Aspen Technology Inc (AZPN) 2010 Q2 法說會逐字稿

Good afternoon. My name is Bonnie and I will be your conference operator today. At this time, I would like to welcome everyone to the Aspen second quarter 2010 earnings 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. I would now like to turn the call over to Chief Financial Officer, Mark Sullivan. Please go ahead, sir.

Thank you. Good afternoon, everyone, and thank you for joining to us review our second quarter fiscal 2010 results for the period ended December 31st, 2009. I am Mark Sullivan, CFO of AspenTech. With me on the call today is Mark Fusco, President and CEO.

Before we begin, I will make the usual Safe Harbor statement 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 ascribed in such statements. Factors that might cause such differences include but are not limited to those discussed in today's call and in our most recent Form 10-K for fiscal 2009, and Form 10-Q for the second quarter fiscal 2010, both of which are filed with the SEC. Also please note that the following information is related to our current business conditions and our outlook as of today, February 9th, 2010. Consistent with our prior practice, we expressly disclaim any obligation to update this information.

The structure of today's call will be as follows; I will begin with a review of our financial results for the second quarter of fiscal 2010, including some key metrics that we will be providing moving forward, and then Mark will discuss some additional business highlights and market overview before we open up the call for Q and A. Let me begin with some comments related to our filing status. The filing of our 10-Q for the second quarter fiscal 2010, AspenTech maintained its current status with all its SEC financial reporting requirements. In conjunction with today's filing our application for relisting has been approved by NASDAQ. Effective tomorrow morning, our common stock will trade on the NASDAQ stock market under the ticker AZPN.

Now let me turn to the Company's second quarter fiscal 2010 financial results. Before getting into the details, let me remind investors this represents the second quarter in which our results reflect the financial reporting impact of our new aspenONE licensing model. As we previously discussed, the near term impact of the new aspenONE licensing model is significantly lower reported revenue and large operating losses. While the majority of the Company's contracts have historically been on a multiyear term basis, the associated license revenue was predominantly recognized up-front. This compares to our new aspenONE licensing model, which has ratable revenue recognition over the life of the contract. As our term customer base renews and moves to the new aspenONE licensing model over the next several years, we expect our long-term financial results to ultimately exceed that which would have been possible under the predominantly up-front revenue licensing model.

Another financial reporting impact of moving to our new aspenONE model is that many of our GAAP related year-over-year comparisons are not particularly meaningful in assessing our business during fiscal 2010. More over, for the next several years, we believe that investors would benefit from financial information in addition to our GAAP financial statements in order to better gauge the Company's financial performance as well as the long-term health of our business. As a result, we will be providing a series of supplemental metrics that we believe will help investors analyze our business and quarterly results. Total product related bookings is a key measure of business activity during any period and represents the combination of license and maintenance fees that are included as part of a contract. Total product related bookings were approximately $95 million during the second quarter fiscal 20 10. This metric includes the value of license renewals as well as growth either from new customers or increased contract value from existing customers. Keep in mind that the timing of license renewals and close dates for large contracts impacts period to period booking comparisons. We now report product related bookings on a gross basis as a result of our new aspenONE licensing model. You will recall that during the time period the Company was not current in its financials, we provided a license bookings metric that did not include maintenance as it was a separate purchase decision for the customer.

In addition, license bookings were reported on a net present value basis during prior year periods. In order to provide additional transparency during fiscal 2010, which is the first year of our new aspenONE licensing model we will provide an estimate related to the year-over-year net present value comparison. In the year ago, period we reported license bookings of $64 million own an NPV basis. And during the second quarter of fiscal 2010 our $95 million in total product related bookings would translate to approximately $65 million of license bookings on a comparable NPV basis. So our bookings performance was essentially consistent to slightly better than the year-ago period.

