Aspen Technology Announces Financial Results for Second-Quarter 2006; Strong Top Line Performance Drives Highest Operating Profit and Margin since Fiscal 1998
CAMBRIDGE, Mass.--(BUSINESS WIRE)--Feb. 7, 2006--Aspen Technology, Inc. (Nasdaq: AZPN), a leading provider of software and services to the process industries, today announced its financial results for its fiscal 2006 second quarter, ended December 31, 2005.
For the quarter ended December 31, 2005, AspenTech reported total revenue of $76.4 million, an increase of 7% from the prior year period. Strong top line results were driven by license revenue of $41.7 million, an increase of 13% from the prior year period. Services revenue was $34.7 million, a 1% decrease from the $34.9 million in the prior year. Excluding services revenue of $1.0 million from the operator training business that was sold in December 2004, services revenue would have been $33.9 million on a non-GAAP basis in the prior year period, yielding an increase of 2% on a year-over-year basis.
Mark Fusco, President and CEO of AspenTech, stated, "In 2005, AspenTech delivered on each of the strategic objectives presented when I took over as CEO. These accomplishments were the result of the hard work of our employees and the loyalty of our blue chip customer base." Fusco added, "After re-aligning our cost and organizational structure, we successfully returned the Company to top-line growth in all parts of our business, including our best performance to date with our aspenONE(TM) solutions suite. Our end markets remain strong, and our unique suite of integrated aspenONE solutions, industry leading domain expertise and solid financial base position us well to capitalize on the growing demand in our core vertical markets to optimize plant operations."
For the quarter ended December 31, 2005, AspenTech's income from operations and net income applicable to common shareholders, determined in accordance with generally accepted accounting principles (GAAP), were $8.9 million and $4.3 million, respectively. This represents an increase from a GAAP loss from operations of ($4.7) million and net loss applicable to common shareholders of ($6.7) million in the same period last year. GAAP net income per share applicable to common shareholders on a diluted basis was $0.08 for the quarter ended December 31, 2005, compared with a net loss per share applicable to common shareholders of ($0.16) in the same period last year.
For the quarter ended December 31, 2005, pro forma income from operations, which excludes items covered in the attached non-GAAP reconciliation table, was $13.3 million or an operating margin of 17%. For the quarter ended December 31, 2005, pro forma net income came in at $12.5 million, the highest level since the Company went public in the fiscal year 1995, leading to pro forma earnings per share of $0.14, an increase of 250% compared to the prior year period.
A reconciliation of GAAP to pro forma results has been provided in the financial statement tables included in the press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."
Charles Kane, CFO of AspenTech, stated, "The December quarter was evidence of the operating leverage potential in AspenTech's business model. For the first time, we saw the benefit of our streamlined cost structure combined with a strong top line performance." Kane added, "At the mid-point of the fiscal year, we are pleased with the operating and financial performance of the business, with all key operating metrics improving on a year-over-year basis, and continued strengthening of our balance sheet and cash flow."
Conference Call and Webcast
AspenTech will host a conference call and webcast today, February 7, 2006, at 4:45 pm (EST) to discuss the Company's financial results, business outlook, and related corporate and financial matters. The live dial in number is: 1-877-239-3024, conference ID code: 4298806. 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 via telephone at: 1-800-642-1687 or 1-706-645-9291, conference ID code 4298806, for four days, beginning at 6:00 pm EST on February 7, 2006.
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 this pro forma measure helps indicate underlying trends in the Company's business, and uses this pro forma measure 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 financial results, to GAAP financial results, is included in the attached condensed consolidated financial statements.
About AspenTech
Aspen Technology, Inc. provides industry-leading software and professional services that help process companies improve efficiency and profitability by enabling them to model, manage and control their operations. AspenTech's integrated aspenONE solutions are aligned with the key industry business processes, providing manufacturers the capabilities they need to optimize operational performance, make real-time decisions and synchronize the plant and supply chain. Over 1,500 leading companies already rely on AspenTech's software, including Bayer, BASF, BP, Chevron Corporation, DuPont, ExxonMobil, Fluor, GlaxoSmithKline, Sanofi-Aventis, Shell and Total. For more information, visit www.aspentech.com.
