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.

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.

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.

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.

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.

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.

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

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.

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.

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.



	Year Ended June 30,
	2019		2018		2017
			As Adjusted		As Adjusted
	(Dollars in Thousands)
Revenue by region:
United States	$	219,967	$	207,266	$	158,761
Europe	155,543		126,862		166,133
Other (1)	222,835		184,731		169,533
	$	598,345	$	518,859	$	494,427

Revenue by type of performance obligation:
License	$	404,122	$	326,549	$	307,259
Maintenance	165,436		161,065		157,012
Services and other	28,787		31,245		30,156
	$	598,345	$	518,859	$	494,427

Revenue by segment:
Subscription and software	$	569,558	$	487,614	$	464,271
Services and other	28,787		31,245		30,156
	$	598,345	$	518,859	$	494,427

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.

The change in deferred revenue during fiscal 2019 was primarily due to an increase in new billings in advance of revenue recognition, partially offset by $14.0 million of revenue recognized that was included in deferred revenue at June 30, 2018.

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 years to eight years for new contracts, reflecting our estimate of the expected period that we will benefit from those commissions.

The following table includes the aggregate amount of the transaction price allocated as of June 30, 2019 to the performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period:



	Year Ended June 30,
	2020		2021		2022		2023		2024		Thereafter
	(Dollars in Thousands)
License	$	47,869	$	31,944	$	9,820	$	3,575	$	1,559	$	721
Maintenance	193,348		144,734		101,127		64,286		37,613		14,847
Services and other	43,679		646		594		345		74		16



	Year Ended June 30, 2018
	As Previously Reported		Adjustments			As Adjusted
	(Dollars in Thousands, Except per Share Data)
Consolidated Statements of Operations:
License revenue	$	—	$	326,549		$	326,549
Maintenance revenue	—		161,065			161,065
Subscription and software revenue	471,041		(471,041		)	—
Services and other revenue	28,473		2,772			31,245
Total revenue	499,514		19,345			518,859
Gross profit	448,870		19,345			468,215
Selling and marketing expense	101,077		(1,340		)	99,737
General and administrative expense	56,076		11,105			67,181
Total operating expenses	239,229		9,765			248,994
Income from operations	209,641		9,580			219,221
Interest income	231		24,723			24,954
Provision for (benefit from) income taxes	54,655		(110,712		)	(56,057		)
Net income	$	148,688	$	145,015		$	293,703
Net income per common share:
Basic	$	2.06				$	4.07
Diluted	$	2.04				$	4.03
Weighted average shares outstanding:
Basic	72,140					72,140
Diluted	72,956					72,956



	Year Ended June 30, 2017
	As Previously Reported		Adjustments			As Adjusted
	(Dollars in Thousands, Except per Share Data)
Consolidated Statements of Operations:
License revenue	$	—	$	307,259		$	307,259
Maintenance revenue	—		157,012			157,012
Subscription and software revenue	453,512		(453,512		)	—
Services and other revenue	29,430		726			30,156
Total revenue	482,942		11,485			494,427
Gross profit	435,476		11,485			446,961
Selling and marketing expense	92,633		(656		)	91,977
General and administrative expense	51,297		7,438			58,735
Total operating expenses	223,460		6,782			230,242
Income from operations	212,016		4,703			216,719
Interest income	808		22,134			22,942
Provision for income taxes	48,150		9,647			57,797
Net income	$	162,196	$	17,190		$	179,386
Net income per common share:
Basic	$	2.12				$	2.35
Diluted	$	2.11				$	2.33
Weighted average shares outstanding:
Basic	76,491					76,491
Diluted	76,978					76,978



	June 30, 2018
	As Previously Reported		Adjustments			As Restated
	(Dollars in Thousands)
Consolidated Balance Sheets:
ASSETS
Current contract assets	$	—	$	237,537		$	237,537
Contract costs	—		20,500			20,500
Accounts receivable, net	21,910		19,900			41,810
Non-current contract assets	—		319,840			319,840
Non-current deferred tax assets	11,090		(9,858		)	1,232
Total assets	264,924		587,919			852,843
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current deferred revenue	286,845		(271,695		)	15,150
Non-current deferred revenue	28,259		(15,905		)	12,354
Deferred income taxes	—		184,901			184,901
Other non-current liabilities	18,492		(1,424		)	17,068
Retained earnings	305,208		692,042			997,250
Total liabilities and stockholders’ equity	$	264,924	$	587,919		$	852,843

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 fiscal 2018 and 2017:



	Year Ended June 30, 2018
	As Previously Reported		Adjustments			As Adjusted
	(Dollars in Thousands)
Consolidated Statements of Cash Flows:
Cash flows from operating activities:
Net income	$	148,688	$	145,015		$	293,703
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes	3,193		(113,501		)	(110,308		)
Changes in assets and liabilities:
Contract assets	—		3,640			3,640
Contract costs	—		(617		)	(617		)
Accounts receivable	4,327		(3,481		)	846
Deferred revenue	13,700		(31,056		)	(17,356		)
Net cash provided by operating activities	$	206,936	$	—		$	206,936



	Year Ended June 30, 2017
	As Previously Reported			Adjustments			As Adjusted
	(Dollars in Thousands)
Consolidated Statements of Cash Flows:
Cash flows from operating activities:
Net income	$	162,196		$	17,190		$	179,386
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes	(4,286		)	9,559			5,273
Changes in assets and liabilities:
Contract assets	—			(4,327		)	(4,327		)
Contract costs	—			(203		)	(203		)
Accounts receivable	(7,480		)	(684		)	(8,164		)
Deferred revenue	18,477			(21,535		)	(3,058		)
Net cash provided by operating activities	$	182,386		$	—		$	182,386

As referenced in Item 9A, "Controls and Procedures," the previously issued unaudited consolidated financial statements in our quarterly reports on Form 10-Q for the quarters ended September 30, 2018, December 31, 2018 and March 31, 2019 have been restated in this Form 10-K. See Note 19, "Quarterly Financial Data (Unaudited)," to our Consolidated Financial Statements for the restated financial statements.