AZPN Aspen Technology Inc New

Aspen Technology, Inc. (NASDAQ: AZPN), the asset optimization software company, today announced financial results for its fourth quarter and fiscal year ended June 30, 2018.

“AspenTech ended fiscal 2018 with a solid performance across all areas of the business. Our results reflect encouraging signs of improvement among Engineering & Construction customers, as well as continued strength from our owner-operator customers,” said Antonio Pietri, President and Chief Executive Officer of AspenTech.

Pietri continued, “We are also seeing growing momentum for our APM business, which signed a number of exciting transactions in the quarter. We are pleased with the significant progress made with APM in its first year in the market and believe we are well positioned to generate meaningful growth from this market opportunity in fiscal 2019 and beyond.”

Fourth Quarter and Fiscal Year 2018 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 $489 million at the end of the fourth quarter of fiscal 2018, which increased 6.4% compared to the fourth quarter of fiscal 2017 and 1.9% sequentially.
• GAAP operating margin was 40.3%, compared to 39.6% in the fourth quarter of fiscal 2017. Non-GAAP operating margin was 45.2%, compared to 46.1% in the fourth quarter of fiscal 2017.
• AspenTech repurchased approximately 550,000 shares of its common stock for $50.0 million in the fourth quarter of fiscal 2018.
• AspenTech repurchased approximately 2.8 million shares of its common stock for $200 million in fiscal year 2018.

Summary of Fourth Quarter Fiscal Year 2018 Financial Results

AspenTech’s total revenue of $126.0 million included:

• Subscription and software revenue was $119.5 million in the fourth quarter of fiscal 2018, an increase from $115.4 million in the fourth quarter of fiscal 2017.
• Services and other revenue was $6.5 million in the fourth quarter of fiscal 2018, compared to $8.2 million in the fourth quarter of fiscal 2017.

For the quarter ended June 30, 2018, AspenTech reported income from operations of $50.7 million, compared to income from operations of $48.9 million for the quarter ended June 30, 2017.

Net income was $38.0 million for the quarter ended June 30, 2018, leading to net income per share of $0.53, compared to net income per share of $0.73 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 and acquisition related fees, was $57.0 million for the fourth quarter of fiscal 2018, compared to non-GAAP income from operations of $57.0 million in the same period last fiscal year. Non-GAAP net income was $42.5 million, or $0.59 per share, for the fourth quarter of fiscal 2018, compared to non-GAAP net income of $59.1 million, or $0.79 per share, in the same period last fiscal year. A reconciliation of GAAP to non-GAAP results is presented in the financial tables included in this press release.

AspenTech had cash and marketable securities of $96.2 million and borrowings of $170.0 million at June 30, 2018.

During the fourth quarter, the company generated $79.1 million in cash flow from operations and $79.5 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.

Summary of Fiscal Year 2018 Financial Results

AspenTech’s total revenue of $499.5 million increased 3.4% from $482.9 million for fiscal year 2017.

• Subscription and software revenue was $471.0 million, an increase from $453.5 million for fiscal year 2017.
• Services and other revenue was $28.5 million, compared to $29.4 million for fiscal year 2017.

For the fiscal year ended June 30, 2018, AspenTech reported income from operations of $209.6 million, compared to income from operations of $212.0 million for fiscal year 2017.

Net income was $148.7 million for the fiscal year ended June 30, 2018, leading to net income per share of $2.04, compared to net income per share of $2.11 for fiscal year 2017.

Non-GAAP income from operations was $237.0 million for fiscal year 2018, an improvement compared to non-GAAP income from operations of $235.8 million for fiscal year 2017. Non-GAAP net income was $168.3 million, or $2.31 per share, for fiscal year 2018, compared to non-GAAP net income of $177.4 million, or $2.30 per share, for fiscal year 2017.

For the fiscal year ended June 30, 2018, the company generated $206.9 million in cash flow from operations and $212 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 8, 2018, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the fourth quarter and fiscal year 2018 as well as the company’s business outlook.

