Aspen Technology Announces Financial Results for the Third Quarter of Fiscal 2015

April 28, 2015
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BEDFORD, Mass.--(BUSINESS WIRE)--Apr. 28, 2015-- Aspen Technology, Inc. (NASDAQ: AZPN), a leading provider of software and services to the process industries, today announced financial results for its third quarter of fiscal year 2015, ended March 31, 2015.

“AspenTech delivered strong third quarter financial results that exceeded our guidance across all key metrics. Total license contract value grew 13.2% year-over-year in the third quarter, which underscores the continued need of customers to improve the efficiency of their operations,” said Antonio Pietri, President and Chief Executive Officer of AspenTech.

Pietri added, “Our disciplined approach to expense management is driving strong profit margins and cash flow generation, which provided the flexibility to repurchase approximately $108 million of our common stock. We believe the combination of continued top and bottom line growth and returning capital to shareholders can generate long-term value.”

Third Quarter Fiscal 2015 and Recent Business Highlights

  • The license portion of total contract value was $2.03 billion at the end of the third quarter of fiscal 2015, which increased 13.2% compared to the third quarter of fiscal 2014 and 3.1% sequentially.
  • Total contract value, including the value of bundled maintenance, was $2.41 billion at the end of the third quarter of fiscal 2015, which increased 14.1% compared to the third quarter of fiscal 2014 and 3.2% 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 $411.6 million at the end of the third quarter of fiscal 2015, which increased 11.9% compared to the third quarter of fiscal 2014 and 2.9% sequentially.
  • GAAP operating margin was 37.5%, compared to 30.3% in the third quarter of fiscal 2014. Non-GAAP operating margin was 43.7%, compared to 38.6% in the third quarter of fiscal 2014.
  • We repurchased nearly three million shares of our common stock for $107.7 million in the third quarter of fiscal 2015.

Summary of Third Quarter Fiscal Year 2015 Financial Results

AspenTech’s total revenue of $111.3 million increased 7.4% from $103.6 million in the third quarter of the prior fiscal year.

  • Subscription and software revenue was $102.5 million in the third quarter of fiscal 2015, an increase from $91.3 million in the third quarter of fiscal 2014.
  • Services & other revenue was $8.8 million in the third quarter of fiscal 2015, compared to $12.3 million in the third quarter of fiscal 2014.

For the quarter ended March 31, 2015, AspenTech reported income from operations of $41.7 million, compared to income from operations of $31.4 million for the quarter ended March 31, 2014.

Net income was $28.2 million for the quarter ended March 31, 2015, leading to net income per share of $0.32, compared to net income per share of $0.22 in the same period last fiscal year.

Non-GAAP income from operations, which adds back stock-based compensation expense, restructuring charges, amortization of intangibles associated with acquisitions and non-capitalized acquired technology, was $48.7 million for the third quarter of fiscal 2015, compared to non-GAAP income from operations of $40.0 million in the same period last fiscal year. Non-GAAP net income was $32.6 million, or $0.37 per share, for the third quarter of fiscal 2015, compared to non-GAAP net income of $26.4 million, or $0.28 per share, in the same period last fiscal year.

AspenTech had cash and marketable securities of $225.0 million at March 31, 2015, a decrease of $31.5 million from the end of the prior quarter after using $107.0 million in cash to repurchase shares of common stock.

During the third quarter, the company generated $64.6 million in cash flow from operations. On a non-GAAP basis, cash flow from operations was $81.4 million and free cash flow was $79.7 million after taking into consideration $1.8 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, April 28, 2015, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the third quarter fiscal year 2015 as well as the company’s business outlook.

The live dial-in number is (866) 604-6127 or (706) 634-5625, conference ID code 21858768. 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 21858768, through May 28, 2015.

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 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, and failure to continue to provide innovative, market-leading solutions; 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 obligation to update forward-looking statements after the date of this press release.

