Aspen Technology Announces Financial Results for First and Second Quarters of Fiscal 2005
CAMBRIDGE, Mass.--(BUSINESS WIRE)--March 15, 2005--Aspen Technology, Inc. (Nasdaq: AZPNE), the leading provider of software and services to the process industries, today reported financial results for its quarters ended September 30, 2004 and December 31, 2004, the first two quarters of fiscal 2005. Additionally, the Company announced in a separate press release that the Audit Committee of the Company's Board of Directors has completed its previously announced investigation and that the Company has restated its financial results for each of the fiscal years ended June 30, 2000 through June 30, 2004.
Total revenues for the quarter ended September 30, 2004 totaled $63.3 million, with software license revenues of $25.3 million and services revenues of $38.0 million. On a generally accepted accounting principles in the United States (GAAP) basis, the Company reported a net loss for the quarter of $33.6 million, or $0.80 per diluted share, which included restructuring charges and FTC legal costs of $21.5 million. On a non-GAAP basis, excluding these charges, litigation defense and settlement costs, the gain on the sale of the AXSYS product line, amortization of intangibles, and preferred stock dividend and discount accretion, the Company reported a loss of $3.7 million, or $0.04 per diluted share, for the quarter ended September 30, 2004.
Total revenues for the quarter ended December 31, 2004 totaled $71.6 million, with software license revenues of $36.7 million and services revenues of $34.9 million. The Company more than doubled the number of software license transactions of approximately $1 million or greater from the preceding quarter. On a GAAP basis, the Company reported a net loss for the quarter of $6.7 million, or $0.16 per diluted share. On a non-GAAP basis, excluding restructuring charges and FTC legal costs, fees related to the Audit Committee review, litigation defense and settlement costs, one-time contract termination costs, amortization of intangibles, and preferred stock dividend and discount accretion, the Company reported net income of $3.3 million, or $0.04 per share, for the quarter ended December 31, 2004.
"The sequential rebound of our software license revenues during the December quarter was significant given the multiple challenges facing the Company, and we believe it demonstrates AspenTech's strategic position within process manufacturers," said Mark Fusco, President and Chief Executive Officer of Aspen Technology. "With the completion of our settlement with the FTC and our restatement of financial results, our entire management team is finally in a position to focus all of its efforts on executing our business strategy. My top priority as the new CEO of AspenTech is now to improve the Company's operations so that we can deliver on the potential of our aspenONE solutions for the Enterprise Operations Management market. We will concentrate our efforts on better serving our customers, which we believe will enable us to grow our revenues and improve our profitability over time."
Focus on Integrated Solutions
"We are focused on taking advantage of the momentum initiated at our AspenWorld Conference in October 2004," said Fusco. "The feedback from our customers has been very positive about the launch of aspenONE, the first comprehensive set of software solutions for the Enterprise Operations Management market. Our aspenONE solutions provide process manufacturers with integrated systems designed to optimize their efficiency and profitability across the process manufacturers' global enterprises.
"We are now able to offer a unique value proposition and a significant return on investment based on solutions that support our customers' integrated business processes. I am confident in the long-term direction of AspenTech given the interest shown in aspenONE, the continued strength of our customers' businesses, our new solutions, and our continuing implementation of new initiatives to improve our internal business processes and execution."
During the first six months of fiscal 2005, AspenTech signed significant software license agreements with BP, Bayer, Bechtel, DSM, Fluor, Owens Corning, Pfizer, and Solutia. Approximately 70% of the Company's software license revenue during that period was associated with the Company's engineering solutions. Licenses with companies in the petroleum industry and engineering and construction industry made the most significant contributions to the Company's software revenue performance in the first six months of the fiscal year.
Improved Cost Structure
During the second quarter of fiscal 2005, the Company's management continued efforts to reduce the Company's expense infrastructure. On a GAAP basis, the Company's total expenses were $76.3 million. On a non-GAAP basis, excluding restructuring charges and FTC legal costs, fees related to the Audit Committee review, litigation defense and settlement costs, one-time contract termination costs, amortization of intangibles, and preferred stock dividend and discount accretion, the Company's total expenses were $69.9 million, down $2.9 million from last year. Management believes it will be able to leverage its improved operating model to improve the Company's profitability over the next twelve to eighteen months.
