Aspen
Annual Report 2015

Plain-text annual report

Annual Report 2015 2015 AspenTech Annual Report About AspenTech AspenTech is a leading supplier of software that optimizes process manufacturing — for energy, chemicals, engineering and construction, and other industries that manufacture and produce products from a chemical process. With integrated aspenONE® solutions, process manufacturers can implement best practices for optimizing their engineering, manufacturing and supply chain operations. As a result, AspenTech customers are better able to increase capacity, improve margins, reduce costs, and become more energy efficient. To see how the world’s leading process manufacturers rely on AspenTech to achieve their operational excellence goals, visit www.aspentech.com. 5 1 0 2 | h c e T n e p s A Use these links to rapidly review the documentTABLE OF CONTENTS Item 15. Exhibits and Financial Statement Schedules. INDEX TO CONSOLIDATED FINANCIAL STATEMENTSTable of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-KCommission file number: 0-24786Aspen Technology, Inc.(Exact name of registrant as specified in its charter)Delaware(State or other jurisdiction ofincorporation or organization) 04-2739697(I.R.S. EmployerIdentification No.)20 Crosby DriveBedford, MA(Address of principal executiveoffices) 01730(Zip Code)Registrant's telephone number, including area code: 781-221-6400Securities registered pursuant to Section 12(b) of the Act:NoneSecurities registered pursuant to Section 12(g) of the Act:Common stock, $0.10 par value per share Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý 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 1934during 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 filingrequirements for the past 90 days. Yes ý No o Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired 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 shorterperiod that the registrant was required to submit and post such files). Yes ý No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, andwill not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this(Mark One) ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended June 30, 2015oro TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Form 10-K or any amendment to this Form 10-K. o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. 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 December 31, 2014, the aggregate market value of common stock (the only outstanding class of common equity of the registrant) held by non-affiliates of the registrant was $2,742,967,100 based on a total of 78,325,731 shares of common stock held by non-affiliates and on a closing price of $35.02on December 31, 2014 for the common stock as reported on The NASDAQ Global Select Market. There were 84,015,600 shares of common stock outstanding as of August 6, 2015. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Proxy Statement related to its 2015 Annual Meeting of Stockholders to be filed with the Securities and ExchangeCommission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K are incorporated by reference inPart III, Items 10-14 of this Form 10-K. Large accelerated filer ý Accelerated filer o Non-accelerated filer o(Do not check if asmaller reporting company) Smaller reporting company oTable of Contents TABLE OF CONTENTS Our registered trademarks include aspenONE, Aspen Plus and AspenTech. All other trademarks, trade names and service marks appearing in thisForm 10-K are the property of their respective owners. Our fiscal year ends on June 30, and references to a specific fiscal year are the twelve months ended June 30 of such year (for example, "fiscal 2015"refers to the year ended June 30, 2015).2 Page PART I Item 1. Business 3 Item 1A. Risk Factors 16 Item 1B. Unresolved Staff Comments 21 Item 2. Properties 21 Item 3. Legal Proceedings 22 Item 4. Mine Safety Disclosures 22 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities 23 Item 6. Selected Financial Data 26 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 27 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 54 Item 8. Financial Statements and Supplementary Data 55 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 55 Item 9A. Controls and Procedures 55 Item 9B. Other Information 58 PART III Item 10. Directors, Executive Officers and Corporate Governance 59 Item 11. Executive Compensation 59 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 59 Item 13. Certain Relationships and Related Transactions, and Director Independence 59 Item 14. Principal Accounting Fees and Services 59 PART IV Item 15. Exhibits, Financial Statement Schedules 60 SIGNATURES Table of Contents SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA This Form 10-K contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the SecuritiesExchange Act of 1934. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-lookingstatements by terminology such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "potential," "should," "target," or the negative ofthese terms or other similar words. These statements are only predictions. The outcome of the events described in these forward-looking statements is subjectto known and unknown risks, uncertainties and other factors that may cause our, our customers' or our industry's actual results, levels of activity, performanceor achievements expressed or implied by these forward-looking statements, to differ. "Item 1. Business," "Item 1A. Risk Factors" and "Item 7. Management'sDiscussion and Analysis of Financial Condition and Results of Operations" as well as other sections in this Form 10-K, discuss some of the factors that couldcontribute to these differences. The forward-looking statements made in this Form 10-K relate only to events as of the date on which the statements are made.We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or toreflect the occurrence of unanticipated events. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers,dispositions, joint ventures or investments we may make. The industry in which we operate is subject to a high degree of uncertainty and risk due to varietyof factors, including those described in "Item 1A. Risk Factors." Unless the context indicates otherwise, references in this report to "we", "us", "our" and othersimilar references mean Aspen Technology, Inc. and its subsidiaries. PART I Item 1. Business. Overview We are a leading global provider of mission-critical process optimization software solutions designed to manage and optimize plant and process design,operational performance, and supply chain planning. Our aspenONE software and related services have been developed specifically for companies in theprocess industries, including the energy, chemicals, and engineering and construction industries. Customers use our solutions to improve theircompetitiveness and profitability by increasing throughput and productivity, reducing operating costs, enhancing capital efficiency, and decreasing workingcapital requirements. Our software incorporates our proprietary mathematical and empirical models of manufacturing and planning processes and reflects the deep domainexpertise we have amassed from focusing on solutions for the process industries for over 30 years. We have developed our applications to design andoptimize processes across three principal business areas: engineering, manufacturing and supply chain. We are a recognized market and technology leader inproviding process optimization software for each of these business areas. We have established sustainable competitive advantages within our industry based on the following strengths:•Innovative products that can enhance our customers' profitability; •Long-term customer relationships; •Large installed base of users of our software; and •Long-term license contracts with historically high renewal rates.3Table of Contents We have approximately 2,100 customers globally. Our customers consist of companies engaged in the process industries such as energy, chemicals, andengineering and construction, as well as consumer packaged goods, power, metals and mining, pulp and paper, pharmaceuticals and biofuels.Industry Background The process industries consist of companies that typically manufacture finished products by applying a controlled chemical process either to a rawmaterial that is fed continuously through the plant or to a specific batch of raw material. Process manufacturing is often complex because small changes in the feedstocks used, or to the chemical process applied, can have a significant impacton the efficiency and cost-effectiveness of manufacturing operations. As a result, process manufacturers, as well as the engineering and construction firms thatpartner with these manufacturers, have extensive technical requirements and need sophisticated, integrated software to help design, operate and manage theircomplex manufacturing environments. The unique characteristics associated with process manufacturing create special demands for business applicationsthat frequently exceed the capabilities of generic software applications or non-process manufacturing software packages.Industry Specific Challenges Facing the Process Industries Companies in different process industries face specific challenges that are driving the need for software solutions that design, operate and managemanufacturing environments more effectively:Energy. Our energy markets are comprised of three primary sectors: Exploration and Production, also called "upstream," Gas Production andProcessing, also called "midstream," and Refining and Marketing, also called "downstream":Companies engaged in Exploration and Production explore for and produce hydrocarbons. They target reserves in increasingly diversegeographies involving geological, logistical and political challenges. They need to design and develop ever larger, more complex andmore remote production, gathering and processing facilities as quickly as possible with the objective of optimizing production andensuring regulatory compliance.Companies engaged in Gas Production and Processing produce and gather natural gas from well heads, clean it, process it and separateit into dry natural gas and natural gas liquids in preparation for transport to downstream markets. The number of gas processing plantsin North America has increased significantly in recent years to process gas extracted from shale deposits.Companies engaged in Refining and Marketing convert crude oil through a chemical manufacturing process into end products such asgasoline, jet and diesel fuels and into intermediate products for downstream chemical manufacturing companies. These companies arecharacterized by high volumes and low operating margins. In order to deliver better margins, they focus on optimizing feedstockselection and product mix, reducing energy and capital costs, maximizing throughput, and minimizing inventory, all while operatingsafely and in accordance with regulations.Chemicals. The chemicals industry includes both bulk and specialty chemical companies:Bulk chemical producers, which manufacture commodity chemicals and who compete primarily on price, are seeking to achieveeconomies of scale and manage operating margin pressure by building larger, more complex plants located near feedstock sources.4Table of ContentsSpecialty chemical manufacturers, which primarily manufacture highly differentiated customer-specific products, face challenges inmanaging diverse product lines, multiple plants, complex supply chains and product quality.Engineering and construction. Engineering and construction firms that work with process manufacturers compete on a global basis bybidding on and executing on complex, large-scale projects. They need a digital environment in which optimal plant designs can be producedquickly and efficiently, incorporating highly accurate modeling, analysis and cost estimation technology. In addition, these projects requiresoftware that enables significant collaboration internally, with the manufacturer, and in many cases, with other engineering and constructionfirms. Companies in the consumer packaged goods, power, metals and mining, pulp and paper, pharmaceuticals and biofuels industries are also seeking processoptimization solutions that help them deliver improved financial and operating results in the face of varied process manufacturing challenges.Complexity of the Process Industries Companies in the process industries constantly face pressure on margins causing them to continually seek ways to operate more efficiently. At the sametime, these manufacturers face complexity as a result of the following:Globalization of markets. Process manufacturers are continuously expanding their operations in order to take advantage of growing demandand more economically viable sources of feedstocks. Process manufacturers must be able to design, build and operate plants efficiently andeconomically, and they need to economically manage and optimize ever broadening supply chains.Market volatility. Process manufacturers must react quickly to frequent changes in feedstock prices, temporary or longer-term feedstockshortages, and rapid changes in finished product prices. Unpredictable commodity markets strain the manufacturing and supply chainoperations of process manufacturers, which must consider, and when appropriate implement, changes in inventory levels, feedstock inputs,equipment usage and operational processes in order to remain competitive.Environmental and safety regulations. Process companies must comply with an expanding array of data maintenance and reportingrequirements under governmental and regulatory mandates, and the global nature of their operations can subject them to numerous regulatoryregimes. These companies often face heightened scrutiny and oversight because of environmental, safety and other implications of theirproducts and manufacturing processes. These companies increasingly are relying upon software applications to model potential outcomes,store operating data and develop reporting capabilities.Market Opportunity Technology solutions play a major role in helping companies in the process industries improve their manufacturing productivity. In the 1980s, processmanufacturers implemented distributed control systems, or DCS, to automate the management of plant hardware. DCS use computer hardware,communication networks and industrial instruments to measure, record and automatically control process variables. In the 1990s, these manufacturersadopted enterprise resource planning, or ERP, systems to streamline back office functions and interact with DCS. These systems allowed processmanufacturers to track, monitor and report the performance of each plant, rather than rely on traditional paper and generic desktop spreadsheets.5Table of Contents Many process manufacturers have implemented both DCS and ERP systems but have realized that their investments in hardware and back-office systemsare inadequate. DCS are only able to control and monitor processes based on fixed sets of parameters and cannot dynamically react to changes in themanufacturing process unless instructed by end users. ERP systems can only record what is produced in operations. Although DCS and ERP systems helpmanage manufacturing performance, neither of these systems can optimize what is produced, how it is produced or where it is produced. Moreover, neithercan help a process manufacturer understand how to improve its processes or how to identify opportunities to decrease operating expenses. Process optimization software addresses the gap between DCS and ERP systems. Process optimization software focuses on the design and optimization ofthe manufacturing process; how the process is run and the economics of the process. By connecting DCS and ERP systems with intelligent, dynamicapplications, process optimization software allows a manufacturer to make better, faster economic decisions. Examples of how process optimization softwarecan optimize a manufacturing environment include incorporating process manufacturing domain knowledge, supporting real-time decision making, andproviding the ability to forecast and simulate potential actions. Furthermore, these solutions can optimize the supply chain by helping a manufacturer tounderstand the operating conditions in each plant, which enables a manufacturer to decide where best to manufacture products. Process manufacturers employ highly skilled technical personnel specializing in areas such as process design, equipment design, control engineering,manufacturing operations, planning, scheduling, and supply chain management. To drive efficiency and improve operating margins, these personnel need tocollaborate across functional areas and increasingly rely on software to enable this collaboration as well as automate complex tasks associated with their jobs.Process companies must adapt to the changing nature of the technical workforce. A generation of highly experienced plant operators and engineers is nearingretirement. Companies are looking for intelligent software applications that capture and automate expert knowledge and are intuitive and easy-to-learn.aspenONE Solutions We provide integrated process optimization software solutions designed and developed specifically for the process industries. Customers use oursolutions to improve their competitiveness and profitability by increasing throughput and productivity, reducing operating costs, enhancing capitalefficiency, enabling collaboration among different functions and decreasing working capital requirements. Our aspenONE software applications areorganized into two suites, which are centered on our principal business areas of engineering, manufacturing and supply chain:aspenONE Engineering. Our engineering software is used to develop process designs of new plants, re-vamp existing plants, and simulateand optimize existing processes.aspenONE Manufacturing and Supply Chain. Our manufacturing software is used to optimize day-to-day processing activities, enablingprocess manufacturers to make better, more profitable decisions and to improve plant performance. Our supply chain management software isdesigned to enable process manufacturers to reduce inventory levels, increase asset efficiency, respond rapidly to market demands andoptimize supply chain operations. In July 2009, we introduced our aspenONE licensing model, which is a subscription offering under which customers receive access to all of the productswithin the aspenONE suite(s) they license, including the right to any new unspecified future software products and updates that may be introduced into alicensed aspenONE software suite. This affords customers the ability to use our software whenever required and to experiment with different applications tobest solve whatever critical business challenges they face.6Table of Contents We offer customer support, professional services and training services to our customers. Under our aspenONE licensing model, and for point productarrangements entered into since July 2009, software maintenance and support is included for the term of the arrangement. Professional services are offered tocustomers as a means to further implement and extend our technology across their corporations. The key benefits of our aspenONE solutions include:Broad and comprehensive software suites. We believe we are the only software provider that has developed comprehensive suites of softwareapplications addressing the engineering, manufacturing and supply chain requirements of process manufacturers. While some competitorsoffer solutions in one or two principal business areas, no other vendor can match the breadth of our aspenONE offerings. In addition, we havedeveloped an extensive array of software applications that address extremely specific and complex industry and end user challenges, such asfeedstock selection and production scheduling for petroleum companies.Mission-critical, integrated software solutions. aspenONE provides a standards-based framework that integrates applications, data andmodels within each of our software suites. Process manufacturers seeking to improve their mission-critical business operations can use theintegrated software applications in the aspenONE Manufacturing and Supply Chain suite to support real-time decision making both forindividual production facilities and across multiple sites.Flexible commercial model. Our aspenONE licensing model provides a customer with access to all of the applications within the aspenONEsuite(s) the customer licenses, including the right to any new unspecified future software products and updates that may be introduced into thelicensed aspenONE software suite. The customer can change or alternate the use of multiple applications in a licensed suite through the use ofexchangeable units of measurement, or tokens, licensed in quantities determined by the customer. This enables the customer to use thoseapplications whenever required and to experiment with different applications to best solve whatever critical business challenges the customerfaces. The customer can easily increase its usage of our software as their business requirements evolve.Our Competitive Strengths In addition to the breadth and depth of our integrated aspenONE software and the flexibility of our aspenONE licensing model, we believe our keycompetitive advantages include the following:Industry-leading innovation based on substantial process expertise. Over the past 34 years, our significant investment in research anddevelopment has led to a number of major process engineering advances considered to be industry-standard applications. Our developmentorganization is comprised of software engineers and chemical engineers. This combination of expertise has been essential to the developmentof leading products embedded with chemical engineering principles, optimization algorithms, and the process industries' workflows and bestpractices.Rapid, high return on investment. Many customers purchase our software because they believe it will provide rapid, demonstrable andsignificant returns on their investment and increase their profitability. For some customers, cost reductions in the first year followinginstallation have exceeded the total cost of our software. For many customers, even a relatively small improvement in productivity cangenerate substantial recurring benefits due to the large production volumes and limited profit margins typical in process industries. Inaddition, our solutions can generate organizational efficiencies and operational improvements that can further increase a process company'sprofitability.7Table of ContentsGrowth Strategy We seek to maintain and extend our position as a leading global provider of process optimization software and related services to the process industries.Our primary growth strategy is to expand organically within our core verticals by leveraging our market leadership position and driving increased usage andproduct adoption (UPA) of the broad capabilities in our aspenONE offerings. Additionally, we seek acquisitions to accelerate our overall growth. Toaccomplish this, we will pursue the following activities:Continue to provide innovative, market-leading solutions. Our recent innovations include adaptive process control, modeling of solidsprocesses, rundown blending optimization, crude assays characterization using molecular science, electrolyte and biofuel characterizations,and methodologies for carbon management. We intend to continue to invest in research and development in order to develop and offer newand enhanced solutions for our aspenONE suites. We have pioneered a number of industry standard and award-winning software applications.For example, Aspen Plus, our process modeling tool for the chemicals industry, has won the Chemical Processing magazine Readers' ChoiceAward for "Process Simulation Software" multiple times. We have also been recognized by R&D Magazine for innovation in out of the boxmodeling capabilities that we developed with the National Institute of Standards and Technology. Additionally, we have been ranked numbereleven on Forbes magazine's 2014 and 2015 lists of the World's 100 Most Innovative Growth Companies.Further penetrate existing customer base. We have an installed base of approximately 2,100 customers. Many of our customers only use afraction of our products. We work with our customers to identify ways in which they can improve their business performance by using theentire licensed suite of aspenONE applications, both at an individual user level and across all of their plant locations. Our customers aresegmented based on their size and complexity. Our large complex customers are serviced by our Field Sales organization, while our othercustomers are serviced by our inside sales Small and Medium Business (SMB) group. Additionally, we regularly enhance our products to makethem easier to use and seek to increase productivity of users by offering more integrated workflows.Invest in high growth markets. Companies in the process industries are expanding their operations to take advantage of growing demand inmarkets such as China, Latin America, the Middle East, and Russia. Additionally, process manufacturers with existing plants in these marketsare beginning to recognize the value of upgrading their operations to take advantage of process optimization solutions. We believe we canfurther extend our presence in these markets by growing our regional operations in these markets. In addition, we will continue to expand ourinside sales organization to address new opportunities in the SMB market segment.Deploy a comprehensive digital engagement strategy. We have a broad user base spanning our vertical industries and geographies, and theypossess a variety of skills, experience and business needs. In order to reach our user base in an effective, productive and leveraged manner, weutilize digital customer engagement solutions including webinars, digital communities, social media, videos, email and other digital means.We intend to capitalize increasingly on segmentation to ensure we deliver targeted messages intended to address the specific needs of eachmarket, customer and user.Pursue acquisitions. As part of our ongoing make-vs-buy analysis, we regularly explore and evaluate acquisitions. We have made severalsmall acquisitions in recent years and believe the opportunity exists to do more.Expand our total addressable market. Our focus on innovation also means introducing product capabilities or new product categories thatcreate value for our customers and therefore expand our total addressable market.8Table of ContentsProducts Our integrated process optimization software solutions are designed and developed specifically for the process industries. Customers use our solutions toimprove their competitiveness and profitability by increasing throughput and productivity, reducing operating costs, enhancing capital efficiency, anddecreasing working capital requirements. We have designed and developed our software applications across three principal business areas:Engineering. Our engineering software applications are used during both the design and the ongoing operation of plant facilities to modeland improve the way engineers develop and deploy manufacturing assets. Process manufacturers must address a variety of challengesincluding design, operational improvement, collaborative engineering and economic evaluation. They must, for example, determine wherethey should locate facilities, how they can lower capital and manufacturing costs, what they should produce and how they can maximize plantefficiency.Manufacturing. Our manufacturing software products focus on optimizing day-to-day processing activities, enabling customers to makebetter, faster decisions that lead to improved plant performance and operating results. These solutions include desktop and server applicationsthat help customers make real-time decisions, which can reduce fixed and variable costs and improve product yields. Process manufacturersmust address a wide range of manufacturing challenges such as optimizing execution efficiency, reducing costs, selecting the right rawmaterials, scheduling and coordinating production processes, and identifying an appropriate balance between turnaround times, deliveryschedules, product quality, cost and inventory.Supply chain management. Our supply chain management solutions include desktop and server applications that help customers optimizecritical supply chain decisions in order to reduce inventory, increase asset efficiency, and respond more quickly to changing marketconditions. Process manufacturers must address numerous challenges as they strive to effectively and efficiently manage raw materialsinventory, production schedules and feedstock purchasing decisions. Supply chain managers face these challenges in an environment of ever-changing market prices, supply constraints and customer demands. Our software applications are organized into two suites: aspenONE Engineering and aspenONE Manufacturing and Supply Chain. These suites areintegrated applications that allow end users to design process manufacturing environments, forecast and simulate potential actions, monitor operationalperformance, and manage planning and scheduling activities as well as collaborate across these functions and activities. The two suites are designed aroundcore modules and applications that9Table of Contentsallow customers to design, manage and operate their process manufacturing environments, as shown below: aspenONE Engineering 10Business Area aspenONE Module Major Products Product DescriptionEngineering Engineering Aspen HYSYS Process modeling software for the design and optimization ofhydrocarbon processes Aspen Plus Process modeling software for the design and optimization ofchemical processes AspenEconomicEvaluation Economic evaluation software for estimating project capital costsand lifecycle asset economics—from conceptual definition throughdetailed engineering AspenExchangerDesign andRating Software for the design, simulation and rating of various types ofheat exchangers Aspen BasicEngineering Process engineering platform for producing front-end designdeliverables such as multi-disciplinary datasheets, PFDs, P&IDs,and equipment listsTable of Contents aspenONE Manufacturing and Supply Chain Our product development activities are currently focused on strengthening the integration of our applications and adding new capabilities that addressspecific mission-critical operational business processes in each industry. As of June 30, 2015, we had a total of 435 employees in our products group, whichis comprised of product management, software development and quality assurance. Research and development expenses were $69.6 million in fiscal 2015,$68.4 million in fiscal 2014 and $62.5 million in fiscal 2013.Sales and Marketing We employ a value-based sales approach, offering our customers a comprehensive suite of software and services that enhance the efficiency andproductivity of their engineering, manufacturing and supply chain operations. We have increasingly focused on positioning our products as a strategicinvestment and therefore devote an increasing portion of our sales efforts to our customers' senior management,11Business Area aspenONEModule Major Products Product DescriptionManufacturing AdvancedProcessControl AspenDMCplus Multi-variable controller software for maintaining processes at theiroptimal operating point under changing process conditions ManufacturingExecutionSystems Aspen InfoPlus.21 Data historian software for storing, visualizing and analyzing largevolumes of data to improve production execution and enhanceperformance managementSupply Chain PetroleumSupply Chain Aspen PIMS Refinery planning software for optimizing feedstock selection, productslate and operational execution AspenPetroleumScheduler Refinery scheduling software for scheduling and optimization ofrefinery operations with integration to refinery planning, blending anddock operations AspenPetroleumSupply ChainPlanner Economic planning software for optimizing the profitability of thepetroleum distribution network, including transportation, rawmaterials, sales demands, and processing facilities AspenCollaborativeDemandManager Software for forecasting market demand and managing forecastthrough changes in the business environment by combining historicaland real time data Aspen FleetOptimizer Software for inventory management and truck transportationoptimization in secondary petroleum distribution Supply ChainManagement Aspen SupplyPlanner Software for determining the optimal production plan taking intoaccount labor and equipment, feedstock, inbound /outboundtransportation, storage capacity, and other variables Aspen PlantScheduler Software for generating optimal production schedules to meet totaldemandTable of Contentsincluding senior decision makers in manufacturing, operations and technology. Our aspenONE solution strategy supports this value-based approach bybroadening the scope of optimization across the entire enterprise and expanding the use of process models in the operations environment. We offer a varietyof training programs focused on illustrating the capabilities of our applications as well as online training built into our applications. We have implementedincentive compensation programs for our sales force to reward efforts that increase customer usage of our products. Furthermore, we believe our aspenONElicensing model enables our sales force to develop consultative sales relationships with our customers. Historically, most of our license sales have been generated through our direct Field Sales organization. In order to market the specific functionality andother technical features of our software, our account managers work with specialized teams of technical sales personnel and product specialists organized foreach sales and marketing effort. Our technical sales personnel typically have degrees in chemical engineering or related disciplines and actively consult witha customer's plant engineers. Product specialists share their detailed knowledge of the specific features of our software solutions as they apply to the uniquebusiness processes of different vertical industries. In addition to our direct Field Sales organization, we employ an inside sales team that targets customers inthe SMB segment. We have established channel relationships with select companies that we believe can help us pursue opportunities in non-core target markets. We alsolicense our software products to universities