Q3 2024 Aspen Technology Inc Earnings Call
Operator: Good day, and thank you for standing by. Welcome to the Q3 Fiscal 2024 Aspen Technology Earnings Conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 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.
Good day and thank you for standing by welcome to the Q3 fiscal 'twenty 'twenty four Aspen Technology earnings Conference call. At this time, all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one one on your.
Telephone and wait for your name to be announced 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.
Brian Denyeau: Thank you, Josh. Good afternoon, everyone, and thank you for joining us to discuss our financial results for the third quarter of fiscal 2024, ending March 31st, 2024. With me on the call today are Antonio Pietri, Aspen Tech's President and CEO, and Chris Stagno, Aspen Tech's Interim CFO. Please note that we have posted Ernie's presentation on our 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.
Brian: Great. Thank you, Josh and good afternoon, everyone and thank you for joining us to discuss our financial results for the third quarter of fiscal 2024, and a March 31 2024.
Brian: On the call today are Antonio Pietri, Aspen, Tech's, President and CEO, and Chris Stagno asthma attacks interim CFO.
Brian: Please note we have posted an earnings presentation on our IR website, and we ask that investors refer to this presentation in conjunction with today's call.
Brian Denyeau: Actual results may differ materially from those contemplated by these four forward-looking statements. 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. Any forwarding 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: 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.
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: 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 Denyeau: During this presentation, we will present both GAAP and certain non-GAAP financial measures. A reconciliation of gap to non-gap 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. Thank you for coming out.
Brian: During this presentation, we will present, both GAAP and certain non-GAAP financial measures I.
Brian: A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release and Investor presentation.
Brian: And which are available on our Investor Relations website.
Brian: Let me turn the call over to Antonio Antonio.
Antonio J. Pietri: Thanks, Brian, and welcome to everyone joining us today. Before I get into our results, I would like to highlight our flagship Optimized user conference, which we held last week in Houston, Texas, with the theme of partnering for the future. This was the first time that the new Aspen Tech organization held an optimized event, and we were pleased to see many new and familiar faces in attendance. More than ever, our customers are focused on addressing the dual challenge of meeting the increasing demand for resources from a growing population with an increasing standard of living while also addressing the sustainability imperative.
Antonio J. Pietri: Thanks, Brian and welcome to everyone joining us today.
Antonio J. Pietri: Before I get into our results I would like to highlight our flagship optimize user conference, which.
Antonio J. Pietri: Which we held last week in Houston, Texas with the theme of partnering for the future.
Antonio J. Pietri: This was the first time that the new Aspen Tech organization has held an optimized event and.
Antonio J. Pietri: And we were pleased to see many new and familiar faces in attendance.
More than ever our customers are focused on addressing the dual challenge of meeting the increasing demand for resources from our growing population with an increase in standard of living while also addressing the sustainability imperatives.
Antonio J. Pietri: At its core, this requires leading organizations through a transformation that will require a heavy investment in digitalization and new technologies to meet performance, resiliency, and sustainability objectives. We believe the strong customer attendance and discussions held at the conference are representative of the opportunity available to Aspen Tech in the future. Now, turning to slide three for our Q3 results, we remain incredibly excited about the market opportunity we're seeing, as reflected in the ongoing and healthy growth of our pipeline.
Antonio J. Pietri: At its core this requires leading their organizations through a transformation that will required a heavy investment in digitalization and new technologies to meet performance resiliency and sustainability objectives.
We believe the strong customer attendance and discussions held at the conference a representative of the opportunity available to Aspen Tech in the future.
Antonio J. Pietri: That said, the volume of business closed in the quarter did not meet our expectations or reflect the opportunity available to us. Annual contract value, or ACV, was $936 million in Q3, increasing 2.4% quarter-over-quarter and 9.5% year-over-year, and included the closing of the delayed renewal agreement that I had referenced on our prior Q2 earnings call. Free cash flow was $137 million in Q2.
Antonio J. Pietri: Now turning to slide three for our Q3 results.
Antonio J. Pietri: We remain incredibly excited about the market opportunity, we're seeing as reflected in the ongoing and healthy growth of our pipeline that said the volume of business closed in the quarter did not meet our expectations or reflect the opportunity available to us.
Antonio J. Pietri: Annual contract value or HCV was $936 million in Q3, increasing two 4% quarter over quarter, a nine 5% year over year and included the closing of the delayed renewal agreement that I had referenced on our prior Q2 earnings call free.
Antonio J. Pietri: Free cash flow was $137 million in Q3.
Antonio J. Pietri: The lower than expected ACB growth in the quarter was driven by what we believe was a slow start to budget deployments by customers in their new fiscal year. And secondarily, and to a much lesser degree, our maturing sales organization. On the customer side, while customers remained engaged throughout the quarter in exciting value creation opportunities and discussions, ultimately, their conviction to close business in the quarter waned in the last month. We saw closing timelines extend beyond the quarter as customers exercised more caution in final purchasing decisions.
Antonio J. Pietri: The lower than expected ACB growth in the quarter was driven by what we believe was a slow start to budget deployments by customers in their new fiscal year, and secondarily and to a much lesser degree our maturing sales organization.
Antonio J. Pietri: On the customer side, while customers remained engaged throughout the quarter unexciting value creation opportunities in discussions ultimately their conviction to close business in the quarter waned in the last month.
Antonio J. Pietri: We saw close in timelines extend beyond the quarter as customers exercise more caution in final purchasing decisions.
Antonio J. Pietri: These dynamics were prevalent across most regions and end markets in the quarter. We believe this reflected customers' need for additional time to evaluate their own end markets and budgetary allocations in the context of the uncertainty created by a dynamic macro environment. That said, customers continue to communicate that their budgets are generally consistent with those of calendar 2023, and we're also seeing that strength exhibited in our pipeline.
Antonio J. Pietri: These dynamics were prevalent across most regions and end markets in the quarter. We believe this reflected customers' need for additional time to evaluate their own end markets and budgetary allocations in the context of the uncertainty created by a dynamic macro environment.
Antonio J. Pietri: That said customers continue to communicate that their budgets are generally consistent with those of calendar 2023, and we're also seeing that strength exhibited in our pipeline.
Antonio J. Pietri: We continue to monitor this dynamic closely and are doing everything within our control to drive faster decision making to meet our sales goal. On the sales side, we saw some instances where our sales execution was below our expectations, as we continue to onboard our expanded sales team and institutionalize best practices. Over the past 12 to 18 months, we have put in place new sales leadership, expanded our overall sales team, and adjusted sales coverage for a significant portion of our customer base.
Antonio J. Pietri: We continue to monitor this dynamic closely and are doing everything within our control to drive faster decision, making to meet our sales goals.
Antonio J. Pietri: On the sales side.
Antonio J. Pietri: We saw some instances where our sales execution was below our expectations as we continue to onboard our expanded sales team and institutionalized best practices over the past 12 to 18 months, we have put in place new sales leadership expanded our overall sales team and adjusted sales coverage for a significant portion of our.
