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 December 31, ~~2022~~2023

☐ 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: ~~333-262106~~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)

~~(781) 221-6400~~

(Registrant’s telephone number, including area code): (781) 221-6400

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common stock, $0.0001 par value per share

AZPN

~~NASDAQ~~Nasdaq 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 filer

oý

Accelerated filer

☐

Non-accelerated filer

ý☐

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 ~~64,771,272~~63,548,821 shares of common stock outstanding as of January ~~23, 2023.~~31, 2024.

Table of Contents

TABLE OF CONTENTS


		Page
	PART I - FINANCIAL INFORMATION

Item 1.	Financial ~~Statements.~~Statements (unaudited).	4
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended December 3 1 , 2023 and 2022	4
	Condensed Consolidated Statements of Comprehensive Loss for the Three and S ix Months Ended December 3 1 , 2023 and 2022	5
	Condensed Consolidated Balance Sheets as of December 3 1 , 2023 and June 30, 2023	6
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended December 3 1 , 2023 and 2022	7
	Condensed Consolidated Statements of Cash Flow for the Six Months Ended December 3 1 , 2023 and 2022	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	2021
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	3132
Item 4.	Controls and Procedures.	3332

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings.	34
Item 1A.	Risk Factors.	34
Item 2.	Unregistered Sales of Equity Securities, ~~and~~ Use of ~~Proceeds.~~Proceeds, and Issuer Purchases of Equity Securities.	35
Item 3.	Defaults upon Senior Securities.	35
Item 4.	Mine Safety Disclosures.	35
Item 5.	Other Information.	36
Item 6.	Exhibits.	3637
	SIGNATURES

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 ~~2023~~2024” refers to the year ending June 30, ~~2023)~~2024).

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Condensed Consolidated ~~and Combined~~ Financial Statements (unaudited)

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~AND COMBINED~~ STATEMENTS OF OPERATIONS

~~(Unaudited in Thousands, Except per Share Data)~~


	Three Months Ended December 31,												Three Months Ended December 31,		Six Months Ended December 31,
											2023	2022		2023		2022

		Three Months Ended December 31,				Six Months Ended December 31,
		2022		2021		2022		2021		(Dollars and Shares in Thousands, Except per Share Data)
Revenue:	Revenue:									Revenue:
License and solutions	License and solutions	$	149,843	$	48,491	$	310,068	$	92,706
Maintenance	Maintenance	78,628		26,272		156,994		50,807
Services and other	Services and other	14,367		7,012		26,595		15,277
Total revenue	Total revenue	242,838		81,775		493,657		158,790
Cost of revenue:	Cost of revenue:
License and solutions	License and solutions	70,833		33,221		140,346		67,609
License and solutions
License and solutions
Maintenance	Maintenance	9,567		4,074		18,784		8,308
Services and other	Services and other	12,698		4,282		25,098		9,180
Total cost of revenue	Total cost of revenue	93,098		41,577		184,228		85,097
Gross profit	Gross profit	149,740		40,198		309,429		73,693
Operating expenses:	Operating expenses:
Selling and marketing	Selling and marketing	117,951		17,995		236,225		42,995
Selling and marketing
Selling and marketing
Research and development	Research and development	49,954		15,383		99,695		30,938
General and administrative	General and administrative	41,230		7,036		84,086		13,653
Restructuring costs		—		38		—		245
Total operating expenses	Total operating expenses	209,135		40,452		420,006		87,831
(Loss) from operations		(59,395)		(254)		(110,577)		(14,138)
Other income (expense), net		38,643		(1,419)		(19,989)		(2,778)
Interest income (expense), net		4,120		(20)		9,143		(292)
(Loss) before provision for income taxes		(16,632)		(1,693)		(121,423)		(17,208)
Provision (benefit) for income taxes		49,565		(933)		(43,982)		(5,246)
Net (loss)		$	(66,197)	$	(760)	$	(77,441)	$	(11,962)
Net (loss) per common share:
Loss from operations
Other (expense) income, net
Interest income, net
Loss before benefit for income taxes
(Benefit) provision for income taxes
Net loss
Net loss per common share:
Basic
Basic
Basic	Basic	$	(1.02)	$	(0.02)	$	(1.20)	$	(0.33)
Diluted	Diluted	$	(1.02)	$	(0.02)	$	(1.20)	$	(0.33)
Weighted average shares outstanding:	Weighted average shares outstanding:
Basic	Basic	64,621		36,308		64,538		36,308
Basic
Basic
Diluted	Diluted	64,621		36,308		64,538		36,308

See accompanying notes to these unaudited condensed consolidated ~~and combined~~ financial statements.

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ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~AND COMBINED~~ STATEMENTS OF COMPREHENSIVE ~~INCOME~~

~~(Unaudited in Thousands)~~LOSS

Three Months Ended
December 31, Six Months Ended
December 31,
2022 2021 2022 2021
Net (loss) $ (66,197) $ (760) $ (77,441) $ (11,962)
Other comprehensive (loss) income:
Foreign currency translation adjustments 6,710 (110) (2,155) (25)
Pension, net of taxes — (1) — 717
Total other comprehensive (loss) income 6,710 (111) (2,155) 692
Comprehensive (loss) $ (59,487) $ (871) $ (79,596) $ (11,270)


	Three Months Ended December 31,				Six Months Ended December 31,
	2023		2022		2023		2022

	(Dollars in Thousands)
Net loss	$	(21,500)	$	(66,197)	$	(56,025)	$	(77,441)
Other comprehensive income (loss):
Foreign currency translation adjustments	4,870		6,710		(6,331)		(2,155)
Total other comprehensive income (loss)	4,870		6,710		(6,331)		(2,155)
Comprehensive loss	$	(16,630)	$	(59,487)	$	(62,356)	$	(79,596)

See accompanying notes to these unaudited condensed consolidated ~~and combined~~ financial statements.

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ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~AND COMBINED~~ BALANCE SHEETS

~~(Unaudited in Thousands, Except Share and Per Share Data)~~


	December 31, 2023		June 30, 2023

	(Dollars in Thousands, Except Share Data)
ASSETS
Current assets:
Cash and cash equivalents	$	130,753	$	241,209
Accounts receivable, net	129,837		122,789
Current contract assets, net	357,847		367,539
Prepaid expenses and other current assets	26,314		27,728
Receivables from related parties	61,479		62,375
Prepaid income taxes	3,021		11,424
Total current assets	709,251		833,064
Property, equipment and leasehold improvements, net	16,756		18,670
Goodwill	8,329,997		8,330,811
Intangible assets, net	4,428,636		4,659,657
Non-current contract assets, net	606,318		536,104
Contract costs	18,971		15,992
Operating lease right-of-use assets	97,035		67,642
Deferred income tax assets	11,392		10,638
Other non-current assets	9,488		13,474
Total assets	$	14,227,844	$	14,486,052

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	16,517	$	20,299
Accrued expenses and other current liabilities	81,059		99,526
Due to related parties	96,087		22,019
Current operating lease liabilities	13,810		12,928
Income taxes payable	28,988		46,205
Current contract liabilities	135,522		151,450
Total current liabilities	371,983		352,427
Non-current contract liabilities	35,036		30,103
Deferred income tax liabilities	867,927		957,911
Non-current operating lease liabilities	83,812		55,442
Other non-current liabilities	20,013		19,240
Stockholders’ equity:
Common stock, $0.0001 par value Authorized—600,000,000 shares Issued— 65,170,178 and 64,952,868 shares Outstanding— 63,620,668 and 64,465,242 shares	6		6
Additional paid-in capital	13,241,067		13,194,028
Accumulated deficit	(97,416)		(41,391)
Accumulated other comprehensive (loss) income	(3,895)		2,436
Treasury stock, at cost — 1,549,510 and 487,626 shares of common stock	(290,689)		(84,150)
Total stockholders’ equity	12,849,073		13,070,929
Total liabilities and stockholders’ equity	$	14,227,844	$	14,486,052

December 31,
2022 June 30,
2022
ASSETS
Current assets:
Cash and cash equivalents $ 446,088 $ 449,725
Accounts receivable, net 140,746 111,027
Current contract assets, net 419,714 428,833
Prepaid expenses and other current assets 23,750 23,461
Receivables from related parties 15,099 16,941
Prepaid income taxes — 17,503
Total current assets 1,045,397 1,047,490
Property, equipment and leasehold improvements, net 17,138 17,148
Goodwill 8,328,846 8,266,809
Intangible assets, net 4,902,442 5,112,781
Non-current contract assets, net 515,820 428,232
Contract costs 9,042 5,473
Operating lease right-of-use assets 71,426 78,286
Deferred tax assets 2,328 4,937
Other non-current assets 8,214 8,766
Total assets $ 14,900,653 $ 14,969,922
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable 12,975 21,416
Accrued expenses and other current liabilities 95,407 90,123
Liability from foreign currency forward contract 15,319 —
Due to related parties 32,284 4,111
Current operating lease liabilities 12,627 7,191
Income taxes payable 25,704 6,768
Current borrowings 264,000 28,000
Current contract liabilities 146,887 143,327
Total current liabilities 605,203 300,936
Non-current contract liabilities 29,707 21,081
Deferred income tax liabilities 1,040,094 1,145,408
Non-current operating lease liabilities 60,005 71,933
Non-current borrowings, net — 245,647
Other non-current liabilities 18,579 15,560
Stockholders’ equity:
Common stock, $0.0001 par value
Authorized—600,000,000 shares
Issued— 64,767,755 shares at December 31, 2022 and 64,425,378 shares at June 30, 2022
Outstanding— 64,767,755 shares at December 31, 2022 and 64,425,378 shares at June 30, 2022
6 6
Additional paid-in capital 13,164,874 13,107,570
Retained earnings (11,072) 66,369
Accumulated other comprehensive (loss) (6,743) (4,588)
Total stockholders’ equity 13,147,065 13,169,357
Total liabilities and stockholders’ equity $ 14,900,653 $ 14,969,922

See accompanying notes to these unaudited condensed consolidated ~~and combined~~ financial statements.

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ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~AND COMBINED~~ STATEMENTS OF ~~EQUITY/~~

STOCKHOLDERS’ EQUITY

~~(Unaudited in Thousands, Except Share Data)~~

Accumulated Other Comprehensive Income (Loss) Common Stock Additional Paid-in Capital Retained Earnings Total Equity/Stockholders’ Equity
Number of Shares Par Value
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 and net share settlement relating to withholding taxes — 71,547 — 8,489 — 8,489
Issuance of restricted stock units and net share settlement relating 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 (loss) 6,710 — — — — 6,710
Issuance of shares of common stock and net share settlement relating to withholding taxes — 202,506 — 16,977 — 16,977
Issuance of restricted stock units and net share settlement relating 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


	Accumulated Other Comprehensive Income (Loss)		Common Stock			Additional Paid-in Capital		Accumulated Deficit		Treasury Stock			Total Stockholders’ Equity
			Number of Shares	Par Value						Number of Shares	Cost

	(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 income	4,870		—	—		—		—		—	—		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 Parent Investment Accumulated Other Comprehensive Income (Loss) Total Equity/Stockholders’ Equity
Balance June 30, 2021 $ 1,772,671 $ (6,487) $ 1,766,184
Net Loss (11,202) — (11,202)
Net transfer from Parent Company 15,561 — 15,561
Other comprehensive income — 803 803
Balance September 30, 2021 $ 1,777,030 $ (5,684) $ 1,771,346
Net Loss (760) — (760)
Net transfer from Parent Company 18,118 — 18,118
Other comprehensive (loss) — (111) (111)
Balance December 31, 2021 $ 1,794,388 $ (5,795) $ 1,788,593


	Accumulated Other Comprehensive Loss		Common Stock			Additional Paid-in Capital		Retained Earnings		Total Equity/Stockholders’ Equity
			Number of Shares	Par 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 income	6,710		—	—		—		—		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

See accompanying notes to these unaudited condensed consolidated ~~and combined~~ financial statements.

Table of Contents

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~AND COMBINED~~ STATEMENTS OF CASH FLOWS

~~(Unaudited in Thousands)~~


				Six Months Ended December 31,
				Six Months Ended December 31,
				Six Months Ended December 31,
							2023	2022

		Six Months Ended December 31,
		2022		2021		(Dollars in Thousands)
Cash flows from operating activities:	Cash flows from operating activities:
Net (loss)		$	(77,441)	$	(11,962)
Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities:
Net loss
Net loss
Net loss
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization	Depreciation and amortization	245,102		54,084
Reduction in the carrying amount of right-of-use assets	Reduction in the carrying amount of right-of-use assets	6,562		3,067
Net foreign currency losses	Net foreign currency losses	4,744		3,013
Stock-based compensation	Stock-based compensation	41,177		826
Deferred income taxes	Deferred income taxes	(106,384)		(8,047)
Provision for uncollectible receivables	Provision for uncollectible receivables	3,228		43
Other non-cash operating activities	Other non-cash operating activities	(593)		84
Changes in assets and liabilities:	Changes in assets and liabilities:
Accounts receivable	Accounts receivable	(33,691)		(47,061)
Accounts receivable
Accounts receivable
Contract assets	Contract assets	(77,864)		(13,034)
Contract costs	Contract costs	(3,547)		—
Lease liabilities	Lease liabilities	(6,609)		(1,811)
Prepaid expenses, prepaid income taxes, and other assets	Prepaid expenses, prepaid income taxes, and other assets	34,177		(1,167)
Liability from foreign currency forward contract	Liability from foreign currency forward contract	15,319		—
Accounts payable, accrued expenses, income taxes payable and other liabilities	Accounts payable, accrued expenses, income taxes payable and other liabilities	(1,490)		(12,805)
Contract liabilities	Contract liabilities	11,922		10,786
Net cash provided by (used in) operating activities		54,612		(23,984)
Net cash provided by operating activities
Cash flows from investing activities:	Cash flows from investing activities:
Purchases of property, equipment and leasehold improvements	Purchases of property, equipment and leasehold improvements	(2,844)		(3,393)
Purchases of property, equipment and leasehold improvements
Purchases of property, equipment and leasehold improvements

Payments for business acquisitions, net of cash acquired	Payments for business acquisitions, net of cash acquired	(74,947)		(1,065)
Payments for business acquisitions, net of cash acquired
Payments for business acquisitions, net of cash acquired

Payments for equity method investments
Payments for equity method investments
Payments for equity method investments	Payments for equity method investments	(465)		—
Payments for capitalized computer software development costs	Payments for capitalized computer software development costs	(329)		—
Purchases of other assets		—		(287)

Payments for asset acquisitions
Payments for asset acquisitions
Payments for asset acquisitions

Net cash used in investing activities
Net cash used in investing activities
Net cash used in investing activities	Net cash used in investing activities	(78,585)		(4,745)
Cash flows from financing activities:	Cash flows from financing activities:
Issuance of shares of common stock	Issuance of shares of common stock	25,605		—
Issuance of shares of common stock
Issuance of shares of common stock
Repurchases of common stock
Payment of tax withholding obligations related to restricted stock	Payment of tax withholding obligations related to restricted stock	(11,698)		—
Deferred business acquisition payments	Deferred business acquisition payments	(1,363)		—
Repayments of amounts borrowed under term loan	Repayments of amounts borrowed under term loan	(12,000)		—
Net transfers from Parent Company	Net transfers from Parent Company	29,872		32,855
Payments of debt issuance costs	Payments of debt issuance costs	(2,375)		—
Net cash provided by financing activities		28,041		32,855
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(7,705)		(134)
(Decrease) increase in cash and cash equivalents		(3,637)		3,992
Decrease in cash and cash equivalents
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	449,725		23,659
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	446,088	$	27,651

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:
Supplemental disclosure of cash flow information:
Supplemental disclosure of cash flow information:
Income taxes paid, net
Income taxes paid, net
Income taxes paid, net	Income taxes paid, net	$	29,388	$	4,818
Interest paid	Interest paid	9,819		441
Supplemental disclosure of non-cash activities:	Supplemental disclosure of non-cash activities:
Change in purchases of property, equipment and leasehold improvements included in accounts payable and accrued expenses	Change in purchases of property, equipment and leasehold improvements included in accounts payable and accrued expenses	$	(735)	$	5
Change in purchases of property, equipment and leasehold improvements included in accounts payable and accrued expenses
Change in purchases of property, equipment and leasehold improvements included in accounts payable and accrued expenses
Lease liabilities arising from obtaining right-of-use assets	Lease liabilities arising from obtaining right-of-use assets	68		—

See accompanying notes to these unaudited condensed consolidated ~~and combined~~ financial statements.

