Bedford, Mass. - August 6, 2024 - Aspen Technology, Inc. ("AspenTech" or the "Company") (NASDAQ: AZPN), a global leader in industrial software, today announced financial results for its fourth quarter and fiscal year ended June 30, 2024.

 Fiscal Year 2024 and Recent Business Highlights

• Annual Contract Value1 ("ACV") was $968.4 million at the end of fiscal 2024, increasing 9.4% year over year and 3.5% quarter over quarter. This amount does not reflect the impact of the write-off related to the suspension of commercial activities in Russia described immediately below. 
• AspenTech has suspended all commercial activities in Russia following the recent announcement of expanded sanctions in the country. In connection with this decision, the Company has written-off approximately $35.5 million in ACV1 (the “Write-Off”), effective as of the end of fiscal 2024. Please see Recent Developments below for additional commentary. ACV1 was $932.9 million as of June 30, 2024, after reflecting the impact of the Write-Off. ACV1 increased 10.0% year over year in fiscal 2024 when adjusting to exclude Russia-based ACV1 in both fiscal 2023 and fiscal 2024.
• Cash flow from operations was $339.9 million in fiscal 2024, increasing 13.6% year over year. Free cash flow2 was $335.3 million in fiscal 2024, increasing 14.7% year over year. A reconciliation of GAAP to non-GAAP results is included in the financial tables included in this press release.
• AspenTech's Board of Directors has approved a share repurchase authorization of up to $100.0 million for fiscal 2025. AspenTech completed its previously announced $300.0 million share repurchase authorization (the "Fiscal 2024 Share Repurchase Authorization") in the fourth quarter of fiscal 2024. Please see Recent Developments below for additional commentary.

Summary of Fourth Quarter Fiscal Year 2024 Financial Results

AspenTech’s total revenue was $342.9 million for the fourth quarter of fiscal 2024 and included the following:

Recent Developments                                                                                                                                                                                                                                                                                       

Russia Business Exit

In June 2024, the United States government announced new expanded sanctions that will prohibit certain commercial activities with customers in Russia. These expanded restrictions impact the sale, service, maintenance, and support (such as bug fixes and updates) of enterprise management software and design and manufacturing software in the Russian market. As a result, the Company recently suspended all commercial activities in Russia. This includes the discontinuation of the following activities: all commercial discussions with customers, initiating and/or processing renewals, providing proposals to customers or selling products or services to customers.

As a result of the sanctions and the decision to exit Russia, the Company has written-off substantially all of its remaining assets that are related to operations in Russia and recorded a reduction of $35.5 million in Russia-based ACV1. ACV1 was $932.9 million as of June 30, 2024, after including the impact of the Write-Off. The impact of the additional sanctions was treated as a modification to existing contracts with customers in Russia in accordance with ASC Topic 606, Revenue from Contracts with Customers. The aggregate impact of the contract modification resulted in the reversal of $5.5 million of revenue in the fourth quarter of fiscal 2024.

The remaining net accounts receivable balance associated with customers in Russia as of June 30, 2024, is not material. The Company also now classifies cash balances that are both held in Russia and in excess of what is estimated to be required to wind down operations in Russia in fiscal 2025 as restricted cash due to current restrictions impacting the Company’s ability to transfer funds from bank accounts located in Russia to other countries. As of June 30, 2024, the Company's restricted cash held in Russia was $11.5 million, which is included within other non-current assets on the Company's consolidated balance sheets.

Restructuring Charge

The Company implemented a workforce reduction of approximately 5% in the first quarter of fiscal 2025 as it continues to seek additional opportunities to streamline expenses and increase efficiencies. As a result, the Company expects to record restructuring expenses consisting primarily of severance expenses, one-time benefits and other contract termination costs during fiscal 2025. The Company is still assessing the full impact of these restructuring activities and currently estimates that the total restructuring expenses for fiscal 2025 for the recent workforce reductions will be between $7.0 million and $9.0 million. The Company expects the majority of these expenses to occur in the first quarter of fiscal 2025.

