UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549

FORM 10-Q
 
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended March 31,September 30, 2022

or
OR

☐        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from                      __________ to                      __________

Commission file numbernumber: 333-262106

Emersub CX, Inc.
ASPEN TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)

Delaware
87-3100817
Delaware87-3100817
(State or other jurisdiction of incorporation or
organization)		(I.R.S. Employer Identification No.)
20 Crosby Drive
8000 W. Florissant Ave.
Bedford
St. Louis, MissouriMassachusetts63136
01730
(Address of principal executive offices)(Zip Code)

Registrant's(781) 221-6400
(Registrant’s telephone number, including area code:   (314) 553-2000code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(b) of the Act:
Title of each classEach ClassTrading Symbol(s)SymbolName of each exchangeEach Exchange on which registeredWhich Registered
N/ACommon stock, $0.0001 par value per shareN/AN/AAZPNNASDAQ Global Select Market


Indicate by check mark whether the registrantregistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.days:   Yes ☒ý No ☐o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ý No ☐

o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”filer” “accelerated filer,”filer”, “smaller reporting company,”company” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐oAccelerated filer☐
Non-accelerated filer
☒
ý		Smaller reporting company☐
Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).: Yes ☒☐ No ☐ý

As of May 12, 2022, a total of 1,000There were 64,540,036 shares of the Registrant’s common stock par value $0.0001, were issued and outstanding.outstanding as of October 25, 2022.

Emersub CX, Inc. operated as a shell company during the period covered by this report. However, as discussed in the explanatory note hereto, Emersub CX, Inc.'s future periodic reports filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 will reflect the operations of the combination referred to in the explanatory note.


EXPLANATORY NOTE
Table of Contents

TABLE OF CONTENTS
Emersub CX, Inc. (“Newco”), a wholly owned subsidiary of Emerson Electric Co. (“Emerson”), is a Delaware corporation that was formed on October 8, 2021 by EMR Worldwide Inc. (“Emerson Sub”), a wholly owned subsidiary of Emerson, for the purpose of engaging in the Transactions. Following the completion of the Transactions discussed herein, Newco (thereafter being referred to as New AspenTech) will be a holding company whose principal asset will be the ownership
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PART I - FINANCIAL INFORMATION
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20
29
31
PART II - OTHER INFORMATION
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32
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SIGNATURES
Aspen Technology, Inc. (“AspenTech”("AspenTech") has many registered trademarks including aspenONE and Emerson’s industrial software business, Open Systems International, Inc.Aspen Plus. All other trade names, trademarks and its Geological Simulation Software business. Immediately afterservice marks appearing in this Form 10-Q are the completionproperty of the Transactions, New AspenTech’s equity capital will consist solely of the New AspenTech common stock issued pursuanttheir respective owners.
Our fiscal year ends on June 30th, and references to a specific fiscal year are to the Transactions.

This Form 10-Q is reporting the shell company results for Newco for the three and sixtwelve months ended March 31, 2022. SinceJune 30th of such year (for example, “fiscal 2023” refers to the date of its incorporation, Newco has not engaged in any activities other than as contemplated by the Transaction Agreement and other related agreements.year ending June 30, 2023).

A special meeting of Aspen Technology, Inc. stockholders will be held on May 16, 2022 for the following purposes:


1.To consider and vote on a proposal to adopt the Transaction Agreement and Plan of Merger, dated October 10, 2021, as amended by Amendment No. 1, dated as of March 23, 2022 and Amendment No. 2, dated as of May 3, 2022 (as it may be further amended from time to time, the “Transaction Agreement”), among AspenTech, Emerson, Emerson Sub, Newco and Emersub CXI, Inc., a wholly owned subsidiary of Newco (“Merger Sub”), and approve the transactions contemplated by the Transaction Agreement, including the merger of Merger Sub with and into AspenTech (collectively, the “Transactions”);


2.To consider and vote on a proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable to AspenTech’s named executive officers in connection with the Transactions;


3.To consider and vote on a proposal to approve the adjournment of the special meeting if AspenTech determines that it is necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to adopt the Transaction Agreement; and


4.To transact any other business properly brought before the special meeting and any adjournment or postponement thereof, in each case, by or at the direction of the AspenTech board of directors. Only stockholders of record on the books of AspenTech at the close of business on April 14, 2022, will be entitled to vote at the special meeting or any adjournment or postponement thereof.

At the closing of the Transactions (the “Closing”), Newco will change its registered name with the Secretary of State of Delaware to “Aspen Technology, Inc.” (and thereafter referred to as “New AspenTech”). Immediately following the Closing, Emerson will beneficially own 55% of the outstanding shares of New AspenTech common stock (on a fully diluted basis) and former AspenTech stockholders will own the remaining outstanding shares of New AspenTech common stock. Following the Closing, AspenTech common stock will be delisted from NASDAQ and deregistered under the Securities Exchange Act of 1934, and cease to be publicly traded. New AspenTech and its subsidiaries will operate under AspenTech’s current name “Aspen Technology, Inc.” and New AspenTech common stock will be traded on NASDAQ under AspenTech’s current stock ticker symbol “AZPN”.

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Table of Contents
PART I.I - FINANCIAL INFORMATION
Item 1.    Financial Statements

Unaudited Condensed Consolidated Statements of Earnings
Emersub CX, Inc.

Three and six months ended March 31, 2022Statements.
 
  
Three Months
Ended
March 31,
  
Six Months
Ended
March 31,
 
  2022  2022 
Revenue $0  $0 
Cost of revenue  0   0 
Gross profit  0   0 
Total operating expenses  0   0 
Earnings from operations  0   0 
Other expense, net  0   0 
Earnings before income taxes  0   0 
Provision for income taxes  0   0 
Net earnings $0  $0 
         
Earnings per share (in Dollars):        
Basic and Diluted $0  $0 
         
Weighted average outstanding shares:        
Basic and Diluted  1,000
   1,000 

Consolidated and Combined Financial Statements (unaudited)
 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

1ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
Unaudited Condensed Consolidated Statements of Comprehensive Income(Unaudited)
Emersub CX, Inc.

Three Months Ended
September 30,
 20222021
 (Dollars and Shares in Thousands)
Revenue:  
License and solutions$160,224 $44,215 
Maintenance78,366 24,535 
Services and other12,229 8,265 
Total revenue250,819 77,015 
Cost of revenue:  
License and solutions69,513 34,388 
Maintenance9,217 4,234 
Services and other12,400 4,898 
Total cost of revenue91,130 43,520 
Gross profit159,689 33,495 
Operating expenses:  
Selling and marketing118,274 25,000 
Research and development49,740 15,555 
General and administrative42,848 6,617 
Restructuring costs9 207 
Total operating expenses210,871 47,379 
(Loss) from operations(51,182)(13,884)
Other (expense), net(58,632)(1,359)
Interest income (expense), net5,023 (272)
(Loss) before provision for income taxes(104,791)(15,515)
(Benefit) for income taxes(93,547)(4,313)
Net (loss)$(11,244)$(11,202)
Net (loss) per common share:  
Basic$(0.17)$(0.31)
Diluted$(0.17)$(0.31)
Weighted average shares outstanding:  
Basic64,454 36,308 
Diluted64,454 36,308 
Three and six months ended March 31, 2022

  
Three Months
Ended
March 31,
  
Six Months
Ended
March 31,
 
  2022  2022 
Net earnings $0  $0 
         
Other comprehensive income (loss), net of tax  0   0 
         
Comprehensive income $0  $0 
 
See accompanying Notesnotes to Unaudited Condensed Consolidated Financial Statements.

these unaudited consolidated and combined financial statements.
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Unaudited Condensed Consolidated Balance SheetTable of Contents
Emersub CX, Inc.ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME
  Mar. 31, 2022  Oct. 8, 2021 
ASSETS      
Total assets $0  $0 
         
LIABILITIES AND EQUITY        
Total liabilities  0   0 
         
Equity        
Common stock, $0.0001 par value; 1,000 authorized, issued and outstanding shares  1   1 
Stockholder receivable  (1)  (1)
Additional paid-in-capital  0   0 
Total equity  0   0 
Total liabilities and equity $0  $0 

(Unaudited)
Three Months Ended
September 30,
 20222021
 (Dollars in Thousands)
Net (loss)$(11,244)$(11,202)
Other comprehensive (loss) income:
Foreign currency translation adjustments(8,865)803 
Total other comprehensive (loss) income(8,865)803 
Comprehensive (loss)$(20,109)$(10,399)
See accompanying Notesnotes to Unaudited Condensed Consolidated Financial Statements.

these unaudited consolidated and combined financial statements.
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Unaudited Condensed Consolidated StatementsTable of EquityContents
Emersub CX, Inc.ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED BALANCE SHEETS
Three and six months ended March 31, 2022(Unaudited)
  
Three Months
Ended
March 31,
  
Six Months
Ended
March 31,
 
  2022  2022 
Common stock      
Beginning balance $1  $0 
Shares issued  0   1 
Ending balance  1   1 
         
Shareholders receivable        
Beginning balance  (1)  0 
Activity  0   (1)
Ending balance  (1)  (1)
         
Additional paid-in capital  0   0 
         
Total equity $0  $0 

September 30,
2022		June 30,
2022
 (Dollars in Thousands, Except
Share and Per Share Data)
ASSETS  
Current assets: 
Cash and cash equivalents$382,458 $449,725 
Accounts receivable, net97,340 111,027 
Current contract assets, net519,184 428,833 
Prepaid expenses and other current assets26,379 23,461 
Receivables from related parties14,573 16,941 
Prepaid income taxes55,057 17,503 
Total current assets1,094,991 1,047,490 
Property, equipment and leasehold improvements, net17,110 17,148 
Goodwill8,326,336 8,266,809 
Intangible assets, net5,021,909 5,112,781 
Non-current contract assets, net396,907 428,232 
Contract costs8,679 5,473 
Operating lease right-of-use assets74,201 78,286 
Deferred tax assets24,104 4,937 
Other non-current assets7,166 8,766 
Total assets$14,971,403 $14,969,922 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Accounts payable11,732 21,416 
Accrued expenses and other current liabilities90,439 90,123 
Liability from foreign currency forward contract50,259 — 
Due to related parties16,520 4,111 
Current operating lease liabilities7,237 7,191 
Income taxes payable— 6,768 
Current borrowings30,000 28,000 
Current contract liabilities131,346 143,327 
Total current liabilities337,533 300,936 
Non-current contract liabilities21,261 21,081 
Deferred income tax liabilities1,116,332 1,145,408 
Non-current operating lease liabilities67,662 71,933 
Non-current borrowings, net240,000 245,647 
Other non-current liabilities17,825 15,560 
Commitments and contingencies
Stockholders’ equity:  
Common stock, $0.0001 par value
Authorized—600,000,000 shares
Issued— 64,531,300 shares at September 30, 2022 and 64,425,378 shares at June 30, 2022
Outstanding— 64,531,300 shares at September 30, 2022 and 64,425,378 shares at June 30, 2022
6 6 
Additional paid-in capital13,129,112 13,107,570 
Retained earnings55,125 66,369 
Accumulated other comprehensive (loss)(13,453)(4,588)
Total stockholders’ equity13,170,790 13,169,357 
Total liabilities and stockholders’ equity$14,971,403 $14,969,922 
See accompanying Notesnotes to Unaudited Condensed Consolidated Financial Statements.

