Aspen Technology Files Quarterly Report on Form 10-Q for the Second and Third Quarters of Fiscal 2008
Selected Preliminary Results for the Second Quarter Fiscal 2009
Mark Fusco, Chief Executive Officer of AspenTech, said "With over $63 million in license bookings during the second quarter of fiscal 2009, our performance for the quarter and first half of fiscal 2009 was solid compared to what was a strong year ago period, despite many of our customers facing increased economic pressures. During the second quarter, we saw a year-over-year increase in the number of seven figure deals and average deal size, which we believe shows continued interest in our differentiated, high value solutions." Fusco concluded, "We remain cautious about the macro environment; however, we continue to believe that AspenTech is well positioned to weather the current economic downturn as a result of our proven ROI, long-standing customer relationships with recurring term-based contracts, and demonstrated ability to manage expenses closely."
The company's cash balance as of December 31, 2008, was approximately $123 million, which was down from $134 million at the end of the first quarter of fiscal 2009, including the payment of approximately $13 million in taxes during the second quarter. The company did not sell any installments receivable during the second quarter of fiscal 2009 and it increased its company-owned installments receivables by approximately $17 million, which adds to future cash flows. The company also continued to reduce its secured borrowings balance, which was down by approximately $10 million for the quarter ending December 31, 2008.
Company Files 10Q's for the Second and Third Quarters of Fiscal 2008
Brad Miller, Chief Financial Officer of AspenTech, said "Now that the company is on file with all required quarterly reports for fiscal 2008, our next focus is completing the audit of Fiscal 2008, ending June 30, 2008, as quickly as possible. Importantly, we believe we will benefit from the significant time and resources invested in the reviews of our second and third quarter 10-Q's with our new independent auditing firm."
Miller added, "After considerable testing of the second and third quarter fiscal 2008 results, it was determined that the company's GAAP license revenue differed from license bookings due primarily to four large transactions in which license revenue will be recognized in subsequent quarters - based either on delivery of a small software component as part of a much larger aspenONE solution or as services are delivered. This difference can be seen in the significant increase in our deferred revenue balance as of March 31, 2008, which was up approximately $51 million, or 75% from September 30, 2007."
Miller concluded, "While the deferral of license revenue impacted our reported operating profitability in our fiscal second and third quarters, we are pleased that strong license bookings during this time period enabled the company to further strengthen its balance sheet. We held our cash balance relatively stable over these two quarters, while reducing secured borrowings and increasing customer accounts and installments receivable. We believe this is representative of the strong underlying growth of AspenTech's business during this time period."
Second Quarter Fiscal 2008 - ending December 31, 2007
For the second quarter ended December 31, 2007, AspenTech reported total revenue of $74.2 million, a decrease of 23% compared to the second quarter of fiscal 2007. Within total revenue, license revenue was $37.6 million, a decrease of 38%, and services revenue was $36.6 million, an increase of 3%, compared to the second quarter of fiscal 2007, respectively. The company closed two large contracts with a net present value totaling $23.8 million that did not meet all of the criteria for revenue recognition by the end of the second quarter of fiscal 2008 and, as such, were recorded as deferred revenue. There was no comparable impact on the prior year period.
AspenTech's income from operations, determined in accordance with generally accepted accounting principles (GAAP), was $4.1 million in the second quarter of fiscal 2008, representing an operating margin of 5.5%, compared to $24.5 million in the second quarter of fiscal 2007.
GAAP operating expenses in the second quarter of fiscal 2008 included $3.8 million of total stock-based compensation, $1.3 million in restructuring charges due to the company's continued office consolidations, and $2.7 million in excess auditing and professional fees associated with bringing the company's financial statements current - the combination of which reduced the company's operating margin by approximately 11 percentage points. These items reduced the company's operating margin by approximately 5 percentage points in the second quarter of fiscal 2007.
