Company Quick10K Filing
Quick10K
Aspen Technology
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$116.37 69 $8,030
10-Q 2019-03-31 Quarter: 2019-03-31
10-Q 2018-12-31 Quarter: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-K 2018-06-30 Annual: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-K 2017-06-30 Annual: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-K 2016-06-30 Annual: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-K 2015-06-30 Annual: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-Q 2014-12-31 Quarter: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-K 2014-06-30 Annual: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-Q 2013-12-31 Quarter: 2013-12-31
8-K 2019-04-24 Earnings, Exhibits
8-K 2019-04-17 Officers, Exhibits
8-K 2019-01-31 Officers, Exhibits
8-K 2019-01-23 Earnings, Exhibits
8-K 2018-12-07 Shareholder Vote
8-K 2018-10-24 Earnings, Exhibits
8-K 2018-08-08 Earnings, Exhibits
8-K 2018-08-06 Officers, Exhibits
8-K 2018-07-26 Officers, Exhibits
8-K 2018-02-05 Other Events, Exhibits
CLF Cleveland-Cliffs 2,890
DENN Dennys 1,170
GSBD Goldman Sachs BDC 835
GRSH Gores Holdings III 495
HIIQ Health Insurance Innovations 295
CODX Co-Diagnostics 20
USEG US Energy 6
NUMD Nu-Med Plus 0
PNTTE Punto Group 0
LBSR Liberty Star Uranium & Metals 0
AZPN 2019-03-31
Part I - Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 6. Exhibits.
EX-31.1 azpn-20190331x10qxex311.htm
EX-31.2 azpn-20190331x10qxex312.htm
EX-32.1 azpn-20190331x10qxex321.htm

Aspen Technology Earnings 2019-03-31

AZPN 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 azpn-20190331x10q.htm 10-Q Document

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
 
ý      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
or
o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                      to                      
 
Commission file number: 001-34630
 
ASPEN TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
04-2739697
(State or other jurisdiction of incorporation or
organization)
 
(I.R.S. Employer Identification No.)
20 Crosby Drive
 
 
Bedford, Massachusetts
 
01730
(Address of principal executive offices)
 
(Zip Code)
(781) 221-6400
(Registrant’s telephone number, including area code)
 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:   Yes ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer," “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
ý
 
Accelerated filer       o
 
Non-accelerated filer  o 
 
Smaller reporting company      o
 
 
 
Emerging growth company      o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o




Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes o No ý
As of April 17, 2019, there were 68,964,073 shares of the registrant’s common stock (par value $0.10 per share) outstanding.
 
 
 
 
 



TABLE OF CONTENTS
 
 
aspenONE is one of our registered trademarks. All other trade names, trademarks and service marks appearing in this Form 10-Q are the property of their respective owners.
 
Our fiscal year ends on June 30th, and references to a specific fiscal year are to the twelve months ended June 30th of such year (for example, “fiscal 2019” refers to the year ending June 30, 2019).

3


PART I - FINANCIAL INFORMATION
 
Item 1.    Financial Statements.
 
Consolidated Financial Statements (unaudited)
 
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
Three Months Ended
March 31,
 
Nine Months Ended
March 31,
 
2019
 
2018
 
2019
 
2018
 
 
 
As Adjusted
 
 
 
As Adjusted
 
(Dollars in Thousands, Except per Share Data)
Revenue:
 

 
 

 
 

 
 

License
$
98,493

 
$
79,073

 
$
255,616

 
$
214,938

Maintenance
41,878

 
40,897

 
125,955

 
121,890

Services and other
7,613

 
7,788

 
21,005

 
22,947

Total revenue
147,984

 
127,758

 
402,576

 
359,775

Cost of revenue:
 

 
 

 
 

 
 

License
1,658

 
1,279

 
5,142

 
3,743

Maintenance
4,962

 
4,259

 
14,241

 
13,061

Services and other
7,740

 
7,238

 
22,943

 
20,793

Total cost of revenue
14,360

 
12,776

 
42,326

 
37,597

Gross profit
133,624

 
114,982

 
360,250

 
322,178

Operating expenses:
 

 
 

 
 

 
 

Selling and marketing
27,410

 
25,246

 
80,532

 
72,690

Research and development
20,520

 
21,584

 
61,893

 
60,863

General and administrative
14,863

 
14,533

 
46,246

 
49,188

Total operating expenses
62,793

 
61,363

 
188,671

 
182,741

Income from operations
70,831

 
53,619

 
171,579

 
139,437

Interest income
6,835

 
6,304

 
21,389

 
18,849

Interest (expense)
(2,350
)
 
(1,485
)
 
(6,328
)
 
(3,952
)
Other (expense), net
(34
)
 
(104
)
 
(485
)
 
(958
)
Income before income taxes
75,282

 
58,334

 
186,155

 
153,376

Provision for (benefit from) income taxes
13,695

 
13,829

 
27,286

 
(63,681
)
Net income
$
61,587

 
$
44,505

 
$
158,869

 
$
217,057

Net income per common share:
 

 
 

 
 

 
 

Basic
$
0.89

 
$
0.62

 
$
2.26

 
$
3.00

Diluted
$
0.88

 
$
0.61

 
$
2.23

 
$
2.97

Weighted average shares outstanding:
 

 
 

 
 

 
 

Basic
69,423

 
71,828

 
70,286

 
72,402

Diluted
70,160

 
72,663

 
71,142

 
73,136

 
See accompanying Notes to these unaudited consolidated financial statements.

4


ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 
Three Months Ended
March 31,
 
Nine Months Ended
March 31,
 
2019
 
2018
 
2019
 
2018
 
 
 
As Adjusted
 
 
 
As Adjusted
 
(Dollars in Thousands)
Net income
$
61,587

 
$
44,505

 
$
158,869

 
$
217,057

Other comprehensive income (loss):
 

 
 

 
 

 
 

Foreign currency translation adjustments
1,159

 
924

 
(159
)
 
2,398

Total other comprehensive income (loss)
1,159

 
924

 
(159
)
 
2,398

Comprehensive income
$
62,746

 
$
45,429

 
$
158,710

 
$
219,455

 
See accompanying Notes to these unaudited consolidated financial statements.

