Aspen Technology Announces Financial Results for the Fourth Quarter and Fiscal Year 2018

August 8, 2018
PDF Version

BEDFORD, Mass.--(BUSINESS WIRE)--Aug. 8, 2018-- Aspen Technology, Inc. (NASDAQ: AZPN), the asset optimization software company, today announced financial results for its fourth quarter and fiscal year ended June 30, 2018.

“AspenTech ended fiscal 2018 with a solid performance across all areas of the business. Our results reflect encouraging signs of improvement among Engineering & Construction customers, as well as continued strength from our owner-operator customers,” said Antonio Pietri, President and Chief Executive Officer of AspenTech.

Pietri continued, “We are also seeing growing momentum for our APM business, which signed a number of exciting transactions in the quarter. We are pleased with the significant progress made with APM in its first year in the market and believe we are well positioned to generate meaningful growth from this market opportunity in fiscal 2019 and beyond.”

Fourth Quarter and Fiscal Year 2018 Recent Business Highlights

  • Annual spend, which the company defines as the annualized value of all term license and maintenance contracts at the end of the quarter, was approximately $489 million at the end of the fourth quarter of fiscal 2018, which increased 6.4% compared to the fourth quarter of fiscal 2017 and 1.9% sequentially.
  • GAAP operating margin was 40.3%, compared to 39.6% in the fourth quarter of fiscal 2017. Non-GAAP operating margin was 45.2%, compared to 46.1% in the fourth quarter of fiscal 2017.
  • AspenTech repurchased approximately 550,000 shares of its common stock for $50.0 million in the fourth quarter of fiscal 2018.
  • AspenTech repurchased approximately 2.8 million shares of its common stock for $200 million in fiscal year 2018.

Summary of Fourth Quarter Fiscal Year 2018 Financial Results

AspenTech’s total revenue of $126.0 million included:

  • Subscription and software revenue was $119.5 million in the fourth quarter of fiscal 2018, an increase from $115.4 million in the fourth quarter of fiscal 2017.
  • Services and other revenue was $6.5 million in the fourth quarter of fiscal 2018, compared to $8.2 million in the fourth quarter of fiscal 2017.

For the quarter ended June 30, 2018, AspenTech reported income from operations of $50.7 million, compared to income from operations of $48.9 million for the quarter ended June 30, 2017.

Net income was $38.0 million for the quarter ended June 30, 2018, leading to net income per share of $0.53, compared to net income per share of $0.73 in the same period last fiscal year.

Non-GAAP income from operations, which adds back the impact of stock-based compensation expense, amortization of intangibles associated with acquisitions and acquisition related fees, was $57.0 million for the fourth quarter of fiscal 2018, compared to non-GAAP income from operations of $57.0 million in the same period last fiscal year. Non-GAAP net income was $42.5 million, or $0.59 per share, for the fourth quarter of fiscal 2018, compared to non-GAAP net income of $59.1 million, or $0.79 per share, in the same period last fiscal year. A reconciliation of GAAP to non-GAAP results is presented in the financial tables included in this press release.

AspenTech had cash and marketable securities of $96.2 million and borrowings of $170.0 million at June 30, 2018.

During the fourth quarter, the company generated $79.1 million in cash flow from operations and $79.5 million in free cash flow. Free cash flow is calculated as net cash provided by operating activities adjusted for the net impact of: purchases of property, equipment and leasehold improvements; capitalized computer software development costs; non-capitalized acquired technology, excess tax benefits from stock-based compensation, and other nonrecurring items, such as acquisition or litigation related payments.

Summary of Fiscal Year 2018 Financial Results

AspenTech’s total revenue of $499.5 million increased 3.4% from $482.9 million for fiscal year 2017.

  • Subscription and software revenue was $471.0 million, an increase from $453.5 million for fiscal year 2017.
  • Services and other revenue was $28.5 million, compared to $29.4 million for fiscal year 2017.

For the fiscal year ended June 30, 2018, AspenTech reported income from operations of $209.6 million, compared to income from operations of $212.0 million for fiscal year 2017.

Net income was $148.7 million for the fiscal year ended June 30, 2018, leading to net income per share of $2.04, compared to net income per share of $2.11 for fiscal year 2017.

