Q1 2020 Earnings Call
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Technologies earnings Conference call.
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Colin telephone as a reminder, this conference call. We see recorded I would now like to try the conference over to your whole Karl Johnsen Chief Financial Officer. Please go ahead Sir.
Thank you good afternoon, everyone. Thank you for joining us to review our first quarter fiscal 2020 result for the period ending September Thirtyth 2019.
I'm proud Johnson CFO of Aspentech with me on the call today, Antonio Pietri, President and CEO .
Before we began.
Safe Harbor statement during the course of this call we may make projections or other forward looking statements about the financial performance.
The company that involve risks and uncertainties.
The company actual results may differ materially such projections or statements.
Factors that might cause such differences include but are not limited to those discussed in today's call and in our Form 10-Q for the first fiscal quarter of 2020, which is now on file with the FCC.
Also please note that the following information is related to our current business conditions.
Our outlook as of today October Thirtyth 2019.
Consistent with our prior practice, we expressly disclaim any obligation to update this information.
The structure of today's call will be as follows.
And Tony will discuss business highlights from the first quarter and then I'll review, our financial results and provide our guidance for fiscal year 2020.
That let me turn the call over to Antonio Antonio.
That's scary.
Thanks to everyone for joining us today.
Hi, good pick it up to a good start to the year.
The demand trends seen in Q1 show continued strength across end markets product suites, and geographies supported increasing by blend volume for our I Miss C N businesses and the continued recovery of the pipe down a business for the engineering Sweet.
All in line with the growth trends experienced in late fiscal 2018 and throughout fiscal 2019.
We're benefiting from multiple growth drivers on that we believe position us well to achieve our food your growth and profitability objectives.
I would like to begin my remarks by looking at our financial highlights for the quarter for the first quarter revenue was $134.1 million.
Got B P. S was 67 cents and non-GAAP EPS was 79 cents.
Annual spend was $548 million up 1.3% in the quarter and 10% year over year.
Free cash flow was $14.3 million I'm, we'd returned $50 million to shareholders by repurchasing approximately 382000 shares.
I stated before.
From a macro perspective, we continue to see positive demand trends across the business.
They need to invest in technology to support the utilization initiative is one of the most significant long term trends in capital intensive industries.
Customers increasingly recognized that to achieve their business and financial objectives and remain competitive over the long term they need to the proposed technology that provides a powerful insights into how their attitude right to enable greater outset uptime and operational efficiency.
A good example of this is the chemicals industry.
As noted on our last earnings call were mindful of the indications that the global trade conflict is having an impact on global chemicals demand.
During the past couple of months I've met with executives of many of our chemicals customers well known niche that their business has become more challenging.
However.
Their feedback is that they remain focused on investing in there the utilization initiatives.
Which they believe is critical for their businesses under long term competitiveness.
Alright, P.M. business had a good start to the year with significant growth achieved across the sweet.
In particular.
That's been prime be had its second consecutive record quarter.
Trends remain favorable with growing customer interest in this week and rising levels of sales activity.
It is becoming apparent that the value proposition of they PM suite is resonating with customers and they recognize this there's substantial benefits it can deliver for their business.
For example, I spend I still has differentiated itself in two key ways superior accuracy and effectiveness and faster time to bodies.
After the accuracy is driven by the deep inside it provides from data about the anomalies it did things.
Well, they're older solutions that can detect anomalies their inability to provide a contextual understanding of what the data means limits their volume.
And still deliver spots are sent to value I see it rapidly scales from one asset to many assets in a plant site or globally across the enterprise.
And bill deployments, our automated and do not require specialized did assigned skills or significant time to implement and support.
Then every sold these that I'm still has a demonstrated track record of the second anomalies early and identifying potential issues that are the solutions me is doing so with more precision accuracy and ease of deployment I News then its competitors.
Looking at a pull their primary markets.
I didn't see trends seen in fiscal 2019 continued to manifest themselves in the first quarter.
