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Aspen Technology Announces Financial Results for Fiscal 2006 Third-Quarter; Strong License Revenue Growth Drives Significant Upside on Profitability

05/09/06

CAMBRIDGE, Mass.--(BUSINESS WIRE)--May 9, 2006--Aspen Technology, Inc. (Nasdaq: AZPN), a leading provider of software and services to the process industries, today announced its financial results for its fiscal 2006 third quarter, ended March 31, 2006.

For the quarter ended March 31, 2006, AspenTech reported total revenue of $77.1 million, an increase of 20% from the prior year period. Strong top line results were driven by license revenue of $41.7 million, an increase of 34% from the prior year period. Services revenue was $35.4 million, an increase of 7% from the prior year period.

Mark Fusco, President and CEO of AspenTech, stated, "We are extremely pleased with our third quarter results, which were strong across all key income statement, balance sheet and cash flow metrics. We continue to make progress toward our goal of returning AspenTech to a growth company that is able to deliver significant profitability and consistent financial results." Fusco added, "The momentum in our business is being driven by strong fundamentals in our end user markets, our market leadership position and growing market acceptance of our unique, integrated aspenONE solutions."

For the quarter ended March 31, 2006, AspenTech's income from operations and net income applicable to common shareholders, determined in accordance with generally accepted accounting principles (GAAP), were $9.3 million and $3.2 million, respectively. This represents an increase from a GAAP loss from operations of ($9.4) million and net loss applicable to common shareholders of ($13.7) million in the same period last year. GAAP net income per share applicable to common shareholders on a diluted basis was $0.06 for the quarter ended March 31, 2006, compared with a net loss per share applicable to common shareholders of ($0.32) in the same period last year.

For the quarter ended March 31, 2006, non-GAAP net income, which excludes items covered in the attached non-GAAP reconciliation table, was $10.8 million, resulting in non-GAAP earnings per share of $0.12, compared to management's guidance given in February 2006 of $0.06 to $0.08 per share.

A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included with this press release. An explanation of these measures is included below under the heading "Non-GAAP Financial Measures." The company is reporting these non-GAAP financial results for the fiscal 2006 third quarter solely for the purpose of providing consistency with previously issued guidance, which was presented on a non-GAAP basis. Beginning with the fiscal 2006 fourth quarter, AspenTech will provide guidance only on a GAAP basis.

Charles Kane, CFO of AspenTech, stated, "In addition to rapid revenue growth and expanding profitability, AspenTech also continued to strengthen the balance sheet and improve cash flow during the March quarter. The scalability of our business model is being demonstrated with the return to improved top line growth."

Conference Call and Webcast

AspenTech will host a conference call and webcast today, May 9, 2006, at 4:45 pm (EST) to discuss the Company's financial results, business outlook, and related corporate and financial matters. The live dial in number is: 1-877-239-3024, conference ID code: 7899945. 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 via telephone at: 1-800-642-1687 or 1-706-645-9291, conference ID code 7899945, through May 16, 2006.

Non-GAAP Results

This release contains non-GAAP financial measures, consisting of non-GAAP total expenses, non-GAAP net income and non-GAAP earnings per share, that exclude the following items:

    --  amortization of technology related intangible assets
        associated with intellectual property acquired in business
        combinations completed in fiscal years 2001 and 2002, which
        represents a non-cash recurring charge;

    --  stock-based compensation costs accounted for under Statement
        of Financial Accounting Standards No. 123R "Share-Based
        Payment", which was adopted in fiscal year 2006 and has no
        comparative amount in the prior year period;

    --  restructuring charges primarily related to reductions in
        headcount and closure of facilities, which do not contribute
        to the ongoing operations of the Company's business;

    --  reversal of a sales-tax reserve originally recorded in fiscal
        2005, which represented a non-cash, non-recurring charge that
        the Company's management considered to be unusual at the time;
        and

    --  preferred stock discount and dividend accretion related to the
        Company's redeemable convertible series D preferred stock,
        which management considers to be a non-cash recurring charge.

A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is included in the financial statement tables presented in this release.

AspenTech is reporting these non-GAAP financial results for the fiscal 2006 third quarter solely for the purpose of providing consistency with previously issued guidance, which was presented on a non-GAAP basis. Beginning with the fiscal 2006 fourth quarter, AspenTech will provide guidance only on a GAAP basis.

