Aspen Technology, Inc. (NASDAQ: AZPN), the asset optimization software company, today announced financial results for its third quarter of fiscal year 2020 ended March 31, 2020.
“AspenTech’s third quarter results reflected strong demand trends through the first two months of the quarter, before the uncertainty and impact of the COVID-19 pandemic led to more cautious customer buying behavior,” said Antonio Pietri, President and Chief Executive Officer of Aspen Technology. “While the near-term market environment will likely continue to be challenging, we believe we are well-positioned to navigate current conditions based on the mission critical nature of our products and solutions, the value they create in our customer’s operations, our durable business model, and strong balance sheet.”
Pietri continued, “As a management team we are focused on the health and safety of our employees and continuing to provide the support our customers need during these challenging times.”
Third Quarter Fiscal 2020 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 $575 million at the end of the third quarter of fiscal 2020, which increased 9.3% compared to the third quarter of fiscal 2019 and 1.9% sequentially.
- AspenTech repurchased approximately 452,000 shares of its common stock for $50 million in the third quarter of fiscal 2020.
Summary of Third Quarter Fiscal Year 2020 Financial Results
AspenTech’s total revenue of $132 million included:
- License revenue, which represents the portion of a term license agreement allocated to the initial license, was $78.6 million in the third quarter of fiscal 2020, compared to $98.5 million in the third quarter of fiscal 2019.
- Maintenance revenue, which represents the portion of the term license agreement related to on-going support and the right to future product enhancements, was $45.2 million in the third quarter of fiscal 2020, compared to $41.9 million in the third quarter of fiscal 2019.
- Services and other revenue was $8.2 million in the third quarter of fiscal 2020, compared to $7.6 million in the third quarter of fiscal 2019.
For the quarter ended March 31, 2020, AspenTech reported income from operations of $46.2 million, compared to income from operations of $70.8 million for the quarter ended March 31, 2019.
Net income was $43.5 million for the quarter ended March 31, 2020, leading to net income per share of $0.64, compared to net income per share of $0.88 in the same period last fiscal year.
Non-GAAP income from operations was $55.3 million for the third quarter of fiscal 2020, compared to non-GAAP income from operations of $78.3 million in the same period last fiscal year. Non-GAAP net income was $50.8 million, or $0.74 per share, for the third quarter of fiscal 2020, compared to non-GAAP net income of $67.5 million, or $0.96 per share, in the same period last fiscal year. These non-GAAP results add back the impact of stock-based compensation expense, amortization of intangibles and acquisition-related fees. A reconciliation of GAAP to non-GAAP results is presented in the financial tables included in this press release.
AspenTech had cash and cash equivalents of $192.2 million and total borrowings, net of debt issuance costs, of $431.3 million at March 31, 2020.
During the third quarter, the company generated $81.4 million in cash flow from operations and $81.2 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, and other nonrecurring items, such as acquisition-related payments.
Business Outlook
Based on information as of today, May 6, 2020, Aspen Technology is issuing the following guidance for fiscal year 2020:
- Annual spend growth of 7-9% year-over-year
- Free cash flow of $230 to $260 million
- Total bookings of $540 to $590 million
- Total revenue of $550 to $582 million
- GAAP total expense of $338 to $343 million
- Non-GAAP total expense of $300 to $305 million
- GAAP operating income of $211 to $239 million
- Non-GAAP operating income of $249 to $277 million
- GAAP net income of $187 to $209 million
- GAAP net income per share of $2.72 to $3.05
- Non-GAAP net income per share of $3.16 to $3.48
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, May 6, 2020, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the third quarter fiscal year 2020 as well as the company’s business outlook. The live dial-in number is (866) 471-3828 or (678) 509-7573, conference ID code 6055266. 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 6055266, through May 13, 2020.
