Aspen Technology Announces Financial Results for the Second Quarter of Fiscal 2015

January 28, 2015
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BEDFORD, Mass.--(BUSINESS WIRE)--Jan. 28, 2015-- Aspen Technology, Inc. (NASDAQ: AZPN), a leading provider of software and services to the process industries, today announced financial results for its second quarter of fiscal year 2015, ended December 31, 2014.

Antonio Pietri, President and Chief Executive Officer of AspenTech, said, “AspenTech reported strong second quarter financial results that exceeded expectations from both a revenue and profitability perspective, highlighted by TLCV growth of nearly 13%. We continue to see positive demand trends for the aspenONE platform as customers focus on driving increased efficiency across their operations. This remains a top strategic priority for customers even in an uncertain and volatile economic and oil price environment.”

Pietri continued, “We are also maintaining expense discipline that is driving increased levels of profitability and cash generation. During the quarter we repurchased $72 million of our common stock and today our Board of Directors has authorized a new $450 million share repurchase program. We are focused on driving continued top and bottom line growth and utilizing our financial strength to generate long-term shareholder value.”

Second Quarter Fiscal 2015 and Recent Business Highlights

  • The license portion of total contract value was $1.97 billion at the end of the second quarter of fiscal 2015, which increased 12.8% compared to the second quarter of fiscal 2014 and 4.5% sequentially.
  • Total contract value, including the value of bundled maintenance, was $2.33 billion at the end of the second quarter of fiscal 2015, which increased 13.9% compared to the second quarter of fiscal 2014 and 4.6% 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 $399.9 million at the end of the second quarter of fiscal 2015, which increased 12.3% compared to the second quarter of fiscal 2014 and 3.9% sequentially.
  • GAAP operating margin was 43.2%, compared to 36.6% in the second quarter of fiscal 2014. Non-GAAP operating margin was 46.6%, compared to 40.0% in the second quarter of fiscal 2014.
  • We repurchased approximately two million shares of our common stock for $72.0 million in the second quarter of fiscal 2015.

Summary of Second Quarter Fiscal Year 2015 Financial Results

AspenTech’s total revenue of $107.8 million increased 9.1% from $98.8 million in the second quarter of the prior year.

  • Subscription and software revenue was $98.7 million in the second quarter of fiscal 2015, an increase from $88.9 million in the second quarter of fiscal 2014.
  • Services and other revenue was $9.1 million in the second quarter of fiscal 2015, compared to $9.8 million in the second quarter of fiscal 2014.

For the quarter ended December 31, 2014, AspenTech reported income from operations of $46.5 million, compared to income from operations of $36.1 million for the quarter ended December 31, 2013.

Net income was $30.5 million for the quarter ended December 31, 2014, leading to net income per share of $0.34, compared to net income per share of $0.25 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 $50.2 million for the second quarter of fiscal 2015, compared to non-GAAP income from operations of $39.5 million in the same period last fiscal year. Non-GAAP net income was $32.8 million, or $0.36 per share, for the second quarter of fiscal 2015, compared to non-GAAP net income of $25.4 million, or $0.27 per share, in the same period last fiscal year. A reconciliation of GAAP to non-GAAP results is included in the financial tables included in this press release.

AspenTech had a cash and marketable securities balance of $256.5 million at December 31, 2014, a decrease of $32.7 million from the end of the prior quarter after repurchasing $72.0 million of common stock, of which $70.9 million settled in the quarter. During the second quarter, the company generated $41.4 million in non-GAAP cash flow from operations and $40.0 million in free cash flow after taking into consideration $1.4 million in capital expenditures and capitalized software.

Board of Directors Approves $450 Million Share Repurchase Program

AspenTech's Board of Directors approved a share repurchase program for up to $450 million. This program replaces the company’s existing share repurchase program, which had approximately $58 million remaining as of December 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,” which 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, January 28, 2015, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the second quarter fiscal year 2015 as well as the company’s business outlook.

The live dial-in number is (866) 604-6127 or (706) 634-5625, conference ID code 65776046. 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 65776046, through February 28, 2015.

About AspenTech

AspenTech is a leading supplier of software that optimizes process manufacturing – for energy, chemicals, 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 increase usage and product adoption of aspenONE offerings, and failure to continue to provide innovative, market-leading solutions; 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 obligation to update forward-looking statements after the date of this press release.

