Edgar Filing: ASPEN TECHNOLOGY INC /DE/

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2019

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

For the transition period from to

Commission file number: 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		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

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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 April 17, 2019, there were 68,964,073 shares of the registrant’s common stock (par value $0.10 per share) outstanding.

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		Page
	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements.	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	44
Item 4.	Controls and Procedures.	45

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings.	46
Item 1A.	Risk Factors.	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	46
Item 6.	Exhibits.	47
	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 March 31,						Nine Months Ended March 31,
	2019			2018			2019			2018
				As Adjusted						As Adjusted
	(Dollars in Thousands, Except per Share Data)
Revenue:
License	$	98,493		$	79,073		$	255,616		$	214,938
Maintenance	41,878			40,897			125,955			121,890
Services and other	7,613			7,788			21,005			22,947
Total revenue	147,984			127,758			402,576			359,775
Cost of revenue:
License	1,658			1,279			5,142			3,743
Maintenance	4,962			4,259			14,241			13,061
Services and other	7,740			7,238			22,943			20,793
Total cost of revenue	14,360			12,776			42,326			37,597
Gross profit	133,624			114,982			360,250			322,178
Operating expenses:
Selling and marketing	27,410			25,246			80,532			72,690
Research and development	20,520			21,584			61,893			60,863
General and administrative	14,863			14,533			46,246			49,188
Total operating expenses	62,793			61,363			188,671			182,741
Income from operations	70,831			53,619			171,579			139,437
Interest income	6,835			6,304			21,389			18,849
Interest (expense)	(2,350		)	(1,485		)	(6,328		)	(3,952		)
Other (expense), net	(34		)	(104		)	(485		)	(958		)
Income before income taxes	75,282			58,334			186,155			153,376
Provision for (benefit from) income taxes	13,695			13,829			27,286			(63,681		)
Net income	$	61,587		$	44,505		$	158,869		$	217,057
Net income per common share:
Basic	$	0.89		$	0.62		$	2.26		$	3.00
Diluted	$	0.88		$	0.61		$	2.23		$	2.97
Weighted average shares outstanding:
Basic	69,423			71,828			70,286			72,402
Diluted	70,160			72,663			71,142			73,136

See accompanying Notes to these unaudited consolidated financial statements.

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ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	Three Months Ended March 31,				Nine Months Ended March 31,
	2019		2018		2019			2018
			As Adjusted					As Adjusted
	(Dollars in Thousands)
Net income	$	61,587	$	44,505	$	158,869		$	217,057
Other comprehensive income (loss):
Foreign currency translation adjustments	1,159		924		(159		)	2,398
Total other comprehensive income (loss)	1,159		924		(159		)	2,398
Comprehensive income	$	62,746	$	45,429	$	158,710		$	219,455

See accompanying Notes to these unaudited consolidated financial statements.

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ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)



	March 31, 2019			June 30, 2018
				As Adjusted
	(Dollars in Thousands, Except Share Data)
ASSETS
Current assets:
Cash and cash equivalents	$	65,592		$	96,165
Accounts receivable, net	45,293			41,810
Current contract assets	314,745			304,378
Contract costs	24,325			20,500
Prepaid expenses and other current assets	11,124			10,509
Prepaid income taxes	1,573			2,601
Total current assets	462,652			475,963
Property, equipment and leasehold improvements, net	7,589			9,806
Computer software development costs, net	1,452			646
Goodwill	73,534			75,590
Intangible assets, net	31,756			35,310
Non-current contract assets	358,709			340,622
Deferred tax assets	1,696			11,090
Other non-current assets	1,279			1,297
Total assets	$	938,667		$	950,324

