Aspen Technology Announces Financial Results for the First Quarter of Fiscal 2019

October 24, 2018
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BEDFORD, Mass.--(BUSINESS WIRE)--Oct. 24, 2018-- Aspen Technology, Inc. (NASDAQ: AZPN), the asset optimization software company, today announced financial results for its first quarter of fiscal year 2019 ended September 30, 2018.

“We are pleased with our first quarter performance, which was highlighted by 8% year-over-year annual spend growth driven by solid performance across the company in each major geography and product suite. We are benefiting from broadening signs of demand among Engineering & Construction customers, in addition to continued positive trends among owner-operator customers,” said Antonio Pietri, President and Chief Executive Officer of AspenTech.

Pietri continued, “We are also pleased with the progress in our APM business. We are seeing growing market recognition of the technical superiority of our product offering, which is helping drive customer wins in our core verticals and the Global Economy Industries. APM represents an exciting, and sizable, growth opportunity in the early days of a market where we believe we are well positioned to win.”

Pietri concluded, “We continue to execute on our strategic priorities while also delivering high levels of profitability and free cash flow on an annual basis. As a reminder, now that we have adopted Topic 606, we will experience significant variability on our income statement, due to the timing of renewals and the fact that a significant amount of license revenue is now recognized up front instead of ratably. However, the fundamental business drivers and the value we provide customers have not changed under Topic 606.”

First Quarter Fiscal 2019 and Recent Business Highlights

All results for the first fiscal quarter of 2019 and the comparable periods are presented under ASC Topic 606, which the company adopted on July 1st, 2018.As a reminder, AspenTech’s income statement results are impacted by the adoption of Topic 606, which impacts both the timing and method of revenue recognition for term license contracts.

  • 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 $498 million at the end of the first quarter of fiscal 2019, which increased 8.1% compared to the first quarter of fiscal 2018 and 1.9% sequentially.
  • AspenTech repurchased approximately 473,000 shares of its common stock for $50.0 million in the first quarter of fiscal 2019.

Summary of First Quarter Fiscal Year 2019 Financial Results

AspenTech’s total revenue of $114.2 million included:

  • License revenue, which represents the portion of a term license agreement allocated to the initial license,was $63.8 million in the first quarter of fiscal 2019, compared to $78.9 million in the first quarter of fiscal 2018.
  • Maintenance revenue, which represents the portion of the term license agreement related to on-going support and the right to future product enhancements,was $43.0 million in the first quarter of fiscal 2019, compared to $40.3 million in the first quarter of fiscal 2018.
  • Services and other revenue: was $7.4 million in the first quarter of fiscal 2019, compared to $7.3 million in the first quarter of fiscal 2018.

For the quarter ended September 30, 2018, AspenTech reported income from operations of $37.0 million, compared to income from operations of $55.7 million for the quarter ended September 30, 2017.

Net income was $38.1 million for the quarter ended September 30, 2018, leading to net income per share of $0.53, compared to net income per share of $0.55 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 and acquisition related fees, was $46.9 million for the first quarter of fiscal 2019, compared to non-GAAP income from operations of $62.8 million in the same period last fiscal year. Non-GAAP net income was $45.9 million, or $0.64 per share, for the first quarter of fiscal 2019, compared to non-GAAP net income of $45.0 million, or $0.61 per share, in the same period last fiscal year. A reconciliation of GAAP to non-GAAP results is presented in the financial tables included in this press release.

AspenTech had cash and marketable securities of $52.0 million and borrowings of $170.0 million at September 30, 2018.

During the first quarter, the company generated $5.6 million in cash flow from operations and $5.4 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, and other nonrecurring items, such as acquisition 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 24, 2018, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the first quarter fiscal year 2019 as well as the company’s business outlook. The live dial-in number is (833) 713-6081 or (702) 374-0603, conference ID code 5091359. 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://ir.aspentech.com/events-and-presentations, 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 5091359, through November 25, 2018.

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 second, third and fourth 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 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 process or other capital-intensive industries; unfavorable economic and market conditions or a lessening demand in the market for asset process optimization software; risks of foreign operations or transacting business with customers outside the United States; risks of competition 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.

© 2018 Aspen Technology, Inc. AspenTech, aspenONE, and the Aspen leaf logo are trademarks of Aspen Technology, Inc. All rights reserved. All other trademarks are property of their respective owners.

