Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Advent Software (NASDAQ:ADVS)

Q4 2012 Earnings Call

February 04, 2013 5:00 pm ET

Executives

Heidi Flaherty

James S. Cox - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

David Peter F. Hess - Chief Executive Officer, President and Director

Analysts

Gil B. Luria - Wedbush Securities Inc., Research Division

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Christopher R. Donat - Sandler O'Neill + Partners, L.P., Research Division

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2012 Advent Software Earnings Conference Call. My name is Ann, and I will be your coordinator for today's call. As a reminder, this conference is being recorded for replay purposes. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Heidi Flaherty, Vice President, Finance and Investor Relations. Please proceed.

Heidi Flaherty

Thank you and good afternoon. Thank you for joining us today for Advent's fourth quarter 2012 earnings call. Hosting our call today are Peter Hess, Advent's Chief Executive Officer; and Jim Cox, Advent's Chief Financial Officer. Most of you participating in this call are aware of the regulations regarding forward-looking statements. Accordingly, we would like to note that during the course of this conference call, we will make forward-looking statements regarding future events and the future performance of the company. We wish to caution you that such statements are just predictions that involve risks and uncertainties, and that actual events or results could differ materially. We discuss a number of these risks in detail in the company’s SEC reports, including our quarterly reports on Form 10-Q and our Annual Report on Form 10-K, and any forward-looking statements must be considered in the context of such risks and uncertainties. The company disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

As a reminder, we include non-GAAP financial measures in our disclosures. These non-GAAP financial results are not meant to be considered in isolation or as a substitute for results prepared on a GAAP basis. Please refer to the reconciliation tables entitled Selected Continuing Operations: GAAP Measures to Non-GAAP Measures and Projected Continuing Operations: GAAP Operationg Income Percent to Non-GAAP Operating Income Percent in our earnings release, which is filed with the SEC on a Form 8-K and available on our website for a reconciliation of GAAP to non-GAAP financial measures.

I'll now turn the call over to Jim.

James S. Cox

Thanks, Heidi. Our fourth quarter results capped off another successful year for Advent, setting performance records in revenue, operating margin and operating cash flow. It was pleasing to see the improvement we expected in the fourth quarter in our renewals performance and cash flow results. And I'm delighted with the operating margin improvement we achieved in the fourth quarter. Those improvements, along with our reorganization, set us up nicely for even more operating margin expansion as we look forward to 2013.

But first, let's look at our fourth quarter results. Starting with booking, annual contract value or ACV, or new contracts signed in the fourth quarter, was $11.1 million. For the full year, ACV was $32.8 million, which was down 3% over the prior year, mainly due to a 20% drop in Europe, Middle East and Africa bookings in 2012.

Turning to renewals. Our initially reported renewal rate for the third quarter, which is based on cash collections and therefore recorded one quarter in arrears, was 94%. This is 1 point higher than the same period last year. When all the cash is collected for these renewals, we expect the initially disclosed rate to increase as it typically does when we update the number with further cash collections.

Our second quarter renewal rate has increased 4 points from the initially reported 87% to an updated 91% as we received additional collections. The improvement from the second to third quarter renewal performance is attributed to Europe, Middle East and Africa region renewals performance rebounding to their historical levels.

Turning to the financials. We had record revenue of $92 million in the fourth quarter, an increase of 7% over the prior year and included a $1.2 million net benefit from the completion of implementation projects in the fourth quarter.

We had record revenue of $359 million for the full year, representing 10% growth over 2011.

GAAP operating income for the fourth quarter was $12.7 million or 13.8% of revenue and included a restructuring charge of $3.6 million related to the reorganization we discussed in the last earnings call. GAAP operating income for the full year was $49.2 million, 13.7% of revenue, an increase of $6.6 million even after -- year-over-year, even after including the restructuring charge.

Non-GAAP operating income for the fourth quarter was $24.6 million or a record 26.7% of revenue. For the full year, non-GAAP operating income was $85 million, a record 23.7% of revenue and an increase of $12.9 million or 18% growth over the prior year. Incremental non-GAAP margin for the year was 40%, demonstrating solid operating leverage.