© 2015 Aspen Technology, Inc. AspenTech, aspenONE and the Aspen leaf logo are registered 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         Nine Months Ended
            March 31,         March 31,
              2015           2014             2015           2014  
Revenue:                                      
Subscription and software           $ 102,543         $ 91,309           $ 300,002         $ 258,916  
Services and other             8,756           12,278             26,213           31,005  
Total revenue             111,299           103,587             326,215           289,921  
Cost of revenue:                                      
Subscription and software             5,404           5,332             15,813           14,974  
Services and other             6,905           9,956             21,142           24,835  
Total cost of revenue             12,309           15,288             36,955           39,809  
Gross profit             98,990           88,299             289,260           250,112  
Operating expenses:                                      
Selling and marketing             23,160           24,267             67,599           71,376  
Research and development             20,323           21,791             52,548           52,641  
General and administrative             13,776           10,839             36,227           33,732  
Total operating expenses, net             57,259           56,897             156,374           157,749  
Income from operations             41,731           31,402             132,886           92,363  
Interest income             122           275             389           969  
Interest expense             (1 )         (6 )           (8 )         (32 )
Other income (expense), net             414           (472 )           354           (1,807 )
Income before provision for income taxes             42,266           31,199             133,621           91,493  
Provision for income taxes             14,096           10,356             46,020           32,388  
Net income           $ 28,170         $ 20,843           $ 87,601         $ 59,105  
Net income per common share:                                      
Basic           $ 0.32         $ 0.23           $ 0.98         $ 0.64  
Diluted           $ 0.32         $ 0.22           $ 0.97         $ 0.63  
Weighted average shares outstanding:                                      
Basic             87,355           92,414             89,509           92,891  
Diluted             87,853           93,365             90,121           93,951  

(*)- Certain items in prior period Consolidated Statements of Operations have been reclassified to conform to the current period presentation.

 
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited in thousands, except share data)
                         
              March 31,         June 30,
                2015             2014  
                         
ASSETS                        
Current assets:                        
Cash and cash equivalents             $ 143,962           $ 199,526  
Short-term marketable securities               71,848             67,619  
Accounts receivable, net               28,084             38,532  
Current portion of installments receivable, net               380             640  
Unbilled services               1,134             1,656  
Prepaid expenses and other current assets               7,397             10,567  
Prepaid income taxes               682             605  
Current deferred tax assets               4,918             10,537  
Total current assets               258,405             329,682  
Long-term marketable securities               9,140             31,270  
Non-current installments receivable, net               250             811  
Property, equipment and leasehold improvements, net               18,459             7,588  
Computer software development costs, net               1,161             1,390  
Goodwill               17,026             19,276  
Non-current deferred tax assets               11,120             12,765  
Other non-current assets               1,504             5,190  
Total assets             $ 317,065           $ 407,972  
                         
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                        
Current liabilities:                        
Accounts payable             $ 3,369           $ 412  
Accrued expenses and other current liabilities               34,751             34,984  
Income taxes payable               1,709             2,168  
Current deferred revenue               236,025             228,940  
Total current liabilities               275,854             266,504  
Non-current deferred revenue               37,813             45,942  
Other non-current liabilities               30,192             11,850  
Commitments and contingencies                        
Series D redeemable convertible preferred stock, $0.10 par value—                        
Authorized— 3,636 shares as of March 31, 2015 and June 30, 2014                        
Issued and outstanding— none as of March 31, 2015 and June 30, 2014                        
Stockholders’ equity (deficit):                        
Common stock, $0.10 par value— Authorized—210,000,000 shares                        
Issued— 101,390,162 shares at March 31, 2015 and 101,033,740 shares at June 30, 2014                        
Outstanding— 86,038,275 shares at March 31, 2015 and 91,661,850 shares at June 30, 2014               10,139             10,103  
Additional paid-in capital               622,266             591,324  
Accumulated deficit               (176,433 )           (264,034 )
Accumulated other comprehensive income               5,026             9,372  

Treasury stock, at cost—15,351,887 shares of common stock at March 31, 2015 and 9,371,890 shares at June 30, 2014

               (487,792 )           (263,089 )
Total stockholders’ equity (deficit)               (26,794 )           83,676  
Total liabilities and stockholders' equity (deficit)             $ 317,065           $ 407,972  
 
 
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS*
(Unaudited in thousands)
 
