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

January 23, 2019
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BEDFORD, Mass.--(BUSINESS WIRE)--Jan. 23, 2019-- Aspen Technology, Inc. (NASDAQ: AZPN), the asset optimization software company, today announced financial results for its second quarter of fiscal year 2019 ended December 31, 2018.

“AspenTech delivered strong second quarter results, highlighted by annual spend growth of 9.4% year-over-year. We saw positive trends across each product suite and geography,” said Antonio Pietri, President and Chief Executive Officer of AspenTech. “The breadth of our performance demonstrated the positive impact of multiple favorable growth drivers and strong execution.”

Pietri continued, “We had our strongest quarterly APM performance to date, reflecting our ability to convert our pipeline into customer wins. We also saw solid demand in our core industries and increasing demand in the global economy industries for our APM suite. The growing adoption of APM reinforces our confidence in the ability to capitalize on this substantial market opportunity. We believe the success of the APM suite, the continued strength of our MSC suite and positive momentum in our Engineering suite position us to achieve our strategic objectives.”

Second Quarter Fiscal 2019 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 $513 million at the end of the second quarter of fiscal 2019, which increased 9.4% compared to the second quarter of fiscal 2018 and 3.0% sequentially.
  • AspenTech repurchased approximately 1.2 million shares of its common stock for $100.0 million in the second quarter of fiscal 2019.

Summary of Second Quarter Fiscal Year 2019 Financial Results

AspenTech’s total revenue of $140.4 million included:

  • License revenue, which represents the portion of a term license agreement allocated to the initial license,was $93.4 million in the second quarter of fiscal 2019, compared to $57.0 million in the second 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 $41.0 million in the second quarter of fiscal 2019, compared to $40.7 million in the second quarter of fiscal 2018.
  • Services and other revenue: was $6.0 million in the second quarter of fiscal 2019, compared to $7.8 million in the second quarter of fiscal 2018.

For the quarter ended December 31, 2018, AspenTech reported income from operations of $63.8 million, compared to income from operations of $30.1 million for the quarter ended December 31, 2017.

Net income was $59.2 million for the quarter ended December 31, 2018, leading to net income per share of $0.83, compared to net income per share of $1.81 in the same period last fiscal year. Net income in the year ago period benefited from one-time, non-cash items related to the implementation of Topic 606 and the implementation of the Tax Cuts and Jobs Act of 2017.

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 $71.2 million for the second quarter of fiscal 2019, compared to non-GAAP income from operations of $37.8 million in the same period last fiscal year. Non-GAAP net income was $65.1 million, or $0.92 per share, for the second quarter of fiscal 2019, compared to non-GAAP net income of $137.0 million, or $1.88 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 $54.4 million and borrowings of $220.0 million at December 31, 2018.

During the second quarter, the company generated $57.5 million in cash flow from operations and $57.3 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, 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, January 23, 2019, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the second 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 5661887. 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 5661887, through February 23, 2019.

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 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.

© 2019 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
December 31,

    

Six Months Ended
December 31,
      2018     2017     2018     2017
            As Adjusted           As Adjusted
Revenue:                        
License     $ 93,368       $ 56,975       $ 157,123       $ 135,865  
Maintenance     41,038       40,729       84,077       80,993  
Services and other     6,017       7,826       13,392       15,159  
Total revenue     140,423       105,530       254,592       232,017  
Cost of revenue:                        
License     1,819       1,233       3,484       2,464  
Maintenance     5,286       4,250       9,279       8,802  
Services and other     7,634       6,606       15,203       13,555  
Total cost of revenue     14,739       12,089       27,966       24,821  
Gross profit     125,684       93,441       226,626       207,196  
Operating expenses:                        
Selling and marketing     26,310       23,928       53,122       47,444  
Research and development     20,317       19,790       41,373       39,279  
General and administrative     15,299       19,618       31,383       34,655  
Total operating expenses     61,926       63,336       125,878       121,378  
Income from operations     63,758       30,105       100,748       85,818  
Interest income     7,485       6,239       14,554       12,545  
Interest (expense)     (2,164 )     (1,261 )     (3,978 )     (2,467 )
Other (expense), net     (578 )     (238 )     (451 )     (854 )
Income before income taxes     68,501       34,845       110,873       95,042  
Provision for (benefit from) income taxes     9,284       (97,187 )     13,591       (77,510 )
Net income     $ 59,217       $ 132,032       $ 97,282       $ 172,552  
Net income per common share:                        
Basic     $ 0.84       $ 1.83       $ 1.38       $ 2.37  
Diluted     $ 0.83       $ 1.81       $ 1.36       $ 2.35  
Weighted average shares outstanding:                        
Basic     70,428       72,342       70,708       72,683  
Diluted     71,148       73,036       71,600       73,333  
 

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited in Thousands, Except Share and Per Share Data)
             
     

December 31,
2018

    

June 30,
2018
            As Adjusted
ASSETS            
Current assets:            
Cash and cash equivalents     $ 54,428       $ 96,165  
Accounts receivable, net     56,586       41,810  
Current contract assets     321,135       304,378  