The third paragraph of this press release includes certain "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 plan to improve operational performance may not be implemented effectively; AspenTech has identified material weaknesses in its internal controls with respect to software license revenue recognition and other matters, that, if not remedied effectively, could result in material misstatements; risks around securities litigation and investigations; AspenTech's lengthy sales cycle 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; the possibility of new accounting standards or the interpretation of existing accounting standards affecting our financial results; 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; challenges associated with international operations; 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 current intention to update forward-looking statements after the date of this press release.
STATEMENT OF OPERATIONS
(in thousands, except per share data)
Three Months Six Months
Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2005 2004 2005 2004
------- ------- ------- -------
(Unaudited)
REVENUES:
Software licenses $41,690 $36,732 $66,007 $62,005
Service and other 34,701 34,893 70,437 72,890
------- ------- ------- -------
Total revenues 76,391 71,625 136,444 134,895
------- ------- ------- -------
COST OF REVENUES:
Cost of software licenses 4,244 4,731 8,026 8,672
Cost of service and other 17,859 21,913 35,103 44,021
Amortization of technology
related intangible assets 1,773 1,778 3,555 3,552
------- ------- ------- -------
Total cost of revenues 23,876 28,422 46,684 56,245
------- ------- ------- -------
Gross profit 52,515 43,203 89,760 78,650
OPERATING COSTS:
Selling and marketing 20,624 23,401 39,271 45,776
Research and development 11,771 11,574 21,905 23,757
General and administrative
(includes litigation costs,
fees associated with the
audit committee review and
one-time contract termination
costs of $0, $4,460, $1,900
and $7,925 for the three months
ended December 31, 2005 and 2004
and six months ended December 31,
2005 and 2004, respectively)(1) 9,884 12,694 20,069 23,121
Restructuring charges 995 219 3,194 21,727
Loss (gain) on sales and
disposals of assets 316 5 377 (357)
------- ------- ------- -------
Total operating costs 43,590 47,893 84,816 114,024
------- ------- ------- -------
Income (loss) from operations 8,925 (4,690) 4,944 (35,374)
Other income (expense), net 1,055 351 392 (42)
Interest income, net 244 657 395 1,311
------- ------- ------- -------
Income (loss) before income tax
benefit (provision) 10,224 (3,682) 5,731 (34,105)
Income tax benefit (provision) (2,080) 573 (2,720) 913
------- ------- ------- -------
Net income (loss) 8,144 (3,109) 3,011 (33,192)
Accretion of preferred stock
discount and dividend (3,843) (3,589) (7,621) (7,117)
------- ------- ------- -------
Net income (loss) applicable to
common shareholders $ 4,301 $(6,698) $(4,610)$(40,309)
======= ======= ======= =======
EARNINGS PER SHARE:
Net income (loss) per share
applicable to common
shareholders - Basic $ 0.10 $ (0.16) $ (0.11) $ (0.96)
======= ======= ======= =======
Net income (loss) per share
applicable to common
shareholders - Diluted $ 0.08 $ (0.16) $ (0.11) $ (0.96)
======= ======= ======= =======
Weighted average shares
outstanding
- Basic 43,743 42,153 43,491 41,974
======= ======= ======= =======
Weighted average shares
outstanding
- Diluted 52,765 42,153 43,491 41,974
======= ======= ======= =======
PRO FORMA (NON-GAAP) EARNINGS
PER SHARE:
Pro forma (non-GAAP) net income (loss) excludes Accretion of
preferred stock discount and dividend, Amortization of technology
related intangible assets, Stock-based compensation costs,
Litigation costs, Fees associated with the audit committee review,
one-time contract termination costs, Restructuring charges,
reversal of a sales tax reserve accrual, 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) $12,483 $ 3,348 $13,972 $ (322)
======= ======= ======= =======
Diluted net income (loss)
per share $ 0.14 $ 0.04 $ 0.16 $ (0.00)
======= ======= ======= =======
Weighted average shares
outstanding
- diluted 89,102 86,651 88,126 73,589
======= ======= ======= =======
(1) These parenthetical references will not be presented in our Form
10-Q.