that agree to use our products in teaching and research. We believe that students' familiarity with our productswill stimulate future demand once the students enter the workplace. We supplement our sales efforts with a variety of marketing initiatives, including industry analyst and public relations activities, campaigns to promoteproduct usage and adoption, user group meetings and customer relationship programs. Our broad user base spans multiple verticals and geographies andthese users possess a variety of skills, experience and business needs. In order to reach each of them in an effective, productive and leveraged manner we willincreasingly capitalize on digital customer engagement solutions. Using webinars, digital communities, social media, videos, email and other digital means,we seek to engage our extensive user base with targeted messages intended to address the specific needs of each market, customer and user. Our overall sales force, which consists of sales account managers, technical sales personnel, indirect-channel personnel, inside sales personnel, andmarketing personnel, consisted of 420 employees as of June 30, 2015.Software Maintenance and Support, Professional Services and Training Software maintenance and support consists primarily of providing customer technical support and access to software fixes and upgrades. Customertechnical support services are provided throughout the world by our three global call centers as well as via email and through our support website. For licenseterm arrangements entered into subsequent to our transition to a subscription-based licensing model, SMS is included with the license arrangement. Forlicense arrangements that don't include SMS, customers can purchase standalone SMS. We offer professional services focused on implementation of our solution. Our professional services team primarily consists of project engineers withdegrees in chemical engineering or a similar discipline, or who have significant relevant industry experience. Our employees include experts in fields such asthermophysical properties, distillation, adsorption processes, polymer processes, industrial reactor modeling, the identification of empirical models forprocess control or analysis, large-scale optimization, supply distribution systems modeling and scheduling methods. Our primary focus is the successfulimplementation and usage of our software, and in many instances, this work can be professionally performed by qualified third parties. As a result, we oftencompete with third-party consulting firms when bidding for professional services contracts, particularly in developed markets. We offer our services on eithera time-and-material or fixed-price basis.12Table of Contents We offer a variety of training solutions ranging from standardized training, which can be delivered in a public forum, on-site at a customer's location orover the Internet, to customized training sessions, which can be tailored to fit customer needs. We have also introduced a wide range of online computer-based training courses offering customers on-demand training in basic and advanced features of our products directly from within the products. As of June 30,2015, we had a total of 293 employees in our customer support, professional services and training groups.Business Segments We have two operating and reportable segments: i) subscription and software and ii) services. The subscription and software segment is engaged in thelicensing of process optimization software solutions and associated support services. The services segment includes professional services and training. Prior to fiscal 2014, we had three operating and reportable segments: license; SMS, training and other; and professional services. Effective July 1, 2013,we re-aligned our operating and reportable segments into i) subscription and software and ii) services. For additional information on segment realignment,revenues and their operating results, please refer to Note 10 "Segment and Geographic Information" to our consolidated financial statements included under"Item 8. Financial Statements and Supplementary Data" of this Form 10-K. Our prior period reportable segment information has been reclassified to reflect thecurrent segment structure and conform to the current period presentation.Competition Our markets in general are competitive, and we expect the intensity of competition in our markets to increase as existing competitors enhance andexpand their product and service offerings and as new participants enter the market. Increased competition may result in price reductions, reducedprofitability and loss of market share. We cannot ensure that we will be able to compete successfully against existing or future competitors. Some of ourcustomers and companies with which we have strategic relationships also are, or may become, competitors. Many of our current and potential competitors have greater financial, technical, marketing, service and other resources than we have. As a result, thesecompanies may be able to offer lower prices, additional products or services, or other incentives that we cannot match or offer. These competitors may be in astronger position to respond more quickly to new technologies and may be able to undertake more extensive marketing campaigns. We believe they alsohave adopted and may continue to pursue more aggressive pricing policies and make more attractive offers to potential customers, employees and strategicpartners. For example, some competitors may be able to initiate relationships through sales and installations of hardware and then seek to expand theircustomer relationships by offering process optimization software at a discount. In addition, competitors with greater financial resources may make strategicacquisitions to increase their ability to gain market share or improve the quality or marketability of their products. Furthermore, we face challenges in sellingour solutions to large companies in the process industries that have internally developed their own proprietary software solutions. We seek to develop and offer integrated suites of targeted, high-value vertical industry solutions that can be implemented with relatively limited servicerequirements. We believe this approach provides us with an advantage over many of our competitors that offer software products that are point solutions orare more service-based. Our key competitive differentiators include:•breadth, depth and integration of our aspenONE software offering; •rapid return on investment and increase in profitability; •domain expertise of chemical engineering personnel;13Table of Contents•focus solely on software for the process industries; •flexibility of our usage-based aspenONE licensing model; and •consistent global support.Key License AgreementsHoneywell We acquired Hyprotech Ltd. and related subsidiaries of AEA Technology plc in May 2002. The Federal Trade Commission alleged in an administrativecomplaint filed in August 2003 that this acquisition was improperly anticompetitive. In December 2004, we entered into a consent decree with the FTC toresolve the matter. In connection with the consent decree, we and certain of our subsidiaries entered into a purchase and sale agreement with HoneywellInternational Inc. and certain of its subsidiaries, pursuant to which we sold intellectual property and other assets to Honeywell relating to our operatortraining business and our Hyprotech engineering software products. Under the terms of the transactions, we retained a perpetual, irrevocable, worldwide, royalty-free non-exclusive license (with the limited rights tosublicense) to the Hyprotech engineering software and have the right to continue to develop and sell the Hyprotech engineering products. We were subject to compliance obligations under the FTC consent decree which expired December 31, 2014. The compliance obligations are describedin our previous annual reports on Form 10-K.Massachusetts Institute of Technology In March 1982, we entered into a System License Agreement with the Massachusetts Institute of Technology, or MIT, granting us a worldwide, perpetualnon-exclusive license (with the right to sublicense) to use, reproduce, distribute and create derivative works of the computer programs known as "ASPEN".The ASPEN program licensed from MIT provides a framework for simulating the steady-state behavior of chemical processes that we utilize in the simulationengine for our Aspen Plus product. MIT agreed that we would own any derivative works and enhancements. A one-time license fee of $30,000 was paid infull. MIT has the right to terminate the agreement if we breach the agreement and do not cure the breach within 90 days after receiving a written notice fromMIT; if we cease to carry on our business; or if certain bankruptcy or insolvency proceedings are commenced and not dismissed. In the event of suchtermination, sublicenses granted to our customers prior to termination will remain in effect.Intellectual Property Our software is proprietary. Our strategy is to rely on a combination of copyright, patent, trademark and trade secret laws in the United States and otherjurisdictions, and to rely on license and confidentiality agreements and software security measures to further protect our proprietary technology and brand.The laws of many countries in which our products are licensed may not protect our intellectual property rights to the same extent as the laws of the UnitedStates. We have obtained or applied for patent protection with respect to some of our intellectual property, but generally do not rely on patents as a principalmeans of protecting intellectual property. We conduct business under our trademarks and use trademarks on some of our products. We believe that having distinctive marks may be an importantfactor in marketing our products. We have registered or applied to register some of our significant trademarks in the United States and in selected othercountries. Although we have a foreign trademark registration program for selected marks, the laws of many countries protect trademarks solely on the basis ofregistration and we may not be able to14Table of Contentsregister or use such marks in each foreign country in which we seek registration. We actively monitor use of our trademarks and have enforced, and willcontinue to enforce, our rights to our trademarks. We rely on trade secrets to protect certain of our technology. We generally seek to protect these trade secrets by entering into non-disclosure agreementswith our employees and customers, and historically have restricted access to our software and source code, which we regard as proprietary information. Incertain cases, we have provided copies of code to customers for the purpose of special product customization or have deposited the source code with a third-party escrow agent as security for ongoing service and license obligations. In these cases, we rely on non-disclosure and other contractual provisions toprotect our proprietary rights. Trade secrets may be difficult to protect, and it is possible that parties may breach their confidentiality agreements with us. The steps we have taken to protect our proprietary rights may not be adequate to deter misappropriation of our technology or independent developmentby others of technologies that are substantially equivalent or superior to our technology. Any misappropriation of our technology or development ofcompetitive technologies could harm our business. We could incur substantial costs in protecting and enforcing our intellectual property rights. We believe that the success of our business depends more on the quality of our proprietary software products, technology, processes and know-how thanon trademarks, copyrights or patents. While we consider our intellectual property rights to be valuable, we do not believe that our competitive position in theindustry is dependent simply on obtaining legal protection for our software products and technology. Instead, we believe that the success of our businessdepends primarily on our ability to maintain a leadership position by developing proprietary software products, technology, information, processes andknow-how. Nevertheless, we attempt to protect our intellectual property rights with respect to our products and development processes through trademark,copyright and patent registrations, both foreign and domestic, whenever appropriate as part of our ongoing research and development activities.Employees As of June 30, 2015, we had a total of 1,372 full-time employees, of whom 772 were located in the United States. None of our employees is representedby a labor union, except for one employee of our subsidiary Hyprotech UK Limited who belongs to the Prospect union for professionals. We haveexperienced no work stoppages and believe that our employee relations are satisfactory.Corporate Information Aspen Technology, Inc. was formed in Massachusetts in 1981 and reincorporated in Delaware in 1998. Our principal executive offices are at 20 CrosbyDrive, Bedford, MA 01730, and our telephone number at that address is (781) 221-6400. Our website address is http://www.aspentech.com. The informationon our website is not part of this Form 10-K, unless expressly noted.Available Information We file reports with the Securities and Exchange Commission, or the SEC, which we make available on our website free of charge. These reports includeannual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports, each of which is provided on ourwebsite as soon as reasonably practicable after we electronically file such materials with or furnish them to the SEC. You can also read and copy any materialswe file with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, DC 20549. You can obtain additional information about theoperation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website (http://www.sec.gov) that containsreports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.15Table of Contents Item 1A. Risk Factors. Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below beforepurchasing our common stock. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertaintiesmay also impair our business operations. If any of the following risks actually occurs, our business, financial condition, results of operations or cash flowswould likely suffer. In that case, the trading price of our common stock could fall, and you may lose all or part of your investment in our common stock.Risks Related to Our BusinessIf we fail to increase usage and product adoption of our aspenONE offerings, or fail to continue to provide innovative, market-leading solutions, we maybe unable to implement our growth strategy successfully, and our business could be seriously harmed. The maintenance and extension of our market leadership and our future growth is largely dependent upon our ability to develop new software productsthat achieve market acceptance with acceptable operating margins, and increase usage and product adoption of our aspenONE offerings. Our strategy is tocontinue to provide innovative, market leading solutions, further penetrate our existing customer base, invest in high-growth markets, deploy acomprehensive digital engagement strategy, pursue acquisitions and expand our total addressable market. Enterprises are requiring their application softwarevendors to provide greater levels of functionality and broader product offerings. We must continue to enhance our current product line and develop andintroduce new products and services that keep pace with increasingly sophisticated customer requirements and the technological developments of ourcompetitors. Our business and operating results could suffer if we cannot successfully execute our strategy and drive usage and product adoption. We have implemented a product strategy that unifies our software solutions under the aspenONE brand with differentiated aspenONE vertical solutionstargeted at specific process industry segments. We cannot ensure that our product strategy will result in products that will continue to meet market needs andachieve significant usage and product adoption. If we fail to increase usage and product adoption or fail to develop or acquire new software products thatmeet the demands of our customers or our target markets, our operating results and cash flows from operations will grow at a slower rate than we anticipateand our financial condition could suffer.Our business could suffer if the demand for, or usage of, our aspenONE software declines for any reason, including declines due to adverse changes in theprocess industries. Our aspenONE suites account for a significant majority of our revenue and will continue to do so for the foreseeable future. If demand for, or usage of, oursoftware declines for any reason, our operating results, cash flows from operations and financial position would suffer. Our business could be adverselyaffected by:•any decline in demand for or usage of our aspenONE suites; •the introduction of products and technologies that serve as a replacement or substitute for, or represent an improvement over, our aspenONEsuites; •technological innovations that our aspenONE suites do not address; •our inability to release enhanced versions of our aspenONE suites on a timely basis; and •adverse changes in the process industries or otherwise that lead to reductions, postponements or cancellations of customer purchases of ourproducts and services, or delays in the execution of license agreement renewals in the same quarter in which the original agreements expire.16Table of Contents Because of the nature of their products and manufacturing processes and their global operations, companies in the process industries are subject to risk ofadverse or even catastrophic environmental, safety and health accidents or incidents and are often subject to changing standards and regulations worldwide. In addition, in the past, worldwide economic downturns and pricing pressures experienced by energy, chemical, engineering and construction, and otherprocess industries have led to consolidations and reorganizations. Any such adverse environmental, safety or health incident, change in regulatory standards, or economic downturn that affects the process industries, aswell as general domestic and foreign economic conditions and other factors that reduce spending by companies in these industries, could harm our operatingresults in the future.Unfavorable economic and market conditions or a lessening demand in the market for process optimization software could adversely affect our operatingresults. Our business is influenced by a range of factors that are beyond our control and difficult or impossible to predict. If the market for process optimizationsoftware grows more slowly than we anticipate, demand for our products and services could decline and our operating results could be impaired. Further, thestate of the global economy may deteriorate in the future. Our operating results may be adversely affected by unfavorable global economic and marketconditions as well as a lessening demand for process optimization software generally. Customer demand for our products is linked to the strength of the global economy. If weakness in the global economy persists, many customers maydelay or reduce technology purchases. This could result in reductions in sales of our products, longer sales cycles, slower adoption of new technologies,increased price competition or reduced use of our products by our customers. We will lose revenue if demand for our products is reduced because potentialcustomers experience weak or deteriorating economic conditions, catastrophic environmental or other events, and our business, results of operations,financial condition and cash flow from operations would likely be adversely affected.The majority of our revenue is attributable to operations outside the United States, and our operating results therefore may be materially affected by theeconomic, political, military, regulatory and other risks of foreign operations or of transacting business with customers outside the United States. As of June 30, 2015, we operated in 31 countries. We sell our products primarily through a direct sales force located throughout the world. In the eventthat we are unable to adequately staff and maintain our foreign operations, we could face difficulties managing our international operations. Customers outside the United States accounted for the majority of our total revenue during the fiscal years ended June 30, 2015, 2014 and 2013. Weanticipate that revenue from customers outside the United States will continue to account for a significant portion of our total revenue for the foreseeablefuture. Our operating results attributable to operations outside the United States are subject to additional risks, including:•unexpected changes in regulatory requirements, tariffs and other barriers, including, for example, sanctions or other regulatory restrictionsimposed by the United States or foreign governments; •less effective protection of intellectual property; •requirements of foreign laws and other governmental controls; •delays in the execution of license agreement renewals in the same quarter in which the original agreements expire;17Table of Contents•difficulties in collecting trade accounts receivable in other countries; •adverse tax consequences; and •the challenges of managing legal disputes in foreign jurisdictions.Fluctuations in foreign currency exchange rates could result in declines in our reported revenue and operating results. During fiscal 2015, 2014 and 2013, 13.8%, 15.7% and 19.1% of our total revenue was denominated in a currency other than the U.S. dollar. 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 andoperating results are subject to fluctuations in foreign exchange rates. Foreign currency risk arises primarily from the net difference between non-U.S. dollarreceipts from customers outside the United States and non-U.S. dollar operating expenses for subsidiaries in foreign countries. Currently, our largestexposures to foreign exchange rates exist primarily with the Euro, Pound Sterling, Canadian dollar and Japanese Yen against the U.S. dollar. During fiscal2015, 2014 and 2013, 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 inthe future may adversely affect our revenue and operating results. Any hedging policies we may implement in the future may not be successful, and the costof those hedging techniques may have a significant negative impact on our operating results.Competition from software offered by current competitors and new market entrants, as well as from internally developed solutions by our customers, couldadversely affect our ability to sell our software products and related services and could result in pressure to price our products in a manner that reducesour margins. Our markets in general are competitive and differ among our principal product areas: engineering, manufacturing, and supply chain management. Weface challenges in selling our solutions to large companies in the process industries that have internally developed their own proprietary software solutions.Many of our current and potential competitors have greater financial, technical, marketing, service and other resources than we have. As a result, thesecompanies may be able to offer lower prices, additional products or services, or other incentives that we cannot match or offer. These competitors may be in astronger position to respond more quickly to new technologies and may be able to undertake more extensive marketing campaigns. We believe they alsohave adopted and may continue to pursue more aggressive pricing policies and make more attractive offers to potential customers, employees and strategicpartners. For example, some competitors may be able to initiate relationships through sales and installations of hardware and then seek to expand theircustomer relationships by offering process optimization software at a discount. In addition, many of our competitors have established, and may in the futurecontinue to establish, cooperative relationships with third parties to improve their product offerings and to increase the availability of their products in themarketplace. Competitors with greater financial resources may make strategic acquisitions to increase their ability to gain market share or improve the qualityor marketability of their products. Competition could seriously impede our ability to sell additional software products and related services on terms favorable to us. Businesses maycontinue to enhance their internally developed solutions, rather than investing in commercial software such as ours. Our current and potential commercialcompetitors may develop and market new technologies that render our existing or future products obsolete, unmarketable or less competitive. In addition, ifthese competitors develop products with similar or superior functionality to our products, we may need to decrease the prices for our products in order toremain competitive. If we are unable to maintain our current pricing due to competitive pressures, our margins will be reduced and our operating results willbe negatively affected.18Table of ContentsWe cannot ensure that we will be able to compete successfully against current or future competitors or that competitive pressures will not materiallyadversely affect our business, financial condition and operating results.Defects or errors in our software products could harm our reputation, impair our ability to sell our products and result in significant costs to us. Our software products are complex and may contain undetected defects or errors. We have not suffered significant harm from any defects or errors to date,but we have from time to time found defects in our products and we may discover additional defects in the future. We may not be able to detect and correctdefects or errors before releasing products. Consequently, we or our customers may discover defects or errors after our products have been implemented. Wehave in the past issued, and may in the future need to issue, corrective releases of our products to remedy defects or errors. The occurrence of any defects orerrors could result in:•lost or delayed market acceptance and sales of our products; •delays in payment to us by customers; •product returns; •injury to our reputation; •diversion of our resources; •increased service and warranty expenses or financial concessions; •increased insurance costs; and •legal claims, including product liability claims.Defects and errors in our software products could result in claims for substantial damages against us.We may be subject to significant expenses and damages because of product-related claims. In the ordinary course of business, we are, from time to time, involved in product-related lawsuits, claims, investigations, proceedings and threats oflitigation. These matters include an April 2004 claim by a customer that certain of our software products and implementation services failed to meet thecustomer's expectations. In March 2014, a judgment issued in favor of the claimant customer against us in the amount of approximately $2.6 million plusinterest and a portion of legal fees. We have filed an appeal of the judgment; however, the results of such appeal, and of claims in general related to ourproducts and services, cannot be predicted with certainty, and could materially adversely affect our results of operations, cash flows or financial position.Claims that we infringe the intellectual property rights of others may be costly to defend or settle and could damage our business. We cannot be certain that our software and services do not infringe issued patents, copyrights, trademarks or other intellectual property rights, soinfringement claims might be asserted against us. In addition, we have agreed, and may agree in the future, to indemnify certain of our customers againstinfringement claims that third parties may assert against our customers based on use of our software or services. Such claims may have a material adverseeffect on our business, may be time-consuming and may result in substantial costs and diversion of resources, including our management's attention to ourbusiness. Furthermore, a party making an infringement claim could secure a judgment that requires us to pay substantial damages and could also include aninjunction or other court order that could prevent us from selling our software or require that we re-engineer some or all of our products. Claims of intellectualproperty infringement also might require us to enter costly royalty or license agreements.19Table of ContentsWe may be unable to obtain royalty or license agreements on terms acceptable to us or at all. Our business, operating results and financial condition could beharmed significantly if any of these events were to occur, and the price of our common stock could be adversely affected.We may not be able to protect our intellectual property rights, which could make us less competitive and cause us to lose market share. Our software is proprietary. Our strategy is to rely on a combination of copyright, patent, trademark and trade secret laws in the United States and otherjurisdictions, and to rely on license and confidentiality agreements and software security measures to further protect our proprietary technology and brand.We have obtained or applied for patent protection with respect to some of our intellectual property, but generally do not rely on patents as a principal meansof protecting our intellectual property. We have registered or applied to register some of our trademarks in the United States and in selected other countries.We generally enter into non-disclosure agreements with our employees and customers, and historically have restricted third-party access to our software andsource code, which we regard as proprietary information. In certain cases, we have provided copies of source code to customers for the purpose of specialproduct customization or have deposited copies of the source code with a third-party escrow agent as security for ongoing service and license obligations. Inthese cases, we rely on non-disclosure and other contractual provisions to protect our proprietary rights. The steps we have taken to protect our proprietary rights may not be adequate to deter misappropriation of our technology or independent developmentby others of technologies that are substantially equivalent or superior to our technology. Our intellectual property rights may expire or be challenged,invalidated or infringed upon by third parties or we may be unable to maintain, renew or enter into new licenses on commercially reasonable terms. Anymisappropriation of our technology or development of competitive technologies could harm our business and could diminish or cause us to lose thecompetitive advantages associated with our proprietary technology, and could subject us to substantial costs in protecting and enforcing our intellectualproperty rights, and/or temporarily or permanently disrupt our sales and marketing of the affected products or services. The laws of some countries in whichour products are licensed do not protect our intellectual property rights to the same extent as the laws of the United States. Moreover, in some non-U.S.countries, laws affecting intellectual property rights are uncertain in their application, which can affect the scope of enforceability of our intellectual propertyrights.Our software research and development initiatives and our customer relationships could be compromised if the security of our information technology isbreached as a result of a cyber-attack. This could have a material adverse effect on our business, operating results and financial condition, and could harmour competitive position. We devote significant resources to continually updating our software and developing new products, and our financial performance is dependent in partupon our ability to bring new products and services to market. Our customers use our software to optimize their manufacturing processes, and they rely on usto provide updates and releases as part of our software maintenance and support services, and to provide remote on-line troubleshooting support. The securityof our information technology environment is therefore important to our research and development initiatives, and an important consideration in ourcustomers' purchasing decisions. If the security of our systems is impaired, our development initiatives might be disrupted, and we might be unable toprovide service. Our customer relationships might deteriorate, our reputation in the industry could be harmed, and we could be subject to liability claims.This could reduce our revenues, and expose us to significant costs to detect, correct and avoid recurrences of any breach of security and to defend any claimsagainst us.20Table of ContentsRisks Related to Our Common StockOur common stock may experience substantial price and volume fluctuations. The equity markets have from time to time experienced extreme price and volume fluctuations, particularly in the high technology sector, and thosefluctuations often have been unrelated to the operating performance of particular companies. In addition, the market price of our common stock may beaffected by other factors, such as: (i) our financial performance; (ii) becoming a U.S. corporate cash taxpayer in fiscal 2016, based on our current projections;(iii) announcements of technological innovations or new products by us or our competitors; and (iv) market conditions in the computer software or hardwareindustries. In the past, following periods of volatility in the market price of a public company's securities, securities class action litigation has often been institutedagainst that company. This type of litigation against us could result in substantial liability and costs and divert management's attention and resources.Our corporate documents and provisions of Delaware law may prevent a change in control or management that stockholders may consider desirable. Section 203 of the Delaware General Corporation Law, our charter and our by-laws contain provisions that might enable our management to resist atakeover of our company. These provisions include:•limitations on the removal of directors; •a classified board of directors, so that not all members of the board are elected at one time; •advance notice requirements for stockholder proposals and nominations; •the inability of stockholders to act by written consent or to call special