Aspen Technology, Inc. :AZPN-US: Earnings Analysis: Q2, 2017 By the Numbers : January 30, 2017

Aspen Technology, Inc. reports financial results for the quarter ended December 31, 2016.

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

Highlights

  • Summary numbers: Revenues of USD 119.93 million, Net Earnings of USD 37.01 million.
  • Gross margins widened from 90.02% to 90.35% compared to the same period last year, operating (EBITDA) margins now 48.76% from 49.33%.
  • Year-on-year change in operating cash flow of 31.08% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings rose compared to same period last year, despite decline in operating and pretax margins.

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

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 119.93 120.05 113.68 119.22 119.15
Revenue Growth (%YOY) 0.66 -0.2 -0.44 7.11 10.54
Earnings (mil) 37.01 35 33.33 33.17 36.68
Earnings Growth (%YOY) 0.89 -4.82 8.18 17.75 20.41
Net Margin (%) 30.86 29.15 29.32 27.82 30.79
EPS 0.48 0.44 0.41 0.4 0.44
Return on Equity (%) N/A N/A N/A N/A N/A
Return on Assets (%) 53.13 39.45 31.03 37.07 54.03

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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 0.66% 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 -0.10% and earnings by 5.74% 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 growth has been influenced by the year-on-year improvement in gross margins from 90.02% to 90.35%. However the company’s overhead costs have prevented it from fully capitalizing on these gross margin improvements. In fact, the company’s operating margins (EBITDA margins) showed no improvement over the same period last year.

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 31.08% 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

Despite a decline in operating (EBIT) margins as well as a decline in pretax margins, the company’s earnings rose.

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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