Stock-Based Compensation

9 Months Ended

Sep. 30, 2011

Stock-Based Compensation

Stock-Based Compensation

Note 7—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, 2010	6,780		$	15.73
Options & SARs granted	1,411		$	26.79
Options & SARs exercised	(740	)	$	14.09
Options & SARs canceled	(111	)	$	23.16
Outstanding at September 30, 2011	7,340		$	17.91	6.29	$	31,985
Exercisable at September 30, 2011	4,420		$	14.43	4.75	$	29,313

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 $20.85 as of September 30, 2011 for options and SARs that were in-the-money as of that date.

The weighted average grant date fair value of options and SARs granted (as determined under ASC 718), total intrinsic value of options and SARs exercised and cash received from option exercises during the nine months ended September 30, 2011 and 2010 were as follows (in thousands, except weighted average grant date fair value):

	Nine Months Ended September 30
	2011		2010
Options and SARs
Weighted average grant date fair value	$	9.34	$	7.49
Total intrinsic value of awards exercised	$	10,243	$	12,445
Options
Cash received from exercises	$	5,482	$	10,943

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

A summary of the status of the Company’s restricted stock unit (“RSU”) activity for the nine months ended September 30, 2011 is as follows:

			Weighted
	Number of		Average
	Shares		Grant Date
	(in thousands)		Fair Value
Outstanding and unvested at December 31, 2010	1,308		$	19.58
RSUs granted	470		$	26.81
RSUs vested	(430	)	$	17.62
RSUs canceled	(60	)	$	22.72
Outstanding and unvested at September 30, 2011	1,288		$	22.73

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 September 30, 2011 was $26.9 million, using the closing price of $20.85 per share as of September 30, 2011.

Stock-Based Compensation Expense

Stock-based employee compensation expense recognized on Advent’s condensed consolidated statement of operations for the three and nine months ended September 30, 2011 and 2010 was as follows (in thousands):

	Three Months Ended September 30						Nine Months Ended September 30
	2011			2010			2011			2010
Statement of operations classification
Cost of recurring revenues	$	528		$	466		$	1,535		$	1,308
Cost of non-recurring revenues	381			294			973			846
Total cost of revenues	909			760			2,508			2,154
Sales and marketing	1,757			1,572			4,726			4,288
Product development	1,377			1,356			3,798			3,882
General and administrative	1,022			1,122			3,135			3,314
Total operating expenses	4,156			4,050			11,659			11,484
Total stock-based compensation expense	5,065			4,810			14,167			13,638
Tax effect on stock-based employee compensation	(1,945		)	(2,244		)	(5,621		)	(6,213		)
Effect on net income from continuing operations, net of tax	$	3,120		$	2,566		$	8,546		$	7,425

Advent capitalized stock-based employee compensation expense of $0.1 million and $0 during the nine months ended September 30, 2011 and 2010, respectively, associated with the Company’s software development, internal-use software and professional services implementation projects.

As of September 30, 2011, total unrecognized compensation cost related to unvested awards not yet recognized under all equity compensation plans, adjusted for estimated forfeitures, was $36.6 million and is expected to be recognized through the remaining vesting period of each grant, with a weighted average remaining period of 2.5 years.

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 September 30		Nine Months Ended September 30
	2011	2010	2011	2010
Stock Options & SARs
Expected volatility	36.0% - 42.4%	38.0% - 38.2%	36.0% - 42.4%	35.2% - 38.8%
Expected life (in years)	4.95	4.96	4.91 - 4.95	3.86 - 4.96
Risk-free interest rate	0.9% - 1.5%	1.5% - 1.9%	0.9% - 2.4%	1.5% - 2.7%
Expected dividends	None	None	None	None
Employee Stock Purchase Plan
Expected volatility	28.6% - 28.8%	29.9%	28.6% - 28.8%	29.5% - 29.9%
Expected life (in months)	6	6	6	6
Risk-free interest rate	0.1% - 0.2%	0.2%	0.1% - 0.2%	0.2%
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 believes 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 US 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.