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Why Aspen Technology Stock Was Falling Today

By Jeremy Bowman - Jan 30, 2020 at 4:27PM

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The industrial technology stock slipped on weaker-than-expected earnings.

What happened

Shares of Aspen Technology (AZPN) were sliding today after the industrial asset optimization specialist posted disappointing results in its second-quarter earnings report. As a result, the stock was down 13.9% as of 3:22 p.m. EST.

So what

Aspen came up short on both top and bottom lines as revenue fell 11% to $124.7 million, missing expectations at $136.1 million. Licensing revenue, its biggest business segment, fell 24.8% to $70.2 million, reflecting a 27% decrease in bookings to $112.3 million as the company had fewer term license contracts up for renewal compared with the year-ago quarter.

A digital of hard-hat worker with computer icons in his head

Image source: Getty Images.

On the bottom line, adjusted earnings per share fell from $0.92 to $0.66, missing estimates at $0.80, as the drop in revenue flowed through the income.

CEO Antonio Pietri said on the earnings call that the timing of contract renewals is not an indicator of the health or growth of the business, and that investors should focus on annual spend and annual cash flow. Annual spend, which is the annualized value of all term license and maintenance contracts, rose 10% in the quarter to $564 million, and the company expects full-year free cash flow of $260 million to $270 million, about 10% to 14% above last year's figure. 

He also added: "AspenTech delivered solid second quarter results highlighted by continued double-digit annual spend growth. While the macro environment in capital intensive industries was uncertain, spending remained favorable as customers recognized that investments in digitalization can drive meaningful improvements in the operating efficiency and financial performance of their business."

Now what

For its full-year guidance, the company called for annual spend growth of 10% to 12%, total revenue of $575 million to $615 million and adjusted earnings per share of $3.43 to $3.84. Both of the midpoints in revenue and EPS were down from 2019 results and below the analyst consensus at $602.4 million in revenue and $3.79 earnings.

Though Aspen is growing based on its own key metrics, that doesn't seem like enough to please the market as the technology company is still valued like a growth stock, and carries high expectations with that.


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