Q2 2024 Aspen Technology Inc Earnings Call

Good day and thank you for standing by fiscal Q2, 'twenty 'twenty four Aspen Technology earnings Conference call. At this time, all participants are in a listen only mode.

Operator: Good day, and thank you for standing by for the Fiscal Q2 2024 Aspen Technology Earnings Conference. At this time, all participants are in a listen-only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is ready. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brian Denyeau from ICR. Please go ahead.

After the Speakers' presentation, there'll be a question and answer session.

Ask a question during the session you will need to press star one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Brian <unk> from ICR. Please go ahead.

Brian Denyeau: Thank you, Justin. Good afternoon, everyone, and thank you for joining us to discuss our financial results for the second quarter of fiscal 2024, ending December 31, 2023. With me on the call today are Antonio Pietri, Aspen Tech's President and CEO, and Chris Dagnon, Aspen Tech's Interim CFO. Please note that we have posted an earnings presentation on the IR website, and we ask that investors refer to this presentation in conjunction with today's call. Starting on slide two, I would like to take this opportunity to remind you that our remarks today will include four looking statements. Factual results may be different materially from those contemplated by these four looking statements.

Brian: Thank you Justin good afternoon, everyone and thank you for joining us to discuss our financial results for the second quarter of fiscal 2024 and December 31 2023.

Brian: Today, our Antonio Pietri asthma attacks, President and CEO, and Chris Stagno <unk> interim CFO.

Brian: Please note we have posted an earnings presentation on our IR website, and we ask that investment refer to this presentation in conjunction with today's call.

Brian: Starting on slide two I would like to take this opportunity to remind you that our remarks today will include forward looking statements.

Brian: Actual results may differ materially from those contemplated by these forward looking statements factor.

Brian: Factors that could cause these results to differ materially are set forth in today's press release and in our annual report on Form 10-K, and other subsequent filings made with the SEC.

Brian Denyeau: Factors that have caused these results to differ materially are set forth in today's press release and in our annual report on Form 10-K and other subsequent filings made with the SEC. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During this presentation, we present both GAAP and certain non-GAAP financial measures. A recompilation of GAAP to non-GAAP measures is included in today's earnings press release and investor presentation, both of which are available on our investor relations website. With that, let me turn the call over to Antonio.

Brian: Any forward looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events.

Brian: This presentation, we present, both GAAP and certain non-GAAP financial measures Arkansas.

Brian: A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release, and Investor presentation, both of which are available on our Investor Relations website.

Brian: Let me turn the call over to Antonio Antonio.

Antonio Jose Pietri: Thanks, Brian and welcome to everyone joining us today.

Antonio Jose Pietri: Thanks, Brian. Welcome to everyone joining us today. Let me start by reiterating that I've never been as excited about the future of Aspen Tech as I am today. The Aspen Tech team has done an excellent job working through a dynamic macro environment to deliver solid results in the second quarter, with an expanded portfolio and team who are uniquely positioned to capture and benefit from the numerous opportunities available in the energy transition from efficiencies and sustainability use cases. Now, starting on slide three with our quarterly results. In Q2, we saw solid demand for our products and solutions. Annual contract value, or ACV, was $914 million, increasing 9.6% year-over-year, while free cash flow was $29 million.

Antonio Jose Pietri: Let me start by reiterating that I've never been as excited about the future of Aspen Tech as I am today.

Antonio Jose Pietri: The Aspen Tech team has done an excellent job working through a dynamic macro environment to deliver solid results in the second quarter.

Antonio Jose Pietri: With an expanded portfolio and team we are uniquely positioned to capture and benefit from the numerous opportunities available in the energy transition from efficiencies and sustainability use cases.

Antonio Jose Pietri: Now.

Antonio Jose Pietri: Starting on slide three.

Antonio Jose Pietri: With our quarterly results in Q2.

Antonio Jose Pietri: We saw solid demand for our products and solutions.

Antonio Jose Pietri: Contract value or ACB was $914 million.

Antonio Jose Pietri: Increasing nine 6% year over year, while free cash flow was $29 million.

Antonio Jose Pietri: These results reflect the delay in renewing a large.

Antonio Jose Pietri: These results reflect the delay in renewing a large customer agreement that was scheduled to be renewed in Q2 and reduced ACP growth by approximately 0.6 points. We now expect to close this customer agreement in Q3 with a corresponding benefit to Q3 ACV growth. In addition to this, I would like to highlight four key takeaways regarding our Q2 results. First, our overall term software pipeline has continued to increase. We're seeing growth in the number and size of opportunities across our business, which is in line with our sales channel investments over the past several quarters and the contribution from the DGM and SSE suites resulting from the transformation of those two pieces. We will start converting more of this pipeline to sales in the second half of fiscal year 24. Second,

Antonio Jose Pietri: Customer agreement that was scheduled to be renewed in Q2 and reduced ACB growth by approximately six points.

Antonio Jose Pietri: Now expect to close these customer agreement in Q3 with a corresponding benefit to Q3 ACB growth.

Antonio Jose Pietri: In addition to this I would like to highlight four key takeaways regarding our Q2 results.

Antonio Jose Pietri: First our overall term software pipeline has continued to increase.

Antonio Jose Pietri: We're seeing growth in the number and size of opportunities across our businesses.

Antonio Jose Pietri: Which is in line with our sales channel investments over the past several quarters and the contribution from the <unk> and SFC suites, resulting from the transformation of those two businesses.

Antonio Jose Pietri: We will start converting more of these pipeline to sales in the second half of fiscal year 'twenty four.

Second.

Antonio Jose Pietri: The macroenvironment and demand for our products and solutions has remained strong in most end markets, consistent with our commentary from the last couple of quarters. Third, we made significant advances in upgrading our product portfolio and advancing new sustainability-related use cases in Q2. With the successful launch of our v14 software update, we have introduced enhancements to our products that we believe will drive incremental growth in the second half of fiscal year 24 and longer term, fourth, and final. Taking all these factors into consideration, we remain confident in our ability to deliver on our ACV growth target of at least 11.5% for the full fiscal year. We recognize that we need to have two strong quarters of growth in the second half to achieve this target, and we continue to believe that we're in a good position to deliver on this outcome. Turning to slide four.

Antonio Jose Pietri: The macro environment and demand for our products and solutions has remained strong in most end markets consistent with our commentary from the last couple of quarters.

Antonio Jose Pietri: Third we made significant advances in upgrading our product portfolio and advancing new sustainability related use cases in Q2.

Antonio Jose Pietri: With the successful launch of our <unk> software update we have introduced enhancements to our products that we believe will drive incremental growth in the second half of fiscal year 2004 and longer term.

Antonio Jose Pietri: Fourth and final taking all these factors into consideration we remain confident in our ability to deliver on our ACB growth target of at least 11, 5% for the full fiscal year, we recognize that we need to have two strong quarters of growth in the second half to achieve this target and we can.

Antonio Jose Pietri: Tina to believe that we're in a good position to deliver on this outcome.

Antonio Jose Pietri: Turning to slide four.

Antonio Jose Pietri: I will now provide an update on our end markets on suite, starting with digital grid management, our utility solutions business.

PJM has enjoyed an excellent first half of the year as it continues to benefit from the mission critical nature of its products and solutions alongside a robust demand environment importantly, today's utilities R&D early stages of an unprecedented investment cycle to expand the electrical grid introduced renewable.

Antonio Jose Pietri: I will now provide an update on our end markets and suites, starting with digital grid management, our utility solutions business. BGM has enjoyed an excellent first half of the year as it continues to benefit from the mission-critical nature of its products and solutions alongside a robust demand environment. Importantly, today's utilities are in the early stages of an unprecedented investment cycle to expand the electrical grid, introduce renewable energy, and enhance cybersecurity capabilities to meet the growth in electricity demand driven by the energy transition and the energy security requirements of countries around the world.

Antonio Jose Pietri: Energy and enhanced cyber security capabilities to meet the growth in electricity demand driven by the energy transition and the energy security requirements of countries around the world.

Antonio Jose Pietri: Our transformation initiatives to align the <unk> business with the heritage Aspen Tech model over the past 18 months are also producing the expected results.

Antonio Jose Pietri: These initiatives have included launching and growing Pgm's term software licensing model expanding its sales channel and global footprint to capitalize on the growth opportunities, we're seeing and ramping up at ISP networking.

Antonio Jose Pietri: For example in Q2.

Antonio Jose Pietri: We won several large term license deals, including one with a leading north American power utility, where we displaced the competition as part of their holding company's vendor standardization program.

Antonio Jose Pietri: Our transformation initiatives to align the DGM business with the Heritage Aspen Tech model over the past 18 months are also producing their expected results. These initiatives have included launching and growing DGM's term software licensing model, expanding its sales channel and global footprint to capitalize on the growth opportunities we're seeing, and ramping up its ISP network. For example, in Q2.

Antonio Jose Pietri: Our energy management solutions proven track record of delivering value as well as our long standing relationships with other utilities in these holding companies portfolio.

Antonio Jose Pietri: At least for us in this win.

Antonio Jose Pietri: Yeah.

Antonio Jose Pietri: Both in the U S and internationally.

Antonio Jose Pietri: <unk> products strength hardware agnostic stance and ability to form a strategic long term partnership with customers are driving growth.

Antonio Jose Pietri: We won several large-term license deals, including one with a leading North American power utility, where we displaced the competition as part of their holding company's vendor standardization program. Our energy management solutions' proven track record of delivering value, as well as our longstanding relationships with other utilities in this holding company's portfolio, were key catalysts for us in this. Both in the US and internationally, BGM's product strength, hardware agnostic stance, and ability to form a strategic long-term partnership with customers are driving growth. We expect to see continuous strength from this suite in the second half of fiscal 24 and believe this will be a high-growth business for Aspen Tech going forward. Now, turning to our subsurface science and engineering suite. SSE performed to expectations in the first half of the fiscal year, benefiting from a strong cap-expanding environment and new use cases driven by sustainability, especially in carbon capture and sequestration.

We expect to see continued strength from the suite in the second half of fiscal 'twenty four and believe this will be a high growth business for us fintech going forward.

Antonio Jose Pietri: Now turning to our subsurface science engineering suite.

Antonio Jose Pietri: SSE performed to expectations in the first half of the fiscal year benefited from a strong capex spending environment and new use cases, driven by sustainability, especially in carbon capture and sequestration.

Antonio Jose Pietri: FSC has long been the Austin the industry's most comprehensive offering and the Aspen take go to market model is serving as a catalyst to help fully unleash its potential.

Antonio Jose Pietri: In Q2 for example, SSE gained further momentum as we closed a large deal with a national oil company in Asia.

