Aspen Technology Announces Financial Results for the Third Quarter of Fiscal 2019

April 24, 2019
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BEDFORD, Mass.--(BUSINESS WIRE)--Apr. 24, 2019-- Aspen Technology, Inc. (NASDAQ: AZPN), the asset optimization software company, today announced financial results for its third quarter of fiscal year 2019 ended March 31, 2019.

“AspenTech’s strong third quarter results were highlighted by annual spend growth of 9.7% year-over-year and positive growth contributions from each product suite and geography,” said Antonio Pietri, President and Chief Executive Officer of Aspen Technology. “Our performance benefited from investments in our strategic growth initiatives in recent quarters, an improving macroeconomic outlook for our Engineering & Construction and upstream customers, and strong execution by the AspenTech team.”

Pietri continued, “Our APM business had a record annual spend quarter as customers increasingly recognized the value predictive and prescriptive maintenance can have in improving their asset operations. We also saw broadening adoption within the APM suite, including the first site licenses for Aspen ProMV, our multivariate analysis solution. We believe our strong APM performance is indicative of the substantial opportunity for the APM suite and our strengthening competitive position in this market.”

Third Quarter Fiscal 2019 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 $526 million at the end of the third quarter of fiscal 2019, which increased 9.7% compared to the third quarter of fiscal 2018 and 2.6% sequentially.
  • AspenTech repurchased approximately 800,000 shares of its common stock for $75 million in the third quarter of fiscal 2019.

Summary of Third Quarter Fiscal Year 2019 Financial Results

AspenTech’s total revenue of $148 million included:

  • License revenue, which represents the portion of a term license agreement allocated to the initial license,was $98.5 million in the third quarter of fiscal 2019, compared to $79.1 million in the third quarter of fiscal 2018.
  • Maintenance revenue, which represents the portion of the term license agreement related to on-going support and the right to future product enhancements,was $41.9 million in the third quarter of fiscal 2019, compared to $40.9 million in the third quarter of fiscal 2018.
  • Services and other revenue was $7.6 million in the third quarter of fiscal 2019, compared to $7.8 million in the third quarter of fiscal 2018.

For the quarter ended March 31, 2019, AspenTech reported income from operations of $70.8 million, compared to income from operations of $53.6 million for the quarter ended March 31, 2018.

Net income was $61.6 million for the quarter ended March 31, 2019, leading to net income per share of $0.88, compared to net income per share of $0.61 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 $78.3 million for the third quarter of fiscal 2019, compared to non-GAAP income from operations of $59.9 million in the same period last fiscal year. Non-GAAP net income was $67.5 million, or $0.96 per share, for the third quarter of fiscal 2019, compared to non-GAAP net income of $49.0 million, or $0.67 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 $65.6 million and borrowings of $220 million at March 31, 2019.

During the third quarter, the company generated $90.0 million in cash flow from operations and $89.1 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, and other nonrecurring items, such as acquisition 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 Aspen Technology’s business. As the result of adoption of new licensing models, management believes that a number of Aspen Technology’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 Aspen Technology’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 Aspen Technology’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

Aspen Technology will host a conference call and webcast today, April 24, 2019, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the third quarter fiscal year 2019 as well as the company’s business outlook. The live dial-in number is (833) 713-6081 or (702) 374-0603, conference ID code 4067052. Interested parties may also listen to a live webcast of the call by logging on to the Investor Relations section of Aspen Technology’s website, http://ir.aspentech.com/events-and-presentations, and clicking on the “webcast” link. A replay of the call will be archived on Aspen Technology’s website and will also be available via telephone at (855) 859-2056 or (404) 537-3406, conference ID code 4067052, through May 24, 2019.

About Aspen Technology

Aspen Technology (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 safer, greener, longer and faster. 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 Aspen Technology’s (AspenTech) 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 process or other capital-intensive industries; unfavorable economic and market conditions or a lessening demand in the market for asset process optimization software; risks of foreign operations or transacting business with customers outside the United States; risks of competition 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.

