Aspen Technology(AZPN) - 2023 Q4 - Annual Report

Part I Business The company provides industrial software to optimize asset lifecycles and address sustainability challenges - The company's core mission is to help asset-intensive industries address the "Dual Challenge" of meeting resource demand while operating sustainably[10] - Following the Emerson transaction, the portfolio expanded to five product suites: Performance Engineering (ENG), Manufacturing and Supply Chain (MSC), Asset Performance Management (APM), Digital Grid Management (DGM), and Subsurface Science & Engineering (SSE)[12] - The business model relies on recurring revenue from term software contracts and a flexible tokenization usage model[47][48][49] - As of June 30, 2023, the company had approximately 3,900 employees, with 1,875 located in the United States[92][98] - The company's intellectual property is protected by 394 issued patents and pending applications worldwide as of June 30, 2023[99][100] Risk Factors The company faces significant risks from its Emerson transaction, operational challenges, and cybersecurity threats - Emerson's control (~55% ownership) presents risks, as its interests may differ from other stockholders[130][131][132] - The integration of Heritage AspenTech with Emerson's OSI and SSE businesses presents significant challenges, including risks of not achieving synergies and diverting management attention[119][120][121] - Ongoing operations in Russia expose the company to geopolitical risks, with $44.6 million in net sales related to Russia in fiscal 2023[147][150] - Cybersecurity breaches pose a material risk to the company's R&D, customer data, and operations[185][189][191] - The market for asset optimization software is highly competitive, with rivals including software companies and large industrial automation firms[108][171] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[204] Properties The company leases all its properties, with its principal executive offices in Bedford, Massachusetts - The company's principal executive offices are in a leased facility in Bedford, Massachusetts, with the lease expiring in March 2025[204] - The company does not own any real property and believes its leased facilities are adequate for its future needs[205] Legal Proceedings The company reports no material legal proceedings - None[205] Mine Safety Disclosures This item is not applicable to the company - Not applicable[205] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's stock trades on Nasdaq, with no dividends paid and active share repurchase programs in place - The company's common stock trades on The Nasdaq Global Select Market under the symbol "AZPN"[208] - The company has never declared or paid cash dividends and does not foresee paying them in the future, with payments also restricted by credit agreements[210][211] - On August 1, 2023, the Board approved a new share repurchase authorization for up to $300.0 million of its common stock[215] Q4 2023 Share Repurchases | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1-30, 2023 | — | — | | May 1-31, 2023 | 487,626 | $172.57 | | June 1-30, 2023 | — | — | | Total | 487,626 | $172.57 | Management's Discussion and Analysis of Financial Condition and Results of Operations Financial results were significantly impacted by the Emerson transaction, driving revenue growth but also a net loss due to amortization - The Emerson transaction is treated as a reverse acquisition, making historical financial results not directly comparable[221] - The increase in total revenue of $561.9 million was primarily due to the Heritage AspenTech acquisition, which contributed $760.8 million of revenue[270] - The operating loss of $183.1 million was primarily driven by high operating expenses, including $485.5 million in amortization of intangible assets[264][280] - The company ended fiscal 2023 with $241.2 million in cash and cash equivalents after paying off its $264.0 million term loan facility[289][293] Key Financial Results (Twelve Months Ended June 30) | Metric | 2023 | 2022 (unaudited) | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $1,044.2 M | $482.3 M | 116.5% | | Gross Profit | $670.6 M | $282.4 M | 137.5% | | (Loss) from Operations | $(183.1) M | $22.3 M | (922.0)% | | Net (Loss) Income | $(107.8) M | $41.9 M | (356.9)% | Key Business Metrics | Metric | As of/For the Year Ended June 30, 2023 | | :--- | :--- | | Annual Contract Value (ACV) | $884.9 million (up 11.8% pro forma) | | Total Contract Value (TCV) | $3.6 billion | | Bookings | $1.078 billion | | Free Cash Flow (non-GAAP) | $292.3 million | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are foreign currency exchange rates and interest rates - Approximately 9% of total revenue in fiscal 2023 was denominated in a currency other than the U.S. dollar[327] - A hypothetical 10% change in foreign currency exchange rates could have impacted consolidated results of operations by approximately $14.3 million for fiscal 2023[328] - The company's exposure to interest rate risk is considered minimal, with a 100 basis point change not expected to materially impact its investments[329] Financial Statements and Supplementary Data This section references the company's consolidated financial statements and the independent auditor's report - This item references the location of the company's audited financial statements and the auditor's report within the Form 10-K[332] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no disagreements with its accountants on accounting and financial disclosure - None[333] Controls and Procedures Management concluded that the company's disclosure controls and internal controls over financial reporting were effective - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[333] - Based on the COSO framework, management concluded that internal control over financial reporting was effective as of June 30, 2023[336] - There were no material changes in internal control over financial reporting during the fourth fiscal quarter[337] Part III Directors, Executive Officers, Corporate Governance, Compensation, and Other Matters Required disclosures on governance and compensation are incorporated by reference from the forthcoming proxy statement - Information regarding Directors, Executive Officers, Executive Compensation, and other governance matters is incorporated by reference from the company's definitive proxy statement[340][342][343][344][345] Part IV Exhibits and Financial Statement Schedules This section contains the audited financial statements and the independent auditor's report from KPMG LLP - This part includes the company's audited Consolidated and Combined Financial Statements and related notes[348] - The independent auditor, KPMG LLP, issued an unqualified opinion on the financial statements and the effectiveness of internal control over financial reporting[353] - A critical audit matter was the audit evidence over term software license and maintenance revenue related to the Heritage AspenTech business[360][361] Form 10-K Summary This item is not applicable - None[553]