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Aspen Technology, Inc. (AZPN)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY25 revenue declined to $215.9M, driven by renewal timing and an unusually high concentration of attrition; non‑GAAP EPS was $0.85 and GAAP EPS was -$0.96 as license revenue stepped down year over year, while maintenance and services rose .
  • Annual contract value (ACV) reached $941.4M (+9.4% y/y; +0.9% q/q) and free cash flow was -$6.4M, modestly below plan due to collections timing; management reiterated FY25 targets including ~9% ACV growth and ~$340M FCF .
  • Management issued Q2 FY25 revenue guidance of $290–$300M and reaffirmed all FY25 guidance; EPS guidance per share was raised slightly due to Q1 buybacks (+$0.01 GAAP, +$0.05 non‑GAAP) .
  • Strategic catalyst: announced acquisition of Open Grid Systems to strengthen Digital Grid Management (DGM) with network model management amid regulatory tailwinds in Europe and rising grid complexity from renewables and electrification .

What Went Well and What Went Wrong

  • What Went Well

    • ACV grew 9.4% y/y to $941.4M; management highlighted resilient demand and reiterated FY25 outlook for ~9% ACV growth and ~$340M FCF .
    • DGM momentum continued with international traction and tuck‑in acquisition of Open Grid Systems to meet European regulatory requirements and broaden utility data governance capabilities .
    • New product innovation launched (aspenONE v14.5; microgrid solution) and notable customer ROI evidence (e.g., GDOT generating $28M and $10M savings in two implementations) .
      • “In two recent customer implementations, we have identified more than $28 million and $10 million of savings from the deployment of our multiunit dynamic optimization, GDOT product.”

  • What Went Wrong

    • Revenue fell y/y to $215.9M (from $249.3M), with license and solutions down to $101.7M (from $148.6M), reflecting renewal timing and higher attrition in the quarter; non‑GAAP op income decreased to $48.6M .
    • Free cash flow was -$6.4M vs $16.0M a year ago due to one‑time Russia exit/restructuring payments and collections timing in certain geographies .
    • Collections timing issues led to softer Q1 cash flow; management is tightening monitoring and coordination with sales to improve predictability .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Revenue ($USD Millions)$278 $343 $215.9
GAAP Diluted EPS ($)N/A$2.37 $(0.96)
Non-GAAP Diluted EPS ($)$1.70 N/A$0.85
Non-GAAP Operating Margin (%)41.8% 50.6% 22.5%
ACV ($USD Millions)$936 $968 (pre-Russia write-off; balances reset to $933 post write-off) $941.4
Bookings ($USD Millions)$301 $416 $151.4
Cash from Operations ($USD Millions)$138 $155 $(4.4)
Free Cash Flow ($USD Millions)$137 $153 $(6.4)

Revenue mix (Q1 FY25 vs Q1 FY24):

Revenue Component ($USD Millions)Q1 2024Q1 2025
License and Solutions$148.6 $101.7
Maintenance$85.0 $90.7
Services and Other$15.7 $23.5
Total Revenue$249.3 $215.9

Additional KPIs:

  • Cash & equivalents: $221.1M (9/30/24); revolver availability $194.5M .
  • Share repurchases: 92,819 shares for ~$20.5M in Q1; ~$79.5M remaining under FY25 authorization .

Notes:

  • Management attributes Q1 revenue/bookings softness to renewal timing and elevated Q1 attrition concentration; ACV growth cadence expected to follow historical patterns .
  • Most FY25 free cash flow is expected in 2H due to one‑time payments and collections timing .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
ACV GrowthFY2025~9% y/y ~9% y/y Maintained
Free Cash Flow ($M)FY2025~$340 ~$340 Maintained
GAAP Operating Cash Flow ($M)FY2025~$357 ~$357 Maintained
Total Bookings ($B)FY2025~$1.17 ~$1.17 Maintained
Total Revenue ($B)FY2025~$1.19 ~$1.19 Maintained
GAAP Net Income ($M)FY2025~$52 ~$52 Maintained
Non-GAAP Net Income ($M)FY2025~$478 ~$478 Maintained
GAAP EPS ($)FY2025Prior per-share not explicitly disclosed; GAAP NI ~$52M ~$0.82 Raised +$0.01 (management)
Non-GAAP EPS ($)FY2025Prior per-share not explicitly disclosed; non‑GAAP NI ~$478M ~$7.52 Raised +$0.05 (management)
Non-GAAP Total Expense ($M)FY2025~$675 ~$675 Maintained
GAAP Total Expense ($M)FY2025~$1,213 ~$1,213 Maintained
Non-GAAP Operating Income ($M)FY2025~$514 ~$514 Maintained
Attrition (%)FY2025~4.5% (ex‑Russia) Commentary reaffirms ~4.5% for the year; Q1 concentrated Maintained
Revenue ($M)Q2 FY2025n/a (first issued)$290–$300 New