Net income was $9.3 million in the second quarter of fiscal 2008, including a tax benefit of $2.6 million due to the release of a valuation allowance on foreign deferred income taxes. The valuation allowance release was recorded as a benefit to the provision for income tax in the second quarter of fiscal 2008. Net income was $24.1 million in the second quarter of fiscal 2007.
Diluted income per share attributable to common shareholders was $0.10 for the quarter ended December 31, 2007, compared to $0.27 in the second quarter of fiscal 2007.
Third Quarter Fiscal 2008 - ending March 31, 2008
For the third quarter ended March 31, 2008, AspenTech reported total revenue of $74.2 million, a decrease of 7% compared to the third quarter of fiscal 2007. Within total revenue, license revenue was $40.0 million, a decrease of 8%, and services revenue was $34.2 million, a decrease of 5%, compared to the third quarter of fiscal 2007, respectively. The company closed two large contracts with a net present value totaling $21.2 million that did not meet all of the criteria for revenue recognition by the end of the third quarter of fiscal 2008 and, as such, were recorded as deferred revenue. There was no comparable impact on the prior year period.
AspenTech's income from operations, determined in accordance with generally accepted accounting principles (GAAP), was $1.9 million in the third quarter of fiscal 2008, representing an operating margin of 2.5% compared to $6.9 million in the third quarter of fiscal 2007.
GAAP operating expenses in the third quarter of fiscal 2008 included $2.1 million of non-cash stock-based compensation, $0.1 million in restructuring charges due to the company's continued office consolidations, and $3.6 million in excess auditing and professional fees associated with bringing the company's financial statements current - the combination of which reduced the company's operating margin by approximately 8 percentage points. These items reduced the company's operating margin by approximately 7 percentage points in the comparable period for fiscal 2007.
Net income was $4.0 million in the third quarter of fiscal 2008, a decrease compared to $5.1 million in the year ago period. Diluted income per share attributable to common shareholders was $0.04 for the quarter ended March 31, 2008, compared to $0.06 in the third quarter of fiscal 2007.
Balance Sheet, Cash Flow and Restatement of First Quarter Fiscal 2008
The company's cash balance at the end of the third quarter of fiscal 2008 was $136.4 million, an increase compared to $129.5 million at the end of the first quarter of fiscal 2008. For the nine months ended March 31, 2008, cash flow from operations was $47.7 million, offset by cash used in investing activities of $7.0 million and cash used in financing activities of $37.0 million.
Over the course of the second and third quarters of fiscal 2008, the company reduced its total secured borrowings account by $24.2 million and its collateralized receivables account by $49.0 million. Over this same time period, the company increased its accounts and installment receivable balances by $89.7 million.
The company's total deferred revenue balance at March 31, 2008, was $119 million, an increase of 77% since June 30, 2007.
The company has filed a restated cash flow statement and balance sheet for the first quarter of fiscal 2008. During this quarter repayments of secured borrowings were $7.8 million lower than originally reported, while they were $9.1 million higher than originally reported in the first quarter fiscal 2007. Offsetting adjustments were included in the cash flows from operations for both respective quarters. This correction did not impact the total cash repayments to the financial institutions, any change in total cash flows, or ending cash balances at the end of any reporting period.
The company also corrected an error in adjustments made to the accumulated deficit as of July 1, 2007, when it adopted FASB Interpretation No. 48. The company had previously recognized an increase of $3.0 million in the liability for unrecognized tax benefits, with an offsetting increase to the accumulated deficit upon adoption. The company currently believes it is appropriate to reverse this $3.0 million liability and the offsetting increase in accumulated deficit as of July 1, 2007. The company has today filed restated financial statements that correct these errors.
Conference Call and Webcast
AspenTech will host a conference call and webcast today, February 19, at 8:00am (Eastern Time), to discuss the Company's selected preliminary financial results for the second quarter of fiscal 2009, second and third quarter financial results for fiscal 2008, restated results for the first quarter of fiscal 2008, business outlook and related corporate and financial matters. The live dial-in number is (877) 239-3024, conference ID code (85678693). 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 (800) 642-1687 or (706) 645-9291, conference ID code (85678693) through February 26, 2009.
