Aspen Technology Announces Financial Results for the Third Quarter of Fiscal 2014

April 29, 2014

BURLINGTON, Mass.--(BUSINESS WIRE)--Apr. 29, 2014-- Aspen Technology, Inc. (NASDAQ: AZPN), a leading provider of software and services to the process industries, today announced financial results for its third quarter of fiscal year 2014, ended March 31, 2014.

“AspenTech delivered a strong third quarter performance that exceeded our guidance across all key metrics. Total license contract value growth year-over-year was over 13% in the third quarter as we continued to see solid customer demand and usage patterns,” said Antonio Pietri, President and Chief Executive Officer of AspenTech.

Pietri added, “Our solid top-line performance and continued expense discipline enabled us to scale our free cash flow generation, which was a quarterly record at over $70 million in the third quarter. We are focused on continuing to use our free cash flow to enhance shareholder value through share buybacks and targeted M&A.”

Third Quarter Fiscal 2014 and Recent Business Highlights

  • The license portion of total contract value was $1.79 billion at the end of the third quarter of fiscal 2014, which increased 13.6% compared to the third quarter of fiscal 2013 and 2.7% sequentially.
  • Total contract value, including the value of bundled maintenance, was $2.1 billion at the end of the third quarter of fiscal 2014, which increased 15.4% compared to the third quarter of fiscal 2013 and 3.0% sequentially.
  • Annual spend, which the company defines as the annualized value of all term license and maintenance revenue contracts at the end of the quarter, was approximately $368 million at the end of the third quarter of fiscal 2014, which increased 14.2% compared to the third quarter of fiscal 2013 and 3.3% sequentially.

Summary of Third Quarter Fiscal Year 2014 Financial Results

AspenTech’s total revenue of $103.6 million increased 30.5% from $79.4 million in the third quarter of the prior fiscal year.

  • Subscription and software revenue was $91.3 million in the third quarter of fiscal 2014, an increase from $70.0 million in the third quarter of fiscal 2013.
  • Services & other revenue was $12.3 million in the third quarter of fiscal 2014, compared to $9.4 million in the third quarter of fiscal 2013.

For the quarter ended March 31, 2014, AspenTech reported income from operations of $31.4 million, compared to income from operations of $16.3 million for the quarter ended March 31, 2013.

Net income was $20.8 million for the quarter ended March 31, 2014, leading to net income per share of $0.22, compared to net income per share of $0.11 in the same period last fiscal year.

Non-GAAP income from operations, which adds back stock-based compensation expense, restructuring charges, amortization of intangibles associated with acquisitions and non-capitalized acquired technology, was $40.0 million for the third quarter of fiscal 2014, compared to non-GAAP income from operations of $20.0 million in the same period last fiscal year. Non-GAAP net income was $26.4 million, or $0.28 per share, for the third quarter of fiscal 2014, compared to non-GAAP net income of $12.9 million, or $0.14 per share, in the same period last fiscal year.

AspenTech had cash and marketable securities of $274.9 million at March 31, 2014, an increase of $39.2 million from the end of the prior quarter after using $30.0 million in cash to repurchase shares of common stock. During the third quarter, the company generated $69.6 million in cash flow from operations. On a non-GAAP basis, cash flow from operations was $73.5 million and free cash flow was $72.5 million after taking into consideration $1.0 million in capital expenditures and capitalized software. Both non-GAAP figures exclude the $3.9 million cash payment associated with the purchase of non-capitalized acquired technology. A reconciliation of GAAP to non-GAAP results is included in the financial tables included in this press release.

Board of Directors Approves $200 Million Share Repurchase Program

AspenTech's Board of Directors approved a share repurchase program for up to $200 million. This program replaces the company’s existing share repurchase program, which had approximately $45 million remaining as of March 31, 2014. The timing and amount of any shares repurchased will be determined by AspenTech based on its evaluation of market conditions and other factors. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when AspenTech might otherwise be precluded from doing so under applicable insider trading laws and regulations. The repurchase program may be suspended or discontinued at any time.

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 AspenTech’s business. As the result of adoption of new licensing models, management believes that a number of AspenTech’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 AspenTech’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 AspenTech’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

AspenTech will host a conference call and webcast today, April 29, 2014, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the third quarter fiscal year 2014 as well as the company’s business outlook.

The live dial-in number is (877) 245-0126 or (706) 634-5625, conference ID code 27742389. Interested parties may also listen to a live webcast of the call by logging on to the Investor Relations section of AspenTech’s website, http://www.aspentech.com/corporate/investor.cfm, and clicking on the “webcast” link. A replay of the call will be archived on AspenTech’s website and will also be available via telephone at (855) 859-2056 or (404) 537-3406, conference ID code 27742389, through May 29, 2014.

