Aspen Technology Announces Financial Results for the Second Quarter of Fiscal 2015

BEDFORD, Mass.--()--Aspen Technology, Inc. (NASDAQ: AZPN), a leading provider of software and services to the process industries, today announced financial results for its second quarter of fiscal year 2015, ended December 31, 2014.

Antonio Pietri, President and Chief Executive Officer of AspenTech, said, “AspenTech reported strong second quarter financial results that exceeded expectations from both a revenue and profitability perspective, highlighted by TLCV growth of nearly 13%. We continue to see positive demand trends for the aspenONE platform as customers focus on driving increased efficiency across their operations. This remains a top strategic priority for customers even in an uncertain and volatile economic and oil price environment.”

Pietri continued, “We are also maintaining expense discipline that is driving increased levels of profitability and cash generation. During the quarter we repurchased $72 million of our common stock and today our Board of Directors has authorized a new $450 million share repurchase program. We are focused on driving continued top and bottom line growth and utilizing our financial strength to generate long-term shareholder value.”

Second Quarter Fiscal 2015 and Recent Business Highlights

  • The license portion of total contract value was $1.97 billion at the end of the second quarter of fiscal 2015, which increased 12.8% compared to the second quarter of fiscal 2014 and 4.5% sequentially.
  • Total contract value, including the value of bundled maintenance, was $2.33 billion at the end of the second quarter of fiscal 2015, which increased 13.9% compared to the second quarter of fiscal 2014 and 4.6% sequentially.
  • Annual spend, which the company defines as the annualized value of all term license and maintenance revenue contracts at the end of the quarter, was $399.9 million at the end of the second quarter of fiscal 2015, which increased 12.3% compared to the second quarter of fiscal 2014 and 3.9% sequentially.
  • GAAP operating margin was 43.2%, compared to 36.6% in the second quarter of fiscal 2014. Non-GAAP operating margin was 46.6%, compared to 40.0% in the second quarter of fiscal 2014.
  • We repurchased approximately two million shares of our common stock for $72.0 million in the second quarter of fiscal 2015.

Summary of Second Quarter Fiscal Year 2015 Financial Results

AspenTech’s total revenue of $107.8 million increased 9.1% from $98.8 million in the second quarter of the prior year.

  • Subscription and software revenue was $98.7 million in the second quarter of fiscal 2015, an increase from $88.9 million in the second quarter of fiscal 2014.
  • Services and other revenue was $9.1 million in the second quarter of fiscal 2015, compared to $9.8 million in the second quarter of fiscal 2014.

For the quarter ended December 31, 2014, AspenTech reported income from operations of $46.5 million, compared to income from operations of $36.1 million for the quarter ended December 31, 2013.

Net income was $30.5 million for the quarter ended December 31, 2014, leading to net income per share of $0.34, compared to net income per share of $0.25 in the same period last fiscal year.

Non-GAAP income from operations, which adds back stock-based compensation expense, restructuring charges, amortization of intangibles associated with acquisitions and non-capitalized acquired technology, was $50.2 million for the second quarter of fiscal 2015, compared to non-GAAP income from operations of $39.5 million in the same period last fiscal year. Non-GAAP net income was $32.8 million, or $0.36 per share, for the second quarter of fiscal 2015, compared to non-GAAP net income of $25.4 million, or $0.27 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 a cash and marketable securities balance of $256.5 million at December 31, 2014, a decrease of $32.7 million from the end of the prior quarter after repurchasing $72.0 million of common stock, of which $70.9 million settled in the quarter. During the second quarter, the company generated $41.4 million in non-GAAP cash flow from operations and $40.0 million in free cash flow after taking into consideration $1.4 million in capital expenditures and capitalized software.

Board of Directors Approves $450 Million Share Repurchase Program

AspenTech's Board of Directors approved a share repurchase program for up to $450 million. This program replaces the company’s existing share repurchase program, which had approximately $58 million remaining as of December 31, 2014. The timing and amount of any shares repurchased will be determined by AspenTech based on its evaluation of market conditions and other factors. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when AspenTech might otherwise be precluded from doing so under applicable insider trading laws and regulations. The repurchase program may be suspended or discontinued at any time.

