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 2019 ended March 31, 2019.

“AspenTech’s strong third quarter results were highlighted by annual spend growth of 9.7% year-over-year and positive growth contributions from each product suite and geography,” said Antonio Pietri, President and Chief Executive Officer of Aspen Technology. “Our performance benefited from investments in our strategic growth initiatives in recent quarters, an improving macroeconomic outlook for our Engineering & Construction and upstream customers, and strong execution by the AspenTech team.”

Pietri continued, “Our APM business had a record annual spend quarter as customers increasingly recognized the value predictive and prescriptive maintenance can have in improving their asset operations. We also saw broadening adoption within the APM suite, including the first site licenses for Aspen ProMV, our multivariate analysis solution. We believe our strong APM performance is indicative of the substantial opportunity for the APM suite and our strengthening competitive position in this market.”

Third Quarter Fiscal 2019 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 $526 million at the end of the third quarter of fiscal 2019, which increased 9.7% compared to the third quarter of fiscal 2018 and 2.6% sequentially.
• AspenTech repurchased approximately 800,000 shares of its common stock for $75 million in the third quarter of fiscal 2019.

Summary of Third Quarter Fiscal Year 2019 Financial Results

AspenTech’s total revenue of $148 million included:

• License revenue, which represents the portion of a term license agreement allocated to the initial license, was $98.5 million in the third quarter of fiscal 2019, compared to $79.1 million in the third quarter of fiscal 2018.
• Maintenance revenue, which represents the portion of the term license agreement related to on-going support and the right to future product enhancements, was $41.9 million in the third quarter of fiscal 2019, compared to $40.9 million in the third quarter of fiscal 2018.
• Services and other revenue was $7.6 million in the third quarter of fiscal 2019, compared to $7.8 million in the third quarter of fiscal 2018.

For the quarter ended March 31, 2019, AspenTech reported income from operations of $70.8 million, compared to income from operations of $53.6 million for the quarter ended March 31, 2018.

Net income was $61.6 million for the quarter ended March 31, 2019, leading to net income per share of $0.88, compared to net income per share of $0.61 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 $78.3 million for the third quarter of fiscal 2019, compared to non-GAAP income from operations of $59.9 million in the same period last fiscal year. Non-GAAP net income was $67.5 million, or $0.96 per share, for the third quarter of fiscal 2019, compared to non-GAAP net income of $49.0 million, or $0.67 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 $65.6 million and borrowings of $220 million at March 31, 2019.

During the third quarter, the company generated $90.0 million in cash flow from operations and $89.1 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, and other nonrecurring items, such as acquisition 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 Aspen Technology’s business. As the result of adoption of new licensing models, management believes that a number of Aspen Technology’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 Aspen Technology’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 Aspen Technology’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

Aspen Technology will host a conference call and webcast today, April 24, 2019, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the third quarter fiscal year 2019 as well as the company’s business outlook. The live dial-in number is (833) 713-6081 or (702) 374-0603, conference ID code 4067052. Interested parties may also listen to a live webcast of the call by logging on to the Investor Relations section of Aspen Technology’s website, http://ir.aspentech.com/events-and-presentations, and clicking on the “webcast” link. A replay of the call will be archived on Aspen Technology’s website and will also be available via telephone at (855) 859-2056 or (404) 537-3406, conference ID code 4067052, through May 24, 2019.

About Aspen Technology

Aspen Technology (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 safer, greener, longer and faster. 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 Aspen Technology’s (AspenTech) 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 process or other capital-intensive industries; unfavorable economic and market conditions or a lessening demand in the market for asset process optimization software; risks of foreign operations or transacting business with customers outside the United States; risks of competition 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.

© 2019 Aspen Technology, Inc. AspenTech, aspenONE, the Aspen leaf logo, Aspen, Aspen ProMV and Aspen Mtell are trademarks of Aspen Technology, Inc. All rights reserved.

Source: Aspen Technology, Inc.

 

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited in Thousands, Except per Share Data)

         

Three Months EndedMarch 31,

Nine Months EndedMarch 31,

2019     2018 2019     2018 As Adjusted As Adjusted Revenue: License $ 98,493 $ 79,073 $ 255,616 $ 214,938 Maintenance 41,878 40,897 125,955 121,890 Services and other 7,613   7,788   21,005   22,947   Total revenue 147,984   127,758   402,576   359,775   Cost of revenue: License 1,658 1,279 5,142 3,743 Maintenance 4,962 4,259 14,241 13,061 Services and other 7,740   7,238   22,943   20,793   Total cost of revenue 14,360   12,776   42,326   37,597   Gross profit 133,624   114,982   360,250   322,178   Operating expenses: Selling and marketing 27,410 25,246 80,532 72,690 Research and development 20,520 21,584 61,893 60,863 General and administrative 14,863   14,533   46,246   49,188   Total operating expenses 62,793   61,363   188,671   182,741   Income from operations 70,831 53,619 171,579 139,437 Interest income 6,835 6,304 21,389 18,849 Interest (expense) (2,350 ) (1,485 ) (6,328 ) (3,952 ) Other (expense), net (34 ) (104 ) (485 ) (958 ) Income before income taxes 75,282 58,334 186,155 153,376 Provision for (benefit from) income taxes 13,695   13,829   27,286   (63,681 ) Net income $ 61,587   $ 44,505   $ 158,869   $ 217,057   Net income per common share: Basic $ 0.89 $ 0.62 $ 2.26 $ 3.00 Diluted $ 0.88 $ 0.61 $ 2.23 $ 2.97 Weighted average shares outstanding: Basic 69,423 71,828 70,286 72,402 Diluted 70,160 72,663 71,142 73,136          

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Unaudited in Thousands, Except Share and Per Share Data)

 

March 31, 2019

June 30, 2018 As Adjusted ASSETS Current assets: Cash and cash equivalents $ 65,592 $ 96,165 Accounts receivable, net 45,293 41,810 Current contract assets 314,745 304,378 Contract costs 24,325 20,500 Prepaid expenses and other current assets 11,124 10,509 Prepaid income taxes 1,573   2,601   Total current assets 462,652 475,963 Property, equipment and leasehold improvements, net 7,589 9,806 Computer software development costs, net 1,452 646 Goodwill 73,534 75,590 Intangible assets, net 31,756 35,310 Non-current contract assets 358,709 340,622 Deferred tax assets 1,696 11,090 Other non-current assets 1,279   1,297   Total assets $ 938,667   $ 950,324   LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 4,023 $ 4,230 Accrued expenses and other current liabilities 42,746 39,515 Income taxes payable 35,582 1,698 Borrowings under credit agreement 220,000 170,000 Current deferred revenue 24,415   15,150   Total current liabilities 326,766 230,593 Non-current deferred revenue 19,312 12,354 Deferred income taxes 154,901 214,125 Other non-current liabilities 12,403 17,068 Commitments and contingencies (Note 16) Series D redeemable convertible preferred stock, $0.10 par value—Authorized— 3,636 shares as of March 31, 2019 and June 30, 2018Issued and outstanding— none as of March 31, 2019 and June 30, 2018 — — Stockholders’ equity: Common stock, $0.10 par value— Authorized—210,000,000 sharesIssued— 103,478,590 shares at March 31, 2019 and 103,130,300 shares at June 30, 2018Outstanding— 69,108,515 shares at March 31, 2019 and 71,186,701 shares at June 30, 2018 10,348 10,313 Additional paid-in capital 730,830 715,475 Retained earnings 1,224,377 1,065,507 Accumulated other comprehensive income 1,229 1,388 Treasury stock, at cost—34,370,075 shares of common stock at March 31, 2019 and 31,943,599 shares at June 30, 2018 (1,541,499 ) (1,316,499 ) Total stockholders’ equity 425,285   476,184   Total liabilities and stockholders’ equity $ 938,667   $ 950,324    

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

         

Three Months EndedMarch 31,

Nine Months EndedMarch 31, 2019     2018 2019     2018 As Adjusted As Adjusted Cash flows from operating activities: Net income $ 61,587 $ 44,505 $ 158,869 $ 217,057 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,014 1,544 6,063 4,902 Net foreign currency (gains) losses (295 ) 96 23 1,086 Stock-based compensation 6,254 5,353 21,454 17,222 Deferred income taxes (2,373 ) (32,662 ) (49,847 ) (123,443 ) Provision for (recovery from) bad debts (353 ) 1,401 474 1,373 Other non-cash operating activities 124 107 341 314 Changes in assets and liabilities: Accounts receivable 12,281 1,762 (4,183 ) 1,429 Contract assets 14,531 33,160 (27,397 ) (7,767 ) Contract costs (1,279 ) (592 ) (3,825 ) (651 ) Prepaid expenses, prepaid income taxes, and other assets (1,543 ) 3,949 201 4,908 Accounts payable, accrued expenses, income taxes payable and other liabilities (4,738 ) (2,656 ) 32,980 (4,448 ) Deferred revenue 3,829   17,100   17,983   15,847   Net cash provided by operating activities 90,039   73,067   153,136   127,829   Cash flows from investing activities: Purchases of property, equipment and leasehold improvements (26 ) (61 ) (206 ) (217 ) Payments for business acquisitions, net of cash — (22,900 ) — (33,700 ) Payments for capitalized computer software costs (905 ) 57   (1,094 ) (299 ) Net cash used in investing activities (931 ) (22,904 ) (1,300 ) (34,216 ) Cash flows from financing activities: Exercises of stock options 1,415 3,854 5,881 7,402 Repurchases of common stock (76,759 ) (49,328 ) (224,182 ) (154,365 ) Payments of tax withholding obligations related to restricted stock (2,262 ) (1,945 ) (11,916 ) (5,412 ) Deferred business acquisition payments (500 ) — (1,700 ) (2,600 ) Proceeds from credit agreement — 19,000 50,000 30,000 Payments of credit agreement issuance costs —   —   —   (351 ) Net cash used in financing activities (78,106 ) (28,419 ) (181,917 ) (125,326 ) Effect of exchange rate changes on cash and cash equivalents 162   628   (492 ) 834   Increase (decrease) in cash and cash equivalents 11,164 22,372 (30,573 ) (30,879 ) Cash and cash equivalents, beginning of period 54,428   48,703   96,165   101,954   Cash and cash equivalents, end of period $ 65,592   $ 71,075   $ 65,592   $ 71,075     Supplemental disclosure of cash flow information: Income taxes paid, net $

