Aspen Technology Announces Financial Results for the Fourth Quarter and Fiscal Year 2016

August 11, 2016
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BEDFORD, Mass.--(BUSINESS WIRE)--Aug. 11, 2016-- Aspen Technology, Inc. (NASDAQ: AZPN), a leading provider of software and services to the process industries, today announced financial results for its fourth quarter and fiscal year ended June 30, 2016.

“AspenTech reported a solid fourth quarter and fiscal year 2016,” said Antonio Pietri, President and Chief Executive Officer of AspenTech. “We saw strong demand among our owner-operator customers during the quarter, including a significant upsell and a large renewal with two of the top oil and chemicals companies in the world. These transactions show the value we deliver for customers and our ability to generate growth in a challenging economic environment.”

Pietri added, “Our scalable business model and disciplined approach to investing for growth while prudently managing expenses delivered another year of solid profitability and free cash flow. Our balance sheet and cash flow are strategic assets that we are leveraging to invest in areas that drive growth in the business and to fund our share repurchase program to deliver significant value to our shareholders.”

Fourth Quarter and Fiscal Year 2016 Business Highlights

  • Annual spend, which the company defines as the annualized value of all term license and maintenance contracts at the end of the quarter, was $441 million at the end of fiscal 2016, an increase of 2.5% from March 31, 2016 and 5.3% from the end of fiscal 2015.
  • GAAP operating margin was 43.1% in the fourth quarter of fiscal 2016, compared to 41.1% in the fourth quarter of fiscal 2015. Non-GAAP operating margin was 46.1% in the fourth quarter of fiscal 2016, compared to 44.2% in the fourth quarter of fiscal 2015.
  • GAAP operating margin was 44.8% for fiscal year 2016, compared to 40.8% for fiscal year 2015. Non-GAAP operating margin was 49.3% for fiscal year 2016, compared to 45.1% for fiscal year 2015.
  • AspenTech repurchased nearly 2.0 million shares of our common stock for $75.0 million in the fourth quarter of fiscal 2016.
  • AspenTech repurchased nearly 4.8 million shares of common stock for $180.0 million in fiscal year 2016.

Summary of Fourth Quarter Fiscal Year 2016 Financial Results

AspenTech’s total revenue of $113.7 million decreased 0.4% from $114.2 million in the fourth quarter of the prior fiscal year.

  • Subscription and software revenue was $106.7 million in the fourth quarter of fiscal 2016, an increase from $105.6 million in the fourth quarter of fiscal 2015.
  • Services and other revenue was $7.0 million in the fourth quarter of fiscal 2016, a decrease from $8.5 million in the fourth quarter of fiscal 2015.

For the quarter ended June 30, 2016, AspenTech reported income from operations of $49.0 million, compared to income from operations of $46.9 million for the quarter ended June 30, 2015.

Net income was $33.3 million for the quarter ended June 30, 2016, leading to net income per share of $0.41, compared to net income per share of $0.36 in the same period last fiscal year.

Non-GAAP income from operations, which adds back stock-based compensation expense, amortization of intangibles associated with acquisitions, acquisition-related costs and non-capitalized acquired technology, was $52.4 million for the fourth quarter of fiscal 2016, compared to non-GAAP income from operations of $50.5 million in the same period last fiscal year. Non-GAAP net income was $35.5 million, or $0.44 per share, for the fourth quarter of fiscal 2016, compared to non-GAAP net income of $33.1 million, or $0.39 per share, in the same period last fiscal year.

AspenTech had cash and marketable securities of $321.3 million at June 30, 2016, compared to $105.9 million at the end of the prior quarter.

During the fourth quarter, the company generated $44.8 million in cash flow from operations and $47.5 million in free cash flow.

Summary of Fiscal Year 2016 Financial Results

AspenTech’s total revenue of $472.3 million increased 7.3% from $440.4 million for fiscal year 2015.

  • Subscription and software revenue was $440.4 million, an increase from $405.6 million for fiscal year 2015.
  • Services and other revenue was $31.9 million, compared to $34.8 million for fiscal year 2015.

For the fiscal year ended June 30, 2016, AspenTech reported income from operations of $211.4 million, an improvement from income from operations of $179.8 million for fiscal year 2015.

Net income was $140.0 million for the fiscal year ended June 30, 2016, leading to net income per share of $1.68, compared to net income per share of $1.33 for fiscal year 2015.