Antonio J. Pietri: We believe the combination of a still maturing sales team and a more cautious spending environment created some missed opportunities in Q2. We remain confident the investments and changes made to our sales organization will best position us to fully capitalize on our long-term growth opportunity. While we cannot control spending caution among global customers, we can actively address those things we can control.
Antonio J. Pietri: <unk> base, we believe the combination of a still maturing sales team and a more cautious it spending environment created some missed opportunities in Q3.
Antonio J. Pietri: We remain confident the investments and changes made to our sales organization will best position us to fully capitalize on our long term growth opportunity, while we cannot control spending caution among global customers. We can actually actively address those things we can control to.
Antonio J. Pietri: To that end, in the near term, we're working to drive full alignment across our self-organization and return our self-execution and predictability to the level that we expect of ourselves as a high-performance organization. Considering our Q3 performance, we're lowering our ACV growth outlook to at least 9.9% in fiscal year 2024. We believe this target is prudent when considering the dynamics we saw in Q3. We're also updating our fiscal year 2024 free cash flow guide to at least $340 million. She's mainly a function of the software NetNew ACV in Q3.
Antonio J. Pietri: To that end in the near term, we're working to drive full alignment across our sales organization and return our sales execution and predictability to the level that we expect of ourselves as a high performance organization.
Antonio J. Pietri: Considering our Q3 performance, while lowering our ACB growth outlook to at least nine 9% in fiscal year 2024.
Antonio J. Pietri: We believe this target is prudent when considering the dynamic we saw in Q3.
Antonio J. Pietri: We're also updating our fiscal year 2020 for free cash flow guide to at least $340 million.
Antonio J. Pietri: She is mainly a function of the softer net new ACB in Q3.
Antonio J. Pietri: Chris will provide more color on our financials in his remarks. With that said, I will now turn to slide four to provide an update on our suite's performance in Q3, as well as our updated expectations for fiscal year 2024. Starting with Digital Grid Management, or DGM, this suite saw continuous strength in demand and signed several term license wins in Q3, as we continue to expand wallet share with existing customers and win new loans.
Antonio J. Pietri: Chris will provide more color on our financials in his remarks.
Christopher Stagno: With that said I will now turn to slide four to provide an update on our suites performances in Q3 as well as our updated expectations for fiscal year 2024.
Antonio J. Pietri: Starting with digital grid management or the GM. The suites. So continued strength in demand and signed several term license wins in Q3, as we continue to expand wallet share with existing customers and win new logos. During the quarter. For example, we won a large distribution management and optimization deal in North America.
Antonio J. Pietri: During the quarter, for example, we won a large distribution management and optimization deal in North America, beating the competition across nearly all evaluation categories, including compliance, technology, security, and performance. Overall, we continue to be excited about the outlook and prospects for this week. Demand for our grid innovation remains strong as the acceleration of global electrification and prioritization of energy security drives an unprecedented investment cycle to update and modernize the grid. The combination of these funding tailwinds and the strength of our grid technology is helping to drive strong long-term pipeline growth for DGN, both in the United States and international markets.
Antonio J. Pietri: Beating the competition across nearly all evaluation categories, including compliance technology security and performance.
Antonio J. Pietri: Overall, we continue to be excited about the outlook and prospects for the suite demand for a great innovation remains strong as the acceleration of global electrification and prioritization of energy security drives an unprecedented investment cycle to update and modernize the grid.
Antonio J. Pietri: The combination of these funding tailwind and the strength of our great technology is helping to drive a strong term pipeline growth for the gn, both in the United States and international markets.
Antonio J. Pietri: Separately, as we've mentioned in the past, utility customers have a materially different and longer procurement process than our older customer segments. We continue to make progress in refining and strengthening our sales forecasting in this area, considering the purchasing process characteristics associated with this deal. Overall, we're pleased with DGN's year-to-date performance, and it remains on track to deliver approximately 2.5 points of growth for our fiscal year 2020. Subsurface Science and Engineering, or SSE, had a softer quarter. In Q3, SSE had its largest block of contracts up for renewal. This backdrop, combined with the two factors I laid out at the top of the call, resulted in deals that were pushed out of the
Antonio J. Pietri: Separately as we've mentioned in the past utility customers have a materially different and longer procurement process than our older customer segments. We continued to make progress in refining and refining and strengthening our sales forecasting in this area considering the purchasing process characteristics associated with these deals.
Antonio J. Pietri: Overall, we're pleased with the GM six year to date performance and it remains on track to deliver approximately two five points of growth for our fiscal year 2024.
Antonio J. Pietri: Subsurface science, and engineering or SSC had a softer quarter in.
Antonio J. Pietri: In Q3, <unk> had its largest block of contracts up for renewal. This backdrop combined with the two factors I laid out at the top of the call resulted in deals that pushed out of the quarter and more muted growth.
Antonio J. Pietri: We now expect to close many of these deals this quarter.
Antonio J. Pietri: With that said the backdrop for SSE customers remains strong with solid capex and operating budgets in place for the remainder of the calendar year. In Q3. For example, we further expanded our existing SSE business with a national oil Company Latin America.
Antonio J. Pietri: This customer values the strength of our seismic technology and has shown significant interest in converting to concession down the road to access our entire portfolio of <unk> and <unk>.
Antonio J. Pietri: Surface innovation more easily.
Antonio J. Pietri: Taking all this into consideration we now expect approximately one point of growth from SSE in our fiscal year 2024.
Antonio J. Pietri: Turning to slide five and our heritage has been tech suites.
Antonio J. Pietri: This is a part of the business who are the two drivers I laid out regarding our Q3 performance where most notable.
Antonio J. Pietri: Engineering, so a significant number of deals pushed out of the quarter across all regions Martin a slowdown from the suites prior asset accelerated levels in the first half of.
Antonio J. Pietri: This was more prevalent in our high velocity sales or <unk> organization, which is one of the areas, where we have increased our sales head count significantly over the past several quarters.
Antonio J. Pietri: <unk> is focused on generating new business through the SMB segment of the market as well as with larger enterprise accounts new to Aspen Tech.
Antonio J. Pietri: With that said, we continue to believe that our engineering suite will remain a prime beneficiary of the positive capex outlook for both traditional energy markets and sustainability over the long term.
Antonio J. Pietri: In Q3 for example, we continue to win deals with owner operators in E&C companies, expanding our BC expanding our business with a long standing customer who is one of the world's top EPC firms in response to the increase in backlog in the energy sector and sustainability projects.
Antonio J. Pietri: Turning to our manufacturing and supply chain suite or MSC in.
Antonio J. Pietri: In Q3, MSC benefited from the closing of the delayed Q2 transaction and a pickup in sales activity. However, we still saw some deals move out of the quarter.
Antonio J. Pietri: The prolonged downturn in the chemicals industry remains a headwind for MSC. While refining was also an area, where we did see some more cautious buying activity in Q3.
Antonio J. Pietri: Nevertheless, we were encouraged by the early uptake of our recently released Aspen unified planning product with several customers committing to it in the quarter.
