Aspen Technology Announces Financial Results for Fourth-Quarter Fiscal Year 2006 and Completion of Stock Option Review and Restatement
CAMBRIDGE, Mass.--(BUSINESS WIRE)--Sept. 28, 2006--Aspen Technology, Inc. (Nasdaq: AZPN), a leading provider of software and services to the process industries, today announced financial results for its quarter and fiscal year ended June 30, 2006.
"Our fourth quarter financial results demonstrate that we finished fiscal 2006 with strong revenue, profitability and cash flow," stated Mark Fusco, chief executive officer of AspenTech. "We were pleased that we were able to complete our internal stock option review and related restatement process and to file our Annual Report on Form 10-K with the SEC today, as previously anticipated. We remain focused on executing against our growth strategies, bringing our aspenONE solutions to market and delivering value to our customers."
Fourth Quarter Fiscal 2006 Results
For the quarter ended June 30, 2006, AspenTech reported total revenue of $79.2 million, an increase of 10% from the prior year period. Top line results were driven by license revenue of $44.4 million, which increased 20% from the prior year period. Services revenue was even with the prior year period at $34.8 million.
For the quarter ended June 30, 2006, AspenTech's income from operations, determined in accordance with generally accepted accounting principles (GAAP), was $8.3 million, or an operating margin of 11%. GAAP operating expenses in the fourth quarter fiscal 2006 included $1.7 million of non-cash stock-based compensation, $1.5 million of payroll tax-related charges resulting from the stock option review, $1.7 million of non-cash amortization of intangibles associated with previous acquisitions and $0.7 million of restructuring charges and loss on sales and disposals of assets, all of which combined to reduce the company's GAAP operating margin by approximately 700 basis points.
For the quarter ended June 30, 2005, the company reported a GAAP loss from operations of $22.8 million. GAAP operating expenses in the fourth quarter fiscal 2005 included $0.7 million of non-cash stock-based compensation, $1.8 million of non-cash amortization of intangibles associated with previous acquisitions and $17.9 million of restructuring charges and loss on sales and disposals of assets
GAAP income applicable to common shareholders was $2.9 million in the fourth quarter of fiscal 2006, compared to a loss of $30.0 million in the same period last year. GAAP income applicable to common shareholders included the impact of $3.9 million of accretion of preferred stock dividend and discount in the fourth quarter of fiscal 2006, and $3.7 million in the prior year period.
GAAP diluted income per share applicable to common shareholders was $0.05 for the quarter ended June 30, 2006, compared with a diluted loss per share applicable to common shareholders of $0.70 in the same period last year. Of note, fourth quarter fiscal 2006 GAAP earnings per share were adversely impacted by $0.03 due to payroll tax-related charges resulting from the stock option review.
As previously reported, AspenTech had cash and cash equivalents of $86.3 million at June 30, 2006, an increase of 23% compared to the end of the prior quarter, and the company remains essentially debt-free. The increase in cash was primarily the result of strong cash flow from operations during the quarter.
Full Year Fiscal 2006 Results
For the fiscal year ended June 30, 2006, AspenTech reported total revenue of $293.3 million, an increase of 9% from the prior fiscal year. Top line growth was driven by license revenue of $152.7 million, which increased 18% from the prior fiscal year. Services revenue was even with the prior fiscal year at $140.6 million.
For the fiscal year ended June 30, 2006, AspenTech's GAAP income from operations was $21.9 million, or an operating margin of 7%. GAAP operating expenses in fiscal 2006 included $6.9 million of non-cash stock-based compensation, $2.3 million of payroll tax-related charges resulting from the stock option review, $7.1 million of non-cash, amortization of intangibles associated with previous acquisitions, and $4.9 million of restructuring charges and loss on sales and disposals of assets - all of which combined to reduce the company's operating margin by approximately 700 basis points.
For the fiscal year ended June 30, 2005, AspenTech's GAAP loss from operations was $68.8 million. GAAP operating expenses in fiscal 2005 included $1.5 million of non-cash stock-based compensation, $0.2 million of payroll tax-related charges resulting from the stock option review, $7.1 million of non-cash, amortization of intangibles associated with previous acquisitions, and $39.3 million of restructuring charges and loss on sales and disposals of assets.
