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

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

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