Aspen Technology Announces Financial Results for the Fourth Quarter and Full Fiscal Year 2007 and First Quarter Fiscal 2008; Announces Selected Preliminary Financial Results for Third Quarter Fiscal 2008

CIMdata PLM Industry Summary Online Archive

14 April 2008

Financial News

Aspen Technology Announces Financial Results for the Fourth Quarter and Full Fiscal Year 2007 and First Quarter Fiscal 2008; Announces Selected Preliminary Financial Results for Third Quarter Fiscal 2008

• Files Fiscal 2007 10-K and First Quarter Fiscal 2008 10-Q with SEC

• Completes Previously Announced Restatement of Prior Period Results

• Announces license bookings of $63 million for the quarter ending March 31, 2008, an increase of 31% on a year-over-year basis

Aspen Technology, Inc. announced that it has filed its Annual Report on Form 10-K for the fiscal year ending June 30, 2007, including the previously announced restatement of prior period results. In addition, the company has filed its Quarterly Report on Form 10-Q for the first quarter of fiscal 2008, ending September 30, 2007.

Brad Miller, Chief Financial Officer of AspenTech, said “We are pleased to bring approximately nine months of comprehensive review of our financial accounts to a close with the filing of our fiscal 2007 10-K and first quarter fiscal 2008 10-Q financial statements. Our work included a detailed examination and restatement of prior financial statements, as well as a review of all significant accounting policies and processes. Although it took longer than expected, we believe it was in the long-term interest of our shareholders and will benefit the company as we look to scale the business in the years ahead. With this significant body of work now behind us, we are highly focused on completing our overall goal of bringing our financial statements current and becoming relisted on a national securities exchange.”

Mark Fusco, Chief Executive Officer of AspenTech, said “While the finance department has been focused on completing our financial statement filings, the company’s customer facing operations have continued to execute at a high level. Following a record fiscal 2007 performance, the company has generated year-over-year license bookings growth of 25% during the first nine months of fiscal 2008, including 31% year-over-year growth during the third quarter.” Fusco added, “The company ended the third fiscal quarter with a strong financial position highlighted by $137 million in cash, an increase from $132 million at December 31, 2007 and net of $12 million used during the third quarter to retire our previously existing Key Bank secured borrowing facility. We continue to be optimistic about the company’s long-term fundamental outlook based on our industry leading domain expertise, unique suite of aspenONE solutions and solid demand in our core markets.”

Fourth Quarter Fiscal 2007 Financial Results

For the fourth quarter ended June 30, 2007, AspenTech reported total revenue of $101.4 million, an increase of 27% from the fourth quarter of the prior fiscal year, and above the company’s original guidance of $85 million to $89 million. Within total revenue, license revenue was $68.0 million, an increase of 52%, and services revenue was $33.4 million, a decrease of 4%, compared to the fourth quarter of fiscal 2006, respectively.

AspenTech's income from operations, determined in accordance with generally accepted accounting principles (GAAP), was $24.0 million in the fourth quarter of fiscal 2007, exceeding the mid-point of the company’s original guidance of approximately $16 million and representing an operating margin of 23.7%. This compares to operating income of $7.7 million in the fourth quarter of fiscal 2006, which represented an operating margin of 9.7%.

GAAP operating expenses in the fourth quarter of fiscal 2007 included $3.1 million of non-cash stock-based compensation, $1.3 million of non-cash amortization of intangibles associated with previous acquisitions, $1.0 million in restructuring charges due to the company’s continued office consolidations, and $0.8 million in incremental auditing and professional fees associated with bringing the company’s financial statements current - the combination of which reduced the company's operating margin by approximately 6 percentage points. These items reduced the prior year’s operating margin by approximately 8 percentage points.

Net income was $17.9 million in the fourth quarter of fiscal 2007. This represented a significant increase compared to net income of $3.9 million in the same period of fiscal 2006. Preferred stock discounts and dividends totaled $3.9 million in the fourth quarter of fiscal 2006 and zero in the fourth quarter of fiscal 2007, resulting in net income applicable to common shareholders of $17.9 million and $52 thousand in the fourth quarter of fiscal 2007 and 2006, respectively.

