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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
(Mark One)
 
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
         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: 001-41400
 
ASPEN TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 87-3100817
(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)
(Registrant’s telephone number, including area code): (781221-6400

____________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common stock, $0.0001 par value per shareAZPNNasdaq Global Select Market
____________________________________________

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 every Interactive Data File required to be submitted 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 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 filerý Accelerated filer      
 Non-accelerated filer   Smaller reporting company
Emerging growth company
 
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  No ý

There were 63,327,853 shares of common stock outstanding as of April 30, 2024.
















TABLE OF CONTENTS
 
  Page
  
   
   
  
   
  
 
Aspen Technology, Inc. (AspenTech) has many registered trademarks including aspenONE and Aspen Plus. All other trade names, trademarks and service marks appearing in this Form 10-Q not owned by AspenTech 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 2024 refers to the year ending June 30, 2024).






3

PART I - FINANCIAL INFORMATION
Item 1.    Financial Statements.
 Condensed Consolidated Financial Statements (unaudited)
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended March 31,Nine Months Ended March 31,
 2024202320242023
 (Dollars and Shares in Thousands, Except per Share Data)
Revenue:    
License and solutions$169,467 $136,292 $470,578 $446,360 
Maintenance86,256 77,283 256,280 234,277 
Services and other22,383 16,303 57,719 42,898 
Total revenue278,106 229,878 784,577 723,535 
Cost of revenue:  
License and solutions65,550 68,980 204,453 209,326 
Maintenance8,344 9,020 29,192 27,804 
Services and other19,048 15,799 52,290 40,897 
Total cost of revenue92,942 93,799 285,935 278,027 
Gross profit185,164 136,079 498,642 445,508 
Operating expenses:  
Selling and marketing121,303 120,035 365,921 356,260 
Research and development49,334 54,046 156,155 153,741 
General and administrative33,821 40,471 105,315 124,557 
Total operating expenses204,458 214,552 627,391 634,558 
Loss from operations(19,294)(78,473)(128,749)(189,050)
Other expense, net(1,988)(13,281)(8,017)(33,270)
Interest income, net13,723 9,969 40,056 19,112 
Loss before benefit for income taxes(7,559)(81,785)(96,710)(203,208)
Benefit for income taxes(9,115)(24,150)(42,241)(68,132)
Net income (loss)$1,556 $(57,635)$(54,469)$(135,076)
Net income (loss) per common share:  
Basic$0.02 $(0.89)$(0.85)$(2.09)
Diluted$0.02 $(0.89)$(0.85)$(2.09)
Weighted average shares outstanding:  
Basic63,508 64,796 63,844 64,622 
Diluted63,802 64,796 63,844 64,622 
 
See accompanying notes to these unaudited condensed consolidated financial statements.
4

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
Three Months Ended March 31,Nine Months Ended March 31,
 2024202320242023
 (Dollars in Thousands)
Net income (loss)$1,556 $(57,635)$(54,469)$(135,076)
Other comprehensive (loss) income:
Foreign currency translation adjustments(1,104)5,845 (7,435)3,690 
Total other comprehensive (loss) income(1,104)5,845 (7,435)3,690 
Comprehensive income (loss)$452 $(51,790)$(61,904)$(131,386)
 
See accompanying notes to these unaudited condensed consolidated financial statements.
5

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2024June 30, 2023
 (Dollars in Thousands, Except Share Data)
ASSETS  
Current assets: 
Cash and cash equivalents$177,592 $241,209 
Accounts receivable, net140,469 122,789 
Current contract assets, net378,914 367,539 
Prepaid expenses and other current assets28,697 27,728 
Receivables from related parties69,097 62,375 
Prepaid income taxes 11,424 
Total current assets794,769 833,064 
Property, equipment and leasehold improvements, net16,414 18,670 
Goodwill8,329,499 8,330,811 
Intangible assets, net4,306,689 4,659,657 
Non-current contract assets, net528,282 536,104 
Contract costs21,049 15,992 
Operating lease right-of-use assets94,353 67,642 
Deferred income tax assets9,843 10,638 
Other non-current assets8,529 13,474 
Total assets$14,109,427 $14,486,052 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Accounts payable$9,876 $20,299 
Accrued expenses and other current liabilities81,842 99,526 
Due to related parties67,954 22,019 
Current operating lease liabilities13,698 12,928 
Income taxes payable33,999 46,205 
Current contract liabilities134,910 151,450 
Total current liabilities342,279 352,427 
Non-current contract liabilities33,042 30,103 
Deferred income tax liabilities822,197 957,911 
Non-current operating lease liabilities81,361 55,442 
Other non-current liabilities19,726 19,240 
Stockholders’ equity:  
Common stock, $0.0001 par value
Authorized—600,000,000 shares
Issued— 65,255,754 and 64,952,868 shares
Outstanding— 63,418,003 and 64,465,242 shares
7 6 
Additional paid-in capital13,259,100 13,194,028 
Accumulated deficit(95,860)(41,391)
Accumulated other comprehensive (loss) income(4,999)2,436 
Treasury stock, at cost — 1,837,751 and 487,626 shares of common stock
(347,426)(84,150)
Total stockholders’ equity12,810,822 13,070,929 
Total liabilities and stockholders’ equity$14,109,427 $14,486,052 

 See accompanying notes to these unaudited condensed consolidated financial statements.
6