Use of Non-GAAP Financial Measures

This press release contains “non-GAAP financial measures,” which 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, January 28, 2015, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the second quarter fiscal year 2015 as well as the company’s business outlook.

The live dial-in number is (866) 604-6127 or (706) 634-5625, conference ID code 65776046. 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 65776046, through February 28, 2015.

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 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; 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.

© 2015 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 Six Months Ended
December 31, December 31,
  2014     2013     2014     2013  
Revenue:
Subscription and software $ 98,716 $ 88,924 $ 197,459 $ 167,607
Services and other   9,074     9,845     17,457     18,727  
Total revenue   107,790     98,769     214,916     186,334  
Cost of revenue:
Subscription and software 5,208 5,022 10,409 9,642
Services and other   7,057     7,421     14,237     14,879  
Total cost of revenue   12,265     12,443     24,646     24,521  
Gross profit   95,525     86,326     190,270     161,813  
Operating expenses:
Selling and marketing 22,821 24,178 44,439 47,109
Research and development 15,957 15,016 32,225 30,850
General and administrative   10,226     11,020     22,451     22,893  
Total operating expenses   49,004     50,214     99,115     100,852  
Income from operations 46,521 36,112 91,155 60,961
Interest income 132 307 268 694
Interest expense (4 ) (8 ) (7 ) (26 )
Other income (expense), net   (248 )   (531 )   (60 )   (1,335 )
Income before provision for income taxes 46,401 35,880 91,356 60,294
Provision for income taxes   15,937     12,617     31,924     22,032  
Net income $ 30,464   $ 23,263   $ 59,432   $ 38,262  
Net income per common share:
Basic $ 0.34 $ 0.25 $ 0.66 $ 0.41
Diluted $ 0.34 $ 0.25 $ 0.65 $ 0.41
Weighted average shares outstanding:
Basic 89,942 92,839 90,562 93,124
Diluted 90,471 93,816 91,196 94,137
 
 
(*)- Certain items in prior period Consolidated Statements of Operations have been reclassified to conform to the current period presentation.
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited in thousands, except share data)
                 
December 31, June 30,
2014 2014
 
ASSETS
Current assets:
Cash and cash equivalents $ 158,443 $ 199,526
Short-term marketable securities 72,675 67,619
Accounts receivable, net 19,578 38,532
Current portion of installments receivable, net - 640
Unbilled services 639 1,656
Prepaid expenses and other current assets 9,015 10,567
Prepaid income taxes 696 605
Current deferred tax assets   4,920     10,537  
Total current assets 265,966 329,682
Long-term marketable securities 25,334 31,270
Non-current installments receivable, net 498 811
Property, equipment and leasehold improvements, net 18,327 7,588
Computer software development costs, net 1,153 1,390
Goodwill 18,045 19,276
Non-current deferred tax assets 11,265 12,765
Other non-current assets   2,766     5,190  
Total assets $ 343,354   $ 407,972  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 2,250 $ 412
Accrued expenses and other current liabilities 31,984 34,984
Income taxes payable 1,983 2,168
Current deferred revenue   197,778     228,940  
Total current liabilities 233,995 266,504
Non-current deferred revenue 40,634 45,942
Other non-current liabilities 31,005 11,850
Commitments and contingencies
Series D redeemable convertible preferred stock, $0.10 par value—
Authorized— 3,636 shares as of December 31, 2014 and June 30, 2014
Issued and outstanding— none as of December 31, 2014 and June 30, 2014
Stockholders’ equity:
Common stock, $0.10 par value— Authorized—210,000,000 shares
Issued— 101,283,764 shares at December 31, 2014 and 101,033,740 shares at June 30, 2014
Outstanding— 88,867,557 shares at December 31, 2014 and 91,661,850 shares at June 30, 2014 10,128 10,103
Additional paid-in capital 605,455 591,324
Accumulated deficit (204,602 ) (264,034 )
Accumulated other comprehensive income 6,819 9,372

Treasury stock, at cost—12,416,207 shares of common stock at December 31, 2014
   and 9,371,890 shares at June 30, 2014

 

  (380,080 )   (263,089 )
Total stockholders’ equity   37,720     83,676  
Total liabilities and stockholders' equity $ 343,354   $ 407,972  
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS*
(Unaudited in thousands)
                             
