Aspen Technology Announces Financial Results for the First Quarter of Fiscal 2017

October 27, 2016
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BEDFORD, Mass.--(BUSINESS WIRE)--Oct. 27, 2016-- 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 2017, ended September 30, 2016.

Antonio Pietri, President and Chief Executive Officer of AspenTech, said, “AspenTech delivered solid first quarter fiscal 2017 financial results that exceeded expectations from both a revenue and profitability perspective. We also made significant progress against our Asset Optimization strategy, completing two technology acquisitions during the quarter and today announcing the acquisition of Mtell. We believe these acquisitions will greatly enhance the capabilities of our analytics and maintenance solutions and further strengthen the value of the aspenONE offering for our customers.”

Pietri continued, “We also repurchased $130 million of stock during the first quarter as part of our share repurchase program. Our disciplined execution enables us to continue investing in product innovation while also maintaining our share repurchase program, generating significant value for customers and shareholders.”

First Quarter Fiscal 2017 and Recent 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 approximately $446 million at the end of the first quarter of fiscal 2017, which increased 5.4% compared to the first quarter of fiscal 2016 and 1.1% sequentially.
  • GAAP operating margin was 45.6%, compared to 46.1% in the first quarter of fiscal 2016. Non-GAAP operating margin was 50.4%, compared to 50.1% in the first quarter of fiscal 2016.
  • AspenTech repurchased 2.9 million shares of its common stock for $130.0 million in the first quarter of fiscal 2017.

Summary of First Quarter Fiscal Year 2017 Financial Results

AspenTech’s total revenue of $120.1 million included:

  • Subscription and software revenue was $113.4 million in the first quarter of fiscal 2017, an increase from $111.9 million in the first quarter of fiscal 2016.
  • Services and other revenue was $6.6 million in the first quarter of fiscal 2017, compared to $8.4 million in the first quarter of fiscal 2016.

For the quarter ended September 30, 2016, AspenTech reported income from operations of $54.7 million, compared to income from operations of $55.4 million for the quarter ended September 30, 2015.

Net income was $35.0 million for the quarter ended September 30, 2016, leading to net income per share of $0.44, consistent with net income per share of $0.44 in the same period last fiscal year.

Non-GAAP income from operations, which adds back the impact of stock-based compensation expense, amortization of intangibles associated with acquisitions, acquisition-related expenses and non-capitalized acquired technology was $60.5 million for the first quarter of fiscal 2017, compared to non-GAAP income from operations of $60.2 million in the same period last fiscal year. Non-GAAP net income was $38.7 million, or $0.49 per share, for the first quarter of fiscal 2017, compared to non-GAAP net income of $39.8 million, or $0.47 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 $191.6 million and borrowings of $140 million at September 30, 2016.

During the first quarter, the company generated $26.3 million in cash flow from operations and $26.7 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, October 27, 2016, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the first quarter fiscal year 2017 as well as the company’s business outlook.

The live dial-in number is (866) 604-6127 or (443) 961-0460, conference ID code 99548515. 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 99548515, through November 27, 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 second and third paragraphs of this press release contain forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may vary significantly from AspenTech’s expectations based on a number of risks and uncertainties, including, without limitation: 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
    September 30,
    2016   2015
Revenue:        
Subscription and software   $ 113,444     $ 111,859  
Services and other     6,606       8,437  
Total revenue     120,050       120,296  
Cost of revenue:        
Subscription and software     5,069       5,242  
Services and other     6,437       7,730  
Total cost of revenue     11,506       12,972  
Gross profit     108,544       107,324  
Operating expenses:        
Selling and marketing     22,025       22,436  
Research and development     18,632       16,597  
General and administrative     13,157       12,862  
Total operating expenses     53,814       51,895  
Income from operations     54,730       55,429  
Interest income     272       82  
Interest expense     (869 )     (1 )
Other income, net     646       896  
Income before provision for income taxes     54,779       56,406  
Provision for income taxes     19,779       19,635  
Net income   $ 35,000     $ 36,771  
Net income per common share:        
Basic   $ 0.44     $ 0.44  
Diluted   $ 0.44     $ 0.44  
Weighted average shares outstanding:        
Basic     79,048       83,876  
Diluted     79,385       84,320  
         
           
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited in thousands, except share data)
           