Advent repurchased 1.7 million shares during the year, which brought down the weighted average share count by 3%. We did not repurchase any shares in the fourth quarter. At the beginning of 2013, we had approximately 400,000 shares remaining in our current buyback authorization.

Turning to the balance sheet and cash flow. As of December 31, we had $231 million in cash, cash equivalents and marketable securities, up $88 million from the balance at September 30. Outstanding debt was $95 million, a $49 million increase from September. As you will recall, in November 2011, we entered into a debt agreement to provide us liquidity of up to $150 million. The agreement included an opportunity to utilize $50 million -- a $50 million delay drop, which expired in November 2012. So we drew down that $50 million before it expired.

Operating cash flow for the quarter was a record $32.8 million. For the year, operating cash flow was $86.6 million, up 4% over 2011.

Turning to guidance, I'll be making additional forward-looking statements, so I will remind you of the Safe Harbor statement in Heidi's opening remarks. In the first quarter, we expect revenue to be between $91 million and $93 million, which is a 5% to 7% organic growth over the first quarter of 2012. For the full year, we expect revenue to be between $373 million and $379 million, representing organic growth of 4% to 6% over 2012.

We expect to renew our TIAA-CREF agreement this summer. And although we haven't finalized negotiations, we expect the revenue from that relationship to decrease and to impact third and fourth quarter revenues. Our full year guidance incorporates that reduction. For more information on the renewal, I direct you to our risk factor disclosures in our 10-Qs and 10-Ks.

For 2013, we are guiding full year GAAP operating margin to be in the range of 17.5% to 18%, and non-GAAP operating margin to be in the range of 27% to 27.5%. This represents margin expansion of over 3 points. The expansion reflects both the increased margin as a result of the reorganization and restructuring, as well as our typical incremental margin improvements. With the reorganization, we've been able to eliminate over $8 million in run rate expense. We're back to hiring but at a slower rate, and we expect average headcount for 2013 to be about 50 heads lower than 2012.

In addition to streamlining of our organization structure, we expect to expand gross margin by reducing the negative margin in professional services through increased efficiency, higher utilization and better financial discipline throughout the entire company. We look forward to sharing more on our progress in this area throughout 2013.

With respect to the seasonality of margin between quarters for 2013, we expect to be most profitable in the second quarter because of the timing of capitalization of software development cost. In the third quarter, our 30th anniversary client conference will be held in San Francisco, and we expect that event to compress margins in that quarter.

Turning to taxes. With the R&D tax credit renewed in 2013, we expect the GAAP provisional tax rate to be 20% in the first quarter of 2013, as it will reflect the benefit of the tax credit for all of last year, whereas the other quarters will be in the range of 30% to 35%. Also in the first quarter, we expect to book a restructuring charge of approximately $1 million.

We expect full year operating cash flow for 2013 will be between $93 million and $97 million, which represents an increase of 7% to 12% over 2012. Although we plan to pay substantially more in cash taxes in 2013, we expect to grow cash flow faster than revenue growth. Please note that the first quarter produces lower cash flows due to seasonality and lower billing, coupled with the payout of annual bonuses in the first quarter. Generally speaking, the fourth quarter is our highest cash flow quarter because approximately 30% of our annual billings occur in that quarter.

We anticipate capital expenditure to be in the range of $10 million to $12 million in 2013. This is higher than 2012 as it includes our normal rate of capital expenditure; custom technology investments to improve productivity, efficiency and client experience.

Now, let me turn the call over to Pete, who can update you on the strategy and other developments for 2013.

David Peter F. Hess

Thank you, Jim. Welcome, everyone, and happy New Year. I'd like to share some color on the quarter, details on how our strategy is progressing, and then we'll open the line for questions.