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Accumulated Other Comprehensive Income (Loss)Common StockAdditional Paid-in CapitalAccumulated DeficitTreasury StockTotal Stockholders’ Equity
Number of SharesPar ValueNumber of SharesCost
(Dollars in Thousands, Except Share Data)
Balance June 30, 2023$2,436 64,952,868 $6 $13,194,028 $(41,391)487,626 $(84,150)$13,070,929 
Net loss— — — — (34,525)— — (34,525)
Other comprehensive loss(11,201)— — — — — — (11,201)
Issuance of shares of common stock— 29,644 — 3,826 — — — 3,826 
Issuance of restricted stock units and net share settlement related to withholding taxes— 47,896 — (4,585)— — — (4,585)
Repurchase of common stock— — — 20,210 — 686,843 (134,434)(114,224)
Stock-based compensation— — — 16,699 — — — 16,699 
Balance September 30, 2023$(8,765)65,030,408 $6 $13,230,178 $(75,916)1,174,469 $(218,584)$12,926,919 
Net loss— — — — (21,500)— — (21,500)
Other comprehensive income4,870 — — — — — — 4,870 
Issuance of shares of common stock— 32,212 — 4,268 — — — 4,268 
Issuance of restricted stock units and net share settlement related to withholding taxes— 107,558 — (9,590)— — — (9,590)
Repurchase of common stock— — — — — 375,041 (72,105)(72,105)
Stock-based compensation— — — 16,211 — — — 16,211 
Balance December 31, 2023$(3,895)65,170,178 $6 $13,241,067 $(97,416)1,549,510 $(290,689)$12,849,073 
Net income— — — — 1,556 — — 1,556 
Other comprehensive loss(1,104)— — — — — — (1,104)
Issuance of shares of common stock— 60,278 1 7,947 — — — 7,948 
Issuance of restricted stock units and net share settlement related to withholding taxes— 25,298 — (2,821)— — — (2,821)
Repurchase of common stock— — — — — 288,241 (56,737)(56,737)
Stock-based compensation— — — 12,907 — — — 12,907 
Balance March 31, 2024$(4,999)65,255,754 $7 $13,259,100 $(95,860)1,837,751 $(347,426)$12,810,822 
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Accumulated Other Comprehensive LossCommon StockAdditional Paid-in CapitalRetained Earnings (Accumulated Deficit)Total Equity/Stockholders’ Equity
Number of SharesPar Value
(Dollars in Thousands, Except Share Data)
Balance June 30, 2022$(4,588)64,425,378 $6 $13,107,570 $66,369 $13,169,357 
Net loss— — — — (11,244)(11,244)
Other comprehensive loss(8,865)— — — — (8,865)
Issuance of shares of common stock— 71,547 — 8,489 — 8,489 
Issuance of restricted stock units and net share settlement related to withholding taxes— 34,375 — (4,683)— (4,683)
Stock-based compensation— — — 17,736 — 17,736 
Balance September 30, 2022$(13,453)64,531,300 $6 $13,129,112 $55,125 $13,170,790 
Net loss— — — — (66,197)(66,197)
Other comprehensive income6,710 — — — — 6,710 
Issuance of shares of common stock— 202,506 — 16,977 — 16,977 
Issuance of restricted stock units and net share settlement related to withholding taxes— 33,949 — (4,656)— (4,656)
Stock-based compensation— — — 23,441 — 23,441 
Balance December 31, 2022$(6,743)64,767,755 $6 $13,164,874 $(11,072)$13,147,065 
Net loss— — — — (57,635)(57,635)
Other comprehensive income5,845 — — — — 5,845 
Issuance of shares of common stock— 50,579 — 6,031 — 6,031 
Issuance of restricted stock units and net share settlement related to withholding taxes— 40,264 — (5,070)— (5,070)
Stock-based compensation— — — 22,843 — 22,843 
Balance March 31, 2023$(898)64,858,598 $6 $13,188,678 $(68,707)$13,119,079 

See accompanying notes to these unaudited condensed consolidated financial statements.

8

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended March 31,
 20242023
 (Dollars in Thousands)
Cash flows from operating activities:
Net loss$(54,469)$(135,076)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization369,794 368,266 
Reduction in the carrying amount of right-of-use assets11,312 10,463 
Net foreign currency losses8,238 3,711 
Realized gain on settlement of foreign currency forward contracts (10,821)
Stock-based compensation45,817 64,020 
Deferred income taxes(138,470)(156,046)
Provision for uncollectible receivables9,269 3,944 
Other non-cash operating activities805 1,108 
Changes in assets and liabilities:
Accounts receivable(22,923)(11,060)
Contract assets(2,902)(10,672)
Contract costs(5,204)(5,357)
Lease liabilities(11,281)(10,303)
Prepaid expenses, prepaid income taxes, and other assets(17,444)27,641 
Liability from foreign currency forward contract 40,454 
Accounts payable, accrued expenses, income taxes payable and other liabilities5,972 (12,038)
Contract liabilities(13,564)17,416 
Net cash provided by operating activities184,950 185,650 
Cash flows from investing activities:
Purchases of property, equipment and leasehold improvements(2,579)(4,515)
Proceeds from settlement of foreign currency forward contracts 10,821 
Payments for business acquisitions, net of cash acquired(8,273)(72,498)
Payments for equity method investments(272)(676)
Payments for capitalized computer software development costs(131)(347)
Payments for asset acquisitions(12,500) 
Purchase of other assets (1,000)
Net cash used in investing activities(23,755)(68,215)
Cash flows from financing activities:
Issuance of shares of common stock15,214 31,542 
Repurchases of common stock(243,066) 
Payment of tax withholding obligations related to restricted stock(17,010)(14,406)
Deferred business acquisition payments (1,363)
Repayments of amounts borrowed under term loan (276,000)
Net transfers from (to) Parent Company32,558 (5,749)
Payments of debt issuance costs (2,375)
Net cash used in financing activities(212,304)(268,351)
Effect of exchange rate changes on cash and cash equivalents(12,508)(12,073)
Decrease in cash and cash equivalents(63,617)(162,989)
Cash and cash equivalents, beginning of period241,209 449,725 
Cash and cash equivalents, end of period$177,592 $286,736 
Supplemental disclosure of cash flow information:
Income taxes paid, net$95,900 $64,840 
Interest paid$4,701 $14,345 
Supplemental disclosure of non-cash activities:
Change in purchases of property, equipment and leasehold improvements included in accounts payable and accrued expenses$45 $(1,307)
Lease liabilities arising from obtaining right-of-use assets$61,657 $784 
See accompanying notes to these unaudited condensed consolidated financial statements.
9

