AspenTech Logo

News Release

View printer-friendly version
<< Back

Aspen Technology Announces Financial Results for First and Second Quarters of Fiscal 2005

03/15/05

CAMBRIDGE, Mass.--(BUSINESS WIRE)--March 15, 2005--Aspen Technology, Inc. (Nasdaq: AZPNE), the leading provider of software and services to the process industries, today reported financial results for its quarters ended September 30, 2004 and December 31, 2004, the first two quarters of fiscal 2005. Additionally, the Company announced in a separate press release that the Audit Committee of the Company's Board of Directors has completed its previously announced investigation and that the Company has restated its financial results for each of the fiscal years ended June 30, 2000 through June 30, 2004.

Total revenues for the quarter ended September 30, 2004 totaled $63.3 million, with software license revenues of $25.3 million and services revenues of $38.0 million. On a generally accepted accounting principles in the United States (GAAP) basis, the Company reported a net loss for the quarter of $33.6 million, or $0.80 per diluted share, which included restructuring charges and FTC legal costs of $21.5 million. On a non-GAAP basis, excluding these charges, litigation defense and settlement costs, the gain on the sale of the AXSYS product line, amortization of intangibles, and preferred stock dividend and discount accretion, the Company reported a loss of $3.7 million, or $0.04 per diluted share, for the quarter ended September 30, 2004.

Total revenues for the quarter ended December 31, 2004 totaled $71.6 million, with software license revenues of $36.7 million and services revenues of $34.9 million. The Company more than doubled the number of software license transactions of approximately $1 million or greater from the preceding quarter. On a GAAP basis, the Company reported a net loss for the quarter of $6.7 million, or $0.16 per diluted share. On a non-GAAP basis, excluding restructuring charges and FTC legal costs, fees related to the Audit Committee review, litigation defense and settlement costs, one-time contract termination costs, amortization of intangibles, and preferred stock dividend and discount accretion, the Company reported net income of $3.3 million, or $0.04 per share, for the quarter ended December 31, 2004.

"The sequential rebound of our software license revenues during the December quarter was significant given the multiple challenges facing the Company, and we believe it demonstrates AspenTech's strategic position within process manufacturers," said Mark Fusco, President and Chief Executive Officer of Aspen Technology. "With the completion of our settlement with the FTC and our restatement of financial results, our entire management team is finally in a position to focus all of its efforts on executing our business strategy. My top priority as the new CEO of AspenTech is now to improve the Company's operations so that we can deliver on the potential of our aspenONE solutions for the Enterprise Operations Management market. We will concentrate our efforts on better serving our customers, which we believe will enable us to grow our revenues and improve our profitability over time."

Focus on Integrated Solutions

"We are focused on taking advantage of the momentum initiated at our AspenWorld Conference in October 2004," said Fusco. "The feedback from our customers has been very positive about the launch of aspenONE, the first comprehensive set of software solutions for the Enterprise Operations Management market. Our aspenONE solutions provide process manufacturers with integrated systems designed to optimize their efficiency and profitability across the process manufacturers' global enterprises.

"We are now able to offer a unique value proposition and a significant return on investment based on solutions that support our customers' integrated business processes. I am confident in the long-term direction of AspenTech given the interest shown in aspenONE, the continued strength of our customers' businesses, our new solutions, and our continuing implementation of new initiatives to improve our internal business processes and execution."

During the first six months of fiscal 2005, AspenTech signed significant software license agreements with BP, Bayer, Bechtel, DSM, Fluor, Owens Corning, Pfizer, and Solutia. Approximately 70% of the Company's software license revenue during that period was associated with the Company's engineering solutions. Licenses with companies in the petroleum industry and engineering and construction industry made the most significant contributions to the Company's software revenue performance in the first six months of the fiscal year.