            Three Months Ended       Nine Months Ended
            March 31,       March 31,
              2015         2014           2015         2014  
Cash flows from operating activities:                                
Net income           $ 28,170       $ 20,843         $ 87,601       $ 59,105  
Adjustments to reconcile net income to net cash provided by operating activities:                                
Depreciation and amortization             1,758         1,376           4,616         3,855  
Net foreign currency (gains) losses             (1,336 )       365           (2,715 )       1,444  
Stock-based compensation             3,456         3,564           11,122         11,102  
Deferred income taxes             (456 )       9,036           21,317         25,827  
Provision for bad debts             (809 )       (31 )         (471 )       751  
Tax benefits from stock-based compensation             14,159         54           21,843         137  
Excess tax benefits from stock-based compensation             (14,159 )       (54 )         (21,843 )       (137 )
Other non-cash operating activities             619         462           1,401         1,358  
Changes in assets and liabilities:                                
Accounts receivable             (7,622 )       (781 )         10,897         5,717  
Unbilled services             (505 )       (504 )         485         667  
Prepaid expenses, prepaid income taxes, and other assets             1,848         2,791           4,762         4,327  
Installments receivable             (158 )       3,588           822         11,933  
Accounts payable, accrued expenses, and other liabilities             4,055         4,403           (1,198 )       (1,248 )
Deferred revenue             35,622         24,521           (222 )       17,051  
Net cash provided by operating activities             64,642         69,633           138,417         141,889  
Cash flows from investing activities:                                
Purchases of marketable securities             (11,017 )       (16,550 )         (50,065 )       (35,542 )
Maturities of marketable securities             27,911         20,938           66,923         33,362  
Purchases of property, equipment and leasehold improvements             (1,586 )       (906 )         (5,914 )       (2,630 )
Purchases of technology intangibles             -         (400 )         -         (400 )
Capitalized computer software development costs             (178 )       (97 )         (315 )       (601 )
Net cash provided by (used in) investing activities             15,130         2,985           10,629         (5,811 )
Cash flows from financing activities:                                
Exercises of stock options             531         3,045           2,046         7,475  
Repurchases of common stock             (106,973 )       (30,000 )         (222,878 )       (88,919 )

Payments of tax withholding obligations related to restricted stock

             (1,300 )       (1,698 )         (3,874 )       (5,935 )
Excess tax benefits from stock-based compensation             14,159         54           21,843         137  
Net cash used in financing activities             (93,583 )       (28,599 )         (202,863 )       (87,242 )
Effect of exchange rate changes on cash and cash equivalents             (670 )       (13 )         (1,747 )       215  
(Decrease) increase in cash and cash equivalents             (14,481 )       44,006           (55,564 )       49,051  
Cash and cash equivalents, beginning of period             158,443         137,477           199,526         132,432  
Cash and cash equivalents, end of period           $ 143,962       $ 181,483         $ 143,962       $ 181,483  
                                 
Supplemental disclosure of cash flow information:                                
Income taxes paid, net           $ 312       $ 672         $ 2,933       $ 5,717  
Supplemental disclosure of non-cash investing and financing activities:                                

Landlord improvement allowance included in leasehold improvements and deferred rent liability

           $ 6,064       $ -         $ 6,064       $ -  

Purchases of property, equipment and leasehold improvements included in accounts payable and accrued expenses

             1,913         -           1,913         -  
Common stock repurchases included in accrued expenses             2,450         -           2,450         -  
 

(*)- Certain items for the three and nine months ended March 31, 2014 and the three months ended September 30, 2014 presented in the Consolidated Statements of Cash Flows have been reclassified to conform to the current period presentation.

 
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Results of Operations and Cash Flows
The following tables reflect a reconciliation of selected Aspen Technology GAAP to Non-GAAP results of operations and cash flows.
(unaudited in thousands, except per share data)
 
            Three Months Ended

March 31,

       Nine Months Ended

March 31,
              2015           2014             2015           2014  

Total expenses

                                      
GAAP total expenses (a)           $ 69,568         $ 72,185           $ 193,329         $ 197,558  
Less:                                      
Stock-based compensation (b)             (3,456 )         (3,564 )           (11,122 )         (11,102 )
Non-capitalized acquired technology (e)             (3,277 )         (4,856 )           (3,277 )         (4,856 )
Restructuring charges             -           19             -           15  
Amortization of purchased technology intangibles             (187 )         (224 )           (635 )         (698 )
                                       
Non-GAAP total expenses           $ 62,648         $ 63,560           $ 178,295         $ 180,917  
                                       

Income from operations

                                      
GAAP income from operations           $ 41,731         $ 31,402           $ 132,886         $ 92,363  
Plus:                                      
Stock-based compensation (b)             3,456           3,564             11,122           11,102  
Non-capitalized acquired technology (e)             3,277           4,856             3,277           4,856  
Restructuring charges             -           (19 )           -           (15 )
Amortization of purchased technology intangibles             187           224             635           698  
                                       
Non-GAAP income from operations           $ 48,651         $ 40,027           $ 147,920         $ 109,004  
                                       