These trends are supported by copies Capex growth at a mid single digit grade an incremental LNG capex investments that are driving that backlog duration metric for the yes. He's we track above its long term trend.
We believe their recent positive trend with the assay customers will continue and as we come to the end of the renewal cycle for contracts with these customers. We expect to see further improvement in the growth rate of that business.
I really finding customers remain a stalwart into adoption about sort of concession solutions to support of their continues focus on operational excellence.
As mentioned earlier did utilization remains a top is strategic priority for these customers and Aspentech is a key enabling said not technology partner for these initiatives.
A group of this customer is also reconfiguring or implementing new operating strategies in the refineries to benefit from new strange and sold for come to regulation Maritime transportation fuel on their they I am all 2020 requirements that dramatically reviews sulfur dioxide content in bunker fuel.
The reconfiguration of refineries or adoption of new operating strategies can be achieved through a combination of capex spend and they use of technologies like PMC, Oh Gee dog I know, there's we told benefit aspentech.
I would now like to share a few examples of contracts we closed in the quarter.
First I chemicals customer in Latin America, and a long term user of our engineering and manufacturing supply chain suites signed an agreement after a detailed evaluation to use somebody flows they asked them to dailies ample I'm probably be products in our asset performance management suite at one of their petrochemicals site there.
Customer is facing issues with the quality and reliability of their feedstock, which coupled with equipment reliability issues has created a challenging operating environment. The customer was seeking solutions to understand process degradation and equipment reliability problems in order to achieve better efficiencies in the operation of the plant.
Second a mining customers in Asia, and a long term you sort of our manufacturing execution system selected they asked I spend until solution. Upon completion of a detailed the sole source evaluation and successful pilot and after considering all friends from at least two older suppliers. That's part of their these utilization.
Transformation initiative.
The cost them or you can see probably liability by reducing the unplanned downtime in their operations a partner of Aspentech executed the pilot with a customer and is now focused on the implementation of the technology in the customers copper manufacturing facility.
Further rollout of the technology suspected to older metals manufacturing facilities a mining operations.
This engagement model is a demonstration of the progress we're making to establish an ecosystem for the successful testing and implementation of them too.
Third an integrated all company, Canada, and long term user of our engineering on M. A C suites selected Aspen until after initially conducting an evaluation of multiple vendors and then narrowing the process to three finalist.
The customer set up a group dedicated to other leading technology is not currently used by the company that could deliver significant incremental value.
Business case west jointly developed <unk> refineries that identified over $10 billion in annual benefits through lost profit opportunity as a maintenance spend reduction also a second upstream side. What's included in this study showing similar benefits potential.
The initial deployment will be to these two sites and will be performed by a partner Obi spent that the successful deployment of Aspen Anthony suspected to lead to the industrialization of the product across all the company's assets.
For.
One of the largest tire manufacturers with plants around the world and user of our supply chain management products.
Decided to evaluate new solutions in the marketplace as their business needs have be bold requiring glance scheduling optimization.
So the customer first conducted a failed pilot without computers brought up our team worked with a customer to show the enhanced functionality of our plans kitchen in products.
I spent plan scheduling enhanced automation or Aspen, B S yea, and Aspen plant scheduling enhanced optimization or I spent b is eel.
They ask them one version 11 software release.
After probably now the new capabilities to the customer they decided to move forward with our products signing a new agreement that commits to the rollout of the Aspen B S. Your product for their primary sites and Aspin P.S.P.A. products for their secondary sites.
Fifth and final a long term European customer of Aspentech has committed to increasing the use of aspentechs refinery blending them blended solution B and C. O M blow a multi blame the optimization and bill as part of it to a spot to be to strategy to me I am all 2020 specifications in maritime fuel production.
Due to its sister Teekay <unk> proximity to shipping lanes.
This is in the context of a broader Adidas transformation program to capture potential margin optimization opportunities each of which represent millions of dollars in profitability.
Moving onto the products area, we recently announced the launch of Aspen Enterprise insights have you certainly session I've worked real management solution that aggregates and analyze this data from across the enterprise to Delever inside an actionable information and drive better collaboration and decision making within organs.
