Aspen Technology Inc (AZPN) 2008 Q2 法說會逐字稿

I will be your operator today. At this time I would like to welcome everyone to fiscal Q2, 2008 preliminary results conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. (OPERATOR INSTRUCTIONS) Thank you.

Mr. Miller, you may begin your conference.

Thank you. Good morning, everyone. I'm Brad Miller, CFO of Aspen Tech and with me today is Mark Fusco, President and CEO. I would like to thank you for joining us as we discuss preliminary selected results for the second fiscal quarter 2008, in addition to other news included in a press release and 8-K filed after the market close yesterday.

Before we begin I will make the use usual Safe Harbor statements that during the course of this call we may make projections or other forward-looking statements about the financial performance of the Company that involve risks and uncertainties. The Company's actual results may differ materially from the projections described in such statements. Factors that might cause such differences include but are not limited to those discussed in yesterday's press release and in our most recent Form 10-K and Form 10-Q on file with the SEC. Also, please note that the following information is related to current business conditions and our outlook as of today January 17, 2008. Consistent with our prior practice we expressly disclaim any intention to update this information prior to the release of our second quarter fiscal 2008 financial results.

The structure of this call will be as followed. I will begin with prepared remarks and then I will pass it over to Mark to discuss the quarter and our growth initiatives in more detail. Then I will conclude with some brief high level comments regarding our outlook. We will then open up the call up for Q&A. After the market closed yesterday, Aspen Tech reported preliminary selected financial results for the second fiscal quarter 2008. We are pleased with the continued strengthened demand we are seeing for our solutions in addition to the high level of operational execution our worldwide organization is delivering. We had a strong quarter, led by licensed bookings which were up approximately 10% on a year over year basis compared to a very strong comparison quarter in the previous year.

Before we get into the details of our performance, I will begin with an update with respect to bringing our financial statement filings current. On our last call we discussed the fact that we requested an extension for filing our annual report on Form 10-K for fiscal 2007 and quarterly report on Form 10-Q for the first quarter of fiscal 2008. In our November 15, meeting with the NASDAQ listing requirements panel we presented the progress and the current status of our prior period restatement in the first quarter 10-Q and requested an extension to January 18, 2008, to bring our filings current. We have continued to make significant progress in these efforts and we believe we are in the final stages of completing the work necessary in order to bring our filings current.

Similar to last call, there is no change to our expectation that the restated amounts for fiscal '05, '06 are likely to include approximately $230 million and $200 million respectively of secured borrowing liability, and we expect the balance of approximately $200 million for this account as of June 30, 2007. Last call we also shared with you that our audit committee and management had engaged in a detailed review of other accounts in our financial statement, including our comprehensive review of historic positions reported on income tax returns and the related reporting in our financial statements. After the market closed last evening, we announced that the Company requested an additional extension to February 8, 2008, from January 18.

The primary area that requires additional time is income taxes, which is complex given the global nature of Aspen Tech's operations, prior period acquisitions, and historic NOL positions. There is no assurance that NASDAQ will grant this additional extension request, however, we are confident that we are close to bringing the income tax analysis and related reporting to a close. In doing so we believe this would enable the Company to file its outstanding financial statements within the requested additional time frame. Our current independent, registered, public accounting firm, Deloitte & Touche is working with Aspen Tech in completing the audit of the financial statements in our annual report on Form 10-K for fiscal 2007, and they have agreed to review the work related to the financial statements in our quarterly report on Form 10-Q for the first quarter of fiscal 2008. After the market closed last evening, we announced Deloitte & Touche decided not to stand for reelection at the Company's independent public accounting firm for fiscal 2008 after its work on our currently delinquent financial statements is completed. Importantly, there have been no disagreements between the Company and Deloitte & Touche with respect to any accounting principles or practices, financial statement disclosure, or auditing scope or procedure. Aspen Tech's audit committee has already begun the process of selecting a successor to Deloitte & Touche and we will make an announcement when this process concludes. A Form 8-K related to this matter was filed yesterday with the Securities and Exchange Commission.