Net income per share applicable to common shareholders was $0.19 for the quarter ended June 30, 2007, a significant increase compared to $0.00 in the same period of fiscal 2006. Fully diluted weighted shares outstanding were 93.3 million in the fourth quarter of fiscal 2007, an increase compared to 58.6 million in the same period of fiscal 2006 due to the conversion of preferred shares to common shares in December 2006 and January 2007. The above mentioned stock-based compensation, amortization of intangibles associated with previous acquisitions, restructuring charges, and incremental professional services fees had a net, negative impact of $6.2 million in the quarter ended June 30, 2007, or $0.07 per share, and $6.0 million in the quarter ended June 30, 2006, or $0.10 per share.

Fiscal Year 2007 Financial Results

For the fiscal year ended June 30, 2007, AspenTech reported total revenue of $341.0 million, an increase of 16% from fiscal 2006. Within total revenue, license revenue was $199.8 million, an increase of 30%, and services revenue was $141.3 million, an increase compared to $140.7 million, in fiscal 2006, respectively.

AspenTech's income from operations, determined in accordance with GAAP, was $55.4 million in fiscal 2007, representing an operating margin of 16.2%. This compares to operating income of $18.8 million in fiscal 2006, which represented an operating margin of 6.4%.

GAAP operating expenses in fiscal 2007 included $11.1 million of non-cash stock-based compensation, $6.5 million of non-cash amortization of intangibles associated with previous acquisitions, $4.6 million in restructuring charges due to the company’s continued office consolidations, and $0.8 million in incremental auditing and professional fees associated with bringing the company’s financial statements current - the combination of which reduced the company's operating margin by approximately 7 percentage points. These items reduced the prior fiscal year’s operating margin by approximately 7 percentage points.

Net income applicable to common shareholders was $38.2 million in fiscal 2007, which was net of $7.3 million in preferred stock discounts and dividends. This represented a significant increase compared to a loss attributable to common shareholders of $8.9 million in fiscal 2006, which was net of $15.4 million in preferred stock discounts and dividends.

Net income per diluted share applicable to common shareholders was $0.50 for the fiscal year ended June 30, 2007, a significant increase from a loss per share of $0.20 in fiscal 2006. Weighted shares outstanding were 91.9 million in fiscal 2007, an increase compared to 44.6 million in fiscal 2006 due to the conversion of preferred shares to common shares in December 2006 and January 2007. The above mentioned stock-based compensation, amortization of intangibles associated with previous acquisitions, restructuring charges and incremental professional services fees had a net, negative impact of $23.0 million in the year ended June 30, 2007 and $20.8 million in fiscal 2006.

AspenTech had cash and cash equivalents of $132.3 million at June 30, 2007, an increase of approximately $31.5 million from $100.8 million at the end of March 31, 2007.

First Quarter Fiscal 2008 Financial Results

For the quarter ended September 30, 2007, AspenTech reported total revenue of $64.8 million, compared to $64.2 million in the first quarter of fiscal 2007. Within total revenue, license revenue was $31.1 million, an increase of 11%, and services revenue was $33.7 million, a decrease of 6%, compared to the first quarter of fiscal 2007, respectively.

AspenTech's loss from operations, determined in accordance with GAAP, was $8.4 million in the first quarter of fiscal 2008. This compares to an operating loss of $17 thousand in the first quarter of fiscal 2007.

GAAP operating expenses in the first quarter of fiscal 2008 included $2.5 million of non-cash stock-based compensation, $7.2 million in restructuring charges due to the previously announced move of the company’s headquarters, and $1.5 million in incremental professional services fees associated with completing the financial restatement. In the first quarter of fiscal 2007, the company’s GAAP operating expenses included $1.7 million in non-cash stock-based compensation, $1.9 million in amortization in intangibles and $1.4 million in restructuring charges.

Net loss applicable to common shareholders was $9.0 million in the first quarter of fiscal 2008 compared to net loss applicable to common shareholders of $5.3 million in the same period in fiscal 2007.

Net loss per share applicable to common shareholders was $0.10 for the quarter ended September 31, 2007, which was consistent with the first quarter of fiscal 2007. Weighted shares outstanding were 89.0 million in the first quarter of fiscal 2008, an increase compared to 52.8 million in the first quarter of fiscal 2007 due to the conversion of preferred shares to common shares in December 2006 and January 2007. The above mentioned stock-based compensation, amortization of intangibles associated with previous acquisitions, restructuring charges, and incremental professional services fees had a net, negative impact of $0.13 per share in the quarter ended September 30, 2007 as compared to a net, negative impact of $0.09 per share in the quarter ended September 30, 2006.