To listen to the earnings call, participants need to utilize the live dial-in number (833) 713-6081 or (702) 374-0603, conference ID code 1967135. The supplemental webcast presentation about ASC Topic 606 will occur at the end of management’s prepared remarks and prior to the live Q&A session. To view the webcast, interested parties will need to log on to the Investor Relations section of AspenTech’s website, http://ir.aspentech.com/, and click on the “Webcast” link. After the webcast presentation, participants should return to the live dial-in number for the Q&A session. A replay of the call and webcast presentation 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 1967135, through September 23, 2018.

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.

© 2018 Aspen Technology, Inc. AspenTech, aspenONE and the Aspen leaf logo are trademarks of Aspen Technology, Inc. All rights reserved.

Source: Aspen Technology, Inc.

   

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except per Share Data)

 

Three Months EndedJune 30,

Twelve Months EndedJune 30, 2018   2017 2018   2017 Revenue: Subscription and software $ 119,501 $ 115,435 $ 471,041 $ 453,512 Services and other 6,459   8,247   28,473   29,430   Total revenue 125,960   123,682   499,514   482,942   Cost of revenue: Subscription and software 6,142 5,285 23,228 21,051 Services and other 6,905   6,829   27,416   26,415   Total cost of revenue 13,047   12,114   50,644   47,466   Gross profit 112,913   111,568   448,870   435,476  

Operating expenses:

Selling and marketing 27,202 26,510 101,077 92,633 Research and development 21,213 21,953 82,076 79,530 General and administrative 13,792   14,157   56,076   51,297   Total operating expenses 62,207   62,620   239,229   223,460   Income from operations 50,706 48,948 209,641 212,016 Interest income 27 143 231 808 Interest (expense) (1,739 ) (1,066 ) (5,691 ) (3,787 ) Other income (expense), net 120   21   (838 ) 1,309   Income before provision for income taxes 49,114 48,047 203,343 210,346 Provision for income taxes 11,094   (6,305 ) 54,655   48,150  

Net income

$ 38,020   $ 54,352   $ 148,688   $ 162,196  

Net income per common share:

Basic $ 0.53 $ 0.73 $ 2.06 $ 2.12 Diluted $ 0.53 $ 0.73 $ 2.04 $ 2.11 Weighted average shares outstanding: Basic 71,349 74,294 72,140 76,491 Diluted 72,315 74,830 72,956 76,978      

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Share and Per Share Data)

 

June 30, 2018

June 30, 2017

ASSETS

Current assets: Cash and cash equivalents $ 96,165 $ 101,954 Accounts receivable, net 21,910 27,670 Prepaid expenses and other current assets 10,509 12,061 Prepaid income taxes 2,601   4,501   Total current assets 131,185 146,186 Property, equipment and leasehold improvements, net 9,806 13,400 Computer software development costs, net 646 667 Goodwill 75,590 51,248 Intangible assets, net 35,310 20,789 Non-current deferred tax assets 11,090 14,352 Other non-current assets 1,297   1,300   Total assets $ 264,924   $ 247,942  

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities: Accounts payable $ 4,230 $ 5,467 Accrued expenses and other current liabilities 39,515 48,149 Income taxes payable 1,698 1,603 Borrowings under credit agreement 170,000 140,000 Current deferred revenue 286,845   272,024   Total current liabilities 502,288 467,243 Non-current deferred revenue 28,259 28,335 Other non-current liabilities 18,492 13,148 Commitments and contingencies (Note 15) Series D redeemable convertible preferred stock, $0.10 par value—Authorized—3,636 shares as of June 30, 2018 and 2017Issued and outstanding—none as of June 30, 2018 and 2017 — — Stockholders' deficit:

Common stock, $0.10 par value—Authorized—210,000,000 sharesIssued—103,130,300 shares at June 30, 2018 and 102,567,129 shares at June 30, 2017Outstanding—71,186,701 shares at June 30, 2018 and 73,421,153 shares at June 30, 2017

10,313 10,257 Additional paid-in capital 715,475 687,479 Retained earnings 305,208 156,520 Accumulated other comprehensive income 1,388 1,459 Treasury stock, at cost— 31,943,599 shares of common stock at June 30, 2018 and 29,145,976 shares at June 30, 2017 (1,316,499 ) (1,116,499 ) Total stockholders' deficit (284,115 ) (260,784 ) Total liabilities and stockholders' deficit $ 264,924   $ 247,942        