Non-GAAP income from operations was $237.0 million for fiscal year 2018, an improvement compared to non-GAAP income from operations of $235.8 million for fiscal year 2017. Non-GAAP net income was $168.3 million, or $2.31 per share, for fiscal year 2018, compared to non-GAAP net income of $177.4 million, or $2.30 per share, for fiscal year 2017.

For the fiscal year ended June 30, 2018, the company generated $206.9 million in cash flow from operations and $212 million in free cash flow.

Use of Non-GAAP Financial Measures

This press release contains “non-GAAP financial measures” under the rules of the U.S. Securities and Exchange Commission. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. This non-GAAP information supplements, and is not intended to represent a measure of performance in accordance with, disclosures required by generally accepted accounting principles, or GAAP. Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. A reconciliation of GAAP to non-GAAP results is included in the financial tables included in this press release.

Management considers both GAAP and non-GAAP financial results in managing AspenTech’s business. As the result of adoption of new licensing models, management believes that a number of AspenTech’s performance indicators based on GAAP, including revenue, gross profit, operating income and net income, should be viewed in conjunction with certain non-GAAP and other business measures in assessing AspenTech’s performance, growth and financial condition. Accordingly, management utilizes a number of non-GAAP and other business metrics, including the non-GAAP metrics set forth in this press release, to track AspenTech’s business performance. None of these non-GAAP metrics should be considered as an alternative to any measure of financial performance calculated in accordance with GAAP.

Conference Call and Webcast

AspenTech will host a conference call and webcast today, August 8, 2018, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the fourth quarter and fiscal year 2018 as well as the company’s business outlook.

To listen to the earnings call, participants need to utilize the live dial-in number (833) 713-6081 or (702) 374-0603, conference ID code 1967135. The supplemental webcast presentation about ASC Topic 606 will occur at the end of management’s prepared remarks and prior to the live Q&A session. To view the webcast, interested parties will need to log on to the Investor Relations section of AspenTech’s website, http://ir.aspentech.com/, and click on the “Webcast” link. After the webcast presentation, participants should return to the live dial-in number for the Q&A session. A replay of the call and webcast presentation will be archived on AspenTech’s website and will also be available via telephone at (855) 859-2056 or (404) 537-3406, conference ID code 1967135, through September 23, 2018.

About AspenTech

AspenTech is a leading software supplier for optimizing asset performance. Our products thrive in complex, industrial environments where it is critical to optimize the asset design, operation and maintenance lifecycle. AspenTech uniquely combines decades of process modeling expertise with big data machine-learning. Our purpose-built software platform automates knowledge work and builds sustainable competitive advantage by delivering high returns over the entire asset lifecycle. As a result, companies in capital-intensive industries can maximize uptime and push the limits of performance, running their assets faster, safer, longer and greener. Visit AspenTech.com to find out more.

© 2018 Aspen Technology, Inc. AspenTech, aspenONE and the Aspen leaf logo are trademarks of Aspen Technology, Inc. All rights reserved.

Source: Aspen Technology, Inc.

         

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except per Share Data)
         
   

Three Months Ended
June 30,

   Twelve Months Ended
June 30,
    2018   2017   2018   2017
Revenue:                
Subscription and software   $ 119,501     $ 115,435     $ 471,041     $ 453,512  
Services and other   6,459     8,247     28,473     29,430  
Total revenue   125,960     123,682     499,514     482,942  
Cost of revenue:                
Subscription and software   6,142     5,285     23,228     21,051  
Services and other   6,905     6,829     27,416     26,415  
Total cost of revenue   13,047     12,114     50,644     47,466  
Gross profit   112,913     111,568     448,870     435,476  

Operating expenses:

                
Selling and marketing   27,202     26,510     101,077     92,633  
Research and development   21,213     21,953     82,076     79,530  
General and administrative   13,792     14,157     56,076     51,297  
Total operating expenses   62,207     62,620     239,229     223,460  
Income from operations   50,706     48,948     209,641     212,016  
Interest income   27     143     231     808  
Interest (expense)   (1,739 )   (1,066 )   (5,691 )   (3,787 )
Other income (expense), net   120     21     (838 )   1,309  
Income before provision for income taxes   49,114     48,047     203,343     210,346  
Provision for income taxes   11,094     (6,305 )   54,655     48,150  

