Aspen Technology, Inc. : Aspen Technology Announces Financial Results for the Second Quarter of Fiscal 2013

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 2013, ended December 31, 2012.

"AspenTech delivered strong second quarter results that exceeded our guidance on all key metrics. We continue to see strong customer demand and product usage patterns, which contributed to our solid year-over-year annual spend growth of nearly 13% during the second quarter," said Mark Fusco, President and Chief Executive Officer. "The company's operational execution remains at a high level, which is evidenced by free cash flow generation of $34.5 million during the quarter. With over $50 million of free cash flow generated during the first half of our fiscal year, we feel very good about the company's position as we are heading into our seasonally strongest cash flow quarter."

Fusco added, "Looking ahead, we are encouraged by the strength of our pipeline and business momentum. We believe the company is tracking well against each of our key full year objectives, including growth, cash flow, revenue and profitability."

Second Quarter Fiscal 2013 and Recent Business Highlights

• 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 approximately $320 million at the end of the second quarter of fiscal 2013, an increase of 12.7% compared to the second quarter of fiscal 2012, and 2.6% sequentially.
• The license portion of total contract value was $1.54 billion at the end of the second quarter of fiscal 2013, an increase of 13.5% compared to the second quarter of fiscal 2012, and 2.9% sequentially.
• Total contract value, including the value of bundled maintenance, was $1.78 billion at the end of the second quarter of fiscal 2013, an increase of 15.5% compared to the second quarter of fiscal 2012, and 3.3% sequentially.

Summary of Second Quarter Fiscal Year 2013 Financial Results

AspenTech's total revenue of $77.3 million increased 16% from $66.6 million in the second quarter of the prior year.

• Subscription and software revenue was $59.5 million in the second quarter of fiscal 2013, an increase from $46.5 million in the second quarter of fiscal 2012.
• Services & other revenue was $17.9 million in the second quarter of fiscal 2013, compared to $20.1 million in the second quarter of fiscal 2012.

For the quarter ended December 31, 2012, AspenTech reported income from operations of $14.9 million, compared to income from operations of $7.0 million for the same period last fiscal year.

Net income was $9.9 million for the quarter ended December 31, 2012, leading to net income per share of $0.10, compared to $0.04 in the same period last fiscal year.

Non-GAAP income from operations, which adds back stock-based compensation expense, restructuring charges and amortization of intangibles associated with acquisitions, was $18.6 million for the second quarter of fiscal 2013, compared to $10.1 million in the same period last fiscal year.

Non-GAAP net income was $12.3 million, or $0.13 per share, for the second quarter of fiscal 2013, compared to non-GAAP net income of $6.0 million, or $0.06 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 cash and cash equivalents of $175.2 million at December 31, 2012, an increase of $11.9 million from the end of the prior quarter after using $19.7 million in cash to repurchase shares of common stock and reducing secured borrowings by $5.6 million. AspenTech has now fully repaid its secured borrowings. During the second quarter, the company generated $35.7 million in cash flow from operations and $34.5 million in free cash flow after taking into consideration $1.2 million in capital expenditures and capitalized software.

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, for the next few years, a number of AspenTech's performance indicators based on GAAP, including revenue, gross profit, operating income (loss) and net income (loss), will be of limited value in assessing AspenTech's performance, growth and financial condition. Accordingly, management instead is focusing on certain 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 29, 2013, at 4:30 p.m. (Eastern Time), to discuss the company's financial results for the second quarter fiscal year 2013 as well as the company's business outlook. The live dial-in number is [phone], conference ID code 86327489. 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 [phone] or [phone], conference ID code 86327489, through March 1, 2013.

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.

© 2013 Aspen Technology, Inc. AspenTech, aspenONE and the Aspen leaf logo are trademarks of Aspen Technology, Inc. All rights reserved. All other trademarks are property of their respective owners.

Forward-Looking Statements

The second and third paragraphs of this press release 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: AspenTech's failure to develop new software products, enhance existing products and services, or penetrate new vertical markets; 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; risks associated with operations outside the United States; weaknesses in AspenTech's internal controls; 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 current intention to update forward-looking statements after the date of this press release.