Three Months Ended Six Months Ended
December 31, December 31,
  2014     2013     2014     2013  
Cash flows from operating activities:
Net income $ 30,465 $ 23,263 $ 59,432 $ 38,262
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,506 1,277 2,858 2,479
Net foreign currency (gains) losses (719 ) 515 (1,379 ) 1,079
Stock-based compensation 3,462 3,151 7,666 7,538
Deferred income taxes 6,213 8,173 21,773 16,791
Provision for bad debts 694 785 338 805
Tax benefits from stock-based compensation 7,612 42 7,684 83
Excess tax benefits from stock-based compensation (7,612 ) (42 ) (7,684 ) (83 )
Other non-cash operating activities 320 823 782 896
Changes in assets and liabilities:
Accounts receivable 4,450 5,323 18,519 6,475
Unbilled services 463 977 990 1,171
Prepaid expenses, prepaid income taxes, and other assets 1,672 666 2,914 1,536
Installments receivable 727 5,316 980 8,345
Accounts payable, accrued expenses, and other liabilities 2,707 3,867 (5,254 ) (5,651 )
Deferred revenue   (18,128 )     (7,793 )   (35,844 )   (7,470 )
Net cash provided by operating activities   33,832       46,343     73,775     72,256  
Cash flows from investing activities:
Purchases of marketable securities (27,063 ) (11,018 ) (39,048 ) (18,992 )
Maturities of marketable securities 24,499 7,886 39,012 12,424
Purchases of property, equipment and leasehold improvements (1,437 ) (809 ) (4,328 ) (1,724 )
Capitalized computer software development costs   (1 )   (285 )   (137 )   (504 )
Net cash used in investing activities   (4,002 )   (4,226 )   (4,501 )   (8,796 )
Cash flows from financing activities:
Exercises of stock options 465 1,497 1,515 4,430
Repurchases of common stock (70,905 ) (30,000 ) (115,905 ) (58,919 )
Payments of tax withholding obligations related to restricted stock (1,163 ) (1,788 ) (2,574 ) (4,237 )
Excess tax benefits from stock-based compensation   7,612     42     7,684     83  
Net cash used in financing activities (63,991 ) (30,249 ) (109,280 ) (58,643 )
Effect of exchange rate changes on cash and cash equivalents   (530 )   5     (1,077 )   228  
(Decrease) increase in cash and cash equivalents (34,691 ) 11,873 (41,083 ) 5,045
Cash and cash equivalents, beginning of period   193,134     125,604     199,526     132,432  
Cash and cash equivalents, end of period $ 158,443   $ 137,477   $ 158,443   $ 137,477  
 
Supplemental disclosure of cash flow information:
Income taxes paid, net $ 1,070 $ 3,715 $ 2,621 $ 5,045
Supplemental disclosure of non-cash investing and financing activities:

Landlord improvement allowance included in leasehold improvements
  and deferred rent liability

 

$ 6,064 $ - $ 6,064 $ -

Purchases of property, equipment and leasehold improvements included in
  accounts payable and accrued expenses

 

2,184 - 2,184 -
Common stock repurchases included in accrued expenses 1,712 - 1,712 -
 

(*)- Certain items for the three and six months ended December 31, 2013 and the three months ended September 30, 2014 presented in the Consolidated Statements of Cash Flows have been reclassified to conform to the current period presentation.

 

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Results of Operations and Cash Flows
 

The following tables reflect a reconciliation of selected Aspen Technology GAAP to Non-GAAP results of operations and cash flows.
(unaudited in thousands, except per share data)

 

                         
Three Months Ended

December 31,

  Six Months Ended

December 31,

2014 2013 2014 2013

Total expenses

GAAP total expenses (a) $ 61,269 $ 62,657 $ 123,761 $ 125,373
Less:
Stock-based compensation (b) (3,462 ) (3,151 ) (7,666 ) (7,538 )
Restructuring charges - (7 ) - (4 )
Amortization of purchased technology intangibles (224 ) (224 ) (448 ) (473 )
                                     
Non-GAAP total expenses           $ 57,583         $ 59,275         $ 115,647         $ 117,358  
 