Table of Contents

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED ~~AND COMBINED~~ FINANCIAL STATEMENTS

1. Organization and Basis of Presentation

~~Aspen Technology, Inc.,~~AspenTech, together with its subsidiaries ~~(“AspenTech” or~~(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. ~~Through the~~The Company’s unique combination of product capabilities, ~~and~~ deep domain expertise and award-winning innovation helps customers across diverse end markets in capital-intensive industries ~~can~~ improve their operational excellence while achieving sustainability goals.

On October 10, 2021, Emerson Electric Co. (“Emerson” or “Parent Company”) entered into a definitive agreement (the “Transaction Agreement”) with AspenTech Corporation. (“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 Open Systems International, Inc. (“OSI Inc.”) and Geological Simulation Software business (“GSS”), which we have renamed as Subsurface Science & Engineering (“SSE”). The Transaction closed on May 16, 2022 (“Closing Date”). Emerson owns 55% of AspenTech on a fully diluted basis as of December 31, 2022.

On December 23, 2022, the Company entered into a credit agreement with Emerson (the “Emerson Credit Agreement”), which will provide for an aggregate term loan commitment of $630.0��million. Refer to Note 13, “Related-Party Transactions”, to our consolidated and combined financial statements for further discussion of the Emerson Credit Agreement.

On July 27, 2022, the Company entered into a definitive agreement to acquire Mining Software Holdings Pty Ltd (“Micromine”) for AU$900.0 million in cash (approximately $623.0 million based on exchange rates when the acquisition was initially announced). Micromine is a global leader in design and operational management solutions for the metals and mining industry. The Company currently intends to finance the transaction primarily through debt financing under the Emerson Credit Agreement. The acquisition is expected to close as soon as the remaining regulatory approval is obtained.

~~The Company operates globally~~has revenue from customers in 79117 countries as of December 31, ~~2022.~~

2023.

Basis of Presentation

The accompanying consolidated and combined financial statements include the accounts of Aspen Technology, Inc. and our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The Transaction was accounted for as a business combination in accordance with U.S. GAAP, with the Industrial Software Business treated as the “acquirer” and Heritage AspenTech treated as the “acquired” company for financial reporting purposes. Accordingly, for the three- and six-month interim period ended December 31, 2021, the consolidated and combined financial statements comprise the results of the Industrial Software Business only and do not include the results of Heritage AspenTech.

~~We have~~Company has prepared the accompanying unaudited condensed consolidated ~~and combined~~ financial statements as of December 31, ~~2022,~~2023, and for the second quarter of fiscal ~~2023~~2024 and ~~2022, without audit,~~2023 pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ~~(SEC)~~(the “SEC”) and in accordance with generally accepted accounting principles in the United States ~~(GAAP)~~(“GAAP”). All intercompany balances and transactions have been eliminated in consolidation.

These unaudited condensed consolidated ~~and combined~~ financial statements should be read in conjunction with the consolidated and combined financial statements and the notes thereto included in our ~~Transition Reports~~Annual Report on Form ~~10-KT~~10-K for the fiscal year ended June 30, ~~2022.~~

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 ~~and combined~~ financial statements and accompanying notes. The actual results that ~~we experience~~the Company experiences may differ materially from ~~our~~these estimates.

Certain reclassifications have been made to the amounts in prior periods in order to conform to the current period’s presentation. We have evaluated subsequent events through the date that the financial statements were issued.

Russia and Ukraine

~~While the~~The Company ~~has no~~maintains limited operations in Ukraine, the ongoing conflict there could negatively impact its financial position, results of operations and cash flows. The United States and other governments have imposed sanctions and taken other regulatory actions that adversely affect doing business in Russia and ~~with Russian companies. The Company maintains~~

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~~operations in Russia,~~ licenses software and provides related services to customers in Russia and areas of Ukraine that are not under ~~sanction.~~sanction. The Company had ~~net sales~~revenue of ~~approximately~~approximately $5.8 million and $16.8 million for the three months ended December 31, 2023 and 2022, respectively, and $13.0 million and $26.8 million for the ~~three- and six-month period~~six months ended December 31, 2023 and 2022, ~~respectively, and~~respectively. The Company had total assets of approximately ~~$19.3~~$35.2 million and $39.7 million as of December 31, ~~2022,~~2023 and June 30, 2023, respectively, related to operations in Russia. ~~While~~

The Company may be required to cease or suspend operations in Russia or, should the conflict or the effects of sanctions, export control measures and business restrictions worsen, the Company may voluntarily elect to do so. The Company has ~~not had a material impact on~~terminated all engineering services in Russia and the ~~Company’s financial results thus far,~~Company has limited its operations to contract renewals with existing customers. While the Company continues to evaluate the impact of the various ~~sanctions, export control measures~~sanctions and ~~business~~ restrictions imposed by the United States and other governments on ~~its~~the Company’s ability to doconduct business in Russia, ~~and areas of Ukraine~~there is no assurance that are not under sanction, maintain contracts with vendors and pay employees in Russia, as well as receive payment from customers in Russia and areas of Ukraine that are not under sanction. The outcome of these assessments will depend on how the conflict evolves and on further actions that may be taken by the United States, Russia, and other governments around the world. As a software company, no material impact to supply chain operations is expected due to the conflict in Ukraine.

~~If the sanctions and other retaliatory measures and restrictions imposed by the global community change,~~ the Company ~~may~~will be ~~required~~able to ~~cease or suspend operations~~do so in the ~~region or, should the conflict or the effects of these sanctions, measures and restrictions worsen, the Company may voluntarily elect to do so.~~future. Any disruption to, or suspension of, the ~~Company’s~~Company’s business and operations in Russia would result in the loss of ~~revenues~~revenue and assets from the business in ~~Russia. In addition,~~Russia and would negatively impact growth. The Company may also suffer reputational harm as a result of ~~the risk of collectability of receivables from customers~~continued operations in Russia, ~~the Company~~which may ~~be required to adjust accounting practices relating to revenue recognition~~adversely impact sales and other businesses in ~~this region, with the result that the Company may not be able to recognize revenue until risk of revenue reversal is not probable.~~

other countries.

2. Significant Accounting Policies

Our significant accounting policies are described in Note 2 to the consolidated ~~and combined~~ financial statements included in our ~~Transition Reports~~Annual Report on Form ~~10-KT~~10-K for the fiscal year ended June 30, ~~2022.~~2023. There were no material changes to our significant accounting policies during the ~~three and~~ six months ended December 31, ~~2022, other than those noted below.~~2023.

(a) Revenue Recognition

~~(a)Derivatives and Hedging~~

We use derivative instruments to manage exposures to foreign currency exchange rate risks. Our primary objective of holding derivatives is to reduce the volatility of cash flows associated with changes in foreign currency exchange rates. Our derivatives expose us to credit riskPrior to the ~~extent that~~third quarter of fiscal 2023, Open Systems International, Inc. (“OSI Inc.”) software licenses were primarily sold with professional services and hardware to form an integrated solution for the ~~counterparties may be unable to meet~~customer. The professional services and hardware sold with the ~~terms~~license significantly customized the underlying functionality and usability of the ~~agreement. We do seek to mitigate~~software. As such, risks by limiting our counterparties to major financial institutions. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored. Management does not expect material losses as a result of defaults by counterparties.

The Company accounts for derivative transactions in accordance with ASC Topic 815, “Derivatives and Hedging,” and recognizes derivatives instruments as either assets or liabilities in the consolidated and combined balance sheet and measures those instruments at fair value. The Company’s foreign currency forward contracts as described in Note 11 do not qualify for hedge accounting. Accordingly, the changes in fair valuenone of the ~~derivative transactions are presented in earnings.~~

~~(b) Recently Issued Accounting Pronouncements~~

~~Recently issued accounting pronouncements that will be applicable~~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 ~~are not expected~~and the Company held an enforceable right to ~~have a material impact~~payment, revenue was recognized over time (typically one to two years) using an input measure of progress based on the ~~Company’s consolidated and combined financial statements.~~ratio of actual costs incurred to date to the total estimated cost to

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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 OSI Inc. 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 OSI Inc. customers to implement its products.

Accordingly, effective January 1, 2023, following the completion of these business transformation activities, for all prospective OSI Inc. contracts entered into after January 1, 2023, the Company accounts for the OSI Inc. 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 OSI Inc. 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

~~The contract~~Contract assets are subject to credit risk and ~~are~~ reviewed in accordance with ~~ASC 326.~~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 they 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 December 31, 2023.

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The Company’s contract assets and contract liabilities were as follows as of December 31, ~~2022~~2023 and June 30, ~~2022:~~2023:

December 31,
2022 June 30,
2022
(Dollars in Thousands)
Contract assets $ 935,534 $ 857,065
Contract liabilities (176,594) (164,408)
$ 758,940 $ 692,657

~~Contract assets and contract liabilities are presented net at the contract level for each reporting period.~~


	December 31, 2023		June 30, 2023

	(Dollars in Thousands)
Contract assets	$	964,165	$	903,643
Contract liabilities	(170,558)		(181,553)
Net contract assets	$	793,607	$	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 ~~schedules.~~schedule. The change in the net contract asset balance during the six months ended December 31, ~~2022~~2023 was primarily due to greater revenue recognition as compared to billings. Revenue recognized from the contract liability balance as of June 30, ~~2022,~~2023, was ~~$37.1~~$47.4 million and ~~$72.6~~$88.4 million ~~during~~for the three and six months ended December 31, ~~2022,~~2023, respectively.

Transaction Price Allocated to Remaining Performance Obligations

The following table includes the aggregate amount of the transaction price allocated as of December 31, 2023 to the performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period:


	Year Ending June 30,
	2024		2025		2026		2027		2028		Thereafter		Total

	(Dollars in Thousands)
License and solutions	$	104,615	$	98,569	$	45,664	$	20,742	$	6,911	$	2,243	$	278,744
Maintenance	165,061		257,890		192,502		134,883		85,101		44,596		880,033
Services and other	32,075		40,838		5,903		1,326		721		426		81,289
Total	$	301,751	$	397,297	$	244,069	$	156,951	$	92,733	$	47,265	$	1,240,066

Disaggregated Revenue Information

The table below reflects disaggregated revenues by business for the three months and six months ended December 31, 2023 and 2022:


	Three Months Ended December 31,				Six Months Ended December 31,
	2023		2022		2023		2022

	(Dollars in Thousands)
Heritage AspenTech	$	167,437	$	167,442	$	343,180	$	343,848
Subsurface Science & Engineering	28,574		29,726		52,655		62,714
OSI, Inc.	61,152		45,670		110,636		87,095
Total	$	257,163	$	242,838	$	506,471	$	493,657

The Company did not have any ~~customer~~customers that accounted for 10 percent or more of the Company’s revenues for the three and six months ended December 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

~~Transaction Price Allocated to Remaining Performance Obligations~~

The following table includes the aggregate amount of the transaction price allocated as of December 31, 2022 to the performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period:

Year Ending June 30,
2023 2024 2025 2026 2027 Thereafter Total
(Dollars in Thousands)
License and solutions $ 117,453 $ 110,707 $ 69,993 $ 27,445 $ 6,899 $ 173 $ 332,670
Maintenance 148,892 230,708 156,535 115,242 83,846 49,696 784,919
Services and other 45,306 10,465 3,948 2,874 2,183 3,865 68,641
Total $ 311,651 $ 351,880 $ 230,476 $ 145,561 $ 92,928 $ 53,734 $ 1,186,230

~~The table below reflects disaggregated revenues by business for the three and six months ended December 31, 2022 and 2021, respectively.~~

Three Months Ended December 31, Six Months Ended December 31,
2022 2021 2022 2021
Heritage AspenTech $ 167,442 $ — $ 343,848 $ —
SSE 29,726 26,072 62,714 55,169
OSI, Inc. 45,670 55,703 87,095 103,621
Total $ 242,838 $ 81,775 $ 493,657 $ 158,790

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4. Acquisitions

Inmation Software GmbH

On August 29, 2022, the Company completed the acquisition of inmation Software GmbH (“Inmation”) for total cash consideration of ~~$87.4~~$87.2 million. The purchase price consisted of $78.9 million of cash paid at closing and an additional ~~$8.5~~$8.3 million ~~to be held back until~~in indemnification holdbacks, which was paid on August 2023 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 and combined balance sheets.18, 2023. The total cash acquired from Inmation was approximately ~~$4.0~~$6.4 million resulting in a net cash payment of ~~$74.9 million.~~$72.5 million during the three months ended September 30, 2022. The Company recognized goodwill of ~~$63.6~~$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. The fair value of assets acquired and liabilities assumed represent the preliminary fair value estimates, and are subject to subsequent adjustments as the Company obtains additional information during the measurement period and finalizes its fair value estimates.

Inmation’s revenue included in the Company’s condensed consolidated statements of operations was $0.8 million and $0.9 million for the three months ended December 31, 2023 and 2022, respectively, and $1.3 million and $1.2 million for the six months ended December 31, 2023 and 2022, respectively. Inmation’s net loss included in the Company’s condensed consolidated statements of operations was $2.2 million and ~~combined income statement from~~$0.9 million for the ~~acquisition date to the reporting period ending on~~three months ended December 31, 2023 and

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2022, ~~were $1.2~~respectively, and $2.3 million and ~~$(1.1)~~$1.1 million for the six months ended December 31, 2023 and 2022, respectively. Results included amortization of developed technology and customer relationships of $1.5 million and $1.4 million for the three months ended December 31, 2023 and 2022 respectively, and $2.9 million and $1.9 ~~million.~~

million for the six months ended December 31, 2023 and 2022, respectively.

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 of its shares in Inmation, with another ~~$2.0~~$1.9 million ~~to be~~ paid for an indemnification holdback 12 months after the ~~close.~~

~~Heritage AspenTech~~

On October 10, 2021, Emerson entered into the Transaction with Heritage AspenTech to contribute the Industrial Software Business comprised of OSI and the SSE business, along with $6.014 billion in cash, to create the Company. On the Closing Date, Emerson owned 55% of the outstanding common shares of AspenTechclose on ~~a fully diluted basis, while the stockholders of Heritage AspenTech owned the remaining 45%. The acquisition-date fair value of the purchase consideration totaled $11.19 billion.~~

During the first two quarters of fiscal 2023, the Company recorded purchase price allocation adjustments that increased goodwill by $1.7 million. The following table sets forth the purchase price allocation of the Heritage AspenTech acquisition:


	~~Amount~~
	~~(Dollars in Thousands)~~
~~Cash and cash equivalents~~	$	~~273,728~~
~~Accounts receivable~~	~~43,163~~
~~Current and non-current contract assets~~	~~730,548~~
~~Intangible assets~~	~~4,390,667~~
~~Other net assets acquired~~	~~66,753~~
~~Total asset acquired (excluding Goodwill)~~	~~5,504,859~~
~~Accounts payable, accrued expenses, and other current liabilities~~	~~56,005~~
~~Current and non-current deferred revenue~~	~~62,319~~
~~Current and non-current borrowings under credit agreement~~	~~282,000~~
~~Deferred income taxes~~	~~1,078,463~~
~~Other net liabilities assumed~~	~~62,279~~
~~Total liabilities assumed~~	~~1,541,066~~
~~Net identifiable assets acquired~~	~~3,963,793~~
~~Goodwill~~	~~7,224,483~~
~~Net assets acquired~~	$	~~11,188,276~~

The following pro forma consolidated and combined financial results of operations are presented as if the Heritage AspenTech acquisition occurred on October 1, 2020. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved had the acquisition occurred as of that time.

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Three Months Ended
December 31, Six Months Ended
December 31,
2022 2021 2022 2021
(Dollars in Thousands)
Total revenue $ 242,838 $ 253,132 $ 493,657 $ 466,167
Net (loss) $ (61,743) $ (8,153) $ (67,950) $ (51,717)

August 18, 2023.