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.    Organization and Basis of Presentation
AspenTech, together with its subsidiaries (the “Company”), is a leading industrial software company that develops solutions to address complex industrial environments where it is critical to optimize the asset design, operations and maintenance lifecycle. The Company’s unique combination of product capabilities, deep domain expertise and award-winning innovation helps customers across diverse end markets in capital-intensive industries improve their operational excellence while achieving sustainability goals.
The Company had revenue from customers in 116 countries during fiscal 2024.
Basis of Presentation
The Company has prepared the accompanying unaudited condensed consolidated financial statements as of March 31, 2024, and for the third quarter of fiscal 2024 and 2023 pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and in accordance with generally accepted accounting principles in the United States (“GAAP”). All intercompany balances and transactions have been eliminated in consolidation.
These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated and combined financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.
The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The actual results that the Company experiences may differ materially from these estimates.
Russia
The Company maintains operations in Russia and licenses software and provides related services to customers in Russia. The Company had revenue in Russia of approximately $13.7 million and $7.3 million for the three months ended March 31, 2024 and 2023, respectively, and $27.7 million and $34.0 million for the nine months ended March 31, 2024 and 2023, respectively. The Company had total assets in Russia of approximately $45.8 million and $39.7 million as of March 31, 2024 and June 30, 2023, respectively, related to operations in Russia.
The Company may be required to cease or suspend operations in Russia or we may voluntarily elect to do so, whether as a result of new sanctions and export-control measure packages or otherwise. There is also a risk that the Company may not be able to continue its business in Russia because it is unable to conduct banking activities in Russia. The Company no longer provides engineering services in Russia, and has limited its operations to contract renewals only with existing customers. While the Company continues to evaluate the impact of the various sanctions and restrictions on its ability to conduct business in Russia, access cash held in Russia, maintain contracts with and pay vendors in Russia, pay employees in Russia, and receive payment from customers in Russia, there is no assurance that the Company will be able to do so in the future. Any disruption to, or suspension of, the Companys business and operations in Russia would result in the loss of revenue or access to cash balances from business in Russia and would negatively impact our growth and profitability. The Company may also suffer reputational harm as a result of continued operations in Russia, which may adversely impact sales and other businesses in other countries.
2.    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, 2023. There were no material changes to our significant accounting policies during the nine months ended March 31, 2024.
(a)     Revenue Recognition
Prior to the third quarter of fiscal 2023, Digital Grid Management (“DGM”) software licenses were primarily sold with professional services and hardware to form an integrated solution for the customer. The professional services and hardware sold with the license significantly customized the underlying functionality and usability of the software. As such, none of the software license, hardware or professional services were considered distinct within the context of the contract and were therefore considered a single performance obligation. Because the integrated solution had no alternative use to the Company and the Company held an enforceable right to payment, revenue was recognized over time (typically one to two years) using an
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input measure of progress based on the ratio of actual costs incurred to date to the total estimated cost to complete. For integrated solution contracts executed prior to the third quarter of fiscal 2023, revenue continues to be recognized over time until the implementation is complete.
At the start of the third quarter of fiscal 2023, the Company completed a series of business transformation activities relating to DGM products and services in conjunction with its ongoing integration activities. As part of a change in the related go-to-market strategy, the Company has invested in tools and processes to simplify and streamline the implementation services to significantly reduce the complexity and interdependency associated with its software. In addition, the Company has identified and trained several third-party implementation service partners to operate autonomously and directly with DGM customers to implement its products.
Accordingly, effective January 1, 2023, following the completion of these business transformation activities, for all prospective DGM contracts entered into after January 1, 2023, the Company accounts for the DGM software license, hardware, maintenance, and professional services as separate and distinct performance obligations. Software license revenue is recognized at a point in time when control transfers to the customer, which generally aligns with the first day of the contractual term. Hardware revenue is recognized at the point in time when control transfers to the customer, which generally occurs upon delivery. The recognition of maintenance revenue at DGM is unchanged and continues to be recognized ratably over the maintenance term. Professional services revenue is recognized over time (typically one to two years) using the proportional performance method by comparing the costs incurred to the total estimated project costs.
(b)     Recently Issued Accounting Standards Not Yet Adopted
In October 2023, the FASB issued Accounting Standards Updated (“ASU”) 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”). ASU 2023-06 was issued to modify the disclosure or presentation requirements of a variety of topics in the codification. The effective date for each amendment will be the date on which the SEC removal of the related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company does not expect the adoption of ASU 2023-06 to have a material impact on its financial position or results of operations.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 expands segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The disclosures required under ASU 2023-07 are also required for public entities with a single reportable segment. The ASU is effective for the Company’s first fiscal year beginning after December 15, 2023 and for interim periods within the Company’s first fiscal year beginning after December 15, 2024, with early adoption permitted. The Company does not expect the adoption of ASU 2023-07 to have a material impact on its financial position or results of operations.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The ASU is effective for the Company’s first fiscal year beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company does not expect the adoption of ASU 2023-09 to have a material impact on its financial position or results of operations.
3.    Revenue from Contracts with Customers
Contract Assets and Contract Liabilities
Contract assets are subject to credit risk and reviewed in accordance with Accounting Standards Codification (“ASC”) 326, Financial Instruments Credit Losses. The Company monitors the credit quality of customer contract asset balances on an individual basis, at each reporting date, through credit characteristics, geographic location, and the industry in which the customers operate. The Company recognizes an impairment on contract assets if, subsequent to contract inception, it becomes probable payment is not collectible. An allowance for expected credit loss reflects losses expected over the remaining term of the contract asset and is determined based upon historical losses, customer-specific factors, and current economic conditions. The potential impact of credit losses on contract assets was immaterial as of March 31, 2024.
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The Company’s contract assets and contract liabilities were as follows as of March 31, 2024 and June 30, 2023:
March 31, 2024June 30, 2023
(Dollars in Thousands)
Contract assets$907,196 $903,643 
Contract liabilities(167,952)(181,553)