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

 

Three Months EndedJune 30,

Twelve Months EndedJune 30,

2018   2017 2018   2017 Operating activities: Net income $ 38,020 $ 54,352 $ 148,688 $ 162,196 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,642 1,412 6,544 6,405 Net foreign currency (gains) losses (106 ) 984 980 (1,036 ) Stock-based compensation expense 5,466 4,493 22,688 18,800 Deferred income taxes (1,274 ) (5,455 ) 3,193 (4,286 ) Provision for (recovery from) bad debts 45 (26 ) 1,418 199 Tax benefits from stock-based compensation — 3,621 — 5,965 Excess tax benefits from stock-based compensation — (3,621 ) — (5,965 ) Other non-cash operating activities 107 172 421 602

Changes in assets and liabilities, excluding initial effects of acquisitions:

Accounts receivable 5,291 7,464 4,327 (7,480 ) Prepaid expenses, prepaid income taxes, and other assets (1,087 ) (6,069 ) 3,821 (2,421 ) Accounts payable, accrued expenses, income taxes payable and other liabilities 5,604 (16,018 ) 1,156 (9,070 ) Deferred revenue 25,399   32,039   13,700   18,477   Net cash provided by operating activities 79,107   73,348   206,936   182,386  

Investing activities:

Purchases of marketable securities — — — (683,748 ) Maturities of marketable securities — 17,130 — 686,346 Purchase of property, equipment and leasehold improvements (114 ) (569 ) (331 ) (2,720 ) Payments for business acquisitions, net of cash acquired — — (33,700 ) (36,171 ) Payments for capitalized computer software costs (30 ) (279 ) (329 ) (405 ) Net cash (used in) provided by investing activities (144 ) 16,282   (34,360 ) (36,698 ) Financing activities: Exercise of stock options 6,064 1,381 13,466 9,273 Repurchases of common stock (50,684 ) (75,849 ) (205,049 ) (371,491 ) Payment of tax withholding obligations related to restricted stock (2,484 ) (1,418 ) (7,896 ) (5,764 ) Deferred business acquisition payments (6,049 ) — (8,649 ) — Excess tax benefits from stock-based compensation — 3,621 — 5,965 Proceeds from credit agreement — — 30,000 — Payments of credit agreement issuance costs —   —   (351 ) —   Net cash used in financing activities (53,153 ) (72,265 ) (178,479 ) (362,017 ) Effect of exchange rate changes on cash and cash equivalents (720 ) 37   114   (53 ) Increase (decrease) in cash and cash equivalents 25,090 17,402 (5,789 ) (216,382 ) Cash and cash equivalents, beginning of year 71,075   84,552   101,954   318,336   Cash and cash equivalents, end of year $ 96,165   $ 101,954   $ 96,165   $ 101,954     Supplemental disclosure of cash flow information: Income tax paid, net $ 11,895 $ 23,794 $ 50,557 $ 65,536 Interest paid 1,582 945 5,038 3,444      

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Results of Operations and Cash Flows

(Dollars in Thousands, Except per Share Data)

 

Three Months EndedJune 30,

Twelve Months EndedJune 30,

2018   2017 2018   2017

Total expenses

GAAP total expenses (a) $ 75,254 $ 74,734 $ 289,873 $ 270,926 Less: Stock-based compensation (b) (5,466 ) (4,493 ) (22,688 ) (18,800 ) Non-capitalized acquired technology (e) — (1,900 ) — (2,250 ) Amortization of intangibles (653 ) (434 ) (2,231 ) (950 ) Litigation judgment (141 ) — (1,689 ) — Acquisition related fees (15 ) (1,261 ) (721 ) (1,754 )

 

                Non-GAAP total expenses   $ 68,979     $ 66,646     $ 262,544     $ 247,172    

Income from operations

GAAP income from operations $ 50,706 $ 48,948 $ 209,641 $ 212,016 Plus: Stock-based compensation (b) 5,466 4,493 22,688 18,800 Non-capitalized acquired technology (e) — 1,900 — 2,250 Amortization of intangibles 653 434 2,231 950 Litigation judgment 141 — 1,689 — Acquisition related fees 15 1,261 721 1,754                  

