Aspen Technology, Inc. (AspenTech), a global leader in industrial software, announced financial results for its second quarter in fiscal 2024, ended December 31, 2023.
"AspenTech had a solid second quarter with strong demand for our products and solutions,” commented Antonio Pietri, President and Chief Executive Officer of AspenTech. “We continue to see numerous growth opportunities in asset-intensive industries as they navigate the energy transition and focus on efficiencies and sustainability use cases. In particular, with DGM, we are uniquely positioned to capitalize on the unprecedented investment cycle to expand and upgrade the grid globally."
"We continue to see resilient demand and meaningful pipeline growth across most end markets as we move into the second half of our fiscal year. We remain confident in our outlook for fiscal 2024, and we are reaffirming our ACV growth target of at least 11.5 percent,” concluded Pietri.
Second Quarter Fiscal Year 2024 Recent Business Highlights
- Annual contract value1 (“ACV”) was $914.1 million at the end of the second quarter of fiscal 2024, increasing 9.6% year over year and 1.8% quarter over quarter. This result reflects the delay of a customer agreement that was scheduled to renew in the second quarter of fiscal 2024 and reduced ACV growth by approximately 0.6 points. AspenTech now expects this customer renewal to close in the third quarter of fiscal 2024, with a corresponding benefit to ACV growth.
- Cash flow from operations was $29.8 million for the second quarter of fiscal 2024, compared to $49.5 million in the second quarter of fiscal 2023.
- Free cash flow2 was $29.2 million for the second quarter of fiscal 2024, compared to $47.8 million in the second quarter of fiscal 2023.
Summary of Second Quarter Fiscal Year 2024 Financial Results
AspenTech’s total revenue was $257.2 million in the second quarter of fiscal 2024 and included the following:
- License and solutions revenue, which represents the portion of a term license agreement allocated to the initial license and Open Systems International, Inc. (OSI) revenue where software, hardware and professional services are recognized as one performance obligation, was $152.5 million in the second quarter of fiscal 2024, compared to $149.8 million in the second quarter of fiscal 2023.
- Maintenance revenue, which represents the portion of customer agreements related to ongoing support and the right to future product enhancements, was $85.1 million in the second quarter of fiscal 2024, compared to $78.6 million in the second quarter of fiscal 2023.
- Services and other revenue, which represents the portion of customer agreements related to professional services and training services, was $19.6 million in the second quarter of fiscal 2024, compared to $14.4 million in the second quarter of fiscal 2023.
Loss from operations was $49.2 million in the second quarter of fiscal 2024, compared to $59.4 million in the second quarter of fiscal 2023. Non-GAAP income from operations was $88.7 million in the second quarter of fiscal 2024, compared to $86.6 million in the second quarter of fiscal 2023. A reconciliation of GAAP to non-GAAP results is presented in the financial tables included in this press release.
Net loss was $21.5 million, or $0.34 per diluted share, in the second quarter of fiscal 2024, compared to $66.2 million, or $1.02 per diluted share, in the second quarter of fiscal 2023. AspenTech has increased amortization of intangible assets following the close of its transaction with Emerson Electric Co. AspenTech expects its amortization of intangible assets to remain at higher levels for the next several years as the related asset balance is amortized over the respective expected useful lives of the intangible assets.
Non-GAAP net income was $87.8 million, or $1.37 per diluted share, in the second quarter of fiscal 2024, compared to $22.8 million, or $0.35 per diluted share, in the second quarter of fiscal 2023. The year-over-year increase in non-GAAP net income was mainly due to the change in approach to computing AspenTech’s tax provision, which initially occurred in the second quarter of fiscal 2023.
AspenTech had cash and cash equivalents of $130.8 million as of December 31, 2023, compared to $241.2 million as of June 30, 2023. The decrease in cash and cash equivalents during this period was due to the impact of share repurchase activity under AspenTech’s $300.0 million share repurchase authorization (the “share repurchase authorization”) in the first half of fiscal 2024. Please see below for an update on the share repurchase authorization. Under its revolving credit facility, AspenTech had no borrowings and $197.4 million available as of December 31, 2023.
AspenTech generated $29.8 million in cash flow from operations and $29.2 million in free cash flow2 in the second quarter of fiscal 2024, compared to $49.5 million in cash flow from operations and $47.8 million in free cash flow2 in the second quarter of fiscal 2023. The difference in free cash flow2 results between periods was mainly due to the variability of contract cycle renewals and billings between quarters as well as higher expenses and cash tax in the second quarter of fiscal 2024.
Recent Developments
Appointment of Interim Chief Financial Officer
Effective January 1, 2024, Christopher Stagno was appointed to the position of Senior Vice President, Interim Chief Financial Officer of AspenTech, while AspenTech searches for a new permanent Chief Financial Officer following Chantelle Breithaupt’s previously announced resignation from the role, effective December 31, 2023. Mr. Stagno is an experienced financial executive with deep knowledge of AspenTech’s business and over 25 years of leadership in finance, including at various software companies.
Share Repurchase Authorization Update
AspenTech repurchased 375,041 shares for $72.1 million under its $300.0 million share repurchase authorization, announced on August 1, 2023, in the second quarter of fiscal 2024. As of December 31, 2023, a total of 954,839 shares had been repurchased under the share repurchase authorization for $186.3 million, with the total remaining value being $113.7 million.
Fiscal Year 2024 Business Outlook
Based on information as of today, February 6, 2024, AspenTech is reaffirming its fiscal 2024 guidance and increasing its Non-GAAP net income per share guidance by $0.02 to reflect the impact of share repurchase activity in the second quarter of fiscal 2024. AspenTech’s fiscal 2024 guidance is as follows.
- ACV1 growth of at least 11.5% year-over-year.
- GAAP operating cash flow of at least $378 million
- Free cash flow2 of at least $360 million
- Total bookings of at least $1.04 billion
- Total revenue of at least $1.12 billion
- GAAP total expense of approximately $1.22 billion
- Non-GAAP total expense of approximately $675 million
- GAAP operating loss at or better than $100 million
- Non-GAAP operating income of at least $445 million
- GAAP net loss at or better than $7 million
- Non-GAAP net income of at least $424 million
- GAAP net loss per share at or better than $0.11
- Non-GAAP net income per share of at least $6.59
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 AspenTech’s actual results to differ materially from these forward-looking statements.
Conference Call and Webcast
AspenTech will host a conference call and webcast presentation on Tuesday, February 6, 2024, at 4:30 p.m. ET to discuss its financial results, business outlook, and related corporate and financial matters. A live webcast of the call will be available on AspenTech’s Investor Relations website, ir.aspentech.com, via its “Webcasts” page. To access the call by phone, please use the following registration link. To avoid delays, we encourage participants to dial into the conference call fifteen minutes ahead of the scheduled start time. A replay of the webcast also will be available for a limited time at http://ir.aspentech.com/.
AspenTech has provided an earnings presentation for its second quarter of fiscal 2024. AspenTech asks that shareholders refer to this presentation in conjunction with the conference call, which can be found at ir.aspentech.com.