As you just heard from Jim, we had a strong fourth quarter with record profit and revenue. I'm really proud of the discipline we've shown through our focus on profitability and it's gratifying to see the benefits to the bottom line. Coupled with our robust cash flow and healthier renewal rates, our profitability has further strengthened our foundation as we continue to execute on our strategy and increase our share in our target markets.

During our past 2 earnings call, I noted that we had a healthy pipeline but that sales cycles were lengthening. These prolonged sales cycles continued in the fourth quarter and especially overseas. Still, our sales team executed very well in Q4 and our win rates were as strong as ever. Not only did we win most of the opportunities where we competed, but we added many new prestigious firms to our client base and closed the year with a healthy pipeline for 2013.

Looking at our sales wins in the fourth quarter. APX and Moxy finished the year strongly. A sampling of our new clients include Sentinel Asset Management, Wedgewood Partners, Cupps Capital Management, QV Investors and Crestone Capital Advisors. These new clients were impressed with our new October release of APX and Moxy and their associated products that delivered expanded instrument coverage, including private equity, as well as improved data presentation, workflow and reconciliation processing. Demand for APX, Moxy and their associated products continues to build as we've made these solutions even more attractive to prospective clients and easier for our Axys clients to upgrade and adopt.

Geneva had another solid quarter and continues to be the standard for more complex investment managers, hedge funds, fund administrators and prime brokers around the globe. Geneva saw continued adoption internationally, including key wins in Latin America, Asia and Europe, in addition to both new and established firms in the U.S. We're winning against the competition with Geneva because with our most recent releases, we've complemented the system's robust accounting engine, investment class support and flexibility with greater usability and even stronger general ledger and more complete reporting.

Our Black Diamond solution continued its winning ways with a record-setting year, signing more new clients than ever before, including Moneta Group and the Solaris Group. Firms choose Black Diamond for its advisor-centric reporting and data presentation, as well as its ongoing investment in innovation, which we demonstrated in 2012 with the launch of our rebalancing tool, expanded instrument coverage and improved data quality via the integration with Advent Custodial Data. It was also gratifying to hear from several large new clients that being a part of Advent made the decision to go with Black Diamond that much easier.

We're seeing similar traction with Tamale, which had its biggest year ever, as 66 firms chose Advent's Tamale to enhance their research and investment due diligence process. And Advent continues to help more firms manage their investment financing with Syncova, including BMO Capital Markets, who signed on in the fourth quarter.

In EMEA, we were selected by a number of quality firms in Q4, including Courtiers Investment Services in the U.K., the Investment Management Department of Insidika Group [ph] in Norway and Alterum Truhand [ph], a German family office. While we do not expect the EMEA demand environment to bounce back in the short term, it remains an important part of our long-term global expansion strategy.

During our last call, I spoke about our strategy, which is to be the best at what our clients expect from us. In our business, the best solution wins. In some segments of the market and for some workflows, the market has declared that Advent is the best. In other areas, whether it's specific work flows or some of the market segments we serve, we still have the opportunity to become the best and to reap the rewards that follow.

Our objective is simple. Help our clients to thrive and transform the Investment Management industry. We will accomplish this goal by innovating the design and delivery of our solutions to make them easier to implement, adopt and own, and by being attentive and responsive to our clients' varied lines of business, user profiles, geographies and size. We are eliminating boundaries between systems, information and people, and we're doing it faster than ever before. Where we will not deliver the best solution, we will partner with firms who do. That is the strategy.

Last quarter, I explained that we were embarking on an organizational change to better align us to execute this strategy. We just finished putting the new structure into effect. We shifted from 4 business units to 1 unified team, organized by function, which will enable us to deliver the industry's best solutions to our clients and at the same time, realize efficiencies, which as Jim said, will drive an expected $8 million of run rate savings for 2013.

But the benefits of this new structure go far beyond the margin expansion. In our new structure, it's easier to map our solutions and product roadmaps to the new lines of business that our clients are increasingly adding. As we progress in our new functional structure, we will more efficiently and flexibly deliver even better solutions to our clients.

