Aspen Technology Announces Financial Results for the Second Quarter of Fiscal 2016

January 28, 2016
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BEDFORD, Mass.--(BUSINESS WIRE)--Jan. 28, 2016-- 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 2016, ended December 31, 2015.

Antonio Pietri, President and Chief Executive Officer of AspenTech, said, “AspenTech delivered solid second quarter results highlighted by continued year-over-year non-GAAP operating margin expansion and strong cash generation. Despite the macro environment, we continued to perform well, particularly in the downstream energy and chemicals businesses.”

Pietri added, “The Engineering & Construction and midstream and upstream energy vertical markets have become more challenging, as decreasing oil prices and continued market uncertainty have impacted demand due to lower CapEx and operating budgets. However, because of the mission-critical nature of our solutions and the significant value we deliver for customers, we believe we remain well-positioned to continue to generate growth in this environment. In addition, over the long term, we believe the opportunity to drive increased usage of the aspenONE® suite combined with our business model will position us to continue to generate strong levels of profitability and cash flow.”

Second Quarter Fiscal 2016 and Recent Business Highlights

  • 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 $430 million at the end of the second quarter of fiscal 2016, which increased 7.6% compared to the second quarter of fiscal 2015 and 1.6% sequentially.
  • GAAP operating margin was 47.3%, compared to 43.2% in the second quarter of fiscal 2015. Non-GAAP operating margin was 51.1%, compared to 46.6% in the second quarter of fiscal 2015.

Summary of Second Quarter Fiscal Year 2016 Financial Results

AspenTech’s total revenue of $119.2 million increased 10.5% from $107.8 million in the second quarter of the prior fiscal year.

  • Subscription and software revenue was $110.1 million in the second quarter of fiscal 2016, an increase from $98.7 million in the second quarter of fiscal 2015.
  • Services and other revenue was $9.0 million in the second quarter of fiscal 2016, compared to $9.1 million in the second quarter of fiscal 2015.

For the quarter ended December 31, 2015, AspenTech reported income from operations of $56.3 million, compared to income from operations of $46.5 million for the quarter ended December 31, 2014.

Net income was $36.7 million for the quarter ended December 31, 2015, leading to net income per share of $0.44, compared to net income per share of $0.34 in the same period last fiscal year.

Non-GAAP income from operations, which adds back stock-based compensation expense, amortization of intangibles associated with acquisitions, acquisition-related costs and non-capitalized acquired technology, was $60.9 million for the second quarter of fiscal 2016, compared to non-GAAP income from operations of $50.2 million in the same period last fiscal year. Non-GAAP net income was $39.6 million, or $0.47 per share, for the second quarter of fiscal 2016, compared to non-GAAP net income of $32.8 million, or $0.36 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 $200.6 million at December 31, 2015, an increase of $19.1 million from the end of the prior quarter.

During the second quarter, the company generated $20.7 million in cash flow from operations and $20.3 million in free cash flow after taking into consideration the net impact of $0.7 million in capital expenditures and capitalized software and $0.3 million in excess tax benefits from stock-based compensation.

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, January 28, 2016, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the second quarter fiscal year 2016 as well as the company’s business outlook.

The live dial-in number is (877) 245-0126 or (706) 634-5625, conference ID code 24090138. 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 24090138, through February 28, 2016.

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; AspenTech’s failure to consummate its proposed acquisition of KBC Advanced Technologies plc, or successfully integrate the business or realize the anticipated benefits if consummated; 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.

