Stock-Based Compensation

9 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Stock Compensation Accounting

The weighted average estimated fair value of option awards granted was $37.54 and $20.05 during the three months ended March 31, 2020 and 2019, respectively. The weighted average estimated fair value of option awards granted was $33.15 and $31.26 during the nine months ended March 31, 2020 and 2019, respectively.

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



	Nine Months Ended March 31,
	2020		2019
Risk-free interest rate	1.5	%	2.8	%
Expected dividend yield	0.0	%	0.0	%
Expected life (in years)	4.5		4.6
Expected volatility factor	26.8	%	26.6	%

The stock-based compensation expense under all equity plans and its classification in the unaudited consolidated statements of operations for the three and nine months ended March 31, 2020 and 2019 are as follows:



	Three Months Ended March 31,				Nine Months Ended March 31,
	2020		2019		2020		2019
	(Dollars in Thousands)
Recorded as expenses:
Cost of maintenance	$	343	$	379	$	1,104	$	916
Cost of services and other	450		366		1,477		1,038
Selling and marketing	1,472		1,228		4,228		3,687
Research and development	2,082		1,518		6,193		5,451
General and administrative	2,952		2,763		11,131		10,362
Total stock-based compensation	$	7,299	$	6,254	$	24,133	$	21,454

A summary of stock option and restricted stock unit ("RSU") activity under all equity plans for the nine months ended March 31, 2020 is as follows:



	Stock Options							Restricted Stock Units
	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in 000’s)		Shares		Weighted Average Grant Date Fair Value
Outstanding at June 30, 2019	1,304,017		$	60.33	6.94	$	83,388	793,718		$	98.38
Granted	297,504		133.05					266,237		133.39
Settled (RSUs)	—							(204,114	)	85.16
Exercised	(84,571	)	53.06					—
Cancelled / Forfeited	(30,851	)	99.18					(83,951	)	112.68
Outstanding at March 31, 2020	1,486,099		$	74.50	6.80	$	46,116	771,890		$	112.39
Vested and exercisable at March 31, 2020	980,407		$	56.76	5.87	$	41,571	—
Vested and expected to vest as of March 31, 2020	1,429,077		$	73.10	6.73	$	45,612	726,960		$	112.46

The weighted average grant-date fair value of RSUs granted was $138.27 and $82.18 during the three months ended March 31, 2020 and 2019, respectively. The weighted average grant-date fair value of RSUs granted was $133.39 and $114.66 during the nine months ended March 31, 2020 and 2019, respectively. The total fair value of shares vested from RSU grants was $5.7 million and $6.9 million during the three months ended March 31, 2020 and 2019, respectively. The total fair value of shares vested from RSU grants was $23.6 million and $31.9 million during the nine months ended March 31, 2020 and 2019, respectively.

At March 31, 2020, the total future unrecognized compensation cost related to stock options was $11.7 million and is expected to be recorded over a weighted average period of 2.6 years. At March 31, 2020, the total future unrecognized compensation cost related to RSUs was $36.0 million and is expected to be recorded over a weighted average period of 2.6 years. Amounts represent compensation cost, net of estimated forfeitures.

The total intrinsic value of options exercised was $2.9 million and $2.4 million during the three months ended March 31, 2020 and 2019, respectively. The total intrinsic value of options exercised was $5.9 million and $9.2 million during the nine months ended March 31, 2020 and 2019, respectively. We received cash proceeds from option exercises of $2.7 million and $1.4 million during the three months ended March 31, 2020 and 2019, respectively. We received cash proceeds from option exercises of $5.4 million and $5.9 million during the nine months ended March 31, 2020 and 2019, respectively. We withheld taxes on vested RSUs of $2.4 million and $2.4 million during the three months ended March 31, 2020 and 2019, respectively. We withheld taxes on vested RSUs of $8.2 million and $12.0 million during the nine months ended March 31, 2020 and 2019, respectively.

As of March 31, 2020, common stock reserved for future issuance under equity compensation plans was 7.2 million shares.

Performance Awards

Beginning in fiscal 2019, we granted performance-based long-term incentive awards (“performance awards”) to certain of our executives, including our named executive officers. The performance period for each performance award is either of the following two-year periods: (i) fiscal year 2019 - fiscal year 2020, or (ii) fiscal year 2020 - fiscal year 2021. Participants receive RSUs on the grant date associated with achievement of all performance targets. The performance targets for the performance awards are based on meeting at least ten percent growth in annual spend, defined as an estimate of the annualized value of our portfolio of term license arrangements, as of a specific date, and the performance goals set out in the executive bonus plan for each fiscal year, such as free cash flow. If the performance targets are met during one of the two performance periods and the participant remains actively employed by us, the RSUs convert to time-based vesting wherein fifty percent of the awards immediately vest, and the remaining fifty percent are subject to additional service vesting over a three-year period. In general, if the performance targets are not met, or if the participant is no longer actively employed by us prior to the performance targets being met, the participant forfeits all of the RSUs.

We record compensation expense for the performance awards based on the fair value of the awards, in an amount proportionate to the service time rendered by the participant, when it is probable that the achievement of the goals will be met. The total fair value of the performance awards was estimated using the closing price on the date of grant as well as the estimated probable achievement levels of the performance metrics. If the performance-based conditions are not met, no compensation cost is recognized and any recognized compensation cost is reversed.

As of March 31, 2020, we have granted 418,886 RSUs in connection with the performance awards. As of March 31, 2020, all of the RSUs issued in connection with the performance awards were unvested and outstanding. No compensation expense was recognized during the three and nine months ended March 31, 2020 and 2019.

On August 2, 2019, 60,680 RSUs in connection with the performance awards were forfeited associated with the departure of an executive.

Employee Stock Purchase Plan

On July 26, 2018, our Board of Directors approved the Aspen Technology, Inc. 2018 Employee Stock Purchase Plan (the "ESPP"), which provides for the issuance of up to 250,000 shares of common stock to participating employees. The ESPP is intended to be a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, or the IRC. The ESPP was approved at our Annual Meeting of Stockholders on December 7, 2018. The ESPP currently provides for a purchase price equal to 85% of the lower of (a) the fair market value of the common stock on the first trading day of each ESPP offering period and (b) the fair market value of the common stock on the last day of the offering period. Our initial offering period was January 1, 2019 through June 30, 2019. Our current offering period is January 1, 2020 through June 30, 2020.

During the three and nine months ended March 31, 2020, we recorded stock-based compensation expense of approximately $0.2 million and $0.4 million, respectively, associated with the ESPP. As of March 31, 2020, there were 229,807 shares of common stock available for issuance under the ESPP.