AspenTech Logo

News Release

View printer-friendly version
<< Back

Aspen Technology Announces Financial Results for Second-Quarter 2006; Strong Top Line Performance Drives Highest Operating Profit and Margin since Fiscal 1998

02/07/06

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Feb. 7, 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 second quarter, ended December 31, 2005.

For the quarter ended December 31, 2005, AspenTech reported total revenue of $76.4 million, an increase of 7% from the prior year period. Strong top line results were driven by license revenue of $41.7 million, an increase of 13% from the prior year period. Services revenue was $34.7 million, a 1% decrease from the $34.9 million in the prior year. Excluding services revenue of $1.0 million from the operator training business that was sold in December 2004, services revenue would have been $33.9 million on a non-GAAP basis in the prior year period, yielding an increase of 2% on a year-over-year basis.

Mark Fusco, President and CEO of AspenTech, stated, "In 2005, AspenTech delivered on each of the strategic objectives presented when I took over as CEO. These accomplishments were the result of the hard work of our employees and the loyalty of our blue chip customer base." Fusco added, "After re-aligning our cost and organizational structure, we successfully returned the Company to top-line growth in all parts of our business, including our best performance to date with our aspenONE(TM) solutions suite. Our end markets remain strong, and our unique suite of integrated aspenONE solutions, industry leading domain expertise and solid financial base position us well to capitalize on the growing demand in our core vertical markets to optimize plant operations."

For the quarter ended December 31, 2005, AspenTech's income from operations and net income applicable to common shareholders, determined in accordance with generally accepted accounting principles (GAAP), were $8.9 million and $4.3 million, respectively. This represents an increase from a GAAP loss from operations of ($4.7) million and net loss applicable to common shareholders of ($6.7) million in the same period last year. GAAP net income per share applicable to common shareholders on a diluted basis was $0.08 for the quarter ended December 31, 2005, compared with a net loss per share applicable to common shareholders of ($0.16) in the same period last year.

For the quarter ended December 31, 2005, pro forma income from operations, which excludes items covered in the attached non-GAAP reconciliation table, was $13.3 million or an operating margin of 17%. For the quarter ended December 31, 2005, pro forma net income came in at $12.5 million, the highest level since the Company went public in the fiscal year 1995, leading to pro forma earnings per share of $0.14, an increase of 250% compared to the prior year period.

A reconciliation of GAAP to pro forma results has been provided in the financial statement tables included in the press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

Charles Kane, CFO of AspenTech, stated, "The December quarter was evidence of the operating leverage potential in AspenTech's business model. For the first time, we saw the benefit of our streamlined cost structure combined with a strong top line performance." Kane added, "At the mid-point of the fiscal year, we are pleased with the operating and financial performance of the business, with all key operating metrics improving on a year-over-year basis, and continued strengthening of our balance sheet and cash flow."

Conference Call and Webcast

AspenTech will host a conference call and webcast today, February 7, 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: 4298806. 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 4298806, for four days, beginning at 6:00 pm EST on February 7, 2006.

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 this pro forma measure helps indicate underlying trends in the Company's business, and uses this pro forma measure 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 financial results, to GAAP financial results, is included in the attached condensed consolidated financial statements.

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. AspenTech's integrated aspenONE 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.

The third paragraph of this press release includes certain "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 plan to improve operational performance may not be implemented effectively; AspenTech has identified material weaknesses in its internal controls with respect to software license revenue recognition and other matters, that, if not remedied effectively, could result in material misstatements; risks around securities litigation and investigations; AspenTech's lengthy sales cycle 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; the possibility of new accounting standards or the interpretation of existing accounting standards affecting our financial results; 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; challenges associated with international operations; 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 current intention to update forward-looking statements after the date of this press release.