Income from operations

GAAP income from operations $ 46,521 $ 36,112 $ 91,155 $ 60,961
Plus:
Stock-based compensation (b) 3,462 3,151 7,666 7,538
Restructuring charges - 7 - 4
Amortization of purchased technology intangibles 224 224 448 473
                                     
Non-GAAP income from operations           $ 50,207         $ 39,494         $ 99,269         $ 68,976  
 

Net income

GAAP net income $ 30,464 $ 23,263 $ 59,432 $ 38,262
Plus:
Stock-based compensation (b) 3,462 3,151 7,666 7,538
Restructuring charges - 7 - 4
Amortization of purchased technology intangibles 224 224 448 473
Less:
Income tax effect on Non-GAAP items (c) (1,327 ) (1,218 ) (2,921 ) (2,885 )
                                     
Non-GAAP net income           $ 32,823         $ 25,427         $ 64,625         $ 43,392  
 

Diluted income per share

GAAP diluted income per share $ 0.34 $ 0.25 $ 0.65 $ 0.41
Plus:
Stock-based compensation (b) 0.04 0.03 0.08 0.08
Restructuring charges - - - -
Amortization of purchased technology intangibles - - - 0.01
Less:
Income tax effect on Non-GAAP items (c) (0.01 ) (0.01 ) (0.03 ) (0.03 )
                                     
Non-GAAP diluted income per share           $ 0.36         $ 0.27         $ 0.71         $ 0.46  
 
Shares used in computing Non-GAAP diluted income per share 90,471 93,816 91,196 94,137
 
 

Three Months Ended
December 31,

 

 

Six Months Ended
December 31,

 

2014 2013 2014 2013

Non-GAAP Cash Flows from Operating Activities and Free Cash Flow

GAAP cash flows from operating activities $ 33,832 $ 46,343 $ 73,775 $ 72,256
Plus:
Excess tax benefits from stock-based compensation (d) 7,612 42 7,684 83
                                     
Non-GAAP Cash Flows from Operating Activities           $ 41,444         $ 46,385         $ 81,459       # $ 72,339  
 
Less:
Purchases of property, equipment and leasehold improvements (1,437 ) (809 ) (4,328 ) (1,724 )
Capitalized computer software development costs (1 ) (285 ) (137 ) (504 )
                                     
Free Cash Flow           $ 40,006         $ 45,291         $ 76,994         $ 70,111  
 
(a) GAAP total expenses

Three Months Ended
December 31,

 

 

Six Months Ended
December 31,

 

2014 2013 2014 2013
Total costs of revenue $ 12,265 $ 12,443 $ 24,646 $ 24,521
Total operating expenses   49,004     50,214     99,115     100,852  
GAAP total expenses $ 61,269   $ 62,657   $ 123,761   $ 125,373  
 
(b) Stock-based compensation expense was as follows:

Three Months Ended
December 31,

 

 

Six Months Ended
December 31,

 

2014 2013 2014 2013
Cost of services and other $ 339 $ 327 $ 677 $ 628
Selling and marketing 754 710 1,504 1,821
Research and development 973 889 1,964 1,745
General and administrative   1,396     1,225     3,521     3,344  
Total stock-based compensation $ 3,462   $ 3,151   $ 7,666   $ 7,538  
 
 
(c) The income tax effect on non-GAAP items for the three and six months ended December 31, 2014 and 2013 is calculated utilizing the Company's estimated federal and state tax rate of 36%.
 
(d) Excess tax benefits from stock-based compensation are included in non-GAAP cash flows from operating activities and free cash flow to be consistent with the treatment of other tax benefits. Refer to the Company's Form 10-Q for the period ended December 31, 2014 for additional details.

Contacts

Media Contact
AspenTech
David Grip, +1 781-221-5273
david.grip@aspentech.com
or
Investor Contact
ICR
Brian Denyeau, +1 646-277-1251
brian.denyeau@icrinc.com

Contacts

Media Contact
AspenTech
David Grip, +1 781-221-5273
david.grip@aspentech.com
or
Investor Contact
ICR
Brian Denyeau, +1 646-277-1251
brian.denyeau@icrinc.com