© 2016 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,
          2015         2014         2015         2014  
Revenue:                          
Subscription and software       $ 110,126       $ 98,716       $ 221,985       $ 197,459  
Services and other         9,025         9,074         17,462         17,457  
Total revenue         119,151         107,790         239,447         214,916  
Cost of revenue:                          
Subscription and software         4,967         5,208         10,209         10,409  
Services and other         6,921         7,057         14,651         14,237  
Total cost of revenue         11,888         12,265         24,860         24,646  
Gross profit         107,263         95,525         214,587         190,270  
Operating expenses:                          
Selling and marketing         21,178         22,821         43,614         44,439  
Research and development         15,981         15,957         32,578         32,225  
General and administrative         13,805         10,226         26,667         22,451  
Total operating expenses, net         50,964         49,004         102,859         99,115  
Income from operations         56,299         46,521         111,728         91,155  
Interest income         71         132         153         268  
Interest expense         (13 )       (4 )       (14 )       (7 )
Other income (expense), net         (157 )       (248 )       739         (60 )
Income before provision for income taxes         56,200         46,401         112,606         91,356  
Provision for income taxes         19,517         15,937         39,152         31,924  
Net income       $ 36,683       $ 30,464       $ 73,454       $ 59,432  
Net income per common share:                          
Basic       $ 0.44       $ 0.34       $ 0.88       $ 0.66  
Diluted       $ 0.44       $ 0.34       $ 0.87       $ 0.65  
Weighted average shares outstanding:                          
Basic         83,315         89,942         83,596         90,562  
Diluted         83,703         90,471         84,035         91,196  
                                           
 
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited in thousands, except share data)
               
        December 31,     June 30,
          2015         2015  
               
ASSETS              
Current assets:              
Cash and cash equivalents       $ 170,623       $ 156,249  
Short-term marketable securities         29,946         59,197  
Accounts receivable, net         14,777         30,721  
Current portion of installments receivable, net         254         1,589  
Unbilled services         668         1,108  
Prepaid expenses and other current assets         7,310         8,055  
Prepaid income taxes         538         542  
Current deferred tax assets         6,110         6,169  
Total current assets         230,226         263,630  
Long-term marketable securities         -         3,047  
Non-current installments receivable, net         258         253  
Property, equipment and leasehold improvements, net         17,049         18,039  
Computer software development costs, net         674         1,026  
Goodwill         16,258         17,360  
Non-current deferred tax assets         10,525         10,444  
Other non-current assets         1,403         1,562  
Total assets       $ 276,393       $ 315,361  
               
LIABILITIES AND STOCKHOLDERS’ DEFICIT              
Current liabilities:              
Accounts payable       $ 3,924       $ 5,240  
Accrued expenses and other current liabilities         29,996         38,483  
Income taxes payable         4,548         1,775  
Current deferred revenue         196,191         250,968  
Total current liabilities         234,659         296,466  
Non-current deferred revenue         33,870         37,919  
Other non-current liabilities         30,060         29,522  
Commitments and contingencies              
Series D redeemable convertible preferred stock, $0.10 par value—              
Authorized— 3,636 shares as of December 31, 2015 and June 30, 2015              
Issued and outstanding— none as of December 31, 2015 and June 30, 2015         -        
Stockholders’ deficit:              
Common stock, $0.10 par value— Authorized—210,000,000 shares              

Issued— 101,832,152 shares at December 31, 2015 and 101,607,520 shares at June 30, 2015

            
Outstanding— 83,389,335 shares at December 31, 2015 and 84,504,202 shares at June 30, 2015         10,183         10,161  
Additional paid-in capital         651,976         641,883  
Accumulated deficit         (72,173 )       (145,627 )
Accumulated other comprehensive income         4,317         6,470  
Treasury stock, at cost—18,442,817 shares of common stock at December 31, 2015

and 17,103,318 shares at June 30, 2015

         (616,499 )       (561,433 )
Total stockholders’ deficit         (22,196 )       (48,546 )
Total liabilities and stockholders' deficit       $ 276,393       $ 315,361  
                       
 

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited in thousands)
                     