Longer term, once we have year-over-year comparisons on the new reporting basis, we will only report and comment on total product related bookings. We closed 18 products related bookings that were greater than $1 million during the quarter and 57 that were between $250,000 and $1 million. The average deal size for product related bookings over $100,000 on a gross basis was approximately $778,000. A substantial majority of quarterly bookings related to our new aspenONE licensing model are not recognized as revenue during the quarter. Only the first year of our multiyear contracts, which average more than five years typically get recorded as deferred revenue. As a result, we will provide you with a billings backlog update each quarter, which represents the value of term based contracts that is not reported on our balance sheet either as receivables or as deferred revenue. Our billings backlog was over $205 million at the end of the quarter.

The expected future cash selection of Aspen Tech is the sums of the Company's billings backlog, net accounts and installments receivable, plus deferred interest from committed term contracts. The Company is contractually committed future cash collections as of the end of the second quarter was over $400 million. Total contract value is another key non-GAAP measure that we use to measure the value of the Company's overall customer base and associated multiyear term contracts. This metric is reported on a gross basis and beginning in fiscal 2010 includes maintenance when it is bundled with term based license contracts. Our total term contract value at the end of the second quarter was over $1.18 billion compared to over $1.13 billion at the end of fiscal 2009, with growth driven primarily by new and expanded usage.

With these key metrics as background on the Company's operational performance in the quarter, let me now turn to our financial results on a GAAP basis. Total revenue of $42.7 million was down from $82.6 million in the prior year period, primarily as a result of the ratable revenue recognition associated with our new aspenONE licensing model. As I just mentioned, the Company's bookings were flat to slightly up on a year-over-year basis. Subscription revenue came in at $1.2 million compared to none in the prior fiscal period as we launched the new aspenONE licensing model during the first quarter of fiscal 2010. As a reminder, subscription fees from the new aspenONE model include maintenance fees as part of the overall subscription. Given the fact that we are recognizing subscription bookings over the course of a five plus year average contract length, it will take time for subscription revenue to build.

Software revenue is the component of our revenue that is most impacted by the move to our new aspenONE licensing model. Software revenue relates to new perpetual license contracts, any term-based license contracts for point products, as well as the recognition of software license fees that were deferred from prior fiscal year periods. This includes transactions from our billings backlog entering the fiscal year as well as from agreements for point products sold in the first quarter of fiscal 2010. Software revenue was $9 million in the second quarter of fiscal 2010 compared to $47.3 million in the prior year period. Drilling down into our software revenue for the second quarter of fiscal 2010, $1.7 million related to contracts closed in the quarter including $900,000 related to perpetual licenses. Approximately $7.3 million of our reported software revenue related to term based contracts from prior periods. We expect quarter to quarter software revenue to be variable in 2010 and beyond.

In looking back at our fiscal 2009 software revenue, I would remind investors that in prior fiscal year periods the Company predominantly recognized term license revenue on an up-front basis, in what was previously categorized as license revenue typically equaled license bookings. However, in the second quarter of fiscal 2009, license revenue was approximately $17 million lower than license bookings as a result of certain license bookings not meeting the criteria for up-front revenue recognition.

Finally, services and other revenue was $32.5 million compared to $35.4 million in the year ago period. The vast majority of the year over year decline was due to the difficult economic environment in fiscal 2010 compared to fiscal 2009, as discussed on recent calls and also due it to the timing of revenue recognition. On a sequential basis services and other revenue was up approximately $3.8 million with the increase driven primarily by reaching a milestone associated with a sizable professional services engagement, which triggered the recognition of revenue for work that spanned multiple quarters. We currently expect our services and other revenue to be generally stable with a level of the first quarter of fiscal 2010. Keep in mind from the longer term perspective maintenance revenue will migrate from services and other to subscription revenue, because maintenance revenue is included as part of our new aspenONE licensing model. As such, reported services and other revenue will likely decline over the next several years, even though the underlying economics of the business are unchanged.