Improved Cost Structure

During the second quarter of fiscal 2005, the Company's management continued efforts to reduce the Company's expense infrastructure. On a GAAP basis, the Company's total expenses were $76.3 million. On a non-GAAP basis, excluding restructuring charges and FTC legal costs, fees related to the Audit Committee review, litigation defense and settlement costs, one-time contract termination costs, amortization of intangibles, and preferred stock dividend and discount accretion, the Company's total expenses were $69.9 million, down $2.9 million from last year. Management believes it will be able to leverage its improved operating model to improve the Company's profitability over the next twelve to eighteen months.

"We have worked diligently to put the Company in a position to drive significantly improved levels of profitability," said Charles Kane, Senior Vice President and Chief Financial Officer of Aspen Technology. "We are continuing to evaluate ways to capture organizational efficiencies by eliminating excess facilities charges and improving our business processes and organizational efficiency. A major focus of the Company for the remainder of the year will be to strengthen our balance sheet further, which has already improved dramatically over the past 18 months, with our increase in cash and decrease in debt."

Customer Service Award

During the quarter ended December 31, 2004, AspenTech received a Hall of Fame lifetime achievement award from the Service and Support Professionals Association (SSPA) as a result of the Company's receipt of a fifth straight "STAR" award for delivering outstanding customer service. This achievement recognizes that AspenTech has consistently delivered world-class technical support and customer service, and reflects the Company's commitment to continuously improving its support offerings. AspenTech believes that its ability to help customers capture value with complex solutions and outstanding customer support continues to be an important competitive differentiator in the marketplace.

Conference Call and Webcast

The Company will hold a conference call and webcast to discuss its financial results, the results of its Audit Committee review and financial restatement, the status and outlook for the Company's business, and related corporate and financial matters at 5:45 p.m. Eastern time on March 15, 2005. The live dial-in number for the call is 877-239-3024. Interested parties may also listen to a live webcast of the call by logging on to AspenTech's website: http://www.aspentech.com and clicking on the "webcast" link under the investor relations section of the site. A replay of the call will be archived on AspenTech's website and will also be available for 72 hours via telephone, beginning 8:30 p.m. Eastern time on March 15, 2005, by dialing (800) 642-1687 and entering confirmation code 4697408.

Non-GAAP Results

AspenTech reports non-GAAP financial results, which exclude certain non-operational, non-cash and other specified charges that management generally does not consider in evaluating the Company's ongoing operations. These results are provided as a complement to results provided in accordance with accounting principles generally accepted in the United States (known as "GAAP"). Management believes these non-GAAP measures help indicate underlying trends in the Company's business, and uses these measures to establish budgets and operational goals that are communicated internally and externally, to manage the Company's business and to evaluate its performance. A reconciliation of non-GAAP to GAAP is included in the attached condensed consolidated financial statements.

About AspenTech

Aspen Technology, Inc. provides industry-leading software and implementation services that enable process companies to use simulation models to increase efficiency and profitability. aspenONE(TM), a new generation of software solutions and services from AspenTech, represents a major step forward in helping process manufacturers achieve their strategic operational excellence initiatives. The first comprehensive offering to address the demands of the Enterprise Operations Management (EOM) market, aspenONE provides companies with integrated systems that enable them to manage and optimize their operational performance. Over 1,500 companies license on AspenTech's software, including Aventis, Bayer, BASF, BP, ChevronTexaco, Dow Chemical, DuPont, ExxonMobil, Fluor, GlaxoSmithKline, Shell, and Total. For more information, visit www.aspentech.com.

The last sentence of the fourth paragraph and last sentence of the eighth paragraph of this press release contain forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may vary significantly from AspenTech's expectations based on a number of risks and uncertainties, including: AspenTech has identified material weakness in its internal controls with respect to software license revenue recognition, that, if not remedied effectively, could result in material misstatements; AspenTech's lengthy sales cycle which makes it difficult to predict quarterly operating results; fluctuations in AspenTech's quarterly operating results; AspenTech's dependence on customers in the cyclical chemicals, petrochemicals and petroleum industries; AspenTech's ability to raise additional capital as required; intense competition; AspenTech's need to develop and market products successfully; reliance on relationships with strategic partners; and other risk factors described from time to time in AspenTech's periodic reports filed with the Securities and Exchange Commission. AspenTech cannot guarantee any future results, levels of activity, performance, or achievements. AspenTech undertakes no obligation to update the forward-looking statements after the date of this press release.