Similar to last quarter's preview, due to the pending restatement we do not at this point have other P&L numbers that we can share; however, we will provide you with license bookings and other key metrics to highlight the ongoing momentum of our business. We define license bookings as the total net present value of licensed contracts signed in the period. In the second quarter, we generated license bookings of approximately $66 million, which is an increase of approximately 10% compared to approximately $60 million in license bookings during the year ago period. We are particularly pleased with this growth considering the year ago period was a very strong quarter as we indicated when we announced those results and as we previewed before entering the just completed second quarter. As a reminder, we pointed out last quarter that there could be timing differences between when a license is booked and when it is recognized as revenue. These timing differences can relate to factors such as future obligations or milestones and the period that they are achieved.

During the second quarter of this year we booked seven license transactions that exceeded $1 million, this compares to eight in the same quarter of fiscal 2007. In addition, we booked 29 transactions between $250,000 and $1 million during the quarter, as compared to 20 in the prior year quarter. Our average booking value this quarter based on transactions above $100,000 was approximately $700,000, compared to the $680,000 level in the same quarter of fiscal 2007.

Business was strong across the board and similar to the December quarter in the prior year, we did benefit from the closure of some large transactions in the quarter. It is important to remember that on an historical basis approximately two-thirds of our business continues to be driven by five to six year term based license agreements where our renewal rates have historically been in the mid to high 90% range. Our high degree of customer satisfaction and loyalty combined with a large base of renewable contracts is a significant long term asset for Aspen Tech. With respect to our ongoing operating costs, from a high level perspective we continue to have solid control over our costs and expenses. This is consistent with our commentary that we will increase our level of investment in a targeted, focused manner in the future while we continue to focus on making incremental improvements in our operational execution and efficiency.

From a head count perspective we ended the quarter with approximately 1300 employees, which is unchanged from the end of last quarter. The Company ended December 31, 2007, with $131 million in cash and cash equivalents, which is an increase from the end of the prior quarter, primarily due to strong license booking, continued focus on managing costs and expenses, offset by a previously disclosed $4 million payment the Company elected to make in December to satisfy the remaining balances of a loan agreement. The Company continues to have full access to its installments receivable financing facilities. However, the Company elected to reduce the level of cash proceeds from sales of installments receivable by approximately 30%, or $20 million compared to the first six months of fiscal 2007 during a period that license bookings increased by over 20%. With that, let me turn it over the Mark so he can provide a more qualitative perspective on our December quarter performance.

Thanks, Brad. While we are still somewhat limited in what we can disclose, I am glad to again share with you that the Company's business continues to operate at a high level. The Company is highly focused on getting our financial statements current as soon as possible, and as Brad mentioned, we believe we are in the final stages of completing our work in this regard. I would like to thank our shareholders and customers again for their continued support as we finish this process. As our license bookings results indicate, all of our customer facing operations remain highly focused on executing against our growth strategies as we bring this process to a close.

The underlying drivers to our strong license bookings were well balanced across expanded usage, new customer wins and renewal activity with existing customers during the second quarter. Moreover, the size of our sales pipeline continues to be robust. Market demand remains strong and our high ROI solutions well suited to help customers in our targeted verticals perform during periods where their end demand is quite strong as is currently the case, but they could also add significant value to our customers during challenging market environments as well.

During the second quarter, we enjoyed strong performance across each of our key verticals with the energy sector delivering a particularly strong performance followed by engineering and construction and chemicals delivering solid quarters as well. From a product perspective we continued to enjoy solid demand across each of our key solutions. Our industry leading engineering solutions continue to drive a majority of our license bookings, and they were a key contributor to 7 of our 10 top license bookings in the quarter. It was also very good to see a strong performance from our plant operations and supply chain solutions during the quarter as well as evidenced by the fact that they were the primary application of 3 of our top 10 transactions for the quarter. In fact, our supply chain and plant operations solutions were the key solutions purchased in our two largest deals during the quarter.

We believe Aspen Tech is unique in our ability to generate significant returns for our customers based on domain expertise and aspenONE suite of integrated solutions. During the first quarter, aspenONE related solutions accounted for approximately 60% of our licensed bookings with demand for each of our key vertical markets. We are still early in the process of bringing our end to end aspenONE suite to our base of over 1500 customers which includes the largest process manufacturers in the world in each of our key targeted markets.