About Aspen Technology
Aspen Technology (AspenTech) is a global leader in asset optimization software. Its solutions address 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 artificial intelligence. Its 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 second and third paragraphs of this press release as well as the Business Outlook section contain 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: delays or reductions in demand for AspenTech solutions due to the COVID-19 pandemic; 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 and due to the drop in demand for oil due to the COVID-19 pandemic, compounded by the excess supply arising from producers’ failure to agree on production cuts; unfavorable economic and market conditions or a lessening demand in the market for asset process optimization software, including due to the significant drop in oil prices arising from drop in demand due to the COVID-19 pandemic and producers’ failure to agree on production cuts; 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.
© 2020 Aspen Technology, Inc. AspenTech, aspenONE, asset optimization and the Aspen leaf logo are 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
| Nine Months Ended
| ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(Dollars in Thousands, Except per Share Data) | |||||||||||||||
Revenue: | |||||||||||||||
License | $ | 78,562 | $ | 98,493 | $ | 229,929 | $ | 255,616 | |||||||
Maintenance | 45,230 | 41,878 | 134,094 | 125,955 | |||||||||||
Services and other | 8,235 | 7,613 | 26,827 | 21,005 | |||||||||||
Total revenue | 132,027 | 147,984 | 390,850 | 402,576 | |||||||||||
Cost of revenue: | |||||||||||||||
License | 1,881 | 1,658 | 5,550 | 5,142 | |||||||||||
Maintenance | 4,778 | 4,962 | 14,339 | 14,241 | |||||||||||
Services and other | 9,046 | 7,740 | 26,560 | 22,943 | |||||||||||
Total cost of revenue | 15,705 | 14,360 | 46,449 | 42,326 | |||||||||||
Gross profit | 116,322 | 133,624 | 344,401 | 360,250 | |||||||||||
Operating expenses: | |||||||||||||||
Selling and marketing | 28,354 | 27,410 | 86,046 | 80,532 | |||||||||||
Research and development | 23,576 | 20,520 | 68,694 | 61,893 | |||||||||||
General and administrative | 18,219 | 14,863 | 54,525 | 46,246 | |||||||||||
Total operating expenses | 70,149 | 62,793 | 209,265 | 188,671 | |||||||||||
Income from operations | 46,173 | 70,831 | 135,136 | 171,579 | |||||||||||
Interest income | 8,173 | 6,835 | 24,577 | 21,389 | |||||||||||
Interest expense | (3,207 | ) | (2,350 | ) | (9,368 | ) | (6,328 | ) | |||||||
Other (expense), net | (352 | ) | (34 | ) | (217 | ) | (485 | ) | |||||||
Income before income taxes | 50,787 | 75,282 | 150,128 | 186,155 | |||||||||||
Provision for income taxes | 7,266 | 13,695 | 22,048 | 27,286 | |||||||||||
Net income | $ | 43,521 | $ | 61,587 | $ | 128,080 | $ | 158,869 | |||||||
Net income per common share: | |||||||||||||||
Basic | $ | 0.64 | $ | 0.89 | $ | 1.88 | $ | 2.26 | |||||||
Diluted | $ | 0.64 | $ | 0.88 | $ | 1.86 | $ | 2.23 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 67,806 | 69,423 | 68,122 | 70,286 | |||||||||||
Diluted | 68,482 | 70,160 | 68,906 | 71,142 | |||||||||||
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited in Thousands, Except Share and Per Share Data) | |||||||
March 31,
| June 30,
| ||||||
(Dollars in Thousands, Except Share Data) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 192,172 | $ | 71,926 | |||
Accounts receivable, net | 61,865 | 47,784 | |||||