Non-GAAP income from operations was $232.7 million for fiscal year 2016, an improvement compared to non-GAAP income from operations of $198.4 million for fiscal year 2015. Non-GAAP net income was $155.8 million, or $1.87 per share, for fiscal year 2016, an improvement compared to non-GAAP net income of $130.3 million, or $1.46 per share, for fiscal year 2015.

For the fiscal year ended June 30, 2016, the company generated $153.7 million in cash flow from operations and $165.1 million in free cash flow.

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, August 11, 2016, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the fourth quarter and fiscal year 2016 as well as the company’s business outlook.

The live dial-in number is (866) 604-6127 or (443) 961-0460, conference ID code 56375102. 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 56375102, through September 11, 2016.

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, including declines due to adverse changes in the process industries; 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.

© 2016 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     Twelve Months Ended
      June 30,     June 30,
      2016     2015     2016     2015
Revenue:                        
Subscription and software     $ 106,701       $ 105,638       $ 440,408       $ 405,640  
Services and other       6,979         8,548         31,936         34,761  
Total revenue       113,680         114,186         472,344         440,401  
Cost of revenue:                        
Subscription and software       4,901         5,352         20,376         21,165  
Services and other       6,830         7,269         28,235         28,411  
Total cost of revenue       11,731         12,621         48,611         49,576  
Gross profit       101,949         101,565         423,733         390,825  
Operating expenses:                        
Selling and marketing       24,832         25,137         91,536         92,736  
Research and development       16,754         17,036         67,152         69,584  
General and administrative       11,391         12,486         53,664         48,713  
Total operating expenses       52,977         54,659         212,352         211,033  
Income from operations       48,972         46,906         211,381         179,792  
Interest income       198         98         441         487  
Interest expense       (868 )       (22 )       (1,212 )       (30 )
Other income (expense), net       1,976         (1,132 )       29         (778 )
Income before provision for income taxes       50,278         45,850         210,639         179,471  
Provision for income taxes       16,952         15,044         70,688         61,064  
Net income     $ 33,326       $ 30,806       $ 139,951       $ 118,407  
Net income per common share:                        
Basic     $ 0.41       $ 0.36       $ 1.69       $ 1.34  
Diluted     $ 0.41       $ 0.36       $ 1.68       $ 1.33  
Weighted average shares outstanding:                        
Basic       81,282         85,056         82,892         88,398  
Diluted       81,599         85,585         83,309         89,016  
   

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited in thousands, except per share data)
             
      June 30,     June 30,
      2016     2015
             
ASSETS            
Current assets:            
Cash and cash equivalents     $ 318,336       $ 156,249  
Short-term marketable securities       3,006         59,197  
Accounts receivable, net       20,476         30,721  
Prepaid expenses and other current assets       13,948         10,752  
Prepaid income taxes       5,557         542  
Current deferred tax assets       —         6,169  
Total current assets       361,323         263,630  
Long-term marketable securities       —         3,047  
Property, equipment and leasehold improvements, net       15,825         18,039  
Computer software development costs, net       720         1,026  
Goodwill       23,438         17,360  
Intangible assets, net       5,000         147  
Non-current deferred tax assets       12,236         10,444  
Other non-current assets       1,196         1,668  
Total assets     $ 419,738       $ 315,361  
             
LIABILITIES AND STOCKHOLDERS’ DEFICIT            
Current liabilities:            
Accounts payable     $ 3,559       $ 5,240  
Accrued expenses and other current liabilities       36,105         38,483  
Income taxes payable       439         1,775  
Borrowings under credit agreement       140,000         —  
Current deferred revenue       252,520         250,968  
Total current liabilities       432,623         296,466  
Non-current deferred revenue       29,558         37,919  
Other non-current liabilities       32,591         29,522  
Commitments and contingencies            
Series D redeemable convertible preferred stock, $0.10 par value—Authorized—3,636 shares as of June 30, 2016 and 2015

Issued and outstanding—none as of June 30, 2016 and 2015

     —         —  
Stockholders’ deficit:            
Common stock, $0.10 par value—Authorized—210,000,000 shares

Issued—102,031,960 shares at June 30, 2016 and 101,607,520 shares at June 30, 2015

Outstanding—80,177,950 shares at June 30, 2016 and 84,504,202 shares at June 30, 2015

     10,203         10,161  
Additional paid-in capital       659,287         641,883  
Accumulated deficit       (5,676 )       (145,627 )
Accumulated other comprehensive income       2,651         6,470  
Treasury stock, at cost—21,854,010 shares of common stock at June 30, 2016 and 17,103,318 shares at June 30, 2015     (741,499 )       (561,433 )
Total stockholders’ deficit       (75,034 )       (48,546 )
Total liabilities and stockholders' deficit     $ 419,738       $ 315,361  
 