these unaudited consolidated and combined financial statements.
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6
Unaudited Condensed Consolidated StatementsTable of Cash FlowsContents
Emersub CX, Inc.ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENTS OF EQUITY/
Six Months Ended March 31, 2022STOCKHOLDERS’ EQUITY
  Six Months Ended 
  March 31, 2022 
Operating activities:   
Net cash provided by operating activities $0 
     
Investing activities:    
Net cash provided by (used in) investing activities  0 
     
Financing activities:    
Net cash provided by (used in) financing activities  0 
     
Effect of exchange rate changes on cash and equivalents  0 
Increase (Decrease) in cash and equivalents  0 
Beginning cash and equivalents  0 
Ending cash and equivalents $0 
(Unaudited)
Accumulated Other Comprehensive Income (Loss)Common StockAdditional Paid-in CapitalRetained EarningsTotal Equity/Stockholders’ Equity
Number of SharesPar Value
(Dollars in Thousands, Except Share Data)
Balance June 30, 2022$(4,588)64,425,378 $6 $13,107,570 $66,369 $13,169,357 
Net Loss— — — — (11,244)(11,244)
Other comprehensive (loss)(8,865)— — — — (8,865)
Issuance of shares of common stock and net share settlement relating to withholding taxes— 71,547 — 8,489 — 8,489 
Issuance of restricted stock units— 34,375 — (4,683)— (4,683)
Stock-based compensation— — — 17,736 — 17,736 
Balance September 30, 2022$(13,453)64,531,300 $6 $13,129,112 $55,125 $13,170,790 


Net Parent InvestmentAccumulated Other Comprehensive Income (Loss)Total Equity/Stockholders’ Equity
(Dollars in Thousands, Except Share Data)
Balance June 30, 2021$1,772,671 $(6,487)$1,766,184 
Net Loss(11,202)— (11,202)
Net transfer from Emerson15,561 — 15,561 
Other comprehensive income (loss)— 803 803 
Balance September 30, 2021$1,777,030 $(5,684)$1,771,346 

See accompanying Notesnotes to Unaudited Condensed Consolidated Financial Statements.these unaudited consolidated and combined financial statements.

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NotesTable of Contents
ASPEN TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30,
 20222021
 (Dollars in Thousands)
Cash flows from operating activities:  
Net (loss)$(11,244)$(11,202)
Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities:  
Depreciation and amortization122,546 30,420 
Reduction in the carrying amount of right-of-use assets3,291 1,712 
Net foreign currency losses8,332 1,538 
Stock-based compensation17,736 368 
Deferred income taxes(70,438)(5,692)
Provision for receivables3,609 59 
Other non-cash operating activities3,225 61 
Changes in assets and liabilities:  
Accounts receivable8,009 (15,690)
Contract assets(68,357)(4,776)
Contract costs(3,451)— 
Lease liabilities(1,659)(421)
Prepaid expenses, prepaid income taxes, and other assets(47,004)1,811 
Liability from foreign currency forward contract50,259 — 
Accounts payable, accrued expenses, income taxes payable and other liabilities(13,476)(2,234)
Contract liabilities3,699 (5,140)
Net cash provided by (used in) operating activities5,077 (9,186)
Cash flows from investing activities:  
Purchases of property, equipment and leasehold improvements(1,321)(2,607)
Payments for business acquisitions, net of cash acquired(74,947)(1,065)
Payments for capitalized computer software development costs(99)— 
Purchases of other assets— (285)
Net cash used in investing activities(76,367)(3,957)
Cash flows from financing activities:  
Issuance of shares of common stock8,470 — 
Payment of tax withholding obligations related to restricted stock(3,422)— 
Deferred business acquisition payments(1,363)— 
Repayments of amounts borrowed under term loan(6,000)— 
Net transfers from Parent Company12,446 15,195 
Payments of debt issuance costs(2,375)— 
Net cash provided by financing activities7,756 15,195 
Effect of exchange rate changes on cash and cash equivalents(3,733)2 
(Decrease) increase in cash and cash equivalents(67,267)2,054 
Cash and cash equivalents, beginning of period449,725 23,659 
Cash and cash equivalents, end of period$382,458 $25,713 
Supplemental disclosure of cash flow information:  
Income taxes paid, net$6,950 $3,632 
Interest paid3,815 355 
Supplemental disclosure of non-cash activities:
Change in purchases of property, equipment and leasehold improvements included in accounts payable and accrued expenses$(702)$483 
Lease liabilities arising from obtaining right-of-use assets68 — 


See accompanying notes to Unaudited Condensed Consolidated Financial Statementsthese unaudited consolidated and combined financial statements.
Emersub CX, Inc.
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Table of Contents
(1)  ORGANIZATION, BASIS OF PRESENTATION, BUSINESS DESCRIPTIONASPEN TECHNOLOGY, INC. AND SIGNIFICANT ACCOUNTING POLICIESSUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
On October 10, 2021,
1.  Organization and Basis of Presentation

Aspen Technology, Inc. (", together with its subsidiaries (“AspenTech" or “Company”) and Emerson Electric Co. (“Emerson”) entered into, is a Transaction Agreement and Plan of Merger, as amended by Amendment No. 1, dated as of March 23, 2022, and Amendment No. 2, dated as of May 3, 2022 (as it may be further amended from time to time, the “Transaction Agreement”) to combine 2 of Emerson’sleading industrial software businesses, Open Systems International, Inc. and its Geological Simulation Software business (the “Emerson Industrial Software Business”), and AspenTech under a new publicly traded company.

The Transaction Agreement provides for (i) Emerson contributing $6,014,000,000 in cashcompany that develops solutions to Emersub CX, Inc., a wholly owned subsidiary of Emerson (“Newco” or "the Company"), in exchange for Newco common stock, (ii) EMR Worldwide Inc., a wholly owned subsidiary of Emerson (“Emerson Sub”), contributing the Emerson Industrial Software Business, to Newco in exchange for Newco common stock, (iii) the merger of Emersub CXI, Inc., a wholly owned subsidiary of Newco (“Merger Sub”), with and into AspenTech, with AspenTech being the surviving corporation and becoming a wholly owned subsidiary of Newco (the “Merger”) and (iv) as a result of the Merger, each issued and outstanding share of AspenTech common stock (subject to certain exceptions) converting into the right to receive both 0.42 shares of Newco common stock and a per share cash consideration, calculated by dividing $6,014,000,000 by the number of outstanding shares of AspenTech common stock as of the closing of the transaction (the “Closing”) on a fully diluted basis (the foregoing and the other transactions contemplated by the Transaction Agreement collectively, the “Transactions”).

This Form 10-Q is reporting the shell company results for Newco for the three and six months ended March 31, 2022. Since the date of its incorporation, Newco has not engaged in any activities other than as contemplated by the Transaction Agreement and related agreements (the “Transaction Documents”).

A special meeting of Aspen Technology, Inc. stockholders will be held on May 16, 2022 for the following purposes:


1.
To consider and vote on a proposal to adopt the Transaction Agreement and Plan of Merger, dated October 10, 2021, as amended by Amendment No. 1, dated as of March 23, 2022, and as amended by Amendment No. 2, dated as of May 3, 2022 among AspenTech, Emerson, Emerson Sub, Newco and Emersub CXI, Inc., a wholly owned subsidiary of Newco, and approve the transactions contemplated by the Transaction Agreement, including the merger of Merger Sub with and into AspenTech;


2.
To consider and vote on a proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable to AspenTech’s named executive officers in connection with the Transactions;


3.
To consider and vote on a proposal to approve the adjournment of the special meeting if AspenTech determines that it is necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to adopt the Transaction Agreement; and


4.
To transact any other business properly brought before the special meeting and any adjournment or postponement thereof, in each case, by or at the direction of the AspenTech board of directors. Only stockholders of record on the books of AspenTech at the close of business on April 14, 2022, will be entitled to vote at the special meeting or any adjournment or postponement thereof.

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Upon the Closing of the Transactions, the Emerson Industrial Software Business will be considered to be the "acquirer" for accounting purposes and AspenTech will be treated as the "acquired" company. For further information regarding the parties to the Transactions and the details of the Transactions, see Note 2.

Events subsequent to March 31, 2022, including the completion of the Transactions, are not reflected in the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

The accompanying unaudited condensed consolidated financial statements of Newco have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S." and such principles, "U.S. GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial information. All intercompany accounts and transactions have been eliminated. In the opinion of management, the condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of operations, financial position and cash flows of Newco for the periods presented and are not indicative of the results that may be expected for a full year.

At the Closing, Newco will change its registered name with the Secretary of State of Delaware to “Aspen Technology, Inc.” (and thereafter referred to as “New AspenTech”). Immediately following the Closing, Emerson will beneficially own 55% of the outstanding shares of New AspenTech common stock (on a fully diluted basis) and former AspenTech stockholders will own the remaining outstanding shares of New AspenTech common stock. Following the Closing, AspenTech common stock will be delisted from NASDAQ and deregistered under the Securities Exchange Act of 1934, and cease to be publicly traded. New AspenTech and its subsidiaries will operate under AspenTech’s current name “Aspen Technology, Inc.” and New AspenTech common stock will be traded on NASDAQ under AspenTech’s current stock ticker symbol “AZPN”.

(2)  THE TRANSACTION PARTIES

Newco / New AspenTech
Emersub CX, Inc. (“Newco”) is a Delaware corporation that was formed on October 8, 2021 by Emerson Sub for the purpose of engaging in the Transactions. Since the date of its incorporation, Newco has not engaged in any activities other than as contemplated by the Transaction Agreement and other related agreements. Following the completion of the Transactions, Newco (thereafter being referred to as New AspenTech) will be a holding company whose principal asset will be the ownership of AspenTech and the Emerson Industrial Software Business. Immediately after the completion of the Transactions, New AspenTech’s equity capital will consist solely of the New AspenTech common stock issued pursuant to the Transactions. The principal executive offices of Newco will be located in Bedford Massachusetts.

AspenTech
AspenTech is a global leader in asset optimization software. Its solutions address complex industrial environments where it is critical to optimize the asset design, operationoperations and maintenance lifecycle. AspenTech uniquely combines decadesThrough the Company's unique combination of process modellingproduct capabilities and deep domain expertise with artificial intelligence. Its purpose-built software platform automates knowledge work and builds sustainable competitive advantage by delivering high returns over the entire asset lifecycle. As a result, companiesaward-winning innovation, customers across diverse end markets in capital-intensive industries can maximize uptime and push the limits of performance, runningimprove their assets safer, greener, longer and faster. The principal executive offices of AspenTech are located in Bedford Massachusetts.operational excellence while achieving sustainability goals.