Antonio J. Pietri: Looking ahead, we remain cautious on when a chemical recovery will return while refiners continue to have a favorable outlook.
Antonio J. Pietri: Our pipeline of business in this area continues to grow with the interest in our multi variable process control DMC three product multi unit dynamic optimization, ddos product and comprehensive supply chain optimization solution.
Antonio J. Pietri: Finally asset performance management or APM performed below expectations in Q3 as several deals moved out of the quarter.
Antonio J. Pietri: The combination of these with higher expected attrition for the full fiscal year means that we do not expect APM to contribute to ACB growth in fiscal 2024.
Antonio J. Pietri: We're in the process of simplifying its go to market strategy. Since it is now clear to us that there are certain market segments, where we're taking a leadership position in APM as return on investment in Israel material and quantifiable.
Antonio J. Pietri: We believe this should provide better more targeted selling opportunities and minimize the risk of future attrition over time.
Antonio J. Pietri: Okay.
Antonio J. Pietri: Taken all these factors into account, we now expect our heritage has been tech suite to contribute at least five five points of ACB growth toward fiscal year 2024 results.
Antonio J. Pietri: On slide six I would now like to provide an update on our product and R&D initiatives R&D and product teams have remained laser focused on the launch of our <unk> 14, three software update which we plan to release this quarter.
Antonio J. Pietri: Version 14, three will include updates to our recently launched Aspen unified platform deeper industrial AI integration across our portfolio and more as an example, this release will include Aspen virtual adviser or.
Antonio J. Pietri: For Aspen unified planning and scheduling we have previously we have previously released Aspen virtual adviser for our DMC three multi variable process control technology.
Antonio J. Pietri: In version 14, three we're introducing Eva to the planning and scheduling area.
Antonio J. Pietri: <unk> Leverages AI algorithms at its core to help guide users in analyzing and optimizing production plants.
Antonio J. Pietri: We also launched a beta version of our new Aspen workflow product in Q3.
Antonio J. Pietri: As I share component for unified and other solutions Aspen workflow allows users to orchestrate workflows and actions across <unk> and third party applications for more efficient operational outcomes. This is just one of the many ways. We are working to enhance the ability of our users to achieve greater workflow automation in their highly.
Antonio J. Pietri: Complex operating environments.
Antonio J. Pietri: Finally, we're excited to announce the recent limited availability launch of our strategic planning for sustainability pathways product.
Antonio J. Pietri: New and unique integrated modeling and optimization solution that aims to guide companies in carbon capture use and sequestration decision, making and sustainability strategy investments.
Antonio J. Pietri: By leveraging generative AI capabilities and strategic planning for sustainability pathways helps sustainability planners to solve the blank page problem.
Antonio J. Pietri: Binding different inputs to generate initial plans for asset carbon reduction.
Antonio J. Pietri: Turning to slide seven.
Speaker Change: I would now like to provide some color on our key focus areas for the coming quarters.
Speaker Change: First we have several initiatives underway to drive better alignment and complete the onboarding across our sales teams are already making progress in these areas to date.
Antonio J. Pietri: Second we're working to further drive efficiencies and productivity across the entire company to accelerate accelerate our path to best in class profitability and free cash flow going forward. We are focused on controlling what we can control and believe there are several opportunities to rationalize expenses and drive multi year improvements in productivity.
Antonio J. Pietri: Third we will continue to make targeted investments into strategically important areas of the business. This includes a special focus on our <unk> business given the multiple <unk> wins in that space and our continued belief in its significant long term growth opportunity.
Antonio J. Pietri: Finally, I want to be clear that we feel strongly that our performance in Q3 does not reflect the full potential of the opportunities. We're seeing today, nor does it reflect any material changes in the long term underlying strength of our end markets.
Antonio J. Pietri: Our customers remain at the center of several important mega trends, including global de Carbonization and electrification as well as the transition to a new energy system.
Antonio J. Pietri: At the same time, they are dealing with demand to do more with less while working to address a growing skills gap across their labor forces.
Antonio J. Pietri: As leaders in industrial software our calls our portfolio remains perfectly situated to help customers navigate these challenges providing a compelling outlook for future spend with Aspen Tech.
Antonio J. Pietri: In conclusion, we're taking the necessary steps to drive improvement in areas that are both within our control unable to better position us to achieve our objectives in Q4 and beyond.
Antonio J. Pietri: We're confident that increased focus we've now had in place for our expanded sales force combined with a multiple Dell wins, we see across most end markets will yield improved ACB growth over time.
Speaker Change: Before I turn the call over to Chris I would like to welcome two new members to the Aspen Tech team.
Speaker Change: First is our new Chief Financial Officer, David Baker.
Speaker Change: With a long and successful tenure in senior financial roles at Emerson Dave.
Antonio J. Pietri: It comes to the company armed with deep financial acumen and operational expertise in support of our long term growth objectives I am looking forward to my partnership with Dave.
Antonio J. Pietri: I would also like to thank Kris for serving in the interim role over the last four months and for everything he has done to maintain our forward trajectory.
Kris: Thank you Chris.
Kris: Secondly, I would like to welcome David handful to Aspen Tech's board of directors over a long and highly successful career in softer David has accumulated a wealth of knowledge and leadership experience will prove invaluable to us as we advance organization going forward.
Kris: Welcome David.
Kris: With that I will turn it over to Kris for a review of our financial results before we open it up for Q&A.
Kris: Yes.
Kris: Thank you Antonio and Hello, everyone.
Kris: Turning to our Q3 performance I will start out by highlighting that our earnings presentation includes explanations regarding the impact of ASC topic 606 on our financial results.
Kris: <unk> also included definitions of annual contract value or ACB bookings and free cash flow among other metrics in our earnings presentation now available on our IR website.
Kris: We asking investors refer to these definitions together with today's call.
Kris: Starting on slide eight annual contract value was $936 million in the third quarter of fiscal 2024.
Kris: Up nine 5% year over year, and two 4% quarter over quarter.
Kris: As Antonio mentioned this included the closing of the large delayed renewal that pushed out from our prior Q2.
Kris: Total bookings were $301 million in the third quarter, increasing 30% year over year, while total revenue was $278 million for the third quarter, increasing 21% year over year.
Kris: Please note that bookings and revenue are heavily impacted by contract renewal timing, while the majority of our revenue is recognized under ASC topic 606.
Kris: Now turning to profitability.
Kris: On a non-GAAP basis, we reported operating income of $116 million in Q3, representing a 41, 8% non-GAAP operating margin.
Kris: This compares to non-GAAP operating income of $67 million for a non-GAAP operating margin of 29% a year ago.
Kris: The year over year improvement in our margin profile was mainly driven by a higher mix of license and solutions revenue. In addition to onetime expense savings and our continuing focus on driving efficiencies.
Kris: 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.
Kris: non-GAAP net income was $109 million in the quarter or $1 70 per share compared to non-GAAP net income of $69 million or $1 <unk> per share a year ago.
Kris: The year over year increase in non-GAAP net income between periods was mainly due to the combination of solid revenue growth and strong operating leverage.
