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Aspen (AZPN) Misses Q3 Earnings Estimates, Lowers View

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Aspen Technology (AZPN - Free Report) reported third-quarter fiscal 2020 non-GAAP earnings of 74 cents per share that missed the Zacks Consensus Estimate by 10.8% and declined 22.9% on a year-over-year basis.

Revenues of $132 million missed the Zacks Consensus Estimate by 3.6% and fell 10.8% from the year-ago quarter’s figure. The decline was caused by lower year-over-year bookings.

Total bookings for the reported quarter came in at $126.7 million, down 20.8% year over year. The company has attributed the decline to unfavorable timing of renewals compared with year-ago quarter.

Moreover, due to uncertainties prevailing in the market due to COVID-19, the company witnessed a decline in demand and slowdown in customer payments in the last few weeks of the fiscal third quarter.

Aspen Technology Inc Price, Consensus and EPS Surprise

 

 

Notably, shares have declined 14.2% in the year-to-date period compared with the industry’s rise of 7.3%.

Quarter in Detail

License revenues (59.5% of revenues) declined 20.2% year over year to $78.6 million due to decline in bookings related to unfavorable timing of renewals.

Maintenance revenues (34.2%) increased 7.9% year over year to approximately $45.2 million. The company attributed the upside to growth of its base of arrangements, which include maintenance, being recognized on a ratable basis.

Services and other revenues (6.3%) improved 7.9% from the year-ago quarter’s figure to $8.2 million due to growing volume of professional service engagements.

Annual spend increased 9.3% year over year to $575 million.

Margins

Gross margin contracted 220 basis points (bps) on a year-over-year basis to approximately 88.1%.

Total operating expenses climbed 11.7% from the year-ago quarter’s figure to $70.1 million due to increase in research & development and general & administrative expenses.

Non-GAAP operating income of $55.3 million declined 29.3% from the year-ago quarter’s figure. Non-GAAP operating margin was 41.9% compared with 52.9% in the year-ago quarter.

Balance Sheet & Cash Flow

As of Mar 31, 2020, cash and cash equivalents were $192.2 million compared with $80.5 million as of Dec 31, 2019.

The company generated $81.4 million cash from operations during the quarter compared with $46.9 million in the previous quarter. Free cash flow came in at $81.2 million compared with $48.1 million in the previous quarter.

The company repurchased approximately 452,000 shares for $50 million in third-quarter fiscal 2020.

Fiscal 2020 Guidance

Due to COVID-19 induced uncertainties, the company has lowered its guidance for fiscal 2020.

Aspen Technology expects revenues in the range of $550-$582 million compared with the previous range of $575-$615 million. The Zacks Consensus Estimate for revenues is pegged at $561 million, which indicates a decline of 13.8% from the year-ago quarter’s figure.

Non-GAAP net income is anticipated in the range of $3.16-$3.48 per share compared with previous guidance of $3.43-$3.84. The consensus mark for earnings is pegged at $3.50, which suggests a decline of 14.4% from the year-ago quarter’s figure.

Non-GAAP operating income is projected in the range of $249-$277 million compared with the previous guidance of $272-$307 million.

Free cash flow is now anticipated in the range of $230-$260 million compared with the prior range of $260-$270 million.

Zacks Rank & Stocks to Consider

Currently, Aspen carries a Zacks Rank #4 (Sell).

Cogent Communications Holdings, Inc. (CCOI - Free Report) , NeoPhotonics Corporation (NPTN - Free Report) and InterDigital, Inc. (IDCC - Free Report) are some better-ranked stocks worth considering in the broader computer and technology sector, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.  

Long-term earnings growth rate for NeoPhotonics and InterDigital is pegged at 15% each, while the same for Cogent is pegged at 11.46%.

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