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,023		$	4,230
Accrued expenses and other current liabilities	42,746			39,515
Income taxes payable	35,582			1,698
Borrowings under credit agreement	220,000			170,000
Current deferred revenue	24,415			15,150
Total current liabilities	326,766			230,593
Non-current deferred revenue	19,312			12,354
Deferred income taxes	154,901			214,125
Other non-current liabilities	12,403			17,068
Commitments and contingencies (Note 16)
Series D redeemable convertible preferred stock, $0.10 par value— Authorized— 3,636 shares as of March 31, 2019 and June 30, 2018 Issued and outstanding— none as of March 31, 2019 and June 30, 2018	—			—
Stockholders’ equity:
Common stock, $0.10 par value— Authorized—210,000,000 shares Issued— 103,478,590 shares at March 31, 2019 and 103,130,300 shares at June 30, 2018 Outstanding— 69,108,515 shares at March 31, 2019 and 71,186,701 shares at June 30, 2018	10,348			10,313
Additional paid-in capital	730,830			715,475
Retained earnings	1,224,377			1,065,507
Accumulated other comprehensive income	1,229			1,388
Treasury stock, at cost—34,370,075 shares of common stock at March 31, 2019 and 31,943,599 shares at June 30, 2018	(1,541,499		)	(1,316,499		)
Total stockholders’ equity	425,285			476,184
Total liabilities and stockholders’ equity	$	938,667		$	950,324

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See accompanying Notes to these unaudited consolidated financial statements.

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ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)



	Common Stock			Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Income			Treasury Stock				Total Stockholders' Equity
	Number of Shares	$0.10 Par Value		Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Income			Number of Shares	Cost			Total Stockholders' Equity
	(Dollars in Thousands, Except Share Data)
June 30, 2018, As Adjusted	103,130,300	$	10,313	$	715,475		$	1,065,507	$	1,388		31,943,599	$	(1,316,499	)	$	476,184
Comprehensive income (loss):
Net income	—	—		—			38,066		—			—	—			38,066
Other comprehensive (loss)	—	—		—			—		(423		)					(423		)
Exercise of stock options	90,009	9		3,702			—		—			—				3,711
Issuance of restricted stock units	58,829	6		(3,290		)	—		—			—	—			(3,284		)
Repurchase of common stock	—	—		—			—		—			473,376	(50,000		)	(50,000		)
Stock-based compensation	—	—		8,865			—		—			—	—			8,865
September 30, 2018	103,279,138	$	10,328	$	724,752		$	1,103,573	$	965		32,416,975	$	(1,366,499	)	$	473,119
Comprehensive income (loss):
Net income	—	—		—			59,217		—			—	—			59,217
Other comprehensive (loss)	—	—		—			—		(895		)					(895		)
Exercise of stock options	15,902	2		757			—		—			—				759
Issuance of restricted stock units	100,643	10		(6,351		)	—		—			—	—			(6,341		)
Repurchase of common stock	—	—		—			—		—			1,175,531	(100,000		)	(100,000		)
Stock-based compensation	—	—		6,335			—		—			—	—			6,335
December 31, 2018	103,395,683	$	10,340	$	725,493		$	1,162,790	$	70		33,592,506	$	(1,466,499	)	$	432,194
Comprehensive income:
Net income	—	—		—			61,587		—			—	—			61,587
Other comprehensive income	—	—		—			—		1,159							1,159
Exercise of stock options	39,303	4		1,444			—		—			—				1,448
Issuance of restricted stock units	43,604	4		(2,361		)	—		—			—	—			(2,357		)
Repurchase of common stock	—	—		—			—		—			777,569	(75,000		)	(75,000		)
Stock-based compensation	—	—		6,254			—		—			—	—			6,254
March 31, 2019	103,478,590	$	10,348	$	730,830		$	1,224,377	$	1,229		34,370,075	$	(1,541,499	)	$	425,285

