Aspen Technology Announces Financial Results for the First Quarter of Fiscal 2014

October 29, 2013
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BURLINGTON, Mass.--(BUSINESS WIRE)--Oct. 29, 2013-- Aspen Technology, Inc. (NASDAQ: AZPN), a leading provider of software and services to the process industries, today announced financial results for its first quarter of fiscal year 2014, ended September 30, 2013.

Antonio Pietri, President and Chief Executive Officer of AspenTech, said, “AspenTech’s performance in the first quarter was a strong start to fiscal 2014 and was highlighted by low-teens year-over-year growth in total license contract value. We continue to experience positive adoption trends for our industry leading aspenONE suite on a worldwide basis. As we look ahead to the remainder of the fiscal year, we believe that AspenTech is well positioned to continue driving an attractive combination of solid growth along with strong profitability and free cash flow.”

First Quarter Fiscal 2014 and Recent Business Highlights

  • The license portion of total contract value was $1.69 billion at the end of the first quarter of fiscal 2014, which increased 13.2% compared to the first quarter of fiscal 2013 and 2.5% sequentially.
  • Total contract value, including the value of bundled maintenance, was $1.98 billion at the end of the first quarter of fiscal 2014, which increased 15.3% compared to the first quarter of fiscal 2013 and 2.8% sequentially.
  • Annual spend, which the company defines as the annualized value of all term license and maintenance revenue contracts at the end of the quarter, was approximately $346 million at the end of the first quarter of fiscal 2014, which increased 11.0% compared to the first quarter of fiscal 2013 and 2.5% sequentially.

Summary of First Quarter Fiscal Year 2014 Financial Results

AspenTech’s total revenue of $87.6 million increased 22.5% from $71.5 million in the first quarter of the prior year.

  • Subscription and software revenue was $78.7 million in the first quarter of fiscal 2014, an increase from $63.8 million in the first quarter of fiscal 2013.
  • Services & other revenue was $8.9 million in the first quarter of fiscal 2014, compared to $7.7 million in the first quarter of fiscal 2013.

For the quarter ended September 30, 2013, AspenTech reported income from operations of $24.8 million, compared to income from operations of $9.0 million for the quarter ended September 30, 2012.

Net income was $15.0 million for the quarter ended September 30, 2013, leading to net income per share of $0.16, compared to net income per share of $0.05 in the same period last fiscal year.

Non-GAAP income from operations, which adds back stock-based compensation expense, restructuring charges and amortization of intangibles associated with acquisitions, was $29.5 million for the first quarter of fiscal 2014, compared to non-GAAP income from operations of $13.4 million in the same period last fiscal year. Non-GAAP net income was $18 million, or $0.19 per share, for the first quarter of fiscal 2014, compared to non-GAAP net income of $7.3 million, or $0.08 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 a cash and marketable securities balance of $221.5 million at September 30, 2013, a decrease of $3.3 million from the end of the prior quarter after using $28.9 million in cash to repurchase shares of common stock. During the first quarter, the company generated $25.9 million in cash flow from operations and $24.8 million in free cash flow after taking into consideration $1.1 million in capital expenditures and capitalized software.

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 29, 2013, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the first quarter fiscal year 2014 as well as the company’s business outlook.

The live dial-in number is (877) 245-0126 or (706) 634-5625, conference ID code 80555103. 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 80555103, through November 29, 2013.

About AspenTech

AspenTech is a leading supplier of software that optimizes process manufacturing – for energy, chemicals, engineering and construction, 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.

© 2013 Aspen Technology, Inc. AspenTech, aspenONE, the Aspen leaf logo, and OPTIMIZE are trademarks of Aspen Technology, Inc. All rights reserved. All other trademarks are property of their respective owners.

Forward-Looking Statements

The second 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 develop new software products, enhance existing products and services, or penetrate new vertical markets; demand for, or usage of, aspenONE software declines for any reason; unfavorable economic and market conditions or a lessening demand in the market for 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 current intention to update forward-looking statements after the date of this press release.