meetings; •the ability of the board to make, alter or repeal our by-laws; and •the ability of the board to designate the terms of and issue new series of preferred stock without stockholder approval.These provisions could:•have the effect of delaying, deferring or preventing a change in control of our company or a change in our management that stockholders mayconsider favorable or beneficial; •discourage proxy contests and make it more difficult for stockholders to elect directors and take other corporate actions; and •limit the price that investors might be willing to pay in the future for shares of our common stock. Item 1B. Unresolved Staff Comments. None. Item 2. Properties. Our principal executive offices are located in leased facilities in Bedford, Massachusetts, consisting of approximately 143,000 square feet of office spaceto accommodate our product development, sales, marketing, operations, finance and administrative functions. The lease for our Bedford executive officescommenced in November, 2014 and is scheduled to expire March 2025. Subject to the terms and conditions of the lease, we may extend the term of the leasefor two successive terms of five years each.21Table of Contents During fiscal 2015 we relocated and consolidated our Burlington, Massachusetts executive offices (lease expired January 31, 2015) and Nashua, NewHampshire product development office (lease expires August 31, 2015) into the Bedford facilities. We also leased approximately 76,000 square feet in Houston, Texas, which includes approximately 8,000 square feet of subleased space. In August 2015,an amendment to the Houston lease was executed which reduces the leased space to approximately 63,000 and returns the subleased space. In addition to ourBedford and Houston locations, we lease office space in Shanghai, Reading (UK), Singapore, Bahrain and Tokyo, to accommodate sales, services and productdevelopment functions. In the remainder of our other locations, the majority of our leases have lease terms of one year or less that are generally based on the number ofworkstations required. We believe this facilities strategy provides us with significant flexibility to adjust to changes in our business environment. We do notown any real property. We believe that our leased facilities are adequate for our anticipated future needs. Item 3. Legal Proceedings. None. Item 4. Mine Safety Disclosures None.22Table of Contents PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock currently trades on The NASDAQ Global Select Market under the symbol "AZPN." The closing price of our common stock onJune 30, 2015 was $45.55. The following table sets forth, for the periods indicated, the high and low sales prices per share of our common stock as reportedby The NASDAQ Global Select Market:Holders On August 6, 2015, there were 454 holders of record of our common stock. The number of record holders does not include persons who held our commonstock in nominee or "street name" accounts through brokers.Dividends We have never declared or paid cash dividends on our common stock. We do not anticipate paying cash dividends on our common stock in theforeseeable future. Any future determination relating to our dividend policy will be made at the discretion of the Board of Directors and will depend on anumber of factors, including our future earnings, capital requirements, financial condition and future prospects and such other factors as the Board ofDirectors may deem relevant.Purchases of Equity Securities by the Issuer As of June 30, 2015, we had repurchased an aggregate of 17,103,318 shares of our common stock pursuant a series of repurchases beginning onNovember 1, 2010. On January 28, 2015, our Board of Directors approved a share repurchase program for up to $450 million worth of our common stock. This sharerepurchase program replaced and terminated the prior program approved by the Board of Directors on April 23, 2014 that provided for repurchases of up to$200 million.23 2015 2014 Period Low High Low High Quarter ended June 30 $38.10 $46.52 $37.60 $46.40 Quarter ended March 31 32.25 39.93 40.43 47.84 Quarter ended December 31 32.59 40.33 33.75 42.22 Quarter ended September 30 36.69 47.05 29.29 35.27 Table of Contents The following table sets forth, for the month indicated, our purchases of common stock during the fourth quarter of fiscal 2015: Issuer Purchases of Equity Securities Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information about the securities authorized for issuance under our equity compensation plans as of June 30, 2015: Equity compensation plans approved by security holders consist of our 2010 equity incentive plan. Options issuable under the equity incentive planhave a maximum term of ten years.Stockholder Return Comparison The information included in this section is not deemed to be "soliciting material" or to be "filed" with the SEC or subject to Regulation 14A or 14Cunder the Securities Exchange Act or to the liabilities of Section 18 of the Securities Exchange Act, and will not be deemed to be incorporated by referenceinto any filing under the Securities Act or the Securities Exchange Act, except to the extent we specifically incorporate it by reference into such a filing. The graph below matches the cumulative 5-year total return of holders of our common stock with the cumulative total returns of the NASDAQ Compositeindex and the NASDAQ Computer & Data Processing index. The graph assumes that the value of the investment in our common stock and in each of theindexes (including reinvestment of dividends) was $100 on June 30, 2010 and tracks it through June 30, 2015.24Period Total Numberof SharesPurchased Average PricePaid per Share Total Number ofShares Purchasedas Part of PubliclyAnnouncedProgram Approximate DollarValue of Shares thatMay Yet BePurchased Underthe Program April 1 to 30, 2015 852,671 $40.07 852,671 May 1 to 31, 2015 476,017 43.20 476,017 June 1 to 30, 2015 422,743 44.74 422,743 1,751,431 $42.05 1,751,431 $301,358,696 Plan Category Number ofsecurities to beissued upon exerciseof outstandingoptions, warrantsand rights Weighted-averageexerciseprice ofoutstandingoptions,warrants andrights Number of securitiesremaining available forfuture issuance underequity compensationplans Equity compensation plans approved by security holders 1,756,689 $29.99 4,146,931 Equity compensation plans not approved by security holders — — — Total 1,756,689 $29.99 4,146,931 Table of Contents COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among Aspen Technology, Inc., the NASDAQ Composite Indexand the NASDAQ Computer & Data Processing Index *$100 invested on 6/30/10 in stock or index, including reinvestment of dividends. Fiscal year ending June 30.The stock price performance included in this graph is not necessarily indicative of future stock price performance.25 Year Ended June 30, 2010 2011 2012 2013 2014 2015 Aspen Technology, Inc. $100.00 $157.76 $212.58 $264.37 $426.08 $418.27 NASDAQ Composite $100.00 $132.14 $142.90 $169.55 $223.20 $253.21 NASDAQ Computer & Data Processing $100.00 $129.86 $138.45 $166.63 $224.67 $250.44 Table of Contents Item 6. Selected Financial Data. The following tables present selected consolidated financial data for Aspen Technology, Inc. The consolidated statements of operations data set forthbelow for fiscal 2015, 2014 and 2013 and the consolidated balance sheets data as of June 30, 2015, and 2014, are derived from our consolidated financialstatements included beginning on page F-1 of this Form 10-K. The consolidated statements of operations data for fiscal 2012 and 2011 and the consolidatedbalance sheet data as of June 30, 2013, 2012, and 2011 are derived from our consolidated financial statements that are not included in this Form 10-K. Thedata presented below should be read in conjunction with our consolidated financial statements and accompanying notes beginning on page F-1 and "Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations."26 Year Ended June 30, 2015 2014 2013 2012 2011 (in Thousands, except per share data) Consolidated Statements of Operations Data: Revenue(1) $440,401 $391,453 $311,387 $243,134 $198,154 Gross profit 390,825 338,765 261,039 190,857 145,809 Income (loss) from operations 179,792 129,724 55,600 (15,007) (54,576)Net income (loss)(2) $118,407 $85,783 $45,262 $(13,808)$10,257 Basic income (loss) per share $1.34 $0.93 $0.48 $(0.15)$0.11 Diluted income (loss) per share $1.33 $0.92 $0.47 $(0.15)$0.11 Weighted average shares outstanding—Basic 88,398 92,648 93,586 93,780 93,488 Weighted average shares outstanding—Diluted 89,016 93,665 95,410 93,780 95,853 (1)In July 2009, we introduced our aspenONE licensing model under which license revenue is recognized over the term of a licensecontract. We previously recognized a substantial majority of our license revenue upfront, upon shipment of software. Refer to "Item 7.Management's Discussion and Analysis and Results of Operations—Transition to the aspenONE Licensing Model." (2)Our provision for income taxes provided a net benefit of $54.0 million in fiscal 2011, due to the reversal of a significant portion of ourU.S. valuation allowance in the fourth quarter of fiscal 2011. Year Ended June 30, 2015 2014 2013 2012 2011 (in Thousands) Consolidated Balance Sheet Data: Cash and cash equivalents $156,249 $199,526 $132,432 $165,242 $149,985 Marketable securities 62,244 98,889 92,368 — — Working capital (32,836) 63,178 69,890 65,744 80,188 Accounts receivable, net 30,721 38,532 36,988 31,450 27,866 Installments receivable, net 1,842 1,451 14,732 47,230 86,476 Collateralized receivables, net — — — 6,297 25,039 Total assets 315,361 407,972 382,748 368,335 399,794 Deferred revenue 288,887 274,882 231,353 187,173 128,943 Secured borrowings — — — 10,756 24,913 Total stockholders' (deficit) equity (48,546) 83,676 101,898 113,592 157,803 Table of Contents Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion in conjunction with our consolidated financial statements and related notes beginning on page F-1. Inaddition to historical information, this discussion contains forward-looking statements that involve risks and uncertainties. You should read "Item 1A. RiskFactors" for a discussion of important factors that could cause our actual results to differ materially from our expectations. Our fiscal year ends on June 30, and references to a specific fiscal year are the twelve months ended June 30 of such year (for example, "fiscal 2015" refersto the year ended June 30, 2015).Business Overview We are a leading global provider of mission-critical process optimization software solutions designed to manage and optimize plant and process design,operational performance, and supply chain planning. Our aspenONE software and related services have been developed specifically for companies in theprocess industries, including the energy, chemicals, and engineering and construction industries. Customers use our solutions to improve theircompetitiveness and profitability by increasing throughput and productivity, reducing operating costs, enhancing capital efficiency, and decreasing workingcapital requirements. Our software incorporates our proprietary mathematical and empirical models of manufacturing and planning processes and reflects the deep domainexpertise we have amassed from focusing on solutions for the process industries for over 30 years. We have developed our applications to design andoptimize processes across three principal business areas: engineering, manufacturing and supply chain. We are a recognized market and technology leader inproviding process optimization software for each of these business areas. We have established sustainable competitive advantages within our industry based on the following strengths:•Innovative products that can enhance our customers' profitability; •Long-term customer relationships; •Large installed base of users of our software; and •Long-term license contracts with historically high renewal rates. We have approximately 2,100 customers globally. Our customers consists of companies engaged in process industries such as energy, chemicals,engineering and construction, as well as consumer packaged goods, power, metals and mining, pulp and paper, pharmaceuticals and biofuels. We license our software products primarily through a subscription offering which we refer to as our aspenONE licensing model. Our aspenONE productsare organized into two suites: 1) engineering and 2) manufacturing and supply chain, or MSC. The aspenONE licensing model provides customers withaccess 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 suitethrough the use of exchangeable units of measurement, called tokens, licensed in quantities determined by the customer. This licensing system enablescustomers to use products as needed and to experiment with different products to best solve whatever critical business challenges they face. Customers canincrease their usage of our software by purchasing additional tokens as business needs evolve. We believe easier access to all of the aspenONE products willlead to increased software usage and higher revenue over time.27Table of ContentsTransition to the aspenONE Licensing Model Prior to fiscal 2010, we offered term or perpetual licenses to specific products, or specifically defined sets of products, which we refer to as point products.The majority of our license revenue was recognized under an "upfront revenue model," in which the net present value of the aggregate license fees wasrecognized as revenue upon shipment of the point products, provided all revenue recognition criteria were met. Customers typically received one year ofpost-contract software maintenance and support, or SMS, with their license agreements and then could elect to renew SMS annually. Revenue from SMS wasrecognized ratably over the period in which the SMS was delivered. In fiscal 2010, we introduced the following changes to our licensing model:(i)We began offering our software on a subscription basis allowing our customers access to all products within a licensed suite (aspenONEEngineering or aspenONE Manufacturing and Supply Chain). SMS is included for the entire term of the arrangement and customers areentitled to any software products or updates introduced into the licensed suite. We refer to this license arrangement as our aspenONE licensingmodel. (ii)We began to include SMS for the entire term on our point product term arrangements. In fiscal 2012, we introduced Premier Plus SMS. As part of this offering, customers receive 24x7 support, faster response times, dedicated technicaladvocates and access to web-based training modules. Premier Plus SMS is exclusively available as a component of our term contract arrangements and we areunable to establish VSOE for this deliverable because we don't offer it on a stand-alone basis. Revenue related to our aspenONE licensing model and point product arrangements with Premier Plus SMS are both recognized over the term of thearrangement on a ratable basis. The changes to our licensing model resulted in a significant reduction in license revenue in fiscal 2010, as compared to fiscalperiods preceding our licensing model changes. From fiscal 2010 through fiscal 2015, as customer license arrangements previously executed under theupfront revenue model reached the end of their terms, and were renewed under the aspenONE licensing model, we recognized increasing amounts ofsubscription revenue and deferred revenue. The value of our installed base of software licenses was also growing during this period, which further contributedto growth in subscription and deferred revenue. Many of our license arrangements were five or six years in duration when the aspenONE licensing model wasintroduced at the start of fiscal 2010, and consequently, a number of arrangements executed under the upfront revenue model did not reach the end of theiroriginal term until the end of fiscal 2015. For fiscal 2016 and beyond, we do not expect the changes to our licensing model to have any material impact onsubscription revenue or deferred revenue. The changes to our licensing model introduced in fiscal 2010 did not change the method or timing of customer billings or cash collections. In addition,the changes to our licensing model did not impact the incurrence or timing of our expenses. Since there was no corresponding expense reduction to offset thelower revenue during fiscal years 2010 through 2015, operating income was lower than what would have been reported under a fully transitioned revenuemodel, and during fiscal 2010, 2011 and 2012, the lower revenue resulted in operating losses.Segments Re-alignment Prior to fiscal 2014, we had three operating and reportable segments: license; SMS, training and other; and professional services. As our customers have transitioned to our aspenONE licensing model, legacy SMS revenue has decreased and been offset by a corresponding increase inrevenue from aspenONE licensing arrangements and from point product arrangements with Premier Plus. As a result, legacy SMS revenue28Table of Contentsis no longer significant in relation to our total revenue and no longer represents a significant line of business. We manage legacy SMS as a part of our broader software licensing business and assess business performance on a combined basis. Our President andChief Executive Officer evaluates software licensing and maintenance on an aggregate basis when assessing performance. Effective July 1, 2013, we re-aligned our operating and reportable segments into i) subscription and software and ii) services. The subscription and software segment is engaged in the licensing of process optimization software solutions and associated support services. Theservices segment includes professional services and training. For additional information on segment revenues and their operating results, please refer to Note 10 "Segment and Geographic Information" to ourconsolidated financial statements included under "Item 8. Financial Statements and Supplementary Data" of this Form 10-K. Our prior period reportablesegment information was reclassified to reflect the current segment structure and conform to the current period presentation.Revenue We generate revenue primarily from the following sources:Subscription and software. We provide integrated process optimization software solutions designed specifically for process industries. Welicense our software products, together with SMS, primarily on a term basis, and we offer extended payment options for our term licenseagreements that generally require annual payments, which we also refer to as installments. We provide customers technical support, access tosoftware fixes and updates and the right to any new unspecified future software products and updates that may be introduced into the licensedaspenONE software suite. Our technical support services are provided from our customer support centers throughout the world, as well as viaemail and through our support website.Services and other. We provide training and professional services to our customers. Our professional services are focused on implementingour technology in order to improve customers' plant performance and gain better operational data. Customers who use our professionalservices typically engage us to provide those services over periods of up to 24 months. We charge customers for professional services on atime-and-materials or fixed-price basis. We provide training services to our customers, including on-site, Internet-based and customizedtraining.Key Components of OperationsRevenue Subscription and Software Revenue. Our subscription and software revenue consists of product and related revenue from the following sources:(i)aspenONE licensing model; (ii)point product arrangements with our Premier Plus SMS offering included for the contract term (referred to as point product arrangements withPremier Plus SMS); (iii)legacy arrangements including (a) amendments to existing legacy term arrangements, (b) renewals of legacy term arrangements and (c) legacyarrangements that are being recognized over time as a result of not previously meeting one or more of the requirements for recognition underthe upfront revenue model;29Table of Contents(iv)legacy SMS arrangements; and (v)perpetual arrangements.Revenue Reclassification Prior to fiscal 2014, legacy SMS revenue was classified within services and other revenue in our consolidated statements of operations. Cost of legacySMS revenue was included within cost of services and other revenue. Beginning with fiscal 2014, legacy SMS revenue is included within subscription andsoftware revenue in our consolidated statements of operations. We reclassified legacy SMS revenue into subscription and software revenue in ourconsolidated statements of operations based on the following rationale:i)Legacy SMS revenue had decreased since fiscal 2010, and had been offset by a corresponding increase in subscription and software revenue ascustomers transitioned to our aspenONE licensing model and to point product arrangements with Premier Plus SMS. ii)Legacy SMS revenue was no longer significant in relation to our total revenue due to the number of our term license arrangements that hadbeen converted to the aspenONE licensing model. iii)We expected legacy SMS revenue to continue to decrease as expiring license arrangements were renewed on the aspenONE licensing model. iv)We managed legacy SMS as a part of our broader software licensing business. The distinction between legacy SMS revenue and revenue fromaspenONE licensing and point product arrangements with Premier Plus SMS included for the full contract term no longer represented ameaningful difference from a line of business standpoint since we assessed business performance on a combined basis. v)Legacy SMS revenue and revenue from our aspenONE license arrangements share the same revenue recognition methodology and are bothrecognized on a ratable basis. The following table summarizes the impact of revenue and cost of revenue reclassifications for fiscal 2013: Prior to fiscal 2014, services and other revenue included revenue related to professional services, training, legacy SMS and other revenue. Beginningwith fiscal 2014, legacy SMS revenue is included within subscription and software revenue in our consolidated statements of operations.30 Classification in Consolidated Statements ofOperations for the Year Ended June 30, Year Ended June 30, 2015 and 2014 2013 2015 2014 2013 (Dollars in Thousands) Legacy SMS revenue Subscription and software Services and other $20,467 $30,341 $36,931 Cost of Legacy SMS revenue Subscription and software Services and other $4,036 $5,571 $7,360 Table of Contents The following tables summarize the impact of legacy SMS revenue and cost of revenue reclassification on our previously presented consolidatedstatements of operations for fiscal 2013: Services and Other Revenue. Our services and other revenue consists primarily of revenue related to professional services and training. The amount andtiming 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 licensingarrangement; •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 Subscription and Software. Our cost of subscription and software revenue consists of (i) royalties, (ii) amortization of capitalized software andpurchased technology intangibles, (iii) distribution fees, (iv) costs of providing Premier Plus SMS bundled with our aspenONE licensing and point productarrangements; and (v) costs of providing legacy SMS.31 Impact on Consolidated Statementsof Operations for theYear Ended June 30, 2013 As PreviouslyReported Reclassifications As CurrentlyReported (Dollars in Thousands) Subscription and software revenue: Legacy SMS $— $36,931 $36,931 Subscription and software 239,654 — 239,654 $239,654 $36,931 $276,585 Services and other revenue: Legacy SMS $— $(36,931)$(36,931)Professional services, training and other 71,733 — 71,733 $71,733 $(36,931)$34,802 Cost of subscription and software revenue: Cost of legacy SMS revenue $— $7,360 $7,360 Cost of subscription and software revenue 12,788 — 12,788 $12,788 $7,360 $20,148 Cost of services and other revenue: Cost of legacy SMS revenue $— $(7,360)$(7,360)Cost of professional services, training and other revenue 37,560 — 37,560 $37,560 $(7,360)$30,200 Table of Contents Prior to fiscal 2014, costs of providing legacy SMS were presented within cost of services and other revenue in our consolidated statements of operations.Beginning with fiscal 2014, costs of our legacy SMS business are presented within cost of subscription and software revenue in our consolidated statementsof operations. For further information, please refer to the "Revenue Reclassification" section. Cost of Services and Other. Our cost of services and other revenue consists primarily of personnel-related and external consultant costs associated withproviding 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 ourproducts and services to current and potential customers, as well as for overall management of customer relationships. Marketing expenses include expensesneeded 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 newsoftware products, enhancements and engineering changes to existing products and costs of acquired technology prior to establishing technologicalfeasibility. General and Administrative Expenses. General and administrative expenses include the costs of corporate and support functions, such as executiveleadership and administration groups, finance, legal, human resources and corporate communications, and other costs, such as outside professional andconsultant fees and provision for bad debts. Restructuring Charges. Restructuring charges result from the closure or consolidation of our facilities, or from qualifying reductions in headcount.Other Income and Expenses Interest Income. Interest income is recorded for the accretion of interest on the installment payments of our term software license contracts whenrevenue is recognized upfront at net present value, and from the investment in marketable securities and short-term money market instruments. Interest Expense. During fiscal 2013 interest expense consisted primarily of charges related to our secured borrowings which were repaid in full in fiscal2013. During fiscal 2015 and 2014, interest expense was comprised of miscellaneous interest charges. Other Income (Expense), Net. Other income (expense), net is comprised primarily of foreign currency exchange gains (losses) generated from thesettlement and remeasurement of transactions denominated in currencies other than the functional currency of our operating units. Provision for (Benefit from) Income Taxes. Provision for income taxes is comprised of domestic and foreign taxes. Benefits from income taxes arecomprised of any deferred benefit for tax deductions and credits that we expect to utilize in the future. We record interest and penalties related to income taxmatters as a component of income tax expense. We expect the amount of income tax expense to vary each reporting period depending upon fluctuations inour taxable income by jurisdiction.32Table of ContentsKey Business MetricsBackground The changes to our licensing model in fiscal 2010 resulted in a reduction to license revenue in fiscal 2010, as compared to the fiscal years preceding ourlicensing model changes. By fiscal 2013, the number of license arrangements renewed on the aspenONE licensing model resulted in sufficient ratablerevenue to generate an operating profit, but we would not recognize levels of revenue reflective of the value of our active license agreements until all termlicense agreements executed under our upfront revenue model (i) reached the end of their original terms; and (ii) were renewed. As a result, we believed thatuntil the revenue transition was completed, a number of our performance indicators based on GAAP, including revenue, gross profit, operating income (loss),net income (loss), and trend in deferred revenue, should be reviewed in conjunction with certain non-GAAP and other business measures in assessing ourperformance, growth and financial condition. During the transition period, from fiscal year 2010 through 2015, we utilized the following non-GAAP andother key business metrics to track our business performance.•Total term contract value; •Annual spend; •Adjusted total costs; and •Free cash flow. As of June 30, 2015, we had fully transitioned our term license arrangements to the aspenONE licensing model. For fiscal 2016 and beyond, we do notexpect the changes to our licensing model to have any material impact on subscription revenue results. Consequently, we believe that starting in fiscal 2016,our performance indicators based on GAAP, including revenue, gross profit, operating income (loss), net income (loss), and trend in deferred revenue, willprovide a more meaningful representation of business performance. Nonetheless, we will continue to utilize certain key non-GAAP and other business measures to track and assess the performance of our business and weplan to make these measures available to investors. We have refined the set of appropriate business metrics in the context of our evolving business and inconsideration of the completion of the revenue transition and now expect to use the following non-GAAP business metrics in addition to GAAP measures, totrack our business performance:•Annual spend; •Free cash flow; and •Non-GAAP operating income. The annual spend metric is closely related to the total term contract metric because both provide insight into the growth component of license bookingsduring a fiscal period. However, we believe that annual spend is a more meaningful metric because its value and growth rate are more closely related to thevalue and growth rate of subscription and software revenue. We now use non-GAAP operating income instead of adjusted total costs because non-GAAPoperating income provides additional insight into our business and financial performance and incorporates the elements of adjusted total cost. None of these metrics should be considered as an alternative to any measure of financial performance calculated in accordance with GAAP.33Table of ContentsAnnual Spend Annual spend is an estimate of the annualized value of our portfolio of term license arrangements, as of a specific date. Annual spend is calculated bysumming the most recent annual invoice value of each of our active term license contracts. Annual spend also includes the annualized value of standaloneSMS agreements purchased in conjunction with term license agreements. Comparing annual spend for different dates can provide insight into the growth andretention rates of our business, and since annual spend represents the estimated annualized billings associated with our active term license agreements, itprovides 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 thenumber 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 not renewed. We estimate that annual spend grew by approximately 10.5% during fiscal 2015, from $379.5 million at June 30, 2014 to $419.3 million at June 30,2015. We estimate that annual spend grew by approximately 12.3% during fiscal 2014, from $337.9 million at June 30, 2013 to $379.5 million at June 30,2014. The growth was attributable primarily to an increase in the number of tokens or products sold.