Stock-Based Compensation

12 Months Ended

Jun. 30, 2019

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

Stock Compensation Plans

In December 2016, the shareholders approved the establishment of the 2016 Omnibus Incentive Plan (the 2016 Plan), which provides for the issuance of a maximum of 6,000,000 shares of common stock. The 2016 Plan provides for the grant of incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-related awards, and performance awards that may be settled in cash, stock, or other property. As of June 30, 2019, there were 5,617,627 shares of common stock available for issuance subject to awards under the 2016 Plan.

In April 2010, the shareholders approved the establishment of the 2010 Equity Incentive Plan (the 2010 Plan), which provides for the issuance of a maximum of 7,000,000 shares of common stock. The 2010 Plan provides for the grant of incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-related awards, and performance awards that may be settled in cash, stock, or other property. As of June 30, 2019, there were 1,945,234 shares of common stock available for issuance subject to awards under the 2010 Plan.

Employee Stock Purchase Plan

On July 26, 2018, our Board of Directors approved the Aspen Technology, Inc. 2018 Employee Stock Purchase Plan (the "ESPP"), which provides for the issuance of up to 250,000 shares of common stock to participating employees. The ESPP is intended to be a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, or the IRC. The ESPP was approved at our Annual Meeting of Stockholders on December 7, 2018. The ESPP currently provides for a purchase price equal to 85% of the lower of (a) the fair market value of the common stock on the first trading day of each ESPP offering period and (b) the fair market value of the common stock on the last day of the offering period. Our initial offering period was for January 1, 2019 through June 30, 2019.

During the six months ended June 30, 2019, we recorded stock-based compensation expense of approximately $0.3 million associated with the ESPP. As a result of employee stock purchases during fiscal 2019, we issued 13,039 shares of common stock. The aggregate intrinsic value of shares issued under the ESPP during fiscal 2019 was $0.9 million. As of June 30, 2019, there were 236,961 shares of common stock available for issuance under the ESPP.

General Award Terms

We issue stock options and restricted stock units (RSUs) to our employees and outside directors, pursuant to shareholder-approved equity compensation plans. Option awards are granted with an exercise price equal to the market closing price of our stock on the trading day prior to the grant date. Those options generally vest over four years and expire within 7 or 10 years of grant. RSUs generally vest over four years. Historically, our practice has been to settle stock option exercises and RSU vesting through newly-issued shares.

Stock Compensation Accounting

Our stock-based compensation is accounted for as awards of equity instruments. Our policy is to issue new shares upon the exercise of stock awards.

We utilize the Black-Scholes option valuation model for estimating the fair value of options granted. The Black-Scholes option valuation model incorporates assumptions regarding expected stock price volatility, the expected life of the option, the risk-free interest rate, dividend yield and the market value of our common stock. The expected stock price volatility is determined based on our stock's historic prices over a period commensurate with the expected life of the award. The expected life of an option represents the period for which options are expected to be outstanding as determined by historic option exercises and cancellations. The risk-free interest rate is based on the U.S. Treasury yield curve for notes with terms approximating the expected life of the options granted. The expected dividend yield is zero, based on our history and expectation of not paying dividends on common shares. We recognize compensation costs on a straight-line basis, net of forfeitures, over the requisite service period for time-vested awards.

The weighted average estimated fair value of option awards granted during fiscal 2019, 2018 and 2017 was $31.25, $17.07, and $13.16, respectively.

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



	Year Ended June 30,
	2019		2018		2017
Risk-free interest rate	2.8	%	1.7	%	1.2	%
Expected dividend yield	None		None		None
Expected life (in years)	4.6		4.6		4.6
Expected volatility factor	26.6	%	28.0	%	31.3	%

The stock-based compensation expense and its classification in the accompanying consolidated statements of operations for fiscal 2019, 2018 and 2017 was as follows:



	Year Ended June 30,
	2019		2018		2017
			As Adjusted		As Adjusted
	(Dollars in Thousands)
Recorded as expenses:
Cost of maintenance	$	1,282	$	559	$	564
Cost of service and other	1,420		920		913
Selling and marketing	4,849		3,862		3,652
Research and development	6,923		7,617		5,806
General and administrative	13,099		9,730		7,865
Total stock-based compensation	$	27,573	$	22,688	$	18,800

A summary of stock option and RSU activity under all equity plans in fiscal 2019 is as follows:



	Stock Options							Restricted Stock Units
	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	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	282,798		113.88					645,146		114.72
Settled (RSUs)								(392,364	)	60.51
Exercised	(252,975	)	39.24
Cancelled / Forfeited	(95,248	)	68.25					(80,764	)	68.58
Outstanding at June 30, 2019	1,304,017		$	60.33	6.94	$	83,388	793,718		$	98.38
Exercisable at June 30, 2019	842,746		$	48.81	6.11	$	63,598
Vested and expected to vest at June 30, 2019	1,249,802		$	59.52	6.87	$	80,935	748,240		$	99.36

During fiscal 2019, 2018 and 2017, the weighted average grant-date fair value of RSUs granted was $114.72, $64.32 and $46.59, respectively. During fiscal 2019, 2018 and 2017 the total fair value of vested shares from RSU grants amounted to $39.9 million, $23.0 million and $16.6 million, respectively.

As of June 30, 2019, the total future unrecognized compensation cost related to stock options and RSUs was $8.4 million and $26.2 million, respectively, and are expected to be recorded over a weighted average period of 2.47 years and 2.44 years, respectively.

During fiscal 2019, 2018 and 2017 the weighted average exercise price of stock options granted was $113.88, $64.30 and $46.31. The total intrinsic value of options exercised during fiscal 2019, 2018 and 2017 was $18.2 million, $15.1 million and $7.9 million, respectively. We received $10.9 million, $13.5 million and $9.3 million in cash proceeds from issuances of shares of common stock during fiscal 2019, 2018 and 2017, respectively. We paid $14.7 million, $8.1 million and $5.8 million for withholding taxes on vested RSUs during fiscal 2019, 2018 and 2017, respectively.

At June 30, 2019, common stock reserved for future issuance or settlement under equity compensation plans was 9.7 million shares.

Performance Awards

During fiscal 2019, 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 RSUs on the grant date associated with achievement of all performance targets. The performance targets for the performance awards are based on meeting double digit growth in annual spend, 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.

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 total fair value of the performance awards granted during fiscal 2019 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.

During fiscal 2019, we granted 382,373 RSUs in connection with the performance awards. As of June 30, 2019, all of the RSUs issued in connection with the performance awards were unvested and outstanding. No compensation expense was recognized during fiscal 2019.

On August 2, 2019, 60,680 RSUs in connection with the performance awards were forfeited associated with the departure of an executive.