Kris: Turning to our balance sheet, we ended the quarter with approximately $178 million of cash and cash equivalents.
Kris: Reflecting the impact of share repurchases under our $300 million share repurchase authorization.
Kris: And $198 million available under our revolving credit facility.
Kris: During the quarter, we repurchased approximately 228000 shares for $57 million under our $300 million share repurchase authorization for fiscal year 2024.
Kris: Year to date, we have repurchased approximately one 2 million shares for $243 million under the same authorization with a total remaining value of $57 million.
Kris: On cash flows we generated $138 million of cash flow from operations and $137 million of free cash flow in Q3 compared to $131 million in cash flow from operations and $121 $129 million in free cash flow a year ago.
Kris: Turning to slide nine I would now like to close with guidance.
Kris: As Antonio mentioned, we now expect to achieve a CV growth of at least 9% in fiscal 2024.
Kris: We expect total bookings of at least $1.03 billion.
Kris: With $580 million up for renewal in fiscal 2024, and $195 million up for renewal in Q4.
Kris: We expect total revenue of at least $1 1 billion.
Kris: GAAP net loss at or better than $29 million and non-GAAP net income of at least $403 million.
Kris: From a cash flow perspective, we expect operating cash flow of at least $349 million and free cash flow of at least $340 million.
Kris: For a complete overview of our updated fiscal year 2024 guidance. Please refer to our earnings presentation slides now available on our IR website.
Kris: In closing, we recognize that our year to date performance has not met our expectations and we are committed to implementing the necessary actions to improve our performance going forward.
Kris: As Antonio mentioned, we now have several different initiatives in place that we're confident will help us address these different areas.
Kris: Additionally, we are making steady progress toward our return to best in class profitability and free cash flow generation.
Kris: With that.
Kris: I will turn the call back to Antonio for his closing remarks Antonio.
Antonio J. Pietri: Thanks, Chris as I mentioned earlier, we have adjusted our guide for fiscal year 'twenty to be four in response to the dynamics, we faced in Q3 and our measure expectations for this quarter.
Antonio J. Pietri: Our actively monitor and engage with our customers to confirm their spending plans and ensure a successful Q4 outcome more broadly we remain excited about the strength of our software portfolio and its ability to help our customers run their assets more efficiently and sustainably.
Kris: We look forward to closing out this fiscal year on a positive note with a focus on execution following our recent expansion initiatives.
Kris: With that we'll open it up to questions Josh.
Josh: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment for questions.
Josh: Okay.
Josh: Our first question comes from Jason <unk> with Keybanc capital markets. You May proceed.
Jason: Hi, Jason.
Josh: Antonio Thanks for.
Jason: Taking my questions.
Jason: Thanks, Sam and thanks.
Speaker Change: Quick question.
Speaker Change: One's mines.
Speaker Change: Relative to maybe last quarter, especially.
Speaker Change: Especially for the heritage business like what specifically changed.
Speaker Change: Changed.
Speaker Change: That means we're kind of particularly with a downtick and then at what point.
Speaker Change: In the quarter did you did you start start to kind of feel it.
Speaker Change: But let me look Ed.
Ed: We maintain very good conversations and engagement with our customers basically through the beginning of March.
Ed: We started to see star ethane to start to turn into the second week of March and especially the last two weeks of March.
Ed: As our teams started to drive to.
Ed: That started to drive the closing.
Ed: Process with these customers on the different deals.
Speaker Change: And while we expect it to be final approval it didn't happen or reasons to extend beyond the quarter. So I would tell you came down to the last three weeks of.
Speaker Change: The quarter, mainly the last two weeks as you know as you well know.
Speaker Change: Most of our business comes to comes down to the last two weeks of the quarter and this is where we saw.
Speaker Change: They push out materialize.
Speaker Change: What I will say about that as I said in my remarks, it was broad based across all of our regions.
Speaker Change: <unk>.
Speaker Change: Impacted.
Speaker Change: Most of our.
Speaker Change: Product suites to a lesser extent the GM because he is driven by different dynamics, but it was very consistent.
Speaker Change: And in a way also some pricing.
Speaker Change: And then just when I think about the Q4 guidance.
Speaker Change: Usually when we look at the sequential change between Q3 and Q4 for ACB.
Speaker Change: It looks like the implied comment.
Speaker Change: The increase is kind of consistent with what we saw last year online on.
Speaker Change: On a gross basis, so I guess, what im asking is.
Speaker Change: What's baked in from a conservatism standpoint like is there anything that we should be aware of on deals that maybe didn't close this quarter, but you feel good about closing next quarter.
Speaker Change: Any anything you can kind of stay there.
Speaker Change: Well, let me look.
Speaker Change: We've had a strong conviction about the fiscal year.
Speaker Change: We said as much in the in the in the Q2 earnings call.
Speaker Change: January early early February.
Speaker Change: We have a very strong pipeline of business, we have some very interesting deals in the pipeline.
Speaker Change: <unk> Q4, and our guide is based on very specific conversations, we're having with customers around very specific set of deals.
Speaker Change: Across all of our regions.
Speaker Change: Where were we.
Speaker Change: We are confirming and we have confirmed with customers not only.
Speaker Change: They have a budget because we believe budgets are in place, but their intent to spend.
Speaker Change: Thank you.
Speaker Change: We need to differentiate between budgets on.
Speaker Change: We intend to spend I think what we saw in Q3, it was budgets in place, but they intend to spend got pushed out.
Speaker Change: Sure.
Speaker Change: And so our Q4 outlook and guidance is based on engagement with customers. There are many conversations had at optimize last week.
Speaker Change: And what we're guiding to is it.
Speaker Change: It reflects those conversations.
Speaker Change: <unk>.
Speaker Change: Of our pipeline.
Speaker Change: I personally Don that top to bottom review.
Speaker Change: All of our sales activity.
Speaker Change: With every one of our frontline sales leaders area sales managers areas of directors.
Speaker Change: And that already happened the week before optimize and that will happen again here.
Speaker Change: NSO.
Speaker Change: The guidance that we have provided.
Speaker Change: Great. Thank you.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: One moment for questions.
Speaker Change: Our next question comes from Andrew <unk> with Bank of America, You May proceed.
Speaker Change: Hi, This is David Ridley Lane on for Andrew Ruben.
Speaker Change: Could you could you add a little more color around <unk>.
Speaker Change: <unk> pipeline those comments you had just.
Speaker Change: Yeah.
Speaker Change: Relative size.
Speaker Change: Developing your confidence in kind of the.
Speaker Change: Knowing that theres have elongated sales cycles like your confidence in those closing in this fiscal year.
Speaker Change: Yes sure.
Speaker Change: First up for most.
Speaker Change: We just told you that we believe that CGM.
Speaker Change: We will grow approximately two five points of or will contribute two five points of growth to our guide of nine.
Speaker Change: Two five points of growth towards AGM put CGM.
Speaker Change: Somewhere around the range of 40% growth for the year. The suite last year that suite grew 30%. So we do believe we have different dynamics.