Net income

                                      
GAAP net income           $ 28,170         $ 20,843           $ 87,601         $ 59,105  
Plus:                                      
Stock-based compensation (b)             3,456           3,564             11,122           11,102  
Non-capitalized acquired technology (e)             3,277           4,856             3,277           4,856  
Restructuring charges             -           (19 )           -           (15 )
Amortization of purchased technology intangibles             187           224             635           698  
Less:                                      
Income tax effect on Non-GAAP items (c)             (2,491 )         (3,105 )           (5,412 )         (5,991 )
                                       
Non-GAAP net income           $ 32,599         $ 26,363           $ 97,223         $ 69,755  
                                       

Diluted income per share

                                      
GAAP diluted income per share           $ 0.32         $ 0.22           $ 0.97         $ 0.63  
Plus:                                      
Stock-based compensation (b)             0.04           0.04             0.12           0.12  
Non-capitalized acquired technology (e)             0.04           0.05             0.04           0.05  
Restructuring charges             -           -             -           -  
Amortization of purchased technology intangibles             -           -             0.01           0.01  
Less:                                      
Income tax effect on Non-GAAP items (c)             (0.03 )         (0.03 )           (0.06 )         (0.06 )
                                       
Non-GAAP diluted income per share           $ 0.37         $ 0.28           $ 1.08         $ 0.74  
                                       
Shares used in computing Non-GAAP diluted income per share             87,853           93,365             90,121           93,951  
                                       
                                       
            Three Months Ended

March 31,

       Nine Months Ended

March 31,
              2015           2014             2015           2014  

Non-GAAP Cash Flows from Operating Activities and Free Cash Flow

                                      
GAAP cash flows from operating activities           $ 64,642         $ 69,633           $ 138,417         $ 141,889  
Plus:                                      
Non-capitalized acquired technology (e)             2,621           3,856             2,621           3,856  
Excess tax benefits from stock-based compensation (d)             14,159           54             21,843           137  
                                       
Non-GAAP Cash Flows from Operating Activities           $ 81,422    

 

   $ 73,543           $ 162,881    

 

   $ 145,882  
                                       
Less:                                      
Purchases of property, equipment and leasehold improvements             (1,586 )         (906 )           (5,914 )         (2,630 )
Capitalized computer software development costs             (178 )         (97 )           (315 )         (601 )
                                       
Free Cash Flow           $ 79,658         $ 72,540           $ 156,652         $ 142,651  
                                       
(a) GAAP total expenses                                      
            Three Months Ended

March 31,

       Nine Months Ended

March 31,
              2015           2014             2015           2014  
Total costs of revenue           $ 12,309         $ 15,288           $ 36,955         $ 39,809  
Total operating expenses             57,259           56,897             156,374           157,749  
GAAP total expenses           $ 69,568         $ 72,185           $ 193,329         $ 197,558  
                                       
(b) Stock-based compensation expense was as follows:                                      
            Three Months Ended

March 31,

       Nine Months Ended

March 31,
              2015           2014             2015           2014  
Cost of services and other           $ 336         $ 282           $ 1,014         $ 910  
Selling and marketing             778           832             2,282           2,653  
Research and development             959           1,523             2,923           3,267  
General and administrative             1,383           927             4,903           4,272  
Total stock-based compensation           $ 3,456         $ 3,564           $ 11,122         $ 11,102  

(c) The income tax effect on non-GAAP items for the three and nine months ended March 31, 2015 and 2014 is calculated utilizing the Company's estimated federal and state tax rate of 36%.

(d) Excess tax benefits from stock-based compensation are included in non-GAAP cash flows from operating activities and free cash flow to be consistent with the treatment of other tax benefits. Refer to the Company's Form 10-Q for the period ended March 31, 2015 for additional details.

(e) During the three months ended March 31, 2015 and 2014, we acquired certain technology for $3.3 million and $4.9 million, respectively, as a part of projects initiated during these periods to develop commercially available products. At the time of these purchases, the projects did not meet the accounting definition of having reached technological feasibility, and, as such, the costs of the acquired technology were expensed during the three and nine months ended March 31, 2015 and 2014.  During the three and nine months ended March 31, 2015 and 2014, we excluded the payments of $2.6 million and $3.9 million for the acquired technology from non-GAAP cash flows from operating activities and free cash flow to be consistent with the treatment of other transactions where acquired assets are capitalized.

 

Source: Aspen Technology, Inc.

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