Stations.
This release incorporates that technology from this obese what acquisition last quarter and it's an important an example of that type of collaborative and data driven applications were focused on introducing to the market.
Based on initial feedback from customers, we anticipate a strong interest in the capabilities of this technology to help customers aggregate analyze and visualize information across their enterprises.
[noise] early customer feedback on that score capabilities of nubile, instead be soup and our broader vision for AI and machine learning asked me very positive.
Cost of must recognize that deploying these technologies has the potential to leads to better understanding of how to drive higher levels of operational excellence across their assets.
We're working on integrating the new boat technology stack into the architecture of our future solutions to enable their their enterprise deployment through <unk> cloud capabilities and overtime also via edge computing capabilities.
In addition, we will continue to sell the new boat technology stack as an OEM solution into the into their historical verticals, which all fall under the global economy industries of Aspentech.
We also continued to make incremental investments in our product portfolio and our sales capacity for a P M to fully capitalized on our growth opportunities.
The combination of our scalable business model and rigorous ROI based investment methodology allows us to effectively manage the balance between spending for growth and continuing to maintain our strong profitability levels.
We will continue to utilize our balance sheet and I look at capital to invest in our organic growth initiatives pursue acquisitions and execute on our share repurchase program.
To summarize.
Aspentech got off to a good started fiscal 2020, and we believe we're well positioned to achieve our full year growth and profitability outlook.
We're executing well on our strategic growth initiatives and believe we will continue generating an attractive combination of growth and profitability for the foreseeable future as customers continue to invest in digitally session in our core market and GE ice.
We're confident this will generate significant value for long term shareholders.
With that let me turn the call over to Carl Carl.
Thanks Antonio I.
I will now review our financial results for the first quarter fiscal 2020.
As a reminder, these results are being reported under topic six so sick, which has a material impact on both the timing and method of our revenue recognition for our term license contract.
License revenue is heavily impacted by the timing of bookings and more specifically renewal bookings.
Decrease or increase in bookings between fiscal periods, resulting from a change the amount of term license contracts up for renewal is not an indicator of the health for growth of our business.
The timing of renewals is not linear between quarters, our fiscal years and this nonlinearity well have a significant impact on the timing of our revenue.
As a result, we believe our income statement will provide an inconsistent view into our financial performance, especially when comparing between fiscal periods.
Our view annual spend will continue to be the most important metric in assessing the growth of our business and annual free cash flow. The most important metric for assessing the overall value our business generates.
Annual spend which represents the accumulated value of all the current invoices for term license agreement at the end of each period with approximately $548 million at the end of the first quarter.
Represented an increase of approximately 10% on a year over year basis, and 1.3% sequentially.
Total bookings, which we define it's a total value of customer term license contracts signed in the current period last the value of term license contracts signed in the current period, but where the initial licenses are not yet team delivered on the topic six six plus term license contract signing a previous paired for which the enough.
Sure licenses are deemed delivered in the current period was $135 million you, 40.4% increase year over year.
Year over year increase in bookings reflect a significant increase the amount of term license contracts up for renewal as compare to the year ago period.
Total revenue was $134.1 million for the first quarter is 17.4% increase from the prior year period.
The year over year increase in revenue was the result of the increase in total bookings discussed above.
Wow.
Turning to profitability beginning on a GAAP basis.
Operating expenses for the quarter for $71.6 million, which was up from 64 million dogs in the year ago period.
Total expenses, including cost of revenue for $86.8 million, which was up from $77.2 million in a year ago period and $84.5 million last quarter.
The increase in expenses is primarily related to the organic investments, we're making in fiscal year 2020, as well as the impact of our recent new boat and for these two acquisitions.
Operating income was $47.3 million and net income for the quarter was $46.3 million or 67 cents per share.
Turning to non-GAAP results, excluding the impact of stock based compensation expense amortization of intangibles associated with acquisitions and acquisition related fees remember, we reported non-GAAP operating income of $57.9 million, representing a 43.2% no.
non-GAAP operating margin.