                        ASPEN TECHNOLOGY, INC.
                 CONSOLIDATED CONDENSED BALANCE SHEETS
                            (in thousands)

                                                   Sept. 30,  June 30,
                                                      2004      2004
                                                    --------  --------
ASSETS
Current assets:
    Cash, cash equivalents and short-term
     investments                                   $ 92,555  $107,677
    Accounts receivable, net                         47,611    50,874
    Unbilled services                                17,481    15,518
    Current portion of long-term installments
     receivable, net                                 25,482    25,244
    Deferred tax asset                                  266        31
    Prepaid expenses and other current assets         8,584    10,084
                                                    --------  --------

       Total current assets                         191,979   209,428
                                                    --------  --------

Long-term installments receivable, net               55,018    65,527
Equipment and leasehold improvements, net            17,325    18,664
Computer software development costs, net             17,018    16,863
Intangible assets, net                               32,291    34,307
Purchased intellectual property, net                  1,154     1,295
Deferred tax asset                                    2,586     2,492
Other assets                                          3,147     3,158
                                                    --------  --------

    Total assets                                   $320,518  $351,734
                                                    ========  ========


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
    Current portion of long-term debt              $ 58,366  $ 58,595
    Accounts payable and accrued expenses            71,310    83,115
    Unearned revenue                                 18,910    18,051
    Deferred revenue                                 30,689    33,462
    Deferred tax liability                              424       325
                                                    --------  --------
      Total current liabilities                     179,699   193,548
                                                    --------  --------

Long-term debt, less current maturities               1,628     1,952
Deferred revenue, less current portion                4,485     5,363
Deferred tax liability                                4,240     4,220
Other liabilities                                    23,262    11,527
                                                    --------  --------

Redeemable preferred stock                          110,289   106,761

Total stockholders' equity (deficit)                 (3,085)   28,363
                                                    --------  --------

    Total liabilities and stockholders' equity
     (deficit)                                     $320,518  $351,734
                                                    ========  ========



                        ASPEN TECHNOLOGY, INC.
            CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                 (in thousands, except per share data)

                                                Three Months Ended
                                             Sept. 30,       Sept. 30,
                                                2004            2003
                                             ---------       ---------
REVENUES:
   Software licenses                          $25,273         $38,144
   Service and other                           37,997          42,265
                                             ---------       ---------
      Total revenues                           63,270          80,409
                                             ---------       ---------

COST OF REVENUES:
   Cost of software licenses                    3,941           3,617
   Cost of service and other                   22,108          24,382
   Amortization of technology related
    intangible assets                           1,774           1,832
                                             ---------       ---------
      Total cost of revenues                   27,823          29,831
                                             ---------       ---------

   Gross profit                                35,447          50,578

OPERATING COSTS:
   Selling and marketing                       22,375          23,957
   Research and development                    12,183          16,006
   General and administrative (includes
    litigation defense and settlement costs
    of $3,465 and $0 for the three months
    ended September 30, 2004 and 2003,
    respectively) (2)                          10,427           6,872
   Restructuring charges and FTC legal costs   21,508               -
   Loss (gain) on sales and disposals of
    assets                                       (362)           (302)
                                             ---------       ---------
      Total operating costs                    66,131          46,533
                                             ---------       ---------

   Income (loss) from operations              (30,684)          4,045

   Other income (expense), net                   (393)           (691)
   Interest income, net                           654             682
                                             ---------       ---------

