business as we expect total revenues from a customer to increase over time. For example, over a ten-year period, a customer may enter into two or more contracts for the same software product and services under a term license model.

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.

Now that we are substantially complete in our transition, 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. In the first half of 2009, the revenue recognized from completed implementations exceeded the revenue deferred from projects being implemented by $4.4 million composed of $3.1 million of term license revenue and $1.3 million of professional services revenue. We do not expect this trend of revenue recognition exceeding revenue deferral to continue. For example, in the first half of 2008, the revenue deferred from projects being implemented exceeded the revenue recognized from completed implementations by $5.0 million composed of $0.9 million of term license revenue and $4.1 million of professional services revenue.

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Amounts of revenues and directly-related expenses deferred as of June 30, 2009 and December 31, 2008 associated with our term licensing deferral was as follows (in millions):

	June 30		December 31
	2009		2008
Deferred revenues
Short-term	$	20.7	$	26.0
Long-term	5.7		4.8

Total	$	26.4	$	30.8

Directly-related expenses
Short-term	$	6.3	$	8.1
Long-term	2.9		2.1

Total	$	9.2	$	10.2

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

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations are based on our condensed 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.

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 are reasonable for making judgments at the time they are made. Actual results may differ from these 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 condensed consolidated financial statements.

· Revenue recognition and deferred revenues;

· Income taxes;

· Stock-based compensation;

· Restructuring charges and related accruals;

· Business combinations;

· Goodwill;

· Impairment of long-lived assets;

· Legal contingencies; and

· Sales returns and accounts receivable allowances

There have been no significant changes in our critical accounting policies and estimates during the first six months of 2009 as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2008.

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RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008

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

	Three Months Ended June 30				Six Months Ended June 30
	2009		2008		2009		2008
Net revenues:
Term license, maintenance and other recurring	86	%	79	%	85	%	80	%
Perpetual license fees	5		8		5		9
Professional services and other	9		12		10		12

Total net revenues	100		100		100		100

Cost of revenues:
Term license, maintenance and other recurring	18		18		17		18
Perpetual license fees	*		*		*		*
Professional services and other	12		13		12		13
Amortization of developed technology	2		1		2		1

Total cost of revenues	31		33		31		32

Gross margin	69		67		69		68

Operating expenses:
Sales and marketing	23		24		23		25
Product development	19		20		19		21
General and administrative	14		14		13		15
Amortization of other intangibles	1		*		1		1
Restructuring charges (benefit)	*		*		*		*

Total operating expenses	56		60		56		61

Income from operations	12		8		13		7
Interest and other income, net	3		6		1		3

Income before income taxes	16		13		14		10
Provision for income taxes	4		2		4		2

Net income	12	%	11	%	10	%	8	%

*Less than 1%

NET REVENUES

	Three Months Ended June 30						Six Months Ended June 30
	2009		2008		Change		2009		2008		Change

Total net revenues (in thousands)	$	69,532	$	64,027	$	5,505	$	142,318	$	125,500	$	16,818

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 recorded 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 or transaction-based services. Perpetual license revenues are derived from the licensing of software products under a perpetual arrangement and include AUA fees. 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.

Prior to fiscal 2006, each of the major revenue categories varied as a percentage of net revenues. However, since fiscal 2006, revenues from recurring sources have grown from 75% in 2006, to 77% in 2007, to 79% in 2008 and to 85% in the first half of 2009 and conversely revenues from perpetual licenses have decreased from 15% in 2006, to 12% in 2007, to 9% in 2008 and to 5% in the first half of 2009. As we continue to sign term license agreements for new customers, we expect our revenue from recurring sources to continue to represent over 80% of our total net revenues.

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Revenue derived from sales to the Europe, Middle East and Africa (“EMEA”) region was $7.9 million and $16.8 million for the three and six months ended June 30, 2009 which reflected a decrease of $1.2 million and $0.6 million when compared to comparable periods in 2008. These decreases are primarily due to the impact of the US dollar strengthening against the Pound Sterling and Euro during the first half of 2009 compared to the comparable period of 2008. 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 that total net revenues from continuing operations, which do not include the results of our MicroEdge segment, to be between $61 million and $63 million in the third quarter of 2009.

Term License, Maintenance and Other Recurring Revenues

(in thousands, except percent of	Three Months Ended June 30									Six Months Ended June 30
total net revenues)	2009			2008			Change			2009			2008			Change

Term license revenues	$	24,540		$	15,078		$	9,462		$	50,573		$	29,449		$	21,124
Maintenance revenues	22,384			22,892			(508		)	44,729			45,391			(662		)
Other recurring revenues	12,818			12,868			(50		)	25,337			25,137			200
Total term license, maintenance and other recurring revenues	$	59,742		$	50,838		$	8,904		$	120,639		$	99,977		$	20,662
Percent of total net revenues	86		%	79		%				85		%	80		%

The increase in term license revenues reflected the continued market acceptance of our Geneva, APX, Partner and Moxy products. Revenues from term licenses, which include both the software license and maintenance services for term licenses, grew 63% and 72% during the three and six months ended June 30, 2009, respectively, compared to the same periods in 2008, and represented 41% and 42% of total term license, maintenance and other recurring revenues as compared to 30% and 29% in the comparable periods of 2008. The growth of term license revenues in the second quarter of 2009 reflects the continued layering of incremental ACV sold in previous quarters into our term revenue. In addition, in the first half of 2009, the revenue recognized from completed implementations exceeded the revenue deferred from projects being implemented by $3.1 million. The amount of net revenue recognized from completed implementations was $0.8 million and $3.1 million for the three and six months ended June 30, 2009, respectively. This is in contrast to our historical trend of net revenue deferral. In the first half of 2008, term license revenue deferred from projects being implemented exceeded the revenue recognized from completed implementations by $0.9 million. Revenues from Tamale Software, acquired in October 2008 also contributed to the growth of our term license revenues for the three and six months ended June 30, 2009.

