Aspen Technology today announced results for its second quarter of fiscal 2010. AspenTech is in the midst of a painful transition from a typical perpetual license model, where a large upfront new license payment is followed by much smaller periodic maintenance payments in succeeding years, to a subscription program called the aspenOne licensing scheme. As we saw when the company reported 1FQ10 in December total revenue fell almost 50% from a year earlier, as software revenue declined from almost $50 million to $25,000 in subscription revenue and $11.1 million in non-subscription software revenue. The company had been saying that, despite these dismal early results, customer interest in the new model has been good and that the December quarter “will prove a better barometer for customer acceptance”.
So, how did it go?
Not great, but looking up. While FQ2 results are still down significantly from last year, as subscription plus traditional software revenue was only $10.2 million. With total revenue slightly more than half of last year’s $82.6 million, it’s not surprising that AspenTech reported a net loss of $30.7 million.
But the company is optimistic. Said CEO Mark Fusco,“We are pleased with the company’s performance in the second quarter, as solid transaction flow drove product-related bookings of approximately $95 million . Within product related bookings, the license portion was consistent with the year ago period. Early customer response to our new aspenONE licensing model has been very favorable, which is driving both renewal activity and expanded usage with customers across each of our target markets.”
It’s important to note that comparisons to prior periods are very difficult. AspenTech offered a number of comparisons that all involved things like the time-value of money, net present value and redefining the buckets in which categories of revenue (maintenance) were recognized. It does seem as though things are at least holding steady and may be slightly improving from a year ago.
The details:
• subscription revenue was $1.2 million, up from $25,000 last quarter
• non-subscription software revenue was $9 million, down from $47.3 million last year
• services revenue was down 8% from a year ago to $32.5 million, but up sequentially from $28.7 million in the first quarter of fiscal 2010
• the company closed 18 product-related deals of over $1 million and 57 between $250,000 and $1 million in FQ2 (of the 18, “virtually all” were on the new aspenONE model)
• the average deal size for product-related bookings over $100,000 was $778,000 in the second quarter
• AspenTech had a cash balance of $109.4 million at at the end of FQ2, generating a bit over $9 million in the quarter. The company did not sell any installments receivable to raise cash during FQ2 (as it had done in the past) and paid down its borrowings by $12.3 million, to $96.5 million
• the energy, chemicals, and engineering and construction verticals made up over 90% of bookings
• the engineering solutions had a particularly strong second quarter, although no details were given
• on a geo basis, revenue held relatively consistent. Each region had a good start to the year, with no standouts that would lead to a conclusion that one region is more or less receptive to the aspenONE model. Continued to have good performance in Latin America, consistent strength in Europe and North America and just opened an office in the Middle East to support what it sees as a growth area.
In a bit of related news, AspenTech has brought its financial filings current with the US SEC and has received approval to relist the company’s common stock on the Nasdaq effective February 10, 2010 under the ticker ‘AZPN’.
The company offered guidance for the fiscal year with GAAP revenue $165 million leading to an operating loss of $100 million. The company is seeing growing customer interest in investing in its solutions as their end-markets improve. One analyst on the call wanted to know why AspenTech is issuing guidance now, where it really hasn’t in the recent past; the company responded that it has a better handle on customer uptake of aspenONE subscriptions and felt comfortable
While the revenue-coming-in details would argue otherwise, the other metrics offered by the company do make it appear that AspenTech’s transition to a subscription model is succeeding. Bookings are up. New customers are showing interest and existing customers are expanding installations of AspenTech products and suites and are doing so using the aspenONE licensing scheme. Sounds good.