AZPN Aspen Technology Inc New

Aspen Technology, Inc. (NASDAQ: AZPN), the asset optimization software company, today announced financial results for its third quarter of fiscal year 2017, ended March 31, 2017.

Antonio Pietri, President and Chief Executive Officer of AspenTech, said “AspenTech reported third quarter fiscal 2017 financial results that exceeded expectations from a revenue and profitability perspective. The demand from our owner-operator customers offset the impact of continued macroeconomic challenges facing engineering and construction and upstream customers.”

Pietri continued, “Last week we hosted our biennial OPTIMIZE 2017 user conference, which was focused on Asset Optimization. Customers showed strong interest in the direction of our engineering and manufacturing and supply chain products and the significant value those solutions can capture from increased asset efficiency. A highlight of the conference was the positive customer reaction to our new Asset Performance Maintenance (APM) suite, which expands AspenTech’s capabilities into the maintenance of the physical asset by leveraging reliability analysis, machine-based learning, and prescriptive analytics. We are excited by the opportunity for APM and believe it can be an important contributor to growth in the coming years.”

Pietri concluded, “At the same time, we continued to utilize our strong cash flow to generate value for shareholders via our share buyback program, which in the third quarter surpassed $1 billion in cumulative repurchases since the program began in fiscal year 2011.”

Third Quarter Fiscal 2017 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 $452 million at the end of the third quarter of fiscal 2017, which increased 4.9% compared to the third quarter of fiscal 2016 and 0.3% sequentially.
• GAAP operating margin was 43.8%, compared to 42.5% in the third quarter of fiscal 2016. Non-GAAP operating margin was 48.1%, compared to 49.7% in the third quarter of fiscal 2016.
• AspenTech repurchased 1.7 million shares of its common stock for $100.0 million in the third quarter of fiscal 2017.

Summary of Third Quarter Fiscal Year 2017 Financial Results

AspenTech’s total revenue of $119.3 million included:

• Subscription and software revenue was $111.7 million in the third quarter of fiscal 2017, consistent with $111.7 million in the third quarter of fiscal 2016.
• Services and other revenue was $7.6 million in the third quarter of fiscal 2017, an increase from $7.5 million in the third quarter of fiscal 2016.

For the quarter ended March 31, 2017, AspenTech reported income from operations of $52.3 million, compared to income from operations of $50.7 million for the quarter ended March 31, 2016.

Net income was $35.8 million for the quarter ended March 31, 2017, leading to net income per share of $0.47, compared to net income per share of $0.40 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 $57.4 million for the third quarter of fiscal 2017, compared to non-GAAP income from operations of $59.3 million in the same period last fiscal year. Non-GAAP net income was $39.4 million, or $0.52 per share, for the third quarter of fiscal 2017, compared to non-GAAP net income of $40.9 million, or $0.49 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 $101.7 million and borrowings of $140.0 million at March 31, 2017.

During the third quarter, the company generated $55.6 million in cash flow from operations and $56.2 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, May 2, 2017, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the third 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 7805720. 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 7805720, through June 2, 2017.

About AspenTech

AspenTech is a leading software supplier for optimizing asset performance. Our products thrive in complex, industrial environments where it is critical to optimize the asset design, operation and maintenance lifecycle. AspenTech uniquely combines decades of process modeling expertise with big data machine-learning. Our purpose-built software platform automates knowledge work and builds sustainable competitive advantage by delivering high returns over the entire asset lifecycle. As a result, companies in capital-intensive industries can maximize uptime and push the limits of performance, running their assets faster, safer, longer and greener. Visit AspenTech.com to find out more.

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.

© 2017 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 EndedMarch 31,

Nine Months EndedMarch 31,

  2017     2016     2017     2016   Revenue: Subscription and software $ 111,717 $ 111,722 $ 338,077 $ 333,707 Services and other   7,560     7,495     21,184     24,957   Total revenue   119,277     119,217     359,261     358,664   Cost of revenue: Subscription and software 5,521 5,266 15,766 15,475 Services and other   6,746     6,754     19,586     21,405   Total cost of revenue   12,267     12,020     35,352     36,880   Gross profit   107,010     107,197     323,909     321,784   Operating expenses: Selling and marketing 22,269 23,090 66,123 66,704 Research and development 20,348 17,820 57,577 50,398 General and administrative   12,120     15,606     37,140     42,273   Total operating expenses   54,737     56,516     160,840     159,375   Income from operations 52,273 50,681 163,069 162,409 Interest income 176 90 665 243 Interest (expense) (959 ) (330 ) (2,721 ) (344 ) Other (expense) income, net   (56 )   (2,686 )   1,287     (1,947 ) Income before provision for income taxes 51,434 47,755 162,300 160,361 Provision for income taxes   15,600     14,584     54,455     53,736   Net income $ 35,834   $ 33,171   $ 107,845   $ 106,625   Net income per common share: Basic $ 0.47 $ 0.40 $ 1.40 $ 1.28 Diluted $ 0.47 $ 0.40 $ 1.39 $ 1.27 Weighted average shares outstanding: Basic 75,676 83,081 77,221 83,425 Diluted 76,182 83,373 77,652 83,842               ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited in thousands, except share data)  