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share data)
					Three Months Ended								Six Months Ended
					December 31,								December 31,
					2012				2011				2012				2011
Revenue:
Subscription and software					$	59,457			$	46,502			$	113,537			$	78,412
Services and other						17,852				20,053				35,229				39,368
Total revenue						77,309				66,555				148,766				117,780
Cost of revenue:
Subscription and software						3,100				2,622				6,290				5,346
Services and other						9,273				10,303				18,421				21,400
Total cost of revenue						12,373				12,925				24,711				26,746
Gross profit						64,936				53,630				124,055				91,034
Operating expenses:
Selling and marketing						23,303				22,318				44,894				45,764
Research and development						15,039				12,767				30,805				26,536
General and administrative						11,671				11,490				24,439				27,377
Restructuring charges						(6	)			14				34				(59	)
Total operating expenses						50,007				46,589				100,172				99,618
Income (loss) from operations						14,929				7,041				23,883				(8,584	)
Interest income						955				2,034				2,054				4,265
Interest expense						(116	)			(1,015	)			(373	)			(2,107	)
Other expense, net						(57	)			(425	)			(334	)			(2,457	)
Income (loss) before provision for (benefit from) income taxes						15,711				7,635				25,230				(8,883	)
Provision for (benefit from) income taxes						5,774				3,799				10,880				(983	)
Net income (loss)					$	9,937			$	3,836			$	14,350			$	(7,900	)
Net Income (loss) per common share:
Basic					$	0.11			$	0.04			$	0.15			$	(0.08	)
Diluted					$	0.10			$	0.04			$	0.15			$	(0.08	)
Weighted average shares outstanding:
Basic						93,512				93,902				93,470				93,983
Diluted						95,463				96,267				95,541				93,983

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share data)
					December 31,				June 30,
					2012				2012
ASSETS
Current assets:
Cash and cash equivalents					$	175,224			$	165,242
Accounts receivable, net						39,531				31,450
Current portion of installments receivable, net						20,923				33,184
Collateralized receivables						-				6,297
Unbilled services						1,006				1,592
Prepaid expenses and other current assets						7,990				16,219
Prepaid income taxes						133				283
Current deferred tax assets						6,770				7,196
Total current assets						251,577				261,463
Non-current installments receivable, net						8,089				14,046
Property, equipment and leasehold improvements, net						7,727				7,037
Computer software development costs, net						1,618				1,689
Goodwill						19,851				19,399
Non-current deferred tax assets						49,173				58,559
Other non-current assets						7,403				6,142
Total assets					$	345,438			$	368,335
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Secured borrowings					$	-			$	10,756
Accounts payable						4,502				2,566
Accrued expenses and other current liabilities						29,248				37,989
Income taxes payable						295				598
Current deferred revenue						141,538				143,578
Current deferred tax liabilities						232				232
Total current liabilities						175,815				195,719
Non-current deferred revenue						50,358				43,595
Other non-current liabilities						14,968				15,429
Commitments and contingencies
Series D redeemable convertible preferred stock, $0.10 par value--
Authorized-- 3,636 shares at December 31, 2012 and June 30, 2012
Issued and outstanding-- none at December 31, 2012 and June 30, 2012						-				-
Stockholders' equity:
Common stock, $0.10 par value-- Authorized--210,000,000 shares
Issued-- 98,294,064 shares at December 31, 2012 and 96,663,580 shares at June 30, 2012
Outstanding-- 93,615,934 shares at December 31, 2012 and 93,465,955 shares at June 30, 2012						9,829				9,666
Additional paid-in capital						559,983				547,546
Accumulated deficit						(380,729	)			(395,079	)
Accumulated other comprehensive income						8,702				8,095
Treasury stock, at cost--4,678,130 shares of common stock at December 31, 2012 and 3,197,625 at June 30, 2012						(93,488	)			(56,636	)
Total stockholders' equity						104,297				113,592
Total liabilities and stockholders' equity					$	345,438			$	368,335