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	Common Stock			Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Income		Treasury Stock				Total Stockholders' Equity
	Number of Shares	$0.10 Par Value		Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Income		Number of Shares	Cost			Total Stockholders' Equity
	(Dollars in Thousands, Except Share Data)
June 30, 2017, As Adjusted	102,567,129	$	10,257	$	687,479		$	780,365	$	1,459	29,145,976	$	(1,116,499	)	$	363,061
Comprehensive income:
Net income	—	—		—			40,521		—		—	—			40,521
Other comprehensive income	—	—		—			—		1,401						1,401
Exercise of stock options	66,567	6		2,404			—		—		—				2,410
Issuance of restricted stock units	58,398	6		(1,659		)	—		—		—	—			(1,653		)
Repurchase of common stock	—	—		—			—		—		839,159	(50,000		)	(50,000		)
Stock-based compensation	—	—		6,414			—		—		—	—			6,414
September 30, 2017, As Adjusted	102,692,094	$	10,269	$	694,638		$	820,886	$	2,860	29,985,135	$	(1,166,499	)	$	362,154
Comprehensive income:
Net income	—	—		—			132,031		—		—	—			132,031
Other comprehensive income	—	—		—			—		73						73
Exercise of stock options	36,767	4		1,129			—		—		—				1,133
Issuance of restricted stock units	47,058	5		(1,794		)	—		—		—	—			(1,789		)
Repurchase of common stock	—	—		—			—		—		756,349	(50,000		)	(50,000		)
Stock-based compensation	—	—		5,455			—		—		—	—			5,455
December 31, 2017, As Adjusted	102,775,919	$	10,278	$	699,428		$	952,917	$	2,933	30,741,484	$	(1,216,499	)	$	449,057
Comprehensive income:
Net income	—	—		—			44,505		—		—	—			44,505
Other comprehensive income	—	—		—			—		924						924
Exercise of stock options	112,972	11		3,815			—		—		—				3,826
Issuance of restricted stock units	47,714	5		(2,042		)	—		—		—	—			(2,037		)
Repurchase of common stock	—	—		—			—		—		649,479	(50,000		)	(50,000		)
Stock-based compensation	—	—		5,353			—		—		—	—			5,353
March 31, 2018, As Adjusted	102,936,605	$	10,294	$	706,554		$	997,422	$	3,857	31,390,963	$	(1,266,499	)	$	451,628

See accompanying Notes to these unaudited consolidated financial statements.

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ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Nine Months Ended March 31,
	2019			2018
				As Adjusted
	(Dollars in Thousands)
Cash flows from operating activities:
Net income	$	158,869		$	217,057
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	6,063			4,902
Net foreign currency losses	23			1,086
Stock-based compensation	21,454			17,222
Deferred income taxes	(49,847		)	(123,443		)
Provision for bad debts	474			1,373
Other non-cash operating activities	341			314
Changes in assets and liabilities:
Accounts receivable	(4,183		)	1,429
Contract assets	(27,397		)	(7,767		)
Contract costs	(3,825		)	(651		)
Prepaid expenses, prepaid income taxes, and other assets	201			4,908
Accounts payable, accrued expenses, income taxes payable and other liabilities	32,980			(4,448		)
Deferred revenue	17,983			15,847
Net cash provided by operating activities	153,136			127,829
Cash flows from investing activities:
Purchases of property, equipment and leasehold improvements	(206		)	(217		)
Payments for business acquisitions, net of cash	—			(33,700		)
Payments for capitalized computer software costs	(1,094		)	(299		)
Net cash used in investing activities	(1,300		)	(34,216		)
Cash flows from financing activities:
Exercises of stock options	5,881			7,402
Repurchases of common stock	(224,182		)	(154,365		)
Payments of tax withholding obligations related to restricted stock	(11,916		)	(5,412		)
Deferred business acquisition payments	(1,700		)	(2,600		)
Proceeds from credit agreement	50,000			30,000
Payments of credit agreement issuance costs	—			(351		)
Net cash used in financing activities	(181,917		)	(125,326		)
Effect of exchange rate changes on cash and cash equivalents	(492		)	834
Decrease in cash and cash equivalents	(30,573		)	(30,879		)
Cash and cash equivalents, beginning of period	96,165			101,954
Cash and cash equivalents, end of period	$	65,592		$	71,075
Supplemental disclosure of cash flow information:
Income taxes paid, net	$	39,123		$	38,662
Interest paid	5,728			3,456
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	$	10		$	(31	)
Change in repurchases of common stock included in accounts payable and accrued expenses	818			(4,365		)

See accompanying Notes to these unaudited consolidated financial statements.

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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 and nine months ended March 31, 2019 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 and nine months ended March 31, 2019.

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 (expense), net. Net foreign currency exchange losses were $(0.1) million and $(0.5) million during the three and nine months ended March 31, 2019, respectively, and $(0.1) million and $(1.0) million during the three and nine months ended March 31, 2018, respectively.

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(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 and nine months ended March 31, 2019 and 2018, respectively, that was expensed as research and development expense.

(f) New Accounting Pronouncements Adopted in Fiscal 2019

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.