                        STATEMENT OF OPERATIONS
                 (in thousands, except per share data)

                                    Three Months       Six Months
                                        Ended             Ended
                                  Dec. 31, Dec. 31, Dec. 31, Dec. 31,
                                     2005     2004     2005     2004
                                   -------  -------  -------  -------
                                              (Unaudited)
REVENUES:
 Software licenses                 $41,690  $36,732  $66,007  $62,005
 Service and other                  34,701   34,893   70,437   72,890
                                   -------  -------  -------  -------
  Total revenues                    76,391   71,625  136,444  134,895
                                   -------  -------  -------  -------

COST OF REVENUES:
 Cost of software licenses           4,244    4,731    8,026    8,672
 Cost of service and other          17,859   21,913   35,103   44,021
 Amortization of technology
  related intangible assets          1,773    1,778    3,555    3,552
                                   -------  -------  -------  -------
  Total cost of revenues            23,876   28,422   46,684   56,245
                                   -------  -------  -------  -------

   Gross profit                     52,515   43,203   89,760   78,650

OPERATING COSTS:
 Selling and marketing              20,624   23,401   39,271   45,776
 Research and development           11,771   11,574   21,905   23,757
 General and administrative
  (includes litigation costs,
  fees associated with the
  audit committee review and
  one-time contract termination
  costs of $0, $4,460, $1,900
  and $7,925 for the three months
  ended December 31, 2005 and 2004
  and six months ended December 31,
  2005 and 2004, respectively)(1)    9,884   12,694   20,069   23,121
 Restructuring charges                 995      219    3,194   21,727
 Loss (gain) on sales and
  disposals of assets                  316        5      377     (357)
                                   -------  -------  -------  -------
  Total operating costs             43,590   47,893   84,816  114,024
                                   -------  -------  -------  -------

 Income (loss) from operations       8,925   (4,690)   4,944  (35,374)

 Other income (expense), net         1,055      351      392      (42)
 Interest income, net                  244      657      395    1,311
                                   -------  -------  -------  -------

 Income (loss) before income tax
  benefit (provision)               10,224   (3,682)   5,731  (34,105)

 Income tax benefit (provision)     (2,080)     573   (2,720)     913
                                   -------  -------  -------  -------

 Net income (loss)                   8,144   (3,109)   3,011  (33,192)

 Accretion of preferred stock
  discount and dividend             (3,843)  (3,589)  (7,621)  (7,117)
                                   -------  -------  -------  -------

 Net income (loss) applicable to
  common shareholders              $ 4,301  $(6,698) $(4,610)$(40,309)
                                   =======  =======  =======  =======

EARNINGS PER SHARE:
 Net income (loss) per share
  applicable to common
  shareholders - Basic             $  0.10  $ (0.16) $ (0.11) $ (0.96)
                                   =======  =======  =======  =======
 Net income (loss) per share
  applicable to common
  shareholders - Diluted           $  0.08  $ (0.16) $ (0.11) $ (0.96)
                                   =======  =======  =======  =======

 Weighted average shares
  outstanding
  - Basic                           43,743   42,153   43,491   41,974
                                   =======  =======  =======  =======
 Weighted average shares
  outstanding
  - Diluted                         52,765   42,153   43,491   41,974
                                   =======  =======  =======  =======

PRO FORMA (NON-GAAP) EARNINGS
 PER SHARE:
    Pro forma (non-GAAP) net income (loss) excludes Accretion of
    preferred stock discount and dividend, Amortization of technology
    related intangible assets, Stock-based compensation costs,
    Litigation costs, Fees associated with the audit committee review,
    one-time contract termination costs, Restructuring charges,
    reversal of a sales tax reserve accrual, 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)                 $12,483  $ 3,348  $13,972  $  (322)
                                   =======  =======  =======  =======

 Diluted net income (loss)
  per share                        $  0.14  $  0.04  $  0.16  $ (0.00)
                                   =======  =======  =======  =======

 Weighted average shares
 outstanding
  - diluted                         89,102   86,651   88,126   73,589
                                   =======  =======  =======  =======

(1) These parenthetical references will not be presented in our Form
    10-Q.
 Supplemental information -