        Three Months Ended   Six Months Ended
        December 31,   December 31,
          2015       2014       2015       2014  
Cash flows from operating activities:                    
Net income       $ 36,683     $ 30,465     $ 73,454     $ 59,432  
Adjustments to reconcile net income to net cash provided by operating activities:         -              
Depreciation and amortization         1,473       1,506       3,020       2,858  
Net foreign currency gains         (255 )     (719 )     (1,444 )     (1,379 )
Stock-based compensation         3,512       3,462       7,935       7,666  
Deferred income taxes (benefit)         (133 )     6,213       (133 )     21,773  
Provision for bad debts         150       694       176       338  
Tax benefits from stock-based compensation         254       7,612       1,831       7,684  
Excess tax benefits from stock-based compensation         (254 )     (7,612 )     (1,831 )     (7,684 )
Other non-cash operating activities         112       320       271       782  
Changes in assets and liabilities:         -              
Accounts receivable         6,951       4,450       15,720       18,519  
Unbilled services         328       463       423       990  
Prepaid expenses, prepaid income taxes, and other assets         840       1,672       231       2,914  
Installments receivable         13       727       1,339       980  
Accounts payable, accrued expenses, and other liabilities         (5,655 )     2,707       (3,307 )     (5,254 )
Deferred revenue         (23,293 )     (18,128 )     (58,513 )     (35,844 )
Net cash provided by operating activities         20,726       33,832       39,172       73,775  
Cash flows from investing activities:                    
Purchase of marketable securities         -       (27,063 )     -       (39,048 )
Maturities of marketable securities         21,679       24,499       32,049       39,012  
Purchase of property, equipment and leasehold improvements         (662 )     (1,437 )     (1,781 )     (4,328 )
Capitalized computer software development costs         -       (1 )     -       (137 )
Net cash provided by (used in) investing activities         21,017       (4,002 )     30,268       (4,501 )
Cash flows from financing activities:                    
Exercise of stock options         1,834       465       2,445       1,515  
Repurchases of common stock         (1,757 )     (70,905 )     (56,790 )     (115,905 )
Payment of tax withholding obligations related to restricted stock         (1,063 )     (1,163 )     (2,188 )     (2,574 )
Excess tax benefits from stock-based compensation         254       7,612       1,831       7,684  
Net cash used in financing activities         (732 )     (63,991 )     (54,702 )     (109,280 )
Effect of exchange rate changes on cash and cash equivalents         (127 )     (530 )     (364 )     (1,077 )
Increase (decrease) in cash and cash equivalents         40,884       (34,691 )     14,374       (41,083 )
Cash and cash equivalents, beginning of period         129,739       193,134       156,249       199,526  
Cash and cash equivalents, end of period       $ 170,623     $ 158,443     $ 170,623     $ 158,443  
                     
Supplemental disclosure of cash flow information:                    
Income taxes paid, net       $ 31,602     $ 1,070     $ 34,497     $ 2,621  
                                     
 
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Results of Operations and Free Cash Flow
The following tables reflect a reconciliation of selected Aspen Technology GAAP to Non-GAAP results of operations and cash flow.

(unaudited in thousands, except per share data)
                         
     

Three Months Ended
December 31,

Six Months Ended
December 31,
        2015         2014         2015         2014  

Total expenses

                        
GAAP total expenses (a)     $ 62,852       $ 61,269       $ 127,719       $ 123,761  
Less:                        
Stock-based compensation (b)       (3,512 )       (3,462 )       (7,935 )       (7,666 )
Non-capitalized acquired technology (e)       -         -         (250 )       -  
Amortization of purchased technology intangibles       (20 )       (224 )       (133 )       (448 )
Expense associated with pending Acquisition (f)       (1,028 )       -         (1,028 )       -  
                         
Non-GAAP total expenses     $ 58,292       $ 57,583       $ 118,373       $ 115,647  
                         

Income from operations

                        
GAAP income from operations     $ 56,299       $ 46,521       $ 111,728       $ 91,155  
Plus:                        
Stock-based compensation (b)       3,512         3,462         7,935         7,666  
Non-capitalized acquired technology (e)       -         -         250         -  
Amortization of purchased technology intangibles       20         224         133         448  
Expense associated with pending Acquisition (f)       1,028         -         1,028         -  
                         
Non-GAAP income from operations     $ 60,859       $ 50,207       $ 121,074       $ 99,269  
                         