In summary, we are pleased with the Company's operational performance of the second quarter which completes a strong first half to our fiscal year. Our license bookings have increased over 20% in the first six months of the fiscal year. Our end markets are strong. Our aspenONE suite remains best in class and we are executing at a high level. With that, I'll turn it back to Brad.

Thanks, Mark. While we've shared information on today's call relative to the ongoing strength of our business we are not in a position to provide specific guidance on the third quarter of fiscal 2008 at this time, nor can we comment on specific amounts in the income statements that are in the process of being completed. I would however, reiterate my comments from last quarter which are that the June and December quarters tend to be the strongest quarters of the year for license booking while the March and September quarters tend to be the seasonally weakest.

We continue to enjoy robust demand with a healthy pipeline of opportunities. From a high level perspective we currently expect to generate license bookings in the March quarter that will be up on a year over year basis and as is typically the case, we expect them to be down sequentially from the stronger December quarter that we just reported. In addition, we always remind investors that our business model involves sizable deals and the timing of when they close and are recognized as revenue can be variable. Services revenue has a much less pronounced seasonality over the course of the year, so it can fluctuate from quarter to quarter. On an annual basis we are targeting services revenue growth in the low single digit range.

I will now turn the call over to the operator to begin the Q&A session. But before doing so, please understand that we are not in a position to elaborate further relative to our second quarter results, timing of filings beyond what we shared, or other forward-looking expectations and we will not be in a position to do so until we are completed with the restatement and fiscal 2007 year end audit and first quarter 10-Q review processes. We appreciate your understanding on these matters. With that we will begin the Q&A session. Operator.

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Richard Davis with Needham & Company.

Thank you very much. With regard to the chemical companies, they used energy and oil and gas as an input so when they see rising costs, have you seen any kind of pushback from them in terms of wanting to use your software to help make their processes more efficient or is it actually to some degree or a greater or lesser degree spur on demand on that type? That is one of the questions I sometimes get from investors.

Richard, I have not seen any change in the buying patterns from the chemical companies. There has been consistent demand. I think we have seen over time a sharper increase in demand from some of the oil related companies, both the integrated companies and some of the refining companies, but as far as chemicals goes, it has been consistently strong over the past few years. The buying patterns remain more or less the same and the same could be said for engineering and construction which has been strong over the last couple of years and continues to be so.

Got it. Okay. Good. Well, that was my main question. I appreciate it. Good work. Thank you.

Thank you.

Your next question comes from the line of Phillip Rueppel with Wachovia Securities.

You mentioned that you chose to sell fewer of the installment receivables in the past period. Could you give us little more color as to why you chose to do that and is that something that is structurally going to be different as we go forward or is it just a one period kind of adjustment?

Phil, the way to think about that is we have been looking for opportunities to simplify our business along the way, these facilities continue to be open and completely available to us. So we can use them on an opportunistic basis. As we see cash flow requirements that would suggest that this is something we should do. But in the meantime, as you can see, relative to both declining the amount of sales that we did on that front on a year over year basis, as well as paying off the facility go Guggenheim back in December, we are looking to simplify our life and to keep things running on the business front as more straightforward as possible, so that was really what was behind the declining balance. We will continue to use them as we believe we need to but not on a 100% type of a basis.

Great. Thanks. Then Mark, you had mentioned aspenONE as a percent of sales was 60%. Just a clarification, was that in the quarter or in the first half?

That was in the quarter.

Okay. Great. And any change there in terms of how it is appealing to particular verticals, any color, is chemicals or energy strong in terms of adoption with aspenONE or are you seeing across the board?

We are seeing it across the board, but I would say, as the spending from the oil related companies and those verticals has increased in our licenses over the last couple of years, we have seen a lot of interest in demand, especially around petroleum supply chain where Aspen is number one in the world and has been for quite some time with point solutions. As the aspenONE suite becomes more integrated, we are seeing continued and I think accelerating interest in what we have as an integrated suite, how we bring it to market, the commercial model that we have for it and the things that it will do over a period of time. Our customers have done reasonably well at optimizing parts of their process on a bit of a vertical basis, but they haven't necessarily tied these things together.