GAAP income applicable to common shareholders was $3.0 million in fiscal 2006, compared to a loss of $85.2 million in the prior fiscal year. GAAP income applicable to common shareholders includes the impact of $15.4 million for the accretion of preferred stock dividend and discount in fiscal 2006, and $14.5 million in the prior fiscal year.
GAAP diluted income per share applicable to common shareholders was $0.06 for the fiscal year ended June 30, 2006, compared with a diluted loss per share applicable to common shareholders of $2.01 in the prior fiscal year.
Restatement of certain prior period financials completed
As previously disclosed, in connection with the preparation of AspenTech's financial statements for the fiscal year ended June 30, 2006, a subcommittee of independent directors reviewed the company's accounting treatment for stock option grants since its initial public offering in fiscal 1995. Based upon the subcommittee's review, the Audit Committee and company management determined that certain option grants during fiscal years 1995 through 2004 were accounted for improperly, and concluded that stock-based compensation associated with the grants was misstated in fiscal years 1995 through 2005 and in the nine months ended March 31, 2006.
The restatement effects of stock-based compensation charges resulted in charges totaling $1.0 million for the nine months ended March 31, 2006, $0.5 million for the year ended June 30, 2005, and $7.2 million for the year ended June 30, 2004. The restatement also resulted in $50.1 million of charges for periods prior to fiscal 2004, which is reflected in the July 1, 2003 beginning accumulated deficit.
As previously disclosed, the restated financial statements also reflect the correction of errors relating to prior periods that were not previously recorded because the company believed they were not material either individually or in the aggregate. These adjustments increased net income by approximately $2.5 million for the first three quarters of fiscal 2006, while increasing net loss by an aggregate of $1.9 million in fiscal years 2003, 2004 and 2005.
The effects of the restatement of financial results for prior fiscal periods are described in further detail in the company's annual report on Form 10-K filed with the SEC earlier today.
Conference Call and Webcast
AspenTech will host a conference call and webcast today, September 28, 2006, at 6:00 pm (EDT) to discuss the company's financial results, business outlook, and related corporate and financial matters. The live dial-in number is 877-239-3024, conference ID code 7759540. Interested parties may also listen to a live webcast of the call by logging on to the Investor Relations section of AspenTech's website, http://www.aspentech.com/corporate/investor.cfm, and clicking on the "webcast" link. A replay of the call will be archived on AspenTech's website and will also be available via telephone at 800-642-1687 or 706-645-9291, conference ID code 7759540, through October 5, 2006.
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 solutions is 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 STATEMENT OF OPERATIONS
(in thousands except per share data)
Three Months Ended Year Ended
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
--------- --------- --------- ---------
(Unaudited)
REVENUES:
Software licenses $ 44,387 $ 36,995 $152,686 $129,621
Service and other 34,776 34,802 140,564 140,373
--------- --------- --------- ---------
Total revenues 79,163 71,797 293,250 269,994
--------- --------- --------- ---------
COST OF REVENUES:
Cost of software licenses 4,168 4,157 16,805 16,864
Cost of service and other 18,794 19,357 72,492 82,744
Amortization of technology
related intangible assets 1,739 1,782 7,070 7,112
--------- --------- --------- ---------
Total cost of revenues 24,701 25,296 96,367 106,720
--------- --------- --------- ---------
Gross profit 54,462 46,501 196,883 163,274
OPERATING COSTS:
Selling and marketing 23,178 26,128 84,010 96,275
Research and development 10,245 11,933 44,139 47,276
General and administrative 12,019 13,303 41,916 49,277
Restructuring charges 265 3,330 3,993 24,960
Loss on sales and disposals
of assets 418 14,590 898 14,314
--------- --------- --------- ---------
Total operating costs 46,125 69,284 174,956 232,102
--------- --------- --------- ---------