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 isuseful 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 growthinitiatives and a basis for comparing our performance with that of our competitors. The presentation of free cash flow is not meant to be considered inisolation 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 andleasehold improvements, (b) insurance proceeds, (c) capitalized computer software development costs, (d) excess tax benefits from stock-based compensationand (e) non-capitalized acquired technology.34Table of Contents The following table provides a reconciliation of net cash flows provided by operating activities to free cash flow for the indicated periods:Fiscal 2015 Compared to Fiscal 2014 Total free cash flow increased $23.6 million during fiscal 2015 as compared to the prior fiscal year. Excess tax benefits are related to stock-based compensation tax deductions in excess of book compensation expense and reduce our income taxespayable. We have included the impact of excess tax benefits from free cash flow to be consistent with the treatment of other tax benefits. In fiscal 2015 and 2014, we acquired technology that did not meet the accounting requirements for capitalization and therefore the cost of the acquiredtechnology was expensed as research and development. We have excluded the expense of the acquired technology from free cash flow to be consistent withtransactions where the acquired assets were capitalized.Fiscal 2014 Compared to Fiscal 2013 Total free cash flow increased $56.4 million during fiscal 2014 as compared to the prior fiscal year. We have realized steadily improving free cash flow due to growth of our portfolio of term license contracts as well as from the renewal of customercontracts on an installment basis that were previously paid upfront.Non-GAAP Results Non-GAAP operating income excludes certain non-cash and non-recurring expenses, and is used as a supplement to operating income presented on aGAAP basis. We believe that non-GAAP operating income is a useful financial measure because removing non-recurring and certain non-cash items, providesadditional insight into recurring profitability and cash flow from operations.35 Year Ended June 30, 2015 2014 2013 (Dollars in Thousands) Net cash provided by operating activities $191,985 $200,131 $146,562 Purchase of property, equipment, and leasehold improvements (7,645) (4,011) (4,507)Insurance proceeds — — 2,222 Capitalized computer software development costs (359) (685) (1,156)Excess tax benefits from stock-based compensation 37,024 727 478 Non-capitalized acquired technology 2,621 3,856 — Free cash flow (non-GAAP) $223,626 $200,018 $143,599  Table of Contents The following table presents our net income, as adjusted for stock-based compensation expense, non-capitalized acquired technology, restructuringcharges, and amortization of purchased technology intangibles, for the indicated periods: Non-GAAP operating income increased $48.9 million or approximately 33% in fiscal year 2015 as compared to the prior year. In fiscal year 2014, Non-GAAP operating income increased $78.6 million or approximately 111%, as compared to the prior year. In fiscal 2015 and 2014, we acquired technology that did not meet the accounting requirements for capitalization and therefore the cost of the acquiredtechnology was expensed as research and development. We have excluded the expense of the acquired technology from non-GAAP operating income to beconsistent with transactions where the acquired assets were capitalized.Total Term Contract Value Total term contract value, or TCV, is an estimate of the renewal value, as of a specific date, of our active portfolio of term license agreements. TCV iscalculated by multiplying the terminal annual payment for each active term license agreement by the original length of the existing license term, and thenaggregating this amount for all active term license agreements. Accordingly, TCV represents the full renewal value of all of our current term licenseagreements under the hypothetical assumption that all of those agreements are simultaneously renewed for the identical license terms and at the sameterminal annual payment amounts. TCV includes the value of SMS for any multi-year license agreements for which SMS is committed for the entire licenseterm. TCV does not include any amounts for perpetual licenses, professional services, training or standalone renewal SMS. TCV is calculated using constantcurrency assumptions for agreements denominated in currencies other than U.S. dollars in order to remove the impact of currency fluctuations betweencomparison dates. We also estimate a license-only TCV, which we refer to as TLCV, by removing the SMS portion of TCV using our historic estimated selling price forSMS. During the revenue transition period, from fiscal year 2010 through 2015, our portfolio of active license agreements reflected a mix of (a) licenseagreements that included SMS for the entire license term and (b) legacy license agreements that did not include SMS. TLCV provided a consistent basis forassessing growth while customers were transitioning to arrangements that included SMS for the term of the arrangement. We believe TCV and TLCV were useful metrics for analyzing our business performance while we were transitioning to our aspenONE licensing model orto point product arrangements with Premier Plus SMS included for the full term, and revenue comparisons between fiscal periods did not reflect36 Year Ended June 30, 2015 Comparedto 2014 2014 Comparedto 2013 2015 2014 2013 $ % $ % GAAP income from operations $179,792 $129,724 $55,600 $50,068 38.6%$74,124 133%Plus: Stock-based compensation 14,584 14,056 14,637 528 3.8% (581) –4%Non-capitalized acquired technology 3,277 4,856 — (1,579) –32.5% 4,856 * Restructuring charges — (15) (5) 15 –100.0% (10) 200%Amortization of purchasedtechnology intangibles 748 922 702 (174) –18.9% 220 31%Non-GAAP net income $198,401 $149,543 $70,934 $48,858 32.7%$78,609 111%*not meaningfulTable of Contentsthe actual growth rate of our business. Comparing TCV and TLCV for different dates provided insight into the growth and retention rate of our businessduring the period between those dates. TCV and TLCV increase as the result of:•new term license agreements with new or existing customers; •renewals or modifications of existing license agreements that result in higher license fees due to price escalation or an increase in the numberof tokens (units of software usage) or products licensed; and •renewals of existing license agreements that increase the length of the license term. The renewal of an existing license agreement will not increase TCV and TLCV unless the renewal results in higher license fees or a longer license term.TCV and TLCV are adversely affected by customer non-renewals and by renewals that result in lower license fees or a shorter license term. Our standardlicense term historically has been between five and six years, and we do not expect this standard term to change in the future. Many of our contracts haveescalating annual payments throughout the term of the arrangement. By calculating TCV and TLCV based on the terminal year annual payment, we aretypically using the highest annual fee from the existing arrangement to calculate the hypothetical renewal value of our portfolio of term arrangements. We estimate that TLCV grew by approximately 11.8% during fiscal 2015, from $1.85 billion at June 30, 2014 to $2.07 billion at June 30, 2015. Weestimate that TCV grew by approximately 12.3% during fiscal 2015, from $2.19 billion at June 30, 2014 to $2.46 billion at June 30, 2015. The growth wasattributable primarily to an increase in the number of tokens or products sold.37Table of ContentsResults of Operations The following table sets forth the results of operations, percentage of total revenue and the year-over-year percentage change in certain financial data forfiscal 2015, 2014 and 2013:RevenueFiscal 2015 Compared to Fiscal 2014 Total revenue increased by $48.9 million during fiscal 2015 as compared to the prior fiscal year. The increase was due to higher subscription andsoftware revenue of $55.1 million, partially offset by lower services and other revenue of $6.2 million.38 Year Ended June 30, 2015Comparedto 2014% 2014Comparedto 2013% 2015 2014 2013 (Dollars in Thousands) Revenue: Subscription and software $405,640 92.1%$350,486 89.5%$276,585 88.8% 15.7% 26.7%Services and other 34,761 7.9 40,967 10.5 34,802 11.2 (15.1) 17.7 Total revenue 440,401 100.0 391,453 100.0 311,387 100.0 12.5 25.7 Cost of revenue: Subscription and software 21,165 4.8 20,141 5.2 20,148 6.5 5.1 — Services and other 28,411 6.5 32,547 8.3 30,200 9.7 (12.7) 7.8 Total cost of revenue 49,576 11.3 52,688 13.5 50,348 16.2 (5.9) 4.6 Gross profit 390,825 88.7 338,765 86.5 261,039 83.8 15.4 29.8 Operating expenses: Selling and marketing 92,736 21.1 94,827 24.2 93,655 30.1 (2.2) 1.3 Research and development 69,584 15.8 68,410 17.5 62,516 20.1 1.7 9.4 General and administrative 48,713 11.1 45,819 11.7 49,273 15.8 6.3 (7.0)Restructuring charges — — (15) — (5) — * * Total operating expenses 211,033 47.9 209,041 53.4 205,439 66.0 1.0 1.8 Income (loss) from operations 179,792 40.8 129,724 33.1 55,600 17.8 * * Interest income 487 0.1 1,124 0.3 3,379 1.1 (56.7) (66.7)Interest expense (30) — (37) — (424) (0.1) (18.9) (91.3)Other (expense) income, net (778) (0.2) (2,278) (0.6) (1,117) (0.4) (65.8) * Income (loss) before provisionfor (benefit from) incometaxes 179,471 40.8 128,533 32.8 57,438 18.4 * * Provision for (benefit from)income taxes 61,064 13.9 42,750 10.9 12,176 3.9 * * Net income (loss) $118,407 26.9%$85,783 21.9%$45,262 14.5% 38.0% 89.5%*Not meaningfulTable of Contents Total revenue recognized during fiscal 2014 included $7.6 million related to the completion of a significant customer arrangement recognized undercompleted contract accounting. This amount was recognized as $4.9 million of subscription and software revenue and $2.7 million of services and otherrevenue. We did not have a comparable event in fiscal 2015.Fiscal 2014 Compared to Fiscal 2013 Total revenue increased by $80.1 million during fiscal 2014 as compared to the prior fiscal year. The increase was due to higher subscription andsoftware revenue of $73.9 million and higher services and other revenue of $6.2 million. Total revenue recognized during fiscal 2014 included $7.6 millionrelated to the completion of a significant customer arrangement recognized under completed contract accounting, as described above.Subscription and Software RevenueFiscal 2015 Compared to Fiscal 2014 The increase in subscription and software revenue during fiscal 2015 as compared to the prior fiscal year was primarily the result of a larger base oflicense arrangements being recognized on a ratable basis. The subscription and software revenue for fiscal 2014 included $4.9 million of revenue on asignificant customer arrangement recognized under completed contract accounting, as noted above. We did not have a comparable event in fiscal 2015.Fiscal 2014 Compared to Fiscal 2013 The increase in subscription and software revenue during fiscal 2014 as compared to the prior fiscal year was primarily the result of a larger base oflicense arrangements being recognized on a ratable basis combined with revenue recognition of $4.9 million on the significant customer arrangementrecognized under completed contract accounting, as noted above.Services and Other Revenue Services and other revenue consists primarily of revenue related to professional services and training.Fiscal 2015 Compared to Fiscal 2014 The decrease in services and other revenue of $6.2 million during fiscal 2015 as compared to the prior fiscal year was attributable to lower professionalservices revenue of $5.1 million and lower training revenue of $1.1 million.39 Year Ended June 30, 2015 Comparedto 2014 2014 Comparedto 2013 2015 2014 2013 $ % $ % (Dollars in Thousands) Subscription and software revenue $405,640 $350,486 $276,585 $55,154 15.7%$73,901 26.7%As a percent of revenue 92.1% 89.5% 88.8% Year Ended June 30, 2015 Comparedto 2014 2014 Comparedto 2013 2015 2014 2013 $ % $ % (Dollars in Thousands) Services and other revenue $34,761 $40,967 $34,802 $(6,206) (15.1)$6,165 17.7%As a percent of revenue 7.9% 10.5% 11.2% Table of Contents The year-over-year decrease in professional services revenue of $5.1 million was attributable to the recognition, in fiscal 2014, of $2.7 million ofpreviously deferred professional services revenue on the significant customer arrangement noted above, combined with lower levels of professional serviceactivity in fiscal year 2015. Under the aspenONE licensing model, revenue from committed professional service arrangements that are sold as a single arrangement with, or incontemplation of, a new aspenONE licensing transaction is deferred and recognized on a ratable basis over the longer of (a) the period the services areperformed or (b) the term of the related software arrangement. As our typical contract term approximates five years, professional services revenue on thesetypes of arrangements will usually be recognized over a longer period than the period over which the services are performed. Revenue from professionalservice arrangements bundled with and recognized over the term of aspenONE transactions was consistent year-over-year.Fiscal 2014 Compared to Fiscal 2013 The increase in services and other revenue of $6.2 million during fiscal 2014 as compared to the prior fiscal year was attributable to higher professionalservices revenue of $5.3 million and higher training revenue of $0.9 million. The year-over-year increase in professional services revenue of $5.3 million was primarily attributable to the recognition of $2.7 million of previouslydeferred professional services revenue on the significant customer arrangement noted above and a revenue increase of $2.3 million from professional servicearrangements bundled with and recognized over the term of aspenONE transactions.Gross Profit Gross profit increased by $52.1 million during fiscal 2015 as compared to the prior fiscal year and gross profit margin increased to 88.7% in fiscal 2015from 86.5% in fiscal 2014. The year-to-year increase in gross profit and gross margin was primarily attributable to the growth of our subscription and softwarerevenue, partially offset by a $1.1 million increase in our costs of subscription and software revenue. Gross profit increased by $77.8 million during fiscal 2014 as compared to the prior fiscal year and gross profit margin increased to 86.5% in fiscal 2014from 83.8% in fiscal 2013. The year-to-year increase in gross profit and gross margin was primarily attributable to the growth of our subscription and softwarerevenue combined with flat cost of subscription and software revenue. Please refer to the "Cost of Subscription and Software Revenue" and "Cost of Services and Other Revenue" sections below.ExpensesCost of Subscription and Software Revenue Cost of subscription and software revenue increased by $1.1 million during fiscal 2015 as compared with the prior fiscal year and was consistent duringfiscal years 2014 and 2013. Subscription and40 Year Ended June 30, 2015Comparedto 2014 2014Comparedto 2013 2015 2014 2013 $ % $ % (Dollars in Thousands) Cost of subscription and software revenue $21,165 $20,141 $20,148 $1,024 5.1%$(7) —%As a percent of revenue 4.8% 5.1% 6.5% Table of Contentssoftware gross profit margin was 94.8% in fiscal 2015 and increased from 94.3% and 92.7% in fiscal years 2014 and 2013 respectively. Subscription andsoftware gross margins increased due to revenue growth exceeding increases in cost of revenue over the periods shown.Cost of Services and Other Revenue Cost of services and other revenue includes the cost of providing professional services and training.Fiscal 2015 Compared to Fiscal 2014 Cost of services and other revenue decreased by $4.1 million during fiscal 2015 as compared to the prior fiscal year. The decrease was due to lower costof professional services revenue of $4.3 million, slightly offset by higher cost of training revenue of $0.2 million. The year-over-year decrease of $4.3 million in cost of professional services revenue is attributable to lower cost of revenue of $2.6 million related toprojects accounted for under the completed contract method and lower costs of revenue of $1.7 million related to lower professional service business activityduring fiscal year 2015. The timing of revenue and expense recognition on professional service arrangements can impact the comparability of cost of professional servicesrevenue from year to year. During fiscal 2014, we recognized net costs of $2.3 million on a significant customer arrangement recognized under completedcontract accounting, as discussed in the "Revenue" section. Gross profit margin on services and other revenue decreased from 20.5% during fiscal 2014 to 18.3% during fiscal 2015 primarily due to lower revenueand flat costs.Fiscal 2014 Compared to Fiscal 2013 Cost of services and other revenue increased by $2.3 million during fiscal 2014 as compared to the prior fiscal year. The increase was due to higher costof professional services revenue of $2.0 million and higher cost of training revenue of $0.3 million. The year-over-year increase of $2.0 million in cost of professional services revenue is attributable to higher cost of revenue of $3.9 million recognized onprofessional service projects accounted for under completed contract method, partially offset by lower third-party subcontractor costs of $0.9 million, lowercompensation-related costs of $0.6 million and other net costs of $0.4 million. Gross profit margin on services and other revenue increased from 13.2% during fiscal 2013 to 20.5% during fiscal 2014 primarily due to higher revenue,lower compensation and other professional services costs, including the impact of cost deferrals, as noted above.41 Year Ended June 30, 2015 Comparedto 2014 2014 Comparedto 2013 2015 2014 2013 $ % $ % (Dollars in Thousands) Cost of services and other revenue $28,411 $32,547 $30,200 $(4,136) (12.7)%$2,347 7.8%As a percent of revenue 6.5% 8.3% 9.7%  Table of ContentsSelling and Marketing ExpenseFiscal 2015 Compared to Fiscal 2014 The year-over-year decrease in selling and marketing expense in fiscal 2015 as compared to the prior fiscal year was primarily the result of lowercompensation expense of $1.7 million, lower severance costs of $0.7 million, lower third-party commissions of $0.6 million and lower net other costs of$1.3 million. These lower expense items were partially offset by higher overhead allocations of $1.5 million and higher marketing costs of $0.7 millionrelated to our global customer conference held in fiscal 2015. We typically host our global customer conference every other fiscal year. Overhead allocations consist of information systems costs, facility costs and certain benefit costs. The overhead expenses are allocated to departmentsbased on relative headcount, geographic location and total salary.Fiscal 2014 Compared to Fiscal 2013 The year-over-year increase in selling and marketing expense during fiscal 2014 as compared to the prior fiscal year was primarily the result of highercommissions of $1.8 million and higher overhead allocations of $1.2 million. These increases were partially offset by lower marketing-related costs of$0.8 million as a result of hosting our global customer conference during fiscal 2013, lower stock-based compensation expense of $0.6 million and other netcosts of $0.4 million.Research and Development ExpenseFiscal 2015 Compared to Fiscal 2014 Research and development expenses increased by approximately $1.2 million during fiscal 2015 as compared to the prior fiscal year. The increaseresulted primarily from higher overhead allocations of $2.0 million, higher compensation costs of $0.4 million and higher other net costs of $0.3 million,partially offset by lower costs of acquired technology of $1.6 million. In fiscal 2015 and 2014, we acquired technology in two separate transactions for $3.3 million and $4.9 million, respectively. We plan to modify andenhance the acquired technology prior to releasing as commercially available products. At the time we acquired the technology, the projects to developcommercially available products did not meet the accounting definition of having reached technological feasibility and therefore the cost of the acquiredtechnology was expensed as a research and development expense. We continue to expect that we will develop the acquired technology into commerciallyavailable products.42 Year Ended June 30, 2015Comparedto 2014 2014Comparedto 2013 2015 2014 2013 $ % $ % (Dollars in Thousands) Selling and marketing expense $92,736 $94,827 $93,655 $(2,091) (2.2)%$1,172 1.3%As a percent of revenue 21.1% 24.2% 30.1% Year Ended June 30, 2015Compared to2014 2014Compared to2013 2015 2014 2013 $ % $ % (Dollars in Thousands) Research and development expense $69,584 $68,410 $62,516 $1,174 1.7%$5,894 9.4%As a percent of revenue 15.8% 17.5% 20.1% Table of ContentsFiscal 2014 Compared to Fiscal 2013 Research and development expenses increased by approximately $5.9 million during fiscal 2014 as compared to the prior fiscal year. The increaseresulted primarily from expensing $4.9 million of acquired technology, higher stock based compensation expense of $1.1 million and higher overheadallocations of $1.1 million. These increases were partially offset by lower severance costs of $0.9 million and other net costs of $0.3 million.General and Administrative ExpenseFiscal 2015 Compared to Fiscal 2014 The year-over-year increase in general and administrative expense during fiscal 2015 as compared to the prior fiscal year was primarily attributable tohigher consulting and contractor costs of $1.2 million, higher allocation costs of $1.0 million, higher stock-based compensation expense of $1.0 million, andhigher compensation costs of $0.8 million. These increases were partially offset by a $0.9 million business tax refund and lower other net costs of$0.1 million.Fiscal 2014 Compared to Fiscal 2013 The year-over-year decrease in general and administrative expense during fiscal 2014 as compared to the prior fiscal year was primarily attributable tolower third-party legal costs of $3.0 million, lower overhead allocations of $0.9 million, lower stock-based compensation expense of $1.1 million resultingfrom an increase of forfeitures in the period and other net costs of $0.3 million. These decreases were partially offset by higher costs of $1.8 million related tolegal matters.Interest Income The year-over-year decrease in interest income during fiscal 2015 and 2014 as compared to each respective prior fiscal year was primarily attributable tothe decrease of our installments receivable portfolio. We expect interest income to continue to decrease going forward as our installments receivable balancecontinues to decrease.43 Year Ended June 30, 2015Compared to2014 2014Compared to2013 2015 2014 2013 $ % $ % (Dollars in Thousands) General and administrative expense $48,713 $45,819 $49,273 $2,894 6.3%$(3,454) (7.0)%As a percent of revenue 11.1% 11.7% 15.8% Year Ended June 30, 2015Compared to2014 2014Compared to2013 2015 2014 2013 $ % $ % (Dollars in Thousands) Interest income $487 $1,124 $3,379 $(637) (56.7)%$(2,255) (66.7)%As a percent of revenue 0.1% 0.3% 1.1% Table of ContentsInterest ExpenseFiscal 2015 Compared to Fiscal 2014 Interest expense in fiscal 2015 was consistent with fiscal 2014.Fiscal 2014 Compared to Fiscal 2013 The year-over-year decrease in interest expense during fiscal 2014 as compared to the prior fiscal year was attributable to the pay-down of our securedborrowings which were repaid in full during fiscal 2013.Other Income (Expense), Net Other income (expense), net is comprised primarily of unrealized and realized foreign currency exchange gains and losses generated from the settlementand remeasurement of transactions denominated in currencies other than the functional currency of our operating units. Other income (expense), net alsoincludes miscellaneous non-operating gains and losses. During fiscal 2015, 2014 and 2013, other income (expense), net was comprised primarily of $0.8 million, $2.3 million and $1.2 million of net currencylosses, respectively.Provision for (Benefit from) Income Taxes44 Year Ended June 30, 2015Compared to2014 2014Compared to2013 2015 2014 2013 $ % $ % (Dollars in Thousands) Interest expense $(30)$(37)$(424)$(7) (18.9)%$(387) (91.3)%As a percent of revenue —% —% (0.1)% Year Ended June 30, 2015Compared to2014 2014Compared to2013 2015 2014 2013 $ % $ % (Dollars in Thousands) Other income (expense), net $(778)$(2,278)$(1,117)$1,500 65.8%$1,161 *%As a percent of revenue (0.2)% (0.6)% (0.4)% *Not meaningful Year Ended June 30, 2015Compared to2014 2014Compared to2013 2015 2014 2013 $ % $ % (Dollars in Thousands)Provision for (benefit from) income taxes $61,064 $42,750 $12,176 $18,314 (42.8)$30,574 *Effective tax rate 34.0% 33.3% (21.2)% *Not meaningfulTable of ContentsFiscal 2015 Compared to Fiscal 2014 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 taxrates, 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 was 34.0% and 33.3% during fiscal 2015 and 2014, respectively. We recognized an income tax expense of $61.1 million during fiscal 2015 compared to $42.8 million during fiscal 2014. The $18.3 million year-over-year increase was generally attributable to additional income tax expense of $19.4 million resulting from higher U.S. pre-tax profit offset by an increased taxbenefit of $1.1 million related to a Domestic Production Activity Deduction. As of June 30, 2015, we maintained a valuation allowance in the U.S. primarily for certain deferred tax assets related to capital losses that are anticipatedto expire unused. We also maintain a valuation allowance on certain foreign subsidiary NOL carryforwards because it is more likely than not that a benefitwill not be realized. As of June 30, 2015 and 2014, our total valuation allowance was $10.1 million and $10.0 million, respectively. We made cash tax payments totaling $4.6 million during fiscal 2015. We paid $3.0 million for foreign tax liabilities and $1.6 million for state taxliabilities. These payments were partially offset by cash tax refunds of $0.9 million.Fiscal 2014 Compared to Fiscal 2013 Our effective tax rate was 33.3% and 21.2% during fiscal 2014 and 2013, respectively. We recognized an income tax expense of $42.8 million during fiscal 2014 compared to $12.2 million during fiscal 2013. The $30.6 million year-over-year increase was primarily attributable to additional income tax expense of $23.7 million primarily resulting from higher U.S. pre-tax profit combined with$6.9 million of discrete tax benefit items. As of June 30, 2014, we maintained a valuation allowance in the U.S. primarily for certain deferred tax assets related to capital losses that are anticipatedto expire unused. We also maintain a valuation allowance on certain foreign subsidiary NOL carryforwards because it is more likely than not that a benefitwill not be realized. As of June 30, 2014 and 2013, our total valuation allowance was $10.0 million and $9.9 million, respectively. We made cash tax payments totaling $8.5 million during fiscal 2014. The majority of these tax payments were related to foreign liabilities. Thesepayments were partially offset by cash tax refunds of $1.3 million. We made cash tax payments totaling $5.1 million during fiscal 2013. The majority of these tax payments were related to foreign liabilities. Thesepayments were partially offset by cash tax refunds of $0.5 million.Liquidity and Capital ResourcesResources In recent years, we have financed our operations with cash generated from operating activities. As of June 30, 2015, our principal sources of liquidityconsisted of $156.2 million in cash and cash equivalents and $62.2 million of marketable securities. As of June 30, 2014, our principal sources of liquidityconsisted of $199.5 million in cash and cash equivalents and $98.9 million of marketable securities.45Table of Contents We believe our existing cash and cash equivalents and marketable securities, together with our cash flows from operating activities, will be sufficient tomeet our anticipated cash needs for at least the next twelve months. We may need to raise additional funds in the event we decide to make one or moreacquisitions of businesses, technologies or products. If additional funding is required, we may not be able to effect a receivable, equity or debt financing onterms acceptable to us or at all. Our cash equivalents of $130.2 million and $175.9 million as of June 30, 2015 and 2014, respectively, consisted primarily of money market funds. Ourinvestments in marketable securities of $62.2 million and $98.9 million as of June 30, 2015 and 2014 consisted primarily of investment grade fixed incomecorporate debt securities with maturities ranging from less than 1 month to 14 months and less than one month to 23 months, respectively. The fair value ofour portfolio is affected by interest rate movements, credit and liquidity risks. The objective of our investment policy is to manage our cash and investmentsto preserve principal and maintain liquidity, while earning a return on our investment portfolio by investing available funds. We diversify our investmentportfolio by investing in multiple types of investment-grade securities and attempt to mitigate a risk of loss by using a third-party investment manager. The following table summarizes our cash flow activities for the periods indicated:Operating Activities Our primary source of cash is from the annual installments associated with our software license arrangements and related software support services, and toa lesser extent from professional services and training. We believe that cash inflows from our term license business will grow as we benefit from the continuedgrowth of our portfolio of term license contracts.Fiscal 2015 Compared to Fiscal 2014 Cash from operating activities provided $192.0 million during fiscal 2015. This amount resulted from net income of $118.4 million, adjusted for non-cash items of $40.5 million, and net sources of cash of $33.1 million due to decreases in operating assets of $12.3 million and increases in operatingliabilities of $20.8 million. Cash flow from operations for fiscal 2015 was reduced by our expensing a $2.6 million payment related to the purchase of non-capitalized acquiredtechnology. Other past acquisitions of technology qualified for capitalization and therefore the cash outflow was shown in the investing section of theconsolidated statements of cash flows. Refer to the 'Key Business Metrics—Free Cash Flow" and "Non-GAAP Operating Income" for further discussion of thenon-capitalized acquired technology transaction. Non-cash expenses within net income consisted primarily of deferred income tax expense of $20.1 million, stock-based compensation expense of$14.6 million, and depreciation and amortization expense of $6.2 million.46 Year Ended June 30, 2015 2014 2013 (Dollars in Thousands) Cash flow provided by (used in): Operating activities $191,985 $200,131 $146,562 Investing activities 27,466 (13,187) (97,391)Financing activities (261,259) (120,170) (81,771)Effect of exchange rates on cash balances (1,469) 320 (210)Increase (decrease) in cash and cash equivalents $(43,277)$67,094 $(32,810)Table of Contents A decrease in operating assets of $12.3 million and an increase in operating liabilities of $20.8 million contributed $33.1 million to net cash fromoperating activities. Sources of cash consisted of increases in deferred revenue of $14.9 million, decreases in accounts receivable of $8.0 million, netincreases in accounts payable, accrued expenses and other current liabilities of $5.9 million, decreases in prepaid expenses, prepaid income taxes and otherassets totaling $4.1 million and decreases in unbilled services of $0.5 million. Partially offsetting these sources of cash were increases in installmentreceivables of $0.4 million.Fiscal 2014 Compared to Fiscal 2013 Cash from operating activities provided $200.1 million during fiscal 2014. This amount resulted from net income of $85.8 million, adjusted for non-cashitems of $59.4 million, and net sources of cash of $54.9 million due to decreases in operating assets of $11.7 million and increases in operating liabilities of$43.2 million. Cash flow from operations for fiscal 2014 was reduced by our expensing of a $3.9 million payment related to the purchase of non-capitalized acquiredtechnology. Non-cash expenses within net income consisted primarily of deferred income tax expense of $34.6 million, stock-based compensation expense of$14.1 million and depreciation and amortization expense of $5.2 million. A decrease in operating assets of $11.7 million and an increase in operating liabilities of $43.2 million contributed $54.9 million to net cash fromoperating activities. Sources of cash consisted of increases in deferred revenue of $42.3 million, decreases in installments receivable totaling $13.6 million,decreases in prepaid expenses, prepaid income taxes and other assets totaling $0.9 million, net increases in accounts payable, accrued expenses and othercurrent liabilities of $0.9 million and decreases in unbilled services of $0.3 million. Partially offsetting these sources of cash were increases in accountsreceivable of $3.2 million.Investing ActivitiesFiscal 2015 Compared to Fiscal 2014 During fiscal 2015, we provided $27.5 million of cash from investing activities. The source of cash was from $85.5 million related to the maturity ofmarketable securities. Partially offsetting this source of cash were a $50.1 million use related to the purchases of marketable securities, a $7.6 million use ofcash for capital expenditures, primarily related to our new principal executive offices located in Bedford, Massachusetts, and a $0.4 million use of cashrelated to the capitalization of internally developed software costs.Fiscal 2014 Compared to Fiscal 2013 During fiscal 2014, we used $13.2 million of cash for investing activities. The uses of cash consisted primarily of $68.4 million for purchases ofmarketable securities related to a program which we initiated during fiscal 2013 to make direct investments in these assets. Partially offsetting this use of cashwas the receipt of $60.3 million from maturities of marketable securities. Additional uses of cash during fiscal 2014 included $4.0 million related to capital expenditures, primarily for computer hardware and software,$0.7 million related to capitalized computer software development costs and $0.4 million used for the purchase of technology intangibles.47Table of ContentsFinancing ActivitiesFiscal 2015 Compared to Fiscal 2014 During fiscal 2015, we used $261.3 million of cash for financing activities. We paid $297.2 million for repurchases of our common stock and paidwithholding taxes of $5.7 million on vested and settled restricted stock units. Sources of cash in the period included $37.0 million related to stock-basedcompensation tax deductions in excess of book compensation expense that reduced taxes payable and increased additional paid in capital and proceeds of$4.7 million from the exercise of employee stock options.Fiscal 2014 Compared to Fiscal 2013 During fiscal 2014, we used $120.2 million of cash for financing activities. We paid $121.8 million for repurchases of our common stock and paidwithholding taxes of $7.8 million on vested and settled restricted stock units. Sources of cash in the period included proceeds of $8.7 million from theexercise of employee stock options. Cash used for financing activities during fiscal 2014 includes $0.7 million related to stock-based compensation taxdeductions in excess of book compensation expense that reduced taxes payable and increased additional paid in capital.Contractual Obligations and Requirements Our contractual obligations consisted primarily of royalties and operating lease and commitments for our headquarters and other facilities and were asfollows as of June 30, 2015: In August 2015, we executed a lease amendment for our Houston, Texas, location. The amendment extended the original lease termination date fromJuly 2016 until February 2023 and increased future non-cancelable lease payments from $1.8 million, reflected in the above table, to $9.9 million. Baseannual rent under the amended lease ranges between $1.3 million and $1.5 million, excluding our pro-rata share of taxes and expenses. In August 2015, we entered into a new lease agreement for our office location in Singapore. The initial term of the lease is for 60 months andapproximately 11,343 square feet, commencing December 2015. Base annual rent will be $0.6 million, excluding our proportionate share of taxes and otherexpenses. Subject to the terms and conditions of the lease, we may extend the lease for an additional 36 month term. Future minimum non-cancelable leasepayments due over the term of the lease amount to approximately $3.1 million. Aggregate capital expenditures, including leasehold improvements, furnitureand equipment, with respect to the leased premises, are estimated to total approximately $1.1 million. Payments of $0.7 million for binding contractualobligations related to the new facility capital expenditures are expected to be made in fiscal 2016.48 Payments due by Period Total Less than1 Year 1 to 3 Years 3 to 5 Years More than5 Years Contractual Cash Obligations: Operating leases $45,961 $8,325 $10,622 $9,239 $17,775 Fixed fee royalty obligations 5,717 1,792 3,507 227 191 Contractual royalty obligations 2,084 2,084 Other obligations 9,476 4,730 3,675 1,070 — Total contractual cash obligations $63,238 $16,931 $17,804 $10,536 $17,966 Other Commercial Commitments: Standby