Aspen Technology, Inc. :AZPN-US: Earnings Analysis: Q1, 2017 By the Numbers : November 4, 2016

Aspen Technology, Inc. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of Aspen Technology, Inc. – PTC Inc., Honeywell International Inc., General Electric Company and SAP SE Sponsored ADR (PTC-US, HON-US, GE-US and SAP-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 120.05 million, Net Earnings of USD 35 million.
  • Gross margins widened from 89.22% to 90.42% compared to the same period last year, operating (EBITDA) margins now 47.08% from 47.36%.
  • Year-on-year change in operating cash flow of 42.31% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2015-09-30 2015-12-31 2016-03-31 2016-06-30 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 120.3 119.15 119.22 113.68 120.05
Revenue Growth (%YOY) 12.29 10.54 7.11 -0.44 -0.2
Earnings (mil) 36.77 36.68 33.17 33.33 35
Earnings Growth (%YOY) 26.94 20.41 17.75 8.18 -4.82
Net Margin (%) 30.57 30.79 27.82 29.32 29.15
EPS 0.44 0.44 0.4 0.41 0.44
Return on Equity (%) N/A N/A N/A N/A N/A
Return on Assets (%) 50.53 54.03 37.07 31.03 39.45

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Market Share Versus Profits

Revenues History
Earnings History

AZPN-US‘s change in revenue this period compared to the same period last year of -0.20% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that AZPN-US is holding onto its market share. Also, for comparison purposes, revenues changed by 5.60% and earnings by 5.02% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings declined year-on-year largely because of the increases in operating costs. Its operating margins (EBITDA margins) went from 47.36% to 47.08%. This decline in earnings would have been worse except for the fact that the company showed improvement in gross margins, from 89.22% to 90.42%. For comparison, gross margins were 89.68% and EBITDA margins 44.44% in the immediate last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

AZPN-US‘s change in operating cash flow of 42.31% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 46.08% to 45.59% and (2) one-time items that contributed to a decrease in pretax margins from 46.89% to 45.63%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Aspen Technology, Inc. engages in the provision of process optimization software solutions designed to manage and optimize plant and process design, operational performance, and supply chain planning. The company’s aspenONE software and related services have been developed specifically for companies in the process industries, including the energy, chemicals, and engineering and construction industries. It operates through the following segments: Subscription & Software, and Services. The Subscription & Software segment engages in the licensing of process optimization software solutions and associated support services. The Services segment includes professional services and training. The company was founded by Lawrence B. Evans in 1981 and is headquartered in Bedford, MA.

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