Aspen Technology Announces Financial Results for the First Quarter of Fiscal 2018

October 26, 2017
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BEDFORD, Mass.--(BUSINESS WIRE)--Oct. 26, 2017-- Aspen Technology, Inc. (NASDAQ: AZPN), the asset optimization software company, today announced financial results for its first quarter of fiscal year 2018, ended September 30, 2017.

“AspenTech delivered a solid start to fiscal 2018 with financial results that exceeded our expectations, driven by positive, broad-based demand from owner-operator customers,” said Antonio Pietri, President and Chief Executive Officer of AspenTech.

Pietri continued, “During the quarter we continued to execute well against our Asset Optimization strategy and develop momentum among prospective customers for the APM product suite, which we believe positions us to enhance the value we deliver to both our customers and shareholders over the long term.”

First Quarter Fiscal 2018 and Recent 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 $461 million at the end of the first quarter of fiscal 2018, which increased 3.3% compared to the first quarter of fiscal 2017 and 0.3% sequentially.
  • GAAP operating margin was 43.4%, compared to 45.6% in the first quarter of fiscal 2017. Non-GAAP operating margin was 49.2%, compared to 50.4% in the first quarter of fiscal 2017.
  • AspenTech repurchased approximately 839,000 shares of its common stock for $50.0 million in the first quarter of fiscal 2018.

Summary of First Quarter Fiscal Year 2018 Financial Results

AspenTech’s total revenue of $122.8 million included:

  • Subscription and software revenue was $115.8 million in the first quarter of fiscal 2018, an increase from $113.4 million in the first quarter of fiscal 2017.
  • Services and other revenue was $7.0 million in the first quarter of fiscal 2018, compared to $6.6 million in the first quarter of fiscal 2017.

For the quarter ended September 30, 2017, AspenTech reported income from operations of $53.3 million, compared to income from operations of $54.7 million for the quarter ended September 30, 2016.

Net income was $34.8 million for the quarter ended September 30, 2017, leading to net income per share of $0.47, 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 $60.4 million for the first quarter of fiscal 2018, compared to non-GAAP income from operations of $60.5 million in the same period last fiscal year. Non-GAAP net income was $39.3 million, or $0.53 per share, for the first quarter of fiscal 2018, compared to non-GAAP net income of $38.7 million, or $0.49 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 $59.0 million and borrowings of $140.0 million at September 30, 2017.

During the first quarter, the company generated $12.4 million in cash flow from operations and $12.2 million in free cash flow. Free cash flow is calculated as net cash provided by operating activities adjusted for the net impact of: purchases of property, equipment and leasehold improvements; capitalized computer software development costs; non-capitalized acquired technology, excess tax benefits from stock-based compensation, and other nonrecurring items, such as acquisition or litigation related payments.

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, October 26, 2017, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the first quarter fiscal year 2018 as well as the company’s business outlook.

The live dial-in number is (866) 604-6127 or (443) 961-0460, conference ID code 98608997. 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 98608997, through November 26, 2017.

About AspenTech

AspenTech is a leading software supplier for optimizing asset performance. Our products thrive in complex, industrial environments where it is critical to optimize the asset design, operation and maintenance lifecycle. AspenTech uniquely combines decades of process modeling expertise with big data machine learning. Our purpose-built software platform automates knowledge work and builds sustainable competitive advantage by delivering high returns over the entire asset lifecycle. As a result, companies in capital-intensive industries can maximize uptime and push the limits of performance, running their assets faster, safer, longer and greener. Visit AspenTech.com to find out more.

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 or grow the aspenONE APM business, and failure to continue to provide innovative, market-leading solutions; the demand for, or usage of, aspenONE software declines for any reason, including declines due to adverse changes in the capital-intensive process industries; unfavorable economic and market conditions or a lessening demand in the market for asset 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 AspenTech leaf logo are 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
September 30,
      2017     2016
Revenue:            
Subscription and software     $ 115,756       $ 113,444  
Services and other     7,025       6,606  
Total revenue     122,781       120,050  
Cost of revenue:            
Subscription and software     5,783       5,069  
Services and other     6,949       6,437  
Total cost of revenue     12,732       11,506  
Gross profit     110,049       108,544  
Operating expenses:            
Selling and marketing     23,571       22,025  
Research and development     19,489       18,632  
General and administrative     13,676       13,157  
Total operating expenses     56,736       53,814  
Income from operations     53,313       54,730  
Interest income     141       272  
Interest (expense)     (1,206 )     (869 )
Other (expense) income, net     (616 )     646  
Income before provision for income taxes     51,632       54,779  
Provision for income taxes     16,877       19,779  
Net income     $ 34,755       $ 35,000  
Net income per common share:            
Basic     $ 0.48       $ 0.44  
Diluted     $ 0.47       $ 0.44  
Weighted average shares outstanding:            
Basic     73,024       79,048  
Diluted     73,609       79,385  
 