© 2015 Aspen Technology, Inc. AspenTech, aspenONE and the Aspen leaf logo are registered 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       Six Months Ended
        December 31,       December 31,
          2014           2013           2014           2013  
Revenue:                                
Subscription and software       $ 98,716         $ 88,924         $ 197,459         $ 167,607  
Services and other         9,074           9,845           17,457           18,727  
Total revenue         107,790           98,769           214,916           186,334  
Cost of revenue:                                
Subscription and software         5,208           5,022           10,409           9,642  
Services and other         7,057           7,421           14,237           14,879  
Total cost of revenue         12,265           12,443           24,646           24,521  
Gross profit         95,525           86,326           190,270           161,813  
Operating expenses:                                
Selling and marketing         22,821           24,178           44,439           47,109  
Research and development         15,957           15,016           32,225           30,850  
General and administrative         10,226           11,020           22,451           22,893  
Total operating expenses         49,004           50,214           99,115           100,852  
Income from operations         46,521           36,112           91,155           60,961  
Interest income         132           307           268           694  
Interest expense         (4 )         (8 )         (7 )         (26 )
Other income (expense), net         (248 )         (531 )         (60 )         (1,335 )
Income before provision for income taxes         46,401           35,880           91,356           60,294  
Provision for income taxes         15,937           12,617           31,924           22,032  
Net income       $ 30,464         $ 23,263         $ 59,432         $ 38,262  
Net income per common share:                                
Basic       $ 0.34         $ 0.25         $ 0.66         $ 0.41  
Diluted       $ 0.34         $ 0.25         $ 0.65         $ 0.41  
Weighted average shares outstanding:                                
Basic         89,942           92,839           90,562           93,124  
Diluted         90,471           93,816           91,196           94,137  
                                 
                                 
(*)- Certain items in prior period Consolidated Statements of Operations have been reclassified to conform to the current period presentation.
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited in thousands, except share data)
                       
            December 31,         June 30,
            2014         2014
                       
ASSETS                      
Current assets:                      
Cash and cash equivalents           $ 158,443           $ 199,526  
Short-term marketable securities             72,675             67,619  
Accounts receivable, net             19,578             38,532  
Current portion of installments receivable, net             -             640  
Unbilled services             639             1,656  
Prepaid expenses and other current assets             9,015             10,567  
Prepaid income taxes             696             605  
Current deferred tax assets             4,920             10,537  
Total current assets             265,966             329,682  
Long-term marketable securities             25,334             31,270  
Non-current installments receivable, net             498             811  
Property, equipment and leasehold improvements, net             18,327             7,588  
Computer software development costs, net             1,153             1,390  
Goodwill             18,045             19,276  
Non-current deferred tax assets             11,265             12,765  
Other non-current assets             2,766             5,190  
Total assets           $ 343,354           $ 407,972  
                       
LIABILITIES AND STOCKHOLDERS’ EQUITY                      
Current liabilities:                      
Accounts payable           $ 2,250           $ 412  
Accrued expenses and other current liabilities             31,984             34,984  
Income taxes payable             1,983             2,168  
Current deferred revenue             197,778             228,940  
Total current liabilities             233,995             266,504  
Non-current deferred revenue             40,634             45,942  
Other non-current liabilities             31,005             11,850  
Commitments and contingencies                      
Series D redeemable convertible preferred stock, $0.10 par value—                      
Authorized— 3,636 shares as of December 31, 2014 and June 30, 2014                      
Issued and outstanding— none as of December 31, 2014 and June 30, 2014                      
Stockholders’ equity:                      
Common stock, $0.10 par value— Authorized—210,000,000 shares                      
Issued— 101,283,764 shares at December 31, 2014 and 101,033,740 shares at June 30, 2014                      
Outstanding— 88,867,557 shares at December 31, 2014 and 91,661,850 shares at June 30, 2014             10,128             10,103  
Additional paid-in capital             605,455             591,324  
Accumulated deficit             (204,602 )           (264,034 )
Accumulated other comprehensive income             6,819             9,372  

Treasury stock, at cost—12,416,207 shares of common stock at December 31, 2014
   and 9,371,890 shares at June 30, 2014