Earnings Call Themes & Trends

TopicQ3 2024 (Prior-2)Q4 2024 (Prior-1)Q1 2025 (Current)Trend
Digital Grid Management (DGM)Strong pipeline; utilities sales cycles long; targeting ~2.5 pts of FY24 growth ~40% FY24 DGM growth; large EU/N.A. wins; outage mgmt momentum Robust demand; EU regulatory-driven network model mgmt; Open Grid Systems acquisition to accelerate Positive, expanding internationally
Industrial AI / MicrogridV14.3 launched AI features; AVA expansions; Workflow automation Microgrid GA in v14.4, cross‑sell beyond utilities v14.5, more industrial AI; microgrid launch with early traction into chemicals/refining Productization and cross‑industry adoption
Chemicals & Refining MacroChemicals downturn pressure; cautious spending; refining favorable but mixed Refining strong in 2H; caution re FY25 refining margins Chemicals still soft; refiner investments continue despite margin pressure Chemicals weak; refining steady investment
Emerson PartnershipCalibrating APM go‑to‑market; focus where ROI is quantifiable Improved joint go‑to‑market; more benefits expected FY25 APM wins in upstream driven by Emerson relationships Increasing contribution to APM
APM StrategyUnderperformed; sharpen focus to reduce attrition Flat y/y; focusing on high‑ROI segments Notable wins; reiterated focused go‑to‑market Improving in targeted segments
Expense DisciplineDriving efficiencies; productivity focus Workforce reduction (~5%); flat expenses target; ~$25M annualized savings Second‑half FCF heavy due to one‑offs; reiteration of cost discipline Sustained margin focus
Russia Exitn/aACV reset ($933M) after write‑off; Q4 revenue -$5.5M ASC 606 impact One-time cash outflows in 1H FY25; restructuring costs noted One-offs largely front‑loaded

Management Commentary

  • Strategy and market positioning
    • “We remain confident in our fiscal year 2025 guidance which includes expectations for ACV growth of approximately 9% and free cash flow generation of approximately $340 million.”
    • “AspenTech is focused on a $14–15B TAM… tailwinds of ongoing digitalization, sustainability, the energy transition and global electrification.”
  • Grid investment and Open Grid Systems rationale
    • “The need for network model management capabilities was accelerated by regulations introduced in Europe… it made a lot of sense… that we would acquire [Open Grid Systems].”
    • “This acquisition will further enhance… DGM… supporting utilities in effectively managing grid complexity… ensuring resiliency.”
  • Customer ROI and product innovation
    • “We have identified more than $28M and $10M of savings from… GDOT” across two customers .
    • “In Q1, we released… v14.5… additional generative AI capabilities… and launched our new microgrid solution…”

Q&A Highlights

  • Macro/Spending and ACV cadence: Management sees budgets intact but near‑term spending intent cautious; expects ACV cadence to mirror historical patterns despite Q1 attrition concentration .
  • Microgrid/DGM opportunity: Microgrid to expand beyond utilities into chemicals, refining, mining, transportation; Open Grid Systems driven by European regulation and growing N.A. interest .
  • Collections/cash flow: Q1 FCF softness tied to administrative delays in specific geos; increased monitoring and earlier sales coordination to improve timing .
  • APM + Emerson: Two notable upstream wins; Emerson relationships and Mtell predictive capabilities shortened sales cycles .
  • Europe DGM pipeline: Expect increasing adoption; Open Grid Systems to sit atop Monarch and integrate with ADMS/DERMS .

Estimates Context

  • S&P Global consensus for Q1 FY25 and Q2 FY25 was unavailable via our data connection at this time (missing CIQ mapping for AZPN); as a result, we cannot quantify beat/miss versus consensus for revenue or EPS this quarter. We will update when S&P data becomes available.
  • Management provided Q2 FY25 revenue guidance of $290–$300M and reiterated FY25 targets, which may prompt estimate recalibration toward 2H‑weighted FCF and revenue linearity .

Key Takeaways for Investors

  • Q1 softness was largely mechanical (renewal/attrition/collections timing) rather than demand‑driven; ACV grew 9.4% y/y and full‑year targets were reaffirmed .
  • DGM remains a multi‑year growth vector with regulatory and electrification tailwinds; Open Grid Systems adds “single source of truth” network model management, strengthening competitive position in Europe and North America .
  • Underlying FCF is intact with 2H weighting; one‑offs (Russia exit/restructuring, collections) disproportionately impacted Q1 .
  • Innovation cadence (v14.5, microgrid, industrial AI) supports cross‑sell and token model leverage across asset‑intensive verticals .
  • APM execution recalibration is yielding early upstream wins via Emerson channel; focus on high‑ROI segments should reduce attrition risk .
  • Near‑term trading setup: watch Q2 revenue delivery ($290–$300M) and cash collections improvement; any acceleration in EMEA DGM deal closure or chemicals recovery would be incremental positives .
  • Medium‑term: sustained ACV growth with flat expenses targets supports margin expansion trajectory toward the 45–47% non‑GAAP operating margin model over time .

Sources

  • Q1 FY25 8‑K/Press Release and financial tables:
  • Q1 FY25 earnings call transcript (prepared remarks and Q&A):
  • Q4 FY24 and Q3 FY24 transcripts for trend analysis: