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

January 30, 2014
PDF Version

BURLINGTON, Mass.--(BUSINESS WIRE)--Jan. 30, 2014-- Aspen Technology, Inc. (NASDAQ: AZPN), a leading provider of software and services to the process industries, today announced financial results for its second quarter of fiscal year 2014, ended December 31, 2013.

“AspenTech continued to perform at a high level in the second quarter, with financial results that exceeded our guidance on all key metrics. Customer demand and usage patterns continue to be solid and helped drive year-over-year growth of over 13% in total license contract value,” said Antonio Pietri, President and Chief Executive Officer of AspenTech. “At the same time we remain disciplined from an operational perspective, as evidenced by the $70 million of free cash flow generated on a year-to-date basis. We are focused on building on our strong first half results and are optimistic about the company’s outlook for the remainder of the fiscal year.”

Second Quarter Fiscal 2014 and Recent Business Highlights

  • The license portion of total contract value was $1.75 billion at the end of the second quarter of fiscal 2014, which increased 13.3% compared to the second quarter of fiscal 2013 and 3.0% sequentially.
  • Total contract value, including the value of bundled maintenance, was $2.05 billion at the end of the second quarter of fiscal 2014, which increased 15.2% compared to the second quarter of fiscal 2013 and 3.3% 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 $356 million at the end of the second quarter of fiscal 2014, which increased 11.3% compared to the second quarter of fiscal 2013 and 2.9% sequentially.

Summary of Second Quarter Fiscal Year 2014 Financial Results

AspenTech’s total revenue of $98.8 million increased 27.8% from $77.3 million in the second quarter of the prior fiscal year.

  • Subscription and software revenue was $88.9 million in the second quarter of fiscal 2014, an increase from $69.0 million in the second quarter of fiscal 2013.
  • Services & other revenue was $9.8 million in the second quarter of fiscal 2014, compared to $8.3 million in the second quarter of fiscal 2013.

For the quarter ended December 31, 2013, AspenTech reported income from operations of $36.1 million, compared to income from operations of $14.9 million for the quarter ended December 31, 2012.

Net income was $23.3 million for the quarter ended December 31, 2013, leading to net income per share of $0.25, compared to net income per share of $0.10 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 $39.5 million for the second quarter of fiscal 2014, compared to non-GAAP income from operations of $18.6 million in the same period last fiscal year. Non-GAAP net income was $25.4 million, or $0.27 per share, for the second quarter of fiscal 2014, compared to non-GAAP net income of $12.3 million, or $0.13 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 cash and marketable securities of $235.7 million at December 31, 2013, an increase of $14.2 million from the end of the prior quarter after using $30.0 million in cash to repurchase shares of common stock. During the second quarter, the company generated $46.3 million in cash flow from operations and $45.2 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, January 30, 2014, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the second 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 35794133. 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 35794133, through March 2, 2014.

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

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.

© 2014 Aspen Technology, Inc. AspenTech, aspenONE, the Aspen leaf logo, Aspen Plus and Aspen HYSYS are trademarks of Aspen Technology, Inc. All rights reserved. All other trademarks are property of their respective owners.

 
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS *
(Unaudited in thousands, except per share data)
                             
        Three Months Ended       Six Months Ended
        December 31,       December 31,
        2013     2012       2013     2012
Revenue:                            
Subscription and software       $ 88,924       $ 69,037         $ 167,607       $ 132,800  
Services and other         9,845         8,272           18,727         15,966  
Total revenue         98,769         77,309           186,334         148,766  
Cost of revenue:                            
Subscription and software         5,022         5,118           9,642         10,246  
Services and other         7,421         7,255           14,879         14,465  
Total cost of revenue         12,443         12,373           24,521         24,711  
Gross profit         86,326         64,936           161,813         124,055  
Operating expenses:                            
Selling and marketing         24,178         23,303           47,109         44,894  
Research and development         15,016         15,039           30,850         30,805  
General and administrative         11,013         11,671           22,889         24,439  
Restructuring charges         7         (6 )         4         34  
Total operating expenses         50,214         50,007           100,852         100,172  
Income from operations         36,112         14,929           60,961         23,883  
Interest income         307         955           694         2,054  
Interest expense         (8 )       (116 )         (26 )       (373 )
Other income (expense), net         (531 )       (57 )         (1,335 )       (334 )
Income before provision for income taxes         35,880         15,711           60,294         25,230  
Provision for income taxes         12,617         5,774           22,032         10,880  
Net income       $ 23,263       $ 9,937         $ 38,262       $ 14,350  
Net income per common share:                            
Basic       $ 0.25       $ 0.11         $ 0.41       $ 0.15  
Diluted       $ 0.25       $ 0.10         $ 0.41       $ 0.15  
Weighted average shares outstanding:                            
Basic         92,839         93,512           93,124         93,470  
Diluted         93,816         95,463           94,137         95,541  
                             
                             

 

                            

* 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 operations. 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. Corresponding line items in the consolidated statements of operations for the three and six months ended December 31, 2012 have been reclassified to conform to the current period presentation. Refer to the company’s Form 10-Q for the period ended December 31, 2013 for additional details.