AspenTech had cash and cash equivalents of $129.5 million at September 30, 2007, a decrease of approximately $2.8 million from $132.3 million at the end of June 30, 2007.

Summary of Restatement Effects of Prior Period Financial Results

The company’s Annual Report on Form 10-K for fiscal 2007 included the restatement of its financial statements for fiscal years ended June 30, 2006 and 2005, in addition to the first three quarters of the year ended June 30, 2007. On June 11, 2007, the company announced that it had identified errors related to the accounting for sales of installment receivables. In particular, it was determined that certain sales of installments receivable did not meet criteria for true sale accounting on an ongoing basis.

As a result, two new balance sheet accounts were created - Collateralized Receivables and the related Secured Borrowing liability. The restated consolidated balance sheet as of June 30, 2006 includes the recording of $211.3 million in collateralized receivables, the related recording of $182.4 million in secured borrowings, and the elimination of $19.0 million in retained interest in sold receivables. As previously stated, the company views this newly reported liability as self funding, with collections of collateralized receivables servicing the liability. The company does not believe that this accounting conclusion alters its arrangements with its customers, and it has not changed its economic relationship with the financial institutions.

The summary impact to income/loss from operations related to the restatement of installments receivable, in addition to correcting other errors in the company’s previously reported financial statements, was as follows:

• Income from operations improved from $28.1 million as previously reported to $31.4 million as restated for the nine months ended March 31, 2007;

• Income from operations in fiscal 2006 was $18.8 million both as previously reported and as restated;

• Loss from operations in fiscal 2005 improved from a previously reported operating loss of $70.0 million to a restated operating loss of $59.0 million.

On February 11, 2008, the company announced it had identified errors relating to its historical accounting for income taxes for certain international tax obligations, primarily arising from transactions among consolidated subsidiaries or from revaluation of foreign currencies. As a result, the company increased tax provisions for these potential obligations in the applicable period in the amounts of $4.1 million for the nine months ended March 31, 2007, $3.2 million for the year ended June 30, 2006, $6.8 million for the year ended June 30, 2005, and $4.6 million as of June 30, 2004.

The summary impact on net income or loss as a result of the restatement was:

• Net income for the nine months ended March 31, 2007 as restated was $27.6 million, a decrease from $31.9 million as previously reported;

• Net income for fiscal 2006 as restated was $6.5 million, a decrease from $12.8 million as previously reported;

• Net loss for fiscal 2005 as restated was $69.1 million, an improvement from $73.6 million as previously reported.

In addition, in the calculation and disclosure of deferred tax balances, errors were identified for the book or tax accounting treatment for certain items. These errors resulted in the incorrect disclosure of components of the company’s deferred taxes and the related offsetting valuation allowance within the income tax footnote. Accordingly, the deferred tax balances included in the income tax footnote and the offsetting valuation allowance has been restated as of June 30, 2006. As these net deferred tax assets had a full valuation allowance, the adjustments to deferred tax assets had no net impact on the company’s consolidated balance sheet or statements of operations.

Ending cash balances were not affected as a result of the restatement; however, the presentation of the cash flow statement was restated. The net proceeds from the sale of installments receivable were previously classified in cash flows from operations and have been restated as cash flows from financing activities. Payments made on secured borrowings are now similarly classified as cash flows from financing activities. Annual collections relating to installments receivable that were previously transferred to a financing institution are recognized as cash flows from operations. The company did not previously recognize these collections within its cash flow statement following the transfer of the installments receivable to the financing institution.

Investors can find additional details on all income statement and balance sheet results, on a “previously reported” and “as restated” basis, in the company’s Annual Report on Form 10-K for the year ended June 30, 2007.

Become a member of the CIMdata PLM Community to receive your daily PLM news and much more.

Tell us what you think of the CIMdata Newsletter. Send your feedback.

CIMdata is committed to your privacy. Your personal information will never be sold or shared outside of CIMdata without your express permission.