Q4 2020 Aspen Technology Inc Earnings Call
Ladies and gentlemen, your Aspen technology fourth quarter 2020 earnings conference call will begin momentarily. Once again. Please standby your conference call will begin momentarily. Thank you for your patience and please continue to hold.
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Aspen Technologies fourth quarter 2020 earnings Conference call. At this time all participants are in listen only mode. After the speakers presentation. There will be a question and answer session to ask a question during the session you'll need to press star one on your telephone as a reminder, threes program is being recorded.
I would now like to introduce your host for todays program called Johnson Chief Financial Officer. Please go ahead Sir.
Thank you.
Good afternoon, everyone and thank you for joining us to review our fourth quarter fiscal 2020 resolved the geared ending June Thirtyth 2020.
I'm proud Johnson CFO of Aspentech with me on the call again, Tony theatrical President and CEO.
Before we begin I will make the safe Harbor statement. During the course of this call we may make projections or other forward looking statements about the financial performance of the company that involve risks and uncertainties.
The companys actual results may differ materially such projections for statement.
Factors that might cause such differences include but are not limited to those discussed in today's call and contained in our most recently filed form 10-Q.
Also please note that the following information related to our current business conditions in our outlook as of today August 12 2020.
Consistent with prior practice.
Resolutely disclaim any obligation to update this information.
The structure today's call will be as follows and tell you will discuss business highlights from the fourth quarter and then I will will review our financial results and discuss our guidance for fiscal year 2021.
That let me turn the call over to Antonio Antonio.
Thank you Carl and thank you all for joining us today.
We hope all of you and your families are staying safe and healthy.
Good day World to celebrate in Aspentechs 39, suddenly bursary Orbitz founded.
That's been take the lever solid fourth quarter results against one of the most uncertain economic environments, we have experienced in our 39 year history.
By utilizing Aspentech solutions, our customers were able to adapt quickly do unexpected and challenging circumstances.
While continuing to operate their attitudes safely and efficiently.
Our customers faced an unprecedented demand disruption in our fiscal fourth quarter.
And we thank them for their continued trust and they aspentech team.
And our products and solutions.
We believe this illustrates the mission critical nature of Aspentech, that's what they receive didn't see of our operating and financial model.
Our performance was made possible by the hard work and dedication of everybody on the Aspentech team.
Remained focused on our customer success from the very beginning of the pandemic amazing challenging circumstances.
Looking quickly at our financial results for the fourth quarter.
Revenue was $199.3 million.
GAAP EPS was $1.43 cents and non-GAAP EPS was $1.54 cents.
Annual spend was $593 million up 3.1% in this quarter and 9.6% year over year.
I'm free cash flow was $99.5 million.
For the full year.
Revenue was $590.2 million.
GAAP as was $3.28 and non-GAAP EPS was three the older 72 cents.
Free cash flow was $243.1 million.
And we returned $150 million to shareholders by repurchasing approximately 1.3 million shares.
Well, we were pleased with our performance in the in the quarter.
Hi results reflect the impact of the economic downturn related to the Kabi 19 pandemic.
We have seen conditions in our end markets showed some improvement since the late March April timeframe, but our customers continue to operate in uncertain and challenging market conditions.
In the energy sector.
We had a good quarter with some notable wings amongst refining customers.
Oil prices have stabilized, but the ended the quarter from their trough in early may and I recently trading around the $40 per barrel level. That's supply caught took effect and demand showed signs of improvement.
Increased economic activity and automobile using that May trough have resulted in improved fuel demand, creating a more stable operating environment in refining driven by an increase in utilization rate.
I'll be still well below pre kabi levels.
Reduce air and ground travel levels are likely to persist at least in the near term, which could limit further improvements in end market demand.
We also had a solid quarter with can because customers.
This is a sector, where some companies benefit I know there's are impacted from the significant changes in product demand patterns, sometimes even in business units within the same company.
The customers being adversely impacted our adjusted their operations and operating expenses to reflect current a near term demand levels.
We're anticipating a slower than expected recovery in economic activity in the second half of this calendar year, which will prolong the recovery for the chemicals industry.
Despite the tough operating conditions for our owner operator customers in the refining and chemicals markets in each case, we continued to see solid adoption of our products and solutions as well as growth in our pipeline of business.
