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Summary

Two months ago, Aspect Software, Inc. (Aspect) filed a Chapter 11 bankruptcy petition to reduce $795m of debt that had limited the company's ability to invest in next-generation products. Aspect initiated the capital restructuring to eliminate $320m of second-lien debt and convert $60m of first-lien debt into company equity.

A refreshed capital structure positions company for success

The capital restructure announced on March 9th by Aspect, a provider of software systems and equipment for contact centers, resulted in much apprehension among channel partners, customers, and prospects. The relatively new company leaders, who had arrived just three years earlier, denied a pending demise of the company and boasted of strong revenues and a loyal customer base. Since the new management team's arrival, Aspect had spent $160m (US) in acquisitions of promising new technology including Voxeo (IVRs), Qivox (fraud protection), and most recently LinguaSys (natural language understanding). The company had also just retooled its software development process, redesigned its professional services, rebranded the company, and made a significant switch from premise-based solutions to the cloud. Aspect also shifted $50m in nonstrategic spending and redeployed it to strategic areas to improve customer experience and employee development. All were moves to better position Aspect for a promising future.

Aspect executives initially estimated the capital reorganization would take 105 days to complete. However, at last week's Aspect customer/analyst conference, held in Las Vegas, CEO Stew Bloom announced the process would close much earlier and be completed by May 27th instead of mid-July. The shortened cycle was attributed to a high level of receptiveness by the company's stockholders and investors.

As a result of the reorganization, Ovum believes Aspect will be a much more viable competitor. Aspect's debt has dropped from $796m to $320m and its balance sheet has been significantly de-leveraged. The resulting company has a strong income statement with over $400m in revenue ($300m of which is recurring) and nearly $100m of annualized EBITDA (cash earnings). Aspect's cloud bookings are growing 22% annually, and Aspect is on target to spend $40m on internal R&D annually to maintain its strong product/service reputation. We commend Aspect for being proactive in tackling its balance sheet issues ahead of several of its major competitors, which will likely have to deal with similar issues in the near future.

Appendix

Author

Ken Landoline, Principal Analyst, Customer Experience

ken.landoline@ovum.com

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