© 2019 Aspen Technology, Inc. AspenTech, aspenONE, the Aspen leaf logo, Aspen, Aspen ProMV and Aspen Mtell are trademarks of Aspen Technology, Inc. All rights reserved.

Source: Aspen Technology, Inc.

 

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited in Thousands, Except per Share Data)
               
       

Three Months Ended
March 31,

    

Nine Months Ended
March 31,
        2019     2018     2019     2018
              As Adjusted           As Adjusted
Revenue:                          
License       $ 98,493       $ 79,073       $ 255,616       $ 214,938  
Maintenance       41,878       40,897       125,955       121,890  
Services and other       7,613       7,788       21,005       22,947  
Total revenue       147,984       127,758       402,576       359,775  
Cost of revenue:                          
License       1,658       1,279       5,142       3,743  
Maintenance       4,962       4,259       14,241       13,061  
Services and other       7,740       7,238       22,943       20,793  
Total cost of revenue       14,360       12,776       42,326       37,597  
Gross profit       133,624       114,982       360,250       322,178  
Operating expenses:                          
Selling and marketing       27,410       25,246       80,532       72,690  
Research and development       20,520       21,584       61,893       60,863  
General and administrative       14,863       14,533       46,246       49,188  
Total operating expenses       62,793       61,363       188,671       182,741  
Income from operations       70,831       53,619       171,579       139,437  
Interest income       6,835       6,304       21,389       18,849  
Interest (expense)       (2,350 )     (1,485 )     (6,328 )     (3,952 )
Other (expense), net       (34 )     (104 )     (485 )     (958 )
Income before income taxes       75,282       58,334       186,155       153,376  
Provision for (benefit from) income taxes       13,695       13,829       27,286       (63,681 )
Net income       $ 61,587       $ 44,505       $ 158,869       $ 217,057  
Net income per common share:                          
Basic       $ 0.89       $ 0.62       $ 2.26       $ 3.00  
Diluted       $ 0.88       $ 0.61       $ 2.23       $ 2.97  
Weighted average shares outstanding:                          
Basic       69,423       71,828       70,286       72,402  
Diluted       70,160       72,663       71,142       73,136  
               

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited in Thousands, Except Share and Per Share Data)
               
       

March 31,
2019

     June 30,
2018
              As Adjusted
ASSETS              
Current assets:              
Cash and cash equivalents       $ 65,592       $ 96,165  
Accounts receivable, net       45,293       41,810  
Current contract assets       314,745       304,378  
Contract costs       24,325       20,500  
Prepaid expenses and other current assets       11,124       10,509  
Prepaid income taxes       1,573       2,601  
Total current assets       462,652       475,963  
Property, equipment and leasehold improvements, net       7,589       9,806  
Computer software development costs, net       1,452       646  
Goodwill       73,534       75,590  
Intangible assets, net       31,756       35,310  
Non-current contract assets       358,709       340,622  
Deferred tax assets       1,696       11,090  
Other non-current assets       1,279       1,297  
Total assets       $ 938,667       $ 950,324  
LIABILITIES AND STOCKHOLDERS’ EQUITY              
Current liabilities:              
Accounts payable       $ 4,023       $ 4,230  
Accrued expenses and other current liabilities       42,746       39,515  
Income taxes payable       35,582       1,698  
Borrowings under credit agreement       220,000       170,000  
Current deferred revenue       24,415       15,150  
Total current liabilities       326,766       230,593  
Non-current deferred revenue       19,312       12,354  
Deferred income taxes       154,901       214,125  
Other non-current liabilities       12,403       17,068  
Commitments and contingencies (Note 16)              
Series D redeemable convertible preferred stock, $0.10 par value—
Authorized— 3,636 shares as of March 31, 2019 and June 30, 2018
Issued and outstanding— none as of March 31, 2019 and June 30, 2018		       —       —  
Stockholders’ equity:              
Common stock, $0.10 par value— Authorized—210,000,000 shares
Issued— 103,478,590 shares at March 31, 2019 and 103,130,300 shares at June 30, 2018
Outstanding— 69,108,515 shares at March 31, 2019 and 71,186,701 shares at June 30, 2018		       10,348       10,313  
Additional paid-in capital       730,830       715,475  
Retained earnings       1,224,377       1,065,507  
Accumulated other comprehensive income       1,229       1,388  
Treasury stock, at cost—34,370,075 shares of common stock at March 31, 2019 and 31,943,599 shares at June 30, 2018       (1,541,499 )     (1,316,499 )
Total stockholders’ equity       425,285       476,184  
Total liabilities and stockholders’ equity       $ 938,667       $ 950,324  
 

