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Aspen Technology Reports GAAP Profitability and Higher Second Quarter Software License Revenue

01/22/04
Continued operational improvement drives earnings growth

CAMBRIDGE, Mass., Jan 22, 2004 (BUSINESS WIRE) -- Aspen Technology, Inc. (NASDAQ: AZPN) today reported financial results for its fiscal 2004 second quarter and six months ended December 31, 2003.

Total revenues for the second quarter totaled $80.4 million, with software license revenues of $37.7 million and services revenues of $42.7 million. On a Generally Accepted Accounting Principles (GAAP) basis, the company reported second quarter net income of $560,000, or $0.01 per diluted share, compared to a net loss of $136.9 million or ($3.59) per diluted share in the same period last year. Excluding the preferred stock dividend and discount accretion, the company reported second quarter net income of $3.9 million, or $0.05 per diluted share compared to pro forma (non-GAAP) net income of $643,000, or $0.02 per diluted share, in the second quarter of fiscal 2003.

"During the second quarter, we continued to build upon the operational performance and financial foundation that we worked hard to establish at AspenTech over the previous four quarters," said David McQuillin, President and CEO of AspenTech. "With the significant structural changes behind us, we have now turned our full attention to focusing on the execution of our business strategy to deliver sustainable, profitable growth for our shareholders. With economic indicators steadily improving, we are beginning to see pockets of strength in our customer base and we are moving aggressively to capitalize on these opportunities.

"Our strategy to deliver business value with vertical software solutions to the emerging enterprise operations management (EOM) market is gaining momentum. We are encouraged by our customers' response to the benefits they are receiving from some of our newer products such as Aspen Operations Manager. We have also added new functionality to our supply chain planning solutions over the past year which has strengthened demand for this technology from the petroleum, chemicals and consumer goods markets."

Second Quarter Highlights

AspenTech accomplished the following in the second quarter:

  • Significantly improved year-over-year GAAP net income.
  • Pro forma (non-GAAP) net income increased six-fold from the year-ago quarter and more than eight-fold sequentially.
  • Increased cash balance by more than $23 million to approximately $125 million.
  • Closed 9 transactions of approximately $1 million or greater, compared to 5 transactions last year.
  • Signed significant license transactions with Saudi Aramco, Anadarko Petroleum Corporation, Aker Kvaerner, Stone & Webster and Akzo Nobel.
  • Reduced total expenses by approximately seven percent year-over-year and delivered a sequential decline for the third straight quarter. Fiscal 2004 second quarter total expenses include a $2 million accrual for legal fees related to the FTC proceeding.
  • Lowered DSOs for billed receivables by 11 days to 72 days compared to 83 days in the second quarter of fiscal 2003.
  • Delivered on new product development commitments with commercial availability of Aspen RefSYS 1.0, HYSYS Upstream Oil & Gas Option 1.0, and new functionality for Aspen Operations Manager.
  • Purchased $7.0 million of the company's 5.25% subordinated debentures at a discount to par in January 2004.

Charles Kane, Senior Vice President & CFO, commented, "We have made measurable improvement in almost every aspect of our financial performance, both sequentially and on a year-over-year basis. Our reduction in operating expenses and a more favorable revenue mix drove an improvement in operating margins this quarter."

Total revenues for the six months ended December 31, 2003 were $157.4 million, with software license revenues growing by approximately ten percent year-over-year to $72.8 million and services revenue totaling $84.6 million. On a GAAP basis, the company reported net income of $4.9 million, or $0.10 per diluted share compared to a net loss of $149.9 million or ($3.93) per diluted share for the same period last year. Fiscal 2004 GAAP earnings include a one-time gain of $6.5 million relating to the retirement of the Series B preferred stock. On a pro forma (non-GAAP) basis, excluding this one-time gain as well as the preferred stock dividend and discount accretion, the company reported net income of $4.4 million, or $0.06 per diluted share compared to a pro forma (non-GAAP) loss of $10.1 million or ($0.26) per diluted share in the prior year.

The company will hold 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 Thursday, January 22, 2004. Interested parties may 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 for the next twelve months and will also be available for forty-eight hours via telephone, beginning at 8:00 p.m. eastern time on January 22, 2004, by dialing (800) 642-1687 and entering in confirmation code: 4734628.