About AspenTech

AspenTech is a leading supplier of software that optimizes process manufacturing – for energy, chemicals, pharmaceuticals, engineering and construction, and other industries that manufacture and produce products from a chemical process. With integrated aspenONE solutions, process manufacturers can implement best practices for optimizing their engineering, manufacturing and supply chain operations. As a result, AspenTech customers are better able to increase capacity, improve margins, reduce costs and become more energy efficient. To see how the world’s leading process manufacturers rely on AspenTech to achieve their operational excellence goals, visit www.aspentech.com.

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 AspenTech’s expectations based on a number of risks and uncertainties, including, without limitation: AspenTech’s failure to develop new software products, enhance existing products and services, or penetrate new vertical markets; demand for, or usage of, aspenONE software declines for any reason; unfavorable economic and market conditions or a lessening demand in the market for process optimization software; 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.

© 2014 Aspen Technology, Inc. AspenTech, aspenONE, the Aspen leaf logo, Aspen Plus and Aspen HYSYS are trademarks of Aspen Technology, Inc. All rights reserved. All other trademarks are property of their respective owners.

 
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS *
(Unaudited in thousands, except per share data)
                                 
            Three Months Ended       Nine Months Ended
            March 31,       March 31,
              2014         2013           2014         2013  
Revenue:                                
Subscription and software           $ 91,309      

$

69,994

       

$

258,916

     

$

202,794

 
Services and other             12,278         9,363           31,005         25,329  
Total revenue             103,587         79,357           289,921         228,123  
Cost of revenue:                                
Subscription and software             5,332         4,998           14,974         15,244  
Services and other             9,956         7,651           24,835         22,116  
Total cost of revenue             15,288         12,649           39,809         37,360  
Gross profit             88,299         66,708           250,112         190,763  
Operating expenses:                                
Selling and marketing             24,267         22,958           71,376         67,852  
Research and development             21,791         15,772           52,641         46,577  
General and administrative             10,858         11,685           33,747         36,124  
Restructuring charges             (19 )       (41 )         (15 )       (7 )
Total operating expenses             56,897         50,374           157,749         150,546  
Income from operations             31,402         16,334           92,363         40,217  
Interest income             275         807           969         2,861  
Interest expense             (6 )       (12 )         (32 )       (385 )
Other income (expense), net             (472 )       (18 )         (1,807 )       (352 )
Income before provision for income taxes             31,199         17,111           91,493         42,341  
Provision for income taxes             10,356         6,598           32,388         17,478  
Net income          

$

20,843

      $ 10,513         $ 59,105       $ 24,863  
Net income per common share:                                
Basic           $ 0.23       $ 0.11         $ 0.64       $ 0.27  
Diluted           $ 0.22       $ 0.11         $ 0.63       $ 0.26  
Weighted average shares outstanding:                                
Basic             92,414         93,730           92,891         93,556  
Diluted             93,365         95,400           93,951         95,475  
                                 

* Beginning with the first quarter of fiscal 2014, revenue from software maintenance support (SMS) is included within subscription and software revenue in our unaudited consolidated statements of operations. Prior to fiscal 2014, SMS revenue was included within services and other revenue. Additionally, beginning in the first quarter of fiscal 2014, the cost of providing SMS is included within subscription and software cost of revenue. Prior to fiscal 2014, the cost of providing SMS was included within services and other cost of revenue. Corresponding line items in the consolidated statements of operations for the three and nine months ended March 31, 2013 have been reclassified to conform to the current period presentation. Refer to the company’s Form 10-Q for the period ended March 31, 2014 for additional details.

                     
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited in thousands, except share data)
                     
            March 31       June 30,
              2014           2013  
                     
ASSETS
Current assets:                    
Cash and cash equivalents           $ 181,483         $ 132,432  
Short-term marketable securities             75,357           57,015  
Accounts receivable, net             31,031           36,988  
Current portion of installments receivable, net             2,243           13,769  
Unbilled services             1,282           1,965  
Prepaid expenses and other current assets             8,477           9,665  
Prepaid income taxes             323           288  
Current deferred tax assets             18,224           33,229  
Total current assets             318,420           285,351  
Long-term marketable securities             18,092           35,353  
Non-current installments receivable, net             850           963  
Property, equipment and leasehold improvements, net             7,167           7,829  
Computer software development costs, net             1,536           1,742  
Goodwill             18,869           19,132  
Non-current deferred tax assets             13,821           25,250  
Other non-current assets             4,275           7,128  
Total assets           $ 383,030         $ 382,748  
                     
