A month has gone by since the last earnings report for Aspen Technology (AZPN). Shares have added about 3.2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Aspen Technology due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Aspen Q1 Earnings & Revenues Miss Estimates

Aspen reported first-quarter fiscal 2025 non-GAAP earnings per share  (EPS) of 85 cents, missing the Zacks Consensus Estimate of $1.51. It reported non-GAAP earnings of $1.16 per share in the year-ago quarter.

The company reported revenues of $215.9 million, missing the Zacks Consensus Estimate by 20.2%. The company generated revenues of $249.3 million in the year-ago quarter.

Quarter in Detail

License’s revenues (47.1% of revenues) were down 31.6% year over year to $101.7 million. Maintenance’s revenues (42% of revenues) rose 6.7% to $90.7 million.Revenues from Services and other (10.9% of revenues) surged 49.7% from the year-ago quarter to $23.5 million.

As of Sept. 30, 2024, annual contract value or ACV ( which Aspen Technology defines as the estimate of the annual value of our portfolio of term license and software maintenance and support, or SMS, contracts, the annual value of SMS agreements purchased with perpetual licenses and the annual value of standalone SMS agreements purchased with certain legacy term license agreements, which have become an immaterial part of its business) amounted to $941.4 million, up 9.4% year over year and 0.9% quarter over quarter. 

AspenTech’s Digital Grid Management (DGM) suite is experiencing strong demand, with a growing global pipeline. Recently, a leading U.S. utility adopted the company’s latest Distributed Energy Resources Management (DERMS) capabilities to help meet clean energy targets and support its net-zero initiatives. 

AspenTech also announced its agreement to acquire Open Grid Systems, which will enhance its DGM suite with advanced network model management and data infrastructure. The deal is expected to close before the end of 2024.

AspenTech’s heritage Engineering suite momentum continues with robust demand from traditional energy and sustainability projects. The HVS team had a strong first quarter, securing numerous wins in sustainability use cases and new logos.

AspenTech is targeting a $14-15 billion addressable market in industrial software. In the first quarter, it released aspenONE version 14.5 with key software updates in industrial artificial intelligence (AI) and sustainability. The company also launched a Microgrid Management System (MMS), leveraging an Industrial AI approach designed for power-intensive industries like chemicals, mining and refining.

Margins

Gross profit decreased to $120.4 million from the year-ago quarter’s figure of $151.3 million. As a percentage of total revenues, the figure reached 55.8% from 60.7% reported in the prior-year quarter.

Total operating expenses amounted to $216.4 million compared with the year-ago quarter’s figure of $211.5 million.

Non-GAAP operating income totaled $48.6 million compared with $77.8 million reported in the prior-year quarter.

Balance Sheet & Cash Flow

As of Sept. 30, 2024, cash and cash equivalents were $221.1 million compared with $237 million as of June 30, 2024. The decrease was due to the effects of share repurchases under the company’s fiscal 2025 buyback program.

The company used $4.4 million in cash from operations against $17 million generated from cash from operations reported in the year-ago quarter. Non-GAAP free cash outflow was $6.4 million in the fiscal first quarter compared with free cash flow of $16 million in the prior-year quarter. This difference in cash flows from the prior year was mainly attributed to payments associated with the workforce reduction as part of Russia’s exit during this quarter.

In the first quarter of fiscal 2025, Aspen repurchased 92,819 shares for a total of $20.5 million. As of Sept. 30, 2024, approximately $79.5 million remained under the share buyback authorization.

Fiscal 2025 Guidance Reiterated

AspenTech reaffirmed its fiscal 2025 guidance.

For fiscal 2025, Aspen expects revenues to be at least $1.19 billion.Non-GAAP net income is now anticipated to be no less than $7.52 per share.

Management projects ACV growth to be at least 9% from a year ago and total bookings to be no less than $1.17 billion. 

Non-GAAP operating income is now estimated to be approximately $514 million. Non-GAAP total expenses are expected to be nearly $675 million. Free cash flow is projected to be at least $340 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

The consensus estimate has shifted 23.97% due to these changes.

VGM Scores

At this time, Aspen Technology has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Aspen Technology has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Aspen Technology belongs to the Zacks Internet - Software industry. Another stock from the same industry, Snap (SNAP), has gained 5.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.

Snap reported revenues of $1.37 billion in the last reported quarter, representing a year-over-year change of +15.5%. EPS of $0.08 for the same period compares with $0.02 a year ago.

For the current quarter, Snap is expected to post earnings of $0.13 per share, indicating a change of +62.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -13.2% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Snap. Also, the stock has a VGM Score of D.

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