"We have worked diligently to put the Company in a position to drive significantly improved levels of profitability," said Charles Kane, Senior Vice President and Chief Financial Officer of Aspen Technology. "We are continuing to evaluate ways to capture organizational efficiencies by eliminating excess facilities charges and improving our business processes and organizational efficiency. A major focus of the Company for the remainder of the year will be to strengthen our balance sheet further, which has already improved dramatically over the past 18 months, with our increase in cash and decrease in debt."
Customer Service Award
During the quarter ended December 31, 2004, AspenTech received a Hall of Fame lifetime achievement award from the Service and Support Professionals Association (SSPA) as a result of the Company's receipt of a fifth straight "STAR" award for delivering outstanding customer service. This achievement recognizes that AspenTech has consistently delivered world-class technical support and customer service, and reflects the Company's commitment to continuously improving its support offerings. AspenTech believes that its ability to help customers capture value with complex solutions and outstanding customer support continues to be an important competitive differentiator in the marketplace.
Conference Call and Webcast
The Company will hold a conference call and webcast to discuss its financial results, the results of its Audit Committee review and financial restatement, the status and outlook for the Company's business, and related corporate and financial matters at 5:45 p.m. Eastern time on March 15, 2005. The live dial-in number for the call is 877-239-3024. Interested parties may also listen to a live webcast of the call by logging on to AspenTech's website: http://www.aspentech.com and clicking on the "webcast" link under the investor relations section of the site. A replay of the call will be archived on AspenTech's website and will also be available for 72 hours via telephone, beginning 8:30 p.m. Eastern time on March 15, 2005, by dialing (800) 642-1687 and entering confirmation code 4697408.
Non-GAAP Results
AspenTech reports non-GAAP financial results, which exclude certain non-operational, non-cash and other specified charges that management generally does not consider in evaluating the Company's ongoing operations. These results are provided as a complement to results provided in accordance with accounting principles generally accepted in the United States (known as "GAAP"). Management believes these non-GAAP measures help indicate underlying trends in the Company's business, and uses these measures to establish budgets and operational goals that are communicated internally and externally, to manage the Company's business and to evaluate its performance. A reconciliation of non-GAAP to GAAP is included in the attached condensed consolidated financial statements.
About AspenTech
Aspen Technology, Inc. provides industry-leading software and implementation services that enable process companies to use simulation models to increase efficiency and profitability. aspenONE(TM), a new generation of software solutions and services from AspenTech, represents a major step forward in helping process manufacturers achieve their strategic operational excellence initiatives. The first comprehensive offering to address the demands of the Enterprise Operations Management (EOM) market, aspenONE provides companies with integrated systems that enable them to manage and optimize their operational performance. Over 1,500 companies license on AspenTech's software, including Aventis, Bayer, BASF, BP, ChevronTexaco, Dow Chemical, DuPont, ExxonMobil, Fluor, GlaxoSmithKline, Shell, and Total. For more information, visit www.aspentech.com.
The last sentence of the fourth paragraph and last sentence of the eighth paragraph 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: AspenTech has identified material weakness in its internal controls with respect to software license revenue recognition, that, if not remedied effectively, could result in material misstatements; AspenTech's lengthy sales cycle which makes it difficult to predict quarterly operating results; fluctuations in AspenTech's quarterly operating results; AspenTech's dependence on customers in the cyclical chemicals, petrochemicals and petroleum industries; AspenTech's ability to raise additional capital as required; intense competition; AspenTech's need to develop and market products successfully; reliance on relationships with strategic partners; 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 undertakes no obligation to update the forward-looking statements after the date of this press release.
