10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

or

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                      

Commission file number: 001-34630

ASPEN TECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

Delaware	04-2739697
(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)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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	ý	Accelerated filer       o
Non-accelerated filer  o (Do not check if a smaller reporting company)		Smaller reporting company      o
		Emerging growth company      o

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 o No ý

As of October 17, 2018, there were 70,769,877 shares of the registrant’s common stock (par value $0.10 per share) outstanding.

TABLE OF CONTENTS

		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements.	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	40
Item 4.	Controls and Procedures.	41
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings.	42
Item 1A.	Risk Factors.	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	42
Item 6.	Exhibits.	43
	SIGNATURES

aspenONE is one of our registered trademarks. All other trade names, trademarks and service marks appearing in this Form 10-Q are the property of their respective owners.

Our fiscal year ends on June 30^th, and references to a specific fiscal year are to the twelve months ended June 30^th of such year (for example, “fiscal 2019” refers to the year ending June 30, 2019).

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PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements.

Consolidated Financial Statements (unaudited)

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,
	2018			2017
				As Adjusted
	(Dollars in Thousands, Except per Share Data)
Revenue:
License	$	63,755		$	78,890
Maintenance	43,039			40,264
Services and other	7,375			7,333
Total revenue	114,169			126,487
Cost of revenue:
License	1,665			1,231
Maintenance	3,993			4,552
Services and other	7,569			6,949
Total cost of revenue	13,227			12,732
Gross profit	100,942			113,755
Operating expenses:
Selling and marketing	26,812			23,516
Research and development	21,056			19,489
General and administrative	16,084			15,037
Total operating expenses	63,952			58,042
Income from operations	36,990			55,713
Interest income	7,069			6,306
Interest (expense)	(1,814		)	(1,206		)
Other income (expense), net	128			(615		)
Income before provision for income taxes	42,373			60,198
Provision for income taxes	4,307			19,677
Net income	$	38,066		$	40,521
Net income per common share:
Basic	$	0.54		$	0.55
Diluted	$	0.53		$	0.55
Weighted average shares outstanding:
Basic	70,988			73,024
Diluted	72,015			73,609

See accompanying Notes to these unaudited consolidated financial statements.

4

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended September 30,
	2018			2017
				As Adjusted
	(Dollars in Thousands)
Net income	$	38,066		$	40,521
Other comprehensive income (loss):
Foreign currency translation adjustments	(422		)	1,401
Total other comprehensive income (loss)	(422		)	1,401
Comprehensive income	$	37,644		$	41,922

See accompanying Notes to these unaudited consolidated financial statements.

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ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30, 2018			June 30, 2018
				As Adjusted
	(Dollars in Thousands, Except Share Data)
ASSETS
Current assets:
Cash and cash equivalents	$	52,048		$	96,165
Accounts receivable, net	53,999			41,810
Current contract assets	317,967			304,378
Contract costs	21,296			20,500
Prepaid expenses and other current assets	12,992			10,509
Prepaid income taxes	1,422			2,601
Total current assets	459,724			475,963
Property, equipment and leasehold improvements, net	9,006			9,806
Computer software development costs, net	695			646
Goodwill	75,649			75,590
Intangible assets, net	34,192			35,310
Non-current contract assets	357,947			340,622
Non-current deferred tax assets	1,176			11,090
Other non-current assets	1,279			1,297
Total assets	$	939,668		$	950,324
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,501		$	4,230
Accrued expenses and other current liabilities	32,000			39,515
Income taxes payable	46,869			1,698
Borrowings under credit agreement	170,000			170,000
Current deferred revenue	23,737			15,150
Total current liabilities	275,107			230,593
Non-current deferred revenue	15,046			12,354
Deferred income taxes	159,563			214,125
Other non-current liabilities	16,833			17,068
Commitments and contingencies (Note 16)
Series D redeemable convertible preferred stock, $0.10 par value— Authorized— 3,636 shares as of September 30, 2018 and June 30, 2018 Issued and outstanding— none as of September 30, 2018 and June 30, 2018	—			—
Stockholders’ equity:
Common stock, $0.10 par value— Authorized—210,000,000 shares Issued— 103,279,138 shares at September 30, 2018 and 103,130,300 shares at June 30, 2018 Outstanding— 70,862,163 shares at September 30, 2018 and 71,186,701 shares at June 30, 2018	10,328			10,313
Additional paid-in capital	724,752			715,475
Retained earnings	1,103,573			1,065,507
Accumulated other comprehensive income	965			1,388
Treasury stock, at cost—32,416,975 shares of common stock at September 30, 2018 and 31,943,599 shares at June 30, 2018	(1,366,499		)	(1,316,499		)
Total stockholders’ equity	473,119			476,184
Total liabilities and stockholders’ equity	$	939,668		$	950,324

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See accompanying Notes to these unaudited consolidated financial statements.

7

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended September 30,
	2018			2017
				As Adjusted
	(Dollars in Thousands)
Cash flows from operating activities:
Net income	$	38,066		$	40,521
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,000			1,753
Net foreign currency (gains) losses	(200		)	936
Stock-based compensation	8,865			6,414
Deferred income taxes	(44,670		)	(33		)
Provision for bad debts	169			20
Other non-cash operating activities	107			—
Changes in assets and liabilities:
Accounts receivable, net	(12,529		)	(9,093		)
Contract assets	(30,914		)	(35,791		)
Contract costs	(796		)	(185		)
Prepaid expenses, prepaid income taxes, and other assets	(855		)	2,292
Accounts payable, accrued expenses, income taxes payable and other liabilities	34,924			6,764
Deferred revenue	11,403			(1,238		)
Net cash provided by operating activities	5,570			12,360
Cash flows from investing activities:
Purchases of property, equipment and leasehold improvements	(96		)	(123		)
Payments for capitalized computer software costs	(90		)	(65		)
Net cash used in investing activities	(186		)	(188		)
Cash flows from financing activities:
Exercises of stock options	4,054			2,411
Repurchases of common stock	(49,977		)	(55,109		)
Payments of tax withholding obligations related to restricted stock	(3,179		)	(1,650		)
Deferred business acquisition payments	—			(600		)
Payments of credit agreement issuance costs	—			(351		)
Net cash used in financing activities	(49,102		)	(55,299		)
Effect of exchange rate changes on cash and cash equivalents	(399		)	156
Decrease in cash and cash equivalents	(44,117		)	(42,971		)
Cash and cash equivalents, beginning of period	96,165			101,954
Cash and cash equivalents, end of period	$	52,048		$	58,983
Supplemental disclosure of cash flow information:
Income taxes paid, net	$	2,755		$	1,243
Interest paid	1,538			968
Supplemental disclosure of non-cash investing and financing activities:
Change in purchases of property, equipment and leasehold improvements included in accounts payable and accrued expenses	$	(11	)	$	(70	)
Change in repurchases of common stock included in accounts payable and accrued expenses	23			(5,109		)

See accompanying Notes to these unaudited consolidated financial statements.

8

ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.  Interim Unaudited Consolidated Financial Statements

The accompanying interim unaudited consolidated financial statements of Aspen Technology, Inc. and its subsidiaries have been prepared on the same basis as our annual consolidated financial statements.  We have omitted certain information and footnote disclosures normally included in our annual consolidated financial statements.  Such interim unaudited consolidated financial statements have been prepared in conformity with U.S. Generally Accepted Accounting Principles (GAAP), as defined in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 270, Interim Reporting, for interim financial information and with the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  It is suggested that these unaudited consolidated financial statements be read in conjunction with the audited consolidated financial statements for the year ended June 30, 2018, which are contained in our Annual Report on Form 10-K, as previously filed with the U.S. Securities and Exchange Commission (SEC). In the opinion of management, all adjustments, consisting of normal and recurring adjustments, considered necessary for a fair presentation of the financial position, results of operations, and cash flows at the dates and for the periods presented have been included and all intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three months ended September 30, 2018 are not necessarily indicative of the results to be expected for the subsequent quarter or for the full fiscal year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Unless the context requires otherwise, references to we, our and us refer to Aspen Technology, Inc. and its subsidiaries.

2.  Significant Accounting Policies

(a)Principles of Consolidation

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

(b)Significant Accounting Policies

Our significant accounting policies are described in Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018. We adopted Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers ("Topic 606") and ASU No. 2017-01, Business Combinations (Topic 805) - Clarifying the Definition of a Business effective July 1, 2018. Refer to Note 2 (f), “New Accounting Pronouncements Adopted in Fiscal 2019,” for further information regarding the adoption of Topic 606 and ASU No. 2017-01. There were no other material changes to our significant accounting policies during the three months ended September 30, 2018.

(c)  Loss Contingencies

We accrue estimated liabilities for loss contingencies arising from claims, assessments, litigation and other sources when it is probable that a liability has been incurred and the amount of the claim, assessment or damages can be reasonably estimated. We believe that we have sufficient accruals to cover any obligations resulting from claims, assessments or litigation that have met these criteria.

(d)Foreign Currency Transactions

Foreign currency exchange gains and losses generated from the settlement and remeasurement of transactions denominated in currencies other than the functional currency of our subsidiaries are recognized in our results of operations as incurred as a component of other income (expense), net. Net foreign currency gains (losses) were $0.1 million and $(0.6) million during the three months ended September 30, 2018 and 2017, respectively.

9

(e)    Research and Development Expense

We charge research and development expenditures to expense as the costs are incurred. Research and development expenses consist primarily of personnel expenses related to the creation of new products, enhancements and engineering changes to existing products and costs of acquired technology prior to establishing technological feasibility.

We acquired no technology during the three months ended September 30, 2018 and 2017, respectively.

(f)New Accounting Pronouncements Adopted in Fiscal 2019

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805) - Clarifying the Definition of a Business. The amendment changes the definition of a business to assist entities in evaluating when a set of transferred assets and activities constitutes a business. We adopted ASU No. 2017-01 effective July 1, 2018. The adoption of ASU No. 2017-01 did not have a material effect on the consolidated financial statements or related disclosures.

In May 2014, the FASB issued Topic 606, which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and requires entities to recognize revenue when they transfer promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to evaluate revenue recognition through a five-step process.  In applying the principles of Topic 606, more judgment and estimates are required within the revenue recognition process than were required under previous U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each separate performance obligation.

We adopted Topic 606 effective July 1, 2018 using the full retrospective method, which required us to adjust the prior periods presented. The adoption of Topic 606 impacted the timing of the license portion of the revenue recognized from our term contracts.  Under the new standard, for arrangements that include term-based software licenses bundled with maintenance and support, we are now required to recognize as revenue a portion of the arrangement fee upon delivery of the software license. We recognize as revenue a portion of the arrangement fee related to maintenance and support, professional services, and training over time as the services are provided. Additionally, under the new standard, we capitalize certain direct and incremental commission costs to obtain a contract and amortize such costs over the expected period of benefit, rather than expensing them as incurred in the period that the commissions are earned. See Note 3, "Revenue from Contracts with Customers," to our Unaudited Consolidated Financial Statements for more information on our accounting policies as a result of the adoption of Topic 606.

(g)Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Under the amendment, lessees will be required to recognize virtually all of their leases on the balance sheet, by recording a right-of-use asset and lease liability. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. We are currently evaluating the impact of ASU No. 2016-02 on our consolidated financial statements.

In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The amendment provides guidance on accounting for the impact of the Tax Cuts and Jobs Act (the “Tax Act”) and allows entities to complete the accounting under ASC 740 within a one-year measurement period from the Tax Act enactment date. This standard is effective upon issuance. The Tax Act has several significant changes that impact all taxpayers, including a transition tax, which is a one-time tax charge on accumulated, undistributed foreign earnings. The calculation of accumulated foreign earnings requires an analysis of each foreign entity’s financial results going back to 1986. We currently estimate that we will not be subject to the transition tax associated with our accumulated, undistributed foreign earnings. We will continue to evaluate this area and expect to finalize our conclusions by December 31, 2018.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The amendment modifies, removes, and adds certain disclosure requirements on fair value measurements. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. We are currently evaluating the impact of ASU No. 2018-13 on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service

10

Contract. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendment. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact of ASU No. 2018-15 on our consolidated financial statements.

11

3.   Revenue from Contracts with Customers

In accordance with Topic 606, we account for a customer contract when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights can be identified, payment terms can be identified, the contract has commercial substance, and it is probable that we will collect substantially all of the consideration to which we are entitled. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer.

Nature of Products and Services

We generate revenue from the following sources: (1) License revenue; (2) Maintenance revenue; and (3) Services and other revenue. We sell our software products to end users primarily under fixed-term licenses. We license our software products primarily through a subscription offering which we refer to as our aspenONE licensing model, which includes software maintenance and support, known as our Premier Plus SMS offering, for the entire term. Our aspenONE products are organized into three suites: 1) engineering; 2) manufacturing and supply chain; and 3) asset performance management. The aspenONE licensing model provides customers with access to all of the products within the aspenONE suite(s) they license. We refer to these arrangements as token arrangements. Tokens are fixed units of measure. The amount of software usage is limited by the number of tokens purchased by the customer.

We also license our software through point product term arrangements, which include our Premier Plus SMS offering for the entire term.

We determine revenue recognition through the following steps:

• Identification of the contract, or contracts, with a customer;

• Identification of the performance obligations in the contract;

• Determination of the transaction price;

• Allocation of the transaction price to the performance obligations in the contract; and

• Recognition of revenue when, or as, we satisfy a performance obligation.

Term-based Arrangements: Term-based arrangements consist of on-premise term licenses as well as maintenance.

Term licenses

License revenue consists primarily of product and related revenue from our aspenONE licensing model and point product arrangements.

When a customer elects to license our products under our aspenONE licensing model, the customer receives, for the term of the arrangement, the right to all software products in the licensed aspenONE software suite. When a customer elects to license point products, the customer receives, for the term of the arrangement, the right to license specified products in the licensed aspenONE software suite. Revenue from initial product licenses is recognized upfront upon delivery.

Maintenance

When a customer elects to license our products under our aspenONE licensing model, our Premier Plus SMS offering is included for the entire term of the arrangement and the customer receives, for the term of the arrangement, the right to any updates that may be introduced into the licensed aspenONE software suite. When a customer elects to license point products, our Premier Plus SMS offering is included for the entire term of the arrangement and the customer receives, for the term of the arrangement, the right to any updates that may be introduced related to the specified products licensed. Maintenance represents a stand-ready obligation and, due to our obligation to provide unspecified future software updates on a when-and-if available basis as well as telephone support services, we are required to recognize revenue ratably over the term of the arrangement.

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Services and Other Revenue

Professional Services Revenue

Professional services are provided to customers on a time-and-materials ("T&M") or fixed-price basis. The obligation to provide professional services is generally satisfied over time, with the customer simultaneously receiving and consuming the benefits as we satisfy our performance obligation. For professional services, revenue is recognized by measuring progress toward the completion of our obligations. We recognize professional services fees for our T&M contracts based upon hours worked and contractually agreed-upon hourly rates. Revenue from fixed-price engagements is recognized using the proportional performance method based on the ratio of costs incurred to the total estimated project costs. The use of the proportional performance method is dependent upon our ability to reliably estimate the costs to complete a project. We use historical experience as a basis for future estimates to complete current projects. Additionally, we believe that costs are the best available measure of performance. Out-of-pocket expenses which are reimbursed by customers are recorded as revenue.

Training Revenue

We provide training services to our customers, including on-site, Internet-based, public and customized training. The obligation to provide training services is generally satisfied over time, with the customer simultaneously receiving and consuming the benefits as we satisfy our performance obligation. Revenue is recognized in the period in which the services are performed.

Contracts with Multiple Performance Obligations

Our contracts generally contain more than one of the products and services listed above, each of which is separately accounted for as a distinct performance obligation.

Allocation of consideration: We allocate total contract consideration to each distinct performance obligation in an arrangement on a relative standalone selling price basis. The standalone selling price reflects the price we would charge for a specific product or service if it was sold separately in similar circumstances and to similar customers.

If the arrangement contains professional services and other products or services, we allocate to the professional service obligation a portion of the total contract consideration based on the standalone selling price of professional services that is observed from consistently priced standalone sales.

The standalone selling price for term licenses, which are always sold with maintenance, is the price for the combined license and maintenance bundle. The amount assigned to the license and maintenance bundle is separated into license and maintenance amounts using the respective standalone selling prices represented by the value relationship between the software license and maintenance.

When two or more contracts are entered into at or near the same time with the same customer, we evaluate the facts and circumstances associated with the negotiation of those contracts. Where the contracts are negotiated as a package, we will account for them as a single arrangement and allocate the consideration for the combined contracts among the performance obligations accordingly.

Standalone selling price: When available, we use directly observable transactions to determine the standalone selling prices for performance obligations. Generally, directly observable data is not available for term licenses and maintenance. When term licenses are sold together with maintenance in a bundled arrangement, we estimate a standalone selling price for these distinct performance obligations using relevant information, including our overall pricing objectives and strategies and historical pricing data, and taking into consideration market conditions and other factors, such as customer type and geography.

Other policies and judgments

Payment terms and conditions vary by contract type, although terms generally include a requirement of payment annually over the term of the license arrangement. Therefore, we generally receive payment from a customer after the performance obligation related to the license has been satisfied, and therefore, our contracts generally contain a significant financing component. The significant financing component is calculated utilizing an interest rate that derives the net present value of the performance obligations delivered on an upfront basis based on the allocation of consideration. We have instituted a customer portfolio approach in assigning interest rates. The rates are determined at contract inception and are based on the credit characteristics of the customers within each portfolio.

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Contract modifications

We sometimes enter into agreements to modify previously executed contracts, which constitute contract modifications. We assess each of these contract modifications to determine (i) if the additional products and services are distinct from the products and services in the original arrangement; and (ii) if the amount of consideration expected for the added products and services reflects the stand-alone selling price of those products and services, as adjusted for contract-specific circumstances. A contract modification meeting both criteria is accounted for as a separate contract. A contract modification not meeting both criteria is considered a change to the original contract and is accounted for on either (i) a prospective basis as a termination of the existing contract and the creation of a new contract; or (ii) a cumulative catch-up basis. Generally, our contract modifications meet both criteria and are accounted for as a separate contract, as adjusted for contract-specific circumstances.

Disaggregation of Revenue

We disaggregate our revenue by region, type of performance obligation, timing of revenue recognition, and segment as follows:

	Three Months Ended September 30,
	2018		2017
Revenue by region:
United States	$	39,228	$	53,213
Europe	28,946		26,256
Other (1)	45,995		47,018
	$	114,169	$	126,487
Revenue by type of performance obligation:
Term licenses	$	63,755	$	78,890
Maintenance	43,039		40,264
Professional services and other	7,375		7,333
	$	114,169	$	126,487
Revenue by segment:
Subscription and software	$	106,794	$	119,154
Services and other	7,375		7,333
	$	114,169	$	126,487

____________________________________________

(1) Other consists primarily of Asia Pacific, Canada, Latin America and the Middle East.

Contract Balances

The difference in the opening and closing balances of our contract assets and deferred revenue primarily results from the timing difference between our performance and the customer’s payment. We fulfill our obligations under a contract with a customer by transferring products and services in exchange for consideration from the customer. We recognize a contract asset when we transfer products or services to a customer and the right to consideration is conditional on something other than the passage of time. Accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional. We recognize deferred revenue when we have received consideration or an amount of consideration is due from the customer and we have a future obligation to transfer products or services.

Our contract assets (liabilities) were as follows as of September 30, 2018 and June 30, 2018:

14

	September 30, 2018			June 30, 2018
				As Adjusted
	(Dollars in Thousands)
Contract assets	$	675,914		$	645,000
Deferred revenue	(38,783		)	(27,504		)
	$	637,131		$	617,496

Contract assets and deferred revenue are presented net at the contract level for each reporting period.

The change in deferred revenue in the three months ended September 30, 2018, excluding the impact of the netting of contract assets and deferred revenue, was primarily due to an increase in new billings in advance of revenue recognition, partially offset by $2.7 million of revenue recognized that was included in deferred revenue at June 30, 2018.

Contract Costs

We pay commissions for new product sales as well as for renewals of existing contracts. Commissions paid to obtain renewal contracts are not commensurate with the commissions paid for new product sales and therefore, a portion of the commissions paid for new contracts relate to future renewals.

We account for new product sales commissions using a portfolio approach and allocate the cost of commissions in proportion to the allocation of transaction price of license and maintenance performance obligations, including assumed renewals. Commissions allocated to the license and license renewal components are expensed at the time the license revenue is recognized. Commissions allocated to maintenance are capitalized and amortized on a straight-line basis over a period of four to eight years for new contracts, reflecting our estimate of the expected period that we will benefit from those commissions.

Amortization of capitalized contract costs is included in sales and marketing expenses in our Condensed Consolidated Statement of Operations.

Transaction Price Allocated to Remaining Performance Obligations

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

	Year Ended June 30,
	2019		2020		2021		2022		2023		Thereafter
	(Dollars in Thousands)
License	$	34,414	$	16,434	$	13,786	$	7,784	$	1,310	$	173
Maintenance	120,392		129,547		93,578		58,657		31,948		11,735
Services and other	38,967		5,270		2,987		1,467		979		432

Impact to Prior Period Information

The following table presents the effect of the adoption of Topic 606 on select consolidated statements of operations line items for the three months ended September 30, 2017:

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	Three Months Ended September 30, 2017
	As Previously Reported		Adjustments			As Adjusted
	(Dollars in Thousands, Except per Share Data)
Consolidated Statements of Operations:
License revenue	$	—	$	78,890		$	78,890
Maintenance revenue	—		40,264			40,264
Subscription and software revenue	115,756		(115,756		)	—
Services and other revenue	7,025		308			7,333
Gross profit	110,049		3,706			113,755
Selling and marketing expense	23,571		(55		)	23,516
General and administrative expense	13,676		1,361			15,037
Income from operations	53,313		2,400			55,713
Interest income	141		6,165			6,306
Provision for income taxes	16,877		2,800			19,677
Net income	$	34,755	$	5,766		$	40,521
Basic	$	0.48				$	0.55
Diluted	$	0.47				$	0.55
Weighted average shares outstanding - Basic	73,024					73,024
Weighted average shares outstanding - Diluted	73,609					73,609

The following table presents the effect of the adoption of Topic 606 on select consolidated balance sheet line items as of June 30, 2018:

	June 30, 2018
	As Previously Reported		Adjustments			As Adjusted
	(Dollars in Thousands)
Consolidated Balance Sheets:
Assets:
Current contract assets	$	—	$	304,378		$	304,378
Contract costs	—		20,500			20,500
Accounts receivable, net	21,910		19,900			41,810
Non-current contract assets	—		340,622			340,622
Liabilities:
Current deferred revenue	286,845		(271,695		)	15,150
Non-current deferred revenue	28,259		(15,905		)	12,354
Deferred income taxes	—		214,125			214,125
Other non-current liabilities	18,492		(1,424		)	17,068
Stockholders' equity:
Retained earnings	305,208		760,299			1,065,507

The adoption of Topic 606 had no impact on our total cash flows or net cash provided by operating activities. The impacts of adoption resulted in offsetting shifts in cash flows throughout the components of net income and various changes in working capital balances. The following table presents the effect of the adoption of Topic 606 on select consolidated statement of cash flows line items for the three months ended September 30, 2017:

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	Three Months Ended September 30, 2017
	As Previously Reported			Adjustments			As Adjusted
	(Dollars in Thousands)
Consolidated Statements of Cash Flows:
Cash flows from operating activities:
Net income	$	34,755		$	5,766		$	40,521
Changes in assets and liabilities:
Contract assets	—			(35,791		)	(35,791		)
Contract costs	—			(185		)	(185		)
Accounts receivable, net	(504		)	(8,589		)	(9,093		)
Deferred revenue	(40,037		)	38,799			(1,238		)
Net cash provided by operating activities	$	12,360		$	—		$	12,360

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4.   Fair Value

We determine 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 we have 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 of $5.0 million as of September 30, 2018 and June 30, 2018, respectively, were reported at fair value utilizing quoted market prices in identical markets, or “Level 1 inputs.” Our cash equivalents consist of short-term, highly liquid investments with remaining maturities of three months or less when purchased.