We're already seeing benefits of our new org structure in deals where our products are being integrated in valuable new combinations. For example, a couple of the new Geneva clients we signed in the fourth quarter also bought Moxy for trade order management. Opportunities like that are much easier to identify when we are operating as one team instead of separate business units. In addition, we're able to consolidate investments to deliver the market's best solutions to address needs that are the same across our clients' lines of business. In fact, we will be offering many other products and new combinations that will both benefit our clients and increase Advent's opportunity to grow.

So what does all this mean to you? It means Advent is making the changes and investments necessary to grow our business into the future and become much more valuable to both our clients and our shareholders. We are committed to delivering incremental shareholder value each step along the way. As a strong market leader, our business is extremely attractive, and as our defense ability continues to grow, Advent is uniquely positioned to succeed.

2012 was a challenging yet successful year where we enhanced our strategy, optimized our organizational structure and invested in the next generation of solutions that will take us into the future. 2013 marks our 30th anniversary, and I'm confident that we are poised for another successful 30 years as we sharpen our focus on our clients' needs and delivering shareholder value.

This is an exciting time at Advent, and I'm glad that you are all here with us on this journey. Now, I would like to open the call to questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Gil Luria with Wedbush.

Gil B. Luria - Wedbush Securities Inc., Research Division

Wanted to get a sense for the ACV for last year. It sounds like Europe was really the big drag with 20% down. Can you give us a sense of what the appropriate U.S. metric is? And if you wouldn't mind trying to isolate for the effect of Black Diamond, either including it in all of 2012 or '11 or excluding it from both, just so we get a sense for the bookings growth rate within the United States?

David Peter F. Hess

Gil, this is Pete. If you take the EMEA portion out, I think you would find that we were pretty close to even year-over-year in the United States. And when I think about Black Diamond, one thing about Black Diamond is that we are selling Black Diamond where we used to sell Advent OnDemand, APX and Axys. And so it's not an accurate sort of approach, I don't believe, to take Black Diamond out to figure out what's sort of the organic year-over-year bookings growth was. It really is a matter of we have a suite of products that we're selling into the advisory marketplace. Now we are selling more than we used to because we do have Black Diamond. But it's a difficult comparison to make for the reasons that I mentioned.

Gil B. Luria - Wedbush Securities Inc., Research Division

Got it. And then in terms of your guidance, I think long term takes a little bit of a different meaning for you these days. I think we've been talking about there being a new normal in the short to medium term, which is why you're guiding to mid-single-digit revenue growth for next year. But in that time frame, let's call the 2- to 3-year time frame, do you think that -- given how high your operating margin guidance you're giving for 2013, could we see that in that 2- to 3-year time frame we could get to the 30% or above operating margin range as we compensate for the low revenue growth?

David Peter F. Hess

Gil, I'll take this. Let me start actually with the 2013 revenue guidance and explain a bit what went into that. First of all, it is a purely organic number. And the assumptions in there as well are that we have a constant demand environment. So we're not expecting a better environment in 2013 than we had in 2012. Those are some of the constants. The -- if you look at what the factors are that are contributing to that reduction in growth, part of it is obviously the 10% that we grew in 2012 wasn't a pure organic number, given the Black Diamond acquisition. And then part of it -- we had been benefiting from some non-core tailwinds. And by that, I'm thinking about Kia [ph] and some of the contracts that we signed that are not really core business, but rather they were really substantial contracts that were very nice to have layering in on the revenue as they grew. But now, we're in a position where we're renegotiating those contracts into a place that's still great business for Advent and for the partner, but it's substantially less revenue than they were. And that's creating a bit of a headwind that is part of the guidance that you're getting from us there. And then also the flow-through of what was a pretty difficult renewals year in EMEA in particular. And so that -- when people close their businesses or they consolidate, they drop users, they rightsize their business as we saw a fair amount in Europe and Middle East this past year. The real revenue impact of that actually hits us the following year. And so that's kind of what you're seeing in that revenue guidance. We're going to stabilize on those things next year, and then I think you're going to see us grow at a faster clip. Now that said, we also are looking at margin more aggressively than we have in the past. And certainly, within 3 years, we'll be up over 30% on non-GAAP margin. But we want to reserve the long-term guidance that we used to have until we've had a few quarters to prove that we're going to execute on that margin expansion. And then at the Analyst Day in September, we'll probably come out with some new long-term guidance for you guys.