Net contract assets$739,244 $722,090 
The majority of the Company’s contract balances are related to arrangements where revenue is recognized at a point in time and payments are made according to a contractual billing schedule. The change in the net contract asset balance during the nine months ended March 31, 2024 was primarily due to greater revenue recognition as compared to billings. Revenue recognized from the contract liability balance as of June 30, 2023, was $23.8 million and $112.1 million for the three and nine months ended March 31, 2024, respectively.
Transaction Price Allocated to Remaining Performance Obligations
The following table includes the aggregate amount of the transaction price allocated as of March 31, 2024 to the performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period:
Year Ending June 30,
20242025202620272028ThereafterTotal
(Dollars in Thousands)
License and solutions$75,529 $116,533 $50,467 $20,546 $7,495 $2,724 $273,294 
Maintenance84,621 275,169 200,500 141,483 94,010 65,330 861,113 
Services and other23,216 69,346 33,389 15,099 7,129 290 148,469 
Total$183,366 $461,048 $284,356 $177,128 $108,634 $68,344 $1,282,876 
Disaggregated Revenue Information
The table below reflects disaggregated revenues by business for the three months and nine months ended March 31, 2024 and 2023:
Three Months Ended March 31,Nine Months Ended March 31,
2024202320242023
(Dollars in Thousands)
Heritage AspenTech$178,621 $155,481 $521,801 $499,328 
Subsurface Science & Engineering
43,665 36,854 96,320 99,569 
DGM55,820 37,543 166,456 124,638 
Total$278,106 $229,878 $784,577 $723,535 
The Company did not have any customers that accounted for 10 percent or more of the Company’s revenues for the three and nine months ended March 31, 2024 and 2023, respectively.
4.    Acquisitions 
Inmation Software GmbH
On August 29, 2022, the Company completed the acquisition of inmation Software GmbH (“Inmation”) for total cash consideration of $87.2 million. The purchase price consisted of $78.9 million of cash paid at closing and an additional $8.3 million in indemnification holdbacks, which was paid on August 18, 2023. The total cash acquired from Inmation was approximately $6.4 million resulting in a net cash payment of $72.5 million during the three months ended September 30, 2022. The Company recognized goodwill of $63.0 million (none of which is expected to be tax deductible) and identifiable intangible assets of $31.5 million, primarily consisting of developed technology and customer relationships, with a useful life of approximately five years for developed technology and seven years for customer relationships.
Prior to the closing date, Inmation was considered a related party to AspenTech as Emerson Electric Co. (“Emerson” or “Parent Company”), through one of its subsidiaries, held an equity-method investment in Inmation. At the time of close, $17.6 million was paid to Emerson in exchange for all its shares in Inmation, with another $1.9 million paid for an indemnification holdback 12 months after the close on August 18, 2023.
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5.    Intangible Assets 
Intangible assets consist of the following as of March 31, 2024 and June 30, 2023:
March 31, 2024
Developed TechnologyTrademarksCustomer Relationships and BacklogCapitalized Software and OtherTotal
(Dollars in Thousands)
Gross carrying amount$1,903,599 $464,400 $3,082,541 $24,026 $5,474,566 
Less: Accumulated amortization(484,828)(24,047)(649,197)(9,805)(1,167,877)
Net carrying amount$1,418,771 $440,353 $2,433,344 $14,221 $4,306,689 
June 30, 2023
Developed TechnologyTrademarksCustomer Relationships and BacklogCapitalized Software and OtherTotal
(Dollars in Thousands)
Gross carrying amount$1,903,599 $464,400 $3,082,541 $11,526 $5,462,066 
Less: Accumulated amortization(341,964)(13,821)(437,673)(8,951)(802,409)
Net carrying amount$1,561,635 $450,579 $2,644,868 $2,575 $4,659,657 
Of the total intangible assets net carrying amount of $4.3 billion as of March 31, 2024, $430.0 million relates to the registered trademarks associated with the Transaction (as defined in Note 15, “Related-Party Transactions”) that are not subject to amortization. Total intangible asset amortization expense was $122.0 million and $121.7 million during the three months ended March 31, 2024 and 2023, respectively, and $365.4 million and $364.2 million during the nine months ended March 31, 2024 and 2023, respectively.
6.    Goodwill
The changes in the carrying amount of goodwill during the nine months ended March 31, 2024 were as follows:
Carrying Value
(Dollars in Thousands)
Balance as of June 30, 2023
$8,330,811 
Foreign currency translation(1,312)
Balance as of March 31, 2024
$8,329,499 
7.    Leases
On December 26, 2023, the Company entered into an amendment to its existing lease agreement at its principal executive offices located in Bedford, Massachusetts (the “Lease Amendment”). Under the Lease Amendment, the Company: (i) extended the term of the existing lease for approximately 132,000 rentable square feet from March 2025 to March 2038, and (ii) obtained an additional approximate 23,000 rentable square feet of office space, also through March 2038.
The Company accounted for the Lease Amendment as a lease modification. Accordingly, the right-of-use assets and lease liabilities were remeasured using an incremental borrowing rate at the date of modification. This lease modification resulted in the recording of an additional right-of-use asset and lease liability of $32.9 million recognized on the condensed consolidated balance sheets as of the commencement date, which is reflected net of a $25.4 million leasehold improvement incentive to be reimbursed to the Company by the landlord under the Lease Amendment. As invoices are paid by the Company during construction of the improvements, the Company will increase the balances of the lease liability and construction-in-process assets, which is included within property, equipment and leasehold improvements, net in the condensed consolidated balance sheets. When placed into service, the construction-in-process assets will be reclassified to leasehold improvements and depreciated over the shorter of the remaining term of the Lease Amendment or the life of the underlying asset.
Operating lease costs are recognized on a straight-line basis over the term of the lease. The components of total lease expense for the three and nine months ended March 31, 2024 and 2023 are as follows:
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Three Months Ended March 31,Nine Months Ended March 31,
 2024202320242023
 (Dollars in Thousands)
Operating lease expense$5,199 $4,495 $14,688 $12,882 
Variable lease expense281 245 697 670 
Short term lease expense142 167 447 71 
Total lease expense$5,622 $4,907 $15,832 $13,623 
The following table summarizes the balances of the Company’s operating lease right-of-use assets and operating lease liabilities as of March 31, 2024 and June 30, 2023:
March 31, 2024June 30, 2023
(Dollars in Thousands)
Operating lease right-of-use assets$94,353 $67,642 
Current operating lease liabilities$13,698 $12,928 
Non-current operating lease liabilities$81,361 $55,442 
The weighted-average remaining lease term for operating leases was approximately 12 years and 9 years, and the weighted-average discount rate was approximately 4.0% and 3.0% as of March 31, 2024 and June 30, 2023, respectively.
The following table represents the future maturities of the Company’s operating lease liabilities as of March 31, 2024:
Fiscal Year Ending June 30,(Dollars in Thousands)
2024$3,811 
202511,977 
20268,895 
202713,015 
202812,818 
Thereafter103,186 
Total lease payments153,702 
Less: imputed interest(33,258)
Less: leasehold improvement incentives to be utilized(25,385)
Total lease maturities$95,059 
8.    Fair Value
The Company determines 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 the Company has 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 are reported at fair value utilizing quoted market prices in identical markets, or “Level 1 Inputs.” The Company’s cash equivalents consist of short-term money market instruments.
Equity method investments are reported at fair value calculated in accordance with the market approach, utilizing market consensus pricing models with quoted prices that are directly or indirectly observable, or “Level 2 Inputs.”
The following table summarizes financial assets and liabilities measured and recorded at fair value on a recurring basis in the accompanying condensed consolidated balance sheets as of March 31, 2024 and June 30, 2023, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
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March 31, 2024
 