 
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS *
(Unaudited in thousands, except per share data)
         
    Three Months Ended
    September 30,
      2013       2012  
Revenue:        
Subscription and software   $ 78,683     $ 63,763  
Services and other     8,882       7,694  
Total revenue     87,565       71,457  
Cost of revenue:        
Subscription and software     4,620       5,128  
Services and other     7,458       7,210  
Total cost of revenue     12,078       12,338  
Gross profit     75,487       59,119  
Operating expenses:        
Selling and marketing     22,931       21,591  
Research and development     15,834       15,766  
General and administrative     11,876       12,768  
Restructuring charges     (3 )     40  
Total operating expenses     50,638       50,165  
Income from operations     24,849       8,954  
Interest income     387       1,099  
Interest expense     (18 )     (257 )
Other income (expense), net     (804 )     (277 )
Income before provision for income taxes     24,414       9,519  
Provision for income taxes     9,415       5,106  
Net income   $ 14,999     $ 4,413  
Net income per common share:        
Basic   $ 0.16     $ 0.05  
Diluted   $ 0.16     $ 0.05  
Weighted average shares outstanding:        
Basic     93,410       93,428  
Diluted     94,522       95,670  
         
         

* Beginning with the first quarter of fiscal 2014, revenue from software maintenance support (SMS) is included within subscription and software revenue in our unaudited consolidated statements of operation. Prior to fiscal 2014, SMS revenue was included within services and other revenue. Additionally, beginning in the first quarter of fiscal 2014, the cost of providing SMS is included within subscription and software cost of revenue. Prior to fiscal 2014, the cost of providing SMS was included within services and other cost of revenue. The first quarter of fiscal 2013 has been reclassified to conform to the current period presentation. Refer to the company’s first quarter fiscal 2014 Form 10-Q for additional details.

 
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited in thousands, except share data)
         
    September 30,   June 30,
      2013       2013  
         
ASSETS        
Current assets:        
Cash and cash equivalents   $ 125,604     $ 132,432  
Short-term marketable securities     69,792       57,015  
Accounts receivable, net     36,153       36,988  
Current portion of installments receivable, net     11,065       13,769  
Unbilled services     1,764       1,965  
Prepaid expenses and other current assets     9,021       9,665  
Prepaid income taxes     255       288  
Current deferred tax assets     33,226       33,229  
Total current assets     286,880       285,351  
Long-term marketable securities     26,068       35,353  
Non-current installments receivable, net     881       963  
Property, equipment and leasehold improvements, net     7,957       7,829  
Computer software development costs, net     1,708       1,742  
Goodwill     19,523       19,132  
Non-current deferred tax assets     17,147       25,250  
Other non-current assets     6,895       7,128  
Total assets   $ 367,059     $ 382,748  
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable   $ 1,484     $ 846  
Accrued expenses and other current liabilities     25,230       34,421  
Income taxes payable     1,180       1,697  
Current deferred revenue     178,852       178,341  
Current deferred tax liabilities     156       156  
Total current liabilities     206,902       215,461  
Non-current deferred revenue     53,483       53,012  
Other non-current liabilities     12,371       12,377  
Commitments and contingencies        
Series D redeemable convertible preferred stock, $0.10 par value—        
Authorized— 3,636 shares as of September 30, 2013 and June 30, 2013        
Issued and outstanding— none as of September 30, 2013 and June 30, 2013     -       -  
Stockholders’ equity:        
Common stock, $0.10 par value— Authorized—210,000,000 shares        
Issued— 100,362,079 shares at September 30, 2013 and 99,945,545 shares at June 30, 2013        
Outstanding— 93,230,456 shares at September 30, 2013 and 93,683,769 shares at June 30, 2013     10,036       9,995  
Additional paid-in capital     580,641       575,770  
Accumulated deficit     (334,818 )     (349,817 )
Accumulated other comprehensive income     8,676       7,263  

Treasury stock, at cost—7,131,623 shares of common stock at September 30, 2013 and 6,261,776 shares of common stock at June 30, 2013

     (170,232 )     (141,313 )
Total stockholders’ equity     94,303       101,898  
Total liabilities and stockholders' equity   $ 367,059     $ 382,748  
                 
 
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited in thousands)
         
