Aspen Technology Announces Financial Results for the Second Quarter of Fiscal 2017

January 26, 2017
PDF Version

BEDFORD, Mass.--(BUSINESS WIRE)--Jan. 26, 2017-- 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 2017, ended December 31, 2016.

Antonio Pietri, President and Chief Executive Officer of AspenTech, said “AspenTech reported second quarter fiscal 2017 financial results that exceeded expectations from both a financial and operational perspective. We also achieved a major milestone in our Asset Optimization strategy with the release of the new aspenONE® Asset Performance Management™ (APM) suite. We are pleased with the positive feedback and strong interest we have received from early customers, and believe this new suite represents a significant opportunity and important growth driver for our business.”

Pietri continued, “We also see strong early demand for our recently acquired Mtell product, whose machine learning-based functionality enables prescriptive analytics for maximizing asset availability. We expect the Mtell product together with our Fidelis Reliability and Aspen Asset Analytics solutions to serve as core components of our asset performance management offerings going forward. We believe our expanding product portfolio will add to the long-term value we deliver to our shareholders.”

Second Quarter Fiscal 2017 Business Highlights

  • Annual spend, which the company defines as the annualized value of all term license and maintenance contracts at the end of the quarter, was approximately $450 million at the end of the second quarter of fiscal 2017, which increased 4.6% compared to the second quarter of fiscal 2016 and 0.9% sequentially.
  • GAAP operating margin was 46.7%, compared to 47.3% in the second quarter of fiscal 2016. Non-GAAP operating margin was 50.8%, compared to 51.1% in the second quarter of fiscal 2016.
  • AspenTech repurchased 1.3 million shares of its common stock for $70.0 million in the second quarter of fiscal 2017.

Summary of Second Quarter Fiscal Year 2017 Financial Results

AspenTech’s total revenue of $119.9 million included:

  • Subscription and software revenue was $112.9 million in the second quarter of fiscal 2017, an increase from $110.1 million in the second quarter of fiscal 2016.
  • Services and other revenue was $7.0 million in the second quarter of fiscal 2017, compared to $9.0 million in the second quarter of fiscal 2016.

For the quarter ended December 31, 2016, AspenTech reported income from operations of $56.1 million, compared to income from operations of $56.3 million for the quarter ended December 31, 2015.

Net income was $37.0 million for the quarter ended December 31, 2016, leading to net income per share of $0.48, compared to net income per share of $0.44 in the same period last fiscal year.

Non-GAAP income from operations, which adds back the impact of stock-based compensation expense, amortization of intangibles associated with acquisitions, acquisition-related expenses and non-capitalized acquired technology was $60.9 million for the second quarter of fiscal 2017, compared to non-GAAP income from operations of $60.9 million in the same period last fiscal year. Non-GAAP net income was $40.2 million, or $0.52 per share, for the second quarter of fiscal 2017, compared to non-GAAP net income of $39.6 million, or $0.47 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 cash and marketable securities of $140.0 million and borrowings of $140.0 million at December 31, 2016.

During the second quarter, the company generated $27.2 million in cash flow from operations and $27.5 million in free cash flow.

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 26, 2017, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the second quarter fiscal year 2017 as well as the company’s business outlook.

The live dial-in number is (866) 604-6127 or (443) 961-0460, conference ID code 54181526. 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 54181526, through February 26, 2017.

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 second and third paragraphs of this press release contain forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may vary significantly from AspenTech’s expectations based on a number of risks and uncertainties, including, without limitation: AspenTech’s 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, including declines due to adverse changes in the process industries; 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.