ASPEN TECHNOLOGY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
Sept. 30, June 30,
2004 2004
-------- --------
ASSETS
Current assets:
Cash, cash equivalents and short-term
investments $ 92,555 $107,677
Accounts receivable, net 47,611 50,874
Unbilled services 17,481 15,518
Current portion of long-term installments
receivable, net 25,482 25,244
Deferred tax asset 266 31
Prepaid expenses and other current assets 8,584 10,084
-------- --------
Total current assets 191,979 209,428
-------- --------
Long-term installments receivable, net 55,018 65,527
Equipment and leasehold improvements, net 17,325 18,664
Computer software development costs, net 17,018 16,863
Intangible assets, net 32,291 34,307
Purchased intellectual property, net 1,154 1,295
Deferred tax asset 2,586 2,492
Other assets 3,147 3,158
-------- --------
Total assets $320,518 $351,734
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt $ 58,366 $ 58,595
Accounts payable and accrued expenses 71,310 83,115
Unearned revenue 18,910 18,051
Deferred revenue 30,689 33,462
Deferred tax liability 424 325
-------- --------
Total current liabilities 179,699 193,548
-------- --------
Long-term debt, less current maturities 1,628 1,952
Deferred revenue, less current portion 4,485 5,363
Deferred tax liability 4,240 4,220
Other liabilities 23,262 11,527
-------- --------
Redeemable preferred stock 110,289 106,761
Total stockholders' equity (deficit) (3,085) 28,363
-------- --------
Total liabilities and stockholders' equity
(deficit) $320,518 $351,734
======== ========
ASPEN TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended
Sept. 30, Sept. 30,
2004 2003
--------- ---------
REVENUES:
Software licenses $25,273 $38,144
Service and other 37,997 42,265
--------- ---------
Total revenues 63,270 80,409
--------- ---------
COST OF REVENUES:
Cost of software licenses 3,941 3,617
Cost of service and other 22,108 24,382
Amortization of technology related
intangible assets 1,774 1,832
--------- ---------
Total cost of revenues 27,823 29,831
--------- ---------
Gross profit 35,447 50,578
OPERATING COSTS:
Selling and marketing 22,375 23,957
Research and development 12,183 16,006
General and administrative (includes
litigation defense and settlement costs
of $3,465 and $0 for the three months
ended September 30, 2004 and 2003,
respectively) (2) 10,427 6,872
Restructuring charges and FTC legal costs 21,508 -
Loss (gain) on sales and disposals of
assets (362) (302)
--------- ---------
Total operating costs 66,131 46,533
--------- ---------
Income (loss) from operations (30,684) 4,045
Other income (expense), net (393) (691)
Interest income, net 654 682
--------- ---------
Income (loss) before provision for income
taxes (30,423) 4,036
Provision for income taxes 340 (411)
--------- ---------
Net income (loss) (30,083) 3,625
Accretion of preferred stock discount
and dividend (1) (3,528) 3,852
--------- ---------
Net income (loss) applicable to common
stockholders $(33,611) $7,477
========= =========
EARNINGS PER SHARE:
Basic net income (loss) per common share $(0.80) $0.19
========= =========
Diluted net income (loss) per common
share $(0.80) $0.15
========= =========
Weighted average shares outstanding -
Basic 41,796 39,772
========= =========
Weighted average shares outstanding -
Diluted 41,796 59,437
========= =========
PRO FORMA (NON-GAAP) EARNINGS PER SHARE:
Pro forma (non-GAAP) net income excludes Accretion of preferred
stock discount and dividend, Amortization of technology related
intangible assets, Litigation defense and settlement costs,
Restructuring charges and FTC legal costs, and gain on sale of the
AXSYS product line. Pro forma (non-GAAP) weighted average shares
outstanding assumes the conversion of the Series D preferred stock
to common stock.
Net income (loss) $(3,670) $5,457
========= =========
Diluted earnings (loss) per share $(0.04) $0.09
========= =========
Weighted average shares outstanding -
diluted 86,590 59,437
========= =========
(1) Detail of this amount is provided on the reconciliation of net
income (loss) to pro forma (non-GAAP) net income
(2) This parenthetical reference will not be presented in our Form
10-K.