Gil B. Luria - Wedbush Securities Inc., Research Division

Makes sense. And then just one quick question for Jim. What cash tax rate does the cash flow guidance imply?

James S. Cox

Between 20% and 25% cash taxes.

Gil B. Luria - Wedbush Securities Inc., Research Division

So should we expect that to be the rate going forward, at least again for the 2- to 3-year time frame?

James S. Cox

It's something we evaluate every year, Gil. I'm very comfortable with that number for '13. And as we look at it into '14, it's probably closer to 25%. And so I don't want to go on record that it's going to be there for many years. So I think I'm comfortable with '13.

Operator

And our next question comes from the line of Sterling Auty with JPMorgan.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Let's go back to the TIAA-CREF discussion. The first thing would be you mentioned why your -- the renewal discussions are not final. Can you just give us just a sense, have you begun active dialogue back and forth? And any other -- obviously, you're not going to give us the gory details, but just some color as to where that stands.

James S. Cox

Gil, this is Jim. So we have commenced discussions on that. I think we expect it to renew. We expect the run rate will be down. And we expect that'll impact our third and fourth quarters this year and flowing forward that run rate. And we've included it in our guidance.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Okay. And is there a sense, is there a ballpark as percentages that you can -- not that you expect, but what's been included in that $373 million to $379 million? Are you including half the run rate?

James S. Cox

Yes, we know the number. I don't think I want to disclose it to you, but we know the number.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Okay. And any additional items about some of the other opportunities to maybe take that solution set more broadly to marketers or is it too soon to tell?

James S. Cox

Yes, I think since the negotiations are still ongoing, I think it's too soon to tell.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Okay, different topic. You talked about the long-term operating margin and operating margin going over 30%. If we start to see a more constructive end market, whether it be here in the U.S. or combined U.S. and Europe, and ACV starts to grow, are you leaving open the opportunity to kind of step back on the accelerator in terms of sales and marketing expenses to go after that? Or is this a firm commitment on the margin side that you would still need that balance, you would still -- even if you wanted to go after faster growth, you still have to deliver this margin goal?

David Peter F. Hess

Well, it's a balance. If we see that the macro environment -- there are 2 -- our bookings performance is a function of the macro environment, but it's obviously also a function of our effectiveness within the existing opportunity base. So we hope that both of those get better, and as they do, we'll invest in incremental sales and marketing resources. But I also think we'll still be able to realize those margin improvements that we're talking about.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Okay. And you mentioned a tough renewal environment in Europe. Can you kind of characterize what you feel the renewal pipeline, if you will, looks like both domestically and internationally as you're going into this year?

David Peter F. Hess

We tend to enter the year knowing the big renewal risks. And I think we've talked about Kia [ph] as one example, and there are few others. But we go into this year feeling pretty good about our renewals opportunity. And in some ways, if you go back to 2009, we had a lot of, what I would characterize as sort of corrections in our renewals rates in that clients were downsizing. There were firms that went out of business. There were consolidations of firms. We saw a lot of that in EMEA in 2012. And so I'm sure we're not done with that. I'm sure we'll see some things. We'll have some new ones that come up, but we're operating with the assumption that the renewal environment in EMEA is going to be a bit better in 2013 than it was in 2012.

James S. Cox

This is Jim. Just to add to that, I think another element is -- that Pete has talked about in the past is that a fundamental element of our product strategy is making our products stickier. And so I think as that product strategy plays out over time, that makes the renewals on a like-for-like basis, a stronger element of our growth.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Okay. And then last question would be on the renewal rates, not looking for a targeted number to pinpoint, but just in terms of trajectory, how should we think about those renewal percentages as we go through 2013 as you've embedded into the guidance? Is that flat with kind of where you are now or some improvement or even possible degradation?

