Advent Software's CEO Discusses Q3 2011 Results - Earnings Call Transcript

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Advent Software (NASDAQ:ADVS)

Q3 2011 Earnings Call

October 24, 2011 5:00 pm ET

Executives

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

Stephanie G. DiMarco - Founder, Chief Executive Officer and Director

David Peter F. Hess - President

Heidi Flaherty - Vice President of Financial Planning and Investor Relations

Analysts

David M. Scharf - JMP Securities LLC, Research Division

Saket Kalia - JP Morgan Chase & Co, Research Division

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

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

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2011 Advent Software, Inc. Earnings Conference Call. My name is Jennifer, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I will now like to turn the conference over to your host for today, Ms. Heidi Flaherty, Vice President of Finance and Investor Relations. Please proceed.

Heidi Flaherty

Thanks, Jennifer, and good afternoon. Thank you for joining us today for Advent's Third Quarter 2011 Earnings Call. Hosting our call today are Stephanie DiMarco, Advent's Chief Executive Officer; Peter Hess, Advent's President; 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 discussed a number of these risks in detail in the company's SEC reports including our quarterly report 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 risk and uncertainty. The company disclaims any intention and 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 appearance 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 tables entitled Reconciliation of Selected Continuing Operations' GAAP Measures to Non-GAAP Measures 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 Stephanie.

Stephanie G. DiMarco

Thanks, Heidi, and welcome, everyone. Thank you for joining us this afternoon. Advent had a strong third quarter. Revenues were $85 million, a 17% increase. Operating cash flow was $24 million, a 10% increase year-over-year. And new bookings were $8.5 million. Later in the call, I'll talk more about our accomplishments and some highlights but first, let me turn the call over to Jim who will provide further details on the numbers.

James S. Cox

Thanks, Stephanie. We're pleased with our third quarter results, which demonstrates significant growth in revenue, bookings and operating cash flow. Total net revenue in the third quarter was a record $84.6 million, up 17% over the third quarter of 2010. International revenue comprised 17% of total revenue, up from 15% in the same quarter last year. As we predicted on our last earnings call, international revenue is down from the 20% in the second quarter we achieved when we completed several large implementations. The percentage of international revenue to total revenue has returned to more normalized level. And going forward, we expect international revenue to continue growing as a percentage of total revenue.

Recurring revenue, which includes term license, perpetual maintenance, other recurring revenues and assets under administration fees was up $11.5 million, or 18% over the prior year and accounted for 89% of total revenue. The increase was primarily driven by a 22% growth in term fee revenue. Other recurring revenues grew $5.6 million or 33% over the prior year, including approximately $3 million of revenue from Black Diamond, which we acquired in June 2011.

Nonrecurring revenue, which includes perpetual licenses, professional services and other revenue grew by $1.1 million this quarter or 13% over the third quarter of 2010.

Professional services revenue increased by $1.8 million. The increase in nonrecurring revenue was partially offset by a $700,000 decrease in perpetual license fees, which is to be expected given our continued focus on term license sales.

Now onto bookings and renewals. Annual contract value for new contracts signed in the third quarter was $8.5 million, up 13% from the third quarter of last year. As we noted in our last earnings call, we continue to expect the second half of this year's bookings to be stronger than the first half of this year's booking. Our renewal rate, which is based upon cash collections and therefore reported 1 quarter in arrears, was 92% in the second quarter, up 1 point over the same period last year. We expect to update this initial rate as cash continues to be collected on these billings. The initial renewal rate provided in last quarter's earnings call related to the first quarter this year increased from the 91% initially reported to an updated 93% following subsequent cash collections.

Turning to expenses and profitability. Gross margin in the third quarter was 64%, down from 68% in the same period last year. There are 3 reasons for this 3-point decrease in gross margin. First, the increase in our term implementation deferral for our projects not completed in the third quarter caused a $2.1 million reduction in gross profit. This represents 2.5 points of the decrease. Second, amortization of developed technology increased $900,000 as a result of both the Syncova and Black Diamond acquisitions. This represents another point of the decrease. Third, related to our client conference, costs related to that increased about $250,000 while the revenues remained flat. That's the rest of the difference.

In the operating expense line item, year-over-year growth was in the range we would expect except for amortization of intangibles, which increased by $600,000 over the same period in 2010.