Level 1 Inputs
Level 2 Inputs
 (Dollars in Thousands)
Cash equivalents$68,868 $— 
Equity method investments$— $2,424 
June 30, 2023
Level 1 Inputs
Level 2 Inputs
(Dollars in Thousands)
Cash equivalents$132,918 $— 
Equity method investments$— $2,673 
Financial instruments not measured or recorded at fair value in the accompanying condensed 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 Amended and Restated Credit Agreement (described below in Note 10, “Debt”) approximates its carrying value due to the floating interest rate.
9.     Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets consist of the following:
 March 31, 2024June 30, 2023
 (Dollars in Thousands)
Compensation-related$54,044 $62,162 
Accrued taxes7,229 7,921 
Professional fees4,144 6,265 
Acquisition related1,019 8,984 
Royalties and outside commissions504 654 
Other14,902 13,540 
Total accrued expenses and other current liabilities$81,842 $99,526 
10.    Debt
Credit Agreement with Related Party
On December 23, 2022, the Company entered into a credit agreement with Emerson (the “Emerson Credit Agreement”), which provided for an aggregate term loan commitment of $630.0 million. Under the terms of the Emerson Credit Agreement, the Company would have used the proceeds from borrowings under the Emerson Credit Agreement to pay, in part, the cash consideration for funding the acquisition of Mining Software Holdings Pty Ltd (“Micromine”) and to pay the fees and expenses incurred in connection with the Emerson Credit Agreement.
On August 18, 2023, the Emerson Credit Agreement was terminated in connection with the termination of the agreement to purchase Micromine. There was no amount outstanding under the Emerson Credit Agreement at the time it was terminated.
Amended and Restated Credit Agreement
The Company has an Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”) with JPMorgan Chase Bank, N.A. (“JPMorgan”) that provides for a $200.0 million secured revolving credit facility.
As of March 31, 2024, after considering eligible outstanding letters of credit allowable per the Amended and Restated Credit Agreement in the aggregate amount of $2.3 million, the Company had $197.7 million available for borrowing under the Amended and Restated Credit Agreement. Any outstanding balances of the indebtedness under the revolving credit facility will mature on December 23, 2024.
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The Amended and Restated Credit Agreement contains customary affirmative and negative covenants, including restrictions on incurring additional debt, liens, fundamental changes, asset sales, restricted payments (including dividends) and transactions with affiliates. There are also financial covenants measured at the end of each fiscal quarter including a maximum leverage ratio of 3.50 to 1.00 and a minimum interest coverage ratio of 2.50 to 1.00. As of March 31, 2024, the Company was in compliance with these covenants.
11.    Stock-Based Compensation 
The stock-based compensation expense under all equity plans and its classification in the condensed consolidated statements of operations for the three and nine months ended March 31, 2024 and 2023 are as follows:
Three Months Ended March 31,Nine Months Ended March 31,
 2024202320242023
 (Dollars in Thousands)
Cost of license and solutions$522 $832 $1,804 $2,752 
Cost of maintenance667 427 1,884 1,462 
Cost of services and other731 599 1,589 1,457 
Selling and marketing2,463 3,695 8,112 10,886 
Research and development3,343 5,972 11,615 13,831 
General and administrative5,181 11,318 20,813 33,632 
Total stock-based compensation$12,907 $22,843 $45,817 $64,020 
Stock Options
The table below summarizes activities related to stock options for the nine months ended March 31, 2024:
Number of SharesWeighted Average Exercise PriceWeighted Average Remaining Contractual Term
Aggregate Intrinsic Value(1)
(in years)(in thousands)
Outstanding as of June 30, 20231,005,826 $144.17 6.44$32,935 
Granted1,471 $171.56 
Exercised(132,771)$140.42 
Cancelled / Forfeited(41,635)$184.13 
Outstanding as of March 31, 2024832,891 $160.81 5.93$58,787 
Exercisable as of March 31, 2024627,849 $130.04 5.23$52,292 
Vested and expected to vest as of March 31, 2024815,941 $141.91 5.89$58,329 
__________
(1)     The aggregate intrinsic value in this table represents any excess of the closing market price of the Company’s common stock as of March 31, 2024 ($213.28) over the exercise price of the underlying options.
Restricted Stock Units and Performance Stock Units
Restricted stock units and performance stock units are not included in issued and outstanding common stock until the units are vested and the underlying shares are settled. The table below summarizes activities related to restricted stock units and performance stock units for the nine months ended March 31, 2024:
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Number of Shares Underlying Performance Stock UnitsNumber of Shares Underlying Restricted Stock Units
(Dollars in Thousands)
Outstanding as of June 30, 2023 456,368 
Granted94,174 190,426 
Settled (268,705)
Forfeited(9,446)(40,789)
Outstanding as of March 31, 202484,728 337,300 
Weighted average remaining recognition period of outstanding restricted units (in years)2.252.38
Unrecognized stock-based compensation expense of outstanding restricted units$8,295 $50,982 
Aggregate intrinsic value of outstanding restricted units$12,684 $69,872 
The weighted average grant date fair value per restricted stock unit was $200.73 and $201.72 during the three months ended March 31, 2024 and 2023, respectively, and $193.86 and $208.79 during the nine months ended March 31, 2024 and 2023, respectively. The weighted average grant date fair value per performance stock unit was $194.03 during the nine months ended March 31, 2024. There were no performance stock units granted during the three months ended March 31, 2024, and there were no performance stock units granted or outstanding during the three and nine months ended March 31, 2023.
Beginning in fiscal 2024, the Company granted performance stock units with a performance condition and service condition. These performance stock units vest on a cliff basis in three years based upon the achievement of predefined performance goals, with the ability for 25% of granted awards to vest on an accelerated basis in each of the first two years. The performance goal relates to the sum of (i) annual contract value growth and (ii) free cash flow margin over the performance period. Up to 175% of the performance stock units could vest upon achievement of the performance goals. Conversely, if a minimum performance goal is not met, none of the performance stock units will vest. On a quarterly basis, management evaluates the probability that the threshold performance goals will be achieved, if at all, and the anticipated level of attainment to determine the amount of compensation expense to record in the condensed consolidated financial statements.
12.    Net Income (Loss) Per Share
Basic income (loss) per share is determined by dividing net income (loss) by the weighted average common shares outstanding during the period. Diluted income (loss) per share is determined by dividing net income (loss) by diluted weighted average shares outstanding during the period. Diluted weighted average shares reflect the dilutive effect, if any, of potential common shares. To the extent their effect is dilutive, employee equity awards and other commitments to be settled in common stock are included in the calculation of diluted net income (loss) per share based on the treasury stock method.
The calculations of basic and diluted net loss per share and basic and diluted weighted average shares outstanding for the three and nine months ended March 31, 2024 and 2023 are as follows:
Three Months Ended March 31,Nine Months Ended March 31,
2024202320242023
 (Dollars and Shares in Thousands, Except per Share Data)
Net income (loss)$1,556 $(57,635)$(54,469)$(135,076)
Basic weighted average shares outstanding63,508 64,796 63,844 64,622 
Dilutive impact from:    
Employee equity awards294 — — — 
Dilutive weighted average shares outstanding63,802 64,796 63,844 64,622 
Net income (loss) per share    
Basic$0.02 $(0.89)$(0.85)$(2.09)
Dilutive$0.02 $(0.89)$(0.85)$(2.09)
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For the three and nine months ended March 31, 2024, and 2023, certain employee equity awards were anti-dilutive based on the treasury stock method. The following employee equity awards were excluded from the calculation of diluted weighted average shares outstanding because their effect would be anti-dilutive as of March 31, 2024 and 2023:
Three Months Ended March 31,Nine Months Ended March 31,
 2024202320242023
 (Shares in Thousands)
Employee equity awards1,242 1,441 1,192 1,367 
13.    Stock Repurchases
On May 5, 2023, the Company entered into an accelerated share repurchase program (“ASR Program”) with JPMorgan to repurchase an aggregate of $100.0 million of the Company’s common stock. Pursuant to the terms of the ASR Program, the Company made an initial payment to JPMorgan and received an initial delivery of 487,626 shares of the Company’s common stock, which represented approximately 80% of the total number of shares of the Company’s common stock expected to be purchased under the ASR Program.