The decrease in maintenance revenues during the 2009 periods was attributable to the 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. 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 initial disclosure to include all cash collections subsequent to the initial disclosure. The following summarizes our initial and updated renewal rates for the previous five quarters:

Renewal Rates	Q209		Q109		Q408		Q308		Q208

Current Methodology (based on cash collections relative to prior year collections)
Initially Disclosed Rate (1)	85	%	93	%	98	%	103	%	103	%
Updated Disclosed Rate (2)	—		98	%	100	%	109	%	106	%

Previous Methodology (based on cash collections relative to original list price including price increases)
Initially Disclosed Rate (1)	77	%	82	%	88	%	86	%	92	%
Updated Disclosed Rate (2)	—		84	%	88	%	92	%	95	%

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

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

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The slight fluctuations in other recurring revenues reflected fluctuations in transaction charges and subscription, data management and outsourced services.

Perpetual License Fees

(in thousands, except percent of	Three Months Ended June 30									Six Months Ended June 30
total net revenues)	2009			2008			Change			2009			2008			Change

Assets under administration (AUA) fees	$	1,359		$	1,416		$	(57	)	$	2,853		$	3,395		$	(542	)
Other perpetual license fees	1,964			3,826			(1,862		)	4,372			7,472			(3,100		)

Total perpetual license fees	$	3,323		$	5,242		$	(1,919	)	$	7,225		$	10,867		$	(3,642	)

Percent of total net revenues	5		%	8		%				5		%	9		%

Total perpetual license fees decreased 37% and 34% during the three and six months ended June 30, 2009, respectively. As a percentage of total net revenues, perpetual license fees decreased to 5% in the second quarter of 2009 down from 8% in the same period of 2008. 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 $0.5 million during the six months ended June 30, 2009 when compared to the same period in 2008 as clients experienced declines in the market value of AUA balances during 2009 due to market conditions.

Professional Services and Other Revenues

	Three Months Ended June 30									Six Months Ended June 30
	2009			2008			Change			2009			2008			Change
Professional services and other revenues (in thousands)	$	6,467		$	7,947		$	(1,480	)	$	14,454		$	14,656		$	(202	)
Percent of total net revenues	9		%	12		%				10		%	12		%

Professional services and other revenues primarily include consulting, project management, custom integration, and training. 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.

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):

	Change From			Change From
	2008 to 2009			2008 to 2009
	QTD			YTD

Decreased consulting services	$	(3,348	)	$	(3,843	)
Decreased reimbursable travel revenue	(534		)	(747		)
Decreased project management	(298		)	(415		)
Decreased net term license implementation deferral	3,085			5,423
Various other items	(385		)	(620		)

Total change	$	(1,480	)	$	(202	)

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Total professional services and other revenues decreased 19% and 1% during the three and six months ended June 30, 2009, respectively. Revenues from consulting services decreased during the three and six months ended June 30, 2009 due to lower utilization of our consultants resulting from a decrease in demand for consulting services. This decrease was partially offset by the recognition of net professional services revenue related to the completion of term license implementations during the three and six months ended June 30, 2009. We deferred less professional services revenues for services performed on term license implementations which contributed to $3.1 million and $5.4 million of the increase for the three and six months ended June 30, 2009, respectively. During the first and second quarters of 2009, a number of professional service implementation projects reached substantial completion.

Revenues by Segment

	Three Months Ended June 30						Six Months Ended June 30
(in thousands)	2009		2008		Change		2009		2008		Change

Advent Investment Management	$	63,076	$	57,979	$	5,097	$	129,401	$	113,243	$	16,158
MicroEdge	6,456		6,048		408		12,917		12,257		660

Total net revenues	$	69,532	$	64,027	$	5,505	$	142,318	$	125,500	$	16,818

We have two reportable segments: Advent Investment Management (“AIM”) and MicroEdge. AIM derives revenues from the development, marketing and sale of software products, data interfaces and related maintenance and services that automate, integrate and support certain mission critical functions of investment management organizations. MicroEdge derives revenues from the sale of software and services for grant management, matching gifts and volunteer tracking for the grant-making community.

The 9% and 14% increase in AIM’s revenue during the three and six months ended June 30, 2009 reflected the increase in term license revenues described in the “Term License, Maintenance and Other Recurring Revenue” section above.

The 7% and 5% increase in MicroEdge revenue during the three and six months ended June 30, 2009 primarily reflected an increase in perpetual license sales in MicroEdge’s core product GIFTS, and to a lesser extent an increase in maintenance revenues due to price increases and continued strong customer retention. The technology spending patterns of organizations in MicroEdge’s primary markets (independent foundations, community foundations and corporations) are directly affected by economic fluctuations as foundation budgets are largely driven by endowment income. Given that endowments often contain market-exposed components, they are significantly affected by the economy and foundation spending typically decreases in an economic downturn. Community foundations are subject to similar influences, compounded by the fact that in many cases much of their ongoing funding and endowment comes from active donors who may increase or reduce their giving depending on the economic climate and the related effect on their income and wealth. Corporations typically fund charitable activities from operating budgets, and the allocation to charitable donations and supporting company charitable operations is often closely tied to a company’s performance. Thus, corporate philanthropy and spending on related technology are correlated with company and overall economic performance.

COST OF REVENUES

	Three Months Ended June 30								Six Months Ended June 30
	2009			2008			Change		2009			2008			Change

Total cost of revenues (in thousands)	$	21,856		$	20,854		$	1,002	$	44,365		$	40,553		$	3,812
Percent of total net revenues	31		%	33		%			31		%	32		%

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 increase in total cost of revenues in absolute dollars was due principally to headcount additions in our client support and services groups to support our new term license bookings since the second quarter of 2008 and associated increase in client implementation projects. Cost of revenues as a percent of total net revenues decreased for the three and six months ending June 30, 2009 resulting principally from the recognition of term license and professional services revenue from several projects that reached substantial completion during the first and second quarters of 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.

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Cost of Term License, Maintenance and Other Recurring

	Three Months Ended June 30								Six Months Ended June 30
	2009			2008			Change		2009			2008			Change
Cost of term license, maintenance and other recurring (in thousands)	$	12,272		$	11,379		$	893	$	24,408		$	22,313		$	2,095
Percent of total term license, maintenance and other recurring revenue	21		%	22		%			20		%	22		%

Cost of term license fees consists primarily of royalties and other fees paid to third parties, the fixed direct labor 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 under maintenance agreements and other services for recurring revenues and royalties paid to third party subscription-based and transaction-based vendors.

