ASPEN TECHNOLOGY Caution Concerning Forward-Looking Statements
This Quarterly Report contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, prospective products, size of market, plans, objectives of management, expected market growth and the anticipated effects of the coronavirus (COVID-19) pandemic (and any COVID-19 variants, the "COVID-19 pandemic") on our business, operating results and financial condition are forward-looking statements. Forward-looking statements concern future circumstances and results and other statements that are not historical facts and are sometimes identified by the words "may," "will," "should," "potential," "intend," "expect," "endeavor," "seek," "anticipate," "estimate," "overestimate," "underestimate," "believe," "plan," "could," "would," "project," "predict," "continue," "target" or other similar words or expressions or negatives of these words, but not all forward-looking statements include such identifying words. Forward-looking statements are based upon current plans, estimates and expectations that are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. We can give no assurance that such plans, estimates or expectations will be achieved and therefore, actual results may differ materially from any plans, estimates or expectations in such forward-looking statements. Any forward-looking statements speak only as of the date of this Quarterly Report. We undertake no obligation to update any forward-looking statements, whether as a result of new information or development, future events or otherwise, except as required by law. You should read the following discussion in conjunction with our unaudited consolidated and combined financial statements and related notes thereto contained in this report. You should also read "Item 1A. Risk Factors" of Part II for a discussion of important factors that could cause our actual results to differ materially from our expectations. Our fiscal year ends onJune 30 , and references in this Quarterly Report to a specific fiscal year are the twelve months endedJune 30 of such year with the exception of fiscal 2022 being the nine months endedJune 30 (for example, "fiscal 2023" refers to the year endingJune 30, 2023 ).
Business Overview
We are a global leader in asset optimization software that enables industrial manufacturers to design, operate, and maintain their operations for maximum performance. We combine decades of modeling, simulation, and optimization capabilities with industrial operations expertise and apply advanced analytics to improve the profitability and sustainability of production assets. Our purpose-built software is proven to drive value creation levers for our customers; improving operational efficiency and maximizing productivity, reducing unplanned downtime and safety risks, and minimizing energy consumption and emissions. Our technology is at the center of their sustainability and decarbonization programs, enabling circularity through improved industrial technologies, and supporting the broader energy transition with advanced solutions for power transmission and distribution, carbon capture, storage and utilization, batteries and energy storage. Cybersecurity is foundational in the design of our software. OnOctober 10, 2021 ,Heritage AspenTech and Emerson Electric Co. ("Emerson") and certain of its subsidiaries, entered into a definitive agreement pursuant to, among other matters Emerson and its subsidiaries contributed to HeritageAspenTech shareholders$6,014,000,000 in cash and itsOpen Systems International, Inc. business (the "OSI business" or "OSI Inc. ") andGeological Simulation Software business, which we have renamed as Subsurface Science & Engineering (the "SSE business" or "SSE") in exchange for 55% of our outstanding common stock (on a fully diluted basis). The Transaction closed onMay 16, 2022 . By combining the software capabilities, deep domain expertise and leadership of Heritage AspenTech with the OSI and SSE businesses, we have created a company that we believe will deliver superior value to customers across diverse end markets including energy, chemicals, power transmission and distribution, engineering, procurement, and construction, pharmaceuticals, and metals and mining, among others. 20 -------------------------------------------------------------------------------- Table of Contents For the three and six-month periods endedDecember 31, 2022 , the consolidated and combined financial statements comprised the results ofOSI Inc. , SSE and Heritage AspenTech businesses, while for the same periods in the prior fiscal year, these financial statements comprised the results of onlyOSI Inc. and the SSE business. Certain financial information for the periods endedDecember 31, 2021 have been reclassed to conform to the consolidated and combined financial statements for the three and six-month period endedDecember 31, 2022 . We have been working through a series of business transformations relating to the OSI products and services as a result of our ongoing integration activities. In particular, as part of a change in the related go-to-market strategy, we have identified and trained several third-party implementation service partners to operate autonomously and directly with our OSI customers to implement our products. Previously, with the exception of one customer, we were the only provider able to perform these implementations. In addition, we have invested in tools and processes to simplify and streamline the implementation services to significantly reduce complexity and interdependency with our software. As a result, we anticipate a material change to the accounting treatment for OSI software licenses sold together with professional services and hardware. Previously, these products and services were treated as a single performance obligation. Beginning in the third quarter of fiscal 2023, for all new OSI contracts, we expect to account for the software license, hardware and professional services as separate and distinct performance obligations.