Now let me turn to profitability. Gross profit was $26.2 million with a gross margin of 61% in the second quarter of fiscal 2010, which compares to $64.5 million with a gross margin of 78% in the prior year period. The year over year reduction is a result of the fact that a majority of the Company's license bookings in the second quarter of fiscal 2010 were not recognized on an up-front revenue basis while related costs were recognized. Over the long term, we expect gross margins to be higher under the new commercial model as a result of the fact that the full value of customer payments will be recognized as revenue where as in the prior up-front revenue model, a portion of customer payments were broken out and classified as interest income. Operating expenses were $55.5 million in the second quarter, which was up from $45.6 million in the year-ago period and $47.1 million last quarter. There was an increase in each of our operating expense line it temperatures due primarily to the fact that we made a previously disclosed equity grant in the quarter for the first time in several years when we brought our financials current. As a result, we incurred a noncash stock-based compensation expense of approximately $9.6 million during the second quarter fiscal 2010. Excluding the impact of this event, our operating expenses would have been in the range of recent quarters.

I would like to make two additional comments related to our operating expenses in the quarter. First, while we recognize revenue ratably under our new aspenONE licensing model, we incur variable sales commission expense at the time of the booking. Second, our total audit and financial consulting expenses were $4.9 million in the second quarter of fiscal 2010, which was down from $5.6 million in the year-ago quarter and $6.4 million in the first quarter of fiscal 2010. In addition, if we further break this down, in the second quarter of fiscal 2010, our audit only costs of $2.7 million were up from $1.6 million in the year-ago quarter and down from $3.4 million last quarter. Operating loss was $29.3 million in the second quarter of fiscal 2010, which compared to an operating profit of $18.8 million in the year-ago period. This resulted in a net loss of $30.7 million in the second quarter of fiscal 2010, which compares to net income of $23 million in the second quarter of fiscal 2009.

Let me now turn to the balance sheet and cash flow. The Company ended the first quarter with $109.4 million in cash, which was up slightly from $109 million at the end of the prior quarter. The Company did not sell any installments receivables to raise cash during the second quarter of fiscal 2010, and it continued to reduce its secured borrowings balance which was down by approximately $12.3 million from the end of the first quarter of fiscal 2010, ending the second quarter at approximately $96.5 million. You will also recall that the current portion of our secured borrowings balance increased substantially within fiscal 2009 as a result of a reclassification from long term. This related to our financial statements not being current with SEC requirements. At the end of the second quarter of fiscal 2010, there was a substantial reduction in our short-term secured borrowings and an increase in our long-term secured borrowings as we subsequently reclassified a portion of our secured borrowings now that the Company is current with its financials. As we stated before there is no change to the underlying structure of these agreements, and the most important fact is that the total amount of secured borrowings continues to decrease.

The Company's collateralized receivables balance at the end of the second quarter was approximately $80.5 million. The difference between the collateralized receivables and secured borrowings relates to the fact that a portion of secured borrow sings collateralized by a contract contained in billings backlog. Our secured borrowings are fully collateralized. At the end of the second quarter, the Company owned receivables balance was $192.1 million, which was down from approximately $206 million at the end of the first quarter. As we've discussed, since announcing the new aspenONE licensing model, the installments receivable balance will decline moving forward. The majority of future license bookings will not be recorded as installments receivable but will instead be included in our billings backlog metric. Accounts receivable will continue to reflect the value of invoices that have already been billed and are yet to be collected.

From a cash flow perspective, the Company generated $9.9 million in cash from operations during the second quarter. As we discussed on our last conference call, we expect our cash balance to increase modestly over the course of the fiscal year. We remain focused on moving the Company's overall book of business to multiyear agreements that are paid annually. Our progress in doing so is evidenced by the fact that the Company has not sold receivables to raise cash in the last two years, we continue to reduce the perpetual license mix of our business, and we've increased the percentage of our multiyear term based license book that is are paid annually to as high as 90% plus in recent quarters. We continue to target full fiscal year free cash flow in the $30 million range for fiscal 2010, provided that licensed bookings are at a comparable level to fiscal 2009 and assuming that contracts with up-front payments comprise up to 10% of the value of our total license bookings during the year.

I'll wrap with deferred revenue, which reflect the difference between amounts billed and revenue recognized. Deferred revenue decreased $2.8 million from the end of Q1 to $73 million at December 31st, 2009. We expect deferred revenue to grow as our subscription business scales. However, until the subscription business becomes more material, there are likely to be fluctuations in the deferred revenue account balance due to the timing of recognizing software and maintenance revenue. With that let me turn it over to Mark Fusco for additional perspective on our second quarter highlights.