Fair to non-GAAP operating income and margin of $46.9 billion and 41.1% respectively in the ever go period.
The margin performance reflects the positive impact of the incremental license revenue recognized during the quarter.
Given the fluctuations in our revenue due to the timing of bookings, we believe focusing on annual free cash flow as a percentage of annual spend is the most appropriate way to assess the efficiency of our performance in a period.
non-GAAP net income was $54.6 million or 79 cents per share based on 69.3 million shares outstanding.
Turning to cash flow.
We generated $15.3 million, the cash from operations and $14.3 million a free cash flow after taking into consideration the net impact of capital expenditures capital software capitalized software litigation and acquisition related payments.
Free cash flow is ahead of our expectation due to a better than expected collections within the quarter.
A reconciliation of GAAP to non-GAAP result is providing the tables within our press release, which is also available on <unk> are on our website.
I would now like to close with guidance. Please note that we are reiterating our guidance for all metrics, except for GAAP and non-GAAP EPS, which are increasing to reflect the impact of shares we repurchased in the first quarter.
Recall that we only provide guidance on an annual basis and provide directional commentary on the timing of annual spend and bookings during the year.
Full guidance for our income statement metrics can be found in our earnings press release.
With respect to annual spend growth Antonio mentioned, we continue to forecast, 10% to 12% annual spend growth for fiscal 2020 of that 7% to 9% is expected to come from our engineering and M. A C suites and approximately 3% from ATM.
Similar to fiscal 2019, we anticipate growth to nail spend will be weighted to the second half the fiscal year.
We continue to expect bookings to be in the range of $600 million to $650 million, which includes $317 million of contracts that are up for renewal in fiscal 2020.
From a linear already perspective, it's mentioned at Investor Day, we still anticipate 40% to 45% a fiscal year 2020 bookings come in the first half the year with the remainder in the second now.
As a reminder, on the topic six so sick or license revenue recognition is tied to when we recognize bookings as such a license revenue linear narrative will generally track the bookings linear study.
From an expense perspective, we continue to expect total GAAP expenses of $369 million to $374 million and non-GAAP expenses of $303 million to $308 million.
From a free cash flow perspective, we're expecting to generate $250 million to $260 million.
Fiscal 2020 free cash flow guidance assumes cash tax payments of approximately $55 million to $60 million.
Our 2020 free cash flow outlook reflects the impact of incremental investments, we're making in the business.
From a timing perspective, we anticipate free cash flow follow a seasonal pattern similar to fiscal 2019.
In summary, we began fiscal 2020 benefiting from the same trends we've seen in recent quarters. We believe we're well positioned to continue delivering an attractive combination of growth and profitability. They can generate sustained value for the shareholders over time.
With that we'd like we would now like to began the QNX.
Operator.
And then himself from the Q. Please press the pound key.
Your first question comes from the line of Rob Oliver from Baird. Your line is now open.
Hi, Rob.
San Antonio he Carl Thanks for taking my question guys.
I just wanted to kick off well on a P.M.. So I don't coming out of the analyst day in August it sounded as if this shift from kind of one off equipment licenses to side licenses, what's helping to drive higher retention rates and I was wondering if we can get could we could get any color around.
Around that if that continues and then I just had one follow up on some of the wins that you referred to as well.
In Q1, we signed a more new customers to the use of.
Both and filled prime be AMPU their lease and we were very happy with the acceleration of that business.
Versus Q1, if why 19, that's what I would say about that.
And and I Tony on on I know its customers you know tanks. There was a lot of a lot of data you guys always give us on the customer from you know I just outside of maybe the tire company you mentioned or maybe they are customer it seems like all of them are already current.
It's been customers on M. A C or engineering suites. So it's sort of illustrates the power of incumbency well you mentioned that a lot of these initial lands.
We're only in one area and you know could be rolled out across for example in the mining area across multiple different metals in an area. When you look at these aren't opportunities without putting a dollar figure on it kind of what sort of multiplier do you think you have on that initial land within the contract. Thank you guys very much.
