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

Current Economic Environment

Since 2008, the effects of the subprime mortgage and broader credit crisis have been negatively impacting the United States. Concerns about the subprime mortgage market led to a liquidity crunch, which hampered businesses and contributed to investment depreciation and depressed earnings. Some of the most affected companies were investment banks, as fixed-income operations were harmed due to the value decline of structured finance products, necessitating large write-downs. Hedge funds, private equity firms, investment management firms and commercial banks were also affected greatly by the liquidity crunch and depressed asset values.

Although global markets found temporary respite in the summer of 2008, US home prices continued to fall; foreclosures and defaults began to climb, precipitating the global economic crisis. Going forward, we believe that the effects of the subprime mortgage and broader credit crisis, coupled with a decline in global gross domestic product ("GDP"), will continue to weigh on operating results for investment services firms throughout at least 2009. During the first quarter of 2009, real gross domestic product (GDP) decreased at an estimated annual rate of approximately 6%. The equity markets are still experiencing intense volatility (S&P 500 Index down 12% and 22% during the first quarter of 2009 and fourth quarter of 2008, respectively) and the credit markets remain tight amid uncertainty.

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 quarter of 2009, investment managers have seen their revenues decrease as a result of

decreases in their assets under management and decreased asset values, and we believe that some hedge funds and other types of clients will go out of business during 2009.

The current recession may also create pressure on our clients to decrease their information technology budgets, which could negatively impact our business. While we are not immune to downturns in technology spending, should our customers reduce 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

† 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.

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 first 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 12 APX contracts, bringing the total number of licenses sold globally to 294, and we added 9 new Geneva clients which brings the total number of Geneva licenses sold to 213 as of March 31, 2009.

† New and incremental bookings. The term license contracts signed in the first quarter of 2009 will contribute approximately $3.3 million in annual revenue ("annual term license contract value" or "ACV") once they are fully implemented.

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

Financial Overview

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

                                      Three Months Ended March 31           $             %
                                         2009              2008           Change       Change

Term license revenues               $       26,032    $       14,372    $   11,660           81 %
Maintenance revenues                        22,346            22,499          (153 )         -1 %
Other recurring revenues                    12,519            12,268           251            2 %
Total term license, maintenance
and other recurring revenues                60,897            49,139        11,758           24 %
Recurring revenue as % of total
revenue                                         84 %              80 %

Asset under administration (AUA)
fees                                         1,494             1,979          (485 )        -25 %
Other perpetual license fees                 2,408             3,646        (1,238 )        -34 %
Total perpetual license fees                 3,902             5,625        (1,723 )        -31 %

Professional services and other              7,987             6,709         1,278           19 %

Total net revenues                  $       72,786    $       61,473    $   11,313           18 %

We recognized revenue of $72.8 million during the first quarter of 2009, which represented an increase of 18% over the same quarter of last year. This increase was driven by significant growth in term license revenue as we continue to layer in incremental ACV sold in previous periods. Perpetual license fees in the first quarter of 2009 were down compared to the first 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 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 and professional services revenues.

†

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

Total recurring revenues, which we define as term license, perpetual maintenance, and other recurring revenues, have increased to 84% of total net revenues during the first quarter of 2009, as compared to 80% during the same period of 2008. Term license revenues increased to 36% of total net revenues in the first quarter of 2009, as compared to 23% in the same period in 2008.

Total expenses, including cost of revenues, were $62.9 million in the first quarter of 2009, compared with $57.7 million in the first 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 first quarter of 2008 was $9.9 million or 14% of revenue, compared to $3.7 million or 6% of revenue in the first quarter of 2008.

During the first quarter of 2009, we recognized $3.2 million of income tax expense, compared to $1.3 million in the first quarter of 2008.

We earned net income of $6.2 million, resulting in diluted earnings per share of $0.24 for the first quarter of 2009, compared to $2.6 million or $0.09 in the first quarter of 2008.

We generated $13.9 million in cash from operations in the first quarter of 2009, which compares to $9.3 million in the first quarter of 2008, primarily as a result of revenue growth and collections of resulting customer receivables.

Term License and Term License Deferral

We are continuing 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.

In the first quarter of 2009, for the first time, the revenue recognized from completed implementations exceeded the revenue deferred from projects being implemented. This resulted in an increase to revenue of $2.7 million composed of $2.3 million to term license revenue and $0.4 million to professional services revenue. We expect that 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.