Thanks, Mark, and thanks to everyone for joining us today. I'm pleased that the Company was able to maintain its status as a current filer, which is driven by the significant improvement in execution and process management that Mark Sullivan has brought to the organization. His work and the countless hours of the finance team and Board and auditing firm have put us in a position to relist our common stock on the NASDAQ stock market. We are excited to complete this process so that investors can focus exclusively on AspenTech's business performance, strong competitive position and market opportunity. We are pleased with the execution during the second quarter. Product related bookings more than doubled sequentially in our seasonally stronger quarter and were consistent with the year-ago period in spite of continued difficult economic environment. Importantly, the strength of our business was well balanced in the quarter and including deals of all sizes in each of our key vertical markets.

The underlying driver to our bookings is the positive market feedback related to our new aspenONE licensing model. This is the first full quarter of availability of our new aspenONE model, which provides customers with access to all product modules within a product family such as engineering in addition to the rights to future applications and maintenance included as part of the single subscription. The release of this new licensing model is a final step in our transition from being a provider of point product to a vendor that delivers integrated end to end product suites. During the second quarter, over 80% of our product related bookings were on our new Aspen once licensing model. During the second quarter, our vertical mix returned to a more familiar historical pattern with energy representing the largest contributor to our product related bookings, followed by chemicals and finally engineering and construction. Product related bookings were solid in each of these verticals with the sum of these three verticals again representing over 90% of AspenTech total product related bookings.

From a product perspective, we are seeing demand across our product suite including engineering and manufacturing and supply chain. The second quarter, however, was a particularly strong quarter in our flagship engineering solutions. We are pleased to see customer interest not only in our new aspenONE licensing model but also in the efforts we have made in our engineering product suite to improve the user interface and cross application integration, all with the goal of making it easier for our customers to expand the value they receive from their increased usage. During the first half of fiscal 2010, expanded usage and new customers adoption represented approximately 40% of our total product related bookings, which is within the range of recent years and contributed to our total term contract value coming in at a record level of $1.18 billion at the end of December.

As we look ahead, we are cautiously optimistic about the Company's outlook for the second half of the fiscal year. The economic environment remains challenging but customer interest levels remain high, market feedback related to our new aspenONE licensing model is very positive and our competitive position is a strong as it's ever been. Most importantly, we believe we are doing the right things to create a Company that has significant scale, a highly visible base of recurring revenue, best in class profitability margins, and high levels of subscription based cash flow. With that, I will turn it back to Mark for some near-term financial guidance.

Thanks, Mark. I'd like to close by providing guidance on several metrics for full year fiscal 2010. From a product related bookings perspective, we are currently targeting full-year bookings of approximately $270 million with a reasonable amount of variability. To be clear, this is a gross, not net basis, and it includes maintenance that is included with our term-based contracts. This would imply that the license-only portion of our product related bookings is generally consistent with fiscal 2009 on a net present value basis with the first half of the year down slightly on a year-over-year basis and the momentum of the second quarter continuing into the second half of the year where we expect bookings to be up on a year-over-year basis. We do not plan on commenting on the license only portion of bookings beyond 2010 as maintenance is now part of our subscription agreements but wanted to provide some additional perspective as this is the first year of our new aspenONE licensing model.

Taking a look at our expectations for GAAP results, we currently expect total GAAP revenue in the range of $165 million with a reasonable amount of variability. Operating loss is expected to be in the range of $100 million and loss per share is expected to be in the range of $1.05 based on shares outstanding of approximately 91 million. This guidance related to operating loss is consistent with our directional discussions dating back to the analyst day hosted in July 2009.

With that we are now happy to take any questions. Operator, let's begin the Q and A. Thank you.

(Operator Instructions). Your first question comes from Phillip Rueppel of Wachovia.