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited in thousands)
                         
      Three Months Ended     Twelve Months Ended
      June 30,     June 30,
      2016     2015     2016     2015
Cash flows from operating activities:                        
Net income     $ 33,326       $ 30,806       $ 139,951       $ 118,407  
Adjustments to reconcile net income to net cash provided by operating activities:                        
Depreciation and amortization       1,542         1,600         6,061         6,216  
Net foreign currency (gains) losses       (5,087 )       1,163         (3,666 )       (1,552 )
Stock-based compensation       3,414         3,462         15,727         14,584  
Deferred income taxes       1,804         (1,205 )       2,499         20,112  
Provision for bad debts       86         (42 )       260         (513 )
Tax benefits from stock-based compensation       330         15,181         2,208         37,024  
Excess tax benefits from stock-based compensation       (330 )       (15,181 )       (2,208 )       (37,024 )
Other non-cash operating activities       64         218         321         1,619  
Changes in assets and liabilities:                        
Accounts receivable       869         (2,493 )       9,382         8,028  
Unbilled services       (507 )       41         —         526  
Prepaid expenses, prepaid income taxes, and other assets       (9,084 )       (692 )       (7,681 )       4,070  
Installment receivables       39         (1,186 )       1,575         (364 )
Accounts payable, accrued expenses, and other liabilities       1,094         7,131         (4,489 )       5,933  
Deferred revenue       17,289         14,765         (6,196 )       14,919  
Net cash provided by operating activities       44,849         53,568         153,744         191,985  
Cash flows from investing activities:                        
Purchases of marketable securities       —         —         —         (50,065 )
Maturities of marketable securities       6,008         18,612         58,973         85,535  
Purchases of property, equipment and leasehold improvements       (953 )       (1,731 )       (3,483 )       (7,645 )
Acquisition related deposits       255,067         —         —         —  
Payments for business acquisitions       (8,000 )       —         (8,000 )       —  
Capitalized computer software development costs       (269 )       (44 )       (269 )       (359 )
Net cash provided by investing activities       251,853         16,837         47,221         27,466  
Cash flows from financing activities:                        
Exercises of stock options       1,062         2,616         3,924         4,662  
Repurchases of common stock       (75,476 )       (74,368 )       (178,604 )       (297,246 )
Payments of tax withholding obligations related to restricted stock       (1,076 )       (1,825 )       (4,480 )       (5,699 )
Excess tax benefits from stock-based compensation       330         15,181         2,208         37,024  
Proceeds from credit agreement       —         —         140,000         —  
Payments of credit agreement issuance costs       (120 )       —         (1,707 )       —  
Net cash used in financing activities       (75,280 )       (58,396 )       (38,659 )       (261,259 )
Effect of exchange rate changes on cash and cash equivalents       4         278         (219 )       (1,469 )
Increase (decrease) in cash and cash equivalents       221,426         12,287         162,087         (43,277 )
Cash and cash equivalents, beginning of period       96,910         143,962         156,249         199,526  
Cash and cash equivalents, end of period     $ 318,336       $ 156,249       $ 318,336       $ 156,249  
                         
Supplemental disclosure of cash flow information:                        
Income taxes paid, net     $ 17,416       $ 779       $ 69,028       $ 3,712  
Interest paid       963         30         963         30  
 

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
June 30,

    

Twelve Months Ended
June 30,
      2016     2015     2016     2015

Total expenses

                        
GAAP total expenses (a)     $ 64,708       $ 67,280       $ 260,963       $ 260,609  
Less:                        
Stock-based compensation (b)       (3,414 )       (3,462 )       (15,727 )       (14,584 )
Non-capitalized acquired technology (e)       —         —         (250 )       (3,277 )
Amortization of purchased technology intangibles       —         (113 )       (147 )       (748 )
Acquisition bid costs (f)       —         —         (5,213 )       —  
                         
Non-GAAP total expenses     $ 61,294       $ 63,705       $ 239,626       $ 242,000  
                         

Income from operations

                        
GAAP income from operations     $ 48,972       $ 46,906       $ 211,381       $ 179,792  
Plus:                        
Stock-based compensation (b)       3,414         3,462         15,727         14,584  
Non-capitalized acquired technology (e)       —         —         250         3,277  
Amortization of purchased technology intangibles       —         113         147         748  
Acquisition bid costs (f)       —         —         5,213         —  
                         
