Aspen Technology(US:AZPN)2019-01-24 02:47Financial Data and Key Metrics Changes - Revenue for Q2 2019 was $140.4 million, representing a 33% increase year-over-year [27] - GAAP EPS was $0.83, while non-GAAP EPS was $0.92 [7] - Annual spend reached $513 million, up 9.4% year-over-year [7][26] - Free cash flow was $57.3 million, with $100 million returned to shareholders through share repurchases [7][32] - Total bookings increased by 80% year-over-year to $154.8 million [26] Business Line Data and Key Metrics Changes - The APM business grew 190% in the first half of the fiscal year compared to the same period last year, contributing 1.25 points to annual spend growth [11][22] - The engineering business exceeded growth expectations, with positive trends in E&C renewals and lower attrition rates [12][13] - The MSC business is expected to achieve double-digit growth in 2019 [14] Market Data and Key Metrics Changes - APM transactions were closed in eight different countries across various industries, indicating broad market strength [10] - North American E&C customers showed positive growth for two consecutive quarters, reflecting increased investment in engineering modeling and simulation capabilities [13] - The overall macro environment remains positive for technology spending, particularly in capital-intensive industries [19] Company Strategy and Development Direction - The company is focused on expanding its APM suite, which is seen as a significant growth opportunity due to its cost-saving benefits for customers [11][12] - The strategy includes increasing share repurchase programs to capitalize on favorable market conditions [7] - The company aims to leverage its strong balance sheet to support growth investments and enhance shareholder value [7][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business outlook, increasing annual spend growth forecasts to 8.5% to 9.5% [22][34] - The company noted that fluctuations in oil prices have not significantly impacted its business performance [19] - Management highlighted a positive sentiment among customers regarding budget and spending, with expectations for flat to low-to-mid-single-digit increases in CapEx [58] Other Important Information - The company repurchased approximately 1.2 million shares for $100 million during the quarter [7][32] - The transition to Topic 606 has impacted revenue recognition, making annual spend a more reliable metric for assessing business growth [24][25] Q&A Session Summary Question: Insights on APM opportunities and pipeline - Management noted that the APM pipeline has grown, with significant interest in mining and pharmaceuticals [40] Question: Factors affecting license revenue - Management clarified that the number of renewals in Q2 significantly contributed to revenue performance [42] Question: Initiatives to improve pilot capacity - Steps are being taken to centralize data analysis and improve pilot execution capabilities [44] Question: Clarification on license revenue as a percent of bookings - Management explained that various factors, including performance obligations and interest income, affect the recognition of license revenue [46] Question: Update on Emerson relationship and pipeline - The relationship with Emerson is progressing well, particularly in the engineering suite [52] Question: Demand pickup in E&C - Management observed improved demand from E&C customers, with less attrition and increased entitlements [54] Question: CapEx forecasts and customer sentiment - Management indicated that customer sentiment remains stable, with expectations for flat to modest increases in CapEx [58] Question: Breakdown of annual spend growth and churn - Management provided guidance on attrition rates and indicated strong gross growth [80]