letters of credit $2,195 $399 $1,389 $126 $281 Total commercial commitments $65,433 $17,330 $19,193 $10,662 $18,247 Table of Contents Except for the commitments under the aforementioned lease agreement, we are not currently a party to any other material purchase contracts related tofuture capital expenditures, and we do not expect our future investment in capital expenditures to be materially different from recent levels. The standby letters of credit were issued by Silicon Valley Bank in the United States and secure our performance on professional services contracts andcertain facility leases. The above table does not reflect a liability for uncertain tax positions of $19.9 million as of June 30, 2015. We estimate that none of this amount will bepaid within the next year and we are currently unable to reasonably estimate the timing of payments for the remainder of the liability.Off-Balance Sheet Arrangements As of June 30, 2015, we did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.Critical Accounting Estimates and Judgments Our consolidated financial statements are prepared in accordance with GAAP. The preparation of our financial statements requires management to makeestimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our estimates on historicalexperience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgmentsabout the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates underdifferent assumptions or conditions. We believe that the assumptions and estimates associated with the following critical accounting policies have the greatest potential impact on ourconsolidated financial statements:•revenue recognition; •accounting for income taxes; and •loss contingencies. For further information on our significant accounting policies, refer to Note 2 to the consolidated financial statements included under "Item 8. FinancialStatements and Supplementary Data" of this Form 10-K.Revenue Recognition Four basic criteria must be satisfied before software license revenue can be recognized: persuasive evidence of an arrangement between us and an enduser; delivery of our product has occurred; the fee for the product is fixed or determinable; and collection of the fee is probable. Persuasive evidence of an arrangement—We use a signed contract as evidence of an arrangement for software licenses and SMS. For professionalservices we use a signed contract and a work proposal to evidence an arrangement. In cases where both a signed contract and a purchase order are required bythe customer, we consider both taken together as evidence of the arrangement. Delivery of our product—Software and the corresponding access keys are generally delivered to customers via disk media with standard shipping termsof Free Carrier, our warehouse (i.e., FCA, named place) or electronic delivery. Our software license agreements do not contain conditions for acceptance. Fee is fixed or determinable—We assess whether a fee is fixed or determinable at the outset of the arrangement. Significant judgment is involved inmaking this assessment.49Table of Contents Under our upfront revenue model, we are able to demonstrate that the fees are fixed or determinable for all arrangements, including those for our termlicenses that contain extended payment terms. We have an established history of collecting under the terms of these contracts without providing concessionsto customers. In addition, we also assess whether a contract modification to an existing term arrangement constitutes a concession. In making this assessment,significant analysis is performed to ensure that no concessions are given. Our software license agreements do not include a right of return or exchange. Forlicense arrangements executed under the upfront revenue model, we recognize license revenue upon delivery of the software product, provided all otherrevenue recognition requirements are met. We cannot assert that the fees under our aspenONE licensing model and point product arrangements with Premier Plus SMS are fixed or determinablebecause the rights provided to customers, and the economics of the arrangements, are not comparable to our transactions with other customers under theupfront revenue model. As a result, the amount of revenue recognized for these arrangements is limited by the amount of customer payments that become due. Collection of fee is probable—We assess the probability of collecting from each customer at the outset of the arrangement based on a number of factors,including the customer's payment history, its current creditworthiness, economic conditions in the customer's industry and geographic location, and generaleconomic conditions. If in our judgment collection of a fee is not probable, revenue is recognized as cash is collected, provided all other conditions forrevenue recognition have been met.Vendor-Specific Objective Evidence of Fair Value We have established VSOE for certain SMS offerings, professional services, and training, but not for our software products or our Premier Plus SMSoffering. We assess VSOE for SMS, professional services, and training based on an analysis of standalone sales of these offerings using the bell-shaped curveapproach. We do not have a history of selling our Premier Plus SMS offering to customers on a standalone basis, and as a result are unable to establish VSOEfor this deliverable. As of July 1, 2014, we were no longer able to establish VSOE for legacy SMS offerings sold with our perpetual license arrangements. As aresult, all perpetual license agreements that include legacy SMS entered into subsequent to June 30, 2014 are recognized ratably over the legacy SMS serviceperiod. Loss of VSOE on legacy SMS offerings sold with our perpetual license arrangements did not have a material impact on our revenue in fiscal 2015 andis not expected to have a material impact on our revenue in future periods. We allocate the arrangement consideration among the elements included in our multi-element arrangements using the residual method. Under theresidual method, the VSOE of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue upon deliveryof the software, assuming all other revenue recognition criteria are met. If VSOE does not exist for an undelivered element in an arrangement, revenue isdeferred until such evidence does exist for the undelivered elements, or until all elements are delivered, whichever is earlier. Under the upfront revenuemodel, the residual license fee is recognized upon delivery of the software provided all other revenue recognition criteria were met. Arrangements thatqualified for upfront recognition during fiscal 2014 and prior periods included sales of perpetual licenses, amendments to existing legacy term arrangementsand renewals of legacy term arrangements.Subscription and Software Revenue Subscription and software revenue consists of product and related revenue from our (i) aspenONE licensing model; (ii) point product arrangements withour Premier Plus SMS offering included for the contract term; (iii) legacy arrangements including (a) amendments to existing legacy term arrangements,(b) renewals of legacy term arrangements and (c) legacy arrangements that are being recognized over50Table of Contentstime as a result of not previously meeting one or more of the requirements for recognition under the upfront revenue model; (iv) legacy SMS arrangements;and (v) perpetual arrangements. 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 thearrangement and the customer receives, for the term of the arrangement, the right to any new unspecified future software products and updates that may beintroduced into the licensed aspenONE software suite. Due to our obligation to provide unspecified future software products and updates, we are required torecognize revenue ratably over the term of the arrangement, once the other revenue recognition criteria noted above have been met. Our point product arrangements with Premier Plus SMS include SMS for the term of the arrangement. Since we do not have VSOE for our Premier PlusSMS offering, the SMS element of our point product arrangements is not separable. As a result, revenue associated with point product arrangements withPremier Plus SMS included for the contract term is recognized ratably over the term of the arrangement, once all other revenue recognition criteria have beenmet. Perpetual and legacy term license arrangements do not include the same rights as those provided to customers under the aspenONE licensing model andpoint product arrangements with Premier Plus SMS. Legacy SMS revenue is generated from legacy SMS offerings provided in support of perpetual andlegacy term license arrangements. Customers typically receive SMS for one year and then can elect to renew SMS annually. During fiscal 2014 and priorperiods, we had VSOE for certain legacy SMS offerings sold with perpetual and term license arrangements and could therefore separate the undeliveredelements. Accordingly, license fee revenue for perpetual and legacy term license arrangements was recognized upon delivery of the software products usingthe residual method, provided all other revenue recognition requirements were met. VSOE of fair value for the undelivered SMS component sold with ourperpetual and term license arrangements was deferred and subsequently amortized into revenue ratably over the contractual term of the SMS arrangement. Asof July 1, 2014, we were no longer able to establish VSOE for legacy SMS offerings sold with our perpetual license arrangements. As a result, all perpetuallicense agreements that include legacy SMS entered into subsequent to June 30, 2014 are recognized ratably over the legacy SMS service period. Loss ofVSOE on legacy SMS offerings sold with our perpetual license arrangements did not have a material impact on our revenue in fiscal 2015 and is not expectedto have a material impact on our revenue in future periods. We expect legacy SMS revenue to continue to decrease as additional customers transition to our aspenONE licensing model. Prior to fiscal 2014, legacySMS revenue was significant in relation to our total revenue and was classified within services and other revenue in our consolidated statements ofoperations. Beginning with fiscal 2014, legacy SMS revenue is included within subscription and software revenue in our consolidated statements ofoperations. For further information, please refer to the "Revenue Reclassification" section.Services and Other RevenueProfessional Services Revenue Professional services are provided to customers on a time-and-materials (T&M) or fixed-price basis. We recognize professional services fees for our T&Mcontracts based upon hours worked and contractually agreed-upon hourly rates. Revenue from fixed-price engagements is recognized using the proportionalperformance method based on the ratio of costs incurred to the total estimated project costs. Project costs are typically expensed as incurred. The use of theproportional performance method is dependent upon our ability to reliably estimate the costs to complete a project. We use historical experience as a basisfor future estimates to complete current projects. Additionally, we believe that costs are the best available measure of performance. Out-of-pocket expenseswhich are reimbursed by customers are recorded as revenue.51Table of Contents In certain circumstances, professional services revenue may be recognized over a longer time period than the period over which the services areperformed. If the costs to complete a project are not estimable or the completion is uncertain, the revenue is recognized upon completion of the services. Incircumstances in which professional services are sold as a single arrangement with, or in contemplation of, a new aspenONE license or point productarrangement with Premier Plus SMS, revenue is deferred and recognized on a ratable basis over the longer of (i) the period the services are performed, or(ii) the license term. When we provide professional services considered essential to the functionality of the software, we recognize the combined revenue fromthe sale of the software and related services using the completed contract or percentage-of-completion method. We have occasionally been required to commit unanticipated additional resources to complete projects, which resulted in losses on those contracts.Provisions for estimated losses on contracts are made during the period in which such losses become probable and can be reasonably estimated.Training Revenue We provide training services to our customers, including on-site, Internet-based, public and customized training. Revenue is recognized in the period inwhich the services are performed. In circumstances in which training services are sold as a single arrangement with, or in contemplation of, a new aspenONElicense or point product arrangement with Premier Plus SMS, revenue is deferred and recognized on a ratable basis over the longer of (i) the period theservices are performed or (ii) the license term.Accounting for Income Taxes We utilize the asset and liability method of accounting for income taxes in accordance with ASC 740. Under this method, deferred tax assets andliabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets andliabilities are measured using the enacted tax rates and statutes that will be in effect when the differences are expected to reverse. Deferred tax assets can resultfrom unused operating losses, research and development (R&D) and foreign tax credit carryforwards and deductions recorded for financial statement purposesprior to them being deductible on a tax return. The realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of taxable temporary differences.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 thedeferred tax assets will not be realized. Significant management judgment is required in determining any valuation allowance recorded against deferred taxassets. We consider, among other available information, projected future taxable income, limitations on the availability of net operating loss (NOLs) and taxcredit carryforwards, scheduled reversals of deferred tax liabilities and other evidence assessing the potential realization of deferred tax assets. Adjustments tothe valuation allowance are included in the provision for (benefit from) income taxes in our consolidated statements of operations in the period they becomeknown. Our provision for (benefit from) income taxes includes amounts determined under the provisions of ASC 740, and is intended to satisfy additionalincome tax assessments, including interest and penalties, that could result from any tax return positions for which the likelihood of sustaining the position onan audit does not meet a threshold of "more likely than not." Penalties and interest are recorded as a component of our provision for (benefit from) incometaxes. Tax liabilities under the provisions of ASC 740 were recorded as a component of our income taxes payable and other non-current liabilities. Theultimate amount of taxes due will not be known until examinations are completed and settled or the audit periods are closed by statutes.52Table of Contents Our U.S. and foreign tax returns are subject to periodic compliance examinations by various local and national tax authorities through periods definedby the tax code in applicable jurisdictions. The years prior to 2007 are closed in the United States, although the utilization of net operating loss carryforwardsand tax credits generated in earlier periods will keep these periods open for examination. Similarly, the years prior to 2010 are closed in the United Kingdom,although the utilization of net operating loss carryforwards generated in earlier periods will keep the periods open for examination. Our Canadiansubsidiaries are subject to audit from 2007 forward, and certain other of our international subsidiaries are subject to audit from 2003 forward. In connectionwith examinations of tax filings, tax contingencies can arise from differing interpretations of applicable tax laws and regulations relative to the amount,timing or proper inclusion or exclusion of revenue and expenses in taxable income or loss. For periods that remain subject to audit, we have asserted andunasserted potential assessments that are subject to final tax settlements.Loss Contingencies The outcomes of legal proceedings and claims brought against us are subject to significant uncertainty. We accrue estimated liabilities for losscontingencies 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. Disclosure of a contingency is required if there is at least a reasonable possibility that a loss has beenincurred. In determining whether a loss should be accrued we evaluate, among other factors, the degree of probability of an unfavorable outcome and theability to make a reasonable estimate of the loss amount. Change in these factors could materially impact our consolidated financial statements. Under the terms of substantially all of our license agreements, we have agreed to indemnify customers for costs and damages arising from claims againstsuch customers based on, among other things, allegations that our software products infringe the intellectual property rights of a third party. In most cases, inthe event of an infringement claim, we retain the right to procure for the customer the right to continue using the software product or to replace or modify thesoftware product to eliminate the infringement while providing substantially equivalent functionality. These indemnification provisions are accounted for inaccordance with ASC Topic 460, Guarantees. In most cases, and where legally enforceable, the indemnification refund is limited to the amount of the licensefees paid by the customer.Recently Adopted Accounting Pronouncements In fiscal 2015, we adopted ASU 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, which did nothave an impact on our reported financial position or results of operations and cash flows. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts withCustomers. ASU No. 2014-09 was issued by the FASB as a part of the joint project with the International Accounting Standards Board (IASB) to clarifyrevenue recognition principles and develop a common revenue standard for the U.S. Generally Accepted Accounting Principles (GAAP) and InternationalFinancial Reporting Standards (IFRS). ASU No. 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption of ASUNo. 2014-09 is not permitted. The amendments included within ASU No. 2014-09 should be applied by using one of the following methods:Retrospectively to each prior reporting period presented. The entity may elect any of the practical expedients described in ASU No. 2014-09 when applying this method.53Table of ContentsRetrospectively with the cumulative effect of initially applying ASU No. 2014-09 recognized at the date of initial application. In thereporting periods that include the date of the initial application of ASU No. 2014-09, the entity should disclose the amount by which eachfinancial statement line item is affected by the application of ASU No. 2014-09 in the current reporting period as compared to the guidancethat was in effect before the change. We will adopt ASU No. 2014-09 during the first quarter of fiscal 2019. We are currently evaluating the impact of ASU No. 2014-09 on our financialposition, results of operations and cash flows. Item 7A. 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 risksinclude changes in currency exchange rates and interest rates which could affect operating results, financial position and cash flows. We manage ourexposure to these market risks through our regular operating and financing activities and, if considered appropriate, we may enter into derivative financialinstruments such as forward currency exchange contracts.Foreign Currency Risk During fiscal 2015 and 2014, 13.8% and 15.7% of our total revenue was denominated in a currency other than the U.S. dollar. In addition, certain of ouroperating costs incurred outside the United States are denominated in currencies other than the U.S. dollar. We conduct business on a worldwide basis and asa result, a portion of our revenue, earnings, net assets, and net investments in foreign affiliates is exposed to changes in foreign currency exchange rates. Wemeasure 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. Wemay enter into foreign currency forward contracts to minimize the impact related to unfavorable exchange rate movements, although we have not done soduring fiscal 2014 and fiscal 2013. Our largest exposures to foreign currency exchange rates exist primarily with the Euro, Pound Sterling, Canadian Dollar,and Japanese Yen. During fiscal 2015 and fiscal 2014, we recorded $0.8 million and $(2.3) million of net foreign currency exchange gains and losses, respectively, relatedto the settlement and remeasurement of transactions denominated in currencies other than the functional currency of our operating units. Our analysis ofoperating results transacted in various foreign currencies indicated that a hypothetical 10% change in the foreign currency exchange rates could haveincreased or decreased the consolidated results of operations by approximately $5.0 million for fiscal 2015 and by approximately $6.0 million for fiscal2014, respectively.Interest Rate Risk We place our investments in money market instruments and high quality, investment grade, fixed-income corporate debt securities that meet high creditquality standards, as specified in our investment guidelines. We mitigate the risks by diversifying our investment portfolio, limiting the amount of investments in debt securities of any single issuer and using athird-party investment manager. Our debt securities are short- to intermediate- term investments with maturities ranging from less than 1 month to 14 monthsas of June 30, 2015 and less than 1 month to 23 months as of June 30, 2014, respectively. We do not use derivative financial instruments in our investmentportfolio. Our analysis of our investment portfolio and interest rates at June 30, 2015 and 2014 indicated that a 100 basis point increase or decrease in interest rateswould result in a decrease or increase of approximately $0.3 million for fiscal 2015 and $0.8 million for fiscal 2014 in the fair value of our54Table of Contentsinvestment portfolio determined in accordance with income-based approach utilizing portfolio future cash flows discounted at the appropriate rates. Item 8. Financial Statements and Supplementary Data. The following consolidated financial statements specified by this Item, together with the reports thereon of KPMG LLP, are presented following Item 15of this Form 10-K: Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. Item 9A. 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 controlsand procedures as of June 30, 2015. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the SecuritiesExchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in thereports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in theSEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information requiredto 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'smanagement, 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 achievingtheir objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based onthe evaluation of our disclosure controls and procedures as of June 30, 2015, our chief executive officer and chief financial officer concluded that, as of suchdate, our disclosure controls and procedures were effective.b) Management's Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Internal controlover financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as a process designed by, or under the supervisionof, a company's principal executive and principal financial officers and effected by the Company's board of directors, management and other personnel, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external55Financial Statements: Report of Independent Registered Public Accounting Firm Consolidated Statements of Operations for the years ended June 30, 2015, 2014 and 2013 Consolidated Statements of Comprehensive Income for the years ended June 30, 2015, 2014 and 2013 Consolidated Balance Sheets as of June 30, 2015 and 2014 Consolidated Statements of Stockholders' (Deficit) Equity for the years ended June 30, 2015, 2014 and 2013 Consolidated Statements of Cash Flows for the years ended June 30, 2015, 2014 and 2013 Notes to Consolidated Financial Statements Table of Contentspurposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:•pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets ofthe company; •provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the company are being made in accordance withauthorizations of management and directors of the company; and •provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assetsthat could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate. Our management, including our chief executive officer and chief financial officer, assessed the effectiveness of our internal control over financialreporting as of June 30, 2015 based on criteria established in "Internal Control—Integrated Frameworks (2013) issued by the Committee of SponsorsOrganizations of the Treadway Commission (COSO), and concluded that, as of June 30, 2015, our internal control over financial reporting was effective. KPMG LLP, our independent registered public accounting firm, has audited our consolidated financial statements and the effectiveness of our internalcontrol over financial reporting as of June 30, 2015. This report appears below.c) Changes in Internal Control over Financial Reporting During the three months ended June 30, 2015, no changes were identified to our internal controls over financial reporting that materially affected, orwere reasonably likely to materially affect, our internal controls over financial reporting.56Table of Contents Report of Independent Registered Public Accounting Firm The Board of Directors and StockholdersAspen Technology, Inc.: We have audited Aspen Technology, Inc.'s and subsidiaries (the "Company") internal control over financial reporting as of June 30, 2015, based oncriteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting.Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performingsuch other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internalcontrol over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately andfairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the companyare being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financialstatements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2015, based on criteriaestablished in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balancesheets of the Company as of June 30, 2014 and 2015, and the related consolidated statements of operations, comprehensive income, stockholders' (deficit)equity, and cash flows for each of the years in the three-year period ended June 30, 2015, and our report dated August 13, 2015 expressed an unqualifiedopinion on those consolidated financial statements./s/ KPMG LLPBoston, MassachusettsAugust 13, 201557Table of Contents Item 9B. Other Information. None.58Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance. Certain information required under this Item 10 will appear under the sections entitled "Executive Officers of the Registrant," "Election of Directors,""Information Regarding our Board of Directors and Corporate Governance," "Code of Business Conduct and Ethics," and "Section 16(a) BeneficialOwnership Reporting Compliance" in our definitive proxy statement for our 2015 annual meeting of stockholders, and is incorporated herein by reference. Item 11. Executive Compensation. Certain information required under this Item 11 will appear under the sections entitled "Director Compensation," "Compensation Discussion andAnalysis," "Executive Compensation" and "Employment and Change in Control Agreements" in our definitive proxy statement for our 2015 annual meetingof stockholders, and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Certain information required under this Item 12 will appear under the sections entitled "Stock Owned by Directors, Executive Officers and Greater-than5% Stockholders" and "Securities Authorized for Issuance Under Equity Compensation Plans" in our definitive proxy statement for our 2015 annual meetingof stockholders, and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. Certain information required under this Item 13 will appear under the sections entitled "Information Regarding the Board of Directors and CorporateGovernance" and "Related Party Transactions" in our definitive proxy statement for our 2015 annual meeting of stockholders, and is incorporated herein byreference. Item 14. Principal Accounting Fees and Services. Certain information required under this Item 14 will appear under the section entitled "Independent Registered Public Accountants" in our definitiveproxy statement for our 2015 annual meeting of stockholders, and is incorporated herein by reference.59Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules. (a)(1) Financial Statements The consolidated financial statements appear immediately following page 62 ("Signatures").(a)(2) Financial Statement Schedules All schedules are omitted because they are not required or the required information is shown in the consolidated financial statements or notes thereto.(a)(3) Exhibits The exhibits listed in the accompanying exhibit index are filed or incorporated by reference as part of this Form 10-K.60Description PageReport of Independent Registered Public Accounting Firm F-2Consolidated Statements of Operations for the years ended June 30, 2015, 2014 and 2013 F-3Consolidated Statements of Comprehensive Income for the years ended June 30, 2015, 2014 and 2013 F-4Consolidated Balance Sheets as of June 30, 2015 and 2014 F-5Consolidated Statements of Stockholders' (Deficit) Equity for the years ended June 30, 2015, 2014 and 2013 F-6Consolidated Statements of Cash Flows for the years ended June 30, 2015, 2014 and 2013 F-7Notes to Consolidated Financial Statements F-8 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.61 ASPEN TECHNOLOGY, INC.Date: August 13, 2015 By: /s/ ANTONIO J. PIETRIAntonio J. PietriPresident and Chief Executive OfficerDate: August 13, 2015 By: /s/ MARK P. SULLIVANMark P. SullivanExecutive Vice President andChief Financial OfficerSignature Title Date /s/ ANTONIO J. PIETRIAntonio J. Pietri President and Chief Executive Officer andDirector (Principal Executive Officer) August 13, 2015/s/ MARK P. SULLIVANMark P. Sullivan Executive Vice President and Chief FinancialOfficer (Principal Financial and AccountingOfficer) August 13, 2015/s/ ROBERT M. WHELAN, JR.Robert M. Whelan, Jr. Chairman of the Board of Directors August 13, 2015/s/ DONALD P. CASEYDonald P. Casey Director August 13, 2015/s/ GARY E. HAROIANGary E. Haroian Director August 13, 2015Table of Contents62Signature Title Date /s/ JOAN C. MCARDLEJoan C. McArdle Director August 13, 2015/s/ SIMON OREBI GANNSimon Orebi Gann Director August 13, 2015Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS F-1Report of Independent Registered Public Accounting Firm F-2Consolidated Statements of Operations for the years ended June 30, 2015, 2014 and 2013 F-3Consolidated Statements of Comprehensive Income for the years ended June 30, 2015, 2014 and 2013 F-4Consolidated Balance Sheets as of June 30, 2015 and 2014 F-5Consolidated Statements of Stockholders' (Deficit) Equity for the years ended June 30, 2015, 2014 and 2013 F-6Consolidated Statements of Cash Flows for the years ended June 30, 2015, 2014 and 2013 F-7 Table of ContentsReport of Independent Registered Public Accounting FirmThe Board of Directors and StockholdersAspen Technology, Inc.: We have audited the accompanying consolidated balance sheets of Aspen Technology, Inc. and subsidiaries (the "Company") as of June 30, 2015 and2014, and the related consolidated statements of operations, comprehensive income, stockholders' (deficit) equity, and cash flows for each of the years in thethree-year period ended June 30, 2015. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is toexpress an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as ofJune 30, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 2015, inconformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internalcontrol over financial reporting as of June 30, 2015, based on criteria established in Internal Control—Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated August 13, 2015 expressed an unqualified opinion onthe effectiveness of the Company's internal control over financial reporting./s/ KPMG LLPBoston, MassachusettsAugust 13, 2015F-2 Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS See accompanying notes to these consolidated financial statements.F-3 Year Ended June 30, 2015 2014 2013 (Dollars in Thousands, Except per ShareData) Revenue: Subscription and software $405,640 $350,486 $276,585 Services and other 34,761 40,967 34,802 Total revenue 440,401 391,453 311,387 Cost of revenue: Subscription and software 21,165 20,141 20,148 Services and other 28,411 32,547 30,200 Total cost of revenue 49,576 52,688 50,348 Gross profit 390,825 338,765 261,039 Operating expenses: Selling and marketing 92,736 94,827 93,655 Research and development 69,584 68,410 62,516 General and administrative 48,713 45,819 49,273 Restructuring charges — (15) (5)Total operating expenses 211,033 209,041 205,439 Income from operations 179,792 129,724 55,600 Interest income 487 1,124 3,379 Interest expense (30) (37) (424)Other (expense), net (778) (2,278) (1,117)Income before provision for income taxes 179,471 128,533 57,438 Provision for income taxes 61,064 42,750 12,176 Net income $118,407 $85,783 $45,262 Net income per common share: Basic $1.34 $0.93 $0.48 Diluted $1.33 $0.92 $0.47 Weighted average shares outstanding: Basic 88,398 92,648 93,586 Diluted 89,016 93,665 95,410  Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME See accompanying notes to these consolidated financial statements.F-4 Year Ended June 30, 2015 2014 2013 (Dollars in Thousands) Net income $118,407 $85,783 $45,262 Other comprehensive income (loss): Net unrealized (losses) gains on available for sale securities, net of tax effects of $15,($32) and $28 for fiscal years 2015, 2014 and 2013 (29) 59 (52)Foreign currency translation adjustments (2,873) 2,050 (780)Total other comprehensive income (loss) (2,902) 2,109 (832)Comprehensive income $115,505 $87,892 $44,430  Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS See accompanying notes to these consolidated financial statements.F-5 June 30, 2015 2014 (Dollars in Thousands,Except Share Data) ASSETS Current assets: Cash and cash equivalents $156,249 $199,526 Short-term marketable securities 59,197 67,619 Accounts receivable, net 30,721 38,532 Current portion of installments receivable, net 1,589 640 Unbilled services 1,108 1,656 Prepaid expenses and other current assets 8,055 10,567 Prepaid income taxes 542 605 Current deferred tax assets 6,169 10,537 Total current assets 263,630 329,682 Long-term marketable securities 3,047 31,270 Non-current installments receivable, net 253 811 Property, equipment and leasehold improvements, net 18,039 7,588 Computer software development costs, net 1,026 1,390 Goodwill 17,360 19,276 Non-current deferred tax assets 10,444 12,765 Other non-current assets 1,562 5,190 Total assets $315,361 $407,972 LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY Current liabilities: Accounts payable $5,240 $412 Accrued expenses and other current liabilities 38,483 34,984 Income taxes payable 1,775 2,168 Current deferred revenue 250,968 228,940 Total current liabilities 296,466 266,504 Non-current deferred revenue 37,919 45,942 Other non-current liabilities 29,522 11,850 Commitments and contingencies (Note 8) Series D redeemable convertible preferred stock, $0.10 par value—Authorized—3,636 shares as ofJune 30, 2015 and 2014 Issued and outstanding—none as of June 30, 2015 and 2014 — — Stockholders' (deficit) equity: Common stock, $0.10 par value—Authorized—210,000,000 shares Issued—101,607,520 sharesat June 30, 2015 and 101,033,740 shares at June 30, 2014 Outstanding—84,504,202 shares atJune 30, 2015 and 91,661,850 shares at June 30, 2014 10,161 10,103 Additional paid-in capital 641,883 591,324 Accumulated deficit (145,627) (264,034)Accumulated other comprehensive income 6,470 9,372 Treasury stock, at cost—17,103,318 shares of common stock at June 30, 2015 and 9,371,890shares at June 30, 2014 (561,433) (263,089)Total stockholders' (deficit) equity (48,546) 83,676 Total liabilities and stockholders' (deficit) equity $315,361 $407,972  Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY See accompanying notes to these consolidated financial statements.F-6 Common Stock Treasury Stock AccumulatedOtherComprehensiveIncome TotalStockholders'(Deficit)Equity Number ofShares $0.10 ParValue AdditionalPaid-inCapital AccumulatedDeficit Number ofShares Cost (Dollars in Thousands, Except Share Data) Balance June 30, 2012 96,663,580 $9,666 $547,546 $(395,079)$8,095 3,197,625 $(56,636)$113,592 Comprehensive income (loss): Net income — — — 45,262 — — — 45,262 Other comprehensive income(loss) — — — — (832) — — (832)Exercise of stock options 2,743,772 275 20,868 — — — — 21,143 Issuance of restricted stockunits 538,193 54 (7,759) — — — — (7,705)Repurchase of common stock — — — — — 3,064,151 (84,677) (84,677)Stock-based compensation — — 14,637 — — — — 14,637 Excess tax benefits from stock-based compensation — — 478 478 Balance June 30, 2013 99,945,545 $9,995 $575,770 $(349,817)$7,263 6,261,776 $(141,313)$101,898 Comprehensive income (loss): Net income — — — 85,783 — — — 85,783 Other comprehensive income(loss) — — — — 2,109 — — 2,109 Exercise of stock options 723,330 72 8,638 — — — — 8,710 Issuance of restricted stockunits 364,865 36 (7,867) — — — — (7,831)Repurchase of common stock — — — — — 3,110,114 (121,776) (121,776)Stock-based compensation — — 14,056 — — — — 14,056 Excess tax benefits from stock-based compensation — — 727 727 Balance June 30, 2014 101,033,740 $10,103 $591,324 $(264,034)$9,372 9,371,890 $(263,089)$83,676 Comprehensive income (loss): Net income — — — 118,407 — — — 118,407 Other comprehensive income(loss) — — — — (2,902) (2,902)Exercise of stock options 308,847 31 4,635 — — — 4,666 Issuance of restricted stockunits 264,933 27 (5,684) — — — — (5,657)Repurchase of common stock — — — — — 7,731,428 (298,344) (298,344)Stock-based compensation — — 14,584 — — — — 14,584 Excess tax benefits from stock-based compensation — — 37,024 37,024 Balance June 30, 2015 101,607,520 $10,161 $641,883 $(145,627)$6,470 17,103,318 $(561,433)$(48,546) Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS See accompanying notes to these consolidated financial statements.F-7 Year Ended June 30, 2015 2014 2013 (Dollars in Thousands) Cash flows from operating activities: Net income $118,407 $85,783 $45,262 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,216 5,215 5,229 Net foreign currency loss (gain) (1,552) 1,934 (952)Stock-based compensation 14,584 14,056 14,637 Deferred income taxes 20,112 34,596 5,127 Provision for bad debts (513) 1,793 489 Tax benefits from stock-based compensation 37,024 727 478 Excess tax benefits from stock-based compensation (37,024) (727) (478)Other non-cash operating activities 1,619 1,847 818 Changes in assets and liabilities: Accounts receivable 8,028 (3,179) (6,094)Unbilled services 526 301 (380)Prepaid expenses, prepaid income taxes, and other assets 4,070 947 3,827 Installment receivables (364) 13,607 39,419 Accounts payable, accrued expenses and other liabilities 5,933 906 (5,425)Deferred revenue 14,919 42,325 44,605 Net cash provided by operating activities 191,985 200,131 146,562 Cash flows from investing activities: Purchase of marketable securities (50,065) (68,356) (97,597)Maturities of marketable securities 85,535 60,265 4,549 Purchase of property, equipment and leasehold improvements (7,645) (4,011) (4,507)Insurance proceeds — — 2,222 Purchase of technology intangibles — (400) (902)Capitalized computer software development costs (359) (685) (1,156)Net cash provided by (used in) investing activities 27,466 (13,187) (97,391)Cash flows from financing activities: Exercise of stock options 4,662 8,710 21,143 Repayments of secured borrowings — — (11,010)Repurchases of common stock (297,246) (121,776) (84,677)Payment of tax withholding obligations related to restricted stock (5,699) (7,831) (7,705)Excess tax benefits from stock-based compensation 37,024 727 478 Net cash used in financing activities (261,259) (120,170) (81,771)Effect of exchange rate changes on cash and cash equivalents (1,469) 320 (210)(Decrease) increase in cash and cash equivalents (43,277) 67,094 (32,810)Cash and cash equivalents, beginning of year 199,526 132,432 165,242 Cash and cash equivalents, end of year $156,249 $199,526 $132,432 Supplemental disclosure of cash flow information: Income tax paid, net $3,712 $7,157 $4,645 Interest paid 30 37 424  Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(1) Operations Aspen Technology, Inc., together with its subsidiaries, is a leading global provider of mission-critical process optimization software solutions designedto manage and optimize plant and process design, operational performance, and supply chain planning. Our aspenONE software and related services havebeen developed for companies in the process industries, which consist of energy, chemicals, engineering and construction, as well as consumer packagedgoods, power, metals and mining, pulp and paper, pharmaceuticals and biofuels. Customers use our solutions to improve their competitiveness andprofitability by increasing throughput and productivity, reducing operating costs, enhancing capital efficiency, and decreasing working capital requirements.We operate globally in 31 countries as of June 30, 2015.(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. Allintercompany balances and transactions have been eliminated in consolidation.Reclassifications Certain line items in prior period financial statements have been reclassified to conform to currently reported presentations.(b) Management Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requiresmanagement to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actualresults could differ from those estimates.(c) Cash and Cash Equivalents Cash and cash equivalents consist of short-term, highly liquid investments with remaining maturities of three months or less when purchased.F-8Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(2) Significant Accounting Policies (Continued)(d) Marketable Securities The following table summarizes the fair value, the amortized cost and unrealized holding gains (losses) on our marketable securities as of June 30, 2015and 2014: Our marketable securities are classified as available-for-sale and reported at fair value on the consolidated balance sheets. Net unrealized gains (losses)are reported as a separate component of accumulated other comprehensive income, net of tax. Realized gains and losses on investments are recognized inearnings as incurred. Our investments consist primarily of investment grade fixed income corporate debt securities with maturity dates ranging from July2015 through August 2016 as of June 30, 2015 and from July 2014 through May 2016 as of June 30, 2014, respectively. We review our marketable securities for impairment at each reporting period to determine if any of our securities have experienced an other-than-temporary decline in fair value in accordance with the provisions of ASC Topic 320, Investments—Debt and Equity Securities. We consider factors, such asthe length of time and extent to which the market value has been less than the cost, the financial condition and near-term prospects of the issuer, our intent tosell, or whether it is more likely than not we will be required to sell the investment before recovery of its amortized cost basis. If we believe that an other-than-temporary decline in fair value has occurred, we write down the investment to fair value and recognize the credit loss in earnings and the non-credit loss inaccumulated other comprehensive income. During fiscal 2015 and 2014, our marketable securities were not considered other-than-temporarily impaired and,as such, we did not recognize impairment losses during the periods then ended. Unrealized losses are attributable to changes in interest rates.F-9 Fair Value Cost UnrealizedGains UnrealizedLosses (Dollars in Thousands) June 30, 2015: U.S. corporate bonds $59,197 $59,223 $8 $(34)Total short-term marketable securities $59,197 $59,223 $8 $(34)U.S. corporate bonds $3,047 $3,055 $— $(8)Total long-term marketable securities $3,047 $3,055 $— $(8)June 30, 2014: U.S. corporate bonds $67,619 $67,587 $39 $(7)Total short-term marketable securities $67,619 $67,587 $39 $(7)U.S. corporate bonds $31,270 $31,290 $1 $(21)Total long-term marketable securities $31,270 $31,290 $1 $(21)Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(2) Significant Accounting Policies (Continued)(e) Property and Equipment Property and equipment are stated at cost. We provide for depreciation and amortization, primarily computed using the straight-line method, by chargesto operations in amounts estimated to allocate the cost of the assets over their estimated useful lives, as follows: Depreciation expense was $4.7 million, $3.3 million and $3.4 million for fiscal 2015, 2014 and 2013, respectively.(f) Revenue RecognitionTransition to the aspenONE Licensing Model Prior to fiscal 2010, we offered term or perpetual licenses to specific products, or specifically defined sets of products, which we refer to as point products.The majority of our license revenue was recognized under an "upfront revenue model," in which the net present value of the aggregate license fees wasrecognized as revenue upon shipment of the point products. Customers typically received one year of post-contract software maintenance and support, orSMS, with their license agreements and then could elect to renew SMS annually. Revenue from SMS was recognized ratably over the period in which theSMS was delivered. In fiscal 2010, we introduced the following changes to our licensing model:(i)We began offering our software on a subscription basis, allowing our customers access to all products within a licensed suite (aspenONEEngineering or aspenONE Manufacturing and Supply Chain). SMS is included for the entire term of the arrangement and customers areentitled to any software products or updates introduced into the licensed suite. We refer to this license arrangement as our aspenONE licensingmodel. (ii)We began to include SMS for the entire term on our point product term arrangements. In fiscal 2012, we introduced Premier Plus SMS. As part of this offering, customers receive 24x7 support, faster response times, dedicated technicaladvocates and access to web-based training modules. Premier Plus SMS is exclusively available as a component of our term contract arrangements and we areunable to establish VSOE for this deliverable because we don't offer it on a stand-alone basis. Revenue related to our aspenONE licensing model and point product arrangements with Premier Plus SMS are both recognized over the term of thearrangement on a ratable basis. The changes to our licensing model resulted in a significant reduction to license revenue in fiscal 2010, as compared to fiscalperiods preceding our licensing model changes. From fiscal 2010 through fiscal 2015, as customer license arrangements previously executed under theupfront revenue model reached the end of their terms, and were renewed under the aspenONE licensing model, we recognized increasing amounts ofF-10Asset Classification Estimated Useful LifeComputer equipment 3 yearsPurchased software 3 - 5 yearsFurniture and fixtures 3 - 10 yearsLeasehold improvements Life of lease or asset, whichever is shorterTable of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(2) Significant Accounting Policies (Continued)subscription revenue and deferred revenue. The value of our installed base of software licenses was also growing during this period which further contributedto growth in subscription and deferred revenue. Many of our license arrangements were five or six years in duration when the aspenONE licensing model wasintroduced at the start of fiscal 2010, and consequently, a number of arrangements executed under the upfront revenue model did not reach the end of theiroriginal term until the end of fiscal 2015. For fiscal 2016 and beyond, we do not expect the changes to our licensing model to have any material impact onsubscription revenue or deferred revenue. The changes to our licensing model introduced in fiscal 2010 did not change the method or timing of customer billings or cash collections. In addition,the changes to our licensing model did not impact the incurrence or timing of our expenses. Since there was no corresponding expense reduction to offset thelower revenue during fiscal years 2010-2015, operating income was lower than what would have been reported under a fully transitioned revenue model, andduring fiscal 2010, 2011 and 2012, the lower revenue resulted in operating losses.Revenue Recognition We generate revenue from the following sources: (1) licensing software products; (2) providing SMS and training; and (3) providing professionalservices. We sell our software products to end users under fixed-term and perpetual licenses. As a standard business practice, we offer extended payment termoptions for our fixed-term license arrangements, which are generally payable on an annual basis. Certain of our fixed-term license agreements include productmixing rights that allow customers the flexibility to change or alternate the use of multiple products included in the license arrangement after those productsare delivered to the customer. We refer to these arrangements as token arrangements. Tokens are fixed units of measure. The amount of software usage islimited by the number of tokens purchased by the customer. Four basic criteria must be satisfied before software license revenue can be recognized: persuasive evidence of an arrangement between us and an enduser; delivery of our product has occurred; the fee for the product is fixed or determinable; and collection of the fee is probable. Persuasive evidence of an arrangement—We use a signed contract as evidence of an arrangement for software licenses and SMS. For professionalservices we use a signed contract and a work proposal to evidence an arrangement. In cases where both a signed contract and a purchase order are required bythe customer, we consider both taken together as evidence of the arrangement. Delivery of our product—Software and the corresponding access keys are generally delivered to customers via disk media with standard shipping termsof Free Carrier, our warehouse (i.e., FCA, named place). Our software license agreements do not contain conditions for acceptance. Fee is fixed or determinable—We assess whether a fee is fixed or determinable at the outset of the arrangement. Significant judgment is involved inmaking this assessment. Under our upfront revenue model, we are able to demonstrate that the fees are fixed or determinable for all arrangements, including those for our termlicenses that contain extended payment terms. We have an established history of collecting under the terms of these contracts without providing concessionsto customers. In addition, we also assess whether a contract modification to an existing term arrangement constitutes a concession. In making this assessment,significant analysis is performedF-11Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(2) Significant Accounting Policies (Continued)to ensure that no concessions are given. Our software license agreements do not include a right of return or exchange. For license arrangements executedunder the upfront revenue model, we recognize license revenue upon delivery of the software product, provided all other revenue recognition requirementsare met. We cannot assert that the fees under our aspenONE licensing model and point product arrangements with Premier Plus SMS are fixed or determinablebecause the rights provided to customers, and the economics of the arrangements, are not comparable to our transactions with other customers under theupfront revenue model. As a result, the amount of revenue recognized for these arrangements is limited by the amount of customer payments that become due. Collection of fee is probable—We assess the probability of collecting from each customer at the outset of the arrangement based on a number of factors,including the customer's payment history, its current creditworthiness, economic conditions in the customer's industry and geographic location, and generaleconomic conditions. If in our judgment collection of a fee is not probable, revenue is recognized as cash is collected, provided all other conditions forrevenue recognition have been met.Vendor-Specific Objective Evidence of Fair Value We have established VSOE for certain SMS offerings, professional services, and training, but not for our software products or our Premier Plus SMSoffering. We assess VSOE for SMS, professional services, and training, based on an analysis of standalone sales of the offerings using the bell-shaped curveapproach. We do not have a history of selling our Premier Plus SMS offering to customers on a standalone basis, and as a result are unable to establish VSOEfor this deliverable. As of July 1, 2014, we are no longer able to establish VSOE for legacy SMS offerings sold with our perpetual license arrangements. As aresult, all perpetual license agreements that include legacy SMS entered into subsequent to June 30, 2014 will be recognized ratably over the legacy SMSservice period. Loss of VSOE on legacy SMS offerings sold with our perpetual license arrangements did not have a material impact on our revenue in fiscal2015 and is not expected to have a material impact on our revenue in future periods. We allocate the arrangement consideration among the elements included in our multi-element arrangements using the residual method. Under theresidual method, the VSOE of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue upon deliveryof the software, assuming all other revenue recognition criteria are met. If VSOE does not exist for an undelivered element in an arrangement, revenue isdeferred until such evidence does exist for the undelivered elements, or until all elements are delivered, whichever is earlier. Under the upfront revenuemodel, the residual license fee is recognized upon delivery of the software provided all other revenue recognition criteria were met. Arrangements thatqualified for upfront recognition during fiscal 2014 and prior periods included sales of perpetual licenses, amendments to existing legacy term arrangementsand renewals of legacy term arrangements.Subscription and Software Revenue Subscription and software revenue consists of product and related revenue from our (i) aspenONE licensing model; (ii) point product arrangements withour Premier Plus SMS offering included for the contract term; (iii) legacy arrangements including (a) amendments to existing legacy term arrangements,F-12Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(2) Significant Accounting Policies (Continued)(b) renewals of legacy term arrangements and (c) legacy arrangements that are being recognized over time as a result of not previously meeting one or more ofthe requirements for recognition under the upfront revenue model; (iv) legacy SMS arrangements; and (v) perpetual arrangements. 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 thearrangement and the customer receives, for the term of the arrangement, the right to any new unspecified future software products and updates that may beintroduced into the licensed aspenONE software suite. Due to our obligation to provide unspecified future software products and updates, we are required torecognize revenue ratably over the term of the arrangement, once the other revenue recognition criteria noted above have been met. Our point product arrangements with Premier Plus SMS include SMS for the term of the arrangement. Since we do not have VSOE for our Premier PlusSMS offering, the SMS element of our point product arrangements is not separable. As a result, revenue associated with point product arrangements withPremier Plus SMS included for the contract term is recognized ratably over the term of the arrangement, once the other revenue recognition criteria have beenmet. Perpetual and legacy term license arrangements do not include the same rights as those provided to customers under the aspenONE licensing model andpoint product arrangements with Premier Plus SMS. Legacy SMS revenue is generated from legacy SMS offerings provided in support of perpetual andlegacy term license arrangements. Customers typically receive SMS for one year and then can elect to renew SMS annually. During fiscal 2014 and priorperiods, we had VSOE for certain legacy SMS offerings sold with perpetual and term license arrangements and could therefore separate the undeliveredelements. Accordingly, license fee revenue for perpetual and legacy term license arrangements was recognized upon delivery of the software products usingthe residual method, provided all other revenue recognition requirements were met. VSOE of fair value for the undelivered SMS component sold with ourperpetual and term license arrangements was deferred and subsequently amortized into revenue ratably over the contractual term of the SMS arrangement. Asof July 1, 2014, we are no longer able to establish VSOE for our legacy SMS offerings sold with our perpetual license arrangements. As a result, all perpetuallicense agreements that include legacy SMS entered into subsequent to June 30, 2014 will be recognized ratably over the legacy SMS service period. Loss ofVSOE on legacy SMS offerings sold with our perpetual license arrangements did not have a material impact on our revenue in fiscal 2015 and is not expectedto have a material impact on our revenue in future periods.Revenue Reclassification Prior to fiscal 2014, legacy SMS revenue was classified within services and other revenue in our consolidated statements of operations. Cost of legacySMS revenue was included within cost of services and other revenue. Beginning with fiscal 2014, legacy SMS revenue is included within subscription andsoftware revenue in our consolidated statements of operations. We reclassified legacy SMS revenue into subscription and software revenue in ourconsolidated statements of operations based on the following rationale:i)Legacy SMS revenue had decreased since fiscal 2010, and been offset by a corresponding increase in subscription and software revenue ascustomers transitioned to our aspenONE licensing model and to point product arrangements with Premier Plus SMS.F-13Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(2) Significant Accounting Policies (Continued)ii)Legacy SMS revenue was no longer significant in relation to our total revenue due to the number of our term license arrangements that hadbeen converted to the aspenONE licensing model. iii)We expected legacy SMS revenue to continue to decrease as expiring license arrangements were renewed on the aspenONE licensing model. iv)We manage legacy SMS as a part of our broader software licensing business. The distinction between legacy SMS revenue and revenue fromaspenONE licensing and point product arrangements with Premier Plus SMS included for the full contract term no longer represents ameaningful difference from a line of business standpoint since we assess business performance on a combined basis. v)Legacy SMS revenue and revenue from our aspenONE license arrangements share the same revenue recognition methodology and are bothrecognized on a ratable basis. The following table summarizes the impact of revenue and cost of revenue reclassifications for fiscal 2013: Prior to fiscal 2014, services and other revenue included revenue related to professional services, training, legacy SMS and other revenue. Beginningwith fiscal 2014, legacy SMS revenue is included within subscription and software revenue in our consolidated statements of operations.F-14 Classification in Consolidated Statements ofOperations for the Year Ended June 30, Year Ended June 30, 2015 and 2014 2013 2015 2014 2013 (Dollars in Thousands) Legacy SMS revenue Subscription and software Services and other $20,467 $30,341 $36,931 Cost of Legacy SMS revenue Subscription and software Services and other $4,036 $5,571 $7,360 Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(2) Significant Accounting Policies (Continued) The following tables summarize the impact of legacy SMS revenue and cost of revenue reclassification on our previously presented consolidatedstatements of operations for fiscal 2013:Services and OtherProfessional Services Revenue Professional services are provided to customers on a time-and-materials (T&M) or fixed-price basis. We recognize professional services fees for our T&Mcontracts based upon hours worked and contractually agreed-upon hourly rates. Revenue from fixed-price engagements is recognized using the proportionalperformance method based on the ratio of costs incurred to the total estimated project costs. Project costs are typically expensed as incurred. The use of theproportional performance method is dependent upon our ability to reliably estimate the costs to complete a project. We use historical experience as a basisfor future estimates to complete current projects. Additionally, we believe that costs are the best available measure of performance. Out-of-pocket expenseswhich are reimbursed by customers are recorded as revenue. In certain circumstances, professional services revenue may be recognized over a longer time period than the period over which the services areperformed. If the costs to complete a project are not estimable or the completion is uncertain, the revenue is recognized upon completion of the services. Incircumstances in which professional services are sold as a single arrangement with, or in contemplationF-15 Impact on Consolidated Statementsof Operations for theYear Ended June 30, 2013 As PreviouslyReported Reclassifications As CurrentlyReported (Dollars in Thousands) Subscription and software revenue: Legacy SMS $— $36,931 $36,931 Subscription and software 239,654 — 239,654 $239,654 $36,931 $276,585 Services and other revenue: Legacy SMS $— $(36,931)$(36,931)Professional services, training and other 71,733 — 71,733 $71,733 $(36,931)$34,802 Cost of subscription and software revenue: Cost of legacy SMS revenue $— $7,360 $7,360 Cost of subscription and software revenue 12,788 — 12,788 $12,788 $7,360 $20,148 Cost of services and other revenue: Cost of legacy SMS revenue $— $(7,360)$(7,360)Cost of professional services, training and other revenue 37,560 — 37,560 $37,560 $(7,360)$30,200 Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(2) Significant Accounting Policies (Continued)of, a new aspenONE license or point product arrangement with Premier Plus SMS, revenue is deferred and recognized on a ratable basis over the longer of(i) the period the services are performed, or (ii) the license term. When we provide professional services considered essential to the functionality of thesoftware, we recognize the combined revenue from the sale of the software and related services using the completed contract or percentage-of-completionmethod. We have occasionally been required to commit unanticipated additional resources to complete projects, which resulted in losses on those contracts.Provisions for estimated losses on contracts are made during the period in which such losses become probable and can be reasonably estimated.Training Revenue We provide training services to our customers, including on-site, Internet-based, public and customized training. Revenue is recognized in the period inwhich the services are performed. In circumstances in which training services are sold as a single arrangement with, or in contemplation of, a new aspenONElicense or point product arrangement with Premier Plus SMS, revenue is deferred and recognized on a ratable basis over the longer of (i) the period theservices are performed or (ii) the license term.Deferred Revenue Deferred revenue includes amounts billed or collected in advance of revenue recognition, including arrangements under the aspenONE licensing model,point product arrangements with Premier Plus SMS, legacy SMS arrangements, professional services, and training. Under the aspenONE licensing model andfor point product arrangements with Premier Plus SMS, VSOE does not exist for the undelivered elements, and as a result, the arrangement fees are recognizedratably (i.e., on a subscription basis) over the term of the license. Deferred revenue is recorded as each invoice becomes due. For arrangements under the upfront revenue model, a portion of the arrangement fee is generally recorded as deferred revenue due to the inclusion of anundelivered element, typically certain of our legacy SMS offerings or professional services. The amount of revenue allocated to undelivered elements isbased on the VSOE for those elements using the residual method, and is earned and recognized as revenue as each element is delivered.Other Licensing Matters Our standard licensing agreements include a product warranty provision. We have not experienced significant claims related to software warrantiesbeyond the scope of SMS support, which we are already obligated to provide, and consequently, we have not established reserves for warranty obligations. Our agreements with our customers generally require us to indemnify the customer against claims that our software infringes third-party patent,copyright, trademark or other proprietary rights. Such indemnification obligations are generally limited in a variety of industry-standard respects, includingour right to replace an infringing product. As of June 30, 2015 and 2014, we had not experienced any material losses related to these indemnificationobligations and no claims with respect thereto wereF-16Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(2) Significant Accounting Policies (Continued)outstanding. We do not expect significant claims related to these indemnification obligations, and consequently, have not established any related reserves.