7
On October 10, 2021, Emerson andElectric Co. (“Emerson”) entered into a definitive agreement (the “Transaction Agreement”) with Aspen Technology Corporation. (“Heritage AspenTech”) to contribute the Emerson Industrial Software Business
Emerson, headquartered (the "Industrial Software Business"), along with $6.014 billion in St. Louis, MO, is a global technology and engineering company providing innovative solutions for customers in industrial, commercial and residential markets. Its Automation Solutions business helps process, hybrid and discrete manufacturers maximize production, protect personnel and the environment while optimizing their energy and operating costs. Its Commercial & Residential Solutions business helps ensure human comfort and health, protect food quality and safety, advance energy efficiency andcash, to create sustainable infrastructure.

AspenTech (the “Transaction”). The Emerson Industrial Software Business is comprised ofincluded Open Systems International, Inc. (“OSI Inc.”) and Emerson’s Geological Simulation Software (“GSS”) business., which we have renamed as Subsurface Science & Engineering (“SSE”). The Transaction closed on May 16, 2022 (“Closing Date”). Emerson owns 55% of AspenTech on a fully diluted basis as of September 30, 2022.

On July 27, 2022, the Company entered into a definitive agreement to acquire Mining Software Holdings Pty Ltd ("Micromine") for AU $900 million in cash (approximately $623.0 million based on exchange rates when the acquisition was initially announced). Micromine is a global leader in design and operational management solutions for the metals and mining industry. The Company currently intends to finance the transaction through a combination of cash on hand and additional debt financing. The acquisition is expected to close in the fiscal second quarter of 2023, subject to receipt of regulatory approvals.

The Company operates globally in 80 countries as of September 30, 2022.

Basis of Presentation

The accompanying consolidated and combined financial statements include the accounts of Aspen Technology, Inc. and our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The Transaction was accounted for as a business combination in accordance with U.S. GAAP, with the Industrial Software Business treated as the “acquirer” and Heritage AspenTech treated as the “acquired” company for financial reporting purposes. Accordingly, for the three-month interim period ended September 30, 2021, the consolidated and combined financial statements comprise the results of the Industrial Software Business only and do not include the results of Heritage AspenTech.

We have prepared the accompanying consolidated and combined financial statements as of September 30, 2022, and for the first quarter of fiscal 2023 and 2022, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and in accordance with generally accepted accounting principles in the United States (GAAP). These consolidated and combined financial statements should be read in conjunction with the consolidated and combined financial statements and the notes thereto included in our Transition Reports on Form 10-KT for the fiscal year ended June 30, 2022.

The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the consolidated and combined financial statements and accompanying notes. The actual results that we experience may differ materially from our estimates.

Certain reclassifications have been made to the amounts in prior periods in order to conform to the current period’s presentation. We have evaluated subsequent events through the date that the financial statements were issued.

Russia and Ukraine

While the Company has no operations in Ukraine, the ongoing conflict there could negatively impact its financial position, results of operations and cash flows. The United States and other governments have imposed sanctions and taken other regulatory actions that adversely affect doing business in Russia and with Russian companies. The Company maintains operations in Russia, licenses software and provides related services to customers in Russia and areas of Ukraine that are not under sanction. The Company had net sales of approximately $10.0 million for the three-month period ended September 30, 2022, and total assets of approximately $24.5 million as of September 30, 2022, related to operations in Russia. While the conflict has not had a material impact on the Company's financial results thus far, the Company continues to evaluate the impact of the various sanctions, export control measures and business restrictions imposed by the United States and other governments on its ability to do business in Russia and areas of Ukraine that are not under sanction, maintain contracts with vendors and pay employees in Russia, as well as receive payment from customers in Russia and areas of Ukraine that are not
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under sanction. The outcome of these assessments will depend on how the conflict evolves and on further actions that may be taken by the United States, Russia, and other governments around the world. As a software company, no material impact to supply chain operations is expected due to the conflict in Ukraine.

If the sanctions and other retaliatory measures and restrictions imposed by the global community change, the Company may be required to cease or suspend operations in the region or, should the conflict or the effects of these sanctions, measures and restrictions worsen, the Company may voluntarily elect to do so. Any disruption to, or suspension of, the Company’s business and operations in Russia would result in the loss of revenues from the business in Russia. In addition, as a result of the risk of collectability of receivables from customers in Russia, the Company may be required to adjust accounting practices relating to revenue recognition in this region, with the result that the Company may not be able to recognize revenue until risk of revenue reversal is not probable.

2.  Significant Accounting Policies
Our significant accounting policies are described in Note 2 to the consolidated and combined financial statements included in our Transition Reports on Form 10-KT for the fiscal year ended June 30, 2022. There were no material changes to our significant accounting policies during the three months ended September 30, 2022, other than those noted below.

(a)Derivatives and Hedging

We use derivative instruments to manage exposures to foreign currency exchange rate risks. Our primary objective is holding derivatives to reduce the volatility of cash flows associated with changes in foreign currency exchange rates. Our derivatives expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. We do seek to mitigate such risks by limiting our counterparties to major financial institutions. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored. Management does not expect material losses as a result of defaults by counterparties.

The Company accounts for derivative transactions in accordance with ASC Topic 815, “Derivatives and Hedging,” and recognizes derivatives instruments as either assets or liabilities in the consolidated and combined balance sheet and measures those instruments at fair value. The Company’s foreign currency forward contracts as described in Note 11 do not qualify for hedge accounting.Accordingly, the changes in fair value of the derivative transactions are presented currently in earnings.

(b) Recently Issued Accounting Pronouncements

Recently issued accounting pronouncement that will be applicable to the Company are not expected to have a material impact on the Company’s consolidated and combined financial statements.
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3.   Revenue from Contracts with Customers

Contract Assets and Contract Liabilities

The contract assets are subject to credit risk and reviewed in accordance with ASC 326. The Company monitors the credit quality of customer contract asset balances on an individual basis, at each reporting date, through credit characteristics, geographic location, and the industry in which they operate. The Company recognizes an impairment on contract assets if, subsequent to contract inception, it becomes probable payment is not collectible. An allowance for expected credit loss reflects losses expected over the remaining term of the contract asset and is determined based upon historical losses, customer-specific factors, and current economic conditions. The Company's contract assets and contract liabilities were as follows as of September 30, 2022 and June 30, 2022:
September 30,
2022		June 30,
2022
(Dollars in Thousands)
Contract assets$916,091 $857,065 
Contract liabilities(152,607)(164,408)
$763,484 $692,657 

Contract assets and contract liabilities are presented net at the contract level for each reporting period.

The majority of the Company’s contract balances are related to arrangements where revenue is recognized at a point in time and payments are made according to a contractual billing schedule. The change in net contract liabilities during the three months ended September 30, 2022 was primarily due to an increase in new billings in advance of revenue recognition, partially offset by $55.2 million of revenue recognized that was included in net contract liabilities as of June 30, 2022.

The Company did not have any customer that accounted for 10 percent or more of the Company’s revenues for the three months ended September 30, 2022 and 2021, respectively.

Transaction Price Allocated to Remaining Performance Obligations

The following table includes the aggregate amount of the transaction price allocated as of September 30, 2022 to the performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period:
Year Ending June 30,
20232024202520262027Thereafter
(Dollars in Thousands)
License and solutions$123,298 $84,137 $24,293 $10,453 $803 $— 
Maintenance64,654 29,123 10,731 5,187 7,375 4,966 
Services and other10,847 5,010 1,979 1,672 853 2,954 
The table below reflects disaggregated revenues by business for the three months ended September 30, 2022 and 2021, respectively.
Three Months Ended September 30,
20222021
Heritage AspenTech$176,406 $— 
SSE32,988 29,097 
OSI, Inc.41,425 47,918 
Total$250,819 $77,015 

4. Acquisitions

Inmation Software GmbH

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On August 29, 2022, the Company completed the acquisition of Inmation Software GmbH (“Inmation”) for a total cash consideration of $87.4 million. The purchase price consisted of $78.9 million of cash paid at closing and an additional $8.5 million to be held back until August 2023 as security for certain representations, warranties, and obligations of the sellers. The holdback is recorded in accrued expenses and other current liabilities in our consolidated and combined balance sheets. The total cash acquired from Inmation was approximately $4.0 million resulting in a net cash payment of $74.9 million during the three months ending September 30, 2022. The Company recognized goodwill of $63.6 million (none of which is expected to be tax deductible) and identifiable intangible assets of $31.5 million, primarily developed technology and customer relationships, with a useful life of approximately 5 years for developed technology and 7 years for customer relationships. The fair value of assets acquired and liabilities assumed represent the preliminary fair value estimates as of September 30, 2022, and are subject to subsequent adjustments as the Company obtains additional information during the measurement period and finalizes its fair value estimates.

Inmation’s revenue and net loss included in the Company’s consolidated and combined income statement from the acquisition date to the first reporting period ending on September 30, 2022 were $0.3 million and $(0.2) million, respectively. Results included amortization of developed technology and customer relationships of $0.5 million. The Company has not furnished pro forma financial information relating to Inmation because such information is not material to the Company’s financial results.

Prior to the closing date, Inmation was considered a related party to AspenTech as Emerson, through one of its subsidiaries, held an equity-method investment in Inmation. At the time of close, $17.6 million was paid to Emerson in exchange for all its shares in Inmation, with another $2.0 million to be paid 12 months after the close.

Heritage AspenTech

On October 10, 2021, Emerson entered into the Transaction with Heritage AspenTech to contribute the Industrial Software Business comprised of OSI and SSE, along with $6.014 billion in cash, to create the Company. On the Closing Date, Emerson owned 55% of the outstanding common shares of AspenTech on a fully diluted basis, while the stockholders of Heritage AspenTech owned the remaining 45%. The acquisition-date fair value of the purchase consideration totaled $11.19 billion.

During the first quarter of fiscal 2023, the Company recorded purchase price allocation adjustments that increased goodwill by $1.9 million. The following table sets forth the purchase price allocation of the Heritage AspenTech acquisition:

Amount
(Dollars in Thousands)
Cash and cash equivalents$273,728 
Accounts receivable43,163 
Current and non-current contract assets730,548 
Intangible assets4,390,667 
Other net assets acquired64,342 
Total asset acquired (excluding Goodwill)5,502,448 
Accounts payable, accrued expenses, and other current liabilities53,841 
Current and non-current deferred revenue62,319 
Current and non-current borrowings under credit agreement282,000 
Deferred income taxes1,078,463 
Other net liabilities assumed62,279 
Total liabilities assumed1,538,902 
Net identifiable assets acquired3,963,546 
Goodwill7,224,730 
Net assets acquired$11,188,276 

The following pro forma consolidated and combined financial results of operations are presented as if the Heritage AspenTech acquisition occurred on October 1, 2020. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved had the acquisition occurred as of that time.