5


ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,
2019
 
June 30,
2018
 
 
 
As Adjusted
 
(Dollars in Thousands, Except
Share Data)
ASSETS
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
65,592

 
$
96,165

Accounts receivable, net
45,293

 
41,810

Current contract assets
314,745

 
304,378

Contract costs
24,325

 
20,500

Prepaid expenses and other current assets
11,124

 
10,509

Prepaid income taxes
1,573

 
2,601

Total current assets
462,652

 
475,963

Property, equipment and leasehold improvements, net
7,589

 
9,806

Computer software development costs, net
1,452

 
646

Goodwill
73,534

 
75,590

Intangible assets, net
31,756

 
35,310

Non-current contract assets
358,709

 
340,622

Deferred tax assets
1,696

 
11,090

Other non-current assets
1,279

 
1,297

Total assets
$
938,667

 
$
950,324

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
4,023

 
$
4,230

Accrued expenses and other current liabilities
42,746

 
39,515

Income taxes payable
35,582

 
1,698

Borrowings under credit agreement
220,000

 
170,000

Current deferred revenue
24,415

 
15,150

Total current liabilities
326,766

 
230,593

Non-current deferred revenue
19,312

 
12,354

Deferred income taxes

154,901

 
214,125

Other non-current liabilities
12,403

 
17,068

Commitments and contingencies (Note 16)

 

Series D redeemable convertible preferred stock, $0.10 par value—
Authorized— 3,636 shares as of March 31, 2019 and June 30, 2018
Issued and outstanding— none as of March 31, 2019 and June 30, 2018

 

Stockholders’ equity:
 

 
 

Common stock, $0.10 par value— Authorized—210,000,000 shares
Issued— 103,478,590 shares at March 31, 2019 and 103,130,300 shares at June 30, 2018
Outstanding— 69,108,515 shares at March 31, 2019 and 71,186,701 shares at June 30, 2018
10,348

 
10,313

Additional paid-in capital
730,830

 
715,475

Retained earnings
1,224,377

 
1,065,507

Accumulated other comprehensive income
1,229

 
1,388

Treasury stock, at cost—34,370,075 shares of common stock at March 31, 2019 and 31,943,599 shares at June 30, 2018
(1,541,499
)
 
(1,316,499
)
Total stockholders’ equity
425,285

 
476,184

Total liabilities and stockholders’ equity
$
938,667

 
$
950,324

 

6


See accompanying Notes to these unaudited consolidated financial statements.

7


ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income
 
Treasury Stock
 
Total Stockholders' Equity
 
Number of Shares
 
$0.10 Par Value
 
 
 
 
Number of Shares
 
Cost
 
 
(Dollars in Thousands, Except Share Data)
June 30, 2018, As Adjusted
103,130,300

 
$
10,313

 
$
715,475

 
$
1,065,507

 
$
1,388

 
31,943,599

 
$
(1,316,499
)
 
$
476,184

Comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 
38,066

 

 

 

 
38,066

Other comprehensive (loss)

 

 

 

 
(423
)
 
 
 
 
 
(423
)
Exercise of stock options
90,009

 
9

 
3,702

 

 

 

 
 
 
3,711

Issuance of restricted stock units
58,829

 
6

 
(3,290
)
 

 

 

 

 
(3,284
)
Repurchase of common stock

 

 

 

 

 
473,376

 
(50,000
)
 
(50,000
)
Stock-based compensation

 

 
8,865

 

 

 

 

 
8,865

September 30, 2018
103,279,138

 
$
10,328

 
$
724,752

 
$
1,103,573

 
$
965

 
32,416,975

 
$
(1,366,499
)
 
$
473,119

Comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 
59,217

 

 

 

 
59,217

Other comprehensive (loss)

 

 

 

 
(895
)
 
 
 
 
 
(895
)
Exercise of stock options
15,902

 
2

 
757

 

 

 

 
 
 
759

Issuance of restricted stock units
100,643

 
10

 
(6,351
)
 

 

 

 

 
(6,341
)
Repurchase of common stock

 

 

 

 

 
1,175,531

 
(100,000
)
 
(100,000
)
Stock-based compensation

 

 
6,335

 

 

 

 

 
6,335

December 31, 2018
103,395,683

 
$
10,340

 
$
725,493

 
$
1,162,790

 
$
70

 
33,592,506

 
$
(1,466,499
)
 
$
432,194

Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 
61,587

 

 

 

 
61,587

Other comprehensive income

 

 

 

 
1,159

 
 
 
 
 
1,159

Exercise of stock options
39,303

 
4

 
1,444

 

 

 

 
 
 
1,448

Issuance of restricted stock units
43,604

 
4

 
(2,361
)
 

 

 

 

 
(2,357
)
Repurchase of common stock

 

 

 

 

 
777,569

 
(75,000
)
 
(75,000
)
Stock-based compensation

 

 
6,254

 

 

 

 

 
6,254

March 31, 2019
103,478,590

 
$
10,348

 
$
730,830

 
$
1,224,377

 
$
1,229

 
34,370,075

 
$
(1,541,499
)
 
$
425,285




8


 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income
 
Treasury Stock
 
Total Stockholders' Equity
 
Number of Shares
 
$0.10 Par Value
 
 
 
 
Number of Shares
 
Cost
 
 
(Dollars in Thousands, Except Share Data)
June 30, 2017, As Adjusted
102,567,129

 
$
10,257

 
$
687,479

 
$
780,365

 
$
1,459

 
29,145,976

 
$
(1,116,499
)
 
$
363,061

Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 
40,521

 

 

 

 
40,521

Other comprehensive income

 

 

 

 
1,401

 
 
 
 
 
1,401

Exercise of stock options
66,567

 
6

 
2,404

 

 

 

 
 
 
2,410

Issuance of restricted stock units
58,398

 
6

 
(1,659
)
 

 

 

 

 
(1,653
)
Repurchase of common stock

 

 

 

 

 
839,159

 
(50,000
)
 
(50,000
)
Stock-based compensation

 

 
6,414

 

 

 

 

 
6,414

September 30, 2017, As Adjusted
102,692,094

 
$
10,269

 
$
694,638

 
$
820,886

 
$
2,860

 
29,985,135

 
$
(1,166,499
)
 