As they do, and as we bring new pieces of software to market and new pieces of software go live like our inventory management software which goes live this spring in the first release with British petroleum, I think we will see that there's a lot of additional demand for inventory management and how it ties ino the plant and how it ties into the rest of the supply chain. We have seen a lo of demand for this. I think it is accelerating. As adoption of aspenONE has continued over the past couple of years and I still think we are early in the process when you look at the number of big oil companies and the ones that I would say have an aspenONE appetite. We have not really closed too many of them yet but there is lots of opportunity there.

Oka. Great. And then just one final question, if I heard everything correctly, Deloitte will complete its prior commitment to getting everything current up through Q1. Is finding a new auditor a critical or a gating factor as you look into being able to file a 10-Q for the second quarter and are you confident that once you're up to date you will be able to stay within the filing time frames?

Phil, I think you do have it right on the Deloitte front that they are staying through the completion of the filings needed to get us current and parallel with that we will be engaged in the auditor selection process and finding a successor with our audit committee. And we will be moving that as quickly as we can. Of course, at the time that we do have a new audit firm to announce, we will be public with that. And at that time, we will be able to also be talking about our timing on a go-forward basis. Clearly our focus at this point is getting our filings caught up and becoming current, and that is really job one and what we are heavily focused on.

Okay. Thank you very much.

Thanks.

Your next question comes transfer the fuel Robert Schwartz with Jefferies & Company.

Rob, we cannot hear you.

Is that better?

That is better.

Thanks. It helps if you take the mute off. You mentioned that 7 of your 10 largest deals were in engineering, 3 were in the plant and supply chain. I am wondering if you re seeing any evidence of customers buying across the three major product sets? And maybe talk about what you saw this quarter with that respect?

We do not license our -- we do not have a -- our commercial model is not one contract for all the three different pieces of the business. We have contracts for our engineering business, and then a contract for our plant and supply chain business. We are trying to narrow as we go through the aspenONE reboot process with our customers to try and upgrade them to a new suite, we want to simplify the contracting structure really down top two, which is easier for them and easier for us. Typically the people that are buying either engineering or plant and supply chain is not the same customer so they are not going to be buying in the same cycle. But that said, a company like BP has both an engineering contract which is aspenONE based and they also have a plant and supply chain contract which is aspenONE based. They are not the same contract but we have skinnied the universe of probably 80 contracts that we had in the past down to roughly two, plus there may be some services things here and there. So it is a dramatically simpler model with them and with us, it allows them to buy in a simpler way and we hope buy more things in a simpler way and we are seeing that while they do not buy at the same time the same things, there is consistent demand on both sides of the business.

I thought part of the aspenONE pitch is that you have got an integrated suite of products and that they were being -- the value proposition was being presented with how they integrated across what we used to think of as traditionally different product sets. Contracting aside, let me ask the question differently. Did you see see more interest or commitment to multiproduct contracts this quarter or are you seeing any trend in that direction?

It has been consistent that there has been more demand for all of the different products or access to all of the different products that we have all on parts of the business, the engineering, plant, or supply chain. What I was referring to was more of the commercial model. As far as the software goes, the engineering suite is integrated into pieces of the plant. In the supply chain it gets tighter over a period of time with every release and certainly the plant and the supply chain are integrated together and will be pulled together in the next year or so to be fully integrated. As the integration of the modules gets tighter, the integration between the modules and the parts of the business gets tighter as well. It is a bit of a journey but we are well down the track of it.

With respect to the receivables, just following up on that, going back several years before both of you were with Aspen, the Company used to get criticized for the way that it handled its long term receivables, that it would factor in some quarters and not factor others so that the DSO however you calculate it was spiking all the time and highly variable. And then the Company went to a commitment to essentially factor basically everything and now it sounds like you are backing off and you are going through this again, periodic as we need it approach. Are we going to expect to see DSOs moving around a lot and how are you going to deal with that criticism, I guess?