Congratulations on getting current, or relisted. A couple questions. Mark Fusco, in the past, you have been cautious on the business outlook due to the economy. Given these results and your commentary for guidance, do you -- are you seeing some positive signs, and can you sort of qualitatively talk about some of the new business that you're getting, not just renewals?

We are, as I mentioned in my comments, cautiously optimistic about how the economy is going to do, and our outperformance in the second half. We believe we'll see continued good performance as we said in our comments where our bookings will be up in the second half on a year over year basis. We do caution, obviously, we see our customers continue to struggle in some of our core markets, but with that said, we do them continuing to invest, continuing to be interested in the things that we do to make their businesses better, continue to be interested in software to make their decision making better, and it really validates our thesis going back multiple years now that in good times and in bad, we can continue to grow our business, grow our term contract value that we have in our total backlog and continue to do well. The economy is still not great and in some of our core markets, it's a little bit soft, but as we saw in the last quarter we can get our bookings back. This will be the first quarter in six where the bookings on a year-over-year basis are now slightly just a little bit positive, and I think the trend will continue. But we're going to see how things go forward.

Great, thanks. Couple other questions about the quarter. In past December quarters you've sometimes had some very big deals. You gave us some metrics on the number of over $1 million deals, but were there any multimillion dollar deals that were notable? And then second of all, you had also mentioned that you had been working on existing customers to make -- that were not up for renewal to try to move them to the new subscription model. Have you made any progress along those lines?

We've made a lot of progress in moving people on the new aspenONE licensing model. As we mentioned in the comments, 80% of the bookings were on the new model for the second quarter, and roughly 75% or so for the year, so that's not bad coming out of the blocks in the first half. As far as the big deals go, we can't do a nearly $100 million total product related bookings quarter without some big contracts. We've talked about these in the past. We have big deal flow. We did have it in this quarter as well where, we had a number of contracts, I guess you'd put into the large category, as we've talked in the past, and the pipeline still remains strong for the back half of the fiscal year, which shows people are interested in what we're doing generally, and they're also interested in our new licensing model as we move forward. So I think we're, again, cautiously optimistic about deal flow, about size of the deals, about how we're executing in the market in all parts of the world, and about the strength of the big three verticals we serve, despite what would be on the surface some concern given some of their operating results. We see the customers continuing to move forward. This is the environment that they're in. They've got businesses to run. They're continuing to build new plants in new parts of the world. Continuing to move their businesses into the high margin part of the business from maybe bulk chemicals more into specialty as you see in companies like Dell. So there's opportunity for us and our customers and our job is to help them do their business better and help them create value in their businesses and I think our guys are doing it.

Thanks. My final question, sort of along those lines of the verticals you've mentioned, more normal distribution with energy, chemicals and E & C make up the bulk of it. Within those three verticals are there any that are particularly strong in your outlook? You could maybe characterize the outlook as somewhat more positive than others, or conversely anything that's might be more cautious as we move into the calendar 2010.

I'm not seeing anything so far this year or in my view on the pipeline for the remainder of the year, which would make me conclude that the distribution of our bookings is going to be materially different than it has been since I've been here, which is roughly 90% of the bookings are from our big three verticals that we serve. It does bounce around from quarter to quarter, but I would expect it to end the year in a similar way where energy is the bigger contributor, followed by chemicals, then engineering and construction. But we'll see. We've seen consistent results so far for the first six months.

Great, thanks. That's it for me.

(Operator Instructions). Your next question comes from Richard Davis of Needham & Company.

Hey, guys, thanks. It's DJ on for Richard. Do you have the comparable large deals metrics to the year-ago period? This year's metrics include maintenance, obviously. Is there any way we can get an apples to apples comparison?

DJ, we don't have it. We looked at trying to give it to you, and any way that we would do it would be, I guess very approximate, so we just decided to give you what we have this year on a total product bookings basis.

Okay. And then another question, on some of the catch up license payments that were coming in, I think you guys had said there was going to be $20 million recognized kind of over the last three-quarters of fiscal 2010. Any update there? What should we see in the back half coming into that software line from deals that were previously signed?

