AspenTech continues its reinvention

AspenTech continues its turnaround, with total revenue climbing 34% to nearly $67 million for the second fiscal quarter ended December 31. The transition from paid-up license/maintenance revenue recognition to subscriptions has been rocky with the company not yet near prior levels of revenue, but CEO Mark Fusco remains optimistic, saying that AspenTech “again met or exceeded our financial guidance across all key metrics for the second quarter, and we believe the company is well positioned to do the same relative to our full year objectives.” Subscription and software revenue was $47 million in the quarter, nearly double the $25 million reported a year ago and up 22% sequentially. Services & other revenue was $20 million in the second quarter of fiscal 2012, down from $25 million a year ago but up compared to the $19 million reported in the prior quarter. The big news is that AspenTech reported income from operations of $7 million, compared to a loss from operations of $9 million a year ago and a loss of $16 million last quarter. The losses had primarily been due to the change in the way it recognizes revenue rather than any underlying customer or product issues, but it was worrying none the less. Mark Sullivan, CFO, told investors that revenue and income were above guidance because of when the company recognized revenue “associated with a few large contracts with longstanding customers”. Mr. Fusco said that he was “pleased with the company’s execution during the second quarter. While global economic conditions remain volatile, AspenTech delivered accelerated year-over-year growth in total license contract value for the second quarter and first half of fiscal 2012 as compared to growth in the prior fiscal year periods.” Total license contract value is AspenTech’s mechanism for trying to compare the old revenue recognition method to the old. Looking at these metrics, AspenTech says total contract value, a way of adding together all subscription payments as if they were group as initial and maintenance payments, was $1.54 billion for most recent quarter, while the license portion of that total contract value was $1.36 billion, up 13% over last year and up 4% sequentially. While the way they come up with the number is a bit fuzzy, if it’s being done consistently from period to period, the signs are good: more people are buying more licenses and staying on with their subscriptions. It’s not done yet, perhaps the corner has just barely begun to be turned. But increased new revenue and subscription renewals are a good sign.