Antonio Jose Pietri: While many vendors competed for this opportunity the strength of our subsurface formation evaluation and geological modeling capabilities combined with the strength of our relationships across organization allowed us to ultimately win this deal. We continue to work closely with this customer and see clear pathways to expand this is strategic strategic real.

And chip and additional sites with more solutions.

Antonio Jose Pietri: <unk> is also benefiting from synergies with our engineering suite and the positive momentum from it still can be session rollout.

Antonio Jose Pietri: As well as with our other suites, we continue to see that the combination of a term license model and took a nice suite is a true win win situations.

Antonio Jose Pietri: Allowing our customers to benefit from our latest innovation and supported faster product uptake.

Antonio Jose Pietri: Overall.

Antonio Jose Pietri: We expect capex budgets in calendar 'twenty four to remain consistent with last years supporting the demand for <unk> products in the second half of fiscal 'twenty four in line with our expectations.

Antonio Jose Pietri: SSE has long been the off-stream industry's most comprehensive offering, and the Aspen Tech go-to-market model is serving as a catalyst to help fully unleash its potential. In Q2, for example, SSE gained further momentum as we closed a large deal with a national oil company in Asia. While many vendors competed for this opportunity, the strength of our subsurface formation evaluation and geological modeling capabilities, combined with the strength of our relationships across the organization, allowed us to ultimately win this deal.

Antonio Jose Pietri: Now moving to slide five.

Antonio Jose Pietri: Let's review our heritage has been take business, starting with our engineering suite.

Antonio Jose Pietri: Strong capex trends in traditional upstream market on newer sustainability related use cases are driving greater usage by <unk> on our owner operators.

Antonio Jose Pietri: On the back of these favorable spending environment, our engineering suite modeling simulation and analysis capabilities.

Antonio Jose Pietri: Mainly in high demand supporting the strongest growth is suite has seen in many years in the first half of fiscal 'twenty four.

Antonio Jose Pietri: In Q2 for example, we won a large scale deal with a new EPC logo that is executing several projects for a large energy company in the middle East proud.

Antonio Jose Pietri: We continue to work closely with this customer and seek clear pathways to expand this strategic relationship at additional sites with more solutions. SSE is also benefiting from synergies with our engineering suite and the positive momentum from its tokenization rollout. As with our other suites, we continue to see that the combination of a term license model and tokenized suite is a true win-win situation, allowing our customers to benefit from our latest innovation and supporting faster product updates. We expect CAPEX budgets in calendar 24 to remain consistent with last year's, supporting the demand for SSE products in the second half of fiscal 24 in line with our expectations. Now, moving to slide five.

Antonio Jose Pietri: Prior to working with Aspen Tech this customer was using a variety of tools from different vendors to manage its process engineering workflows.

The customer was interested in standardizing their engineering software solutions toolset and conducted a competitive evaluation process resulted in the selection of <unk> due to the breadth of capabilities.

Antonio Jose Pietri: By engaging with Aspen Tech they are now able to leverage our full portfolio of innovation and product synergies to execute on their project backlog.

Antonio Jose Pietri: Separately.

Our engineering suite has continued to see solid traction with our small to medium business segment of the market through our high velocity sales organization.

During the quarter. This business continues to win engineering deals with customers in non traditional industries for Aspen Tech that are looking to decarbonize their operations or business opportunity in sustainability.

Antonio Jose Pietri: Including such areas as the aviation Biofuels hydrogen ammonia LNG director of carbon capture or DAC and more.

Antonio Jose Pietri: Now.

Antonio Jose Pietri: Turning to our manufacturing and supply chain suite.

Antonio Jose Pietri: Let's review our heritage Aspen Tech business, starting with our engineering. Strong capex trends in traditional upstream markets and newer sustainability-related use cases are driving greater usage by EPCs and owner operators. On the back of this favorable spending environment, our engineering suite's modeling, simulation, and analysis capabilities have remained in high demand, supporting the strongest growth this suite has seen in many years in the first half of fiscal 2020. In Q2, for example, we won a large-scale deal with a new EPC logo that is executing several projects for a large energy company in the Middle East. Prior to working with Aspen Tech, this customer was using a variety of tools from different vendors to manage its process engineering workflow. The customer was interested in standardizing their engineering software solutions toolet and conducted a competitive evaluation process resulting in the selection of Aspen Tech due to the breadth of capability.

Antonio Jose Pietri: The MSC results in the first half of 2024 reflected the ongoing weakness in the chemicals market as well as the delayed renewal that I referenced earlier.

Antonio Jose Pietri: Are they less given this business is typical seasonality strong product pipeline and expected closing of the delayed renewal agreement as well as the continuation of solid refining demand and our ongoing innovation efforts, we expect a stronger performance in the second half of this year.

Antonio Jose Pietri: As part of our recent <unk> 14 software update we have made substantial improvement to our new Aspen unified platform environment for asset planning and scheduling and MSC specifically.

We have introduced tighter a better model integration improved data management capabilities deeper AI capabilities and a more scalable architecture.

Antonio Jose Pietri: This represents the most significant update to our unified platform planning and scheduling solutions and over ethic.

Antonio Jose Pietri: While we're still in the early phases of this rollout.

Customers are responding positively to this improvement for example in Q2, we received a green light from one of the world's largest integrated energy companies to implement our updated Aspen unified planning and scheduling solution across their asset base. This customer highly value the strength of our latest innovations.

Antonio Jose Pietri: And ultimately our ability to support better operational decision, making across their global teams.

Antonio Jose Pietri: By engaging with Aspen Tech, they are now able to leverage our full portfolio of innovation and product synergies to execute on their project backlog. Separately, our engineering suite has continued to see solid traction in the small to medium business segment of the market through our high-velocity sales organization. During the quarter, this business continued to win engineering deals with customers in non-traditional industries for Aspen Tech that are looking to decarbonize their operations or see a business opportunity in sustainability, including such areas as aviation biofuels, hydrogen, ammonia, LNG, direct air carbon capture, or DAC, and more. Now, turning to our manufacturing and supply chain suite, the MSC results in the first half of 2024 reflected the ongoing weakness in the chemicals market, as well as the delayed renewal that I referenced earlier.

Antonio Jose Pietri: We're excited to work with them on this project over the next several months and see additional opportunities to support their digitalization initiatives going forward.

Antonio Jose Pietri: Finally, our asset performance management suite continues to gain industry recognition and grow its customer base. For example in Q2, our APM team closed an exciting win with a large global pharmaceutical company to implement our ample product at one of its European manufacturing plants.

Antonio Jose Pietri: This deal was supported by our commercial agreement with Emerson.

Antonio Jose Pietri: Who also has a strong relationship with the customer via other offerings, including the delta be controlled system.

Antonio Jose Pietri: While this deal was for one initial site the customer has shown strong interest in rolling out the solution across its entire manufacturing base to drive further operational and sustainability excellence.

Antonio Jose Pietri: Turning to slide six.

Antonio Jose Pietri: We will discuss our sustainability initiatives.

Antonio Jose Pietri: As I highlighted previously sustainability related Capex contributed to accelerated engineering suite growth in Q2.

Antonio Jose Pietri: We believe that the strong tailwind, we're seeing and sustainability is being driven by the energy transition and the alignment of corporate our strategies with government policy and funding.

Antonio Jose Pietri: This was further validated to me at Cop 28, the United Nations Climate change conference as part of this event public and private organizations alike made pledges to reduce carbon emissions by increasing renewable energy production and usage and driving higher energy efficient.

Antonio Jose Pietri: Nevertheless, given this business' typical seasonality, strong pipeline, and expected closing of the Delayed Renewal Agreement, as well as the continuation of solid refining demand and our ongoing innovation efforts, we expect a stronger performance in the second half of the year. As part of our recent v14 software update, we have made substantial improvements to our new Aspen Unified Platform environment for asset planning and scheduling in MSC. Specifically, we have introduced tighter and better model integration, improved data management capabilities, deeper AI capabilities, and a more scalable architecture.

Antonio Jose Pietri: To do this company's model must not only accelerate their digitalization journey, but also leverage the potential of new and existing asset optimization technologies.

Antonio Jose Pietri: We remain focused on partnering and co innovating with customers in these areas in Q2 to accelerate their use case development. For example, we advanced our collaboration with a large global player in renewable wind energy that aims to also secure leadership in the production of green hydrogen in ammonium while it.

Antonio Jose Pietri: This customer currently Leverages, our modern Nancy and DMC three process capabilities to drive efficiency.

Antonio Jose Pietri: Now also partnering to improve their electrolyze our modeling capability.

Antonio Jose Pietri: This represents the most significant update to our unified platform planning and scheduling solutions in over a decade. While we're still in the early phases of this rollout, customers are already responding positively to this improvement. For example, in Q2, we received the green light from one of the world's largest integrated energy companies to implement our updated Aspen Unified Planning and Scheduling solution across their asset base. This customer highly values the strength of our latest innovations and, ultimately, our ability to support better operational decision-making across their global team. We're excited to work with them on this project over the next several months and see additional opportunities to support their digitalization initiatives going forward. Finally, our asset performance management suite continues to gain industry recognition and grow its customer base.

Antonio Jose Pietri: Additionally.

Antonio Jose Pietri: We've built on our existing relationship with a refining company in Europe to implement our emissions management solution for better tracking reporting and modeling.

Antonio Jose Pietri: This customer already rely on our solutions to Ron its assets more efficiently and sustainably and is excited about the potential to leverage our emissions management solution to better manage its carbon footprint going forward.

Antonio Jose Pietri: As an organization. We also recognize that the challenges presented by the prevailing energy Mega trends are considerable.

Antonio Jose Pietri: We remain committed to doing our part.

Antonio Jose Pietri: To that end I.

Antonio Jose Pietri: I am proud to announce that we made a formal commitment last week to achieve net zero emissions as an organization by 2045.

Antonio Jose Pietri: As part of this commitment we were built at the Carbonization plan over the next 12 to 24 months to achieve net zero for scope, one and two emissions by 2030 and at CRO scope one to three by 2045 in line with the science based targets initiative.

Now.

Antonio Jose Pietri: Turning to slide seven for our innovation initiatives.

Antonio Jose Pietri: For example, in Q2, our APM team closed an exciting win with a large global pharmaceutical company to implement our ENTEL product at one of its European manufacturing plants. This deal was supported by our commercial agreement with Emerson, who also has a strong relationship with the customer via their offerings, including the Delta V control system. While this deal was for one initial site, the customer has shown strong interest in rolling out the solution across its entire manufacturing base to drive further operational and sustainability excellence. Turning to slide 6.