Current contract assets | 273,390 | 294,193 | |||||
Prepaid expenses and other current assets | 13,061 | 12,628 | |||||
Prepaid income taxes | 1,170 | 2,509 | |||||
Total current assets | 541,658 | 429,040 | |||||
Property, equipment and leasehold improvements, net | 6,307 | 7,234 | |||||
Computer software development costs, net | 988 | 1,306 | |||||
Goodwill | 133,906 | 78,383 | |||||
Intangible assets, net | 44,211 | 33,607 | |||||
Non-current contract assets | 338,437 | 325,510 | |||||
Contract costs | 26,564 | 24,982 | |||||
Operating lease right-of-use assets | 34,213 | — | |||||
Deferred tax assets | 1,920 | 1,669 | |||||
Other non-current assets | 1,844 | 1,334 | |||||
Total assets | $ | 1,130,048 | $ | 903,065 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 4,058 | $ | 5,891 | |||
Accrued expenses and other current liabilities | 34,425 | 54,594 | |||||
Current operating lease liabilities | 6,331 | — | |||||
Income taxes payable | 13,120 | 14,952 | |||||
Current borrowings | 135,163 | 220,000 | |||||
Current deferred revenue | 43,046 | 25,318 | |||||
Total current liabilities | 236,143 | 320,755 | |||||
Non-current deferred revenue | 15,402 | 19,573 | |||||
Deferred income taxes | 159,433 | 159,071 | |||||
Non-current operating lease liabilities | 32,991 | — | |||||
Non-current borrowings, net | 296,167 | — | |||||
Other non-current liabilities | 4,798 | 10,381 | |||||
Commitments and contingencies (Note 17) | |||||||
Series D redeemable convertible preferred stock, $0.10 par value—
| — | — | |||||
Stockholders’ equity: | |||||||
Common stock, $0.10 par value— Authorized—210,000,000 shares
| 10,387 | 10,365 | |||||
Additional paid-in capital | 760,454 | 739,099 | |||||
Retained earnings | 1,388,064 | 1,259,984 | |||||
Accumulated other comprehensive (loss) income | (7,292 | ) | 336 | ||||
Treasury stock, at cost—36,270,015 shares of common stock at March 31, 2020 and 35,017,726
| (1,766,499 | ) | (1,616,499 | ) | |||
Total stockholders’ equity | 385,114 | 393,285 | |||||
Total liabilities and stockholders’ equity | $ | 1,130,048 | $ | 903,065 | |||
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited in Thousands) | |||||||||||||||
Three Months Ended
| Nine Months Ended
| ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(Dollars in Thousands) | |||||||||||||||
Cash flows from operating activities: | |||||||||||||||
Net income | $ | 43,521 | $ | 61,587 | $ | 128,080 | $ | 158,869 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 2,549 | 2,014 | 7,028 | 6,063 | |||||||||||
Reduction in the carrying amount of right-of-use assets | 3,267 | — | 6,518 | — | |||||||||||
Net foreign currency losses | 345 | (295 | ) | 183 | 23 | ||||||||||
Stock-based compensation | 7,299 | 6,254 | 24,133 | 21,454 | |||||||||||
Deferred income taxes | (372 | ) | (2,373 | ) | (382 | ) | (49,847 | ) | |||||||
Provision for (benefit from) bad debts | 2,127 | (353 | ) | 3,391 | 474 | ||||||||||
Other non-cash operating activities | 208 | 124 | 423 | 341 | |||||||||||
Changes in assets and liabilities: | |||||||||||||||
Accounts receivable | (11,889 | ) | 12,281 | (16,428 | ) | (4,183 | ) | ||||||||
Contract assets | 30,777 | 14,531 | 8,256 | (27,397 | ) | ||||||||||
Contract costs | (692 | ) | (1,279 | ) | (1,522 | ) | (3,825 | ) | |||||||
Lease liabilities | (3,444 | ) | — | (6,840 | ) | — | |||||||||
Prepaid expenses, prepaid income taxes, and other assets | (433 | ) | (1,543 | ) | (2,201 | ) | 201 | ||||||||