That, of course, is driven by our acquisition of Syncova, as well as Black Diamond. GAAP operating income for the third quarter was $10.6 million or 12.5% of revenue, which was up 9% over the same period last year. GAAP operating income grew at a slower pace than revenue due to the increased amortization at developed technology and intangibles from the Syncova and Black Diamond acquisitions. GAAP diluted earnings per share were $0.13 in the quarter, up 15% from $0.11 per share in the same period last year. On a non-GAAP basis, operating income for the third quarter was $18.5 million or 21.9% of revenue, which is up 17% from the same period last year. Non-GAAP diluted earnings per share were $0.22 in the quarter, up 15% from the $0.19 in the same period last year.

Turning to the balance sheet and cash flow. As of September 30, we had $58.9 million in cash, cash equivalents and marketable securities, down $19.6 million from the balance at June 30 due to the repurchase of 1.9 million shares of stock for $41.4 million. The third quarter's repurchases depleted our existing share repurchase authorization. So this morning, our Board of Directors approved an additional 2 million shares authorization for repurchase.

Operating cash flow for the quarter was $23.8 million, up 10% from the $21.6 million in the third quarter of last year. Deferred revenue was $162.3 million, up $3 million from June 30, primarily due to the increase in the term deferral related to our implementations.

Accounts receivable is flat when compared to the balance at June 30, resulting in days sales outstanding of 62 days in the third quarter, down from 64 days in the second quarter.

I'll now turn to guidance, and because I'll be making forward-looking statements, I'll remind you of the Safe Harbor remarks in Heidi's opening statement. In the fourth quarter, we expect revenue to be between $84 million and $86 million, up 11% to 14% over the same period last year. For the full year, we are increasing revenue guidance by $3 million to $5 million for an updated revenue range of $324 million to $326 million, representing an increase of 14% to 15% over 2010 revenue.

Year-to-date, we've achieved 22% non-GAAP operating margin, and we expect to complete 2011 at approximately 22% non-GAAP margin. So we're eliminating the low end of the original guidance range of 21%.

Please note that we're achieving the high end of our original margin guidance while absorbing 2 acquisitions this year, which added approximately $10 million in 2011 revenue at roughly breakeven non-GAAP margins. These acquisitions, which support our growth and will contribute to operating profit growth in the future, have impacted margins in 2011 by approximately 70 basis points.

In 2010, we expanded non-GAAP margin by 160 basis points, and in 2011, we expect to expand margins by 80 basis points while absorbing the 70 basis points of margin pressure from those acquisitions.

Amortization, which was originally guided at 1% to 2% of revenue, is expected to be 3% of revenue due to the acquisition. This increase will be partially offset by a lower-than-expected level of stock comp expense -- excuse me, stock compensation expense, which we expect to be at the low end of the 6% to 7% of revenue range originally guided.

The resulting GAAP operating margin range is expected to be 13% of revenue, which is at the low end of the original 13% to 14% guidance range. All other guidance figures remain unchanged from the start of the year.

In summary, we're pleased with our performance in the third quarter, growing revenues, bookings, cash flows and profits over last year. Now let me turn the call back to Stephanie.

Stephanie G. DiMarco

Thank you, Jim. As you've just heard, we had a strong third quarter. We continue to execute on our core strategy to deliver solutions to meet the needs of a broad range of clients across the investment management industry. The strength we saw in the third quarter was across all products and geographies. Despite the volatility in the markets, our pipelines are strong, and we anticipate a strong finish to the year.

The key element of Advent's growth strategy has been to offer customers choice in deployment models. Our hosted solutions are gaining traction around the world. In the third quarter, we signed [indiscernible], our first managed hosting client in EMEA, and Black Diamond, which has delivered value to its advisory client via the clouds since it started, signed significant new clients in the quarter including Jefferies Wealth Management Group.

Last month, we hosted Advent Connect 2011, our annual client conference. We were pleased to see record attendance with over 1,000 attendees. We announced new developments to all the core products including the preview of APX 4.0 and a powerful new version of our Tamale Research Management Solution, which features an even more intuitive user experience and support for a broad range of mobile devices, including an aid of iPad application. We signed Pacific Life Insurance Company among the many new Tamale client added in the quarter.

New lines of business, including our Syncova solutions, also gained momentum in the quarter. These solutions designed to help clients manage margin and collateral are bringing more transparency into exposure and borrowing cost for fund managers. We added 3 new Syncova clients, 2 prime brokers including Gleneagle Securities in Australia and a large well-known hedge fund in London. Sales of our largest platforms, Geneva and APX, were also strong this quarter. We added several hedge fund clients to the Geneva platform including Carhay [ph] Capital, a new London-based hedge fund. And on the APX side, we had several large customers make the move from access to APX. Among those firms making the move were a multibillion-dollar investment management and brokerage firm in the Pacific Northwest and a growing multibillion-dollar bank and trust company, that is leveraging the full suite of APX and Moxy as its central enterprise platform.