Contract costs

    

23,046

      

20,500

  
Prepaid expenses and other current assets     10,330       10,509  
Prepaid income taxes     921       2,601  
Total current assets    

466,446

      

475,963

  
Property, equipment and leasehold improvements, net     8,311       9,806  
Computer software development costs, net     691       646  
Goodwill     74,802       75,590  
Intangible assets, net     32,889       35,310  
Non-current contract assets     366,581       340,622  
Non-current deferred tax assets     1,651       11,090  
Other non-current assets     1,075       1,297  
Total assets     $ 952,446       $ 950,324  
LIABILITIES AND STOCKHOLDERS’ EQUITY            
Current liabilities:            
Accounts payable     $ 5,249       $ 4,230  
Accrued expenses and other current liabilities     36,688       39,515  
Income taxes payable     43,573       1,698  
Borrowings under credit agreement     220,000       170,000  
Current deferred revenue     23,145       15,150  
Total current liabilities     328,655       230,593  
Non-current deferred revenue     18,167       12,354  
Deferred income taxes     157,238       214,125  
Other non-current liabilities     16,192       17,068  
Commitments and contingencies (Note 16)            
Series D redeemable convertible preferred stock, $0.10 par value—
Authorized— 3,636 shares as of December 31, 2018 and June 30, 2018
Issued and outstanding— none as of December 31, 2018 and June 30, 2018		     —       —  
Stockholders’ equity:            
Common stock, $0.10 par value— Authorized—210,000,000 shares
Issued— 103,395,683 shares at December 31, 2018 and 103,130,300 shares at June 30, 2018
Outstanding— 69,803,177 shares at December 31, 2018 and 71,186,701 shares at June 30, 2018		     10,340       10,313  
Additional paid-in capital     725,493       715,475  
Retained earnings     1,162,790       1,065,507  
Accumulated other comprehensive income     70       1,388  
Treasury stock, at cost—33,592,506 shares of common stock at December 31, 2018 and 31,943,599 shares at June 30, 2018     (1,466,499 )     (1,316,499 )
Total stockholders’ equity     432,194       476,184  
Total liabilities and stockholders’ equity     $ 952,446       $ 950,324  
 

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited in Thousands)
             
      Three Months Ended
December 31,		     Six Months Ended
December 31,
      2018     2017     2018     2017
            As Adjusted           As Adjusted
Cash flows from operating activities:                        
Net income     $ 59,217       $ 132,032       $ 97,282       $ 172,552  
Adjustments to reconcile net income to net cash provided by operating activities:                        
Depreciation and amortization     2,049       1,605       4,049       3,358  
Net foreign currency losses     518       54       318       990  
Stock-based compensation     6,335       5,455       15,200       11,869  
Deferred income taxes     (2,804 )     (90,748 )     (47,474 )     (90,781 )
Provision for (recovery from) bad debts     658       (48 )     827       (28 )
Other non-cash operating activities     110       207       217       207  
Changes in assets and liabilities:                        
Accounts receivable     (3,935 )     8,760       (16,464 )     (333 )
Contract assets     (11,014 )     (5,136 )     (41,928 )     (40,927 )
Contract costs     (1,750 )     126       (2,546 )     (59 )
Prepaid expenses, prepaid income taxes, and other assets     2,599       (1,333 )     1,744       959  
Accounts payable, accrued expenses, income taxes payable and other liabilities     2,793       (8,557 )     37,718       (1,792 )
Deferred revenue     2,751       (15 )     14,154       (1,253 )
Net cash provided by operating activities     57,527       42,402       63,097       54,762  
Cash flows from investing activities:                        
Purchases of property, equipment and leasehold improvements     (84 )     (33 )     (180 )     (156 )
Payments for business acquisitions     —       (10,800 )     —       (10,800 )
Payments for capitalized computer software costs     (99 )     (291 )     (189 )     (356 )
Net cash used in investing activities     (183 )     (11,124 )     (369 )     (11,312 )
Cash flows from financing activities:                        
Exercises of stock options     412       1,137       4,466       3,548  
Repurchases of common stock     (97,446 )     (49,928 )     (147,423 )     (105,037 )
Payments of tax withholding obligations related to restricted stock     (6,475 )     (1,817 )     (9,654 )     (3,467 )
Deferred business acquisition payments     (1,200 )     (2,000 )     (1,200 )     (2,600 )
Proceeds from credit agreement     50,000       11,000       50,000       11,000  
Payments of credit agreement issuance costs     —       —       —       (351 )
Net cash used in financing activities     (54,709 )     (41,608 )     (103,811 )     (96,907 )
Effect of exchange rate changes on cash and cash equivalents     (255 )     50       (654 )     206  
Increase (decrease) in cash and cash equivalents     2,380       (10,280 )     (41,737 )     (53,251 )
Cash and cash equivalents, beginning of period     52,048       58,983       96,165       101,954  
Cash and cash equivalents, end of period     $ 54,428       $ 48,703       $ 54,428       $ 48,703  
                         
