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Aspen Technology Reports Financial Results for Fourth Quarter and Full Fiscal Year

09/13/05
Company outperforms revenue guidance, pays off convertible debt, and closes strategic aspenONE agreements with key customers

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Sept. 13, 2005-- Aspen Technology, Inc. (NASDAQ: AZPN), a leading provider of software and services to the process industries, today reported financial results for its fiscal 2005 fourth quarter and fiscal year ended June 30, 2005.

Total revenues for the fourth quarter totaled $70.4 million, with software license revenues of $36.1 million and services revenues totaling $34.3 million, compared to the Company's total revenue guidance of $66 to $68 million. On a Generally Accepted Accounting Principles (GAAP) basis, the Company reported a fourth quarter net loss applicable to common stockholders of $29.8 million, or $0.69 per share. Included in the GAAP loss is a tax provision of $3.6 million. Excluding this tax provision and other items in the non-GAAP reconciliation table, the Company reported non-GAAP earnings of $0.00 per share, compared to non-GAAP earnings per share guidance of $0.00 to $0.02.

"We were pleased with the progress the Company made in the quarter, which was highlighted by revenues exceeding our expectations," said Mark Fusco, President and CEO of AspenTech. "We are delivering against many of the operating initiatives we outlined for investors earlier this year. In just two quarters, we have improved our services revenue and profitability, eliminated our convertible debt, streamlined the organization for better efficiency, positioned the Company for improved profitability in the future with a lower cost structure, and advanced our aspenONE solutions strategy.

"While our work to improve our business performance has just begun, we are entering Fiscal 2006 with an improved financial position and our new organizational structure should enable us to generate higher levels of profitability and cash flow. We recently closed important aspenONE transactions with two of our largest customers in the chemical and petroleum industries. These long-term agreements are a validation of our aspenONE vision and our customers' willingness to make significant IT investments that help them address their strategic operating initiatives. We hope to leverage these relationships to drive further aspenONE adoption within these key vertical markets."

Fourth Quarter Highlights

  • AspenTech significantly strengthened its financial position, eliminating $56.7 million of convertible debt and ending the quarter with $68.1 million in cash and $1.4 million of debt.
  • Services gross margins increased sequentially by approximately 150 basis points to 43.5%. This improvement was primarily the result of a lower cost base and improved utilization in the professional services organization.
  • Signed large fourth quarter software license transactions with Braskem, Polimeri Europa, Technip, Reliance Industries and SINOPEC.
  • The chemicals industry represented the highest percentage of the Company's revenue, while the petroleum, and oil & gas industries also made a solid contribution.
  • Closed four transactions of $1 million or greater in the quarter.
  • Closed its first large scale deal for aspenONE Inventory Management and Operations Scheduling for the Petroleum industry with one of the industry's "super majors". This solution will enable petroleum companies to manage the operational risk and financial exposure that result from lack of visibility into current and projected inventories. AspenTech will work with this customer to incrementally roll out the solution on a global basis.
  • Signed a large scale agreement with Lyondell Chemical to roll out a new integrated scheduling solution for the ethylene market. aspenONE for Ethylene Scheduling will enable Lyondell to bring together data and systems to make faster, more profitable scheduling decisions in the plant. The Company believes this project will allow it to target other ethylene plants around the world that could also benefit from aspenONE for Ethylene Scheduling.

Charles Kane, Senior Vice President & CFO of AspenTech said, "We were pleased with the Company's revenue performance and the higher level of services profitability in the quarter. While our expense run rate was higher than we would have liked in the fourth quarter, we exited Q4 on track to achieve the organizational efficiencies that we communicated earlier this year. We believe these initiatives will result in a considerably lower expense run rate for the first quarter of fiscal 2006."

Conference Call and Webcast

AspenTech will host a conference call and webcast to discuss its financial results, business outlook, and related corporate and financial matters at 5:00 p.m. Eastern Time on September 13, 2005. The live dial in number is 877-239-3024. 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 (800) 642-1687, confirmation code 8395870, for four days, beginning at 8:00 p.m. Eastern Daylight Time on September 13, 2005.

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. The new generation of integrated aspenONE(TM) 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 Aventis, Bayer, BASF, BP, ChevronTexaco, DuPont, ExxonMobil, Fluor, GlaxoSmithKline, Shell, and Total. For more information, visit www.aspentech.com.

This press release may contain 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.