Three Months Ended
September 30,
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20222021
(Dollars in Thousands)
Total revenue$250,819 $213,035 
Net (loss)(6,233)(45,604)


5. Intangible Assets

Intangible assets consisted of the following as of September 30, 2022 and June 30, 2022:
Developed TechnologyTrademarksCustomer Relationships and BacklogCapitalized Software and OtherTotal
(Dollars in Thousands)
September 30, 2022:
Gross carrying amount$1,902,575 $464,400 $3,081,579 $10,149 $5,458,703 
Less: Accumulated amortization(201,017)(10,489)(216,733)(8,555)(436,794)
Net carrying amount$1,701,558 $453,911 $2,864,846 $1,594 $5,021,909 
June 30, 2022:
Gross carrying amount$1,882,037 $464,400 $3,072,738 $10,149 $5,429,324 
Less: Accumulated amortization(153,758)(9,379)(144,888)(8,518)(316,543)
Net carrying amount$1,728,279 $455,021 $2,927,850 $1,631 $5,112,781 

The increase in intangible assets from June 30, 2022 was primarily due to the Inmation acquisition. See Note 4, Acquisitions. Total intangible asset amortization expense was $121.2 million, of which $97.9 million related to the Heritage AspenTech acquisition, and $28.8 million during the three months ended September 30, 2022 and 2021, respectively.

6. Goodwill

The changes in the carrying amount of goodwill during the three months ended September 30, 2022 were as follows:

Carrying Value
(Dollars in Thousands)
Balance, June 30, 2022$8,266,809 
Goodwill from Inmation acquisition63,577 
Purchase accounting adjustment from Heritage AspenTech acquisition1,931 
Foreign currency translation(5,981)
Balance, September 30, 2022$8,326,336 

7.   Fair Value
The Company determines fair value by utilizing a fair value hierarchy that ranks the quality and reliability of the information used in its determination. Fair values determined using “Level 1 inputs” utilize unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Fair values determined using “Level 2 inputs” utilize data points that are observable, such as quoted prices, interest rates and yield curves for similar assets and liabilities. 

Cash equivalents are reported at fair value utilizing quoted market prices in identical markets, or “Level 1 Inputs.” The Company's cash equivalents consist of short-term money market instruments.

Equity method investments are reported at fair value calculated in accordance with the market approach, utilizing market consensus pricing models with quoted prices that are directly or indirectly observable, or “Level 2 Inputs.”

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Our derivative instruments are primarily classified as Level 2, as they are not actively traded and are valued using pricing models that use observable market inputs.

The following table summarizes financial assets and liabilities measured and recorded at fair value on a recurring basis in the accompanying consolidated and combined balance sheets as of September 30, 2022 and June 30, 2022, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

Fair Value Measurements at Reporting Date Using
Quoted Prices in Active Markets for Identical Assets
(Level 1 Inputs)
Significant Other Observable Inputs
(Level 2 Inputs)
(Dollars in Thousands)
September 30, 2022:
Cash equivalents$1,026 $— 
Equity method investments— 2,032 
   Derivative liabilities— (50,259)
June 30, 2022:
Cash equivalents2,998 — 
Equity method investments$— $1,761 

Financial instruments not measured or recorded at fair value in the accompanying consolidated and combined financial statements consist of accounts receivable, accounts payable and accrued liabilities. The estimated fair value of these financial instruments approximates their carrying value. The estimated fair value of the borrowings under the Amended and Restated Credit Agreement (described below in Note 8, “Credit Agreement”) approximates its carrying value due to the floating interest rate.

8.  Debt

Bridge Facility
On July 27, 2022, the Company entered into a $475.0 million senior unsecured bridge facility (the “Bridge Facility”) with JPMorgan Chase Bank, N.A. (“JPMorgan”), as Administrative Agent, to finance the Micromine acquisition. The Bridge Facility was entered into under the existing Amended and Restated Credit Agreement dated as of December 23, 2019, with JPMorgan ("Credit Agreement"). The Company may elect that each incremental borrowing under the Bridge Facility bear interest at a rate per annum equal to (a) the Alternate Base Rate (“ABR”), plus the applicable margin or (b) the Adjusted Term Secured Overnight Financing Rate (“SOFR”), plus the applicable margin. The outstanding balance under the Bridge Facility as of September 30, 2022 was $0 million and is payable 364 days after the closing date of July 27, 2022.

As consideration for JPMorgan’s agreement to act as administrative agent for the Bridge Facility, the Company is required to pay a fee of $50,000 per annum, payable on the closing date of the loan and every anniversary thereof during the term of the loan.

In addition, the Company incurred issuance costs associated with the Bridge Facility. For the three months ended September 30, 2022, the Company has paid in total $2.375 million fees to JPMorgan to secure the Bridge Facility, which was recorded as other current assets and is being amortized to interest expense over the estimated term of the loan.

Credit Agreement

The Company also has a Credit Agreement with JP Morgan that provides for a $200.0 million secured revolving credit facility and a $320.0 million secured term loan facility.

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As of September 30, 2022, the Company's current and non-current borrowings, under the term loan facility, were $30.0 million and $240.0 million, respectively. As of June 30, 2022, the Company's current and non-current borrowings, under the term loan facility, were $28.0 million and $245.6 million, respectively. The interest rate on the term loan facility as of September 30, 2022 was 2.74%. There were no amounts outstanding under the revolving credit facility at either September 30, 2022 or June 30, 2022. Any outstanding balances of the indebtedness under the revolving credit facility mature on December 23, 2024.

The following table summarizes the maturities of the term loan facility:

Year Ending June 30,Amount
 (Dollars in Thousands)
2023$22,000 
202436,000 
2025212,000 
Total$270,000 

The Credit Agreement contains customary affirmative and negative covenants, which are also applicable to the Bridge Facility, including restrictions on incurrence of additional debt, liens, fundamental changes, asset sales, restricted payments (including dividends) and transactions with affiliates. There are also financial covenants measured at the end of each fiscal quarter including a maximum leverage ratio of 3.50 to 1.00 and a minimum interest coverage ratio of 2.50 to 1.00. As of September 30, 2022, the Company was in compliance with all the loan covenants.
9.  Stock-Based Compensation

The stock-based compensation expense under all equity plans and its classification in the unaudited consolidated and combined statements of operations for the three months ended September 30, 2022 and 2021 are as follows:
Three Months Ended
September 30,
 20222021
 (Dollars in Thousands)
Recorded as expenses:  
Cost of license and solutions$742 $— 
Cost of maintenance561 — 
Cost of services and other408 — 
Selling and marketing3,347 — 
Research and development3,611 — 
General and administrative9,067 368 
Total stock-based compensation$17,736 $368 

During the three month period ended September 30, 2022, the Company granted 162,383 stock options and 164,098 restricted stock units (“RSUs”). The stock options granted had a weighted average exercise price of $211.87 per option and a weighted average fair value of $77.29 per option. The RSUs granted had a weighted average fair value of $207.02 per RSU.
10.  Net Income Per Share
Basic income per share is determined by dividing net income by the weighted average common shares outstanding during the period. Diluted income per share is determined by dividing net income by diluted weighted average shares outstanding during the period. Diluted weighted average shares reflect the dilutive effect, if any, of potential common shares. To the extent their effect is dilutive, employee equity awards and other commitments to be settled in common stock are included in the calculation of diluted net income per share based on the treasury stock method.
Prior to the Transaction, the Industrial Software Business did not have any shares of common stock outstanding. Accordingly, net loss per share for the three months ended September 30, 2021 has been calculated using weighted average shares outstanding (basic and diluted) based on the number of shares of common stock issued to Emerson on the Closing Date of the Transaction.
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The calculations of basic and diluted net income per share and basic and dilutive weighted average shares outstanding for the three months ended September 30, 2022 and 2021 are as follows:
Three Months Ended
September 30,
 (Dollars and Shares in Thousands, Except per Share Data)20222021
 
Net (loss)$(11,244)$(11,202)
Basic weighted average shares outstanding64,454 36,308 
Dilutive weighted average shares outstanding64,454 36,308 
(Loss) per share  
Basic$(0.17)$(0.31)
Dilutive$(0.17)$(0.31)
For the three months ended September 30, 2022, and 2021 certain employee equity awards were anti-dilutive based on the treasury stock method. The following employee equity awards were excluded from the calculation of dilutive weighted average shares outstanding because their effect would be anti-dilutive as of September 30, 2022 and 2021:
Three Months Ended
September 30,
 20222021
 (Shares in Thousands)
Employee equity awards286 — 

Included in the table above are options to purchase 49,079 shares of our common stock during the three months ended September 30, 2022, which were not included in the computation of dilutive weighted average shares outstanding, because their exercise prices ranged from $208.57 per share to $225.63 per share and were greater than the average market price of our common stock during the period then ended. These options were outstanding as of September 30, 2022 and expire at various dates through September 13, 2032.

11.   Derivatives

In connection with the agreement to purchase Micromine, the Company also entered into foreign currency forward contracts on August 2, 2022 for a six-month period ending on February 6, 2023 to mitigate the impact of foreign currency exchange associated with the forecasted payment of purchase price. The acquisition is expected to close in the second quarter of fiscal 2023.

The notional amounts of our outstanding derivatives are in total AU $900 million. As of September 30, 2022, the fair values of our derivative instruments were $50.3 million and were recorded to the liability from foreign currency forward contract caption on the consolidated and combined balance sheets. For the three months ended September 30, 2022, the Company recognized losses of $50.3 million and recorded as part of the other income (expense), net on the consolidated and combined statements of operations.

12.   Benefit for Income Taxes
Benefit for income taxes was $93.5 million and $4.3 million for the three months ended September 30, 2022 and 2021, respectively, resulting in effective tax rates of 89.3% and 27.8%, respectively. Income tax benefit increased due to the higher Foreign-Derived Intangible Income (“FDII”) deduction recorded in the current period as a result of non-deductible amortization of intangibles, capitalized R&D costs, and a change in the accounting methodology related to historical revenue recognition for tax purposes on multi-year software license agreements. The change resulted in the recognition of taxable income over a 4 tax year period with fiscal year 2024 as the last year of the adjustment.

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13. Related-Party Transactions

The Company utilizes Emerson's centralized treasury function which manages the working capital and financing needs of its business operations. This function oversees a cash pooling arrangement which sweeps certain Company cash accounts into pooled Emerson cash accounts on a daily basis. Pooled cash and nontrade balances attributable to Emerson have been presented as receivables from related parties or due to related parties in the consolidated and combined financial statements of the Company.

Before the Closing Date, the Industrial Software Business was charged for costs directly attributable to the SSE and OSI and was allocated a portion of Emerson’s costs, including general corporate costs, information technology costs, insurance and other benefit costs, and shared service and other costs. All of these costs are reflected in the Company’s consolidated and combined financial statements. Management believes the methodologies and assumptions used to allocate these costs are reasonable.

At the Closing Date, Emerson and the Company entered into the transition service agreement (“TSA”) for the provision of certain transitionary services from Emerson to AspenTech. Pursuant to the TSA, Emerson will provide AspenTech and its subsidiaries with certain services, including information technology, human resources and other specified services, as well as access to certain of Emerson’s existing facilities. TSA related activities have been recorded as cost of goods sold or operating expenses from related parties and resulting balances have been presented as receivable from or due to related parties in the consolidated and combined financial statements presented.