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

	Change From			Change From
	2008 to 2009			2008 to 2009
	QTD			YTD

Increased payroll and related costs	$	1,153		$	2,406
Increased computers and telecom	84			197
Decreased royalty	(342		)	(184		)
Decreased outside services	(73		)	(157		)
Decreased recruiting	(55		)	(176		)
Various other items	126			9

Total change	$	893		$	2,095

The increases in absolute dollars for the three and six months ended June 30, 2009 were due primarily to an increase in compensation and related costs resulting from increases in salary costs and headcount. This increase was offset by decreases to royalty expenses resulting from the cessation of royalty contracts with certain software vendors. Additionally, decreases to outside services and recruiting expenses reflect less activity and utilization during the three and six months ended June 30, 2009.

We expect cost of term license, maintenance and other recurring revenue in the third quarter of 2009 to increase slightly as compared to the second quarter.

Cost of Perpetual License Fees

	Three Months Ended June 30									Six Months Ended June 30
	2009			2008			Change			2009			2008			Change

Cost of perpetual license fees (in thousands)	$	128		$	224		$	(96	)	$	303		$	541		$	(238	)
Percent of total perpetual license revenues	4		%	4		%				4		%	5		%

Cost of perpetual license fees consists primarily of royalties and other fees paid to third parties, the fixed direct labor involved in producing and distributing our software, and cost of product media including duplication, manuals and packaging materials. The cost of perpetual license fees for the three and six months ended June 30, 2009 decreased by $0.1 million and $0.2 million compared with the same period in 2008 as a result of a reduction in payroll and related expenses due to a decline in headcount and product media costs as we continue to transition away from perpetual licensing.

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Cost of Professional Services and Other

	Three Months Ended June 30									Six Months Ended June 30
	2009			2008			Change			2009			2008			Change
Cost of professional services and other (in thousands)	$	8,010		$	8,519		$	(509	)	$	16,691		$	16,245		$	446
Percent of total professional services and other revenues	124		%	107		%				115		%	111		%

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. Also, 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):

	Change From			Change From
	2008 to 2009			2008 to 2009
	QTD			YTD

Decreased travel and entertainment	$	(654	)	$	(914	)
Decreased outside services	(446		)	(612		)
Decreased marketing	(289		)	(278		)
Increased (decreased) payroll and related costs	(258		)	191
Decreased recruiting	(99		)	(195		)
Decreased net service cost deferral related to term implementations	1,375			2,400
Various other items	(138		)	(146		)

Total change	$	(509	)	$	446

Cost of professional services and other expense as a percent of total professional services and other revenues increased for the three and six months ending June 30, 2009 as a result of decreased total professional services and other revenues for the same periods. While the cost of professional services fluctuated slightly for the three and six months ended June 30, 2009, when compared to the same periods in 2008, professional services revenues decreased by a greater rate due to lower billing rates for our consultants and lower utilization of our existing consultants. The change in total dollars of professional services and other expense during the three and six months ended June 30, 2009 reflects decreases in travel and entertainment expenses, outside services, marketing and recruiting resulting from less professional service activity and lower utilization of consulting employees. These decreases were offset by increased payroll and related costs related to less cost deferral associated with our term implementations. During the first and second quarter of 2009, we recognized revenue on several professional service implementation projects that reached substantial completion. We defer direct costs associated with services performed on term license implementations until a project reaches substantial completion. As a result, we recognized previously deferred salary costs related to these completed projects. We recognized net professional service costs of $0.4 million and $0.6 million during the three and six months ended June 30, 2009, compared to a deferral of net professional service costs of $0.9 million and $1.8 million for the same periods in 2008. As a result, less cost deferral from our term implementations resulted in increases of $1.4 million and $2.4 million in costs for the three and six months ended June 30, 2009.

Amortization of Developed Technology

	Three Months Ended June 30								Six Months Ended June 30
	2009			2008			Change		2009			2008			Change
Amortization of developed techology (in thousands)	$	1,446		$	732		$	714	$	2,963		$	1,454		$	1,509
Percent of total net revenues	2		%	1		%			2		%	1		%

Amortization of developed technology represents amortization of acquisition-related intangible assets and of capitalized software development costs previously capitalized under FAS 86. The increase during the three and six months ended June 30, 2009 reflects increased amortization from technology-related intangible assets associated with Tamale Software which we acquired in October 2008, and additional amortization from software development costs capitalized during 2009.

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OPERATING EXPENSES

Sales and Marketing

	Three Months Ended June 30								Six Months Ended June 30
	2009			2008			Change		2009			2008			Change

Sales and marketing (in thousands)	$	16,280		$	15,626		$	654	$	33,357		$	31,016		$	2,341
Percent of total net revenues	23		%	24		%			23		%	25		%

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 expenses increased in dollar amount due to the following (in thousands):

	Change From			Change From
	2008 to 2009			2008 to 2009
	QTD			YTD

Increased payroll and related costs	$	1,414		$	3,746
Decreased travel and entertainment	(568		)	(884		)
Decreased advertising	(144		)	(229		)
Various other items	(48		)	(292		)

Total change	$	654		$	2,341

The increase in expense in absolute dollars for the three and six months ended June 30, 2009 reflected the growth of payroll related costs, while the decrease of expense as a percentage of revenue during 2009 reflected revenue growing at a higher rate as we implemented programs to control operating costs in 2009. The increase in payroll related costs was due principally to an increase in salary costs as headcount grew to 200 at June 30, 2009 from 189 at June 30, 2008 resulting from the acquisition of Tamale Software, Inc. on October 1, 2008. The decreases in travel and entertainment costs and advertising costs were due to the impact of cost control measures implemented in 2009.

Product Development

	Three Months Ended June 30									Six Months Ended June 30
	2009			2008			Change			2009			2008			Change

Product development (in thousands)	$	12,881		$	13,008		$	(127	)	$	26,476		$	25,898		$	578
Percent of total net revenues	19		%	20		%				19		%	21		%

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

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

	Change From			Change From
	2008 to 2009			2008 to 2009
	QTD			YTD

Increased payroll and related costs	$	1,154		$	2,652
Increased capitalization of product development	(1,110		)	(933		)
Decreased outside services	(94		)	(829		)
Various other items	(77		)	(312		)

Total change	$	(127	)	$	578

The change in total product development expenses for the three and six months ended June 30, 2009 reflects increases in payroll related costs during the three and six months ended June 30, 2009 that are a result of an increase in headcount attributable to our acquisition of Tamale Software, as well as increases in headcount to help continue the enhancement of our existing product suite including new versions of Geneva, APX, Moxy, Advent Rules Manager, Advent Revenue Center and Tamale RMS. The increases in payroll related costs from the increase in headcount were offset by increases in capitalized payroll costs related to our software development efforts primarily associated with a new release of Geneva. The decrease in outside services primarily reflects our cost control measures implemented in 2009. We invested 19% of our revenues in product development during the three and six months ended June 30, 2009.