(g) Installments Receivable Installments receivable resulting from product sales under the upfront revenue model are discounted to present value at prevailing market rates at thedate the contract is signed, taking into consideration the customer's credit rating. The finance element is recognized using the effective interest method overthe relevant license term and is classified as interest income. Installments receivable are classified as current and non-current in our consolidated balancesheets based on the maturity date of the related installment. Non-current installments receivable consist of receivables with a due date greater than one yearfrom the period-end date. Current installments receivable consist of invoices with a due date of less than one year but greater than 45 days from the period-end date. Once an installments receivable invoice becomes due within 45 days, it is reclassified as a trade accounts receivable in our consolidated balancesheets. As a result, we did not have any past due installments receivable as of June 30, 2015. Our non-current installments receivable are within the scope of Accounting Standards Update (ASU) No. 2010-20, Receivables (Topic 310): Disclosuresabout the Credit Quality of Financing Receivables and the Allowance for Credit Losses. As our portfolio of financing receivables arises from the sale of oursoftware licenses, the methodology for determining our allowance for doubtful accounts is based on the collective population of receivables and is notstratified by class or portfolio segment. We consider factors such as existing economic conditions, country risk, customers' credit rating and past paymenthistory in determining our allowance for doubtful accounts. We reserve against our installments receivable when the related trade accounts receivable havebeen past due for over a year, or when there is a specific risk of uncollectability. Our specific reserve reflects the full value of the related installmentsreceivable for which collection has been deemed uncertain. We transfer an installment receivable reserve balance into a trade accounts receivable allowancewhen an installment receivable ages into a trade account receivable. We write-off receivables when they are considered uncollectable based on our judgment. In instances when we write-off specific customers' tradeaccounts receivable, we also write off any related current and non-current installments receivable balances. As of June 30, 2015, our current and non-current installments receivable of $1.6 million and $0.3 million are presented net of unamortized discounts ofless than $0.1 million each, respectively. As of June 30, 2014, our gross current and non-current installments receivable of $0.7 million and $0.9 million are presented net of unamortizeddiscounts and allowance for doubtful accounts of less than $0.1 million each, respectively. Under the aspenONE licensing model and for point product arrangements with Premier Plus SMS included for the contract term, the installmentpayments are not considered fixed or determinable and, as a result, are not included as installments receivable on our consolidated balance sheet.F-17 Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(2) Significant Accounting Policies (Continued)(h) Allowance for Doubtful Accounts and Discounts We make judgments as to our ability to collect outstanding receivables and provide allowances for the portion of receivables when a loss is reasonablyexpected to occur. The allowance for doubtful accounts is established to represent the best estimate of the net realizable value of the outstanding accountsreceivable. The development of the allowance for doubtful accounts is based on a review of past due amounts, historical write-off and recovery experience, aswell as aging trends affecting specific accounts and general operational factors affecting all accounts. In addition, factors are developed utilizing historicaltrends in bad debts and allowances. We consider current economic trends when evaluating the adequacy of the allowance for doubtful accounts. If circumstances relating to specificcustomers change or unanticipated changes occur in the general business environment, our estimates of the recoverability of receivables could be furtheradjusted. The following table presents our allowance for doubtful accounts activity for accounts receivable in fiscal 2015 and 2014, respectively: The following table summarizes our accounts receivable, net of the related allowance for doubtful accounts, as of June 30, 2015 and 2014:(i) Fair Value of Financial Instruments We determine fair value of financial and non-financial assets and liabilities in accordance with provisions of ASC Topic 820, Fair Value Measurementsand Disclosures (ASC 820). ASC 820 defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderlytransaction between market participants. ASC 820 establishes a fair value hierarchy for valuation inputsF-18 Year Ended June 30, 2015 2014 (Dollars in Thousands) Balance, beginning of year $3,465 $1,615 Provision for bad debts (1,032) 1,922 Write-offs (797) (72)Balance, end of year $1,636 $3,465 Gross Allowance Net (Dollars in Thousands) June 30, 2015: Accounts Receivable $32,357 $1,636 $30,721 $32,357 $1,636 $30,721 June 30, 2014: Accounts Receivable $41,997 $3,465 $38,532 $41,997 $3,465 $38,532 Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(2) Significant Accounting Policies (Continued)that gives the highest priority to quoted prices in active markets for identical assets or liabilities, and the lowest priority to unobservable inputs. The fairvalue hierarchy is as follows:Level 1 Inputs—Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to accessat the measurement date.Level 2 Inputs—Inputs other than quoted prices included in Level 1 that are observable for an asset or a liability, either directly or indirectly.These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities inmarkets that are not active, inputs other than quoted prices that are observable for an asset or a liability (such as interest rates, yield curves,volatilities, prepayment speeds, credit risks, etc.), or inputs that are derived principally from or corroborated by market data by correlation orother means.Level 3 Inputs—Unobservable inputs for determining fair values of assets or liabilities that reflect an entity's own assumptions in pricingassets or liabilities. Cash Equivalents. Cash equivalents are reported at fair value utilizing quoted market prices in identical markets, or "Level 1 Inputs." Our cashequivalents consist of short-term, highly liquid investments with remaining maturities of three months or less when purchased. Marketable Securities. Marketable securities are reported at fair value calculated in accordance with the market approach, utilizing market consensuspricing models with quoted prices that are directly or indirectly observable, or "Level 2 Inputs". Financial instruments not measured or recorded at fair value in the accompanying consolidated financial statements consist of accounts receivable,installments receivable and accounts payable. The estimated fair value of these financial instruments approximates their carrying value. The following table summarizes financial assets and financial liabilities measured and recorded at fair value on a recurring basis in the accompanyingconsolidated balance sheets as of June 30, 2015 and 2014, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measurefair value: At June 30, 2015 and 2014, we did not have any assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs("Level 3 Inputs").F-19 Fair Value Measurements atReporting Date Using, Quoted Prices inActive Markets forIdentical Assets(Level 1 Inputs) Significant OtherObservable Inputs(Level 2 Inputs) (Dollars in Thousands) June 30, 2015: Cash equivalents $130,232 $— Marketable securities — 62,244 June 30, 2014: Cash equivalents $175,875 $— Marketable securities — 98,889 Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(2) Significant Accounting Policies (Continued) Certain non-financial assets, including goodwill, finite-lived intangible assets and other non-financial long-lived assets, are measured at fair value usingmarket and income approaches on a non-recurring basis when there is an indication of impairment.(j) Computer Software Development Costs Certain computer software development costs are capitalized in the accompanying consolidated balance sheets. Capitalization of computer softwaredevelopment costs begins upon establishing technological feasibility defined as meeting specifications determined by the program design. Amortization ofcapitalized computer software development costs is provided on a product-by-product basis using the greater of (a) the amount computed using the ratio thatcurrent gross revenue for a product bears to total of current and anticipated future gross revenue for that product or (b) the straight-line method, beginningupon commercial release of the product, and continuing over the remaining estimated economic life of the product, not to exceed three years. Total computer software costs capitalized were $0.4 million, $0.7 million and $1.2 million during the years ended June 30, 2015, 2014 and 2013,respectively. Total amortization expense charged to operations was approximately $0.7 million, $1.0 million and $1.1 million for the years ended June 30,2015, 2014 and 2013, respectively. Computer software development accumulated amortization totaled $73.3 million and $72.7 million as of June 30, 2015and 2014, respectively. Weighted average remaining useful life of computer software development costs was 1.1 years and 1.9 years at June 30, 2015 and2014, respectively. At each balance sheet date, we evaluate the unamortized capitalized software costs for potential impairment by comparing the balance to the netrealizable value of the products. During the years ending June 30, 2015, 2014 and 2013, our computer software development costs were not consideredimpaired and as such, we did not recognize impairment losses during the periods then ended.(k) Foreign Currency Translation The determination of the functional currency of subsidiaries is based on the subsidiaries' financial and operational environment and is the local currencyof the subsidiary. Gains and losses from foreign currency translation related to entities whose functional currency is their local currency are credited orcharged to accumulated other comprehensive income included in stockholders' equity in the consolidated balance sheets. In all instances, foreign currencytransaction and remeasurement gains or losses are credited or charged to the consolidated statements of operations as incurred as a component of otherincome (expense), net. Foreign currency transaction and remeasurement losses were $0.8 million, $2.3 million and $1.2 million in fiscal 2015, 2014 and2013, respectively.(l) Net Income (Loss) Per Share Basic income (loss) per share is determined by dividing net income (loss) by the weighted average common shares outstanding during the period.Diluted income (loss) per share is determined by dividing net income (loss) by diluted weighted average shares outstanding during the period. Dilutedweighted average shares reflect the dilutive effect, if any, of potential common shares. To the extent their effect is dilutive, employee equity awards and othercommitments to be settled in common stock are included in the calculation of diluted income (loss) per share based on the treasury stock method.F-20Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(2) Significant Accounting Policies (Continued) For the years ended June 30, 2015, 2014 and 2013, certain employee equity awards were anti-dilutive based on the treasury stock method. Thecalculations of basic and diluted net income (loss) per share and basic and diluted weighted average shares outstanding are as follows: The following potential common shares were excluded from the calculation of dilutive weighted average shares outstanding because their effect wouldbe anti-dilutive at the balance sheet date:(m) Concentration of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk are principally cash and cash equivalents, marketable securities,accounts receivable and installments receivable. Our cash is held in financial institutions, and our cash equivalents are invested in money market mutualfunds that we believe to be of high credit quality. At June 30, 2015, our investments in marketable securities consist primarily of investment grade fixedincome corporate debt securities with maturities ranging from less than 1 month to 14 months. We diversify our investment portfolio by investing in multipletypes of investment-grade securities and attempt to mitigate a risk of loss by using a third-party investment manager. Concentration of credit risk with respect to receivables is limited to certain customers to which we make substantial sales. To reduce risk, we assess thefinancial strength of our customers. We do not require collateral or other security in support of our receivables. As of June 30, 2015, one customer receivablebalance represented approximately 11% of our total receivables. The balance was collected subsequent to June 30, 2015.(n) Intangible Assets, Goodwill, Computer Software Developed for Internal Use and Long-Lived AssetsIntangible Assets: We include in our amortizable intangible assets those intangible assets acquired in our business and asset acquisitions. We amortize acquired intangibleassets with finite lives over their estimatedF-21 Year Ended June 30, 2015 2014 2013 (Dollars and Shares in Thousands,Except per Share Data) Net income (loss) $118,407 $85,783 $45,262 Weighted average shares outstanding 88,398 92,648 93,586 Dilutive impact from: Employee equity awards 618 1,017 1,824 Dilutive weighted average shares outstanding 89,016 93,665 95,410 Income (loss) per share Basic $1.34 $0.93 $0.48 Dilutive $1.33 $0.92 $0.47 Year Ended June 30, 2015 2014 2013 (Shares in Thousands) Employee equity awards 587 291 443 Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(2) Significant Accounting Policies (Continued)economic lives, generally using the straight-line method. Each period, we evaluate the estimated remaining useful lives of acquired intangible assets todetermine whether events or changes in circumstances warrant a revision to the remaining period of amortization. Acquired intangibles are removed from theaccounts when fully amortized and no longer in use. Intangible assets consist of the following as of June 30, 2015 and 2014: Amortization expense for technology and patents is included in operating expenses and amounted to $0.7 million, $0.9 million and $0.7 million infiscal 2015, 2014 and 2013, respectively. Amortization expense is expected to approximate $0.1 million for fiscal 2016.Goodwill: During fiscal 2014, we re-aligned our reporting units to reflect our revised operating and reportable segment structure (refer to Note 10). As a result of thisre-alignment, goodwill previously assigned to our SMS, training and other reporting unit was combined with goodwill in our license reporting unit, which iscurrently known as the subscription and software reporting unit. The carrying amount of goodwill of our professional services reporting unit, currently knownas the services reporting unit, was zero at June 30, 2015 and 2014 and consisted of gross goodwill of $5.1 million offset by accumulated impairment losses of$(5.1) million as of the end of each period.F-22 GrossCarryingAmount AccumulatedAmortization Effect ofcurrencytranslation NetCarryingAmount WeightedAverageRemainingLife (in Years) (Dollars in Thousands) June 30, 2015: Technology and patents $2,596 $(2,646)$197 $147 0.4 Total $2,596 $(2,646)$197 $147 0.4 June 30, 2014: Technology and patents $2,596 $(1,899)$197 $894 1.1 Total $2,596 $(1,899)$197 $894 1.1 Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(2) Significant Accounting Policies (Continued) The changes in the carrying amount of goodwill for our subscription and software reporting unit during fiscal years ending June 30, 2015 and 2014 wereas follows: We test goodwill for impairment annually (or more often if impairment indicators arise), at the reporting unit level. We first assess qualitative factors todetermine whether the existence of events or circumstances indicates that it is more likely than not that the fair value of a reporting unit is less than itscarrying amount. If we determine based on this assessment that it is more likely than not that the fair value of a reporting unit is less than its carrying amount,we perform the two-step goodwill impairment test. The first step requires us to determine the fair value of the reporting unit and compare it to the carryingamount, including goodwill, of such reporting unit. If the fair value exceeds the carrying amount, no impairment loss is recognized. However, if the carryingamount of the reporting unit exceeds its fair value, the goodwill of the unit may be impaired. The amount of impairment, if any, is measured based upon theimplied fair value of goodwill at the valuation date. Fair value of a reporting unit is determined using a combined weighted average of a market-based approach (utilizing fair value multiples of comparablepublicly traded companies) and an income-based approach (utilizing discounted projected cash flows). In applying the income-based approach, we would berequired to make assumptions about the amount and timing of future expected cash flows, growth rates and appropriate discount rates. The amount andtiming of future cash flows would be based on our most recent long-term financial projections. The discount rate we would utilize would be determined usingestimates of market participant risk-adjusted weighted-average costs of capital and reflect the risks associated with achieving future cash flows. We have elected December 31st as the annual impairment assessment date and perform additional impairment tests if triggering events occur. Weperformed our annual impairment test for the subscription and software reporting unit as of December 31, 2014 and, based upon the results of ourF-23 Amount (Dollars inThousands) Balance as of June 30, 2013: Goodwill $84,701 Accumulated impairment losses (65,569) $19,132 Effect of currency translation 144 Balance as of June 30, 2014: Goodwill $84,845 Accumulated impairment losses (65,569) $19,276 Effect of currency translation (1,916)Balance as of June 30, 2015: Goodwill $82,929 Accumulated impairment losses (65,569) $17,360 Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(2) Significant Accounting Policies (Continued)qualitative assessment, determined that it was not likely that its fair value was less than its carrying amount. As such, we did not perform the two-stepgoodwill impairment test and did not recognize impairment losses as a result of our analysis. If an event occurs or circumstances change that would morelikely than not reduce the fair value of a reporting unit below its carrying value, goodwill will be evaluated for impairment between annual tests. Notriggering events indicating goodwill impairment occurred during fiscal 2015 and 2014.Computer Software Developed for Internal Use: Computer software developed for internal use is capitalized in accordance with ASC Topic 350-40, Intangibles Goodwill and Other—Internal UseSoftware. We capitalize direct labor costs incurred to develop internal-use software during the application development stage after determining softwaretechnological requirements and obtaining management approval for funding projects probable of completion. In fiscal 2015, 2014, and 2013, we capitalized direct labor costs of $0.3 million, $0.8 million and $0.6 million, respectively associated with ourdevelopment of software for internal use. These costs are included within property, plant and equipment in our consolidated balance sheets.Impairment of Long-Lived Assets: We evaluate our long-lived assets, which include finite-lived intangible assets, property and leasehold improvements for impairment as events andcircumstances indicate that the carrying amount of an asset or a group of assets may not be recoverable. We assess the recoverability of the asset or a group ofassets based on the undiscounted future cash flows the asset is expected to generate, and recognize an impairment loss when estimated undiscounted futurecash flows expected to result from the use of the asset are less than its carrying value. If an asset or a group of assets are deemed to be impaired, the amount ofthe impairment loss, if any, represents the excess of the asset's or a group of assets' carrying value compared to their estimated fair values.(o) Comprehensive Income Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstancesfrom non-owner sources. Comprehensive income (loss) and its components for fiscal 2015, 2014 and 2013 are disclosed in the accompanying consolidatedstatements of comprehensive income (loss). As of June 30, 2015, 2014 and 2013, accumulated other comprehensive income is comprised of foreign translation adjustments of $6.5 million,$9.4 million $7.3 million, respectively, and net unrealized gains (losses) on available for sale securities of less than ($0.1) million, $0.1 million and ($0.1)million, respectively.(p) Accounting for Stock-Based Compensation Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period.F-24Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(2) Significant Accounting Policies (Continued)(q) Income Taxes Deferred income taxes are recognized based on temporary differences between the financial statement and tax bases of assets and liabilities. Deferred taxassets and liabilities are measured using the statutory tax rates and laws expected to apply to taxable income in the years in which the temporary differencesare expected to reverse. Valuation allowances are provided against net deferred tax assets if, based upon the available evidence, it is more likely than not thatsome 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 taxableincome and the timing of the temporary differences becoming deductible. Management considers, among other available information, scheduled reversals ofdeferred tax liabilities, projected future taxable income, limitations of availability of net operating loss carryforwards, and other matters in making thisassessment. We do not provide deferred taxes on unremitted earnings of foreign subsidiaries since we intend to indefinitely reinvest either currently or sometime inthe foreseeable future. Unrecognized provisions for taxes on undistributed earnings of foreign subsidiaries, which are considered indefinitely reinvested, arenot material to our consolidated financial position or results of operations. We are continuously subject to examination by the IRS, as well as various stateand foreign jurisdictions. The IRS and other taxing authorities may challenge certain deductions and credits reported by us on our income tax returns. Inaccordance with provisions of ASC Topic 740, Income Taxes (ASC 740), an entity should recognize a tax benefit when it is more-likely-than-not, based onthe technical merits, that the position would be sustained upon examination by a taxing authority. The amount to be recognized, if the more-likely-than-notthreshold was passed, should be measured as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlementwith a taxing authority that has full knowledge of all relevant information. Furthermore, any change in the recognition, de-recognition or measurement of atax position should be recorded in the period in which the change occurs. We account for interest and penalties related to uncertain tax positions as part ofthe provision for (benefit from) income taxes.(r) Loss Contingencies We accrue estimated liabilities for loss contingencies arising from claims, assessments, litigation and other sources when it is probable that a liability hasbeen incurred and the amount of the claim assessment or damages can be reasonably estimated. We believe that we have sufficient accruals to cover anyobligations resulting from claims, assessments or litigation that have met these criteria. Refer to Note 8 for discussion of these matters and related liabilityaccruals.(s) Advertising Costs Advertising costs are expensed as incurred and are classified as sales and marketing expenses. We incurred advertising expenses of $2.9 million,$2.1 million and $2.9 million during fiscal 2015, 2014 and 2013, respectively. We had less than $0.1 million in prepaid advertising costs included in theaccompanying consolidated balance sheets as of June 30, 2015 and 2014.(t) Research and Development Expense We charge research and development expenditures to expense as the costs are incurred. Research and development expenses consist primarily ofpersonnel expenses related to the creation of newF-25Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(2) Significant Accounting Policies (Continued)products, enhancements and engineering changes to existing products and costs of acquired technology prior to establishing technological feasibility. During fiscal 2015 and 2014, we acquired certain technologies for $3.3 million and $4.9 million, respectively, that we plan to modify and enhance forrelease as a commercially available product. At the time we acquired the technology, the project to develop a commercially available product did not meetthe definition of having reached technological feasibility and as such, the entire cost of the acquired technology was expensed as research and developmentexpense.(u) Recently Adopted Accounting Pronouncements In fiscal 2015, we adopted ASU 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, which did nothave an impact on our reported financial position or results of operations and cash flows. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts withCustomers. ASU No. 2014-09 was issued by the FASB as a part of the joint project with the International Accounting Standards Board (IASB) to clarifyrevenue recognition principles and develop a common revenue standard for the U.S. Generally Accepted Accounting Principles (GAAP) and InternationalFinancial Reporting Standards (IFRS). ASU No. 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption of ASUNo. 2014-09 is not permitted. The amendments included within ASU No. 2014-09 should be applied by using one of the following methods:Retrospectively to each prior reporting period presented. The entity may elect any of the practical expedients described in ASU No. 2014-09 when applying this method.Retrospectively with the cumulative effect of initially applying ASU No. 2014-09 recognized at the date of initial application. In thereporting periods that include the date of the initial application of ASU No. 2014-09, the entity should disclose the amount by which eachfinancial statement line item is affected by the application of ASU No. 2014-09 in the current reporting period as compared to the guidancethat was in effect before the change. We will adopt ASU No. 2014-09 during the first quarter of fiscal 2019. We are currently evaluating the impact of ASU No. 2014-09 on our financialposition, results of operations and cash flows.(3) Secured Borrowings and Collateralized Receivables We had no outstanding secured borrowings as of June 30, 2015 and 2014 since the balance due to the financial institutions was repaid in full duringfiscal 2013. Prior to the repayment of secured borrowings, we maintained arrangements with financial institutions for borrowings secured by our installmentsreceivable contracts for which limited recourse existed against us. Under these programs, we and the financial institution negotiated the amount borrowedand interest rate secured by each receivable for each transaction. The customers' payments of the underlying receivables funded the repayment of the relatedamounts borrowed. The collateralized receivables earned interest income, and the secured borrowings accrued borrowing costs at approximately the sameinterest rate. These arrangements were accounted for as secured borrowings.F-26 Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(3) Secured Borrowings and Collateralized Receivables (Continued) Proceeds from and payments on the secured borrowings are presented as components of cash flows from financing activities in the accompanyingconsolidated statements of cash flows. Reductions of secured borrowings were recognized as financing cash flows upon payment to the financial institutions,and operating cash flows from collateralized receivables were recognized upon customer payments of amounts due.(4) Supplemental Balance Sheet Information Property, equipment and leasehold improvements in the accompanying consolidated balance sheets consist of the following: We account for asset retirement obligations in accordance with ASC Topic 410, Asset Retirement and Environmental Obligations. Our asset retirementobligations relate to leasehold improvements for leased properties. The balance of our asset retirement obligations was $0.6 million as of June 30, 2015 and2014. We account for restructuring activities in accordance with ASC Topic 420, Exit or Disposal Cost Obligations. We have undertaken no restructuringactions during fiscal 2015, 2014, or 2013. Net restructuring charges consisted of credits of less than $0.1 million in fiscal 2015, 2014 and 2013. Accruedfacility exit costs were $0.1 million as of June 30, 2015, 2014 and 2013. Cash payments related to accrued facility exit costs were less than $0.1 millionduring fiscal 2015 and 2014 and $0.8 million during fiscal 2013. We expect to pay the remaining facility exit cost obligations over the remaining lease termsthat will expire on various dates through 2017. Accrued expenses and other current liabilities in the accompanying consolidated balance sheets consist of the following:F-27 Year Ended June 30, 2015 2014 (Dollars in Thousands) Property, equipment and leasehold improvements—at cost: Computer equipment $11,614 $11,772 Purchased software 23,338 23,720 Furniture & fixtures 6,653 4,530 Leasehold improvements 12,225 3,448 Accumulated depreciation (35,791) (35,882)Property, equipment and leasehold improvements—net $18,039 $7,588 Year Ended June 30, 2015 2014 (Dollars in Thousands) Royalties and outside commissions $2,879 $3,596 Payroll and payroll-related 18,965 19,347 Other 16,639 12,041 Total accrued expenses and other current liabilities $38,483 $34,984 Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(4) Supplemental Balance Sheet Information (Continued) Other non-current liabilities in the accompanying consolidated balance sheets consist of the following:(5) Common Stock On January 28, 2015, our Board of Directors approved a share repurchase program for up to $450 million worth of our common stock. This sharerepurchase program replaced the prior program approved by the Board of Directors on April 23, 2014 that had a value of up to $200 million and remainingcapacity of approximately $25.4 million and was terminated on January 28, 2015. TheF-28 Year Ended June 30, 2015 2014 (Dollars in Thousands) Deferred rent $5,273 $402 Other* 24,249 11,448 Total other non-current liabilities $29,522 $11,850 (1)During fiscal 2015, we received $6.1 million of landlord-funded leasehold improvements related to our new principalexecutive offices located in Bedford, Massachusetts. The landlord-funded leasehold improvements were recorded as property,plant and equipment and deferred rent in our consolidated balance sheets as of June 30, 2015 and are being amortized as areduction to rent expense over the life of the lease. During fiscal 2014, we determined that $1.5 million of improvements madeto the Bedford, Massachusetts offices were owned by the landlord. As of June 30, 2014, the $1.5 million of improvements wererecorded within other non-current assets in our consolidated balance sheets and were reclassified as a reduction to deferred rentduring fiscal 2015 when we occupied the facility. The improvements are being amortized as additional rent expense over thelife of the lease. Please refer to Note 8 for further information on the lease. (2)Other was comprised primarily of our net reserve for uncertain tax positions of $22.6 million and $9.3 million as of June 30,2015 and June 30, 2014, respectively. We account for unrecognized tax benefits in accordance with ASU No. 2013-11,Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax CreditCarryforward Exists. In accordance with ASU 2013-11, deferred tax assets should be presented net of liabilities for uncertaintax positions provided there are specific deferred tax assets available to settle the uncertain income tax liabilities. As ofJune 30, 2014, we had sufficient deferred tax assets available to settle a portion of our reserve for uncertain tax positions, andconsequently, only a portion of our total reserve for uncertain tax positions was reported as a non-current liability in ourconsolidated balance sheets. As of June 30, 2015, we no longer had deferred tax assets available to net against our reserve foruncertain tax positions, and, as a result, the total reserve for uncertain tax positions was presented as a non-current liability inour unaudited consolidated balance sheets as of June 30, 2015. Our total reserve for uncertain tax positions was approximately$22.6 million and $21.2 million as of June 30, 2015 and June 30, 2014, respectively.Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(5) Common Stock (Continued)program approved on April 23, 2014, had replaced the prior program approved by the Board of Directors on April 23, 2013 that had a value of up to$150 million. The program approved on April 23, 2013 had replaced a repurchase program approved by the Board of Directors on October 24, 2012 with avalue of up to $100 million. The program approved on October 24, 2012 had replaced a repurchase program approved by the Board of Directors onNovember 1, 2011 with a value of up to $100 million. The timing and amount of any shares repurchased are based on market conditions and other factors. Allshare repurchases of our common stock have been recorded as treasury stock under the cost method. We repurchased 7,731,428 shares and 3,110,114 shares of our common stock for $298.3 million and $121.8 million during fiscal 2015 and 2014,respectively. As of June 30, 2015, the remaining dollar value under the stock repurchase program approved on January 28, 2015 was $301.4 million.(6) Stock-Based CompensationStock Compensation Plans In April 2010, the shareholders approved the establishment of the 2010 Equity Incentive Plan (the 2010 Plan), which provides for the issuance of amaximum 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 30,2015, there were 4,146,931 shares of common stock available for issuance subject to awards under the 2010 Plan. In May 2005, the shareholders approved the establishment of the 2005 Stock Incentive Plan (the 2005 Plan), which provides for the issuance of amaximum of 4,000,000 shares of common stock. The 2005 Plan provides for the grant of incentive and nonqualified stock options and other stock-basedawards, including the grant of shares based upon certain conditions, the grant of securities convertible into common stock and the grant of stock appreciationrights. Restricted stock and other stock-based awards granted under the 2005 Plan may not exceed, in the aggregate, 4,000,000 shares of common stock. The2005 Plan expired on March 31, 2015.General Award Terms We issue stock options and restricted stock units (RSUs) to our employees and outside directors, pursuant to shareholder-approved equity compensationplans. 