Net income

                        
GAAP net income     $ 36,683       $ 30,464       $ 73,454         59,432  
Plus:                        
Stock-based compensation (b)       3,512         3,462         7,935         7,666  
Non-capitalized acquired technology (e)       -         -         250         -  
Amortization of purchased technology intangibles       20         224         133         448  
Expense associated with pending Acquisition (f)       1,028         -         1,028         -  
Less:                        
Income tax effect on Non-GAAP items (c)       (1,642 )       (1,327 )       (3,365 )       (2,921 )
                         
Non-GAAP net income     $ 39,601       $ 32,823       $ 79,435       $ 64,625  
                         

Diluted income per share

                        
GAAP diluted income per share     $ 0.44       $ 0.34       $ 0.87       $ 0.65  
Plus:                        
Stock-based compensation (b)       0.04         0.04         0.09         0.08  
Non-capitalized acquired technology (e)       -         -         -         -  
Amortization of purchased technology intangibles       -         -         -         -  
Expense associated with pending Acquisition (f)       0.01         -         0.01         -  
Less:                        
Income tax effect on Non-GAAP items (c)       (0.02 )       (0.01 )       (0.04 )       (0.03 )
                         
Non-GAAP diluted income per share     $ 0.47       $ 0.36       $ 0.95       $ 0.71  
                         
Shares used in computing Non-GAAP diluted income per share       83,703         90,471         84,035         91,196  
                         
                         
     

Three Months Ended
December 31,

Six Months Ended
December 31,
        2015         2014         2015         2014  

Free Cash Flow

                        
GAAP cash flow from operating activities     $ 20,726       $ 33,832       $ 39,172       $ 73,775  
                         
Purchase of property, equipment and leasehold improvements   (662 )       (1,437 )       (1,781 )       (4,328 )
Capitalized computer software development costs       -         (1 )       -         (137 )
Non-capitalized acquired technology (e)       -         -         1,250         -  
Excess tax benefits from stock-based compensation (d)       254         7,612         1,831         7,684  
                         
                         
Free Cash Flow     $ 20,318       $ 40,006       $ 40,472       $ 76,994  
                         
(a) GAAP total expenses                        
     

Three Months Ended
December 31,

Six Months Ended
December 31,
        2015         2014         2015         2014  
Total costs of revenue     $ 11,888       $ 12,265       $ 24,860       $ 24,646  
Total operating expenses       50,964         49,004         102,859         99,115  
GAAP total expenses     $ 62,852       $ 61,269       $ 127,719       $ 123,761  
                         
(b) Stock-based compensation expense was as follows:                        
     

Three Months Ended
December 31,

Six Months Ended
December 31,
        2015         2014         2015         2014  
Cost of services and other     $ 350       $ 339       $ 707       $ 677  
Selling and marketing       837         754         1,750         1,504  
Research and development       848         973         1,672         1,964  
General and administrative       1,477         1,396         3,806         3,521  
Total stock-based compensation     $ 3,512       $ 3,462       $ 7,935       $ 7,666  
                                         

(c) The income tax effect on non-GAAP items for the three months ended December 31, 2015 and 2014 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 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, 2015 for additional details.

(e) During the six months ended December 31, 2015, we acquired certain technology for $0.3 million as a part of projects initiated during the period to develop commercially available products. At the time of these purchases, the projects did not meet the accounting definition of having reached technological feasibility, and, as such, the costs of the acquired technology were expensed during the six months ended December 31, 2015. During the six months ended December 31, 2015, we excluded the payments of $1.3 million for the non-capitalized acquired technology (including a $1 million final payment related to non-capitalized acquired technology from fiscal year 2014) from free cash flow to be consistent with the treatment of other transactions where acquired assets are capitalized. There were no such activities for the three months ended December 31, 2015.

(f) Expense associated with pending acquisition of KBC Advanced Technologies plc. Refer to the Company's Form 10-Q for the period ended December 31, 2015 for additional details.

 

Source: Aspen Technology, Inc.

AspenTech
David Grip, +1 781-221-5273
david.grip@aspentech.com
or
ICR
Brian Denyeau, +1 646-277-1251
brian.denyeau@icrinc.com