AspenTech is getting better

AspenTech yesterday announced results for its fiscal third quarter, and they are not pretty. Getting better, though. Total revenue was $45.6 million, down 36% from a year ago, due primarily to the company’s transition from a traditional perpetual fee/periodic maintenance payment structure to a subscription model. This transition will take time: companies won’t be signing up under the new model until their existing maintenance contracts come up for renewal, so expect AspenTech’s revenue to be affected for several years as it builds a cushion of subscription revenue.

CFO Mark Sullivan said that FQ3 product-related bookings of $94 million were on par with the seasonally strong second quarter, unusual for the typically slower FQ3. CEO Mark Fusco said that this strength “reflects customer interest in the company’s new aspenONE licensing model and expanded usage across our customer base.” To help allay fears about the top-line decline, Mr. Fusco said that the company was able to grow its “cash balance by nearly $10 million and reduce borrowings by $9 million. We are at the early stages of ramping the company’s subscription cash flow model and are encouraged by our progress and long-term outlook."

The details:
• Total revenue was $45.6 million, down 36% from a year ago but up 7% from last quarter.

• Subscription revenue was approximately $4.0 million in FQ3, triple the FQ2 amount of $1.2 million. (No subscription revenue was recorded a year ago since the aspenONE licensing model was launched during FQ1 of fiscal 2010.)

• Software revenue was $14.7 million, down 64% from a year ago. Software revenue includes all non-subscription license revenue, including term-based contracts for some products as well as perpetual licenses.

• Services & other revenue was $26.9 million down 11% from $30.2 million in the year ago period.

• The company reports closing 21 product-related deals of over $1 million and 39 of between $250,000 and $1 million, up from 18 and 57, respectively, in FQ2. The average deal size for product-related bookings over $100,000 was $807,000 in the third quarter, up from $778,000 in the second quarter.

• Mr. Fusco said that the atmosphere at the AspenTech user conference held earlier this week was upbeat, as customers are more optimistic about both their own prospects and AspenTech’s.

• Energy continues to be the strongest vertical for AspenTech, followed by chemicals. Add in engineering and construction, and these three verticals account for over 90% of total revenue. Demand for chemical engineering products continue to be stronger than the supply chain solutions.

• AspenTech had a cash balance of $119.1 million on March 31, 2010.

• For the quarter AspenTech reported a loss from operations of $19.6 million (versus $29.3 million in FQ2) and a net loss of $21.8 million (versus $30.7 million in FQ2).

Back in February the company offered guidance for the fiscal year with GAAP revenue $165 million leading to an operating loss of $100 million. For the three quarters to date, total revenue is $128 million, while the operating loss is $73.8 million so it looks as though the revenue goal is definitely in sight while the company may just avoid the $100 million operating loss.