5. Intangible Assets

Intangible assets ~~consisted~~consist of the following as of December 31, ~~2022~~2023 and June 30, ~~2022:~~2023:


	December 31, 2023														December 31, 2023
	Developed Technology											Developed Technology	Trademarks	Customer Relationships and Backlog		Capitalized Software and Other	Total
		Developed Technology		Trademarks		Customer Relationships and Backlog		Capitalized Software and Other		Total
		(Dollars in Thousands)
December 31, 2022:
		(Dollars in Thousands)
		(Dollars in Thousands)
		(Dollars in Thousands)
Gross carrying amount	Gross carrying amount	$	1,903,599	$	464,400	$	3,082,541	$	10,348	$	5,460,888
Less: Accumulated amortization	Less: Accumulated amortization	(248,960)		(11,599)		(289,320)		(8,567)		(558,446)
Net carrying amount	Net carrying amount	$	1,654,639	$	452,801	$	2,793,221	$	1,781	$	4,902,442

June 30, 2022:
		June 30, 2023
		June 30, 2023
		June 30, 2023
	Developed Technology											Developed Technology	Trademarks	Customer Relationships and Backlog		Capitalized Software and Other	Total

		(Dollars in Thousands)
		(Dollars in Thousands)
		(Dollars in Thousands)
Gross carrying amount	Gross carrying amount	$	1,882,037	$	464,400	$	3,072,738	$	10,149	$	5,429,324
Less: Accumulated amortization	Less: Accumulated amortization	(153,758)		(9,379)		(144,888)		(8,518)		(316,543)
Net carrying amount	Net carrying amount	$	1,728,279	$	455,021	$	2,927,850	$	1,631	$	5,112,781

~~The increase in~~Of the total intangible assets ~~from June 30, 2022 was primarily due~~net carrying amount of $4.4 billion as of December 31, 2023, $430.0 million relates to the ~~Inmation acquisition. See~~registered trademarks associated with the Transaction (as defined in Note ~~4, Acquisitions.~~15, “Related-Party Transactions”) that are not subject to amortization. Total intangible asset amortization expense was $121.7 million and $121.2 million ~~for~~during the three months ended December 31, 2023 and 2022, ~~of which $98.9~~respectively, and $243.4 million ~~related to the Heritage AspenTech Transaction. Total intangible asset amortization expense was~~and $242.3 million ~~for~~during the six months ended December 31, 2023 and 2022, ~~of which, $1.9 million related to the Heritage AspenTech Transaction.~~

respectively.

6. Goodwill

The changes in the carrying amount of goodwill during the six months ended December 31, ~~2022~~2023 were as follows:


	Carrying Value
	~~Carrying Value~~
	(Dollars in Thousands)
Balance as of June 30, ~~2022~~2023	$	~~8,266,809~~8,330,811
~~Goodwill from Inmation acquisition~~	~~63,577~~
~~Purchase accounting adjustment from Heritage AspenTech acquisition~~	~~(1,685)~~
Foreign currency translation	~~145~~ (814)
Balance as of December 31, ~~2022~~2023	$	~~8,328,846~~8,329,997

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 sheet, which is reflected net of a $25.4 million leasehold improvement incentive to be paid directly to external vendors by the landlord under the Lease Amendment. As invoices are paid by the landlord during construction of the

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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 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 six months ended December 31, 2023 and 2022 are as follows:


	Three Months Ended December 31,				Six Months Ended December 31,
	2023		2022		2023		2022

	(Dollars in Thousands)
Operating lease expense	$	5,023	$	4,352	$	9,489	$	8,387
Variable lease expense	193		216		416		425
Short term lease expense	147		199		304		(96)
Total lease expense	$	5,363	$	4,767	$	10,209	$	8,716

The following table summarizes the balances of the Company’s operating lease right-of-use assets and operating lease liabilities as of December 31, 2023 and June 30, 2023:


	December 31, 2023		June 30, 2023

	(Dollars in Thousands)
Operating lease right-of-use assets	$	97,035	$	67,642
Current operating lease liabilities	$	13,810	$	12,928
Non-current operating lease liabilities	$	83,812	$	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 December 31, 2023 and June 30, 2023, respectively.

The following table represents the future maturities of the Company’s operating lease liabilities as of December 31, 2023:


Fiscal Year Ending June 30,	(Dollars in Thousands)
2024	$	2,345
2025	9,018
2026	9,422
2027	13,104
2028	12,510
Thereafter	103,490
Total lease payments	149,889
Less: imputed interest	(26,882)
Less: leasehold improvement incentives to be utilized	(25,385)
Total lease maturities	$	97,622

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.

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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.”

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~~Our derivative instruments are primarily classified as Level 2, as they are not actively traded and are valued using pricing models that use observable market inputs.~~

The following table summarizes financial assets and liabilities measured and recorded at fair value on a recurring basis in the accompanying condensed consolidated ~~and combined~~ balance sheets as of December 31, ~~2022~~2023 and June 30, ~~2022,~~2023, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:


	~~Fair Value Measurements at Reporting Date Using~~December 31, 2023
	~~Quoted Prices in Active Markets for Identical Assets~~ (Level 1 ~~Inputs)~~ Inputs		~~Significant Other Observable Inputs~~ (Level 2 ~~Inputs)~~ Inputs

	(Dollars in Thousands)
~~December 31, 2022:~~Cash equivalents	$	7,715	$	—
Equity method investments	$	—	$	2,398


	June 30, 2023
	Level 1 Inputs		Level 2 Inputs

	(Dollars in Thousands)
Cash equivalents	$	~~2,955~~132,918	$	—
Equity method investments	$	—
~~Equity method investments~~	—		~~2,231~~
~~Derivative liabilities~~	—		~~(15,319)~~
~~June 30, 2022:~~
~~Cash equivalents~~	$	~~2,998~~2,673	$	—
~~Equity method investments~~	—		~~1,761~~

Financial instruments not measured or recorded at fair value in the accompanying condensed consolidated ~~and combined~~ 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 ~~8, “Credit Agreement”~~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:


	December 31, 2023		June 30, 2023

	(Dollars in Thousands)
Compensation-related	$	54,729	$	62,162
Professional fees	4,042		6,265
Accrued taxes	2,941		3,065
Royalties and outside commissions	422		654
Acquisition-related	5		8,984
Other	18,920		18,396
Total accrued expenses and other current liabilities	$	81,059	$	99,526

8.10. Debt

~~Bridge Facility~~

On July 27, 2022, the Company entered into a $475.0 million senior unsecured bridge facility (the “Bridge Facility”) with JPMorgan Chase Bank, N.A. (“JPMorgan”), as Administrative Agent, to finance the Micromine acquisition. The Bridge Facility was entered into under the existing Amended and Restated Credit Agreement ~~dated as of December 23, 2019,~~ with JPMorgan (“Credit Agreement”). The Company may elect that each incremental borrowing under the Bridge Facility bear interest at a rate per annum equal to (a) the Alternate Base Rate (“ABR”), plus the applicable margin or (b) the Adjusted Term Secured Overnight Financing Rate (“SOFR”), plus the applicable margin.

As consideration for JPMorgan’s agreement to act as administrative agent for the Bridge Facility, the Company is required to pay a fee of $50,000 per annum, payable on the closing date of the loan and every anniversary thereof during the term of the loan.

In addition, the Company incurred issuance costs associated with the Bridge Facility. For the six months ended December 31, 2022, the Company paid a total of $2.375 million in fees to JPMorgan to secure the Bridge Facility.

Related Party

On December 23, 2022, the Company ~~terminated the Bridge Facility, and at the same time~~ entered into a credit agreement with Emerson (the “Emerson Credit Agreement”), which ~~will provide~~provided for an aggregate term loan commitment of $630.0 million. ~~Refer to Note 13, “Related-Party Transactions”, to our consolidated and combined financial statements for further discussion~~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 December 31, 2023, after taking into account eligible outstanding letters of credit allowable per the Amended and Restated Credit Agreement in the aggregate amount of $2.6 million, the Company had $197.4 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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~~Credit Agreement~~

The ~~Company also has a Credit Agreement with JP Morgan that provides for a $200.0 million secured revolving credit facility~~Amended and ~~a $320.0 million secured term loan facility.~~

As of December 31, 2022, the Company’s current and non-current borrowings, under the term loan facility, were $264.0 million and $0.0 million, respectively. As of June 30, 2022, the Company’s current and non-current borrowings, under the term loan facility, were $28.0 million and $245.6 million, respectively. The interest rate on the term loan facility as of December 31, 2022 was 5.26%. There were no amounts outstanding under the revolving credit facility at either December 31, 2022 or June 30, 2022. Any outstanding balances of the indebtedness under the revolving credit facility mature on December 23, 2024. Refer to Note 15, “Subsequent Events”, to our consolidated and combined financial statements for further discussion of the subsequent payoff of our term loan facility of the Credit Agreement after the reporting date of December 31, 2022.

~~The~~Restated Credit Agreement contains customary affirmative and negative covenants, ~~which are also applicable to the Bridge Facility,~~ including restrictions on ~~incurrence of~~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 December 31, ~~2022,~~2023, the Company was in compliance with ~~all the loan~~these covenants.

9.11. Stock-Based Compensation

The stock-based compensation expense under all equity plans and its classification in the ~~unaudited~~condensed consolidated ~~and combined~~ statements of operations for the three and six months ended December 31, ~~2022~~2023 and ~~2021~~2022 are as follows:


	Three Months Ended December 31,											Three Months Ended December 31,		Six Months Ended December 31,
										2023	2022		2023		2022
		Three Months Ended December 31,				Six Months Ended December 31,
		2022		2021		2022		2021
		(Dollars in Thousands)
Recorded as expenses:
										(Dollars in Thousands)
Cost of license and solutions	Cost of license and solutions	$	1,200	$	—	$	1,919	$	—
Cost of maintenance	Cost of maintenance	474		—		1,035		—
Cost of services and other	Cost of services and other	428		—		858		—
Selling and marketing	Selling and marketing	3,826		—		7,191		—
Research and development	Research and development	4,240		—		7,858		—
General and administrative	General and administrative	13,273		458		22,316		826
Total stock-based compensation	Total stock-based compensation	$	23,441	$	458	$	41,177	$	826

Stock Options

~~During~~The table below summarizes activities related to stock options for the six ~~month period~~months ended December 31, 2023:


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value(1)
				(in years)	(in thousands)
Outstanding as of June 30, 2023	1,005,826	$	144.17	6.44	$	32,935
Granted	1,471	$	171.56
Exercised	(49,671)	$	134.25
Cancelled / Forfeited	(7,958)	$	184.16
Outstanding as of December 31, 2023	949,668	$	161.10	5.63	$	72,007
Exercisable as of December 31, 2023	683,313	$	130.41	4.88	$	61,341
Vested and expected to vest as of December 31, 2023	933,517	$	143.75	5.58	$	71,386

__________

(1) The aggregate intrinsic value in this table represents any excess of the closing market price of the Company’s common stock as of December 31, 2023 ($220.15) 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 six months ended December 31, 2023:

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	Number of Shares Underlying Restricted Units — Performance-Based Awards		Number of Shares Underlying Restricted Units — Time-Based Awards

	(Dollars in Thousands)
Outstanding as of June 30, 2023	—		456,368
Granted	94,174		186,938
Settled	—		(229,807)
Cancelled / Forfeited	(716)		(12,792)
Outstanding as of December 31, 2023	93,458		400,707
Weighted average remaining recognition period of outstanding restricted units (in years)	2.50		3.03
Unrecognized stock-based compensation expense of outstanding restricted units	$	8,824	$	43,170
Aggregate intrinsic value of outstanding restricted units	$	14,418	$	86,235

The weighted average grant date fair value per restricted stock unit was $192.21 and $246.15 during the three months ended December 31, 2023 and 2022, respectively, and $193.74 and $209.79 during the six months ended December 31, 2023 and 2022, respectively. The weighted average grant date fair value per performance stock unit was $199.06 and $194.03 during the three and six months ended December 31, 2023, respectively, and there were no granted or outstanding performance stock units during the three and six months ended December 31, 2022.

Beginning in fiscal 2024, the Company granted ~~167,932 stock options and 164,693 restricted~~performance stock units ~~(“RSUs”).~~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 ~~options granted had~~units could vest upon achievement of the performance goals. Conversely, if a ~~weighted average exercise price~~minimum performance goal is not met, none of ~~$207.79 per option~~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 ~~a weighted average fair value~~the anticipated level of ~~$77.45 per option. The RSUs granted had a weighted average fair value~~attainment to determine the amount of ~~$207.87 per RSU.~~

compensation expense to record in the condensed consolidated financial statements.

~~10.~~12. Net ~~Income~~Loss Per Share

Basic (loss) income per share is determined by dividing net (loss) income by the weighted average common shares outstanding during the period. Diluted (loss) income per share is determined by dividing net (loss) income 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 (loss) income per share based on the treasury stock method.

~~Prior to the Transaction, the Industrial Software Business did not have any shares of common stock outstanding. Accordingly, net loss per share for the three and~~ ~~six~~ ~~months ended~~ ~~December 31, 2022~~ ~~has been calculated using weighted average shares outstanding (basic and diluted) based on the number of shares of common stock issued to Emerson on the Closing Date of the Transaction.~~

~~Table of Contents~~

The calculations of basic and diluted net ~~income~~loss per share and basic and dilutive weighted average shares outstanding for the three and six months ended December 31, ~~2022~~2023 and ~~2021~~2022 are as follows:


	Three Months Ended December 31,											Three Months Ended December 31,			Six Months Ended December 31,
	2023										2023		2022	2023		2022

		Three Months Ended December 31,				Six Months Ended December 31,
(Dollars and Shares in Thousands, Except per Share Data)		2022		2021		2022		2021

Net (loss)		$	(66,197)	$	(760)	$	(77,441)	$	(11,962)
										(Dollars and Shares in Thousands, Except per Share Data)
Net loss

Basic weighted average shares outstanding	Basic weighted average shares outstanding	64,621		36,308		64,538		36,308
Basic weighted average shares outstanding
Basic weighted average shares outstanding

Dilutive weighted average shares outstanding	Dilutive weighted average shares outstanding	64,621		36,308		64,538		36,308

(Loss) per share

Dilutive weighted average shares outstanding

Dilutive weighted average shares outstanding

Net loss per share
Net loss per share
Net loss per share
Basic	Basic	$	(1.02)	$	(0.02)	$	(1.20)	$	(0.33)
Dilutive	Dilutive	$	(1.02)	$	(0.02)	$	(1.20)	$	(0.33)

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For the three and six months ended December 31, ~~2022~~2023, and ~~2021,~~2022 certain employee equity awards were anti-dilutive based on the treasury stock method. The following employee equity awards were excluded from the calculation of dilutive weighted average shares outstanding because their effect would be anti-dilutive as of December 31, ~~2022~~2023 and ~~2021:~~2022:

Three Months Ended
December 31, Six Months Ended
December 31,
2022 2021 2022 2021
(Shares in Thousands)
Employee equity awards 1,574 — 1,479 —


	Three Months Ended December 31,		Six Months Ended December 31,
	2023	2022	2023	2022

	(Shares in Thousands)
Employee equity awards	1,433	1,574	1,352	1,479

~~11. Derivatives~~13. Stock Repurchases

~~In connection with the agreement to purchase Micromine,~~On May 5, 2023, the Company ~~also~~ entered into ~~foreign currency forward contracts~~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 ~~2, 2022 for a six-month period ending on February 6,~~7, 2023, ~~to mitigate~~resulting in an additional delivery of 107,045 shares of the ~~impact of foreign currency exchange associated with the forecasted payment of purchase price.~~Company’s common stock. The ~~acquisition is expected to close as soon as the remaining regulatory approval is obtained.~~

~~The notional amounts of our outstanding derivatives are~~Company repurchased in total ~~AU $900 million.~~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 second quarter of fiscal 2024, the Company repurchased 375,041 shares for $72.1 million under the Share Repurchase Authorization. As of December 31, ~~2022,~~2023, a total of 954,839 shares have been repurchased under the ~~fair values of our derivative instruments were $15.3~~Share Repurchase Authorization for $186.3 million, ~~and were recorded to~~with the liability from foreign currency forward contract caption on the consolidated and combined balance sheets. For the three and six months ended December 31, 2022, the Company recognized gains of $34.9 million and losses of $15.3 million, respectively, and recorded as part of the other income (expense), net on the consolidated and combined statements of operations.

total remaining value being $113.7 million.