Antonio Jose Pietri: November we successfully launched enhancements to our virtual portal and a new version $14 to Aspen one software.

Antonio Jose Pietri: This update included enhancing industrial AI.

Antonio Jose Pietri: Further OTT data integration and additional sustainability capabilities.

Antonio Jose Pietri: With more than 140 sustainability models now available to customers.

Antonio Jose Pietri: As mentioned previously this latest rollout is garnering positive customer response are helping us to win additional business. We look forward to showcasing the full range of our innovations at our optimized 2024 conference in Houston. This may.

Antonio Jose Pietri: I would also like to take a moment to speak about how our latest deep 14 update incorporate artificial intelligence.

Antonio Jose Pietri: We will discuss our sustainability initiative. As I highlighted previously, sustainability-related topics contributed to accelerated engineering suite growth in Q2. We believe that the strong tailwind we're seeing in sustainability is being driven by the energy transition and the alignment of corporate strategies with government policy and funding. This was further validated for me at COP28, the United Nations Climate Change Conference.

Antonio Jose Pietri: While we have been using industrial AI in our products for years.

Antonio Jose Pietri: This latest update leverages the technology in ways that are new innovative and represent exciting growth drivers for us.

Antonio Jose Pietri: For example.

Antonio Jose Pietri: With this latest release, we have integrated additional AI capabilities, including neural networks into Aspen unified and Aspen Hiseq dynamics hybrid models.

Antonio Jose Pietri: These AI enhancements extend and build up on our ability to employ non linear our hybrid model in both traditional and sustainability related use cases to improve modeling accuracy.

We have also incorporated generative AI based assistant into our strategic planning capabilities for sustainability pathways.

Antonio Jose Pietri: As part of this event, public and private organizations alike made pledges to reduce carbon emissions by increasing renewable energy production and usage and driving higher energy efficiency. To do this, companies must not only accelerate their digitalization journeys but also leverage the potential of new and existing asset optimization technologies. We remain focused on partnering and co-innovating with customers in these areas in Q2 to accelerate their use case development. For example, we are advancing our collaboration with a large global player in renewable wind energy that aims to also secure leadership in the production of green hydrogen and ammonium. While this customer currently leverages our modeling and DMC3 process capabilities to drive efficiency, we're now also partnering to improve their electrolyzer modeling capabilities. Additionally... We've built on our existing relationship with a refining company in Europe to implement our emissions management solution for better CO2 tracking, reporting, and modeling.

Antonio Jose Pietri: This innovation helps to solve the cold start program for users by using their queries are prompt to automatically create a new super structure workflow saving them time, and allowing them to focus on more creative about high value tasks.

Antonio Jose Pietri: These are just a few examples of the way Aspen Tech is leveraging AI across our portfolio today as always our ability to leverage this innovation alongside deep industry expertise.

Antonio Jose Pietri: First principles Knowhow remains a competitive differentiator for us and highly valued by our customers.

Antonio Jose Pietri: In closing on slide eight.

Antonio Jose Pietri: We remain confident in our ability to deliver ACB growth of at least 11, 5% year over year in fiscal 2024.

Antonio Jose Pietri: Our comprehensive reaffirming this guidance is primarily based on the following factors.

Antonio Jose Pietri: First is the strength of our pipeline, resulting from a positive microenvironment Brazilian demand and sales channel expansion.

Antonio Jose Pietri: Second the adoption of the <unk> suite term licensing model is accelerating in the market and contributing to increasing growth.

Antonio Jose Pietri: Third the SSC suite and it's took a mutation continues to gain momentum in the market.

Antonio Jose Pietri: It is a continued demand strength for our engineering suite, driven by upstream sustainability, Capex and fifth and final and expanded sales channel will have a greater impact on pipeline conversion in the second half of the fiscal year.

Antonio Jose Pietri: This customer already relies on our solutions to run its assets more efficiently and sustainably, and it's excited about the potential to leverage our emissions management solution to better manage its carbon footprint going forward. As an organization, we also recognize that the challenges presented by the prevailing energy megatrends are considerable, and we remain committed to doing our part.

Antonio Jose Pietri: Specifically on Q3, we now expect sequential ACB growth in the mid to high 3% range. This accounts for the closing of the delayed renewal agreement mentioned earlier as well as the factors referenced in support of our fiscal year guidance.

A stronger Q3, and Q4 quarters are in line with our historical cadence assessment actually sold have traditionally been more weighted to the second half of our fiscal year.

Antonio Jose Pietri: With that I would now like to turn the call over to Chris for a discussion of our Q2 financial results Chris.

Antonio Jose Pietri: I'm proud to announce that we made a formal commitment last week to achieve net zero emissions as an organization by 2045. As part of this commitment, we will build a decarbonization plan over the next 12 to 24 months to achieve net zero for Scope 1 and 2 emissions by 2030 and across Scope 1 to 3 by 2045, in line with the science-based targets initiated.

Chris Stagno: Thank you Antonio and Hello, everyone.

Chris Stagno: I'm excited to be with you here today and to help lead Aspen tech through the CFO transition process.

Chris Stagno: Turning to our Q2 performance I will start out by highlighting that our earnings presentation includes explanations regarding the impact of ASC topic 606 on our financial results.

Chris Stagno: We have also included definitions of annual contract value or <unk>.

Chris Stagno: <unk> bookings and free cash flow among other metrics in our earnings presentation now available on our IR website.

Chris Stagno: We ask that investors refer to these definitions together with today's call.

Chris Stagno: Starting on slide nine annual contract value was $914 million in.

Antonio Jose Pietri: Turning to slide seven for our innovation initiative, in November, we successfully launched enhancements to our version 14 and a new version 14.2, Aspen One Soft. This update included enhanced industrial AI, further OT data integration, and additional sustainability capabilities with more than 140 sustainability models now available to customers. As mentioned previously, this latest rollout is garnering positive customer response and helping us to win additional business. We look forward to showcasing the full range of our innovations at our Optimize 2024 conference in Houston this May. I would also like to take a moment to speak about how our latest v14 update incorporates artificial intelligence. While we have been using industrial AI in our products for years, this latest update leverages the technology in ways that are new, innovative, and represent exciting growth drivers for us. For example... With this latest release, we have integrated additional AI capabilities, including neural networks, into Aspen Unified and Aspen High-Speed Dynamics Hybrid models. These AI enhancements extend and build upon our ability to employ nonlinear hybrid modeling in both traditional and sustainability-related use cases to improve modeling accuracy.

Chris Stagno: In the second quarter of fiscal 2020.

Chris Stagno: Up nine 6% year over year, and one 8% quarter over quarter.

Chris Stagno: As Antonio mentioned, we had one large renewal approximately $5 4 million or.

Chris Stagno: <unk> six points of growth that we expected to close in the second quarter, but was delayed.

Chris Stagno: We now expect to close this deal in Q3.

Total bookings were $233 $4 million in the second quarter, decreasing three 9% year over year consistent with our expectations.

Chris Stagno: Mobile revenue was $257 million for the second quarter up five 9% on a year over year basis.

Chris Stagno: Please note that revenue in our model is heavily impacted by contract renewal timing and variability under ASC topic 606. This.

Chris Stagno: This includes the impact of a larger deal that was pushed out of Q2.

Speaker Change: Now turning to profitability.

Speaker Change: On a non-GAAP basis, we reported operating income of $89 million in Q2.

Speaker Change: Representing a 34% non-GAAP operating.

Speaker Change: This compares to non-GAAP operating income of $87 million for non-GAAP operating margin of 36% a year ago.

Speaker Change: The year over year increase in expenses was driven by increased head count and compensation costs consistent with our sales expansion efforts and other business initiatives.

Speaker Change: As a reminder, margins will fluctuate period to period due to the timing of customer renewals and the resulting impact on license revenue recognition in a given quarter.

Speaker Change: non-GAAP net income was $88 million in the quarter or $1 37 per share compared to non-GAAP net income of $43 million or.

Speaker Change: <unk> 35 per share.

Antonio Jose Pietri: We have also incorporated generative AI-based assistance into our strategic planning capabilities for the sustainability path. This innovation helps to solve the cold start problem for users by using their queries or prompts to automatically create a new superstructure workflow, saving them time and allowing them to focus on more creative and high-value tasks. These are just a few examples of the way Aspen Tech is leveraging AI across our portfolio today. As always, our ability to leverage these innovations alongside deep industry expertise and first-principles know-how remains a competitive differentiator for us and highly valued by our customers. In closing, on slide eight.

Speaker Change: Please note that the difference in non-GAAP net income between periods was mainly due to the change in computing, our tax provision, which initially incurred in the second quarter of fiscal 2023.

Speaker Change: Okay.

Speaker Change: Turning to our balance sheet, we ended the quarter with approximately $131 million of cash and cash equivalents, reflecting the impact of share repurchases under our $300 million share repurchase authorization.

Speaker Change: $197 million available under our revolving credit facility.

Speaker Change: During the quarter, we repurchased approximately 375000 shares for $72 million under our $300 million share repurchase authorization for fiscal year 2024.

Speaker Change: Year to date, we have repurchased approximately 955000 shares for $186 million under the same authorization.

On cash flows we generated $30 million of cash flow from operations and $29 million of free cash flow in Q2 compared to $50 million in cash flow from operations and $48 million of free cash flow a year ago, mainly due to higher cash tax and the variability of contract cycle of renewals and billings between.

Antonio Jose Pietri: We remain confident in our ability to deliver ATP growth of at least 11.5% year-over-year in fiscal 2024. Our confidence in reaffirming this guidance is primarily based on the following facts: first, the strength of our pipeline resulting from a positive microenvironment, resilient demand, and self-channeled expansion. Second, the adoption of the DGM suite term licensing model is accelerating in the market and contributing to increasing growth.

Speaker Change: Okay.

Speaker Change: Turning to slide 10, I would now like to close with guidance for the full year of fiscal 2024, we are reiterating our outlook across all metrics we.

Speaker Change: We continue to expect <unk> growth of at least 11, 5% in fiscal 'twenty four.

As Antonio mentioned, we are seeing pipeline strength and healthy demand environment. Several other notable tailwind across our business that support our conviction as we move into the second half of our fiscal year.

Speaker Change: In addition, our non-GAAP EPS range is increased by <unk> from our prior guide to reflect the impact of our share repurchase activity in the second quarter. There was no impact to GAAP EPS.

Speaker Change: Now turning to slide 11 for linearity is.

Speaker Change: As Antonio noted, we now expect to deliver sequential ACB growth in the mid to high 3% range in the third quarter.

