Release Details

BEDFORD, Mass.--(BUSINESS WIRE)--Jan. 24, 2018-- Aspen Technology, Inc. (NASDAQ: AZPN), the asset optimization software company, today announced financial results for its second quarter of fiscal year 2018, ended December 31, 2017.

“AspenTech delivered solid second quarter fiscal 2018 financial results that exceeded our expectations from both a revenue and profitability perspective. We saw positive performance from owner-operator customers and growth from our Engineering and Manufacturing/Supply Chain suites,” said Antonio Pietri, President and Chief Executive Officer of AspenTech.

Pietri continued, “In addition, our APM business saw continued traction for each solution in the product suite. Our second quarter results have validated our belief that APM is a large opportunity that can greatly increase the value we deliver to our customers over time.”

Second Quarter Fiscal 2018 and 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 $469 million at the end of the second quarter of fiscal 2018, which increased 4.2% compared to the second quarter of fiscal 2017 and 1.7% sequentially.
• GAAP operating margin was 43.6%, compared to 46.7% in the second quarter of fiscal 2017. Non-GAAP operating margin was 49.8%, compared to 50.8% in the second quarter of fiscal 2017.
• AspenTech repurchased approximately 756,000 shares of its common stock for $50.0 million in the second quarter of fiscal 2018.

Summary of Second Quarter Fiscal Year 2018 Financial Results

AspenTech’s total revenue of $124.9 million included:

• Subscription and software revenue was $117.7 million in the second quarter of fiscal 2018, an increase from $112.9 million in the second quarter of fiscal 2017.
• Services and other revenue was $7.2 million in the second quarter of fiscal 2018, compared to $7.0 million in the second quarter of fiscal 2017.

For the quarter ended December 31, 2017, AspenTech reported income from operations of $54.5 million, compared to income from operations of $56.1 million for the quarter ended December 31, 2016.

Net income was $38.1 million for the quarter ended December 31, 2017, leading to net income per share of $0.52, compared to net income per share of $0.48 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, litigation judgments, acquisition related fees and non-capitalized acquired technology, was $62.2 million for the second quarter of fiscal 2018, compared to non-GAAP income from operations of $60.9 million in the same period last fiscal year. Non-GAAP net income was $43.0 million, or $0.59 per share, for the second quarter of fiscal 2018, compared to non-GAAP net income of $40.2 million, or $0.52 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 $48.7 million and borrowings of $151.0 million at December 31, 2017.

During the second quarter, the company generated $42.4 million in cash flow from operations and $42.2 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.

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, January 24, 2018, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the second quarter fiscal year 2018 as well as the company’s business outlook.

The live dial-in number is (866) 604-6127 or (443) 961-0460, conference ID code 6562029. 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 (855) 859-2056 or (404) 537-3406, conference ID code 6562029, through February 24, 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.

Forward-Looking Statements

The third paragraph of this press release contains 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, without limitation: AspenTech’s failure to increase usage and product adoption of aspenONE offerings or grow the aspenONE APM business, and failure to continue to provide innovative, market-leading solutions; the demand for, or usage of, aspenONE software declines for any reason, including declines due to adverse changes in the capital-intensive process industries; unfavorable economic and market conditions or a lessening demand in the market for asset process optimization software; 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 expressly disclaims any obligation to update forward-looking statements after the date of this press release.

© 2018 Aspen Technology, Inc. AspenTech, aspenONE and the Aspen leaf logo are registered trademarks of Aspen Technology, Inc. All rights reserved. All other trademarks are property of their respective owners.

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited in thousands, except per share data)
			Three Months Ended December 31,										Six Months Ended December 31,
			2017					2016					2017					2016
Revenue:
Subscription and software			$	117,658				$	112,916				$	233,414				$	226,360
Services and other			7,244					7,017					14,269					13,623
Total revenue			124,902					119,933					247,683					239,983
Cost of revenue:
Subscription and software			5,486					5,176					11,269					10,245
Services and other			6,603					6,403					13,552					12,839
Total cost of revenue			12,089					11,579					24,821					23,084
Gross profit			112,813					108,354					222,862					216,899
Operating expenses:
Selling and marketing			24,380					21,829					47,951					43,854
Research and development			19,790					18,597					39,279					37,229
General and administrative			14,178					11,863					27,854					25,020
Total operating expenses			58,348					52,289					115,084					106,103
Income from operations			54,465					56,065					107,778					110,796
Interest income			40					216					181					488
Interest (expense)			(1,261		)			(892		)			(2,467		)			(1,762		)
Other (expense) income, net			(238		)			697					(854		)			1,344
Income before provision for income taxes			53,006					56,086					104,638					110,866
Provision for income taxes			14,928					19,076					31,805					38,855
Net income			$	38,078				$	37,010				$	72,833				$	72,011
Net income per common share:
Basic			$	0.53				$	0.48				$	1.00				$	0.92
Diluted			$	0.52				$	0.48				$	0.99				$	0.92
Weighted average shares outstanding:
Basic			72,342					76,905					72,683					77,977
Diluted			73,036					77,318					73,333					78,356