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General and Administrative

	Three Months Ended June 30								Six Months Ended June 30
	2009			2008			Change		2009			2008			Change

General and administrative (in thousands)	$	9,438		$	9,232		$	206	$	18,701		$	18,459		$	242
Percent of total net revenues	14		%	14		%			13		%	15		%

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):

	Change From			Change From
	2008 to 2009			2008 to 2009
	QTD			YTD

Increased depreciation	$	401		$	797
Increased (decreased) payroll and related costs	(129		)	303
Decreased legal and professional	(106		)	(444		)
Various other items	40			(414		)

Total change	$	206		$	242

The increase in expenses during the three and six months ended June 30, 2009 is partially attributable to the increase in depreciation as a result of the build out of our headquarters in San Francisco. The change in payroll and other related costs during the three and six months ended June 30, 2009 is primarily associated with an increase in headcount to 170 at June 30, 2009 from 165 at June 30, 2008 as a result of our Tamale acquisition. The increases in payroll related costs associated with the increase in headcount were offset by a decrease in the use of outside contractors during the three and, to a lesser extent, six months ended June 30, 2009. The decrease in legal and professional fees primarily reflects a reduction in external accounting fees.

Amortization of Other Intangibles

	Three Months Ended June 30								Six Months Ended June 30
	2009			2008			Change		2009			2008			Change
Amortization of other intangibles (in thousands)	$	444		$	242		$	202	$	888		$	729		$	159
Percent of total net revenues	1		%	0		%			1		%	1		%

Amortization of other intangibles represents amortization of non-technology related intangible assets. The increase during 2009 reflected increased amortization from technology-related intangible assets associated with Tamale Software which we acquired in October 2008, partially offset by less amortization from assets from prior acquisitions becoming fully amortized during 2008.

Restructuring Charges (Benefit)

	Three Months Ended June 30								Six Months Ended June 30
	2009			2008			Change		2009			2008			Change

Restructuring charges (benefit) (in thousands)	$	2		$	(1	)	$	3	$	47		$	55		$	(8	)
Percent of total net revenues	0		%	0		%			0		%	0		%

During the six months ended June 30, 2009 and 2008, we recorded restructuring charges of $47,000 and $55,000, respectively, which related to the present value amortization of facility exit obligations partially offset by adjustments to facility exit assumptions.

For additional analysis of the components of the payments and charges made against the restructuring accrual during the first half of 2009, see Note 9, “Restructuring Charges” to our condensed consolidated financial statements.

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Income from Operations by Segment

	Three Months Ended June 30									Six Months Ended June 30
(in thousands)	2009			2008			Change			2009			2008			Change

Advent Investment Management	$	13,881		$	9,290		$	4,591		$	28,005		$	17,226		$	10,779
MicroEdge	1,729			611			1,118			3,482			999			2,483
Unallocated corporate operating costs and expenses:
Stock-based employee compensation	(5,089		)	(3,861		)	(1,228		)	(9,152		)	(7,252		)	(1,900		)
Amortization of developed technology	(1,446		)	(732		)	(714		)	(2,963		)	(1,454		)	(1,509		)
Amortization of other intangibles	(444		)	(242		)	(202		)	(888		)	(729		)	(159		)

Total income from operations	$	8,631		$	5,066		$	3,565		$	18,484		$	8,790		$	9,694

Income from operations for the AIM segment increased by approximately $4.6 million in the second quarter of 2009 compared with the second quarter of 2008 primarily as a result of an increase in AIM revenue of $5.1 million or 9%, reflecting substantially increased term license revenues while our total expenses increased by $0.5 million or 1%, primarily due to payroll and other related costs. Headcount remained relatively flat during the three and six months ended June 30, 2009 when compared to the same periods in 2008, with the exception of personnel added from our acquisition of Tamale Software in October 2008.

MicroEdge’s income from operations increased by $1.1 million and $2.5 million during the three and six months ended June 30, 2009, as compared to comparable periods of 2008, primarily due to an decrease in total costs of $0.7 million and $1.8 million. This decrease primarily resulted from initiatives that have been implemented in the MicroEdge operating segment to reduce costs and improve operating efficiencies.

Interest and Other Income, Net

	Three Months Ended June 30									Six Months Ended June 30
	2009			2008			Change			2009			2008			Change

Interest and other income, net (in thousands)	$	2,201		$	3,559		$	(1,358	)	$	1,824		$	3,786		$	(1,962	)
Percent of total net revenues	3		%	6		%				1		%	3		%

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

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

	Change From			Change From
	2008 to 2009			2008 to 2009
	QTD			YTD

Decreased gain on sale of private equity investments	$	(1,337	)	$	(1,335	)
Decreased interest income	(234		)	(547		)
(Increased) decreased interest expense	11			(77		)
Various other items	202			(3		)

Total change	$	(1,358	)	$	(1,962	)

In April 2008, we received the initial deferred contingent payment of $3.4 million as a result of the Company’s sale of its ownership in LatentZero Limited (“LatentZero”) to royalblue group plc. in April 2007. In April 2009, the Company received the second and final deferred contingent payment of $2.1 million related to the sale of its ownership in LatentZero. In April 2007, the Company, together with other LatentZero shareholders, sold their ownership in LatentZero to royalblue group plc. Total payments received by Advent from the sale of its LatentZero ownership were $15.4 million.

The decreases in interest income for the three and six months ended June 30, 2009 were attributable to lower interest rates during 2009.

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Provision for Income Taxes

	Three Months Ended June 30								Six Months Ended June 30
	2009			2008			Change		2009			2008			Change
Provision for income taxes (in thousands)	$	2,810		$	1,270		$	1,540	$	6,057		$	2,586		$	3,471
Effective tax rate	26		%	15		%			30		%	21		%

The increases in the effective tax rates during the 2009 periods over the prior year periods primarily reflect the smaller percentage impact of the discrete tax benefits in 2009 due to the increase in income before tax in 2009 over 2008.

