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Aspen's (AZPN) Q1 Earnings And Revenues Surpass Estimates

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Aspen Technology (AZPN - Free Report) reported first-quarter fiscal 2022 non-GAAP earnings of 77 cents per share, which beat the Zacks Consensus Estimate by 26.2%. The company reported non-GAAP earnings of 58 cents per share in the year-ago quarter.

Revenues of $136 million beat the Zacks Consensus Estimate by 12.8%. The company reported revenues of $115 million in the year-ago quarter.

The year-over-year improvement in the top line can be attributed to increases in customer demand, mainly refining customers, noted the company.

In October 2021, Aspen Technology and Emerson inked an agreement. Per the terms, Aspen Technology will be integrated with Emerson’s OSI Inc and the Geological Simulation Software business to form a new company. Emerson will control 55% of the stake in the new entity.

Aspen Technology, Inc. Price, Consensus and EPS Surprise

 

Aspen Technology, Inc. Price, Consensus and EPS Surprise

Aspen Technology, Inc. price-consensus-eps-surprise-chart | Aspen Technology, Inc. Quote

 

Aspen Technology’s shareholders will get $87 per share in cash and 0.42 shares of common stock in the newly-formed company against each share. The deal is expected to be concluded by the second quarter of 2022, subject to regulatory, shareholders’ and customary approvals.

The new company will have more than $1 billion in revenues with over 3,000 customer base, noted Aspen Technology.

In the quarter under review, total bookings were $128.2 million, up 30% year over year

Following the announcement, shares are trading down 0.3% in the premarket trading on Oct 28. In the past year, shares of Aspen Technology have returned 34.2% compared with the industry’s rally of 49%.

Quarter in Detail

License revenues (59.6% of revenues) soared 31.1% year over year to $81.1 million.

Maintenance revenues (35.5%) improved 2.9% year over year to $48.2 million.

Services and other revenues (4.9%) increased 7.2% from the year-ago quarter’s figure to $6.7 million.

As of Sep 30, 2021, the annual spend (which Aspen Technology defines as the annualized value of all term license and maintenance contracts at the end of the quarter) amounted to $630 million, up 5.6% year over year and 1.4% quarter over quarter.

Margins

Gross profit increased 21.7% year over year to $121.1 million. As a percentage of total revenues, the figure expanded 260 basis points (bps) on a year-over-year basis to 89.1%.

Total operating expenses increased 24.4% from the year-ago quarter’s figure to $81.3 million, due to higher spend related to general & administrative, research and development as well as selling and marketing.

Non-GAAP operating income totaled $55.4 million compared with $42.7 million reported in the prior-year quarter. Non-GAAP operating margin was 40.7% compared with 37.2% operating margin reported in the year-ago quarter.

Balance Sheet & Cash Flow

As of Sep 30, 2021, cash and cash equivalents were $248 million compared with $379.9 million as of Jun 30, 2021. The company’s total borrowings, net of debt issuance costs, stood at $289.4 million as of Sep 30, 2021.

The company generated $32.7 million cash from operations compared with $103.2 million in the previous quarter. Non-GAAP free cash flow was $33 million in the fiscal first quarter.

The company repurchased 1.1 million shares in the fiscal first quarter for $150 million.

In June 2021, Aspen Technology announced that its board of directors approved a new $300-million share buyback authorization to be executed in the fiscal year 2022. The new buyback authorization includes an accelerated share repurchase ("ASR") agreement to repurchase up to $150 million of the company’s common shares in the first quarter of fiscal 2022. The remaining $150 million worth of shares will be repurchased over the next three quarters of fiscal 2022.

Fiscal 2022 View

For fiscal 2022, Aspen Technology expects revenues in the range of $702-$737 million. The Zacks Consensus Estimate for revenues is pegged at $720.1 million.

Annual spend growth rate is expected between 5% and 7%, while total bookings are projected in the range of $766-$819 million.

Non-GAAP net income is anticipated in the range of $4.75-$5.13 per share compared with $4.79-$5.17 per share guided earlier. The consensus mark for earnings is pegged at $4.97.

Management projects non-GAAP operating income in the range of $361-$391 million. Free cash flow is anticipated between $275 million and $285 million.

Zacks Rank & Stocks to Consider

Currently, Aspen Technology carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector worth considering are Salesforce (CRM - Free Report) , HP Inc (HPQ - Free Report) and Jabil (JBL - Free Report) . All stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Salesforce, HP Inc and Jabil is currently pegged at 16.8%, 12.7% and 12%, respectively.

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