Business Wire | Aug 12, 2020 04:05PM EDT

Aspen Technology Announces Financial Results for the Fourth Quarter and Fiscal 2020

Aug. 12, 2020

BEDFORD, Mass.--(BUSINESS WIRE)--Aug. 12, 2020--Aspen Technology, Inc. (NASDAQ: AZPN), the asset optimization software company, today announced financial results for its fourth quarter of fiscal year 2020 ended June 30, 2020.

"AspenTech delivered solid fourth quarter results that exceeded expectations in the midst of unprecedented economic conditions," said Antonio Pietri, President and Chief Executive Officer of Aspen Technology. "Customers in our core markets continued to make significant investments in AspenTech products despite the challenges facing their own businesses. Companies in the process and other capital intensive industries increasingly recognize that investing in digitalization initiatives is essential to long-term financial and operational success and we believe we are well-positioned to benefit from this trend."

Pietri continued, "We are furthering our commitment to our customers through today's announcement of the new AIoT Hub and our investment in the next generation of hybrid modeling software capabilities, planned for release in the coming months. We intend to introduce contextual artificial intelligence into our core products to enable better informed and more accurate decisions to improve the operating performance of assets. We are confident that these innovations will further extend the value AspenTech delivers for its customers."

Fourth Quarter and Fiscal Year 2020 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 $593 million at the end of the fourth quarter of fiscal 2020, which increased 9.6% compared to the fourth quarter of fiscal 2019 and 3.1% sequentially. * AspenTech repurchased approximately 1.3 million shares of its common stock for $150 million in fiscal year 2020.

Summary of Fourth Quarter Fiscal Year 2020 Financial Results

AspenTech's total revenue of $199.3 million included:

* License revenue, which represents the portion of a term license agreement allocated to the initial license, was $147.2 million in the fourth quarter of fiscal 2020, compared to $148.5 million in the fourth 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 $45.7 million in the fourth quarter of fiscal 2020, compared to $39.5 million in the fourth quarter of fiscal 2019. * Services and other revenue was $6.4 million in the fourth quarter of fiscal 2020, compared to $7.8 million in the fourth quarter of fiscal 2019.

For the quarter ended June 30, 2020, AspenTech reported income from operations of $113.7 million, compared to income from operations of $111.2 million for the quarter ended June 30, 2019.

Net income was $97.6 million for the quarter ended June 30, 2020, leading to net income per share of $1.43, compared to net income per share of $1.49 in the same period last fiscal year.

Non-GAAP income from operations, was $122.9 million for the fourth quarter of fiscal 2020, compared to non-GAAP income from operations of $119.9 million in the same period last fiscal year. Non-GAAP net income was $104.9 million, or $1.54 per share, for the fourth quarter of fiscal 2020, compared to non-GAAP net income of $110.7 million, or $1.59 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 $287.8 million and total borrowings, net of debt issuance costs, of $427.5 million at June 30, 2020.

During the fourth quarter, the company generated $99.7 million in cash flow from operations and $99.5 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; payments for capitalized computer software development costs, and other nonrecurring items, such as acquisition-related payments.

Summary of Fiscal Year 2020 Financial Results

AspenTech's total revenue of $590.2 million decreased 1.0% from $598.3 million for fiscal year 2019.

* License revenue, was $377.2 million, a decrease from $404.1 million for fiscal year 2019. * Maintenance revenue, was $179.8 million, an increase from $165.4 million for fiscal year 2019. * Services and other revenue was $33.2 million, an increase from $28.8 million for fiscal year 2019.

For the fiscal year ended June 30, 2020, AspenTech reported income from operations of $248.8 million, compared to income from operations of $282.8 million for fiscal year 2019.

Net income was $225.7 million for the fiscal year ended June 30, 2020, leading to net income per share of $3.28, compared to net income per share of $3.71 for fiscal year 2019.

Non-GAAP income from operations was $287.0 million for fiscal year 2020, compared to non-GAAP income from operations of $316.3 million for fiscal year 2019. Non-GAAP net income was $255.9 million, or $3.72 per share, for fiscal year 2020, compared to non-GAAP net income of $289.2 million, or $4.09 per share, for fiscal year 2019.

For the fiscal year ended June 30, 2020, the company generated $243.3 million in cash flow from operations and $243.1 million in free cash flow.