But let me look I think it.
It is multiple times it depends on the number of assets that are customers have to further rollout that technology.
And the case of that customers multiple sites in the case or the customer in Canada is not only add refineries what upstream operations you know a in mining we talked about a customer the west rolling that technology out already to seven different mines. You know you you have.
Customers in chemicals that have multiple chemical plant. So so until that multiple is as the potential for annual spend growth is multiple times, while we get out of the initial land a London deal.
And that is now starting to get reflected on day PM pipeline with cheese is continues to grow and he is as large as it's ever been since we started this business almost one have years ago now.
[noise], Yeah, Rob I don't know if a if it's something wrong with your line, but we're getting a noise or typing or maybe just yeah.
Yes, that's probably me just taking notes thanks, guys. Appreciate it okay, sorry [laughter] problem.
Okay. Thank you.
Thanks.
Our next question comes from the line of David Hynes from Canaccord. Your line is now Olson.
Did you.
Hey, Hey, guys how are you.
Good good and Tony I want ask you about the chemicals customers and what you're seeing in the end market.
I think you offer an anecdotal comment that they're going to continued to invest in digitization efforts, but but I'm curious what you're seeing in the field today I mean are you seeing.
Any signs of those folks pushing off decisions you know, making smaller commitments I guess, what you know kind of what what has been the manifestation of a more challenging environment or in your sales execution.
Well, then and and that's the point DJ that would really haven't seen any change in and they're in the cadence of business from these chemicals customers are they all their old certainly talking about.
The the the difficult macro environment on and deterioration of some of their and Mark and at some of their businesses, but across the board a there's a commitment to a adoption of digital capabilities on and driving operational excellence. So so.
So we're encouraged by what were hearing despite the macro environment that these chemical customers arsene or experiencing.
Got it.
And then maybe one follow up on a p.
You know that the products, but in the market for a little while now and I think you had said in the past that early days customers would get some.
Early adopters discounting I have you seen of any or have you pushed any evolution in Canada. The pricing model. There as you kind of think about more value based pricing and I have you been able to kind of <unk> drive better economics on the deals that you're signing now versus maybe where you were a year ago.
Well, let me look at [laughter] I think we said the from the very beginning the we're trying to be.
Ambitious with our pricing.
From the from the get go and certainly there was a you know we were testing the our pricing in the market.
And as such we've made adjustments or more specifically dependent on the end market as you move away from the process industries do tend to see less value creation because of profitability lower profitability in other industries.
And then the other adjustment that's happened is certainly a.
There's compared to those out into market, perhaps don't necessarily follow value based pricing, but.
Nonetheless, Oh, we continue to experience a good pricing I believe at Investor Day, we.
We talked about how every a p. entrant transaction is increasing the total wallets spend or amount of spend by those customers with respect to our engineering on the Missy business. So so look if we were satisfied with where the value we're getting.
You know we've done an enterprise steel and we're very happy with that value and and I think going forward.
The thing that we need to demonstrate.
More often is is our ability to price enterprise deals that are out a multiple of what we're doing these initial deals, which I think will be the case, but but no I from day. One we always felt were going to go to market with the value based pricing.
The other thing is that we're proving that the value is significant because some of these customers are telling a that through that one or two saves that they achieved after they implemented until they are recovering.
The cost of the investment and that alone says, okay, there's an opportunity perhaps too to do a little bit more but at the same time you know we think we're getting good value for for what we're selling yep excellent. That's helpful color. Thanks, guys.
Okay. Thank you Jim.
Our next question comes from from mine.
Steve can you from let's say your line is Nelson.
I said, Hey, guys are you doing thanks, calling on me.
Hey, maybe enough numbers question for call and then one for Antonio So just on the numbers.
We're going to get a better feel for RPL cadence over time, I guess, it's probably it's difficult for us to be down sequentially into Q1, and then just on the bookings metric said, we get five by your I'm kind of seasonality health that you gave us the kind of looks like given the renewal schedule, we should see flux.
