AZPN Aspen Technology Inc New

Aspen Technology, Inc. (NASDAQ: AZPN), the asset optimization software company, today announced financial results for its first quarter of fiscal year 2018, ended September 30, 2017.

“AspenTech delivered a solid start to fiscal 2018 with financial results that exceeded our expectations, driven by positive, broad-based demand from owner-operator customers,” said Antonio Pietri, President and Chief Executive Officer of AspenTech.

Pietri continued, “During the quarter we continued to execute well against our Asset Optimization strategy and develop momentum among prospective customers for the APM product suite, which we believe positions us to enhance the value we deliver to both our customers and shareholders over the long term.”

First Quarter Fiscal 2018 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 $461 million at the end of the first quarter of fiscal 2018, which increased 3.3% compared to the first quarter of fiscal 2017 and 0.3% sequentially.
• GAAP operating margin was 43.4%, compared to 45.6% in the first quarter of fiscal 2017. Non-GAAP operating margin was 49.2%, compared to 50.4% in the first quarter of fiscal 2017.
• AspenTech repurchased approximately 839,000 shares of its common stock for $50.0 million in the first quarter of fiscal 2018.

Summary of First Quarter Fiscal Year 2018 Financial Results

AspenTech’s total revenue of $122.8 million included:

• Subscription and software revenue was $115.8 million in the first quarter of fiscal 2018, an increase from $113.4 million in the first quarter of fiscal 2017.
• Services and other revenue was $7.0 million in the first quarter of fiscal 2018, compared to $6.6 million in the first quarter of fiscal 2017.

For the quarter ended September 30, 2017, AspenTech reported income from operations of $53.3 million, compared to income from operations of $54.7 million for the quarter ended September 30, 2016.

Net income was $34.8 million for the quarter ended September 30, 2017, leading to net income per share of $0.47, compared to 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 $60.4 million for the first quarter of fiscal 2018, compared to non-GAAP income from operations of $60.5 million in the same period last fiscal year. Non-GAAP net income was $39.3 million, or $0.53 per share, for the first quarter of fiscal 2018, compared to non-GAAP net income of $38.7 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 $59.0 million and borrowings of $140.0 million at September 30, 2017.

During the first quarter, the company generated $12.4 million in cash flow from operations and $12.2 million in free cash flow. Free cash flow is calculated as net cash provided by operating activities adjusted for the net impact of: purchases of property, equipment and leasehold improvements; capitalized computer software development costs; non-capitalized acquired technology, excess tax benefits from stock-based compensation, and other nonrecurring items, such as acquisition or litigation related payments.

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 26, 2017, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the first quarter fiscal year 2018 as well as the company’s business outlook.

The live dial-in number is (866) 604-6127 or (443) 961-0460, conference ID code 98608997. 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 98608997, through November 26, 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 or grow the aspenONE APM business, and failure to continue to provide innovative, market-leading solutions; the demand for, or usage of, aspenONE software declines for any reason, including declines due to adverse changes in the capital-intensive process industries; unfavorable economic and market conditions or a lessening demand in the market for asset 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 AspenTech leaf logo are trademarks of Aspen Technology, Inc. All rights reserved. All other trademarks are property of their respective owners.

 

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited in thousands, except per share data)

   

Three Months EndedSeptember 30,

2017     2016 Revenue: Subscription and software $ 115,756 $ 113,444 Services and other 7,025   6,606   Total revenue 122,781   120,050   Cost of revenue: Subscription and software 5,783 5,069 Services and other 6,949   6,437   Total cost of revenue 12,732   11,506   Gross profit 110,049   108,544   Operating expenses: Selling and marketing 23,571 22,025 Research and development 19,489 18,632 General and administrative 13,676   13,157   Total operating expenses 56,736   53,814   Income from operations 53,313 54,730 Interest income 141 272 Interest (expense) (1,206 ) (869 ) Other (expense) income, net (616 ) 646   Income before provision for income taxes 51,632 54,779 Provision for income taxes 16,877   19,779   Net income $ 34,755   $ 35,000   Net income per common share: Basic $ 0.48 $ 0.44 Diluted $ 0.47 $ 0.44 Weighted average shares outstanding: Basic 73,024 79,048 Diluted 73,609 79,385  