Recent Events
OnJuly 27, 2022 , we announced that we entered into a definitive agreement to acquireMicromine , a global leader in design and operational management solutions for the metals and mining industry, from private equity firmPotentia Capital and other sellers for AU$900.0 million in cash (approximately$623.0 million USD based on foreign currency exchange rate at the time of announcement). We currently intend to finance the transaction primarily through debt financing under the Emerson Credit Agreement. The acquisition currently is expected to close as soon as the remaining regulatory approval is obtained. In connection with the agreement to purchaseMicromine , we also entered into foreign currency forward contracts onAugust 2, 2022 for a six-month period ending onFebruary 6, 2023 to mitigate the impact of foreign currency exchange associated with the forecasted payment of purchase price.
Key Business Metrics
Background
We utilize key business metrics to track and assess the performance of our business. We have identified the following set of appropriate business metrics in the context of our evolving business:
•Annual Contract Value •Total Contract Value •Bookings
We also use the following non-GAAP business metrics in addition to GAAP measures to track our business performance:
•Free cash flow
•Non-GAAP operating income
We make these measures available to investors and none of these metrics should be considered as an alternative to any measure of financial performance calculated in accordance with GAAP.
Annual Contract Value
Annual contract value (ACV) is an estimate of the annual value of our portfolio of term license and software maintenance and support (SMS) contracts, the annual value of SMS agreements purchased with perpetual licenses, and the annual value of standalone SMS agreements purchased with certain legacy term license agreements, which have become an immaterial part of our business.
Comparing ACV for different dates can provide insight into the growth and retention rates of our recurring software business because ACV represents the estimated annual billings associated with our recurring license and maintenance
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agreements at any point in time. Management uses the ACV business metric to
evaluate the growth and performance of our business as well as for planning and
forecasting purposes. We believe that ACV is a useful business metric to
investors as it provides insight into the growth component of our software
business.
ACV generally increases as a result of new term license and SMS agreements with
new or existing customers, renewals or modifications of existing term license
agreements that result in higher license fees due to contractually-agreed price
escalation or an increase in the number of tokens (units of software usage) or
products licensed, or an increase in the value of licenses delivered.
ACV is adversely affected by term license and SMS agreements that are renewed at
a lower entitlement level or not renewed, a decrease in the value of licenses
delivered, and, to a lesser extent, by customer agreements that become inactive
during the agreement's term because, in our determination, amounts due (or which
will become due) under the agreement are not collectible. As ACV is an estimate
of annual billings, it will generally not include contracts with a term of less
than one year. Because ACV represents all other active term software and SMS
agreements, it may include amounts under agreements with customers that are
delinquent in paying invoices, that are in bankruptcy proceedings, are subject
to termination by the customer or where payment is otherwise in doubt.
As of December 31, 2022 , customer agreements representing approximately 85% of
our ACV (by value) were denominated in U.S. dollars. For agreements denominated
in other currencies, we use a fixed historical exchange rate to calculate ACV in
dollars rather than using current exchange rates, so that our calculation of
growth in ACV is not affected by fluctuations in foreign currencies. We have not
applied this methodology retroactively for OSI software amounts delivered prior
to October 2020 , but do not believe this to have a material impact on our
reported ACV metric due to the high USD-denominated concentration of the OSI
business. As of December 31, 2022 , approximately 95% of OSI ACV was denominated
in USD.
For term license agreements that contain professional services or other products
and services, we have included in ACV the portion of the invoice allocable to
the term license under Topic 606 rather than the portion of the invoice
attributed to the license in the agreement. We believe that methodology more
accurately allocates any discounts or premiums to the different elements of the
agreement.