Seems kinda down year on year from next few quarters.
My math right.
So that's something that I got one kind of 'em higher level question for Tom Yes, you don't mind.
Sure. So you broke up on the first part of that question could you do I said again, Steve Okay, yeah, or RPL being down.
Sequentially in the Q1, that's probably a typical cadence is that is that fair.
Hi.
Stephen I just for my clarification, what do you mean by our appeal.
Oh, the remaining performance obligation.
Oh, it looked like it was down sequentially and.
Does that normal for Q1.
You're talking about the contract asset and built.
No.
No I'm talking about that.
So what are your charge off the remaining.
Remaining I'm not following what you mean by the remaining performance obligation.
Okay, maybe that is the contract that maybe you got to using different terminology, yeah, not the unbilled not the unbilled receivables, we can take it offline in the follow up that's fine.
Maybe maybe just on bookings, though looks like given the renewal schedule your bookings should be a kind of.
Down year on year. The next three quarters of that somebody doing my math right on that.
Yeah. So yeah, that's kind of you know as we said that bookings you know we got like 40, 45% in the first half the rest will come in the second Oh Gee you can figure out the math on what that will look like by the quarters as little as I said before there's some timing and that.
Which.
Mike move stuff between the quarters, but in general I use that split between the two.
Okay great.
Then if I may I wanted to ask Antonio about this the enterprise inside announcement.
Maybe can you saw that we saw that about a month ago looks interesting could you tell us how how does this differ from aspens existing analytic capabilities is it does it provide kind of an AD hoc capability that that's new or what what is new with it and maybe a little color on what kind of UK says Oh, you expect to see out of that and anything.
Lines of initial traction not it. Thanks, yeah, Okay no. Good so I spend interpreting site, formerly sub leases.
Look or so so.
Yeah, I spend into fresh insights, it's a it's a enterprise visualization and workflow management capability.
So our or is it has some analytic separately.
But very worthy me Terry.
It's really about what what Aspen enterprise seen such allows this is is it used to vary.
It's tactically at pool information from any system into your enterprise I corrugated and do analytics on it or or massage that information to the ambition like I said on a and do that as part of of work flow collaboration Cross.
Yes.
Then supports a decision, making and and actions.
Well, we talk about our own analytic solutions. The these are paving analytic solutions that are very localized.
Planned on on assets, what Dan Aspen Enterprise insights Daus. This allows you to to elevate all that information and then and then make it available as to anyone on the enterprise and so for example customers could.
Could I want to do benchmarking between different clients. They would they maybe want to do benchmark and be between it seemed like type of assets across different plants also maybe we have mtell on eye on encore on a compressor on up Clinton and on multiple plan. So.
So the customer can elevate that information aggregated and then put it on a dashboard. So that you can compare the performance of that compressor across multiple plants and the Alair study until it might be generating so so it's always about data aggregation analysis and visualization within a collaborative work flow environment as to.
To allow for four decision, making on taking actions.
Great. Thanks, guys I'll leave it there.
Yeah. Thank you think is too.
Your next question comes from the line HM.
From JP Morgan Your line is Nelson.
That's great. Thanks, Hi, guys. Thanks for taking my questions first Antonio kind of a high level question on M.C. I know you said that growth rates are pretty consistent that you mentioned that the analyst day, a couple of months ago in in kind of all three of your major segments, but.
Just curious.
If we re wines 12 months ago, we're in the middle about pretty precipitous drop in the price of oil. So I'm. Just curious you know what are you seeing now in terms of budget at your end see customers and weather.
Things are hardening softening can you just comparing and contrasting what what looks like today versus last year.
Well im injection so so.
I'm going to try to recollect.
From memory.
The price of all 12 months ago, but I believe we were more or less in the same branch a sort of a range bound between.
I'll call. It 50, an $80 maybe it was a little higher a year ago somewhere in that $70 range I don't think dramatically different from from where we are today.