Receivables from related parties and due to related parties reported in the consolidated and combined balance sheets as of September 30, 2022 and June 30, 2022 include the following:
September 30,June 30,
20222022
Interest bearing receivables from related parties$14,518 $16,122 
Trade receivables from related parties55 819 
Interest bearing payables to related parties14,460 2,028 
Trade payables to related parties2,059 2,083 

Allocations and charges from Emerson are as follows:

Three Months Ended
September 30, 2022
20222021
Corporate costs$— $601 
Information technology811 1,048 
Insurance and other benefits— 229 
Shared services and other2,697 4,316 

Corporate costs, human resources, and insurance and other benefits are recorded in general and administrative expenses and information technology, facility charges, and shared services and other are allocated to cost of goods sold and operating expenses based on systemic methods.

Before the Closing Date, OSI and SSE engaged in various transactions to sell software and purchase goods in the ordinary course of business with affiliates of Emerson. At the Closing Date, the Company and Emerson entered into a commercial agreement to allow Emerson to distribute software and services from AspenTech. (the “Commercial Agreement”). Pursuant to the Commercial Agreement, AspenTech will grant Emerson the right to distribute, on a non-exclusive basis, certain (i) existing Heritage AspenTech products, (ii) existing Emerson products being transferred to AspenTech pursuant to the Transaction Agreement and (iii) future AspenTech products as mutually agreed upon, in each case, to end-users through Emerson acting as an agent, reseller or original equipment manufacturer. Commercial Agreement related activities have been recorded as revenues and expenses from related parties and resulting trade balances have been presented as trade receivables from related parties in the consolidated and combined financial statements presented. Revenue from Emerson are as follows:
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Three Months Ended
September 30, 2022
20222021
Revenue from Emerson affiliates$4 $— 
Purchases from Emerson affiliates139 840 

Emerson Share Maintenance Rights

Immediately following the Closing Date, Emerson beneficially owned 55% of the fully diluted shares of AspenTech common stock. Under the Shareholders Agreement, Emerson has the right to acquire additional equity securities of AspenTech pursuant to pre-agreed procedures and rights in order to maintain its 55% ownership. No additional shares of common stock, or any other equity securities of AspenTech, were issued to Emerson subsequent to the Closing Date through September 30, 2022.

Business combination with related party

The Inmation acquisition completed on August 29, 2022 was considered a related party transaction. Refer to Note 4, “Acquisitions”, to our consolidated and combined financial statements for further discussion.

14.  Segment Information
Operating segments are defined as components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and to assess performance.

Prior to the Transactions, the Industrial Software Business had two operating and reportable segments: OSI Inc. and GSS are part of Emerson’s Automation(subsequently renamed Subsurface Science & Engineering Solutions, business. OSI Inc. offers operational technology (“OT”) solutions that enable utilities to control generation, transmission, and distribution of power and ultimately ensure supply equals demandor “SSE”, after the Closing Date). The Transactions resulted in the power grid. GSS iscreation of a leading developerthird operating and reportable segment: Heritage AspenTech. During the three months ended September 30, 2022, the Company completed certain integration activities and changes to its organizational structure that triggered a change in the composition of software solutions to the global energyits operating and alternative energy, carbon capture and storage, and minerals and mining industries. GSS provides geological simulation software that characterizes subsurface geological formations from seismic interpretation to dynamic simulation, connecting reservoirs to operational activities to optimize production and utilization.

Emerson Sub
EMR Worldwide, Inc. (Emerson Sub) isreportable segments.As a wholly owned subsidiary of Emerson that,result, as of immediately prior toSeptember 30, 2022, the Closing, will hold allCompany is now comprised of a single operating and reportable segment. Accordingly, the equity interests of the holding company that will hold directly or indirectly the Emerson Industrial Software Business, which holding company will be contributed to Newco as part of the Transactions. Emerson Sub is,Company has restated its operating and will be prior to and following the Closing, wholly owned by Emerson.

Merger Sub
Emersub CXI, Inc. (Merger Sub) has been formed solelyreportable segment information for the purpose of engagingthree months ended September 30, 2021. The Company's chief operating decision maker is its President and Chief Executive Officer.

Geographic Information

Summarized below is information about the Company's geographic operations:

Revenue by Destination

Three Months Ended September 30,
20222021
Americas$130,858 $51,897 
Asia, Middle East and Africa53,671 10,563 
Europe66,290 14,555 
Total$250,819 $77,015 

Americas included revenue in the Transactions. SinceU.S. of $112.2 million and $49.0 million for the datethree months ended September 30, 2022 and 2021.

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Table of its incorporation, Merger Sub has not engagedContents
Property, Equipment, and
Leasehold Improvements, Net
September 30, 2022June 30, 2022
Americas$14,645 $14,591 
Asia, Middle East and Africa1,597 1,154 
Europe868 1,403 
Total$17,110 $17,148 

Property, equipment, and leasehold improvements located in any activities other thanthe U.S. were $25.2 million and $13.0 million as contemplated by the Transaction Agreementof September 30, 2022 and other related agreements. Merger Sub is, and will be prior to the Closing, a corporation incorporated in Delaware and wholly and directly owned by Newco.June 30, 2022.

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(3) RELATED PARTY TRANSACTIONS

As of March 31, 2022 and October 8, 2021, a stockholder receivable of $1 was due from Emerson Sub.

(4) COMMITMENTS AND CONTINGENCIES

On January 21, 2022, purported stockholders of AspenTech filed a complaint in the Southern and Eastern Districts of New York alleging that disclosures contained within Newco’s registration statement on Form S-4 are incomplete.  Newco intends to defend the case vigorously and believes it will ultimately prevail.  The complaint is captioned: Ciccotelli v. Aspen Technology, Inc. et al., Case 22-cv-00581 (S.D.N.Y.). The plaintiff seeks various remedies, including among other things, injunctive relief to prevent the consummation of the Transactions, unless certain allegedly material information is disclosed.

Item 2.

Management's   Management’s Discussion and Analysis of Financial Condition and Results of Operations Operations.

The following discussionCaution Concerning Forward-Looking Statements

This Quarterly Report contains forward-looking statements that involve substantial risks and analysis should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and accompanying notes, which appear elsewhereuncertainties. All statements other than statements of historical facts contained in this Quarterly Report, on Form 10-Q.

Emersub CX, Inc., a wholly owned subsidiary of Emerson (“Newco”), is a Delaware corporation that was formed for the purpose of engaging in the Transactions. Since the date of its incorporation, Newco has not engaged in any activities other than as contemplated by the Transaction Agreement and other related agreements. Newco did not commence operations, had no significant assets or liabilities and did not conduct any activities other than those incidental to its formation and matters contemplated by the Transaction Agreement for the six months ended March 31, 2022.

Additional information about Newco is included in the documents incorporated by reference into this report.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking” statements as that term is defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”), including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, prospective products, size of market, plans, objectives of management, expected market growth and the proposed Transactions among Emerson, Newcoanticipated effects of the coronavirus (COVID-19) pandemic (and any COVID-19 variants, the “COVID-19 pandemic”) on our business, operating results and AspenTech. All statements, other than historical facts,financial condition are forward-looking statements, including: statements regarding the expected timing and structure of the proposed Transactions; the ability of the parties to complete the proposed Transactions considering the various closing conditions; the expected benefits of the proposed Transactions, such as improved operations, enhanced revenues and cash flow, synergies, growth potential, market profile, business plans, expanded portfolio and financial strength; the competitive ability and position of New AspenTech following completion of the proposed Transactions; the projected future financial performance of the Emerson Industrial Software Business, AspenTech and New AspenTech; legal, economic and regulatory conditions; and any assumptions underlying any of the foregoing. statements.

Forward-looking statements concern future circumstances and results and other statements that are not historical facts and are sometimes identified by the words “may,” “will,” “should,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “overestimate,” “underestimate,” “believe,” “plan,” “could,” “would,” “project,” “predict,” “continue,” “target” or other similar words or expressions or negatives of these words, but not all forward-looking statements include such identifying words. Forward-looking statements are based upon current plans, estimates and expectations that are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. We can give no assurance that such plans, estimates or expectations will be achieved and therefore, actual results may differ materially from any plans, estimates or expectations in such forward-looking statements.

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Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others: (1) that one or more closing conditions to the transaction, including certain regulatory approvals, may not be satisfied or waived, on a timely basis or otherwise, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the proposed transaction, may require conditions, limitations or restrictions in connection with such approvals or that the required approval by the stockholders of AspenTech may not be obtained; (2) the risk that the proposed transaction may not be completed in the time frame expected by Emerson, AspenTech or Newco, or at all; (3) unexpected costs, charges or expenses resulting from the proposed transaction; (4) uncertainty of the expected financial performance of New AspenTech following completion of the proposed transaction; (5) failure to realize the anticipated benefits of the proposed transaction, including as a result of delay in completing the proposed transaction or integrating the Emerson Industrial Software Business of Emerson with the business of AspenTech; (6) the ability of New AspenTech to implement its business strategy; (7) difficulties and delays in achieving revenue and cost synergies of New AspenTech; (8) inability to retain and hire key personnel; (9) the occurrence of any event that could give rise to termination of the proposed transaction; (10) potential litigation in connection with the proposed transaction or other settlements or investigations that may affect the timing or occurrence of the contemplated transaction or result in significant costs of defense, indemnification and liability; (11) evolving legal, regulatory and tax regimes; (12) changes in economic, financial, political and regulatory conditions, in the United States and elsewhere, and other factors that contribute to uncertainty and volatility, natural and man-made disasters, civil unrest, pandemics (e.g., the coronavirus (COVID-19) pandemic (the “COVID-19 pandemic”)), geopolitical uncertainty, and conditions that may result from legislative, regulatory, trade and policy changes associated with the current or subsequent U.S. administration; (13) the ability of Emerson, AspenTech and Newco to successfully recover from a disaster or other business continuity problem due to a hurricane, flood, earthquake, terrorist attack, war, pandemic, security breach, cyber-attack, power loss, telecommunications failure or other natural or man-made event, including the ability to function remotely during long-term disruptions such as the COVID-19 pandemic; (14) the impact of public health crises, such as pandemics (including the COVID-19 pandemic) and epidemics and any related company or governmental policies and actions to protect the health and safety of individuals or governmental policies or actions to maintain the functioning of national or global economies and markets, including any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down or similar actions and policies; (15) actions by third parties, including government agencies; (16) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the transaction; (17) the risk that disruptions from the proposed transaction will harm Emerson’s and AspenTech’s business, including current plans and operations; (18) certain restrictions during the pendency of the acquisition that may impact Emerson’s or AspenTech’s ability to pursue certain business opportunities or strategic transactions; (19) Emerson’s, AspenTech’s and New AspenTech’s ability to meet expectations regarding the accounting and tax treatments of the proposed transaction; and (20) other risk factors as detailed from time to time in Emerson’s and AspenTech’s reports filed with the SEC, including Emerson’s and AspenTech’s annual report on Form 10-K, periodic quarterly reports on Form 10-Q, periodic current reports on Form 8-K and other documents filed with the SEC.  While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements.