We estimate that the pro forma ACV of
Total Contract Value
Total Contract Value ("TCV") is the aggregate value of all payments received or
to be received under all active term license and perpetual SMS agreements,
including maintenance and escalation. TCV of Heritage AspenTech, the OSI
business and the SSE business was
Bookings
Bookings is the total value of customer term license and perpetual SMS contracts signed in the current period, less the value of such contracts signed in the current period where the initial licenses and SMS agreements are not yet deemed delivered, plus term license contracts and SMS agreements signed in a previous period for which the initial licenses are deemed delivered in the current period. The bookings of Heritage AspenTech, the OSI business and the SSE business was$242.8 million during the three months endedDecember 31, 2022 , compared to$208.8 million during the three months endedDecember 31, 2021 . The bookings of Heritage AspenTech, the OSI business and the SSE business was$466.9 million during the six months endedDecember 31, 2022 , compared to$365.0 million during the six months endedDecember 31, 2021 . The change in bookings is related to the timing of renewals. 22 -------------------------------------------------------------------------------- Table of Contents Non-GAAP Business Metrics The following table provides a reconciliation of GAAP net cash provided by (used in) operating activities to free cash flow for the indicated periods (in thousands): Six Months EndedDecember 31, 2022 2021
Net cash provided by (used in) operating activities (GAAP)
$ (23,984) Purchase of property, equipment, and leasehold improvements (2,844)
(3,393)
Payments for capitalized computer software development costs (329)
-
Acquisition related payments 12,380 54
Free cash flow $ 63,819 $ (27,323)
The following table presents our (loss) from operations, as adjusted for
stock-based compensation expense, amortization of intangible assets, and other
items, such as the impact of acquisition and integration planning related fees,
for the indicated periods:
Three Months Ended Six Months Ended
December 31, December 31,
2022 2021 2022 2021
GAAP (loss) from operations $ (59,395) $ (254) $ (110,577) $ (14,138)
Plus:
Stock-based compensation 23,441 458 41,177 826
Amortization of intangibles 121,161 22,176 242,321 50,985
Acquisition and integration planning
related fees 1,411 - 6,269 54
Non-GAAP income from operations
Critical Accounting Estimates and Judgments
Note 2, "Significant Accounting Policies," to the audited consolidated and combined financial statements in our Transition Reports on Form 10-KT for the fiscal year endedJune 30, 2022 describes the significant accounting policies and methods used in the preparation of the consolidated and combined financial statements appearing in this report. The accounting policies that reflect our critical estimates, judgments and assumptions in the preparation of our consolidated and combined financial statements are described in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of our Transition Reports on Form 10-KT for the fiscal year endedJune 30, 2022 , and include the subsection captioned "Revenue Recognition." 23 -------------------------------------------------------------------------------- Table of Contents Results of Operations
The following table sets forth the results of operations and the
period-over-period percentage change in certain financial data for the three and
six months ended
Increase /
Three Months Ended Increase / (Decrease) Six Months Ended (Decrease)