                        ASPEN TECHNOLOGY, INC.
            CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                 (in thousands, except per share data)


                           Three Months Ended          Year Ended
                           June 30,   June 30,     June 30,   June 30,
                              2005       2004         2005       2004
                          --------------------------------------------
REVENUES:
   Software licenses       $36,131    $45,025     $129,233   $158,661
   Service and other        34,323     44,245      140,334    174,335
                          --------------------------------------------
   Total revenues           70,454     89,270      269,567    332,996
                          --------------------------------------------

COST OF REVENUES:
   Cost of software
    licenses                 4,157      3,791       16,864     15,577
   Cost of service and
    other                   19,402     25,210       82,638     99,183
   Amortization of
    technology related
    intangible assets        1,782      1,790        7,112      7,270
   Impairment of
    technology related
    intangible and
    computer software
    development assets           -      3,250            -      3,250
                          --------------------------------------------
   Total cost of
    revenues                25,341     34,041      106,614    125,280
                          --------------------------------------------

   Gross profit             45,113     55,229      162,953    207,716

OPERATING COSTS:
   Selling and marketing
    (includes a sales
    tax exposure accrual
    of $1,832 for the
    three months and
    year ended June 30,
    2005) (2)               26,112     28,579       96,187    100,028
   Research and
    development             11,927     14,421       47,236     58,955
   General and
    administrative
    (includes litigation
    defense and
    settlement costs,
    audit committee
    review costs, and
    one-time contract
    and employment
    termination costs of
    $1,471, $5,103,
    $13,410 and $6,553
    for the three months
    ended June 30, 2005
    and 2004 and years
    ended June 30, 2005
    and 2004,
    respectively) (2)       13,308     12,849       49,175     32,727
   Long-lived asset
    impairment charges           -        967            -        967
   Restructuring charges
    and FTC legal costs      3,277     18,085       24,907     20,085
   Loss (gain) on sales
    and disposals of
    assets                  13,911          6       13,635       (879)
                          --------------------------------------------
   Total operating costs    68,535     74,907      231,140    211,883
                          --------------------------------------------

   Income (loss) from
    operations             (23,422)   (19,678)     (68,187)    (4,167)

   Other income
    (expense), net             676        441          618        252
   Interest income, net        185        400        1,973      2,356
                          --------------------------------------------

   Income (loss) before
    provision for income
    taxes                  (22,561)   (18,837)     (65,596)    (1,559)

   Provision for income
    taxes                   (3,556)   (17,566)      (3,776)   (19,896)
   Equity in earnings
    from joint ventures          -       (251)           -       (351)
                          --------------------------------------------

     Net income (loss)     (26,117)   (36,654)     (69,372)   (21,806)

    Accretion of
     preferred stock
     discount and
     dividend (1)           (3,703)    (3,458)     (14,450)    (6,358)
                          --------------------------------------------

   Net income (loss)
    applicable to common
    stockholders          $(29,820)  $(40,112)    $(83,822)  $(28,164)
                          ============================================

EARNINGS PER SHARE:
   Basic and Diluted net
    income (loss) per
    common share            $(0.69)    $(0.97)      $(1.98)    $(0.69)
                          ============================================

   Weighted average
    shares outstanding -
    Basic and Diluted       42,942     41,328       42,381     40,575
                        ==============================================


PRO FORMA (NON-GAAP) EARNINGS PER SHARE:

Pro forma (non-GAAP) net income excludes Accretion of preferred
stock discount and dividend, Amortization of technology related
intangible assets, Impairment of technology related intangible and
computer software development assets, Long-lived asset impairment
charges, Litigation defense and settlement costs, One-time
contract and employment termination costs, Fees associated with
the audit committee review, Restructuring charges and FTC legal
costs, Loss on the securitization of installments receivable, Gain
on sale of the AXSYS product line, and Write-down of assets. In
addition, pro forma (non-GAAP) income excludes the recorded
provision for income taxes and assumes a provision for income
taxes at a 25% effective rate. Pro forma (non-GAAP) weighted
average shares outstanding assumes the conversion of the Series D
preferred stock to common stock.

   Net income                   $6     $7,580      $(3,347)   $27,161
                          ============================================

   Diluted earnings
    (loss) per share         $0.00      $0.09       $(0.04)     $0.34
                          ============================================

   Weighted average
    shares outstanding -
    diluted                 87,591     86,976       87,979     80,991
                          ============================================

(1) Detail of this amount is provided on the reconciliation of net
    income (loss) to pro forma (non-GAAP) net income

(2) This parenthetical reference will not be presented in our Form
    10-K.



