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