Speaker Change: Around <unk> these are utilities.
Speaker Change: Government own whether it's a municipality.
Speaker Change: Stayed or multiple across multiple states. So they are driven by by the need to upgrade and expand the grid cyber security. So the so their spend has different drivers and motivations.
Speaker Change: When we first.
Speaker Change: Our pipeline continues to grow on the GM, we've expanded our sales organization into Europe. We have started an expansion into Asia Pacific now and in the Middle East.
Speaker Change: But that pipeline when we go into a customer and we replaced an existing system, that's a 12% to 12% to 24 months sales cycle.
Speaker Change: Because it is a very rigorous procurement process that happens tied to government regulations.
Speaker Change: Now once we're in there.
Speaker Change: Upgrades and new applications that get deployed and the sales cycle that tends to be shorter six to 12 months. So our pipeline is a combination of these longer longer sales cycle deals and.
Speaker Change: And the shorter sales cycle.
Speaker Change: Upgrades in.
Speaker Change: <unk> add ons, if you will.
Speaker Change: We like what we see we like the progress that we're making.
Speaker Change: Right.
Speaker Change: The investment.
Speaker Change: The thesis behind you.
Speaker Change: Utilities industry and the continued commitment of funds to upgrade the grid.
Speaker Change: And we believe we will continue to benefit from all of that.
Speaker Change: Of course, we.
Speaker Change: We did a reset of the OSI sales team even in North America, we've put in a new sales team into Europe, we're going to put a new sales team into Asia Pacific. There is a lot of learning that has to happen in these sales teams onboarding.
Speaker Change: An institutionalization if you will around how we do business in Aspen tech to deliver that quality of growth and profitability.
Speaker Change: We're accustomed to so it takes time to onboard these people and make sure they're producing at the level of productivity that we expect nonetheless.
Speaker Change: The Q3 quarter for the GM was a good quarter. There were a couple of deals that slipped a slipped into into Q4, but that's more timing than anything due to the procurement processes that those customers are follow.
Speaker Change: But overall.
Speaker Change: We remain.
Speaker Change: Very excited about our PGM business.
Speaker Change: Got it and as a as a follow up a lot of kind of commentary you have here.
Speaker Change: Is that if you will most calendar year budgets for your clients are flat to up.
Speaker Change: But given your fiscal year end in June more of that spend is likely to happen in fiscal 'twenty five versus fiscal 'twenty four.
Speaker Change: Would you say there is.
Speaker Change: Sort of if you look at it on a 12 month view theres been a significant change in your outlook for HCV editions.
Speaker Change: Yes, I mean look at.
Speaker Change: And I appreciate your question sort of comment all wrapped into one.
Speaker Change: Look.
Speaker Change: I think.
Speaker Change: It is important.
Speaker Change: The.
Speaker Change: I don't mean to.
Speaker Change: Split hairs here Budd.
Speaker Change: <unk> budgets and then there's intent to spend.
Speaker Change: If you look at if you look at the macro indicators that we track oil prices refining margins capex spend in oil and gas capex spend around sustainability all those indicators are flashing green.
Speaker Change: Oil prices have fluctuated between 70, and 90 to 95 box refining margins came down a little bit in the March quarter, but there is still solid and we're now going into the driving season in the summer here in the United States are margins should improve for refiners.
Speaker Change: Capex spending in electrification continues to so all of those indicators are green.
Speaker Change: And we believe that our customers have put in place.
Speaker Change: Budgets.
Speaker Change: That are in line with what they deployed in 'twenty, three perhaps even a little bit better in some cases around oil and gas capex.
Speaker Change: They intend to spend I think is has to do more with uncertainty around the macro environment, whether that is interest rates or anything else.
Speaker Change: If you look at the results that our customers are in hot.
Speaker Change: There are customers in inherit that just been posted.
Speaker Change: The oil and gas companies chemical companies you can understand why perhaps there was.
Speaker Change: A slowdown in spending in the quarter in order to support better results in light of lower revenue lower profitability.
Speaker Change: Driven by lower oil prices, our margins and refining and the challenges around chemicals. So so so the question then is okay.
Speaker Change: Is it temporary.
Speaker Change: Slowdown in spending.
Speaker Change: Does it go into Q4 or the remainder of the year.
Speaker Change: We don't know that what we're trying what we're working on doing is now very rigorously engage with our customers to make sure that it is.
Speaker Change: Gabe our champion our sponsor says is we're going to do a deal that when it goes up to the CFO and CEO for approval that is approved because we saw some of that in the Q3 quarter.
Speaker Change: A strong willingness to do business by our charterers and sponsors with approvals and then some deals that got rejected it.
Speaker Change: The CFO CEO level to the surprise of everyone, including our charges and sponsor. So so I think this is this is a different dynamic.
Speaker Change: I think budgets are in there frankly oil prices at 80, 90 or 70 are equally healthy.
Speaker Change: But the results reported by our customers.
Antonio J. Pietri: For the March quarter.
Antonio J. Pietri: Certainly lead me to think as well that while we saw was just a premeditated pulled back on spending.
Speaker Change: Understood. Thank you very much.
Speaker Change: Youre welcome.
Speaker Change: Thank you.
Antonio J. Pietri: One moment for questions.
Speaker Change: Our next question comes from Rob Oliver with Baird. You May proceed hi, Rob.
Speaker Change: Great Hi, Antonio Thanks, nice to see everybody.
Robert Cooney Oliver: Everybody in Houston I appreciate you guys hosting.
Robert Cooney Oliver: The panel as well two questions I guess the first one for me is around the sales related issues.
Robert Cooney Oliver: I know you just enumerated some of those issues on the previous question, but it just seems like a lot.
Robert Cooney Oliver: Coming on here in the back half of the year or so as you are approaching your FY 'twenty five you look at the sales challenge is what's been done and what's fixed and what's still remains to be done and are you confident that youll have that straightened out.
Antonio J. Pietri: FY 'twenty five kind of a sales kickoff and everything and then I had a follow up question.
Speaker Change: Yes, no I appreciate the question I mean first of all Rob.
Antonio J. Pietri: Rob.
Antonio J. Pietri: Yes.
Antonio J. Pietri: I already conducted a couple of reviews one of the with the regional sales leaders.
Robert Cooney Oliver: An area and group leaders.
Antonio J. Pietri: Right. After the quarter ended and then one a couple of weeks ago with the first line leaders for sales and part of my objective is also to understand what are the challenges and opportunities that they see.
Antonio J. Pietri: We've come up with a very specific set of.
Antonio J. Pietri: Opportunities.
Antonio J. Pietri: Have put actions around them.
Antonio J. Pietri: Of course first and foremost when.
Antonio J. Pietri: When you have.
Antonio J. Pietri: A lot of new salespeople.
Antonio J. Pietri: And the organization starts with.
Antonio J. Pietri: Their affinity for what customers are telling them their ability to read the signals that customers had given them or not.
Antonio J. Pietri: Including their own body language when they are meeting with them. So we are certainly deploying a lot of our more experienced people.