Supplemental information -
Three Months Ended
Sept. 30, Sept. 30,
2004 2003
--------- ---------
Reconciliation of total expenses to pro
forma (non-GAAP) total expenses
Total expenses (cost of revenues and
operating costs) $93,954 $76,364
Adjustments to total expenses (cost of
revenues and operating costs)
Amortization of technology related
intangible assets (1,774) (1,832)
Litigation defense and settlement
costs, included in General and
Administrative costs (3,465) -
Restructuring charges and FTC legal
costs (21,508) -
Gain on sale of AXSYS product line,
included in Loss (gain) on sales and
disposals of assets 334 -
--------- ---------
Pro forma (non-GAAP) total expenses (cost of
revenues and operating costs) $67,541 $74,532
========= =========
Reconciliation of net income (loss) to pro
forma (non-GAAP) net income (loss)
Net income (loss) applicable to common
stockholders $(33,611) $7,477
Adjustments to net income (loss)
applicable to common stockholders
Net effect of adjustments to cost of
revenues and operating costs 26,413 1,832
Preferred stock discount and dividend
accretion 3,528 2,600
Gain on conversion of Series B
redeemable preferred stock - (6,452)
--------- ---------
Pro forma (non-GAAP) net income (loss) $(3,670) $5,457
========= =========
ASPEN TECHNOLOGY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
Dec. 31, June 30,
2004 2004
--------- ---------
ASSETS
Current assets:
Cash, cash equivalents and short-term
investments $86,887 $107,677
Accounts receivable, net 50,431 50,874
Unbilled services 10,669 15,518
Current portion of long-term installments
receivable, net 28,573 25,244
Deferred tax asset 276 31
Prepaid expenses and other current assets 10,297 10,084
--------- ---------
Total current assets 187,133 209,428
--------- ---------
Long-term installments receivable, net 57,132 65,527
Equipment and leasehold improvements, net 16,355 18,664
Computer software development costs, net 16,998 16,863
Intangible assets, net 30,710 34,307
Purchased intellectual property, net 1,013 1,295
Deferred tax asset 2,619 2,492
Other assets 3,117 3,158
--------- ---------
Total assets $315,077 $351,734
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt $58,215 $58,595
Accounts payable and accrued expenses 70,206 83,115
Unearned revenue 20,997 18,051
Deferred revenue 26,699 33,462
Deferred tax liability 446 325
--------- ---------
Total current liabilities 176,563 193,548
--------- ---------
Long-term debt, less current maturities 1,368 1,952
Deferred revenue, less current portion 3,774 5,363
Deferred tax liability 4,242 4,220
Other liabilities 23,516 11,527
--------- ---------
Redeemable preferred stock 113,877 106,761
Total stockholders' equity (deficit) (8,263) 28,363
--------- ---------
Total liabilities and stockholders' equity
(deficit) $315,077 $351,734
========= =========
ASPEN TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended Six Months Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
------------------------------------------------
REVENUES:
Software licenses $36,732 $38,856 $62,005 $77,000
Service and other 34,893 42,886 72,890 85,151
------------------------------------------------
Total revenues 71,625 81,742 134,895 162,151
------------------------------------------------
COST OF REVENUES:
Cost of software
licenses 4,731 4,315 8,672 7,932
Cost of service and
other 21,913 24,246 44,021 48,628
Amortization of
technology related
intangible assets 1,778 1,842 3,552 3,674
------------------------------------------------
Total cost of revenues 28,422 30,403 56,245 60,234
------------------------------------------------
Gross profit 43,203 51,339 78,650 101,917
OPERATING COSTS:
Selling and marketing 23,401 23,651 45,776 47,608
Research and
development 11,574 14,294 23,757 30,300
General and
administrative
(includes litigation
defense and
settlement costs and
one-time contract
termination costs of
$4,460, $0, $6,854
and $0 for the three
months ended December
31, 2004 and 2003 and
six months ended
December 31, 2004 and
2003, respectively)
(2) 12,694 6,607 23,121 13,479
Restructuring charges
and FTC legal costs 219 2,000 21,727 2,000
Loss (gain) on sales
and disposals of
assets 5 (377) (357) (679)
------------------------------------------------