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:                    
Accounts payable           $ 1,116         $ 846  
Accrued expenses and other current liabilities             31,605           34,421  
Income taxes payable             2,319           1,697  
Current deferred revenue             207,303           178,341  
Current deferred tax liabilities             156           156  
Total current liabilities             242,499           215,461  
Non-current deferred revenue             42,337           53,012  
Other non-current liabilities             11,991           12,377  
Commitments and contingencies                    
Series D redeemable convertible preferred stock, $0.10 par value—                    
Authorized— 3,636 shares as of March 31, 2014 and June 30, 2013                    
Issued and outstanding— none as of March 31, 2014 and June 30, 2013             -           -  
Stockholders’ equity:                    
Common stock, $0.10 par value— Authorized—210,000,000 shares                    
Issued— 100,862,392 shares at March 31, 2014 and 99,945,545 shares at June 30, 2013                    
Outstanding— 92,254,182 shares at March 31, 2014 and 93,683,769 shares at June 30, 2013             10,086           9,995  
Additional paid-in capital             588,458           575,770  
Accumulated deficit             (290,712 )         (349,817 )
Accumulated other comprehensive income             8,603           7,263  
Treasury stock, at cost—8,608,210 shares of common stock at March 31, 2014 and

6,261,776 shares of common stock at June 30, 2013

            (230,232 )         (141,313 )
Total stockholders’ equity             86,203           101,898  
Total liabilities and stockholders' equity           $ 383,030         $ 382,748  
                     
                     

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

                     
            Three Months Ended       Nine Months Ended
            March 31,       March 31,
              2014         2013           2014         2013  
Cash flows from operating activities:                                
Net income           $ 20,843       $ 10,513         $ 59,105       $ 24,863  
Adjustments to reconcile net income to net cash provided by operating activities:                                
Depreciation and amortization             1,376         1,427           3,855         4,114  
Net foreign currency loss (gain)             365         (363 )         1,444         (667 )
Stock-based compensation             3,564         3,527           11,102         11,295  
Deferred income taxes             9,036         5,810           25,827         15,668  
Provision for bad debts             358         (131 )         1,144         31  
Excess tax benefits from stock-based compensation             (54 )       -           (137 )       -  
Other non-cash operating activities             462         337           1,358         365  
Changes in assets and liabilities:                                
Accounts receivable             (1,428 )       10,352           5,066         2,395  
Unbilled services             (504 )       (1,251 )         667         (645 )
Prepaid expenses, prepaid income taxes, and other assets             2,791         (1,017 )         4,327         4,888  
Installments receivable             3,588         7,264           11,933         32,365  
Accounts payable, accrued expenses, and other liabilities             4,457         (2,683 )         (1,111 )       (11,186 )
Deferred revenue             24,779         24,699           17,309         29,138  
Net cash provided by operating activities             69,633         58,484           141,889         112,624  
Cash flows from investing activities:                                
Purchase of marketable securities             (16,550 )       (75,713 )         (35,542 )       (75,713 )
Maturities of marketable securities             20,938         -           33,362         -  
Purchase of property, equipment and leasehold improvements             (906 )       (451 )         (2,630 )       (3,018 )
Insurance proceeds             -         -           -         2,222  
Purchase of technology intangibles             (400 )       (375 )         (400 )       (902 )
Capitalized computer software development costs             (97 )       (158 )         (601 )       (593 )

Net cash provided by (used in) investing activities

            2,985         (76,697 )         (5,811 )       (78,004 )
Cash flows from financing activities:                                
Exercise of stock options             3,045         6,310           7,475         15,430  
Repayments of secured borrowings             -         -           -         (11,010 )
Repurchases of common stock             (30,000 )       (22,399 )         (88,919 )       (59,251 )
Payment of tax withholding obligations related to restricted stock             (1,698 )       (1,470 )         (5,935 )       (5,758 )
Excess tax benefits from stock-based compensation             54         -           137         -  
Net cash used in financing activities             (28,599 )       (17,559 )         (87,242 )       (60,589 )
Effect of exchange rate changes on cash and cash equivalents             (13 )       (410 )         215         (231 )
Increase (decrease) in cash and cash equivalents             44,006         (36,182 )         49,051         (26,200 )
Cash and cash equivalents, beginning of period             137,477         175,224           132,432         165,242  
Cash and cash equivalents, end of period           $ 181,483       $ 139,042         $ 181,483       $ 139,042  
                                 

Supplemental disclosure of cash flow information:

         

 

                   

Income taxes paid, net

         

$

672

     

$

880

       

$

5,717

     

$

2,692

 

Interest paid

           

6

       

12

         

32

       

385

 
                                 
 
Reconciliation of GAAP to Non-GAAP Results of Operations and Cash Flows
The following tables reflect a reconciliation of selected Aspen Technology 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,

              2014         2013           2014         2013  

Total expenses

                               
GAAP total expenses (a)           $ 72,185       $ 63,023        

$

197,558

      $ 187,906  
Less:                                
Stock-based compensation (b)             (3,564 )       (3,527 )         (11,102 )       (11,295 )
Non-capitalized acquired technology             (4,856 )       -           (4,856 )       -  
Restructuring charges             19         41           15         7  
Amortization of purchased technology intangibles             (224 )       (201 )         (698 )       (503 )
                                 