Financial instruments not measured or recorded at fair value in the accompanying unaudited consolidated financial statements consist of accounts receivable, accounts payable and accrued liabilities. The estimated fair value of these financial instruments approximates their carrying value. The estimated fair value of the borrowings under the Credit Agreement (described below in Note 11, "Credit Agreement") approximates its carrying value due to the floating interest rate.

5.  Accounts Receivable, Net

Our accounts receivable, net of the related allowance for doubtful accounts, were as follows as of September 30, 2018 and June 30, 2018:

	Gross		Allowance		Net
	(Dollars in Thousands)
September 30, 2018:
Accounts receivable	$	56,872	$	2,873	$	53,999
June 30, 2018, As Adjusted:
Accounts receivable	$	44,513	$	2,703	$	41,810

As of September 30, 2018, we had no customer receivable balances that individually represented 10% or more of our net accounts receivable.

6.  Property and Equipment

Property, equipment and leasehold improvements in the accompanying unaudited consolidated balance sheets consisted of the following:

	September 30, 2018			June 30, 2018
	(Dollars in Thousands)
Property, equipment and leasehold improvements, at cost:
Computer equipment	$	8,339		$	8,344
Purchased software	24,245			24,225
Furniture & fixtures	6,827			6,850
Leasehold improvements	11,993			12,023
Property, equipment and leasehold improvements, at cost	51,404			51,442
Accumulated depreciation	(42,398		)	(41,636		)
Property, equipment and leasehold improvements, net	$	9,006		$	9,806

7. Acquisitions

Apex Optimisation

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On February 5, 2018, we completed the acquisition of all the outstanding shares of Apex Optimisation and affiliates (“Apex”), a provider of software which aligns Advanced Process Control with Planning and Scheduling to unify production optimization, for a total cash consideration of $23.0 million. The purchase price consisted of $18.4 million of cash paid at closing and an additional $4.6 million to be held back until February 2020 as security for certain representations, warranties, and obligations of the sellers. The holdback is recorded in other non-current liabilities in our consolidated balance sheet.

A preliminary allocation of the purchase price is as follows. The valuation of the net assets acquired and the deferred tax liabilities are considered preliminary as of September 30, 2018:

	Amount
	(Dollars in Thousands)
Liabilities assumed, net	$	(1,164	)
Identifiable intangible assets:
Technology-related	4,500
Customer relationships	3,800
Goodwill	17,483
Deferred tax liabilities	(1,619		)
Total assets acquired, net	$	23,000

We used the relief from royalty and income approaches to derive the fair value of the technology-related and customer relationship intangible assets, respectively. The weighted-average discount rate (or rate of return) used to determine the value of the Apex intangible assets was 28% and the effective tax rate used was 21%.  The technology-related and customer relationship intangible assets are each being amortized on a straight-line basis over their estimated useful lives of seven years.

The goodwill, which is not deductible for tax purposes, reflects the value of the assembled workforce and the company-specific synergies we expect to realize by selling Apex products and services to our existing customers.  The results of operations of Apex have been included prospectively in our results of operations since the date of acquisition.

8. Intangible Assets

We include in our amortizable intangible assets those intangible assets acquired in our business and asset acquisitions. We amortize acquired intangible assets with finite lives over their estimated economic lives, generally using the straight-line method. Each period, we evaluate the estimated remaining useful lives of acquired intangible assets to determine whether events or changes in circumstances warrant a revision to the remaining period of amortization. Acquired intangibles are removed from the accounts when fully amortized and no longer in use.

Intangible assets consisted of the following as of September 30, 2018 and June 30, 2018:

	Gross Carrying Amount		Accumulated Amortization			Effect of Currency Translation			Net Carrying Amount
	(Dollars in Thousands)
September 30, 2018:
Technology and patents	$	35,644	$	(6,068	)	$	(27	)	$	29,549
Customer relationships	4,979		(513		)	(23		)	4,443
Non-compete agreements	553		(353		)	—			200
Total	$	41,176	$	(6,934	)	$	(50	)	$	34,192
June 30, 2018:
Technology and patents	$	35,898	$	(5,182	)	$	(254	)	$	30,462
Customer relationships	5,181		(377		)	(202		)	4,602
Non-compete agreements	553		(307		)	—			246
Total	$	41,632	$	(5,866	)	$	(456	)	$	35,310

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Total amortization expense related to intangible assets is included in operating expenses and amounted to approximately $1.1 million and $0.5 million for the three months ended September 30, 2018 and 2017, respectively.

Future amortization expense as of September 30, 2018 is expected to be as follows:

Year Ended June 30,	Amortization Expense
	(Dollars in Thousands)
2019	$	3,479
2020	4,710
2021	4,754
2022	4,694
2023	4,609
Thereafter	11,946
Total	$	34,192

9. Goodwill

The changes in the carrying amount of goodwill for our subscription and software reporting segment during the three months ended September 30, 2018 was as follows:

	Gross Carrying Amount		Accumulated Impairment Losses			Effect of Currency Translation			Net Carrying Amount
	(Dollars in Thousands)
June 30, 2018:	$	142,316	$	(65,569	)	$	(1,157	)	$	75,590
Foreign currency translation	—		—			59			59
September 30, 2018:	$	142,316	$	(65,569	)	$	(1,098	)	$	75,649

No triggering events indicating goodwill impairment occurred during the three months ended September 30, 2018.

10. Accrued Expenses and Other Liabilities

Accrued expenses and other current liabilities in the accompanying unaudited consolidated balance sheets consisted of the following:

	September 30, 2018		June 30, 2018
	(Dollars in Thousands)
Payroll and payroll-related	$	14,763	$	21,796
Royalties and outside commissions	3,306		3,333
Professional fees	1,582		1,695
Deferred acquisition payments	1,700		1,700
Other	10,649		10,991
Total accrued expenses and other current liabilities	$	32,000	$	39,515

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Other non-current liabilities in the accompanying unaudited consolidated balance sheets consisted of the following:

	September 30, 2018		June 30, 2018
			As Adjusted
	(Dollars in Thousands)
Deferred rent	$	6,138	$	6,442
Uncertain tax positions	4,327		4,510
Deferred acquisition payments	4,600		4,294
Other	1,768		1,822
Total other non-current liabilities	$	16,833	$	17,068

11.  Credit Agreement

On February 26, 2016, we entered into a $250.0 million Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, Silicon Valley Bank, as syndication agent, and the lenders and other parties named therein (the “Lenders”). On August 9, 2017, we entered into an Amendment to increase the Credit Agreement to $350.0 million. The indebtedness evidenced by the Credit Agreement matures on February 26, 2021. Prior to the maturity of the Credit Agreement, any amounts borrowed may be repaid and, subject to the terms and conditions of the Credit Agreement, borrowed again in whole or in part without penalty. We had $170.0 million and $170.0 million in outstanding borrowings under the Credit Agreement as of September 30, 2018 and June 30, 2018, respectively.

Borrowings under the Credit Agreement bear interest at a rate equal to either, at our option, the sum of (a) the highest of (1) the rate of interest publicly announced by JPMorgan Chase Bank, N.A. as its prime rate in effect, (2) the Federal Funds Effective Rate plus 0.5%, and (3) the one-month Adjusted LIBO Rate plus 1.0%, plus (b) a margin initially of 0.5% for the first full fiscal quarter ending after the date of the Credit Agreement and thereafter based on our Leverage Ratio; or the Adjusted LIBO Rate plus a margin initially of 1.5% for the first full fiscal quarter ending after the date of the Credit Agreement and thereafter based on our Leverage Ratio.  We must also pay, on a quarterly basis, an unused commitment fee at a rate of between 0.2% and 0.3% per annum, based on our Leverage Ratio. The interest rates as of September 30, 2018 were 3.75% on $159.0 million of our outstanding borrowings, and 3.57% on the remaining $11.0 million of our outstanding borrowings.

All borrowings under the Credit Agreement are secured by liens on substantially all of our assets. The 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 Credit Agreement contains financial covenants regarding maintenance as of the end of each fiscal quarter, commencing with the quarter ending June 30, 2016, of a maximum Leverage Ratio of 3.0 to 1.0 and a minimum Interest Coverage Ratio of 3.0 to 1.0. As of September 30, 2018 we were in compliance with these covenants.

12.  Stock-Based Compensation

The weighted average estimated fair value of option awards granted was $31.70 and $16.91 during the three months ended September 30, 2018 and 2017, respectively.

We utilized the Black-Scholes option valuation model with the following weighted average assumptions:

	Three Months Ended September 30,
	2018		2017
Risk-free interest rate	2.8	%	1.7	%
Expected dividend yield	0.0	%	0.0	%
Expected life (in years)	4.6		4.6
Expected volatility factor	26.6	%	28.1	%

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The stock-based compensation expense under all equity plans and its classification in the unaudited consolidated statements of operations for the three months ended September 30, 2018 and 2017 are as follows:

	Three Months Ended September 30,
	2018		2017
	(Dollars in Thousands)
Recorded as expenses:
Cost of services and other	$	465	$	450
Selling and marketing	1,331		885
Research and development	2,295		1,896
General and administrative	4,774		3,183
Total stock-based compensation	$	8,865	$	6,414

A summary of stock option and RSU activity under all equity plans for the three months ended September 30, 2018 is as follows:

	Stock Options							Restricted Stock Units
	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in 000’s)		Shares		Weighted Average Grant Date Fair Value
Outstanding at June 30, 2018	1,369,442		$	45.93	7.23	$	64,103	621,700		$	53.64
Granted	262,471		115.37					614,140		115.17
Settled (RSUs)	—							(88,078	)	69.73
Exercised	(90,009	)	41.23					—
Cancelled / Forfeited	(60,815	)	65.87					(53,183	)	64.80
Outstanding at September 30, 2018	1,481,089		$	57.70	7.46	$	83,612	1,094,579		$	86.33
Vested and exercisable at September 30, 2018	781,669		$	42.13	6.19	$	56,144	—
Vested and expected to vest as of September 30, 2018	1,419,308		$	57.03	7.40	$	81,071	1,027,166		$	87.50

The weighted average grant-date fair value of RSUs granted was $115.17 and $63.14 during the three months ended September 30, 2018 and 2017, respectively.  The total fair value of shares vested from RSU grants was $9.9 million and $5.3 million during the three months ended September 30, 2018 and 2017, respectively.

At September 30, 2018, the total future unrecognized compensation cost related to stock options was $13.4 million and is expected to be recorded over a weighted average period of 3.1 years.  At September 30, 2018, the total future unrecognized compensation cost related to RSUs was $43.2 million and is expected to be recorded over a weighted average period of 3.0 years.

The total intrinsic value of options exercised was $6.1 million and $1.7 million during the three months ended September 30, 2018 and 2017, respectively. We received cash proceeds from option exercises of $4.1 million and $2.4 million during the three months ended September 30, 2018 and 2017, respectively. We withheld withholding taxes on vested RSUs of $3.3 million and $1.7 million during the three months ended September 30, 2018 and 2017, respectively.

At September 30, 2018, common stock reserved for future issuance or settlement under equity compensation plans was 10.0 million shares.

During the three months ended September 30, 2018, we granted performance-based long-term incentive awards (“performance awards”) to certain of our executives, including our named executive officers. The performance period for each performance award is either of the following two-year periods: (i) fiscal year 2019 - fiscal year 2020, or (ii) fiscal year 2020 - fiscal year 2021.  Participants receive restricted stock units (“RSUs”) on the grant date associated with achievement of all performance targets. The performance targets for the performance awards are based on meeting annual spend growth, defined

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as an estimate of the annualized value of our portfolio of term license arrangements, as of a specific date, and the performance goals set out in the executive bonus plan for each fiscal year, such as free cash flow. If the performance targets are met during one of the two performance periods and the participant remains actively employed by us, the RSUs convert to time-based vesting wherein fifty percent of the awards immediately vest, and the remaining fifty percent are subject to additional service vesting over a three-year period.  In general, if the performance targets are not met, or if the participant is no longer actively employed by us prior to the performance targets being met, the participant forfeits all of the RSUs.

During the three months ended September 30, 2018, we granted 373,704 RSUs in connection with the performance awards.  As of September 30, 2018, all of the RSUs issued in connection with the performance awards are unvested and outstanding.

We record compensation expense for the performance awards based on the fair value of the awards, in an amount proportionate to the service time rendered by the participant, when it is probable that the achievement of the goals will be met. The fair value of the performance awards granted during the quarter ended September 30, 2018 was estimated using the closing price on the date of grant as well as the estimated probable achievement levels of the performance metrics.  If the performance-based conditions are not met, no compensation cost is recognized and any recognized compensation cost is reversed.  As of September 30, 2018, we concluded that the performance metrics related to the performance awards were not probable of achievement; therefore, no compensation expense was recognized during the quarter ended September 30, 2018. 

13.  Stockholders’ Equity

Stock Repurchases

On January 22, 2015, our Board of Directors approved a share repurchase program (the "Share Repurchase Program") for up to $450.0 million worth of our common stock. On April 26, 2016, June 8, 2017, and April 18, 2018, the Board of Directors approved a $400.0 million, $200.0 million, and $200.0 million increase in our current share repurchase plan, respectively. The timing and amount of any shares repurchased are based on market conditions and other factors. All shares of our common stock repurchased have been recorded as treasury stock under the cost method.

During the three months ended September 30, 2018, we repurchased 473,376 shares of our common stock in the open market for $50.0 million. As of September 30, 2018, the total remaining value under the Share Repurchase Program was approximately $296.3 million.

Accumulated Other Comprehensive Income

As of September 30, 2018 and June 30, 2018, accumulated other comprehensive income was comprised of foreign currency translation adjustments of $(0.4) million and $(0.1) million, respectively.

14.  Net Income Per Share

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

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The calculations of basic and diluted net income per share and basic and dilutive weighted average shares outstanding for the three months ended September 30, 2018 and 2017 are as follows:

	Three Months Ended September 30,
	2018		2017
			As Adjusted
	(Dollars and Shares in Thousands, Except per Share Data)
Net income	$	38,066	$	40,521
Weighted average shares outstanding	70,988		73,024
Dilutive impact from:
Share-based payment awards	1,027		585
Dilutive weighted average shares outstanding	72,015		73,609
Income per share
Basic	$	0.54	$	0.55
Dilutive	$	0.53	$	0.55

For the three months ended September 30, 2018 and 2017, 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 September 30, 2018 and 2017:

	Three Months Ended September 30,
	2018	2017
	(Shares in Thousands)
Employee equity awards	850	674

Included in the table above are options to purchase 262,343 shares of our common stock during the three months ended September 30, 2018, which were not included in the computation of dilutive weighted average shares outstanding, because their exercise prices ranged from $115.36 per share to $116.00 per share and were greater than the average market price of our common stock during the period then ended. These options were outstanding as of September 30, 2018 and expire at various dates through September 4, 2028.

15.   Income Taxes

The effective tax rate for the periods presented was primarily the result of income earned in the U.S., taxed at U.S. federal and state statutory income tax rates, income earned in foreign tax jurisdictions taxed at the applicable rates, as well as the impact of permanent differences between book and tax income.

On December 22, 2017, the President of the United States signed into law Public Law No. 115-97, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), following its passage by the United States Congress. The Tax Act made significant changes to U.S. federal income tax laws, including reduction of the corporate tax rate from 35.0% to 21.0%, and the implementation of a territorial tax system resulting in a one-time transition tax on the unremitted earnings of our foreign subsidiaries. The Tax Act also contains additional provisions that will become effective for us in fiscal year 2019, including a new deduction for Foreign-Derived Intangible Income (“FDII”), the repeal of the domestic production activity deduction, a new tax on Global Intangible Low-Taxed Income (“GILTI”), and increased limitations on the deductibility of certain executive compensation.

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In December 2017, the SEC staff issued Staff Accounting Bulletin 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC Topic 740 -Income Taxes (“ASC 740”). We will continue our analysis for all the tax effects of the Tax Act, which are still subject to change during the measurement period, and anticipate further guidance on accounting interpretations from the FASB and application of the Tax Act from the Department of the Treasury.

Our effective tax rate was 10.2% and 32.7% for the three months ended September 30, 2018 and 2017, respectively. Our effective tax rate decreased for the three months ended September 30, 2018 compared to the same period in 2017 due to a reduction in the federal corporate tax rate from 35.0% to 21.0% and the FDII deduction. During the three months ended September 30, 2018 and 2017, our income tax expense was driven primarily by pre-tax profitability in our domestic and foreign operations and the impact of the excess tax benefits related to our stock-based compensation.

The Tax Act has several significant changes that impact all taxpayers, including a transition tax, which is a one-time tax charge on accumulated, undistributed foreign earnings. The calculation of accumulated foreign earnings requires an analysis of each foreign entity’s financial results going back to 1986. We currently estimate that we will not be subject to the transition tax associated with our accumulated, undistributed foreign earnings. We will continue to evaluate this area and expect to finalize our conclusions by the second quarter of fiscal 2019. We do not provide deferred taxes on unremitted earnings of our foreign subsidiaries as we intend to indefinitely reinvest those earnings.

The Tax Act also included a new provision designed to tax global intangible low-taxed income (“GILTI”). Under U.S. GAAP, we are allowed to make an accounting policy choice to either (i) treat taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the "period cost method"); or (ii) factor in such amounts into the measurement of our deferred taxes (the "deferred method"). Our selection of an accounting policy related to the GILTI tax provisions depends, in part, on analyzing our global income to determine whether we expect to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. While our future global operations depend on a number of different factors, we do expect to have future U.S. inclusions in taxable income related to GILTI. Further, we have made a policy decision to record GILTI tax as a current-period expense when incurred.

Deferred income taxes are recognized based on temporary differences between the financial statement and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using the statutory tax rates and laws expected to apply to taxable income in the years in which the temporary differences are expected to reverse. Valuation allowances are provided against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the timing of the temporary differences becoming deductible.  Management considers, among other available information, scheduled reversals of deferred tax liabilities, projected future taxable income, limitations of availability of net operating loss carryforwards, and other matters in making this assessment.

16. Commitments and Contingencies

Operating Leases

We lease certain facilities under non-cancellable operating leases with terms in excess of one year. Rental expense on leased facilities under operating leases was approximately $2.0 million during the three months ended September 30, 2018 and 2017, respectively.

Standby letters of credit for $4.0 million and $3.5 million secure our performance on professional services contracts, certain facility leases and potential liabilities as of September 30, 2018 and June 30, 2018, respectively. The letters of credit expire at various dates through fiscal 2025.

17.  Segment Information

Operating segments are defined as components of an enterprise that engage 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. Our chief operating decision maker is our President and Chief Executive Officer.

The subscription and software segment is engaged in the licensing of process optimization and asset performance management software solutions and associated support services, and includes our license and maintenance revenue. The

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services segment includes professional services and training, and includes our services and other revenue. We do not track assets or capital expenditures by operating segments. Consequently, it is not practical to present assets, capital expenditures, depreciation or amortization by operating segments.

The following table presents a summary of our reportable segments’ profits:

	Subscription and Software			Services			Total
	(Dollars in Thousands)
Three Months Ended September 30, 2018
Segment revenue	$	106,794		$	7,375		$	114,169
Segment expenses (1)	(53,526		)	(7,569		)	(61,095		)
Segment profit	$	53,268		$	(194	)	$	53,074
Three Months Ended September 30, 2017, As Adjusted
Segment revenue	$	119,154		$	7,333		$	126,487
Segment expenses (1)	(48,788		)	(6,949		)	(55,737		)
Segment profit	$	70,366		$	384		$	70,750

(1)    Our reportable segments’ operating expenses include expenses directly attributable to the segments. Segment expenses include selling and marketing, research and development, stock-based compensation and certain corporate expenses incurred in support of the segments. Segment expenses do not include allocations of general and administrative; interest income, net; and other income, net.

Reconciliation to Income before Income Taxes

The following table presents a reconciliation of total segment profit to income before income taxes for the three months ended September 30, 2018 and 2017:

	Three Months Ended September 30,
	2018			2017
				As Adjusted
	(Dollars in Thousands)
Total segment profit for reportable segments	$	53,074		$	70,750
General and administrative expense	(16,084		)	(15,037		)
Interest income, net	5,255			5,100
Other income (expense), net	128			(615		)
Income before income taxes	$	42,373		$	60,198

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

You should read the following discussion in conjunction with our unaudited consolidated financial statements and related notes thereto contained in this report.  In addition to historical information, this discussion contains forward-looking statements that involve risks and uncertainties.  You should read “Item 1A. Risk Factors” of Part II 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^th, and references in this Quarterly Report to a specific fiscal year are to the twelve months ended June 30^th of such year (for example, “fiscal 2019” refers to the year ending on June 30, 2019).

Business Overview

We are a leading global supplier of asset optimization solutions that optimize asset design, operations and maintenance in complex, industrial environments. We combine decades of process modeling and operations expertise with big data machine-learning and analytics. Our purpose-built software solutions improve the competitiveness and profitability of our customers by increasing throughput, energy efficiency, and production, reducing unplanned downtime, enhancing capital efficiency, and decreasing working capital requirements over the entire asset lifecycle to support operational excellence.

Our software incorporates our proprietary mathematical and empirical models of manufacturing and planning processes and reflects the deep domain expertise we have amassed from focusing on solutions for the process and other capital-intensive industries for over 35 years. We have developed our applications to design and optimize processes across three principal business areas: engineering, manufacturing and supply chain, and asset performance management. We are a recognized market and technology leader in providing process optimization and asset performance management software solutions for each of these business areas.

We have established sustainable competitive advantages based on the following strengths:

•Innovative products that can enhance our customers' profitability and productivity;

•Long-term customer relationships;

•Large installed base of users of our software; and

•Long-term license contracts.

