A month has gone by since the last earnings report for Aspen Technology (AZPN Quick QuoteAZPN - Free Report) . Shares have added about 1.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Aspen Technology due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Aspen Q2 Earnings Miss Estimates

Aspen reported second-quarter fiscal 2024 non-GAAP earnings per share (EPS) of $1.37, which missed the Zacks Consensus Estimate of $1.49. AZPN reported non-GAAP EPS of 35 cents in the year-ago quarter.

Revenues of $257.2 million increased 5.9% year over year driven by solid demand for products and solutions across most of the end markets. However, it lagged the Zacks Consensus Estimate by 1%.

Quarter in Detail

License and solutions’ revenues (59.3% of revenues) were up 1.7% year over year to $152.5 million.

Maintenance’s revenues (33.1%) rose 8.2% year over year to $85.1 million.

Revenues from Services and other (7.6%) increased 36.7% year over year to $19.6 million.

Margins

Gross profit increased to $162.2 million from the year-ago quarter’s $149.7 million. As a percentage of total revenues, the figure reached 63.1% from 61.7% reported in the prior-year quarter.

Total operating expenses amounted to $211.4 million from the year-ago quarter’s $209.1 million due to higher selling, marketing, and research and development costs.

Non-GAAP operating income totaled $88.7 million compared with $86.6 million reported in the year-ago quarter.

Balance Sheet & Cash Flow

As of Dec 31, 2023, cash and cash equivalents were $130.7 million compared with $120.5 million as of Sep 30, 2023.

The company generated $29.8 million in cash from operations compared with $49.5 million reported in the previous quarter. Non-GAAP free cash flow was $29.2 million in the fiscal second quarter compared with $47.8 million in the prior-year quarter. Free cash flow performance was affected due to the variability of contract cycle renewals and billings between quarters coupled with higher expenses and cash tax in the fiscal second quarter.

Aspen repurchased 375,041 shares for $72.1 million in the fiscal second quarter. As of Dec 31, 2023, a total of 954,839 shares worth $186.3 million had been repurchased under the share repurchase authorization of $300 million announced in August 2023. The company has shares worth $113.7 million left under its buyback authorization.

Fiscal 2024 View

For fiscal 2024, Aspen expects revenues to be at least $1.12 billion. The Zacks Consensus Estimate is pegged at $1.12 billion.

Non-GAAP net income is now anticipated to be at least $6.59 per share compared with earlier guidance of $6.57 per share. The consensus estimate is pegged at $6.63 per share.
Management projects Annual Contract Value growth to be at least 11.5% from a year ago and total bookings to be at least $1.04 billion.

Non-GAAP operating income is estimated to be at least $445 million, while non-GAAP total expenses are expected to be nearly $675 million.

Free cash flow is projected to be at least $360 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

At this time, Aspen Technology has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Aspen Technology has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.