Aspen Technology, Inc. reports 8.3% Net Income decline in 2018 and 1.9 pp EBITDA Margin decline from 45.2% to 43.3%
08/08/2018 • About Aspen Technology, Inc. (
$AZPN) • By InTwits
Aspen Technology, Inc. reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- Aspen Technology, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.9%.
- In the last 5 years the company invested considerably less than D&A: $20m vs. $30m. In FY2018 this situation was still the same: CAPEX was 1 while D&A was 7
- The company has highly profitable business model: ROIC is 58.1%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.3x while industry average is -2.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 3.4%. Revenue growth showed slowdown in FY18Q4 - it was 1.8% YoY. Revenue decline was accelerating on average at -5.5 pp per annum in FY2014-FY2018. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased slightly on 1.9 pp from 45.2% to 43.3% in FY2018. During FY2014-FY2018 EBITDA Margin topped in FY2016 at 46.0% and was declining since that time.
Gross Margin showed almost no change in FY2018. During FY2014-FY2018 Gross Margin topped in FY2017 at 90.2%. SG&A as a % of Revenue increased slightly on 1.7 pp from 29.8% to 31.5% in FY2018. During FY2014-FY2018 SG&A as a % of Revenue bottomed in FY2017 at 29.8%. Stock Based Compensation (SBC) as a % of Revenue increased slightly on 0.65 pp from 3.9% to 4.5% in FY2018. During FY2014-FY2018 SBC as a % of Revenue bottomed in FY2015 at 3.3% and was growing since that time.
Net Income margin decreased on 3.8 pp from 33.6% to 29.8% in FY2018. During FY2014-FY2018 Net Income margin topped in FY2017 at 33.6%. The efficient tax rate was 26.9% in FY2018 while the average for the last five years was 29.7%.
Investments (CAPEX, working capital and M&A)
In FY2018 the company had CAPEX/Revenue of 0.13%. Aspen Technology, Inc. showed small CAPEX/Revenue decline of 1.7 pp from 1.8% in FY2015 to 0.13% in FY2018. Average CAPEX/Revenue for the last three years was 0.52%. During FY2014-FY2018 CAPEX as a % of Revenue topped in FY2015 at 1.8% and was declining since that time.
Accounts receivable as a % of Revenue increased on 2.6 pp from 5.7% to 8.4% in FY2018. Accounts payable as a % of Revenue decreased on 3.2 pp from 11.5% to 8.4% in FY2018.
Aspen Technology, Inc. has spent
$34m on M&A in FY2018 which accounts for 6.7% of revenue.
Leverage (Debt)
Company's Net Debt / EBITDA is 0.3x and Debt / EBITDA is 0.8x. Net Debt / EBITDA jumped on 0.2x from 0.2x to 0.3x in FY2018. Debt jumped on 21.4% while cash decreased on 5.7%. Net Debt/EBITDA followed a growing trend at 0.5x per annum in FY2014-FY2018.
Aspen Technology, Inc. has good short term financial stability: Interest coverage ratio (ICR) is 36.8x. Aspen Technology, Inc. has short term refinancing risk: cash is only 56.6% of short term debt.
Average interest expence paid by the company was 3.3% in FY2018.
Valuation and dividends
The company's trades at EV/EBITDA 35.7x and P/E 51.4x.
Management team
Aspen Technology, Inc.'s CEO Antonio J Pietri is a founder and has spent 5 years with the company. CEO total compensation was
$6,325,453 in FY2018 which included
$600,000 salary. The company's CFO is Karl E Johnsen. Karl E Johnsen has 3 years tenure at the company.
At the end of financial year the company had 0.57% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 1,466 employees. The number of employees increased on 3.3%. Average revenue per employee in FY2018 was
$340,733 and it showed almost no change in 2018.