Revenues from outside the U.S. are an important and growing piece of our business, and I'm very enthusiastic about the opportunities we see in EMEA and the Asia Pacific region. In the third quarter, we signed LH -- LVH in Estonia, Mohammed el Suvai [ph] & Sons in Saudi Arabia and Waterfield [ph] Advisors in Indian multifamily office.

As we look forward, there are key themes shaping our focus in developing products and services, usability, flexibility and mobile access are at the forefront of our development efforts. As always, we continue to keep our eye squarely on the value we offer clients, whether clients choose cloud-based services or locally installed software, Advent is committed to solving problems with solutions that are innovative, reliable and responsive to the needs of this highly dynamic markets.

Thank you for joining us. And now, I'd like to open the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of David Scharf from JMP Securities.

David M. Scharf - JMP Securities LLC, Research Division

Stephanie, I guess I'd like to just start with maybe an update relative to 3 months ago on what you see as the state of the end market demand right now. It's obviously been an interesting summer and early fall we've just come through in terms of the equity markets, and not surprisingly, the journal had a big article today, and hedge funds kind of waiting with bated breadth this last couple of months to see what redemptions look like. Is there any update or change in tone in sales cycle, decision making and spending that you can relay to us?

Stephanie G. DiMarco

Well, I mean, we just posted a big quarter, and we feel pretty good about the fourth quarter. So I think the reality is that it's still a tough market, but we sell to a broad spectrum of institutions. So it's not just hedge funds, and some hedge funds do well, and some aren't doing so well. So we really do cover that spectrum. And -- so hopefully, for every delay, there's a contract being signed. Pete, do you want to add anything to that?

David Peter F. Hess

Just that in most cases, a lot of these decisions are premeditated at least 12 months in advance, and so you have budgeted projects that are still being executed this year. So I think there is some apprehension especially in Europe about what's happening, and we're seeing that in the market but we still remain very busy and we have a great-looking pipeline just by virtue of the fact everybody's kind of got it in their plans to make a system change. They tend to stick to that plan.

David M. Scharf - JMP Securities LLC, Research Division

Okay. Is it fair to assume, I guess, the comment last quarter that renewal rates are expected to kind of snap back to the mid 90s quickly? Do you still feel comfortable with that level?

David Peter F. Hess

Yes, I think what we can see so far, we're feeling that the mid to high 90s is still looking good. This is the initial renewal rate that we provided for Q2.

David M. Scharf - JMP Securities LLC, Research Division

Right, right. So on a cash basis, it's probably going to be closer to 94, 95 I would think?

Stephanie G. DiMarco

Yes. And, David, if you take a look at as we've updated our renewal rate as cash comes in, we have been in the mid to high 90s.

David M. Scharf - JMP Securities LLC, Research Division

Right. Okay. Another thing that occurred to me. Well, I know you don't give absolute bookings guidance, but just to help us get a little better feel for how good you feel about the pipeline, the loan directional comment was the second half will be better than the first half, but I think if you kind of apply the math to that, all that means is you need $3.2 million of ACV in the fourth quarter for the second half to equal the first half. And I'm guessing that's not the order of magnitude you're thinking. Is there any other range you could provide for us to give us a little more context?

Stephanie G. DiMarco

I don't think we want to give a range because we don't know what's going to happen. We can't predict what's going to happen. And as you pointed out, the markets are volatile. And so for certain perimeters, they're experiencing some challenges, and that can elongate sales cycles. But sitting where we are, we feel like we're going to have a good fourth quarter.

David M. Scharf - JMP Securities LLC, Research Division

Okay, great. Last question, and I'll get back in queue. It's still early on in the integration of Black Diamond. You referenced in your new client example, Stephanie, some upgrades from Access to APX. As we think about Black Diamond and APX being sold side-by-side, do you have a sense yet for just how complementary versus cannibalizing they are? I mean, I'm just trying to get a sense for whether or not it's been figured out, which are the prime candidates for APX upgrades versus those that are more likely to transition to sort of the cloud-based model at Black Diamond?

Stephanie G. DiMarco

You want to do that?

