Yahoo Finance Aspen Technology (AZPN) Up 6.5% 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 6.5% 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 its most recent earnings report in order to get a better handle on the important drivers.
Aspen Q3 Earnings Surpass Estimates
Aspen reported third-quarter fiscal 2024 non-GAAP earnings of $1.70 per share, beating the Zacks Consensus Estimate of $1.32. AZPN reported non-GAAP earnings of $1.06 per share in the year-ago quarter.
The company reported revenues of $278.1 million, surpassing the Zacks Consensus Estimate by 10.5%. The company had reported revenues of $230 million in the year-ago quarter.
Quarter in Detail
License’s revenues (61% of revenues) were up 24.3% year over year to $169.5 million.
Maintenance’s revenues (31% of revenues) rose 11.6% year over year to $86.3 million.
Revenues from Services and other (8% of revenues) rose 37.3% from the year-ago quarter’s figure to $22.4 million.
As of Mar 31, 2024, Annual contract value or "ACV" ( which Aspen Technology defines as the estimate of the annual value of our portfolio of term license and software maintenance and support, or SMS, contracts, the annual value of SMS agreements purchased with perpetual licenses and the annual value of standalone SMS agreements purchased with certain legacy term license agreements, which have become an immaterial part of its business) amounted to $936.1 million, up 9.5% year over year and 2.4% quarter over quarter.
Margins
Gross profit increased to $185.2 million from the year-ago quarter’s figure of $136.1 million. As a percentage of total revenues, the figure reached 66.6% from 59.2% reported in the prior-year quarter.
Total operating expenses amounted to $204.5 million compared with the year-ago quarter’s figure of $214.6 million due to a reduction in research and development costs and general and administrative expenses.
Non-GAAP operating income totaled $116.3 million compared with $66.8 million reported in the prior-year quarter.
Balance Sheet & Cash Flow
As of Mar 31, 2024, cash and cash equivalents were $177.6 million compared with $241.2 million as of Jun 30, 2023. The downtick was caused due to the impact of share repurchase activity under AZPN’s $300 million share buyback authorization in the course of fiscal 2024.
The company generated $138.1 million in cash from operations compared with $131 million reported in the previous quarter. Non-GAAP free cash flow was $137 million in the fiscal third quarter compared with $129.3 million in the prior-year quarter.
Aspen repurchased 288,241 shares for $56.7 million in the fiscal third quarter. As of Mar 31, 2024, a total of 1,243,080 shares worth $243.1 million had been repurchased under the share buyback authorization of $300 million announced in August 2023. The company has shares worth $56.9 million left under its buyback authorization.
Fiscal 2024 Guidance
The updated guidance for fiscal 2024 highlights the impact of cautious customer spending behaviour. However, the company expects its global business pipeline to cushion the overall performance in 2024.
For fiscal 2024, Aspen expects revenues to be at least $1.10 billion, slightly down from the previous guidance of $1.12 billion.
Non-GAAP net income is now anticipated to be at least $6.29 per share compared with earlier guidance of $6.59 per share.
Management projects ACV growth to be at least 9% from a year ago and total bookings to be at least $1.03 billion. Earlier, it predicted ACV growth to be at least 11.5% from a year ago and total bookings to be at least $1.04 billion.
Non-GAAP operating income is now estimated to be at least $425 million, down from the earlier outlook of $445 million. Non-GAAP total expenses are expected to be nearly $675 million, unchanged from the prior outlook.
Free cash flow is projected to be at least $340 million, down from prior guidance of $360 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -28.87% due to these changes.
VGM Scores
Currently, Aspen Technology has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Aspen Technology has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Aspen Technology belongs to the Zacks Internet - Software industry. Another stock from the same industry, Model N (MODN), has gained 0.5% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.
Model N reported revenues of $65.11 million in the last reported quarter, representing a year-over-year change of +4%. EPS of $0.24 for the same period compares with $0.22 a year ago.
For the current quarter, Model N is expected to post earnings of $0.37 per share, indicating a change of +5.7% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
Model N has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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