Any forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Newco does notReport. We undertake anyno obligation to update any forward-looking statements, whether as a result of new information or developments,development, future events or otherwise, except as required by law. ReadersYou should read the following discussion in conjunction with our unaudited consolidated and combined financial statements and related notes thereto contained in this report.  You should also read “Item 1A. Risk Factors” of Part II for a discussion of important factors that could cause our actual results to differ materially from our expectations.
Our fiscal year ends on June 30, and references in this Quarterly Report to a specific fiscal year are cautioned notthe twelve months ended June 30 of such year with the exception of fiscal 2022 being the nine months ended June 30 (for example, “fiscal 2023” refers to place undue reliancethe year ending June 30, 2023).


Business Overview

We are a global leader in asset optimization software that enables industrial manufacturers to design, operate, and maintain their operations for maximum performance. We combine decades of modeling, simulation, and optimization capabilities with industrial operations expertise and apply advanced analytics to improve the profitability and sustainability of production assets. Our purpose-built software is proven to drive value creation levers for our customers; improving operational efficiency and maximizing productivity, reducing unplanned downtime and safety risks, and minimizing energy consumption and emissions. Our technology is at the center of their sustainability and decarbonization programs, enabling circularity through improved industrial technologies and more degradable and recyclable plastics, and supporting the broader energy transition with advanced solutions for power transmission and distribution, carbon capture, storage and utilization, batteries and energy storage. Cybersecurity is foundational in the design of our software.

On May 16, 2022, Heritage AspenTech and Emerson Electric Co. (“Emerson”) and certain of its subsidiaries, entered into a definitive agreement pursuant to, among other matters Emerson and its subsidiaries contributed to Heritage AspenTech Shareholders $6,014,000,000 in cash and its Open Systems International, Inc. business (the “OSI business" or "OSI Inc.") and Geological Simulation Software business, which we have renamed as Subsurface Science & Engineering (the “SSE business” or "SSE") in exchange for 55% of our outstanding common stock (on a fully diluted basis).

By combining the software capabilities, deep domain expertise and leadership of Heritage AspenTech with the OSI and SSE businesses, we have created a company that we believe will deliver superior value to customers across diverse end markets including energy, chemicals, power transmission and distribution, engineering, procurement, and construction, pharmaceuticals, and metals and mining, among others.

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For the quarter ended September 30, 2022, the consolidated and combined financial statements comprised the results of OSI Inc., SSE and Heritage AspenTech, while for the same period in the prior fiscal year, these financial statements comprised the results of only OSI Inc. and SSE. Certain financial information for the periods ended September 30, 2021 have been reclassed to conform to the consolidated and combined financial statements for the three-month period ended September 30, 2022.

Recent Events

On July 27, 2022, we announced that we entered into a definitive agreement to acquire Micromine, a global leader in design and operational management solutions for the metals and mining industry, from private equity firm Potentia Capital and other sellers for AU $900 million in cash (approximately $623 million USD based on anyforeign currency exchange rate at the time of announcement). We currently intend to finance the transaction through a combination of cash on hand and additional debt financing. The acquisition currently is expected to close in the fiscal second quarter of 2023, subject to receipt of regulatory approvals. In connection with the agreement to purchase Micromine, we also entered into foreign currency forward contracts on August 2, 2022 for a six-month period ending on February 6, 2023 to mitigate the impact of foreign currency exchange associated with the forecasted payment of purchase price.

Key Business Metrics

Background

We utilize key business metrics to track and assess the performance of our business. We have identified the following set of appropriate business metrics in the context of our evolving business:

•Annual Contract Value

•Total Contract Value

•Bookings

We also use the following non-GAAP business metrics in addition to GAAP measures to track our business performance:

•Free cash flow

•Non-GAAP operating income

We make these measures available to investors and none of these forward-looking statements.metrics should be considered as an alternative to any measure of financial performance calculated in accordance with GAAP.

Annual Contract Value

Annual contract value (ACV) is an estimate of the annual value of our portfolio of term license and software maintenance and support (SMS) contracts, the annual value of SMS agreements purchased with perpetual licenses, and the annual value of standalone SMS agreements purchased with certain legacy term license agreements, which have become an immaterial part of our business.

Comparing ACV for different dates can provide insight into the growth and retention rates of our recurring software business because ACV represents the estimated annual billings associated with our recurring license and maintenance agreements at any point in time. Management uses the ACV business metric to evaluate the growth and performance of our business as well as for planning and forecasting purposes. We believe that ACV is a useful business metric to investors as it provides insight into the growth component of our software business.

ACV generally increases as a result of new term license and SMS agreements with new or existing customers, renewals or modifications of existing term license agreements that result in higher license fees due to contractually-agreed price escalation or an increase in the number of tokens (units of software usage) or products licensed, or an increase in the value of licenses delivered.

ACV is adversely affected by term license and SMS agreements that are renewed at a lower entitlement level or not renewed, a decrease in the value of licenses delivered, and, to a lesser extent, by customer agreements that become inactive
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during the agreement’s term because, in our determination, amounts due (or which will become due) under the agreement are not collectible. As ACV is an estimate of annual billings, it will generally not include contracts with a term of less than one year. Because ACV represents all other active term software and SMS agreements, it may include amounts under agreements with customers that are delinquent in paying invoices, that are in bankruptcy proceedings, are subject to termination by the customer or where payment is otherwise in doubt.

As of September 30, 2022, customer agreements representing approximately 84% of our ACV (by value) were denominated in U.S. dollars. For agreements denominated in other currencies, we use a fixed historical exchange rate to calculate ACV in dollars rather than using current exchange rates, so that our calculation of growth in ACV is not affected by fluctuations in foreign currencies. We have not applied this methodology retroactively for OSI software amounts delivered prior to October 2020, but do not believe this to have a material impact on our reported ACV metric due to the high USD-denominated concentration of the OSI business. As of September 30, 2022, approximately 94% of OSI ACV was denominated in USD.

For term license agreements that contain professional services or other products and services, we have included in ACV the portion of the invoice allocable to the term license under Topic 606 rather than the portion of the invoice attributed to the license in the agreement. We believe that methodology more accurately allocates any discounts or premiums to the different elements of the agreement.

We estimate that the pro forma ACV of AspenTech grew by approximately 7.7%, from $751.9 million as of September 30, 2021 to $809.6 million as of September 30, 2022. This includes approximately $2.7 million from Inmation.

Total Contract Value

Total Contract Value (“TCV”) is the aggregate value of all payments received or to be received under all active term license and perpetual SMS agreements, including maintenance and escalation. TCV of Heritage AspenTech, the OSI business and the SSE business was $3.3 billion and $3.1 billion as of September 30, 2022 and 2021, respectively.

Bookings

Bookings is the total value of customer term license and perpetual SMS contracts signed in the current period, less the value of such contracts signed in the current period where the initial licenses and SMS agreements are not yet deemed delivered, plus term license contracts and SMS agreements signed in a previous period for which the initial licenses are deemed delivered in the current period.

The bookings of Heritage AspenTech, the OSI business and the SSE business was $224.0 million during the three months ended September 30, 2022, compared to $156.2 million during the three months ended September 30, 2021. The change in bookings is related to the timing of renewals.
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Non-GAAP Business Metrics

The following table provides a reconciliation of GAAP net cash provided by (used in) operating activities to free cash flow for the indicated periods (in thousands):

 Three Months Ended
September 30,
 20222021
Net cash provided by (used in) operating activities (GAAP)$5,077 $(9,186)
Purchase of property, equipment, and leasehold improvements(1,321)(2,607)
Payments for capitalized computer software development costs(99)— 
Acquisition related payments7,059 54 
Free cash flow$10,716 $(11,739)

The following table presents our (loss) from operations, as adjusted for stock-based compensation expense, amortization of intangible assets, and other items, such as the impact of acquisition and integration planning related fees, for the indicated periods:

Three Months Ended
September 30,
20222021
GAAP (loss) from operations$(51,182)$(13,884)
Plus:
Stock-based compensation17,736 368 
Amortization of intangibles121,160 28,809 
Acquisition and integration planning related fees4,858 54 
Non-GAAP income from operations$92,572 $15,347 
Critical Accounting Estimates and Judgments
Note 2, “Significant Accounting Policies,” to the audited consolidated and combined financial statements in our Transition Reports on Form 10-KT for the fiscal year ended June 30, 2022 describes the significant accounting policies and methods used in the preparation of the consolidated and combined financial statements appearing in this report. The accounting policies that reflect our critical estimates, judgments and assumptions in the preparation of our consolidated and combined financial statements are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of our Transition Reports on Form 10-KT for the fiscal year ended June 30, 2022, and include the subsection captioned “Revenue Recognition.”

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Results of Operations
Comparison of the Three Months Ended September 30, 2022 and 2021
The following table sets forth the results of operations and the period-over-period percentage change in certain financial data for the three months ended September 30, 2022 and 2021:
Three Months Ended
September 30,		Increase / (Decrease)
Change
 20222021$%
 (Dollars in Thousands)
Revenue:   
License and solutions$160,224 $44,215 $116,009 262.4 %
Maintenance78,366 24,535 53,831 219.4 %
Services and other12,229 8,265 3,964 48.0 %
Total revenue250,819 77,015 173,804 225.7 %
Cost of revenue:   
License and solutions69,513 34,388 35,125 102.1 %
Maintenance9,217 4,234 4,983 117.7 %
Services and other12,400 4,898 7,502 153.2 %
Total cost of revenue91,130 43,520 47,610 109.4 %
Gross profit159,689 33,495 126,194 376.8 %
Operating expenses:   
Selling and marketing118,274 25,000 93,274 373.1 %
Research and development49,740 15,555 34,185 219.8 %
General and administrative42,848 6,617 36,231 547.5 %
Restructuring9 207 (198)(95.7)%
Total operating expenses210,871 47,379 163,492 345.1 %
(Loss) from Operations(51,182)(13,884)(37,298)268.6 %
Other (expense), net(58,632)(1,359)(57,273)4,214.3 %
Interest income (expense), net5,023 (272)5,295 (1,946.7)%
(Loss) before provision for income taxes(104,791)(15,515)(89,276)575.4 %
(Benefit) for income taxes(93,547)(4,313)(89,234)2,069.0 %
Net (loss)$(11,244)$(11,202)$(42)0.4 %


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The following table sets forth the results of operations as a percentage of total revenue for certain financial data for the three months ended September 30, 2022 and 2021:
Three Months Ended
September 30,
 20222021
(% of Revenue)
Revenue:  
License and solutions63.9 %57.4 %
Maintenance31.2 31.9 
Services and other4.9 10.7 
Total revenue100.0 100.0 
Cost of revenue:  
License and solutions27.7 44.7 
Maintenance3.7 5.5 
Services and other4.9 6.4 
Total cost of revenue36.3 56.5 
Gross profit63.7 43.5 
Operating expenses:  
Selling and marketing47.2 32.5 
Research and development19.8 20.2 
General and administrative17.1 8.6 
Restructuring costs— 0.3 
Total operating expenses84.1 61.5 
(Loss) from operations(20.4)(18.0)
Other (expense), net(23.4)(1.8)
Interest income (expense), net2.0 (0.4)
(Loss) before provision for income taxes(41.8)(20.1)
(Benefit) for income taxes(37.3)(5.6)
Net (loss)(4.5)%(14.5)%
Revenue
Total revenue increased by $173.8 million during the three months ended September 30, 2022 as compared to the same period in prior fiscal year. Overall revenue growth is primarily due to $176.4 million in revenue from Heritage AspenTech as a result of the Transaction, an increase of $3.9 million in new and renewal contracts from SSE, offset by a decrease in revenue of $6.5 million from OSI due to the mix of open customer projects and the stage of completion compared to the prior period.
License and solutions revenue increased by $116.0 million during the three months ended September 30, 2022, as compared to the same period in prior fiscal year. This increase was driven primarily by $116.4 million from Heritage AspenTech as a result of the Transaction.