Accounts payable, accrued expenses, income taxes payable and other liabilities | 2,353 | (4,738 | ) | (20,752 | ) | 32,980 | |||||||||
Deferred revenue | 5,765 | 3,829 | 13,701 | 17,983 | |||||||||||
Net cash provided by operating activities | 81,381 | 90,039 | 143,588 | 153,136 | |||||||||||
Cash flows from investing activities: | |||||||||||||||
Purchases of property, equipment and leasehold improvements | (143 | ) | (26 | ) | (1,111 | ) | (206 | ) | |||||||
Payments for business acquisitions, net of cash acquired | (241 | ) | — | (74,460 | ) | — | |||||||||
Payments for equity method investments | (319 | ) | — | (319 | ) | — | |||||||||
Payments for capitalized computer software costs | (71 | ) | (905 | ) | (141 | ) | (1,094 | ) | |||||||
Net cash used in investing activities | (774 | ) | (931 | ) | (76,031 | ) | (1,300 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||
Issuance of shares of common stock | 2,650 | 1,415 | 5,364 | 5,881 | |||||||||||
Repurchases of common stock | (49,757 | ) | (76,759 | ) | (150,621 | ) | (224,182 | ) | |||||||
Payments of tax withholding obligations related to restricted stock | (2,395 | ) | (2,262 | ) | (8,246 | ) | (11,916 | ) | |||||||
Deferred business acquisition payments | (4,600 | ) | (500 | ) | (4,600 | ) | (1,700 | ) | |||||||
Proceeds from borrowings | 86,000 | — | 215,163 | 50,000 | |||||||||||
Payments of debt issuance costs | (79 | ) | — | (3,533 | ) | — | |||||||||
Net cash provided by (used in) financing activities | 31,819 | (78,106 | ) | 53,527 | (181,917 | ) | |||||||||
Effect of exchange rate changes on cash and cash equivalents | (740 | ) | 162 | (838 | ) | (492 | ) | ||||||||
Increase (decrease) in cash and cash equivalents | 111,686 | 11,164 | 120,246 | (30,573 | ) | ||||||||||
Cash and cash equivalents, beginning of period | 80,486 | 54,428 | 71,926 | 96,165 | |||||||||||
Cash and cash equivalents, end of period | $ | 192,172 | $ | 65,592 | $ | 192,172 | $ | 65,592 | |||||||
Supplemental disclosure of cash flow information: | |||||||||||||||
Income taxes paid, net | $ | 6,611 | $ | 21,296 | $ | 26,359 | $ | 39,123 | |||||||
Interest paid | 3,054 | 2,187 | 8,246 | 5,728 | |||||||||||
Supplemental disclosure of non-cash activities: | |||||||||||||||
Change in purchases of property, equipment and leasehold improvements
| $ | 7 | $ | 5 | $ | (89 | ) | $ | 10 | ||||||
Change in repurchases of common stock included in accounts payable and accrued expenses | 243 | (1,759 | ) | (621 | ) | 818 | |||||||||
Lease liabilities arising from obtaining right-of-use assets | 6,802 | — | 11,626 | — | |||||||||||
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
| Nine Months Ended
| ||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||
Total expenses | |||||||||||||||||
GAAP total expenses (a) | $ | 85,854 | $ | 77,153 | $ | 255,714 | $ | 230,997 | |||||||||
Less: | |||||||||||||||||
Stock-based compensation (b) | (7,299 | ) | (6,254 | ) | (24,133 | ) | (21,454 | ) | |||||||||
Amortization of intangibles | (1,864 | ) | (1,157 | ) | (4,741 | ) | (3,380 | ) | |||||||||
Acquisition related fees | — | (15 | ) | (78 | ) | (8 | ) | ||||||||||
Non-GAAP total expenses | $ | 76,691 | $ | 69,727 | $ | 226,762 | $ | 206,155 | |||||||||
Income from operations | |||||||||||||||||
GAAP income from operations | $ | 46,173 | $ | 70,831 | $ | 135,136 | $ | 171,579 | |||||||||
Plus: | |||||||||||||||||
Stock-based compensation (b) | 7,299 | 6,254 | 24,133 | 21,454 | |||||||||||||
