CIMdata PLM Industry Summary Online Archive
5 May 2005
Financial News
Aspen Technology Announces Financial Results for the Third Quarter of Fiscal 2005
Aspen Technology, Inc. reported financial results for its third quarter of fiscal 2005, ended March 31, 2005.
Total revenues for the third quarter totaled $64.2 million, with software license revenues of $31.1 million and services revenues totaling $33.1 million. On a Generally Accepted Accounting Principles (GAAP) basis, the Company reported a third quarter net loss applicable to common shareholders of $13.7 million, or $0.32 per diluted share, which includes fees related to the recently completed audit committee investigation. On a non-GAAP basis, excluding these fees, amortization of intangibles, an adjustment to previously recorded restructuring charges, and the preferred stock dividend and discount accretion, the Company reported a fiscal 2005 third quarter net loss of $4.4 million, or $0.05 per share. A $1.1 million tax provision for international locations is included in these results, which increased the GAAP loss per share by $0.03 and the non-GAAP loss per share by $0.01.
"While our third quarter revenues and expenses were in-line with the directional guidance we provided on our March 15 earnings call, we are working hard to ensure that the Company is in position to report improved financial results in the future," said Mark Fusco, President and CEO of AspenTech. "After evaluating AspenTech's operations during my first 90 days as CEO, I have determined that the Company must simplify its structure and processes in order to remove internal obstacles that have prevented it from growing revenues and delivering profitable performance. Although some of these changes will take time to implement, we have finalized a plan to improve our performance, which we expect will enhance results in our next fiscal year."
Highlights of New Plan to Improve Operational Performance
On the Company's March 15 conference call, management discussed its high level priorities designed to help AspenTech improve its profitability and revenues. Today, AspenTech is announcing the details of its new execution plan which is focused on three areas: (1) operational improvement, (2) end-to-end vertical alignment of customer facing functions, and (3) integration of product management and marketing into a single organization that is closer to the customer. Details and benefits to the new plan include the following:
Operational Improvement
• Consolidate disparate facilities and back office personnel in order create a simplified operating infrastructure and improve efficiency, control and information flow
• Consolidate R&D to fewer locations in order to improve productivity, quality and efficiency of R&D resources
Vertical Alignment
• Align all customer-facing employees-product marketing, product management, professional services, pre-sales, and direct sales-into key vertical market segments
• Create greater accountability across each functional department and ensure that employees closest to the customer are driving R&D toward the greatest areas of customer demand
Integration of Product Management and Marketing into a Single Function
Merge product management and marketing into one organization, with a greater emphasis on customer interaction and marketing resources in the field
• Increase the allocation of resources toward key vertical market initiatives
• Create increased interaction and better communication with our customers, and increase the resources available to drive our vertical sales strategy
"Our new operational plan is comprehensive, and we believe that successful execution against it will put AspenTech in a much better position to deliver consistent and improving financial results. Many of our customers continue to report solid financial results, and we have the capability to significantly increase our percentage of their software spending as we improve our execution.
He added, "We have a solid sales pipeline and expect to deliver an improvement in software licenses, services, and profitability in the June quarter. Most important, we believe AspenTech has the potential to return to profitability and free cash flow generation in fiscal 2006 by streamlining our focus and improving the day-to-day execution of our business strategy."
Charles Kane, Senior Vice President & CFO of AspenTech said, "During the third quarter we significantly decreased our year-over-year cost structure, and we believe we can reduce our expense run rate by another $3 to $4 million per quarter over the next 12 months. We are committed to running a profitable company, which includes delivering a year-over-year increase in our fiscal 2006 operating margins. We also plan to pay off our 5.25% convertible debentures, which will improve the Company's ongoing financial position over the next few months."
Additions to Management Team
Over the past few months, AspenTech made significant additions to its senior management team. Blair Wheeler joined the Company as Senior Vice President of Marketing, following a distinguished career in sales and marketing across a variety of organizations, including Cisco and Amoco. Hedwig (Hedy) Whitney was named Vice President of Human Resources, after having held senior executive positions in a similar capacity at New England Business Services and Fidelity Investments. Wheeler and Whitney will play instrumental roles in executing the Company's new plan to improve its operational performance.
Significant Transactions
AspenTech signed significant software transactions in the third quarter with Air Liquide, Dow Corning, DuPont, PepsiCo Inc., NOVA Chemicals, and Statoil.
Financial Impact of Restructuring
As a result of the operational changes and restructuring, the Company expects to reduce its quarterly run rate by roughly $3 to $4 million over the course of Fiscal 2006. Management anticipates incurring a fourth quarter restructuring charge of between $4 and $6 million.
Conference Call and Webcast
AspenTech will host a conference call and webcast to discuss its financial results, business outlook, and related corporate and financial matters at 4:45 p.m. Eastern Daylight Time on May 5, 2005. Interested parties may listen to a live webcast of the call by logging on to AspenTech's website: http://www.aspentech.com and clicking on the "webcast" link under the investor relations section of the site. A replay of the call will be archived on AspenTech's website and will also be available via telephone at (800) 642-1687, confirmation code 6079595, for four days, beginning at 8:00 p.m. Eastern Daylight Time on May 5, 2005.
Non-GAAP Results
AspenTech reports pro forma financial results, which exclude certain non-operational, non-cash and other specified charges that management generally does not consider in evaluating the Company's ongoing operations. These results are provided as a complement to results provided in accordance with accounting principles generally accepted in the United States (known as "GAAP"). Management believes this pro forma measure helps indicate underlying trends in the Company's business, and uses this pro forma measure to establish budgets and operational goals that are communicated internally and externally, to manage the Company's business and to evaluate its performance. A reconciliation of non-GAAP financial results, to GAAP financial results, is included in the attached condensed consolidated financial statements.
Full financials are available at http://www.aspentech.com/publication_files/IR_May_05_2005.pdf .
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