Business Outlook

Based on information as of today, August 12, 2020, Aspen Technology is issuing the following guidance for fiscal year 2020:

* Annual spend growth of 6-9% year-over-year * Free cash flow of $260 to $270 million * Total bookings of $770 to $850 million * Total revenue of $704 to $754 million * GAAP total expense of $372 to $377 million * Non-GAAP total expense of $330 to $335 million * GAAP operating income of $332 to $377 million * Non-GAAP operating income of $374 to $420 million * GAAP net income of $290 to $327 million * Non-GAAP net income of $324 to $360 million * GAAP net income per share of $4.29 to $4.83 * Non-GAAP net income per share of $4.78 to $5.32

These statements are forward-looking and actual results may differ materially. Refer to the Forward-Looking Statements safe harbor below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

AspenTech has not reconciled its expectations as to non-GAAP operating income and non-GAAP net income per share to their most directly comparable GAAP measure because certain items are out of AspenTech's control or cannot be reasonably predicted. Accordingly, a reconciliation for forward-looking non-GAAP total expenses, non-GAAP operating income and non-GAAP net income per share is not available without unreasonable effort.

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, August 12, 2020, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the fourth quarter and 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 8084773. 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 8084773, through August 19, 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.

(c) 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 Twelve Months Ended June 30, June 30,

2020 2019 2020 2019

Revenue:

License $ 147,226 $ 148,506 $ 377,155 $ 404,122

Maintenance 45,719 39,481 179,813 165,436

Services and other 6,386 7,782 33,213 28,787

Total revenue 199,331 195,769 590,181 598,345

Cost of revenue:

License 1,691 1,918 7,241 7,060

Maintenance 4,909 4,967 19,248 19,208

Services and other 8,558 8,605 35,118 31,548

Total cost of revenue 15,158 15,490 61,607 57,816

Gross profit 184,173 180,279 528,574 540,529

Operating expenses:

Selling and marketing 28,440 30,842 114,486 111,374

Research and development 23,536 21,229 92,230 83,122

General and administrative 18,510 16,985 73,035 63,231

Total operating expenses 70,486 69,056 279,751 257,727

Income from operations 113,687 111,223 248,823 282,802

Interest income 8,081 7,068 32,658 28,457

Interest (expense) (2,494 ) (2,405 ) (11,862 ) (8,733 )

Other income, net 1,419 1,149 1,202 664

Income before income taxes 120,693 117,035 270,821 303,190

Provision for income taxes 23,065 13,170 45,113 40,456

Net income $ 97,628 $ 103,865 $ 225,708 $ 262,734

Net income per common share:

Basic $ 1.44 $ 1.51 $ 3.32 $ 3.76

Diluted $ 1.43 $ 1.49 $ 3.28 $ 3.71

Weighted average shares outstanding:

Basic 67,634 68,839 68,000 69,925

Diluted 68,176 69,638 68,727 70,787

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

June 30, June 30, 2020 2019

ASSETS

Current assets:

Cash and cash equivalents $ 287,796 $ 71,926

Accounts receivable, net 55,750 47,784

Current contract assets 289,152 294,193

Prepaid expenses and other current assets 15,260 12,628

Prepaid income taxes 2,276 2,509

Total current assets 650,234 429,040

Property, equipment and leasehold improvements, 5,963 7,234 net

Computer software development costs, net 928 1,306

Goodwill 137,055 78,383

Intangible assets, net 42,851 33,607

Non-current contract assets 328,379 325,510

Contract costs 28,614 24,982

Operating lease right-of-use assets 34,905 -

Deferred tax assets 1,735 1,669

Other non-current assets 1,838 1,334

Total assets $ 1,232,502 $ 903,065



LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 3,988 $ 5,891

Accrued expenses and other current liabilities 43,556 54,594

Current operating lease liabilities 6,824 -

Income taxes payable 1,799 14,952

Current borrowings 135,163 220,000

Current deferred revenue 28,495 25,318

Total current liabilities 219,825 320,755

Non-current deferred revenue 7,953 19,573

Deferred income taxes 182,447 159,071

Non-current operating lease liabilities 33,088 -

Non-current borrowings, net 292,369 -

Other non-current liabilities 3,105 10,381

Commitments and contingencies (Note 17)