Non-GAAP income from operations     $ 52,386       $ 50,481       $ 232,718       $ 198,401  
                         

Net income

                        
GAAP net income     $ 33,326       $ 30,806       $ 139,951       $ 118,407  
Plus:                        
Stock-based compensation (b)       3,414         3,462         15,727         14,584  
Non-capitalized acquired technology (e)       —         —         250         3,277  
Amortization of purchased technology intangibles       —         113         147         748  
Acquisition bid costs (f)       —         —         8,649         —  
Less:                        
Income tax effect on Non-GAAP items (c)       (1,229 )       (1,287 )       (8,918 )       (6,699 )
                         
Non-GAAP net income     $ 35,511       $ 33,094       $ 155,806       $ 130,317  
                         

Diluted income per share

                        
GAAP diluted income per share     $ 0.41       $ 0.36       $ 1.68       $ 1.33  
Plus:                        
Stock-based compensation (b)       0.04         0.04         0.19         0.16  
Non-capitalized acquired technology (e)       —         —         —         0.04  
Amortization of purchased technology intangibles       —         —         —         0.01  
Acquisition bid costs (f)       —         —         0.10         —  
Less:                        
Income tax effect on Non-GAAP items (c)       (0.02 )       (0.02 )       (0.11 )       (0.08 )
                         
Non-GAAP diluted income per share     $ 0.44       $ 0.39       $ 1.87       $ 1.46  
                         
Shares used in computing Non-GAAP diluted income per share       81,599         85,585         83,309         89,016  

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
June 30,

    

Twelve Months Ended
June 30,
      2016     2015     2016     2015

Free Cash Flow

                        
GAAP cash flow from operating activities     $ 44,849       $ 53,568       $ 153,744       $ 191,985  
                         
Purchase of property, equipment and leasehold improvements       (953 )       (1,731 )       (3,483 )       (7,645 )
Capitalized computer software development costs       (269 )       (44 )       (269 )       (359 )
Non-capitalized acquired technology (e)       —         —         1,250         2,621  
Litigation related payments       960         —         3,040         —  
Acquisition bid costs (f)       2,581         —         8,649         —  
Excess tax benefits from stock-based compensation (d)       330         15,181         2,208         37,024  
                         
Free Cash Flow     $ 47,498       $ 66,974       $ 165,139       $ 223,626  
                         
(a) GAAP total expenses                        
     

Three Months Ended
June 30,

    

Twelve Months Ended
June 30,
      2016     2015     2016     2015
Total costs of revenue     $ 11,731       $ 12,621       $ 48,611       $ 49,576  
Total operating expenses       52,977         54,659         212,352         211,033  
GAAP total expenses     $ 64,708       $ 67,280       $ 260,963       $ 260,609  
                         
(b) Stock-based compensation expense was as follows:                        
     

Three Months Ended
June 30,

    

Twelve Months Ended
June 30,
      2016     2015     2016     2015
Cost of services and other     $ 341       $ 337       $ 1,390       $ 1,351  
Selling and marketing       804         774         4,351         3,056  
Research and development       880         958         3,423         3,881  
General and administrative       1,389         1,393         6,563         6,296  
Total stock-based compensation     $ 3,414       $ 3,462       $ 15,727       $ 14,584  
                         
(c) The income tax effect on non-GAAP items for the three and twelve months ended June 30, 2016 and 2015 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-K for the period ended June 30, 2016 for additional details.
                         
                         

(e) During the year ended June 30, 2016, we acquired certain technology for $0.3 million. At the time we acquired the technology, the project did not meet the accounting definition of having reached technological feasibility, and therefore the cost of the acquired technology was expensed as a research and development expense during the year ended June 30, 2016. During the year ended June 30, 2016, we have excluded the payments of $1.3 million for the non-capitalized acquired technology (including a $1 million final payment related to non-capitalized acquired technology from fiscal year 2014) from free cash flow to be consistent with the treatment of other transactions where the acquired assets were capitalized. There were no such activities for the three months ended June 30, 2016.
                         
                         
(f) During the twelve months ended June 30, 2016, we incurred $8.6 million of operating expenses related to the bid to acquire KBC Advanced Technologies plc., of which $3.4 million of foreign exchange losses and fees were recognized as a component of other income (expense), net. There were no such activities for the three months ended June 30, 2016. During the three and twelve months ended June 30, 2016, we excluded payments of $2.6 million and $8.6 million, respectively, for the acquisition bid. Refer to the Company's Form 10-K for the period ended June 30, 2016 for additional details.

 

Source: Aspen Technology, Inc.

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