We currently expect an annual effective tax rate for 2009 between 30% and 35%. Our expectation is based on a projected fiscal 2009 effective tax rate of 36%, adjusted for discrete tax benefits for tax deductions due to disqualifying dispositions of incentive stock options and employee stock purchase plan shares, and the release of the valuation allowance against certain capital loss carryovers recognized in the second quarter.

LIQUIDITY AND CAPITAL RESOURCES

Our aggregate cash and cash equivalents were $47.0 million at June 30, 2009, compared with $48.4 million at December 31, 2008. 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.

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

	Six Months Ended June 30
	2009			2008

Net cash provided by operating activities	$	35,654		$	35,039
Net cash used in investing activities	$	(1,047	)	$	(7,052	)
Net cash provided by (used in) financing activities	$	(36,041	)	$	4,545

Cash Flows from Operating Activities

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 and operating results.

Our cash provided by operating activities of $35.7 million during the six months ended June 30, 2009 was primarily the result of our net income and non-cash charges including stock-based compensation and depreciation and amortization, partially offset by a gain from our equity investment activity. Cash flows resulting from changes in assets and liabilities included decreases in accounts receivable, deferred revenue, accounts payable and accrued liabilities. The decrease in accounts receivable primarily reflected collections during the first half of 2009 of invoices billed in our previous fourth quarter. Days’ sales outstanding based on billings were 66 and 59 days during the first and second quarters of 2009, respectively, compared to 63 and 52 days in the first and second quarters of 2008. The decrease in deferred revenue reflected the recognition of revenue as several term license implementation projects reached substantial completion during the first and second quarters of 2009 and lower level of bookings. The decreases in accounts payable and accrued liabilities reflected cash payments of fiscal 2008 liabilities including year-end bonuses, commissions, and payroll taxes.

Our cash provided by operating activities of $35.0 million during the six months ended June 30, 2008 was primarily the result of our net income and non-cash charges including stock-based compensation and depreciation and amortization, partially offset by a gain from our equity investment activity during the six months. Cash flows resulting from changes in assets and liabilities included decreases in accounts receivable and increases in deferred revenue and accounts payable. The decrease in accounts receivable primarily reflected collections during the first half of 2008 of invoices billed in the previous fourth quarter. The increase in deferred revenue primarily reflected our continued transition to the term license model. 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. This has the effect of increasing deferred revenue when compared to a perpetual license model where no license revenue is deferred. Other changes in assets and liabilities included an increase in our prepaid and other assets and decreases in accrued liabilities. The decrease in accrued liabilities reflected cash payments of fiscal 2007 liabilities including year-end payables and bonuses, commissions and payroll taxes.

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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 revenues, collection of accounts receivable, and timing of payments.

Cash Flows from Investing Activities

Net cash used in investing activities of $1.0 million for the six months ended June 30, 2009 reflects capital expenditures of $1.8 million primarily related to internal use software and capitalized software development costs of $1.3 million, partially offset by the receipt of $2.1 million for the final deferred contingent consideration from the sale of our ownership interest in LatentZero.

Net cash used in investing activities of $7.1 million for the six months ended June 30, 2008 reflects capital expenditures of $9.8 million primarily related to the build-out of additional space at our San Francisco headquarters facility, capitalized software development costs of $0.4 million and change in restricted cash of $0.2 million, partially offset by the receipt of $3.4 million for the initial deferred contingent consideration from the sale of our ownership interest in LatentZero.

Cash Flows from Financing Activities

Net cash used in financing activities of $36.0 million for the six months ended June 30, 2009 reflected the repurchase of 0.7 million shares of our common stock for $14.6 million, repayment of $25.0 million on our credit facility, and payments totaling $1.8 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 $2.4 million and proceeds of $2.9 million from the issuance of common stock under the employee stock purchase plan.

Net cash provided by financing activities of $4.5 million for the six months ended June 30, 2008 reflected proceeds of $2.6 million from the issuance of common stock under the employee stock purchase plan and $3.3 million received from the exercise of employee stock options, partially offset by payments totaling $1.3 million to satisfy withholding taxes on net share settled equity awards.

Our liquidity and capital resources in any period could 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.

At June 30, 2009, we had negative working capital of $(54.1) million, compared to negative working capital of $(47.9) million at December 31, 2008. Our negative working capital is due to our common stock repurchases, totaling $14.6 million and $61.6 million during the six months ended June 30, 2009 and fiscal 2008, respectively, and our deferred revenue balance, primarily resulting from our transition to a predominantly term pricing model. We repaid $25.0 million on our credit facility in the first half of 2009 and paid $27.8 million in cash to acquire Tamale in the fourth quarter of 2008. Excluding deferred revenues and deferred taxes, we had working capital of $73.9 million at June 30, 2009, compared to $85.6 million at December 31, 2008.

On July 27, 2009, we executed an Agreement and Plan of Merger to sell the MicroEdge segment, as further described in Note 16, “Subsequent Event”. We anticipate that the acquisition will close in the fourth quarter of 2009 and will result in a gain on sale. Under the terms of the agreement, the Purchaser will pay approximately $30 million in cash, less transaction costs, to Advent for all of the outstanding capital stock of MicroEdge subject to adjustment for a working capital adjustment and certain other specified items. Approximately $3 million of the Purchase Price will be placed into escrow for eighteen (18) months following the closing date 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. Our cash flows from operating activities and investing activities will be impacted upon the close of the transaction.

Credit Facility

In February 2007, Advent Software, Inc. 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. The credit facility will expire in February 2010. As of June 30, 2009, there was no outstanding balance under the Credit Facility.

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Common Stock Repurchases

On October 30, 2008, our Board authorized the repurchase of up to 3.0 million shares of the Company’s common stock. During the second quarter of 2009, the Company did not make any repurchases of its common stock and at June 30, 2009, there remained approximately 1.0 million shares authorized by the Board for repurchase.

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 acquisitions, repurchase additional common stock, or invest in other businesses, when opportunities arise. We believe that our cash and cash equivalents, cash generated from operations and availability under our Credit Facility 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 equity or debt 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.