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

                             March 31     December 31
                               2009          2008
Deferred revenues
Short-term                  $     21.9   $        26.0
Long-term                          6.2             4.8

Total                       $     28.1   $        30.8

Directly-related expenses
Short-term                  $      6.6   $         8.1
Long-term                          3.2             2.1

Total                       $      9.8   $        10.2

Deferred net revenues and directly-related expenses are classified as "Deferred revenues" (short-term and long-term), and "Prepaid expenses and other," and "Other assets, 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 is 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 quarter 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.

Recent Accounting Pronouncements

There have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 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.

Recent Developments

In April 2009, we received $2.1 million related to the final deferred contingent payment from the sale of our ownership in LatentZero Limited. We will record this gain on sale of $2.1 million in "interest and other income, net" which will be reflected in our second quarter of 2009 results.

In April 2009, the Company repaid $7.5 million of the debt under our Credit Facility, resulting in a $7.5 million balance as of April 30, 2009.

See Note 16, "Subsequent Events", to the condensed consolidated financial statements for further information.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 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 March 31
                                                    2009             2008
Net revenues:
Term license, maintenance and other recurring             84 %             80 %
Perpetual license fees                                     5                9
Professional services and other                           11               11

Total net revenues                                       100              100

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

Total cost of revenues                                    31               32

Gross margin                                              69               68

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

Total operating expenses                                  56               62

Income from operations                                    14                6
Interest and other income (expense), net                  (1 )              0

Income before income taxes                                13                6
Provision from income taxes                                4                2

Net income                                                 9 %              4 %

NET REVENUES

Our net revenues are made up of three components: term license, maintenance and other recurring revenue; perpetual license fees; and professional services and other revenue. Term license fees include both the software license fees and maintenance fees 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. Professional services and other revenues include fees for consulting, training services, and 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 84% in the first quarter 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 quarter of 2009. 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.

Net revenues increased in the first quarter of 2009 principally due to revenues from term license arrangements entered into in prior periods reflecting customer adoption for many of our products and services, which principally includes sales of our APX and Geneva products. The year-over-year growth in total net revenues for the first quarter of 2009 was due principally to substantially higher term license revenue, which reflected $11.7 million or 81% growth in term license revenues during the first quarter of 2009 as compared to the same quarter in 2008.

Additionally in the first quarter of 2009, for the first time, the revenue recognized from completed implementations exceeded the revenue deferred from projects being implemented. This resulted in an increase to revenue of $2.7 million composed of $2.3 million to term license revenue and $0.4 million to professional services revenue.

Revenue derived from sales to Europe, Middle East and Africa ("EMEA") contributed to our growth in 2009 and increased 7% in the first three months of 2009 in comparison to the same period in 2008. Revenues from sales to EMEA were $8.9 million and $8.3 million in the first quarter of 2009 and 2008, respectively. We plan to continue expanding our international growth, 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 total net revenues for the second quarter of 2009 to be between $68 million and $70 million.

Term License, Maintenance and Other Recurring Revenues



(in thousands, except percent of                 Three Months Ended March 31
total net revenues)                                 2009              2008           Change

Term license revenues                          $       26,032    $       14,372    $   11,660
Maintenance revenues                                   22,346            22,499          (153 )
Other recurring revenues                               12,519            12,268           251
Total term license, maintenance and other
recurring revenues                             $       60,897    $       49,139    $   11,758

Percent of total net revenues                              84 %              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 $11.7 million or 81% during the first quarter of 2009 compared to the same quarter in 2008, and represented 43% of total term license, maintenance and other recurring revenues as compared to 29% in the first quarter of 2008. We began our transition to a term licensing model in 2004 and have experienced growth in our term license bookings through 2008. The growth of term license revenues in the first quarter of 2009 reflects the continued layering of incremental ACV sold in previous quarters into our term revenue. In addition, we acquired Tamale Software in October 2008 which contributed to our term revenues in the first quarter of 2009.

Maintenance revenues decreased by $0.2 million or 1% during the first quarter of 2009 compared to the same quarter of 2008. This decrease was attributable to the perpetual license customers migrating to term licenses, maintenance de-activations due to customer attrition or customers downgrading maintenance levels which were 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                        Q109           Q408           Q308        Q208      Q108

Current Methodology (based on cash collections relative to prior year collections)
Initially Disclosed Rate (1)              94 %           98 %          103 %      103 %     n/a
Updated Disclosed Rate (2)                 -            100 %          109 %      106 %     n/a

Previous Methodology (based on cash collections relative to original list price including price
. . .