Non-GAAP total expenses           $ 63,560       $ 59,336        

$

180,917

      $ 176,115  
                                 

Income from operations

                               
GAAP income from operations           $ 31,402       $ 16,334         $ 92,363       $ 40,217  
Plus:                                
Stock-based compensation (b)             3,564         3,527           11,102         11,295  
Non-capitalized acquired technology             4,856         -           4,856         -  
Restructuring charges             (19 )       (41 )         (15 )       (7 )
Amortization of purchased technology intangibles             224         201           698         503  
                                 
Non-GAAP income from operations           $ 40,027       $ 20,021        

$

109,004

      $ 52,008  
                                 

Net income

                               
GAAP net income           $ 20,843       $ 10,513         $ 59,105       $ 24,863  
Plus:                                
Stock-based compensation (b)             3,564         3,527           11,102         11,295  
Non-capitalized acquired technology             4,856         -           4,856         -  
Restructuring charges             (19 )       (41 )         (15 )       (7 )
Amortization of purchased technology intangibles             224         201           698         503  
Less:                                
Income tax effect on Non-GAAP items (c)             (3,105 )       (1,331 )         (5,991 )       (4,257 )
                                 
Non-GAAP net income           $ 26,363       $ 12,869         $ 69,755       $ 32,397  
                                 

Diluted income per share

                               
GAAP diluted income per share           $ 0.22       $ 0.11         $ 0.63       $ 0.26  
Plus:                                
Stock-based compensation (b)             0.04         0.04           0.12         0.12  
Non-capitalized acquired technology             0.05         -           0.05         -  
Restructuring charges             -         -           -         -  
Amortization of purchased technology intangibles             -         -           0.01         0.01  
Less:                                
Income tax effect on Non-GAAP items (c)             (0.03 )       (0.01 )         (0.06 )       (0.04 )
                                 
Non-GAAP diluted income per share           $ 0.28       $ 0.14         $ 0.74       $ 0.35  
                                 
Shares used in computing Non-GAAP diluted income per share             93,365         95,400           93,951         95,475  
                                 
                                 
            Three Months Ended

March 31,

      Nine Months Ended

March 31,

              2014         2013           2014         2013  

Non-GAAP Cash Flows from Operating Activities and Free Cash Flow

                               
GAAP cash flows from operating activities           $ 69,633       $ 58,484        

$

141,889

      $ 112,624  
Plus:                                
Non-capitalized acquired technology (d)             3,856         -           3,856         -  
                                 
Non-GAAP Cash Flows from Operating Activities           $ 73,489       $ 58,484        

$

145,745

      $ 112,624  
                                 
Less:                                
Purchase of property, equipment and leasehold improvements             (906 )       (451 )         (2,630 )       (3,018 )
Capitalized computer software development costs             (97 )       (158 )         (601 )       (593 )
Plus:                                
Insurance proceeds             -         -           -         2,222  
                                 
Free Cash Flow           $ 72,486       $ 57,875        

$

142,514

      $ 111,235  
                                 
(a) GAAP total expenses
            Three Months Ended

March 31,

      Nine Months Ended

March 31,

              2014         2013           2014         2013  
Total costs of revenue           $ 15,288       $ 12,649         $ 39,809       $ 37,360  
Total operating expenses             56,897         50,374           157,749         150,546  
GAAP total expenses           $ 72,185       $ 63,023        

$

197,558

      $ 187,906  
                                 
(b) Stock-based compensation expense was as follows:
            Three Months Ended

March 31,

      Nine Months Ended

March 31,

              2014         2013           2014         2013  
Cost of services and other           $ 282       $ 325         $ 910       $ 984  
Selling and marketing             832         994           2,653         2,943  
Research and development             1,523         770           3,267         2,253  
General and administrative             927         1,438           4,272         5,115  
Total stock-based compensation           $ 3,564       $ 3,527         $ 11,102       $ 11,295  
                                 

(c) The income tax effect on Non-GAAP items for the three and nine months ended March 31, 2014 and 2013 is calculated utilizing an estimate of our future effective tax rate.

(d) In the third quarter of fiscal 2014, we acquired certain technology that did not meet the accounting definition of having reached technological feasibility, and therefore, the cost of the acquired technology was expensed and is included in research and development. We have excluded the $3.9 million cash payment associated with the acquired technology (non-capitalized acquired technology) from non-GAAP cash flows from operating activities and free cash flow to be consistent with past treatment of other transactions where the acquired assets were capitalized. Refer to the company’s Form 10-Q for the period ending March 31, 2014 for additional details.

 

Source: Aspen Technology, Inc.

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