Off-Balance Sheet Arrangements and Contractual Obligations

The following table summarizes our contractual cash obligations as of June 30, 2009 (in thousands):

	Six
	Months Ended
	December 31		Years Ended December 31
	2009		2010		2011		2012		2013		Thereafter		Total
Operating lease obligations, net of sub-lease income	$	3,645	$	6,830	$	6,229	$	5,428	$	4,820	$	17,939	$	44,891

At June 30, 2009 and December 31, 2008, we had a gross liability of $7.4 million and $6.9 million for uncertain tax positions associated with the adoption of FIN 48. 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. Additionally, our cash payments for income taxes will continue to be nominal over the next few years as we have significant net operating losses, capital losses and tax credit carryforwards to utilize.

At June 30, 2009 and December 31, 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to financial market risks, including changes in foreign currency exchange rates and interest rates. 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 June 30, 2009, $42.4 million of goodwill and $1.8 million of other intangibles 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 approximately $3 million and could increase or decrease our condensed consolidated results of operations or cash flows by approximately $0.3 million.

Our interest rate risk related primarily to our investment portfolio which consisted of $48.4 million in cash and cash equivalents as of December 31, 2008 and $47.0 million in cash and cash equivalents as of June 30, 2009. Cash equivalent securities were comprised of overnight US government and treasury obligation money market mutual funds which would not be materially affected by an immediate sharp increase or decrease in interest rates.

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If we draw from our line of credit, we have interest rate risk relating to debt under our line of credit facility which is indexed to the LIBOR rate or Wells Fargo prime rate. From time to time we have drawn on that line of credit. As of June 30, 2009, we had no outstanding balance under this credit facility.

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 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. At June 30, 2009 and December 31, 2008, our net investments in privately-held companies totaled $0.5 million.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures.

The Company’s management evaluated, with the participation of the Principal Executive and Financial Officer, the effectiveness of the Company’s disclosure controls and procedures, as such term is defined under Rule 13a-15(f) of the Securities and Exchange Act of 1934, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, the Principal Executive and Financial Officer has concluded our disclosure controls and procedures were effective as of June 30, 2009 to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) is accumulated and communicated to Advent’s management, including our Principal Executive and Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting.

There were no changes in our internal control over financial reporting which were identified in connection with the evaluation required by Rule 13a-15(e) of the Exchange Act that occurred during the second quarter ended June 30, 2009 that has materially affected, or is reasonably likely to materially affect, Advent’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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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 and 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 1A. Risk Factors

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

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. In addition, in our MicroEdge business segment, we target corporations, public funds, universities and non-profit organizations, which also manage investment portfolios and have many of the same needs. The success of many of our clients is intrinsically linked to the health of the financial markets. 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. We have recently experienced some clients and prospects delaying or cancelling additional license purchases. For example, our bookings in the second quarter of 2009 were lower than they have been in previous quarters. 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.

Beginning in the second half of 2008, difficulties in the mortgage and broader credit markets in the United States and elsewhere resulted in a relatively sudden and substantial decrease in the availability of credit and a corresponding increase in funding costs. More recently, the current volatility and uncertainty in the financial markets generally has also caused large losses, layoffs, dissolutions and acquisitions by financial institutions and other clients, have resulted and will likely continue to result in reduced expenditures for software and related services. Additionally, the economic downturn has also decreased our clients’ AUA or AUM, which in turn causes our revenues to decrease since some pricing is based on assets under administration or management. 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.

The technology spending patterns of organizations in MicroEdge’s primary markets (independent foundations, community foundations and corporations) are directly affected by economic fluctuations as foundation budgets are largely driven by endowment income. Given that endowments often contain market-exposed components, they are significantly affected by the economy and foundation spending typically decreases in an economic downturn. Community foundations are subject to similar influences, compounded by the fact that in many cases much of their ongoing funding and endowment comes from active donors who may increase or reduce their giving depending on the economic climate and the related effect on their income and wealth. Corporations typically fund charitable activities from operating budgets, and the allocation to charitable donations and supporting company charitable operations is often closely tied to a company’s performance. Thus, corporate philanthropy and spending on related technology are correlated with company and overall economic performance.

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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 recent quarters 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 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 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. Recent 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 perpetual license revenue or our level of ACV in any particular period is subject to significant fluctuation. For example, during the first half of 2009, our perpetual license revenue and ACV decreased by 34% and 44%, respectively, compared to the first half of 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.

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

Revenues recognized from recurring contracts represented 85%, 79% and 77% of total net revenues in the first half of 2009, fiscal 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 are critical to our future success. Some factors that may affect the renewal rate of our contracts include:

· The impact of the current extreme market volatility on our clients and prospects;

· 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 fourth quarter of 2008 and the first and second quarters of 2009 were below the ranges of our previous four quarters. 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.

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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 the first half of 2009, we cannot yet conclude whether customers will renew in a manner 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 current operating results may not be reflective of our future financial performance.

In the first half of 2009 and in fiscal 2008 and 2007, we recognized 85%, 79% and 77%, 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, 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 non-GAAP information, such as our quarterly 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. However, placing undue reliance upon non-GAAP or operating information is not appropriate because this information is neither standardized across companies nor subjected to the same control activities and audit procedures that produce our GAAP financial results.

The current market downturn has started to cause, and may in the future cause more, clients not to renew their licenses or maintenance, which would affect our renewal rates. 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 had 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.

Our stock price may fluctuate significantly.

Like many other companies, our stock price has been subject to wide fluctuations in recent months as part of the high 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. 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.

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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. Any further 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 market that may develop innovative technologies or business models. Furthermore, competitors may respond to worsening 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 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.

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 new 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 new 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 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 product revenues. Additionally, existing clients may be reluctant to go through the sometimes complex and time consuming process of migrating from our Axys to 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, Sun Microsystems, 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.

Our operating results may fluctuate significantly.

Revenues from recurring sources have grown from 75% in fiscal 2006, to 77% in 2007, to 79% in 2008 and to 85% in the first half of fiscal 2009. Term license revenues comprised approximately 42% of term license, maintenance and other recurring revenues during the first half of 2009 compared to 29% in the first half of 2008. During fiscal 2008, term license revenues comprised approximately 32% of term license, maintenance and other recurring revenues as compared to approximately 22% and 14% in fiscal 2007 and 2006, 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 80% of our total net revenues.