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited in thousands, except share data)
             
     

September 30,
2017

    

June 30,
2017
ASSETS            
Current assets:            
Cash and cash equivalents     $ 58,983       $ 101,954  
Accounts receivable, net     28,284       27,670  
Prepaid expenses and other current assets     11,336       12,061  
Prepaid income taxes     3,334       4,501  
Total current assets     101,937       146,186  
Property, equipment and leasehold improvements, net     12,360       13,400  
Computer software development costs, net     706       667  
Goodwill     51,738       51,248  
Intangible assets, net     20,263       20,789  
Non-current deferred tax assets     14,404       14,352  
Other non-current assets     1,315       1,300  
Total assets     $ 202,723       $ 247,942  
LIABILITIES AND STOCKHOLDERS’ DEFICIT            
Current liabilities:            
Accounts payable     $ 3,522       $ 5,467  
Accrued expenses and other current liabilities     36,761       48,149  
Income taxes payable     15,913       1,603  
Borrowings under credit agreement     140,000       140,000  
Current deferred revenue     233,476       272,024  
Total current liabilities     429,672       467,243  
Non-current deferred revenue     26,754       28,335  
Other non-current liabilities     13,754       13,148  
Commitments and contingencies (Note 15)            
Series D redeemable convertible preferred stock, $0.10 par value—
Authorized— 3,636 shares as of September 30, 2017 and June 30, 2017
Issued and outstanding— none as of September 30, 2017 and June 30, 2017		     —       —  
Stockholders’ deficit:            
Common stock, $0.10 par value— Authorized—210,000,000 shares
Issued— 102,692,094 shares at September 30, 2017 and 102,567,129 shares at June 30, 2017
Outstanding— 72,706,959 shares at September 30, 2017 and 73,421,153 shares at June 30, 2017		     10,269       10,257  
Additional paid-in capital     694,638       687,479  
Retained earnings     191,275       156,520  
Accumulated other comprehensive income     2,860       1,459  
Treasury stock, at cost—29,985,135 shares of common stock at September 30, 2017 and 29,145,976 shares at June 30, 2017     (1,166,499 )     (1,116,499 )
Total stockholders’ deficit     (267,457 )     (260,784 )
Total liabilities and stockholders’ deficit     $ 202,723       $ 247,942  
 

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

Three Months Ended
September 30,
      2017     2016
Cash flows from operating activities:            
Net income     $ 34,755       $ 35,000  
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation and amortization     1,753       1,791  
Net foreign currency (gains) losses     936       (745 )
Stock-based compensation     6,414       4,958  
Deferred income taxes     (33 )     (46 )
Provision for (recovery from) bad debts     20       (7 )
Tax benefits from stock-based compensation     —       584  
Excess tax benefits from stock-based compensation     —       (584 )
Other non-cash operating activities     —       90  
Changes in assets and liabilities:            
Accounts receivable     (504 )     (1,355 )
Prepaid expenses, prepaid income taxes, and other assets     2,292       1,885  
Accounts payable, accrued expenses, income taxes payable and other liabilities     6,764       12,520  
Deferred revenue     (40,037 )     (27,841 )
Net cash provided by operating activities     12,360       26,250  
Cash flows from investing activities:            
Purchases of marketable securities     —       (193,748 )
Maturities of marketable securities     —       53,184  
Purchases of property, equipment and leasehold improvements     (123 )     (898 )
Payments for business acquisitions     —       (5,400 )
Payments for capitalized computer software costs     (65 )     (51 )
Net cash used in investing activities     (188 )     (146,913 )
Cash flows from financing activities:            
Exercises of stock options     2,411       3,089  
Repurchases of common stock     (55,109 )     (151,621 )
Payments of tax withholding obligations related to restricted stock     (1,650 )     (1,297 )
Deferred business acquisition payment     (600 )     —  
Excess tax benefits from stock-based compensation     —       584  
Payments of credit agreement issuance costs     (351 )     —  
Net cash used in financing activities     (55,299 )     (149,245 )
Effect of exchange rate changes on cash and cash equivalents     156       (51 )
Decrease in cash and cash equivalents     (42,971 )     (269,959 )
Cash and cash equivalents, beginning of period     101,954       318,336  
Cash and cash equivalents, end of period     $ 58,983       $ 48,377  
             