These non-GAAP financial measures should not be considered in isolation to, or as a substitute for, the financial results presented in accordance with GAAP.

These non-GAAP measures have inherent limitations because they do not include all items of income and expense that impact AspenTech's operations and because they lack comparability to the GAAP financial results of AspenTech's competitors.

About AspenTech

Aspen Technology, Inc. provides industry-leading software and professional services that help process companies improve efficiency and profitability by enabling them to model, manage and control their operations. The new generation of integrated aspenONE (TM) solutions are aligned with the key industry business processes, providing manufacturers the capabilities they need to optimize operational performance, make real-time decisions and synchronize the plant and supply chain. Over 1,500 leading companies already rely on AspenTech's software, including Bayer, BASF, BP, Chevron Corporation, DuPont, ExxonMobil, Fluor, GlaxoSmithKline, Sanofi-Aventis, Shell and Total. For more information, visit www.aspentech.com.

AspenTech, aspenONE and the aspen leaf logo are trademarks of Aspen Technology, Inc., Cambridge, Mass.

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

                               Three Months Ended  Nine Months Ended
                               March 31, March 31, March 31, March 31,
                                 2006      2005      2006      2005
                               --------- --------- --------- ---------
                                             (Unaudited)
REVENUES:
   Software licenses            $41,750   $31,097  $107,757   $93,102
   Service and other             35,351    33,121   105,788   106,011
                               --------- --------- --------- ---------
      Total revenues             77,101    64,218   213,545   199,113
                               --------- --------- --------- ---------

COST OF REVENUES:
   Cost of software licenses      4,518     4,035    12,544    12,707
   Cost of service and other     18,231    19,215    53,334    63,236
   Amortization of technology
    related intangible assets     1,776     1,778     5,331     5,330
                               --------- --------- --------- ---------
      Total cost of revenues     24,525    25,028    71,209    81,273
                               --------- --------- --------- ---------

   Gross profit                  52,576    39,190   142,336   117,840

OPERATING COSTS:
   Selling and marketing         21,325    24,299    60,596    70,075
   Research and development      11,844    11,552    33,749    35,309
   General and administrative     9,498    12,746    29,567    35,867
   Restructuring charges            534       (97)    3,728    21,630
   Loss (gain) on sales and
    disposals of assets             103        81       480      (276)
                               --------- --------- --------- ---------
      Total operating costs      43,304    48,581   128,120   162,605
                               --------- --------- --------- ---------

   Income (loss) from
    operations                    9,272    (9,391)   14,216   (44,765)

   Other income (expense), net      304       (16)      696       (58)
   Interest income, net             558       477       953     1,788
                               --------- --------- --------- ---------

   Income (loss) before income
    tax benefit (provision)      10,134    (8,930)   15,865   (43,035)

   Income tax benefit
    (provision)                  (3,083)   (1,133)   (5,803)     (220)
                               --------- --------- --------- ---------

   Net income (loss)              7,051   (10,063)   10,062   (43,255)

    Accretion of preferred
     stock discount and
     dividend                    (3,888)   (3,630)  (11,509)  (10,747)
                               --------- --------- --------- ---------

   Net income (loss)
    applicable to common
    shareholders                 $3,163  $(13,693)  $(1,447) $(54,002)
                               ========= ========= ========= =========

EARNINGS PER SHARE:
   Net income (loss) per share
    applicable to common
    shareholders - Basic          $0.07    $(0.32)   $(0.03)   $(1.28)
                               ========= ========= ========= =========
   Net income (loss) per share
    applicable to common
    shareholders - Diluted        $0.06    $(0.32)   $(0.03)   $(1.28)
                               ========= ========= ========= =========

   Weighted average shares
    outstanding - Basic          44,561    42,639    43,843    42,193
                               ========= ========= ========= =========
   Weighted average shares
    outstanding - Diluted        55,497    42,639    43,843    42,193
                               ========= ========= ========= =========


NON-GAAP EARNINGS PER SHARE:

    Non-GAAP net income excludes Accretion of preferred stock discount
    and dividend, Amortization of technology related intangible
    assets, Stock- based compensation costs, Restructuring charges,
    and the reversal of a sales tax reserve accrual. Non-GAAP weighted
    average shares outstanding assumes the conversion of the Series D
    preferred stock to common stock.