   Income (loss) before provision for income
    taxes                                     (30,423)          4,036

   Provision for income taxes                     340            (411)
                                             ---------       ---------

     Net income (loss)                        (30,083)          3,625

    Accretion of preferred stock discount
     and dividend (1)                          (3,528)          3,852
                                             ---------       ---------

   Net income (loss) applicable to common
    stockholders                             $(33,611)         $7,477
                                             =========       =========

EARNINGS PER SHARE:
   Basic net income (loss) per common share    $(0.80)          $0.19
                                             =========       =========
   Diluted net income (loss) per common
    share                                      $(0.80)          $0.15
                                             =========       =========

   Weighted average shares outstanding -
    Basic                                      41,796          39,772
                                             =========       =========
   Weighted average shares outstanding -
    Diluted                                    41,796          59,437
                                             =========       =========

PRO FORMA (NON-GAAP) EARNINGS PER SHARE:
   Pro forma (non-GAAP) net income excludes Accretion of preferred
    stock discount and dividend,  Amortization of technology related
    intangible assets, Litigation defense and settlement costs,
    Restructuring charges and FTC legal costs, and gain on sale of the
    AXSYS product line.   Pro forma (non-GAAP) weighted average shares
    outstanding assumes the conversion of the Series D preferred stock
    to common stock.
   Net income (loss)                          $(3,670)         $5,457
                                             =========       =========

   Diluted earnings (loss) per share           $(0.04)          $0.09
                                             =========       =========

   Weighted average shares outstanding -
    diluted                                    86,590          59,437
                                             =========       =========

   (1) Detail of this amount is provided on the reconciliation of net
       income (loss) to pro forma (non-GAAP) net income
   (2) This parenthetical reference will not be presented in our Form
       10-K.



 Supplemental information -
                                                 Three Months Ended
                                             Sept. 30,       Sept. 30,
                                                2004            2003
                                             ---------       ---------

 Reconciliation of total expenses to pro
  forma (non-GAAP) total expenses

Total expenses (cost of revenues and
 operating costs)                             $93,954         $76,364
   Adjustments to total expenses (cost of
    revenues and operating costs)
      Amortization of technology related
       intangible assets                       (1,774)         (1,832)
      Litigation defense and settlement
       costs, included in General and
       Administrative costs                    (3,465)              -
      Restructuring charges and FTC legal
       costs                                  (21,508)              -
      Gain on sale of AXSYS product line,
       included in Loss (gain) on sales and
       disposals of assets                        334               -
                                             ---------       ---------

 Pro forma (non-GAAP) total expenses (cost of
  revenues and operating costs)               $67,541         $74,532
                                             =========       =========


 Reconciliation of net income (loss) to pro
  forma (non-GAAP) net income (loss)

Net income (loss) applicable to common
 stockholders                                $(33,611)         $7,477
      Adjustments to net income (loss)
       applicable to common stockholders
      Net effect of adjustments to cost of
       revenues and operating costs            26,413           1,832
      Preferred stock discount and dividend
       accretion                                3,528           2,600
      Gain on conversion of Series B
       redeemable preferred stock                   -          (6,452)
                                             ---------       ---------

 Pro forma (non-GAAP) net income (loss)       $(3,670)         $5,457
                                             =========       =========



                        ASPEN TECHNOLOGY, INC.
                 CONSOLIDATED CONDENSED BALANCE SHEETS
                            (in thousands)

                                                    Dec. 31,  June 30,
                                                      2004      2004
                                                   --------- ---------
ASSETS
Current assets:
   Cash, cash equivalents and short-term
    investments                                     $86,887  $107,677
   Accounts receivable, net                          50,431    50,874
   Unbilled services                                 10,669    15,518
   Current portion of long-term installments
    receivable, net                                  28,573    25,244
   Deferred tax asset                                   276        31
   Prepaid expenses and other current assets         10,297    10,084
                                                   --------- ---------