March 31, 2017

June 30, 2016

ASSETS Current assets: Cash and cash equivalents $ 84,552 $ 318,336 Short-term marketable securities 17,137 3,006 Accounts receivable, net 35,192 20,476 Prepaid expenses and other current assets 9,655 13,948 Prepaid income taxes   516     5,557   Total current assets 147,052 361,323 Property, equipment and leasehold improvements, net 14,154 15,825 Computer software development costs, net 505 720 Goodwill 50,909 23,438 Intangible assets, net 21,223 5,000 Non-current deferred tax assets 8,868 12,236 Other non-current assets   1,241     1,196   Total assets $ 243,952   $ 419,738     LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable $ 4,643 $ 3,559 Accrued expenses and other current liabilities 38,342 36,105 Income taxes payable 3,499 439 Borrowings under credit agreement 140,000 140,000 Current deferred revenue   240,791     252,520   Total current liabilities 427,275 432,623 Non-current deferred revenue 27,661 29,558 Other non-current liabilities 38,511 32,591 Commitments and contingencies (Note 16) Series D redeemable convertible preferred stock, $0.10 par value—

Authorized— 3,636 shares as of March 31, 2017 and June 30, 2016

Issued and outstanding— none as of March 31, 2017 and June 30, 2016

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

Issued— 102,484,948 shares at March 31, 2017 and 102,031,960 shares at June 30, 2016

Outstanding— 74,661,804 shares at March 31, 2017 and 80,177,950 shares at June 30, 2016

10,249 10,203 Additional paid-in capital 679,471 659,287 Retained earnings (deficit) 102,168 (5,676 ) Accumulated other comprehensive income 116 2,651 Treasury stock, at cost—27,823,144 shares of common stock at March 31, 2017 and 21,854,010 shares at June 30, 2016   (1,041,499 )   (741,499 ) Total stockholders’ deficit   (249,495 )   (75,034 ) Total liabilities and stockholders’ deficit $ 243,952   $ 419,738                       ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited in thousands)  

Three Months EndedMarch 31,

Nine Months EndedMarch 31,

  2017     2016     2017     2016   Cash flows from operating activities: Net income $ 35,834 $ 33,171 $ 107,845 $ 106,625 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,693 1,499 4,993 4,519 Net foreign currency losses (gains) 281 2,865 (2,020 ) 1,421 Stock-based compensation 4,677 4,378 14,307 12,313 Deferred income taxes 987 828 1,169 695 Provision for bad debts 169 (2 ) 225 174 Tax benefits from stock-based compensation 1,312 47 2,344 1,878 Excess tax benefits from stock-based compensation (1,312 ) (47 ) (2,344 ) (1,878 ) Other non-cash operating activities 390 (14 ) 430 257 Changes in assets and liabilities, excluding initial effects of acquisitions: Accounts receivable (17,438 ) (7,207 ) (14,944 ) 8,513 Prepaid expenses, prepaid income taxes, and other assets (13 ) 1,453 3,648 3,446 Accounts payable, accrued expenses, income taxes payable and other liabilities 1,863 (2,276 ) 6,947 (5,583 ) Deferred revenue   27,178     35,028     (13,562 )   (23,485 ) Net cash provided by operating activities   55,621     69,723     109,038     108,895   Cash flows from investing activities: Purchases of marketable securities — — (683,748 ) — Maturities of marketable securities 55,837 20,916 669,216 52,965 Purchases of property, equipment and leasehold improvements (777 ) (749 ) (2,151 ) (2,530 ) Acquisition related deposits — (255,067 ) — (255,067 ) Payments for business acquisitions, net of cash acquired — — (36,171 ) — Payments for capitalized computer software costs   (26 )   —     (126 )   —   Net cash provided by (used in) investing activities   55,034     (234,900 )   (52,980 )   (204,632 ) Cash flows from financing activities: Exercises of stock options 3,049 417 7,892 2,862 Repurchases of common stock (96,058 ) (46,338 ) (295,642 ) (103,128 ) Payments of tax withholding obligations related to restricted stock (1,560 ) (1,216 ) (4,346 ) (3,404 ) Excess tax benefits from stock-based compensation 1,312 47 2,344 1,878 Proceeds from credit agreement — 140,000 — 140,000 Payments of credit agreement issuance costs   —     (1,587 )   —     (1,587 ) Net cash (used in) provided by financing activities (93,257 ) 91,323 (289,752 ) 36,621 Effect of exchange rate changes on cash and cash equivalents   128     141     (90 )   (223 ) Increase (decrease) in cash and cash equivalents 17,526 (73,713 ) (233,784 ) (59,339 ) Cash and cash equivalents, beginning of period   67,026     170,623     318,336     156,249   Cash and cash equivalents, end of period $ 84,552   $ 96,910   $ 84,552   $ 96,910     Supplemental disclosure of cash flow information: Income taxes paid, net $ 16,742 $ 17,115 $ 41,742 $ 51,612 Interest paid 920 330 2,499 344                             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 March 31,