We have approximately 2,200 customers globally. Our customers consist of companies engaged in the process and other capital-intensive industries such as energy, chemicals, engineering and construction, as well as pharmaceuticals, transportation, power, metals and mining, pulp and paper, and consumer packaged goods.

Business Segments

We have two operating and reportable segments: i) subscription and software and ii) services and other. The subscription and software segment is engaged in the licensing of process optimization and asset performance management software solutions and associated support services, and includes our license and maintenance revenue. The services and other segment includes professional services and training, and includes our services and other revenue.

Key Components of Operations

Revenue

We generate revenue primarily from the following sources: 

License Revenue. We sell our software products to end users, primarily under fixed-term licenses, through a subscription offering which we refer to as our aspenONE licensing model. The aspenONE licensing model includes software maintenance and support, known as our Premier Plus SMS offering, for the entire term. Our aspenONE products are organized into three suites: 1) engineering; 2) manufacturing and supply chain; and 3) asset performance management. The aspenONE licensing model provides customers with access to all of the products within the aspenONE suite(s) they license. Customers can change or alternate the use of multiple products in a licensed suite through the use of exchangeable units of measurement, called tokens, licensed in quantities determined by the customer. This licensing system enables customers to use products as needed and to experiment with different products to best solve whatever critical business challenges they face. Customers can increase their usage of our software by purchasing additional tokens as business needs evolve. 

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We also license our software through point product arrangements with our Premier Plus SMS offering included for the contract term, as well as perpetual license arrangements.

Maintenance Revenue. We provide customers technical support, access to software fixes and updates and the right to any new unspecified future software products and updates that may be introduced into the licensed aspenONE software suite. Our technical support services are provided from our customer support centers throughout the world, as well as via email and through our support website.

Services and Other Revenue. We provide training and professional services to our customers. Our professional services are focused on implementing our technology in order to improve customers' plant performance and gain better operational data. Customers who use our professional services typically engage us to provide those services over periods of up to 24 months. We charge customers for professional services on a time-and-materials or fixed-price basis. We provide training services to our customers, including on-site, Internet-based and customized training.

Our services and other revenue consists primarily of revenue related to professional services and training. The amount and timing of this revenue depend on a number of factors, including:

• whether the professional services arrangement was sold as a single arrangement with, or in contemplation of, a new aspenONE licensing arrangement;

• the number, value and rate per hour of service transactions booked during the current and preceding periods;

• the number and availability of service resources actively engaged on billable projects;

• the timing of milestone acceptance for engagements contractually requiring customer sign-off;

• the timing of collection of cash payments when collectability is uncertain; and

• the size of the installed base of license contracts.

Cost of Revenue

Cost of License. Our cost of license revenue consists of (i) royalties, (ii) amortization of capitalized software and intangibles, and (iii) distribution fees.

Cost of Maintenance. Our cost of maintenance revenue consists of costs of providing Premier Plus SMS bundled with our aspenONE licensing and point product arrangements.

Cost of Services and Other. Our cost of services and other revenue consists primarily of personnel-related and external consultant costs associated with providing customers professional services and training.

Operating Expenses

Selling and Marketing Expenses. Selling expenses consist primarily of the personnel and travel expenses related to the effort expended to license our products and services to current and potential customers, as well as for overall management of customer relationships. Marketing expenses include expenses needed to promote our company and our products and to conduct market research to help us better understand our customers and their business needs.

Research and Development Expenses. Research and development expenses consist primarily of personnel expenses related to the creation of new software products, enhancements and engineering changes to existing products and costs of acquired technology prior to establishing technological feasibility.

General and Administrative Expenses. General and administrative expenses include the costs of corporate and support functions, such as executive leadership and administration groups, finance, legal, human resources and corporate communications, and other costs, such as outside professional and consultant fees and provision for bad debts. 

Other Income and Expenses

Interest Income. Interest income is recorded for financing components under Topic 606. When a contract includes a significant financing component because we generally receive payments in arrears, we are in the position of providing financing to the customer. As a result, we decrease the amount of revenue recognized and increase interest income by a corresponding amount. Interest income also includes the accretion of interest on investments in short-term money market instruments.

Interest Expense. Interest expense is primarily related to our Credit Agreement.

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Other Income (Expense), Net. Other income (expense), net is comprised primarily of foreign currency exchange gains (losses) generated from the settlement and remeasurement of transactions denominated in currencies other than the functional currency of our operating units.

Provision for Income Taxes. Provision for income taxes is comprised of domestic and foreign taxes. We record interest and penalties related to income tax matters as a component of income tax expense. Our effective income tax rate may fluctuate between fiscal years and from quarter to quarter due to items arising from discrete events, such as tax benefits from the disposition of employee equity awards, settlements of tax audits and assessments and tax law changes. Our effective income tax rate is also impacted by, and may fluctuate in any given period because of, the composition of income in foreign jurisdictions where tax rates differ.

Key Business Metrics

We utilize certain key non-GAAP and other business measures to track and assess the performance of our business and we make these measures available to investors.  We have refined the set of appropriate business metrics in the context of our evolving business and use the following non-GAAP business metrics in addition to GAAP measures to track our business performance:

• Annual spend;

• Total contract value;

• Bookings;

• Free cash flow; and

• Non-GAAP operating income.

None of these metrics should be considered as an alternative to any measure of financial performance calculated in accordance with GAAP.

Annual Spend

Annual spend is an estimate of the annualized value of our portfolio of term license arrangements, as of a specific date. Management believes that this financial measure is a useful metric to investors as it provides insight into the growth component of license bookings during a fiscal period. Annual spend is calculated by summing the most recent annual invoice value of each of our active term license contracts. Annual spend also includes the annualized value of standalone SMS agreements purchased in conjunction with term license agreements. Comparing annual spend for different dates can provide insight into the growth and retention rates of our business, and since annual spend represents the estimated annualized billings associated with our active term license agreements, it provides insight into the future value of subscription and software revenue.

Annual spend increases as a result of:

• New term license agreements with new or existing customers;

• Renewals or modifications of existing term license agreements that result in higher license fees due to price escalation or an increase in the number of tokens (units of software usage) or products licensed; and

• Escalation of annual payments in our active term license contracts.

Annual spend is adversely affected by term license and standalone SMS agreements that are renewed at a lower entitlement level or not renewed and, to a lesser extent, by customer contracts that are terminated during the contract term due to the customer’s business ceasing operations.

We estimate that annual spend grew by approximately 1.9% during the first quarter of fiscal 2019, from $489.3 million at June 30, 2018 to $498.4 million at September 30, 2018.

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Total Contract Value

Total Contract Value ("TCV") is the value of all payments received or to be received under all active term license agreements, including escalation. TCV is an annual metric and will be included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019.

Bookings

Bookings is the total value of customer term license contracts signed in the current period, less the value of such contracts signed in the current period where the initial licenses are not yet deemed delivered, plus term license contracts signed in a previous period for which the initial licenses are deemed delivered in the current period.

Bookings decreased from $124.5 million during the three months ended September 30, 2017 to $96.1 million during the three months ended September 30, 2018.

Free Cash Flow

We use a non-GAAP measure of free cash flow to analyze cash flows generated from our operations. Management believes that this financial measure is useful to investors because it permits investors to view our performance using the same tools that management uses to gauge progress in achieving our goals. We believe this measure is also useful to investors because it is an indication of cash flow that may be available to fund investments in future growth initiatives or to repay borrowings under the Credit Agreement, and it is a basis for comparing our performance with that of our competitors. The presentation of free cash flow is not meant to be considered in isolation or as an alternative to cash flows from operating activities as a measure of liquidity.

Free cash flow is calculated as net cash provided by operating activities adjusted for the net impact of (a) purchases of property, equipment and leasehold improvements, (b) capitalized computer software development costs, (c) non-capitalized acquired technology, and (d) other nonrecurring items, such as acquisition related payments.

The following table provides a reconciliation of GAAP cash flow from operating activities to free cash flow for the indicated periods:

	Three Months Ended September 30,
	2018			2017
				As Adjusted
	(Dollars in Thousands)
Net cash provided by operating activities	$	5,570		$	12,360
Purchases of property, equipment, and leasehold improvements	(96		)	(123		)
Capitalized computer software development costs	(90		)	(65		)
Non-capitalized acquired technology	—			75
Acquisition related fee payments	12			—
Free cash flows (non-GAAP)	$	5,396		$	12,247

Total free cash flow on a non-GAAP basis decreased by $6.9 million during the three months ended September 30, 2018 as compared to the same period of the prior fiscal year primarily due to changes in working capital. See additional commentary in the "Liquidity and Capital Resources" section below.

Non-GAAP Operating Income

Non-GAAP operating income excludes certain non-cash and non-recurring expenses, and is used as a supplement to operating income presented on a GAAP basis. We believe that non-GAAP operating income is a useful financial measure because removing certain non-cash and other items provides additional insight into recurring profitability and cash flow from operations.

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The following table presents our net income, as adjusted for stock-based compensation expense and amortization of acquired intangibles, and other items, such as acquisition related fees, for the indicated periods:

	Three Months Ended September 30,					Increase / (Decrease) Change
	2018			2017		$			%
				As Adjusted
	(Dollars in Thousands)
GAAP income from operations	$	36,990		$	55,713	$	(18,723	)	(33.6	)%
Plus:
Stock-based compensation	8,865			6,414		2,451			38.2	%
Amortization of intangibles	1,067			526		541			102.9	%
Acquisition related fees	(7		)	130		(137		)	(105.4	)%
Non-GAAP income from operations	$	46,915		$	62,783	$	(15,868	)	(25.3	)%

Critical Accounting Estimates and Judgments

Note 2, "Significant Accounting Policies," to the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018 describes the significant accounting policies and methods used in the preparation of the consolidated financial statements appearing in this report. The accounting policies that reflect our critical estimates, judgments and assumptions in the preparation of our consolidated financial statements are described in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of our Annual Report on Form 10-K for the fiscal year ended June 30, 2018, and include the following:

• Revenue recognition

Our accounting policies for revenue recognition were updated as a result of adopting Topic 606. See Note 2, "Significant Accounting Policies," and Note 3, "Revenue from Contracts with Customers," to our Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for more information on our accounting policies as a result of the adoption of Topic 606.

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Results of Operations

Comparison of the Three Months Ended September 30, 2018

The following table sets forth the results of operations and the period-over-period percentage change in certain financial data for the three months ended September 30, 2018:

	Three Months Ended September 30,						Increase / (Decrease) Change
	2018			2017			%
				As Adjusted
	(Dollars in Thousands)
Revenue:
License	$	63,755		$	78,890		(19.2	)%
Maintenance	43,039			40,264			6.9	%
Services and other	7,375			7,333			0.6	%
Total revenue	114,169			126,487			(9.7	)%
Cost of revenue:
License	1,665			1,231			35.3	%
Maintenance	3,993			4,552			(12.3	)%
Services and other	7,569			6,949			8.9	%
Total cost of revenue	13,227			12,732			3.9	%
Gross profit	100,942			113,755			(11.3	)%
Operating expenses:
Selling and marketing	26,812			23,516			14.0	%
Research and development	21,056			19,489			8.0	%
General and administrative	16,084			15,037			7.0	%
Total operating expenses, net	63,952			58,042			10.2	%
Income from operations	36,990			55,713			(33.6	)%
Interest income	7,069			6,306			12.1	%
Interest (expense)	(1,814		)	(1,206		)	50.4	%
Other (expense) income, net	128			(615		)	(120.8	)%
Income before provision for income taxes	42,373			60,198			(29.6	)%
Provision for income taxes	4,307			19,677			(78.1	)%
Net income	$	38,066		$	40,521		(6.1	)%

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The following table sets forth the results of operations as a percentage of total revenue for certain financial data for the three months ended September 30, 2018:

	Three Months Ended September 30,
	2018		2017
			As Adjusted
	(% of Revenue)
Revenue:
License	55.8	%	62.4	%
Maintenance	37.7		31.8
Services and other	6.5		5.8
Total revenue	100.0		100.0
Cost of revenue:
License	1.5		1.0
Maintenance	3.5		3.6
Services and other	6.6		5.5
Total cost of revenue	11.6		10.1
Gross profit	88.4		89.9
Operating expenses:
Selling and marketing	23.5		18.6
Research and development	18.4		15.4
General and administrative	14.1		11.9
Total operating expenses, net	56.0		45.9
Income from operations	32.4		44.0
Interest income	6.2		5.0
Interest (expense)	(1.6	)	(1.0	)
Other (expense) income, net	0.1		(0.5	)
Income before provision for income taxes	37.1		47.6
Provision for income taxes	3.8		15.6
Net income	33.3	%	32.0	%

Revenue

Total revenue decreased by $12.3 million during the three months ended September 30, 2018 as compared to the corresponding period of the prior fiscal year. The decrease of $12.3 million during the three months ended September 30, 2018 was comprised of a decrease in license revenue of $15.1 million, partially offset by an increase in maintenance revenue of $2.8 million and an increase in services and other revenue of less than $0.1 million, as compared to the corresponding period of the prior fiscal year.

License Revenue

	Three Months Ended September 30,						Increase / (Decrease) Change
	2018			2017			$			%
				As Adjusted
	(Dollars in Thousands)
License revenue	$	63,755		$	78,890		$	(15,135	)	(19.2	)%
As a percent of total revenue	55.8		%	62.4		%

The period-over-period decrease of $15.1 million in license revenue during the three months ended September 30, 2018 was primarily attributable to a decrease in bookings compared to three months ended September 30, 2017 due to the timing of contract renewals.

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Maintenance Revenue

	Three Months Ended September 30,						Increase / (Decrease) Change
	2018			2017			$		%
				As Adjusted
	(Dollars in Thousands)
Maintenance revenue	$	43,039		$	40,264		$	2,775	6.9	%
As a percent of total revenue	37.7		%	31.8		%

The period-over-period increase of $2.8 million in maintenance revenue during the three months ended September 30, 2018 was primarily attributable to growth of our base of subscription arrangements being recognized on a ratable basis.

We expect maintenance revenue to increase as a result of: (i) having a larger base of arrangements recognized on a ratable basis; (ii) increased customer usage of our software; (iii) adding new customers; and (iv) escalating annual payments.

Services and Other Revenue

	Three Months Ended September 30,						Increase / (Decrease) Change
	2018			2017			$		%
				As Adjusted
	(Dollars in Thousands)
Services and other revenue	$	7,375		$	7,333		$	42	0.6	%
As a percent of total revenue	6.5		%	5.8		%

Services and other revenue remained consistent during the three months ended September 30, 2018 and 2017.

We recognize professional services fees for our time-and-materials ("T&M") contracts based upon hours worked and contractually agreed-upon hourly rates. Revenue from fixed-price engagements is recognized using the proportional performance method based on the ratio of costs incurred to the total estimated project costs. As our typical contract term approximates five years, professional services revenue on these types of arrangements will usually be recognized over a longer period than the period over which the services are performed.

Cost of Revenue

Cost of License Revenue

	Three Months Ended September 30,						Increase / (Decrease) Change
	2018			2017			$		%
				As Adjusted
	(Dollars in Thousands)
Cost of license revenue	$	1,665		$	1,231		$	434	35.3	%
As a percent of license revenue	2.6		%	1.6		%

Cost of license revenue remained consistent for the three months ended September 30, 2018 as compared to the corresponding period of the prior fiscal year.

License gross profit margin was 97.4% and 98.4% for the three months ended September 30, 2018 and 2017, respectively.

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Cost of Maintenance Revenue

	Three Months Ended September 30,						Increase / (Decrease) Change
	2018			2017			$			%
				As Adjusted
	(Dollars in Thousands)
Cost of maintenance revenue	$	3,993		$	4,552		$	(559	)	(12.3	)%
As a percent of maintenance revenue	9.3		%	11.3		%

Cost of maintenance revenue decreased$0.6 million for the three months ended September 30, 2018 as compared to the corresponding period of the prior fiscal year primarily due to lower headcount related costs.

Maintenance gross profit margin was 90.7% and 88.7% for the three months ended September 30, 2018 and 2017, respectively.

Cost of Services and Other Revenue

	Three Months Ended September 30,						Increase / (Decrease) Change
	2018			2017			$		%
				As Adjusted
	(Dollars in Thousands)
Cost of services and other revenue	$	7,569		$	6,949		$	620	8.9	%
As a percent of services and other revenue	102.6		%	94.8		%

The timing of revenue and expense recognition on professional service arrangements can impact the comparability of cost and gross profit margin of professional services revenue from year to year.

Cost of services and other revenue increased$0.6 million for the three months ended September 30, 2018 as compared to the corresponding period of the prior fiscal year primarily due to higher cost of professional services revenue.

Gross profit margin on services and other revenue of (2.6)% for the three months ended September 30, 2018 decreased from 5.2% for the corresponding period of the prior fiscal year.

Gross Profit

Gross profit decreased$12.8 million for the three months ended September 30, 2018 as compared to the corresponding period of the prior fiscal year.

Gross profit margin of 88.4% during the three months ended September 30, 2018 was consistent with the corresponding period of the prior fiscal year. For further discussion of subscription and software gross profit and services and other gross profit, please refer to the “Cost of Subscription and Software Revenue” and “Cost of Services and Other Revenue” sections above.

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Operating Expenses

Selling and Marketing Expense

	Three Months Ended September 30,						Increase / (Decrease) Change
	2018			2017			$		%
				As Adjusted
	(Dollars in Thousands)
Selling and marketing expense	$	26,812		$	23,516		$	3,296	14.0	%
As a percent of total revenue	23.5		%	18.6		%

The period-over-period increase of $3.3 million in selling and marketing expense during the three months ended September 30, 2018 was primarily attributable to higher compensation costs of $1.4 million related to an increase in headcount, higher commissions of $0.5 million, higher stock-based compensation of $0.5 million, and higher sales training costs of $0.3 million.

Research and Development Expense

	Three Months Ended September 30,						Increase / (Decrease) Change
	2018			2017			$		%
				As Adjusted
	(Dollars in Thousands)
Research and development expense	$	21,056		$	19,489		$	1,567	8.0	%
As a percent of total revenue	18.4		%	15.4		%

The period-over-period increase of $1.6 million in research and development expense during the three months ended September 30, 2018 was primarily attributable to higher compensation costs of $0.7 million related to an increase in headcount, and higher stock-based compensation of $0.4 million.

General and Administrative Expense

	Three Months Ended September 30,						Increase / (Decrease) Change
	2018			2017			$		%
				As Adjusted
	(Dollars in Thousands)
General and administrative expense	$	16,084		$	15,037		$	1,047	7.0	%
As a percent of total revenue	14.1		%	11.9		%

The period-over-period increase of $1.0 million in general and administrative expense during the three months ended September 30, 2018 was primarily attributable to higher stock-based compensation of $1.6 million.

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Non-Operating Income (Expense)

Interest Income

	Three Months Ended September 30,						Increase / (Decrease) Change
	2018			2017			$		%
				As Adjusted
	(Dollars in Thousands)
Interest income	$	7,069		$	6,306		$	763	12.1	%
As a percent of total revenue	6.2		%	5.0		%

The period-over-period increase of $0.8 million in interest income during the three months ended September 30, 2018 was attributable to contracts that include a significant financing component under Topic 606.

We expect interest income to continue to increase as a result of: (i) increased customer usage of our software; (ii) adding new customers; and (iii) escalating annual payments.

Interest Expense

	Three Months Ended September 30,						Increase / (Decrease) Change
	2018			2017			$			%
				As Adjusted
	(Dollars in Thousands)
Interest expense	$	(1,814	)	$	(1,206	)	$	(608	)	50.4	%
As a percent of total revenue	(1.6		)%	(1.0		)%

The period-over-period increase of $0.6 million in interest expense during the three months ended September 30, 2018 was primarily attributable to interest expenses related to higher interest rates under our Credit Agreement.

Other (Expense) Income, net

	Three Months Ended September 30,						Increase / (Decrease) Change
	2018			2017			$		%
				As Adjusted
	(Dollars in Thousands)
Other (expense) income, net	$	128		$	(615	)	$	743	(120.8	)%
As a percent of total revenue	0.1		%	(0.5		)%

During the three months ended September 30, 2018 and 2017, other (expense) income, net was comprised of $0.1 million of currency gains and $(0.6) million of currency losses, respectively.

Provision for Income Taxes

	Three Months Ended September 30,						Increase / (Decrease) Change
	2018			2017			$			%
				As Adjusted
	(Dollars in Thousands)
Provision for income taxes	$	4,307		$	19,677		$	(15,370	)	(78.1	)%
Effective tax rate	10.2		%	32.7		%

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On December 22, 2017, the President of the United States signed into law Public Law No. 115-97, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), following its passage by the United States Congress. The Tax Act made significant changes to U.S. federal income tax laws, including reduction of the corporate tax rate from 35.0% to 21.0%, and the implementation of a territorial tax system resulting in a one-time transition tax on the unremitted earnings of our foreign subsidiaries. The Tax Act also contains additional provisions that will become effective for us in fiscal year 2019, including a new deduction for Foreign-Derived Intangible Income (“FDII”), the repeal of the domestic production activity deduction, a new tax on Global Intangible Low-Taxed Income (“GILTI”), and increased limitations on the deductibility of certain executive compensation.

The effective tax rate for the periods presented is primarily the result of income earned in the U.S. taxed at U.S. federal and state statutory income tax rates, income earned in foreign tax jurisdictions taxed at the applicable rates, as well as the impact of permanent differences between book and tax income. Our effective tax rate decreased to 10.2% for the three months ended September 30, 2018 compared to 32.7% for the corresponding period of the prior fiscal year due to the reduced federal corporate tax rate and FDII deduction.

The Tax Act has several significant changes that impact all taxpayers, including a transition tax, which is a one-time tax charge on accumulated, undistributed foreign earnings. The calculation of accumulated foreign earnings requires an analysis of each foreign entity’s financial results going back to 1986. We currently estimate that we will not be subject to the transition tax associated with our accumulated, undistributed foreign earnings. We will continue to evaluate this area and expect to finalize our conclusions by the second quarter of fiscal 2019. We do not provide deferred taxes on unremitted earnings of our foreign subsidiaries as we intend to indefinitely reinvest those earnings.

The Tax Act also included a new provision designed to tax global intangible low-taxed income (“GILTI”). Under U.S. GAAP, we are allowed to make an accounting policy choice to either (i) treat taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the "period cost method"); or (ii) factor in such amounts into the measurement of our deferred taxes (the "deferred method"). Our selection of an accounting policy related to the GILTI tax provisions depends, in part, on analyzing our global income to determine whether we expect to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. While our future global operations depend on a number of different factors, we do expect to have future U.S. inclusions in taxable income related to GILTI. Further, we have made a policy decision to record GILTI tax as a current-period expense when incurred.

Liquidity and Capital Resources

Resources

In recent years, we have financed our operations with cash generated from operating activities. As of September 30, 2018, our principal capital resources consisted of $52.0 million in cash and cash equivalents.