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 our consolidated financial statements or related disclosures.

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 have concluded that we will not be subject to the transition tax associated with our accumulated, undistributed foreign earnings.

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. We adopted ASU No. 2018-15 effective October 1, 2018. The adoption of ASU No. 2018-15 did not have a material effect on our consolidated financial statements or related disclosures.

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(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 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.

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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 March 31,				Nine Months Ended March 31,
	2019		2018		2019		2018
			As Adjusted				As Adjusted
	(Dollars in Thousands)
Revenue by region:
United States	$	54,022	$	39,735	$	134,774	$	130,561
Europe	33,665		36,662		109,085		98,673
Other (1)	60,297		51,361		158,717		130,541
	$	147,984	$	127,758	$	402,576	$	359,775

Revenue by type of performance obligation:
Term licenses	$	98,493	$	79,073	$	255,616	$	214,938
Maintenance	41,878		40,897		125,955		121,890
Professional services and other	7,613		7,788		21,005		22,947
	$	147,984	$	127,758	$	402,576	$	359,775

Revenue by segment:
Subscription and software	$	140,371	$	119,970	$	381,571	$	336,828
Services and other	7,613		7,788		21,005		22,947
	$	147,984	$	127,758	$	402,576	$	359,775

____________________________________________


(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 and deferred revenue were as follows as of March 31, 2019 and June 30, 2018:

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	March 31, 2019			June 30, 2018
				As Adjusted
	(Dollars in Thousands)
Contract assets	$	673,454		$	645,000
Deferred revenue	(43,727		)	(27,504		)
	$	629,727		$	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 nine months ended March 31, 2019, 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 $11.5 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 as of March 31, 2019 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	$	24,904	$	39,658	$	30,468	$	9,423	$	2,502	$	1,451
Maintenance	49,261		174,031		127,876		85,991		51,340		32,662
Services and other	32,248		11,834		853		651		381		91

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 and nine months ended March 31, 2018:

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	Three Months Ended March 31, 2018
	As Previously Reported		Adjustments			As Adjusted
	(Dollars in Thousands, Except per Share Data)
Consolidated Statements of Operations:
License revenue	$	—	$	79,073		$	79,073
Maintenance revenue	—		40,897			40,897
Subscription and software revenue	118,126		(118,126		)	—
Services and other revenue	7,745		43			7,788
Total revenue	125,871		1,887			127,758
Gross profit	113,095		1,887			114,982
Selling and marketing expense	25,924		(678		)	25,246
General and administrative expense	14,430		103			14,533
Total operating expenses	61,938		(575		)	61,363
Income from operations	51,157		2,462			53,619
Interest income	23		6,281			6,304
Provision for income taxes	11,756		2,073			13,829
Net income	$	37,835	$	6,670		$	44,505
Net income per common share:
Basic	$	0.53				$	0.62
Diluted	$	0.52				$	0.61
Weighted average shares outstanding:
Basic	71,828					71,828
Diluted	72,663					72,663

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	Nine Months Ended March 31, 2018
	As Previously Reported		Adjustments			As Adjusted
	(Dollars in Thousands, Except per Share Data)
Consolidated Statements of Operations:
License revenue	$	—	$	214,938		$	214,938
Maintenance revenue	—		121,890			121,890
Subscription and software revenue	351,540		(351,540		)	—
Services and other revenue	22,014		933			22,947
Total revenue	373,554		(13,779		)	359,775
Gross profit	335,957		(13,779		)	322,178
Selling and marketing expense	73,875		(1,185		)	72,690
General and administrative expense	42,284		6,904			49,188
Total operating expenses	177,022		5,719			182,741
Income from operations	158,935		(19,498		)	139,437
Interest income	204		18,645			18,849
Provision for (benefit from) income taxes	43,561		(107,242		)	(63,681		)
Net income	$	110,668	$	106,389		$	217,057
Net income per common share:
Basic	$	1.53				$	3.00
Diluted	$	1.51				$	2.97
Weighted average shares outstanding:
Basic	72,402					72,402
Diluted	73,136					73,136