$
362,154

Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 
132,031

 

 

 

 
132,031

Other comprehensive income

 

 

 

 
73

 
 
 
 
 
73

Exercise of stock options
36,767

 
4

 
1,129

 

 

 

 
 
 
1,133

Issuance of restricted stock units
47,058

 
5

 
(1,794
)
 

 

 

 

 
(1,789
)
Repurchase of common stock

 

 

 

 

 
756,349

 
(50,000
)
 
(50,000
)
Stock-based compensation

 

 
5,455

 

 

 

 

 
5,455

December 31, 2017, As Adjusted
102,775,919

 
$
10,278

 
$
699,428

 
$
952,917

 
$
2,933

 
30,741,484

 
$
(1,216,499
)
 
$
449,057

Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 
44,505

 

 

 

 
44,505

Other comprehensive income

 

 

 

 
924

 
 
 
 
 
924

Exercise of stock options
112,972

 
11

 
3,815

 

 

 

 
 
 
3,826

Issuance of restricted stock units
47,714

 
5

 
(2,042
)
 

 

 

 

 
(2,037
)
Repurchase of common stock

 

 

 

 

 
649,479

 
(50,000
)
 
(50,000
)
Stock-based compensation

 

 
5,353

 

 

 

 

 
5,353

March 31, 2018, As Adjusted
102,936,605

 
$
10,294

 
$
706,554

 
$
997,422

 
$
3,857

 
31,390,963

 
$
(1,266,499
)
 
$
451,628


See accompanying Notes to these unaudited consolidated financial statements.


9


ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended
March 31,
 
2019
 
2018
 
 
 
As Adjusted
 
(Dollars in Thousands)
Cash flows from operating activities:
 

 
 

Net income
$
158,869

 
$
217,057

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation and amortization
6,063

 
4,902

Net foreign currency losses
23

 
1,086

Stock-based compensation
21,454

 
17,222

Deferred income taxes
(49,847
)
 
(123,443
)
Provision for bad debts
474

 
1,373

Other non-cash operating activities
341

 
314

Changes in assets and liabilities:
 

 
 

Accounts receivable
(4,183
)
 
1,429

Contract assets
(27,397
)
 
(7,767
)
Contract costs
(3,825
)
 
(651
)
Prepaid expenses, prepaid income taxes, and other assets
201

 
4,908

Accounts payable, accrued expenses, income taxes payable and other liabilities
32,980

 
(4,448
)
Deferred revenue
17,983

 
15,847

Net cash provided by operating activities
153,136

 
127,829

Cash flows from investing activities:
 

 
 

Purchases of property, equipment and leasehold improvements
(206
)
 
(217
)
Payments for business acquisitions, net of cash

 
(33,700
)
Payments for capitalized computer software costs
(1,094
)
 
(299
)
Net cash used in investing activities
(1,300
)
 
(34,216
)
Cash flows from financing activities:
 

 
 

Exercises of stock options
5,881

 
7,402

Repurchases of common stock
(224,182
)
 
(154,365
)
Payments of tax withholding obligations related to restricted stock
(11,916
)
 
(5,412
)
Deferred business acquisition payments
(1,700
)
 
(2,600
)
Proceeds from credit agreement
50,000

 
30,000

Payments of credit agreement issuance costs

 
(351
)
Net cash used in financing activities
(181,917
)
 
(125,326
)
Effect of exchange rate changes on cash and cash equivalents
(492
)
 
834

Decrease in cash and cash equivalents
(30,573
)
 
(30,879
)
Cash and cash equivalents, beginning of period
96,165

 
101,954

Cash and cash equivalents, end of period
$
65,592

 
$
71,075

Supplemental disclosure of cash flow information:
 

 
 

Income taxes paid, net
$
39,123

 
$
38,662

Interest paid
5,728

 
3,456

Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Change in purchases of property, equipment and leasehold improvements included in accounts payable and accrued expenses
$
10

 
$
(31
)
Change in repurchases of common stock included in accounts payable and accrued expenses
818

 
(4,365
)
 
See accompanying Notes to these unaudited consolidated financial statements.

10


ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
1.  Interim Unaudited Consolidated Financial Statements
 
The accompanying interim unaudited consolidated financial statements of Aspen Technology, Inc. and its subsidiaries have been prepared on the same basis as our annual consolidated financial statements.  We have omitted certain information and footnote disclosures normally included in our annual consolidated financial statements.  Such interim unaudited consolidated financial statements have been prepared in conformity with U.S. Generally Accepted Accounting Principles (GAAP), as defined in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 270, Interim Reporting, for interim financial information and with the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  It is suggested that these unaudited consolidated financial statements be read in conjunction with the audited consolidated financial statements for the year ended June 30, 2018, which are contained in our Annual Report on Form 10-K, as previously filed with the U.S. Securities and Exchange Commission (SEC). In the opinion of management, all adjustments, consisting of normal and recurring adjustments, considered necessary for a fair presentation of the financial position, results of operations, and cash flows at the dates and for the periods presented have been included and all intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three and nine months ended March 31, 2019 are not necessarily indicative of the results to be expected for the subsequent quarter or for the full fiscal year.
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
 
Unless the context requires otherwise, references to we, our and us refer to Aspen Technology, Inc. and its subsidiaries.
 
2.  Significant Accounting Policies
 
(a)         Principles of Consolidation
 
The accompanying consolidated financial statements include the accounts of Aspen Technology, Inc. and our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

(b)         Significant Accounting Policies 

Our significant accounting policies are described in Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018. We adopted Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers ("Topic 606") and ASU No. 2017-01, Business Combinations (Topic 805) - Clarifying the Definition of a Business effective July 1, 2018. Refer to Note 2 (f), “New Accounting Pronouncements Adopted in Fiscal 2019,” for further information regarding the adoption of Topic 606 and ASU No. 2017-01. There were no other material changes to our significant accounting policies during the three and nine months ended March 31, 2019.
 