We believe our existing cash and cash equivalents, together with our cash flows from operating activities, will be sufficient to meet our anticipated cash needs for at least the next twelve months. 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 purpose is required beyond existing resources and our Credit Agreement described below, we may not be able to effect a receivable, equity or debt financing on terms acceptable to us or at all.

Credit Agreement

On February 26, 2016, we entered into a $250.0 million Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, Silicon Valley Bank, as syndication agent, and the lenders and other parties named therein (the “Lenders”). On August 9, 2017, we entered into an Amendment to increase the Credit Agreement to $350.0 million. The indebtedness evidenced by the Credit Agreement matures on February 26, 2021. Prior to the maturity of the Credit Agreement, any amounts borrowed may be repaid and, subject to the terms and conditions of the Credit Agreement, borrowed again in whole or in part without penalty. We had $170.0 million in outstanding borrowings under the Credit Agreement as of September 30, 2018 and June 30, 2018, respectively.

For a more detailed description of the Credit Agreement, see Note 11, "Credit Agreement," to our Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q.

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Cash Equivalents and Cash Flows

Our cash equivalents of $5.0 million consisted of money market funds as of September 30, 2018. The objective of our investment policy is to manage our cash and investments to preserve principal and maintain liquidity.

The following table summarizes our cash flow activities for the periods indicated:

	Three Months Ended September 30,
	2018			2017
				As Adjusted
	(Dollars in Thousands)
Cash flow provided by (used in):
Operating activities	$	5,570		$	12,360
Investing activities	(186		)	(188		)
Financing activities	(49,102		)	(55,299		)
Effect of exchange rates on cash balances	(399		)	156
Decrease in cash and cash equivalents	$	(44,117	)	$	(42,971	)

Operating Activities

Our primary source of cash is from the annual installments associated with our software license arrangements and related software support services, and to a lesser extent from professional services and training. We believe that cash inflows from our term license business will grow as we benefit from the continued growth of our portfolio of term license contracts.

Cash from operating activities provided $5.6 million during the three months ended September 30, 2018. This amount resulted from net income of $38.1 million, adjusted for non-cash items of $(33.7) million and net sources of cash of $1.2 million related to changes in working capital.

Non-cash items during the three months ended September 30, 2018 consisted primarily of deferred income taxes of $(44.7) million, stock-based compensation expense of $8.9 million, and depreciation and amortization expense of $2.0 million.

Cash provided by working capital of $1.2 million during the three months ended September 30, 2018 was primarily attributable to cash provided by increases in accounts payable, accrued expenses and other current liabilities of $34.9 million and increases in deferred revenue of $11.4 million, partially offset by cash used by increases in contract assets of $30.9 million, increases in accounts receivable of $12.5 million, increases in prepaid expenses, prepaid income taxes, and other assets of $0.9 million, and increases in contract costs of $0.8 million. The increase in income taxes payable as of September 30, 2018 represents the tax liability associated with adopting Topic 606. There was a correlating decrease in deferred income taxes during the three months ended September 30, 2018.

Investing Activities

During the three months ended September 30, 2018, we used $0.2 million of cash for investing activities. We used $0.1 million for capitalized computer software development costs and $0.1 million for capital expenditures.

Financing Activities

During the three months ended September 30, 2018, we used $49.1 million of cash for financing activities. We used $50.0 million for repurchases of our common stock and $3.2 million for withholding taxes on vested and settled restricted stock units, partially offset by $4.1 million from the exercise of employee stock options. 

Contractual Obligations

Standby letters of credit for $4.0 million and $3.5 million secure our performance on professional services contracts, certain facility leases and potential liabilities as of September 30, 2018 and June 30, 2018, respectively. The letters of credit expire at various dates through fiscal 2025.

39

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 Risk

During the three months ended September 30, 2018 and 2017, 6.1% 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, although we have not done so during the three months ended September 30, 2018 and 2017. Our largest exposures to foreign currency exchange rates exist primarily with the Euro, Pound Sterling, Canadian Dollar, and Japanese Yen.

During the three months ended September 30, 2018 and 2017, we recorded $0.1 million of net foreign currency exchange gains and $(0.6) million of net foreign currency exchange losses, respectively, 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 results of operations by approximately $1.1 million for the three months ended September 30, 2018 and 2017, respectively.

Interest Rate Risk

We place our investments in money market instruments. Our analysis of our investment portfolio and interest rates at September 30, 2018 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.

We had $170.0 million in outstanding borrowings under our Credit Agreement as of September 30, 2018. 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.

40

Item 4.Controls and Procedures.

a)Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2018. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under 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 the Company’s management, including its 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 September 30, 2018, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective.

b)Changes in Internal Controls Over Financial Reporting

During the three months ended September 30, 2018, we adopted new revenue recognition guidance. We designed and implemented new business processes and internal controls to ensure that we adequately evaluated our contracts with customers and properly assessed the impact of the new guidance to facilitate the adoption. Additionally, we implemented a new revenue recognition software system to assist in the ongoing application of the new guidance.

41

PART II - OTHER INFORMATION

Item 1.Legal Proceedings.

Refer to Note 16, “Commitments and Contingencies,” in the Notes to the Unaudited Consolidated Financial Statements for information regarding certain legal proceedings, the contents of which are herein incorporated by reference.

Item 1A. Risk Factors.

The risks described in "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended June 30, 2018, 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 2018 Annual Report on Form 10-K remains current in all material respects, with the exception of the revised risk factors below.

Fluctuations in foreign currency exchange rates could result in declines in our reported revenue and operating results.

During the three months ended September 30, 2018 and 2017, 6.1% of our total revenue was denominated in a currency other than the U.S. dollar, respectively. In addition, certain of our operating expenses incurred outside the United States are denominated in currencies other than the U.S. dollar. Our reported revenue and operating results are subject to fluctuations in foreign exchange rates. Foreign currency risk arises primarily from the net difference between non-U.S. dollar receipts from customers outside the United States and non-U.S. dollar operating expenses for subsidiaries in foreign countries. Currently, our largest exposures to foreign exchange rates exist primarily with the Euro, Pound Sterling, Canadian dollar and Japanese Yen against the U.S. dollar. During the three months ended September 30, 2018 and 2017, we did not enter into, and were not a party to any, derivative financial instruments, such as forward currency exchange contracts, intended to manage the volatility of these market risks. We cannot predict the impact of foreign currency fluctuations, and foreign currency fluctuations in the future may adversely affect our revenue and operating results. Any hedging policies we may implement in the future may not be successful, and the cost of those hedging techniques may have a significant negative impact on our operating results.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.

The following table provides information about purchases by us during the three months ended September 30, 2018 of shares of our common stock: 

Period	Total Number of Shares Purchased (2)	Average Price Paid per Share (3)		Total Number of Shares Purchased as Part of Publicly Announced Program (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (4)
July 1 to 31, 2018	171,083	$	97.35	171,083
August 1 to 31, 2018	163,601	$	107.05	163,601
September 1 to 30, 2018	138,692	$	114.15	138,692
Total	473,376	$	105.62	473,376	$	296,293,063

(1) On January 22, 2015, our Board of Directors approved a share repurchase program (the "Share Repurchase Program") for up to $450 million worth of our common stock. On April 26, 2016, June 8, 2017, and April 18, 2018, the Board of Directors approved a $400 million, $200 million, and $200 million increase in our current share repurchase plan, respectively.

(2) As of September 30, 2018, the total number of shares of common stock repurchased under all programs approved by the Board of Directors was 32,416,975.

(3) The total average price paid per share is calculated as the total amount paid for the repurchase of our common stock during the period divided by the total number of shares repurchased.

(4)   As of September 30, 2018, the total remaining value under the Share Repurchase Program was approximately $296.3 million.

42

Item 6.Exhibits.

			Incorporated by Reference
Exhibit Number	Description	Filed with this Form 10-Q	Form	Filing Date with SEC	Exhibit Number
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	X
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	X
32.1	Certification of President and Chief Executive Officer and Executive 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	X
101.INS	Instance Document	X
101.SCH	XBRL Taxonomy Extension Schema Document	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	X

43

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: October 24, 2018	By:	/s/ ANTONIO J. PIETRI
		Antonio J. Pietri
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: October 24, 2018	By:	/s/ KARL E. JOHNSEN
		Karl E. Johnsen
		Senior Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

44

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Antonio J. Pietri, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Aspen Technology, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 24, 2018	/s/ ANTONIO. J. PIETRI
	Antonio J. Pietri
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Karl E. Johnsen, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Aspen Technology, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 24, 2018	/s/ KARL E. JOHNSEN
	Karl E. Johnsen
	Senior Vice President and Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Aspen Technology, Inc. (the “Company”) for the quarter ended September 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned hereby certifies in his capacity as an officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 24, 2018	/s/ ANTONIO J. PIETRI
	Antonio J. Pietri
	President and Chief Executive Officer

Date: October 24, 2018	/s/ KARL E. JOHNSEN
	Karl E. Johnsen
	Senior Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Aspen Technology, Inc. and will be retained by Aspen Technology, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	3 Months Ended
	Sep. 30, 2018	Oct. 17, 2018
Document and Entity Information
Entity Registrant Name	ASPEN TECHNOLOGY INC /DE/
Entity Central Index Key	0000929940
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Common Stock, Shares Outstanding		70,769,877
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Revenue:
Total revenue	$ 114,169
Cost of revenue:
Total cost of revenue	13,227
Gross profit	100,942	$ 110,049
Operating expenses:
Selling and marketing	26,812	23,571
Research and development	21,056
General and administrative	16,084	13,676
Total operating expenses	63,952
Income from operations	36,990	53,313
Interest income	7,069	141
Interest (expense)	(1,814)
Other income (expense), net	128
Income before provision for income taxes	42,373
Provision for income taxes	4,307	16,877
Net income	$ 38,066	$ 34,755
Net income per common share:
Basic (in dollars per share)	$ 0.54	$ 0.48
Diluted (in dollars per share)	$ 0.53	$ 0.47
Weighted average shares outstanding:
Basic (in shares)	70,988	73,024
Diluted (in shares)	72,015	73,609
Accounting Standards Update 2014-09 [Member]
Revenue:
Total revenue		$ 126,487
Cost of revenue:
Total cost of revenue		12,732
Gross profit		113,755
Operating expenses:
Selling and marketing		23,516
Research and development		19,489
General and administrative		15,037
Total operating expenses		58,042
Income from operations		55,713
Interest income		6,306
Interest (expense)		(1,206)
Other income (expense), net		(615)
Income before provision for income taxes		60,198
Provision for income taxes		19,677
Net income		$ 40,521
Net income per common share:
Basic (in dollars per share)		$ 0.55
Diluted (in dollars per share)		$ 0.55
Weighted average shares outstanding:
Basic (in shares)		73,024
Diluted (in shares)		73,609
License [Member]
Revenue:
Total revenue	$ 63,755	$ 0
Cost of revenue:
Total cost of revenue	1,665
License [Member] | Accounting Standards Update 2014-09 [Member]
Revenue:
Total revenue		78,890
Cost of revenue:
Total cost of revenue		1,231
Maintenance [Member]
Revenue:
Total revenue	43,039	0
Cost of revenue:
Total cost of revenue	3,993
Maintenance [Member] | Accounting Standards Update 2014-09 [Member]
Revenue:
Total revenue		40,264
Cost of revenue:
Total cost of revenue		4,552
Services and other
Revenue:
Total revenue	7,375	7,025
Cost of revenue:
Total cost of revenue	$ 7,569
Services and other | Accounting Standards Update 2014-09 [Member]
Revenue:
Total revenue		7,333
Cost of revenue:
Total cost of revenue		$ 6,949

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Net income	$ 38,066	$ 34,755
Other comprehensive income (loss):
Foreign currency translation adjustments	(422)
Total other comprehensive income (loss)	(422)
Comprehensive income	$ 37,644
Accounting Standards Update 2014-09 [Member]
Net income		40,521
Other comprehensive income (loss):
Foreign currency translation adjustments		1,401
Total other comprehensive income (loss)		1,401
Comprehensive income		$ 41,922

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Statement of Comprehensive Income [Abstract]
Net unrealized losses on available for sale securities, net of tax effects	$ 0	$ 0

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018
Current assets:
Cash and cash equivalents	$ 52,048	$ 96,165
Accounts receivable, net	53,999	21,910
Contract assets	317,967	0
Contract costs	21,296	0
Prepaid expenses and other current assets	12,992
Prepaid income taxes	1,422
Total current assets	459,724
Property, equipment and leasehold improvements, net	9,006	9,806
Computer software development costs, net	695
Goodwill	75,649
Intangible assets, net	34,192	35,310
Contract with Customer, Asset, Net, Noncurrent	357,947	0
Non-current deferred tax assets	1,176
Other non-current assets	1,279
Total assets	939,668
Current liabilities:
Accounts payable	2,501
Accrued expenses and other current liabilities	32,000	39,515
Income taxes payable	46,869
Borrowings under credit agreement	170,000
Current deferred revenue	23,737	286,845
Total current liabilities	275,107
Non-current deferred revenue	15,046	28,259
Deferred income taxes	159,563	0
Other non-current liabilities	16,833	18,492
Commitments and contingencies (Note 16)
Series D redeemable convertible preferred stock
Series D redeemable convertible preferred stock, $0.10 par value— Authorized— 3,636 shares as of September 30, 2018 and June 30, 2018 Issued and outstanding— none as of September 30, 2018 and June 30, 2018	0
Stockholders' deficit:
Common stock, $0.10 par value— Authorized—210,000,000 shares Issued— 103,279,138 shares at September 30, 2018 and 103,130,300 shares at June 30, 2018 Outstanding— 70,862,163 shares at September 30, 2018 and 71,186,701 shares at June 30, 2018	10,328
Additional paid-in capital	724,752
Retained earnings	1,103,573	305,208
Accumulated other comprehensive income	965
Treasury stock, at cost—32,416,975 shares of common stock at September 30, 2018 and 31,943,599 shares at June 30, 2018	(1,366,499)
Total stockholders’ equity	473,119
Total liabilities and stockholders’ equity	$ 939,668
Accounting Standards Update 2014-09 [Member]
Current assets:
Cash and cash equivalents		96,165
Accounts receivable, net		41,810
Contract assets		304,378
Contract costs		20,500
Prepaid expenses and other current assets		10,509
Prepaid income taxes		2,601
Total current assets		475,963
Property, equipment and leasehold improvements, net		9,806
Computer software development costs, net		646
Goodwill		75,590
Intangible assets, net		35,310
Contract with Customer, Asset, Net, Noncurrent		340,622
Non-current deferred tax assets		11,090
Other non-current assets		1,297
Total assets		950,324
Current liabilities:
Accounts payable		4,230
Accrued expenses and other current liabilities		39,515
Income taxes payable		1,698
Borrowings under credit agreement		170,000
Current deferred revenue		15,150
Total current liabilities		230,593
Non-current deferred revenue		12,354
Deferred income taxes		214,125
Other non-current liabilities		17,068
Commitments and contingencies (Note 16)
Series D redeemable convertible preferred stock
Series D redeemable convertible preferred stock, $0.10 par value— Authorized— 3,636 shares as of September 30, 2018 and June 30, 2018 Issued and outstanding— none as of September 30, 2018 and June 30, 2018		0
Stockholders' deficit:
Common stock, $0.10 par value— Authorized—210,000,000 shares Issued— 103,279,138 shares at September 30, 2018 and 103,130,300 shares at June 30, 2018 Outstanding— 70,862,163 shares at September 30, 2018 and 71,186,701 shares at June 30, 2018		10,313
Additional paid-in capital		715,475
Retained earnings		1,065,507
Accumulated other comprehensive income		1,388
Treasury stock, at cost—32,416,975 shares of common stock at September 30, 2018 and 31,943,599 shares at June 30, 2018		(1,316,499)
Total stockholders’ equity		476,184
Total liabilities and stockholders’ equity		$ 950,324

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2018	Jun. 30, 2018
Series D redeemable convertible preferred stock, par value (in dollars per share)	$ 0.10	$ 0.10
Series D redeemable convertible preferred stock, authorized	3,636	3,636
Series D redeemable convertible preferred stock, issued	0	0
Series D redeemable convertible preferred stock, outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, authorized	210,000,000	210,000,000
Common stock, issued	103,279,138	103,130,300
Common stock, outstanding	70,862,163	71,186,701
Treasury stock, shares	32,416,975	31,943,599

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash flows from operating activities:
Net income	$ 38,066	$ 34,755
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,000
Net foreign currency (gains) losses	(200)
Stock-based compensation	8,865
Deferred income taxes	(44,670)
Provision for bad debts	169
Other non-cash operating activities	107	0
Changes in assets and liabilities:
Accounts receivable, net	(12,529)	504
Contract assets	(30,914)	0
Contract costs	(796)	0
Prepaid expenses, prepaid income taxes, and other assets	(855)
Accounts payable, accrued expenses, income taxes payable and other liabilities	34,924
Deferred revenue	11,403	(40,037)
Net cash provided by operating activities	5,570	12,360
Cash flows from investing activities:
Purchases of property, equipment and leasehold improvements	(96)
Payments for capitalized computer software costs	(90)
Net cash used in investing activities	(186)
Cash flows from financing activities:
Exercises of stock options	4,054
Repurchases of common stock	(49,977)
Payments of tax withholding obligations related to restricted stock	(3,179)
Deferred business acquisition payments	0
Payments of credit agreement issuance costs	0
Net cash used in financing activities	(49,102)
Effect of exchange rate changes on cash and cash equivalents	(399)
Decrease in cash and cash equivalents	(44,117)
Cash and cash equivalents, beginning of period	96,165
Cash and cash equivalents, end of period	52,048
Supplemental disclosure of non-cash investing and financing activities:
Change in purchases of property, equipment and leasehold improvements included in accounts payable and accrued expenses	(11)
Change in repurchases of common stock included in accounts payable and accrued expenses	23
Supplemental disclosure of cash flow information:
Income taxes paid, net	2,755
Interest paid	1,538
Accounting Standards Update 2014-09 [Member]
Cash flows from operating activities:
Net income		40,521
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,753
Net foreign currency (gains) losses		936
Stock-based compensation		6,414
Deferred income taxes		(33)
Provision for bad debts		20
Changes in assets and liabilities:
Accounts receivable, net		(9,093)
Contract assets		35,791
Contract costs		185
Prepaid expenses, prepaid income taxes, and other assets		2,292
Accounts payable, accrued expenses, income taxes payable and other liabilities		6,764
Deferred revenue		(1,238)
Net cash provided by operating activities		12,360
Cash flows from investing activities:
Purchases of property, equipment and leasehold improvements		(123)
Payments for capitalized computer software costs		(65)
Net cash used in investing activities		(188)
Cash flows from financing activities:
Exercises of stock options		2,411
Repurchases of common stock		(55,109)
Payments of tax withholding obligations related to restricted stock		(1,650)
Deferred business acquisition payments		(600)
Payments of credit agreement issuance costs		(351)
Net cash used in financing activities		(55,299)
Effect of exchange rate changes on cash and cash equivalents		156
Decrease in cash and cash equivalents		(42,971)
Cash and cash equivalents, beginning of period	$ 96,165	101,954
Cash and cash equivalents, end of period		58,983
Supplemental disclosure of non-cash investing and financing activities:
Change in purchases of property, equipment and leasehold improvements included in accounts payable and accrued expenses		(70)
Change in repurchases of common stock included in accounts payable and accrued expenses		(5,109)
Supplemental disclosure of cash flow information:
Income taxes paid, net		1,243
Interest paid		$ 968

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Interim Unaudited Consolidated Financial Statements

3 Months Ended

Sep. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Interim Unaudited Consolidated Financial Statements

Interim Unaudited Consolidated Financial Statements

The accompanying interim unaudited consolidated financial statements of Aspen Technology, Inc. and its subsidiaries have been prepared on the same basis as our annual consolidated financial statements.  We have omitted certain information and footnote disclosures normally included in our annual consolidated financial statements.  Such interim unaudited consolidated financial statements have been prepared in conformity with U.S. Generally Accepted Accounting Principles (GAAP), as defined in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 270, Interim Reporting, for interim financial information and with the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  It is suggested that these unaudited consolidated financial statements be read in conjunction with the audited consolidated financial statements for the year ended June 30, 2018, which are contained in our Annual Report on Form 10-K, as previously filed with the U.S. Securities and Exchange Commission (SEC). In the opinion of management, all adjustments, consisting of normal and recurring adjustments, considered necessary for a fair presentation of the financial position, results of operations, and cash flows at the dates and for the periods presented have been included and all intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three months ended September 30, 2018 are not necessarily indicative of the results to be expected for the subsequent quarter or for the full fiscal year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Unless the context requires otherwise, references to we, our and us refer to Aspen Technology, Inc. and its subsidiaries.

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Significant Accounting Policies

3 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Significant Accounting Policies

Significant Accounting Policies

(a)Principles of Consolidation

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

(b)Significant Accounting Policies

Our significant accounting policies are described in Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018. We adopted Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers ("Topic 606") and ASU No. 2017-01, Business Combinations (Topic 805) - Clarifying the Definition of a Business effective July 1, 2018. Refer to Note 2 (f), “New Accounting Pronouncements Adopted in Fiscal 2019,” for further information regarding the adoption of Topic 606 and ASU No. 2017-01. There were no other material changes to our significant accounting policies during the three months ended September 30, 2018.

(c)  Loss Contingencies

We accrue estimated liabilities for loss contingencies arising from claims, assessments, litigation and other sources when it is probable that a liability has been incurred and the amount of the claim, assessment or damages can be reasonably estimated. We believe that we have sufficient accruals to cover any obligations resulting from claims, assessments or litigation that have met these criteria.

(d)Foreign Currency Transactions

Foreign currency exchange gains and losses generated from the settlement and remeasurement of transactions denominated in currencies other than the functional currency of our subsidiaries are recognized in our results of operations as incurred as a component of other income (expense), net. Net foreign currency gains (losses) were $0.1 million and $(0.6) million during the three months ended September 30, 2018 and 2017, respectively.

(e)    Research and Development Expense

We charge research and development expenditures to expense as the costs are incurred. Research and development expenses consist primarily of personnel expenses related to the creation of new products, enhancements and engineering changes to existing products and costs of acquired technology prior to establishing technological feasibility.

We acquired no technology during the three months ended September 30, 2018 and 2017, respectively.

(f)New Accounting Pronouncements Adopted in Fiscal 2019

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805) - Clarifying the Definition of a Business. The amendment changes the definition of a business to assist entities in evaluating when a set of transferred assets and activities constitutes a business. We adopted ASU No. 2017-01 effective July 1, 2018. The adoption of ASU No. 2017-01 did not have a material effect on the consolidated financial statements or related disclosures.

In May 2014, the FASB issued Topic 606, which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and requires entities to recognize revenue when they transfer promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to evaluate revenue recognition through a five-step process.  In applying the principles of Topic 606, more judgment and estimates are required within the revenue recognition process than were required under previous U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each separate performance obligation.