Series D redeemable convertible preferred stock,$0.10 par value-Authorized-3,636 shares as of June30, 2020 and 2019 - - Issued and outstanding-none as of June 30, 2020and 2019

Stockholders' equity:

Common stock, $0.10 parvalue-Authorized-210,000,000 sharesIssued-103,988,707 shares at June 30, 2020 and 10,399 10,365 103,642,292 shares at June 30, 2019Outstanding-67,718,692 shares at June 30, 2020 and68,624,566 shares at June 30, 2019

Additional paid-in capital 769,411 739,099

Retained earnings 1,485,692 1,259,984

Accumulated other comprehensive income (5,288 ) 336

Treasury stock, at cost- 36,270,015 shares ofcommon stock at June 30, 2020 and 35,017,726 (1,766,499 ) (1,616,499 )shares at June 30, 2019

Total stockholders' equity 493,715 393,285

Total liabilities and stockholders' equity $ 1,232,502 $ 903,065

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited in Thousands)

Three Months Ended Twelve Months Ended June 30, June 30,

2020 2019 2020 2019

Cash flows from operating activities:

Net income $ 97,628 $ 103,865 $ 225,708 $ 262,734

Adjustments to reconcilenet income to net cash provided by operatingactivities:

Depreciation and 2,522 2,080 9,550 8,143 amortization

Reduction in the carryingamount of right-of-use 2,105 - 8,623 - assets

Net foreign currency (1,128 ) (1,274 ) (945 ) (1,251 )gains

Stock-based compensation 7,415 6,119 31,548 27,573

Deferred income taxes 22,225 23,008 21,843 (26,839 )

Provision for bad debts 1,864 171 5,255 645

Other non-cash operating 202 88 625 429 activities

Changes in assets and liabilities:

Accounts receivable 4,104 (2,443 ) (12,324 ) (6,626 )

Contract assets (5,986 ) (31,925 ) 2,270 (59,322 )

Contract costs (2,048 ) (657 ) (3,570 ) (4,482 )

Lease liabilities (2,197 ) - (9,037 ) -

Prepaid expenses, prepaidincome taxes, and other (3,136 ) (2,612 ) (5,337 ) (2,411 )assets

Accounts payable, accruedexpenses, income taxes (2,610 ) (11,059 ) (23,362 ) 21,921 payable and otherliabilities

Deferred revenue (21,290 ) (184 ) (7,589 ) 17,799

Net cash provided by 99,670 85,177 243,258 238,313 operating activities

Cash flows from investing activities:

Purchase of property,equipment and leasehold (167 ) (230 ) (1,278 ) (436 )improvements

Payments for businessacquisitions, net of cash - (6,098 ) (74,460 ) (6,098 )acquired

Payments for equity (5 ) - (324 ) - method investments

Payments for capitalized - (37 ) (141 ) (1,131 )computer software costs

Net cash used in (172 ) (6,365 ) (76,203 ) (7,665 )investing activities

Cash flows from financing activities:

Issuance of shares of 3,640 4,983 9,004 10,864 common stock

Repurchases of common (1,811 ) (75,032 ) (152,432 ) (299,214 )stock

Payment of taxwithholding obligations (1,921 ) (2,561 ) (10,167 ) (14,477 )related to restrictedstock

Deferred business - - (4,600 ) (1,700 )acquisition payments

Proceeds from borrowings, 4,000 - 219,163 50,000 net of repayments

Repayments of amounts (8,000 ) - (8,000 ) - borrowed

Payments of debt issuance - - (3,533 ) - costs

Net cash provided by(used in) financing (4,092 ) (72,610 ) 49,435 (254,527 )activities

Effect of exchange ratechanges on cash and cash 218 132 (620 ) (360 )equivalents

Increase (decrease) in 95,624 6,334 215,870 (24,239 )cash and cash equivalents

Cash and cashequivalents, beginning of 192,172 65,592 71,926 96,165 year

Cash and cash $ 287,796 $ 71,926 $ 287,796 $ 71,926 equivalents, end of year

Supplemental disclosure of cash flow information:

Income taxes paid, net $ 13,174 $ 14,030 $ 39,533 $ 53,153

Interest paid 2,616 2,393 12,444 8,121

Supplemental disclosure of non-cash activities:

Change in purchases ofproperty, equipment andleasehold improvements $ (10 ) $ 94 $ (99 ) $ 104 included in accountspayable and accruedexpenses