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited in Thousands)
               
       

Three Months Ended
March 31,

     Nine Months Ended
March 31,
        2019     2018     2019     2018
              As Adjusted           As Adjusted
Cash flows from operating activities:                          
Net income       $ 61,587       $ 44,505       $ 158,869       $ 217,057  
Adjustments to reconcile net income to net cash provided by operating activities:                          
Depreciation and amortization       2,014       1,544       6,063       4,902  
Net foreign currency (gains) losses       (295 )     96       23       1,086  
Stock-based compensation       6,254       5,353       21,454       17,222  
Deferred income taxes       (2,373 )     (32,662 )     (49,847 )     (123,443 )
Provision for (recovery from) bad debts       (353 )     1,401       474       1,373  
Other non-cash operating activities       124       107       341       314  
Changes in assets and liabilities:                          
Accounts receivable       12,281       1,762       (4,183 )     1,429  
Contract assets       14,531       33,160       (27,397 )     (7,767 )
Contract costs       (1,279 )     (592 )     (3,825 )     (651 )
Prepaid expenses, prepaid income taxes, and other assets       (1,543 )     3,949       201       4,908  
Accounts payable, accrued expenses, income taxes payable and other liabilities       (4,738 )     (2,656 )     32,980       (4,448 )
Deferred revenue       3,829       17,100       17,983       15,847  
Net cash provided by operating activities       90,039       73,067       153,136       127,829  
Cash flows from investing activities:                          
Purchases of property, equipment and leasehold improvements       (26 )     (61 )     (206 )     (217 )
Payments for business acquisitions, net of cash       —       (22,900 )     —       (33,700 )
Payments for capitalized computer software costs       (905 )     57       (1,094 )     (299 )
Net cash used in investing activities       (931 )     (22,904 )     (1,300 )     (34,216 )
Cash flows from financing activities:                          
Exercises of stock options       1,415       3,854       5,881       7,402  
Repurchases of common stock       (76,759 )     (49,328 )     (224,182 )     (154,365 )
Payments of tax withholding obligations related to restricted stock       (2,262 )     (1,945 )     (11,916 )     (5,412 )
Deferred business acquisition payments       (500 )     —       (1,700 )     (2,600 )
Proceeds from credit agreement       —       19,000       50,000       30,000  
Payments of credit agreement issuance costs       —       —       —       (351 )
Net cash used in financing activities       (78,106 )     (28,419 )     (181,917 )     (125,326 )
Effect of exchange rate changes on cash and cash equivalents       162       628       (492 )     834  
Increase (decrease) in cash and cash equivalents       11,164       22,372       (30,573 )     (30,879 )
Cash and cash equivalents, beginning of period       54,428       48,703       96,165       101,954  
Cash and cash equivalents, end of period       $ 65,592       $ 71,075       $ 65,592       $ 71,075  
                           
Supplemental disclosure of cash flow information:                          
Income taxes paid, net       $

21,296

       $ 8,920       $

39,123

       $ 38,662  
Interest paid       2,187       1,417       5,728       3,456  
               

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
March 31,		     Nine Months Ended
March 31,
        2019     2018     2019     2018
              As Adjusted           As Adjusted

Total expenses

                          
GAAP total expenses (a)       $ 77,153       $ 74,139       $ 230,997       $ 220,338  
Less:                          
Stock-based compensation (b)       (6,254 )     (5,353 )     (21,454 )     (17,222 )
Amortization of intangibles       (1,157 )     (526 )     (3,380 )     (1,578 )
Litigation judgment       —       —       —       (1,548 )
Acquisition related fees       (15 )     (378 )     (8 )     (706 )
                           