Income (loss) from operations 8,337 (22,783) 21,927 (68,828)
Other income (expense), net (79) (396) 1,076 (481)
Interest income, net 1,422 219 4,049 2,034
--------- --------- --------- ---------
Income (loss) before income
tax provision 9,680 (22,960) 27,052 (67,275)
Income tax provision (2,865) (3,292) (8,706) (3,499)
--------- --------- --------- ---------
Net income (loss) 6,815 (26,252) 18,346 (70,774)
Accretion of preferred stock
discount and dividend (3,874) (3,703) (15,383) (14,450)
--------- --------- --------- ---------
Income (loss) applicable to
common shareholders $ 2,941 $(29,955) $ 2,963 $(85,224)
========= ========= ========= =========
EARNINGS PER SHARE:
Income (loss) per share
applicable to common
shareholders - Basic $ 0.06 $ (0.70) $ 0.07 $ (2.01)
========= ========= ========= =========
Income (loss) per share
applicable to common
shareholders - Diluted $ 0.05 $ (0.70) $ 0.06 $ (2.01)
========= ========= ========= =========
Weighted average shares
outstanding - Basic 46,989 42,942 44,627 42,381
========= ========= ========= =========
Weighted average shares
outstanding - Diluted 58,646 42,942 53,771 42,381
========= ========= ========= =========
Supplemental information -
Three Months Ended Year Ended
June 30, June 30, June 30, June 30,
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 months and year
ended June 30, 2006, stock-based compensation was accounted for
under SFAS 123R while for the three months and year ended June 30,
2005, 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 $ 339 $ 27 $ 1,244 $ 128
Selling and marketing 566 20 2,126 94
Research and development 342 13 1,056 61
General and administrative 408 650 2,449 1,241
--------- --------- --------- ---------
Total stock-based
compensation $ 1,655 $ 710 $ 6,875 $ 1,524
========= ========= ========= =========
Payroll tax-related charges resulting from the stock option review
included in the Statements of Operations
As a result of the completion of the stock option review conducted by
the subcommittee of independent directors, AspenTech has incurred
certain payroll withholding and other tax charges. The amounts in
the attached Statements of Operations include payroll and other tax
charges related to the stock option review, as follows:
Cost of service and other $ 556 $ 11 $ 840 $ 61
Selling and marketing 397 8 600 42
Research and development 262 5 395 27
General and administrative 287 6 433 31
--------- --------- --------- ---------
Total payroll and other tax
costs associated with the
stock option review $ 1,502 $ 30 $ 2,268 $ 161
========= ========= ========= =========
ASPEN TECHNOLOGY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
June 30, June 30,
2006 2005
--------- ---------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 86,272 $ 68,149
Accounts receivable, net 55,654 52,102
Unbilled services 8,518 9,826
Current portion of long-term installments
receivable, net 12,123 5,355
Deferred tax asset - 692
Prepaid expenses and other current assets 8,813 11,299
--------- ---------
Total current assets 171,380 147,423
--------- ---------
Long-term installments receivable, net 35,681 18,445
Retained interest in sold receivables, net 19,010 16,667
Equipment and leasehold improvements, net 8,351 10,956
Computer software development costs, net 15,456 17,411
Intangible assets, net 20,048 26,852
Purchased intellectual property, net 165 730
Deferred tax asset 1,595 1,354
Other assets 2,552 2,656
--------- ---------
Total assets $274,238 $242,494
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt $ 247 $ 1,042
Accounts payable and accrued expenses 81,646 85,679
Deferred revenue 64,238 57,846
--------- ---------
Total current liabilities 146,131 144,567
--------- ---------
Long-term debt, less current maturities 149 338
Deferred revenue, less current portion 2,609 2,093
Deferred tax liability 1,309 2,760
Other liabilities 20,446 23,143
Redeemable preferred stock 125,475 121,210
Total stockholders' equity (deficit) (21,881) (51,617)
--------- ---------
Total liabilities and stockholders' equity
(deficit) $274,238 $242,494
========= =========
CONTACT: Media:
Aspen Technology, Inc.
Patrick Pecorelli, 617-949-1220
patrick.pecorelli@aspentech.com
or
Investors:
Integrated Corporate Relations
Kori Doherty, 617-217-2084
kdoherty@icrinc.com
SOURCE: Aspen Technology, Inc.