Robert Cooney Oliver: On the deals that we believe we need to close in Q4, because one it will help them accelerate their own understanding of learning, but also it will give us greater assurance of what's coming back as a deal that would have the opportunity to close Israel.
Robert Cooney Oliver: This isn't something that I think.
Antonio J. Pietri: Is.
Antonio J. Pietri: I think.
Antonio J. Pietri: The regular process.
Antonio J. Pietri: Of salespeople when they join our company in a learning, but we also have a lot of experienced people in the company that have been here selling for 15 2025 years. So.
Antonio J. Pietri: We're taking a much more.
Antonio J. Pietri: Rigorous approach around partnering and reviewing of the deals.
Antonio J. Pietri: We're also then looking at accelerating the Onboarding, making sure that.
Antonio J. Pietri: All the training that needs to happen happens as quickly as possible and more specifically this quarter before we go into the new fiscal year, and our new and our sales kickoff meeting in mid July.
Antonio J. Pietri: For fiscal 'twenty five we don't want to wait until this the sales kickoff meeting to bring to closure.
Antonio J. Pietri: All the all the Onboarding.
Antonio J. Pietri: To happen, including.
Antonio J. Pietri: What are our crown jewels, where we're negotiating deals including.
Antonio J. Pietri: What are those terms and conditions in our agreements that are most important to us again to maintain the high quality of business that we generate that support the profitability that we drive in order to avoid the elongation of negotiations and then many other activities I think the action plan is very clear.
Antonio J. Pietri: I think also there are some alignment that needs to happen. When you have new people that are still learning their way around the organization. So so we're also working to facilitate some of that but I think look we've been onboarding people here for the last 12 months 12 to 18 months.
Antonio J. Pietri: The European <unk> team was put in place pretty much.
Antonio J. Pietri: In the middle of last year, there's newer people that got Onboarding in Q1 to you through uneven some in Q3. So we're just working to make sure that we get everyone on the same page.
Antonio J. Pietri: Going forward, but I'm optimistic.
Antonio J. Pietri: Is what we're supposed to do and we'll get it done.
Speaker Change: Great. Thanks, and then just a quick follow up.
Antonio J. Pietri: I think we're all going at this this question right.
Antonio J. Pietri: So it's a bit repetitive but.
Antonio J. Pietri: When I look at the breakdown of your business you guys actually did a nice job forecasting the <unk> businesses, although a little weakness in SFC, what you called out.
Antonio J. Pietri: But PGM essentially came in line so the bulk of the reduction.
Antonio J. Pietri: Yes.
Antonio J. Pietri: Pretty significantly direction that ECB is actually coming from.
Antonio J. Pietri: If I had isolated just that portion of the slide deck that said, Hey, you know that MSC deal that was heightened closed closed I would have thought okay.
Antonio J. Pietri: Sure.
Antonio J. Pietri: We're out of here, we're in a good spot so, but even with that deal closing things got much worse. So I think we're focused here.
Antonio J. Pietri: But was it more kind of at the midpoint of the year just sort of.
Antonio J. Pietri: Hoping that these deals would get through amid some troubling signs or was it something that changed dramatically in the macro because it seems a pretty a pretty significant amount in your core which is clearly the business that you guys know best thanks very much.
Speaker Change: I appreciate the question.
Antonio J. Pietri: Rob I think we've always emphasized that.
Antonio J. Pietri: One of the challenges that we have with our fiscal year.
Antonio J. Pietri: Is that he starts on July one in the middle of fiscal budgets for our customers.
Antonio J. Pietri: And then and then com.
Antonio J. Pietri: January one.
Antonio J. Pietri: As a new fiscal year for our customers, we're while we're still in the middle of our fiscal year.
Antonio J. Pietri: We have not only just finished the second quarter.
Antonio J. Pietri: I think.
Antonio J. Pietri: We saw good activity in Q1, and Q2, we always said that our fiscal year was going to be back end loaded meaning to the second half of the year.
Antonio J. Pietri: And then we come into the new calendar year, new fiscal year for our customers, our Q3 quarter end customer to deploy.
Antonio J. Pietri: New budgets, but also.
Antonio J. Pietri: Their intent to spend or not clear.
Antonio J. Pietri: Clearly was targeted at the at the March quarter. This is why.
Antonio J. Pietri: I want to be very clear that we need to differentiate between budgets and spending.
Speaker Change: So I think what's happening here is.
Antonio J. Pietri: We always said this was going to be back end loaded we came into Q3 with great expectations are great pipeline at the ABC ability into deals I set us much in the early February earnings call.
Antonio J. Pietri: And we got caught.
Antonio J. Pietri: By surprise.
Antonio J. Pietri: Right.
Antonio J. Pietri: By their spending decisions.
Antonio J. Pietri: Our customers.
Antonio J. Pietri: This is a challenge that we have with with how our fiscal year lays out.
Antonio J. Pietri: In some case some years, it's been positive some years as being neutral and other use has been a surprise and I think that's what happened.
Antonio J. Pietri: This time around.
Antonio J. Pietri: Later.
Speaker Change: Thank you.
Speaker Change: Thank you.
Antonio J. Pietri: One moment for questions.
Antonio J. Pietri: Our next question comes from Dylan Becker with William Blair You May proceed.
Speaker Change: Hey, Anthony.
Antonio J. Pietri: Maybe kind of double clicking on the pipeline strength and being more kind of calendar year versus fiscal year any kind of incremental takeaways from the conference last week in your customer conversations that helped kind of validate that conference I think it was the first time you guys were able to kind of show the full strength of the combined Aspen <unk> approach.
Antonio J. Pietri: So maybe some customer takeaways that help kind of.
Antonio J. Pietri: Support that intent to spend initiative.
Speaker Change: Yes, but let me look.
Antonio J. Pietri: First of all the incredible feedback from customers about the conference.
Antonio J. Pietri: The value proposition our strategy.
Antonio J. Pietri: The opportunity that they see and the challenges that they have on how Aspen <unk> is incredibly well lined up.
Antonio J. Pietri: All of that so.
Antonio J. Pietri: Sure.
Antonio J. Pietri: It was really a moment of a high.
Antonio J. Pietri: That was great to see.
Antonio J. Pietri: Look at we also had.
Antonio J. Pietri: Great customer meetings.
Antonio J. Pietri: Ron just new relationships.
Antonio J. Pietri: Developed extending existing relationships and also.
Antonio J. Pietri: Specific deals.
Antonio J. Pietri: If you look at what happened.
Antonio J. Pietri: We had.
Antonio J. Pietri: Close to 12, 1300 customers R&D, GM, planarian, which up in the Monday.
Antonio J. Pietri: It was a standing room only planarian.
Antonio J. Pietri: Seeds for 550 people, we believe we got in there about 650.
Antonio J. Pietri: Part of that was due to.
Antonio J. Pietri: Customers from other industries interested on the PGM solutions to to understand their applicability into there are industries, where there is refining chemicals mining.
Antonio J. Pietri: It was assigned to see it.
Antonio J. Pietri: To add a standing room only.
