AspenTech revenue up 23% in F12

AspenTech, maker of aspenONE for chemical process and plant optimization, yesterday announced that fourth quarter revenue was $64 million, up 22% from a year ago, leading to total revenue for fiscal 2012 of $243 million, up 23% over last year.

Mark Fusco, CEO, said that Q4 was “a strong finish to a great year for AspenTech. The company exceeded its fiscal 2012 guidance for each of its key financial metrics, including growth in total license contract value, free cash flow and expense management. Our aspenONE subscription software offering continues to gain traction in the market and we have a significant opportunity to drive increased product adoption and usage levels over the long term.”

AspenTech is in the midst of a transition from selling its products primarily on a perpetual license basis to selling software subscriptions. As a result, reported revenue had significantly declined over prior periods even as it built backlog. The company has used alternate metrics to describe its business:

  • Total contract value, including the value of maintenance that’s bundled into the subscriptions, was $1.68 billion at the end of fiscal 2012, up 18%.
  • The license portion of total contract value was $1.46 billion at the end June, up 15% from fiscal 2011.
  • Taken together, the two factoids above lead to the conclusion that customers (1) have not decreased their reliance on AspenTech’s solutions, just how they pay for them, and (2) that AspenTech is seeing slowing license revenue growth like many other engineering software vendors — not that 15% is bad, of course. But it indicates a finite number of customers and product; AspenTech needs to get new products to new users to boost license growth.
  • Annual spend, or the annualized value of all term license and maintenance revenue contracts at the end of the quarter, was about $304 million at the end of fiscal 2012. This is almost at the reported total revenue of $312 million in fiscal 2009, before the transition to subscriptions.

As reported,

  • Total revenue for Q4 was $64 million, of which $46 million was subscription and software revenue, up 60% from a year ago.
  • Services & other revenue was $18 million in Q4, down from $24 million a year ago.
  • The company reported a loss from operations of $3.6 million, much better than last year’s loss of $18 million.

For the year, AspenTech’s total revenue was $243 million, an increase of 23%. Subscription and software revenue was $167 million, up 61%, while services & other revenue was $76.4 million, down 20% from last year’s level. For the fiscal 2012, AspenTech reported a loss from operations of $15.0 million, a significant improvement from last year’s loss from operations of $55 million.

News stories today about AspenTech are leading with the net loss reported for 2012, and contrasting that to positive net income in fiscal 2011 — that’s very misleading, though factually correct. For FQ4 2012 AspenTech reported a net loss of $5.4 million or $0.06 per share, a stark reversal of the net income of $41.7 million or $0.43 per share reported for FQ4 2011 last year. BUT last year’s results included a one-time $57.3 million tax benefit, resulting from a “valuation reversal against deferred tax assets”. Without that tax benefit, the company would have reported a net loss of $16 million, so accounting-math aside, 2012 is an improvement.

Much more important to customers is the fact that AspenTech has a cash balance of $165 million as it leaves fiscal 2012 and generated $105 million in cash flow from operations.

At an investor event last month, Mr. Fusco said that AspenTech has about 1,500 core customers and that 80% of revenue comes from about 300. Clearly, AspenTech has a lock in its key customers — the challenge now is to expand in those accounts.

 

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