(c)  Loss Contingencies
 
We accrue estimated liabilities for loss contingencies arising from claims, assessments, litigation and other sources when it is probable that a liability has been incurred and the amount of the claim, assessment or damages can be reasonably estimated. We believe that we have sufficient accruals to cover any obligations resulting from claims, assessments or litigation that have met these criteria.

(d)         Foreign Currency Transactions
 
Foreign currency exchange gains and losses generated from the settlement and remeasurement of transactions denominated in currencies other than the functional currency of our subsidiaries are recognized in our results of operations as incurred as a component of other (expense), net. Net foreign currency exchange losses were $(0.1) million and $(0.5) million during the three and nine months ended March 31, 2019, respectively, and $(0.1) million and $(1.0) million during the three and nine months ended March 31, 2018, respectively.


11


(e)    Research and Development Expense
We charge research and development expenditures to expense as the costs are incurred. Research and development expenses consist primarily of personnel expenses related to the creation of new products, enhancements and engineering changes to existing products and costs of acquired technology prior to establishing technological feasibility.
We acquired no technology during the three and nine months ended March 31, 2019 and 2018, respectively, that was expensed as research and development expense.
(f)          New Accounting Pronouncements Adopted in Fiscal 2019

In May 2014, the FASB issued Topic 606, which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and requires entities to recognize revenue when they transfer promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to evaluate revenue recognition through a five-step process.  In applying the principles of Topic 606, more judgment and estimates are required within the revenue recognition process than were required under previous U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each separate performance obligation.

We adopted Topic 606 effective July 1, 2018 using the full retrospective method, which required us to adjust the prior periods presented. The adoption of Topic 606 impacted the timing of the license portion of the revenue recognized from our term contracts.  Under the new standard, for arrangements that include term-based software licenses bundled with maintenance and support, we are now required to recognize as revenue a portion of the arrangement fee upon delivery of the software license. We recognize as revenue a portion of the arrangement fee related to maintenance and support, professional services, and training over time as the services are provided. Additionally, under the new standard, we capitalize certain direct and incremental commission costs to obtain a contract and amortize such costs over the expected period of benefit, rather than expensing them as incurred in the period that the commissions are earned. See Note 3, "Revenue from Contracts with Customers," to our Unaudited Consolidated Financial Statements for more information on our accounting policies as a result of the adoption of Topic 606.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805) - Clarifying the Definition of a Business. The amendment changes the definition of a business to assist entities in evaluating when a set of transferred assets and activities constitutes a business. We adopted ASU No. 2017-01 effective July 1, 2018. The adoption of ASU No. 2017-01 did not have a material effect on our consolidated financial statements or related disclosures.
In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The amendment provides guidance on accounting for the impact of the Tax Cuts and Jobs Act (the “Tax Act”) and allows entities to complete the accounting under ASC 740 within a one-year measurement period from the Tax Act enactment date. This standard is effective upon issuance. The Tax Act has several significant changes that impact all taxpayers, including a transition tax, which is a one-time tax charge on accumulated, undistributed foreign earnings. The calculation of accumulated foreign earnings requires an analysis of each foreign entity’s financial results going back to 1986. We have concluded that we will not be subject to the transition tax associated with our accumulated, undistributed foreign earnings.
In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendment. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. We adopted ASU No. 2018-15 effective October 1, 2018. The adoption of ASU No. 2018-15 did not have a material effect on our consolidated financial statements or related disclosures.


12


(g)          Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Under the amendment, lessees will be required to recognize virtually all of their leases on the balance sheet, by recording a right-of-use asset and lease liability. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. We are currently evaluating the impact of ASU No. 2016-02 on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The amendment modifies, removes, and adds certain disclosure requirements on fair value measurements. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. We are currently evaluating the impact of ASU No. 2018-13 on our consolidated financial statements.


13


3.   Revenue from Contracts with Customers

In accordance with Topic 606, we account for a customer contract when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights can be identified, payment terms can be identified, the contract has commercial substance, and it is probable that we will collect substantially all of the consideration to which we are entitled. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer.

Nature of Products and Services

We generate revenue from the following sources: (1) License revenue; (2) Maintenance revenue; and (3) Services and other revenue. We sell our software products to end users primarily under fixed-term licenses. We license our software products primarily through a subscription offering which we refer to as our aspenONE licensing model, which includes software maintenance and support, known as our Premier Plus SMS offering, for the entire term. Our aspenONE products are organized into three suites: 1) engineering; 2) manufacturing and supply chain; and 3) asset performance management. The aspenONE licensing model provides customers with access to all of the products within the aspenONE suite(s) they license. We refer to these arrangements as token arrangements. Tokens are fixed units of measure. The amount of software usage is limited by the number of tokens purchased by the customer.

We also license our software through point product term arrangements, which include our Premier Plus SMS offering for the entire term.

We determine revenue recognition through the following steps:

Identification of the contract, or contracts, with a customer;
Identification of the performance obligations in the contract;
Determination of the transaction price;
Allocation of the transaction price to the performance obligations in the contract; and
Recognition of revenue when, or as, we satisfy a performance obligation.

Term-based Arrangements: Term-based arrangements consist of on-premise term licenses as well as maintenance.

Term licenses

License revenue consists primarily of product and related revenue from our aspenONE licensing model and point product arrangements.

When a customer elects to license our products under our aspenONE licensing model, the customer receives, for the term of the arrangement, the right to all software products in the licensed aspenONE software suite. When a customer elects to license point products, the customer receives, for the term of the arrangement, the right to license specified products in the licensed aspenONE software suite. Revenue from initial product licenses is recognized upfront upon delivery.

Maintenance

When a customer elects to license our products under our aspenONE licensing model, our Premier Plus SMS offering is included for the entire term of the arrangement and the customer receives, for the term of the arrangement, the right to any updates that may be introduced into the licensed aspenONE software suite. When a customer elects to license point products, our Premier Plus SMS offering is included for the entire term of the arrangement and the customer receives, for the term of the arrangement, the right to any updates that may be introduced related to the specified products licensed. Maintenance represents a stand-ready obligation and, due to our obligation to provide unspecified future software updates on a when-and-if available basis as well as telephone support services, we are required to recognize revenue ratably over the term of the arrangement.