Net income

   $ 38,020     $ 54,352     $ 148,688     $ 162,196  

Net income per common share:

                
Basic   $ 0.53     $ 0.73     $ 2.06     $ 2.12  
Diluted   $ 0.53     $ 0.73     $ 2.04     $ 2.11  
Weighted average shares outstanding:                
Basic   71,349     74,294     72,140     76,491  
Diluted   72,315     74,830     72,956     76,978  
                         
         

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Share and Per Share Data)
         
   

June 30,
2018

   June 30,
2017

ASSETS

        
Current assets:        
Cash and cash equivalents   $ 96,165     $ 101,954  
Accounts receivable, net   21,910     27,670  
Prepaid expenses and other current assets   10,509     12,061  
Prepaid income taxes   2,601     4,501  
Total current assets   131,185     146,186  
Property, equipment and leasehold improvements, net   9,806     13,400  
Computer software development costs, net   646     667  
Goodwill   75,590     51,248  
Intangible assets, net   35,310     20,789  
Non-current deferred tax assets   11,090     14,352  
Other non-current assets   1,297     1,300  
Total assets   $ 264,924     $ 247,942  

LIABILITIES AND STOCKHOLDERS' DEFICIT

        
Current liabilities:        
Accounts payable   $ 4,230     $ 5,467  
Accrued expenses and other current liabilities   39,515     48,149  
Income taxes payable   1,698     1,603  
Borrowings under credit agreement   170,000     140,000  
Current deferred revenue   286,845     272,024  
Total current liabilities   502,288     467,243  
Non-current deferred revenue   28,259     28,335  
Other non-current liabilities   18,492     13,148  
Commitments and contingencies (Note 15)        
Series D redeemable convertible preferred stock, $0.10 par value—Authorized—3,636 shares as of June 30, 2018 and 2017
Issued and outstanding—none as of June 30, 2018 and 2017		   —     —  
Stockholders' deficit:        

Common stock, $0.10 par value—Authorized—210,000,000 shares
Issued—103,130,300 shares at June 30, 2018 and 102,567,129 shares at June 30, 2017
Outstanding—71,186,701 shares at June 30, 2018 and 73,421,153 shares at June 30, 2017

   10,313     10,257  
Additional paid-in capital   715,475     687,479  
Retained earnings   305,208     156,520  
Accumulated other comprehensive income   1,388     1,459  
Treasury stock, at cost— 31,943,599 shares of common stock at June 30, 2018 and 29,145,976 shares at June 30, 2017   (1,316,499 )   (1,116,499 )
Total stockholders' deficit   (284,115 )   (260,784 )
Total liabilities and stockholders' deficit   $ 264,924     $ 247,942  
                 
         

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)
         
   

Three Months Ended
June 30,

  

Twelve Months Ended
June 30,
    2018   2017   2018   2017
Operating activities:                
Net income   $ 38,020     $ 54,352     $ 148,688     $ 162,196  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization   1,642     1,412     6,544     6,405  
Net foreign currency (gains) losses   (106 )   984     980     (1,036 )
Stock-based compensation expense   5,466     4,493     22,688     18,800  
Deferred income taxes   (1,274 )   (5,455 )   3,193     (4,286 )
Provision for (recovery from) bad debts   45     (26 )   1,418     199  
Tax benefits from stock-based compensation   —     3,621     —     5,965  
Excess tax benefits from stock-based compensation   —     (3,621 )   —     (5,965 )
Other non-cash operating activities   107     172     421     602  

Changes in assets and liabilities, excluding initial effects of acquisitions:

                
Accounts receivable   5,291     7,464     4,327     (7,480 )
Prepaid expenses, prepaid income taxes, and other assets   (1,087 )   (6,069 )   3,821     (2,421 )
Accounts payable, accrued expenses, income taxes payable and other liabilities   5,604     (16,018 )   1,156     (9,070 )
Deferred revenue   25,399     32,039     13,700     18,477  
Net cash provided by operating activities   79,107     73,348     206,936     182,386  

Investing activities:

                
Purchases of marketable securities   —     —     —     (683,748 )
Maturities of marketable securities   —     17,130     —     686,346  
Purchase of property, equipment and leasehold improvements   (114 )   (569 )   (331 )   (2,720 )
Payments for business acquisitions, net of cash acquired   —     —     (33,700 )   (36,171 )
Payments for capitalized computer software costs   (30 )   (279 )   (329 )   (405 )
Net cash (used in) provided by investing activities   (144 )   16,282     (34,360 )   (36,698 )
Financing activities:                
Exercise of stock options   6,064     1,381     13,466     9,273  
Repurchases of common stock   (50,684 )   (75,849 )   (205,049 )   (371,491 )
Payment of tax withholding obligations related to restricted stock   (2,484 )   (1,418 )   (7,896 )   (5,764 )
Deferred business acquisition payments   (6,049 )   —     (8,649 )   —  
Excess tax benefits from stock-based compensation   —     3,621     —     5,965  
Proceeds from credit agreement   —     —     30,000     —  
Payments of credit agreement issuance costs   —     —     (351 )   —  
Net cash used in financing activities   (53,153 )   (72,265 )   (178,479 )   (362,017 )
Effect of exchange rate changes on cash and cash equivalents   (720 )   37     114     (53 )
Increase (decrease) in cash and cash equivalents   25,090     17,402     (5,789 )   (216,382 )
Cash and cash equivalents, beginning of year   71,075     84,552     101,954     318,336  
Cash and cash equivalents, end of year   $ 96,165     $ 101,954     $ 96,165     $ 101,954  
                 
Supplemental disclosure of cash flow information:                
Income tax paid, net   $ 11,895     $ 23,794     $ 50,557     $ 65,536  
Interest paid   1,582     945     5,038     3,444  
                         
         

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Results of Operations and Cash Flows

(Dollars in Thousands, Except per Share Data)
         
   

Three Months Ended
June 30,

  

Twelve Months Ended
June 30,
    2018   2017   2018   2017

Total expenses

                
GAAP total expenses (a)   $ 75,254     $ 74,734     $ 289,873     $ 270,926  
Less:                
Stock-based compensation (b)   (5,466 )   (4,493 )   (22,688 )   (18,800 )
Non-capitalized acquired technology (e)   —     (1,900 )   —     (2,250 )
Amortization of intangibles   (653 )   (434 )   (2,231 )   (950 )
Litigation judgment   (141 )   —     (1,689 )   —  
Acquisition related fees   (15 )   (1,261 )   (721 )   (1,754 )

 

                
Non-GAAP total expenses   $ 68,979     $ 66,646     $ 262,544     $ 247,172  
                 

Income from operations

                
GAAP income from operations   $ 50,706     $ 48,948     $ 209,641     $ 212,016  
Plus:                
Stock-based compensation (b)   5,466     4,493     22,688     18,800  
Non-capitalized acquired technology (e)   —     1,900     —     2,250  
Amortization of intangibles   653     434     2,231     950  
Litigation judgment   141     —     1,689     —  
Acquisition related fees   15     1,261     721     1,754  
                 

Non-GAAP income from operations

   $ 56,981     $ 57,036     $ 236,970     $ 235,770  
                 

Net income

                
GAAP net income   $ 38,020     $ 54,352     $ 148,688     $ 162,196  
Plus:                
Stock-based compensation (b)   5,466     4,493     22,688     18,800  
Non-capitalized acquired technology (e)   —     1,900     —     2,250  
Amortization of intangibles   653     434     2,231     950  
Litigation judgment   141     —     1,689     —  
Acquisition related fees   15     1,261     721     1,754  
Less:                
Income tax effect on Non-GAAP items (c)   (1,763 )   (3,303 )   (7,679 )   (8,551 )
                 
Non-GAAP net income   $ 42,532     $ 59,137     $ 168,338     $ 177,399  
                 

Diluted income per share

                
GAAP diluted income per share   $ 0.53     $ 0.73     $ 2.04     $ 2.11  
Plus:                
Stock-based compensation (b)   0.07     0.05     0.32     0.24  
Non-capitalized acquired technology (e)   —     0.03     —     0.03  
Amortization of intangibles   0.01     0.01     0.03     0.01  
Litigation judgment   —     —     0.02     —  
Acquisition related fees   —     0.01     0.01     0.02  
Less:                
Income tax effect on Non-GAAP items (c)   (0.02 )   (0.04 )   (0.11 )   (0.11 )
                 