               
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited in thousands, except share data)
               
      December 31,     June 30,
      2013       2013
               
ASSETS              
Current assets:              
Cash and cash equivalents     $ 137,477         $ 132,432  
Short-term marketable securities       81,173           57,015  
Accounts receivable, net       30,043           36,988  
Current portion of installments receivable, net       5,617           13,769  
Unbilled services       782           1,965  
Prepaid expenses and other current assets       9,422           9,665  
Prepaid income taxes       273           288  
Current deferred tax assets       26,422           33,229  
Total current assets       291,209           285,351  
Long-term marketable securities       17,057           35,353  
Non-current installments receivable, net       992           963  
Property, equipment and leasehold improvements, net       7,123           7,829  
Computer software development costs, net       1,733           1,742  
Goodwill       19,199           19,132  
Non-current deferred tax assets       15,130           25,250  
Other non-current assets       6,468           7,128  
Total assets     $ 358,911         $ 382,748  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY              
Current liabilities:              
Accounts payable     $ 1,133         $ 846  
Accrued expenses and other current liabilities       29,042           34,421  
Income taxes payable       1,767           1,697  
Current deferred revenue       181,072           178,341  
Current deferred tax liabilities       156           156  
Total current liabilities       213,170           215,461  
Non-current deferred revenue       43,695           53,012  
Other non-current liabilities       11,571           12,377  
Commitments and contingencies              
Series D redeemable convertible preferred stock, $0.10 par value—              
Authorized— 3,636 shares as of December 31, 2013 and June 30, 2013              
Issued and outstanding— none as of December 31, 2013 and June 30, 2013       -           -  
Stockholders’ equity:              
Common stock, $0.10 par value— Authorized—210,000,000 shares              
Issued— 100,549,498 shares at December 31, 2013 and 99,945,545 shares at June 30, 2013            
Outstanding— 92,617,481 shares at December 31, 2013 and 93,683,769 shares at June 30, 2013     10,055           9,995  
Additional paid-in capital       583,523           575,770  
Accumulated deficit       (311,555 )         (349,817 )
Accumulated other comprehensive income       8,684           7,263  
Treasury stock, at cost—7,932,017 shares of common stock at December 31, 2013 and

6,261,776 shares of common stock at June 30, 2013

     (200,232 )         (141,313 )
Total stockholders’ equity       90,475           101,898  
Total liabilities and stockholders' equity     $ 358,911         $ 382,748  
 
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited in thousands)
                 
    Three Months Ended   Six Months Ended
    December 31,   December 31,
      2013       2012       2013       2012  
Cash flows from operating activities:                
Net income   $ 23,263     $ 9,937     $ 38,262     $ 14,350  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     1,277       1,370       2,479       2,687  
Net foreign currency loss (gain)     515       (183 )     1,079       (304 )
Stock-based compensation     3,151       3,453       7,538       7,768  
Deferred income taxes     8,173       5,636       16,791       9,858  
Provision for bad debts     766       65       786       162  
Excess tax benefits from stock-based compensation     (42 )     -       (83 )     -  
Other non-cash operating activities     823       25       896       28  
Changes in assets and liabilities:                
Accounts receivable     5,342       (16,852 )     6,494       (7,957 )
Unbilled services     977       568       1,171       606  
Prepaid expenses, prepaid income taxes, and other assets     666       1,462       1,536       5,905  
Installment receivables     5,316       14,071       8,345       25,101  
Accounts payable, accrued expenses, and other liabilities     3,909       4,750       (5,568 )     (8,503 )
Deferred revenue     (7,793 )     11,377       (7,470 )     4,439  
Net cash provided by operating activities     46,343       35,679       72,256       54,140  
Cash flows from investing activities:                
Purchase of marketable securities     (11,018 )     -       (18,992 )     -  
Maturities of marketable securities     7,886       -       12,424       -  
Purchase of property, equipment and leasehold improvements     (809 )     (767 )     (1,724 )     (2,567 )
Insurance proceeds     -       -       -       2,222  
Purchase of technology intangibles     -       -       -       (527 )
Capitalized computer software development costs     (285 )     (435 )     (504 )     (435 )
Net cash used in investing activities     (4,226 )     (1,202 )     (8,796 )     (1,307 )
Cash flows from financing activities:                
Exercise of stock options     1,497       5,072       4,430       9,120  
Repayments of secured borrowings     -       (5,616 )     -       (11,010 )
Repurchases of common stock     (30,000 )     (19,689 )     (58,919 )     (36,852 )
Payment of tax withholding obligations related to restricted stock     (1,788 )     (2,312 )     (4,237 )     (4,288 )
Excess tax benefits from stock-based compensation     42       -       83       -  
Net cash used in financing activities     (30,249 )     (22,545 )     (58,643 )     (43,030 )
Effect of exchange rate changes on cash and cash equivalents     5       (71 )     228       179  
Increase in cash and cash equivalents     11,873       11,861       5,045       9,982  
Cash and cash equivalents, beginning of period     125,604       163,363       132,432       165,242  
Cash and cash equivalents, end of period   $ 137,477     $ 175,224     $ 137,477     $ 175,224  
                 