Antonio Jose Pietri: Third, the SSE suite and its tokenization continue to gain momentum in the market. Fourth is the continued demand strength for our engineering suite driven by upstream and sustainability topics. And, fifth and final, an expanded sales channel will have a greater impact on pipeline conversion in the second half of the fiscal year.

Speaker Change: On free cash flow, we expect Q4 to come in slightly above Q3.

Speaker Change: On revenue, we continue to expect our fiscal 'twenty four revenue linearity to be similar to that of fiscal 'twenty three this.

This includes expectations for bookings up for renewal of $580 million in fiscal 'twenty four.

Speaker Change: With $173 million up for renewal Q3, and $195 million up for renewal in Q4.

Speaker Change: For a complete overview of our fiscal year 2000, and for guidance and linearity commentary. Please refer to our earnings presentation slides now available on our IR website.

Chris Dagnon: Specifically, for Q3, we now expect sequential ACV growth in the mid to high 3% range. This accounts for the closing of the Delayed Renewal Agreement mentioned earlier, as well as the factors just referenced in support of our fiscal year guide. A stronger Q3 and Q4 quarter is in line with our historical cadence, as Aspen Tech's results have traditionally been more weighted to the second half of our fiscal year. With that, I would now like to turn the call over to Chris for a discussion of our Q2 financial results. Chris?

Speaker Change: In closing we delivered a solid Q2 performance to close out the first half of our fiscal 2020.

Speaker Change: With a strong foundation in place we continue to make investments in those areas that can support growth. While also remaining disciplined in our execution and return to our historical profitability levels overtime.

Speaker Change: Looking ahead, we are excited about the opportunities we are seeing across our end markets and confident in our ability to deliver on our fiscal 'twenty four financial targets.

Speaker Change: With that I will turn it back over to Antonio for closing comments.

Antonio Jose Pietri: Thanks, Chris.

Chris Dagnon: Thank you, Antonio. Hello, everyone. I'm excited to be with you here today and to help lead Aspen Tech through the CFO transition process. Turning to our Q2 performance, I will start out by highlighting that our earnings presentation includes explanations regarding the impact of ASV Topic 606 on our financial results. We have also included definitions of annual contract value, or CB, bookings, and free cash flow, among other metrics, in our earnings presentation, now available on our IR website. We ask that investors refer to these definitions together.

Antonio Jose Pietri: As I mentioned earlier.

Antonio Jose Pietri: We recognize that we need two strong quarters of growth in the second half to achieve our fiscal 'twenty four guidance targets.

Antonio Jose Pietri: We believe that we're in a good position to deliver on this outcome.

Antonio Jose Pietri: Our confidence is supported by the factors we laid out today.

Antonio Jose Pietri: We're also excited by the growth potential of our innovation efforts across our portfolio, we continue to rollout new and enhanced capabilities to help our customers better meet their efficiency and sustainability objectives as.

Antonio Jose Pietri: Global lead us in industrial software Aspen Tech has a long track record of partnering closely with customers to understand their needs and support their digitalization efforts and drive positive business outcomes.

Antonio Jose Pietri: We remain fully committed to this work going forward.

Speaker Change: That we will open it up for Q&A operator.

Speaker Change: And thank you.

Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced so withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster and we do ask that you limit yourself to one question and one follow up again. This one question one follow up and one moment for our first question.

Chris Dagnon: Starting on slide nine, annual contract value was $914 million in the second quarter of fiscal 2020, up 9.6% year-over-year and 1.8% quarter-over-quarter. As Antonio mentioned, we had one large renewal of approximately $5.4 million, or 0.6 points of growth, that we expected to close in the second quarter, but were unable to do so. We now expect to close this deal in. Total bookings were $233.4 million dollars in the second quarter, decreasing 3.9% year over year, consistent with our expectations. Total revenue was $257 million for the second quarter, up 5.9% on a year-over-year basis.

Speaker Change: And our first question comes from Rob Oliver from Baird. Your line is now open.

Rob Oliver: Hi, Rob.

Rob Oliver: Great Hi, Antonio Good afternoon. Thanks for taking my questions I had two my first one is.

Rob Oliver: Just.

Rob Oliver: I know you've called out the <unk>.

Rob Oliver: Sort of back half weighted nature of the HCV guidance you provided some details around that.

Rob Oliver: Even with the deal that slipped.

Rob Oliver: At least in our model it shows up as something markedly more backend loaded than historically you guys were so low.

Rob Oliver: Some of the things you mentioned pipeline channel expansions I guess, maybe if you could just kind of one or two things that gives you. The most comfort here as we look at that sort of a big ramp you guys need in the second half and then typically in the past you guys provided a range.

Rob Oliver: This year, you guys said that that would be sort of the minimum.

Rob Oliver: Is that now the goal in other words.

Rob Oliver: Chance of beating that number and that being the minimum kind of off the table now and then I just had a quick follow up thank you.

Chris Dagnon: Please note that revenue in our model is heavily impacted by contract renewal timing and variability under ASC Topics. This includes the impact of the larger deal that was pushed out. Now turning to profitability. On a non-GAAP basis, we reported operating income of $89 million, representing a 34% non-GAAP operating margin. This compares to non-GAAP operating income of $87 million for a non-GAAP operating margin of 36% a year. The year-over-year increase in expenses was driven by increased headcount and compensation costs consistent with our sales expansion efforts and other business initiatives. As a reminder, margins will fluctuate from period to period due to the timing of customer renewals and the resulting impact on license revenue recognition in a given quarter. Non-GAAP Net Income was $88 million in the quarter, or $1.37 per share, compared to $23 million.

Speaker Change: But let me look.

Speaker Change: First of all.

Speaker Change: We will remain to our guidance, which it has always been at least 11, 5%.

Speaker Change: And that is the goal.

Speaker Change: And time will tell.

What that means but at least 11, 5%.

Speaker Change: Over and over that number.

Speaker Change: Look with regards to.

Speaker Change: Two.

Speaker Change: The.

Speaker Change: Weighted this.

Speaker Change: CRA as to the second half first of all of course that delayed renewals, which is about six points of growth.

Speaker Change: Unfortunately through comps.

Speaker Change: Complications.

Speaker Change: Internal alignment and administrative issues with that customer.

That debt deal there.

Speaker Change: Renewed on time.

Speaker Change: Is it the first time that something like this happens.

Speaker Change: Certainly the largest deal that we've had to experience that with normally it's much smaller transactions.

Speaker Change: But it's not unusual.

This is a firsthand up we probably have to disclose something like this.

Speaker Change: With regards to our confidence on the second half.

Speaker Change: Look it starts with the volume of the pipeline.

Speaker Change: Our pipeline over the last 12 months January to January our total pipeline for the company has grown over 30%.

Speaker Change: And this is certainly supported by the channel expansion, but also by.

Chris Dagnon: $0.35 per share. Please note that the difference in non-gap mid-income between periods was mainly due to the change in computing our tax, which initially occurred in the second quarter of fiscal 2023. Turning to our balance sheet, we ended the quarter with approximately $131 million of cash-in-cash acquisitions, reflecting the impact of share repurchases under a $300 million share repurchase authorization and $197 million available under our revolving credit. During the quarter, we repurchased approximately 375,000 shares for $72 million under our $300 million share repurchase authorization for fiscal year 2020. Year-to-date, we have repurchased approximately 955,000 shares for $186 million under this same authorization. On cash flows, we generated $30 million of cash flow from operations and $29 million of free cash flow, compared to $50 million of cash flow from operations.

Speaker Change: The macro environment that we see the demand from our customer.

Speaker Change: Certainly.

The market leadership position of our products.

Speaker Change: More specifically.

Speaker Change: Look we're very excited about the fact that now after 18 months.

Speaker Change: The transformation initiatives that we started working at that.

Speaker Change: Beginning in our fiscal 'twenty three are starting to bear fruit.

Speaker Change: The outcome for the AGM on term.

Speaker Change: Software licensing in the first half of the year was a great outcome the pipe that term.

Speaker Change: Term software pipeline for the GM is expanding very rapidly.

Speaker Change: Matter of fact is growing by almost 500% in the last in the last 12 months.

Speaker Change: The majority of our customers are now accepting term software. So we're very excited about that we have a positive outlook for the PGM suite for the full year.

Speaker Change: Equally the transformation of the SSE suite into a token suite. They used to do term deals mostly one years one year deals now is tokens and we're expanding the duration of those deals.

<unk> took a momentum.

Speaker Change: This is gaining the attention of our customers, but look I also believe is catching the attention of our competition because it is.

Chris Dagnon: $48 million in free cash flow a year ago, mainly due to higher cash tax and the variability of contract cycle renewals and billing. Turning to slide 10, I would now like to close with guidance. For the full year of fiscal 2024, we are reiterating our outlook across all metrics. We continue to expect ACV growth of at least 11.5% in fiscal 24. As Antonio mentioned, we are seeing pipeline strength, a healthy demand environment, and several other notable tailwinds across our business that support our conviction as we move into the second half of the year. In addition, our non-GAAP EPS range is increased by two cents from our prior guide to reflect the impact of our share repurchase activity in the second quarter; there was no impact on Gap. Now turning to slide 11 for Linear.

Speaker Change: Starting to.

Speaker Change: He'd into into the.

Speaker Change: The market position of some of our competitors.

Speaker Change: Peter So we're also very excited about SFC and.

Speaker Change: We also have a positive outlook for that suite for the full year.

Speaker Change: Look at equally.

Speaker Change: The growth that we're seeing on the engineering suite that has started last year last fiscal year, but has continued this year and we expect it to continue through the full fiscal year is very exciting is driven by.

Both.

Speaker Change: Capex spend but also sustainability.

Speaker Change: Expand.

Speaker Change: We expect that suite to perform very well for the full fiscal year end.

Speaker Change: Most likely.

Speaker Change: Above plan.

Speaker Change: And then look at we now have unexpected sales team that's in place.

Speaker Change: For the most part.

Speaker Change: That is now familiar with our motion and cadences and we expect them to be very very engaged.

Converting that pipeline here in Q3, Q4, but I also want us to say that following because in a way with heritage has spent day after.

Chris Dagnon: As Antonio noted, we now expect to deliver sequential ACV growth in the mid to high 3% range in the third quarter. On free cash flow, we expect Q4 to come in slightly above. On revenue, we continue to expect our fiscal 24 revenue linearity to be similar to that of fiscal 2015. This includes expectations for bookings up for renewal of $580 million in Fiscal 2015, with $173 million up for renewal and $195 million up for renewal. For a complete overview of our Fiscal Year 24 guidance and Linearity Commentary, please refer to our earnings presentation slides now available on our IR website. In closing, we delivered a solid Q2 performance to close out the first half of our fiscal year. With a strong foundation in place, we continue to make investments in those areas that can support growth, while also remaining disciplined in our execution to return to our historical profitability levels over time. Looking ahead, we are excited about the opportunities we are seeing across our end markets and confident in our ability to deliver on our fiscal 24 financial targets. With that, I will turn it back over to Antonio for closing comments. Thanks, Chris.