Customers in this market recognize that digitalization and automation are areas in which they must continue to invest.
We have heard this repeatedly in the last five months during customer meetings I'm from the membership of our executive Advisory Board.
These customers would require technology that allows them to run their plans more efficiently with more agility and in a more sustainable and safer fashion.
We strongly believe that the macro disruption created by the pandemic further underscores the strength and the opportunity for expanded usage of our product suites.
The engineering and construction market experienced further backlog declined that's its customers reduced global capex budget and delayed final investment decisions or slow down projects.
Although the resumption of construction activity in many jurisdictions in the last two three months has been a positive development.
We generated modest growth from these vertical in the quarter driven by a combination of transactions in North America, and Europe, and a strong currency contribution from Russia.
We believe there are growth opportunities from this customer so they continue to look for productivity improvements in their engineering teams and their design activities and shift their focus to operations and maintenance activities in Brown field operations.
Overall, we're pleased with a solid performance of both engineering and embassy suites in the quarter.
They admit C suite delivered especially strong performance and the engineers, we generated good growth despite the challenges facing the engineering and construction industry.
The A.P.M. suite delivered a record quarter the largest quarter in its history.
If we sign some exciting transactions in the quarter that highlight the opportunity for ATM to drive new value creation opportunities for customers across all industries.
Key transactions were signed with customers in mining engineering and construction bolt on paper refining chemicals pharmaceuticals and specialty chemicals.
At the same time, we had a number of ATM transactions up were delayed as customers to adjusted their operations to current conditions.
Hey, P. M is an emerging set of technologies, which makes it easier for some prospective customers to delayed purchasing decisions. That's part of their near term cost saving initiatives.
We remain very encouraged by the breadth of ATM pipeline activity and are confident we will see improved performance as the economy normalizes.
Today, the APN suite is being used by 103 cost immersing 33 different countries and we had the largest by done a business into your own history of the sweet.
Following our highlights of some of the transaction signed in the quarter.
First a European oil and gas company that also produces low carbon energy and he's a longtime customer up aspentechs embassy suites signs that global enterprise agreement for Aspentechs Multivariable control technology DMC three.
This customer is committed to a net zero greenhouse emissions targets by 2050, that's part of the Paris climate change agreement and identified Multivariable process control as one of the key enabling technologies that will contribute to meet its objective.
I spent DMC three was selected to be standardized across all refining operations over competing offerings due to our clear market leadership in process control.
Second.
Hey, Europe based global Yeah see company focused on day acid lifecycle of it and you sort of customers across many industries.
Once again renewed its agreement with Aspentech and increased spend by licensing our ATM suite.
These customer conducted on evaluation of multiple software technology suppliers and selected Aspentech for its broad range ambition and leading market position.
This company expects to become a digital efficient partner to our joint customers and plans to promote and implement our ATM sweet spot of expanding relationships in the operations and maintenance space.
Third and final a leading global chemical company in Japan, and long term customer of Aspentech selected Aspen mtell to improve maintenance operations as part of its corporate digitalization transformation initiative.
The customer evaluated technology from several local and foreign companies and selected our product. After the result of a proof of concept <unk>.
The initial deployment will be at one side in Japan with expectation of an aircraft rollout in the future.
We also had a solid quarter of profitability and free cash flow, we believe the strength of our balance sheet and financial model together with our operating discipline, you said significant competitive advantage during difficult market cycles, we have the resources and flexibility to continue investing in our core.
Our growth initiative initiatives, which further extends our product market leadership.
I would now like to provide you with some additional details about our performance for the food year 22 any.
From a product perspective, the engineering business grew annual spend 5.4% for the year.
Generating 33.4% of our overall annual spend growth.
Our manufacturing and supply chain already Missy business continued to perform at a high level delivering annual spend growth of 12.7% <unk>.
Representing 49.5% of our total annual spend growth.
Combined engineering and MSC businesses came in the middle of the range of the original guidance given for the fiscal year of seven to nine point of growth contribution from those two suites.
They asset performance management or a P.M. business generated total annual spend growth of over 64% or 17.1% of our total annual spend growth for the year.
Contributed 1.7 points up I know spend growth.