Supplemental disclosure of cash flow information:                
Income tax paid, net   $ 3,715     $ 778     $ 5,045     $ 1,812  
Interest paid     8       116       26       373  
                                 
                             
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

December 31,

       Six Months Ended

December 31,
        2013     2012       2013     2012

Total expenses

                            
GAAP total expenses (a)       $ 62,657       $ 62,380         $ 125,373       $ 124,883  
Less:                            
Stock-based compensation (b)         (3,151 )       (3,453 )         (7,538 )       (7,768 )
Restructuring charges         (7 )       6           (4 )       (34 )
Amortization of purchased technology intangibles         (224 )       (199 )         (473 )       (302 )
                             
Non-GAAP total expenses       $ 59,275       $ 58,734         $ 117,358       $ 116,779  
                             

Income from operations

                            
GAAP income from operations       $ 36,112       $ 14,929         $ 60,961       $ 23,883  
Plus:                            
Stock-based compensation (b)         3,151         3,453           7,538         7,768  
Restructuring charges         7         (6 )         4         34  
Amortization of purchased technology intangibles         224         199           473         302  
                             
Non-GAAP income from operations       $ 39,494       $ 18,575         $ 68,976       $ 31,987  
                             

Net income

                            
GAAP net income       $ 23,263       $ 9,937         $ 38,262       $ 14,350  
Plus:                            
Stock-based compensation (b)         3,151         3,453           7,538         7,768  
Restructuring charges         7         (6 )         4         34  
Amortization of purchased technology intangibles         224         199           473         302  
Less:                            
Income tax effect on Non-GAAP items (c)         (1,218 )       (1,316 )         (2,885 )       (2,926 )
                             
Non-GAAP net income       $ 25,427       $ 12,267         $ 43,392       $ 19,528  
                             

Diluted income per share

                            
GAAP diluted income per share       $ 0.25       $ 0.10         $ 0.41       $ 0.15  
Plus:                            
Stock-based compensation (b)         0.03         0.04           0.08         0.08  
Restructuring charges         -         -           -         -  
Amortization of purchased technology intangibles         -         -           0.01         -  
Less:                            
Income tax effect on Non-GAAP items (c)         (0.01 )       (0.01 )         (0.03 )       (0.03 )
                             
Non-GAAP diluted income per share       $ 0.27       $ 0.13         $ 0.46       $ 0.20  
                             
Shares used in computing Non-GAAP diluted income per share         93,816         95,463           94,137         95,541  
                             
(a) GAAP total expenses                            
        Three Months Ended

December 31,

       Six Months Ended

December 31,
        2013     2012       2013     2012
Total costs of revenue       $ 12,443       $ 12,373         $ 24,521       $ 24,711  
Total operating expenses         50,214         50,007           100,852         100,172  
GAAP total expenses       $ 62,657       $ 62,380         $ 125,373       $ 124,883  
                             
(b) Stock-based compensation expense was as follows:                            
        Three Months Ended

December 31,

       Six Months Ended

December 31,
        2013     2012       2013     2012
Cost of services and other       $ 327       $ 316         $ 628       $ 659  
Selling and marketing         710         972           1,821         1,949  
Research and development         889         742           1,745         1,483  
General and administrative         1,225         1,423           3,344         3,677  
Total stock-based compensation       $ 3,151       $ 3,453         $ 7,538       $ 7,768  
                             

(c) The income tax effect on Non-GAAP items for the three and six months ended December 31, 2013 and 2012 is calculated utilizing an estimate of our future effective tax rate.

Source: Aspen Technology, Inc.

Media Contact
AspenTech
David Grip, +1 781-221-5273
david.grip@aspentech.com
or
Investor Contact
ICR
Brian Denyeau, +1 646-277-1251
brian.denyeau@icrinc.com