Pro Forma Results

AspenTech reports pro forma 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 pro forma to GAAP is included in the attached condensed consolidated financial statements.

About AspenTech

Aspen Technology, Inc. provides industry-leading software and implementation services that enable process companies to increase efficiency and profitability. AspenTech's engineering product line is used to design and improve plants and processes, maximizing returns throughout an asset's operating life. Its manufacturing/supply chain product line allows companies to increase margins in their plants and supply chains, by managing customer demand, optimizing production, and streamlining the delivery of finished products. These two offerings are combined to create solutions for enterprise operations management (EOM), integrated enterprise-wide systems that provide process manufacturers with the capability to dramatically improve their operating performance. Over 1,500 leading companies already rely on AspenTech's software, including Aventis, Bayer, BASF, BP, ChevronTexaco, Dow Chemical, DuPont, ExxonMobil, Fluor, Foster Wheeler, GlaxoSmithKline, Shell, and Total. For more information, visit www.aspentech.com.

The third and fourth paragraphs of this press release contains forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For this purpose, any statement using the term "will," "should," "could," "anticipates," "believes" or a comparable term is a forward-looking statement. Actual results may vary significantly from AspenTech's expectations based on a number of risks and uncertainties, including: AspenTech's lengthy sales cycle which makes it difficult to predict quarterly operating results; the FTC's investigation of AspenTech's acquisition of Hyprotech; fluctuations in AspenTech's quarterly operating results; AspenTech's dependence on customers in the cyclical chemicals, petrochemicals and petroleum industries; AspenTech's ability to raise additional capital as required; AspenTech's ability to integrate the operations of acquired companies; intense competition; AspenTech's need to develop and market products successfully; reliance on relationships with strategic partners; and other risk factors described from time to time in AspenTech's periodic reports and registration statements filed with the Securities and Exchange Commission. AspenTech cannot guarantee any future results, levels of activity, performance, or achievements. Moreover, neither AspenTech nor anyone else assumes responsibility for the accuracy and completeness of any forward-looking statements. AspenTech undertakes no obligation to update any of the forward-looking statements after the date of this press release.

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

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


                       Three Months Ended     Six Months Ended
                      Dec. 31,     Dec. 31,  Dec. 31,    Dec. 31,
                        2003         2002      2003        2002
                      --------   ---------- --------   ----------
REVENUES:
   Software licenses  $37,759      $36,781  $72,822      $66,427
   Services            42,661       46,192   84,612       93,796
                      --------   ---------- --------   ----------
     Total revenues    80,420       82,973  157,434      160,223
                      --------   ---------- --------   ----------

EXPENSES:
   Cost of software
    licenses            4,315        3,511    7,932        6,846
   Cost of services    24,246       26,823   48,878       54,831
   Selling and
    marketing          23,589       27,031   47,463       56,185
   Research and
    development        14,294       15,997   30,300       33,742
   General and
    administrative      8,167        8,923   16,907       18,744
   Restructuring &
    Other One Time
    Charges             2,000      135,244    2,000      135,244
                      --------   ---------- --------   ----------
     Total costs
      and expenses     76,611      217,529  153,480      305,592
                      --------   ---------- --------   ----------

   Income (loss)
    from operations     3,809     (134,556)   3,954     (145,369)

   Other income
    (expense), net        523         (313)     295         (814)
   Interest income,
    net                   895          268    1,617          849
                      --------   ---------- --------   ----------

   Income (loss)
    before provision
    for income taxes    5,227     (134,601)   5,866     (145,334)

   Provision for
    income taxes        1,315            -    1,503            -
                      --------   ---------- --------   ----------

     Net income
      (loss)            3,912     (134,601)   4,363     (145,334)

    Accretion of
     preferred
     stock discount
     and dividend(1)   (3,352)      (2,287)     500       (4,521)
                      --------   ---------- --------   ----------

   Net income
    (loss)
    applicable to
    common
    stockholders         $560    $(136,888)  $4,863    $(149,855)
                      ========   ========== ========   ==========

