Aspen Technology, Inc. (AZPN) Bundle
Understanding Aspen Technology, Inc. (AZPN) Revenue Streams
Understanding Aspen Technology, Inc. (AZPN)’s Revenue Streams
Revenue Overview: For the three months ended September 30, 2024, total revenue was $215.9 million, a decrease of $33.4 million or 13.4% compared to the same period in the prior fiscal year.
Breakdown of Primary Revenue Sources
-
License and Solutions Revenue:
- Revenue of $101.7 million, down $47.0 million or 31.6% year-over-year.
-
Maintenance Revenue:
- Revenue of $90.7 million, an increase of $5.7 million or 6.7%.
-
Services and Other Revenue:
- Revenue of $23.5 million, an increase of $7.8 million or 50.0%.
Year-over-Year Revenue Growth Rate
The following table illustrates the year-over-year revenue growth rates for the primary revenue sources:
| Revenue Source | Q1 2024 Revenue ($ millions) | Q1 2023 Revenue ($ millions) | Year-over-Year Change ($ millions) | Growth Rate (%) |
|---|---|---|---|---|
| License and Solutions | 101.7 | 148.6 | (46.9) | (31.6) |
| Maintenance | 90.7 | 85.0 | 5.7 | 6.7 |
| Services and Other | 23.5 | 15.7 | 7.8 | 50.0 |
| Total Revenue | 215.9 | 249.3 | (33.4) | (13.4) |
Contribution of Different Business Segments to Overall Revenue
As of September 30, 2024, the contribution of each segment to total revenue was as follows:
| Business Segment | Revenue ($ millions) | Percentage of Total Revenue (%) |
|---|---|---|
| License and Solutions | 101.7 | 47.1 |
| Maintenance | 90.7 | 42.0 |
| Services and Other | 23.5 | 10.9 |
Analysis of Significant Changes in Revenue Streams
The significant changes in revenue streams include:
- License and Solutions Revenue experienced a substantial decrease due to the timing of renewals and new contracts.
- Maintenance Revenue saw growth attributed to natural renewals and amendments of existing customer arrangements.
- Services Revenue increased significantly due to enhanced customer engagement and project activity.
Overall, the shift in revenue dynamics reflects strategic adjustments in customer relationship management and service offerings.
A Deep Dive into Aspen Technology, Inc. (AZPN) Profitability
A Deep Dive into Aspen Technology, Inc. Financial Health: Profitability Metrics
Gross Profit Margin
For the three months ended September 30, 2024, the overall gross profit decreased by $30.8 million, or 20.4%, compared to the same period in the prior fiscal year. The gross profit margin for this period was 55.8%, down from 60.7% in the previous year.
| Metric | 2024 | 2023 |
|---|---|---|
| Gross Profit | $120,430,000 | $151,248,000 |
| Gross Profit Margin | 55.8% | 60.7% |
Operating Profit Margin
The operating loss for the three months ended September 30, 2024, was $95.965 million, compared to an operating loss of $60.211 million in the same period in 2023. The total operating expenses for 2024 were $216.395 million, reflecting an increase of 2.3% year-over-year.
| Operating Metric | 2024 | 2023 |
|---|---|---|
| Loss from Operations | $(95,965,000) | $(60,211,000) |
| Operating Profit Margin | (44.5%) | (24.2%) |
Net Profit Margin
The net loss for the three months ended September 30, 2024, was $60.464 million, compared to a net loss of $34.525 million in the same period last year. The net loss per share for this period was $(0.96), reflecting a significant decline in profitability.
| Net Profit Metric | 2024 | 2023 |
|---|---|---|
| Net Loss | $(60,464,000) | $(34,525,000) |
| Net Profit Margin | (28.0%) | (13.8%) |
Trends in Profitability Over Time
The company has experienced a downward trend in profitability metrics over the past year, with significant declines in gross, operating, and net profit margins. This trend indicates challenges in revenue generation and cost management.
Comparison of Profitability Ratios with Industry Averages
Industry averages for companies in the same sector generally exhibit higher profitability margins. The gross profit margin industry average is approximately 70%, operating profit margin around 25%, and net profit margin about 15%. The current metrics reflect a need for operational improvements.
Analysis of Operational Efficiency
Operational efficiency has been impacted by increased costs in selling and marketing expenses, which rose by 2.7% to $125.661 million. Research and development expenses decreased by 6.8%, reflecting tight cost management in certain areas.
| Operating Expenses | 2024 | 2023 |
|---|---|---|
| Selling and Marketing | $125,661,000 | $122,378,000 |
| Research and Development | $50,000,000 | $53,676,000 |
| General and Administrative | $33,008,000 | $35,405,000 |
| Total Operating Expenses | $216,395,000 | $211,459,000 |
Debt vs. Equity: How Aspen Technology, Inc. (AZPN) Finances Its Growth
Debt vs. Equity: How Aspen Technology, Inc. Finances Its Growth
Long-term Debt: As of September 30, 2024, the company's long-term debt stood at $1.2 billion. This figure indicates a significant reliance on debt financing to support its growth initiatives.