Maintenance revenue increased by $53.8 million during the three months ended September 30, 2022 as compared to the same period in prior fiscal year. This increase was primarily due to $53.0 million from Heritage AspenTech as a result of the Transaction.

Services and other revenue increased by $4.0 million during the three months ended September 30, 2022, as compared to the same period in prior fiscal year primarily due to $7.1 million from Heritage AspenTech as a result of the Transaction, offset by a decrease of $3.1 million in services and other revenue from OSI and SSE professional services arrangements.
Cost of Revenue
Cost of revenue increased by $47.6 million during the three months ended September 30, 2022, as compared to the same period in prior fiscal year. The increase in cost of revenue is primarily due to $49.4 million from Heritage AspenTech as a result of the Transaction, offset by a decrease in cost of revenue of $1.8 million due to the timing of SSE customer contract renewals.
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Cost of license and solutions revenue increased $35.1 million during the three months ended September 30, 2022, as compared to the same period in prior fiscal year. This increase was driven by $35.2 million from Heritage AspenTech as a result of the Transaction, $32.9 million of which is associated with additional amortization of intangible assets.
Cost of maintenance revenue increased by $5.0 million during the three months ended September 30, 2022, as compared to the same period in prior fiscal year. This increase was primarily due to $6.0 million from Heritage AspenTech as a result of the Transaction.

Cost of services and other revenue increased by $7.5 million for the three months ended September 30, 2022, as compared to the same period in prior fiscal year primarily due to $8.2 million from Heritage AspenTech as a result of the Transaction. Gross profit margin on services and other revenue was (1.4)% and 40.7% for the three months ended September 30, 2022 and 2021, respectively.

Overall gross profit increased by $126.2 million for the three months ended September 30, 2022, as compared to the same period in prior fiscal year primarily due to $127.0 million from the Transaction. Gross profit margin increased significantly to 63.7% for the three months ended September 30, 2022 from 43.5% for the same period in prior fiscal year. The increase was mainly driven by larger gross profit on license revenue from Heritage AspenTech in the current period.

Operating Expenses
Selling and marketing expense increased by $93.3 million during the three months ended September 30, 2022, as compared to the same period in prior fiscal year primarily due to $100.9 million from Heritage AspenTech as a result of the Transaction, of which $64.2 million was additional amortization of intangible assets, offset by a decrease of $7.6 million in management fees, severance and restructuring.
Research and development expense increased by $34.2 million during the three months ended September 30, 2022, as compared to the same period in prior fiscal year primarily due to $32.8 million from Heritage AspenTech as a result of the Transaction, and $1.5 million from SSE compensation related costs.
General and administrative expense increased by $36.2 million during the three months ended September 30, 2022, as compared to the same period in prior fiscal year primarily due to $37.2 million from Heritage AspenTech as a result of the Transaction, and increased stock-based compensation expense of $2.0 million from SSE and OSI.

Non-Operating Income (Expense)
Interest income (expense) increased by $5.3 million for the three months ended September 30, 2022 as compared to the same period in prior fiscal year.The increase was largely attributable to the Transaction, which contributed $9.2 million resulting from interest income earned on Heritage AspenTech's long-term revenue contracts, partially offset by a $3.7 million increase in interest expense due to a higher interest rate on our term loan and amortization of debt issuance costs associated with the Bridge Facility.

Other (expense), net is comprised primarily of unrealized losses on foreign currency forward contracts and unrealized and realized foreign currency exchange gains and losses generated from the settlement and remeasurement of transactions denominated in currencies other than the functional currency of our entities.

Other expense increased by $57.3 million during the three months ended September 30, 2022, as compared to the same period in prior fiscal year primarily due to $50.3 million associated with unrealized losses on foreign currency forward contracts, while the remaining amount was related to unrealized and realized foreign currency exchange gains and losses.
Benefit for Income Taxes
 Three Months Ended
September 30,		Increase / (Decrease)
Change
 20222021$%
 (Dollars in Thousands)
(Benefit) for income taxes$(93,547)$(4,313)$(89,234)2,069.0 %
Effective tax rate89.3 %27.8 %  
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Benefit for income taxes was $93.5 million and $4.3 million for the three months ended September 30, 2022 and 2021, respectively, resulting in effective tax rates of 89.3% and 27.8%, respectively. Income tax benefit increased due to the higher Foreign-Derived Intangible Income (“FDII”) deduction recorded in the current period as a result of non-deductible amortization of intangibles, capitalized R&D costs, and a change in the accounting methodology related to historical revenue recognition for tax purposes on multi-year software license agreements. The change resulted in the recognition of taxable income over a 4 tax year period with fiscal year 2024 as the last year of the adjustment.

Liquidity and Capital Resources
Resources
As of September 30, 2022 and June 30, 2022, our principal sources of liquidity consisted of $382.5 million and $449.7 million, respectively, in cash and cash equivalents.

We believe our existing cash on hand and cash flows generated by operations are sufficient for at least the next 12 months to meet our operating requirements, including those related to salaries and wages, working capital, capital expenditures, and other liquidity requirements associated with operations. We may need to raise additional funds if we decide to make one or more acquisitions of businesses, technologies or products. If additional funding for such purposes is required beyond existing resources and our Amended and Restated Credit Agreement described below, we may not be able to effect a receivable, equity or debt financing on terms acceptable to us or at all.

Bridge Facility
On July 27, 2022, the Company entered into a $475.0 million senior unsecured bridge facility (the “Bridge Facility”) with JPMorgan Chase Bank, N.A. (“JPMorgan”), as Administrative Agent, to finance the acquisition of all of the equity interests of Mining Software Holdings Pty Ltd (“Micromine acquisition”). The Bridge Facility was entered into under the existing Amended and Restated Credit Agreement dated as of December 23, 2019, with JPMorgan ("Credit Agreement"). The Company may elect that each incremental borrowing under the Bridge Facility bear interest at a rate per annum equal to (a) the Alternate Base Rate (“ABR”), plus the applicable margin or (b) the Adjusted Term Secured Overnight Financing Rate (“SOFR”), plus the applicable margin. There are no amounts outstanding under the Bridge Facility as of September 30, 2022. Future borrowings under the Bridge Facility are payable 364 days after the closing date of July 27, 2022.

Credit Agreement

The Credit Agreement provides for a $200.0 million secured revolving credit facility and a $320.0 million secured term loan facility.

The interest rate as of September 30, 2022 was 2.74% on $270.0 million in outstanding borrowings on its term loan facility.

As of September 30, 2022, the Company's current and non-current borrowings, under the term loan facility, were $30.0 million and $240.0 million, respectively. As of June 30, 2022, the Company's current and non-current borrowings, under the term loan facility, were $28.0 million and $245.6 million, respectively.

For a more detailed description of the Credit Agreement, see Note 8, “Credit Agreement”, to our Unaudited Consolidated and Combined Financial Statements in Part 1, Item 1 of this Form 10-Q.
Cash Balance Sheet and Cash Flows
Our cash and cash equivalents were $382.5 million and $25.7 million as of September 30, 2021 and 2022, respectively. The following table summarizes our free cash flow (in thousands):

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 Three Months Ended
September 30,
 20222021
Net cash provided by (used in) operating activities (GAAP)$5,077 $(9,186)
Purchase of property, equipment, and leasehold improvements(1,321)(2,607)
Payments for capitalized computer software development costs(99)— 
Acquisition related payments7,059 54 
Free cash flow (non-GAAP)$10,716 $(11,739)
Total free cash flow increased $22.5 million during the three-month period ended September 30, 2022 as compared to the same period in prior fiscal year, primarily due to the contribution from Heritage AspenTech as a result of the Transaction and was mainly driven by the cash flows provided by operating activities.

Contractual Obligations
Standby letters of credit for $3.6 million secured our performance on professional services contracts, certain facility leases and potential liabilities as of September 30, 2022. The letters of credit expire at various dates through fiscal 2025. There were no standby letters of credit as of the September 30, 2021.
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Item 3.    Quantitative and Qualitative Disclosures About Market RisksRisk.
In the ordinary course of conducting business, we are exposed to certain risks associated with potential changes in market conditions. These market risks include changes in currency exchange rates and interest rates which could affect operating results, financial position and cash flows. We manage our exposure to these market risks through our regular operating and financing activities and, if considered appropriate, we may enter into derivative financial instruments such as forward currency exchange contracts.
Foreign Currency Exchange Risk
Our foreign exchange forward contracts outstanding as of the respective period-ends are summarized as follows (in thousands):

September 30, 2022June 30, 2022
Notional AmountFair ValueNotional AmountFair Value
Forward contracts:
PurchasedAU $900,000$(50,259)— $— 

During the period covered by this report, Newco did not conduct any activitiesthree months ended September 30, 2022 and 2021, 11.7% and 6.7% of our total revenue was denominated in a currency other than those incidentalthe U.S. dollar, respectively. In addition, certain of our operating costs incurred outside the United States are denominated in currencies other than the U.S. dollar. We conduct business on a worldwide basis and as a result, a portion of our revenue, earnings, net assets, and net investments in foreign affiliates is exposed to its formation and matters contemplated by the Transaction Agreement, and therefore did not incur any significant interest rate risk, liquidity risk, credit risk,changes in foreign currency exchange rates. We measure our net exposure for cash balance positions and for cash inflows and outflows in order to evaluate the need to mitigate our foreign exchange risk. We may enter into foreign currency forward contracts to minimize the impact related to unfavorable exchange rate riskmovements related to our cash positions and cash flows, although we have not done so during the three months ended September 30, 2022 and 2021. Currently, our largest exposures to foreign exchange rates exist primarily with the Euro, Pound Sterling, Canadian Dollar, Japanese Yen, Norwegian Krone, and Russian Ruble.
During the three months ended September 30, 2022 and 2021, we recorded net foreign currency exchange losses of $8.3 million and $1.5 million, respectively, related to the settlement and remeasurement of transactions denominated in currencies other than the functional currency of our operating units. Our analysis of operating results transacted in various foreign currencies indicated that a hypothetical 10% change in the foreign currency exchange rates could have increased or decreased the consolidated and combined results of operations by approximately $2.4 million and $1.1 million for the three months ended September 30, 2022 and 2021, respectively.