Speaker Change: 40 years of taking those products to market.

Speaker Change: We relied on volume to deliver a result in the past.

Speaker Change: And once in a while we had deals of significant size, we are now seeing with.

Speaker Change: At the AGM and assess.

Speaker Change: Is that we have.

Speaker Change: The larger number of more sizeable deals in our pipeline.

Speaker Change: Come through as a result of their spend.

Speaker Change: It is.

Speaker Change: To put in place in order to upgrade their systems. These are very large systems that required a lot of software and technology. Therefore, the size of these deals is is <unk> figures and so on.

Speaker Change: <unk> deep into the seven figures and with SSE. We're also seeing deals that are larger than historically had deals. So when we look at our pipeline, it's not only volume, but also size, especially.

As we talked specifically Q.

Speaker Change: Q3, Q4, so so there are many reasons for this.

As I said very excited about what I see going forward.

Speaker Change: Of course, we know that.

Speaker Change: We need to hit on all cylinders to deliver Q3 and Q4 my expectation is that we will.

Speaker Change: I appreciate all the detail Antonio Thank you.

Speaker Change: Quickly as a follow up if you could just comment because the question we've been getting from investors is around your relationship with a ramp co and I know that you guys do have a co innovation model with Aramco, they're an important customer could you just comment on what the recent.

Antonio Jose Pietri: As I mentioned earlier, we recognize that we need two strong quarters of growth in the second half to achieve our fiscal 24 guidance target. We believe that we are in a good position to deliver on this outcome. Our confidence is supported by the factors we have laid out today. We're also excited by the growth potential of our innovation efforts. Across our portfolio, we continue to roll out new and enhanced capabilities to help our customers better meet their efficiency and sustainability objectives. As global leaders in industrial software, Aspen Tech has a long track record of partnering closely with customers to understand their needs, support their digitalization efforts, and drive positive business outcomes.

Speaker Change: Production cut from Aramco could mean in terms of their capex and if that might have any impact at all on Aspen I know you do a lot with them. Thank you very much.

Speaker Change: Yeah <unk> is one of our most important customers. We've had we've been doing business with Aramco for probably 30 years.

Speaker Change: Certainly with SSC relationship.

Speaker Change: Spanned it with Aramco.

Speaker Change: But look it's a relationship that existed and spend that existed before they announced that we're going to expand their production from $12 million to $13 million sorry million barrels now that they've.

Speaker Change: Announced that theyre going to do it and stay at 12 million barrels I don't think it changes.

Speaker Change: Outlook for for a ramp so matter of fact.

Speaker Change: <unk> has been.

Speaker Change: Heavy user of our engineering suite.

Speaker Change: And in my prepared remarks, I talked about.

Speaker Change: The opportunities are advantages that our customers are seeing from leveraging the synergies around.

Operator: We remain fully committed to this work going forward. With that, we will open it up for Q&A. Operator?

Speaker Change: Engineering suite and the SSE suite. So so we're engaged with aramco.

Operator: and thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: And Furthermore, one of what I would say that what I will say is that on a global basis.

Speaker Change: Oil and gas companies have to replace four to 5 million barrels of oil production every year because of depletion.

Speaker Change: And their reserve.

Speaker Change: So theres a lot of Capex that has to be put to work to just maintain production level.

Operator: Please stand by while we compile the Q&A roster, and we do ask that you limit yourself to one question and one follow-up. Again, that's one question, one follow-up, and one moment for our first question. And our first question comes from Rob Oliver from Baird. Your line is now open. Hi, Rob.

Speaker Change: Let alone increase it so so we're still very optimistic about our outlook and the middle East a barrel.

Speaker Change: Great. Thanks, again Antonio appreciate it.

Speaker Change: Thank you Rob.

Speaker Change: And thank you.

Speaker Change: And one moment our next question.

Speaker Change: And our next question comes from Matthew Paul from William and Blair. Your line is now open.

Matthew Pfau: Okay, Great Hey, guys. Thanks for taking my question.

Rob Oliver: Great. Hi Antonio. Good afternoon. Thanks for taking my questions. I had two.

Matthew Pfau: Just wanted to first ask a follow up in terms of the back half ramp for HCV. So if we exclude the deal renewal that got delayed is the back half ramp is still in line with your expectations from the previous quarter or dedicate more backend loaded absent that the impact of that renewal.

Antonio Jose Pietri: My first one is just, you know, I know you've called out the, you know, sort of back half-weighted nature of the ACV guide, and you provided some details around that. You know, I think even with the deal that slipped, at least in our model, it shows up as something, you know, markedly more back-end loaded than historically you guys were. So, but just, you know, some of the things you mentioned, pipeline, you know, channel expansions, I guess maybe if you could just home in on kind of one or two things that give you the most comfort here as we look at that sort of big ramp you guys need in the second half. And then, you know, typically in the past, you guys provided a range, and this year, you guys said that that would be sort of the minimum. Is that now the goal? In other words, the chance of, you know, kind of beating that number and that being the minimum kind of off the table now.

Matthew Pfau: Just slightly slightly high.

Matthew Pfau: Higher in the second half.

Speaker Change: You were to put that.

Speaker Change: Back into Q2.

Speaker Change: It's just a few percentage points.

Speaker Change: Higher second half, but nothing.

Speaker Change: That material.

Speaker Change: Okay, Great and then on PGM could you hear the commentary on that pipeline being up 500% over the past 12 months for for term deals.

Speaker Change: What about in terms of implementation capacity, there I know that building out the ecosystem has been a focus it do you feel you have enough implementation capacity to implement those deals.

Speaker Change: Yes Luke.

Luke: I think this is this is something that.

Luke: We remain very focused on at this is the reason why we continue to progress building.

Luke: The implementation services partner network.

Antonio Jose Pietri: And then I just had a quick follow-up. Thank you. Well, I mean, first of all, we will remain to our guidance, which has always been at least eleven and a half percent. And, you know, time will tell what that means, but at least eleven and a half percent over that number.

Luke: We talked about already.

Luke: 12 to 18 months ago.

Luke: But also equally.

Luke: Part of that demand is new business, we're generating in other regions of the World then.

Luke: And we're setting up teams in those regions as well, including developing these partnerships. So so we're confident in our ability to meet.

Antonio Jose Pietri: Look, with regard to how weighted this year is to the second half, first of all, of course, that delayed a renewal, which is about six points of growth. And unfortunately, through complications and internal alignment and administrative issues with that customer, that deal didn't get renewed on time. This isn't the first time that something like this happens.

Luke: Meet the demand.

Luke: Working closely and collaborating with these customers as this.

Luke: This.

Luke: Agreements get signed and implementation plaskett defined.

Speaker Change: Okay, Great I appreciate it guys.

Speaker Change: Yes. Thank you.

Speaker Change: And thank you.

Speaker Change: And one moment our next question.

Speaker Change: And our next question comes from Mark Chappell from Loop capital markets. Your line is now open.

Speaker Change: Alright.

Antonio Jose Pietri: This is certainly the largest deal that we've had to experience that with. Normally, it's much smaller transactions, but it's not unusual. And this is the first time that we probably have to disclose something like this. With regard to our confidence in the second half, look, it starts with the volume of the pipeline. Our pipeline Over the last twelve months, January to January, our total pipeline for the company has grown over thirty percent, and this is certainly supported by the channel sales expansion, but also by the macro environment that we see, the demand from our customers, and certainly the market leadership position of our products. But more specifically, look, we're very excited about the fact that now, after eighteen months, some of the transformation initiatives that we started working on at the beginning of fiscal twenty The outcome for DGM on term software licensing in the first half of the year was a great result.

Mark Schappel: Guys. Thanks, Thanks for taking my question here.

Mark Schappel: And Tony I'm wondering if you could just provide some additional details around that slipped renewal contract in terms of say industry or geography.

Mark Schappel: Also too I mean, what's giving you confidence that that's.

Mark Schappel: Slipped renewals closed in Q3.

Mark Schappel: Yes.

Mark Schappel: Mark just.

Mark Schappel: For four reasons.

Mark Schappel: Confidentiality and considering.

Mark Schappel: Our friendly competitors may always be listening.

Mark Schappel: Want to talk about.

Geography, what technologies or products.

Mark Schappel: This is this is about as.

Mark Schappel: As we said it's above.

Mark Schappel: But it's a renewal that got delayed it's about $5 $4 million in value.

Mark Schappel: We expect that it will close in Q3.

Mark Schappel: We have a very detailed sequence of events, we are about three quarters through the sequence of events already so we expect that transaction to close in Q3.

Mark Schappel: Okay.

Speaker Change: Great. Thanks, and then.

Speaker Change: Regarding your joint commercial agreement with Emerson.

Speaker Change: Is there an immediate.

Or maybe a near term industry focus around on agreements. So for example.

Antonio Jose Pietri: The term software pipeline for DGM is expanding very rapidly. As a matter of fact, it's grown by almost five hundred percent in the last twelve months, and the majority of our customers are now accepting term software. So we're very excited about that, and we have a positive outlook for the DGM suite for the full year. Equally, the transformation of the SSE suite into a token suite; they used to do term deals, mostly one-year deals; now it's tokens, and we're expanding the duration of those deals. It continues to gain momentum.

Speaker Change: You did a pulp and paper joint deal with them last quarter. It looks like a nice pharma deals. This quarter. It appears that the commercial agreement is focused more on process manufacturing industries outside of the core oil and gas business. So I was wondering if you could just comment on that.

Speaker Change: Yes.

Speaker Change: I think in the first 12 months of the.

Speaker Change: Commercial agreement.

Speaker Change: Mostly a fiscal 'twenty three.

Speaker Change: As we learned about each other.

Speaker Change: It became clear that.

Speaker Change: Focus what's going to be very important and succeed in initially in the partnership.

Speaker Change: So we have we are targeting very specific areas of engagement both.

Antonio Jose Pietri: This is gaining the attention of our customers, but look, I also believe it's catching the attention of our competition because it is starting to eat into the market position of some of our competitors. So, we're also very excited about SSE, and we also have a positive outlook for that suite for the full year. Look, equally, the growth that we're seeing on the engineering suite that started last year, last fiscal year, but has continued this year, and we expect it to continue through the full fiscal year. It's very exciting.