Non-GAAP income from operations

  $ 56,981     $ 57,036     $ 236,970     $ 235,770    

Net income

GAAP net income $ 38,020 $ 54,352 $ 148,688 $ 162,196 Plus: Stock-based compensation (b) 5,466 4,493 22,688 18,800 Non-capitalized acquired technology (e) — 1,900 — 2,250 Amortization of intangibles 653 434 2,231 950 Litigation judgment 141 — 1,689 — Acquisition related fees 15 1,261 721 1,754 Less: Income tax effect on Non-GAAP items (c) (1,763 ) (3,303 ) (7,679 ) (8,551 )                   Non-GAAP net income   $ 42,532     $ 59,137     $ 168,338     $ 177,399    

Diluted income per share

GAAP diluted income per share $ 0.53 $ 0.73 $ 2.04 $ 2.11 Plus: Stock-based compensation (b) 0.07 0.05 0.32 0.24 Non-capitalized acquired technology (e) — 0.03 — 0.03 Amortization of intangibles 0.01 0.01 0.03 0.01 Litigation judgment — — 0.02 — Acquisition related fees — 0.01 0.01 0.02 Less: Income tax effect on Non-GAAP items (c) (0.02 ) (0.04 ) (0.11 ) (0.11 )                   Non-GAAP diluted income per share   $ 0.59     $ 0.79     $ 2.31     $ 2.30     Shares used in computing Non-GAAP diluted income per share 72,315 74,830 72,956 76,978    

Three Months EndedJune 30,

Twelve Months EndedJune 30, 2018 2017 2018 2017

Free Cash Flow

GAAP cash flow from operating activities $ 79,107 $ 73,348 $ 206,936 $ 182,386   Purchase of property, equipment and leasehold improvements (114 ) (569 ) (331 ) (2,720 ) Capitalized computer software development costs (30 ) (279 ) (329 ) (405 ) Non-capitalized acquired technology (e) — 1,400 75 2,246 Excess tax benefits from stock-based compensation (d) — 3,621 — 5,965 Acquisition related fee payments 280 — 1,148 448

Litigation related payments

  260     (721 )   4,546     (721 ) Free Cash Flow   $ 79,503     $ 76,800     $ 212,045     $ 187,199     (a) GAAP total expenses Three Months EndedJune 30, Twelve Months EndedJune 30, 2018 2017 2018 2017 Total costs of revenue $ 13,047 $ 12,114 $ 50,644 $ 47,466 Total operating expenses 62,207   62,620   239,229   223,460   GAAP total expenses $ 75,254   $ 74,734   $ 289,873   $ 270,926     (b) Stock-based compensation expense was as follows: Three Months EndedJune 30, Twelve Months EndedJune 30, 2018 2017 2018 2017 Cost of services and other $ 360 $ 371 $ 1,479 $ 1,477 Selling and marketing 992 715 3,862 3,652 Research and development 1,938 1,629 7,617 5,806 General and administrative 2,176   1,778   9,730   7,865   Total stock-based compensation $ 5,466   $ 4,493   $ 22,688   $ 18,800     (c) The income tax effect on non-GAAP items for the three and twelve months ended June 30, 2018 is calculated utilizing the Company's blended statutory tax rate, of 28 percent. The income tax rate used for the three and twelve months ended June 30, 2018 reflects the impact of the Tax Cuts and Jobs Act signed into law on December 22, 2017, with an effective date of January 1, 2018. The income tax effect on non-GAAP items for the three and twelve months ended June 30, 2017 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 $0.9 million and $3.0 million is presented as an operating activity as a component of net income for the three and twelve months ended June 30, 2018, respectively, while $3.6 million and $6.0 million of excess tax benefits from stock-based compensation is presented as a financing activity for the three and twelve months ended June 30, 2017, respectively.   (e) In the twelve months ended June 30, 2017, 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 twelve months ended June 30, 2018 and 2017, the Company has excluded payments of $0.1 million and $2.2 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