Source: Aspen Technology, Inc.

 

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited in thousands, except per share data)

 
       
     

Three Months Ended
September 30,
      2018     2017
            As Adjusted
Revenue:            
License     $ 63,755       $ 78,890  
Maintenance     43,039       40,264  
Services and other     7,375       7,333  
Total revenue     114,169       126,487  
Cost of revenue:            
License     1,665       1,231  
Maintenance     3,993       4,552  
Services and other     7,569       6,949  
Total cost of revenue     13,227       12,732  
Gross profit     100,942       113,755  
Operating expenses:            
Selling and marketing     26,812       23,516  
Research and development     21,056       19,489  
General and administrative     16,084       15,037  
Total operating expenses     63,952       58,042  
Income from operations     36,990       55,713  
Interest income     7,069       6,306  
Interest (expense)     (1,814 )     (1,206 )
Other income (expense), net     128       (615 )
Income before provision for income taxes     42,373       60,198  
Provision for income taxes     4,307       19,677  
Net income     $ 38,066       $ 40,521  
Net income per common share:            
Basic     $ 0.54       $ 0.55  
Diluted     $ 0.53       $ 0.55  
Weighted average shares outstanding:            
Basic     70,988       73,024  
Diluted     72,015       73,609  
 

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

 
           

 
     

September 30,
2018

    

June 30,
2018
            As Adjusted
ASSETS            
Current assets:            
Cash and cash equivalents     $ 52,048       $ 96,165  
Accounts receivable, net     53,999       41,810  
Current contract assets    

317,967

      

304,378

  
Contract costs     21,296       20,500  
Prepaid expenses and other current assets     12,992       10,509  
Prepaid income taxes     1,422       2,601  
Total current assets    

459,724

      

475,963

  
Property, equipment and leasehold improvements, net     9,006       9,806  
Computer software development costs, net     695       646  
Goodwill     75,649       75,590  
Intangible assets, net     34,192       35,310  
Non-current contract assets    

357,947

      

340,622

  
Non-current deferred tax assets     1,176       11,090  
Other non-current assets     1,279       1,297  
Total assets     $ 939,668       $ 950,324  
LIABILITIES AND STOCKHOLDERS’ EQUITY            
Current liabilities:            
Accounts payable     $ 2,501       $ 4,230  
Accrued expenses and other current liabilities     32,000       39,515  
Income taxes payable     46,869       1,698  
Borrowings under credit agreement     170,000       170,000  
Current deferred revenue     23,737       15,150  
Total current liabilities     275,107       230,593  
Non-current deferred revenue     15,046       12,354  
Deferred income taxes     159,563       214,125  
Other non-current liabilities     16,833       17,068  
Commitments and contingencies (Note 16)            
Series D redeemable convertible preferred stock, $0.10 par value—
Authorized— 3,636 shares as of September 30, 2018 and June 30, 2018
Issued and outstanding— none as of September 30, 2018 and June 30, 2018		     —       —  
Stockholders’ equity:            
Common stock, $0.10 par value— Authorized—210,000,000 shares
Issued— 103,279,138 shares at September 30, 2018 and 103,130,300 shares at June 30, 2018
Outstanding— 70,862,163 shares at September 30, 2018 and 71,186,701 shares at June 30, 2018		     10,328       10,313  
Additional paid-in capital     724,752       715,475  
Retained earnings     1,103,573       1,065,507  
Accumulated other comprehensive income     965       1,388  
Treasury stock, at cost—32,416,975 shares of common stock at September 30, 2018 and 31,943,599 shares at June 30, 2018     (1,366,499 )     (1,316,499 )
Total stockholders’ equity     473,119       476,184  
Total liabilities and stockholders’ equity     $ 939,668       $ 950,324  
 

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

 
       
     

Three Months Ended
September 30,
      2018     2017
            As Adjusted
Cash flows from operating activities:            
Net income     $ 38,066       $ 40,521  
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation and amortization     2,000       1,753  
Net foreign currency (gains) losses     (200 )     936  
Stock-based compensation     8,865       6,414  
Deferred income taxes     (44,670 )     (33 )
Provision for bad debts     169       20  
Other non-cash operating activities     107       —  
Changes in assets and liabilities:            
Accounts receivable, net     (12,529 )     (9,093 )
Contract assets     (30,914 )    

(35,791

 )
Contract costs     (796 )    