~~12. Benefit~~14. (Benefit) Provision 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 ~~and six months~~ ended ~~December 31, 2021,~~September 30, 2022, the Company computed its tax provision (benefit) using the AETR approach. However, ~~for~~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~~year-to-date pretax (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 six months ended December 31, 2023, the Company again recorded the actual effective tax rate as it was determined that the AETR approach was not the most appropriate estimate.

~~Income~~Benefit for income taxes was $15.7 million for the three months ended December 31, 2023 and income tax expense was $49.6 million for the three months ended December 31, 2022, ~~and income tax benefit was $0.9 million for the three months ended December 31, 2021,~~ resulting in effective tax rates of 42.1% and (298.0)% ~~and 55.1%~~, respectively. ~~Our income~~Income tax ~~was higher in the three months ended December 31, 2022~~benefit primarily increased due to the ~~current quarters'~~prior year’s change in the Company’s approach to computing its tax provision (benefit) for ~~the~~ interim periods to ~~the~~an actual effective tax rate method.

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The change resulted in a tax provision during the three months ended December 31, 2022 that reflects recording a year-to-date benefit compared to that of the three months ended September 30, 2022, which was recorded under the AETR approach.

Table of non-deductible amortization of intangibles, capitalized R&D costs, and a change in the accounting methodology related to historical revenue recognition for tax purposes on multi-year software license agreements. The change resulted in the recognition of taxable income over a four-tax year period with fiscal year 2024 as the last year of the adjustment.Contents

~~13.~~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 OSI Inc. and the Geological Simulation Software business (“GSS”), which the Company has renamed as Subsurface Science & Engineering (“SSE”). The Transaction closed on May 16, 2022 (“Closing Date”). Emerson owned approximately 56% of AspenTech on a fully diluted basis as of December 31, 2023.

The Company utilizes some aspects of Emerson’s centralized treasury function ~~which manages~~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. Pooled cash~~basis and ~~nontrade balances attributable to Emerson have been presented~~are reflected as receivables from related parties orin the condensed consolidated balance sheet.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 sheet. The aggregate net activity between the Company and ~~combined financial~~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 ~~the Company.~~

cash flows.

Before the ~~Closing Date,~~closing of the Transaction, the Industrial Software Business was charged for costs directly attributable to the SSE business and OSI Inc. 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 ~~and combined~~ financial statements. Management believes the methodologies and assumptions used to allocate these costs are reasonable.

At the ~~Closing Date,~~closing of the Transaction, Emerson and the Company entered into ~~the~~a transition service agreement ~~(“TSA”~~(the “Transition Service Agreement”) for the provision of certain transitionary services from Emerson to ~~AspenTech.~~the Company. Pursuant to the ~~TSA,~~Transition Service Agreement, Emerson ~~will provide AspenTech and its subsidiaries~~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. ~~TSA~~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 ~~and combined~~ financial statements presented.

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 ~~and combined~~ balance sheets as of December 31, ~~2022~~2023 and June 30, ~~2022~~2023 include the following:
December 31, June 30,
2022 2022
Interest bearing receivables from related parties $ 14,946 $ 16,122
Trade receivables from related parties 153 819
Interest bearing payables to related parties 30,883 2,028
Trade payables to related parties 1,401 2,083


	December 31, 2023		June 30, 2023

	(Dollars in Thousands)
Interest bearing receivables from related parties	$	60,870	$	61,948
Trade receivables from related parties	609		427
Receivables from related parties	$	61,479	$	62,375

Interest bearing payables to related parties	$	95,860	$	21,866
Trade payables to related parties	227		153
Due to related parties	$	96,087	$	22,019

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Allocations and charges from Emerson are as follows:

Three Months Ended
December 31, Six Months Ended
December 31,
2022 2021 2022 2021
Corporate costs $ — $ 490 $ — $ 1,091
Information technology 763 427 1,574 862
Insurance and other benefits — 145 — 374
Shared services and other 1,157 2,848 3,895 5,635


	Three Months Ended December 31,				Six Months Ended December 31,
	2023		2022		2023		2022

	(Dollars in Thousands)

Information technology	$	370	$	763	$	1,346	$	1,574

Shared services and other	$	266	$	1,157	$	640	$	3,895

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 ~~systematic~~systemic methods.

~~Table of Contents~~

Before the ~~Closing Date,~~closing of the Transaction, OSI Inc. and the SSE business engaged in various transactions to sell software and purchase goods in the ordinary course of business with affiliates of Emerson. At the ~~Closing Date,~~closing, the Company and Emerson entered into a commercial agreement to allow Emerson to distribute software and services from ~~AspenTech~~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 ~~will grant~~grants Emerson the right to distribute, on a non-exclusive basis, certain (i) existing Heritage AspenTech products, (ii) existing Emerson products ~~being~~ 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~~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 ~~and combined~~ financial statements presented. Revenue and purchases from Emerson affiliates for the three months ended December 31, 2023 and 2022 are as follows:

Three Months Ended
December 31, Six Months Ended
December 31,
2022 2021 2022 2021
Revenue from Emerson affiliates $ 4 $ 8 $ 567 $ 1,009
Purchases from Emerson affiliates 85 215 1,786 5,394


	Three Months Ended December 31,				Six Months Ended December 31,
	2023		2022		2023		2022

	(Dollars in Thousands)
Revenue from Emerson affiliates	$	43	$	4	$	310	$	567

Purchases from Emerson affiliates	$	118	$	85	$	189	$	1,786

Emerson Share Maintenance Rights

Immediately following the ~~Closing Date,~~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 ~~Shareholders~~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 55% ~~ownership.~~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 Date~~closing of the Transaction through December 31, ~~2022.~~

2023.

Business ~~combination~~Combination with ~~related party~~

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 ~~and combined~~ financial statements for further discussion.

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Credit ~~agreement~~Agreement with ~~related party~~

Related Party

On December 23, 2022, the Company entered into the Emerson Credit Agreement with Emerson, which ~~provides~~provided for an aggregate term loan commitment of $630.0 ~~million. Under~~million, and on August 18, 2023, the ~~terms of the~~Emerson Credit Agreement the Company will use the proceeds from borrowings under the Agreement to (i) pay in part the cash consideration for funding acquisitions, (ii) consummate certain other loan repayments, (iii) pay the fees and expenses incurredwas terminated in connection with the ~~Emerson Credit Agreement and (iv) for other working capital and general corporate purposes.~~

Principal outstanding under the Emerson Credit Agreement bears interest at a rate per annum equal to Term SOFR Rate (as such term is defined in Emerson Credit Agreement) plus an amount ranging from 1.25% to 1.75%.

~~The term loan to be made under the Agreement is unsecured and matures on the fifth anniversary~~termination of the ~~date the term loan is funded. The Company is permitted~~agreement to prepay the term loan in whole or in part upon provision of notice in accordance with the Emerson Credit Agreement. Upon an event of default (as such term is defined in the Emerson Credit Agreement), the loan may become due and payable in full upon provision of notice in accordance with the Agreement.

In addition, the Emerson Credit Agreement includes a mandatory prepayment provision if at any time Emerson fails to beneficially own more than 40% of our common stock for a period of more than 30 consecutive days and Emerson provides us written notice requiring us to prepay the term loan. In such an event, we would have no less than either 30 days or 180 days from the date of such notice, depending upon the circumstances giving rise to the decrease in Emerson’s ownership interest, to prepay the term loan.

The Emerson 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 Agreement also contains financial covenants regarding maintenance as of the end of each fiscal quarter of a maximum leverage ratio of 3.50 to 1.00 and a minimum interest coverage ratio of 2.50 to 1.00. As of December 31, 2022, the Company was in compliance with all the loan covenants.

~~Table of Contents~~

purchase Micromine. There was no amount outstanding under the Emerson Credit Agreement at ~~December 31, 2022.~~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 currently integrating 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.”

~~14.~~16. Segment and Geographic Information

~~Operating segments are defined as components of an enterprise that engage~~The Company operates in ~~business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and to assess performance.~~

~~Prior~~ ~~to the Transaction, the Industrial Software Business had two~~one operating and reportable segments: OSI Inc. and the GSS business (subsequently renamed Subsurface Science & Engineering Solutions, or “SSE”, after the Closing Date). The Transaction resulted in the creation of a third operating and reportable segment: Heritage AspenTech. During the three months ended September 30, 2022, the Company completed certain integration activities and changes to its organizational structure that triggered a change in the composition of its operating and reportable segments. As a result, beginning with the interim period ended September 30, 2022, the Company is now comprised of a single operating and reportable segment. ~~Accordingly, the Company has restated its operating and reportable segment information for the three and six months ended December 31, 2021.~~ The Company’s chief operating decision maker is its President and Chief Executive ~~Officer.~~

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 December 31, Six Months Ended December 31,
2022 2021 2022 2021
Americas $ 114,463 $ 60,041 $ 245,321 $ 111,938
Asia, Middle East and Africa 62,043 12,249 115,714 22,812
Europe 66,332 9,485 132,622 24,040
Total $ 242,838 $ 81,775 $ 493,657 $ 158,790


	Revenue by Destination
	Three Months Ended December 31,				Six Months Ended December 31,
	2023		2022		2023		2022

	(Dollars in Thousands)
Americas	$	148,358	$	114,463	$	281,374	$	245,321
Asia, Middle East and Africa	57,030		62,043		114,715		115,714
Europe	51,775		66,332		110,382		132,622
Total	$	257,163	$	242,838	$	506,471	$	493,657

Americas included revenue in the ~~U.S.~~United States of ~~$88.1~~$132.7 million and ~~$53.2~~$88.1 million for the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$200.4~~$228.7 million and ~~$102.2~~$200.4 million for the six months ended December 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

Property, Equipment, and
Leasehold Improvements, Net
December 31, 2022 June 30, 2022
Americas $ 14,685 $ 14,591
Asia, Middle East and Africa 1,686 1,154
Europe 767 1,403
Total $ 17,138 $ 17,148


	Property, Equipment, and
	Leasehold Improvements, Net
	December 31, 2023		June 30, 2023

	(Dollars in Thousands)
Americas	$	13,788	$	15,793
Asia, Middle East and Africa	1,875		1,923
Europe	1,093		954
Total	$	16,756	$	18,670

Property, equipment, and leasehold improvements, net located in the ~~U.S.~~United States were ~~$13.1~~$11.8 million and ~~$13.0~~$13.4 million as of December 31, ~~2022~~2023 and June 30, ~~2022,~~2023, respectively.

~~15. Subsequent Events~~

On January 17, 2023, the Company paid off the outstanding balance of our existing JPMorgan term loan facility of $264.0 million, plus accrued interest, which resulted in the long-term portion of term loan obligation being reclassified and reported as short-term borrowings as of December 31, 2022.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Caution Concerning Forward-Looking Statements

~~This Quarterly Report contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained~~Statements in this Quarterly Report including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, prospective products, size of market, plans, objectives of management, expected market growth and the anticipated effects of the coronavirus (COVID-19) pandemic (and any COVID-19 variants, the “COVID-19 pandemic”) on ~~our business, operating results and financial condition are forward-looking statements.~~

~~Forward-looking statements concern future circumstances and results and other statements~~Form 10-Q that are not strictly historical ~~facts~~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 ~~are sometimes identified~~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 ~~words~~following words: “may,” “will,~~” “should,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “overestimate,” “underestimate,” “believe,” “plan,~~” “could,” “would,” ~~“project,~~“should,” “expect,” “intend,” “plan,” “strategy,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” ~~“target”~~“ongoing,” “opportunity” or the negative of these terms or other ~~similar words or expressions or negatives of these words, but~~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 the pandemic and adverse changes in the process or other capital-intensive industries such ~~identifying words. Forward-looking statements are based upon current plans, estimates~~as materially reduced spending budgets due to oil and ~~expectations~~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 ~~are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect,~~our actual future results may ~~vary~~be materially different from ~~those indicated or anticipated~~what we expect. We qualify all of our forward-looking statements by ~~such forward-looking~~these cautionary statements. We can give no assurance that such plans, estimates or expectations will be achieved and therefore, actual results may differ materially from any plans, estimates or expectations in such forward-looking statements.

Any forward-looking statements speak only as of the date of this Quarterly ~~Report.~~Report on Form 10-Q. We undertake no obligation to update any forward-looking statements, whether as a result of new information or ~~development,~~developments, future events or otherwise, except as required by law. You should read the following discussion in conjunction with our ~~unaudited~~condensed consolidated ~~and combined~~ 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 ~~with the exception of fiscal 2022 being the nine months ended June 30~~ (for example, “fiscal ~~2023”~~2024” refers to the year ending June 30, ~~2023)~~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 ~~optimization~~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 ~~enables industrial manufacturers to design, operate,~~combines engineering first principles, deep industry domain knowledge, and ~~maintain their operations for maximum performance.~~advanced technologies. We ~~combine~~drive significant value creation through our decades of experience in modeling, simulation, and optimization ~~capabilities with industrial~~technologies. The operational challenges we help our customers solve include, among others, how to maintain maximum efficiency in process operations, ~~expertise~~manage electrical grids amid the growth in renewable energy sources, ensure supply chain resiliency, and ~~apply advanced analytics~~reduce carbon emissions.

Our software also seeks to ~~improve the profitability and sustainability of production assets. Our purpose-built software is proven~~help companies develop new processes that can be scaled to drive value creation levers for our customers; improving operational efficiency and maximizing productivity, reducing unplanned downtime and safety risks, and minimizing energy consumption and emissions. Our technology is at the center of their sustainability and decarbonization programs, enabling circularity through improved industrial technologies, and supporting the broadersupport energy transition ~~with advanced solutions for power transmission~~ and ~~distribution,~~a net zero future, such as green hydrogen, biofuels, carbon capture, utilization and storage and ~~utilization, batteries and energy storage. Cybersecurity is foundational in the design~~circularity of ~~our software.~~plastics.

Recent Events

On ~~October 10, 2021, Heritage AspenTech and Emerson Electric Co. (“Emerson”) and certain~~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 subsidiaries, entered into a definitive agreement pursuant to, among other matters Emerson and its subsidiaries contributed to Heritage AspenTech shareholders $6,014,000,000 in cash and its Open Systems International, Inc. business (the “OSI business” or “OSI Inc.”) and Geological Simulation Software business, which we have renamed as Subsurface Science & Engineering (the “SSE business” or “SSE”) in exchange for 55% of our outstanding common stock ~~(on~~may be repurchased. During the second quarter of fiscal 2024, the Company repurchased 375,041 shares for $72.1 million under the Share Repurchase Authorization. As of December 31, 2024, a ~~fully diluted basis). The Transaction closed on May 16, 2022.~~

~~By combining~~total of 954,839 shares have been repurchased under the ~~software capabilities, deep domain expertise and leadership of Heritage AspenTech~~Share Repurchase Authorization for $186.3 million, with the ~~OSI and SSE businesses, we have created a company that we believe will deliver superior~~total remaining value to customers across diverse end markets including energy, chemicals, power transmission and distribution, engineering, procurement, and construction, pharmaceuticals, and metals and mining, among others.

being $113.7 million.

2021

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For the three and six-month periods ended December 31, 2022, the consolidated and combined financial statements comprised the results of OSI Inc., SSE and Heritage AspenTech businesses, while for the same periods in the prior fiscal year, these financial statements comprised the results of only OSI Inc. and the SSE business. Certain financial information for the periods ended December 31, 2021 have been reclassed to conform to the consolidated and combined financial statements for the three and six-month period ended December 31, 2022.