    Three Months Ended
    September 30,
      2013       2012  
Cash flows from operating activities:        
Net income   $ 14,999     $ 4,413  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization     1,202       1,317  
Net foreign currency loss (gain)     564       (121 )
Stock-based compensation     4,387       4,315  
Deferred income taxes     8,618       4,222  
Provision for bad debts     20       97  
Excess tax benefits from stock-based compensation     (41 )     -  
Other non-cash operating activities     73       3  
Changes in assets and liabilities:        
Accounts receivable     1,152       8,895  
Unbilled services     194       38  
Prepaid expenses, prepaid income taxes, and other assets     870       4,443  
Installments receivables     3,029       11,030  
Accounts payable, accrued expenses, and other liabilities     (9,477 )     (13,253 )
Deferred revenue     323       (6,938 )
Net cash provided by operating activities     25,913       18,461  
Cash flows from investing activities:        
Purchase of marketable securities     (7,974 )     -  
Maturities of marketable securities     4,538       -  
Purchase of property, equipment and leasehold improvements     (915 )     (1,800 )
Insurance proceeds     -       2,222  
Purchase of technology intangibles     -       (527 )
Capitalized computer software development costs     (219 )     -  
Net cash used in investing activities     (4,570 )     (105 )
Cash flows from financing activities:        
Exercise of stock options     2,933       4,048  
Repayments of secured borrowings     -       (5,394 )
Repurchases of common stock     (28,919 )     (17,163 )
Payment of tax withholding obligations related to restricted stock     (2,449 )     (1,976 )
Excess tax benefits from stock-based compensation     41       -  
Net cash used in financing activities     (28,394 )     (20,485 )
Effect of exchange rate changes on cash and cash equivalents     223       250  
Decrease in cash and cash equivalents     (6,828 )     (1,879 )
Cash and cash equivalents, beginning of period     132,432       165,242  
Cash and cash equivalents, end of period   $ 125,604     $ 163,363  
         
Supplemental disclosure of cash flow information:        
Income tax paid, net   $ 1,330     $ 1,034  
Interest paid     18       257  
                 
 
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
GAAP Results Reconciled to Non-GAAP Results

The following table reflects selected Aspen Technology GAAP results reconciled to Non-GAAP results.

(unaudited in thousands, except per share data)
         
   

Three Months Ended
September 30,
      2013       2012  

Total expenses

        
GAAP total expenses (a)   $ 62,716     $ 62,503  
Less:        
Stock-based compensation (b)     (4,387 )     (4,315 )
Restructuring charges     3       (40 )
Amortization of purchased technology intangibles     (250 )     (103 )
         
Non-GAAP total expenses   $ 58,082     $ 58,045  
         

Income from operations

        
GAAP income from operations   $ 24,849     $ 8,954  
Plus:        
Stock-based compensation (b)     4,387       4,315  
Restructuring charges     (3 )     40  
Amortization of purchased technology intangibles     250       103  
         
Non-GAAP income from operations   $ 29,483     $ 13,412  
         

Net income

        
GAAP net income   $ 14,999     $ 4,413  
Plus:        
Stock-based compensation (b)     4,387       4,315  
Restructuring charges     (3 )     40  
Amortization of purchased technology intangibles     250       103  
Less:        
Income tax effect on Non-GAAP items (c)     (1,668 )     (1,609 )
         
Non-GAAP net income   $ 17,965     $ 7,262  
         

Diluted income per share

        
GAAP diluted income per share   $ 0.16     $ 0.05  
Plus:        
Stock-based compensation (b)     0.05       0.05  
Restructuring charges     -       -  
Amortization of purchased technology intangibles     -       -  
Less:        
Income tax effect on Non-GAAP items (c)     (0.02 )     (0.02 )
         
Non-GAAP diluted income per share   $ 0.19     $ 0.08  
         
Shares used in computing Non-GAAP diluted income per share     94,522       95,670  
         
(a) GAAP total expenses        
   

Three Months Ended
September 30,
      2013       2012  
Total costs of revenue   $ 12,078     $ 12,338  
Total operating expenses     50,638       50,165  
GAAP total expenses   $ 62,716     $ 62,503  
         
(b) Stock-based compensation expense was as follows:        
   

Three Months Ended
September 30,
      2013       2012  
Cost of services and other   $ 301     $ 343  
Selling and marketing     1,111       977  
Research and development     856       741  
General and administrative     2,119       2,254  
Total stock-based compensation   $ 4,387     $ 4,315  
         
(c) The income tax effect on Non-GAAP items for the three months ended September 30, 2013 and 2012 is calculated utilizing an estimate of our future effective tax rate.

 

Source: Aspen Technology, Inc.

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