EARNINGS PER SHARE:
   Basic net
    income (loss)
    per common
    share               $0.01       $(3.59)   $0.12       $(3.93)
                      ========   ========== ========   ==========

   Diluted net
    income (loss)
    per common
    share               $0.01       $(3.59)   $0.10       $(3.93)
                      ========   ========== ========   ==========

   Weighted
    average shares
    outstanding -
    Basic              40,175       38,128   39,967       38,092
                      ========   ========== ========   ==========

   Weighted
    average shares
    outstanding -
    Diluted            50,315       38,128   46,337       38,092
                      ========   ========== ========   ==========


PRO FORMA EARNINGS PER SHARE:
Pro forma net income (loss) excludes Accretion of preferred stock
discount and dividend for all periods and Restructuring and other
charges for the periods ended December 31, 2002 , and pro forma
weighted average shares outstanding assumes the conversion of the
Series D preferred stock to common stock.

   Net income (loss)   $3,912          $643   $4,363     $(10,090)
                      ========    ========== ========   ==========

   Diluted earnings
    (loss) per share    $0.05         $0.02    $0.06       $(0.26)
                      ========    ========== ========   ==========

   Weighted
    average shares
    outstanding -
    diluted            86,651        39,560   73,589       38,092
                      ========    ========== ========   ==========



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





Supplemental information - Reconciliation of net income (loss) to pro
 forma net income (loss)


                         Three Months Ended     Six Months Ended
                        Dec. 31,    Dec. 31,   Dec. 31,   Dec. 31,
                          2003        2002       2003       2002
                        --------   ---------- --------   ----------

 Net income (loss)        $560    $(136,888)  $4,863    $(149,855)
   Adjustments to net
    income (loss):
   Restructuring and
    other charges             -      135,244        -      135,244
   Preferred stock
    discount and
    dividend accretion    3,352        2,287    5,952        4,521
   Gain on conversion
    of Series B
    redeemable
    preferred stock           -            -   (6,452)           -
                        --------   ---------- --------   ----------

 Pro forma net
  income (loss)          $3,912         $643   $4,363     $(10,090)
                        ========   ========== ========   ==========


Pro forma net income (loss) excludes Restructuring and other
charges and Accretion of preferred stock discount and dividend, and
pro forma weighted average shares outstanding assumes the conversion
of the Series D preferred stock to common stock.




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




                                                   Dec. 31,   June 30,
                                                     2003       2003
                                                   --------- ---------
ASSETS
Current assets:
 Cash, cash equivalents and short-term
  investments                                      $124,941   $51,567
 Accounts receivable, net                            64,574    77,725
 Unbilled services                                   16,389    15,279
 Current portion of long-term installments
  receivable, net                                    15,201    34,720
 Deferred tax asset                                   2,929     2,929
 Prepaid expenses and other current assets            8,930    11,581
                                                   --------- ---------

    Total current assets                            232,964   193,801
                                                   --------- ---------

Long-term installments receivable, net               69,347    73,377
Equipment and leasehold improvements, net            25,840    31,158
Computer software development costs, net             18,411    17,728
Intangible assets, net                               37,958    41,279
Purchased intellectual property, net                  1,578     1,861
Deferred tax asset                                   13,829    13,831
Other assets                                          4,235     5,445
                                                   --------- ---------

 Total assets                                      $404,162  $378,480
                                                   ========= =========


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Current portion of long-term debt                   $2,427    $3,849
 Amount owed to Accenture                                 -     8,162
 Accounts payable and accrued expenses               67,957    82,094
 Unearned revenue                                    21,577    20,492
 Deferred revenue                                    35,287    37,266
                                                   --------- ---------
   Total current liabilities                        127,248   151,863
                                                   --------- ---------

Long-term debt, less current maturities              76,450    89,911
Deferred revenue, less current portion                7,741     9,815
Deferred tax liability                               13,391    13,258
Other liabilities                                    11,032    16,009
                                                   --------- ---------

Redeemable preferred stock                           99,903    57,537

Total stockholders' equity                           68,397    40,087
                                                   --------- ---------
 Total liabilities and stockholders' equity        $404,162  $378,480
                                                   ========= =========

Aspen Technology, Inc.
Joshua Young, 617-949-1274
joshua.young@aspentech.com