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
Total assets	264,924		685,400			950,324
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	—		214,125			214,125
Other non-current liabilities	18,492		(1,424		)	17,068
Retained earnings	305,208		760,299			1,065,507
Total liabilities and stockholders’ equity	$	264,924	$	685,400		$	950,324

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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 nine months ended March 31, 2018:



	Nine Months Ended March 31, 2018
	As Previously Reported			Adjustments			As Adjusted
	(Dollars in Thousands)
Consolidated Statements of Cash Flows:
Cash flows from operating activities:
Net income	$	110,668		$	106,389		$	217,057
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes	4,467			(127,910		)	(123,443		)
Changes in assets and liabilities:
Contract assets	—			(7,767		)	(7,767		)
Contract costs	—			(651		)	(651		)
Accounts receivable	(964		)	2,393			1,429
Deferred revenue	(11,699		)	27,546			15,847
Net cash provided by operating activities	$	127,829		$	—		$	127,829

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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 $1.0 million and $5.0 million as of March 31, 2019 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 money market instruments.

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 March 31, 2019 and June 30, 2018:



	March 31, 2019			June 30, 2018
				As Adjusted
	(Dollars in Thousands)
Accounts receivable, gross	$	48,471		$	44,513
Allowance for doubtful accounts	(3,178		)	(2,703		)
Accounts receivable, net	$	45,293		$	41,810

As of March 31, 2019, 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 consisted of the following as of March 31, 2019 and June 30, 2018:



	March 31, 2019			June 30, 2018
	(Dollars in Thousands)
Property, equipment and leasehold improvements, at cost:
Computer equipment	$	8,321		$	8,344
Purchased software	24,207			24,225
Furniture & fixtures	6,843			6,850
Leasehold improvements	12,048			12,023
Property, equipment and leasehold improvements, at cost	51,419			51,442
Accumulated depreciation	(43,830		)	(41,636		)
Property, equipment and leasehold improvements, net	$	7,589		$	9,806

During the nine months ended March 31, 2019, we wrote off fully depreciated property, equipment and leasehold improvements that were no longer in use with gross book values of $0.2 million.

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 accrued expenses and other current liabilities in our consolidated balance sheet.

An allocation of the purchase price is as follows:



	Amount
	(Dollars in Thousands)
Tangible assets acquired, net	$	360
Identifiable intangible assets:
Technology-related	4,500
Customer relationships	3,800
Goodwill	15,959
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 March 31, 2019 and June 30, 2018:



	Gross Carrying Amount		Accumulated Amortization			Effect of Currency Translation			Net Carrying Amount
	(Dollars in Thousands)
March 31, 2019:
Technology	$	35,644	$	(7,936	)	$	(94	)	$	27,614
Customer relationships	4,979		(865		)	(80		)	4,034
Non-compete agreements	553		(445		)	—			108
Total	$	41,176	$	(9,246	)	$	(174	)	$	31,756
June 30, 2018:
Technology	$	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 cost of license revenue and operating expenses and amounted to approximately $1.2 million and $3.4 million for the three and nine months ended March 31, 2019, respectively, and approximately $0.5 million and $1.6 million for the three and nine months ended March 31, 2018, respectively.

Future amortization expense as of March 31, 2019 is expected to be as follows:



Year Ended June 30,	Amortization Expense
	(Dollars in Thousands)
2019	$	1,155
2020	4,692
2021	4,736
2022	4,675
2023	4,591
Thereafter	11,907
Total	$	31,756

9. Goodwill

The changes in the carrying amount of goodwill for our subscription and software reporting segment during the nine months ended March 31, 2019 were 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
Adjustment to goodwill from acquisitions	(1,524		)	—			—			(1,524		)
Foreign currency translation	—			—			(532		)	(532		)
March 31, 2019:	$	140,792		$	(65,569	)	$	(1,689	)	$	73,534

No triggering events indicating goodwill impairment occurred during the nine months ended March 31, 2019.