We have been working through a series of business transformations relating to the OSI products and services as a result of our ongoing integration activities. In particular, as part of a change in the related go-to-market strategy, we have identified and trained several third-party implementation service partners to operate autonomously and directly with our OSI customers to implement our products. Previously, with the exception of one customer, we were the only provider able to perform these implementations. In addition, we have invested in tools and processes to simplify and streamline the implementation services to significantly reduce complexity and interdependency with our software. As a result, we anticipate a material change to the accounting treatment for OSI software licenses sold together with professional services and hardware. Previously, these products and services were treated as a single performance obligation. Beginning in the third quarter of fiscal 2023, for all new OSI contracts, we expect to account for the software license, hardware and professional services as separate and distinct performance obligations.

~~Recent Events~~

On July 27, 2022, we announced that we entered into a definitive agreement to acquire Micromine, a global leader in design and operational management solutions for the metals and mining industry, from private equity firm Potentia Capital and other sellers for AU $900.0 million in cash (approximately $623.0 million USD based on foreign currency exchange rate at the time of announcement). We currently intend to finance the transaction primarily through debt financing under the Emerson Credit Agreement. The acquisition currently is expected to close as soon as the remaining regulatory approval is obtained. In connection with the agreement to purchase Micromine, we also entered into foreign currency forward contracts on August 2, 2022 for a six-month period ending on February 6, 2023 to mitigate the impact of foreign currency exchange associated with the forecasted payment of purchase price.

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~~

contract value (“ACV”)

•Total ~~Contract Value~~

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 ~~operating~~ 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

~~Annual contract value (ACV)~~ACV is an estimate of the annual value of our portfolio of term license and software maintenance and support ~~(SMS)~~(“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 maintenance

~~Table of Contents~~

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 December 31, ~~2022,~~2023, customer agreements representing approximately 85% 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. We have not applied this methodology retroactively for OSI software amounts delivered prior to October 2020, but do not believe this to have a material impact on our reported ACV metric due to the high USD-denominated concentration of the OSI business. As of December 31, 2022, approximately 95% of OSI ACV was denominated in USD.

For term license agreements that contain professional services or other products and services, we have included ~~in ACV~~ the portion of those agreements that are reflective of the ~~invoice allocable to~~relative fair value of the term license, ~~under Topic 606~~ rather than the portion of the actual invoice attributed to the term license, as outlined in the ~~agreement.~~agreement within ACV. We believe that this methodology more accurately allocates any discounts or premiums to the different elements of the agreement.

We estimate that ~~the pro forma~~ ACV ~~of AspenTech~~ grew by approximately ~~8.7%~~9.6%, from ~~$766.9 million as of December 31, 2021 to~~ $833.7 million as of December 31, ~~2022.~~2022 to $914.1 million as of December 31, 2023.

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Total Contract Value

~~Total Contract Value (“TCV”)~~TCV is the aggregate value of all payments received or to be received under all active term license and perpetual SMS agreements, including maintenance and escalation. TCV ~~of Heritage AspenTech, the OSI business and the SSE business~~ was ~~$3.4~~$3.8 billion and ~~$3.1~~$3.4 billion as of December 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

Bookings

Bookings is the total value of customer term license and perpetual license 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 perpetual license SMS ~~agreements~~contracts signed in a previous period for which the initial licenses are deemed delivered in the current period.

~~The bookings of Heritage AspenTech,~~Bookings were $233.4 million during the ~~OSI business and the SSE business was~~three months ended December 31, 2023, compared to $242.8 million during the three months ended December 31, ~~2022, compared to $208.8~~2022. Bookings were $445.2 million during the ~~three~~six months ended December 31, ~~2021. The bookings of Heritage AspenTech, the OSI business and the SSE business was~~2023, compared to $466.9 million during the six months ended December 31, ~~2022, compared to $365.0 million during the six months ended December 31, 2021.~~2022. 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:


	Six Months Ended December 31,
	2023		2022

	(Dollars in Thousands)
Net cash provided by operating activities (GAAP)	$	46,808	$	54,612
Purchase of property, equipment, and leasehold improvements	(1,437)		(2,844)
Payments for capitalized computer software development costs	(131)		(329)
Free cash flow (non-GAAP) (1)	$	45,240	$	51,439

__________

(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 income 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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~~Non-GAAP Business Metrics~~

The following table provides a reconciliation of GAAP ~~net cash provided by (used in) operating activities~~loss from operations to ~~free cash flow~~non-GAAP income from operations for the indicated ~~periods (in thousands):~~periods:


	Three Months Ended December 31,				Six Months Ended December 31,
	2023		2022		2023		2022

	(Dollars in Thousands)
GAAP loss from operations	$	(49,243)	$	(59,395)	$	(109,455)	$	(110,577)
Plus:
Stock-based compensation	16,211		23,441		32,910		41,177
Amortization of intangibles (1)	121,565		121,161		243,152		242,321
Acquisition and integration planning related fees	125		1,411		(130)		6,269
Non-GAAP income from operations	$	88,658	$	86,618	$	166,477	$	179,190

__________

(1)

Six Months Ended
December 31,
2022 2021
Net cash provided by (used in) operating activities (GAAP) $ 54,612 $ (23,984)
Purchase of property, equipment, and leasehold improvements (2,844) (3,393)
Payments for capitalized computer software development costs (329) —
Acquisition related payments 12,380 54
Free cash flow $ 63,819 $ (27,323)

The ~~following table presents our (loss) from operations, as adjusted for stock-based compensation expense,~~Company has increased amortization of intangible assets ~~and other items, such~~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 ~~impact~~related asset balance is amortized over the respective expected useful lives of ~~acquisition and integration planning related fees, for~~ the ~~indicated periods:~~

intangible assets.

Three Months Ended
December 31, Six Months Ended
December 31,
2022 2021 2022 2021
GAAP (loss) from operations $ (59,395) $ (254) $ (110,577) $ (14,138)
Plus:
Stock-based compensation 23,441 458 41,177 826
Amortization of intangibles 121,161 22,176 242,321 50,985
Acquisition and integration planning related fees 1,411 — 6,269 54
Non-GAAP income from operations $ 86,618 $ 22,380 $ 179,190 $ 37,727

Critical Accounting Estimates and Judgments

Note 2, “Significant Accounting Policies,” to the audited consolidated ~~and combined~~ financial statements in our ~~Transition Reports~~Annual Report on Form ~~10-KT~~10-K for the fiscal year ended June 30, ~~2022~~2023 describes the significant accounting policies and methods used in the preparation of the condensed consolidated ~~and combined~~ financial statements appearing in this report. The accounting policies that reflect our critical estimates, judgments and assumptions in the preparation of our condensed consolidated ~~and combined~~ financial statements are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of our ~~Transition Reports~~Annual Report on Form ~~10-KT~~10-K for the fiscal year ended June 30, ~~2022, and include the subsection captioned “Revenue Recognition.”~~

2023.

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Results of Operations

Comparison of the Three Months Ended December 31, 2023 and 2022

The following table sets forth the results of operations, ~~and~~ the period-over-period percentage change, ~~in certain financial data for the three~~ and ~~six months ended December 31, 2022 and 2021:~~

Three Months Ended
December 31, Increase / (Decrease)
Change Six Months Ended
December 31, Increase /
(Decrease)
Change
2022 2021 $ % 2022 2021 $ %
(Dollars in Thousands)
Revenue:
License and solutions $ 149,843 $ 48,491 $ 101,352 209 % $ 310,068 $ 92,706 $ 217,362 234 %
Maintenance 78,628 26,272 52,356 199 % 156,994 50,807 106,187 209 %
Services and other 14,367 7,012 7,355 105 % 26,595 15,277 11,318 74 %
Total revenue 242,838 81,775 161,063 197 % 493,657 158,790 334,867 211 %
Cost of revenue:
License and solutions 70,833 33,221 37,612 113 % 140,346 67,609 72,737 108 %
Maintenance 9,567 4,074 5,493 135 % 18,784 8,308 10,476 126 %
Services and other 12,698 4,282 8,416 197 % 25,098 9,180 15,918 173 %
Total cost of revenue 93,098 41,577 51,521 124 % 184,228 85,097 99,131 116 %
Gross profit 149,740 40,198 109,542 273 % 309,429 73,693 235,736 320 %
Operating expenses:
Selling and marketing 117,951 17,995 99,956 555 % 236,225 42,995 193,230 449 %
Research and development 49,954 15,383 34,571 225 % 99,695 30,938 68,757 222 %
General and administrative 41,230 7,036 34,194 486 % 84,086 13,653 70,433 516 %
Restructuring — 38 (38) (100) % — 245 (245) (100) %
Total operating expenses 209,135 40,452 168,683 417 % 420,006 87,831 332,175 378 %
(Loss) from Operations (59,395) (254) (59,141) 23,284 % (110,577) (14,138) (96,439) 682 %
Other income (expense), net 38,643 (1,419) 40,062 (2,823) % (19,989) (2,778) (17,211) 620 %
Interest income (expense), net 4,120 (20) 4,140 (20,700) % 9,143 (292) 9,435 (3,231) %
(Loss) before provision for income taxes (16,632) (1,693) (14,939) 882 % (121,423) (17,208) (104,215) 606 %
Provision (benefit) for income taxes 49,565 (933) 50,498 (5,412) % (43,982) (5,246) (38,736) 738 %
Net (loss) $ (66,197) $ (760) $ (65,437) 8,610 % $ (77,441) $ (11,962) $ (65,479) 547 %

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~~The following table sets forth~~ the results of operations as a percentage of total revenue ~~for~~in certain financial data for the three ~~and six~~ months ended December 31, ~~2022~~2023 and ~~2021:~~2022:

Three Months Ended
December 31, Six Months Ended
December 31,
2022 2021 2022 2021
(% of Revenue)
Revenue:
License and solutions 61.7 % 59.3 % 62.8 % 58.4 %
Maintenance 32.4 32.1 31.8 32.0
Services and other 5.9 8.6 5.4 9.6
Total revenue 100.0 100.0 100.0 100.0
Cost of revenue:
License and solutions 29.2 40.6 28.4 42.6
Maintenance 3.9 5.0 3.8 5.2
Services and other 5.2 5.2 5.1 5.8
Total cost of revenue 38.3 50.8 37.3 53.6
Gross profit 61.7 49.2 62.7 46.4
Operating expenses:
Selling and marketing 48.6 22.0 47.9 27.1
Research and development 20.6 18.8 20.2 19.5
General and administrative 17.0 8.6 17.0 8.6
Restructuring costs — — — 0.2
Total operating expenses 86.1 49.5 85.1 55.3
(Loss) from operations (24.5) (0.3) (22.4) (8.9)
Other income (expense), net 15.9 (1.7) (4.0) (1.7)
Interest income (expense), net 1.7 — 1.9 (0.2)
(Loss) before provision for income taxes (6.8) (2.1) (24.6) (10.8)
Provision (benefit) for income taxes 20.4 (1.1) (8.9) (3.3)
Net (loss) (27.3) % (0.9) % (15.7) % (7.5) %

~~Comparison of the Three Months Ended December 31, 2022 and 2021~~


	Three Months Ended December 31,				Increase / (Decrease) Change				(% of Revenue)
	2023		2022		$		%		2023		2022

	(Dollars in Thousands)
Revenue:
License and solutions	$	152,463	$	149,843	$	2,620	1.7	%	59.3	%	61.7	%
Maintenance	85,056		78,628		6,428		8.2		33.1		32.4
Services and other	19,644		14,367		5,277		36.7		7.6		5.9
Total revenue	257,163		242,838		14,325		5.9		100.0		100.0
Cost of revenue:
License and solutions	67,326		70,833		(3,507)		(5.0)		26.2		29.2
Maintenance	10,647		9,567		1,080		11.3		4.1		3.9
Services and other	16,960		12,698		4,262		33.6		6.6		5.2
Total cost of revenue	94,933		93,098		1,835		2.0		36.9		38.3
Gross profit	162,230		149,740		12,490		8.3		63.1		61.7
Operating expenses:
Selling and marketing	122,240		117,951		4,289		3.6		47.5		48.6
Research and development	53,145		49,954		3,191		6.4		20.7		20.6
General and administrative	36,088		41,230		(5,142)		(12.5)		14.0		17.0
Total operating expenses	211,473		209,135		2,338		1.1		82.2		86.1
Loss from operations	(49,243)		(59,395)		10,152		(17.1)		(19.1)		(24.5)
Other (expense) income, net	(199)		38,643		(38,842)		(100.5)		(0.1)		15.9
Interest income, net	12,283		4,120		8,163		198.1		4.8		1.7
Loss before benefit for income taxes	(37,159)		(16,632)		(20,527)		123.4		(14.4)		(6.8)
(Benefit) provision for income taxes	(15,659)		49,565		(65,224)		(131.6)		(6.1)		20.4
Net loss	$	(21,500)	$	(66,197)	$	44,697	(67.5)	%	(8.4)	%	(27.3)	%

Revenue

Total revenue increased by ~~$161.1~~$14.3 million, or 5.9%, during the three months ended December 31, ~~2022~~2023, as compared to the same period in the prior fiscal ~~year. Overall revenue growth is primarily~~year, due to ~~$167.4 million in revenue from Heritage AspenTech as a result of the Transaction,~~ an increase of ~~$3.6~~$6.4 million in ~~new~~maintenance revenue, an increase of $5.3 million in services and ~~renewal contracts from the SSE business, offset by a decrease~~other revenue and an increase of $2.6 million in ~~revenue of $10.0 million from OSI due to the mix of open customer projects~~license and ~~the stage of completion compared to the prior period.~~solutions revenue.

License and Solutions Revenue

License and solutions revenue increased by ~~$101.4~~$2.6 million, or 1.7%, during the three months ended December 31, ~~2022,~~2023, as compared to the same period in the prior fiscal ~~year. This increase was driven~~year, primarily ~~by $105.4 million from Heritage AspenTech as a result~~attributable to new term license orders in the second quarter of ~~the Transaction.~~fiscal 2024.

Maintenance Revenue

Maintenance revenue increased by ~~$52.4~~$6.4 million, or 8.2%, during the three months ended December 31, ~~2022~~2023, as compared to the same period in the prior fiscal ~~year. This increase was~~year, primarily due to ~~$53.7 million from Heritage AspenTech as a result~~growth of ~~the Transaction.~~our base of arrangements.

Services and Other Revenue

Services and other revenue increased by ~~$7.4~~$5.3 million, or 36.7%, during the three months ended December 31, ~~2022,~~2023, as compared to the same period in the prior fiscal year, primarily due to ~~$8.3 million~~the timing and volume of professional services engagements, and increased activities from ~~Heritage AspenTech~~certain customer contracts where the related professional services revenue is recognized as a ~~result~~distinct performance obligation effective beginning in the third quarter of ~~the Transaction, offset by a decrease of $1.2 million in services and other revenue from OSI and SSE professional services arrangements.~~

fiscal 2023.

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Cost of Revenue

~~Cost~~Total cost of revenue increased by ~~$51.5~~$1.8 million, or 2.0%, during the three months ended December 31, ~~2022,~~2023, as compared to the same period in the prior fiscal ~~year. The increase in cost of revenue is~~year, primarily due to ~~$49.6 million from Heritage AspenTech as a result~~increased compensation costs and headcount.

Cost of ~~the Transaction.~~

License and Solutions Revenue

Cost of license and solutions revenue ~~increased $37.6~~decreased $3.5 million, or 5.0%, during the three months ended December 31, ~~2022,~~2023, as compared to the same period in the prior fiscal ~~year. This increase was driven by $35.1 million~~year, primarily due to the business transformation activities in which we began recognizing distinct performance obligations for certain customer contracts effective beginning in the third quarter of fiscal 2023. Gross profit margin on license and solutions revenue increased to 55.8% from ~~Heritage AspenTech as a result~~52.7% for the three months ended December 31, 2023 2022, respectively, due to higher license and solutions revenue.

Cost of ~~the Transaction, $32.7 million of which is associated with additional amortization of intangible assets.~~

Maintenance Revenue

Cost of maintenance revenue increased by ~~$5.5~~$1.1 million, or 11.3%, during the three months ended December 31, ~~2022,~~2023, as compared to the same period in the prior fiscal ~~year. This increase was~~year, primarily due to ~~$5.9 million from Heritage AspenTech~~higher compensation costs related to salaries, benefits, and stock-based compensation. Gross profit margin on maintenance revenue remained consistent at 87.5% for the three months ended December 31, 2023 as ~~a result~~compared to 87.8% for the same period in the prior fiscal year.