About AspenTech
AspenTech is a leading global supplier of software that optimizes process manufacturing - including oil and gas, petroleum, chemicals, pharmaceuticals and other industries that manufacture and produce products from a chemical process. With integrated aspenONE solutions, process manufacturers can implement best practices for optimizing their engineering, manufacturing and supply chain operations. As a result, AspenTech customers are better able to increase capacity, improve margins, reduce costs and become more energy efficient. To see how the world's leading process manufacturers rely on AspenTech to achieve their operational excellence goals, visit www.aspentech.com.
(C) 2009 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.
Forward Looking Statements This press release may 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: fluctuations in AspenTech's quarterly revenues, operating results and cash flow; difficulty in predicting quarterly revenue levels and operating results due to AspenTech's lengthy sales cycle; economic downturn in the highly cyclical oil and gas, chemicals, petrochemicals and petroleum industries from which AspenTech derives a majority of its total revenues; substantial damages and expenses AspenTech might incur as the result of securities and derivative litigation and government investigations based on AspenTech's restatement of its consolidated financial statements due to AspenTech's prior software accounting practices; a determination that AspenTech has failed to comply with its existing consent decree with the Federal Trade Commission; failure to remedy effectively material weaknesses identified by AspenTech in its internal control over financial reporting; risks associated with the delisting of AspenTech's common stock from The NASDAQ Stock Market; failure to manage international operations effectively, or failure to address the challenges associated with transacting business internationally; competition from software offered by current competitors and new market entrants, as well as from internally developed solutions; failure to develop new software products or enhance existing products and services; new accounting standards or interpretations of existing accounting standards that could adversely affect AspenTech's operating results; failure to develop or maintain strategic alliance relationships; failure to raise capital when needed; 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.
| Aspen Technology, INC. | ||||||
| CONSOLIDATED CONDENSED BALANCE SHEETS | ||||||
| (in thousands) | ||||||
|
March 31, |
June 30, |
|||||
| ASSETS | (Unaudited) | (Unaudited) | ||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 136,355 | $ | 132,267 | ||
| Accounts receivable, net | 63,957 | 47,200 | ||||
| Unbilled services | 4,493 | 10,641 | ||||
| Current portion of installments receivable, net | 43,141 | 14,214 | ||||
| Current portion of collateralized receivables, net | 57,253 | 104,473 | ||||
| Deferred tax assets | 2,620 | - | ||||
| Prepaid expenses and other current assets | 11,477 | 10,163 | ||||
| Total current assets | 319,296 | 318,958 | ||||
| Non-current installments receivable, net | 79,485 | 28,613 | ||||
| Non-current collateralized receivables, net | 116,901 | 140,603 | ||||
| Property and leasehold improvements, net | 10,814 | 6,535 | ||||
| Computer software development costs | 5,974 | 11,104 | ||||
| Other intangible assets, net | 689 | 585 | ||||
| Goodwill | 18,936 | 19,112 | ||||