      September 30,   June 30,
      2016   2016
           
ASSETS          
Current assets:          
Cash and cash equivalents     $ 48,377     $ 318,336  
Short-term marketable securities       143,174       3,006  
Accounts receivable, net       21,847       20,476  
Prepaid expenses and other current assets       12,154       13,948  
Prepaid income taxes       112       5,557  
Total current assets       225,664       361,323  
Property, equipment and leasehold improvements, net       15,766       15,825  
Computer software development costs, net       680       720  
Goodwill       25,278       23,438  
Intangible assets, net       9,067       5,000  
Non-current deferred tax assets       12,264       12,236  
Other non-current assets       1,225       1,196  
Total assets     $ 289,944     $ 419,738  
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current liabilities:          
Accounts payable     $ 3,754     $ 3,559  
Accrued expenses and other current liabilities       29,968       36,105  
Income taxes payable       11,838       439  
Borrowings under credit agreement       140,000       140,000  
Current deferred revenue       226,105       252,520  
Total current liabilities       411,665       432,623  
Non-current deferred revenue       28,097       29,558  
Other non-current liabilities       33,767       32,591  
Commitments and contingencies          
Series D redeemable convertible preferred stock, $0.10 par value—

Authorized— 3,636 shares as of September 30, 2016 and June 30, 2016

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

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

Issued— 102,218,791 shares at September 30, 2016 and 102,031,960 shares at June 30, 2016

Outstanding— 77,468,068 shares at September 30, 2016 and 80,177,950 shares at June 30, 2016

     10,222       10,203  
Additional paid-in capital       646,647       659,287  
Retained earnings (deficit)       29,324       (5,676 )
Accumulated other comprehensive income       1,721       2,651  

Treasury stock, at cost—24,750,723 shares of common stock at September 30, 2016 and
21,854,010 shares at June 30, 2016

     (871,499 )     (741,499 )
Total stockholders’ deficit       (183,585 )     (75,034 )
Total liabilities and stockholders' deficit     $ 289,944     $ 419,738  
           
         
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited in thousands)
         
    Three Months Ended
    September 30,
    2016   2015
Cash flows from operating activities:        
Net income   $ 35,000     $ 36,771  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization     1,791       1,547  
Net foreign currency gains     (745 )     (1,189 )
Stock-based compensation     4,958       4,423  
Deferred income taxes     (46 )     —  
Provision for (recovery from) bad debts     (7 )     26  
Tax benefits from stock-based compensation     584       1,577  
Excess tax benefits from stock-based compensation     (584 )     (1,577 )
Other non-cash operating activities     90       159  
Changes in assets and liabilities:        
Accounts receivable     (1,355 )     8,769  
Prepaid expenses, prepaid income taxes, and other assets     1,885       812  
Accounts payable, accrued expenses, income taxes payable and other liabilities     12,520       2,348  
Deferred revenue     (27,841 )     (35,220 )
Net cash provided by operating activities     26,250       18,446  
Cash flows from investing activities:        
Purchases of marketable securities     (193,748 )     —  
Maturities of marketable securities     53,184       10,370  
Purchases of property, equipment and leasehold improvements     (898 )     (1,119 )
Payments for business acquisitions     (5,400 )     —  
Payments for capitalized computer software costs     (51 )     —  
Net cash (used in) provided by investing activities     (146,913 )     9,251  
Cash flows from financing activities:        
Exercises of stock options     3,089       611  
Repurchases of common stock     (151,621 )     (55,033 )
Payments of tax withholding obligations related to restricted stock     (1,297 )     (1,125 )
Excess tax benefits from stock-based compensation     584       1,577  
Net cash used in financing activities     (149,245 )     (53,970 )
Effect of exchange rate changes on cash and cash equivalents     (51 )     (237 )
Decrease in cash and cash equivalents     (269,959 )     (26,510 )
Cash and cash equivalents, beginning of period     318,336       156,249  
Cash and cash equivalents, end of period   $ 48,377     $ 129,739  
         
Supplemental disclosure of cash flow information:        
Income taxes paid, net   $ 1,239     $ 2,895  
Interest paid     850       1  
         
             
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES  
Reconciliation of GAAP to Non-GAAP Results of Operations and Cash Flows  
(Unaudited in thousands, except per share data)  
             