Total operating costs 47,893 46,175 114,024 92,708
------------------------------------------------
Income (loss) from
operations (4,690) 5,164 (35,374) 9,209
Other income
(expense), net 351 246 (42) (445)
Interest income, net 657 855 1,311 1,537
------------------------------------------------
Income (loss) before
provision for income
taxes (3,682) 6,265 (34,105) 10,301
Benefit from
(provision for)
income taxes 573 (1,578) 913 (1,989)
Equity in earnings
from joint ventures - (100) - (100)
------------------------------------------------
Net income (loss) (3,109) 4,587 (33,192) 8,212
Accretion of
preferred stock
discount and
dividend (1) (3,589) (3,352) (7,117) 500
------------------------------------------------
Net income (loss)
applicable to common
stockholders $(6,698) $1,235 $(40,309) $8,712
================================================
EARNINGS PER SHARE:
Basic net income
(loss) per common
share $(0.16) $0.03 $(0.96) $0.22
================================================
Diluted net income
(loss) per common
share $(0.16) $0.02 $(0.96) $0.19
================================================
Weighted average
shares outstanding -
Basic 42,153 40,175 41,974 39,967
================================================
Weighted average
shares outstanding -
Diluted 42,153 50,315 41,974 46,337
================================================
PRO FORMA (NON-GAAP) EARNINGS PER SHARE:
Pro forma (non-GAAP) net income excludes Accretion of preferred
stock discount and dividend, Amortization of technology related
intangible assets, Litigation defense and settlement costs,
one-time contract termination costs, Restructuring charges and FTC
legal costs, and gain on sale of the AXSYS product line. Pro forma
(non-GAAP) weighted average shares outstanding assumes the
conversion of the Series D preferred stock to common stock.
Net income $3,348 $8,429 $(322) $13,886
================================================
Diluted earnings
(loss) per share $0.04 $0.10 $(0.00) $0.19
================================================
Weighted average
shares outstanding -
diluted 87,209 86,651 87,203 73,589
================================================
(1) Detail of this amount is provided on the reconciliation of net
income (loss) to pro forma (non-GAAP) net income
(2)These parenthetical references will not be presented in our Form
10-K.
Supplemental information -
Three Months Six Months
Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
-------- -------- --------- ---------
Reconciliation of total
expenses to pro forma (non-
GAAP) total expenses
Total expenses (cost of revenues
and operating costs) $76,315 $76,578 $170,269 $152,942
Adjustments to total expenses
(cost of revenues and
operating costs)
Amortization of technology
related intangible assets (1,778) (1,842) (3,552) (3,674)
Litigation defense and
settlement costs, included in
General and Administrative
costs (300) - (3,765) -
Fees associated with the audit
committee review, included in
General and Administrative
costs (3,089) - (3,089) -
One-time contract termination
cost, included in General and
Administrative costs (1,071) - (1,071) -
Restructuring charges and FTC
legal costs (219) (2,000) (21,727) (2,000)
Gain on sale of AXSYS product
line, included in Loss (gain)
on sales and disposals of
assets - - 334 -
-------- -------- --------- ---------
Pro forma (non-GAAP) total
expenses (cost of revenues and
operating costs) $69,858 $72,736 $137,399 $147,268
======== ======== ========= =========
Reconciliation of net income
(loss) to pro forma (non-GAAP)
net income
Net income (loss) applicable to
common stockholders $(6,698) $1,235 $(40,309) $8,712
Adjustments to net income
(loss) applicable to common
stockholders
Net effect of adjustments to
cost of revenues and operating
costs 6,457 3,842 32,870 5,674
Preferred stock discount and
dividend accretion 3,589 3,352 7,117 5,952
Gain on conversion of Series B
redeemable preferred stock - - - (6,452)
-------- -------- --------- ---------
Pro forma (non-GAAP) net income $3,348 $8,429 $(322) $13,886
======== ======== ========= =========
CONTACT:
For Media:
Aspen Technology, Inc.
Robin Swanger, 281-504-3256
robin.swanger@aspentech.com
For Investors:
Aspen Technology, Inc.
Joshua Young, 617-949-1274
joshua.young@aspentech.com