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited in thousands, except share data)
			December 31, 2017					June 30, 2017
ASSETS
Current assets:
Cash and cash equivalents			$	48,703				$	101,954
Accounts receivable, net			24,208					27,670
Prepaid expenses and other current assets			10,420					12,061
Prepaid income taxes			5,408					4,501
Total current assets			88,739					146,186
Property, equipment and leasehold improvements, net			11,483					13,400
Computer software development costs, net			766					667
Goodwill			55,703					51,248
Intangible assets, net			27,737					20,789
Non-current deferred tax assets			10,093					14,352
Other non-current assets			1,275					1,300
Total assets			$	195,796				$	247,942
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable			$	3,996				$	5,467
Accrued expenses and other current liabilities			42,753					48,149
Income taxes payable			17					1,603
Borrowings under credit agreement			151,000					140,000
Current deferred revenue			232,653					272,024
Total current liabilities			430,419					467,243
Non-current deferred revenue			26,025					28,335
Other non-current liabilities			13,859					13,148
Commitments and contingencies (Note 15)
Series D redeemable convertible preferred stock, $0.10 par value— Authorized— 3,636 shares as of December 31, 2017 and June 30, 2017 Issued and outstanding— none as of December 31, 2017 and June 30, 2017			—					—
Stockholders’ deficit:
Common stock, $0.10 par value— Authorized—210,000,000 shares Issued— 102,775,919 shares at December 31, 2017 and 102,567,129 shares at June 30, 2017 Outstanding— 72,034,435 shares at December 31, 2017 and 73,421,153 shares at June 30, 2017			10,278					10,257
Additional paid-in capital			699,428					687,479
Retained earnings			229,353					156,520
Accumulated other comprehensive income			2,933					1,459
Treasury stock, at cost—30,741,484 shares of common stock at December 31, 2017 and 29,145,976 shares at June 30, 2017			(1,216,499		)			(1,116,499		)
Total stockholders’ deficit			(274,507		)			(260,784		)
Total liabilities and stockholders’ deficit			$	195,796				$	247,942

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited in thousands)
			Three Months Ended December 31,										Six Months Ended December 31,
			2017					2016					2017					2016
Cash flows from operating activities:
Net income			$	38,078				$	37,010				$	72,833				$	72,011
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			1,605					1,509					3,358					3,300
Net foreign currency (gains) losses			54					(1,554		)			990					(2,301		)
Stock-based compensation			5,455					4,671					11,869					9,630
Deferred income taxes			4,329					228					4,296					182
Provision for (recovery from) bad debts			(48		)			63					(28		)			56
Tax benefits from stock-based compensation			—					448					—					1,032
Excess tax benefits from stock-based compensation			—					(448		)			—					(1,032		)
Other non-cash operating activities			207					(50		)			207					40
Changes in assets and liabilities:
Accounts receivable			4,160					3,849					3,656					2,494
Prepaid expenses, prepaid income taxes, and other assets			(1,333		)			1,776					959					3,661
Accounts payable, accrued expenses, income taxes payable and other liabilities			(8,556		)			(7,436		)			(1,792		)			5,084
Deferred revenue			(1,549		)			(12,899		)			(41,586		)			(40,740		)
Net cash provided by operating activities			42,402					27,167					54,762					53,417
Cash flows from investing activities:
Purchases of marketable securities			—					(490,000		)			—					(683,748		)
Maturities of marketable securities			—					560,195					—					613,379
Purchases of property, equipment and leasehold improvements			(33		)			(476		)			(156		)			(1,374		)
Payments for business acquisitions, net of cash acquired			(10,800		)			(30,771		)			(10,800		)			(36,171		)
Payments for capitalized computer software costs			(291		)			(49		)			(356		)			(100		)
Net cash used in investing activities			(11,124		)			38,899					(11,312		)			(108,014		)
Cash flows from financing activities:
Exercises of stock options			1,137					1,754					3,548					4,843
Repurchases of common stock			(49,928		)			(47,963		)			(105,037		)			(199,584		)
Payments of tax withholding obligations related to restricted stock			(1,817		)			(1,489		)			(3,467		)			(2,786		)
Deferred business acquisition payments			(2,000		)			—					(2,600		)
Excess tax benefits from stock-based compensation			—					448					—					1,032
Proceeds from credit agreement			11,000					—					11,000					—
Payments of credit agreement issuance costs			—					—					(351		)			—
Net cash used in financing activities			(41,608		)			(47,250		)			(96,907		)			(196,495		)
Effect of exchange rate changes on cash and cash equivalents			50					(167		)			206					(218		)
Decrease in cash and cash equivalents			(10,280		)			18,649					(53,251		)			(251,310		)
Cash and cash equivalents, beginning of period			58,983					48,377					101,954					318,336
Cash and cash equivalents, end of period			$	48,703				$	67,026				$	48,703				$	67,026
Supplemental disclosure of cash flow information:
Income taxes paid, net			$	28,499				$	23,761				$	29,742				$	25,000
Interest paid			1,071					729					2,039					1,579