David Peter F. Hess

Sure. This is Pete. So I would say we figured it out pretty well. There are enough differences in the products where in 5 or 6 questions, we can determine whether a client should be on Black Diamond or whether they should be on APX. So I think we've worked through those issues pretty well.

Operator

Your next question comes from the line of Gil Luria From Wedbush Securities.

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

I wanted to follow up on that question about Black Diamond. How do you feel of the integrate -- what stage of the integration do you feel you're at? How close do you feel like until you get to the point where Black Diamond is fully integrated? How is that translated to some of those customers that you had that were on the fence 3, 4 months ago as you were integrating Black Diamond? Where are we at in terms of the integration?

David Peter F. Hess

I'll take that as well. There are different layers to the integration, but I would say that organizationally, we work together now as though we're one team. So all that we accomplished I think pretty soon after we merged the companies, and with regard to the clients out there who had been considering Black Diamond or APX, I mentioned that in the last call that David asked or the last question, I think we have given clarity there. So we haven't closed every deal. Some were still in contracts. But I think we're marching forward with a clear plan with every aspect. And there are opportunities though that we haven't finished to further integrate the company just with regard to some of the other Advent components that makes sense to be integrated with the Black Diamond solution. We're still working through those issues and fine tuning some other elements. But it's gone very well. I think we feel pretty good about the strategy and how that's playing out.

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

When Black Diamond came in, we talked a little bit about the fact that they were able to get some uplift for their customers, that they were able to book at a higher price point and then get results for their customers that were quantifiable. Have you been able to go in and verify any of those advantages that Black Diamond offers their customers?

David Peter F. Hess

Well, they had a little different pricing model than we had in the advisory space, and we haven't changed their pricing at all. So that's -- I think, we're happy with the way that they price. And as assets grow, their client assets grow, typically Black Diamond collects more revenue. So that's a great model that we like to keep.

Stephanie G. DiMarco

And it's a different service model too because Black Diamond is doing more. It's full BPO.

David Peter F. Hess

Right.

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

Got it. So there is an uplift, when somebody switches from Access to Black Diamond, they do come in at a higher revenue point.

David Peter F. Hess

Probably 3x the size.

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

Okay. And then, Jim, you went through the detail of cost of goods sold and then cost of revenue and the fact that gross margins were down a little bit. But operating expenses seem to have stayed fairly flat on a quarter-to-quarter basis and as a percent of overall revenue, they seem to be down. What is it though that you've been able to do even as you integrate acquisitions to keep those lower?

James S. Cox

Well, I think it's a thousand little things, Gil. It's about making sure that everybody's focused on improving margin and making sure that everybody understands that there's continuous improvement for everyone to go through. So I think we've focused on that. I think another element is that frankly, we haven't been able to hire people as quickly as we would like. And so that has a near-term benefit of slowing the expense growth, but we obviously still have plans to hire people.

Operator

Your next question comes from the line of Chris Donat from Sandler O'Neill.

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

Jim, first one for you, just a follow up on expenses, if it's getting tough to hire people, is that a function of an aggressive pricing environment for employees or other things going on?

James S. Cox

I think it depends on who those employees are and what we're trying to do as well as where they're located. But I think it's really, we have a lot of exciting things we're trying to do particularly with Black Diamond down in Jacksonville. It's a fast-growing business. I think it's just hard to be able to hire that many people for an organization of that size. So we're figuring out how to do that as best we can.

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

Okay. So there's a little bit of issue on your end of just figuring out where people are and where responsibilities are?

James S. Cox

No. I think it's merely a function of getting people hired to do the jobs that we want.

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

Okay. And then looking at the cost of revenues, the nonrecurring revenue, the cost of nonrecurring revenues, the $12.5 million, was there anything unusual going on in that line item?

James S. Cox

Yes. So I think the first thing to think about is, is we don't manage -- so the largest component of those nonrecurring revenues are our professional services fees, and we don't manage that professional services business for profitability. And what we try and do is we try to make sure that it's about 10% of revenues or less, and that we're running it at about breakeven. Because on a like-for-like basis, we'd rather have people signed up and paying term license fees than worrying about paying their professional services fees. Having said that, whenever there's kind of -- whenever you're adding either new contractors or new employees to do those professional services work, their utilization levels drop down. And so, as you have the kind of what I'll call churn because these are very good employees for us, these professional service, when they're doing the implementation, they learn a lot. We frequently will move them to a solutions consulting role or a sales role or somewhere else within the organization. When we have those people moved through in that cycle, their utilization levels drop a little bit. So that occurred and we have been seeing that all year as those folks have moved through. The third quarter is particularly tough because we have our Client Conference, which goes into that revenue line and in that expense line. And obviously, we don't manage. That's a negative margin business on the gross margin line. So I think, when you kind of compile all 3 of those together, that kind of adds up to the picture that we see. I wouldn't expect it to model to look like that going forward.