Nine Months Ended March 31,

  2017     2016     2017     2016  

Total expenses

GAAP total expenses (a) $ 67,004 $ 68,536 $ 196,192 $ 196,255 Less: Stock-based compensation (b) (4,677 ) (4,378 ) (14,307 ) (12,313 ) Non-capitalized acquired technology (e) — — (350 ) (250 ) Amortization of intangibles (405 ) (14 ) (516 ) (147 ) Acquisition related fees (31 ) (4,187 ) (493 ) (5,213 )                                       Non-GAAP total expenses         $ 61,891         $ 59,957           $ 180,526         $ 178,332    

Income from operations

GAAP income from operations $ 52,273 $ 50,681 $ 163,069 $ 162,409 Plus: Stock-based compensation (b) 4,677 4,378 14,307 12,313 Non-capitalized acquired technology (e) — — 350 250 Amortization of intangibles 405 14 516 147 Acquisition related fees 31 4,187 493 5,213                                       Non-GAAP income from operations         $ 57,386         $ 59,260           $ 178,735         $ 180,332    

Net income

GAAP net income $ 35,834 $ 33,171 $ 107,845 $ 106,625 Plus: Stock-based compensation (b) 4,677 4,378 14,307 12,313 Non-capitalized acquired technology (e) — — 350 250 Amortization of intangibles 405 14 516 147 Acquisition related fees 31 7,623 493 8,649 Less: Income tax effect on Non-GAAP items (c) (1,554 ) (4,325 ) (5,248 ) (7,689 )                                       Non-GAAP net income         $ 39,393         $ 40,861           $ 118,263         $ 120,295    

Diluted income per share

GAAP diluted income per share $ 0.47 $ 0.40 $ 1.39 $ 1.27 Plus: Stock-based compensation (b) 0.06 0.05 0.18 0.15 Non-capitalized acquired technology (e) — — 0.00 0.00 Amortization of intangibles 0.01 0.00 0.01 0.00 Acquisition related fees 0.00 0.09 0.01 0.10 Less: Income tax effect on Non-GAAP items (c) (0.02 ) (0.05 ) (0.07 ) (0.09 )                                       Non-GAAP diluted income per share         $ 0.52         $ 0.49           $ 1.52         $ 1.43     Shares used in computing Non-GAAP diluted income per share 76,182 83,373 77,652 83,842                     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 March 31,

Nine Months Ended March 31,

  2017     2016     2017     2016  

Free Cash Flow

GAAP cash flow from operating activities $ 55,621 $ 69,723 $ 109,038 $ 108,895   Purchase of property, equipment and leasehold improvements (777 ) (749 ) (2,151 ) (2,530 ) Capitalized computer software development costs (26 ) — (126 ) — Non-capitalized acquired technology (e) — — 846 1,250 Excess tax benefits from stock-based compensation (d) 1,312 47 2,344 1,878 Acquisition related fee payments 35 6,068 448 6,068 Litigation related payments         —         2,080           —         2,080   Free Cash Flow       $ 56,165       $ 77,169         $ 110,399       $ 117,641     (a) GAAP total expenses

Three Months Ended March 31,

Nine Months Ended March 31,

  2017     2016     2017     2016   Total costs of revenue $ 12,267 $ 12,020 $ 35,352 $ 36,880 Total operating expenses   54,737     56,516     160,840     159,375   GAAP total expenses $ 67,004   $ 68,536   $ 196,192   $ 196,255     (b) Stock-based compensation expense was as follows:

Three Months Ended March 31,

Nine Months Ended March 31,

  2017     2016     2017     2016   Cost of services and other $ 363 $ 343 $ 1,106 $ 1,049 Selling and marketing 972 1,797 2,937 3,547 Research and development 1,618 871 4,177 2,543 General and administrative   1,724     1,367     6,087     5,174   Total stock-based compensation $ 4,677   $ 4,378   $ 14,307   $ 12,313  

(c) The income tax effect on non-GAAP items for the three and nine months ended March 31, 2017 and 2016 is calculated utilizing the Company's estimated federal and state tax rate.

(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 nine months ended March 31, 2017 and March 31, 2016, 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 nine months ended March 31, 2017 and 2016, we have excluded payments of $0.8 million and $1.3 million, respectively, for the non-capitalized acquired technology (including $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.

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Media ContactAspenTechDavid Grip, +1 781-221-5273david.grip@aspentech.comorInvestor ContactICRBrian Denyeau, +1 646-277-1251brian.denyeau@icrinc.com