© 2017 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
December 31,

      

Six Months Ended
December 31,
        2016       2015       2016       2015
Revenue:                                
Subscription and software       $ 112,916         $ 110,126         $ 226,360         $ 221,985  
Services and other         7,017           9,025           13,623           17,462  
Total revenue         119,933           119,151           239,983           239,447  
Cost of revenue:                                
Subscription and software         5,176           4,967           10,245           10,209  
Services and other         6,403           6,921           12,839           14,651  
Total cost of revenue         11,579           11,888           23,084           24,860  
Gross profit         108,354           107,263           216,899           214,587  
Operating expenses:                                
Selling and marketing         21,829           21,178           43,854           43,614  
Research and development         18,597           15,981           37,229           32,578  
General and administrative         11,863           13,805           25,020           26,667  
Total operating expenses, net         52,289           50,964           106,103           102,859  
Income from operations         56,065           56,299           110,796           111,728  
Interest income         216           71           488           153  
Interest expense         (892 )         (13 )         (1,762 )         (14 )
Other income (expense), net         697           (157 )         1,344           739  
Income before provision for income taxes         56,086           56,200           110,866           112,606  
Provision for income taxes         19,076           19,517           38,855           39,152  
Net income       $ 37,010         $ 36,683         $ 72,011         $ 73,454  
Net income per common share:                                
Basic       $ 0.48         $ 0.44         $ 0.92         $ 0.88  
Diluted       $ 0.48         $ 0.44         $ 0.92         $ 0.87  
Weighted average shares outstanding:                                
Basic         76,905           83,315           77,977           83,596  
Diluted         77,318           83,703           78,356           84,035  
                                 
                 
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited in thousands, except share data)
                 
       

December 31,
2016

      

June 30,
2016
ASSETS                
Current assets:                
Cash and cash equivalents       $ 67,026         $ 318,336  
Short-term marketable securities         72,939           3,006  
Accounts receivable, net         17,927           20,476  
Prepaid expenses and other current assets         10,409           13,948  
Prepaid income taxes         108           5,557  
Total current assets         168,409           361,323  
Property, equipment and leasehold improvements, net         14,992           15,825  
Computer software development costs, net         571           720  
Goodwill         53,033           23,438  
Intangible assets, net         21,628           5,000  
Non-current deferred tax assets         7,542           12,236  
Other non-current assets         1,182           1,196  
Total assets       $ 267,357         $ 419,738  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
Current liabilities:                
Accounts payable       $ 1,289         $ 3,559  
Accrued expenses and other current liabilities         33,028           36,105  
Income taxes payable         6,800           439  
Borrowings under credit agreement         140,000           140,000  
Current deferred revenue         213,883           252,520  
Total current liabilities         395,000           432,623  
Non-current deferred revenue         27,452           29,558  
Other non-current liabilities         37,782           32,591  
Commitments and contingencies (Note 16)                
Series D redeemable convertible preferred stock, $0.10 par value—

Authorized— 3,636 shares as of December 31, 2016 and June 30, 2016

Issued and outstanding— none as of December 31, 2016 and June 30, 2016

     —           —  
Stockholders’ deficit:                
Common stock, $0.10 par value— Authorized—210,000,000 shares

Issued— 102,331,673 shares at December 31, 2016 and 102,031,960 shares at June 30, 2016

Outstanding— 76,244,859 shares at December 31, 2016 and 80,177,950 shares at June 30, 2016

     10,233           10,203  
Additional paid-in capital         672,041           659,287  
Accumulated deficit         66,334           (5,676 )
Accumulated other comprehensive income         14           2,651  
Treasury stock, at cost—26,086,814 shares of common stock at December 31, 2016 and 21,854,010 shares at June 30, 2016     (941,499 )         (741,499 )
Total stockholders’ deficit         (192,877 )         (75,034 )
Total liabilities and stockholders’ deficit       $ 267,357         $ 419,738  
                 
 