Speaker Change: Areas like pharma, but also areas, where Amazon has a lot of strength in their businesses.

Speaker Change: There is a geographies, whether it's types of projects that they pursue.

Speaker Change: And other other other areas, where <unk> has a very strong presence.

Speaker Change: And also <unk>.

Speaker Change: Non traditional industries four four for Aspen Tech.

Speaker Change: We've been very focused on that this fiscal year.

Speaker Change: Our efforts are very targeted in that regard.

Antonio Jose Pietri: It's driven by both the capex spend and the sustainability capex spend, and we expect that suite to perform very well for the full fiscal year and, most likely, above plan. So, And then, look, we now have an expanded sales team that's in place for the most part that is now familiar with our motion and cadences, and we expect them to be very, very engaged in converting that pipeline here in Q3, Q4. But I also want to say the following because, in a way, with Heritage Aspen Tech, after, you know, 40 years of taking those products to market, we relied on volume to deliver our results in the past. And once in a while, we had deals of significant size. What we are now seeing with DGM and SSE is that we have a larger number of more sizable deals in our pipeline that come through as a result of the spend that utilities have to put in place in order to upgrade their systems. These are very large systems that require a lot of software and technology. Therefore, the size of these deals is in the seven figures and sometimes deep into the seven figures.

Speaker Change: And we believe that.

Speaker Change: This is paying off and will pay off.

Speaker Change: Handsomely in the future as we ramp up.

Speaker Change: Those go to market activities.

Speaker Change: Great. Thank you that's all for me.

Speaker Change: Thank you Mark.

Speaker Change: And thank you.

Speaker Change: And one moment our next question.

Speaker Change: And our next question comes from Jason Celaeno from Keybanc capital markets. Your line is now open.

Jason Celino: Hi, Jamie.

Jason Celino: Yes Antonio.

Jason Celino: Now that we've now we've but not most of your customers have kind of set their budgets for the year, our global Capex rates looking for this year and maybe how does that maybe comparator.

Jason Celino: The last year.

Jason Celino: Yes.

Jason Celino: Hi.

Speaker Change: Very excited about what we're hearing is saying.

Speaker Change: Oil and gas capex in more or less in line to last year or up depending on the customer segment or geography.

Speaker Change: By that I mean, probably 5% to 10%, but mostly in line with last year, which was healthy and good for our business.

Speaker Change: Refining customers equally capex, our capex spending in line with.

Speaker Change: What they've traditionally done and what they did last year chemicals is more of the same so we don't expect.

Speaker Change: Recovery in the spend or opex spend by chemical customers in calendar.

Antonio Jose Pietri: And with SSE, we're also seeing deals that are larger than historically had deals. So when we look at our pipeline, it's not only volume but also size, especially as we talk specifically about Q3 and Q4. There are many reasons for this.

Speaker Change: Calendar 'twenty four.

Speaker Change: The fact is that.

Speaker Change: Are there sort of.

Speaker Change: Patch that theyre going through will probably extend through the full calendar year.

Speaker Change: And then utilities Liberty utilities, more and more capex is being targeted at global electrification in in that.

Antonio Jose Pietri: As I said, I am very excited about what I see going forward. And, of course, we know that we need to hit on all cylinders to deliver Q3 and Q4. And my expectation is that we will. I appreciate all the detail, Antonio.

Speaker Change: Utilities, but.

Speaker Change: Part of that Capex in global electrification is going into renewables, whether it's solar and wind.

Speaker Change: But those that renewable electricity produced from renewables has to be put into our connected into the grid and therefore utility you then have to spend.

Rob Oliver: Thank you. Just quickly as a follow-up, if you could just comment, because the question we've been getting from investors is around your relationship with Aramco. And I know that you guys do have a co-innovation model with Aramco. They're an important customer. Could you just comment on what the recent production cut from Aramco could mean in terms of their capex and if that might have any impact at all on Aspen? I know you do a lot with them.

Speaker Change: To upgrade their systems deal with the complexity of more and more renewable energy electricity into into their networks and this is one of the main drivers.

Speaker Change: For for them to have to spend to upgrade their systems.

Very excited about what we are hearing from from utilities.

Speaker Change: And Luka you used to be.

Speaker Change: A very.

Speaker Change: Sort of.

Speaker Change: Steady state of the industry 30, 40 years ago today is an incredibly exciting industry as an industry that absolutely.

Antonio Jose Pietri: Thank you very much. Yeah. Aramco is one of our most important customers. We've been doing business with them for probably 30 years. Certainly, with SSE, our relationship has expanded with Aramco. But look, it's a relationship that existed and spanned that existed before they announced that we're going to expand their production from 12 to 13 million dollars, sorry, million barrels. And now that they've announced that they're going to not do it and stay at 12 million barrels, I don't think it changes our outlook for Aramco.

Speaker Change: We'll have to rely on technology to deal with.

Speaker Change: <unk> agreed to maintain decorate imbalance and in operation, but also to cyber secure it.

Speaker Change: And our conversations.

Not only about.

Speaker Change: Delivering our software to these customers, but also co innovating and accelerating co innovation because part of the.

Speaker Change: But one of the challenges at <unk>.

Speaker Change: If you talk to utilities customers is.

Speaker Change: They feel that there needs to be an acceleration of innovation for them to keep up with the complexity that they're having to to manage so so we're very excited about this.

Speaker Change: Over the last 12, 18 months and especially the last six months of last calendar year.

Antonio Jose Pietri: As a matter of fact, Aramco has been a heavy user of our engineering suite. And in my prepared remarks, I talked about the opportunities or advantages that our customers are seeing from leveraging the synergies around the engineering suite and the SSE suite. So we're engaged with Aramco.

Speaker Change: I traveled to meet utility customers around the world not only am I excited about what I just mentioned, but also about the role of that now new Aspen Tech with the DJ EM suite plays around global electrification and global infrastructure.

Speaker Change: Aspen Tech and the monarch escaped us system in the DJ <unk> suite is responsible not only for managing but keeping the electrical grid and balance for the entire country of India. For example, but also the entire country of Vietnam that also.

Antonio Jose Pietri: And furthermore, what I would say is that on a global basis, oil and gas companies have to replace four to five million barrels of oil production every year because of depletion in their reservoirs. So there's a lot of capital that has to be put to work to just maintain production, let alone increase it. So we're still very optimistic about our outlook in the Middle East overall. Great. Thanks again, Antonio. Appreciate it.

Speaker Change: Southern California, the lights, and southern California are kept on through.

Speaker Change: Through the use of our technology and systems, 40%.

Speaker Change: Utilities.

Speaker Change: And digit out of state.

Rob Oliver: Thank you, Rob, and thank you. And one moment for our next question, and our next question comes from Matthew Pfau of William and Blair. Your line is now open.

Speaker Change: Now the CGM products and solutions that Aspen Tech is key to them, but also we've made great progress moving into Europe.

Speaker Change: Yes.

Speaker Change: Now, we're going to be basically the foundation technology.

Matthew Pfau: Thanks for taking my question. I just wanted to first ask a follow-up question in terms of the back-half ramp for ACV. So if we exclude the deal, the renewal that got delayed, is the back-half ramp still in line with your expectations from the previous quarter, or did it get more back-end loaded absent the impact of that renewal? Just slightly higher in the second half, if you were to put that deal back into Q2. It's just a few percentage points higher in the second half, but nothing that material.

Speaker Change: For multiple countries in Europe.

Speaker Change: Certainly.

Speaker Change: In the Netherlands at Tenet is a well known installation that's been going on for.

Speaker Change: Two three years now, but we've also won business in two or three other countries, where our technology is going to be the base technology to run their creating those countries and I will mention them because just recently signed agreements, but equally our expansion into Latin America, we run the largest transmission network in Latin America.

Antonio Jose Pietri: Okay, great. And then on DGM, it's good to hear the commentary on that pipeline being up 500% over the past 12 months for term deals. What about in terms of implementation capacity there? I know that building out the ecosystem has been a focus. Do you feel you have enough implementation capacity to implement those deals? Yeah, I think this is something that we remain very focused on, and this is the reason why we continue to progress building the implementation services partner network that we talked about already 12, 18 months ago. But also, equally, part of that demand is new business that we're generating in other regions of the world, and we're setting up teams in those regions as well, including developing these partnerships. So we're confident in our ability to meet the demand, working closely and collaborating with these customers as these agreements get signed and the implementation plans get defined. Great. I appreciate it, guys. Yeah, thank you.

Speaker Change: Using our technology the entire gas distribution network in Spain is wrong using.

Speaker Change: No the monarch scale system in the DJ <unk> suite, So and look every time, we win a deal we're displacing the competition.

Speaker Change: We're displacing industrials that are being in the market.

Speaker Change: For many years, but now Theyre solutions haven't kept up with the needs of the industry and this is Dan were always Si and now Aspen Tech are stepping into the bridge.

Speaker Change: I'm being very successful. So so we're very excited about what we're seeing with TTM I think this is a game changing suite for us.

Speaker Change: And as I said is not only the volume, but also the size of deals.

Speaker Change: And I think Thats part of what gives us confidence about the success, we're going to have in Q3 Q4.

Speaker Change: Okay awesome good stuff on the AGM.

Speaker Change: Maybe to follow up on Matt's earlier question. So.

Speaker Change: Yes.

Speaker Change: Apologies, but yes.

Speaker Change: If we strip out that chemicals.

Matthew Pfau: And thank you. And one moment for our next question. And our next question comes from Mark Schappel from Luke Capital Markets. Your line is now open. Hi guys.

Speaker Change: Deals slipping and you think about that.

Speaker Change: Pipeline, moving a little bit more back half weighted what area move back.

Speaker Change: It was a specific vertical or chemicals.

Mark Schappel: Thanks for taking my question here. Antonio, I was wondering if you could just provide some additional details around that slipped renewal contract in terms of, say, industry or geography. And also, too, I mean, what's giving you confidence that that slipped renewal will close? Yeah, but so, Mark, just for reasons of confidentiality and considering that our friendly competitors may always be listening, we want to talk about geography, what technologies or products this is about. As we said, it's a renewal that got delayed. It's about $5.4 million in value.

Speaker Change: Curious on how you would kind of characterize it.

Speaker Change: But look I don't want to confirm or deny that that did that slip as a chemical sale.

Speaker Change: We haven't said anything about about what what vertical it isn't but.

Speaker Change: Putting that aside.

Speaker Change: Okay.

Speaker Change: As we said.

Speaker Change: Certainly the MSC suite.

Speaker Change: What we'll say is.

Speaker Change: Is that deal certainly.