      Total current assets                          187,133   209,428
                                                   --------- ---------

Long-term installments receivable, net               57,132    65,527
Equipment and leasehold improvements, net            16,355    18,664
Computer software development costs, net             16,998    16,863
Intangible assets, net                               30,710    34,307
Purchased intellectual property, net                  1,013     1,295
Deferred tax asset                                    2,619     2,492
Other assets                                          3,117     3,158
                                                   --------- ---------

   Total assets                                    $315,077  $351,734
                                                   ========= =========


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
   Current portion of long-term debt                $58,215   $58,595
   Accounts payable and accrued expenses             70,206    83,115
   Unearned revenue                                  20,997    18,051
   Deferred revenue                                  26,699    33,462
   Deferred tax liability                               446       325
                                                   --------- ---------
     Total current liabilities                      176,563   193,548
                                                   --------- ---------

Long-term debt, less current maturities               1,368     1,952
Deferred revenue, less current portion                3,774     5,363
Deferred tax liability                                4,242     4,220
Other liabilities                                    23,516    11,527
                                                   --------- ---------

Redeemable preferred stock                          113,877   106,761

Total stockholders' equity (deficit)                 (8,263)   28,363
                                                   --------- ---------

   Total liabilities and stockholders' equity
    (deficit)                                      $315,077  $351,734
                                                   ========= =========



                        ASPEN TECHNOLOGY, INC.
            CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                 (in thousands, except per share data)

                          Three Months Ended        Six Months Ended
                         Dec. 31,     Dec. 31,     Dec. 31,  Dec.  31,
                           2004         2003         2004       2003
                      ------------------------------------------------
REVENUES:
Software licenses        $36,732      $38,856      $62,005    $77,000
Service and other         34,893       42,886       72,890     85,151
                      ------------------------------------------------
Total revenues            71,625       81,742      134,895    162,151
                      ------------------------------------------------

COST OF REVENUES:
Cost of software
 licenses                 4,731         4,315        8,672      7,932
Cost of service and
 other                   21,913        24,246       44,021     48,628
Amortization of
 technology related
 intangible assets        1,778         1,842        3,552      3,674
                      ------------------------------------------------
Total cost of revenues   28,422        30,403       56,245     60,234
                      ------------------------------------------------

Gross profit             43,203        51,339       78,650    101,917

OPERATING COSTS:
Selling and marketing    23,401        23,651       45,776     47,608
Research and
 development             11,574        14,294       23,757     30,300
General and
 administrative
 (includes litigation
 defense and
 settlement costs and
 one-time contract
 termination costs of
 $4,460, $0, $6,854
 and $0 for the three
 months ended December
 31, 2004 and 2003 and
 six months ended
 December 31, 2004 and
 2003, respectively)
 (2)                     12,694         6,607       23,121     13,479
Restructuring charges
 and FTC legal costs        219         2,000       21,727      2,000
Loss (gain) on sales
 and disposals of
 assets                       5          (377)        (357)      (679)
                      ------------------------------------------------
Total operating costs    47,893        46,175      114,024     92,708
                      ------------------------------------------------

Income (loss) from
 operations              (4,690)        5,164      (35,374)     9,209

Other income
 (expense), net             351           246          (42)      (445)
Interest income, net        657           855        1,311      1,537
                      ------------------------------------------------

Income (loss) before
 provision for income
 taxes                   (3,682)        6,265      (34,105)    10,301

Benefit from
 (provision for)
 income taxes               573        (1,578)         913     (1,989)
Equity in earnings
 from joint ventures          -          (100)           -       (100)
                      ------------------------------------------------

  Net income (loss)      (3,109)        4,587      (33,192)     8,212

 Accretion of
  preferred stock
  discount and
  dividend (1)           (3,589)       (3,352)      (7,117)       500
                      ------------------------------------------------

Net income (loss)
 applicable to common
 stockholders           $(6,698)       $1,235     $(40,309)    $8,712
                      ================================================