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

December 31,

       Six Months Ended

December 31,
        2016       2015       2016       2015
Cash flows from operating activities:                                
Net income       $ 37,010         $ 36,683         $ 72,011         $ 73,454  
Adjustments to reconcile net income to net cash provided by operating activities:                                
Depreciation and amortization         1,509           1,473           3,300           3,020  
Net foreign currency gains         (1,554 )         (255 )         (2,301 )         (1,444 )
Stock-based compensation         4,671           3,512           9,630           7,935  
Deferred income taxes         228           (133 )         182           (133 )
Provision for bad debts         63           150           56           176  
Tax benefits from stock-based compensation         448           254           1,032           1,831  
Excess tax benefits from stock-based compensation         (448 )         (254 )         (1,032 )         (1,831 )
Other non-cash operating activities         (50 )         112           40           271  
Changes in assets and liabilities, excluding initial effects of acquisitions:                                
Accounts receivable         3,849           6,951           2,494           15,720  
Prepaid expenses, prepaid income taxes, and other assets         1,776           1,181           3,661           1,993  
Accounts payable, accrued expenses, income taxes payable and other liabilities         (7,436 )         (5,655 )         5,084           (3,307 )
Deferred revenue         (12,899 )         (23,293 )         (40,740 )         (58,513 )
Net cash provided by operating activities         27,167           20,726           53,417           39,172  
Cash flows from investing activities:                                
Purchases of marketable securities         (490,000 )         —           (683,748 )         —  
Maturities of marketable securities         560,195           21,679           613,379           32,049  
Purchases of property, equipment and leasehold improvements         (476 )         (662 )         (1,374 )         (1,781 )
Payments for business acquisitions, net of cash acquired         (30,771 )         —           (36,171 )         —  
Capitalized computer software development costs         (49 )         —           (100 )         —  
Net cash provided by (used in) investing activities         38,899           21,017           (108,014 )         30,268  
Cash flows from financing activities:                                
Exercises of stock options         1,754           1,834           4,843           2,445  
Repurchases of common stock         (47,963 )         (1,757 )         (199,584 )         (56,790 )
Payments of tax withholding obligations related to restricted stock         (1,489 )         (1,063 )         (2,786 )         (2,188 )
Excess tax benefits from stock-based compensation         448           254           1,032           1,831  
Net cash used in financing activities         (47,250 )         (732 )         (196,495 )         (54,702 )
Effect of exchange rate changes on cash and cash equivalents         (167 )         (127 )         (218 )         (364 )
Increase (decrease) in cash and cash equivalents         18,649           40,884           (251,310 )         14,374  
Cash and cash equivalents, beginning of period         48,377           129,739           318,336           156,249  
Cash and cash equivalents, end of period       $ 67,026         $ 170,623         $ 67,026         $ 170,623  
                                 
Supplemental disclosure of cash flow information:                                
Income taxes paid, net       $ 23,761         $ 31,602         $ 25,000         $ 34,497  
Interest paid         729           13           1,579           14  
                                 
                                 
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
Reconciliation of 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,
        2016       2015       2016       2015

Total expenses

                                
GAAP total expenses (a)       $ 63,868         $ 62,852         $ 129,187         $ 127,719  
Less:                                
Stock-based compensation (b)         (4,671 )         (3,512 )         (9,630 )         (7,935 )
Non-capitalized acquired technology (e)         —           —           (350 )         (250 )
Amortization of intangibles         (56 )         (20 )         (111 )         (133 )

Acquisition related fees

         (99 )         (1,028 )         (461 )         (1,028 )
                                 
Non-GAAP total expenses       $ 59,042         $ 58,292         $ 118,635         $ 118,373  
                                 

Income from operations

                                
GAAP income from operations       $ 56,065         $ 56,299         $ 110,796         $ 111,728  
Plus:                                
Stock-based compensation (b)         4,671           3,512           9,630           7,935  
Non-capitalized acquired technology (e)         —           —           350           250  
Amortization of intangibles         56           20           111           133  

Acquisition related fees

         99           1,028           461           1,028  
                                 
Non-GAAP income from operations       $ 60,891         $ 60,859         $ 121,348         $ 121,074  
                                 

Net income

                                
GAAP net income       $ 37,010         $ 36,683         $ 72,011         $ 73,454  
Plus:                                
Stock-based compensation (b)         4,671           3,512           9,630           7,935  
Non-capitalized acquired technology (e)         —           —           350           250  
Amortization of intangibles         56           20           111           133  