| Other assets | 2,251 | 3,387 | ||||
| Total assets | $ | 554,346 | $ | 528,897 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
| Current liabilities: | ||||||
| Current portion of term debt | $ | - | $ | 193 | ||
| Current portion of secured borrowing | 56,149 | 101,826 | ||||
| Accounts payable | 3,202 | 5,833 | ||||
| Accrued expenses and other current liabilities | 61,461 | 67,068 | ||||
| Income tax payable | 19,960 | 28,674 | ||||
| Deferred revenue | 117,397 | 62,345 | ||||
| Total current liabilities | 258,169 | 265,939 | ||||
| Long-term secured borrowing | 114,570 | 104,324 | ||||
| Deferred revenue | 1,105 | 4,761 | ||||
| Deferred tax liability | 625 | 625 | ||||
| Other liabilities | 28,971 | 16,042 | ||||
| Total stockholders' equity | 150,906 | 137,206 | ||||
| Total liabilities and stockholder's equity | $ | 554,346 | $ | 528,897 | ||
| Aspen Technology, INC. | ||||||||||||||||
| CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||||||||||
| (in thousands except per share data) | ||||||||||||||||
|
Three Months Ended |
Six Months Ended |
|||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Revenues: | ||||||||||||||||
|
Software licenses |
$ | 37,579 | $ | 60,461 | $ | 68,698 | $ | 88,579 | ||||||||
| Service and other | 36,640 | 35,533 | 70,359 | 71,580 | ||||||||||||
| Total revenues | 74,219 | 95,994 | 139,057 | 160,159 | ||||||||||||
| Cost of revenues: | ||||||||||||||||
| Cost of software licenses | 3,831 | 3,709 | 7,207 | 6,858 | ||||||||||||
| Cost of service and other | 18,069 | 18,463 | 34,408 | 35,944 | ||||||||||||
|
Amortization of technology related intangible assets |
- | 1,672 | - | 3,574 | ||||||||||||
| Total cost of revenues | 21,900 | 23,844 | 41,615 | 46,376 | ||||||||||||
| Gross profit | 52,319 | 72,150 | 97,442 | 113,783 | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Selling and marketing | 23,293 | 22,118 | 45,584 | 43,328 | ||||||||||||
| Research and development | 10,584 | 10,729 | 22,261 | 19,219 | ||||||||||||
| General and administrative | 13,201 | 14,106 | 25,489 | 24,625 | ||||||||||||
| Restructuring charges | 1,291 | 589 | 8,517 | 2,035 | ||||||||||||
| (Gain) loss on sales and disposals of assets | (120 | ) | 88 | (100 | ) | 73 | ||||||||||
| Total operating costs | 48,249 | 47,630 | 101,751 | 89,280 | ||||||||||||
| Income (loss) from operations | 4,070 | 24,520 | (4,309 | ) | 24,503 | |||||||||||
| Interest income | 5,748 | 5,353 | 11,946 | 10,473 | ||||||||||||
| Interest expense | (4,834 | ) | (4,738 | ) | (9,228 | ) | (9,326 | ) | ||||||||
| Foreign currency exchange gain | 2,030 | 3,114 | 2,193 | 3,047 | ||||||||||||
| Income before provision for income taxes | 7,014 | 28,249 | 602 | 28,697 | ||||||||||||
| (Provision) benefit for income taxes | 2,244 | (4,156 | ) | (347 | ) | (6,202 | ) | |||||||||
| Net income | 9,258 | 24,093 | 255 | 22,495 | ||||||||||||
| Accretion of preferred stock discount and dividends | - | (3,408 | ) | - | (7,144 | ) | ||||||||||
| Income attributable to common shareholders | $ | 9,258 | $ | 20,685 | $ | 255 | $ | 15,351 | ||||||||
| Basic income per share attributable to common shareholders | $ | 0.10 | $ | 0.36 | $ | - | $ | 0.28 | ||||||||
| Diluted income per share attributable to common shareholders | $ | 0.10 | $ | 0.27 | $ | - | $ | 0.25 | ||||||||
| Basic weighted average shares outstanding | 89,602 | 57,059 | 89,299 | 54,930 | ||||||||||||
| Diluted weighted average shares outstanding | 94,730 | 90,534 | 94,297 | 90,677 | ||||||||||||