Cost of ~~the Transaction.~~

Services and Other Revenue

Cost of services and other revenue increased by ~~$8.4~~$4.3 million, or 33.6%, for the three months ended December 31, ~~2022,~~2023, as compared to the same period in the prior fiscal year, primarily due to ~~$8.6 million~~higher compensation costs related to salaries, benefits, and bonuses and the increased activities from ~~Heritage AspenTech~~customer contracts where the related professional services revenue is recognized as a ~~result of the Transaction.~~distinct performance obligation. Gross ~~profit~~ margin on services and other revenue ~~was~~increased to 13.7% from 11.6% ~~and 38.9%~~ for the three months ended December 31, 2023 and 2022, respectively, due to an increase in services and ~~2021, respectively.~~other revenue.

Gross Profit

Overall gross profit increased by ~~$109.5~~$12.5 million, or 8.3%, for the three months ended December 31, ~~2022,~~2023, as compared to the same period in the prior fiscal ~~year primarily due to $117.9 million from Heritage AspenTech as a result of the Transaction.~~year. Gross profit margin increased ~~significantly~~ to ~~61.7%~~63.1% for the three months ended December 31, ~~2022~~2023, from ~~49.2%~~61.7% for the same period in the prior fiscal year. The increase was mainly driven by ~~larger gross profit on license~~an increase in licensing and services and other revenue ~~from Heritage AspenTech~~compared to the same period in the ~~current period.~~

prior fiscal year.

Operating Expenses

Selling and Marketing Expense

Selling and marketing expense increased by ~~$100.0~~$4.3 million, or 3.6%, during the three months ended December 31, ~~2022,~~2023, as compared to the same period in the prior fiscal year, primarily due to ~~$99.3~~higher compensation costs of $4.4 million ~~from Heritage AspenTech~~related to salaries and benefits as we continue to expand our sales capacity in new and existing markets, partially offset by a ~~result of the Transaction, of which $64.4 million was additional amortization of intangible assets.~~decrease in stock-based compensation.

Research and Development Expense

Research and development expense increased by ~~$34.6~~$3.2 million, or 6.4%, during the three months ended December 31, ~~2022,~~2023, as compared to the same period in the prior fiscal year, primarily due to ~~$30.8~~higher compensation costs of $4.2 million, ~~from Heritage AspenTech as~~related to salaries and benefits, partially offset by a ~~result of the Transaction,~~decrease in stock-based compensation.

General and ~~an increase of $1.4 million and $2.4 million from the SSE business and OSI compensation related costs, respectively.~~

Administrative Expense

General and administrative expense ~~increased~~decreased by ~~$34.2~~$5.1 million, or 12.5%, during the three months ended December 31, ~~2022,~~2023, as compared to the same period in the prior fiscal year, primarily due to ~~$34.1~~lower compensation costs of $5.2 million ~~from Heritage AspenTech as a result of the Transaction.~~

~~Non-Operating Income (Expense)~~

Other income (expense), net is comprised primarily of unrealized gains and losses on foreign currency forward contracts and unrealized and realized foreign currency exchange gains and losses generated from the settlement and remeasurement of transactions denominated in currencies other than the functional currency of our entities.

Other income (expense) increased by $40.1 million during the three months ended December 31, 2022, as compared to the same period in prior fiscal year primarily due to $34.9 million associated with unrealized gains on foreign currency forward contracts, while the remaining amount was related to ~~unrealized and realized foreign currency exchange gains and losses.~~

~~Interest income (expense) increased by $4.1 million for~~lower stock-based compensation in the ~~three months ended December 31, 2022 as compared to the same~~current period, ~~in prior fiscal year. The increase was largely attributable to the Transaction, which contributed $9.8 million resulting from interest income earned on Heritage AspenTech~~’~~s long-term revenue contracts,~~ partially offset by ~~a $5.9 million~~an increase in ~~interest expense due to a higher interest rate on our term loan~~salaries and ~~amortization of debt issuance costs associated with the Bridge Facility.~~

benefits.

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~~Comparison of the Six Months Ended December 31, 2022 and 2021~~Non-Operating (Expense) Income

Other (Expense) Income, Net

~~Revenue~~

~~Total revenue increased~~Other (expense) income, net decreased by ~~$334.9~~$38.8 million, or 100.5%, during the ~~six~~three months ended December 31, ~~2022~~2023, as compared to the same period in the prior fiscal ~~year. Overall revenue growth is~~year, primarily due to ~~$343.8~~a $34.9 million ~~in revenue from Heritage AspenTech as a result of the Transaction, an increase of $7.5 million in new and renewal~~unrealized gain on foreign currency forward contracts ~~from the SSE business, offset by a decrease~~ in ~~revenue of $16.5 million from OSI due to the mix of open customer projects and the stage of completion compared to~~ the prior ~~period.~~year that were terminated in June 2023, as well as decreases in unrealized and realized foreign currency exchange gains.

Interest Income, Net

~~License and solutions revenue~~Interest income, net increased by ~~$217.4~~$8.2 million, or 198.1%, during the ~~six~~three months ended December 31, ~~2022,~~2023, as compared to the same period in ~~prior fiscal year. This increase was driven primarily by $221.4 million from Heritage AspenTech as a result of~~ the Transaction, partially offset by a decrease of $5.5 million from the SSE business as a result of large dollar amount of new and renewal agreements entered during the same period in the prior fiscal year.

Maintenance revenue increased by $106.2 million during the six months ended December 31, 2022 as compared to the same period in prior fiscal year. This increase was primarily due to $107.1 million from Heritage AspenTech as a result of the Transaction.

~~Services and other revenue increased by $11.3 million during the six months ended December 31, 2022, as compared to the same period in~~ prior fiscal year, primarily due to ~~$15.4 million from Heritage AspenTech as a result of the Transaction,~~ ~~offset by a decrease in services and other revenue of $2.4 million and $1.7 million from OSI and SSE professional services arrangements, respectively.~~

~~Cost of Revenue~~

~~Cost of revenue increased by $99.1 million during the six months ended December 31, 2022, as compared to the same period in prior fiscal year. The~~an increase in ~~cost of revenue is primarily due to $98.9 million from Heritage AspenTech as a result of the Transaction.~~

Cost of license and solutions revenue increased $72.7 million during the six months ended December 31, 2022, as compared to the same period in prior fiscal year. This increase was driven by $70.4 million from Heritage AspenTech as a result of the Transaction, $65.6 million of which is associated with additional amortization of intangible assets.

Cost of maintenance revenue increased by $10.5 million during the six months ended December 31, 2022, as compared to the same period in prior fiscal year. This increase was primarily due to $11.8 million from Heritage AspenTech as a result of the Transaction.

Cost of services and other revenue increased by $15.9 million for the six months ended December 31, 2022, as compared to the same period in prior fiscal year primarily due to $16.7 million from Heritage AspenTech as a result of the Transaction. Gross profit margin on services and other revenue was 5.6% and 39.9% for the six months ended December 31, 2022 and 2021, respectively.

Overall gross profit increased by $235.7 million for the six months ended December 31, 2022, as compared to the same period in prior fiscal year primarily due to $244.9 million from Heritage AspenTech as a result of the Transaction. Gross profit margin increased significantly to 61.7% for the six months ended December 31, 2022 from 46.4% for the same period in prior fiscal year. The increase was mainly driven by larger gross profit on license revenue from Heritage AspenTech in the current period.

~~Operating Expenses~~

Selling and marketing expense increased by $193.2 million during the six months ended December 31, 2022, as compared to the same period in prior fiscal year primarily due to $200.2 million from Heritage AspenTech as a result of the Transaction, of which $128.6 million was additional amortization of intangible assets.

Research and development expense increased by $68.8 million during the six months ended December 31, 2022, as compared to the same period in prior fiscal year primarily due to $63.6 million from Heritage AspenTech as a result of the Transaction, and the remaining increase was from OSI and the SSE business mainly attributable to increased compensation related costs.

~~Table of Contents~~

General and administrative expense increased by $70.4 million during the six months ended December 31, 2022, as compared to the same period in prior fiscal year primarily due to $71.3 million from Heritage AspenTech as a result of the Transaction.

~~Non-Operating Income (Expense)~~

Other income (expense) increased by $17.2 million during the six months ended December 31, 2022, as compared to the same period in prior fiscal year primarily due to $15.3 million associated with unrealized losses on foreign currency forward contracts, while the remaining amount was related to unrealized and realized foreign currency exchange gains and losses.

Interest income (expense) increased by $9.4 million for the six months ended December 31, 2022 as compared to the same period in prior fiscal year. The increase was largely attributable to the Transaction, which contributed $19.1 million resulting from interest income earned on ~~Heritage AspenTech~~’scash and cash equivalent balances of $2.4 million, an increase in interest income earned on long-term revenue contracts of $2.1 million, and a ~~$10.3 million increase~~decrease in interest expense onof $4.6 million due to the repayment of our term loan facility under the Amended and ~~amortization~~Restated Credit Agreement in the third quarter of ~~debt issuance costs associated with the Bridge Facility.~~

fiscal 2023.

Benefit (Provision) for Income Taxes

Three Months Ended
December 31, Increase / (Decrease)
Change Six Months Ended
December 31, Increase / (Decrease)
Change
2022 2021 $ % 2022 2021 $ %
(Dollars in Thousands)
Provision (benefit) for income taxes $ 49,565 $ (933) $ 50,498 (5412) % $ (43,982) $ (5,246) $ (38,736) 738.4 %
Effective tax rate (298.0) % 55.1 % 36.2 % 30.5 %

~~We compute our~~The Company computes its tax provision (benefit) for interim periods by applying the estimated ~~annual effective tax rate (“AETR”)~~AETR to year-to-date income from operations and adjusting for discrete items arising in that quarter. However, if ~~we are~~the Company is unable to make a reliable estimate of ~~our~~its AETR, then the actual effective tax rate for the year-to-date period may be the best estimate. For the three months ~~and six months ended December 31, 2021, we computed our tax provision (benefit) using the AETR approach. However, for the six months~~ ended December 31, 2022, wethe 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 pretax (loss) income given small changes in the forecast of pre-tax (loss) income would result in significant changes in the AETR. For the three months ended December 31, 2023, the Company again recorded the actual effective tax rate as it was determined that the AETR approach was not the most appropriate estimate.

~~Income~~Benefit for income taxes was $15.7 million for the three months ended December 31, 2023 and income tax expense was $49.6 million for the three months ended December 31, 2022, ~~and income tax benefit was $0.9 million for the three months ended December 31, 2021,~~ resulting in effective tax rates of 42.1% and (298.0)% ~~and 55.1%~~, respectively. ~~Our income~~Income tax ~~was higher~~benefit primarily increased due to the prior year’s change in the ~~three~~Company’s approach to computing its tax provision (benefit) for interim periods to an actual effective tax rate method.

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Comparison of the Six Months Ended December 31, 2023 and 2022

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 six months ended December 31, ~~2022~~2023 and 2022:


	Six Months Ended December 31,				Increase / (Decrease) Change				(% of Revenue)
	2023		2022		$		%		2023		2022

	(Dollars in Thousands)
Revenue:
License and solutions	$	301,111	$	310,068	$	(8,957)	(2.9)	%	59.5	%	62.8	%
Maintenance	170,024		156,994		13,030		8.3		33.6		31.8
Services and other	35,336		26,595		8,741		32.9		7.0		5.4
Total revenue	506,471		493,657		12,814		2.6		100.0		100.0
Cost of revenue:
License and solutions	138,903		140,346		(1,443)		(1.0)		27.4		28.4
Maintenance	20,848		18,784		2,064		11.0		4.1		3.8
Services and other	33,242		25,098		8,144		32.4		6.6		5.1
Total cost of revenue	192,993		184,228		8,765		4.8		38.1		37.3
Gross profit	313,478		309,429		4,049		1.3		61.9		62.7
Operating expenses:
Selling and marketing	244,618		236,225		8,393		3.6		48.3		47.9
Research and development	106,821		99,695		7,126		7.1		21.1		20.2
General and administrative	71,494		84,086		(12,592)		(15.0)		14.1		17.0
Total operating expenses	422,933		420,006		2,927		0.7		83.5		85.1
Loss from operations	(109,455)		(110,577)		1,122		(1.0)		(21.6)		(22.4)
Other expense, net	(6,029)		(19,989)		13,960		(69.8)		(1.2)		(4.0)
Interest income, net	26,333		9,143		17,190		188.0		5.2		1.9
Loss before benefit for income taxes	(89,151)		(121,423)		32,272		(26.6)		(17.6)		(24.6)
Benefit for income taxes	(33,126)		(43,982)		10,856		(24.7)		(6.5)		(8.9)
Net loss	$	(56,025)	$	(77,441)	$	21,416	(27.7)	%	(11.1)	%	(15.7)	%

Revenue

Total revenue increased by $12.8 million, or 2.6%, during the six months ended December 31, 2023, as compared to the same period in the prior fiscal year, primarily due to an increase of $13.0 million in maintenance revenue and an increase of $8.7 million in services and other revenue, resulting from an increase in bookings related to the timing of contract renewals. This increase was partially offset by a decrease in license and solutions revenue of $9.0 million.

License and Solutions Revenue

License and solutions revenue decreased by $9.0 million, or 2.9%, during the six months ended December 31, 2023, as compared to the same period in the prior fiscal year, primarily attributable to the timing of renewals and new contracts signed in the same period in the prior fiscal year.

Maintenance Revenue

Maintenance revenue increased by $13.0 million, or 8.3%, during the six months ended December 31, 2023, as compared to the same period in the prior fiscal year, primarily due to growth of our base of arrangements.

Services and Other Revenue

Services and other revenue increased by $8.7 million, or 32.9%, during the six months ended December 31, 2023, as compared to the same period in the prior fiscal year, primarily due to the ~~current quarters' change~~timing and volume of professional services engagements and increased activities from certain customer contracts where the related professional services revenue is recognized as a distinct performance obligation effective beginning in the third quarter of fiscal 2023.

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Cost of Revenue

Total cost of revenue increased by $8.8 million, or 4.8%, during the six months ended December 31, 2023, as compared to the same period in the prior fiscal year, primarily due to increased compensation costs and headcount, as well as timing of software implementation projects.

Cost of License and Solutions Revenue

Cost of license and solutions revenue decreased by $1.4 million, or 1.0%, during the six months ended December 31, 2023, as compared to the same period in the prior fiscal year, primarily due to the business transformation activities in which we began recognizing distinct performance obligations for certain customer contracts effective beginning in the third quarter of fiscal 2023. Gross profit margin on license and solutions revenue decreased to 53.9% from 54.7% for the six months ended December 31, 2023 and 2022, respectively, primarily due to lower license and solutions revenue.

Cost of Maintenance Revenue

Cost of maintenance revenue increased by $2.1 million, or 11.0%, during the six months ended December 31, 2023, as compared to the same period in the prior fiscal year, primarily due to higher compensation costs related to salaries, benefits, and stock-based compensation. Gross profit margin on maintenance revenue decreased to 87.7% from 88.0% for the six months ended December 31, 2023 and 2022, respectively.

Cost of Services and Other Revenue

Cost of services and other revenue increased by $8.1 million, or 32.4%, for the six months ended December 31, 2023, as compared to the same period in the prior fiscal year, primarily due to higher compensation costs related to salaries and benefits and the increased activities from customer contracts where the related professional services revenue is recognized as a distinct performance obligation. Gross margin on services and other revenue increased to 5.9% from 5.6% for the six months ended December 31, 2023 and 2022, respectively, due to an increase in services and other revenue.

Gross Profit

Overall gross profit increased by $4.0 million, or 1.3%, for the six months ended December 31, 2023, as compared to the same period in the prior fiscal year. Gross profit margin decreased to 61.9% from 62.7% for the six months ended December 31, 2023 and 2022, respectively. The decrease in gross profit margin was mainly driven by a decrease in license revenue compared to the same period in the prior fiscal year, due to a decrease in bookings driven by the timing of renewals, while compensation costs increased primarily due to headcount.