December 31, Change December 31, Change
2022 2021 $ % 2022 2021 $ %
(Dollars in Thousands)Revenue: License and solutions$ 149,843 $ 48,491 $ 101,352 209 %$ 310,068 $ 92,706 $ 217,362 234 % Maintenance 78,628 26,272 52,356 199 % 156,994 50,807 106,187 209 % Services and other 14,367 7,012 7,355 105 % 26,595 15,277 11,318 74 % Total revenue 242,838 81,775 161,063 197 % 493,657 158,790 334,867 211 % Cost of revenue: License and solutions 70,833 33,221 37,612 113 % 140,346 67,609 72,737 108 % Maintenance 9,567 4,074 5,493 135 % 18,784 8,308 10,476 126 % Services and other 12,698 4,282 8,416 197 % 25,098 9,180 15,918 173 % Total cost of revenue 93,098 41,577 51,521 124 % 184,228 85,097 99,131 116 % Gross profit 149,740 40,198 109,542 273 % 309,429 73,693 235,736 320 % Operating expenses: Selling and marketing 117,951 17,995 99,956 555 % 236,225 42,995 193,230 449 % Research and development 49,954 15,383 34,571 225 % 99,695 30,938 68,757 222 % General and administrative 41,230 7,036 34,194 486 % 84,086 13,653 70,433 516 % Restructuring - 38 (38) (100) % - 245 (245) (100) % Total operating expenses 209,135 40,452 168,683 417 % 420,006 87,831 332,175 378 % (Loss) from Operations (59,395) (254) (59,141) 23,284 % (110,577) (14,138) (96,439) 682 % Other income (expense), net 38,643 (1,419) 40,062 (2,823) % (19,989) (2,778) (17,211) 620 % Interest income (expense), net 4,120 (20) 4,140 (20,700) % 9,143 (292) 9,435 (3,231) % (Loss) before provision for income taxes (16,632) (1,693) (14,939) 882 % (121,423) (17,208) (104,215) 606 % Provision (benefit) for income taxes 49,565 (933) 50,498 (5,412) % (43,982) (5,246) (38,736) 738 % Net (loss)$ (66,197) $ (760) $ (65,437) 8,610 %$ (77,441) $ (11,962) $ (65,479) 547 % 24
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Table of Contents The following table sets forth the results of operations as a percentage of total revenue for certain financial data for the three and six months endedDecember 31, 2022 and 2021: Three Months Ended Six Months Ended December 31, December 31, 2022 2021 2022 2021 (% of Revenue) Revenue: License and solutions 61.7 % 59.3 % 62.8 % 58.4 % Maintenance 32.4 32.1 31.8 32.0 Services and other 5.9 8.6 5.4 9.6 Total revenue 100.0 100.0 100.0 100.0 Cost of revenue: License and solutions 29.2 40.6 28.4 42.6 Maintenance 3.9 5.0 3.8 5.2 Services and other 5.2 5.2 5.1 5.8 Total cost of revenue 38.3 50.8 37.3 53.6 Gross profit 61.7 49.2 62.7 46.4 Operating expenses: Selling and marketing 48.6 22.0 47.9 27.1 Research and development 20.6 18.8 20.2 19.5 General and administrative 17.0 8.6 17.0 8.6 Restructuring costs - - - 0.2 Total operating expenses 86.1 49.5 85.1 55.3 (Loss) from operations (24.5) (0.3) (22.4) (8.9) Other income (expense), net 15.9 (1.7) (4.0) (1.7) Interest income (expense), net 1.7 - 1.9 (0.2) (Loss) before provision for income taxes (6.8) (2.1) (24.6) (10.8) Provision (benefit) for income taxes 20.4 (1.1) (8.9) (3.3) Net (loss) (27.3) % (0.9) % (15.7) % (7.5) %
Comparison of the Three Months Ended
Revenue
Total revenue increased by$161.1 million during the three months endedDecember 31, 2022 as compared to the same period in prior fiscal year. Overall revenue growth is primarily due to$167.4 million in revenue from HeritageAspenTech as a result of the Transaction, an increase of$3.6 million in new and renewal contracts from the SSE business, offset by a decrease in revenue of$10.0 million from OSI due to the mix of open customer projects and the stage of completion compared to the prior period.