Financial and operational results
FY ended 06/30/2018
Aspen Technology, Inc. ($AZPN) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 391.5 | 440.4 | 472.3 | 482.9 | 499.5 | 3.4% |
| Gross Profit | 338.8 | 390.8 | 423.7 | 435.5 | 448.9 | 3.1% |
| SG&A | 140.6 | 141.4 | 145.2 | 143.9 | 157.2 | 9.2% |
| EBITDA | 134.9 | 186.0 | 217.4 | 218.4 | 216.2 | -1.0% |
| EBIT | 129.7 | 179.8 | 211.4 | 212.0 | 209.6 | -1.1% |
| Interest expence | 0.0 | 0.0 | 1.2 | 3.8 | 5.7 | 50.3% |
| Tax | 42.8 | 61.1 | 70.7 | 48.2 | 54.7 | 13.5% |
| Net Income | 85.8 | 118.4 | 140.0 | 162.2 | 148.7 | -8.3% |
| Stock Based Compensation | 14.1 | 14.6 | 15.7 | 18.8 | 22.7 | 20.7% |
Balance Sheet
|
|---|
| Cash | 199.5 | 156.2 | 318.3 | 102.0 | 96.2 | -5.7% |
| Accounts Receivable | 38.5 | 30.7 | 20.5 | 27.7 | 41.8 | 51.1% |
| Accounts Payable | 0.4 | 5.2 | 3.6 | 5.5 | 4.2 | -22.6% |
| Short Term Debt | 0.0 | 0.0 | 140.0 | 140.0 | 170.0 | 21.4% |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
Cash flow
|
|---|
| Capex | 4.7 | 8.0 | 3.8 | 3.1 | 0.7 | -78.9% |
| Acquisitions | | | 8.0 | 36.2 | 33.7 | -6.8% |
Ratios
|
|---|
| Revenue growth | 25.7% | 12.5% | 7.3% | 2.2% | 3.4% | |
| EBITDA growth | 121.8% | 37.8% | 16.9% | 0.5% | -1.0% | |
|
|---|
| Gross Margin | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% | -0.3% |
| EBITDA Margin | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% | -1.9% |
| EBIT Margin | 33.1% | 40.8% | 44.8% | 43.9% | 42.0% | -1.9% |
| SG&A, % of revenue | 35.9% | 32.1% | 30.7% | 29.8% | 31.5% | 1.7% |
| SBC, % of revenue | 3.6% | 3.3% | 3.3% | 3.9% | 4.5% | 0.6% |
| Net Income Margin | 21.9% | 26.9% | 29.6% | 33.6% | 29.8% | -3.8% |
| CAPEX, % of revenue | 1.2% | 1.8% | 0.8% | 0.6% | 0.1% | -0.5% |
|
|---|
| ROIC | 133.4% | 814.0% | 4,233.1% | | 58.1% | |
| ROE | 92.5% | | | | | |
| Net Debt/EBITDA | -1.5x | -0.8x | -0.8x | 0.2x | 0.3x | 0.2x |
| Interest expence / Average debt | | | 1.7% | 2.7% | 3.3% | 0.6% |
People
|
|---|
| Insider ownership | 0.6% | 0.6% | 0.6% | 0.6% | 0.6% | 0.0% |
| Employees | 1,344 | 1,372 | 1,396 | 1,419 | 1,466 | 3.3% |
| Revenue/Employee, th. $ | 291 | 321 | 338 | 340 | 341 | 0.1% |
Aspen Technology, Inc. ($AZPN) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 126 | 106 | 128 | 126 | | 5.4% | -12.0% | 7.1% | 1.8% |
| EBITDA | 57 | 32 | 55 | 52 | | 1.7% | -44.9% | 2.2% | 3.9% |
| Net Income | 41 | 132 | 45 | 38 | | 15.8% | 256.7% | 24.2% | -30.0% |
Balance Sheet
|
|---|
| Cash | 59 | 49 | 71 | 96 | | 21.9% | -27.3% | -15.9% | -5.7% |
| Short Term Debt | 140 | 151 | 170 | 170 | | 0.0% | 7.9% | 21.4% | 21.4% |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 89.9% | 88.5% | 90.0% | 89.6% | | -0.5% | -1.8% | 0.3% | -0.6% |
| EBITDA Margin | 45.4% | 30.0% | 43.2% | 41.6% | | -1.6% | -18.0% | -2.1% | 0.8% |
| Net Income Margin | 32.0% | 125.1% | 34.8% | 30.2% | | 2.9% | 94.3% | 4.8% | -13.8% |
Peers in Application Software
Below we provide Aspen Technology, Inc. benchmarking against other companies in Application Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (150 companies) | 27.9% | 14.0% | 14.3% | 15.7% | 15.2% |
|---|
| Aspen Technology, Inc. ($AZPN) | | 12.5% | 7.3% | 2.2% | 3.4% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Datawatch Corporation ($DWCH) | 79.0% | 79.7% | 83.6% | 88.3% | 88.2% |
| |
|---|
| Median (149 companies) | 62.8% | 61.7% | 63.8% | 64.4% | 65.3% |
|---|
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| Intelligent Systems Corporation ($INS) | -51.1% | -54.5% | -5.4% | -12.8% | 33.6% |
| |
|---|
| Median (151 companies) | -10.3% | -10.7% | -5.3% | -4.2% | -3.3% |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (152 companies) | 2.8% | 2.7% | 3.0% | 2.3% | 2.4% |
|---|
| Aspen Technology, Inc. ($AZPN) | 1.2% | 1.8% | 0.8% | 0.6% | 0.1% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| The Trade Desk, Inc. ($TTD) | | 63.3% | 42.1% | 30.0% | 32.2% |
| |
|---|
| Median (178 companies) | -14.4% | -12.2% | -9.5% | -11.0% | -9.8% |
|---|
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (69 companies) | -1.2x | -1.0x | -0.9x | -0.9x | -0.7x |
|---|
| Aspen Technology, Inc. ($AZPN) | -1.5x | -0.8x | -0.8x | 0.2x | 0.3x |