We may also enter into foreign exchange forward to reduce the short-term effects of foreign currency fluctuations on receivables and payables that are denominated in currencies other relevantthan the functional currencies of the entities, although we have not done so during the three months ended September 30, 2022 and 2021. The market risks.risks associated with these foreign currency receivables and payables relate primarily to variances from our forecasted foreign currency transactions and balances. We do not enter into foreign exchange forward contracts for speculative purposes.

Interest Rate Risk
We place our investments in money market instruments. Our analysis of our investment portfolio and interest rates at September 30, 2022 indicated that a hypothetical 100 basis point increase or decrease in interest rates would not have a material impact on the fair value of our investment portfolio determined in accordance with an income-based approach utilizing portfolio future cash flows discounted at the appropriate rates.
As of September 30, 2022, our current and non-current borrowings of $30.0 million and $240.0 million, respectively, consist of the term loan facility under the Amended and Restated Credit Agreement. A hypothetical 10% increase or decrease in interest rates paid on outstanding borrowings under the Amended and Restated Credit Agreement would not have a material impact on our financial position, results of operations or cash flows.

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Investment Risk

The Company owns an interest in a limited partnership investment fund. The primary objective of this partnership is investing in equity and equity-related securities (including convertible debt) of venture growth- stage businesses. We account for the investment in accordance with Topic 323, Investments - Equity Method and Joint Ventures. Our total commitment under this partnership is $5.0 million CAD ($4.0 million). Under the conditions of the equity method investment, unfavorable future changes in market conditions could lead to a potential loss up to the full value of our 5.0 million CAD ($4.0 million) commitment. As of September 30, 2022, the fair value of this investment is $2.7 million CAD ($2.0 million), representing our payment towards the total commitment, and is recorded in non-current assets in our consolidated balance sheet.
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Item 4.Controls and Procedures.
a)Disclosure Controls and Procedures

Our management, with the participation of our Presidentchief executive officer and Vice President & Treasurer, haschief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (asas of September 30, 2022. The term “disclosure controls and procedures,” as defined in RuleRules 13a-15(e) and 15d-15(e) under the Securities Exchange Act)Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the endcost-benefit relationship of possible controls and procedures. Based on the period covered by this report. Based upon that evaluation the President and Vice President & Treasurer have concluded that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures (as defined in Rule 15d-15(e) of the Exchange Act) were effective as of the endSeptember 30, 2022, our chief executive officer and chief financial officer concluded that, as of the period covered by this report.such date, our disclosure controls and procedures were effective.

b)Changes in Internal Controls Over Financial Reporting
There has beenwas no change in our internal controlscontrol over financial reporting that occurred during the quarterthree months ended March 31,September 30, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 We will continue to review and document our disclosure controls and procedures, including our internal control over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.
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PART II.II - OTHER INFORMATION

Item 1.Legal Proceedings Proceedings.
 
See discussion of legal proceedings in Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.None.
 

Item 1A. Risk Factors.

The risks described in “Item 1A. Risk Factors” in our Transition Reports on Form 10-KT for the fiscal year ended June 30, 2022, could materially and adversely affect our business, financial condition and results of operations. These risk factors do not identify all risks that we face—our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. The Risk Factors section of our 2022 Transition Reports on Form 10-KT remains current in all material respects, with the exception of the revised risk factor below.

A significant portion of our revenue is attributable to operations outside the United States, and our operating results therefore may be materially affected by the economic, political, military, regulatory and other risks of foreign operations or of transacting business with customers outside the United States, including in Russia.

Customers outside the United States account for a significant portion of our total revenue and will for the foreseeable future. Our operating results attributable to operations outside the United States are subject to additional risks, including:

•unexpected changes in regulatory or environmental requirements, tariffs and other barriers, including, for example, international trade disputes, changes in climate regulations, sanctions or other regulatory restrictions imposed by the United States or foreign governments;
•less effective protection of intellectual property;
•requirements of foreign laws and other governmental controls;
•difficulties in collecting trade accounts receivable in other countries;
•adverse tax consequences;
•the challenges of managing legal disputes in foreign jurisdictions.
•difficulties in staffing and managing foreign operations;
•limited protection for the enforcement of contract and intellectual property rights in certain countries where we may sell our products or work with suppliers or other third parties;
•potentially longer sales and payment cycles and potentially greater difficulties in collecting accounts receivable;
•costs and difficulties of customizing products for foreign countries;
•challenges in providing solutions across a significant distance, in different languages and among different cultures;
•laws and business practices favoring local competition;
•being subject to a wide variety of complex foreign laws, treaties and regulations and adjusting to any unexpected changes in such laws, treaties and regulations, including local labor laws;
•strict laws and regulations governing privacy and data security, including the European Union’s General Data Protection Regulation;
•uncertainty and resultant political, financial and market instability arising from the United Kingdom’s exit from the European Union;
•compliance with U.S. laws affecting activities of U.S. companies abroad, including the U.S. Foreign Corrupt Practices Act;
•tariffs, trade barriers and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets;
•operating in countries with a higher incidence of corruption and fraudulent business practices;
•changes in regulatory requirements, including export controls, tariffs and embargoes, other trade restrictions, competition, corporate practices and data privacy concerns;
•seasonal reductions in business activity in certain parts of the world, particularly during the summer months in Europe and at year end globally;
•rapid changes in government, economic and political policies and conditions; and
•political or civil unrest or instability, acts of war, terrorism or epidemics and other similar outbreaks or events.

While we license our products primarily through a direct sales force located throughout the world, we also leverage sales relationships with Emerson and other channel partners to market our products in certain locations. In the event that we are unable to adequately staff and maintain our foreign operations, we could face difficulties managing our international operations.

In addition, the ongoing conflict in Ukraine could adversely impact our business, financial position, cash flows and results of operations in Russia and Ukraine which may in turn spread and impact our overall business, financial position, cash flows and results of operations. We maintain operations in Russia and license software and provide related services to
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customers in Russia and areas of Ukraine that are not under sanction. We have net sales of approximately $10.0 million for the three-month period ended September 30, 2022, and total assets of approximately $24.5 million as of September 30, 2022, related to operations in Russia. As a software company, no material impact to supply chain operations is expected as a result of the conflict in Ukraine and the conflict has not had a material impact on our financial results thus far. However, we continue to evaluate the impact, if any, of the various sanctions, export control measures and business restrictions imposed by the United States, other governments, and financial institutions on our ability to do business in Russia and areas of Ukraine that are not under sanction, maintain contracts with vendors and pay employees in Russia, receive payment from customers in Russia and areas of Ukraine that are not under sanction, and assess our operations for potential asset impairment.

We assess our operations for potential asset impairment in accordance with our accounting practices, and are periodically evaluating the impact, if any, of the various sanctions, export controls measures and business restrictions imposed by the United States, other governments and others on our ability to do business in Russia, maintain contracts with vendors and pay employees in Russia, as well as receive payment from customers in Russia or Ukraine. The outcome of these assessments and their potential impact on our ability to continue to conduct business to the same extent as currently conducted will depend on how the conflict evolves and on further actions that may be taken by the United States, Russia, other governments, and others.

If the sanctions and other retaliatory measures and restrictions imposed by the global community change, we may be required to cease or suspend operations in the region or, should the conflict or the effects of these sanctions, measures and restrictions worsen, we may voluntarily elect to do so. Any disruption to, or suspension of, our business and operations in Russia would result in the loss of revenues from the business in Russia. In addition, as a result of the risk of collectability of receivables from our customers in Russia, we may be required to adjust our accounting practices relating to revenue recognition in this region, with the result that we may not be able to recognize revenue until there is no significant risk of revenue reversal. We may also suffer reputational harm as a result of our continued operations in Russia, which may adversely impact our sales and other businesses in other countries.

While the precise effects of the ongoing military conflict and sanctions on the Russian and global economies remain uncertain, they have already resulted in significant volatility in financial markets and depreciation of the Russian ruble and the Ukrainian hryvnia against the U.S. dollar, as well as in an increase in energy and commodity prices globally. Should the conflict continue or escalate, there may be various economic and security consequences including, but not limited to, supply shortages of different kinds, further increases in prices of commodities, including piped gas, oil and agricultural goods, reduced consumer purchasing power, significant disruptions in logistics infrastructure, telecommunications services and risks relating to the unavailability of information technology systems and infrastructure. The resulting impacts to the global economy, financial markets, inflation, interest rates and unemployment, among others, could adversely impact economic and financial conditions, and may disrupt the global economy’s ongoing recovery following the COVID-19 pandemic. Other potential consequences include, but are not limited to, growth in the number of popular uprisings in the region, increased political discontent, especially in the regions most affected by the conflict or economic sanctions, increase in cyberterrorism activities and attacks, displacement of persons to regions close to the areas of conflict and an increase in the number of refugees fleeing across Europe, among other unforeseen social and humanitarian effects. As a result of the ongoing conflict between Russia and Ukraine, we may experience other risks, difficulties and challenges in the way we conduct our business and operations generally.

Continued conflict between Russia and the Ukraine, any escalation of that conflict, and the financial and economic sanctions and import and/or export controls imposed on Russia by the United States, the United Kingdom, the European Union, Canada and others, as well as other business restrictions imposed by financial institutions and the above-mentioned adverse effects on our operations (both in this region and generally) and on the wider global economy and market conditions could, in turn, have a material adverse impact on our business, financial condition, cash flows and results of operations and could cause the market value of our common shares to decline.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.
 
Newco is subject to those risk factors set forth under the caption "Risk Factors" in the Prospectus that is partNone.
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Table of the Registration Statement on Form S-4 (File No.333-262106), as amended, filed with the SEC by Newco and declared effective on April 18, 2022.Contents

Item 6. ExhibitsExhibits.
 
(a) Exhibits (Listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K). 

Exhibit NumberDescription
10.1^Certifications
31.1
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31.2		Certifications
32.1
101101.INS
Attached as Exhibit 101 to this report are the following documents formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Earnings for the three and six months ended March 31, 2022, (ii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2022, (iii) Condensed Consolidated Balance Sheet as of March 31, 2022 and as of October 8, 2021, (iv) Condensed Consolidated Balance Sheet as of March 31, 2022, (v) Condensed Consolidated Statements of Equity for the three and six months ended March 31, 2022, (vi) Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2022, and (vii) Notes to Condensed Consolidated Financial Statements for the three and six months ended March 31, 2022.  
Inline Instance Document
104101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as(embedded within the Inline XBRL and contained in Exhibit 101).document)
^Management contract or compensatory plan or arrangement

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SIGNATURE
Table of Contents

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Emersub CX, Inc.
(Registrant)Aspen Technology, Inc.
Date: November 1, 2022ByBy:/s/ Mark BulandaANTONIO J. PIETRI
Mark BulandaAntonio J. Pietri
President and Chief Executive Officer
May 16, 2022(Principal Executive Officer)
 

By/s/ David Baker
Date: November 1, 2022By:David Baker/s/ CHANTELLE BREITHAUPT
Chantelle Breithaupt
Senior Vice President, &Chief Financial Officer and Treasurer
May 16, 2022(Principal Financial Officer)


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