Supplemental information -
Three Months Six Months
Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2005 2004 2005 2004
-------- -------- -------- --------
(Unaudited)
Stock-based compensation costs
included in the Statements of
Operations
Effective July 1, 2005, AspenTech adopted SFAS 123R, "Share-Based
Payment," and uses the modified prospective method to value its
share-based payments. Accordingly, for the three and six months
ended December 31, 2005, stock-based compensation was accounted
for under SFAS 123R while for the three and six months ended
December 31, 2004, stock-based compensation was accounted for
under APB 25, "Accounting for Stock Issued to Employees," as
permitted by SFAS 123. The amounts in the attached Statements of
Operations include stock-based compensation as follows:
Cost of service and other $ 302 $ - $ 532 $ -
Selling and marketing 550 - 958 -
Research and development 274 - 436 -
General and administrative 805 - 1,446 -
-------- -------- -------- --------
Total stock-based compensation $ 1,931 $ - $ 3,372 $ -
======== ======== ======== ========
Reconciliation of total expenses
to pro forma (non-GAAP)
total expenses
Total expenses (cost of revenues
and operating costs) $67,466 $76,315 $131,500 $170,269
Amortization of technology
related intangible assets (1,773) (1,778) (3,555) (3,552)
Stock-based compensation (1,931) - (3,372) -
Restructuring charges (995) (219) (3,194) (21,727)
Sales-tax reserve accrual,
included in Selling and
Marketing costs 360 - 1,060 -
Litigation costs, included
in General and Administrative
costs - (300) (1,900) (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)
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) $ 63,127 $ 69,858 $120,539 $137,399
======== ======== ======== ========
Reconciliation of Income (loss)
from operations to pro forma
(non-GAAP) Income from operations
Income (loss) from operations $ 8,925 $ (4,690) $ 4,944 $(35,374)
Adjustments to income (loss)
from operations
Net effect of adjustments to
cost of revenues and
operating costs 4,339 6,457 10,961 32,870
-------- -------- -------- --------
Pro forma (non-GAAP) Income
from operations $ 13,264 $ 1,767 $15,905 $ (2,504)
======== ======== ======== ========
Reconciliation of Net income (loss)
to pro forma (non-GAAP)
Net income (loss)
Net income (loss) applicable to
common shareholders $ 4,301 $ (6,698) $(4,610)$(40,309)
Adjustments to net income (loss)
applicable to common
shareholders
Net effect of adjustments to
cost of revenues and
operating costs 4,339 6,457 10,961 32,870
Preferred stock discount and
dividend accretion 3,843 3,589 7,621 7,117
-------- -------- -------- --------
Pro forma (non-GAAP) net
income (loss) $ 12,483 $ 3,348 $ 13,972 $ (322)
======== ======== ======== ========
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
Dec. 31, June 30,
2005 2005
--------- ---------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $57,458 $68,149
Accounts receivable, net 44,615 52,254
Unbilled services 9,533 9,826
Current portion of long-term installments
receivable, net 10,632 5,355
Deferred tax asset 702 692
Prepaid expenses and other current assets 9,115 11,483
--------- ---------
Total current assets 132,055 147,759
--------- ---------
Long-term installments receivable, net 28,746 19,425
Retained interest in sold receivables 17,145 16,667
Equipment and leasehold improvements, net 9,293 11,388
Computer software development costs, net 15,919 17,411
Intangible assets, net 23,251 26,852
Purchased intellectual property, net 447 730
Deferred tax asset 1,293 1,354
Other assets 2,536 2,656
--------- ---------
Total assets $230,685 $244,242
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt $ 502 $ 1,042
Accounts payable and accrued expenses 65,936 84,407
Unearned revenue 30,322 23,480
Deferred revenue 27,213 34,854
--------- ---------
Total current liabilities 123,973 143,783
--------- ---------
Long-term debt, less current maturities 234 338
Deferred revenue, less current portion 1,156 2,093
Deferred tax liability 2,780 2,760
Other liabilities 22,237 23,143
Redeemable preferred stock 128,831 121,210
Total stockholders' equity (deficit) (48,526) (49,085)
--------- ---------
Total liabilities and stockholders' equity
(deficit) $230,685 $244,242
========= =========
AspenTech, aspenONE, and the aspen leaf logo are trademarks of Aspen Technology, Inc., Cambridge, Mass.
CONTACT:
Media:
Aspen Technology, Inc.
Robin Swanger, 281-504-3256
robin.swanger@aspentech.com
Investor:
Integrated Corporate Relations
Kori Doherty, 617-217-2084
kdoherty@icrinc.com