Rob, I guess the -- if I could focus on the present and the future, it is hard for me to comment on the past, of course. On the present and future, where we are is that when the restated financials are out there, you will see that on the face of the balance sheet, all of what we have factored, if you will -- all of what we have borrowed will be there for all to see. So when you look at our financials you will be able to measure what we have or have not sold. And I think for -- given the performance of the Company and our ability to generate our own cash flows, it make sense that we go with the most cost effective financing vehicles that we need to the extent that we do need to generate the cash through the sales of the receivables we would. We have as we have clearly demonstrated over the last six months made a decision that that is not as much of a priority as maybe it had been a year ago. What you will see is the Company doing so on an opportunistic basis but not as part of the core cash flow requirements required to run the business.

Rob, I think you should also -- given the bit of peculiarity of our revenue model, we generate installments receivable, the factoring of them is a quite expensive way to finance the Company.

I was not here four or five years ago when they may have been more hit or miss about how they did it but clearly they started to factor all of it because the cash needs of the Company were dramatic. We had debt which was staring us in the face that needed to be repaid, we had other issues, the Company had been losing and burning cash quite dramatically on a quarterly basis. So my suspicion is they decided to do this. But as the Company's finances have improved, as the balance sheet has improved, it is clear that this is very expensive financing and we would only want to do it if we need it. And because it is to the betterment of the shareholders and certainly accretive over a period of time I think it is our responsibility and obligation after we get current to put something together for everyone to make it clearer what we are trying to accomplish here and why it is in the Company's best interest to do as little of this as possible given the cost of it. But we need to do that and will after we get current.

And last question if I may, sort of elephant in the room. You have asked for an extension. The primary issues right now sounds like it is taxes. Does that mean that the installment receivables audit has pretty much been put to bed and why are you confident that another issue in this ongoing work by the audit committee will not arise that will need another extension?

Right, Rob. We did put in our request to the NASDAQ for another three weeks beyond the Friday date that they had granted. And so, this process, as you are well aware, has been going on for a period of months now. So -- as is inevitable, these processes include a number of different things that we look at. The income tax item is the one that we feel is the pacing item and the one that we need to complete in order to bring to close all of the different detailed reviews that we have been doing on multiple accounts. We have highlighted that because we believe it is the most significant after the installments receivable. But again, as you can appreciate, there is a binary outcome here that until we are done, we are not done. When we do get done we will be in a position to talk about the financials as a whole including the effects on all of the different areas. With all of that said, the process is one that given the time and energy that has been focused on this for an extended period of time, we feel like we are nearing completion on all of the matters necessary to bring the financials current. That is the focus right now.

Just a clarification, this extension, does it require another hearing and if so when is it scheduled?

We have put in a request to NASDAQ, which we put in earlier this week. And the process there is one where we submit that request to them and then it's in their court to get back to with whatever they would view as the next step.

Thank you.

(OPERATOR INSTRUCTIONS) Your next question comes from the line of Andrew Matorin with Bear Stearns.

Just regarding teams decision to stand down, can you give us any more color on why they came to that decision? Was it price or were they just burnt out from all the restatements? What can you tell us there?

Well, Andrew, as I am sure you can appreciate, there are multiple things involved here. I think first and foremost, bear in mind that Deloitte has committed to completing the fiscal 2007 audit and the restatement for the prior years, the first quarter 10-Q and thereby the financials necessary to bring us current and that there were no disagreements with them or other limitations that caused them to decide for fiscal '08 that they would like to not stand for reelection. That decision is one that they make and I characterize it as a business decision that they make that doesn't have a lot of other color other than just a decision not to stand for reelection. Again, bear in mind that they have agreed to complete the work that has been going on for a period of time in order to bring our financials current with the '07 and first quarter '08 filings.

Were you as a Company pleased with the work they had done? Had you sought them to -- are you disappointed with their decision?

Well, again, I guess I would characterize it, Andrew, that this is a business relationship and one that we have made commitments to each other, if you will, relative to getting the financial statements current. That is what our focus is. As part of that effort we are very much focused on getting caught up with the filings needed to bring ourselves current, and that is really the level that we have been engaged in is a business relationship in order to get that accomplished. They have made the determination that they would not be seeking reappointment for fiscal '08 once the quarter is done.