Change in repurchases ofcommon stock included in (1,811 ) (32 ) (2,432 ) 786 accounts payable andaccrued expenses

Lease liabilities arisingfrom obtaining 2,387 - 14,013 - right-of-use assets

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 Twelve Months Ended June 30, June 30,

2020 2019 2020 2019

Total expenses

GAAP total expenses $ 85,644 $ 84,546 $ 341,358 $ 315,543 (a)

Less:

Stock-based (7,415 ) (6,119 ) (31,548 ) (27,573 )compensation (b)

Amortization of (1,831 ) (1,153 ) (6,572 ) (4,533 )intangibles

Acquisition related - (1,430 ) (78 ) (1,438 )fees



Non-GAAP total $ 76,398 $ 75,844 $ 303,160 $ 281,999 expenses



Income from operations

GAAP income from $ 113,687 $ 111,223 $ 248,823 $ 282,802 operations

Plus:

Stock-based 7,415 6,119 31,548 27,573 compensation (b)

Amortization of 1,831 1,153 6,572 4,533 intangibles

Acquisition related - 1,430 78 1,438 fees



Non-GAAP income from $ 122,933 $ 119,925 $ 287,021 $ 316,346 operations



Net income

GAAP net income $ 97,628 $ 103,865 $ 225,708 $ 262,734

Plus:

Stock-based 7,415 6,119 31,548 27,573 compensation (b)

Amortization of 1,831 1,153 6,572 4,533 intangibles

Acquisition related - 1,430 78 1,438 fees

Less:

Income tax effect on (1,942 ) (1,827 ) (8,022 ) (7,044 )Non-GAAP items (c)



Non-GAAP net income $ 104,932 $ 110,740 $ 255,884 $ 289,234



Diluted income per share

GAAP diluted income $ 1.43 $ 1.49 $ 3.28 $ 3.71 per share

Plus:

Stock-based 0.11 0.09 0.46 0.40 compensation (b)

Amortization of 0.03 0.02 0.10 0.06 intangibles

Acquisition related - 0.02 - 0.02 fees

Less:

Income tax effect on (0.03 ) (0.03 ) (0.12 ) (0.10 )Non-GAAP items (c)



Non-GAAP diluted $ 1.54 $ 1.59 $ 3.72 $ 4.09 income per share



Shares used incomputing Non-GAAP 68,176 69,638 68,727 70,787 diluted income pershare





Three Months Ended Twelve Months Ended June 30, June 30,

2020 2019 2020 2019

Free Cash Flow

GAAP net cash providedby operating $ 99,670 $ 85,177 $ 243,258 $ 238,313 activities

Purchase of property,equipment and (167 ) (230 ) (1,278 ) (436 )leasehold improvements

Payments forcapitalized computer - (37 ) (141 ) (1,131 )software developmentcosts

Acquisition related - - 1,264 27 payments

Free Cash Flow $ 99,503 $ 84,910 $ 243,103 $ 236,773



(a) GAAP total expenses

Three Months Ended Twelve Months Ended June 30, June 30,

2020 2019 2020 2019

Total costs of revenue $ 15,158 $ 15,490 $ 61,607 $ 57,816

Total operating 70,486 69,056 279,751 257,727 expenses

GAAP total expenses $ 85,644 $ 84,546 $ 341,358 $ 315,543



(b) Stock-basedcompensation expense was as follows:

Three Months Ended Twelve Months Ended June 30, June 30,

2020 2019 2020 2019

Cost of maintenance $ 337 $ 366 $ 1,441 $ 1,282

Cost of services and 484 382 1,961 1,420 other

Selling and marketing 1,428 1,162 5,656 4,849

Research and 2,113 1,472 8,306 6,923 development

General and 3,053 2,737 14,184 13,099 administrative

Total stock-based $ 7,415 $ 6,119 $ 31,548 $ 27,573 compensation

(c) The income tax effect on non-GAAP items for the three and twelve monthsended June 30, 2020 and 2019, respectively, is calculated utilizing theCompany's statutory tax rate of 21 percent.

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CONTACT: Media Contact Lucy Millington Aspen Technology +1 781-221-6419 lucy.millington@aspentech.com

CONTACT: Investor Contact Brian Denyeau ICR for Aspen Technology +1 646-277-1251 brian.denyeau@icrinc.com