 

             (380,080 )           (263,089 )
Total stockholders’ equity             37,720             83,676  
Total liabilities and stockholders' equity           $ 343,354           $ 407,972  
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS*
(Unaudited in thousands)
                                       
              Three Months Ended       Six Months Ended
              December 31,       December 31,
                2014           2013           2014           2013  
  Cash flows from operating activities:                                    
  Net income           $ 30,465         $ 23,263         $ 59,432         $ 38,262  
  Adjustments to reconcile net income to net cash provided by operating activities:                                    
  Depreciation and amortization             1,506           1,277           2,858           2,479  
  Net foreign currency (gains) losses             (719 )         515           (1,379 )         1,079  
  Stock-based compensation             3,462           3,151           7,666           7,538  
  Deferred income taxes             6,213           8,173           21,773           16,791  
  Provision for bad debts             694           785           338           805  
  Tax benefits from stock-based compensation             7,612           42           7,684           83  
  Excess tax benefits from stock-based compensation             (7,612 )         (42 )         (7,684 )         (83 )
  Other non-cash operating activities             320           823           782           896  
  Changes in assets and liabilities:                                    
  Accounts receivable             4,450           5,323           18,519           6,475  
  Unbilled services             463           977           990           1,171  
  Prepaid expenses, prepaid income taxes, and other assets             1,672           666           2,914           1,536  
  Installments receivable             727           5,316           980           8,345  
  Accounts payable, accrued expenses, and other liabilities             2,707           3,867           (5,254 )         (5,651 )
  Deferred revenue             (18,128 )         (7,793 )         (35,844 )         (7,470 )
  Net cash provided by operating activities             33,832           46,343           73,775           72,256  
  Cash flows from investing activities:                                    
  Purchases of marketable securities             (27,063 )         (11,018 )         (39,048 )         (18,992 )
  Maturities of marketable securities             24,499           7,886           39,012           12,424  
  Purchases of property, equipment and leasehold improvements             (1,437 )         (809 )         (4,328 )         (1,724 )
  Capitalized computer software development costs             (1 )         (285 )         (137 )         (504 )
  Net cash used in investing activities             (4,002 )         (4,226 )         (4,501 )         (8,796 )
  Cash flows from financing activities:                                    
  Exercises of stock options             465           1,497           1,515           4,430  
  Repurchases of common stock             (70,905 )         (30,000 )         (115,905 )         (58,919 )
  Payments of tax withholding obligations related to restricted stock             (1,163 )         (1,788 )         (2,574 )         (4,237 )
  Excess tax benefits from stock-based compensation             7,612           42           7,684           83  
  Net cash used in financing activities             (63,991 )         (30,249 )         (109,280 )         (58,643 )
  Effect of exchange rate changes on cash and cash equivalents             (530 )         5           (1,077 )         228  
  (Decrease) increase in cash and cash equivalents             (34,691 )         11,873           (41,083 )         5,045  
  Cash and cash equivalents, beginning of period             193,134           125,604           199,526           132,432  
  Cash and cash equivalents, end of period           $ 158,443         $ 137,477         $ 158,443         $ 137,477  
                                       
  Supplemental disclosure of cash flow information:                                    
  Income taxes paid, net           $ 1,070         $ 3,715         $ 2,621         $ 5,045  
  Supplemental disclosure of non-cash investing and financing activities:                                    
 

Landlord improvement allowance included in leasehold improvements
  and deferred rent liability

 

                            
              $ 6,064         $ -         $ 6,064         $ -  
 

Purchases of property, equipment and leasehold improvements included in
  accounts payable and accrued expenses

 

             2,184           -           2,184           -  
  Common stock repurchases included in accrued expenses             1,712           -           1,712           -  
                                       
 

(*)- Certain items for the three and six months ended December 31, 2013 and the three months ended September 30, 2014 presented in the Consolidated Statements of Cash Flows have been reclassified to conform to the current period presentation.