We think the positive contribution on strong gross growth of our three suites speaks to the multiple growth lever levers in our business.
At the end of the year, our installed base of business will split, 58% engineering, and 38% MSC, where they P. M at 4% on an annual spend basis.
Our three core verticals of energy chemicals, and engineering and construction contributed 37.7%, 34.3% and 80% of our growth in annual spend during the year respectively.
One of the trends were also pleased with is our performance in the global economy industries or G.E. ice.
Which contributed 10% of our I know spend growth for the year with the pharmaceutical seen the street included in this segment and growing 19.7% in the year.
The success of the ice is a positive indicator of the opportunity with the ATM suites and the potential for further end market diversification.
At the end of fiscal year 20, the energy vertical represented 41% of our business chemicals, 28% E N C, 25% and you guys, including pharma 6%.
An important trend to note is that over the last six years more of our business has shifted away from the yancey industry now representing 25% of our I know spend from 31% at the end of fiscal year 14.
Well, we have continued to grow and create significant value for our shareholders.
For the full year, our attrition rate was 4.2%.
We were pleased with the trend seen attrition in both the fourth quarter and for the full year.
It is important to recognize that we generated 13.8% gross growth for the year.
This is growth prior to attrition.
Turning to our outlook for fiscal years 21.
We entered the year still facing uncertainty in our core end markets.
Positively we continue to have a strong pipeline across all three of our product suite and significant customer interest in newer solutions like a P. M D dog and Aspen enterprise insights.
These encouraging demand trends reflect in part this strategic importance of digitalization investments in the process and other capital intensive industries.
Based on our fourth quarter results, which we felt could be a good barometer for the rest of the calendar year.
Current visibility into their business.
Our expectations of how the macro environment will impact our business in fiscal year 21 have shifted to the early may.
We're now projecting gross growth to be double digit again.
Our expectation for attrition is marginally higher than our original expectation in the range of 5% to 6%.
Though as I noted we remain confident it will not reached the peak from the previous site.
The year over year increase in attrition reflects the war sent economic environment, particularly for E. N C customers and recognized says that we have a larger than usual amount of business up for renewal this fiscal year.
As we discussed at length on our last earnings call. While we expect the three shouldn't to increase from fiscal year 20 level. There are several factors that gives us confidence attrition will not reach the highs that we experienced during the last cycle.
Please note that we expect attrition to be somewhat evenly distributed across all four quarters of the year and anticipate growth will follow our historical seasonality with the majority of the sequential growth in our business occurring in the second half of the fiscal year.
Taking all they seem to account were targeting annual spend growth of 6% to 9% in fiscal year 21.
Underlying this guidance, it's an expectation that our core engineering and embassy suites will grow in the 4% to 7% range and APN will contribute approximately two points of growth.
The resiliency demonstrate about our business in fiscal year 20 gives us confidence to continue investing in our key strategic strategic priorities in fiscal year 21.
We announced one of our top investments priorities today with the introduction of our new.
The hub that is the result of the integration of recent investments in industry four point, all digital capabilities, including the acquisition. So Bharti Tech savvy, so a new.
You will also include our process the industrys, leading data historian info, plus 21 and related capabilities.
These new LT hub will focus on data connectivity edge on cloud capabilities between decision and insights and provide the cloud reighty environment for our next generation hybrid.
Products and solutions.
They have enables seamless and flexible debt of mobility and integration across the enterprise from sensors to the edge and cloud and a seller raise the delivery of business insights for the capital intensive industries.
A key focus for they IP solutions organization will be to grow the installed base of our IP 21 historian by expanding access to data at the enterprise level as our customers increased the use of data to deploy our high value applications and those of third parties you seen they hub cloud ready capabilities.
Were very excited about the opportunity for they iOS P. hub and believe it will further repositioning to strengthen aspentech in the rapidly expanding segment of industry 4.0 digital capabilities.
We will also be releasing later this year the newest version of the asking one suite, which kicks off the introduction of a new generation of software products with hybrid modeling capabilities that will leverage the Io T hub for their delivery.
Hybrid modeling will combine <unk> algorithms and capabilities directly with first principles domain knowledge and expertise in our current softer products to significantly advanced accuracy and responsiveness without the need for customers to invest inexpensive armies of data scientists.