James S. Cox

I think we would assume it's flat with where we are now.

Operator

And our next question comes from the line of Chris Donat with Sandler O'Neill.

Christopher R. Donat - Sandler O'Neill + Partners, L.P., Research Division

For me, the -- really my first question is trying to square the circle, and I apologize for my voice here. But between your higher operating margins and then I saw it, like at AdventConnect this fall, Pete, you had talked about, using phrases like "finishing what you started". And it sounded like I thought you might be more aggressive on product development. And I realized that doesn't all show up on expenses, it shows up maybe in the $10 million to $12 million of CapEx including software. But it seems to me like you've got a faster development cycle that you're running here, but yet, you're able to do it at a lower cost. I'm just trying to understand a little bit more on how you're able to do that.

David Peter F. Hess

So there are 2 factors that are changes since I would say, going back historically at Advent. One is the development methodology. We have an agile development methodology on all of our products now. So our productivity in our product development organization has improved substantially. So that's number one. And number two is that going back to my message at AdventConnect and the way we view our strategy, it is -- our clients expect us to be great at certain workflows. And in some cases, we are not the best in the market. Usually it's because we were building redundant solutions in each of our business units to solve the same workflow. And so what we're going to do now and have started to do is consolidate investments to deliver a single solution to those common workflows. And so we can actually invest less while delivering a better end solution just by virtue of this consolidation from business units into our new functional structure.

Christopher R. Donat - Sandler O'Neill + Partners, L.P., Research Division

Okay. And so that -- in terms of -- that helps on any -- both the operating expenses and your CapEx? Is that a fair way to look at it?

David Peter F. Hess

It does. And it also helps with the competitiveness of the output, the actual solution.

Christopher R. Donat - Sandler O'Neill + Partners, L.P., Research Division

Okay. And then just a couple housekeeping questions for Jim. I think about interest expense, I guess, it was around $0.5 million this quarter. With the additional part that you borrowed there, is it safe to assume that would be more like $750,000 a quarter? Or -- sorry, I didn't...

James S. Cox

Yes, that's fair, that's fair.

Christopher R. Donat - Sandler O'Neill + Partners, L.P., Research Division

Okay. And then you didn't repurchase any shares this quarter. And I noticed the last 4 -- or last 3 fourth quarters, no share repurchases. Is that just a coincidence or is there a seasonal issue I'm overlooking?

James S. Cox

I think it's just a coincidence.

Operator

[Operator Instructions] And our next question comes from the line of Pete Heckmann with Avondale Partners.

Unknown Analyst

This is actually Salim [ph] for Pete. I've got a question here, a couple of questions. Can you provide an update on the Black Diamond integration and sales trends going forward and in the past as well?

David Peter F. Hess

Sure. We -- I think we've done very well in the integration of Black Diamond, both from management's perspective. The Black Diamond employees, I think, feel that way through the data that we've gathered. The clients of Black Diamond feel that way from the data that we've gathered. And the strategy has been not to -- obviously, not to try and fix what is not broken. So we've taken a lot of our cues at Advent proper from the way Black Diamond innovates and the way that they develop their solutions and service their clients. So we've been gleaning a lot from them. They have been leveraging a combination of Advent's expertise in certain new frontiers of development where they're going, instrument types and things that they've been enhancing. And then also, they've been leveraging Advent Custodial Data. We've got over 40 Advent Custodial Data feeds now hooked up to Black Diamond, which makes the management of the data that they do for their clients much more effective. So that's an example. And we continue to collaborate where we can, both on method and integration of product that make sense for the Black Diamond client base. So that's a bit on that. The one other thing I'll add is that in the beginning of 2012, we merged the Black Diamond sales force with what was at the time called our AMG, our Asset Management Group sales force because we wanted to approach the market agnostic with respect to the solution that we prescribe, really be as prescriptive as possible so that the clients ended up leveraging the right systems. We didn't want to force the wrong system on the wrong client. That decision was the right decision long term. And we feel really good about the fit of the products that we're rolling out to our clients. But there was a short-term slowdown in Black Diamond sales as the AMG sales team learned how to sell Black Diamond. So that was one of the headwinds, I would say, in the bookings performance in 2012, was that organizational shift. The good news is it's already been made. And we are now at full steam. The fourth quarter was Black Diamond's strongest sales quarter ever. So we feel good about the way that that's going on the integration side.

