Aspen Technology Inc (NASDAQ:AZPN) Q1 2019 Earnings Conference Call Transcript

Oct 24, 2018 • 04:30 pm ET

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Aspen Technology Inc (NASDAQ:AZPN) Q1 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good afternoon, everyone. My name is Rose, and I will be your conference operator today. At this time, I would like to welcome everyone to Aspen Technology Q1 2019 Earnings Call. (Operator Instructions)

Mr. Karl Johnsen, you may begin your conference.

Executive
Karl Johnsen

Thank you. Good afternoon, everyone, and thank you for joining us to review our first quarter fiscal 2019 results for the period ended September 30, 2018. I'm Karl Johnsen, CFO of AspenTech and with me on the call today is Antonio Pietri, President and CEO.

(Forward-Looking Cautionary Statements)

Also, please note that the following information is related to our current business condition and our outlook as of today, October 24, 2018. Consistent with our prior practice, we expressly disclaim any obligation to update this information.The structure of today's call will be as follows: Antonio will discuss business highlights from the first quarter, and then I'll review our financial results and discuss our guidance for fiscal year 2019.

With that, let me turn the call over to Antonio. Antonio?

Executive
Antonio Pietri

Thanks, Karl, and thanks to everyone for joining us today. AspenTech got off to a good start in fiscal 2019 that reflects solid performance across the company and keeps us on track to achieve our financial objectives for the year. Once again, I want to thank the AspenTech team for the strong performance achieved in Q1 in what is our most challenging growth quarter in any fiscal year and our customers for their continued support.

Looking at our financial highlights for the quarter, which, as a reminder, are reported under ASC Topic 606, also referred to as Topic 606. Annual spend was $498 million, up 8.1% year-over-year. Total revenue was $114.2 million. License revenue was $63.8 million. GAAP operating income was $37 million and non-GAAP operating income was $46.9 million, which represents a non-GAAP operating margin of 41.1%. GAAP EPS was $0.53 and non-GAAP EPS was $0.64. Free cash flow was $5.4 million, and we returned $50 million to shareholders by repurchasing approximately 473,000 shares. Overall, we are pleased with our performance in the quarter, which included positive results across all our product suites and geographies. The highlight of the quarter was our engineering suite, which delivered one of its strongest quarters in approximately three years.

As we discussed last quarter, we have started to see improving trends from E&C customers. This strength continued in the first quarter and began to show signs of broadening. For example, North American E&C customers, which had remained under pressure, delivered net growth for the first time in nearly three years. The improvement in E&C customers is a result of lower attrition from renewing customers relative to recent years as well as some early examples of customers buying incremental tokens during their contract period. While the performance in E&C customers is not near its pre-fiscal 2015 levels, we are beginning to see improvement.

Another area that showed signs of improvement was Latin America, which, as we have discussed in the past, had several customers which did