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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. For example, during the third quarter of 2008, we deferred net revenues of $3.8 million and directly related expenses of $1.0 million. 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. In the first and second quarters of 2009, the revenue recognized from completed implementations exceeded the revenue deferred from projects being implemented. The total amount of net revenue recognized from completed implementations for the second half of 2009 amounted to $4.4 million, with $0.9 million of directly related expenses. 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 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 the annual nature of some AUA or AUM contracts, 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 or other large subscription-based relationships are 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 this software would need to be redesigned if their services were unavailable for any reason. Termination of our current agreement with FTID would require at least two years’ notice by either us or them, or 90 days in the case of material breach. Our operating results would be adversely impacted if our relationship with FTID was terminated or their services were unavailable to our clients for any reason. 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, and our operating results could be adversely impacted if those agreements are not fully implemented, terminated or not renewed or if we are unable to continue to generate similar opportunities. Some of these agreements are subject to milestones, acceptance and penalties and there is no assurance that these agreements will be fully implemented, renewed, or that Advent will be able to enter similar or larger sized contracts in the future.

We must retain and recruit 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 the

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anticipated increase in product 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 the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. 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. Fluctuations in our stock price may make it more difficult to retain and motivate employees. The recent significant adverse volatility in our stock price has resulted in many employees’ stock option and/or stock appreciation right exercises exceeding the underlying stock’s market value as well as the deterioration in the value of employees restricted stock units granted, thus lessening the effectiveness of retaining employees through stock-based awards. 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 or business partners.

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 a subsidiary of Advent Software, Inc. in Hong Kong in 2008. 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 have begun to outsource certain engineering activities with a business partner located in China. 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.

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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 November 2007, our MicroEdge subsidiary acquired Vivid Orange Limited, a United Kingdom company providing corporate community involvement and employee charitable giving technology. In December 2006, we acquired East Circle Solutions, Inc., a developer of investment management billing solutions to integrate their product into our software offerings. From 2001 through the middle of 2003, we made five major acquisitions, including Kinexus Corporation, Techfi Corporation and Advent Outsource Data Management LLC, and also acquired all of the common stock of five of our European distributor’s subsidiaries. In addition, we purchased our European distributor’s remaining two subsidiaries in the United Kingdom and Switzerland in May 2004.

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, similar to those we have experienced with our Kinexus and Advent Outsource acquisitions.

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 July 2009, we entered into a definitive agreement to divest 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. 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.

There is no guarantee that the proposed divestiture of MicroEdge will close or will achieve expected benefits.

As described in Note 16, “Subsequent Events,” to our unaudited condensed consolidated financial statements in this Form 10-Q, and as previously announced by us on July 28, 2009, we entered into a definitive agreement with Microedge Holdings LLC (“Purchaser”) pursuant to which Purchaser will acquire all of the outstanding shares of our MicroEdge subsidiary in a cash merger transaction. The transaction is subject closing conditions and other factors that may cause the proposed transaction not to close when anticipated or at all. These factors include, but are not limited to, (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement with Purchaser; and (2) the inability to complete the merger due to the failure to satisfy conditions to completion of the merger. The merger may not result in achieving the expected financial, operational and other benefits to the transaction, and there are also risks related to the proposed transaction, including the potential disruption of current plans and operations and the potential difficulties in employee retention as a result of the merger announcement. In addition, the Company may be unable to create new revenue sources or grow current revenues to replace the amounts previously provided by the operations of its MicroEdge subsidiary.

Impairment of investments could harm our results of operations.

We have made and may make future investments in privately held companies, many of which are considered in the start-up or development stages. These investments, which we classify as other assets on our consolidated balance sheets, are inherently risky, as the market for the technologies or products these companies have under development is typically in the early stages and may never materialize. The value of the investment in these companies is influenced by many factors, including the operating effectiveness of these companies, the overall health of these companies’ industries, the strength of the private equity markets and general market conditions. Due to these and other factors, we have previously determined, and may in the future determine, that the value of these investments is impaired, which has caused and would cause us to write down the carrying value of these investments, such as the $0.6 million write-down of one of our investments during the second quarter of 2007. Furthermore, we cannot be sure that future investment, license, fixed asset or other asset write-downs will not occur. If future write-downs do occur, they could harm our business and results of operations.

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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 one registered patent. 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 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.

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.

Information we provide to investors is accurate only as of the date we disseminate it.

From time to time, we may publicly disseminate forward-looking information or guidance in compliance with Regulation FD. This information or guidance represents our outlook only as of the date we disseminate it, and we do not undertake to update such information or guidance.

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

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

Our products may contain undetected software errors or 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 until after commencement of commercial shipments, 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 38% as of July 31, 2009). As a result, if these people 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 fail to comply with these new rules and reporting requirements. In fiscal 2008, 2007 and 2006, we incurred approximately $0.8 million, $0.9 million and $1.3 million, respectively, in Sarbanes-Oxley related expenses consisting of external consulting costs and auditor fees, and the Company anticipates similarly spending a significant amount for its 2009 compliance activities. 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.

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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 particular, in the first quarter of 2006, we adopted SFAS 123R which requires the measurement of all stock-based compensation to employees, including grants of employee stock options, restricted stock units and stock appreciation rights, using a fair-value-based method and the recording of such expense in our consolidated statements of operations. The adoption of SFAS 123R had a significant adverse effect on our results of operations. It will continue to significantly adversely affect our results of operations and has resulted in changes to our compensation practices, such as an increased reliance on using equity vehicles such as stock-settled stock appreciation rights (“SAR”) and restricted stock units (“RSU”).

We also adopted FIN 48 in the first quarter of 2007. The adoption of FIN 48 resulted in an increase in both assets and liabilities in our consolidated balance sheet as of the beginning of fiscal 2007 and may create increased volatility in our future operating results.

Additionally, in December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141 (revised 2007), (“SFAS 141R”), “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. FAS 141R is effective for financial statements issued for fiscal years beginning after December 15, 2008. We currently believe that the adoption of SFAS 141R 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 effects will depend upon the nature, terms and size of the acquisitions the Company consummates after the effective date.

Borrowings under our credit facility must be repaid if we fail to comply with certain covenants.