   Net income                   $10,751
                               =========

   Diluted net income per
    share                         $0.12
                               =========

   Weighted average shares
    outstanding - diluted        91,834
                               =========


Supplemental information -

                               Three Months Ended   Nine Months Ended
                               March 31, March 31, March 31, March 31,
                                 2006      2005      2006      2005
                               --------- --------- --------- ---------
                                             (Unaudited)

 Stock-based compensation costs
 included in the Statements of
 Operations

     Effective July 1, 2005, AspenTech adopted SFAS 123R, "Share-Based
     Payment," and uses the modified prospective method to value its
     share-based payments. Accordingly, for the three and six months
     ended December 31, 2005, stock-based compensation was accounted
     for under SFAS 123R while for the three and six months ended
     December 31, 2004, stock-based compensation was accounted for
     under APB 25, Accounting for Stock Issued to Employees, as
     permitted by SFAS 123. The amounts in the attached Statements of
     Operations include stock-based compensation as follows:

     Cost of service and other     $293        $-      $825        $-
     Selling and marketing          543         -     1,501         -
     Research and development       240         -       676         -
     General and administrative     549         -     1,995         -
                               --------- --------- --------- ---------

     Total stock-based
      compensation               $1,625        $-    $4,997        $-
                               ========= ========= ========= =========


 Reconciliation of total
  expenses to non-GAAP total
  expenses

Total expenses (cost of
 revenues and operating costs)  $67,829

     Amortization of technology
      related intangible assets  (1,776)
     Stock-based compensation    (1,625)
     Restructuring charges         (534)
     Sales-tax reserve accrual,
      included in Selling and
      Marketing costs               235
                               ---------

 Non-GAAP total expenses (cost
  of revenues and operating
  costs)                        $64,129
                               =========


 Reconciliation of Net income
  to non-GAAP Net income

Net income applicable to common
 shareholders                    $3,163
   Adjustments to net income
    applicable to common
    shareholders
     Net effect of adjustments
      to cost of revenues and
      operating costs             3,700
     Preferred stock discount
      and dividend accretion      3,888
                               ---------

 Non-GAAP net income            $10,751
                               =========



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

                                                   March 31, June 30,
                                                     2006      2005
                                                   --------- ---------
ASSETS                                                 (Unaudited)
Current assets:
   Cash and cash equivalents                        $70,089   $68,149
   Accounts receivable, net                          51,690    52,254
   Unbilled services                                  9,541     9,826
   Current portion of long-term installments
    receivable, net                                  10,586     5,355
   Deferred tax asset                                   701       692
   Prepaid expenses and other current assets          8,351    11,483
                                                   --------- ---------

      Total current assets                          150,958   147,759
                                                   --------- ---------

Long-term installments receivable, net               32,551    19,425
Retained interest in sold receivables, net           17,396    16,667
Equipment and leasehold improvements, net             8,764    11,388
Computer software development costs, net             14,627    17,411
Intangible assets, net                               21,555    26,852
Purchased intellectual property, net                    306       730
Deferred tax asset                                    1,290     1,354
Other assets                                          2,466     2,656
                                                   --------- ---------

   Total assets                                    $249,913  $244,242
                                                   ========= =========


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
   Current portion of long-term debt                   $232    $1,042
   Accounts payable and accrued expenses             64,068    84,407
   Deferred revenue                                  64,380    58,334
                                                   --------- ---------
     Total current liabilities                      128,680   143,783
                                                   --------- ---------

Long-term debt, less current maturities                 188       338
Deferred revenue, less current portion                2,126     2,093
Deferred tax liability                                2,780     2,760
Other liabilities                                    21,683    23,143

Redeemable preferred stock                          132,720   121,210

Total stockholders' equity (deficit)                (38,264)  (49,085)
                                                   --------- ---------

   Total liabilities and stockholders' equity
    (deficit)                                      $249,913  $244,242
                                                   ========= =========

CONTACT:
Media:
Aspen Technology, Inc.
Elisa Logan, 617-949-1398
elisa.logan@aspentech.com

Investor:
Integrated Corporate Relations
Kori Doherty, 617-217-2084
kdoherty@icrinc.com