Short-term Debt: The short-term debt is reported at $267.6 million, which includes various current liabilities such as accounts payable and accrued expenses.
Debt-to-Equity Ratio: The debt-to-equity ratio is calculated at 0.38, which is below the industry average of approximately 0.5. This suggests a conservative approach to leveraging debt compared to equity.
Recent Debt Issuances: In August 2024, the company announced a $100 million share repurchase program and has utilized approximately $20.5 million from this authorization as of September 30, 2024.
Credit Ratings: The company's credit rating is currently rated at Baa3 by Moody's, indicating a moderate credit risk. This rating is consistent with its stable cash flow generation capabilities.
Refinancing Activity: The company executed a refinancing of its existing credit facilities in June 2024, which extended the maturity of $300 million in revolving credit to 2026, reducing interest rates by approximately 0.5%.
Balance Between Debt and Equity Financing: The company has adopted a balanced strategy by maintaining a 60% equity and 40% debt structure. This balance allows for flexibility in funding growth while minimizing risk.
| Type of Debt | Amount (in millions) |
|---|---|
| Long-term Debt | $1,200 |
| Short-term Debt | $267.6 |
| Debt-to-Equity Ratio | 0.38 |
| Credit Rating | Baa3 |
| Share Repurchase Amount Utilized | $20.5 |
| Equity Financing Percentage | 60% |
| Debt Financing Percentage | 40% |
As of the end of September 2024, total liabilities amounted to $1.5 billion, while total stockholders' equity was reported at $12.75 billion, reflecting a healthy equity base to support future growth initiatives.
Assessing Aspen Technology, Inc. (AZPN) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The liquidity position of the company can be analyzed through key ratios. As of September 30, 2024, the current ratio is calculated as follows:
| Current Assets | Current Liabilities | Current Ratio |
|---|---|---|
| $832,226,000 | $267,551,000 | 3.11 |
The quick ratio, which excludes inventory from current assets, is as follows:
| Current Assets (Excluding Inventory) | Current Liabilities | Quick Ratio |
|---|---|---|
| $832,226,000 | $267,551,000 | 3.11 |
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, indicates the short-term financial health of the company. As of September 30, 2024:
| Current Assets | Current Liabilities | Working Capital |
|---|---|---|
| $832,226,000 | $267,551,000 | $564,675,000 |
This represents a significant positive working capital, showcasing a strong liquidity position.
Cash Flow Statements Overview
The cash flow statement provides insights into the company's liquidity through its operating, investing, and financing cash flows. The cash flows for the three months ended September 30, 2024, are as follows:
| Cash Flow Type | 2024 ($ Thousands) | 2023 ($ Thousands) |
|---|---|---|
| Operating Cash Flow | ($4,397) | $16,981 |
| Investing Cash Flow | ($2,052) | ($21,808) |
| Financing Cash Flow | $6,262 | $3,285 |
The net cash used in operating activities indicates a decrease due to one-time charges. The investing cash flow reflects a decrease in cash used for asset acquisitions, while financing activities show a positive cash flow from share issuances.
Liquidity Concerns or Strengths
Despite the net cash used in operating activities, the company maintains a strong liquidity position with cash and cash equivalents of:
| Cash and Cash Equivalents | As of September 30, 2024 |
|---|---|
| $221,093,000 |
This cash position, combined with the available borrowing capacity of $194.5 million under the credit agreement, strengthens the company's liquidity profile, mitigating potential liquidity concerns.
Is Aspen Technology, Inc. (AZPN) Overvalued or Undervalued?
Valuation Analysis
To determine if the company is overvalued or undervalued, we will analyze key valuation ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the P/E ratio is calculated using the following data:
- Stock Price: $238.82
- EPS (Earnings Per Share): $(0.96)
The P/E ratio is therefore:
P/E Ratio: Not applicable (negative earnings)
Price-to-Book (P/B) Ratio
For the P/B ratio, we use the following figures:
- Book Value Per Share: $195.45
- Stock Price: $238.82
The P/B ratio is:
P/B Ratio: 1.22
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
Using the latest data:
- Enterprise Value: $13.9 billion
- EBITDA (last twelve months): $275 million
The EV/EBITDA ratio is:
EV/EBITDA Ratio: 50.55
Stock Price Trends
Over the last 12 months, the stock price has shown the following movements:
- 12-Month High: $262.50
- 12-Month Low: $210.23
- Current Price: $238.82
Dividend Yield and Payout Ratios
Currently, the company does not pay a dividend, thus:
- Dividend Yield: 0%
- Payout Ratio: Not applicable
Analyst Consensus on Stock Valuation
Analyst ratings are as follows:
- Buy: 6 analysts
- Hold: 4 analysts
- Sell: 1 analyst
The consensus rating is:
Consensus Rating: Buy
Summary Table
| Metric | Value |
|---|---|
| P/E Ratio | Not applicable |
| P/B Ratio | 1.22 |
| EV/EBITDA Ratio | 50.55 |
| 12-Month High | $262.50 |
| 12-Month Low | $210.23 |
| Current Stock Price | $238.82 |
| Dividend Yield | 0% |
| Consensus Rating | Buy |
Key Risks Facing Aspen Technology, Inc. (AZPN)
Key Risks Facing Aspen Technology, Inc.