At this point, the guidance we've given is that the total revenue line. So what will happen to that $20 million that we referenced is it will just increase as we go forward. We're not giving, at this point, anything specific into the software revenue line, but as talked about, at least based through the first half of the year, 20% is in the bookings are in the software revenue type category. Those tend to come in, sometimes we've called it in the past more of a lumpy, ratable kind of way. So when the first payment is due typically. So that number will go up, we think, as we go through the year, and we do see some bookings on that basis. But I guess at this point the guidance that we're giving is really only the total revenue line.

I think the other thing, DJ that would skew that line, which you haven't seen so far in the first half of the year is anything that was sold which would book on an up-front basis for some reason, and we're really focused on selling the new aspenONE licensing model and or point products with bundled maintenance which forces things to go ratable. So primarily that line so far is revenue that comes from the past, which you referred to your comments. So it's still there. We have visibility into it, and it's taken into account in the guidance that we gave.

So the 20% of bookings that were not in the new model were not paid up, they were point solution sales, is that correct?

Yes, they're pint solution sales, perpetual sales, but they weren't booked up-front. They go into billings backlog.

Got you..

They're ratable, but they're not pure subscription. That's why they don't go into the subscription line and they do include maintenance.

You talked about expanded usage, when you get your customers on board with aspenONE. Is there any way you can quantify it? Is there a rule of thumb when a customer upgrades? Will you get 10% more usage from them, or is there any way that we could wrap our arms around that?

It's hard to give a pithy answer for every customer and what the average increase is, and that's why we try to give you, what was the new component of the bookings, because we don't want you to think that we're just renewing business with no growth. We are obviously renewing business. That's why we have a big term contract backlog. But we want to grow those engagements, but we want to do it the right way in creating value for the customers and that's what we're focused on. So it's very difficult to give that you but we are trying to get people focused on how is the term contract portfolio growing over time, because that is a measure of are we growing or shrinking, and the only way that that can grow, unless the contract duration changes, which it hasn't, is for us to have more product bookings.

Got it. That's it for me. Thanks.

Our next question comes from Mark Schappel of The Benchmark Company.

Good evening. Mark, with respect to reintroducing financial guidance or giving a few more details on your guidance here, in your view was that more because you were just feeling more comfortable with the macro environment, or was it due more to feeling more comfortable with the business model transition and where that's heading?

We said on the last call that at that time half year, after we see how a couple of quarters come in, we would give some sort of better visibility to investors where we thought the year would come out, and we put our, I guess our model together late last year, and we talked about some directional illustrations during our analyst day. It wasn't crystal clear to us exactly how the revenue was going to flow or how the deals were going come to in or how our customers were going to take to the new aspenONE licensing model. So it was a bit fuzzy at that time how the uptake would be. But after six months and seeing that three-quarters of the bookings are on the new model and then virtually the rest of the bookings had bundled maintenance, which forces them ratable as well, we feel pretty comfortable that we understand how the business is going to come in, what the customer reaction is going to be, to give people some guidance. And we try to give -- we know we have some optics issues on the P&L just because of the revenue model change, and we're trying to give people as much as we can about how the business is doing in addition to the GAAP financials.

Okay. Just a couple housekeeping questions here. So headcount. Where did that end up in the quarter?

Roughly flat for the past number of quarters at roughly 1300.

Any kind of foreign exchange impact on the top line, positive or negative of any material size?

I think this quarter foreign exchange was under $1 million, I think.

Okay. Great, thank you.

Our next question comes from Zach Shaffran of Waddell and Reed.

Thank you, good afternoon. One, can you guys talk about the dispersion geographically of business in the quarter? Two, can you spend some time, Mark, talking about new customers? And then, Mark, maybe to the balance sheet specifically, the debt, as you pay the debt down what is the average cost of capital look like?