Non-GAAP total expenses       $ 69,727       $ 67,882       $ 206,155       $ 199,284  
                           

Income from operations

                          
GAAP income from operations       $ 70,831       $ 53,619       $ 171,579       $ 139,437  
Plus:                          
Stock-based compensation (b)       6,254       5,353       21,454       17,222  
Amortization of intangibles       1,157       526       3,380       1,578  
Litigation judgment       —       —       —       1,548  
Acquisition related fees       15       378       8       706  
                           
Non-GAAP income from operations       $ 78,257       $ 59,876       $ 196,421       $ 160,491  
                           

Net income

                          
GAAP net income       $ 61,587       $ 44,505       $ 158,869       $ 217,057  
Plus:                          
Stock-based compensation (b)       6,254       5,353       21,454       17,222  
Amortization of intangibles       1,157       526       3,380       1,578  
Litigation judgment       —       —       —       1,548  
Acquisition related fees       15       378       8       706  
Less:                          
Income tax effect on Non-GAAP items (c)       (1,559 )     (1,758 )     (5,217 )     (5,916 )
                           
Non-GAAP net income       $ 67,454       $ 49,004       $ 178,494       $ 232,195  
                           

Diluted income per share

                          
GAAP diluted income per share       $ 0.88       $ 0.61       $ 2.23       $ 2.97  
Plus:                          
Stock-based compensation (b)       0.08       0.06       0.30       0.23  
Amortization of intangibles       0.02       0.01       0.05       0.02  
Litigation judgment       —       —       —       0.02  
Acquisition related fees       —       0.01       —       0.01  
Less:                          
Income tax effect on Non-GAAP items (c)       (0.02 )     (0.02 )     (0.07 )     (0.08 )
                           
Non-GAAP diluted income per share       $ 0.96       $ 0.67       $ 2.51       $ 3.17  
                           
Shares used in computing Non-GAAP diluted income per share       70,160       72,663       71,142       73,136  
                           
                           
        Three Months Ended
March 31,		     Nine Months Ended
March 31,
        2019     2018     2019     2018
              As Adjusted           As Adjusted

Free Cash Flow

                          
GAAP cash flow from operating activities       $ 90,039       $ 73,067       $ 153,136       $ 127,829  
                           
Purchase of property, equipment and leasehold improvements       (26 )     (61 )     (206 )     (217 )
Capitalized computer software development costs       (905 )     57       (1,094 )     (299 )
Non-capitalized acquired technology (d)       —       —       —       75  
Acquisition related fee payments       16       780       27       868  
Litigation related payments       —       4,286       —       4,286  
Free Cash Flow       $ 89,124       $ 78,129       $ 151,863       $ 132,542  
                           
(a) GAAP total expenses                          
        Three Months Ended
March 31,		     Nine Months Ended
March 31,
        2019     2018     2019     2018
              As Adjusted           As Adjusted
Total costs of revenue       $ 14,360       $ 12,776       $ 42,326       $ 37,597  
Total operating expenses       62,793       61,363       188,671       182,741  
GAAP total expenses       $ 77,153       $ 74,139       $ 230,997       $ 220,338  
                           
(b) Stock-based compensation expense was as follows:                          
        Three Months Ended
March 31,		     Nine Months Ended
March 31,
        2019     2018     2019     2018
Cost of maintenance       $ 379       $ —       $ 916       $ —  
Cost of services and other       366       345       1,038       1,119  
Selling and marketing       1,228       979       3,687       2,870  
Research and development       1,518       1,892       5,451       5,679  
General and administrative       2,763       2,137       10,362       7,554  
Total stock-based compensation       $ 6,254       $ 5,353       $ 21,454       $ 17,222  

(c) The income tax effect on non-GAAP items for the three and nine months ended March 31, 2019 is calculated utilizing the Company's statutory tax rate of 21 percent. The income tax effect on non-GAAP items for the three and nine months ended March 31, 2018 is calculated utilizing the Company's estimated federal and state tax rate.
 
(d) In the nine months ended March 31, 2018, the Company has excluded $0.1 million 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.

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AspenTech
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david.grip@aspentech.com

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