The ASR Program was settled on August 7, 2023, resulting in an additional delivery of 107,045 shares of the Company’s common stock. The Company repurchased in total 594,671 shares of common stock for $100.0 million as part of the ASR Program. The $100.0 million payment made to JPMorgan was recognized as a reduction to stockholders’ equity, consisting of an increase in treasury stock representing the value of the 594,671 shares received upon settlement, offset by an increase to additional-paid-in-capital for the value of the shares repurchased in excess of the $100.0 million payment.
On August 1, 2023, the Company announced that its Board of Directors approved a share repurchase program (the “Share Repurchase Authorization”) pursuant to which an aggregate $300.0 million of its common stock may be repurchased, by means of open market transactions, block transactions, privately negotiated purchase transactions or any other purchase techniques, including 10b5-1 trading plans. The timing and amount of any shares repurchased under the Share Repurchase Authorization are based on market conditions and other factors. All shares of the Company’s common stock repurchased have been recorded as treasury stock under the cost method. The Company reflects share repurchases in its condensed consolidated financial statements once the transaction is settled.
During the third quarter of fiscal 2024, the Company repurchased 288,241 shares for $56.7 million under the Share Repurchase Authorization. As of March 31, 2024, a total of 1,243,080 shares have been repurchased under the Share Repurchase Authorization for $243.1 million, with the total remaining value being $56.9 million.
14.    Benefit for Income Taxes
The Company computes its tax provision (benefit) for interim periods by applying the estimated annual effective tax rate (“AETR”) to year-to-date income from operations and adjusting for discrete items arising in that quarter. However, if the Company is unable to make a reliable estimate of its AETR, then the actual effective tax rate for the year-to-date period may be the best estimate. For the three months ended September 30, 2022, the Company computed its tax provision (benefit) using the AETR approach. However, starting with the six months ended December 31, 2022, the Company recorded the actual effective tax rate as it was determined that the AETR approach was not the most appropriate estimate to be applied to the year-to-date pre-tax (loss) income given small changes in the forecast of pre-tax (loss) income would result in significant changes in the AETR. For the three and nine months ended March 31, 2024, the Company again recorded the actual effective tax rate as it was determined that the AETR approach was not the most appropriate estimate.
Benefit for income taxes was $9.1 million and $24.2 million for the three months ended March 31, 2024 and 2023, respectively, resulting in effective tax rates of 120.6% and 29.5%, respectively. Income tax benefit decreased primarily due to an increase in pre-tax profitability in our domestic and foreign operations.
Benefit for income taxes was $42.2 million and $68.1 million for the nine months ended March 31, 2024 and 2023, respectively, resulting in effective tax rates of 43.7% and 33.5%, respectively. Income tax benefit decreased primarily due to an increase in pre-tax profitability in our domestic and foreign operations.
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15.    Related-Party Transactions
On October 10, 2021, Emerson entered into a definitive agreement (the “Transaction Agreement”) with AspenTech Corporation (f/k/a Aspen Technology, Inc.) (“Heritage AspenTech”) to contribute the Emerson industrial software business (the “Industrial Software Business”), along with $6.014 billion in cash, to create AspenTech (the “Transaction”). The Industrial Software Business included the DGM business and the Subsurface Science & Engineering (“SSE”) business. The Transaction closed on May 16, 2022 (“Closing Date”). Emerson owned approximately 56% of AspenTech on a fully diluted basis as of March 31, 2024.
The Company utilizes some aspects of Emersons centralized treasury function to manage the working capital and financing needs of its business operations. This function oversees a cash pooling arrangement which sweeps certain Company cash accounts into pooled Emerson cash accounts on a daily basis and are reflected as receivables from related parties in the condensed consolidated balance sheets. Conversely, any cash funded to the Company from these pooled Emerson cash accounts are reflected as due to related parties in the condensed consolidated balance sheets. The aggregate net activity between the Company and Emerson associated with the cash pooling arrangement is reflected within cash flows from financing activities as net transfers from parent within the condensed consolidated statements of cash flows.
Before the closing of the Transaction, the Industrial Software Business was charged for costs directly attributable to the DGM and SSE businesses and was allocated a portion of Emerson’s costs, including general corporate costs, information technology costs, insurance and other benefit costs, and shared service and other costs. All of these costs are reflected in the Company’s condensed consolidated financial statements. Management believes the methodologies and assumptions used to allocate these costs are reasonable.
At the closing of the Transaction, Emerson and the Company entered into a transition service agreement (the “Transition Service Agreement”) for the provision of certain transitionary services from Emerson to the Company. Pursuant to the Transition Service Agreement, Emerson provides the Company with certain services, including information technology, human resources and other specified services, as well as access to certain of Emerson’s existing facilities. Transition Service Agreement related activities have been recorded as cost of goods sold or operating expenses from related parties and resulting balances have been presented as receivable from or due to related parties in the condensed consolidated financial statements.
In connection with the closing of the Transaction, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) and a tax matters agreement (the “Tax Matters Agreement”) with Emerson. The Registration Rights Agreement grants Emerson certain market registration rights, including demand registration rights and piggyback registration rights, with respect to its registrable securities. The Company has agreed to pay out-of-pocket fees and expenses in connection with such registration, subject to certain exceptions. The Tax Matters Agreement governs the rights and obligations that the Company and Emerson have with respect to taxes of the Company and certain Emerson subsidiaries. In addition, under the terms of the Tax Matters Agreement, the Company agreed to indemnify Emerson and its affiliates against any and all tax-related liabilities incurred by them relating to the Transaction and certain related business reorganizations to the extent such tax-related liabilities are caused by any action taken by the Company.
Receivables from related parties and due to related parties reported in the condensed consolidated balance sheets as of March 31, 2024 and June 30, 2023 include the following:
March 31, 2024June 30, 2023
(Dollars in Thousands)
Interest bearing receivables from related parties$68,767 $61,948 
Trade receivables from related parties330 427 
Receivables from related parties$69,097 $62,375 
Interest bearing payables to related parties$67,805 $21,866 
Trade payables to related parties149 153 
Due to related parties$67,954 $22,019 
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Allocations and charges from Emerson are as follows:
Three Months Ended March 31,Nine Months Ended March 31,
2024202320242023
(Dollars in Thousands)
Information technology$176 $677 $1,522 $2,251 
Shared services and other$262 $850 $807 $4,745 
Corporate costs, human resources, and insurance and other benefits are recorded in general and administrative expenses and information technology, facility charges, and shared services and other are allocated to cost of goods sold and operating expenses based on systemic methods.
Before the closing of the Transaction, the DGM and SSE businesses engaged in various transactions to sell software and purchase goods in the ordinary course of business with affiliates of Emerson. At the closing, the Company and Emerson entered into a commercial agreement to allow Emerson to distribute software and services from the Company (the “Commercial Agreement”). Pursuant to the Commercial Agreement as amended from time to time in accordance with the Stockholders Agreement (as defined below), AspenTech grants Emerson the right to distribute, on a non-exclusive basis, certain (i) existing Heritage AspenTech products, (ii) existing Emerson products transferred to AspenTech pursuant to the Transaction Agreement and (iii) future AspenTech products as mutually agreed upon, in each case, to end-users through Emerson acting as an agent, reseller or original equipment manufacturer. Commercial Agreement-related activities have been recorded as revenues and expenses from related parties and resulting trade balances have been presented as trade receivables from related parties in the condensed consolidated financial statements. Revenue and purchases from Emerson affiliates for the three and nine months ended March 31, 2024 and 2023 are as follows:
Three Months Ended March 31,Nine Months Ended March 31,
2024202320242023
(Dollars in Thousands)
Revenue from Emerson affiliates$351 $4 $661 $12 
Purchases from Emerson affiliates$124 $116 $313 $331 
Emerson Share Maintenance Rights
Immediately following the closing of the Transaction, Emerson beneficially owned 55% of the fully diluted shares of AspenTech common stock. At the Closing Date, the Company and Emerson entered into a stockholders agreement (the “Stockholders Agreement”), which sets forth, among other matters, the right of Emerson to nominate directors to the Company’s board of directors, the right of Emerson to nominate the chair of the Company’s board of directors, the composition of the committees of the Company’s board of directors, certain consent rights of Emerson to certain material actions taken by the Company and consent rights with respect to modifications or changes to the Company’s business strategy. Under the Stockholders Agreement, Emerson also has the right to acquire additional equity securities of AspenTech pursuant to pre-agreed procedures and rights in order to maintain its ownership interest. No additional shares of common stock, or any other equity securities of AspenTech, were issued by the Company to Emerson subsequent to the closing of the Transaction through March 31, 2024.
Business Combination with Related Party
The Inmation acquisition completed on August 29, 2022 was considered a related party transaction. Refer to Note 4, “Acquisitions”, to our condensed consolidated financial statements for further discussion.
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Credit Agreement with Related Party
On December 23, 2022, the Company entered into the Emerson Credit Agreement with Emerson, which provided for an aggregate term loan commitment of $630.0 million, and on August 18, 2023, the Emerson Credit Agreement was terminated in connection with the termination of the agreement to purchase Micromine. There was no amount outstanding under the Emerson Credit Agreement at the time it was terminated. Refer to Note 10, “Debt”, to our condensed consolidated financial statements for further discussion.
Plantweb Optics Analytics
On July 28, 2023, the Company entered into the Plantweb Optics Analytics Assignment and License Agreement with Emerson for the purchase of Emerson’s Plantweb Optics Analytics software and the perpetual and royalty-free licensing of other Emerson intellectual property for $12.5 million in the aggregate.
The Company is continuing to integrate the purchased software and licensed intellectual property with its existing asset performance management product suite and accordingly has capitalized the full purchase price in accordance with ASC 985-20, “Costs of Software to be Sold, Leased, or Marketed.”
16.    Segment and Geographic Information
The Company operates in one operating and reportable segment. The Company’s chief operating decision maker is its President and Chief Executive Officer, who makes operating decisions, assesses performance and allocates resources on a consolidated basis.
Geographic Information
Summarized below is information about the Company’s geographic operations:
Revenue by Destination
Three Months Ended March 31,Nine Months Ended March 31,
2024202320242023
(Dollars in Thousands)
Americas$121,704 $115,614 $403,078 $360,935 
Asia, Middle East and Africa78,165 58,881 192,880 174,595 
Europe78,237 55,383 188,619 188,005 
Total$278,106 $229,878 $784,577 $723,535 
Americas included revenue in the United States of $104.1 million and $89.4 million for the three months ended March 31, 2024 and 2023, respectively, and $332.8 million and $289.9 million for the nine months ended March 31, 2024 and 2023, respectively.
Property, Equipment, and
Leasehold Improvements, Net
March 31, 2024June 30, 2023
(Dollars in Thousands)
Americas$13,438 $15,793 
Asia, Middle East and Africa1,775 1,923 
Europe1,201 954 
Total$16,414 $18,670 
Property, equipment, and leasehold improvements, net located in the United States were $11.3 million and $13.4 million as of March 31, 2024 and June 30, 2023, respectively.
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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Caution Concerning Forward-Looking Statements
Statements in this Quarterly Report on Form 10-Q that are not strictly historical may be “forward-looking” statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties, and AspenTech undertakes no obligation to update any such statements to reflect later developments. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “strategy,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” “opportunity” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These risks and uncertainties include, without limitation: the failure to realize the anticipated benefits of our transaction with Emerson; risks resulting from our status as a controlled company; the scope, duration and ultimate impacts of the Russia-Ukraine war and the Israeli-Hamas conflict; as well as economic and currency conditions, market demand (including related to adverse changes in the process or other capital-intensive industries such as materially reduced spending budgets due to oil and gas price declines and volatility), pricing, protection of intellectual property, cybersecurity, natural disasters, tariffs, sanctions, competitive and technological factors, inflation; and others, including those described in “Item 1A. Risk Factors” of Part II in this Quarterly Report on Form 10-Q and those described in our most recent Annual Report on Form 10-K and subsequent reports filed with the SEC. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Any forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update any forward-looking statements, whether as a result of new information or developments, future events or otherwise, except as required by law. You should read the following discussion in conjunction with our condensed consolidated financial statements and related notes thereto contained in this report. You should also read “Item 1A. Risk Factors” of Part II in this Quarterly Report on Form 10-Q for a discussion of important factors that could cause our actual results to differ materially from our expectations.
Our fiscal year ends on June 30, and references in this Quarterly Report on Form 10-Q to a specific fiscal year are to the twelve months ended June 30 of such year (for example, “fiscal 2024” refers to the year ending June 30, 2024).
Business Overview 
We are a global leader in industrial software focused on helping customers in asset-intensive industries address the world’s dual challenge of meeting the increasing demand for resources from a rapidly growing population with the expectation of a higher living standard in a profitable and sustainable manner. Our solutions address complex environments where it is critical to optimize across the full asset lifecycle - asset design, operation, and maintenance - enabling customers to run their assets safer, greener, longer and faster. Thousands of companies, ranging from multi-national corporations to start-ups, rely on our software to help them run their assets more profitably, resiliently, and sustainably to meet their operational excellence and sustainability goals.
We help customers solve some of their most critical challenges via our purpose-built software that combines engineering first principles, deep industry domain knowledge, and advanced technologies. We drive significant value creation through our decades of experience in modeling, simulation, and optimization technologies. The operational challenges we help our customers solve include, among others, how to maintain maximum efficiency in process operations, manage electrical grids amid the growth in renewable energy sources, ensure supply chain resiliency, and reduce carbon emissions.
Our software also seeks to help companies develop new processes that can be scaled to support the energy transition and a net zero future, such as green hydrogen, biofuels, carbon capture utilization and storage and circularity of plastics.
By combining the software capabilities, deep domain expertise and leadership of Heritage AspenTech with the DGM and SSE businesses, we expanded our served markets, augmented our expertise and sales channels, and broadened our portfolio to include five product suites: Performance Engineering (“ENG”), Manufacturing and Supply Chain (“MSC”), Asset Performance Management (“APM”), DGM, and SSE. These suites are supported by DataWorks Industrial Data Management ("DataWorks"), our industry-leading platform with advanced capabilities in data contextualization, structuring and cleansing, and enables AspenTech customers to better manage their industrial data at scale.