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Unaudited in thousands, except share data)

       

September 30, 2017

June 30, 2017

ASSETS Current assets: Cash and cash equivalents $ 58,983 $ 101,954 Accounts receivable, net 28,284 27,670 Prepaid expenses and other current assets 11,336 12,061 Prepaid income taxes 3,334   4,501   Total current assets 101,937 146,186 Property, equipment and leasehold improvements, net 12,360 13,400 Computer software development costs, net 706 667 Goodwill 51,738 51,248 Intangible assets, net 20,263 20,789 Non-current deferred tax assets 14,404 14,352 Other non-current assets 1,315   1,300   Total assets $ 202,723   $ 247,942   LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable $ 3,522 $ 5,467 Accrued expenses and other current liabilities 36,761 48,149 Income taxes payable 15,913 1,603 Borrowings under credit agreement 140,000 140,000 Current deferred revenue 233,476   272,024   Total current liabilities 429,672 467,243 Non-current deferred revenue 26,754 28,335 Other non-current liabilities 13,754 13,148 Commitments and contingencies (Note 15) Series D redeemable convertible preferred stock, $0.10 par value—Authorized— 3,636 shares as of September 30, 2017 and June 30, 2017Issued and outstanding— none as of September 30, 2017 and June 30, 2017 — — Stockholders’ deficit: Common stock, $0.10 par value— Authorized—210,000,000 sharesIssued— 102,692,094 shares at September 30, 2017 and 102,567,129 shares at June 30, 2017Outstanding— 72,706,959 shares at September 30, 2017 and 73,421,153 shares at June 30, 2017 10,269 10,257 Additional paid-in capital 694,638 687,479 Retained earnings 191,275 156,520 Accumulated other comprehensive income 2,860 1,459 Treasury stock, at cost—29,985,135 shares of common stock at September 30, 2017 and 29,145,976 shares at June 30, 2017 (1,166,499 ) (1,116,499 ) Total stockholders’ deficit (267,457 ) (260,784 ) Total liabilities and stockholders’ deficit $ 202,723   $ 247,942    

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited in thousands)

   

Three Months EndedSeptember 30,

2017     2016 Cash flows from operating activities: Net income $ 34,755 $ 35,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,753 1,791 Net foreign currency (gains) losses 936 (745 ) Stock-based compensation 6,414 4,958 Deferred income taxes (33 ) (46 ) Provision for (recovery from) bad debts 20 (7 ) Tax benefits from stock-based compensation — 584 Excess tax benefits from stock-based compensation — (584 ) Other non-cash operating activities — 90 Changes in assets and liabilities: Accounts receivable (504 ) (1,355 ) Prepaid expenses, prepaid income taxes, and other assets 2,292 1,885 Accounts payable, accrued expenses, income taxes payable and other liabilities 6,764 12,520 Deferred revenue (40,037 ) (27,841 ) Net cash provided by operating activities 12,360   26,250   Cash flows from investing activities: Purchases of marketable securities — (193,748 ) Maturities of marketable securities — 53,184 Purchases of property, equipment and leasehold improvements (123 ) (898 ) Payments for business acquisitions — (5,400 ) Payments for capitalized computer software costs (65 ) (51 ) Net cash used in investing activities (188 ) (146,913 ) Cash flows from financing activities: Exercises of stock options 2,411 3,089 Repurchases of common stock (55,109 ) (151,621 ) Payments of tax withholding obligations related to restricted stock (1,650 ) (1,297 ) Deferred business acquisition payment (600 ) — Excess tax benefits from stock-based compensation — 584 Payments of credit agreement issuance costs (351 ) —   Net cash used in financing activities (55,299 ) (149,245 ) Effect of exchange rate changes on cash and cash equivalents 156   (51 ) Decrease in cash and cash equivalents (42,971 ) (269,959 ) Cash and cash equivalents, beginning of period 101,954   318,336   Cash and cash equivalents, end of period $ 58,983   $ 48,377     Supplemental disclosure of cash flow information: Income taxes paid, net $ 1,243 $ 1,239 Interest paid 968 850  