License and solutions revenue increased by
Maintenance revenue increased by$52.4 million during the three months endedDecember 31, 2022 as compared to the same period in prior fiscal year. This increase was primarily due to$53.7 million from Heritage AspenTech as a result of the Transaction. Services and other revenue increased by$7.4 million during the three months endedDecember 31, 2022 , as compared to the same period in prior fiscal year primarily due to$8.3 million from Heritage AspenTech as a result of the Transaction, offset by a decrease of$1.2 million in services and other revenue from OSI and SSE professional services arrangements. 25 -------------------------------------------------------------------------------- Table of Contents Cost of Revenue
Cost of revenue increased by
Cost of license and solutions revenue increased$37.6 million during the three months endedDecember 31, 2022 , as compared to the same period in prior fiscal year. This increase was driven by$35.1 million from Heritage AspenTech as a result of the Transaction,$32.7 million of which is associated with additional amortization of intangible assets. Cost of maintenance revenue increased by$5.5 million during the three months endedDecember 31, 2022 , as compared to the same period in prior fiscal year. This increase was primarily due to$5.9 million from Heritage AspenTech as a result of the Transaction. Cost of services and other revenue increased by$8.4 million for the three months endedDecember 31, 2022 , as compared to the same period in prior fiscal year primarily due to$8.6 million from Heritage AspenTech as a result of the Transaction. Gross profit margin on services and other revenue was 11.6% and 38.9% for the three months endedDecember 31, 2022 and 2021, respectively. Overall gross profit increased by$109.5 million for the three months endedDecember 31, 2022 , as compared to the same period in prior fiscal year primarily due to$117.9 million from Heritage AspenTech as a result of the Transaction. Gross profit margin increased significantly to 61.7% for the three months endedDecember 31, 2022 from 49.2% for the same period in prior fiscal year. The increase was mainly driven by larger gross profit on license revenue from Heritage AspenTech in the current period.
Operating Expenses
Selling and marketing expense increased by$100.0 million during the three months endedDecember 31, 2022 , as compared to the same period in prior fiscal year primarily due to$99.3 million from Heritage AspenTech as a result of the Transaction, of which$64.4 million was additional amortization of intangible assets. Research and development expense increased by$34.6 million during the three months endedDecember 31, 2022 , as compared to the same period in prior fiscal year primarily due to$30.8 million from Heritage AspenTech as a result of the Transaction, and an increase of$1.4 million and$2.4 million from the SSE business and OSI compensation related costs, respectively. General and administrative expense increased by$34.2 million during the three months endedDecember 31, 2022 , as compared to the same period in prior fiscal year primarily due to$34.1 million from Heritage AspenTech as a result of the Transaction.
Non-Operating Income (Expense)
Other income (expense), net is comprised primarily of unrealized gains and losses on foreign currency forward contracts and unrealized and realized foreign currency exchange gains and losses generated from the settlement and remeasurement of transactions denominated in currencies other than the functional currency of our entities.
Other income (expense) increased by$40.1 million during the three months endedDecember 31, 2022 , as compared to the same period in prior fiscal year primarily due to$34.9 million associated with unrealized gains on foreign currency forward contracts, while the remaining amount was related to unrealized and realized foreign currency exchange gains and losses. Interest income (expense) increased by$4.1 million for the three months endedDecember 31, 2022 as compared to the same period in prior fiscal year. The increase was largely attributable to the Transaction, which contributed$9.8 million resulting from interest income earned on Heritage AspenTech's long-term revenue contracts, partially offset by a$5.9 million increase in interest expense due to a higher interest rate on our term loan and amortization of debt issuance costs associated with the Bridge Facility. 26 -------------------------------------------------------------------------------- Table of Contents Comparison of the Six Months EndedDecember 31, 2022 and 2021
Revenue
Total revenue increased by$334.9 million during the six months endedDecember 31, 2022 as compared to the same period in prior fiscal year. Overall revenue growth is primarily due to$343.8 million in revenue from HeritageAspenTech as a result of the Transaction, an increase of$7.5 million in new and renewal contracts from the SSE business, offset by a decrease in revenue of$16.5 million from OSI due to the mix of open customer projects and the stage of completion compared to the prior period. License and solutions revenue increased by$217.4 million during the six months endedDecember 31, 2022 , as compared to the same period in prior fiscal year. This increase was driven primarily by$221.4 million from Heritage AspenTech as a result of the Transaction, partially offset by a decrease of$5.5 million from the SSE business as a result of large dollar amount of new and renewal agreements entered during the same period in the prior fiscal year.