(185

)
Prepaid expenses, prepaid income taxes, and other assets     (855 )     2,292  
Accounts payable, accrued expenses, income taxes payable and other liabilities     34,924       6,764  
Deferred revenue     11,403       (1,238 )
Net cash provided by operating activities     5,570       12,360  
Cash flows from investing activities:            
Purchases of property, equipment and leasehold improvements     (96 )     (123 )
Payments for capitalized computer software costs     (90 )     (65 )
Net cash used in investing activities     (186 )     (188 )
Cash flows from financing activities:            
Exercises of stock options     4,054       2,411  
Repurchases of common stock     (49,977 )     (55,109 )
Payments of tax withholding obligations related to restricted stock     (3,179 )     (1,650 )
Deferred business acquisition payments     —       (600 )
Payments of credit agreement issuance costs     —       (351 )
Net cash used in financing activities     (49,102 )     (55,299 )
Effect of exchange rate changes on cash and cash equivalents     (399 )     156  
Decrease in cash and cash equivalents     (44,117 )     (42,971 )
Cash and cash equivalents, beginning of period     96,165       101,954  
Cash and cash equivalents, end of period     $ 52,048       $ 58,983  
             
Supplemental disclosure of cash flow information:            
Income taxes paid, net     $ 2,755       $ 1,243  
Interest paid     1,538       968  
 

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,
      2018     2017
            As Adjusted

Total expenses

            
GAAP total expenses (a)     $ 77,179       $ 70,774  
Less:            
Stock-based compensation (b)     (8,865 )     (6,414 )
Amortization of intangibles     (1,067 )     (526 )
Acquisition related fees     7       (130 )
             
Non-GAAP total expenses     $ 67,254       $ 63,704  
             

Income from operations

            
GAAP income from operations     $ 36,990       $ 55,713  
Plus:            
Stock-based compensation (b)     8,865       6,414  
Amortization of intangibles     1,067       526  
Acquisition related fees     (7 )     130  
             
Non-GAAP income from operations     $ 46,915       $ 62,783  
             

Net income

            
GAAP net income     $ 38,066       $ 40,521  
Plus:            
Stock-based compensation (b)     8,865       6,414  
Amortization of intangibles     1,067       526  
Acquisition related fees     (7 )     130  
Less:            
Income tax effect on Non-GAAP items (c)     (2,084 )     (2,545 )
             
Non-GAAP net income     $ 45,907       $ 45,046  
             

Diluted income per share

            
GAAP diluted income per share     $ 0.53       $ 0.55  
Plus:            
Stock-based compensation (b)     0.13       0.08  
Amortization of intangibles     0.01       0.01  
Acquisition related fees     —       —  
Less:            
Income tax effect on Non-GAAP items (c)     (0.03 )     (0.03 )
             
Non-GAAP diluted income per share     $ 0.64       $ 0.61  
             
Shares used in computing Non-GAAP diluted income per share     72,015       73,609  
             
             
             
     

Three Months Ended
September 30,
      2018     2017
            As Adjusted

Free Cash Flow

            
GAAP cash flow from operating activities     $ 5,570       $ 12,360  
             
Purchase of property, equipment and leasehold improvements     (96 )     (123 )
Capitalized computer software development costs     (90 )     (65 )
Non-capitalized acquired technology (d)     —       75  
Acquisition related fee payments     12       —  
Free Cash Flow     $ 5,396       $ 12,247  
             
(a) GAAP total expenses            
     

Three Months Ended
September 30,
      2018     2017
            As Adjusted
Total costs of revenue     $ 13,227       $ 12,732  
Total operating expenses     63,952       58,042  
GAAP total expenses     $ 77,179       $ 70,774  
             
(b) Stock-based compensation expense was as follows:            
     

Three Months Ended
September 30,
      2018     2017
Cost of services and other     $ 465       $ 450  
Selling and marketing     1,331       885  
Research and development     2,295       1,896  
General and administrative     4,774       3,183  
Total stock-based compensation     $ 8,865       $ 6,414  

 

 

(c) The income tax effect on non-GAAP items for the three months ended September 30, 2018 is calculated utilizing the Company's statutory tax rate, of 21 percent. The income tax effect on non-GAAP items for the three months ended September 30, 2017 is calculated utilizing the Company's estimated federal and state tax rate.

(d) In the three months ended September 30, 2017, the Company has excluded $0.1 million 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