We will also expand our investments in APN to increase market coverage and best positioned this suite to benefit from the improvement in the macro environment over time.
In addition, we will materially increase investments in sales capacity for the G III markets to capitalize on the opportunity we see in those verticals.
We look forward to discussing all these I'm more new during our annual Investor day, which will be held in November.
As Carl will detail later, we're forecasting another strong year of profitability and free cash flow generation in fiscal year 21, which is supported by by our operating discipline on growth outlook.
Addition, we will be resuming our stock repurchase program.
Our board of directors recently authorized the repurchase of up to 200 million dollar so stop this fiscal year.
We believe our ability to consistently returned capital to shareholders throughout the business cycle is evidence of the strength and stability of our business.
To conclude.
I'm as excited as I've ever been about the outlook for Aspentech.
While the current macroeconomic environment is challenging there are many factors are two for long term growth for the business.
The introduction of they I O T hub and innovations that we will be the LIBOR in our new software release will further reinforced the value our mission critical solutions have generated four customers for nearly 40 years and.
And uniquely position Aspentech to again lead the next transformation of the process industries.
We believe that recovery from the current economic macro conditions will create a REIT environment for the company to get back to sustainable double digit growth in the future.
I'm confident in our ability to execute in this challenging times and two gener generate value for our shareholders over the years to come.
Now, let me turn the call over to Carl Carl.
Thanks, John Here I will now review our financial results for the fourth quarter fiscal 2020.
As a reminder, these results are being recorded under topic six effect, which has a material impact on both the timing and method of our revenue recognition for our term license contracts.
Our license revenue heavily impacted by the timing of booking more specifically renewal bookings.
The decrease or increase in bookings between fiscal periods, resulting from a change and the amount of term license contracts up for renewal is not an indicator of the health a growth of our business.
The timing of renewals is not linear between quarters or fiscal year and this nonlinearity, we'll 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.
In 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 our current invoices for our term license agreements at the end of each period was approximately $593 million at the end of the fourth quarter.
This represented an increase of approximately 9.6% on a year over year basis, and 3.1% sequentially.
Total contract value or TV, which we define as the aggregate value of all payments received or to be received under all active term license agreement, including maintenance and escalation.
We believe the TCV metric is insight into the scale of our overall business.
As of June Thirtyth 2020, total contract value was $2.76 billion as compared to $2.57 billion at June Thirtyth 2019.
Total bookings, which redefines the total value of customer term license contract.
And in the current period.
Yes, the value of term license contracts signed in the current period, but where the initial licenses are not yet team delivered on the topic of sex plus term license contracts signed in a previous period for which the initial licenses are deemed delivered in the current period was $236.2 million a 2%.
Increase year over year.
Total bookings in fiscal year, 2020 were $610.1 million, a 6% decrease year over year.
This decrease in the quarter and for the year with the result of a lower amount of renewal booking for each period versus the comparable yearago period.
As a reminder, the Tommy renewal bookings is not an indicator of our growth or health of our company.
Overall, we were pleased with our booking performance in the quarter, which reflected solid demand across all three products suite and attrition that was in line with our expectations.
Total revenue was $199.3 million for the fourth quarter.
1.8% increase from the prior year period.
Turning to profitability beginning on a GAAP basis.
Operating expenses for the quarter was $70.5 million compared to $69.1 million in a year ago period.
Total expenses, including cost of revenue for $85.6 million, which was up from $84.5 million in the year ago period, and down from $85.9 million last quarter.
Operating income was $113.7 million and net income for the quarter was $97.6 million or one dollar and 43 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.
We reported non-GAAP operating income for the fourth quarter of $122.9 million, representing a 61.7% non-GAAP operating margin compared to non-GAAP operating income and margin of $119.9 million and 61.3% respectively in.
A year ago period.
As a reminder, operating margin is heavily impacted by the timing of booking and threatened recognition of license revenue, which is typically high in the fourth quarter.
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 $104.9 million from $1.54 cents per share based on 68.2 million shares outstanding.
Turning to the balance sheet and cash flow, we ended the quarter with $287.8 million, a cash cash equivalents and $431.2 million outstanding under our term loan and revolving credit facility.
We did not repurchase any stock in the fourth quarter and completed $150 million to stock buybacks during the fiscal year.