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIESReconciliation of GAAP to Non-GAAP Results of Operations and Cash Flows(Unaudited in thousands, except per share data)

     

Three Months EndedSeptember 30,

2017     2016

Total expenses

GAAP total expenses (a) $ 69,468 $ 65,320 Less: Stock-based compensation (b) (6,414 ) (4,958 ) Non-capitalized acquired technology (e) — (350 ) Amortization of intangibles (526 ) (55 ) Acquisition related fees (130 ) (362 )               Non-GAAP total expenses     $ 62,398       $ 59,595    

Income from operations

GAAP income from operations $ 53,313 $ 54,730 Plus: Stock-based compensation (b) 6,414 4,958 Non-capitalized acquired technology (e) — 350 Amortization of intangibles 526 55 Acquisition related fees 130 362               Non-GAAP income from operations     $ 60,383       $ 60,455    

Net income

GAAP net income $ 34,755 $ 35,000 Plus: Stock-based compensation (b) 6,414 4,958 Non-capitalized acquired technology (e) — 350 Amortization of intangibles 526 55 Acquisition related fees 130 362 Less: Income tax effect on Non-GAAP items (c) (2,545 ) (2,061 )               Non-GAAP net income     $ 39,280       $ 38,664    

Diluted income per share

GAAP diluted income per share $ 0.47 $ 0.44 Plus: Stock-based compensation (b) 0.08 0.06 Non-capitalized acquired technology (e) — 0.01 Amortization of intangibles 0.01 — Acquisition related fees — 0.01 Less: Income tax effect on Non-GAAP items (c) (0.03 ) (0.03 )               Non-GAAP diluted income per share     $ 0.53       $ 0.49     Shares used in computing Non-GAAP diluted income per share 73,609 79,385  

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIESReconciliation of GAAP to Non-GAAP Results of Operations and Cash Flows(Unaudited in thousands, except per share data)

 

Three Months EndedSeptember 30,

2017 2016

Free Cash Flow

GAAP cash flow from operating activities $ 12,360 $ 26,250   Purchase of property, equipment and leasehold improvements (123 ) (898 ) Capitalized computer software development costs (65 ) (51 ) Non-capitalized acquired technology (e) 75 846 Excess tax benefits from stock-based compensation (d)     —       584   Free Cash Flow     $ 12,247       $ 26,731     (a) GAAP total expenses

Three Months EndedSeptember 30,

2017 2016 Total costs of revenue $ 12,732 $ 11,506 Total operating expenses 56,736   53,814   GAAP total expenses $ 69,468   $ 65,320     (b) Stock-based compensation expense was as follows:

Three Months EndedSeptember 30,

2017 2016 Cost of services and other $ 450 $ 369 Selling and marketing 885 955 Research and development 1,896 1,062 General and administrative 3,183   2,572   Total stock-based compensation $ 6,414   $ 4,958    

(c) The income tax effect on non-GAAP items for the three months ended September 30, 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 the Company’s income taxes payable. The Company adopted ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU No. 2016-09”) effective July 1, 2017. The Company adopted the cash flow presentation prospectively, and accordingly, excess tax benefits from stock-based compensation of $0.5 million is presented as an operating activity as a component of net income for the three months ended September 30, 2017, while $0.6 million of excess tax benefits from stock-based compensation is presented as a financing activity for the three months ended September 30, 2016.

(e) In the three months ended September 30, 2016, the Company 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. The Company has 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, 2017 and 2016, the Company has excluded payments of $0.1 million and $0.8 million, respectively, for non-capitalized acquired technology (including $0.1 million and $0.5 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