14


Services and Other Revenue

Professional Services Revenue

Professional services are provided to customers on a time-and-materials ("T&M") or fixed-price basis. The obligation to provide professional services is generally satisfied over time, with the customer simultaneously receiving and consuming the benefits as we satisfy our performance obligation. For professional services, revenue is recognized by measuring progress toward the completion of our obligations. We recognize professional services fees for our T&M contracts based upon hours worked and contractually agreed-upon hourly rates. Revenue from fixed-price engagements is recognized using the proportional performance method based on the ratio of costs incurred to the total estimated project costs. The use of the proportional performance method is dependent upon our ability to reliably estimate the costs to complete a project. We use historical experience as a basis for future estimates to complete current projects. Additionally, we believe that costs are the best available measure of performance. Out-of-pocket expenses which are reimbursed by customers are recorded as revenue.

Training Revenue

We provide training services to our customers, including on-site, Internet-based, public and customized training. The obligation to provide training services is generally satisfied over time, with the customer simultaneously receiving and consuming the benefits as we satisfy our performance obligation. Revenue is recognized in the period in which the services are performed.

Contracts with Multiple Performance Obligations

Our contracts generally contain more than one of the products and services listed above, each of which is separately accounted for as a distinct performance obligation.

Allocation of consideration: We allocate total contract consideration to each distinct performance obligation in an arrangement on a relative standalone selling price basis. The standalone selling price reflects the price we would charge for a specific product or service if it was sold separately in similar circumstances and to similar customers.

If the arrangement contains professional services and other products or services, we allocate to the professional service obligation a portion of the total contract consideration based on the standalone selling price of professional services that is observed from consistently priced standalone sales.

The standalone selling price for term licenses, which are always sold with maintenance, is the price for the combined license and maintenance bundle. The amount assigned to the license and maintenance bundle is separated into license and maintenance amounts using the respective standalone selling prices represented by the value relationship between the software license and maintenance.

When two or more contracts are entered into at or near the same time with the same customer, we evaluate the facts and circumstances associated with the negotiation of those contracts. Where the contracts are negotiated as a package, we will account for them as a single arrangement and allocate the consideration for the combined contracts among the performance obligations accordingly.

Standalone selling price: When available, we use directly observable transactions to determine the standalone selling prices for performance obligations. Generally, directly observable data is not available for term licenses and maintenance. When term licenses are sold together with maintenance in a bundled arrangement, we estimate a standalone selling price for these distinct performance obligations using relevant information, including our overall pricing objectives and strategies and historical pricing data, and taking into consideration market conditions and other factors, such as customer type and geography.

Other policies and judgments

Payment terms and conditions vary by contract type, although terms generally include a requirement of payment annually over the term of the license arrangement. Therefore, we generally receive payment from a customer after the performance obligation related to the license has been satisfied, and therefore, our contracts generally contain a significant financing component. The significant financing component is calculated utilizing an interest rate that derives the net present value of the performance obligations delivered on an upfront basis based on the allocation of consideration. We have instituted a customer portfolio approach in assigning interest rates. The rates are determined at contract inception and are based on the credit characteristics of the customers within each portfolio.

15



Contract modifications

We sometimes enter into agreements to modify previously executed contracts, which constitute contract modifications. We assess each of these contract modifications to determine (i) if the additional products and services are distinct from the products and services in the original arrangement; and (ii) if the amount of consideration expected for the added products and services reflects the stand-alone selling price of those products and services, as adjusted for contract-specific circumstances. A contract modification meeting both criteria is accounted for as a separate contract. A contract modification not meeting both criteria is considered a change to the original contract and is accounted for on either (i) a prospective basis as a termination of the existing contract and the creation of a new contract; or (ii) a cumulative catch-up basis. Generally, our contract modifications meet both criteria and are accounted for as a separate contract, as adjusted for contract-specific circumstances.

Disaggregation of Revenue

We disaggregate our revenue by region, type of performance obligation, timing of revenue recognition, and segment as follows:

 
Three Months Ended
March 31,
 
Nine Months Ended
March 31,
 
2019
 
2018
 
2019
 
2018
 
 
 
As Adjusted
 
 
 
As Adjusted
 
(Dollars in Thousands)
Revenue by region:
 
 
 
 
 
 
 
United States
$
54,022

 
$
39,735

 
$
134,774

 
$
130,561

Europe
33,665

 
36,662

 
109,085

 
98,673

Other (1)
60,297

 
51,361

 
158,717

 
130,541

 
$
147,984

 
$
127,758

 
$
402,576

 
$
359,775

 
 
 
 
 
 
 
 
Revenue by type of performance obligation:
 
 
 
 
 
 
 
Term licenses
$
98,493

 
$
79,073

 
$
255,616

 
$
214,938

Maintenance
41,878

 
40,897

 
125,955

 
121,890

Professional services and other
7,613

 
7,788

 
21,005

 
22,947

 
$
147,984

 
$
127,758

 
$
402,576

 
$
359,775

 
 
 
 
 
 
 
 
Revenue by segment:
 
 
 
 
 
 
 
Subscription and software
$
140,371

 
$
119,970

 
$
381,571

 
$
336,828

Services and other
7,613

 
7,788

 
21,005

 
22,947

 
$
147,984

 
$
127,758

 
$
402,576

 
$
359,775

____________________________________________
(1)
Other consists primarily of Asia Pacific, Canada, Latin America and the Middle East.

Contract Balances

The difference in the opening and closing balances of our contract assets and deferred revenue primarily results from the timing difference between our performance and the customer’s payment. We fulfill our obligations under a contract with a customer by transferring products and services in exchange for consideration from the customer. We recognize a contract asset when we transfer products or services to a customer and the right to consideration is conditional on something other than the passage of time. Accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional. We recognize deferred revenue when we have received consideration or an amount of consideration is due from the customer and we have a future obligation to transfer products or services.
  
Our contract assets and deferred revenue were as follows as of March 31, 2019 and June 30, 2018:

16


 
March 31, 2019
 
June 30, 2018
 
 
 
As Adjusted
 
(Dollars in Thousands)
Contract assets
$
673,454

 
$
645,000

Deferred revenue
(43,727
)
 
(27,504
)
 
$
629,727

 
$
617,496


Contract assets and deferred revenue are presented net at the contract level for each reporting period.