Share Repurchase Updates

AspenTech repurchased 277,913 shares for $56.9 million under its Fiscal 2024 Share Repurchase Authorization in the fourth quarter of fiscal 2024. As of June 30, 2024, the Company had completed its Fiscal 2024 Share Repurchase Authorization, repurchasing 1,520,993 shares in total in fiscal 2024. AspenTech's Board of Directors has approved a new share repurchase authorization, pursuant to which an aggregate amount of up to $100.0 million of its outstanding shares of common stock may be repurchased by the Company in fiscal 2025.

Credit Agreement Renewal 

On June 27, 2024 (the "Closing Date"), AspenTech entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”), with the lenders and issuing banks party thereto from time to time and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement provides for a new revolving credit facility (the “Credit Facility”) with initial commitments in an aggregate principal amount of $200.0 million, which includes a $40.0 million sub-facility for letters of credit, to replace the Company’s previous revolving credit facility. The proceeds of the Credit Facility may be used for working capital and general corporate purposes. The Credit Facility is scheduled to terminate on June 27, 2029.

On the Closing Date, in connection with the entry into the Credit Agreement as described above, the Company terminated the then-existing Amended and Restated Credit Agreement, dated as of December 23, 2019 (as amended, restated, amended and restated, supplemented or otherwise modified prior to the Closing Date) with the lenders party thereto, the initial issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent.

Fiscal Year 2025 Business Outlook

Based on information as of today, August 6, 2024, AspenTech is issuing the following guidance for fiscal 2025. Please note that the Company’s fiscal 2025 ACV1 guidance is based on an ACV1 balance of $932.9 million as of June 30, 2024, which reflects the impact of the Write-Off.

These statements are forward-looking and actual results may differ materially. Refer to the Forward-Looking Statements safe harbor below for information on the factors that could cause AspenTech’s actual results to differ materially from these forward-looking statements.

Conference Call and Webcast

Footnotes

1. AspenTech defines ACV as the estimate of the annual value of portfolio of term license and software maintenance and support ("SMS") contracts, the annual value of SMS agreements purchased with perpetual licenses and the annual value of standalone SMS agreements purchased with certain legacy term license agreements, which have become an immaterial part of the Company's business.

2. Free cash flow is a non-GAAP metric that is calculated as net cash provided by operating activities adjusted for the net impact of purchases of property, equipment and leasehold improvements and payments for capitalized computer software development costs. Effective January 1, 2023, AspenTech no longer excludes acquisition and integration planning related payments from its computation of free cash flow. Free cash flow for all prior periods presented has been revised to the current period computation.

About AspenTech

Aspen Technology, Inc. (NASDAQ: AZPN) is a global software leader helping industries at the forefront of the world’s dual challenge meet the increasing demand for resources from a rapidly growing population in a profitable and sustainable manner. AspenTech solutions address complex environments where it is critical to optimize the asset design, operation and maintenance lifecycle. Through AspenTech's unique combination of deep domain expertise and innovation, customers in asset-intensive industries can run their assets safer, greener, longer and faster to improve their operational excellence. To learn more, visit AspenTech.com.

Forward-Looking Statements

Use of Non-GAAP Financial Measures

This press release contains “non-GAAP financial measures” under the rules of the SEC. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. This non-GAAP information supplements, and is not intended to represent a measure of performance in accordance with, disclosures required by generally accepted accounting principles, or GAAP. Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. A reconciliation of GAAP to non-GAAP results is included in the financial tables included in this press release.

Management considers both GAAP and non-GAAP financial results in managing AspenTech’s business. As the result of adoption of new licensing models, management believes that a number of AspenTech’s performance indicators based on GAAP, including revenue, gross profit, operating income and net income, should be viewed in conjunction with certain non-GAAP and other business measures in assessing AspenTech’s performance, growth and financial condition. Accordingly, management utilizes a number of non-GAAP and other business metrics, including the non-GAAP metrics set forth in this press release, to track AspenTech’s business performance.