Regarding the February 8, extension date that you guys requested, how would you characterize your confidence level in completing by that date? Cautiously optimistic, confident, very confident?

Well, the -- as you can appreciate, Andrew, we put in a request for a date that we believe we can hit. We have been working through a number of matters that were components of the detailed review that we have been describing on some of these calls over the last few months. Given where we are in the process and what we believe is left in order to complete both the detailed review and then the filings themselves, February 8, is the date that we believe we can hit, and is the basis for the request. You remember when we made the request for January 18, that was back in November, and in fact we had submitted the materials a few weeks before that so it was with a much longer time horizon in front of us at that time. We believe we are now in the, what I characterize as the home stretch to get the detail reviews as well as the filings themselves. So February 8, is the date that we believe we can hit and is the basis for the request.

I appreciate that. That regarding your business, what can you say about the demand overall? Obviously there are macroeconomic concerns in the U.S. economy. Can you speak to what you are seeing out there in the U.S. as well as in other geographic areas?

We are seeing consistent demand and have over the past several years. As we look at our pipeline of opportunities going out a number of quarters, it is strong, really as I have seen it. That does not mean that things will come in or go out over a period of time. The Company has been executing well. A lot of the things that we put in place several years ago on how we want to target the market are working. We, I'm sure, will be affected by the general economy just the way everybody else does at some level. But we are not seeing a change in demand in the process industries.

Our customers are doing well in general. They are interested in optimizing what they are doing. There is geographic growth in new markets, there is new plant construction and there are general upgrades to computer systems, whether it is legacy apps that need to be upgraded or acquisitions that need to be done over a period of time, those things need to be consolidated and reworked. We are seeing continued demand across all parts of the business and really all parts of the world and both the emerging markets and the legacy Western markets as well. So it has been strong and that does not mean it will not change. We see a very strong and stable pipeline of opportunities both for the base products and for the aspenONE suite and we're pleased with where we are.

Can you make any comments about the large deals that you spoke of geographically where those deals were?

We typically do not do that. Every quarter we have some large deals. A year ago in the second quarter we had a few large deals which gave us a relatively large overage compared with what expectations were. This quarter we had a very difficult compare coming off last year. We had a couple of deals that were plant and supply chain related. That we had been working on for quite some time that were aspenONE deals. So, it has been strong, and as you know, all of our customers, or the big ones that would be interested in big deals are operating in multiple geographies around the world. They may buy in one place but they will use the stuff in many places.

And then just lastly, you made a comment, Mark, I believe it was Mark, about service revenue growth expectations in the low single didn't range and I believe that that is a change from the last couple quarters when you said low to mid-single digits. I am wondering is there a change in how you view the opportunity in that area, and is that a reflection of any change in the economy or economic outlook?

I think, Andrew, it was my comment, and the way that we are looking at the services business is consistent with the way that we have been looking at it that we look at it as a strategic enabler nd our customers do as well, to our ability to generate license revenues, and so our continued focus on generating the license bookings and revenues that are what the Company's core business is, is unchanged. As we look at where our growth drivers are going forward, Mark has characterized the strength and demand that we see across the business and that our continued focus at the strategic level is to do what we have been doing and that is to generate the strong growth in our license bookings and you have seen that as the way we have driven our -- the bookings values up by 20% or so on a year over year basis.

And, sorry, just one more if I may. On the decision to reduce the amount of installment receivables that you factor, does any of that have to do with these broad credit problems in the marketplace and perhaps a higher discount rate used by the financial institutions in valuing those receivables? And would that change going forward once this credit issue resolves itself in the broader markets?

Right. I understand the question. The decision on the receivables, a couple of things to that. One is that the facilities themselves continue to be fully available to us, so I guess the direct answer to your question on that one is the facilities are not affected or have not been affected by some of the other credit discussions that you have seen out in the marketplace. And in fact we have -- we have recently increased and you might have seen this in the filing that we made, we have recently increased the capacity that we have under one of our larger facilities. Nothing different there other than continued availability and if anything, increased capacity.