The change in deferred revenue in the nine months ended March 31, 2019, excluding the impact of the netting of contract assets and deferred revenue, was primarily due to an increase in new billings in advance of revenue recognition, partially offset by $11.5 million of revenue recognized that was included in deferred revenue at June 30, 2018.

Contract Costs

We pay commissions for new product sales as well as for renewals of existing contracts. Commissions paid to obtain renewal contracts are not commensurate with the commissions paid for new product sales and therefore, a portion of the commissions paid for new contracts relate to future renewals.

We account for new product sales commissions using a portfolio approach and allocate the cost of commissions in proportion to the allocation of transaction price of license and maintenance performance obligations, including assumed renewals. Commissions allocated to the license and license renewal components are expensed at the time the license revenue is recognized. Commissions allocated to maintenance are capitalized and amortized on a straight-line basis over a period of four to eight years for new contracts, reflecting our estimate of the expected period that we will benefit from those commissions.

Amortization of capitalized contract costs is included in sales and marketing expenses in our Condensed Consolidated Statement of Operations.

Transaction Price Allocated to Remaining Performance Obligations

The following table includes the aggregate amount of the transaction price allocated as of March 31, 2019 to the performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period:
 
Year Ended June 30,
 
2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
 
(Dollars in Thousands)
License
$
24,904

 
$
39,658

 
$
30,468

 
$
9,423

 
$
2,502

 
$
1,451

Maintenance
49,261

 
174,031

 
127,876

 
85,991

 
51,340

 
32,662

Services and other
32,248

 
11,834

 
853

 
651

 
381

 
91


Impact to Prior Period Information

The following table presents the effect of the adoption of Topic 606 on select consolidated statements of operations line items for the three and nine months ended March 31, 2018:


17


 
Three Months Ended March 31, 2018
 
As Previously Reported
 
Adjustments
 
As Adjusted
 
(Dollars in Thousands, Except per Share Data)
Consolidated Statements of Operations:
 
 
 
 
 
License revenue
$

 
$
79,073

 
$
79,073

Maintenance revenue

 
40,897

 
40,897

Subscription and software revenue
118,126

 
(118,126
)
 

Services and other revenue
7,745

 
43

 
7,788

Total revenue
125,871

 
1,887

 
127,758

Gross profit
113,095

 
1,887

 
114,982

Selling and marketing expense
25,924

 
(678
)
 
25,246

General and administrative expense
14,430

 
103

 
14,533

Total operating expenses
61,938

 
(575
)
 
61,363

Income from operations
51,157

 
2,462

 
53,619

Interest income
23

 
6,281

 
6,304

Provision for income taxes
11,756

 
2,073

 
13,829

Net income
$
37,835

 
$
6,670

 
$
44,505

Net income per common share:

 
 
 
 
 
Basic
$
0.53

 
 
 
$
0.62

Diluted
$
0.52

 
 
 
$
0.61

Weighted average shares outstanding:
 
 
 
 
 
Basic
71,828

 
 
 
71,828

Diluted
72,663

 
 
 
72,663



18


 
Nine Months Ended March 31, 2018
 
As Previously Reported
 
Adjustments
 
As Adjusted
 
(Dollars in Thousands, Except per Share Data)
Consolidated Statements of Operations:
 
 
 
 
 
License revenue
$

 
$
214,938

 
$
214,938

Maintenance revenue

 
121,890

 
121,890

Subscription and software revenue
351,540

 
(351,540
)
 

Services and other revenue
22,014

 
933

 
22,947

Total revenue
373,554

 
(13,779
)
 
359,775

Gross profit
335,957

 
(13,779
)
 
322,178

Selling and marketing expense
73,875

 
(1,185
)
 
72,690

General and administrative expense
42,284

 
6,904

 
49,188

Total operating expenses
177,022

 
5,719

 
182,741

Income from operations
158,935

 
(19,498
)
 
139,437

Interest income
204

 
18,645

 
18,849

Provision for (benefit from) income taxes
43,561

 
(107,242
)
 
(63,681
)
Net income
$
110,668

 
$
106,389

 
$
217,057

Net income per common share:

 
 
 
 
 
Basic
$
1.53

 
 
 
$
3.00

Diluted
$
1.51

 
 
 
$
2.97

Weighted average shares outstanding:
 
 
 
 
 
Basic
72,402

 
 
 
72,402

Diluted
73,136

 
 
 
73,136



The following table presents the effect of the adoption of Topic 606 on select consolidated balance sheet line items as of June 30, 2018:
 
June 30, 2018
 
As Previously Reported
 
Adjustments
 
As Adjusted
 
(Dollars in Thousands)
Consolidated Balance Sheets:
 
 
 
 
 
ASSETS
 
 
 
 
 
Current contract assets
$

 
$
304,378

 
$
304,378

Contract costs

 
20,500

 
20,500

Accounts receivable, net
21,910

 
19,900

 
41,810

Non-current contract assets

 
340,622

 
340,622

Total assets
264,924

 
685,400

 
950,324

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
Current deferred revenue
286,845

 
(271,695
)
 
15,150

Non-current deferred revenue
28,259

 
(15,905
)
 
12,354

Deferred income taxes

 
214,125

 
214,125

Other non-current liabilities
18,492

 
(1,424
)
 
17,068

Retained earnings
305,208

 
760,299

 
1,065,507

Total liabilities and stockholders’ equity

$
264,924

 
$
685,400

 
$
950,324



19


The adoption of Topic 606 had no impact on our total cash flows or net cash provided by operating activities. The impacts of adoption resulted in offsetting shifts in cash flows throughout the components of net income and various changes in working capital balances. The following table presents the effect of the adoption of Topic 606 on select consolidated statement of cash flows line items for the nine months ended March 31, 2018:

 
Nine Months Ended March 31, 2018
 
As Previously Reported
 
Adjustments
 
As Adjusted
 
(Dollars in Thousands)
Consolidated Statements of Cash Flows:
 
 
 
 
 
Cash flows from operating activities:
 
 
 
 
 
Net income
$
110,668

 
$
106,389

 
$
217,057

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Deferred income taxes
4,467

 
(127,910
)
 
(123,443
)
Changes in assets and liabilities:
 
 
 
 
 
Contract assets

 
(7,767
)
 
(7,767
)
Contract costs

 
(651
)
 
(651
)
Accounts receivable
(964
)
 
2,393

 
1,429

Deferred revenue
(11,699
)
 
27,546

 
15,847

Net cash provided by operating activities
$
127,829

 
$

 
$
127,829




20


4.   Fair Value
 
We determine fair value by utilizing a fair value hierarchy that ranks the quality and reliability of the information used in its determination. Fair values determined using “Level 1 inputs” utilize unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Fair values determined using “Level 2 inputs” utilize data points that are observable, such as quoted prices, interest rates and yield curves for similar assets and liabilities.
 