We adopted Topic 606 effective July 1, 2018 using the full retrospective method, which required us to adjust the prior periods presented. The adoption of Topic 606 impacted the timing of the license portion of the revenue recognized from our term contracts.  Under the new standard, for arrangements that include term-based software licenses bundled with maintenance and support, we are now required to recognize as revenue a portion of the arrangement fee upon delivery of the software license. We recognize as revenue a portion of the arrangement fee related to maintenance and support, professional services, and training over time as the services are provided. Additionally, under the new standard, we capitalize certain direct and incremental commission costs to obtain a contract and amortize such costs over the expected period of benefit, rather than expensing them as incurred in the period that the commissions are earned. See Note 3, "Revenue from Contracts with Customers," to our Unaudited Consolidated Financial Statements for more information on our accounting policies as a result of the adoption of Topic 606.

(g)Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Under the amendment, lessees will be required to recognize virtually all of their leases on the balance sheet, by recording a right-of-use asset and lease liability. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. We are currently evaluating the impact of ASU No. 2016-02 on our consolidated financial statements.

In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The amendment provides guidance on accounting for the impact of the Tax Cuts and Jobs Act (the “Tax Act”) and allows entities to complete the accounting under ASC 740 within a one-year measurement period from the Tax Act enactment date. This standard is effective upon issuance. The Tax Act has several significant changes that impact all taxpayers, including a transition tax, which is a one-time tax charge on accumulated, undistributed foreign earnings. The calculation of accumulated foreign earnings requires an analysis of each foreign entity’s financial results going back to 1986. We currently estimate that we will not be subject to the transition tax associated with our accumulated, undistributed foreign earnings. We will continue to evaluate this area and expect to finalize our conclusions by December 31, 2018.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The amendment modifies, removes, and adds certain disclosure requirements on fair value measurements. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. We are currently evaluating the impact of ASU No. 2018-13 on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendment. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact of ASU No. 2018-15 on our consolidated financial statements.

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Revenue from Contracts with Customers (Notes)

3 Months Ended

Sep. 30, 2018

Revenue from Contracts with Customers [Abstract]

Revenue from Contract with Customer [Text Block]

Revenue from Contracts with Customers

In accordance with Topic 606, we account for a customer contract when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights can be identified, payment terms can be identified, the contract has commercial substance, and it is probable that we will collect substantially all of the consideration to which we are entitled. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer.

Nature of Products and Services

We generate revenue from the following sources: (1) License revenue; (2) Maintenance revenue; and (3) Services and other revenue. We sell our software products to end users primarily under fixed-term licenses. We license our software products primarily through a subscription offering which we refer to as our aspenONE licensing model, which includes software maintenance and support, known as our Premier Plus SMS offering, for the entire term. Our aspenONE products are organized into three suites: 1) engineering; 2) manufacturing and supply chain; and 3) asset performance management. The aspenONE licensing model provides customers with access to all of the products within the aspenONE suite(s) they license. We refer to these arrangements as token arrangements. Tokens are fixed units of measure. The amount of software usage is limited by the number of tokens purchased by the customer.

We also license our software through point product term arrangements, which include our Premier Plus SMS offering for the entire term.

We determine revenue recognition through the following steps:

• Identification of the contract, or contracts, with a customer;

• Identification of the performance obligations in the contract;

• Determination of the transaction price;

• Allocation of the transaction price to the performance obligations in the contract; and

• Recognition of revenue when, or as, we satisfy a performance obligation.

Term-based Arrangements: Term-based arrangements consist of on-premise term licenses as well as maintenance.

Term licenses

License revenue consists primarily of product and related revenue from our aspenONE licensing model and point product arrangements.

When a customer elects to license our products under our aspenONE licensing model, the customer receives, for the term of the arrangement, the right to all software products in the licensed aspenONE software suite. When a customer elects to license point products, the customer receives, for the term of the arrangement, the right to license specified products in the licensed aspenONE software suite. Revenue from initial product licenses is recognized upfront upon delivery.

Maintenance

When a customer elects to license our products under our aspenONE licensing model, our Premier Plus SMS offering is included for the entire term of the arrangement and the customer receives, for the term of the arrangement, the right to any updates that may be introduced into the licensed aspenONE software suite. When a customer elects to license point products, our Premier Plus SMS offering is included for the entire term of the arrangement and the customer receives, for the term of the arrangement, the right to any updates that may be introduced related to the specified products licensed. Maintenance represents a stand-ready obligation and, due to our obligation to provide unspecified future software updates on a when-and-if available basis as well as telephone support services, we are required to recognize revenue ratably over the term of the arrangement.

Services and Other Revenue

Professional Services Revenue

Professional services are provided to customers on a time-and-materials ("T&M") or fixed-price basis. The obligation to provide professional services is generally satisfied over time, with the customer simultaneously receiving and consuming the benefits as we satisfy our performance obligation. For professional services, revenue is recognized by measuring progress toward the completion of our obligations. We recognize professional services fees for our T&M contracts based upon hours worked and contractually agreed-upon hourly rates. Revenue from fixed-price engagements is recognized using the proportional performance method based on the ratio of costs incurred to the total estimated project costs. The use of the proportional performance method is dependent upon our ability to reliably estimate the costs to complete a project. We use historical experience as a basis for future estimates to complete current projects. Additionally, we believe that costs are the best available measure of performance. Out-of-pocket expenses which are reimbursed by customers are recorded as revenue.

Training Revenue

We provide training services to our customers, including on-site, Internet-based, public and customized training. The obligation to provide training services is generally satisfied over time, with the customer simultaneously receiving and consuming the benefits as we satisfy our performance obligation. Revenue is recognized in the period in which the services are performed.

Contracts with Multiple Performance Obligations

Our contracts generally contain more than one of the products and services listed above, each of which is separately accounted for as a distinct performance obligation.

Allocation of consideration: We allocate total contract consideration to each distinct performance obligation in an arrangement on a relative standalone selling price basis. The standalone selling price reflects the price we would charge for a specific product or service if it was sold separately in similar circumstances and to similar customers.

If the arrangement contains professional services and other products or services, we allocate to the professional service obligation a portion of the total contract consideration based on the standalone selling price of professional services that is observed from consistently priced standalone sales.

The standalone selling price for term licenses, which are always sold with maintenance, is the price for the combined license and maintenance bundle. The amount assigned to the license and maintenance bundle is separated into license and maintenance amounts using the respective standalone selling prices represented by the value relationship between the software license and maintenance.

When two or more contracts are entered into at or near the same time with the same customer, we evaluate the facts and circumstances associated with the negotiation of those contracts. Where the contracts are negotiated as a package, we will account for them as a single arrangement and allocate the consideration for the combined contracts among the performance obligations accordingly.

Standalone selling price: When available, we use directly observable transactions to determine the standalone selling prices for performance obligations. Generally, directly observable data is not available for term licenses and maintenance. When term licenses are sold together with maintenance in a bundled arrangement, we estimate a standalone selling price for these distinct performance obligations using relevant information, including our overall pricing objectives and strategies and historical pricing data, and taking into consideration market conditions and other factors, such as customer type and geography.

Other policies and judgments

Payment terms and conditions vary by contract type, although terms generally include a requirement of payment annually over the term of the license arrangement. Therefore, we generally receive payment from a customer after the performance obligation related to the license has been satisfied, and therefore, our contracts generally contain a significant financing component. The significant financing component is calculated utilizing an interest rate that derives the net present value of the performance obligations delivered on an upfront basis based on the allocation of consideration. We have instituted a customer portfolio approach in assigning interest rates. The rates are determined at contract inception and are based on the credit characteristics of the customers within each portfolio.

Contract modifications

We sometimes enter into agreements to modify previously executed contracts, which constitute contract modifications. We assess each of these contract modifications to determine (i) if the additional products and services are distinct from the products and services in the original arrangement; and (ii) if the amount of consideration expected for the added products and services reflects the stand-alone selling price of those products and services, as adjusted for contract-specific circumstances. A contract modification meeting both criteria is accounted for as a separate contract. A contract modification not meeting both criteria is considered a change to the original contract and is accounted for on either (i) a prospective basis as a termination of the existing contract and the creation of a new contract; or (ii) a cumulative catch-up basis. Generally, our contract modifications meet both criteria and are accounted for as a separate contract, as adjusted for contract-specific circumstances.

Disaggregation of Revenue

We disaggregate our revenue by region, type of performance obligation, timing of revenue recognition, and segment as follows:

	Three Months Ended September 30,
	2018		2017
Revenue by region:
United States	$	39,228	$	53,213
Europe	28,946		26,256
Other (1)	45,995		47,018
	$	114,169	$	126,487
Revenue by type of performance obligation:
Term licenses	$	63,755	$	78,890
Maintenance	43,039		40,264
Professional services and other	7,375		7,333
	$	114,169	$	126,487
Revenue by segment:
Subscription and software	$	106,794	$	119,154
Services and other	7,375		7,333
	$	114,169	$	126,487

____________________________________________

(1) Other consists primarily of Asia Pacific, Canada, Latin America and the Middle East.

Contract Balances

The difference in the opening and closing balances of our contract assets and deferred revenue primarily results from the timing difference between our performance and the customer’s payment. We fulfill our obligations under a contract with a customer by transferring products and services in exchange for consideration from the customer. We recognize a contract asset when we transfer products or services to a customer and the right to consideration is conditional on something other than the passage of time. Accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional. We recognize deferred revenue when we have received consideration or an amount of consideration is due from the customer and we have a future obligation to transfer products or services.

Our contract assets (liabilities) were as follows as of September 30, 2018 and June 30, 2018:

	September 30, 2018			June 30, 2018
				As Adjusted
	(Dollars in Thousands)
Contract assets	$	675,914		$	645,000
Deferred revenue	(38,783		)	(27,504		)
	$	637,131		$	617,496

Contract assets and deferred revenue are presented net at the contract level for each reporting period.

The change in deferred revenue in the three months ended September 30, 2018, excluding the impact of the netting of contract assets and deferred revenue, was primarily due to an increase in new billings in advance of revenue recognition, partially offset by $2.7 million of revenue recognized that was included in deferred revenue at June 30, 2018.

Contract Costs

We pay commissions for new product sales as well as for renewals of existing contracts. Commissions paid to obtain renewal contracts are not commensurate with the commissions paid for new product sales and therefore, a portion of the commissions paid for new contracts relate to future renewals.

We account for new product sales commissions using a portfolio approach and allocate the cost of commissions in proportion to the allocation of transaction price of license and maintenance performance obligations, including assumed renewals. Commissions allocated to the license and license renewal components are expensed at the time the license revenue is recognized. Commissions allocated to maintenance are capitalized and amortized on a straight-line basis over a period of four to eight years for new contracts, reflecting our estimate of the expected period that we will benefit from those commissions.

Amortization of capitalized contract costs is included in sales and marketing expenses in our Condensed Consolidated Statement of Operations.

Transaction Price Allocated to Remaining Performance Obligations

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

	Year Ended June 30,
	2019		2020		2021		2022		2023		Thereafter
	(Dollars in Thousands)
License	$	34,414	$	16,434	$	13,786	$	7,784	$	1,310	$	173
Maintenance	120,392		129,547		93,578		58,657		31,948		11,735
Services and other	38,967		5,270		2,987		1,467		979		432

Impact to Prior Period Information

The following table presents the effect of the adoption of Topic 606 on select consolidated statements of operations line items for the three months ended September 30, 2017:

	Three Months Ended September 30, 2017
	As Previously Reported		Adjustments			As Adjusted
	(Dollars in Thousands, Except per Share Data)
Consolidated Statements of Operations:
License revenue	$	—	$	78,890		$	78,890
Maintenance revenue	—		40,264			40,264
Subscription and software revenue	115,756		(115,756		)	—
Services and other revenue	7,025		308			7,333
Gross profit	110,049		3,706			113,755
Selling and marketing expense	23,571		(55		)	23,516
General and administrative expense	13,676		1,361			15,037
Income from operations	53,313		2,400			55,713
Interest income	141		6,165			6,306
Provision for income taxes	16,877		2,800			19,677
Net income	$	34,755	$	5,766		$	40,521
Basic	$	0.48				$	0.55
Diluted	$	0.47				$	0.55
Weighted average shares outstanding - Basic	73,024					73,024
Weighted average shares outstanding - Diluted	73,609					73,609

The following table presents the effect of the adoption of Topic 606 on select consolidated balance sheet line items as of June 30, 2018:

	June 30, 2018
	As Previously Reported		Adjustments			As Adjusted
	(Dollars in Thousands)
Consolidated Balance Sheets:
Assets:
Current contract assets	$	—	$	304,378		$	304,378
Contract costs	—		20,500			20,500
Accounts receivable, net	21,910		19,900			41,810
Non-current contract assets	—		340,622			340,622
Liabilities:
Current deferred revenue	286,845		(271,695		)	15,150
Non-current deferred revenue	28,259		(15,905		)	12,354
Deferred income taxes	—		214,125			214,125
Other non-current liabilities	18,492		(1,424		)	17,068
Stockholders' equity:
Retained earnings	305,208		760,299			1,065,507

The adoption of Topic 606 had no impact on our total cash flows or net cash provided by operating activities. The impacts of adoption resulted in offsetting shifts in cash flows throughout the components of net income and various changes in working capital balances. The following table presents the effect of the adoption of Topic 606 on select consolidated statement of cash flows line items for the three months ended September 30, 2017:

	Three Months Ended September 30, 2017
	As Previously Reported			Adjustments			As Adjusted
	(Dollars in Thousands)
Consolidated Statements of Cash Flows:
Cash flows from operating activities:
Net income	$	34,755		$	5,766		$	40,521
Changes in assets and liabilities:
Contract assets	—			(35,791		)	(35,791		)
Contract costs	—			(185		)	(185		)
Accounts receivable, net	(504		)	(8,589		)	(9,093		)
Deferred revenue	(40,037		)	38,799			(1,238		)
Net cash provided by operating activities	$	12,360		$	—		$	12,360

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Fair Value

3 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value

Fair Value

We determine 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 we have 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 of $5.0 million as of September 30, 2018 and June 30, 2018, respectively, were reported at fair value utilizing quoted market prices in identical markets, or “Level 1 inputs.” Our cash equivalents consist of short-term, highly liquid investments with remaining maturities of three months or less when purchased.

Financial instruments not measured or recorded at fair value in the accompanying unaudited consolidated financial statements consist of accounts receivable, accounts payable and accrued liabilities. The estimated fair value of these financial instruments approximates their carrying value. The estimated fair value of the borrowings under the Credit Agreement (described below in Note 11, "Credit Agreement") approximates its carrying value due to the floating interest rate.

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Accounts Receivable

3 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Accounts Receivable

Accounts Receivable, Net

Our accounts receivable, net of the related allowance for doubtful accounts, were as follows as of September 30, 2018 and June 30, 2018:

	Gross		Allowance		Net
	(Dollars in Thousands)
September 30, 2018:
Accounts receivable	$	56,872	$	2,873	$	53,999
June 30, 2018, As Adjusted:
Accounts receivable	$	44,513	$	2,703	$	41,810

As of September 30, 2018, we had no customer receivable balances that individually represented 10% or more of our net accounts receivable.

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Property and Equipment

3 Months Ended

Sep. 30, 2018

Property, Plant and Equipment [Abstract]

Property and Equipment

Property and Equipment

Property, equipment and leasehold improvements in the accompanying unaudited consolidated balance sheets consisted of the following:

	September 30, 2018			June 30, 2018
	(Dollars in Thousands)
Property, equipment and leasehold improvements, at cost:
Computer equipment	$	8,339		$	8,344
Purchased software	24,245			24,225
Furniture & fixtures	6,827			6,850
Leasehold improvements	11,993			12,023
Property, equipment and leasehold improvements, at cost	51,404			51,442
Accumulated depreciation	(42,398		)	(41,636		)
Property, equipment and leasehold improvements, net	$	9,006		$	9,806

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Acquisitions

3 Months Ended

Sep. 30, 2018

Business Combinations [Abstract]

Acquisitions

Acquisitions

Apex Optimisation

On February 5, 2018, we completed the acquisition of all the outstanding shares of Apex Optimisation and affiliates (“Apex”), a provider of software which aligns Advanced Process Control with Planning and Scheduling to unify production optimization, for a total cash consideration of $23.0 million. The purchase price consisted of $18.4 million of cash paid at closing and an additional $4.6 million to be held back until February 2020 as security for certain representations, warranties, and obligations of the sellers. The holdback is recorded in other non-current liabilities in our consolidated balance sheet.

A preliminary allocation of the purchase price is as follows. The valuation of the net assets acquired and the deferred tax liabilities are considered preliminary as of September 30, 2018:

	Amount
	(Dollars in Thousands)
Liabilities assumed, net	$	(1,164	)
Identifiable intangible assets:
Technology-related	4,500
Customer relationships	3,800
Goodwill	17,483
Deferred tax liabilities	(1,619		)
Total assets acquired, net	$	23,000

We used the relief from royalty and income approaches to derive the fair value of the technology-related and customer relationship intangible assets, respectively. The weighted-average discount rate (or rate of return) used to determine the value of the Apex intangible assets was 28% and the effective tax rate used was 21%.  The technology-related and customer relationship intangible assets are each being amortized on a straight-line basis over their estimated useful lives of seven years.

The goodwill, which is not deductible for tax purposes, reflects the value of the assembled workforce and the company-specific synergies we expect to realize by selling Apex products and services to our existing customers.  The results of operations of Apex have been included prospectively in our results of operations since the date of acquisition.

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Intangible Assets

3 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Intangible Assets

We include in our amortizable intangible assets those intangible assets acquired in our business and asset acquisitions. We amortize acquired intangible assets with finite lives over their estimated economic lives, generally using the straight-line method. Each period, we evaluate the estimated remaining useful lives of acquired intangible assets to determine whether events or changes in circumstances warrant a revision to the remaining period of amortization. Acquired intangibles are removed from the accounts when fully amortized and no longer in use.

Intangible assets consisted of the following as of September 30, 2018 and June 30, 2018:

	Gross Carrying Amount		Accumulated Amortization			Effect of Currency Translation			Net Carrying Amount
	(Dollars in Thousands)
September 30, 2018:
Technology and patents	$	35,644	$	(6,068	)	$	(27	)	$	29,549
Customer relationships	4,979		(513		)	(23		)	4,443
Non-compete agreements	553		(353		)	—			200
Total	$	41,176	$	(6,934	)	$	(50	)	$	34,192
June 30, 2018:
Technology and patents	$	35,898	$	(5,182	)	$	(254	)	$	30,462
Customer relationships	5,181		(377		)	(202		)	4,602
Non-compete agreements	553		(307		)	—			246
Total	$	41,632	$	(5,866	)	$	(456	)	$	35,310

Total amortization expense related to intangible assets is included in operating expenses and amounted to approximately $1.1 million and $0.5 million for the three months ended September 30, 2018 and 2017, respectively.

Future amortization expense as of September 30, 2018 is expected to be as follows:

Year Ended June 30,	Amortization Expense
	(Dollars in Thousands)
2019	$	3,479
2020	4,710
2021	4,754
2022	4,694
2023	4,609
Thereafter	11,946
Total	$	34,192

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Goodwill

3 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill

The changes in the carrying amount of goodwill for our subscription and software reporting segment during the three months ended September 30, 2018 was as follows:

	Gross Carrying Amount		Accumulated Impairment Losses			Effect of Currency Translation			Net Carrying Amount
	(Dollars in Thousands)
June 30, 2018:	$	142,316	$	(65,569	)	$	(1,157	)	$	75,590
Foreign currency translation	—		—			59			59
September 30, 2018:	$	142,316	$	(65,569	)	$	(1,098	)	$	75,649

No triggering events indicating goodwill impairment occurred during the three months ended September 30, 2018.

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Accrued Expenses and Other Liabilities

3 Months Ended

Sep. 30, 2018

Balance Sheet Related Disclosures [Abstract]

Accrued Expenses and Other Liabilities

Accrued Expenses and Other Liabilities

Accrued expenses and other current liabilities in the accompanying unaudited consolidated balance sheets consisted of the following:

	September 30, 2018		June 30, 2018
	(Dollars in Thousands)
Payroll and payroll-related	$	14,763	$	21,796
Royalties and outside commissions	3,306		3,333
Professional fees	1,582		1,695
Deferred acquisition payments	1,700		1,700
Other	10,649		10,991
Total accrued expenses and other current liabilities	$	32,000	$	39,515

Other non-current liabilities in the accompanying unaudited consolidated balance sheets consisted of the following:

	September 30, 2018		June 30, 2018
			As Adjusted
	(Dollars in Thousands)
Deferred rent	$	6,138	$	6,442
Uncertain tax positions	4,327		4,510
Deferred acquisition payments	4,600		4,294
Other	1,768		1,822
Total other non-current liabilities	$	16,833	$	17,068

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Credit Agreement

3 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Credit Agreement

Credit Agreement

On February 26, 2016, we entered into a $250.0 million Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, Silicon Valley Bank, as syndication agent, and the lenders and other parties named therein (the “Lenders”). On August 9, 2017, we entered into an Amendment to increase the Credit Agreement to $350.0 million. The indebtedness evidenced by the Credit Agreement matures on February 26, 2021. Prior to the maturity of the Credit Agreement, any amounts borrowed may be repaid and, subject to the terms and conditions of the Credit Agreement, borrowed again in whole or in part without penalty. We had $170.0 million and $170.0 million in outstanding borrowings under the Credit Agreement as of September 30, 2018 and June 30, 2018, respectively.

Borrowings under the Credit Agreement bear interest at a rate equal to either, at our option, the sum of (a) the highest of (1) the rate of interest publicly announced by JPMorgan Chase Bank, N.A. as its prime rate in effect, (2) the Federal Funds Effective Rate plus 0.5%, and (3) the one-month Adjusted LIBO Rate plus 1.0%, plus (b) a margin initially of 0.5% for the first full fiscal quarter ending after the date of the Credit Agreement and thereafter based on our Leverage Ratio; or the Adjusted LIBO Rate plus a margin initially of 1.5% for the first full fiscal quarter ending after the date of the Credit Agreement and thereafter based on our Leverage Ratio.  We must also pay, on a quarterly basis, an unused commitment fee at a rate of between 0.2% and 0.3% per annum, based on our Leverage Ratio. The interest rates as of September 30, 2018 were 3.75% on $159.0 million of our outstanding borrowings, and 3.57% on the remaining $11.0 million of our outstanding borrowings.

All borrowings under the Credit Agreement are secured by liens on substantially all of our assets. The 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 Credit Agreement contains financial covenants regarding maintenance as of the end of each fiscal quarter, commencing with the quarter ending June 30, 2016, of a maximum Leverage Ratio of 3.0 to 1.0 and a minimum Interest Coverage Ratio of 3.0 to 1.0. As of September 30, 2018 we were in compliance with these covenants.

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Stock-Based Compensation

3 Months Ended

Sep. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

The weighted average estimated fair value of option awards granted was $31.70 and $16.91 during the three months ended September 30, 2018 and 2017, respectively.

We utilized the Black-Scholes option valuation model with the following weighted average assumptions:

	Three Months Ended September 30,
	2018		2017
Risk-free interest rate	2.8	%	1.7	%
Expected dividend yield	0.0	%	0.0	%
Expected life (in years)	4.6		4.6
Expected volatility factor	26.6	%	28.1	%

The stock-based compensation expense under all equity plans and its classification in the unaudited consolidated statements of operations for the three months ended September 30, 2018 and 2017 are as follows:

	Three Months Ended September 30,
	2018		2017
	(Dollars in Thousands)
Recorded as expenses:
Cost of services and other	$	465	$	450
Selling and marketing	1,331		885
Research and development	2,295		1,896
General and administrative	4,774		3,183
Total stock-based compensation	$	8,865	$	6,414

A summary of stock option and RSU activity under all equity plans for the three months ended September 30, 2018 is as follows:

	Stock Options							Restricted Stock Units
	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in 000’s)		Shares		Weighted Average Grant Date Fair Value
Outstanding at June 30, 2018	1,369,442		$	45.93	7.23	$	64,103	621,700		$	53.64
Granted	262,471		115.37					614,140		115.17
Settled (RSUs)	—							(88,078	)	69.73
Exercised	(90,009	)	41.23					—
Cancelled / Forfeited	(60,815	)	65.87					(53,183	)	64.80
Outstanding at September 30, 2018	1,481,089		$	57.70	7.46	$	83,612	1,094,579		$	86.33
Vested and exercisable at September 30, 2018	781,669		$	42.13	6.19	$	56,144	—
Vested and expected to vest as of September 30, 2018	1,419,308		$	57.03	7.40	$	81,071	1,027,166		$	87.50

The weighted average grant-date fair value of RSUs granted was $115.17 and $63.14 during the three months ended September 30, 2018 and 2017, respectively.  The total fair value of shares vested from RSU grants was $9.9 million and $5.3 million during the three months ended September 30, 2018 and 2017, respectively.

At September 30, 2018, the total future unrecognized compensation cost related to stock options was $13.4 million and is expected to be recorded over a weighted average period of 3.1 years.  At September 30, 2018, the total future unrecognized compensation cost related to RSUs was $43.2 million and is expected to be recorded over a weighted average period of 3.0 years.

The total intrinsic value of options exercised was $6.1 million and $1.7 million during the three months ended September 30, 2018 and 2017, respectively. We received cash proceeds from option exercises of $4.1 million and $2.4 million during the three months ended September 30, 2018 and 2017, respectively. We withheld withholding taxes on vested RSUs of $3.3 million and $1.7 million during the three months ended September 30, 2018 and 2017, respectively.

At September 30, 2018, common stock reserved for future issuance or settlement under equity compensation plans was 10.0 million shares.

During the three months ended September 30, 2018, we granted performance-based long-term incentive awards (“performance awards”) to certain of our executives, including our named executive officers. The performance period for each performance award is either of the following two-year periods: (i) fiscal year 2019 - fiscal year 2020, or (ii) fiscal year 2020 - fiscal year 2021.  Participants receive restricted stock units (“RSUs”) on the grant date associated with achievement of all performance targets. The performance targets for the performance awards are based on meeting annual spend growth, defined as an estimate of the annualized value of our portfolio of term license arrangements, as of a specific date, and the performance goals set out in the executive bonus plan for each fiscal year, such as free cash flow. If the performance targets are met during one of the two performance periods and the participant remains actively employed by us, the RSUs convert to time-based vesting wherein fifty percent of the awards immediately vest, and the remaining fifty percent are subject to additional service vesting over a three-year period.  In general, if the performance targets are not met, or if the participant is no longer actively employed by us prior to the performance targets being met, the participant forfeits all of the RSUs.

During the three months ended September 30, 2018, we granted 373,704 RSUs in connection with the performance awards.  As of September 30, 2018, all of the RSUs issued in connection with the performance awards are unvested and outstanding.

We record compensation expense for the performance awards based on the fair value of the awards, in an amount proportionate to the service time rendered by the participant, when it is probable that the achievement of the goals will be met. The fair value of the performance awards granted during the quarter ended September 30, 2018 was estimated using the closing price on the date of grant as well as the estimated probable achievement levels of the performance metrics.  If the performance-based conditions are not met, no compensation cost is recognized and any recognized compensation cost is reversed.  As of September 30, 2018, we concluded that the performance metrics related to the performance awards were not probable of achievement; therefore, no compensation expense was recognized during the quarter ended September 30, 2018.

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Stockholders' Deficit

3 Months Ended

Sep. 30, 2018

Equity [Abstract]

Stockholders' Deficit

Stockholders’ Equity

Stock Repurchases

On January 22, 2015, our Board of Directors approved a share repurchase program (the "Share Repurchase Program") for up to $450.0 million worth of our common stock. On April 26, 2016, June 8, 2017, and April 18, 2018, the Board of Directors approved a $400.0 million, $200.0 million, and $200.0 million increase in our current share repurchase plan, respectively. The timing and amount of any shares repurchased are based on market conditions and other factors. All shares of our common stock repurchased have been recorded as treasury stock under the cost method.

During the three months ended September 30, 2018, we repurchased 473,376 shares of our common stock in the open market for $50.0 million. As of September 30, 2018, the total remaining value under the Share Repurchase Program was approximately $296.3 million.

Accumulated Other Comprehensive Income

As of September 30, 2018 and June 30, 2018, accumulated other comprehensive income was comprised of foreign currency translation adjustments of $(0.4) million and $(0.1) million, respectively.

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Net Income Per Share

3 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Net Income Per Share

Net Income Per Share

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

The calculations of basic and diluted net income per share and basic and dilutive weighted average shares outstanding for the three months ended September 30, 2018 and 2017 are as follows:

	Three Months Ended September 30,
	2018		2017
			As Adjusted
	(Dollars and Shares in Thousands, Except per Share Data)
Net income	$	38,066	$	40,521
Weighted average shares outstanding	70,988		73,024
Dilutive impact from:
Share-based payment awards	1,027		585
Dilutive weighted average shares outstanding	72,015		73,609
Income per share
Basic	$	0.54	$	0.55
Dilutive	$	0.53	$	0.55

For the three months ended September 30, 2018 and 2017, 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 September 30, 2018 and 2017:

	Three Months Ended September 30,
	2018	2017
	(Shares in Thousands)
Employee equity awards	850	674

Included in the table above are options to purchase 262,343 shares of our common stock during the three months ended September 30, 2018, which were not included in the computation of dilutive weighted average shares outstanding, because their exercise prices ranged from $115.36 per share to $116.00 per share and were greater than the average market price of our common stock during the period then ended. These options were outstanding as of September 30, 2018 and expire at various dates through September 4, 2028.

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Income Taxes

3 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The effective tax rate for the periods presented was primarily the result of income earned in the U.S., taxed at U.S. federal and state statutory income tax rates, income earned in foreign tax jurisdictions taxed at the applicable rates, as well as the impact of permanent differences between book and tax income.

On December 22, 2017, the President of the United States signed into law Public Law No. 115-97, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), following its passage by the United States Congress. The Tax Act made significant changes to U.S. federal income tax laws, including reduction of the corporate tax rate from 35.0% to 21.0%, and the implementation of a territorial tax system resulting in a one-time transition tax on the unremitted earnings of our foreign subsidiaries. The Tax Act also contains additional provisions that will become effective for us in fiscal year 2019, including a new deduction for Foreign-Derived Intangible Income (“FDII”), the repeal of the domestic production activity deduction, a new tax on Global Intangible Low-Taxed Income (“GILTI”), and increased limitations on the deductibility of certain executive compensation.

In December 2017, the SEC staff issued Staff Accounting Bulletin 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC Topic 740 -Income Taxes (“ASC 740”). We will continue our analysis for all the tax effects of the Tax Act, which are still subject to change during the measurement period, and anticipate further guidance on accounting interpretations from the FASB and application of the Tax Act from the Department of the Treasury.

Our effective tax rate was 10.2% and 32.7% for the three months ended September 30, 2018 and 2017, respectively. Our effective tax rate decreased for the three months ended September 30, 2018 compared to the same period in 2017 due to a reduction in the federal corporate tax rate from 35.0% to 21.0% and the FDII deduction. During the three months ended September 30, 2018 and 2017, our income tax expense was driven primarily by pre-tax profitability in our domestic and foreign operations and the impact of the excess tax benefits related to our stock-based compensation.

The Tax Act has several significant changes that impact all taxpayers, including a transition tax, which is a one-time tax charge on accumulated, undistributed foreign earnings. The calculation of accumulated foreign earnings requires an analysis of each foreign entity’s financial results going back to 1986. We currently estimate that we will not be subject to the transition tax associated with our accumulated, undistributed foreign earnings. We will continue to evaluate this area and expect to finalize our conclusions by the second quarter of fiscal 2019. We do not provide deferred taxes on unremitted earnings of our foreign subsidiaries as we intend to indefinitely reinvest those earnings.

The Tax Act also included a new provision designed to tax global intangible low-taxed income (“GILTI”). Under U.S. GAAP, we are allowed to make an accounting policy choice to either (i) treat taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the "period cost method"); or (ii) factor in such amounts into the measurement of our deferred taxes (the "deferred method"). Our selection of an accounting policy related to the GILTI tax provisions depends, in part, on analyzing our global income to determine whether we expect to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. While our future global operations depend on a number of different factors, we do expect to have future U.S. inclusions in taxable income related to GILTI. Further, we have made a policy decision to record GILTI tax as a current-period expense when incurred.

Deferred income taxes are recognized based on temporary differences between the financial statement and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using the statutory tax rates and laws expected to apply to taxable income in the years in which the temporary differences are expected to reverse. Valuation allowances are provided against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the timing of the temporary differences becoming deductible.  Management considers, among other available information, scheduled reversals of deferred tax liabilities, projected future taxable income, limitations of availability of net operating loss carryforwards, and other matters in making this assessment.

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Commitments and Contingencies

3 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Operating Leases

We lease certain facilities under non-cancellable operating leases with terms in excess of one year. Rental expense on leased facilities under operating leases was approximately $2.0 million during the three months ended September 30, 2018 and 2017, respectively.

Standby letters of credit for $4.0 million and $3.5 million secure our performance on professional services contracts, certain facility leases and potential liabilities as of September 30, 2018 and June 30, 2018, respectively. The letters of credit expire at various dates through fiscal 2025.

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Segment Information

3 Months Ended

Sep. 30, 2018

Segment Reporting [Abstract]

Segment Information

Segment Information

Operating segments are defined as components of an enterprise that engage 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. Our chief operating decision maker is our President and Chief Executive Officer.

The subscription and software segment is engaged in the licensing of process optimization and asset performance management software solutions and associated support services, and includes our license and maintenance revenue. The services segment includes professional services and training, and includes our services and other revenue. We do not track assets or capital expenditures by operating segments. Consequently, it is not practical to present assets, capital expenditures, depreciation or amortization by operating segments.

The following table presents a summary of our reportable segments’ profits:

	Subscription and Software			Services			Total
	(Dollars in Thousands)
Three Months Ended September 30, 2018
Segment revenue	$	106,794		$	7,375		$	114,169
Segment expenses (1)	(53,526		)	(7,569		)	(61,095		)
Segment profit	$	53,268		$	(194	)	$	53,074
Three Months Ended September 30, 2017, As Adjusted
Segment revenue	$	119,154		$	7,333		$	126,487
Segment expenses (1)	(48,788		)	(6,949		)	(55,737		)
Segment profit	$	70,366		$	384		$	70,750

(1)    Our reportable segments’ operating expenses include expenses directly attributable to the segments. Segment expenses include selling and marketing, research and development, stock-based compensation and certain corporate expenses incurred in support of the segments. Segment expenses do not include allocations of general and administrative; interest income, net; and other income, net.

Reconciliation to Income before Income Taxes

The following table presents a reconciliation of total segment profit to income before income taxes for the three months ended September 30, 2018 and 2017:

	Three Months Ended September 30,
	2018			2017
				As Adjusted
	(Dollars in Thousands)
Total segment profit for reportable segments	$	53,074		$	70,750
General and administrative expense	(16,084		)	(15,037		)
Interest income, net	5,255			5,100
Other income (expense), net	128			(615		)
Income before income taxes	$	42,373		$	60,198

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Significant Accounting Policies (Policies)

3 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

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

Loss Contingencies

Loss Contingencies

We accrue estimated liabilities for loss contingencies arising from claims, assessments, litigation and other sources when it is probable that a liability has been incurred and the amount of the claim, assessment or damages can be reasonably estimated. We believe that we have sufficient accruals to cover any obligations resulting from claims, assessments or litigation that have met these criteria.

Foreign Currency Transactions

Foreign Currency Transactions

Foreign currency exchange gains and losses generated from the settlement and remeasurement of transactions denominated in currencies other than the functional currency of our subsidiaries are recognized in our results of operations as incurred as a component of other income (expense), net. Net foreign currency gains (losses) were $0.1 million and $(0.6) million during the three months ended September 30, 2018 and 2017, respectively.

Research and Development Expense

Research and Development Expense

We charge research and development expenditures to expense as the costs are incurred. Research and development expenses consist primarily of personnel expenses related to the creation of new products, enhancements and engineering changes to existing products and costs of acquired technology prior to establishing technological feasibility.

We acquired no technology during the three months ended September 30, 2018 and 2017, respectively.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Under the amendment, lessees will be required to recognize virtually all of their leases on the balance sheet, by recording a right-of-use asset and lease liability. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. We are currently evaluating the impact of ASU No. 2016-02 on our consolidated financial statements.

In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The amendment provides guidance on accounting for the impact of the Tax Cuts and Jobs Act (the “Tax Act”) and allows entities to complete the accounting under ASC 740 within a one-year measurement period from the Tax Act enactment date. This standard is effective upon issuance. The Tax Act has several significant changes that impact all taxpayers, including a transition tax, which is a one-time tax charge on accumulated, undistributed foreign earnings. The calculation of accumulated foreign earnings requires an analysis of each foreign entity’s financial results going back to 1986. We currently estimate that we will not be subject to the transition tax associated with our accumulated, undistributed foreign earnings. We will continue to evaluate this area and expect to finalize our conclusions by December 31, 2018.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The amendment modifies, removes, and adds certain disclosure requirements on fair value measurements. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. We are currently evaluating the impact of ASU No. 2018-13 on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendment. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact of ASU No. 2018-15 on our consolidated financial statements.

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Revenue from Contracts with Customers (Policies)

3 Months Ended

Sep. 30, 2018

Revenue from Contracts with Customers [Abstract]

Revenue from Contract with Customer [Policy Text Block]

Revenue from Contracts with Customers

In accordance with Topic 606, we account for a customer contract when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights can be identified, payment terms can be identified, the contract has commercial substance, and it is probable that we will collect substantially all of the consideration to which we are entitled. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer.

Nature of Products and Services

We generate revenue from the following sources: (1) License revenue; (2) Maintenance revenue; and (3) Services and other revenue. We sell our software products to end users primarily under fixed-term licenses. We license our software products primarily through a subscription offering which we refer to as our aspenONE licensing model, which includes software maintenance and support, known as our Premier Plus SMS offering, for the entire term. Our aspenONE products are organized into three suites: 1) engineering; 2) manufacturing and supply chain; and 3) asset performance management. The aspenONE licensing model provides customers with access to all of the products within the aspenONE suite(s) they license. We refer to these arrangements as token arrangements. Tokens are fixed units of measure. The amount of software usage is limited by the number of tokens purchased by the customer.

We also license our software through point product term arrangements, which include our Premier Plus SMS offering for the entire term.

We determine revenue recognition through the following steps:

• Identification of the contract, or contracts, with a customer;

• Identification of the performance obligations in the contract;

• Determination of the transaction price;

• Allocation of the transaction price to the performance obligations in the contract; and

• Recognition of revenue when, or as, we satisfy a performance obligation.

Term-based Arrangements: Term-based arrangements consist of on-premise term licenses as well as maintenance.

Term licenses

License revenue consists primarily of product and related revenue from our aspenONE licensing model and point product arrangements.

When a customer elects to license our products under our aspenONE licensing model, the customer receives, for the term of the arrangement, the right to all software products in the licensed aspenONE software suite. When a customer elects to license point products, the customer receives, for the term of the arrangement, the right to license specified products in the licensed aspenONE software suite. Revenue from initial product licenses is recognized upfront upon delivery.

Maintenance

When a customer elects to license our products under our aspenONE licensing model, our Premier Plus SMS offering is included for the entire term of the arrangement and the customer receives, for the term of the arrangement, the right to any updates that may be introduced into the licensed aspenONE software suite. When a customer elects to license point products, our Premier Plus SMS offering is included for the entire term of the arrangement and the customer receives, for the term of the arrangement, the right to any updates that may be introduced related to the specified products licensed. Maintenance represents a stand-ready obligation and, due to our obligation to provide unspecified future software updates on a when-and-if available basis as well as telephone support services, we are required to recognize revenue ratably over the term of the arrangement.

Services and Other Revenue

Professional Services Revenue

Professional services are provided to customers on a time-and-materials ("T&M") or fixed-price basis. The obligation to provide professional services is generally satisfied over time, with the customer simultaneously receiving and consuming the benefits as we satisfy our performance obligation. For professional services, revenue is recognized by measuring progress toward the completion of our obligations. We recognize professional services fees for our T&M contracts based upon hours worked and contractually agreed-upon hourly rates. Revenue from fixed-price engagements is recognized using the proportional performance method based on the ratio of costs incurred to the total estimated project costs. The use of the proportional performance method is dependent upon our ability to reliably estimate the costs to complete a project. We use historical experience as a basis for future estimates to complete current projects. Additionally, we believe that costs are the best available measure of performance. Out-of-pocket expenses which are reimbursed by customers are recorded as revenue.

Training Revenue

We provide training services to our customers, including on-site, Internet-based, public and customized training. The obligation to provide training services is generally satisfied over time, with the customer simultaneously receiving and consuming the benefits as we satisfy our performance obligation. Revenue is recognized in the period in which the services are performed.

Contracts with Multiple Performance Obligations

Our contracts generally contain more than one of the products and services listed above, each of which is separately accounted for as a distinct performance obligation.

Allocation of consideration: We allocate total contract consideration to each distinct performance obligation in an arrangement on a relative standalone selling price basis. The standalone selling price reflects the price we would charge for a specific product or service if it was sold separately in similar circumstances and to similar customers.

If the arrangement contains professional services and other products or services, we allocate to the professional service obligation a portion of the total contract consideration based on the standalone selling price of professional services that is observed from consistently priced standalone sales.

The standalone selling price for term licenses, which are always sold with maintenance, is the price for the combined license and maintenance bundle. The amount assigned to the license and maintenance bundle is separated into license and maintenance amounts using the respective standalone selling prices represented by the value relationship between the software license and maintenance.

When two or more contracts are entered into at or near the same time with the same customer, we evaluate the facts and circumstances associated with the negotiation of those contracts. Where the contracts are negotiated as a package, we will account for them as a single arrangement and allocate the consideration for the combined contracts among the performance obligations accordingly.

Standalone selling price: When available, we use directly observable transactions to determine the standalone selling prices for performance obligations. Generally, directly observable data is not available for term licenses and maintenance. When term licenses are sold together with maintenance in a bundled arrangement, we estimate a standalone selling price for these distinct performance obligations using relevant information, including our overall pricing objectives and strategies and historical pricing data, and taking into consideration market conditions and other factors, such as customer type and geography.

Other policies and judgments

Payment terms and conditions vary by contract type, although terms generally include a requirement of payment annually over the term of the license arrangement. Therefore, we generally receive payment from a customer after the performance obligation related to the license has been satisfied, and therefore, our contracts generally contain a significant financing component. The significant financing component is calculated utilizing an interest rate that derives the net present value of the performance obligations delivered on an upfront basis based on the allocation of consideration. We have instituted a customer portfolio approach in assigning interest rates. The rates are determined at contract inception and are based on the credit characteristics of the customers within each portfolio.

Contract modifications

We sometimes enter into agreements to modify previously executed contracts, which constitute contract modifications. We assess each of these contract modifications to determine (i) if the additional products and services are distinct from the products and services in the original arrangement; and (ii) if the amount of consideration expected for the added products and services reflects the stand-alone selling price of those products and services, as adjusted for contract-specific circumstances. A contract modification meeting both criteria is accounted for as a separate contract. A contract modification not meeting both criteria is considered a change to the original contract and is accounted for on either (i) a prospective basis as a termination of the existing contract and the creation of a new contract; or (ii) a cumulative catch-up basis. Generally, our contract modifications meet both criteria and are accounted for as a separate contract, as adjusted for contract-specific circumstances.

Disaggregation of Revenue

We disaggregate our revenue by region, type of performance obligation, timing of revenue recognition, and segment as follows:

	Three Months Ended September 30,
	2018		2017
Revenue by region:
United States	$	39,228	$	53,213
Europe	28,946		26,256
Other (1)	45,995		47,018
	$	114,169	$	126,487
Revenue by type of performance obligation:
Term licenses	$	63,755	$	78,890
Maintenance	43,039		40,264
Professional services and other	7,375		7,333
	$	114,169	$	126,487
Revenue by segment:
Subscription and software	$	106,794	$	119,154
Services and other	7,375		7,333
	$	114,169	$	126,487

____________________________________________

(1) Other consists primarily of Asia Pacific, Canada, Latin America and the Middle East.

Contract Balances

The difference in the opening and closing balances of our contract assets and deferred revenue primarily results from the timing difference between our performance and the customer’s payment. We fulfill our obligations under a contract with a customer by transferring products and services in exchange for consideration from the customer. We recognize a contract asset when we transfer products or services to a customer and the right to consideration is conditional on something other than the passage of time. Accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional. We recognize deferred revenue when we have received consideration or an amount of consideration is due from the customer and we have a future obligation to transfer products or services.

Our contract assets (liabilities) were as follows as of September 30, 2018 and June 30, 2018:

	September 30, 2018			June 30, 2018
				As Adjusted
	(Dollars in Thousands)
Contract assets	$	675,914		$	645,000
Deferred revenue	(38,783		)	(27,504		)
	$	637,131		$	617,496

Contract assets and deferred revenue are presented net at the contract level for each reporting period.

The change in deferred revenue in the three months ended September 30, 2018, excluding the impact of the netting of contract assets and deferred revenue, was primarily due to an increase in new billings in advance of revenue recognition, partially offset by $2.7 million of revenue recognized that was included in deferred revenue at June 30, 2018.

Contract Costs

We pay commissions for new product sales as well as for renewals of existing contracts. Commissions paid to obtain renewal contracts are not commensurate with the commissions paid for new product sales and therefore, a portion of the commissions paid for new contracts relate to future renewals.

We account for new product sales commissions using a portfolio approach and allocate the cost of commissions in proportion to the allocation of transaction price of license and maintenance performance obligations, including assumed renewals. Commissions allocated to the license and license renewal components are expensed at the time the license revenue is recognized. Commissions allocated to maintenance are capitalized and amortized on a straight-line basis over a period of four to eight years for new contracts, reflecting our estimate of the expected period that we will benefit from those commissions.

Amortization of capitalized contract costs is included in sales and marketing expenses in our Condensed Consolidated Statement of Operations.

Transaction Price Allocated to Remaining Performance Obligations

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

	Year Ended June 30,
	2019		2020		2021		2022		2023		Thereafter
	(Dollars in Thousands)
License	$	34,414	$	16,434	$	13,786	$	7,784	$	1,310	$	173
Maintenance	120,392		129,547		93,578		58,657		31,948		11,735
Services and other	38,967		5,270		2,987		1,467		979		432

Impact to Prior Period Information

The following table presents the effect of the adoption of Topic 606 on select consolidated statements of operations line items for the three months ended September 30, 2017:

	Three Months Ended September 30, 2017
	As Previously Reported		Adjustments			As Adjusted
	(Dollars in Thousands, Except per Share Data)
Consolidated Statements of Operations:
License revenue	$	—	$	78,890		$	78,890
Maintenance revenue	—		40,264			40,264
Subscription and software revenue	115,756		(115,756		)	—
Services and other revenue	7,025		308			7,333
Gross profit	110,049		3,706			113,755
Selling and marketing expense	23,571		(55		)	23,516
General and administrative expense	13,676		1,361			15,037
Income from operations	53,313		2,400			55,713
Interest income	141		6,165			6,306
Provision for income taxes	16,877		2,800			19,677
Net income	$	34,755	$	5,766		$	40,521
Basic	$	0.48				$	0.55
Diluted	$	0.47				$	0.55
Weighted average shares outstanding - Basic	73,024					73,024
Weighted average shares outstanding - Diluted	73,609					73,609

The following table presents the effect of the adoption of Topic 606 on select consolidated balance sheet line items as of June 30, 2018:

	June 30, 2018
	As Previously Reported		Adjustments			As Adjusted
	(Dollars in Thousands)
Consolidated Balance Sheets:
Assets:
Current contract assets	$	—	$	304,378		$	304,378
Contract costs	—		20,500			20,500
Accounts receivable, net	21,910		19,900			41,810
Non-current contract assets	—		340,622			340,622
Liabilities:
Current deferred revenue	286,845		(271,695		)	15,150
Non-current deferred revenue	28,259		(15,905		)	12,354
Deferred income taxes	—		214,125			214,125
Other non-current liabilities	18,492		(1,424		)	17,068
Stockholders' equity:
Retained earnings	305,208		760,299			1,065,507

The adoption of Topic 606 had no impact on our total cash flows or net cash provided by operating activities. The impacts of adoption resulted in offsetting shifts in cash flows throughout the components of net income and various changes in working capital balances. The following table presents the effect of the adoption of Topic 606 on select consolidated statement of cash flows line items for the three months ended September 30, 2017:

	Three Months Ended September 30, 2017
	As Previously Reported			Adjustments			As Adjusted
	(Dollars in Thousands)
Consolidated Statements of Cash Flows:
Cash flows from operating activities:
Net income	$	34,755		$	5,766		$	40,521
Changes in assets and liabilities:
Contract assets	—			(35,791		)	(35,791		)
Contract costs	—			(185		)	(185		)
Accounts receivable, net	(504		)	(8,589		)	(9,093		)
Deferred revenue	(40,037		)	38,799			(1,238		)
Net cash provided by operating activities	$	12,360		$	—		$	12,360

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Intangible Assets (Policies)

3 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Intangible Assets

We include in our amortizable intangible assets those intangible assets acquired in our business and asset acquisitions. We amortize acquired intangible assets with finite lives over their estimated economic lives, generally using the straight-line method. Each period, we evaluate the estimated remaining useful lives of acquired intangible assets to determine whether events or changes in circumstances warrant a revision to the remaining period of amortization. Acquired intangibles are removed from the accounts when fully amortized and no longer in use.

Intangible assets consisted of the following as of September 30, 2018 and June 30, 2018:

	Gross Carrying Amount		Accumulated Amortization			Effect of Currency Translation			Net Carrying Amount
	(Dollars in Thousands)
September 30, 2018:
Technology and patents	$	35,644	$	(6,068	)	$	(27	)	$	29,549
Customer relationships	4,979		(513		)	(23		)	4,443
Non-compete agreements	553		(353		)	—			200
Total	$	41,176	$	(6,934	)	$	(50	)	$	34,192
June 30, 2018:
Technology and patents	$	35,898	$	(5,182	)	$	(254	)	$	30,462
Customer relationships	5,181		(377		)	(202		)	4,602
Non-compete agreements	553		(307		)	—			246
Total	$	41,632	$	(5,866	)	$	(456	)	$	35,310

Total amortization expense related to intangible assets is included in operating expenses and amounted to approximately $1.1 million and $0.5 million for the three months ended September 30, 2018 and 2017, respectively.

Future amortization expense as of September 30, 2018 is expected to be as follows:

Year Ended June 30,	Amortization Expense
	(Dollars in Thousands)
2019	$	3,479
2020	4,710
2021	4,754
2022	4,694
2023	4,609
Thereafter	11,946
Total	$	34,192

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Goodwill (Policies)

3 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill

The changes in the carrying amount of goodwill for our subscription and software reporting segment during the three months ended September 30, 2018 was as follows:

	Gross Carrying Amount		Accumulated Impairment Losses			Effect of Currency Translation			Net Carrying Amount
	(Dollars in Thousands)
June 30, 2018:	$	142,316	$	(65,569	)	$	(1,157	)	$	75,590
Foreign currency translation	—		—			59			59
September 30, 2018:	$	142,316	$	(65,569	)	$	(1,098	)	$	75,649

No triggering events indicating goodwill impairment occurred during the three months ended September 30, 2018.

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Revenue from Contracts with Customers (Tables)

3 Months Ended

Sep. 30, 2018

Revenue from Contracts with Customers [Abstract]

Disaggregation of Revenue [Table Text Block]

Disaggregation of Revenue

We disaggregate our revenue by region, type of performance obligation, timing of revenue recognition, and segment as follows:

	Three Months Ended September 30,
	2018		2017
Revenue by region:
United States	$	39,228	$	53,213
Europe	28,946		26,256
Other (1)	45,995		47,018
	$	114,169	$	126,487
Revenue by type of performance obligation:
Term licenses	$	63,755	$	78,890
Maintenance	43,039		40,264
Professional services and other	7,375		7,333
	$	114,169	$	126,487
Revenue by segment:
Subscription and software	$	106,794	$	119,154
Services and other	7,375		7,333
	$	114,169	$	126,487

____________________________________________

(1) Other consists primarily of Asia Pacific, Canada, Latin America and the Middle East.

Contract with Customer, Asset and Liability [Table Text Block]

Our contract assets (liabilities) were as follows as of September 30, 2018 and June 30, 2018:

	September 30, 2018			June 30, 2018
				As Adjusted
	(Dollars in Thousands)
Contract assets	$	675,914		$	645,000
Deferred revenue	(38,783		)	(27,504		)
	$	637,131		$	617,496

Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Table Text Block]

Transaction Price Allocated to Remaining Performance Obligations

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

	Year Ended June 30,
	2019		2020		2021		2022		2023		Thereafter
	(Dollars in Thousands)
License	$	34,414	$	16,434	$	13,786	$	7,784	$	1,310	$	173
Maintenance	120,392		129,547		93,578		58,657		31,948		11,735
Services and other	38,967		5,270		2,987		1,467		979		432

Schedule of Error Corrections and Prior Period Adjustments [Table Text Block]

Impact to Prior Period Information

The following table presents the effect of the adoption of Topic 606 on select consolidated statements of operations line items for the three months ended September 30, 2017:

	Three Months Ended September 30, 2017
	As Previously Reported		Adjustments			As Adjusted
	(Dollars in Thousands, Except per Share Data)
Consolidated Statements of Operations:
License revenue	$	—	$	78,890		$	78,890
Maintenance revenue	—		40,264			40,264
Subscription and software revenue	115,756		(115,756		)	—
Services and other revenue	7,025		308			7,333
Gross profit	110,049		3,706			113,755
Selling and marketing expense	23,571		(55		)	23,516
General and administrative expense	13,676		1,361			15,037
Income from operations	53,313		2,400			55,713
Interest income	141		6,165			6,306
Provision for income taxes	16,877		2,800			19,677
Net income	$	34,755	$	5,766		$	40,521
Basic	$	0.48				$	0.55
Diluted	$	0.47				$	0.55
Weighted average shares outstanding - Basic	73,024					73,024
Weighted average shares outstanding - Diluted	73,609					73,609

The following table presents the effect of the adoption of Topic 606 on select consolidated balance sheet line items as of June 30, 2018:

	June 30, 2018
	As Previously Reported		Adjustments			As Adjusted
	(Dollars in Thousands)
Consolidated Balance Sheets:
Assets:
Current contract assets	$	—	$	304,378		$	304,378
Contract costs	—		20,500			20,500
Accounts receivable, net	21,910		19,900			41,810
Non-current contract assets	—		340,622			340,622
Liabilities:
Current deferred revenue	286,845		(271,695		)	15,150
Non-current deferred revenue	28,259		(15,905		)	12,354
Deferred income taxes	—		214,125			214,125
Other non-current liabilities	18,492		(1,424		)	17,068
Stockholders' equity:
Retained earnings	305,208		760,299			1,065,507

The adoption of Topic 606 had no impact on our total cash flows or net cash provided by operating activities. The impacts of adoption resulted in offsetting shifts in cash flows throughout the components of net income and various changes in working capital balances. The following table presents the effect of the adoption of Topic 606 on select consolidated statement of cash flows line items for the three months ended September 30, 2017:

	Three Months Ended September 30, 2017
	As Previously Reported			Adjustments			As Adjusted
	(Dollars in Thousands)
Consolidated Statements of Cash Flows:
Cash flows from operating activities:
Net income	$	34,755		$	5,766		$	40,521
Changes in assets and liabilities:
Contract assets	—			(35,791		)	(35,791		)
Contract costs	—			(185		)	(185		)
Accounts receivable, net	(504		)	(8,589		)	(9,093		)
Deferred revenue	(40,037		)	38,799			(1,238		)
Net cash provided by operating activities	$	12,360		$	—		$	12,360

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Accounts Receivable (Tables)

3 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Schedule of accounts receivable, net allowance for doubtful accounts

Our accounts receivable, net of the related allowance for doubtful accounts, were as follows as of September 30, 2018 and June 30, 2018:

	Gross		Allowance		Net
	(Dollars in Thousands)
September 30, 2018:
Accounts receivable	$	56,872	$	2,873	$	53,999
June 30, 2018, As Adjusted:
Accounts receivable	$	44,513	$	2,703	$	41,810

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Property and Equipment (Tables)

3 Months Ended

Sep. 30, 2018

Property, Plant and Equipment [Abstract]

Schedule of property, equipment and leasehold improvements

Property, equipment and leasehold improvements in the accompanying unaudited consolidated balance sheets consisted of the following:

	September 30, 2018			June 30, 2018
	(Dollars in Thousands)
Property, equipment and leasehold improvements, at cost:
Computer equipment	$	8,339		$	8,344
Purchased software	24,245			24,225
Furniture & fixtures	6,827			6,850
Leasehold improvements	11,993			12,023
Property, equipment and leasehold improvements, at cost	51,404			51,442
Accumulated depreciation	(42,398		)	(41,636		)
Property, equipment and leasehold improvements, net	$	9,006		$	9,806

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Acquisitions (Tables)

3 Months Ended

Sep. 30, 2018

Business Combinations [Abstract]

Schedule of recognized identified assets acquired and liabilities assumed

A preliminary allocation of the purchase price is as follows. The valuation of the net assets acquired and the deferred tax liabilities are considered preliminary as of September 30, 2018:

	Amount
	(Dollars in Thousands)
Liabilities assumed, net	$	(1,164	)
Identifiable intangible assets:
Technology-related	4,500
Customer relationships	3,800
Goodwill	17,483
Deferred tax liabilities	(1,619		)
Total assets acquired, net	$	23,000

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Intangible Assets (Tables)

3 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Future amortization expense as of September 30, 2018 is expected to be as follows:

Year Ended June 30,	Amortization Expense
	(Dollars in Thousands)
2019	$	3,479
2020	4,710
2021	4,754
2022	4,694
2023	4,609
Thereafter	11,946
Total	$	34,192

Intangible assets

Intangible assets consisted of the following as of September 30, 2018 and June 30, 2018:

	Gross Carrying Amount		Accumulated Amortization			Effect of Currency Translation			Net Carrying Amount
	(Dollars in Thousands)
September 30, 2018:
Technology and patents	$	35,644	$	(6,068	)	$	(27	)	$	29,549
Customer relationships	4,979		(513		)	(23		)	4,443
Non-compete agreements	553		(353		)	—			200
Total	$	41,176	$	(6,934	)	$	(50	)	$	34,192
June 30, 2018:
Technology and patents	$	35,898	$	(5,182	)	$	(254	)	$	30,462
Customer relationships	5,181		(377		)	(202		)	4,602
Non-compete agreements	553		(307		)	—			246
Total	$	41,632	$	(5,866	)	$	(456	)	$	35,310

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Goodwill (Tables)

3 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Changes in carrying amount of goodwill by reporting unit

The changes in the carrying amount of goodwill for our subscription and software reporting segment during the three months ended September 30, 2018 was as follows:

	Gross Carrying Amount		Accumulated Impairment Losses			Effect of Currency Translation			Net Carrying Amount
	(Dollars in Thousands)
June 30, 2018:	$	142,316	$	(65,569	)	$	(1,157	)	$	75,590
Foreign currency translation	—		—			59			59
September 30, 2018:	$	142,316	$	(65,569	)	$	(1,098	)	$	75,649

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Accrued Expenses and Other Liabilities (Tables)

3 Months Ended

Sep. 30, 2018

Balance Sheet Related Disclosures [Abstract]

Schedule of accrued expenses and other current liabilities

Accrued expenses and other current liabilities in the accompanying unaudited consolidated balance sheets consisted of the following:

	September 30, 2018		June 30, 2018
	(Dollars in Thousands)
Payroll and payroll-related	$	14,763	$	21,796
Royalties and outside commissions	3,306		3,333
Professional fees	1,582		1,695
Deferred acquisition payments	1,700		1,700
Other	10,649		10,991
Total accrued expenses and other current liabilities	$	32,000	$	39,515

Schedule of other non-current liabilities

Other non-current liabilities in the accompanying unaudited consolidated balance sheets consisted of the following:

	September 30, 2018		June 30, 2018
			As Adjusted
	(Dollars in Thousands)
Deferred rent	$	6,138	$	6,442
Uncertain tax positions	4,327		4,510
Deferred acquisition payments	4,600		4,294
Other	1,768		1,822
Total other non-current liabilities	$	16,833	$	17,068

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Stock-Based Compensation (Tables)

3 Months Ended

Sep. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of weighted average assumptions

We utilized the Black-Scholes option valuation model with the following weighted average assumptions:

	Three Months Ended September 30,
	2018		2017
Risk-free interest rate	2.8	%	1.7	%
Expected dividend yield	0.0	%	0.0	%
Expected life (in years)	4.6		4.6
Expected volatility factor	26.6	%	28.1	%

Schedule of stock-based compensation expense

The stock-based compensation expense under all equity plans and its classification in the unaudited consolidated statements of operations for the three months ended September 30, 2018 and 2017 are as follows:

	Three Months Ended September 30,
	2018		2017
	(Dollars in Thousands)
Recorded as expenses:
Cost of services and other	$	465	$	450
Selling and marketing	1,331		885
Research and development	2,295		1,896
General and administrative	4,774		3,183
Total stock-based compensation	$	8,865	$	6,414

Schedule of stock option and RSU activity

A summary of stock option and RSU activity under all equity plans for the three months ended September 30, 2018 is as follows:

	Stock Options							Restricted Stock Units
	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in 000’s)		Shares		Weighted Average Grant Date Fair Value
Outstanding at June 30, 2018	1,369,442		$	45.93	7.23	$	64,103	621,700		$	53.64
Granted	262,471		115.37					614,140		115.17
Settled (RSUs)	—							(88,078	)	69.73
Exercised	(90,009	)	41.23					—
Cancelled / Forfeited	(60,815	)	65.87					(53,183	)	64.80
Outstanding at September 30, 2018	1,481,089		$	57.70	7.46	$	83,612	1,094,579		$	86.33
Vested and exercisable at September 30, 2018	781,669		$	42.13	6.19	$	56,144	—
Vested and expected to vest as of September 30, 2018	1,419,308		$	57.03	7.40	$	81,071	1,027,166		$	87.50

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Net Income Per Share (Tables)

3 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Schedule of calculations of basic and diluted net income per share and basic and dilutive weighted average shares outstanding

The calculations of basic and diluted net income per share and basic and dilutive weighted average shares outstanding for the three months ended September 30, 2018 and 2017 are as follows:

	Three Months Ended September 30,
	2018		2017
			As Adjusted
	(Dollars and Shares in Thousands, Except per Share Data)
Net income	$	38,066	$	40,521
Weighted average shares outstanding	70,988		73,024
Dilutive impact from:
Share-based payment awards	1,027		585
Dilutive weighted average shares outstanding	72,015		73,609
Income per share
Basic	$	0.54	$	0.55
Dilutive	$	0.53	$	0.55

Schedule of employee equity awards excluded from the calculation of dilutive weighted average shares outstanding

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 September 30, 2018 and 2017:

	Three Months Ended September 30,
	2018	2017
	(Shares in Thousands)
Employee equity awards	850	674

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Segment Information (Tables)

3 Months Ended

Sep. 30, 2018

Segment Reporting [Abstract]

Summary of reportable segments' profits

The following table presents a summary of our reportable segments’ profits:

	Subscription and Software			Services			Total
	(Dollars in Thousands)
Three Months Ended September 30, 2018
Segment revenue	$	106,794		$	7,375		$	114,169
Segment expenses (1)	(53,526		)	(7,569		)	(61,095		)
Segment profit	$	53,268		$	(194	)	$	53,074
Three Months Ended September 30, 2017, As Adjusted
Segment revenue	$	119,154		$	7,333		$	126,487
Segment expenses (1)	(48,788		)	(6,949		)	(55,737		)
Segment profit	$	70,366		$	384		$	70,750

(1)    Our reportable segments’ operating expenses include expenses directly attributable to the segments. Segment expenses include selling and marketing, research and development, stock-based compensation and certain corporate expenses incurred in support of the segments. Segment expenses do not include allocations of general and administrative; interest income, net; and other income, net.

Schedule of reconciliation of total segment operating profit to income before income taxes

The following table presents a reconciliation of total segment profit to income before income taxes for the three months ended September 30, 2018 and 2017:

	Three Months Ended September 30,
	2018			2017
				As Adjusted
	(Dollars in Thousands)
Total segment profit for reportable segments	$	53,074		$	70,750
General and administrative expense	(16,084		)	(15,037		)
Interest income, net	5,255			5,100
Other income (expense), net	128			(615		)
Income before income taxes	$	42,373		$	60,198

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Significant Accounting Policies - Revenue Recognition and Other Licensing Matters (Details)	3 Months Ended
	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Jun. 30, 2018 claims
Accounting Policies [Abstract]
Software Licensing, Indemnification Obligations, Number of Claims Outstanding | claims			0
Technology acquired | $	$ 0	$ 0

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Significant Accounting Policies - Foreign Currency Transactions (Details) - USD ($) $ in Millions	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Other income (expense), net
Foreign Currency Transactions
Foreign currency transaction and remeasurement gains (losses)	$ 0.1	$ (0.6)

XML

Significant Accounting Policies - Research and Development Expense (Details) - USD ($)	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Accounting Policies [Abstract]
Research and development expense	$ 0	$ 0

XML

Revenue from Contracts with Customers Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Total revenue	$ 114,169
United States
Total revenue	39,228
Europe
Total revenue	28,946
Other
Total revenue	45,995
Subscription and software
Total revenue	106,794
Services and other
Total revenue	7,375
Term Licenses [Member]
Total revenue	63,755	$ 0
Maintenance [Member]
Total revenue	43,039	0
Professional Services And Other [Member]
Total revenue	$ 7,375
Accounting Standards Update 2014-09 [Member]
Total revenue		126,487
Accounting Standards Update 2014-09 [Member] | United States
Total revenue		53,213
Accounting Standards Update 2014-09 [Member] | Europe
Total revenue		26,256
Accounting Standards Update 2014-09 [Member] | Other
Total revenue		47,018
Accounting Standards Update 2014-09 [Member] | Subscription and software
Total revenue		119,154
Accounting Standards Update 2014-09 [Member] | Services and other
Total revenue		7,333
Accounting Standards Update 2014-09 [Member] | Term Licenses [Member]
Total revenue		78,890
Accounting Standards Update 2014-09 [Member] | Maintenance [Member]
Total revenue		40,264
Accounting Standards Update 2014-09 [Member] | Professional Services And Other [Member]
Total revenue		$ 7,333

XML

Revenue from Contracts with Customers Contract Balances (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Jun. 30, 2018
Contract with Customer, Liability, Revenue Recognized	$ 2,700
Deferred Revenue	38,783
Net contract assets (liabilities)	637,131
Contract with Customer, Asset, Net	$ 675,914
Accounting Standards Update 2014-09 [Member]
Deferred Revenue		$ 27,504
Net contract assets (liabilities)		617,496
Contract with Customer, Asset, Net		$ 645,000

XML

Revenue from Contracts with Customers Contract Costs (Details)	Sep. 30, 2018
Minimum
Capitalized Contract Cost, Amortization Period	4 years
Maximum
Capitalized Contract Cost, Amortization Period	8 years

XML

Revenue from Contracts with Customers Transaction Price Allocated to Remaining Performance Obligations (Details) $ in Thousands	Sep. 30, 2018 USD ($)
License [Member] | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-07-01
Revenue, Remaining Performance Obligation, Amount	$ 34,414
License [Member] | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-07-01
Revenue, Remaining Performance Obligation, Amount	16,434
License [Member] | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-07-01
Revenue, Remaining Performance Obligation, Amount	13,786
License [Member] | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-07-01
Revenue, Remaining Performance Obligation, Amount	7,784
License [Member] | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-07-01
Revenue, Remaining Performance Obligation, Amount	1,310
License [Member] | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-07-01
Revenue, Remaining Performance Obligation, Amount	173
Maintenance [Member] | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-07-01
Revenue, Remaining Performance Obligation, Amount	120,392
Maintenance [Member] | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-07-01
Revenue, Remaining Performance Obligation, Amount	129,547
Maintenance [Member] | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-07-01
Revenue, Remaining Performance Obligation, Amount	93,578
Maintenance [Member] | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-07-01
Revenue, Remaining Performance Obligation, Amount	58,657
Maintenance [Member] | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-07-01
Revenue, Remaining Performance Obligation, Amount	31,948
Maintenance [Member] | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-07-01
Revenue, Remaining Performance Obligation, Amount	11,735
Services and other | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-07-01
Revenue, Remaining Performance Obligation, Amount	38,967
Services and other | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-07-01
Revenue, Remaining Performance Obligation, Amount	5,270
Services and other | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-07-01
Revenue, Remaining Performance Obligation, Amount	2,987
Services and other | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-07-01
Revenue, Remaining Performance Obligation, Amount	1,467
Services and other | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-07-01
Revenue, Remaining Performance Obligation, Amount	979
Services and other | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-07-01
Revenue, Remaining Performance Obligation, Amount	$ 432

XML

Revenue from Contracts with Customers Impact to Prior Period Information (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Jun. 30, 2018
Contract assets	$ 317,967		$ 0
Contract costs	21,296		0
Total revenue	114,169
Subscription and Software Revenue		$ 115,756
Gross Profit	100,942	110,049
Selling and marketing	26,812	23,571
General and administrative	16,084	13,676
Income from operations	36,990	53,313
Interest income	7,069	141
Provision for income taxes	4,307	16,877
Net income	38,066	34,755
Increase (Decrease) in Contract with Customer, Asset	30,914	0
Increase (Decrease) in Deferred Charges	$ 796	$ 0
Earnings Per Share, Basic	$ 0.54	$ 0.48
Earnings Per Share, Diluted	$ 0.53	$ 0.47
Weighted Average Number of Shares Outstanding, Basic	70,988	73,024
Weighted Average Number of Shares Outstanding, Diluted	72,015	73,609
Accounts receivable, net	$ 53,999		21,910
Contract with Customer, Asset, Net, Noncurrent	357,947		0
Current deferred revenue	23,737		286,845
Non-current deferred revenue	15,046		28,259
Deferred income taxes	159,563		0
Other non-current liabilities	16,833		18,492
Retained earnings	1,103,573		305,208
Increase (Decrease) in Accounts Receivable	(12,529)	$ 504
Deferred revenue	11,403	(40,037)
Net Cash Provided by (Used in) Operating Activities, Continuing Operations	5,570	12,360
License [Member]
Total revenue	63,755	0
Maintenance [Member]
Total revenue	43,039	0
Services and other
Total revenue	$ 7,375	7,025
Accounting Standards Update 2014-09 [Member]
Contract assets			304,378
Contract costs			20,500
Total revenue		126,487
Subscription and Software Revenue		0
Gross Profit		113,755
Selling and marketing		23,516
General and administrative		15,037
Income from operations		55,713
Interest income		6,306
Provision for income taxes		19,677
Net income		40,521
Increase (Decrease) in Contract with Customer, Asset		(35,791)
Increase (Decrease) in Deferred Charges		$ (185)
Earnings Per Share, Basic		$ 0.55
Earnings Per Share, Diluted		$ 0.55
Weighted Average Number of Shares Outstanding, Basic		73,024
Weighted Average Number of Shares Outstanding, Diluted		73,609
Accounts receivable, net			41,810
Contract with Customer, Asset, Net, Noncurrent			340,622
Current deferred revenue			15,150
Non-current deferred revenue			12,354
Deferred income taxes			214,125
Other non-current liabilities			17,068
Retained earnings			1,065,507
Increase (Decrease) in Accounts Receivable		$ (9,093)
Deferred revenue		(1,238)
Net Cash Provided by (Used in) Operating Activities, Continuing Operations		12,360
Accounting Standards Update 2014-09 [Member] | License [Member]
Total revenue		78,890
Accounting Standards Update 2014-09 [Member] | Maintenance [Member]
Total revenue		40,264
Accounting Standards Update 2014-09 [Member] | Services and other
Total revenue		7,333
Difference between Revenue Guidance in Effect before and after Topic 606 [Member]
Contract assets			304,378
Contract costs			20,500
Subscription and Software Revenue		(115,756)
Gross Profit		3,706
Selling and marketing		(55)
General and administrative		1,361
Income from operations		2,400
Interest income		6,165
Provision for income taxes		2,800
Net income		5,766
Increase (Decrease) in Contract with Customer, Asset		(35,791)
Increase (Decrease) in Deferred Charges		(185)
Accounts receivable, net			19,900
Contract with Customer, Asset, Net, Noncurrent			340,622
Current deferred revenue			(271,695)
Non-current deferred revenue			(15,905)
Deferred income taxes			214,125
Other non-current liabilities			(1,424)
Retained earnings			$ 760,299
Increase (Decrease) in Accounts Receivable		8,589
Deferred revenue		38,799
Net Cash Provided by (Used in) Operating Activities, Continuing Operations		0
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | License [Member]
Total revenue		78,890
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Maintenance [Member]
Total revenue		40,264
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Services and other
Total revenue		$ 308

XML

Fair Value (Details) - USD ($) $ in Millions	Sep. 30, 2018	Jun. 30, 2018
Level 1 Inputs
Fair Value
Cash equivalents	$ 5.0	$ 5.0

XML

Accounts Receivable - Schedule of Accounts Receivable (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018
Accounts Receivable
Account receivable, Gross	$ 56,872
Account receivable, Allowance	2,873
Account receivable, Net	$ 53,999	$ 21,910
Accounting Standards Update 2014-09 [Member]
Accounts Receivable
Account receivable, Gross		44,513
Account receivable, Allowance		2,703
Account receivable, Net		$ 41,810

XML

Accounts Receivable (Details)	3 Months Ended
	Sep. 30, 2018
Concentration Risk [Line Items]
Concentration Risk, Customer	0
Accounts Receivable | Customer Concentration Risk
Concentration Risk [Line Items]
Percentage of net accounts receivable	10.00%

XML

Property and Equipment - Property, Equipment and Leasehold Improvements (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018
Property, Plant and Equipment [Line Items]
Property, equipment and leasehold improvements-at cost	$ 51,404	$ 51,442
Accumulated depreciation	(42,398)	(41,636)
Property, equipment and leasehold improvements, net	9,006	9,806
Computer equipment
Property, Plant and Equipment [Line Items]
Property, equipment and leasehold improvements-at cost	8,339	8,344
Purchased software
Property, Plant and Equipment [Line Items]
Property, equipment and leasehold improvements-at cost	24,245	24,225
Furniture & fixtures
Property, Plant and Equipment [Line Items]
Property, equipment and leasehold improvements-at cost	6,827	6,850
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property, equipment and leasehold improvements-at cost	$ 11,993	$ 12,023

XML

Acquisitions - Narrative (Details) - USD ($) $ in Thousands		3 Months Ended
	Feb. 05, 2018	Sep. 30, 2018	Sep. 30, 2017
Business Acquisition [Line Items]
Cash paid		$ 0
Goodwill		$ 75,649
Effective income tax rate (as a percent)		10.20%	32.70%
Apex Optimisation
Business Acquisition [Line Items]
Consideration transferred	$ 23,000
Cash paid	$ 18,400
Future contingent consideration payment		$ 4,600
Goodwill		$ 17,483
Weighted average discount rate (as a percent)		28.00%
Effective income tax rate (as a percent)		21.00%
Developed Technology Rights | Apex Optimisation
Business Acquisition [Line Items]
Finite-lived intangible assets acquired		$ 4,500
Finite-lived intangible asset, useful life		7 years
Customer Relationship | Apex Optimisation
Business Acquisition [Line Items]
Finite-lived intangible assets acquired		$ 3,800
Finite-lived intangible asset, useful life		7 years

XML

Acquisitions - Schedule of Recognized Identified Assets Acquired and Liabilities Assumed (Details) $ in Thousands	Sep. 30, 2018 USD ($)
Business Acquisition [Line Items]
Goodwill	$ 75,649
Apex Optimisation
Business Acquisition [Line Items]
Tangible assets acquired, net	(1,164)
Goodwill	17,483
Deferred tax liabilities, net	(1,619)
Total assets acquired	23,000
Developed Technology Rights | Apex Optimisation
Business Acquisition [Line Items]
Finite-lived intangible assets acquired	4,500
Customer Relationship | Apex Optimisation
Business Acquisition [Line Items]
Finite-lived intangible assets acquired	$ 3,800

XML

Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Sep. 30, 2018	Jun. 30, 2018
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 41,176	$ 41,632
Accumulated Amortization	(6,934)	(5,866)
Finite Lived Intangible Assets, Foreign Currency Translation Gain (Loss)	(50)	(456)
Net Carrying Amount	34,192	35,310
Technology and patents
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	35,644	35,898
Accumulated Amortization	(6,068)	(5,182)
Finite Lived Intangible Assets, Foreign Currency Translation Gain (Loss)	(27)	(254)
Net Carrying Amount	29,549	30,462
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	4,979	5,181
Accumulated Amortization	(513)	(377)
Finite Lived Intangible Assets, Foreign Currency Translation Gain (Loss)	(23)	(202)
Net Carrying Amount	4,443	4,602
Non-compete Agreements
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	553	553
Accumulated Amortization	(353)	(307)
Finite Lived Intangible Assets, Foreign Currency Translation Gain (Loss)	0	0
Net Carrying Amount	$ 200	$ 246

XML

Intangible Assets - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Intangible asset amortization expense	$ 1,100	$ 500
Amortization expense - 2019	3,479
Amortization expense - 2020	4,710
Amortization expense - 2021	4,754
Amortization expense - 2022	4,694
Amortization expense - 2023	4,609
Amortization expense - Thereafter	11,946
Finite Lived Intangible Assets Future Amortization Expense	$ 34,192

XML

Goodwill - Goodwill, Net (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Sep. 30, 2018	Jun. 30, 2018
Goodwill:
Goodwill, net, ending balance	$ 75,649
Subscription and software
Goodwill:
Goodwill, gross, beginning balance	142,316
Accumulated impairment losses, beginning balance	(65,569)
Goodwill, net, beginning balance	75,590
Effect of currency translation	(1,098)
Goodwill, gross, ending balance	142,316	$ 142,316
Accumulated impairment losses, ending balance	(65,569)	(65,569)
Goodwill, net, ending balance	75,649	75,590
Goodwill Foreign Currency Translation Gain Loss [Member] | Subscription and software
Goodwill:
Effect of currency translation	$ 59	$ (1,157)

XML

Goodwill - Narrative (Details)	3 Months Ended
	Sep. 30, 2018 triggering_event
Goodwill and Intangible Assets Disclosure [Abstract]
Number of triggering events	0

XML

Accrued Expenses and Other Liabilities - Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018
Accrued expenses and other current liabilities
Payroll and payroll-related	$ 14,763	$ 21,796
Royalties and outside commissions	3,306	3,333
Professional fees	1,582	1,695
Deferred acquisition payments	1,700	1,700
Other	10,649	10,991
Total accrued expenses and other current liabilities	$ 32,000	$ 39,515

XML

Accrued Expenses and Other Liabilities - Other Non-Current Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018
Other non-current liabilities
Deferred rent	$ 6,138
Uncertain tax positions	4,327
Deferred acquisition payments	4,600
Other	1,768
Total other non-current liabilities	$ 16,833	$ 18,492
Accounting Standards Update 2014-09 [Member]
Other non-current liabilities
Deferred rent		6,442
Uncertain tax positions		4,510
Deferred acquisition payments		4,294
Other		1,822
Total other non-current liabilities		$ 17,068

XML

Credit Agreement (Details)	Feb. 26, 2016 USD ($)	Sep. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)	Aug. 09, 2017 USD ($)
Credit Agreement
Amount outstanding		$ 170,000,000
Line of Credit | Credit Agreement
Credit Agreement
Principal amount	$ 250,000,000.0			$ 350,000,000.0
Amount outstanding		$ 170,000,000	$ 170,000,000
Margin rate (as a percent)	0.50%
Maximum leverage ratio		3.0
Minimum interest coverage ratio		3.0
Line of Credit | Credit Agreement | Minimum
Credit Agreement
Commitment fee percentage (as a percent)	0.20%
Line of Credit | Credit Agreement | Maximum
Credit Agreement
Commitment fee percentage (as a percent)	0.30%
Line of Credit | Credit Agreement | Federal Funds Effective Rate
Credit Agreement
Variable rate spread (as a percent)	0.50%
Line of Credit | Credit Agreement | Adjusted LIBOR
Credit Agreement
Variable rate spread (as a percent)	1.00%
Margin rate (as a percent)	1.50%
Outstanding Borrowing 1 [Member] | Line of Credit | Credit Agreement
Credit Agreement
Amount outstanding		$ 159,000,000
Effective interest rate (as a percent)		3.75%
Outstanding Borrowing 2 [Member] | Line of Credit | Credit Agreement
Credit Agreement
Amount outstanding		$ 11,000,000
Effective interest rate (as a percent)		3.57%

XML

Stock-Based Compensation - Additional Disclosures (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Stock-based compensation, additional disclosures
Exercises of stock options	$ 4,054
Common stock reserved for future issuance or settlement (in shares)	10,000,000
Restricted Stock Units
Stock-based compensation, additional disclosures
Weighted average grant-date fair value of RSUs granted	$ 115.17	$ 63.14
Total fair value of shares vested from RSU grants	$ 9,900	$ 5,300
Total unrecognized compensation cost	$ 43,200
Total unrecognized compensation cost, period of recognition	3 years 15 days
Excess tax benefits from stock-based compensation	$ 3,300	$ 1,700
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	614,140
Stock Options
Stock-based compensation, additional disclosures
Weighted average fair value (in dollars per share)	$ 31.70	$ 16.91
Total unrecognized compensation cost	$ 13,400
Total unrecognized compensation cost, period of recognition	3 years 19 days
Total intrinsic value of options exercised	$ 6,100	$ 1,700
Exercises of stock options	$ 4,100	$ 2,400
Performance Shares [Member]
Stock-based compensation, additional disclosures
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	373,704

XML

Stock-Based Compensation - Stock-Based Compensation Accounting (Details) - Stock Options - $ / shares	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Stock-Based Compensation Accounting
Weighted average fair value (in dollars per share)	$ 31.70	$ 16.91
Risk-free interest rate (as a percent)	2.80%	1.70%
Expected dividend yield (as a percent)	0.00%	0.00%
Expected life (in years)	4 years 7 months 6 days	4 years 7 months 6 days
Expected volatility factor (as a percent)	26.60%	28.10%

XML

Stock-Based Compensation - Stock-Based Compensation Expense and its Classification in the Consolidated Statements of Operations (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Recorded as expenses:
Total stock-based compensation	$ 8,865	$ 6,414
Cost of services and other
Recorded as expenses:
Total stock-based compensation	465	450
Selling and marketing
Recorded as expenses:
Total stock-based compensation	1,331	885
Research and development
Recorded as expenses:
Total stock-based compensation	2,295	1,896
General and administrative
Recorded as expenses:
Total stock-based compensation	$ 4,774	$ 3,183

XML

Stock-Based Compensation - Stock Option Activity (Details) - Stock Options - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Sep. 30, 2018	Jun. 30, 2018
Stock options activity
Outstanding, beginning of period (in shares)	1,369,442
Granted (in shares)	262,471
Exercised (in shares)	(90,009)
Cancelled / Forfeited (in shares)	(60,815)
Outstanding, end of period (in shares)	1,481,089	1,369,442
Vested and exercisable, end of period (in shares)	781,669
Vested and expected to vest, end of period (in shares)	1,419,308
Weighted Average Exercise Price
Outstanding, beginning of period (in dollars per share)	$ 45.93
Granted (in dollars per share)	115.37
Exercised (in dollars per share)	41.23
Cancelled / Forfeited (in dollars per share)	65.87
Outstanding, end of period (in dollars per share)	57.70	$ 45.93
Vested and exercisable, end of period (in dollars per share)	42.13
Vested and expected to vest, end of period (in dollars per share)	$ 57.03
Weighted Average Remaining Contractual Term
Outstanding, end of period	7 years 5 months 17 days	7 years 2 months 23 days
Vested and exercisable, end of period	6 years 2 months 7 days
Vested and expected to vest, end of period	7 years 4 months 25 days
Aggregate Intrinsic Value
Outstanding, end of period	$ 83,612	$ 64,103
Vested and exercisable, end of period	56,144
Vested and expected to vest, end of period	$ 81,071

XML

Stock-Based Compensation - RSU Activity (Details) - Restricted Stock Units	3 Months Ended
	Sep. 30, 2018 $ / shares shares	Sep. 30, 2017 $ / shares
Restricted stock units activity
Outstanding, beginning of period (in shares) | shares	621,700
Granted (in shares) | shares	614,140
Settled (in shares) | shares	(88,078)
Cancelled / Forfeited (in shares) | shares	(53,183)
Outstanding, end of period (in shares) | shares	1,094,579
Vested and expected to vest (in shares) | shares	1,027,166
Weighted Average Grant Date Fair Value
Outstanding, beginning of period (in dollars per share) | $ / shares	$ 53.64
Granted (in dollars per share) | $ / shares	115.17	$ 63.14
Settled (RSUs) (in dollars per share) | $ / shares	69.73
Cancelled / Forfeited (in dollars per share) | $ / shares	64.80
Outstanding, end of period (in dollars per share) | $ / shares	$ 86.33
Vested and expected to vest, end of period (in dollars per share) | $ / shares	87.50

XML

Stockholders' Deficit - Stock Repurchase Program (Details) - USD ($)	3 Months Ended
	Sep. 30, 2018	Apr. 18, 2018	Jun. 08, 2017	Apr. 26, 2016	Jan. 22, 2015
Class of Stock [Line Items]
Approved stock repurchase program, authorized amount (up to)		$ 200,000,000	$ 200,000,000.0	$ 400,000,000.0	$ 450,000,000.0
Remaining capacity under the stock repurchase program	$ 296,300,000
Open Market Transaction
Class of Stock [Line Items]
Repurchase of common stock (in shares)	473,376
Repurchase of common stock, amount	$ 50,000,000

XML

Stockholders' Deficit - Accumulated Other Comprehensive Income (Details) - USD ($) $ in Millions	Sep. 30, 2018	Jun. 30, 2018
Accumulated Other Comprehensive Income
Foreign translation adjustments	$ (0.4)	$ (0.1)

XML

Net Income Per Share - Calculations of Basic and Diluted Net Income per Share and Basic and Dilutive Weighted Average Shares Outstanding (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Net income	$ 38,066	$ 34,755
Weighted average shares outstanding (in shares)	70,988	73,024
Dilutive impact from:
Share-based payment awards (in shares)	1,027
Dilutive weighted average shares outstanding (in shares)	72,015	73,609
Income per share
Basic (in dollars per share)	$ 0.54	$ 0.48
Dilutive (in dollars per share)	$ 0.53	$ 0.47
Accounting Standards Update 2014-09 [Member]
Net income		$ 40,521
Weighted average shares outstanding (in shares)		73,024
Dilutive impact from:
Share-based payment awards (in shares)		585
Dilutive weighted average shares outstanding (in shares)		73,609
Income per share
Basic (in dollars per share)		$ 0.55
Dilutive (in dollars per share)		$ 0.55

XML

Net Income Per Share - Stock Options Excluded from the Computation of Dilutive Weighted Average Shares Outstanding (Details)	3 Months Ended
	Sep. 30, 2018 $ / shares shares
Stock Options
Employee equity awards were excluded from the calculation of dilutive weighted average shares outstanding because their effect would be anti-dilutive
Options to purchase shares of common stock (in shares) | shares	262,343
Stock Options
Employee equity awards were excluded from the calculation of dilutive weighted average shares outstanding because their effect would be anti-dilutive
Exercise price range, low end of range (in dollars per share)	$ 115.36
Exercise price range, high end of range (in dollars per share)	$ 116.00

XML

Net Income Per Share - Employee Equity Awards Excluded from the Calculation of Dilutive Weighted Average Shares Outstanding (Details) - shares shares in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Employee Equity Awards
Employee equity awards were excluded from the calculation of dilutive weighted average shares outstanding because their effect would be anti-dilutive
Employee equity awards (in shares)	850	674

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Income Taxes (Details)	3 Months Ended		6 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Jun. 30, 2018	Dec. 31, 2017
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%		21.00%	35.00%
Effective income tax rate (as a percent)	10.20%	32.70%

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Commitments and Contingencies - Rental Expense (Details) $ in Millions	3 Months Ended
	Sep. 30, 2018 USD ($)
Operating Leases
Rent expense	$ 2.0
Minimum
Operating Leases
Operating lease terms	1 year

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Commitments and Contingencies - Standby Letters of Credit (Details) - USD ($) $ in Millions	Sep. 30, 2018	Jun. 30, 2018
Standby Letter of Credit
Operating Leases
Standby letters of credit	$ 4.0	$ 3.5

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Segment Information - Summary of Reportable Segments' Profits (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Summary of reportable segments' profits
Income from operations	$ 36,990	$ 53,313
Operating segments
Summary of reportable segments' profits
Segment revenue	114,169
Segment expenses	(61,095)
Income from operations	53,074
Subscription and software | Operating segments
Summary of reportable segments' profits
Segment revenue	106,794
Segment expenses	(53,526)
Income from operations	53,268
Services and other | Operating segments
Summary of reportable segments' profits
Segment revenue	7,375
Segment expenses	(7,569)
Income from operations	$ (194)
Accounting Standards Update 2014-09 [Member]
Summary of reportable segments' profits
Income from operations		55,713
Accounting Standards Update 2014-09 [Member] | Operating segments
Summary of reportable segments' profits
Segment revenue		126,487
Segment expenses		(55,737)
Income from operations		70,750
Accounting Standards Update 2014-09 [Member] | Subscription and software | Operating segments
Summary of reportable segments' profits
Segment revenue		119,154
Segment expenses		(48,788)
Income from operations		70,366
Accounting Standards Update 2014-09 [Member] | Services and other | Operating segments
Summary of reportable segments' profits
Segment revenue		7,333
Segment expenses		(6,949)
Income from operations		$ 384

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Segment Information - Reconciliation of Total Segment Profit to Income before Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Reconciliation to Income before Income Taxes
Total segment profit for reportable segments	$ 36,990	$ 53,313
General and administrative	(16,084)	(13,676)
Other (expense) income, net	128
Income before provision for income taxes	42,373
Operating segments
Reconciliation to Income before Income Taxes
Total segment profit for reportable segments	53,074
Segment Reconciling Items
Reconciliation to Income before Income Taxes
General and administrative	(16,084)
Other (expense) income, net	5,255
Other income (expense), net	$ 128
Accounting Standards Update 2014-09 [Member]
Reconciliation to Income before Income Taxes
Total segment profit for reportable segments		55,713
General and administrative		(15,037)
Other (expense) income, net		(615)
Income before provision for income taxes		60,198
Accounting Standards Update 2014-09 [Member] | Operating segments
Reconciliation to Income before Income Taxes
Total segment profit for reportable segments		70,750
Accounting Standards Update 2014-09 [Member] | Segment Reconciling Items
Reconciliation to Income before Income Taxes
General and administrative		(15,037)
Other (expense) income, net		5,100
Other income (expense), net		$ (615)