Amortization of intangibles | 1,864 | 1,157 | 4,741 | 3,380 | |||||||||||||
Acquisition related fees | — | 15 | 78 | 8 | |||||||||||||
Non-GAAP income from operations | $ | 55,336 | $ | 78,257 | $ | 164,088 | $ | 196,421 | |||||||||
Net income | |||||||||||||||||
GAAP net income | $ | 43,521 | $ | 61,587 | $ | 128,080 | $ | 158,869 | |||||||||
Plus: | |||||||||||||||||
Stock-based compensation (b) | 7,299 | 6,254 | 24,133 | 21,454 | |||||||||||||
Amortization of intangibles | 1,864 | 1,157 | 4,741 | 3,380 | |||||||||||||
Acquisition related fees | — | 15 | 78 | 8 | |||||||||||||
Less: | |||||||||||||||||
Income tax effect on Non-GAAP items (c) | (1,924 | ) | (1,559 | ) | (6,080 | ) | (5,217 | ) | |||||||||
Non-GAAP net income | $ | 50,760 | $ | 67,454 | $ | 150,952 | $ | 178,494 | |||||||||
Diluted income per share | |||||||||||||||||
GAAP diluted income per share | $ | 0.64 | $ | 0.88 | $ | 1.86 | $ | 2.23 | |||||||||
Plus: | |||||||||||||||||
Stock-based compensation (b) | 0.10 | 0.08 | 0.35 | 0.30 | |||||||||||||
Amortization of intangibles | 0.03 | 0.02 | 0.07 | 0.05 | |||||||||||||
Acquisition related fees | — | — | — | — | |||||||||||||
Less: | |||||||||||||||||
Income tax effect on Non-GAAP items (c) | (0.03 | ) | (0.02 | ) | (0.09 | ) | (0.07 | ) | |||||||||
Non-GAAP diluted income per share | $ | 0.74 | $ | 0.96 | $ | 2.19 | $ | 2.51 | |||||||||
Shares used in computing Non-GAAP diluted income per share | 68,482 | 70,160 | 68,906 | 71,142 | |||||||||||||
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
| Nine Months Ended
| ||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||
Free Cash Flow | |||||||||||||||||
GAAP cash flow from operating activities | $ | 81,381 | $ | 90,039 | $ | 143,588 | $ | 153,136 | |||||||||
Purchase of property, equipment and leasehold improvements | (143 | ) | (26 | ) | (1,111 | ) | (206 | ) | |||||||||
Payments for capitalized computer software development costs | (71 | ) | (905 | ) | (141 | ) | (1,094 | ) | |||||||||
Acquisition related payments | — | 16 | 1,264 | 27 | |||||||||||||
Free Cash Flow | $ | 81,167 | $ | 89,124 | $ | 143,600 | $ | 151,863 | |||||||||
(a) GAAP total expenses | |||||||||||||||||
Three Months Ended
| Nine Months Ended
| ||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||
Total costs of revenue | $ | 15,705 | $ | 14,360 | $ | 46,449 | $ | 42,326 | |||||||||
Total operating expenses | 70,149 | 62,793 | 209,265 | 188,671 | |||||||||||||
GAAP total expenses | $ | 85,854 | $ | 77,153 | $ | 255,714 | $ | 230,997 | |||||||||
(b) Stock-based compensation expense was as follows: | |||||||||||||||||
Three Months Ended
| Nine Months Ended
| ||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||
Cost of maintenance | $ | 343 | $ | 379 | $ | 1,104 | $ | 916 | |||||||||
Cost of services and other | 450 | 366 | 1,477 | 1,038 | |||||||||||||
Selling and marketing | 1,472 | 1,228 | 4,228 | 3,687 | |||||||||||||
Research and development | 2,082 | 1,518 | 6,193 | 5,451 | |||||||||||||
General and administrative | 2,952 | 2,763 | 11,131 | 10,362 | |||||||||||||
Total stock-based compensation | $ | 7,299 | $ | 6,254 | $ | 24,133 | $ | 21,454 | |||||||||
| (c) The income tax effect on non-GAAP items for the three and nine months ended March 31, 2020 and 2019, respectively, is calculated utilizing the Company's statutory tax rate of 21 percent. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20200506005977/en/
Contacts:
Lucy Millington
AspenTech
+1 781-221-6419
lucy.millington@aspentech.com