And really at this time last years, though CNC customers were completing their budgets for calendar 2019, a we are now at the end of calendar 2019, and their spend was given by that ball just double said now a year ago and those customers are now working on there.
Budgets for calendar 2020, and I will be the real determine and Oh.
Growth in the next calendar year or the second half of our fiscal year 20.
So so so far so good as far as you know the same trend that we so through our fiscal 19 now new budgets are gonna come into place for these customers in January of next year, and and I will they start dictate and then are you know there span.
On the second half of our fiscal year.
Okay, hopefully I answered your question.
Yeah, Yeah, no. That's helpful. I mean I about the same as is completely fun.
Yes, Thats helpful. Karl just a quick follow up.
Should we.
If if collection.
Maybe came in a little bit better than you had been expecting and that's what caused the free cash flow to come in better as well should we read that also maybe renewals came in maybe the timing of renewals came in better than expected or should we kind of lead those two separate.
Yeah, leaving separate I mean, the bookings came in about where we thought they would come in for the quarter on it was really just as we gave guidance at the end of last year at Investor Day, We've talked about Q1 would probably be about breakeven for free cash flow. So we focused very hard on collections and just some of them came in a little bit early.
Sure. So it's not an indicator of increase collections for the year. It's just some of the Q2 collections came in in Q1.
I guess im alright, thank you.
Thank you Jackson.
Your next question comes from the line of Chase.
Okay.
So my sense your line is no.
Hey, guys Hi, guys. Thanks for taking my question, Yeah, I wanted to ask about sales initiative that hiring an ATM I know that's kinda Caucasus here and just so no wanting to get your color on how that's going to Miss early on.
Yeah, I know there.
We.
Normally we start the recruiting and air force for a new fiscal year ahead of the fiscal year. So that we can you take Ron Ron in the new fiscal year.
We we haven't had any issues Oh, we have this tapping the we were hoping to have at this point according to our plan.
And we continue.
Okay, and then I'm kind of one question on for Karl on annual spend.
On a sequential decrease from Q1 growth wise seems still up sequentially on a on a dollar basis, but.
Is this kind of typical seasonality we should expect.
Yeah.
Yeah. So again Q1's, usually one of our lower one.
Yes. They are 19, we had a little bit of bulk performance in Q4. So some of that says Q1 deal may have been pulled into Q4, just to sort of the end of year.
Processing cadence, but you got Q1, you we usually at the same seasonality.
To our annual spend you can look back and use that as a good guide for the last couple of years as to how you [noise].
Coming in.
Okay, great. Thanks.
Yeah. Thank you just.
Your next question comes from the line of mass.
From William Blair. Your line is now.
I'm not saying Hey, guys. This is David on for Matt I'm Real quick I was wondering if you guys had a.
Update on partnerships with from your partners such as a honor hexcel, John Hexagon in terms of any new customer wins or increased spending activity there. Thanks.
Okay, well, let me look is too it's still early days with hexagon because.
The fact is that the hexagon partnership.
Is it's more of a technology partnership and we're working on create creating a seamless.
Data workflow automated their data work flow between our solutions.
To create basically a comprehensive.
I said design lifecycle.
So we've already been working with the hexagon I'm, we've held a workshops around the world with customers.
Where these customers are helping us they find the work processes on the they don't workflows that they're interested in to see between Aspentech on hexagon. So we've made a lot of progress in this is a four months since went onto partnership on and the first the first release of of that into.
Operation will be in the market soon.
You know we continued to make progress on other fronts us well, we were establishing partnerships with a consulting companies. Another system systems integrators that are interested in taking solutions such as they can solution or more specifically and Phil and also.
The GE dog product around around multi dynamic optimization as seats on top of our multi wearable controllers. So so far and we're encouraged by the interest at the company. The we are seeing from potential partners.
As a result of this strategy on the direction of the company, though that was put in place into last to really three four years. So so we're encouraged by all Dod budget, but early days them or some partnership continues to be a positive one.
There are some things that we're working on fine tuning as far as part of the partnership.