In the fourth quarter, we generated $99.7 million, the cash from operations and $99.5 million free cash flow after taking into consideration the net impact of capital expenditures capitalized software and acquisition related payments.
Our cash flow performance was generally in line with the expectation, but did reflect lower than usual cash collection as some customers were more cautious and managing the cash flow given the current macro environment.
We had approximately $18 million of receivables due June thirtyth that were not collected until the first few weeks of July.
Overall, we've not seen any material changes in contract or billing terms or the collectability of our receivable since the pandemic began.
For the full year 2020, we generate $243.3 million of cash from operation and $243.1 million a free cash flow.
A reconciliation of GAAP to non-GAAP result is provided in the tables within our press release, which is available on our website.
I would now like to close with guidance.
Consistent with fiscal years 2020 in 2019, we will be providing guidance on an annual basis.
This year, we will also be providing renewal bookings on a quarterly basis to provide better insight into the quarterly cadence of our revenue.
We expect bookings in the range of $770 million to $850 million, which includes $519 million of contracts that are up for renewal in fiscal year 2021.
This includes $81 million of contracts up for renewal in the first quarter.
From a linear narrative perspective, we currently anticipate 40% to 45% of fiscal year 2021 bookings coming in the first half the year with the remainder in the second half.
With respect to annual spend growth and Tony mentioned, we're now forecasting 6% to 9% annual spend growth.
In terms of timing, we would expect a linear narrative sequential growth to be similar to recent years.
This means the majority of our annual spend growth will occur in the second half of the fiscal year.
We expect revenue in the range of $704 million to $754 million.
We expect license revenue in the range of $485 million to $534 million and maintenance revenue and service and other revenue of approximately 192, and two and $28 million respectively.
From an expense perspective, we expect total GAAP expenses of $372 million to $377 million.
Taken together, we expect crop for GAAP operating income in the range of $332 million to $377 million for fiscal 2021 with GAAP net income of approximately $290 million to $327 million.
Expect GAAP net income per share to be in the range of portals and 29 cents to $4 in 83 cents.
From a non-GAAP perspective, we now expect non-GAAP operating income of $374 million to $420 million and non-GAAP income per share in the range of portals and 78 cents a $5.32.
From a free cash flow perspective, we now expect $260 million to $270 million.
Our fiscal 2021 free cash flow guidance assumes cash tax payments in the range of $60 million to $70 million.
To wrap up our performance in the fourth quarter and our outlook for fiscal 2021 demonstrate aspentechs ability to generate solid growth and profitability in trying circumstances.
We are focused on continuing to deliver significant value to our customers and investing in the next generation or products that will provide additional ways to improve the performance of their assets.
With that we would now like to began the QNX operator.
Certainly ladies and gentlemen, it could have a question at this time. Please press Star then one and you touched on telephone. If your question has been answered and do you like to move yourself from the Q. Please press the pound key our first question comes from a line up not fell from William Blair. Your question. Please.
Hi, Matt.
Hey, guys. Thanks for taking my questions.
First wanted to start off with when I when I look at the 21 guidance and.
Specifically around annual spend maybe you can just help us understand what sort of macro.
His impacts are factored into that and it's sort of a recovery then in the back half of your fiscal year factored in and necessary to come within that guidance range.
Well, let me look.
Again.
And this is a little bit back to what we saw in Q4.
And that we continue to have good conversations with customers.
But at the same time, we recognize the environment that these customers are operating in.
The uncertainty around how economic growth is going to develop over the next two three quarters based on on the resolution or not of.
The pandemic.
But but what you what you see in our guidance.
Is again.
Solid performance from our embassy suites.
Certainly and engineering business will reflect the increased attrition.
But as you so we're guiding to five to six up from 4.2.
On an ATM business that.
Should perform in line or better than it did in.
In fiscal year 20 from a from a stamp on a point of.
Growth contribution.
No. The ranges is just a reflection of.
I think that uncertainty that we see but also their positive conversations that we're saying.
The high end of the attrition is associated with the low end of our growth guidance and vice versa, and perhaps a little.
Little bit less gross growth from from the engineering business of what we saw in fiscal year, 20, and and while we help them Missy business will perform at the same level.