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
			Three Months Ended								Six Months Ended
			December 31,								December 31,
			2012				2011				2012				2011
	Cash flows from operating activities:
	Net income (loss)		$	9,937			$	3,836			$	14,350			$	(7,900	)
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Depreciation and amortization			1,370				1,281				2,687				2,693
	Net foreign currency (gain) loss			(183	)			(57	)			(304	)			1,218
	Stock-based compensation			3,453				3,071				7,768				6,779
	Deferred income taxes			5,636				3,044				9,858				(2,310	)
	Provision for bad debts			65				(553	)			162				(403	)
	Other non-cash activities			25				-				28				13
	Changes in assets and liabilities:
	Accounts receivable			(16,852	)			(13,662	)			(7,957	)			(8,068	)
	Unbilled services			568				1,294				606				1,905
	Prepaid expenses, prepaid income taxes, and other assets			1,462				(419	)			5,905				768
	Installments and collateralized receivables			14,071				18,399				25,101				26,728
	Accounts payable, accrued expenses, income taxes payable and other liabilities			4,750				(1,694	)			(8,503	)			(8,592	)
	Deferred revenue			11,377				8,467				4,439				15,449
	Net cash provided by operating activities			35,679				23,007				54,140				28,280
	Cash flows from investing activities:
	Purchase of property, equipment and leasehold improvements			(767	)			(536	)			(2,567	)			(922	)
	Insurance proceeds			-				-				2,222				-
	Purchase of technology intangibles			-				-				(527	)			-
	Capitalized computer software development costs			(435	)			(192	)			(435	)			(392	)
	Net cash used in investing activities			(1,202	)			(728	)			(1,307	)			(1,314	)
	Cash flows from financing activities:
	Exercise of stock options and warrants			5,072				1,874				9,120				4,106
	Proceeds from secured borrowings			-				3,574				-				4,982
	Repayments of secured borrowings			(5,616	)			(18,188	)			(11,010	)			(20,420	)
	Repurchases of common stock			(19,689	)			(11,068	)			(36,852	)			(20,240	)
	Payment of tax withholding obligations related to restricted stock			(2,312	)			(582	)			(4,288	)			(1,769	)
	Net cash used in financing activities			(22,545	)			(24,390	)			(43,030	)			(33,341	)
	Effects of exchange rate changes on cash and cash equivalents			(71	)			10				179				(355	)
	Increase (decrease) in cash and cash equivalents			11,861				(2,101	)			9,982				(6,730	)
	Cash and cash equivalents, beginning of period			163,363				145,356				165,242				149,985
	Cash and cash equivalents, end of period		$	175,224			$	143,255			$	175,224			$	143,255
	Supplemental disclosure of cash flow information:
	Income tax paid (refunded), net		$	778			$	(293	)		$	1,812			$	338
	Interest paid			116				1,015				373				2,107

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
GAAP Results Reconciled to Non-GAAP Results
The following table reflects selected Aspen Technology GAAP results reconciled to non-GAAP results. (Unaudited and in thousands, except per share data)
					Three Months Ended December 31,								Six Months Ended December 31,
					2012				2011				2012				2011
Total expenses
GAAP total expenses (a)					$	62,380			$	59,514			$	124,883			$	126,364
Less:
Stock-based compensation (b)						(3,453	)			(3,071	)			(7,768	)			(6,779	)
Restructuring charges						6				(14	)			(34	)			59
Amortization of purchased intangibles						(199	)			-				(302	)			-
Non-GAAP total expenses					$	58,734			$	56,429			$	116,779			$	119,644
Income (loss) from operations
GAAP income (loss) from operations					$	14,929			$	7,041			$	23,883			$	(8,584	)
Plus:
Stock-based compensation (b)						3,453				3,071				7,768				6,779
Restructuring charges						(6	)			14				34				(59	)
Amortization of purchased intangibles						199				-				302				-
Non-GAAP income (loss) from operations					$	18,575			$	10,126			$	31,987			$	(1,864	)
Net income (loss)
GAAP net income (loss)					$	9,937			$	3,836			$	14,350			$	(7,900	)
Plus:
Stock-based compensation (b)						3,453				3,071				7,768				6,779
Restructuring charges						(6	)			14				34				(59	)
Amortization of purchased intangibles						199				-				302				-
Less:
Income tax effect on Non-GAAP items (c)						(1,316	)			(941	)			(2,926	)			(1,970	)
Non-GAAP net income (loss)					$	12,267			$	5,980			$	19,528			$	(3,150	)
Diluted income (loss) per share
GAAP diluted income (loss) per share					$	0.10			$	0.04			$	0.15			$	(0.08	)
Plus:
Stock-based compensation (b)						0.04				0.03				0.08				0.07
Restructuring charges						-				-				-				-
Amortization of intangible assets						-				-				-				-
Less:
Income tax effect on Non-GAAP items (c)						(0.01	)			(0.01	)			(0.03	)			(0.02	)
Non-GAAP diluted income (loss) per share					$	0.13			$	0.06			$	0.20			$	(0.03	)
Shares used in computing diluted income (loss) per share						95,463				96,267				95,541				93,983
(a) GAAP total expenses
					Three Months Ended December 31,								Six Months Ended December 31,
						2012				2011				2012				2011
Total costs of revenue					$	12,373			$	12,925			$	24,711			$	26,746
Total operating expenses						50,007				46,589				100,172				99,618
GAAP total expenses					$	62,380			$	59,514			$	124,883			$	126,364
(b) Stock-based compensation expense was as follows:
					Three Months Ended December 31,								Six Months Ended December 31,
						2012				2011				2012				2011
Cost of services and other					$	316			$	314			$	659			$	617
Selling and marketing						972				1,229				1,949				2,399
Research and development						742				353				1,483				701
General and administrative						1,423				1,175				3,677				3,062
Total stock-based compensation					$	3,453			$	3,071			$	7,768			$	6,779
(c) The income tax effect on Non-GAAP items for the three and six months ended December 31, 2012 is calculated utilizing an estimate of our future effective tax rate.

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