Aspen Technology (AZPN) Up 15% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Aspen Technology (AZPN). Shares have added about 15% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Aspen Technology due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Aspen Technology Q2 Earnings & Revenues Miss Estimates
Aspen Technology reported second-quarter fiscal 2023 non-GAAP earnings of 35 cents per share, missing the Zacks Consensus Estimate of $1.27. The company reported non-GAAP earnings of 46 cents per share in the year-ago quarter.
The company reported revenues of $242.8 million compared with $81.8 million reported in the year-ago quarter. The top-line performance was driven by the acquisition of Emerson’s business units as well as strong end-market demand. However, revenues missed the Zacks Consensus Estimate by 10.7%.
Quarter in Detail
License’s revenues (61.7% of revenues) were up 209% year over year to $149.8 million.
Maintenance’s revenues (32.3% of revenues) rose 199% year over year to $78.6 million.
Revenues from Services and other (6% of revenues) rose 105% from the year-ago quarter’s figure to $14.4 million.
As of Dec 31, 2022, the annual spend (which Aspen Technology defines as the annualized value of all term license and maintenance contracts at the end of the quarter other than OSI and SSE) amounted to $697.5 million, up 9% year over year and 2.2% quarter over quarter.
Margins
Gross profit increased to $149.7 million from the year-ago quarter’s figure of $40.2 million. As a percentage of total revenues, the figure reached 61.7% from 49.2% reported in the prior-year quarter.
Total operating expenses amounted to $209.1 million from the year-ago quarter’s figure of $40.5 million due to higher selling, marketing, and research and development costs.
Non-GAAP operating income totaled $86.6 million compared with $22.4 million reported in the prior-year quarter.
Balance Sheet & Cash Flow
As of Dec 31, 2022, cash and cash equivalents were $446.1 million compared with $382.5 million as of Sep 30, 2022. The company’s total borrowings were $264 million as of Dec 31, 2022.
The company generated $49.5 million in cash from operations compared with $5.1 million reported in the previous quarter. Non-GAAP free cash flow was $53.1 million in the fiscal second quarter.
Fiscal 2023 View
For fiscal 2023, Aspen expects revenues in the range of $1.14-$1.20 billion.
Non-GAAP net income is now anticipated to be $6.83-$7.43 per share compared with earlier guided range of $6.76-$6.91 per share.
Management projects Annual Contract Value growth of 10.5-13.5% year over year.
Total bookings are projected in the range of $1.07-$1.17 billion.
Management projects non-GAAP operating income in the range of $503-$555 million. Non-GAAP total expenses are projected to be between $637 million and $647 million.
The free cash flow is projected in the range of $347-$362 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 18.44% due to these changes.
VGM Scores
Currently, Aspen Technology has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Aspen Technology has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Aspen Technology, Inc. (AZPN) : Free Stock Analysis Report
