Segment and Geographic Information

3 Months Ended

Sep. 30, 2013

Segment and Geographic Information

Segment and Geographic Information

12.  Segment and Geographic Information

Operating segments are defined as components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and to assess performance. Our chief operating decision maker is our President and Chief Executive Officer.

Prior to fiscal 2014, we had three operating and reportable segments: license; SMS, training and other; and professional services. As our customers have transitioned to our aspenONE licensing model, legacy SMS revenue has decreased, and been offset by a corresponding increase in revenue from aspenONE licensing arrangements and from point product arrangements with Premier Plus SMS (for further information on transition to the aspenONE licensing model and its impact on revenue and our results of operations, please refer to Note 2). As a result, legacy SMS revenue is no longer significant in relation to our total revenue and no longer represents a significant line of business.

We manage legacy SMS as a part of our broader software licensing business and assess business performance on a combined basis. Our President and Chief Executive Officer evaluates software licensing and maintenance on an aggregate basis in deciding how to assess performance. Effective July 1, 2013, we re-aligned our operating and reportable segments into i) subscription and software; and  ii) services.

The subscription and software segment is engaged in the licensing of process optimization software solutions and associated support services. The services segment includes professional services and training.

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies (refer to Note 2 in the financial statements of our Form 10-K for the year ended June 30, 2013). We do not track assets or capital expenditures by operating segments. Consequently, it is not practical to present assets, capital expenditures, depreciation or amortization by operating segments.

Our prior period reportable segment information has been reclassified to reflect the current segment structure and conform to the current period presentation.

The following table presents a summary of our reportable segments’ profits:

	Subscription and Software			Services			Total
	(Dollars in Thousands)
Three Months Ended September 30, 2013
Segment revenue	$	78,683		$	8,882		$	87,565
Segment expenses (1)	(43,385		)	(7,458		)	(50,843		)
Segment profit	$	35,298		$	1,424		$	36,722
Three Months Ended September 30, 2012
Segment revenue	$	63,763		$	7,694		$	71,457
Segment expenses (1)	(42,485		)	(7,210		)	(49,695		)
Segment profit	$	21,278		$	484		$	21,762

(1) Our reportable segments’ operating expenses include expenses directly attributable to the segments. Segment expenses do not include allocations of general and administrative; restructuring; interest income, net; and other (income) expense, net. As a result of operating and reportable segments realignment, certain costs are more directly attributable to our new operating segments. Starting with the first quarter of fiscal 2014, segment expenses include selling and marketing, research and development, stock-based compensation and certain corporate expenses incurred in support of the segments. Please refer to Note 12 in our Consolidated Financial Statements and Notes thereto included in our Annual Report on the Form 10-K for the fiscal year ended June 30, 2013 for a basis of measurement of our reportable segments’ operating expenses prior to the first quarter of fiscal 2014.

Reconciliation to Income Before Income Taxes

The following table presents a reconciliation of total segment profit to income before income taxes for the three months ended September 30, 2013 and 2012:

	Three Months Ended
	September 30,
	2013			2012
	(Dollars in Thousands)
Total segment profit for reportable segments	$	36,722		$	21,762
General and administrative	(11,876		)	(12,768		)
Restructuring charges	3			(40		)
Other income (expense), net	(804		)	(277		)
Interest income (net)	369			842
Income before income taxes	$	24,414		$	9,519