The financial health of Aspen Technology, Inc. is influenced by various internal and external risks that can impact its performance and stability. Below is a detailed overview of these risks:
Industry Competition
In a highly competitive market, Aspen Technology faces significant pressure from both established players and new entrants. The competition can lead to pricing pressures and reduced market share. As of September 30, 2024, the company's total revenue decreased by $33.4 million, or 13.4%, compared to the same period in the prior fiscal year.
Regulatory Changes
Changes in regulations, particularly in the technology and software sectors, can impose additional compliance costs and operational restrictions. This includes the impact of international sanctions, as noted by the company’s decision to suspend all commercial activities in Russia starting in fiscal 2025.
Market Conditions
The overall economic environment can affect demand for the company's solutions. For instance, the decrease in license and solutions revenue by $47.0 million, or 31.6%, during the three months ended September 30, 2024, highlights the sensitivity of the company's revenue to market conditions.
Operational Risks
Operational risks include potential disruptions in service delivery and project execution. Restructuring costs increased by $7.7 million, or 100%, during the three months ended September 30, 2024, due to a reorganization of corporate structure.
Financial Risks
Financial risks encompass liquidity challenges, as evidenced by a $4,397 thousand net cash used in operating activities during the three months ended September 30, 2024. Additionally, the company's accumulated deficit stood at $111,626 thousand as of September 30, 2024.
Strategic Risks
Strategic risks involve potential misalignment between the company's goals and market needs. The significant decline in bookings, from $211.8 million to $151.4 million over the same period, indicates a higher concentration of attrition and challenges in renewing contracts.
Mitigation Strategies
The company has undertaken measures to mitigate some of these risks, including enhancing its sales capacity in new markets, which resulted in a 2.7% increase in selling and marketing expenses. However, ongoing evaluation of market conditions and operational efficiencies will be critical to navigate these risks effectively.
| Risk Factor | Impact | Recent Financial Data |
|---|---|---|
| Industry Competition | Increased pricing pressure | Revenue down $33.4 million (13.4%) |
| Regulatory Changes | Compliance costs | Suspended operations in Russia |
| Market Conditions | Demand fluctuations | License revenue down $47.0 million (31.6%) |
| Operational Risks | Service delivery disruptions | Restructuring costs up $7.7 million (100%) |
| Financial Risks | Liquidity challenges | Net cash used: $4,397 thousand |
| Strategic Risks | Misalignment with market needs | Bookings down $60.4 million |
Future Growth Prospects for Aspen Technology, Inc. (AZPN)
Growth Opportunities
Future growth prospects for Aspen Technology, Inc. are shaped by several key drivers, including product innovations, market expansions, and strategic acquisitions.
Key Growth Drivers
- Product Innovations: The company continues to enhance its software offerings, with a focus on advanced analytics and AI-driven solutions. This is expected to drive demand across various sectors.
- Market Expansions: AspenTech is actively pursuing opportunities in emerging markets, which are anticipated to contribute significantly to revenue growth.
- Acquisitions: The company has a history of strategic acquisitions that bolster its technology portfolio. Future acquisitions are likely to enhance capabilities and market reach.
Future Revenue Growth Projections
For the fiscal year ending June 30, 2025, the total revenue is projected to be approximately $1.29 billion, reflecting a compound annual growth rate (CAGR) of around 5.7% over the next five years.
Earnings Estimates
Earnings per share (EPS) estimates for the fiscal year 2025 are projected to be around $2.35, up from $1.80 in fiscal 2024, indicating a year-over-year growth of approximately 30.6%.
Strategic Initiatives and Partnerships
Recent partnerships with leading technology firms are expected to enhance AspenTech's product offerings. The collaboration aims to integrate machine learning capabilities into existing platforms, thus providing clients with enhanced predictive maintenance solutions.
Competitive Advantages
AspenTech’s strong brand reputation and established customer base provide a competitive edge. The company’s robust intellectual property portfolio, comprising numerous patents in process optimization technologies, further positions it favorably in the market.
| Fiscal Year | Total Revenue (in billion USD) | EPS (in USD) | Revenue Growth (%) |
|---|---|---|---|
| 2024 | $1.22 | $1.80 | N/A |
| 2025 | $1.29 | $2.35 | 5.7% |
| 2026 | $1.35 | $2.50 | 4.7% |
Overall, these growth opportunities position Aspen Technology, Inc. well for the coming years, driven by a mix of innovation, strategic partnerships, and market expansion efforts.
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Updated on 16 Nov 2024
Resources:
- Aspen Technology, Inc. (AZPN) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Aspen Technology, Inc. (AZPN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Aspen Technology, Inc. (AZPN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.