Operating Expenses

Selling and Marketing Expense

Selling and marketing expense increased by $8.4 million, or 3.6%, during the six months ended December 31, 2023, as compared to the same period in the prior fiscal year, primarily due to higher compensation costs of $8.9 million related to salaries and benefits as we continue to expand our ~~approach~~sales capacity in new and existing markets, partially offset by a decrease in stock-based compensation.

Research and Development Expense

Research and development expense increased by $7.1 million, or 7.1%, during the six months ended December 31, 2023, as compared to ~~computing~~the same period in the prior fiscal year, primarily due to higher compensation costs of $7.1 million related to salaries and benefits.

General and Administrative Expense

General and administrative expense decreased by $12.6 million, or 15.0%, during the six months ended December 31, 2023, as compared to the same period in the prior fiscal year, primarily due to lower compensation costs of $6.7 million related to stock-based compensation, and a decrease in acquisition and integration expenses of $6.0 million related to the Transaction with Emerson.

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Non-Operating (Expense) Income

Other Expense, Net

Other expense, net decreased by $14.0 million, or 69.8%, during the six months ended December 31, 2023, as compared to the same period in the prior fiscal year, primarily due to $15.3 million of unrealized loss on foreign currency forward contracts in the prior year that were terminated in June 2023, as well as increases in unrealized and realized foreign currency exchange losses.

Interest Income, Net

Interest income, net increased by $17.2 million, or 188.0%, during the six months ended December 31, 2023, as compared to the same period in the prior fiscal year, primarily due to an increase in interest income earned on cash and cash equivalent balances of $4.7 million, an increase in interest income earned on long-term revenue contracts of $4.6 million, and a decrease in interest expense of $8.7 million due to the repayment of our term loan facility under the Amended and Restated Credit Agreement in the third quarter of fiscal 2023.

Benefit for Income Taxes

The Company computes its tax provision (benefit) for ~~the~~ interim periods by applying the estimated 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 ~~method. The change resulted in a tax provision during~~for the ~~three months ended December 31, 2022 that reflects recording a~~ year-to-date ~~benefit compared to that of~~period may be the best estimate. For the three months ended September 30, 2022, ~~which was recorded under~~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 pretax (loss) income given small changes in the forecast of pre-tax (loss) income would result in significant changes in the AETR. For the six months ended December 31, 2023, 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 ~~$44.0~~$33.1 million and ~~$5.2~~$44.0 million for the six months ended December 31, ~~2022~~2023 and ~~December 31, 2021,~~2022, respectively, resulting in effective tax rates of ~~36.2 %~~37.2% and ~~30.5 %,~~36.2%, respectively. Income tax benefit ~~increased~~decreased primarily due to ~~the higher~~an increase in year-to-date earnings and a reduced Foreign-Derived Intangible Income (“FDII”) deduction recorded in the current period as a result of non-deductible amortization of intangibles, capitalized R&D costs, and a change in the accounting methodology related to historical revenue recognition for tax purposes on multi-year software license agreements. The change resulted in the recognition of taxable income over a four-tax year period with fiscal year 2024 as the last year of the adjustment.period.

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Liquidity and Capital Resources

Resources

As of December 31, ~~2022~~2023 and June 30, ~~2022,~~2023, our principal sources of liquidity consisted of ~~$446.1~~$130.8 million and ~~$449.7~~$241.2 million, ~~respectively,~~ in cash and cash ~~equivalents.~~

equivalents, respectively.

We believe our existing cash on hand and cash flows generated by operations are sufficient for at least the next 12 months to meet our operating requirements, including those related to salaries and wages, working capital, capital expenditures, and other liquidity requirements associated with operations. We may need to raise additional funds if we decide to make one or more acquisitions of businesses, technologies or products. If additional funding for such purposes is required beyond existing resources and our Amended and Restated Credit Agreement described below, we may not be able to affect a receivable, equity or debt financing on terms acceptable to us or at all.

~~Bridge Facility~~

On July 27, 2022, the Company entered into a $475.0 million senior unsecured bridge facility (the “Bridge Facility”) with JPMorgan Chase Bank, N.A. (“JPMorgan”), as Administrative Agent, to finance the acquisition of all of the equity interests of Mining Software Holdings Pty Ltd (“Micromine acquisition”). The Bridge Facility was entered into under the existing Amended and Restated Credit Agreement dated as of December 23, 2019, with JPMorgan (“Credit Agreement”). The Company may elect that each incremental borrowing under the Bridge Facility bear interest at a rate per annum equal to (a) the Alternate Base Rate (“ABR”), plus the applicable margin or (b) the Adjusted Term Secured Overnight Financing Rate (“SOFR”), plus the applicable margin.

~~On December 23, 2022, the Company terminated the Bridge Facility~~The Amended and ~~entered into a credit agreement with Emerson Electric Co. (the “Emerson Credit Agreement”), which will provide for an aggregate term loan commitment of $630.0 million.~~

~~Refer to Note 13, “Related-Party Transactions”, to our consolidated and combined financial statements for further discussion of the Emerson Credit Agreement.~~

~~Credit Agreement~~

~~The~~Restated Credit Agreement provides for a $200.0 million secured revolving credit facility, ~~and a $320.0~~of which the Company had $197.4 million ~~secured term loan facility.~~

~~The interest rate~~available for borrowing as of December 31, ~~2022 was 5.26% on $264.0 million in outstanding borrowings on its term loan facility.~~

2023.

On January 17, 2023, the Company paid off the outstanding balance of our existing term loan facility of $264 million, plus accrued interest, which resulted in the long-term portion of term loan obligation being reclassified and reported as short-term borrowings at December 31, 2022.

For a more detailed description of the Amended and Restated Credit Agreement, see Note 8,10, “Debt”, to our ~~Unaudited Consolidated and Combined Financial Statements in Part 1, Item 1 of this Form 10-Q.~~condensed consolidated financial statements.

~~Cash Balance Sheet and~~ Cash Flows

Operating Cash Flows

~~Our~~Net cash ~~and cash equivalents were $446.1~~provided by operating activities decreased by $7.8 million ~~and $27.7 million as of December 31, 2022 and 2021, respectively. The following table summarizes our free cash flow (in thousands):~~

~~Table of Contents~~

~~Total free cash flow increased~~ ~~$91.1 million~~ during the six~~-month~~ month period ended December 31, ~~2022~~2023, as compared to the same period in prior fiscal year, primarily driven by a decrease of $36.3 million in cash due to unfavorable changes in working capital, primarily due to the ~~contribution~~timing of contract cycle renewals and billings, partially offset by an increase of $28.5 million in cash provided due to higher income before non-cash charges.

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Investing Cash Flows

Net cash used in investing activities decreased by $55.7 million during the six month period ended December 31, 2023, as compared to the same period in prior fiscal year, primarily driven by a decrease of $66.7 million in cash used for business acquisitions and $1.4 million in cash used for capital expenditures, partially offset by an increase of $12.5 million in cash used for the asset acquisition of Plantweb Optics Analytics software.

Financing Cash Flows

Net cash used in financing activities increased by $151.5 million during the six month period ended December 31, 2023, as compared to the same period in prior fiscal year, primarily driven by an increase of $186.3 million in cash used for common stock repurchases, partially offset by an increase of $38.9 million in cash provided from ~~Heritage AspenTech~~our cash pooling arrangements with related parties.

Free Cash Flows

Free cash flow (non-GAAP) decreased $6.2 million during the six month period ended December 31, 2023, as ~~a result of~~compared to the ~~Transaction and was mainly~~same period in prior fiscal year, primarily driven by the decrease in net cash ~~flows~~ provided by operating ~~activities.~~activities (GAAP), partially offset by a decrease in capital expenditures.

The following table provides a reconciliation of net cash provided by operating activities (GAAP) to free cash flow (non-GAAP) for the indicated periods:


	Six Months Ended December 31,
	2023		2022

	(Dollars in Thousands)
Net cash provided by operating activities (GAAP)	$	46,808	$	54,612
Purchase of property, equipment, and leasehold improvements	(1,437)		(2,844)
Payments for capitalized computer software development costs	(131)		(329)
Free cash flow (non-GAAP) (1)	$	45,240	$	51,439

__________

Contractual Obligations

Letters of Credit

Standby letters of credit ~~for $21.5~~in the aggregate amounts of $31.5 million and ~~$28.7~~$39.0 million secured our performance on professional services contracts, certain facility leases and potential liabilities as of December 31, ~~2022~~2023 and June 30, ~~2022,~~2023, respectively. The letters of credit expire at various dates through fiscal ~~2027.~~2031.

Effects of Inflation

We do not believe that inflation has had a material impact on our business or operating results during the periods presented. However, inflation may in the future have an impact on our ability to execute on our acquisition strategy. Inflationary costs could adversely affect our business, financial condition and results of operations. In addition, increased inflation has had, and may continue to have, an effect on interest rates. Increased interest rates may adversely affect our borrowing rate and our ability to obtain, or the terms under which we can obtain, any potential additional funding.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

In the ordinary course of conducting business, we are exposed to certain risks associated with potential changes in market conditions. These market risks include changes in currency exchange rates and interest rates which could affect operating results, financial position and cash flows. We manage our exposure to these market risks through our regular operating and financing activities and, if considered appropriate, we may enter into derivative financial instruments such as forward currency exchange contracts.

Foreign Currency ~~Exchange~~ Risk

~~Our foreign exchange forward contracts outstanding as of the respective period-ends are summarized as follows (in thousands):~~

~~December 31, 2022~~

~~June 30, 2022~~

~~Notional Amount~~

~~Fair Value~~

~~Notional Amount~~

~~Fair Value~~

~~Forward contracts:~~

~~Purchased~~

~~AU $900,000~~

~~(15,319)~~

—

During the three months ended December 31, 2023 and 2022, 12.1% and ~~2021,~~ 8.3% ~~and 7.8%~~ of our total revenue was denominated in a currency other than the U.S. dollar, respectively. During the six months ended December 31, 2023 and 2022, 9.9% and ~~2021,~~ 10.0% ~~and 6.5%~~ of our total revenue was denominated in a currency other than the U.S. dollar, respectively. In addition, certain of our operating costs incurred outside the United States are denominated in currencies other than the U.S. dollar. We conduct business on a worldwide basis and as a result, a portion of our revenue, earnings, net assets, and net investments in foreign affiliates is exposed to changes in foreign currency exchange rates. We measure our net exposure for cash balance positions and for cash inflows and outflows in order to evaluate the need to mitigate our foreign exchange risk. We may enter into foreign currency forward contracts to minimize the impact related to unfavorable exchange rate movements related to our cash positions and cash flows, although we have not done so during the three months ended December 31, ~~2022~~2023 and ~~2021.~~2022. Currently, our largest exposures to foreign exchange rates exist primarily with the Euro, Pound Sterling, Japanese Yen, Canadian Dollar, ~~Japanese Yen,~~Indonesian Rupiah, and Norwegian ~~Krone, and Russian Ruble.~~

Krone.

We recorded ~~$3.6 million and $1.5 million of~~ net foreign currency exchange ~~gain~~losses of $0.3 million and ~~loss~~$3.6 million, respectively, during the three months ended December 31, 2023 and 2022, and ~~2021, respectively,~~$6.2 million and $4.7 million, ~~and $3.0 million of net foreign currency exchange losses~~respectively, during the six months ended December 31, ~~2022~~2023 and ~~2021, respectively,~~2022, related to the settlement and remeasurement of transactions denominated in currencies other than the functional currency of our operating units. Our analysis of operating results transacted in various foreign currencies indicated that a hypothetical 10% change in the foreign currency exchange rates could have increased or decreased ~~the consolidated and combined~~our results of operations by approximately ~~$3.1~~$3.0 million and ~~$1.2~~$3.1 million for the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022, respectively, and by approximately ~~$5.6~~$4.8 million and ~~$2.3~~$5.6 million for the six months ended December 31, 2023 and 2022, ~~and 2021,~~ respectively.

We may also enter into foreign exchange forward contracts to reduce the short-term effects of foreign currency fluctuations on receivables and payables that are denominated in currencies other than the functional currencies of the entities, although we have not done so during the three months ended December 31, 2022 and 2021. The market risks associated with these foreign currency receivables and payables relate primarily to variances from our forecasted foreign currency transactions and balances. We do not enter into foreign exchange forward contracts for speculative purposes.

Interest Rate Risk

We place our investments in money market instruments. Our analysis of our investment portfolio and interest rates atas of December 31, ~~2022~~2023 indicated that a hypothetical 100 basis point increase or decrease in interest rates would not have a material impact on the fair value of our investment portfolio determined in accordance with an income-based approach utilizing portfolio future cash flows discounted at the appropriate rates.

As of December 31, 2022, our current borrowings of $264.0 million consist of the term loan facility under the Credit Agreement. A hypothetical 10% increase or decrease in interest rates paid on outstanding borrowings under the Credit Agreement would not have a material impact on our financial position, results of operations or cash flows.

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Investment Risk

~~The Company owns~~We own an interest in a limited partnership investment fund. The primary objective of this partnership is investing in equity and equity-related securities (including convertible debt) of venture ~~growth- stage~~growth-stage businesses. We account for the investment in accordance with Topic 323, Investments - Equity Method and Joint Ventures. Our total commitment under this partnership is $5.0 million CAD, ~~($4.0~~or $3.7 million ~~USD).~~USD. Under the conditions of the equity method investment, unfavorable future changes in market conditions could lead to a potential loss up to the full value of our $5.0 million CAD, ~~($4.0~~or $3.7 million ~~USD)~~USD commitment. As of December 31, ~~2022,~~2023, the fair value of this investment ~~value is $2.9~~was $3.2 million CAD, ~~($2.3~~or $2.4 million ~~USD),~~USD, representing our payment towards the total commitment, and is recorded in non-current assets in our condensed consolidated balance ~~sheet.~~sheets.

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Item 4.Controls and Procedures.

a) Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and interim chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, ~~2022.~~2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”) means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, ~~2022,~~2023, our chief executive officer and interim chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective.

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b) Changes in Internal Controls Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the ~~six~~three months ended December 31, ~~2022,~~2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We will continue to review and document our disclosure controls and procedures, including our internal control over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

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PART II - OTHER INFORMATION

Item 1.Legal Proceedings.

None.

Item 1A. Risk Factors.

The risks described in “Item 1A. Risk Factors” in our ~~Transition Reports~~Annual Report on Form ~~10-KT~~10-K for the fiscal year ended June 30, ~~2022,~~2023, could materially and adversely affect our business, financial condition and results of operations. These risk factors do not identify all risks that we face—our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. The Risk Factors section of our ~~2022 Transition Reports~~2023 Annual Report on Form ~~10-KT~~10-K remains current in all material respects,, with the exception of the ~~revised~~ risk ~~factor~~factors described below.

A significant portion of our revenue is attributable to operations outside the United States, and our operating results therefore may be materially affected by the economic, political, military, regulatory and other risks of foreign operations or of transacting business with customers outside the United States, including in Russia.

Customers outside the United States account for a significant portion of our total revenue and will for the foreseeable future. Our operating results attributable to operations outside the United States are subject to additional risks, including:

•unexpected changes in regulatory or environmental requirements, tariffs and other barriers, including, for example, international trade disputes, changes in climate regulations, sanctions or other regulatory restrictions imposed by the United States or foreign governments;

•~~less effective protection of intellectual property;~~

•~~requirements of foreign laws and other governmental controls;~~

•~~difficulties in collecting trade accounts receivable in other countries;~~

•~~adverse tax consequences;~~

•~~the challenges of managing legal disputes in foreign jurisdictions.~~

•~~difficulties in staffing and managing foreign operations;~~

•~~limited protection for the enforcement of contract and intellectual property rights in certain countries where we may sell our products or work with suppliers or other third parties;~~

•~~potentially longer sales and payment cycles and potentially greater difficulties in collecting accounts receivable;~~

•~~costs and difficulties of customizing products for foreign countries;~~

•~~challenges in providing solutions across a significant distance, in different languages and among different cultures;~~

•~~laws and business practices favoring local competition;~~

•~~being subject to a wide variety of complex foreign laws, treaties and regulations and adjusting to any unexpected changes in such laws, treaties and regulations, including local labor laws;~~

•~~strict laws and regulations governing privacy and data security, including the European Union’s General Data Protection Regulation;~~

•~~uncertainty and resultant political, financial and market instability arising from the United Kingdom’s exit from the European Union;~~

•~~compliance with U.S. laws affecting activities of U.S. companies abroad, including the U.S. Foreign Corrupt Practices Act;~~

•~~tariffs, trade barriers and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets;~~

•~~operating in countries with a higher incidence of corruption and fraudulent business practices;~~

•~~changes in regulatory requirements, including export controls, tariffs and embargoes, other trade restrictions, competition, corporate practices and data privacy concerns;~~

•~~seasonal reductions in business activity in certain parts of the world, particularly during the summer months in Europe and at year end globally;~~

•~~rapid changes in government, economic and political policies and conditions; and~~

•~~political or civil unrest or instability, acts of war, terrorism or epidemics and other similar outbreaks or events.~~

While we license our products primarily through a direct sales force located throughout the world, we also leverage sales relationships with Emerson and other channel partners to market our products in certain locations. In the event that we are unable to adequately staff and maintain our foreign operations, we could face difficulties managing our international operations.