10. Accrued Expenses and Other Liabilities

Accrued expenses and other current liabilities consisted of the following as of March 31, 2019 and June 30, 2018:



	March 31, 2019		June 30, 2018
	(Dollars in Thousands)
Payroll and payroll-related	$	20,017	$	21,796
Deferred acquisition payments	4,600		1,700
Royalties and outside commissions	3,815		3,333
Share repurchases	2,464		1,646
Professional fees	1,732		1,695
Deferred rent	1,308		1,188
Other	8,810		8,157
Total accrued expenses and other current liabilities	$	42,746	$	39,515

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Other non-current liabilities consisted of the following as of March 31, 2019 and June 30, 2018:



	March 31, 2019		June 30, 2018
			As Adjusted
	(Dollars in Thousands)
Deferred rent	$	5,478	$	6,442
Uncertain tax positions	5,492		4,510
Deferred acquisition payments	—		4,294
Other	1,433		1,822
Total other non-current liabilities	$	12,403	$	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 $220.0 million and $170.0 million in outstanding borrowings under the Credit Agreement as of March 31, 2019 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 March 31, 2019 were 4.00% on $159.0 million of our outstanding borrowings and 4.01% on $61.0 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 March 31, 2019, we were in compliance with these covenants.

12. Stock-Based Compensation

The weighted average estimated fair value of option awards granted was $20.05 and $31.26 during the three and nine months ended March 31, 2019, respectively, and $19.21 and $17.04 during the three and nine months ended March 31, 2018, respectively.

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



	Nine Months Ended March 31,
	2019		2018
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	%	28.0	%

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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 and nine months ended March 31, 2019 and 2018 are as follows:



	Three Months Ended March 31,				Nine Months Ended March 31,
	2019		2018		2019		2018
	(Dollars in Thousands)
Recorded as expenses:
Cost of maintenance	$	379	$	—	$	916	$	—
Cost of services and other	366		345		1,038		1,119
Selling and marketing	1,228		979		3,687		2,870
Research and development	1,518		1,892		5,451		5,679
General and administrative	2,763		2,137		10,362		7,554
Total stock-based compensation	$	6,254	$	5,353	$	21,454	$	17,222

A summary of stock option and restricted stock unit ("RSU") activity under all equity plans for the nine months ended March 31, 2019 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	278,454		113.94					635,959		114.66
Settled (RSUs)	—							(326,903	)	59.94
Exercised	(145,214	)	40.75					—
Cancelled / Forfeited	(83,607	)	67.38					(71,152	)	67.45
Outstanding at March 31, 2019	1,419,075		$	58.54	7.02	$	67,607	859,604		$	95.25
Vested and exercisable at March 31, 2019	876,403		$	46.06	6.06	$	51,599	—
Vested and expected to vest as of March 31, 2019	1,356,714		$	57.71	6.95	$	65,668	807,825		$	96.33

The weighted average grant-date fair value of RSUs granted was $82.18 and $114.66 during the three and nine months ended March 31, 2019, respectively, and $75.41 and $64.18 during the three and nine months ended March 31, 2018, respectively. The total fair value of shares vested from RSU grants was $6.9 million and $31.9 million during the three and nine months ended March 31, 2019, respectively, and $5.7 million and $16.0 million during the three and nine months ended March 31, 2018, respectively.

At March 31, 2019, the total future unrecognized compensation cost related to stock options was $9.9 million and is expected to be recorded over a weighted average period of 2.6 years. At March 31, 2019, the total future unrecognized compensation cost related to RSUs was $30.1 million and is expected to be recorded over a weighted average period of 2.6 years.

The total intrinsic value of options exercised was $2.4 million and $9.2 million during the three and nine months ended March 31, 2019, respectively, and $4.9 million and $7.9 million during the three and nine months ended March 31, 2018, respectively. We received cash proceeds from option exercises of $1.4 million and $5.9 million during the three and nine months ended March 31, 2019, respectively, and $3.9 million and $7.4 million during the three and nine months ended March 31, 2018, respectively. We withheld withholding taxes on vested RSUs of $2.4 million and $12.0 million during the three and nine months ended March 31, 2019, respectively, and $2.0 million and $5.5 million during the three and nine months ended March 31, 2018, respectively.

At March 31, 2019, common stock reserved for future issuance or settlement under equity compensation plans was 9.8 million shares.

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During the nine months ended March 31, 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 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 nine months ended March 31, 2019, we granted 382,373 RSUs in connection with the performance awards. As of March 31, 2019, 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 total fair value of the performance awards granted during the nine months ended March 31, 2019 was estimated using the closing price on the date o