Cash equivalents of $1.0 million and $5.0 million as of March 31, 2019 and June 30, 2018, respectively, were reported at fair value utilizing quoted market prices in identical markets, or “Level 1 inputs.” Our cash equivalents consist of short-term money market instruments.
 
Financial instruments not measured or recorded at fair value in the accompanying unaudited consolidated financial statements consist of accounts receivable, accounts payable and accrued liabilities. The estimated fair value of these financial instruments approximates their carrying value. The estimated fair value of the borrowings under the Credit Agreement (described below in Note 11, "Credit Agreement") approximates its carrying value due to the floating interest rate.

5.  Accounts Receivable, Net
 
Our accounts receivable, net of the related allowance for doubtful accounts, were as follows as of March 31, 2019 and June 30, 2018:
 
 
March 31,
2019
 
June 30,
2018
 
 
 
As Adjusted
 
(Dollars in Thousands)
Accounts receivable, gross
$
48,471

 
$
44,513

Allowance for doubtful accounts
(3,178
)
 
(2,703
)
Accounts receivable, net
$
45,293

 
$
41,810


As of March 31, 2019, we had no customer receivable balances that individually represented 10% or more of our net accounts receivable.

6.  Property and Equipment

Property, equipment and leasehold improvements consisted of the following as of March 31, 2019 and June 30, 2018:
 
 
March 31,
2019
 
June 30,
2018
 
(Dollars in Thousands)
Property, equipment and leasehold improvements, at cost:
 

 
 

Computer equipment
$
8,321

 
$
8,344

Purchased software
24,207

 
24,225

Furniture & fixtures
6,843

 
6,850

Leasehold improvements
12,048

 
12,023

Property, equipment and leasehold improvements, at cost
51,419

 
51,442

Accumulated depreciation
(43,830
)
 
(41,636
)
Property, equipment and leasehold improvements, net
$
7,589

 
$
9,806


During the nine months ended March 31, 2019, we wrote off fully depreciated property, equipment and leasehold improvements that were no longer in use with gross book values of $0.2 million.

7. Acquisitions 

Apex Optimisation

21


On February 5, 2018, we completed the acquisition of all the outstanding shares of Apex Optimisation and affiliates (“Apex”), a provider of software which aligns Advanced Process Control with Planning and Scheduling to unify production optimization, for a total cash consideration of $23.0 million. The purchase price consisted of $18.4 million of cash paid at closing and an additional $4.6 million to be held back until February 2020 as security for certain representations, warranties, and obligations of the sellers. The holdback is recorded in accrued expenses and other current liabilities in our consolidated balance sheet.
An allocation of the purchase price is as follows:
 
Amount
 
(Dollars in Thousands)
Tangible assets acquired, net
$
360

Identifiable intangible assets:
 
Technology-related
4,500

Customer relationships
3,800

Goodwill
15,959

Deferred tax liabilities
(1,619
)
Total assets acquired, net
$
23,000

We used the relief from royalty and income approaches to derive the fair value of the technology-related and customer relationship intangible assets, respectively. The weighted-average discount rate (or rate of return) used to determine the value of the Apex intangible assets was 28% and the effective tax rate used was 21%.  The technology-related and customer relationship intangible assets are each being amortized on a straight-line basis over their estimated useful lives of seven years.
The goodwill, which is not deductible for tax purposes, reflects the value of the assembled workforce and the company-specific synergies we expect to realize by selling Apex products and services to our existing customers.  The results of operations of Apex have been included prospectively in our results of operations since the date of acquisition.

8. Intangible Assets 
We include in our amortizable intangible assets those intangible assets acquired in our business and asset acquisitions. We amortize acquired intangible assets with finite lives over their estimated economic lives, generally using the straight-line method. Each period, we evaluate the estimated remaining useful lives of acquired intangible assets to determine whether events or changes in circumstances warrant a revision to the remaining period of amortization. Acquired intangibles are removed from the accounts when fully amortized and no longer in use.
Intangible assets consisted of the following as of March 31, 2019 and June 30, 2018:
 
Gross Carrying Amount
 
Accumulated Amortization
 
Effect of Currency Translation
 
Net Carrying Amount
 
(Dollars in Thousands)
March 31, 2019:
 
 
 
 
 
 
 
Technology
$
35,644

 
$
(7,936
)
 
$
(94
)
 
$
27,614

Customer relationships
4,979

 
(865
)
 
(80
)
 
4,034

Non-compete agreements
553

 
(445
)
 

 
108

Total
$
41,176

 
$
(9,246
)
 
$
(174
)
 
$
31,756

June 30, 2018:
 
 
 
 
 
 
 
Technology
$
35,898

 
$
(5,182
)
 
$
(254
)
 
$
30,462

Customer relationships
5,181

 
(377
)
 
(202
)
 
4,602

Non-compete agreements
553

 
(307
)
 

 
246

Total
$
41,632

 
$
(5,866
)
 
$
(456
)
 
$
35,310


22


Total amortization expense related to intangible assets is included in cost of license revenue and operating expenses and amounted to approximately $1.2 million and $3.4 million for the three and nine months ended March 31, 2019, respectively, and approximately $0.5 million and $1.6 million for the three and nine months ended March 31, 2018, respectively.
Future amortization expense as of March 31, 2019 is expected to be as follows:
Year Ended June 30,
Amortization Expense
 
(Dollars in Thousands)
2019
$
1,155

2020
4,692

2021
4,736

2022
4,675

2023
4,591

Thereafter
11,907

Total
$
31,756


9. Goodwill
 
The changes in the carrying amount of goodwill for our subscription and software reporting segment during the nine months ended March 31, 2019 were as follows:

 
Gross Carrying Amount
 
Accumulated Impairment Losses
 
Effect of Currency Translation
 
Net Carrying Amount
 
(Dollars in Thousands)
June 30, 2018:

$
142,316

 
$
(65,569
)
 
$
(1,157
)
 
$
75,590

Adjustment to goodwill from acquisitions
(1,524
)
 

 

 
(1,524
)
Foreign currency translation

 

 
(532
)
 
(532
)
March 31, 2019:
$
140,792

 
$
(65,569
)
 
$
(1,689
)
 
$
73,534

 
No triggering events indicating goodwill impairment occurred during the nine months ended March 31, 2019.