Recent Events
On August 1, 2023, the Company announced that its Board of Directors approved the Share Repurchase Authorization pursuant to which an aggregate $300.0 million of its common stock may be repurchased. During the third quarter of fiscal 2024,
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the Company repurchased 288,241 shares for $56.7 million under the Share Repurchase Authorization. As of March 31, 2024, a total of 1,243,080 shares have been repurchased under the Share Repurchase Authorization for $243.1 million, with the total remaining value being $56.9 million.
Key Business Metrics
Background
We utilize key business metrics to track and assess the performance of our business. We have identified the following set of appropriate business metrics in the context of our evolving business:
Annual contract value (“ACV”)
Total contract value (“TCV”)
Bookings
We also use the following non-GAAP business metrics in addition to GAAP measures to track our business performance:
Free cash flow
Non-GAAP income from operations
We make these measures available to investors and none of these metrics should be considered as an alternative to any measure of financial performance calculated in accordance with GAAP.
Annual Contract Value
ACV is an estimate of the annual value of our portfolio of term license and software maintenance and support (“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 our business.
Comparing ACV for different dates can provide insight into the growth and retention rates of our recurring software business because ACV represents the estimated annual billings associated with our recurring license and SMS agreements at any point in time. Management uses the ACV business metric to evaluate the growth and performance of our business as well as for planning and forecasting purposes. We believe that ACV is a useful business metric to investors as it provides insight into the growth component of our software business.
ACV generally increases as a result of new term license and SMS agreements with new or existing customers, renewals or modifications of existing term license agreements that result in higher license fees due to contractually-agreed price escalation or an increase in the number of tokens (units of software usage) or products licensed, or an increase in the value of licenses delivered.
ACV is adversely affected by term license and SMS agreements that are renewed at a lower entitlement level or not renewed, a decrease in the value of licenses delivered, and, to a lesser extent, by customer agreements that become inactive during the agreement’s term because, in our determination, amounts due (or which will become due) under the agreement are not collectible. As ACV is an estimate of annual billings, it will generally not include contracts with a term of less than one year. Because ACV represents all other active term software and SMS agreements, it may include amounts under agreements with customers that are delinquent in paying invoices, that are in bankruptcy proceedings, and agreements that are subject to termination by the customer or where payment is otherwise in doubt.
As of March 31, 2024, customer agreements representing approximately 84.5% of our ACV (by value) were denominated in U.S. dollars. For agreements denominated in other currencies, we use a fixed historical exchange rate to calculate ACV in U.S. dollars rather than using current exchange rates, so that our calculation of growth in ACV is not affected by fluctuations in foreign currencies.
For term license agreements that contain professional services or other products and services, we have included the portion of those agreements that are reflective of the relative fair value of the term license, rather than the portion of the actual invoice attributed to the term license, as outlined in the agreement within ACV. We believe that this methodology more accurately allocates any discounts or premiums to the different elements of the agreement.
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We estimate that ACV grew by approximately 9.5%, from $854.6 million as of March 31, 2023 to $936.1 million as of March 31, 2024.
Total Contract Value
TCV is the aggregate value of all payments received or to be received under all active term license and SMS agreements, including maintenance and escalation. TCV was $3.9 billion and $3.5 billion as of March 31, 2024 and 2023, respectively.
Bookings
Bookings is the total value of customer term license and SMS contracts signed and delivered in the current period, less the value of such contracts signed in the current period where the initial licenses and SMS agreements are not yet deemed delivered, plus the value of term license contracts and SMS contracts signed in a previous period for which the initial licenses are deemed delivered in the current period.
Bookings were $301.2 million during the three months ended March 31, 2024, compared to $231.3 million during the three months ended March 31, 2023. Bookings were $746.4 million during the nine months ended March 31, 2024, compared to $698.1 million during the nine months ended March 31, 2023. The change in bookings is related to the timing of renewals.
Non-GAAP Business Metrics
Free cash flow (non-GAAP) excludes certain non-cash and non-recurring expenses, and is used as a supplement to net cash provided by operating activities presented on a GAAP basis. We believe that free cash flow (non-GAAP) is a useful financial measure because it permits investors to view our performance using tools that our management uses to gauge progress in achieving goals and as an indication of cash flow that may be available to fund future investments and other capital uses, such as to repay borrowings under our credit facilities or to fund acquisitions or share repurchase programs.
The following table provides a reconciliation of net cash provided by operating activities (GAAP) to free cash flow (non-GAAP) for the indicated periods:
 Nine Months Ended March 31,
 20242023
(Dollars in Thousands)
Net cash provided by operating activities (GAAP)$184,950 $185,650 
Purchase of property, equipment, and leasehold improvements(2,579)(4,515)
Payments for capitalized computer software development costs(131)(347)
Free cash flow (non-GAAP) (1)
$182,240 $180,788 
__________
(1)     For the interim period beginning January 1, 2023, we no longer exclude acquisition and integration planning related payments from our computation of free cash flow. Free cash flow for all prior periods presented has been revised to the current period computation methodology.
Non-GAAP income from operations excludes certain non-cash and non-recurring expenses, and is used as a supplement to loss from operations presented on a GAAP basis. We believe that non-GAAP income from operations is a useful financial measure because removing certain non-cash and other items provides additional insight into recurring profitability and cash flow from operations.
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The following table provides a reconciliation of GAAP loss from operations to non-GAAP income from operations for the indicated periods:
Three Months Ended March 31,Nine Months Ended March 31,
2024202320242023
(Dollars in Thousands)
GAAP loss from operations$(19,294)$(78,473)$(128,749)$(189,050)
Plus:
Stock-based compensation12,907 22,843 45,817 64,020 
Amortization of intangibles (1)
121,749 121,639 364,901 363,960 
Acquisition and integration planning related fees945 761 815 7,030 
Non-GAAP income from operations$116,307 $66,770 $282,784 $245,960 
__________
(1)     The Company has increased amortization of intangible assets following the close of the Transaction with Emerson. As a result, the Company expects its amortization of intangibles assets to remain at higher levels for the next several years as the related asset balance is amortized over the respective expected useful lives of the intangible assets.
Critical Accounting Estimates and Judgments
Note 2, “Significant Accounting Policies,” to the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 describes the significant accounting policies and methods used in the preparation of the condensed consolidated financial statements appearing in this report. The accounting policies that reflect our critical estimates, judgments and assumptions in the preparation of our condensed consolidated financial statements are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.
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Results of Operations
Comparison of the Three Months Ended March 31, 2024 and 2023
The following table sets forth the results of operations, the period-over-period percentage change, and the results of operations as a percentage of total revenue in certain financial data for the three months ended March 31, 2024 and 2023:
Three Months Ended March 31,Increase / (Decrease) Change(% of Revenue)
 20242023$%20242023
 (Dollars in Thousands)
Revenue:     
License and solutions$169,467 $136,292 $33,175 24.3 %60.9 %59.3 %
Maintenance86,256 77,283 8,973 11.6 31.0 33.6