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

Okay. And then, lastly for me, on the -- I must have missed it, the -- just relative to your guidance on the revenue side of $81 million to $83 million, coming in at $85 million, was that conference related or is it something else of a one-time nature?

James S. Cox

No, no. It was a lot of good things. So some of it was our assets under administration fees, which were up. So for some of our clients where we share in the asset growth of those customers through our basis point model. That came in stronger than what we had forecast, term had come in stronger than forecast as did the effective maintenance renewals as well. So we have forecast about the right amount of revenue for the conference. So it was good, strong underlying performance there.

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

Okay. Is the AUA a function of average balances or end of period because with the S&P down 14% in the quarter seems like that would work against you, not for you.

James S. Cox

So it depends, it is a point-in-time balance, but when that is measured, depends. But I think that the more important driver for us is we're helping our customers do more for their customers. And so, therefore, we're attracting more assets broadly, i.e., taking market share as opposed to just floating up and down with the market.

Stephanie G. DiMarco

So as long as assets are being added to the systems, the market can be down but the asset levels can be up.

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

Got it. It sounds like a fun flow, is a better outcome than the market?

Stephanie G. DiMarco

Yes.

James S. Cox

Yes. You're absolutely right, Chris.

Operator

Your next question is a follow-up question from David Scharf.

David M. Scharf - JMP Securities LLC, Research Division

Just a couple. One was following up on the margin discussion but more granularly, I believe on the last call, you had mentioned that with respect to product development expenses, we could use the Q2 level as a pretty good run rate going forward. Is that still the way we ought to be thinking about that area of investment? Has anything changed as you'd gotten further down the path with integrating the 2 acquisitions or is that kind of Q2, Q3 product development expense line item, something we can string out the next 4 or 6 quarters?

James S. Cox

I would -- so you know me. I probably only think a couple of quarters in advance, but that's the way I think about it for now, yes.

David M. Scharf - JMP Securities LLC, Research Division

Okay, so no substantial change. Got you. So there will certainly be some operating leverage there. Following up on the AUA discussion, is that becoming a more prominent way you structure some of your new contracts?

James S. Cox

It is used -- right on, it is becoming more and more important to us. And in fact, that's -- I think we alluded to that a little bit in the last earnings call, but there are a number of customers who were taking lower minimums, which is driving a smaller ACV number. But we have better basis point leverage and upside. And that's better for the business in the long run. And so, we're thinking about that. And obviously, our larger contracts usually have a basis point component in it. So those are important to us.

David Peter F. Hess

Well, just to add to that, I think we have some, I would characterize them as hosting/distribution partners that are now starting to actually become effective revenue generators, deals that we did in the past where they didn't show up in ACV, but they -- we have 1 basis point revenue share. And so, we are leveraging these third parties to post and distribute our products in ways that we didn't use to in the past. In fact, we, in this past quarter, had another good sized deal get closed with one of our distribution partners that again, it doesn't show up in ACV, but that particular distribution partner now has 4 or 5, what we would characterize as sort of doubles in the World Series technology. Deal flow, it doesn't show up in ACV, but it does come back in once they're implemented and positively affect the revenue line.

David M. Scharf - JMP Securities LLC, Research Division

Yes. Well, I'm just curious, setting aside what's right for your business and just focusing on the more kind of mundane of what TheStreet looks at. When do -- how far out does it become an issue in terms of investors interpreting ACV and the strength of your bookings each quarter? I mean, obviously, that's the primary metric that people are looking at to categorize new sales, and I mean, are we still at so called rounding year levels in terms of AUA that it's not detracting that much from what would have shown up in ACV or like a year from now, is that going to become an optical issue?

Stephanie G. DiMarco

Well, it's something that we're spending a lot of time on, and I think we introduced the concept earlier this year that ACV is an imperfect measure of the momentum of the business. It gives you one view of it, but it doesn't show these distribution partnerships, it doesn't show AUA. And so we're working on how we can augment the disclosure to get to maybe more of a run rate type disclosure that would encompass those. We aren't quite there yet, but it's definitely something that is, as we say, it is an imperfect measure right now because we're doing more of these things. They are still smaller, but I would say in the last 3 quarters, they've been more meaningful than in the past.