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 optionsgenerally 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 stockoption 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. Weuse the "with-and-without" approach for determining if excess tax benefits are realized under ASC 718. We utilize the Black-Scholes option valuation model for estimating the fair value of options granted. The Black-Scholes option valuation modelincorporates assumptions regarding expected stockF-29Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(6) Stock-Based Compensation (Continued)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 pricevolatility 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 optionrepresents the period for which options are expected to be outstanding as determined by historic option exercises and cancellations. The risk-free interest rateis 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 estimatedforfeitures, over the requisite service period for time-vested awards. The weighted average estimated fair value of option awards granted during fiscal 2015, 2014 and 2013 was $13.43, $11.56 and $9.76 respectively. We utilized the Black-Scholes option valuation model with the following weighted average assumptions: The stock-based compensation expense and its classification in the accompanying consolidated statements of operations for fiscal 2015, 2014 and 2013was as follows:F-30 Year Ended June 30, 2015 2014 2013 Risk-free interest rate 1.5% 1.3% 0.6%Expected dividend yield None None None Expected life (in years) 4.6 4.6 4.8 Expected volatility factor 35% 39% 49% Year Ended June 30, 2015 2014 2013 (Dollars in Thousands) Recorded as expenses: Cost of service and other $1,351 $1,239 $1,281 Selling and marketing 3,056 3,280 3,890 Research and development 3,881 4,129 2,969 General and administrative 6,296 5,408 6,497 Total stock-based compensation $14,584 $14,056 $14,637 Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(6) Stock-Based Compensation (Continued) A summary of stock option and RSU activity under all equity plans in fiscal 2015 is as follows: During fiscal 2015, 2014 and 2013, the weighted average grant-date fair value of RSUs granted was $42.65, $33.07 and $23.46, respectively. Duringfiscal 2015, 2014 and 2013 the total fair value of vested shares from RSU grants amounted to $16.1 million, $22.2 million and $22.5 million, respectively. As of June 30, 2015, the total future unrecognized compensation cost related to stock options and RSUs was $4.9 million and $17.4 million,respectively, and both are expected to be recorded over a weighted average period of 2.5 years. During fiscal 2015, 2014 and 2013 the weighted average exercise price of stock options granted was $42.66, $33.06 and $23.40. The total intrinsic valueof options exercised during fiscal 2015, 2014 and 2013 was $8.2 million, $19.9 million and $55.7 million, respectively. We received $4.6 million,$8.7 million and $21.1 million in cash proceeds from option exercises during fiscal 2015, 2014 and 2013, respectively. We paid $5.7 million, $7.8 millionand $7.7 million for withholding taxes on vested RSUs during fiscal 2015, 2014 and 2013, respectively. At June 30, 2015, common stock reserved for future issuance or settlement under equity compensation plans was 5.9 million shares. The compensation committee and Board of Directors completed its annual program grant for fiscal 2016 and authorized and approved the grant of320,968 RSUs and 350,933 stock options with a grant date of August 3, 2015.F-31 Stock Options Restricted Stock Units Shares WeightedAverageExercisePrice WeightedAverageRemainingContractualTerm AggregateIntrinsicValue(in 000's) Shares WeightedAverageGrantDate FairValue Outstanding at June 30, 2014 1,246,528 $20.30 7.14 $32,543 617,269 $25.74 Granted 315,521 42.66 373,071 42.65 Settled (RSUs) (408,654) 27.23 Exercised (308,847) 15.10 Cancelled / Forfeited (38,945) 25.96 (39,254) 27.29 Outstanding at June 30, 2015 1,214,257 $27.25 7.26 $22,232 542,432 $36.13 Exercisable at June 30, 2015 764,052 $22.00 6.55 $18,000 Vested and expected to vest at June 30, 2015 1,160,576 $26.57 7.17 $22,024 478,028 $36.48  Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(7) Income Taxes Income (loss) before provision for (benefit from) income taxes consists of the following: The provision for (benefit from) income taxes shown in the accompanying consolidated statements of operations is composed of the following: The provision for (benefit from) income taxes differs from that based on the federal statutory rate due to the following:F-32 Year Ended June 30, 2015 2014 2013 (Dollars in Thousands) Domestic $175,805 $121,329 $54,587 Foreign 3,666 7,204 2,851 Income (loss) before provision for (benefit from) income taxes $179,471 $128,533 $57,438 Year Ended June 30, 2015 2014 2013 (Dollars in Thousands) Federal— Current $— $— $— Deferred 55,895 32,996 7,867 State— Current 2,176 528 136 Deferred 729 1,005 693 Foreign— Current 3,382 7,785 7,068 Deferred (1,118) 436 (3,588) $61,064 $42,750 $12,176 Year Ended June 30, 2015 2014 2013 (Dollars in Thousands) Federal tax provision (benefit) at statutory rate $62,815 $44,989 $20,103 State income taxes 2,114 78 88 Subpart F and dividend income 2,799 6,667 4,456 Foreign taxes and rate differences (222) 1,881 2,298 Stock-based compensation 763 631 900 Tax credits (3,562) (8,902) (4,816)Tax contingencies (641) (261) (168)Return to provision adjustments 384 150 (149)Domestic Production Activity Deduction (3,600) (2,443) — Valuation allowance 176 (16) (1,813)Benefit from foreign restructuring — — (9,266)Other 38 (24) 543 Provision for (benefit from) income taxes $61,064 $42,750 $12,176 Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(7) Income Taxes (Continued) Deferred tax assets (liabilities) consist of the following at June 30, 2015 and 2014: Reflected in the deferred tax assets above at June 30, 2015, we have foreign net operating loss carryforwards of $8.0 million some of which will expirebeginning in 2019 and others with unlimited carryforwards, state research and development credits of $1.8 million which begin to expire in 2023, and U.S.federal alternative minimum tax credit carryforwards of $0.4 million which has an unlimited carryforward. In addition, for U.S. federal income tax purposes at June 30, 2015, we had $2.6 million in foreign tax credits and $1.9 million of research anddevelopment tax credits, which will expire between 2024 and 2033. These credits are excluded from the above deferred tax schedule at June 30, 2015 andwill be credited to additional paid in capital when such credits reduce taxes payable on the "with and without" approach. In fiscal 2015 and fiscal 2014, we recorded reductions in the income taxes payable of $37.0 million and $0.7 million, respectively, with an increase toadditional paid in capital, for the benefits of excess stock-based compensation deductions recognized during the period in the United States and UnitedKingdom.F-33 Year Ended June 30, 2015 2014 (Dollars inThousands) Deferred tax assets: Federal and state credits $2,144 $4,354 Foreign tax credits — 4,752 Federal and state loss carryforwards 104 Capital loss carryforwards 8,028 8,012 Foreign loss carryforwards 2,133 1,672 Deferred revenue 5,620 4,823 Restructuring accruals 19 26 Other reserves and accruals 6,819 6,074 Intangible assets 2,478 419 Property, leasehold improvements, and other basis differences 2,136 2,005 Other temporary differences 2,916 3,065 32,293 35,306 Deferred tax liabilities: Deferred revenue (1,362) (194)Intangible assets (1,065) (1,295)Property, leasehold improvements, and other basis differences (2,812) (298)Other temporary differences (645) (826) (5,884) (2,613)Valuation allowance (10,144) (9,959)Net deferred tax assets $16,265 $22,734 Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(7) Income Taxes (Continued) In fiscal 2013, we restructured our Canadian affiliate, AspenTech Canada Ltd ("ATC"). The restructuring was considered a deemed liquidation for taxpurposes resulting in (i) the elimination of a deferred tax liability of $9.3 million associated with a basis difference and (ii) recognition of a capital loss for taxpurposes of $22.2 million. Our valuation allowance for deferred tax assets was $10.1 million and $9.9 million as of June 30, 2015 and 2014 respectively. The most significantportion of the valuation allowance is attributable to reserve against US capital loss carryforward deferred tax asset of $8.0 million discussed in the precedingparagraph. We have determined that we underwent an ownership change (as defined under section 382 of the Internal Revenue Code of 1986, as amended) duringfiscal 2011. As such, the utilization of certain tax attributes is subject to an annual limitation. The annual limitation is not expected to impact therealizability of the deferred tax assets. For fiscal 2015, our income tax provision included amounts determined under the provisions of ASC 740 intended to satisfy additional income taxassessments, including interest and penalties, that could result from any tax return positions for which the likelihood of sustaining the position on audit doesnot meet a threshold of "more likely than not." Tax liabilities were recorded as a component of our income taxes payable and other non-current liabilities.The ultimate amount of taxes due will not be known until examinations are completed and settled or the audit periods are closed by statutes. A reconciliation of the reserve for uncertain tax positions is as follows: At June 30, 2015, the total amount of unrecognized tax benefits is $19.9 million, upon recognized, the amount would reduce the effective tax rate. Ourpolicy is to recognize interest and penalties related to income tax matters as provision for (benefit from) income taxes. At June 30, 2015, we hadapproximately $1.9 million of accrued interest and $0.8 million of penalties related to uncertain tax positions. We recorded a benefit for interest andpenalties of approximately $0.2 million during fiscal 2015. We do not anticipate the total amount of unrecognized tax benefits to significantly changewithin the next twelve months. Fiscal years 2007-2014 are subject to audit in the United States and Canada. Subsidiaries of Aspen Technology in a number of countries outside of the U.S. and Canada are also subject to tax audits. The Company estimates that theeffects of such tax audits are not material to these consolidated financial statements.F-34 Year Ended June 30, 2015 2014 2013 (Dollars in Thousands) Uncertain tax positions, beginning of year $21,193 $22,031 $21,906 Gross increases—tax positions in prior period 238 112 1,150 Gross decreases—lapse of statutes (1,024) (823) (1,172)Currency translation adjustment (537) (127) 147 Uncertain tax positions, end of year $19,870 $21,193 $22,031 Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(8) Commitments and ContingenciesOperating Leases We lease certain facilities and various office equipment under non-cancellable operating leases with terms in excess of one year. Rental expense,including short term leases, maintenance charges and taxes on leased facilities, was approximately $8.3 million, $7.1 million and $6.7 million for fiscal years2015, 2014 and 2013, respectively. Future minimum lease payments under these leases and scheduled sublease payments as of June 30, 2015 are as follows: In August 2015, we executed a lease amendment for our Houston, Texas, location. The amendment extended the original lease termination date fromJuly 2016 until February 2023 and increased future non-cancelable lease payments from $1.8 million, reflected in the above table, to $9.9 million. Baseannual rent under the amended lease ranges between $1.3 million and $1.5 million, excluding our pro-rata share of taxes and expenses. In addition, under theamended lease we will not receive the $0.2 million of sub-lease income detailed in the above table. In August 2015, we entered into a new lease agreement for our office location in Singapore. The initial term of the lease is for 60 months andapproximately 11,343 square feet, commencing December 2015. Base annual rent will be $0.6 million, excluding our proportionate share of taxes and otherexpenses. Subject to the terms and conditions of the lease, we may extend the lease for an additional 36 month term. Future minimum non-cancelable leasepayments due over the term of the lease amount to approximately $3.1 million. Aggregate capital expenditures, including leasehold improvements, furnitureand equipment, with respect to the leased premises are estimated to total approximately $1.1 million. Payments of $0.7 million for binding contractualobligations related to the new facility capital expenditures are expected to be made in fiscal 2016. Standby letters of credit for $2.2 million secure our performance on professional services contracts and certain facility leases. The letters of credit expireat various dates through fiscal 2025.Legal Matters In the ordinary course of business, we are, from time to time, involved in lawsuits, claims, investigations, proceedings and threats of litigation, includingproceedings related to intellectual property rights. These matters include an April 2004 claim by a customer that certain of our software products andimplementation services failed to meet the customer's expectations. In March 2014, aF-35Year Ended June 30, GrossPayments ScheduledSubleasePayments NetPayments (Dollars in Thousands) 2016 $8,325 $159 $8,166 2017 5,607 13 5,594 2018 5,015 5,015 2019 4,770 4,770 2020 4,469 4,469 Thereafter 17,775 17,775 Total $45,961 $172 $45,789 Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(8) Commitments and Contingencies (Continued)judgment was issued in favor of the claimant customer against us in the amount of approximately $2.6 million plus interest and a portion of legal fees. Wehave filed an appeal of the judgment. While the outcome of the proceedings and claims referenced above cannot be predicted with certainty, there are no such matters, as of June 30, 2015 that,in the opinion of management, are reasonably possible to have a material adverse effect on our financial position, results of operations or cash flows.Liabilities, if applicable, related to the aforementioned matters discussed in this Note have been included in our accrued liabilities at June 30, 2015, and arenot material to our financial position for the periods then ended. As of June 30, 2015, we do not believe that there is a reasonable possibility of a material lossexceeding the amounts already accrued for the proceedings or matters discussed above. However, the results of litigation (including the above-referencedappeal) and claims cannot be predicted with certainty; unfavorable resolutions are possible and could materially affect our results of operations, cash flows orfinancial position. In addition, regardless of the outcome, litigation could have an adverse impact on us because of attorneys' fees and costs, diversion ofmanagement resources and other factors.(9) Retirement and Profit Sharing Plans We maintain a defined contribution retirement plan under Section 401(k) of the Internal Revenue Code (IRC) covering all eligible employees, asdefined. Under the plan, a participant may elect to defer receipt of a stated percentage of his or her compensation, subject to limitation under the IRC, whichwould otherwise be payable to the participant for any plan year. We may make discretionary contributions to this plan, including making matchingcontributions of 50%, up to a maximum of 6% of an employee's pretax contribution. We made matching contributions of approximately $2.2 million,$2.0 million and $1.9 million in fiscal 2015, 2014 and 2013, respectively. Additionally, we participate in certain government mandated and definedcontribution plans throughout the world for which we comply with all funding requirements.(10) Segment and Geographic Information Operating segments are defined as components of an enterprise that engage in business activities for which discrete financial information is available andregularly reviewed by the chief operating decision maker in deciding how to allocate resources and to assess performance. Our chief operating decision makeris our President and Chief Executive Officer. Prior to fiscal 2014, we had three operating and reportable segments: license; SMS, training and other; and professional services. As our customers havetransitioned to our aspenONE licensing model, legacy SMS revenue has decreased and has been offset by a corresponding increase in revenue fromaspenONE licensing arrangements and from point product arrangements with Premier Plus SMS (for further information on transition to the aspenONElicensing model and its impact on revenue and our results of operations, please refer to Note 2). As a result, legacy SMS revenue is no longer significant inrelation to our total revenue and no longer represents a significant line of business. We manage legacy SMS as a part of our broader software licensing business and assess business performance on a combined basis. Our President andChief Executive Officer evaluates software licensing and maintenance on an aggregate basis in deciding how to assess performance. Effective July 1, 2013,we re-aligned our operating and reportable segments into i) subscription and software and ii) services.F-36Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(10) Segment and Geographic Information (Continued) The subscription and software segment is engaged in the licensing of process optimization software solutions and associated support services. Theservices segment includes professional services and training. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies (refer to Note 2). Wedo not track assets or capital expenditures by operating segments. Consequently, it is not practical to present assets, capital expenditures, depreciation oramortization by operating segments. Our prior period reportable segment information has been reclassified to reflect the current segment structure and conform to the current periodpresentation. The following table presents a summary of our reportable segments' profits:F-37 Subscriptionand software Services Total (Dollars in Thousands) Year Ended June 30, 2015: Segment revenue $405,640 $34,761 $440,401 Segment expenses(1) (183,485) (28,411) (211,896)Segment profit $222,155 $6,350 $228,505 Year Ended June 30, 2014: Segment revenue $350,486 $40,967 $391,453 Segment expenses(1) (183,378) (32,547) (215,925)Segment profit $167,108 $8,420 $175,528 Year Ended June 30, 2013: Segment revenue $276,585 $34,802 $311,387 Segment expenses(1) (176,319) (30,200) (206,519)Segment profit $100,266 $4,602 $104,868 (1)Our reportable segments' operating expenses include expenses directly attributable to the segments. Segment expenses do notinclude allocations of general and administrative; restructuring; interest income, net; and other (income) expense, net. As aresult of operating and reportable segments realignment, certain costs are more directly attributable to our new operatingsegments. Starting with fiscal 2014, segment expenses include selling and marketing, research and development, stock-basedcompensation and certain corporate expenses incurred in support of the segments. Prior to fiscal 2014, segment expensesincluded certain allocations of selling and marketing; general and administrative; and research and development and did notinclude restructuring and other corporate expenses incurred in support of these functions.Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(10) Segment and Geographic Information (Continued)Reconciliation to Income (Loss) Before Provision for (Benefit from) Income Taxes The following table presents a reconciliation of total segment operating profit to income (loss) before provision for (benefit from) income taxes:Geographic Information: Revenue to external customers is attributed to individual countries based on the location the product or services are sold. Domestic and internationalsales as a percentage of total revenue are as follows: We have long-lived assets of approximately $23.8 million that are located domestically and $14.2 million that reside in other geographic locations as ofJune 30, 2015. We had long-lived assets of approximately $16.7 million that were located domestically and $16.8 million that reside in other geographiclocations as of June 30, 2014.F-38 Year Ended June 30, 2015 2014 2013 (Dollars in Thousands) Total segment profit for reportable segments $228,505 $175,528 $104,868 General and administrative (48,713) (45,819) (49,273)Restructuring charges — 15 5 Other income (expense), net (778) (2,278) (1,117)Interest income (net) 457 1,087 2,955 Income (loss) before provision for (benefit from) income taxes $179,471 $128,533 $57,438 Year Ended June 30, 2015 2014 2013 United States 34.6% 35.5% 38.5%Europe 30.6 30.2 29.3 Other(1) 34.8 34.3 32.2 100.0% 100.0% 100.0%(1)Other consists primarily of Asia Pacific, Canada, Latin America and the Middle East.Table of ContentsASPEN TECHNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(11) Quarterly Financial Data (Unaudited) The following tables present quarterly consolidated statement of operations data for fiscal 2015 and 2014. The below data is unaudited but, in ouropinion, reflects all adjustments necessary for a fair presentation of this data in accordance with GAAP: F-39 Three Months Ended June 30,2015 March 31,2015 December 31,2014 September 30,2014 (Dollars and Shares in Thousands, Except per ShareData) Total revenue $114,186 $111,299 $107,790 $107,126 Gross profit 101,565 98,990 95,525 94,745 Income from operations 46,906 41,731 46,521 44,634 Net income 30,806 28,170 30,464 28,967 Net income per common share: Basic $0.36 $0.32 $0.34 $0.32 Diluted $0.36 $0.32 $0.34 $0.32 Weighted average shares outstanding: Basic 85,056 87,355 89,942 91,183 Diluted 85,585 87,853 90,471 91,891 Three Months Ended June 30,2014 March 31,2014 December 31,2013 September 30,2013 (Dollars and Shares in Thousands, Except per ShareData) Total revenue $101,532 $103,587 $98,769 $87,565 Gross profit 88,653 88,299 86,326 75,487 Income from operations 37,361 31,402 36,112 24,849 Net income 26,678 20,843 23,263 14,999 Net income per common share: Basic $0.29 $0.23 $0.25 $0.16 Diluted $0.29 $0.22 $0.25 $0.16 Weighted average shares outstanding: Basic 91,916 92,414 92,839 93,410 Diluted 92,710 93,365 93,816 94,522 Table of Contents EXHIBIT INDEX EX-1 Incorporated by Reference Exhibit Number Description Filedwith thisForm 10-K Form Filing Datewith SEC(1) ExhibitNumber 3.1 Certificate of Incorporation of AspenTechnology, Inc., as amended 8-K August 22, 2003 4 3.2 By-laws of Aspen Technology, Inc. 8-K March 27, 1998 3.2 4.1 Specimen certificate for common stock, $.10 parvalue, of Aspen Technology, Inc. 8-A/A June 12, 1998 4 10.1 Lease dated May 7, 2007 between AspenTechnology, Inc. and One Wheeler RoadAssociates regarding 200 Wheeler Road,Burlington, Massachusetts 10-K April 11, 2008 10.3 10.2 Lease Agreement dated January 27, 2014 betweenRAR2-Crosby Corporate Center QRS, Inc. andAspen Technology, Inc. regarding 20, 22 and 28Crosby Drive, Bedford, Massachusetts 10-Q January 30, 2014 10.1 10.3 System License Agreement dated March 30, 1982between Aspen Technology, Inc. and theMassachusetts Institute of Technology 10-K April 11, 2008 10.4 10.4 Amendment dated March 30, 1982 to SystemLicense Agreement dated March 30, 1982between Aspen Technology, Inc. and theMassachusetts Institute of Technology 10-K April 11, 2008 10.5 10.5^Aspen Technology, Inc. 2005 Stock IncentivePlan (as amended) 10-K November 9, 2009 10.39 10.6^Form of Terms and Conditions of Stock OptionAgreement granted under Aspen Technology, Inc.2005 Stock Incentive Plan 10-Q November 14, 2006 10.8 10.7^Form of Restricted Stock Unit Agreement grantedunder Aspen Technology, Inc. 2005 StockIncentive Plan 10-Q November 14, 2006 10.9 Table of ContentsEX-2 Incorporated by Reference Exhibit Number Description Filedwith thisForm 10-K Form Filing Datewith SEC(1) ExhibitNumber 10.8^Form of Restricted Stock Unit Agreement—Ggranted under Aspen Technology, Inc. 2005 StockIncentive Plan 10-Q November 14, 2006 10.10 10.9^Terms and Conditions of Restricted Stock UnitAgreement granted under 2005 Stock IncentivePlan 10-K November 9, 2009 10.43 10.10^Aspen Technology, Inc. 2010 Equity IncentivePlan 8-K April 21, 2010 10.1 10.11^Form of Terms and Conditions of Restricted StockUnit Agreement granted under AspenTechnology, Inc. 2010 Equity Incentive Plan 10-K September 2, 2010 10.42 10.12^Form of Terms and Conditions of Stock OptionAgreement Granted under Aspen Technology, Inc.2010 Equity Incentive Plan 10-K September 2, 2010 10.43 10.13^Form of Confidentiality and Non-CompetitionAgreement of Aspen Technology, Inc. 10-K April 11, 2008 10.45 10.14^Aspen Technology, Inc. Executive AnnualIncentive Bonus Plan (Fiscal Year 2013) 8-K July 26, 2012 10.1 10.15^Aspen Technology, Inc. Executive AnnualIncentive Bonus Plan (Fiscal Year 2013), asamended 8-K October 30, 2012 10.1 10.16^Aspen Technology, Inc. Executive AnnualIncentive Bonus Plan (Fiscal Year 2014) 8-K July 25, 2013 10.1 10.17^Aspen Technology, Inc. Executive AnnualIncentive Bonus Plan (Fiscal Year 2015) 8-K July 25, 2014 10.1 10.18^Aspen Technology, Inc. Executive AnnualIncentive Bonus Plan (Fiscal Year 2016) 8-K July 24, 2015 10.1 10.19^Form of Executive Retention Agreement enteredinto by Aspen Technology, Inc. and eachexecutive officer of Aspen Technology, Inc. (otherthan Mark E. Fusco and Antonio J. Pietri) 10-Q February 9, 2010 10.1 Table of ContentsEX-3 Incorporated by Reference Exhibit Number Description Filedwith thisForm 10-K Form Filing Datewith SEC(1) ExhibitNumber 10.20^Form of Amended and Restated ExecutiveRetention Agreement entered into by AspenTechnology, Inc. and each executive officer ofAspen Technology, Inc. (other than Antonio J.Pietri) 10-K August 13, 2014 10.29 10.21^Offer letter dated April 24, 2013 by and betweenAspen Technology, Inc and Antonio J. Pietri 10-K August 15, 2013 10.28 10.22^Amended and Restated Executive RetentionAgreement dated July 1, 2013 entered into byAspen Technology, Inc. and Antonio J. Pietri 10-K August 15, 2013 10.29 10.23^Non-Competition and Non-SolicitationAgreement dated July 1, 2013 entered into byAspen Technology, Inc. and Antonio J. Pietri 10-K August 15, 2013 10.30 21.1 Subsidiaries of Aspen Technology, Inc. X 23.1 Consent of KPMG LLP X 31.1 Certification of Principal Executive OfficerPursuant to Section 302 of the Sarbanes-OxleyAct of 2002 X 31.2 Certification of Principal Financial OfficerPursuant to Section 302 of the Sarbanes-OxleyAct of 2002 X 32.1*Certification Pursuant to 18 U.S.C. Section 1350,As Adopted Pursuant to Section 906 of theSarbanes-Oxley Act of 2002 X 101.INS Instance Document X 101.SCH XBRL Taxonomy Extension Schema Document X 101.CAL XBRL Taxonomy Extension CalculationLinkbase Document X 101.DEF XBRL Taxonomy Extension Definition LinkbaseDocument X 101.LAB XBRL Taxonomy Extension Label LinkbaseDocument X Table of ContentsEX-4 Incorporated by Reference Exhibit Number Description Filedwith thisForm 10-K Form Filing Datewith SEC(1) ExhibitNumber 101.PRE XBRL Taxonomy Extension PresentationLinkbase Document X (1)The SEC File No. is 001-34630 for Exhibits 10.9 through 10.11; and 10.13 through 10.15, inclusive. The SEC File No. for all otherexhibits is 000-24786. ^Management contract or compensatory plan or arrangement *The certification attached as Exhibit 32.1 that accompanies this Form 10-K is not deemed filed with the SEC and is not to beincorporated by reference into any filing of Aspen Technology, Inc. under the Securities Act of 1933 or the Securities Exchange Act of1934, whether made before or after the date of this Form 10-K, irrespective of any general incorporation language contained in suchfiling.Exhibit 21.1 ASPEN TECHNOLOGY, INC.List of Subsidiaries as of June 30, 2015 State or Country Name of Subsidiary of Incorporation1AspenTech Argentina S.R.L.Argentina2Aspen Technology Australia Pty. Ltd.Australia3Aspen Technology WLLBahrain4AspenTech Europe, S.A./N.V.Belgium5AspenTech Software Brazil Ltda.Brazil6AspenTech Canada CorporationCanada7Aspen Technology S.A.S.Colombia8Aspen Tech India Pte. Ltd.India9AspenTech S.r.l.Italy10AspenTech Japan Co. Ltd.Japan11AspenTech Solutions Sdn. Bhd.Malaysia12Aspen Tech de Mexico, S. de R.L. de C.V.Mexico13AspenTech Europe B.V.Netherlands14AspenTech (Beijing) Co., Ltd.PRC15AspenTech (Shanghai) Ltd.PRC16Aspen Technology LLCRussia17AspenTech Pte. Ltd.Singapore18AspenTech Africa (Pty.) Ltd.South Africa19Aspen Technology S.L.Spain20AspenTech (Thailand) Ltd.Thailand21AspenTech Ltd.UK22Hyprotech UK Ltd.UK23AspenTech Canada Holdings, LLCDelaware24AspenTech Holding CorporationDelaware25Aspen Technology (Asia), Inc.Delaware26Aspen Technology International, Inc.Delaware27Aspen Technology Services CorporationDelaware28AspenTech Software CorporationDelaware29AspenTech Venezuela, C.A.Venezuela30SolidSim Engineering GmbHGermany QuickLinks -- Click here to rapidly navigate through this document Exhibit 23.1 Consent of Independent Registered Public Accounting Firm The Board of DirectorsAspen Technology, Inc. We consent to the incorporation by reference in the registration statements (No. 333-42538, 333-42540, 333-71872, 333-117637, 333-118952, 333-128423, and 333-169657) on Form S-8 of Aspen Technology, Inc. (the "Company") of our report dated August 13, 2015 with respect to the consolidatedbalance sheets of the Company as of June 30, 2015 and 2014 and the related consolidated statements of operations, comprehensive income, stockholders'(deficit) equity, and cash flows for each of the years in the three-year period ended June 30, 2015, and the effectiveness of internal control over financialreporting as of June 30, 2015, which reports appear in the June 30, 2015 annual report on Form 10-K of the Company./s/ KPMG LLPBoston, MassachusettsAugust 13, 20151QuickLinksExhibit 23.1Consent of Independent Registered Public Accounting FirmQuickLinks -- Click here to rapidly navigate through this document Exhibit 31.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICERPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Antonio J. Pietri, certify that:1.I have reviewed this Annual Report on Form 10-K 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 makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period coveredby this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe 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 definedin 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) and15d-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 oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to usby 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 underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements 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 theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely 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 arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and1b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting.2Date: August 13, 2015 /s/ ANTONIO. J. PIETRIAntonio J. PietriPresident and Chief Executive Officer(Principal Executive Officer)QuickLinksExhibit 31.1CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002QuickLinks -- Click here to rapidly navigate through this document Exhibit 31.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICERPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Mark P. Sullivan, certify that:1.I have reviewed this Annual Report on Form 10-K 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 makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period coveredby this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe 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 definedin 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) and15d-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 oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to usby 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 underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements 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 theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely 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 arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and1b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting.2Date: August 13, 2015 /s/ MARK P. SULLIVANMark P. SullivanExecutive Vice President and Chief Financial Officer(Principal Financial Officer)QuickLinksExhibit 31.2CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002QuickLinks -- Click here to rapidly navigate through this document Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of Aspen Technology, Inc. (the "Company") for the year ended June 30, 2015, as filed with theSecurities 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 theCompany.Date: August 13, 2015 A signed original of this written statement required by Section 906 has been provided to Aspen Technology, Inc. and will be retained by AspenTechnology, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.1 /s/ ANTONIO J. PIETRIAntonio J. PietriPresident and Chief Executive OfficerDate: August 13, 2015 /s/ MARK P. SULLIVANMark P. SullivanExecutive Vice President and Chief Financial OfficerQuickLinksExhibit 32.1CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002Executive Officers, Board of Directors, and Corporate Information Executive Officers Antonio J. Pietri President and Chief Executive Officer Karl E. Johnsen Senior Vice President and Chief Financial Officer Frederic G. Hammond Senior Vice President, General Counsel and Secretary Board of Directors Robert M. Whelan, Jr. Chairman Whelan & Company, LLC Donald P. Casey Consultant Gary E. Haroian Consultant Joan C. McArdle Senior Vice President Massachusetts Capital Resource Company Dr. Simon J. Orebi Gann Consultant Antonio J. Pietri President and Chief Executive Officer Aspen Technology, Inc. Corporate Information Questions regarding taxpayer identification numbers, transfer procedures, and other stock account matters should be addressed to the Transfer Agent & Registrar at: American Stock Transfer & Trust Company, LLC Operations Center 6201 15th Avenue Brooklyn, NY 11219 USA 1–800–937–5449 www.amstock.com info@amstock.com The Annual Meeting of Shareholders will be held on December 10, 2015, at 9:00 a.m. at the offices of: K&L Gates LLP State Street Financial Center One Lincoln Street Boston, Massachusetts 02111 USA Shareholders may obtain a copy of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2015, filed with the Securities and Exchange Commission, by sending a written request to: Investor Relations Aspen Technology, Inc. 20 Crosby Drive Bedford, Massachusetts 01730 USA 1–781-221-8385 Worldwide Headquarters Aspen Technology, Inc. 20 Crosby Drive Bedford, Massachusetts 01730 USA 1–781–221–6400 Latin America Headquarters AspenTech Software Brasil Ltda. Edifício Antonio Alves Ferreira Guedes Av. Brigadeiro Faria Lima 3729 - 4.º andar (Piso Regus) CEP: 04538-905-São Paulo-SP-Brasil 55–11–3443–6261 Europe Headquarters AspenTech Ltd. C2 Reading International Business Park Basingstoke Road Reading, Berkshire RG2 6DT United Kingdom 44–(0)–1189–226400 Middle East & North Africa Headquarters AspenTech Ltd. Almoayyed Tower 38th Floor Building 2504, Road 2832, Block 428 Al-Seef Bahrain 00–(973)–17–50–2747 Asia Pacific Headquarters AspenTech Pte. Ltd. #04-20/23 Galaxis 1 Fusionopolis Place Singapore 138522 65-6395-3900 Independent Public Accountants KPMG LLP Two Financial Center 60 South Street Boston, Massachusetts 02111 USA Legal Counsel K&L Gates LLP State Street Financial Center One Lincoln Street Boston, Massachusetts 02111 USA © 2015 Aspen Technology, Inc., AspenTech®, aspenONE®, the Aspen leaf logo, the aspenONE logo, and OPTIMIZE are trademarks of Aspen Technology, Inc. All rights reserved. 11-7956-1015 Worldwide Headquarters Aspen Technology, Inc. 20 Crosby Drive Bedford, Massachusetts 01730 USAphone: +1–781–221–6400 fax: +1–781–221–6410 info@aspentech.com

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