                                    Three Months       Six Months
                                        Ended             Ended
                                  Dec. 31, Dec. 31, Dec. 31,  Dec. 31,
                                     2005     2004     2005     2004
                                  -------- -------- -------- --------
                                              (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         $   302  $     -  $   532  $     -
 Selling and marketing                 550        -      958        -
 Research and development              274        -      436        -
 General and administrative            805        -    1,446        -
                                  -------- -------- -------- --------

 Total stock-based compensation    $ 1,931  $     -  $ 3,372  $     -
                                  ======== ======== ======== ========

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

Total expenses (cost of revenues
 and operating costs)              $67,466  $76,315 $131,500 $170,269

 Amortization of technology
  related intangible assets         (1,773)  (1,778)  (3,555)  (3,552)
 Stock-based compensation           (1,931)       -   (3,372)       -
 Restructuring charges                (995)    (219)  (3,194) (21,727)
 Sales-tax reserve accrual,
  included in Selling and
  Marketing costs                      360        -    1,060        -
 Litigation costs, included
  in General and Administrative
  costs                                  -     (300)  (1,900)  (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)
 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)            $ 63,127 $ 69,858 $120,539 $137,399
                                  ======== ======== ======== ========


 Reconciliation of Income (loss)
  from operations to pro forma
  (non-GAAP) Income from operations

Income (loss) from operations     $  8,925 $ (4,690) $ 4,944 $(35,374)
 Adjustments to income (loss)
  from operations
  Net effect of adjustments to
   cost of revenues and
   operating costs                   4,339    6,457   10,961   32,870
                                  -------- -------- -------- --------

 Pro forma (non-GAAP) Income
  from operations                 $ 13,264 $  1,767  $15,905 $ (2,504)
                                  ======== ======== ======== ========


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

Net income (loss) applicable to
 common shareholders              $  4,301 $ (6,698) $(4,610)$(40,309)
 Adjustments to net income (loss)
  applicable to common
  shareholders
  Net effect of adjustments to
   cost of revenues and
   operating costs                   4,339    6,457   10,961   32,870
  Preferred stock discount and
   dividend accretion                3,843    3,589    7,621    7,117
                                  -------- -------- -------- --------

 Pro forma (non-GAAP) net
  income (loss)                   $ 12,483 $  3,348 $ 13,972 $   (322)
                                  ======== ======== ======== ========

                 CONSOLIDATED CONDENSED BALANCE SHEETS
                            (in thousands)

                                                    Dec. 31,  June 30,
                                                      2005      2005
                                                   --------- ---------
ASSETS                                                 (Unaudited)
Current assets:
  Cash and cash equivalents                         $57,458   $68,149
  Accounts receivable, net                           44,615    52,254
  Unbilled services                                   9,533     9,826
  Current portion of long-term installments
   receivable, net                                   10,632     5,355
  Deferred tax asset                                    702       692
  Prepaid expenses and other current assets           9,115    11,483
                                                   --------- ---------

     Total current assets                           132,055   147,759
                                                   --------- ---------

Long-term installments receivable, net               28,746    19,425
Retained interest in sold receivables                17,145    16,667
Equipment and leasehold improvements, net             9,293    11,388
Computer software development costs, net             15,919    17,411
Intangible assets, net                               23,251    26,852
Purchased intellectual property, net                    447       730
Deferred tax asset                                    1,293     1,354
Other assets                                          2,536     2,656
                                                   --------- ---------

  Total assets                                     $230,685  $244,242
                                                   ========= =========


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Current portion of long-term debt                $    502  $  1,042
  Accounts payable and accrued expenses              65,936    84,407
  Unearned revenue                                   30,322    23,480
  Deferred revenue                                   27,213    34,854
                                                   --------- ---------
    Total current liabilities                       123,973   143,783
                                                   --------- ---------

Long-term debt, less current maturities                 234       338
Deferred revenue, less current portion                1,156     2,093
Deferred tax liability                                2,780     2,760
Other liabilities                                    22,237    23,143

Redeemable preferred stock                          128,831   121,210

Total stockholders' equity (deficit)                (48,526)  (49,085)
                                                   --------- ---------

  Total liabilities and stockholders' equity
   (deficit)                                       $230,685  $244,242
                                                   ========= =========

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

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

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