What led to Aspen Technology, Inc. (NASDAQ: AZPN) stock crash

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Aspen Technology, Inc. (NASDAQ: AZPN) stock lost over 14.3% on 30th January, 2020 (as of 11:13 am GMT-5; Source: Google finance) though the company posted lower than expected results for the second quarter of FY 20. The license revenue is heavily affected due to the timing of bookings and more specifically, renewal bookings. A decrease or increase in bookings between fiscal periods, resulted from a change in the amount of term license contracts up for renewal is not an indicator of the health or growth of the business. Annual spend, which represents the accumulated value of all the current invoices for the term license agreement at the end of each period was about $564 million at the end of the second quarter, which reflects an increase of about 10% on a year-over-year basis and 3% sequentially. The company has generated $46.9 million of cash from operations and $48.1 million of free cash flow after taking into consideration the net impact of capital expenditures, capitalized software and acquisition related payments.

AZPN in the second quarter of FY 20 has reported the adjusted earnings per share of 66 cents, missing the analysts’ estimates for the adjusted earnings per share of 79 cents, according to Zacks Investment Research. The company had reported 11 percent decline in the adjusted revenue to $124.7 million in the second quarter of FY 20, missing the analysts’ estimates for revenue of $134.6 million. Total expenses, including cost of revenue had risen to $83.1 million, which was up from $76.7 million in the year-ago period and down from $86.8 million last quarter. The rise in the year-over-year expense reflects the impact of the organic investments the company have been making in the business as well as the impact of the Nuvo and Sabisu acquisitions. The company has reported non-GAAP operating income of $50.9 million, which represents a 40.8% non-GAAP operating margin compared to non-GAAP operating income and margin of $71.2 million and 50.7%, respectively in the year-ago period.

Aspen Technology expects full-year earnings to be in the range of $3.43 to $3.84 per share, with revenue expected to be in the range of $575 million to $615 million. The company has updated the free cash flow guidance to be in the range of $260 million to $270 million compared to the prior outlook of $250 million to $260 million. The updated free cash flow guidance reflects lower expected cash tax payments in the range of $45 million to $50 million as compared to the prior view of $55 million to $60 million.

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