Supplemental disclosure of cash flow information:                        
Income taxes paid, net     $ 15,072       $ 28,499       $ 17,827       $ 29,742  
Interest paid     2,003       1,071       3,541       2,039  
 

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,
      2018     2017     2018     2017
            As Adjusted           As Adjusted

Total expenses

                        
GAAP total expenses (a)     $ 76,665       $ 75,425       $ 153,844       $ 146,199  
Less:                        
Stock-based compensation (b)     (6,335 )     (5,455 )     (15,200 )     (11,869 )
Amortization of intangibles     (1,156 )     (526 )     (2,223 )     (1,052 )
Litigation judgment     —       (1,548 )     —       (1,548 )
Acquisition related fees     —       (198 )     7       (328 )
                         
Non-GAAP total expenses     $ 69,174       $ 67,698       $ 136,428       $ 131,402  
                         

Income from operations

                        
GAAP income from operations     $ 63,758       $ 30,105       $ 100,748       $ 85,818  
Plus:                        
Stock-based compensation (b)     6,335       5,455       15,200       11,869  
Amortization of intangibles     1,156       526       2,223       1,052  
Litigation judgment     —       1,548       —       1,548  
Acquisition related fees     —       198       (7 )     328  
                         
Non-GAAP income from operations     $ 71,249       $ 37,832       $ 118,164       $ 100,615  
                         

Net income

                        
GAAP net income     $ 59,217       $ 132,032       $ 97,282       $ 172,552  
Plus:                        
Stock-based compensation (b)     6,335       5,455       15,200       11,869  
Amortization of intangibles     1,156       526       2,223       1,052  
Litigation judgment     —       1,548       —       1,548  
Acquisition related fees     —       198       (7 )     328  
Less:                        
Income tax effect on Non-GAAP items (c)     (1,573 )     (2,782 )     (3,657 )     (5,327 )
                         
Non-GAAP net income     $ 65,135       $ 136,977       $ 111,041       $ 182,022  
                         

Diluted income per share

                        
GAAP diluted income per share     $ 0.83       $ 1.81       $ 1.36       $ 2.35  
Plus:                        
Stock-based compensation (b)     0.09       0.07       0.21       0.16  
Amortization of intangibles     0.02       0.01       0.03       0.01  
Litigation judgment     —       0.02       —       0.02  
Acquisition related fees     —       0.01       —       0.01  
Less:                        
Income tax effect on Non-GAAP items (c)     (0.02 )     (0.04 )     (0.05 )     (0.07 )
                         
Non-GAAP diluted income per share     $ 0.92       $ 1.88       $ 1.55       $ 2.48  
                         
Shares used in computing Non-GAAP diluted income per share     71,148       73,036       71,600       73,333  
                         
                         
                         
      Three Months Ended
December 31,		     Six Months Ended
December 31,
      2018     2017     2018     2017
            As Adjusted           As Adjusted

Free Cash Flow

                        
GAAP cash flow from operating activities     $ 57,527       $ 42,402       $ 63,097       $ 54,762  
                         
Purchase of property, equipment and leasehold improvements     (84 )     (33 )     (180 )     (156 )
Capitalized computer software development costs     (99 )     (291 )     (189 )     (356 )
Non-capitalized acquired technology (d)     —       —       —       75  
Acquisition related fee payments     —       88       12       88  
Free Cash Flow     $ 57,344       $ 42,166       $ 62,740       $ 54,413  
                         
(a) GAAP total expenses                        
      Three Months Ended
December 31,		     Six Months Ended
December 31,
      2018     2017     2018     2017
            As Adjusted           As Adjusted
Total costs of revenue     $ 14,739       $ 12,089       $ 27,966       $ 24,821  
Total operating expenses     61,926       63,336       125,878       121,378  
GAAP total expenses     $ 76,665       $ 75,425       $ 153,844       $ 146,199  
                         
(b) Stock-based compensation expense was as follows:                        
      Three Months Ended
December 31,		     Six Months Ended
December 31,
      2018     2017     2018     2017
Cost of maintenance     $ 391       $ —       $ 537       $ —  
Cost of services and other     288       324       606       774  
Selling and marketing     1,194       1,006       2,526       1,891  
Research and development     1,637       1,891       3,932       3,788  
General and administrative     2,825       2,234       7,599       5,416  
Total stock-based compensation     $ 6,335       $ 5,455       $ 15,200       $ 11,869  

 

                        
       
                         

 

                
               

(c) The income tax effect on non-GAAP items for the three and six months ended December 31, 2018 is calculated utilizing the Company's statutory tax rate, of 21 percent. The income tax effect on non-GAAP items for the three and six months ended December 31, 2017 is calculated utilizing the Company's estimated federal and state tax rate.

(d) In the six months ended December 31, 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
David Grip
AspenTech
+1 781-221-5273
david.grip@aspentech.com

Investor Contact
Brian Denyeau
ICR
+1 646-277-1251
brian.denyeau@icrinc.com