      Three Months Ended

September 30,
      2016     2015

Total expenses

            
GAAP total expenses (a)     $ 65,320       $ 64,867  
Less:            
Stock-based compensation (b)       (4,958 )       (4,423 )
Non-capitalized acquired technology (e)       (350 )       (250 )
Amortization of purchased technology intangibles       (55 )       (113 )
Acquisition related fees (f)       (362 )       —  
             
Non-GAAP total expenses     $ 59,595       $ 60,081  
             

Income from operations

            
GAAP income from operations     $ 54,730       $ 55,429  
Plus:            
Stock-based compensation (b)       4,958         4,423  
Non-capitalized acquired technology (e)       350         250  
Amortization of purchased technology intangibles       55         113  
Acquisition related fees (f)       362         —  
             
Non-GAAP income from operations     $ 60,455       $ 60,215  
             

Net income

            
GAAP net income     $ 35,000       $ 36,771  
Plus:            
Stock-based compensation (b)       4,958         4,423  
Non-capitalized acquired technology (e)       350         250  
Amortization of purchased technology intangibles       55         113  
Acquisition related fees (f)       362         —  
Less:            
Income tax effect on Non-GAAP items (c)       (2,061 )       (1,723 )
             
Non-GAAP net income     $ 38,664       $ 39,834  
             

Diluted income per share

            
GAAP diluted income per share     $ 0.44       $ 0.44  
Plus:            
Stock-based compensation (b)       0.06         0.05  
Non-capitalized acquired technology (e)       0.01         0.00  
Amortization of purchased technology intangibles       0.00         0.00  
Acquisition related fees (f)       0.01         —  
Less:            
Income tax effect on Non-GAAP items (c)       (0.03 )       (0.02 )
             
Non-GAAP diluted income per share     $ 0.49       $ 0.47  
             
Shares used in computing Non-GAAP diluted income per share       79,385         84,320  
             
             
      Three Months Ended

September 30,

  
      2016     2015

Free Cash Flow

            
GAAP cash flow from operating activities     $ 26,250       $ 18,446  
             
Purchase of property, equipment and leasehold improvements       (898 )       (1,119 )
Capitalized computer software development costs       (51 )       —  
Non-capitalized acquired technology (e)       846         1,250  
Excess tax benefits from stock-based compensation (d)       584         1,577  
             
Free Cash Flow     $ 26,731       $ 20,154  
             
(a) GAAP total expenses            
      Three Months Ended

September 30,
      2016     2015
Total costs of revenue     $ 11,506       $ 12,972  
Total operating expenses       53,814         51,895  
GAAP total expenses     $ 65,320       $ 64,867  
             
(b) Stock-based compensation expense was as follows:            
      Three Months Ended

September 30,
      2016     2015
Cost of services and other     $ 369       $ 357  
Selling and marketing       955         912  
Research and development       1,062         824  
General and administrative       2,572         2,330  
Total stock-based compensation     $ 4,958       $ 4,423  
 
(c) The income tax effect on non-GAAP items for the three months ended September 30, 2016 and 2015 is calculated
utilizing the Company's estimated federal and state tax rate of 36%.
 
(d) Excess tax benefits are related to stock-based compensation tax deductions in excess of book compensation expense and
reduce our income taxes payable. We have included the impact of excess tax benefits in free cash flow to be consistent with
the treatment of other tax activity.
 
(e) In the three months ended September 30, 2016 and September 30, 2015, we acquired technology that did not meet the
accounting requirements for capitalization and therefore the cost of the acquired technology was expensed as research and
development. We have excluded the expense of the acquired technology from non-GAAP operating income to be consistent
with transactions where the acquired assets were capitalized. In the three months ended September 30, 2016 and 2015, we
have excluded payments of $0.8 million and $1.3 million, respectively, for the non-capitalized acquired technology (including
a $0.5 million and $1 million, respectively of final payments related to non-capitalized acquired technology from prior fiscal
periods) from free cash flow to be consistent with the treatment of other transactions where the acquired assets were
capitalized.
 
(f) During the three months ended September 30, 2016, we incurred $0.4 million of operating expenses related to acquisition
fees, which were not paid by September 30, 2016. There were no such activities for the three months ended September 30,
2015.

 

Source: Aspen Technology, Inc.

Media Contact
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or
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