Aspen Technology (AZPN) Beats On Q1 Earnings & Revenues

Aspen Technology (NASDAQ:AZPN) reported first-quarter fiscal 2020 non-GAAP earnings of 79 cents per share, outpacing the Zacks Consensus Estimate by 21.5% and improving 23.4% on a year-over-year basis.

Revenues of $134.1 million surpassed the Zacks Consensus Estimate of $120 million and improved 17.4% from the year-ago quarter. The increase can be attributed to improvement in year-over-year bookings.

Notably, total bookings for the reported quarter came in at $135 million, up 40.4% year over year, primarily driven by higher term license contracts for renewals.

Moreover, ongoing momentum in Asset Performance Management (APM) and Manufacturing & Supply Chain (MSC) suite, and strength in Engineering suite of solutions drove year-over-year revenues.

Coming to the price performance, shares of Aspen Technology have returned 44.3% in the year-to-date period, outperforming the industry’s rally of 35.7%.

Quarter in Detail

License revenues (60.5%) surged 27.3% year over year to $81.2 million, primarily on higher bookings due to the timing of contract renewals.

Maintenance revenues (32.5%) inched up 1.2% year over year to approximately $43.6 million.

Services and other revenues (almost 7%) surged 26.7% from the year-ago quarter to $9.3 million.

Annual spend improved 1.3% sequentially and 10% year over year to $548 million.

Management is optimistic on expanding E&C and GEI customer base. With the company signing significant deals globally, the APM suite and Aspen Mtell offerings continue to gain traction. The company also witnessed pipeline expansion, which remains a positive.

For instance, China Petroleum Engineering’s subsidiary, China HuanQiu Contracting and Engineering Corporation (HQC), has deployed Aspen HYSYS Dynamics software with an aim to enhance throughput and safety to increase profit levels with improved asset performance.

During the reported quarter, the company announced acquisition of Mnubo, which offers custom AI and analytics infrastructure solutions for IoT. The company is also anticipated to gain from Sabisu buyout, which provides enterprise workflow and visualization solutions.

The inorganic additions are expected to strengthen Aspen Technology’s offerings with embedded AI capabilities.

Margins

Gross margin expanded 30 bps on a year-over-year basis to approximately 88.7%.

Total operating expenses climbed 11.9% from the year-ago quarter to $71.6 million.

Non-GAAP operating income of $57.9 million surged 23.4% from the year-ago quarter. Non-GAAP operating margin expanded 210 bps year over year to 43.2%.

Balance Sheet & Cash Flow

Aspen Technology ended the first quarter with $57.9 million in cash and cash equivalents compared with $71.9 million reported in the previous quarter.

The company generated $15.3 million cash from operations during the quarter compared with $85.2 million in the previous quarter. Free cash flow came in at $14.3 million compared with $84.9 million in the previous quarter.

The company repurchased approximately 382,000 shares for $50 million.

Fiscal 2020 Guidance

Aspen Technology revised non-GAAP earnings guidance on share repurchases. Non-GAAP earnings are now projected in the range of $3.47-$3.89 per share, compared with the prior guided range of $3.44-$3.85. The mid-point of the raised guided range — $3.68 — is lower than the current Zacks Consensus Estimate for the period of $3.76.

The remaining guided metrics remain unchanged. Aspen Technology continues to forecast revenues between $575 million and $615 million. The mid-point of which — $595 million — is lower than the current Zacks Consensus Estimate for the period, currently pegged at $599.02 million.

Non-GAAP operating income is projected in the range $272-$307 million.

Free cash flow is anticipated in the range of $250 million to $260 million.

APM suite is projected to contribute 3% to the anticipated annual spend increase of 10-12%, while Engineering and MSC suites are projected to contribute 7% and 9%, respectively.

Zacks Rank & Stocks to Consider

Aspen currently carries a Zacks Rank #3 (Hold).

NetEase (NASDAQ:NTES) , Benefitfocus (NASDAQ:BNFT) and Five9 (NASDAQ:FIVN) are some better-ranked stocks in the broader computer and technology sector, each sporting 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 NetEase, Benefitfocus and Five9 is pegged at 31.93%, 20% and 10%, respectively.

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