David M. Scharf - JMP Securities LLC, Research Division

Got you. And then one last question on stock comp. As we think about it going forward, I mean, it's been in sort of the $18 million, $19 million range in the last 3, 4 years. In the guidance tables, it's obviously presented as a percentage of revenue. But as we think about going forward, is sort of $19 million to $20 million the right number given the kind of headcount you're thinking about? Or should we be thinking it in terms of a percentage of revenue in whether or not the share buybacks is partially or mostly just to offset potential dilution?

David Peter F. Hess

I think we've been more aggressive in our buybacks than just to offset potential dilution, David. But I think that, that run rate, $20 million run rate is probably a reasonable number as we think about next year. It's hard to know as we go out many years beyond that because it's a function of how many people we add and that sort of information.

Operator

Your next question comes from the line of Sterling Auty from JPMorgan.

Saket Kalia - JP Morgan Chase & Co, Research Division

It's Saket here for Sterling. One question and one follow-up. So, Jim, I think last quarter, you said you had about 3 to 4 large deals that slipped into the third quarter, and subsequently a couple of those had gotten closed. I guess qualitatively or even quantitatively, if you could for this quarter, if you were to exclude those slipped deals, what would the ACV numbers have looked like this quarter, and I have a follow-up.

James S. Cox

So, I don't want to get that granular, Saket, but I would say that it's up over last year. We have year-over-year growth, even if you take those out, yes.

Saket Kalia - JP Morgan Chase & Co, Research Division

Got it, got it. Okay. And then, a little more broader, I guess just to dig into the uncertain environment out there, can you give us just a little bit of color on kind your different customer segments, I guess asset managers, hedge funds, wealth management? Just any sort of color on how each of them is kind of responding to the volatility differently, if at all?

James S. Cox

I think Pete's the right person to answer that.

David Peter F. Hess

Yes. I mean, I think we had a great hedge fund quarter. And so, going back to one of the earlier comments about redemptions and people sitting, being apprehensive, I don't think, we experienced that so much in the hedge fund side. And our pipeline looks great there. Wealth management and advisory business, that's going great. We're seeing lots of broker breakaways and the events that fuel Black Diamond's business and to some extent, AMG. So it's less about a market vertical that it's more regional. So I think just Continental Europe is softer than the other regions of the world. And obviously, I think for good reasons, there's maybe more apprehension there about the euro debt crisis. That's where I tend, if I was to call anything out as being affected by the volatility. That would be the one spot.

Operator

Your next question comes from the line of Gil Luria.

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

I wanted to ask question about the high-profile deals. Last couple of quarters, we've been talking about the fact that because the way Advent is now positioned, you're getting access to deals that you may not have gotten to 3 or 5 years ago. Do we still have some of those in the pipeline or are those some of the ones that are affected by the macro sentiment right now?

David Peter F. Hess

We have them in the pipeline, and they are the hardest to predict because a, they're large and b, because those big institutions tends to be a little more cagey in tough macro times. So that's one of the reasons, I think, Stephanie cautiously talked about Q4. The reality is we have a very strong pipeline. It's just very difficult sometimes to say how these big firms are going to react to a macro environment like we have. But we are progressing. And as I said earlier, projects are still authorized projects. And so we still -- we feel good, we're just cautious about the guidance, obviously given the overall macro environment isn't as strong as it was this time last year.

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

And then, Jim, in terms of how much cash you need to run the business on an ongoing basis, what's the excess cash that you have right now in terms of thinking about the stock buyback going forward with the cash flow you're going to generate for the next few quarters?

James S. Cox

So we like -- kind of our walking around cash, it's probably around $30 million.

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

And everything in excess that is available for the buyback, and then since Black Diamond, you've progressed nicely. Are you going to start looking at other M&A opportunities like that one or the ones that you've been able to do in the more recent -- in the previous to that, that had to do more with product enhancements?

Stephanie G. DiMarco

I would say, we're always looking at things, and we just have a high-quality screen. So when things look attractive, that's when we'll act. But we're always looking at things.

Operator

There are no further questions at this time. I will now turn the call over to Stephanie DiMarco, CEO, please proceed.

Stephanie G. DiMarco

Thank you, everyone, for joining us, and we look forward to speaking with you next quarter.

Operator

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may all disconnect. Have a great day.

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