I'll take the first couple, Zach and Mark can take the last one. As far as geographies go, it does bounce around, just as the horizontal split of revenue of the vertical split bounces around. Historically, we've been North America roughly just under half, Europe and the Middle East around 35% or so, and Asia being the rest. It's roughly consistent. It does it bounce around a little bit, but actually each region had a very good start to the fiscal year. We've had good distribution across the regions, meaning we haven't seen say Europe blow it out and versus everybody else, which would lead to us some sort of conclusion about how customers in that segment are doing. So it's been relatively consistent. As far as new customers go, we've got some new customers, but as you know we've got most of the customers already, and our job is to penetrate those account in a much broader way. That's why we changed to the new model. That's why we want to give all of our customers all of our products and help them use them in a better way. So there are some new customers, there always are, but our job is to maintain what we have, grow the usage in customers and help them do their job better and I'll pass to the Mark to talk about cost of capital.

As far as the debt goes, I guess I'll take that one, too. We're focused on paying it down. The rough -- I'm not going to deal with this in the cost of capital way. I think about it more historically here since I've been here, that debt would have come with a discount rate off of the sale at about 8%, and the big reason other than the model change not to sell receivables it's quite expensive. So as we work our way to paying down that debt, the Company gets to realize all of the cash that comes from the sale as opposed to the going to a financial institution. It is very expensive, and it nix our license revenue so to speak by mid teens in percentage terms, which we've talked publicly about in the past, in the old model. So we are focused on paying it down, and that's why we're trying to build our subscription cash flow. Mark made some comments about up-front payments. You've seen our perpetual license business go from 15% to 20% of our total bookings, down into the low to mid single digits. It's in that range again for this fiscal year, and we expect it to be that way through the end of the fiscal year, and we're it not seeing a lot of up-front payment so far in the term based contracts so far this year, which it impacts us a little bit on the cash line, at least right now, but in the longer term, it's a benefit to the shareholder and to the Company, and that's why we're driving everybody to paying on a yearly basis over the term of the contract.

Great, thank you.

Our last question comes from Richard Williams of Cross Research.

Hi, guys, thanks for taking my question. Could you give some color on the business conditions by geography, please?

As far as geography goes, Richard this year has been relatively consistent. We've continued to have good performance out of Latin America. That's been a strong part of the world for us. It's also been good for us in Asia as well. We've had consistent strength in Europe and North America, but the growth I would say in percentage terms over the past few years and even in this year, it's obviously off a smaller base, so it is consistent. You would have seen in October when we took back and opened up a direct office in the Middle East, we believe that's an opportunity for us to grow our business. We have our own employees there and our own office infrastructure in new reseller base there. We did see a material contract close in the second quarter from the Middle East, which is important to us, so we think there's lots of opportunity at some big customers in the Middle East, and you'll also see that many of our core customers from North America and Europe are doing JVs in the Middle East and in Asia as well. So we need to we in all those places, but we didn't see any weakness in any geography, and we saw particular strength continuing in Latin America, and I would expect, as we have invested in the Middle East, we'll see better performance there as we move our way forward.

Thanks. And how many supply chain deals did you do in the quarter?

We didn't disclose a number of deals by horizontal. To be honest, I don't have that number off the top of my head. Other than to say for the second quarter, the engineering portion of continues was the stronger contributor, which we're happy about, because it's one of the great things we're known for, but we continue to see strength and opportunity in the manufacturing space as well. It was a good performer as well.

And out of the 18 large deals, what percentage of those were not the subscription deals?

I don't have all 18 listed here in front of me, but if I look at some of them that I do have, virtually all of therm on the new model.

Okay. Thanks very much, and congrats on refiling.

Thank you.

At this time, there are no further questions. I will turn the call back to manage for closing remarks.

I want to thank everybody for joining the call today. We're glad to final bring to a close all of the filing issues of the Company and maintain our current status. We're also glad to get the PK off of the ticker symbol tomorrow morning. We're pleased to be back on the NASDAQ. We'll be out doing some marketing to see some investors over the next month or so before the quiet period hits in March and we look forward to seeing everybody. Thanks to the employees and especially the finance team for all the hard work over the past six months and bringing the Company current, keeping us current and getting us now relisted on the NASDAQ. Thanks to all, and thanks to our investors as well. Have a nice evening.

This concludes today's conference call. You may now disconnect.