We also would expect the perhaps a little bit of a slowdown in gross growth in that business, but overall.
Six to nine is the range that we're very comfortable with four for the fiscal year.
Got it and one more for me just.
Maybe you can give us a little bit more detail and how you're investing and sales capacity in the key industries are these resources dedicated to specific industries with within GE I and then your current G.I. business, what's the split between direct or partner source.
Yes. So so yes, we do have 'em, we talked about different industries in the past on D. I used to we've sort of people get away from a couple of them a power on.
Water.
Thing water forget the name executive it but.
But certainly mining its core to our activities there.
You can expect us to see to do more in pharmaceuticals.
We believe there's also an opportunity and food and beverage and there's one or two others are we're looking ahead, we'll we'll give you a much more clarity and certainty.
On on exactly the industries, we're now going to be focusing on come the November investor day, but just know that.
We believe there's an opportunity there we see it.
We're going to put more sales resources into this industry is going forward.
Great.
As we go ahead.
And Matt and the other part of your question direct versus indirect.
Certainly we're seeing good traction from from from indirect but based on what we're saying we also feel that we need to step in with our own direct sales organization in Tulsa into some of this industries and that's where our investment will go into.
Thanks, Tony I appreciate it yeah no problem. Thank you.
You are next question comes from the line of Jackson, Alex from JP Morgan Your question. Please.
Jack Thanks, guys. Thanks for taking my question.
So the embassy suites.
Really strong growth this year and sounds like.
Another outlook for 21 is calling for more.
More growth I think that's just surprising on the upside given the pressure that we're seeing for refiners and chemicals customers. So what's kind of what's driving this growth.
Look I, just we've always said that in a way as economic at the macro environment margins get tied then and demand. So first for these customers. They focus the focus more on more on.
On on efficiencies on flexibility on agility, and that's what our products do.
You know I.
I told the story to Investor said during the there there's sort of the call back that we had with you all of you a may and June or one of the largest global chemical company is been using our multi variable control technology to drive more.
Throughput to their through their units to their ethylene crackers under probe propylene plant.
Prior to carve it.
Of course with the demand destruction. The objective was no longer increased throughput through those plant.
They shifted their objective function for our controllers to driving stability in the plan to operational stability to driving better quality in their products and his executive Vice President was so excited because they could do this and sort of drive that sort of flexibility have that's sort of flexibility in our technology. So.
So this is what we do look our our technology is not only to be used urine as steady stayed on growth environment. As you can adjust economic function of the of of our products.
No one and two to whatever objectives, you're trying to accomplish and supply chain scale disrupted our supply chain solutions can be used to to reply and refineries to optimize distribution logistics across multiple plans.
And for demand and supply. So so this is what we do and in a way.
The conversations we've had since this all happened or much more real.
And we expect they will continue to be with for for a couple of years, We've we've said that.
Digitalization.
It's become in front and center for this industry that word in the early stages of technology adoption and automation.
And and we believe those trends will only accelerate going forward.
Okay.
And then make sense the follow up question Carl for you on on cash flow if we.
If we normalize maybe for that $18 million attach that ended up being collected in July versus June.
It's like flattish free cash flow between what you're expecting in 21 versus 20.
With everything else looking like like if it's going to grow what's the main driver of that kind of flat normalized cash flow growth.
And there's probably two pieces to it one is.
That 18, that's probably about a three four day increase in our DSL and we're carrying that forward.
Just to.
Assuming that that that dynamic will hold for the year. So it's a little bit of that playing into it. But then also you've got.
Cash taxes are up considerably next year.
Part of that is there's a little bit of the bump seven and a half million of that is for catch up to six so five adoption that we've been paying your lat am and three years, so little bit of that too. So I think if you look at those two pieces that gives you your answer and.
I think the collections are right in line with what we'd expect with that slight bump in the DSL.
And then the cash taxes.
Got you are makes sense. Thank you.
Thank you.
Thank you. Our next question comes from the line up Rob Oliver from Baird. Your question. Please.
Rob.
Hi, great great. Thanks, Jose Antonio Hi, Carl Thanks for taking my question a couple just to start I wanted to ask Scott about the ATM BPM business.
Solid guidance and strong year over year growth could you maybe talk a little bit Antonio about how that's selling environment may have evolved.