Our decision as it relates to managing our cash balance and the way we capitalize the business has been one that our requirements have been less over time. You would have seen the cash balance increase by over $50 million over the last year and in that time we have also done a number of things to streamline the capital structure, paying off the one facility recently, you remember that when we converted all the preferred stock a year ago that we paid off that dividend in cash as well. So it's fair to say that our cash requirements are such that if we need to access that cash, we can. If we do not need to, as Mark alluded it is expensive money to get so if we do not need to, there is no reason to be paying a bank for it, but we have continued full availability of those facilities.

Thanks a lot.

Operator, I think we have time for one more question.

Your last question from from the line of Richard Williams with Cross Research.

My questions have been answered but just wondered if you could you give a little bit of color on the competitive front? Are you seeing anyone different emerging? Are you seeing any of the old players backing away?

I would say the competitive environment is more or less the same. We compete with many large companies in the different spaces that we are in, we think we are competing quite effectively both from an operational perspective and with the products that we have in the market and are bringing to market today. We are not seeing any competitive integrated solution that's coming to market from anybody else. Aspen has been and continues to be number one in the market worldwide for the process industry. So we believe that we are taking market share from other competitors in various parts of the business and in various geographies.

It is a bit -- it's not quite crystal clear when you look at industry and analyst data but given the growth that we've had over the last few years, we are taking market share. That is a credit to the team here and to the products that we have in the markets. We are not seeing any change in the competitive dynamic. I do think we get stronger over the period of time and as our aspenONE suite gets more mature and gets more adoption, it becomes -- when you are early in the process in any adoption cycle it takes some time to generate demand. Later on it gets a little bit easier over time as people see it start to work. I have not seen any change in the competitive environment and I would expect us to continue to compete well and aggressively in the market.

Obviously doing well with these license sales. As far as aspenONE is concerned, it has ramped up, as I recall, like 10% of the deals to 40% to now 60%. Is there any upper limit to that?

In a perfect world, some number of years from now, we would only be selling aspenONE integrated suites and not selling point products at all. We would like everybody to have all of our products. I think there is a bunch of different demand drivers here. The first is to get our customers to want to be -- have aspenONE as a backbone to their operations, and then the second component to that is are they using as many products as we would like them to have? Or as many modules. Is there white space in their facilities. Are there competitive products that are there that they may be interested in swapping out for one of ours because the optimization opportunities are compelling when you integrate things together.

There are a lot of different demand drivers around the Company's suite of products, but the first step is to get people interested, to get them to buy it, and then our job is to increase their usage of our models and increase our usage in the number of plants or the number of people using the products. It can vary. It has been high in the past a little bit. But it will bounce around a little bit. We have not given any forward guidance as to what we expect aspenONE sales to be as a percentage of our license, but we will do that as we get current here.

I guess no conference call in the current environment would be complete without the credit crunch question. Understanding that most of your customers tie into petroleum in one form or other and that has obviously been very strong, do you get any indication from customers that the credit crunch is impacting them in any way?

No.

Okay. Thank you very much and good job.

All right. Thank you.

At this time we would like to turn the conference over to the Company for closing remarks.

Well, thank you very much for joining us here this morning. We are pleased with how the Company has continued to perform in selling our aspenONE suite and on the license line. The market demand for the products and our solutions continues to be strong. We are working very hard to bring our financials current. I think it is fair to say that we are all tired of not being current. We appreciate your staying with us and your interest in our Company. We will bring this to a close. We are working hard to do so. We do look forward to communicating with you in a much more direct way.

All the different things around our financials and what the Company is doing, and I think it is incumbent upon us in the future as well to spend some time talking to you about what we are doing, what our products are doing, and what our strategy is, and how we are going to continue to perform over a period of time. We have had too much conversation about financials and these things. So we do appreciate your patience with us, but our patience is thin, and I am sure yours is as well. But please bear with us, we are almost done. Thanks again and we look forward to talking with you soon.

This concludes today's fiscal Q2 2008 preliminary results conference call. You may now disconnect.