21,296

$ 8,920 $

39,123

$ 38,662 Interest paid 2,187 1,417 5,728 3,456          

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 EndedMarch 31, Nine Months EndedMarch 31, 2019     2018 2019     2018 As Adjusted As Adjusted

Total expenses

GAAP total expenses (a) $ 77,153 $ 74,139 $ 230,997 $ 220,338 Less: Stock-based compensation (b) (6,254 ) (5,353 ) (21,454 ) (17,222 ) Amortization of intangibles (1,157 ) (526 ) (3,380 ) (1,578 ) Litigation judgment — — — (1,548 ) Acquisition related fees (15 ) (378 ) (8 ) (706 )                             Non-GAAP total expenses       $ 69,727       $ 67,882       $ 206,155       $ 199,284    

Income from operations

GAAP income from operations $ 70,831 $ 53,619 $ 171,579 $ 139,437 Plus: Stock-based compensation (b) 6,254 5,353 21,454 17,222 Amortization of intangibles 1,157 526 3,380 1,578 Litigation judgment — — — 1,548 Acquisition related fees 15 378 8 706                             Non-GAAP income from operations       $ 78,257       $ 59,876       $ 196,421       $ 160,491    

Net income

GAAP net income $ 61,587 $ 44,505 $ 158,869 $ 217,057 Plus: Stock-based compensation (b) 6,254 5,353 21,454 17,222 Amortization of intangibles 1,157 526 3,380 1,578 Litigation judgment — — — 1,548 Acquisition related fees 15 378 8 706 Less: Income tax effect on Non-GAAP items (c) (1,559 ) (1,758 ) (5,217 ) (5,916 )                             Non-GAAP net income       $ 67,454       $ 49,004       $ 178,494       $ 232,195    

Diluted income per share

GAAP diluted income per share $ 0.88 $ 0.61 $ 2.23 $ 2.97 Plus: Stock-based compensation (b) 0.08 0.06 0.30 0.23 Amortization of intangibles 0.02 0.01 0.05 0.02 Litigation judgment — — — 0.02 Acquisition related fees — 0.01 — 0.01 Less: Income tax effect on Non-GAAP items (c) (0.02 ) (0.02 ) (0.07 ) (0.08 )                             Non-GAAP diluted income per share       $ 0.96       $ 0.67       $ 2.51       $ 3.17     Shares used in computing Non-GAAP diluted income per share 70,160 72,663 71,142 73,136     Three Months EndedMarch 31, Nine Months EndedMarch 31, 2019 2018 2019 2018 As Adjusted As Adjusted

Free Cash Flow

GAAP cash flow from operating activities $ 90,039 $ 73,067 $ 153,136 $ 127,829   Purchase of property, equipment and leasehold improvements (26 ) (61 ) (206 ) (217 ) Capitalized computer software development costs (905 ) 57 (1,094 ) (299 ) Non-capitalized acquired technology (d) — — — 75 Acquisition related fee payments 16 780 27 868 Litigation related payments       —       4,286       —       4,286   Free Cash Flow       $ 89,124       $ 78,129       $ 151,863       $ 132,542     (a) GAAP total expenses Three Months EndedMarch 31, Nine Months EndedMarch 31, 2019 2018 2019 2018 As Adjusted As Adjusted Total costs of revenue $ 14,360 $ 12,776 $ 42,326 $ 37,597 Total operating expenses 62,793   61,363   188,671   182,741   GAAP total expenses $ 77,153   $ 74,139   $ 230,997   $ 220,338     (b) Stock-based compensation expense was as follows: Three Months EndedMarch 31, Nine Months EndedMarch 31, 2019 2018 2019 2018 Cost of maintenance $ 379 $ — $ 916 $ — Cost of services and other 366 345 1,038 1,119 Selling and marketing 1,228 979 3,687 2,870 Research and development 1,518 1,892 5,451 5,679 General and administrative 2,763   2,137   10,362   7,554   Total stock-based compensation $ 6,254   $ 5,353   $ 21,454   $ 17,222  

(c) The income tax effect on non-GAAP items for the three and nine months ended March 31, 2019 is calculated utilizing the Company's statutory tax rate of 21 percent. The income tax effect on non-GAAP items for the three and nine months ended March 31, 2018 is calculated utilizing the Company's estimated federal and state tax rate.

  (d) In the nine months ended March 31, 2018, the Company has excluded $0.1 million 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 ContactDavid GripAspenTech+1 781-221-5273david.grip@aspentech.comInvestor ContactBrian DenyeauICR+1 646-277-1251brian.denyeau@icrinc.com