| Aspen Technology, INC. | ||||||||||||||||
| CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||||||||||
| (in thousands except per share data) | ||||||||||||||||
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Revenues: | ||||||||||||||||
|
Software licenses |
$ | 40,018 | $ | 43,299 | $ | 108,716 | $ | 131,878 | ||||||||
| Service and other | 34,226 | 36,201 | 104,585 | 107,781 | ||||||||||||
| Total revenues | 74,244 | 79,500 | 213,301 | 239,659 | ||||||||||||
| Cost of revenues: | ||||||||||||||||
| Cost of software licenses | 4,034 | 3,571 | 11,241 | 10,429 | ||||||||||||
| Cost of service and other | 17,416 | 18,620 | 51,824 | 54,564 | ||||||||||||
| Amortization of technology related intangible assets | - | 1,632 | - | 5,206 | ||||||||||||
| Total cost of revenues | 21,450 | 23,823 | 63,065 | 70,199 | ||||||||||||
| Gross profit | 52,794 | 55,677 | 150,236 | 169,460 | ||||||||||||
| Operating costs: | ||||||||||||||||
| Selling and marketing | 25,362 | 23,505 | 70,946 | 66,833 | ||||||||||||
| Research and development | 11,592 | 12,120 | 33,853 | 31,339 | ||||||||||||
| General and administrative | 13,844 | 11,402 | 39,333 | 36,027 | ||||||||||||
| Restructuring charges | 111 | 1,597 | 8,628 | 3,632 | ||||||||||||
| Loss (gain) on sales and disposals of assets | 13 | 161 | (87 | ) | 234 | |||||||||||
| Total operating costs | 50,922 | 48,785 | 152,673 | 138,065 | ||||||||||||
| Income (loss) from operations | 1,872 | 6,892 | (2,437 | ) | 31,395 | |||||||||||
| Interest income | 6,136 | 5,634 | 18,082 | 16,107 | ||||||||||||
| Interest expense | (4,510 | ) | (4,669 | ) | (13,738 | ) | (13,995 | ) | ||||||||
| Foreign currency exchange gain (loss) | 2,653 | (176 | ) | 4,846 | 2,871 | |||||||||||
| Income before provision for income taxes | 6,151 | 7,681 | 6,753 | 36,378 | ||||||||||||
| Provision for income taxes | (2,118 | ) | (2,595 | ) | (2,465 | ) | (8,797 | ) | ||||||||
| Net income | 4,033 | 5,086 | 4,288 | 27,581 | ||||||||||||
| Accretion of preferred stock discount and dividends | - | (146 | ) | - | (7,290 | ) | ||||||||||
| Income attributable to common shareholders | $ | 4,033 | $ | 4,940 | $ | 4,288 | $ | 20,291 | ||||||||
| Basic income per share attributable to common shareholders | $ | 0.04 | $ | 0.06 | $ | 0.05 | $ | 0.31 | ||||||||
| Diluted income per share attributable to common shareholders | $ | 0.04 | $ | 0.06 | $ | 0.05 | $ | 0.30 | ||||||||
| Basic weighted average shares outstanding | 89,972 | 86,228 | 89,522 | 65,211 | ||||||||||||
| Diluted weighted average shares outstanding | 93,834 | 91,876 | 93,865 | 90,647 | ||||||||||||
Supplemental information -
Stock-based compensation costs included in the Statements of Operations
|
Three Months |
Three Months |
|||||||||||
| 2007 | 2006 | 2008 | 2007 | |||||||||
| Recorded as expense: | ||||||||||||
| Cost of service and other | $ | 482 | $ | 353 | $ | 228 | $ | 451 | ||||
| Selling and marketing | 1,312 | 1,026 | 642 | 919 | ||||||||
| Research and development | 402 | 391 | 344 | 716 | ||||||||
| General and administrative | 1,592 | 1,227 | 866 | 1,155 | ||||||||
| 3,788 | 2,997 | 2,080 | 3,241 | |||||||||
| Capitalized computer software development costs | - | 2 | - | - | ||||||||
| Total stock-based compensation | $ | 3,788 | $ | 2,999 | $ | 2,080 | $ | 3,241 | ||||
SOURCE: Aspen Technology, Inc.
Media:
AspenTech
David Grip, +1 781-221-5273
david.grip@aspentech.com
or
Investors:
ICR
Kori Doherty, +1 617-956-6730
kdoherty@icrinc.com