Acquisition related fees

         99           1,028           461           1,028  
Less:                                
Income tax effect on Non-GAAP items (c)         (1,649 )         (1,642 )         (3,665 )         (3,365 )
                                 
Non-GAAP net income       $ 40,187         $ 39,601         $ 78,898         $ 79,435  
                                 

Diluted income per share

                                
GAAP diluted income per share       $ 0.48         $ 0.44         $ 0.92         $ 0.87  
Plus:                                
Stock-based compensation (b)         0.06           0.04           0.12           0.10  
Non-capitalized acquired technology (e)         —           —           0.01           0.01  
Amortization of intangibles         0.00           0.00           0.00           0.00  

Acquisition related fees

         0.00           0.01           0.01           0.01  
Less:                                
Income tax effect on Non-GAAP items (c)         (0.02 )         (0.02 )         (0.05 )         (0.04 )
                                 
Non-GAAP diluted income per share       $ 0.52         $ 0.47         $ 1.01         $ 0.95  
                                 
Shares used in computing Non-GAAP diluted income per share         77,318           83,703           78,356           84,035  
                                 
                                 
       

Three Months Ended
December 31,

      

Six Months Ended
December 31,
        2016       2015       2016       2015

Free Cash Flow

                                
GAAP cash flow from operating activities       $ 27,167         $ 20,726         $ 53,417         $ 39,172  
                                 
Purchase of property, equipment and leasehold improvements         (476 )         (662 )         (1,374 )         (1,781 )
Capitalized computer software development costs         (49 )         —           (100 )         —  
Non-capitalized acquired technology (e)         —           —           846           1,250  
Excess tax benefits from stock-based compensation (d)         448           254           1,032           1,831  

Acquisition related fees

         413           —           413           —  
                                 
Free Cash Flow       $ 27,503         $ 20,318         $ 54,234         $ 40,472  
                                 
(a) GAAP total expenses                                
       

Three Months Ended
December 31,

      

Six Months Ended
December 31,
        2016       2015       2016       2015
Total costs of revenue       $ 11,579         $ 11,888         $ 23,084         $ 24,860  
Total operating expenses         52,289           50,964           106,103           102,859  
GAAP total expenses       $ 63,868         $ 62,852         $ 129,187         $ 127,719  
                                 
(b) Stock-based compensation expense was as follows:                                
       

Three Months Ended
December 31,

      

Six Months Ended
December 31,
        2016       2015       2016       2015
Cost of services and other       $ 374         $ 350         $ 743         $ 707  
Selling and marketing         1,010           837           1,965           1,750  
Research and development         1,495           848           2,558           1,672  
General and administrative         1,792           1,477           4,364           3,806  
Total stock-based compensation       $ 4,671         $ 3,512         $ 9,630         $ 7,935  
                                 

(c) The income tax effect on non-GAAP items for the three and six months ended December 31, 2016 and 2015 is calculated utilizing the Company's estimated federal and state tax rate.

(d) Excess tax benefits are related to stock-based compensation tax deductions in excess of book compensation expense and reduce our income taxes payable. We have included the impact of excess tax benefits in free cash flow to be consistent with the treatment of other tax activity.

(e) In the six months ended December 31, 2016 and December 31, 2015, we acquired technology that did not meet the accounting requirements for capitalization and therefore the cost of the acquired technology was expensed as research and development. We have excluded the expense of the acquired technology from non-GAAP operating income to be consistent with transactions where the acquired assets were capitalized. In the six months ended December 31, 2016 and 2015, we have excluded payments of $0.8 million and $1.3 million, respectively, for the non-capitalized acquired technology (including $0.5 million and $1 million, respectively of final payments related to non-capitalized acquired technology from prior fiscal periods) from free cash flow to be consistent with the treatment of other transactions where the acquired assets were capitalized.

 

Source: Aspen Technology, Inc.

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