No no doubt Emerson has seen success in the market.
Or the they are interested in another level of Ah integration of our solutions and they're all friends and we are discussing and discussions in that regard so.
Thanks, guys.
Yep.
Thank you.
Your next question comes from the line of my Shuffle. Some benchmark your line is no.
Hi, Mark Hi, guys. Thanks for taking my question. Most of my questions have been answer I do have one though for you Antonio you touched on this in the press release and also at the Analyst day with respect to AI, and putting a <unk> or developing a <unk> and you're just different solutions. Just wonder if you could just give us a couple of real.
World Examples of how customers are pushing the early days are using.
AI or for other incorporating into their processes.
Well, let me look so so in a way a lot of customers are.
Our forming groups.
On hiring data scientist than some of the bigger companies the oil and chemical companies or even building teams that are that are focused somebody's.
We we believe that our position in the marketplace and and rubber lever.
From Burberry, firstly, the as our incumbency in the marketplace gives us a unique position because.
Our our proprietary proprietary technology on first principles modeling.
And I wouldn't you leverage that.
And I layer AI capabilities on top of a.
Creates a new level of insights on accuracy, and our ability to model and and drive optimization for for this plan. So we've had a research going on in the company for a year and a half and I will not get into specifics of what we're doing because we consider these oh.
Competitive nature, but we're very encouraged by already the pilots and the beta testing and even lied house.
In.
Deployments or does that we're gonna have of these new capabilities.
And ultimately I think what we're hoping to do is demonstrate to customers that the combination of our own historical capabilities.
With.
Hi.
Including called me, Steve Deep learning machine learning and other things.
Integrated in into those products will create and a new generation of capabilities. We hope will will transform the industry's once more so so we are there's a lot of work on in this area, we consider it a of.
Competitive nature on and at some point in the future of the June June start hearing more specifics from us, but what are the customers by the way that.
Our working with us on days, because we are something we call lending Novation club.
We've shed a record participation in those innovation philosophy, you saw some are soft learn about.
Well, we're working on a lot of this customers are moving from study Novation club into beta testing on lighthouse in all of these solutions.
So we see a lot of excitement on we're very encouraged by by the feedback we're getting.
And I'm personally very encouraged by by the creativity and innovation of the team.
As we form a team of data sciences, which we've.
Blended together with.
Our own chemical engineers on computer science is to create what we believe will be the next generation of capabilities for the industry.
Thank you that's a that's helpful and look forward to hearing more about this as it progresses. Thanks.
Right. Thank you are.
Your next question comes from the line of Andrew.
Sometimes very capital your line is Nelson.
And if it's a this is for us on French actually Oh, we just have one question about.
Sort of you asked in one or the 11, that's been out since March.
How did you seem to adoption with that in terms of converting users who generally use older versions of Aspen have you seen a higher adoption now with new capabilities and version 11 are you seeing more of the same in terms of how penetrated you can get with those legacy users.
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No. It looked as is typically the adoption cycles for new versions tend to be longer and they seem to in what we do because these technologies are deployed in operating environment, but engineering suite, which is also used by in sees it gets tends to get the.
We'll get people tend to upgrade to it faster. So we're saying at foster upgrades into version 11 of the engineering suite on MSC that drive for adoption on the M. A C side. These are GE dog.
Product, which is unique capability in the marketplace on and there's a lot of interest.
In that regard.
And it's a product that we consider a will be.
Integral to who are resulting in this fiscal year.
So that's driving adoption of 11 for or M. A C.
So so no worse, so we're satisfied with the with adoption that we're seeing on page 11, but normally they engineering suite gets adopted faster than the embassy suite.
Great. Thank you.
Yeah.
We have okay. My other question at this time I will now turn the call over I was asked to see Oh, no filtri for his closing remarks.
All right well I want to thank everyone for joining the call today I look forward to a teen you during a and B also in investor conferences. Thank you.
Ladies and gentlemen. This concludes today's conference call. Thank you for your participation and have a wonderful thing you may all disconnect.