Throughout the back half for the year for you guys are now going back to January there's some for some deals.
Yeah that were delayed even prior to China and co bid and.
You were pretty confident those deals were going to close it sounds like there's still some deals that are being held up or.
Maybe just for a longer sales cycles. So can you maybe just talk a little bit about that environment, and how and how that may have changed throughout the quarter or what you're seeing right now and then I had one follow up.
Okay well.
Well, let me Rob.
I think through throughout last year.
It's especially the first up of the year, we've maintained that really.
Most of our growth what's going to come in in Q3 Q4.
We were prepared to the liver.
My opinion, a fantastic Q3 quarter until basically March 8th hit.
We did what we did in Q3.
Our performance in Q4, and IP damage just a reflection of what we felt the what's gonna be the second half of fiscal 20, which which we're going to prove a the breakout capacity of our APN business.
It was a it was a very there was a record quarter for IP I mean Q4. The fact is that it could have been even better but certainly some customers a that work that we're looking at the technology at to sign up for it for the first time hesitated, we had some some some good medium large deals were customers.
At the very end decided to delay their decision.
So we've explained that in the prepared remarks, it's an emerging set of technologies and in a way to it's an easy decision to delay investment in something like that but.
We also we were also very confident about above the suite and the technologies into suite is being validated by customers.
We did some sizable deals in the in the quarter.
And I.
Look.
Well, well, it's hard to be patient.
Economic environment recovers, we'll we'll see APN.
Come back and give us opportunity to prove out a it's a is that breakout capacity.
At the same time like you said fiscal year 20 were guiding for what I believe on we believe is a is solid guidance solid growth in.
In the context of the uncertainty on macro that we're saying on.
We'll go from there so.
Great. That's that's helpful. And then just one very quick follow up.
On that 2021 attrition guide is that going to be more skewed towards any one particular vertical as you guys kind of look at the renewal profile of the large renewals that you guys have this year. Thanks. Thanks very much appreciate it guys.
Yeah, I know I mean look of course.
A lot of it will come out of.
The engineering as suite, they even see vertical.
We'll probably see some attrition us well in India, India, India energy vertical.
But but I think.
And follow the historical pattern associated with the downturn, a though that we saw in fiscal 15 and 16 not to the same levels that it did back then but certainly same same pattern same profile.
That's what we expect.
Thank you and as a reminder, ladies and gentlemen, if you have a question at this time. Please press Star then one our next question comes from the line of Jason something now from Keybanc. Your question. Please.
Hi, Jason Antonio Kyle Thanks for taking my questions you know.
Get all the color.
As you kind of talk about your ATM pipeline I think you mentioned it was kind of the biggest pipes that you've seen so far.
Much of this confidence is maybe due to enterprise deals or is it just the number of opportunities.
Yeah, Let me Jason Thats, a good point I mean, when we started talking about they put a PM pipeline a three years ago. It was all sort of first time deals in the pipeline now the pipeline. A also also has a much larger deals enterprise type deals based on the fact that.
We now have some customer that I've been using that technology for one or two years and we've been expanding into more sites on and we're having conversations with some of these customers about doing an enterprise transactions. So.
We did that with.
One of our customers in Q4, and one of the G.I. industries.
And on our expectation is that we're going to have an opportunity to a.
To to do more of those in the future.
Okay, and then one more ATM question. If I can you know the so this is maybe the first downturn relative to when this new technology was developed.
Relative to your competitors have you noticed any change in competition are are they doing maybe as well as youre doing and that's reflective of more of the market for any other commentary you can provide.
Yeah, I mean look we only worried about the competition when we're competing against them head to head.
Otherwise they have to worry about their own business.
What we what we see one in head to head competition is that we continue to hold our own.
One of the Peanuts talked about you know these Japanese customer evaluating seven.
Technology providers and selecting aspentech.
By the way we also have.
You know some of the global consulting and global implementation companies now not only partnering with aspentech, but actually making.
A P.M. on the Mtell products exclusive in their go to market activities with their own customers through the conviction that they're saying in the market about the product.
So it's all the business continues to build including the ecosystem.
Around the ATM suite and the Mtell products. So so this is all part of the success that I believe we continue to help with a pen.
Great. Thank you appreciate it I'll get back in Q.