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES Reconciliation of GAAP to Non-GAAP Results of Operations and Cash Flows (Unaudited in thousands, except per share data)
			Three Months Ended December 31,										Six Months Ended December 31,
			2017					2016					2017					2016
Total expenses
GAAP total expenses (a)			$	70,437				$	63,868				$	139,905				$	129,187
Less:
Stock-based compensation (b)			(5,455		)			(4,671		)			(11,869		)			(9,630		)
Non-capitalized acquired technology (e)			—					—					—					(350		)
Amortization of intangibles			(526		)			(56		)			(1,052		)			(111		)
Litigation judgment			(1,548		)			—					(1,548		)			—
Acquisition related fees			(198		)			(99		)			(328		)			(461		)
Non-GAAP total expenses			$	62,710				$	59,042				$	125,108				$	118,635
Income from operations
GAAP income from operations			$	54,465				$	56,065				$	107,778				$	110,796
Plus:
Stock-based compensation (b)			5,455					4,671					11,869					9,630
Non-capitalized acquired technology (e)			—					—					—					350
Amortization of intangibles			526					56					1,052					111
Litigation judgment			1,548					—					1,548					—
Acquisition related fees			198					99					328					461
Non-GAAP income from operations			$	62,192				$	60,891				$	122,575				$	121,348
Net income
GAAP net income			$	38,078				$	37,010				$	72,833				$	72,011
Plus:
Stock-based compensation (b)			5,455					4,671					11,869					9,630
Non-capitalized acquired technology (e)			—					—					—					350
Amortization of intangibles			526					56					1,052					111
Litigation judgment			1,548					—					1,548					—
Acquisition related fees			198					99					328					461
Less:
Income tax effect on Non-GAAP items (c)			(2,782		)			(1,649		)			(5,327		)			(3,665		)
Non-GAAP net income			$	43,023				$	40,187				$	82,303				$	78,898
Diluted income per share
GAAP diluted income per share			$	0.52				$	0.48				$	0.99				$	0.92
Plus:
Stock-based compensation (b)			0.07					0.06					0.16					0.12
Non-capitalized acquired technology (e)			—					—					—					0.01
Amortization of intangibles			0.01					—					0.01					—
Litigation judgment			0.02					—					0.02					—
Acquisition related fees			0.01					—					0.01					0.01
Less:
Income tax effect on Non-GAAP items (c)			(0.04		)			(0.02		)			(0.07		)			(0.05		)
Non-GAAP diluted income per share			$	0.59				$	0.52				$	1.12				$	1.01
Shares used in computing Non-GAAP diluted income per share			73,036					77,318					73,333					78,356
			Three Months Ended December 31,										Six Months Ended December 31,
			2017					2016					2017					2016
Free Cash Flow
GAAP cash flow from operating activities			$	42,402				$	27,167				$	54,762				$	53,417
Purchase of property, equipment and leasehold improvements			(33		)			(476		)			(156		)			(1,374		)
Capitalized computer software development costs			(291		)			(49		)			(356		)			(100		)
Non-capitalized acquired technology (e)			—					—					75					846
Excess tax benefits from stock-based compensation (d)			—					448					—					1,032
Acquisition related fee payments			88					413					88					413
Free Cash Flow			$	42,166				$	27,503				$	54,413				$	54,234
(a) GAAP total expenses
			Three Months Ended December 31,										Six Months Ended December 31,
			2017					2016					2017					2016
Total costs of revenue			$	12,089				$	11,579				$	24,821				$	23,084
Total operating expenses			58,348					52,289					115,084					106,103
GAAP total expenses			$	70,437				$	63,868				$	139,905				$	129,187
(b) Stock-based compensation expense was as follows:
			Three Months Ended December 31,										Six Months Ended December 31,
			2017					2016					2017					2016
Cost of services and other			$	324				$	374				$	774				$	743
Selling and marketing			1,006					1,010					1,891					1,965
Research and development			1,891					1,495					3,788					2,558
General and administrative			2,234					1,792					5,416					4,364
Total stock-based compensation			$	5,455				$	4,671				$	11,869				$	9,630

(c) The income tax effect on non-GAAP items for the three and six months ended December 31, 2017 is calculated utilizing the Company's federal and state tax rate in effect as of the beginning of the fiscal year, of 36 percent. The income tax effect on non-GAAP items for the three and six months ended December 31, 2016 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 $0.4 million and $1.0 million is presented as an operating activity as a component of net income for the three and six months ended December 31, 2017, respectively, while $0.4 million and $1.0 million of excess tax benefits from stock-based compensation is presented as a financing activity for the three and six months ended December 31, 2016, respectively.

(e) In the six months ended December 31, 2016, 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 six months ended December 31, 2017 and 2016, the Company has excluded payments of $0.1 million and $0.8 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.

 

View source version on businesswire.com: http://www.businesswire.com/news/home/20180124006118/en/

Source: Aspen Technology, Inc.

Media Contact
AspenTech
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