Speaker Change: This is a transaction that is all the MSC software so that impacted the performance of the MSC suite in the first half of the year chemicals was a little flat. So so we do expect this.

Speaker Change: The stronger performance for for MSC in the second half of the year.

Speaker Change: AP.

Speaker Change: <unk> has continued to behave the same manner that it has now for a couple of years.

Antonio Jose Pietri: We expect that it will close in Q3. We have a very detailed sequence of events. We are about three quarters through that sequence of events already, so we expect that transaction to close in Q3. Okay, that's fair.

Speaker Change: We're also excited about the over performance in engineering, because we do think.

Speaker Change: That will be able to make up.

If necessary for any any.

Antonio Jose Pietri: Thanks. And then, regarding your joint commercial agreement with Emerson, is there an immediate, or maybe near-term, industry focus around that agreement? So for example, you did a pulp and paper joint deal with them last quarter; it looks like a nice pharma deal this quarter; it appears that the commercial agreement is focused more on process manufacturing industries outside of the core oil and gas business. So I was wondering if you could just comment, Yeah, look, I think in the first 12 months of the commercial agreement, mostly fiscal 23, as we learned about each other, it became clear that, you know, focus was going So, we are targeting very specific areas of engagement, both areas like pharma, but also areas where Emerson has a lot of strength in their businesses, whether it's geographies, whether it's types of projects that they pursue, and other areas where Emerson has a very strong presence. And also, non-traditional industries for Aspen Tech.

Speaker Change: Shortfall that we may see Ron MSC or APM, but our goal is to get certainly the MSC suite to plan and if possible also APM.

Speaker Change: Look what we're seeing with.

Speaker Change: With PJM and SSC is also exciting so overall.

Speaker Change: We were confident there is work to do here, we're going to execute on.

And we will have two quarters to two.

Speaker Change: So at least 11, 5%.

Speaker Change: Okay, great. Thank you I'll get back in queue.

Ed: Ed Thank you.

Speaker Change: And if he would like to ask a question that is star one one again, if you would like to ask a question that is star one one and one moment our next question.

Speaker Change: And our next question comes from Nathan <unk> from Bamberg. Your line is now open.

Nathan: Hi, everyone. Thank you for taking my question.

Nathan: Okay.

Development.

Nathan: Hey, Joe breaking up.

Speaker Change: You're not coming through.

Speaker Change: Operator, I think we lost Nathan one moment please.

Speaker Change: Okay.

Speaker Change: One moment our next question.

Speaker Change: And our next question comes from <unk> <unk> from.

Wolfe Research: From Wolfe Research your line is now open.

Wolfe Research: Hi, This is <unk> hi.

Hi, Anthony how are you. This is our study on for Josh. Thanks for taking my question. So seeing that this delayed renewal impacted about $5 4 million basically in the quarter. What gives you more confidence in the visibility to ramp in the second half was idiosyncratic to the company up for renewal or could this maybe show more weakness in their respective end market than was initially expected.

Mark Schappel: We've been very focused on that this fiscal year, and our efforts are very targeted in that regard, and we believe that this is paying off and will pay off more handsomely in the future as we ramp up those go-to-market activities. Great, thank you. That's all for me.

Wolfe Research: For the second half of 'twenty, four and then I have a brief follow up on PJM. Thanks.

Speaker Change: No Lucas.

Speaker Change: Yes.

Anthony: The specifics around the deal that didn't renew I have nothing to do with the macro environment or the demand.

Jason Celino: Thank you, Mark, and thank you. And one moment for our next question. And our next question comes from Jason Celino from KeyBank Capital Markets. Your line is now open.

Lucas: It's just some internal issues and administrative issues.

Lucas: With this customer.

Lucas: We thought the deal was going to get renewed and it didnt. So so it will happen now in Q3.

Antonio Jose Pietri: Hey Antonio, now that we've, well, not we've, but now that most of your customers have kind of set their budgets for the year, how are global capex rates looking for this year, and how does that maybe compare to last year? Yeah, I know, actually, we're very excited about what we're hearing and seeing, oil and gas capex more or less in line with last year or higher, depending on the customer segment or geography. And by that, I mean, probably five to ten percent, but mostly in line with last year, which was healthy and good for our business, treating refining customers equally, and capex spending in line with what they've traditionally done and what they did last year. Chemicals is more of the same, so we don't expect a recovery in the spend, or OPEX spend by chemical customers in calendar twenty-four. The fact is that they are in sort of a soft patch that they are going through will probably extend through the full calendar year.

Lucas: So nothing to do with demand.

Lucas: No.

Lucas: Look.

Lucas: What gives us confidence we've said it a pipeline.

The strength that we're seeing in DJ MSC and engineering.

Lucas: A bigger sense of organization.

Lucas: That is now in place to convert that pipeline. So so overall those are the factors that we think.

Lucas: Will get us there.

Speaker Change: Got it thanks for that and then given the traction youre seeing in <unk> is the two five percentage point starting point for the contribution ATB that you expected for growth conservative cannot be a stronger contribution to growth and then just very briefly on the renewal impact what was the specific impact to free cash flow in the quarter from the renewal.

Speaker Change: Thank you.

Speaker Change: Yes, let me let me first address.

Speaker Change: Question on the GM and then.

Speaker Change: I'll have Chris talk about that impact but.

Speaker Change: If any.

Speaker Change: Two and a half point is.

Speaker Change: Is the goal.

Speaker Change: Two five points of growth contribution as a goal for the AGM.

Chris Stagno: Hopefully, we'll exceed it but we'll keep that as it goes for the moment.

Antonio Jose Pietri: And then utilities, more and more capex is being targeted at global electrification and in that, utilities. But part of that capex in global electrification is going into renewables, whether it's solar and wind. But those that say that electricity produced from renewables has to be put into or connected to the grid, and therefore utilities then have to spend to upgrade their systems, deal with the complexity of more and more renewable energy, and electricity into their networks.

Chris Stagno: The pipeline looks solid, but let's see where we get to at the end of Q4.

And then as it relates to to free cash flow there was an impact as it related to that that renewal will be pushed out it was the.

Chris Stagno: The ACB amount that we quoted of about $5 4 million, we do expect that.

Chris Stagno: I can Tony you said the deal will close in the third quarter.

Chris Stagno: Collect that in the in the second half of the year.

Speaker Change: Thank you.

Speaker Change: And thank you.

Speaker Change: And one moment our next question.

Speaker Change: And our next question comes from Clarke Jeffries from Piper Sandler Your line is now open.

Antonio Jose Pietri: And this is one of the main drivers for them to have to spend money to upgrade their systems. We're very excited about what we were hearing from utilities, which used to be a very sort of steady state industry thirty, forty years ago. Today is an incredibly exciting industry, an industry that absolutely will have to rely on technology to deal with the complexity of the grid to maintain the grid imbalance and operation, but also to cybersecure it and our conversations, not only about delivering our software to these customers but also co-innovating and accelerating co-innovation. Because part of one of the challenges that if you talk to utilities and customers, they feel that there needs to be an acceleration of innovation for them to keep up with the complexity that they're having to manage.

Speaker Change: Hello.

Thank you for taking the question.

Speaker Change: Antonio.

Speaker Change: Sounds like the the.

Clarke Jeffries: The growth in the pipeline is broad based but I wanted to specifically ask around the sales capacity expansion in the sales capacity that seems to be coming online in the second half can you remind us is that broad based across the business is that weighted to <unk>.

Clarke Jeffries: Is that really.

Clarke Jeffries: Primary driver even in first half in terms of the pipeline growth.

Clarke Jeffries: Any assumptions around close rates.

Clarke Jeffries: Based off of that expansion of capacity coming on in the second half.

Clarke Jeffries: Trying to understand if this is.

Clarke Jeffries: Particular product category or.

Clarke Jeffries: All round the business getting it.

Speaker Change: Capacity increase thank you.

Speaker Change: Yes, yes.

Speaker Change: As you would expect.

Certainly.

Speaker Change: A significant portion of the investment went into DJ M expansion of the of the sales organization in PJM into other regions, but also in North America.

Antonio Jose Pietri: So, we're very excited about this over the last twelve, eighteen months, and especially the last six months of the previous calendar year. I travel to meet utility customers around the world. Not only am I excited about what I just mentioned, but also about the role that the now new Aspentec with the DGM suite plays around global electrification and global infrastructure. Aspentec and the Monarch SCADA system in the DGM suite are responsible, not only for managing, but keeping the electrical grid in balance for the entire country of India, for example. But also the entire country of Vietnam, and Southern California, the lights in Southern California are kept on through the use of our technology and systems.

Speaker Change: Expansion of the high velocity sales organization are small to medium sales team.

Speaker Change: Because we are seeing.

Speaker Change: Celebrated growth and that team. So so that team also benefited from an important expansion in the head count.

Speaker Change: That team.

Speaker Change: Pursuant, mostly engineering business that comes through.

Speaker Change: Consulting engineering consulting companies or companies that are first customers of Aspen first time customers of Aspen Tech.

Speaker Change: This is a team that.

Speaker Change: It has.

Speaker Change: Obtain.

Speaker Change: Companies like Tesla.

Speaker Change: Google to be customers of.

Speaker Change: <unk>. So so it's a very active team and a team that is.

Antonio Jose Pietri: Forty percent of utilities in the United States are now using DGM products and solutions, and Aspentec is key to them. But we've also made great progress moving into Europe, and now we're going to be basically the foundation technology for multiple countries in Europe and certainly in the Netherlands, a well-known installation that's been going on for two, three years now. But we've also won business in two or three other countries where our technology is going to be the base technology to run the grid in those countries. And I will mention them because they just recently signed agreements, but equally to our expansion into Latin America. We run the largest transmission network in Latin America using our technology. The entire gas distribution network in Spain is run using the Monarch SCADA system in the DGM suite.

Speaker Change: Has grown materially for us over the last two or three years, but also we added especially solution consultants in our heritage <unk> team.

Speaker Change: As we focus also on driving.

Speaker Change: More enterprise.

Speaker Change: Type deals with our customers.

Speaker Change: In that area.

Speaker Change: Considering the critical mass of business that we already have with some of these customers.

Speaker Change: Believe there's an opportunity there for us to do more with those customers.

Speaker Change: A little bit off as we've reorganized SFC into our sales organization.

Speaker Change: We've also made a little bit of investments in to the <unk> vessel.

Speaker Change: Perfect and just one follow up on that.

Speaker Change: At this point I would imagine there is a lag between hiring and actual capacity the reps being ready, but are you at the point, where you're still on the upswing in terms of hiring ambitions are growing head count or is this all about maturity of kind of previously hired individuals trying to understand if there is <unk>.