Supplemental disclosure of cash flow information:            
Income taxes paid, net     $ 1,243       $ 1,239  
Interest paid     968       850  
 

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
September 30,
      2017     2016

Total expenses

            
GAAP total expenses (a)     $ 69,468       $ 65,320  
Less:            
Stock-based compensation (b)     (6,414 )     (4,958 )
Non-capitalized acquired technology (e)     —       (350 )
Amortization of intangibles     (526 )     (55 )
Acquisition related fees     (130 )     (362 )
             
Non-GAAP total expenses     $ 62,398       $ 59,595  
             

Income from operations

            
GAAP income from operations     $ 53,313       $ 54,730  
Plus:            
Stock-based compensation (b)     6,414       4,958  
Non-capitalized acquired technology (e)     —       350  
Amortization of intangibles     526       55  
Acquisition related fees     130       362  
             
Non-GAAP income from operations     $ 60,383       $ 60,455  
             

Net income

            
GAAP net income     $ 34,755       $ 35,000  
Plus:            
Stock-based compensation (b)     6,414       4,958  
Non-capitalized acquired technology (e)     —       350  
Amortization of intangibles     526       55  
Acquisition related fees     130       362  
Less:            
Income tax effect on Non-GAAP items (c)     (2,545 )     (2,061 )
             
Non-GAAP net income     $ 39,280       $ 38,664  
             

Diluted income per share

            
GAAP diluted income per share     $ 0.47       $ 0.44  
Plus:            
Stock-based compensation (b)     0.08       0.06  
Non-capitalized acquired technology (e)     —       0.01  
Amortization of intangibles     0.01       —  
Acquisition related fees     —       0.01  
Less:            
Income tax effect on Non-GAAP items (c)     (0.03 )     (0.03 )
             
Non-GAAP diluted income per share     $ 0.53       $ 0.49  
             
Shares used in computing Non-GAAP diluted income per share     73,609       79,385  
             

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
September 30,
      2017     2016

Free Cash Flow

            
GAAP cash flow from operating activities     $ 12,360       $ 26,250  
             
Purchase of property, equipment and leasehold improvements     (123 )     (898 )
Capitalized computer software development costs     (65 )     (51 )
Non-capitalized acquired technology (e)     75       846  
Excess tax benefits from stock-based compensation (d)     —       584  
Free Cash Flow     $ 12,247       $ 26,731  
             
(a) GAAP total expenses            
     

Three Months Ended
September 30,
      2017     2016
Total costs of revenue     $ 12,732       $ 11,506  
Total operating expenses     56,736       53,814  
GAAP total expenses     $ 69,468       $ 65,320  
             
(b) Stock-based compensation expense was as follows:            
     

Three Months Ended
September 30,
      2017     2016
Cost of services and other     $ 450       $ 369  
Selling and marketing     885       955  
Research and development     1,896       1,062  
General and administrative     3,183       2,572  
Total stock-based compensation     $ 6,414       $ 4,958  
                     

(c) The income tax effect on non-GAAP items for the three months ended September 30, 2017 and 2016 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 the Company’s income taxes payable. The Company adopted ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU No. 2016-09”) effective July 1, 2017. The Company adopted the cash flow presentation prospectively, and accordingly, excess tax benefits from stock-based compensation of $0.5 million is presented as an operating activity as a component of net income for the three months ended September 30, 2017, while $0.6 million of excess tax benefits from stock-based compensation is presented as a financing activity for the three months ended September 30, 2016.

(e) In the three months ended September 30, 2016, the Company 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. The Company has 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 three months ended September 30, 2017 and 2016, the Company has excluded payments of $0.1 million and $0.8 million, respectively, for non-capitalized acquired technology (including $0.1 million and $0.5 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
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brian.denyeau@icrinc.com