Maintenance revenue increased by
Services and other revenue increased by$11.3 million during the six months endedDecember 31, 2022 , as compared to the same period in prior fiscal year primarily due to$15.4 million from Heritage AspenTech as a result of the Transaction, offset by a decrease in services and other revenue of$2.4 million and$1.7 million from OSI and SSE professional services arrangements, respectively.
Cost of Revenue
Cost of revenue increased by
Cost of license and solutions revenue increased$72.7 million during the six months endedDecember 31, 2022 , as compared to the same period in prior fiscal year. This increase was driven by$70.4 million from Heritage AspenTech as a result of the Transaction,$65.6 million of which is associated with additional amortization of intangible assets. Cost of maintenance revenue increased by$10.5 million during the six months endedDecember 31, 2022 , as compared to the same period in prior fiscal year. This increase was primarily due to$11.8 million from Heritage AspenTech as a result of the Transaction. Cost of services and other revenue increased by$15.9 million for the six months endedDecember 31, 2022 , as compared to the same period in prior fiscal year primarily due to$16.7 million from Heritage AspenTech as a result of the Transaction. Gross profit margin on services and other revenue was 5.6% and 39.9% for the six months endedDecember 31, 2022 and 2021, respectively. Overall gross profit increased by$235.7 million for the six months endedDecember 31, 2022 , as compared to the same period in prior fiscal year primarily due to$244.9 million from Heritage AspenTech as a result of the Transaction. Gross profit margin increased significantly to 61.7% for the six months endedDecember 31, 2022 from 46.4% for the same period in prior fiscal year. The increase was mainly driven by larger gross profit on license revenue from Heritage AspenTech in the current period.
Operating Expenses
Selling and marketing expense increased by$193.2 million during the six months endedDecember 31, 2022 , as compared to the same period in prior fiscal year primarily due to$200.2 million from Heritage AspenTech as a result of the Transaction, of which$128.6 million was additional amortization of intangible assets. Research and development expense increased by$68.8 million during the six months endedDecember 31, 2022 , as compared to the same period in prior fiscal year primarily due to$63.6 million from Heritage AspenTech as a result of the Transaction, and the remaining increase was from OSI and the SSE business mainly attributable to increased compensation related costs. 27
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General and administrative expense increased by$70.4 million during the six months endedDecember 31, 2022 , as compared to the same period in prior fiscal year primarily due to$71.3 million from Heritage AspenTech as a result of the Transaction.
Non-Operating Income (Expense)
Other income (expense), net is comprised primarily of unrealized gains and losses on foreign currency forward contracts and unrealized and realized foreign currency exchange gains and losses generated from the settlement and remeasurement of transactions denominated in currencies other than the functional currency of our entities.
Other income (expense) increased by$17.2 million during the six months endedDecember 31, 2022 , as compared to the same period in prior fiscal year primarily due to$15.3 million associated with unrealized losses on foreign currency forward contracts, while the remaining amount was related to unrealized and realized foreign currency exchange gains and losses. Interest income (expense) increased by$9.4 million for the six months endedDecember 31, 2022 as compared to the same period in prior fiscal year. The increase was largely attributable to the Transaction, which contributed$19.1 million resulting from interest income earned on Heritage AspenTech's long-term revenue contracts, and a$10.3 million increase in interest expense on our term loan and amortization of debt issuance costs associated with the Bridge Facility. Benefit for Income Taxes Three Months Ended Increase / (Decrease) Six Months Ended Increase / (Decrease) December 31, Change December 31, Change 2022 2021 $ % 2022 2021 $ % (Dollars in Thousands) Provision (benefit) for income taxes$ 49,565 $ (933) $ 50,498 (5412) %$ (43,982) $ (5,246) $ (38,736) 738.4 % Effective tax rate (298.0) % 55.1 % 36.2 % 30.5 % We compute our tax provision (benefit) for interim periods by applying the estimated annual effective tax rate ("AETR") to year-to-date income from operations and adjusting for discrete items arising in that quarter. However, if we are unable to make a reliable