In February 2007, we entered into a senior secured facility agreement which provides us with a revolving line of credit up to an aggregate amount of $75.0 million. We have in the past, and may in the future, borrow under the credit facility in order to fund working capital requirements, make share repurchases of our common stock or fund acquisitions. In addition, if our anticipated cash flow from our recurring sources of revenue is materially impaired due to customer defaults or failure to renew term licenses or maintenance contracts, our ability to borrow under the credit facility, or continue to meet the contractual covenants, may be compromised. Our continued ability to borrow under our credit facility is subject to compliance with certain financial and non-financial covenants. The financial covenant is limited to a maximum ratio of senior debt to earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted for cost capitalizations, extraordinary gains (losses) and non-cash stock compensation. Our failure to comply with such covenants could cause default under the agreement, and we may then be required to repay such debt with capital from other sources. Under those circumstances, other sources of capital may not be available to us, or be available only on unfavorable terms, particularly in the current economic environment. In the event of a default which is not remedied within the prescribed timeframe, the assets of the Company (subject to the amount borrowed) may be attached or seized by the lender. On October 30, 2008, the Board of Directors authorized a share repurchase program of up to 3.0 million shares, and in November 2008, we borrowed $25.0 million under the credit facility to fund a portion of these repurchases. As of June 30, 2009, we had no outstanding balance under this credit facility.

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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’ 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 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, also could 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.

As of December 31, 2008, approximately 360 or 4% of our clients utilized trading commissions (“soft dollar arrangements”) to pay for software products and services. During fiscal 2007 and 2006, the total value of Advent products and services paid with soft dollars was approximately 4% and 5% of our total billings. Such soft dollar arrangements could be impacted by changes in the regulations governing those arrangements.

During the fourth quarter of 2006, we completed the wind down of the “soft dollar” business of our SEC-registered broker/dealer subsidiary, Second Street Securities, as it no longer fits with our corporate strategy. Second Street Securities’ soft dollar business offered our customers the ability to pay for Advent products and other third party products and services through brokerage commissions and other fee-based arrangements. We will continue to allow clients to utilize soft dollar arrangements to pay for Advent software products and services through other independent broker/dealers.

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

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Our ability to conclude that a control deficiency is not a material weakness or that an accounting error does not require a restatement can be affected by a number of factors, including our level of pre-tax income.

Under the Sarbanes-Oxley Act of 2002, our management is required to assess the impact of control deficiencies based upon both quantitative and qualitative factors, and depending upon that analysis we classify such identified deficiencies as either a control deficiency, significant deficiency or a material weakness.

One element of our quantitative analysis of any control deficiency is its actual or potential financial impact, and any impact that is greater than 5% of our pre-tax income in any quarter may be more likely to result in that deficiency being determined to be a significant deficiency or a material weakness. For example, our assessment of a control deficiency as a significant deficiency or material weakness remains dependent in part on our level of profitability during a particular quarter. If our quarterly or fiscal year pre-tax income were to decrease, this will make it statistically less likely for us and our independent registered public accounting firm to determine that a control deficiency is not a material weakness.

In addition, if management or our independent registered public accountants identify errors in our interim or annual financial statements, it is statistically more likely that such errors may meet the quantitative threshold established under Staff Accounting Bulletin No. 99, “Materiality”, that could, depending upon the complete qualitative and quantitative analysis, result in our having to restate previously issued financial statements.

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

Issuer Purchases of Equity Securities

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

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 second quarter of 2009, Advent did not make any repurchases of common stock.

We withheld shares through net share settlements during the three months ended June 30, 2009. The following table provides a month-to-month summary of the purchase activity upon the employee vesting of restricted stock units and the exercise of stock-settled stock appreciation rights under our equity compensation plan to satisfy tax withholding obligations during the three months ended June 30, 2009 (in thousands, except per share data):

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

April	6	$	34.76	—
May	1	$	32.56	—
June	3	$	31.23	—

Total	10	$	33.62	—

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

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Item 3. Defaults Upon Senior Securities

None.

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

The Annual Meeting of Stockholders (the “Annual Meeting”) of Advent Software, Inc. was held at the principal office of the Company at 600 Townsend Street, San Francisco, California 94103 on May 13, 2009. Stockholders of record at the close of business on March 20, 2009 (the “Record Date”) were entitled to notice of and to vote at the meeting. As of the Record Date, 25,166,391 shares of the Company’s common stock were issued and outstanding, and a quorum of 21,822,283 shares of common stock was represented in person or by proxy at the Annual Meeting.

At the Annual Meeting, three items were voted upon:

1. To elect eight directors to serve for the ensuing year and until their successors are duly elected and qualified.

	Number of Shares
	Voted For	Withheld

John H. Scully	21,110,930	711,353
Stephanie G. DiMarco	21,339,857	482,426
A. George Battle	19,856,042	1,957,241
Robert A. Ettl	21,697,453	124,830
James D. Kirsner	21,576,052	246,231
Christine S. Manfredi	21,799,983	22,300
James P. Roemer	21,576,703	245,580
Wendell G. Van Auken	20,105,847	1,716,436

2. To ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2009.

	Number of Shares
				Broker
	For	Against	Abstained	Non-Votes
Ratification of appointment of PricewaterhouseCoopers LLP	21,769,240	46,902	6,141	—

3. To approve the amended and restated 2002 Stock Plan, and add and reserve 1,800,000 shares thereunder.

	Number of Shares
				Broker
	For	Against	Abstained	Non-Votes
Amended and restated 2002 Stock Plan	16,449,909	2,683,711	9,601	2,679,062

Item 5. Other Information

None.

Item 6. Exhibits

10.1 Description of Director Compensation*

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

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

*Denotes management contract or compensatory plan or arrangement.

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets
	Condensed Consolidated Statements of Operations
	Condensed Consolidated Statements of Cash Flows
	Notes to Condensed Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings
Item 1A.	Risk Factors
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.	Defaults Upon Senior Securities
Item 4.	Submission of Matters to a Vote of Security Holders
Item 5.	Other Information
Item 6.	Exhibits
Signatures

	ADVENT SOFTWARE, INC.

Dated: August 6, 2009	By:	/s/ Stephanie G. DiMarco
		Stephanie G. DiMarco
		Executive President,
		Chief Executive Officer and Chief Financial Officer
		(Principal Executive and Financial Officer)

Dated: August 6, 2009	By:	/s/ James S. Cox
		James S. Cox
		Vice President and Corporate Controller
		(Principal Accounting Officer)