10. Accrued Expenses and Other Liabilities

Accrued expenses and other current liabilities consisted of the following as of March 31, 2019 and June 30, 2018:
 
 
March 31,
2019
 
June 30,
2018
 
(Dollars in Thousands)
Payroll and payroll-related
$
20,017

 
$
21,796

Deferred acquisition payments
4,600

 
1,700

Royalties and outside commissions
3,815

 
3,333

Share repurchases
2,464

 
1,646

Professional fees
1,732

 
1,695

Deferred rent
1,308

 
1,188

Other
8,810

 
8,157

Total accrued expenses and other current liabilities
$
42,746

 
$
39,515



23


Other non-current liabilities consisted of the following as of March 31, 2019 and June 30, 2018:
 
 
March 31,
2019
 
June 30,
2018
 
 
 
As Adjusted
 
(Dollars in Thousands)
Deferred rent
$
5,478

 
$
6,442

Uncertain tax positions
5,492

 
4,510

Deferred acquisition payments

 
4,294

Other
1,433

 
1,822

Total other non-current liabilities
$
12,403

 
$
17,068


11.  Credit Agreement
 
On February 26, 2016, we entered into a $250.0 million Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, Silicon Valley Bank, as syndication agent, and the lenders and other parties named therein (the “Lenders”). On August 9, 2017, we entered into an Amendment to increase the Credit Agreement to $350.0 million. The indebtedness evidenced by the Credit Agreement matures on February 26, 2021. Prior to the maturity of the Credit Agreement, any amounts borrowed may be repaid and, subject to the terms and conditions of the Credit Agreement, borrowed again in whole or in part without penalty. We had $220.0 million and $170.0 million in outstanding borrowings under the Credit Agreement as of March 31, 2019 and June 30, 2018, respectively.
 
Borrowings under the Credit Agreement bear interest at a rate equal to either, at our option, the sum of (a) the highest of (1) the rate of interest publicly announced by JPMorgan Chase Bank, N.A. as its prime rate in effect, (2) the Federal Funds Effective Rate plus 0.5%, and (3) the one-month Adjusted LIBO Rate plus 1.0%, plus (b) a margin initially of 0.5% for the first full fiscal quarter ending after the date of the Credit Agreement and thereafter based on our Leverage Ratio; or the Adjusted LIBO Rate plus a margin initially of 1.5% for the first full fiscal quarter ending after the date of the Credit Agreement and thereafter based on our Leverage Ratio.  We must also pay, on a quarterly basis, an unused commitment fee at a rate of between 0.2% and 0.3% per annum, based on our Leverage Ratio. The interest rates as of March 31, 2019 were 4.00% on $159.0 million of our outstanding borrowings and 4.01% on $61.0 million of our outstanding borrowings.
 
All borrowings under the Credit Agreement are secured by liens on substantially all of our assets. The Credit Agreement contains affirmative and negative covenants customary for facilities of this type, including restrictions on: incurrence of additional debt; liens; fundamental changes; asset sales; restricted payments; and transactions with affiliates. The Credit Agreement contains financial covenants regarding maintenance as of the end of each fiscal quarter, commencing with the quarter ending June 30, 2016, of a maximum Leverage Ratio of 3.0 to 1.0 and a minimum Interest Coverage Ratio of 3.0 to 1.0. As of March 31, 2019, we were in compliance with these covenants.
 
12.  Stock-Based Compensation
 
The weighted average estimated fair value of option awards granted was $20.05 and $31.26 during the three and nine months ended March 31, 2019, respectively, and $19.21 and $17.04 during the three and nine months ended March 31, 2018, respectively.
 
We utilized the Black-Scholes option valuation model with the following weighted average assumptions:
 
 
Nine Months Ended
March 31,
 
2019
 
2018
Risk-free interest rate
2.8
%
 
1.7
%
Expected dividend yield
0.0
%
 
0.0
%
Expected life (in years)
4.6

 
4.6

Expected volatility factor
26.6
%
 
28.0
%
 

24


The stock-based compensation expense under all equity plans and its classification in the unaudited consolidated statements of operations for the three and nine months ended March 31, 2019 and 2018 are as follows:
 
 
Three Months Ended
March 31,
 
Nine Months Ended
March 31,
 
2019
 
2018
 
2019
 
2018
 
(Dollars in Thousands)
Recorded as expenses:
 

 
 

 
 

 
 

Cost of maintenance
$
379

 
$

 
$
916

 
$

Cost of services and other
366

 
345

 
1,038

 
1,119

Selling and marketing
1,228

 
979

 
3,687

 
2,870

Research and development
1,518

 
1,892

 
5,451

 
5,679

General and administrative
2,763

 
2,137

 
10,362

 
7,554

Total stock-based compensation
$
6,254

 
$
5,353

 
$
21,454

 
$
17,222


A summary of stock option and restricted stock unit ("RSU") activity under all equity plans for the nine months ended March 31, 2019 is as follows:
 
 
Stock Options
 
Restricted Stock Units
 
Shares
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term
(Years)
 
Aggregate
Intrinsic Value
(in 000’s)
 
Shares
 
Weighted
Average
Grant Date
Fair Value
Outstanding at June 30, 2018
1,369,442

 
$
45.93

 
7.23
 
$
64,103

 
621,700

 
$
53.64

Granted
278,454