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In addition, the ongoing conflict in Ukraine could adversely impact our business, financial position, cash flows and results of operations in Russia and Ukraine which may in turn spread and impact our overall business, financial position, cash flows and results of operations.

We maintain limited operations in Russia and license software and provide related services to customers in Russia and areas of Ukraine that are not under sanction. We ~~have net sales~~had revenue of approximately $44.6 million and $9.9 million for fiscal 2023 and 2022, respectively, and $5.8 million and $16.8 million for the three months ended December 31, 2023 and 2022, respectively, and $13.0 million and $26.8 million for the ~~three- and six-month period~~six months ended December 31, 2023 and 2022, ~~and~~respectively. We also had total assets of approximately ~~$19.3~~$35.2 million and $39.7 million as of December 31, ~~2022,~~2023 and June 30, 2023, respectively, related to operations in Russia.

As ~~a software company, no material impact to supply chain operations is expected as~~ a result of the conflict between Russia and Ukraine, the United States, the European Union, the United Kingdom and other governments, among others, have developed coordinated sanctions and export-control measure packages. These packages include, comprehensive financial sanctions against major Russian banks (including SWIFT cut off); designations of individuals and entities involved in ~~Ukraine~~Russian military activities; additional designations of Russian individuals including but not limited to those with significant business interests and government connections; and enhanced export controls and trade sanctions targeting Russia’s imports of a wide range of goods as a whole, including tighter controls on exports and reexports of items previously subject to only a low level of control, stricter licensing policy with respect to issuing export licenses, and/or increased use of “end-use” controls to block or impose licensing requirements on exports.

We may be required to cease or suspend operations in Russia or, should the conflict ~~has not had a material~~or the effects of sanctions, export control measures and business restrictions worsen, we may voluntarily elect to do so. We no longer provide engineering services to customers in Russia, which may impact on our ~~financial results thus far. However,~~ability to renew existing contracts and provide support to those customers. In addition, we have limited our operations in Russia to contract renewals only with existing customers. While we continue to evaluate the impact ~~if any,~~ of the various sanctions ~~export control measures~~ and ~~business~~ restrictions imposed by the United States, other governments, and financial institutions on our ability to do business in Russia and areas of Ukraine that are not under sanction, maintain contracts with vendors and pay employees in Russia, and receive payment from customers in Russia and areas of Ukraine that are not under sanction, there is no assurance that we will be able to do so in the future. Any disruption to, or suspension of, our business and ~~assess~~operations in Russia would result in the loss of revenue from the business in Russia and would negatively impact our growth. We also may suffer reputational harm as a result of our continued operations ~~for potential asset impairment.~~

in Russia, which may adversely impact our sales and other businesses in other countries.

We assess our operations for potential asset impairment in accordance with our accounting practices, and are periodically evaluating the impact ~~if any,~~ of the various sanctions ~~export controls measures~~ and ~~business~~ restrictions imposed by the United States and other governments ~~and others~~ on our ability to doconduct business in ~~Russia, maintain contracts with vendors and pay employees in Russia, as well as receive payment from customers in Russia or Ukraine.~~Russia. The outcome of these assessments, which may include a write-off of our remaining assets that are related to the operations in Russia, and their potential impact on our ability to continue to conduct business to the same extent as currently conducted will depend on how the conflict evolves and on further actions that may be taken by the United States, Russia, other governments, and others.

If the sanctions and other retaliatory measures and restrictions imposed by the global community change, we may be required to cease or suspend operations in the region or, should the conflict or the effects of these sanctions, measures and restrictions worsen, we may voluntarily elect to do so. Any disruption to, or suspension of, our business and operations in Russia would result in the loss of revenues from the business in Russia. In addition, as a result of the risk of collectability of receivables from our customers in Russia, we may be required to adjust our accounting practices relating to revenue recognition in this region, with the result that we may not be able to recognize revenue until there is no significant risk of revenue reversal. We may also suffer reputational harm as a result of our continued operations in Russia, which may adversely impact our sales and other businesses in other countries.

~~While the precise effects of~~Furthermore, the ongoing military conflict and sanctions on Russia have resulted in adverse macroeconomic effects which have in the ~~Russian~~past and ~~global economies remain uncertain, they~~may in the future have an adverse effect on our business. For example, the war between Russia and Ukraine has already resulted in significant volatility in financial markets and depreciation of the Russian ruble and the Ukrainian hryvnia against the U.S. dollar, as well as in an increase in energy and commodity prices ~~globally. Should the~~globally and restrictions on our ability to withdraw and move funds from Russian bank accounts. The conflict ~~continue or escalate, there~~ may ~~be various economic and security~~also result in additional consequences including, but not limited to, supply shortages, ~~of different kinds,~~ further increases in prices of commodities, ~~including piped gas, oil and agricultural goods,~~ reduced consumer purchasing power, significant disruptions in logistics infrastructure, telecommunications services and risks relating to the ~~unavailability~~availability of

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information technology systems and infrastructure. The resulting impacts to the global economy, financial markets, inflation, interest rates and unemployment, among others, could adversely impact economic and financial conditions, and may disrupt the global economy’s ongoing recovery following the COVID-19 pandemic. Other potential consequences include, but are not limited to, growth in the number of popular uprisings in the region, increased political discontent, especially in the regions most affected by the conflict or economic sanctions, increase in cyberterrorism activities and attacks, displacement of persons to regions close to the areas of conflict and an increase in the number of refugees fleeing across Europe, among other unforeseen social and humanitarian effects. ~~As a result of the ongoing conflict between Russia and Ukraine, we may experience other risks, difficulties and challenges in the way we conduct our business and operations generally.~~

Continued conflict between Russia and ~~the~~ Ukraine and any escalation of that conflict, and the financial and economic sanctions and import and/or export controls imposed on Russia by the United States, the United Kingdom, the European Union, Canada and others, as well as other business restrictions imposed by financial institutions and the above-mentioned adverse effects on our operations (both in this region and generally) and on the wider global economy and market conditions could ~~in turn,~~ have a material adverse impact on our business, financial condition, cash flows and results of operations and could cause the market value of our ~~common shares~~securities to decline.

An escalation of the Israeli-Hamas conflict may have a material adverse impact on the Company’s business and operations in the region.

We have operations and customers in the Middle East. A further escalation of the current Israeli-Hamas conflict could result in additional armed conflict, terrorist activities, and political or macroeconomic instability in the Middle East region. This, in turn, could cause our customers in the region to reduce their capital expenditures, resulting in a reduction of our sales to such customers. A decline in our sales to our customers in the affected region and any further impact of such conflict or instability on our operations could have a material adverse impact on our business and operations in the region, results of operations or financial condition.

Item 2. Unregistered Sales of Equity Securities, ~~and~~ Use of ~~Proceeds.~~Proceeds, and Issuer Purchases of Equity Securities.

Purchases of Equity Securities by the Issuer

On May 5, 2023, we entered into the ASR Program with JPMorgan to repurchase an aggregate of $100.0 million of our common stock. For more details on the ASR Program, refer to Note 13, “Stock Repurchases” to our condensed consolidated financial statements. During fiscal 2023, we repurchased 487,626 shares of our common stock for $100.0 million pursuant to the ASR Program, and on August 7, 2023 the ASR Program settled, resulting in an additional delivery of 107,045 shares of our common stock to us.

On August 1, 2023, we announced that our board of directors approved the Share Repurchase Authorization, pursuant to which an aggregate $300.0 million of our common stock may be repurchased. During the second quarter of fiscal 2024, the Company repurchased 375,041 shares for $72.1 million under the Share Repurchase Authorization. As of December 31, 2024, a total of 954,839 shares have been repurchased under the Share Repurchase Authorization for $186.3 million, with the total remaining value being $113.7 million. For more details on the Share Repurchase Authorization, refer to Note 13, “Stock Repurchases” to our condensed consolidated financial statements.

The following is a summary of stock repurchases for each month during the second quarter of fiscal 2024:


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value that May Yet Be Purchased Under the Plans or Programs (1)

	(Dollars in Thousands, Except Shares and per Share Data)
October 1, 2023 to October 31, 2023	158,479	$	197.67	158,479	$	154,449
November 1, 2023 to November 30, 2023	122,110	177.63		122,110	$	132,759
December 1, 2023 to December 31, 2023	94,452	202.10		94,452	$	113,671
Total	375,041	$	192.26	375,041

__________

(1) 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.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

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Item 5. Other Information.

During the three months ended December 31, 2023, none of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement.

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Item 6.Exhibits.

Exhibit Number

Description

~~10.1~~

~~Credit Agreement by and between Aspen Technology, Inc. and Emerson Electric Co., dated December 23, 2022 incorporated by reference to the Company’s Form 8-K filed on December 30, 2022. Exhibit 10.1~~

~~10.2~~

Third Amendment, dated as of January 22, 2023, to the Amended and Restated Credit Facility, dated as of December 23, 2019, by and among Aspen Technology, Inc., the other loan parties from time to time party thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent

31.1

Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of President and Chief Executive Officer and Senior Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

Management contract or compensatory plan or arrangement

3637

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Aspen Technology, Inc.

Date: ~~January 30, 2023~~February 6, 2024	By:	/s/ ANTONIO J. PIETRI
		Antonio J. Pietri
		President and Chief Executive Officer
		(Principal Executive Officer)


Date: ~~January 30, 2023~~February 6, 2024	By:	/s/ ~~CHANTELLE BREITHAUPT~~CHRISTOPHER STAGNO
		~~Chantelle Breithaupt~~Christopher Stagno
		Senior Vice President, Interim Chief Financial Officer ~~and Treasurer~~
		(Principal Financial Officer)

3738


	December 31, 2022		June 30, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	446,088	$	449,725
Accounts receivable, net	140,746		111,027
Current contract assets, net	419,714		428,833
Prepaid expenses and other current assets	23,750		23,461
Receivables from related parties	15,099		16,941
Prepaid income taxes	—		17,503
Total current assets	1,045,397		1,047,490
Property, equipment and leasehold improvements, net	17,138		17,148
Goodwill	8,328,846		8,266,809
Intangible assets, net	4,902,442		5,112,781
Non-current contract assets, net	515,820		428,232
Contract costs	9,042		5,473
Operating lease right-of-use assets	71,426		78,286
Deferred tax assets	2,328		4,937
Other non-current assets	8,214		8,766
Total assets	$	14,900,653	$	14,969,922

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	12,975		21,416
Accrued expenses and other current liabilities	95,407		90,123
Liability from foreign currency forward contract	15,319		—
Due to related parties	32,284		4,111
Current operating lease liabilities	12,627		7,191
Income taxes payable	25,704		6,768
Current borrowings	264,000		28,000
Current contract liabilities	146,887		143,327
Total current liabilities	605,203		300,936
Non-current contract liabilities	29,707		21,081
Deferred income tax liabilities	1,040,094		1,145,408
Non-current operating lease liabilities	60,005		71,933
Non-current borrowings, net	—		245,647
Other non-current liabilities	18,579		15,560

Stockholders’ equity:

Common stock, $0.0001 par value Authorized—600,000,000 shares Issued— 64,767,755 shares at December 31, 2022 and 64,425,378 shares at June 30, 2022 Outstanding— 64,767,755 shares at December 31, 2022 and 64,425,378 shares at June 30, 2022	6		6
Additional paid-in capital	13,164,874		13,107,570
Retained earnings	(11,072)		66,369
Accumulated other comprehensive (loss)	(6,743)		(4,588)
Total stockholders’ equity	13,147,065		13,169,357
Total liabilities and stockholders’ equity	$	14,900,653	$	14,969,922


	Net Parent Investment		Accumulated Other Comprehensive Income (Loss)		Total Equity/Stockholders’ Equity
Balance June 30, 2021	$	1,772,671	$	(6,487)	$	1,766,184
Net Loss	(11,202)		—		(11,202)
Net transfer from Parent Company	15,561		—		15,561

Other comprehensive income	—		803		803
Balance September 30, 2021	$	1,777,030	$	(5,684)	$	1,771,346
Net Loss	(760)		—		(760)
Net transfer from Parent Company	18,118		—		18,118
Other comprehensive (loss)	—		(111)		(111)
Balance December 31, 2021	$	1,794,388	$	(5,795)	$	1,788,593


	December 31,		June 30,
	2022		2022
Interest bearing receivables from related parties	$	14,946	$	16,122
Trade receivables from related parties	153		819
Interest bearing payables to related parties	30,883		2,028
Trade payables to related parties	1,401		2,083


	Property, Equipment, and
	Leasehold Improvements, Net
	December 31, 2022		June 30, 2022
Americas	$	14,685	$	14,591
Asia, Middle East and Africa	1,686		1,154
Europe	767		1,403
Total	$	17,138	$	17,148


	Three Months Ended December 31,				Increase / (Decrease) Change				Six Months Ended December 31,				Increase / (Decrease) Change
	2022		2021		$		%		2022		2021		$		%
	(Dollars in Thousands)
Revenue:
License and solutions	$	149,843	$	48,491	$	101,352	209	%	$	310,068	$	92,706	$	217,362	234	%
Maintenance	78,628		26,272		52,356		199	%	156,994		50,807		106,187		209	%
Services and other	14,367		7,012		7,355		105	%	26,595		15,277		11,318		74	%
Total revenue	242,838		81,775		161,063		197	%	493,657		158,790		334,867		211	%
Cost of revenue:
License and solutions	70,833		33,221		37,612		113	%	140,346		67,609		72,737		108	%
Maintenance	9,567		4,074		5,493		135	%	18,784		8,308		10,476		126	%
Services and other	12,698		4,282		8,416		197	%	25,098		9,180		15,918		173	%
Total cost of revenue	93,098		41,577		51,521		124	%	184,228		85,097		99,131		116	%
Gross profit	149,740		40,198		109,542		273	%	309,429		73,693		235,736		320	%
Operating expenses:
Selling and marketing	117,951		17,995		99,956		555	%	236,225		42,995		193,230		449	%
Research and development	49,954		15,383		34,571		225	%	99,695		30,938		68,757		222	%
General and administrative	41,230		7,036		34,194		486	%	84,086		13,653		70,433		516	%
Restructuring	—		38		(38)		(100)	%	—		245		(245)		(100)	%
Total operating expenses	209,135		40,452		168,683		417	%	420,006		87,831		332,175		378	%
(Loss) from Operations	(59,395)		(254)		(59,141)		23,284	%	(110,577)		(14,138)		(96,439)		682	%
Other income (expense), net	38,643		(1,419)		40,062		(2,823)	%	(19,989)		(2,778)		(17,211)		620	%
Interest income (expense), net	4,120		(20)		4,140		(20,700)	%	9,143		(292)		9,435		(3,231)	%
(Loss) before provision for income taxes	(16,632)		(1,693)		(14,939)		882	%	(121,423)		(17,208)		(104,215)		606	%
Provision (benefit) for income taxes	49,565		(933)		50,498		(5,412)	%	(43,982)		(5,246)		(38,736)		738	%
Net (loss)	$	(66,197)	$	(760)	$	(65,437)	8,610	%	$	(77,441)	$	(11,962)	$	(65,479)	547	%