EARNINGS PER SHARE:
Basic net income
 (loss) per common
 share                   $(0.16)        $0.03       $(0.96)     $0.22
                      ================================================
Diluted net income
 (loss) per common
 share                   $(0.16)        $0.02       $(0.96)     $0.19
                      ================================================

Weighted average
 shares outstanding -
 Basic                   42,153        40,175       41,974     39,967
                      ================================================
Weighted average
 shares outstanding -
 Diluted                 42,153        50,315       41,974     46,337
                      ================================================


PRO FORMA (NON-GAAP) EARNINGS PER SHARE:

Pro forma (non-GAAP) net income excludes Accretion of preferred
stock discount and dividend, Amortization of technology related
intangible assets, Litigation defense and settlement costs,
one-time contract termination costs, Restructuring charges and FTC
legal costs, and gain on sale of the AXSYS product line. Pro forma
(non-GAAP) weighted average shares outstanding assumes the
conversion of the Series D preferred stock to common stock.

Net income               $3,348        $8,429        $(322)   $13,886
                      ================================================

Diluted earnings
 (loss) per share         $0.04         $0.10       $(0.00)     $0.19
                      ================================================

Weighted average
 shares outstanding -
 diluted                 87,209        86,651       87,203     73,589
                      ================================================

(1) Detail of this amount is provided on the reconciliation of net
    income (loss) to pro forma (non-GAAP) net income

(2)These parenthetical references will not be presented in our Form
    10-K.



 Supplemental information -

                                   Three Months         Six Months
                                       Ended               Ended
                                 Dec. 31, Dec. 31,  Dec. 31,  Dec. 31,
                                   2004     2003      2004      2003
                                 -------- -------- --------- ---------

 Reconciliation of total
  expenses to pro forma (non-
  GAAP) total expenses

Total expenses (cost of revenues
 and operating costs)            $76,315  $76,578  $170,269  $152,942
 Adjustments to total expenses
  (cost of revenues and
  operating costs)
 Amortization of technology
  related intangible assets       (1,778)  (1,842)   (3,552)   (3,674)
 Litigation defense and
  settlement costs, included in
  General and Administrative
  costs                             (300)       -    (3,765)        -
 Fees associated with the audit
  committee review, included in
  General and Administrative
  costs                           (3,089)       -    (3,089)        -
 One-time contract termination
  cost, included in General and
  Administrative costs            (1,071)       -    (1,071)        -
 Restructuring charges and FTC
  legal costs                       (219)  (2,000)  (21,727)   (2,000)
 Gain on sale of AXSYS product
  line, included in Loss (gain)
  on sales and disposals of
  assets                               -        -       334         -
                                 -------- -------- --------- ---------

 Pro forma (non-GAAP) total
  expenses (cost of revenues and
  operating costs)               $69,858  $72,736  $137,399  $147,268
                                 ======== ======== ========= =========


 Reconciliation of net income
  (loss) to pro forma (non-GAAP)
  net income

Net income (loss) applicable to
 common stockholders             $(6,698)  $1,235  $(40,309)   $8,712
 Adjustments to net income
  (loss) applicable to common
  stockholders
 Net effect of adjustments to
  cost of revenues and operating
  costs                            6,457    3,842    32,870     5,674
 Preferred stock discount and
  dividend accretion               3,589    3,352     7,117     5,952
 Gain on conversion of Series B
  redeemable preferred stock           -        -         -    (6,452)
                                 -------- -------- --------- ---------

 Pro forma (non-GAAP) net income  $3,348   $8,429     $(322)  $13,886
                                 ======== ======== ========= =========

CONTACT:
For Media:
Aspen Technology, Inc.
Robin Swanger, 281-504-3256
robin.swanger@aspentech.com

For Investors:
Aspen Technology, Inc.
Joshua Young, 617-949-1274
joshua.young@aspentech.com