Antonio J. Pietri: We got great feedback, we got great feedback from customers in PGM about the opportunity to take some of our artificial intelligence capabilities, our optimization capabilities, our control capabilities from our heritage has been tech industries refining chemicals into our utility solutions.
Antonio J. Pietri: To enhance.
Antonio J. Pietri: The value creation for them and resiliency of the grid.
Antonio J. Pietri: If you look at.
Antonio J. Pietri: Also the <unk>.
Antonio J. Pietri: Sessions that we had.
Antonio J. Pietri: One of the main points of feedback that we received is that.
Antonio J. Pietri: Some of our customers were frustrated because there were so many stations that they wanted to attend.
Antonio J. Pietri: That were happening at the same time. So so they were asking us to find a way to extend the conference next time, so that they can attain more stations and this just speaks to the wealth of technology that now exist inside of Aspen Tech.
Antonio J. Pietri: So relevant to the challenges and opportunities that these customers are facing so.
Antonio J. Pietri: Look I said it in my plane area presentation.
Antonio J. Pietri: I've never been as excited about the future of this company as I am today I came out of the conference even more convinced about that feeling and statement.
Antonio J. Pietri: And I think we have to work our way through this moment that we encounter in Q3.
Antonio J. Pietri: We have to certainly finish up some of the transformation initiatives that we're working on now that we have in place a sales team because we now have it in place.
Antonio J. Pietri: We are only expanding sales in the in the GM to moving to Asia and the Middle East.
Antonio J. Pietri: We're going to focus on solidifying the execution of the sales team, making sure that is performing.
Antonio J. Pietri: The excellent level that we have traditionally performing Aspen tech.
Speaker Change: And I can only see positive going forward, but certainly this is Ben.
Antonio J. Pietri: More challenging year than I expected, we expected and the company but.
Antonio J. Pietri: I just see these as.
Antonio J. Pietri: As a bump in the road and absolutely those unchanged our future trajectory whatsoever.
Speaker Change: Got it that's super helpful.
Antonio J. Pietri: Maybe thinking internally as you guys kind of think about the expense management side of the equation as well too I know you called out the opportunity to rationalize and realized productivity gains you are now two years into that Emerson integration, I guess I wonder where.
Antonio J. Pietri: Or how you are seeing kind of the most readily apparent opportunities there that haven't been realized already and maybe what's more of a kind of a long term structural shift I know sales will be a component of that and sales efficiency, but thinking about kind of the broader cost structure as well. Thanks.
Speaker Change: Well I mean look.
Antonio J. Pietri: Certainly.
Antonio J. Pietri: We said it in the prepared remarks, I think one of the big opportunities that we're now there.
Antonio J. Pietri: We will now and we're already working on and will continue to work on here is efficiencies and productivity.
Antonio J. Pietri: When you have three companies coming together and really three and a small one imation.
Antonio J. Pietri: There will always be opportunities to drive efficiencies.
Antonio J. Pietri: As you simplified streamlined.
Antonio J. Pietri: <unk> session.
Antonio J. Pietri: So so we're very much focused on that and including.
Antonio J. Pietri: One time expenses that are non compensation expenses, which are because as always.
Antonio J. Pietri: If you want to if you want to be a best in class profitability company, you have to do more with less and as a culture that we're building here and as part of the focus on efficiencies.
Antonio J. Pietri: We're driving and we continue to drive.
Antonio J. Pietri: From a productivity standpoint.
Antonio J. Pietri: It's always been my North Northstar.
Antonio J. Pietri: You get to that profitability level.
Antonio J. Pietri: Doing more with less on head count and driving to maximum productivity is a multi year journey. Because you cannot just is not a binary zero to one.
Antonio J. Pietri: As you drive improvements on exercise your muscles, you get theater on theater. So this is why I said it was a multiyear journey.
Antonio J. Pietri: The productivity that we want to put us as you as you drive that productivity you can grow you can grow and spending less and we today nexstar, it's expanding profitability and free cash flow going forward.
Antonio J. Pietri: One of the things that we.
Antonio J. Pietri: We're giving credit for was in the early phases of my tenure in Aspen take when we maintain flat expenses for four years in this company and we drove incredible increases in profitability.
Antonio J. Pietri: And I think that that's possible.
Antonio J. Pietri: No.
Antonio J. Pietri: Well and then in the new asthma, so we're going to be focusing on all that much more rigorously.
Antonio J. Pietri: And in the meantime, we will build our.
Antonio J. Pietri: Optimize our sales muscle.
Antonio J. Pietri: And I'm sure we will find ourselves in the right place here pretty soon.
Speaker Change: Great. Thanks Anthony.
Antonio J. Pietri: Yes.
Speaker Change: Thank you.
Antonio J. Pietri: One moment for questions.
Antonio J. Pietri: Our next question comes from Clarke Jeffries with Piper Sandler you May proceed.
Speaker Change: Hello. Thank you for taking the question Antonio I think you've really shaped a lot of the description around budget versus spending intent.
Antonio J. Pietri: But I really wanted to put.
Antonio J. Pietri: Putting that final piece of the.
Antonio J. Pietri: The discussion around <unk>.
Antonio J. Pietri: Are these deals primarily loss to no decision or later decision more than anything else and I think the final part of that has been seen in the presentation, but I want to be explicit.
Antonio J. Pietri: Is attrition trending as you expected is the 5% number still the applicable number when you think about this commentary around expansion versus retention of everyone.
Antonio J. Pietri: I have one follow up great Great point, no look our attrition is in line with.
Antonio J. Pietri: With our with what we guided for the year about five points of attrition of course, we've had these large deal.
Antonio J. Pietri: The and renew in Q2 is now in Q3, the produce a big bump of attrition.
Antonio J. Pietri: Excluding the dealer attrition is in line because we have now closed that deal. So that was a net neutral deal if you will.
Antonio J. Pietri: But but no attrition attrition attrition is fine and.
Antonio J. Pietri: We believe we have very good sight into into into that attrition in Q4 as well.
Antonio J. Pietri: Yeah.
Antonio J. Pietri: It's an interesting dynamic because while a lot of engineering business got pushed out of the quarter.
Antonio J. Pietri: Our E&C customers are expanding spending with Aspen Tech.
Antonio J. Pietri: We signed a number of transactions in the quarter, especially one of our largest tncs, where they expanded their spend with Aspen Tech.
Antonio J. Pietri: And incremental.
Antonio J. Pietri: Percentage.
Antonio J. Pietri: Which is a sizable number in the context of there.
Antonio J. Pietri: Their deal of the spend they already have with us <unk>. We're seeing this at the same behavior across more and more E&C. So so I don't think it's a capex related issue because capex is a long term investment by these customers I think this is a temporary pullback on opex spending and that impacts on <unk>.
Antonio J. Pietri: Short term deals.
Antonio J. Pietri: <unk> engineering, and MSC and APM.
Antonio J. Pietri: The dynamic that we saw in APM is very typical of the dynamic that we saw.
Antonio J. Pietri: During the pandemic.
Antonio J. Pietri: Pull back on Opex maintenance being a very discretionary areas of spending.