Thank you Jason.
Thank you. Our next question comes from the line of and do the gasping from Burns for your question. Please.
Andrew.
Hi, Thanks for taking my question just someone on the field that.
You said last quarter that were being delayed.
Just wondering you know how many those that they didn't close in Q4, given the strong quarter.
Or where some potentially delayed beyond this quarter into next year.
Yeah, I know I mean look at some of the deals from Q3 closed in Q4.
Some of them sort of across all of Q4 and are now in Q1 are there were some deals in Q4 that close in Q4 and some deals in Q4 that moved out of Q4.
In a way.
The last three weeks of March a did was foolish.
The pipeline into the future.
Hi, but the opportunity seven disappeared is just a they all got pushed into the future on and and we close some of that in Q4 and now it in fiscal year 21.
Well look at it like like we said in the prepared remarks is an emerging technology.
There has to be a strong conviction by customers to spend the money, we're asking them to spend in the middle of this uncertainty and some customers are pulling the trigger I know, there's our are deciding to to sort of delay, but but overall.
We we were we're happy to look at its a suite is a product that grew a year on year, 64%.
Yeah. As you know is they didn't grow we had hope we would grow about 64% I still think is pretty decent in the context of everything that what's going on and the last four months of our fiscal year.
That's helpful and then.
If I may on on the guidance for next fiscal year.
I was wondering how conservative it would be given the current economic environment I mean, I think in the past you mentioned that oil generally being below 50 for sustainable amount of time was was a negative.
Hi, there just seems to be the case with this annual spend guidance and I'm wondering.
Are you baking in some significant improvement in execution versus the Q4 quarter.
Well, let me look we gave a range of six to nine and again, we're not we're not oblivious to the to the challenges in the market.
But at the same time, you know again Q4, if you look at the the earnings result from our customers.
After you know in the last few weeks you could see how it was one of the most challenging quarters, a they've ever faced a financially.
And they still we still saw their commitment to a to continue to drive efficiencies in their business. So so while while we're cognizant of the of the macro environment the rains in and out there.
We also we also so you know a good traction with our customers are men and implementation of our products. So so that's what you have the range that you have.
It's a wider range than we've ever given.
But oh, we we.
We've done a lot of analysis, a around our business and and we love. We gave you the range that we gave you because we believe in it.
Great Thanks and Tony.
Yes.
Thank you aren't next question comes on line Mark Chappelle from benchmark your question. Please.
Hi, Mark.
Hi, how are you doing thank you for taking my question just one.
Antonio with respect to ATM in the past you've talked about incumbency being important true remember deals are winning new business.
I was wondering if you had any meaningful deal wins in the quarter, where were you weren't there.
But look I actually and quite a bit a and when you talk about the D. I industries.
Thats the case when you know when you talk about mining when you talk about bolt on paper or even a specialty chemicals and other places now.
Now when we talk about energy and chemicals.
Incumbency from a standpoint that it's a customer of Aspentech nod incumbents in that there is already so my P.M. product in there.
So, but but certainly the fact that we have long time existing relationships gives us a leg up a against the competition, but we're proving that we can go into other industries and an equally a show success with JP.
In suite. So this is why we're stepping up our investment in a in ours in a sales organization for the GE eyes.
And more to come on that when we do our Investor day in November.
Great. Thank you.
No.
Thank you and this does conclude the question and answers section of todays program I'd like to have the program back to Antonio Pietri for any further remarks.
Yes. Thank you looked at I want to thank everyone for joining us today.
I just want to take a minute to also think they aspentech team again.
I believe they did a tremendous job Peabody in in early April to a applied the learnings that we.
We gain from the 15 16 downturn and the leadership team they demonstrated.
I think our Q4 results should be further proof of the financial model on a per operating resiliency of this business I know there the where a lot of questions.
From investors during the cold box in May and June.
About the resiliency of our business in the face of everything that what's going on I hope.
We've proven that.
That our business it has a resiliency to is that.
Israel, and Furthermore, that behind the scenes over the last four or five years, we've worked to transform.
Our organization the execution, how we need.
And I believe what we achieved in Q4 in fiscal year 20 is a reflection of that and bug fiscal year 21 is ahead of us. So thank you everyone.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
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