Antonio Jose Pietri: And look, every time we win a deal, we're displacing competition. We're displacing industrials that have been in the market for many years, but now their solutions haven't kept up with the needs of the industry, and this is where OSI and now Aspentec are stepping onto the bridge and being very successful. So we're very excited about what we're seeing with DGM. I think this is a game changing suite for us. And as I said, it's not only the volume but also the size of the deals.

Speaker Change: Other ramps coming.

Speaker Change: Even beyond fiscal 'twenty four.

Speaker Change: Yes.

Speaker Change: If I look at the.

Speaker Change: We're pretty much done with expansion in fiscal 'twenty four.

Speaker Change: <unk> cycle started in Q4 of fiscal 'twenty three so last April nine months ago.

Antonio Jose Pietri: And I think that's part of what gives us confidence about the success we're going to have in Q3. Okay, awesome. Good stuff on DGM. Maybe to follow up on Matt's earlier question. So, you know, apologies, but if we strip out that chemicals, you know, steel slipping, and you think about the pipeline moving a little bit more back half-weighted, what area moved back? You know, if it was a specific vertical, or was it chemicals, curious about how you would kind of characterize it.

Speaker Change: Don.

Speaker Change: Most of the sales head count is in place. It has been in place for a number of months. So this is why we expect to see we're seeing the benefit in the pipeline and we expect to see that benefit on the conversion.

Speaker Change: Now having said that.

Speaker Change: For fiscal 'twenty five coming up.

Speaker Change: Look at what investments, we need to we need to make around expanding the PGM sales organization into other parts of the world.

Speaker Change: What other sort of tweak investments, we have to make in other parts of the sales organization, but.

Jason Celino: But, look, I don't want to confirm or deny that the deal that slipped is a chemicals deal. We haven't said anything about what vertical it is in. But putting that aside, look, as we said, certainly the MSC suite. What we'll say is that deal certainly is a transaction that is all MSC software, so that impacted the performance of the MSC suite in the first half of the year. Chemicals was a little flat, so we do expect a stronger performance for MSC in the second half of the year. But you know, APM has continued to behave in the same manner that it has done for now for a couple of years.

Speaker Change: Was an important ramp up in head count and now we also want to see that that additional head count increase of productivity. So so so so good investment.

Speaker Change: A little bit more investment in fiscal 'twenty fiber on the GM and a few other areas and look at it now that I talked about pipeline and conversion. There was a question just before about the conversion rates for our pipeline look.

Speaker Change: We track certainly the conversion rates for our pipeline quarter to quarter and year to year, and we expect that the historical range of conversion that we've seen in order to deliver our goals is what we need to have in Q3 Q4 to achieve at least 11, 5%. So so so.

Antonio Jose Pietri: But we're also excited about the overperformance in engineering because we do think that we'll be able to make up, if necessary, for any shortfall that we may see around MSC or APM. But our goal is to get the MSC suite to plan and, if possible, also APM. And, look, what we're seeing with BGM and SSE is also exciting. So, overall, you know, we were confident there was work to do here. We're going to execute, and we have two quarters to do at least 11.5.

Speaker Change: We do the team does a good job of striking that performance against historical then.

Speaker Change: Sure.

Speaker Change: As a forbearance of what's going to come.

Speaker Change: Really appreciate the color. Thank you very much.

Speaker Change: Yes.

Speaker Change: And thank you.

Speaker Change: And I'm showing no further questions I would now like to turn the call back over to CEO Antonio Pietri.

Antonio Jose Pietri: Alright, Thank you operator, and thank you everyone for joining the call today over the covenant with over the coming months.

Jason Celino: Okay, great, thank you. We'll get back in queue. Ed, thank you. And if you would like to ask a question, that is star 11. Again, if you would like to ask a question, that is star 11.

Antonio Jose Pietri: We'll attend two investor conferences in February we're going to attend the Wolf Investor Conference in March we will attend the Keybanc emerging technology summit. So please reach out to our Investor relations team for more information on these two events and we look forward to catching up with many of you soon thank you everyone for joining us.

Operator: And one moment for our next question. And our next question comes from Naseel Nang from Berenberg. Your line is now open. Hi, everyone. Thank you for taking my question. I actually have a few parts in my development. Nathan, you're breaking up.

Speaker Change: We will see you on the road. Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

Naseel Nang: You're not coming through. Operator, I think we lost Nathan. One moment, please. One moment for our next question. And our next question comes from Arcinji Madad. From Wolf Research, your line is now open. Hi, this is Arseniy. Hi, Antonio, how are you? This is Arseniy on for Josh.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Operator: Thanks for taking my question. So, seeing that this delayed renewal impacted about $5.4 million of ACV in the quarter, what gives you more confidence in the visibility to ramp in the second half? Was this idiosyncratic to the company up for renewal, or could this maybe show more weakness in their respective end market than was initially expected for the second half of 24? And then I have a brief follow-up on DGM. Thanks. No, look, Arsenio, the specifics around this deal that didn't renew have nothing to do with the macro environment or demand. It's just some internal issues and administrative issues with this customer. You know, we thought the deal was going to get renewed, and it didn't, so it will happen now in Q3. So it has nothing to do with demand at all.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Antonio Jose Pietri: So, look, what gives us confidence: we've set a pipeline, the strength that we're seeing in DGM, SSE, engineering, and a bigger sales organization that is now in place to convert that pipeline. So, overall, those are the factors that we think will get us there.

Speaker Change: Okay.

[music].

Arseniy Madad: Thanks for that. And then, given the traction you're seeing in DGM, is the 2.5 percentage point starting point for the contribution ACV that you expected for growth conservative? Can that be a stronger contribution to growth?

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Antonio Jose Pietri: And then just very briefly on the renewal impact, what was the specific impact on pre-cash flow in the quarter from the renewal? Thank you. Yeah, let me first address the question on DGM, and then, you know, I'll have Chris talk about that impact.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Chris Dagnon: But if any, look, two and a half points is the goal, two and a half points of gross contribution is the goal for DGM, you know, hopefully we'll exceed it, but we'll keep that as the goal for the moment. You know, the pipeline looks solid, but let's see where we get to at the end of Q4. Yeah, and then as it relates to free cash flow, there was an impact as it related to that renewal being pushed out. It was the, you know, the ACV amount that we quoted of about 5.4 million. We do expect that, like Antonio said, the deal will close in the third quarter and that we'll collect that in the second half. Thank you, and thank you. And one moment for our next question. And our next question comes from Clark Jeffries on Piper Sandler. Your line is now open. Bye. Whoa.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Uh huh.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: Yes.

Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: [music].

Clark Jeffries: Thank you for taking the question. Antonio, it sounds like the growth in the pipeline is broad based, but I wanted to specifically ask about the sales capacity expansion and the sales capacity that seems to be coming online in the second half. Can you remind us, is that broad based across the business? Is that weighted to DGM?

Speaker Change: Okay.

Speaker Change: Hum.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Sure.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Okay.

Antonio Jose Pietri: Is that really, you know, the primary driver even in the first half in terms of pipeline growth? And any assumptions around close rates? Based on that expansion of capacity coming in the second half, trying to understand if this is a particular product category or all rounds of business getting a capacity increase. Yeah, look, as you would expect, certainly a significant portion of the sales investment went into DGM, the expansion of the sales organization in DGM into other regions, but also in North America. Expansion of the high-velocity sales organization, our small-to-medium sales team, because we're seeing accelerated growth in that team, so that team also benefited from an important expansion in the headcount. That team is pursuing mostly engineering business that comes through consulting, engineering consulting companies, or companies that are first-time customers of Aspen Tech. This is a team that has acquired companies like Tesla, Meta, and Google to be customers of Aspen Tech. So it's a very active team and a team that has grown materially for us over the last two, three years.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Hum.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Sure.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Clark Jeffries: But also, we added especially solution consultants to our heritage Aspen Tech team, as we focus on driving more enterprise-type deals with our customers in that area. Considering the critical mass of business that we already have with some of these customers, we believe there's an opportunity there for us to do more with those customers. And a little bit of, as we reorganize SSE into our head sales organization, we've also made a little bit of investments in the SSE team as well.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Antonio Jose Pietri: And just one follow-up on that, you mean, at this point, I mean, imagine there's a lag between the hiring and the actual capacity, the reps being ready, but are you at the point where you're still on the upswing in terms of hiring ambitions or growing headcount, or is this all about maturity of previously hired individuals, trying to understand if there's further ramps coming, you know, even beyond fiscal 24? Yeah, we're pretty much done with expansion in Fiscal 24. This investment cycle started in Q4 of Fiscal 23, so last April, nine months ago, we were done. Most of the sales headcount is in place; it's been in place for a number of months.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Sure.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change:

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Antonio Jose Pietri: So this is why we expect to see, and we are seeing the benefit of the pipeline, and we expect to see the benefit of the conversion. Now, having said that, now that Fiscal 25 is coming up, we'll look at what investments we need to make around expanding the DGM sales organization into other parts of the world and what other sort of tweak investments we have to make in other parts of the sales organization. But this was an important wrap-up in headcount, and now we also want to see that additional headcount increase their productivity. So good investment, a little bit more investment in Fiscal 25 around DGM and a few other areas. And look, now that I talked about the pipeline and conversion, there was a question just before about the conversion rate for our pipeline.

Antonio Jose Pietri: Look, we certainly track the conversion rate for our pipeline quarter to quarter and year to year, and we expect that the historical range of conversion that we've seen in order to deliver our goals is what we need to have in Q3, Q4 to achieve at least 11.5%. So the team does a good job of tracking their performance against historical data and as a forbearer of what's coming.

Speaker Change: Yes.

Speaker Change: [music].

Antonio Jose Pietri: I really appreciate the call. Thank you very much. Thank you, and thank you. And I'm not asking any further questions.

Operator: I would now like to turn the call back over to CEO Antonio Pietri. Thank you, Operator, and thank you, everyone, for joining the call today. You know, in the coming months, we will attend two investor conferences. In February, we're going to attend the Wolf Investor Conference, and in March, we will attend the KeyBank Emerging Technology Summit. So, please reach out to our investor relations team for more information on these two events, and we look forward to catching up with many of you soon. Thank you, everyone, for joining us, and we will see you on the road. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect, www.mercierfilms.ca www.mercierfilms.ca www.mercierfilms.ca www.mercierfilms.ca www.mercierfilms.ca www.mercierfilms.ca www.mercierfilms.ca www.mercierfilms.ca www.mercierfilms.ca www.mercierfilms.ca www.mercierfilms.ca www.