Unknown Analyst

Okay, good, perfect, okay. Next thing is can you provide an update on the base of the legacy Axys customers and the relative percentage moving towards Black Diamond or APX?

David Peter F. Hess

So I guess the pace of Axys migrations to APX is pretty constant. I think we always call it the gift that keeps on giving from a revenue growth perspective and the fourth quarter was no exception. With regard to Black Diamond, we expected when we bought Black Diamond for a lot of Axys clients to go to Black Diamond and a lot have. But what we've also found is that owning Black Diamond gave many of our Axys clients comfort that there is a path forward for them. And so we have seen a lot of Axys clients, who prior to us owning Black Diamond, were on the ropes and potentially flight risks for us. They are now ultimately still planning on migrating to something, but they don't feel the same urgency. And so that's what we've observed. And we continue to make the transition from Axys to APX and Axys to Black Diamond as easy as we can for those clients, but we're still using a carrot, not a stick. Axys is a product that we fully plan to continue to support and enhance into the future. It's a great solution for so many clients that we're not planning on changing that.

Unknown Analyst

All right, great. And then the one last thing you guys kind of touched on a little bit earlier, but how should we interpret the increase in debt levels and lack of the stock repurchases in the fourth quarter? And can we take this as we may see some M&A activity going forward?

James S. Cox

We are always considering alternative uses of our capital. The drawdown of the debt in the fourth quarter was a function of the lapsing of that right. And so with interest levels where they are, we thought it made sense to make that draw. But we're always evaluating all of our potential uses of capital.

Operator

And we have a follow-up question from Sterling Auty with JPMorgan.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

You mentioned organic growth. What was your organic growth for the fourth quarter and all of 2012?

James S. Cox

Let me get that to you later, Sterling.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Okay. And then on a different topic, Pete, I think you've mentioned some of the Custodial and other feeds into Black Diamond. When you look at the part of revenue that comes from data feeds and some of those pass-through, how should we think about that category of revenue for 2013? Are there things that are expanding usage and we should see that revenue grow at faster or less than the corporate average? And is there any change to kind of how you're managing the pricing of it? So what kind of margin impact?

David Peter F. Hess

So there are things we're doing -- going back to our new structure where it's easier for us to integrate services across products and combinations that were organizationally difficult in the past, I do anticipate that we'll be integrating ACD corporate actions, getting more traction across our product base as a consequence of that. So that would lead to data revenue growth. But you also have something that's a headwind to data revenue growth, which is still a good thing for Advent. But when we convert an Axys client who was paying us for Custodial Data to Black Diamond, they no longer pay us for Custodial Data. Now the overall revenue picture is much better when a client goes to Black Diamond. We're realizing about a 4 to 5x uptick in revenue. But as a line item specifically with regard to data, that puts downward pressure on that data growth. So the net of it is that we see data growing pretty much commensurate with the way we see the business growing.

Operator

Ladies and gentlemen, this concludes today's question-and-answer session. I would now like to turn the call over to Pete Hess for closing remarks.

David Peter F. Hess

Well, thank you everybody. We appreciate all the questions. We're really excited about 2013 and excited to talk to all of you in 3 months. Thank you for joining the call.

Operator

Ladies and gentlemen, we thank you for your participation in today's conference. This concludes the presentation and you may now disconnect. Have a good day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Advent Software Management Discusses Q4 2012 Results - Earnings Call Transcript
This Transcript
All Transcripts