 
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
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

December 31,

       Six Months Ended

December 31,
            2014       2013       2014       2013

Total expenses

                                    
GAAP total expenses (a)           $ 61,269         $ 62,657         $ 123,761         $ 125,373  
Less:                                    
Stock-based compensation (b)             (3,462 )         (3,151 )         (7,666 )         (7,538 )
Restructuring charges             -           (7 )         -           (4 )
Amortization of purchased technology intangibles             (224 )         (224 )         (448 )         (473 )
                                     
Non-GAAP total expenses           $ 57,583         $ 59,275         $ 115,647         $ 117,358  
                                     

Income from operations

                                    
GAAP income from operations           $ 46,521         $ 36,112         $ 91,155         $ 60,961  
Plus:                                    
Stock-based compensation (b)             3,462           3,151           7,666           7,538  
Restructuring charges             -           7           -           4  
Amortization of purchased technology intangibles             224           224           448           473  
                                     
Non-GAAP income from operations           $ 50,207         $ 39,494         $ 99,269         $ 68,976  
                                     

Net income

                                    
GAAP net income           $ 30,464         $ 23,263         $ 59,432         $ 38,262  
Plus:                                    
Stock-based compensation (b)             3,462           3,151           7,666           7,538  
Restructuring charges             -           7           -           4  
Amortization of purchased technology intangibles             224           224           448           473  
Less:                                    
Income tax effect on Non-GAAP items (c)             (1,327 )         (1,218 )         (2,921 )         (2,885 )
                                     
Non-GAAP net income           $ 32,823         $ 25,427         $ 64,625         $ 43,392  
                                     

Diluted income per share

                                    
GAAP diluted income per share           $ 0.34         $ 0.25         $ 0.65         $ 0.41  
Plus:                                    
Stock-based compensation (b)             0.04           0.03           0.08           0.08  
Restructuring charges             -           -           -           -  
Amortization of purchased technology intangibles             -           -           -           0.01  
Less:                                    
Income tax effect on Non-GAAP items (c)             (0.01 )         (0.01 )         (0.03 )         (0.03 )
                                     
Non-GAAP diluted income per share           $ 0.36         $ 0.27         $ 0.71         $ 0.46  
                                     
Shares used in computing Non-GAAP diluted income per share             90,471           93,816           91,196           94,137  
                                     
                                     
           

Three Months Ended
December 31,

 

      

Six Months Ended
December 31,

 
            2014       2013       2014       2013

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

                                    
GAAP cash flows from operating activities           $ 33,832         $ 46,343         $ 73,775         $ 72,256  
Plus:                                    
Excess tax benefits from stock-based compensation (d)             7,612           42           7,684           83  
                                     
Non-GAAP Cash Flows from Operating Activities           $ 41,444         $ 46,385         $ 81,459       # $ 72,339  
                                     
Less:                                    
Purchases of property, equipment and leasehold improvements             (1,437 )         (809 )         (4,328 )         (1,724 )
Capitalized computer software development costs             (1 )         (285 )         (137 )         (504 )
                                     
Free Cash Flow           $ 40,006         $ 45,291         $ 76,994         $ 70,111  
                                     
(a) GAAP total expenses                                    
           

Three Months Ended
December 31,

 

      

Six Months Ended
December 31,

 
            2014       2013       2014       2013
Total costs of revenue           $ 12,265         $ 12,443         $ 24,646         $ 24,521  
Total operating expenses             49,004           50,214           99,115           100,852  
GAAP total expenses           $ 61,269         $ 62,657         $ 123,761         $ 125,373  
                                     
(b) Stock-based compensation expense was as follows:                                    
           

Three Months Ended
December 31,

 

      

Six Months Ended
December 31,

 
            2014       2013       2014       2013
Cost of services and other           $ 339         $ 327         $ 677         $ 628  
Selling and marketing             754           710           1,504           1,821  
Research and development             973           889           1,964           1,745  
General and administrative             1,396           1,225           3,521           3,344  
Total stock-based compensation           $ 3,462         $ 3,151         $ 7,666         $ 7,538  
                                     
                                     
(c) The income tax effect on non-GAAP items for the three and six months ended December 31, 2014 and 2013 is calculated utilizing the Company's estimated federal and state tax rate of 36%.
                                     
(d) Excess tax benefits from stock-based compensation are included in non-GAAP cash flows from operating activities and free cash flow to be consistent with the treatment of other tax benefits. Refer to the Company's Form 10-Q for the period ended December 31, 2014 for additional details.

 

Source: Aspen Technology, Inc.

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