Antonio J. Pietri: And even if you have deals that have already been signed as they come up for renewal. We've also seen those customers give up on those on those agreements in order to save spend so so overall.
Antonio J. Pietri: It's a combination of behavior that.
Antonio J. Pietri: Yes.
Antonio J. Pietri: Support the macro the positive.
Antonio J. Pietri: Flashing green indicators that we have but also.
Antonio J. Pietri: Or was clearly.
Antonio J. Pietri: Pull back on spending in the quarter.
Speaker Change: Perfect I think I think that's very helpful and I think just the last point on this about.
Antonio J. Pietri: Really being March being the timeframe, where you're starting to see.
Antonio J. Pietri: Some of these impacts to sort of closing times.
Antonio J. Pietri: Just as you sort of frame up across all the segments April and where we are in today have you seen any definable improvement, especially maybe in the wake of optimize and if there was any amount of reminder, you can give us around how much of the business and the ECB terms closes in the last month.
Speaker Change: That would be incredibly helpful. Thank you.
Antonio J. Pietri: Let me know where a typical software company in that regard in the most of our business closes in the last months okay.
Antonio J. Pietri: And.
Antonio J. Pietri: You can ask any software company and they'll probably give you numbers somewhere around.
Antonio J. Pietri: 675% of the business closing in the last month of the quarter.
Antonio J. Pietri: Just how are sales cycles work and.
Speaker Change: Now I will say and this is just a commentary we've already closed.
Antonio J. Pietri: Good business in the April month.
Antonio J. Pietri: A lot of it tied to the Q4.
Antonio J. Pietri: The Q3.
Antonio J. Pietri: Deals.
Antonio J. Pietri: We were pursuing but theres also some business.
Antonio J. Pietri: In Q3 that has moved into into into Q1.
Antonio J. Pietri: But what I'll also say is hardly ever those those are deal disappear from our pipeline like.
Antonio J. Pietri: Our customer didn't want to do business in the deal falls off of the pipeline it gets pushed starting to into the future.
Antonio J. Pietri: And most of the business.
Antonio J. Pietri: That pushed out of Q3.
Antonio J. Pietri: In Q4 or some of it in Q1.
Speaker Change: Thank you very much.
Antonio J. Pietri: Thanks.
Speaker Change: Thank you.
Antonio J. Pietri: One moment for questions.
Antonio J. Pietri: Our next question comes from Mark Chappell with loop capital markets. You May proceed.
Antonio J. Pietri: Kirk.
Speaker Change: Okay fair enough. Thanks for taking my question.
Antonio J. Pietri: In your prepared remarks, you noted that you were reviewing your APM segment as a result of the segments underperformance in the quarter.
Antonio J. Pietri: And you may have touched on this a little bit in a prior question I was wondering if you could just provide some additional details around.
Antonio J. Pietri: Are your APM segment in Panama.
Antonio J. Pietri: Yes, yes.
Antonio J. Pietri: Market.
Antonio J. Pietri: The fact is our APM business, our especially our <unk> product is a great product.
Antonio J. Pietri: <unk> has been given five or six awards as best technology.
Antonio J. Pietri: AI Iot whatever since the very beginning.
Antonio J. Pietri: Central region of the World <unk> has got an based.
Antonio J. Pietri: R&D Award.
Antonio J. Pietri: By.
Antonio J. Pietri: Hydrocarbon processing by.
Antonio J. Pietri: Conferences, frankly, it's a little bit incredible.
Antonio J. Pietri: <unk>.
Antonio J. Pietri: The recognition of our products received.
Speaker Change: So okay.
Antonio J. Pietri: A lot has happened with dental.
Antonio J. Pietri: <unk>.
Antonio J. Pietri: While we're clearly seeing is that <unk>.
Antonio J. Pietri: Value proposition for <unk>.
Antonio J. Pietri: Is incredibly clear.
Antonio J. Pietri: <unk> viable and material.
Antonio J. Pietri: In sum.
Antonio J. Pietri: Customer segments.
Antonio J. Pietri: To the extent, we see very little attrition.
Antonio J. Pietri: In those customer segments. So so these customers buy the technology deployed and expanded so we have we have some customers already with the technology across 2025 sites.
Antonio J. Pietri: Generating incredibly value and I am not going to mention what customer segments because.
Speaker Change: I'm sure the competition is probably listening in.
Antonio J. Pietri: So but at the same time, we have some customer segments, where customers love the technology they buy they implemented.
Antonio J. Pietri: For whatever reason.
Antonio J. Pietri: A year or two later.
Antonio J. Pietri: Either they're teams move on get promoted.
Antonio J. Pietri: Leave the company.
Antonio J. Pietri: And the value Hasnt really been proven and quantified and therefore, there isn't a commitment to sustaining the use of the technology that.
Antonio J. Pietri: And that is what generates attrition so the product and until an APM they've never stop generating growth. The fact is that every quarter. There is an important amount of gross growth new growth or cash generated but he has negated then by summer <unk>.
Antonio J. Pietri: So in this review that we've done in <unk>.
Antonio J. Pietri: No.
Antonio J. Pietri: It's part of the outcome of their reviews.
Antonio J. Pietri: Boston is clearly that if we sharpened our focus with Intel on APM.
Antonio J. Pietri: We can go into some customer segments, where we will be very successful with the product, where we will see very little illustration. Therefore, the net growth will be more material.
Antonio J. Pietri: And as a contributor to our overall growth as a company. So that's what we're doing we're going to for fiscal 'twenty five we're going to we're going to sharpen our strategy, we're going to be very focused and we're going to pursue.
Antonio J. Pietri: <unk> business for the sake of business, but high quality business that doesn't generate attrition later on and we believe we have a number of customer segments. I can tell you. We believe we're becoming the leader with Intel and some of those customer segments by far.
Antonio J. Pietri: And those customers are already using it just not the technology. So.
Speaker Change: Thank you that's helpful. That's all for me.
Antonio J. Pietri: Yes.
Antonio J. Pietri: Thank you I would now like to turn the call back over to Antonio Pietri for any closing remarks.
Speaker Change: Alright, Thank you Josh and thank you to everyone for joining the call today.
Antonio J. Pietri: We will be attending the Baird technology conference and the William Blair growth conference in the first week of June. So please reach out to our Investor relations team for more information on this event.
Speaker Change: We look forward to catching up with many of you. Soon so thank you everyone for joining and we will see you on the road.
Antonio J. Pietri: Yes.
Speaker Change: Thank you. This concludes the conference. Thank you for your participation you may now disconnect.
Antonio J. Pietri: Okay.
Antonio J. Pietri: [music].
Antonio J. Pietri: Okay.
Antonio J. Pietri: [music].
Antonio J. Pietri: Okay.
Antonio J. Pietri: Okay.
Antonio J. Pietri: [music].
Antonio J. Pietri: Yes.
Antonio J. Pietri: [music].
Antonio J. Pietri: Yes.
Antonio J. Pietri: Yes.
Antonio J. Pietri: [music].