Non-GAAP diluted income per share   $ 0.59     $ 0.79     $ 2.31     $ 2.30  
                 
Shares used in computing Non-GAAP diluted income per share   72,315     74,830     72,956     76,978  
                 
                 
   

Three Months Ended
June 30,

   Twelve Months Ended
June 30,
    2018   2017   2018   2017

Free Cash Flow

                
GAAP cash flow from operating activities   $ 79,107     $ 73,348     $ 206,936     $ 182,386  
                 
Purchase of property, equipment and leasehold improvements   (114 )   (569 )   (331 )   (2,720 )
Capitalized computer software development costs   (30 )   (279 )   (329 )   (405 )
Non-capitalized acquired technology (e)   —     1,400     75     2,246  
Excess tax benefits from stock-based compensation (d)   —     3,621     —     5,965  
Acquisition related fee payments   280     —     1,148     448  

Litigation related payments

   260     (721 )   4,546     (721 )
Free Cash Flow   $ 79,503     $ 76,800     $ 212,045     $ 187,199  
                 
(a) GAAP total expenses                
    Three Months Ended
June 30,		   Twelve Months Ended
June 30,
    2018   2017   2018   2017
Total costs of revenue   $ 13,047     $ 12,114     $ 50,644     $ 47,466  
Total operating expenses   62,207     62,620     239,229     223,460  
GAAP total expenses   $ 75,254     $ 74,734     $ 289,873     $ 270,926  
                 
(b) Stock-based compensation expense was as follows:                
    Three Months Ended
June 30,		   Twelve Months Ended
June 30,
    2018   2017   2018   2017
Cost of services and other   $ 360     $ 371     $ 1,479     $ 1,477  
Selling and marketing   992     715     3,862     3,652  
Research and development   1,938     1,629     7,617     5,806  
General and administrative   2,176     1,778     9,730     7,865  
Total stock-based compensation   $ 5,466     $ 4,493     $ 22,688     $ 18,800  
                 
(c) The income tax effect on non-GAAP items for the three and twelve months ended June 30, 2018 is calculated utilizing the Company's blended statutory tax rate, of 28 percent. The income tax rate used for the three and twelve months ended June 30, 2018 reflects the impact of the Tax Cuts and Jobs Act signed into law on December 22, 2017, with an effective date of January 1, 2018. The income tax effect on non-GAAP items for the three and twelve months ended June 30, 2017 is calculated utilizing the Company's estimated federal and state tax rate.
                 
(d) Excess tax benefits are related to stock-based compensation tax deductions in excess of book compensation expense and reduce the Company’s income taxes payable. The Company adopted ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU No. 2016-09”) effective July 1, 2017. The Company adopted the cash flow presentation prospectively, and accordingly, excess tax benefits from stock-based compensation of $0.9 million and $3.0 million is presented as an operating activity as a component of net income for the three and twelve months ended June 30, 2018, respectively, while $3.6 million and $6.0 million of excess tax benefits from stock-based compensation is presented as a financing activity for the three and twelve months ended June 30, 2017, respectively.
                 
(e) In the twelve months ended June 30, 2017, the Company acquired technology that did not meet the accounting requirements for capitalization and therefore the cost of the acquired technology was expensed as research and development. The Company has excluded the expense of the acquired technology from non-GAAP operating income to be consistent with transactions where the acquired assets were capitalized. In the twelve months ended June 30, 2018 and 2017, the Company has excluded payments of $0.1 million and $2.2 million, respectively, for non-capitalized acquired technology (including $0.1 million and $0.5 million, respectively, of final payments related to non-capitalized acquired technology from prior fiscal periods) from free cash flow to be consistent with the treatment of other transactions where the acquired assets were capitalized.

 

Source: Aspen Technology, Inc.

Media Contact
AspenTech
David Grip, +1 781-221-5273
david.grip@aspentech.com
or
Investor Contact
ICR
Brian Denyeau, +1 646-277-1251
brian.denyeau@icrinc.com