estimate of our AETR, then the actual effective tax rate for the year-to-date period may be the best estimate. For the three months and six months endedDecember 31, 2021 , we computed our tax provision (benefit) using the AETR approach. However, for the six months endedDecember 31, 2022 , we recorded the actual effective tax rate as it was determined that the AETR approach was not the most appropriate estimate to be applied to the year to date pretax (loss) income given small changes in the forecast of pre-tax (loss) income would result in significant changes in the AETR. Income tax expense was$49.6 million for the three months endedDecember 31, 2022 and income tax benefit was$0.9 million for the three months endedDecember 31, 2021 , resulting in effective tax rates of (298.0)% and 55.1%, respectively. Our income tax was higher in the three months endedDecember 31, 2022 due to the current quarters' change in our approach to computing our tax provision (benefit) for the interim periods to the actual effective tax rate method. The change resulted in a tax provision during the three months endedDecember 31, 2022 that reflects recording a year-to-date benefit compared to that of the three months endedSeptember 30, 2022 , which was recorded under the AETR approach. Benefit for income taxes was$44.0 million and$5.2 million for the six months endedDecember 31, 2022 andDecember 31, 2021 , respectively, resulting in effective tax rates of 36.2 % and 30.5 %, respectively. Income tax benefit increased due to the higher Foreign-Derived Intangible Income ("FDII") deduction recorded in the current period as a result of non-deductible amortization of intangibles, capitalized R&D costs, and a change in the accounting methodology related to historical revenue recognition for tax purposes on multi-year software license agreements. The change resulted in the recognition of taxable income over a four-tax year period with fiscal year 2024 as the last year of the adjustment. 28 -------------------------------------------------------------------------------- Table of Contents Liquidity and Capital Resources
Resources
As ofDecember 31, 2022 andJune 30, 2022 , our principal sources of liquidity consisted of$446.1 million and$449.7 million , respectively, in cash and cash equivalents. We believe our existing cash on hand and cash flows generated by operations are sufficient for at least the next 12 months to meet our operating requirements, including those related to salaries and wages, working capital, capital expenditures, and other liquidity requirements associated with operations. We may need to raise additional funds if we decide to make one or more acquisitions of businesses, technologies or products. If additional funding for such purposes is required beyond existing resources and our Amended and Restated Credit Agreement described below, we may not be able to affect a receivable, equity or debt financing on terms acceptable to us or at all.
Bridge Facility
OnJuly 27, 2022 , the Company entered into a$475.0 million senior unsecured bridge facility (the "Bridge Facility") withJPMorgan Chase Bank, N.A . ("JPMorgan"), as Administrative Agent, to finance the acquisition of all of the equity interests ofMining Software Holdings Pty Ltd ("Micromine acquisition"). The Bridge Facility was entered into under the existing Amended and Restated Credit Agreement dated as ofDecember 23, 2019 , with JPMorgan ("Credit Agreement"). The Company may elect that each incremental borrowing under the Bridge Facility bear interest at a rate per annum equal to (a) the Alternate Base Rate ("ABR"), plus the applicable margin or (b) the Adjusted Term Secured Overnight Financing Rate ("SOFR"), plus the applicable margin. OnDecember 23, 2022 , the Company terminated the Bridge Facility and entered into a credit agreement with Emerson Electric Co. (the "Emerson Credit Agreement"), which will provide for an aggregate term loan commitment of$630.0 million .
Refer to Note 13, "Related-Party Transactions", to our consolidated and combined financial statements for further discussion of the Emerson Credit Agreement.
Credit Agreement
The Credit Agreement provides for a
The interest rate as of
As ofDecember 31, 2022 , the Company's current and non-current borrowings, under the term loan facility, were$264.0 million and$0.0 million , respectively. As ofJune 30, 2022 , the Company's current and non-current borrowings, under the term loan facility, were$28.0 million and$245.6 million , respectively.
On
For a more detailed description of the Credit Agreement, see Note 8, "Debt", to our Unaudited Consolidated and Combined Financial Statements in Part 1, Item 1 of this Form 10-Q.
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