 Supplemental
  information -
                            Three Months Ended        Year Ended
                           June 30,   June 30,   June 30,   June 30,
                              2005       2004       2005       2004
                           --------   --------   --------   --------

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

Total expenses (cost of
 revenues and operating
 costs)                   $ 93,876   $108,948   $337,754  $ 337,163
 Adjustments to total
  expenses (cost of
  revenues and operating
  costs)
 Amortization of
  technology related
  intangible assets         (1,782)    (1,790)    (7,112)    (7,270)
 Impairment of
  technology related
  intangible and
  computer software
  development assets             -     (3,250)         -     (3,250)
 Litigation defense and
  settlement costs,
  included in General
  and Administrative
  costs                          -     (5,103)    (3,765)    (6,553)
Long-lived asset
 impairment charges              -       (967)         -       (967)
 Fees associated with
  the audit committee
  review, included in
  General and
  Administrative costs           -          -     (7,103)         -
 One-time contract and
  employment termination
  costs, included in
  General and
  Administrative costs      (1,471)         -     (2,542)         -
 Sales-tax reserve
  accrual included in
  Selling and Marketing
  costs                     (1,832)         -     (1,832)         -
 Restructuring charges
  and FTC legal costs       (3,277)   (18,085)   (24,907)   (20,085)
 Write-down of assets,
  included in various
  cost lines                  (301)         -       (301)         -
 Loss on securitization
  of installments
  receivable, included
  in Loss (gain) on
  sales and disposals of
  assets                   (13,906)         -    (13,906)         -
 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)        $ 71,307   $ 79,753   $276,620  $ 299,038
                           ========   ========   ========   ========



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

Net income (loss)
 applicable to common
 stockholders             $(29,820)  $(40,112)  $(83,822) $ (28,164)
 Adjustments to net
  income (loss)
  applicable to common
  stockholders
 Net effect of
  adjustments to cost of
  revenues and operating
  costs                     22,569     29,195     61,134     38,125
 Preferred stock
  discount and dividend
  accretion                  3,703      3,458     14,450     12,810
 Gain on conversion of
  Series B redeemable
  preferred stock                -          -          -     (6,452)
 Provision for income
  taxes                      3,556     17,566      3,776     19,896
                           --------   --------   --------   --------

 Pro forma (non-GAAP)
  net income (loss)
  before income taxes            8     10,107     (4,462)    36,215

 Benefit from (provision
  for) income taxes at
  25% effective rate            (2)    (2,527)     1,116     (9,054)
                           --------   --------   --------   --------

 Pro forma (non-GAAP)
  net income (loss)       $      6   $  7,580   $ (3,347) $  27,161
                           ========   ========   ========   ========



                        ASPEN TECHNOLOGY, INC.
                 CONSOLIDATED CONDENSED BALANCE SHEETS
                            (in thousands)

                                                    June 30, June 30,
                                                        2005     2004
                                                     -------- --------
ASSETS
Current assets:
  Cash, cash equivalents and short-term investments $ 68,149 $107,677
  Accounts receivable, net                            52,254   50,874
  Unbilled services                                    9,826   15,518
  Current portion of long-term installments
   receivable, net                                     5,355   25,244
  Deferred tax asset                                     692       31
  Prepaid expenses and other current assets           11,483   10,084
                                                     -------- --------

   Total current assets                              147,759  209,428
                                                     -------- --------

Long-term installments receivable, net                19,425   65,527
Retained interest in sold receivables                 16,667        -
Equipment and leasehold improvements, net             11,388   18,664
Computer software development costs, net              17,411   16,863
Intangible assets, net                                26,852   34,307
Purchased intellectual property, net                     730    1,295
Deferred tax asset                                     1,354    2,492
Other assets                                           2,656    3,158
                                                     -------- --------

  Total assets                                      $244,242 $351,734
                                                     ======== ========


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Current portion of long-term debt                 $  1,042 $ 58,595
  Accounts payable and accrued expenses               84,407   83,115
  Unearned revenue                                    23,480   18,051
  Deferred revenue                                    34,854   33,462
  Deferred tax liability                                   -      325
                                                     -------- --------
    Total current liabilities                        143,783  193,548
                                                     -------- --------

Long-term debt, less current maturities                  338    1,952
Deferred revenue, less current portion                 2,093    5,363
Deferred tax liability                                 2,760    4,220
Other liabilities                                     23,143   11,527
                                                     -------- --------

Redeemable preferred stock                           121,210  106,761

Total stockholders' equity (deficit)                 (49,085)  28,363
                                                     -------- --------

Total liabilities and stockholders'
 equity (deficit)                                   $244,242 $351,734
                                                     ======== ========

CONTACT:
Aspen Technology, Inc.
Joshua Young, 617-949-1274
Director of Investor Relations & Corp. Communications
joshua.young@aspentech.com